Nautilus 2004 Annual Report Download - page 54

Table of Contents
12. STOCK REPURCHASE PROGRAM
In January 2003, the Board of Directors authorized the expenditure of up to $50,000 to purchase shares of the Company’s common stock
in open-
market transactions. During 2003, the Company repurchased a total of 100,300 shares of common stock in open market transactions for
an aggregate purchase price of $1,422. The authorization expired on June 30, 2003 and was not renewed.
During the year ended December 31, 2002, the Company repurchased a total of 2,843,120 shares of common stock in open-market
transactions for an aggregate purchase price of $49,969.
13. RELATED-PARTY TRANSACTIONS
The Company incurred royalty expense under an agreement with a stockholder of the Company of $1,843 in 2004, $6,556 in 2003, and
$9,089 in 2002, of which $18 and $2,133 was payable at December 31, 2004 and 2003, respectively. In addition to the royalty agreement, the
stockholder had separately negotiated an agreement dated June 18, 1992, when the Company was privately held, between the stockholder, the
Company’s former Chairman and Chief Executive Officer (the “former Chairman”), and a former director of the Company. That separate
agreement stipulated that annual royalties above $90 would be paid 60% to the stockholder, 20% to the former Chairman, and 20% to the
former director. Both of these agreements expired in April 2004.
14. LITIGATION
The Company is subject to litigation, claims and assessments in the ordinary course of business, including disputes that may arise from
intellectual property related matters. Many of our legal matters are covered in whole or in part by insurance. Management believes that any
liability resulting from such matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash
flows.
In December 2002, the Company filed suit against ICON Health and Fitness, Inc. (“ICON”) in the Federal District Court, Western
District of Washington (the “District Court”) alleging infringement by ICON of the Company’
s Bowflex patents and trademarks. The Company
sought injunctive relief, unquantified treble damages and its fees and costs. In October 2003, the District Court dismissed our patent
infringement claims. The Company appealed the District Court’s decision to the United States Court of Appeals for the Federal Circuit (the
“Appeals Court”) and in November 2003, the Appeals Court overruled the District Court and reinstated the patent infringement claims. The
District Court has scheduled a trial on our patent infringement claims against ICON in April 2005.
In July 2003, the District Court ruled in favor of the Company on a motion for preliminary injunction on the issue of trademark
infringement and entered an order barring ICON from using the trademark “CrossBow” on any exercise equipment. In its ruling, the District
Court concluded that the Company showed “a probability of success on the merits and irreparable injury” on its trademark infringement claim.
In August 2003, the Appeals Court granted ICON a temporary stay regarding the motion for a preliminary injunction, enjoining ICON from
using the trademark “CrossBow.” This stay allowed ICON to continue using the trademark “CrossBow” until a decision was issued by the
Appeals Court. In June 2004, the Appeals Court issued its decision upholding the issuance of an injunction, and preventing ICON from selling
exercise equipment using the trademark “CrossBow” pending trial on the trademark issue. No trial date has been set on the trademark claim.
ICON has been using the term “CrossBar” on certain exercise equipment in response to the litigation regarding its use of “CrossBow.” In
July 2004, the Company filed an additional suit against ICON in the District Court alleging that ICON has further infringed on the Bowflex
trademark by the use of the “CrossBar” trademark. The Company seeks injunctive relief to prevent the sale of any fitness equipment that bears
the trademark “CrossBar” as well as monetary damages.
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