Nautilus 2009 Annual Report Download - page 33

Table of Contents
Non
-Cancelable Contractual Obligations
Our operating cash flows include the effect of certain non-cancelable, contractual obligations. A summary of such obligations as of
December 31, 2009, including those related to our discontinued operations, is as follows:
Due to uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2009, we are
unable to make reasonably reliable estimates of the timing of any cash settlements with the respective taxing authorities. Therefore,
approximately $4.1 million of unrecognized tax benefits, including interest and penalties, have been excluded from the contractual table above.
For further information, see Note 11, Income Taxes, in Notes to Consolidated Financial Statements.
Issues Arising from China Sales Operation
In 2008, we recognized a $3.8 million charge, included in discontinued operations, due to uncertainties regarding access to, and future recovery
of, certain assets of our China sales operation. In 2009, we recovered a portion of these assets and, as a result of this and other changes in
circumstances, we reduced the previously accrued loss amount by $2.3 million. At December 31, 2009 we have an allowance of $1.5 million due
to uncertainties regarding the future recovery of our China trade receivables.
Off-Balance Sheet Arrangements
At times, we become involved in third-party lease and financing arrangements which assist our customers in obtaining funds to purchase our
products. While most of these financings are without recourse, in certain cases we may offer a guarantee or other recourse provisions. Our
financing partner reviews consumer credit information in evaluating the risk of default prior to extending credit to our customers. We rely on the
quality of our partner’s review and our own risk assessment in determining whether to proceed with a recourse transaction. At December 31,
2009 and 2008, the maximum contingent liability under all recourse provisions was approximately $1.4 million and $1.6 million, respectively.
Refer to Note 1 of our consolidated financial statements for further discussion of this arrangement.
In the ordinary course of business, we enter into agreements that require us to indemnify counterparties against third-party claims. These may
include: agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or
services; agreements with customers, under which we may indemnify them against claims arising from their use or sale of our products; real
estate and equipment leases, under which we may indemnify lessors against third party claims relating to the use of their property; agreements
with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual
property or our use of their intellectual property; and agreements with parties to debt arrangements, under which we may indemnify them against
claims relating to their participation in the transactions.
The nature and terms of these indemnifications vary from contract to contract, and generally a maximum obligation is not stated. We hold
insurance policies that mitigate potential losses arising from certain types of
29
(In thousands)
Payments due by period
Total
Less than 1
year
1
-
3 years
3
-
5 years
More than 5
years
Operating lease obligations
$
20,298
$
4,828
$
7,788
$
5,610
$
2,072
Purchase obligations (1)
18,029
18,029
—
—
—
Minimum royalty obligations
296
296
—
—
—
Total
$
38,623
$
23,153
$
7,788
$
5,610
$
2,072
(1) Our purchase obligations are comprised of inventory purchase commitments. Because our inventory primarily is sourced from Asia, we
have long lead times and therefore need to secure factory capacity from our vendors in advance.