Nautilus 2011 Annual Report Download - page 26

Table of Contents
Due to uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2011 , we are
unable to make reasonably reliable estimates of the timing of any cash settlements with the respective taxing authorities. Therefore,
approximately $5.9 million of unrecognized tax benefits, including interest and penalties on uncertain tax positions, have been excluded from the
contractual table above. For further information, refer to Note 11, Income Taxes, to our consolidated financial statements in Part II, Item 8 of this
report.
Off-Balance Sheet Arrangements
Prior to its divestiture, our discontinued Commercial business would, from time-to-time, involve a third-party with lease and financing
arrangements to assist customers in purchasing products. While most of these financings were without recourse, in certain cases we offered a
guarantee or other recourse provisions, whereby a third-party financing provider reviewed customer credit information in evaluating the risk of
default prior to extending credit to a customer and we relied on the quality of this review and our own risk assessment in determining whether to
proceed with the recourse transaction. As of December 31, 2011 , the maximum contingent liability under all recourse provisions was
approximately $0.8 million
. For further information, refer to Note 15, Commitments and Contingencies, to our consolidated financial statements
in Part II, Item 8 of this report.
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 indemnifications. Because we are unable to estimate our potential
obligation, and because management does not expect these obligations to have a material adverse effect on our consolidated financial position,
results of operations or cash flows, no liabilities are recorded at December 31, 2011 .
Seasonality
We expect our sales from fitness equipment products to vary seasonally. Sales are typically strongest in the first and fourth quarters, followed by
the third quarter, and are generally weakest in the second quarter. We believe that various factors, such as the broadcast of network season
finales and seasonal weather patterns, influence television viewers and cause our advertising on cable television stations to be less effective in
the second quarter than in other periods. In addition, during the spring and summer months, consumers tend to be involved in outdoor activities,
including outdoor exercise, which impacts sales of indoor fitness equipment. This seasonality can have a significant effect on our inventory
levels, working capital needs and resource utilization.
NEW ACCOUNTING PRONOUNCEMENTS
No new accounting pronouncements had a material impact on our consolidated financial position, results of operations or cash flows.
21
Payments due by period
Total Less than 1
year 1-3 years 3-5 years More than 5
years
Operating lease obligations
$
18,229
$
2,836
$
6,271
$
5,589
$
3,533
Purchase obligations
(1)
10,617
10,617
—
—
—
Minimum royalty obligations
306
306
—
—
—
Total
$
29,152
$
13,759
$
6,271
$
5,589
$
3,533
(1)
Our purchase obligations are comprised primarily of inventory purchase commitments. Because substantially all of our inventory is
sourced from Asia, we have long lead times and therefore need to secure factory capacity from our vendors in advance.