Nautilus 2013 Annual Report Download - page 31

LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2013 , we had $41.0 million of Cash and Cash Equivalents, compared to $23.2 million as of December 31, 2012
. Cash
provided by operating activities was $21.1 million for 2013, compared to cash provided by operating activities of $12.8 million
for 2012. We
expect our Cash and Cash Equivalents at December 31, 2013
, along with cash expected to be generated from operations, to be sufficient to fund
our operating and capital requirements for at least twelve months from December 31, 2013 .
The increase in cash flows from operating activities was primarily due to increased Net Income of $48.0 million
for 2013, compared to Net
Income of $16.9 million for 2012 and changes in our operating assets and liabilities as discussed below. Net income for 2013 included a
$38.9
million non-cash credit related to the reduction of the valuation allowance recorded against our Deferred Income Tax Assets.
Trade Receivables increased $3.5 million to $25.3 million as of December 31, 2013
, compared to $21.8 million as of December 31, 2012, due to
higher revenue within our Retail business. Days sales outstanding ("DSO") at December 31, 2013
were 19.9 days compared to 23.7 days as of
December 31, 2012. The decrease in DSO at December 31, 2013 compared to December 31, 2012 was due to improved collections.
Inventories decreased $3.0 million to $15.8 million as of December 31, 2013
, compared to $18.8 million as of December 31, 2012, primarily
due to improvements in inventory management.
Net Deferred Income Tax Assets increased $32.5 million to
$30.2 million as of December 31, 2013
, compared to a net liability of $2.3 million
as of December 31, 2012, primarily due to the release of $38.9 million
of existing valuation allowance during 2013 as discussed in more detail
above.
Trade Payables increased $4.4 million to $37.2 million as of December 31, 2013
, compared to $32.8 million as of December 31, 2012, primarily
due to increased media expense to support the growth in sales.
Accrued Liabilities increased $0.9 million to $9.1 million as of December 31, 2013
compared to $8.2 million as of December 31, 2012, primarily
due to an increase in accrued incentive compensation.
Cash used in investing activities for purchases of software and equipment was $3.6 million
for 2013 and was primarily related to implementation
of new software and hardware information system upgrades and new product tooling equipment. We anticipate spending $2.5 million in all of
2014 for software and equipment.
Financing Arrangements
We have a Credit Agreement (the "Loan Agreement") with Bank of the West that provides for a $15,750,000 maximum revolving secured credit
line. The line of credit is available through March 31, 2015 for working capital, standby letters of credit and general corporate purposes.
Borrowing availability under the Loan Agreement is subject to our compliance with certain financial and operating covenants at the time
borrowings are requested. Standby letters of credit under the Loan Agreement are treated as a reduction of the available borrowing amount and
are subject to covenant testing.
The interest rate applicable to borrowings under the Loan Agreement is based on either, at our discretion, Bank of the West's base rate, a floating
rate or LIBOR, plus an applicable margin based on certain financial performance metrics. Our borrowing rate was 1.67% as of
December 31,
2013
. The Loan Agreement contains customary covenants, including minimum fixed charge coverage ratio and leverage ratio, and limitations
on capital expenditures, mergers and acquisitions, indebtedness, liens, dispositions, dividends and investments. The Loan Agreement also
contains customary events of default. Upon an event of default, the lender has the option of terminating its credit commitment and accelerating
all obligations under the Loan Agreement. Borrowings under the Loan Agreement are collateralized by substantially all of our assets, including
intellectual property assets.
As of December 31, 2013 , we had no outstanding borrowings and $0.5 million
in standby letters of credit issued under the Loan Agreement. As
of December 31, 2013 , we were in compliance with the financial covenants of the Loan Agreement and approximately $15.3 million
was
available for borrowing.
Commitments and Contingencies
For a description of our commitments and contingencies, refer to Note 15 to our Consolidated Financial Statements in Part II, Item 8 of this
report.
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