Nautilus 2014 Annual Report Download - page 32

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, 2014 , including those related to our discontinued Commercial operations, is as follows (in thousands):
Due to uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2014
, we are
unable to make reasonably reliable estimates of the timing of any cash settlements with the respective taxing authorities. Therefore,
approximately $4.7 million
of liabilities related to 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 12, Income Taxes
, to our Consolidated Financial
Statements in Part II, Item 8 of this report.
Off-Balance Sheet Arrangements
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, 2014 .
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, 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.
INFLATION
We do not believe that inflation had a material effect on our business, financial condition or results of operations in 2014 , 2013 or 2012
.
Inflation pressures do exist in countries where our contract manufacturers are based, however we have largely mitigated these increases through
cost improvement measures.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 1, Significant Accounting Polices , to our Consolidated Financial Statements in Part II, Item 8 of this report.
26
Payments due by period
Total Less than 1
year 1-3 years 3-5 years More than 5
years
Operating lease obligations
$
25,917
$
4,050
$
7,240
$
4,824
$
9,803
Purchase obligations
(1)
21,250
21,250
— —
—
Minimum royalty obligations
188
188
— —
—
Total
$
47,355
$
25,488
$
7,240
$
4,824
$
9,803
(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.