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FORM 10-K
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[x]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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NAUTILUS, INC.
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(Exact name of Registrant as specified in its charter)
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Washington
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94-3002667
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, no par value
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New York Stock Exchange
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 7.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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•
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creatively marketing our equipment, both directly to consumers and through our retail customers, while leveraging our well-known brand names;
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•
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enhancing our product lines by designing fitness equipment that meets or exceeds the high expectations of our customers;
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•
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utilizing our strengths in product engineering to reduce product costs;
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•
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continuing our investment in research and development activities aimed at acquiring or creating new technologies; and
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•
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increasing our international retail sales and distribution.
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•
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Our
Nautilus
brand includes a complete line of cardio equipment, including treadmills, specialized cardio, exercise bikes and ellipticals, as well as selected strength equipment. In late 2010, in anticipation of the holiday shopping season, we introduced selectorized dumbbells to the Nautilus family of products in our retail channel. In November 2010 our Nautilus E514 elliptical and Nautilus T514 treadmill each received a high rating from a leading consumer products rating company. We also launched a new website,
www.NautilusFitness.ca
, which provides our customers in Canada with complete product information, as well as a convenient store locator for finding the optimal shopping location for Nautilus products.
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•
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Our
Bowflex
brand represents a highly-regarded line of fitness equipment comprised of both cardio and strength products, including TreadClimber
®
specialized cardio machines, treadmills, PowerRod
®
home gyms, Revolution
®
home gyms, and SelectTech
®
dumbbells, each designed specifically for home use.
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•
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Our
Schwinn
brand is known for its popular line of exercise bikes, including the Airdyne
®
, ellipticals and treadmills. During 2010, we increased our sales and marketing efforts in support of our new line of Schwinn products for the retail channel introduced in late 2009. In November 2010, our Schwinn 840 treadmill received a high rating from a leading consumer products rating company and our Schwinn 460 elliptical was also favorably reviewed.
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•
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Our
Universal
brand, one of the oldest and most recognized names in the fitness industry, currently offers a line of kettlebell weights and weight benches.
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•
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Introduction and market acceptance of new products;
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•
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Variations in product selling prices and costs and the mix of products sold;
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•
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Size and timing of retail customer orders, which, in turn, often depend upon the success of our customers' businesses or specific products;
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•
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Changes in the market conditions for consumer fitness equipment;
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•
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Changes in macroeconomic factors;
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•
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Availability of consumer credit;
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•
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Timing and availability of products coming from our offshore contract manufacturing suppliers;
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•
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Seasonality of markets, which vary from quarter-to-quarter and are influenced by outside factors such as overall consumer confidence and the availability and cost of television advertising time;
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•
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Effectiveness of our media and advertising programs;
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•
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Customer consolidation in our retail segment, or the bankruptcy of any of our larger retail customers;
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•
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Restructuring charges;
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•
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Goodwill and other intangible asset impairment charges; and
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•
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Legal and contract settlement charges.
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•
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Unexpected increases in manufacturing and repair costs;
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•
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Interruptions in shipments if our contract manufacturer is unable to complete production;
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•
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Inability to completely control the quality of finished products;
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•
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Inability to completely control delivery schedules;
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•
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Changes in our contract manufacturer's business models or operations;
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•
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Potential increases in our negotiated product costs as a result of fluctuations in currency exchange rates;
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•
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Impact of the global market and economic conditions on the financial stability of our contract manufacturers and their ability to operate without requesting earlier payment terms or letters of credit;
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•
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Potential lack of adequate capacity to manufacture all or a part of the products we require; and
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•
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Potential unauthorized reproduction of our products.
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Location
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Primary Function(s)
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Owned or
Leased
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Washington
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Corporate headquarters and customer call center
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Leased
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Oregon
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Warehouse and distribution
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Leased
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Canada
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Warehouse, distribution and showroom
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Leased
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China
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Quality assurance and supplier relationships
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Leased
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High
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Low
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Dividends Paid
|
|||||
2010:
|
|
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Quarter 1
|
$
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4.35
|
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|
$
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1.96
|
|
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—
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Quarter 2
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3.63
|
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1.52
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—
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Quarter 3
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2.02
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1.27
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—
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Quarter 4
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1.92
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1.30
|
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—
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2009:
|
|
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|||||
Quarter 1
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2.57
|
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0.45
|
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—
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Quarter 2
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2.35
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0.59
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—
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Quarter 3
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2.96
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0.96
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—
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Quarter 4
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2.47
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1.59
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—
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Plan Category
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Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
(a)
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Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
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Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
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Equity compensation plans approved by security holders
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1,200,400
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$
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8.80
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4,521,000
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Equity compensation plans not approved by security holders
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—
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—
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—
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Total
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1,200,400
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$
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8.80
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4,521,000
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Year Ended December 31,
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|||||||||
(In thousands)
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2010
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2009
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Change
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% Change
|
|||||||
Net sales
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$
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168,450
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$
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189,260
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$
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(20,810
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)
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(11.0
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)%
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Cost of sales
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91,704
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92,745
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(1,041
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)
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(1.1
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)%
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|||
Gross profit
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76,746
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96,515
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(19,769
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)
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(20.5
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)%
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Operating expenses:
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Selling and marketing
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64,039
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75,827
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(11,788
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)
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(15.5
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)%
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General and administrative
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19,371
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24,616
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(5,245
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)
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(21.3
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)%
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Research and development
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2,905
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5,222
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(2,317
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)
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(44.4
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)%
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|||
Restructuring
|
—
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14,151
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(14,151
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)
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(100.0
|
)%
|
|||
Intangible asset impairments
|
—
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5,904
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(5,904
|
)
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(100.0
|
)%
|
|||
Total operating expenses
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86,315
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|
125,720
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(39,405
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)
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(31.3
|
)%
|
|||
Operating loss
|
(9,569
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)
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(29,205
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)
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|
19,636
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67.2
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%
|
|||
Other income (expense):
|
|
|
|
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|||||||
Interest income
|
15
|
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77
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(62
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)
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(80.5
|
)%
|
|||
Interest expense
|
(140
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)
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|
(168
|
)
|
|
28
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|
|
16.7
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%
|
|||
Other income (expense), net
|
464
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|
|
(194
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)
|
|
658
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|
|
339.2
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%
|
|||
Total other income (expense)
|
339
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|
|
(285
|
)
|
|
624
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|
|
218.9
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%
|
|||
Loss before income taxes
|
(9,230
|
)
|
|
(29,490
|
)
|
|
20,260
|
|
|
68.7
|
%
|
|||
Income tax expense (benefit)
|
588
|
|
|
(10,880
|
)
|
|
11,468
|
|
|
105.4
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%
|
|||
Loss from continuing operations
|
(9,818
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)
|
|
(18,610
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)
|
|
8,792
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|
|
47.2
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%
|
|||
Loss from discontinued operations, net of income taxes
|
(13,023
|
)
|
|
(34,687
|
)
|
|
21,664
|
|
|
62.5
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%
|
|||
Net loss
|
$
|
(22,841
|
)
|
|
$
|
(53,297
|
)
|
|
$
|
30,456
|
|
|
57.1
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||
(In thousands)
|
2010
|
|
2009
|
|
Change
|
|
% Change
|
|||||||
Net sales:
|
|
|
|
|
|
|
|
|||||||
Direct business
|
$
|
96,668
|
|
|
$
|
123,045
|
|
|
$
|
(26,377
|
)
|
|
(21.4
|
)%
|
Retail business
|
67,789
|
|
|
63,597
|
|
|
4,192
|
|
|
6.6
|
%
|
|||
Unallocated corporate (royalty income)
|
3,993
|
|
|
2,618
|
|
|
1,375
|
|
|
52.5
|
%
|
|||
Total net sales
|
$
|
168,450
|
|
|
$
|
189,260
|
|
|
$
|
(20,810
|
)
|
|
(11.0
|
)%
|
Gross profit:
|
|
|
|
|
|
|
|
|||||||
Direct business
|
$
|
54,041
|
|
|
$
|
75,541
|
|
|
$
|
(21,500
|
)
|
|
(28.5
|
)%
|
Retail business
|
18,711
|
|
|
19,310
|
|
|
(599
|
)
|
|
(3.1
|
)%
|
|||
Unallocated corporate
|
3,994
|
|
|
1,664
|
|
|
2,330
|
|
|
140.0
|
%
|
|||
Total gross profit
|
$
|
76,746
|
|
|
$
|
96,515
|
|
|
$
|
(19,769
|
)
|
|
(20.5
|
)%
|
Gross profit margin (% of net sales):
|
|
|
|
|
|
|
|
|||||||
Direct business
|
55.9
|
%
|
|
61.4
|
%
|
|
(5.5
|
)
|
|
|
||||
Retail business
|
27.6
|
%
|
|
30.4
|
%
|
|
(2.8
|
)
|
|
|
||||
Total gross profit margin
|
45.6
|
%
|
|
51.0
|
%
|
|
(5.4
|
)
|
|
|
|
Year Ended December 31,
|
|
|
||||||||
|
2010
|
|
2009
|
|
Change
|
||||||
Trade receivables:
|
|
|
|
|
|
||||||
Collections
|
$
|
188,290
|
|
|
$
|
287,362
|
|
|
$
|
(99,072
|
)
|
Sales on account
|
(181,043
|
)
|
|
(263,904
|
)
|
|
82,861
|
|
|||
Net cash provided
|
$
|
7,247
|
|
|
$
|
23,458
|
|
|
$
|
(16,211
|
)
|
|
|
|
|
|
|
||||||
Inventories:
|
|
|
|
|
|
||||||
Shipments
|
$
|
81,980
|
|
|
$
|
111,722
|
|
|
$
|
(29,742
|
)
|
Purchases
|
(75,637
|
)
|
|
(100,719
|
)
|
|
25,082
|
|
|||
Net cash provided
|
$
|
6,343
|
|
|
$
|
11,003
|
|
|
$
|
(4,660
|
)
|
(In thousands)
|
Payments due by period
|
||||||||||||||||||
|
Total
|
|
Less than 1
year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5
years
|
||||||||||
Operating lease obligations
|
$
|
10,385
|
|
|
$
|
3,641
|
|
|
$
|
4,824
|
|
|
$
|
1,620
|
|
|
$
|
300
|
|
Purchase obligations
(1)
|
12,933
|
|
|
12,933
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Minimum royalty obligations
|
206
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
23,524
|
|
|
$
|
16,780
|
|
|
$
|
4,824
|
|
|
$
|
1,620
|
|
|
$
|
300
|
|
(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.
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Balance Sheets as of December 31, 2010 and 2009
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009
|
|
|
Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the years ended December 31, 2010 and 2009
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009
|
|
|
Notes to Consolidated Financial Statements
|
|
|
As of December 31,
|
||||||
|
2010
|
|
2009
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
14,296
|
|
|
$
|
7,289
|
|
Restricted cash
|
351
|
|
|
—
|
|
||
Trade receivables, net of allowances of $301 in 2010 and $4,160 in 2009
|
19,633
|
|
|
27,799
|
|
||
Inventories
|
10,347
|
|
|
13,119
|
|
||
Prepaids and other current assets
|
5,331
|
|
|
4,705
|
|
||
Income taxes receivable
|
456
|
|
|
13,178
|
|
||
Short-term notes receivable
|
832
|
|
|
338
|
|
||
Assets of discontinued operation held-for-sale
|
292
|
|
|
10,781
|
|
||
Deferred income tax assets
|
57
|
|
|
54
|
|
||
Total current assets
|
51,595
|
|
|
77,263
|
|
||
Restricted cash
|
—
|
|
|
4,933
|
|
||
Property, plant and equipment, net
|
3,795
|
|
|
8,042
|
|
||
Goodwill
|
2,931
|
|
|
2,794
|
|
||
Other intangible assets, net
|
18,774
|
|
|
20,838
|
|
||
Other assets
|
1,272
|
|
|
1,302
|
|
||
Total assets
|
$
|
78,367
|
|
|
$
|
115,172
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Trade payables
|
$
|
24,535
|
|
|
$
|
37,107
|
|
Accrued liabilities
|
7,045
|
|
|
10,744
|
|
||
Warranty obligations, current portion
|
3,539
|
|
|
7,129
|
|
||
Deferred income tax liabilities
|
1,160
|
|
|
1,220
|
|
||
Total current liabilities
|
36,279
|
|
|
56,200
|
|
||
Long-term notes payable to a related party
|
5,141
|
|
|
—
|
|
||
Warranty obligations - non-current
|
396
|
|
|
1,250
|
|
||
Income taxes payable - non-current
|
3,210
|
|
|
2,866
|
|
||
Deferred income tax liabilities - non-current
|
1,008
|
|
|
754
|
|
||
Other long-term liabilities
|
1,534
|
|
|
1,619
|
|
||
Total liabilities
|
47,568
|
|
|
62,689
|
|
||
Commitments and contingencies (Note 17)
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
||||
Common stock - no par value, 75,000 shares authorized and 30,744 shares issued and outstanding at December 31, 2010 and 2009
|
5,051
|
|
|
4,414
|
|
||
Retained earnings
|
18,295
|
|
|
41,136
|
|
||
Accumulated other comprehensive income
|
7,453
|
|
|
6,933
|
|
||
Total stockholders' equity
|
30,799
|
|
|
52,483
|
|
||
Total liabilities and stockholders' equity
|
$
|
78,367
|
|
|
$
|
115,172
|
|
|
Year Ended December 31,
|
||||||
|
2010
|
|
2009
|
||||
Net sales
|
$
|
168,450
|
|
|
$
|
189,260
|
|
Cost of sales
|
91,704
|
|
|
92,745
|
|
||
Gross profit
|
76,746
|
|
|
96,515
|
|
||
Operating expenses:
|
|
|
|
||||
Selling and marketing
|
64,039
|
|
|
75,827
|
|
||
General and administrative
|
19,371
|
|
|
24,616
|
|
||
Research and development
|
2,905
|
|
|
5,222
|
|
||
Restructuring
|
—
|
|
|
14,151
|
|
||
Intangible asset impairments
|
—
|
|
|
5,904
|
|
||
Total operating expenses
|
86,315
|
|
|
125,720
|
|
||
Operating loss
|
(9,569
|
)
|
|
(29,205
|
)
|
||
Other income (expense):
|
|
|
|
||||
Interest income
|
15
|
|
|
77
|
|
||
Interest expense
|
(140
|
)
|
|
(168
|
)
|
||
Other income (expense), net
|
464
|
|
|
(194
|
)
|
||
Total other income (expense), net
|
339
|
|
|
(285
|
)
|
||
Loss from continuing operations before income taxes
|
(9,230
|
)
|
|
(29,490
|
)
|
||
Income tax expense (benefit)
|
588
|
|
|
(10,880
|
)
|
||
Loss from continuing operations
|
(9,818
|
)
|
|
(18,610
|
)
|
||
Discontinued operations:
|
|
|
|
||||
Loss from discontinued operations before income taxes
|
(12,924
|
)
|
|
(34,777
|
)
|
||
Income tax expense (benefit) of discontinued operations
|
99
|
|
|
(90
|
)
|
||
Loss from discontinued operations
|
(13,023
|
)
|
|
(34,687
|
)
|
||
Net loss
|
$
|
(22,841
|
)
|
|
$
|
(53,297
|
)
|
Loss per share from continuing operations:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.32
|
)
|
|
$
|
(0.61
|
)
|
Loss per share from discontinued operations:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.42
|
)
|
|
$
|
(1.13
|
)
|
Net loss per share:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.74
|
)
|
|
$
|
(1.74
|
)
|
Weighted average shares outstanding:
|
|
|
|
||||
Basic and diluted
|
30,744
|
|
|
30,664
|
|
|
Common Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (1)
|
|
Total
Stockholders'
Equity
|
|||||||||||
|
Shares
|
|
Amount
|
|
|
|
||||||||||||
Balances at January 1, 2009
|
30,614
|
|
|
$
|
3,207
|
|
|
$
|
94,433
|
|
|
$
|
6,045
|
|
|
$
|
103,685
|
|
Net loss
|
—
|
|
|
—
|
|
|
(53,297
|
)
|
|
—
|
|
|
(53,297
|
)
|
||||
Foreign currency translation adjustment, net of income taxes of $43
|
—
|
|
|
—
|
|
|
—
|
|
|
888
|
|
|
888
|
|
||||
Comprehensive loss
|
|
|
|
|
|
|
|
|
(52,409
|
)
|
||||||||
Stock-based compensation expense
|
—
|
|
|
1,207
|
|
|
—
|
|
|
—
|
|
|
1,207
|
|
||||
Shares issued for vested stock awards
|
130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Balances at December 31, 2009
|
30,744
|
|
|
4,414
|
|
|
41,136
|
|
|
6,933
|
|
|
52,483
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
(22,841
|
)
|
|
—
|
|
|
(22,841
|
)
|
||||
Foreign currency translation adjustment, including income tax benefit of $15
|
—
|
|
|
—
|
|
|
—
|
|
|
520
|
|
|
520
|
|
||||
Comprehensive loss
|
|
|
|
|
|
|
|
|
(22,321
|
)
|
||||||||
Stock-based compensation expense
|
—
|
|
|
637
|
|
|
—
|
|
|
—
|
|
|
637
|
|
||||
Balances at December 31, 2010
|
30,744
|
|
|
$
|
5,051
|
|
|
$
|
18,295
|
|
|
$
|
7,453
|
|
|
$
|
30,799
|
|
(1)
|
Foreign currency translation adjustments are the sole component of Accumulated Other Comprehensive Income.
|
|
Year Ended December 31,
|
||||||
|
2010
|
|
2009
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Loss from continuing operations
|
$
|
(9,818
|
)
|
|
$
|
(18,610
|
)
|
Loss from discontinued operations
|
(13,023
|
)
|
|
(34,687
|
)
|
||
Net loss
|
(22,841
|
)
|
|
(53,297
|
)
|
||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
6,627
|
|
|
10,739
|
|
||
Allowance for doubtful accounts
|
486
|
|
|
1,315
|
|
||
Inventory lower-of-cost-or-market adjustments
|
205
|
|
|
1,562
|
|
||
Stock-based compensation expense
|
637
|
|
|
1,207
|
|
||
Loss on asset disposals
|
148
|
|
|
10,250
|
|
||
Reduction of previously-estimated asset disposal loss
|
(3,723
|
)
|
|
—
|
|
||
Asset impairments
|
—
|
|
|
9,067
|
|
||
Writeoff of abandoned leasehold improvements and other assets
|
—
|
|
|
9,922
|
|
||
Deferred income taxes, net of valuation allowances
|
290
|
|
|
1,025
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Trade receivables
|
7,247
|
|
|
23,458
|
|
||
Inventories
|
6,343
|
|
|
11,003
|
|
||
Prepaids and other current assets
|
458
|
|
|
2,299
|
|
||
Income taxes
|
12,372
|
|
|
(1,018
|
)
|
||
Trade payables
|
(12,620
|
)
|
|
(1,252
|
)
|
||
Accrued liabilities, including warranty obligations
|
(6,288
|
)
|
|
(11,498
|
)
|
||
Net cash provided by (used in) operating activities
|
(10,659
|
)
|
|
14,782
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sale of discontinued operations
|
7,266
|
|
|
7,397
|
|
||
Proceeds from other asset sales
|
16
|
|
|
211
|
|
||
Refunds of escrow deposits
|
—
|
|
|
4,024
|
|
||
Purchases of equipment and intangible assets
|
(222
|
)
|
|
(2,000
|
)
|
||
Net decrease (increase) in restricted cash
|
4,582
|
|
|
(4,933
|
)
|
||
Net cash provided by investing activities
|
11,642
|
|
|
4,699
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net decrease in short-term borrowings
|
—
|
|
|
(17,944
|
)
|
||
Proceeds from note payable to related party
|
5,000
|
|
|
—
|
|
||
Financing costs
|
(324
|
)
|
|
(75
|
)
|
||
Net cash provided by (used in) financing activities
|
4,676
|
|
|
(18,019
|
)
|
||
Net effect of currency exchange rate changes
|
1,348
|
|
|
280
|
|
||
Net increase in cash and cash equivalents
|
7,007
|
|
|
1,742
|
|
||
Cash and cash equivalents, beginning of year
|
7,289
|
|
|
5,547
|
|
||
Cash and cash equivalents, end of year
|
$
|
14,296
|
|
|
$
|
7,289
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash refunded for income taxes, net of payments
|
$
|
12,455
|
|
|
$
|
11,105
|
|
Cash paid for interest
|
$
|
—
|
|
|
$
|
227
|
|
|
2010
|
|
2009
|
||
Dividend yield
|
—
|
%
|
|
—
|
%
|
Risk-free interest rate
|
2.2
|
%
|
|
2.5
|
%
|
Expected life (years)
|
4.75
|
|
|
4.75
|
|
Expected volatility
|
90
|
%
|
|
88
|
%
|
|
|
2010
|
|
2009
|
||||
Revenue
|
|
$
|
12,593
|
|
|
$
|
74,644
|
|
Operating loss before income taxes
|
|
$
|
(16,647
|
)
|
|
$
|
(25,286
|
)
|
Disposal gain (loss)
|
|
3,723
|
|
|
(9,491
|
)
|
||
Income tax benefit (expense)
|
|
(99
|
)
|
|
90
|
|
||
Loss from discontinued operation - commercial business
|
|
$
|
(13,023
|
)
|
|
$
|
(34,687
|
)
|
|
2009
|
||
Estimated loss on sale of commercial business discontinued operation, as of September 30, 2009
|
$
|
(18,331
|
)
|
Reduction of estimated disposal loss
|
8,840
|
|
|
Estimated loss on sale of commercial business discontinued operation, as of December 31, 2009
|
$
|
(9,491
|
)
|
Asset Group
|
|
Initially Estimated Disposal Loss as of 9/30/09
|
|
Completed Transactions Gain
|
|
Adjustment to Estimated Disposal Loss
|
|
Reduction of Previously-Estimated Disposal Loss
|
|
Disposal Loss Impairment as of 12/31/09
|
|||||||||||
Commercial Business
|
|
$
|
(18,331
|
)
|
|
$
|
—
|
|
|
$
|
8,065
|
|
(1)
|
$
|
8,065
|
|
|
$
|
(10,266
|
)
|
|
|
StairMaster
|
|
|
|
57
|
|
(2)
|
—
|
|
|
57
|
|
|
|
|||||||
|
SchwinnFitness
|
|
|
|
718
|
|
(2)
|
—
|
|
|
718
|
|
|
|
|||||||
|
|
|
$
|
(18,331
|
)
|
|
$
|
775
|
|
|
$
|
8,065
|
|
|
$
|
8,840
|
|
|
$
|
(10,266
|
)
|
|
Inventories
|
|
Property,
Plant &
Equipment
|
|
Totals
|
||||||
Carrying value, before impairment adjustments
|
$
|
14,164
|
|
|
$
|
6,883
|
|
|
$
|
21,047
|
|
Disposal loss impairment
|
(3,897
|
)
|
|
(6,369
|
)
|
|
(10,266
|
)
|
|||
Assets of discontinued operation held-for-sale, net
|
$
|
10,267
|
|
|
$
|
514
|
|
|
$
|
10,781
|
|
|
Previously-Estimated Disposal Loss as of 12/31/09
|
|
Completed Transactions Gain (Loss)
|
|
Adjustments to Estimated Disposal Loss
|
|
Reduction (Increase) to Previously-Estimated Disposal Loss
|
|
Disposal Loss Impairment as of 12/31/10
|
||||||||||
Sale of commercial equipment manufacturing operation
|
$
|
(6,212
|
)
|
|
$
|
(3,967
|
)
|
|
$
|
—
|
|
|
$
|
2,245
|
|
|
|
||
Sale of commercial equipment manufacturing facility
|
(1,268
|
)
|
|
(706
|
)
|
|
—
|
|
|
562
|
|
|
|
||||||
Sale of European commercial business operations
|
(1,618
|
)
|
|
(1,109
|
)
|
|
—
|
|
|
509
|
|
|
|
||||||
Other completed disposals
|
(724
|
)
|
|
(459
|
)
|
|
—
|
|
|
265
|
|
|
|
||||||
Adjustments to previously-completed disposals
|
—
|
|
|
364
|
|
|
—
|
|
|
364
|
|
|
|
||||||
Remaining assets held-for-sale as of December 31, 2010
|
(444
|
)
|
|
—
|
|
|
(222
|
)
|
|
(222
|
)
|
|
$
|
(666
|
)
|
||||
|
$
|
(10,266
|
)
|
|
$
|
(5,877
|
)
|
|
$
|
(222
|
)
|
|
$
|
3,723
|
|
|
$
|
(666
|
)
|
|
Real Property
|
||
Carrying value, before impairment adjustment
|
$
|
958
|
|
Disposal loss impairment
|
(666
|
)
|
|
Assets of discontinued operation held-for-sale, net
|
$
|
292
|
|
(In thousands)
|
Severance and
Benefits |
|
Facilities
and
other
Leases
|
|
Total
Liabilities
|
||||||
Balance as of January 1, 2009
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accruals
|
456
|
|
|
2,391
|
|
|
2,847
|
|
|||
Payments
|
(135
|
)
|
|
(937
|
)
|
|
(1,072
|
)
|
|||
Balance as of December 31, 2009
|
321
|
|
|
1,454
|
|
|
1,775
|
|
|||
Accruals
|
1,460
|
|
|
1,355
|
|
|
2,815
|
|
|||
Payments
|
(1,305
|
)
|
|
(649
|
)
|
|
(1,954
|
)
|
|||
Balance as of December 31, 2010
|
$
|
476
|
|
|
$
|
2,160
|
|
|
$
|
2,636
|
|
|
2009
|
||
Revenue
|
$
|
—
|
|
Loss on adjustment to previously-completed disposal *
|
$
|
(377
|
)
|
Income taxes
|
—
|
|
|
Loss from discontinued operation - fitness apparel business
|
$
|
(377
|
)
|
|
2009
|
||
Employee termination severance costs
|
$
|
563
|
|
Facility lease termination costs
|
2,822
|
|
|
Abandoned leasehold improvements
|
8,028
|
|
|
Abandoned information technology software and related service agreements
|
1,799
|
|
|
Contract termination costs
|
939
|
|
|
|
$
|
14,151
|
|
(In thousands)
|
Severance and
Benefits |
|
Facilities
and
other
Leases
|
|
Total
Liabilities
|
||||||
Balance as of January 1, 2009
|
$
|
1,684
|
|
|
$
|
—
|
|
|
$
|
1,684
|
|
Accruals
|
563
|
|
|
2,839
|
|
|
3,402
|
|
|||
Payments
|
(1,884
|
)
|
|
(2,593
|
)
|
|
(4,477
|
)
|
|||
Balance as of December 31, 2009
|
363
|
|
|
246
|
|
|
609
|
|
|||
Payments
|
(363
|
)
|
|
(246
|
)
|
|
(609
|
)
|
|||
Balance as of December 31, 2010
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2010
|
|
2009
|
||||
Balance, January 1
|
$
|
4,160
|
|
|
$
|
6,602
|
|
Charges to bad debt expense
|
486
|
|
|
1,315
|
|
||
Writeoffs, net of recoveries
|
(4,345
|
)
|
|
(3,757
|
)
|
||
Balance, December 31
|
$
|
301
|
|
|
$
|
4,160
|
|
|
December 31,
|
||||||
|
2010
|
|
2009
|
||||
Finished goods
|
$
|
8,533
|
|
|
$
|
11,850
|
|
Parts and components
|
1,814
|
|
|
1,269
|
|
||
|
$
|
10,347
|
|
|
$
|
13,119
|
|
|
Estimated
Useful Life
(in years)
|
|
December 31,
|
||||||
|
|
2010
|
|
2009
|
|||||
Leasehold improvements
|
5 to 20
|
|
$
|
2,588
|
|
|
$
|
2,767
|
|
Computer equipment
|
2 to 5
|
|
38,033
|
|
|
41,225
|
|
||
Machinery and equipment
|
3 to 5
|
|
6,703
|
|
|
8,393
|
|
||
Furniture and fixtures
|
5
|
|
955
|
|
|
2,573
|
|
||
Construction in process
|
N/A
|
|
101
|
|
|
554
|
|
||
Total cost
|
|
|
48,380
|
|
|
55,512
|
|
||
Accumulated depreciation
|
|
|
(44,585
|
)
|
|
(47,470
|
)
|
||
|
|
|
$
|
3,795
|
|
|
$
|
8,042
|
|
|
Goodwill
|
||
Balance, January 1, 2009
|
$
|
2,398
|
|
Currency exchange rate adjustment
|
396
|
|
|
Balance, December 31, 2009
|
2,794
|
|
|
Currency exchange rate adjustment
|
137
|
|
|
Balance, December 31, 2010
|
$
|
2,931
|
|
|
Estimated
Useful Life
(in years)
|
|
December 31,
|
||||||
|
|
2010
|
|
2009
|
|||||
Indefinite life trademarks
|
N/A
|
|
$
|
9,052
|
|
|
$
|
9,052
|
|
Patents
|
1 to 16
|
|
18,154
|
|
|
18,154
|
|
||
Total cost
|
|
|
27,206
|
|
|
27,206
|
|
||
Accumulated amortization - patents
|
|
|
(8,432
|
)
|
|
(6,368
|
)
|
||
|
|
|
$
|
18,774
|
|
|
$
|
20,838
|
|
|
December 31,
|
||||||
|
2010
|
|
2009
|
||||
Restructuring costs
|
$
|
—
|
|
|
$
|
609
|
|
Exit costs of discontinued operations
|
1,107
|
|
|
716
|
|
||
Payroll and benefits
|
1,954
|
|
|
3,903
|
|
||
Royalties
|
753
|
|
|
970
|
|
||
Legal and professional fees
|
488
|
|
|
1,265
|
|
||
Other
|
2,743
|
|
|
3,281
|
|
||
|
$
|
7,045
|
|
|
$
|
10,744
|
|
|
2010
|
|
2009
|
||||
Balance, January 1
|
$
|
8,379
|
|
|
$
|
17,837
|
|
Accruals
|
1,417
|
|
|
5,002
|
|
||
Adjustments
|
(1,166
|
)
|
|
(3,345
|
)
|
||
Payments
|
(4,695
|
)
|
|
(11,115
|
)
|
||
Balance, December 31
|
$
|
3,935
|
|
|
$
|
8,379
|
|
|
2010
|
|
2009
|
||||
United States
|
$
|
(11,077
|
)
|
|
$
|
(31,164
|
)
|
Non-U.S.
|
1,847
|
|
|
1,674
|
|
||
|
$
|
(9,230
|
)
|
|
$
|
(29,490
|
)
|
|
2010
|
|
2009
|
||||
Current:
|
|
|
|
||||
U.S. federal
|
$
|
(349
|
)
|
|
$
|
(12,153
|
)
|
U.S. state
|
26
|
|
|
(123
|
)
|
||
Non-U.S.
|
656
|
|
|
341
|
|
||
Total current
|
333
|
|
|
(11,935
|
)
|
||
Deferred:
|
|
|
|
||||
U.S. federal
|
202
|
|
|
397
|
|
||
U.S. state
|
17
|
|
|
403
|
|
||
Non-U.S
|
36
|
|
|
255
|
|
||
Total deferred
|
255
|
|
|
1,055
|
|
||
|
$
|
588
|
|
|
$
|
(10,880
|
)
|
|
December 31,
|
||||||
|
2010
|
|
2009
|
||||
Deferred income tax assets:
|
|
|
|
||||
Accrued liabilities
|
$
|
3,227
|
|
|
$
|
4,762
|
|
Allowance for doubtful accounts
|
13
|
|
|
119
|
|
||
Inventory valuation
|
408
|
|
|
893
|
|
||
Capitalized indirect inventory costs
|
167
|
|
|
249
|
|
||
Stock-based compensation expense
|
781
|
|
|
929
|
|
||
Net operating loss carryforward
|
36,933
|
|
|
24,216
|
|
||
Basis difference on assets held-for-sale
|
1,702
|
|
|
1,951
|
|
||
Capital loss carryforward
|
4,319
|
|
|
4,319
|
|
||
Basis difference on long-lived assets
|
10,110
|
|
|
13,262
|
|
||
Other
|
3,553
|
|
|
4,149
|
|
||
|
61,213
|
|
|
54,849
|
|
||
Less: Valuation allowance
|
(59,550
|
)
|
|
(53,712
|
)
|
||
Total deferred income tax assets
|
1,663
|
|
|
1,137
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Prepaid advertising
|
(301
|
)
|
|
(270
|
)
|
||
Other prepaids
|
(366
|
)
|
|
(368
|
)
|
||
Basis difference on long-lived assets
|
(2,135
|
)
|
|
(1,860
|
)
|
||
Undistributed earnings of foreign subsidiaries
|
(34
|
)
|
|
(113
|
)
|
||
Other
|
(543
|
)
|
|
—
|
|
||
Total deferred income tax liabilities
|
(3,379
|
)
|
|
(2,611
|
)
|
||
Net deferred income tax liability
|
$
|
(1,716
|
)
|
|
$
|
(1,474
|
)
|
|
December 31,
|
||||||
|
2010
|
|
2009
|
||||
Current deferred income tax assets
|
$
|
57
|
|
|
$
|
54
|
|
Current deferred income tax liabilities
|
(1,160
|
)
|
|
(1,220
|
)
|
||
Non-current deferred income tax assets, included in “Other assets”
|
395
|
|
|
446
|
|
||
Non-current deferred income tax liabilities
|
(1,008
|
)
|
|
(754
|
)
|
||
Net deferred income tax liability
|
$
|
(1,716
|
)
|
|
$
|
(1,474
|
)
|
|
2010
|
|
2009
|
||
U.S. statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
State tax, net of U.S. federal tax benefit
|
2.2
|
%
|
|
3.4
|
%
|
Nondeductible incentive stock option expense
|
0.2
|
%
|
|
(0.1
|
)%
|
Non-U.S. income taxes
|
13.1
|
%
|
|
(0.6
|
)%
|
Effect of double taxation dividend received
|
(13.6
|
)%
|
|
—
|
|
Nondeductible operating expenses
|
(0.1
|
)%
|
|
(0.1
|
)%
|
Research and development credit
|
—
|
%
|
|
0.3
|
%
|
Change in deferred tax measurement rate
|
0.3
|
%
|
|
(0.2
|
)%
|
Change in uncertain tax positions
|
(1.0
|
)%
|
|
(0.6
|
)%
|
Valuation allowance
|
(40.4
|
)%
|
|
(42.5
|
)%
|
Release of valuation allowance
|
—
|
%
|
|
42.4
|
%
|
Other
|
(2.1
|
)%
|
|
(0.1
|
)%
|
Effective income tax benefit (expense) rate
|
(6.4
|
)%
|
|
36.9
|
%
|
|
|
|
Amount
|
|
Expires in
|
||
Net operating loss carryforwards:
|
|
|
|
|
|||
|
Federal
|
|
$
|
76.6
|
|
|
2029 - 2030
|
|
State
|
|
104.6
|
|
|
2012 - 2030
|
|
|
Germany
|
|
6.7
|
|
|
Indefinite
|
|
|
Switzerland
|
|
13.3
|
|
|
2012 - 2017
|
|
|
China
|
|
3.5
|
|
|
2012 - 2013
|
|
|
Italy
|
|
2.1
|
|
|
2013 - 2015
|
|
Federal capital loss carryforward
|
|
11.3
|
|
|
2013
|
||
Income tax credit carryforwards:
|
|
|
|
|
|||
|
Federal
|
|
2.5
|
|
|
2018 - 2030
|
|
|
State
|
|
0.6
|
|
|
2018 - 2022
|
|
2010
|
|
2009
|
||||
Balance, January 1
|
$
|
3,249
|
|
|
$
|
2,165
|
|
Increases due to tax positions taken in previous periods
|
52
|
|
|
522
|
|
||
Decreases due to tax positions taken in previous periods
|
(75
|
)
|
|
(22
|
)
|
||
Increases due to tax positions taken in the current period
|
125
|
|
|
884
|
|
||
Decreases due to settlements with taxing authorities
|
—
|
|
|
—
|
|
||
Decreases due to lapse of statute of limitations
|
(9
|
)
|
|
(300
|
)
|
||
Balance, December 31
|
$
|
3,342
|
|
|
$
|
3,249
|
|
|
Total
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual Life
(in years)
|
|
Aggregate
Intrinsic
Value
($000s)
|
||||||
Options outstanding, January 1, 2009
|
2,011
|
|
|
$
|
10.70
|
|
|
|
|
|
|||
Granted
|
65
|
|
|
1.63
|
|
|
|
|
|
||||
Forfeited, cancelled or expired
|
(662
|
)
|
|
10.24
|
|
|
|
|
|
||||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
||||
Options outstanding, December 31, 2009
|
1,414
|
|
|
10.50
|
|
|
4.24
|
|
|
$
|
26
|
|
|
Vested and expected to vest, as of December 31, 2009
|
1,266
|
|
|
11.18
|
|
|
4.10
|
|
|
16
|
|
||
Options outstanding, January 1, 2010
|
1,414
|
|
|
10.50
|
|
|
|
|
|
||||
Granted
|
258
|
|
|
2.73
|
|
|
|
|
|
||||
Forfeited, cancelled or expired
|
(472
|
)
|
|
10.34
|
|
|
|
|
|
||||
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
||||
Options outstanding, December 31, 2010
|
1,200
|
|
|
8.80
|
|
|
4.27
|
|
|
22
|
|
||
Vested and expected to vest, as of December 31, 2010
|
1,171
|
|
|
8.88
|
|
|
4.28
|
|
|
22
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|||||||||||
Range of Exercise Prices
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Weighted-
Average
Exercise
Price
|
|
Number of
Options
Exercisable
|
|
Weighted-
Average
Exercise
Price
|
|||||||
$0.95 - $2.99
|
417
|
|
|
5.84
|
|
|
$
|
2.45
|
|
|
44
|
|
|
$
|
2.04
|
|
$3.40 - $4.15
|
240
|
|
|
4.11
|
|
|
4.13
|
|
|
159
|
|
|
4.14
|
|
||
$4.50 - $15.66
|
299
|
|
|
3.18
|
|
|
12.21
|
|
|
261
|
|
|
12.95
|
|
||
$16.10 - $26.77
|
232
|
|
|
3.19
|
|
|
19.63
|
|
|
208
|
|
|
20.03
|
|
||
$27.72 - $27.72
|
12
|
|
|
1.47
|
|
|
27.72
|
|
|
12
|
|
|
27.72
|
|
||
$0.95 - $27.72
|
1,200
|
|
|
4.27
|
|
|
8.80
|
|
|
684
|
|
|
12.62
|
|
|
Number
of
Shares
|
|
Weighted Average
Grant Date Fair
Value per Share
|
|||
Awards outstanding, January 1, 2009
|
144
|
|
|
$
|
9.23
|
|
Vested
|
(130
|
)
|
|
9.23
|
|
|
Forfeited
|
(14
|
)
|
|
9.23
|
|
|
Awards outstanding, December 31, 2009
|
—
|
|
|
—
|
|
|
Performance
Stock Units
|
|
Weighted Average
Grant Date Fair
Value per Share
|
|||
Units outstanding, January 1, 2009
|
33
|
|
|
$
|
15.60
|
|
Granted
|
—
|
|
|
—
|
|
|
Forfeited or expired
|
(33
|
)
|
|
15.60
|
|
|
Units outstanding, December 31, 2009
|
—
|
|
|
—
|
|
|
Granted
|
146
|
|
|
2.32
|
|
|
Forfeited or expired
|
—
|
|
|
—
|
|
|
Units outstanding, December 31, 2010
|
146
|
|
|
2.32
|
|
|
2010
|
|
2009
|
||||
Numerator:
|
|
|
|
||||
Loss from continuing operations
|
$
|
(9,818
|
)
|
|
$
|
(18,610
|
)
|
Loss from discontinued operations
|
(13,023
|
)
|
|
(34,687
|
)
|
||
Net loss
|
$
|
(22,841
|
)
|
|
$
|
(53,297
|
)
|
Denominator:
|
|
|
|
||||
Basic shares outstanding
|
30,744
|
|
|
30,664
|
|
||
Dilutive effect of stock options and restricted stock *
|
—
|
|
|
—
|
|
||
Diluted shares outstanding
|
30,744
|
|
|
30,664
|
|
||
|
|
|
|
||||
Loss per share from continuing operations:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.32
|
)
|
|
$
|
(0.61
|
)
|
Loss per share from discontinued operations:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.42
|
)
|
|
$
|
(1.13
|
)
|
Net loss per share:
|
|
|
|
||||
Basic and diluted
|
$
|
(0.74
|
)
|
|
$
|
(1.74
|
)
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2010
|
|
2009
|
||||
Net sales:
|
|
|
|
||||
Direct
|
$
|
96,668
|
|
|
$
|
123,045
|
|
Retail
|
67,789
|
|
|
63,597
|
|
||
Unallocated corporate (royalty income)
|
3,993
|
|
|
2,618
|
|
||
Consolidated net sales
|
$
|
168,450
|
|
|
$
|
189,260
|
|
Contribution:
|
|
|
|
||||
Direct
|
$
|
(10,778
|
)
|
|
$
|
(716
|
)
|
Retail
|
11,400
|
|
|
10,801
|
|
||
Unallocated corporate
|
3,994
|
|
|
1,664
|
|
||
Consolidated contribution
|
$
|
4,616
|
|
|
$
|
11,749
|
|
Reconciliation of consolidated contribution to loss from continuing operations:
|
|
|
|
||||
Consolidated contribution
|
$
|
4,616
|
|
|
$
|
11,749
|
|
Less:
|
|
|
|
||||
Selling and marketing expenses
|
(6
|
)
|
|
(804
|
)
|
||
General and administrative expenses
|
(14,093
|
)
|
|
(18,505
|
)
|
||
Research and development expenses
|
(86
|
)
|
|
(1,590
|
)
|
||
Restructuring costs
|
—
|
|
|
(14,151
|
)
|
||
Intangible asset impairment charges
|
—
|
|
|
(5,904
|
)
|
||
Interest expense, net
|
(140
|
)
|
|
(168
|
)
|
||
Other income (expense), net
|
479
|
|
|
(117
|
)
|
||
Income tax benefit (expense)
|
(588
|
)
|
|
10,880
|
|
||
Loss from continuing operations
|
$
|
(9,818
|
)
|
|
$
|
(18,610
|
)
|
Assets:
|
|
|
|
||||
Direct
|
$
|
17,345
|
|
|
$
|
21,402
|
|
Retail
|
31,084
|
|
|
31,672
|
|
||
Unallocated corporate
|
29,938
|
|
|
62,098
|
|
||
Total assets
|
$
|
78,367
|
|
|
$
|
115,172
|
|
Depreciation and amortization expense:
|
|
|
|
||||
Direct
|
$
|
4,000
|
|
|
$
|
5,347
|
|
Retail
|
2,226
|
|
|
1,428
|
|
||
Unallocated corporate
|
401
|
|
|
3,075
|
|
||
Total depreciation and amortization expense
|
$
|
6,627
|
|
|
$
|
9,850
|
|
|
|
||
2011
|
$
|
3,641
|
|
2012
|
2,528
|
|
|
2013
|
2,296
|
|
|
2014
|
1,255
|
|
|
2015
|
365
|
|
|
Thereafter
|
300
|
|
|
Minimum non-cancelable lease payments, net
|
$
|
10,385
|
|
|
Quarter Ended
|
||||||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
||||||||||
2010:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
45,644
|
|
|
$
|
30,642
|
|
|
$
|
38,474
|
|
|
$
|
53,690
|
|
|
$
|
168,450
|
|
Gross profit
|
22,965
|
|
|
13,469
|
|
|
16,618
|
|
|
23,694
|
|
|
76,746
|
|
|||||
Operating income (loss)
|
(1,940
|
)
|
|
(6,758
|
)
|
|
(3,225
|
)
|
|
2,354
|
|
|
(9,569
|
)
|
|||||
Income (loss) from continuing operations
|
(2,371
|
)
|
|
(6,994
|
)
|
|
(2,398
|
)
|
|
1,945
|
|
|
(9,818
|
)
|
|||||
Loss from discontinued operations
|
(5,420
|
)
|
|
(3,711
|
)
|
|
(1,908
|
)
|
|
(1,984
|
)
|
|
(13,023
|
)
|
|||||
Net loss
|
(7,791
|
)
|
|
(10,705
|
)
|
|
(4,306
|
)
|
|
(39
|
)
|
|
(22,841
|
)
|
|||||
Net loss per share, basic and diluted
|
$
|
(0.25
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
—
|
|
|
$
|
(0.74
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2009:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net sales
|
$
|
54,055
|
|
|
$
|
40,102
|
|
|
$
|
41,431
|
|
|
$
|
53,672
|
|
|
$
|
189,260
|
|
Gross profit
|
30,304
|
|
|
19,809
|
|
|
20,281
|
|
|
26,121
|
|
|
96,515
|
|
|||||
Operating loss
|
(3,715
|
)
|
|
(14,922
|
)
|
|
(2,822
|
)
|
|
(7,746
|
)
|
|
(29,205
|
)
|
|||||
Income (loss) from continuing operations
|
(5,424
|
)
|
|
(14,678
|
)
|
|
(1,523
|
)
|
|
3,015
|
|
|
(18,610
|
)
|
|||||
Income (loss) from discontinued operations
|
(8,395
|
)
|
|
(6,093
|
)
|
|
(22,895
|
)
|
|
2,696
|
|
|
(34,687
|
)
|
|||||
Net income (loss)
|
(13,819
|
)
|
|
(20,771
|
)
|
|
(24,418
|
)
|
|
5,711
|
|
|
(53,297
|
)
|
|||||
Net income (loss) per share, basic and diluted
|
$
|
(0.45
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(0.80
|
)
|
|
$
|
0.19
|
|
|
$
|
(1.74
|
)
|
|
2009 Quarter Ended
|
||||||||||||||||||
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
Total
|
||||||||||
Included in operating loss:
|
|
|
|
|
|
|
|
|
|
||||||||||
Restructuring expenses
|
$
|
2,049
|
|
|
$
|
11,796
|
|
|
$
|
201
|
|
|
$
|
105
|
|
|
$
|
14,151
|
|
Intangible asset impairment charges
|
—
|
|
|
—
|
|
|
2,101
|
|
|
3,803
|
|
|
5,904
|
|
|||||
Writeoff of deferred financing costs
|
—
|
|
|
223
|
|
|
—
|
|
|
406
|
|
|
629
|
|
|||||
Legal and contract settlement costs
|
(750
|
)
|
|
—
|
|
|
(200
|
)
|
|
200
|
|
|
(750
|
)
|
|||||
|
$
|
1,299
|
|
|
$
|
12,019
|
|
|
$
|
2,102
|
|
|
$
|
4,514
|
|
|
$
|
19,934
|
|
•
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
|
|
N
AUTILUS
, I
NC
.
|
|
|
|
|
Date: March 8, 2011
|
By:
|
/
S
/ E
DWARD
J. B
RAMSON
|
|
|
Edward J. Bramson
|
|
|
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
*By:
|
/
S
/ W
AYNE
M. B
OLIO
|
March 8, 2011
|
|
Wayne M. Bolio
|
|
|
Attorney-In-Fact
|
|
Exhibit No.
|
|
Description
|
2.1
|
|
Stock Purchase Agreement dated as of February 15, 2008 by and among the Company, DashAmerica, Inc. d/b/a/ Pearl Izumi USA, Inc. and Shimano American Corporation - Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, as filed with the Commission on February 22, 2008.
|
|
|
|
2.2
|
|
First Amendment to Stock Purchase Agreement dated as of April 18, 2008 by and among Nautilus, Inc., Shimano American Corporation and DashAmerica, Inc. D/B/A Pearl Izumi USA, Inc. - Incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K, as filed with the Commission on April 24, 2008.
|
|
|
|
3.1
|
|
Amended and Restated Articles of Incorporation - Incorporated by reference to Exhibit A to the Company's Schedule 14A, as filed with the Commission on April 22, 2008.
|
|
|
|
3.5
|
|
Amended and Restated Bylaws - Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K, as filed with the Commission on April 5, 2005.
|
|
|
|
3.6
|
|
Amendment to Amended and Restated Bylaws of the Company - Incorporated by reference to Exhibit 3.1 the Company's Current Report on Form 8-K, as filed with the Commission on January 31, 2007.
|
|
|
|
10.1*
|
|
Company Stock Option Plan, as amended - Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1, as filed with the Commission on March 3, 1999.
|
|
|
|
10.2*
|
|
Amendment to Company Stock Option Plan - Incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2000, as filed with the Commission on August 10, 2000.
|
|
|
|
10.3*
|
|
Company 2005 Long-Term Incentive Plan - Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, as filed with the Commission on June 10, 2005.
|
|
|
|
10.4*
|
|
First Amendment to the Company 2005 Long-Term Incentive Plan - Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2006, as filed with the Commission on November 9, 2006.
|
|
|
|
10.5*
|
|
Form of Employee Incentive Stock Option Agreement under the Company Stock Option Plan - Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Commission on March 16, 2005.
|
|
|
|
10.6*
|
|
Form of Nonstatutory Stock Option Agreement under the Company Stock Option Plan - Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Commission on March 16, 2005.
|
|
|
|
10.7*
|
|
Form of Nonstatutory Stock Option Agreement - Incorporated by reference to Exhibit 10 of the Company's Current Report on Form 8-K, as filed with the Commission on July 29, 2005.
|
|
|
|
10.8*
|
|
Form of Non-Employee Director Nonstatutory Stock Option Agreement - Incorporated by reference to Exhibit 10 of the Company's Current Report on Form 8-K, as filed with the Commission on August 19, 2005.
|
|
|
|
10.9*
|
|
Form of Performance Unit Agreement - Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2006, as filed with the Commission on August 9, 2006.
|
|
|
|
10.10*
|
|
Summary of Performance Unit Award - Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2006, as filed with the Commission on November 9, 2006.
|
|
|
|
10.11
|
|
Trademark License Agreement, dated September 20, 2001, by and between Pacific Direct, LLC and the Company - Incorporated by reference to Exhibit 2.1 of the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2001, as filed with the Commission on November 14, 2001.
|
|
|
|
10.12
|
|
License Agreement, dated April 26, 1999, as amended, between the Company and Gary D. Piaget - Incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the Commission on March 15, 2004.
|
|
|
|
10.13
|
|
Office Lease Agreement, dated June 30, 2009, between Columbia Tech Center LLC and the Company - Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K, as filed with the Commission on July 7, 2009.
|
|
|
|
10.14
|
|
Credit Agreement, dated December 22, 2009, between Bank of America N.A and the Company - Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Commission on January 5, 2010.
|
|
|
|
10.15
|
|
Supply Agreement dated as of May 2, 2008 by and among Nautilus, Inc., Land America Health and Fitness Co., Ltd. and Treuriver Investments Co. Limited - Incorporated by reference to Exhibit 10.4 of the Company's Form 10-Q for the three months ended March 31, 2008 as filed with the Commission on May 12, 2008. [Confidential treatment has been granted with respect to a portion of this Exhibit]
|
|
|
|
10.16
|
|
Settlement Agreement dated as of May 5, 2008 by and among Nautilus, Inc. Land America Health and Fitness Co., Ltd., Treuriver Investments Co. Limited, Michael C. Bruno and Yang Lin Qing - Incorporated by reference to Exhibit 10.5 of the Company's Form 10-Q for the three months ended March 31, 2008 as filed with the Commission on May 12, 2008.
|
|
|
|
10.17
|
|
Schwinn Asset Purchase Agreement dated as of December 5, 2009 between Nautilus, Inc. and Fit Dragon International, Inc. - Incorporated by reference to Exhibit 10.23 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.18
|
|
License Agreement dated as of December 29, 2009 between Nautilus, Inc. and Fit Dragon International, Inc. - Incorporated by reference to Exhibit 10.24 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.19
|
|
Stairmaster Asset Purchase Agreement dated as of December 5, 2009 between Nautilus, Inc. and Fit Dragon International, Inc. - Incorporated by reference to Exhibit 10.25 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.20
|
|
Technology Transfer and License Agreement dated as of December 29, 2009 between Nautilus, Inc. and Fit Dragon International, Inc. - Incorporated by reference to Exhibit 10.26 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.21
|
|
Asset Purchase Agreement dated as of February 18, 2010 between Nautilus, Inc. and Med-Fit Systems, Inc. - Incorporated by reference to Exhibit 10.27 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.22
|
|
Commercial License Agreement dated as of February 18, 2010 between Nautilus, Inc. and Med-Fit Systems, Inc. - Incorporated by reference to Exhibit 10.28 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.23
|
|
Lease Agreement dated as of February 19, 2010 between Nautilus, Inc. and Med-Fit Systems, Inc. - Incorporated by reference to Exhibit 10.29 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.24
|
|
Credit Agreement dated as of March 8, 2010 between Nautilus, Inc. and Bank of the West - Incorporated by reference to Exhibit 10.30 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.25
|
|
Security Agreement dated as of March 8, 2010 between Nautilus, Inc. and Bank of the West - Incorporated by reference to Exhibit 10.31 of the Company's Form 10-K for the fiscal year ended December 31, 2009 as filed with the Commission on March 8, 2010.
|
|
|
|
10.26
|
|
Private Label Consumer Credit Card Program Agreement, dated June 15, 2010, by and between the Company and GE Money Bank - Incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the three months ended June 30, 2010 as filed with the Commission on August 16, 2010. [Confidential treatment has been granted with respect to a portion of this Exhibit].
|
|
|
|
10.27
|
|
HELPcard Merchant Agreement, dated June 14, 2010, effective as of June 11, 2010, by and between the Company, and Dent-A-Med, Inc. - Incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the three months ended June 30, 2010 as filed with the Commission on August 16, 2010. [Confidential treatment has been granted with respect to a portion of this Exhibit].
|
|
|
|
10.28
|
|
Addendum dated August 20, 2010 to Supply Agreement dated May 2, 2008 between the Company, Treuriver Investments LIMITED, and Land America Health and Fitness Co. Ltd. - Incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the three months ended September 30, 2010 as filed with the Commission on November 9, 2010.
|
|
|
|
10.29
|
|
Note Purchase Agreement dated September 3, 2010, by and among the Company and certain entities under common control of Sherborne Investors GP, LLC and its affiliates - Incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the three months ended September 30, 2010 as filed with the Commission on November 9, 2010.
|
|
|
|
10.30
|
|
Subordination Agreement dated September 3, 2010, by and among the Company, certain entities under common control of Sherborne Investors GP, LLC and its affiliates and Bank of the West - Incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q for the three months ended September 30, 2010 as filed with the Commission on November 9, 2010.
|
|
|
|
10.31
|
|
First Amendment dated November 6, 2010 to Private Label Consumer Credit Card Program Agreement, dated June 15, 2010, by and between the Company and GE Money Bank.
|
|
|
|
10.32
|
|
Merchant Agreement dated December 15, 2010, between the Company and Hy Cite Corporation [Confidential treatment has been requested with respect to a portion of this Exhibit].
|
|
|
|
10.33*
|
|
Executive Employment Agreement, dated September 21, 2007, between the Company and Wayne M. Bolio.
|
|
|
|
10.34*
|
|
Executive Employment Agreement, dated September 27, 2007, between the Company and Deborah H. Marsh.
|
|
|
|
10.35*
|
|
Executive Employment Agreement, dated December 4, 2007, between the Company and Kenneth L. Fish.
|
|
|
|
10.36*
|
|
Offer Letter, dated April 9, 2009, between the Company and Ryan A. Neal.
|
|
|
|
21
|
|
Subsidiaries of the Company.
|
|
|
|
23
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
|
31.1
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
I.
|
amendmentS to the agreement
|
NAUTILUS, INC.
By: /s/ William McMahon
Its: SVP Consumer
|
GE MONEY BANK
By: /s/ Glenn Marino
Its: EVP
|
To the Company:
|
Nautilus, Inc.
16400 SE Nautilus Drive
Vancouver, WA 98683
Attention: Deborah Marsh
|
With a Copy to:
|
Garvey, Schubert & Barer
1191 Second Avenue, 18
th
Floor
Seattle, WA 98101-2939
Attention: Anne F. Preston
|
To Employee:
|
Wayne M. Bolio
16400 SE Nautilus Drive
Vancouver, WA 98683
|
To the Company:
|
Nautilus, Inc.
16400 SE Nautilus Drive
Vancouver, WA 98683
Attention: Deborah Marsh
|
With a Copy to:
|
Garvey, Schubert & Barer
1191 Second Avenue, 18
th
Floor
Seattle, WA 98101-2939
Attention: Anne F. Preston
|
To Employee:
|
Deborah H. Marsh
16400 SE Nautilus Drive
Vancouver, WA 98683
|
To the Company:
|
Nautilus, Inc.
16400 SE Nautilus Drive
Vancouver, WA 98683
Attention: Deborah Marsh
|
With a Copy to:
|
Garvey, Schubert & Barer
1191 Second Avenue, 18
th
Floor
Seattle, WA 98101-2939
Attention: Anne F. Preston
|
To Employee:
|
Kenneth L. Fish
16400 SE Nautilus Drive
Vancouver, WA 98683
|
1.
|
Your employment is expected to start on May 4
th
, 2009.
|
2.
|
Your initial compensation will consist of a salary of $225,000, currently payable bi-weekly or in accordance with the company's payroll schedule.
|
3.
|
Eligible for a 100% quarterly bonus based on the same terms as those in the Nautilus Incentive Plan. Your eligibility to participate in the plan will begin in Q3, 2009.
|
4.
|
A lump sum bonus of $56,000, gross to be paid with your first paycheck. This bonus will vest in full after one year of employment. If you should resign or be terminated for cause within your first year of employment, you will be required to repay the full balance.
|
5.
|
Option to purchase 10,000 shares of Nautilus stock in accordance with the stock option plan currently in effect.
|
6.
|
One year severance during the first year of employment if your employment ends for other than cause. Six months after the first year of employment, if your employment ends for other than cause.
|
7.
|
Airfare for final move to Vancouver, WA.
|
|
/s/ Deloitte & Touche LLP
|
|
Portland, Oregon
|
March 8, 2011
|
1.
|
I have reviewed this annual report on Form 10-K of Nautilus, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
March 8, 2011
|
By:
|
/s/ Edward J. Bramson
|
Date
|
|
Edward J. Bramson,
|
|
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Nautilus, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
March 8, 2011
|
By:
|
/s/ Kenneth L. Fish
|
Date
|
|
Kenneth L. Fish,
|
|
|
Chief Financial Officer
|
March 8, 2011
|
By:
|
/s/ Edward J. Bramson
|
Date
|
|
Edward J. Bramson,
|
|
|
Chairman and Chief Executive Officer
|
March 8, 2011
|
By:
|
/s/ Kenneth L. Fish
|
Date
|
|
Kenneth L. Fish,
|
|
|
Chief Financial Officer
|