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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2001
Or
[_] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to _____________
Commission file number 000-25867
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Direct Focus, Inc.
401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
The Nautilus Group, Inc.
1400 NE 136th Avenue
Vancouver, WA 98684
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1
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT .............................................. 3
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31,
2001 AND 2000:
Statements of Net Assets Available for Benefits ...................... 4
Statements of Changes in Net Assets Available for Benefits ........... 5
Notes to Financial Statements ........................................ 6
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2001:
Schedule H, Line 4i - Schedule of Assets Held for Investment
Purposes at Year End ................................................. 9
Schedule G - Schedule of Non-Exempt Transactions ..................... 10
SIGNATURE ................................................................. 11
EXHIBIT INDEX ............................................................. 12
EXHIBIT 23, INDEPENDENT AUDITORS' CONSENT ................................. 13
Schedules not filed herewith are omitted because of the absence of the
conditions under which they are required.
2
INDEPENDENT AUDITORS' REPORT
Direct Focus, Inc. 401(k) Savings Plan
Vancouver, Washington
We have audited the accompanying statements of net assets available for benefits
of the Direct Focus, Inc. 401(k) Savings Plan (the "Plan") as of December 31,
2001 and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2001 and 2000, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
Table of Contents are presented for the purpose of additional analysis and are
not a required part of the basic 2001 financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
DELOITTE & TOUCHE LLP
June 14, 2002
3
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
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2001 2000
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ASSETS:
Investments, at fair value (Note 3) $ 3,991,045 $ 1,596,860
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Receivables:
Employee contributions 51,362 31,214
Employer contributions 207,941 145,939
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Total receivables 259,303 177,153
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LIABILITIES - Accounts payable (3,935) --
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NET ASSETS AVAILABLE FOR BENEFITS $ 4,246,413 $ 1,774,013
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See notes to financial statements.
4
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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2001 2000
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ADDITIONS:
Dividends $ 28,890 $ 127,317
Net appreciation (depreciation) in
fair value of investments (Note 3) 364,338 (49,945)
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Net investment income 393,228 77,372
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Contributions:
Participant contributions 1,085,208 701,274
Employer matching contributions 207,941 145,939
Rollover contributions 1,006,993 96,918
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Total contributions 2,300,142 944,131
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Total additions 2,693,370 1,021,503
DEDUCTIONS - Benefits paid to participants 220,970 50,047
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NET INCREASE 2,472,400 971,456
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 1,774,013 802,557
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NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 4,246,413 $ 1,774,013
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See notes to financial statements.
5
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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1. DESCRIPTION OF PLAN
The following description of the Direct Focus, Inc. 401(k) Savings Plan
(the "Plan") is provided for general information purposes only.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
GENERAL - The Plan is a defined contribution 401(k) plan maintained for
the benefit of all eligible employees of Direct Focus, Inc. (the
"Company"). On May 21, 2002, the Company changed its name to The Nautilus
Group, Inc., and now trades under the stock ticker symbol "NLS." The Plan
was established effective January 1, 1999 and contributions to the Plan
began on March 4, 1999. The Plan is available to all eligible employees of
the Company who are age 18 or older. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS - Participants may voluntarily contribute between 1% and 20%
of their compensation, limited to $10,500 in 2001 and 2000, as prescribed
by ERISA. Participants may change their contribution percentage quarterly.
Participants may also contribute amounts representing distributions from
other qualified defined benefit or contribution plans. Participants direct
the investment of their contributions and employer matching contributions
into various investment options offered by the Plan. The Plan currently
offers ten mutual funds and one employer stock fund as investment options
for participants. Participants can change the allocation of contributions
or transfer balances between funds up to six times per year. The Company
may match a portion of the participant's elective contribution. The
Company makes matching contributions of 50% of the employee contributions
on the first 6% of allowable employee compensation for all eligible
employees excluding Nautilus Human Performance Systems, Inc. ("Nautilus
HPS") employees. For Nautilus HPS employees, the Company matches 35% of
employee contributions on the first 4% of allowable employee compensation.
Matching contributions are subject to certain limitations. Generally,
participants must have worked a minimum of 1,000 hours during the Plan
year and must be employed by the Company on the last day of the Plan year
in order to receive the matching contributions. In addition to the above
requirements, participants must have worked 12 months before initially
becoming eligible to receive the match.
On September 20, 2001, the Company acquired the Fitness Division ("Schwinn
Fitness") of Schwinn/GT Corp. As a result of this acquisition, Schwinn
Fitness employees became eligible to participate in the Plan and execute
rollover contributions to the Plan beginning October 1, 2001.
PARTICIPANT ACCOUNTS - A separate account is maintained for each
participant, which is credited with the participant's contributions, the
Company's matching contributions, and an allocation of Plan earnings or
losses. Allocation of Plan earnings or losses is based upon participant
account balances. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
6
VESTING - Participants are fully vested at all times in that portion of
their accounts attributable to their own contributions and earnings or
losses thereon. A participant vests in the Company's matching
contributions and earnings or losses thereon pursuant to the following
vesting schedule.
YEARS OF SERVICE VESTING PERCENTAGE
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Less than 1 0%
1 25%
2 50%
3 75%
4 100%
PAYMENT OF BENEFITS - Upon termination of service, a participant will be
paid a lump-sum amount equal to the vested account value if less than
$5,000. In addition to the lump-sum payment option, participants who
maintain a balance greater than $5,000 may elect to maintain their account
in the Plan until a future date, elect a partial distribution, or elect to
receive installment payments.
FORFEITURES - Forfeited balances of terminated participants' nonvested
accounts are allocated as a discretionary matching contribution for the
plan year in which the forfeiture occurs.
TERMINATION - Although it has not expressed any intent to do so, the
Company may terminate the Plan or discontinue contributions at any time,
subject to the provisions of ERISA. In the event of total or partial
termination of the Plan, the accounts of all affected participants shall
become fully vested and nonforfeitable.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared
under the accrual method of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are
stated at fair value, which is based on published market prices at
year-end.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
BENEFIT PAYMENTS - Benefits are recorded when paid.
ADMINISTRATIVE EXPENSES are paid by the Plan to the extent not paid by the
Company.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
INCOME TAXES - The Plan document is based on a non-standardized prototype
plan and adoption agreement, which were approved by the Internal Revenue
Service ("IRS"), as to form, by a letter dated November 19, 2001. However,
the Plan has not yet received a determination letter from the IRS for the
specific provisions of the adoption agreement as adopted by the Plan. The
Plan Administrator believes that the Plan is currently designed and being
operated in accordance with the applicable requirements of the Internal
Revenue Code. Accordingly, no provision for income taxes has been included
in the Plan's financial statements.
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RECLASSIFICATIONS - Certain prior year amounts have been reclassified to
conform to the current year presentation.
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets available for benefits at December 31:
2001 2000
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AIM Balanced Fund $ -- $ 111,691
American Balanced Fund, Inc. Income Fund 301,039 --
Direct Focus, Inc. Common Stock 1,345,250 315,092
Fundamental Investors Fund 303,352 240,177
Growth Fund of America, Inc. 926,189 533,005
New Perspective Fund 325,508 233,243
Net appreciation (depreciation) by investment type for the year ended
December 31 is as follows:
2001 2000
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Mutual funds $ (233,632) $ (111,265)
Common stock 597,970 61,320
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Total $ 364,338 $ (49,945)
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4. PARTY-IN-INTEREST TRANSACTIONS
The Plan invests in shares of the Company's common stock at the direction
of the participants.
5. CONCENTRATION OF RISK
The Plan's assets consist of financial instruments including temporary
cash investments, mutual funds, and Company common stock. These financial
instruments may subject the Plan to concentrations of risk as, from time
to time, cash balances exceed amounts insured by the Federal Deposit
Insurance Corporation, and investments in mutual funds and Company stock
are subject to changes in market values of such investments. Due to the
level of risk associated with such investments, it is reasonably possible
that changes in the values of such investments will occur in the near term
and that such changes could materially affect the amounts reported in the
statements of net assets available for benefits.
6. SUBSEQUENT EVENT
On February 8, 2002, the Company acquired StairMaster Sports/Medical Inc.
("StairMaster"). As a result of this acquisition, StairMaster employees
became eligible to participate in the Plan and execute rollover
contributions to the Plan beginning March 1, 2002.
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DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT YEAR END
DECEMBER 31, 2001
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(e)
(b) Identity of Issue/ (d) Current
(a) (c) Description of Investment Cost Value
CASH $ 120,617
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MUTUAL FUNDS:
American Balanced Fund, Inc. Income Fund 301,039
Dreyfus Premier Core Fund 76,856
Euro Pacific Growth Fund 92,785
Franklin Small Capital Growth Fund 131,533
Fundamental Investors Fund 303,352
Growth Fund of America, Inc. 926,189
MetLife Stable Value Fund 197,523
New Perspective Fund 325,508
Munder Index 500 A Fund 114,746
Putnam Small Cap Value A Fund 55,647
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Total mutual funds 2,525,178
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* COMMON STOCK - Direct Focus, Inc. 1,345,250
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TOTAL INVESTMENTS $3,991,045
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* Denotes a party-in-interest with respect to the Plan
NOTE: Historical cost information is not required for
participant-directed investments
9
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
SCHEDULE G - SCHEDULE OF NONEXEMPT TRANSACTIONS
YEAR ENDED DECEMBER 31, 2001
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(i)
(g) Current
(c) Expense Value
(a) (b) Description (d) (e) (f) Incurred (h) of Asset (j)
Identity of Relationship of Purchase Selling Lease With Trans- Cost Transac- Net Gain
Party Involved to Plan Transaction Price Price Rental action of Asset tion Date or (Loss)
Direct Focus, Inc. Plan Sponsor Untimely $ -- $ -- $ -- $ -- $ 1,941 $ 1,941 $ --
remittance of
employee
contributions*
* In 2001, the Plan Sponsor failed to remit certain employee deferrals to the
trustee within the required time frame. The deferrals, plus estimated
earnings thereon, were remitted to the trustee and allocated to participant
accounts subsequent to this date.
10
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
plan administrator of the Direct Focus, Inc. 401(k) Savings Plan has duly caused
this annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
By: THE NAUTILUS GROUP, INC.,
the plan administrator
Date: June 14, 2002 By: /s/ Rod W. Rice
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Rod W. Rice, Chief Financial Officer,
Treasurer and Secretary
Direct Focus, Inc. 401(k) Savings Plan
Administrator
11
EXHIBIT INDEX
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Document Exhibit Number
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Independent Auditors' Consent 23
12
EXHIBIT 23
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-46936 of The Nautilus Group, Inc. on Form S-8 of our report dated June 14,
2002, appearing in this Annual Report on Form 11-K of the Direct Focus, Inc.
401(k) Savings Plan for the year ended December 31, 2001.
DELOITTE & TOUCHE LLP
Portland, Oregon
June 28, 2002