Nautilus 2015 Annual Report Download - page 12
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Please find page 12 of the 2015 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.• preserving the important licensing, research and development, manufacturing and supply, distribution, marketing, customer and other
relationships of acquired businesses;
• minimizing the diversion of management’s attention from ongoing business concerns;
• the potential loss of key employees of the acquired business;
•coordinating geographically separate operations; and
• regulatory and legal issues relating to the integration of legacy and newly-acquired businesses.
The purchase consideration and other costs and expenses of acquisitions could negatively impact our net income and earnings per share and a failure to realize the
anticipated benefits of acquisitions would have a material adverse effect on our business, results of operations or financial condition.
If our contract manufacturers experience any delay, disruption or quality control problems in their operations, we could lose revenues, and our
reputation and market share may be harmed.
We have outsourced the production of all of our products to third-party manufacturers. We rely on our contract manufacturers to procure components and provide
spare parts in support of our warranty and customer service obligations. We generally commit the manufacturing of each product to a single contract manufacturer.
Our reliance on contract manufacturers exposes us to the following risks over which we may have limited control:
• Unexpected increases in manufacturing and repair costs;
• Interruptions in shipments if our contract manufacturer is unable to complete production;
• Inability to completely control the quality of finished products;
•Inability to completely control delivery schedules;
• Changes in our contract manufacturer's business models or operations;
• Potential increases in our negotiated product costs as a result of fluctuations in currency exchange rates;
• 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;
• Potential lack of adequate capacity to manufacture all or a part of the products we require; and
• Potential unauthorized reproduction or counterfeiting of our products.
Substantially all of our contract manufacturers are located in Asia, primarily China and Taiwan, and may be subject to disruption by natural disasters, as well as
political, social or economic instability. The temporary or permanent loss of the services of any of our primary contract manufacturers could cause a significant
disruption in our product supply chain and operations and delays in product shipments.
Our third-party manufacturing contracts are generally of annual or shorter duration, or manufactured products are sourced on the basis of individual purchase
orders. There is no assurance that we will be able to maintain our current relationships with these parties or, if necessary, establish future arrangements with other
third-party manufacturers on commercially reasonable terms. Further, while we maintain an active quality control, factory inspection and qualification program, we
cannot assure that their manufacturing and quality control processes will be maintained at a level sufficient to meet our inventory needs or prevent the inadvertent
sale of substandard products. While we believe that products manufactured by our current third-party manufacturers could generally be procured from alternative
sources, temporary or permanent loss of services from a significant manufacturer could cause disruption in our supply chain and operations.
Our inventory purchases are subject to long lead times, which could negatively impact our sales, cash flows and liquidity.
All of our products are produced by third-party manufacturers, substantially all of which are located in Asia, primarily China and Taiwan. Lead times for inventory
purchases from our Asian suppliers, from order placement to receipt of goods, generally range from approximately two to three months, of which transit time
represents three-to-four weeks. The length of our lead times requires us to place advance manufacturing orders based on management forecasts of future demand
for our products. Due to the length of our lead times, our sales and cash flows may be negatively impacted if we do not have sufficient inventory on hand to meet
customer demand for such items. In addition, our liquidity and cash flows may be negatively affected, and inventory obsolescence may increase, if the quantity of
products we order exceeds customer demand for such items.
A delay in getting non-U.S.-sourced products through port operations and customs in a timely manner could result in reduced sales, canceled sales orders
and unanticipated inventory accumulation.
Most of our imported products are subject to duties or tariffs that affect the cost and quantity of various types of goods imported into the U.S. or our other markets.
The countries in which our products are produced or sold may adjust or impose new quotas,
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