Nautilus 2015 Annual Report Download - page 13
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Please find page 13 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.duties, tariffs or other restrictions. Further, our business depends on our ability to source and distribute products in a timely manner. As a result, we rely on the free
flow of goods through open and operational ports worldwide. Labor disputes at various ports create significant risks for our business, particularly if these disputes
result in work slowdowns, lockouts, strikes or other disruptions during our peak importing seasons. Any of these factors could result in reduced sales, canceled
sales orders and unanticipated inventory accumulation and have a material adverse effect on our operating results, financial position and cash flows.
Unpredictable events and circumstances relating to our international operations, including our use of non-U.S. manufacturers, could have a material
adverse effect on our business.
Substantially all of our products are manufactured outside of the U.S. and a portion of our revenue is derived from sales outside the U.S., primarily in Canada, but
also in markets outside North America. Accordingly, our future results could be materially adversely affected by a variety of factors pertaining to international
trade, including: changes in a specific country's or region's political or economic conditions; trade restrictions; import and export licensing requirements; changes
in regulatory requirements; additional efforts to comply with a variety of foreign laws and regulations; and longer payment cycles in certain countries, thus
requiring us to finance customer purchases over a longer period than those made in the U.S. In addition, we rely on the performance of our employees located in
foreign countries. Our ability to control the actions of these employees may be limited by the laws and regulations in effect in each country. Changes in any of the
above factors could have a material adverse effect on our operating results, financial position and cash flows.
Currency exchange rate fluctuations could result in higher costs, reduced margins or decreased international sales.
Substantially all of our products are manufactured outside of the U.S. and, therefore, currency exchange rate fluctuations could result in higher costs for our
products, or could disrupt the business of independent manufacturers that produce our products, by making their purchases of raw materials more expensive and
more difficult to finance. Our future financial results could be significantly affected by the value of the U.S. dollar in relation to the foreign currencies in which we,
our customers or our suppliers conduct business. Past fluctuations in currency exchange rates versus the U.S. dollar have caused our costs for certain products to
increase, reducing our margins and cash flows. Similar fluctuations and cost increases may occur in the future. If we are unable to increase our selling prices to
offset such cost increases, or if such increases have a negative impact on sales of our products, our revenues and margins would be reduced and our operating
results and cash flows would be negatively impacted. In addition, a portion of our revenue is derived from sales outside the U.S., primarily in Canada and Europe.
Currency rate fluctuations could make our products more expensive for foreign consumers and reduce our sales, which would negatively affect our operating
results and cash flows.
We may face competition from providers of comparable products in categories where our patent protection is limited or reduced due to patent
expiration. Increased competition in those product categories could negatively affect our future revenues and operating results.
While we own a number of patents covering aspects of our TreadClimber ® products, the introduction of comparable products designed to compete with our
TreadClimber ® line of specialized cardio machines may increase in the future as a result of certain patent expirations. Sales of cardio products, including
TreadClimber ® and Max Trainer ® products, represent a substantial portion of our Direct segment revenues. Introduction by competitors of comparable products, a
maturing product lifecycle or other factors could result in a decline in our revenues derived from these products. A significant decline in our sales of these
products, without offsetting sales gains, would have a material adverse effect on our operating results, financial position and cash flows.
Failure or inability to protect our intellectual property could significantly harm our competitive position.
Protecting our intellectual property is an essential factor in maintaining our competitive position in the health and fitness industry. Failure to maximize or to
successfully assert our intellectual property rights could impact our competitiveness. We rely on trademark, trade secret, patent and copyright laws to protect our
intellectual property rights. Many factors bear upon the exclusive ownership and right to exploit intellectual properties, including, without limitation, prior rights of
third parties and nonuse and/or nonenforcement by us and/or related entities. While we make efforts to develop and protect our intellectual property, the validity,
enforceability and commercial value of our intellectual property rights may be reduced or eliminated. We cannot be sure that our intellectual property rights will be
maximized or that they can be successfully asserted. There is a risk that we will not be able to obtain and perfect our own or, where appropriate, license intellectual
property rights necessary to compete successfully within the marketplace for our products. We cannot be sure that these rights, if obtained, will not be invalidated,
circumvented or challenged in the future. If we do not, or are unable to, adequately protect our intellectual property, then we may face difficulty in differentiating
our products from those of our competitors and our business, operating results and financial condition may be adversely affected.
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