Nautilus 2003 Annual Report Download - page 24

Table of Contents
In summary, we had a difficult year in 2003, and 2004 will also present a number of challenges, but we are encouraged about our progress-to-
date on our turnaround plan and our long-term potential. The turnaround plan we embarked upon in the middle of 2003 is a rigorous
undertaking, but we believe that the brand and channel segmentation work we initiated will create the leading health and fitness company and
deliver long-term value for our shareholders. In 2004 and beyond we plan to:
• Capture a significantly greater share of the cardiovascular fitness equipment market, which our market research shows makes up
approximately 60% of the consumer dollars spent on fitness equipment through the retail channel;
• Continue to diversify our product line by leveraging our research and development capabilities to launch new innovative products
that consumers demand;
• Leverage our sales channels and sell more products through our retail channels to diversify our portfolio and sell products where
consumers shop. In addition, we will continue to pursue new sales channels, such as the strategic relationship we began with
Amazon.com, Inc. in the latter half of 2003; and
We are excited about the Company’s prospects as we continue to build on our solid foundation with a blueprint based on financial rigor,
innovation and trust. Through careful planning and consistent execution, we expect to deliver both sales and earnings growth over the long
term. We believe we have the infrastructure, balance sheet and management team to support this growth. Over the next nine to twelve months,
we intend to continue laying the foundation for clear and sustainable progress, and we expect to show measurable results from these efforts in
the latter part of 2004 and beyond.
CRITICAL ACCOUNTING POLICIES
• Continue to improve operating efficiencies and cash flow by streamlining operations and maximizing business synergies, such as
brand equity, sales channels and marketing resources.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial
Statements, which have been prepared in accordance with Generally Accepted Accounting Principles. The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development,
selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates
under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are
highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following
critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial
Statements.
Revenue Recognition
We recognize revenue when products are shipped and we have no significant remaining obligations, persuasive evidence of an arrangement
exists, the price to the buyer is fixed or determinable, and
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