Nautilus 2008 Annual Report Download - page 15

Table of Contents
Failure to successfully implement our turnaround strategies may adversely affect revenues and expenses.
To implement our business strategy, we must effectively manage our turnaround in each of our business segments. We expect to continue to
change various aspects of our business, enhance our information systems and operations, and attract, retain and manage qualified personnel. Our
turnaround efforts could place an increasing strain on management, financial, product design, marketing, manufacturing, distribution and other
resources, and we could experience operating difficulties in association with our turnaround and restructuring plans. As a result of these and
other pressures, our turnaround strategies involve many risks and uncertainties that could have a material adverse effect on our results of
operations, financial condition and cash flows.
Our turnaround activities have resulted in significant charges to our results of operations. We anticipate the completion of our turnaround
strategy will require additional charges as we continue to restructure our business and operations. We are exploring opportunities to sublease or
terminate our leases on properties we are no longer using in Tulsa and to reduce the amount of space leased for our headquarters in Vancouver,
Washington. We may decide to further consolidate our U.S. or international operations. Any decisions we make regarding these and other
turnaround and restructuring efforts may have a material adverse affect on our results of operations, financial condition and cash flows.
A significant decline in availability of media time or substantially higher advertising rates may hinder our ability to effectively market
our products and may reduce profitability.
We depend on television commercials and television infomercials to market and sell out direct marketed products. Consequently, a marked
increase in the price we must pay for our preferred media time or a reduction in its availability may adversely impact our financial performance.
Our revenues could decline due to changes in credit markets and decisions made by credit providers.
Reductions in consumer lending and the availability of consumer credit could limit the number of customers with the financial means to
purchase our products. In the past, we have partnered with financial service companies, including HSBC, to assist our customers in obtaining
financing to purchase our products. Our present agreement with HSBC helps certain customers obtain financing if they qualify for HSBC’s
private label Bowflex revolving credit card. In March 2009, HSBC announced it would no longer participate in consumer lending in the U.S.
through its HFC and Beneficial brand names. We have been notified by HSBC that the announced restructuring of their operations would not
affect our agreement with HSBC or the Bowflex revolving credit card. However, we cannot be assured that HSBC, or others, will continue to
provide consumers with access to credit or that credit limits under such arrangements will not be reduced. Such restrictions or reductions in the
availability of consumer credit could have a material adverse impact on our results of operations, financial condition and cash flows.
Failure to collect accounts receivable from our customers could adversely affect our ability to operate our business.
Our trade receivables reflect a large and diverse customer base, with approximately 70% pertaining to customers in the U.S. and approximately
30% pertaining to international customers. Our trade receivables are generally unsecured and therefore collection is affected by the economic
conditions in each of our principal markets. Collection of receivables due from customers outside the U.S. may also be negatively impacted by
the nature, and extent of our business presence in a particular country and any rights or protections afforded to our customers under a country’s
legal system. We cannot predict, with certainty, future changes in the financial stability of our customers or in the general economy. We
periodically review the credit worthiness of our customers to help gauge collectability and increase our allowance for doubtful accounts when
collection is at risk. However, our actual future losses from uncollectible accounts may differ from our estimates. Our ability to collect the
amounts due from our customers could be impacted by various factors including: a deterioration in the financial condition of a key customer,
inability of customers to obtain bank credit lines, a significant slow-down
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