Nautilus 2008 Annual Report Download - page 16

Table of Contents
in the economy, our efforts to pursue collections, product quality matters or other customer disputes. If our estimates of uncollectible amounts
are inaccurate or change significantly or we are unable to collect amounts due from our customers, it could have a material adverse affect on our
operating results, financial condition and cash flows.
If our contract manufacturers experience any delay, disruption or quality control problems in their operations, we could lose market
share and revenues, and our reputation may be harmed.
We have outsourced the manufacturing of many of our products, including substantially all of our consumer 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 platform to a single contract manufacturer.
Our reliance on contract manufacturers exposes us to the following risks over which we may have limited control:
Our contract manufacturers are primarily located in Asia 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. In addition, other than our contract with Land America,
which expires in December 2010, our third-party manufacturing contracts are terminable by either party on relatively short notice.
Our revenues and profitability can fluctuate from period to period and are often difficult to predict due to factors beyond our control.
Our results of operations for any individual quarter or year may not be indicative of results to be expected in future periods. Our operating results
have historically been, and are expected to continue to be, subject to quarterly and yearly fluctuations as a result of a number of factors,
including:
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•
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;
•
The 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
•
Reduced control over the availability of our products.
•
The introduction and market acceptance of new products;
•
Variations in product selling prices and costs and the mix of products sold;
• The size and timing of customer orders, which, in turn, often depend upon the success of our customers’ businesses or specific
products;
•
Changes in the market conditions for consumer and commercial fitness equipment;
•
Changes in macroeconomic factors;
•
The availability of consumer and commercial credit;
•
The timing and availability of products coming from our offshore contract manufacturing partners;