Nautilus 2001 Annual Report Download - page 34

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A SIGNIFICANT DECLINE IN AVAILABILITY OF MEDIA TIME AND A MARKED INCREASE IN ADVERTISING RATES MAY
HINDER OUR ABILITY TO EFFECTIVELY MARKET OUR PRODUCTS AND MAY REDUCE PROFITABILITY.
We depend primarily on 60-second "spot" television commercials and 30-minute television "infomercials" to market and sell our
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.
WE DEPEND ON A SINGLE CONSUMER FINANCE COMPANY TO PROVIDE FINANCING PACKAGES TO OUR CUSTOMERS; A
DETERIORATION OF THE CONSUMER FINANCE MARKET OR FAILURE BY THE FINANCE COMPANY TO PROVIDE
FINANCING TO OUR CUSTOMERS COULD NEGATIVELY IMPACT SALES OF OUR DIRECT-MARKETED PRODUCTS.
In purchasing our products, approximately 41% of our direct-marketed customers utilize convenient financing packages provided by an
independent finance company. We believe that convenient consumer financing is an important tool in our direct marketing efforts and induces
many of our customers to make purchases when they otherwise would not. We facilitate the availability of convenient financing to our
customers in order to increase our sales. Consumers may be less likely to purchase our products if the consumer finance market were to
deteriorate so that financing is less available or less convenient to our customers. In addition, we currently utilize the services of a single
consumer finance company. Although we believe we could enter into similar arrangements with other provides if needed, a failure by the
current provider to adequately service our customers could temporarily disrupt sales.
OUR 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 fitness and health industries. If we do not
or are unable to adequately protect our intellectual property, our sales and profitability could be adversely affected. We currently hold a number
of patents and trademarks and have several patent and trademark applications pending. However, our efforts to protect our proprietary rights
may be inadequate and applicable laws provide only limited protection.
A DETERIORATION IN PRODUCT QUALITY OR INCREASE IN PRODUCT LIABILITY COULD ADVERSELY AFFECT OUR
BUSINESS.
We rely on third party manufacturers for a significant portion of our product components and we may not be able to consistently control the
quality of such components. Any material increase in the quantity of products returned by our customers for purchase-price refunds could
adversely affect revenues. In addition, we are subject to potential product liability claims if our products injure, or allegedly injure, our
customers or other users. Our financial performance could be affected if our warranty reserves are inadequate to cover warranty claims on our
products. We could become liable for significant monetary damages if our product liability insurance coverage and reserves fail to cover future
product liability claims.
GOVERNMENT REGULATORY ACTIONS COULD DISRUPT OUR DIRECT MARKETING EFFORTS AND PRODUCT SALES.
Various federal, state and local government authorities, including the Federal Trade Commission and the Consumer Products Safety
Commission, regulate our direct marketing efforts and products. Our sales and profitability could be significantly harmed if any of these
authorities
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2002. EDGAR Online, Inc.