Nautilus 2002 Annual Report Download - page 33

During the first quarter of 2003, we announced a $50 million stock repurchase program which expires June 30, 2003, and a $0.40 annual stock
dividend to be paid $0.10 per quarter commencing March 10, 2003. We intend to use cash generated from operations to finance the dividend
and any stock repurchase activity.
We believe our existing cash balances, cash generated from operations and borrowings available under our line of credit, will be sufficient to
meet our capital requirements for the foreseeable future.
INFLATION AND PRICE INCREASES
Although we cannot accurately anticipate the effect of inflation on our operations, we do not believe that inflation has had, or is likely in the
foreseeable future to have, a material adverse effect on our results of operations, cash flows or our financial position. However, increases in
inflation over historical levels or uncertainty in the general economy could decrease discretionary consumer spending for products like ours.
Very little of our revenue growth is attributable to price increases.
RISKS AND UNCERTAINTIES
While management is optimistic about the Company's long-term prospects, the following issues and uncertainties, among others, should be
considered in evaluating our growth outlook.
A SIGNIFICANT DECLINE IN AVAILABILITY OF MEDIA TIME OR 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.
UNFAVORABLE ECONOMIC CONDITIONS OR GEOPOLITICAL UPHEAVAL COULD CAUSE A DECLINE IN CONSUMER
SPENDING AND HINDER OUR PRODUCT SALES.
The success of each of our products depends substantially on the amount of discretionary funds available to consumers and their purchasing
preferences. Economic and political uncertainties could continue to adversely impact the U.S. and international economic environment. A
continued decline in economic conditions could further depress consumer spending, especially discretionary spending for premium priced
products like ours. These poor economic conditions could in turn lead to substantial decreases in our net sales.
COMPETITION COULD INCREASE SIGNIFICANTLY UPON THE EXPIRATION OF THE PRINCIPAL U.S. PATENT ON OUR
BOWFLEX POWER ROD RESISTANCE TECHNOLOGY ON APRIL 27, 2004.
Although our Bowflex trademark is protected as long as we continuously use the trademark, the main U.S. patent on our Bowflex Power Rod
resistance technology, a key component of our Bowflex products, expires on April 27, 2004. This impending patent expiration is expected to
trigger the introduction of similar products by competitors and could result in a significant decline in our net sales.
A SIGNIFICANT DECLINE IN CONSUMER INTEREST IN BOWFLEX PRODUCTS WOULD SHARPLY DIMINISH OUR
SALES AND PROFITABILITY.
Our financial performance depends significantly on sales of our Bowflex line of home fitness equipment. During 2002, approximately 61% of
our net sales were attributable to our Bowflex products. Accordingly, any significant decline in consumer interest in our Bowflex products
could significantly reduce our sales and profitability. Sales of our Bowflex line could significantly decline if, for example, a competing product
were
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