Nautilus 2002 Annual Report Download - page 34

effectively marketed and resulted in significant consumer purchases or if the market demand for our Bowflex line were to become saturated.
Although we are working to diversify our revenue base, we anticipate that sales of our Bowflex product line will continue to account for a
substantial portion of our net sales for the foreseeable future.
NEW PRODUCT DEVELOPMENT IS AN ESSENTIAL COMPONENT OF OUR GROWTH STRATEGY; AN INABILITY TO
SUCCESSFULLY DEVELOP NEW PRODUCTS COULD NEGATIVELY IMPACT OUR FUTURE PROFITABILITY.
Our future success depends on our ability to develop or acquire the rights to, and then effectively market and sell, new products that create and
respond to new and evolving consumer demands. Accordingly, our net sales and profitability may be harmed if we are unable to develop, or
acquire the rights to, new and different products that satisfy our marketing criteria. In addition, any new products that we market may not
generate sufficient net sales or profits to recoup their development or acquisition cost.
We also may not be able to successfully acquire intellectual property rights or potentially prevent others from claiming that we have violated
their proprietary rights when we launch new products. We could incur substantial costs in defending against such claims, even if they are
without basis, and we could become subject to judgments requiring us to pay substantial damages.
WE HAVE BEEN A RAPIDLY GROWING COMPANY; OUR FAILURE TO PROPERLY MANAGE GROWTH MAY
ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
We have grown significantly in recent years, with an increase in net sales from $9.2 million in 1996 to $584.6 million in 2002. Our organic
growth has been complemented by acquisitions of Nautilus in January 1999, Schwinn Fitness in September 2001, and StairMaster in February
2002. Our rapid growth and recent acquisitions may strain our management team, production facilities, information systems and other
resources. In addition, we may be unable to effectively allocate our existing and future resources to our various businesses while maintaining
our focus on our core competencies. We cannot assure you that we will succeed in effectively managing our existing operations or our
anticipated growth, which could adversely affect our financial performance.
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 health and fitness 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.
IF WE ARE UNABLE TO EFFECTIVELY INTEGRATE ACQUIRED BUSINESSES INTO OUR OPERATIONS, WE MAY NOT
ACHIEVE ANTICIPATED REVENUE, EARNINGS AND BUSINESS SYNERGIES.
We face significant challenges in integrating acquired businesses into our operations, particularly with respect to corporate cultures and
management teams. Failure to successfully effect the integration could adversely impact the revenue, earnings and business synergies we expect
from the acquisitions. In addition, the process of integrating acquired businesses may be disruptive to our operations and may cause an
interruption of, or a loss of momentum in, our core business.
Our future integration efforts may be jeopardized, and our actual return on investment from such acquisitions may be lower than anticipated, as
a result of various factors, including the following:
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