Nautilus 2002 Annual Report Download - page 35

o Challenges in the successful integration of the products, services or personnel of the acquired business into our operations;
o Loss of employees or customers that are key to the acquired business;
o Time and money spent by our management team focusing on the integration, which could distract it from our core operations;
o Our potential lack of experience in markets of the acquired businesses;
o Possible inconsistencies in standards, controls, procedures and policies among the combined companies and the need to implement our
financial, accounting, information and other systems; and
o The need to coordinate geographically diverse operations.
WE DEPEND ON A SINGLE TIER-ONE 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 37% 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 top tier
consumer finance company. Although we believe we could enter into similar arrangements with other providers if needed, a failure by the
current provider to adequately service our customers could temporarily disrupt sales.
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 commence a regulatory enforcement action that interrupts our direct marketing efforts or results in a product recall.
CHANGES IN FOREIGN CONDITIONS COULD IMPAIR OUR INTERNATIONAL SALES.
A portion of our revenues is derived from sales outside the United States. As of December 31, 2002, international sales represented
approximately 10% of consolidated net sales. In addition, a substantial portion of our products is manufactured outside of the United States.
Accordingly, our future results could be materially adversely affected by a variety of factors, including changes in foreign currency exchange
rates, changes in a specific country's or region's political or economic conditions, trade restrictions, import and export licensing requirements,
the overlap of different tax structures or changes in international tax laws, changes in regulatory requirements, compliance with a variety of
foreign laws and regulations and longer payment cycles in certain countries.
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2003. EDGAR Online, Inc.