Nautilus 2004 Annual Report Download - page 31

Table of Contents
2004” (FSP FAS 109-1) on December 21, 2004. In accordance with FSP FAS 109-1, the Company will treat the deduction for qualified
domestic manufacturing activities as a reduction of the income tax provision in future years as realized. The deduction for qualified domestic
manufacturing activities did not impact the Company’s Consolidated Financial Statements in 2004, and this deduction combined with the
phase-out of the export incentive is not expected to have a material impact on the Company’s effective tax rate in 2005.
In December 2004, the FASB issued FSP FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004,
” allowing companies additional time to evaluate the effect of the AJCA on plans for
reinvestment or repatriation of foreign earnings. The adoption of this standard is not expected to have a material impact on the Company’s
effective tax rate in 2005.
RISKS AND UNCERTAINTIES
Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a
reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.
A significant decline in availability of media time or fluctuating advertising rates may hinder our ability to effectively market our
products and may reduce profitability.
We depend primarily on 30 and 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.
A decline in consumer spending due to unfavorable economic conditions could hinder our product revenues and earnings.
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 adversely impact the U.S. and international economic environment. A
decline in general 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.
A decline in our ability to effectively develop, market and sell future products could adversely affect our ability to generate future
revenues and earnings.
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 costs.
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.
A delay in getting foreign sourced products through customs in a timely manner could result in cancelled orders and unanticipated
inventory accumulation.
Many of our imported products are subject to duties, tariffs or quotas that affect the cost and quantity of various types of goods imported
into the United States or into our other sales markets. The countries in which our products are produced or sold may adjust or impose new
quotas, duties, tariffs or other restrictions, any of which could have a material adverse effect on us.
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