Nautilus 2004 Annual Report Download - page 33

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Table of Contents
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.
Government regulatory actions could disrupt our marketing efforts and product sales.
Various federal, state and local government authorities, including the Federal Trade Commission and the CPSC, regulate our 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 marketing efforts, results in a product recall or negative publicity, or requires changes in product design.
The CPSC is investigating whether the Company violated the reporting obligations of the Consumer Product Safety Act. As detailed in
Item 3, “Legal Proceedings,” penalties are possible in connection with this investigation.
In order to be successful, we must retain and motivate key employees, and failure to do so could have an adverse impact on our
business.
Our future success will depend in part on the continued service of key personnel, particularly Gregg Hammann, our President, Chief
Executive Officer and Chairman of the Company’s Board of Directors. Our future success will also depend on our ability to attract and retain
key managers, product development engineers, sales people, and others. We face intense competition for such individuals worldwide. Not
being able to attract or retain these employees could have a material adverse effect on revenues and earnings.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have primarily invested cash with banks and in liquid debt instruments purchased with maturity dates of less than one year. Our bank
deposits may exceed federally insured limits, and there is risk of loss of the entire principal with any debt instrument. To reduce risk of loss, we
limit our exposure to any individual debt issuer and require certain minimum ratings for debt instruments that we purchase.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk from currency fluctuations, mainly in Europe. Given the relative size of the
Company’s current foreign operations, the Company does not believe the exposure to changes in applicable foreign currencies to be material,
such that it could have a significant impact on our current or near- term financial position, results of operations, or cash flows. Management
estimates the maximum impact on stockholders’ equity of a 10% change in any applicable foreign currency to be $1.5 million.
Interest Rate Risk
The Company has financed its growth through cash generated from operations. At December 31, 2004, the Company had no outstanding
borrowings and was not subject to any related interest rate risk.
The Company invests in liquid debt instruments purchased with maturity dates of less than one year. Due to the short-
term nature of those
investments, management believes that any reasonably possible near-term changes in related interest rates would not have a material impact on
the Company’s financial position, results of operations, or cash flows.
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