Nautilus 2006 Annual Report Download - page 31

Table of Contents
and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. We regularly monitor our
estimated exposure to these contingencies and, as additional information becomes known, may change our estimates significantly. A significant
change in our estimates, or a result that materially differs from our estimates, may have a significant impact on our financial position, results of
operations and cash flows.
Goodwill and Intangible Assets Valuation
We evaluate our intangible assets and goodwill for potential impairment annually or when events or circumstances indicate the carrying
value may be impaired. Our judgments regarding the existence of impairment are based on anticipated cash flows, market conditions,
regulatory and other factors. Future events could cause us to conclude that goodwill or other intangible assets are impaired. Any resulting
impairment loss may reduce our net worth and have a material adverse effect on our financial condition and results of operations. As of
December 31, 2006, goodwill and intangible assets represented 27.0% of our total assets.
NEW ACCOUNTING PRONOUNCEMENTS
For a description of the new accounting standards that affect us, refer to Note 1 to the consolidated financial statements located at Item 8
of this Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We hold our cash and cash equivalents primarily in bank deposits and in liquid debt instruments with maturity dates of less than one year.
We are subject to concentration of credit risk as bank deposits may exceed federally insured limits.
Foreign Exchange Risk
We are exposed to foreign exchange risk from currency fluctuations, mainly in Canada and Europe, due to sourcing of our products in the
U.S. dollars and selling them primarily in Canadian dollars, Swiss Francs, and Euros. Given the relative size of our current foreign operations,
the exposure to the exchange risk could have a material impact on the results of operations. Management estimates the maximum impact on
stockholders’ equity of a ten percent change in any applicable foreign currency to be approximately $1.3 million.
Interest Rate Risk
Fluctuations in the general level of interest rates on our current variable rate credit agreements expose us to market risk. As of
December 31, 2006, our outstanding borrowings under the credit facilities were $47.5 million and represented 28.2% of our total liabilities.
Due to the short-term nature of these borrowings, 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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