Nautilus 2008 Annual Report Download - page 19

Table of Contents
Our or others failure to maintain information and communication systems could result in interruptions to our business.
Our business is increasingly reliant on information and communication technology, and a substantial portion of our revenues are generated with
the support of information and communication systems. The success of our direct business is heavily dependent on our ability to respond to
customer sales inquiries and process sales transactions using our call center communication systems, internet websites and similar data
monitoring and communication systems provided and supported by third-parties. If such systems were to fail, or experience significant or
lengthy interruptions in availability or service, our revenues could be materially affected. We also rely on information systems in all stages of
our production cycle, from design to distribution, and we use such systems as a method of communication between employees, our subsidiaries
overseas, as well as our customers. In addition, we use information systems to maintain our accounting records, assist in collection and customer
service efforts, and to forecast operating results and cash flows. System failures or service interruptions may occur as the result of a number of
factors, including: computer viruses; hacking or other unlawful activities by third parties; disasters; equipment, hardware or software failures;
cable outages, extended power failures, or our inability or failure to properly protect, repair or maintain our communication and information
systems. To mitigate the risk of business interruption, we have in place a disaster recovery program that targets four of our most
critical operational systems. If our disaster recovery system is ineffective (in whole or in part), or efforts conducted by us or third-parties to
prevent or respond to system interruptions in a timely manner are ineffective, our ability to conduct operations would be significantly affected.
Any of the aforementioned factors could have a material adverse affect on our operating results, financial condition and cash flows
Currency exchange rate fluctuations could result in higher costs and decreased margins.
We have significant sales outside of the U.S. As a result, we conduct transactions in various currencies which increase our exposure to
fluctuations in foreign currency exchange rates relative to the U.S. dollar. Our international revenues and expenses generally are derived from
sales and operations in foreign currencies, and these revenues and expenses could be affected by currency fluctuations. Currency exchange rate
fluctuations could also disrupt the business of independent manufacturers that produce our products by making their purchases of raw materials
more expensive and more difficult to finance. Therefore, our future financial results could be significantly affected by the value of the U.S.
dollar in relation to the foreign currencies in which we, our customers or our suppliers conduct business.
Our business is affected by seasonality which results in fluctuations in our operating results.
We experience moderate fluctuations in aggregate sales volume during the year. Historically, our strongest quarter for sales is the fourth quarter,
followed by the first and third quarters. However, the mix of product sales may vary considerably from time to time as a result of changes in
seasonal and geographic demand for particular types of fitness equipment. In addition, our customers may cancel orders, change delivery
schedules or change the mix of products ordered with minimal notice. As a result, we may not be able to accurately predict our quarterly sales.
Accordingly, our results of operations are likely to fluctuate significantly from period to period.
We may be adversely affected by the financial health of our customers.
We extend credit to our customers, generally without requiring collateral, based on our assessment of a customer’s financial circumstances. To
assist in the scheduling of production and the shipping of seasonal products, we offer customers the ability to place orders four to six months
ahead of delivery. These advance orders may be cancelled, and the risk of cancellation may increase when dealing with financially challenged
customers struggling with economic uncertainty. In the past, some customers have experienced financial difficulties which in turn have had an
adverse effect on our business. More recently, customers have been cautious in placing orders as a result of weakness in the economy. The
slowing global economy is expected to continue to negatively affect the financial health of our customers and have an adverse effect on our
results of operations, financial condition and cash flows.
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