Nautilus 2009 Annual Report Download - page 16

Table of Contents
Unpredictable events and circumstances relating to our international operations, including our use of foreign manufacturers, could
result in cancelled orders, unanticipated inventory accumulation, and reduced revenues and earnings.
A portion of our revenue is derived from sales outside the U.S. International sales represented approximately 10% of our consolidated net sales
from continuing operations in 2009. In addition, substantially all of our products are manufactured outside of the U.S. Accordingly, our future
results could be materially adversely affected by a variety of factors pertaining to international trade, including: changes in a specific country’s
or region’s political or economic conditions; trade restrictions; import and export licensing requirements; changes in regulatory requirements;
additional efforts to comply with a variety of foreign laws and regulations; and longer payment cycles in certain countries, thus requiring us to
finance customer purchases over a longer period than those made in the U.S. In addition, we rely on the performance of employees located in
foreign countries. Our ability to control the actions of these employees may be limited by the laws and regulations in effect in each country.
Changes in any of the above factors could have a material adverse effect on our business, operating results, financial condition and cash flows.
Failure or inability to protect our intellectual property could significantly harm our competitive position.
Protecting our intellectual property is an essential factor in maintaining our competitive position in the health and fitness industry. If we do not,
or are unable to, adequately protect our intellectual property, our sales and profitability may be adversely affected. We currently hold
approximately 200 patents and trademarks and have approximately 40 patent and trademark applications pending in the United States. However,
our efforts to protect our proprietary rights may be inadequate, and applicable laws provide only limited protection.
Trademark infringement or other intellectual property claims relating to our products could increase our costs.
Our industry is susceptible to litigation regarding trademark and patent infringement and other intellectual property rights. We could become a
plaintiff or defendant in trademark and patent infringement claims or claims of breach of license. The prosecution or defense of intellectual
property litigation is both costly and disruptive of the time and resources of our management, even if the claim or defense against us is without
merit. We could also be required to pay substantial damages or settlement costs to resolve intellectual property litigation or related matters.
Future impairments on intangible assets could negatively impact our operating results.
We had goodwill of $2.8 million and other intangible assets of $20.8 million at December 31, 2009. We recognized impairment charges of $5.9
million in 2009 for intangible assets related to continuing operations, and an impairment charge of $29.8 million in 2008 for goodwill of our
continuing operations. Any future impairment charges, if significant, could materially and adversely affect our reported operating results. A
decline in revenue, a change in market conditions, a change in competitive products or technologies or a change in management’s intentions to
utilize our intangible assets may lead to further impairment charges.
Intense competition may have a negative impact on our net sales and operating results.
Our products are sold in highly competitive markets with limited barriers to entry. As a result, introduction of lower priced or more innovative
products could result in a significant decline in our net sales, operating results, financial condition and cash flows.
Inability to effectively manage our distribution facilities may harm our business and financial results.
Our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies depends on the
proper operation of our existing distribution facilities and the timely
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