Nautilus 2011 Annual Report Download - page 11

Table of Contents
Prior to December 31, 2011, we extended the expiration date of the Loan and Security Agreement with Bank of the West, thereby extending the
maturity date of our Increasing Rate Senior Discount Notes to May 2, 2013. We expect to obtain other debt financing prior to the maturity date
of the notes and use the proceeds or a portion thereof to pay off the notes. There is no guarantee that we will be able to borrow funds on
favorable terms, if at all, or that any amount raised will be sufficient to meet our cash requirements. If we are not able to obtain sufficient debt
financing, it could have a material adverse affect on our operating results, financial position and cash flows. For more information regarding our
borrowing arrangements, refer to Note 10, Borrowings, to our consolidated financial statements in Part II, Item 8 of this report.
Further decline or weaker than expected recovery in consumer spending likely would negatively affect our product revenues and
earnings.
Success of each of our products depends substantially on the amount of discretionary funds available to our customers. Global credit and
financial markets have experienced extreme disruptions in the recent past, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There
can be no assurance that there will not be further deterioration in these conditions. Further decline or weaker than expected recovery in general
economic conditions could further depress consumer spending, especially spending for discretionary consumer products such as ours. Poor
economic conditions could in turn lead to substantial decreases in our net sales or have a material adverse effect on our operating results,
financial position and cash flows.
Portions of our operating expenses and costs of goods sold are relatively fixed, and we may have limited ability to reduce expenses
sufficiently in response to any revenue shortfalls.
Many of our operating expenses are relatively fixed. We may not be able to adjust our operating expenses or other costs sufficiently to
adequately respond to any revenue shortfalls. If we are unable to reduce operating expenses or other costs quickly in response to any revenue
shortfall, it would negatively impact our operating results, financial condition and cash flows.
If we are unable to anticipate consumer preferences or to effectively develop, market and sell future products, our future revenues and
operating results could be adversely affected.
Our future success depends on our ability to effectively develop, market and sell new products that respond to new and evolving consumer
preferences. Accordingly, our revenues and operating results may be adversely affected if we are unable to develop or acquire rights to new
products that satisfy consumer preferences. In addition, any new products that we market may not generate sufficient revenues to recoup their
acquisition, development, production, marketing, selling and other costs.
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. Sales are typically strongest in the first and fourth quarters,
followed by the third quarter, and are generally weakest in the second quarter. 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.
Government regulatory actions could disrupt our marketing efforts and product sales.
Various international and U.S. federal, state and local governmental authorities, including the Federal Trade Commission and the Consumer
Product Safety Commission, regulate our product marketing efforts. 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.
A significant decline in availability of media time or substantially higher advertising rates may hinder our ability to effectively market
our products and may reduce profitability.
We depend on television advertising to market certain products sold directly to consumers. Consequently, a marked increase in the price we must
pay for our preferred media time and/or a reduction in its availability may adversely impact our financial performance.
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