Nautilus 2012 Annual Report Download - page 12

Table of Contents
Intense competition or loss of one or more of our large Retail customers could negatively impact our sales and operating results.
Our products are sold in highly competitive markets with limited barriers to entry. As a result, introduction by competitors of lower-priced or
more innovative products could result in a significant decline in our revenues and have a material adverse effect on our operating results,
financial position and cash flows.
Additionally, we derive a significant portion of our revenue from a small number of Retail customers. A loss of business from one or more of
these large customers, if not replaced with new business, could negatively affect our operating results and cash flow.
A decline in sales of TreadClimber products without a corresponding increase in sales of other products would negatively affect our
future revenues and operating results.
Sales of cardio products, especially Bowflex® TreadClimber® products, represent a substantial portion of our Direct segment revenues.
Introduction by competitors of comparable products at lower price-points, a maturing product lifecycle or other factors could result in a decline
in our revenues derived from these products. A significant decline in our sales of these products would 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 declines in
revenue, 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.
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.
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.
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