Nautilus 2015 Annual Report Download - page 14
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Please find page 14 of the 2015 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.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 litigation involving trademark or 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, regardless of the claim's merit. We could also be required to pay substantial
damages or settlement costs to resolve intellectual property litigation or related matters.
We also may not be able to successfully acquire intellectual property rights, protect existing rights, or potentially prevent others from claiming that we have
violated their proprietary rights. We could incur substantial costs in defending against such claims even if they are without basis, and we could become subject to
judgments or settlements requiring us to pay substantial damages, royalties or other charges.
Future impairments of intangible assets could negatively impact our operating results.
We had goodwill of $60.5 million and other intangible assets of $73.4 million as of December 31, 2015 . Any future impairment charges, if significant, could
materially and adversely affect our operating results. An unexpected decline in revenue, changes in market conditions, changes in competitive products or
technologies or a change in management's intentions regarding utilization of intangible assets could lead to future impairment charges.
We are subject to periodic litigation, product liability risk and other regulatory proceedings which could result in unexpected expense of time and
resources.
From time to time, we may be a defendant in lawsuits and regulatory actions relating to our business or the former operations of our discontinued Commercial
business segment. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such
proceedings. An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations. In addition, any
significant litigation in the future, regardless of its merits, could divert management's attention from our operations and may result in substantial legal costs.
We are subject to warranty claims for our products which could result in unexpected expense.
Many of our products carry warranties for defects in quality and workmanship. We may experience significant expense as the result of product quality issues,
product recalls or product liability claims which may have a material adverse effect on our business. We maintain a warranty reserve for estimated future warranty
claims. However, the actual costs of servicing future warranty claims may exceed the reserve and have a material adverse effect on our results of operations,
financial condition and cash flows.
Disruption to our information and communication systems could result in interruptions to our business and potential implementation of new systems for
critical business functions may heighten the risk of disruption.
Our business is 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 product cycle, from design to distribution, and we use such systems as a method of communication between
employees, suppliers and customers. In addition, we use information systems to maintain our accounting records, assist in trade receivables collection and
customer service efforts, and 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; ineffective design or implementation of new systems or systems upgrades; 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 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. If we do not consider the potential impact of critical decisions related to systems or process design and implementation,
this could lead to operational challenges and increased costs. Any of the aforementioned factors could have a material adverse effect on our operating results,
financial position and cash flows.
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