Nautilus 2001 Annual Report Download - page 18

products. In addition, there are no significant technological, manufacturing or marketing barriers to entry into the fitness equipment markets in
which we compete, even though like many companies in the industry, we have sought and received patent and trademark protection in an effort
to protect our competitive position.
We believe that our combination of high-quality products, recognized brand names, multiple distribution channels, and dependable customer
service gives us the ability to compete in our current markets.
MANUFACTURING AND DISTRIBUTION
Our primary manufacturing and distribution objectives for all of our products are to maintain product quality, reduce and control costs,
maximize production flexibility and improve delivery speed. We use computerized inventory management systems to forecast our
manufacturing requirements.
Our Nautilus commercial fitness manufacturing operations are located in Virginia. These operations are vertically integrated and include such
functions as metal fabrication, powder coating, upholstery and vacuum-formed plastics processes. By managing our own manufacturing
operations, we can control the quality of our Nautilus commercial products, while offering commercial customers greater color specification
flexibility.
Our manufacturing operations also include a plant in Texas for Schwinn Fitness and Trimline consumer treadmills and a plant in Oklahoma for
StairMaster products. By manufacturing these products in our own facilities, we ensure the highest quality control standards.
The main components of our Bowflex products, the Power Rods, are exclusively produced in our facilities to protect our manufacturing trade
secrets and to ensure the highest quality control standards. In addition, we use outside suppliers to manufacture many of our components and
finished parts for our direct and retail products. Whenever possible, we attempt to use at least two suppliers to manufacture each product
component in order to improve flexibility.
Domestically, we inspect, package, and ship our products from our facilities in Washington, Virginia, Illinois, Texas, and Nevada. We rely
primarily on United Parcel Service (UPS) to deliver our Bowflex and our Nautilus Sleep Systems products. We distribute our Nautilus,
Schwinn Fitness retail equipment and accessories, and StairMaster retail and commercial fitness equipment from our Illinois and Oklahoma
facilities using various commercial truck lines. We distribute Nautilus commercial fitness equipment from our Virginia warehouse facilities
directly to customers primarily through our truck fleet. This method of distribution allows us to effectively control the set-up and inspection of
equipment at the end-user's facilities.
For international sales, we have distributors in over 50 countries, and we inspect, package and ship our products from leased facilities in
Switzerland, the United Kingdom, and Germany. We also lease, on a month-to-month basis, flexible warehouse space in multiple countries in
Asia and Europe devoted to international distribution of Schwinn Fitness products.
INTELLECTUAL PROPERTY
Protecting our intellectual property is an important factor in maintaining our competitive position in the fitness and mattress industries. If we do
not, or are unable to, adequately protect our intellectual
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