Nautilus 2003 Annual Report Download - page 15

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Table of Contents
and manufacturing resources and has significantly greater experience in marketing and distributing sleep systems. We believe the market for
sleep systems is large enough for both companies to be successful and that our Nautilus Sleep Systems possess features that will enable us to
compete effectively. However, the intense competition in the mattress industry, both from conventional mattress manufacturers and Select
Comfort, has adversely affected our efforts to market and sell our sleep systems. Consequently, we decreased direct advertising for our sleep
systems during 2003 in order to reassess our marketing message. A new marketing campaign for our Nautilus Sleep Systems is expected to be
launched in 2004.
Commercial/Retail Segment Products
Commercial Fitness Equipment. The market for commercial fitness equipment is highly competitive. Our Nautilus, Schwinn, and StairMaster
products compete against the products of numerous other commercial fitness equipment companies, including Life Fitness (a division of
Brunswick), Cybex, Star Trac, Precor (owned by Amer Group, PLC), and Techno Gym. We believe the key competitive factors in this industry
include price, quality, durability, diversity of features, financing options, product service network, and warranties. Some of our competitors
have greater financial resources, more experience in the fitness industry, and more extensive experience manufacturing their products.
Retail Fitness Equipment.
Strong competition exists with respect to the retail fitness equipment market. Our Nautilus, Schwinn, Bowflex,
StairMaster, and Trimline retail products compete against the products of numerous domestic retail fitness equipment companies including
ICON Health & Fitness (marketing products under the brand names Weslo, Crossbow, Health Rider, NordicTrak, ProForm, Image and, under
license, Reebok, Weider and Gold’s Gym), Life Fitness, Star Trac, True Fitness Technology, HOIST Fitness Systems, Horizon Fitness (a
division of Johnson Health Tech), Cybex, Fitness Quest, and Precor. The principal competitive factors in the retail fitness equipment industry
include price, quality, brand name recognition, customer service and the ability to create and develop new, innovative products. There are
limited technological, manufacturing or marketing barriers to entry into the fitness equipment markets in which we compete. Like many
companies in the industry, we have sought and received patent and trademark protection on our products in an effort to protect our competitive
position.
We believe that our combination of recognized brand names, high quality products, multiple distribution channels, and dependable customer
service allows us to remain competitive in our current markets.
STRATEGY
Our mission is to be a complete provider of products to the health and fitness industry and help people achieve a fit and healthy lifestyle
through proper exercise, rest and nutrition. At the core of this mission is an internal initiative called FIT #1, which is the foundation of our plan
to create long-term shareholder value.
FIT #1 stands for Financial rigor, Innovation, Trust and a drive to be #1 in the categories in which we compete. These are the core strategic
elements around which we plan to structure our activities, enabling us to refocus our efforts and begin to grow again. Financial rigor means we
must ensure accurate and streamlined financial and forecasting processes. Innovation means we must apply creative solutions to both research
and development and business operations. Trust means we must ensure we are taking care of our customers and stockholders and doing
everything we can to serve them.
In 2003, we conducted a thorough due diligence process, in which we interviewed our internal team, spoke with industry consultants, and
conducted the most comprehensive market research study in our history in order to help identify and realize our growth opportunities. We have
targeted several areas as significant opportunities for growth, including leveraging our research and development capabilities to launch new
products and repositioning our strength, cardiovascular, and sleep products to better meet customer demand and shopping patterns. We also
seek to improve operating efficiencies and cash flow by streamlining operations and maximizing business synergies, such as brand equity, sales
channels and marketing resources.
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