Nautilus 2005 Annual Report Download - page 5

Table of Contents
Item 1. Business
OVERVIEW
Nautilus, Inc. (the “Company”) is a leading marketer, developer and manufacturer of branded health and fitness products sold under such
well-known brand names as Nautilus, Bowflex, Schwinn, StairMaster, Trimline and Pearl Izumi. Our products are distributed through
diversified direct, retail and commercial sales channels, both domestically and internationally. We market and sell a variety of branded products
that are targeted at specific locations where people shop or exercise. Nautilus, StairMaster and Pearl Izumi brands are most commonly
marketed through the commercial and high-end specialty retail markets, while the Bowflex and Schwinn branded products are marketed
primarily through the retail and direct channels. Our product marketing includes direct response marketing utilizing a combination of television
commercials, infomercials, response mailings, the Internet, catalog, and inbound/outbound call centers. It also includes a sales force and dealer
network marketing to retail organizations, health clubs, government agencies, hotels, corporate fitness centers, colleges, universities and
assisted living facilities worldwide.
Founded in 1986, the Company has grown to over $630 million in annual sales through a combination of internal growth of our Bowflex
brand and a series of strategic acquisitions of strong brands, including Nautilus International, Inc. (“Nautilus”) in January 1999, the fitness
division of Schwinn/GT Corp. and its affiliates (“Schwinn Fitness”) in September 2001, StairMaster Sports/Medical, Inc. (“StairMaster”) in
February 2002, and DashAmerica, Inc. d/b/a Pearl Izumi USA (“Pearl Izumi”) in July 2005. As a result of these acquisitions, we expanded our
portfolio of leading brands, product lines, channels of distribution, product development capabilities and the size of our customer base. We now
offer a specialized line of fitness apparel in retail channels and a comprehensive line of cardiovascular and strength, or weight resistance,
products in the direct, retail and commercial fitness channels both domestically and internationally.
Our cardiovascular and strength product lines reflect a complete assortment of high-quality fitness equipment. Our Nautilus brand
includes four distinct lines of strength equipment, plus free weights and benches, and both upright and recumbent exercise cycles. During 2004
and 2005, the Company developed a line of Nautilus cardiovascular equipment, including new ellipticals and treadmills, and began
development of a commercial version of our popular TreadClimber cardio machine. During 2005, we continued to invest heavily in product
development and introduced approximately 22 new products, including the next generation of our popular Bowflex TreadClimber cardio
trainer, the Bowflex Revolution home gym, and Bowflex SelectTech dumbbells, specifically for women and teens. Our StairMaster brand is
best known for steppers and stepmills designed for excellent lower-body and cardiovascular workouts, but also includes treadmills and
ellipticals. Our Bowflex brand has been expanded to represent a complete line of fitness equipment, both strength and cardio, including
multiple models of home gyms, plus strength cages, free weights, SelectTech dumbbells, benches, TreadClimbers and treadmills. Our Schwinn
Fitness brand includes a popular line for indoor cycling, along with upright and recumbent exercise bikes, treadmills and ellipticals.
Our fitness apparel line is composed of high-end performance apparel and footwear targeted to consumers who are fitness and outdoor
enthusiasts, especially for those interested in cycling and running activities. This apparel line is composed almost entirely of Pearl Izumi
branded wear. Pearl Izumi is best known for its innovative and technically superior cycling apparel and has been expanded into the running
apparel and footwear markets.
Our fitness products are in approximately 25% of U.S. retail doors that sell products within the scope of our business, and approximately
40% of specialty fitness doors. In addition, we work with more than 1,200 dealers in the U.S., a worldwide network of distributors in over 50
countries, and sales offices in Switzerland, Italy, Germany, the United Kingdom and China.
The Company acquired Belko Canada in May 2005, which has since been named Nautilus Fitness Canada. Nautilus Fitness Canada has
served as our exclusive Canadian distributor since 1996. This acquisition has
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