Nautilus 2008 Annual Report Download - page 5

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Table of Contents
PART I
Item 1. Business
OVERVIEW
Nautilus, Inc., a global fitness products company headquartered in Vancouver, Washington, is committed to providing innovative, quality
solutions to help people achieve a fit and healthy lifestyle. Our principal business activities include designing, developing, sourcing,
manufacturing and marketing high quality cardiovascular and strength products and related accessories. Our products are sold under some of the
most-recognized brand names in the fitness industry, including Nautilus
®
, Bowflex
®
, Schwinn
®
Fitness and StairMaster
®
.
Founded in 1986, the Company developed and introduced the Bowflex rod-based home gym and, through the use of infomercials, became a
leading direct marketer of fitness equipment. The direct marketing model of selling directly to the consumer grew quickly, allowing the
Company to invest its earnings in a series of strategic acquisitions of well-recognized brands including: Nautilus International, Inc. (“Nautilus”)
in January 1999; the fitness division of Schwinn/GT Corp. and its affiliates (“Schwinn Fitness”) in September 2001; and StairMaster
Sports/Medical, Inc. (“StairMaster”) in February 2002. As a result of these acquisitions and the success of the Company’s Bowflex brand,
Nautilus has developed a strong presence in the direct, retail and commercial fitness markets.
BUSINESS STRATEGY
We are focused on developing and marketing fitness equipment and related products to help people enjoy healthier lives. Our products are
targeted to meet the needs of a broad range of consumers, including professional athletes, fitness enthusiasts and individuals who are simply
seeking the benefits of regular exercise. We have diversified our product lines by expanding our portfolio of high-quality fitness equipment into
multiple, well recognized brands. More recently, our strategy has focused on consolidating our business activities and placing greater emphasis
on products, markets and distribution channels that we believe will provide the greatest long-term value to our shareholders. Implementation of
this strategy includes discontinuing lower volume or lower margin products and reducing or eliminating our presence in unprofitable markets.
Product innovation is a vital part of our business. A unique or new product can often provide a significant competitive advantage, as consumers
are looking for ways to improve the effectiveness of their workouts. We continually evaluate new product concepts, generated by both internal
and external resources, and seek feedback from users on how to enhance our current product offerings.
Our strategies incorporate the specific characteristics of our various business segments. Our direct business segment focuses on (i) the
development of, or acquisition of rights to, unique products, and (ii) the application of creative, cost-effective ways to communicate the benefits
of their use. We are very attentive to direct business metrics, particularly those that provide feedback regarding the effectiveness of our media
marketing programs. In our retail business segment, we strive to enter into business relationships with key retailers of sports or fitness
equipment. The primary objectives of our retail business are (i) to offer a combination of products at key price points in order to maintain lasting
relationships with our customers, and (ii) to utilize such relationships and the strength of our brands to obtain more floor space for our products.
Our commercial business segment markets long-lasting, durable products to health clubs and other high-use facilities. We strive to incorporate
the best biomechanics and latest technologies and features in our commercial fitness equipment and believe we offer a product portfolio with the
track record of performance our customers have come to expect in strength and cardio applications. The commercial business has required
substantial investments in fixed assets and working capital and has been unprofitable in recent years. Management intends to focus especially on
actions necessary to restructure the commercial business.
As a result of recent U.S. and global economic challenges, we are in the process of restructuring certain aspects of our operations to (i) improve
our cost structure and operating efficiency, and (ii) provide us with greater flexibility to respond to future market opportunities. In addition, we
plan to place additional emphasis on our
1