Nautilus 2012 Annual Report Download - page 6

Table of Contents
PART I
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Words such as "plan," "expect," "aim," "believe," "project," "intend," "estimate," "will," "should," "could," and other terms of similar
meaning typically identify forward-looking statements. The forward-looking statements in this report include, without limitation, the anticipated
opportunity for growth in sales of cardio products; plans to continue to be a large direct marketer of strength products; potential continuance of
or improvement in consumer credit financing approval rates; the continuance of certain advertising strategies and the impact of such programs
on product sales; our new product development strategies; expectations for increased research and development expenses and our plans and
expectations regarding borrowing agreements. Forward-looking statements also include any statements related to our expectations regarding
future business and financial performance or conditions, anticipated sales growth across markets, distribution channels and product categories,
expenses and gross margins, profits or losses, losses from discontinued operation, settlements of warranty obligations, new product
introductions, financing and working capital requirements and resources. These forward-looking statements, and others we make from time-to-
time, are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in
forward-looking statements, including the risks described in Part I, Item 1A of this report. We do not undertake any duty to update forward-
looking statements after the date they are made or conform them to actual results or to changes in circumstances or expectations.
Item 1. Business
Unless the context otherwise requires, “Nautilus,” “Company,” “we,” “us,” and “our”
refer to Nautilus, Inc. and its subsidiaries. All references to
2012 , 2011 and 2010 in this report refer to our fiscal years ended on December 31, 2012 , 2011 and 2010 , respectively.
OVERVIEW
Founded in 1986, Nautilus is a consumer fitness products company headquartered in Vancouver, Washington and incorporated in the State of
Washington in January 1993. We are committed to providing innovative, quality solutions to help people achieve a fit and healthy lifestyle. Our
principal business activities include designing, developing, sourcing and marketing high-quality cardio and strength fitness products and related
accessories for consumer use, primarily in the United States and Canada. Our products are sold under some of the most-recognized brand names
in the fitness industry: Nautilus
®
, Bowflex
®
, Schwinn
®
, Schwinn Fitness™ and Universal
®
.
We market our products through two distinct distribution channels, Direct and Retail, which we consider to be separate business segments. Our
Direct
business offers products directly to consumers through television advertising, catalogs and the Internet. Our Retail business offers our
products through a network of independent retail companies with stores and websites located in the United States and internationally. We also
derive a portion of our revenue from the licensing of our brands and intellectual property.
During the third quarter of 2009, we committed to a plan for the complete divestiture of our Commercial business with the expectation that the
plan's successful completion would improve our overall operating results. Our former Commercial business, now classified as a discontinued
operation, offered products to health clubs, schools, hospitals and other organizations. We completed the disposal of the assets held for sale of
our former Commercial business in April 2011 and we substantially completed the liquidation of our investment in foreign subsidiaries related to
the discontinued operation in the fourth quarter of 2012.
BUSINESS STRATEGY
We are focused on developing and marketing consumer 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 fitness enthusiasts and individuals who are seeking the benefits of
regular exercise. We have diversified our business by expanding our portfolio of high-quality fitness equipment into multiple product lines
utilizing our well-recognized brand names. Our business strategy focuses exclusively on consumer products, markets and distribution channels.
Our strategies incorporate the individual characteristics of our Direct and Retail businesses. Our Direct business focuses on (i) the development
of, or acquisition of rights to, unique products; (ii) the application of creative, cost-effective ways to communicate the benefits of their use; and
(iii) making various payment options available to our customers. We are particularly
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