Nautilus 2003 Annual Report Download - page 17

Table of Contents
methodology, and common warehousing and distribution facilities for all our products in the most effective locations. We are establishing a
performance-driven culture based on teamwork that clearly ties employee compensation to both company and individual performance. We are
seeking to develop a high-energy collaborative culture with a clear focus on the metrics that drive performance and create shareholder value.
Into 2005 we will seek common technology platforms, including our websites to further capitalize on the power of one team, one Company.
EMPLOYEES
As of December 31, 2003, we employed 1,126 employees, including 4 executive officers. None of our employees are subject to any collective
bargaining agreements.
INTELLECTUAL PROPERTY
We own many trademarks including Nautilus
®
, Bowflex
®
, Power Rod
®
, TreadClimber
®
, Schwinn
®
(fitness products), StairMaster
®
and
Trimline
®
. Our trademarks, many of which are registered or subject to pending applications in the United States and other countries, are used
on a variety of our products. We believe that our trademarks are of great value, assuring the consumer that the product being purchased is of
high quality and provides a good value.
We also place significant value on product designs (the overall appearance and image of our products) and processes which, as much as
trademarks, distinguish our products in the marketplace. We hold many United States and foreign patents and have submitted additional
applications for patent protection that are pending approval. We believe all patents are important to our strategy and have identified the patents
on the Bowflex Power Rod resistance technology and TreadClimber as the most significant to our business. Although our Bowflex trademark is
protected as long as we continuously use the trademark, the main U.S. patent on our Bowflex Power Rod resistance technology expires on
April 27, 2004. The main U.S. patent on our TreadClimber line of cardiovascular equipment expires on December 13, 2013. The expiration of
our patents could trigger the introduction of similar products by competitors.
Building our intellectual property portfolio 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 property, our sales and profitability could be adversely affected. We are very
protective of these proprietary rights and take action to prevent counterfeit reproductions or other infringing products. Refer to Item 3, Legal
Proceedings, and Note 15 of the Notes to Consolidated Financial Statements for a discussion of significant intellectual property disputes. As we
expand our market share, geographic scope and product categories, intellectual property disputes are anticipated to increase making it more
expensive and challenging to establish and protect our proprietary rights and to defend against claims of infringement by others.
Each federally registered trademark is renewable indefinitely if the trademark is still in use at the time of renewal. We are not aware of any
material claims of infringement or other challenges to our right to use our trademarks.
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. Our product components are manufactured primarily in the U.S. and Asia. We
have not experienced any significant issues with availability of raw materials or quality control either domestically or abroad, and do not
anticipate any in the foreseeable future.
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