Nautilus 2005 Annual Report Download - page 9

Table of Contents
The fitness apparel segment is responsible for the design, production, selling and marketing of branded apparel and footwear products
currently sold under the Pearl Izumi name. These products are primarily sold through four distinct sales channels that include wholesale direct,
internet direct, retail stores leased by the Company, and international distributors. The domestic wholesale direct sales are made to independent
bike dealers as well as to large outdoor retailing stores. The internet direct sales are comprised of product sales made directly to end consumers
in the U.S. The Company leases 10 retail stores that sell primarily closeout fitness apparel and footwear items. The international distributor
sales are made to independent bike dealers and a few large sporting good consortiums mainly located in Canada, Australia, Czech Republic,
Switzerland, New Zealand, Norway, Russia, Slovenia England, Germany and China.
Detailed financial information about our two business segments is included in Note 3 of the Notes to Consolidated Financial Statements.
Sales outside the U.S. represented approximately $88.4 million, $66.5 million and $66.3 million for the years ended December 31, 2005,
2004 and 2003, respectively. Long-lived assets outside the U.S. were approximately $5.3 million, $0.4 million and $0.6 million at
December 31, 2005, 2004 and 2003, respectively. Comparatively, sales within the U.S. represented approximately $542.9 million, $457.3
million and $432.5 million for the years ended December 31, 2005, 2004, and 2003, respectively. Long-lived assets within the U.S. were
approximately $162.8 million, $93.4 million and $97.0 million at December 31, 2005, 2004 and 2003, respectively.
FITNESS EQUIPMENT SEGMENT
Direct to Consumer Sales Channel and Marketing
Through our direct-to-consumer sales and distribution channel, we market and sell our products directly to the end consumer. We market
and sell a complete line of Bowflex branded cardiovascular, strength, and fitness accessory products through this channel utilizing an integrated
combination of media and direct consumer contact. Along with “spot”
television advertising, which ranges in length from 30 seconds to as long
as five minutes, we also utilize extended 30-minute television “infomercials,” Internet advertising, our product websites, inquiry response
mailings, catalog, and inbound/outbound call centers. By selling directly to consumers, we are able to fully realize premium price points paid
for our products and drive our brand equity.
We have been highly successful with what we refer to as a “two-step” marketing approach. Our two-step approach focuses first on
generating consumer interest in our products while eliciting consumer requests for product information. Development of this interest is
achieved primarily through the use of spot commercials and infomercials, supplemented by Internet advertising. The second step focuses on
converting the informational requests into sales, which we accomplish through a combination of response mailings and outbound calling.
Conversion of Inquiries into Sales
Customer Service Call Center and Order Processing . We manage our own customer service call center in Vancouver, Washington. It
operates 18 to 23 hours per day to receive and process the vast majority of all infomercial-generated and customer service-related inquiries.
We contract with large telemarketing companies to receive and process information requests generated by our spot television advertising
24 hours per day. The telemarketing agents for these companies collect names, addresses and other basic information from callers but do not
directly sell our products.
Internet . We use spot commercials and infomercials, together with Internet advertising and search-engine placement, to lead consumers
to our website, as we believe consumers who visit our website are more inclined to purchase our products. We believe we successfully balance
our goals of finalizing sales and capturing consumer information by strategically designing our web pages and carefully analyzing web page
visits, conversion rates, average sales prices and inquiry counts.
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