Nautilus 2006 Annual Report Download - page 7

Table of Contents
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation located at Part II, Item 7 for a
discussion of the impact of these developments on the results of operations.
BUSINESS SEGMENTS
The Company’s reportable segments are evidence of the structure of the Company’s internal organization and allow focus on specific
business opportunities in the Company’s worldwide market place. The Company’s three business segments are as follows:
Sales from our Bowflex home-gym product line across all sales channels, including related shipping revenue, accounted for
approximately 39% of our aggregate net sales in 2006, down from 44% and 48% in 2005 and 2004, respectively, as we continue our
strategy of diversifying our breadth of products in all channels.
Detailed financial information about our three business segments, including information regarding geographic areas, is included in Note
13 of the Notes to Consolidated Financial Statements.
PRODUCTS
The Company’s principal business activity is the design, development, manufacturing, and worldwide marketing of high quality fitness
equipment and apparel products. Our product offerings include cardiovascular and strength products, indoor and outdoor fitness apparel, and
running and cycling footwear.
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• Consolidated production facilities for our cardiovascular line of equipment by ceasing manufacturing at our Tyler, Texas facility and
transitioning manufacturing of key products to other U.S. and Asian manufacturing facilities,
• Reduced the number of our distribution facilities to 10 in North America compared with 24 a year ago thus bringing more efficiency
to our distribution process,
• Concluded a year-long transition to a third party logistics company to improve our parts shipping which allowed us to make
significant improvements in customer service while lowering expenses for parts shipping and handling,
• Made significant progress by implementing our new information system which now allows us to better analyze our sales and margin
information by customer, channel, brand and product. As a result, we have eliminated a number of less profitable products and
restructured some of our relationships with existing customers resulting in improved profitability,
•
Integrated a reverse engineering initiative to reduce costs for various existing products,
• Restructured multiple vendor agreements to allow us to reduce warranty costs by recovering a portion of such costs from our
suppliers, and
• Reduced the cost of our sourced products by increasing the percentage of our retail products shipped directly from our Asian
manufacturers thus improving the overall quality due to less damage as the result of less handling while in transit and shorter product
delivery time.
• The Fitness Equipment Business is responsible for the design, production, marketing and selling of branded fitness equipment sold
under the Nautilus, Bowflex, Schwinn Fitness, and StairMaster brand names and is responsible for servicing customers within the
Americas, which includes the United States, Mexico, Canada and South America.
• The International Equipment Business is responsible for the marketing and selling of branded fitness equipment sold under the
Nautilus, Bowflex, Schwinn Fitness, and StairMaster brand names and is responsible for servicing customers outside of the
Americas.
•
The Fitness Apparel Business is responsible for the design, production, marketing and selling of branded fitness apparel and footwear
products sold primarily under the Pearl Izumi and Nautilus brands in both domestic and international markets.