Nautilus 2009 Annual Report Download - page 22

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Our Management’s Discussion and Analysis of Financial Condition and Results of Operation (the “MD&A”) should be read in conjunction with
our consolidated financial statements and related notes, in Item 8.
OVERVIEW
Nautilus, Inc., a 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 and marketing high-
quality cardiovascular and strength fitness products and related accessories for consumer home use, primarily in the United States and Canada.
Our products are sold under some of the most-recognized brand names in the fitness industry, including Nautilus , Bowflex , Universal
and
Schwinn Fitness.
We market our products through two business segments: Direct and Retail, each representing a distinct marketing distribution channel. Our
direct business offers products directly to consumers through direct advertising, catalogs and the Internet. Our retail business offers our products
through a network of independent retail companies located in the United States and Canada, as well as Internet-based merchants.
Economic and market conditions have been, and continue to be, disruptive and volatile. These conditions, including reduced business and
consumer confidence, disruptions in the residential housing market, materially reduced consumer credit availability for our customers and
increased unemployment, all of which have contributed to reductions in consumer spending, particularly on discretionary products such as our
home fitness equipment.
During 2008, we implemented cost reduction efforts to adjust for the decline in revenue, and in early 2009 we announced plans to initiate
additional cost reductions aimed at further reducing operating costs and improving the overall alignment of spending and anticipated revenue.
During the third quarter of 2009, in order to focus exclusively on the development of our direct and retail businesses, management committed to
a plan for the complete divestiture of our commercial business. Consequently, our commercial business has been classified as a discontinued
operation. Management’s actions to reduce costs in our continuing and discontinued operations and focus on the development of our direct and
retail businesses are summarized as follows:
During 2009:
During 2008:
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• We restructured our workforce and reduced the number of employees in our corporate headquarters and our manufacturing and
distribution functions to better match the requirements of our business;
• We conducted a thorough review of our information technology costs to better align computer systems and support services to our
restructured business model, resulting in significant savings related to software purchases, maintenance agreements and licensing
fees;
• We terminated our lease for our corporate headquarters facility in Vancouver, Washington, and entered into a new lease for
substantially less space and substantially lower rent payments in the same building;
• We terminated a third-party warehouse distribution service agreement for our U.S. service parts inventory, which now will be
distributed from our company facility; and
•
We committed to a plan for the complete divestiture of our commercial business, and completed the sale of certain assets of our
StairMaster and Schwinn Fitness commercial product lines. In February 2010, we completed an agreement for the sale of certain
assets of our Nautilus
commercial fitness product lines.
•
We restructured our workforce to better match the requirements of our redefined business segment organization;
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