Nautilus 2010 Annual Report Download - page 5

Table of Contents
PART I
Forward-Looking Statements
This Form 10-K, including Item 1 of Part I and Item 7 of Part II, 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 Form 10-K
include, without limitation, statements regarding anticipated declines in sales of strength products, increased sales of cardio-oriented products,
and the expectation that increased sales of the Bowflex® TreadClimber product line will offset declines in sales of legacy strength products;
potential improvement in consumer credit financing approval rates and possible corresponding improvements in sales; the continuance of
promotional programs and the impact of such programs on profit margins; our plans and expectations regarding borrowing agreements; our new
product development strategies; and our plans for achieving future profitability. 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 operations and disposal loss
adjustments, 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 herein. We do not undertake
any duty to update forward-
looking statements after the date they are made or to 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
2010 , 2009 and 2008 in this report refer to our fiscal years ended on December 31, 2010 , 2009 and 2008, respectively. Our company was
incorporated in the State of Washington in January 1993.
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, including Nautilus
®
, Bowflex
®
, Schwinn
®
Fitness ("Schwinn") 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 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 Canada.
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 will improve our overall operating results. Consequently, our commercial business has been classified as a
discontinued operation. Our commercial business offered products to health clubs, schools, hospitals and other organizations. The disposal of our
commercial business has been substantially completed and we expect to dispose of the remaining commercial business assets during the first
quarter of 2011.
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 business segments. Our direct
business segment 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 financing options provided by third-party sources
3