Nautilus 2013 Annual Report Download - page 8

LOGISTICS
Our warehousing and distribution facilities are located in Portland, Oregon and Winnipeg, Manitoba. In our Direct business, we strive to
maintain inventory levels that will allow us to ship our products shortly after receiving a customer's order. We use common carriers for
substantially all of our merchandise shipments to Direct customers.
In our Retail business, we manage our inventory levels to accommodate anticipated seasonal changes in demand. Generally, we maintain higher
inventory levels at the end of the third and fourth quarters to satisfy relatively higher consumer demand in the fourth and first quarters of each
year. Many of our Retail customers place orders well in advance of peak periods of consumer demand to ensure an adequate supply for the
anticipated selling season.
In 2013 approximately 40% of our Retail inventory replenishment orders were shipped by our contract manufacturers in Asia directly to our
Retail customer locations, typically in container loads. The use of such direct shipments allows us to maintain lower levels of inventory in our
warehouses, resulting in lower storage, handling, freight, insurance and other costs. We use various commercial truck lines for our merchandise
shipments to Retail customers.
COMPETITION
The markets for all of our products are highly competitive. We believe the principal competitive factors affecting our business are quality, brand
recognition, innovation and pricing. We believe we are well positioned to compete in markets in which we can take advantage of our strong
brand names, and that our focus on innovative product design, quality, and performance distinguishes our products from the competition.
Our products compete directly with those offered by a large number of companies that market consumer fitness equipment and fitness programs.
As the use of Internet websites for product sales by traditional retailers has increased, our competitors have become increasingly similar across
our Direct and Retail sales channels.
Our principal competitors include: Fitness Quest ,
ICON Health & Fitness, Johnson Health Tech, Beach Body and American Telecast. We also
compete with marketers of computer-based physical activity products, such as the Nintendo Wii
®
and Microsoft Xbox
®
Kinect
®
,
and weight
management companies, such as Weight Watchers, each of which offers alternative solutions for a fit and healthy lifestyle.
EMPLOYEES
As of February 21, 2014, we had approximately 311 employees, substantially all of whom were full-
time. None of our employees are subject to
collective bargaining agreements. We have not experienced a material interruption of our operations due to labor disputes.
INTELLECTUAL PROPERTY
Trademarks, patents and other forms of intellectual property are vital to the success of our business and are an essential factor in maintaining our
competitive position in the health and fitness industry.
Trademarks
We own many trademarks including Nautilus
®
, Bowflex
®
, PowerRod
®
, Revolution
®
, TreadClimber
®
, MAX Trainer
TM
, SelectTech
®
,
Trimline
®
, Airdyne
®
, CoreBody Reformer
®
and Universal
®
. Nautilus is the exclusive licensee under the mark Schwinn
®
for indoor fitness
products. We believe that having distinctive trademarks that are readily identifiable by consumers is an important factor in creating a market for
our products, maintaining a strong company identity and developing brand loyalty among our customers. In addition, we have granted licenses to
certain third-
parties to use the Nautilus, Schwinn and TreadClimber tradenames on commercial fitness products, for which we receive royalty
income and expanded consumer awareness of our brands.
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 trademark rights in our major markets.
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