Nautilus 2014 Annual Report Download - page 5

PART I
Forward-Looking Statements
This Annual Report on Form 10-K 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 report include, without limitation: our prospects,
resources or capabilities; current or future financial trends; future operating results; future plans for introduction of new products; anticipated
demand for our new and existing products; maintenance of appropriate inventory levels; growth in revenues and profits; leverage of operating
expenses; future revenues from our licensing initiative; results of increased media investment in the Direct segment; continued improvement in
operating margins; expectations for increased Research and Development expenses; the amount expected to be spent on software and equipment
in 2015; fluctuations in Net Sales due to seasonality; and our ability to continue to fund our operating and capital needs for the following twelve-
month period. 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, settlements of warranty obligations, the anticipated outcome of litigation to which we are a
party, 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 in Part I, Item 1A of this report. We do not undertake any duty to
update forward-looking statements after the date they are made or conform them to actual results or to changes in circumstances or expectations.
Item 1. Business
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 their fitness goals through 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, but also in international markets outside
North America. Our products are sold under some of the most
-recognized brand names in the fitness industry: Nautilus
®
, Bowflex
®
, 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 directly 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 internationally. We also
derive a portion of our revenue from the licensing of our brands and intellectual property.
Beginning in 2009, we began the divestiture of our Commercial business, which focused on the sale of commercial fitness equipment into gyms,
health clubs, and fitness centers. That process was largely completed in 2011, and we reached substantial completion of asset liquidation at
December 31, 2012. Results of operations from the Commercial business are presented as Discontinued Operations for all periods. There was no
revenue related to the Commercial business for the years ended December 31, 2014 , 2013 or 2012 .
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. We are focused exclusively on consumer markets and distribution channels and view the continual
innovation of our product offerings as a key aspect of our business strategy. We regularly refresh our existing product lines with new
technologies and finishes, and focus significant effort and resources on the development or acquisition of innovative new fitness products for
introduction to the marketplace at periodic intervals.
Our strategies incorporate the individual characteristics of our Direct and Retail businesses. Our Direct business 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 payment options available to our customers. We are particularly attentive to
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