Nautilus 2014 Annual Report Download - page 8

volume or purchase commitments on the part of either party. Our third-
party manufacturers are responsible for the sourcing of raw materials and
producing parts and finished products to our specifications.
LOGISTICS
Our warehousing and distribution facilities are located in Portland, Oregon, Obetz, Ohio, 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 2014 approximately 54%
of our Retail customers 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 25, 2015, we had approximately 340 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
®
, Bowflex Revolution
®
, TreadClimber
®
, Bowflex Max Trainer
®
,
SelectTech
®
, Trimline
®
, Airdyne
®
, Bowflex Boost
®
, Bowflex Body
TM
and Universal
®
.
Nautilus is the exclusive licensee under the Schwinn
®
mark 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 trademarks 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.
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