Net Income from Continuing Operations Improved to $1.2 Million
Third Quarter Gross Margin Improved 650 Basis Points to 48.7%
Third Quarter Direct Sales Increased 11%
VANCOUVER, WASHINGTON--(BUSINESS WIRE)--
November 5, 2012 - Nautilus, Inc. (NYSE: NLS) today reported its
unaudited operating results for the third quarter ended September
30, 2012. Continuing the momentum established the first half of fiscal
2012, net sales for the third quarter 2012 totaled $38.1 million, an
increase of 1.7% compared to net sales of $37.4 million for the same
quarter in 2011.
Gross margin for the third quarter of 2012 improved 650 basis points to
48.7%, compared to 42.2% for the same quarter in 2011. The increase in
gross margin was primarily due to sales of higher margin Direct
products. Operating margin for the third quarter of 2012 improved 370
basis points to 1.8% versus a loss of 1.9% during the same period last
year.
Income from continuing operations for the third quarter ended September
30, 2012 was $1.2 million, compared to $0.3 million for the same period
last year. Income per diluted share from continuing operations for the
third quarter of 2012 increased to $0.04, compared to $0.01 for the same
quarter a year ago. The strong improvement in results from continuing
operations primarily reflects improved gross margins and higher
operating income from the Company's Direct business.
For the nine months ended September 30, 2012, income from continuing
operations was $3.4 million, compared to loss from continuing operations
of $0.8 million for the same period last year. Income per diluted share
from continuing operations for the first nine months of 2012 was $0.11,
compared to loss per diluted share of $(0.03) for the same period a year
ago.
Bruce M. Cazenave, Chief Executive Officer, stated, "We are pleased with
the performance of our business in the third quarter and first nine
months of this year, as we generated sales growth and significant
improvements in net income compared to the same periods last year . Our
results reflect the continued strength of our Direct business, which
highlights the successful execution of a number of our key initiatives,
including generating strong top line growth while delivering higher
gross margins. As we previously disclosed, our Retail business was
impacted by a shift in some of our retail partners' buying patterns,
which accelerated revenue into the second quarter from the third
quarter. Importantly, our Retail margins stabilized despite being
adversely affected by the revenue shift and resulting lower volume
absorption of fixed costs in the third quarter versus the same period
last year. Our Retail segment continued to contribute positively to our
overall profitability in the third quarter."
The Company reported net income (including discontinued operation) of
$1.0 million for the third quarter of 2012, compared to net loss of $0.1
million for the third quarter of 2011. Net income per diluted share for
the third quarter of 2012 was $0.03, compared to breakeven for the same
period last year. Net income for the 2012 third quarter included loss
from discontinued operation of $ 0.3 million, or $(0.01) per diluted
share, compared to loss from discontinued operation of $0.4 million, or
$(0.01) per diluted share, for the same period last year.
Mr. Cazenave continued, "The momentum in our Direct business is
encouraging, and the positioning of both the Retail and Direct
businesses for more profitable growth in the future is advancing as
planned. New products remain a top focus area for the company and we
have a number of exciting products hitting the marketplace during the
fall / winter season, including a new and unique DVD based exercise
program, new and refreshed items for our Retail segment, and the
marketing re-launch of our CoreBody Reformer. Our new product plans and
restructured operating platform are key elements of our strategy to
successfully grow revenues, leverage our operating expenses, and
continue to improve our operating margins while expanding our product
portfolio."
For further information, see "Results of Operations Information"
attached hereto.
Segment Results
Net sales for the Direct segment were $25.1 million in the third quarter
of 2012, an increase of 10.9% over the comparable period last year,
reflecting strong demand for the Company's cardio products. The higher
sales were also partly driven by increased advertising effectiveness and
higher U.S. consumer credit approval rates, which rose to 31% in the
third quarter of 2012, up from 27% for the same period last year.
Operating income for the Direct segment improved to $1.9 million for the
third quarter 2012, compared to $0.2 million for the third quarter 2011.
This improvement reflects stronger sales as well as a 590 basis point
improvement in Direct gross margin. Gross margin for the Direct business
was 57.9% for the third quarter of 2012, compared to 52.0% in the third
quarter of last year, reflecting successful execution of the Company's
key initiative to improve product margins.
Net sales for the Retail segment were $11.4 million in the third quarter
2012, compared to $13.7 million in the third quarter last year. As
previously disclosed, in the first half of 2012, the Company took
certain steps to stabilize declining gross margins in its Retail
business. These steps included a price increase for the back half of
2012, which contributed to a 23% year-over-year increase in sales for
the second quarter as some Retail customers accelerated a portion of
their purchases into the second quarter compared to their typical buying
patterns.
Operating income for the Retail segment was $0.8 million, compared to
$1.3 million in the third quarter last year. Retail gross margin was
21.4% in the third quarter of 2012, compared to 21.6% in the same
quarter of last year. Retail margins were adversely affected by less
absorption of fixed costs due to the lower volumes in the quarter versus
the same period last year.
For further information, see "Segment Information" attached hereto.
Balance Sheet
As of September 30, 2012, the Company had cash and cash equivalents of
$15.2 million and no debt, compared to cash and cash equivalents of
$17.4 million and $5.6 million of debt at year end 2011. Working capital
was $17.9 million as of September 30, 2012, compared to $19.4 million at
year end 2011; the decline in working capital was mainly the result of
paying off the $5.6 million of debt during March of this year. Inventory
as of September 30, 2012 was $16.9 million, compared to $11.6 million as
of December 31, 2011 and $13.5 million same period last year. The
Company believes it has adequate inventory to support current demand
levels.
For further information, see "Balance Sheet Information" attached
hereto.
Conference Call
Nautilus will host a conference call to discuss the Company's operating
results for the third quarter ended September 30, 2012 at 4:30 p.m. ET
(1:30 p.m. PT) on Monday, November 5, 2012. The call will be broadcast
live over the Internet hosted at http://www.nautilusinc.com/events
and will be archived online within one hour after completion of the
call. In addition, listeners may call (800) 406-5162 in North America
and international listeners may call (303) 223-2690. Participants from
the Company will include Bruce M. Cazenave, Chief Executive Officer,
Linda Pearce, Chief Financial Officer, and William B. McMahon, Chief
Operating Officer.
A telephonic playback will be available from 6:30 p.m. ET, November 5,
2012, through 6:30 p.m. ET, November 19, 2012. Participants can dial
(800) 633-8284 in North America and international participants can dial
(402) 977-9140 to hear the playback. The passcode for the playback is
21608608.
About Nautilus, Inc.
Headquartered in Vancouver, Washington, Nautilus, Inc. (NYSE: NLS) is a
global fitness products company providing innovative, quality solutions
to help people achieve a healthy lifestyle. With a brand portfolio
including Nautilus®, Bowflex®, TreadClimber®,
Schwinn®, Schwinn FitnessTM, Universal® and
CoreBody Reformer™, Nautilus markets innovative fitness products through
Direct and Retail channels. Websites: www.nautilusinc.com,
www.bowflex.com,
www.schwinnfitness.com,
www.treadclimber.com
and www.corebody.com.
This press release includes forward-looking statements (statements which
are not historical facts) within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements concerning: the
Company's prospects, resources or capabilities; current or future
financial trends; future operating results; future plans for
introduction of new products; expected profitability and the timing
thereof and results anticipated to be achieved from the restructuring of
the Company's operating platform, including expectations regarding
future growth in revenues, leverage of operating expenses, and continued
improvement in operating margins. Factors that could cause Nautilus,
Inc.'s actual results to differ materially from these forward-looking
statements include our ability to timely acquire inventory that meets
our quality control standards from sole source foreign manufacturers at
acceptable costs, availability and price of media time consistent with
our cost and audience profile parameters, greater than anticipated costs
associated with launch of new products, a decline in consumer spending
due to unfavorable economic conditions, softness in the retail
marketplace, an adverse change in the availability of credit for our
customers who finance their purchases, our ability to pass along vendor
raw material price increases and increased shipping costs, our ability
to effectively develop, market and sell future products, our ability to
protect our intellectual property, the introduction of competing
products, and our ability to get foreign-sourced product through customs
in a timely manner. Additional assumptions, risks and uncertainties are
described in detail in our registration statements, reports and other
filings with the Securities and Exchange Commission, including the "Risk
Factors" set forth in our Annual Report on Form 10-K, as supplemented by
our quarterly reports on Form 10-Q. Such filings are available on our
website or at www.sec.gov.
You are cautioned that such statements are not guarantees of future
performance and that our actual results may differ materially from those
set forth in the forward-looking statements. We undertake no obligation
to publicly update or revise forward-looking statements to reflect
subsequent developments, events or circumstances.
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated
statements of operations for the three and nine months ended September
30, 2012 and 2011:
Results of Operations Information
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(Unaudited and in thousands, except per share amounts)
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Net sales
|
|
$
|
38,052
|
|
|
$
|
37,402
|
|
|
$
|
128,897
|
|
|
$
|
120,427
|
|
Cost of sales
|
|
19,511
|
|
|
21,605
|
|
|
69,283
|
|
|
68,000
|
|
Gross profit
|
|
18,541
|
|
|
15,797
|
|
|
59,614
|
|
|
52,427
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
12,434
|
|
|
11,517
|
|
|
41,057
|
|
|
38,601
|
|
General and administrative
|
|
4,371
|
|
|
4,134
|
|
|
12,672
|
|
|
13,103
|
|
Research and development
|
|
1,038
|
|
|
859
|
|
|
2,957
|
|
|
2,336
|
|
Total operating expenses
|
|
17,843
|
|
|
16,510
|
|
|
56,686
|
|
|
54,040
|
|
Operating income (loss)
|
|
698
|
|
|
(713
|
)
|
|
2,928
|
|
|
(1,613
|
)
|
Other expense, net
|
|
(107
|
)
|
|
(176
|
)
|
|
(105
|
)
|
|
(317
|
)
|
Income (loss) from continuing operations before income taxes
|
|
591
|
|
|
(889
|
)
|
|
2,823
|
|
|
(1,930
|
)
|
Income tax benefit
|
|
(625
|
)
|
|
(1,170
|
)
|
|
(554
|
)
|
|
(1,136
|
)
|
Income (loss) from continuing operations
|
|
1,216
|
|
|
281
|
|
|
3,377
|
|
|
(794
|
)
|
Loss from discontinued operation, net of income taxes
|
|
(265
|
)
|
|
(373
|
)
|
|
(68
|
)
|
|
(960
|
)
|
Net income (loss)
|
|
$
|
951
|
|
|
$
|
(92
|
)
|
|
$
|
3,309
|
|
|
$
|
(1,754
|
)
|
Income (loss) per basic and diluted share:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.04
|
|
|
$
|
0.01
|
|
|
$
|
0.11
|
|
|
$
|
(0.03
|
)
|
Discontinued operation
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
0.00
|
|
|
(0.03
|
)
|
Net income (loss)
|
|
0.03
|
|
|
0.00
|
|
|
0.11
|
|
|
(0.06
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
30,892
|
|
|
30,747
|
|
|
30,892
|
|
|
30,746
|
|
Diluted
|
|
30,942
|
|
|
30,747
|
|
|
31,006
|
|
|
30,746
|
|
SEGMENT INFORMATION
The following table presents comparative net sales by segment for the
three months ended September 30, 2012 and 2011:
Net Sales by Segment
|
|
Three months ended
September 30,
|
|
Change
|
(Unaudited and in thousands)
|
|
2012
|
|
2011
|
|
$
|
|
%
|
Direct
|
|
$
|
25,103
|
|
|
$
|
22,645
|
|
|
$
|
2,458
|
|
|
10.9
|
%
|
Retail
|
|
11,388
|
|
|
13,710
|
|
|
(2,322
|
)
|
|
(16.9
|
)%
|
Royalty income
|
|
1,561
|
|
|
1,047
|
|
|
514
|
|
|
49.1
|
%
|
Total net sales
|
|
$
|
38,052
|
|
|
$
|
37,402
|
|
|
$
|
650
|
|
|
1.7
|
%
|
The following table presents comparative operating results by segment
for the three months ended September 30, 2012 and 2011:
Operating Income (Loss) by Segment
|
|
Three months ended
September 30,
|
|
|
(Unaudited and in thousands)
|
|
2012
|
|
2011
|
|
Change
|
Direct
|
|
$
|
1,947
|
|
|
$
|
161
|
|
|
$
|
1,786
|
|
Retail
|
|
827
|
|
|
1,319
|
|
|
(492
|
)
|
Unallocated corporate
|
|
(2,076
|
)
|
|
(2,193
|
)
|
|
117
|
|
Total operating income (loss)
|
|
$
|
698
|
|
|
$
|
(713
|
)
|
|
$
|
1,411
|
|
The following table presents comparative net sales by segment for the
nine months ended September 30, 2012 and 2011:
Net Sales by Segment
|
|
Nine months ended
September 30,
|
|
Change
|
(Unaudited and in thousands)
|
|
2012
|
|
2011
|
|
$
|
|
%
|
Direct
|
|
$
|
83,544
|
|
|
$
|
75,354
|
|
|
$
|
8,190
|
|
|
10.9
|
%
|
Retail
|
|
42,057
|
|
|
42,090
|
|
|
(33
|
)
|
|
(0.1
|
)%
|
Royalty income
|
|
3,296
|
|
|
2,983
|
|
|
313
|
|
|
10.5
|
%
|
Total net sales
|
|
$
|
128,897
|
|
|
$
|
120,427
|
|
|
$
|
8,470
|
|
|
7.0
|
%
|
The following table presents comparative operating results by segment
for the nine months ended September 30, 2012 and 2011:
Operating Income (Loss) by Segment
|
|
Nine months ended
September 30,
|
|
|
(Unaudited and in thousands)
|
|
2012
|
|
2011
|
|
Change
|
Direct
|
|
$
|
5,968
|
|
|
$
|
1,339
|
|
|
$
|
4,629
|
|
Retail
|
|
4,182
|
|
|
4,420
|
|
|
(238
|
)
|
Unallocated corporate
|
|
(7,222
|
)
|
|
(7,372
|
)
|
|
150
|
|
Total operating income (loss)
|
|
$
|
2,928
|
|
|
$
|
(1,613
|
)
|
|
$
|
4,541
|
|
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated balance
sheets as of September 30, 2012 (unaudited) and December 31, 2011:
Balance Sheet Information
|
|
As of
|
(In thousands)
|
|
September 30, 2012
|
|
December 31, 2011 |
Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,209
|
|
|
$
|
17,427
|
Trade receivables, net
|
|
11,735
|
|
|
23,780
|
Inventories
|
|
16,900
|
|
|
11,601
|
Prepaids and other current assets
|
|
5,313
|
|
|
5,279
|
Total current assets
|
|
49,157
|
|
|
58,087
|
Property, plant and equipment, net
|
|
5,811
|
|
|
4,405
|
Goodwill
|
|
2,979
|
|
|
2,873
|
Other intangible assets, net
|
|
15,178
|
|
|
16,716
|
Other assets
|
|
711
|
|
|
732
|
Total assets
|
|
$
|
73,836
|
|
|
$
|
82,813
|
Liabilities and Stockholders' Equity
|
|
|
|
|
Trade payables
|
|
$
|
21,117
|
|
|
$
|
28,563
|
Accrued liabilities
|
|
7,110
|
|
|
7,218
|
Warranty obligations, current portion
|
|
1,848
|
|
|
1,803
|
Deferred income tax liabilities
|
|
1,158
|
|
|
1,064
|
Total current liabilities
|
|
31,233
|
|
|
38,648
|
Long-term notes payable
|
|
—
|
|
|
5,598
|
Warranty obligations, non-current
|
|
214
|
|
|
214
|
Income taxes payable, non-current
|
|
2,891
|
|
|
3,658
|
Deferred income tax liabilities, non-current
|
|
1,660
|
|
|
1,434
|
Other long-term liabilities
|
|
2,057
|
|
|
1,308
|
Stockholders' equity
|
|
35,781
|
|
|
31,953
|
Total liabilities and stockholders' equity
|
|
$
|
73,836
|
|
|
$
|
82,813
|
Investor Relations Contact:
John Mills, ICR, LLC
Telephone:
(310) 954-1105
Source: Nautilus, Inc.
News Provided by Acquire Media