November 7, 2011 - Nautilus, Inc. (NYSE: NLS) reported today its
unaudited operating results for the third quarter ended
September 30, 2011. All information regarding the
Company's operating results, unless otherwise noted, pertains to
its continuing operations, which include the Direct and Retail
fitness segments. The Company's former commercial fitness business
is reported as a discontinued operation.
Net sales for the third quarter ended
September 30, 2011 totaled $37.4 million, a decline of
2.8% as compared to net sales of $38.5 million for the same quarter
in 2010. For the nine months ended September 30, 2011,
net sales increased to $120.4 million, an increase of 4.9% as
compared to net sales of $114.8 million for the same period in
2010.
Income from continuing operations for the third quarter ended
September 30, 2011 was $0.3 million, compared to a loss
from continuing operations of $2.4 million for the 2010 third
quarter. Diluted income per share from continuing operations for
the third quarter of 2011 was $0.01, compared to a diluted loss per
share of $(0.08) for the same quarter a year ago. The significant
improvement in results from continuing operations was primarily due
to a 16.8% reduction in operating expenses achieved principally
through more efficient advertising expenditures. Selling and
marketing expenses for the 2011 third quarter, as a percent of net
sales, declined to 30.8% from 37.3% for the comparable 2010
period.
Bruce M. Cazenave, Chief Executive Officer, stated, "Despite a
continued challenging consumer sales environment, we are pleased
that revenues in our direct business continue to grow, reflecting
solid demand for our products. Improvement in overall profitability
during the quarter resulted from achieving further operating
expense efficiencies through disciplined cost controls and more
efficient and effective media expenditures. Given our management
team's refocused efforts to bring more new and innovative products
to market, we made a number of moves during the quarter to expand
our product development resources and capabilities."
The Company reported a net loss of $0.1 million for the third
quarter ended September 30, 2011, compared to a net loss
of $4.3 million for the third quarter of 2010. Diluted net loss per
share for the third quarter of 2011 was breakeven $(0.00), compared
to diluted net loss per share of $(0.14) for the same quarter a
year ago. Net loss for the 2011 third quarter included a loss from
discontinued operation of $0.4 million, or $(0.01) per diluted
share, compared to a loss of $1.9 million, or $(0.06) per diluted
share for the 2010 third quarter.
For the nine months ended September 30, 2011, loss
from continuing operations was $0.8 million, compared to loss from
continuing operations of $11.8 million for the same period in 2010.
Diluted loss per share from continuing operations for the first
nine months of 2011 was $(0.03), compared to $(0.38) for the same
period a year ago.
The Company reported a net loss of $1.8 million for the nine
months ended September 30, 2011 compared to a net loss of
$22.8 million for the same period a year ago. Diluted net loss per
share for the first nine months of 2011 was $(0.06), as compared to
diluted net loss per share of $(0.74) for the same period a year
ago. Net loss for the first nine months of 2011 included a loss
from discontinued operation of $1.0 million, or $(0.03) per diluted
share, compared to a loss of $11.0 million, or $(0.36) per diluted
share, for the same period in 2010.
Net sales for the Direct segment increased 5.3% for the 2011
third quarter over the comparable period last year. This sales
increase was largely driven by continued strong demand for the
Company's TreadClimber® products, attributable partly to increased
advertising effectiveness and higher consumer credit approval
rates, which rose to 27% in the 2011 third quarter, from 21% for
the same period last year. The improvement in Direct net sales, led
by strong growth in TreadClimber® products, was partially offset by
a decline in net sales of strength products due to sales promotions
during the third quarter 2010 and the maturing product life cycle
for home gyms.
Net sales in the Retail segment for the 2011 third quarter
totaled $13.7 million, compared to $16.1 million for the same
period last year, primarily due to a third quarter 2010 sales
promotion of certain cardio products that was not repeated in the
third quarter this year, as well as a shift in the timing of
customer orders to the fourth quarter.
Third quarter 2011 operating results for the Direct segment
improved by $2.8 million over the same quarter last year, primarily
due to a 5.3% increase in sales and more effective media
advertising content, which enabled more efficient ad spending.
Gross margin percent for the Direct business was 52.0% of net sales
for the third quarter of 2011, a decrease of 310 basis points
compared to the comparable 2010 period, as improved product margins
were more than offset by increased freight and warranty
expenses.
Third quarter 2011 operating results for the Retail segment
declined $0.7 million from the same quarter a year ago, primarily
due to a decline of 14.9% in sales and lower gross margin, offset
in part by lower selling and marketing expenses. Retail gross
margin percent of 21.6% declined by approximately 280 basis points
from the 2010 third quarter, primarily due to higher supply chain
costs combined with lower sales volume, partially offset by
improved product margins.
The following summary contains information from our unaudited
condensed consolidated statements of operations for the three and
nine months ended September 30, 2011 and 2010:
Results of Operations Three months ended September
30, Nine months ended September 30, (Unaudited
and in thousands, except per share amounts)
2011 2010
2011 2010 Net sales
$ 37,402 $ 38,474
$ 120,427 $ 114,760 Cost of sales
21,605
21,856
68,000 61,708 Gross
margin
15,797 16,618
52,427
53,052 Operating expenses: Selling and marketing
11,517 14,347
38,601 47,935 General and
administrative
4,134 4,797
13,103 14,750 Research and
development
859 699
2,336 2,290
Total operating expenses
16,510 19,843
54,040 64,975 Operating loss
(713
) (3,225 )
(1,613 ) (11,923 ) Other expense,
net
(176 ) 338
(317 ) 290
Loss from continuing operations before income taxes
(889
) (2,887 )
(1,930 ) (11,633 ) Income tax
(benefit) expense
(1,170 ) (489 )
(1,136
) 130 Income (loss) from continuing operations
281 (2,398 )
(794 ) (11,763 )
Discontinued operation: Loss from discontinued operation before
income taxes
(19 ) (1,728 )
(509 )
(10,778 ) Income tax expense of discontinued operation
354
180
451 261
Loss from discontinued operation
(373 ) (1,908 )
(960 ) (11,039 ) Net
loss
$ (92 ) $ (4,306 )
$ (1,754
) $ (22,802 )
Income (loss) per share from continuing
operations:
Basic and diluted
$ 0.01 $ (0.08 )
$ (0.03 ) $
(0.38 )
Loss per share from discontinued
operation:
Basic and diluted
$ (0.01 ) $ (0.06 )
$ (0.03
) $ (0.36 )
Net loss per share:
Basic and diluted
$ (0.00 ) $ (0.14 )
$ (0.06
) $ (0.74 )
Weighted average shares outstanding:
Basic and diluted
30,747 30,744
30,746 30,744
The following table presents comparative net sales by segment
for the third quarters ended September 30, 2011 and
2010:
Net Sales by Segment Three months ended September
30, Change (Unaudited and in thousands)
2011
2010 $ % Direct
$ 22,645 $ 21,504 $
1,141 5.3 % Retail
13,710 16,118 (2,408 ) (14.9 )% Royalty
income
1,047 852 195 22.9 %
$
37,402 $ 38,474 $ (1,072 ) (2.8 )%
The following table presents comparative net sales by segment
for the nine months ended September 30, 2011 and
2010:
Net Sales by Segment Nine months ended September
30, Change (Unaudited and in thousands)
2011
2010 $ % Direct $ 75,354 $ 68,450 $ 6,904 10.1 %
Retail 42,090 43,869 (1,779 ) (4.1 )% Royalty income 2,983
2,441 542 22.2 % $ 120,427 $ 114,760 $
5,667 4.9 %
The following table presents comparative operating results by
segment for the third quarters ended September 30, 2011
and 2010:
Operating Income (Loss) by Segment Three months
ended September 30, Change (Unaudited and in thousands)
2011 2010 $ % Direct
$ 161 $
(2,686 ) $ 2,847 106.0 % Retail
1,319 2,001 (682 ) (34.1 )%
Unallocated corporate
(2,193 ) (2,540 ) 347
13.7 %
$ (713 ) $ (3,225 ) $ 2,512 77.9
%
The following table presents comparative operating results by
segment for the nine months ended September 30, 2011 and
2010:
Operating Income (Loss) by Segment Nine months
ended September 30, Change (Unaudited and in thousands)
2011 2010 $ % Direct
$ 1,339 $
(9,200 ) $ 10,539 n.m. Retail
4,420 5,594 (1,174 ) (21.0 )%
Unallocated corporate
(7,372 ) (8,317 ) 945
11.4 %
$ (1,613 ) $ (11,923 ) $ 10,310
86.5 %
The following summary contains information from our unaudited
condensed consolidated balance sheets as of
September 30, 2011 and December 31, 2010:
Balance Sheet As of (Unaudited and in
thousands)
September 30, 2011 December 31, 2010
Assets Current assets: Cash and cash equivalents
$
11,518 $ 14,296 Trade receivables, net
11,520 19,633
Inventories
13,492 10,347 Prepaids and other current assets
6,329 7,319 Total current assets
42,859 51,595
Property, plant and equipment, net
4,290 3,795 Goodwill
2,837 2,931 Other intangible assets, net
17,229
18,774 Other assets
715 1,272
$ 67,930
$ 78,367
Liabilities and Stockholders' Equity Current
liabilities: Trade payables
$ 17,799 $ 24,535 Accrued
liabilities
6,620 7,045 Warranty obligations, current
portion
1,764 3,539 Deferred income tax liabilities
1,142 1,160 Total current liabilities
27,325
36,279 Long-term notes payable
5,480 5,141 Warranty
obligations, non-current
408 396 Income taxes payable,
non-current
3,293 3,210 Deferred income tax liabilities,
non-current
1,354 1,008 Other long-term liabilities
1,427 1,534 Stockholders' equity
28,643 30,799
$ 67,930 $ 78,367
Conference Call
Nautilus will host a conference call to discuss the Company's
operating results for the third quarter at 4:30 p.m. ET (1:30 p.m.
PT) on Monday, November 7, 2011. 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) 681-8612 in North
America and international listeners may call (303) 223-2695.
Participants from the Company will include Bruce M. Cazenave, Chief
Executive Officer, William B. McMahon, Chief Operating Officer and
Michael D. Mulholland, Chief Financial Officer.
A telephonic playback will be available from 6:30 p.m. ET,
November 7, 2011, through 6:30 p.m. ET, November 21, 2011.
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 21543843.
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 and Universal®, Nautilus markets
innovative fitness products through Direct and Retail channels.
Websites: www.nautilusinc.com,
www.bowflex.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,
capabilities, current or future financial trends or operating
results. Factors that could cause Nautilus, Inc.'s actual results
to differ materially from these forward-looking statements include
our ability to acquire inventory from sole source foreign
manufacturers at acceptable costs, within timely delivery schedules
and that meet our quality control standards, availability and price
of media time consistent with our cost and audience profile
parameters, a decline in consumer spending due to unfavorable
economic conditions, 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 actual results or developments 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 events or circumstances.
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