May 6, 2013 - Nautilus, Inc. (NYSE: NLS) today reported its
unaudited operating results for the first quarter ended March
31, 2013.
Net sales for the first quarter of 2013 totaled $59.2 million, a
15.5% increase compared to $51.3 million in the same quarter of
2012. Gross margin for the first quarter of 2013 improved 520 basis
points to 51.8%, compared to 46.6% for the same quarter in 2012.
The increase in gross margin was primarily due to higher gross
margins in both the Retail and Direct businesses, as well as the
continuing shift of sales to higher margin cardio products in the
Direct channel. Operating margin for the first quarter of 2013
improved 460 basis points to 10.1% compared to 5.5% in the same
period last year.
Income from continuing operations for the first quarter of 2013
was $5.5 million, compared to $2.6 million for the same period last
year. Income per diluted share from continuing operations for the
first quarter of 2013 increased to $0.18, compared to $0.09 for the
same quarter a year ago. The strong improvement in results from
continuing operations primarily reflects increased sales, improved
gross margins and higher operating income from the Company’s Direct
business.
Bruce M. Cazenave, Chief Executive Officer, stated, “We are
pleased to report a solid start to fiscal 2013. We continued to
build on the strong momentum established last year and delivered
strong growth in revenue, gross margin, and profitability in the
first quarter this year. Our Direct business continued to perform
very well, reflecting both the steady growth of our existing
products, as well as the initial success of our new products,
including the Bowflex® UpperCut™. As anticipated, our Retail
business was impacted by the continued soft overall Retail
environment for fitness equipment. Given the recent margin and
sales challenges we have faced in Retail, we are encouraged by the
margin improvement in the first quarter. As previously
communicated, we have been focused on the development and
successful placement of a new lineup of cardio products for
shipment during the next Retail planning and sales cycle starting
this fall. These products appear to be receiving a favorable
reception thus far, although it is much too early to determine to
what extent preliminary indications may lead to improvement in
Retail results.”
For the first quarter of 2013, the Company reported net income
(including discontinued operations) of $5.2 million, or $0.17 per
diluted share, compared to $2.5 million, or $0.08 per diluted
share, for the first quarter of 2012. Net income for the first
quarter of 2013 included a loss of $0.4 million, or ($0.01) per
diluted share, from discontinued operations. Net income for the
first quarter of 2012 included a loss of $0.1 million, or ($0.01)
per diluted share, from discontinued operations.
Mr. Cazenave continued, “The business is achieving momentum and
is beginning to realize the financial benefits from our team’s
successful execution on key areas of focus, including establishing
an expanded and more diversified product portfolio and improving
gross margins. In order to further expand consumer awareness of our
most recently launched products, we will continue to prudently
invest in our sales and marketing efforts with a constant eye on
building a strong foundation for continued long-term profitable
growth. ”
For further information, see "Results of
Operations Information" attached hereto.
Segment Results
Net sales for the Direct segment were $42.6 million in the first
quarter of 2013, an increase of 26.4% over the comparable period
last year, reflecting strong demand for the Company's cardio
products, especially our Bowflex® Treadclimber®. The higher sales
were driven by continued effectiveness of our advertising and call
center processes, and higher U.S. consumer credit approval rates.
U.S. credit approval rates rose to 35% in the first quarter of
2013, up from 30% for the same period last year. First quarter 2013
sales also benefitted from sales of CoreBody Reformer® and Bowflex®
UpperCut™.
Operating income for the Direct segment improved to $6.7 million
for the first quarter 2013, compared to $3.0 million for the first
quarter 2012. This improvement reflects stronger sales, as well as
a 330 basis point improvement in Direct segment gross margin. Gross
margin for the Direct business was 59.8% for the first quarter of
2013, compared to 56.5% in the first quarter of last year. Direct
business gross margin benefitted from better product mix of higher
margin cardio sales.
Net sales for the Retail segment were $15.1 million in the first
quarter 2013, a decrease of 9.0% when compared to $16.6 million in
the first quarter last year. First quarter retail sales were
impacted by the continued soft overall retail environment for
fitness equipment. As noted above, the launch of our new lineup of
cardio products for the Retail segment is currently in progress. We
advise caution in comparing interim period results for our Retail
business with prior year periods until the second half of the year,
when these products have fully launched and the level of consumer
acceptance can be evaluated.
Operating income for the Retail segment was $2.0 million,
compared to $2.3 million in the first quarter last year. Retail
gross margin was 24.9% in the first quarter of 2013, compared to
23.8% in the same quarter of last year, a 110 basis point
improvement.
For further information, see "Segment
Information" attached hereto.
Balance Sheet
The Company ended the first quarter of 2013 in a strong
financial position. As of March 31, 2013, the Company had cash and
cash equivalents of $28.7 million and no debt, compared to cash and
cash equivalents of $23.2 million and no debt at year end 2012.
Working capital was $31.1 million as of March 31, 2013, compared to
$25.4 million at year end 2012. Inventory as of March 31, 2013 was
$13.7 million, compared to $18.8 million as of December 31, 2012
and $13.5 million at the end of the first quarter of 2012. The
company tightly manages inventory levels and the reduction in the
first quarter was planned and reflects the seasonal nature of our
business.
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 first quarter ended March 31, 2013 at
4:30 p.m. ET (1:30 p.m. PT) on Monday, May 6, 2013. 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) 768-3591 in North America and
international listeners may call (212) 231-2938. Participants from
the Company will include Bruce M. Cazenave, Chief Executive
Officer, Linda M. Pearce, Chief Financial Officer, and William B.
McMahon, Chief Operating Officer.
A telephonic playback will be available from 6:30 p.m. ET, May
6, 2013, through 6:30 p.m. ET, May 20, 2013. 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 21655026.
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 Fitness TM 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 or
capabilities; current or future financial trends; future operating
results; future plans for introduction of new products; anticipated
demand for the Company's products, including expectations regarding
future demand for new products for the Retail segment and the
anticipated timing of orders and shipments of these products,
growth in revenues and profits, 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 months
ended March 31, 2013 and 2012:
Results of Operations Information Three months
ended March 31, (Unaudited and in thousands, except per share
amounts)
2013 2012 Net sales $
59,214 $ 51,262
Cost of sales 28,520 27,357
Gross profit 30,694 23,905
Operating
expenses: Selling and marketing 18,626 16,066 General and
administrative 4,947 4,010 Research and development 1,127
1,000 Total operating expenses 24,700 21,076
Operating income 5,994 2,829
Other income (expense),
net (117 ) 82
Income from continuing operations
before
income taxes
5,877 2,911
Income tax expense 353 264
Income from continuing operations 5,524 2,647
Loss from
discontinued operation, net of income taxes (365 ) (125 )
Net income $ 5,159 $ 2,522
Income
(loss) per basic and diluted share: Continuing
operations $ 0.18 $ 0.09 Discontinued operation (0.01 ) (0.01 )
Net income 0.17 0.08
Weighted average shares
outstanding: Basic 30,947 30,748 Diluted 31,264 30,839
SEGMENT INFORMATION
The following table presents comparative net
sales by segment for the three months ended March 31, 2013 and
2012:
Net Sales by Segment Three months ended March
31, Change (Unaudited and in
thousands)
2013 2012 $
% Direct $ 42,635 $ 33,734 $ 8,901 26.4 % Retail
15,134 16,639 (1,505 ) (9.0 )% Royalty income 1,445 889
556 62.5 % Total net sales $ 59,214 $
51,262 $ 7,952 15.5 %
The following table presents comparative
operating results by segment for the three months ended March 31,
2013 and 2012:
Operating Income (Loss) by Segment Three months
ended March 31, Change (Unaudited
and in thousands)
2013 2012 $
% Direct $ 6,708 $ 3,028 $ 3,680 121.5 %
Retail 1,960 2,267 (307 ) (13.5 )% Unallocated corporate (2,674 )
(2,466 ) (208 ) 8.4 % Total operating income $ 5,994
$ 2,829 $ 3,165 111.9 %
BALANCE SHEET INFORMATION
The following summary contains information
from our consolidated balance sheets as of March 31, 2013
(unaudited) and 2012:
Balance Sheet Information As of (In
thousands, Unaudited)
March 31, 2013
December 31, 2012 Assets Cash and cash equivalents $
28,680 $ 23,207 Trade receivables, net 12,257 21,767 Inventories
13,653 18,787 Prepaids and other current assets 4,529 6,126
Total current assets 59,119 69,887 Property, plant and
equipment, net 6,587 6,138 Goodwill 2,879 2,940 Other intangible
assets, net 14,153 14,666 Other assets 608 680
Total
assets $ 83,346 $ 94,311
Liabilities and
Stockholders' Equity Trade payables $ 17,776 $ 32,753 Accrued
liabilities 6,528 8,171 Warranty obligations, current portion 2,396
2,278 Deferred income tax liabilities 1,338 1,275
Total
current liabilities 28,038 44,477 Warranty obligations,
non-current 214 214 Income taxes payable, non-current 2,891 2,812
Deferred income tax liabilities, non-current 1,627 1,484 Other
long-term liabilities 1,877 1,998 Stockholders' equity 48,699
43,326
Total liabilities and stockholders' equity $
83,346 $ 94,311
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