Nautilus, Inc. reported sales for the third quarter 2012 totaled $38.1 million, an increase of
1.7 percent 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 percent, compared to 42.2 percent 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 percent versus a loss of 1.9 percent
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."
Segment Results
Net sales
for the Direct segment were $25.1 million in the third quarter of 2012,
an increase of 10.9 percent 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 percent in
the third quarter of 2012, up from 27 percent 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 percent for the third quarter of 2012,
compared to 52.0 percent 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 percent 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 percent in the third quarter of 2012,
compared to 21.6 percent 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.
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.
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