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Nautilus, Inc. Continues Positive Momentum Reporting Profit From Continuing Operations For The Third Quarter Of 2011

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.

Stock quotes in this article: NLS 

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