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Nautilus, Inc. Reports Strong Results For The Fourth Quarter And Full Year 2011

Stocks in this article: NLS

The Company reported net income (including discontinued operation) of $3.2 million for the fourth quarter of 2011, compared to a net loss of $39,000 for the fourth quarter of 2010. Diluted net income per share for the fourth quarter of 2011 was $0.10, compared to breakeven $(0.00) for the same quarter a year ago. Net income for the 2011 fourth quarter included a loss from discontinued operation of $0.1 million, or $(0.01) per diluted share, compared to a loss of $2.0 million, or $(0.06) per diluted share for the 2010 fourth quarter.

The Company reported net income (including discontinued operation) of $1.4 million for the full year ended December 31, 2011, compared to a net loss of $22.8 million for 2010. Diluted net income per share for 2011 was $0.05, as compared to diluted net loss per share of $(0.74) last year. Net loss for 2011 included a loss from discontinued operation of $1.1 million, or $(0.03) per diluted share, compared to a loss of $13.0 million, or $(0.42) per diluted share, for 2010.

The following summary contains information from our unaudited consolidated statements of operations for the three months and years ended December 31, 2011 and 2010:

Results of Operations Information  

Three months ended December 31,

  Year ended December 31,
(Unaudited and in thousands, except per share amounts) 2011   2010 2011   2010
Net sales $ 59,985 $ 53,690 $ 180,412 $ 168,450
Cost of sales 33,953   29,996   101,953   91,704  
Gross profit 26,032   23,694   78,459   76,746  
Operating expenses:
Selling and marketing 15,893 16,104 54,494 64,039
General and administrative 4,040 4,621 17,143 19,371
Research and development 887   615   3,223   2,905  
Total operating expenses 20,820   21,340   74,860   86,315  
Operating income (loss) 5,212 2,354 3,599 (9,569 )
Other (expense) income, net (95 ) 49   (412 ) 339  
Income (loss) from continuing operations before taxes 5,117 2,403 3,187 (9,230 )
Income tax expense 1,822   458   686   588  
Income (loss) from continuing operations 3,295   1,945   2,501   (9,818 )
Discontinued operation:
Loss from discontinued operation before taxes (556 ) (2,146 ) (1,065 ) (12,924 )
Income tax (benefit) expense of discontinued operation (435 ) (162 ) 16   99  
Loss from discontinued operation (121 ) (1,984 ) (1,081 ) (13,023 )
Net income (loss) $ 3,174   $ (39 ) $ 1,420   $ (22,841 )
Income (loss) per share from continuing operations:
Basic $ 0.11 $ 0.06 $ 0.08 $ (0.32 )
Diluted 0.11 0.06 0.08 (0.32 )
Loss per share from discontinued operation:
Basic and diluted (0.01 ) (0.06 ) (0.03 ) (0.42 )
Net income (loss) per share:
Basic 0.10 0.05 (0.74 )
Diluted 0.10 0.05 (0.74 )
Weighted average shares outstanding:
Basic 30,747 30,744 30,746 30,744
Diluted 30,759 30,744 30,776 30,744

Segment Results

Net sales for the Direct segment were $31.7 million in the fourth quarter of 2011, an increase of 12.4% over the comparable period last year. This sales increase reflects continued strong demand for the Company's TreadClimber ® products, attributable partly to increased advertising effectiveness and also higher consumer credit approval rates, which rose to 30% in the 2011 fourth quarter, from 20% for the same period last year. Fourth quarter of 2011 sales also benefitted from the launch and positive consumer reception of the Company's CoreBody Reformer™. As anticipated, strong TreadClimber ® and new product sales were partially offset by a decline in sales of strength products due to management's strategic decision to decrease overall advertising expenditures supporting home gyms. Although 2011 sales were down for strength products when compared to last year, overall profitability of the product category increased as a result of less expensive online media.

Fourth quarter 2011 operating income for the Direct segment improved to $1.6 million, a $3.2 million increase over the same quarter last year. An increase in sales driven by strong product demand and more effective media advertising content enabled the Company to significantly reduce its media marketing spend while increasing revenue. The improved effectiveness of our media expenditure more than offset the creative content costs associated with the launch of the CoreBody Reformer™ in the fourth quarter 2011. Gross margin for the Direct business was 55.6% of net sales for the fourth quarter of 2011, an increase of 350 basis points compared to the fourth quarter of last year, primarily driven by fewer sales promotions and improved product margins.

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