Net sales in the Retail segment for the 2011 fourth quarter totaled $26.5 million, a 10.8% increase compared to the same period last year. The increase reflects improvements in sales of bikes and elliptical products. Operating income for the Retail segment was $5.1 million, a decline of $0.7 million from the same quarter a year ago, primarily due to lower gross margins, offset in part by lower selling and marketing expenses. Retail gross margin was 25.0% in the fourth quarter of 2011, a decline of approximately 620 basis points from the same quarter a year ago, and is mostly due to an increase in new product launch support expenses and increased supply chain costs.

The following table presents comparative net sales by segment for the three months ended December 31, 2011 and 2010:
 
  Three months ended  
Net Sales by Segment December 31, Change
(Unaudited and in thousands) 2011   2010 $   %
Direct $ 31,707 $ 28,218 $ 3,489 12.4 %
Retail 26,501 23,920 2,581 10.8 %
Royalty income 1,777   1,552   225   14.5 %
Total net sales $ 59,985   $ 53,690   $ 6,295   11.7 %
 

The following table presents comparative net sales by segment for the years ended December 31, 2011 and 2010:
 
Net Sales by Segment   Year ended December 31,   Change
(Unaudited and in thousands) 2011   2010 $   %
Direct $ 107,061 $ 96,668 $ 10,393 10.8 %
Retail 68,591 67,789 802 1.2 %
Royalty income 4,760   3,993   767   19.2 %
Total net sales $ 180,412   $ 168,450   $ 11,962   7.1 %
 

The following table presents comparative operating results by segment for the three months ended December 31, 2011 and 2010:
 
Operating Income (Loss)   Three months ended  
by Segment December 31,
(Unaudited and in thousands) 2011   2010 Change
Direct $ 1,615 $ (1,578 ) $ 3,193
Retail 5,069 5,806 (737 )
Unallocated corporate (1,472 ) (1,874 ) 402  
Total operating income $ 5,212   $ 2,354   $ 2,858  
 

The following table presents comparative operating results by segment for the years ended December 31, 2011 and 2010:
 
Operating Income (Loss)    
by Segment Year ended December 31,
(Unaudited and in thousands) 2011   2010 Change
Direct $ 2,954 $ (10,778 ) $ 13,732
Retail 9,489 11,400 (1,911 )
Unallocated corporate (8,844 ) (10,191 ) 1,347  
Total operating income (loss) $ 3,599   $ (9,569 ) $ 13,168  
 

Balance Sheet

As of December 31, 2011, cash and cash equivalents were $17.4 million, compared to $14.3 million at year end 2010. Working capital was $19.4 million, compared to $15.3 million at year end 2010. Inventory as of December 31, 2011 was $11.6 million, compared to $10.3 million as of December 31, 2010. The Company believes it has adequate inventory to support current demand levels.

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