May 8 2012
Nautilus, Inc. (NYSE: NLS) reported today its unaudited operating results for the first quarter ended March 31, 2012. Continuing the momentum established in 2011, net sales for the first quarter ended March 31, 2012 totaled $51.3 million, an increase of 6.1% compared to net sales of $48.3 million for the same quarter in 2011. Gross margin for the first quarter of 2012 improved 90 basis points to 46.6% compared to 45.7% for the same quarter in 2011. The increase in gross margin was primarily due to a greater proportion of sales being derived from the higher margin Direct segment. Operating margin for the first quarter of 2012 improved 180 basis points to 5.5%, compared to 3.7% for the same period last year.
Income from continuing operations for the first quarter ended March 31, 2012 was $2.6 million, compared to $1.1 million for the same period last year. Diluted income per share from continuing operations for the first quarter of 2012 was $0.09, compared to $0.04 for the same quarter a year ago. The significant improvement in results from continuing operations reflects stronger sales, improved gross margins, and lower operating expenses as a percentage of sales, mainly due to lower general and administrative expense.
Bruce M. Cazenave, Chief Executive Officer, stated, "We are pleased with our start to fiscal 2012. The increased revenues and improved bottom line profitability are consistent with our stated priority of delivering sustainable and profitable growth. Our first quarter results benefited from revenue growth in the Direct channel driven by the continued success of a number of products, higher gross margins and diligent management of operating expenses for all areas of our business. Importantly, we also pre-paid all amounts outstanding under our senior notes issued in 2010 and ended the quarter with a strong balance sheet, including cash of over $20 million. This gives us the financial flexibility to make strategic investments in our business as we see appropriate."
Mr. Cazenave continued, "We are excited about our outlook for the remainder of the year and remain confident that we are well positioned to continue to deliver improved year-over-year financial results. As part of our continuing initiative to introduce innovative new products that satisfy changing customer needs and diversify our product portfolio, we recently launched the Bowflex® BodyTower™, which is a unique, strength training product that leverages our well recognized Bowflex® brand. Initial consumer response to this product has been encouraging and we look forward to continuing to roll-out more new products in the coming quarters."
The Company reported net income (including discontinued operation) of $2.5 million for the first quarter of 2012, compared to $1.6 million for the first quarter of 2011. Diluted net income per share for the first quarter of 2012 was $0.08, compared to $0.05 for the same quarter a year ago. Net income for the 2012 first quarter included a loss from discontinued operation of $0.1 million, or $(0.01) per diluted share, compared to income from discontinued operation of $0.5 million, or $0.01 per diluted share for the 2011 first quarter.
Segment Results
Net sales for the Direct segment were $33.7 million in the first quarter of 2012, an increase of 11.5% 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 consumer credit approval rates, which rose to 30% in the 2012 first quarter, from 21% for the same period last year.
First quarter 2012 operating income for the Direct segment improved to $3.0 million, a 37.6% increase over the same quarter last year. This improvement reflects stronger sales as well as a 90 basis point reduction in Direct selling and marketing expense as a percentage of sales. Gross margin for the Direct business was 56.5% for the first quarter of 2012, an increase of 20 basis points compared to the first quarter of last year.
Net sales in the Retail segment for the first quarter 2012 totaled $16.6 million, compared to $17.0 million in the same period last year. The decrease in sales was primarily attributed to lower sales of certain strength products to brick-and-mortar retailers, partially offset by higher sales to online retailers. Operating income for the Retail segment was $2.3 million, essentially flat compared to the same quarter a year ago. Retail gross margin was 23.8% in the first quarter of 2012, an increase of 40 basis points from the same quarter a year ago.
Balance Sheet
As of March 31, 2012, cash and cash equivalents were $20.4 million, compared to $17.4 million at year end 2011. On March 30, 2012 the Company used $5.5 million of cash on hand to pre-pay all outstanding obligations under its increasing rate senior discount notes issued in 2010. Working capital was $17.2 million, compared to $19.4 million at year end 2011. Inventory as of March 31, 2012 was $13.5 million, compared to $11.6 million as of December 31, 2011. The Company believes it has adequate inventory to support current demand levels.