Exhibit 99.1
Nautilus, Inc. Announces Results for First Quarter 2009
VANCOUVER, Wash., May 11, 2009 — Fitness company Nautilus, Inc. (NYSE:NLS) today announced unaudited results for the first quarter ended March 31, 2009.
For the quarter ended March 31, 2009 the Company reported net sales of $72.1 million, compared to net sales of $129.6 million for the first quarter of 2008.
The Company reported a loss from continuing operations for the first quarter of 2009 of $13.8 million, or ($0.45) per diluted share. Included in the loss from continuing operations were pre-tax restructuring charges of $3.8 million. The restructuring charges are principally related to the Company’s previously announced closure of the manufacturing facility in Tulsa, Oklahoma and a write-off related to abandoned information technology software.
In the first quarter of 2008, the Company reported a loss from continuing operations of $6.9 million or ($0.22) per diluted share. Included in the loss from continuing operations were pre-tax charges of $10.7 million, primarily related to the cancellation in the first quarter of 2008 of the Company’s agreement to purchase Land America Health & Fitness Co., Ltd.
Excluding the restructuring charges mentioned above, the Company’s adjusted loss from continuing operations before income taxes was $8.3 million for the quarter ended March 31, 2009. For the corresponding period in 2008, excluding the restructuring charges mentioned above, adjusted income from continuing operations before income taxes was $1.2 million (see attached Supplemental Disclosure table).
Results from continuing operations for the first quarter of 2008 exclude the Company’s former apparel business, which was sold in April 2008 and is considered a discontinued operation.
Comparative net sales by business segment were as follows:
| | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | |
($ thousands) | | Mar 31, 2009 | | Mar 31, 2008 | | $ Change | | | % Change | |
Direct | | $ | 40,716 | | $ | 69,633 | | $ | (28,917 | ) | | -41.5 | % |
Retail | | | 12,548 | | | 25,236 | | | (12,688 | ) | | -50.3 | % |
Commercial | | | 18,031 | | | 33,684 | | | (15,653 | ) | | -46.5 | % |
Corporate | | | 791 | | | 1,048 | | | (257 | ) | | -24.5 | % |
| | | | | | | | | | | | | |
Net Sales | | $ | 72,086 | | $ | 129,601 | | $ | (57,515 | ) | | -44.4 | % |
For the three months ended March 31, 2009, net sales from continuing operations were $72.1 million, a decrease of 44.4% from $129.6 million reported in the corresponding period in 2008. Net sales declined in the direct and retail businesses, primarily due to the weak consumer environment. Offsetting a portion of the sales decline in the direct business segment was an increase in sales of TreadClimber products compared to the same period last year. The commercial business net sales decrease reflects an overall decline in the economy, and the Company’s decision to implement more stringent sales terms in certain channels.
Consolidated gross profit margin improved slightly to 43.4% of net sales for the first quarter of 2009, compared to 43.2% for the same period in the previous year. For the first quarter of 2009, the gross profit margin in direct business improved to 63.0% of net sales, compared to 62.4% for the same period in the previous year; the retail business gross margin improved to 33.5%, compared to 22.5%; and the commercial business gross margin declined to 7.2%, compared to 17.6%. Operating expenses declined by approximately $21.3 million, or 33.1%, in the first quarter of 2009, compared to the first quarter of 2008. On an operating basis, the retail and direct businesses were profitable in the first quarter of 2009, while the commercial business lost $7.1 million (see attached Reportable Segments Financial Information table).
The Company generated $12.8 million of net cash provided by operating activities from continuing operations compared to $20.0 million in the first quarter of 2008. The cash generated in 2009 was primarily due to working capital improvements. As of March 31, 2009, the Company had approximately $0.1 million in debt (net of cash), compared to net debt of $12.4 million at December 31, 2008 and net debt of $52.9 million at March 31, 2008. Subsequent to the end of the first quarter, the Company received a $10.6 million U.S. Federal income tax refund, which was not included above. As of May 8, 2009, the Company had no outstanding borrowings.
Edward Bramson, Chairman and Chief Executive Officer of Nautilus, Inc., stated, “While we are not satisfied with the consolidated net loss, we are encouraged by the operating improvements. During the first quarter, we achieved the highest gross margins in over a year and reduced operating expenses by 33% compared to the same period last year. Even though the overall consumer environment remains very challenging, our recently implemented marketing and operating adjustments are providing positive contributions in the Direct and Retail businesses.”
Mr. Bramson added, “We continued to right-size our cost structure in the first quarter by implementing an additional $17 million in anticipated annualized cost reductions. These actions will begin to benefit our operating results in the second quarter, and we expect to realize substantially all of the benefit from these improvements in the fourth quarter of 2009.”
Conference Call
Nautilus will host a conference call today, May 11th, for 4:30 p.m. EDT (1:30 p.m. PDT). It will be broadcast live over the Internet hosted athttp://www.nautilusinc.com/events and will be archived online within one hour after completion of the call. In addition, listeners may call (866) 394-6821 or (706) 645-0458 (international) passcode 85267161.
A telephonic playback will be available from 3:30 p.m. PDT, May 11, 2009, through 3:30 p.m. PDT, May 25, 2009. Participants can dial (800) 633-8284 or (402) 977-9140 (international) passcode 21422779 to hear the playback.
About Nautilus, Inc.
Headquartered in Vancouver, Wash., Nautilus, Inc. (NYSE:NLS) is a global fitness products company providing innovative, quality solutions to help people achieve a healthy lifestyle. With a brand portfolio including Nautilus(R), Bowflex(R), Schwinn(R)Fitness, StairMaster(R) and Universal(R), Nautilus manufactures and markets innovative fitness products through global direct, commercial and retail channels. Formed in 1986, the Company had 2008 sales of $411 million. It has approximately 760 employees and operations in Washington, Oregon, Virginia, Canada, Switzerland, Germany, United Kingdom, Italy, China and other locations around the world. Website:www.nautilusinc.com
Safe Harbor Statement:
This press release includes forward-looking statements, including statements concerning anticipated future profitability, estimated cost reductions, estimated restructuring charges and operational improvement. Factors that could cause Nautilus, Inc. actual results to differ materially from these forward-looking statements include availability of media time and fluctuating advertising rates, its ability to successfully transfer products to alternative manufacturing facilities, manufacturing quality issues resulting in increased warranty costs, its ability to effectively restructure the business and reduce costs, a decline in consumer spending due to unfavorable economic conditions, a change in the availability of credit for its customers who finance their purchases, its ability to effectively develop, market, and sell future products, its ability to get foreign-sourced product through customs in a timely manner, its ability to effectively identify, negotiate and integrate any future strategic acquisitions, its ability to protect its intellectual property, introduction of lower-priced competing products, unpredictable events and circumstances relating to international operations including its use of foreign manufacturers, government regulatory action, and general economic conditions. Please refer to our reports and filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, for a further discussion of these risks and uncertainties. We also caution you not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.
SOURCE: Nautilus, Inc.
For Nautilus, Inc.
Investor Relations
John Mills, 310-954-1100
NAUTILUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
| | | | | | |
| | | March 31,
2009 | | December 31,
2008 |
| ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 3,123 | | $ | 5,547 |
Trade receivables, net | | | 30,057 | | | 53,770 |
Inventories, net | | | 39,625 | | | 43,802 |
Prepaid expenses and other current assets | | | 11,302 | | | 11,628 |
Income taxes receivable | | | 11,099 | | | 11,954 |
| | | | | | |
Total current assets | | | 95,206 | | | 126,701 |
| | | | | | |
Property, plant and equipment, net | | | 29,912 | | | 32,883 |
Goodwill and other intangible assets, net | | | 36,124 | | | 36,801 |
Other assets | | | 2,603 | | | 1,134 |
| | | | | | |
Total assets | | $ | 163,845 | | $ | 197,519 |
| | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Trade payables | | $ | 34,485 | | $ | 38,198 |
Accrued liabilities | | | 28,349 | | | 30,472 |
Short-term borrowings | | | 3,243 | | | 17,944 |
Deferred tax liabilities | | | 1,428 | | | 919 |
| | | | | | |
Total current liabilities | | | 67,505 | | | 87,533 |
Long-term liabilities | | | 6,931 | | | 6,301 |
| | | | | | |
Total liabilities | | | 74,436 | | | 93,834 |
| | | | | | |
Stockholders’ equity: | | | | | | |
Common stock – no par value, 75,000 shares authorized, 30,614 shares issued and outstanding at March 31, 2009 and December 31, 2008. | | | 3,599 | | | 3,207 |
Retained earnings | | | 80,614 | | | 94,433 |
Accumulated other comprehensive income | | | 5,196 | | | 6,045 |
| | | | | | |
Total stockholders’ equity | | | 89,409 | | | 103,685 |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 163,845 | | $ | 197,519 |
| | | | | | |
NAUTILUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
| | | 2009 | | | 2008 | |
Net sales | | $ | 72,086 | | | $ | 129,601 | |
Cost of sales | | | 40,769 | | | | 73,676 | |
| | | | | | | | |
Gross profit | | | 31,317 | | | | 55,925 | |
| | | | | | | | |
Operating expenses: | | | | | | | | |
Selling and marketing | | | 27,673 | | | | 41,728 | |
General and administrative | | | 9,586 | | | | 9,644 | |
Research and development | | | 1,881 | | | | 2,205 | |
Restructuring | | | 3,821 | | | | 10,668 | |
| | | | | | | | |
Total operating expenses | | | 42,961 | | | | 64,245 | |
| | | | | | | | |
Operating loss | | | (11,644 | ) | | | (8,320 | ) |
| | | | | | | | |
Other income (expense): | | | | | | | | |
Interest expense | | | (147 | ) | | | (1,237 | ) |
Other income (expense), net | | | (283 | ) | | | 122 | |
| | | | | | | | |
Total other income (expense) | | | (430 | ) | | | (1,115 | ) |
| | | | | | | | |
Loss from continuing operations before income taxes | | | (12,074 | ) | | | (9,435 | ) |
Income tax expense (benefit) | | | 1,745 | | | | (2,554 | ) |
| | | | | | | | |
Loss from continuing operations | | | (13,819 | ) | | | (6,881 | ) |
| | | | | | | | |
Discontinued operations: | | | | | | | | |
Income from discontinued operations | | | — | | | | 2,376 | |
Income tax expense from discontinued operations | | | — | | | | 1,855 | |
| | | | | | | | |
Income from discontinued operations, net of tax | | | — | | | | 521 | |
| | | | | | | | |
Net loss | | $ | (13,819 | ) | | $ | (6,360 | ) |
| | | | | | | | |
Loss per common share from continuing operations: | | | | | | | | |
Basic and diluted | | $ | (0.45 | ) | | $ | (0.22 | ) |
| | | | | | | | |
Income per common share from discontinued operations: | | | | | | | | |
Basic and diluted | | $ | 0.00 | | | $ | 0.02 | |
| | | | | | | | |
Net loss per common share: | | | | | | | | |
Basic and diluted | | $ | (0.45 | ) | | $ | (0.20 | ) |
| | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | |
Basic and diluted | | | 30,614 | | | | 31,557 | |
| | | | | | | | |
NAUTILUS, INC.
REPORTABLE SEGMENTS FINANCIAL INFORMATION
(Unaudited)
| | | | | | | | | | | | | | | | | | |
(In thousands) Three months ended March 31, 2009: | | Direct | | Retail | | Commercial | | | Corporate | | | Total | |
Net sales | | $ | 40,716 | | $ | 12,548 | | $ | 18,031 | | | $ | 791 | | | $ | 72,086 | |
Gross profit | | | 25,655 | | | 4,203 | | | 1,295 | | | | 164 | | | | 31,317 | |
Depreciation and amortization expense | | | 1,359 | | | 359 | | | 619 | | | | 701 | | | | 3,038 | |
Operating income (loss) | | | 2,738 | | | 1,383 | | | (7,131 | ) | | | (8,634 | ) | | | (11,644 | ) |
Interest expense | | | — | | | — | | | — | | | | 147 | | | | 147 | |
Income tax expense from continuing operations | | | — | | | — | | | — | | | | 1,745 | | | | 1,745 | |
Income (loss) from continuing operations | | | 2,738 | | | 1,383 | | | (7,131 | ) | | | (10,809 | ) | | | (13,819 | ) |
Total assets | | | 30,577 | | | 26,127 | | | 69,880 | | | | 37,261 | | | | 163,845 | |
| | | | | |
Three months ended March 31, 2008: | | | | | | | | | | | | | |
Net sales | | $ | 69,633 | | $ | 25,236 | | $ | 33,684 | | | $ | 1,048 | | | $ | 129,601 | |
Gross profit | | | 43,464 | | | 5,687 | | | 5,939 | | | | 835 | | | | 55,925 | |
Depreciation and amortization expense | | | 1,630 | | | 470 | | | 1,061 | | | | 745 | | | | 3,906 | |
Operating income (loss) | | | 7,564 | | | 2,647 | | | (3,036 | ) | | | (15,495 | ) | | | (8,320 | ) |
Interest expense | | | — | | | — | | | — | | | | 1,237 | | | | 1,237 | |
Income tax benefit from continuing operations | | | — | | | — | | | — | | | | (2,554 | ) | | | (2,554 | ) |
Income (loss) from continuing operations | | | 7,564 | | | 2,647 | | | (3,036 | ) | | | (14,056 | ) | | | (6,881 | ) |
Total assets | | | 52,092 | | | 82,899 | | | 106,010 | | | | 141,374 | | | | 382,375 | |
SUPPLEMENTAL DISCLOSURE
Reconciliation of GAAP to Adjusted Pre-tax Income (Loss) from Continuing Operations Statement
(Unaudited, in thousands, except per share amounts)
| | | | | | | | |
| | | Three Months Ended
March 31, | |
Supplemental Non-GAAP Disclosure | | 2009 | | | 2008 | |
Loss from continuing operations before income taxes (GAAP basis) | | $ | (12,074 | ) | | $ | (9,435 | ) |
Facility exit costs related to closure of Tulsa manufacturing and distribution facilities | | | 1,673 | | | | — | |
Abandonment of information technology software | | | 1,799 | | | | — | |
Employee termination and other employee costs | | | 27 | | | | 2,668 | |
Termination of purchase agreement with Land America Health and Fitness Co., Ltd. | | | — | | | | 8,000 | |
Underutilized headquarters office costs | | | 322 | | | | | |
| | | | | | | | |
Adjusted income (loss) from continuing operations before income taxes | | $ | (8,253 | ) | | $ | 1,233 | |
| | | | | | | | |
