EXHIBIT 99
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THE NAUTILUS GROUP
FOR IMMEDIATE RELEASE
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CONTACTS: The Nautilus Group, Inc. Investor Relations Inquiries:
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Rod Rice John Mills
Chief Financial Officer Integrated Corporate Relations, Inc.
360-694-7722 562-256-7049--203-222-9013
THE NAUTILUS GROUP ANNOUNCES THIRD QUARTER 2003 RESULTS IN LINE WITH GUIDANCE
VANCOUVER, Wash., October 28, 2003 (BUSINESS WIRE) -- The Nautilus Group, Inc.
(NYSE: NLS), a leading marketer, developer, and manufacturer of branded health
and fitness products, today announced results for the third quarter and nine
month period ended September 30, 2003.
Third quarter net sales were $116.0 million compared to $152.9 million for the
corresponding period last year. Net income during the period was $6.6 million,
or $0.20 per diluted share, compared to $25.1 million, or $0.71 per diluted
share, for the corresponding period in the previous year.
The Company's net sales for the nine months ended September 30, 2003 were $346.0
million compared to $429.2 million for the same period last year. Net income
during the period was $25.0 million or $0.76 per diluted share, compared to
$74.8 million, or $2.10 per diluted share, for the same period last year.
Gregg Hammann, President and Chief Executive Officer, commented, "Two months ago
The Nautilus Group embarked upon a very rigorous three phase turnaround plan
that is targeted to improve operational efficiencies, reposition some of our
underperforming brands and expand our channels of distribution. We believe this
plan will be very rewarding for our shareholders over the long-term."
"We continue to pursue opportunities to maximize our brand potential by
differentiating our brands and offering unique products to meet consumer needs,"
Mr. Hammann continued. "During the first quarter of 2003, we introduced products
utilizing the Bowflex Power Rod resistance technology in the retail market. With
80% of our targeted consumers purchasing fitness equipment through retail, we
plan to make more of our brands available through this channel. We are also
introducing several new products to the cardiovascular market, which represents
over 70% of the dollars spent on exercise equipment and is an underserved market
for us. We began marketing our new StairMaster 2100 commercial treadmill at the
end of the third quarter, and we expect to introduce a new StairMaster
commercial elliptical by the end of this year. In addition, we are gaining
momentum with direct sales of our TreadClimber(R) product line and expect to
achieve sales of $16 to $18 million for the year through planned restrained
demand. This approach ensures that when we rollout new or repositioned brands
our manufacturing, marketing and operations are all performing in unison before
we expand our marketing efforts."
Rod Rice, Chief Financial Officer, stated, "During the third quarter, we
undertook restructuring initiatives to lower our cost of operations, including
reducing our workforce. As our management team worked to contain costs and
improve operating performance, we also maintained our focus on leveraging our
research and development and sales expertise to open new market channels, such
as the recently announced strategic alliance with Amazon.com. These initiatives
will continue to improve our long-term financial strength. Our cash and cash
equivalents grew to $63.8 million, we have no debt and stockholders' equity is
$218.9 million, placing the Company in an ideal position to pursue our targeted
growth opportunities in the health and fitness industries." Mr. Rice continued,
"We will closely monitor our cost structure and use our operating cash flow to
build upon our industry leading position. We will also use our cash flow to
increase shareholder value through our regular quarterly dividend. Today, the
Board of Directors has declared a regular quarterly dividend of $0.10 per common
share, payable December 10, 2003, to shareholders of record at the close of
business on November 20, 2003."
The Company reiterated full year 2003 guidance of $450 to $470 million in
revenue and earnings per share of $1.00 to $1.10. Operating cash flow is
expected to be approximately $35 million to $40 million for the year.
Mr. Hammann concluded, "Despite the current challenging conditions, we are
excited about Nautilus' long-term prospects. We have an unparalleled combination
of leading brand names, multiple distribution channels, product development
capabilities and a broad range of cardiovascular and strength products that will
enable us to deliver both sales and earnings growth over the long-term--and we
have the infrastructure, balance sheet and management team to support this
growth. We will continue to build on our solid foundation by increasing our
brand equity, expanding our distribution network and introducing innovative new
products."
The Company also announced today that the United States Federal District Court
for the Western District of Washington entered an order of Final Judgment,
dismissing The Nautilus Group's patent infringement case against ICON Health and
Fitness, Inc. As the Company has previously disclosed, the court entered summary
judgment in favor of ICON on our claim for patent infringement. Today's ruling
makes the dismissal of our patent infringement claim final in the District
Court. The Nautilus Group plans to appeal this decision to the Federal Circuit
Court of Appeals.
The Company's Trademark Infringement case against ICON is proceeding separately
and is not impacted by today's court order. The Trademark Infringement case is
currently awaiting a trial date in 2004.
The Nautilus Group will host a conference call on October 28, 2003 to discuss
its third quarter financial results at 2:00 PM Pacific (5:00 PM Eastern). The
earnings release will be broadcast live over the Internet hosted at
http://www.nautilusgroup.com/ir/events.asp under "Investor Relations/Events
Calendar" and will be archived online within one hour of the completion of the
conference call. In addition, you may call 800-240-2134 if in North America.
International callers will dial 303-262-2076. Participating in the call will be
Gregg Hammann, Chief Executive Officer, Kevin Lamar, President of the
Commercial/Retail division, and Rod Rice, Chief Financial Officer. A telephonic
replay of the call will be available through November 11, 2003 by calling
800-405-2236 if in North America or calling 303-590-3000 if an international
caller and using the passcode 556011#.
--more--
ABOUT THE NAUTILUS GROUP
The Nautilus Group, Inc. is a leading marketer, developer, and manufacturer of
branded health and fitness products sold under such well-known names as
Nautilus, Bowflex, Schwinn and StairMaster. The Company currently markets its
Bowflex and TreadClimber home fitness equipment and Nautilus Sleep Systems
through its direct-marketing channel, using an effective combination of
television commercials, infomercials, response mailings, the Internet, and
inbound/outbound call centers. The Company sells its Nautilus, Schwinn and
StairMaster commercial fitness equipment through its sales force and selected
dealers to health clubs, government agencies, hotels, corporate fitness centers,
colleges, universities, and assisted living facilities. The Nautilus Group also
markets and sells a complete line of consumer fitness equipment, under its
Nautilus, Schwinn, Bowflex, StairMaster and Trimline brands, through a network
of specialty dealers, distributors, and retailers worldwide. The Company is
headquartered in Vancouver, Washington. The Nautilus Group is located on the Web
at www.nautilusgroup.com.
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This press release includes forward-looking statements, including statements
related to anticipated revenues, expenses, earnings, operating cash flows,
distribution channels and new product introductions. Factors that could cause
The Nautilus Group's actual results to differ materially from these
forward-looking statements include availability of media time and fluctuating
advertising rates, a decline in consumer spending due to unfavorable economic
conditions, expiration of important patents, its reliance on a limited product
line, its ability to effectively develop, market, and sell future products, its
ability to effectively identify and negotiate any future strategic acquisitions,
its ability to integrate any acquired businesses into its operations,
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.
--Financial Tables Follow--
THE NAUTILUS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
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2003 2002 2003 2002
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NET SALES $ 115,958 $ 152,865 $ 346,009 $ 429,187
COST OF SALES 60,508 64,435 168,144 179,687
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Gross profit 55,450 88,430 177,865 249,500
OPERATING EXPENSES:
Selling and marketing 34,492 40,654 109,688 106,345
General and administrative 9,241 5,634 24,891 19,338
Related-party royalties 1,597 2,531 4,838 7,092
Third-party royalties 333 384 969 717
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Total operating expenses 45,663 49,203 140,386 133,492
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OPERATING INCOME 9,787 39,227 37,479 116,008
OTHER INCOME (EXPENSE):
Interest income 134 333 593 1,260
Other - net 459 (408) 1,037 (326)
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Total other income (expense), net 593 (75) 1,630 934
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INCOME BEFORE INCOME TAXES 10,380 39,152 39,109 116,942
INCOME TAX EXPENSE 3,737 14,093 14,079 42,099
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NET INCOME $ 6,643 $ 25,059 $ 25,030 $ 74,843
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BASIC EARNINGS PER SHARE $ 0.20 $ 0.72 $ 0.77 $ 2.14
DILUTED EARNINGS PER SHARE $ 0.20 $ 0.71 $ 0.76 $ 2.10
Weighted average shares outstanding:
Basic shares outstanding 32,600,101 34,672,293 32,571,840 34,949,988
Diluted shares outstanding 32,980,358 35,343,184 32,982,358 35,692,274
THE NAUTILUS GROUP, INC.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2003 2002
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ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 63,825 $ 31,719
Short-term investments -- 17,578
Trade receivables, net 57,388 50,099
Inventories 51,403 63,798
Prepaid expenses and other current assets 5,610 4,919
Short-term notes receivable 2,904 3,067
Current deferred tax assets 3,425 2,924
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Total current assets 184,555 174,104
LONG-TERM NOTES RECEIVABLE 91 363
PROPERTY, PLANT AND EQUIPMENT, NET 52,388 55,564
GOODWILL 29,755 29,755
OTHER ASSETS, NET 17,282 16,867
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TOTAL ASSETS $ 284,071 $ 276,653
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Trade payables 22,660 41,288
Accrued liabilities 22,764 15,827
Income taxes payable 6,927 5,284
Royalty payable to stockholders 1,597 1,997
Customer deposits 1,405 685
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Total current liabilities 55,353 65,081
LONG-TERM DEFERRED TAX LIABILITY 9,819 9,149
STOCKHOLDERS' EQUITY:
Common stock 2,791 --
Unearned compensation (1,629) --
Retained earnings 215,469 201,238
Accumulated other comprehensive income 2,268 1,185
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Total stockholders' equity 218,899 202,423
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 284,071 $ 276,653
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