Washington | 001-31321 | 94-3002667 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
17750 SE 6th Way Vancouver, Washington 98683 |
(Address of principal executive offices and zip code) |
(360) 859-2900 |
(Registrant's telephone number, including area code) |
N/A |
(Former name or former address, if changed since last report) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
Item 2.02 | Results of Operations |
Item 9.01 | Financial Statements and Exhibits |
Nautilus, Inc. press release dated October 30, 2017. |
NAUTILUS, INC. | |||
(Registrant) | |||
October 30, 2017 | By: | /s/ Sidharth Nayar | |
Date | Sidharth Nayar | ||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
![]() | EXHIBIT 99.1 |
• | Revenues: |
◦ | Total revenue increased 9.0% to $88.1 million compared to prior year of $80.8 million. |
◦ | Direct segment sales increased 0.8% to $34.0 million as sales growth of new products, including the Bowflex HVTTM, offset the expected decline in TreadClimber® sales. |
◦ | Retail segment sales increased 15.8% to $53.5 million, reflecting strong seasonal sell-in with key traditional and e-commerce partners, partially offset by weakness in specialty and commercial customers. |
• | Gross Margins: |
◦ | Total company gross margins decreased by 160 basis points to 46.9% primarily due to a shift in segment revenue mix from Direct to Retail. |
◦ | Direct margins decreased by 220 basis points due to a shift in product mix and increased discounting of the TreadClimber® product line, coupled with select promotional offers on other products. |
◦ | Retail margins increased by 60 basis points as stronger revenue translated into improved absorption of fixed costs and benefited from a $0.6 million settlement related to an indemnification claim. |
• | Operating Expenses: |
◦ | Operating expenses decreased 9.9% to $28.0 million due to lower finance fees related to a contract extension with a financing partner that provided a retroactive adjustment, coupled with ongoing lower costs in the Direct segment and a $1.0 million favorable settlement related to an indemnification claim. |
• | Operating income increased 62.8% to $13.4 million compared to prior year of $8.2 million, with operating margin of 15.2%, up 500 basis points versus prior year. |
• | Income from continuing operations for the third quarter of 2017 was $8.3 million, or $0.27 per diluted share, compared to income from continuing operations of $7.8 million, or $0.25 per diluted share in the prior year quarter. |
• | The effective tax rate for the third quarter of 2017 was 36.8% compared to 1.9% for the prior year period. The prior year period was favorably impacted by the release of previously unrecognized tax benefits associated with certain non-U.S. filing positions. |
• | EBITDA from continuing operations totaled $15.3 million compared to $10.2 million in the prior year period. |
• | At September 30, 2017, cash and marketable securities decreased to $77.8 million and debt decreased to $52.0 million, compared to $79.6 million and $64.0 million, respectively, at December 31, 2016. |
• | Revenues: |
◦ | Total revenue was $278.4 million compared to prior year of $280.3 million. |
◦ | Direct segment sales decreased 7.6% to $147.8 million primarily due to lower TreadClimber® sales slightly offset by the introduction of the new Bowflex HVTTM. |
◦ | Retail segment sales increased 8.9% to $128.4 million, reflecting sales increases across a variety of product offerings and traditional and e-commerce partners, partially offset by weakness in sales to specialty and commercial customers. |
• | Gross Margins: |
◦ | Total company gross margins decreased by 180 basis points to 50.8% due to a shift in segment mix, and lower margins in the Direct segment, partially offset by higher Retail margins. |
• | Operating income decreased by 12.3% to $29.9 million and operating margin decreased by 150 basis points, from 12.2% to 10.7%. |
• | EBITDA from continuing operations decreased by 8.5% to $36.4 million. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 88,132 | $ | 80,818 | $ | 278,413 | $ | 280,275 | |||||||
Cost of sales | 46,817 | 41,601 | 136,975 | 132,852 | |||||||||||
Gross profit | 41,315 | 39,217 | 141,438 | 147,423 | |||||||||||
Operating expenses: | |||||||||||||||
Selling and marketing | 18,028 | 21,394 | 79,321 | 81,284 | |||||||||||
General and administrative | 6,305 | 6,177 | 21,106 | 21,611 | |||||||||||
Research and development | 3,617 | 3,435 | 11,114 | 10,444 | |||||||||||
Total operating expenses | 27,950 | 31,006 | 111,541 | 113,339 | |||||||||||
Operating income | 13,365 | 8,211 | 29,897 | 34,084 | |||||||||||
Other expense, net | (161 | ) | (218 | ) | (648 | ) | (1,336 | ) | |||||||
Income from continuing operations before income taxes | 13,204 | 7,993 | 29,249 | 32,748 | |||||||||||
Income tax expense | 4,862 | 148 | 10,156 | 9,621 | |||||||||||
Income from continuing operations | 8,342 | 7,845 | 19,093 | 23,127 | |||||||||||
Loss from discontinued operations(1) | (101 | ) | (251 | ) | (1,270 | ) | (559 | ) | |||||||
Net income | $ | 8,241 | $ | 7,594 | $ | 17,823 | $ | 22,568 | |||||||
Basic income per share from continuing operations | $ | 0.27 | $ | 0.25 | $ | 0.62 | $ | 0.74 | |||||||
Basic loss per share from discontinued operations | — | (0.01 | ) | (0.04 | ) | (0.02 | ) | ||||||||
Basic net income per share(2) | $ | 0.27 | $ | 0.24 | $ | 0.58 | $ | 0.73 | |||||||
Diluted income per share from continuing operations | $ | 0.27 | $ | 0.25 | $ | 0.61 | $ | 0.74 | |||||||
Diluted loss per share from discontinued operations | — | (0.01 | ) | (0.04 | ) | (0.02 | ) | ||||||||
Diluted net income per share | $ | 0.27 | $ | 0.24 | $ | 0.57 | $ | 0.72 | |||||||
Shares used in per share calculations: | |||||||||||||||
Basic | 30,749 | 31,118 | 30,739 | 31,069 | |||||||||||
Diluted | 31,075 | 31,385 | 31,098 | 31,340 | |||||||||||
Select Metrics: | |||||||||||||||
Gross margin | 46.9 | % | 48.5 | % | 50.8 | % | 52.6 | % | |||||||
Selling and marketing % of net sales | 20.5 | % | 26.5 | % | 28.5 | % | 29.0 | % | |||||||
General and administrative % of net sales | 7.2 | % | 7.6 | % | 7.6 | % | 7.7 | % | |||||||
Research and development % of net sales | 4.1 | % | 4.3 | % | 4.0 | % | 3.7 | % | |||||||
Operating income % of net sales | 15.2 | % | 10.2 | % | 10.7 | % | 12.2 | % | |||||||
(1) The nine months ended September 30, 2017 includes a $1.2 million expense related to a lawsuit settlement with Biosig Instruments, Inc. | |||||||||||||||
(2) May not add due to rounding. |
Three Months Ended September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Net sales: | ||||||||||||||
Direct | $ | 33,986 | $ | 33,710 | $ | 276 | 0.8 | % | ||||||
Retail | 53,505 | 46,223 | 7,282 | 15.8 | % | |||||||||
Royalty | 641 | 885 | (244 | ) | (27.6 | )% | ||||||||
$ | 88,132 | $ | 80,818 | $ | 7,314 | 9.0 | % | |||||||
Operating income (loss): | ||||||||||||||
Direct | $ | 5,289 | $ | 2,584 | $ | 2,705 | 104.7 | % | ||||||
Retail | 12,118 | 9,164 | 2,954 | 32.2 | % | |||||||||
Unallocated corporate | (4,042 | ) | (3,537 | ) | (505 | ) | (14.3 | )% | ||||||
$ | 13,365 | $ | 8,211 | $ | 5,154 | 62.8 | % | |||||||
Nine Months Ended September 30, | Change | |||||||||||||
2017 | 2016 | $ | % | |||||||||||
Net sales: | ||||||||||||||
Direct | $ | 147,800 | $ | 159,884 | $ | (12,084 | ) | (7.6 | )% | |||||
Retail | 128,393 | 117,939 | 10,454 | 8.9 | % | |||||||||
Royalty | 2,220 | 2,452 | (232 | ) | (9.5 | )% | ||||||||
$ | 278,413 | $ | 280,275 | $ | (1,862 | ) | (0.7 | )% | ||||||
Operating income (loss): | ||||||||||||||
Direct | $ | 23,141 | $ | 31,253 | $ | (8,112 | ) | (26.0 | )% | |||||
Retail | 20,427 | 17,225 | 3,202 | 18.6 | % | |||||||||
Unallocated corporate | (13,671 | ) | (14,394 | ) | 723 | 5.0 | % | |||||||
$ | 29,897 | $ | 34,084 | $ | (4,187 | ) | (12.3 | )% | ||||||
As of | |||||||
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 30,481 | $ | 47,874 | |||
Available-for-sale securities | 47,295 | 31,743 | |||||
Trade receivables, net of allowances of $472 and $170 | 38,534 | 45,458 | |||||
Inventories | 57,646 | 47,030 | |||||
Prepaids and other current assets | 6,795 | 8,020 | |||||
Income taxes receivable | 61 | 3,231 | |||||
Total current assets | 180,812 | 183,356 | |||||
Property, plant and equipment, net | 16,166 | 17,468 | |||||
Goodwill | 62,045 | 61,888 | |||||
Other intangible assets, net | 67,354 | 69,800 | |||||
Deferred income tax assets, non-current | — | 11 | |||||
Other assets | 456 | 543 | |||||
Total assets | $ | 326,833 | $ | 333,066 | |||
Liabilities and Shareholders' Equity | |||||||
Trade payables | $ | 62,146 | $ | 66,020 | |||
Accrued liabilities | 8,056 | 12,892 | |||||
Warranty obligations, current portion | 3,253 | 3,500 | |||||
Note payable, current portion | 15,993 | 15,993 | |||||
Total current liabilities | 89,448 | 98,405 | |||||
Warranty obligations, non-current | 3,048 | 3,950 | |||||
Income taxes payable, non-current | 2,646 | 2,403 | |||||
Deferred income tax liabilities, non-current | 16,868 | 16,991 | |||||
Other non-current liabilities | 2,365 | 2,481 | |||||
Note payable, non-current | 35,984 | 47,979 | |||||
Shareholders' equity | 176,474 | 160,857 | |||||
Total liabilities and shareholders' equity | $ | 326,833 | $ | 333,066 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income from continuing operations | $ | 8,342 | $ | 7,845 | $ | 19,093 | $ | 23,127 | |||||||
Interest expense, net | 207 | 429 | 757 | 1,287 | |||||||||||
Income tax expense of continuing operations | 4,862 | 148 | 10,156 | 9,621 | |||||||||||
Depreciation and amortization | 1,868 | 1,784 | 6,386 | 5,748 | |||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations | $ | 15,279 | $ | 10,206 | $ | 36,392 | $ | 39,783 |
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