2002 Third Quarter Report
For the third quarter of 2002, The Nautilus Group reported net sales of $152.9 million, an increase of 72% from $88.7 million for the third quarter of 2001. Commercial and retail sales represented 30% of total sales, up from 17% of total sales for the same period of 2001. Net income for the third quarter of 2002 was $25.1 million, or $0.71 per diluted share, up 49% from $16.8 million or $0.46 per diluted share for the same period of 2001.
"We are very pleased with our strong sales and profits for the third quarter despite continued challenges in the macroeconomic environment," said Brian Cook, chief executive officer. "In our direct business, we continued to see strong demand for our high-quality products that address the major components of a healthy lifestyle -- fitness, rest and nutrition."
"In our commercial and retail business, we introduced a number of new products during the third quarter under our Nautilus and Schwinn brand names, which we expect to help fuel our retail sales in the fourth quarter and beyond. At the same time, we continue to integrate our acquisitions and consolidate operations, which is laying the foundation for long-term growth through further leveraging of our powerful brands, product lines and product development platform."
"We continue to expect to complete 2002 with 60% year-over-year sales growth and 50% earnings growth. As we move forward, we are seeing cautious consumer spending, a decline in overall consumer confidence and higher advertising rates. Assuming these trends continue into 2003, we would expect to see substantially slower sales growth next year while continuing to generate profits comparable to 2002. Despite the current uncertainty, we continue to focus on extending The Nautilus Group's leadership in the health and fitness industry, and we remain very excited about our long-term growth strategy and worldwide market opportunities."
During the quarter, the Company repurchased 430,500 shares of its common stock for approximately $10.9 million. The Company ended the quarter with cash and short-term investments of $63.2 million.
The Nautilus Group will host a conference call to discuss its third quarter 2002 results today at 2:00 p.m. Pacific (5:00 p.m. Eastern). A broadcast of the conference call will be available on the Company's Web site under "Investor Relations/Events Calendar" at www.nautilusgroup.com/ir/events.asp or by calling 800/240-6709 or 303/262-2140 (Reservation No. 499948). A 48-hour replay will be available by calling 800/405-2236 or 303/590-3000 (Reservation No. 4999948). A replay will also be available through October 28, 2002 on the Company's Web site.
About The Nautilus Group
The Nautilus Group, Inc. (formerly Direct Focus, 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 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 and StairMaster 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.
This press release contains forward-looking statements relating to anticipated sales, revenue growth, and the development of The Nautilus Group's products and services, including statements regarding its Nautilus, Schwinn Fitness, and StairMaster businesses. Factors that could affect The Nautilus Group's actual results include its reliance on a limited product line, fluctuations in advertising rates, market acceptance of its existing and future products, growth management challenges including the growth resulting from the acquisition of the assets of Schwinn Fitness in September 2001 and StairMaster in February 2002, a decline in consumer spending due to unfavorable economic conditions, government regulatory action, its ability to effectively identify and negotiate any future strategic acquisitions, its ability to integrate the StairMaster business and any other acquired businesses into its operations, unpredictable events and circumstances relating to international operations including its use of foreign manufacturers, 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.
THE NAUTILUS GROUP, INC.
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
NET SALES $152,865 $88,702 $429,187 $238,566
COST OF SALES 64,500 33,011 179,892 84,087
----------- ----------- ----------- -----------
Gross profit 88,365 55,691 249,295 154,479
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling and marketing 40,654 25,082 106,345 70,867
General and
administrative 5,602 3,727 19,242 10,343
Royalties 2,915 1,686 7,809 5,008
----------- ----------- ----------- -----------
Total operating
expenses 49,171 30,495 133,396 86,218
----------- ----------- ----------- -----------
OPERATING INCOME 39,194 25,196 115,899 68,261
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 333 966 1,260 3,478
Other - net (375) 31 (217) 218
----------- ----------- ----------- -----------
Total other
income (expense),
net (42) 997 1,043 3,696
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 39,152 26,193 116,942 71,957
INCOME TAX EXPENSE 14,093 9,429 42,099 25,904
----------- ----------- ----------- -----------
NET INCOME $25,059 $16,764 $74,843 $46,053
=========== =========== =========== ===========
BASIC EARNINGS PER
SHARE $0.72 $0.48 $2.14 $1.31
DILUTED EARNINGS PER
SHARE $0.71 $0.46 $2.10 $1.28
Basic shares
outstanding 34,672,293 35,209,547 34,949,988 35,268,137
Diluted shares
outstanding 35,343,184 36,180,686 35,692,274 36,090,841
THE NAUTILUS GROUP, INC.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30, December 31,
2002 2001
----------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $37,860 $35,639
Short-term investments 25,313 16,070
Trade receivables, net 37,759 24,858
Inventories, net 62,440 45,516
Prepaid expenses and other
current assets 7,738 2,007
Notes receivable 3,004 2,672
Current deferred tax asset 2,214 1,425
----------------------------------
Total current assets 176,328 128,187
PROPERTY, PLANT, AND
EQUIPMENT, net 50,963 25,228
GOODWILL 29,755 29,625
OTHER ASSETS, net 16,921 10,865
----------------------------------
TOTAL ASSETS $273,967 $193,905
==================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Trade payables $34,635 $25,256
Accrued liabilities 15,927 10,888
Income taxes payable 4,066 4,792
Royalty payable to stockholders 2,531 1,885
Customer deposits 891 1,000
----------------------------------
Total current liabilities 58,050 43,821
----------------------------------
LONG-TERM DEFERRED TAX LIABILITY 6,985 2,670
----------------------------------
STOCKHOLDERS' EQUITY:
Common stock 570 4,900
Retained earnings 207,337 142,637
Accumulated other
comprehensive income (loss) 1,025 (123)
----------------------------------
Total stockholders' equity 208,932 147,414
----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $273,967 $193,905
==================================
Contact:
The Nautilus Group
Rod Rice, 800/371-3363
Chief Financial Officer
or
StreetConnect
Michael Newman, 206/239-0133
Investor Relations