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07.18.00
DIRECT FOCUS, INC. ANNOUNCES RECORD SECOND QUARTER RESULTS
DIRECT FOCUS, INC. ANNOUNCES RECORD SECOND QUARTER RESULTS
VANCOUVER, WA...July 18, 2000...Direct Focus, Inc. (Nasdaq: DFXI), a leading marketing company for fitness and healthy lifestyle products with a highly-effective direct business model, today announced its results for the quarter ended June 30, 2000.
For the second quarter of 2000, Direct Focus reported net sales of $43.7 million, an increase of 73% from $25.2 million in the second quarter of 1999. Net income for the second quarter of 2000 was $8.2 million or $0.77 per diluted share, up 105% from $4.0 million or $0.38 per diluted share for the same period of 1999, excluding an after-tax charge of $2.6 million for a legal settlement in 1999.
For the first six months of 2000, Direct Focus reported net sales of $86.6 million, up 68% from $51.4 million for the same period of 1999. Net income for the first six months of 2000 was $17.1 million, or $1.60 per diluted share, up 101% from $8.5 million or $0.84 per diluted share for the same period of 1999, excluding the legal settlement charge in 1999.
eCommerce sales were $6.6 million for the second quarter of 2000, up 32% sequentially from $5.0 million in the previous quarter. Direct Focus is continuing to strengthen its infrastructure, management team and advertising related to its eCommerce sales effort, in anticipation of continued eCommerce sales growth.
Direct Focus also reported increased sales and profitability for its Nautilus business. While this business represented only 12% of total sales for the quarter, Direct Focus continues to strengthen its Nautilus commercial and retail sales effort in order to build upon Nautilus? powerful brand equity.
?We are very pleased with our strong sales and profits for the quarter,? said Brian Cook, President and Chief Executive Officer. ?While the second quarter is historically our slowest period, our eCommerce business has become an increasingly important part of our integrated direct business model and has provided an added boost to our sales growth.?
?We continue to see sustained sales growth across our Bowflex and Nautilus product lines, driven by the strong economy and the growing interest in health and fitness. We are also very pleased with the growing sales of our Nautilus Sleep System, the newest product sold through our direct business channel. In coming periods, we intend to continue to leverage our direct business model and our powerful brand names.?
An Internet broadcast of Direct Focus Inc.?s second quarter conference call (2:00 PM Pacific/5:00 PM Eastern) will be available today at www.directfocusinc.com under ?Investor Relations.?
About Direct Focus, Inc.
Direct Focus, Inc. is a leading marketing company for fitness and healthy lifestyle products with a sophisticated direct business model. Direct Focus currently markets its Bowflex line of home fitness equipment and Nautilus Sleep Systems directly to consumers, using an effective combination of strong brand names, television advertising, Web sites, an extensive business intelligence database and integrated customer relationship management systems. Direct Focus also sells its Nautilus commercial fitness equipment directly to health clubs and other institutions, and its Nautilus fitness accessories through retail sporting goods stores. Direct Focus is headquartered in Vancouver, Washington, and located on the Web at www.directfocusinc.com.
This press release contains forward-looking statements relating to anticipated sales, net income, earnings and the development of Direct Focus' products and services, including statements regarding its Nautilus business. Factors that could affect Direct Focus' actual results include its reliance on a limited product line, market acceptance of its existing and future products and growth management challenges. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in Direct Focus' annual report on Form 10-K for the fiscal year ended December 31, 1999.DIRECT FOCUS, INC. - CONSOLIDATED
Statement of Operations
DIRECT FOCUS, INC.-CONSOLIDATED
Balance Sheet
June 30, 2000
For the second quarter of 2000, Direct Focus reported net sales of $43.7 million, an increase of 73% from $25.2 million in the second quarter of 1999. Net income for the second quarter of 2000 was $8.2 million or $0.77 per diluted share, up 105% from $4.0 million or $0.38 per diluted share for the same period of 1999, excluding an after-tax charge of $2.6 million for a legal settlement in 1999.
For the first six months of 2000, Direct Focus reported net sales of $86.6 million, up 68% from $51.4 million for the same period of 1999. Net income for the first six months of 2000 was $17.1 million, or $1.60 per diluted share, up 101% from $8.5 million or $0.84 per diluted share for the same period of 1999, excluding the legal settlement charge in 1999.
eCommerce sales were $6.6 million for the second quarter of 2000, up 32% sequentially from $5.0 million in the previous quarter. Direct Focus is continuing to strengthen its infrastructure, management team and advertising related to its eCommerce sales effort, in anticipation of continued eCommerce sales growth.
Direct Focus also reported increased sales and profitability for its Nautilus business. While this business represented only 12% of total sales for the quarter, Direct Focus continues to strengthen its Nautilus commercial and retail sales effort in order to build upon Nautilus? powerful brand equity.
?We are very pleased with our strong sales and profits for the quarter,? said Brian Cook, President and Chief Executive Officer. ?While the second quarter is historically our slowest period, our eCommerce business has become an increasingly important part of our integrated direct business model and has provided an added boost to our sales growth.?
?We continue to see sustained sales growth across our Bowflex and Nautilus product lines, driven by the strong economy and the growing interest in health and fitness. We are also very pleased with the growing sales of our Nautilus Sleep System, the newest product sold through our direct business channel. In coming periods, we intend to continue to leverage our direct business model and our powerful brand names.?
An Internet broadcast of Direct Focus Inc.?s second quarter conference call (2:00 PM Pacific/5:00 PM Eastern) will be available today at www.directfocusinc.com under ?Investor Relations.?
About Direct Focus, Inc.
Direct Focus, Inc. is a leading marketing company for fitness and healthy lifestyle products with a sophisticated direct business model. Direct Focus currently markets its Bowflex line of home fitness equipment and Nautilus Sleep Systems directly to consumers, using an effective combination of strong brand names, television advertising, Web sites, an extensive business intelligence database and integrated customer relationship management systems. Direct Focus also sells its Nautilus commercial fitness equipment directly to health clubs and other institutions, and its Nautilus fitness accessories through retail sporting goods stores. Direct Focus is headquartered in Vancouver, Washington, and located on the Web at www.directfocusinc.com.
This press release contains forward-looking statements relating to anticipated sales, net income, earnings and the development of Direct Focus' products and services, including statements regarding its Nautilus business. Factors that could affect Direct Focus' actual results include its reliance on a limited product line, market acceptance of its existing and future products and growth management challenges. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in Direct Focus' annual report on Form 10-K for the fiscal year ended December 31, 1999.
Statement of Operations
| 3 Mos. Ended June 30, | 6 Mos. Ended June 30, | |||
| 2000 | 1999 | 2000 | 1999 | |
| ------------ | ------------ | ------------ | ------------ | |
| NET SALES | $43,681,651 | $25,244,216 | $86,588,517 | $51,356,746 |
| COST OF SALES | 12,491,283 | 7,362,016 | 23,250,062 | 14,751,212 |
| ------------ | ------------ | ------------ | ------------ | |
| Gross profit | 31,190,368 | 17,882,200 | 63,338,455 | 36,605,534 |
| ------------ | ------------ | ------------ | ------------ | |
| OPERATING EXPENSES | ||||
| Selling and marketing | 16,401,562 | 9,920,772 | 32,216,335 | 20,009,526 |
| General and administrative | 1,823,892 | 1,326,408 | 3,782,303 | 2,427,780 |
| Royalties | 1,151,326 | 636,008 | 2,165,313 | 1,261,929 |
| Litigation settlement | - | 4,000,000 | - | 4,000,000 |
| ------------ | ------------ | ------------ | ------------ | |
| Total operation expenses | 19,376,780 | 15,883,188 | 38,163,951 | 27,699,235 |
| ------------ | ------------ | ------------ | ------------ | |
| INCOME FROM OPERATIONS | 11,813,588 | 1,999,012 | 25,174,504 | 8,906,299 |
| ------------ | ------------ | ------------ | ------------ | |
| OTHER INCOME(EXPENSE) | ||||
| Interest income | 824,195 | 175,245 | 1,439,712 | 237,168 |
| State business tax and other -net | 124,179 | (20,408) | 85,031 | (98,522) |
| ------------ | ------------ | ------------ | ------------ | |
| Total other income(expense)-net | 948,374 | 154,837 | 1,524,743 | 138,646 |
| ------------ | ------------ | ------------ | ------------ | |
| INCOME BEFORE INCOME TAXES | 12,761,962 | 2,153,849 | 26,699,247 | 9,044,945 |
| INCOME TAX EXPENSE | 4,595,161 | 754,790 | 9,611,728 | 3,166,673 |
| ------------ | ------------ | ------------ | ------------ | |
| NET INCOME | $8,166,801 | $1,399,059 | $17,087,519 | $5,878,272 |
| ------------ | ------------ | ------------ | ------------ | |
| BASIC EARNINGS PER SHARE | $0.78 | $0.14 | $1.63 | $0.60 |
| DILUTED EARNINGS PER SHARE | $0.77 | $0.13 | $1.60 | $0.58 |
| Basic shares outstanding | 10,415,036 | 10,156,914 | 10,453,018 | 9,838,350 |
| Diluted shares outstanding | 10,661,185 | 10,454,819 | 10,684,914 | 10,130,464 |
Balance Sheet
June 30, 2000
| June 30, 2000 |
December 31, 1999 |
||
| ------------ | ------------ | ||
| ASSETS | |||
| CURRENT ASSETS | |||
| Cash and cash equivalents | $48,443,384 | $35,703,457 | |
| Trade receivables | 2,879,898 | 4,744,213 | |
| Inventories | 13,549,470 | 9,167,554 | |
| Prepaid expenses and other current assets | 2,153,113 | 1,863,951 | |
| Current deferred tax asset | 1,099,204 | 820,789 | |
| ------------ | ------------ | ||
| Total Current assets | 68,125,069 | 52,299,964 | |
| ------------ | ------------ | ||
| PROPERTY, PLANT AND EQUIPMENT | 11,721,811 | 10,644,838 | |
| LONG-TERM DEFERRED TAX ASSET | 295,000 | - | |
| OTHER ASSETS | 4,346,182 | 4,364,963 | |
| TOTAL ASSETS | $84,488,062 | $67,309,765 | |
| ------------ | ------------ | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||
| CURRENT LIABILITIES | |||
| Trade payables | $8,470,575 | $5,871,369 | |
| Accrued liabilities | 4,469,227 | 4,051,540 | |
| Income taxes payable | 1,814,613 | 2,177,236 | |
| Royalty payable to stockholders | 1,025,000 | 893,563 | |
| Customer deposits | 1,012,484 | 1,097,748 | |
| ------------ | ------------ | ||
| Total current liabilities | 16,791,899 | 14,091,456 | |
| ------------ | ------------ | ||
| LONG-TERM DEFERRED TAX LIAILITY | - | 187,484 | |
| ------------ | ------------ | ||
| STOCKHOLDERS' EQUITY | |||
| Common stock-authorized 50,000,000 shares of no par value | 16,180,239 | 18,602,420 | |
| Retained earnings | 51,515,924 | 34,428,405 | |
| ------------ | ------------ | ||
| Total stockholders' equity | 67,696,163 | 53,030,825 | |
| ------------ | ------------ | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $84,488,062 | $67,309,765 | |
| ------------ | ------------ |