UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: February 7, 2007
(Date of earliest event reported)
NAUTILUS, INC.
(Exact name of registrant as specified in its charter)
| Washington | 001-31321 | 94-3002667 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
16400 SE Nautilus Drive
Vancouver, Washington 98683
(Address of principal executive offices and zip code)
(360) 859-2900
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b)) |
| ¨ | 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)) |
Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 7, 2007, Nautilus, Inc. issued a press release announcing fourth quarter 2006 earnings and first quarter 2007 earnings estimates. The press release also announced the declaration of the regular quarterly dividend for the first quarter of 2007. A copy of the press release is attached as Exhibit 99.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
| Exhibit No. | Description | |
| 99 | Nautilus, Inc. Press Release, dated February 7, 2007, announcing fourth quarter 2006 earnings, first quarter 2007 earnings estimates and the regular quarterly dividend for the first quarter of 2007. | |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NAUTILUS, INC. | ||||
| (Registrant) | ||||
| February 7, 2007 | By: | /s/ William D. Meadowcroft | ||
| (Date) | William D. Meadowcroft, Chief Financial | |||
| Officer, Secretary and Treasurer | ||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99 | Nautilus, Inc. Press Release, dated February 7, 2007, announcing fourth quarter 2006 earnings, first quarter 2007 earnings estimates and the regular quarterly dividend for the first quarter of 2007. | |
Exhibit 99
FOR IMMEDIATE RELEASE
| CONTACTS: | Nautilus, Inc. | Integrated Corporate Relations, Inc. | ||
| Ron Arp | John Mills | |||
| (360)859-2514 | (310)954-1105 |
NAUTILUS, INC. ACHIEVES RECORD REVENUES FOR FOURTH QUARTER
AND FISCAL YEAR 2006; CORE EARNINGS RISE 29 PERCENT IN 2006
VANCOUVER, Wash. – (February 7, 2007) –Nautilus, Inc. (NYSE: NLS), a pure fitness company, today announced results for the three months and fiscal year ended December 31, 2006.
Net sales for the three months ended December 31, 2006, were $199.3 million compared to $182.0 million for the corresponding period last year, up 10 percent and the largest single quarter in the company’s history. Net income for the quarter was $12.9 million, or $0.41 per share, up from $2.0 million, or $0.06 per share, for the fourth quarter of 2005.
For the 12 months ended December 31, 2006, the company generated $681.5 million in net sales compared to $631.3 million in the fiscal year ended December 31, 2005, an 8 percent increase. Net income for fiscal year 2006 was $29.1 million or $0.90 per share, compared to $23.0 million or $0.68 in fiscal 2005.
Including pro forma adjustments (see table), 2006 net income was $26.1 million or $0.81 per share, compared to $21.4 million or $0.63 per share in 2005, an increase in earnings per share of 29 percent.
“We achieved record net sales for the fourth quarter and 2007, and are well positioned for solid top and bottom line growth in 2007 with an exciting pipeline of innovative fitness products and education across all channels of distribution,” said Gregg Hammann, Chairman and CEO of Nautilus, Inc.
“We are completing the transformation of our company’s foundation with leading yet diverse brands, diversity in our channels of distribution, and diversity of our supply chain to prepare us for long-term sustainable growth. All of this heavy lifting has positioned us with a solid foundation for a sustainable rhythm of sales and earnings growth.”
For fiscal 2007, the company expects net sales growth of approximately 10 percent and diluted earnings growth of 20-30 percent from a 2006 pro forma base of $0.81 per share. For the first quarter of 2007, the Company estimates that net sales will be in the $185-195 million range, with expected earnings of $0.18 to $0.21 per diluted share.
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In addition, the Company announced that its Board of Directors declared a regular quarterly dividend of $0.10 per common share, payable March 9, 2007, to stockholders of record as of February 20, 2007.
The conference call is scheduled for 5:00 p.m. EST (2:00 p.m. PST), February 7, 2007. It will be broadcast live over the Internet hosted at www.nautilusinc.com/events and will be archived online within one hour after completion of the call. In addition, listeners may call 800-834-5691 in North America and 212-676-5285 from outside North America. Participants will include: Gregg Hammann, Chairman and Chief Executive Officer; Bill Meadowcroft, Chief Financial Officer; Tim Hawkins, President of Fitness Equipment; Juergen Eckmann, President of Apparel; and Mark Meussner, Sr. VP of Global Manufacturing, Quality and Engineering.
A telephonic playback will be available from 4:00 p.m. PST, February 7, through 4:00 p.m. PST, February 21, 2007. North American callers can dial (800)633-8284, and international callers can dial (402)977-9140 to hear the playback. The passcode is 21321565.
About Nautilus, Inc.
Headquartered in Vancouver, Wash., Nautilus, Inc. (NYSE:NLS) is a pure fitness company that provides tools and education necessary to help people achieve a fit and healthy lifestyle. With a brand portfolio that includes Nautilus(R), Bowflex(R), Schwinn(R) Fitness, StairMaster(R), and Pearl iZUMi(R), Nautilus manufactures and markets a complete line of innovative health and fitness products through direct, commercial, retail, specialty and international channels. The Company was formed in 1986 and had sales of $682 million in 2006. It has 1,600 employees and operations in Washington, Oregon, Colorado, Oklahoma, Illinois, Virginia, Canada, Switzerland, Germany, United Kingdom, Italy, China, and other locations around the world. More information is at www.nautilusinc.com
This press release includes forward-looking statements, including statements concerning estimated future sales and earnings, new product introduction, 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, a decline in consumer spending due to unfavorable economic conditions, 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.
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NAUTILUS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
(Unaudited, in thousands)
| 2006 | 2005 | ||||||
| ASSETS |
|||||||
| CURRENT ASSETS: |
|||||||
| Cash and cash equivalents |
$ | 4,262 | $ | 7,984 | |||
| Trade receivables, net |
138,933 | 116,908 | |||||
| Inventories |
75,676 | 96,084 | |||||
| Prepaid expenses and other current assets |
23,088 | 8,369 | |||||
| Short-term note receivable |
2,461 | 2,496 | |||||
| Asset held for sale |
1,677 | 6,115 | |||||
| Deferred tax assets |
5,722 | 7,235 | |||||
| Total current assets |
251,819 | 245,191 | |||||
| PROPERTY, PLANT AND EQUIPMENT, net |
52,658 | 59,320 | |||||
| GOODWILL |
65,037 | 64,404 | |||||
| INTANGIBLE AND OTHER ASSETS, net |
56,491 | 44,371 | |||||
| TOTAL ASSETS |
$ | 426,005 | $ | 413,286 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||
| CURRENT LIABILITIES: |
|||||||
| Trade payables |
$ | 62,015 | $ | 61,132 | |||
| Accrued liabilities |
31,867 | 29,097 | |||||
| Short-term borrowings |
47,500 | 40,147 | |||||
| Income taxes payable |
4,551 | 3,810 | |||||
| Customer deposits |
2,229 | 3,327 | |||||
| Current portion of long-term debt |
259 | 707 | |||||
| Total current liabilities |
148,421 | 138,220 | |||||
| LONG-TERM DEBT |
4,158 | 5,610 | |||||
| NONCURRENT DEFERRED TAX LIABILITIES |
16,792 | 16,990 | |||||
| COMMITMENTS AND CONTINGENCIES |
|||||||
| STOCKHOLDERS’ EQUITY: |
|||||||
| Common stock |
1,026 | 3,549 | |||||
| Unearned stock compensation |
— | (1,947 | ) | ||||
| Retained earnings |
251,418 | 248,123 | |||||
| Accumulated other comprehensive income |
4,190 | 2,741 | |||||
| Total stockholders’ equity |
256,634 | 252,466 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 426,005 | $ | 413,286 | |||
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NAUTILUS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
| Three Months Ended December 31, |
Twelve Months Ended December 31, | ||||||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||||
| NET SALES |
$ | 199,327 | $ | 182,033 | $ | 681,513 | $ | 631,310 | |||||||
| COST OF SALES |
111,605 | 110,332 | 381,797 | 352,496 | |||||||||||
| Gross profit |
87,722 | 71,701 | 299,716 | 278,814 | |||||||||||
| OPERATING EXPENSES: |
|||||||||||||||
| Selling and marketing |
49,666 | 50,231 | 187,552 | 179,656 | |||||||||||
| General and administrative |
13,880 | 14,259 | 54,279 | 48,826 | |||||||||||
| Research and development |
2,876 | 2,392 | 11,199 | 11,160 | |||||||||||
| Royalties |
1,617 | 1,416 | 5,607 | 5,368 | |||||||||||
| Total operating expenses |
68,039 | 68,298 | 258,637 | 245,010 | |||||||||||
| OPERATING INCOME |
19,683 | 3,403 | 41,079 | 33,804 | |||||||||||
| OTHER INCOME (EXPENSE): |
|||||||||||||||
| Interest income (expense), net |
(863 | ) | (281 | ) | (2,015 | ) | 1,179 | ||||||||
| Other income (expense), net |
388 | (232 | ) | 1,605 | 310 | ||||||||||
| Total other income (expense) |
(475 | ) | (513 | ) | (410 | ) | 1,489 | ||||||||
| INCOME BEFORE INCOME TAXES |
19,208 | 2,890 | 40,669 | 35,293 | |||||||||||
| INCOME TAX EXPENSE |
6,355 | 920 | 11,569 | 12,293 | |||||||||||
| NET INCOME |
$ | 12,853 | $ | 1,970 | $ | 29,100 | $ | 23,000 | |||||||
| EARNINGS PER SHARE: |
|||||||||||||||
| BASIC |
$ | 0.41 | $ | 0.06 | $ | 0.90 | $ | 0.69 | |||||||
| DILUTED |
$ | 0.41 | $ | 0.06 | $ | 0.90 | $ | 0.68 | |||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: |
|||||||||||||||
| BASIC |
31,478 | 33,115 | 32,300 | 33,303 | |||||||||||
| DILUTED |
31,642 | 33,931 | 32,457 | 33,857 | |||||||||||
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NAUTILUS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Unaudited, in Thousands)
| 2006 | 2005 | 2004 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
| Net income |
$ | 29,100 | $ | 23,000 | $ | 29,985 | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||||||
| Depreciation and amortization |
16,786 | 16,354 | 11,972 | |||||||||
| Amortization of unearned stock compensation |
— | 363 | 340 | |||||||||
| Stock-based compensation |
2,534 | — | — | |||||||||
| (Gain) loss on sale of property, plant and equipment |
146 | 17 | (1,214 | ) | ||||||||
| Tax benefit from exercise of nonqualified options |
— | 1,788 | 1,285 | |||||||||
| Excess tax benefit from exercise of employee stock options |
(48 | ) | — | — | ||||||||
| Deferred income taxes |
656 | (437 | ) | 860 | ||||||||
| Foreign currency transaction gain |
(1,545 | ) | — | — | ||||||||
| Decrease in allowance for notes receivable |
— | — | (594 | ) | ||||||||
| Changes in assets and liabilities, net of the effect of acquisitions: |
||||||||||||
| Trade receivables |
(25,472 | ) | (16,261 | ) | (19,702 | ) | ||||||
| Inventories |
21,729 | (33,342 | ) | 4,693 | ||||||||
| Prepaid expenses and other current assets |
(12,228 | ) | (1,564 | ) | (1,036 | ) | ||||||
| Trade payables |
(392 | ) | 2,228 | 22,774 | ||||||||
| Accrued liabilities |
2,372 | 2,315 | (5,991 | ) | ||||||||
| Income taxes payable |
806 | (4,600 | ) | 2,261 | ||||||||
| Customer deposits |
(1,384 | ) | 493 | 1,373 | ||||||||
| Net cash provided by (used in) operating activities |
33,060 | (9,646 | ) | 47,006 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
| Purchases of property, plant and equipment |
(11,155 | ) | (31,771 | ) | (9,043 | ) | ||||||
| Proceeds from sale of property, plant and equipment, and assets held for sale |
7,143 | 2,972 | 641 | |||||||||
| Net increase in intangible and other assets |
(10,989 | ) | (449 | ) | (596 | ) | ||||||
| Acquisitions, net of cash acquired |
— | (73,689 | ) | — | ||||||||
| Purchases of short-term investments |
— | (49,352 | ) | (126,143 | ) | |||||||
| Proceeds from maturities of short-term investments |
— | 134,671 | 92,106 | |||||||||
| Net (decrease) increase in notes receivable |
(21 | ) | 8 | 453 | ||||||||
| Net cash used in investing activities |
(15,022 | ) | (17,610 | ) | (42,582 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
| Cash dividends paid on common stock |
(12,913 | ) | (13,351 | ) | (13,091 | ) | ||||||
| Proceeds from exercise of stock options |
603 | 5,609 | 6,569 | |||||||||
| Excess tax benefit from exercise of employee stock options |
48 | — | — | |||||||||
| Stock repurchases |
(16,653 | ) | (15,636 | ) | — | |||||||
| Net increase of short-term borrowings |
7,353 | 40,147 | — | |||||||||
| Principal payments on long-term debt |
(1,900 | ) | (300 | ) | — | |||||||
| Net cash provided by (used in) financing activities |
(23,462 | ) | 16,469 | (6,522 | ) | |||||||
| Net effect of foreign currency exchange rate changes |
1,702 | (495 | ) | 12 | ||||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
$ | (3,722 | ) | $ | (11,282 | ) | $ | (2,086 | ) | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
7,984 | 19,266 | 21,352 | |||||||||
| CASH AND CASH EQUIVALENTS, END OF YEAR |
$ | 4,262 | $ | 7,984 | $ | 19,266 | ||||||
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SUPPLEMENTAL PRO FORMA DISCLOSURE
Reconciliation of GAAP to Pro Forma Earnings Statement
(Unaudited, in thousands, except per share amounts)
| Twelve Months Ended December 31, |
||||||||
| 2006 | 2005 | |||||||
| GAAP NET INCOME |
$ | 29,100 | $ | 23,000 | ||||
| Adjustments: |
||||||||
| Net Share-Based Payment (“SFAS 123R”) expense, net of tax |
— | (1,617 | ) | |||||
| State Income Tax Reserve adjustment |
(2,967 | ) | — | |||||
| PRO FORMA NET INCOME |
$ | 26,133 | $ | 21,383 | ||||
| GAAP net income per common share, diluted |
$ | 0.90 | $ | 0.68 | ||||
| Pro forma net income per common share, diluted |
$ | 0.81 | $ | 0.63 | ||||
| * | To supplement our consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP measures of pro forma net income and pro forma earnings per share, which are adjusted from our GAAP results as shown above. These non-GAAP adjustments are provided to enhance the user’s overall understanding of our current financial performance. We believe the non-GAAP results provide useful information to both management and investors by including or excluding certain charges and other amounts that we believe are not indicative of our core operating results. These non-GAAP measures are included to provide investors and management with an alternative method for assessing the Company’s operating results in a manner that is focused on the performance of the Company’s ongoing operations and to provide a more consistent basis for comparison between quarters. These measures are not in accordance with or an alternative for, GAAP and may be different from pro forma measures used by other companies. |
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