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 13, 2008
(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)) |
NAUTILUS, INC.
FORM 8-K
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 13, 2008, Nautilus, Inc. issued a press release announcing fourth quarter 2007 preliminary earnings results. A copy of the press release is attached as Exhibit 99.1 hereto.
The information in this Item 2.02 and in Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise expressly stated in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHBITS
(d) Exhibits
| Exhibit No. |
Description | |
| 99.1 | Nautilus, Inc. Press Release dated February 13, 2008 |
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)
| ||
| By: | /s/ William D. Meadowcroft | |
| William D. Meadowcroft | ||
| Chief Financial Officer, Secretary and Treasurer | ||
February 13, 2008
(Date)
Exhibit 99.1
| CONTACTS: | Nautilus, Inc. | ICR, Inc. | ||||
| Ron Arp | John Mills | |||||
| (360) 859-2514 | (310) 954-1105 |
NAUTILUS, INC. ANNOUNCES RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2007
Vancouver, Wash. – February 13, 2008 – Fitness company Nautilus, Inc. (NYSE: NLS) today announced unaudited results for the three months and fiscal year ended December 31, 2007.
Net sales from continuing operations for the three months ended December 31, 2007, were $147.3 million compared to $185.1 million for the corresponding period last year, a decrease of 20 percent. Loss from continuing operations for the quarter was $31.4 million or $0.99 per diluted share, compared to income from continuing operations of $12.6 million or $0.40 per diluted share for the fourth quarter of 2006.
The results from continuing operations for the current and prior periods exclude the Company’s apparel segment, which is considered a discontinued operation as it is currently offered for sale. Sales from discontinued operations of the company’s former apparel segment were $12.4 million for the fourth quarter 2007 and $67.1 million for the full year 2007. Discontinued operations resulted in a pre-tax loss of $17.1 million in the quarter, primarily reflecting an impairment of $15.9 million in book value of the apparel segment.
Net loss for the quarter was $47.7 million, or $1.51 per diluted share, compared to net income of $12.9 million, or $0.41 per diluted share for the fourth quarter of 2006.
The fourth quarter 2007 loss from continuing operations before income taxes of $48.7 million included certain pre-tax charges totaling $45.1 million. Included in this amount:
| • | $19.4 million related to the suspended acquisition of the Land America manufacturing facility in China; |
| • | $16.9 million in costs associated with inventory and warranty reserves related to certain commercial cardiovascular products; |
| • | $3.0 million for intellectual property impairments, and; |
| • | $5.8 million for other items including expenses related to the special shareholder meeting, the cost to exit certain marketing contracts, staff restructuring and debt restructuring. |
For the twelve months ended December 31, 2007, the Company generated $502.1 million in net sales from continuing operations compared to $617.3 million in the fiscal year ended December 31, 2006, a 19 percent decrease. Loss from continuing operations for fiscal year 2007 was $45.0 million, compared to income from continuing operations of $24.9 million in fiscal 2006.
“After a very difficult year in 2007, our newly reconstituted board and management are making the necessary strategic improvements to restore the Company to profitability,” said Bob Falcone, President and CEO of Nautilus, Inc.
“We are making significant adjustments in our business and cost structure to achieve improvements in both gross and operating margins. We recorded substantial charges during the fourth quarter as we make the necessary strategic corrections to our business model to reposition us for long-term growth and profitability.
“In this economic environment, our path to profitability initially will come from cost containment and margin improvements rather than from sales growth. We will be making better selling decisions, introducing new products to the marketplace only when they are ready, and be more disciplined about product segmentation into the right channels.”
The conference call is scheduled for 5:00 p.m. EST (2:00 p.m. PST), February 13, 2008. 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) 926-6502 in North America and (212) 231-2903 from outside North America. Participants will include: Bob Falcone, President and Chief Executive Officer and Bill Meadowcroft, Chief Financial Officer.
A telephonic playback will be available from 4:00 p.m. PST, February 13, through 4:00 p.m. PST, February 27, 2008. North American callers can dial (800) 633-8284, and international callers can dial (402) 977-9140 to hear the playback. The passcode is 21372770.
About Nautilus, Inc.
Headquartered in Vancouver, Wash., Nautilus, Inc. (NYSE:NLS) is a global fitness products company providing innovative, quality solutions to help people achieve a healthy lifestyle. With a brand portfolio including Nautilus®, Bowflex®, Schwinn®Fitness, StairMaster® and Universal®, Nautilus manufactures and markets innovative fitness products through direct, commercial, retail, and international channels. Formed in 1986, the company had 2007 sales of $502 million. It has 1,450 employees and operations in Washington, Oregon, Colorado, Oklahoma, Illinois, Virginia, Canada, Switzerland, Germany, United Kingdom, Italy, China, Australia, and other locations around the world. Website: www.nautilusinc.com
Safe Harbor Statement:
This press release includes forward-looking statements, including statements concerning estimated future profitability 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, manufacturing quality issues resulting in increased warranty costs, 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.
NAUTILUS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006
(Preliminary unaudited, in thousands)
| 2007 | 2006 | |||||
| ASSETS |
||||||
| CURRENT ASSETS: |
||||||
| Cash and cash equivalents |
$ | 5,121 | $ | 2,997 | ||
| Trade receivables, net |
88,241 | 128,427 | ||||
| Inventories |
58,910 | 55,548 | ||||
| Prepaid expenses and other current assets |
8,759 | 22,739 | ||||
| Income taxes receivable |
12,018 | — | ||||
| Short-term note receivable |
2,384 | 2,461 | ||||
| Assets of discontinued operations |
73,781 | 90,192 | ||||
| Assets held for sale |
1,677 | 1,677 | ||||
| Deferred tax assets |
21,015 | 4,961 | ||||
| Total current assets |
271,906 | 309,002 | ||||
| PROPERTY, PLANT AND EQUIPMENT, net |
42,291 | 51,420 | ||||
| GOODWILL |
32,743 | 32,896 | ||||
| INTANGIBLE AND OTHER ASSETS, net |
44,086 | 31,624 | ||||
| TOTAL ASSETS |
$ | 391,026 | $ | 424,942 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| CURRENT LIABILITIES: |
||||||
| Trade payables |
$ | 44,458 | $ | 57,285 | ||
| Accrued liabilities |
43,438 | 29,176 | ||||
| Short-term borrowings |
79,000 | 47,500 | ||||
| Income taxes payable |
1,175 | 5,584 | ||||
| Customer deposits |
2,925 | 2,229 | ||||
| Liabilities of discontinued operations |
14,835 | 16,236 | ||||
| Total current liabilities |
185,831 | 158,010 | ||||
| NONCURRENT DEFERRED TAX LIABILITIES |
7,731 | 10,298 | ||||
| LONG-TERM TAXES PAYABLE |
2,958 | — | ||||
| COMMITMENTS AND CONTINGENCIES |
||||||
| STOCKHOLDERS’ EQUITY: |
||||||
| Common stock |
4,346 | 1,026 | ||||
| Retained earnings |
183,072 | 251,418 | ||||
| Accumulated other comprehensive income |
7,088 | 4,190 | ||||
| Total stockholders’ equity |
194,506 | 256,634 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 391,026 | $ | 424,942 | ||
NAUTILUS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Preliminary unaudited, in thousands, except per share amounts)
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| NET SALES |
$ | 147,317 | $ | 185,092 | $ | 502,088 | $ | 617,271 | ||||||||
| COST OF SALES |
110,686 | 103,928 | 317,570 | 346,012 | ||||||||||||
| Gross profit |
36,631 | 81,164 | 184,518 | 271,259 | ||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Selling and marketing |
42,929 | 45,950 | 181,217 | 175,307 | ||||||||||||
| General and administrative |
37,561 | 11,951 | 74,606 | 46,897 | ||||||||||||
| Research and development |
2,136 | 2,210 | 9,390 | 8,761 | ||||||||||||
| Royalties |
1,422 | 1,606 | 5,953 | 5,536 | ||||||||||||
| Litigation settlement |
— | — | (18,300 | ) | — | |||||||||||
| Total operating expenses |
84,048 | 61,717 | 252,866 | 236,501 | ||||||||||||
| OPERATING INCOME (LOSS) |
(47,417 | ) | 19,447 | (68,348 | ) | 34,758 | ||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
121 | 145 | 364 | 710 | ||||||||||||
| Interest expense |
(1,659 | ) | (952 | ) | (5,014 | ) | (2,676 | ) | ||||||||
| Other income (expense), net |
211 | 163 | 1,234 | 1,224 | ||||||||||||
| Total other income (expense) |
(1,327 | ) | (644 | ) | (3,416 | ) | (742 | ) | ||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
(48,744 | ) | 18,803 | (71,764 | ) | 34,016 | ||||||||||
| INCOME TAX EXPENSE (BENEFIT) |
(17,385 | ) | 6,221 | (26,782 | ) | 9,096 | ||||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS |
(31,359 | ) | 12,582 | (44,982 | ) | 24,920 | ||||||||||
| DISCONTINUED OPERATIONS: |
||||||||||||||||
| Gain (loss) from discontinued operations |
(17,104 | ) | 405 | (10,523 | ) | 6,653 | ||||||||||
| Income tax expense (benefit) from discontinued operations |
(778 | ) | 134 | 2,055 | 2,473 | |||||||||||
| Gain (loss) from discontinued operations |
(16,326 | ) | 271 | (12,578 | ) | 4,180 | ||||||||||
| NET INCOME (LOSS) |
$ | (47,685 | ) | $ | 12,853 | $ | (57,560 | ) | $ | 29,100 | ||||||
| EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS: |
||||||||||||||||
| BASIC |
$ | (0.99 | ) | $ | 0.40 | $ | (1.43 | ) | $ | 0.77 | ||||||
| DILUTED |
$ | (0.99 | ) | $ | 0.40 | $ | (1.43 | ) | $ | 0.77 | ||||||
| EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS: |
||||||||||||||||
| BASIC |
$ | (0.52 | ) | $ | 0.01 | $ | (0.40 | ) | $ | 0.13 | ||||||
| DILUTED |
$ | (0.52 | ) | $ | 0.01 | $ | (0.40 | ) | $ | 0.13 | ||||||
| EARNINGS (LOSS) PER SHARE: |
||||||||||||||||
| BASIC |
$ | (1.51 | ) | $ | 0.41 | $ | (1.83 | ) | $ | 0.90 | ||||||
| DILUTED |
$ | (1.51 | ) | $ | 0.41 | $ | (1.83 | ) | $ | 0.90 | ||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: |
||||||||||||||||
| BASIC |
31,555 | 31,478 | 31,538 | 32,300 | ||||||||||||
| DILUTED |
31,555 | 31,642 | 31,538 | 32,457 | ||||||||||||