Nautilus, Inc. finished the 2006 fiscal year with a step towards verticality as it announced plans to acquire one of its major manufacturing partners, Xiamen, China-based Land America Health and Fitness Co., Ltd. Consideration for the acquisition is approximately $72 million in cash and stock with an anticipated closing date of December 31, 2007. The acquisition is expected to improve company gross margins by 1.5-2.0 percentage points in 2008.
Net sales for the fourth quarter were $199.3 million compared to $182.0 million for the corresponding period last year, up 9.5% and represented the largest single quarter in the company's history. Retail sales increased 5.0% to $71.1 million from $67.7 million during last years quarter, while commercial sales increased 6.0% to $21.0 million. Direct sales inched up 1.0% to $20.9 million, but international equipment sales jumped 49.0% to $20.9 million. Apparel sales, which includes the Pearl Izumi brand, also had a strong quarter, up 46.0% to $13.0 million. On the Nautilus side of the apparel business, the company said it is currently running a “5 to 10 store test” with The Sports Authority, but that it was still too early to see any results.
Gross margin jumped 460 basis points in the quarter to 44.0% of net sales from 39.4% last year. Net income for the quarter was $12.9 million, or 41 cents per share, up from $2.0 million, or six cents per share, for the fourth quarter of 2005.
For 2007, the company expects net sales growth of approximately 10%, with the apparel business unit expecting its seventh straight year of 10% to 20% sales growth. The international business is forecasting 15% to 30% growth, while single-digit growth is expected from the direct and retail businesses and 10% to 20% growth is anticipated in the commercial segment. Diluted earnings per share are expected to grow 20% to 30% from a 2006 pro forma base of 81 cents 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 18 cents to 21 cents per diluted share.
| Nautilus Inc. | |||
| Full-Year Results | |||
| (in $ mm) | 2006 | 2005 | Change |
| Total Sales | $681.5 | $631.3 | +8.0% |
| GM % | 44.0% | 44.2% | -20 bps |
| Net Income | $29.1 | $23.0 | +26.5% |
| Diluted EPS | 90¢ | 68¢ | +32.4% |
| Inventories* | $75.7 | $96.1 | -21.2% |
| Accts Rec* | $138.9 | $116.9 | +18.8% |
| *at year-end | |||
