Nautilus, Inc. saw revenues tumble 44.4% to $72.1 million in the first quarter ended March 31 from $129.6 million in the year-ago period. The company reported a loss from continuing operations for the first quarter of $13.8 million, or 45 cents a share. Included in the loss from continuing operations were pre-tax restructuring charges of $3.8 million.
The restructuring charges are principally related to the company's previously announced closure of the manufacturing facility in Tulsa, Oklahoma and a write-off related to abandoned information technology software.
In the first quarter of 2008, the company reported a loss from continuing operations of $6.9 million, or 22 cents a share. Included in the loss from continuing operations were pre-tax charges of $10.7 million, primarily related to the cancellation in the first quarter of 2008 of the company's agreement to purchase Land America Health & Fitness Co., Ltd.
Excluding the restructuring charges mentioned above, the company's adjusted loss from continuing operations before income taxes was $8.3 million for the quarter ended March 31, 2009. For the corresponding period in 2008, excluding the restructuring charges mentioned above, adjusted income from continuing operations before income taxes was $1.2 million.
Results from continuing operations for the first quarter of 2008 exclude the company's former apparel business, which was sold in April 2008 and is considered a discontinued operation.
By business segment, direct sales were down 41.5% to $40.7 million from $69.6 million. Retail revenues were off 50.3% to $12.5 million from $25.2 million.
For the three months ended March 31, 2009, net sales from continuing operations were $72.1 million, a decrease of 44.4% from $129.6 million reported in the corresponding period in 2008. Net sales declined in the direct and retail businesses, primarily due to the weak consumer environment. Offsetting a portion of the sales decline in the direct business segment was an increase in sales of TreadClimber products compared to the same period last year. The commercial business net sales decrease reflects an overall decline in the economy, and the company's decision to implement more stringent sales terms in certain channels.
Consolidated gross profit margin improved slightly to 43.4% of net sales for the first quarter of 2009, compared to 43.2% for the same period in the previous year. For the first quarter of 2009, the gross profit margin in direct business improved to 63.0% of net sales, compared to 62.4% for the same period in the previous year; the retail business gross margin improved to 33.5%, compared to 22.5%; and the commercial business gross margin declined to 7.2%, compared to 17.6%. Operating expenses declined by approximately $21.3 million, or 33.1%, in the first quarter of 2009, compared to the first quarter of 2008. On an operating basis, the retail and direct businesses were profitable in the first quarter of 2009, while the commercial business lost $7.1 million.
The company generated $12.8 million of net cash provided by operating activities from continuing operations compared to $20.0 million in the first quarter of 2008. The cash generated in 2009 was primarily due to working capital improvements. As of March 31, 2009, the Company had approximately $0.1 million in debt (net of cash), compared to net debt of $12.4 million at December 31, 2008 and net debt of $52.9 million at March 31, 2008. Subsequent to the end of the first quarter, the company received a $10.6 million U.S. Federal income tax refund, which was not included above. As of May 8, 2009, the Company had no outstanding borrowings.
Edward Bramson, Chairman and Chief Executive Officer of Nautilus, Inc., stated, “While we are not satisfied with the consolidated net loss, we are encouraged by the operating improvements. During the first quarter, we achieved the highest gross margins in over a year and reduced operating expenses by 33% compared to the same period last year. Even though the overall consumer environment remains very challenging, our recently implemented marketing and operating adjustments are providing positive contributions in the Direct and Retail businesses.”
Bramson added, “We continued to right-size our cost structure in the first quarter by implementing an additional $17 million in anticipated annualized cost reductions. These actions will begin to benefit our operating results in the second quarter, and we expect to realize substantially all of the benefit from these improvements in the fourth quarter of 2009.”
Nautilus' brands include Nautilus, Bowflex, Schwinn Fitness, StairMaster and Universal.
