Nautilus, Inc. reported net sales for the fourth quarter ended Dec. 31, 2011 totaled $60.0 million, an increase of 11.7 percent as compared to net sales of $53.7 million for the same quarter in 2010. For the full year ended December 31, 2011, net sales increased to $180.4 million, an increase of 7.1 percent as compared to net sales of $168.5 million for the same period in 2010.

Income from continuing operations for the fourth quarter ended Dec. 31, 2011 was $3.3 million, compared to $1.9 million for the 2010 fourth quarter. Diluted income per share from continuing operations for the fourth quarter of 2011 was $0.11, compared to $0.06 for the same quarter a year ago. The significant improvement in results from continuing operations reflects stronger sales and a 500 basis point decrease in operating expenses as a percentage of sales due to lower general and administrative costs and marketing spend efficiencies within the Direct channel. Selling and marketing expenses for the 2011 fourth quarter were roughly flat to prior year, but as a percent of net sales declined to 26.5 percent from 30.0 percent. This reflects a strategic shift toward online media for strength products as well as improved efficiency of marketing and media expenditure for our cardio products.

Income from continuing operations for the full year ended Dec. 31, 2011 was $2.5 million, compared to a loss from continuing operations of $9.8 million in 2010.

Bruce M. Cazenave, chief executive officer, stated, “We are pleased with our financial performance for the fourth quarter and full year 2011; it represents a quantum improvement over prior years and puts us on a path towards sustained profitable growth. Increased sales and greater leverage of operating expenses resulted in significant improvement in our income from continuing operations. Consumer demand for our products in the fourth quarter remained strong in both our Direct and Retail channels, with the TreadClimber product line continuing to perform well in our Direct segment and new bikes and ellipticals performing well in our Retail segment. In addition, we launched our new CoreBody Reformer in the fourth quarter and are encouraged by the initial acceptance in the marketplace.”

Cazenave continued, “As we begin 2012, we are excited about the outlook for our business and are confident in our ability to deliver growth and improved financial results. Our management team remains focused on introducing more new products in 2012, in addition to refreshing products in our current portfolio. We will also continue our focus on tight expense management in order to achieve further leverage in our business model.”

The company reported net income (including discontinued operation) of $3.2 million for the fourth quarter of 2011, compared to a net loss of $39,000 for the fourth quarter of 2010. Diluted net income per share for the fourth quarter of 2011 was 10 cents, compared to breakeven $(0.00) for the same quarter a year ago. Net income for the 2011 fourth quarter included a loss from discontinued operation of $0.1 million, or 1 cent per diluted share, compared to a loss of $2.0 million, or 6 cents per diluted share for the 2010 fourth quarter.

The company reported net income (including discontinued operation) of $1.4 million for the full year ended Dec. 31, 2011, compared to a net loss of $22.8 million for 2010. Diluted net income per share for 2011 was 5 cents, as compared to diluted net loss per share of 74 cents last year. Net loss for 2011 included a loss from discontinued operation of $1.1 million, or 3 cents per diluted share, compared to a loss of $13.0 million, or 42 cents per diluted share, for 2010.

The following summary contains information from unaudited consolidated statements of operations for the three months and years ended Dec. 31, 2011 and 2010:

 
Results of Operations Information  
Three months ended
December 31,
  Year ended December 31,
(Unaudited and in thousands, except per share amounts) 2011   2010 2011   2010
Net sales $ 59,985 $ 53,690 $ 180,412 $ 168,450
Cost of sales 33,953   29,996   101,953   91,704  
Gross profit 26,032   23,694   78,459   76,746  
Operating expenses:
Selling and marketing 15,893 16,104 54,494 64,039
General and administrative 4,040 4,621 17,143 19,371
Research and development 887   615   3,223   2,905  
Total operating expenses 20,820   21,340   74,860   86,315  
Operating income (loss) 5,212 2,354 3,599 (9,569 )
Other (expense) income, net (95 ) 49   (412 ) 339  
Income (loss) from continuing operations before taxes 5,117 2,403 3,187 (9,230 )
Income tax expense 1,822   458   686   588  
Income (loss) from continuing operations 3,295   1,945   2,501   (9,818 )
Discontinued operation:
Loss from discontinued operation before taxes (556 ) (2,146 ) (1,065 ) (12,924 )
Income tax (benefit) expense of discontinued operation (435 ) (162 ) 16   99  
Loss from discontinued operation (121 ) (1,984 ) (1,081 ) (13,023 )
Net income (loss) $ 3,174   $ (39 ) $ 1,420   $ (22,841 )
 
Income (loss) per share from continuing operations:
Basic $ 0.11 $ 0.06 $ 0.08 $ (0.32 )
Diluted 0.11 0.06 0.08 (0.32 )
Loss per share from discontinued operation:
Basic and diluted (0.01 ) (0.06 ) (0.03 ) (0.42 )
Net income (loss) per share:
Basic 0.10 – 0.05 (0.74 )
Diluted 0.10 – 0.05 (0.74 )
Weighted average shares outstanding:
Basic 30,747 30,744 30,746 30,744
Diluted 30,759 30,744 30,776 30,744

Segment Results

Net sales for the Direct segment were $31.7 million in the fourth quarter of 2011, an increase of 12.4 percent over the comparable period last year. This sales increase reflects continued strong demand for the Company's TreadClimber products, attributable partly to increased advertising effectiveness and also higher consumer credit approval rates, which rose to 30 percent in the 2011 fourth quarter, from 20 percent for the same period last year. Fourth quarter of 2011 sales also benefited from the launch and positive consumer reception of the Company's CoreBody Reformer. As anticipated, strong TreadClimber and new product sales were partia