The back-half of fiscal 2009 picked up where the front-end left off for Nautilus, Inc. as the company reported general weakness in all of its major segments. Net sales from continuing operations for the Vancouver, WA-based fitness manufacturer fell 33.9% to $41.4 million from $62.7 million in the year-ago period, pushing total revenues down 38.3% for the fiscal year-to-date period. The Q3 results did not include the company’s Commercial division, which has been reclassified as a discontinued operation per a plan for its complete divesture.
For continuing operations, management said the company’s Direct segment fell 34.8% to $25.3 million from $38.7 million a year ago due to the “restricted availability of consumer credit programs as well as the decision to reduce advertising spend(ing) commensurate with sales trends.” In a conference call with analysts, management said the Treadclimber product line has continued to exhibit strength as it benefits from adjusted price points, an improved product mix and an older and more affluent consumer demographic that is “less impacted” by economic conditions.
Operating income for the Direct segment swung to $1.7 million from a loss of $922,000 in the year-ago period. Margins for the segment improved 250 basis points to 62.8% from 59.3%, a reflection of a decrease in warranty expense that was partially offset by a $400,000 write-off of inventory in connection with the relocation of the company’s service warehouse facility.
The Retail division saw sales fall 34.0% to $15.7 million from $23.7 million a year ago as retailers reduced inventory levels in response to limited consumer discretionary spending. The company said retailers have also been reluctant to replenish inventories amidst the environment, while the company has experienced “reduced product placement” at certain customers.
The Retail division reported an operating income of $2.2 million, down 49.8% from $4.4 million a year ago. Margins for the retail segment slipped 340 basis points to 26.6% from 30.0% in the year-ago period due to “changes in product sales mix in connection with [the company’s] decision to reduce the number of broad-based home gym products in [the] retail business.”
Commercial business revenues fell 37.1% to $19.6 million from $31.1 million a year ago. Management for Nautilus said the company was in “active discussion” to sell various products of its commercial business and hopes to have one or more of those pieces sold in the “reasonably near future.”
The company reported a loss from discontinued operations of $22.9 million, or 75 cents per diluted share for the third quarter. The commercial business qualified for “held-for-sale” accounting treatment as a result of the planned divestiture of that business and, as such, loss from discontinued operations includes a non-cash after-tax impairment loss of $17.9 million.
The net loss from continuing and discontinued operations in the third quarter 2009 was $24.4 million, or 80 cents per diluted share, compared with a net loss of $34.1 million, or $1.11 per diluted share, in the third quarter 2008.
