The Nautilus Group, Inc. reported that fourth quarter net sales were $169.6 million compared to $152.8 million for the corresponding period last year, up 11%. Net income during the fourth quarter was $14.2 million, or 42 cents per diluted share, up 51.1% from $9.4 million, or 28 cents per share, in the fourth quarter of 2003. Net income in the fourth quarter of 2004 included a gain of a penny per diluted share from reducing a tax reserve after the completion of normal federal tax audits.
For the year ended December 31, 2004, net sales were $523.8 million, compared to $498.8 million in 2003, a 5% increase. Net income was $30.0 million, or 90 cents per diluted share, compared to $34.4 million, or $1.04 in 2003. The company finished 2004 with cash and cash equivalents of $104.6 million, up 44% in 2004 compared to the prior year.
“With this quarter’s excellent performance, we have concluded our turnaround as planned and returned our Company to growth,” said Gregg Hammann, Chairman and Chief Executive Officer. “We believe our Company is now properly positioned to expand our product offering and grow our market share in all sales channels in 2005. We believe our diversified portfolio of fitness brands offered across multiple channels provides us a venue to reach more consumers and serve their needs better than any other fitness company.
“Now, we are preparing our organization to drive growth and invest in our future. Were entering the first year of a three-year growth plan with four of the most widely recognized fitness brands that have been repositioned through consumer and customer insights, plus we have a growing pipeline of significant fitness innovations. We expect to accelerate the innovation cycle to launch more new products in 2005 than in any other year in the Company’s history.”
For the first quarter of 2005, the Company estimates that net sales would be in the range of $145 to $150 million, and earnings per share will grow by more than 25% to approximately $0.24 to $0.26.
For the full year of 2005, the company believes net sales will grow around 15% compared to the prior year, and earnings will grow about 25 to 30%. The company’s guidance does not include any impact from FASB statement 123R, which would require all companies to expense stock options for all periods beginning after June 15, 2005. Because of the seasonal nature of fitness equipment sales, the company expects more than two-thirds of its earnings to occur in the second half of the year.
The company also announced that its Board of Directors declared a regular quarterly dividend of $0.10 per common share, payable March 10, 2005, to stockholders of record as of February 20, 2005.
NLS also announced it is proceeding with plans to change its name from The Nautilus Group, Inc. to Nautilus, Inc., reflecting that it is managed today as a single company rather than as a holding company.
THE NAUTILUS GROUP, INC.
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
(Unaudited)
Three months ended
December 31,
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% of % of
2004 Sales 2003 Sales
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NET SALES $169,580 $152,827
COST OF SALES 89,599 52.8% 83,196 54.4%
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Gross profit 79,981 47.2% 69,631 45.6%
OPERATING EXPENSES:
Selling and marketing 46,185 27.2% 39,557 25.9%
General and administrative 9,938 5.9% 12,207 8.0%
Research and development 1,970 1.2% 1,350 0.9%
Related-party royalties - 0.0% 1,718 1.1%
Third-party royalties 1,275 0.8% 462 0.3%
------------- -------------
Total operating expenses 59,368 35.0% 55,294 36.2%
------------- -------------
OPERATING INCOME 20,613 12.2% 14,337 9.4%
OTHER INCOME:
Interest income 444 0.3% 246 0.2%
Other - net (139) -0.1% 61 0.0%
------------- -------------
Total other income, net 305 0.2% 307 0.2%
------------- -------------
INCOME BEFORE INCOME TAXES 20,918 12.3% 14,644 9.6%
INCOME TAX EXPENSE 6,760 4.0% 5,272 3.4%
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NET INCOME $14,158 8.3% $9,372 6.1%
============= =============
BASIC EARNINGS PER SHARE $0.43 $0.29
DILUTED EARNINGS PER SHARE $0.42 $0.28
Twelve months ended
December 31,
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% of % of
2004 Sales 2003 Sales
------------- -------------
NET SALES $523,837 $498,836
COST OF SALES 279,043 53.3% 247,020 49.5%
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Gross profit 244,794 46.7% 251,816 50.5%
OPERATING EXPENSES:
Selling and marketing 156,577 29.9% 149,245 29.9%
General and administrative 31,033 5.9% 37,098 7.4%
Research and development 6,754 1.3% 5,670 1.1%
Related-party royalties 1,843 0.4% 6,556 1.3%
Third-party royalties 4,125 0.8% 1,431 0.3%
------------- -------------
Total operating expenses 200,332 38.3% 200,000 40.1%
------------- -------------
OPERATING INCOME 44,462 8.5% 51,816 10.4%
OTHER INCOME:
Interest income 1,357 0.3% 839 0.2%
Other - net (172) 0.0% 1,098 0.2%
------------- -------------
Total other income, net 1,185 0.2% 1,937 0.4%
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INCOME BEFORE INCOME TAXES 45,647 8.7% 53,753 10.8%
INCOME TAX EXPENSE 15,662 3.0% 19,351 3.9%
------------- -------------
NET INCOME $29,985 5.7% $34,402 6.9%
============= =============
BASIC EARNINGS PER SHARE $0.92 $1.06
DILUTED EARNINGS PER SHARE $0.90 $1.04
