Nautilus, Inc. reported a net loss from continuing operations of $7.0 million, or 23 cents per share, for the second quarter ended June 30, 2010. Sales slid 23.7% to $30.6 million from $40.1
million a year ago.
Loss from
continuing operations in the second quarter of 2009 was $14.7 million,
or 48 cents per share, which included a pre-tax restructuring charge of
$11.8 million, principally related to a non-cash write-off of leasehold
improvements in connection with the reduction of leased office space in
the Company’s corporate headquarters facility.
For the quarter ended June 30, 2010, the company’s loss from continuing operations was $7.0 million, or 23 cents per share. Loss from continuing operations in the second quarter of 2009 was $14.7 million, or 48 cents per share, which included a pre-tax restructuring charge of $11.8 million, principally related to a non-cash write-off of leasehold improvements in connection with the reduction of leased office space in the Company’s corporate headquarters facility. The Company reported net sales of $30.6 million in the second quarter of 2010, compared to $40.1 million in the second quarter of 2009.
Operating loss was $6.8 million for the second quarter 2010, compared to a loss of $14.9 million for the second quarter 2009. Operating loss for the second quarter 2009 included the aforementioned $11.8 million restructuring charge.
For the second quarter of 2010, the Company’s continuing operations depreciation and amortization was $1.7 million, compared to $2.6 million for the same period in 2009. For the six months ended June 30, 2010, continuing operations depreciation and amortization was $3.5 million, compared to $5.2 million for the same period last year. The year-over-year decline in depreciation and amortization was mainly attributable to the 2009 write-off of the leasehold improvements associated with the Company’s corporate headquarters facility.
Loss from discontinued operations, net of tax, in the second quarter of 2010 was $3.7 million, or 12 cents loss per share, compared to a loss of $6.1 million, or $0.20 loss per share, in the second quarter of 2009. A significant portion of the remaining assets of the discontinued operation were sold in April 2010 and a majority of the loss from discontinued operations in the second quarter of 2010 was attributable to operations which have since been sold.
Net loss in the second quarter 2010 was $10.7 million, or 35 cents loss per share, compared to net loss of $20.8 million, or $0.68 loss per share, in the second quarter 2009.
As of June 30, 2010, the Company had no borrowings against its credit facility, cash and cash equivalents of $4.5 million, and a further $4.3 million of restricted cash. The Company had $2.8 million of assets of discontinued operations held for sale as of June 30, 2010.
At December 31, 2009, the Company had no borrowings, cash and cash equivalents of $7.3 million, and a further $4.9 million of restricted cash.
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Comparative net sales by segment:
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| Three Months Ended | June 30, 2010 | June 30, 2009 | $Change | % Change | |||||||||
| (thousands) | |||||||||||||
| Direct | $ | 18,443 | $ | 28,200 | $ | (9,757 | ) | -34.6 | % | ||||
| Retail | 11,820 | 11,356 | 464 | 4.1 | % | ||||||||
| Unallocated Corporate | 379 | 546 | (167 | ) | -30.6 | % | |||||||
| Net Sales | $ | 30,642 | $ | 40,102 | $ | (9,460 | ) | -23.6 | % | ||||
Management does not believe the credit quality of customers applying for credit in its direct business has declined in proportion to the reduction in the rate of credit approvals from its consumer credit financing providers. In early June 2010, the Company notified its Tier 1 financing provider that it would be terminating its agreement and was working to transition to a new financing provider. As previously announced, we entered into a new agreement on June 15, 2010 with GE Money Bank (“GE”) to become our new Tier 1 provider and offer customized private label consumer financing programs to our qualified customers. The Company began offering customers consumer credit financing programs from GE on August 9, 2010 and will fully complete the implementation in September. In anticipation of improved credit availability through GE, the Company reduced advertising expenditures in recent months and it expects to increase spending later in the year.
In addition, during the final two weeks of second quarter, the Company launched a new Tier 2 financing program that offers customized private label consumer credit financing programs to eligible customers not qualifying for credit arrangements offered by its Tier 1 provider.
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Comparative segment operating income (loss):
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| Three Months Ended | June 30, 2010 | June 30, 2009 |
$ Change
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% Change | |||||||||||
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(thousands)
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| Direct | $ | (4,978 | ) | $ | 577 | $ | (5,555 | ) | -962.7 | % | |||||
| Retail | 1,333 | 1,191 | 142 | 11.9 | % | ||||||||||
| Unallocated Corporate | (3,113 | ) | (16,690 | ) | 13,577 | 81.3 | % | ||||||||
| Operating Income (Loss) | $ | (6,758 | ) | $ | (14,922 | ) | 8,164 | 54.7 | % | ||||||
Operating expenses in the second quarter 2010 declined by 41.8% to $20.2 million, compared to $34.7 million in the second quarter of 2009. Operating expenses in 2009 included the previously mentioned $11.8 million restructuring charge. The decline also reflects reduced selling and marketing costs, mainly lower advertising expenditures, as well as lower general and administrative costs resulting from cost reduction initiatives implemented last year.
| NAUTILUS, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Unaudited and in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net sales | $ | 30,642 | $ | 40,102 | $ | 76,286 | $ | 94,157 | ||||||||
| Cost of sales | 17,173 | 20,293 | 39,852 | 44,044 | ||||||||||||
| Gross profit | ||||||||||||||||
