News Column

Nautilus Inc. reports strong first-quarter earnings

May 5, 2014

By Aaron Corvin, The Columbian, Vancouver, Wash.

May 05--Nautilus Inc., the Vancouver-based manufacturer of fitness equipment, said Monday it's off to a strong start this year, posting a first-quarter profit of $5.4 million, moving to add a second U.S. distribution center, and planning to consolidate its research and development facilities into a new building next to its headquarters.

During the company's earnings conference call Monday, CEO Bruce Cazenave said Nautilus' robust performance in the January-to-March period shows that strategies "we set in motion three years ago are working well and have put us on a solid trajectory to build an even stronger and more profitable company for the future."

The company's first-quarter profit of $5.4 million compares with a profit of $5.2 million during the same three-month period in 2013. Nautilus reported net sales of $71.9 million in the first quarter, up 21 percent from $59.2 million in the same year-ago period.

The company sells its cardio, muscle-building and other fitness equipment by way of its direct-to-consumer channel, involving TV, social media and other advertising, and through brick-and-mortar retailers.

Sid Nayar, the company's chief financial officer, said the increase in net sales reflected both strong direct-to-consumer demand for Nautilus' cardio products and solid retail sales of its new lineup of cardio products.

Meanwhile, the company will launch a second distribution center in the fall, said Bill McMahon, chief operating officer for Nautilus. The structure will add to the company's existing distribution center in Portland. The new one, to be located in the Midwest, will enable the company to better serve customers on the East Coast and will reduce Nautilus' freight costs, McMahon said.

In another expansion of the company's footprint, McMahon said Nautilus will bring its product development team into one space by consolidating its rapid prototype and lab facilities into a new building next to its headquarters in east Vancouver.

It's unclear when that new building will be up and running.

'To better compete'

In addition to planning new buildings, McMahon said, Nautilus has launched a new, cloud-based information systems platform that will "provide improved access to data by key decision-makers."

And the company will roll out new fitness machines, he said, including a treadmill that will be sold at prices of $799 and $999 under the company's Schwinn and Nautilus brands.

Initially, the company had decided not to enter a treadmill market "rife with competition," McMahon said, unless it was able to develop the right product. However, he said, Nautilus "feels we have developed that product to compete in this space" and will introduce its new treadmill in the fall. The product also will enable the company "to better compete in the global cardio fitness market," McMahon said.

In reviewing its first-quarter financial results Monday, the company said it recorded total operating expenses of $29.4 million in the first quarter, an increase of 19 percent from $24.7 million in the same year-ago period.

Nautilus said its balance sheet is strong. As of March 31, the company had cash, cash equivalents and marketable securities of $55.6 million and no debt. That compares with $41 million in cash, cash equivalents and marketable securities and no debt at the end of 2013.

Meanwhile, Nautilus' working capital -- a measure of both a company's efficiency and its short-term financial health -- was $53.9 million as of March 31. By contrast, Nautilus' working capital was $45.7 million at the end of last year.

The company's stock, which trades as NLS, closed up 51 cents Monday, at $8.86 per share. The company's shares have traded between $6.15 and $9.90 in the past 52 weeks.


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Source: Columbian (Vancouver, WA)

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