Nautilus Inc. (NLS, Financial) is an iconic industry leader with a rich history and reputation for building the best cardio and strength equipment for home use. Known for its family of brands that included Bowflex, Nautilus, Schwinn and Universal, the company develops, manufactures and markets branded products that include home gyms, free weight equipment, treadmills, indoor cycling equipment, elliptical and fitness accessories.
The company reported strong fourth-quarter results and a year of solid top-line growth. The fourth-quarter results reflect increased sales for both Direct and Retail segments, including continued strong consumer demand for the Max Trainer product line as well as strong contributions from new product categories for the retail business.
Strong fourth quarter
Nautilus expects to report net sales of approximately $109 million for the fourth quarter of 2015, which marks an increase of 15% from the prior-year quarter. For the full year 2015, net sales are expected to be approximately $336 million, which is an increase of 22% from the prior-year period.
Earnings per diluted share from continuing operations are estimated to be in the range of 31 cents to 33 cents per share for the fourth quarter of 2015 (33 cents per share during the prior-year quarter). Earnings per diluted share from continuing operations for the fourth quarter of 2015 includes approximately 6 cents of unusual items. For the full year 2015, earnings per share from continuing operations are expected to be in the range of 85 cents to 87 cents per share (64 cents per share during the prior-year period).
As previously disclosed, on Dec. 31, 2015 the company entered into and closed on a definitive purchase agreement to acquire Octane Fitness LLC, a leading fitness products company ("Octane"), through the purchase of 100% of the capital stock of OF Holdings Inc., Octane's parent corporation, from North Castle Partners, a private equity firm, and other stockholders. The purchase price of $115 million plus working capital and other adjustments was financed through an $80 million term loan and cash on hand. For more information, please refer to the company's press release dated Jan. 4.
The company had cash and investments of $55 million and $80 million of term debt at Dec. 31, 2015 ($72 million and no debt at Dec. 31, 2014). The decline in cash and investments and the addition of debt were due to the acquisition of Octane.
(Source: Company’s website)
Positive attributes of the company
- An industry leader in branded health and fitness products.
- Well-positioned in large, growing markets with favorable demographic trends.
- Diverse direct and retail sales channels.
- Committed to innovation through research and development, licensing and acquisition.
Long-term strategy
- Creatively marketing equipment, both directly to consumers and through retail customers, while leveraging well-known brand names.
- Enhancing product lines by designing fitness equipment that meets or exceeds the high expectations of the customers.
- Utilizing strengths in product engineering to reduce product costs.
- Continuing investment in research and development activities aimed at acquiring or creating new technologies.
- Increasing international retail sales and distribution.
- Maximizing available royalty revenues from the licensing of brands and intellectual property.
On a concluding note
Founded in 1986 with a business based on its signature Bowflex product line, the company has expanded through strategic acquisitions to grow a portfolio of leading brands that include Nautilus, Bowflex, Schwinn and Universal products.
The company is focused on developing and marketing consumer fitness equipment and related products to help people enjoy healthier lives. The products are targeted to meet the needs of a broad range of consumers, including fitness enthusiasts and individuals who are seeking the benefits of regular exercise. The company has diversified business by expanding the portfolio of high-quality fitness equipment into multiple product lines utilizing its well-recognized brand names.
It is focused exclusively on consumer markets and distribution channels and views the continual innovation of product offerings as a key aspect of its business strategy. It regularly refreshes existing product lines with new technologies and finishes and focuses significant effort and resources on the development or acquisition of innovative new fitness products for introduction to the marketplace at periodic intervals.
Disclosure: I do not hold any position in the company.
