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Nautilus Inc. (NLS - NYSE) Monday, August 27, 2012 PSW Staff |
the United States and Canada. It designs, develops, sources, and markets cardio and strength fitness products and related accessories for consumer use. The company provides a range of cardio equipment, including treadmills, specialized cardio, exercise bikes, ellipticals, and CoreBody Reformer yoga/pilates products under the Nautilus brand name; fitness equipment, such as cardio and strength products comprising TreadClimber specialized cardio machines, treadmills, PowerRod home gyms, Revolution home gyms, and SelectTech dumbbells under the Bowflex brand name; exercise bikes, including the Airdyne, ellipticals, and treadmills under the Schwinn brand; and various kettlebell weights and weight benches, as well as dumbbells under the Universal brand name. It offers products directly to consumers through television advertising, catalogs, and the Internet; and through a network of retail companies consisting of sporting goods stores, Internet retailers, and large-format and warehouse stores, as well as specialty retailers and independent bike dealers. The company was founded in 1986 and is headquartered in Vancouver, Washington. Net sales for the first quarter ended March 31, 2012 totaled $51.3 million, an increase of 6.1% compared to net sales of $48.3 million for the same quarter in 2011. Gross margin for the first quarter of 2012 improved 90 basis points to 46.6% compared to 45.7% for the same quarter in 2011. The increase in gross margin was primarily due to a greater proportion of sales being derived from the higher margin Direct segment. Operating margin for the first quarter of 2012 improved 180 basis points to 5.5%, compared to 3.7% for the same period last year. Income from continuing operations for the first quarter ended March 31, 2012 was $2.6 million, compared to $1.1 million for the same period last year. Diluted income per share from continuing operations for the first quarter of 2012 was $0.09, compared to $0.04 for the same quarter a year ago. The significant improvement in results from continuing operations reflects stronger sales, improved gross margins, and lower operating expenses as a percentage of sales, mainly due to lower general and administrative expense. As of March 31, 2012, cash and cash equivalents were $20.4 million, compared to $17.4 million at year end 2011. On March 30, 2012 the Company used $5.5 million of cash on hand to pre-pay all outstanding obligations under its increasing rate senior discount notes issued in 2010. Working capital was $17.2 million, compared to $19.4 million at year end 2011. Inventory as of March 31, 2012 was $13.5 million, compared to $11.6 million as of December 31, 2011. The Company believes it has adequate inventory to support current demand levels. Net sales for the second quarter of 2012 were $39.6 million, an increase of $4.9 million, or 14.0%, as compared to net sales of $34.7 million for the second quarter of 2011. Gross margin for the second quarter of 2012 improved 150 basis points to 43.4%, compared to 41.9% for the same quarter in 2011. The increase in gross margin was primarily due to sales of higher margin Direct products. Operating margin for the second quarter of 2012 improved 670 basis points over the same period last year. Loss from continuing operations was $0.5 million for the second quarter of 2012, compared to a loss of $2.2 million for the second quarter of 2011. Loss per diluted share from continuing operations was $(0.02) for the second quarter of 2012, compared to $(0.07) for the second quarter of 2011. Net loss for the second quarter of 2012 was $0.2 million, an improvement of $3.1 million, or 95.0%, over net loss of $3.3 million for the second quarter of 2011. Net loss per diluted share was $(0.01) for the second quarter of 2012, compared to $(0.11) for the second quarter of 2011. As of June 30, 2012, the Company had cash and cash equivalents of $16.1 million and no debt, compared to cash and cash equivalents of $17.4 million and $5.6 million of debt at year end 2011. Working capital was $16.8 million, compared to $19.4 million at year end 2011; the decline in working capital was mainly the result of paying off the $5.6 million of debt during March of this year. Inventory as of June 30, 2012 was $12.6 million, compared to $11.6 million as of December 31, 2011. The Company believes it has adequate inventory to support current demand levels. NLS's P/E Ratio is greater than 79% of other companies in the Recreational Products industry. This typically means that investors are willing to pay more for its level of earnings relative to future growth. NLS's Gross Margin is more than 80% of other companies in the Recreational Products industry, which means it has more cash to spend on business operations as compared to its peers. As indicated by the Operating Margin, NLS controls its costs and expenses as well as its peers. The Return on Equity for NLS shows that it is able to reinvest its earnings more efficiently than 64% of its competitors in the Recreational Products industry. Typically, companies that have higher return on equity values are more attractive to investors. NLS's EPS Growth Rate is greater than 90% of its peers in the Recreational Products industry. NLS has seen a very large amount of insider buys since November of 2011. Almost a quarter of a million dollars worth of shares have been bought in small amounts by more than a handful of individuals at prices ranging from $1.68 to $2.69. In the last 5 years insiders have on average purchased 1,761,722 shares each year. Bottom Line NLS has seen a month of strong stock performance on the heals of an excellent quarterly report, and has since pulled back a bit on an equally good quarterly report that was seen in a negative light. The company has seen outstanding quarterly earnings growth, has plenty of cash on the books and has no debt. It is not just improving margins and growing earnings, but it is also growing revenues, which are currently at close to $6 per share. We believe that Nautilus' decision to discontinue its commercial business and focus on direct sales to consumers is paying off and will continue to pay off big time. Buy: $2.30-$2.40 Profit Target: $5-$6 Stop Loss: $1.95 Time Horizon: 2-6 Months Position Weight: Small to Medium |
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| NLS Fundamentals As of 8/272012 |
