Nautilus makes profit on tax benefit

Boost averts 2Q loss; full-year profit expected, CEO says

By Aaron Corvin, Columbian port & economy reporter

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Nautilus Inc., a manufacturer of fitness equipment, reported on Monday a profit of $32.9 million for the second quarter of this year, or $1.05 per diluted share. That compares with a net loss of $164,000, or a penny per diluted share, in the same three-month period of 2012.

However, the unusually robust earnings came by way of a tax benefit involving the Vancouver-based company's deferred tax assets.

Take the tax benefit out of the equation, and Nautilus experienced a net loss of $1.4 million, or 4 cents per diluted share, in the April-to-June period.

And that makes sense: Nautilus' seasonal business typically slows down in the second quarter.

Although the second-quarter softness was indeed in effect this year, CEO Bruce Cazenave said, the company believes its strategic investments in advertising and new products will boost revenues in the latter part of the year and hand the company a profit for all of 2013.

"The course we are on is the right one," Cazenave said during the company's conference call to discuss its financial results.

Nautilus reported overall net sales of $36.24 million in the second quarter, down 8 percent from $39.58 million in the same period a year ago.

The company's direct-to-consumer segment — through which it sells cardio and muscle-building machines by way of TV, social media and other advertising — posted sales of $25.31 million in the second-quarter, up 2.5 percent from $24.70 million in the same period of 2012.

Bill McMahon, chief operating officer for Nautilus, said the company's direct business continues to make progress, with TV and other advertising purchases benefitting sales of the TreadClimber and Bowflex UpperCut devices.

However, Nautilus' sales in brick-and-mortar retail outlets plummeted by 27.5 percent — from $14.03 million in the second-quarter of 2012 to $10.17 million in the same three-month period this year.

McMahon said the company's "retail partners continue to be cautious with their spending" and are looking for improvements to existing fitness products and new ones that "capitalize on evolving trends."

Cazenave said Nautilus has moved to boost its portfolio of retail products, including a new line of cardio machines, that he expects will increase sales in the third and fourth quarters of this year.

The company, known for its large and pricey fitness machines, also said it will continue to roll out lower-priced products, including the Bowflex Boost — a bracelet that tracks its wearer's exercise goals and calorie burning.

McMahon said the company will have more details in the third quarter about another planned new product: a midpriced elliptical machine.

Nautilus also plans to make a larger public relations push in support of its brands and products, McMahon said, including an annual event that will showcase the company's new fall product offerings. The first such event will take place in September in New York City, he said.