Nautilus '02 sales up 61%, new cardio piece debuts in March

The Nautilus Group has announced net sales for the year ended Dec. 31, 2002 that are up 61 percent -- $584.6 million over the previous year's $363.9 million.

The Nautilus Group has announced net sales for the year ended Dec. 31, 2002 that are up 61 percent -- $584.6 million over the previous year's $363.9 million. The results from 2002 included the company's acquisition of StairMaster, which was final in February 2002, while the acquisition of Schwinn was final in September 2001.

For the fourth quarter, net sales for Nautilus (NYSE: NLS) were $155.5 million, up from $125.3 million for the corresponding period last year; earnings per share (EPS) this quarter were 69 cents, compared to 57 cents for the fourth quarter of 2001. For the year, EPS was up 50 percent to $2.79 from $1.85 in 2001.

Commercial/retail sales represented 41 percent of total sales in the fourth quarter, up from 35 percent in fourth quarter of 2001, due to the acquisitions and diversification by the company in the last 18 months.

"This was a record year for our company," said CEO Brian Cook. "We introduced 16 new products through the retail sales channel and continued to develop and expand our line of commercial fitness products. We also grew our direct marketing segment more than 34 percent year over year."

Forecast for 2003 is $580 million to $600 million in revenue with EPS estimated between $2.50 to $2.60 and gross margins of 54 percent to 56 percent. Cook added that the company is still looking for strategic acquisitions.

The biggest news is perhaps that Nautilus confirmed its plans to roll out a patented, "revolutionary" cardiovascular piece of equipment March 11 in New York. Describing the machine as "a perfect complement to the Bowflex," Cook said it will be sold direct beginning in the second quarter at a price close to Bowflex's current $1,540 average sale price. Citing what he called as typically slow ramp-up periods for Nautilus, he projected sales to be in the $10 million range for the first year.

Also discussed on the call were the company's plans to sell Bowflex at retail to accommodate those who balk at buying direct in favor of trying a product first. After initial positive feedback from retailers at The Super Show, Nautilus believes that a strong retail demand exists for Bowflex, but admitted that it is too early to elaborate on the retail program. The units are being piloted at retail at a handful of locations including one in the Chicago area.

The day after the release, U.S. Bancorp upped Nautilus' rating to market-perform from underperform.

SNEWS View: Interesting that prior to and on the heels of this analyst call about earnings on Feb. 6 that NLS stock prices have inched back up into the 14s from a low in late January of the high 11s. OK, OK, maybe this ain't much to speak of when the high in the last 52 weeks was a staggering 45.89 in May, but it's progress. The unveiling -- and we do expect drama -- of a new "revolutionary" machine in March will likely have the industry buzzing. Insiders seem to feel that "that next new thing" is what the entire industry needs for another burst of energy -- like it was given by the elliptical trainer introduced by Precor in the mid-90s. We don't think that one piece of steel will lift the entire industry, but it does give people something to talk about and reason for someone to go to a show or into a store. And that's a start.


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