Executives for Nautilus Inc., Vancouver, Washington, shared details about the company's recent purchase of Octane Fitness, Brooklyn Park, Minnesota, with investment analysts in a conference call on Tuesday.
Nautilus, which reported preliminary unaudited fourth quarter and 2015 results on Tuesday, closed on a deal to acquire Octane Fitness for $115 million plus working capital and other adjustments on Dec. 31, 2015.
"The Octane business is a perfect strategic fit with Nautilus, and the growth opportunities created are significant for our business going forward," Nautilus Chief Executive Officer Bruce Cazenave said, adding more details related to Octane Fitness will come in a conference call with investors in late February.
Nautilus expects to report net sales of approximately $109 million for the fourth quarter of 2015, marking an increase of 15 percent compared to the fourth quarter of 2014. For the full year 2015, net sales are expected to be approximately $336 million, marking an increase of 22 percent compared to the full year 2014. The financials do not include financials from Octane, the company confirmed to Club Industry.
"Both of our direct and retail channels are growing in revenue and profitability, and now we've added still more positive momentum with Octane Fitness joining our team covering the specialty, vertical and commercial market," Nautilus Chief Operating Officer William McMahon told analysts. "While we have a busy time ahead of us in terms of integrating and optimizing, our core focus will remain on delivering profitable growth."
Earnings per diluted share from continuing operations are estimated to be in the range of $0.31 - $0.33 per share for the fourth quarter of 2015, compared to $0.33 per share for the fourth quarter of 2014.
The Octane Fitness purchase was financed through an $80 million term loan and cash on hand. The acquisition drove primarily legal and audit transaction-related expenses, which resulted in an earnings per share impact of two cents per share for the fourth quarter, Nautilus Chief Financial Officer Sid Nayar told investors.
The adjusted earnings per diluted share from continuing operations are estimated to be in the range of 37 cents to 39 cents per share for the fourth quarter of 2015. 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 versus 64 cents per share for the full year 2014. The adjusted earnings per diluted share figures for the fourth quarter and full-year 2015 excluded the Octane Fitness acquisition.
Nautilus had cash and investments of $55 million and $80 million of term debt at Dec. 31, 2015, compared to cash and investments of $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.
In its retail business, Nautilus is expected to post full-year revenue growth of 14 percent in 2015 compared to 2014. Nautilus reported $92.2 million in retail net sales for 2014, which was up 21 percent from 2013. Cazenave cited 2015 retail growth to growth across all products, a greater retail presence in North American and international markets, strength product sales and the launch of the MaxTrainer into international markets in the third quarter.
"The recovery in retail margins is particularly noteworthy and should be further strengthened by the anticipated accretion in earnings per share of 15 cents to 17 cents from the Octane Fitness acquisition during 2016," Nayar said.
Cazenave told analysts: "As we close 2015 and look forward to 2016 and beyond, I'm proud of what our team has accomplished to date, and I am excited about what we can accomplish in the future. Both of our direct and retail channels are growing in revenue and profitability, and now we've added still more positive momentum with Octane Fitness joining our team covering the specialty, vertical and commercial market. While we have a busy time ahead of us in terms of integrating and optimizing, our core focus will remain on delivering profitable growth."
Nautilus closed Tuesday up nearly two percent at $17.98 per share on the New York Stock Exchange and was up 1.5 percent in after hours trading. In addition to Octane Fitness, Nautilus' brands include Bowflex, TreadClimber, Schwinn, Schwinn Fitness and Universal. The company markets its products through direct and retail channels.