Fitness financials: Brunswick's Q2 fitness segment sales up 9 percent, plus Nautilus, Life Time Fitness

Life Fitness parent, Brunswick, reported that Q2 fitness sales rose 9 percent, Nautilus said it would consolidate manufacturing facilities, and Life Time Fitness posted a Q2 profit.
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Life Fitness parent, Brunswick, reported that Q2 fitness sales rose 9 percent, Nautilus said it would consolidate manufacturing facilities, and Life Time Fitness posted a Q2 profit.

Life Fitness parent, Brunswick, shows Q2 fitness segment sales up 9 percent

While Brunswick Corp. (NYSE: BC) swung to a second-quarter loss because it posted a hefty restructuring charge due to scaled-back production in its marine segment, its fitness segment posted a 9-percent increase in sales on higher sales of commercial equipment.

Brunswick lost $6 million, or $0.07 per share, during the April-to-July period. That compares to a year-ago profit of $57.3 million, or $0.63 per share. Revenue fell 2 percent to $1.49 billion from $1.52 billion.

The company had an operating loss of $17.2 million for the second quarter, which included $83.1 million of restructuring charges, compared with operating earnings of $86.3 million in the year-ago quarter, including the $1.1 million of restructuring charges.

Brunswick was hit by a restructuring charge of $0.59 per share, mainly related to efforts to reduce fixed costs by $300 million from 2007 spending levels by the end of next year.

Hardest hit by the declining economy was the company's boat segment, where net sales were down 6 percent to $687.9 million. The unit posted a $37.7 million operating loss.

“Life Fitness delivered a 9-percent sales increase even though the consumer portion of its business has suffered the same downward pressure I've been describing in our marine businesses,” said CEO and Chairman Dustan McCoy in a July 24 call with analysts. “Their new products and great efforts by the commercial businesses in Life Fitness were the foundation of this nice growth in sales and earnings.”

Sales for the fitness segment, with brands Life Fitness, Hammer Strength and ParaBody, were $156.9 million, up from $144.0 million in the year-ago quarter. Operating earnings for the quarter totaled $8.2 million, up from $7.4 million for the second quarter of 2007, and operating margins were 5.2 percent versus 5.1 percent a year ago.

"Sales of commercial equipment were up double digits worldwide, as Life Fitness continued to benefit from a number of new products introduced since the beginning of the year," said McCoy in a statement. "The strength in commercial equipment helped to offset a decline in the segment's consumer business. Operating earnings, which included $1.3 million in restructuring charges, improved slightly as efforts to trim costs and improve productivity continued to show results."

The company announced in June that it would reduce its hourly and salaried work force by 1,000 jobs. Furthermore, the company said it may slash up to 1,700 more jobs as further cost-cutting initiatives are completed.

Brunswick has already laid off about 1,500 marine employees and announced plans to close eight boat plants. By the time the most recent rounds of layoffs and closures are completed, Brunswick's marine division will have been cut by about 25 percent since January.

The moves are expected to reduce costs by $300 million this year. On the call, CFO Peter Leemputte said operating expenses were actually down but the decline in gross margin was driven by reduced fixed cost absorption on lower production volumes. Plus, he noted there are higher freight costs due to fuel surcharges. This will affect both the third and fourth quarters, he noted, although Life Fitness will enter its strongest selling season at that time.

Nautilus to consolidate manufacturing facilities

Nautilus (NYSE: NLS) said it is consolidating its U.S. manufacturing and distribution facilities, closing its facilities in Tulsa, Okla., by the end of the year and transferring the work to its Independence, Va., site. Nautilus distribution will be consolidated into its two centers located in Independence and Portland, Ore.

"By streamlining these functions it supports our restructuring activity to provide better efficiency in our manufacturing processes and better service for our customers," said Tim Joyce, senior vice president/general manager, in a statement.

The company said it does not plan to eliminate any major product lines as a result of the consolidation. Nautilus said it is still calculating the related cost and will release further information during its July 31 earnings conference call.

Nautilus has struggled as it tries to execute a turnaround plan amid a weak consumer spending environment. Former CEO Gregg Hamman left nearly a year ago, and a shareholder group took over control of its board in December. The company posted a loss of $6.4 million, or $0.20 per share, in the first quarter.

Shares of the company fell $0.35 to close at $5.15 on July 24.

Life Time Fitness posts Q2 profit

Life Time Fitness (NYSE:LTM) experienced a 20-percent growth spurt in its second-quarter earnings, helped by increased membership.

Net income rose to $19.8 million, or $0.50 a share, for the three months ended June 30, from $16.5 million, or $0.44 a share, in the same period last year.

Revenue rose 19 percent to $192.4 million from $162.1 million.

It said membership rose 12 percent to 547,497 in the second quarter compared with last year.

Total operating expenses during the quarter totaled $152.5 million compared to $128.6 million last year, driven primarily by increased expenses to support new centers, membership growth and presale activities.

EBITDA for the quarter grew 18.4 percent to $57.4 million from $48.5 million in 2007.

Shares of the company fell $3.94 to close at $33.63 on July 24.

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