Fitness financials: Nautilus pulls out of China factory purchase deal, plus Life Fitness/Brunswick, Nike, adidas/Reebok, Costco

Fitness financials: Nautilus pulls out of deal to buy China factory. Brunswick's FY '07 sales flat, fitness segment sales up 10 percent for year. Umbro shareholders approve Nike takeover bid. Umbro shareholders approve Nike takeover bid. Costco declares quarterly cash dividend.
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Nautilus pulls out of deal to buy China factory

In a filing with the U.S. Securities and Exchange Commission, Nautilus said it is terminating its agreement to buy Land America Health & Fitness Co. -- its largest contract manufacturer in China.

Early last year, Nautilus had agreed to acquire the Land America Health & Fitness Co. for $72 million in cash and stock.

The filing noted that Nautilus had received a letter from Land America's legal counsel saying it was in breach of contract and Nautilus likely would have to forfeit the $18.5 million nonrefundable deposit paid to Land America. It also will pay a higher price and lose a special rebate for equipment made for it by Land America.

According to The Oregonian newspaper, Eric Wold, an analyst with Merriman Curhan Ford, issued a report saying Nautilus will save $46.5 million by dropping the Land America purchase.

"Since the acquisition was announced in January 2007, we have staunchly opposed Nautilus paying ($72 million) to increase its manufacturing overhead and margin risk at a time when sales were declining," Wold wrote in a research report. As a result of the announcement, Wold increased his estimate of Nautilus' net loss in 2008 from $0.11 to $0.20 a share.

Reportedly, the Land America plant is the largest of about a dozen contractors in China that manufacture Nautilus products. It has made Bowflex units for nine years, and produces free-weight benches and the TreadClimber machine.

Brunswick's FY '07 sales flat, fitness segment sales up 10 percent for year

Brunswick Corp. (NYSE: BC), parent of the Life Fitness division, swung to a fourth-quarter profit from a year-ago period that included a charge on discontinued operations. But its adjusted earnings slipped sharply as demand for marine products in the United States -- the company's mainstay continued to weaken.

The company reported a profit of $6.8 million, or $0.08 per share, after posting a loss of $53.2 million, or $0.58 per share, in the year-ago period. The 2006 quarter included a loss on discontinued operations that took $1.05 per share from earnings.

Profit from continuing operations fell 73 percent to $12.1 million, or $0.14 per share, from $44.2 million, or $0.47 per share, last year.

Sales rose 5 percent to $1.43 billion from $1.73 billion last year.

Brunswick's Life Fitness division, which includes Life Fitness, Hammer Strength and ParaBody, had quarterly net sales of $214.5 million, up 11 percent from $192.8 million in the year-ago quarter. Operating earnings increased 12 percent to $32.4 million from $28.9 million, and operating margins were 15.1 percent, up from 15.0 percent in the fourth quarter of 2006.

For FY 2007, Brunswick's sales were flat at $5.67 billion and profit dropped 17 percent to $111.6 million, or $1.24 per share.

For the year, the fitness segment reported net sales of $653.7 million, up 10 percent from $593.1 million in 2006. Operating earnings in 2007 increased 3 percent to $59.7 million from $57.8 million, and operating margins were 9.1 percent compared with 9.7 percent a year ago.

"Life Fitness capped off a very successful year with solid growth in both sales and operating earnings during the fourth quarter of 2007, seasonally the unit's strongest quarter of the year," CEO Dustan McCoy said in a statement.

"New products in both the consumer and commercial segments helped spur sales momentum during the quarter as well as the year. For 2007, operating earnings and operating margins at Life Fitness were under pressure due to higher spending for marketing and research and development to support new product introductions, the shift in our mix to lower-margin strength equipment and competitive pricing in international markets."

Umbro shareholders approve Nike takeover bid

Shareholders of British sportswear manufacturer Umbro PLC approved a $566 million takeover by Nike (NYSE: NKE), possibly bringing the U.S. company a step closer to its stated goal of becoming soccer's top brand by the next World Cup.

The deal should be completed in early March, pending court hearings and final regulatory approvals due in late February.

Nike, which agreed to pay 193.06 pence (USD $3.84) in cash for each Umbro share, plans to operate Umbro as an independent, British-based subsidiary, like its Converse brand.

Britain's Office of Fair Trading approved the takeover earlier this month.

adidas CEO: Reebok U.S. sales expected to drop for year

The German financial daily Boersen-Zeitung reported that Reebok's U.S. sales are expected to fall this year due to the ongoing restructuring of its adidas (ADSG.DE) unit.

"We will lose sales in the United States with Reebok this year, but that's intended," CEO Herbert Hainer was quoted as saying in Boersen-Zeitung. On a global scale, Reebok was expected to grow at a one-digit percentage rate this year, he added.

adidas, which bought Reebok in 2005, is in the process of restructuring the unit, which also involves an increase of average prices for Reebok products.

This year, it plans to invest 10 percent of Reebok's and 13 percent of adidas' revenues in marketing. As a result the unit was expected to show rising U.S. sales next year. Meanwhile, Reebok-parent adidas would still manage to grow in a stagnating U.S. market despite an economic slowdown, Hainer was quoted as saying.

Costco declares quarterly cash dividend

Costco's (Nasdaq: COST) board of directors has declared a quarterly cash dividend on its common stock. The dividend of $.145 per share is payable Feb. 29, 2008, to shareholders of record at the close of business on Feb. 15, 2008.


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