Fitness financials: Nautilus upgraded by analyst, shares rise, plus Winmark/Play It Again Sports, IHRSA Third Quarter Index

Nautilus upgraded by analyst, shares rise. Play It Again parent reports impairment charge for Tomsten acquisition. IHRSA report shows moderate Q3 revenue growth among clubs.
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Nautilus upgraded by analyst, shares rise

Merriman Curhan Ford upgraded Nautilus (NYSE: NLS), saying bankruptcy of the company is less of a likely outcome than previously feared. Nautilus shares closed up nearly 7 percent.

In a client note, analyst Eric Wold wrote that the company's senior management now has the correct mindset and plans to begin to improve operations and profitability by focusing on core operations and potentially shedding money-losing divisions.

"We recommend short positions be covered at this time and investors begin looking at the company as a long-term investment opportunity," Wold wrote. He upgraded Nautilus from "sell" to "neutral."

He also noted that the company's balance sheet is relatively healthy, and its $40 million credit facility will provide ample liquidity until cash flow trends improve in the second half of 2009 and fiscal year 2010.

Wold added that any near-term risk to results is priced into the shares, but lowered estimates on the company to account for continued economic weakness disrupting near-term sales.

Shares of Nautilus rose $0.10 to close at $1.55, after hitting a day's high of $1.77 on Jan. 26. The company has a 52-week range of $1.38 to $6.85.

Play It Again parent reports impairment charge for Tomsten acquisition

Winmark Corp. (Nasdaq: WINA), parent of Play It Again Sports, said it took an impairment charge relating to its investment in Tomsten, dba Archiver's.



The impact to Winmark's financial statements includes a $2.8 million reduction to the carrying value of Winmark's investment in Archiver's. As of Dec. 27, 2008, the book value of Winmark's investment was $2.3 million down from $5.2 million at the end of the third quarter.

Other effects include a reduction of Winmark's equity of $2.8 million, and a reduction of pre-tax income of $2.8 million for the fourth quarter. The charge will negatively impact earnings per share by $0.52 per share for the quarter.

IHRSA report shows moderate Q3 revenue growth among clubs

IHRSA's Third Quarter Index reported that health club companies maintained performance from third quarter 2007 to third quarter 2008 in company sales by an increase of 1.0 percent. The index gauges the financial performance of the commercial health club industry by surveying 17 health club companies, which represent about 200 facilities.

For the quarter ending Sept. 30, this moderate growth was lead by an increase in membership dues, 3.8 percent from third quarter 2007 to third quarter 2008, while non-dues revenue held at 0.1 percent during the same periods. Total membership accounts also increased by 1.5 percent over third quarter 2007.



Clubs maintained EBITDAR -- earnings before interest, taxes, depreciation, amortization and rent -- as a percent of total revenue from third quarter 2007 to third quarter 2008 to 31 percent. But total EBITDAR dropped 3.9 percent from $1.43 million in third quarter 2007 to $1.38 million in third quarter 2008.



IHRSA said same-store revenue experienced marginal growth during this time frame, up slightly to $5 million or an increase of 1.0 percent from third quarter 2007 to third quarter 2008.

--Compiled by Wendy Geister

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For May 16-22Analyst issues concerns, tells investors to wait on NautilusAnalyst Merriman Curhan Ford on May 17 issued a newsletter that SNEWS® obtained expressing concern over the quality of earnings for Nautilus as well as trends in the balance sheet. The group concluded by ...read more