Fitness financials: One-time costs hammer Nautilus' Q1, plus Town Sports, Iconix, Health Fitness

One-time costs helped hammer Nautilus' Q1, Town Sports returned to Q1 profit, Iconix posted an 81-percent increase in revenue, and Health Fitness reported a bump in Q1 revenue.

One-time costs help hammer Nautilus' Q1

Nautilus (NYSE: NLS) was rattled by a first-quarter loss when it was hit by two one-time costs -- $8 million to end a deal to buy a Chinese manufacturing plant and $2.4 million for a deal with the former CEO.

It reported a first-quarter loss of $6.4 million, or $0.20 per share, which compares with net income of $2.5 million, or $0.08 a share, a year earlier. Sales dropped to $129.6 million from $137 million in the first quarter of 2007.

The company said net sales declined an average of 7 percent across its domestic fitness equipment business channels, but were partially offset by a 6-percent increase in net sales in its international business that was primarily driven by currency changes in the first quarter of 2008. By channel, retail sales dropped 9 percent over the year-ago quarter hitting $25 million; commercial sales were down 10 percent to $16 million; direct sales were also down 6 percent to $69 million, reported CFO Bill Meadowcraft in a quarterly call with analysts and others on May 5.

Nautilus reported it paid $8 million -- $0.18 per diluted share after-tax -- to supplier Land America Health & Fitness Co. Ltd. to cancel a deal to purchase Land America's China-based manufacturing assets. That deal was canceled in January. Meadowcraft said that deal will end up being nearly a wash since the company will get about a $7.1 million cash refund in early 2009 for the event occurring in the 2008 tax year. The cash paid to Land America was partly to ensure continued good relationships and to avoid litigation, CEO Edward Bramson said in the call. Nautilus and Land America now have an agreement through 2010.

Nautilus also paid $2.4 million -- $0.06 per diluted share after-tax -- in connection with the March departure of former CEO Robert Falcone, who served as CEO since August 2007 upon the departure of Gregg Hammann.

Also, the company had finalized its deal to sell Pearl Izumi mid-April, after the quarter closed, so Bramson noted that it was not reflected in the quarter’s earnings.

“Our balance sheet is stronger now due to the Pearl Izumi sale,” he said in the call. That brought in enough to leave Nautilus with about $7 million net cash.

Also, the company's board of directors has authorized a share repurchase program for the purchase of up to $10 million of the company's common stock.

All the moves to help get Nautilus back on its feet don’t mean the year will be smooth sailing, Meadowcraft said.

“The uncertain consumer environment will continue to affect us,” he added.

The company said it plans to unveil more detailed plans on its future and actions sometime after the close of the second quarter or in about July.

Town Sports returns to Q1 profit

Town Sports International Holdings (Nasdaq: CLUB) said that it swung to a profit in the first quarter as debt charges came off the books.

It earned $4.8 million, or $0.18 per share, in the period ended March 31. Revenue increased 9 percent, to $126.3 million from $115.4 million. In the first quarter of 2007, Town Sports lost $3.8 million, or $0.15 per share, as it took a charge of $12.5 million to pay off debt.

Town Sports said revenue from membership dues and initiation fees increased, pushing total membership revenue up 9 percent, to $102.6 million from $93.7 million. Personal training revenue grew 16 percent, to $16.1 million from $13.9 million. Same-club revenue increased 4.5 percent.

Town Sports also backed its 2008 profit and revenue forecasts of $0.80 to $0.84 per share on $510 million to $520 million in revenue.

The company also said it will spend $90 million in 2008, down from a previous estimate of $95 million. The company plans to open 11 new clubs during the year and close four others.

Town Sports said it plans to buy back up to $25 million in shares by the end of 2009. It approved the buyback plan on April 29. The stock will be bought at market prices.

Iconix posts 81-percent increase in revenue

Iconix Brand Group (Nasdaq: ICON), parent of Danskin Fitness, said its first-quarter revenue was up 81 percent to $55.7 million compared to $30.8 million in the first quarter of 2007.

EBITDA for the first quarter increased 66 percent to $38.8 million, as compared to $23.3 million in the prior year quarter. Also, free cash flow for the quarter increased 49 percent to $32.3 million, as compared to $21.6 million in the prior year quarter.

Net income for the first quarter increased 43 percent to $18.2 million, as compared to $12.7 million the prior year quarter, and diluted earnings per share increased 43 percent to $0.30 versus $0.21 in the prior year quarter.

The company is maintaining its previously issued 2008 guidance of revenue in a range of $250 million to $260 million and diluted earnings per share of between $1.35 and $1.40. Its guidance is predicated on acquiring an additional $30 million of acquisition revenue that falls into the remainder of this year.

Health Fitness reports bump in Q1 revenue

Health Fitness Corp. (OTC Bulletin Board: HFIT), a provider of integrated employee health and productivity management solutions, said its revenue increased nearly 13 percent for the first quarter ended March 31.

For the first quarter, revenue increased 12.7 percent to $18.7 million, from $16.6 million for the same period in 2007. Gross profit during the quarter rose to $5.3 million, from $4.8 million during the prior-year period.

Net earnings were down to $324,712, or $0.02 per diluted share, from $511,667, or $0.03 per diluted share, in the prior-year period. Operating income totaled $563,453 for the quarter compared to $885,797 for the same period in 2007.

Revenue mix shifted to 45 percent health management and 55 percent fitness management from 36 percent health management and 64 percent fitness management a year earlier

Additionally, its board authorized a plan to repurchase up to $2.5 million of the company's outstanding common shares. Share repurchases will be funded by the company's available working capital.

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