Showing a jump of $140.1 million in net sales over 2002, Icon Health & Fitness' 2003 revenues topped $1 billion at the close of its fiscal year May 31, reaching $1,011.5. Gross profits for the year also moved up to $298.1 million (29.5 percent of net sales) from $236.4 in 2002 (27.1 percent of net sales). In addition, net income hit $26.7 million, up $7.3 million from a year earlier.
Looking at how the sales were divided among segments, cardiovascular and other equipment sales increased $80.5 million to $825.6 million, while strength training equipment sales were up $59.6 million, reaching $185.9 million. International sales climbed 13.5 percent to $87.5 million.
EBITDA rose 32 percent to $89.8 million, or 8.9 percent of net sales, compared to $68.3 million, or 7.8 percent of sales. Earnings and EBITDA for the fiscal year were negatively affected by an additional bad debt provision of $9.1 million related to the pre-bankruptcy receivables of Kmart, reported the Logan, Utah-based, company's 10-K SEC filing dated Aug. 29.
Total assets for the fiscal years 2003 and 2002 ended May 31 were $465.1 million and $423.2 million, respectively. This increase resulted primarily from an increase in accounts receivable and inventory. The increase in accounts receivable was due partially to increased direct-response receivables, and the increase in inventories was due primarily to building inventory levels to meet anticipated sales levels as a result of increased sales.
The company has also lowered its reliance on Sears as a customer. In fiscal year 2003, Sears accounted for approximately 39 percent of net sales, which was a 5 percent decrease from a year earlier. Other important customers include Sam's Club, Wal-Mart, The Sports Authority, Dick's Sporting Goods, Costco, Target, Gold's Gym and 24 Hour Fitness.
"Although Sears still accounts for a substantial portion of our sales," the SEC filing reported, "the percentage of net sales to Sears has decreased over the past decade from a high of approximately 68 percent in 1989. Nevertheless, the dollar amount of our net sales to Sears has increased during this time period."
Regarding its debt refinancing from April 2002, the company stated it entered at that time into its existing credit facility totaling $235 million of revolving and term loans with a syndicate of banks and financial services companies, with the loans due in 2007. As of May 31, 2003, the company's consolidated indebtedness was approximately $244.2 million, of which approximately $91.3 million was senior indebtedness.
"Based on our current level of operations, management believes that cash flow from operations and available cash, together with available borrowings under our existing credit facility, will be adequate to meet future liquidity needs for at least the next few years," the statement reported. "We may, however, need to refinance all or a portion of the principal amount of the notes on or prior to maturity."
In other nuggets from the annual filing:
>> For the fourth quarter, Icon reported a net loss of $3.9 million compared to a loss of $9.7 million in the fourth quarter a year ago. Revenues for the period went up 16 percent to $204.6 million from $176.6 million.
>> As of May 31, 2003, it had approximately 462 employees in the research and development group.
>> Icon holds 178 U.S. patents, as well as 79 U.S. and 494 foreign trademarks. It also has 34 U.S. and 58 foreign patents pending, and 21 U.S. and 78 foreign trademarks pending.
>> It named its top competitors domestically as Cybex International, Fitness Quest, Life Fitness, Nautilus Group and Precor. Also, it named foreign importers Horizon, Impex and Stamina as competitors, and competitors in Europe were principally BH (Spain), CARE (France), Helmut Kettler, Tunturi and York (Great Britain).
>> In 2003, Icon announced plans to set up a manufacturing facility in Xiamen, China. This facility is expected to be operational in 2004. The total project cost is anticipated to be approximately $12 million, with $7 million to be funded in the form of capital contributions, and approximately $5 million in the form of debt.
If you want to see all the details and charts, go to the filing on the Securities and Exchange Commission website by clicking here.