Nautilus acquires its largest contract manufacturer in China

VANCOUVER, WA--Feb 1, 2007 -- In a significant step toward achieving its long-range financial operating margin targets, Nautilus, Inc. (NYSE:NLS) announced today it has signed a purchase option agreement to acquire the assets of its largest contract manufacturer, Xiamen, China-based Land America Health and Fitness Co., Ltd.
Author:
Publish date:

VANCOUVER, WA--Feb 1, 2007 -- In a significant step toward achieving its long-range financial operating margin targets, Nautilus, Inc. (NYSE:NLS) announced today it has signed a purchase option agreement to acquire the assets of its largest contract manufacturer, Xiamen, China-based Land America Health and Fitness Co., Ltd.

The purchase option through June 30, 2007 gives Nautilus time to complete necessary due diligence and enter into definitive agreements, while extending procurement cost reductions through 2007. The agreement also includes rebates for the period of January 1, 2006 to June, 30, 2007, which will continue through December 31, 2007 upon exercise of the purchase option. Consideration for the acquisition is approximately $72 million in cash and stock with an anticipated closing date of December 31, 2007. The acquisition is expected to improve company gross margins by 1.5-2.0 percentage points in 2008.

"The prospect of acquiring Land America is a significant step toward our goal of achieving 11-14 percent operating margins in the next three years, and positioning our company for long-term competitiveness in the global fitness industry," said Gregg Hammann, Chairman and CEO of Nautilus, Inc.

"Diversifying our manufacturing supply chain is the next logical step after diversifying our brands and channels to prepare for a rhythm of sustainable and profitable growth. In addition to margin improvement, vertical ownership presents an opportunity to further control intellectual property, quality, and flow of goods from Asia, where three-fourths of our equipment is manufactured today."

Land America has manufactured the popular Bowflex® home exercise gyms for more than eight years and began manufacturing Bowflex® TreadClimber® cardio trainers for the company last year. The purchase option of Land America involves four modern buildings with approximately 700,000 square feet of manufacturing floor space on a 15-acre site in an economic development zone near Xiamen, China, as well as a trading company, Treuriver Investments Ltd. Land America was honored by Nautilus last spring as its supplier of the year for routinely meeting Nautilus standards for quality and delivery.

Hammann said the company will continue to work with its other contract manufacturing partners in Asia and its two domestic manufacturing plants to drive growth and improve margins.

"A diversified manufacturing and supply base is important to maximizing our margin potential and to mitigate supply risks as we grow our business. The combination of strategic partnerships with key suppliers, along with domestic and international manufacturing, helps us accomplish that goal."

Nautilus will discuss the agreement during its fourth quarter 2006 earnings call scheduled February 7, 2007.

About Nautilus, Inc.

Headquartered in Vancouver, Wash., Nautilus, Inc. (NYSE:NLS) is a pure fitness company that provides tools and education necessary to help people achieve a fit and healthy lifestyle. With a brand portfolio that includes Nautilus®, Bowflex®, Schwinn® Fitness, StairMaster®, and Pearl iZUMi®, Nautilus manufactures and markets a complete line of innovative health and fitness products through direct, commercial, retail, specialty and international channels. The Company was formed in 1986 and had sales of $631 million in 2005. It has 1,600 employees and operations in Washington, Oregon, Colorado, Oklahoma, Texas, Illinois, Virginia, Canada, Switzerland, Germany, United Kingdom, Italy, China, and other locations around the world. More information is at www.nautilusinc.com

Related

Nautilus debuts XPLOAD strength line

SAN ANTONIO, TX--Jan 11, 2007 -- Nautilus, Inc. (NYSE:NLS), a pure fitness company, has introduced a new Nautilus® XPLOAD(TM) athletic performance strength training line, plate-loaded strength equipment designed to give athletes a training advantage. The line was unveiled at the ...read more