Fitness financials: Cybex glows over 4Q sales jumps, Precor kicks it home for Amer, plus Bally, Crocs, Under Armour, Sport Chalet, Everlast, Puma
Fitness financials: Cybex glows over 4Q sales jumps, announces return to home market; Precor kicks it home for Amer Sports; Bally's meeting results are confirmed, and opposing sides agree to peace; Crocs hits a high in Nasdaq trading debut; Under Armour Q4 profit is up 14 percent; Sport Chalet's Q3 same-store sales drop; Everlast refinances; and Puma quarterly earnings rise 15 percent.
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Cybex glows over 4Q sales jumps, announces return to home market
Long past the stage when CEO John Aglialoro on every quarterly call would talk about the “wolf at the door,” Cybex (AMEX: CYB) these days is more into glowing about becoming a new company with new products, new design and a new-found lease on life.
Looking forward to its official re-launch into the consumer market at the Health & Fitness Business Show in August, the company on its fourth-quarter and year-end call reported net sales up 20 percent to $36 million for the quarter, with net sales for the 2005 year up overall 11 percent to $114.6 million. Excluding a fourth-quarter litigation-related charge, the company’s 4Q pro forma net income was $2,943,000 or $0.19 per fully diluted share, compared to net income of $1,607,000, or $0.10 per fully diluted share for the year-ago quarter.
Gross profit margin was 37.3 percent, up from 35.1 percent, with a “high-confidence target” of 38 percent for 2006, according to Aglialoro speaking to analysts, stockholders and the media on the Feb. 10 call. Ultimately, he added, the goal is 40 percent in 2007, which he sees as possible with the addition of new strength product lines as well as additional retail product later this year.
Of sales for the quarter, $19.9 million stemmed from cardiovascular equipment, up 37 percent; $12.6 million from strength sales, up 2 percent; and $3.5 million from other areas, up 19 percent. Arc Trainer sales were up 36 percent over the year-ago quarter and up 44 percent for the 2005 year. Internationally, Cybex saw sales increase for the quarter by 23 percent to $10 million, and by 11 percent for the year to $32 million.
Much of the talk centered on Cybex’s re-entry into the home arena at the show in August in Denver, where it will launch a value strength-line called the VR1.
“The core competency of Cybex is strength,” Aglialoro said.
In addition, there will be home bikes and a home gym to come, he said. The home Arc Trainer will also be available.
“That’s enough to say, ‘OK, we’re coming back,” Aglialoro said. “We’re very optimistic about the consumer side of the market. We’ll be in that big time in 2007.”
He noted that Cybex’s competitors garner on average 40 percent to 50 percent of their sales in the consumer arena, which is why the entry into that area is so important to the company’s continued turnaround.
“We’re not interested in all of the consumer side. We want part of the market,” he added. “We see the company as having a nice revenue upside â€¦ from having a consumer product.”
In other Cybex news, the company announced that B.Riley was initiating coverage with an analysis that said the company’s turnaround was underway, simultaneously giving Cybex a “buy” rating.
In a post-call report, Mark Rupe of CanAccord Adams (formerly Adams Harkness) wrote: “Cybex’s ArcTrainer remains one of the hottest products in the industry, which has the potential to open up new relationships and new markets. Cybex, like many other companies in the healthy living, fitness or wellness categories, will increasingly benefit from several strong underlying factors. Aging demographics (U.S. and international), rising obesity, skyrocketing health care costs, and declining leisure time are driving factors for growth in the fitness/wellness/healthy living industries.”
Precor kicks it home for Amer Sports
Amer Sports in Finland saw the fastest growth for the year in the Fitness Equipment division, a.k.a. Precor and its family of companies, according to the annual report released Feb. 10 by the Finland-based parent. Fitness saw a 20-percent growth in net sales, double or more than the other divisions at Amer (AMEAS.HE).
Specifically, in the fitness division, net sales were Euro 252.1 million (USD $300.2 million) in 2005, up from Euro 210.1 million (USD $250.3 million) for 2004. EBIT in the division was 31.1, up from 23.9 for 2004. According to Amer’s report, net sales growth was fueled primarily by direct sales to major commercial customers, and the company’s increased ability to deliver what the company called “a total product” that addressed all the needs of commercial facilities. That ability stemmed partly from acquisitions in the strength (Icarian brand) and entertainment (ClubCom) areas. Of net sales, 79 percent came from the Americas, where sales increased by 18 percent. Sales in Asia Pacific grew by 25 percent over 2004, and sales rose 64 percent in Japan.
In the fourth quarter, the fitness equipment division had net sales of Euro 80.7 million (USD $96.1 million), or up 38 percent.
Overall for Amer and its seven divisions, net sales grew 32 percent to Euro 1,363.7 million (USD $1.624.3 million). The acquisition of Salomon from adidas earlier this year increased net sales by 25 percent. Organic net sales growth exclusive of Salomon was 7 percent.
“Amer Sports is now the market leader by a good margin in the world of sporting goods equipment,” said CEO Roger Talermo. “We have now reached this important target that we set for ourselves a few years ago. New, more ambitious targets must now be put forward.”
Looking ahead, for 2006, Amer Sports’ net sales were expected to be Euro 1.8 billion (USD $2.144 billion), with Salomon being included in the figures during the entire year (pro forma 2005: Euro 1,732 million (USD $2.063 million). Earnings per share in 2006 are expected to come in at Euro 0.90-1.05 (USD $1.07-$1.25).
“Demand for sports equipment was good in 2005,” the company stated in its report. “The company estimates that the trend in demand for sports equipment will be steady in 2006.”
(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Feb. 10.)
Bally’s meeting results confirmed, opposing sides agree to peace
Bally Total Fitness Holding (NYSE: BFT) and two of its biggest shareholders — Liberation Investment Group and Pardus Capital Management — have agreed to dismiss all pending lawsuits against each other, ending a yearlong battle in which the shareholders sought to overhaul the company’s management.
Bally also announced that IVS Associates, the independent inspectors of election, has certified results of Bally’s annual shareholders meeting on Jan. 26, confirming Charles Burdick, Barry Elson and Don Kornstein to the nine-member board. All three were proposed by Liberation and Pardus, and they will join the compensation, audit, and nominating and corporate governance committees.
Kornstein and Elson will also join the board’s strategic-alternatives committee, which was set up in January to review strategic options, including a possible sale of the company. Kornstein will also co-chair the committee with John Rogers Jr., lead independent director of Bally’s board.
Bally said that Eric Langshur has been reappointed to the board after Adam Metz resigned to permit Langshur to re-join. The move was unanimously approved by the board, including the new directors. Langshur, who had been a director since December 2004, will continue as head of the audit committee — a key role in a company that was forced to restate five years of financial results.
Based on the certified results, proposals submitted by Liberation failed to receive enough votes for passage at the annual meeting on Jan. 26, Bally said (Click here to see a Jan. 27 SNEWSÂ® story, “Bally shareholder meeting: Dissident hedge funds make strides, but Toback keeps job.” Liberation had sought to remove company officers, including CEO Paul Toback, and amend corporate bylaws to give shareholders more authority over director tenure.
Separately, Bally submitted a filing with the SEC saying that Dimensional Fund Advisors now owns 8.21 percent of Bally stock.
Crocs hits a high in Nasdaq trading debut
Anointed the largest initial public offering ever from a footwear manufacturer, Crocs (Nasdaq: CROX) shares hit a $32.50 high on the Nasdaq Stock Market in trading on Feb. 8 — the day of its debut. It represented a 45 percent jump from its initial IPO price of $21 a share.
Crocs, which designs colorful clogs made out of a soft resin material, sold 9.9 million shares of its stock at a price just above the targeted, per-share range of $19 to $20. Underwriters Piper Jaffray and Thomas Weisel Partners Group had already raised that range from its prior level of $13 to $15 a share in response to investor demand. They also increased the number of shares sold by 10 percent.
Crocs said it is selling half the shares on offer. In addition to paying down debt, Crocs expects to use approximately $11.2 million of the proceeds from its IPO for capital expenditures that will increase its manufacturing capacity and improve its infrastructure.
Half the shares in the IPO were sold by the company’s current owners, an unusually lengthy list of more than 100 sellers, including two of its co-founders and CEO Ronald Snyder. The proceeds from those shares will not go to Crocs.
Crocs began marketing its first design three years ago, and sold 1,500 pairs of shoes in its first two months of existence. In the first three quarters of 2005, it sold 4.4 million pairs. Its revenue in the first nine months of 2005 rose nine fold to $75 million, compared with the same period of 2004. It became profitable in 2005, earning $12.8 million in its first three quarters, and sports a gross profit margin of 57 percent.
Thomson Financial said in addition to being the largest IPO from a footwear company, it’s also only the third time that a shoemaker’s shares have priced above the expected range. Converse did it in 1983, and K-Swiss in 1990.
Crocs ended the day’s trading on Feb. 8 at $28.55.
Under Armour Q4 profit up 14 percent
Fourth-quarter profit for Under Armour (Nasdaq: UARM) rose 14 percent, driven by strong overall clothing and license sales, it said.
Net income was $7.0 million, or $0.08 per share, from $6.2 million, or $0.15 per share, in the same period of 2004. The latest quarter reflects preferred dividend payments of $3.5 million, the company said.
The quarter’s earnings per share were diluted after Under Armour issued an additional 9.5 million shares in connection with its November IPO, which boosted the number of weighted average diluted shares outstanding.
Net revenues, which consist of net sales and license revenue, increased 25 percent in the fourth quarter to $87.3 million compared to net revenues of $69.6 million in the same period of 2004. Fourth-quarter net sales, which consist of Under Armour products sold globally other than through licensees, increased 24 percent to $84.4 million from $68.3 million last year.
Net revenues for the entire 2005 year increased 37 percent to $281.1 million from $205.2 million in 2004. Net sales for the year increased 35 percent to $271.3 million from $200.9 million in the prior year. Net income increased 21 percent to $19.7 million from $16.3 million in the prior year. Diluted earnings per share for 2005 was $0.36 compared to diluted earnings per share in 2004 of $0.39.
Under Armour projected 2006 net income and revenue would each increase between 20 percent to 25 percent. That would result in revenue of between $337.3 million and $351.4 million.
Sport Chalet’s Q3 same-store sales down
Third-quarter sales for Sport Chalet (Nasdaq: SPCHA and SPCHB) increased 3.7 percent from $96.1 million from $99.7 million last year, with sales from six new stores contributing $5.4 million, or 5.5 percent of the increase.
Same-store sales decreased 1.8 percent for the quarter following last year’s record winter weather conditions, which increased customer traffic. Excluding winter-related merchandise, same-store sales increased 3.0 percent for the quarter following a 3.4 percent increase for the same quarter last year.
Gross profit decreased as a percent of sales from 32.5 percent to 31.9 percent for the same period this year because of higher rent expenses for new stores opened during the quarter, the company said. Selling, general and administrative expenses increased as a percent of sales from 25.9 percent in the third quarter of fiscal 2005 to 26.5 percent in the third quarter of fiscal 2006. The increase is related to greater advertising expenses for the holiday season and new store openings, it added.
Net income for the quarter was down to $3.0 million, or $0.22 per diluted share, from last year’s $3.7 million, or $0.26 per diluted share.
During the third quarter, Sport Chalet expanded into its third state with the opening of three stores in Arizona and opened its 40th store in South Orange County, Calif. It anticipates opening four to eight stores in fiscal 2007.
Lastly, Sport Chalet also announced the following management promotions: Steve Belardi, vice president – logistics; Jason Gautereaux, vice president – inventory; Ted Jackson, vice president – IT and chief information officer; and Linda Obermeyer, vice president – merchandising.
Everlast Worldwide (Nasdaq: EVST) reported the entire redemption of its outstanding $20 million Series A Preferred Stock by entering into a $25 million senior secured four-year term facility with Wells Fargo Century. Under the terms of the facility, Everlast redeemed its Series A Preferred Stock and prepaid notes payable for an aggregate amount of $22.7 million. The remaining $2.3 million was used to pay for financing and professional costs associated with the term facility. Everlast said it has also eliminated the profit-sharing mechanism, the retirement of its two board of director seats, and the prepayment of its outstanding $6 million in notes payable to one of the former Series A preferred stockholders.
Puma quarterly earnings up 15 percent
Puma reported a better-than-expected 15 percent increase in fourth-quarter earnings and said it anticipates strong sales during this year’s soccer World Cup. Puma also said it expected overall sales to top Euro 2 billion (USD $2.4 billion) this year.
Puma earned Euro 44.1 million (USD $52.7 million), or Euro 2.76 euros (USD $3.30) a share, in the quarter, up from last year’s Euro 38.4 million, or Euro 2.38 a share.
Revenue was up 28 percent to Euro 349.2 million (USD $418 million) from Euro 273.4 million a year earlier, boosted by worldwide on demand for the company’s footwear and clothing, Puma said. It added that quarterly sales were bolstered by increased revenue from the United States, where sales nearly doubled on demand for the company’s sneakers, followed by gains in Asia of 9.5 percent and Europe and the Middle East, where sales rose 6 percent.
For FY 2005, Puma earned Euro 285.8 million (USD $342.1 million), or Euro 17.68 (USD $21.16) a share, up 10 percent from 2004. Full-year revenue rose 16 percent to Euro 1.78 billion (USD $2.12 billion).
The company forecast sales for 2006 of Euro 2.3 billion (USD $2.75 billion), while its operating profit would likely increase to Euro 350 million (USD $419 million).
(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Feb. 10.)
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