Fitness financials: Cybex posts 10.1 percent sales increase, plus Gaiam, Crocs, Everlast, Sport Chalet, Town Sports

Cybex posts a 10.1 percent increase in sales
Cybex International (AMEX: CYB) posted a 10.1 percent increase in net sales for the second quarter of 2006—$29.9 million compared to $27.2 million in 2005 and left analysts relatively bullish based on its announcement that it would have the product to enter the consumer equipment arena later this year.

The company showed prototypes of the home version of its Arc Trainer and its light commercial model at the Health & Fitness Business Show, Aug. 3-5.

On a GAAP basis, the company reported net income for the second quarter of 2006 of $16.1 million, or $0.96 per diluted share. Excluding a second-quarter 2006 reduction of the valuation reserve for deferred taxes, Cybex’s second-quarter 2006 pro forma net income would have been $1.7 million, or $0.10 per diluted share, compared to net income for the second quarter of 2005 of $1.03 million, or $0.07 per diluted share.

Actual GAAP results for the second quarter ended July 1, 2006, include a $14.4 million reduction in the company’s deferred tax valuation reserve, resulting in a net tax benefit of the same amount. 

For the three months ended the company showed a gross profit of $10.86 million with a margin of 36.3 percent, compared to a year-ago of $9.65 million at 35.5 percent. Income before taxes for the 2006 quarter was $1.75 million, up from the second quarter of 2005 figure of $1.07 million.

“We are working hard to accelerate our re-entry into the high-end consumer fitness equipment market,” John Aglialoro, chairman and CEO, said in a statement. “Cybex is expanding its specialty fitness dealer relationships and expects to begin shipping two premium consumer products by the end of 2006. This will mean incurring expenses planned for 2007 beginning in the third quarter of 2006. However, the company believes these investments will begin paying off in the fourth quarter of 2006 and will provide a good foundation for 2007 and beyond.”

In addition to the home Arc Trainer, the company said additional home products bikes, treadmills and home gyms) will be introduced in the next 12-18 months. 

Gaiam sees 98.8 percent jump in Q2 revenue
For the second quarter, Gaiam (Nasdaq: GAIA) posted a whopping 98.8 percent leap in revenue, aided by a combination of internal growth in both the business and direct to consumer segments, as well as contributions from sales of media titles acquired from GoodTimes Entertainment in September 2005.

Gaiam generated revenue of $43.2 million, an increase of 98.8 percent over the $21.7 million. Revenues for Gaiam’s direct to consumer segment, including growth from acquisitions, increased 125.8 percent to $27.0 million in the second quarter. Gaiam’s business segment, including growth from acquisitions, increased 65.7 percent to $16.2 million in the second quarter.

Despite the good news, the company did report a net loss for the second quarter of $1.2 million, or $0.05 per share, as compared to a net loss of approximately $766,000, or $0.05 per share, for the second quarter of 2005. Gross margin increased 1370 basis points to 62.3 percent in the second quarter of 2006, compared to 48.6 percent in the same period last year. The company said the increase was primarily due to strong media sales and the leverage on purchasing discounts associated with higher DVD sales volume. Gaiam also continued to benefit from the elimination of fees previously paid for third-party distribution following the GoodTimes Entertainment transaction.

Operating expenses increased to 68.5 percent of revenue in the second quarter of 2006 from 54.5 percent in the comparable period last year.

Crocs’ Q2 sales triple
Crocs’ (Nasdaq: CROX) second-quarter profit surged, as sales more than tripled on strong demand domestically and abroad – widely beating analyst expectations.

Crocs also adjusted its third-quarter guidance above Wall Street projections, sending the company’s shares jumping in after-market trading.

Second-quarter income after preferred dividends grew to $15.7 million, or $0.39 per share, from $3.3 million, or $0.10 per share. Revenue catapulted to $85.6 million from $25.8 million. Analyst had expected a profit of $0.22 per share on sales of $56.7 million. 

Looking ahead, Crocs expects third-quarter earnings per share to be between $0.38 and $0.40 on revenue of between $87 million and $90 million. Analysts are projecting profit of $0.23 per share on sales of $56.7 million.
Crocs shares jumped $1.95, or 6.7 percent, to $30.95 in after-hours trading on the INET electronic exchange. They had closed up $1.21, or 4.4 percent, at $29 on the Nasdaq. The stock has traded between $20.32 and $37 over the past 52 weeks.

Everlast reports lower Q2 revenue
Everlast Worldwide’s (Nasdaq: EVST) second-quarter revenue dipped from 2005, impacted by the company’s decision not to renew its previous footwear license and by a litigation settlement.

2006 net revenues were $9.8 million, as compared to $10.3 million in the same period in 2005. Net licensing revenues for the second quarter of 2006 were $3.0 million, as compared to $2.9 million in the same period a year ago. Revenues from sporting goods for the second quarter were $6.8 million as compared to $7.3 million in 2005. 

Adjusted earnings per diluted share, excluding the $0.03 effects of stock based compensation, for the second quarter of fiscal 2006 was $0.13 per diluted share, as compared to a net income from continuing operations of $0.08 per diluted share, in the 2005 comparable period. Everlast said this is a more appropriate comparison as stock compensation costs were not included in the year-ago calculation.

Gross margin for the quarter improved 330 basis points to 45.7 percent, compared with 42.4 percent in the second quarter a year ago. The higher gross profit margin was achieved from an increased mix of licensing revenues as well as improved margin on sporting goods equipment due to some operational efficiencies as well as production cost reductions.

The company achieved a 53 percent increase in operating income from continuing operations to approximately $1.6 million versus the year-ago level of approximately $1.0 million. The increase in operating income resulted from improved gross margins and a reduction in operating expenses, which improved by 260 basis points to 29.8 percent of sales compared with 32.4 percent of sales in the prior year’s quarter. 

Sport Chalet net income up 36.2 percent
Five new stores helped drive Sport Chalet’s (Nasdaq: SPCHA and SPCHB) sales increase by 17 percent in the first quarter.

Sales increased $12.3 million to $84.4 million for the quarter ended July 2, 2006, from $72.1 million for quarter ended June 30, 2005. Five new stores contributed $6.9 million in sales on a same-day basis. Same-store sales on a same day basis increased 3.3 percent. Sales for the quarter also benefited by $2.6 million from two additional days as a result of the company’s calendar change.

Net income increased 36.2 percent to $530,000, or $0.04 per diluted share, compared to $389,000, or $0.03 per diluted share, for the first quarter last year.

Gross profit as a percent of sales decreased 20 basis points to 29.3 percent from 29.5 percent in the first quarter of last year. The slight decrease was primarily due to additional markdowns taken to stimulate sales of slow moving merchandise in select departments. Selling, general and administrative expenses as a percent of sales improved by 40 basis points to 28.2 percent from 28.6 percent last year. 

Town Sports posts second-quarter loss
Second-quarter revenue for Town Sports International (Nasdaq: CLUB) grew 11.7 percent to $109.5 million from $98.0 million for the same period last year, driven by growth in membership revenue and ancillary club revenue. The company reported a net loss of $2.7 million compared to net income of $500,000 in the same period of prior year.
Same club revenue increased 8.2 percent during the second quarter compared to the prior year. The company said the increase in same club revenue was from a 5.2 percent increase in membership, a 2.3 percent increase in price, and a 1.4 percent increase in ancillary revenue offset by a 0.7 percent decrease in initiation fee revenue recognized.

Membership revenue for the second quarter grew 10.6 percent to $89.1 million from $80.5 million in 2005. Ancillary revenue for the second quarter grew 12.3 percent to $18.6 million from $16.5 million in 2005. Total operating expenses increased by 9.7 percent to $95.9 million in 2006 compared to $87.4 million in 2005.

EBITDA for the 2006 second quarter increased 16.2 percent to $24.5 million from $21.0 million in 2005. As a percentage of total revenue, EBITDA margin was 22.3 percent in 2006, compared to 21.5 percent in 2005. Adjusted EBITDA for the second quarter 2006 increased 19.6 percent to $26.1 million from $21.8 million in 2005. As a percentage of total revenue, adjusted EBITDA margin was 23.9 percent in 2006, compared to 22.3 percent in the same 2005 period.

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