Fitness financials: Johnson Health Tech continues int'l growth, plus Life Time Fitness, Bally, Russell, Nike, adidas, Winmark/Play It Again

Johnson Health Tech continues int’l growth with 33-percent jump in net sales
Parent company of Matrix, Vision and Horizon fitness companies, Johnson Health Tech reported last week a continued upswing in net sales, with a 33-percent jump for the 2005 year ended Dec. 31, 2005.

Net sales for the year were USD $266.7 million, compared to 2004 sales of USD $200.68 million. Johnson stated that the growth makes the company, listed since January 2003 on the Taiwan Stock Exchange as JHT (1736) “the fastest growing fitness company in the world for the past three years.” Its average annualized growth rate is 35.4 percent, the company said in a statement.

Although the full-year figures aren’t available on the Taiwan exchange website for the Taichung-based parent company as of Feb. 17, the exchange did show net sales revenue figures for the first quarter of TWD $1.102 billion (USD $34 million), for the second quarter of TWD $2.079 billion (USD $64.2 million) and for the third quarter of TWD $3.962 billion (USD $122.3 million). For example, that shows a jump in the third quarter over the third quarter of 2004 (TWD $2.699 billion or USD $83.3 million) of 47 percent.

The company also reported that net income in 2005 was USD $37.5 million, compared to USD $22.8 million in 2004, an increase of 64.5 percent.

“The 33-percent sales growth and 64.5 percent net income growth for 2005 are the results of our commitment to innovation, new products, and a sustainable competitive advantage over other major fitness competitors,” Peter Lo, founder and chairman, said in a statement. “Johnson leads the industry in vertical integration, and has a major cost advantage with our Greater China manufacturing facilities.

“Our diversified portfolio of fitness brands offers a continuous stream of innovative new products, distributed across multiple channels, which has created balanced growth in both the commercial and home markets in 2005,” he added.

In other figures now available on the Taiwan Stock Exchange, Johnson showed gross profit for the first three quarters of the 2005 year of TWD $1.141 billion (USD $35.2 million). In addition, the figures also showed income from operations for the first three quarters of TWD $295.6 million (USD $9.1 million). Gross margin percentages in 2005 were by quarter, for the first three quarters available, 15.74, 16.98 and 15.51.

In addition, the website for the exchange showed operating revenue for January 2006 of TWD $125.67 million (USD $3.9 million), or down 74 percent from January 2005.

According to Lo in the statement, the company for 2006 is projecting net sales growth of
30 percent over 2005 and has said it is targeting earnings growth between 40 percent and 45 percent.

[Direct conversion of Taiwan dollars (TWD) into USD has been provided by the Johnson company. Other conversions, where noted as TWD with a USD conversion, are for information only and based on the conversion rate on Feb. 17. One Taiwan dollar equals approximately USD $0.03. For more information about this company, go to www.johnsonfitness.com.]  

Life Time Fitness Q4 profit up nearly 50 percent
Rising membership rolls boosted Life Time Fitness’ (NYSE: LTM) bottom line by 48 percent in the fourth quarter. It added seven facilities in 2005, ending the year with 46 centers in eight states.

Fourth quarter 2005 revenue grew 26.2 percent to $103.6 million from $82.1 million during the same period last year. Net income during the quarter grew 48.1 percent to $12.1 million, or $0.33 per diluted share on 36.7 million shares. This compares to net income of $8.1 million, or $0.23 per diluted share on 35.9 million shares, in 2004.

Revenue for the full year totaled $390.1 million, up 25.0 percent from $312.0 million in 2004. Net income grew 42.6percent to $41.2 million, or $1.13 per diluted share on 36.3 million shares. This compares to net income of $28.9 million, or $0.87 per diluted share on 33.1 million shares, for 2004.

Life Time said a 20 percent rise in membership enrollments helped drive the results, especially at its newer locations.

Life Time forecast a 2006 profit of $1.25 to $1.27 per share, including a stock options expenses, or $1.37 to $1.39 per share excluding items. The company said it also sees a continued rise in membership and new outlets driving 2006 revenue growth by 22 percent to 24 percent to between $475 million and $485 million.

Bally reports two new shareholders
In filings to the SEC, Bally Total Fitness (NYSE: BFT) reported two new shareholders who bought multi-million shares. Morgan Stanley bought over 3 million shares and now has a 7.9 percent shareholder stake. Everest Capital Ltd. out of Bermuda purchased more than 2.4 million shares of common stock — approximately 6.4 percent.

Higher sales boost Russell’s Q4 profit
Russell’s (NYSE: RML) fourth-quarter profit rose 15 percent, aided by higher sales and an income tax benefit. The company also projected a loss in the current quarter due to restructuring charges, but backed its full-year financial forecast.

For the quarter, Russell reported net income of $11.8 million, or $0.36 per share, versus a prior-year profit of $10.3 million, or $0.31 per share. Revenue rose to $354.6 million from $334 million a year ago.

Russell said that the quarter’s results benefited from a $2.4 million income tax benefit, which it attributed to a greater portion of profits generated outside the United States, and a one-time resolution of certain tax matters from previous years.

For the 2005 full year, net sales increased $136.4 million to $1.435 billion, a 10.5percent increase over the prior year’s sales of $1.298 billion. Excluding the sales from acquisitions owned for less than a year, sales were $1.271 billion.

Looking ahead, Russell projected a loss between $0.29 to $0.41 for the first quarter, and backed its 2006 forecast of $0.32 to $0.59 per share. Full-year sales are expected to range from $1.45 billion to $1.48 billion.

Separately, Margaret Porter will retire as a member of its board of directors at the company’s annual meeting in April 2006. Porter, who currently chairs the Corporate Responsibility Committee of the Board, has been a director since 1997 and was the first woman to serve on Russell’s board.

Nike suing adidas over patent
Nike (NYSE: NKE) is suing adidas over patent violations, saying adidas’ A3 cushioning system infringes on Nike’s patented Shox cushioning technology.

Nike filed the legal complaint in the U.S. District Court for the Eastern District of Texas, saying the Shox technology is protected by more than 19 patents. Nike is asking that adidas be ordered to pay damages for the infringement as well as be stopped from further violation of the patent.

adidas told the Wall Street Journal that it had received notice of the lawsuit. “We are currently examining the content of the complaint with our legal advisers and therefore we cannot comment any further,” the company said.

The A3 cushioning is being used in adidas’ Kevin Garnett signature shoe and Adidas1 footwear.

During the World Shoe Association Show in Las Vegas last week, Nike served lawsuits on two other companies it claims are infringing on Nike patents — Air Max Import & Export Inc. and Romeo & Juliette.

Charges knock Winmark Q4 net income down
Winmark Corp. (Nasdaq: WINA), parent of Play It Again Sports, reported a disappointing fourth quarter and full year results, hit by impairment and compensation charges. It provides financial services and develops franchises for Play It Again Sports.

Its fourth-quarter net loss was $68,600, or $0.01 per share diluted, compared to net income of $980,100, or $0.15 per share diluted, for the same period last year.

The company said fourth-quarter results were negatively impacted by two items: an impairment charge related to Winmark’s investment in eFrame of $937,610, or $0.08 per share and a stock option compensation charge of approximately $420,000 or $0.04 per share.

Net income for the full year was $2.1 million, or $0.33 per share diluted, compared to net income of $4.1 million, or $0.63 per share, in 2004. Revenues for the year were $26.6 million, down from $27.2 million in 2004.

“2005 was a year where we continued to improve our franchising business and build the leasing sales and operations infrastructure to support future growth,” John Morgan, the company’s chairman and CEO, said in a statement. “2006 will be the first full year that both our franchise and leasing businesses will be firmly in place.”

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