Nautilus shareholder seeks to oust directors
A major Nautilus (NYSE: NLS) shareholder has sent a demand letter to the fitness manufacturer urging the removal of four board members and the election of replacements.
In the Sept. 20 letter filed with the SEC, Sherborne Investors L.P. demanded a special meeting of shareholders. Sherborne, which specializes in taking control of struggling companies, owns about 7.4 million shares, or a 23.5 percent stake in Nautilus, according to the filing.
The demand letter also asked for the removal of Peter A. Allen, Evelyn Follit, Donald W. Keeble and Diane L. Neal from the seven-member board and for the election of a slate of nominees. The nominees include Sherborne principals Edward Bramson and Gerald L. Eastman, as well as Michael A. Stein and Richard A. Horn. It also expressed concern with the company’s high debt, a bid to buy its largest contract manufacturer in China, and its search for a permanent CEO.
Prior to the demand letter, Sherborne’s Bramson had met Sept. 13 with lead Nautilus board member Ronald Badie and asked for two seats on the board, according to the filing. Sources speculate the shareholder felt Nautilus acted too slowly on the request, instigating the letter being sent.
If elected, Sherborne said the nominees would consider separating the positions of chairman and chief executive, and appointing Bramson as chairman.
Sherborne said it intends to file a proxy statement with the SEC enabling it to solicit proxies from other shareholders to support the proposals.
Nautilus confirmed receipt of Sherborne’s letter saying that under Washington corporate law, it has 30 days from Sept. 21 to give notice of a special meeting of shareholders, and to hold that meeting within 60 days of the notice. It added that the board is giving consideration to the updated request.
In other company news: An agreement between Nautilus and Pacific Cycle, a division of Dorel Industries, will allow the Pacific Cycle sales force to market Schwinn Fitness and Bowflex exercise products to the company’s 2,000 independent bike dealer accounts, in addition to the outdoor cycling equipment the company currently markets.
The transition will be complete by Oct. 1 and will be presented to dealers at the upcoming Interbike show in Las Vegas. Through the partnership, independent bike dealers can offer certain models of Schwinn Fitness upright and recumbent exercise bikes, and ellipticals, plus certain Bowflex home strength training equipment.
Everlast shareholders OK buyout
Everlast Worldwide is a privately held company following shareholder approval of the proposed acquisition by Brands Holdings Ltd., a unit of Sports Direct International PLC, for $168 million, or $30 per share, on Sept. 19.
More than 2.6 million shares, or over 65 percent of the 4.0 million total outstanding shares of Everlast common stock, were voted in favor of the adoption of the merger agreement. Approval required a vote of at least a majority of Everlast’s outstanding shares of common stock. Of the shares voted, over 99 percent voted in favor of the merger.
The decision by shareholders to accept the buyout comes after a round of competitive offers from Brands Holdings and New York-based investor group Hidary Group.
On June 1, Everlast agreed to Hidary’s $26.50-per-share takeover proposal. However, Everlast terminated its deal with Hidary on June 28 to accept the rival bid from Brands Holdings, although Hidary offered to boost its offer to $30.55 per share and make other changes. Hidary filed a lawsuit against Everlast to force the company to honor its previous buyout agreement.
On closing of the buyout transaction, each issued and outstanding share of Everlast (Nasdaq: EVST) common stock was cancelled and converted automatically into the right to receive $33 in cash, without interest.
Nike’s Q1 profit rises 51 percent
Nike (NYSE: NKE) reported a 51-percent increase in fiscal first-quarter net income, with strong sales in Europe and Asia making up for slower growth in the United States.
The company’s net income rose to $569.7 million, or $1.12 cents a share, in its fiscal first quarter, which ended Aug. 31, from $377.2 million, or $0.74 a share, a year ago.
Revenue rose 11 percent to $4.7 billion from $4.2 billion. Gross margins were 44.8 percent, compared to 44.1 percent a year ago.
“We are off to a strong start as our first-quarter results reflect the power of our brands as well as the strength and diversification of the Nike,” Mark Parker, the company’s president and CEO, said in a statement. “We have an aggressive growth plan to achieve $23 billion in revenue by fiscal year 2011, and we are well on our way.”
Revenue gains were led by a 16 percent increase in the Europe, Middle East and Africa division to $1.47 billion, with a boost from the weak dollar. U.S. revenue rose at a slower pace of 2 percent to $1.64 billion, while Asian revenue rose 22 percent to $630.8 million. Americas revenue increased 15 percent to $279.5 million.
Nike’s worldwide futures orders, an indicator of growth based on estimates of product orders, rose 11.5 percent to $5.9 billion for the period from September through January.
U.S. futures grew 3 percent. In the Americas, futures orders rose 20 percent, while in the Asia-Pacific region, futures orders increased 17 percent. Futures orders in Europe, the Mideast and Africa grew 17 percent.
Total revenue from subsidiaries, including Converse, Cole Haan, Nike Golf, Nike Bauer Hockey and Exeter Brands Group, rose 12 percent to $628.7 million from $560.4 million last year.
Analyst trims Q3 earnings forecast for Big 5, shares fall
Shares of Big 5 Sporting Goods (Nasdaq: BGFV) declined on Sept. 20, after an analyst trimmed his third-quarter earnings estimate for the company. In August, Big 5 warned third-quarter sales were being hurt by cooler weather on the West Coast, which slowed sales of products that sell better in warmer weather.
SunTrust Robinson Humphrey David Magee said in a client note that he expects weakness in the third quarter, noting that sales were soft in the second quarter. “We believe that macro pressures have likely persisted into the third quarter, which have kept a lid on sales, even after weather normalized in August,” Magee wrote.
Magee also noted that Sports Chalet, another retailer with stores concentrated in California, forecast disappointing results for its quarter ending in September.
Magee noted that about 55 percent of Big 5’s stores are located in California, as well, and lowered his third-quarter earnings estimate to $0.30, which is $0.02 below analyst expectations.
The company previously forecast earnings between $0.27 and $0.35 per share for the quarter.
Big 5 shares fell as much as $2.10 to $20.17 in afternoon trading on Sept 20, and closed at $20.31.
Genesco sues to have Finish Line and UBS complete $1.5 billion buyout
Although Genesco shareholders recently approved a $1.5 billion buyout by Finish Line (Nasdaq: FINL), Genesco is now suing Finish Line to complete the deal. The lawsuit seeks an order to enforce Finish Line’s agreement with investment bank UBS AG to finance most of the deal.
Previously committed to financing the buyout, UBS announced earlier it had stopped processing the closing documents for the deal, pending further analysis, because of concerns about Genesco’s financial performance since the deal was struck.
Genesco’s chairman and CEO Hal N. Pennington has accused UBS of trying to back out of the deal because of upheaval in credit markets and not because of Genesco’s financial performance.
“No more delays by The Finish Line and UBS; no more reservation of rights; no more bankers’ putting their pencils down,” Pennington said in a release. “We want a court of competent jurisdiction to enforce our rights under the Merger Agreement and for The Finish Line and UBS to live up to their obligations.”
Genesco said late last month that it swung to a loss of $4.2 million, or $0.19 per share, in the quarter ended Aug. 4. That compared to a profit of $5.9 million, or $0.24 per share, in the year-ago quarter. Finish Line made the $54.50-per-share offer for the athletic footwear and apparel retailer in June.
George Foreman Enterprises regains listing on OTC Bulletin Board
George Foreman Enterprises (OTC Bulletin Board: GFME) common stock is again being traded on the OTC Bulletin Board after being de-listed for delayed filings. The company is focused on new business development related to the use of boxing champion George Foreman’s intellectual property, including forays into the fitness industry.
The company’s delay in filing its September 2006 quarterly report was a result of an accounting issue relating to an August 2005 transaction involving George Foreman and George Foreman Productions. Its independent accountants, Parente Randolph, said the proper accounting treatment for the transaction would result in an increase in the company’s assets and shareholder equity, and a reduction in its liabilities and expenses. After analyzing the situation, the company adopted Parente’s accounting treatment for this transaction.
George Foreman Enterprises has since filed its quarterly reports for the periods ending Sept. 30, 2006, and March 30, 2007, as well as an annual report for the year ending Dec. 31, 2006.
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