Nautilus is in due diligence for the acquisition of its largest contract manufacturer in China, Land America Health & Fitness, for $72 million in cash and shares. Twelve factories in China currently make 75 percent of Nautilus’ equipment, supplementing the production of Nautilus’ own two factories in the USA. The acquisition, which is scheduled to be closed by Dec. 31, would give Nautilus improved margins and the addition of 700,000 square feet of manufacturing space for further expansion.
The takeover will help Nautilus to implement a plan to hit an operating margin of 11-14 percent by 2010. The American company boasts that improved operations and product innovation over the last three years have put it in a position to be the world’s top fitness company. Nautilus sees sales outside of the USA growing by 15-30 percent in the near future.
In the 4th quarter ended Dec. 31 Nautilus’ net income jumped to $12,853,000, as compared to $1,970,000 in the year-ago period. Sales rose by 10 percent to $199.3 million, while the gross margin improved by 460 basis points to 44.0 percent. For the 2006 full year, net income rose by 27 percent to $29.1 million, while net sales increased by 8 percent to $681.3 million. The company introduced 16 new products in 2006. The launch time for its new fitness products has been reduced to 10 months from 16.
For the current year Nautilus is anticipating 10 percent growth in net sales and a rise in earnings of 20-30 percent. The forecast for the 1st quarter of 2007 calls for sales of $185-195 million and earnings in the range of $5.7-6.6 million.
