From: SNEWS Icon's cardio sales up, strength sales down for quarter Icon Health & Fitness reported another quarter dominated by red ink, with net sales for the three months ended Feb. 26 down $5.6 million, or 1.8 percent, to $301.3 million from last year's $306.9 million. Increased sales of cardiovascular equipment over the year-ago quarter weren't enough to offset the trend, the SEC filing reported: The quarter's sales of its cardiovascular and other equipment increased $26.7 million, or 11.2 percent, to $264.6 million, while sales of its strength training equipment decreased $32.2 million, or 46.7 percent, to $36.7 million.
Gross profit for the quarter was $72.0 million, or 23.9 percent of net sales, compared to $98.2 million, or 32.0 percent of net sales, last year. Logan, Utah-based, Icon said the decrease in gross profit margin was primarily due to increased transportation costs and commodities (steel, plastics and wood), unfavorable manufacturing variances and the inability to pass on the full impact of these increases to the consumer. In addition, its direct-to-consumer business, with normally higher margins than retail, was a smaller portion of its overall sales mix this quarter compared to the quarter last year, likely due partly to the ongoing legal battles with Nautilus now entering their third year. Trials for two are now pending for late June 2005 in the Washington State case filed in December 2002, August 2005 for the Utah case filed in 2002, and January 2006 for the second Washington case over the Crossbar name.
EBITDA was $17.8 million for the quarter compared to last year's EBITDA of $38.3 million. Selling expenses decreased $5.3 million, or 13.8 percent, to $33.0 million, reflecting reduced advertising and trade show expenses. Expressed as a percentage of net sales, selling expenses were 11.0 percent compared to 12.5 percent last year. General and administrative expenses increased $0.4 million, or 1.6 percent, to $24.7 million. The income from operations was $11.2 million in the last three months compared to income from operations of $32.2 last year.
During the nine months ended Feb. 26, 2005, net sales decreased $72.8 million, or 9.3 percent, to $707.4 million from $780.2 million in the corresponding nine-month period last year. Icon said due to the historically high sales in the nine-month period ended Feb. 28, 2004, and weak demand, sales were lower this year. Sales of its cardiovascular and other equipment in the last nine months decreased $15.0 million, or 2.4 percent, to $598.7 million. Sales of its strength training equipment in the last nine months decreased $57.8 million, or 34.7 percent, to $108.7 million.
Icon said its three largest customers together accounted for approximately 53.1 percent, 53.8 percent, 56.4 percent and 53.2 percent of revenues in fiscal years 2002, 2003, 2004, and the first nine months of fiscal 2005, respectively. Its largest customer, Sears, Roebuck and Co., accounted for 44.5 percent, 39.3 percent, 38.7 percent and 41.9 percent of our revenues in fiscal years 2002, 2003, 2004, and the first nine months of fiscal 2005, respectively. With Sears' merger with Kmart, the company said it isn't yet possible to determine the potential impact of this merger on Sears' purchases as an Icon customer.
In its second quarter, ended Nov. 27, 2004, red on the balance sheet meant a 10.9 percent drop in net sales, and a fifth the income and less than a third the EBITDA from the same quarter a year ago. At that time, CEO and Chairman David Watterson told analysts and media in a conference call that he was disappointed but remained optimistic.