EXHIBIT 99.1
ICON Health & Fitness Reports Financial Results for the Third Fiscal Quarter
2004 Ended February 28, 2004
For the third quarter ended February 28, 2004, ICON reported net sales of $328.0
million, compared to $344.0 million for the third quarter ended March 1, 2003,
which represents a $16.0 million, or 4.7%, decrease over the prior-year quarter.
The decrease in sales was not attributable to a single customer, distributor or
any other specific factor. The decrease was across several product lines. For
the nine months ended February 28, 2004, ICON reported net sales of $857.7
million, compared to $806.9 million for the nine months ended March 1, 2003,
which represents a $50.8 million, or 6.3%, increase over the prior year nine
month period. The overall increase in sales was not attributable to a single
customer, distributor or any other specific factor. The increase was across all
product lines for which there was increased demand, particularly direct to
consumer sales.
Net income for the three-month period ended February 28, 2004 was $18.2 million,
compared to a net income of $20.3 million for the three-month period ended March
1, 2003. Net income before taxes for the three-month period ended February 28,
2004 was $23.4 million, compared to a net income before taxes of $31.0 million
for the three-month period ended March 1, 2003. The provision for taxes for the
three-month period ended February 28, 2004 was $5.2 million compared to a
provision of $10.7 million in the three-month period ended March 1, 2003.
Depreciation and amortization for the three-month period ended February 28, 2004
was $6.2 million compared to $5.0 million for the three-month period ended March
1, 2003. Interest expense, including amortization of deferred financing fees,
for the three-month period ended February 28, 2004 was $6.7 million versus the
prior year's comparable period interest expense and amortization of deferred
financing fees of $6.5 million.
Net income for the nine-month period ended February 28, 2004 was $31.9 million,
compared to net income of $30.6 million for the corresponding period ended March
1, 2003. This increase resulted primarily from increased sales and improved
gross margins. The improved gross margin was a result of increased direct to
consumer sales, changes in product mix and manufacturing efficiencies in both
the first and second quarters of fiscal 2004. Income before taxes for the nine
month period ended February 28, 2004 was $46.6 million, compared to income
before taxes of $48.4 million for nine-month period ended March 1, 2003. The
provision for taxes for the nine-month period ended February 28, 2004 was $14.7
million compared to a provision of $17.8 million in the nine-month period ended
March 1, 2003. Depreciation and amortization for the nine-month period ended
February 28, 2004 was $17.3 million versus the prior year's comparable period
depreciation and amortization of $13.2 million. Interest expense, including
amortization of deferred financing fees, for the nine-month period ended
February 28, 2004 was $19.4 million versus the prior year's comparable period
interest expense and amortization of deferred financing fees of $19.9 million.
The market for exercise equipment is highly seasonal, with peak periods
occurring from late fall through February. As a result, the first and fourth
quarters of every year are generally the Company's weakest periods in terms of
sales. During these periods, ICON builds product inventory to prepare for the
heavy demand anticipated during the peak season. This operating strategy helps
ICON to realize the efficiencies of a steady pace of year-round production.
The Company has established earnings before net interest expense, income taxes,
depreciation and amortization ("EBITDA") as an indicator of operating
performance and as a measure of cash generating ability. EBITDA for the
three-month period ended February 28, 2004 was $36.3 million, or 11.1% of net
sales, compared to $42.5 million, or 12.3% of net sales, for the three-month
period ended March 1, 2003, a $6.2 million or 14.6% decrease. EBITDA for the
nine months ended February 28, 2004 was $83.3 million, or 9.7% of net sales
compared to $81.5 million, or 10.1% of net sales for the nine months ended March
1, 2003, a $1.8 million or 2.2% increase. Management considers EBITDA to be one
measure of the cash flows from operations of the Company before debt service
that provides a relevant basis for comparison, and EBITDA is presented to assist
investors in analyzing the performance of the Company. This information should
not be considered as an alternative to any measure of performance as promulgated
under accounting principles generally accepted in the United States, nor should
it be considered as an indicator of the overall financial performance of the
Company. The Company's calculation of EBITDA may be different from the
calculation used by other companies and, therefore, comparability may be
limited.
The following is a reconciliation of net income (loss) to EBITDA for the
three-month period and the nine-month period ended February 28, 2004:
Three months Nine months
------------ -----------
ended February 28, 2004
Net income $18.2 $31.9
Add back:
Depreciation and amortization 6.2 17.3
Provision for income tax 5.2 14.7
Interest expense 6.4 18.8
Amortization of deferred
financing fees 0.3 0.6
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EBITDA $36.3 $83.3
===== =====
ended March 1, 2003
Net income $20.3 $30.6
Add back:
Depreciation and amortization 5.0 13.2
Provision for income tax 10.7 17.8
Interest expense 6.3 19.2
Amortization of deferred
financing fees 0.2 0.7
--------- ---------
EBITDA $42.5 $81.5
===== =====
Total assets for the nine-month period ended February 28, 2004 and the fiscal
year ended May 31, 2003 were $606.2 million and $465.1 million, respectively.
This increase resulted in part from continued manufacturing to meet anticipated
demand. Net debt (current portion of long-term debt plus long-term debt less
cash) for the nine-month period ended February 28, 2004 and the fiscal year
ended May 31, 2003 was $292.7 million and $239.6 million, respectively. This
increase represents the build up of inventory. Capital expenditures for the nine
months ended February 28, 2004 were $12.4 million versus the prior year's
comparable period capital expenditures of $13.4 million. Capital expenditures on
the manufacturing facility in China for the nine-month period ended February 28,
2004 were $4.9 million.
ICON Health & Fitness, Inc. will hold a conference call with investors on
Wednesday, April 14th; at 4:30 p.m. EST to discuss its financial results for the
Third quarter of fiscal 2004 filed on Form 10-Q with the Securities and Exchange
Commission on April 13, 2004. The Form 10-Q can be accessed at www.sec.gov. ICON
Chairman and CEO, Scott Watterson, President and COO, Gary Stevenson and CFO,
Fred Beck will co-host the call.
To participate by phone, please dial 800-857-2283. Callers should ask to be
connected to the ICON Health & Fitness earnings conference call.
ICON Health & Fitness, Inc. is the world's largest manufacturer and marketer of
fitness equipment. The Company is headquartered in Logan, Utah and has more than
5,000 employees worldwide. ICON develops, manufactures and markets fitness
equipment under the following company-owned brand names: NordicTrack, ProForm,
HealthRider, Weslo, Weider, IMAGE and Free Motion, as well as Reebok and Gold's
Gym under license agreements.
This press release contains forward-looking statements that involve a variety of
business risks and other uncertainties that could cause actual results to differ
materially. These risks and uncertainties include the possibility of changes or
fluctuations in global economic conditions; currency exchange rates; product
demand and industry capacity; competitive products and pricing; availability and
costs of critical components and materials; new product development and
commercialization; order activity and demand from major customers; capital
spending by larger customers in the telecommunications industry and other
business segments; the mix of sales between premium and non-premium products;
possible disruption in commercial activities due to terrorist activity and armed
conflict; ability to obtain financing and capital on commercially reasonable
terms; acquisition and divestiture activities; the level of excess or obsolete
inventory; the ability to enforce patents; product and components performance
issues; and litigation. These and other risk factors are identified in ICON's
filings with the Securities and Exchange Commission. Forward-looking statements
speak only as of the day that they are made, and ICON undertakes no obligation
to update them in light of new information or future events.
For more information, please contact:
Fred Beck
CFO and Treasurer
Tel. (1) 435-750-5000
fbeck@iconfitness.com