ICON Health & Fitness, Inc. reported net sales for the fiscal fourth quarter ended May 31 decreased 4.2% to $190.7 million, compared to $199.0 million for the year-ago period. For the year ending May 31, ICON reported net sales of $898.1 million, a 9.5% decrease compared to $992.2 million for the prior year. The decrease in sales can be attributed to a consolidation of customers in the department store channel of distribution, the timing of buying patterns in that channel and a decline in the direct to consumer channel.
During the second quarter of fiscal 2005, management determined that the Company's JumpKing, Inc. subsidiary would discontinue manufacturing, marketing, and distributing all outdoor recreational equipment which includes trampolines, spas, and other non-exercise related products. The Outdoor Recreational Equipment Operations were not part of the Companys core business operations or its strategic focus. The Outdoor Recreational Equipment Operations were not making a positive contribution to the Companys earnings and also required a substantial investment in working capital. The Outdoor Recreational Equipment Operations have been classified as a discontinued operation and its expenses are not included in the results of continuing operations.
The results of operations for the year ended May 31, 2005 for the Outdoor Recreational Equipment Operations have been reclassified to loss from discontinued operations. As of May 31, 2005, ICON has approximately $19.9 million of assets that have been written down to $9.5 million, which consist of inventory of approximately $12.5 million written down to $3.3 million, fixed assets of approximately $1.3 million written down to $1.1 million and accounts receivable of $5.1 million that remained at its stated value. The loss from operations, net of tax, for the outdoor recreational equipment was $31.7 million and $3.1 million for the fiscal years ended May 31, 2005 and 2004, respectively. ICON expects to complete this discontinuation of its outdoor recreational operations by the second quarter of fiscal 2006. The outdoor recreational equipment operations were not part of its core business operations or its strategic focus. ICON is in the process of finding a buyer for the remaining assets. The outdoor recreational operations were not making a positive contribution to earnings and also required a substantial investment in working capital.
The net loss for the three months ended May 31, 2005 was $70.3 million, compared to net loss of $8.5 million for the three months ended May 31, 2004. Net loss before taxes, minority interest and discontinued operations for the three months ended May 31, 2005 was $42.2 million, compared to a net loss before taxes, minority interest and discontinued operations of $8.0 million for the three months ended May 31, 2004. The provision for taxes for the three months ended May 31, 2005 was $19.1 million compared to a provision of $1.1 million in the three months ended May 31, 2004. Depreciation and amortization for three months ended May 31, 2005 was $7.6 million compared to $3.9 million for the three months ended May 31, 2004. Interest expense, including amortization of deferred financing fees, for the three months ended May 31, 2005 was $7.0 million versus the prior year's comparable period interest expense and amortization of deferred financing fees of $6.6 million. The loss from discontinued operations for the three months ended May 31, 2005 net of a tax benefit of $2.7 million was $6.4 million compared to a gain on discontinued operations of $0.7 million net of tax benefit of $0.2 million for the three months ended May 31, 2004.
Net loss for the year ended May 31, 2005 was $110.0 million, compared to net income of $23.4 million for the year ended May 31, 2004. Net loss before taxes for the year ended May 31, 2005 was $66.3 million, compared to a net income before taxes of $44.3 million for the year ended May 31, 2004. The benefit from taxes for the year ended May 31, 2005 was $7.0 million compared to a provision of $15.9 million in the year ended May 31, 2004. Depreciation and amortization for the year ended May 31, 2005 was $25.4 million compared to $20.7 million for the year ended May 31, 2004. Interest expense, including amortization of deferred financing fees, for the nine months ended May 31, 2005 was $28.9 million versus the prior year's comparable period interest expense and amortization of deferred financing fees of $26.0 million. The loss from discontinued operations for the year ended May 31, 2005 net of a tax benefit of $19.4 million was $31.7 million compared to a loss on discontinued operations of $3.1 million net of tax benefit of $1.9 million for the year ended May 31, 2004.
EBITDA for the three months ended May 31, 2005 was negative $27.4 million compared to $2.5 million for the three months ended May 31, 2004. EBITDA for the year ended May 31, 2005 was negative $11.6 million compared to $91.0 million for the year ended May 31, 2004.
Total assets as of May 31, 2005 and May 31, 2004 were $460.7 million and $558.5 million, respectively. The decrease in assets was primarily attributable to the decreases in accounts receivable, discontinued assets, deferred tax assets and inventory. Accounts receivable decreased as a result of lower sales for the period and partially due to decreased direct response receivables which are financed over a longer period of time. The decrease in deferred tax assets can be attributed to the deferred tax valuation allowance. Accounting guidelines suggest that when a company has a cumulative loss over a three-year period that a valuation allowance should e provided. Although the Company income in two of the last three years, the loss in the third year exceeded the accumulative income in the previous two years. The Company recorded a $41.7 million valuation allowance on its net deferred tax assets. The decrease in inventory can be attributed to more improved process planning and more efficient working capital management. Net debt (current portion of long-term debt plus long-term debt less cash) for the year ended May 31, 2005 and the fiscal year ended May 31, 2004 was $282.1 million and $283.9 million, respectively. This decrease represents decreased borrowings on the revolver. Capital expenditures were $39.9 million compared to capital expenditures of $23.8 million in the year ended May 31, 2004. Capital expenditures in China were $19.1 million as of May 31, 2005 and $9.0 million as of May 31, 2004.