Icon Sees Sales Dip for Q4, Year; Net Loss Improves

For the fiscal fourth quarter, ICON Health & Fitness, Inc. reported net sales of $161.3 million, down 1.3% from $163.4 million for the same period last year. For the full fiscal year, the company reported net sales of $852.2 million, a 2.2% decrease compared to last year’s $871.0 million. The decrease in sales was primarily due to lower customer demand for certain products.

During the fourth quarter of fiscal 2006, the Company discontinued its NordicTrack retail subsidiary. This subsidiary consisted of more than 60 NordicTrack retail outlets nationwide. The NordicTrack brand will continue to be one of the Company’s strongest competing brands in all distribution channels used by the Company, and the discontinuance of the Stores did not result in the impairment of the NordicTrack trade name. The Stores have been classified as a discontinued operation, and its expenses are not included in the results of continuing operations. The results of operations in fiscal 2006 for the Stores have been reclassified to loss from discontinued operations. As of May 31, 2006, approximately $7.5 million of assets have been written down to $4.1 million, which consists of cash of approximately $.1 million, accounts receivable of $.5 million, other assets of $.4 million that have been written-off, inventory of $4.5 million written down to $3.4 million and fixed assets of $2.0 million that have been written-off. The loss from operations for the Stores was $19.2 million and $6.9 million for the fiscal years ended May 31, 2006 and 2005, respectively. As the Stores were not making a positive contribution to the Company’s earnings for several years, the company determined that utilizing other distribution channels will be more profitable.

Net loss for the three months ended May 31, 2006 was $29.3 million, compared to net loss of $70.3 million for the three months ended May 31, 2005. Net loss before taxes, minority interest and discontinued operations for the three months ended May 31, 2006 was $14.0 million, compared to a net loss before taxes, minority interest and discontinued operations of $40.0 million for the three months ended May 31, 2005. The provision for taxes for the three months ended May 31, 2006 was $0.4 million compared to a provision of $19.1 million in the three months ended May 31, 2005. Depreciation and amortization for three months ended May 31, 2006 was $4.6 million compared to $7.3 million for the three months ended May 31, 2005. Interest expense, including amortization of deferred financing fees, for the three months ended May 31, 2006 was $8.4 million versus the prior year’s comparable period interest expense and amortization of deferred financing fees of $7.0 million. The loss from discontinued operations for the three months ended May 31, 2006 was $14.9 million compared to a loss on discontinued operations of $11.4 million for the three months ended May 31, 2005.

Net loss for the year ended May 31, 2006 was $49.7 million, compared to a net loss of $110.0 million for the year ended May 31, 2005. Net loss before taxes for the year ended May 31, 2006 was $15.9 million, compared to a net loss before taxes of $59.4 million for the year ended May 31, 2005. The provision for income taxes for the year ended May 31, 2006 was $2.5 million compared to a benefit of $7.0 million in the year ended May 31, 2005. Depreciation and amortization for the year ended May 31, 2006 was $24.6 million compared to $24.1 million for the year ended May 31, 2005. Interest expense, including amortization of deferred financing fees, for the fiscal year ended May 31, 2006 was $32.8 million versus the prior year’s comparable period interest expense and amortization of deferred financing fees of $28.9 million. The loss from discontinued operations for the year ended May 31, 2006 was $31.3 million compared to a loss on discontinued operations of $57.9 million for the year ended May 31, 2005.

EBITDA for the three months ended May 31, 2006 was negative $1.0 million compared to a negative $25.5 million for the three months ended May 31, 2005. EBITDA for the year ended May 31, 2006 was $43.2 million compared to a negative $6.1 million for the year ended May 31, 2005.