Nautilus, Inc. has exercised a purchase option to acquire the assets of its largest contract manufacturer, Xiamen, China-based Land America Health and Fitness Co., Ltd. The all cash-transaction of approximately $72 million is expected to close January 2, 2008 and improve company gross margins by at least 1.5 to 2.0 percentage points in 2008.
“A diversified manufacturing and supply base is important to maximize our margin potential and to mitigate supply risks,” said Gregg Hammann, Chairman and CEO of Nautilus, Inc. “In addition to benefiting from manufacturing margins, we expect to see significant improvement by optimizing flow and expanding the range of home fitness products made at the facility.”
Land America has made the Bowflex® home exercise gyms for more than eight years and began manufacturing Bowflex® TreadClimber® cardio trainers for the company last year. In addition, Nautilus and Land America teams have built a new production line to manufacture and ship additional products from the facility later in 2007.
The acquisition of Land America involves four modern buildings on a 15-acre site in an economic development zone near Xiamen, China, as well as a trading company, Treuriver Investments Ltd. The Land America organization was honored by Nautilus a year ago as its supplier of the year for routinely achieving Nautilus standards for quality and delivery.
Mr. Hammann said the company will continue to work with its other contract manufacturing partners in Asia and its domestic manufacturing plants in Oklahoma and Virginia to facilitate growth and improve margins.
