Nautilus, Inc. plans to consolidate its domestic manufacturing of cardiovascular equipment in its Tulsa, Okla., plant and close its Tyler, Tex. cardio manufacturing facilities by the end of 2006.
The move will create about 50 new positions in Tulsa and bring its total employment to about 220 positions. Meanwhile, it will result in about 100 positions being eliminated in Tyler over the course of the year. The transition will begin in June as the company shifts production of Nautilus® Sport Series treadmills, and Bowflex® TreadClimber 5300 cardio units to Tulsa. Tyler employees will be provided retention incentive compensation for maintaining employment and productivity, and will either be offered transfers to Tulsa or will be assisted with severance benefits and outplacement support.
“Our decision to consolidate domestic cardiovascular manufacturing operations is part of our continued power-of-one initiative to improve manufacturing competitiveness and long-term operating efficiencies,” said Gregg Hammann, Chairman and CEO of Nautilus, Inc. “As we evaluated cardiovascular manufacturing requirements over the next five to seven years, we concluded that a single domestic cardio facility would be the best decision for our future growth. Compared to operating two facilities within 300 miles, one facility provides significant manufacturing efficiencies, primarily through overhead, labor savings, procurement leverage, engineering expertise, and quality control.”
The Tyler facility, which consists of a 135,000 square foot manufacturing facility and 63,000 square foot distribution center, became part of Nautilus through an acquisition in 2001. Since then, this facility has produced treadmills and TreadClimber cardio products. The Tyler properties are valued at approximately $4-5 million in total, and will be offered for sale.
Nautilus expects modest efficiency contributions from the consolidation in late 2006, inclusive of transition costs, and expects operating improvement of $3-4 million annually beginning in 2007. The Company said its 125,000 square foot Tulsa manufacturing facility can absorb the additional manufacturing volume on a single four-day-a-week shift with only modest expansion to its materials management area. Process improvement initiatives underway in Tulsa are expected to accommodate near term double-digit annual sales growth. Longer term growth can be accommodated through expanded hours of operation or adding second shifts on the plant's multiple assembly lines.
Following the consolidation, Nautilus, Inc. will have one domestic cardio facility in Tulsa, Okla., and one domestic strength facility in Independence, Va. Both facilities will make high-quality fitness products that retail for more than $3,000 on average. Other cardiovascular products currently manufactured in Tyler will either be discontinued or transitioned to one of the company's contract manufacturing partners in Asia.