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Gold/Mining/Energy : Direct Focus Inc. (DFXI)
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To: trilobyte who wrote (347)11/10/1998 8:27:00 PM
From: Gordo  Read Replies (1) of 768
 
Hmmm... not so sure about this recent acquisition. Here's what I have been able to dig up so far:

Delta Woodworks bought Nautilus in January 1993 out of bankruptcy. It seems an odd addition as the rest of the company's business is in textiles an apparels.

Nautilus has a history of losing money. It is difficult to tell how much they are losing because Delta Woodworks decided in March to actively looking for a buyer, and thus they are included in the 1998 financial statements under discontinued operations, along with another subsidiary. The reason given for the sale is the "history of operating losses".

Going back to 1997, the financial picture is not that pretty. In Delta's 1997 10-K under Fitness Equipment and Other (I am assuming this is virtually all fitness equipment), we can see the following numbers (in US dollars):

Revenue: $24.5M
Gross Profit: $6.4M
Operating Profit: ($5.5M)
Assets: $38M

If you look at previous years, you can see losses of $4.5M and $4.9M respectively.

So why are they buying this pooch?? Does the company really believe that they can pull off a turnaround play?? Given that the market for Nautilus is largely fitness centers and other institutions, there really seems to be no ability to leverage DFX's key strength - direct marketing.

I'll have to admit that I'm disappointed that this is the best use they could find for the company's money. I think I'll have to give Rod Rice a call to get his perspective on the whole thing.

gord
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