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Nautilus to End Commercial Orders This Month

VANCOUVER, WA -- Nautilus Inc. notified its customers this week that it would not take new orders for commercial equipment past Oct. 30. All outstanding orders will be shipped by Dec. 31, according to a letter sent to customers. The notice essentially dates Nautilus’ previously announced exit from the commercial fitness equipment business at the end of the year.

In August, Ed Bramson, Nautilus chairman and CEO, notified shareholders that the company was investigating a plan to divest itself of the commercial side of the business and focus solely on the consumer business (retail and direct). The company has not given an official date for the exit, but Bramson said in August that he expected to present the commercial business as a discontinued operation starting with the third quarter. Nautilus has engaged Robert W. Baird & Co. to find a possible buyer for the business. The company is looking for a buyer to continue the Nautilus, Schwinn and Stairmaster brands, the letter states.

In the second quarter, Nautilus’ commercial business experienced another quarter of losses ($7.2 million in losses compared to a loss of $1.1 million in second quarter 2008). However, the company’s retail business generated $1.2 million in income from operations compared to a loss of $0.2 million for the previous year period, and its direct business generated $0.6 million of income from operations compared to a loss of $0.6 million in the same period last year.

The letter noted that Nautilus will accept orders for the new Schwinn AC line, IC Pro and Stairmaster SM/SC 916 models if delivery can be completed by Dec. 31.

The letter noted, “[While] it is not possible to make predictions about the future of the commercial business, the company remains hopeful about the future availability of these products, albeit under different ownership, beyond the end of 2009.”

Nautilus also assured customers in the letter that warrantees on products made and manufactured through Dec. 31 would be fully supported by the company.

TV station WSLS-10 in Roanoke, VA, noted that the Nautilus plant in Independence, VA, that manufactures Nautilus’ commercial strength equipment would likely close in December if Nautilus did not find a buyer for its commercial business by then. The company has stated that it hopes a buyer would continue to manufacturer equipment at the plant under the company’s license.

The senior vice president told the TV station that the 173 workers at the plant received a Workers Adjustment and Retraining Notification (WARN) Act notice this week. The WARN Act requires employers to provide 60 days advance notice about plant closings and mass layoffs.

Nautilus’ commercial cardio equipment is manufactured at a plant in Tulsa, OK. Nautilus has not responded to inquiries about whether workers at this plant also received WARN Act notices.
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