Nautilus Shares Fall 16% on Recall

Shares of Nautilus Group Inc., a health and fitness equipment maker, dropped 16% on Thursday after the company recalled 420,000 of its strength-training Bowflex machines because of two safety issues.

Shares of Vancouver, Wash.-based Nautilus fell $2.46 to $13.37 on the New York Stock Exchange, after dropping as low as $13.11.

The Bowflex backboard bench could collapse and break in some cases while being used in the incline position, the company said. Another part of the machine, known as the “lat tower,” could rotate forward and fall during use.

The firm expects costs related to the recall to total about $3 million, Nautilus Chief Financial Officer Rod Rice said. “We set up reserves to deal with this.”

Nautilus reported at least 59 injuries related to the backboard benches breaking and about 14 tied to the lat tower.

The recalled fitness machines, which were made in China, Taiwan and the U.S., are the Bowflex Power Pro XL, XTL and XTLU systems. The machines were sold from January 1995 to December 2003, retailing for $1,200 to $1,600.

Nautilus will provide customers with safety reinforcement kits so the machines can be repaired without being returned, Rice said.

Also on Thursday, the company reported that fourth-quarter profit fell to $9.37 million, or 28 cents a share, from $23.0 million, or 69 cents, a year earlier. Sales fell 1.7% to $152.8 million from $155.5 million. Earnings matched analysts’ forecasts.

Operating costs rose 13% in the quarter.

Last year “was a challenging year for Nautilus,” President and Chief Executive Gregg Hammann said.

The company said revenue and earnings would be lower in the first half of 2004 before recovering during the second half. Nautilus will increase investment in research and development in 2004 and expects to earn about 18 cents to 20 cents a share in the first quarter on revenue of $120 million to $130 million.

Nautilus will pay a dividend of 10 cents a share March 10 to shareholders of record on Feb. 19.