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S&P may cut ICON Health
Standard & Poor's said it placed its B+ corporate credit rating on ICON Health & Fitness Inc. on CreditWatch with negative implications, based on lower equipment sales trends and margin pressures because of increased commodity prices, which are unlikely to abate soon.
For the quarter ending Aug. 28, ICON's sales declined by 13.9% from the year-earlier period. Both cardiovascular and strength-training equipment lines experienced lower sales. Cardiovascular and other equipment sales decreased 9.6% year over year and strength-training equipment sales decreased 31.4% (off a significantly smaller base) year over year. In addition to pressure from lower sales, margins also deteriorated because of higher commodity prices on steel, plastics, wood, and paper products, and increased transportation costs.
As a result of these negative trends, S&P said EBITDA went from positive $10.2 million to negative $18.6 million, and the EBITDA margin declined to 5.4% for the 12 months ended Aug. 28, 2004 from 8.4% at May 31, 2002.
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