BowFlex Inc. said Tuesday it has filed for Chapter 11 bankruptcy with a New Jersey court, after the home-exercise equipment company saw sales slump in the post-pandemic world.
The Vancouver, Washington-based company’s move was expected, after it said there was “substantial doubt” it could continue as a going concern in its latest earnings release, when it posted a loss and sales that were well below the year-earlier period.
“As a result of the continued challenging retail operating environment, deteriorating macroeconomic conditions, and decline in customer demand, we experienced a significant year over year decline in our revenue for the three and nine months ended December 31, 2023,” the company
BFX,
said in its 10-Q filing with the Securities and Exchange Commission.
“Additionally, we now believe that conditions will not improve in the next several quarters, which is negatively affecting our liquidity projections,” it added, as it warned it may be forced into bankruptcy.
On Tuesday, BowFlex said it had entered a so-called “stalking horse” asset purchase agreement and received a debtor-in-possession, or DIP, loan from creditors. DIP loans allow companies to continue to pay staff and vendors while they go through bankruptcy.
Specialty retailer Johnson Health Tech Retail Inc. has agreed to act as “stalking horse” for a total of $37.5 million in cash, subject to the approval of the bankruptcy court. That sets a floor for competing bids, which will be gathered during an auction process.
The company and Crystal Financial LLC and its units have agreed to amend an existing term loan credit agreement to offer the company and its Nautilus Fitness Canada Inc. subsidiary a DIP loan of up to $25 million.
That loan will be used for working capital and general corporate purposes to allow the company to continue operating during the bankruptcy process.
The company warned shareholders that there’s no guarantee they will recoup their investment.
“The company cannot be certain that holders of the company’s common stock (the “Common Stock”) will receive any payment or other distribution on account of those shares following the Chapter 11 cases,” said the filing.
The stock was halted for the news after closing Monday at 20 cents.
BowFlex was known as Nautilus until last year, when it sold that brand name to help bolster its finances. The company markets home-exercise equipment under the Schwinn, JRNY and BowFlex brands.
Like its rival Peloton Interactive Inc.
PTON,
BowFlex enjoyed strong sales during the pandemic, when many consumers invested in home gyms during lockdowns while fitness centers were closed. Those sales fizzled once gyms reopened, and the company came under pressure from the rising prices of the materials and commodities it needsd to manufacture its products.
Sales in its fiscal second quarter fell to $48.7 million from $65.5 million in the year-earlier quarter. Sales peaked at $590 million in the fourth quarter of 2022.
The stock has fallen 89% in the last 12 months, while the S&P 500
SPX
has gained 27%.
