Direct Focus Acquires Schwinn's Fitness Division

VANCOUVER, Wash. — Direct Focus, the parent company of Nautilus and Bowflex, has acquired Schwinn Fitness, the fitness equipment division of Schwinn/GT, through a bankruptcy auction. Direct Focus paid approximately $65 million in cash and retained all of the division's assets, with the exception of some warehouses and distribution centers.

According to Direct Focus, Schwinn Fitness had 2000 annual revenue in excess of $100 million and strong operating cash flows. If so, why did Schwinn end up in bankruptcy court?

“The bicycle side was much bigger than the fitness side,” Kevin Lamar, Direct Focus' president, told Club Industry, “and that was largely an unprofitable business, and so it was very difficult for Schwinn Fitness to carry the whole entity.”

No stranger to Schwinn, Lamar served as the company's president before joining Direct Focus. And he already has plans for his former employer.

“We're going to continue to try and work with Mad Dogg Athletics on the Spinning side of the business and go heavy after that,” he said. [Editor's note: At press time, Mad Dogg issued a press release stating it had ended its six-year relationship with Schwinn. The release cited Schwinn's “financial and management difficulties” as the reason for the move.]

“I want to continue to look at how we improve RiPP group strength exercise, a little bit of my baby before I left,” Lamar continued. “I know it's been launched a couple of times, but has it really taken off like they want? So we're going to refine it however we need to and continue to push that.”

As for the Schwinn Fitness Advisor, Direct Focus will now offer this interactive fitness network to the Nautilus direct commercial reps. However, this doesn't mean that all distribution channels will change as a result of the acquisition.

“We're going to collaborate with each other, but there is a difference in the distribution philosophy,” Lamar said. “Schwinn distributes about 10 to 15 percent of its commercial products direct and uses the retailers to distribute the rest, whereas Nautilus distributes virtually 90 or more percent of its products through direct reps and direct to the clubs.

“We're not necessarily going to mix that right away. We're going to try to figure out the right blended mix. We may never mix them, but we will start to share things like trade show booths and share expenses.”

As part of the collaboration between the Direct Focus companies, the market may eventually see Schwinn-developed cardio equipment bearing the Nautilus name. But this isn't to suggest that the Schwinn name will eventually disappear. Lamar emphasized that Direct Focus bought an operating business in Schwinn. “Almost all [Schwinn Fitness employees] have been retained,” he said.

Ultimately, acquisitions such as this one bring Direct Focus closer to its goal of becoming the “most prosperous health and fitness company in the world,” according to Lamar. And other acquisitions could be coming.

“We are obviously looking at opportunities all the time,” Lamar said. “StairMaster has been for sale. I will say that we looked at and evaluated that opportunity. I can't say that we are going to proceed or not proceed with that company. We don't divulge too much about what we do with mergers and acquisitions until we actually do it. But we are looking all over the industry, and just because we look at StairMaster doesn't mean we are going to do it or not.”


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