Icon Health & Fitness, Inc. - Company Profile, Information, Business Description, History, Background Information on Icon Health & Fitness, Inc.

1500 South 1000 West
Logan, Utah 84321

Company Perspectives:

Icon Health & Fitness is the world's largest manufacturer and marketer of home fitness equipment.

History of Icon Health & Fitness, Inc.

Icon Health & Fitness, Inc. is the world's largest manufacturer of fitness and exercise equipment. Sold under the brand names Weslo, ProForm, HealthRider, Weider, IMAGE, JumpKing, Reebok, and NordicTrack, Icon products include treadmills, stationary bicycles, elliptical trainers, trampolines, strength machines, and related items. Icon sells its products using its own catalog, web sites for each of its brand names, and infomercials; through retailers including Sears, Wal-Mart, and Kmart; and through other marketing methods. Although the company originally sold just to home consumers, it now sells its equipment to commercial users such as health and fitness clubs. Icon thus is a major player in the world of fitness, a multibillion-dollar international industry.

Origins and Predecessor Firms

In 1977 two college students started a small import business that would eventually become Icon Health & Fitness. Longtime friends Scott Watterson and Gary Stevenson were majoring in business at Utah State University in Logan, Utah, when they and Bradley Sorenson incorporated Weslo Design International under Utah law. According to the company's incorporation papers, its original purpose was to 'engage in wholesale and retail sales of clocks, furniture, marble, metals, insulation, and other raw materials and manufactured items, and to engage in export and import sales of such items, and to invest and make investments in real and personal property, and to engage in any business whatsoever ...'. After graduating from Utah State, the founders expanded their product line by selling wood-burning stoves. To balance the seasonal sales of the stoves, they began selling trampolines and minitrampolines, their entry into the exercise equipment field.

By 1983 the young company's annual sales had reached about $30 million, mostly from the sales of both kinds of trampolines and also exercise bicycles. At that point Stan Tuttleman, a Philadelphia businessman, bought 55 percent of Weslo, including all interests of Blaine Hancy, an early partner of Watterson and Stevenson.

Under Tuttleman's ownership, Weslo continued to grow, reaching 1988 annual sales of about $60 million. In 1988 Weider Health and Fitness acquired Weslo and ProForm and made them subsidiaries of the privately owned company founded by Ben and Joe Weider. Stevenson and Watterson continued to manage Weslo with stock options as an incentive. With new products such as motorized treadmills, Weslo's annual sales reached $202.4 million in 1991.

In 1993 the company began using television information commercials or infomercials to sell its products. Cofounder Scott Watterson in Icon's January 1996 newsletter said, 'Where we once marketed our products exclusively to the retail trade, the introduction of infomercials opened doors for our company to successfully reach the consumer directly.' Icon's first major infomercial demonstrated the benefits of the ProForm Crosswalk treadmill. By January 1995 Icon's direct marketing program included print, broadcast, and direct-mail operations.

Celebrities such as skater Peggy Fleming, baseball star George Brett, and NFL quarterbacks Roger Staubach and Steve Young eventually promoted Icon products in infomercials and various other formats.

The Formation of Icon Health & Fitness

Weider originally considered taking Weslo, Inc. and ProForm Fitness Products, Inc. public, but instead the owners decided to sell the two subsidiaries to Bain Capital, a Boston-based investment firm headed by Mitt Romney, who had ties to Utah through his membership in The Church of Jesus Christ of Latter-day Saints. Weider initially received $159.3 million in cash while keeping 25 percent ownership. In addition to Bain Capital, the new owners included founders Stevenson and Watterson and other executives. They incorporated Icon Health & Fitness, Inc. on November 14, 1994 by combining Weslo; ProForm; Legend Products, Inc.; and American Physical Therapy Inc., a Weider division. Watterson became Icon's chairman and CEO, while Stevenson served as president and chief operating officer.

Product innovations continued to fuel Icon's growth in the mid-1990s. For example, in 1995 the company introduced ProForm Crosswalk treadmills with a trademarked Space Saver feature that allowed home users to store the Crosswalk vertically. In 1996 Icon added 25,000 square feet of office space to its Logan, Utah headquarters.

In 1996 Icon sold bonds to raise $82.5 million, most of which was used the following year to acquire HealthRider Corporation, a Salt Lake City company that sold a popular line of exercise equipment. Gary H. Smith and his wife, Helen, had in 1990 discovered the HealthRider machine designed by Doyle Lambert. After acquiring the patent rights, the Smiths incorporated ExerHealth Inc. in March 1991, with Gary Smith as the new company's president and CEO. In 1992 ExerHealth began using infomercials to sell its HealthRider, primarily to those at least 40 years old. The company added aeROBICRider and SportRider, two lower-priced versions of its original product, and added over 250 retail outlets in 33 states by 1996. In 1995 the firm began international sales by using LaForza Limited to distribute its products in Europe. With the addition of HealthRider's annual sales of $250 million in 1995, Icon's sales in 1996 reached about $1 billion.

Business in the Late 1990s and Beyond

In 1997 Icon acquired Hoggan Health Industries, a 20-year-old exercise equipment manufacturer. Unlike Icon, with its emphasis on home exercisers, Hoggan made equipment for institutional use in rehabilitation and fitness centers. Icon's annual sales were $836.2 million in fiscal 1997.

That same year Icon faced two challenges. First, in June 1997 the Federal Trade Commission (FTC) charged Icon and three other fitness equipment companies with false advertising that exaggerated their machines' fitness and weight-loss benefits. While denying any wrongdoing, Icon and the other companies admitted they could not back up any of their advertising claims. They all agreed to not make future claims without valid documentation. No fines or penalties were involved. The four companies settled quickly with the FTC to avoid expensive court actions. Also in 1997 Icon voluntarily recalled 78,000 ProForm R930 Space Save Riders after receiving reports of injuries due to the product's tendency to close into the upright storage position while being used. Icon cooperated in this recall with the Consumer Product Safety Commission, which worked with many other companies to prevent more injuries from similar products.

In the late 1990s NordicTrack, another leader in the exercise equipment industry, declared bankruptcy and then was purchased by Icon. Started in 1976 by Minnesota inventor Ed Pauls, NordicTrack had helped pioneer the fitness machine industry with its popular cross-country skiing device. In 1986 CML Group Inc. purchased NordicTrack, and sales continued to increase. From its peak sales of $477 million in 1993, NordicTrack declined to $267 million in 1997. Facing stiff competition from makers of a variety of equipment, NordicTrack started 125 permanent retail mall stores and set up 100 temporary mall kiosks, instead of just relying on its usual infomercials and other forms of direct marketing. That 'clumsy expansion was an invitation to disaster,' said Jay Weiner in the December 14, 1998 Business Week. Faced with a saturated market, NordicTrack filed for Chapter 11 bankruptcy in November 1998. Icon Health & Fitness bid first to acquire NordicTrack, and in December 1998 NordicTrack announced its intent to be acquired by Icon. The Utah company paid $12 million for the Chaska, Minnesota-based firm, which by that time had closed its retail stores.

Although NordicTrack had declined as a business, its brand name remained popular. Icon used that reputation as it offered new NordicTrack brand products. By 2000 NordicTrack treadmills, ellipticals, recumbent bikes, and strength machines were available, some with small TV screens and Internet access.

In the late 1990s Icon began offering its products through licensing agreements with other firms. For example, in 1998 it signed an agreement with Reebok to produce home exercise equipment to be sold under the Reebok name. By 2000 it offered brand names NordicTrack, ProForm, and HealthRider under various licensing agreements. Meanwhile, Icon in 1998 introduced its new ProForm Club Series of commercial treadmills, which surprised the fitness industry since ProForm previously was sold just to home consumers.

At the end of its fiscal year ending May 31, 1999, Icon Health & Fitness recorded total annual sales of $710 million, down about five percent from its 1998 total of $749 million. It also had a net loss in 1999 of $7.8 million compared to a 1998 net loss of $9.5 million. In fiscal 1999, 'ICON chose to reduce its sales to longtime customers Service Merchandise, Venture Stores and Caldor, all of whom had credit problems,' said Icon spokesperson Colleen Logan in a September 1, 1999 Business Wire. 'That choice, although it reduced the Company's topline sales, helped protect its financial position.'

Also in 1999 Icon introduced a web site for its recently acquired line of NordicTrack products. Cyber shoppers at www.nordictrack.com were invited to buy the company's products on a retail basis or through an online auction system. The interactive site also allowed people to type in personal data and then receive a health report with recommendations for better health.

By early 2000 Icon expanded its use of the Internet by introducing iFit.com, host to 'the world's first internet-controlled fitness equipment,' according to a February 8, 2000 Business Wire. This new technology allowed exercisers to plug their equipment into their computers and then use the iFit.com web site to select various programs that could adjust speed, incline, resistance levels, or weight levels to get the best workout. The iFit.com technology received several awards in 2000, including a Best Value honor from the Good Housekeeping Institute and the Most Innovative Product designation from The Sports Authority.

In 2000 ICON began designing and manufacturing eight models of scooters priced from $39 to $129. ICON distributed its more expensive scooters through Sears and also The Sports Authority, Dick's Sporting Goods, Oshman's, and other sporting goods stores. Scooters were first sold in early 1999 by other companies primarily to children, teenagers, and young adults. According to Huffy Vice-President Bill Smith in the Sporting Goods Business on October 11, 2000, about 50,000 scooters were sold in 1999, but he expected at least five million would be sold by the end of 2000.

Groundbreaking was held in August 2000 for a new Texas industrial park that Icon would occupy. Located in Mesquite in the Dallas-Fort Worth area, the Skyline Business Park would accommodate Icon's plans for a 400,000-square-foot distribution facility.

In December 2000 ICON announced it would not participate in the Super Show 2001 in Las Vegas. Described as the world's major trade show for sports equipment and fitness apparel, the Super Show had included ICON ever since it was first held in 1986. The show's general decline in the late 1990s and bad timing were two factors involved in ICON's decision, which was supported by spokepersons from both Sears and Dick's Sporting Goods.

Icon in January 2001 announced its acquisition of Ground Zero Design, a manufacturer of exercise equipment that had been founded in 1999. Based in Colorado Springs, Ground Zero planned to remain in Colorado Springs as an Icon division employing about 35 people. Icon purchased Ground Zero to help it enter the commercial market. 'Icon dominates the consumer business; virtually everything you see at Sears or Sam's Club is Icon under various brand names,' explained Roy Simonson, Ground Zero's cofounder in the Colorado Springs Gazette-Telegraph. 'But they have no experience in the commercial market. They were looking for someone with fresh ideas already connected to the industry.' Simonson designed what writer Steven Saint called Ground Zero's '15-piece line of nontraditional training machines designed to follow the movement of the user's body rather than dictate a certain position or movement.'

At the start of the new millennium, Icon faced several challenges. It had to continue to find new customers, since most fitness machine owners would not consider purchasing a second fitness machine. Their customers were limited to middle or upper-class people or clubs that catered to such individuals. The good news was that the U.S. economy, although declining, remained basically healthy, so many could afford to purchase their products. Many overweight and unfit Americans had much to gain from treadmills, the main fitness product sold in the United States, and other devices that Icon offered. The fitness equipment industry praised Icon's high-tech innovations, one of the company's obvious strengths. Icon also benefitted from leadership continuity, for its cofounders Scott Watterson and Gary Stevenson remained in charge of leading their company into the 21st century.

Principal Divisions: JumpKing; ProForm; Weslo; NordicTrack; HealthRider; Image.

Principal Competitors: Brunswick Corporation; Cybex International; Guthy-Renker Corporation.


Additional Details

Further Reference

Agoglia, John, 'Icon Refinancing Is `Critical' to Viability,' Sporting Goods Business, October 11, 1999, p. 22.------, 'Reverse Order: ProForm Jumps from Home to Club,' Sporting Goods Business, April 15, 1998, p. 16.Boulton, Guy, 'Shaping Up Business: Icon Health & Fitness Restructures to Shed Itself of Excessive Debt,' Salt Lake Tribune, October 10, 1999, p. E1.Cassidy, Hilary, 'Will Scooters Keep Rolling Along?' Sporting Goods Business, October 11, 2000, pp. 22--24.'Executive Focus: Gary H. Smith,' Deseret News, June 6, 1993, p. M2.'Fitness Industry Leader Releases TOP Brand Names for Licensing; ICON Health & Fitness Ready for Licensing Ventures,' Business Wire, December 15, 2000.'Fitness Leader Says No to the Super Show; ICON Health & Fitness Leaves Behind an Old Venue,' Business Wire, December 15, 2000.Grossman, Cathy Lynn, 'Treadmill Sales Outpace Ski, Ab Machines,' USA Today, November 23, 1998, p. 01D.Hawthorne, Kate, 'Pulling It All Together,' Marketeer, May 1996, pp. 16--18.'ICON Continues 21-Year Profit Streak; Receives Sears Order for 75,000 New Treadmills; Now Hiring for 250 Open Positions,' Business Wire, September 1, 1999, p. 1.'ICON Health & Fitness and iFit.com Awarded Retailer's Top Honors; Starting the Year Off Right, ICON and iFit.com Receive Major Awards in the First Quarter of 2000,' Business Wire, May 22, 2000.'Icon to Buy Ground Zero,' Salt Lake Tribune, January 6, 2001, p. B4.'iFit.com Works with Microsoft's Windows Media to Create World's First Internet Appliance for `Body Surfing' the Web,' Business Wire, February 8, 2000.Knudson, Max B., 'ProForm, Weslo Health-Equipment Firms Sign a Deal to Boost Their Fiscal Fitness,' Deseret News, November 15, 1994, p. D7.Lee, Renee C., 'Mesquite Development Groundbreaking Today ...,' Fort Worth Star-Telegram, August 24, 2000, p. 3.'Logan's ICON Health Buys Hoggan Health,' Salt Lake Tribune, February 19, 1997.Lorenzi, Neal, 'Consumer Product Safety Commission Product Recalls,' Professional Safety, September 1997, p. 12.McEvoy, Christopher, 'FTC Cracks Down on Top Fitness Vendor,' Sporting Goods Business, July 7, 1997, p. 42.'NordicTrack Goes On-line; America's Number One Fitness Brand Launches High-Tech Outlet,' PR Newswire, April 27, 1999, p. 1.Rebello, Joseph, 'Bain Group to Buy Assets of Three Firms,' Wall Street Journal, November 14, 1994, pp. A3, A6.'Retail Entrepreneurs of the Year: Helen Smith, Gary Smith,' Chain Store Age, December 1996, p. 94.Retsky, Maxine Lans, 'Exercise Good Judgement When Developing Your Advertising,' Marketing News, August 18, 1997, p. 5.Saint, Steven, 'Maker of NordicTrack Buys Springs Firm,' Colorado Springs Gazette-Telegraph, January 6, 2001, p. BUS1.'Tailored for an LBO,' Mergers and Acquisitions, November/December 1996, p. 26.Villarosa, Linda, 'A Fitness Industry, with Gadgets Galore,' New York Times, April 25, 2000.Walden, David M., 'ICON Health & Fitness, Inc.,' in Centennial Utah: The Beehive State on the Eve of the Twenty-First Century, Encino, Calif.: Cherbo Publishing Group, 1995, by G. Wesley Johnson and Marian Ashby Johnson, pp. 134--35.Weiner, Jay, 'How Nordictrack Lost Its Footing,' Business Week, December 14, 1998, p. 138.

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