-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CiH15mYi8GTL5hzOeSIvi+BZxv/jxywKm+7jK+c07R8Ut1xwoHNQ2cLVutNvildV 00BJkYouGCsAWAWKfA7AcA== 0001029294-97-000005.txt : 19971015 0001029294-97-000005.hdr.sgml : 19971015 ACCESSION NUMBER: 0001029294-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970830 FILED AS OF DATE: 19971014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICON FITNESS CORP CENTRAL INDEX KEY: 0001029294 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 870566936 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-18475 FILM NUMBER: 97694749 BUSINESS ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 BUSINESS PHONE: 801-750-7737 MAIL ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICON HEALTH & FITNESS INC CENTRAL INDEX KEY: 0000934798 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 870531206 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-87930 FILM NUMBER: 97694750 BUSINESS ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 BUSINESS PHONE: 8017507737 MAIL ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IHF HOLDINGS INC CENTRAL INDEX KEY: 0000934799 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 870531209 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-87930-01 FILM NUMBER: 97694751 BUSINESS ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 BUSINESS PHONE: 8017505000 MAIL ADDRESS: STREET 1: 1500 SOUTH 1000 WEST CITY: LOGAN STATE: UT ZIP: 84321 10-Q 1 ICON FITNESS, IHF HOLDINGS, ICON HEALTH FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [*] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ Commission File Numbers: 33-87930, 33-87930-0, 333-18475 ICON Health & Fitness, Inc. IHF Holdings, Inc. ICON Fitness Corporation (Exact name of registrant as specified in its charter) Delaware 87-0531206, 87-0531209, 87-0566936 (State or other jurisdiction of (I.R.S. Employer Identification Nos.) incorporation or organization) 1500 South 1000 West Logan, Utah 84321 (Address and zip code of principal executive offices) (801) 750-5000 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if change since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: ICON Health & Fitness, Inc. 1,000 shares, IHF Holdings, Inc. 1,000 shares, ICON Fitness Corporation 100 shares. ICON Fitness Corporation and its wholly-owned subsidiary, IHF Holdings, Inc. and its wholly-owned subsidiary, ICON Health & Fitness, Inc. FORM 10-Q INDEX Page No. -------- PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3 Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3-6 Consolidated Condensed Balance Sheets as of August 30, 1997 and May 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 3-4 Consolidated Condensed Statements of Operations for the three months ended August 30, 1997 and August 31, 1996 . . . . . . . . . . . 5 Consolidated Condensed Statements of Cash Flows for the three months ended August 30, 1997 and August 31, 1996 . . . . . . . . . . . 6 Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 7-10 PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 10 Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 10 Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 10 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 10 Item 4. Submission of Matters to a Vote of Securities Holders . . . . 11 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 11 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements ICON Fitness Corporation and its wholly-owned subsidiary, IHF Holdings, Inc. and its wholly-owned subsidiary, ICON Health & Fitness, Inc. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In Thousands)
ICON Fitness IHF ICON Health ICON Fitness IHF Holding, ICON Health Corporation Holdings, Inc. & Fitness, Inc. Corporation Inc. &Fitness,Inc. August 30, August 30, August 30, May 31, 1997 May 31,1997 May 31,1997 1997 1997 1997 ____________ ______________ _______________ ____________ ____________ ____________ Assets Current assets Cash $5,671 $5,671 $5,671 $5,560 $5,560 $5,560 Accounts receivable-net 143,706 143,706 143,706 192,825 192,825 192,825 Inventories: Raw materials 36,747 36,747 36,747 27,974 27,974 27,974 Finished goods 125,322 125,322 125,322 93,864 93,864 93,864 Deferred income taxes 14,919 14,777 14,409 8,401 8,301 8,006 Other current assets 10,595 10,595 10,595 12,895 12,895 12,895 Asset held for sale 17,080 17,080 17,080 17,080 17,080 17,080 Income tax receivable 7,440 7,440 7,440 7,429 7,429 7,429 ------- ------- ------- ------- ------- ------- Total current assets 361,480 361,338 360,970 366,028 365,928 365,633 Property and equipment Land 2,371 2,371 2,371 2,371 2,371 2,371 Building 17,130 17,130 17,130 17,391 17,391 17,391 Machinery and equipment 61,904 61,904 61,904 59,318 59,318 59,318 ------- ------- ------- -------- -------- -------- Total 81,405 81,405 81,405 79,080 79,080 79,080 Less:accum depreciation (30,817) (30,817) (30,817) (27,342) (27,342) (27,342) -------- -------- -------- -------- -------- -------- Property & equipment-net 50,588 50,588 50,588 51,738 51,738 51,738 Receivable from parent 2,307 2,307 2,307 2,307 2,307 2,307 Trademarks,ne 18,024 18,024 18,024 18,236 18,236 18,236 Deferred income taxes 10,587 7,622 8,338 6,405 -- Other assets 30,516 26,594 21,910 28,157 24,066 19,029 -------- -------- -------- -------- -------- Total assets $473,502 $466,473 $453,799 $474,804 $468,680 $456,943 ======== ======== ======== ======== ======== ========
See notes to consolidated condensed financial statements. ICON Fitness Corporation and its wholly-owned subsidiary, IHF Holdings, Inc. and its wholly-owned subsidiary, ICON Health & Fitness, Inc. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Continued) (In Thousands)
ICON Fitness IHF ICON Health ICON Fitness IHF Holding, ICON Health Corporation Holdings, Inc. & Fitness, Inc. Corporation Inc. &Fitness,Inc. August 30, August 30, August 30, May 31, 1997 May 31,1997 May 31,1997 1997 1997 1997 ____________ ______________ _______________ ____________ ____________ _____________ Liabilities and Stockholders' Equity (Deficit) Current liabilities Current portion of long-term debt $5,607 $5,607 $5,607 $5,401 $5,401 $5,401 Accounts payable 117,850 117,850 117,850 112,079 112,079 112,079 Interest payable 2,668 2,668 2,668 6,220 6,220 6,220 Accrued expenses 19,995 19,995 19,995 20,696 20,696 20,696 Income taxes payable 1,641 1,641 1,641 1,165 1,165 1,165 ------- ------- ------- ------- ------- ------- Total current liabilities 147,761 147,761 147,761 145,561 145,561 145,561 Long term-debt 499,760 408,532 325,875 489,400 401,196 321,625 Deferred income taxes -- -- 245 -- -- 501 Other liabilities 1,464 1,464 1,464 -- -- -- Stockholders' equity (deficit) Common stock & additional paid-in capital 49,698 127,767 166,184 49,699 127,767 166,184 Receivable from officers for purchase of equity (656) (656) (656) (656) (656) (656) Cumulative translation adjustment (389) (389) (389) (506) (506) (506) Retained earnings(deficit) (224,136) (218,006) (186,685) (208,694) (204,682) (175,766) --------- --------- --------- --------- --------- --------- Total Stockholders' Equity (175,483) (91,284) (21,546) (160,157) (78,077) (10,744) --------- --------- --------- --------- --------- --------- Total liabilities and stockholders' equity $473,502 $466,473 $453,799 $474,804 $468,680 $456,943 ========== ========== ========== ========== ========== ==========
See notes to consolidated condensed financial statements. ICON Fitness Corporation and its wholly-owned subsidiary, IHF Holdings, Inc. and its wholly-owned subsidiary, ICON Health & Fitness, Inc. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands)
For The Three Months Ended ICON Fitness IHF ICON Health ICON Fitness IHF Holding, ICON Health Corporation Holdings, Inc. & Fitness, Inc. Corporation Inc. &Fitness,Inc. August 30, August 30, August 30, August 31, August 31, August 31, 1997 1997 1997 1996 1996 1996 ____________ ______________ _______________ ____________ ____________ _____________ Net sales $127,482 $127,482 $127,482 $125,810 $125,810 $125,810 Cost of goods sold 92,334 92,334 92,334 90,581 90,581 90,581 Cost of goods sold- revaluation of HealthRider, Weider Sports and CanCo inventory 326 326 326 1,865 1,865 1,865 -------- -------- -------- --------- ------- ------- Gross profit 34,822 34,822 34,822 33,364 33,364 33,364 -------- -------- -------- --------- ------- ------- Operating expenses: Selling expenses 26,645 26,645 26,645 18,813 18,813 18,813 Research and development 1,920 1,920 1,920 1,639 1,639 1,639 General and administrative 13,837 13,837 13,837 10,887 10,887 10,887 ------ ------ ------ ------ ------ ------ Total operating expenses 42,402 42,402 42,402 31,339 31,339 31,339 ------ ------ ------ ------ ------ ------ Operating income (loss) (7,580) (7,580) (7,580) 2,025 2,025 2,025 Interest expense 14,591 11,569 8,482 8,773 8,773 6,167 Dividend on cumulative redeemable preferred stock of Subsidiary -- -- -- 1,275 -- -- Amortization of deferred financing fees 1,758 1,588 1,236 949 949 652 -------- -------- -------- ------- -------- -------- Loss before income tax (23,929) (20,737) (17,298) (8,972) (7,697) (4,794) Benefit from income taxes (8,487) (7,413) (6,379) (1,875) (1,875) (1,173) --------- --------- --------- -------- -------- -------- Net loss ($15,442) ($13,324) ($10,919) ($7,097) ($5,822) ($3,621) ========= ========= ========= ======== ======== ========
See notes to consolidated condensed financial statements. ICON Fitness Corporation and its wholly-owned subsidiary, IHF Holdings, Inc. and its wholly-owned subsidiary, ICON Health & Fitness, Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
For The Three Months Ended ICON Fitness IHF ICON Health ICON Fitness IHF Holding, ICON Health Corporation Holdings, Inc. & Fitness, Inc. Corporation Inc. &Fitness,Inc. August 30, August 30, August 30, August 31, August 31, August 31, 1997 1997 1997 1996 1996 1996 ____________ ______________ _______________ ____________ ____________ _____________ OPERATING ACTIVITIES: Net income/(loss) ($15,442) ($13,324) ($10,919) ($7,097) ($5,822) ($3,621) Adjustments to reconcile net income to net cash provided by operating activity: Provision for bad debt and advertising allowance 4,641 4,641 4,641 2,792 2,792 2,792 Provision/(benefit)for deferred taxes (8,767) (7,693) (6,659) (140) (140) -- Amortization of debt discount and deferred financing fees 7,944 4,752 1,313 3,607 3,607 703 Depreciation & amortization 3,966 3,966 3,966 2,284 2,284 2,284 Inventory revaluation 326 326 326 -- -- -- Interest expense attributable to dividends on preferred stock -- -- -- 1,275 -- -- Changes in operating assets and liabilities: Accounts receivable 44,556 44,556 44,556 9,360 9,360 9,360 Inventory (40,558) (40,558) (40,558) (37,004) (37,004) (37,004) Other assets (2,166) (2,166) (2,166) 387 387 950 Account payable and accrued expenses 3,441 3,441 3,441 (7,079) (7,079) (7,079) -------- -------- -------- -------- -------- -------- Net cash received from/(used in) operating activities (2,059) (2,059) (2,059) (31,615) (31,615) (31,615) INVESTING ACTIVITIES: Payments for acquisitions -- -- -- (28,203) (28,203) (28,203) Purchases of property and equipment (2,325) (2,325) (2,325) (6,598) (6,598) (6,598) ------- ------- ------- -------- -------- -------- Net cash received from /(used in) investing activities (2,325) (2,325) (2,325) (34,801) (34,801) (34,801) ------- ------- ------- -------- -------- -------- FINANCING ACTIVITIES: Proceeds from long-term debt, net of payments 4,378 4,378 4,378 51,924 51,924 51,924 ----- ----- ----- ------ -------- -------- Net cash received from/ (used in) financing activities 4,378 4,378 4,378 51,924 51,924 51,924 ----- ----- ----- ------ -------- -------- Effect of exchange rate change on cash 117 117 117 (234) (234) (234) ----- ----- ----- -------- -------- -------- Net increase/(decrease)in cash 111 111 111 (14,726) (14,726) (14,726) Cash at beginning of period 5,560 5,560 5,560 19,313 19,313 19,313 ------ ------ ------ -------- -------- -------- Cash at end of period $5,671 $5,671 $5,671 $4,587 $4,587 $4,587 ====== ====== ====== ====== ======== ======== SUPPLEMENTAL DISCLOSURES: Cash paid (received) during the year for: Interest $11,481 $11,481 $11,481 $9,073 $9,073 $9,073 Income taxes ($174) ($174) ($174) $35 $35 $35
See notes to consolidated condensed financial statements. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Basis of Presentation IHF Holdings, Inc. ("IHF Holdings") is a holding company whose principal asset is all of the capital stock of ICON Health & Fitness, Inc. ("ICON Health"). ICON Fitness Corporation ("ICON Fitness") is a holding company whose principal asset is all of the capital stock of IHF Holdings. IHF Capital, Inc. ("IHF Capital") which is not a registrant, is a holding company whose principal asset is all of the common stock of IHF Fitness. Unless the context requires otherwise, all references herein to the "Company" refer to the combined operations of the companies. The accompanying consolidated condensed financial statements and notes should be read in conjunction with the financial statements contained in the Company's Annual Report on Form 10-K. In the opinion of management, the accompanying consolidated condensed financial statements include all adjustments necessary for a fair presentation of the results of the interim periods presented and all such adjustments are of a normal recurring nature. The home fitness industry is seasonal in nature and the results of operations for the interim periods presented may not be indicative of the results for the full year. The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the consolidated financial statements and the reported amount of revenues and expenses during the period. Actual results could differ from those estimates. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. The Company's actual results could differ materially from those set forth in the forward-looking statements. Seasonality The Company has historically sold the majority of its products to customers in its second and third fiscal quarters (i.e., from September through February). Increased sales and distribution typically have occurred in the Christmas retail season and the beginning of a new calendar year because of increased customer promotions and customer purchases. While this seasonality has been the trend, it may not be indicative of the results to be expected for this fiscal year or any future years. The following table reflects the Company's net sales for the first quarter of fiscal 1998 and for each quarter in fiscal 1997 and fiscal 1996. First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Fiscal 1998 $127.5 -- -- -- Fiscal 1997 $125.8 $249.5 $248.7 $212.2 Fiscal 1996 $124.8 $228.5 $240.9 $153.4 Operating Results for the First Quarters of 1998 and 1997 --------------------------------------------------------- Net sales were $127.5 million in the first quarter of fiscal 1998, compared to $125.8 million in the first quarter of fiscal 1997. Domestic treadmill sales increased $23.8 million in the first quarter of fiscal 1998 to $67.3 million compared to $43.5 million in the first quarter of fiscal 1997. Domestic treadmill sales accounted for approximately 52.8% and 34.6% of total net sales during the first quarter of fiscal 1998 and 1997. Sales of the Company's line of upright rowers decreased $19.4 million to $1.6 million from $21.0 million in the first quarter of 1997. Sales of trampolines decreased $4.3 million in the first quarter of 1998 to $13.1 million from $17.4 million in the first quarter of fiscal 1997. The Company has introduced several new products which include Airwalkers, home spas, relaxation chairs and elliptical products which generated $7.0 million of sales in the first quarter of fiscal 1998 compared to $.8 million in the first quarter of fiscal 1997. Gross profit for the first quarter of fiscal 1998 was $34.8 million, or 27.3% of net sales, compared to $33.4 million, or 26.6% of net sales, for the first quarter of fiscal 1997. The step-up of HealthRider inventory increased cost of sales by $.3 million in the first quarter of fiscal 1998 and $1.9 million in the first quarter of fiscal 1997. Without these charges, the gross profit would have been 27.5%, and 28.1% for the first quarter of fiscal 1998 and 1997 respectively. This decrease is attributed to the changes in product mix. Selling expenses were $26.6 million, or 20.9% of net sales, in the first quarter of fiscal 1998 compared to $18.8 million, or 14.9% of net sales, for the first quarter of fiscal 1997. This increase of $7.8 million over the same period last year is primarily due to the increase of selling expenses of HealthRider from $2.5 million for two weeks of operation included in the first quarter of 1997 to $5.5 million for the first quarter of fiscal 1998. Other increases include freight charges of $1.8 million, customer service and warranty expenses of $1.2 million and bad debt expenses of $1.0 million. Research and development expenses were $1.9 million or 1.5% of net sales, for the first quarter of 1998 compared to $1.6 million, or 1.3% of net sales, for the first quarter 1997. General and administrative expenses totaled $13.8 million, or 10.8% of net sales, for the first quarter of 1998 compared to $10.9 million, or 8.7% of net sales, for the first quarter of 1997. This increase in general and administrative expenses as a percentage of sales can be attributed in part to the inclusion of the operating results of HealthRider and ICON of Canada for the entire first quarter of fiscal 1998. These costs were $.4 million for the first quarter of 1997 compared to $1.5 for the first quarter of 1998. The balance of $1.8 million is due to the higher costs associated with operating the Company's business. As a result of the foregoing factors, the operating loss was $7.6 million in the first quarter of fiscal 1998, compared to operating income of $2.0 million in the first quarter of fiscal 1997. Interest expense, including amortization of deferred financing fees, was $9.7 million for ICON Health, $13.2 million for IHF Holdings and $16.3 million for ICON Fitness in the first quarter of fiscal 1998 compared to $6.8 million for ICON Health and $9.7 million for IHF Holdings and ICON Fitness for the first quarter of fiscal 1997. In the first quarter of fisal 1997, ICON Fitness recorded an additional $1.3 million of interest expense related to dividends accruing on the IHF Holdings preferred stock issued in connection with the Recapitalization and which was held by affiliates of the Company. The IHF Holdings preferred stock was redeemed with the proceeds of the 14% Series A Senior Secured Discount Notes issued in November 1996. Interest expense has increased due to the interest associated with these Senior Discount Notes, the Company's growth and the high level of borrowing incurred in connection with the HealthRider Acquisition, the WHF Settlement the Weider Sports and CanCo Acquisitions. The income tax benefit was $6.4 million for ICON Health, $7.4 million for IHF Holdings, and $8.5 million for ICON Fitness for the first quarter of 1998 compared with a tax benefit of $1.2 million for ICON Health and a tax benefit of $1.9 million for IHF Holdings and ICON Fitness during the first quarter of fiscal 1997. This is a result of the increase in the loss before income tax during the first quarter of 1998 compared to the same period in the preceding year. As a result of the foregoing factors, the net operating loss was $10.9 million for ICON Health and $13.3 million for IHF Holdings and $15.4 million for ICON Fitness for the first quarter of 1998 compared to net operating loss of $3.6 million for ICON Health, $5.8 million for IHF Holdings and $7.1 million for ICON Fitness during the same period for fiscal 1997. Advertising allowances with retail customers have increased by $3.2 million to $6.1 million at August 30, 1997 from $2.9 million at May 31, 1997. Advertising allowances are generally a fixed percentage of sales to customers. Fluctuations in the balance of this allowance are attributable to changes in customer sales mix and the timing of when allowances are taken. Bad debt allowances totaled $3.3 million at August 30, 1997 compared to $2.6 at May 31, 1997. This increase in the allowance is primarily due to additional amounts allocated to the Montgomery Ward provision. Montgomery Ward recently filed for protection under Chapter 11 of the Bankruptcy Code. Terms with retail customers remained unchanged from previous periods. Liquidity and Capital Resources ------------------------------- As a result of the Company's Recapitalization on November 14, 1994, the Company's cash needs have changed significantly. Management believes that cash flows from operations and ICON Health's ability to make revolving credit borrowings under the amended Credit Agreement will provide adequate funds for working capital, planned capital expenditures and debt service obligations for the foreseeable future. Nevertheless, the Company is highly leveraged, and the ability to fund operations, make planned capital expenditures, make scheduled debt payments and refinance indebtedness depends on future operating performance and cash flows, which in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company's control. In the first three months of fiscal 1998, the Company used $2.1 million of cash in operating activities primarily as a result of increased inventory in preparation of the Company's peak selling season. During the first three months of fiscal 1998, the Company had a net increase in cash of $.1 million. The Company also used $2.3 million of cash in the first three months of fiscal 1998 for capital expenditures primarily related to tooling and manufacturing equipment. At August 30, 1997, ICON Health had $184.5 million of revolving credit borrowings under the Credit Agreement. At the close of the quarter additional availability under this Credit Agreement was $16.4 million. Management believes that availability under this amended Credit Agreement is adequate to meet the Company's obligations. The revolving credit borrowings have increased by $5.7 million from $178.8 million reported at the end of fiscal 1997. Line of Credit borrowings have historically been used to fund increased inventory levels, finance normal trade credit for customers, finance acquisitions, make interest payment on debt issued in connection with the Company's Recapitalization and to fund capital expenditures. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company is party to a variety of non-product liability commercial suits involving contract claims and intellectual property claims. The Company believes that potential adverse resolution of these suits will not have a material adverse effect on the Company. The Company is also involved in several patent infringement claims, arising in the ordinary course of its business. The Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. Exhibits. 27.1 Financial Data Scheduled for ICON Fitness Corporation 27.2 Financial Data Schedule for IHF Holdings, Inc. 27.3 Financial Data Schedule for ICON Health & Fitness, Inc. Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. ICON Fitness Corporation IHF Holdings,Inc. ICON Health & Fitness, Inc. (Registrants) Date: October 14, 1997 _________________ By /s/ Gary Stevenson ________________________________ Gary Stevenson, President By /s/ S. Fred Beck ______________________________________ S. Fred Beck, Chief Accounting Officer EX-27 2
5 SCHEDULE 27.1 This schedule contains summary financial information extracted from the August 30, 1997 Financial Statements included in the Company's Form 10-Q and is qualified in its entirety by reference to such Form 10-Q. 0001029294 ICON Health Fitness Corporation 1000 3-MOS MAY-31-1998 JUN-01-1997 AUG-30-1997 5671 0 156498 12792 162069 361480 81405 30817 473502 147761 499760 0 0 49698 (225181) 473502 127482 127482 92660 42402 0 0 14591 (23929) (8487) (15442) 0 0 0 (15442) 0 0
EX-27 3
5 SCHEDULE 27.2 This schedule contains summary financial information extracted from the August 30, 1997 Financial Statements included in the Company's Form 10-Q and is qualified in its entirety by reference to such Form 10-Q. 0000934799 IHF Holdings Inc 1000 3-MOS MAY-31-1998 JUN-01-1997 AUG-30-1997 5671 0 156498 12792 162069 361338 81405 30817 466473 147761 408532 0 0 127767 (219051) 466473 127482 127482 92660 42402 0 0 11569 (20737) (7413) (13324) 0 0 0 (13324) 0 0
EX-27 4
5 SCHEDULE 27.3 This schedule contains summary financial information extracted from the August 30, 1997 Financial Statements included in the Company's Form 10-Q and is qualified in its entirety by reference to such Form 10-Q. 0000934798 ICON Health & Fitness Inc 1000 3-MOS MAY-31-1998 JUN-01-1997 AUG-30-1997 5671 0 156498 12792 162069 360970 81405 30817 453799 147761 325875 0 0 166184 (187730) 453799 127482 127482 92660 42402 0 0 8482 (17298) (6374) (10919) 0 0 0 (10919) 0 0
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