Fitness company bulks up with acquisitions
Seattle Times business reporter
Founded:1981; now a subsidiary of Amer Sports Corp.
Employees: 733 total, about 500 in Woodinville.
2005 sales: $311 million, up 20 percent from 2004 (72 percent clubs and institutions, 28 percent home).
2005 operating profit: $38.4 million, up 30.1 percent from 2004.
Competitors: Nautilus, Life Fitness, Cybex, Technogym, Icon.
Source: Company reports
Although its treadmills, elliptical cross-trainers and other exercise machines are stationary, Precor is pulling ahead of the pack.
Last year, sales at the Woodinville-based company surged by 20 percent, while the industry as a whole grew by less than 4 percent. In the three and a half years since it was bought by Finnish sporting-goods giant Amer Sports, Precor has grown into a $311 million-a-year business.
Now, bulked up by a couple of key acquisitions, Precor is setting its sights on further integrating electronics and entertainment with exercise.
The company's next generation of high-end fitness equipment, to be unveiled later this month, will build on technologies it gained in 2004 with the $22 million purchase of Pittsburgh-based ClubCom and its Cardio Theater division. ClubCom provided closed-circuit TV programming to fitness centers; Cardio Theater made audio and video systems for clubs.
"If you come out with the same thing every year — a little bit better bike, a little bit better treadmill — it's going to take you a long, long time to achieve your goals," said Paul Byrne, Precor's president. "So we took a look at what's actually going on in clubs, and it was clear that people want to be entertained."
Such a blending of fitness and entertainment is a far cry from Precor's early days. Its roots go back to 1981, when industrial engineer David Smith started the company to make private-label rowing machines for Woodinville-based Amerec.
Smith's company was bought in 1984 by Dart & Kraft. That conglomerate split three years later, with most of the non-food businesses becoming part of Premark International. Premark was bought by Illinois Tool Works in 1999, which had little interest in Precor.
"They kept us for the two years they had to keep us, because of the way the transaction was structured, but as soon as those two years were up — boom, we were on the market," Byrne said.
Precor was sold in 2002 to Amer Sports, a Finnish sporting-goods behemoth whose other brands include Wilson, Salomon and Atomic, for about $182 million. In 2004, Amer bought Fitness Products International, makers of Icarian-brand weight machines, to round out Precor's portfolio.
Ellipticals, though, are still at the heart of Precor's business. The exercise machines — something like a cross between a stairclimber, a stationary bike and a cross-country ski machine — offer many of the advantages of treadmills but with much less impact on an exerciser's knees and ankles.
"Precor was virtually the leader in ellipticals," said. Michael Peterson, associate director for operations at the University of Washington's Intramural Activities Building. "They were two to three years ahead of the curve compared to everyone else."
Precor's machines have a good reputation for quality and user-friendliness, Peterson said.
The U.S. fitness-equipment business was mostly flat from 2001-2003, especially in the club/institutional segment where Precor makes more than two-thirds of its sales. The business has rebounded in the past two years, however, as the economy has improved. Precor's operating profit jumped 30 percent last year.
Not every equipment maker has benefited, though. Vancouver, Wash.-based Nautilus, for instance, saw total sales rise by 20.4 percent last year, but net profit slipped from $29.9 million to $23.8 million — largely due to production problems in the fourth quarter.
Getting Precor's machines in fitness clubs and keeping them there also helps market them to potential home buyers, Byrne said.
"A company our size doesn't have the ability to do a national branding campaign," he said. "In our view, one of the best ways for us to get our product out in front of customers was to get the products in the clubs."
Byrne, 54, ought to know. A former college athlete (running back, Colgate), he has been in the fitness-equipment business for pretty much his entire adult life — since he and some college friends started a chain of equipment stores. After selling out his share, Byrne went to work for Precor's sales and marketing department in 1985 and has been with the company ever since; he was named president in 2000.
It makes sense, Peterson said, that Precor and other equipment makers are trying to incorporate more entertainment technology into their machines.
"There's no doubt about it — if you put a TV screen in front of [users], give them something to watch or a way to listen to their favorite music, it makes the exercise easier to do and draws them back."
Ultimately, Byrne said, he wants to sell fully integrated hardware-software systems — machines that keep exercisers amused while they sweat, help them vary their workouts for maximum results, and simultaneously give club owners constant feedback on which machines are used the most, what times they're most popular, and when they need to be repaired or replaced.
"Our guys will be able to go to clubs and say, 'We really want to help you manage your business,' " he said.
Copyright © 2006 The Seattle Times Company