Schwinn

2003

Pacific Cycle LLC Headed for Auction

Pacific Cycle LLC, owner of the Schwinn and GT bicycle brands, is headed for the auction block. Wind Point Partners, a midsize private equity firm based in Chicago, has hired CIBC World Markets to start soliciting buyers for the business, which is considered one of the few bicycle makers operating in high gear. It seeks about a $500 million valuation for Pacific Cycle, in which it owns a 43% stake. CEO Chris Hornung owns a 35% stake and may not sell.

Since buying a stake in Pacific Cycle in 1998, Wind Point has positioned it to win much of the U.S. mass merchant bicycle business at a time when mass merchandisers were taking market share away from specialty retail shops. Pacific Cycle's original mission was to import bikes from Asia and sell them cheaply to places such as Toys "R" Us Inc. and Wal-Mart Stores Inc. But in the past two years, it has refined its strategy by buying the same brand name competitors it helped replace, including Schwinn/GT Corp. for $86 million and Brunswick Corp.'s bike division, which includes the Mongoose and Roadmaster brands, for $60 million. Pacific Cycle is the largest bicycle company in the U.S., selling 30% of the bicycles bought in the states.

Wind Point projects Pacific Cycle will generate $55 million in Ebitda in 2003, up from $45 million in 2002. But buyers are likely to be skeptical of projected numbers. "It's a good short," said a partner at one firm, explaining that it is hard to make money in the bicycle industry. The most interested buyers are likely to be private equity firms willing to pay between a 5 and 6 times Ebitda multiple (about $275 million). There will also be cautious bidding because several high-profile buyout firms have failed miserably in the bicycle business. Questor Partners in 2000 lost $70 million of cash in bicycle maker Schwinn/GT Corp. before Pacific Cycle bought it out of bankruptcy.

September 11–12, 2001

Schwinn/GT Cycling & Fitness Divisions Sold For $151 Million

In a U.S. District Court bankruptcy auction in Denver, CO, as an Acceptance Tender Joint Bid for the assets, the successful bidders to acquire the assets of Schwinn/GT were announced.

The Schwinn/GT Cycling Divisions sold for $86 million to Pacific Cycle, LLC — 4902 Hammersley Road, Madison, WI 53711. General line: 608-268-2468. Consumer hotline: 1-800-SCHWINN. The parent company of Mongoose Bicycles. Changes at Schwinn and GT include the elimination of the parts and accessories business. The earliest Pacific Cycles will introduce Schwinn to mass retail would be fall 2002. Schwinn/GT BMX Bikes at Bike Shops Only — BMX Racing/Freestyle Bikes are NOT in mass retail at this time.

The Schwinn Fitness Divisions sold for $65 million to Direct Focus, Inc. / The Nautilus Group — 1400 NE 136th Ave, Vancouver, WA 98684. Phone: (800) 618-8853. The parent company of Bowflex Fitness Equipment. Schwinn Fitness will remain in Boulder, CO for the near future. Nautilus/Schwinn Fitness - Retail Consumer Relations: 1690 38th Street, Boulder, CO 80301. Phone: (800) 688-9991.

December 31, 2002

Pacific Cycle Licenses Brand Names To Torpedo Sports

MADISON, WI. Pacific Cycle signed a five-year licensing deal with Torpedo Sports USA, a wholly owned subsidiary of Torpedo Sports of Quebec, Canada, allowing the snow sports company to use the Flexible Flyer, Mongoose and Schwinn brand names on products such as sleds, toboggans and snowboards. The agreement stipulates that Torpedo has the exclusive rights to market Flexible Flyer and Mongoose snow products and the non-exclusive rights to the Schwinn name.

November 27, 2002

Pacific Creates New Sales Territory, Adds Staff

MADISON, WI. Pacific carved out a new sales territory, hired new sales reps and brought on a new warranty manager. The new territory will include parts of upstate New York, Vermont, Massachusetts and Connecticut. Pacific hired Adam Andrade as the territory's sales manager. Andrade, who lives in Poughkeepsie, New York, most recently worked for Bikeway in Wappingers Falls, New York.

Pacific hired Dave Carson as its new outside sales rep for Oregon, Washington, Alaska, Western Montana and northern Idaho. Carson, who lives in Woodinville, Washington, most recently was director of parts and accessories at Raleigh USA. Lee Emmons is the company's new warranty manager for IBD and mass-merchant product. Emmons most recently managed the customer service call center for WPS Insurance in Madison, Wisconsin.

November 5, 2002

Pacific Cycles Built Up a Smooth Operation — Forbes Magazine

Christopher Hornung had just nosed out a rival for the deal of his life. The founder of Pacific Cycles put in an $86 million bid for the venerable — but twice-bankrupted — Schwinn/GT Bicycle Co. The offer was $3 million higher than the previous day's bid and $22 million more than the starting price. But Hornung needed to knock out his competition, Dayton, Ohio-based Huffy, and do it quickly. Seven minutes after the judge approved his price, the bankruptcy court was evacuated; it was the morning of Sept. 11.

Schwinn gave Hornung control of a premium brand and boosted his share of the bicycle market to a dominant 30%. With the acquisition, Pacific Cycles would rack up $280 million in revenues for 2001, up from just $140 million the year before. Just one problem: Schwinn, though down on its luck, maintained its marquee image through 2,700 finicky dealers, many of whom provided personal service. Pacific Cycles, by contrast, sold mid-tier bikes through the largest retail chains — Toys "R" Us, Target, Wal-Mart.

Hornung had spent 25 years building a lean operation that imported bikes from China and shipped them directly to the chains, which account for 80% of the bikes sold in America. The business grew out of a promotional scheme by an electronics store in sleepy Madison, Wis. — free bikes to buyers of high-end TVs and stereos. Deciding to go off on his own in 1979, Hornung began importing low-end bikes from China, up to 150,000 a year, to 60 markets across the U.S. "We were a manufacturer's dream," he laughs. "We just wanted one size and one color."

Schwinn, meantime, had been skidding since the late 1980s. It missed the mountain-bike trend, dismissing it as a fad, and filed for Chapter 11 in 1993. Recovering four years later, the company spent $170 million for the flashy high-end bikemaker GT. Plagued by at least $7 million in losses, as well as flat companywide sales and production problems, Schwinn, founded in 1895, was forced into bankruptcy again last year.

Once the deal closed Sept. 11, Hornung set about cleaning house. Pacific began a rapid cost-cutting program, closing headquarters buildings and seven warehouses. That saved $4 million on rent. Smith canned more than 300 people, most of them in administrative jobs, and scaled back Schwinn's $12 million marketing budget. By year-end, Schwinn's operating costs were trimmed to $5 million from $59 million.

A month after the buyout, Hornung and Smith headed to Las Vegas for the Interbike show, hoping to persuade dealers that while Schwinn would be sold in chain stores, dealers would have exclusive rights to particular upscale models. Among them: the Moab and Delta 88 lines (price: $500 to $1,600), and the Voyager GSX line with dual-drive hubs ($550). Less pricey models would go to mass retailers.

October 17, 2002

Pacific Cycle Partners With German Distributor

Pacific Cycle signed a multi-year agreement with Epple Zwetrad to distribute GT Bicycles in Germany. "We are excited to be working with Epple," said Pete Garski, director of GT's international sales. "Manfred Neun and his team have a proven track record of building brands in the German market."

Former GT parent company Schwinn/GT distributed GT bicycles in Germany prior to filing for bankruptcy in July 2001. Epple has manufactured and distributed trekking bikes for more than 70 years in Germany. The company has warehouses in Memmingen and Bayreuth and more than 120 employees to serve its 3,800 German dealers.

October 2, 2002

TJ Lavin To Ride For Schwinn In 2003

Vernon Hills, IL — Three-time X-Games gold medallist TJ Lavin has signed with Schwinn for 2003. TJ has won everything in BMX jumping. He was the BMX dirt championship gold medallist in ESPN's 1997, '98 and '99 X-Games. He took the prestigious King of Dirt title in 1999, and also won the gold medal at the '99 Gravity Games.

"We're very excited to have TJ riding for Schwinn," said Travis Chipres, Schwinn's team director. "TJ's accomplishments on and off the bike have been phenomenal, he's always pushing himself and the sport, and I have all the confidence in the world in him and his abilities."

In addition to his television appearances during the X-Games and Gravity Games broadcasts, Lavin's stunts have been featured on MTV's Backyard BBQ, in advertising for Ford and Mountain Dew and in video games. He starred in this year's IMAX film, "Ultimate X." In his spare time, the multi-talented Las Vegas native plays piano and composes music.

"BMX has given me confidence to pursue things I wouldn't have thought possible otherwise," said Lavin. "I want to keep the sport of BMX dirt jumping headed in the right direction, to help it grow so more kids can enjoy the sport and everything it has to offer, and the Schwinn brand adds a lot of horsepower."

September 27, 2002

Genesis Cycle Of Toronto Will Handle GT In Canada

TORONTO, Ontario — Genesis Cycle of Toronto will distribute GT in Canada, focusing on the independent retail channel. "We are extremely pleased to be able to bring this brand back to Canada. Our plan is to rebuild the GT line to its former status in Canada, through the IBD channel," said Elio Moracci, owner of Genesis Cycle.

GT's previous Canadian distributor was Norco, also headquartered in Toronto. Norco executives last fall declined to order GT's 2002 line, citing potential delivery delays and uncertainties surrounding Schwinn/GT's bankruptcy and subsequent purchase by Pacific Cycle. Genesis has been in the cycling business for more than 30 years, and began distributing bikes, parts and accessories to Canadian retailers in 1996.

September 16, 2002

New Licensee For Schwinn Classic Parts

Vernon Hills, IL — Under the new agreement, Pacific Cycle has licensed the rights to manufacture and distribute Classic Schwinn bicycle parts for such icon bikes as the Sting-Ray, Phantom and other Classic Schwinn models. Parts include fenders, handlebars, chainguards, forks, pedals, hubs, tires, reflectors, saddles, tanks and other Classic parts and components. The parts will be available early in 2003 through independent bicycle dealers.

"We are very pleased to have the opportunity to reproduce Classic Schwinn parts," said Chad Kellenberger, CEO of Maple Island Sales, LLC. "Schwinn's rich 107-year history of quality bike parts nicely compliments our existing business of supplying parts to the classic bike collectors." The agreement is in response to Pacific Cycle's ongoing commitment to the independent bicycle dealers and their need for Schwinn Classic parts.

September 12, 2002

Pacific Expands Madison Offices, Employees

MADISON, WI. Pacific on Friday will break ground on an addition to its Madison offices. The new wing will be twice as large as Pacific's existing building and bump the total space to 35,000 square feet. The wing will house Pacific's executive offices, service department and some logistic department personnel. The current 12,000 square foot space will be used primarily as a design space.

Chris Hornung, Pacific's chief executive officer, said the growth of its IBD program forced Pacific to add more space. "We also are bringing 90 percent of our design team into the building." Pacific's design team is currently scattered in three locations — two in Madison and one in Southern California. Pacific's California team will remain there.

August 13, 2002

Schwinn Enters Mass, Specialty Retailers Shrug Shoulders

VERNON HILLS, IL — Without much hoopla, Schwinn bikes arrived at Wal-Mart, Target and Toys R Us last week. Reactions vary widely across the industry. "We are happy with the launch, and the consumer acceptance is well beyond expectations," said Richard Whittenberg, Pacific's vice president of marketing and business development.

Retailers who spoke with Bicycle Retailer & Industry News said their business was not immediately affected. Mike Abel owns Huntington Beach Bicycle in Huntington Beach, California. "We don't think our business has been affected by it," he said. Pacific's Whittenberg said Schwinn's specialty retailers had mixed reactions. "Some are impressed by the quality and pleased that we aren't tarnishing the Schwinn brand; others are more emotional and worried that they can't compete against mass merchants."

August 9, 2002

Schwinn's New Chains — The Classic Bike Brand Ends Its Exclusive Reliance on Specialty-Shop Sales

The gold standard of traditional American bicycles started appearing in Wal-Mart, Target and Toys R Us stores this month, stunning the U.S. cycling industry and promising to transform the way bicycles are sold. Schwinn, the premier brand of Pacific Cycle LLC, has long been a staple of specialty bike shops, which sell its family, off-road and sleek racing bikes for up to $2,800 apiece.

"We need to get as many people as we can interested in cycling again," said Richard Wittenberg, Pacific's vice president of marketing and business development. "We need to go where America shops." The three chains are the nation's largest bicycle retailers. The decision is bold but controversial — never before has a top-tier bicycle brand been sold in both the specialty shops and big-box chains.

"It's a fundamental change in the way bicycles have been marketed and distributed since the end of World War II," said Jay Townley, an industry consultant in Lyndon Station, Wis. "It's a paradigm shift."

The National Sporting Goods Association reports that the bicycle-riding public peaked at 56 million people in 1995, then plummeted to 39 million last year. Adults 35 to 44 years old still make up the most enthusiastic group of bike riders. But the size of that group is expected to shrink by 5.5 million between 2000 and 2010. Meanwhile, the 55 to 64 age group should swell by 11.4 million — bad news for the industry because bicycle ownership and ridership rates dip sharply among that age group.

August 7, 2002

Schwinn Bicycles Launch in Mass Retail

MADISON, Wis. — Pacific Cycle announced that its Schwinn Bicycles — the American icon of premium-quality bicycles — will now be available for the entire family at mass-merchandising retailers Wal-Mart, Toys 'R' Us and Target.

"Cycling is a family sport, and our move into the mass-market channel simply recognizes that Schwinn — the premium bike brand — must be available where most families shop today," said Chris Hornung, Pacific Cycle's founder and chief executive officer. "Our goal is to provide consumers with the signature Schwinn quality, at a price that fits their budget."

Pacific Cycle emphasized that its much broader assortment of higher-end Schwinn models targeted to bike enthusiasts will continue to be sold in independent bike stores. Generations of Americans grew up riding the classic Stingray and Phantom models that Schwinn marketed in neighborhood bike shops, which have carried the brand since it was introduced in 1895.

The retail bicycle business is a $3 billion-a-year industry and Pacific Cycle — which also owns GT and Mongoose — is the leading bike distributor with a 30 percent industry share and anticipated 2002 sales of more than $380 million.

July 10, 2002

Pacific Licenses Brands To Parts Maker PTI

MADISON, WI. Pacific signed a multi-year licensing deal with parts and accessory maker PTI in which PTI will produce and distribute Schwinn, GT and Mongoose-brand parts and accessories to mass merchants, sporting goods chains and specialty retailers. The agreement covers a wide range of parts and accessories, including helmets, locks, pumps, water bottles, bags, gloves and saddles.

The deal could help PTI compete with Bell Sports for mass merchant floor space. Bell is a leading supplier of bike accessories to mass merchants and specialty retailers. In related news, bike rack and accessory maker Graber signed a licensing agreement with Schwinn to sell Schwinn-brand roof racks to the mass market.

June 17, 2002

Currie To Sell Schwinn/GT Electric Scooters

VAN NUYS, CA. Electric bike and scooter maker Currie Technologies is licensing the Schwinn, GT and Mongoose brand names from Pacific Cycle for a new line of electric scooters it will introduce this summer. Malcolm Currie, chairman and chief executive officer of Currie, said his company will "follow Pacific Cycle's brand styling direction and focused distribution into the market place." "Currie Technologies brings Pacific a solid company with strong, proven electric-vehicle expertise and valuable resources," Byron Smith, Pacific's president, said in a statement.

June 14, 2002

GT Bicycles Revives BMX Airshow

MADISON, WI. GT Bicycles is reviving its Airshow, a traveling BMX stunt team. GT Airshow was once the largest and busiest of its kind, performing at NBA halftime shows and large country fairs. When Pacific purchased GT last year, many riders and team managers left and formed a new team under Satellite Sports. Pacific, however, retained rights to the Airshow name and its equipment, including trailers and ramps. The team will perform its first show on June 15 in Los Angeles, California.

June 12, 2002

Cantilever Frame Styled From 1955 Schwinn Design

Madison, WI — Remember the Schwinn Twinn and Town & Country tandems? The glory days are back, this time under the guise of the new Schwinn Tango tandem, based on the classic Schwinn cantilever frame design. Features include Schwinn unicrown fork, 7-speed Shimano Revo twist shifting and Mega-Range gearing, linear-pull brakes, whitewall Schwinn Typhoon balloon tires, swept-back steel Cruiser handlebars, ultra-comfortable Schwinn Sofa spring saddles and full-length chainguard. Manufacturer's suggested retail price: $549.95.

"This is the first time Schwinn has offered a Cruiser tandem since the popular Twinn models of the 1970s," said Lance Bohlen, Schwinn's Director of Product Development. "The Tango acknowledges our past while respecting available technology and creature comforts." Schwinn Bicycle Company, based in Madison, WI, has been designing, marketing and distributing bicycles and related products in the U.S. since 1895.

May 29, 2002

Pacific Cycle Promotes, Hires Employees

MADISON, WI. Since taking over Schwinn/GT, Pacific Cycle has been on a promotion and hiring spree. Jim Coninx was named executive vice president finance/CFO; Rob Gooze was named executive vice president supply chain; Bob Ippolito was named executive vice president product and services; and Bruno Maier was named vice president sales. Bob Habersaat was promoted to vice president sporting goods chains sales; Richard Wittenberg was named vice president of marketing and new business development.

Recently hired employees include: Lance Bohlen, director of Schwinn product development; Alice Tillett, vice president sales; Nick Andrade, vice president IBD sales; Jeff Frehner, vice president human resources and associate general counsel; Rick Castle, director of planning and procurement; and Stacy Martin, vendor management inventory analyst.

May 22, 2002

Pacific Cycle and Unicycle.com Sign Exclusive Distribution Agreement

Madison, WI — Pacific Cycle and Unicycle.com have signed an exclusive distribution agreement for Schwinn unicycles worldwide. Under the terms of the agreement, Unicycle.com will manufacture and distribute Schwinn Black Phantom unicycles and replacement parts.

"Being associated with the Schwinn name is an honor," said John Drummond, president of Unicycle.com. "We have traded on the Schwinn reputation for quality and individual service. Schwinn has earned a respectable following among unicyclists, and we are committed to the retailers who serve those loyal customers." The new Schwinn unicycle will be available at bike, juggling and skate shops in fall 2002.

May 21, 2002

Direct Focus Changes Name to The Nautilus Group

Vancouver, WA. Direct Focus, Inc. changes its name to The Nautilus Group. The Nautilus Group, Inc., a leading marketer, developer, and manufacturer of branded health and fitness products, is ushering in a new corporate identity with a bell-ringing ceremony that marks the company's name change and move to the New York Stock Exchange.

The Nautilus Group sells its Nautilus, Schwinn and StairMaster commercial fitness equipment through its sales force and selected dealers to health clubs, government agencies, hotels, corporate fitness centers, colleges, universities, and assisted living facilities. The Company is headquartered in Vancouver, Washington.

May 14, 2002

Pacific Lays Out Plan For Schwinn, GT

MADISON, WI. Since the Interbike Expo, Pacific Cycles has been reshuffling its distribution plan for Schwinn and GT. The ace in Pacific's hand is that it will not sell GT bikes through mass merchants such as Wal-Mart or Target for at least another year. "Since taking over GT we have a new appreciation for why GT customers are so loyal to the brand. They aspire to it because it represents high-performance," said Chris Hornung, Pacific's president.

Pacific designed two distinct Schwinn lines for next year. One, with price points mostly below $300, will go to mass retailers this fall. Specialty retailers and sporting-goods chains will have a dedicated line that contains traditional models such as the Mesa and Sierra. Prices range from $200 to $1,000.

GT is positioned as the high-end, technology-driven brand in Pacific's portfolio. Nick Andrade, the new head of Pacific's IBD sales team, said GT needs about 1,000 retailers to remain viable in the specialty retail market. Currently, there are 350 GT dealers, a significant decline from the 3,000 retailers that once sold GT bikes.

"Schwinn will be the industry's poster child for family-oriented events. It will be the focal point for enlarging rider population. We are losing people as an industry and Schwinn is the brand that is going to bring them back," said Richard Wittenberg, Pacific's vice president of global sales.

May 6, 2002

Schwinn, Mongoose Bikes Featured In Gap TV Spots

MADISON, WI. The Gap is running 30-second television commercials nationwide featuring actors riding Schwinn and Mongoose bicycles down a deserted city street. "I didn't even realize The Gap was using our products in the commercials until I saw them myself," said Gary Boulanger, public relations director for Schwinn and Mongoose. Roman Coppola directed the commercial, which features actors and actresses from recent movies and television shows riding Schwinn cruisers and a Mongoose 24-inch BMX bike.

April 1, 2002

Pacific Hires Boulanger To Lead Public Relations

MADISON, WI. Pacific Cycles hired industry veteran Gary Boulanger to lead its public relations efforts. "Pacific has a great group of people and I like Chris Hornung's openness. They have some great plans and strategies; they just have a hard time verbalizing what's going on. The company never had to do any of this before. When they were strictly in the mass they didn't have to do any media or marketing," Boulanger said.

Boulanger formerly was executive director of Bike Miami Valley, an advocacy association in Dayton, Ohio. He also was Airborne's communications director until 2001, and consulted for Trek's family of brands and worked at a bike shop in Milwaukee, Wisconsin.

March 20, 2002

The 2002 GT Bicycles Pro Team

Vernon Hills, IL — 2002 marks a new beginning for Team GT. This season we have the best pound-for-pound team with four of the most talented riders in the world. These riders are proud to be flying the GT wings around the world, winning events, and keeping GT Bicycles the #1 team in all disciplines.

Christophe Leveque, 2001 UCI World Champion and ABA Pro of the Year, joins the GT BMX Pro team for 2002. Brian Lopes returns to the GT program in 2002 — winner of the 2001 UCI Dual World Championship and the 2001 UCI World Cup Dual Titles, with seven U.S. National titles and one UCI World Title.

Jamie Bestwick returns to the GT squad for 2002 with a lot of hardware from 2001: Gravity Games Gold Medallist in Pro Vert; BS Pro Vert title; and the CFB Pro Vert title. He also brings with him the 2002 X-Games gold medal. Hans Rey, multiple Trials National and World Champion, is one of the pioneers of Trials and Extreme Mountain Biking.

January 28, 2002

Pacific Signs With Riteway Products-Japan

TOKYO, Japan — Pacific Cycle inked a long-term exclusive distribution agreement with Tom Takashima, the new majority owner of Riteway Products-Japan, a distributor of GT bicycles and parts and accessories. The agreement means GT's business in Japan will continue uninterrupted, helping GT retain its strong presence in the market. "GT has had a long and successful relationship with Riteway Products-Japan and we are happy to see that continue," said Chris Hornung, Pacific's chief executive officer. Pacific owns 10 percent of Riteway Products-Japan.

January 16, 2002

Nick Andrade Joins Pacific To Lead IBD Sales

MADISON, WI. Starting Feb. 1, Nick Andrade will direct Pacific Cycle's specialty retail sales. He is charged with visiting retailers and developing specialty retail offerings from GT, Mongoose and Schwinn. "There are a number of concerns and a bit of confusion within the dealer base since the acquisition. Chris has charged me to solve problems and make things happen," said Andrade, Pacific Cycle's vice president of IBD Sales.

Andrade, who has 45 years of industry experience, will be based in San Francisco. He began his career at West Coast Cycle and worked at Giant, Bianchi and Trek. "Pacific is committed to making our business with the IBDs a success and we cannot imagine one individual more capable of making that a reality than Nick Andrade," said Chris Hornung, Pacific's chief executive officer.

November 20, 2001

Will Pacific Reshape The Bike Industry?

MADISON, WI — Executives at Pacific Cycles, the new owner of Schwinn and GT, will know on Nov. 15 how many Schwinn and GT dealers will stick with the brand, as the company attempts to redefine the industry's distribution system. On that date Pacific will begin taking orders for bikes to be built to order and delivered to retailers 90 days later.

"Schwinn's bicycle business was not profitable for the last 20 years, it was only the fitness division that was keeping them afloat," said Byron Smith, Pacific's president. "We want to support Schwinn and GT dealers, but the old supplier model is broken. If we continued to run Schwinn and GT as they were run — which was running with operating expenses 2 percent more than gross margins — we would be bankrupt again."

The financial muscle behind the growth is Chicago-based Wind Point Partners, a private equity group that invested in Pacific in 1998. "The biggest difference between our investment into the bike market and those of other investment firms is that we began our investment with profitable businesses. Pacific and Mongoose are making money," said Rich Kracum, Wind Point's managing director.

After taking ownership of the company, Pacific moved Schwinn out of its Boulder, Colorado, offices as well as GT's new offices in Foothill Ranch, California. It also closed all Schwinn/GT warehouses and distribution centers. Schwinn/GT's customer service, product development and warehousing were integrated into Pacific's headquarters in Madison, Wisconsin.

November 20, 2001

Schwinn/GT To Get Facelift Under Pacific

LAS VEGAS, NV — Chris Hornung, Pacific Cycles' chief executive officer, and Byron Smith, the company's president met with retailers at the Interbike Expo to explain their plan for the future of Schwinn and GT Bicycles. Having purchased Schwinn/GT just two weeks prior, Pacific executives outlined their basic strategy for dual-channel distribution.

The number of models in both lines will be reduced. Schwinn's line will be predominantly lower end, while GT will continue with products like its I-Drive. "There will be Schwinn products to halo the brand, but offerings above $500 will be limited," said Richard Wittenberg, Pacific's vice president of sales and marketing.

Pacific will bring its Built to Order model from the mass to specialty retailers. Instead of ordering bikes en masse, storing them in a warehouse and shipping to retailers as they are ordered, Pacific places the forecasting burden on its dealers. Pacific requires that minimum orders of 25 bikes are placed 90 days in advance, six times a year and with 60-day invoicing.

November 9, 2001

Police Find 16 Pallets Of Stolen Pacific Goods

VACAVILLE, CA. Law enforcement officers found a Southern Californian warehouse full of allegedly stolen containers, including 16 pallets of bike components taken from a Pacific Cycles semi trailer. Three trailers — one packed with high-end Shimano parts — were stolen as Pacific relocated the inventory from GT/Riteway's warehouses to its own.

The first trailer was stolen after leaving GT/Riteway's distribution center in Fontana, California. A few days later two trailers were stolen from Pacific's Vacaville warehouse parking lot. In their place, the thieves left behind two semi trailers full of rice, which the FBI confiscated.

November 8, 2001

Contents Of Three Pacific Trailers Stolen

MADISON, WI. Pacific Cycle employees loaded 215 semi trailers at GT/Riteway's Fontana, California, distribution center, stuffing one with high-end Shimano components. That trailer was stolen in route to Pacific's warehouses while two others filled with accessories were swiped and replaced with dummy trailers full of rice at Pacific's Vacaville, California, warehouse.

Some of the products on the three trailers were Shimano Ultegra and Dura Ace wheel sets and headsets, Syncros stems and seatposts, Kryptonite locks, Schwinn messenger bags, Saris racks and accessories, Enduro 2 computers, BMX gloves branded Team GT and Stingray, helmets, GT aprons and Schwinn hats. "The wholesale value of this was $250,000," Thompson said.

October 30, 2001

Schwinn Bonus Plan Public, Exec's Walk With Almost $1 Million

DENVER, CO. Schwinn/GT's $2 million retention plan was made public last week despite Questor's efforts to keep details of the plan confidential. The top 10 managers received about 40 percent of the $2 million bonus package with the remainder distributed among 51 other employees.

Executive bonuses were calculated as a percent of their annual salaries. Trevor Bell, Schwinn/GT's fitness division president, received a $161,860 bonus based on his $350,696 salary. Tom Soper received a $113,077 bonus based on his salary of $245,000. Larry Pizzi received a $92,308 bonus based on his salary of $200,000.

U.S. Bankruptcy Judge Sidney Brooks questioned Schwinn/GT's bonus plan in August, saying it addressed the executives but did not adequately compensate the company's rank-and-file employees. Pacific Cycle and Direct Focus purchased Schwinn/GT's assets in September. Pacific bought the cycling assets for $86 million and Direct Focus took the fitness assets for $65 million.

October 22, 2001

Mad Dogg Separates From Schwinn

VENICE, CA. Mad Dogg Athletics, owners of the Spinning program, legally separated from Schwinn Fitness and its new owner Direct Focus. On Oct. 15 the American Arbitration Association granted Mad Dogg's request for contract termination that it filed before Schwinn went into bankruptcy proceedings.

"Schwinn is no longer in the Spinning business. Terminating our contract enables us to get back to the business of providing Spinning training and Spinning bikes to facilities in the United States and abroad," said John Baudhuin, Mad Dogg's president and chief executive officer. Schwinn had been a licensee of Mad Dogg's patented Johnny G Spinner bikes since 1995.