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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ Annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended December 31, 2000
Or
/ / Transition report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
for the transition period from _______ to _______
Commission file number 000-25867
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Direct Focus, Inc.
401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Direct Focus, Inc.
1400 NE 136th Avenue
Vancouver, WA 98684
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DIRECT FOCUS, INC. 401(K) SAVINGS PLAN
TABLE OF CONTENTS
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PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS
ENDED DECEMBER 31, 2000 AND 1999:
Statements of Net Assets Available for Benefits 4
Statements of Changes in Net Assets Available for Benefits 5
Notes to Financial Statements 6-8
SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2000:
Line 4i - Schedule of Assets Held for Investment Purposes at Year End 9
SIGNATURE 10
EXHIBIT INDEX 11
EXHIBIT 23, INDEPENDENT AUDITOR'S CONSENT 12
Schedules not filed herewith are omitted because of the absence of the
conditions under which they are required.
2
INDEPENDENT AUDITORS' REPORT
Direct Focus, Inc. 401(k) Savings Plan
Vancouver, Washington
We have audited the accompanying statements of net assets available for benefits
of the Direct Focus, Inc. 401(k) Savings Plan (the "Plan") as of December 31,
2000 and 1999, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2000 and 1999, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
DELOITTE & TOUCHE LLP
Portland, Oregon
June 13, 2001
3
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2000 AND 1999
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2000 1999
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ASSETS:
Investments, at fair value (Note 3) $ 1,596,860 $ 645,829
Receivables:
Employee contributions 31,214 63,364
Employer contributions 145,939 93,183
Accrued income -- 181
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Total receivables 177,153 156,728
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NET ASSETS AVAILABLE FOR BENEFITS $ 1,774,013 $ 802,557
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See notes to financial statements.
4
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2000 AND 1999
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2000 1999
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ADDITIONS:
Dividends $ 127,317 $ 4,608
Net appreciation (depreciation) in fair
value of investments (Note 3) (49,945) 60,403
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Net investment income 77,372 65,011
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Contributions:
Participant contributions 798,192 654,024
Employer matching contributions 145,939 93,183
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Total contributions 944,131 747,207
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Total additions 1,021,503 812,218
DEDUCTIONS - Benefits paid to participants 50,047 9,661
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NET INCREASE 971,456 802,557
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 802,557 --
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NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 1,774,013 $ 802,557
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See notes to financial statements.
5
DIRECT FOCUS, INC. 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
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1. DESCRIPTION OF PLAN
The following description of the Direct Focus, Inc. 401(k) Savings Plan
(the "Plan") is provided for general information purposes only.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
GENERAL - The Plan is a defined contribution 401(k) plan maintained for
the benefit of all eligible employees of Direct Focus, Inc. (the
"Company"). The Plan was established effective January 1, 1999 and
contributions to the Plan began on March 4, 1999. The Plan is available to
all eligible employees of the Company who are age 18 or older. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").
CONTRIBUTIONS - Participants may voluntarily contribute between 1% and 20%
of their compensation, limited to $10,500 in 2000, as prescribed by ERISA.
Participants may change their contribution percentage quarterly.
Participants may also contribute amounts representing distributions from
other qualified defined benefit or contribution plans. Participants direct
the investment of their contributions and employer matching contributions
into various investment options offered by the Plan. The Plan currently
offers nine mutual funds and one employer stock fund as investment options
for participants. Participants can change the allocation of contributions
or transfer balances between funds up to six times per year. The Company
may match a portion of the participant's elective contribution. The
Company makes matching contributions of 50% of the employee contributions
on the first 6% of allowable employee compensation for all eligible
employees excluding Nautilus Human Performance Systems, Inc. ("Nautilus
HPS") employees. For Nautilus HPS employees, the Company matches 35% of
employee contributions on the first 4% of allowable employee compensation.
Matching contributions are subject to certain limitations. Generally,
participants must have worked a minimum of 1,000 hours during the Plan
year and must be employed by the Company on the last day of the Plan year
in order to receive the matching contributions. In addition to the above
requirements, participants must have worked 12 months before initially
becoming eligible to receive the match.
PARTICIPANT ACCOUNTS - A separate account is maintained for each
participant, which is credited with the participant's contributions, the
Company's matching contributions, and an allocation of Plan earnings or
losses. Allocation of Plan earnings or losses is based upon participant
account balances. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
VESTING - Participants are fully vested at all times in that portion of
their accounts attributable to their own contributions and earnings or
losses thereon. A participant vests in the Company's matching
contributions and earnings or losses thereon pursuant to the following
vesting schedule.
YEARS OF SERVICE VESTING PERCENTAGE
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Less than 1 0%
1 25%
2 50%
3 75%
4 100%
6
PAYMENT OF BENEFITS - Upon termination of service, a participant may be
paid a lump-sum amount equal to the vested account value if less than
$5,000 or by installment if greater than $5,000. Participants may also
elect to maintain their account in the Plan until a future date.
FORFEITURES - Forfeited balances of terminated participants' nonvested
accounts are allocated as a discretionary matching contribution for the
plan year in which the forfeiture occurs.
TERMINATION - Although it has not expressed any intent to do so, the
Company may terminate the Plan or discontinue contributions at any time,
subject to the provisions of ERISA. In the event of total or partial
termination of the Plan, the accounts of all affected participants shall
become fully vested and nonforfeitable.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared
under the accrual method of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are
stated at fair value, which is based on published market prices at year
end.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
BENEFIT PAYMENTS - Benefits are recorded when paid.
ADMINISTRATIVE EXPENSES are paid entirely by the Company.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
INCOME TAXES - The Plan document is based on a non-standardized prototype
plan and adoption agreement, which were approved by the Internal Revenue
Service ("IRS"), as to form, by a letter dated May 17, 1990. However, the
Plan has not yet received a determination letter from the IRS for the
specific provisions of the adoption agreement as adopted by the Plan. The
Plan Administrator believes that the Plan is currently designed and being
operated in accordance with the applicable requirements of the Internal
Revenue Code. Accordingly, no provision for income taxes has been included
in the Plan's financial statements.
7
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets available for benefits at December 31:
2000 1999
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AIM Balanced Fund $ 111,691 $ --
American Balanced Fund, Inc. Income Fund -- 45,178
Direct Focus, Inc. Common Stock 315,092 43,873
Fundamental Investors Fund 240,177 --
Growth Fund of America, Inc. 533,005 234,866
New Perspective Fund 233,243 104,248
Washington Mutual Investors Fund, Inc. -- 196,767
Net appreciation (depreciation) by investment type for the year ended
December 31 is as follows:
2000 1999
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Mutual funds $(111,265) $ 50,729
Common stock 61,320 9,674
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Total $ (49,945) $ 60,403
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4. PARTY-IN-INTEREST TRANSACTIONS
The Plan invests in shares of the Company at the direction of the
participants.
5. CONCENTRATION OF RISK
The Plan's assets consist of financial instruments including temporary
cash investments, mutual funds, and Company common stock. These financial
instruments may subject the Plan to concentrations of risk as, from time
to time, cash balances exceed amounts insured by the Federal Deposit
Insurance Corporation, and investments in mutual funds and Company stock
are subject to changes in market values of the stock.
* * * * * *
8
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT YEAR END
DECEMBER 31, 2000
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(e)
(b) Identity of Issue/ (d) Current
(a) (c) Description of Investment Cost Value
CASH $ 72,426
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MUTUAL FUNDS:
AIM Balanced Fund 111,691
Dreyfus Premier Core Fund 1,412
Euro Pacific Growth Fund 6,168
Federated Max Capital Fund 7,762
Franklin Small Capital Growth Fund 23,206
Fundamental Investors Fund 240,177
Growth Fund of America, Inc. 533,005
MetLife Stable Value Fund 52,678
New Perspective Fund 233,243
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Total mutual funds 1,209,342
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* COMMON STOCK - Direct Focus, Inc. 315,092
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TOTAL INVESTMENTS $1,596,860
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* Denotes a party-in-interest with respect to the Plan
NOTE: Historical cost information is not required for participant-directed
investments
9
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the plan administrator of the Direct Focus, Inc. 401(k) Savings Plan has duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
DIRECT FOCUS, INC. 401(k) SAVINGS PLAN
By: DIRECT FOCUS, INC., the plan administrator
Date: June 26, 2001 By: /s/ Rod W. Rice
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Rod W. Rice, Secretary
Direct Focus, Inc.
401(k) Savings Plan Administrator
10
EXHIBIT INDEX
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Document Exhibit Number
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Independent Auditors' Consent 23
11
EXHIBIT 23
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-46936 of Direct Focus, Inc. on Form S-8 of our report dated June 13, 2001,
appearing in this Annual Report on Form 11-K of the Direct Focus, Inc. 401(k)
Savings Plan for the year ended December 31, 2000.
DELOITTE & TOUCHE LLP
Portland, Oregon
June 26, 2001