UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C.  20549

                              FORM 10-K/A

                           Amendment No. 2

                              (Mark One)
[*]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                               EXCHANGE
           ACT OF 1934 for the fiscal year ended May 31, 2003

                                  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 number: 333-93711


                           ICON Health & Fitness, Inc.
             (Exact name of registrant as specified in its charter)

         Delaware                                   87-0531206
(State or other jurisdiction of         (I.R.S. Employer Identification
 incorporation or organization)                         No.)


                    1500 South 1000 West, Logan, Utah 84321
             (Address and zip code of principal executive offices)

                              435 750-5000
            (Registrant's telephone number, including area code)

                             Not Applicable
  (Former name, former address and former fiscal year, if changed since
                              last report)

     Indicate by checkmark 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 [*] No [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

     Indicate by checkmark 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.


                               Explanatory Note

    This Amendment No. 2 on Form 10-K/A (this Amendment) amends Amendment No. 1
to the Annual Report on Form 10-K for the fiscal year ended May 31, 2003, filed
on October 14, 2003.  The Company has filed this Amendment to give effect to the
restatement of the Company's balance sheets as of May 31, 2003 and 2002 as
discussed in Note 2 to the Consolidated Financial Statements to reflect
borrowings under its credit agreement as a current liability.



                       ICON Health & Fitness, Inc.

                                INDEX

                                                               Page No.
                                                               --------
PART II
Item 6.     Selected Financial Data                                2

Item 7.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                    3

Item 8.     Financial Statements and Supplementary Data           12





Item 6.  Selected Financial Data

     The selected financial data set forth below with respect to our statements
of operations for the three years ended May 31, 2003 and the balance sheet data
for May 31, 2003 and May 31, 2002 have been derived from our financial
statements included elsewhere in this Form 10-K that have been audited by
PricewaterhouseCoopers LLP, independent registered public accounting firm, as
indicated in their report included elsewhere in this Form 10-K. Our statement of
operations data for the years ended May 31, 2000 and 1999, and our balance sheet
data as of May 31, 2001, 2000 and 1999, have been derived from the financial
statements audited by PricewaterhouseCoopers LLP but not included in this Form
10-K.

     The data set forth should be read together with, and is qualified in its
entirety by, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," our consolidated financial statements, and the related
notes thereto appearing elsewhere in this Form 10-K.



                                      For the Year Ended May 31,
                                            (in millions)

                              2003      2002      2001      2000      1999
                              ----      ----      ----      ----      ----
                                                      
Operating Data:
 Net sales(1)               $1,011.5    $871.4    $797.0    $712.8   $687.9
 Cost of sales                 713.4     635.0     580.5     531.6    514.0
                            -----------------------------------------------
 Gross profit                  298.1     236.4     216.5     181.2    173.9
 Operating expenses:
  Selling                      134.1     101.4      86.3      75.8     85.3
  Research and development      11.6      10.4      10.9       8.3      7.7
  General and
   administrative               81.8      68.1      64.5      61.3     53.4
                            -----------------------------------------------
 Total operating expenses      227.5     179.9     161.7     145.4    146.4
                            -----------------------------------------------
 Income from operations         70.6      56.5      54.8      35.8     27.5
 Interest expense               25.1      26.2      34.8      33.9     33.1
 Amortization of deferred
  financing fees                 1.2       3.1       3.2       2.7      7.0
 Net income (loss)              26.7      19.4      13.3      (6.6)   (24.7)
Other Financial Data:
 Depreciation and
  amortization              $   19.2    $ 19.2    $ 17.4    $ 16.7   $ 17.4
 Purchases of property
  and equipment(2)              17.0      11.6      16.1      12.9     11.6
 Net cash provided by
  operating activities          31.6      37.5      12.4       0.5     38.0
 Net cash used in
  investing activities         (21.8)    (17.1)    (22.8)    (19.9)   (20.1)
 Net cash provided by
  (used in) financing
  activities                   (12.3)    (19.3)      8.7      21.4    (17.1)
Supplemental Data:
 EBITDA(3)                  $   89.8    $ 68.3    $ 72.1    $ 49.4   $ 44.9
Balance Sheet Data (at the end of the period):
 Cash                       $    4.7    $  4.8    $  3.3    $  5.9   $  4.3
 Working capital
   (as restated)(4)            100.5      65.9     (48.4)    (61.3)   (45.1)
 Total assets                  465.1     423.2     405.5     368.1    331.9
 Long-term obligations
   (as restated)(4)            162.6     157.7      47.3      48.6    100.3
- ----------
<FN>
(1) In November of 2001, the Emerging Issues Task Force issued EITF 01-09,
    "Accounting for Consideration Given by a Vendor to a Customer" ("EITF
    01-09") effective for annual or interim financial statements for periods
    beginning after December 15, 2001. For comparative purposes, net sales are
    shown as if EITF 01-09 had been adopted for all periods.
(2) Excludes purchases of intangibles and trademarks and acquisitions of $4.9
    million for fiscal year 2003, $5.5 million for fiscal year 2002, $6.7
    million for fiscal year 2001, $4.4 million for fiscal year 2000 and $8.5
    million for fiscal year 1999.
(3) EBITDA is a presentation of "earnings before interest, taxes, depreciation
    and amortization." EBITDA data is included because management understands
    that such information is considered by bankers and certain investors as an
    additional basis on evaluating a company's ability to pay interest, repay
    debt and make capital expenditures. EBITDA may not be comparable to
    similarly titled measures reported by other companies. In addition, EBITDA
    is a non-GAAP measure and should not be considered an alternative to
    operating or net income in measuring company results. Our definition of
    EBITDA may differ from definitions of EBITDA used by other companies. A
    reconciliation of net income to EBITDA can be found in Management's
    Discussion and Analysis of Financial Condition and Results of Operations
    under the heading Results of Operations. The following table includes a list
    of unusual items that have affected EBITDA.

                                                For the Year Ended May 31,
                                          -------------------------------------
                                            2003   2002   2001   2000   1999
                                            ----   ----   ----   ----   ----
                                                    (In millions)
     Loss on extinguishment of debt            -    7.4(a)   -      -      -
     Kmart bankruptcy bad debt               9.1(b) 2.4(b)   -      -      -
     Excess air freight charges                -      -      -    6.0(c)   -
     Non-recurring recapitalization cost       -      -      -    1.8(d)   -
     Equity grant to senior management         -      -      -    3.1(e)   -
     Non-recurring costs in selling expense    -      -      -      -   10.5(f)
     ---------------

(a)       A loss of approximately $7.4 million was recorded on the
          extinguishment of the Company's Old 1999 Credit Facilities and the 12%
          Notes.
(b)       On January 22, 2002, Kmart filed for bankruptcy protection. On that
          date, we had $12.1 million of unsecured accounts receivable
          outstanding with Kmart. We disposed of the remaining balance of the
          pre-bankruptcy receivables in the third quarter of fiscal 2003.
(c)       We incurred $6.0 million of in-bound air freight charges (in cost of
          sales) in excess of normal freight costs. Due to our significant
          indebtedness, certain of our vendors shortened our payment terms prior
          to our recapitalization in September 1999. Due to liquidity
          constraints we had to delay the purchase of certain component parts
          and finished goods, and we therefore incurred additional in-bound air
          freight expenses related to these items that we needed to receive
          rapidly in order to meet our customers' delivery schedules.
(d)       We recorded $1.5 million of non-recurring costs (in general and
          administrative expense) related to management retention bonuses, paid
          to certain executive officers, and $0.3 million of one-time
          non-recurring costs associated with the redemption of our 13% senior
          subordinated notes due 2002, both in connection with our
          recapitalization in September 1999.
(e)       We recorded $3.1 million of non-recurring non-cash costs (in general
          and administrative expense) related to an equity grant made to certain
          members of senior management due to our recapitalization in September
          1999.
(f)       We recorded $10.5 million of non-recurring costs (in selling expenses)
          related to the write-off of accounts receivable due to the bankruptcy
          of Service Merchandise.

(4) The credit agreement, which includes our $210 million revolving credit line
    and our term loan ("Credit Agreement"), requires us to maintain a lockbox
    arrangement whereby remittances from our customers reduce the borrowings
    outstanding under the Credit Agreement. In January 2004, we determined that
    the Credit Agreement also contains a Material Adverse Effect ("MAE") clause
    which grants the agent and lenders having more than 66 and 2/3% of the
    commitment or borrowings the right to block our requests for future
    advances. EITF Issue 95-22 "Balance Sheet Classification of Borrowings
    Outstanding Under Revolving Credit Agreements That include both a Subjective
    Acceleration Clause and a Lockbox Arrangement" requires borrowings under
    credit agreements with these two provisions to be classified as current
    obligations. The credit agreement in place prior to the one entered into on
    April 9, 2002 also contained a MAE clause. Accordingly, we have classified
    the outstanding borrowings under these Credit Agreements, which were
    previously classified as long-term debt and totaled $86.3 million, $98.1
    million, $206.0 million, $193.6 million and $45.1 as of May 31, 2003, 2002,
    2001, 2000 and 1999; respectively, as a short-term liability.

</FN>


Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.

     The following should be read in conjunction with the financial statements
and the related notes thereto appearing elsewhere in this Form 10-K. Our fiscal
year ends on May 31 of the corresponding calendar year. For example, fiscal 2003
ended on May 31, 2003.

Recent Developments

     In fiscal 2003, we formed a foreign subsidiary to build a manufacturing
facility in Xiamen, China. The total project cost is anticipated to be
approximately $12.0 million, with $7.0 million to be funded in the form of
capital contributions, and approximately $5.0 million in the form of debt. Our
share of the equity investment is expected to be approximately $5.0 million. We
are in the process of arranging for the debt portion of the financing, which is
expected to be provided by the Bank of China.

Overview

     We manufacture and market a broad line of cardiovascular and other
equipment and strength training equipment. We are one of the largest
manufacturers and marketers of home fitness equipment in the United States. In
addition, we manufacture and distribute an innovative line of cardiovascular and
other equipment and strength training equipment for the institutional fitness
equipment market.

     We sell our products under a wide variety of brand names and we use our
portfolio of brands to tailor our product offerings to specific distribution
channels. We sell our products to department stores, mass retailers and
warehouse clubs, sporting goods and specialty fitness retailers, directly to
consumers, and health clubs.

     The following paragraphs provide a brief description of certain items that
appear in our Consolidated Statements of Operations.

     Net sales. Net sales primarily represent our gross sales adjusted for
returns and allowances. We limit our customers' ability to return merchandise to
us to products sold to their customers in which defects were discovered within
the warranty coverage period (usually 90 days from the time of retail sale). We
do not permit our customers to return unsold merchandise.

     Cost of sales. Cost of sales primarily includes the cost of components that
we purchase, direct manufacturing labor and overhead, inbound shipping and
freight and depreciation expense related to our property, plant, equipment and
tooling.

     Selling expense. Selling expense primarily includes our direct advertising
expense, advertising allowances provided to certain customers and the costs
related to our sales and marketing staff for our home fitness and institutional
fitness business.

     Research and development expense. Research and development expense relates
primarily to the activities of our product development group and external
sources related to the development of new products and product enhancements.

     General and administrative expense. General and administrative expense
primarily includes expenses related to our senior management team, all
accounting and finance functions, management information systems, legal and
human resources expenses and unallocated overhead expenses.

Critical Accounting Policies

     Critical accounting policies are those that require application of
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods.

     Our significant accounting policies are described in Note 3 to the
Consolidated Financial Statements. Not all of these significant accounting
policies require management to make difficult, subjective or complex judgments
or estimates. However, the following accounting policies could be deemed to be
critical.

     Inventories - Inventories consist primarily of raw materials (principally
parts and supplies) and finished goods, and are valued at the lower of cost or
market. Cost is determined using standard costs which approximate the first-in,
first-out (FIFO) method.

     Intangible Assets - We adopted the provisions of SFAS No. 142, "Goodwill
and Other Intangible Assets" effective June 1, 2002. SFAS No. 142 no longer
requires the amortization of goodwill and other indefinite lived intangibles. As
a result, results for the year ended May 31, 2003 were positively impacted by a
$0.4 million elimination of such amortization. As of May 31, 2003, we had
approximately $5.6 million of unamortized goodwill. Under the provisions of SFAS
No. 142, we are required to test these assets for impairment at least annually.
The annual impairment tests have been completed and did not result in an
impairment charge. To the extent an impairment is identified in the future, we
will record the amount of the impairment as an operating expense in the period
in which it is identified.

     Long-Lived Assets - Long-lived assets are reviewed for impairment whenever
events or circumstances indicate that the carrying amount of long-lived assets
may not be recoverable. The carrying value of a long-lived asset is considered
impaired when the anticipated cumulative undiscounted cash flows from that asset
is less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair market value of the
long-lived asset, which is generally based on discounted cash flows. As a result
of our review, we do not believe that any impairment currently exists related to
our long-lived assets.

     Revenue Recognition - We recognize revenue upon the shipment of product to
the customer. Allowances are recognized for estimated returns, discounts,
advertising programs and warranty costs associated with these sales.

     Income Taxes - We account for income taxes utilizing the asset and
liability method as prescribed by SFAS No. 109, "Accounting for Income Taxes".
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities at
currently enacted tax rates. If appropriate, deferred tax assets are reduced by
a valuation allowance which reflects expectations of the extent to which such
assets will be realized.

     Contingencies - We account for contingencies in accordance with SFAS No. 5,
"Accounting for Contingencies". SFAS No. 5 requires that we record an estimated
loss from a loss contingency when information available prior to issuance of the
consolidated financial statements indicates that it is probable that an asset
has been impaired or a liability can be reasonably estimated. Accounting for
contingencies such as environmental, legal and income tax matters requires us to
use our judgment. While we believe that our accruals for these matters are
adequate, if the actual loss from a loss contingency is significantly different
from the estimated loss, our results of operations will be affected in the
period the contingency is resolved.

Results of Operations

     The following table sets forth certain of our financial data, expressed as
a percentage of net sales, for fiscal years ended May 31, 2003, 2002 and 2001:



                                      For the Year Ended May 31,
                                      --------------------------
                                      2003       2002       2001
                                      ----       ----       ----
                                                  
     Net sales                       100.0%     100.0%     100.0%
     Cost of sales                    70.5%      72.9%      72.8%
                                     -----      -----      -----
     Gross profit                     29.5%      27.1%      27.2%
     Operating expenses:
       Selling                        13.3%      11.6%      10.8%
       Research and development        1.1%       1.2%       1.4%
       General and administrative      8.1%       7.8%       8.1%
                                     -----      -----      -----
       Total operating expenses       22.5%      20.6%      20.3%
                                     -----      -----      -----
     Income from operations            7.0%       6.5%       6.9%
     Interest expense                  2.5%       3.0%       4.4%
     Amortization of deferred
       financing fees                  0.1%       0.4%       0.4%
     Loss on debt extinguishment         -        0.9%         -
                                     -----      -----      -----
     Income before income taxes        4.4%       2.2%       2.1%
     Provision for income taxes        1.7%       0.0%       0.4%
                                     -----      -----      -----
     Net income                        2.7%       2.2%       1.7%
                                     =====      =====      =====
     EBITDA                            8.9%       7.8%       9.0%
                                     =====      =====      =====

Year Ended May 31, 2003 Compared to Year Ended May 31, 2002
- -----------------------------------------------------------

     Net sales for fiscal 2003 increased $140.1 million, or 16.1%, to $1,011.5
million from $871.4 million in the comparable period in 2002. Sales increased
primarily due to increased direct consumer sales and customer demand. Sales of
our cardiovascular and other equipment in fiscal 2003 increased $80.5 million,
to $825.6 million. Sales of our strength training equipment in fiscal 2003
increased $59.6 million, to $185.9 million.

     Gross profit for fiscal 2003 was $298.1 million, or 29.5% of net sales,
compared to $236.4 million, or 27.1% of net sales, in fiscal 2002. This 26.1%
increase was largely due to increased direct consumer sales which have higher
margins, changes in product mix and manufacturing efficiencies.

     Selling expenses increased $32.7 million, or 32.2%, to $134.1 million in
fiscal 2003. This increase reflected increased bad debt expense related to
pre-bankruptcy receivables of Kmart of $9.1 million. Increased direct consumer
advertising, commissions and freight also contributed to the increase. Expressed
as a percentage of net sales, selling expenses were 13.3% in fiscal 2003 and
11.6% in fiscal 2002. Absent the Kmart bad debt expense, selling expenses were
12.4% in fiscal 2003.

     Research and development expenses increased $1.2 million, or 11.5%, to
$11.6 million in 2003. Expressed as a percentage of net sales, research and
development expenses were 1.1% in fiscal 2003 and 1.2% in fiscal 2002.

     General and administrative expenses increased $13.7 million, or 20.1%, to
$81.8 million in fiscal 2003. This increase is a factor of normal salary
increases, planned additions to staff, increased insurance costs and increases
attributable to performance based bonus and incentive programs. Increased rent
and lease expense also contributed to the increase. Expressed as a percentage of
net sales, general and administrative expenses were 8.1% in fiscal 2003 compared
with 7.8% in fiscal 2002.

     As a result of the foregoing factors, operating income increased $14.1
million, or 25.0%, to $70.6 million in fiscal 2003. Expressed as a percentage of
net sales, operating income was 7.0% in 2003 compared with 6.5% in fiscal 2002.

     As a result of the foregoing factors, EBITDA increased $21.5 million, or
31.5%, to $89.8 million in fiscal 2003. Expressed as a percentage of net sales,
EBITDA was 8.9% in fiscal 2003 compared with 7.8% in fiscal 2002.

     Interest expense, including amortization of deferred financing fees,
decreased $3.0 million, or 10.2%, to $26.3 million in fiscal 2003. This decrease
reflects lower interest rates during fiscal 2003. In addition, deferred
financing fees decreased as a result of the April 2002 debt refinancing.
Expressed as a percentage of net sales, interest expense including amortization
of deferred financing fees was 2.6% in fiscal 2003 compared with 3.4% in fiscal
2002.

     The provision for income taxes increased $17.2 million, or 4300.0%, to
$17.6 million in fiscal 2003. Our effective tax rate was 39.7% in 2003 compared
to 1.9% in fiscal 2002. The lower effective tax rate in fiscal 2002 is the
result of adjustments pursuant to an Internal Revenue Service audit. These
adjustments created a deferred tax benefit of approximately $11.5 million. No
valuation allowance was recorded against this asset because we believe that we
will generate sufficient future taxable income through operations to realize the
net deferred asset. However, there can be no assurance that we will generate any
specific level of taxable earnings or that we will be able to realize any of the
deferred tax asset in future periods. If we are unable to generate sufficient
taxable income in the future, an additional valuation allowance against this
deferred tax asset would result in a charge to earnings.

     As a result of the foregoing factors, net income was $26.7 million in
fiscal 2003 compared to net income in fiscal 2002 of $19.4 million.

Year Ended May 31, 2002 Compared to Year Ended May 31, 2001
- -----------------------------------------------------------

     Net sales for fiscal 2002 increased $74.4 million, or 9.3%, to $871.4
million from $797.0 million in the comparable period in 2001. Sales increased
primarily due to increased customer demand and the introduction of our new line
of institutional fitness equipment which represented $11.0 million, or 14.8%, of
the sales increase. Sales of our cardiovascular and other equipment in fiscal
2002 increased $57.9 million, to $745.1 million. Sales of our strength training
equipment in fiscal 2002 increased $16.5 million, to $126.3 million.

     Gross profit for fiscal 2002 was $236.4 million, or 27.1% of net sales,
compared to $216.5 million, or 27.2% of net sales in fiscal 2001.

     Selling expenses increased $15.1 million, or 17.5%, to $101.4 million in
fiscal 2002. This increase was the result of higher selling costs associated
with the increase in sales combined with the impact of the introduction of our
new line of institutional fitness equipment as well as increased advertising
expenses. Expressed as a percentage of net sales, selling expenses were 11.6% in
fiscal 2002 compared to 10.8% in fiscal 2001.

     Research and development expenses decreased $0.5 million, or 4.6%, to $10.4
million in fiscal 2002. Expressed as a percentage of net sales, research and
development expenses were 1.2% in fiscal 2002 and 1.4% in fiscal 2001.

     General and administrative expenses increased $3.6 million, or 5.6%, to
$68.1 million in fiscal 2002. This increase was the result of higher costs
associated with our increase in sales combined with the impact of the
introduction of our new line of institutional fitness equipment. Expressed as a
percentage of net sales, general and administrative expenses were 7.8% in fiscal
2002 and 8.1% in fiscal 2001.

     As a result of the foregoing factors, operating income increased $1.7
million, or 3.1%, to $56.5 million in fiscal 2002. Expressed as a percentage of
net sales, operating income was 6.5% in fiscal 2002 compared with 6.9% in fiscal
2001.

     As a result of the foregoing factors, EBITDA decreased $3.8 million, or
5.3%, to $68.3 million in fiscal 2002. Expressed as a percentage of net sales,
EBITDA was 7.8% in fiscal 2002 compared with 9.0% in fiscal 2001.

     Interest expense, including amortization of deferred financing fees,
decreased $8.7 million, or 22.9%, to $29.3 million in fiscal 2002. This
decrease reflects our lower borrowing levels during the period combined with
lower interest rates on our borrowings.

     A loss of $7.4 million was recorded on the extinguishment of the existing
credit facility and the 12% Notes.

     The provision for income taxes decreased $3.0 million, or 88.2%, to $0.4
million in fiscal 2002. Our effective tax rate was 1.9% in fiscal 2002 compared
to 20.7% in fiscal 2001. The lower effective tax rate in fiscal 2002 was the
result of adjustments pursuant to an Internal Revenue Service audit. These
adjustments created a deferred tax benefit of approximately $11.5 million.

     As a result of the foregoing factors, our net income was $19.4 million in
fiscal 2002 compared to net income in fiscal 2001 of $13.3 million.

Seasonality

     The market for exercise equipment is highly seasonal, with peak periods
occurring from late fall through February. As a result, the first and fourth
quarters of every year are generally the Company's weakest periods in terms of
sales. During these periods, ICON builds product inventory to prepare for the
heavy demand anticipated during the upcoming peak season. This operating
strategy helps ICON to realize the efficiencies of a steady pace of year-round
production.

     The following are the net sales, operating income (loss) and net income
(loss) of our Company by quarter for fiscal years 2003, 2002 and 2001:


                            First      Second       Third     Fourth
                         Quarter(1)  Quarter(2)  Quarter(3)  Quarter(4)
                         ----------  ----------  ----------  ----------
                                          (in millions)
                                                 
     Net Sales(5)
       2003                 $170.2      $292.7      $344.0      $204.6
       2002                  134.2       264.6       296.0       176.6
       2001                  125.9       267.6       247.6       155.9

     Operating Income (Loss)
       2003                 $  2.0      $ 28.8      $ 37.5      $  2.3
       2002                   (4.5)       26.9        33.8         0.3
       2001                   (2.3)       31.9        29.4        (4.2)

     Net Income (Loss)
       2003                 $ (3.4)     $ 13.7      $ 20.3      $ (3.9)
       2002                   (7.5)       11.1        25.5        (9.7)
       2001                   (8.2)       11.7        10.8        (1.0)


The following is a reconciliation of net income (loss) to EBITDA by quarter (6):


                             First        Second       Third       Fourth
                            Quarter      Quarter      Quarter      Quarter       Total
                         ----------------------------------------------------------------
                                                                 
2003
Net income (loss)           $ (3.4)      $ 13.7       $ 20.3       $ (3.9)      $ 26.7
Add back:
  Depreciation and
    amortization               4.2          4.0          5.0          6.0         19.2
  Provision (benefit)
    for income tax            (1.2)         8.3         10.7         (0.2)        17.6
  Interest expense             6.4          6.5          6.3          5.9         25.1
  Amortization of deferred
    financing fees             0.3          0.2          0.2          0.5          1.2
                            ------       ------       ------       ------       ------
EBITDA                      $  6.3       $ 32.7       $ 42.5       $  8.3       $ 89.8
                            ======       ======       ======       ======       ======





                             First        Second       Third        Fourth
                            Quarter      Quarter      Quarter      Quarter       Total
                         ----------------------------------------------------------------
                                                                 
2002
Net income (loss)           $ (7.5)      $ 11.1       $ 25.5       $ (9.7)      $ 19.4
Add back:
  Depreciation and
    amortization               4.5          4.3          4.9          5.5         19.2
  Provision (benefit)
    for income tax            (4.8)         8.2          1.4         (4.4)         0.4
  Interest expense             6.8          6.8          6.0          6.6         26.2
  Amortization of deferred
    financing fees             0.9          0.9          0.9          0.4          3.1
                            ------       ------       ------       ------       ------
EBITDA                      $ (0.1)      $ 31.3       $ 38.7       $ (1.6)      $ 68.3
                            ======       ======       ======       ======       ======


2001
Net income (loss)           $ (8.2)      $ 11.7       $ 10.8       $ (1.0)      $ 13.3
Add back:
  Depreciation and
    amortization               4.0          4.0          4.3          5.1         17.4
  Provision (benefit)
    for income tax            (3.2)         8.0          7.0         (8.4)         3.4
  Interest expense             8.2          9.7          9.3          7.6         34.8
  Amortization of deferred
    financing fees             0.8          0.8          0.8          0.8          3.2
                            ------       ------       ------       ------       ------
EBITDA                      $  1.6       $ 34.2       $ 32.2       $  4.1       $ 72.1
                            ======       ======       ======       ======       ======
<FN>
The following is a reconciliation of net loss to EBITDA for the fiscal years
ended May 31, 2000 and 1999.

                                                2000        1999
                                         -----------------------------
           Net loss                           $ (6.6)     $(24.7)
           Add back:
             Depreciation and
               amortization                     16.7        17.4
             Provision for income tax            2.7        12.1
             Interest expense                   33.9        33.1
             Amortization of deferred
               financing fees                    2.7         7.0
                                         -----------------------------
           EBITDA                             $ 49.4      $ 44.9
                                         =============================

(1) Our first quarter ended August 31, September 1, and September 2 for fiscal
years 2003, 2002 and 2001, respectively.

(2) Our second quarter ended November 30, December 1, and December 2 for fiscal
years 2003, 2002 and 2001, respectively.

(3) Our third quarter ended March 1, March 2, and March 3 for fiscal years 2003,
2002 and 2001, respectively.

(4) Our fourth quarter ended May 31 for the fiscal years 2003, 2002 and 2001,
respectively.

(5) In November of 2001, the Emerging Issues Task Force issued EITF 01-09,
"Accounting for Consideration Given by a Vendor to a Customer" ("EITF 01-09")
effective for annual or interim financial statements for periods beginning after
December 15, 2001. EITF 01-09 provides guidance on the accounting treatment of
various types of consideration given by a vendor to a customer. We adopted EITF
01-09 in fiscal 2003. Net sales are shown as if EITF 01-09 were adopted for all
periods presented. Net sales without the adjustment for EITF 01-09 were as
follows:

                            First      Second       Third      Fourth
                           Quarter    Quarter      Quarter    Quarter
                         ----------------------------------------------
                                          (in millions)
Net Sales
  2003                     $175.8      $301.5      $354.8      $210.9
  2002                      138.1       272.1       304.9       181.0
  2001                      129.5       276.0       254.6       160.4

(6) EBITDA is a presentation of "earnings before interest, taxes, depreciation
and amortization." EBITDA data is included because management understands that
such information is considered by bankers and certain investors as an additional
basis on evaluating a company's ability to pay interest, repay debt and make
capital expenditures. EBITDA may not be comparable to similarly titled measures
reported by other companies. In addition, EBITDA is a non-GAAP measure and
should not be considered an alternative to operating or net income in measuring
company results.
</FN>


Liquidity and Capital Resources

     Net cash provided by operating activities was $31.6 million in fiscal 2003,
as compared to $37.5 million of cash provided by operating activities in fiscal
2002. In fiscal 2003, major sources of funds were net income of $26.7 million,
non-cash provisions of $19.2 million for depreciation and amortization and an
increase in accounts payable and accrued expenses of $18.5 million. These
changes were offset by increases in accounts receivable of $22.0 million, due
partially to increased direct response receivables, and inventories of $28.0
million, due primarily to building inventory levels to meet anticipated sales
levels. In fiscal 2002, major sources of funds were net income of $19.4 million,
non-cash provisions of $19.2 million for depreciation and amortization, and a
decrease in inventories of $12.2 million. These changes were offset by an
increase in accounts receivable of $20.0 million.

     Net cash used in investing activities was $21.8 million in fiscal 2003,
compared to $17.1 million of cash used in investing activities in fiscal 2002.
Investing activities in fiscal 2003 consisted primarily of capital expenditures
of $17.0 million related to upgrades in plant and tooling and purchases of
additional manufacturing equipment and purchases of intangible assets of $4.9
million. Cash used in investing activities in fiscal 2002 consisted primarily of
capital expenditures of $11.6 million related to upgrades in plant and tooling
and purchases of additional manufacturing equipment and purchases of intangible
assets of $5.2 million.

     Net cash used in financing activities was $12.3 million in fiscal 2003,
compared to $19.3 million of cash used in financing activities in fiscal 2002.
Cash used in financing activities in fiscal 2003 resulted from payments on the
revolving credit facility, payments on the April 2002 term notes, payment of
debt issuance fees and payments on other long-term debt. Cash used in financing
activities in fiscal 2002 resulted from the issuance in April 2002 of the 11.25%
Senior Subordinated Notes, borrowings on our new credit facility, repayment of
our old credit facility and the redemption of our 12% subordinated notes.

     Net cash provided by operating activities was $37.5 million in fiscal 2002,
as compared to $12.4 million of cash provided by operations in fiscal 2001. In
fiscal 2002, major sources of funds were net income of $19.4 million, non-cash
provisions of $19.2 million for depreciation and amortization, and a decrease in
inventories of $12.2 million. These changes were offset by increases in accounts
receivable of $20.0 million. In fiscal 2001, major sources of funds were net
income of $13.3 million, non-cash provisions of $17.4 million for depreciation
and amortization, and increases in accounts payable and accrued expenses of
$10.0 million. These increases were offset by increases in accounts receivable
of $14.1 million and inventories of $14.8 million. Such increases were due to
the aforementioned factors relating to sales increases.

     Net cash used in investing activities was $17.1 million in fiscal 2002,
compared to $22.8 million in fiscal 2001. Investing activities in fiscal 2002
consisted primarily of capital expenditures of $11.6 million related to upgrades
in plant and tooling and purchases of additional manufacturing equipment and
purchases of intangible assets of $5.2 million. Cash used in investing
activities in fiscal 2001 was primarily for capital expenditures of $16.1
million, acquisitions of $4.0 million and purchases of intangible assets of $2.7
million.

     Net cash used in financing activities was $19.3 million in fiscal 2002,
compared to $8.7 million of cash provided by financing activities in fiscal
2001. Cash used in financing activities in fiscal 2002 resulted from the
issuance in April 2002 of the 11.25% Senior Subordinated Notes, borrowings on
our new credit facility, repayment of our old credit facility and the redemption
of our 12% subordinated notes. Cash provided by financing activities in fiscal
2001 resulted from borrowings on the revolving credit facility, payments on the
September 1999 term notes, payments of debt issuance fees and payments on other
long-term debt.

     We made capital expenditures of approximately $17.0 million during fiscal
2003 and expect to make capital expenditures of approximately $15.0 million in
fiscal 2004. Capital expenditures are primarily for expansion of physical plant,
purchases of additional or replacement manufacturing equipment and revisions and
upgrades in plant tooling.

     On January 22, 2002, Kmart, a customer for over a decade, filed for
bankruptcy protection. At the time of the bankruptcy filing, we had $12.1
million of unsecured accounts receivable outstanding with Kmart. We disposed of
the remaining balance of the pre-bankruptcy receivable in the third quarter of
fiscal 2003. We had net sales to Kmart of $26.7 million in fiscal 2003,
representing approximately 2.6% of total net sales for that period. In fiscal
2002, we had net sales to Kmart of approximately $28.9 million, representing
approximately 3.3% of total net sales for that period. We resumed shipments to
Kmart on February 5, 2002 and continue with payment terms of 30 days. Kmart
emerged from Chapter 11 protection on May 6, 2003.

     Our primary short-term liquidity needs consist of financing seasonal
merchandise inventory buildups and paying cash interest expense under our
existing credit facilities and on the 11.25% subordinated notes due in April
2012. Our principal source of financing for our seasonal merchandise inventory
buildup and increased accounts receivable is revolving credit borrowings under
the existing credit facilities. At May 31, 2003, we had $110.7 million of
availability under these facilities. Our working capital borrowing needs are
typically at their lowest level from April through June, increase somewhat
through the summer and sharply increase from September through November to
finance accounts receivable and purchases of inventory in advance of the
Christmas and post-holiday selling season. Generally, in the period from
November through February, our working capital borrowings remain at their
highest level and then are paid down to their lowest annual levels from April
through August.

     In connection with our debt refinancing in April 2002, we entered into our
existing credit facility totaling $235.0 million of revolving and term loans
with a syndicate of banks and financial services companies. The revolving and
term loans are due in 2007.

     Proceeds of our existing credit facility were used to refinance our then
existing credit facility and 12% senior subordinated notes due 2005, to fund
transaction fees and expenses and to provide general working capital.

     As of May 31, 2003 the balance outstanding under the existing credit
facility consisted of (in millions):

     Revolver                                     $ 72.6
     Term Loan                                      18.7
                                                  ------
                                                  $ 91.3
                                                  ======

    As of May 31, 2003, our consolidated indebtedness was approximately $244.2
million, of which approximately $91.3 million was senior indebtedness.

     Based on our current level of operations, management believes that cash
flow from operations and available cash, together with available borrowings
under our existing credit facility, will be adequate to meet future liquidity
needs for at least the next few years. We may, however, need to refinance all or
a portion of the principal amount of the notes on or prior to maturity.

     As of May 31, 2003, our contractual cash obligations and commercial
commitments were as follows:


                              Payments Due by Period (in millions)
                          -----------------------------------------------------
                                  Less Than 1                           After 5
                           Total      Year     2-3 Years    4-5 Years    Years
                          -----------------------------------------------------
                                                         
Credit facilities
    (as restated)          $ 91.3   $ 91.3       $   -       $   -      $    -
Senior subordinated notes   152.9        -           -           -       152.9
Operating leases             36.4      9.1        18.7         6.2         2.4
                          -----------------------------------------------------
Total contractual cash
  obligations              $280.6   $100.4      $ 18.7       $ 6.2      $155.3
                          =====================================================

     As part of our cash management activities, we seek to manage accounts
receivable credit risk, collections and accounts payable and payments thereof to
maximize our free cash at any given time.

     Careful management of credit risk has allowed us to avoid (except for
Kmart, as discussed above) significant accounts receivable losses in light of
the poor financial condition of many of our potential and existing customers. In
light of current and prospective global regional economic conditions, we cannot
assure you that we will not be materially adversely affected by accounts
receivable losses in the future.

Recent Accounting Pronouncements

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which establishes accounting standards for the
recognition and measurement of an asset retirement obligation and its associated
asset retirement cost. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. The adoption of SFAS No. 143 effective June 1, 2003 did not
have a material effect on our financial position or results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment of
Disposal of Long-Lived Assets" which supercedes SFAS No. 121 and requires that
one accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. SFAS No. 144 also broadens
the presentation of discontinued operations to include more disposal
transactions. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. The adoption of SFAS No. 144 did not have a material effect
on our financial position or results of operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos. 4, 44
and 64, Amendment of FAS 13 and Technical Corrections as of April 2002", which
rescinds FAS Nos. 4, 44 and 64 and amends other existing authoritative
pronouncements to make various technical corrections, clarify meaning or
describe their applicability under changed conditions. SFAS No. 145 is effective
for fiscal years beginning after May 15, 2002 and resulted in the 2002 loss on
debt extinguishment being reclassified from an extraordinary item to income from
continuing operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses significant issues
relating to the recognition, measurement and reporting of costs associated with
exit and disposal activities. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002 and is not expected to have a
material effect on our financial position or results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB 123". This
statement provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation.
In addition, this statement amends disclosure requirements of SFAS No. 123 to
ensure that fair value disclosures are prominent in both annual and interim
financial statements. We have adopted the disclosure provisions of SFAS No. 148,
but will continue to account for our stock-based compensation plans in
accordance with APB 25.

     In November 2001, the Emerging Issues Task Force issued EITF 01-09,
"Accounting for Consideration Given by a Vendor to a Customer". EITF 01-09
provides guidance on the accounting treatment of various types of consideration
given by a vendor to a customer. The Company has adopted EITF 01-09 effective
June 1, 2002 which reduced net sales for the fiscal year ended May 31, 2003 by
approximately $31.5 million with a corresponding reduction of selling, general
and administrative expenses. This change has no effect on income from operations
or net income. For comparative purposes, net sales for fiscal years ended May
31, 2002 and 2001 have been reduced by approximately $24.7 million and $23.5
million, respectively, with a corresponding reduction of selling, general and
administrative expenses.

     In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the Company must recognize an initial liability for the fair
value, or market value, of the obligations it assumes under that guarantee and
must disclose that information in its interim and annual financial statements.
FIN 45 is effective on a prospective basis for guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. We do not expect FIN 45 to have a material effect on our consolidated
financial statements.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities", which clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements" to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN 46 is applicable immediately for variable interest entities
created after January 31, 2003. For variable interest entities created prior to
January 31, 2003, the provisions of FIN 46 are applicable no later than July 1,
2003. We do not expect FIN 46 to have a material effect on our consolidated
financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". SFAS
No. 150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS No. 150 are effective for financial instruments entered into
or modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. We are currently evaluating the effects SFAS No. 150 may have on our
financial statements.




Item 8.  Financial Statements and Supplementary Data

               Index to Consolidated Financial Statements
                             and Schedule
                                                              Page
                                                              ----

     Report of Independent Auditors                            46

     Consolidated Financial Statements:

     Consolidated Balance Sheets as of May 31, 2003 and 2002   47

     Consolidated Statements of Operations and Comprehensive
       Income for the Years Ended May 31, 2003, 2002 and 2001  48

     Consolidated Statement of Stockholder's Equity (Deficit)
       for the Years Ended May 31, 2003, 2002 and 2001         49

     Consolidated Statements of Cash Flows for the Years
       Ended May 31, 2003, 2002 and 2001                       50

     Notes to Consolidated Financial Statements                51

     Financial Statement Schedule:

     Schedule II - Valuation and Qualifying Accounts for
       the Three Years Ended May 31, 2003                      79





SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ICON Health & Fitness, Inc. has duly caused this report to
be signed on its behalf by the undersigned, there unto duly authorized.

                                       ICON HEALTH & FITNESS, INC.
                                       By: /s/ David J. Watterson
                                       ----------------------------
                                       Name:  David J. Watterson
                                       Title: Chairman of the Board and Chief
                                              Executive Officer
                                       Date:  August 27, 2004

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.


Signatures                  Capacity                    Date
- ----------                  --------                    ----
/s/ David J. Watterson
- -----------------------Chairman of the Board of         August 27, 2004
David J. Watterson     Directors and Chief Executive
                       Officer (principal Executive
                       Officer)
/s/ S. Fred Beck
- -----------------------Vice President, Chief Financial  August 27, 2004
S. Fred Beck           and Accounting Officer, and
                       Treasurer
/s/ Ronald P. Mika
- -----------------------Director                         August 27, 2004
Ronald P. Mika

/s/ W. Steve Albrecht
- -----------------------Director                         August 27, 2004
W. Steve Albrecht

/s/ Stan Tuttleman
- -----------------------Director                         August 27, 2004
Stan Tuttleman

/s/ Gregory Benson
- -----------------------Director                         August 27, 2004
Gregory Benson



        Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of ICON Health & Fitness, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of stockholder's
equity (deficit) and of cash flows present fairly,  in all material respects,
the financial position of ICON Health & Fitness, Inc. and its subsidiaries at
May 31, 2003 and 2002, and the results of their operations and their cash flows
for each of the three years in the period ended May 31, 2004 in conformity with
accounting principles generally accepted in the United States of America.  These
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.  We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material miss
tatement.  An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company has
restated its balance sheets as of May 31, 2003 and 2002 to reflect borrowings
under its revolving credit line as a current liability.

As discussed in Note 3 to the consolidated financial statements, effective
June 1, 2002, the Company adopted the provisions of EITF 01-09, "Accounting for
Consideration Given by a Vendor to a Customer", Statement of Financial
accounting Standards No. 142, "Goodwill and Other Intangible Assets", and
Statement of Financial Accounting Standards No. 145, "Rescission of FAS Nos. 4,
44 and 64, Amendment of FAS 13 and Technical Corrections as of April 2002".



/s/ PricewaterhouseCoopers LLP

Salt Lake City, Utah
July 17, 2003, except for Notes 2, 9 and 17 for
which the date is January 12, 2004


ICON Health & Fitness, Inc.
CONSOLIDATED BALANCE SHEETS
(In Thousands)


                                                     
                                           May 31, 2003    May 31, 2002
                                           ------------    ------------
ASSETS                                     (as restated)   (as restated)
Current assets:
  Cash                                      $  4,650        $  4,773
  Accounts receivable, net                   175,164         153,178
  Inventories, net                           161,708         133,753
  Deferred income taxes                        7,323           4,807
  Other current assets                         9,830          18,675
                                            --------        --------
     Total current assets                    358,675         315,186

Property and equipment, net                   48,777          44,985
Intangible assets, net                        29,069          30,201
Deferred income taxes                          8,379          12,084
Other assets, net                             20,214          20,768
                                            --------        --------
     Total assets                           $465,114        $423,224
                                            ========        ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Current portion of long-term debt         $ 91,313        $103,106
  Accounts payable                           121,177         113,927
  Accrued expenses                            33,964          23,751
  Income taxes payable                         4,228           5,421
  Interest payable                             7,484           3,045
                                            --------        --------
     Total current liabilities               258,166         249,250

Long-term debt                               152,919         152,831
Other liabilities                              9,691           4,934
                                            --------        --------
     Total liabilities                       420,776         407,015
                                            --------        --------

Commitments and contingencies
  (Notes 9 and 13)

Stockholder's Equity
  Common stock and additional
    paid-in capital                          204,155         204,155
  Receivable from Parent                      (2,200)         (2,200)
  Accumulated deficit                       (157,252)       (183,941)
  Accumulated other comprehensive loss          (365)         (1,805)
                                            --------        --------
     Total stockholder's equity               44,338          16,209
                                            --------        --------
     Total liabilities and
       stockholder's equity                 $465,114        $423,224
                                            ========        ========

The accompanying notes are an integral part of the consolidated financial
statements.



ICON Health & Fitness, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In Thousands)


                                      For the Year Ended May 31,
                                                   
                                    2003          2002         2001
                                 ----------    ---------    ---------
Net sales                        $1,011,544    $ 871,399    $ 796,994
Cost of sales                       713,415      635,046      580,484
                                 ----------    ---------    ---------
Gross profit                        298,129      236,353      216,510
                                 ----------    ---------    ---------
Operating expenses:
  Selling                           134,047      101,355       86,279
  Research and development           11,648       10,405       10,851
  General and administrative         81,766       68,089       64,631
                                  ---------    ---------    ---------
Total operating expenses            227,461      179,849      161,761
                                  ---------    ---------    ---------

Income from operations               70,668       56,504       54,749

Interest expense                    (25,105)     (26,149)     (34,771)
Amortization of deferred
  financing fees                     (1,267)      (3,146)      (3,189)
Loss on extinguishment of debt            -       (7,435)           -
                                  ---------    ---------    ---------
Income before income taxes           44,296       19,774       16,789
Provision for income taxes           17,607          380        3,483
                                  ---------    ---------    ---------
Net income                           26,689       19,394       13,306
Other comprehensive income
  (loss), comprised of foreign
  currency translation adjustment,
  net of income tax expense of
  $883 in 2003 and $129 in 2002
  and net of a tax benefit of
  $325 in 2001.                       1,440          210         (532)
                                  ---------    ---------    ---------
Comprehensive income              $  28,129    $  19,604    $  12,774
                                  =========    =========    =========

The accompanying notes are an integral part of the consolidated financial
statements.

















ICON Health & Fitness, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(In Thousands, except share amounts)


                 Common Stock and
                    additional
                 paid-in capital                                Accumulated    Total
                 ----------------  Receivable                     other     stockholder's
                                      from      Accumulated   comprehensive   equity
                 Shares   Amount     Parent       deficit      Income (loss) (deficit)
                -------------------------------------------------------------------------
                                                          
Balance at
  May 31, 2000    1,000   $204,155   $ (2,200)  $ (216,641)      $(1,483)    $(16,169)

Other
  comprehensive
  loss                -          -          -            -          (532)        (532)
Net income            -          -          -       13,306             -       13,306
               -------------------------------------------------------------------------
Balance at
  May 31, 2001    1,000    204,155     (2,200)    (203,335)       (2,015)      (3,395)

Other
  comprehensive
  income              -          -          -            -           210          210
Net income            -          -          -       19,394             -       19,394
               -------------------------------------------------------------------------
Balance at
  May 31, 2002    1,000    204,155     (2,200)    (183,941)       (1,805)      16,209

Other
  comprehensive
  income              -          -          -            -         1,440        1,440
Net income            -          -          -       26,689             -       26,689
               -------------------------------------------------------------------------
Balance at
  May 31, 2003    1,000   $204,155   $ (2,200)  $ (157,252)      $  (365)    $ 44,338
                  ======================================================================

The accompanying notes are an integral part of the consolidated financial
statements.
























ICON Health & Fitness, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)


                                               For the Year Ended May 31,
                                                            
                                             2003          2002         2001
                                           ---------    ---------    ---------
OPERATING ACTIVITIES:
Net income                                 $  26,689     $ 19,394     $ 13,306
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Benefit for deferred taxes                   306      (10,138)        (588)
    Gain on sale of property
      and equipment                               (5)           -            -
    Amortization of gain on
      extinguishment of debt                       -       (1,191)      (1,300)
    Amortization of deferred financing fees    1,267        3,146        3,189
    Amortization of debt discount                 73           18            -
    Depreciation and amortization             19,170       19,162       17,372
    Loss on extinguishment of debt                 -        7,435            -
Changes in operating assets and liabilities,
  net of acquisitions:
      Accounts receivable, net               (21,986)     (19,968)     (14,097)
      Inventories, net                       (27,955)      12,231      (14,784)
      Other assets, net                       10,327       (4,162)      (3,098)
      Accounts payable and accrued expenses   18,526         (671)      10,040
      Income taxes payable                    (1,193)       5,076          345
      Interest payable                         4,439        2,272        2,022
      Other liabilities                        1,980        4,934            -
                                           ---------    ---------    ---------
Net cash provided by operating activities     31,638       37,538       12,407
                                           ---------    ---------    ---------
INVESTING ACTIVITIES:
Purchase of property and equipment           (16,952)     (11,624)     (16,095)
Purchase of intangible assets                 (4,892)      (5,200)      (2,693)
Acquisitions, net of cash acquired                 -         (306)      (3,997)
Proceeds from sale of property
  and equipment                                   19            -            -
                                           ---------    ---------    ---------
Net cash used in investing activities        (21,825)     (17,130)     (22,785)
                                           ---------    ---------    ---------
FINANCING ACTIVITIES:
Borrowings (payments) on
  revolving credit facility, net              (6,749)      32,831       19,497
Payments on other long-term debt                 (29)         (48)        (376)
Proceeds from April 2002 term notes                -       25,000            -
Payments on April 2002 term notes             (5,000)      (1,250)           -
Payments on September 1999 term notes              -     (172,834)      (9,273)
Proceeds from 11.25% notes                         -      152,813            -
Payments to 12% noteholders                        -      (46,053)           -
Payment of fees-debt portion                    (481)      (9,757)      (1,153)
                                           ---------    ---------    ---------
Net cash provided by (used in)
  financing activities                       (12,259)     (19,298)       8,695
                                           ---------    ---------    ---------
Effect of exchange rates on cash               2,323          339         (857)
                                           ---------    ---------    ---------
Net increase (decrease) in cash                 (123)       1,449       (2,540)
Cash, beginning of period                      4,773        3,324        5,864
                                           ---------    ---------    ---------
Cash, end of period                        $   4,650     $  4,773     $  3,324
                                           =========    =========    =========

The accompanying notes are an integral part of the consolidated financial
statements.


ICON Health & Fitness, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Basis of Presentation and Description of Business

     Basis of Presentation - The consolidated financial statements include the
accounts of ICON Health & Fitness, Inc., and its wholly owned subsidiaries ("the
Company"). At May 31, 2003 and 2002, the Company was a wholly owned subsidiary
of HF Holdings, Inc. ("HF Holdings" or the "Parent").

     Description of Business - The Company is principally involved in the
development, manufacturing and distribution of home fitness equipment. The
Company's revenues are derived from the sale of various aerobic and anaerobic
fitness product lines in domestic and foreign markets. Because product life
cycles can be short in the fitness industry, the Company emphasizes new product
innovation and product repositioning. The Company primarily sells its products
to retailers and, to a limited extent, to end-users through direct response
advertising efforts and retail outlets.


2. Restatement

     The credit agreement, which includes the Company's $210 million revolving
credit line and the term loan ("Credit Agreement"), requires the Company to
maintain a lockbox arrangement whereby remittances from the Company's customers
reduce the borrowings outstanding under the Credit Agreement.  The Company has
determined that the Credit Agreement also contains a Material Adverse Effect
("MAE") clause which grants the agent and lenders having more than 66 and 2/3%
of the commitment or borrowings the right to block the Company's requests for
future advances. EITF Issue 95-22 "Balance Sheet Classification of Borrowings
Outstanding Under Revolving Credit Agreements That Include Both a Subjective
Acceleration Clause and a Lockbox Arrangement" requires borrowings under credit
agreements with these two provisions to be classified as current obligations.
Accordingly, the Company has restated its balance sheets as of May 31, 2003
and 2002 to reclassify the borrowings of $86.3 million and $98.1 million from
long-term debt to current as of May 31, 2003 and 2002, respectively. The
disclosures in footnotes 9 and 17 have been restated for this reclassification.

     This restatement had no impact on the Company's compliance with its debt
covenants under the Credit Agreement, its ability to draw on existing
facilities, its previously reported total assets and stockholder's equity as of
May 31, 2003 and 2002 or its previously reported net income for the years ended
May 31, 2003, 2002 and 2001.


3.   Significant Accounting Policies

     Principles of Consolidation - All significant intercompany accounts and
transactions have been eliminated in the consolidated financial statements.

     Cash - At May 31, 2003, substantially all of the Company's cash is held by
two banks located in Illinois and Massachusetts. The Company does not believe
that as a result of this concentration it is subject to any unusual financial
risk beyond the normal risk associated with commercial banking relationships.

     Inventories - Inventories consist primarily of raw materials (principally
parts and supplies) and finished goods, and are valued at the lower of cost or
market. Cost is determined using standard costs which approximate the first-in,
first-out (FIFO) method.

     Property and Equipment - Property and equipment is stated at cost and
depreciated using the straight-line method over the estimated useful lives of
the respective assets. Expenditures for renewals and improvements are
capitalized, and maintenance and repairs are charged to expense as incurred.

     Intangible Assets - In July 2001, the Financial Accounting Standards Board
("FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations", and Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets". SFAS No. 141 specifies criteria
that must be met in order for intangible assets acquired in a purchase method
business combination to be recognized and reported apart from goodwill. SFAS
No. 142 requires that goodwill and intangible assets with indefinite useful
lives no longer be amortized; but instead be tested for impairment at least
annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with definite lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". The Company adopted the provisions
of SFAS No. 141 immediately and SFAS No. 142 effective June 1, 2002. The Company
completed an impairment evaluation of its goodwill as of June 1, 2002 and
May 31, 2003.  No impairment was identified.

     At June 1, 2002, goodwill totaled $5,624,000, net of accumulated
amortization of $1,919,000. The following table presents what reported net
income would have been for the years ended May 31, 2002 and 2001 under SFAS No.
142:


                                                       Year Ended May 31,
                                                         2002        2001
                                                   --------------------------
                                                            
      Reported net income                             $ 19,394    $ 13,306
      Add back:  Goodwill amortization, net of
                 income tax of $143 and $143
                 respectively, for the years ended
                 May 31, 2002 and 2001                     234         234
                                                   --------------------------
      Adjusted net income                             $ 19,628    $ 13,540
                                                   ==========================

     Intangible assets other than goodwill are recorded at cost and are
amortized on a straight-line basis over the following estimated useful lives:

                Trademarks          20 years
                Other                5 years

     Long-Lived Assets - Long-lived assets are reviewed for impairment whenever
events or circumstances indicate that the carrying amount of long-lived assets
may not be recoverable. The carrying value of a long-lived asset is considered
impaired when the anticipated cumulative undiscounted cash flows from that asset
are less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair market value of the
long-lived asset, which is generally based on discounted cash flows. As a result
of its review, the Company does not believe that as of May 31, 2003 and 2002,
any impairment exists related to its long-lived assets.

     Deferred Financing Costs - The Company deferred certain debt issuance costs
relating to the establishment of the New 2002 Credit Facilities and the issuance
of the 11.25% Notes as part of the April 2002 Refinancing (see Note 9). These
costs are capitalized in other long-term assets and are being amortized using
the effective interest method. Deferred costs relating to the 12% Notes and
existing bank credit agreement were written off as part of the April 2002
Refinancing.

     Advertising Costs - The Company expenses the costs of advertising as
incurred, except for the cost of direct response advertising, which is
capitalized and amortized over its expected period of future benefit, generally
twelve months. Direct response advertising costs consist primarily of costs to
produce infomercials for the Company's products. At May 31, 2003 and 2002,
$1,792,000 and $1,586,000, respectively, of capitalized advertising costs were
included in other current assets. For the fiscal years ended May 31, 2003, 2002
and 2001, total advertising expense was approximately $30,743,000, $17,169,000
and $13,011,000, respectively.

     Revenue Recognition - The Company recognizes revenue upon the shipment of
product to the customer. Allowances are recognized for estimated returns,
discounts, advertising programs and warranty costs associated with these sales.

     Concentration of Credit Risk - The primary financial instruments which
potentially expose the Company to concentration of credit risk include trade
accounts receivable. To minimize this risk, ongoing credit evaluations of
customers' financial condition are performed and reserves are maintained;
however, collateral is not required. A significant portion of the Company's
sales are made to Sears Roebuck ("Sears"). Sears accounted for approximately
39%, 44% and 44% of the total net sales for the fiscal years ended May 31, 2003,
2002 and 2001, respectively. Accounts receivable from Sears accounted for
approximately 31% and 35% of gross accounts receivable at May 31, 2003 and 2002,
respectively. The Company is not the exclusive supplier of home fitness
equipment to any of its major customers. The loss of, or a substantial decrease
in the amount of purchases by, or a write-off of any significant receivable due
from, any of its major customers would have a material adverse effect on the
Company's business.

     Research and Development Costs - Research and product development costs are
expensed as incurred. Research and development activities include the design of
new products and product enhancements, and are performed by both internal and
external sources.

     Income Taxes - The Company accounts for income taxes utilizing the asset
and liability method as prescribed by SFAS No. 109, "Accounting for Income
Taxes". Deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax bases of assets and
liabilities at currently enacted tax rates. If appropriate, deferred tax assets
are reduced by a valuation allowance which reflects expectations of the extent
to which such assets will be realized.

     As of May 31, 2003 and 2002, the Company was included as part of the
consolidated tax return filed by HF Holdings, Inc. The income tax provision for
the Company has been prepared on a separate company basis.

     Foreign Operations - Assets and liabilities of the Company's European and
Canadian subsidiaries are translated into U.S. dollars at the applicable rates
of exchange at each period end. The Company's foreign transactions are primarily
denominated in Canadian dollars and the Euro and transactions with foreign
entities that result in income and expense for the Company are translated at the
weighted average rate of exchange during the period. Translation gains and
losses are reflected as a separate component of other comprehensive income
(loss). Transaction gains and losses are recorded in the consolidated statements
of operations and comprehensive income (loss) and were not material in the
fiscal years ended May 31, 2003, 2002 and 2001. For the fiscal years ended May
31, 2003, 2002 and 2001, the Company's foreign operations represented less than
10% of the Company's net sales and effects of exchange rate changes did not have
a material impact on the Company's earnings.

     Warranty Reserves - The Company maintains a warranty accrual for estimated
future warranty obligations based upon the relationship between historical and
anticipated costs and sales volumes. If actual warranty expenses are greater
than those projected, additional reserves and other charges against earnings may
be required. If actual warranty expenses are less than projected, prior reserves
could be reduced providing a positive impact on the Company's reported results.
The following table provides a reconciliation of the changes in the Company's
product warranty reserve (table in thousands):




                                              Year Ended May 31,
                                     ----------------------------------
                                        2003        2002        2001
                                     ----------------------------------
                                                     
Warranty Reserve:
Balance at beginning of year          $ 1,290     $ 2,557     $ 2,570
Additions:
  Charged to costs and expenses         1,349           -          30
Deductions:
  Reduction in reserve                      -      (1,267)        (43)
                                     ----------------------------------
Balance at end of year                $ 2,639     $ 1,290     $ 2,557
                                     ==================================

     The reduction in the warranty reserve in the fiscal year ended May 31, 2002
resulted primarily from the reclassification of the accrued warranty reserve on
long-term maintenance contracts to deferred revenue. Revenue from these
contracts is recognized ratably over the term of the contract.

     Fair Value of Financial Instruments - The following methods and assumptions
were used to estimate the fair value disclosures for financial instruments:

     11.25% Notes - fair value equals quoted market price.

     Other long-term debt - fair value approximates carrying value since such
     debt is primarily variable rate debt.

     The carrying amounts and fair values of long-term debt at May 31, 2003 and
2002 were as follows (table in thousands):


                        2003         2003         2002          2002
                      -------------------------------------------------
                      Carrying     Estimated     Carrying     Estimated
                       Amount     Fair Value      Amount     Fair Value
                      -------------------------------------------------
                                                 
11.25% Notes          $152,903    $162,750       $152,831     $152,831
Other long-term debt    91,329      91,329        103,106      103,106


     Stock-Based Compensation Plans - The Company accounts for employee
stock-based compensation arrangements in accordance with provisions of
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees." Accordingly, no compensation cost has been recognized for options
granted to employees under its fixed stock option plan.

     On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 148 requires more prominent
and frequent disclosures about the effects of stock-based compensation, which
the Company has adopted for the period ending May 31, 2003. As permitted by SFAS
No. 148, the Company will continue to account for its stock based compensation
according to the provisions of APB No. 25.

     Had compensation cost for the Company's stock options been recognized based
upon the estimated fair value on the grant date under the fair value methodology
prescribed by SFAS No. 123, the Company's net earnings would have been as
follows (table in thousands):


                                                Year Ended May 31,
                                              2003      2002     2001
                                             ------   -------   -------
                                                       
Net income, as reported                     $26,689   $19,394   $13,306
Less: Total stock-based employee
      compensation expense determined
      under fair value based method for
      all awards, net of related tax effects     28       133       133
                                            -------   -------   -------
Pro forma net income                        $26,661   $19,261   $13,173
                                            =======   =======   =======


     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 disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses for the period presented. Actual results could differ from
those estimates.

     New Accounting Standards - In June 2001, the FASB issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," which establishes accounting
standards for the recognition and measurement of an asset retirement obligation
and its associated asset retirement cost. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002. The adoption of SFAS No. 143 effective June
1, 2003 did not have a material effect on the Company's financial position or
results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment of
Disposal of Long-Lived Assets" which supercedes SFAS No. 121 and requires that
one accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. SFAS No. 144 also broadens
the presentation of discontinued operations to include more disposal
transactions. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. The adoption of SFAS No. 144 did not have a material effect
on the Company's financial position or results of operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos. 4, 44
and 64, Amendment of FAS 13 and Technical Corrections as of April 2002", which
rescinds FAS Nos. 4, 44 and 64 and amends other existing authoritative
pronouncements to make various technical corrections, clarify meaning or
describe their applicability under changed conditions. SFAS No. 145 is effective
for fiscal years beginning after May 15, 2002 and resulted in the 2002 loss on
debt extinguishment being reclassified from an extraordinary item to income from
continuing operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses significant issues
relating to the recognition, measurement and report of costs associated with
exit or disposal activities initiated after December 31, 2002 and is not
expected to have a material effect on the Company's financial position or
results of operations.

     In November 2001, the Emerging Issues Task Force issued EITF 01-09,
"Accounting for Consideration Given by a Vendor to a Customer". EITF 01-09
provides guidance on the accounting treatment of various types of consideration
given by a vendor to a customer. The Company has adopted EITF 01-09 effective
June 1, 2002, which reduced net sales for the fiscal year ended May 31, 2003 by
approximately $31.5 million with a corresponding reduction of selling, general
and administrative expenses. This change has no effect on income from operations
or net income. For comparative purposes, net sales for fiscal years ended
May 31, 2002 and 2001 have been reduced by approximately $24.7 million and $23.5
million respectively, with a corresponding reduction of selling, general and
administrative expenses.

     In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company
issues a guarantee, the Company must recognize an initial liability for the fair
value, or market value, of the obligations it assumes under that guarantee and
must disclose that information in its interim and annual financial statements.
FIN 45 is effective on a prospective basis for guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company does not expect FIN 45 to have a material effect on its
consolidated financial statements.

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities", which clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements" to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN 46 is applicable immediately for variable interest entities
created after January 31, 2003. For variable interest entities created prior to
January 31, 2003, the provisions of FIN 46 are applicable no later than July 1,
2003. The Company does not expect FIN 46 to have a material effect on its
consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". SFAS
No. 150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS No. 150 are effective for financial instruments entered into
or modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The Company does not expect SFAS No. 150 to have a material effect on
its consolidated financial statements.

     Reclassifications - Certain balances of the prior years have been
reclassified to conform to the current year's presentation. These
reclassifications had no effect on net income or total assets.


4.   Accounts Receivable

     Accounts receivable, net, consist of the following (table in thousands):


                                                May 31,
                                          2003         2002
                                       ---------------------
                                               
          Trade accounts receivable     $183,558     $161,117
          Less allowance for doubtful
            accounts, advertising
            discounts and credit memos    (8,394)      (7,939)
                                        ---------------------
                                        $175,164     $153,178
                                        =====================


5.   Inventories

     Inventories, net, consist of the following (table in thousands):


                                               May 31,
                                          2003          2002
                                        ---------------------
                                               
          Raw materials, principally
            parts and supplies          $ 53,748     $ 60,136
          Finished goods                 107,960       73,617
                                        ---------------------
                                        $161,708     $133,753
                                        =====================

     Inventories are net of allowances (primarily for finished goods) of
$3,900,000 and $3,275,000 at May 31, 2003 and 2002, respectively. These
allowances are established based on management's estimates of inventory held at
fiscal year end that is potentially obsolete or for which its market value is
below cost.


6.   Property and Equipment

     Property and equipment, net, consist of the following (table in thousands):


                            Estimated           May 31,
                           Useful lives      2003      2002
                           ----------------------------------
                             (Years)
                                            
          Land                    -       $ 2,160    $ 1,472
          Building and
            improvements   up to 31        21,053     21,174
          Equipment and
            tooling             3-7        75,053     73,304
                                         --------------------
                                           98,266     95,950
          Less accumulated
            depreciation                  (49,489)   (50,965)
                                         --------------------
                                         $ 48,777   $ 44,985
                                         ====================

     For the fiscal years ended May 31, 2003, 2002 and 2001, the Company
recorded depreciation expense of $13,166,000, $13,398,000 and $13,619,000,
respectively.

7.   Intangible Assets

     Intangible assets, net, consist of the following (table in thousands):


                      May 31, 2003                    May 31, 2002
           --------------------------------  ------------------------------
                      Accumulated                      Accumulated
               Cost   Amortization   Net        Cost   Amortization   Net
           --------------------------------  -------------------------------
                                                  
Goodwill     $ 7,543   $ (1,919)   $ 5,624    $ 7,543   $ (1,919)   $ 5,624
Trademarks    27,607    (10,247)    17,360     27,963     (8,495)    19,468
Other         13,944     (7,859)     6,085     10,813     (5,704)     5,109
           --------------------------------  -------------------------------
             $49,094   $(20,025)   $29,069    $46,319   $(16,118)   $30,201
           ================================  ===============================

     Amortization expense related to intangible assets for the fiscal years
ended May 31, 2003, 2002 and 2001 was $6,004,000, $5,764,000 and $3,753,000,
respectively. Approximately $5,624,000 of the net goodwill at May 31, 2003 is
tax deductible in future periods. Estimated amortization expense for years
ending after May 31, 2003 is as follows (table in thousands):







                      Year Ending May 31,
                      ---------------------------
                                      
                      2004               $  4,428
                      2005                  3,813
                      2006                  2,930
                      2007                  1,930
                      2008                  1,171
                      Thereafter            9,173
                                         --------
                                         $ 23,445
                                         ========

8.   Other Assets

     Other assets, net, consist of the following (table in thousands):


                                                May 31,
                                           2003        2002
                                         ---------------------
                                              
          Deferred financing costs, net  $  8,356   $  9,142
          Long-term receivables, net          556     10,362
          Long-term portion of trade
            receivables                     7,255          -
          Other                             4,047      1,264
                                        ---------------------
                                         $ 20,214   $ 20,768
                                        =====================

     At May 31, 2003 and 2002, deferred financing costs are net of accumulated
amortization of $1,438,000 and $171,000, respectively.

     Long-term receivables consist of receivables whose collection is not
considered to be current because the customer is in bankruptcy and whose
carrying values have been written down to net realizable value. At May 31, 2003
and 2002, long-term receivables are net of an allowance for doubtful accounts of
$70,000 and $2,434,000, respectively.

     As of May 31, 2003, long-term portion of trade receivables consists of the
long-term portion of receivables from direct response sales. The allowance for
doubtful accounts related to the long-term portion of these receivables is not
significant.



















9.   Long-Term Debt

     Long-term debt consists of the following (table in thousands):


                                               May 31,
                                          2003         2002
                                        --------------------
                                     (as restated) (as restated)
                                              
          2002 Revolver                  $ 72,563   $ 79,312
          2002 Term Loan                   18,750     23,750
          11.25% Senior Subordinated
            Notes, face amount
            $155,000, net of
            unamortized discount of
            $2,096 and $2,169 at
            May 31, 2003 and
            2002, respectively.           152,903    152,831
          Other                                16         44
                                        --------------------
                                          244,232    255,937
          Less current portion            (91,313)  (103,106)
                                        --------------------
                                         $152,919   $152,831
                                        ====================

April 2002 Refinancing

     In April 2002, the Company entered into new credit facilities and issued
new 11.25% senior subordinated notes ("11.25% notes") (the "April 2002
Refinancing"). The Company used the net proceeds of the 11.25% Notes and the New
2002 Credit Facilities to repay all outstanding indebtedness under the existing
credit agreement, to redeem in full all of the outstanding 12% subordinated
notes due 2005, to pay accrued interest and premiums thereon, and pay certain
transaction fees and expenses.

New Credit Facilities

     In connection with the April 2002 Refinancing, the Company entered into new
credit facilities (the "New 2002 Credit Facilities") of $235 million with a
syndicate of banks and financial services companies.

     The New 2002 Credit Facilities include a $210 million revolving credit line
(the "2002 Revolver"), which includes a letter of credit sub-facility of up to
$10 million and a swing line sub-facility of up to $10 million. The term is five
years. Borrowing availability is limited to certain percentages of qualified
assets as specified in the agreement. The letter of credit margin of 2% and an
unused facility fee of .50% per annum of the average unused daily balance of the
2002 Revolver are due monthly.

     In addition, the New 2002 Credit Facilities include a $25 million Term Loan
("2002 Term Loan") with a 58-month term. The 2002 Term Loan amortizes quarterly
at a rate of $1,250,000. At the Company's option, the 2002 Revolver and 2002
Term Loan bear interest at either (a) a floating rate equal to the Index Rate
plus the applicable margin of 1.25% and 1.75%, respectively, or (b) a floating
rate equal to the LIBOR rate plus the applicable margin of 2.625% and 3.125%,
respectively. If the 2002 Revolver is terminated or if the 2002 Term Loan is
prepaid, certain prepayment premiums will apply.

     All loans under the New 2002 Credit Facilities are collateralized by a
first priority security interest in all of the existing and subsequently
acquired assets of the Company and its domestic and Canadian subsidiaries,
subject to specified exceptions, and a pledge of 65% of the stock of the
Company's first-tier foreign subsidiaries. All loans are cross-collateralized
and contain cross default provisions.

     All of the outstanding common stock of the Company, owned by HF Holdings,
has been pledged to the lenders under the New 2002 Credit Facilities. If the
Company were to default under these New 2002 Credit Facilities, the lenders
would foreclose on the pledge and take control of the Company.

     The new credit agreement contains a number of restrictive covenants that,
among other things, limit or restrict the Company's and its subsidiaries'
ability to dispose of assets, incur additional indebtedness, incur guarantee
obligations, prepay other indebtedness, make restricted payments, create liens,
make equity or debt investments, make certain acquisitions, modify terms of the
indenture, engage in mergers or consolidations, enter into operating leases or
engage in transactions with affiliates. In addition, the Company is expected to
comply with various financial ratios and tests, including a maximum capital
expenditures test, minimum debt service coverage ratio, minimum EBITDA, maximum
senior leverage ratio and minimum revenue. At May 31, 2003, the Company was in
compliance with all of its debt covenants.

11.25% Senior Subordinated Notes

     The new 11.25% Notes are due April 2012. The 11.25% Notes were issued with
a face principal amount of $155 million at a price of 98.589%. Interest is due
January 1 and July 1 of each year, beginning on July 1, 2003. The 11.25% Notes
are redeemable for a premium of between 1% and 5.625% anytime after April 2007,
as outlined in the indenture. Up to 35% of the 11.25% Notes can be redeemed
prior to April 1, 2005 at an 11.25% premium. The 11.25% Notes are guaranteed on
an unsecured, senior subordinated basis by the Company's existing and future
domestic subsidiaries.

     The 11.25% Notes contain certain restrictive covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur
additional debt, pay dividends or make other distributions, make investments,
dispose of assets, issue capital stock of subsidiaries, enter into mergers or
consolidations or sell all, or substantially all, of their assets.

     The table below reflects the scheduled principal payment terms of the
Company's long-term debt (table in thousands):




               Year ending May 31,             (as restated)
               -------------------
                                               
              2004                                $ 91,328
              2005                                       -
              2006                                       -
              2007                                       -
              2008                                       -
              Thereafter                           155,000
                                                  --------
                                                   246,328
              Unamortized debt discount             (2,096)
                                                  --------
                                                  $244,232
                                                  ========

     For the fiscal year ended May 31, 2002, a loss of approximately $7.4
million was recorded on the extinguishment of the Company's Old 1999 Credit
Facilities and the 12% Notes.

10.  Stockholder's Equity

     The Company has 3,000 shares of $.01 par value common stock authorized and
1,000 shares issued and outstanding.

     During the fiscal year ended May 31, 2000, the Company established a new
Junior Management stock option plan (the "Plan") and issued 333,300 options to
purchase common stock of HF Holdings with an exercise price of $5.83 to members
of the Plan. These options have a ten-year life, 25% vested immediately and the
balance vests in 25% increments on each anniversary of the grant date. The
following table summarizes activity under the Plan for the fiscal years ended
May 31, 2003, 2002 and 2001:


                                                   Year Ended May 31,
                                       2003               2002               2001
                                 --------------------------------------------------------
                                         Weighted           Weighted           Weighted
                                          Average            Average            Average
                                         Exercise           Exercise           Exercise
                                 Shares   Price     Shares   Price    Shares    Price
                                 --------------------------------------------------------
                                                             
  Outstanding at beginning
   of year                       333,330   $ 5.83   333,300   $ 5.83   333,330   $ 5.83
  Granted                              -                  -        -         -        -
  Expired                              -                  -        -         -        -
  Exercised                            -                  -        -         -        -
  Forfeited                            -                  -        -         -        -
                                 --------------------------------------------------------
  Outstanding at end of year     333,330   $ 5.83   333,300   % 5.83   333,330   $ 5.83
                                 ========================================================
  Options exercisable at
    end of year                  333,330            249,975            166,650
                                 ========================================================
  Weighted average fair market
    value of options granted
    during year                        -                  -                  -
                                 ========================================================





     The following table summarizes information about stock options outstanding
at May 31, 2003:


                Options Outstanding                     Options Exercisable
- -----------------------------------------------------------------------------------------
                                  Weighted
                                   Average         Weighted                      Weighted
Range of                          Remaining        Average                       Average
Exercise        Number           Contractual       Exercise        Number        Exercise
 Prices       Outstanding       Life(in years)       Price       Exercisable       Price
- -----------------------------------------------------------------------------------------
                                                                  
 $5.83          333,300              6.3            $5.83          333,330        $5.83

     The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: (1) risk-free
interest rate of 6.00%; (2) expected life of five years; (3) dividend yield of
zero; and (4) a volatility of zero.


11.  Income Taxes

     The provision for income taxes consists of the following (table in
thousands):



                                   Year Ended May 31,
                    ---------------------------------------------------
                             2003          2002          2001
                    ---------------------------------------------------
                                              
Current:
  Federal                 $ 12,453      $ 10,178       $ 2,720
  State                      1,067           872           233
  Foreign                    3,781         2,293         1,118
                    ---------------------------------------------------
     Total current          17,301        13,343         4,071
                    ---------------------------------------------------
Deferred:
  Federal                      346       (12,323)       (1,041)
  State                         30        (1,055)          (90)
  Foreign                      (70)          415           543
                    ---------------------------------------------------
     Total deferred            306       (12,963)         (588)
                    ---------------------------------------------------
Total provision for
  income taxes            $ 17,607      $    380       $ 3,483
                    ===================================================



     The components of the Company's income before income taxes are as follows
(table in thousands):


                                     Year Ended May 31,
                    ---------------------------------------------------
                             2003          2002          2001
                    ---------------------------------------------------
                                             
  Domestic                $ 39,944      $ 17,017      $ 14,964
  Foreign                    4,352         2,757         1,825
                    ---------------------------------------------------
                          $ 44,296      $ 19,774      $ 16,789
                    ===================================================



     The provision for income tax differs from the amount computed by applying
the statutory federal income tax rate to income before taxes as follows:


                                     Year Ended May 31,
                    ---------------------------------------------------
                             2003          2002          2001
                    ---------------------------------------------------
                                                
Statutory federal
  income tax rate             35%           35%           35%
State tax provision            3             3             3
Benefit from net
  operating loss
  related to
  September 1999
  Restructuring                -             -           (17)
Provision for (Benefit
  from) Internal Revenue
  Service adjustment           2           (59)            -
Foreign income taxes           3            25             9
Foreign tax credit            (3)           (9)           (1)
Other                          -             7            (8)
                    ---------------------------------------------------
Provision for
  Income taxes                40%            2%           21%
                    ===================================================

     At May 31, 2003 and 2002, the net deferred tax asset consists of the
following (table in thousands):



                                                     May 31,
                                               -------------------
                                                 2003       2002
                                               -------------------
                                                    
Deferred tax assets:
  Foreign net operating loss carryforwards      $ 8,037   $ 8,244
  Expenses capitalized for income tax purposes   11,208    12,276
  Reserves and allowances                         5,999     4,478
  Deferred compensation plan                      1,525       470
  Uniform capitalization of inventory             1,069       728
  Other                                           2,029     2,763
                                               -------------------
  Total deferred tax assets:                    $29,867   $28,959
                                               ===================

Deferred tax liabilities:
  Property and equipment                        $ 4,389   $ 2,044
  Other                                           1,739     1,780
                                               -------------------
  Total deferred tax liabilities:               $ 6,128   $ 3,824
                                               ===================

  Valuation allowance                            (8,037)   (8,244)
                                               -------------------
  Net deferred tax asset                        $15,702   $16,891
                                               ===================

     In February 2002, the Internal Revenue Service ("IRS") completed an
examination of the Company's taxable years ended May 31, 1997, 1996 and 1995. In
May 2003, the examination report was approved by the Congressional Joint
Committee. As a result of this examination, approximately $35.0 million of
previously deducted expenses for tax purposes were capitalized during the fiscal
year ended May 31, 2002 and are currently being amortized over fifteen years.
These adjustments created a long-term deferred tax asset of approximately $11.5
million.

     During the fiscal year ended May 31, 2002, the valuation allowance
increased by $624,000 due to additional foreign net operating loss carryforwards
that may not be utilized in future years. During the fiscal year ended May 31,
2001, the valuation allowance decreased by $16,466,000 due to the elimination of
net operating loss carryforwards that would provide no future benefit to the
Company.

     Management believes that it is more likely than not that the Company will
generate sufficient future taxable income to realize the balance of the net
deferred tax asset as of May 31, 2003. However, there can be no assurance that
the Company will generate any specific level of taxable income or that it will
be able to realize any of the remaining deferred tax assets in future periods.
If the Company were unable to generate sufficient taxable income in the future,
an additional valuation allowance against this deferred tax asset would result
in a charge to earnings.

     During the fiscal year ended May 31, 2001, the Company utilized
approximately $9.5 million in net operating loss carryforwards generated during
the period from September 1999 to May 2000.

     At May 31, 2003, the Company had approximately $21.2 million of foreign net
operating loss carryforwards which may be carried forward indefinitely. The
Company has provided a full valuation allowance against the deferred tax asset
related to these carryforwards.


12. Supplemental Disclosures of Cash Flow
Information


                                  Year Ended May 31,
                    -------------------------------------------
                             2003          2002          2001
                    -------------------------------------------
                                              
  Cash paid during the period for (in thousands):
  Interest                 $20,665       $27,222       $34,063
  Income taxes, net          9,813         8,221         6,131

Non-cash investing and financing activities:

     During the fiscal year ended May 31, 2001, the Company added interest of
$2.9 million to long-term debt principal.


13.  Commitments and Contingencies

     Leases - The Company has noncancellable operating leases, primarily for
warehouse and production facilities and computer and production equipment, that
expire over the next five years. These leases generally contain renewal options
for periods ranging from three to five years and require the Company to pay all
executory costs such as maintenance and insurance. Future minimum payments under
noncancellable operating leases consist of the following (table in thousands):

                                Year ending May 31:
                                ------------------
                                2004      $  9,131
                                2005        10,917
                                2006         7,818
                                2007         4,715
                                2008         1,456
                          Thereafter         2,324
                                ------------------
                                          $ 36,361
                                ==================

     Rental expense under noncancellable operating leases was approximately
$14,650,000, $15,060,000 and $15,282,000 for the fiscal years ended May 31,
2003, 2002 and 2001, respectively.

     Environmental Issues - The Company's operations are subject to federal,
state and local health, safety and environmental laws and regulations that
impose workplace standards and limitations on the discharge of pollutants into
the environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage and disposal of materials, substances and
wastes. As of July 17, 2003, the Company was unaware of any environmental,
health or safety violations.

     Product Liability - Due to the nature of the Company's products, the
Company is subject to product liability claims involving personal injuries
allegedly related to the Company's products. These claims include injuries
sustained by individuals using the Company's products. The Company currently
carries an occurrence-based product liability insurance policy. The current
policy provides coverage for the period from October 1, 2002 to October 1, 2003
of up to $5.0 million per occurrence and $5.0 million in the aggregate. The
policy has a deductible on each claim of up to $1,000,000. For occurrences prior
to October 1, 2002, the policy provides coverage of up to $5.0 million per
occurrence and $5.0 million in the aggregate. The policy has a deductible on
each claim of up to $500,000. For occurrences prior to October 1, 2001, the
policy provides coverage of up to $5.0 million per occurrence and $25.0 million
in the aggregate. The policy has a deductible on each claim ranging from
$100,000 to $250,000. The Company believes that its insurance is generally
adequate to cover product liability claims. Nevertheless, currently pending
claims and any future claims are subject to the uncertainties related to
litigation, and the ultimate outcome of any such proceedings or claims cannot be
predicted. Due to uncertainty with respect to the nature and extent of
manufacturers' and distributors' liability for personal injuries, the Company
cannot guarantee that its product liability insurance is or will be adequate to
cover such claims. The Company vigorously defends any and all product liability
claims brought against it and does not believe that any currently pending claim
or series of claims will have a material adverse effect on its results of
operations, liquidity or financial position.

     Other Litigation - The Company is party to a variety of non-product
liability commercial suits involving contract claims. The Company believes that
adverse resolution of these lawsuits would not have a material adverse effect on
its results of operations or financial position.

     In December 2001, a claim was made against the Company alleging the Company
received $1.7 million of preferential transfers in connection with the 1999
Service Merchandise bankruptcy proceedings. The proposed claim is currently
being vigorously defended by the Company's counsel. At this time, the Company
and its counsel are unable to determine the likelihood of an unfavorable outcome
or the amount or range of potential recovery or loss.

     The Company is involved in litigation with Vectra Fitness, Inc. ("Vectra").
Vectra filed a civil action in the United States District Court, for the Western
District of Washington in Seattle, Washington. Vectra is alleging one claim of
patent infringement by the Company on one of its patents. The complaint seeks
monetary damages and other relief. This case is currently being vigorously
defended by the Company's counsel; however, it is not possible for the Company
to quantify with any certainty the extent of any potential liability.

     The Company is also involved in several intellectual property and 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 upon its results of operations or financial position.

     Retirement Plans - All employees who have met minimum age and service
requirements are eligible to participate in the 401(k) savings plan. Company
contributions to the plan for the fiscal years ended May 31, 2003, 2002 and 2001
were $630,000, $610,000 and $540,000, respectively.

     In September 2001, the Company established a nonqualified deferred
compensation plan that permits certain employees to annually elect to defer a
portion of their compensation for their retirement. The amount of compensation
deferred and related investment earnings have been placed in an irrevocable
rabbi trust and recorded within other assets in the Company's consolidated
balance sheet, as this trust will be available to the Company's general
creditors in the event of insolvency. An offsetting deferred compensation
liability, which equals the total value of the trust at May 31, 2003 and 2002 of
$4,015,000 and $1,238,000, respectively, and which is recorded within other
liabilities in the Company's consolidated balance sheet, reflects amounts due to
employees who contributed to the plan. The Company's contributions to the
deferred compensation plan for the fiscal years ended May 31, 2003 and 2002 were
$1,293,000 and $120,000, respectively.

     Employment Agreements - In May of 2003, the Company renegotiated the
September 27, 1999 employment agreements ("second amendment") with each of the
Chairman and Chief Executive Officer and the President and Chief Operating
Officer. The second amendment extends these agreements to September 27, 2005.
The employment agreements provide for the continued employment of Chairman and
Chief Executive Officer with an increase in base salary from $525,000 to
$625,000, and President and Chief Operating Officer with an increase in base
salary from $475,000 to $575,000. Except as set forth below, in all other
material respects the agreements are substantially identical to the September
1999 agreement.

     The second amendment provides for a one-time retention bonus for each of
Chairman and Chief Executive Officer and President and Chief Operating Officer
of $300,000. Each executive is also entitled to participate in a bonus program
providing for a bonus equal to a percentage of the Company's consolidated EBITDA
(as defined in the Company's credit facility) and the Company's subsidiaries
(the Company's "EBITDA") which percentage shall equal 1.50% for Chairman and
Chief Executive Officer and 1.32% for President and Chief Operating Officer. The
executives will not be entitled to a bonus, however, unless the Company's
Profits exceed 5.5% of net sales.

     The Company may terminate each executive's employment (1) for cause as
provided in each agreement, (2) upon six months' disability, or (3) without
cause. Each executive may similarly terminate his employment immediately for
cause as provided in his employment agreement, upon three months notice to
perform full-time church service or for any reason upon six months' notice.

     The employment agreements prohibit the executives from engaging in outside
business activity during the term, subject to certain exceptions. The employment
agreements provide for customary confidentiality obligations and, in addition, a
non-competition obligation for a period of four years following termination (two
years if the executive quits with cause or without cause or is terminated
without cause, except that the Company may, at the Company's option, extend such
period for up to two additional years by paying the executive his salary and
bonus during the extended period).

     In fiscal 2003, the Company formed a foreign subsidiary to build a
manufacturing facility in Xiamen, China. The total project cost is anticipated
to be approximately $12.0 million, with $7.0 million to be funded in the form of
equity by the subsidiary, and approximately $5.0 million in the form of debt.
The Company's share of the equity investment is expected to be approximately
$5.0 million. The Company is in the process of arranging for the debt portion of
the financing, which is expected to be provided by the Bank of China.


14.  Related Party Transactions

Management Fees

     The Company has an agreement with major stockholders of HF Holdings who
provide management and advisory services to the Company. Total annual fees due
under this agreement are $800,000, for the fiscal years ended May 31, 2003, 2002
and 2001. The Company recorded management fee expense of $800,000 each year. If
the Company enters into any acquisition transaction involving at least $10
million, the Company must pay a fee of approximately 1% of the gross purchase
price, including liabilities assumed, of the transaction to these stockholders.
In addition, in the event of a Liquidity Event (as defined in the Stockholder's
Agreement), the Company will pay a fee in an amount which will approximate 1% of
the purchase price of the transaction to another major stockholder.

Airplane Lease

     In June 1996, the Company entered into an agreement with FG
Aviation, Inc. ("FG"), a company which is jointly owned by officers of the
Company, whereby the Company committed to lease an airplane from FG. Minimum
rentals under the lease, which expires in May 2005, are $56,610 per month.

     In February 2002, the Company entered into a new agreement with FG whereby
the Company terminated the original airplane lease and committed to lease a new
airplane from FG. Minimum lease rentals under the lease, which expires February
2009, are $120,000 per month. The Company is responsible for scheduled
maintenance and fuel costs; however, these costs reduce the monthly rental. In
addition, the Company is responsible for payment of the aircraft crew and any
unscheduled maintenance of the aircraft. In connection with its airplane lease
commitments, the Company recorded $809,000, $695,000 and $903,000 of rental
expense for the fiscal years ended May 31, 2003, 2002 and 2001, respectively. In
addition, in February 2002, the Company advanced $280,000 to FG as a security
deposit on the aircraft lease.

Receivable from Parent

     As part of the September 1999 Restructuring, HF Holdings loaned to senior
management an aggregate of $2.2 million against non-recourse notes with a
maturity of 10 years. HF Holdings used funds advanced from the Company to make
the loans. The notes bear interest at a rate equal to that of the New Credit
Facilities, payable in cash until the first date as of which the cumulative net
taxable income of the Company arising on or after the date of consummation of
the September 1999 Restructuring exceeds zero. As of May 31, 2003 and 2002,
these notes are non-interest bearing. The notes may be accelerated upon
specified defaults and liquidity events, and are collateralized by shares of HF
Holdings common stock.


15.  Acquisition of Business

     On December 20, 2000, the Company acquired certain assets of a corporation.
The aggregate purchase price was $3,997,000, net of cash acquired of $3,438. The
acquisition was accounted for under the purchase method of accounting.

     The costs of the acquisition have been allocated on the basis of the
estimated fair market value of the assets acquired and the liabilities assumed
as reflected in the following table (in thousands). The results of the
operations of the acquired business have been included in the accompanying
consolidated financial statements since the date of acquisition. The acquired
corporation's historical revenue and net income for the period preceding the
acquisition date was not significant to the Company.








                                             
     Fair value of assets acquired:
        Trade accounts receivable               $   756
        Inventories                                 835
        Property and equipment                      429
        Goodwill                                  4,430
        Other                                        32
                                                 -------
          Total assets acquired                   6,482

     Liabilities assumed:
        Accounts payable                         (2,320)
        Other                                      (100)
        Note payable                                (65)
                                                -------
          Total liabilities assumed              (2,485)
                                                -------
     Cash paid for acquisition                  $ 3,997
                                                =======

     As a result of a contingent purchase price agreement, the Company paid
$306,000 of additional consideration during the fiscal year ended May 31, 2002,
which was classified as goodwill.


16.  Geographic Segment Information

     Based on the Company's method of internal reporting, the Company operates
and reports as a single industry segment, which is, development, manufacturing
and distribution of home fitness equipment.

     Revenue and long-lived asset information by geographic area as of and for
the fiscal years ended May 31 is as follows (table in thousands):


                    Revenues                       Long-lived
              for the years ended May 31    assets (net) as of May 31,
            -----------------------------  ----------------------------
                2003     2002     2001          2003          2002
            -----------------------------  ----------------------------
                                             
United States $924,047 $794,319 $728,221      $44,961       $41,650
Foreign         87,497   77,080   68,773        3,816         3,335
            -----------------------------  ----------------------------
     Total  $1,011,544 $871,399 $796,994      $48,777       $44,985
            =============================  ============================


     Foreign revenue is based on the country in which the sales originate (i.e.
where the legal subsidiary is domiciled). Revenue from no single foreign country
was material to the consolidated revenues of the Company.


17.  Condensed Consolidating Financial Statements

     The Company's subsidiaries JumpKing, Inc., 510152 N.B. Ltd., Universal
Technical Services, Inc., ICON International Holdings, Inc., NordicTrack, Inc.
and Free Motion Fitness, Inc. ("Subsidiary Guarantors") have fully and
unconditionally guaranteed on a joint and several basis, the obligation to pay
principal and interest with respect to the 11.25% Notes. A significant portion
of the Company's operating income and cash flow is generated by its
subsidiaries. As a result, funds necessary to meet the Company's debt service
obligations are provided in part by distributions or advances from its
subsidiaries. Under certain circumstances, contractual and legal restrictions,
as well as the financial condition and operating requirements of the Company's
subsidiaries, could limit the Company's ability to obtain cash from its
subsidiaries for the purpose of meeting its debt service obligations, including
the payment of principal and interest on the 11.25% Notes. Although holders of
the 11.25% Notes will be direct creditors of the Company's principal direct
subsidiaries by virtue of the guarantees, the Company has indirect subsidiaries
located primarily in Europe ("Non-Guarantor Subsidiaries") that are not included
among the Guarantor Subsidiaries, and such subsidiaries will not be obligated
with respect to the 11.25% Notes. As a result, the claims of creditors of the
Non-Guarantor Subsidiaries will effectively have priority with respect to the
assets and earnings of such companies over the claims of creditors of the
Company, including the holders of the 11.25% Notes.

     The following supplemental condensed consolidating financial statements are
presented (in thousands):

     1.  Condensed consolidating balance sheets as of May 31, 2003 and 2002 and
         condensed consolidating statements of operations and cash flows for
         each of the years in the three year period ended May 31, 2003.

     2.  The Company's combined Subsidiary Guarantors and combined Non-
         Guarantor Subsidiaries with their investments in subsidiaries accounted
         for using the equity method.

     3.  Elimination entries necessary to consolidate the Company and all of its
         subsidiaries.




                             Supplemental Condensed Consolidating Balance Sheet
                                           Year ended May 31, 2003
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
ASSETS

Current assets:

Cash                    $    941      $  2,385       $ 1,324     $       -      $  4,650
Accounts receivable,
  net                    103,461        74,425        12,376       (15,098)      175,164
Inventories, net         101,297        51,142         9,825          (556)      161,708
Deferred income taxes      6,838           241           244             -         7,323
Other current assets       1,611         4,397         3,822             -         9,830
                        --------      --------       -------     ---------      --------
Total current assets     214,148       132,590        27,591       (15,654)      358,675
                        --------      --------       -------     ---------      --------

Property and equipment,
  net                     37,813         9,581         1,383             -        48,777
Receivable from
  affiliates             116,479        25,889             -      (142,368)            -
Intangible assets, net    20,295         7,556         1,218             -        29,069
Deferred income taxes      8,154           225             -             -         8,379
Investment in
  subsidiaries            57,793             -             -       (57,793)            -
Other assets, net         12,936         7,255            23             -        20,214
                        --------      --------       -------     ---------      --------
Total Assets            $467,618      $183,096       $30,215     $(215,815)     $465,114
                        ========      ========       =======     ==========     ========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:

Current portion of
  long-term debt
 (as restated)          $ 91,313      $      -       $     -     $       -      $ 91,313
Accounts payable          86,192        25,876        24,207       (15,098)      121,177
Accrued expenses          21,772         6,802         5,390             -        33,964
Income taxes payable       3,969          (856)        1,115             -         4,228
Interest payable           7,484             -             -             -         7,484
                        --------     ---------       -------     ---------      --------
Total current
  liabilities            210,730        31,822        30,712       (15,098)      258,166
                        --------     ---------       -------     ---------      --------

Long-term debt
 (as restated)           152,904            15             -             -       152,919
Other liabilities          4,015         5,676             -             -         9,691
Payable to affiliates     25,889        95,128        21,351      (142,368)            -

Stockholder's equity (deficit):
Common stock and
  additional paid-in
  capital                206,324        37,259         5,481       (44,909)      204,155
Receivable from Parent    (2,200)            -             -             -        (2,200)
Retained earnings
  (accumulated deficit) (130,525)       11,191       (24,478)      (13,440)     (157,252)
Accumulated other
  comprehensive
  income (loss)              481         2,005        (2,851)            -          (365)
                        --------     ---------       -------     ---------      --------
Total stockholder's
 equity (deficit)         74,080        50,455       (21,848)      (58,349)       44,338
                        --------     ---------       -------     ---------      --------
Total Liabilities
  and Stockholder's
  Equity                $467,618      $183,096       $30,215     $(215,815)     $465,114
                        ========      ========       =======     ==========     ========








                              Supplemental Condensed Consolidating Balance Sheet
                                            Year Ended May 31, 2002
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                               
ASSETS

Current assets:

Cash                  $    327       $  1,448       $ 2,998     $       -       $  4,773
Accounts receivable,
  net                  104,553         54,071        11,249       (16,695)       153,178
Inventories, net        82,558         45,657         5,847          (309)       133,753
Deferred income taxes    4,591            214             2             -          4,807
Other current assets     8,472          8,457         1,746             -         18,675
                      --------       --------       -------     ---------       --------
Total current assets   200,501        109,847        21,842       (17,004)       315,186
                      --------       --------       -------     ---------       --------

Property and
  equipment, net        34,031         10,101           853             -         44,985
Receivable from
  affiliates            81,636         16,361             -       (97,997)             -
Intangible assets,
  net                   20,466          8,517         1,218             -         30,201
Deferred income taxes   11,402            377           305             -         12,084
Investment in
  subsidiaries          31,104              -             -       (31,104)             -
Other assets, net       20,756              -            12             -         20,768
                      --------       --------       -------     ---------       --------
Total Assets          $399,896       $145,203       $24,230     $(146,105)      $423,224
                      ========       ========       =======     ==========      ========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:

Current portion of
  long-term debt
 (as restated)        $103,062       $     44       $     -     $       -       $103,106
Accounts payable        81,909         28,586        20,127       (16,695)       113,927
Accrued expenses        16,280          4,998         2,473             -         23,751
Income taxes payable         -          5,069           352             -          5,421
Interest payable         3,045              -             -             -          3,045
                      --------       --------       -------     ---------       --------
Total current
  liabilities          204,296         38,697        22,952       (16,695)       249,250
                      --------       --------       -------     ---------       --------

Long-term debt
 (as restated)         149,135          3,696             -             -        152,831
Other liabilities        4,934              -             -             -          4,934
Payable to affiliates   16,361         60,784        20,852       (97,997)             -

Stockholder's equity (deficit):

Common stock and
  additional paid-in
  capital              206,324         37,259         5,481       (44,909)       204,155
Receivable from Parent  (2,200)             -             -             -         (2,200)
Retained earnings
  (accumulated
  deficit)            (178,954)         5,632       (24,115)       13,496       (183,941)
Accumulated other
  comprehensive loss         -           (865)         (940)            -         (1,805)
                      --------       --------       -------     ---------       --------
Total stockholder's
  equity (deficit)      25,170         42,026       (19,574)      (31,413)        16,209
                      --------       --------       -------     ---------       --------
Total Liabilities
  and Stockholder's
  Equity              $399,896       $145,203       $24,230     $(146,105)      $423,224
                      ========       ========       =======     ==========      ========





                         Supplemental Condensed Consolidating Statement of Operations
                                           Year ended May 31, 2003
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
Net sales              $659,357      $300,539       $51,648       $     -     $1,011,544
Cost of sales           499,796       183,755        29,617           247        713,415
                       --------      --------       -------       -------     ----------
Gross profit            159,561       116,784        22,031          (247)       298,129

Total operating
  expenses              103,988       103,883        19,590             -        227,461
                       --------      --------       -------       -------     ----------
Income (loss)
  from operations        55,573        12,901         2,441          (247)        70,668
Interest expense        (23,299)          (32)       (1,774)            -        (25,105)
Amortization of
  deferred financing
  fees                   (1,267)            -             -             -         (1,267)
Equity in earnings
  of subsidiaries         4,949             -             -        (4,949)             -
                       --------      --------       -------       -------     ----------
Income (loss)
  before income taxes    35,956        12,869           667        (5,196)        44,296
Provision for
  income taxes            9,267         7,310         1,030             -         17,607
                       --------      --------       -------       -------     ----------
Net income (loss)      $ 26,689      $  5,559       $  (363)      $(5,196)    $   26,689
                       ========      ========       =======       =======     ==========






                         Supplemental Condensed Consolidating Statement of Operations
                                            Year ended May 31, 2002
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
Net sales              $623,012      $206,193       $42,194        $    -       $871,399
Cost of sales           464,431       141,733        29,025          (143)       635,046
                       --------      --------       -------        ------       --------
Gross profit            158,581        64,460        13,169           143        236,353

Total operating
  expenses               98,244        68,127        13,478             -        179,849
                       --------      --------       -------        ------       --------
Income (loss)
  from operations        60,337        (3,667)         (309)          143         56,504
Interest expense        (23,200)       (1,177)       (1,772)            -        (26,149)
Amortization of
  deferred financing
  fees                   (3,146)            -             -             -         (3,146)
Loss on
  extinguishment of
  debt                   (7,435)            -             -             -         (7,435)
Equity in earnings
  of subsidiaries        (6,629)            -             -         6,629              -
                       --------      --------       -------        ------       --------
Income (loss)
  before income taxes    19,927        (4,844)       (2,081)        6,772         19,774
Provision (benefit)
  for income taxes          533          (404)          251             -            380
                       --------      --------       -------        ------       --------
Net income (loss)      $ 19,394      $ (4,440)      $(2,332)       $6,772       $ 19,394
                       ========      ========       =======        ======       ========






                        Supplemental Condensed Consolidating Statement of Operations
                                           Year Ended May 31, 2001
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
Net sales              $652,445      $106,685       $37,864        $    -       $796,994
Cost of sales           474,343        81,163        25,055           (77)       580,484
                       --------      --------       -------        ------       --------
Gross profit            178,102        25,522        12,809            77        216,510

Total operating
  expenses              122,140        25,870        13,751             -        161,761
                       --------      --------       -------        ------       --------
Income (loss)
  from operations        55,962          (348)         (942)           77         54,749
Interest expense        (31,875)       (1,408)       (1,488)            -        (34,771)
Amortization of
  deferred financing
  fees                   (3,189)            -             -             -         (3,189)
Equity in earnings
  of subsidiaries        (4,503)            -             -         4,503              -
                       --------      --------       -------        ------       --------
Income (loss)
  before income taxes    16,395        (1,756)       (2,430)        4,580         16,789
Provision for
  income taxes            3,089            60           334             -          3,483
                       --------      --------       -------        ------       --------
Net income (loss)      $ 13,306      $ (1,816)      $(2,764)       $4,580       $ 13,306
                       ========      =========      ========       ======       ========





                          Supplemental Condensed Consolidating Statement of Cash Flows
                                            Year Ended May 31, 2003
                      ---------------------------------------------------------------------
                         ICON         Combined      Combined
                        Health &      Guarantor   Non-Guarantor
                      Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                      ------------  ------------  ------------  ------------   ------------
                                                                
Operating activities:
Net cash provided by
  (used in) operating
  activities:          $ 55,844      $(24,595)      $   389        $    -       $ 31,638
                       --------      --------       -------        ------       --------
Investing activities:
Net cash used in
  investing activities: (18,568)       (2,301)         (956)            -        (21,825)
                       --------      --------       -------        ------       --------
Financing activities:
  Borrowings on
    revolving credit
    facility, net        (6,749)            -             -             -         (6,749)
  Payments on other
    long-term debt            -           (29)            -             -            (29)
  Payments on April
    2002 term notes      (5,000)            -             -             -         (5,000)
  Payment of fees-debt     (481)            -             -             -           (481)
  Other                 (25,315)       24,816           499             -              -
                       --------      --------       -------        ------       --------
Net cash provided by
  (used in) financing
  activities:           (37,545)       24,787           499             -        (12,259)
                       --------      --------       -------        ------       --------
Effect of exchange
  rates on cash             883         3,046        (1,606)            -          2,323
                       --------      --------       -------        ------       --------
Net increase (decrease)
  in cash                   614           937        (1,674)            -           (123)
Cash, beginning of period   327         1,448         2,998             -          4,773
                       --------      --------       -------        ------       --------
Cash, end of period    $    941      $  2,385       $ 1,324        $    -       $  4,650
                       ========      ========       =======        ======       ========



                        Supplemental Condensed Consolidating Statement of Cash Flows
                                       Year Ended May 31, 2002
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
Operating activities:
Net cash provided by
  operating
  activities:          $ 30,169      $  6,133      $  1,236        $    -       $ 37,538
                       --------      --------       -------        ------       --------
Investing activities:
Net cash used in
  investing activities: (13,747)       (2,834)         (549)            -        (17,130)
                       --------      --------       -------        ------       --------
Financing activities:
  Borrowings on
    revolving credit
    facility, net        32,831             -             -             -         32,831
  Payments on other
    long-term debt, net       -           (48)            -             -            (48)
  Proceeds from April
    2002 term notes      25,000             -             -             -         25,000
  Payments on April
    2002 term notes      (1,250)            -             -             -         (1,250)
  Payments on September
    1999 term notes    (172,834)            -             -             -       (172,834)
  Proceeds from
    11.25% notes        152,813             -             -             -        152,813
  Payments to 12%
    noteholders         (46,053)            -             -             -        (46,053)
  Payment of fees-debt   (9,757)            -             -             -         (9,757)
  Other                   1,540        (2,689)        1,149             -              -
                       --------      --------       -------        ------       --------
Net cash provided by
  (used in) financing
  activities:           (17,710)       (2,737)        1,149             -        (19,298)
                       --------      --------       -------        ------       --------
Effect of exchange
  rates on cash               -           273            66             -            339
                       --------      --------       -------        ------       --------
Net increase (decrease)
  in cash                (1,288)          835         1,902             -          1,449
Cash, beginning of period 1,615           613         1,096             -          3,324
                       --------      --------       -------        ------       --------
Cash, end of period    $    327      $  1,448       $ 2,998        $    -       $  4,773
                       ========      ========       =======        ======       ========







                        Supplemental Condensed Consolidating Statement of Cash Flows
                                         Year Ended May 31, 2001
                    ---------------------------------------------------------------------
                       ICON         Combined      Combined
                      Health &      Guarantor   Non-Guarantor
                    Fitness,Inc.  Subsidiaries  Subsidiaries  Eliminations   Consolidated
                    ------------  ------------  ------------  ------------   ------------
                                                              
Operating activities:
Net cash provided by
  (used in) operating
  activities:          $ 28,025      $(14,425)      $  (330)       $ (863)      $ 12,407
                       --------      --------       -------        ------       --------
Investing activities:
Net cash provided by
  (used in) investing
  activities:           (16,526)       (7,271)          149           863        (22,785)
                       --------      --------       -------        ------       --------
Financing activities:
  Borrowings on
    revolving credit
    facility, net        19,497             -             -             -         19,497
  Payments on other
    long-term debt, net    (393)           17             -             -           (376)
  Payments on September
    1999 term notes      (9,273)            -             -             -         (9,273)
  Payment of fees-debt   (1,153)            -             -             -         (1,153)
  Other                 (22,195)       22,381          (186)            -              -
                       --------      --------       -------        ------       --------
Net cash provided by
  (used in) financing
  activities:           (13,517)       22,398          (186)            -          8,695
                       --------      --------       -------        ------       --------
Effect of exchange
  rates on cash               -          (622)         (235)            -           (857)
                       --------      --------       -------        ------       --------
Net increase (decrease)
  in cash                (2,018)           80          (602)            -         (2,540)
Cash, beginning of period 3,633           533         1,698             -          5,864
                       --------      --------       -------        ------       --------
Cash, end of period    $  1,615      $    613       $ 1,096        $    -       $  3,324
                       ========      ========       =======        ======       ========




                      Valuation and Qualifying Accounts
                       Financial Statement Schedule II
                                (in thousands)


                                              Year Ended May 31,
                                     ----------------------------------
                                        2003        2002        2001
                                     ----------------------------------
                                                    
Trade accounts receivable-allowance
  for doubtful accounts,
  advertising discounts and
  and credit memos:

Balance at beginning of year         $  7,939    $  6,752    $  7,004
Additions:
  Charged to costs and expenses
    (allowance for doubtful accounts
    and credit memos)                  14,528       4,658       3,582
  Charged to costs and expenses
    (discounts and advertising)        52,461      45,998      41,668
Deductions:
  Accounts charged off (allowance
    for doubtful accounts and
    credit memos)                     (12,460)     (3,906)     (5,044)
  Accounts charged off (advertising)  (54,074)    (45,563)    (40,458)
                                     ----------------------------------
Balance at end of year               $  8,394     $ 7,939    $  6,752
                                     ==================================




                                               Year Ended May 31,
                                     ----------------------------------
                                        2003        2002        2001
                                     ----------------------------------
                                                     
Inventory reserve:
Balance at beginning of year          $ 3,275     $ 3,185     $ 2,829
Additions:
  Charged to costs and expenses           625         679         506
Deductions:
  Reduction in reserve                      -        (589)       (150)
                                     ----------------------------------
Balance at end of year                $ 3,900     $ 3,275     $ 3,185
                                     ==================================

























                                   CERTIFICATION
                                   --------------

I, David J. Watterson, certify that:

1. I have reviewed this annual report of ICON Health & Fitness, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


Date:  August 27, 2004

/s/ David J. Watterson
- ----------------------
David J. Watterson
Chief Executive Officer







                                   CERTIFICATION
                                   --------------

I, S. Fred Beck, certify that:

1. I have reviewed this annual report of ICON Health & Fitness, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


Date:  August 27, 2004

/s/ S. Fred Beck
- ----------------
S. Fred Beck
Chief Financial Officer