1. DIRECT FOCUS, INC. Consumer Sector Jaci Barrett Arianne Obering Brian Price Mary Whitehouse John Wilson

2. SECTOR OVERVIEW

3. Current Stock Price Holdings WMT: 58.05 PEP: 52.20 GPS: 14.66 LTD: 19.56

4. COMPANY BACKGROUND Established in 1986 Went public in 1999 Direct products: Bowflex and Nautilus Sleep System Retail and Commercial Products: Schwinn, Nautilus, and Stairmaster

5. Direct Focus, Inc.

9. Income Statements & Profitability Sales (ttm): $424.9M EBITDA (ttm): $115.8M Income available to common (ttm): $75.8M Profit Margin (ttm): 17.8% Operating Margin (ttm): 27.3%

10. SALES GROWTH

11. NET INCOME GROWTH

12. EARNINGS GROWTH 35.8% in 2002 27.7% in 2003 25.0% in 2004

13. Valuation Ratios Price/Book (mrq): 8.89 Price/Earnings (ttm): 20.87 Price/Sales (ttm): 3.72

14. PE RATIOS 20.84 present 16.02 times 2002 eps 13.17 times 2003 eps PEG ratio = 0.623 PEG Ratio The PEG ratio is a powerful formula which compares earnings growth and the Price Earnings Ratio

15. Price and Volume Recent Price: $43.97 52-Week Low on 21-Sep-2001: $16.80 52-Week High on 19-Apr-2002: $44.75 Beta: 1.66 Daily Volume (3-month avg): 922.6K Daily Volume (10-day avg):1.36M

16. Per-Share Data Book Value (mrq): $4.95 Earnings (ttm): $2.11 Earnings (mrq): $0.67 Sales (ttm): $11.81 Cash (mrq): $1.46

17. PROS/CONS High profit margins High ROE Strong Brands High growth prospects Large run-up in price recently due to higher than expected earnings…recently hit new 52 week high Management aversion to debt financing

18. COMPETITION Brunswick (Life Fitness) Retail Mail Order Industry Sporting Goods Industry

19. BETA ANALYSIS 24-Apr DFXI100$42.00$4,200.0012.16%1.660.202 LTD218$18.79$4,096.2211.86%1.440.171 PEP170$52.93$8,998.1026.06%0.70.182 WMT300$57.45$17,235.0049.91%0.940.469 $34,529.32Beta Port.1.024

20. RECOMMENDATION USE capital from GPS Sale to Buy Direct Focus Inc. (DFXI) Buy 100 Shares of DFXI Price $42.00 as of today