Exercise equipment maker Nautilus Inc. said net sales from continuing operations for the three months ended Dec. 31, 2007, fell 20% to  $147.3 million compared to $185.1 million for the corresponding period last year. Loss from continuing operations for the quarter was $31.4 million, or $0.99 per diluted share, compared to income from continuing operations of $12.6 million or $0.40 per diluted share for the fourth quarter of 2006.


The results from continuing operations for the current and prior periods exclude the company's apparel segment, which is considered a discontinued operation as it is currently offered for sale. Sales from discontinued operations of the company's former apparel segment were $12.4 million for the fourth quarter 2007 and $67.1 million for the full year 2007. Discontinued operations resulted in a pre-tax loss of $17.1 million in the quarter, primarily reflecting an impairment of $15.9 million in book value of the apparel segment.


Net loss for the quarter was $47.7 million, or $1.51 per diluted share, compared to net income of $12.9 million, or $0.41 per diluted share for the fourth quarter of 2006.


The fourth quarter 2007 loss from continuing operations before income taxes of $48.7 million included certain pre-tax charges totaling $45.1 million. Included in this amount:



  • $19.4 million related to the suspended acquisition of the Land America manufacturing facility in China;
  •  $16.9 million in costs associated with inventory and warranty reserves related to certain commercial cardiovascular products;
  •  $3.0 million for intellectual property impairments, and;
  •  $5.8 million for other items including expenses related to the special shareholder meeting, the cost to exit certain marketing contracts, staff restructuring and debt restructuring.

For the twelve months ended Dec. 31, 2007, the company generated $502.1 million in net sales from continuing operations compared to $617.3 million in the fiscal year ended Dec. 31, 2006, a 19 percent decrease. Loss from continuing operations for fiscal year 2007 was $45.0 million, compared to income from continuing operations of $24.9 million in fiscal 2006.


“After a very difficult year in 2007, our newly reconstituted board and management are making the necessary strategic improvements to restore the company to profitability,” said Bob Falcone, president and CEO of Nautilus, Inc.


“We are making significant adjustments in our business and cost structure to achieve improvements in both gross and operating margins. We recorded substantial charges during the fourth quarter as we make the necessary strategic corrections to our business model to reposition us for long-term growth and profitability.


“In this economic environment, our path to profitability initially will come from cost containment and margin improvements rather than from sales growth. We will be making better selling decisions, introducing new products to the marketplace only when they are ready, and be more disciplined about product segmentation into the right channels.”