Nautilus Q2 Income Slips on 6% Sales Increase

Nautilus, Inc. net sales for the three months ended June 30, 2006, were $137.6 million, compared to $129.6 million for the corresponding period last year, up 6.2%. Net income for the quarter was $1.7 million, or five cents per diluted share, compared with $3.3 million or 10 cents per diluted share for the year ago quarter, or $0.08 per diluted share on a non-GAAP basis when adjusted for FAS 123R.

“Our channel diversification strategy helped us improve sales in several channels, despite cautious consumer behavior in the wake of high fuel prices and continued interest rate increases,” said Gregg Hammann, Chairman and Chief Executive Officer. “Good expense management helped us offset these pressures.

“We finished the quarter with a strong and improving balance sheet. We ended with cash exceeding our short-term borrowings, with inventory steadily improving. This provides us flexibility to consider stock repurchases or acquisitions in addition to working capital requirements.

“We effectively managed the seasonally slowest quarter and are now gearing up for the fall selling season, where we expect positive comps in every channel where we compete.

“We are now at a positive inflection point in our business,” Hammann added. “Over the past three years, we have made many improvements to our business, including cleaning up legacy issues, doubling our investment in innovation, developing and executing a revenue-driving multi-brand and multi-channel marketing plan, and making substantial improvements in manufacturing, operations and information systems. After three years of investing in these areas, the foundation of our business is strong and continues to strengthen, positioning us for long-term profitable growth and category leadership.

For the third quarter of 2006, the Company estimates that net sales will be in the $165-180 million range, with expected earnings of $0.16 to $0.24 per diluted share, including about 1.5 cents per share for stock option expensing as required by FAS 123R in 2006. The Company said full year net sales are expected to be within its three-year range of 10-20 percent growth, and earnings expected to be above the high end of its three-year range of 20-30 percent growth.

                            NAUTILUS, INC.
                 Consolidated Statements of Operations
          (Unaudited, in thousands, except per share amounts)

                               Three Months Ended   Six Months Ended
                                     June 30,            June 30,
                               ------------------- -------------------
                                 2006      2005      2006      2005
                               --------- --------- --------- ---------

NET SALES                      $137,613  $129,581  $322,602  $285,969
COST OF SALES                    77,022    71,527   182,699   151,142
                               --------- --------- --------- ---------

Gross profit                     60,591    58,054   139,903   134,827

OPERATING EXPENSES:
Selling and marketing            43,111    39,977    95,266    84,899
General and administrative       12,243     9,985    25,892    23,421
Research and development          2,532     3,109     5,800     5,912
Royalties                         1,116     1,181     2,695     2,655
                               --------- --------- --------- ---------

Total operating expenses         59,002    54,252   129,653   116,887
                               --------- --------- --------- ---------

OPERATING INCOME                  1,589     3,802    10,250    17,940

OTHER INCOME (EXPENSE):
Interest income (expense), net     (164)      798      (615)    1,315
Other income, net                 1,207       460     1,222       511
                               --------- --------- --------- ---------

Total other income, net           1,043     1,258       607     1,826
                               --------- --------- --------- ---------

INCOME BEFORE INCOME TAXES        2,632     5,060    10,857    19,766

INCOME TAX EXPENSE                  961     1,730     3,985     7,007
                               --------- --------- --------- ---------

NET INCOME                       $1,671    $3,330    $6,872   $12,759
                               ========= ========= ========= =========

BASIC EARNINGS PER SHARE          $0.05     $0.10     $0.21     $0.38

DILUTED EARNINGS PER SHARE        $0.05     $0.10     $0.21     $0.38

Weighted average shares
 outstanding:

Basic shares outstanding         32,803    33,379    32,800    33,274

Diluted shares outstanding       32,997    34,250    32,986    33,917