Nautilus, Inc. reported a third-quarter loss from continuing operations of $35.4 million, or $1.15 a share, including a non-cash charge to record a deferred tax asset valuation allowance of $26.8 million, or 87 cents a share, as well as restructuring and other charges of $8.2 million, or 17 cents. Net sales plunged 18.7% to $93.7 million from $115.3 million.

In the third quarter of 2007, the company reported a loss from continuing operations of $14.4 million, or 46 cents per share, including charges of $7.1 million, or 15 cents, related to a large bad debt and severance costs.

Excluding restructuring and other charges and reflecting the recording of a tax asset valuation allowance as if required in both periods, the company’s adjusted loss from continuing operations before income taxes was $5.5 million, or $0.18 per share after tax, for the quarter ended September 30, compared with $17.2 million, or 54 cents per share after tax, in the corresponding period last year. The recording of a tax asset valuation allowance will substantially eliminate tax benefit in a period of losses but similarly will substantially eliminate tax expense upon a return to profitability. Accordingly, the company will record minimal income tax expense or benefit in future periods until the valuation allowance is fully utilized or reversed.

Results from continuing operations exclude the company's former Pearl Izumi apparel business, which was sold in April 2008 and is considered a discontinued operation.

By business unit, direct sales tumbled 34.2% to $38.7 million from $58.8 million. Retail sales were flat at $26.37 million. Commercial sales were down 4.6% to $28.4 million. Royalties were ahead 2.8% to $335,000.

Nautilus said the net sales decline in the direct business was primarily due to the weak consumer and tight credit environments. The decline in the commercial business was primarily due to the suspension of sales of the Commercial TreadClimber.

Operating expenses declined by approximately $23.5 million in the third quarter 2008 compared to the same period last year. In 2007, the company incurred a $4.8 million bad debt write off due to a customer bankruptcy. Adjusted for lower sales volumes, operating expense reductions under the company’s restructuring plan were $11.5 million in the quarter compared with reductions of $8.5 million projected at the time of the Company’s second quarter earnings release.

As of September 30, the company had a debt (net of cash) position of $3.2 million compared to net cash of $4.0 million at June 30, 2008 and net debt of approximately $71 million at December 31, 2007.

Edward Bramson, chairman and CEO of Nautilus, Inc., stated, “We are continuing with our previously announced turnaround and restructuring efforts with particular focus on strengthening the balance sheet and improving liquidity. We are pleased that cost reductions achieved during the quarter have been significantly better than originally anticipated. However, the decrease in sales, primarily due to the challenging economic environment, offset our expense reductions for the quarter. The renewed strategic focus on product development and improving the effectiveness of our advertising to restore the company to growth is progressing as scheduled.”

“On a separate note, Ken Fish will be assuming the position of chief financial officer for Nautilus effective Nov. 11, 2008. Ken has over 30 years of global experience in finance and operations and has been at Nautilus for over three years, most recently as chief administrative officer and general manager of the Commercial Business. Bill Meadowcroft will be leaving the company. Between now and the end of the year, Bill will be assisting in the transition of finance and support functions to Ken Fish. We would like to thank Bill for his more than eight years of service to Nautilus and for the many important contributions he has made.”