Nautilus, Inc. said for the quarter ended Dec. 31, 2008, the company reported a loss from continuing operations of $41.2 million, or ($1.35) per diluted share.

Included in the net loss from continuing operations are pre-tax goodwill and other intangible asset impairment charges of $30.9 million, pre-tax charges against certain assets of a subsidiary in China of $3.8 million and restructuring and other pre-tax charges of $6.3 million.
 
During the fourth quarter of 2008 the company conducted its impairment testing required by SFAS No. 142, “Goodwill and Other Intangible Assets” and recognized an impairment loss to write down certain assets to implied fair value. The restructuring charges are principally related to our previously announced closure of the manufacturing facility in Tulsa, Oklahoma, severance and legal costs.

In the fourth quarter of 2007, the company reported a loss from continuing operations of $32.0 million, or ($1.01) per diluted share, which included pre-tax charges of $43.1 million, of which $19.4 million was related to the suspended acquisition of the Land America manufacturing facility in China, and $15.7 million was inventory and warranty reserves related to certain commercial cardiovascular products.

Gross profit improved to 33.7% of net sales for the fourth quarter of 2008, compared to 24.1% for the same period in the previous year. Operating expenses declined by approximately $4.6 million in the fourth quarter of 2008, compared to the fourth quarter of 2007.

Excluding non-cash goodwill and intangible impairments and restructuring and other charges mentioned above, the company’s adjusted loss from continuing operations before income taxes was $10.2 million for the quarter. For the corresponding period in 2007, excluding unusual charges mentioned above, the loss from continuing operations before income taxes was $6.0 million.

The 2008 fourth quarter loss from continuing operations, and related per share amounts, include the impact of a $9.7 million increase in the Company’s deferred tax valuation allowance, which substantially reduced the Company’s tax benefits for the quarter.

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

For the three months ended Dec. 31, 2008, net sales from continuing operations were $92.3 million, a decrease of 37.1%, from $146.7 million reported in the corresponding period in 2007. Net sales declined in the direct and retail businesses, primarily due to the weak consumer environment. Sales in the direct business were also affected negatively by lower credit approval rates by the company’s third party financing partner. The commercial business sales declines were similar across geographic regions and reflect an overall economic decline.
 
Comparative net sales by business segment were as follows:
  
Three Months Ended
   
($ thousands) Dec 31, 2008   Dec 31, 2007

$ Change

% Change

Direct $ 36,089 $ 61,912 $ (25,823 ) -41.7%
Retail 28,516 41,409 (12,893 ) -31.1%
Commercial 26,446 41,917 (15,471 ) -36.9%
Royalties 1,213 1,469

(256

)

-17.4%
Net Sales $ 92,264 $ 146,707 $ (54,443 ) -37.1%

Full Year 2008 Results

Net sales for the year ended Dec. 31, 2008, totaled $411.2 million, a decline of 18.0% compared to the $501.5 million reported for the year ended Dec. 31, 2007. The decline in net sales reflects lower net revenues in all three of our business segments: direct, retail and commercial.

In addition to the overall weak consumer environment and tight credit market, sales declined due to lower sales discounts, reduced marketing spend and a reduction in the number of rod-based products offered to retail customers as the company further differentiated its products between the retail and direct segments. The decline in retail net sales was partially offset by increased sales of Schwinn ellipticals and bikes.

For the year, the company reported a loss from continuing operations of $93.0 million, or ($2.99) per diluted share. The company estimates that it achieved cost reduction benefits of approximately $53 million in 2008.

The company incurred $67.1 million of intangible impairment, restructuring charges and other costs before tax during 2008, and recorded a $35.5 million charge to income tax expense as a result of increases in the Company’s deferred tax asset valuation allowance.

For the year, the company reported a loss from continuing operations of $45.8 million or ($1.45) per diluted share. The company’s 2007 loss from continuing operations before income taxes included $50.3 million in restructuring and other unusual costs, and an $18.3 million reduction to operating expenses as a result of a litigation settlement.

As of Dec. 31, 2008, the company had debt (net of cash) of $12.4 million, compared to net debt of $3.2 million at Sept. 30, 2008, and net debt of $71.1 million at Dec. 31, 2007.