Nautilus, Inc. reported net sales from continuing operations for the first quarter declined 5.4% to $129.6 million compared to $137.0 million for the corresponding period last year. The company's loss from continuing operations widened for the quarter to $6.9 million or 22 cents per diluted share compared to a net loss from continuing operations of $0.01 million or $0.00 per diluted share for the first quarter last year. The 2008 quarter includes pretax charges of $8.0 million in connection with the cancellation of the agreement to purchase Land America Health & Fitness Co., Ltd., and $2.4 million for costs associated with the departure in March of the company's former CEO. Results from continuing operations exclude the company's apparel business, which is considered a discontinued operation and was sold on April 18, 2008 for $69.4 million.


Net sales declines averaging 7% in each of the company's Domestic Fitness Equipment business channels were partially offset by a 6% increase in net sales in the company's International business which was primarily driven by currency in the first quarter of 2008.


Net loss (including the company's former apparel business) for the first quarter 2008 was $6.4 million, or 20 cents per diluted share, compared to net income of $2.5 million, or 8 cents per diluted share for the first quarter of 2007.


The company announced that it entered into an agreement to pay $8.0 million to a major supplier, Land America, to settle all claims from the previously announced termination of the agreement to purchase its China-based manufacturing assets. The settlement is expected to be paid in cash in the second quarter of 2008. Separately, the company extended its supply agreement with Land America by one year to December 31, 2010.


The company's board of directors has authorized a share repurchase program for the purchase of up to $10 million of the company's common stock. Under the authorization, the company may purchase shares from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. However, the timing and amount of such purchases, if any, would be at the discretion of management, and would depend on market conditions and other considerations.


Edward Bramson, chairman and CEO of Nautilus, Inc., stated, “Management is conducting a thorough review of each business unit with particular focus on operating effectiveness and costs, market positioning and product innovation. We expect to communicate the results of the review and plans for improvement during the third quarter. The strengthening of our balance sheet from the sale of Pearl iZumi has enabled us to fund the share repurchase announced today.”


 
                           NAUTILUS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)

Three Months
Ended March 31,
——————-
2008 2007
——— ———
NET SALES $129,601 $136,973
COST OF SALES 73,676 74,458
——— ———
Gross profit 55,925 62,515
——— ———
OPERATING EXPENSES:
Selling and marketing 42,230 47,562
General and administrative 19,810 11,410
Research and development 2,205 2,787
——— ———
Total operating expenses 64,245 61,759
——— ———
OPERATING INCOME (LOSS) (8,320) 756
OTHER INCOME (EXPENSE):
Interest income 79 70
Interest expense (1,237) (880)
Other income, net 43 95
——— ———
Total other income (expense) (1,115) (715)
——— ———
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (9,435) 41
INCOME TAX EXPENSE (BENEFIT) (2,554) 50
——— ———
LOSS FROM CONTINUING OPERATIONS (6,881) (9)
DISCONTINUED OPERATIONS:
Gain from discontinued operations 2,376 3,980
Income tax expense from discontinued
operations 1,855 1,507
——— ———
GAIN FROM DISCONTINUED OPERATIONS, net of tax 521 2,473
——— ———
NET INCOME (LOSS) $ (6,360) $ 2,464
========= =========
EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS:
BASIC $ (0.22) $ 0.00
DILUTED $ (0.22) $ 0.00
EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS:
BASIC $ 0.02 $ 0.08
DILUTED $ 0.02 $ 0.08
EARNINGS (LOSS) PER SHARE:
BASIC $ (0.20) $ 0.08
DILUTED $ (0.20) $ 0.08
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 31,557 31,508
DILUTED 31,557 31,729