Nautilus Sees Q2 Net Income Plunges 82% on 28% Sales Slide

The Nautilus Group Announces announced second quarter net sales were $100.6 million compared to $140.4 million for the corresponding period last year. Net income during the period was $4.7 million, or $0.14 per diluted share, compared to $25.8 million, or $0.72 per diluted share, for the corresponding period in the previous year.

The Company's net sales for the six months ended June 30, 2003 were $230.1 million compared to $276.3 million for the comparable period last year. Net income during the period was $18.4 million or $0.56 per diluted share, compared to $49.8 million, or $1.39 per diluted share, for the same period last year.

The Company also reiterated its comfort with revised guidance for the remainder of 2003. The Nautilus Group expects revenue to range from $450 to $470 million with corresponding earnings per share estimate ranging from $1.00 to $1.10. In terms of revised earnings on a quarterly basis for the remainder of 2003, the Company expects the third quarter will represent approximately 18% to 20% of earnings. Operating cash flow is expected to be approximately $35 million to $40 million for the year.

“As we have previously mentioned, the second quarter of 2003 was a challenging business environment due to Bowflex product line competition and lackluster consumer spending,” began Brian Cook, Chairman. “During this time period, the increased competition had an adverse effect on direct sales of the Bowflex product line and lackluster consumer spending impacted both our direct and commercial/retail divisions.”

“However, we remain very excited about the future of The Nautilus Group.” Mr. Cook added. “We continue to develop and introduce new products and expand our distribution network. As examples, both the TreadClimber(R) product line in our direct channel and our retail offering of the Bowflex Power Rod resistance technology continue to exceed expectations. Nautilus maintains the strongest financial position in our industry, and combined with our new initiatives we are excited about the long-term outlook for our portfolio of leading health and fitness brands.”

Mr. Cook concluded, “I am also very excited to have Gregg Hammann as our new President and CEO. I believe his experience in the marketing of multiple consumer branded products, business strategy, brand management, and customer focus, are exactly what our Company needs at this important juncture.”

“We will continue to use our operating cash flow to build upon our leadership position by improving our core businesses and introducing new products into our direct and commercial/retail sales channels to enable our Company's long-term growth in the health and fitness industry,” stated Rod Rice, Chief Financial Officer. “We will also use our cash flow to increase shareholder value through our regular quarterly dividend. Today, the Board of Directors has declared a regular quarterly dividend of $0.10 per common share, payable September 10, 2003, to shareholders of record at the close of business on August 20, 2003.”

                       THE NAUTILUS GROUP, INC.
                Consolidated Statements of Operations
           (In Thousands, Except Share and Per Share Data)
                             (Unaudited)


                      Three months ended         Six months ended
                           June 30,                  June 30,
                   ------------------------- -------------------------
                       2003         2002         2003         2002
                   ------------ ------------ ------------ ------------

NET SALES          $   100,602  $   140,408  $   230,051  $   276,322

COST OF SALES           48,203       56,639      107,636      115,392
                   ------------ ------------ ------------ ------------

    Gross profit        52,399       83,769      122,415      160,930

OPERATING EXPENSES:
  Selling and
   marketing            35,695       34,091       75,196       65,691
  General and
   administrative        8,752        7,376       15,650       13,640
  Related-party
   royalties             1,450        2,413        3,241        4,561
  Third-party
   royalties               337          152          636          333
                   ------------ ------------ ------------ ------------

    Total operating
     expenses           46,234       44,032       94,723       84,225
                   ------------ ------------ ------------ ------------

OPERATING INCOME         6,165       39,737       27,692       76,705

OTHER INCOME:
  Interest income          230          477          459          927
  Other - net              945          139          578          158
                   ------------ ------------ ------------ ------------

    Total other
     income, net         1,175          616        1,037        1,085
                   ------------ ------------ ------------ ------------

INCOME BEFORE
 INCOME TAXES            7,340       40,353       28,729       77,790

INCOME TAX EXPENSE       2,642       14,527       10,342       28,006
                   ------------ ------------ ------------ ------------

NET INCOME         $     4,698  $    25,826  $    18,387  $    49,784
                   ------------ ------------ ------------ ------------

BASIC EARNINGS
 PER SHARE         $      0.14  $      0.73  $      0.56  $      1.42

DILUTED EARNINGS
 PER SHARE         $      0.14  $      0.72  $      0.56  $      1.39