SOURCE: Nautilus, Inc.

July 16, 2007 16:10 ET

Nautilus, Inc. Announces Second Quarter 2007 Results

VANCOUVER, WA--(Marketwire - July 16, 2007) - Pure fitness company Nautilus, Inc. (NYSE: NLS) today announced results for the three months ended June 30, 2007.

Net sales for the three months ended June 30, 2007 were $117.1 million, compared to $137.6 million for the corresponding period last year, down 15 percent. Net income for the quarter was $1.1 million, or $0.04 per share, compared to $1.7 million or $0.05 per share for the second quarter of 2006.

Excluding pro forma adjustments pertaining to a valuation adjustment from access to intellectual property received through a litigation settlement with Icon Health and Fitness (see table), net loss for the second quarter of 2007 was $9.5 million or $0.30 per share, compared to net income of $1.7 million or $0.05 per share in the second quarter of 2006.

"Our quarter was primarily affected by a softer-than-expected consumer environment in the North American home fitness market served by our retail and direct channels, especially within the home exercise gym segment. Meanwhile, our international, apparel and commercial businesses are performing in line with our growth plans," said Gregg Hammann, Chairman and CEO of Nautilus, Inc.

"While we cannot control the consumer spending environment, we believe by implementing a better brand assortment at retail, launching new advertising, achieving greater brand leverage, and better marketing and sell through support, we will improve our results in the retail and direct channels."

"We continue to position our Company for long-term growth by providing the innovative tools and education people need to achieve a healthy life. We have the top five brands in the category, have put in place a diversified distribution strategy, and are now diversifying and gaining leverage with our supply chain."

Taking into account trends in discretionary spending and softness in the North American home fitness market, for the second half of 2007 the Company expects net sales of $350-380 million and expects earnings of $0.20-$0.30 per share.

The second quarter 2007 investor conference call is scheduled for 5:00 p.m. EDT (2:00 p.m. PDT) Monday, July 16, 2007. It will be broadcast live over the Internet hosted at www.nautilusinc.com/events and will be archived online within one hour after completion of the call. In addition, listeners may call 800-737-8106 in North America and 646-862-1128 from outside North America. Participants will include: Gregg Hammann, Chairman and Chief Executive Officer; and Bill Meadowcroft, Chief Financial Officer.

A telephonic playback will be available from 4:00 p.m. PDT, July 16 through 12:00 p.m. PDT, July 30, 2007. North American callers can dial 800-633-8284, and international callers can dial 402-977-9140 to hear the playback. The passcode is 21344240.

About Nautilus, Inc.

Headquartered in Vancouver, Wash., Nautilus, Inc. (NYSE: NLS) is a pure fitness company that provides the tools and education necessary to help people achieve a fit and healthy lifestyle. With a brand portfolio that includes Nautilus®, Bowflex®, Schwinn®Fitness, StairMaster®, Universal®, and Pearl iZUMi®, Nautilus manufactures and markets a complete line of innovative health and fitness products through direct, commercial, retail, and international channels. The Company was formed in 1986 and had sales of $680 million in 2006. It has 1,500 employees and operations in Washington, Oregon, Colorado, Oklahoma, Illinois, Virginia, Canada, Switzerland, Germany, United Kingdom, Italy, China, Australia, and other locations around the world. More information is at www.nautilusinc.com

Safe Harbor Statement:

This press release includes forward-looking statements, including statements concerning estimated future sales and earnings, new product introduction, and operational improvement. Factors that could cause Nautilus, Inc. actual results to differ materially from these forward-looking statements include availability of media time and fluctuating advertising rates, a decline in consumer spending due to unfavorable economic conditions, its ability to effectively develop, market, and sell future products, its ability to get foreign-sourced product through customs in a timely manner, its ability to effectively identify, negotiate and integrate any future strategic acquisitions, its ability to protect its intellectual property, introduction of lower-priced competing products, unpredictable events and circumstances relating to international operations including its use of foreign manufacturers, government regulatory action, and general economic conditions. Please refer to our reports and filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, for a further discussion of these risks and uncertainties. We also caution you not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.


                          NAUTILUS, INC.
                     CONSOLIDATED BALANCE SHEETS
                      (Unaudited, in thousands)

                                                    June 30,   December 31,
                                                      2007        2006
                                                  ------------ ------------
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                     $      5,850 $      4,262
    Trade receivables, net                              77,025      137,714
    Inventories                                         92,475       75,832
    Prepaid expenses and other current assets           18,591       23,093
    Short-term note receivable                           2,594        2,461
    Assets held for sale                                 1,677        1,677
    Deferred tax assets                                  6,744        5,722
                                                  ------------ ------------

      Total current assets                             204,956      250,761

PROPERTY, PLANT AND EQUIPMENT, net                      51,003       52,658
GOODWILL                                                65,326       65,037
INTANGIBLE AND OTHER ASSETS, net                        74,554       56,486
                                                  ------------ ------------
TOTAL ASSETS                                      $    395,839 $    424,942
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
    Trade payables                                $     39,806 $     61,375
    Accrued liabilities                                 26,599       31,444
    Short-term borrowings                               48,100       47,500
    Income taxes payable                                   242        4,551
    Customer deposits                                    2,301        2,229
    Current portion of long-term debt                      295          259
                                                  ------------ ------------
      Total current liabilities                        117,343      147,358

LONG-TERM DEBT                                           3,980        4,158
NONCURRENT DEFERRED TAX LIABILITIES                     15,410       16,792
LONG-TERM TAXES PAYABLE                                  3,441           --

STOCKHOLDERS’ EQUITY:
    Common stock                                         3,250        1,026
    Retained earnings                                  247,360      251,418
    Accumulated other comprehensive income               5,055        4,190
                                                  ------------ ------------
      Total stockholders’ equity                       255,665      256,634
                                                  ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY        $    395,839 $    424,942
                                                  ============ ============



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

                                    Three Months           Six Months
                                  Ended June 30,         Ended June 30,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
NET SALES                       $ 117,073  $ 137,613  $ 275,912  $ 322,602
COST OF SALES                      71,577     77,022    157,146    182,699
                                ---------  ---------  ---------  ---------
      Gross profit                 45,496     60,591    118,766    139,903
                                ---------  ---------  ---------  ---------

OPERATING EXPENSES
    Selling and marketing          43,941     43,111     94,893     95,266
    General and administrative     13,360     12,243     26,683     25,892
    Research and development        2,897      2,532      5,938      5,800
    Royalties                       1,389      1,116      2,707      2,695
    Litigation settlement         (18,300)        --    (18,300)        --
                                ---------  ---------  ---------  ---------

      Total operating expenses     43,287     59,002    111,921    129,653
                                ---------  ---------  ---------  ---------


OPERATING INCOME                    2,209      1,589      6,845     10,250

OTHER INCOME (EXPENSE):
    Interest expense                 (866)      (250)    (1,751)      (839)
    Interest income                    24         86         43        224
    Other income, net                 536      1,207        787      1,222
                                ---------  ---------  ---------  ---------
      Total other income
       (expense)                     (306)     1,043       (921)       607
                                ---------  ---------  ---------  ---------


INCOME BEFORE INCOME TAXES          1,903      2,632      5,924     10,857
INCOME TAX EXPENSE                    793        961      2,349      3,985
                                ---------  ---------  ---------  ---------
NET INCOME                      $   1,110  $   1,671  $   3,575  $   6,872
                                =========  =========  =========  =========

EARNINGS PER SHARE:
      BASIC                     $    0.04  $    0.05  $    0.11  $    0.21
      DILUTED                   $    0.04  $    0.05  $    0.11  $    0.21
WEIGHTED AVERAGE SHARES
 OUTSTANDING:
      BASIC                        31,545     32,803     31,527     32,800
      DILUTED                      31,685     32,997     31,707     32,986



                   SUPPLEMENTAL PRO FORMA DISCLOSURE*

            Reconciliation of GAAP to Pro Forma Earnings Statement
            (Unaudited, in thousands, except per share amounts)

                                                        Three Months
                                                       Ended June 30,
                                                  -------------------------
                                                      2007         2006
                                                  -----------  ------------

GAAP NET INCOME                                   $     1,110  $      1,671
Adjustments:
  Legal settlement with ICON Health and Fitness,
   net of tax                                         (10,610)            -

                                                  -----------  ------------

PRO FORMA NET INCOME (LOSS)                       $    (9,500) $      1,671
                                                  ===========  ============

GAAP net income per common share, diluted         $      0.04  $       0.05
Pro forma net income (loss) per common share,
 diluted                                          $     (0.30) $       0.05


* To supplement our consolidated financial statements presented in
accordance with GAAP, the Company uses non-GAAP measures of pro forma net
income (loss) and pro forma earnings (loss) per share, which are adjusted
from our GAAP results as shown above. These non-GAAP adjustments are
provided to enhance the user's overall understanding of our current
financial performance. We believe the non-GAAP results provide useful
information to both management and investors by including or excluding
certain charges and other amounts that we believe are not indicative of our
core operating results. These non-GAAP measures are included to provide
investors and management with an alternative method for assessing the
Company's operating results in a manner that is focused on the performance
of the Company's ongoing operations and to provide a more consistent basis
for comparison between quarters. These measures are not in accordance with
or an alternative for, GAAP and may be different from pro forma measures
used by other companies.