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Nautilus, Inc. Announces Continued Positive Momentum In Operating Results For The Second Quarter Of 2011

The Company reported a net loss of $3.3 million for the second quarter ended June 30, 2011, an improvement of 69.5%, or $7.4 million, over net loss of $10.7 million for the second quarter of 2010. Diluted net loss per share for the second quarter of 2011 was $(0.11), as compared to diluted net loss per share of $(0.35) for the same quarter a year ago. Net loss for the 2011 second quarter included a loss from discontinued operation of $1.1 million, or $(0.04) per diluted share, compared to a loss of $3.7 million, or $(0.12) per diluted share, for the 2010 second quarter, as the Company completed the divestiture of its former commercial business in April 2011.

For the six months ended June 30, 2011, loss from continuing operations was $1.1 million, an improvement of 88.5%, or $8.3 million, over loss from continuing operations of $9.4 million for the same period in 2010. Diluted loss per share from continuing operations for the first six months of 2011 was $(0.03), compared to $(0.30) for the same period a year ago.

Net loss of $1.7 million for the six months ended June 30, 2011 represented an improvement of 91.0%, or $16.8 million, over net loss of $18.5 million for the same period a year ago. Diluted net loss per share for the first six months of 2011 was $(0.05), as compared to diluted net loss per share of $(0.60) for the same period a year ago. Net loss for the first six months of 2011 included a loss from discontinued operation of $0.6 million, or $(0.02) per diluted share, compared to a loss of $9.1 million, or $(0.30) per diluted share, for the same period in 2010.

The following summary contains information from our unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010:
Results of Operations  

Three months ended June 30,
 

Six months ended June 30,
(Unaudited and in thousands, except per share amounts) 2011   2010 2011   2010
Net sales $ 34,724 $ 30,642 $ 83,025 $ 76,286
Cost of sales 20,181   17,173   46,395   39,852  
Gross margin 14,543   13,469   36,630   36,434  
Operating expenses:
Selling and marketing 12,219 14,645 27,084 33,588
General and administrative 4,277 4,794 8,969 9,953
Research and development 724   788   1,477   1,591  
Total operating expenses 17,220   20,227   37,530   45,132  
Operating loss (2,677 ) (6,758 ) (900 ) (8,698 )
Other expense, net (52 ) (35 ) (141 ) (48 )
Loss from continuing operations before income taxes (2,729 ) (6,793 ) (1,041 ) (8,746 )
Income tax (benefit) expense (533 ) 201   34   619  
Loss from continuing operations (2,196 ) (6,994 ) (1,075 ) (9,365 )
Loss from discontinued operation (1,072 ) (3,711 ) (587 ) (9,131 )
Net loss $ (3,268 ) $ (10,705 ) $ (1,662 ) $ (18,496 )
Loss per share from continuing operations
Basic and diluted $ (0.07 ) $ (0.23 ) $ (0.03 ) $ (0.30 )
Loss per share from discontinued operation
Basic and diluted $ (0.04 ) $ (0.12 ) $ (0.02 ) $ (0.30 )
Net loss per share
Basic and diluted $ (0.11 ) $ (0.35 ) $ (0.05 ) $ (0.60 )
Weighted average shares outstanding
Basic and diluted 30,745 30,744 30,745 30,744

The following table presents comparative net sales by segment for the second quarter ended June 30, 2011 and 2010:
Net Sales by Segment  

Three months ended June 30,
  Change
(Unaudited and in thousands) 2011   2010 $   %
Direct business $ 22,455 $ 18,443 $ 4,012 21.8 %
Retail business 11,417 11,820 (403 ) (3.4 )%
Royalty income 852   379   473   124.8 %
$ 34,724   $ 30,642   $ 4,082   13.3 %

Net sales for the Direct segment increased 21.8% for the 2011 second quarter over the comparable period last year. This sales increase was largely driven by continued strong demand for the Company's TreadClimber® products, attributable partly to increased advertising effectiveness and to higher consumer credit approval rates, which rose to 24% in the 2011 second quarter, as compared to 13% for the same period last year.

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