Nautilus, Inc. Announces Third Quarter 2007 Results

Global fitness company Nautilus, Inc. (NYSE: NLS) today announced quarterly results for the three-month period ended September 30, 2007. Also today, the company's new President and Chief Executive Officer, Robert S. Falcone, announced Nautilus' restructured operating strategy and principles intended to drive shareholder value.

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.

Third Quarter Recap

Nautilus reported that net sales for the three months ended September 30, 2007, were $134 million, compared to $159.6 million for the corresponding period last year, down 16 percent. Net loss for the third quarter, including charges of 13 cents related to bad debt reserves for a customer's pending bankruptcy and costs associated with the departure of the Company's former CEO, was $13.3 million, or $0.42 per diluted share, compared to income of $9.4 million, or $0.29 per diluted share, for the third quarter of 2006. The year-ago third quarter included a tax reserve reversal of $3.0 million, or 9 cents per share. Excluding the tax reversal, net income for the quarter was $6.4 million, or $0.20 per diluted share.

The decline in performance was primarily attributable to a reduction in sales of rod-based home gyms in retail and an overall shift in sales mix for customers, channels and products.

"We are very disappointed by Nautilus' third quarter financial results," said Robert S. Falcone, Nautilus Chairman, President and Chief Executive Officer. "Our shareholders can be certain that we are implementing the changes necessary to address these shortfalls in order to drive sustainable growth and value."

Outlook

For the fourth quarter, the Company expects net sales of approximately $160 million and earnings from operations to be about break-even. Nautilus is undergoing a comprehensive review of the business and expects some restructuring charges in the fourth quarter, which are not included in this estimate. These will include severance costs and may include inventory adjustments for discontinued products and other restructuring charges.

Addressing Shortfalls, Improving Financial Position

Since taking over as Nautilus' Chief Executive Officer on August 13, 2007, Mr. Falcone has undertaken a thorough review of the Company's business and operating strategy and implemented several initiatives aimed at improving the Company's financial condition, and will continue to build on the Company's turnaround strategy.

These steps include:

--  The Company's anticipated agreement to amend and secure its $125
    million line of credit with a $50 million accordion and replace it with a
    new $150 million asset-based loan with a $50 million accordion.

--  The re-negotiation of the financial terms associated with Nautilus'
    planned acquisition of Land America, its largest contract manufacturer,
    based in Xiamen, China. New terms include a price concession of
    approximately $7 million and a payment schedule that has been extended to
    October 2008. The transaction, which will provide the Company with a
    vertical manufacturing presence, is expected to help improve long-term
    gross and operating margins.

--  A reduction of workforce by approximately 140 employees, or 9 percent
    of the Company's employee base, generating approximately $10 million in
    fixed-cost savings.

--  The exploration of divestitures for non-core assets, including the
    Company's  technical apparel business, Pearl iZUMi.

--  The suspension of the Company's 10-cent-per-share quarterly cash
    dividend, which will provide an additional $13 million available for
    operations.

--  The development of a global growth strategy for the Company's
    commercial, direct and retail business lines.

"These steps are both necessary to unlocking the true value of Nautilus for our shareholders and reflective of the conservative and strategic manner in which we will manage our business moving forward," said Mr. Falcone.

The Company remains optimistic about its prospects for future growth within the $10 billion global fitness industry. "Not only does Nautilus operate the most widely recognized brand names, it offers a growing global consumer base the most innovative products," said Mr. Falcone. "Our shareholders can be confident that we will combine the right infrastructure with best-in-class execution to leverage the many opportunities before us."

Conference Call Details

The third quarter 2007 investor conference call is scheduled for 5:00 p.m. EDT (2:00 p.m. PDT) Thursday, October 18, 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 800 926 6502 in North America and 212 231 2903 from outside North America. Participants will include: Bob Falcone, President and Chief Executive Officer; and Bill Meadowcroft, Chief Financial Officer.