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 Breaking Headlines

Nautilus 4Q Sales & Earnings Plunge

FEBRUARY 06, 2006 -- Nautilus' 4Q sales were $181.3 million compared to $169.6 million for the corresponding period last year, up 6.9%. Net income for the quarter was $2.8 million down from $14.2 million. For FY05, the company generated $630.6 million in net sales and EPS of 70¢ per share. This compares to revenues of $23.8 million and EPS of 90¢.

"I am very disappointed in our fourth quarter performance," said Gregg Hammann, COB/CEO. "This team has performed well the previous nine quarters delivering upon our guidance each quarter. However, during the fourth quarter our manufacturing and go-to-market processes were not able to manage the introduction of six new products during the busy holiday season. This operational issue accounted for the majority of our revenue shortfall.

"Our team has identified the causes of these operational issues, and we are focused on correcting these processes during the first half of 2006. Four of the six innovative products are now in full market launch, and we are completing refinements on the additional two products. We are making a number of improvements in our manufacturing and go-to-market process, including the requirement of on-site sub-supplier inspections for each new product going forward. We are also working closely with key suppliers to move more of our work upstream to free capacity in our distribution centers and manufacturing plants. Examples of this work include moving master-packing to our suppliers, working cross dock activities, and initiating direct-to-customer shipments from suppliers versus through our distribution network.

"Our '06 growth and performance will be driven by leveraging our industry-leading pipeline of innovative products, expanding assortments with existing partners, and achieving growth in every business channel again in 2006. Our manufacturing and operations teams are being supported by a global sourcing team to assure we are achieving operating improvement, and by a companywide initiative focused on quality, customer service, and cost takeout."

For 1Q06, the company estimates that net sales will be in the $180-185 million range, with expected earnings of 14¢-18¢ per diluted share, including an estimated 2¢ per share charge for stock option expensing.


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