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The Columbian

By Jonathan Nelson, The Columbian, Vancouver, Wash.

May 4--A hint of vindication laced the voices of Nautilus officials Wednesday as they released first-quarter results in which net sales rose 18.3 percent to $185 million, a company quarterly revenue record.

The conference call to industry analysts was a sharp contrast to the previous quarter, when it was confirmed that production problems for the Vancouver-based company slowed the release of six new products. The year-end glitches ultimately caused sales to miss projections by $28.7 million.

"We got knocked on our tail in the fourth quarter, there's no doubt about it," said Gregg Hammann, Nautilus CEO and chairman. "We got up about as mad as a hen and got back after it in the first quarter."

Hammann said the production problems have been fixed, in part, by closing one manufacturing plant in Tyler, Texas, and moving those operations to Tulsa, Okla.

The manufacturer of such fitness apparel and products as Bowflex, Nautilus and Schwinn parlayed those increased efficiencies into a $20 million reduction of inventories to $76 million. Net income for the three-month period that ended March 31 was down 44.7 percent to $5.2 million.

Hammann said improving production efficiencies is a key focus for the company this year and includes such changes as putting quality engineers in domestic plants, reducing the number of distribution centers from 10 to seven by 2007, and discontinuing older and redundant product lines.

The second quarter is historically the slowest period for the fitness industry. Nautilus expects net sales to be between $145 million and $150 million, with earnings of 4 cents to 7 cents per diluted share.

Hammann and other executives said the company is preparing for the second half of the year, a time when 15 new products will be launched, and is developing a diverse marketing plan for the holiday season.

The publicly traded company finished 2005 with $631 million in sales. Its stock closed Wednesday at $17.40 a share, up 25 cents on the day.

Nautilus employs about 450 people at its headquarters on Southeast 164th Avenue.

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