Vancouver, WA — What to do with a commercial business that showed a$7.2 million loss in the second quarter? That's what Nautilus Inc. is mulling over as its management team engaged a company to help Nautilus evaluate its commercial business. The commercial business was the only one of Nautilus' three divisions not to show a profit in the quarter, according to the company's financials released last month.

Ed Bramson, CEO of Nautilus, blamed the commercial business' $7.2 million loss on the economy, which has made it difficult for club operators to purchase equipment. The commercial business was down 39.7 percent to $20.7 million, reflecting a weakness in strength equipment sales that was partly offset by strength in cardio equipment sales, according to CFO Kenneth Fish.

In a call with analysts, Bramson said that the company had a backlog of commercial inventory in the second quarter, so the company reduced prices to decrease that inventory.

On the consumer side, the retail and direct businesses showed profits in the second quarter, despite showing losses last year at this time. The retail business generated$1.2 million in income from operations compared to a loss of $0.2 million for the previous period last year. The direct business generated $0.6 million of income from operations compared to a loss of $0.6 million in the same period last year. The commercial business had a loss from continuing operations of $7.2 million in second quarter 2009 compared to a loss of $1.1 million for the same period last year.

Robert W. Baird & Co. will help Nautilus study whether it should concentrate more on the consumer business. Possible results of the study could be a smaller group of commercial products, a sale of the commercial division or — if a buyer could not be found — a closure of the commercial business. Bramson did not offer details about whether the company was leaning one direction or another. He said it would be several months before the evaluation was complete.

Overall, Nautilus reported a loss of 36.4 percent in net sales for the second quarter 2009. Nautilus reported net sales of$60.8 million in the quarter, compared to net sales of $95.6 million for the second quarter 2008.

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