Nautilus 2001 Annual Report Download - page 27

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GENERAL AND ADMINISTRATIVE
General and administrative expenses grew to $15.6 million in 2001 from $8.8 million in 2000, an increase of 76.9%. Our direct-marketing
business accounted for $4.0 million of the increase, due primarily to increased staffing and infrastructure expenses necessary to support our
growth. Our commercial and retail operations accounted for the remaining increase primarily due to our product diversification strategy. As a
percentage of net sales, general and administrative expenses increased to 4.3% in 2001 from 3.9% in 2000. We believe that our general and
administrative expenses will increase in future periods in real dollar terms, and increase marginally as a percentage of sales.
ROYALTY
Royalty expense grew to $7.4 million in 2001 from $5.0 million in 2000, an increase of 47.9%. Both our direct and commercial/retail segments
have several royalty agreements. The increase in our royalty expenses is primarily attributable to the increased sales of our Bowflex products,
along with sales of other products under royalty agreements which have been added as part of our diversification strategy. Our royalty expenses
will increase if sales of our Bowflex products continue to increase and as we sell recently acquired products which have royalty agreements
associated with them.
OTHER INCOME
In 2001, other income was $4.4 million compared to $4.0 million for 2000. The small increase resulted primarily from an increase in interest
earned on invested cash and cash equivalents due to the effect of higher invested cash amounts offset by considerable interest rate cuts by the
Federal Reserve Bank in 2001. Interest income should be lower in future periods due to the lower rate environment and the use of cash to
acquire Schwinn Fitness and StairMaster.
INCOME TAX EXPENSE
Income tax expense increased by $14.8 million for 2001 primarily due to the growth in our income before taxes. The increase in our effective
tax rate from 36.0% in 2000 to 36.5% in 2001 is due to state income tax issues relating to our commercial and retail business. We expect our
income tax expense to increase in line with our growth in income before taxes.
NET INCOME
For the reasons discussed above, net income grew to $66.6 million in 2001 from $41.6 million in 2000, an increase of 60.0%. Not only were we
able to maintain a higher sales growth rate, but we also complemented that with a control on our expenses, which grew only marginally as a
percentage of sales from 2000. Higher sales, coupled with controlling our expenses, translated into strong net income growth in 2001.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999
NET SALES
Net sales in 2000 grew by 68.3% to $223.9 million from $133.1 million in 1999. Our Bowflex line of products continued to exhibit strong
growth and was the primary reason for the strong sales growth in 2000. This was also enhanced by the full integration of Nautilus within our
business. New products provided momentum to our sales, primarily in the direct products segment through the Nautilus Sleep
26
2002. EDGAR Online, Inc.