Nautilus 2003 Annual Report Download - page 34

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Table of Contents
General and Administrative
General and administrative expenses grew to $26.0 million in 2002 from $15.6 million in 2001, an increase of $10.4 million, or 67.1%. Our
commercial/retail segment accounted for $7.4 million of the increase due primarily to our Schwinn Fitness and StairMaster acquisitions. The
remainder of the increase was primarily due to increased staffing and infrastructure expenses necessary to support our growth. As a percentage
of net sales, general and administrative expenses increased marginally to 4.5% in 2002 from 4.3% in 2001.
Royalties
Royalty expense grew to $10.1 million in 2002 from $7.4 million in 2001, an increase of 37.3%. The increase in our royalty expenses was
primarily attributable to the increased sales of our Bowflex products, along with sales of other products under royalty agreements that were
added as part of our diversification strategy.
Other Income
In 2002, other income was $1.8 million compared to $4.4 million for 2001. This decline resulted primarily from a decrease in interest earned on
invested cash and cash equivalents. Because we used a significant portion of our cash for acquisitions and stock buybacks, we had less cash
from which to derive interest income. Interest income also decreased due to interest rate cuts by the Federal Reserve Bank in 2002.
Income Tax Expense
Income tax expense increased by $16.8 million in 2002 primarily due to our increase in income before taxes.
Net Income
For the reasons discussed above, net income grew to $97.9 million in 2002 from $66.6 million in 2001, an increase of 47.0%.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the quarters in the periods ended December 31, 2003 and 2002. The information
for each of these quarters is unaudited and has been prepared on the same basis as the audited financial statements appearing elsewhere in this
Annual Report on Form 10-K. In the opinion of management, all necessary adjustments, consisting only of normal recurring adjustments, have
been included to present fairly the unaudited quarterly results when read together with our audited financial statements and the related notes.
Certain amounts from previous periods have been reclassified to conform to the 2003 full-year presentation with no effect on previously
reported consolidated net income or stockholders’ equity. These operating results are not necessarily indicative of the results of any future
period. Due to recent acquisitions within our commercial/retail segment, we expect heightened seasonality in our business. We expect sales in
the second quarter to be weakest while the first and fourth quarters should be our strongest. We expect the fourth quarter will generally be
stronger than the first quarter.
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