Nautilus 2003 Annual Report Download - page 54

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Table of Contents
With one exception, the Company has not recognized compensation expense relating to employee stock options because it has only
granted options with an exercise price equal to the fair value of the stock on the effective date of grant. In July 2003, certain stock options
were granted at an exercise price below current market price on the day of the grant and thus the Company recognized compensation
expense of $156 in 2003. The unearned portion of this stock option grant resides in Stockholders’ Equity in the Consolidated Balance
Sheets and will be recognized evenly over the five-year vesting period as compensation expense. The estimated compensation expense
for the next four years is $340 per year and $184 in year five. If the Company had elected to recognize compensation expense for all
options granted using a fair value approach, and therefore determined the compensation based on the value as determined by the Black-
Scholes option pricing model, the pro forma net income and earnings per share would have been as follows:
The pro forma amounts may not be indicative of the effects on reported net income for future years due to the effect of options vesting
over a period of years and the granting of stock compensation awards in future years.
2003
2002
2001
Net income, as reported
$
34,402
$
97,887
$
66,583
Add: Stock-
based employee compensation expense included in reported net income,
net of tax
100
—
—
Deduct: Stock-based employee compensation expense determined under fair value
based method, net of tax
(3,215
)
(3,141
)
(2,243
)
Net income, pro forma
$
31,287
$
94,746
$
64,340
Basic earnings per share, as reported
$
1.06
$
2.84
$
1.89
Basic earnings per share, pro forma
$
0.96
$
2.75
$
1.83
Diluted earnings per share, as reported
$
1.04
$
2.79
$
1.85
Diluted earnings per share, pro forma
$
0.95
$
2.70
$
1.79
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for the grants in 2003, 2002 and 2001:
-
53
-
2003
2002
2001
Dividend yield
3.5
%
None
None
Risk
-
free interest rate
3.9
%
4.1
%
4.4
%
Expected volatility
59
%
67
%
67
%
Expected option lives
10 years
5 years
5 years
Weighted
-
average fair value of options granted per share
$
4.75
$
20.52
$
11.75
Weighted
-
average fair value of options granted below market price per share
$
4.83
$
—
$
—