Nautilus 2000 Annual Report Download - page 21

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Expand marketing for our home fitness equipment products and fitness accessories under the Nautilus brand name.
General and Administrative
General and administrative expenses grew to $8.8million in 2000 from $4.2million in 1999, an increase of 107.8%. As a percentage of net
sales, general and administrative expenses increased to 3.9% in 2000 from 3.2% in 1999. Our direct products segment accounted for
$4.0million of the increase in general and administrative expenses, due primarily to increased staffing and infrastructure expenses necessitated
by our continued growth and the implementation of our information systems. Commercial and retail operations accounted for the remaining
increase of $0.6million. We believe our general and administrative expenses will continue to increase in future periods in real dollar terms and
also as a percentage of net sales.
Royalty
Royalty expense grew to $5.0million in 2000 from $2.9million in 1999, an increase of 71.9%. The increase in our royalty expense is
attributable to increased sales of our Bowflex products in 2000, plus new royalty agreements related to the development of additional products.
Our royalty expenses will increase if sales of our Bowflex products continue to increase.
Other Income
In 2000, other income increased to $4.0million from $1.0million in 1999. The $3.0million increase resulted primarily from interest earned on
invested cash and cash equivalents. We expect other income to increase if invested cash balances increase and interest rates remain steady.
Income Tax Expense
Income tax expense increased by $11.9million in 2000 compared to 1999. We expect our income tax expense to increase in line with increases
of our income before taxes.
Net Income
For the reasons discussed above, net income increased 104.6% to $41.6million in 2000 compared to $20.3million in 1999.
Comparison of Years Ending December31, 1999, and December31, 1998
Net Sales
Net sales grew by 110.6% to $133.1million in 1999 from $63.2million in 1998. Sales within our direct products segment increased by 78.9%
over prior year levels and accounted for $113.0million, or 84.9%, of our aggregate net sales in 1999. Net sales within our commercial and retail
segment generated $20.1million of our aggregate net sales and accounted for 33.4% of the aggregate increase. Sales growth in 1999 primarily
resulted from expanded direct marketing of our Bowflex products and the addition of our commercial and retail segment.
Except for the fourth quarter, fiscal 1999 sales of our Bowflex products appear to have been consistent with historic trends. As in prior years,
first and third quarter sales of our Bowflex products were strong, while the second quarter reflected seasonal weakness. Our direct products
segment is largely dependent upon national cable television advertising, and we found that second quarter influences on television viewership,
such as the broadcast of national network season finales and seasonal weather factors, caused our spot television commercials on national cable
television to be marginally less effective than in other periods of the year. During the fourth quarter of 1999, we
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2002. EDGAR Online, Inc.