Nautilus 2001 Annual Report Download - page 47

Download and view the complete annual report

Please find page 47 of the 2001 Nautilus annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 89

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89

structural parts, a six month to three year warranty on parts, labor, electronics, upholstery, grips and cables, and a five year warranty on motors.
Warranty costs are estimated based on the Company's experience and are charged to cost of sales as sales are recognized or as such estimates
change.
RESEARCH AND DEVELOPMENT
Internal research and development costs are expensed as incurred and included in cost of sales. Third party research and development costs are
expensed when the contracted work has been performed. Research and development expense was $716,240, $1,186,216 and $2,229,242 for
1999, 2000 and 2001, respectively.
ADVERTISING
The Company expenses all advertising costs as incurred. Advertising expense was $27,698,564, $47,264,904, and $63,581,847 for 1999, 2000,
and 2001, respectively.
INCOME TAXES
Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to periods in which the
differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the
amount more likely than not to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
STOCK-BASED COMPENSATION
The Company continues to measure compensation expense for its stock-based employee compensation plans using the method prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Company provides pro forma disclosures of net income and earnings
per share as if the method prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation," had been applied in measuring
compensation expense. See Note 9.
COMPREHENSIVE INCOME
Comprehensive income is defined as net income as adjusted for changes to equity resulting from events other than net income or transactions
related to an entity's capital structure. Comprehensive income equals net income for the years ended December 31, 1999 and 2000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's cash and cash equivalents, short-term investments, trade receivables, trade payables, royalty payable to
stockholders, and accrued liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, which
43
2002. EDGAR Online, Inc.