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## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(in thousands, except share and per share data, unless otherwise indicated) 

## Goodwill and Other Intangibles 

Goodwill and other intangibles, net, which result principally from acquisitions, consist of the following at December 31: 

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Goodwill and other intangibles are presented net of accu- mulated amortization of $37,143 and $27,262 as of December 31, 2001 and 2000, respectively. Goodwill and other intangible asset amortization expense totaled approximately $9,881, $10,121 and $9,769 in 2001, 2000 and 1999, respectively. The Company regularly evaluates its accounting for goodwill and other intangible assets. No impairment charges were recorded in 2001, 2000 and 1999. Impairment would be recognized when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Measurement of the amount of impairment would be based on appraisal, market value of similar assets or esti- mated discounted future cash flows resulting from the use and ultimate disposition of the asset. 

## Accrued Expenses and Other Current Liabilities 

Accrued expenses and other current liabilities consist of the following at December 31: 

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## Income Taxes 

The Company accounts for income taxes using the provi- sions of SFAS 109, “Accounting for Income Taxes.” Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts. Future tax benefits are recognized to the extent that real- ization of such benefits is more likely than not. 

## Currency Translation Adjustment 

The financial statements of foreign subsidiaries, where the local currency is the functional currency, are translat- ed into U.S. dollars using exchange rates in effect at the period end for assets and liabilities and average exchange rates during each reporting period for results of opera- tions. Adjustments resulting from translation of financial statements are reflected as accumulated other compre- hensive loss. 

The financial statements of foreign subsidiaries, where the U.S. dollar is the functional currency and which have certain transactions denominated in a local currency, are re-measured as if the functional currency were the U.S. dollar. The re-measurement of local currencies into U.S. dollars creates translation adjustments which are includ- ed in net income. All translation and transaction activi- ties were insignificant in 2001, 2000 and 1999. 

## Revenue Recognition 

The Company recognizes revenues from the sale of prod- ucts, net of costs of returns and allowances, at the point of passage of title, which is generally at the time of ship- ment. Revenue is recognized in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” 

## Product Development Expenses 

Expenses associated with the development of new prod- ucts and changes to existing products are charged to expense as incurred. The costs amounted to $26,996, $26,750 and $21,976 in 2001, 2000 and 1999, respectively. 

## Stock-Based Compensation 

The Company has adopted the disclosure-only provisions of SFAS 123, “Accounting for Stock-Based Compensation.” The Company continues to follow Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its employee share options. Since the exercise price of the Company’s employee share options equals the market price of the shares on the date of grant, no compensation expense is recorded. 

## Financial Instruments and Derivative Financial Instruments 

Financial instruments held by the Company include cash and cash equivalents, accounts receivable, accounts payable, long-term debt, interest rate swap agreements and forward currency contracts. The carrying value of cash and cash equivalents, accounts receivable and accounts payable is considered to be representative of fair value because of the short maturity of these instruments. The fair values of borrowings under the long-term debt facili- ties are based on rates available to the Company for debt with comparable terms and maturities. Refer to Note 10 for fair value disclosures of the interest rate swaps and currency forward contracts. 

## Accounting Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including certain self-insured risks and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial state- ments and the reported amounts of revenues and expenses during the reporting period. Since actual results could differ from those estimates, the Company revises its estimates and assumptions as new information becomes available. 

## Net Income Per Share 

Net income per share amounts for all periods are pre- sented in accordance with SFAS 128, “Earnings per Share,” which requires the presentation of basic net income per share and diluted net income per share. Basic net income per share was computed by dividing net income by the weighted average number of common shares outstanding for each respective period. Diluted net income per share was calculated by dividing net income by the weighted average of all potentially dilutive common shares that were outstanding during the periods presented, except for the years ended December 31, 2000 and 1999, where such inclusion would have had an anti- dilutive effect. Actual weighted average shares outstand- ing used in calculating basic and diluted net income per share were as follows: 

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## Impairment of Assets 

The Company reviews its long-lived assets and identifi- able intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impair- ment charges were recorded in 2001, 2000 and 1999. Impairment would be recognized when events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. Measurement of the amount of impairment may be based on appraisal, market values of similar assets or estimated discounted future cash flows resulting from the use and ultimate disposition of the asset. 

## Accounting Standards 

Effective January 1, 2001, the Company adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (as amended by SFAS 138). SFAS 133 establish- es new accounting and reporting standards for derivatives and hedging activities, which requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for designation and effec- tiveness of transactions entered into for hedging purpos- es. The cumulative effect of adopting SFAS 133 was to increase other comprehensive loss by $0.3 million, after- tax. The effect on net income was not significant, primari- ly because the hedges in place as of January 1, 2001 qual- ified for hedge accounting treatment and were highly effective. 

In July 2001, the FASB issued SFAS 141, “Business Combinations.” SFAS 141 eliminates the pooling-of-inter- ests method and requires the purchase method of accounting to be used for all business combinations initi- ated after June 30, 2001. The adoption of SFAS 141 did not have a material impact on the Company’s financial statements. 

