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PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Expenditures
for repairs and maintenance are charged to expense as incurred. The following table represents a summary of property, plant and equipment at original cost
(in thousands):
DECEMBER 31, DECEMBER 31, USEFUL
2003 2002 LIVES
Land $ 1,506 $ 1,506 —
Buildings 8,981 8,683 30-40 yrs
Machinery and equipment 35,280 32,472 3-10 yrs
Total property, plant and equipment $ 45,767 $ 42,661
Depreciation expense of $4,442,000, $4,080,000 and $3,743,000 was recorded for the years ended December 31, 2003, 2002 and 2001, respectively.
PATENTS
Cost for patents acquired is determined at acquisition date. Patents are amortized over the remaining lives of the individual patents, which are four to 14 years.
Patents are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
GOODWILL
Goodwill represents the excess of cost over the fair value of tangible and identifiable intangible net assets acquired. Through December 31, 2001, goodwill
was being amortized over 25 years. Beginning January 1, 2002, accounting for goodwill was changed to conform to Statement of Financial Accounting
Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” as outlined in Note 2. Annual impairment testing for goodwill is done in accordance
with SFAS No. 142 using a fair value-based test. Goodwill is also reviewed periodically for impairment whenever events or changes in circumstances indicate
a change in value may have occurred.
REVENUES
The Company recognizes revenue when its products are shipped to its customers and distributors, provided an arrangement exists, the fee is fixed and
determinable and collectibility is reasonably assured. Net sales represent gross sales invoiced to customers, less certain related charges, including
discounts, returns and other allowances. Returns, discounts and other allowances have been insignificant historically.
SHIPPING AND HANDLING POLICY
Shipping and handling fees charged to customers are reported as revenue and all shipping and handling costs incurred related to products sold are
reported as cost of goods sold.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs relating to the development of new products and improvements of existing products are expensed as incurred.
STOCK-BASED COMPENSATION 
At December 31, 2003, the Company had three stock-based employee compensation plans, which are described more fully in Note 8. The Company
accounts for those plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted
under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the
effect on net income and income per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based
Compensation,” to stock-based employee compensation: