Adaptec 2006 Annual Report Download - page 46

Table of Contents
Research and Development Expenses
Our research and development, or R&D, expenses were $40 million, or 34%, higher in 2006 compared to 2005. Total payroll costs, including the acquired
businesses, were higher by $16.1 million due to salary increases, and additional headcount from Passave and the Storage Semiconductor Business for 2006,
which were partially offset by savings from our workforce reduction initiatives. In addition, we recorded $16.2 million stock-based compensation expense
compared to none in 2005. Material costs were higher by $6.1 million, office and facilities costs were higher by $1.8 million, depreciation increased by $1.2
million, and training and travel costs also increased by $0.9 million due to the acquisitions. These increases were offset by lower hardware and software costs of
$1.4 million and other cost reductions of $0.9 million.
Our research and development, or R&D, expenses were $1.8 million, or 1%, lower in 2005 compared to 2004. The decrease was primarily the result of $3.4
million less in personnel costs resulting from workforce reductions initiated in 2005, which were partially offset by an incremental week in the first quarter and
compensation increases in the second quarter of 2005. In addition, development costs were lower by $5.0 million due to the timing of design completions. These
decreases were offset by higher hardware and software costs of $4.7 million, increased depreciation of $0.8 million, and higher travel costs of $0.5 million.
Amortization of intellectual property was higher by $0.8 million due to purchases of intellectual property in the second half of 2004, and other costs were lower
by $0.2 million.
Selling, General and Administrative Expenses
Our selling, general and administrative, or SG&A, expenses were $46.1 million, or 82% higher in 2006 compared to 2005. The primary reason for the increase in
SG&A expense as a percentage of revenues were that we recorded $19.9 million of stock-based compensation expense compared to $0.2 million in 2005, and
that payroll-related costs were higher by $14.0 million due to increased headcount. We also incurred additional $3.8 million professional fees, the majority of
which related to the investigation by the Audit Committee and the resulting restatement of our financial statements, and $2.5 million in additional payroll
withholding taxes associated with transactions from years 2000 and prior. Sales commissions were higher by $2.0 million, training and travel increased by $1.8
million primarily due to the acquisitions, and office and facilities costs increased by $1.1 million. In addition, in 2005 we reversed $0.9 million provision for
doubtful accounts receivable. Other costs increased by $0.3 million.
Our selling, general and administrative, or SG&A, expenses were $10.0 million, or 22% higher in 2005 compared to 2004. Our SG&A personnel and related
costs increased by $6.3 million due to an incremental week in the first quarter and compensation adjustments. In addition, increased recruitment, travel and
training activities resulted in higher costs of approximately $0.7 million. Facilities costs allocated to SG&A increased by $0.8 million. Of the remaining increase,
$0.7 was due to higher professional fees from incremental tax consulting and internal audit, $0.8 million was attributable to higher commissions, and other
expenses increased by $0.4 million. These increases were offset by a $0.9 million reversal of a provision for doubtful accounts receivable based on the
completion of an analysis of the credit status of a significant customer due to a change in ownership. 2004 SG&A expenses were lower by a further $1.3 million
because we eliminated a provision for employee-related taxes on completion of a payroll tax audit in that year.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠