Lenovo 2012 Annual Report Download - page 26
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MANAGEMENT’S DISCUSSION & ANALYSIS
2011/12 Annual Report Lenovo Group Limited
24
For the year ended March 31, 2012, overall operating expenses across the board increased when compared to last year
as current year includes NEC JV and Medion. Employee benefit costs increased by 35 percent as compared to last year
due to increased headcount and performance-driven incentive payments. Legal and professional fees increased by 16
percent as compared to last year due to the increase in merger and acquisition activities. Branding and promotional
expenses increased by 75 percent as compared to last year as a result of the branding campaign.
Further analyses of income and expense by function for the year ended March 31, 2012 are set out below:
Other income – net
Other income represents mainly net gain on disposal of available-for-sale financial assets and investments.
Selling and distribution expenses
Selling and distribution expenses for the year increased by 63 percent as compared to last year. This is principally
attributable to a US$248 million increase in promotional, branding and marketing activities and a US$221 million increase
in employee benefit costs.
Administrative expenses
Administrative expenses for the year increased slightly by 2 percent as compared to last year. This is mainly attributable
to a US$26 million increase in employee benefit costs and a US$20 million increase in legal and professional fees relating
to merger and acquisition activities. The increase is partly offset by a decrease in contracted service expense of US$25
million.
Research and development expenses
Research and development spending for the year increased by 49 percent as compared to last year. The major part of
the increase is attributable to an increase in employee benefit costs of US$78 million, and an increase in R&D supplies &
laboratory expenses of US$64 million. There was also a R&D laboratory relocation expense of US$7 million in last year.
Other operating expense/income – net
Net other operating income for the year decreased by US$68 million as compared to last year. The decrease is
attributable to one-off items such as IP license fee of US$35 million noted in current year and in prior year the Group
recognized a gain of US$13 million relating to the disposal of a subsidiary. Net exchange gain also decreased by US$17
million as compared to last year.
For the year ended March 31
2012
US$’000
2011
US$’000
Depreciation of property, plant and equipment and
amortization of prepaid lease payments 77,721 81,856
Amortization of intangible assets 97,684 94,284
Employee benefit costs 1,938,256 1,431,218
– long-term incentive awards 66,418 41,375
Rental expenses under operating leases 63,252 52,670