SanDisk 2005 Annual Report Download - page 112

Pacific print media spending and advertising and merchandising for such product lines as USB drives, wireless
mobile and Shoot & Store.
General and Administrative.
FY 2005
Percent
Change FY 2004
Percent
Change FY 2003
(In millions, except percentages)
General and administrative ................. $79.1 56% $50.8 63% $31.1
Percent of revenue........................ 3.4% 2.9% 2.9%
Our 2005 general and administrative expense growth was primarily related to increased legal expenses
associated with litigation to defend our intellectual property of $17.3 million, increased payroll and payroll related
expenses of $6.0 million and consulting expenses of $5.0 million to support our expanded business. Our 2005
general and administrative expenses also included significant consulting expenses associated with establishing new
legal entities and modifying our corporate organization to reflect our global business.
Our 2004 general and administrative expenses increases were primarily relates to increased legal expenses
related in part to higher litigation expenses to defend our intellectual property, increased staffing and consulting
expenses to support our expanded business and compliance with the Sarbanes-Oxley Act, as well as provisions for
doubtful accounts due to the growth in accounts receivable balances.
Non-Operating Income (Loss), net.
FY 2005
Percent
Change FY 2004
Percent
Change FY 2003
(In millions, except percentages)
Equity in income of business ventures ......... $ 0.4 (20)% $ 0.5 150% $ 0.2
Interest income .......................... 42.8 110% 20.4 129% 8.9
Interest expense ......................... (0.6) (90)% (5.9) (13)% (6.8)
Gain (loss) in investment in foundries ......... (8.2) (36)% (12.9) (449)% 3.7
Recovery (loss) on unauthorized sale of UMC
shares ............................... — (100)% 6.2 (134)% (18.3)
Other income (loss), net ................... 2.3 (162)% (3.7) 28% (2.9)
Total Non-Operating Income (Loss), net........ $36.7 698% $ 4.6 (130)% $(15.2)
Non-operating income for 2005 was comprised of interest income of $42.8 million, an other- than-temporary
reduction in the value of our investment in Tower of ($10.1) million and other items of $4.0 million.
Non-operating income for 2004 was comprised of interest income of $20.4 million, a settlement of $6.2 million
from a third-party brokerage firm related to the unauthorized disposition of our investment in UMC, an other-
than-temporary reduction in the value of our investment in Tower of ($11.8) million, interest expense on our
41⁄2% Convertible Subordinated Note of ($5.9) million and other items of ($4.3) million.
Provision for Income Taxes
FY 2005 FY 2004 FY 2003
Provision for income taxes ................................ 37% 37% 30%
Our 2005 and 2004 tax rates differ from the statutory rate primarily due to state tax expense, net of federal
benefit. Our 2003 tax rate differs from the statutory rate due to state tax expense, a reversal of the tax benefit we
recognized in 2001 and 2002 related to the unrealized gain on the disposition of our UMC shares and to the benefit
provided by the reversal of $47 million in valuation allowance carried on the net deferred tax assets at the end of
fiscal 2002 which could be taken principally because our net operating loss carryforwards have been fully realized.
Our future tax rate may be impacted by state taxes, our ability to realize tax benefits from capital losses and the
geographic mix of our earnings.
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Annual Report