SanDisk 2008 Annual Report Download - page 53

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General and Administrative.
FY 2008
Percent
Change FY 2007
Percent
Change FY 2006
(in millions, except percentages)
General and administrative ............................... $204.8 13% $181.5 14% $159.8
Percent of revenue ...................................... 6.1% 4.7% 4.9%
Our fiscal year 2008 general and administrative expense growth over the comparable period in fiscal year
2007 was primarily related to increased legal and outside advisor costs of $30 million and bad debt expense of
$5 million, partially offset by lower share-based compensation costs of ($9) million and payroll and employee-
related costs of ($3) million. Our legal and outside advisor costs increased in fiscal year 2008 as compared to
fiscal year 2007 primarily due to increased patent and anti-trust litigation expenses as well as expenses incurred
in connection with strategic initiatives. Due to our restructuring activities in the fourth quarter of fiscal year
2008, we expect that our general and administrative payroll and employee-related expenses will be lower in
fiscal year 2009 than in fiscal year 2008. For further discussion, see “Restructuring Charges and Other” below.
Our fiscal year 2007 general and administrative expense increases were primarily related to increased
payroll, payroll-related expenses and share-based compensation expense associated with headcount increases
including our acquisition of msystems in November 2006.
Impairment of Goodwill.
FY 2008
Percent
Change FY 2007
Percent
Change FY 2006
(in millions, except percentages)
Impairment of goodwill .................................. $845.5 100% n/a — n/a
Percent of revenue ...................................... 25.2% n/a n/a
In accordance with SFAS 142, goodwill is not amortized, but instead is reviewed and tested for impairment
at least annually and whenever events or circumstances occur which indicate that goodwill might be impaired.
We performed our annual impairment test on the first day of the fourth quarter of fiscal year 2008 and
determined that the goodwill was not impaired. However, based on a combination of factors, including the
economic environment, current and forecasted operating results, NAND-industry pricing conditions and a
sustained decline in our market capitalization, we concluded that there were sufficient indicators to require an
interim goodwill impairment analysis during the fourth quarter of fiscal year 2008 and we recognized an
impairment charge of $845.5 million.
Impairment of Acquisition-Related Intangible Assets.
FY 2008
Percent
Change FY 2007
Percent
Change FY 2006
(in millions, except percentages)
Impairment of acquisition-related intangible assets ............ $175.8 100% n/a — n/a
Percent of revenue ...................................... 5.3% n/a n/a
In accordance with SFAS 144, we recorded a $176 million impairment on acquisition-related intangible
assets in the fourth quarter of fiscal year 2008. This impairment was based upon forecasted discounted cash flows
which considered factors including a reduced business outlook primarily due to NAND-industry pricing
conditions.
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