TeleNav 2012 Annual Report Download - page 55

Table of Contents
Research and development . Our research and development expenses decreased 8% to $60.3 million in fiscal 2013 from $65.8 million in fiscal
2012 . The decrease was primarily due to decreased compensation and benefits costs of $5.6 million associated with decreased average headcount,
primarily in our China offices. As a percentage of revenue, research and development expenses decreased to 31% in fiscal 2013 from 32% in fiscal
2012 . The total number of research and development personnel decreased 22% to 480 at June 30, 2013 from 615 at June 30, 2012 . A substantial
portion of the decrease in personnel occurred in June 2013 in conjunction with our restructuring efforts. Although research and development
personnel have decreased in the short-term, we expect research and development expenses will not reflect a proportionate decrease as we retain
research and development personnel in higher cost geographic areas. We also believe that as we continue to invest in expanding the navigation
services we offer, establish relationships with new automotive manufacturers and OEMs and advertisers and develop new services and products,
revenue from those investments and development efforts will lag the related research and development expenses. We expect that research and
development expenses will not change materially in absolute dollars.
Sales and marketing . Our sales and marketing expenses increased 20% to $30.4 million in fiscal 2013 from $25.3 million in fiscal 2012 . The
increase was primarily due to increased advertising and promotion expenses of $2.2 million, increased stock-based compensation of $1.1 million and
increased recruiting expenses of $0.4 million. As a percentage of revenue, sales and marketing expenses increased to 16% in fiscal 2013 from 12%
in
fiscal 2012 . The total number of sales and marketing personnel decreased 18% to 93 at June 30, 2013 from 113 at June 30, 2012
. We expect that our
sales and marketing expenses will continue to increase over time in absolute dollars as we add sales personnel to support our advertising business.
General and administrative . Our general and administrative expenses decreased 5% to $24.8 million in fiscal 2013 from $26.1 million in
fiscal
2012 . The decrease was primarily due to decreased legal costs of $5.4 million, partially offset by increased compensation and benefits costs of $1.2
million, increased stock compensation expense of $1.3 million and professional services fees of $0.4 million. The total number of general and
administrative personnel decreased 3% to 71 at June 30, 2013 from 73 at June 30, 2012 . As a percentage of revenue, general and administrative
expenses were comparable at 13% in fiscal 2013 and 2012 . We anticipate that our general and administrative expenses may vary substantially from
period to period as our legal expenses associated with ongoing intellectual property litigation and requests for indemnification related to intellectual
property litigation proceed.
Restructuring costs . We incurred restructuring costs of $1.7 million in fiscal 2013 in order to better align and focus our resources around our
strategic growth areas. We initiated a restructuring plan consisting of reductions of approximately 83 full-
time positions in the U.S. and China and we
recorded restructuring charges of $1.5 million related to severance and benefits for the positions eliminated. In addition, we consolidated our
Shanghai office facilities and recorded restructuring charges of $0.1 million related to the forfeiture of our lease deposit. We also recorded
restructuring charges of $0.1 million related to the write-off of certain assets that were no longer useful to us based upon the changes in our business.
Other income, net . Our other income, net was $1.2 million in fiscal 2013 and $1.5 million in fiscal 2012 . The change was primarily due to
decreased interest income due to lower cash and cash equivalents and short-term investments balances.
Income from discontinued operations, net . Our income from discontinued operations, net was $7.5 million in fiscal 2013 and $0.6 million in
fiscal 2012 . Income from discontinued operations in fiscal 2013 includes a gain of $6.5 million realized on the sale of our enterprise business, net of
tax.
Provision for income taxes . Our provision for income taxes, excluding discontinued operations, decreased to $1.1 million in fiscal 2013 from
$13.6 million in fiscal 2012 . Our effective tax rate, excluding discontinued operations, was 16% in fiscal 2013 compared to 30% in fiscal 2012 . Our
effective tax rate in fiscal 2013 was lower than the tax computed at the U.S. federal statutory income tax rate due primarily to the R&D credit and
changes in intercompany arrangements, partially offset by nondeductible stock compensation.
The usage of our remaining U.S. federal and state loss carryforwards of approximately $2.3 million and $9.7 million respectively, is
substantially limited each fiscal year by Section 382 of the Internal Revenue Code. The federal limitation declines over time with an annual limitation
of $0.7 million for the next two years followed by a significant decrease in the annual limitation thereafter.
As of June 30, 2013 , our cumulative unrecognized tax benefit was $6.3 million , of which $0.9 million was netted against deferred tax assets.
Included in the balance of unrecognized tax benefits at June 30, 2013 was $4.8 million of unrecognized tax benefits that, if recognized, would affect
the annual effective tax rate.
We file income tax returns with the Internal Revenue Service, or IRS, California, various states and foreign tax jurisdictions in which we have
subsidiaries. The statute of limitations remains open for fiscal 2011 through fiscal 2012 in the
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