3Ware 2002 Annual Report Download - page 44

Selling, General and Administrative. SG&A expenses were approximately $69.2 million, or 15.9% of
revenues, for the year ended March 31, 2001, as compared to approximately $28.0 million, or 16.3% of net
revenues, for the year ended March 31, 2000. The increase in SG&A expenses in absolute dollars for the year
ended March 31, 2001 was primarily attributable to investments made in our corporate infrastructure, an increase
in the size of our sales force and related commissions, additional marketing and advertising associated with the
introduction of new products, general corporate branding and increases in our reserves for bad debt. The
remaining increase is the result of our acquisition of MMC Networks in the third quarter which was not included
in the comparison period.
Stock-based Compensation. Stock-based compensation charges were $79.7 million and $0.5 million for
the years ended March 31, 2001 and March 31, 2000, respectively. The increase is directly related to the
acquisitions completed in fiscal 2001.
Amortization of Goodwill and Purchased Intangibles. Amortization of goodwill and purchased intangible
assets was $308.8 million for the year ended March 31, 2001. These charges are related to the purchases of MMC
Networks, SiLUTIA, YuniNetworks, pBaud, Chameleon and RTC in fiscal 2001. There were no amortization
charges in the year ended March 31, 2000.
Acquired In-process Research and Development. For the year ended March 31, 2001, we recorded
$202.1 million of IPR&D resulting from the acquisitions of YuniNetworks, SiLUTIA and MMC Networks. This
amount was expensed on the acquisition date because the acquired technology had not yet reached technological
feasibility and had no future alternative uses. There were no purchase acquisitions giving rise to IPR&D charges
in the fiscal year ended March 31, 2000.
Net Interest Income. Net interest income increased to $55.3 million for the year ended March 31, 2001
compared to $12.9 million for the year ended March 31, 2000. This increase was due principally to increased
funds available for investment generated by our operations, public stock offerings and employee stock option
exercises.
Income Taxes. We recorded an income tax benefit of approximately $1.1 million in the year ended
March 31, 2001, compared to income tax expense of $25.4 million in the year ended March 31, 2000. Income
taxes for the year ended March 31, 2001 differed from statutory rates primarily due to the utilization of certain
federal and state tax credits and the nondeductibility of IPR&D and the amortization of goodwill.
Financial Condition and Liquidity
Although fiscal 2002 was a difficult year, our financial condition remains strong. As of March 31, 2002, our
principal source of liquidity consisted of $1.1 billion in cash, cash equivalents and short-term investments.
Working capital as of March 31, 2002 was also $1.1 billion, and total short and long-term debt was only
$2.3 million. At the end of fiscal 2002, we had future operating lease obligations not included on our balance
sheet totaling $52.2 million, primarily related to facilities and engineering design software tools.
For fiscal 2002, we used $35.7 million of cash to fund our operations compared to generating $200.1 million
and $65.3 million of cash from our operations in fiscal 2001 and 2000, respectively. Although we had a net loss
of $3.6 billion in fiscal 2002, $3.5 billion of such amount was related to non-cash amortization and impairments
of purchased intangibles. The remaining change in operating cash flows for fiscal 2002 primarily reflects
decreases in accounts receivable, inventory, accounts payable and deferred tax liabilities. Net cash provided by
operations in fiscal 2001 primarily reflects our operating results before noncash charges, offset by increases in
deferred tax liabilities.
We generated $323.0 million of cash from investing activities during fiscal 2002, compared to using
$379.0 million and $733.5 million in fiscal 2001 and 2000, respectively. The inflow of cash in fiscal 2002
39