3Ware 2004 Annual Report Download - page 41

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Gross Profit. The following table presents net revenue, cost of revenue and gross profit for fiscal year
ended March 31, 2003 and March 31, 2002 (in thousands):
Fiscal Years Ended March 31,
Increase
(Decrease) Change
2003 2002
Amount
%ofNet
Revenue Amount
%ofNet
Revenue
Net revenue ............................. $101,591 100.0% $152,840 100.0% $(51,249) -33.5%
Cost of revenues ......................... 61,900 60.9% 150,924 98.7% (89,024) -59.0%
Gross profit ............................. $ 39,691 39.1% $ 1,916 1.3% $ 37,775 1971.6%
The net increase in gross profit is primarily attributable to a decrease in non-cash acquisition-related charges
of $52 million and a special charge of $15.9 million in fiscal 2002 for excess inventory, which were partially
offset by approximately $4.0 million of increased under-utilization of our wafer fabrication and testing facilities,
adecrease in the volume of product shipments, and accelerated depreciation as a result of the closure of the
internal wafer fabrication facility of $2.0 million. Approximately $6.3 million and $58.3 million of non-cash
purchased intangible charges were included in cost of revenues in the years ended March 31, 2003 and 2002,
respectively.
Research and Development and Selling, General and Administrative Expenses. The following table
presents research and development and selling, general and administrative expenses for fiscal year ended March
31, 2003 and March 31, 2002 (in thousands):
Fiscal Years Ended March 31,
Increase
(Decrease) Change
2003 2002
Amount
%ofNet
Revenue Amount
%ofNet
Revenue
Research and development ................. $131,909 129.8% $154,622 101.2% $(22,713) -14.7%
Selling, general and administrative ........... 59,588 58.7% 75,656 49.5% (16,068) -21.2%
Research and Development. The decrease in R&D spending for the year ended March 31, 2003 is a result
of streamlining and prioritizing of our product development efforts, a reduction of subcontracting costs of $9.9
million and reduced payroll and related benefit expenses of $13.4 million due to the effect of our workforce
reductions.
Selling, General and Administrative. The decrease in SG&A expenses in absolute dollars was primarily
attributable to the decrease in payroll and related benefit expenses of $6.7 million as a result of reduced
headcount, decreases in sales commissions of $2.3 million as a result of lower net revenues and decreases of $0.6
million in travel expenses and $1.2 million in marketing expenses as we reduced discretionary spending.
Stock-Based Compensation. The following table presents stock-based compensation expense for
employees engaged in research and development and selling, general and administrative activities for fiscal year
ended March 31, 2003 and March 31, 2002, all of which was excluded from those operating expenses (in
thousands):
Fiscal Years Ended March 31,
Increase
(Decrease) Change
2003 2002
Amount
%ofNet
Revenue Amount
%ofNet
Revenue
Research and development ................. $ 70,840 69.7% $ 71,760 47.0% $ (920) -1.3%
Selling, general and administrative ........... 58,510 57.6% 66,425 43.5% (7,915) -11.9%
$129,350 127.3% $138,185 90.5% $(8,835) -6.4%
33