3Ware 2005 Annual Report Download - page 36

Other Income (Expense), net. Other income (expense), net for the year ended March 31, 2004 primarily
consisted of a gain on the sale of a parcel of real estate located in Poway, California of approximately $7.6
million and a gain on the sale of a strategic equity investment of approximately $1.0 million. Other income
(expense), net for the year ended March 31, 2003 primarily consisted of a recognized impairment charge of $13.3
million for certain strategic equity investments and losses of $2.3 million for certain fixed asset disposals, offset
by a $3.7 million gain from the sale of real estate.
Income Taxes. Our income tax benefit in fiscal 2004 was $1.8 million. The benefit primarily reflects the
reversal of our income tax accrual upon the completion of IRS audits for the fiscal years through 2001. No
additional income tax benefits were accorded for our tax losses in fiscal 2004 or 2003 because we believe that it
is more likely that these assets will not be utilized because of our recent cumulative losses and full utilization of
our loss carrybacks. Accordingly, we have provided a full valuation allowance for these deferred tax assets. At
March 31, 2004, we provided a valuation allowance against our net deferred tax assets in the amount of $396.2
million.
FINANCIAL CONDITION AND LIQUIDITY
As of March 31, 2005, our principal source of liquidity consisted of $423.4 million in cash, cash equivalents
and short-term investments. Working capital as of March 31, 2005 was $396.3 million. Total cash, cash
equivalents, and short-term investments decreased by $437.6 million during the year ended March 31, 2005
primarily as a result of the use of $368.4 million of net cash to fund our fiscal 2005 acquisitions, $28.1 million to
fund our stock repurchase program, $27.5 million to purchase property, equipment and other assets, and $11.3
million to fund our operating activities. At the end of March 31, 2005, we had contractual obligations not
included on our balance sheet totaling $48.2 million, primarily related to facilities leases, engineering design
software tool licenses and inventory purchase commitments.
For the year ended March 31, 2005, we used $11.3 million of cash for our operations compared to using
$42.5 million for our operations in the year ended March 31, 2004. Although we had a net loss of $127.4 million
for the year ended March 31, 2005, $102.7 million consisted of non-cash charges such as $18.1 million of
depreciation, $57.7 million of amortization and impairments of purchased intangibles, $13.4 million of acquired
in-process research and development charges, $9.3 million of stock-based compensation charges, and $4.2
million of non-cash restructuring charges. The remaining change in operating cash flows for the year ended
March 31, 2005 primarily reflects increases in accounts receivable, inventory, other assets, accounts payable, and
accrued payroll and accrued liabilities offset by a decrease in deferred revenue for the year ended March 31,
2005. Net cash used for operations for the year ended March 31, 2004 primarily reflects our operating results
before non-cash charges, as well as increases in accounts receivables resulting from higher revenues, a decrease
in accrued interest income as a result of lower investment balances and a decrease in prepaid software licenses as
a result of our restructuring initiatives.
We used $225.0 million of cash for investing activities during the year ended March 31, 2005, compared to
generating $195.7 million during the year ended March 31, 2004. The use of cash for the year ended March 31,
2005 primarily reflects the net cash paid for our fiscal 2005 acquisitions, and purchases of property, equipment
and other assets offset by the net proceeds from the sale and maturities of short-term investments. The inflow of
cash for the year ended March 31, 2004, primarily represents the proceeds from the sale of real estate and the sale
and maturities of short-term investments, in order to acquire cash needed for our fiscal 2004 acquisitions, offset
by net cash paid for the acquisitions and purchases of property, equipment and other assets.
We used $17.4 million of cash for the year ended March 31, 2005 for financing activities compared to
generating $25.5 million for the year ended March 31, 2004. The major financing use of cash was in funding the
repurchase of our common stock and our structured stock repurchase programs offset by the sale of common
stock through the exercise of employee stock options. The major financing source of cash for the year ended
March 31, 2004 was related to sales of common stock through the exercise of employee stock options.
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