Memorex 2011 Annual Report Download - page 25

SG&A expense was essentially flat in 2011 compared with 2010 and was impacted by lower compensation expense, the
reversal of a bad debt reserve of $2.7 million and cost control actions, offset by additional ongoing SG&A expenses related to our
acquired businesses. This resulted in an increase in our SG&A expense as a percent of revenue in 2011 compared to 2010.
SG&A expense decreased in 2010 compared with 2009 due to lower legal expenses of $10.5 million related to the
Philips litigation settled in July 2009 as well as cost control actions. As a percentage of revenue, our SG&A remained flat in
2010 compared with 2009.
Research and Development (R&D)
Years Ended December 31, Percent Change
2011 2010 2009 2011 vs. 2010 2010 vs. 2009
(In millions)
Research and development .............................. $21.0 $16.4 $20.4 28.0% (19.6)%
As a percent of revenue ............................... 1.6% 1.1% 1.2%
R&D expense increased in 2011 compared with 2010 due to our investment to support growth initiatives in secure and
scalable storage products. During 2011 we refocused our R&D effort to invest in four core product technology areas: secure
storage, scalable storage, wireless/connectivity and magnetic tape. This resulted in an increase in our R&D expense as a
percent of revenue in 2011 compared with 2010.
R&D expense decreased in 2010 compared with 2009 due to cost savings from restructuring activities and cost control
actions. R&D expense as a percent of revenue in 2010 remained relatively flat compared with 2009.
Litigation Settlements
Years Ended December 31,
2011 2010 2009
(In millions)
Litigation settlements .......................................................... $2.0 $2.6 $49.0
A litigation settlement charge of $2.0 million was recognized in 2011. In September 2011 we entered into a settlement
with Advanced Research Corp. (ARC) under which we agreed to pay ARC $2.0 million to settle a dispute relating to a supply
agreement under which we purchased our requirements for magnetic heads to write servo patterns on magnetic tape prior to
sale of the finished cartridges.
A litigation settlement charge of $2.6 million was recognized in 2010. On January 11, 2011, we signed a patent cross-
license agreement with SanDisk to settle the two patent cases filed by SanDisk in Federal District Court against our flash
memory products, including USB drives and solid state disk (SSD) drives. Under the terms of the cross-license, we will pay
SanDisk royalties on certain flash memory products that were previously not licensed. The specific terms of the cross-license
are confidential. The cross-license agreement required us to make a one-time payment of $2.6 million in 2011, which was
included in litigation settlement expense in the Consolidated Statements of Operations during 2010.
A litigation settlement charge of $49.0 million was recorded in 2009. We entered into a confidential settlement
agreement ending all legal disputes with Philips Electronics N.V., U.S. Philips Corporation and North American Philips
Corporation (collectively, Philips). We had been involved in a complex series of disputes in multiple jurisdictions regarding
cross-licensing and patent infringement related to recordable optical media. The settlement provided resolution of all claims
and counterclaims filed by the parties without any finding or admission of liability or wrongdoing by any party. As a term of the
settlement, we agreed to pay Philips $53.0 million over a period of three years. Based on the present value of these
settlement payments, we recorded a charge of $49.0 million in the second quarter of 2009. We made payments of $8.3
million, $8.2 million and $20.0 million in 2011, 2010 and 2009, respectively. Interest accretion of $1.2 million, $1.5 million and
$0.8 million was recorded in 2011, 2010 and 2009, respectively. The interest accretion is included in the interest expense on
our Consolidated Statements of Operations.
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