SanDisk 2011 Annual Report Download - page 110

Our fiscal year 2011 general and administrative expense decreased from fiscal year 2010 primarily due to
lower employee costs of ($21) million related to the modification of stock awards and benefits pursuant to the
retirement agreement of our former Chief Executive Officer in fiscal year 2010 that did not recur in fiscal year
2011, offset by higher legal costs of $8 million.
Our fiscal year 2010 general and administrative expense declined from fiscal year 2009 primarily due to
lower legal costs of ($14) million, outside advisor costs of ($6) million and bad debt expense of ($2) million,
partially offset by a non-cash charge of $17 million related to the modification of stock awards and a cash charge
of $4 million related to certain provisions and benefits pursuant to the retirement agreement of our former Chief
Executive Officer.
Amortization of Acquisition-Related Intangible Assets.
FY 2011
Percent
Change FY 2010
Percent
Change FY 2009
(In millions, except percentages)
Amortization of acquisition-related
intangible assets ..................... $ 4.4 175% $ 1.6 33% $ 1.2
Percent of revenue ..................... 0.1% 0.0% 0.0%
Amortization of acquisition-related intangible assets in fiscal year 2011, compared to fiscal year 2010, was
higher due to increased amortization of intangible assets from the Pliant acquisition, which was completed in
May 2011. Amortization of acquisition-related intangible assets associated with the Pliant acquisition will
continue to be amortized through the first quarter of fiscal year 2016, while the intangible assets acquired from
our January 2006 acquisition of Matrix Technology, Inc., or Matrix, will be fully amortized at the end of the first
quarter of fiscal year 2012.
As part of the Pliant purchase agreement, $36.2 million related to the next generation of enterprise storage
products was allocated to acquired in-process technology because technological feasibility had not been
established and no alternative future uses existed. The value was determined by estimating the net cash flows and
discounting forecasted net cash flows to their present values. The net cash flows from the project were based on
estimates of revenues, costs of revenues, operating expenses and income taxes. The estimated net revenues and
gross margins were based on our projections of the project and were in line with industry averages. Estimated
operating expenses included research and development expenses and selling, marketing and administrative
expenses based upon historical and expected direct expense level and general industry metrics. The project is
expected to be completed by the second quarter of fiscal year 2013, at which point, amortization of the $36.2
million in-process research and development intangible will begin. As of January 1, 2012, it was estimated that
these in-process projects would be completed at a total remaining cost of approximately $33 million, which
includes incremental non-recurring engineering costs and customer qualification costs. The project is dependent
on general development and project milestones, which if not met, may result in higher costs, or if not successful,
could result in an impairment of the acquired in-process technology intangible.
Amortization of acquisition-related intangible assets in fiscal year 2010 compared to fiscal year 2009 was
higher due to the acceleration of amortization expense in the third quarter of fiscal year 2010 related to the
remaining intangible asset acquired from MusicGremlin, Inc. Amortization of acquisition-related intangible
assets related to the intangible assets acquired from Matrix will continue to be amortized through the first quarter
of fiscal year 2012.
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