total net sales during 2005 down from 6% and 8% of total net sales in 2004 and 2003, respectively. This decrease is due to the significant increase of 68% in total net sales of the Company for 2005. Although R&D expense decreased as a percentage of total net sales in 2005, actual expense for R&D in 2005 increased $45 million or 9% from 2004, which follows an $18 million or 4% increase in 2004 compared to 2003. The overall increase in R&D expense relates primarily to increased headcount and support for new product development activities and the impact of employee salary increases in 2005. R&D expense does not include capitalized software development costs of approximately $29.7 million related to the development of Mac OS X Tiger during 2005; $4.5 million related to the development of Mac OS X Tiger and $2.3 million related to the development of FileMaker Pro 7 in 2004; and $14.7 million related to the development of Mac OS X Panther in 2003. Further information related to the Company’s capitalization of software development costs may be found in Part II, Item 8 of this Form 10-K at Note 1 of Notes to Consolidated Financial Statements. 

Selling, General, and Administrative Expense (SG&A) 

Expenditures for SG&A increased $438 million or 31% during 2005 compared to 2004. These increases are due primarily to the Company’s continued expansion of its Retail segment in both domestic and international markets, a current year increase in discretionary spending on marketing and advertising, and higher direct and channel selling expenses resulting from the increase in net sales and employee salary merit increases. SG&A as a percentage of total net sales in 2005 was 13%, down from 17% in 2004, which is due to the increase in total net sales of 68% for the Company during 2005. 

Expenditures for SG&A increased $209 million or 17% during 2004 compared to 2003. These increases were due primarily to the Company’s continued expansion of its Retail segment in both domestic and international markets, an increase in discretionary spending on marketing and advertising, an increase in amortization costs associated with restricted stock compensation, and higher direct and channel selling expenses resulting from the increase in net sales and employee salary merit increases. SG&A as a percentage of total net sales in 2004 was 17%, down from 20% in 2003 due to the increase in total net sales for the Company of 33% during 2004. 

Fiscal 2004 Restructuring Actions 

The Company recorded total restructuring charges of approximately $23 million during 2004, including approximately $14 million in severance costs, $5.5 million in asset impairments, and a $3.5 million charge for lease cancellations in conjunction with the vacating of a leased sales facility in Europe during the fourth quarter of 2004 related to a European workforce reduction. Of the $23 million charge, $19.7 million had been utilized by the end of 2005, with the remaining $3.3 million consisting of $0.7 million for employee severance benefits and $2.6 million for lease cancellations. These actions will result in the termination of 461 employees, 448 of which had been terminated prior to the end of 2005.