of Shrek 2 and Shark Tale, which was a combined expense of $13.0 million and an increase in personnel and professional services fees in our legal, finance, investor relations and information technology functions in order to accommodate the increased demands of a public company. Stock Compensation Expense Stock compensation expenses were $21.4 million for the year ended December 31, 2004 as compared to a stock compensation credit of $2.3 million for the year ended December 31, 2003, which reflected a reduction in the redemption value of the underlying awards. The increase in stock compensation expense resulted from the fact that we recorded deferred compensation related to grants of unvested restricted stock awards of approximately $33 million of which $1.0 million was amortized to expense in the fourth quarter of 2004. In addition, we granted fully vested stock to certain employees and advisors and recorded an expense of $20.0 million in the fourth quarter of 2004. Interest and Other Income (Expense). Total interest expense net of other income was $15.0 million for the year ended December 31, 2004 as compared to total interest expense and other expense of $15.5 million for the year ended December 31, 2003. This $0.5 million net decrease in expense was primarily due to a decrease in expense from interest rate swap agreements allocated from DreamWorks Studios of $10.0 million and lower interest expense from allocated DreamWorks Studios debt of $2.6 million. This was partially offset by increased interest expense from the Universal advance of $5.5 million and by a non-recurring settlement in 2003 unrelated to our core business and by other income recognized in 2003 in connection with preferred vendor arrangements. Provision for Income Taxes For the year ended December 31, 2004 we recorded actual income tax expense of $90.3 million which represents U.S Federal and State income taxes incurred from the Separation Date through December 31, 2004, and foreign taxes for the entire year. In 2004 our effective tax rate of 21.3% was significantly lower than the statutory tax rate primarily because of our pre-Separation income not being subject to tax and a reduced valuation allowance on our net deferred tax assets. For 2005 we anticipate our effective tax rate to be approximately 38%. See footnote 13 of the accompanying audited consolidated financial statements contained herein for further discussion. Operating Results. The year ended December 31, 2004 resulted in operating income of $438.3 million and net income of $333.0 million, as compared to operating losses of $167.3 million and a net loss of $187.2 million for the year ended December 31, 2003. This was primarily due to substantial profits generated from the success of Shrek 2 in the worldwide theatrical and home video markets In addition, for the year ended December 31, 2003, we recorded a write-down for a change in the estimated fair value of unamortized film inventory for Sinbad: Legend of the Seven Seas. Year Ended December 31, 2003, Compared to the Year Ended December 31, 2002 Revenue. For the year ended December 31, 2003, revenue decreased by $133.3 million, or 31%, to $301.0 million from $434.3 million for the year ended December 31, 2002. Film revenue for the year ended December 31, 2003 was derived primarily from worldwide home video and television revenue from Shrek, which is classified as a library title, and from the worldwide theatrical and home video release of Sinbad: Legend of the Seven Seas. Also contributing to revenue in 2003 was ongoing revenue from Spirit: Stallion of the Cimarron in the international theatrical and worldwide home video markets. Other revenue, primarily from library titles other than Shrek (Antz, Prince of Egypt, The Road to El Dorado, Chicken Run and Joseph: King of Dreams), contributed approximately $58.7 million in the year ended December 31, 2003, primarily from the worldwide homevideo and television markets. Film revenue for the year ended December 31, 2002 was primarily driven by the ongoing success of Shrek in the worldwide home video and television markets, and by the release of Spirit: Stallion of the Cimarron in the worldwide theatrical and home video markets, along with their associated 58