Adaptec 2001 Annual Report Download - page 58

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Inventories. Inventories are stated at the lower of cost (first-in, first out) or market (estimated net
realizable value). Cost is computed using standard cost, which approximates actual average
cost. The Company provides inventory allowances on obsolete inventories and inventories in
excess of twelve-month demand for each specific part.
The components of net inventories are as follows:
Investments in non-public entities. The Company has certain investments in non-publicly traded
companies and venture capital funds in which it has less than 20% of the voting rights and in
which it does not exercise significant influence. The Company monitors these investments for
impairment and makes appropriate reductions in carrying values when necessary. These
investments are included in Other investments and assets on the Company's balance sheet and
are carried at cost, net of w rite-downs for impairment.
Investments in public companies. The Company has certain investments in publicly traded
companies in which it has less than 20% of the voting rights and in which it does not exercise
significant influence. Certain of these investments are subject to resale restrictions. Securities
restricted for more than one year are carried at cost. Securities restricted for less than one year
from the balance sheet date and securities not subject to resale restrictions are classified as
available-for-sale and reported at fair value, based upon quoted market prices, w ith the
unrealized gains or losses, net of any related tax effect, included in equity as a separate
component of stockholders’ equity. The Company evaluates its investments in public
companies for factors indicating an other than temporary impairment and makes appropriate
reductions in carrying value where necessary.
Investments in equity accounted investees. Investees in w hich the Company has between 20% and
50% of the voting rights, and in which the Company exercises significant influence, are
accounted for using the equity method. The Company sold a portion of its only investment in
an equity accounted investee during 2000 and as at December 31, 2000 and 2001, held less than
20% of the voting rights of the investee.
Deposits for wafer fabrication capacity. The Company has wafer supply agreements with two
independent foundries. Under these agreements, the Company has deposits of $22.0 million
(2000 - $23.0 million) to secure access to wafer fabrication capacity. During 2001, the Company
purchased $42.7 million ($81.1 million and $30.5 million in 2000 and 1999, respectively) from
these foundries. Purchases in any year may or may not be indicative of any future period since
wafers are purchased based on current market pricing and the Company’s volume
requirements change in relation to sales of its products.
In each year, the Company is entitled to receive a refund of a portion of the deposits based on
the annual purchases from these suppliers compared to the target levels in the wafer supply
(in thousands) 2001 2000
Work-in-progress 10,973$ 31,035$
Finished goods 23,273 23,878
34,246$ 54,913$
December 31,