Adaptec 2002 Annual Report Download - page 26

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Gain (Loss) on Investments ($000,000)
2002 Change 2001 Change 2000
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Gain (loss) on investments $ (11.6) 21% $ (14.6) (125%) $ 58.5
Percentage of net revenues (5%) (5%) 8%
We reported a net loss on investments of $11.6 million in 2002, $14.6 million in
2001 and a gain on investments of $58.5 million in 2000.
In 2002, we recorded a $3.7 million gain on the sale of a portion of our investment in Sierra Wireless,
Inc., a public company, as well as other investments. This gain was offset by a $15.3 million charge to
recognize the impairment of our investments in non−public entities. See "Critical Accounting Policies and
Significant Estimates".
In 2001, we recorded a $2.9 million gain on the sale of a portion of our investment in Sierra Wireless, as
well as other investments. This gain was offset by a $17.5 million charge to recognize the impairment of our
investments in non−public entities. See "Critical Accounting Policies and Significant Estimates".
In 2000, gains of $54.4 million and $4.1 million resulted from the sale of a portion of our investment in
Sierra Wireless and our investment in Cypress Semiconductor, Inc., respectively. Our investment in Cypress
Semiconductor was received through its acquisition of IC Works, a company in which we had invested.
Provision for Income Taxes.
Our annual effective tax rate for the year ended December 31, 2002 was a recovery of 22.5%. Excluding the
effects of non−deductible amortization of purchased intangibles and deferred stock compensation, and
incremental taxes on foreign earnings, the effective income tax rate for 2001 was a recovery of 24.1%
compared to the statutory tax rate of 35%. Our effective tax rate was lower than the statutory rate as a
result of a valuation allowance provided on deferred tax assets, where timing of realization is uncertain.
Our annual effective tax rate for the year ended December 31, 2001 was a recovery of 2.7%. Excluding the
effects of non−deductible goodwill, deferred stock compensation amortization, impairment of purchased
intangibles, and incremental taxes on foreign earnings, the effective income tax rate for 2001 was a
recovery of 21.7% compared to the statutory tax rate of 35%. Our effective tax rate was lower than the
statutory rate for the same reason as in 2002. Our annual effective tax rate for the year ended December 31,
2000 was an expense of 57.6% compared to a statutory tax rate of 35%. Our increased effective tax rate
primarily reflects the higher provision for income taxes for our Canadian subsidiary and the non−tax
deductible charges for in process research and development, goodwill amortization, deferred stock
compensation and acquisition costs related to acquisitions completed during the year. These factors were
partially offset by the utilization of tax losses and other deferred tax assets for which benefits were
previously not recognized.
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