Adaptec 2002 Annual Report Download - page 53

The components of net inventories are as follows:
December 31,
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
(in thousands) 2002 2001
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Work−in−progress $ 11,409 $ 10,973
Finished goods 15,011 23,273
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
$ 26,420 $ 34,246
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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 write−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, with 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 which 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
since that disposition has held less than 20% of the voting rights of this 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 (2001 − $22.0 million) to
secure access to wafer fabrication capacity. During 2002, the Company purchased $32.3 million ($42.7 million
and $81.1 million in 2001 and 2000, 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 agreements. Based on 2002
purchases and the current agreements, the Company is not entitled to a refund from these suppliers in 2003.
If the Company does not receive back the balance of its deposits during the term of the agreements, then the
outstanding deposits will be refunded to the Company after the termination of the agreements at the end of
2003.
Property and equipment, net. Property and equipment are stated at cost, net of write−downs for impairment,
and depreciated using the straight−line method over the estimated useful lives of the assets, ranging from
two to five years, or the applicable lease term, whichever is shorter.
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