Adaptec 2005 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2005 Adaptec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

Table of Contents
Loss on extinguishment of debt and amortization of debt issue costs
In the fourth quarter of 2005, we issued $225.0 million 2.25% senior convertible notes and recognized amortization of debt issue costs of $1.0 million during
2007, $1.0 million in 2006 and $0.2 million in 2005.
On January 18, 2005, we redeemed our remaining outstanding 3.75% convertible subordinated notes. We expensed the $1.0 million call premium and the
remaining unamortized debt issue costs of $0.6 million, resulting in an aggregate net loss on redemption of $1.6 million.
(Loss) gain on investments
During 2006, we sold our investment in Ikanos Communications Inc. for proceeds of $5.1 million and recorded a gain of $3.1 million, which has been included
in (Loss) gain on sale of investments on the Statement of Operations. Also included in (Loss) gain on sale of investments were a gain on sale of another
investment, as well as an impairment loss of $3.2 million on our investment in a private company, and a $1.3 million loss on sales of other short-term
investments that were redeemed prior to maturity to fund the acquisition of the Storage Semiconductor Business.
In 2005, we received $2.2 million as final satisfaction of the mortgage owed to us for a property we sold in 2003. As part of the agreement we surrendered an
option to purchase the property. The difference between the proceeds and the carrying value of the mortgage receivable was recorded as a gain of $0.6 million on
the Statement of Operations. In addition, we received $0.7 million that had been in escrow for one year pending final settlement of the sale of our investment in a
private technology company. As a result we recorded a gain for this amount, which has been included in (Loss) gain on investments on the Statement of
Operations.
Provision for Income Taxes
Our provision for income taxes for the year ended December 30, 2007 was $16.8 million, resulting in an effective tax rate of 52% on a net loss of $32.3 million.
Despite this net loss, income taxes were incurred primarily from a $28 million additional accrual relating to an ongoing FIN 48 liability arising from the
examination of our historic transfer pricing policies and practices of certain companies within the PMC Group by a certain tax authority. Of the $28 million
increase in our FIN 48 liability, $13 million is related to arrears interest. Our FIN 48 liability is partially offset by available investment tax credits of $18 million.
The remainder of the provision for income taxes primarily relates to $6 million of deferred taxes recorded with respect to a past acquisition and net $1 million
due to various items, including revisions of prior estimates.
Our provision for income taxes for the year ended December 31, 2006 was $49.2 million on a net loss before taxes of $50.7 million, or 97% of the net loss before
taxes, compared to a United States federal statutory tax rate of 35%. Our effective tax rate represents a rate that is applicable to all of our operations crossing
multiple tax jurisdictions with tax rates that are
43
Source: PMC SIERRA INC, 10-K, February 22, 2008