Adaptec 2005 Annual Report Download - page 97

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Table of Contents
Included in the deferred tax assets before valuation allowance are approximately $145.9 million of cumulative tax benefits related to equity transactions, which
will be credited to stockholder’s equity if and when realized.
The pretax income from foreign operations was $30.4 million, $48.2 million, and $65.7 million in 2007, 2006, and 2005, respectively. The Company recorded
$7.1 million tax expense related to earnings it repatriated in 2006 to fund the purchase of the Storage Semiconductor Business in 2006. This distribution does not
change the Company’s intent to indefinitely reinvest undistributed earnings of the Company’s foreign subsidiaries and accordingly, no additional provision for
federal and state income taxes has been provided thereon. It is not practical to estimate the income tax liability that might be incurred on the remittance of such
earnings.
The Company had $92.5 million of gross unrecognized tax benefits as of January 1, 2007. The total amount of net unrecognized tax benefits that, if recognized,
would affect the effective tax rate was $92.5 million as of January 1, 2007. The Company accrues interest and penalties related to unrecognized tax benefits in its
provision for income taxes. As of January 1, 2007, the company had accrued interest and penalties related to unrecognized tax benefits of $32.6 million. See Note
1 to the consolidated financial statements for additional disclosures related to the adoption of FIN 48.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in millions):
Gross unrecognized tax benefits at January 1, 2007 $ 92.5
Increases in tax positions for prior years 15.0
Decreases in tax positions for prior years (1.3)
Lapse in statute of limitations (0.7)
Effect of foreign currency loss on translation 20.1
Gross unrecognized tax benefits at December 30, 2007 $125.6
The total amount of gross unrecognized tax benefits that, if recognized, would affect the effective tax rate was $125.6 million at December 30, 2007. The
Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At December 30, 2007, the Company had accrued
interest and penalties related to unrecognized tax benefits of $46.8 million.
The Company and its subsidiaries file income tax returns in the U.S. and in various states, local and foreign jurisdictions. The 2004 through 2007 tax years
generally remain subject to examination by federal and most state tax authorities. In significant foreign jurisdictions, the 2000 through 2007 tax years generally
remain subject to examination by their respective tax authorities. The Company does not reasonably estimate that the unrecognized tax benefit will change
significantly within the next 12 months.
91
Source: PMC SIERRA INC, 10-K, February 22, 2008