Adaptec 2006 Annual Report Download - page 58

Table of Contents
We entered into a Registration Rights Agreement with the holders of the Notes, under which we are required to keep the shelf registration statement effective
until the earlier of (i) the sale pursuant to the shelf registration statement of all of the notes and/or shares of common stock issuable upon conversion of the notes,
and (ii) the expiration of the holding period applicable to such securities held by non-affiliates under Rule 144(k) under the Securities Act, or any successor
provision, subject to certain permitted exceptions.
We will be required to pay liquidated damages, subject to some limitations, to the holders of the notes if we fail to comply with our obligations to register the
notes and the common stock issuable upon conversion of the notes or the registration statement does not become effective within the specified time periods. In no
event will liquidated damages accrue after the second anniversary of the date of issuance of the notes or at a rate exceeding 0.50% of the issue price of the notes.
We will have no other liabilities or monetary damages with respect to any registration default. If the holder has converted some or all of its notes into common
stock, the holder will not be entitled to receive any liquidated damages with respect to such common stock or the principal amount of the notes converted.
Purchase obligations are comprised of commitments to purchase design tools and software for use in product development. Included in the purchase
commitments above is $15.8 million in design software tools, which will be spent between 2007 and 2010. We have not included open purchase orders for
inventory or other expenses issued in the normal course of business in the purchase obligations shown above. We estimate these other commitments to be
approximately $11.3 million at December 31, 2006 for inventory and other expenses that will be received in the coming 90 days and that will require settlement
30 days thereafter.
We have a line of credit with a bank that allows us to borrow up to $0.8 million provided we maintain eligible investments with the bank equal to the amount
drawn on the line of credit. At December 31, 2006 we had committed $0.8 million under letters of credit as security for office leases.
We expect to use approximately $23.0 million of cash in 2007 for capital expenditures including purchases of intellectual property. Based on our current
operating prospects, we believe that existing sources of liquidity will be sufficient to satisfy our projected operating, working capital, capital expenditure,
purchase obligations, and remaining restructuring requirements through the end of 2007.
Our estimated tax provision rate increased significantly at the end of 2006 due to an increase in our estimated tax liability following receipt in 2007 of a written
communication from a tax authority concerning past transfer pricing policies and practices of certain companies within the PMC-Sierra group. We have various
tax uncertainties for which, in compliance with current accounting literature, we have recorded significant tax payables and accruals. In the unlikely event we are
required to pay all or a significant portion of such amounts in one payment, our cash reserves will be significantly reduced. This could hinder our ability to enter
into strategic transactions and could impair our operations. Should we seek additional financing for operational needs, we cannot assure you that the financing
will be available on favorable terms or at all.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠