Plantronics 2010 Annual Report Download - page 46

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38
In comparison to fiscal 2009, the increase in the effective tax rate for fiscal 2010 was primarily due to the incremental benefit
associated with the release of a higher amount of tax reserves resulting from the lapse of the statute of limitations in certain
jurisdictions in fiscal 2009 and reduced federal tax credits in fiscal 2010 as the research tax credit was available for only nine months
compared to fifteen months in fiscal 2009 due to the reinstatement of the credit in October 2008 retroactively to January 1, 2008.
In comparison to fiscal 2008, the decrease in the effective tax rate for fiscal 2009 is primarily due to the incremental benefit associated
with the release of a higher amount of tax reserves resulting from the lapse of the statute of limitations in certain jurisdictions in fiscal
2009 and the reinstatement of the research tax credit retroactively to January 1, 2008 in fiscal 2009 providing fifteen months credit
compared to only nine months in fiscal 2008.
Our effective tax rate for fiscal years 2008, 2009 and 2010 differ from the statutory rate due to the impact of foreign operations taxed
at different statutory rates, income tax credits, state taxes, and other factors. The future tax rate could be impacted by a shift in the
mix of domestic and foreign income, tax treaties with foreign jurisdictions, changes in tax laws in the U.S. or internationally or a
change in estimate of future taxable income which could result in a valuation allowance being required.
As of March 31, 2010, we had $11.2 million of unrecognized tax benefits compared to $11.1 million as of March 31, 2009 and $12.4
million as of March 31, 2008. The unrecognized tax benefits as of the end of fiscal 2010 would favorably impact the effective tax rate
in future periods if recognized.
It is our continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. As of March
31, 2010, we had approximately $1.7 million of accrued interest related to uncertain tax positions, compared to $1.6 million as of
March 31, 2009 and $1.7 million as of March 31, 2008. No penalties have been accrued.
Although the timing and outcome of income tax audits is highly uncertain, it is possible that certain unrecognized tax benefits may be
reduced as a result of the lapse of the applicable statutes of limitations in federal, state, and foreign jurisdictions within the next twelve
months. Currently, we cannot reasonably estimate the amount of reductions, if any, during the next twelve months. Any such
reduction could be impacted by other changes in unrecognized tax benefits.
We file income tax returns in the U.S. federal jurisdiction, various states, and foreign jurisdictions. We are no longer subject to U.S.
federal tax examinations by tax authorities for years prior to 2007 and state income tax examinations prior to 2006. We are under
examination by the California Franchise Tax Board for our 2007 and 2008 tax years. Foreign income tax matters for material tax
jurisdictions have been concluded for tax years prior to fiscal 2004, except for the United Kingdom and Germany which have been
concluded for tax years prior to fiscal 2008.
Discontinued Operations
We entered into an Asset Purchase Agreement (“APA”) on October 2, 2009, as subsequently amended, to sell Altec Lansing, our AEG
segment. The sale was completed effective December 1, 2009. All of the revenues in the AEG segment were derived from sales of
Altec Lansing products. All operations of AEG have been classified as discontinued operations in the Consolidated statement of
operations for all periods presented.
The results from discontinued operations in fiscal 2010 include a loss of $0.6 million on sale of Altec Lansing which is calculated as
follows (in thousands):
Proceeds received upon close 11,075$
Escrow payments received to date 2,065
Remaining escrow payments to be received 1,625
Payment to purchaser for adjustment for final value of net assets under APA (3,956)
Total estimated proceeds 10,809
Book value of net assets sold (11,057)
Costs incurred upon closing (363)
Loss on sale of AEG (611)$