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for uncertain income tax positions, including $6.1 million recognized under FAS 5 and carried forward from prior years and an
additional charge of $18.9 million to retained earnings. On a quarterly basis, we evaluate uncertain income tax positions in accordance
with the FIN 48 criteria and establish or release reserves as appropriate under FIN 48. During 2008, we recognized a net increase of
$6.6 million in liabilities and at December 31, 2008 had $38.6 million in liabilities for uncertain income tax positions (see Note 8 of
the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).
As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities
involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. Our estimate
of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances
existing at that time. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which
could result in the need to record additional tax liabilities or potentially to reverse previously recorded tax liabilities. In addition, we
may be subject to examination of our tax returns by the U.S. Internal Revenue Service and other domestic and foreign tax authorities.
We are currently under audit by the Internal Revenue Service for tax years 2004 through 2006. In addition, we have been notified by
the California Franchise Tax Board that we are being audited for tax years 2005 through 2007. It is possible that these audits may
conclude in the next 12 months and that the unrecognized tax benefits we have recorded in relation to these tax years may change
compared to the liabilities recorded for the periods. However, it is not possible to estimate the amount, if any, of such change. We
adequately establish reserves for these tax contingencies when we believe that certain tax positions might be challenged despite our
belief that our tax positions are fully supportable. We adjust these reserves when changing events and circumstances arise.
Non-Income Tax Contingencies. In accordance with the provisions of SFAS No. 5, Accounting for Contingencies, we make
judgments regarding the future outcome of contingent events and record loss contingency amounts that are probable and reasonably
estimated based upon available information. The amounts recorded may differ from the actual income or expense that occurs when the
uncertainty is resolved. The estimates that we make in accounting for contingencies and the gains and losses that we record upon the
ultimate resolution of these uncertainties could have a significant effect on the liabilities and expenses in our financial statements. As
of December 31, 2008, we had $2.6 million of non-income tax related contingent liabilities.
Recent Accounting Pronouncements
See Note 2. Basis of Presentation and Summary of Significant Accounting Policies, Recent Accounting Policies of our
accompanying consolidated financial statements for a full description of recent accounting pronouncements and our expectations of
their impact on our consolidated financial position and results of operations.