3Ware 2005 Annual Report Download - page 85

APPLIED MICRO CIRCUITS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The provision for income taxes reconciles to the amount computed by applying the federal statutory rate
(35%) to income before income taxes as follows (in thousands):
Fiscal Years Ended March 31,
2005 2004 2003
$ % $ % $ %
Tax at federal statutory rate ....................... $(43,577) 35% $(37,329) 35% $(225,159) 35%
In-process research and development ............... 3,099 (2) 5,635 (5) — —
Goodwill ...................................... — — — — 63,052 (10)
Tax exempt interest ............................. (594) — — — (192) —
State taxes, net of federal benefit ................... (4,650) 4 (3,739) 4 (17,389) 3
Federal tax credits .............................. (5,616) 5 (4,889) 5 (7,903) 1
State tax credits ................................ (1,825) 2 (1,589) 1 (4,521) 1
State net operating loss carryforward change ......... — — — — (15,128) 2
Reduction in estimated state effective tax rate ......... — — — — (6,808) 1
Prior year accruals .............................. — — (5,306) 5 — —
Valuation allowance ............................. 50,807 (41) 47,734 (45) 211,688 (33)
Change in contingency reserve .................... 1,924 (2) (2,395) 2 — —
Other ......................................... 3,293 (3) 102 — 2,360 —
2,861 (2)% $ (1,776) 2% $ — — %
Significant components of the Company’s deferred tax assets and liabilities for federal and state income
taxes are as shown below (in thousands):
March 31,
2005 2004 2003
Deferred tax assets:
Net operating loss carryforwards .............................. $300,872 $ 238,996 $ 196,314
Research and development credit carryforwards .................. 101,582 90,713 74,905
Inventory write-downs and other reserves ....................... 39,306 40,182 31,952
Capitalization of inventory and research and development costs ..... 27,229 30,061 22,192
Depreciation and amortization ................................ 722 1,629 257
Intangible assets ........................................... 9,165 7,807 —
Other .................................................... 5,173 2,544 1,955
Total deferred tax assets ..................................... 484,049 411,932 327,575
Deferred tax liabilities:
Purchase accounting ........................................ (6,374) (15,685) (17,911)
Total deferred tax liabilities .................................. (6,374) (15,685) (17,911)
Net deferred tax assets before valuation allowance ................ 477,675 396,247 309,664
Valuation allowance ........................................ (477,675) (396,247) (309,664)
Net deferred tax assets after valuation allowance ................. $ — $ — $ —
At March 31, 2005, the Company has federal and state research and development tax credit carryforwards of
approximately $75.3 million and $40.4 million, respectively, which will begin to expire in fiscal 2010 unless
previously utilized. The Company also has federal and state net operating loss carryforwards of approximately
$818.9 million and $248.3 million, respectively, which will begin to expire in fiscal 2012 and fiscal 2006,
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