AMD 2006 Annual Report Download - page 303

Spansion Inc.
Notes to Consolidated Financial Statements—(Continued)
Revenue Code. As a result, the Company may incur greater tax liabilities than it would in the absence of such a limitation and any incurred liabilities could
materially adversely affect it.
The table below displays the reconciliation between statutory federal income taxes and the total provision (benefit) for income taxes. For purposes of the
reconciliation between the provision (benefit) for income taxes and the effective rate for the period prior to the IPO in the year ended December 25, 2005 and
earlier periods, a notional U.S. rate of 35 percent is applied.
Tax Rate
(In thousands, except
for percentages)
Year Ended December 31, 2006
Statutory federal income tax expense $ (52,493) 35.0%
State taxes 24 — %
Foreign income at other than U.S. rates (7,677) 5.1%
Reserve release (6,399) 4.3%
Valuation allowance 64,330 (42.9)%
Benefit for income taxes $ (2,215) 1.5%
Year Ended December 25, 2005
Statutory federal income tax expense $ (114,360) 35.0%
State taxes, net of federal benefit 150 (0.1)%
Foreign income at other than U.S. rates (8,500) 2.6%
Valuation allowance 100,084 (30.6)%
Benefit for income taxes $ (22,626) 6.9%
Year Ended December 26, 2004
Provision at U.S. notional statutory rate $ (11,801) 35.0%
Losses not subject to U.S. notional income tax 11,571 (34.3)%
Foreign income at other than U.S. rates (7,680) 22.8%
Valuation allowance (6,103) 18.1%
Benefit for income taxes $ (14,013) 41.6%
The Company’s operations in China and Penang currently operate under tax holidays, which will expire in whole or in part at various dates through 2013.
Certain of the tax holidays may be extended if specific conditions are met. The net impact of these tax holidays was to decrease the Company’s net loss by
approximately $2.3 million in fiscal year 2006 (less than $0.02 per share, diluted), $2.3 million in fiscal year 2005 (less than $.035 per share, diluted), $0.7
million in fiscal year 2004 (less than $0.01 per share, diluted).
The Company has made no provision for U.S. income taxes on approximately $374 million of cumulative undistributed earnings of certain foreign
subsidiaries at December 31, 2006 because it is the Company’s intention to reinvest such earnings permanently. If such earnings were distributed, the Company
would incur additional income taxes of approximately $107 million (subject to an adjustment for foreign tax credits). These additional income taxes may not
result in income tax expense or a cash payment to the Internal Revenue Service, but may result in the utilization of deferred tax assets that are currently subject to
a valuation allowance.
During fiscal year 2006, the Company resolved audits in Japan and Thailand that resulted in the reversal of the tax reserves of approximately $6.4 million.
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007