Adaptec 2004 Annual Report Download - page 78

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Year Ended December 31,
(in thousands) 2004 2003 2002
Income (loss) before provision for income taxes $ 48,358 $ (16,703) $ (83,865)
Federal statutory tax rate 35% 35% 35%
Income taxes at U.S. Federal statutory rate 16,925 (5,846) (29,353)
Goodwill and other intangible assets — — 398
Deferred stock compensation 244 353 984
Incremental tax (recovery) on foreign earnings (31,768) (20,198) 1,971
Additional recovery of prior year taxes (5,866) (3,517) —
Other — — 421
Valuation allowance 17,142 20,496 6,721
Recovery of income taxes $ (3,323) $ (8,712) $ (18,858)
Significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
(in thousands) 2004 2003
Deferred tax assets:
Net operating loss carryforwards $ 242,889 $ 219,043
Capital loss 42,974 41,041
State tax loss carryforwards 11,574 18,186
Credit carryforwards 35,235 31,948
Reserves and accrued expenses 13,432 16,199
Restructuring and other charges 5,377 7,343
Depreciation and amortization 11,237 8,966
Deferred income 1,461 3,543
Unrealized loss on investment 558
Total deferred tax assets 364,737 346,269
Valuation allowance (364,179) (346,148)
Total net deferred tax assets 558 121
Deferred tax liabilities:
Capitalized technology (74) (195)
Unrealized gain on investments (622) (1,167)
Total deferred tax liabilities (696) (1,362)
Total net deferred taxes $ (137) $ (1,241)
At December 31, 2004, the Company has approximately $698.6 million of federal net operating losses, which will expire through
2024. Approximately $4.7 million of the federal net operating losses is subject to ownership change limitations provided by the
Internal Revenue Code of 1986. The Company also has approximately $192.9 million of state tax loss carryforwards, which expire
through 2024. The utilization of a portion of these state losses is also subject to ownership change limitations provided by the various
states’ income tax legislation.
Included in the credit carryforwards are $16.6 million of federal research and development credits which expire through 2024, $0.5
million of federal AMT credits which carryforward indefinitely, $14.1 million of state research and development credits which do not
expire, $7.1 million of state research and development credits which expire through 2009, and $1.1 million of state manufacturer’s
investment credits which expire through 2014.
Included in the above net operating loss carryforwards are $23.8 million and $7.9 million of federal and state net operating losses
related to acquisitions accounted for under the purchase
72