Adaptec 2004 Annual Report Download - page 79

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method of accounting. The benefit of such losses, if and when realized, will be credited first to reduce to zero any goodwill related to
the respective acquisition, second to reduce to zero other non−current intangible assets related to the respective acquisition, and third
to reduce income tax expense.
Included in the deferred tax assets before valuation allowance are approximately $159.9 million of cumulative tax benefits related to
equity transactions, which will be credited to stockholder’s equity if and when realized.
The pretax income (loss) from foreign operations was $75.8 million, $19.3 million and ($32.6 million) in 2004, 2003, and 2002,
respectively. Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and
accordingly, no provision for federal and state income taxes has been provided thereon. Upon distribution of those earnings in the
form of a dividend or otherwise, the Company would be subject to both US income taxes (subject to an adjustment for foreign tax
credits) and withholding taxes payable to the various foreign countries. It is not practical to estimate the income tax liability that
might be incurred on the remittance of such earnings.
NOTE 14. Segment Information
Until the end of fiscal 2003 the Company operated in two segments: networking and non−networking products. The networking
segment consists of internetworking semiconductor devices and related technical service and support to equipment manufacturers for
use in their communications and networking equipment. The non−networking segment consisted of a single medical device. The
Company is supporting this non−networking product for existing customers, but has decided not to develop any further products of
this type. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The Company evaluates performance based on net revenues and gross profits from operations of its segments. In the fourth quarter of
2003, the Company shipped final orders of its non−networking product and does not anticipate further orders of this product in the
future.
Summarized financial information by segment is as follows:
Year Ended December 31,
(in thousands) 2004 2003 2002
Net revenues
Networking $ 297,383 $ 247,947 $ 212,651
Non−networking — 1,536 5,442
Total $ 297,383 $ 249,483 $ 218,093
Gross profit
Networking $ 209,841 $ 160,950 $ 126,222
Non−networking — 658 2,329
Total $ 209,841 $ 161,608 $ 128,551
Enterprise−wide information is provided in accordance with SFAS 131. Geographic revenue
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