Adaptec 2005 Annual Report Download - page 96

Table of Contents
The Company’s estimated tax provision rate increased significantly at the end of 2006 due to an increase in its estimated tax liability following receipt in 2007 of
a written communication from a tax authority examining the historic transfer pricing policies and practices of certain companies within the PMC-Sierra group. As
a result, in 2006, the Company increased its provision for periods prior to 2006 by $29.9 million.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
(in thousands)
December 30,
2007
December 31,
2006
Deferred tax assets:
Net operating loss carryforwards $ 210,718 $ 215,547
Capital loss 38,780 42,043
Credit carryforwards 68,238 25,216
Reserves and accrued expenses 13,681 16,988
Intangible assets 11,347 8,683
Depreciation and amortization 9,332 8,694
Restructuring and other charges 5,680 6,896
State tax loss carryforwards 8,200 6,439
Deferred income 2,700 2,927
Total deferred tax assets 368,676 333,433
Valuation allowance (322,750) (333,433)
Deferred tax liabilities:
Acquired intangible assets and goodwill (15,924) (12,095)
Capitalized technology and other (355) (74)
Unrealized gain on investments (744) —
Total net deferred taxes $ 28,903 $ (12,169)
Presented on the Consolidated Balance Sheet in the following components:
Deferred tax assets $ 54,676 $ —
Deferred income taxes (2,787) (2,042)
Deferred taxes and other liabilities (22,986) (10,127)
$ 28,903 $ (12,169)
At December 30, 2007, the Company has approximately $599.9 million of federal net operating losses, which will expire through 2027. The Company also has
approximately $273.3 million of state tax loss carryforwards, which expire through 2017. A portion of our net operating losses were used in 2005 and 2006 to
reduce the taxes otherwise payable on intercompany dividends. The utilization of a portion of these net operating losses is also subject to ownership change
limitations provided by federal and specific state income tax legislation.
Included in the credit carry-forwards are $37.7 million of investment tax credits, $16.7 million of federal research and development credits which expire through
2025, $1.8 million of federal AMT credits which carryforward indefinitely, $11.5 million of state research and development credits which do not expire, and $0.5
million of state manufacturer’s investment credits which expire through 2011.
Included in the above net operating loss carryforwards are $23.8 million and $3.9 million of U.S. federal and state net operating losses related to acquisitions
accounted for under the purchase 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.
90
Source: PMC SIERRA INC, 10-K, February 22, 2008