Adaptec 2006 Annual Report Download - page 55

Table of Contents
In the third quarter of 2005, we recorded charges of $5.3 million for the restructuring of excess facilities in connection with the restructuring plans implemented
in 2005. The total remaining estimate of $4.3 million represents 100% of the estimated total future operating costs and lease obligations for the site.
In the third quarter of 2006, we announced the closure of our development site in Ottawa and recorded total charges of $2.3 million for the restructuring of excess
facilities. The total remaining estimate of $2.1 million represents 100% of the estimated total future operating costs and lease obligations for the site.
We believe our estimates of the obligations for the closing of sites remain sufficient to cover anticipated settlement costs. However, our assumptions on either the
lease termination payments, operating costs until terminated, or the amounts and timing of offsetting sublease revenues may turn out to be incorrect and our
actual cost may be materially different from our estimates. If our actual costs exceed our estimates, we would incur additional expenses in future periods.
Income Taxes
In estimating our annual effective tax rate we review our forecasted net income for the year by geographic area and apply the appropriate tax rates. We also
consider the income tax credits available in each tax jurisdiction.
Our operations are conducted in a number of countries with complex tax legislation and regulations pertaining to our activities. We have recorded income tax
liabilities based on our estimates and interpretations of those regulations for the countries we operate in. However our estimates are subject to review and
assessment by the tax authorities and the courts of those countries. For example, our estimated tax provision rate increased significantly at the end of 2006 due to
an increase in our estimated tax liability following receipt in 2007 of a written communication from a tax authority concerning past transfer pricing policies and
practices of certain companies within the PMC-Sierra group. As a result, we increased our provision for periods prior to 2006 by $29.9 million. The timing of
any such review and final assessment of our liabilities by local authorities is substantially out of our control and is dependent on the actions by those authorities
in the countries we operate in. Any re-assessment of our tax liabilities by tax authorities may result in adjustments of the income taxes we pay or refunds that are
due to us.
In certain jurisdictions we have incurred losses and other costs that can be applied against future taxable earnings to reduce our tax liability on those earnings. As
we are uncertain of realizing the future benefit of those losses and expenditures, we have taken a valuation allowance against all domestic and foreign deferred
tax assets.
Business Outlook
We expect our revenues for the first quarter of 2007 to be approximately $98 to $105 million based on typical order patterns. As in the past, and consistent with
business practice in the semiconductor industry, a portion of our revenues are likely to be derived from orders placed and shipped during the same quarter, which
we call our “turns business”. Our turns business varies from quarter to quarter. In the fourth quarter of 2006, net orders booked and shipped
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠