Adaptec 2006 Annual Report Download - page 99

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Table of Contents
NOTE 15. Income Taxes
The income tax provisions, calculated under Statement of Financial Accounting Standard No. 109 (SFAS 109), consist of the following:
(in thousands)
December 31,
2006
December 31,
2005
December 26,
2004
Current:
Federal $ 2,248 $ 263 $ —
State 4 3 3
Foreign 43,140 1,842 (3,326)
45,392 2,108 (3,323)
Deferred:
Federal 3,845 — —
Foreign — — —
3,845 — —
Provision for (recovery of) income taxes $ 49,237 $ 2,108 $ (3,323)
A reconciliation between the Company’s effective tax rate and the U.S. Federal statutory rate is as follows:
(in thousands)
December 31,
2006
December 31,
2005
December 26,
2004
Income (loss) before provision for income taxes $ (50,655) $ 30,094 $ 48,358
Federal statutory tax rate 35% 35% 35%
Income taxes at U.S. Federal statutory rate (17,729) 10,533 16,925
Tax on intercompany dividend 45,727 19,871 —
Adjustment due to change in estimate 29,889 — —
Adjustment of prior year taxes and excess tax credits (673) (3,924) (5,866)
Non-deductible intangible asset amortization and in-process research and development 12,221 — —
Non-deductible stock-based compensation 9,299 75 244
Non-deductible items and other 5,875 (81) (5,291)
Incremental tax (recovery) on foreign earnings and other rate differentials (8,530) (35,677) (26,477)
Valuation allowance (26,842) 11,311 17,142
Provision for (recovery of) income taxes $ 49,237 $ 2,108 $ (3,323)
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, 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:
97
Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠