Adaptec 2007 Annual Report Download - page 53

Download and view the complete annual report

Please find page 53 of the 2007 Adaptec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

Table of Contents
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 and including 2006 by $29.9 million and continued to accrue
additional taxes and interest during 2007. 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 certain foreign
deferred tax assets.
Business Outlook
We expect our revenues for the first quarter of 2008 to be approximately $120 to $125 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 2007, net orders booked and shipped within the quarter
were approximately 21% of quarterly sales, and we expect the turns percentage to be higher in the first quarter of 2008 compared with the fourth quarter of 2007.
We anticipate our first quarter 2008 gross margin percentage to remain in the 65% range including approximately $0.5 million stock-based compensation
expense. As in past quarters this could vary depending on the volumes of products sold, since many of our costs are fixed. Margins will also vary depending on
the mix of products sold.
We expect our first quarter 2008 research and development and selling, general and administrative expenses to be approximately $63.1 million to $64.1 million
respectively including stock-based compensation expense of approximately $6.6 million to $7.6 million. Therefore, we expect our first quarter core operating
research and development and selling, general and administrative expenses to be approximately $56.5 million.
We expect that we will continue to incur significant amortization of purchased intangible assets related to the 2006 acquisitions in the first quarter of 2008.
We anticipate that net interest income will be approximately $2 million in the first quarter of 2008.
Liquidity and Capital Resources
Our principal source of liquidity at December 30, 2007 was $364.9 million in cash and cash equivalents.
47
Source: PMC SIERRA INC, 10-K, February 22, 2008