Adaptec 2008 Annual Report Download - page 37

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In 2007, we did not have any comparable investing activities that consumed significant cash and we were
able to increase our cash balances through operations during the year. Partially offsetting the impact of the higher
cash balances was reduced interest income from prior year tax refunds.
In the first quarter of 2006, we acquired the Storage Semiconductor Business for $431.3 million in cash,
which lowered our cash balance and resulted in a significant decrease in interest income that year.
Foreign exchange gain (loss)
Foreign exchange gain was $8.1 million in 2008 compared to a loss of $18.5 million in 2007 and $0.1
million in 2006. The foreign exchange gain (loss) for all years presented relates primarily to the re-measurement
each period of accrued income tax amounts.
In 2008, the U.S. dollar strengthened against foreign currencies, in the jurisdictions in which we operate,
which generated foreign exchange gains. In 2007, the U.S. dollar weakened against these foreign currencies,
generating foreign exchange losses.
Gain on repurchase of senior convertible notes and amortization of debt issue costs
In 2005, we issued $225.0 million 2.25% senior convertible notes. In 2008, we repurchased $156.7 million
principal amount of our senior convertible notes for $138.3 million and expensed $3.2 million of related
unamortized debt issue costs and transactions costs resulting in a net gain of $15.2 million. We also recognized
amortization of debt issue costs of $0.6 million, $1.0 million, $1.0 million for 2008, 2007 and 2006 respectively.
Asset impairment
In 2008, we recorded $4.3 million for an asset impairment related to a supplier contract termination.
Recovery on Investments
In 2008, we received $0.4 million as recovery on a previously booked investment loss related to our past
investment in a private company.
Loss on Investment Securities
At December 28, 2008, we held $209.7 million in investments in shares of the Reserve Funds, net of the
recorded impairment of $11.8 million that we recognized in the third quarter of 2008.
During 2006, we sold our investment in Ikanos Communications Inc. for proceeds of $5.1 million and
recorded a gain of $3.1 million, which has been included in (Loss) gain on sale of investments on the Statement
of Operations. Also included in (Loss) gain on sale of investments were a gain on sale of another investment, as
well as an impairment loss of $3.2 million on our investment in a private company, and a $1.3 million loss on
sales of other short-term investments that were redeemed prior to maturity to fund the acquisition of the Storage
Semiconductor Business.
Provision for Income Taxes
Our provision for income taxes for the year ended December 28, 2008 was a $70.0 million recovery,
resulting in an effective tax rate of negative 110% on net income of $63.9 million. The recovery was primarily as
a result of one of the Company’s foreign subsidiaries settling several ongoing tax matters for less than had been
accrued as part of its liability for unrecognized tax benefits, resulting in the recognition of a $124.1 million tax
benefit. In addition, the Company accrued $35.2 million (including associated interest) relating to an ongoing
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