Adaptec 2008 Annual Report Download - page 42

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We expect our first quarter 2009 research and development and selling, general and administrative expenses
to be approximately $59.7 million to $60.7 million respectively including stock-based compensation expense of
approximately $4.7 million to $5.7 million. Therefore, we expect our first quarter core operating research and
development and selling, general and administrative expenses to be approximately $55.0 million.
We expect that we will continue to incur significant amortization of purchased intangible assets related to
our 2006 acquisitions in the first quarter of 2009.
We anticipate that net interest income will be approximately zero in the first quarter of 2009 as interest
income earned from our cash position will be offset by interest expense incurred on our outstanding senior
convertible notes.
Liquidity and Capital Resources
Our principal sources of liquidity are cash from operations, and our short term investments. We employ
these sources of liquidity to support ongoing business activities, acquire or invest in critical or complementary
technologies, purchase capital equipment, repurchase and repay our senior convertible notes and finance working
capital. The combination of cash, cash equivalents and short-term securities at December 28, 2008 and
December 30, 2007 totaled $307.5 million and $364.9 million, respectively. As of December 28, 2008 and
December 30, 2007, we had $68.3 million and $225.0 million of senior convertible notes outstanding,
respectively. In the future, we expect our cash on hand, from operations, and distributions from the Reserve
Funds to be our primary source of liquidity.
The short-term investments of $209.7 million held at December 28, 2008 relate to shares of the Reserve
International Liquidity Fund, Ltd. (the “International Fund”) and the Reserve Primary Fund (the “Primary Fund”,
together the “Reserve Funds”) for which we have outstanding redemption orders. The Reserve Funds were
AAA-rated money market funds which announced redemption delays and suspended trading in September 2008,
during the severe disruption in financial markets. The Reserve Funds are in the process of liquidating their
portfolio of investments, which included securities of Lehman Brothers Holdings, Inc. (“Lehman Brothers”)
which was downgraded and has filed for Chapter 11 bankruptcy protection. The Primary Fund has received an
U.S. Security Exchange Commission (the “SEC”) order providing that the SEC will supervise the distribution of
assets from the fund. The redemptions from the International Fund are subject to pending litigation which could
cause further delay in any redemption of our investments.
Our investments in money market funds are classified in the consolidated balance sheet as follows:
(in millions)
December 28,
2008
December 30,
2007
Cash equivalents ............................................ $ 69.2 $323.8
Short-term investments ....................................... 209.7 —
Total ...................................................... $278.9 $323.8
We expect distributions from the Reserve Funds will occur over the following 12 months as the underlying
investments held in the Reserve Funds mature and distributions are made from the funds through the liquidation
process. Subsequent to December 28, 2008, we received $134.9 million as a partial distribution from the
International Fund.
Changes in market conditions and the method and timing of the liquidation process of the Reserve Funds
could result in further adjustments to the fair value and classification of these investments, and these changes
could be material.
See Critical Accounting Estimates—Investment in Cash Equivalents, Short Term Investments and
Investment Securities for additional information.
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