Adaptec 2008 Annual Report Download - page 80

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percentage of their annual compensation to the plans, limited to maximum annual amounts set by local taxation
authorities. The Company contributed $2.9 million, $3.7 million and $4.3 million, to the plans in fiscal years
2008, 2007 and 2006, respectively.
NOTE 15. Income Taxes
The income tax provision, calculated under SFAS 109, consists of the following:
December 28, December 30, December 31,
(in thousands) 2008 2007 2006
Current:
Federal .................................... $(15,711) $ (258) $ 2,248
State ...................................... 100 4 4
Foreign ................................... (64,158) 25,864 43,140
(79,769) 25,610 45,392
Deferred:
Federal .................................... 5,781 3,549 3,845
Foreign ................................... 3,971 (12,311) —
9,752 (8,762) 3,845
Provision for (recovery of) income taxes ............. $(70,017) $ 16,848 $49,237
Reconciliation between the Company’s effective tax rate and the U.S. Federal statutory rate is as follows:
(in thousands)
December 28,
2008
December 30,
2007
December 31,
2006
Income (loss) before provision for income taxes .................. $63,905 $(32,256) $(50,655)
Federal statutory tax rate ..................................... 35% 35% 35%
Income taxes at U.S. Federal statutory rate ....................... 22,367 (11,290) (17,729)
Tax on intercompany dividend ................................ 35,000 — 45,727
Adjustment of prior years due to change in estimate ............... — — 29,889
Change in liability for unrecognized tax benefit ................... (91,974) 28,296 —
Non-deductible intangible asset amortization and in-process research
and development ......................................... 5,106 11,059 12,221
Non-deductible stock-based compensation ....................... 6,890 9,409 9,299
Non-deductible items and other ............................... 13,187 (215) 5,875
Adjustment/expiry of loss carryforward ......................... 13,264 11,091 —
Adjustment of prior year taxes and tax credits .................... 2,785 12,537 (673)
Investment tax credits ....................................... (16,189) (19,169) —
Foreign and other rate differential .............................. (6,611) (14,188) (8,530)
Valuation allowance ........................................ (53,842) (10,682) (26,842)
Provision for (recovery of) income taxes ........................ $(70,017) $ 16,848 $ 49,237
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, prior to the settlement, the Company accrued $35.2
million (including associated interest) relating to an ongoing liability arising from the examination of our existing
transfer pricing practices, $28.1 million of income tax from normal operations (offset by investment tax credits of
$19.5 million), $5.8 million deferred tax expense from an unrealized gain arising from foreign currency
translation pertaining to a foreign subsidiary, and $4.5 million increase in tax from various items, including
deferred taxes, minimum taxes and revisions of prior estimates.
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