Adaptec 2008 Annual Report Download - page 82

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Included in the deferred tax assets before valuation allowance are approximately $116.8 million of
cumulative tax benefits related to equity transactions, which will be credited to stockholder’s equity if and when
realized.
The pretax income from foreign operations was $63.9 million, $30.4 million, and $48.2 million in 2008,
2007, and 2006, respectively. The Company recorded $4.3 million tax expense related to earnings it repatriated
in 2008. In addition, the Company recorded $7.1 million tax expense in 2006 related to earnings it repatriated to
fund the purchase of the Storage Semiconductor Business. These distributions do not change the Company’s
intent to indefinitely reinvest undistributed earnings of the Company’s foreign subsidiaries and accordingly, no
additional provision for federal and state income taxes has been provided thereon. It is not practical to estimate
the income tax liability that might be incurred on the remittance of such earnings.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax
benefits is as follows (in millions):
December 28,
2008
December 30,
2007
Gross unrecognized tax benefits at December 31, 2007 ........................ $125.5 $ 92.5
Increases in tax positions for prior years .................................... 24.2 15.0
Decreases in tax positions for prior years ................................... — (1.3)
Decreases in tax positions for settlement with tax authorities .................... (114.3) —
Lapse in statute limitations .............................................. (3.0) (0.7)
Effect of foreign currency gain (loss) on translation ........................... (9.5) 20.1
Gross unrecognized tax benefits December 28, 2008 .......................... $ 22.9 $125.6
The total amount of gross unrecognized tax benefits that, if recognized, would affect the effective tax rate
was $22.9 million at December 28, 2008 (2007—$125.6 million). The Company accrues interest and penalties
related to unrecognized tax benefits in its provision for income taxes. At December 28, 2008, the Company had
accrued interest and penalties related to unrecognized tax benefits of $3.8 million (2007—$46.8 million). See
Note 1 to the consolidated financial statements for additional disclosures related to the adoption of FIN 48.
The Company and its subsidiaries file income tax returns in the U.S. and in various states, local and foreign
jurisdictions. The 2004 through 2008 tax years generally remain subject to examination by federal and most state
tax authorities. In significant foreign jurisdictions, the 2004 through 2008 tax years generally remain subject to
examination by their respective tax authorities. The Company does not reasonably estimate that the unrecognized
tax benefit will change significantly within the next 12 months.
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