Adaptec 2011 Annual Report Download - page 78

Table of Contents
loss carryforwards recognized in equity, $6.2 million tax expense relating to unrecognized tax benefits (including associated interest), $3.9 million increase in
deferred tax expense arising from amortization of acquisition related intangibles, $6 million tax expense on an inter-company sale of certain assets, as
discussed below.
The 2010 provision for income taxes of $30.2 million consisted of $13.4 million tax expense from stock option related loss carryforwards recognized in
equity, $10.2 million tax expense relating to unrecognized tax benefits (including associated interest), $5.4 million related to adjustments to prior period
estimates, $5.3 million increase in deferred income tax expense arising from amortization of acquisition-related intangibles, $3.2 million deferred tax recovery
associated with an unrealized foreign exchange loss arising from foreign currency translation of a foreign subsidiary, $3.2 million tax expense on an inter-
company sale of certain assets, as discussed below, $1.1 million tax expense from the inter-company share transfer of certain foreign subsidiaries, and $5.2
million decrease in tax expense from operations, net of investment tax credits.
The 2009 provision for income taxes was $4.2 million, which consisted of a $9.9 million deferred tax recovery associated with an unrealized foreign
exchange loss arising from foreign currency translation of a foreign subsidiary, $4.9 million tax expense on an inter-company sale of certain assets, as
discussed below, $4.5 million tax expense relating to unrecognized tax benefits (including associated interest), $3.8 million increase in deferred income tax
related to past acquisitions, and a $0.9 million increase in tax expense from operations, net of investment tax credits.
The consolidated financial statements for the 2011, 2010 and 2009 include the tax effects associated with the sale of certain assets between our wholly-
owned subsidiaries. GAAP requires the tax expense associated with gains on such inter-company transactions to be recognized over the estimated life of the
related assets. Accordingly prepaid tax expenses were recorded in the years ended December 31, 2011, December 26, 2010 and December 27, 2009. The
balance in long-term prepaid expenses as at December 31, 2011 and December 26, 2010, to be recognized in future years was $16.9 million and $23 million,
respectively. The tax expense during 2011, 2010 and 2009 resulting from these transactions was $6 million, $3.2 million, $4.9 million, respectively.
Significant components of the Company's deferred tax assets and liabilities are as follows:
(in thousands)
December 31,
2011
December 26,
2010
Deferred tax assets:
Net operating loss carryforwards 104,522 106,466
Capital loss 1,670 4,031
Credit carryforwards 69,038 40,721
Reserves and accrued expenses 27,221 24,398
Intangible assets 2,740 2,701
Depreciation and amortization 1,150 3,081
Restructuring and other charges 1,680 2,396
State tax loss carryforwards 9,513 8,695
Deferred income 4,101 2,796
Other — 332
Unrealized loss on investment 29 —
Total deferred tax assets 221,664 195,617
Valuation allowance (185,776) (180,808)
Acquired intangible assets and goodwill (43,039) (38,925)
Capital gain, sale/write down of assets — (1,031)
Depreciation (4,269) —
Capitalized technology & other (474) (75)
Unrealized gain on investments — (801)
Total net deferred taxes $ (11,894) $ (26,023)
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