Adaptec 2011 Annual Report Download - page 79

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Table of Contents
At December 31, 2011, the Company has approximately $313 million of federal net operating losses, which will expire through 2027. The Company
also has approximately $240 million of state tax loss carryforwards, which expire through 2029. The utilization of a portion of these net operating losses may
be subject to annual limitations under federal and state income tax legislation. Substantially, all of the Company's net operating losses relate to the Company's
domestic operations and no tax benefit has been recorded for these losses. Included in the credit carry-forwards are $55 million of federal research and
development credits which expire through 2025, $5 million of federal alternative minimum tax credits which carryforward indefinitely, $12 million of state
research and development credits which do not expire, and $4 million foreign tax credits which expire through 2018.
The Company intends to indefinitely reinvest undistributed earnings of foreign subsidiaries. Accordingly, the Company has not recorded a deferred tax
liability on these earnings, after taking into account available net operating losses and credits, of approximately $9 million related to federal and state income
taxes.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in millions):
(in millions)
December 31,
2011
December 26,
2010
December 27,
2009
Gross unrecognized benefit at beginning of the year $ 49.9 $ 40.5 $ 22.9
Increase in tax position for prior years — 1.5 3.0
Increase in tax position for current year 4.3 5.9 9.6
Lapse in statute limitation (1.3) — (0.1)
Effect on foreign currency gain (loss) on translation (0.6) 2.0 5.1
Ending balance before interest accrual $ 52.3 $ 49.9 $ 40.5
The total amount of gross unrecognized tax benefits that, if recognized, would affect the effective tax rate was $52.3 million at December 31, 2011
(2010—$49.9 million, 2009—$40.5 million). The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income
taxes. During 2011, the Company had accrued interest and penalties related to unrecognized tax benefits of $3 million (2010—$2.8 million, 2009—$1.6
million).
The Company and its subsidiaries file income tax returns in the U.S. and in various states, local and foreign jurisdictions. The 2006 through 2011 tax
years generally remain subject to examination by federal and most state tax authorities. In significant foreign jurisdictions, the 2007 through 2011 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.
NOTE 16. SEGMENT INFORMATION
The Company derives its net revenues from the following operating segments: Communication Products, Fiber-to-the-Home Products, Enterprise
Storage Products, Microprocessor Products, Broadband Wireless Products, Channel Storage Products, and Wireless Infrastructure and Networking Products.
All operating segments noted above have been aggregated into one reportable segment because they have similar long-term economic characteristics,
products, production processes, types or classes of customers and methods use to distribute their products. Accordingly, the Company has one reportable
segment—semiconductor solutions for communications network infrastructure.
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