Plantronics 2008 Annual Report Download - page 46

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Income Tax Expense
Consolidated
(in thousands)
Income before income taxes $ 112,554 $ 61,538 $ (51,016) (45.3)% $ 61,538 $ 85,237 $ 23,699 38.5%
Income tax expense 31,404 11,395 (20,009) (63.7)% 11,395 16,842 5,447 47.8%
Net income $ 81,150 $ 50,143 $ (31,007) (38.2)% $ 50,143 $ 68,395 $ 18,252 36.4%
Effective tax rate 27.9% 18.5% (9.4) ppt. 18.5% 19.8% 1.3 ppt.
Fiscal Year Ended Fiscal Year Ended
March 31, March 31, Increase March 31,
2006 2007 (Decrease)
Increase
2007 2008 (Decrease)
March 31,
In comparison to fiscal 2007, the increase in the effective rate for fiscal 2008 is primarily due to reduced federal tax credits in fiscal
2008 as the research credit was available for only nine months in fiscal 2008, compared to fifteen months in fiscal 2007 due to
reinstatement of the credit retroactively to January 1, 2006. We also benefited from a one-time solar credit in fiscal 2007.
In comparison to fiscal 2006, the decrease in the effective income tax rate in fiscal 2007 is primarily due to lower U.S. net income
which was taxed at higher rates than our foreign income. The decline in U.S. net income was primarily due to the losses in AEG and
stock-based compensation due to the adoption of SFAS No. 123R. Stock-based compensation is proportionally higher in the U.S.
than in our overseas locations which impacts our effective tax rate.
On April 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB
Statement No. 109” (“FIN 48”). Under FIN 48, the impact of an uncertain income tax position on income tax expense must be
recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized
unless it has a greater than 50% likelihood of being sustained. There were no material adjustments as a result of the adoption of FIN
48. At the adoption date, we had $12.4 million of unrecognized tax benefits, $9.8 million of which would affect our income tax
expense if recognized. The remaining balance of the unrecognized tax benefits of $2.6 million would be an adjustment to goodwill if
recognized before April 1, 2009 prior to the adoption of SFAS No. 141R. As of March 31, 2008, we had $12.4 million of
unrecognized tax benefits all of which would favorably impact the effective tax rate in future periods if recognized.
Our effective tax rate differs from the statutory rate due to the impact of foreign operations taxed at different statutory rates, income
tax credits, state taxes, and other factors. The future tax rate could be impacted by a shift in the mix of domestic and foreign income,
tax treaties with foreign jurisdictions, changes in tax laws in the United States or internationally, a return to profitability for the AEG
business, or a change in estimate of future taxable income which could result in a valuation allowance being required.
FINANCIAL CONDITION
The table below provides selected consolidated cash flow information, for the periods indicated:
March 31, March 31, March 31,
(in thousands) 2006 2007 2008
Cash provided by operating activities $ 78,348 $ 73,048 $ 102,900
Cash used for capital expenditures and other assets (41,860) (24,028) (23,298)
Cash used for acquisitions (165,393) - -
Cash provided by (used for) other investing activities 156,387 1,546 (18,850)
Cash used for investing activities (50,866) (22,482) (42,148)
Cash provided by (used for) financing activities $ (36,558) $ (26,244) $ 5,618