SanDisk 2008 Annual Report Download - page 99

Notes To Consolidated Financial Statements
The Company’s provision for income taxes differs from the amount computed by applying the federal
statutory rates to income (loss) before taxes as follows:
Fiscal Years Ended
December 28,
2008
December 30,
2007
December 31,
2006
U.S. federal statutory rate .................................... 35.0% 35.0% 35.0%
State taxes, net of federal benefit .............................. 0.4 3.7 3.1
Non-deductible share-based compensation expense ................ (0.7) 5.0 2.9
Impairment of goodwill ...................................... (18.3) — —
Valuation allowance ........................................ (24.1) — —
Write-off of acquired in-process technology ..................... — — 18.3
Tax-exempt interest income .................................. 1.1 (5.7) (2.7)
Foreign earnings at other than U.S. rates ........................ (1.0) (4.0) (2.9)
Foreign losses not benefited .................................. — 7.8 0.6
Other .................................................... (0.5) 2.1 (0.8)
Effective income tax rates ................................ (8.1)% 43.9% 53.5%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax return reporting
purposes. Significant components of the Company’s net deferred tax assets as of December 28, 2008 and
December 30, 2007 were as follows (in thousands):
December 28,
2008
December 30,
2007
Deferred tax assets:
Deferred revenue recognized for tax purposes ........................... $ 35,908 $ 48,932
Accruals and reserves not currently deductible ........................... 149,582 170,279
Depreciation and amortization not currently deductible .................... 60,406 53,176
Deductible original issue discount ..................................... 98,615 119,358
Deductible share-based compensation .................................. 50,465 37,959
Unrealized loss on investments ....................................... 52,138 24,879
Unrealized foreign exchange loss ..................................... 58,131 —
Net operating loss carryforwards ...................................... 52,553 33,444
Tax credit carryforward ............................................. 149,785 15,287
Other ........................................................... 17,073 7,621
Gross deferred tax assets ................................................ 724,656 510,935
Valuation allowance .................................................... (529,366) (67,354)
Deferred tax assets, net of valuation allowance ............................... 195,290 443,581
Deferred tax liabilities:
Acquired intangible assets ........................................... (15,816) (42,477)
Unrealized gain on investments ....................................... (72,302) (23,553)
Unrealized foreign exchange gain ..................................... (78,031) —
U.S. taxes provided on unremitted earnings of foreign subsidiaries ........... (17,619) (62,647)
Total deferred tax liabilities .............................................. (183,768) (128,677)
Net deferred tax assets .................................................. $ 11,522 $ 314,904
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