SAN FRANCISCO Processor licensor MIPS Technologies Inc. Friday (Sept. 9) said its 10-K filing with the U.S. Securities and Exchange Commission reflected an increase of $1.5 million in net income for 2005 as the result of a favorable ruling earlier this month in a tax dispute involving the company's Swiss subsidiary.
As a result of the ruling, MIPS said its net income for fiscal 2005 increased to $14.9 million, $1.5 million (or 3 cents per diluted share) more than the company reported when it disclosed its fiscal fourth quarter and fiscal 2005 financial results on July 27. The company said its fiscal fourth quarter net income also increased by $1.5 million to $4.2 million.
MIPS (Mountain View, Calif.) said the favorable tax ruling related to the company's international tax restructuring activities for its Swiss subsidiary, which resulted in a $1.8 million reduction to the company's tax provision for fiscal 2005. This was offset in part by $254,000 in additional operating expenses which were adjusted due to revision of estimates, MIPS said.
According to Kevin Eichler, MIPS vice president and chief financial officer, the company set aside funds against the possibility that it would be forced to pay additional taxes when Swiss tax authorities raised questions about some of its activities. Eichler said he traveled to Switzerland earlier this month and resolved the dispute in the company's favor, allowing MIPS to reflect the additional funds in its quarterly and fiscal year earnings.
Just last week, programmable logic supplier Xilinx Inc. revised its fiscal second quarter guidance upward based on an August ruling by the U.S. Tax Court in the company's favor. Xilinx had been involved in a dispute with the U.S. Internal Revenue Service (IRS) over cost sharing with its Irish subsidiary.
Eichler said the MIPS case also related to cost sharing with its foreign subsidiary, in addition to other issues. But while the Xilinx case was argued in court for over a year, MIPS resolved its dispute with Swiss tax authorities much more quickly, Eichler said.