Western Digital 2007 Annual Report Download - page 72

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Income Tax (Benefit) Expense
The components of the (benefit) provision for income taxes were as follows for the three years ended June 29, 2007
(in millions):
2007 2006 2005
Current:
Foreign ................................................... $ 8 $ 6 $ 2
Domestic-federal ............................................ (4) 3 1
Domestic-state.............................................. — — 1
Deferred:
Domestic-federal ............................................ (65) (19) —
Domestic-state.............................................. (60) (3) —
Income tax (benefit) provision ................................. $(121) $(13) $ 4
Remaining net undistributed earnings from foreign subsidiaries at June 29, 2007 on which no U.S. tax has been
provided amounted to approximately $1.1 billion. The net undistributed earnings are intended to finance local operating
requirements. Accordingly, an additional U.S. tax provision has not been made on these earnings. The tax liability for
these earnings approximates $433 million, if the Company repatriates the $1.1 billion in undistributed earnings from
the foreign subsidiaries.
Deferred Taxes
Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities
as of June 29, 2007 and June 30, 2006 were as follows (in millions):
2007 2006
Deferred tax assets:
Reserves and accrued expenses not currently deductible ...................... $ 88 $ 99
Domestic net operating loss (NOL) carryforward ........................... — 10
Business credit carryforward ......................................... 35 40
Other ......................................................... 34 28
157 177
Deferred tax liabilities ............................................... (10) —
Valuation allowance ............................................... — (155)
Deferred tax assets, net ........................................... $147 $ 22
2007 2006
Deferred tax assets:
Current portion (included in other current assets) ........................... $ 69 $10
Non-current portion (included in other non-current assets) ..................... 88 12
Deferred tax liabilities ................................................ (10) —
Deferred tax assets, net ............................................ $147 $22
In addition to the deferred tax assets presented above, the Company had additional NOL and credit benefits related
to stock option deductions of approximately $106 million and $90 million at June 29, 2007 and June 30, 2006,
respectively. In accordance with the provisions of SFAS No. 123-R, this will be recorded as a credit to shareholders’ equity
when an incremental benefit is recognized after considering all other tax attributes available to the Company.
66
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)