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FORM 10-K
SEAGATE TECHNOLOGY
(Annual Report)
Filed 8/10/2004 For Period Ending 7/2/2004
Address P.O. BOX 309GT, UGLAND HOUSE SOUTH CHURCH STREET,
GEORGE TOWN
GRAND CAYMAN, 00000
Telephone 345-949-8066
CIK 0001137789
Industry Computer Storage Devices
Sector Technology
Fiscal
Year 06/30

Table of contents

  • Page 1
    SEAGATE TECHNOLOGY FORM 10-K (Annual Report) Filed 8/10/2004 For Period Ending 7/2/2004 Address P.O. BOX 309GT, UGLAND HOUSE SOUTH CHURCH STREET, GEORGE TOWN GRAND CAYMAN, 00000 Telephone 345-949-8066 CIK Industry Sector Fiscal Year 0001137789 Computer Storage Devices Technology 06/30

  • Page 2
    ... Islands (Address of principal executive offices) Registrant's telephone number, including area code: (345) 949-8066 Securities registered pursuant to Section 12 (b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $0.00001 per share New York Stock...

  • Page 3
    ... SEAGATE TECHNOLOGY TABLE OF CONTENTS Page No. Item PART I 1. 2. 3. 4. Business Properties Legal Proceedings Submission of Matters to a Vote of Security Holders PART II Market for Registrant's Common Stock and Related Shareholder Matters Selected Financial Data Management's Discussion and Analysis...

  • Page 4
    ... to major original equipment manufacturers, or OEMs, and also market to distributors under our globally recognized brand name. For fiscal years 2004, 2003 and 2002, approximately 60%, 61% and 66%, respectively, of our rigid disc drive revenue was from sales to OEMs, including customers such as...

  • Page 5
    ... their products, and by whether they are captive, producing rigid disc drives for their own computer systems, or independent. Integrated manufacturers are companies that design and produce the critical technologies, including read/write heads and recording media, used in their rigid disc drives. An...

  • Page 6
    ... boards. ASICs move data to and from the read/write head and the internal controller, or interface, which communicates with the host computer. Rigid disc drive manufacturers typically use one or more of several industry standard interfaces such as advanced technology architecture, or ATA, Serial ATA...

  • Page 7
    ... production of individual components and ends with a fully assembled unit. We design, assemble and/or manufacture a number of the most important components found in our rigid disc drives, including read/write heads, recording media, printed circuit boards, spindle motors and ASICs. Read/Write Heads...

  • Page 8
    ... SCSI/Fibre Channel ATA/SATA ATA ATA ATA In June 2004, we announced 12 new rigid disc drive products which will be introduced in fiscal year 2005, including our first 1-inch form factor rigid disc drive, which will be primarily used in hand held consumer electronics devices such as digital audio...

  • Page 9
    ... Electronics Storage U Series and Barracuda ATA/SATA Family . The U-9 Series of rigid disc drives are used in new markets, including personal video recorder (PVR), video game consoles, audio jukeboxes, home media centers, and home and industrial security systems. The Barracuda 7200.7 is used in PVR...

  • Page 10
    ...We maintain sales offices throughout the United States and in Australia, China, England, France, Germany, India, Ireland, Japan, Singapore and Taiwan. Our marketing organization works to increase demand for our rigid disc drive products through strategic collaboration with key OEM customers to align...

  • Page 11
    ... rigid disc drive industry have shortened product life cycles and caused acceleration in the development and introduction of new technology. Based on the recent pace of new product introductions, however, we believe that the current rate of increase in areal density is slowing from the rate of the...

  • Page 12
    ...effort is to ensure timely availability of mature component technologies to our product development teams as well as allowing us to leverage and coordinate those technologies in the design centers across our products in order to take advantage of opportunities in the marketplace. During fiscal years...

  • Page 13
    ... and Chief Operating Officer Executive Vice President, Worldwide Sales, Marketing and Customer Service Executive Vice President, General Counsel and Corporate Secretary Executive Vice President, Product and Process Development Senior Vice President and General Manager, Asia Operations Senior Vice...

  • Page 14
    ... the position of Chief Operating Officer, with responsibility for our disc drive manufacturing, recording media and head operations and product development. In June 2000, he was appointed to the position of President, and in November 2000, he became a member of our board of directors. Effective July...

  • Page 15
    ..., product development, disc drive integration, production launch, materials and volume production activities for the worldwide operations relating to heads and media, which are located in the United States, Asia and Europe. Mr. Glembocki joined us in the February 1996 merger with Conner Peripherals...

  • Page 16
    ... Director and Head of Technology Investment Banking. He is also a member of the board of directors of Flextronics International Ltd. Mr. Hutchins became a member of our board of directors in November 2000. Mr. Hutchins is a managing member of Silver Lake Partners, a private equity investment firm he...

  • Page 17
    ... which time he oversaw the company's day-to-day business operations, including hardware and software design and development, global sales, service and customer advocacy, worldwide manufacturing and purchasing, research and development and worldwide marketing. Mr. Zander has acquired over 25 years of...

  • Page 18
    Table of Contents ITEM 2. PROPERTIES Our company headquarters is located in the Cayman Islands, while our U.S. executive offices are in Scotts Valley, California. Our principal manufacturing facilities are located in China, Malaysia, Northern Ireland, Singapore and Thailand and, in the United States...

  • Page 19
    ... were approximately 822 holders of record of our common shares. There were no sales of our equity securities during fiscal year 2004 that were not registered under the Securities Act of 1933. Dividends On January 29, 2004, our board of directors amended our quarterly dividend policy, and pursuant to...

  • Page 20
    ...common shares will not be treated as a return of capital distribution and will be treated as dividend income. Furthermore, we currently believe that we are a foreign personal holding company for U.S. federal income tax purposes. Under recent U.S. federal income tax legislation, U.S. shareholders who...

  • Page 21
    ... Predecessor Fiscal Year Ended June 30, 2000 Nov. 23, 2000 to June 29, 2001 July 1, 2000 to Nov. 22, 2000 (in millions, except for per share data) Revenue Gross margin Income (loss) from operations Gain on sale of SanDisk common stock Gain on exchange of certain investments in equity securities...

  • Page 22
    ...105 million write-off of in-process research and development incurred in connection with the acquisition of XIOtech, a $64 million charge related to the settlement of litigation, $43 million of non-cash compensation expense and payroll taxes related to the reorganization of Seagate Software Holdings...

  • Page 23
    ... consumer electronic applications, where our products are used in digital video recorders (DVR's), gaming platforms, and digital music players. We sell our rigid disc drives primarily to major OEMs and also market to distributors under our globally recognized brand name. For fiscal years 2004, 2003...

  • Page 24
    ...audits with no additional tax due, and based on the March 15, 2004 notification to VERITAS from the Internal Revenue Service, we recorded a $125 million income tax benefit in our third fiscal quarter of 2004 from the reversal of accrued income taxes relating to the tax indemnification amounts due to...

  • Page 25
    ...of the plan and we subsequently recorded an accrual of $147 million in the fourth fiscal quarter of 2002. As a result of certain distributions by New SAC to holders of its preferred shares in connection with our initial public offering, Seagate Technology HDD Holdings became obligated to pay out the...

  • Page 26
    ... than the rate of the last several years. The slowing change in areal density contributes to an increase in the rates of price erosion as the slowing areal density curve results in longer product cycles which permits more competitors time to enter the market for a particular type of disc drive and...

  • Page 27
    ... sales, disc drive manufacturers may experience increased volatility in their results of operations. Seagate Overview. We maintain a highly integrated approach to our business by designing and manufacturing components we view as critical to our products, such as read/write heads and recording media...

  • Page 28
    ... contrast to when the rate of growth in areal density is increasing, a slowing growth rate in areal density can limit the cost benefits of new products because it is technologically more difficult to reduce the number of read/write heads and rigid discs in a particular drive. In addition, given the...

  • Page 29
    ... maintained our market share. During fiscal year 2004, we shipped 3.6 million mobile computing disc drives. We continue to be impacted by our limited product set for this market and our concentrated customer base. We also experienced aggressive pricing in the first half of calendar year 2004. As we...

  • Page 30
    ... slowing in the rate of increase in areal density. Gross margin as a percentage of revenue for the first, second, third and fourth fiscal quarters of 2004 was 27%, 26%, 22% and 17%, respectively. Product Development Expense. Product development expense decreased by $4 million, or 1%, for fiscal year...

  • Page 31
    ... tax or is exempt from tax due to tax holidays or tax incentive programs we operate under in China, Malaysia, Singapore and Thailand. These tax holidays or incentives are scheduled to expire in whole or in part at various dates through 2015. The benefit for income taxes recorded for the fiscal year...

  • Page 32
    ...Contents Certain of Seagate Delaware's foreign and state tax returns remain under examination by various taxing authorities. The Internal Revenue Service is currently examining our federal income tax returns for fiscal years ending in 2001 and 2002. The timing of the settlement of these examinations...

  • Page 33
    .... As a result, our worldwide operating income is either subject to varying rates of tax or exempt from tax due to tax holidays and tax incentive programs that we operate under in China, Malaysia, Singapore and Thailand. Our provision for income taxes for fiscal year 2003 differed from the provision...

  • Page 34
    ...for outstanding letters of credit and bankers' guarantees as of July 2, 2004. The credit agreement that governs our senior secured credit facilities contains covenants that Seagate Technology HDD Holdings, our wholly-owned subsidiary that operates our rigid disc drive business, must satisfy in order...

  • Page 35
    ... and equipment related to our subassembly and disc drive final assembly and test facilities in the United States and the Far East 157 million to expand our Woodlands thin-film media operations in Singapore; $149 million for manufacturing facilities and equipment for our recording head operations in...

  • Page 36
    ... outstanding letters of credit and bankers' guarantees as of July 2, 2004, and (3) cash we expect to generate from operations during this fiscal year. Since the closing of the November 2000 transactions, our principal liquidity requirements have been to service our debt and meet our working capital...

  • Page 37
    ... price of the outstanding options, warrants and rights, and the number of common shares remaining available for issuance under such plans as of the end of fiscal year 2004. (a) (b) (c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities...

  • Page 38
    ... on our reported results of operations for a given period. Establishment of Sales Program Accruals. We establish certain distributor and OEM sales programs aimed at increasing customer demand. These programs are typically related to a distributor's level of sales, order size, advertising or point...

  • Page 39
    ... the introduction of our five-year warranty on products shipped into our distribution and retail channels, and we expect that the impact of this change will increase our future warranty costs. Valuation of Deferred Tax Assets. The recording of our deferred tax assets each period depends primarily...

  • Page 40
    ... prices to retain our market share, which could adversely affect our results of operations. Based on our recent experience in the industry with respect to new product introductions, we believe that the rate of increase in areal density, or the storage capacity per square inch on a disc, is slowing...

  • Page 41
    ... operations will be adversely affected. In addition, in response to customer demand for high-quality, high-volume and low-cost rigid disc drives, manufacturers of rigid disc drives have had to develop large, in some cases global, production facilities with highly developed technological capabilities...

  • Page 42
    ... disc drive and a 2.5-inch form factor disc drive for enterprise storage applications. These products are scheduled for introduction during fiscal year 2005. If we do not successfully introduce these products or if we do not suitably adapt our technology and product offerings to successfully develop...

  • Page 43
    ... even more intense price competition from other rigid disc drive manufacturers than usual. Seasonality-Because we experience seasonality in the sales of our products, our results of operations will generally be adversely impacted during our fourth fiscal quarter. Because sales of computer systems...

  • Page 44
    ... of our manufacturing processes. sales. Dependence on Distributors-We are dependent on sales to distributors, which may increase price erosion and the volatility of our A substantial portion of our sales has been to distributors of desktop disc drive products. Product qualification programs in...

  • Page 45
    ... contrast to when the rate of growth in areal density is increasing, a slowing growth rate in areal density can limit the cost benefits of new products because it is technologically more difficult to reduce the number of read/write heads and rigid discs in a particular drive. In addition, given the...

  • Page 46
    ... investment in existing products and inventory. New Product Development and Technological Change-If we do not develop products in time to keep pace with technological changes, our operating results will be adversely affected. Our customers have demanded new generations of rigid disc drive products...

  • Page 47
    ... sole suppliers and a limited number of suppliers for some of these components, including the read/write heads and recording media that we do not manufacture, ASICs, spindle motors and printed circuit boards. In the past, we have experienced increased costs and production delays when we were unable...

  • Page 48
    ... could cause sales of our products to decline. Mergers, acquisitions, consolidations or other significant transactions involving our customers generally entail risks to our business. For example, IBM, which is one of our key customers, merged its disc drive business with the disc drive business of...

  • Page 49
    ...from sales to customers located in the Far East. We have manufacturing facilities in China, Malaysia, Northern Ireland, Singapore and Thailand, in addition to those in the United States. A substantial portion of our desktop rigid disc drive assembly occurs in our facility in China. Our international...

  • Page 50
    ... manufacturing facilities, complying with local legal and regulatory requirements and protecting our intellectual property. We cannot assure you that we will continue to be found to be operating in compliance with applicable customs, currency exchange control regulations, transfer pricing...

  • Page 51
    ...the claim by Papst that its license agreement was not properly transferred. We received a letter dated November 20, 2002 from Read-Rite Corporation asserting that we do not currently have a license to its patented technology and that our rigid disc drive products infringe at least two of its patents...

  • Page 52
    ...in correspondence since that date, asserted that we do not currently have a license to Read-Rite Corporation patented technology and that our rigid disc drive products infringe at least two Read-Rite Corporation patents. Intellectual property litigation is expensive and time-consuming, regardless of...

  • Page 53
    ... to secure these patents may limit our ability to protect the intellectual property rights that these applications were intended to cover. Disclosure of our Proprietary Technology-Confidentiality and non-disclosure agreements may not adequately protect our proprietary technology or trade secrets. We...

  • Page 54
    ... our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements; • our...

  • Page 55
    ... to us, in each case, in amounts sufficient to enable us to fund our liquidity needs. If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product development efforts, strategic acquisitions, investments and alliances, selling assets...

  • Page 56
    ... with the November 2000 transactions and is owned by our sponsor group and members of our management. Through their ownership of New SAC, as of July 2, 2004, affiliates of Silver Lake Partners, Texas Pacific Group, August Capital, J.P. Morgan Partners, LLC and investment partnerships affiliated with...

  • Page 57
    ... value or the price you paid for your shares. Any decision regarding their ownership of us that members of our sponsor group may make at some future time will be in their absolute discretion. Future Sales-Additional sales of our common shares by New SAC, our sponsors or our employees or issuances by...

  • Page 58
    ... of our common shares could result in securities class action claims against us. Significant price and value fluctuations have occurred with respect to the publicly traded securities of rigid disc drive companies and technology companies generally. The price of our common shares is likely to be 57

  • Page 59
    ... periods of decline in the market price of a company's securities, class action lawsuits have often been pursued against that company. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management's attention and resources, which could materially...

  • Page 60
    ...-Holders of our common shares may have difficulty obtaining or enforcing a judgment against us because we are incorporated under the laws of the Cayman Islands. Because we are a Cayman Islands exempted company, there is uncertainty as to whether the Grand Court of the Cayman Islands would recognize...

  • Page 61
    ... a highly liquid portfolio by investing only in marketable securities with active secondary or resale markets. We have both fixed and floating rate debt obligations. We enter into debt obligations to support general corporate purposes including capital expenditures and working capital needs. We have...

  • Page 62
    ... and presents the notional amounts (at the contract exchange rates) and the weighted average contractual foreign currency exchange rates. Notional Amount Average Contract Rate Estimated Fair Value(1) (In millions, except average contract rate) Foreign currency forward exchange contracts: Singapore...

  • Page 63
    ... employee compensation Accrued expenses Accrued warranty Accrued income taxes Current portion of long-term debt Total Current Liabilities Accrued warranty Other liabilities Long-term debt, less current portion Total Liabilities Commitments and contingencies SHAREHOLDERS' EQUITY Preferred shares...

  • Page 64
    Table of Contents SEAGATE TECHNOLOGY CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Fiscal Year Ended July 2, 2004 Fiscal Year Ended June 27, 2003 Fiscal Year Ended June 28, 2002 Revenue Cost of revenue Product development Marketing and administrative Amortization of ...

  • Page 65
    ..., employee compensation and warranty Accrued income taxes Accrued deferred compensation Other assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES Acquisition of property, equipment and leasehold improvements Purchases of short-term investments Maturities and sales...

  • Page 66
    ... of former senior secured credit facilities Net income Comprehensive income Compensation expense related to New SAC Balance at June 28, 2002 Net income and comprehensive Income Issuance of common shares related to exercise of employee stock options Sale of XIOtech to New SAC in exchange for $32 note...

  • Page 67
    ... customer demand. These programs are typically related to a distributor's level of sales, order size, advertising or point of sale activity or an OEM's level of sale activity or agreed upon rebate programs. The Company provides for these obligations at the time that revenue is recorded based...

  • Page 68
    ... Separately Priced Extended Warranty and Product Maintenance contracts" for sales of extended warranties. In the third quarter of fiscal year 2002, the Company's North American distribution customers transitioned from a consignment model, under which the Company recognized revenue when distributors...

  • Page 69
    ... SEAGATE TECHNOLOGY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Estimated reductions to revenue for sales incentive programs, such as price protection, and sales growth bonuses, are recorded when revenue is recorded. Marketing development programs are either recorded as a reduction...

  • Page 70
    ...results of operations for fiscal years 2004 and 2003 included write-downs of $2 million and $10 million, respectively, in an investment in a private company. Concentration of Credit Risk -The Company's customer base for disc drive products is concentrated with a small number of OEMs and distributors...

  • Page 71
    Table of Contents SEAGATE TECHNOLOGY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Earnings Per Share In accordance with SFAS 128, "Earnings per Share," the following table sets forth the computation of basic and diluted net income per share for the fiscal years ended July 2, 2004 and June ...

  • Page 72
    ... of Secondary Public Offering Under the Seagate Technology shareholders agreement among New SAC, the Company's financial sponsors and the Company, New SAC has demand registration rights to request from time to time that the Company register to sell shares of its common stock held by New SAC. New SAC...

  • Page 73
    ... Auction rate preferred stock Corporate securities Total available-for-sale securities Included in cash and cash equivalents Included in short-term investments $ 234 171 265 459 $ 234 171 265 459 $1,129 $ 684 445 $1,129 $ 1,129 The fair value of the Company's investment in debt securities, by...

  • Page 74
    ... instruments for trading purposes. During fiscal years 2004, 2003 and 2002, the Company did not enter into any fair value hedges or hedges of net investments in foreign operations. In the fourth fiscal quarter of 2004, the Company instituted a foreign currency hedging program to protect against the...

  • Page 75
    ...: Components Work-in-process Finished goods $ 91 39 319 $ 449 $ 71 38 210 $ 319 Property, equipment and leasehold improvements Property, equipment and leasehold improvements consisted of the following: Useful Life in Years July 2, 2004 June 27, 2003 (in millions) Land Equipment Building and...

  • Page 76
    ... Company's wholly-owned subsidiaries, Seagate Technology HDD Holdings ("HDD") and Seagate Technology (US) Holdings, Inc., entered into new senior secured credit facilities with a group of banks that permit up to $500 million of borrowings consisting of a $150 million revolving credit and a five-year...

  • Page 77
    ...its board of directors. 3. Compensation Tax-Deferred Savings Plan The Company has a tax-deferred savings plan, the Seagate 401(k) Plan ("the 40l(k) plan"), for the benefit of qualified employees. The 40l (k) plan is designed to provide employees with an accumulation of funds at retirement. Qualified...

  • Page 78
    ... STATEMENTS-(Continued) Stock-Based Benefit Plans Share Option Plan -In December 2000, the Company's board of directors adopted the Seagate Technology 2001 Share Option Plan (the "Seagate Technology Option Plan"). Under the terms of the Seagate Technology Option Plan, eligible employees, directors...

  • Page 79
    ... case, the plan is immediately canceled after that purchase date, and a new one-year plan is established using the then-current stock price as the base purchase price. On July 31, 2003, the purchase date for the ESPP's first purchase period, a total of 2,496,495 shares of the Company's common stock...

  • Page 80
    ...Company's stock options granted to employees during fiscal years 2004 and 2003 was estimated using the following weighted average assumptions: 2004 Post-IPO 2003 Pre-IPO 2003 Option Plan Shares Expected life (in years) Risk-free interest rate Volatility Expected dividend Fair value ESPP Plan Shares...

  • Page 81
    ...-retirement medical plan for new retirees subsequent to July 2, 2004. As a result, the benefit obligation accrued to date for current company employees will be eliminated and the Company estimates that it will record a reduction in operating expenses of approximately $18 million in its first fiscal...

  • Page 82
    ...no outstanding balances for taxes due to or from any New SAC affiliates. The provision for (benefit from) income taxes consisted of the following: Fiscal Year Ended July 2, 2004 Fiscal Year Ended June 27, 2003 (in millions) Fiscal Year Ended June 28, 2002 Current Tax Expense (Benefit): U.S. Federal...

  • Page 83
    ... of $74 million, which will expire at various dates beginning in 2006, if not utilized. Utilization of the U.S. net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as...

  • Page 84
    ...earnings of the Company's foreign subsidiaries, as these earnings will not be subject to tax in the Cayman Islands or U.S. federal income tax if remitted to the foreign parent holding company. On July 31, 2001, Seagate Delaware and the Internal Revenue Service filed a settlement stipulation with the...

  • Page 85
    ... of 2004. Certain of Seagate Delaware's foreign and state tax returns remain under examination by various taxing authorities. The Internal Revenue Service is currently examining the Company's federal income tax returns for fiscal years ending in 2001 and 2002. The timing of the settlement of these...

  • Page 86
    ... customer accounted for more than 10% of consolidated revenues in any year presented. Long-lived assets consist of property, equipment and leasehold improvements, capital leases, equity investments, goodwill and other intangibles, and other non-current assets as recorded by the Company's operations...

  • Page 87
    ... of Contents SEAGATE TECHNOLOGY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables summarize the Company's operations by business segment: Fiscal Years Ended July 2, 2004 June 27, 2003 (in millions) June 28, 2002 Revenue and Gross Profit Revenue: Rigid Disc Drives Other...

  • Page 88
    ...price of its common stock and the voting and other rights of the holders of common stock. As of July 2, 2004, there were no shares of preferred stock outstanding. Distributions During fiscal year 2004, pursuant to its quarterly dividend policy, the Company made cash distributions to its shareholders...

  • Page 89
    ... patents are invalid and not infringed and that it owns any intellectual property based on the information that the Company disclosed to Convolve. The court denied plaintiffs' motion for expedited discovery and ordered plaintiffs to identify their trade secrets to defendants before discovery could...

  • Page 90
    ... China, by an individual, Shao Tong, and a private Chinese company, Nanjing Yisike Network Safety Technique Co., Ltd. The complaint alleged that two of the Company's personal storage disc drive products infringe Chinese patent number ZL94111461.9, which prevents the corruption of systems data stored...

  • Page 91
    ...Cross-License Agreement to the extent permitted by Section 365(n) of the U.S. Bankruptcy Code. Securities and Exchange Commission's Request for Information In October 2003, the Company received from the SEC a request for all third-party research analyst reports regarding Seagate Technology published...

  • Page 92
    ... The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of one to five years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to...

  • Page 93
    ... companies. Upon the closing of the stock purchase agreement by New SAC, these services continue to be provided by the Company through New SAC. The services provided generally include general management, treasury, tax, financial reporting, benefits administration, insurance, information technology...

  • Page 94
    ... holders of its ordinary shares including approximately $245 million distributed to the Company's officers and employees who hold ordinary shares of New SAC. In February 2003 and May 2003, pursuant to its quarterly dividend policy, the Company made cash distributions to its shareholders aggregating...

  • Page 95
    ... to its ordinary shareholders, including the distribution of approximately $7 million paid to officers and employees of the Company that held ordinary shares of New SAC. 13. Condensed Consolidating Financial Information On May 13, 2002, Seagate Technology HDD Holdings, or HDD, issued $400 million...

  • Page 96
    ... FINANCIAL STATEMENTS-(Continued) Consolidating Balance Sheet July 2, 2004 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Seagate Technology Consolidated Eliminations Cash and cash equivalents Short-term investments Accounts receivable, net...

  • Page 97
    ... FINANCIAL STATEMENTS-(Continued) Consolidating Balance Sheet June 27, 2003 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Seagate Technology Consolidated Eliminations Cash and cash equivalents Short-term investments Accounts receivable, net...

  • Page 98
    ... Statement of Operations Fiscal Year Ended July 2, 2004 (in millions) Seagate Technology Parent Company Guarantor Combined NonGuarantors Seagate Technology Consolidated HDD Subsidiary Issuer Eliminations Revenue Cost of revenue Product development Marketing and administrative Restructuring Total...

  • Page 99
    ...Year Ended July 2, 2004 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Eliminations Seagate Technology Consolidated Net Income Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization VERITAS...

  • Page 100
    ... Operations Fiscal Year Ended June 27, 2003 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Eliminations Seagate Technology Consolidated Revenue Cost of revenue Product development Marketing and administrative Restructuring Total operating...

  • Page 101
    ... of Cash Flows Fiscal Year Ended June 27, 2003 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Eliminations Seagate Technology Consolidated Net Income Adjustments to reconcile net income to net cash from operating activities: Depreciation...

  • Page 102
    ... Statement of Operations Fiscal Year Ended June 28, 2002 (in millions) Seagate Technology Parent Company Guarantor HDD Subsidiary Issuer Combined NonGuarantors Eliminations Seagate Technology Consolidated Revenue Cost of revenue Product development Marketing and administrative Amortization of...

  • Page 103
    ...Repayment of loan from NonGuarantor to HDD Loan from HDD to Non-Guarantor Loan to Parent Loan payment from Parent Distributions from HDD to Seagate Technology Distributions to shareholders Exercise of employee stock options Capital contributions to HDD Capital contributions to NonGuarantors Net cash...

  • Page 104
    the period $ - 102 $ 46 $ 566 $ - $ 612

  • Page 105
    ... a $39 million restructuring charge and a $2 million write-down of an investment in a private company. Fiscal Year 2003 Unaudited, in millions except per share data 1st 2nd 3rd 4th Revenue Gross margin Income from operations Net income Net income per share: Basic Diluted $1,579 372 119 110 $ 0.27...

  • Page 106
    ... June 27, 2003, and the consolidated results of operations and cash flows of Seagate Technology for the fiscal years ended July 2, 2004, June 27, 2003 and June 28, 2002, in conformity with U.S. generally accepted accounting principles. /s/ San Jose, California July 20, 2004 104 E RNST & Y OUNG LLP

  • Page 107
    ... within 120 days of the end of our fiscal year pursuant to General Instruction G(3) to Form 10-K. See the information contained under the heading "Equity Plan Compensation Information" within Item 7 of this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required...

  • Page 108
    ... Amendment to Stock Purchase Agreement, Agreement and Plan of Merger and Reorganization, and Indemnification Agreement, and Consent, dated as of August 29, 2000, by and among Suez Acquisition Company (Cayman) Limited, Seagate Technology, Inc., Seagate Software Holdings, Inc., VERITAS Software...

  • Page 109
    .... 2 to Stock Purchase Agreement, Agreement and Plan of Merger and Reorganization, and Indemnification Agreement, and Consent, dated as of October 18, 2000, by and among Suez Acquisition Company (Cayman) Limited, Seagate Technology, Inc., Seagate Software Holdings, Inc., VERITAS Software Corporation...

  • Page 110
    ...4.5 Shareholders Agreement by and among Seagate Technology Holdings, New SAC, Silver Lake Technology Investors Cayman, L.P., Silver Lake Investors Cayman, L.P., Silver Lake Partners Cayman, L.P., SAC Investments, L.P., August Capital III, L.P., J.P. Morgan Partners, L.L.C., GS Capital Partners III...

  • Page 111
    ...) Shareholders Agreement, dated as of November 22, 2000, by and among New SAC, Silver Lake Technology Investors Cayman, L.P., Silver Lake Investors Cayman, L.P., Silver Lake Partners Cayman, L.P., SAC Investments, L.P., August Capital III, L.P., Chase Equity Associates, L.P., GS Capital Partners III...

  • Page 112
    ... Agreement, dated as of May 13, 2002, by and among Seagate Technology Holdings, Seagate Technology HDD Holdings, Seagate Technology (US) Holdings, Inc., the Lenders party thereto, JPMorgan Chase Bank, as administrative agent, J.P. Morgan Securities Inc., as joint bookrunner and co-lead arranger...

  • Page 113
    ...a Current Report on Form 8-K with regard to the announcement that it will separate the roles of its Chairman and Chief Executive Officer with Bill Watkins succeeding Steve Luczo as CEO effective July 3, 2004. Additionally, the registrant announced the resignation of David Bonderman from its board of...

  • Page 114
    ..., but without limiting the generality of the foregoing, power and authority to sign the name of the registrant and the name of the undersigned, individually and in his capacity as a director or officer of the registrant, to the Annual Report as filed with the U.S. Securities and Exchange Commission...

  • Page 115
    ... entered into an employment agreement, dated February 1, 2001 (the "Original Employment Agreement") pursuant to which Executive, in relevant part, has been employed as the Chief Executive Officer of the Company and its corporate parent, Seagate Technology, a limited company domiciled in the...

  • Page 116
    ... of the Collateral Documents (as defined below) and Section 7 of the Original Employment Agreement, Executive will remain continuously employed by the Company as he transitions from his position as the Company's and ST's Chief Executive Officer to Chairman. Executive further agrees that none of the...

  • Page 117
    ... fees, payable to members of the Board who are not employees of ST. 5. Employee Benefits/Equity Awards . During the Employment Term, Executive shall be provided with health, life and disability insurance benefits pursuant to the terms of the Company's various benefit plans, as listed on Exhibit...

  • Page 118
    ... as an investment, securities of any person engaged in the business of New SAC or its subsidiaries which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person...

  • Page 119
    ... any original works of authorship which are made by Executive (solely or jointly with others) within the scope of and during the period of Executive's employment with the Company are deemed not to be "works made for hire," Executive hereby assigns the copyright and all other intellectual property...

  • Page 120
    ... only upon receipt. If to the Company: Seagate Technology (US) Holdings, Inc. 920 Disc Drive Scotts Valley, CA 95066 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company. i. Executive Representation . Executive hereby...

  • Page 121
    ... Technology Media (Ireland) Limavady Northern Ireland Branch Seagate Technology (Thailand) Limited Cayman Cayman California Delaware Delaware Delaware Delaware Sweden Australia Germany Hong Kong China China China France Taiwan Delaware Cayman Netherlands Singapore Malaysia Malaysia Singapore India...

  • Page 122
    ... in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who...

  • Page 123
    ... of the Annual Report of Seagate Technology (the "Company") on Form 10-K for the fiscal year ended July 2, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"). In connection with the Report, we, William D. Watkins, Chief Executive Officer of the Company, and...