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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The fair value of the Company’
s stock options granted to employees during fiscal years 2004 and 2003 was estimated using the following
weighted average assumptions:
Deferred Compensation Plan
2004
Post-IPO
2003
Pre-IPO
2003
Option Plan Shares
Expected life (in years)
3.0
3.0
3.0
Risk
-
free interest rate
2.3
–
2.5%
2.1
–
3.0%
2.1
–
3.0%
Volatility
0.75
–
0.83
0.83
Minimum
Expected dividend
0.5
–
2.0%
0.7
–
1.2%
—
Fair value
$11.45
$4.80
$4.80
ESPP Plan Shares
Expected life (in years)
0.5
–
1.0
0.5
–
1.0
—
Risk
-
free interest rate
1.0
–
1.3%
1.2
–
1.3%
—
Volatility
0.45
–
0.99
0.74
–
0.91
—
Expected dividend
0.8
–
1.5%
1.2%
—
Fair value
$4.72
$3.31
—
On January 1, 2001, the Company adopted a deferred compensation plan for the benefit of eligible employees. This plan is designed to
permit certain discretionary employer contributions, in excess of the tax limits applicable to the 401(k) plan and to permit employee deferrals in
excess of certain tax limits. Company assets earmarked to pay benefits under the plan are held by a rabbi trust. The Company has adopted the
provisions of Emerging Issues Task Force Issue No. 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned
are Held in a Rabbi Trust” (“EITF 97-14”). Under EITF 97-14, the assets and liabilities of a rabbi trust must be accounted for as if they are
assets and liabilities of the Company. In addition all earnings and expenses of the rabbi trust are recorded as other income or expense in the
Company’s financial statements. At July 2, 2004 and June 27, 2003, the deferred compensation amounts related to the rabbi trust were
approximately $61 million and $42 million, respectively, and are included in current liabilities on the accompanying balance sheets.
Post-Retirement Medical Plan
In fiscal year 2000, Seagate Delaware adopted a post-retirement medical plan that offers medical coverage to eligible U.S. retirees and
their eligible dependents. Substantially all U.S. employees become eligible for these benefits after 15 years of service and attaining age 60 and
older. The Company’s measurement date is March 31
st
of each year.
79