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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In the fiscal year ended July 2, 2004, the Company recorded a $125 million income tax benefit from the reversal of accrued income taxes
relating to tax indemnification amounts due to VERITAS pursuant to the Indemnification Agreement between Seagate Delaware, New SAC
and VERITAS. The $125 million tax indemnification amount had been recorded by the Company in connection with the purchase of the
operating assets of Seagate Delaware and represented U.S. tax liabilities previously accrued by Seagate Delaware for periods prior to the
acquisition date of the operating assets. As a result of the conclusion of the tax audits with no additional tax liabilities due, the Company
determined that the $125 million accrual for the tax indemnification was no longer required and it was reversed in the third fiscal quarter 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 examinations is uncertain. We believe that adequate amounts of tax have been provided for any final assessment that may result.
5. Restructuring Costs
During fiscal year 2004, the Company recorded $59 million in restructuring charges. Of the $59 million, $39 million was incurred in the
quarter ended July 2, 2004 and was associated with the Company’s planned workforce reduction first announced in April 2004 and
implemented in June 2004. The $39 million restructuring charge was comprised of employee termination costs relating to a workforce
reduction, primarily in its U.S. and Far East operations, of approximately 2,407 employees, 1,626 of whom had been terminated as of July 2,
2004. The Company expects the restructuring activities related to the charge taken in its fourth fiscal quarter of 2004 to be substantially
completed by August 2004.
The remaining $20 million in restructuring charges were incurred through the nine months ended April 2, 2004 and a result of a
restructuring plan established to continue the alignment of the Company’s global workforce with existing and anticipated future market
requirements, primarily in its U.S. design centers and Far East operations. The restructuring costs were comprised of employee termination
costs relating to a reduction in the Company’s workforce of approximately 649 employees, 626 of whom had been terminated as of July 2,
2004. These restructuring activities were substantially complete at July 2, 2004.
During fiscal year 2003, the Company recorded $19 million in restructuring charges. The Company also reduced a restructuring accrual
previously recorded by its predecessor in fiscal year 1998 by $10 million due to a change in estimated lease obligations. These combined
actions resulted in a net restructuring charge of $9 million for fiscal year 2003.
Of the $19 million of restructuring charges the Company recorded in fiscal year 2003, $17 million was incurred in the fiscal quarter
ended September 27, 2002 as a result of a restructuring plan, which the Company refers to as the fiscal year 2003 restructuring plan,
established to continue the alignment of the Company’s global workforce and manufacturing capacity with existing and anticipated future
market requirements, primarily in its Far East operations. The restructuring charge was comprised of employee termination costs relating to a
reduction in its workforce of approximately 3,750 employees. The fiscal year 2003 restructuring plan was substantially complete at June 27,
2003. The remaining $2 million restructuring charge was incurred in the fiscal quarter ended June 27, 2003 and was comprised of employee
termination costs relating to a workforce reduction of approximately 686 employees in the Company’
s Thailand operations. These restructuring
activities were completed in July 2003.
During fiscal year 2002, the Company recorded $13 million in restructuring charges and reversed $9 million of restructuring charges
recorded in prior fiscal years resulting in a net restructuring charge of $4 million. The
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