Seagate 2004 Annual Report Download - page 89

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On July 31, 2001, Seagate Delaware and the Internal Revenue Service filed a settlement stipulation with the United States Tax Court in
complete settlement of the remaining disputed tax matter reflected in the statutory notice of deficiency dated June 12, 1998. The settlement
stipulation was expressly contingent upon Seagate Delaware and the Internal Revenue Service entering into a closing agreement in connection
with certain tax matters arising in all or some part of the open tax years of Seagate Delaware and New SAC. The Internal Revenue Service
completed its review of Seagate Delaware’
s federal tax returns for the periods prior to the acquisition date of the operating assets and submitted
its conclusions to the congressional Joint Committee on Taxation for review. On March 15, 2004, VERITAS Software Corporation
(“VERITAS”) received written notification from the Internal Revenue Service that the congressional Joint Committee on Taxation had
completed its review and had taken no exception to the Internal Revenue Service’s conclusions. On April 6, 2004, Seagate Delaware and the
Internal Revenue Service filed a revised settlement stipulation with the United States Tax Court in connection with the statutory notice of
deficiency which reflected the parties’ agreement to fully resolve the remaining tax matters included in the statutory notice of deficiency. On
June 28, 2004, the revised settlement stipulation was made final by the United States Tax Court and the case has been closed.
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. The Company believes that adequate amounts of tax have been provided for
any final assessment that may result.
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 quarter of fiscal
year 2004.
5. Restructuring Costs
During fiscal year 2005, the Company recorded restructuring costs of $8 million in connection with its on-going restructuring activities.
These costs were primarily a result of a restructuring plan established to continue the alignment of the Company’s global workforce with
existing and anticipated future business requirements, primarily in its U.S. operations. The restructuring costs were comprised of employee
termination costs of approximately $5 million relating to a reduction in the Company’s workforce and approximately $3 million in charges
related to impaired facility improvements as a result of the alignment plan. The Company expects these restructuring activities to be
substantially completed by July 1, 2005. Additionally, the Company reversed approximately $8 million of its restructuring accruals comprised
of approximately $3 million recorded in prior fiscal years relating to accrued severance benefits that were less than amounts originally
estimated and approximately $5 million relating to the sale in the first quarter of fiscal year 2005 of a surplus building previously impaired in
the fiscal year 2000 restructuring.
During fiscal year 2004, the Company recorded $59 million in restructuring charges. Of the $59 million, $39 million was incurred in the
fourth fiscal 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 2,400 employees. The restructuring activities related to the charge
taken in the fourth quarter of fiscal year 2004 were substantially complete as of October 2004.
85