Seagate 2006 Annual Report Download - page 93

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the fourth quarter of fiscal year 2006, the Company repurchased 16.7 million shares under a previously
authorized stock repurchase program. The program authorizing repurchases in the fourth quarter of fiscal year 2006
was completed and there is no outstanding authority for further shares to be purchased under that program.
Leases — The Company leases certain property, facilities and equipment under non-cancelable lease
agreements. Land and facility leases expire at various dates through 2082 and contain various provisions for rental
adjustments including, in certain cases, a provision based on increases in the Consumer Price Index. Also, certain
leases provide for renewal of the lease at the Company’
s option at expiration of the lease. All of the leases require the
Company to pay property taxes, insurance and normal maintenance costs.
Future minimum lease payments for operating leases with initial or remaining terms of one year or more were as
follows at June 29, 2007 (lease payments are shown net of sublease income):
Total rent expense for all land, facility and equipment operating leases was approximately $36 million,
$24 million and $19 million for fiscal years 2007, 2006 and 2005, respectively. Total sublease rental income for
fiscal year 2007 was $11 million and $6 million for each of fiscal years 2006 and 2005. The Company subleases a
portion of its facilities that it considers to be in excess of current requirements. As of June 29, 2007, total future lease
income to be recognized for the Company’s existing subleases is approximately $32 million.
The Company established both adverse and favorable leasehold interests and for exit costs that apply directly to
the lease commitments assumed through the acquisition of Maxtor. As of June 29, 2007, in accordance with
SFAS No. 141, the Company has recorded a $62 million adverse leasehold interest and a $4 million favorable
leasehold interest. Both the adverse and favorable leasehold interest reserve is being amortized to Cost of Revenue
and Operating Expenses over the remaining duration of the leases. In addition, the Company had $28 million
remaining in accrued exit costs related to the planned exit of leased excess facilities at June 29, 2007.
Capital Expenditures — The Company’s commitments for construction of manufacturing facilities and
equipment approximated $244 million at June 29, 2007.
In accordance with SFAS No. 5, Accounting for Contingencies, the Company assesses the probability of an
unfavorable outcome of all its material litigation, claims, or assessments to determine whether a liability had been
incurred and whether it is probable that one or more future events will occur confirming the fact of the loss. In the
event that an unfavorable outcome is determined to be probable and the amount of the loss can be reasonably
estimated, the Company establishes an accrual for the litigation, claim or assessment. Litigation is inherently
uncertain and may result in adverse rulings or decisions. Additionally, we may enter into settlements or be subject to
judgments that may, individually or in the aggregate, have a material adverse effect adverse effect on our results of
operations. Accordingly, actual results could differ materially.
90
8.
Commitments
Operating
Fiscal Years Ending
Leases
(In millions)
2008
$
42
2009
37
2010
34
2011
44
2012
15
Thereafter
137
$
309
9.
Legal, Environmental, and Other Contingencies