Seagate 2007 Annual Report Download - page 113

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
—
(
Continued)
Recognition of Liabilities in Connection with Maxtor Acquisition
Under EITF 95
-
3,
Recognition of Liabilities in Connection with a Business Combination,
the Company accrued certain exit costs
aggregating $246 million, of which $108 million relates to employee severance, $45 million relates to the planned exit of leased or owned excess
facilities and $93 million relates to the cancellation or settlement of contractual obligations that will not provide any future economic benefit.
The severance and associated benefits liability related to the employment termination of approximately 4,900 Maxtor employees, primarily in
the U.S. and Far East, all of whom had been terminated as of June 29, 2007. In the fiscal year ended June 27, 2008, the Company paid
$16 million of the accrued exit costs. The Company’s payments for severance and related benefits and for contractual settlements were
substantially completed as of June 29, 2007, while the payments associated with the exit of certain facilities will continue to the end of fiscal
year 2016.
The following table summarizes the Company’s exit activities in connection with the Maxtor acquisition:
Accrued exit costs are included in short-term and long-term Accrued Restructuring on the Consolidated Balance Sheet.
Stock-Based Compensation
Severance
and
Benefits
Excess
Facilities
Contract
Cancellations
Total
(In millions)
Accrued exit costs, May 19, 2006
$
117
$
43
$
91
$
251
Cash payments
(8
)
—
(
10
)
(18
)
Accrued exits costs, June 30, 2006
109
43
81
233
Purchase accounting adjustments
(9
)
2
3
(4
)
Cash payments
(99
)
(17
)
(80
)
(196
)
Accrued exits costs, June 29, 2007
1
28
4
33
Cash payments
(1
)
(11
)
(4
)
(16
)
Accrued exit costs, June 27, 2008
$
—
$
17
$
—
$
17
The fair value of stock-based compensation related to the unearned stock options and nonvested shares assumed from Maxtor was
approximately $69 million, net of forfeitures, of which approximately $58 million has been amortized through June 27, 2008. The remaining
$11 million is being amortized on a straight-line basis over the remaining estimated service (vesting) periods of the underlying stock options or
nonvested shares.
Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of operations of the Company and the results of
Maxtor prior to the Merger, on a pro forma basis, as though the companies had been combined as of July 3, 2004 for the period presented. Pro
forma financial information for our other acquisitions have not been presented, as the effects were not material to our historical consolidated
financial statements either individually or in aggregate. The pro forma financial information for the period presented also includes the business
combination accounting effect on conforming Maxtor’s revenue recognition policy to the Company’s, adjustments related to the fair value of
acquired inventory and fixed assets, amortization charges from acquired intangible assets, stock-based compensation charges for unvested
options assumed and nonvested shares exchanged and related tax effects of these adjustments. The pro forma financial information is presented
for
112