Seagate 2009 Annual Report Download - page 59

Table of Contents
Other Income (Expense), net
The change in Other income (expense), net was primarily due to a $40 million decrease in interest income as a result of lower yields on
cash, cash equivalents and short-term investments, and a $38 million decline in the value of the deferred compensation plan assets. The
corresponding gain or loss on deferred compensation plan liabilities is primarily reported in operating expenses.
Income Taxes
We recorded a provision for income taxes of $311 million for fiscal year 2009 compared to a provision for income taxes of $67 million for
fiscal year 2008. Our fiscal year 2009 provision for income taxes included $271 million of income tax expense recorded in the second quarter
associated with an increase in our valuation allowance for U.S. deferred tax assets related to a reduction in our forecasted U.S. taxable income.
We were a non-U.S. holding company incorporated in the Cayman Islands with U.S. and non-U.S. subsidiaries that operate in multiple
taxing jurisdictions. As a result, our worldwide operating income was either subject to varying rates of tax or was exempt from tax due to tax
holidays or tax incentive programs we operated under in China, Malaysia, Singapore, Switzerland and Thailand. These tax holidays or incentives
were scheduled to expire in whole or in part at various dates through 2020.
Our provision for income taxes for fiscal year 2009 differed from the provision for income taxes that would be derived by applying a
notional U.S. 35% rate to income before income taxes primarily due to the net effect of (i) non-deductible goodwill impairments, (ii) an increase
in our valuation allowance for certain deferred tax assets, (iii) non-U.S. losses with no tax benefit, (iv) tax benefits related to tax holiday and tax
incentive programs, and (v) tax expense related to intercompany transactions. Our provision for income taxes recorded for fiscal year ended
June 27, 2008 differed from the provision for income taxes that would be derived by applying a notional U.S. 35% rate to income before income
taxes primarily due to the net effect of (i) tax benefits related to tax holiday and tax incentive programs, (ii) a decrease in our valuation
allowance for certain deferred tax assets, and (iii) tax expense related to intercompany transactions.
In fiscal year 2009, the deferred tax asset valuation allowance was approximately $1.3 billion. The valuation allowance for deferred tax
assets increased by approximately $864 million in fiscal year 2009. The increase in valuation allowance resulted primarily from the liquidation
of our wholly owned subsidiary, Maxtor, effective June 1, 2009 and represented the net effects of the extinguishment of all deferred tax assets
related to historical carryover tax attributes of Maxtor and the increase in deferred tax assets related to losses incurred in connection with the
liquidation transaction. As of June 27, 2008, the deferred tax asset valuation allowance was $433 million. Approximately $22 million of this
amount was related to deferred tax assets acquired in the Maxtor acquisition for which the related benefit would have been credited to goodwill
if realized. The net increase in the valuation allowance in fiscal year 2008 was $34 million.
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Fiscal Years Ended
(Dollars in millions)
July 3,
2009
(1)
June 27,
2008
(1)
Change %
Change
Other income (expense),
net
$
(149
)
$
(58
)
$
(91
)
157
%
(1) As adjusted due to a required change in the accounting for convertible debt instruments implemented in the
first quarter of 2010, applied on a retrospective basis.
Fiscal Years Ended
(Dollars in millions)
July 3,
2009
(1)
June 27,
2008
(1)
Change %
Change
Provision for income
taxes
$
311
$
67
$
244
364
%
(1) As adjusted due to a required change in the accounting for convertible debt instruments implemented in the
first quarter of 2010, applied on a retrospective basis.