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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
resolution of these matters will have a material adverse eÅect on its consolidated Ñnancial position, results of
operations or liquidity.
From time to time the Company receives claims and is a party to suits and other judicial and
administrative proceedings incidental to its business. Although occasional adverse decisions (or settlements)
may occur, the Company does not believe that the ultimate resolution of these matters will have a material
adverse eÅect on its consolidated Ñnancial position, results of operations or liquidity.
Note 5. Income Taxes
The domestic and international components of income (loss) before income taxes are as follows (in
thousands):
1998 1999 2000
United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(348,397) $(399,006) $(214,316)
International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56,389 (93,684) 6,800
Income (loss) before income taxes and after
extraordinary itemÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(292,008) $(492,690) $(207,516)
The components of the provision (beneÑt) for income taxes are as follows (in thousands):
1998 1999 2000
Current
United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (6,195) $ (3,519) $ (15,302)
International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,905 3,352 2,623
State ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (501) 167 179
(1,791) Ì (12,500)
Deferred, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (7,000)
Provision (beneÑt) for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (1,791) $ Ì $ (19,500)
The tax beneÑts associated with employee exercises of non-qualiÑed stock options, disqualifying
dispositions of stock acquired with incentive stock options, and disqualifying dispositions of stock acquired
under the employee stock purchase plan reduced taxes currently payable in 1998 by $2.3 million. Such
beneÑts were credited to additional paid-in capital. No amounts were recorded to additional paid-in capital in
1999 and 2000 because their realization was not more likely than not to occur and, consequently, a valuation
allowance was recorded against the entire beneÑt.
During 2000, the Company reversed $19.5 million of tax accruals and certain deferred tax amounts.
These accruals were previously established over time and primarily related to unremitted income of foreign
subsidiaries. However, based upon a review of the Company's tax positions after the substantial international
operations restructurings in 2000, and due to the signiÑcant balances of net operating losses in recent years, the
Company believes these accruals are no longer necessary.
Income tax payments amounted to $16.9 million, $5.5 million and $4.6 million in 1998, 1999 and 2000,
respectively.
46