Western Digital 2002 Annual Report Download - page 22

Selling, general and administrative (""SG&A'') expense was $110.8, $115.8 and $127.0 million for 2002, 2001
and 2000, respectively. The decrease in SG&A expense in 2002 from 2001 of $5.0 million was primarily due to expense
reduction eÅorts, partially oÅset by higher employee incentive payments. The decrease in 2001 from 2000 of
$11.2 million was primarily due to the Company's exit from the SCSI hard drive market in 2000 and expense reduction
eÅorts in its remaining hard drive operations.
Restructuring Charges
During 2000, the Company initiated restructuring actions to improve operational eÇciency and reduce operating
expenses. These actions primarily consisted of a consolidation of the Company's Asian operations and termination of its
SCSI hard drive product line. Restructuring charges recorded in connection with these actions totaled $85.8 million and
consisted of severance and outplacement costs, the retirement of manufacturing equipment and information systems
assets, and net lease cancellation costs. Also recorded in connection with these actions were special charges to cost of
revenues of $34.8 million for vendor settlements, incremental warranty, and inventory write-downs associated with
exiting the SCSI hard drive product line.
Interest and Other Income (Expense)
Net interest and other income (expense) was $1.4, ($53.1) and $4.9 million in 2002, 2001 and 2000,
respectively. This includes net investment gains of $4.8 million in 2002, investment write-oÅs and related lease
contingency accruals of $52.4 million in 2001, and net investment gains of $14.8 million in 2000. Excluding these
nonrecurring items, net interest and other expense was $3.4, $0.7 and $9.9 million in 2002, 2001 and 2000,
respectively. The increase in net expense in 2002 (excluding nonrecurring items) was primarily due to a decrease in
interest income as a result of lower interest rates. The decrease in net expense in 2001 (excluding nonrecurring items) was
primarily due to lower interest expense on lower average debt balances resulting from the payment in 2000 of an
outstanding term loan of $50.0 million and redemptions during 2000 and 2001 of the Company's 5.25% zero coupon
convertible debentures.
Included in 2002's net investment gains is a $9.0 million recovery from the sale of the Company's remaining
Komag investments to a third party. These investments were part of the $52.4 million nonoperating charge recorded to
net interest and other expense during 2001 to adjust the carrying value of equity investments in and notes receivable from
Komag and accruals of Komag contingent guarantees, resulting from Komag's announcement to Ñle for Chapter 11
reorganization.
Income Tax BeneÑt
The Company's 2002 net income tax beneÑt of $1.1 million included a federal income tax refund of $3.1 million
for a loss carryback available as a result of tax legislation enacted during the year. During 2001, the Company did not
record an income tax beneÑt, as no loss carrybacks were available at that time. During 2000, the Company recorded an
income tax beneÑt of $19.5 million to adjust its current and deferred tax accruals. The accruals were established in prior
years primarily for the unremitted income of foreign subsidiaries. However, due to the signiÑcant increase of net
operating loss carryforwards and reevaluation of the accruals after the substantial international restructurings in 2000, the
Company believed the accruals were no longer necessary. See Note 11 of Notes to Consolidated Financial Statements.
Discontinued Operations
During 2002, the Company discontinued the operations of new business ventures, including Connex, Inc.
(""Connex''), SANavigator, Inc. (""SANavigator'') and Keen Personal Media, Inc. (""Keen''). The Company sold
substantially all of the assets of its Connex and SANavigator businesses for a net gain of $24.5 million and terminated the
Keen operations. These operating losses for the periods reported and the net gain recognized on the sale of Connex and
SANavigator have been segregated from continuing operations and reported separately on the statements of operations as
discontinued operations.
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