Western Digital 2003 Annual Report Download - page 57

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Note 9. Discontinued Operations
The Company acquired Connex, Inc. (""Connex''), a storage systems and solutions startup, in 1999. SANavigator,
Inc. (""SANavigator'') was formed as a subsidiary of Connex in 2001 and developed and marketed storage area network
management software.
During 2000, the Company formed Keen Personal Media, Inc. (""Keen PM''), to develop and sell interactive
personal video recorder and set-top box software, services and hardware for broadband television content management
and commerce.
In 2002, the Company discontinued Connex, SANavigator and Keen. The disposals have been accounted for as
discontinued operations and, accordingly, the consolidated Ñnancial statements for all periods presented have been
reclassiÑed. In August 2001, substantially all of the operating assets of Connex were sold to Quantum Corporation for
cash proceeds of $11.0 million, and in September 2001 substantially all of the operating assets of SANavigator were sold
to McData Corporation for cash proceeds of $29.8 million. These transactions generated a gain of $24.5 million, net of
costs incurred from the measurement date of July 1, 2001 through the end of the period to shutdown the businesses.
During 2002, in connection with the disposal of Keen, the Company assumed certain remaining debt
commitments, as Western Digital was the guarantor of these obligations. In 2003, the Company repaid these obligations
resulting in a gain of $1.3 million due to a favorable settlement.
Note 10. Income Taxes
The domestic and international components of income (loss) before income taxes are as follows (in millions):
2003 2002 2001
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 64.9 $(56.5) $(214.8)
InternationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124.8 120.8 115.9
Income (loss) before income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $189.7 $ 64.3 $ (98.9)
The components of the income tax expense (beneÑt) are as follows (in millions):
2003 2002 2001
Current
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4.0 $(3.1) $(1.8)
InternationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.4 1.7 1.6
StateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.3 0.2
Income tax expense (beneÑt) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7.6 $(1.1) $ Ì
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 generally reduce taxes currently payable. However, no tax beneÑts were recorded to additional paid-in capital in
2003, 2002 and 2001 because their realization was not believed to be ""more likely than not.'' Consequently, a valuation
allowance was recorded against the entire beneÑt. BeneÑts to be recognized in the future related to stock option
deductions are approximately $23.7 million.
During 2002, the company received a refund of U.S. federal income taxes of $3.1 million. This refund was for
alternative minimum taxes paid in prior years and was made in accordance with legislation enacted during 2002.
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