Summary
Seagate Technology Holdings plc (STX) filed an 8-K report on March 15, 2004, to disclose a significant tax event. The company had previously accrued $125 million for potential tax indemnification obligations to VERITAS Software Corporation related to an asset purchase in November 2000. The Internal Revenue Service (IRS) has completed its review of the relevant tax periods, and the congressional Joint Committee on Taxation has taken no exception to the IRS's conclusions. This outcome means no additional tax will be assessed on VERITAS. Consequently, Seagate will recognize the full $125 million indemnification amount as an income tax benefit in the current quarter ending April 2, 2004. This will result in a corresponding increase to net income after tax. Importantly, this event will have no cash impact on Seagate. The filing indicates that William L. Hudson, Executive Vice President, General Counsel and Secretary, signed the report on behalf of the company.
Key Highlights
- 1Seagate will record a $125 million income tax benefit in the current quarter.
- 2The tax benefit is related to a prior indemnification agreement with VERITAS Software Corporation.
- 3The Internal Revenue Service has completed its tax review without exceptions.
- 4The congressional Joint Committee on Taxation also took no exception to the IRS conclusions.
- 5This resolution means no additional tax will be assessed on VERITAS.
- 6The recognition of the benefit will increase Seagate's net income after tax.
- 7There will be no cash outflow or impact on the company from this tax settlement.