Summary
Seagate Technology Holdings plc (STX) has disclosed a significant tax assessment from the Jiangsu Province State Tax Bureau of the People's Republic of China on December 31, 2014. This assessment pertains to tax and interest adjustments for the calendar years 2007 through 2013, affecting its Chinese affiliates, Seagate Technology International (Wuxi) Co., Ltd. and Seagate Technology (Suzhou) Co., Ltd. The company expects to recognize approximately $200 million in additional tax expense in its second quarter of fiscal year 2015, with a cash payment of roughly $230 million due in the third quarter of fiscal year 2015. While this represents a substantial charge, Seagate views the resolution of this audit and the agreement on predictable future tax expenses as a positive step towards greater financial stability. The company anticipates that the additional future tax expenses will not materially impact its financial statements. Investors should note the timing of the expense recognition and cash outflow, as well as the company's assertion of no material future impact.
Key Highlights
- 1Seagate Technology plc received a final audit assessment from China's Jiangsu Province State Tax Bureau on December 31, 2014.
- 2The assessment covers tax and interest related to calendar years 2007 through 2013 for its Chinese affiliates.
- 3The company will record approximately $200 million in additional tax expense in its Q2 fiscal year 2015.
- 4A cash payment of approximately $230 million is expected in Q3 fiscal year 2015.
- 5Seagate views the resolution as providing stability and agreement on predictable future tax expenses.
- 6The company does not expect the additional future tax expense to have a material impact on its financial statements.