Western Digital 2008 Annual Report Download - page 51

As of June 27, 2008, we had outstanding the following purchased foreign currency forward exchange contracts (in
millions, except weighted average contract rate):
Contract
Amount
Weighted Average
Contract Rate*
Unrealized
Loss
Foreign currency forward contracts:
Thai Baht cash flow hedges ................ $733 33.22 $ (9)
Thai Baht fair value hedges ................ $144 33.63 —
Malaysian Ringgit cash flow hedges .......... $359 3.23 $ (3)
Euro fair value hedges . . . ................. $ 14 0.64 —
* Expressed in units of foreign currency per dollar.
In 2008, 2007 and 2006, total net realized transaction and forward exchange contract currency gains and losses were
not material to our consolidated financial statements.
Disclosure About Other Market Risks
Variable Interest Rate Risk
Borrowings under the Credit Facility bear interest at a rate equal to, at the option of WDTI, either (a) a LIBOR rate
determined by reference to the cost of funds for Eurodollar deposits for the interest period relevant to such borrowing,
adjusted for certain additional costs (the “Eurocurrency Rate”) or (b) a base rate determined by reference to the higher of
(i) the federal funds rate plus 0.50% and (ii) the prime rate as announced by JPMorgan Chase Bank, N.A. (the “Base
Rate”), in each case plus an applicable margin. The applicable margin for borrowings under the term loan facility ranges
from 1.25% to 1.50% with respect to borrowings at the Eurocurrency Rate and 0.0% to 0.125% with respect to
borrowings at the Base Rate. The applicable margin for revolving loan borrowings under the revolving credit facility
ranges from 0.8% to 1.125% with respect to borrowings at the Eurocurrency Rate and 0.0% to 0.125% with respect to
borrowings at the Base Rate. The applicable margins for borrowings under the Credit Facility are determined based upon
a leverage ratio of the Company and its subsidiaries calculated on a consolidated basis. If either the base rate or LIBOR
rate increase, our interest payments would also increase. A one percent increase in the variable rate of interest on the
Credit Facility would increase interest expense by approximately $5 million annually.
Credit Market Risk
Our long-term investments consist of auction-rate securities totaling $28 million as of June 27, 2008. The recent
negative conditions in the global credit markets have prevented us from liquidating some of our holdings of auction-rate
securities because the amount of securities submitted for sale has exceeded the amount of purchase orders for such
securities. If the credit market does not improve, auctions for our invested amounts may continue to fail. If this occurs, we
may be unable to liquidate some or all of our auction-rate securities at par should we need or desire to access the funds
invested in those securities prior to maturity of the underlying assets. In the event we need or desire to access these funds,
we will not be able to do so until a future auction on these investments is successful or a buyer is found outside the auction
process. If a buyer is found but is unwilling to purchase the investments at par, we may incur a loss. The market values of
some of the auction-rate securities we owned were impacted by the macro-economic credit market conditions. Rating
downgrades of the security issuer or the third-parties insuring such investments may require us to adjust the carrying
value of these investments through an impairment charge. Based on our ability to access our cash, cash equivalents and
short-term investments, our expected operating cash flows and our other sources of cash, we do not anticipate these
investments will affect our ability to execute our current business plan.
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