Adaptec 2001 Annual Report Download - page 33

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Liquidity and Capital Resources
We have no special purpose entities and no undisclosed borrowings or debt. We have not
entered into any derivative contracts other than our convertible notes and through our stock
option plans, and we have not entered into any synthetic leases. We contribute only cash to our
employees’ 401K and other pension plans.
Our principal source of liquidity at December 31, 2001 was our cash, cash equivalents and
short-term investments of $410.7 million, which increased from $375.1 million at the end of
2000. At the end of 2001, we also held $171 million in investments in bonds and notes with
maturities betw een 12 and 30 months. We had no such investments at the end of 2000.
During 2001, w e used $53.2 million in cash for operating activities. Our net loss of $639.1
million included non-cash charges of $269.8 million for impairment of intangible assets, $46.8
million for amortization of intangibles, $51.2 million for depreciation, $41.2 million for
amortization of deferred stock compensation, $20.7 million for an excess inventory w rite-down,
$17.5 for impairment of other investments, and $16.2 million of non-cash restructuring costs. In
addition, w e recognized $2.9 million of gains on the sale of investments.
With respect to changes in working capital, we generated cash by decreasing our accounts
receivable by $77.8 million and our prepaid expenses by $6.1 million. We used cash to decrease
our accounts payable and accrued liabilities by $30 million, deferred income by $36.4 million
and income taxes payable by $43.7 million. By the end of 2001, w e had $161.2 million in
accrued restructuring costs that we expect will consume cash in future periods.
Our year to date investing activities include the maturity of and reinvestment in short-term
investments. We also invested $197.1 million in bonds and notes with maturities between 12
and 30 months, $26.1 million of which were reclassified as short-term investments at the end of
2001. We purchased $27.8 million of property and equipment, $4.2 million in other investments
and assets, net of sales, and reduced total w afer fabrication deposits by $1 million.
Our financing activities in 2001 generated $290.2 million. We received $24.8 million of proceeds
from issuing common stock upon exercise of stock options and used $1.7 million for debt and
capital lease repayments during 2001. In 2001 we received net proceeds of $267.2 million by
issuing $275.0 million of convertible subordinated notes. The notes are subordinated to all of
our senior debt, pay a 3.75% coupon of approximately $5.2 million on February 15 and August
15 of each year, and mature on A ugust 15, 2006. The notes are convertible into shares of our
common stock at a conversion price of approximately $42.43 per share, and are subject to
restrictive covenants including those concerning payments on the notes and other
indebtedness. In the event of a change in control of PMC, the noteholders may require us to
repurchase their notes.
We have a line of credit with a bank that allows us to borrow up to $25 million provided, along
with other restrictions, that we do not pay cash dividends or make any material divestments
without the bank's written consent. At December 31, 2001, w e committed approximately $5.3