Seagate 2003 Annual Report Download - page 55

Table of Contents
• our substantial leverage increases our vulnerability to economic downturns and adverse competitive and industry conditions and
could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;
• our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and our industry and
could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and
implement our business strategies;
• our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures,
product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements; and
Significant Debt Service Requirements—Servicing our debt requires a significant amount of cash, and our ability to generate cash
may be affected by factors beyond our control.
• covenants in our debt instruments limit our ability and the ability of our subsidiaries to pay distributions or make other restricted
payments and investments.
Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness or to
fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments
and alliances, and other general corporate requirements. Our ability to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. We cannot assure you that:
• our business will generate sufficient cash flow from operations;
• we will continue to realize the cost savings, revenue growth and operating improvements that resulted from the execution of our
long
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term strategic plan; or
• future borrowings will be available to us under our senior secured credit facilities or that other sources of funding will be available to
us, in each case, in amounts sufficient to enable us to fund our liquidity needs.
If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product
development efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing our debt, or seeking additional
equity capital. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. In
addition, our existing debt instruments permit us to incur a significant amount of additional debt. If we incur additional debt above the levels
now in effect, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough
cash flow to fund our liquidity needs, could intensify.
Restrictions Imposed by Debt Covenants—
Restrictions imposed by our existing debt instruments will limit our ability to finance future
operations or capital needs or engage in other business activities that may be in our interest.
Our existing debt instruments, including the indenture governing our outstanding 8% senior notes, impose, and the terms of any future
debt may impose, operating and other restrictions on us. The indenture governing our 8% senior notes limits our ability to incur additional
indebtedness if our consolidated coverage ratio, which is the ratio of the aggregate consolidated EBITDA of our subsidiary, Seagate
Technology HDD Holdings, the issuer of our 8% senior notes, and its restricted subsidiaries, to the total interest expense of those entities, is
less than or equal to 3.0 to 1.0 during any consecutive four-quarter period. Our existing debt instruments also limit, among other things, our
ability to:
• pay dividends or make distributions in respect of our shares;
• redeem or repurchase shares;
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• make investments or other restricted payments;