Seagate 2007 Annual Report Download - page 62

Table of Contents
Liquidity Sources and Cash Requirements and Commitments
Our principal sources of liquidity as of June 27, 2008, consisted of: (1) approximately $1.1 billion in cash, cash equivalents, and short
-
term
investments, (2) cash we expect to generate from operations and (3) a $500 million revolving credit facility.
Our $500 million revolving credit facility that matures in September 2011 is available for cash borrowings and for the issuance of letters of
credit up to a sub-limit of $100 million. Although no borrowings have been drawn under this revolving credit facility to date, we had used
$62 million for outstanding letters of credit and bankers’ guarantees as of June 27, 2008, leaving $438 million for additional borrowings, subject
to compliance with financial covenants and other customary conditions to borrowing.
The credit agreement that governs our revolving credit facility contains covenants that we must satisfy in order to remain in compliance
with the agreement. This credit agreement contains three financial covenants: (1) minimum cash, cash equivalents and marketable securities;
(2) a fixed charge coverage ratio; and (3) a net leverage ratio. As of June 27, 2008, we are in compliance with all covenants.
In October 2006, we used $416 million of the net proceeds from the September 2006 issuance of $1.5 billion debt to redeem the
$400 million principal amount of our 8% Notes and pay a $16 million redemption premium.
Our principal liquidity requirements are primarily to meet our working capital, research and development, capital expenditure needs, and to
service our debt. In addition, since the second half of fiscal year 2002 and through the June 2008 quarter, we have paid dividends to our
shareholders.
On August 17, 2007, November 16, 2007, February 16, 2008 and May 16, 2008, we paid dividends aggregating approximately
$216 million, or $0.42 per share, to our common shareholders of record as of August 3, 2007, November 2, 2007, February 1, 2008 and May 2,
2008. On July 15, 2008, we declared a quarterly dividend of $0.12 per share that will be paid on or before August 15, 2008 to our common
shareholders of record as of August 1, 2008. In deciding whether or not to declare quarterly dividends, our directors will take into account such
factors as general business conditions within the disc drive industry, our financial results, our capital requirements, contractual and legal
restrictions on the payment of dividends by our subsidiaries to us or by us to our shareholders, the impact of paying dividends on our credit
ratings and such other factors as our board of directors may deem relevant.
With respect to the closure of our Limavady and Milpitas facilities, we expect to pay cash restructuring charges aggregating approximately
$25 million to $30 million in the next 12 months.
Because we had current earnings and profits in excess of distributions for our taxable year ended June 27, 2008, distributions on our
common shares to U.S. shareholders during this period were treated as dividend income for U.S. federal income tax purposes. We anticipate that
we will have earnings and profits in excess of distributions in fiscal year 2009. Therefore, distributions to U.S. shareholders in fiscal year 2009
are anticipated to be treated as dividend income for U.S. federal income tax purposes. Non-
U.S. shareholders should consult with a tax advisor to
determine appropriate tax treatment.
As a result of the acquisition of Maxtor, we assumed all of Maxtor’s outstanding debts, including, without limitation, its outstanding
convertible senior notes. Maxtor’s 2.375% Convertible Senior Notes due August 2012 (the “2.375% Notes), of which $326 million were
outstanding as of June 27, 2008, contain a cash conversion feature that will require Seagate to deliver the holders, upon any conversion of these
notes, cash in an amount equal to the lesser of (a) the principal amount of the notes converted and (b) the as-converted value of the notes. We
will also be required to deliver an additional amount equal to the difference between the as-
converted value of the notes and the principal amount
in either cash or stock at our election. To the extent holders of the Maxtor
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