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Table of Contents
amounts (at the contract exchange rates) and the weighted average contractual foreign currency exchange rates.
Other Market Risks. We have exposure to counterparty credit downgrades in the form of credit risk related to our foreign currency
forward exchange contracts and our fixed income portfolio. We monitor and limit our credit exposure for our foreign currency forward exchange
contracts by performing ongoing credit evaluations. We also manage the notional amount of contracts entered into with any one counterparty,
and we maintain limits on maximum tenor of contracts based on the credit rating of the financial institutions. Additionally, the investment
portfolio is diversified and structured to minimize credit risk. As of June 29, 2012, we had counterparty credit exposure of $1 million comprised
of the mark-to-market valuation related to our foreign currency forward exchange contracts in a gain position. Changes in our corporate issuer
credit ratings have minimal impact on our financial results, but downgrades may negatively impact our future transaction costs and our ability to
execute transactions with various counterparties.
We are subject to equity market risks due to changes in the fair value of the notional investments selected by our employees as part of our
Seagate Deferred Compensation Plan (the "SDCP"). We currently manage our exposure to equity market risks associated with the SDCP
liabilities by investing directly in mutual funds that mirror the employees' investment options.
As of June 29, 2012 we continued to hold auction rate securities with a par value of approximately $17 million, all of which are
collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in the March 2008 quarter, these securities
have continuously failed to settle at auction. As of June 29, 2012, the estimated fair value of these auction rate securities was $15 million. We
believe that the impairments totaling $2 million are temporary as we do not intend to sell these securities and have concluded it is not more likely
than not that we will be required to sell the securities before the recovery of the amortized cost basis. As such, the impairment was recorded in
Other comprehensive income (loss) and these securities were classified as long-term investments.
62
(Dollars in millions, except average contract rate)
Notional
Amount
Average
Contract Rate
Estimated
Fair
Value
(1)
Foreign currency forward exchange
contracts:
Thai baht
$
252
31.41
$
(1
)
Singapore dollar
71
1.28
—
Chinese renminbi
27
6.34
—
Czech koruna
7
19.72
—
Total
$
357
$
(1
)
(1)
Equivalent to the unrealized net gain (loss) on existing contracts.