Western Digital 1999 Annual Report Download - page 37

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Bowne Conversion 32
The Company has various note receivables from other companies. All of the notes carry a fixed rate of interest. Therefore a
significant change in interest rates would not impact the Company's consolidated financial statements.
Variable Interest Rate Risk
The Company maintains a $50.0 million term loan bearing interest at LIBOR or a base rate plus margin determined by the borrowing
base with an approximate current interest rate of 7.75%, as part of its Senior Bank Facility. This is the only debt which does not have a
fixed-rate of interest. A significant change in interest rates (up to 12%) would not materially impact the Company's consolidated
financial statements. The Senior Bank Facility expires in November 2001.
Fair Value Risk
The Company owns approximately 10.8 million shares of Komag, Inc. stock. (See Note 8 of Notes to Consolidated Financial
Statements). The estimated fair market value of the Komag stock on the date of acquisition was $34.9 million. The stock is restricted as
to the percentage of total shares which can be sold in a given time period (see Note 8 of Notes to Consolidated Financial Statements.)
The unrestricted portion of the total Komag shares acquired represents the shares which can be sold within one year. The Company
reviews, on a quarterly basis, the fair market value of the unrestricted Komag shares and records an unrealized gain or loss resulting
from the difference in the fair market value of the unrestricted shares as of the previous quarter end and the fair market value of the
unrestricted shares on the measurement date. As of July 3, 1999, a $2.1 million unrealized loss has been recorded and is shown as a
component of stockholders' deficit. If the Company sells all or a portion of this stock, any unrealized gain or loss on the date of sale will
be recorded as a realized gain or loss in the Company's results of operations. Due to market fluctuations, a significant decline in the
stock's fair market value (of 15% or more) could occur, and this decline could adversely impact the Company's consolidated financial
statements. As of July 3, 1999, the quoted market value of the Company's Komag stock holdings, without regard to discounts due to
sales restrictions, was $33.7 million.