Western Digital 2000 Annual Report Download - page 26

price may be paid in cash or common stock, at the Company's option.) The Debentures are convertible into
shares of the Company's common stock at the rate of 14.935 shares per $1,000 principal amount at maturity.
The principal amount at maturity of the Debentures when issued was $1.3 billion. During 2000, the Company
issued 26.7 million shares of common stock in exchange for Debentures with a book value of $284.1 million,
and an aggregate principal amount at maturity of $735.6 million. These redemptions were private, individually
negotiated transactions with certain institutional investors and resulted in extraordinary gains of $166.9
million. As of June 30, 2000, the book value of the remaining outstanding Debentures was $225.5 million and
the aggregate principal amount at maturity was $561.6 million. Between July 1, 2000 and September 26, 2000,
the Company issued 6.3 million shares of common stock in exchange for Debentures with a book value of
$49.8 million and an aggregate principal amount at maturity of $122.7 million. As of September 26, 2000, the
aggregate principal amount at maturity was $438.9 million.
Subsequent to June 30, 2000, the Company entered into a new three-year Senior Credit Facility for its
hard drive solutions division (""HDS''), replacing a previous facility that had matured on March 31, 2000. The
new Senior Credit Facility provides up to $125 million in revolving credit (subject to a borrowing base
calculation), is secured by HDS's accounts receivable, inventory, 65% of the stock in its foreign subsidiaries
and other assets. At the option of HDS, borrowings bear interest at either LIBOR (with option periods of one
to three months) or a base rate, plus a margin determined by the borrowing base. The Senior Credit Facility
requires HDS to maintain certain amounts of tangible net worth, prohibits the payment of cash dividends on
common stock and contains a number of other covenants. As of the date hereof, the Company was in
compliance with these covenants and there were no borrowings under the Facility.
Under an existing shelf registration statement (the ""equity facility''), the Company may issue shares of
common stock to institutional investors for cash. The equity facility provides for up to $190.0 million in cash
proceeds of which $111.8 million had been utilized as of June 30, 2000. Shares sold under the facility are at
the market price of the Company's common stock less a discount ranging from 2.75% to 4.25%. Between
July 1, 2000 and September 5, 2000, the Company issued 6.1 million shares for cash proceeds of $27.6 million.
As of September 21, 2000, $139.4 million of the equity facility had been utilized.
The Company had a shareholders' deÑciency of $109.8 million as of June 30, 2000 and expects to
continue to incur operating losses in 2001. However, at June 30, 2000, the Company had cash and cash
equivalent balances of $184.0 million and working capital of $6.3 million. The Company has achieved
signiÑcant reductions in manufacturing labor and overhead, capital expenditures and operating expenses
resulting from the sale in late 1999 of the Company's media operations, the closure in 2000 of the Company's
two Singapore based manufacturing facilities and its enterprise design center and the reduction in worldwide
headcount from 10,503 at July 3, 1999 to 7,321 at June 30, 2000. In addition, the Company had the following
additional sources of liquidity available:
‚ As of September 21, 2000, $50.6 million remaining available under the equity facility;
‚ As of September 21, 2000, a Senior Credit Facility providing up to $125 million in revolving credit
(subject to a borrowing base calculation); and
‚ Other equity investments that may be disposed of during the next twelve months, including 6.5 million
shares of Komag common stock (of which 4.9 million shares were sold during September 2000 for net
proceeds of $15.0 million) and 1.3 million shares of Vixel common stock. The combined market value
of the remaining 1.6 million Komag shares which can be sold in the next twelve months and the
1.3 million shares of Vixel common stock is approximately $15.4 million as of September 21, 2000 (an
additional 3.2 million shares of Komag common stock will become available for disposition in October
2001).
Based on the above factors, the Company believes its current cash and cash equivalent balances, its
existing equity and credit facilities, and other liquidity sources currently available to it, will be suÇcient to
meet its working capital needs through 2001. There can be no assurance that the Senior Credit Facility or the
equity facility will continue to be available to the Company. Also, the Company's ability to sustain its working
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