Western Digital 2000 Annual Report Download - page 34

hedging its Malaysian Ringgit currency risk in 1999. Future hedging of this currency will depend on currency
conditions in Malaysia. The imposition of exchange controls by the Malaysian government resulted in a $7.5
million realized loss on terminated hedging contracts in the Ñrst quarter of 1999. As a result of the closure of
the Company's Singapore operations in 2000, the Company has also discontinued its hedging program related
to the Singapore Dollar.
As of June 30, 2000, the Company had outstanding the following purchased foreign currency forward
exchange contracts (in millions, except average contract rate):
June 30, 2000
Contract Weighted Average Unrealized
Amount Contract Rate Loss
(U.S. Dollar equivalent amounts)
Foreign currency forward contracts:
British Pound Sterling ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.5 1.50 Ì
In 1998, 1999, and 2000 total realized transaction and forward exchange contract currency gains and
losses (excluding the $7.5 million realized loss on the Malaysian Ringgits realized in 1999), were immaterial
to the consolidated Ñnancial statements. Based on historical experience, the Company does not expect that a
signiÑcant change in foreign exchange rates (up to approximately 25%) would materially aÅect the
Company's consolidated Ñnancial statements.
Disclosure About Other Market Risks
Fixed Interest Rate Risk
At June 30, 2000, the market value of the Company's 5.25% zero coupon convertible subordinated
debentures due in 2018 was approximately $111.6 million, compared to the related book value of $225.5
million. The convertible debentures will be repurchased by the Company, at the option of the holder, as of
February 18, 2003, February 18, 2008, or February 18, 2013, or if there is a Fundamental Change (as deÑned
in the Debenture documents), at the issue price plus accrued original issue discount to the date of redemption.
The payment on those dates, with the exception of a Fundamental Change, can be in cash, stock or any
combination, at the Company's option.
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 market value of the convertible subordinated debentures was
approximately $116.9 million, compared to the related book value of $178.7 million.
The Company has various notes receivable from other companies. All of the notes carry a Ñxed rate of
interest. Therefore a signiÑcant change in interest rates would not cause these notes to impact the Company's
consolidated Ñnancial statements.
Variable Interest Rate Risk
At the option of HDS, borrowings under the new Senior Credit Facility would 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. This is the only debt which does not have a Ñxed-rate of interest. A change in interest rates
resulting in rates as high as 12% would not materially impact the Company's consolidated Ñnancial
statements.
The new 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, there were no borrowings under the new Senior Credit Facility.
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