Western Digital 2000 Annual Report Download - page 46

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
comprehensive income (loss) is comprised of unrealized gains and losses on marketable securities categorized
as ""available for sale'' under SFAS 115.
Minority Interest in Subsidiary
In June 2000, the Company's subsidiary, Sagetree, Inc. (""Sagetree''), received cash proceeds of $10.0
million from NCR Corporation in exchange for a minority voting interest in Sagetree at June 30, 2000. The
Company reÖects the portion of the earnings or losses of Sagetree which are applicable to the minority interest
as an adjustment to minority interest on the consolidated balance sheets, and as a component of other income
(expense) on the consolidated statements of operations. For the year ended June 30, 2000, the amount of
minority interest in Sagetree's losses was not material to the Company's consolidated Ñnancial statements.
Foreign Exchange Contracts
Although the majority of the Company's transactions are in U.S. Dollars, some transactions are based in
various foreign currencies. From time to time, the Company purchases short-term, forward exchange contracts
to hedge the impact of foreign currency Öuctuations on certain underlying assets, liabilities and commitments
for operating expenses denominated in foreign currencies. The purpose of entering into these hedge
transactions is to minimize the impact of foreign currency Öuctuations on the results of operations. The
contracts have maturity dates that do not exceed twelve months. The unrealized gains and losses on these
contracts are deferred and recognized in the results of operations in the period in which the hedged transaction
eÅects the results of operations. Costs associated with entering into such contracts are typically amortized over
the life of the instrument. The Company does not purchase short-term forward exchange contracts for trading
purposes.
In response to the Company's underlying foreign currency exposures, the Company may, from time to
time, adjust its foreign currency hedging position by taking out additional contracts or by terminating or
oÅsetting existing foreign currency forward exchange contracts. Gains or losses on terminated contracts and
oÅsetting contracts are recognized in the results of operations in the periods in which the hedged transactions
eÅect the results of operations.
The Company had outstanding forward exchange contracts with commercial banks with nominal values
of $241.9, $66.4 and $13.5 million, at June 27, 1998, July 3, 1999 and June 30, 2000, respectively. The total
unrealized gains and losses on outstanding forward exchange contracts and foreign currency transactions were
not material to the consolidated Ñnancial statements as of and for the years ended June 27, 1998 and June 30,
2000. For the year ended July 3, 1999, the total net loss on foreign currency transactions and forward exchange
contracts was $10.3 million. Of this amount, a realized loss of $7.5 million on terminated hedging contracts
was recorded due to the imposition of exchange controls by the Malaysian government. Historically, the
Company has focused on hedging its foreign currency risk related to the Singapore Dollar, the British Pound
and the Malaysian Ringgit. With the establishment of currency controls and the prohibition of purchases or
sales of the Malaysian Ringgit by oÅshore companies, the Company has discontinued hedging its Malaysian
Ringgit currency risk. Future hedging of this currency will depend on currency conditions in Malaysia. 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.
Use of Estimates
Company management has made estimates and assumptions relating to the reporting of certain assets
and liabilities in conformity with generally accepted accounting principles. Actual results could diÅer from
these estimates.
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