Western Digital 2000 Annual Report Download - page 64

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Note 12. Quarterly Results of Operations (unaudited)
First(1) Second(2) Third(3) Fourth(4)
(in thousands, except per share amounts)
1999
Revenues, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 650,858 $738,590 $ 668,456 $ 709,302
Gross proÑt (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (82,752) 19,167 39,864 20,873
Operating lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (192,005) (79,015) (110,045) (95,727)
Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (194,658) (82,253) (114,293) (101,486)
Basic and diluted loss per share ÏÏÏÏÏÏÏ $ (2.20) $ (.93) $ (1.27) $ (1.12)
2000
Revenues, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 406,957 $560,174 $ 516,587 $ 473,862
Gross proÑt (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (65,343) 20,242 11,584 41,586
Operating lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (191,608) (88,446) (84,158) (15,077)
Net income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (106,315) (15,197) (70,669) 4,165
Basic and diluted earnings (loss) per
share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (1.11) $ (.13) $ (.53) $ .03
(1) First quarter 1999 includes a $7.5 million charge to general and administrative expenses for losses on
terminated hedging contracts and a $77.0 million special charge to costs of revenues to increase warranty
accruals associated with the Company's last generations of thin-Ñlm desktop products.
During the Ñrst quarter of 2000, the Company announced a recall of its 6.8GB per platter series of
WD Caviar» desktop hard drives because of a reliability problem resulting from a faulty power driver chip
manufactured by a third-party supplier. Approximately 1.2 million units were manufactured with the
faulty chip. Replacement of the chips involved rework of the printed circuit board assembly. Revenues of
approximately $100 million, which related to products shipped during the Ñrst quarter and that were
recalled, were reversed in the Ñrst quarter of 2000. In addition, the Caviar product line was shut down for
approximately two weeks, eliminating approximately $70 million of forecasted revenue during the
quarter. Cost of revenues for the Ñrst quarter of 2000 included charges totaling $37.7 million for
estimated costs to recall and repair the aÅected drives, consisting of $23.1 million for repair and retrieval,
$4.5 million for freight and other, and $10.1 million for write-downs of related inventory. By June 30,
2000, the Company had completed rework on approximately 86% of the 1.2 million units and had
resolved its claims against third parties resulting from the recall. The remaining drives have not yet been
returned by end users, but the Company maintains a warranty accrual for potential repair or replacement.
During the Ñrst quarter of 2000 the Company recorded a restructuring charge of $32.3 million related to
the consolidation of the Asian operations, consisting of $14.1 million for the write-oÅ of Ñxed assets no
longer utilized as a result of the restructuring, $13.0 million for severance and outplacement as a result of
headcount reductions from the restructuring, and lease cancellations and other costs of $5.2 million.
During the Ñrst quarter of 2000 the Company also recognized an extraordinary gain of $90.6 million for
the redemption of debentures.
(2) During the second quarter of 2000, the Company continued with its restructuring actions and recorded a
restructuring charge of $25.5 million related to further consolidation of the Asian operations, consisting of
$14.7 million for the write-oÅ of Ñxed assets, $5.8 million for lease cancellation and other costs, and
$5.0 million for severance and outplacement costs.
Also during the second quarter of 2000 the Company recognized an extraordinary gain of $76.3 million
relating to the redemption of debentures.
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