Western Digital 2001 Annual Report Download - page 69

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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
(1) 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.
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.
The Ñrst quarter of 2001 includes an extraordinary gain of $11.2 million the Company recognized 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.
The second quarter of 2001 includes an extraordinary gain of $10.6 million the Company recognized for
the redemption of debentures.
(3) The third quarter of 2000 includes a $28.0 million net restructuring charge and a special charge to cost of
revenues of $34.8 million, directly resulting from the Company's exit from SCSI hard drive production.
The third quarter of 2000 also includes a $14.8 million gain on the disposition of certain investment
securities.
(4) The fourth quarter of 2000 includes beneÑts for adjustments to tax and other accrual accounts of
$19.5 million and $11.0 million, respectively.
During the fourth quarter of 2001, the Company recorded nonoperating charges of $52.4 million to adjust
the carrying value of equity investments in and notes receivable from Komag and accruals of Komag
contingent guarantees.
(5) As a result of the adoption of StaÅ Accounting Bulletin 101 (""SAB 101''), ""Revenue Recognition in
Financial Statements'', the Company changed its revenue recognition policy eÅective July 1, 2000 to
recognize revenue on certain product shipments upon delivery rather than shipment and recorded a
cumulative eÅect of change in accounting principle of $1.5 million in the Ñrst quarter of 2001. In
accordance with the requirements of SAB 101, as a result of its adoption during the fourth quarter of
2001, previously reported quarterly information for 2001 has been restated.
The quarterly results presented have been reclassiÑed to present the operations of Connex and
SANavigator as discontinued.
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