Western Digital 2003 Annual Report Download - page 27

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Commitments
The following is a summary of the Company's signiÑcant contractual cash obligations and commercial commitments
at June 27, 2003:
Operating Leases
The Company leases certain facilities and equipment under long-term, non-cancelable operating leases which expire
at various dates through 2012. The following table summarizes the future payments of these leases (in millions):
Operating
Leases
2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9.5
2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.7
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.5
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.7
2008 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.7
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.6
Total future minimum lease obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $50.7
In connection with its acquisition of the assets of Read-Rite in July 2003, the Company will assume Read-Rite's
lease of an approximately 181,000 square foot facility in Fremont, California that is used for wafer fabrication. The lease
expires in February 2008 with annual rental payments of $1.9 million.
Purchase Orders
In the normal course of business, to reduce the risk of component shortages, the Company enters into purchase
commitments with suppliers for the purchase of hard drive components used to manufacture the Company's products.
These commitments generally cover forecasted component supplies needed for production during the next quarter,
become payable upon receipt of the components and may be non-cancelable (cancellation charges may be signiÑcant).
The Company's relationship with suppliers allows for some Öexibility within these commitments and quantities are
subject to change as a quarter progresses and the Company's needs change.
Forward Exchange Contracts
Although the majority of the Company's transactions are in U.S. Dollars, some transactions are based in various
foreign currencies. 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 and product costs
denominated in foreign currencies. The Company does not purchase short-term forward exchange contracts for trading
purposes. As of June 27, 2003, the Company had $36 million outstanding of purchased foreign currency forward
exchange contracts. The contracts have maturity dates that do not exceed three months. At June 27, 2003, the carrying
value of the contracts approximates fair value.
Critical Accounting Policies
The Company has prepared the accompanying consolidated Ñnancial statements in conformity with accounting
principles generally accepted in the United States. The preparation of the Ñnancial statements requires the use of
judgment and estimates that aÅect the reported amounts of revenue, expenses, assets and liabilities. The Company has
adopted accounting policies and practices that are generally accepted in the industry in which it operates. The Company
believes the following are its most critical accounting policies that aÅect signiÑcant areas and involve management's
judgment and estimates. If these estimates diÅer materially from actual results, the impact to the consolidated Ñnancial
statements may be material.
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