Western Digital 2005 Annual Report Download - page 28

Capital Commitments
The following is a summary of the Company's significant contractual cash obligations and commercial commitments
at July 1, 2005 (in millions):
Less than More than
Total 1 Year 1-3 Years 3-5 Years 5 Years
Long-term debt, including current
portion ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 38 $ 13 $ 25 $ Ì $ Ì
Capital lease obligations ÏÏÏÏÏÏÏÏÏÏ 15 7 8 Ì Ì
Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60 11 21 16 12
Purchase obligations* ÏÏÏÏÏÏÏÏÏÏÏÏ 2,835 1,821 1,014 Ì Ì
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,948 $1,852 $1,068 $ 16 $ 12
* Includes long-term purchase agreements entered into before August 17, 2005.
Long-Term Debt
The Company has a $125 million credit facility (""Senior Credit Facility'') consisting of a revolving credit line
(subject to outstanding letters of credit and a borrowing base calculation) and a term loan of $38 million. Both the
revolving credit facility and the term loan mature on September 19, 2008 and are secured by the Company's accounts
receivable, inventory, 65% of its stock in its foreign subsidiaries and other assets. For the year ended July 1, 2005, the
Company had no borrowings on the revolving credit line and the average variable rate on the Company's term loan was
4.5%.
The Senior Credit Facility prohibits the payment of cash dividends on common stock and contains specific financial
covenants. The Company is required to maintain an available liquidity level of $300 million at the end of each quarter.
Available liquidity is defined as cash plus eligible trade receivables. As of July 1, 2005, the Company was in compliance
with this covenant. Should the Company's available liquidity be less than $300 million, the Company would then be
subject to minimum EBITDA (earnings before interest, taxes, depreciation and amortization) requirements and capital
expenditure limitations.
The term loan requires quarterly principal payments of approximately $3 million. Principal payments made on the
term loan increase the amount of revolving credit available. At July 1, 2005, $85 million was available for borrowing
under the revolving credit line and the Company had $3 million in outstanding letters of credit.
Purchase Orders
In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of hard
disk drive components used to manufacture the Company's products. These purchase orders generally cover forecasted
component supplies needed for production during the next quarter, are recorded as a liability upon receipt of the
components, and generally may be changed or canceled at any time prior to shipment of the components. In some cases
the Company may be obligated to pay for certain costs related to changes to, or cancellation of, a purchase order, such as
costs incurred for raw materials or work in process.
The Company has entered into long-term purchase agreements with various component suppliers. The commit-
ments are subject to minimum quality requirements. In addition, the dollar amount of the purchases may depend on the
specific products ordered and future price negotiations. The estimated related minimum purchase requirements are
included in ""Purchase Obligations'' in the table above.
The Company enters into, from time to time, other long-term purchase agreements for components with certain
vendors. Generally, future purchases under these agreements are not fixed and determinable as they depend on the
Company's overall unit volume requirements and are contingent upon the prices, technology and quality of the supplier's
products remaining competitive. These arrangements are not included under ""Purchase Obligations'' in the table above.
See below under the heading ""Risk Factors That May Affect Future Results'' for a discussion of these commitments.
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