Western Digital 2010 Annual Report Download - page 50

Long-Term Debt
In February 2008, Western Digital Technologies, Inc. (“WDTI”), a wholly-owned subsidiary of the Company,
entered into a five-year Credit Agreement that provided for a $500 million term loan facility. As of July 2, 2010, the
remaining balance of the term loan facility was $400 million, which requires principal payments totaling $106 million in
2011, $144 million in 2012 and $150 million in 2013. See Part II, Item 8, Note 3 in the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K.
Purchase Orders
In the normal course of business, we enter into purchase orders with suppliers for the purchase of hard drive
components used to manufacture our 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. We also enter into purchase orders with
suppliers for capital equipment that are recorded as a liability upon receipt of the equipment. Our ability to change or
cancel a capital equipment purchase order without penalty depends on the nature of the equipment being ordered. In
some cases, we 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 of components or capital equipment.
We have entered into long-term purchase agreements with various component suppliers, which contain minimum
quantity requirements. However, the dollar amount of the purchases may depend on the specific products ordered,
achievement of pre-defined quantity or quality specifications or future price negotiations. The estimated related
minimum purchase requirements are included in “Purchase obligations” in the table above. We have also entered into
long-term purchase agreements with various component suppliers that carry fixed volumes and pricing which obligate us
to make certain future purchases, contingent on certain conditions of performance, quality and technology of the vendor’s
components. These arrangements are included under “Purchase obligations” in the table above.
We enter 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 our 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. Please see Item 1A of
this Annual Report on Form 10-K for a discussion of risks related to these commitments.
Foreign Exchange Contracts
We purchase short-term, foreign exchange contracts to hedge the impact of foreign currency fluctuations on certain
underlying assets, revenue, liabilities and commitments for operating expenses and product costs denominated in foreign
currencies. See Part II, Item 7A, under the heading “Disclosure About Foreign Currency Risk,” for a description of our
current foreign exchange contract commitments and Part II, Item 8, Notes 1 and 11 in the Notes to Consolidated
Financial Statements, included in this Annual Report on Form 10-K.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers,
vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses
arising out of our breach of such agreements, products or services to be provided by us, or from intellectual property
infringement claims made by third parties. In addition, we have entered into indemnification agreements with our
directors and certain of our officers that will require us, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or officers. We maintain director and officer insurance, which
may cover certain liabilities arising from our obligation to indemnify our directors and officers in certain circumstances.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the
limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, we have not
incurred material costs as a result of obligations under these agreements.
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