Western Digital 2010 Annual Report Download - page 69

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Credit Facility
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 $750 million unsecured loan consisting of a $500 million
term loan facility (“Term Loan”) and a $250 million revolving credit facility. The Company voluntarily terminated the
$250 million revolving credit facility during its fourth fiscal quarter of 2010. As of July 2, 2010, the Term Loan had a
variable interest rate of 1.63% and a remaining balance of $400 million, which requires principal payments totaling
$106 million in 2011, $144 million in 2012 and $150 million in 2013. The Term Loan has a maturity date of
February 11, 2013. The Credit Facility requires WDTI to comply with a leverage ratio and an interest coverage ratio
calculated on a consolidated basis for the Company and its subsidiaries. In addition, the Credit Facility contains
customary covenants, including covenants that limit or restrict WDTI’s and its subsidiaries’ ability to incur liens, incur
indebtedness, make certain restricted payments, merge or consolidate and enter into certain speculative hedging
arrangements. As of July 2, 2010, WDTI was in compliance with all covenants.
Note 4. Commitments and Contingencies
Lease Commitments
The Company leases certain facilities and equipment under long-term, non-cancelable operating leases. The
Company’s operating leases consist of leased property that expire at various dates through 2020. Rental expense under
these operating leases, including month-to-month rentals, was $22 million, $21 million and $18 million in 2010, 2009
and 2008, respectively. Future minimum lease payments under operating leases that have initial or remaining non-
cancelable lease terms in excess of one year at July 2, 2010 are as follows (in millions):
2011 . . . .......................................... $15
2012 . . . .......................................... 13
2013 . . . .......................................... 14
2014 . . . .......................................... 12
2015 . . . .......................................... 10
Thereafter .......................................... 35
Total future minimum payments ........................ $99
Product Warranty Liability
Changes in the warranty accrual for 2010, 2009 and 2008 were as follows (in millions):
2010 2009 2008
Warranty accrual, beginning of period ....... $123 $114 $ 90
Charges to operations ................. 183 126 106
Utilization ......................... (138) (111) (73)
Changes in estimate related to pre-existing
warranties........................ 2 (6) (9)
Warranty accrual, end of period ............ $170 $123 $114
Accrued warranty also includes amounts classified in non-current other liabilities of $41 million at July 2, 2010 and
$28 million at July 3, 2009.
63
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)