Western Digital 2014 Annual Report Download - page 52

Long-Term Debt
On March 8, 2012, we, in our capacity as the parent entity and guarantor, and the Borrowers, entered into the
Prior Credit Facility. The Prior Credit Facility provided for $2.8 billion of unsecured loan facilities, consisting of a
$2.3 billion term loan facility and a $500 million revolving credit facility. On January 9, 2014, the outstanding bal-
ance on the Prior Credit Facility was repaid, the Prior Credit Facility was terminated, and the new Credit Agreement
was entered into.
As of June 27, 2014, no amounts were outstanding under the revolving credit facility of the Credit Agreement
and the term loan facility had an outstanding balance of $2.4 billion and a variable interest rate of 1.7%. We are
required to make quarterly principal payments on the term loan facility totaling $125 million in fiscal 2015, $156
million in fiscal 2016, $219 million in fiscal 2017, $250 million in fiscal 2018 and the remaining balance of $1.7
billion in fiscal 2019. For additional information, see Part II, Item 8, Note 3 in the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K.
The Credit Agreement requires the Company to comply with a leverage ratio and an interest coverage ratio calcu-
lated on a consolidated basis for the Company and its subsidiaries. In addition, the Credit Agreement contains
customary covenants, including covenants that limit or restrict the Company’s and its subsidiaries’ ability to incur
liens, incur indebtedness, make certain restricted payments, merge or consolidate and enter into certain speculative
hedging arrangements, and customary events of default. As of June 27, 2014, the Company was in compliance with
all covenants.
Purchase Orders
In the normal course of business, we enter into purchase orders with suppliers for the purchase of 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 suppli-
ers 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, containing 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 commitments.
Foreign Exchange Contracts
We purchase short-term, foreign exchange contracts to hedge the impact of foreign currency fluctuations on cer-
tain underlying assets, 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 12 in the Notes to Consolidated
Financial Statements, included in this Annual Report on Form 10-K.
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