Tom S.
I had a busy wk at work, so I could not respond to your fine questions
any earlier. To refresh your memory you asked abt 1) the current
WDC debt issue, and 2) the prospects for WDC. I will answer question
1) now, and get to question 2) later.
1) I went back over my spreadsheets looking at WDC's capitalization
structure fr 1983 - 1997. A good short defn of the capital structure
is the % of assets financed by either a) long term debt, or b)
perferred stock, or c) common stock. Short term liabilities are not used
on the theory they will be paid off quickly. On my spreadsheets I define
long term debt as BONDS + LEASE OBLIGATIONS + OTHER (usa.
deferred taxes). Perferred stock is self explanatory, and since WDC
does not use this type of financing is a moot point. Finally, common
stock is COMMON STOCK & PAID IN SUPLUS + RETAINED EARNINGS.
The following chart shows WDC long term debt / assets or debt
capitalization:
Year long term debt / assets Notes
1997 5.116% no bonds out
1996 3.452 no bonds out
1995 3.232 no bonds out
1994 20.980
1993 59.616
1992 69.592
1991 57.358
1990 33.035
1989 35.290
1988 31.543
1987 12.357
1986 41.888
1985 21.872
1984 25.758
1983 19.816
The chart shows WDC debt capitalization has been up and down
over the last 15 yrs, and only recently has WDC had no long term
bonds on its balance sheet. It should come as no surprise to any
one that WDC will use long term bonds to finance its operations
given its past.
The argument about WDC doing something underhanded by not
filing the correct forms with the Securities and Exchange Commission
is not complete. Anyone with this view can get their questions
answered by accessing the SEC Edgar database, looking up
Western Digital Corporation, and reading WDC recent filings. Or
simply call WDC and speak with their finance people (or ask investor
relations to speak to the finance people and get back to you).
Recently, I saw a post to this board stating WDC has floating $400 mill
in this recent long term debt offering. I assume this is correct.
Using the Jun 30, 1997 balance sheet as a what-if base for
calculations: the what-if long term debt / assets is about 35 - 40%.
As compared to just over 5%; so this a major change, yet not outside
of the historical range. Nor uniquely high. Another needed
comparison is to the capitalization of its disk competitors. I hope
another reader will take time to make that comparison and report
back to us.
I noticed WDC recent bonds were zero coupon bonds. A quick defn
of zeros are bonds sold at a discount to face value, paying 0 interest,
and redeemed at face value at maturity. The important thing is WDC
will pay no interest on these bonds, which should help more revenue
drop to the net income line -- very good for the shareholders. As an
aside back in 1991 when WDC went to its bankers and asked for
more time to pay its short term debt, its credit was so bad zero
coupon bond financing was out of the question. WDC finances have
come a long way, indeed.
Thanks for your time and good luck investing
Carey Thompson |
