Thailand’s historic floods last October cost Western Digital Corp. at least $214 million in damages and recovery efforts, and it appears the company may not recoup all those losses through insurance claims.
“It is reasonably possible that the final losses that we incur in connection with the flood damage and our business interruption will exceed the limits of our insurance policies,” the Irvine-based disk-drive maker said in its annual report, filed Aug. 20.
The charges included $119 million in fixed asset impairments, $61 million in recovery charges, $28 million in write-downs for damaged inventory and $27 million in paid wages during its shutdown.
It has recovered $21 million in insurance and other cost reimbursements, according to the regulatory filing.
Western Digital was among the hardest hit manufacturers in Thailand, as widespread floods and equipment damage forced both of its plants there to shut down for months late last year.
December Reopenings
In December, it reopened some operations in Thailand, where it typically ships more than half its disk drives and employs some 37,000 people−more than a third of its total work force.
The company restarted disk-drive and head-slider production in the March quarter there and established a new slider-fabrication plant in Malaysia.
Hard-disk drives store and allow access to data. Western Digital’s disk drives go into computers, external storage devices, corporate networks and consumer electronics such as DVR players.
Lost production caused the company to lose its title as the top seller of disk drive units in the December quarter to Cupertino rival Seagate Technologies LLC.
A faster-than-expected recovery, buoyed by its March buy of Hitachi Global Systems Technologies Ltd. for $4.8 billion, helped Western Digital recapture the crown and post record earnings in the June quarter, the end of its fiscal year.
It recorded an adjusted profit of $1.61 billion for the year, more than doubling its $726 million profit a year earlier.
Revenue topped $12.48 billion, up 31%.
Quantum Coverage
Newport Beach-based investment bank Roth Capital Partners initiated coverage of Quantum Fuel Systems Technologies Worldwide Inc., a key development for the company as it attempts a turnaround under new Chief Executive Brian Olson.
Analyst coverage should help Quantum raise awareness on Wall Street and reach a broader investor base.
“I think that will be a nice addition,” Olson told the Business Journal shortly after transitioning from interim chief in June.
The coverage comes as Quantum sees increased demand for its natural gas fuel systems. The company last month reported nearly a four-fold jump in orders for that segment through the first seven months of the year, compared to a year ago.
Quantum is refocusing efforts and resources solely on the automotive sector in the wake of the May resignations of former Chief Executive Alan Niedzwiecki and Chairman Dale Rasmussen.
Quantum, since it was established in 2000, has tinkered with many business lines beyond its primary revenue source—the engine, transmission, fuel tank and other parts that make hybrid vehicles go.
Quantum plans to shed its Irvine headquarters by the end of the year and consolidate all operations to a three-building campus in Lake Forest. It also aims to rein in executive compensation and other corporate overhead expenses.
Roth has a “buy” rating on Quantum with a price target of $1.20. Shares were trading at about 85 cents last week to a recent market value of $39.7 million.
Moody’s on Igram
Moody’s Investors Service Inc., part of New York-based Moody’s Corp., maintained a “stable” rating on Ingram Micro Inc. after the Santa Ana company announced plans to secure $300 million in senior unsecured notes.
Moody’s assigned a Baa3 rating to the new debt securities, one notch above junk. The notes are due in 2017.
Ingram, the world’s largest technology distributor with $36.3 billion in sales last year, plans to use the proceeds for general corporate purposes, which may include funding a portion of its pending $840 million buy of Indianapolis-based wholesale distributor Brightpoint Inc.
“We expect the Brightpoint acquisition to bring new customer and supplier relationships to Ingram Micro, strengthen its presence with existing clients and vendors, and expand its portfolio of mobility products, particularly in media tablets and smartphones,” Moody’s said in a report.
It did caution that Ingram has “significant international accounts payable balances.” The rating on the recently issued unsecured notes could be downgraded if the accounts overseas deteriorate, Moody’s said.
Its last rating on Ingram was in August 2010 on $300 million in new senior notes.
