SEC Apparently Ends Western Digital Probe
Western Digital Corp., which just completed a $45-million debenture offering, has been the target of an inquiry by the Securities and Exchange Commission into accounting practices used in the Irvine-based computer equipment company’s fiscal 1985 financial report.
The SEC investigators also looked into potential stock-trading violations and examined the adequacy of Western Digital’s public disclosures about its unusually large fourth-quarter loss last year, a company official acknowledged.
SEC officials, in maintaining a longstanding policy, would not comment on the investigation.
But a Western Digital official said this week that the agency, which apparently launched its inquiry after the company filed a prospectus in February for a $35-million debenture offering, subsequently allowed the offering to proceed--and permitted Western Digital to increase it to $45 million.
Western Digital has not been informed of the outcome of the investigation or been told whether it is still in progress, according to A.J. Moyer, the company’s chief financial officer. But Moyer said he assumes that the inquiry has ended and that the company has not been found in violation of any securities laws or regulations.
“We have no feeling for what they are looking at,” Moyer said. “It’s like dealing with a very secretive organization.” Western Digital officials were informed of the investigation in April, he said, and the SEC asked at the time for additional information.
“We supplied it and apparently that satisfied them, because they allowed the offering to happen. I am told that is usually an indication that nothing more will happen,” Moyer observed.
Western Digital reported a net loss of $4.6 million for the fiscal year ended June 30, 1985, despite huge profit increases in the second and third quarters of that year. The company reported a fourth-quarter loss of $16.5 million before tax benefits, which gave it the annual loss and put it in default on certain credit agreements with its banks.
For the first nine months of fiscal 1986, Western Digital reported net earnings of $13.8 million, up from $8.7 million for the same period in fiscal 1985.
In the prospectus for its debenture offering, which was completed several weeks ago and netted the company $43.8 million, Western Digital said it had been informed by the SEC of an investigation and that discussions with the agency’s staff led company officials to believe that the probe involved the accounting methods used in making year-end adjustments for 1985, the adequacy of Western Digital’s public disclosures of its fiscal 1985 loss and trading activity in the company’s stock at the time the financial information was released.
