UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 20, 2011
Western Digital Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-08703 | 33-0956711 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 3355 Michelson Drive, Suite 100 Irvine, California |
92612 |
|
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (949) 672-7000
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On April 20, 2011, Western Digital Corporation (“Western Digital”) announced financial results
for the third fiscal quarter ended April 1, 2011. A copy of the press release making this
announcement is attached hereto as Exhibit 99.1 and is incorporated herein by reference. A copy of
Western Digital’s Investor Information Summary for the third quarter ended April 1, 2011 is
attached hereto as Exhibit 99.2 and is incorporated herein by reference.
In Western Digital’s press release attached as Exhibit 99.1 hereto, Western Digital reports
certain financial information, including net income and earnings per share on both a GAAP and a
non-GAAP basis for the third fiscal quarter ended April 1, 2011. These non-GAAP measures exclude
acquisition expenses related to Western Digital’s planned acquisition of Hitachi Global Storage
Technologies. Because management believes these expenses may not be indicative of ongoing
operations, management believes that the non-GAAP measures presented in the press release are
useful to investors as an alternative method for measuring Western Digital’s operating performance
and comparing it against prior periods’ performance.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02,
including Exhibit 99.1 and Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to
the liabilities of that section, and shall not be incorporated by reference into any registration
statement or other document filed under the Securities Act of 1933, as amended (the “Securities
Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such
filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Press Release issued by Western Digital Corporation on April 20, 2011
announcing financial results for the third fiscal quarter ended April 1, 2011. |
|||
| 99.2 | Third Quarter Fiscal Year 2011 Western Digital Corporation Investor Information
Summary. |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Western Digital Corporation | ||||||
| (Registrant) | ||||||
Date: April 20, 2011
|
By: | /s/ Michael C. Ray
|
||||
| Vice President, General Counsel | ||||||
| and Secretary | ||||||
Exhibit 99.1
Company contacts:
Bob Blair
Investor Relations
949.672.7834
robert.blair@wdc.com
Bob Blair
Investor Relations
949.672.7834
robert.blair@wdc.com
Steve Shattuck
Public Relations
949.672.7817
steve.shattuck@wdc.com
Public Relations
949.672.7817
steve.shattuck@wdc.com
FOR IMMEDIATE RELEASE:
WD® ANNOUNCES Q3 REVENUE OF $2.25 BILLION AND
NET INCOME OF $146 MILLION, OR $0.62 PER SHARE
NET INCOME OF $146 MILLION, OR $0.62 PER SHARE
IRVINE, Calif.—Apr. 20, 2011—Western Digital Corp. (NYSE: WDC) today reported revenue of $2.25
billion, hard-drive unit shipments of 50 million and net income
of $146 million, or $0.62 per share, for its third fiscal quarter ended Apr. 1, 2011. The company’s
results include expenses of $10 million associated with the
planned acquisition of Hitachi Global
Storage Technologies announced Mar. 7, 2011. Excluding the acquisition-related expenses, non-GAAP
net income was $156 million or $0.66 per share.1
In the year-ago quarter, the company reported revenue of $2.64 billion, shipped 51 million
hard drives, and reported net income and earnings per share of $400 million and $1.71,
respectively.
The company generated $313 million in cash from operations during the March quarter, ending
with total cash and cash equivalents of $3.2 billion.
“The March quarter in the hard drive industry was impacted by two significant
developments—the delayed supply of Industry CPUs to PC makers and the tragic events in Japan,” said
| 1 | Non-GAAP net income consists of GAAP net income of $146 million plus $10 million of acquisition-related expenses. Non-GAAP earnings per share of $0.66 is calculated by using the same 236 million diluted shares as is used for GAAP earnings per share. The tax effect of the acquisition-related expenses was not material. |
WD Announces Q3 Revenue of $2.25 Billion and
Net Income of $146 Million, or $0.62 Per Share
Page 2
Net Income of $146 Million, or $0.62 Per Share
Page 2
John
Coyne, president and chief executive officer. “While demand for hard
drives in the quarter got off to a slow start, it later picked up as
availability of CPUs improved and as fears took hold of component
shortages related to the events in Japan.
“In relation to our planned acquisition of Hitachi GST, we are in the approval process with
all required regulatory agencies, our integration planning is well underway and we have
successfully syndicated the loan financing associated with the transaction.”
The investment community conference call to discuss these results will be broadcast live over
the Internet today at 3 p.m. Pacific/6 p.m. Eastern. The call will be accessible live and on an
archived basis via the link below:
Audio Webcast:
|
www.westerndigital.com/investor | |
| Click on “Conference Calls” | ||
Telephone Replay:
|
800-964-3941 (toll free) | |
| +1-203-369-3117 (international) |
About WD
WD, one of the storage industry’s pioneers and long-time leaders, provides products and
services for people and organizations that collect, manage and use digital information. The company
designs and produces reliable, high-performance hard drives and solid state drives that keep users’
data accessible and secure from loss. Its advanced technologies are configured into applications
for client and enterprise computing, embedded systems and consumer electronics, as well as its own
consumer storage and home entertainment products.
WD Announces Q3 Revenue of $2.25 Billion and
Net Income of $146 Million, or $0.62 Per Share
Page 3
Net Income of $146 Million, or $0.62 Per Share
Page 3
WD was founded in 1970. The company’s storage products are marketed to leading OEMs, systems
manufacturers, selected resellers and retailers under the Western Digital® and
WD® brand names. Visit the Investor section of the company’s Website
(www.westerndigital.com) to access a variety of financial and investor information
###
Western Digital, WD, and the WD logo are registered trademarks of Western Digital Technologies,
Inc. All other trademarks mentioned herein belong to their respective owners.
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
| Apr. 1, | Jul. 2, | |||||||
| 2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 3,230 | $ | 2,734 | ||||
Accounts receivable, net |
1,171 | 1,256 | ||||||
Inventories |
574 | 560 | ||||||
Other |
178 | 170 | ||||||
Total current assets |
5,153 | 4,720 | ||||||
Property,
plant and equipment, net |
2,249 | 2,159 | ||||||
Goodwill |
151 | 146 | ||||||
Other intangible assets, net |
75 | 88 | ||||||
Other assets |
211 | 215 | ||||||
Total assets |
$ | 7,839 | $ | 7,328 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 1,486 | $ | 1,507 | ||||
Accrued expenses |
250 | 281 | ||||||
Accrued warranty |
134 | 129 | ||||||
Current portion of long-term debt |
125 | 106 | ||||||
Total current liabilities |
1,995 | 2,023 | ||||||
Long-term debt |
200 | 294 | ||||||
Other liabilities |
328 | 302 | ||||||
Total liabilities |
2,523 | 2,619 | ||||||
Shareholders’ equity |
5,316 | 4,709 | ||||||
Total liabilities and shareholders’ equity |
$ | 7,839 | $ | 7,328 | ||||
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(unaudited)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| Apr. 1, | Apr. 2, | Apr. 1, | Apr. 2, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue, net |
$ | 2,252 | $ | 2,641 | $ | 7,123 | $ | 7,468 | ||||||||
Cost of revenue |
1,842 | 1,976 | 5,801 | 5,602 | ||||||||||||
Gross margin |
410 | 665 | 1,322 | 1,866 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
179 | 160 | 515 | 456 | ||||||||||||
Selling, general and administrative |
73 | 64 | 198 | 177 | ||||||||||||
Total operating expenses |
252 | 224 | 713 | 633 | ||||||||||||
Operating income |
158 | 441 | 609 | 1,233 | ||||||||||||
Net interest and other |
1 | (1 | ) | — | (5 | ) | ||||||||||
Income before income taxes |
159 | 440 | 609 | 1,228 | ||||||||||||
Income tax provision |
13 | 40 | 41 | 110 | ||||||||||||
Net income |
$ | 146 | $ | 400 | $ | 568 | $ | 1,118 | ||||||||
Income per common share: |
||||||||||||||||
Basic |
$ | 0.63 | $ | 1.75 | $ | 2.46 | $ | 4.93 | ||||||||
Diluted |
$ | 0.62 | $ | 1.71 | $ | 2.42 | $ | 4.82 | ||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
232 | 229 | 231 | 227 | ||||||||||||
Diluted |
236 | 234 | 235 | 232 | ||||||||||||
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| Apr. 1, | Apr. 2, | Apr. 1, | Apr. 2, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash flows from operating activities |
||||||||||||||||
Net income |
$ | 146 | $ | 400 | $ | 568 | $ | 1,118 | ||||||||
Adjustments to reconcile net income to net cash
provided by operations: |
||||||||||||||||
Depreciation and amortization |
151 | 128 | 452 | 376 | ||||||||||||
Stock-based compensation |
17 | 16 | 54 | 43 | ||||||||||||
Deferred income taxes |
3 | 4 | 4 | (2 | ) | |||||||||||
Changes in operating assets and liabilities |
(4 | ) | 40 | 130 | 44 | |||||||||||
Net cash provided by operating activities |
313 | 588 | 1,208 | 1,579 | ||||||||||||
Cash flows from investing activities |
||||||||||||||||
Purchases of
property, plant and equipment |
(175 | ) | (177 | ) | (625 | ) | (552 | ) | ||||||||
Sales and maturities of investments |
— | 1 | — | 4 | ||||||||||||
Net cash used in investing activities |
(175 | ) | (176 | ) | (625 | ) | (548 | ) | ||||||||
Cash flows from financing activities |
||||||||||||||||
Employee stock plans, net |
7 | (2 | ) | 38 | 58 | |||||||||||
Repurchases of common stock |
— | — | (50 | ) | — | |||||||||||
Repayment of long-term debt |
(25 | ) | (19 | ) | (75 | ) | (57 | ) | ||||||||
Net cash provided by (used in) financing activities |
(18 | ) | (21 | ) | (87 | ) | 1 | |||||||||
Net increase in cash and cash equivalents |
120 | 391 | 496 | 1,032 | ||||||||||||
Cash and cash equivalents, beginning of period |
3,110 | 2,435 | 2,734 | 1,794 | ||||||||||||
Cash and cash equivalents, end of period |
$ | 3,230 | $ | 2,826 | $ | 3,230 | $ | 2,826 | ||||||||
Exhibit 99.2
| Page ? 1 Volume and Market Share EPS Analysis Revenue and Gross Margin Note: Unless otherwise noted, information is presented on a GAAP basis Note: Q1'08 actual EPS reflects the acquisition of Komag, Inc. and a one-time net tax charge of $60M. Q2'09 includes restructuring charge of $113M (r) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY07 FY07 FY08 FY08 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 TAM 113.0 111.8 133.6 143.7 131.6 131.9 145.8 123.8 111.4 135.4 152.4 160.4 163.3 156.2 164.0 167.5 159.5 Share 21.7% 22.3% 22.0% 23.9% 26.3% 26.7% 27.0% 28.6% 28.3% 29.5% 28.9% 30.9% 31.3% 31.8% 30.9% 31.2% 31.2% Units (HDD) 24.5 24.9 29.4 34.2 34.5 35.2 39.4 35.5 31.6 40.0 44.1 49.5 51.1 49.7 50.7 52.2 49.8 ASP $58 $55 $59 $61 $59 $56 $53 $51 $50 $48 $49 $52 $51 $47 $46 $47 $45 Revenue $1,410 $1,367 $1,766 $2,204 $2,111 $1,993 $2,109 $1,823 $1,592 $1,928 $2,208 $2,619 $2,641 $2,382 $2,396 $2,475 $2,252 Gross Margin $222 $205 $323 $513 $477 $425 $424 $290 $253 $370 $514 $687 $665 $535 $437 $475 $410 Gross Margin % 15.7% 15.0% 18.3% 23.3% 22.6% 21.3% 20.1% 15.9% 15.9% 19.2% 23.3% 26.2% 25.2% 22.5% 18.2% 19.2% 18.2% R&D $75 $79 $91 $122 $123 $128 $133 $119 $125 $132 $142 $154 $160 $154 $167 $169 $179 SG&A $32 $47 $48 $59 $56 $56 $57 $42 $49 $52 $53 $60 $64 $61 $59 $66 $63 Other $ - $ - $49 $ - $ - $ - $ - $113 $18 ($23) $ - $ - $ - $27 $ - $ - $10 Total Operating Expenses $107 $126 $188 $181 $179 $184 $190 $274 $192 $161 $195 $214 $224 $242 $226 $235 $252 Operating Income $115 $79 $135 $332 $298 $241 $234 $16 $61 $209 $319 $473 $441 $293 $211 $240 $158 Net Income $121 $212 $69 $305 $280 $213 $211 $14 $50 $196 $288 $429 $400 $265 $197 $225 $146 EPS $0.53 $0.94 $0.31 $1.35 $1.23 $0.94 $0.93 $0.06 $0.22 $0.86 $1.25 $1.85 $1.71 $1.13 $0.84 $0.96 $0.62 Diluted Shares Outstanding 226 225 224 226 227 227 226 224 226 227 230 232 234 235 234 235 236 Top 10 Customers Revenue 46% 48% 46% 47% 48% 53% 51% 49% 47% 52% 56% 55% 51% 52% 50% 48% 49% Revenue by Channel OEM 47% 47% 50% 48% 50% 57% 56% 57% 48% 54% 52% 48% 49% 54% 50% 45% 47% Distributors 34% 36% 31% 34% 34% 24% 26% 21% 30% 29% 31% 30% 33% 29% 32% 33% 33% Retail 19% 17% 19% 18% 16% 19% 18% 22% 22% 17% 17% 22% 18% 17% 18% 22% 20% Revenue by Geography Americas 36% 40% 34% 32% 28% 29% 23% 23% 26% 24% 22% 25% 24% 25% 23% 22% 22% Europe 29% 26% 33% 32% 31% 25% 29% 29% 28% 22% 22% 25% 24% 21% 23% 25% 24% Asia 35% 34% 33% 36% 41% 46% 48% 48% 46% 54% 56% 50% 52% 54% 54% 53% 54% Compute Units Notebook 2.960 2.986 4.785 7.134 8.819 9.878 12.411 11.187 7.932 14.670 16.528 17.735 17.072 16.802 16.582 17.385 16.227 Desktop 15.399 15.731 16.674 18.331 17.834 15.863 17.484 14.225 14.659 16.349 18.282 19.290 21.461 20.282 20.918 20.411 20.118 Non-Compute Units Consumer Electronics 2.579 2.692 3.707 4.077 3.109 4.097 3.913 4.128 3.487 3.666 3.064 4.083 4.643 5.306 5.239 4.709 4.765 Branded 2.596 2.317 2.910 3.390 3.456 4.081 4.396 4.918 4.512 3.994 4.539 6.219 5.565 5.005 5.678 7.427 6.404 Enterprise Units 0.978 1.127 1.281 1.280 1.324 1.266 1.203 1.005 0.973 1.308 1.669 2.170 2.356 2.346 2.319 2.284 2.318 Total HDD Units 24.512 24.853 29.357 34.212 34.542 35.185 39.407 35.463 31.563 39.987 44.082 49.497 51.097 49.741 50.736 52.216 49.832 Amounts in millions; except per share amounts, ASP percentages. Revenue by Geography Rolling Four Quarters Ending Q3 FY08 Revenue by Geography Rolling Four Quarters Ending Q3 FY11 (CHART) (CHART) Asia 54% Europe 23% Americas 23% (CHART) Asia 36% Europe 31% Americas 33% (CHART) (CHART) (CHART) |
| Page ? 2 (r) Free Cash Flow Return on Assets R&D and Capital Expenditures Gross vs. Net Cash & Cash Equivalents Business Model Gross Margin 18%-23% Operating Expense 9%-10% Operating Income 8%-14% Tax 6%-9% of Income Before Tax Capital Expenditures 7%-8% Inventory Turns 12-16 Turns Conversion Cycle 4-8 Days Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY07 FY07 FY08 FY08 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 Cash and Cash Equivalents $704 $700 $651 $917 $917 $1,104 $1,213 $1,376 $1,579 $1,794 $2,056 $2,435 $2,826 $2,734 $2,858 $3,110 $3,230 Debt $27 $22 $1,018 $775 $514 $509 $507 $504 $502 $482 $463 $444 $425 $400 $375 $350 $325 Net Cash and Cash Equivalents $677 $678 ($367) $142 $403 $595 $706 $872 $1,077 $1,312 $1,593 $1,991 $2,401 $2,334 $2,483 $2,760 $2,905 Cash Flow From Operations $164 $154 $219 $519 $431 $229 $301 $300 $355 $349 $434 $557 $588 $363 $390 $505 $313 Free Cash Flow $94 $69 $56 $350 $294 $83 $139 $160 $249 $238 $258 $358 $411 $178 $190 $255 $138 Capital Expenditures $70 $85 $163 $169 $137 $146 $162 $140 $106 $111 $176 $199 $177 $185 $200 $250 $175 Depreciation and Amortization $55 $61 $78 $111 $111 $113 $117 $122 $119 $122 $121 $126 $128 $134 $150 $151 $151 EBITDA $170 $140 $213 $443 $409 $354 $351 $138 $180 $331 $440 $599 $569 $427 $361 $391 $309 Accounts Receivable, Net $715 $697 $985 $1,086 $1,014 $1,010 $1,082 $926 $824 $926 $1,131 $1,365 $1,257 $1,256 $1,325 $1,250 $1,171 Inventory Raw Materials $12 $12 $165 $171 $153 $144 $129 $124 $104 $97 $96 $102 $115 $159 $155 $141 $151 Work in Process $86 $94 $145 $131 $131 $145 $168 $159 $152 $154 $173 $212 $254 $255 $266 $274 $260 Finished Goods $145 $153 $151 $157 $171 $167 $180 $163 $129 $125 $126 $139 $138 $146 $140 $153 $163 Inventory, Net $243 $259 $461 $459 $455 $456 $477 $446 $385 $376 $395 $453 $507 $560 $561 $568 $574 Property and Equipment, Net $672 $741 $1,516 $1,560 $1,529 $1,668 $1,674 $1,620 $1,570 $1,584 $1,625 $1,696 $1,756 $2,159 $2,245 $2,277 $2,249 Accounts Payable $851 $882 $1,106 $1,216 $1,144 $1,181 $1,215 $1,075 $1,001 $1,101 $1,342 $1,507 $1,508 $1,507 $1,703 $1,628 $1,486 Days Sales Outstanding 46 46 51 45 44 46 47 46 47 47 47 47 43 48 50 46 47 Days Inventory Outstanding 19 20 29 25 25 27 26 27 26 24 21 21 23 28 26 26 28 Days Payables Outstanding 65 69 70 66 64 69 66 64 68 69 72 71 69 74 79 74 73 Cash Conversion Cycle - (3) 10 4 5 4 7 9 5 2 (4) (3) (3) 2 (3) (2) 2 Inventory Turns 20 18 13 15 14 14 14 14 14 15 17 17 16 13 14 14 13 Shares Repurchased 1.5 2.5 0.8 - 1.5 - 1.2 - - - - - - - 1.8 - - Shares Repurchased $ $29 $45 $16 $ - $44 $ - $36 $ - $ - $ - $ - $ - $ - $ - $50 $ - $ - Remaining Amount Authorized $107 $62 $46 $46 $502 $502 $466 $466 $466 $466 $466 $466 $466 $466 $416 $416 $416 R4Q ROIC 32.3% 28.7% 27.3% 31.4% 33.8% 34.0% 33.5% 22.9% 14.9% 13.9% 15.3% 24.9% 31.2% 30.2% 26.4% 21.1% 15.6% R4Q ROA 18.7% 16.8% 16.4% 19.0% 20.7% 21.2% 21.1% 14.7% 9.8% 9.2% 10.4% 17.0% 21.2% 20.7% 18.1% 14.6% 10.9% Worldwide Headcount 27,277 29,572 41,263 42,534 41,876 50,072 51,409 50,838 43,898 45,991 52,208 55,128 61,803 62,500 62,817 62,991 61,349 Balance sheet, cash flows, earnings and share repurchase amounts in millions (CHART) (CHART) (CHART) (CHART) Note: Unless otherwise noted, information is presented on a GAAP basis |
| Page ? 3 Footnotes FY08 and Q1 FY11 ASP, Revenue by Channel and Revenue by Geography exclude external sales of media/substrates Unit volume excludes WD TV Media Players without hard drives, WD Livewire, SSD and media Worldwide Headcount excludes temporary employees 4. Q4 FY10 SG&A and Other have been revised to break out litigation settlement expense (r) Formulas Share = Units / TAM ASP = Revenue / Units Free Cash Flow = Cash Flow from Operations - Capital Expenditures EBITDA = Net income + Interest Expense + Income Tax Expense + Depreciation and Amortization Days Sales Outstanding (DSO) = Accounts Receivable / (Revenue / 91 days) Days Inventory Outstanding (DIO) = Inventory / (Cost of Revenue / 91 days) Days Payables Outstanding (DPO) = Accounts Payable / (Cost of Revenue / 91 days) Cash Conversion Cycle = DSO + DIO - DPO Inventory Turns = 364 days / DIO R4Q ROIC = R4Q (Net Income from Continuing Operations + Interest Expense) / R4Q Average (Equity + Debt) R4Q ROA = R4Q Net Income from Continuing Operations / R4Q Average Total Assets |
| Page ? 4 (r) Non-GAAP Financial Measures Free Cash Flow: Free cash flow is a non-GAAP financial measure defined as cash flows from operations less capital expenditures. We consider free cash flow to be useful as an indicator of our overall liquidity, as the amount of free cash flow generated in any period is representative of cash that is available for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, repaying debt and repurchasing stock. We also believe that free cash flow is one of several benchmarks used by investors for comparison of our liquidity with other companies in our industry, although our measure of free cash flow may not be directly comparable to similar measures reported by other companies. Free cash flow should not be construed as an alternative to cash flows from operations or other cash flow measurements determined in accordance with GAAP. EBITDA: EBITDA is a non-GAAP financial measure defined as net income before interest, income tax expense, depreciation and amortization. We include information concerning EBITDA because we believe it is a useful measure to evaluate our operating performance. As a measure of our operating performance, we believe EBITDA provides a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. While EBITDA is a relevant and widely used measure of operating performance, it does not represent net income as defined by GAAP and it should not be considered as an alternative to that measure in evaluating operating performance. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY07 FY07 FY08 FY08 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 Reconciliation of Cash Flows from Operations to Free Cash Flow Cash Flows from Operations $164 $154 $219 $519 $431 $229 $301 $300 $355 $349 $434 $557 $588 $363 $390 $505 $313 Capital Expenditures (70) (85) (163) (169) (137) (146) (162) (140) (106) (111) (176) (199) (177) (185) (200) (250) (175) Free Cash Flow $94 $69 $56 $350 $294 $83 $139 $160 $249 $238 $258 $358 $411 $178 $190 $255 $138 Reconciliation of Net Income to EBITDA Net Income $121 $212 $69 $305 $280 $213 $211 $14 $50 $196 $288 $429 $400 $265 $197 $225 $146 Interest Expense (7) (7) (3) 16 8 4 4 9 3 2 2 2 1 1 - 1 (1) Income Tax Expense 1 (126) 69 11 10 24 19 (7) 8 11 29 42 40 27 14 14 13 Depreciation and Amortization 55 61 78 111 111 113 117 122 119 122 121 126 128 134 150 151 151 EBITDA $170 $140 $213 $443 $409 $354 $351 $138 $180 $331 $440 $599 $569 $427 $361 $391 $309 |