UNITED STATES
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
Date of Report (Date of earliest event reported): January 23, 2013
Western Digital Corporation
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-08703 | 33-0956711 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
| 3355 Michelson Drive, Suite 100 Irvine, California |
92612 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
(949) 672-7000
(Registrant’s Telephone Number, Including Area Code)
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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 240.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | 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 January 23, 2013, Western Digital Corporation (“Western Digital”) announced financial results for the second fiscal quarter ended December 28, 2012. 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 second quarter ended December 28, 2012 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 second fiscal quarter ended December 28, 2012. These non-GAAP measures exclude a tax-related matter, amortization of intangibles related to the HGST acquisition and certain employee termination benefits and other charges. 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 January 23, 2013 announcing financial results for the second fiscal quarter ended December 28, 2012. |
| 99.2 | Second Quarter Fiscal Year 2013 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) | ||||||
| By: | /s/ Michael C. Ray | |||||
|
| ||||||
| Date: January 23, 2013 | Michael C. Ray | |||||
| Senior Vice President, General Counsel and Secretary | ||||||
Exhibit 99.1
Company contacts:
Bob Blair
Western Digital Investor Relations
949.672.7834
robert.blair@wdc.com
Steve Shattuck
Western Digital Public Relations
949.672.7817
steve.shattuck@wdc.com
FOR IMMEDIATE RELEASE:
WESTERN DIGITAL® ANNOUNCES Q2 REVENUE OF $3.8 BILLION AND
NON-GAAP NET INCOME OF $513 MILLION, OR $2.09 PER SHARE1
IRVINE, Calif. — Jan. 23, 2013 — Western Digital® Corp. (NASDAQ: WDC) today reported revenue of $3.8 billion, hard-drive shipments of 59.2 million and net income of $335 million, or $1.36 per share for its second fiscal quarter ended Dec. 28, 2012. On a non-GAAP basis, net income was $513 million or $2.09 per share.1 In the year-ago quarter, the company reported revenue of $2.0 billion, net income of $145 million, or $0.61 per share, and shipped 28.5 million hard drives. Non-GAAP net income in the year-ago quarter was $358 million, or $1.51 per share.2
The company generated $772 million in cash from operations during the December quarter, ending with total cash and cash equivalents of $3.8 billion. During the quarter, the company utilized $146 million to buy back 4.2 million shares of common stock. On Dec. 3, the company declared a $0.25 per common share dividend, which was paid on Dec. 26.
“We are pleased with our December quarter results, reflecting outstanding execution and value creation by our HGST and WD® teams,” said Steve Milligan, president and chief executive officer. “In an environment marked by continued macroeconomic uncertainty, soft PC demand and inventory rebalancing by our customers, we continue to manage our business by focusing on those variables that we control, allowing us to generate better than expected revenue and profitability and strong cash generation.”
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 live and archived conference call webcast can be accessed online at investor.wdc.com. The telephone replay number is 888-568-0860 in the U.S. or +1-402-998-0245 for international callers.
Western Digital Announces Q2 Revenue of $3.8 Billion and
Non-GAAP Net Income of $513 Million, or $2.09 Per Share 1
Page 2
About Western Digital
Western Digital Corp. (NASDAQ: WDC), Irvine, Calif., is a global provider of products and services that empower people to create, manage, experience and preserve digital content. Its subsidiaries design and manufacture storage devices, networking equipment and home entertainment products under the WD®, HGST and G-Technology brands. Visit the Investor section of the company’s website (www.westerndigital.com) to access a variety of financial and investor information.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements concerning the company’s revenue, profitability and cash generation. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including the impact of continued uncertainty and volatility in global economic conditions; supply and demand conditions in the hard drive industry; uncertainties concerning the availability and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; uncertainties related to the development and introduction of products based on new technologies and expansion into new data storage markets; business conditions and growth in the various hard drive markets; pricing trends and fluctuations in average selling prices; and other risks and uncertainties listed in the company’s filings with the Securities and Exchange Commission (the “SEC”), including the company’s recent Form 10-Q filed with the SEC on Nov. 2, 2012, to which your attention is directed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
Western Digital Announces Q2 Revenue of $3.8 Billion and
Non-GAAP Net Income of $513 Million, or $2.09 Per Share 1
Page 3
###
Western Digital, WD and the WD logo are registered trademarks in the U.S. and other countries. Other marks may be mentioned herein that belong to other companies.
| 1 | Non-GAAP net income for the second quarter fiscal 2013 consists of GAAP net income of $335 million plus $88 million for a tax-related matter, $49 million of amortization of intangibles related to the acquisition of HGST and $41 million related to employee termination benefits and other charges. Non-GAAP earnings per share of $2.09 for the second quarter is calculated by using the same 246 million diluted shares as is used for GAAP earnings per share. The tax effect of the employee termination benefits and other charges was not material. |
| 2 | Non-GAAP net income for the second quarter fiscal 2012 consists of GAAP net income of $145 million plus $199 million for charges and expenses related to the flooding and $14 million of acquisition-related expenses. Non-GAAP earnings per share of $1.51 for the second quarter is calculated by using the same 237 million diluted shares as is used for GAAP earnings per share. |
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
| Dec. 28, | Jun. 29, | |||||||
| 2012 | 2012 | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,816 | $ | 3,208 | ||||
| Accounts receivable, net |
1,732 | 2,364 | ||||||
| Inventories |
1,204 | 1,210 | ||||||
| Other |
423 | 359 | ||||||
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| Total current assets |
7,175 | 7,141 | ||||||
| Property, plant and equipment, net |
3,938 | 4,067 | ||||||
| Goodwill |
1,907 | 1,975 | ||||||
| Other intangible assets, net |
709 | 799 | ||||||
| Other assets |
200 | 224 | ||||||
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| Total assets |
$ | 13,929 | $ | 14,206 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 2,185 | $ | 2,773 | ||||
| Accrued expenses |
722 | 858 | ||||||
| Accrued warranty |
131 | 171 | ||||||
| Current portion of long-term debt |
288 | 230 | ||||||
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| Total current liabilities |
3,326 | 4,032 | ||||||
| Long-term debt |
1,840 | 1,955 | ||||||
| Other liabilities |
516 | 550 | ||||||
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| Total liabilities |
5,682 | 6,537 | ||||||
| Total shareholders’ equity |
8,247 | 7,669 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 13,929 | $ | 14,206 | ||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| Dec. 28, | Dec. 30, | Dec. 28, | Dec. 30, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue, net |
$ | 3,824 | $ | 1,995 | $ | 7,859 | $ | 4,689 | ||||||||
| Cost of revenue |
2,765 | 1,347 | 5,607 | 3,500 | ||||||||||||
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| Gross profit |
1,059 | 648 | 2,252 | 1,189 | ||||||||||||
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| Operating expenses: |
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| Research and development |
378 | 191 | 774 | 384 | ||||||||||||
| Selling, general and administrative |
162 | 96 | 341 | 185 | ||||||||||||
| Employee termination benefits and other charges |
41 | — | 67 | — | ||||||||||||
| Charges related to flooding |
— | 199 | — | 199 | ||||||||||||
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| Total operating expenses |
581 | 486 | 1,182 | 768 | ||||||||||||
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| Operating income |
478 | 162 | 1,070 | 421 | ||||||||||||
| Net interest and other |
(10 | ) | (2 | ) | (24 | ) | (3 | ) | ||||||||
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| Income before income taxes |
468 | 160 | 1,046 | 418 | ||||||||||||
| Income tax provision |
133 | 15 | 192 | 34 | ||||||||||||
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| Net income |
$ | 335 | $ | 145 | $ | 854 | $ | 384 | ||||||||
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| Income per common share: |
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| Basic |
$ | 1.38 | $ | 0.62 | $ | 3.50 | $ | 1.64 | ||||||||
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| Diluted |
$ | 1.36 | $ | 0.61 | $ | 3.43 | $ | 1.62 | ||||||||
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| Weighted average shares outstanding: |
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| Basic |
242 | 234 | 244 | 234 | ||||||||||||
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| Diluted |
246 | 237 | 249 | 237 | ||||||||||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| Dec. 28, | Dec. 30, | Dec. 28, | Dec. 30, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Cash flows from operating activities |
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| Net income |
$ | 335 | $ | 145 | $ | 854 | $ | 384 | ||||||||
| Adjustments to reconcile net income to net cash provided by operations: |
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| Depreciation and amortization |
309 | 140 | 622 | 298 | ||||||||||||
| Stock-based compensation |
32 | 24 | 71 | 41 | ||||||||||||
| Deferred income taxes |
80 | 9 | 68 | 18 | ||||||||||||
| Non-cash portion of employee termination benefits and other charges |
15 | — | 15 | — | ||||||||||||
| Non-cash portion of charges related to flooding |
— | 109 | — | 109 | ||||||||||||
| Changes in operating assets and liabilities, net |
1 | (49 | ) | 78 | (120 | ) | ||||||||||
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| Net cash provided by operating activities |
772 | 378 | 1,708 | 730 | ||||||||||||
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| Cash flows from investing activities |
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| Purchases of property, plant and equipment |
(246 | ) | (120 | ) | (628 | ) | (253 | ) | ||||||||
| Acquisitions, net of cash acquired |
(18 | ) | — | (27 | ) | — | ||||||||||
| Purchase of investment |
(15 | ) | — | (15 | ) | — | ||||||||||
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| Net cash used in investing activities |
(279 | ) | (120 | ) | (670 | ) | (253 | ) | ||||||||
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| Cash flows from financing activities |
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| Employee stock plans, net |
53 | 22 | 113 | 20 | ||||||||||||
| Repurchases of common stock |
(146 | ) | — | (364 | ) | — | ||||||||||
| Dividends to shareholders |
(121 | ) | — | (121 | ) | — | ||||||||||
| Repayment of debt |
— | (31 | ) | (58 | ) | (63 | ) | |||||||||
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| Net cash used in financing activities |
(214 | ) | (9 | ) | (430 | ) | (43 | ) | ||||||||
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| Net increase in cash and cash equivalents |
279 | 249 | 608 | 434 | ||||||||||||
| Cash and cash equivalents, beginning of period |
3,537 | 3,675 | 3,208 | 3,490 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 3,816 | $ | 3,924 | $ | 3,816 | $ | 3,924 | ||||||||
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| (CHART) Page ? 1 Volume and Market Share EPS Analysis Revenue and Gross Margin Note: Refer to "Non-GAAP Financial Measures" for information about non-GAAP financial measures included in this investor summary (r) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 TAM 111.4 135.4 152.4 160.4 163.3 156.2 164.0 167.5 159.5 165.8 176.3 119.1 146.4 156.7 139.1 135.7 Share 28.3% 29.5% 28.9% 30.9% 31.3% 31.8% 30.9% 31.2% 31.2% 32.5% 32.8% 23.9% 30.2% 45.3% 44.9% 43.7% Units (HDD) 31.6 40.0 44.1 49.5 51.1 49.7 50.7 52.2 49.8 53.8 57.8 28.5 44.2 71.0 62.5 59.2 ASP (HDD) $50 $48 $49 $52 $51 $47 $46 $47 $45 $44 $46 $69 $68 $65 $62 $62 Revenue $1,592 $1,928 $2,208 $2,619 $2,641 $2,382 $2,396 $2,475 $2,252 $2,403 $2,694 $1,995 $3,035 $4,754 $4,035 $3,824 Gross Profit $253 $370 $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 Gross Margin 15.9% 19.2% 23.3% 26.2% 25.2% 22.5% 18.2% 19.2% 18.2% 19.5% 20.1% 32.5% 32.2% 31.0% 29.6% 27.7% R&D $125 $132 $142 $154 $160 $154 $167 $169 $179 $188 $193 $191 $265 $406 $396 $378 SG&A $49 $52 $53 $60 $64 $61 $59 $66 $63 $77 $71 $85 $122 $178 $179 $162 Other $18 ($23) $ - $ - $ - $27 $ - $ - $10 $32 $18 $210 $48 $80 $26 $41 Total Operating Expenses $192 $161 $195 $214 $224 $242 $226 $235 $252 $297 $282 $486 $435 $664 $601 $581 Operating Income $61 $209 $319 $473 $441 $293 $211 $240 $158 $172 $259 $162 $542 $808 $592 $478 Net Income $50 $196 $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 EPS $0.22 $0.86 $1.25 $1.85 $1.71 $1.13 $0.84 $0.96 $0.62 $0.67 $1.01 $0.61 $1.96 $2.87 $2.06 $1.36 Diluted Shares Outstanding 226 227 230 232 234 235 234 235 236 237 237 237 246 260 252 246 Non-GAAP Results Gross Profit $253 $370 $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 Gross Margin 15.9% 19.2% 23.3% 26.2% 25.2% 22.5% 18.2% 19.2% 18.2% 19.5% 20.1% 32.5% 35.5% 31.8% 30.5% 28.7% Net Income $68 $173 $288 $429 $400 $292 $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 EPS $0.30 $0.76 $1.25 $1.85 $1.71 $1.24 $0.84 $0.96 $0.66 $0.81 $1.10 $1.51 $2.52 $3.35 $2.36 $2.09 Top 10 Customers Revenue 47% 52% 56% 55% 51% 52% 50% 48% 49% 53% 49% 51% 53% 53% 44% 45% Revenue by Channel OEM 48% 54% 52% 48% 49% 54% 50% 45% 47% 55% 53% 59% 64% 69% 63% 61% Distributors 30% 29% 31% 30% 33% 29% 32% 33% 33% 29% 29% 25% 28% 21% 24% 24% Retail 22% 17% 17% 22% 18% 17% 18% 22% 20% 16% 18% 16% 8% 10% 13% 15% Revenue by Geography Americas 26% 24% 22% 25% 24% 25% 23% 22% 22% 20% 19% 22% 21% 27% 23% 27% EMEA 28% 22% 22% 25% 24% 21% 23% 25% 24% 20% 22% 21% 18% 18% 18% 23% Asia/ANZ 46% 54% 56% 50% 52% 54% 54% 53% 54% 60% 59% 57% 61% 55% 59% 50% Compute Units Notebook 7.932 14.670 16.528 17.735 17.072 16.802 16.582 17.385 16.227 16.867 19.622 9.814 18.067 32.773 25.887 21.300 Desktop 14.659 16.349 18.282 19.290 21.461 20.282 20.918 20.411 20.118 22.348 21.588 11.391 15.975 21.211 16.819 17.717 Non-Compute Units Consumer Electronics 3.487 3.666 3.064 4.083 4.643 5.306 5.239 4.709 4.765 6.459 7.188 2.352 3.643 4.155 8.019 6.452 Branded 4.512 3.994 4.539 6.219 5.565 5.005 5.678 7.427 6.404 5.672 7.060 3.191 2.926 4.986 5.767 7.139 Enterprise Units 0.973 1.308 1.669 2.170 2.356 2.346 2.319 2.284 2.318 2.463 2.369 1.724 3.616 7.913 5.988 6.633 Total HDD Units 31.563 39.987 44.082 49.497 51.097 49.741 50.736 52.216 49.832 53.809 57.827 28.472 44.227 71.038 62.480 59.241 Amounts in millions; except per share amounts,ASP, percentages. Revenue by Geography Rolling Four Quarters EndingQ2'10 Revenue by Geography Rolling Four Quarters EndingQ2'13 (CHART) (CHART) Asia/ ANZ 56% EMEA 19% Americas 25% (CHART) Asia/ ANZ 52% EMEA 24% Americas 24% (CHART) (CHART) |
| Page ? 2 (r) Free Cash Flow R4Q Return on Invested Capital R&D and Capital Expenditures Gross vs. Net Cash & Cash Equivalents Business Model Gross Margin* 27%-32%Operating Expense* 10%-12%Operating Income* 15%-22%Tax 7%-10% of Income Before TaxCapital Expenditures* 5%-7% Conversion Cycle 4-8 Days*Percent of Revenue Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 Cash and Cash Equivalents $1,579 $1,794 $2,056 $2,435 $2,826 $2,734 $2,858 $3,110 $3,230 $3,490 $3,675 $3,924 $3,377 $3,208 $3,537 $3,816 Debt $502 $482 $463 $444 $425 $400 $375 $350 $325 $294 $263 $231 $2,743 $2,185 $2,128 $2,128 Net Cash and Cash Equivalents $1,077 $1,312 $1,593 $1,991 $2,401 $2,334 $2,483 $2,760 $2,905 $3,196 $3,412 $3,693 $634 $1,023 $1,409 $1,688 Cash Flow From Operations $355 $349 $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 Free Cash Flow $249 $238 $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 Capital Expenditures $106 $111 $176 $199 $177 $185 $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 Depreciation and Amortization $119 $122 $121 $126 $128 $134 $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 EBITDA $180 $331 $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 Accounts Receivable, Net $824 $926 $1,131 $1,365 $1,257 $1,256 $1,325 $1,250 $1,171 $1,206 $1,356 $747 $2,377 $2,364 $1,951 $1,732 Inventory Raw Materials $104 $97 $96 $102 $115 $159 $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 Work in Process $152 $154 $173 $212 $254 $255 $266 $274 $260 $263 $275 $185 $667 $552 $559 $581 Finished Goods $129 $125 $126 $139 $138 $146 $140 $153 $163 $142 $200 $90 $286 $413 $508 $430 Inventory, Net $385 $376 $395 $453 $507 $560 $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 Property, Plant and Equipment, Net $1,570 $1,584 $1,625 $1,696 $1,756 $2,159 $2,245 $2,277 $2,249 $2,224 $2,209 $2,091 $4,171 $4,067 $4,027 $3,938 Accounts Payable $1,001 $1,101 $1,342 $1,507 $1,508 $1,507 $1,703 $1,628 $1,486 $1,545 $1,708 $883 $2,774 $2,773 $2,545 $2,185 Days Sales Outstanding 47 47 47 47 43 48 50 46 47 46 46 34 71 45 44 41 Days Inventory Outstanding 26 24 21 21 23 28 26 26 28 27 27 31 57 34 42 40 Days Payables Outstanding 68 69 72 71 69 74 79 74 73 73 72 60 123 77 82 72 Cash Conversion Cycle 5 2 (4) (3) (3) 2 (3) (2) 2 - 1 5 5 2 4 9 Inventory Turns 14 15 17 17 16 13 14 14 13 13 13 12 6 11 9 9 Shares Repurchased - - - - - - 1.8 - - - - - - 16.4 5.2 4.2 Shares Repurchased $ $ - $ - $ - $ - $ - $ - $50 $ - $ - $ - $ - $ - $ - $604 $218 $146 Remaining Amount Authorized $466 $466 $466 $466 $466 $466 $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 R4Q ROIC 14.9% 13.9% 15.3% 24.9% 31.2% 30.2% 26.4% 21.1% 15.6% 13.2% 13.6% 11.9% 14.8% 20.4% 21.3% 21.0% R4Q ROA 9.8% 9.2% 10.4% 17.0% 21.2% 20.7% 18.1% 14.6% 10.9% 9.2% 9.5% 8.5% 10.5% 14.3% 14.9% 14.7% Worldwide Headcount 43,898 45,991 52,208 55,128 61,803 62,500 62,817 62,991 61,349 65,431 67,799 67,121 106,604 103,111 96,002 93,820 Balance sheet, cash flows, earnings and share repurchase amounts in millions (CHART) (CHART) (CHART) (CHART) Note: Refer to "Non-GAAP Financial Measures" for information about non-GAAP financial measures included in this investor summary |
| Page ? 3 (r) Non-GAAP Financial MeasuresFree 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. Non-GAAP Gross Margin and Non-GAAP Gross Profit: Non-GAAP gross margin is a non-GAAP measure defined as non-GAAP gross profit divided by revenue. Non-GAAP gross profit is a non-GAAP measure defined as gross profit before any unusual or non-recurring charges to cost of goods sold. For Q3 FY12, non-GAAP gross profit excludes costs recognized upon the sale of inventory that was written-up to fair value in connection with the HGST acquisition. Because we believe these costs may not be indicative of ongoing operations, we believe that non-GAAP gross profit is a useful measure to investors as an alternative method for measuring our operating performance and comparing it against prior periods' performance. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 Reconciliation of Cash Flows from Operations to Free Cash Flow Cash Flows from Operations $355 $349 $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 Capital Expenditures (106) (111) (176) (199) (177) (185) (200) (250) (175) (153) (134) (120) (139) (324) (382) (246) Free Cash Flow $249 $238 $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 Reconciliation of Net Income to EBITDA Net Income $50 $196 $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 Interest 3 2 2 2 1 1 - 1 (1) 2 1 2 4 7 14 10 Income Tax Expense 8 11 29 42 40 27 14 14 13 12 19 15 55 56 59 133 Depreciation and Amortization 119 122 121 126 128 134 150 151 151 150 158 140 188 339 313 309 EBITDA $180 $331 $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 Reconciliation of Gross Margin to Non-GAAP Gross Margin and Gross Profit to Non-GAAP Gross Profit Gross Profit $253 $370 $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 Acquisition-Related Fair Value Adjustments 91 Amortization of Intangible Assets Acquired from HGST 9 39 38 38 Non-GAAP Gross Profit $253 $370 $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 Revenue $1,592 $1,928 $2,208 $2,619 $2,641 $2,382 $2,396 $2,475 $2,252 $2,403 $2,694 $1,995 $3,035 $4,754 $4,035 $3,824 Gross Margin 15.9% 19.2% 23.3% 26.2% 25.2% 22.5% 18.2% 19.2% 18.2% 19.5% 20.1% 32.5% 32.2% 31.0% 29.6% 27.7% Non-GAAP Gross Margin 15.9% 19.2% 23.3% 26.2% 25.2% 22.5% 18.2% 19.2% 18.2% 19.5% 20.1% 32.5% 35.5% 31.8% 30.5% 28.7% |
| Page ? 4 (r) Non-GAAP Financial MeasuresNon-GAAP Net Income and non-GAAP EPS: Non-GAAP net income and non-GAAP EPS are non-GAAP measures defined as net income and EPS, respectively, before any unusual or non-recurring charges or any tax impact related to those charges. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 FY12 FY12 FY13 FY13 Reconciliation of Net Income to Non-GAAP Net Income Net Income $50 $196 $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 Acquisition-Related Expense ^ ^ ^ ^ ^ ^ ^ ^ 10 10 14 14 34 ^ ^ ^ Litigation Accruals ^ ^ ^ ^ ^ 27 ^ ^ ^ 25 7 ^ ^ ^ ^ ^ Charges Related to Flooding, Net of Recoveries ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 199 15 ^ ^ ^ In-Process Research and Development Charge 14 ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ Acquisition-Related Adjustments to Fair Value of Inventory / Cost of Revenue ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 91 ^ ^ ^ Amortization of Intangible Assets Acquired from HGST ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 12 51 49 49 Restructuring 4 (23) ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ 80 26 41 Tax Impact ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ (16) (4) ^ 88 Non-GAAP Net Income $68 $173 $288 $429 $400 $292 $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 EPS $0.22 $0.86 $1.25 $1.85 $1.71 $1.13 $0.84 $0.96 $0.62 $0.67 $1.01 $0.61 $1.96 $2.87 $2.06 $1.36 Non-GAAP EPS $0.30 $0.76 $1.25 $1.85 $1.71 $1.24 $0.84 $0.96 $0.66 $0.81 $1.10 $1.51 $2.52 $3.35 $2.36 $2.09 Diluted Shares Outstanding 226 227 230 232 234 235 234 235 236 237 237 237 246 260 252 246 |
| Page ? 5 FootnotesQ1 FY11 ASP, Revenue by Channel and Revenue by Geography exclude external sales of media/substratesUnit volume excludes WD TV Media Players without hard drives, WD Livewire, SSD and mediaWorldwide Headcount excludes temporary employeesConsumer Electronics includes gaming (r) FormulasShare = Units / TAMASP = Revenue / UnitsFree Cash Flow = Cash Flow from Operations - Capital ExpendituresEBITDA = Net income + Interest + Income Tax Expense + Depreciation and AmortizationDays 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 - DPOInventory Turns = 364 days / DIOR4Q 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 |