Table of Contents
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
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 27, 2006
WESTERN DIGITAL CORPORATION
(Exact Name of Registrant as Specified in Charter)
| Delaware (State or Other Jurisdiction of Incorporation) |
1-08703 (Commission File Number) |
33-0956711 (IRS Employer Identification No.) |
||
| 20511 Lake Forest Drive, Lake Forest, California (Address of Principal Executive Offices) |
92630 (Zip Code) |
|||
Registrant’s telephone number, including area code: (949) 672-7000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
(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))
TABLE OF CONTENTS
Table of Contents
Item 2.02. Results of Operations and Financial
Condition.
On July 27, 2006,
Western Digital Corporation (the “Company”) announced financial results for
the fourth fiscal quarter and fiscal year ended June 30, 2006. 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 the Company’s Investor Information Summary for the fiscal quarter ended June 30, 2006 is
attached hereto as Exhibit 99.2 and is incorporated herein by reference.
In accordance with General
Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report
on Form 8-K, 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, or the Exchange Act, except as shall be expressly set forth by specific reference in such
filing.
Item 7.01 Regulation FD Disclosure.
On July 27, 2006,
the Company announced that a Special Committee of its Board of Directors,
comprised solely of independent directors, is conducting a company-initiated, voluntary review of
its historical stock option grants. A copy of the press release making this announcement is
attached hereto as Exhibit 99.3 and is incorporated herein by reference.
In accordance with General
Instruction B.2 of Form 8-K, the information in Item 7.01 of this
Current Report on Form 8-K, including Exhibit 99.3, shall not be deemed to be “filed” for purposes
of Section 18 of 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, 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 July 27, 2006 announcing financial results for the fourth fiscal quarter and year ended June 30, 2006. | |
| 99.2 | Fourth Quarter Fiscal Year 2006 Western Digital Corporation Investor Information Summary. | |
| 99.3 | Press Release issued by Western Digital Corporation on July 27, 2006 announcing a company-initiated, voluntary review of its historical option grants by a Special Committee. |
Table of Contents
SIGNATURES
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 hereunto duly authorized.
| WESTERN DIGITAL CORPORATION |
||||
| Dated: July 27, 2006 | By: | /s/ Raymond M. Bukaty | ||
| Raymond M. Bukaty | ||||
| Senior Vice President, Administration, General Counsel and Secretary |
||||
Table of Contents
INDEX TO EXHIBITS
| Exhibit | Description | |
99.1
|
Press Release issued by Western Digital Corporation on July 27, 2006 announcing financial results for the fourth fiscal quarter and fiscal year ended June 30, 2006. | |
99.2
|
Fourth Quarter Fiscal Year 2006 Western Digital Corporation Investor Information Summary. | |
99.3
|
Press Release issued by Western Digital Corporation on July 27, 2006 announcing a company-initiated, voluntary review of its historical option grants by a Special Committee. |
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 CAPS STRONG YEAR WITH Q4 REVENUE OF $1.1 BILLION AND
NET INCOME OF $.53 PER SHARE, INCLUDING $35 MILLION
IN FAVORABLE ADJUSTMENTS
NET INCOME OF $.53 PER SHARE, INCLUDING $35 MILLION
IN FAVORABLE ADJUSTMENTS
LAKE FOREST, Calif. — Jul. 27, 2006 — Western Digital Corp. (NYSE: WDC) today reported revenue of
$1.1 billion on shipments of approximately 19.2 million hard drives, and net income of $119.9
million, or $.53 per share for its fourth fiscal quarter ended June 30, 2006. Net income included
approximately $35 million in favorable adjustments. Revenue increased 15 percent over the fourth
quarter of the prior year, and net income, including the favorable adjustments, increased 191
percent, versus revenue of $940 million and net income of $41.2 million, respectively. Net income
in the prior year fourth quarter was negatively affected by a $19 million expense for settlement of
a lawsuit.
The favorable adjustments in net income in the fourth quarter included a $13 million benefit
to gross margin related to the resolution of certain items that impacted amounts previously
recorded as costs, and a $22 million benefit to income taxes related to an adjustment to the value
of the company’s deferred tax assets.
WD Caps Strong Year with Q4 Revenue of $1.1 Billion and
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 2
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 2
Western Digital also announced in a separate press release today that it has appointed a
Special Committee of its Board of Directors that is conducting a company-initiated, voluntary
review of its historical stock option grants. The Special Committee has hired independent
counsel and is reviewing option grants from fiscal year 1998 to the present. While the Special
Committee has not completed its review, a preliminary determination has been made that measurement
dates for accounting purposes may differ from recorded dates used for certain grants made from fiscal year 1999 through
fiscal year 2003. The company does not at present anticipate a material adjustment to the
operating results included in this release. However, depending on the results of the Special
Committee’s review, a material adjustment to the company’s financial statements could be required.
The company has informed the Securities and Exchange Commission that its historical stock option
grants are being reviewed. The company will provide a public statement once its review is
complete.
WD also separately announced today that it is in volume production of 2.5-inch mobile hard
drives with 80 gigabyte-per-platter perpendicular magnetic recording (PMR) technology and of
3.5-inch desktop hard drives utilizing 160 gigabyte-per-platter technology. Both product families
utilize heads designed and manufactured by WD.
“Our results in the June quarter demonstrate WD’s ability to post consistently strong
financial performance and they represent a noteworthy achievement during the industry’s slower
season,” said Arif Shakeel, chief executive officer of Western Digital. “We performed well in the
high volume desktop market and showed significant progress in our two major growth
markets—3.5-inch drives for consumer electronics (CE) and 2.5-inch drives for notebook PCs.
“Several years ago, we established revenue diversification as a key strategic objective in
order to leverage our resources into an expanding array of hard drive applications and fast-
WD Caps Strong Year with Q4 Revenue of $1.1 Billion and
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 3
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 3
growing markets,” Shakeel said. “We continued to make excellent progress in addressing these
opportunities in the fourth quarter: 34 percent of revenue came from new markets for WD such as
CE and mobile drives, while 66 percent came from the desktop PC market. This compares with a mix in
the year-ago quarter of 23 percent new market revenue and 77 percent desktop PC revenue.”
Demonstrating this trend, shipments of 3.5-inch hard drives for CE devices such as digital and
personal video recorders expanded to 2.2 million units in the June quarter while 2.5-inch mobile
hard drive shipments grew to 1.6 million, with both categories showing strong year-over-year and
sequential growth.
Commenting on the company’s volume production of 2.5-inch mobile hard drives with 80
gigabyte-per-platter PMR technology and of 3.5-inch desktop hard drives utilizing 160 gigabyte
per-platter technology, Shakeel said: “These technology achievements represent a continued return
on investment from our substantial technology spending over the last four years. We are deploying
both technologies at a time when we can maximize the critical balance of cost, reliability, quality, availability, and our customers’ needs.”
The company’s results for its full year ended June 30, 2006, reflected strong year-over-year
performance, with revenue of $4.3 billion, net income of $396 million, and earnings per share of
$1.77. Net income for the full year included the $22 million adjustment related to deferred income
taxes. These results represent increases in revenue of 19 percent and in net income of 100 percent,
including the favorable adjustment, compared with fiscal 2005. For the prior year, net income was
$198 million, or $.91 per share.
WD Caps Strong Year with Q4 Revenue of $1.1 Billion and
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 4
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 4
From a balance sheet perspective, WD generated over $400 million in cash flow from operations
during fiscal 2006, and ended the year with $699 million of cash and short-term investments, an
increase of 17 percent from the prior fiscal year.
“Our fiscal-year performance reflects a sustained track record by WD of executing in all
aspects of our operations and of delivering outstanding financial results throughout all seasons in
the dynamic hard drive industry,” said Shakeel. “We remain focused on executing to our business
model as we address the multiple growth market opportunities for high-volume suppliers in our
industry.”
The investment community conference call to discuss these results and the company’s outlook
will be broadcast live over the Internet today at 2 p.m. PDT/5 p.m. EDT. 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: 866-448-2576 (toll-free) or +1-203-369-1172 (international)
Telephone Replay: 866-448-2576 (toll-free) or +1-203-369-1172 (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
produces reliable, high-performance hard drives that keep users’ data close-at-hand and secure from
loss.
WD was founded in 1970. The company’s storage products are marketed to leading systems
manufacturers and selected resellers under the Western Digital and WD brand names. Visit the
Investor section of the company’s Web site (www.westerndigital.com) to access a variety of
financial and investor information.
WD Caps Strong Year with Q4 Revenue of $1.1 Billion and
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 5
Net Income of $.53 per Share, including $35 Million in Favorable Adjustments
Page 5
This press release contains forward-looking statements, including the statements regarding the
company’s ability to post consistently strong financial performance; growth market opportunities;
and the company’s current anticipation that the stock option review will not result in a material
adjustment to the operating results reported in this release. These forward-looking statements are
based on the company’s current expectations and are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the forward-looking statements,
including risks and uncertainties arising out of the company’s ongoing review of its stock option
grants and developments in regulatory and legal guidance regarding stock option grants and
accounting for such grants. For example, information may be learned and analysis may be undertaken
concerning the company’s historic stock option grants and accounting that may materially impact the
company’s financial statements or results. Other potential risks and uncertainties that could cause
actual results to differ materially from those expressed in the forward looking statements include
pricing trends and fluctuations in average selling prices (ASPs); actions by competitors; changes
in the availability and cost of specialized product components, including media; supply and demand
conditions in the hard drive industry; changes in product and customer mix; uncertainties related
to the development and introduction of products based on new technologies and successful expansion
into new hard drive markets, including the 1-inch and other small form factor markets; difficulties
in reducing yield losses from complex manufacturing processes; business conditions and growth in
the notebook, consumer electronics, enterprise, branded products and desktop markets; and other
risks and uncertainties listed in the company’s recent Form 10-Q filed with the SEC on May 9, 2006,
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 and WD are registered trademarks, and the Western Digital logo is a trademark
of Western Digital Technologies, Inc.
1 gigabyte (GB) = 1 billion bytes. Total accessible capacity varies depending on operating environment.
1 gigabyte (GB) = 1 billion bytes. Total accessible capacity varies depending on operating environment.
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
| Jun. 30, | Jul. 1, | |||||||
| 2006 | 2005 | |||||||
| ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 550.7 | $ | 485.2 | ||||
Short-term investments |
148.1 | 113.2 | ||||||
Accounts receivable, net |
481.5 | 402.9 | ||||||
Inventories |
205.1 | 152.9 | ||||||
Other |
106.8 | 27.0 | ||||||
Total current assets |
1,492.2 | 1,181.2 | ||||||
Property and equipment, net |
548.6 | 395.0 | ||||||
Other assets, net |
32.5 | 12.4 | ||||||
Total assets |
$ | 2,073.3 | $ | 1,588.6 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 631.8 | $ | 569.1 | ||||
Accrued expenses |
128.5 | 154.1 | ||||||
Accrued warranty |
71.6 | 75.2 | ||||||
Current portion of long-term debt |
24.6 | 20.1 | ||||||
Total current liabilities |
856.5 | 818.5 | ||||||
Long-term debt |
19.5 | 32.6 | ||||||
Other liabilities |
37.6 | 35.4 | ||||||
Total liabilities |
913.6 | 886.5 | ||||||
Shareholders’ equity |
1,159.7 | 702.1 | ||||||
Total liabilities and shareholders’ equity |
$ | 2,073.3 | $ | 1,588.6 | ||||
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(unaudited)
(unaudited)
| Three Months Ended | Years Ended | |||||||||||||||||||
| Jun. 30, | Mar. 31, | Jul. 1, | Jun. 30, | Jul. 1, | ||||||||||||||||
| 2006 | 2006 | 2005 | 2006 | 2005 | ||||||||||||||||
Revenue, net |
$ | 1,085.5 | $ | 1,128.8 | $ | 940.4 | $ | 4,341.3 | $ | 3,638.8 | ||||||||||
Cost of revenue |
881.1 | 910.9 | 780.9 | 3,512.4 | 3,049.0 | |||||||||||||||
Gross margin |
204.4 | 217.9 | 159.5 | 828.9 | 589.8 | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
71.6 | 78.7 | 64.1 | 296.5 | 238.5 | |||||||||||||||
Selling, general and administrative |
38.8 | 38.5 | 57.0 | 165.4 | 154.4 | |||||||||||||||
Total operating expenses |
110.4 | 117.2 | 121.1 | 461.9 | 392.9 | |||||||||||||||
Operating income |
94.0 | 100.7 | 38.4 | 367.0 | 196.9 | |||||||||||||||
Net interest and other income |
5.7 | 4.8 | 2.7 | 15.8 | 5.4 | |||||||||||||||
Income before income taxes |
99.7 | 105.5 | 41.1 | 382.8 | 202.3 | |||||||||||||||
Income tax (benefit) provision |
(20.2 | ) | 2.6 | 0.1 | (13.1 | ) | 3.9 | |||||||||||||
Net income |
$ | 119.9 | $ | 102.9 | $ | 41.2 | $ | 395.9 | $ | 198.4 | ||||||||||
Net income per common share: |
||||||||||||||||||||
Basic |
$ | .55 | $ | .47 | $ | .19 | $ | 1.84 | $ | .96 | ||||||||||
Diluted |
$ | .53 | $ | .45 | $ | .19 | $ | 1.77 | $ | .91 | ||||||||||
Common shares used in computing per share amounts: |
||||||||||||||||||||
Basic |
217.6 | 216.7 | 211.4 | 215.0 | 207.6 | |||||||||||||||
Diluted |
225.1 | 226.8 | 222.6 | 223.6 | 216.9 | |||||||||||||||
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Years Ended | |||||||||||||||||||
| Jun. 30, | Mar. 31, | Jul. 1, | Jun. 30, | Jul. 1, | ||||||||||||||||
| 2006 | 2006 | 2005 | 2006 | 2005* | ||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||
Net income |
$ | 119.9 | $ | 102.9 | $ | 41.2 | $ | 395.9 | $ | 198.4 | ||||||||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||||||||||||||
Depreciation and amortization |
43.7 | 41.9 | 35.8 | 159.8 | 131.0 | |||||||||||||||
Stock-based compensation |
11.8 | 8.7 | 1.9 | 36.3 | 3.8 | |||||||||||||||
Deferred income taxes |
(22.3 | ) | — | — | (22.3 | ) | — | |||||||||||||
Other non-cash items |
— | (2.1 | ) | — | 4.9 | — | ||||||||||||||
Changes in operating assets and liabilities |
(26.8 | ) | (32.4 | ) | 34.2 | (173.1 | ) | 127.5 | ||||||||||||
Net cash provided by operating activities |
126.3 | 119.0 | 113.1 | 401.5 | 460.7 | |||||||||||||||
Cash flows from investing activities |
||||||||||||||||||||
Capital expenditures, net |
(95.8 | ) | (103.9 | ) | (80.4 | ) | (301.9 | ) | (233.4 | ) | ||||||||||
Short-term investments, net |
(17.3 | ) | (36.2 | ) | — | (34.8 | ) | (80.9 | ) | |||||||||||
Net cash used in investing activities |
(113.1 | ) | (140.1 | ) | (80.4 | ) | (336.7 | ) | (314.3 | ) | ||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Issuance of common stock under employee plans |
10.1 | 38.3 | 18.0 | 77.6 | 57.8 | |||||||||||||||
Repurchase of common stock |
(9.8 | ) | (17.5 | ) | (21.7 | ) | (53.5 | ) | (45.0 | ) | ||||||||||
Repayment of long-term debt |
(6.2 | ) | (6.5 | ) | (4.9 | ) | (23.4 | ) | (19.5 | ) | ||||||||||
Net cash (used in) provided by financing activities |
(5.9 | ) | 14.3 | (8.6 | ) | 0.7 | (6.7 | ) | ||||||||||||
Net increase in cash and cash equivalents |
7.3 | (6.8 | ) | 24.1 | 65.5 | 139.7 | ||||||||||||||
Cash and cash equivalents, beginning of period |
543.4 | 550.2 | 461.1 | 485.2 | 345.5 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 550.7 | $ | 543.4 | $ | 485.2 | $ | 550.7 | $ | 485.2 | ||||||||||
* Certain reclassifications have been made to previously reported amounts to conform to the
current period presentation.
Exhibit 99.2
WESTERN DIGITAL CORPORATION
INVESTOR INFORMATION SUMMARY
Q4 FY2006 (All $ amounts in millions, except ASPs and headcount)
INVESTOR INFORMATION SUMMARY
Q4 FY2006 (All $ amounts in millions, except ASPs and headcount)
| Q4 FY05 | Q1 FY06 | Q2 FY06 | Q3 FY06 | Q4 FY06 | ||||||||||||||||||||||
HARD DRIVE UNITS (in millions): |
15.8 | 17.1 | 18.1 | 18.8 | 19.2 | |||||||||||||||||||||
REVENUE: |
$ | 940 | $ | 1,010 | $ | 1,117 | $ | 1,129 | $ | 1,086 | ||||||||||||||||
AVERAGE SELLING PRICE: |
$ | 59 | $ | 59 | $ | 62 | $ | 60 | $ | 56 | ||||||||||||||||
GROSS MARGIN %: |
17.0 | % | 17.7 | % | 20.4 | % | 19.3 | % | 18.8 | % | ||||||||||||||||
REVENUE BY CHANNEL: |
||||||||||||||||||||||||||
OEM |
57 | % | 55 | % | 56 | % | 53 | % | 54 | % | ||||||||||||||||
DISTRIBUTORS |
38 | % | 39 | % | 39 | % | 40 | % | 37 | % | ||||||||||||||||
RETAIL |
5 | % | 6 | % | 5 | % | 7 | % | 9 | % | ||||||||||||||||
REVENUE BY GEOGRAPHY: |
||||||||||||||||||||||||||
AMERICAS |
38 | % | 36 | % | 32 | % | 39 | % | 38 | % | ||||||||||||||||
EUROPE |
25 | % | 29 | % | 34 | % | 27 | % | 22 | % | ||||||||||||||||
ASIA |
37 | % | 35 | % | 34 | % | 34 | % | 40 | % | ||||||||||||||||
WORLDWIDE HEADCOUNT: |
23,161 | 24,211 | 24,591 | 24,235 | 24,750 | |||||||||||||||||||||
CASH RELATED INFORMATION: |
||||||||||||||||||||||||||
CASH FLOW FROM OPERATIONS |
$ | 113 | $ | 40 | $ | 117 | $ | 119 | $ | 126 | ||||||||||||||||
CAPITAL INVESTMENTS |
$ | 80 | $ | 50 | $ | 52 | $ | 104 | $ | 96 | ||||||||||||||||
DEPRECIATION AND AMORTIZATION |
$ | 36 | $ | 36 | $ | 39 | $ | 42 | $ | 44 | ||||||||||||||||
DAYS SALES OUTSTANDING |
39 | 42 | 35 | 39 | 40 | |||||||||||||||||||||
INVENTORY METRICS: |
||||||||||||||||||||||||||
RAW MATERIALS |
$ | 14 | $ | 14 | $ | 18 | $ | 16 | $ | 23 | ||||||||||||||||
WORK IN PROCESS |
60 | 54 | 58 | 63 | 62 | |||||||||||||||||||||
FINISHED GOODS |
79 | 105 | 92 | 99 | 120 | |||||||||||||||||||||
TOTAL INVENTORY, NET |
$ | 153 | $ | 173 | $ | 168 | $ | 178 | $ | 205 | ||||||||||||||||
INVENTORY TURNS |
20 | 19 | 21 | 21 | 17 | |||||||||||||||||||||
Exhibit 99.3
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 COMPANY-INITIATED, VOLUNTARY REVIEW OF
STOCK OPTION GRANTS BY SPECIAL BOARD COMMITTEE
STOCK OPTION GRANTS BY SPECIAL BOARD COMMITTEE
LAKE FOREST, Calif. — Jul. 27, 2006 — Western Digital Corp. (NYSE: WDC) announced today that a
Special Committee of its Board of Directors, comprised solely of independent directors, is
conducting a company-initiated, voluntary review of its historical stock option grants. The Special
Committee has retained independent counsel to assist it with this review. The Special Committee is
reviewing option grants from fiscal year 1998 to the present. While the Special Committee has not
completed its review, a preliminary determination has been made that measurement dates for
accounting purposes may differ from recorded dates used for certain grants made from fiscal year
1999 through fiscal year 2003. The company does not at present anticipate a material
adjustment to the operating results reported today in its earnings
press release.
However, depending on the results of the Special Committee's review, a material adjustment to the company's
financial statements could be required. The company has informed the Securities and Exchange Commission
that its historical stock option grants are being reviewed. The company will provide a public
statement once its review is complete.
WD Announces Company-Initiated, Voluntary Review of
Stock Option Grants by Special Board Committee
Page 2
Stock Option Grants by Special Board Committee
Page 2
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
produces reliable, high-performance hard drives that keep users’ data close-at-hand and secure from
loss.
WD was founded in 1970. The company’s storage products are marketed to leading systems
manufacturers and selected resellers under the Western Digital and WD brand names. Visit the
Investor section of the company’s Web site (www.westerndigital.com) to access a variety of
financial and investor information.
This press release contains a forward-looking statement regarding the company’s current
anticipation that the stock option review will not result in a material adjustment to the operating
results reported by the company today in its separate press release. This forward-looking statement
is based on the company’s current expectations and is subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in the forward-looking statement,
including risks and uncertainties arising out of the company’s ongoing review of its stock option
grants and developments in regulatory and legal guidance regarding stock option grants and
accounting for such grants. For example, information may be learned and analysis may be undertaken
concerning the company’s historic stock option grants and accounting that may materially impact the
company’s financial statements or results. Readers are cautioned not to place undue reliance on
this forward-looking statement, which speaks only as of the date
hereof, and the company undertakes no obligation to update this forward-looking statement to
reflect subsequent events or circumstances.
###
Western Digital and WD are registered trademarks, and the Western Digital logo is a trademark
of Western Digital Technologies, Inc.