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, 2012
| 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, including 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 (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | 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, 2012, Western Digital Corporation (“Western Digital”) announced financial results for the second fiscal quarter ended December 30, 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 second quarter ended December 30, 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 second fiscal quarter ended December 30, 2011. These non-GAAP measures exclude charges and expenses related to the Thailand flooding and Western Digital’s planned acquisition of Hitachi Global Storage Technologies. Because management believes these charges and 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, 2012 announcing financial results for the second fiscal quarter ended December 30, 2011. | |
| 99.2 | Second Quarter Fiscal Year 2012 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, 2012 | Michael C. Ray | |||||
| Senior Vice President,General Counsel | ||||||
| and Secretary | ||||||
3
Exhibit 99.1
Company contacts:
Bob Blair
Investor Relations
949.672.7834
robert.blair@wdc.com
Steve Shattuck
Public Relations
949.672.7817
steve.shattuck@wdc.com
FOR IMMEDIATE RELEASE:
WD® ANNOUNCES Q2 RESULTS AND OPERATIONS UPDATE, REFLECTING CONTINUED PROGRESS IN FLOOD RECOVERY
IRVINE, Calif.—Jan. 23, 2012—Western Digital Corp. (NYSE: WDC) today reported revenue of $2.0 billion, hard-drive unit shipments of 28.5 million and net income of $145 million, or $0.61 per share, for its second fiscal quarter ended Dec. 30, 2011. Excluding charges and expenses related to the Thailand flooding and the planned acquisition of Hitachi Global Storage Technologies (HGST), non-GAAP net income was $358 million or $1.51 per share.1 During the quarter, the company incurred charges and expenses of $199 million related to the flooding and expenses of $14 million associated with the planned acquisition of HGST.
In the year-ago quarter, the company reported revenue of $2.5 billion, net income of $225 million, or $0.96 per share, and shipped 52.2 million hard drives.
The company generated $378 million in cash from operations during the December quarter, ending with total cash and cash equivalents of $3.9 billion.
WD Announces Q2 Results and Operations Update,
Reflecting Continued Progess in Flood Recovery
Page 2
Operations Update
The company also announced it has made significant additional progress to restore its manufacturing capacity following the recent flooding in Thailand. It has continued to ramp HDD production in Thailand and yesterday resumed slider production which had been suspended since October 10. The company now believes its manufacturing capacity will be back to pre-flood capabilities in the quarter ending September 2012.
“We have made substantial progress in restoring WD’s manufacturing capabilities in the aftermath of the historic flooding in Thailand, and this is reflected in our second quarter financial results and in the resumption of our operations there,” said John Coyne, president and chief executive officer. “While much work remains to be done over the next several quarters to reach our pre-flood manufacturing capabilities, the progress thus far is significantly ahead of our original expectations and is a tribute to the dedicated and effective actions of our employees, contractors and Thai government agencies, the efforts of our supply partners and the support of our customers. We are grateful to all involved in this extraordinary effort.”
HGST Acquisition
The company’s plan to complete the acquisition of HGST is on track to close by March 2012. The company continues to work on obtaining the regulatory approval of the transaction from the remaining government agencies.
Conference Call
The investment community conference call to discuss these results will be broadcast live over the Internet today at 2 p.m. Pacific/5 p.m. Eastern. The live and archived conference call webcast can be accessed online at www.westerndigital.com/investor, click on “Conference Calls.” The telephone replay number is 1-866-403-7115 in the U.S. or +1-203-369-0585 for international callers.
WD Announces Q2 Results and Operations Update,
Reflecting Continued Progess in Flood Recovery
Page 3
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 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.
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 belief that its manufacturing capacity will be back to pre-flood capabilities in the quarter ending September 2012 and the expected timing of its planned acquisition of HGST. 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 about the timeframe for the full restoration of the company’s operations in Thailand and the expansion of production capacity in Malaysia, as well as associated costs for such restoration and expansion; uncertainties concerning the availability and cost of commodity materials and specialized product components and the adverse impacts of the Thailand flooding on such availability and
WD Announces Q2 Results and Operations Update,
Reflecting Continued Progess in Flood Recovery
Page 4
associated costs; delays in or failure to obtain any required regulatory approvals with respect to the company’s planned acquisition of HGST, or failure to consummate or delay in consummating the transaction for other reasons; 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 Oct. 28, 2011, 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, WD, and the WD logo are registered trademarks of Western Digital Technologies, Inc. All other trademarks mentioned herein belong to their respective owners.
| 1 | 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. 30, | Jul. 1, | |||||||
| 2011 | 2011 | |||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 3,924 | $ | 3,490 | ||||
| Accounts receivable, net |
747 | 1,206 | ||||||
| Inventories |
466 | 577 | ||||||
| Other |
261 | 214 | ||||||
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| Total current assets |
5,398 | 5,487 | ||||||
| Property, plant and equipment, net |
2,091 | 2,224 | ||||||
| Goodwill |
151 | 151 | ||||||
| Other intangible assets, net |
63 | 71 | ||||||
| Other assets |
104 | 185 | ||||||
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| Total assets |
$ | 7,807 | $ | 8,118 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 883 | $ | 1,545 | ||||
| Accrued expenses |
364 | 349 | ||||||
| Accrued warranty |
124 | 132 | ||||||
| Current portion of long-term debt |
181 | 144 | ||||||
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| Total current liabilities |
1,552 | 2,170 | ||||||
| Long-term debt |
50 | 150 | ||||||
| Other liabilities |
282 | 310 | ||||||
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| Total liabilities |
1,884 | 2,630 | ||||||
| Total shareholders’ equity |
5,923 | 5,488 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 7,807 | $ | 8,118 | ||||
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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. 30, 2011 |
Dec. 31, 2010 |
Dec. 30, 2011 |
Dec. 31, 2010 |
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| Revenue, net |
$ | 1,995 | $ | 2,475 | $ | 4,689 | $ | 4,871 | ||||||||
| Cost of revenue |
1,347 | 2,000 | 3,500 | 3,959 | ||||||||||||
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| Gross margin |
648 | 475 | 1,189 | 912 | ||||||||||||
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| Operating expenses: |
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| Research and development |
191 | 169 | 384 | 336 | ||||||||||||
| Selling, general and administrative |
96 | 66 | 185 | 125 | ||||||||||||
| Charges related to flooding |
199 | — | 199 | — | ||||||||||||
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| Total operating expenses |
486 | 235 | 768 | 461 | ||||||||||||
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| Operating income |
162 | 240 | 421 | 451 | ||||||||||||
| Net interest and other |
(2 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||
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| Income before income taxes |
160 | 239 | 418 | 450 | ||||||||||||
| Income tax provision |
15 | 14 | 34 | 28 | ||||||||||||
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| Net income |
145 | $ | 225 | $ | 384 | $ | 422 | |||||||||
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| Income per common share: |
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| Basic |
$ | 0.62 | $ | 0.98 | $ | 1.64 | $ | 1.83 | ||||||||
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| Diluted |
$ | 0.61 | $ | 0.96 | $ | 1.62 | $ | 1.80 | ||||||||
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| Weighted average shares outstanding: |
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| Basic |
234 | 230 | 234 | 230 | ||||||||||||
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| Diluted |
237 | 235 | 237 | 235 | ||||||||||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| Dec. 30, 2011 |
Dec. 31, 2010 |
Dec. 30, 2011 |
Dec. 31, 2010 |
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| Cash flows from operating activities |
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| Net income |
$ | 145 | $ | 225 | $ | 384 | $ | 422 | ||||||||
| Adjustments to reconcile net income to net cash provided by operations: |
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| Depreciation and amortization |
140 | 151 | 298 | 301 | ||||||||||||
| Stock-based compensation |
24 | 18 | 41 | 37 | ||||||||||||
| Deferred income taxes |
9 | 1 | 18 | 1 | ||||||||||||
| Non-cash portion of charges related to flooding |
109 | — | 109 | — | ||||||||||||
| Changes in operating assets and liabilities |
(49 | ) | 110 | (120 | ) | 134 | ||||||||||
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| Net cash provided by operating activities |
378 | 505 | 730 | 895 | ||||||||||||
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| Cash flows from investing activities |
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| Purchases of property, plant and equipment |
(120 | ) | (250 | ) | (253 | ) | (450 | ) | ||||||||
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| Cash used in investing activities |
(120 | ) | (250 | ) | (253 | ) | (450 | ) | ||||||||
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| Cash flows from financing activities |
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| Employee stock plans, net |
22 | 22 | 20 | 31 | ||||||||||||
| Repurchases of common stock |
— | — | — | (50 | ) | |||||||||||
| Repayment of long-term debt |
(31 | ) | (25 | ) | (63 | ) | (50 | ) | ||||||||
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| Net cash used in financing activities |
(9 | ) | (3 | ) | (43 | ) | (69 | ) | ||||||||
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| Net increase in cash and cash equivalents |
249 | 252 | 434 | 376 | ||||||||||||
| Cash and cash equivalents, beginning of period |
3,675 | 2,858 | 3,490 | 2,734 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 3,924 | $ | 3,110 | $ | 3,924 | $ | 3,110 | ||||||||
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Exhibit 99.2
| (CHART) Page ? 1 Volume and Market Share EPS Analysis Revenue and Gross Margin Note: Unless otherwise noted, information is presented on a GAAP basis Note: Q2'09 includes restructuring charge of $113M. Q2'12 guidance excludes charges related to flooding and acquisition-related expenses. (r) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 TAM 131.6 131.9 145.8 123.8 111.4 135.4 152.4 160.4 163.3 156.2 164.0 167.5 159.5 165.8 176.3 118.9 Share 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% 32.5% 32.8% 23.9% Units (HDD) 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 53.8 57.8 28.5 ASP $59 $56 $53 $51 $50 $48 $49 $52 $51 $47 $46 $47 $45 $44 $46 $69 Revenue $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 $2,403 $2,694 $1,995 Gross Margin $477 $425 $424 $290 $253 $370 $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 Gross Margin % 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% 19.5% 20.1% 32.5% R&D $123 $128 $133 $119 $125 $132 $142 $154 $160 $154 $167 $169 $179 $188 $193 $191 SG&A $56 $56 $57 $42 $49 $52 $53 $60 $64 $61 $59 $66 $63 $77 $71 $85 Other $ - $ - $ - $113 $18 ($23) $ - $ - $ - $27 $ - $ - $10 $32 $18 $210 Total Operating Expenses $179 $184 $190 $274 $192 $161 $195 $214 $224 $242 $226 $235 $252 $297 $282 $486 Operating Income $298 $241 $234 $16 $61 $209 $319 $473 $441 $293 $211 $240 $158 $172 $259 $162 Net Income $280 $213 $211 $14 $50 $196 $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 EPS $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 $0.67 $1.01 $0.61 Diluted Shares Outstanding 227 227 226 224 226 227 230 232 234 235 234 235 236 237 237 237 Top 10 Customers Revenue 48% 53% 51% 49% 47% 52% 56% 55% 51% 52% 50% 48% 49% 53% 49% 51% Revenue by Channel OEM 50% 57% 56% 57% 48% 54% 52% 48% 49% 54% 50% 45% 47% 55% 53% 59% Distributors 34% 24% 26% 21% 30% 29% 31% 30% 33% 29% 32% 33% 33% 29% 29% 25% Retail 16% 19% 18% 22% 22% 17% 17% 22% 18% 17% 18% 22% 20% 16% 18% 16% Revenue by Geography Americas 28% 29% 23% 23% 26% 24% 22% 25% 24% 25% 23% 22% 22% 20% 19% 22% Europe 31% 25% 29% 29% 28% 22% 22% 25% 24% 21% 23% 25% 24% 20% 22% 21% Asia 41% 46% 48% 48% 46% 54% 56% 50% 52% 54% 54% 53% 54% 60% 59% 57% Compute Units Notebook 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 16.867 19.622 9.814 Desktop 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 22.348 21.588 11.391 Non-Compute Units Consumer Electronics 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 6.459 7.188 2.352 Branded 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 5.672 7.060 3.191 Enterprise Units 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 2.463 2.369 1.724 Total HDD Units 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 53.809 57.827 28.472 Amounts in millions; except per share amounts,ASP, percentages. Revenue by Geography Rolling Four Quarters Ending Q2 FY09 Revenue by Geography Rolling Four Quarters Ending Q2 FY12 (CHART) (CHART) Asia 57% Europe 22% Americas 21% (CHART) Asia 46% Europe 28% Americas 26% (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 18%-23%Operating Expense 9%-10%Operating Income 8%-14%Tax 6%-9% of Income Before TaxCapital Expenditures 7%-8% Inventory Turns 12-16 TurnsConversion Cycle 4-8 Days Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 Cash and Cash Equivalents $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 $3,490 $3,675 $3,924 Debt $514 $509 $507 $504 $502 $482 $463 $444 $425 $400 $375 $350 $325 $294 $263 $231 Net Cash and Cash Equivalents $403 $595 $706 $872 $1,077 $1,312 $1,593 $1,991 $2,401 $2,334 $2,483 $2,760 $2,905 $3,196 $3,412 $3,693 Cash Flow From Operations $431 $229 $301 $300 $355 $349 $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 Free Cash Flow $294 $83 $139 $160 $249 $238 $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 Capital Expenditures $137 $146 $162 $140 $106 $111 $176 $199 $177 $185 $200 $250 $175 $153 $134 $120 Depreciation and Amortization $111 $113 $117 $122 $119 $122 $121 $126 $128 $134 $150 $151 $151 $150 $158 $140 EBITDA $409 $354 $351 $138 $180 $331 $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 Accounts Receivable, Net $1,014 $1,010 $1,082 $926 $824 $926 $1,131 $1,365 $1,257 $1,256 $1,325 $1,250 $1,171 $1,206 $1,356 $747 Inventory Raw Materials $153 $144 $129 $124 $104 $97 $96 $102 $115 $159 $155 $141 $151 $172 $170 $191 Work in Process $131 $145 $168 $159 $152 $154 $173 $212 $254 $255 $266 $274 $260 $263 $275 $185 Finished Goods $171 $167 $180 $163 $129 $125 $126 $139 $138 $146 $140 $153 $163 $142 $200 $90 Inventory, Net $455 $456 $477 $446 $385 $376 $395 $453 $507 $560 $561 $568 $574 $577 $645 $466 Property, Plant and Equipment, Net $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 $2,224 $2,209 $2,091 Accounts Payable $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 $1,545 $1,708 $883 Days Sales Outstanding 44 46 47 46 47 47 47 47 43 48 50 46 47 46 46 34 Days Inventory Outstanding 25 27 26 27 26 24 21 21 23 28 26 26 28 27 27 31 Days Payables Outstanding 64 69 66 64 68 69 72 71 69 74 79 74 73 73 72 60 Cash Conversion Cycle 5 4 7 9 5 2 (4) (3) (3) 2 (3) (2) 2 - 1 5 Inventory Turns 14 14 14 14 14 15 17 17 16 13 14 14 13 13 13 12 Shares Repurchased 1.5 - 1.2 - - - - - - - 1.8 - - - - - Shares Repurchased $ $44 $ - $36 $ - $ - $ - $ - $ - $ - $ - $50 $ - $ - $ - $ - $ - Remaining Amount Authorized $502 $502 $466 $466 $466 $466 $466 $466 $466 $466 $416 $416 $416 $416 $416 $416 R4Q ROIC 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% 13.2% 13.6% 11.9% R4Q ROA 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% 9.2% 9.5% 8.5% Worldwide Headcount 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 65,431 67,799 67,121 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 FootnotesFY08 and Q1 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 Expense + 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 |
| Page ? 4 (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. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY08 FY08 FY09 FY09 FY09 FY09 FY10 FY10 FY10 FY10 FY11 FY11 FY11 FY11 FY12 FY12 Reconciliation of Cash Flows from Operations to Free Cash Flow Cash Flows from Operations $431 $229 $301 $300 $355 $349 $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 Capital Expenditures (137) (146) (162) (140) (106) (111) (176) (199) (177) (185) (200) (250) (175) (153) (134) (120) Free Cash Flow $294 $83 $139 $160 $249 $238 $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 Reconciliation of Net Income to EBITDA Net Income $280 $213 $211 $14 $50 $196 $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 Interest Expense 8 4 4 9 3 2 2 2 1 1 - 1 (1) 2 1 2 Income Tax Expense 10 24 19 (7) 8 11 29 42 40 27 14 14 13 12 19 15 Depreciation and Amortization 111 113 117 122 119 122 121 126 128 134 150 151 151 150 158 140 EBITDA $409 $354 $351 $138 $180 $331 $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 |