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): July 24, 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 July 24, 2013, Western Digital Corporation (“Western Digital”) announced financial results for the fourth fiscal quarter and fiscal year ended June 28, 2013. 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 Quarterly Fact Sheet for the fourth quarter ended June 28, 2013 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 fourth fiscal quarter and fiscal year ended June 28, 2013, and free cash flow for the fiscal year ended June 28, 2013. These non-GAAP net income and earnings per share measures exclude amortization of intangibles related to the HGST acquisition, certain tax related matters, 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 net income and earnings per share 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. Free cash flow is a non-GAAP measure calculated as cash flow from operations less capital expenditures. Management believes that the free cash flow measure presented in the press release is useful to investors as a means of comparing Western Digital’s liquidity with other companies in its industry.
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 July 24, 2013 announcing financial results for the fourth fiscal quarter and fiscal year ended June 28, 2013. | |
| 99.2 | Fourth Quarter Fiscal Year 2013 Western Digital Corporation Quarterly Fact Sheet. | |
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: July 24, 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 FISCAL YEAR REVENUE OF $15.4 BILLION AND
NON-GAAP NET INCOME OF $2.1 BILLION, OR $8.53 PER SHARE1
For Fourth Quarter, Revenue of $3.7 Billion, Non-GAAP Net Income of
$477 Million, or $1.96 Per Share
IRVINE, Calif. — July 24, 2013 — Western Digital® Corp. (NASDAQ: WDC) today reported revenue of $15.4 billion and net income of $1.7 billion, or $6.75 per share for fiscal year 2013, compared to fiscal 2012 revenue of $12.5 billion and net income of $1.6 billion, or $6.58 per share. On a non-GAAP basis, fiscal 2013 net income was $2.1 billion or $8.53 per share, compared to fiscal 2012 net income of $2.1 billion or $8.61 per share.1
For its fourth fiscal quarter ended June 28, 2013, the company reported revenue of $3.7 billion, hard-drive shipments of 59.9 million and net income of $416 million, or $1.71 per share. On a non-GAAP basis, net income was $477 million or $1.96 per share.2 In the year-ago quarter, the company reported revenue of $4.8 billion, net income of $745 million, or $2.87 per share, and shipped 71.0 million hard drives. Non-GAAP net income in the year-ago quarter was $872 million, or $3.35 per share.3
The company generated $684 million in cash from operations during the June quarter, ending with total cash and cash equivalents of $4.3 billion. For fiscal year 2013, the company generated $3.1 billion in cash from operations and its free cash flow totaled $2.2 billion.4 During the quarter, the company utilized $235 million to buy back 4.4 million shares of common stock. On May 15, the company declared a $0.25 per common share dividend, which was paid on July 15.
“I am pleased with our performance in fiscal year 2013 and the June quarter, reflecting our expanding participation in the storage market, including the cloud and personal storage as we address the ongoing growth in digital data,” said Steve Milligan, president and chief executive officer of Western Digital. “Our financial results were strong with significant free cash flow generation, we continued to forecast the market accurately and we had outstanding execution by our HGST and WD® subsidiaries.”
Western Digital® Announces Revenue of $15.4 Billion and
Non-GAAP Net Income of $2.1 Billion, or $8.53 Per Share 1
Page 2
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 investor.wdc.com. The telephone replay number is 800-873-2156 in the U.S. or +1-402-220-4765 for international callers.
As reported in our Form 8-K filed on July 22, 2013, the Court of Appeals of the State of Minnesota reversed the decision of the District Court of Hennepin County, Minnesota, which had vacated a $630.4 million final arbitration award against the company and ordered a rehearing of certain claims in the arbitration between Western Digital and Seagate Technology, LLC. The financial information reported in this press release does not include any additional accrual for the arbitration award. Western Digital is reviewing the decision of the Minnesota Court of Appeals and will make a determination of whether or not to record an accrual in its results for the quarter ended June 28, 2013, after it completes its review.
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.
Western Digital® Announces Revenue of $15.4 Billion and
Non-GAAP Net Income of $2.1 Billion, or $8.53 Per Share 1
Page 3
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the company’s market participation and growth of digital data. These forward-looking statements are based on management’s current expectations and is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement, 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 May 3, 2013, to which your attention is directed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speaks 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 in the U.S. and other countries. HGST trademarks are intended and authorized for use only in countries and jurisdictions in which HGST has obtained the rights to use, market and advertise the brand. Other marks may be mentioned herein that belong to other companies.
| 1 | Non-GAAP net income for fiscal 2013 consists of GAAP net income of $1.7 billion plus $193 million for amortization of intangibles related to the acquisition of HGST, $138 million for employee termination benefits and other charges and a net $106 million for tax-related matters and other unrelated charges. Non-GAAP earnings per share of $8.53 for fiscal 2013 is calculated by using the same 246 million diluted shares as is used for GAAP earnings per share. Non-GAAP net income for fiscal 2012 consists of GAAP net income of $1.6 billion plus $214 million of charges and expenses related to the flooding net of recoveries, $91 million for costs recognized upon the sale of acquired inventory that was written-up to fair value, $80 million related to restructuring, $63 million for amortization of intangibles related to the acquisition of HGST, $62 million of acquisition-related expenses, $7 million of litigation accruals, less $20 million of tax effects related to the aforementioned items. Non-GAAP earnings per share of $8.61 for fiscal 2012 is calculated by using the same 245 million diluted shares as is used for GAAP earnings per share. |
| 2 | Non-GAAP net income for the fourth quarter fiscal 2013 consists of GAAP net income of $416 million plus $46 million for amortization of intangibles related to the acquisition of HGST and $15 million for employee termination benefits and other unrelated charges. Non-GAAP earnings per share of $1.96 for the fourth quarter is calculated by using the same 243 million diluted shares as is used for GAAP earnings per share. |
| 3 | Non-GAAP net income for the fourth quarter fiscal 2012 consists of GAAP net income of $745 million plus $51 million for amortization of intangibles related to the acquisition of HGST, $80 million related to restructuring less a $4 million tax effect related to the restructuring. Non-GAAP earnings per share of $3.35 for the fourth quarter is calculated by using the same 260 million diluted shares as is used for GAAP earnings per share. |
| 4 | Free cash flow for fiscal 2013 consists of cash flows from operations of $3.1 billion less $952 million of capital expenditures. |
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
| Jun. 28, 2013 |
Jun. 29, 2012 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,309 | $ | 3,208 | ||||
| Accounts receivable, net |
1,793 | 2,364 | ||||||
| Inventories |
1,188 | 1,210 | ||||||
| Other |
308 | 359 | ||||||
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| Total current assets |
7,598 | 7,141 | ||||||
| Property, plant and equipment, net |
3,700 | 4,067 | ||||||
| Goodwill |
1,954 | 1,975 | ||||||
| Other intangible assets, net |
605 | 799 | ||||||
| Other assets |
179 | 224 | ||||||
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| Total assets |
$ | 14,036 | $ | 14,206 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 1,990 | $ | 2,773 | ||||
| Accrued expenses |
522 | 482 | ||||||
| Accrued compensation |
453 | 376 | ||||||
| Accrued warranty |
114 | 171 | ||||||
| Current portion of long-term debt |
230 | 230 | ||||||
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| Total current liabilities |
3,309 | 4,032 | ||||||
| Long-term debt |
1,725 | 1,955 | ||||||
| Other liabilities |
428 | 550 | ||||||
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| Total liabilities |
5,462 | 6,537 | ||||||
| Total shareholders’ equity |
8,574 | 7,669 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 14,036 | $ | 14,206 | ||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(unaudited)
| Three Months Ended | Years Ended | |||||||||||||||
| Jun. 28, | Jun. 29, | Jun. 28, | Jun. 29, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenue, net |
$ | 3,728 | $ | 4,754 | $ | 15,351 | $ | 12,478 | ||||||||
| Cost of revenue |
2,678 | 3,282 | 10,988 | 8,840 | ||||||||||||
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| Gross profit |
1,050 | 1,472 | 4,363 | 3,638 | ||||||||||||
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| Operating expenses: |
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| Research and development |
402 | 406 | 1,572 | 1,055 | ||||||||||||
| Selling, general and administrative |
180 | 178 | 706 | 518 | ||||||||||||
| Employee termination benefits and other charges |
8 | 80 | 138 | 80 | ||||||||||||
| Charges related to flooding, net |
— | — | — | 214 | ||||||||||||
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| Total operating expenses |
590 | 664 | 2,416 | 1,867 | ||||||||||||
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| Operating income |
460 | 808 | 1,947 | 1,771 | ||||||||||||
| Net interest and other |
(9 | ) | (7 | ) | (44 | ) | (14 | ) | ||||||||
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| Income before income taxes |
451 | 801 | 1,903 | 1,757 | ||||||||||||
| Income tax provision |
35 | 56 | 242 | 145 | ||||||||||||
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| Net income |
$ | 416 | $ | 745 | $ | 1,661 | $ | 1,612 | ||||||||
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| Income per common share: |
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| Basic |
$ | 1.76 | $ | 2.93 | $ | 6.89 | $ | 6.69 | ||||||||
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| Diluted |
$ | 1.71 | $ | 2.87 | $ | 6.75 | $ | 6.58 | ||||||||
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| Weighted average shares outstanding: |
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| Basic |
236 | 254 | 241 | 241 | ||||||||||||
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| Diluted |
243 | 260 | 246 | 245 | ||||||||||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Year Ended | |||||||||||||||
| Jun. 28, | Jun. 29, | Jun. 28, | Jun. 29, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Cash flows from operating activities |
||||||||||||||||
| Net income |
$ | 416 | $ | 745 | $ | 1,661 | $ | 1,612 | ||||||||
| Adjustments to reconcile net income to net cash provided by operations: |
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| Depreciation and amortization |
302 | 339 | 1,233 | 825 | ||||||||||||
| Stock-based compensation |
30 | 31 | 137 | 92 | ||||||||||||
| Deferred income taxes |
(24 | ) | (8 | ) | 35 | 34 | ||||||||||
| Non-cash portion of employee termination benefits and other charges |
3 | 61 | 19 | 61 | ||||||||||||
| Non-cash portion of charges related to flooding |
— | — | — | 119 | ||||||||||||
| Changes in operating assets and liabilities, net |
(43 | ) | (40 | ) | 34 | 324 | ||||||||||
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| Net cash provided by operating activities |
684 | 1,128 | 3,119 | 3,067 | ||||||||||||
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| Cash flows from investing activities |
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| Purchases of property, plant and equipment |
(136 | ) | (324 | ) | (952 | ) | (717 | ) | ||||||||
| Acquisitions, net |
— | 15 | (1 | ) | (3,526 | ) | ||||||||||
| Purchase of investments |
— | — | (17 | ) | — | |||||||||||
| Proceeds from sale of equipment |
— | 76 | — | 76 | ||||||||||||
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| Net cash used in investing activities |
(136 | ) | (233 | ) | (970 | ) | (4,167 | ) | ||||||||
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| Cash flows from financing activities |
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| Employee stock plans, net |
53 | 93 | 205 | 141 | ||||||||||||
| Repurchases of common stock |
(235 | ) | (604 | ) | (842 | ) | (604 | ) | ||||||||
| Dividends to shareholders |
(60 | ) | — | (181 | ) | — | ||||||||||
| Repayment of debt |
(57 | ) | (558 | ) | (230 | ) | (908 | ) | ||||||||
| Proceeds from debt, net of issuance costs |
— | — | — | 2,775 | ||||||||||||
| Repayment of assumed debt |
— | — | — | (585 | ) | |||||||||||
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| Net cash provided by (used in) financing activities |
(299 | ) | (1,069 | ) | (1,048 | ) | 819 | |||||||||
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| Effect of exchange rate changes on cash |
— | 5 | — | (1 | ) | |||||||||||
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| Net increase (decrease) in cash and cash equivalents |
249 | (169 | ) | 1,101 | (282 | ) | ||||||||||
| Cash and cash equivalents, beginning of period |
4,060 | 3,377 | 3,208 | 3,490 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 4,309 | $ | 3,208 | $ | 4,309 | $ | 3,208 | ||||||||
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| Exhibit 99.2 |
Amounts in millions, except per share amounts, ASP, percentages Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY111 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY136 TAM 152.4 160.4 163.3 156.2 164.0 167.5 159.5 165.8 176.3 119.1 146.4 156.7 139.1 135.8 135.9 132.7 Share 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% 43.6% 44.3% 45.1% Units (HDD)2 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 60.2 59.9 ASP (HDD) $49 $52 $51 $47 $46 $47 $45 $44 $46 $69 $68 $65 $62 $62 $61 $60 Revenue $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 $3,764 $3,728 Gross Profit $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 $1,061 $1,050 Gross Margin 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% 28.2% 28.2% R&D $142 $154 $160 $154 $167 $169 $179 $188 $193 $191 $265 $406 $396 $378 $396 $402 SG&A 53 60 64 61 59 66 63 77 71 85 122 178 179 162 185 180 Other ——27 — 10 32 18 210 48 80 26 41 63 8 Total Operating Expenses $195 $214 $224 $242 $226 $235 $252 $297 $282 $486 $435 $664 $601 $581 $644 $590 Operating Income $319 $473 $441 $293 $211 $240 $158 $172 $259 $162 $542 $808 $592 $478 $417 $460 Net Income $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $416 EPS $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 $1.60 $1.71 Diluted Shares Outstanding 230 232 234 235 234 235 236 237 237 237 246 260 252 246 245 243 Non-GAAP Results Gross Profit $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 $1,099 $1,085 Gross Margin 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% 29.2% 29.1% Net Income $288 $429 $400 $292 $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 $514 $477 EPS $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 $2.10 $1.96 Revenue By Channel OEM 52% 48% 49% 54% 50% 45% 47% 55% 53% 59% 64% 69% 63% 61% 60% 66% Distributors 31% 30% 33% 29% 32% 33% 33% 29% 29% 25% 28% 21% 24% 24% 26% 23% Retail 17% 22% 18% 17% 18% 22% 20% 16% 18% 16% 8% 10% 13% 15% 14% 11% Revenue by Geography Americas 22% 25% 24% 25% 23% 22% 22% 20% 19% 22% 21% 27% 23% 27% 27% 28% EMEA 22% 25% 24% 21% 23% 25% 24% 20% 22% 21% 18% 18% 18% 23% 22% 19% Asia/ANZ 56% 50% 52% 54% 54% 53% 54% 60% 59% 57% 61% 55% 59% 50% 51% 53% Top 10 Customers Revenue 56% 55% 51% 52% 50% 48% 49% 53% 49% 51% 53% 53% 44% 45% 45% 48% PC Units5 Notebook 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 21.547 23.989 Desktop 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 18.383 16.185 Non-PC Units Consumer Electronics4 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 6.517 6.544 Branded 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 6.517 5.281 Enterprise 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 7.211 7.897 Total HDD 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 60.175 59.896 Average GB Shipped 386 443 463 453 512 581 578 608 634 578 581 668 708 804 805 797 EB Shipped 17.0 21.9 23.7 22.5 26.0 30.3 28.8 32.7 36.7 16.5 25.7 47.4 44.3 47.6 48.4 47.7 R4Q EB Shipped 54.0 64.3 76.5 85.1 94.1 102.5 107.7 117.8 128.5 114.6 111.5 126.3 133.9 165.1 187.8 188.0 Revenue by Channel R4Q Ending Q4 FY13 Retail 13% Distributors 24% OEM 63% Revenue by Geography R4Q Ending Q4 FY13 Asia/ANZ 54% Americas 26% EMEA 20% EPS Analysis (Non-GAAP) Revenue and Gross Margin Volume and Market Share
Balance sheet, cash flows, earnings, dividends and share repurchase amounts in millions Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Cash and Cash Equivalents $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 $4,060 $4,309 Debt 463 444 425 400 375 350 325 294 263 231 2,743 2,185 2,128 2,128 2,013 1,955 Net Cash and Cash Equivalents $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 $2,047 $2,354 Cash Flow From Operations $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 Free Cash Flow $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 Capital Expenditures $176 $199 $177 $185 $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 $188 $136 Depreciation and Amortization $121 $126 $128 $134 $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 $309 $302 EBITDA $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $762 Accounts Receivable, Net $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 $1,700 $1,793 Inventory Raw Materials $96 $102 $115 $159 $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 $191 $167 Work in Process 173 212 254 255 266 274 260 263 275 185 667 552 559 581 583 575 Finished Goods 126 139 138 146 140 153 163 142 200 90 286 413 508 430 423 446 Total Inventory $395 $453 $507 $560 $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 $1,197 $1,188 Property, Plant and Equipment, Net $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 $3,803 $3,700 Accounts Payable $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 $2,037 $1,990 Days Sales Outstanding 47 47 43 48 50 46 47 46 46 34 71 45 44 41 41 44 Days Inventory Outstanding 21 21 23 28 26 26 28 27 27 31 57 34 42 40 40 40 Days Payables Outstanding 72 71 69 74 79 74 73 73 72 60 123 77 82 72 69 67 Cash Conversion Cycle (4) (3) (3) 2 (3) (2) 2—1 5 5 2 4 9 12 17 Inventory Turns 17 17 16 13 14 14 13 13 13 12 6 11 9 9 9 9 Dividends Paid $—$—$—$—$—$—$—$—$—$—$—$—$—$121 $—$60 Shares Repurchased — — 1.8 — — — 16.4 5.2 4.2 5.2 4.4 Shares Repurchased $—$—$—$—$50 $—$—$—$—$—$—$604 $218 $146 $243 $235 Remaining Amount Authorized $466 $466 $466 $466 $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 $2,205 $1,970 R4Q Economic Profit $275 $569 $885 $964 $836 $579 $291 $187 $231 $344 $484 $1,197 $1,484 $1,602 $1,423 $955 R4Q ROIC 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% 20.0% 16.5% R4Q ROA 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% 14.2% 11.8% Worldwide Headcount3 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 87,565 85,777
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, paying dividends 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 charges to cost of goods sold that are unusual, non-recurring, or may not be indicative of ongoing operations. Because we believe some charges 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. Non-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 charges that are unusual, non-recurring, or may not be indicative of ongoing operations, or any tax impact related to those charges. In millions, except gross margin and per share amounts Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Reconciliation of Cash Flows from Operations to Free Cash Flow Cash Flows from Operations $434 $557 $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 Capital Expenditures (176) (199) (177) (185) (200) (250) (175) (153) (134) (120) (139) (324) (382) (246) (188) (136) Free Cash Flow $258 $358 $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 Reconciliation of Net Income to EBITDA Net Income $288 $429 $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $416 Interest 2 2 1 1—1 (1) 2 1 2 4 7 14 10 11 9 Income Tax Expense 29 42 40 27 14 14 13 12 19 15 55 56 59 133 15 35 Depreciation and Amortization 121 126 128 134 150 151 151 150 158 140 188 339 313 309 309 302 EBITDA $440 $599 $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $762 Reconciliation of Gross Margin to Non-GAAP Gross Margin & Gross Profit to Non-GAAP Gross Profit Gross Profit $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 $1,061 #### Acquisition-Related Fair Value Adjustments — — — — — 91 — ——Amortization of Intangibles Related to the Acquisition of HGST — — — — — 9 39 38 38 38 35 Non-GAAP Gross Profit $514 $687 $665 $535 $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 $1,099 #### Revenue $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 $3,764 #### Gross Margin 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% 28.2% 28.2% Non-GAAP Gross Margin 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% 29.2% 29.1% Reconciliation of Net Income to Non-GAAP Net Income Net Income $ 288 $ 429 $ 400 $265 $197 $ 225 $ 146 $158 $239 $ 145 $ 483 $745 $519 $ 335 $ 391 $ 416 Acquisition-Related Expense — — — 10 10 14 14 34 — — 7 Litigation Accruals ——27 ——25 7 — — ——Charges Related to Flooding, Net — — — ——199 15 — ——Acquisition-Related Fair Value Adjustments — — — — — 91 — ——Amortization of Intangibles Related to the Acquisition of HGST — — — — — 12 51 49 49 49 46 Restructuring — — — — ——80 26 41 63 8 Tax Impact — — — — — (16) (4)—88 — Other — — — — — — — 11—Non-GAAP Net Income $288 $429 $400 $292 $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 $514 $477 EPS $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 $1.60 $1.71 Non-GAAP EPS $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 $2.10 $1.96 Diluted Shares Outstanding 230 232 234 235 234 235 236 237 237 237 246 260 252 246 245 243
Footnotes 1. ASP, Revenue by Channel and Revenue by Geography exclude external sales of media/substrates 2. Unit volume excludes WD TV Media Players without hard drives, WD Livewire, SSD and media 3. Worldwide Headcount excludes temporary and contracted employees 4. Consumer Electronics includes gaming 5. PC includes shipments to distributors, second/third tier retailers and white box manufacturers TAM is preliminary and based on internal information Formulas Share = Units (HDD) / TAM ASP = Revenue / Units (HDD) Free Cash Flow = Cash Flow from Operations – Capital Expenditures EBITDA = Net Income + Interest + 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 Economic Profit = Net Operating Profit After Taxes – (Invested Capital x WACC) ? Invested Capital = Debt + Equity ? WACC = 11% R4Q ROIC = R4Q (Operating Income + Interest Expense) / R4Q Average (Equity + Debt) R4Q ROA = R4Q Operating Income / R4Q Average Total Assets