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 22, 2014
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 22, 2014, Western Digital Corporation (“Western Digital”) announced financial results for the second fiscal quarter ended December 27, 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 second fiscal quarter ended December 27, 2013 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 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 22, 2014 announcing financial results for the second fiscal quarter ended December 27, 2013. | |
| 99.2 | Second Quarter Fiscal Year 2014 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: January 22, 2014 | 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 $4.0 BILLION AND
NON-GAAP NET INCOME OF $532 MILLION, OR $2.19 PER SHARE1
IRVINE, Calif. — Jan. 22, 2014 — Western Digital® Corp. (NASDAQ: WDC) today reported revenue of $4.0 billion and net income of $430 million, or $1.77 per share for its second fiscal quarter ended Dec. 27, 2013. On a non-GAAP basis, net income was $532 million or $2.19 per share.1 In the year-ago quarter, the company reported revenue of $3.8 billion, net income of $335 million, or $1.36 per share. Non-GAAP net income in the year-ago quarter was $513 million, or $2.09 per share.2
The company generated $727 million in cash from operations during the December quarter, ending with total cash and cash equivalents of $4.7 billion. During the quarter, the company utilized $150 million to buy back 2.0 million shares of common stock. On Nov. 13, the company declared a $0.30 per common-share dividend, which was paid on Jan. 15.
“We executed well in the December quarter as we continue participating in the ongoing growth of data in all of our served markets,” said Steve Milligan, president and chief executive officer. “The industry TAM was slightly higher than anticipated driven by seasonal demand as we saw strength in gaming and branded products.
Western Digital Announces Q2 Revenue of $4.0 Billion and
Non-GAAP Net Income of $532 Million, or $2.19 Per Share1
Page 2
“We continue to be very excited about our unique position in the storage ecosystem, enabling a broad-based perspective on the dramatic changes that are underway,” said Milligan. “We serve very large markets underpinned by strong data growth prospects. Strategically, we are well positioned to play a leadership role by innovating and collaborating with our customers to define the future digital data landscape.”
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 800-688-2171 in the U.S. or +1-402-998-0565 for international callers.
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 Q2 Revenue of $4.0 Billion and
Non-GAAP Net Income of $532 Million, or $2.19 Per Share1
Page 3
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning our participation in the growth, and our role in the future, of digital data and our position in the storage ecosystem. 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 Form 10-Q filed with the SEC on Oct. 29, 2013, and our registration statement on Form S-3 filed with the SEC on Oct. 30, 2013, 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 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 the second quarter fiscal 2014 consists of GAAP net income of $430 million plus $51 million of amortization of intangibles related to the acquisitions of HGST, sTec, VeloBit and Virident, $26 million related to employee termination benefits and other charges and $25 million of charges related to litigation. Non-GAAP earnings per share of $2.19 for the second quarter is calculated by using the same 243 million diluted shares as is used for GAAP earnings per share. The tax effect of the non-GAAP charges was not material. |
| 2 | 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 non-GAAP charges was not material. |
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
| Dec. 27, | June 28, | |||||||
| 2013 | 2013 | |||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 4,655 | $ | 4,309 | ||||
| Accounts receivable, net |
1,959 | 1,793 | ||||||
| Inventories |
1,293 | 1,188 | ||||||
| Other current assets |
381 | 308 | ||||||
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| Total current assets |
8,288 | 7,598 | ||||||
| Property, plant and equipment, net |
3,509 | 3,700 | ||||||
| Goodwill |
2,555 | 1,954 | ||||||
| Other intangible assets, net |
607 | 605 | ||||||
| Other non-current assets |
323 | 179 | ||||||
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| Total assets |
$ | 15,282 | $ | 14,036 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 2,106 | $ | 1,990 | ||||
| Accrued arbitration award |
732 | 706 | ||||||
| Accrued expenses |
479 | 480 | ||||||
| Accrued compensation |
456 | 453 | ||||||
| Accrued warranty |
117 | 114 | ||||||
| Short-term debt |
500 | — | ||||||
| Current portion of long-term debt |
230 | 230 | ||||||
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| Total current liabilities |
4,620 | 3,973 | ||||||
| Long-term debt |
1,610 | 1,725 | ||||||
| Other liabilities |
473 | 445 | ||||||
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| Total liabilities |
6,703 | 6,143 | ||||||
| Total shareholders’ equity |
8,579 | 7,893 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 15,282 | $ | 14,036 | ||||
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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. 27, | Dec. 28, | Dec. 27, | Dec. 28, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenue, net |
$ | 3,972 | $ | 3,824 | $ | 7,776 | $ | 7,859 | ||||||||
| Cost of revenue |
2,831 | 2,765 | 5,547 | 5,607 | ||||||||||||
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| Gross profit |
1,141 | 1,059 | 2,229 | 2,252 | ||||||||||||
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| Operating expenses: |
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| Research and development |
421 | 378 | 822 | 774 | ||||||||||||
| Selling, general and administrative |
229 | 162 | 361 | 341 | ||||||||||||
| Charges related to arbitration award |
13 | — | 26 | — | ||||||||||||
| Employee termination benefits and other charges |
— | 41 | — | 67 | ||||||||||||
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| Total operating expenses |
663 | 581 | 1,209 | 1,182 | ||||||||||||
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| Operating income |
478 | 478 | 1,020 | 1,070 | ||||||||||||
| Net interest and other |
(11 | ) | (10 | ) | (21 | ) | (24 | ) | ||||||||
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| Income before income taxes |
467 | 468 | 999 | 1,046 | ||||||||||||
| Income tax provision |
37 | 133 | 74 | 192 | ||||||||||||
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| Net income |
$ | 430 | $ | 335 | $ | 925 | $ | 854 | ||||||||
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| Income per common share: |
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| Basic |
$ | 1.82 | $ | 1.38 | $ | 3.92 | $ | 3.50 | ||||||||
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| Diluted |
$ | 1.77 | $ | 1.36 | $ | 3.81 | $ | 3.43 | ||||||||
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| Weighted average shares outstanding: |
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| Basic |
236 | 242 | 236 | 244 | ||||||||||||
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| Diluted |
243 | 246 | 243 | 249 | ||||||||||||
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| Dec. 27, | Dec. 28, | Dec. 27, | Dec. 28, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Cash flows from operating activities |
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| Net income |
$ | 430 | $ | 335 | $ | 925 | $ | 854 | ||||||||
| Adjustments to reconcile net income to net cash provided by operations: |
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| Depreciation and amortization |
317 | 309 | 629 | 622 | ||||||||||||
| Stock-based compensation |
42 | 32 | 84 | 71 | ||||||||||||
| Deferred income taxes |
(29 | ) | 80 | (39 | ) | 68 | ||||||||||
| Loss on disposal of assets |
14 | — | 29 | — | ||||||||||||
| Gain from insurance recovery |
— | — | (65 | ) | — | |||||||||||
| Non-cash portion of employee termination benefits and other charges |
— | 15 | — | 15 | ||||||||||||
| Changes in operating assets and liabilities, net |
(47 | ) | 1 | (157 | ) | 78 | ||||||||||
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| Net cash provided by operating activities |
727 | 772 | 1,406 | 1,708 | ||||||||||||
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| Cash flows from investing activities |
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| Purchases of property, plant and equipment |
(170 | ) | (246 | ) | (306 | ) | (628 | ) | ||||||||
| Acquisitions, net of cash acquired |
(560 | ) | (18 | ) | (823 | ) | (27 | ) | ||||||||
| Other investing activities, net |
(35 | ) | (15 | ) | 4 | (15 | ) | |||||||||
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| Net cash used in investing activities |
(765 | ) | (279 | ) | (1,125 | ) | (670 | ) | ||||||||
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| Cash flows from financing activities |
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| Employee stock plans, net |
91 | 53 | 98 | 113 | ||||||||||||
| Repurchases of common stock |
(150 | ) | (146 | ) | (300 | ) | (364 | ) | ||||||||
| Dividends to shareholders |
(59 | ) | (121 | ) | (118 | ) | (121 | ) | ||||||||
| Proceeds from debt |
— | — | 500 | — | ||||||||||||
| Repayment of debt |
(58 | ) | — | (115 | ) | (58 | ) | |||||||||
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| Net cash provided by (used in) financing activities |
(176 | ) | (214 | ) | 65 | (430 | ) | |||||||||
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| Net increase (decrease) in cash and cash equivalents |
(214 | ) | 279 | 346 | 608 | |||||||||||
| Cash and cash equivalents, beginning of period |
4,869 | 3,537 | 4,309 | 3,208 | ||||||||||||
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| Cash and cash equivalents, end of period |
$ | 4,655 | $ | 3,816 | $ | 4,655 | $ | 3,816 | ||||||||
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Exhibit 99.2
FY14Cash and Cash Equivalents $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 $4,869 $4,655 Debt 425 400 375 350 325 294 263 231 2,743 2,185 2,128 2,128 2,013 1,955 2,398 2,340 Net Cash and Cash Equivalents $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 $2,471 $2,315 Cash Flow From Operations $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 Free Cash Flow $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 Capital Expenditures $177 $185 $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 $188 $136 $136 $170 Depreciation and Amortization $128 $134 $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 $309 $302 $312 $317 EBITDA $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 Accounts Receivable, Net $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 $1,791 $1,959 Inventory Raw Materials $115 $159 $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 $191 $167 $208 $201 Work in Process 254 255 266 274 260 263 275 185 667 552 559 581 583 575 579 581 Finished Goods 138 146 140 153 163 142 200 90 286 413 508 430 423 446 457 511 Total Inventory $507 $560 $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 $1,197 $1,188 $1,244 $1,293 Property, Plant and Equipment, Net $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 $3,638 $3,509 Accounts Payable $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 $2,061 $2,106 Days Sales Outstanding 43 48 50 46 47 46 46 34 71 45 44 41 41 44 43 45 Days Inventory Outstanding 23 28 26 26 28 27 27 31 57 34 42 40 40 40 42 42 Days Payables Outstanding 69 74 79 74 73 73 72 60 123 77 82 72 69 67 69 68 Cash Conversion Cycle (3) 2 (3) (2) 2 - 1 5 5 2 4 9 12 17 16 19 Inventory Turns 16 13 14 14 13 13 13 12 6 11 9 9 9 9 9 9 Dividends Paid $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $121 $ - $60 $59 $59 Shares Repurchased - - 1.8 16.4 5.2 4.2 5.2 4.4 2.3 2.0 Shares Repurchased $ - $ - $50 $ - $ - $ - $ - $ - $ - $604 $218 $146 $243 $235 $150 $150 Remaining Amount Authorized $466 $466 $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 $2,205 $1,970 $1,820 $1,670 R4Q Economic Profit8 $786 $826 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) $(176) $(109) R4Q ROIC8 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% 10.1% 9.7% 10.5% R4Q ROA8 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% 7.0% 6.7% 7.2% Worldwide Headcount3 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 87,586 87,976
No Spacing;Cash and Cash Equivalents $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 $4,869 $4,655 Debt 425 400 375 350 325 294 263 231 2,743 2,185 2,128 2,128 2,013 1,955 2,398 2,340 Net Cash and Cash Equivalents $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 $2,471 $2,315 Cash Flow From Operations $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 Free Cash Flow $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 Capital Expenditures $177 $185 $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 $188 $136 $136 $170 Depreciation and Amortization $128 $134 $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 $309 $302 $312 $317 EBITDA $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 Accounts Receivable, Net $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 $1,791 $1,959 Inventory Raw Materials $115 $159 $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 $191 $167 $208 $201 Work in Process 254 255 266 274 260 263 275 185 667 552 559 581 583 575 579 581 Finished Goods 138 146 140 153 163 142 200 90 286 413 508 430 423 446 457 511 Total Inventory $507 $560 $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 $1,197 $1,188 $1,244 $1,293 Property, Plant and Equipment, Net $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 $3,638 $3,509 Accounts Payable $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 $2,061 $2,106 Days Sales Outstanding 43 48 50 46 47 46 46 34 71 45 44 41 41 44 43 45 Days Inventory Outstanding 23 28 26 26 28 27 27 31 57 34 42 40 40 40 42 42 Days Payables Outstanding 69 74 79 74 73 73 72 60 123 77 82 72 69 67 69 68 Cash Conversion Cycle (3) 2 (3) (2) 2 - 1 5 5 2 4 9 12 17 16 19 Inventory Turns 16 13 14 14 13 13 13 12 6 11 9 9 9 9 9 9 Dividends Paid $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $121 $ - $60 $59 $59 Shares Repurchased - - 1.8 16.4 5.2 4.2 5.2 4.4 2.3 2.0 Shares Repurchased $ - $ - $50 $ - $ - $ - $ - $ - $ - $604 $218 $146 $243 $235 $150 $150 Remaining Amount Authorized $466 $466 $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 $2,205 $1,970 $1,820 $1,670 R4Q Economic Profit8 $786 $826 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) $(176) $(109) R4Q ROIC8 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% 10.1% 9.7% 10.5% R4Q8 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% 7.0% 6.7% 7.2% Worldwide Headcount3 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 87,586 87,976 Balance sheet, cash flows, earnings, dividends and share repurchase amounts in millions 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 Q1 FY14 Q2 FY14 Cash and Cash Equivalents $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 $4,869 $4,655 Debt 425 400 375 350 325 294 263 231 2,743 2,185 2,128 2,128 2,013 1,955 2,398 2,340 Net Cash and Cash Equivalents $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 $2,471 $2,315 Cash Flow From Operations $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 Free Cash Flow $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 Capital Expenditures $177 $185 $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 $188 $136 $136 $170 Depreciation and Amortization $128 $134 $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 $309 $302 $312 $317 EBITDA $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 Accounts Receivable, Net $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 $1,791 $1,959 Inventory Raw Materials $115 $159 $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 $191 $167 $208 $201 Work in Process 254 255 266 274 260 263 275 185 667 552 559 581 583 575 579 581 Finished Goods 138 146 140 153 163 142 200 90 286 413 508 430 423 446 457 511 Total Inventory $507 $560 $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 $1,197 $1,188 $1,244 $1,293 Property, Plant and Equipment, Net $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 $3,638 $3,509 Accounts Payable $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 $2,061 $2,106 Days Sales Outstanding 43 48 50 46 47 46 46 34 71 45 44 41 41 44 43 45 Days Inventory Outstanding 23 28 26 26 28 27 27 31 57 34 42 40 40 40 42 42 Days Payables Outstanding 69 74 79 74 73 73 72 60 123 77 82 72 69 67 69 68 Cash Conversion Cycle (3) 2 (3) (2) 2 - 1 5 5 2 4 9 12 17 16 19 Inventory Turns 16 13 14 14 13 13 13 12 6 11 9 9 9 9 9 9 Dividends Paid $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $121 $ - $60 $59 $59 Shares Repurchased - - 1.8 - 16.4 5.2 4.2 5.2 4.4 2.3 2.0 Shares Repurchased $ - $ - $50 $ - $ - $ - $ - $ - $ - $604 $218 $146 $243 $235 $150 $150 Remaining Amount Authorized $466 $466 $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 $2,205 $1,970 $1,820 $1,670 R4Q Economic Profit8 $786 $826 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) 176) $(109) R4QROIC8 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% 10.1% 9.7% 10.5% R4Q ROA8 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% 7.0% 6.7% 7.2% Worldwide Headcount3 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 87,586 87,976
Y14 Reconciliation of Operating Income (Loss) to R4Q Economic Profit Operating Income (Loss) $209 $319 $473 $441 $293 $211 $240 $158 $172 $259 $162 $542 $808 $592 $478 $417 $(221) $542 $478 Income Tax Provision (11) (29) (42) (40) (27) (14) (14) (13) (12) (19) (15) (55) (56) (59) (133) (15) (35) (37) (37) Net Operating Profit After Taxes 198 290 431 401 266 197 226 145 160 240 147 487 752 533 345 402 (256) 505 441 R4Q Net Operating Profit After Taxes 972 1,320 1,388 1,295 1,090 834 728 771 692 1,034 1,626 1,919 2,117 2,032 1,024 996 1,092 Invested Capital x WACC (488) (534) (562) (581) (606) (621) (636) (658) (677) (1,117) (1,084) (1,118) (1,141) (1,148) (1,083) (1,172) (1,201) R4Q Economic Profit $484 $786 $826 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) $(176) $(109) Formulas Share = Units (HDD) / TAM ASP = Revenue / Units (HDD) Free Cash Flow = Cash Flow from Operations – Capital Expenditures EBITDA = Net Income (Loss) + 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 = R4Q Net Operating Profit After Taxes – (Invested Capital x WACC)Ÿ Invested Capital = Short-term debt + Current portion of long-term debt + Long-term debt + Total shareholders’ equity Ÿ WACC7 = 11% R4Q ROIC = R4Q (Operating Income (Loss) + Interest Expense) / R4Q Average (Short-term debt + Current portion of long-term debt + Long-term debt + Total shareholders’ equity) R4Q ROA = R4Q Operating Income (Loss) / R4Q Average Total Assets 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 external HDD manufacturers, and white box manufacturers. 6. Q4 FY13 non-GAAP EPS is calculated using the same number of shares used for Q4 FY13 GAAP EPS plus 7 million dilutive shares. Dilutive shares are not included in the Q4 FY13 GAAP EPS calculation as Q4 FY13 resulted in a net loss. 7. WACC of 11% is an internal assumption. 8. Q2 FY12 includes charges related to the flooding. Q4 FY13 includes charges related to the arbitration award. 9. TAM is preliminary and based on internal information.
No Spacing;Reconciliation of Cash Flows from Operations to Free Cash Flow Cash Flows from Operations $588 $363 $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 Capital Expenditures (177) (185) (200) (250) (175) (153) (134) (120) (139) (324) (382) (246) (188) (136) (136) (170) Free Cash Flow $411 $178 $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 Reconciliation of Net Income to EBITDA Net Income (Loss) $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $(265) $495 $430 Interest 1 1 1 (1) 2 1 2 4 7 14 10 11 9 10 11 Income Tax Expense 40 27 14 14 13 12 19 15 55 56 59 133 15 35 37 37 Depreciation and Amortization 128 134 150 151 151 150 158 140 188 339 313 309 309 302 312 317 EBITDA $569 $427 $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 Reconciliation of Gross Margin to Non GAAP Gross Margin & Gross Profit to Non GAAP Gross Profit Gross Profit $665 $535 $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 $1,061 $1,050 $1,088 $1,141 Acquisition Related Fair Value Adjustments 91 Restucturing 11 15 Amortization of Intangibles 9 39 38 38 38 35 36 40 Non GAAP Gross Profit $665 $535 $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 $1,099 $1,085 $1,135 $1,196 Revenue $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 $3,804 $3,972 Gross Margin 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% 28.6% 28.7% Non GAAP Gross Margin 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% 29.8% 30.1% Reconciliation of Net Income (Loss) to Non GAAP Net Income Net Income (Loss) $400 $265 $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $(265) $495 $430 Acquisition Related Expense 10 10 14 14 34 7 13 Litigation 27 25 7 681 13 25 Charges Related to Flooding, Net 199 15 Acquisition Related Fair Value Adjustments 91 Amortization of Intangibles 12 51 49 49 49 46 47 51 Restructuring and other 80 26 41 74 8 11 26 Insurance Recovery (65) Tax Impact (16) (4) 88 Non GAAP Net Income $400 $292 $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 $514 $477 $514 $532 EPS $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 $(1.12) $2.05 $1.77 Non GAAP EPS $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 $2.12 $2.19 Diluted Shares Outstanding 234 235 234 235 236 237 237 237 246 260 252 246 245 236 242 243 Non GAAP Diluted Shares Outstanding6 234 235 234 235 236 237 237 237 246 260 252 246 245 243 242 243