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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2020
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-8703

https://cdn.kscope.io/ff9fd9fa5a90d401dae8ee198144db78-wdc-20200403_g1.jpg
WESTERN DIGITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware33-0956711
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
5601 Great Oaks ParkwaySan Jose,California95119
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (408) 717-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.01 Par Value Per ShareWDCThe Nasdaq Stock Market LLC
 (Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
As of the close of business on May 5, 2020, 299,701,032 shares of common stock, par value $0.01 per share, were outstanding.



WESTERN DIGITAL CORPORATION
INDEX

PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets — As of April 3, 2020 and June 28, 2019
Condensed Consolidated Statements of Operations — Three and Nine Months Ended April 3, 2020 and March 29, 2019
Condensed Consolidated Statements of Comprehensive Loss — Three and Nine Months Ended April 3, 2020 and March 29, 2019
Condensed Consolidated Statements of Cash Flows — Nine Months Ended April 3, 2020 and March 29, 2019
Condensed Consolidated Statements of Shareholders' Equity — Nine Months Ended April 3, 2020 and March 29, 2019
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 6.Exhibits

Unless otherwise indicated, references herein to specific years and quarters are to our fiscal years and fiscal quarters, and references to financial information are on a consolidated basis. As used herein, the terms “we,” “us,” “our,” the “Company,” “WDC” and “Western Digital” refer to Western Digital Corporation and its subsidiaries, unless we state, or the context indicates, otherwise.

WDC, a Delaware corporation, is the parent company of our data storage business. Our principal executive offices are located at 5601 Great Oaks Parkway, San Jose, California 95119. Our telephone number is (408) 717-6000.

Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital or its affiliates in the U.S. and/or other countries. All other trademarks, registered trademarks and/or service marks, indicated or otherwise, are the property of their respective owners.


3

Table of Contents
FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “would,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, or the use of future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Examples of forward-looking statements include, but are not limited to, statements concerning:

expectations regarding the effects of the COVID-19 pandemic and measures intended to reduce its spread;
expectations regarding our Flash Ventures joint venture with Kioxia Corporation, the flash industry and our flash wafer output plans;
expectations regarding pricing conditions for flash products;
expectations regarding our cost saving initiatives;
expectations regarding our product development and technology plans;
expectations regarding the outcome of legal proceedings in which we are involved;
our reinvestment in the business and ongoing deleveraging efforts;
any changes to our quarterly cash dividend policy and share repurchase program;
expectations regarding the repatriation of funds from our foreign operations;
our beliefs regarding tax benefits and the timing of future payments, if any, relating to the unrecognized tax benefits, and the adequacy of our tax provisions;
expectations regarding capital investments and sources of funding for those investments; and
our beliefs regarding the sufficiency of our available liquidity to meet our working capital, debt and capital expenditure needs as well as our dividend plans.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in Part II, Item 1A of this Quarterly Report on Form 10-Q, and any of those made in our other reports filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

4

Table of Contents
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
April 3,
2020
June 28,
2019
ASSETS
Current assets:
Cash and cash equivalents$2,943  $3,455  
Accounts receivable, net1,978  1,204  
Inventories3,091  3,283  
Other current assets541  535  
Total current assets8,553  8,477  
Property, plant and equipment, net2,735  2,843  
Notes receivable and investments in Flash Ventures2,157  2,791  
Goodwill10,066  10,076  
Other intangible assets, net1,126  1,711  
Other non-current assets872  472  
Total assets$25,509  $26,370  
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,786  $1,567  
Accounts payable to related parties397  331  
Accrued expenses1,569  1,296  
Accrued compensation433  347  
Current portion of long-term debt286  276  
Total current liabilities4,471  3,817  
Long-term debt9,343  10,246  
Other liabilities2,452  2,340  
Total liabilities16,266  16,403  
Commitments and contingencies (Notes 9, 10, 12 and 15)
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized — 5 shares; issued and outstanding — none
    
Common stock, $0.01 par value; authorized — 450 shares; issued — 312 shares; outstanding — 300 shares and 295 shares, respectively
3  3  
Additional paid-in capital3,743  3,851  
Accumulated other comprehensive loss(183) (68) 
Retained earnings6,578  7,449  
Treasury stock — common shares at cost; 12 shares and 17 shares, respectively
(898) (1,268) 
Total shareholders’ equity9,243  9,967  
Total liabilities and shareholders’ equity$25,509  $26,370  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months EndedNine Months Ended
April 3,
2020
March 29,
2019
April 3,
2020
March 29,
2019
Revenue, net$4,175  $3,674  $12,449  $12,935  
Cost of revenue3,170  3,095  9,751  9,648  
Gross profit1,005  579  2,698  3,287  
Operating expenses:
Research and development563  544  1,715  1,659  
Selling, general and administrative281  353  884  1,018  
Employee termination, asset impairment, and other charges8  76  25  142  
Total operating expenses852  973  2,624  2,819  
Operating income (loss)153  (394) 74  468  
Interest and other income (expense):
Interest income6  13  26  43  
Interest expense(99) (118) (326) (352) 
Other income (expense), net(14) 22  (5) 28  
Total interest and other expense, net(107) (83) (305) (281) 
Income (loss) before taxes46  (477) (231) 187  
Income tax expense29  104  167  744  
Net income (loss)$17  $(581) $(398) $(557) 
Income (loss) per common share
Basic$0.06  $(1.99) $(1.34) $(1.91) 
Diluted$0.06  $(1.99) $(1.34) $(1.91) 
Weighted average shares outstanding:
Basic299  292  298  291  
Diluted303  292  298  291  
Cash dividends declared per share$0.50  $0.50  $1.50  $1.50  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)
(Unaudited)
Three Months EndedNine Months Ended
April 3,
2020
March 29,
2019
April 3,
2020
March 29,
2019
Net income (loss)$17  $(581) $(398) $(557) 
Other comprehensive loss, before tax:
Actuarial pension gain1    4  1  
Foreign currency translation adjustment(11) (2) (21) (8) 
Net unrealized loss on derivative contracts and available-for-sale securities(76) (24) (115) (18) 
Total other comprehensive loss, before tax(86) (26) (132) (25) 
Income tax benefit related to items of other comprehensive loss, before tax13  6  17  9  
Other comprehensive loss, net of tax(73) (20) (115) (16) 
Total comprehensive loss$(56) $(601) $(513) $(573) 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended
April 3,
2020
March 29,
2019
Cash flows from operating activities
Net loss$(398) $(557) 
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization1,189  1,396  
Stock-based compensation232  242  
Deferred income taxes(53) 253  
Loss (gain) on disposal of assets(9) 4  
Amortization of debt discounts30  28  
Other non-cash operating activities, net(8) 19  
Changes in:
Accounts receivable, net(774) 975  
Inventories179  (496) 
Accounts payable131  (549) 
Accounts payable to related parties66  53  
Accrued expenses331  373  
Accrued compensation87  (78) 
Other assets and liabilities, net(351) (285) 
Net cash provided by operating activities652  1,378  
Cash flows from investing activities
Purchases of property, plant and equipment(432) (722) 
Proceeds from the sale of property, plant and equipment  3  
Acquisitions, net of cash acquired(22)   
Purchases of investments  (69) 
Proceeds from sale of investments  49  
Proceeds from maturities of investments  7  
Notes receivable issuances to Flash Ventures(353) (858) 
Notes receivable proceeds from Flash Ventures980  570  
Strategic investments and other, net19  (22) 
Net cash provided by (used in) investing activities192  (1,042) 
Cash flows from financing activities
Issuance of stock under employee stock plans79  66  
Taxes paid on vested stock awards under employee stock plans(69) (109) 
Repurchases of common stock  (563) 
Dividends paid to shareholders(445) (438) 
Repayment of debt(919) (113) 
Repayment of revolving credit facility  (500) 
Net cash used in financing activities(1,354) (1,657) 
Effect of exchange rate changes on cash(2) (2) 
Net decrease in cash and cash equivalents(512) (1,323) 
Cash and cash equivalents, beginning of year3,455  5,005  
Cash and cash equivalents, end of period$2,943  $3,682  
Supplemental disclosure of cash flow information:
Cash paid for income taxes$303  $323  
Cash paid for interest$327  $355  

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at June 28, 2019312  $3  (17) $(1,268) $3,851  $(68) $7,449  $9,967  
Net loss—  —  —  —  —  —  (276) (276) 
Adoption of New Accounting Standard—  —  —  —  —  —  (5) (5) 
Employee stock plans—  —  3  181  (207) —  —  (26) 
Stock-based compensation—  —  —  —  77  —  —  77  
Dividends to shareholders—  —  —  —  7  —  (156) (149) 
Actuarial pension gain—  —  —  —  —  1  —  1  
Foreign currency translation adjustment—  —  —  —  —  4  —  4  
Net unrealized loss on derivative contracts—  —  —  —  —  (27) —  (27) 
Balance at October 4, 2019312  3  (14) (1,087) 3,728  (90) 7,012  9,566  
Net loss—  —  —  —  —  —  (139) (139) 
Employee stock plans—  —  1  125  (81) —  —  44  
Stock-based compensation—  —  —  —  77  —  —  77  
Dividends to shareholders—  —  —  —  7  —  (156) (149) 
Actuarial pension gain—  —  —  —  —  1  —  1  
Foreign currency translation adjustment—  —  —  —  —  (13) —  (13) 
Net unrealized loss on derivative contracts—  —  —  —  —  (8) —  (8) 
Balance at January 3, 2020312  3  (13) (962) 3,731  (110) 6,717  9,379  
Net income—  —  —  —  —  —  17  17  
Employee stock plans—  —  1  64  (72) —  —  (8) 
Stock-based compensation—  —  —  —  78  —  —  78  
Dividends to shareholders—  —  —  —  6  —  (156) (150) 
Actuarial pension gain—  —  —  —  —  1  —  1  
Foreign currency translation adjustment—  —  —  —  —  (12) —  (12) 
Net unrealized loss on derivative contracts—  —  —  —  —  (62) —  (62) 
Balance at April 3, 2020312  $3  (12) $(898) $3,743  $(183) $6,578  $9,243  

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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)

Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at June 29, 2018312  $3  (16) $(1,444) $4,254  $(39) $8,757  $11,531  
Net income—  —  —  —  —  —  511  511  
Adoption of New Accounting Standards—  —  —  —  —  —  56