wdc-20210804
0000106040false00001060402021-07-022021-07-02

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): August 4, 2021
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WESTERN DIGITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware001-0870333-0956711
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
5601 Great Oaks Parkway
95119
San Jose
California
(Address of Principal Executive Offices)(Zip Code)
(408717-6000
(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 (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))
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 ShareWDC
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging 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. ☐



Item 2.02    Results of Operations and Financial Condition.

On August 4, 2021, Western Digital Corporation announced financial results for the fiscal fourth quarter and fiscal year ended July 2, 2021. A copy of the press release making this announcement is attached hereto as Exhibit 99.1 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, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01    Financial Statements and Exhibits.

(d)    Exhibits

99. 1    Press Release issued by Western Digital Corporation on August 4, 2021 announcing financial results for the fourth quarter and fiscal year ended July 2, 2021.

104    Cover Page Interactive Data File (embedded within the Inline XBRL document)




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
Michael C. Ray
Executive Vice President, Chief Legal Officer
and Secretary
Date: August 4, 2021

Document

Exhibit 99.1
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Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results

News Summary
Fourth quarter revenue was $4.9 billion, up 15% year-over-year (YoY). Client Devices revenue increased 13%, Data Center Devices and Solutions revenue increased 6%, and Client Solutions revenue increased 42% YoY. Fiscal year 2021 revenue was $16.9 billion, up 1% YoY.
Fourth quarter GAAP earnings per share (EPS) was $1.97 and non-GAAP EPS was $2.16. Fiscal year 2021 GAAP EPS was $2.66 and non-GAAP EPS was $4.55.
Generated operating cash flow of $994 million and free cash flow of $792 million in the fourth quarter. Generated operating cash flow of $1.9 billion and free cash flow of $1.1 billion in fiscal year 2021.
Expecting fiscal first quarter 2022 revenue to be in the range of $4.90 billion to $5.10 billion with non-GAAP EPS in the range of $2.25 to $2.55.

SAN JOSE, Calif., — August 4, 2021 — Western Digital Corp. (Nasdaq: WDC) today reported fourth quarter and fiscal year 2021 financial results.

"I am extremely proud of the outstanding execution our team exhibited as we achieved another quarter of strong revenue, gross margin and EPS results above expectations,” said David Goeckeler, Western Digital CEO. “Throughout this fiscal year, we successfully delivered both flash and hard drive innovations that are essential building blocks in the acceleration of the data economy. This innovation, combined with our broad channels to market, diverse end market exposure and improved operational efficiency, enabled us to successfully navigate through the pandemic and capitalize on strategic growth opportunities. We believe we have the right foundation for success - the right products, the right customer base, and the unique ability to address two very large and growing markets."

















Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Page 2

Q4 2021 Financial Highlights
GAAPNon-GAAP
Q4 2021Q3 2021Q/QQ4 2021Q3 2021Q/Q
Revenue ($M)$4,920$4,137up 19%$4,920$4,137up 19%
Gross Margin31.8%26.4%up 5.4 ppt32.9%27.7%up 5.2 ppt
Operating Expenses ($M)$891$774up 15%$790$732up 8%
Operating Income ($M)$675$317up 113%$828$412up 101%
Net Income ($M)$622$197up 216%$680$318up 114%
Earnings Per Share$1.97$0.63up 214%$2.16$1.02up 112%

GAAPNon-GAAP
Q4 2021Q4 2020Y/YQ4 2021Q4 2020Y/Y
Revenue ($M)$4,920$4,287up 15%$4,920$4,287up 15%
Gross Margin31.8%25.3%up 6.5 ppt32.9%28.9%up 4.0 ppt
Operating Expenses ($M)$891$822up 8%$790$713up 11%
Operating Income ($M)$675$261up 159%$828$527up 57%
Net Income ($M)$622$148up 320%$680$369up 84%
Earnings Per Share$1.97$0.49up 302%$2.16$1.23up 76%

Fiscal Year 2021 Financial Highlights
GAAPNon-GAAP
20212020Y/Y20212020Y/Y
Revenue ($M)$16,922$16,736up 1%$16,922$16,736up 1%
Gross Margin26.7%22.6%up 4.1 ppt28.6%26.9%up 1.7 ppt
Operating Expenses ($M)$3,301$3,446down 4%$2,926$2,983down 2%
Operating Income (Loss) ($M)$1,220$335up 264%$1,906$1,522up 25%
Net Income (Loss) ($M)$821($250)*$1,406$914up 54%
Earnings Per Share$2.66($0.84)*$4.55$3.04up 50%
*not a meaningful figure

Additional details can be found within the company’s earnings presentation, which is accessible online at investor.wdc.com.



Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Page 3

Key End Market Summary
Revenue ($M)Q4 2021Q3 2021Q/QQ4 2020Y/Y20212020Y/Y
Client Devices$2,166$2,012up 8%$1,916up 13%$8,255$7,160up 15%
Data Center Devices & Solutions$1,777$1,237up 44%$1,684up 6%$4,950$6,228down 21%
Client Solutions$977$888up 10%$687up 42%$3,717$3,348up 11%
Total Revenue$4,920$4,137up 19%$4,287up 15%$16,922$16,736up 1%

In the fiscal fourth quarter of 2021, Western Digital’s revenue increased 19% quarter-over-quarter and 15% year-over-year to $4.9 billion. The company’s improving execution and unique ability to shift bits across broad routes to diverse markets enabled growth in revenue and gross margin and drove strong free cash flow.

Client Devices experienced broad-based strength across nearly every product category on a sequential basis. Contributing to this momentum was better than expected demand for notebook and desktop HDDs, as well as flash-based solutions. In addition, there was robust demand for gaming, smart video, automotive, and industrial applications.

In Data Center Devices & Solutions, Western Digital achieved a record shipment of over 104 exabytes in capacity enterprise hard drives, highlighting the importance of these products to datacenter customers. The 18-terabyte energy-assisted hard drive was the leading capacity point and comprised nearly half of Western Digital’s capacity enterprise shipments. Enterprise SSD demand strengthened as the company completed a qualification at another cloud titan and is now ramping the product more broadly.

Client Solutions experienced greater than seasonal demand resulting in sequential growth for both HDD and flash-based solutions. Despite the uneven reopening of economies around the world, the company was able to drive growth in both revenue and gross margin due to the breadth of its portfolio and many routes to market.












Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Page 4

Business Outlook for Fiscal First Quarter of 2022
Three Months Ending
October 1, 2021
GAAP(1)
Non-GAAP(1)
Revenue ($B)$4.90 - $5.10$4.90 - $5.10
Gross margin32.0% - 34.0%33.0% - 35.0%
Operating expenses ($M)$865 - $895$755 - $785
Interest and other expense, net ($M)~$80~$70
Tax rateN/A
      11-12 % (2)
Diluted earnings per shareN/A$2.25 - $2.55
Diluted shares outstanding (in millions)~317~317
(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $40 million to $60 million. The company’s non-GAAP operating expenses guidance excludes amortization of acquired intangible assets; stock-based compensation expense; and employee termination, asset impairment and other charges, totaling approximately $100 million to $120 million. The company's non-GAAP interest and other expense guidance excludes approximately $10 million of convertible debt activity. In the aggregate, non-GAAP diluted earnings per share guidance excludes these items totaling $150 million to $190 million. The timing and amount of these charges excluded from non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, net and non-GAAP diluted earnings per share cannot be further allocated or quantified with certainty. Additionally, the timing and amount of additional charges the company excludes from its non-GAAP tax rate and non-GAAP diluted earnings per share are dependent on the timing and determination of certain actions and cannot be reasonably predicted. Accordingly, full reconciliations of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, non-GAAP tax rate and non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (gross margin, operating expenses, interest and other expense, tax rate and diluted earnings per share, respectively) are not available without unreasonable effort.
(2) The non-GAAP tax rate provided is based on a percentage of non-GAAP pre-tax income. Due to differences in the tax treatment of items excluded from our non-GAAP net income and because our tax rate is based on an estimated forecasted annual GAAP tax rate, our estimated non-GAAP tax rate may differ from our GAAP tax rate and from our actual tax rates.





Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Page 5

Investor Communications
The investment community conference call to discuss these results and the company’s business outlook for the fiscal first quarter of 2022 will be broadcast live online today at 1:30 p.m. Pacific/4:30 p.m. Eastern. The live and archived conference call/webcast and the earnings presentation can be accessed online at investor.wdc.com.

About Western Digital
Western Digital, a leader in data infrastructure, creates environments for data to thrive. The company is driving the innovation needed to help customers capture, preserve, access, analyze, and transform an ever-increasing diversity of data. Everywhere data lives, from advanced data centers to mobile sensors to personal devices, the company's industry-leading solutions deliver the possibilities of data. Western Digital data-centric solutions are comprised of the Western Digital®, G-Technology™, SanDisk® and WD® brands. Financial and investor information is available on the company's Investor Relations website at investor.wdc.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning the company’s preliminary financial results for its fourth quarter ended July 2, 2021 and fiscal year 2021; the company’s business outlook for the fiscal first quarter of 2022; our market position and portfolio synergies; consumer trends and market conditions; and expectations regarding product momentum, and market opportunities and trends. 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. The preliminary financial results for the company’s fourth quarter ended July 2, 2021 and fiscal year 2021 included in this press release represent the most current information available to management. The company’s actual results when disclosed in its Form 10-K may differ from these preliminary results as a result of the completion of the company’s financial closing procedures; final adjustments; completion of the review and audit by the company’s independent registered accounting firm; and other developments that may arise between now and the disclosure of the final results. Other risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: future responses to and effects of the COVID-19 pandemic; volatility in global economic conditions; impact of business and market conditions; impact of competitive products and pricing; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and our strategic relationships; difficulties or delays in manufacturing or other supply chain disruptions; hiring and retention of key employees; our high level of debt and other financial obligations; changes to our relationships with key



Western Digital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
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customers; disruptions in operations from cyberattacks or other system security risks; actions by competitors; risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; 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-K filed with the SEC on August 28, 2020, to which your attention is directed. You should not 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 new information or events.

###
Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital Corporation or its affiliates in the US and/or other countries.
















WESTERN DIGITAL CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited; on a US GAAP basis)
July 2,
2021
July 3,
2020
ASSETS
Current assets:
Cash and cash equivalents$3,370 $3,048 
Accounts receivable, net2,257 2,379 
Inventories3,616 3,070 
Other current assets514 551 
Total current assets9,757 9,048 
Property, plant and equipment, net3,188 2,854 
Notes receivable and investments in Flash Ventures1,586 1,875 
Goodwill10,066 10,067 
Other intangible assets, net442 941 
Other non-current assets1,093 877 
Total assets$26,132 $25,662 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,934 $1,945 
Accounts payable to related parties398 407 
Accrued expenses1,653 1,296 
Accrued compensation634 472 
Current portion of long-term debt251 286 
Total current liabilities4,870 4,406 
Long-term debt8,474 9,289 
Other liabilities2,067 2,416 
Total liabilities15,411 16,111 
Total shareholders’ equity10,721 9,551 
Total liabilities and shareholders’ equity$26,132 $25,662 



WESTERN DIGITAL CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts; unaudited; on a US GAAP basis)

Three Months EndedYears Ended
July 2,
2021
July 3,
2020
July 2,
2021
July 3,
2020
Revenue, net$4,920 $4,287 $16,922 $16,736 
Cost of revenue3,354 3,204 12,401 12,955 
Gross profit1,566 1,083 4,521 3,781 
Operating expenses:
Research and development598 546 2,243 2,261 
Selling, general and administrative297 269 1,105 1,153 
Employee termination, asset impairment and other charges(4)(47)32 
Total operating expenses891 822 3,301 3,446 
Operating income675 261 1,220 335 
Interest and other expense, net(79)(76)(293)(381)
Income (loss) before taxes596 185 927 (46)
Income tax expense (26)37 106 204 
Net income (loss)$622 $148 $821 $(250)
Income (loss) per common share
Basic$2.03 $0.49 $2.69 $(0.84)
Diluted$1.97 $0.49 $2.66 $(0.84)
Weighted average shares outstanding:
Basic307 300 305 298 
Diluted315 301 309 298 




WESTERN DIGITAL CORPORATION
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited; on a US GAAP basis)

Three Months EndedYears Ended
July 2,
2021
July 3,
2020
July 2,
2021
July 3,
2020
Operating Activities
Net income (loss)$622 $148 $821 $(250)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization251 377 1,212 1,566 
Stock-based compensation79 76 318 308 
Deferred income taxes(201)(29)(242)(82)
Loss (gain) on disposal of assets(5)(70)(7)
Amortization of debt issuance costs and discounts10 10 40 40 
Other non-cash operating activities, net20 14 (6)
Changes in:
Accounts receivable, net(353)(401)121 (1,175)
Inventories67 21 (546)200 
Accounts payable150 61 11 192 
Accounts payable to related parties(9)75 
Accrued expenses101 (147)352 184 
Accrued compensation140 37 162 124 
Other assets and liabilities, net112 (6)(266)(357)
Net cash provided by operating activities994 172 1,898 824 
Investing Activities
Purchases of property, plant and equipment, net(304)(215)(1,003)(647)
Acquisitions, net of cash acquired— — — (22)
Activity related to Flash Ventures, net102 304 231 931 
Strategic Investments and Other, net(1)(3)16 
Net cash provided by (used in) investing activities(203)86 (765)278 
Financing Activities
Employee stock plans, net58 59 78 69 
Dividends paid to shareholders— (150)— (595)
Repayment of debt(213)(63)(886)(982)
Other— — (9)— 
Net cash used in financing activities(155)(154)(817)(1,508)
Effect of exchange rate changes on cash— (1)
Net increase (decrease) in cash and cash equivalents636 105 322 (407)
Cash and cash equivalents, beginning of period2,734 2,943 3,048 3,455 
Cash and cash equivalents, end of period$3,370 $3,048 $3,370 $3,048 




WESTERN DIGITAL CORPORATION
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions; unaudited)
Three Months EndedYears Ended
 July 2,
2021
July 3,
2020
July 2,
2021
July 3,
2020
GAAP cost of revenue$3,354 $3,204 $12,401 $12,955 
Amortization of acquired intangible assets(38)(144)(331)(610)
Stock-based compensation expense(14)(13)(55)(51)
Charges related to cost saving initiatives— — — (3)
Charges related to a power outage incident and related recovery— — 75 (68)
Other— — — 
Non-GAAP cost of revenue$3,302 $3,047 $12,090 $12,231 
GAAP gross profit$1,566 $1,083 $4,521 $3,781 
Amortization of acquired intangible assets38 144 331 610 
Stock-based compensation expense14 13 55 51 
Charges related to cost saving initiatives— — — 
Charges related to a power outage incident and related recovery— — (75)68 
Other— — — (8)
Non-GAAP gross profit$1,618 $1,240 $4,832 $4,505 
GAAP operating expenses$891 $822 $3,301 $3,446 
Amortization of acquired intangible assets(38)(39)(155)(159)
Stock-based compensation expense(65)(63)(263)(257)
Employee termination, asset impairment and other charges(7)47 (32)
Charges related to acquisitions and dispositions— — — (9)
Charges related to cost saving initiatives(2)— (3)(6)
Other— — (1)— 
Non-GAAP operating expenses$790 $713 $2,926 $2,983 
GAAP operating income (loss)$675 $261 $1,220 $335 
Cost of revenue adjustments52 157 311 724 
Operating expense adjustments101 109 375 463 
Non-GAAP operating income$828 $527 $1,906 $1,522 
GAAP interest and other expense, net$(79)$(76)$(293)$(381)
Convertible debt activity28 28 
Other(7)(4)(17)
Non-GAAP interest and other expense, net$(79)$(73)$(282)$(344)
GAAP income tax expense$(26)$37 $106 $204 
Income tax adjustments95 48 112 60 
Non-GAAP income tax expense$69 $85 $218 $264 



WESTERN DIGITAL CORPORATION
PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts; unaudited)

Three Months EndedYears Ended
 July 2,
2021
July 3,
2020
July 2,
2021
July 3,
2020
GAAP net income (loss)$622 $148 $821 $(250)
Amortization of acquired intangible assets76 183 486 769 
Stock-based compensation expense79 76 318 308 
Employee termination, asset impairment and other charges(4)(47)32 
Charges related to acquisitions and dispositions— — — 
Charges related to cost saving initiatives— 
Charges related to a power outage incident and related recovery— — (75)68 
Convertible debt activity28 28 
Other(7)(4)(16)
Income tax adjustments(95)(48)(112)(60)
Non-GAAP net income$680 $369 $1,406 $914 
Diluted income (loss) per common share
GAAP$1.97 $0.49 $2.66 $(0.84)
Non-GAAP$2.16 $1.23 $4.55 $3.04 
Diluted weighted average shares outstanding:
GAAP315 301 309 298 
Non-GAAP315 301 309 301 
Cash flows
Cash flow provided by operating activities$994 $172 $1,898 $824 
Purchase of property, plant and equipment, net(304)(215)(1,003)(647)
Activity related to flash ventures, net102 304 231 931 
Free cash flow$792 $261 $1,126 $1,108 




To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”), the table above sets forth non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP operating expenses; non-GAAP operating income; non-GAAP interest and other expense, net; non-GAAP income tax expense; non-GAAP net income; non-GAAP diluted income per common share and free cash flow (“Non-GAAP measures”). These Non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with GAAP and may be different from Non-GAAP measures used by other companies. The company believes the presentation of these Non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors for measuring the company’s earnings performance and comparing it against prior periods. Specifically, the company believes these Non-GAAP measures provide useful information to both management and investors as they exclude certain expenses, gains and losses that the company believes are not indicative of its core operating results or because they are consistent with the financial models and estimates published by many analysts who follow the company and its peers. As discussed further below, these Non-GAAP measures exclude, as applicable, the amortization of acquired intangible assets, stock-based compensation expense, employee termination, asset impairment and other charges, charges related to acquisitions and dispositions, charges related to cost saving initiatives, charges related to a power outage incident and related recovery, convertible debt activity, other adjustments, and income tax adjustments, and the company believes these measures along with the related reconciliations to the GAAP measures provide additional detail and comparability for assessing the company's results. These Non-GAAP measures are some of the primary indicators management uses for assessing the company's performance and planning and forecasting future periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

As described above, the company excludes the following items from its Non-GAAP measures:

Amortization of acquired intangible assets. The company incurs expenses from the amortization of acquired intangible assets over their economic lives. Such charges are significantly impacted by the timing and magnitude of the company's acquisitions and any related impairment charges.

Stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the company's control, the company believes excluding stock-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the company's peers, a majority of whom also exclude stock-based compensation expense from their non-GAAP results.





Employee termination, asset impairment and other charges. From time-to-time, in order to realign the company's operations with anticipated market demand or to achieve cost synergies from the integration of acquisitions, the company may terminate employees and/or restructure its operations. From time-to-time, the company may also incur charges from the impairment of intangible assets and other long-lived assets. In addition, the company may record credits related to gains upon sale of property due to restructuring or reversals of charges recorded in prior periods. These charges or credits are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.

Charges related to acquisitions and dispositions. In connection with the company's business combinations or dispositions, the company incurs expenses which it would not have otherwise incurred as part of its business operations. These expenses include third-party professional service and legal fees, third-party integration services, severance costs, non-cash adjustments to the fair value of acquired inventory, contract termination costs, and retention bonuses. The company may also experience other accounting impacts in connection with these transactions. These charges and impacts are related to acquisitions and dispositions, are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.

Charges related to cost saving initiatives. In connection with the transformation of the company's business, the company incurred charges related to cost saving initiatives which do not qualify for special accounting treatment as exit or disposal activities. These charges, which the company believes are not indicative of the underlying performance of its business, primarily relate to costs associated with rationalizing the company's channel partners or vendors, transforming the company's information systems infrastructure, integrating the company's product roadmap, and accelerated depreciation of assets.

Charges related to a power outage incident and related recovery. In June 2019, an unexpected power outage incident occurred at the flash-based memory manufacturing facilities operated through the company's joint venture with Kioxia Corporation in Yokkaichi, Japan. The power outage incident resulted in costs associated with the repair of damaged tools and the write-off of damaged inventory and unabsorbed manufacturing overhead costs which are expensed as incurred. During fiscal year 2021, the company received recoveries of these losses from its insurance carriers. These charges and recoveries are inconsistent in amount and frequency, and the company believes these charges or recoveries are not part of the ongoing production operation of its business.

Convertible debt activity. The company excludes non-cash economic interest expense associated with its convertible notes. These charges do not reflect the company's operating results, and the company believes they are not indicative of the underlying performance of its business.




Other adjustments. From time-to-time, the company incurs charges or gains that the company believes are not a part of the ongoing operation of its business. The resulting expense or benefit is inconsistent in amount and frequency.

Income tax adjustments. Income tax adjustments include the difference between income taxes based on a forecasted annual non-GAAP tax rate and a forecasted annual GAAP tax rate as a result of the timing of certain non-GAAP pre-tax adjustments. The income tax adjustments also include adjustments to estimates related to the current status of the rules and regulations governing the transition to the Tax Cuts and Jobs Act. These adjustments are excluded because the company believes that they are not indicative of the underlying performance of its ongoing business.

Additionally, free cash flow is defined as cash flows provided by operating activities less purchases of property, plant and equipment, net of proceeds from sales of property, plant and equipment, and the activity related to Flash Ventures, net. The company considers free cash flow generated in any period to be a useful indicator of cash that is available for strategic opportunities including, among others, investing in the company's business, making strategic acquisitions, repaying debt and strengthening the balance sheet.






___________________
Contacts:
Western Digital Corp.

Investor Contact:Media Contact:
T. Peter Andrew
Lisa Neitzel
949.672.9655
408.717.7607
peter.andrew@wdc.comlisa.neitzel@wdc.com
investor@wdc.com