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8-K - FORM 8-K - WESTERN DIGITAL CORPd766900d8k.htm
EX-99.1 - EX-99.1 - WESTERN DIGITAL CORPd766900dex991.htm

Exhibit 99.2

LOGO

FY11 Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY149

TAM 164.0 167.5 159.5 165.8 176.3 119.1 146.4 156.7 139.1 135.8 135.9 133.3 140.2 142.2 138.1 138.1

HDD Share 30.9% 31.2% 31.2% 32.5% 32.8% 23.9% 30.2% 45.3% 44.9% 43.6% 44.3% 44.9% 44.7% 44.4% 43.8% 45.7%

Units (HDD)2 50.7 52.2 49.8 53.8 57.8 28.5 44.2 71.0 62.5 59.2 60.2 59.9 62.6 63.1 60.4 63.1

ASP (HDD) $46 $47 $45 $44 $46 $69 $68 $65 $62 $62 $61 $60 $58 $60 $58 $56

Revenue $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 $3,703 $3,651

Gross Profit $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 $1,061 $1,050 $1,088 $1,141 $1,060 $1,029

Gross Margin 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% 28.6% 28.2%

R&D $167 $169 $179 $188 $193 $191 $265 $406 $396 $378 $396 $402 $401 $421 $426 $462

SG&A 59 66 63 77 71 85 122 178 179 162 185 180 132 229 202 202

Other — — 10 32 18 210 48 80 26 41 63 689 13 13 13 13

Total Operating Expenses $226 $235 $252 $297 $282 $486 $435 $664 $601 $581 $644 $1,271 $546 $663 $641 $677

Operating Income (Loss) $211 $240 $158 $172 $259 $162 $542 $808 $592 $478 $417 $(221) $542 $478 $419 $352

Net Income (Loss) $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $(265) $495 $430 $375 $317

EPS $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 $1.55 $1.32

Diluted Shares Outstanding 234 235 236 237 237 237 246 260 252 246 245 236 242 243 242 241

Non-GAAP Results Gross Profit $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 $1,099 $1,085 $1,135 $1,196 $1,115 $1,078

Gross Margin 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% 30.1% 29.5%

Net Income $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 $514 $477 $514 $532 $470 $445

EPS6 $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 $1.94 $1.85

Revenue By Channel OEM 50% 45% 47% 55% 53% 59% 64% 69% 63% 61% 60% 66% 64% 62% 62% 65%

Distributors 32% 33% 33% 29% 29% 25% 28% 21% 24% 24% 26% 23% 24% 24% 25% 23%

Retail 18% 22% 20% 16% 18% 16% 8% 10% 13% 15% 14% 11% 12% 14% 13% 12%

Revenue by Geography Americas 23% 22% 22% 20% 19% 22% 21% 27% 23% 27% 27% 28% 26% 25% 25% 24%

EMEA 23% 25% 24% 20% 22% 21% 18% 18% 18% 23% 22% 19% 20% 23% 21% 20%

Asia/ANZ 54% 53% 54% 60% 59% 57% 61% 55% 59% 50% 51% 53% 54% 52% 54% 56%

Top 10 Customers Revenue 50% 48% 49% 53% 49% 51% 53% 53% 44% 45% 45% 48% 48% 42% 44% 45%

Enterprise SSD Revenue $—$—$—$—$—$— $11 $54 $70 $89 $92 $104 $106 $155 $134 $113

PC Units5 Notebook 16.582 17.385 16.227 16.867 19.622 9.814 18.067 32.773 25.887 21.300 21.547 23.989 22.912 22.662 21.814 22.899

Desktop 20.918 20.411 20.118 22.348 21.588 11.391 15.975 21.211 16.819 17.717 18.383 16.185 17.307 16.825 16.635 16.182

Non-PC Units Consumer Electronics4 5.239 4.709 4.765 6.459 7.188 2.352 3.643 4.155 8.019 6.452 6.517 6.544 8.474 8.794 8.573 10.906

Branded 5.678 7.427 6.404 5.672 7.060 3.191 2.926 4.986 5.767 7.139 6.517 5.281 6.146 7.018 6.272 6.012

Enterprise 2.319 2.284 2.318 2.463 2.369 1.724 3.616 7.913 5.988 6.633 7.211 7.897 7.771 7.783 7.129 7.098

Total HDD 50.736 52.216 49.832 53.809 57.827 28.472 44.227 71.038 62.480 59.241 60.175 59.896 62.610 63.082 60.423 63.097

Average GB Shipped 512 581 578 608 634 578 581 668 708 804 805 797 811 874 888 875

EB Shipped 26.0 30.3 28.8 32.7 36.7 16.5 25.7 47.4 44.3 47.6 48.4 47.7 50.8 55.1 53.6 55.2

R4Q EB Shipped 94.1 102.5 107.7 117.8 128.5 114.6 111.5 126.3 133.9 165.1 187.8 188.0 194.5 202.0 207.2 214.7


LOGO

alance sheet, cash flows, earnings, dividends and share repurchase amounts in millions 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 Q3 FY14 Q4 FY14

Cash and Cash Equivalents $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 $4,569 $4,804

Short Term & Long Term Investments — — — — — — — — — — — — — — 470 499

Debt (375) (350) (325) (294) (263) (231) (2,743) (2,185) (2,128) (2,128) (2,013) (1,955) (2,398) (2,340) (2,469) (2,438)

Net Cash, Cash Equivalents & Investments $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 $2,570 $2,865

Cash Flow From Operations $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 $697 $713

Free Cash Flow $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 $536 $552

Capital Expenditures $200 $250 $175 $153 $134 $120 $139 $324 $382 $246 $188 $136 $136 $170 $161 $161

Depreciation and Amortization $150 $151 $151 $150 $158 $140 $188 $339 $313 $309 $309 $302 $312 $317 $307 $308

EBITDA $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 $726 $660

Accounts Receivable, Net $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 $1,802 $1,989

Inventory Raw Materials $155 $141 $151 $172 $170 $191 $329 $245 $237 $193 $191 $167 $208 $201 $204 $168

Work in Process 266 274 260 263 275 185 667 552 559 581 583 575 579 581 519 493

Finished Goods 140 153 163 142 200 90 286 413 508 430 423 446 457 511 554 565

Total Inventory $561 $568 $574 $577 $645 $466 $1,282 $1,210 $1,304 $1,204 $1,197 $1,188 $1,244 $1,293 $1,277 $1,226

Property, Plant and Equipment, Net $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 $3,406 $3,293

Accounts Payable $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 $1,902 $1,971

Days Sales Outstanding 50 46 47 46 46 34 71 45 44 41 41 44 43 45 44 50

Days Inventory Outstanding 26 26 28 27 27 31 57 34 42 40 40 40 42 42 44 42

Days Payables Outstanding 79 74 73 73 72 60 123 77 82 72 69 67 69 68 65 68

Cash Conversion Cycle (3) (2) 2 — 1 5 5 2 4 9 12 17 16 19 23 24

Inventory Turns 14 14 13 13 13 12 6 11 9 9 9 9 9 9 8 9

Dividends Paid $— $— $— $— $— $— $— $— $— $121 $— $60 $59 $59 $71 $70

Shares Repurchased 1.8 — — — — — — 16.4 5.2 4.2 5.2 4.4 2.3 2.0 2.8 3.2

Shares Repurchased $50 $— $— $— $— $— $— $604 $218 $146 $243 $235 $150 $150 $244 $272

Remaining Amount Authorized $416 $416 $416 $416 $416 $416 $416 $1,312 $2,594 $2,448 $2,205 $1,970 $1,820 $1,670 $1,426 $1,154

R4Q Economic Profit8 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) $(176) $(109) $(158) $415

R4Q ROIC8 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% 10.2% 15.1%

R4Q ROA8 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% 7.0% 10.6%

Worldwide Headcount3 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 84,556 84,072


LOGO

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,

In FY11 Q3 FY FY13 Q2 FY13 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14

Reconciliation of Cash Flows from Operations to Free Cash Flow

Cash Flows from Operations $390 $505 $313 $447 $352 $378 $1,208 $1,128 $936 $772 $727 $684 $680 $727 $697 $713

Capital Expenditures (200) (250) (175) (153) (134) (120) (139) (324) (382) (246) (188) (136) (136) (170) (161) (161)

Free Cash Flow $190 $255 $138 $294 $218 $258 $1,069 $804 $554 $526 $539 $548 $544 $557 $536 $552

Reconciliation of Net Income to EBITDA

Net Income (Loss) $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $(265) $495 $430 $375 $317

Interest — 1 (1) 2 1 2 4 7 14 10 11 9 10 11 13 5

Income Tax Expense 14 14 13 12 19 15 55 56 59 133 15 35 37 37 31 30

Depreciation and Amortization 150 151 151 150 158 140 188 339 313 309 309 302 312 317 307 308

EBITDA $361 $391 $309 $322 $417 $302 $730 $1,147 $905 $787 $726 $81 $854 $795 $726 $660

Reconciliation of Gross Margin to Non-GAAP Gross Margin &

Gross Profit to Non-GAAP Gross Profit

Gross Profit $437 $475 $410 $469 $541 $648 $977 $1,472 $1,193 $1,059 $1,061 $1,050 $1,088 $1,141 $1,060 $1,029

Acquisition-Related Fair Value Adjustments — — — — — — 91 — — — — — — — — —

Restucturing and other — — — — — — — — — — — — 11 15 16 10

Amortization of Intangibles — — — — — — 9 39 38 38 38 35 36 40 39 39

Non-GAAP Gross Profit $437 $475 $410 $469 $541 $648 $1,077 $1,511 $1,231 $1,097 $1,099 $1,085 $1,135 $1,196 $1,115 $1,078

Revenue $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 $3,703 $3,651

Gross Margin 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% 28.6% 28.2%

Non-GAAP Gross Margin 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% 30.1% 29.5%

Reconciliation of Net Income (Loss) to Non-GAAP Net Income

Net Income (Loss) $197 $225 $146 $158 $239 $145 $483 $745 $519 $335 $391 $(265) $495 $430 $375 $317

Acquisition-Related Expense — — 10 10 14 14 34 — — — — 7 13 — — —

Litigation — — — 25 7 — — — — — — 681 13 25 13 13

Charges Related to Flooding, Net — — — — — 199 15 — — — — — — — — —

Acquisition-Related Fair Value Adjustments — — — — — — 91 — — — — — — — — —

Amortization of Intangibles — — — — — — 12 51 49 49 49 46 47 51 50 47

Restructuring and other — — — — — — — 80 26 41 74 8 11 26 28 32

Insurance Recovery — — — — — — — — — — — — (65) — — —

Write-off of debt issuance costs — — — — — — — — — — — — — — 4 —

Intangible asset impairment — — — — — — — — — — — — — — — 36

Tax Impact — — — — — — (16) (4) — 88 — — — — — —

Non-GAAP Net Income $197 $225 $156 $193 $260 $358 $619 $872 $594 $513 $514 $477 $514 $532 $470 $445

EPS $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 $1.55 $1.32

Non-GAAP EPS $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 $1.94 $1.85

Diluted Shares Outstanding 234 235 236 237 237 237 246 260 252 246 245 236 242 243 242 241

Non-GAAP Diluted Shares Outstanding6 234 235 236 237 237 237 246 260 252 246 245 243 242 243 242 241


LOGO

Non-GAAP Financial Measures

Economic Profit: Economic profit (EP) is a non-GAAP financial measure defined as net operating profit after taxes less the value of invested capital multiplied by the weighted average cost of capital, where net operating profit after taxes is defined as income from operations minus tax expense and invested capital is defined as the sum of current debt, long-term debt and equity. Management uses EP to evaluate business performance and allocate resources, and it is a component in determining management’s incentive compensation. Management believes EP provides additional perspective to investors about financial returns generated by the business and represents profit generated over and above the cost of capital used by the business to generate that profit.

In millions Q1 Q3 FY13 Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4

FY14

Reconciliation of Operating Income (Loss) to

R4Q Economic Profit

Operating Income (Loss) $319 $473 $441 $293 $211 $240 $158 $172 $259 $162 $542 $808 $592 $478 $417 $(221) $542 $478 $419 $352

Income Tax Provision (29) (42) (40) (27) (14) (14) (13) (12) (19) (15) (55) (56) (59) (133) (15) (35) (37) (37) (31) (30)

Net Operating Profit After Taxes 290 431 401 266 197 226 145 160 240 147 487 752 533 345 402 (256) 505 441 388 322

R4Q Net Operating Profit After Taxes 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 1,078 1,656

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) (1,236) (1,241)

R4Q Economic Profit $484 $786 $826 $714 $484 $213 $92 $113 $15 $(83) $542 $801 $976 $884 $(59) $(176) $(109) $(158) $415

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.