WESTERN DIGITAL CORPORATION IRVINE, Calif., April 28, 2016 /PRNewswire/ -- Western Digital(®) Corp. (NASDAQ: WDC) today reported revenue of $2.8 billion and net income of $74 million, or $0.32 per share, for its third fiscal quarter ended Apr. 1, 2016. On a non-GAAP basis, net income was $283 million, or $1.21 per share. In the year-ago quarter, the company reported revenue of $3.5 billion and net income of $384 million, or $1.63 per share. Non-GAAP net income in the year-ago quarter was $441 million, or $1.87 per share.
The company generated $485 million in cash from operations during the third fiscal quarter, ending with total cash and cash equivalents of $5.9 billion. On Feb. 10, 2016, the company declared a cash dividend of $0.50 per share of its common stock, which was paid on Apr. 15, 2016.
"We continue to manage our business effectively in a dynamic storage demand environment," said Steve Milligan, chief executive officer. "Computer usage continues to shift from PCs to mobile devices and enterprise workloads are moving increasingly to cloud-based architectures. Our strategy to become a broad-based provider of media-agnostic storage solutions anticipates these and other trends. After we complete the acquisition of SanDisk, we will be better positioned to address and capitalize on these changes and opportunities, with the storage industry's broadest set of products, a rich technology portfolio, and an experienced team in both rotating magnetic and non-volatile memory."
The company indicated that it continues to expect to complete its planned acquisition of SanDisk in the June quarter.
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. A quarterly fact sheet including our guidance for the fourth fiscal quarter 2016 will also be posted on the same website. The telephone replay number is 1-855-859-2056 in the U.S. or +1-404-537-3406 with passcode 8888801675 for international callers.
About Western Digital
Founded in 1970, Western Digital Corp. (NASDAQ: WDC), Irvine, Calif., is an industry-leading developer and manufacturer of storage solutions that enable people to create, manage, experience and preserve digital content. Western Digital Corporation ("Western Digital") is responding to changing market needs by providing a full portfolio of compelling, high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to OEMs, distributors, resellers, cloud infrastructure providers and consumers. Financial and investor information is available on the company's Investor Relations website at investor.wdc.com.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding the proposed acquisition of SanDisk Corporation ("SanDisk") (including financing of the proposed transaction and the benefits, results, effects and timing of a transaction), all statements regarding Western Digital's (and Western Digital's and SanDisk's combined) expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, and statements containing the use of forward-looking words, such as "may," "will," "could," "would," "should," "project," "believe," "anticipate," "expect," "estimate," "continue," "potential," "plan," "forecast," "approximate," "intend," "upside," and the like, or the use of future tense. Statements contained herein concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth of Western Digital (and the combined businesses of Western Digital and SanDisk), together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of Western Digital based upon currently available information. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions.
Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results may differ materially from Western Digital's expectations as a result of a variety of factors, including, without limitation, those discussed below. These forward-looking statements are based upon management's current expectations and include known and unknown risks, uncertainties and other factors, many of which Western Digital is unable to predict or control, that may cause actual results, performance or plans to differ materially from those expressed or implied by such forward-looking statements, including: volatility in global economic conditions; business conditions and growth in the storage ecosystem; pricing trends and fluctuations in average selling prices; the availability and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; the development and introduction of products based on new technologies and expansion into new data storage markets; and other risks and uncertainties listed in the company's filings with the Securities and Exchange Commission (the "SEC"), including Western Digital's most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and Western Digital undertakes no obligation to update these forward-looking statements to reflect new information or events.
This document contains financial measures defined as non-GAAP by the SEC. We believe that certain non-GAAP financial measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) measures, are useful because that information is an appropriate measure for evaluating our operating performance. Non-GAAP information is used to evaluate business performance and management's effectiveness. These measures should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures may not be calculated in the same manner by all companies and therefore may not be comparable.
Risks and uncertainties related to the proposed merger include, but are not limited to, potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the merger, uncertainties as to the timing of the merger, the possibility that the closing conditions to the proposed merger may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant a necessary approval, adverse effects on Western Digital's stock price resulting from the announcement or completion of the merger, competitive responses to the announcement or completion of the merger, costs and difficulties related to the integration of SanDisk's businesses and operations with Western Digital's businesses and operations, the inability to obtain, or delays in obtaining, cost savings and synergies from the merger, uncertainties as to whether the completion of the merger or any transaction will have the accretive effect on Western Digital's earnings or cash flows that it expects, unexpected costs, liabilities, charges or expenses resulting from the merger, litigation relating to the merger, the inability to retain key personnel, and any changes in general economic and/or industry-specific conditions. In addition to the factors set forth above, other factors that may affect Western Digital's or SanDisk's plans, results or stock price are set forth in Western Digital's and SanDisk's respective filings with the SEC, including Western Digital's and SanDisk's most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and Western Digital's most recent registration statement on Form S-4 referenced below. Many of these factors are beyond Western Digital's and SanDisk's control. Western Digital and SanDisk caution investors that any forward-looking statements made by Western Digital or SanDisk are not guarantees of future performance. Neither Western Digital nor SanDisk intend, or undertake any 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.
Important Additional Information and Where to find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities. In connection with the proposed merger, Western Digital filed a registration statement on Form S-4 with the SEC on Dec. 11, 2015, as amended by Amendment No. 1, dated Jan. 27, 2016 and by Amendment No. 2, dated Feb. 5, 2016, which was declared effective by the SEC on Feb. 5, 2016, and Western Digital filed the definitive proxy statement/prospectus on Feb. 5, 2016. Western Digital and SanDisk began to mail the definitive joint proxy statement/prospectus to their respective shareholders on Feb. 5, 2016. This material is not a substitute for the joint proxy statement/prospectus or registration statement or for any other document that Western Digital or SanDisk may file with the SEC and send to Western Digital's and/or SanDisk's shareholders in connection with the proposed merger. INVESTORS AND SECURITY HOLDERS OF WESTERN DIGITAL AND SANDISK ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the joint proxy statement/prospectus as well as other filings containing information about Western Digital and SanDisk, without charge, at the SEC's website, http://www.sec.gov. Copies of the documents filed with the SEC by Western Digital will be available free of charge on Western Digital's website at http://www.wdc.com. Copies of the documents filed with the SEC by SanDisk will be available free of charge on SanDisk's website at http://www.sandisk.com.
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.
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
Apr. 1, July 3,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash
equivalents $5,887 $5,024
Short-term
investments 146 262
Accounts
receivable, net 1,254 1,532
Inventories 1,227 1,368
Other current
assets 226 331
Total current
assets 8,740 8,517
Property, plant and equipment, net 2,687 2,965
Goodwill 2,766 2,766
Other intangible assets, net 268 332
Other non-current assets 486 601
--- ---
Total assets $14,947 $15,181
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,571 $1,881
Accrued expenses 579 470
Accrued
compensation 282 330
Accrued warranty 146 150
Revolving credit
facility - 255
Current portion
of long-term
debt 203 156
Total current
liabilities 2,781 3,242
Long-term debt 2,000 2,156
Other liabilities 557 564
--- ---
Total
liabilities 5,338 5,962
Total shareholders' equity 9,609 9,219
----- -----
Total
liabilities
and
shareholders'
equity $14,947 $15,181
======= =======
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts; unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Apr. 1, Apr. 3, Apr. 1, Apr. 3,
2016 2015 2016 2015
---- ---- ---- ----
Revenue, net $2,822 $3,550 $9,499 $11,381
Cost of revenue 2,069 2,518 6,885 8,090
----- ----- ----- -----
Gross profit 753 1,032 2,614 3,291
Operating expenses:
Research and development 359 402 1,133 1,265
Selling, general and
administrative 166 199 565 583
Charges related to
arbitration award - - 32 15
Employee termination,
asset impairment and
other charges 140 10 223 72
Total operating
expenses 665 611 1,953 1,935
--- --- ----- -----
Operating income 88 421 661 1,356
Net interest and other (8) (9) (23) (26)
Income before income taxes 80 412 638 1,330
Income tax expense 6 28 30 85
Net income $74 $384 $608 $1,245
=== ==== ==== ======
Income per common share:
Basic $0.32 $1.66 $2.62 $5.34
Diluted $0.32 $1.63 $2.60 $5.23
Weighted average shares outstanding:
Basic 233 231 232 233
Diluted 234 236 234 238
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Apr. 1, Apr. 3, Apr. 1, Apr. 3,
2016 2015 2016 2015
---- ---- ---- ----
Operating Activities
Net income $74 $384 $608 $1,245
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and
amortization 246 285 734 864
Stock-based
compensation 42 37 121 117
Deferred income taxes (32) (22) (17) 9
Gain from insurance
recovery - - - (37)
Loss on disposal of
assets 7 2 13 14
Non-cash portion of
employee termination,
asset impairment and
other charges 18 (7) 36 12
Changes in operating
assets and
liabilities, net 130 5 133 (470)
Net cash provided by
operating
activities 485 684 1,628 1,754
--- --- ----- -----
Investing Activities
Purchases of property, plant and equipment (133) (150) (433) (456)
Acquisitions, net of cash acquired - (241) - (247)
Purchases of investments (54) (92) (462) (687)
Proceeds from sales and maturities of investments 641 35 907 665
Proceeds from sale of property, plant and equipment - - - 7
Other investing activities, net (11) (10) (23) 6
Net cash provided by
(used in) investing
activities 443 (458) (11) (712)
--- ---- --- ----
Financing Activities
Employee stock plans, net 14 48 17 112
Repurchases of common stock - (240) (60) (772)
Dividends paid to shareholders (116) (93) (347) (280)
Repayment of debt (302) (31) (364) (94)
---- --- ---- ---
Net cash used in
financing
activities (404) (316) (754) (1,034)
---- ---- ---- ------
Net increase (decrease) in cash and cash equivalents 524 (90) 863 8
Cash and cash equivalents, beginning of period 5,363 4,902 5,024 4,804
----- ----- ----- -----
Cash and cash equivalents, end of period $5,887 $4,812 $5,887 $4,812
====== ====== ====== ======
WESTERN DIGITAL CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(in millions, except per share amounts; unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Apr. 1, Apr. 3, Apr. 1, Apr. 3,
2016 2015 2016 2015
---- ---- ---- ----
GAAP net income $74 $384 $608 $1,245
Non-GAAP adjustments:
Amortization of
acquired intangible
assets 22 44 71 135
Employee termination,
asset impairment and
other charges 140 10 223 72
Charges related to
cost saving
initiatives 49 - 86 -
Charges related to
arbitration award - - 32 15
Acquisition-related
charges 16 3 43 3
Insurance recoveries - - - (37)
Other charges 2 - 8 51
Income tax
adjustments (20) - (48) -
Non-GAAP net income $283 $441 $1,023 $1,484
==== ==== ====== ======
Diluted net income per common share:
GAAP $0.32 $1.63 $2.60 $5.23
Non-GAAP $1.21 $1.87 $4.37 $6.24
Weighted average shares outstanding:
Diluted 234 236 234 238
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 net
income and Non-GAAP diluted net
income per common share ("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. Western Digital
Corporation believes the
presentation of 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.
These Non-GAAP measures exclude
amortization of acquired intangible
assets; employee termination, asset
impairment and other charges;
charges related to cost saving
initiatives; charges related to
arbitration award; acquisition-
related charges; insurance
recoveries; other charges; and
income tax adjustments. We exclude
these items for purposes of
calculating these Non-GAAP
measures to facilitate a more
meaningful evaluation of our
current operating performance and
comparisons to our operating
performance in prior periods.
As described above, we exclude the
following items from our Non-GAAP
measures:
Amortization of acquired intangible
assets. We incur expenses from the
amortization of acquired intangible
assets over their economic lives.
Such charges are significantly
impacted by the timing and
magnitude of our acquisitions and
any related impairment charges.
Employee termination, asset
impairment and other charges. From
time-to-time, in order to realign
our operations with anticipated
market demand or to achieve cost
synergies from the integration of
acquisitions, we may terminate
employees and/or restructure our
operations. From time-to-time,
we may also incur charges from the
impairment of intangible assets and
other long-lived assets. These
charges (including any reversals of
charges recorded in prior periods)
are inconsistent in amount and
frequency and are not a part of the
ongoing operation of our business.
------------------------------------
Charges related to cost saving
initiatives. In connection with
the transformation of our business,
starting in the 2nd quarter of
fiscal 2016, we incur charges
related to cost saving initiatives
which do not qualify for special
accounting treatment as exit or
disposal activities. These charges,
which are not part of the ongoing
operation of our business,
primarily relate to costs
associated with rationalizing our
channel partners or vendors,
transforming our information
systems infrastructure, integrating
our product roadmap, and
accelerated depreciation on assets.
---
Charges related to arbitration
award. In relation to an
arbitration award for claims
brought against the Company by
Seagate Technology LLC, which was
satisfied in October 2014, and the
related dispute over the
calculation of post-award
interest, we have recorded loss
contingencies. The resulting
expense is inconsistent in amount
and frequency.
---
Acquisition-related charges. In
connection with our business
combinations, we incur expenses
which we would not have otherwise
incurred as part of our 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,
retention bonuses, and changes to
the fair value of contingent
consideration. We may also
experience other one-time
accounting impacts in connection
with these transactions. These
charges and impacts are related to
acquisitions, are inconsistent in
amount and frequency, and have no
direct correlation to the operation
of our business.
---
Insurance recoveries. From time-
to-time, we receive insurance
recoveries related to losses or
other events which occurred in a
prior period. Such recoveries are
inconsistent in amount and
frequency.
---
Other charges. From time-to-time,
we sell investments or other assets
which are not considered strategic
or necessary to our business; are a
party to legal or arbitration
proceedings, which could result in
an expense or benefit due to
settlements, final judgments, or
accruals for loss contingencies; or
incur other charges or gains which
are not a part of the ongoing
operation of our business. The
resulting expense or benefit is
inconsistent in amount and
frequency.
---
Income tax adjustments. Income tax
adjustments reflect 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.
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