Western Digital Corp. (NASDAQ: WDC) today reported revenue of
$3.5 billion and a net loss of $351 million, or $1.34 per share,
for its fourth fiscal quarter ended July 1, 2016. On a non-GAAP
basis, fourth quarter net income was $208 million, or $0.79 per
share. In the year-ago quarter, the company reported revenue of
$3.2 billion and net income of $220 million, or $0.94 per share.
Non-GAAP net income in the year-ago quarter was $356 million, or
$1.51 per share.
The company generated $355 million in cash from operations
during the fourth fiscal quarter of 2016, ending with total cash
and cash equivalents of $8.2 billion. On May 4, 2016, the company
declared a cash dividend of $0.50 per share of its common stock,
which was paid to shareholders on July 15, 2016.
For fiscal 2016, the company achieved revenue of $13.0 billion
and net income of $257 million, or $1.06 per share, compared to
fiscal 2015 revenue of $14.6 billion and net income of $1.5
billion, or $6.18 per share. On a non-GAAP basis, fiscal 2016 net
income was $1.2 billion, or $5.09 per share, compared to fiscal
2015 net income of $1.8 billion, or $7.76 per share. The company
generated $2.0 billion in cash from operations during the 2016
fiscal year and it returned $524 million in dividends and share
repurchases combined.
“Fiscal 2016 was a transformative year for our company and we
are pleased by our customers’ response to the new Western Digital,”
said Steve Milligan, chief executive officer. “With the combination
of SanDisk and our WD and HGST subsidiaries, we are well-positioned
to capture global opportunities through our full portfolio of
products for data center, client device and client solution end
markets. As we begin a new fiscal year, we remain focused on
execution and realizing the benefits of our acquisitions while at
the same time creating innovative solutions for the market.”
The investment community conference call to discuss these
results will be broadcast live at 2 p.m. Pacific/5 p.m. Eastern via
webcast today. The live and archived conference call/webcast can be
accessed online at investor.wdc.com. A quarterly fact sheet
including the company’s guidance for the first fiscal quarter 2017
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 for
international callers. The required passcode is 46180701.
About Western Digital
Western Digital is an industry-leading provider of storage
technologies and solutions that enable people to create, leverage,
experience and preserve data. The company addresses ever-changing
market needs by providing a full portfolio of compelling,
high-quality storage solutions with customer-focused innovation,
high efficiency, flexibility and speed. Our products are marketed
under the HGST, SanDisk 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 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 fiscal quarter ended July 1, 2016;
expectations regarding the company’s transformation, growth
opportunities and strategy execution; and integration activities
and the realization of the benefits of the company’s acquisitions.
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 fiscal quarter ended
July 1, 2016 included in this press release represent the most
current information available to management. The company’s actual
results when disclosed in its Annual Report on 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 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: volatility in global economic conditions; business
conditions and growth in the storage ecosystem; impact of
competitive products and pricing; market acceptance and cost of
commodity materials and specialized product components; actions by
competitors; unexpected advances in competing technologies; our
development and introduction of products based on new technologies
and expansion into new data storage markets; risks associated with
acquisitions, mergers and joint ventures; difficulties or delays in
manufacturing; and other risks and uncertainties listed in the
company’s filings with the Securities and Exchange Commission (the
“SEC”), including the company’s and SanDisk Corporation’s Forms
10-Q filed with the SEC on May 9, 2016 and May 2, 2016,
respectively, 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, WD, the HGST logo, SanDisk and G-Technology are
registered trademarks or trademarks of Western Digital Corporation
or its affiliates in the U.S. and/or other countries. Other
trademarks, registered trademarks, and/or service marks, indicated
or otherwise, are the property of their respective owners.
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (in
millions; unaudited) July 1, July 3,
2016 2015 ASSETS Current assets:
Cash and cash equivalents $ 8,151 $ 5,024 Short-term investments
227 262 Accounts receivable, net 1,461 1,532 Inventories 2,129
1,368 Other current assets 616 331 Total current
assets 12,584 8,517 Property, plant and equipment, net 3,508 2,965
Notes receivable and investments in Flash Ventures 1,171 - Goodwill
9,951 2,766 Other intangible assets, net 5,034 332 Other
non-current assets 629 601 Total assets $ 32,877 $
15,181
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $ 1,888 $ 1,881
Accounts payable to related parties 168 - Accrued expenses 995 470
Accrued compensation 392 330 Accrued warranty 172 150 Revolving
credit facility - 255 Bridge loan 2,995 - Current portion of
long-term debt 339 156 Total current liabilities
6,949 3,242 Long-term debt 13,660 2,156 Other liabilities
1,108 564 Total liabilities 21,717 5,962 Total shareholders'
equity 11,160 9,219 Total liabilities and
shareholders' equity $ 32,877 $ 15,181
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts; unaudited)
Three Months Ended Years Ended July
1, July 3, July 1, July 3,
2016 2015 2016
2015 Revenue, net $ 3,495 $
3,191 $ 12,994 $ 14,572 Cost of revenue 2,674
2,261 9,559 10,351 Gross profit
821 930 3,435
4,221 Operating expenses: Research and development 484 381
1,617 1,646 Selling, general and administrative 400 190 997 788
Employee termination, asset impairment and other charges 117
104 340 176 Total
operating expenses 1,001 675
2,954 2,610 Operating income (loss) (180 ) 255
481 1,611 Interest and other expense, net (290 ) (8 )
(313 ) (34 ) Income (loss) before income taxes (470 )
247 168 1,577 Income tax expense (benefit) (119 ) 27
(89 ) 112 Net income (loss) $ (351 ) $
220 $ 257 $ 1,465 Income (loss) per
common share: Basic $ (1.34 ) $ 0.95 $ 1.08 $ 6.31
Diluted $ (1.34 ) $ 0.94 $ 1.06 $ 6.18
Weighted average shares outstanding: Basic 261
231 239 232 Diluted
261 235 242 237
WESTERN DIGITAL CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions;
unaudited) Three Months Ended Years
Ended July 1, July 3, July 1, July
3, 2016 2015 2016 2015
Operating Activities Net income (loss) $ (351) $ 220 $ 257 $
1,465 Adjustments to reconcile net income to net cash provided by
operations: Depreciation and amortization 420 250 1,154 1,114
Stock-based compensation 70 45 191 162 Deferred income taxes (132)
19 (149) 28 Gain from insurance recovery - - - (37) Loss on
disposal of assets 8 3 22 17 Amortization of debt discount and
issuance costs 36 - 36 - Convertible debt activity, net 58 - 58 -
Non-cash portion of employee termination, asset 1 74 36 86
impairment and other charges Other non-cash operating activities,
net 11 - 11 - Changes in operating assets and liabilities, net 234
(123) 367 (593) Net cash provided by operating activities 355 488
1,983 2,242
Investing Activities Purchases of
property, plant and equipment (151) (156) (584) (612) Note
receivable with Flash Ventures, net (90) - (90) - Acquisitions, net
of cash acquired (9,835) (10) (9,835) (257) Purchases of
investments (143) (170) (605) (857) Proceeds from sales and
maturities of investments 676 103 1,582 768 Strategic investments
and other, net (54) (8) (76) 5 Net cash used in investing
activities (9,597) (241) (9,608) (953)
Financing
Activities Employee stock plans, net 55 55 74 167 Settlement of
warrants (613) - (613) - Settlement of convertible debt, net
(2,202) - (2,202) - Repurchases of common stock - (198) (60) (970)
Dividends paid to shareholders (116) (116) (464) (396) Proceeds
from debt, net of issuance costs 16,709 255 16,709 255 Repayment of
debt (2,328) (31) (2,693) (125) Net cash provided by (used in)
financing activities 11,505 (35) 10,751 (1,069) Effect of changes
in foreign currency exchange rates on cash 1 - 1 - Net increase in
cash and cash equivalents 2,264 212 3,127 220 Cash and cash
equivalents, beginning of period 5,887 4,812 5,024 4,804 Cash and
cash equivalents, end of period $ 8,151 $ 5,024 $ 8,151 $ 5,024
WESTERN DIGITAL
CORPORATION GAAP TO NON-GAAP NET INCOME (LOSS)
RECONCILIATION (in millions, except per share
amounts; unaudited) Three Months
Ended Years Ended July 1, July 3, July
1, July 3, 2016 2015 2016
2015 GAAP net income (loss) $ (351 ) $ 220 $
257 $ 1,465 Non-GAAP adjustments: Amortization of acquired
intangible assets 187 28 258 163 Employee termination, asset
impairment and other charges 117 104 340 176 Acquisition-related
charges 238 - 281 3 Charges related to cost saving initiatives 57 -
143 - Convertible debt activity, net 58 - 58 - Insurance recoveries
- - - (37 ) Other (3 ) 4 37 70 Income tax adjustments (95 )
- (143 ) - Non-GAAP net income $ 208
$ 356 $ 1,231 $ 1,840 Diluted net
income (loss) per common share: GAAP $ (1.34 ) $ 0.94 $ 1.06
$ 6.18 Non-GAAP $ 0.79 $ 1.51 $ 5.09 $ 7.76
Diluted weighted average shares outstanding: GAAP
261 235 242 237
Non-GAAP 263 235 242 237
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 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.
Non-GAAP net income and Non-GAAP diluted net income per common
share are non-GAAP measures defined as net income and diluted net
income per common share, respectively, before any charges that may
not be indicative of ongoing operations, or any tax impact related
to those charges. These Non-GAAP measures exclude: amortization of
acquired intangible assets; employee termination, asset impairment
and other charges; convertible debt activity, net; charges related
to cost saving initiatives; acquisition-related charges; insurance
recoveries; other charges; and income tax adjustments.
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.
Convertible debt activity, net. We
exclude non-cash economic interest expense associated with the
convertible senior notes, the gains and losses on the conversion of
the convertible senior notes and call option, and unrealized gains
and losses related to the change in fair value of the exercise
option and call option. These charges and gains and losses do not
reflect our cash operating results or the ongoing results of our
business.
Charges related to cost saving
initiatives. In connection with the transformation of our
business, beginning in the 2nd quarter of fiscal 2016, we have
incurred 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.
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, and retention bonuses. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728006579/en/
Western Digital Corp. Investor RelationsBob
Blair949.672.7834robert.blair@wdc.comorWestern Digital Corp.
MediaJim Pascoe408.717.5950jim.pascoe@wdc.com
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