Western Digital Announces Financial Results For First Quarter Fiscal 2015

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Oct 28, 2014, 04:15 ET

IRVINE, Calif., Oct. 28, 2014 /PRNewswire/ -- Western Digital^® Corp. (NASDAQ: WDC) today reported revenue of $3.9 billion and net income of $423 million, or $1.76 per share, for its first fiscal quarter ended Oct. 3, 2014. On a non-GAAP basis, net income was $504 million or $2.10 per share. In the year-ago quarter, the company reported revenue of $3.8 billion and net income of $495 million, or $2.05 per share. Non-GAAP net income in the year-ago quarter was $514 million, or $2.12 per share.

The company generated $827 million in cash from operations during the September quarter, ending with total cash and cash equivalents of $5.2 billion. During the September quarter, the company utilized $223 million to repurchase 2.2 million shares of common stock. On Aug. 5, the company declared a $0.40 per common-share dividend, which was paid on Oct. 15.

"We achieved solid revenue, gross margins and EPS in the September quarter, along with continued strong cash flow generation, as the company continued its crisp execution and consistent financial performance," said Steve Milligan, president and chief executive officer of Western Digital. "We were pleased to see strength and momentum in our capacity enterprise hard drive and flash platform solutions businesses. Our client and branded products businesses were seasonally strong as expected and our performance enterprise business was steady. Overall, we believe industry dynamics are stable in terms of supply and demand and inventory levels."

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. The telephone replay number is 1-800-839-2325 in the U.S. or +1-402-998-1125 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. Its HGST and WD^® subsidiaries are long-time innovators in the storage industry. Western Digital Corporation 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. Our products are marketed under the HGST, WD and G-Technology™ 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.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning industry dynamics. 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, including the impact of continued uncertainty and volatility in global economic conditions; supply and demand conditions in the hard drive industry; uncertainties concerning the availability and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; uncertainties related to the development and introduction of products based on new technologies and expansion into new data storage markets; business conditions and growth in the various hard drive markets; pricing trends and fluctuations in average selling prices; 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 Aug. 15, 2014, to which your attention is directed. Readers are cautioned not to 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 subsequent events or circumstances.

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)

			Oct. 3,	Jun. 27,
			2014	2014

ASSETS

Current assets:
	Cash and cash equivalents		$ 5,159	$ 4,804
	Short-term investments		222	284
	Accounts receivable, net		1,915	1,989
	Inventories		1,272	1,226
	Other current assets		422	417
		Total current assets	8,990	8,720
Property, plant and equipment, net			3,202	3,293
Goodwill			2,559	2,559
Other intangible assets, net			406	454
Other non-current assets			495	473
		Total assets	$ 15,652	$ 15,499


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
	Accounts payable		$ 2,016	$ 1,971
	Accrued arbitration award		772	758
	Accrued expenses		433	412
	Accrued compensation		438	460
	Accrued warranty		134	119
	Current portion of long-term debt		125	125
		Total current liabilities	3,918	3,845
Long-term debt			2,281	2,313
Other liabilities			490	499
		Total liabilities	6,689	6,657
Total shareholders' equity			8,963	8,842
		Total liabilities and shareholders' equity	$ 15,652	$ 15,499

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts; unaudited)



			Three Months Ended
			Oct. 3,	Sept. 27,
			2014	2013

Revenue, net			$ 3,943	$ 3,804
Cost of revenue			2,794	2,705
	Gross profit		1,149	1,099
Operating expenses:
	Research and development		437	401
	Selling, general and administrative		220	132
	Charges related to arbitration award		14	13
	Employee termination, asset impairment and other charges		9	11
		Total operating expenses	680	557
Operating income			469	542
	Net interest and other		(9)	(10)
Income before income taxes			460	532
Income tax provision			37	37
Net income			$ 423	$ 495

Income per common share:
	Basic		$ 1.81	$ 2.10
	Diluted		$ 1.76	$ 2.05

Weighted average shares outstanding:
	Basic		234	236
	Diluted		240	242

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)


			Three Months Ended
			Oct. 3,	Sept. 27,
			2014	2013

Cash flows from operating activities
Net income			$ 423	$ 495
Adjustments to reconcile net income to net cash
provided by operations:
	Depreciation and amortization		289	312
	Stock-based compensation		39	42
	Deferred income taxes		10	(10)
	Gain from insurance recovery		—	(65)
	Loss on disposal of assets		4	—
	Non-cash portion of employee termination, asset
		impairment and other charges	1	7
	Changes in operating assets and liabilities, net		61	(101)
		Net cash provided by operating activities	827	680

Cash flows from investing activities
Purchases of property, plant and equipment			(160)	(136)
Acquisitions, net of cash acquired			—	(263)
Purchases of investments			(120)	—
Proceeds from sales of investments			166	—
Other investing activities, net			(12)	39
		Net cash used in investing activities	(126)	(360)

Cash flows from financing activities
Employee stock plans, net			2	7
Repurchases of common stock			(223)	(150)
Dividends to shareholders			(94)	(59)
Proceeds from debt, net of issuance costs			—	500
Repayment of debt			(31)	(58)
		Net cash provided by (used in) financing activities	(346)	240
Net increase in cash and cash equivalents			355	560
Cash and cash equivalents, beginning of period			4,804	4,309
Cash and cash equivalents, end of period			$ 5,159	$ 4,869

WESTERN DIGITAL CORPORATION

GAAP TO NON-GAAP RECONCILIATION

(in millions, except per share amounts; unaudited)



		Three Months Ended
		Oct. 3,	Sept. 27,
		2014	2013

GAAP net income		$ 423	$ 495
Non-GAAP adjustments:
	Amortization of intangibles	46	47
	Employee termination, asset impairment and other charges	9	11
	Charges related to arbitration award	14	13
	Acquisition-related expense	―	13
	Flood-related insurance recovery	―	(65)
	Other expense, net	12	―
Non-GAAP net income		$ 504	$ 514

Diluted net income per common share:
	GAAP	$ 1.76	$ 2.05
	Non-GAAP	$ 2.10	$ 2.12

Weighted average shares outstanding:
	Diluted	240	242

The table above sets forth non-GAAP net income and non-GAAP diluted net income per common share. These non-GAAP net income and diluted net income per common share measures exclude amortization of intangibles related to acquisitions, certain employee termination, asset impairment and other charges, certain charges related to an arbitration award and other charges that are unusual, non-recurring or may not be indicative of ongoing operations. The Company believes that non-GAAP net income and non-GAAP earnings per share are useful measures to investors as an alternative method for measuring the Company's earnings performance and comparing it against prior periods. The presentation of these adjusted amounts vary from numbers presented in accordance with U.S. GAAP and therefore may not be comparable to amounts reported by other companies.