Western Digital Announces Financial Results For Third Quarter Fiscal 2015

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Apr 28, 2015, 04:15 ET

IRVINE, Calif., April 28, 2015 /PRNewswire/ -- Western Digital^® Corp. (NASDAQ: WDC) today reported revenue of $3.5 billion and net income of $384 million, or $1.63 per share, for its third fiscal quarter ended Apr. 3, 2015. On a non-GAAP basis, net income was $441 million or $1.87 per share. In the year-ago quarter, the company reported revenue of $3.7 billion and net income of $375 million, or $1.55 per share. Non-GAAP net income in the year-ago quarter was $470 million, or $1.94 per share.

The company generated $684 million in cash from operations during the third fiscal quarter, ending with total cash and cash equivalents of $4.8 billion. It utilized $240 million to repurchase 2.2 million shares of common stock. On Feb. 3, the company declared a cash dividend of $0.50 per share of its common stock, which was paid on Apr. 16.

"I am satisfied with our execution and results in light of current PC demand challenges that were largely driven by weak macro-economic conditions," said Steve Milligan, president and chief executive officer. "We delivered a solidly profitable quarter with continued strong cash generation, improved average selling price and healthy gross margins.

"We continue to carefully balance the management of short term market dynamics with a strong focus on long term value creation. This is reflected in our balanced approach to capital allocation. Fiscal year to date, we returned $1.1 billion to our shareholders in share repurchases and dividends, while continuing to invest in high growth market opportunities."

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 1-800-925-0240 in the U.S. or +1-402-998-0856 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 the company's management of short term market dynamics, its focus on long term value creation, its approach to capital allocation, and its investments. 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 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 the company's Form 10-Q filed with the SEC on Feb. 10, 2015, 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 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. 3,	Jun. 27,
			2015	2014

ASSETS

Current assets:
	Cash and cash equivalents		$ 4,812	$ 4,804
	Short-term investments		228	284
	Accounts receivable, net		1,696	1,989
	Inventories		1,322	1,226
	Other current assets		371	417
		Total current assets	8,429	8,720
Property, plant and equipment, net			3,051	3,293
Goodwill			2,745	2,559
Other intangible assets, net			400	454
Other non-current assets			551	473
		Total assets	$ 15,176	$ 15,499


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
	Accounts payable		$ 2,020	$ 1,971
	Accrued arbitration award		—	758
	Accrued expenses		503	412
	Accrued compensation		398	460
	Accrued warranty		156	119
	Current portion of long-term debt		141	125
		Total current liabilities	3,218	3,845
Long-term debt			2,203	2,313
Other liabilities			529	499
		Total liabilities	5,950	6,657
Total shareholders' equity			9,226	8,842
		Total liabilities and shareholders' equity	$ 15,176	$ 15,499

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts; unaudited)



			Three Months Ended		Nine Months Ended
			Apr. 3,	Mar. 28,	Apr. 3,	Mar. 28,
			2015	2014	2015	2014

Revenue, net			$ 3,550	$ 3,703	$ 11,381	$ 11,479
Cost of revenue			2,518	2,627	8,090	8,148
	Gross profit		1,032	1,076	3,291	3,331
Operating expenses:
	Research and development		402	418	1,265	1,235
	Selling, general and administrative		199	201	583	559
	Charges related to arbitration award		—	13	15	39
	Employee termination, asset impairment and other charges		10	25	72	59
		Total operating expenses	611	657	1,935	1,892
Operating income			421	419	1,356	1,439
	Net interest and other		(9)	(13)	(26)	(34)
Income before income taxes			412	406	1,330	1,405
Income tax provision			28	31	85	105
Net income			$ 384	$ 375	$ 1,245	$ 1,300

Income per common share:
	Basic		$ 1.66	$ 1.60	$ 5.34	$ 5.51
	Diluted		$ 1.63	$ 1.55	$ 5.23	$ 5.37

Weighted average shares outstanding:
	Basic		231	235	233	236
	Diluted		236	242	238	242

WESTERN DIGITAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)


			Three Months Ended		Nine Months Ended
			Apr. 3,	Mar. 28,	Apr. 3,	Mar. 28,
			2015	2014	2015	2014

Operating Activities
Net income			$ 384	$ 375	$ 1,245	$ 1,300
Adjustments to reconcile net income to net cash provided by operations:
	Depreciation and amortization		285	307	864	936
	Stock-based compensation		37	41	117	125
	Deferred income taxes		(22)	(27)	9	(66)
	Gain from insurance recovery		—	—	(37)	(65)
	Loss on disposal of assets		2	4	14	33
	Non-cash portion of employee termination, asset impairment and other charges		(7)	17	12	26
	Other non-cash operating activities, net		—	4	—	4
	Changes in operating assets and liabilities, net		5	(24)	(470)	(189)
		Net cash provided by operating activities	684	697	1,754	2,104

Investing Activities
Purchases of property, plant and equipment			(150)	(161)	(456)	(467)
Acquisitions, net of cash acquired			(241)	—	(247)	(823)
Purchases of investments			(92)	(470)	(687)	(470)
Proceeds from sales of investments			35	—	665	—
Proceeds from sale of property, plant and equipment			—	—	7	—
Other investing activities, net			(10)	—	6	4
		Net cash used in investing activities	(458)	(631)	(712)	(1,756)

Financing Activities
Employee stock plans, net			48	42	112	139
Repurchases of common stock			(240)	(244)	(772)	(544)
Dividends to shareholders			(93)	(71)	(280)	(189)
Proceeds from debt			—	2,492	—	2,992
Repayment of debt			(31)	(2,371)	(94)	(2,486)
		Net cash used in financing activities	(316)	(152)	(1,034)	(88)
Net increase (decrease) in cash and cash equivalents			(90)	(86)	8	260
Cash and cash equivalents, beginning of period			4,902	4,655	4,804	4,309
Cash and cash equivalents, end of period			$ 4,812	$ 4,569	$ 4,812	$ 4,569

WESTERN DIGITAL CORPORATION

GAAP TO NON-GAAP NET INCOME RECONCILIATION

(in millions, except per share amounts; unaudited)



		Three Months Ended		Nine Months Ended
		Apr. 3,	Mar. 28,	Apr. 3,	Mar. 28,
		2015	2014	2015	2014

GAAP net income		$ 384	$ 375	$ 1,245	$ 1,300
Non-GAAP adjustments:
	Amortization of intangibles	44	50	135	148
	Employee termination, asset impairment and other charges	10	25	72	59
	Charges related to arbitration award	—	13	15	39
	Acquisition-related expense	3	—	3	13
	Flood-related insurance recovery	—	—	(37)	(65)
	Other	—	7	51	22
Non-GAAP net income		$ 441	$ 470	$ 1,484	$ 1,516

Diluted net income per common share:
	GAAP	$ 1.63	$ 1.55	$ 5.23	$ 5.37
	Non-GAAP	$ 1.87	$ 1.94	$ 6.24	$ 6.26

Weighted average shares outstanding:
	Diluted	236	242	238	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. The tax effect of the aforementioned items was not material to the condensed consolidated statements of income for the three and nine month periods ended April 3, 2015 and March 28, 2014.

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SOURCE Western Digital Corp.