Western Digital 1995 Annual Report Download

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T C
Western Digital Corporation is a
leader in information storage
management. The Company
makes hard disk drives for the
world’s leading makers of per-
sonal computers, and serves
consumer markets for replacement
and add-on data storage. The
Company is using proven technol-
ogy and production methods as it
begins the manufacture of high-
performance, high-capacity hard
drives for use in workstations,
servers and other network appli-
cations. Storage connectivity is
provided by Western Digital’s
high-performance hard drive con-
trollers and its family of host bus
controllers for SCSI, Fibre
Channel and PCI interfaces.
These products enhance data
communication between proces-
sors, storage units and peripherals.

Table of contents

  • Page 1
    ... he Company is using proven technology and production methods as it begins the manufacture of highperformance, high-capacity hard drives for use in workstations, servers and other network applications. Storage connectivity is provided by Western Digital' s high-performance hard drive controllers and...

  • Page 2
    ... ght s  . Years ended (in millions, ex cept per share and employee data) July 1, 1995 June 30, 1994 June 30, 1993 June 30, 1992 June 30, 1991 Revenues, net Gross profit Operating income (loss) N et income (loss) Earnings (loss) per share: Primary Fully diluted Working capital...

  • Page 3
    ...) Our Microcomputer Products Group posted very satisfying results, operating profitably throughout the year for the first time. T his improvement was made in concert with the conversion of the Group' s integrated circuit packaging and test plant in Malaysia to hard drive production, which required...

  • Page 4
    ... honors the establishment of quality-assurance processes throughout Western Digital, from manufacturing and marketing to such enterprise-wide services as human resources and finance, and in locations from Singapore and Malaysia to Irvine and Munich. We take it as a challenge to further improve...

  • Page 5
    Serving G lobal M arket s for I nfor mat ion St orage M anagement  . W estern Digital Products Data Storage Personal Storage Data Storage H igh Performance Storage Connectivity Input/ Output

  • Page 6
    .... Personal Computing Desktop PC Mobile PC Enterprise Computing Printers CD-ROMs Desktop/ W orkstation/ Client PC Storage/ Network/ Application Server Other Peripherals A leader in information storage management, Western Digital makes possible the most effective individual and enterprise...

  • Page 7
    ...in share of the global hard drive market, the industry' s largest. We benefited in fiscal 1995 from numerous industry awards, and widespread market recognition and acceptance of our Caviar hard drives, the industry' s best known brand. Of every ten drives we make, three are Kathryn A. Braun marketed...

  • Page 8
    ..., a medical center or a large corporation. Western Digital' s leadership position in information storage management is further enhanced by the addition of these new products. With the Company' s background in highly integrated semiconductor devices, input/ output links, software and board designs...

  • Page 9
    ... year. T he Group, headquartered in Rochester, Minnesota, has made significant strides to meet these goals. Our staff of experienced drive managers and engineers has constructed a research and development center, pilot production line and Functional Integrity Testing Laboratory (FIT Lab), and is...

  • Page 10
    ... our "virtual vertical integration" manufacturing strategy, Western Digital produced $26 in sales per dollar of property, plant and D. Scott Mercer equipment last year, more than twice the average for our industry. T he Company also doubled the merchant hard drive industry' s averages with its...

  • Page 11
    ...Caviar hard drive kits marketed through retail channels help consumers upgrade and enlarge their data storage capacities as the larger "footprints" of software programs and operating systems, such as Windows 95, consume evergreater amounts of storage capacity. Western Digital' s PCI-SCSI adapter kit...

  • Page 12
    ... . Management' s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements N otes to Consolidated Financial Statements Independent Auditors' Report Quarterly Information (unaudited) Common Stock Information 12. 16. 20. 30. 31. 32.

  • Page 13
    ... its silicon wafer manufacturing facility and entering into supply agreements with several suppliers of integrated circuits. T his resulted in an immediate reduction in manufacturing costs, which significantly improved microcomputer products gross profit margins during fiscal 1994 and 1995. T hese...

  • Page 14
    ... two percentage point decline in gross profit margin. T he improved operating results from 1993 to 1994 resulted from a 26% increase in revenues and an improvement in gross margin of approximately six percentage points. Sales of hard drive products were $1.9, $1.4, and $1.0 billion in 1995, 1994 and...

  • Page 15
    ... business with retail and distribution customers that typically purchase product in lower volumes, but at higher ASPs. T he improvements in microcomputer products gross margins were generally attributable to lower product costs resulting from the Company' s fabless manufacturing strategy implemented...

  • Page 16
    ...Capital expenditures totaled $54.8 million and were incurred primarily for the expansion of media production and the retooling of the Company' s Malaysian facility into a hard drive manufacturing site. T he Company anticipates that capital expenditures in 1996 will total approximately $125.0 million...

  • Page 17
    C on sol i d at ed S t at em en t s of O per at i on s  . (in thousands, ex cept per share amounts) July 1, 1995 Years ended June 30, 1994 June 30, 1993 Revenues, net Costs and expenses: Cost of revenues Research and development Selling, general and administrative Total ...

  • Page 18
    ... Preferred stock, $.10 par value; Authorized-5,000 shares; Outstanding-N one Common stock, $.10 par value; Authorized-95,000 shares; Outstanding-50,482 shares in 1995 and 44,895 shares in 1994 Additional paid-in capital Retained earnings Treasury stock-common shares at cost; 805 shares in 1995 Total...

  • Page 19
    ... Balance at June 30, 1994 Exercise of stock options ESPP shares issued (N ote 7) Common stock issued upon conversion of debentures (N ote 4) Income tax benefit from stock options exercised (N ote 6) Purchase of treasury stock (N ote 7) N et income Balance at July 1, 1995 29,212 376 5,750 35,338...

  • Page 20
    ...s (in thousands) July 1, 1995 Years ended June 30, 1994 ... effects from the sale of facility (N ...stock offering, net (N ote 7) Exercise of stock options and warrants, including tax benefit Proceeds from ESPP shares issued Redemption of convertible debentures (N ote 4) Repurchase of common stock...

  • Page 21
    ... A P Western Digital Corporation ("Western Digital" or the "Company") has prepared...Company designs, manufactures and sells hard drives and microcomputer products to personal computer manufacturers and resellers throughout the world. T he Company performs ongoing credit evaluations of its customers...

  • Page 22
    ... weighted average number of shares and dilutive common stock equivalents for each period presented. Fully diluted earnings per share additionally reflects dilutive shares assumed to be issued upon conversion of the Company' s convertible subordinated debentures. Loss per share amounts are based upon...

  • Page 23
    ... Machinery and equipment Furniture and fixtures ...Company. Concurrent with the sale, the Company entered into a supply contract with Motorola under which Motorola is supplying silicon wafers to Western Digital through December 1995. N  4 â€' D  Senior D ebt During 1994, the Company...

  • Page 24
    ...Company a license. Foreign Ex change C ontracts T he Company enters into short-...Leases T he Company leases certain facilities and equipment under long-term, noncancelable operating leases which expire at various dates through 2000. Rental expense under these leases, including month-to-month rentals...

  • Page 25
    ...operating leases as of July 1, 1995 are (in thousands): 1996 1997 1998 1999 2000 Total future minimum rental payments Legal C laims $ 19,029 13,193 11,334 9,916 8,573 $ 62,045 T he Company was sued by Amstrad plc ("Amstrad") in December 1992 under a complaint that alleges that hard drives supplied...

  • Page 26
    ... are as follows: (in thousands) United States International Income (loss) before income taxes 1995 $ 26,421 118,612 $ 145,033 1994... Current United States International State Deferred, net United States International Additional paid-in capital from benefit of stock options exercised Provision ...

  • Page 27
    ... assets Deferred tax liabilities: Depreciation Leases All other Total deferred tax liabilities...share, fully diluted), $27.4 million ($.60 per share, fully diluted) and $8.6 million ($.27 per share, fully diluted) in 1995...undistributed earnings from international subsidiaries at July 1, 1995 were $206...

  • Page 28
    ..., the Company issued 7,618,711 shares of its common stock in a public common stock offering. Proceeds from the offering, net of commissions, and other related expenses totaling $4.2 million, were $73.3 million. Stock O ption Plans Western Digital' s Employee Stock Option Plan ("Employee Plan") is...

  • Page 29
    ... expire in 1999. Employee Stock Purchase Plan During 1994, the Company implemented an employee stock purchase plan ("ESPP") in accordance with Section 423 of the Internal Revenue Code whereby eligible employees may authorize payroll deductions of up to 10% of their salary to purchase shares of the...

  • Page 30
    ... July 1, 1995, the Company repurchased 805,000 shares of its common stock in the open market at a cost of $10.8 million. N  8 â€' B S I O Western Digital operates in one industry segment-the design, manufacture and marketing of hard drives, integrated circuits and board-level products...

  • Page 31
    ... d epen d en t A u d i t or s' R epor t  . T he Board of Directors Western Digital Corporation: We have audited the accompanying consolidated balance sheets of Western Digital Corporation as of July 1, 1995 and June 30, 1994, and the related consolidated statements of operations...

  • Page 32
    ...au d i t ed )  . (in thousands, ex cept per share amounts) First Second T hird Fourth 1995 Revenues, net Gross profit Operating income N et income Primary earnings per share Fully diluted earnings per share 1994 Revenues, net Gross profit Operating income (loss) N et income...

  • Page 33
    ... om m on S t ock I n f or m at i on  . Western Digital' s common stock is listed on the N ew York Stock Exchange ("N YSE"). T he approximate number of holders of record of common stock of the Company as of September 1, 1995 was 3,800. T he Company has not paid any cash dividends...

  • Page 34
    ... and Secretary Scott T. H ughes Irwin Federman General Partner U.S. Venture Partners Venture Capital Investments Vice President, H uman Resources David W. Schafer Vice President, Worldwide Sales André R. H orn Retired, Former Chairman of the Board Joy Manufacturing Company Capital Equipment for...

  • Page 35
    ... Western Digital (S.E. Asia) Pte Ltd Singapore Western Digital Taiwan Co., Ltd. Taipei, Taiwan R.O.C. Western Digital (U.K.) Limited Leatherhead, Surrey, England M F Santa Clara, California Kuala Lumpur, Malaysia Singapore T A R American Stock Transfer & Trust Company 40 Wall Street, 46th Floor...