Western Digital 2006 Annual Report Download

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Table of contents

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  • Page 7
    ... of Incorporation or Organization) 33-0956711 (I.R.S. Employer Identification No.) 20511 Lake Forest Drive Lake Forest, California (Address of principal executive offices) 92630 (Zip Code) Registrant's telephone number, including area code: (949) 672-7000 Securities registered pursuant to...

  • Page 8
    ... corporation that operates as the parent company of our hard drive business, Western Digital Technologies, Inc., which was formed in 1970. Our principal executive offices are located at 20511 Lake Forest Drive, Lake Forest, California 92630. Our telephone number is (949) 672-7000 and our web site...

  • Page 9
    ...are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in Item 1A of this Annual Report on Form 10-K, as well as our other reports filed with the Securities and Exchange Commission ("SEC"). You...

  • Page 10
    .... We also sell our hard drives as stand-alone storage products and integrate them into our own WD-branded external storage products for purposes such as personal data backup and portable or expanded storage of digital music, photography, video, and other data. Hard drives provide non-volatile data...

  • Page 11
    ... Annual Report on Form 10-K. PC Market The PC market consists of the overall hard drive market for desktop and notebook computers. Consumers use PCs in homes, businesses and multi-user networks. PCs use software applications for word processing, spreadsheet, desktop publishing, database management...

  • Page 12
    ...digital audio and video content are 1.8-inch form factors. External Hard Drive Market Most new PC systems include high-speed external interfaces, such as FireWireTM, USB 2.0 or Ethernet network connections that permit users to supplement the storage space of their PC systems or home and small office...

  • Page 13
    ...and super computing in life science, oil and gas and similar industries, business records management, e-mail, file serving, web serving, near-line storage, medical records, engineering data management, video broadcasting and video security. Consumer Electronics Products We offer hard drives designed...

  • Page 14
    ...emitted during hard drive operation - commonly expressed in decibels. All of our hard drive products employ similar technology. The main components of the hard drive are a head disk assembly and a printed circuit board. The head disk assembly includes heads, media (disks), head positioning mechanism...

  • Page 15
    ... applications for hard drives and fast-growing new market opportunities. For an additional discussion of risks related to technological innovations, see Item 1A of this Annual Report on Form 10-K. Sales and Distribution We sell our products globally to OEMs, distributors and retailers. OEMs purchase...

  • Page 16
    ...with hard drive suppliers competing for sales to a limited number of major customers. Hard drives manufactured by different competitors are highly substitutable due to the industry mandate of technical form, fit and function standards. Hard drive manufacturers compete on the basis of product quality...

  • Page 17
    ...to five years from the date of manufacture depending on the type of product. Our warranty obligation is generally limited to repair or replacement of the hard drive. We have engaged third parties in Australia, Brazil, Canada, China, Germany, Hungary, India, Korea, Russia, Singapore, Thailand and the...

  • Page 18
    ...the assets of Read-Rite Corporation, formerly one of our suppliers of heads, including its wafer fabrication equipment in Fremont, California and its slider fabrication facility in Bang Pa-In, Thailand. We upgraded and enhanced these facilities to meet the demands of new technologies consistent with...

  • Page 19
    ... Company's press release on November 2, 2007, Mr. Coyne will become our President and Chief Executive Officer and Mr. Shakeel will relinquish the role of Chief Executive Officer but will continue to be employed by us as Special Advisor to the Chief Executive Officer. Mr. Coyne has joined our Board...

  • Page 20
    ... as Chief Executive Officer. He has served as Chairman of the Board since November 2001. Mr. Shakeel joined us in 1985 and has served in various executive capacities. From February 2000 until April 2001, he served as Executive Vice President and General Manager of Hard Disk Drive Solutions, from...

  • Page 21
    ... the prices our customers are willing to pay for new products. Historically, the industry has experienced periods of increased areal density growth rates. Although in recent years there has been a decrease in the rate of areal density growth, if industry conditions return to periods of increased...

  • Page 22
    ... drive market typically require higher areal densities than previous product generations, posing formidable technical and manufacturing challenges. Higher areal densities require existing head and media technology to be improved or new technology developed to accommodate more data on a single disk...

  • Page 23
    ...only from a limited number of suppliers. Some of this equipment uses materials that at times could be in short supply. If these materials are not available, or are not available in the quantities we require for our manufacturing and testing processes, our ability to manufacture our products could be...

  • Page 24
    ... a new pandemic influenza in Asia Pacific, could impair the total volume of hard drives that we are able to manufacture. Our head manufacturing operations include a single wafer fabrication facility in Fremont, California and a single head gimbal/head stack assembly facility in Bang Pa-In, Thailand...

  • Page 25
    ... service, price and a broad product portfolio. If we fail to: • maintain overall quality of products on new and established programs; • produce sufficient quantities of products at the capacities our customers demand while managing the integration of new and established technologies; • develop...

  • Page 26
    ...our technology, quality, service and support, our distribution customers may favor our competitors, and our operating results could suffer. We also face significant risk in the distribution market for hard drives. If the distribution market weakens as a result of a slowing PC growth rate, technology...

  • Page 27
    ... with these companies. If we do not successfully expand into new hard drive markets, our business may suffer. To remain a significant supplier of hard drives, we will need to offer a broad range of hard drive products to our customers. We currently offer a variety of 3.5-inch hard drives for the...

  • Page 28
    ... the mobile market, our business may suffer. We began shipping 2.5-inch form factor hard drives for the mobile market during calendar year 2004. Although many of our customers who purchase 3.5-inch form factor hard drives also purchase the 2.5-inch form factor drives, the markets are characterized...

  • Page 29
    ... affected. We face litigation risks relating to our historical stock option grants that could have a material adverse effect on the operation of our business. Several purported derivative actions were filed nominally on our behalf against certain of our current and former directors and officers...

  • Page 30
    ... property rights, we consider elements of our product designs and processes to be proprietary and confidential. We rely upon employee, consultant and vendor nondisclosure agreements and contractual provisions and a system of internal safeguards to protect our proprietary information. However, any of...

  • Page 31
    ... from a single or a limited number of suppliers; • competition and consolidation in the data storage industry; • seasonal and other fluctuations in demand for PCs often due to technological advances; and • availability and rates of transportation. Rapidly changing conditions in the hard drive...

  • Page 32
    ... brought against companies after periods of volatility in the market price of their securities. A number of such suits have been filed against us in the past, and should any new lawsuits be filed, such matters could result in substantial costs and a diversion of resources and management's attention...

  • Page 33
    ...center. We also lease office space in various other locations throughout the world primarily for sales and technical support. We own a manufacturing facility in Kuala Lumpur, Malaysia of approximately 484,000 square feet, which is used for assembly of hard drives, printed circuit boards and HSAs. We...

  • Page 34
    ... of fiduciary duty, violations of the California Corporations Code, abuse of control, gross mismanagement, waste of corporate assets, accounting, rescission, and constructive trust in connection with our option granting practices. We have joined the other defendants in filing a motion to dismiss the...

  • Page 35
    ...information about repurchases by us of our common stock during the quarter ended June 30, 2006: Total Number of Shares Purchased Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Value of Shares that May Yet be Purchased Under the Program(2) Average Price Paid per Share...

  • Page 36
    ... of the federal securities laws. You are urged to carefully review our description and examples of forward-looking statements included earlier in this Annual Report on Form 10-K immediately prior to Part I, under the heading "Forward Looking Statements." Forward-looking statements are subject to...

  • Page 37
    ... period. These grants were made by unanimous written consent of the Compensation Committee of our Board. • The Special Committee concluded that the annual employee stock option grant made in November 1999 was intentionally dated with hindsight at a low price. While improper, no evidence was found...

  • Page 38
    ...("USB") thumb drives. We also sell our hard drives as stand-alone storage products and integrate them into our own WD-branded external storage products for uses such as personal data backup and portable or expanded storage of digital music, photography, video, and other data. Hard drives provide non...

  • Page 39
    ... applications to manage multimedia content; and • the increasing use of broadband Internet, including content downloaded from the Internet onto PC hard drives. We believe several other factors affect the rate of PC unit growth, including maturing PC markets in North America and Western Europe...

  • Page 40
    ...; and internal hard drives that are packaged as an installation kit with the WD brand for retail store sales. We believe the worldwide demand for external hard drives is growing, spurred by consumers' and businesses' expanding use of digital content in the form of photographs, video and music - all...

  • Page 41
    ... to the development of new product platforms in support of our entry into new markets, expenditures for advanced head technologies and an increase of $18 million in employee incentive compensation programs, of which $12 million related to the adoption of Statement of Financial Accounting Standard...

  • Page 42
    ... development of new product platforms in support of our entry into new markets, expenditures for advanced head technologies and an increase of $27 million in employee incentive compensation programs. R&D expense in 2004 included a $26 million charge for acquired in-process research and development...

  • Page 43
    ... cycle, which measures how quickly a company can convert its products into cash through sales. The following table summarizes the cash conversion cycle for the three years ended 2006: June 30, 2006 Years Ended July 1, July 2, 2005 2004 Days sales outstanding ...Days in inventory ...Days payables...

  • Page 44
    ... assets purchased to upgrade our head manufacturing capabilities, increased desktop and mobile hard drive production capabilities and for the normal replacement of existing assets. Additionally, during 2006, we purchased our previously leased head wafer manufacturing facility in Fremont, California...

  • Page 45
    ... on or around the date of filing this Annual Report on Form 10-K. Purchase Orders In the normal course of business, we issue purchase orders to suppliers for the purchase of hard drive components used to manufacture our products. These purchase orders generally cover forecasted component supplies...

  • Page 46
    ... in Item 1A of this Annual Report on Form 10-K. We currently anticipate that we will continue to utilize our liquidity and cash flows to improve the efficiency and capability of its existing hard drive and head manufacturing operations. Critical Accounting Policies We have prepared the accompanying...

  • Page 47
    ... or replacement of the hard drive over the warranty period, which generally ranges from one to five years. We have comprehensive processes with which to estimate accruals for warranty, which include specific detail on hard drive reliability, such as factory test data, historical field return rates...

  • Page 48
    ... for stock-based employee compensation plans (including shares issued under our stock option plans and ESPP) in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations ("APB No. 25"), and followed the pro forma net income...

  • Page 49
    ... and forward exchange contract currency gains and losses were not material to our consolidated financial statements. Disclosure About Other Market Risks Variable Interest Rate Risk At our option, borrowings under the Senior Credit Facility would bear interest at either LIBOR (with option periods of...

  • Page 50
    ... June 30, 2006...Consolidated Statements of Shareholders' Equity and Comprehensive Income - Three Years Ended June 30, 2006 ...Notes to Consolidated Financial Statements ...Financial Statement Schedule: Schedule II - Consolidated Valuation and Qualifying Accounts - Three Years Ended June 30, 2006...

  • Page 51
    ... REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors Western Digital Corporation: We have audited the accompanying consolidated balance sheets of Western Digital Corporation and subsidiaries as of June 30, 2006 and July 1, 2005, and the related consolidated statements of income, shareholders...

  • Page 52
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors Western Digital Corporation: We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting appearing under Item 9A, that Western Digital Corporation...

  • Page 53
    WESTERN DIGITAL CORPORATION CONSOLIDATED BALANCE SHEETS (in millions) June 30, 2006 July 1, 2005 (as adjusted) (Note 2) ASSETS Current assets: Cash and cash equivalents ...$ 550.7 Short-term investments ...148.1 Accounts receivable, net ...481.5 Inventories ...205.1 Advances to suppliers ...79.6 ...

  • Page 54
    WESTERN DIGITAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) June 30, 2006 Years Ended July 1, 2005 (as adjusted) July 2, 2004 (as adjusted) Revenue, net ...Cost of revenue ...Gross margin ...Operating expenses: Research and development ...Selling, general ...

  • Page 55
    ...: Depreciation and amortization ...In-process research and development expense ...Stock-based compensation ...Deferred income taxes ...Other non-cash items ...Changes in: Accounts receivable ...Inventories ...Accounts payable ...Accrued expenses ...Advances to suppliers ...Prepaid expenses and other...

  • Page 56
    WESTERN DIGITAL CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY and COMPREHENSIVE INCOME (in millions) Common Stock Shares Amount Treasury Stock Shares Amount Additional Paid-In Capital (as adjusted) Accumulated Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) (as ...

  • Page 57
    ... "Company" or "Western Digital" or "WD") designs, develops, manufactures and sells hard drives. A hard drive is a device that stores data on one or more rotating magnetic disks to allow fast access to data. The Company's hard drives are used in desktop computers, notebook computers, external storage...

  • Page 58
    ... based on existing product return notifications. In accordance with standard industry practice, the Company has agreements with resellers that provide limited price protection for inventories held by resellers at the time of published list price reductions and other incentive programs. Either party...

  • Page 59
    ... DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Warranty The Company records an accrual for estimated warranty costs as products are sold. Warranty covers costs of repair or replacement of the hard drive over the warranty period, which ranges from one to five years...

  • Page 60
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) * For purposes of computing diluted income per share, common share equivalents with an exercise price that exceeded the average fair market value of common stock for the period are considered antidilutive and have ...

  • Page 61
    ... income. Changes in fair value on these contracts were not material to the consolidated financial statements for all years presented. Use of Estimates Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with generally...

  • Page 62
    ... measurement dates for such grants, management determined the Company should have recognized stock-based compensation expense and additional tax expense in its historical financial statements for these 19 grants. For the remaining 9 grants, since the prices at the originally stated grant dates were...

  • Page 63
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table reflects the consolidated income statement classification of the additional stock-based compensation and tax-related expenses related to the adjustment for fiscal years 1998 to 2006: Cost of ...

  • Page 64
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONSOLIDATED STATEMENTS OF INCOME Fiscal Year Ended July 1, 2005 Previously Reported Adjustment As Adjusted Cost of revenue ...Gross margin ...Research and development ...Selling, general and administrative. Total ...

  • Page 65
    ... suppliers of magnetic recording heads, commenced voluntary Chapter 7 bankruptcy proceedings. On July 31, 2003, Western Digital purchased substantially all of the assets of Read-Rite, including its wafer fabrication equipment in Fremont, California and manufacturing facility in Bang Pa-In, Thailand...

  • Page 66
    ... 17.4 Property and equipment ...90.2 Purchased technology ...38.8 In-process research and development ...25.6 $172.0 As of the date of the acquisition, Read-Rite had two in-process research and development ("IPR&D") projects: 120 gigabyte per platter and 160 gigabyte per platter products. The fair...

  • Page 67
    ... covers costs of repair or replacement of the hard drive over the warranty period, which generally ranges from one to five years. This accrual is based on estimated future returns within the warranty period and costs to repair, using factory test data, historical field returns and current average...

  • Page 68
    ... 2004. Long-term Purchase Agreements The Company has entered into long-term purchase agreements with various component suppliers. The commitments depend on specific products ordered and may be subject to minimum quality requirements and future price negotiations. For 2007, 2008, and 2009, WD expects...

  • Page 69
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Since the Company's announcement on July 27, 2006 that it was conducting a company-initiated, voluntary review of its historical stock option grants, several purported derivative actions were filed nominally on ...

  • Page 70
    ...) than on the date of grant, employee participation in that offering period is terminated and re-enrollment in the new offering period occurs automatically. The Company's ESPP operates in accordance with Section 423 of the Internal Revenue Code. The 1993 Employee Stock Purchase Plan, which was...

  • Page 71
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2004, the pro forma income per share information is estimated using a binomial model. Both the Black-Scholes-Merton and the binomial option pricing models require the input of highly subjective assumptions such as ...

  • Page 72
    ...information about options outstanding and exercisable under the Stock Plans at June 30, 2006 (in millions, except per share amounts): Options Outstanding Remaining Contractual Life* (in years) Options Exercisable Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Range...

  • Page 73
    ... rate. The Company uses historical data to estimate option exercise, employee termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant...

  • Page 74
    ...date of grant using a Black-Scholes-Merton option-pricing model with the following weighted average assumptions: Stock Option Plans 2005 2004 ESPP 2005 2006 2004 Option life (in years) ...Risk-free interest rate ...Stock price volatility ...Dividend yield ...Fair value ...Stock Repurchase Program...

  • Page 75
    ... Information As of June 30, 2006, the Company operated in one segment, the hard drive business. International Operations The Company's operations outside the United States include manufacturing facilities in Malaysia and Thailand as well as sales offices throughout Canada, Europe, Asia, Japan, India...

  • Page 76
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Income Tax (Benefit) Provision The components of the (benefit) provision for income taxes were as follows for the three years ended June 30, 2006 (in millions): 2006 2005 (as adjusted) 2004 (as adjusted) Current: ...

  • Page 77
    ...35.0% (43.8) (7.8) - 16.5 2.5 0.2 2.6% A substantial portion of the Company's manufacturing operations in Malaysia and Thailand operate under various tax holidays and tax incentive programs which will expire in whole or in part at various dates through 2019. Certain of the holidays may be extended...

  • Page 78
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 12. Quarterly Results of Operations (unaudited) The Company has adjusted its consolidated financial statements for fiscal 2006 and 2005 to record additional noncash stock-based compensation expense and related ...

  • Page 79
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Previously As Reported Adjustment Adjusted FISCAL YEAR ENDED JULY 1, 2005 2005 - First Quarter Revenue, net ...$ 823.6 Gross margin ...113.1 Operating income ...31.2 Net income ...30.4 Basic earnings per share ...$...

  • Page 80
    WESTERN DIGITAL CORPORATION SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Three years ended June 30, 2006 (in millions) Allowance for Doubtful Accounts Balance at June 27, 2003 ...Charges to operations ...Deductions ...Balance at July 2, 2004 ...Charges to operations ...Deductions ...

  • Page 81
    ... such grants, our management determined we should have recognized stock-based compensation expense and additional tax expense in our historical financial statements for these 19 grants. For the remaining 9 grants, since the prices at the originally stated grant dates were at or above the prices on...

  • Page 82
    ... public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on our assessment of our internal control over financial reporting. See page 46 herein. Changes in Internal Control over Financial Reporting...

  • Page 83
    ... as President and Chief Executive Officer of Computervision Corporation, an international supplier of product development and data management software. She is also a director of Forgent Networks, Inc. John F. Coyne, 56, has been a member of our Board of Directors since October 2006. Mr. Coyne joined...

  • Page 84
    ... and Coyne are each full-time, executive-level employees of Western Digital; therefore, Messrs. Massengill, Shakeel and Coyne are not "independent" as defined by the corporate governance listing standards of the New York Stock Exchange. Committees Our Board of Directors has standing Executive, Audit...

  • Page 85
    ... or public distribution; (8) general review and discussion with management of the presentation and information to be disclosed in our earnings press releases; (9) periodic review of the adequacy of our accounting and financial personnel resources; (10) periodic review and discussion of our internal...

  • Page 86
    ...Chief Executive Officer 2005 2004 John F. Coyne(12) ...2006 President and 2005 Chief Operating Officer Raymond M. Bukaty ...2006 Senior Vice President, 2005 Administration, General 2004 Counsel and Secretary Hossein M. Moghadam(16) ...2006 Senior Vice President, 2005 Chief Technology Officer Stephen...

  • Page 87
    ... the share units is described below under "Employment Contracts, Termination of Employment and Change-in-Control Arrangements." (6) Our 2004 fiscal year included 27 bi-weekly pay periods. (7) This amount represents the payment of two annual installments under a Long-Term Retention Agreement with...

  • Page 88
    ... July 2, 2004. The Long-Term Retention Agreement pursuant to which Mr. Shakeel received these share units is described below under "Employment Contracts, Termination of Employment and Change-in-Control Arrangements." (12) Mr. Coyne became an executive officer of Western Digital in fiscal 2005 and...

  • Page 89
    ... Individual Grants Number of % of Total Securities Options/SARs* Underlying Granted to Options/SARs* Employees in Granted(1) Fiscal Year Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term 5% ($) 10% ($) Name Exercise or Base Price ($/Sh) Expiration Date...

  • Page 90
    ...) will become payable upon the occurrence of a change in control event. Director Compensation Director Fees. Effective January 1, 2006, non-employee directors receive an annual retainer of $75,000 payable on January 1 of each year, or if they join the Board of Directors at a later date, they receive...

  • Page 91
    ...that calendar year. We determine the number of shares of common stock payable to a non-employee director under the Non-Employee Directors Stock-for-Fees Plan by dividing the amount of the cash fee the director would have otherwise received by the fair market value of the common stock on the date the...

  • Page 92
    ... stock immediately following each annual meeting of stockholders. The per-share exercise price of all option grants under the Non-Employee Director Option Grant Program equals the fair market value of a share of our common stock on the date of grant, and the options vest over a period of four years...

  • Page 93
    ...Grant Program are subject to the applicable share limits specified in our 2004 Performance Incentive Plan. We also permit non-employee directors to defer receipt of RSUs payable under the Non-Employee Director Restricted Stock Unit Grant Program pursuant to our Deferred Compensation Plan. Employment...

  • Page 94
    ... benefits under our Amended and Restated Change of Control Severance Plan and payment of certain other accrued obligations, including annual base salary and vacation accrued through Mr. Coyne's termination date. In the event Mr. Coyne remains employed by us as President and Chief Executive Officer...

  • Page 95
    ... three installments: 25% vested on July 1, 2003, 30% vested on July 1, 2004 and 45% vested on July 1, 2005. Within fifteen days of each vesting period, we paid each executive a cash amount equal to the product of the number of share units that vested and the average closing price of our common stock...

  • Page 96
    ... severance benefits are payable if we or our subsidiaries terminate the employment of the executive officer without cause or the employee voluntarily terminates his or her employment for good reason (generally consisting of adverse changes in responsibilities, compensation, benefits or location of...

  • Page 97
    ... for grant under the plan. None of the stock options that we granted under the plan are incentive stock options under Section 422 of the Internal Revenue Code and the term of each outstanding option granted under the plan will not exceed ten years from the date of its grant. All unvested shares of...

  • Page 98
    ... common stock, (2) each director and each nominee for election as a member of our Board of Directors, (3) each of the executive officers named in the Summary Compensation Table below, and (4) all current directors and executive officers as a group. This table is based on information supplied...

  • Page 99
    ... Management. (7) Beneficial and percentage ownership information is based on information contained in a Schedule 13G filed with the Securities and Exchange Commission on February 15, 2006 by Mellon Financial Corporation. (8) Includes shares of our common stock that may be acquired within 60 days...

  • Page 100
    ..., 2004, no new awards are permitted under the Employee Stock Option Plan, the Broad-Based Stock Incentive Plan and the Stock Option Plan for Non-Employee Directors. (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (b) Weighted-Average Exercise Price of...

  • Page 101
    ... audits of our distributors, accounting assistance to our subsidiaries, and audits performed in connection with the Western Digital Corporation 401(k) Plan. (2) Tax Fees in fiscal 2006 and fiscal 2005 consisted of tax compliance assistance and related services and transfer pricing review. The Audit...

  • Page 102
    ..., 2003, including Option Agreements to purchase all of the outstanding capital stock of Read-Rite International, Sunward Technologies International, and Read Rite Holding Company(14) Amended and Restated Certificate of Incorporation of Western Digital Corporation, as amended to date(26) Amended and...

  • Page 103
    ... Incentive Plan, dated April 6, 2001(8)* Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement under the Western Digital Corporation Broad Based Stock Incentive Plan as amended(22)* Western Digital Corporation Amended and Restated Stock Option Plan for Non-Employee Directors...

  • Page 104
    ... and John F. Coyne(26)* Long-Term Retention Agreement - Cash, between Western Digital Corporation and John F. Coyne, dated as of September 21, 2004†Employment Agreement, dated as of October 31, 2006, between Western Digital Corporation and John Coyne(30) Form of Notice of Grant of Stock Units...

  • Page 105
    ... Lease Agreement dated June 24, 2004 between CIT Technologies Corporation, doing business as CIT Systems Leasing, and Western Digital Technologies, Inc.(17) Subsidiaries of Western Digital Corporation†Consent of Independent Registered Public Accounting Firm†Certification of Principal Executive...

  • Page 106
    ... dated September 5, 2003. (16) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08703), as filed with the Securities and Exchange Commission on September 23, 2003. (17) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08703), as filed...

  • Page 107
    ... reference to the Company's Quarterly Report on Form 10-Q (File No. 1-08703), as filed with the Securities and Exchange Commission on May 9, 2006. (29) Incorporated by reference to the Company's Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on May...

  • Page 108
    ... duly authorized. WESTERN DIGITAL CORPORATION By: /s/ STEPHEN D. MILLIGAN Stephen D. Milligan Senior Vice President and Chief Financial Officer Dated: November 17, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by...

  • Page 109
    ... Organization Pacifica Insurance Corporation ...Read-Rite International ...Read-Rite (Malaysia) Sdn. Bhd...Read-Rite Philippines, Inc...Western Digital Canada Corporation ...Western Digital (Deutschland) GmbH ...Western Digital (France) SARL ...Western Digital (Fremont), Inc...Western Digital Hong...

  • Page 110
    ... on Form 10-K of Western Digital Corporation. Our report dated November 17, 2006, contains an explanatory paragraph, which states the Company has adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," on July 2, 2005 and accordingly, has changed its...

  • Page 111
    ..., summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ ARIF SHAKEEL Arif Shakeel Chief Executive Officer Dated: November 17...

  • Page 112
    ...; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. STEPHEN D. MILLIGAN Stephen D. Milligan Senior Vice President and Chief Financial Officer Dated: November 17, 2006 /s/

  • Page 113
    .../s/ ARIF SHAKEEL Arif Shakeel Chief Executive Officer Dated: November 17, 2006 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request...

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    ...Stephen D. Milligan Senior Vice President and Chief Financial Officer Dated: November 17, 2006 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff...

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