Western Digital 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

2012
Annual
Report
Western Digital® Corporation
and Form 10-K

Table of contents

  • Page 1
    2012 Annual Report and Form 10-K Western Digital Corporation ®

  • Page 2
    ... products. Leading WD-branded storage devices and systems, networking products, media players and software solutions empower people around the world to easily save, store, protect, share and experience their content on multiple devices. HGST develops advanced hard drives, enterprise-class solid...

  • Page 3
    ..., extending Western Digital's 10-year record of compound annual revenue and earnings per share growth to 19% and 34%, respectively. Driving this track record is our constant focus on identifying and successfully addressing evolving market trends and delighting customers with innovative, high-quality...

  • Page 4
    ... respective cost structures of both our HGST and WD subsidiaries as newer areal density platforms come into production and as the recovery from ood related matters concludes. Storage continues to be critical to the mass of digital content being created and utilized in entertainment, in education, in...

  • Page 5
    ...thank everyone responsible for our company's performance in fiscal 2012. But, heading the list must be our long-time WD and HGST customers, who provided their understanding and support; our trusted supply partners, who provided nimble responsiveness; and our Western Digital employees, who gave their...

  • Page 6
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 7
    ...(I.R.S. Employer Identification No.) 3355 Michelson Drive, Suite 100 Irvine, California (Address of principal executive offices) 92612 (Zip Code) Registrant's telephone number, including area code: (949) 672-7000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name...

  • Page 8
    ... Statements and Supplementary Data ...Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...Item 10. Item 11. Item 12. Item 13. Item 14. PART III Directors, Executive Officers and Corporate...

  • Page 9
    ... offices are located at 3355 Michelson Drive, Suite 100, Irvine, California 92612. Our telephone number is (949) 672-7000 and our Web site is www.westerndigital.com. The information on our Web site is not incorporated in this Annual Report on Form 10-K. Western Digital, WD, the WD logo, WD Black, WD...

  • Page 10
    ...WD branded network products, media players and software solutions. HGST, known as Hitachi Global Storage Technologies before its acquisition by Western Digital in March, 2012, was founded in 2003 through the combination of the hard drive businesses of IBM, the inventor of the hard drive, and Hitachi...

  • Page 11
    ..., storage subsystem suppliers, and Internet and social media infrastructure players. We sell our products to original equipment manufacturers ("OEMs"), distributors, resellers and consumers. WD has a strong brand and heritage with consumers with our WD Branded Products business; HGST enjoys the same...

  • Page 12
    ..., tablets and smart phones. Most cloud computing models consist of services delivered through large data centers with enterprise-class servers. The infrastructure to support cloud computing storage needs is driving the demand for enterprise capacity hard drives and solid-state drives. The enterprise...

  • Page 13
    ... in the mobile computing market of smart phones and tablets with standalone Western Digital software applications such as WD Photos and WD2go for iOS, Android and Windows Phone platforms. Enterprise Storage Products. Enterprise storage products consist of hard drives for performance enterprise and...

  • Page 14
    ... with various attributes such as low cost per gigabytes, quiet acoustics, low power consumption and protection against shocks; ‰ HGST Travelstar®, WD Black™, WD Blue™ and WD Green™ hard drives are designed for use in mobile PCs requiring high performance, reliability and capacity with...

  • Page 15
    ... TV® media players connect to a user's television or home theater system and play digital movies, music and photos from an integrated hard drive, network hard drives, any of our WD®-branded external hard drives, other USB mass storage devices or content services accessed over the Internet; ‰ WD...

  • Page 16
    ... development, manufacturing infrastructure and capital equipment of head and magnetic media components, in order to secure our competitive position and cost structure. Solid-State Drives Solid-state drives use semiconductor, non-volatile media, rather than magnetic media and magnetic heads, to store...

  • Page 17
    ...retail channel complements our other sales channels while helping to build brand awareness for us and our products. We also sell our branded products through our Web site. For 2012, sales to Hewlett Packard Company accounted for 11% of our net revenue. For 2011 and 2010, no single customer accounted...

  • Page 18
    ... 1A of this Annual Report on Form 10-K. Materials and Supplies We use a number of components, equipment, goods and services in the manufacturing of our products. The key components of our hard drives are: magnetic heads; magnetic media; suspensions with related head gimbal assemblies ("HGAs") and...

  • Page 19
    ..., see Item 1A of this Annual Report on Form 10-K. Employees As of June 29, 2012, we employed a total of 103,111 employees worldwide, excluding temporary employees and contractors. Many of our employees are highly skilled, and our continued success depends in part upon our ability to attract and...

  • Page 20
    ... a Web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. Executive Officers of the Registrant Listed below are all of our executive officers, followed by a brief account of...

  • Page 21
    ... he formed and managed the Branded Products Business Unit. Mr. Nickl, 43, was promoted to Executive Vice President and Chief Financial Officer of WDC in August 2012. Mr. Nickl had previously served as the Company's Senior Vice President and Chief Financial Officer from August 2010 to August 2012 and...

  • Page 22
    ... accounting treatment, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition; ‰ failure to realize the anticipated increase in our revenues due to the acquisition if customers adjust their purchasing...

  • Page 23
    ... relationships with our supplier and customer base; ‰ difficulties, when allowed, integrating and harmonizing business systems; and ‰ the loss of key employees. If we are not able to successfully manage these issues, the anticipated benefits and efficiencies of the HGST acquisition may not be...

  • Page 24
    ...' demand for hard drives. In the desktop, mobile, CE and retail markets, seasonality historically has been partially attributable to the increase in sales of PCs and CE devices during the back-to-school and winter holiday seasons. In the enterprise market our sales are typically seasonal because of...

  • Page 25
    ... a preference for WD®- or HGST™-brand products, our operating results may be adversely affected. Sales in the distribution channel are important to our business, and if we fail to respond to demand changes in distribution markets or if distribution markets for hard drives weaken, our operating...

  • Page 26
    ..., and creates additional capital expenditure costs and asset utilization risks to our business. Under our business plan, we are developing and manufacturing a substantial portion of the heads and magnetic media used in the hard drive products we manufacture. Consequently, we are more dependent...

  • Page 27
    ... transition for head and magnetic media designs is critical to increasing our volume production of heads and magnetic media. There can be no assurance, however, that we will be successful in timely and cost-effectively developing and manufacturing heads or magnetic media for products using future...

  • Page 28
    ...result in product recalls or epidemic failures and could subject us to warranty claims in excess of our warranty provisions or which are greater than anticipated. We warrant the majority of our products for periods of one to five years. We test our hard drives in our manufacturing facilities through...

  • Page 29
    ...our operating costs. Failure by certain suppliers to effectively and efficiently develop and manufacture components, technology or production equipment for our products may adversely affect our operations. We rely on suppliers for various component parts that we integrate into our hard drives but do...

  • Page 30
    ..., the more information can be stored on a single platter. Higher areal densities require existing head and magnetic media technology to be improved or new technologies developed to accommodate more data on a single disk. Historically, we have been able to achieve a large percentage of cost reduction...

  • Page 31
    ... such as digital cameras, MP3 players, USB flash drives, mobile phones and tablet devices that cannot be economically serviced using hard drive technology. Advances in semiconductor technology have resulted in solid-state storage emerging as a technology that is competitive with hard drives for high...

  • Page 32
    ... of our manufacturing capabilities or shipments of our products, our business, operating results and financial condition could be adversely affected. Sudden disruptions to the availability of freight lanes could have an impact on our operations. We generally ship our products to our customers, and...

  • Page 33
    ...to Consolidated Financial Statements included in this Annual Report on Form 10-K, on November 18, 2011, a sole arbitrator ruled against us in an arbitration in Minnesota. The arbitration involves claims brought by Seagate Technology LLC against us and a now former employee, alleging misappropriation...

  • Page 34
    ... we or our component suppliers fail to timely comply with applicable legislation, our customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, which would have a materially adverse effect on our business, financial condition and...

  • Page 35
    ... losses and an increase in our operating costs. Some of our OEM customers have adopted a subcontractor model that requires us to contract directly with companies, such as ODMs, that provide manufacturing and fulfillment services to our OEM customers. Because these subcontractors are generally not as...

  • Page 36
    ... trends in the hard drive, computer, data and content management, storage and communication industries; ‰ contraction in our operating results or growth rates that are lower than our previous high growth-rate periods; ‰ changes in financial estimates by securities analysts relating specifically...

  • Page 37
    ... Comments Not applicable. Item 2. Properties Our principal executive offices are located in Irvine, California. As a result of our acquisition of HGST, we added facilities in San Jose, California, Rochester, Minnesota, China, Japan, Malaysia, the Philippines, Singapore and Thailand. Our leased...

  • Page 38
    ...and support Manufacturing of hard drives Manufacturing of hard drive subassemblies Manufacturing and development of read/ write heads Research and development Manufacturing of hard drives and media Assembly of hard drives, printed circuit boards and HSAs and research and development Manufacturing of...

  • Page 39
    ... for research and development and sales and technical support. We believe our present facilities are adequate for our current needs, although the process of upgrading our facilities to meet technological and market requirements is expected to continue. New manufacturing facilities, in general, can...

  • Page 40
    PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is listed on the NASDAQ Global Select Market ("NASDAQ") under the symbol "WDC." Until June 1, 2012, our common stock was listed on the New York Stock ...

  • Page 41
    ...cumulative total stockholder return of our common stock with the cumulative total return of the S&P 500 Index and the Dow Jones US Technology Hardware & Equipment Index for the five years ended June 29, 2012. The graph assumes that $100 was invested in our common stock at the close of market on June...

  • Page 42
    ...Our Company We are an industry-leading developer and manufacturer of storage products that enable people to create, manage, experience and preserve digital content. We design and make storage devices, networking equipment and home entertainment products under the WD, HGST and G-Technology brands. We...

  • Page 43
    ... include solid-state drives, home entertainment and networking products and software applications for smart phones and tablets. Acquisition Hitachi Global Storage Technologies Holdings Pte. Ltd. ("HGST") Acquisition On March 8, 2012 (the "Closing Date"), we, through Western Digital Ireland ("WDI...

  • Page 44
    ... our hard drive, head gimbal assembly ("HGA") and head stack assembly ("HSA") facilities. In the March quarter of 2012, we restarted hard drive production and recommenced slider production in Thailand. We also extended slider production capacity into Malaysia and began shipping hard drives with...

  • Page 45
    ...% Europe, Middle East and Africa ...19 23 23 Asia ...58 55 53 Revenues by Channel(%) OEM ...63% 49% 51% Distributors ...25 32 31 Retailers ...12 19 18 Unit Shipments* Compute ...150 151 147 Non-compute ...36 46 38 Enterprise ...16 10 9 Total units shipped ...* Based on sales of hard drive units only...

  • Page 46
    ... weighted toward OEM. In accordance with standard industry practice, we have sales incentive and marketing programs that provide customers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue. For 2012, these programs represented 6% of gross...

  • Page 47
    ...shipments. Changes in revenue by geography and channel generally reflected normal fluctuations in market demand and competitive dynamics. In accordance with standard industry practice, we have sales incentive and marketing programs that provide customers with price protection and other incentives or...

  • Page 48
    ... of net revenue increased to 3.2% in 2011 compared to 2.7% in 2010. This increase in SG&A expense was primarily due to the expansion of sales and marketing to support new products and growing markets as well as $17 million of expenses related to the acquisition of HGST. Other Income (Expense...

  • Page 49
    ...These increases were primarily due to the impact of including HGST's accounts receivable, inventory and accounts payable balances as of June 29, 2012, but only including HGST's revenue and cost of sales from the date of Acquisition. Changes in average DSOs and DIOs are generally related to linearity...

  • Page 50
    ... or an increase to its term loan facility) in 2017, with the term loan facility balance due and payable in full on March 8, 2017. See Part II, Item 8, Note 3 in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. The Credit Facility requires us to comply with...

  • Page 51
    ... and quality of the supplier's products remaining competitive. These arrangements are not included under "Purchase obligations" in the table above. Please see Item 1A of this Annual Report on Form 10-K for a discussion of risks related to these commitments. As a result of the Thailand floods and...

  • Page 52
    ...the next one to five years. See Part II, Item 8, Note 9 in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our total tax liability for unrecognized tax benefits. Stock Repurchase Program Our Board of Directors previously authorized...

  • Page 53
    ...to five years. Our warranty provision considers estimated product failure rates and trends, estimated repair or replacement costs and estimated costs for customer compensatory claims related to product quality issues, if any. We use a statistical warranty tracking model to help prepare our estimates...

  • Page 54
    ... all Employee Stock Purchase Plan purchase rights are estimated using the Black-Scholes-Merton option-pricing model. We account for SARs as liability awards based upon our intention to settle such awards in cash. The SARs liability is recognized for that portion of fair value for the service period...

  • Page 55
    ... Yen and Philippine Peso contracts are designated as fair value hedges. See Part II, Item 8, Notes 1 and 11 in the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K. As of June 29, 2012, we had outstanding the following purchased foreign exchange contracts (in...

  • Page 56
    ... Ended June 29, 2012 ...Consolidated Statements of Shareholders' Equity and Comprehensive Income - Three Years Ended June 29, 2012 ...Notes to Consolidated Financial Statements ...Financial Statement Schedule: Schedule II - Consolidated Valuation and Qualifying Accounts - Three Years Ended June 29...

  • Page 57
    ... statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Western Digital Corporation's internal control over financial reporting...

  • Page 58
    ... of the years in the three-year period ended June 29, 2012, and the related financial statement schedule, and our report dated August 17, 2012, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule. /s/ August 17, 2012 Irvine, California KPMG...

  • Page 59
    ...equipment, net ...Goodwill ...Other intangible assets, net ...Other non-current assets ...Total assets ...LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ...Accrued expenses ...Accrued warranty ...Current portion of long... part of these consolidated financial statements. 53

  • Page 60
    WESTERN DIGITAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) June 29, 2012 Years Ended July 1, 2011 July 2, 2010 Revenue, net ...Cost of revenue ...Gross margin ...Operating expenses: Research and development ...Selling, general and administrative ...Charges...

  • Page 61
    ... activities Purchases of property, plant and equipment ...Acquisitions, net of cash acquired ...Proceeds from the sale of equipment ...Sales and maturities of investments ...Net cash used in investing activities ...Cash flows from financing activities Issuance of stock under employee stock plans...

  • Page 62
    ... exchange contracts ...2 56 $ 726 (16) $ 710 Balance at July 1, 2011 ...233 Employee stock plans ...Stock based compensation ...Common stock issued in connection with acquisition ...Stock awards assumed in acquisition ...Increase in excess tax benefits from employee stock plans ...Repurchase...

  • Page 63
    ... centers, home entertainment equipment and stand-alone consumer storage devices. The Company's other products include solid-state drives, home entertainment and networking products and software applications for smart phones and tablets. The Company has prepared its consolidated financial statements...

  • Page 64
    ...the Company's products, which may require a write down of inventory that could materially affect operating results. Property, Plant and Equipment The cost of property, plant and equipment is depreciated over the estimated useful lives of the respective assets. The Company's buildings are depreciated...

  • Page 65
    ... failure rates and trends, estimated repair or replacement costs and estimated costs for customer compensatory claims related to product quality issues, if any. A statistical warranty tracking model is used to help prepare estimates and assist the Company in exercising judgment in determining the...

  • Page 66
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. Management's judgment is subject to a greater degree of subjectivity...

  • Page 67
    ... stock options and cash-settled stock appreciation rights ("SARs") granted are estimated using a binomial model, and the fair values of all ESPP purchase rights are estimated using the Black-Scholes-Merton option-pricing model. The Company accounts for SARs as liability awards based upon management...

  • Page 68
    ...June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-05 "Presentation of Comprehensive Income" ("ASU 2011-05"). The new standard requires that all non-owner changes in shareholders' equity be presented either in a single continuous statement of...

  • Page 69
    ... of either method will constitute a change in the Company's financial statement presentation. Note 2. Supplemental Financial Statement Data Years Ended June 29, July 1, 2012 2011 (In millions) Inventories: Raw materials and component parts ...$ Work-in-process ...Finished goods ...Total inventories...

  • Page 70
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Borrowings under the Credit Facility bear interest at a rate equal to, at the option of the applicable Borrowers, either (a) a LIBOR rate determined by reference to the British Bankers Association LIBOR Rate for the...

  • Page 71
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 4. Commitments and Contingencies Lease Commitments The Company leases certain facilities and equipment under long-term, non-cancelable operating leases. The Company's operating leases consist of leased ...

  • Page 72
    ... Company's Annual Report on Form 10-K, filed with the SEC on August 13, 2010, MagSil and WD settled the matter for an amount that was not material to the Company's financial position, results of operations or cash flows. With respect to the claim pending against HGST, in February 2011, HGST obtained...

  • Page 73
    ... to real time full disk encryption application specific integrated circuits, or ASICs. WD intends to defend itself vigorously in this matter. On November 10, 2010, plaintiff Rembrandt Data Storage filed a complaint in the Western District of Wisconsin against WD alleging infringement of U.S. Patent...

  • Page 74
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On November 18, 2011, the sole arbitrator ruled in favor of WD in connection with five of the eight alleged trade secrets at issue, based on evidence that such trade secrets were known publicly at the time the ...

  • Page 75
    ... manufacturing facilities in China, Japan, Malaysia, the Philippines, Singapore, and Thailand as well as sales offices throughout the Americas, Asia Pacific, Europe and the Middle East. The following table summarizes the Company's operations by geographic area for the three years ended June 29, 2012...

  • Page 76
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In addition to the awards assumed in connection with the HGST acquisition, the Company maintains four stockbased incentive plans (collectively, including the assumed HGST awards, referred to as the "Stock Plans"): ...

  • Page 77
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) included in accrued liabilities as of June 29, 2012 in the consolidated balance sheet. As of June 29, 2012, total compensation cost related to unvested SARs issued to employees but not yet recognized was $18 million...

  • Page 78
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) If an option has an exercise price that is less than the quoted price of the Company's common stock at the particular time, the aggregate intrinsic value of that option at that time is calculated based on the ...

  • Page 79
    ... rights issued is estimated at the date of grant of the purchase rights using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable...

  • Page 80
    ... 1.8%, and 1.6% during 2012, 2011, and 2010, respectively, based on a historical analysis indicating forfeitures for these types of awards. Stock Repurchase Program The Company's Board of Directors previously authorized the repurchase of $750 million of common stock in open market transactions under...

  • Page 81
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock Reserved for Issuance The following table summarizes all shares of common stock reserved for issuance at June 29, 2012 (in millions): Number...three years ended June 29, 2012 (in millions): 2012 2011 2010 ...

  • Page 82
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred Taxes Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities as of June 29, 2012 and July 1, 2011 were as follows (in millions): 2012 2011 ...

  • Page 83
    ... portion of the Company's manufacturing operations in Malaysia, the Philippines, Singapore and Thailand operate under various tax holidays and tax incentive programs which will expire in whole or in part at various dates through 2025. Certain of the holidays may be extended if specific conditions...

  • Page 84
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year ended June 29, 2012 (in millions): Unrecognized tax benefit at July 1, 2011 ...Gross increases related to ...

  • Page 85
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Level 3. Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities. The following table presents information about the Company's financial assets...

  • Page 86
    ...by insurance products and are accounted for as available-for-sale securities. These investments are classified as long-term investments and recorded within other non-current assets in the consolidated balance sheets. Auction-rate securities are valued by a third party using trade information related...

  • Page 87
    ...77 Cost of revenue $1 $93 The total net realized transaction and foreign exchange contract currency gains and losses were not material to the consolidated financial statements during 2012, 2011 and 2010, respectively. See Notes 1 and 10 for additional disclosures related to the Company's foreign...

  • Page 88
    ... the Company's consolidated financial statements. Obligations and Funded Status The changes in the benefit obligations and plan assets for the Japanese defined benefit pension plans were as follows for the period from the Closing Date through June 29, 2012 (in millions): Change in benefit obligation...

  • Page 89
    ... as follows from the Closing Date through June 29, 2012: Discount rate ...Expected long-term rate of return on plan assets ...Rate of compensation increase ...1.9% 3.5% 1.4% The Company develops a discount rate by calculating when the estimated benefit payments will be due. Management in Japan then...

  • Page 90
    ...Fair Value Valuation Techniques Equity securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. Equity commingled/mutual funds are typically valued using the net asset value ("NAV") provided by the investment manager or administrator of...

  • Page 91
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) If available, fixed income securities are valued using the close price reported on the major market on which the individual securities are traded and are classified as Level 1. The fair value of other fixed income ...

  • Page 92
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair values of stock options and SARs assumed were estimated using a Binomial option-pricing model. See "Stock-Based Compensation" included below in this Note 14 for a further discussion concerning stock awards ...

  • Page 93
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment The property, plant and equipment acquired as part of the Acquisition were valued using either the replacement cost or market value approach, as appropriate, as of the Closing Date. The...

  • Page 94
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair values of the identifiable intangible assets acquired from HGST were estimated using an income approach. The fair value of the intangible assets will be amortized to cost of revenue over their weighted ...

  • Page 95
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Thailand) Company Limited ("TSDT"), a wholly-owned subsidiary of Toshiba which manufactured hard drives prior to the recent Thailand flooding. The net impact of these two transactions was immaterial to the Company...

  • Page 96
    ... 2011, severe flooding in Thailand inundated all of the Company's Thailand manufacturing facilities and submerged certain equipment located there. These facilities included the Company's magnetic head slider fabrication facilities, as well as its hard drive, head gimbal assembly and head stack...

  • Page 97
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 17. Quarterly Results of Operations (unaudited) First Second Third Fourth 2012(1) Revenue, net ...Gross margin ...Operating income ...Net income ...Basic income per common share ...Diluted income per common ...

  • Page 98
    WESTERN DIGITAL CORPORATION SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Three years ended June 29, 2012 (in millions) Allowance for Doubtful Accounts Balance at July 3, 2009 ...Recoveries credited to operations ...Deductions ...Balance at July 2, 2010 ...Deductions ...Balance at ...

  • Page 99
    ... public accounting firm, which audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an audit report on our internal control over financial reporting. See page 51 herein. Changes in Internal Control over Financial Reporting There has been no change in...

  • Page 100
    ... set forth in Part I of this report under "Item 1. Business - Executive Officers of the Registrant." In addition, our Board of Directors has adopted a Code of Business Ethics that applies to all of our directors, employees and officers, including our Chief Executive Officer, Chief Financial Officer...

  • Page 101
    ... are filed as part of this Annual Report on Form 10-K. (2) Financial Statement Schedules The financial statement schedule included in Part II, Item 8 of this document is filed as part of this Annual Report on Form 10-K. All other schedules are omitted as the required information is inapplicable...

  • Page 102
    ... Long-Term Cash Award and Long-Term Cash Award Agreement - Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(21)* Form of Notice of Grant of Long-Term Cash Award and Long-Term Cash Award Agreement - Employees, under the Western Digital Corporation...

  • Page 103
    ... Corporation 2005 Employee Stock Purchase Plan, as amended August 11, 2010(17)* Amended and Restated Western Digital Corporation Non-Employee Directors Stock-For-Fees Plan, as amended November 6, 2008(15)* Western Digital Corporation Summary of Compensation Arrangements for Named Executive Officers...

  • Page 104
    ... into any registration statement or other document filed under the Securities Act of 1933, except as expressly set forth by specific reference in such filing. (1) Incorporated by reference to the Company's Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange...

  • Page 105
    ... to the Company's Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 31, 2008. (14) Incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 333-155661), as filed with the Securities and Exchange Commission...

  • Page 106
    ... has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. WESTERN DIGITAL CORPORATION By: WOLFGANG U. NICKL Wolfgang U. Nickl Executive Vice President and Chief Financial Officer /s/ Dated: August 17, 2012 Pursuant to the requirements...

  • Page 107
    ... (Malaysia) Sdn.) ...WD Media (Singapore) Pte. Ltd...Western Digital Canada Corporation ...Western Digital Deutschland GmbH ...Western Digital Do Brasil Comércio E Distribuição De Produtos De Informática Ltda...Western Digital (France) S.A.R.L...Western Digital (Fremont), LLC ...Western Digital...

  • Page 108
    ......Western Digital (Malaysia) Sdn. Bhd...Western Digital Netherlands B.V...Western Digital (S.E. Asia) Pte. Ltd...Western Digital Storage Device (Thailand) Company Limited ...Western Digital Taiwan Co., Ltd...Western Digital Technologies, Inc...Western Digital (Thailand) Company Limited ...Western...

  • Page 109
    ... June 29, 2012, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of June 29, 2012, which reports appear in the June 29, 2012, Annual Report on Form 10-K of Western Digital Corporation. /s/ August 17, 2012 Irvine, California KPMG LLP

  • Page 110
    ... OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, John F. Coyne, certify that: 1. I have reviewed this Annual Report on Form 10-K of Western Digital Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material...

  • Page 111
    ... Chief Executive Officer Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Western Digital Corporation, a Delaware corporation (the "Company"), hereby certifies, to his knowledge, that: (i) the accompanying Annual Report on Form 10...

  • Page 112
    ...Act of 2002, the undersigned officer of Western Digital Corporation, a Delaware corporation (the "Company"), hereby certifies, to his knowledge, that: (i) the accompanying Annual Report on Form 10-K of the Company for the period ended June 29, 2012 (the "Report") fully complies with the requirements...

  • Page 113
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 114
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 115
    ... Manager Semiconductor Business Division of Hitachi, Ltd. EXECUTIVE OFFICERS John F. Coyne Chief Executive Officer Western Digital Corporation Stephen D. Milligan President Western Digital Corporation Wolfgang U. Nickl Executive Vice President and Chief Financial Officer Western Digital Corporation...

  • Page 116
    ... American Stock Transfer & Trust Company Operations Center - 6201 15th Avenue Brooklyn, New York 11219 www.amstock.com 800.937.5449 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP STOCK EXCHANGE LISTING Western Digital common stock is listed on the NASDAQ Global Select Market (NASDAQ...