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Western Digital® Corporation
2014 ANNUAL
REPORT
and Form 10-K

Table of contents

  • Page 1
    2014 Western Digital Corporation ANNUAL REPORT and Form 10-K ®

  • Page 2
    ... 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-Technologyâ„¢ brands to OEMs...

  • Page 3
    Steve Milligan, President and Chief Executive Officer DEAR FELLOW SHAREHOLDERS: We achieved strong financial performance for fiscal 2014, driven by strong execution from our HGST and WD subsidiaries. Profitability and cash-flow generation were healthy on essentially flat year-over-year revenue of $...

  • Page 4
    ... 2014. EARNINGS PER SHARE RESEARCH AND DEVELOPMENT SPENDING Dollars in millions       A highly efficient business model, focus on operational excellence and experienced management team underpin our ability to deliver solid profitability. Research...

  • Page 5
    ... leading technology company and storage solutions provider. I thank our employees for their dedication and our customers and partners for their support, and I look forward to reporting to you on our progress in the years ahead. Steve Milligan President and Chief Executive Officer September 23, 2014

  • Page 6
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 7
    ... 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 of each exchange on which registered Common Stock...

  • Page 8
    ... - HGST and WD. Our principal executive 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...

  • Page 9
    ... to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in Part I, Item 1A of this Annual Report on Form 10-K, and any of those made in our other reports filed with the Securities and Exchange Commission...

  • Page 10
    ... range of customers currently addressing storage opportunities. These include storage subsystem suppliers, major server original equipment manufacturers ("OEMs"), Internet and social media infrastructure players, and personal computer ("PC") and Macâ„¢ OEMs. Through HGST and WD, we sell our products...

  • Page 11
    ... appropriate storage device, driving increasing demand for high capacity and high performance HDDs and flash-based solid-state storage. ‰ The development of advanced storage solutions that bypass tiered architectures while delivering the same benefits. We are a market and customer driven company...

  • Page 12
    ... 2014 from fiscal 2013. Branded products also include media players that connect to a user's television or home theater system and play digital movies, music and photos from an integrated HDD, Universal Serial Bus ("USB") mass storage device or content services accessed over the Internet. Consumer...

  • Page 13
    ... who introduced new models in fiscal 2014, both of which feature HDDs as standard equipment. Competition We compete with manufacturers of HDDs for client compute, client non-compute and enterprise applications and manufacturers of SSDs. The HDD market consists of five principal brands: HGST, Samsung...

  • Page 14
    ...") SSDs for the server market and embedded flash solutions. Our WD subsidiary designs, manufacturers and provides hard drives for a wide range of digital storage uses, from PCs and data centers to home video recorders and home network storage devices. WD also packages these hard drives into consumer...

  • Page 15
    ... mass storage devices or content services accessed over the Internet. Our branded product hard drive unit shipments were 25 million, 25 million and 18 million for 2014, 2013 and 2012, respectively. Consumer Electronics Solutions. CE solutions are used in DVRs, gaming consoles, security surveillance...

  • Page 16
    ... manufacturing processes to bring our products to market in a cost-effective and timely manner. Research and development expenses totaled $1.7 billion, $1.6 billion and $1.1 billion in 2014, 2013 and 2012, respectively. For a discussion of associated risks, see Item 1A of this Annual Report on Form...

  • Page 17
    ... the efficiencies of contract manufacturers when strategically advantageous. For a discussion of associated risks, see Item 1A of this Annual Report on Form 10-K. Materials and Supplies The main components of the hard drive are a Head-Disk-Assembly ("HDA") and a Printed Circuit Board Assembly ("PCBA...

  • Page 18
    ...OEMs with other sales incentive programs. Original Equipment Manufacturers. OEMs, including large-scale datacenter operators, purchase our products, either directly or through a contract manufacturer such as an original design manufacturer ("ODM"), and assemble them into the devices they build. OEMs...

  • Page 19
    ... of increased customer spending. Seasonality can also be impacted by the growth in emerging markets and macroeconomic conditions. For a discussion of associated risks, see Item 1A of this Annual Report on Form 10-K. Service and Warranty We generally warrant our newly manufactured products against...

  • Page 20
    ..., including as the Executive Vice President of Worldwide Sales and Marketing from April 2001 until February 2005, where he formed and managed the Branded Products Business Unit. Mr. Leyden, 62, re-joined us in May 2007 and was appointed to the position of Chief Financial Officer of WDC in November...

  • Page 21
    ..., he served as managing director of VisionPoint Capital, where he provided merger and acquisition and corporate finance services to a range of technology companies, including Fabrik, Inc., which was acquired by Hitachi GST in April 2009. Prior to that, Mr. Long served as a senior executive with both...

  • Page 22
    ... rely on credit financing to purchase our products. If negative conditions in the global credit markets prevent our customers' access to credit, product orders may decrease, which could result in lower revenue. Likewise, if our suppliers, sub-suppliers and subcontractors (collectively referred to...

  • Page 23
    ... market share, all of which could adversely affect our operating results. Demand for our devices, software and solutions that we offer to our customers, which we refer to in this Item 1A. as our "products", depends in large part on the demand for systems manufactured by our customers and on storage...

  • Page 24
    ... external storage devices. Most businesses also include similar local storage as a primary or secondary storage location. This storage is typically provided by hard disk drives. Over the last few years, cloud computing has emerged whereby applications and data are hosted, accessed and processed...

  • Page 25
    ... of orders, each of which could harm our operating results. Also, the storage ecosystem is constantly evolving, and our traditional customer base is changing. Fewer companies now hold greater market share for certain applications and services, such as social media, shopping and streaming media. As...

  • Page 26
    ... overall quality, increasing capital expenditure costs and asset utilization risks for our business. We develop and manufacture a substantial portion of the heads and magnetic media used in the hard drive products we produce. Consequently, we are more dependent upon our own development and execution...

  • Page 27
    ... of the epidemic failure. In addition, a product recall or epidemic failure may damage our reputation or customer relationships, and may cause us to lose market share with our customers, including our OEM and original design manufacturers ("ODM") customers. Our standard warranties contain limits on...

  • Page 28
    ... be unable to develop our products, manufacture them in high volumes, and distribute them to our customers to execute our business plans effectively. As PC demand slows, competition increases from NAND and other consumer devices, the total available market for hard disk drives decreases and costs...

  • Page 29
    ... of reducing other costs may impact our ability to achieve historical levels of cost reduction. Storage capacity of the hard drive, as manufactured by us, is determined by the number of disks and each disk's areal density. Areal density is a measure of the amount of magnetic bits that can be...

  • Page 30
    ... for products that cannot be serviced using hard drive technology. Advances in semiconductor technology have resulted in solid-state storage emerging as a technology that can be competitive with hard drives for high performance needs in advanced digital computing markets such as enterprise servers...

  • Page 31
    ... our manufacturing sites, or the sites of our customers or suppliers, could adversely affect our ability to manufacture or sell our products, and our business, financial condition and results of operations could suffer. Manufacturing and marketing our products globally subjects us to numerous risks...

  • Page 32
    ...which could adversely impact our results of operations or financial condition. Please also see the risk factors above for specific risks and uncertainties regarding our acquisition of HGST. The loss of our key executive management, staff and skilled employees, the inability to hire and integrate new...

  • Page 33
    ... condition or operating results. As disclosed in Part II, Item 8, Note 5 in the Notes 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...

  • Page 34
    ...or 3TG generally, at acceptable prices and could impact the availability of such components or 3TG, since there may be only a limited number of suppliers of "conflict free" 3TG. Our customers, including our OEM customers, may require that our products contain only conflict free 3TG, and our revenues...

  • Page 35
    ... 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 well capitalized as our direct OEM customers, this subcontractor model exposes us to increased credit risks. Our agreements...

  • Page 36
    ... inventory adjustments for write-down of inventories to lower of cost or market value (net realizable value); ‰ testing of goodwill and other long-lived assets for impairment; ‰ reserves for doubtful accounts; ‰ accruals for product returns; ‰ accruals for warranty costs related to product...

  • Page 37
    ... and trends in the hard drive, solid state storage, 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; ‰ failure to meet analysts' revenue or earnings...

  • Page 38
    ..., political, sovereign and interest rate risks, which may be exacerbated by unusual events that affect global financial markets. A material part of our investment portfolio consists of U.S. government securities and bank deposits. If global credit and equity markets experience prolonged periods of...

  • Page 39
    ... principal executive offices are located in Irvine, California. Our leased facilities are occupied under leases that expire at various times through 2022. Our principal manufacturing, research and development, marketing and administrative facilities at June 27, 2014 are as follows: Location Building...

  • Page 40
    ... sales and technical support. We believe our present facilities are adequate for our current needs, although we from time to time upgrade our facilities to meet anticipated future technological and market requirements. New manufacturing facilities, in general, can be developed and become operational...

  • Page 41
    ...Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is listed on the NASDAQ Global Select Market ("NASDAQ") under the symbol "WDC." The approximate number of holders of record of our common stock as of August 7, 2014 was 1,341. The high and low sales prices of...

  • Page 42
    ...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 27, 2014. The graph assumes that $100 was invested in our common stock at the close of market on July...

  • Page 43
    ... this Annual Report on Form 10-K and the other reports entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." June 27, 2014 June 28, June 29, July 1, July 2, 2013 2012 2011 2010 (in millions, except per share and employee data) Revenue, net ...Gross profit...

  • Page 44
    ... with the regulatory approval process of the HGST acquisition, we announced on May 15, 2012 that we had closed a transaction with Toshiba Corporation ("Toshiba") to divest certain 3.5-inch hard drive assets and to purchase Toshiba Storage Device (Thailand) Company Limited ("TSDT"), a wholly owned...

  • Page 45
    ... Virident, sTec, VeloBit and HGST, which were acquired on October 17, 2013, September 12, 2013, July 9, 2013 and March 8, 2012, respectively, are included in our operating results only after the respective dates of acquisition. In 2014, our net revenue decreased by 1% to $15.1 billion on hard drive...

  • Page 46
    ... (%) Americas ...Europe, Middle East and Africa ...Asia ...Revenues by Channel (%) Original Equipment Manufacturers ("OEM") ...Distributors ...Retailers ...Unit Shipments* Compute ...Non-compute ...Total units shipped ...* Based on sales of hard drive units only. Fiscal Year 2014 Compared to Fiscal...

  • Page 47
    ... Federal statutory rate are primarily due to tax holidays in Malaysia, the Philippines, Singapore and Thailand that expire at various dates from 2015 through 2025 and the current year generation of income tax credits. As of June 27, 2014, we had a recorded liability for unrecognized tax benefits of...

  • Page 48
    ... in Part II, Item 8, Note 5 in the Notes 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 against us and a now former employee...

  • Page 49
    ... the effective tax rate and the U.S. Federal statutory rate are primarily due to tax holidays in Malaysia, the Philippines, Singapore and Thailand that expire at various dates from 2014 through 2025, the current year generation of income tax credits and the effect of California Proposition 39. As...

  • Page 50
    ... are generally related to production volume and the timing of purchases during the period. In 2012, the higher DPOs were primarily due to the impact of including HGST's accounts payable balances as of June 29, 2012, but only including HGST's cost of sales from the date of acquisition. From time to...

  • Page 51
    ...billion, net of cash acquired, used for the acquisitions, $76 million of proceeds related to the sale of equipment, and capital expenditures of $717 million. Our cash equivalents are invested in highly liquid money market funds that are invested in U.S. Treasury securities and U.S. Government Agency...

  • Page 52
    ...the prices, technology 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 commitments. Foreign Exchange Contracts...

  • Page 53
    ... next one to eight 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 Since May 18, 2012, our Board of Directors has...

  • Page 54
    ... product failure rates and trends, estimated replacement costs, estimated repair costs which include scrap 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 and assist...

  • Page 55
    ... values of all stock options and cash-settled stock appreciation rights ("SARs") granted are estimated using a binomial model, and the fair values of all Employee Stock Purchase Plan purchase rights are estimated using the Black-Scholes-Merton option-pricing model. We account for SARs as liability...

  • Page 56
    ... fluctuations on our results of operations. The contract maturity dates do not exceed 12 months. We do not purchase foreign exchange contracts for trading purposes. See Part II, Item 8, Notes 1 and 12 in the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K. 50

  • Page 57
    ... In 2014, 2013 and 2012, total net realized transaction and foreign exchange contract currency gains and losses were not material to our consolidated financial statements. Disclosure About Other Market Risks Variable Interest Rate Risk On January 9, 2014, the outstanding balance on the Prior Credit...

  • Page 58
    ...Years Ended June 27, 2014 ...Consolidated Statements of Shareholders' Equity - Three Years Ended June 27, 2014 ...Notes to Consolidated Financial Statements ...Financial Statement Schedule: Schedule II - Consolidated Valuation and Qualifying Accounts - Three Years Ended June 27, 2014 ... 53 55 56 57...

  • Page 59
    ...with the standards of the Public Company Accounting Oversight Board (United States), Western Digital Corporation and subsidiaries' internal control over financial reporting as of June 27, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of...

  • Page 60
    ... years in the three-year period ended June 27, 2014, and the related financial statement schedule, and our report dated August 14, 2014, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule. /s/ August 14, 2014 Irvine, California KPMG LLP 54

  • Page 61
    ...equipment, net ...Goodwill ...Other intangible assets, net ...Other non-current assets ...Total assets ...LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ...Accrued arbitration award ...Accrued expenses ...Accrued compensation ...Accrued warranty ...Current portion of long...

  • Page 62
    WESTERN DIGITAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) June 27, 2014 Years Ended June 28, 2013 June 29, 2012 Revenue, net ...Cost of revenue ...Gross profit ...Operating expenses: Research and development ...Selling, general and administrative ......

  • Page 63
    WESTERN DIGITAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) June 27, 2014 Years Ended June 28, June 29, 2013 2012 Net income ...Other comprehensive income (loss), net of tax: Net actuarial pension gain (loss) ...Translation gain (loss) ...Net unrealized gain (loss) on ...

  • Page 64
    ..., net ...Inventories ...Accounts payable ...Accrued arbitration award ...Accrued expenses ...Accrued compensation ...Other assets and liabilities ...Net cash provided by operating activities ...Cash flows from investing activities Purchases of property, plant and equipment ...Acquisitions, net of...

  • Page 65
    ...(11) Balance at July 1, 2011 ...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 of common stock ...Net income ...Actuarial pension...

  • Page 66
    ... of the Company. The results of operations of Virident, sTec, VeloBit and HGST since the respective dates of acquisition are included in the consolidated financial statements. Cash and Cash Equivalents The Company's cash equivalents represent highly liquid investments in money market funds, which...

  • Page 67
    ...value because of its variable interest rate. Concentration of Credit Risk The Company sells its products to computer manufacturers, resellers and retailers throughout the world. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral...

  • Page 68
    ... long-lived assets in 2014, 2013 and 2012. See Notes 13 and 17. Revenue and Accounts Receivable Revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred, or services have been rendered, the sales price...

  • Page 69
    ... help prepare estimates and assist the Company in exercising judgment in determining the underlying estimates. The statistical tracking model captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. Management...

  • Page 70
    ... under the Company's Employee Stock Purchase Plan ("ESPP") and restricted stock unit awards ("RSUs"). The following table illustrates the computation of basic and diluted income per common share (in millions, except per share data): June 27, 2014 Years Ended June 28, June 29, 2013 2012 Net income...

  • Page 71
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock-based Compensation The Company accounts for all stock-based compensation at fair value. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense ...

  • Page 72
    ... exchange contracts are for risk management purposes only. The Company does not purchase foreign exchange contracts for trading purposes. The Company had foreign exchange contracts with commercial banks for British Pound Sterling, Euro, Japanese Yen, Malaysian Ringgit, Philippine Peso, Singapore...

  • Page 73
    ... to foreign exchange contracts. Pensions and Other Postretirement Benefit Plans The Company has defined benefit pension plans and other postretirement plans covering certain employees in various countries. The benefits are based on the employees' years of service and compensation. The plans are...

  • Page 74
    ... 27, 2014 and June 28, 2013 (in millions): 2014 2013 Term loan ...Less amounts due in one year ...Long-term debt ... $2,438 (125) $2,313 $1,955 (230) $1,725 On March 8, 2012 (the "HGST Closing Date"), the Company, in its capacity as the parent entity and guarantor, Western Digital Technologies...

  • Page 75
    ... leases. The Company's operating leases consist of leased property and equipment that expire at various dates through 2022. Rental expense under these operating leases, including month-to-month rentals, was $59 million, $64 million and $41 million in 2014, 2013 and 2012, respectively. Future...

  • Page 76
    ..., "WD" refers to Western Digital Corporation or one or more of its subsidiaries excluding HGST prior to the HGST Closing Date. HGST refers to Hitachi Global Storage Technologies Holdings Pte. Ltd. or one or more of its subsidiaries as of the HGST Closing Date, and "the Company" refers to Western...

  • Page 77
    ... by Guzik allegedly relate to devices used to test hard disk drive heads and media. On November 30, 2013, WD entered into a settlement agreement for an amount that is not material to the Company's financial position, results of operations or cash flows, for which the Company recorded an accrual in...

  • Page 78
    ... States HDD heads, head gimbal assemblies, and head stack assemblies infringe the claims of the two patents at issue. The complaint seeks an injunction, unspecified monetary damages, fees and costs. Pursuant to the parties' stipulations, the Court has extended the deadline for the Company to respond...

  • Page 79
    ...the statutory rate of 10% from January 24, 2012 through June 27, 2014. Other Matters On December 22, 2011 the German Central Organization for Private Copying Rights (Zentralstelle für private Überspielungsrechte), ("ZPÜ"), an organization consisting of several levy collecting societies, submitted...

  • Page 80
    ... in one reportable operating segment, the hard drive business. Geographic Information The Company's operations outside the United States include manufacturing facilities in China, Japan, Malaysia, the Philippines, Singapore, and Thailand as well as sales offices throughout the Americas, Asia Pacific...

  • Page 81
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) compensation (up to Internal Revenue Service ("IRS") limitations). Company contributions vest over a 5-year period of employment. For 2014, 2013, and 2012, the Company made Plan contributions of $21 million, $19 ...

  • Page 82
    ... 2014, 2013 and 2012, respectively. As of June 27, 2014, total compensation cost related to unvested stock options granted under the Stock Plans and ESPP rights issued to employees but not yet recognized was $128 million and will be amortized on a straight-line basis over a weighted average service...

  • Page 83
    ... purchase an aggregate of 10.0 million shares with an exercise price below the quoted price of the Company's stock on that date resulting in an aggregate intrinsic value of $572 million at that date. During 2014, 2013 and 2012, the aggregate intrinsic value of options exercised under the Stock Plans...

  • Page 84
    ... of each RSU is the market price of the Company's stock on the date of grant. RSUs are generally payable in an equal number of shares of the Company's common stock at the time of the vesting of the units. The aggregate value of RSUs that became fully-vested during 2014, 2013 and 2012 was $89 million...

  • Page 85
    ... all ESPP purchase rights granted on or prior to June 27, 2014 have been estimated at the date of grant using a Black-Scholes-Merton option-pricing model with the following weighted average assumptions: 2014 ESPP 2013 2012 Option life (in years) ...Risk-free interest rate ...Stock price volatility...

  • Page 86
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2014. The remaining amount available to be purchased under the Company's stock repurchase program as of June 27, 2014 was $1.2 billion. The Company may continue to repurchase its stock as it deems appropriate and ...

  • Page 87
    ... signed into law on January 2, 2013 as part of the American Taxpayer Relief Act of 2012. The R&D credit, which had previously expired on December 31, 2011, was extended through December 31, 2013. In addition, the Company recorded an $88 million charge to reduce its previously recognized California...

  • Page 88
    ...follows (in millions): 2014 2013 Deferred tax assets: Sales related reserves and accrued expenses not currently deductible ...Accrued compensation and benefits not currently deductible ...Domestic net operating loss carryforward ...Business credit carryforward ...Long-lived assets ...Other ...Total...

  • Page 89
    ... 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 from 2015 through 2025. Certain of the holidays may be extended if specific conditions...

  • Page 90
    ... previously completed its field examination of the Company's federal income tax returns for fiscal years 2006 and 2007 and issued Revenue Agent Reports that proposed adjustments to income before income taxes of approximately $970 million primarily related to transfer pricing and intercompany payable...

  • Page 91
    ... about the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of June 27, 2014, and indicates the fair value hierarchy of the valuation techniques utilized to determine such value (in millions): Fair Value Measurements at Reporting Date Using Level...

  • Page 92
    ... market interest rates from multiple pricing sources. Auction-Rate Securities. The Company's auction-rate securities had maturity dates through 2050, were primarily backed by insurance products and were accounted for as available-for-sale securities. These investments were classified as long...

  • Page 93
    ... model. The market-based observable inputs for the model include forward rates and credit default swap rates. In 2014, there were no transfers between levels. However, in 2014 the Company sold its remaining Level 3 financial assets measured on a recurring basis. In addition, in 2012, the Company...

  • Page 94
    ... exchange contracts with credit-risk-related contingent features. The Company opened $4.5 billion and $4.9 billion, and closed $4.9 billion and $3.2 billion, in foreign exchange contracts for the years ended June 27, 2014 and June 28, 2013, respectively. The fair value and balance sheet location...

  • Page 95
    ... disclosures related to the Company's foreign exchange contracts. Note 13. Goodwill and Other Intangible Assets The following table summarizes goodwill activity over the last three fiscal years (in millions): Carrying Amount Balance as of June 29, 2012 ...Purchase price adjustments to goodwill...

  • Page 96
    ... 162 (1) 6 (2) - 2 167 $119 (1) During fiscal 2014 the Japan entity assumed benefit obligations and plan assets from Hitachi. These pension obligations related to former Hitachi employees who were hired into the HGST Japan entity during or soon after the 2012 acquisition of HGST by the Company. 90

  • Page 97
    ... 2014, 2013 and 2012: 2014 2013 2012 Discount rate ...Expected long-term rate of return on plan assets ...Rate of compensation increase ... 1.6% 3.5% 0.9% 1.8% 3.5% 1.2% 1.9% 3.5% 1.4% The Company develops a discount rate by calculating when the estimated benefit payments will be due. Management...

  • Page 98
    ... movements of assets between any level categories in 2014, 2013 or 2012. 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...

  • Page 99
    ... Annual benefit payments from the Japanese defined benefit pension plans are estimated to range from $7 million to $11 million annually over the next five years. Note 15. Acquisitions Acquisition of Virident On October 17, 2013, the Company acquired Virident, a provider of server-side flash storage...

  • Page 100
    ... the value of investments acquired in the acquisition of Virident. The $506 million of goodwill recognized is primarily attributable to the benefits the Company expects to derive from an ability to create server-side flash storage solutions leveraging the core technology acquired and is not expected...

  • Page 101
    ..., 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 assembly...

  • Page 102
    WESTERN DIGITAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 18. Quarterly Results of Operations (unaudited) First Second Third Fourth 2014(1) Revenue, net ...Gross profit ...Operating income ...Net income ...Basic income per common share ...Diluted income per common ...

  • Page 103
    WESTERN DIGITAL CORPORATION SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Three years ended June 27, 2014 (in millions) Allowance for Doubtful Accounts Balance at July 1, 2011 Other ...Additions charges to operations ...Balance at June 29, 2012 ...Additions charged to operations ......

  • Page 104
    ... our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report...

  • Page 105
    ... granted to executive officers and directors, on our Web site under the Governance section at www.westerndigital.com. Item 11. Executive Compensation There is incorporated herein by reference the information required by this Item included in the Company's Proxy Statement for the 2014 Annual...

  • Page 106
    ... as part of this Annual Report on Form 10-K. All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related Notes. Separate financial statements have been omitted as we are primarily an operating company...

  • Page 107
    ... undersigned, thereunto duly authorized. WESTERN DIGITAL CORPORATION By: /s/ TIMOTHY M. LEYDEN Timothy M. Leyden Chief Financial Officer Dated: August 14, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following...

  • Page 108
    ... 2.2 to the Company's Annual Report on Form 10-K (File No. 1-08703) with the Securities and Exchange Commission on August 12, 2011) Second Amendment to Stock Purchase Agreement, dated November 23, 2011, among Western Digital Corporation, Western Digital Ireland, Ltd., Hitachi, Ltd., and Viviti...

  • Page 109
    ...2011)* Form of Notice of Stock Option Grant and Stock Option Agreement - Non-Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan (Filed as Exhibit 10.1.5 to the Company's Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange...

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    ...on March 22, 2012)* Western Digital Corporation Summary of Compensation Arrangements for Named Executive Officers and Directors†* Amended and Restated Deferred Compensation Plan, amended and restated effective January 1, 2013 (Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-Q (File...

  • Page 111
    ...(Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 1-08703) with the Securities and Exchange Commission on January 9, 2014) Transition Services Agreement, dated March 7, 2011, among Hitachi, Ltd., Viviti Technologies Ltd. and Western Digital Corporation (Filed as Exhibit 10...

  • Page 112
    ....2 to the Company's Quarterly Report on Form 10-Q (File No. 1-08703) with the Securities and Exchange Commission on January 27, 2012)≠Subsidiaries of Western Digital Corporation†Consent of Independent Registered Public Accounting Firm†Certification of Principal Executive Officer Pursuant to...

  • Page 113
    ...HGST Philippines Corp...HGST Singapore Pte. Ltd...HGST Technologies Malaysia Sdn. Bhd. (formerly known as sTec Technology Sdn. Bhd.) ...HGST Technologies Santa Ana, Inc...HGST, Inc...HICAP Properties Corp...Keen Personal Media, Inc...Pacifica Insurance Corporation ...Read-Rite International ...Read...

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    ... Digital Taiwan Co., Ltd...Western Digital Technologies, Inc... Taiwan Philippines Delaware Australia India Delaware United Kingdom Singapore Malaysia Singapore Delaware Argentina Germany France Delaware Ireland Malaysia Singapore Thailand United Kingdom Ontario, Canada Delaware Brazil Hong Kong...

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    ... June 27, 2014, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of June 27, 2014, which reports appear in the June 27, 2014, Annual Report on Form 10-K of Western Digital Corporation. /s/ August 14, 2014 Irvine, California KPMG LLP

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    ... 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. STEPHEN D. MILLIGAN Stephen D. Milligan President and Chief Executive Officer Dated: August 14, 2014 /s/

  • Page 118
    Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Timothy M. Leyden, 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...

  • Page 119
    ... Exchange Act of 1934, as amended; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ STEPHEN D. MILLIGAN Stephen D. Milligan President and Chief Executive Officer Dated: August 14, 2014

  • Page 120
    ...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 27, 2014 (the "Report") fully complies with the requirements...

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    ... Officer Western Digital Corporation Akio Yamamoto Director, Vice President and Executive Officer Representative of Medical Systems Operations Group Hitachi Medical Corporation Masahiro Yamamura President Hitachi Power Semiconductor Device, Ltd. Board Committees 1 Audit Committee 2 Compensation...

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    ....695.6399 Transfer Agent and Registrar American Stock Transfer & Trust Company, LLC 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's common stock trades on The...