Separate Financial Information of Guarantor Subsidiaries

3 Months Ended

Oct. 04, 2019

Condensed Financial Information Disclosure [Abstract]

Separate Financial Information of Guarantor Subsidiaries

The Company’s 4.750% senior unsecured notes due 2026 (the “2026 Senior Unsecured Notes”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, subject to certain customary guarantor release conditions, by certain 100% owned material domestic subsidiaries of the Company (or the “Guarantor Subsidiaries”). The guarantee by a Guarantor Subsidiary will be released in the event of (i) the release of a Guarantor Subsidiary from its guarantee of indebtedness under the credit agreement governing the revolving credit facility and term loans or other indebtedness that would have required the Guarantor Subsidiary to guarantee the 2026 Senior Unsecured Notes, (ii) the sale, issuance or other disposition of capital stock of a Guarantor Subsidiary such that it is no longer a restricted subsidiary under the indenture governing the 2026 Senior Unsecured Notes, (iii) the sale of all or substantially all of a Guarantor Subsidiary’s assets, (iv) the Company’s exercise of its defeasance options under the indenture governing the 2026 Senior Unsecured Notes, (v) the dissolution or liquidation of a Guarantor Subsidiary or (vi) the sale of all the equity interest in a Guarantor Subsidiary. The Company’s other domestic subsidiaries and its foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) do not guarantee the 2026 Senior Unsecured Notes. The following condensed consolidating financial information reflects the summarized financial information of Western Digital Corporation (“Parent”), the Guarantor Subsidiaries on a combined basis, and the Non-Guarantor Subsidiaries on a combined basis.



Condensed Consolidating Balance Sheet
As of October 4, 2019

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Company
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	7	$	579	$	2,662	$	—		$	3,248
Accounts receivable, net	—		1,031		417		—			1,448
Intercompany receivables	2,514		6,248		1,738		(10,500		)	—
Inventories	—		797		2,602		(112		)	3,287
Loans due from consolidated affiliates	—		—		58		(58		)	—
Other current assets	—		263		254		—			517
Total current assets	2,521		8,918		7,731		(10,670		)	8,500
Property, plant and equipment, net	—		857		1,939		—			2,796
Notes receivable and investments in Flash Ventures	—		—		2,629		—			2,629
Goodwill	—		390		9,700		—			10,090
Other intangible assets, net	—		19		1,495		—			1,514
Investments in consolidated subsidiaries	20,616		15,884		—		(36,500		)	—
Loans due from consolidated affiliates	—		1,164		—		(1,164		)	—
Other non-current assets	58		237		456		—			751
Total assets	$	23,195	$	27,469	$	23,950	$	(48,334	)	$	26,280

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	166	$	1,558	$	—		$	1,724
Accounts payable to related parties	—		42		465		—			507
Intercompany payables	2,067		3,702		4,731		(10,500		)	—
Accrued expenses	174		689		511		—			1,374
Accrued compensation	—		263		169		—			432
Loans due to consolidated affiliates	—		58		—		(58		)	—
Current portion of long-term debt	251		—		—		—			251
Total current liabilities	2,492		4,920		7,434		(10,558		)	4,288
Long-term debt	9,927		—		34		—			9,961
Loans due to consolidated affiliates	1,141		—		23		(1,164		)	—
Other liabilities	69		1,853		543		—			2,465
Total liabilities	13,629		6,773		8,034		(11,722		)	16,714
Total shareholders’ equity	9,566		20,696		15,916		(36,612		)	9,566
Total liabilities and shareholders’ equity	$	23,195	$	27,469	$	23,950	$	(48,334	)	$	26,280



Condensed Consolidating Balance Sheet
As of June 28, 2019

	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Company
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	8	$	985	$	2,462	$	—		$	3,455
Accounts receivable, net	—		779		425		—			1,204
Intercompany receivables	2,409		5,808		1,581		(9,798		)	—
Inventories	—		990		2,438		(145		)	3,283
Loans due from consolidated affiliates	—		—		50		(50		)	—
Other current assets	2		251		282		—			535
Total current assets	2,419		8,813		7,238		(9,993		)	8,477
Property, plant and equipment, net	—		873		1,970		—			2,843
Notes receivable and investments in Flash Ventures	—		—		2,791		—			2,791
Goodwill	—		388		9,688		—			10,076
Other intangible assets, net	—		23		1,688		—			1,711
Investments in consolidated subsidiaries	20,772		16,355		—		(37,127		)	—
Loans due from consolidated affiliates	—		674		—		(674		)	—
Other non-current assets	60		51		361		—			472
Total assets	$	23,251	$	27,177	$	23,736	$	(47,794	)	$	26,370

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	195	$	1,372	$	—		$	1,567
Accounts payable to related parties	—		—		331		—			331
Intercompany payables	1,871		3,515		4,412		(9,798		)	—
Accrued expenses	195		522		579		—			1,296
Accrued compensation	—		214		133		—			347
Loans due to consolidated affiliates	—		50		—		(50		)	—
Current portion of long-term debt	276		—		—		—			276
Total current liabilities	2,342		4,496		6,827		(9,848		)	3,817
Long-term debt	10,213		—		33		—			10,246
Loans due to consolidated affiliates	674		—		—		(674		)	—
Other liabilities	55		1,795		490		—			2,340
Total liabilities	13,284		6,291		7,350		(10,522		)	16,403
Total shareholders’ equity	9,967		20,886		16,386		(37,272		)	9,967
Total liabilities and shareholders’ equity	$	23,251	$	27,177	$	23,736	$	(47,794	)	$	26,370



Condensed Consolidating Statement of Operations
For the three months ended October 4, 2019

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	3,361		$	3,984		$	(3,305	)	$	4,040
Cost of revenue	—			2,952			3,690			(3,360		)	3,282
Gross profit	—			409			294			55			758
Operating expenses:
Research and development	—			364			210			—			574
Selling, general and administrative	1			203			101			—			305
Intercompany operating expense (income)	3			(425		)	422			—			—
Employee termination, asset impairment, and other charges	—			—			8			—			8
Total operating expenses	4			142			741			—			887
Operating income (loss)	(4		)	267			(447		)	55			(129		)
Interest and other income (expense):
Interest income	—			12			10			(10		)	12
Interest expense	(131		)	—			(1		)	10			(122		)
Other income, net	—			—			2			—			2
Total interest and other income (expense), net	(131		)	12			11			—			(108		)
Income (loss) before taxes	(135		)	279			(436		)	55			(237		)
Equity in earnings from subsidiaries	(164		)	(460		)	—			624			—
Income tax expense (benefit)	(23		)	39			23			—			39
Net loss	$	(276	)	$	(220	)	$	(459	)	$	679		$	(276	)



Condensed Consolidating Statement of Operations
For the three months ended September 28, 2018

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	3,485		$	4,996		$	(3,453	)	$	5,028
Cost of revenue	—			3,005			3,824			(3,465		)	3,364
Gross profit	—			480			1,172			12			1,664
Operating expenses:
Research and development	—			363			213			—			576
Selling, general and administrative	1			251			104			—			356
Intercompany operating expense (income)	—			(407		)	407			—			—
Employee termination, asset impairment, and other charges	—			32			14			—			46
Total operating expenses	1			239			738			—			978
Operating income (loss)	(1		)	241			434			12			686
Interest and other income (expense):
Interest income	8			3			12			(8		)	15
Interest expense	(116		)	(6		)	(2		)	8			(116		)
Other income (expense), net	1			—			(1		)	(2		)	(2		)
Total interest and other income (expense), net	(107		)	(3		)	9			(2		)	(103		)
Income (loss) before taxes	(108		)	238			443			10			583
Equity in earnings from subsidiaries	475			345			—			(820		)	—
Income tax expense (benefit)	(144		)	118			98			—			72
Net income	$	511		$	465		$	345		$	(810	)	$	511



Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended October 4, 2019

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net loss	$	(276	)	$	(220	)	$	(459	)	$	679		$	(276	)
Other comprehensive loss, before tax:
Actuarial pension gain	1			1			1			(2		)	1
Foreign currency translation adjustment	5			5			5			(10		)	5
Net unrealized loss, on derivative contracts and available-for-sale securities	(33		)	(8		)	(9		)	17			(33		)
Total other comprehensive loss, before tax	(27		)	(2		)	(3		)	5			(27		)
Income tax benefit (expense) related to items of other comprehensive loss	5			(1		)	(1		)	2			5
Other comprehensive loss, net of tax	(22		)	(3		)	(4		)	7			(22		)
Total comprehensive loss	$	(298	)	$	(223	)	$	(463	)	$	686		$	(298	)



Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended September 28, 2018

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net income	$	511		$	465		$	345		$	(810	)	$	511
Other comprehensive loss, before tax:
Foreign currency translation adjustment	(37		)	(34		)	(34		)	68			(37		)
Net unrealized loss, on derivative contracts and available-for-sale securities	(1		)	(8		)	(10		)	18			(1		)
Total other comprehensive loss, before tax	(38		)	(42		)	(44		)	86			(38		)
Income tax benefit related to items of other comprehensive loss	1			—			1			(1		)	1
Other comprehensive loss, net of tax	(37		)	(42		)	(43		)	85			(37		)
Total comprehensive income	$	474		$	423		$	302		$	(725	)	$	474



Condensed Consolidating Statement of Cash Flows
For the three months ended October 4, 2019

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	(178	)	$	204		$	200		$	27		$	253
Cash flows from investing activities
Purchases of property, plant and equipment	—			(46		)	(99		)	—			(145		)
Acquisitions, net of cash acquired	—			(2		)	(20		)	—			(22		)
Notes receivable issuances to Flash Ventures	—			—			(171		)	—			(171		)
Notes receivable proceeds from Flash Ventures	—			—			357			—			357
Strategic investments and other, net	—			—			15			—			15
Intercompany loan from (to) consolidated affiliates	—			(490		)	(8		)	498			—
Advances from (to) parent and consolidated affiliates	126			(126		)	—			—			—
Net cash provided by (used in) investing activities	126			(664		)	74			498			34
Cash flows from financing activities										—
Issuance of stock under employee stock plans	26			—			—			—			26
Taxes paid on vested stock awards under employee stock plans	(52		)	—			—			—			(52		)
Dividends paid to shareholders	(147		)	—			—			—			(147		)
Repayment of debt	(319		)	—			—			—			(319		)
Intercompany loan from (to) consolidated affiliates	467			8			23			(498		)	—
Change in investment in consolidated subsidiaries	76			46			(95		)	(27		)	—
Net cash provided by (used in) financing activities	51			54			(72		)	(525		)	(492		)
Effect of exchange rate changes on cash	—			—			(2		)	—			(2		)
Net increase (decrease) in cash and cash equivalents	(1		)	(406		)	200			—			(207		)
Cash and cash equivalents, beginning of year	8			985			2,462			—			3,455
Cash and cash equivalents, end of period	$	7		$	579		$	2,662		$	—		$	3,248



Condensed Consolidating Statement of Cash Flows
For the three months ended September 28, 2018

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	(101	)	$	(691	)	$	1,244		$	253		$	705
Cash flows from investing activities
Purchases of property, plant and equipment	—			(63		)	(214		)	—			(277		)
Purchases of investments	—			(2		)	(9		)	—			(11		)
Proceeds from sale of investments	—			—			6			—			6
Proceeds from maturities of investments	—			—			3			—			3
Notes receivable issuances to Flash Ventures	—			—			(115		)	—			(115		)
Notes receivable proceeds from Flash Ventures	—			—			144			—			144
Strategic investments and other, net	—			—			(9		)	—			(9		)
Intercompany loan from (to) consolidated affiliates	696			—			—			(696		)	—
Advances from (to) parent and consolidated affiliates	97			(97		)	—			—			—
Net cash provided by (used in) investing activities	793			(162		)	(194		)	(696		)	(259		)
Cash flows from financing activities
Issuance of stock under employee stock plans	8			—			—			—			8
Taxes paid on vested stock awards under employee stock plans	(66		)	—			—			—			(66		)
Repurchases of common stock	(563		)	—			—			—			(563		)
Dividends paid to shareholders	(148		)	—			—			—			(148		)
Repayment of debt	(38		)	—			—			—			(38		)
Intercompany loan from (to) consolidated affiliates	—			(180		)	(516		)	696			—
Change in investment in consolidated subsidiaries	80			1,426			(1,253		)	(253		)	—
Net cash provided by (used in) financing activities	(727		)	1,246			(1,769		)	443			(807		)
Effect of exchange rate changes on cash	—			—			2			—			2
Net increase (decrease) in cash and cash equivalents	(35		)	393			(717		)	—			(359		)
Cash and cash equivalents, beginning of year	40			668			4,297			—			5,005
Cash and cash equivalents, end of period	$	5		$	1,061		$	3,580		$	—		$	4,646