EX-99.2

EX-99.2 3 d187475dex992.htm EX-99.2 EX-99.2

Exhibit 99.2


Amounts in millions, except per share amounts, ASP, percentages	Q4 FY12			Q1 FY13			Q2 FY13			Q3 FY13			Q4 FY13			Q1 FY14			Q2 FY14			Q3 FY14			Q4 FY14			Q1 FY15			Q2 FY15			Q3 FY15			Q4 FY15			Q1 FY16			Q2 FY16			Q3 FY16⁹			Revenue by Channel R4Q Ending Q3 FY16 Revenue by Geography R4Q Ending Q3 FY16
TAM		156.7			139.1			135.8			135.9			133.3			140.2			142.2			138.1			138.0			147.3			140.8			125.0			111.0			118.7			115.1			99.8
HDD Share		45.3	%		44.9	%		43.6	%		44.3	%		44.9	%		44.7	%		44.4	%		43.8	%		45.7	%		44.0	%		43.4	%		43.6	%		43.7	%		43.6	%		43.2	%		43.2	%
Units (HDD)²		71.0			62.5			59.2			60.2			59.9			62.6			63.1			60.4			63.1			64.7			61.0			54.5			48.5			51.7			49.7			43.1
ASP (HDD)	$	65		$	62		$	62		$	61		$	60		$	58		$	60		$	58		$	56		$	58		$	60		$	61		$	60		$	60		$	61		$	60
Revenue	$	4,754		$	4,035		$	3,824		$	3,764		$	3,728		$	3,804		$	3,972		$	3,703		$	3,651		$	3,943		$	3,888		$	3,550		$	3,191		$	3,360		$	3,317		$	2,822
Gross Profit	$	1,472		$	1,193		$	1,059		$	1,061		$	1,050		$	1,099		$	1,156		$	1,076		$	1,029		$	1,149		$	1,110		$	1,032		$	930		$	955		$	906		$	753
Gross Margin		31.0	%		29.6	%		27.7	%		28.2	%		28.2	%		28.9	%		29.1	%		29.1	%		28.2	%		29.1	%		28.5	%		29.1	%		29.1	%		28.4	%		27.3	%		26.7	%
R&D	$	406		$	396		$	378		$	396		$	402		$	401		$	416		$	418		$	426		$	437		$	426		$	402		$	381		$	385		$	389		$	359
SG&A		178			179			162			185			180			132			226			201			202			220			164			199			190			192			207			166
Other		80			26			41			63			689			24			36			38			49			23			54			10			104			56			59			140

Total Operating Expenses	$	664		$	601		$	581		$	644		$	1,271		$	557		$	678		$	657		$	677		$	680		$	644		$	611		$	675		$	633		$	655		$	665
Operating Income (Loss)	$	808		$	592		$	478		$	417		$	(221	)	$	542		$	478		$	419		$	352		$	469		$	466		$	421		$	255		$	322		$	251		$	88
Net Income (Loss)	$	745		$	519		$	335		$	391		$	(265	)	$	495		$	430		$	375		$	317		$	423		$	438		$	384		$	220		$	283		$	251		$	74
EPS	$	2.87		$	2.06		$	1.36		$	1.60		$	(1.12	)	$	2.05		$	1.77		$	1.55		$	1.32		$	1.76		$	1.84		$	1.63		$	0.94		$	1.21		$	1.07		$	0.32
Diluted Shares Outstanding		260			252			246			245			236			242			243			242			241			240			238			236			235			234			234			234
Non-GAAP Results Gross Profit¹⁰	$	1,511		$	1,231		$	1,097		$	1,099		$	1,085		$	1,135		$	1,196		$	1,115		$	1,078		$	1,188		$	1,187		$	1,069		$	951		$	972		$	944		$	794
Gross Margin¹⁰		31.8	%		30.5	%		28.7	%		29.2	%		29.1	%		29.8	%		30.1	%		30.1	%		29.5	%		30.1	%		30.5	%		30.1	%		29.8	%		28.9	%		28.5	%		28.1	%
Operating Expenses¹⁰	$	572		$	564		$	529		$	559		$	564		$	574		$	616		$	605		$	598		$	638		$	620		$	591		$	560		$	567		$	542		$	477
Net Income	$	872		$	594		$	513		$	514		$	477		$	514		$	532		$	470		$	445		$	504		$	539		$	441		$	356		$	366		$	374		$	283
EPS⁶	$	3.35		$	2.36		$	2.09		$	2.10		$	1.96		$	2.12		$	2.19		$	1.94		$	1.85		$	2.10		$	2.26		$	1.87		$	1.51		$	1.56		$	1.60		$	1.21
Revenue By Channel OEM		69	%		63	%		61	%		60	%		66	%		64	%		62	%		62	%		65	%		63	%		63	%		64	%		67	%		67	%		65	%		66	%
Distributors		21	%		24	%		24	%		26	%		23	%		24	%		24	%		25	%		23	%		24	%		23	%		23	%		21	%		21	%		21	%		22	%
Retail		10	%		13	%		15	%		14	%		11	%		12	%		14	%		13	%		12	%		13	%		14	%		13	%		12	%		12	%		14	%		12	%
Revenue by Geography Americas		27	%		23	%		27	%		27	%		28	%		26	%		25	%		25	%		24	%		27	%		27	%		29	%		32	%		30	%		31	%		30	%
EMEA		18	%		18	%		23	%		22	%		19	%		20	%		23	%		21	%		20	%		21	%		24	%		21	%		21	%		21	%		23	%		23	%
Asia/ANZ		55	%		59	%		50	%		51	%		53	%		54	%		52	%		54	%		56	%		52	%		49	%		50	%		47	%		49	%		46	%		47	%
Top 10 Customers Revenue		53	%		44	%		45	%		45	%		48	%		48	%		42	%		44	%		45	%		45	%		44	%		43	%		44	%		48	%		44	%		45	%
Enterprise SSD Revenue	$	54		$	70		$	89		$	92		$	104		$	106		$	155		$	134		$	113		$	156		$	187		$	224		$	244		$	233		$	270		$	200
Non-PC Revenue¹²		45	%		46	%		51	%		51	%		52	%		53	%		54	%		53	%		54	%		55	%		58	%		60	%		65	%		66	%		65	%		64	%
PC Units⁵ Notebook		32.773			25.887			21.300			21.547			23.989			22.912			22.662			21.814			22.899			23.396			21.178			18.785			15.513			15.804			15.318			13.577
Desktop		21.211			16.819			17.717			18.383			16.185			17.307			16.825			16.635			16.182			16.320			15.375			13.523			11.601			11.683			12.458			10.681
Non-PC Units Consumer Electronics⁴		4.155			8.019			6.452			6.517			6.544			8.474			8.794			8.573			10.906			10.485			9.295			8.610			9.056			11.484			8.461			7.318
Branded		4.986			5.767			7.139			6.517			5.281			6.146			7.018			6.272			6.012			6.780			7.156			6.090			5.151			5.575			6.443			5.157
Enterprise		7.913			5.988			6.633			7.211			7.897			7.771			7.783			7.129			7.098			7.763			8.041			7.519			7.199			7.185			7.008			6.390

Total HDD		71.038			62.480			59.241			60.175			59.896			62.610			63.082			60.423			63.097			64.744			61.045			54.527			48.520			51.731			49.688			43.123
Average GB Shipped		668			708			804			805			797			811			874			888			875			1,001			1,088			1,123			1,159			1,228			1,390			1,443
EB Shipped		47.4			44.3			47.6			48.4			47.7			50.8			55.1			53.6			55.2			64.8			66.4			61.3			56.2			63.5			69.1			62.2
R4Q EB Shipped		126.3			133.9			165.1			187.8			188.0			194.5			202.0			207.2			214.7			228.7			240.0			247.7			248.7			247.4			250.1			251.0


Volume and HDD Share²	Revenue and Non-GAAP Gross Margin¹⁰	Non-GAAP EPS Analysis


Page 1		WDC Quarterly Fact Sheet – Q3 FY16


Balance sheet, cash flows, earnings, dividends and share repurchase amounts in millions	Q4 FY12			Q1 FY13			Q2 FY13			Q3 FY13			Q4 FY13			Q1 FY14			Q2 FY14			Q3 FY14			Q4 FY14			Q1 FY15			Q2 FY15			Q3 FY15			Q4 FY15			Q1 FY16			Q2 FY16			Q3 FY16			Business Model (Non-GAAP) Gross Margin* 27%-32% Operating Expense* 10%-12% Operating Income* 15%-22% Tax 7%-10% of Income Before Tax Capital Expenditures* 5%-7% Conversion Cycle 4-8 Days *Percent of Revenue
Cash and Cash Equivalents	$	3,208		$	3,537		$	3,816		$	4,060		$	4,309		$	4,869		$	4,655		$	4,569		$	4,804		$	5,159		$	4,902		$	4,812		$	5,024		$	5,081		$	5,363		$	5,887
Available-for-Sale (AFS) Securities		—			—			—			—			—			—			—			470			499			454			465			523			590			704			732			146
Debt		(2,185	)		(2,128	)		(2,128	)		(2,013	)		(1,955	)		(2,398	)		(2,340	)		(2,469	)		(2,438	)		(2,406	)		(2,375	)		(2,344	)		(2,567	)		(2,536	)		(2,505	)		(2,203	)

Net Cash, Cash Equivalents & AFS Securities	$	1,023		$	1,409		$	1,688		$	2,047		$	2,354		$	2,471		$	2,315		$	2,570		$	2,865		$	3,207		$	2,992		$	2,991		$	3,047		$	3,249		$	3,590		$	3,830
Cash Flow From Operations	$	1,128		$	936		$	772		$	727		$	684		$	680		$	727		$	697		$	713		$	827		$	243		$	684		$	488		$	545		$	598		$	485
Free Cash Flow	$	804		$	554		$	526		$	539		$	548		$	544		$	557		$	536		$	552		$	667		$	97		$	534		$	332		$	394		$	449		$	352
Capital Expenditures	$	324		$	382		$	246		$	188		$	136		$	136		$	170		$	161		$	161		$	160		$	146		$	150		$	156		$	151		$	149		$	133
Depreciation and Amortization	$	339		$	313		$	309		$	309		$	302		$	312		$	317		$	307		$	308		$	289		$	290		$	285		$	250		$	236		$	252		$	246
EBITDA	$	1,147		$	905		$	787		$	726		$	81		$	854		$	795		$	726		$	660		$	758		$	756		$	706		$	505		$	558		$	503		$	334
Accounts Receivable, Net	$	2,364		$	1,951		$	1,732		$	1,700		$	1,793		$	1,791		$	1,959		$	1,802		$	1,989		$	1,915		$	1,880		$	1,696		$	1,532		$	1,616		$	1,650		$	1,254
Inventory Raw Materials	$	245		$	237		$	193		$	191		$	167		$	208		$	201		$	204		$	168		$	178		$	154		$	173		$	168		$	135		$	130		$	133
Work in Process		552			559			581			583			575			579			581			519			493			509			510			498			500			507			474			440
Finished Goods		413			508			430			423			446			457			511			554			565			585			618			651			700			618			634			654

Total Inventory	$	1,210		$	1,304		$	1,204		$	1,197		$	1,188		$	1,244		$	1,293		$	1,277		$	1,226		$	1,272		$	1,282		$	1,322		$	1,368		$	1,260		$	1,238		$	1,227
Property, Plant and Equipment, Net	$	4,067		$	4,027		$	3,938		$	3,803		$	3,700		$	3,638		$	3,509		$	3,406		$	3,293		$	3,202		$	3,099		$	3,051		$	2,965		$	2,890		$	2,801		$	2,687
Accounts Payable	$	2,773		$	2,545		$	2,185		$	2,037		$	1,990		$	2,061		$	2,106		$	1,902		$	1,971		$	2,016		$	2,071		$	2,020		$	1,881		$	1,799		$	1,806		$	1,571
Days Sales Outstanding¹¹		45			44			41			41			44			43			45			44			50			48			44			44			44			44			45			40
Days Inventory Outstanding¹¹		34			42			40			40			40			42			42			44			42			45			42			48			55			48			47			54
Days Payables Outstanding¹¹		77			82			72			69			67			69			68			65			68			71			68			73			76			68			68			69
Cash Conversion Cycle¹¹		2			4			9			12			17			16			19			23			24			22			18			19			23			24			24			25
Inventory Turns¹¹		11			9			9			9			9			9			9			8			9			8			9			8			7			8			8			7
Dividends Paid	$	—		$	—		$	121		$	—		$	60		$	59		$	59		$	71		$	70		$	94		$	94		$	93		$	116		$	115		$	116		$	116
Shares Repurchased		16.4			5.2			4.2			5.2			4.4			2.3			2.0			2.8			3.2			2.2			3.2			2.2			2.0			0.7			—			—
Shares Repurchased	$	604		$	218		$	146		$	243		$	235		$	150		$	150		$	244		$	272		$	223		$	309		$	240		$	198		$	60		$	—		$	—
Remaining Amount Authorized	$	1,312		$	2,594		$	2,448		$	2,205		$	1,970		$	1,820		$	1,670		$	1,426		$	1,154		$	931		$	622		$	2,382		$	2,184		$	2,124		$	2,124		$	2,124
R4Q Economic Profit⁸	$	542		$	801		$	976		$	884		$	(59	)	$	(176	)	$	(109	)	$	(158	)	$	415		$	332		$	328		$	320		$	203		$	52		$	(157	)	$	(440	)
R4Q ROIC⁸		20.4	%		21.3	%		21.0	%		20.0	%		10.1	%		9.7	%		10.5	%		10.2	%		15.1	%		14.2	%		14.1	%		14.1	%		13.1	%		11.7	%		10.0	%		7.4	%
R4Q ROA⁸		14.3	%		14.9	%		14.7	%		14.2	%		7.0	%		6.7	%		7.2	%		7.0	%		10.6	%		10.0	%		10.1	%		10.2	%		9.6	%		8.7	%		7.5	%		5.4	%
Worldwide Headcount³		103,111			96,002			93,820			87,565			85,777			87,586			87,976			84,556			84,072			83,277			83,993			80,767			76,449			76,052			74,891			67,884

Gross vs. Net Cash, Cash

Equivalents & AFS Securities

R&D¹⁰ and Capital Expenditures

Free Cash Flow

R4Q ROIC & R4Q Economic Profit⁸


Page 2		WDC Quarterly Fact Sheet – Q3 FY16

Non-GAAP Financial Measures

Free Cash Flow: Free cash flow is a non-GAAP financial measure defined as cash flows from operations less capital expenditures. We consider free cash flow to be useful as an indicator of our overall liquidity, as the amount of free cash flow generated in any period is representative of cash that is available for strategic opportunities including, among others, investing in the Company’s business, making strategic acquisitions, strengthening the balance sheet, repaying debt, paying dividends and repurchasing stock. Free cash flow should not be construed as an alternative to cash flows from operations or other cash flow measurements determined in accordance with GAAP.

EBITDA: EBITDA is a non-GAAP financial measure defined as net income before interest, income tax expense, depreciation and amortization. We include information concerning EBITDA because we believe it is a useful measure to evaluate our operating performance. As a measure of our operating performance, we believe EBITDA provides a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. While EBITDA is a relevant and widely used measure of operating performance, it does not represent net income as defined by GAAP and it should not be considered as an alternative to that measure in evaluating operating performance.

Non-GAAP Gross Margin and Non-GAAP Gross Profit: Non-GAAP gross margin is a non-GAAP measure defined as non-GAAP gross profit divided by revenue. Non-GAAP gross profit is a non-GAAP measure defined as gross profit before any charges to cost of goods sold that may not be indicative of ongoing operations. We believe that non-GAAP gross profit is a useful measure to investors as an alternative method for measuring our operating performance and comparing it against prior periods’ performance.

Non-GAAP Operating Expenses: Non-GAAP operating expenses is a non-GAAP measure defined as operating expenses before any charges that may not be indicative of ongoing operations. We believe that non-GAAP operating expenses is a useful measure to investors as an alternative method for measuring our expense management and comparing it against prior periods’ performance.

Non-GAAP Net Income and Non-GAAP EPS: Non-GAAP net income and non-GAAP EPS are non-GAAP measures defined as net income and EPS, respectively, before any charges that may not be indicative of ongoing operations, or any tax impact related to those charges. We believe that non-GAAP net income and non-GAAP EPS are useful measures to investors as an alternative method for measuring our earnings performance and comparing it against prior periods’ performance.

Non-GAAP income tax provision as a percentage of non-GAAP pre-tax income: Non-GAAP income tax provision is a non-GAAP measure defined as income tax provision plus any income tax adjustments that may not be indicative of ongoing operations. We believe that non-GAAP income tax provision as a percentage of non-GAAP pre-tax income is a useful measure to investors as an alternative method for measuring our effective tax rate and comparing it against prior periods’ performance.


In millions, except gross margin and per share amounts	Q4 FY12			Q1 FY13			Q2 FY13			Q3 FY13			Q4 FY13			Q1 FY14			Q2 FY14			Q3 FY14			Q4 FY14			Q1 FY15			Q2 FY15			Q3 FY15			Q4 FY15			Q1 FY16			Q2 FY16			Q3 FY16
Reconciliation of Cash Flows from Operations to Free Cash Flow
Cash Flows from Operations	$	1,128		$	936		$	772		$	727		$	684		$	680		$	727		$	697		$	713		$	827		$	243		$	684		$	488		$	545		$	598		$	485
Capital Expenditures		(324	)		(382	)		(246	)		(188	)		(136	)		(136	)		(170	)		(161	)		(161	)		(160	)		(146	)		(150	)		(156	)		(151	)		(149	)		(133	)

Free Cash Flow	$	804		$	554		$	526		$	539		$	548		$	544		$	557		$	536		$	552		$	667		$	97		$	534		$	332		$	394		$	449		$	352
Reconciliation of Net Income to EBITDA
Net Income (Loss)	$	745		$	519		$	335		$	391		$	(265	)	$	495		$	430		$	375		$	317		$	423		$	438		$	384		$	220		$	283		$	251		$	74
Interest		7			14			10			11			9			10			11			13			5			9			8			9			8			8			7			8
Income Tax Provision		56			59			133			15			35			37			37			31			30			37			20			28			27			31			(7	)		6
Depreciation and Amortization		339			313			309			309			302			312			317			307			308			289			290			285			250			236			252			246

EBITDA	$	1,147		$	905		$	787		$	726		$	81		$	854		$	795		$	726		$	660		$	758		$	756		$	706		$	505		$	558		$	503		$	334
Reconciliation of Gross Margin to Non-GAAP Gross Margin & Gross Profit to Non-GAAP Gross Profit
Gross Profit¹⁰	$	1,472		$	1,193		$	1,059		$	1,061		$	1,050		$	1,099		$	1,156		$	1,076		$	1,029		$	1,149		$	1,110		$	1,032		$	930		$	955		$	906		$	753
Acquisition-related charges		—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Charges related to cost saving initiatives		—			—			—			—			—			—			—			—			—			—			—			—			—			—			22			25
Other charges		—			—			—			—			—			—			—			—			10			—			39			—			1			—			—			—
Amortization of acquired intangible assets		39			38			38			38			35			36			40			39			39			39			38			37			20			17			16			16

Non-GAAP Gross Profit¹⁰	$	1,511		$	1,231		$	1,097		$	1,099		$	1,085		$	1,135		$	1,196		$	1,115		$	1,078		$	1,188		$	1,187		$	1,069		$	951		$	972		$	944		$	794
Revenue	$	4,754		$	4,035		$	3,824		$	3,764		$	3,728		$	3,804		$	3,972		$	3,703		$	3,651		$	3,943		$	3,888		$	3,550		$	3,191		$	3,360		$	3,317		$	2,822
Gross Margin¹⁰		31.0	%		29.6	%		27.7	%		28.2	%		28.2	%		28.9	%		29.1	%		29.1	%		28.2	%		29.1	%		28.5	%		29.1	%		29.1	%		28.4	%		27.3	%		26.7	%
Non-GAAP Gross Margin¹⁰		31.8	%		30.5	%		28.7	%		29.2	%		29.1	%		29.8	%		30.1	%		30.1	%		29.5	%		30.1	%		30.5	%		30.1	%		29.8	%		28.9	%		28.5	%		28.1	%
Reconciliation of Operating Expenses to Non-GAAP Operating Expenses
Total Operating Expenses	$	664		$	601		$	581		$	644		$	1,271		$	557		$	678		$	657		$	677		$	680		$	644		$	611		$	675		$	633		$	655		$	665
Less:
Amortization of acquired intangible assets		(12	)		(11	)		(11	)		(11	)		(11	)		(11	)		(11	)		(11	)		(8	)		(7	)		(7	)		(7	)		(8	)		(8	)		(8	)		(6	)
Employee termination, asset impairment and other charges		(80	)		(26	)		(41	)		(63	)		(8	)		(11	)		(23	)		(25	)		(26	)		(9	)		(36	)		(10	)		(104	)		(56	)		(27	)		(140	)
Charges related to cost saving initiatives		—			—			—			—			—			—			—			—			—			—			—			—			—			—			(15	)		(24	)
Charges related to arbitration award		—			—			—			—			(681	)		(13	)		(13	)		(13	)		(13	)		(14	)		(1	)		—			—			—			(32	)		—
Acquisition-related charges		—			—			—			—			(7	)		(13	)		—			—			—			—			—			(3	)		—			—			(27	)		(16	)
Charges and insurance recoveries related to flooding, net		—			—			—			—			—			65			—			—			—			—			37			—			—			—			—			—
Other charges		—			—			—			(11	)		—			—			(15	)		(3	)		(32	)		(12	)		(17	)		—			(3	)		(2	)		(4	)		(2	)

Non-GAAP Operating Expenses	$	572		$	564		$	529		$	559		$	564		$	574		$	616		$	605		$	598		$	638		$	620		$	591		$	560		$	567		$	542		$	477
Reconciliation of Net Income (Loss) to Non-GAAP Net Income
Net Income (Loss)	$	745		$	519		$	335		$	391		$	(265	)	$	495		$	430		$	375		$	317		$	423		$	438		$	384		$	220		$	283		$	251		$	74
Amortization of acquired intangible assets		51			49			49			49			46			47			51			50			47			46			45			44			28			25			24			22
Employee termination, asset impairment and other charges		80			26			41			63			8			11			23			25			36			9			53			10			104			56			27			140
Charges related to cost saving initiatives		—			—			—			—			—			—			—			—			—			—			—			—			—			—			37			49
Charges related to arbitration award		—			—			—			—			681			13			13			13			13			14			1			—			—			—			32			—
Acquisition-related charges		—			—			—			—			7			13			—			—			—			—			—			3			—			—			27			16
Charges and insurance recoveries related to flooding, net		—			—			—			—			—			(65	)		—			—			—			—			(37	)		—			—			—			—			—
Other charges		—			—			—			11			—			—			15			7			32			12			39			—			4			2			4			2
Income tax adjustments		(4	)		—			88			—			—			—			—			—			—			—			—			—			—			—			(28	)		(20	)

Non-GAAP Net Income	$	872		$	594		$	513		$	514		$	477		$	514		$	532		$	470		$	445		$	504		$	539		$	441		$	356		$	366		$	374		$	283
EPS	$	2.87		$	2.06		$	1.36		$	1.60		$	(1.12	)	$	2.05		$	1.77		$	1.55		$	1.32		$	1.76		$	1.84		$	1.63		$	0.94		$	1.21		$	1.07		$	0.32
Non-GAAP EPS	$	3.35		$	2.36		$	2.09		$	2.10		$	1.96		$	2.12		$	2.19		$	1.94		$	1.85		$	2.10		$	2.26		$	1.87		$	1.51		$	1.56		$	1.60		$	1.21
Diluted Shares Outstanding		260			252			246			245			236			242			243			242			241			240			238			236			235			234			234			234
Non-GAAP Diluted Shares Outstanding⁶		260			252			246			245			243			242			243			242			241			240			238			236			235			234			234			234
Reconciliation of Income Tax Provision as a percentage of pre-tax income to Non-GAAP income tax provision as a percentage of non-GAAP pre-tax income
Net income (loss)	$	745		$	519		$	335		$	391		$	(265	)	$	495		$	430		$	375		$	317		$	423		$	438		$	384		$	220		$	283		$	251		$	74
Income tax provision		56			59			133			15			35			37			37			31			30			37			20			28			27			31			(7	)		6

Pre-tax income	$	801		$	578		$	468		$	406		$	(230	)	$	532		$	467		$	406		$	347		$	460		$	458		$	412		$	247		$	314		$	244		$	80
Income tax provision as a percentage of pre-tax income		7	%		10	%		28	%		4	%		-15	%		7	%		8	%		8	%		9	%		8	%		4	%		7	%		11	%		10	%		-3	%		8	%
Non-GAAP Net Income	$	872		$	594		$	513		$	514		$	477		$	514		$	532		$	470		$	445		$	504		$	539		$	441		$	356		$	366		$	374		$	283
Add:
Income tax provision		56			59			133			15			35			37			37			31			30			37			20			28			27			31			(7	)		6
Income tax adjustments		4			—			(88	)		—			—			—			—			—			—			—			—			—			—			—			28			20

Non-GAAP income tax provision		60			59			45			15			35			37			37			31			30			37			20			28			27			31			21			26
Non-GAAP pre-tax income	$	932		$	653		$	558		$	529		$	512		$	551		$	569		$	501		$	475		$	541		$	559		$	469		$	383		$	397		$	395		$	309
Non-GAAP income tax provision as a percentage of pre-tax income		6	%		9	%		8	%		3	%		7	%		7	%		7	%		6	%		6	%		7	%		4	%		6	%		7	%		8	%		5	%		8	%


Page 3		WDC Quarterly Fact Sheet – Q3 FY16

Non-GAAP Financial Measures

Economic Profit: Economic profit (EP) is a non-GAAP financial measure defined as net operating profit after taxes less the value of invested capital multiplied by the weighted average cost of capital, where net operating profit after taxes is defined as income from operations minus tax expense and invested capital is defined as the sum of current debt, long-term debt and equity. Management uses EP to evaluate business performance and allocate resources, and it is a component in determining management’s incentive compensation. Management believes EP provides additional perspective to investors about financial returns generated by the business and represents profit generated over and above the cost of capital used by the business to generate that profit.


In millions	Q1 FY12			Q2 FY12			Q3 FY12			Q4 FY12			Q1 FY13			Q2 FY13			Q3 FY13			Q4 FY13			Q1 FY14			Q2 FY14			Q3 FY14			Q4 FY14			Q1 FY15			Q2 FY15			Q3 FY15			Q4 FY15			Q1 FY16			Q2 FY16			Q3 FY16
Reconciliation of Operating Income (Loss) to R4Q Economic Profit
Operating Income (Loss)	$	259		$	162		$	542		$	808		$	592		$	478		$	417		$	(221	)	$	542		$	478		$	419		$	352		$	469		$	466		$	421		$	255		$	322		$	251		$	88
Income Tax Provision		(19	)		(15	)		(55	)		(56	)		(59	)		(133	)		(15	)		(35	)		(37	)		(37	)		(31	)		(30	)		(37	)		(20	)		(28	)		(27	)		(31	)		7			(6	)

Net Operating Profit After Taxes		240			147			487			752			533			345			402			(256	)		505			441			388			322			432			446			393			228			291			258			82
R4Q Net Operating Profit After Taxes		771			692			1,034			1,626			1,919			2,117			2,032			1,024			996			1,092			1,078			1,656			1,583			1,588			1,593			1,499			1,358			1,170			859
Invested Capital x WACC		(658	)		(677	)		(1,117	)		(1,084	)		(1,118	)		(1,141	)		(1,148	)		(1,083	)		(1,172	)		(1,201	)		(1,236	)		(1,241	)		(1,251	)		(1,260	)		(1,273	)		(1,296	)		(1,306	)		(1,327	)		(1,299	)

R4Q Economic Profit	$	113		$	15		$	(83	)	$	542		$	801		$	976		$	884		$	(59	)	$	(176	)	$	(109	)	$	(158	)	$	415		$	332		$	328		$	320		$	203		$	52		$	(157	)	$	(440	)

Formulas

Share = Units (HDD) / TAM

ASP = Revenue / Units (HDD)

Free Cash Flow = Cash Flow from Operations – Capital Expenditures

EBITDA = Net Income (Loss) + Interest + Income Tax Expense + Depreciation and Amortization

Days Sales Outstanding (DSO) = Accounts Receivable / (Revenue / 91 days)

Days Inventory Outstanding (DIO) = Inventory / (Cost of Revenue / 91 days)

Days Payables Outstanding (DPO) = Accounts Payable / (Cost of Revenue / 91 days)

Cash Conversion Cycle = DSO + DIO – DPO

Inventory Turns = 364 days / DIO

R4Q Economic Profit = R4Q Net Operating Profit After Taxes – (Invested Capital x WACC)

•

Invested Capital = Short-term debt + Current portion of long-term debt + Long-term debt + Total shareholders’ equity

•

WACC⁷ = 11%

R4Q ROIC = R4Q (Net Income (Loss) + Interest Expense) / R4Q Average (Short-term debt + Current portion of long-term debt + Long-term debt + Total shareholders’ equity)

R4Q ROA = R4Q Net Income (Loss) / R4Q Average Total Assets

Footnotes

1.	ASP, Revenue by Channel and Revenue by Geography exclude external sales of media/substrates.

2.	Unit volume excludes WD TV Media Players without hard drives, WD Livewire, SSD and media.

3.	Worldwide Headcount excludes temporary and contracted employees.

4.	Consumer Electronics includes gaming.

5.	PC includes shipments to distributors, second/third tier external HDD manufacturers, and white box manufacturers.

6.	Q4 FY13 non-GAAP EPS is calculated using the same number of shares used for Q4 FY13 GAAP EPS plus 7 million dilutive shares. Dilutive shares are not included in the Q4 FY13 GAAP EPS calculation as Q4 FY13 resulted in a net loss.

7.	WACC of 11% is an internal assumption.

8.	Q2 FY12 includes charges related to the flooding. Q4 FY13 includes charges related to the arbitration award.

9.	TAM is preliminary and based on internal information.

10.

Certain FY14 prior quarter amounts have been reclassified from gross profit, R&D and SG&A to the other charges line within operating expenses to conform to the annual presentation of FY14 in Part II, Item 8, Note18 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K.

11.	Q1 FY15 cash conversion cycle calculated using 98 days due to a 14 week quarter. Q1 FY15 inventory turns calculated using 371 days due to a 53 week year.

12.	Non-PC revenue percentage includes consumer electronics, enterprise applications, branded products, and SSD.


Page 4		WDC Quarterly Fact Sheet – Q3 FY16