Separate Financial Information of Guarantor Subsidiaries

6 Months Ended

Jan. 03, 2020

Condensed Financial Information Disclosure [Abstract]

Separate Financial Information of Guarantor Subsidiaries

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 January 3, 2020
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Company
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	11	$	786	$	2,340	$	—		$	3,137
Accounts receivable, net	—		1,172		619		—			1,791
Intercompany receivables	2,617		7,840		2,839		(13,296		)	—
Inventories	—		716		2,472		(66		)	3,122
Loans due from consolidated affiliates	—		—		258		(258		)	—
Other current assets	—		364		213		—			577
Total current assets	2,628		10,878		8,741		(13,620		)	8,627
Property, plant and equipment, net	—		820		1,902		—			2,722
Notes receivable and investments in Flash Ventures	—		—		2,321		—			2,321
Goodwill	—		374		9,695		—			10,069
Other intangible assets, net	—		10		1,301		—			1,311
Investments in consolidated subsidiaries	20,637		15,471		—		(36,108		)	—
Loans due from consolidated affiliates	—		1,626		—		(1,626		)	—
Other non-current assets	56		255		499		—			810
Total assets	$	23,321	$	29,434	$	24,459	$	(51,354	)	$	25,860
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	153	$	1,583	$	—		$	1,736
Accounts payable to related parties	—		364		—		—			364
Intercompany payables	2,285		4,953		6,058		(13,296		)	—
Accrued expenses	206		837		516		—			1,559
Accrued compensation	—		356		181		—			537
Loans due to consolidated affiliates	—		258		—		(258		)	—
Current portion of long-term debt	251		—		35		—			286
Total current liabilities	2,742		6,921		8,373		(13,554		)	4,482
Long-term debt	9,547		—		—		—			9,547
Loans due to consolidated affiliates	1,603		—		23		(1,626		)	—
Other liabilities	50		1,843		559		—			2,452
Total liabilities	13,942		8,764		8,955		(15,180		)	16,481
Total shareholders’ equity	9,379		20,670		15,504		(36,174		)	9,379
Total liabilities and shareholders’ equity	$	23,321	$	29,434	$	24,459	$	(51,354	)	$	25,860

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 January 3, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	3,304		$	4,041		$	(3,111	)	$	4,234
Cost of revenue	—			2,881			3,643			(3,225		)	3,299
Gross profit	—			423			398			114			935
Operating expenses:
Research and development	—			362			216			—			578
Selling, general and administrative	—			196			102			—			298
Intercompany operating expense (income)	4			(397		)	393			—			—
Employee termination, asset impairment, and other charges	—			(5		)	14			—			9
Total operating expenses	4			156			725			—			885
Operating income (loss)	(4		)	267			(327		)	114			50
Interest and other income (expense):
Interest income	—			16			5			(13		)	8
Interest expense	(118		)	—			—			13			(105		)
Other income, net	—			—			7			—			7
Total interest and other income (expense), net	(118		)	16			12			—			(90		)
Income (loss) before taxes	(122		)	283			(315		)	114			(40		)
Equity in earnings from subsidiaries	(42		)	(384		)	—			426			—
Income tax expense (benefit)	(25		)	55			69			—			99
Net loss	$	(139	)	$	(156	)	$	(384	)	$	540		$	(139	)

Condensed Consolidating Statement of Operations
For the six months ended January 3, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	6,665		$	8,025		$	(6,416	)	$	8,274
Cost of revenue	—			5,833			7,333			(6,585		)	6,581
Gross profit	—			832			692			169			1,693
Operating expenses:
Research and development	—			726			426			—			1,152
Selling, general and administrative	1			399			203			—			603
Intercompany operating expense (income)	7			(822		)	815			—			—
Employee termination, asset impairment, and other charges	—			(5		)	22			—			17
Total operating expenses	8			298			1,466			—			1,772
Operating income (loss)	(8		)	534			(774		)	169			(79		)
Interest and other income (expense):
Interest income	—			28			15			(23		)	20
Interest expense	(249		)	—			(1		)	23			(227		)
Other income, net	—			—			9			—			9
Total interest and other income (expense), net	(249		)	28			23			—			(198		)
Income (loss) before taxes	(257		)	562			(751		)	169			(277		)
Equity in earnings from subsidiaries	(206		)	(844		)	—			1,050			—
Income tax expense (benefit)	(48		)	94			92			—			138
Net loss	$	(415	)	$	(376	)	$	(843	)	$	1,219		$	(415	)

Condensed Consolidating Statement of Operations
For the three months ended December 28, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	3,392		$	4,857		$	(4,016	)	$	4,233
Cost of revenue	—			2,942			4,215			(3,968		)	3,189
Gross profit	—			450			642			(48		)	1,044
Operating expenses:
Research and development	—			334			205			—			539
Selling, general and administrative	—			214			95			—			309
Intercompany operating expense (income)	—			(347		)	347			—			—
Employee termination, asset impairment, and other charges	—			6			14			—			20
Total operating expenses	—			207			661			—			868
Operating income (loss)	—			243			(19		)	(48		)	176
Interest and other income (expense):
Interest income	2			4			12			(3		)	15
Interest expense	(118		)	(2		)	(1		)	3			(118		)
Other income (expense), net	—			(2		)	8			2			8
Total interest and other income (expense), net	(116		)	—			19			2			(95		)
Income (loss) before taxes	(116		)	243			—			(46		)	81
Equity in earnings from subsidiaries	(468		)	(133		)	—			601			—
Income tax expense (benefit)	(97		)	532			133			—			568
Net loss	$	(487	)	$	(422	)	$	(133	)	$	555		$	(487	)

Condensed Consolidating Statement of Operations
For the six months ended December 28, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Revenue, net	$	—		$	6,877		$	9,853		$	(7,469	)	$	9,261
Cost of revenue	—			5,947			8,039			(7,433		)	6,553
Gross profit	—			930			1,814			(36		)	2,708
Operating expenses:
Research and development	—			697			418			—			1,115
Selling, general and administrative	1			465			199			—			665
Intercompany operating expense (income)	—			(754		)	754			—			—
Employee termination, asset impairment, and other charges	—			38			28			—			66
Total operating expenses	1			446			1,399			—			1,846
Operating income (loss)	(1		)	484			415			(36		)	862
Interest and other income (expense):
Interest income	10			7			24			(11		)	30
Interest expense	(234		)	(8		)	(3		)	11			(234		)
Other income (expense), net	1			(2		)	7			—			6
Total interest and other income (expense), net	(223		)	(3		)	28			—			(198		)
Income (loss) before taxes	(224		)	481			443			(36		)	664
Equity in earnings from subsidiaries	7			212			—			(219		)	—
Income tax expense (benefit)	(241		)	650			231			—			640
Net income	$	24		$	43		$	212		$	(255	)	$	24

Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended January 3, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net loss	$	(139	)	$	(156	)	$	(384	)	$	540		$	(139	)
Other comprehensive loss, before tax:
Actuarial pension gain	2			2			2			(4		)	2
Foreign currency translation adjustment	(15		)	(13		)	(13		)	26			(15		)
Net unrealized loss, on derivative contracts and available-for-sale securities	(6		)	(26		)	(14		)	40			(6		)
Total other comprehensive loss, before tax	(19		)	(37		)	(25		)	62			(19		)
Income tax benefit (expense) related to items of other comprehensive loss	(1		)	4			1			(5		)	(1		)
Other comprehensive loss, net of tax	(20		)	(33		)	(24		)	57			(20		)
Total comprehensive loss	$	(159	)	$	(189	)	$	(408	)	$	597		$	(159	)

Condensed Consolidating Statement of Comprehensive Income (Loss)
For the six months ended January 3, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net loss	$	(415	)	$	(376	)	$	(843	)	$	1,219		$	(415	)
Other comprehensive loss, before tax:
Actuarial pension gain	3			3			3			(6		)	3
Foreign currency translation adjustment	(10		)	(8		)	(8		)	16			(10		)
Net unrealized loss, on derivative contracts and available-for-sale securities	(39		)	(34		)	(23		)	57			(39		)
Total other comprehensive loss, before tax	(46		)	(39		)	(28		)	67			(46		)
Income tax benefit (expense) related to items of other comprehensive loss	4			3			—			(3		)	4
Other comprehensive loss, net of tax	(42		)	(36		)	(28		)	64			(42		)
Total comprehensive loss	$	(457	)	$	(412	)	$	(871	)	$	1,283		$	(457	)

Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended December 28, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net income	$	(487	)	$	(422	)	$	(133	)	$	555		$	(487	)
Other comprehensive income, before tax:
Actuarial pension gain	1			1			1			(2		)	1
Foreign currency translation adjustment	31			32			32			(64		)	31
Net unrealized gain, on derivative contracts and available-for-sale securities	7			30			30			(60		)	7
Total other comprehensive income, before tax	39			63			63			(126		)	39
Income tax benefit (expense) related to items of other comprehensive income	3			(2		)	(2		)	3			2
Other comprehensive income, net of tax	42			61			61			(123		)	41
Total comprehensive loss	$	(445	)	$	(361	)	$	(72	)	$	432		$	(446	)

Condensed Consolidating Statement of Comprehensive Income (Loss)
For the six months ended December 28, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Net income	$	24		$	43		$	212		$	(255	)	$	24
Other comprehensive income, before tax:
Actuarial pension gain	1			1			1			(2		)	1
Foreign currency translation adjustment	(6		)	(2		)	(2		)	4			(6		)
Net unrealized gain, on derivative contracts and available-for-sale securities	6			22			20			(42		)	6
Total other comprehensive income, before tax	1			21			19			(40		)	1
Income tax benefit (expense) related to items of other comprehensive income	4			(2		)	(1		)	2			3
Other comprehensive income, net of tax	5			19			18			(38		)	4
Total comprehensive income	$	29		$	62		$	230		$	(293	)	$	28

Condensed Consolidating Statement of Cash Flows
For the six months ended January 3, 2020
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Company
	(in millions)
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	(24	)	$	499		$	(125	)	$	160		$	510
Cash flows from investing activities
Purchases of property, plant and equipment	—			(84		)	(221		)	—			(305		)
Acquisitions, net of cash acquired	—			(2		)	(20		)	—			(22		)
Notes receivable issuances to Flash Ventures	—			—			(224		)	—			(224		)
Notes receivable proceeds from Flash Ventures	—			—			690			—			690
Strategic investments and other, net	—			6			15			—			21
Intercompany loan from (to) consolidated affiliates	—			(952		)	(208		)	1,160			—
Advances from (to) parent and consolidated affiliates	(71		)	71			—			—			—
Net cash provided by (used in) investing activities	(71		)	(961		)	32			1,160			160
Cash flows from financing activities
Issuance of stock under employee stock plans	72			—			—			—			72
Taxes paid on vested stock awards under employee stock plans	(54		)	—			—			—			(54		)
Dividends paid to shareholders	(296		)	—			—			—			(296		)
Repayment of debt	(707		)	—			—			—			(707		)
Intercompany loan from (to) consolidated affiliates	929			208			23			(1,160		)	—
Change in investment in consolidated subsidiaries	154			55			(49		)	(160		)	—
Net cash provided by (used in) financing activities	98			263			(26		)	(1,320		)	(985		)
Effect of exchange rate changes on cash	—			—			(3		)	—			(3		)
Net increase (decrease) in cash and cash equivalents	3			(199		)	(122		)	—			(318		)
Cash and cash equivalents, beginning of year	8			985			2,462			—			3,455
Cash and cash equivalents, end of period	$	11		$	786		$	2,340		$	—		$	3,137

Condensed Consolidating Statement of Cash Flows
For the six months ended December 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	$	103		$	(819	)	$	1,934		$	(44	)	$	1,174
Cash flows from investing activities
Purchases of property, plant and equipment	—			(129		)	(371		)	—			(500		)
Proceeds from the sale of property, plant and equipment	—			—			3			—			3
Purchases of investments	—			(11		)	(22		)	—			(33		)
Proceeds from sale of investments	—			—			13			—			13
Proceeds from maturities of investments	—			—			7			—			7
Notes receivable issuances to Flash Ventures	—			—			(508		)	—			(508		)
Notes receivable proceeds from Flash Ventures	—			—			312			—			312
Strategic investments and other, net	—			(1		)	(18		)	—			(19		)
Intercompany loan from (to) consolidated affiliates	943			(370		)	—			(573		)	—
Advances from (to) parent and consolidated affiliates	(215		)	215			—			—			—
Net cash provided by (used in) investing activities	728			(296		)	(584		)	(573		)	(725		)
Cash flows from financing activities
Issuance of stock under employee stock plans	61			—			—			—			61
Taxes paid on vested stock awards under employee stock plans	(69		)	—			—			—			(69		)
Repurchases of common stock	(563		)	—			—			—			(563		)
Dividends paid to shareholders	(292		)	—			—			—			(292		)
Repayment of debt	(75		)	—			—			—			(75		)
Proceeds from (repayment of) revolving credit facility	(500		)	—			—			—			(500		)
Intercompany loan from (to) consolidated affiliates	370			(387		)	(556		)	573			—
Change in investment in consolidated subsidiaries	214			1,997			(2,255		)	44			—
Net cash provided by (used in) financing activities	(854		)	1,610			(2,811		)	617			(1,438		)
Effect of exchange rate changes on cash	—			—			(3		)	—			(3		)
Net increase (decrease) in cash and cash equivalents	(23		)	495			(1,464		)	—			(992		)
Cash and cash equivalents, beginning of year	40			668			4,297			—			5,005
Cash and cash equivalents, end of period	$	17		$	1,163		$	2,833		$	—		$	4,013