(Mark One) | ||
þ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
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For the fiscal year ended
July 1,
2011
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or
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o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
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For the transition period
from to
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Delaware | 33-0956711 | |
State or Other Jurisdiction
of Incorporation or Organization |
(I.R.S. Employer Identification No.) |
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3355 Michelson Drive, Suite 100 Irvine, California (Address of principal executive offices) |
92612 (Zip Code) |
Name of each exchange |
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Title of each class | on which registered | |
Common Stock, $.01 Par Value Per Share
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New York Stock Exchange |
Large accelerated filer þ
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Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Page | ||||||||
4 | ||||||||
12 | ||||||||
28 | ||||||||
28 | ||||||||
29 | ||||||||
PART II | ||||||||
30 | ||||||||
32 | ||||||||
32 | ||||||||
42 | ||||||||
44 | ||||||||
77 | ||||||||
77 | ||||||||
78 | ||||||||
PART III | ||||||||
78 | ||||||||
78 | ||||||||
78 | ||||||||
78 | ||||||||
78 | ||||||||
PART IV | ||||||||
79 | ||||||||
83 | ||||||||
EX-2.2 | ||||||||
EX-10.7 | ||||||||
EX-10.11 | ||||||||
EX-21 | ||||||||
EX-23 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
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| the planned acquisition of Viviti Technologies Ltd., until recently known as Hitachi Global Storage Technologies Holdings Pte. Ltd., a wholly owned subsidiary of Hitachi Ltd. (HGST), including the expected timing and anticipated benefits of the acquisition; | |
| the terms of and our ability to syndicate the new credit facility to be entered into in connection with the planned acquisition of HGST; | |
| demand for hard drives and solid-state drives in various markets and factors contributing to such demand; | |
| our plans to continue to develop new products and expand into new storage markets and into emerging economic markets; | |
| our entry into and position in the traditional enterprise market; | |
| emergence of new storage markets for hard drives; | |
| emergence of competing storage technologies; | |
| traditional seasonal demand and pricing and gross margin trends; | |
| our beliefs regarding the adequacy of our facilities and fabrication capacity; | |
| our share repurchase plans; | |
| our stock price volatility; | |
| expectations regarding the outcome of legal proceedings in which we are involved; | |
| our beliefs regarding the adequacy of our tax provisions and the timing of future payments, if any, relating to the unrecognized tax benefits; | |
| expectations regarding our net revenue and industry unit shipments in the September quarter; | |
| expectations regarding our capital expenditure plans and our depreciation and amortization expense in fiscal 2012; and | |
| beliefs regarding the sufficiency of our cash and cash equivalents to meet our working capital and capital expenditure needs. |
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Item 1. | Business |
| distinguishes us in the dynamic and competitive electronic data storage industry; | |
| provides value to our customers; | |
| allows us to better achieve consistent financial performance, including strong returns on invested capital; and | |
| provides continued diversification of our storage product portfolio and entry into additional markets. |
| consumer use of data storage devices for the playing, retention and creation of digital content for personal use; | |
| growth of the external storage devices, permitting the easy storage, portability and backup of digital data such as music, photographs or video; and | |
| growth of Internet-based applications, such as social networking, and cloud computing which drives the need for digital content storage and distribution. |
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| WD Caviar® family of hard drives is designed for use in desktop PCs requiring high performance, reliability and capacity with attributes such as low cost per gigabyte and quiet acoustics; | |
| WD Scorpio® family of hard drives is designed for use in mobile PCs requiring high performance, reliability and capacity with attributes such as low power consumption for extended battery life and cooler operation, quiet acoustics and protection against shocks; and | |
| WD Silicon Edgetm family of solid-state drives is designed for both read-intensive client/consumer applications and write-intensive original equipment manufacturer (OEM) applications that require high performance and endurance with easy plug and play compatibility. |
| My Book® and WD Elementstm Desktop family of storage appliances are designed to add external capacity to desktops and DVRs, allow for the transfer and storage of videos directly from certain camcorders, and connect to networks to simplify storage for consumers; | |
| My Passport® and WD Elementstm Portable family of storage appliances are designed for external portability weighing less than one-half of a pound and allow for the transfer and storage of videos directly from certain camcorders; | |
| WD ShareSpacetm is a network-attached storage system designed for home office or small office applications; | |
| WD TV® media players connect to a users television or home theater system and play digital movies, music and photos from an integrated hard drive, network hard drives, any of our WD®-branded external hard drives, other USB mass storage devices or content services accessed over the Internet; and | |
| WD Livewiretm which enables consumers to use their existing electrical outlets to extend secure and reliable high-speed Internet connections throughout the home. |
| WD S25 hard drive is designed for mission-critical enterprise server and storage applications such as data centers and large data arrays; |
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| WD VelociRaptor® hard drive is designed for enterprise server and storage applications requiring high performance and high reliability. This hard drive is also used in the high-end desktop PC market for applications including gaming, servers and advanced CAD/CAM (computer-aided design/computer-aided manufacturing) systems; | |
| WD® RE family of hard drives is designed for nearline storage enterprise applications requiring high performance and high reliability; and | |
| WD SiliconDrive® family of solid-state drives features fast read/write speeds in high capacities and is designed for embedded system OEM applications that require high performance and reliability with a long product life. |
| Acoustics sound power emitted during hard drive operation, commonly expressed in decibels, and perceived loudness due to sound pressure, commonly expressed in sones; | |
| Data transfer rate sustained rate of data transfer to and from the disk, commonly expressed in gigabits per second. One gigabit equals one billion bits; | |
| Power Consumption which is the amount of electricity required to operate the drive, measured in watts; | |
| Seek time time needed to position the heads over a selected track on the disk surface, commonly expressed in milliseconds; | |
| Spindle rotation speed nominal rotation speed of the disks inside the hard drive, commonly expressed in RPM or latency. Spindle rotation speeds commonly stated as 5,400, 7,200 and 10,000 RPM are sometimes approximations; and | |
| Storage capacity which is the amount of data that can be stored on the hard drive, commonly expressed in GB or TB. As defined in the hard drive industry, one GB equals one billion bytes and one TB equals one trillion bytes. A byte is a digital character, typically comprised of eight bits. A bit is a binary digit, the smallest unit of information in a digital system. |
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| magnetic heads; | |
| magnetic media; | |
| suspensions with related head gimbal assemblies (HGAs) and head stack assemblies (HSAs); | |
| spindle motors; | |
| custom and standard electronics such as system-on-chip, magnetic media, motor controllers, pre-amps and printed circuit boards; | |
| base and top covers; and | |
| magnets and related voice coil motors. |
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Name | Age | Position | ||||
John F. Coyne
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61 | President and Chief Executive Officer | ||||
Timothy M. Leyden
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59 | Chief Operating Officer | ||||
Wolfgang U. Nickl
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42 | Senior Vice President and Chief Financial Officer | ||||
James D. Morris
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46 | Executive Vice President and General Manager, Storage Products | ||||
James J. Murphy
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52 | Executive Vice President of Worldwide Sales and Sales Operations | ||||
James K. Welsh III
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54 | Executive Vice President and General Manager, Branded Products |
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Item 1A. | Risk Factors |
| Required Government Approvals. Completion of our planned acquisition of HGST is conditioned upon, among other things, obtaining required governmental approvals. While certain governmental approvals have been obtained, the transaction remains conditioned upon the receipt of approval from the United States, the European Union, the Peoples Republic of China, Japan, Korea and Mexico. There is no assurance that we will obtain such approvals or, if obtained, the timing of the approvals. We agreed to take any and all actions to obtain the requisite governmental approvals in specified jurisdictions unless such action would reasonably be expected to materially impair the business operations of the combined company absent such imposed condition. There can be no assurance that conditions or changes will not be imposed and any such conditions or changes could have the effect of jeopardizing or delaying completion of the planned acquisition or reducing the anticipated benefits of the planned acquisition. If we agree to any material conditions in order to obtain any approvals required to complete the planned acquisition, the business and results of operations of the combined company may be adversely affected. | |
| Termination Fee. If the acquisition agreement is terminated by any party because the acquisition has not closed by March 7, 2012, and if, as of the time of such termination, certain regulatory and antitrust closing conditions have not been satisfied due to the failure to receive any required antitrust or competition consent, approval or |
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clearance or any action by any certain governmental entities to prevent the acquisition for antitrust or competition reasons, then we will be required to pay a termination fee of $250 million. |
| Transaction Costs. We have incurred and will continue to incur costs relating to the planned acquisition (including significant legal and financial advisory fees) and many of these costs are payable by us whether or not the planned acquisition is completed. | |
| Time and Resources Commitment. Matters relating to the planned acquisition (including integration planning) have and will continue to require substantial commitments of time and resources by our management team, which could otherwise have been devoted to other opportunities that may have been beneficial to us. | |
| Financing. We may fail to complete the planned financing for the transaction. |
| difficulties entering new markets or manufacturing in new geographies where we have no or limited direct prior experience; | |
| difficulties in coordinating geographically separate organizations, which may be subject to additional complications resulting from being geographically distant from our other operations; | |
| failure to identify or assess the magnitude of certain liabilities we are assuming in the acquisition, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition; | |
| failure to realize the anticipated increase in our revenues due to the acquisition if customers adjust their purchasing decisions and allocate more market share to our competitors; | |
| difficulties or delays in incorporating acquired technologies or products with our existing product lines and maintaining uniform standards, controls, processes and policies; | |
| failure to successfully manage relationships with our combined supplier and customer base; | |
| the impact of the March 2011 earthquakes, tsunami and related events in Japan on HGSTs business, component supply or Japan facilities; | |
| difficulties integrating and harmonizing business systems; | |
| difficulties in modifying HGSTs existing accounting and internal control systems to comply with Section 404 of the Sarbanes-Oxley Act of 2002, to which HGST is not currently subject, which could adversely impact the effectiveness of internal control over financial reporting for the combined company; and | |
| the loss of key employees. |
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| Volatile Demand. Negative or uncertain global economic conditions could cause many of our direct and indirect customers to delay or reduce their purchases of our products and systems containing our products. In addition, many of our customers 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 sub-contractors (collectively referred to as suppliers) face challenges in obtaining credit, in selling their products or otherwise in operating their businesses, they may be unable to offer the materials we use to manufacture our products. These actions could result in reductions in our revenue and increased operating costs, which could adversely affect our business, results of operations and financial condition. | |
| Restructuring Activities. If demand slows significantly as a result of a deterioration in economic conditions or otherwise, we may need to execute restructuring activities to realign our cost structure with softening demand. The occurrence of restructuring activities could result in impairment charges and other expenses, which could adversely impact our results of operations or financial condition. | |
| Credit Volatility and Loss of Receivables. We extend credit and payment terms to some of our customers. In addition to ongoing credit evaluations of our customers financial condition, we traditionally seek to mitigate our credit risk by purchasing credit insurance on certain of our accounts receivable balances. As a result of the |
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continued uncertainty and volatility in global economic conditions, however, we may find it increasingly difficult to be able to insure these accounts receivable. We could suffer significant losses if a customer whose accounts receivable we have not insured, or have underinsured, fails and is unable to pay us. Additionally, negative or uncertain global economic conditions increase the risk that if a customer whose accounts receivable we have insured fails, the financial condition of the insurance carrier for such customer account may have also deteriorated such that it cannot cover our loss. A significant loss of an accounts receivable that we cannot recover through credit insurance would have a negative impact on our financial results. |
| Impairment Charges. Negative or uncertain global economic conditions could result in circumstances, such as a sustained decline in our stock price and market capitalization or a decrease in our forecasted cash flows such that they are insufficient, indicating that the carrying value of our long-lived assets or goodwill may be impaired. If we are required to record a significant charge to earnings in our consolidated financial statements because an impairment of our long-lived assets or goodwill is determined, our results of operations will be adversely affected. |
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| Mobile Devices. There has been a recent rapid growth in CE devices that do not contain a hard drive such as tablet computers and smartphones. While tablet computers and smartphones provide many of the same capabilities as PCs, the extent to which they will displace or materially affect the demand for PCs is uncertain. If device-makers are successful in achieving customer acceptance of these devices as a replacement for traditional computing applications that contain hard drives, or if we are not successful in adapting our product offerings to include alternative storage solutions that address these devices, then demand for our products may decrease. | |
| Cloud Computing. Consumers traditionally have stored their data on their PC, often supplemented with personal 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. Recently, cloud computing has emerged whereby applications and data are hosted, accessed and processed through a third-party provider over a broadband Internet connection, potentially reducing or eliminating the need for, among other things, significant storage inside the accessing computer. This trend could cause the market for disk drives in computers to decline over time, which could harm our business to the extent this decline is not offset by the sale of our products to customers who provide cloud computing services. |
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| an unwillingness of a supplier to supply such components or equipment to us; | |
| consolidation of key suppliers; | |
| failure of a key suppliers business process; | |
| a key suppliers or sub-suppliers inability to access credit necessary to operate its business; or | |
| failure of a key supplier to remain in business, to remain an independent merchant supplier, or to adjust to market conditions. |
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| difficulties faced in manufacturing ramp; | |
| implementing at an acceptable cost product features expected by our customers; | |
| market acceptance/qualification; | |
| effective management of inventory levels in line with anticipated product demand; and | |
| quality problems or other defects in the early stages of new product introduction that were not anticipated in the design of those products. |
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| obtaining requisite U.S. and foreign governmental permits and approvals; | |
| currency exchange rate fluctuations or restrictions; | |
| political instability and civil unrest; | |
| limited transportation availability, delays, and extended time required for shipping, which risks may be compounded in periods of price declines; | |
| higher freight rates; | |
| labor problems; | |
| trade restrictions or higher tariffs; | |
| copyright levies or similar fees or taxes imposed in European and other countries; | |
| exchange, currency and tax controls and reallocations; | |
| increasing labor and overhead costs; and | |
| loss or non-renewal of favorable tax treatment under agreements or treaties with foreign tax authorities. |
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| interrupting or otherwise disrupting the shipment of our product components; | |
| damaging our reputation; | |
| forcing us to find alternate component sources; | |
| reducing demand for our products (for example, through a consumer boycott); or |
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| exposing us to potential liability for our suppliers wrongdoings. |
| the timing of orders from and shipment of products to major customers; | |
| our product mix; | |
| changes in the prices of our products; | |
| manufacturing delays or interruptions; | |
| acceptance by customers of competing products in lieu of our products; | |
| variations in the cost of and lead times for components for our products; | |
| limited availability of components that we obtain from a single or a limited number of suppliers; | |
| seasonal and other fluctuations in demand for PCs often due to technological advances; and |
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| availability and rates of transportation. |
| price protection adjustments and other sales promotions and allowances on products sold to retailers, resellers and distributors; | |
| inventory adjustments for write-down of inventories to lower of cost or market value (net realizable value); | |
| reserves for doubtful accounts; | |
| accruals for product returns; | |
| accruals for warranty costs related to product defects; | |
| accruals for litigation and other contingencies; | |
| liabilities for unrecognized tax benefits; and | |
| expensing of stock-based compensation. |
| actual or anticipated fluctuations in our operating results, including those resulting from the seasonality of our business; | |
| announcements of technological innovations by us or our competitors which may decrease the volume and profitability of sales of our existing products and increase the risk of inventory obsolescence; | |
| new products introduced by us or our competitors; | |
| periods of severe pricing pressures due to oversupply or price erosion resulting from competitive pressures or industry consolidation; | |
| developments with respect to patents or proprietary rights; | |
| conditions and trends in the hard drive, computer, data and content management, storage and communication industries; | |
| contraction in our operating results or growth rates that are lower than our previous high growth-rate periods; | |
| changes in financial estimates by securities analysts relating specifically to us or the hard drive industry in general; | |
| macroeconomic conditions that affect the market generally; and | |
| uncertainties regarding our planned acquisition of HGST. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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Item 5. | Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities |
First | Second | Third | Fourth | |||||||||||||
2011
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||||||||||||||||
High
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$ | 33.50 | $ | 35.92 | $ | 38.82 | $ | 41.87 | ||||||||
Low
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$ | 23.06 | $ | 27.41 | $ | 29.14 | $ | 33.22 | ||||||||
2010
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||||||||||||||||
High
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$ | 37.70 | $ | 44.96 | $ | 47.44 | $ | 45.09 | ||||||||
Low
|
$ | 24.68 | $ | 33.24 | $ | 36.22 | $ | 29.56 |
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6/30/06 | 6/29/07 | 6/27/08 | 7/3/09 | 7/2/10 | 7/1/11 | |||||||||||||||||||||||||
Western Digital Corporation
|
100.00 | 97.68 | 176.02 | 132.36 | 152.45 | 184.96 | ||||||||||||||||||||||||
S&P 500 Index
|
100.00 | 120.59 | 104.77 | 77.30 | 88.46 | 115.61 | ||||||||||||||||||||||||
Dow Jones US Technology Hardware & Equipment Index
|
100.00 | 125.68 | 111.26 | 89.44 | 109.73 | 134.09 | ||||||||||||||||||||||||
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Item 6. | Selected Financial Data |
July 1, |
July 2, |
July 3, |
June 27, |
June 29, |
||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
(in millions, except per share and employee data) | ||||||||||||||||||||
Revenue, net
|
$ | 9,526 | $ | 9,850 | $ | 7,453 | $ | 8,074 | $ | 5,468 | ||||||||||
Gross margin
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$ | 1,791 | $ | 2,401 | $ | 1,337 | $ | 1,739 | $ | 900 | ||||||||||
Net income
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$ | 726 | $ | 1,382 | $ | 470 | $ | 867 | $ | 564 | ||||||||||
Net income per common share:
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||||||||||||||||||||
Basic
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$ | 3.14 | $ | 6.06 | $ | 2.12 | $ | 3.92 | $ | 2.57 | ||||||||||
Diluted
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$ | 3.09 | $ | 5.93 | $ | 2.08 | $ | 3.84 | $ | 2.50 | ||||||||||
Working capital
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$ | 3,317 | $ | 2,697 | $ | 1,705 | $ | 1,167 | $ | 899 | ||||||||||
Total assets
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$ | 8,118 | $ | 7,328 | $ | 5,291 | $ | 4,875 | $ | 2,901 | ||||||||||
Long-term debt
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$ | 150 | $ | 294 | $ | 400 | $ | 482 | $ | 10 | ||||||||||
Shareholders equity
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$ | 5,488 | $ | 4,709 | $ | 3,192 | $ | 2,696 | $ | 1,716 | ||||||||||
Number of employees
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65,431 | 62,500 | 45,991 | 50,072 | 29,572 |
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
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Years Ended | ||||||||||||||||||||||||
July 1, 2011 | July 2, 2010 | July 3, 2009 | ||||||||||||||||||||||
Net revenue
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$ | 9,526 | 100.0 | % | $ | 9,850 | 100.0 | % | $ | 7,453 | 100.0 | % | ||||||||||||
Gross margin
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1,791 | 18.8 | 2,401 | 24.4 | 1,337 | 17.9 | ||||||||||||||||||
R&D and SG&A
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1,010 | 10.6 | 876 | 8.9 | 710 | 9.5 | ||||||||||||||||||
Acquired in-process research and development
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| | | | 14 | 0.2 | ||||||||||||||||||
Restructuring and other, net
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| | | | 94 | 1.3 | ||||||||||||||||||
Operating income
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781 | 8.2 | 1,525 | 15.5 | 519 | 7.0 | ||||||||||||||||||
Other expense, net
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(1 | ) | | (5 | ) | (0.1 | ) | (18 | ) | (0.2 | ) | |||||||||||||
Income before income taxes
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780 | 8.2 | 1,520 | 15.4 | 501 | 6.7 | ||||||||||||||||||
Income tax provision
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54 | 0.6 | 138 | 1.4 | 31 | 0.4 | ||||||||||||||||||
Net income
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726 | 7.6 | 1,382 | 14.0 | 470 | 6.3 |
Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Net revenue
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$ | 9,526 | $ | 9,850 | $ | 7,453 | ||||||
ASPs (per unit)*
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$ | 45 | $ | 50 | $ | 51 | ||||||
Revenues by Geography(%)
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Americas
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22 | % | 24 | % | 24 | % | ||||||
Europe, Middle East and Africa
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23 | 23 | 27 | |||||||||
Asia
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55 | 53 | 49 | |||||||||
Revenues by Channel(%)
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OEM
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49 | % | 51 | % | 54 | % | ||||||
Distributors
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32 | 31 | 26 | |||||||||
Retailers
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19 | 18 | 20 | |||||||||
Unit shipments*
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||||||||||||
Compute
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151 | 147 | 109 | |||||||||
Non-compute
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46 | 38 | 33 | |||||||||
Enterprise
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10 | 9 | 4 | |||||||||
Total units shipped
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207 | 194 | 146 |
* | Based on sales of hard drive units only. |
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Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Net cash flow provided by (used in):
|
||||||||||||
Operating activities
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$ | 1,655 | $ | 1,942 | $ | 1,305 | ||||||
Investing activities
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(793 | ) | (986 | ) | (551 | ) | ||||||
Financing activities
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(106 | ) | (16 | ) | (64 | ) | ||||||
Net increase in cash and cash equivalents
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$ | 756 | $ | 940 | $ | 690 | ||||||
Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Days sales outstanding
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47 | 46 | 47 | |||||||||
Days in inventory
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27 | 23 | 26 | |||||||||
Days payables outstanding
|
(75 | ) | (72 | ) | (67 | ) | ||||||
Cash conversion cycle
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(1 | ) | (3 | ) | 6 | |||||||
37
Less than |
More than |
|||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
Long-term debt, including current portion
|
$ | 294 | $ | 144 | $ | 150 | $ | | $ | | ||||||||||
Operating leases
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115 | 18 | 31 | 20 | 46 | |||||||||||||||
Unrecognized tax benefits
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147 | | 15 | 132 | | |||||||||||||||
Purchase obligations
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3,893 | 3,876 | 11 | 6 | | |||||||||||||||
Total
|
$ | 4,449 | $ | 4,038 | $ | 207 | $ | 158 | $ | 46 | ||||||||||
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
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Contract |
Weighted Average |
Unrealized |
||||||||||
Amount | Contract Rate* | Gain (Loss) | ||||||||||
Foreign exchange contracts:
|
||||||||||||
Thai Baht cash flow hedges
|
$ | 1,013 | 30.70 | $ | (9 | ) | ||||||
Thai Baht fair value hedges
|
$ | 103 | 30.70 | | ||||||||
Malaysian Ringgit cash flow hedges
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$ | 331 | 3.09 | 4 | ||||||||
Euro fair value hedges
|
$ | 10 | 0.69 | | ||||||||
British Pound Sterling fair value hedges
|
$ | 4 | 0.62 | |
* | Expressed in units of foreign currency per U.S. dollar. |
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Item 8. | Financial Statements and Supplementary Data |
Page | ||||
Consolidated Financial Statements:
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||||
45 | ||||
47 | ||||
48 | ||||
49 | ||||
50 | ||||
51 | ||||
Financial Statement Schedule:
|
||||
76 |
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July 1, |
July 2, |
|||||||
2011 | 2010 | |||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,490 | $ | 2,734 | ||||
Accounts receivable, net
|
1,206 | 1,256 | ||||||
Inventories
|
577 | 560 | ||||||
Other current assets
|
214 | 170 | ||||||
Total current assets
|
5,487 | 4,720 | ||||||
Property, plant and equipment, net
|
2,224 | 2,159 | ||||||
Goodwill
|
151 | 146 | ||||||
Other intangible assets, net
|
71 | 88 | ||||||
Other non-current assets
|
185 | 215 | ||||||
Total assets
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$ | 8,118 | $ | 7,328 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 1,545 | $ | 1,507 | ||||
Accrued expenses
|
349 | 281 | ||||||
Accrued warranty
|
132 | 129 | ||||||
Current portion of long-term debt
|
144 | 106 | ||||||
Total current liabilities
|
2,170 | 2,023 | ||||||
Long-term debt
|
150 | 294 | ||||||
Other liabilities
|
310 | 302 | ||||||
Total liabilities
|
2,630 | 2,619 | ||||||
Commitments and contingencies (Notes 4 and 5)
|
||||||||
Shareholders equity:
|
||||||||
Preferred stock, $.01 par value; authorized
5 shares; issued and outstanding none
|
| | ||||||
Common stock, $.01 par value; authorized
450 shares; issued and outstanding 233 and
231 shares, respectively
|
2 | 2 | ||||||
Additional paid-in capital
|
1,091 | 1,022 | ||||||
Accumulated other comprehensive income (loss)
|
(5 | ) | 11 | |||||
Retained earnings
|
4,400 | 3,674 | ||||||
Total shareholders equity
|
5,488 | 4,709 | ||||||
Total liabilities and shareholders equity
|
$ | 8,118 | $ | 7,328 | ||||
47
Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Revenue, net
|
$ | 9,526 | $ | 9,850 | $ | 7,453 | ||||||
Cost of revenue
|
7,735 | 7,449 | 6,116 | |||||||||
Gross margin
|
1,791 | 2,401 | 1,337 | |||||||||
Operating expenses:
|
||||||||||||
Research and development
|
703 | 611 | 509 | |||||||||
Selling, general and administrative
|
307 | 265 | 201 | |||||||||
Acquired in-process research and development
|
| | 14 | |||||||||
Restructuring and other, net
|
| | 94 | |||||||||
Total operating expenses
|
1,010 | 876 | 818 | |||||||||
Operating income
|
781 | 1,525 | 519 | |||||||||
Other income (expense):
|
||||||||||||
Interest income
|
9 | 4 | 9 | |||||||||
Interest and other expense
|
(10 | ) | (9 | ) | (27 | ) | ||||||
Total other expense, net
|
(1 | ) | (5 | ) | (18 | ) | ||||||
Income before income taxes
|
780 | 1,520 | 501 | |||||||||
Income tax provision
|
54 | 138 | 31 | |||||||||
Net income
|
$ | 726 | $ | 1,382 | $ | 470 | ||||||
Income per common share:
|
||||||||||||
Basic
|
$ | 3.14 | $ | 6.06 | $ | 2.12 | ||||||
Diluted
|
$ | 3.09 | $ | 5.93 | $ | 2.08 | ||||||
Weighted average shares outstanding:
|
||||||||||||
Basic
|
231 | 228 | 222 | |||||||||
Diluted
|
235 | 233 | 226 | |||||||||
48
Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Cash flows from operating activities
|
||||||||||||
Net income
|
$ | 726 | $ | 1,382 | $ | 470 | ||||||
Adjustments to reconcile net income to net cash provided by
operations:
|
||||||||||||
Depreciation and amortization
|
602 | 510 | 479 | |||||||||
Stock-based compensation
|
69 | 60 | 47 | |||||||||
Deferred income taxes
|
20 | 27 | 24 | |||||||||
Loss on investments
|
| | 10 | |||||||||
Acquired in-process research and development
|
| | 14 | |||||||||
Non-cash portion of restructuring and other, net
|
| | 63 | |||||||||
Changes in:
|
||||||||||||
Accounts receivable, net
|
50 | (330 | ) | 92 | ||||||||
Inventories
|
(17 | ) | (148 | ) | 88 | |||||||
Accounts payable
|
178 | 270 | (33 | ) | ||||||||
Accrued expenses
|
71 | 67 | 23 | |||||||||
Other assets and liabilities
|
(44 | ) | 104 | 28 | ||||||||
Net cash provided by operating activities
|
1,655 | 1,942 | 1,305 | |||||||||
Cash flows from investing activities
|
||||||||||||
Purchases of property, plant and equipment
|
(778 | ) | (737 | ) | (519 | ) | ||||||
Proceeds from the sale of property, plant and equipment
|
| | 29 | |||||||||
Acquisitions, net of cash acquired
|
(15 | ) | (253 | ) | (63 | ) | ||||||
Sales and maturities of investments
|
| 4 | 2 | |||||||||
Net cash used in investing activities
|
(793 | ) | (986 | ) | (551 | ) | ||||||
Cash flows from financing activities
|
||||||||||||
Issuance of stock under employee stock plans
|
58 | 79 | 28 | |||||||||
Taxes paid on vested stock awards under employee stock plans
|
(8 | ) | (17 | ) | (5 | ) | ||||||
Increase (decrease) in excess tax benefits from employee stock
plans
|
| 4 | (24 | ) | ||||||||
Repurchases of common stock
|
(50 | ) | | (36 | ) | |||||||
Repayment of debt
|
(106 | ) | (82 | ) | (27 | ) | ||||||
Net cash used in financing activities
|
(106 | ) | (16 | ) | (64 | ) | ||||||
Net increase in cash and cash equivalents
|
756 | 940 | 690 | |||||||||
Cash and cash equivalents, beginning of year
|
2,734 | 1,794 | 1,104 | |||||||||
Cash and cash equivalents, end of year
|
$ | 3,490 | $ | 2,734 | $ | 1,794 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for income taxes
|
$ | 10 | $ | 7 | $ | 11 | ||||||
Cash paid for interest
|
$ | 6 | $ | 8 | $ | 14 |
49
Additional |
Accumulated Other |
Total |
Total |
|||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock |
Paid-In |
Comprehensive |
Retained |
Shareholders |
Comprehensive |
||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Income (Loss) | Earnings | Equity | Income | ||||||||||||||||||||||||||||
Balance at June 27, 2008
|
225 | $ | 2 | (1 | ) | $ | (22 | ) | $ | 906 | $ | (12 | ) | $ | 1,822 | $ | 2,696 | |||||||||||||||||||
Employee stock plans
|
2 | 58 | (33 | ) | 25 | |||||||||||||||||||||||||||||||
Stock based compensation
|
47 | 47 | ||||||||||||||||||||||||||||||||||
Decrease in excess tax benefits from employee stock plans
|
(24 | ) | (24 | ) | ||||||||||||||||||||||||||||||||
Repurchase of common stock
|
(1 | ) | (36 | ) | (36 | ) | ||||||||||||||||||||||||||||||
Net income
|
470 | 470 | $ | 470 | ||||||||||||||||||||||||||||||||
Unrealized gain on foreign exchange contracts
|
14 | 14 | 14 | |||||||||||||||||||||||||||||||||
Balance at July 3, 2009
|
225 | $ | 2 | | $ | | $ | 896 | $ | 2 | $ | 2,292 | $ | 3,192 | $ | 484 | ||||||||||||||||||||
Employee stock plans
|
6 | 62 | 62 | |||||||||||||||||||||||||||||||||
Stock based compensation
|
60 | 60 | ||||||||||||||||||||||||||||||||||
Increase in excess tax benefits from employee stock plans
|
4 | 4 | ||||||||||||||||||||||||||||||||||
Net income
|
1,382 | 1,382 | $ | 1,382 | ||||||||||||||||||||||||||||||||
Unrealized gain on foreign exchange contracts
|
9 | 9 | 9 | |||||||||||||||||||||||||||||||||
Balance at July 2, 2010
|
231 | $ | 2 | | $ | | $ | 1,022 | $ | 11 | $ | 3,674 | $ | 4,709 | $ | 1,391 | ||||||||||||||||||||
Employee stock plans
|
2 | 2 | 50 | 50 | ||||||||||||||||||||||||||||||||
Stock based compensation
|
69 | 69 | ||||||||||||||||||||||||||||||||||
Repurchase of common stock
|
(2 | ) | (50 | ) | (50 | ) | ||||||||||||||||||||||||||||||
Net income
|
726 | 726 | $ | 726 | ||||||||||||||||||||||||||||||||
Unrealized loss on foreign exchange contracts
|
(16 | ) | (16 | ) | (16 | ) | ||||||||||||||||||||||||||||||
Balance at July 1, 2011
|
233 | $ | 2 | | $ | | $ | 1,091 | $ | (5 | ) | $ | 4,400 | $ | 5,488 | $ | 710 | |||||||||||||||||||
50
51
52
53
54
Years Ended | ||||||||||||
July 1, |
July 2, |
July 3, |
||||||||||
2011 | 2010 | 2009 | ||||||||||
Net income
|
$ | 726 | $ | 1,382 | $ | 470 | ||||||
Weighted average shares outstanding:
|
||||||||||||
Basic
|
231 | 228 | 222 | |||||||||
Employee stock options and other
|
4 | 5 | 4 | |||||||||
Diluted
|
235 | 233 | 226 | |||||||||
Income per common share:
|
||||||||||||
Basic
|
$ | 3.14 | $ | 6.06 | $ | 2.12 | ||||||
Diluted
|
$ | 3.09 | $ | 5.93 | $ | 2.08 | ||||||
Anti-dilutive potential common shares excluded*
|
3 | 1 | 6 |
* | For purposes of computing diluted income per common share, certain potentially dilutive securities have been excluded from the calculation because their effect would have been anti-dilutive. |
55
56
Note 2. | Supplemental Financial Statement Data |
Years Ended | ||||||||
July 1, |
July 2, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Inventories:
|
||||||||
Raw materials and component parts
|
$ | 172 | $ | 159 | ||||
Work-in-process
|
263 | 255 | ||||||
Finished goods
|
142 | 146 | ||||||
Total inventories
|
$ | 577 | $ | 560 | ||||
Property, Plant and Equipment:
|
||||||||
Land and buildings
|
$ | 750 | $ | 675 | ||||
Machinery and equipment
|
3,963 | 3,470 | ||||||
Furniture and fixtures
|
9 | 9 | ||||||
Leasehold improvements
|
115 | 69 | ||||||
Total property, plant and equipment
|
4,837 | 4,223 | ||||||
Accumulated depreciation and amortization
|
(2,613 | ) | (2,064 | ) | ||||
Property, plant and equipment, net
|
$ | 2,224 | $ | 2,159 | ||||
2011 | 2010 | |||||||
Term loan
|
$ | 294 | $ | 400 | ||||
Less amounts due in one year
|
(144 | ) | (106 | ) | ||||
Long-term debt
|
$ | 150 | $ | 294 | ||||
57
2012
|
$ | 18 | ||
2013
|
17 | |||
2014
|
14 | |||
2015
|
11 | |||
2016
|
9 | |||
Thereafter
|
46 | |||
Total future minimum payments
|
$ | 115 | ||
2011 | 2010 | 2009 | ||||||||||
Warranty accrual, beginning of period
|
$ | 170 | $ | 123 | $ | 114 | ||||||
Charges to operations
|
172 | 183 | 126 | |||||||||
Utilization
|
(160 | ) | (138 | ) | (111 | ) | ||||||
Changes in estimate related to pre-existing warranties
|
(12 | ) | 2 | (6 | ) | |||||||
Warranty accrual, end of period
|
$ | 170 | $ | 170 | $ | 123 | ||||||
Note 5. | Legal Proceedings |
58
59
60
2011 | 2010 | 2009 | ||||||||||
Net revenue(1):
|
||||||||||||
United States
|
$ | 1,589 | $ | 1,889 | $ | 1,492 | ||||||
Asia
|
5,434 | 5,239 | 3,639 | |||||||||
Europe, Middle East and Africa
|
2,196 | 2,260 | 2,008 | |||||||||
Other
|
307 | 462 | 314 | |||||||||
Total
|
$ | 9,526 | $ | 9,850 | $ | 7,453 | ||||||
Long-lived assets:
|
||||||||||||
United States
|
$ | 1,285 | $ | 1,173 | $ | 1,043 | ||||||
Asia
|
1,345 | 1,379 | 954 | |||||||||
Europe, Middle East and Africa
|
1 | 56 | 64 | |||||||||
Total
|
$ | 2,631 | $ | 2,608 | $ | 2,061 | ||||||
(1) | Net revenue is attributed to geographic regions based on the ship to location of the customer. |
61
62
Weighted Average |
||||||||||||||||
Weighted Average |
Remaining |
Aggregate |
||||||||||||||
Number |
Exercise Price |
Contractual Life |
Intrinsic |
|||||||||||||
of Shares | Per Share | (in years) | Value | |||||||||||||
Options outstanding at June 27, 2008
|
8.0 | $ | 14.92 | |||||||||||||
Granted
|
4.2 | 20.02 | ||||||||||||||
Exercised
|
(0.6 | ) | 9.59 | |||||||||||||
Canceled or expired
|
(0.3 | ) | 20.10 | |||||||||||||
Options outstanding at July 3, 2009
|
11.3 | $ | 17.00 | |||||||||||||
Granted
|
1.4 | 36.06 | ||||||||||||||
Exercised
|
(3.1 | ) | 14.67 | |||||||||||||
Canceled or expired
|
(0.2 | ) | 22.78 | |||||||||||||
Options outstanding at July 2, 2010
|
9.4 | $ | 20.61 | |||||||||||||
Granted
|
2.5 | 26.59 | ||||||||||||||
Exercised
|
(1.4 | ) | 16.83 | |||||||||||||
Canceled or expired
|
(0.3 | ) | 26.21 | |||||||||||||
Options outstanding at July 1, 2011
|
10.2 | $ | 22.49 | 4.6 | $ | 145 | ||||||||||
Exercisable at July 1, 2011
|
5.5 | $ | 19.36 | 3.8 | $ | 95 | ||||||||||
Vested and expected to vest after July 1, 2011
|
10.1 | $ | 22.43 | 4.5 | $ | 144 | ||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Weighted Average |
||||||||||||||||||||||
Remaining |
||||||||||||||||||||||
Range of |
Number |
Contractual Life |
Weighted Average |
Number |
Weighted Average |
|||||||||||||||||
Exercise Prices | of Shares | (in years) | Exercise Price | of Shares | Exercise Price | |||||||||||||||||
$ | 2.10 $13.76 | 1.6 | 2.5 | $ | 8.98 | 1.6 | $ | 8.97 | ||||||||||||||
$ | 13.95 $20.55 | 2.2 | 4.6 | 17.59 | 1.4 | 18.11 | ||||||||||||||||
$ | 21.29 $25.95 | 2.3 | 4.2 | 23.89 | 1.6 | 23.70 | ||||||||||||||||
$ | 26.17 $26.17 | 2.2 | 6.2 | 26.17 | | 26.17 | ||||||||||||||||
$ | 27.64 $40.66 | 1.9 | 4.9 | 33.91 | 0.9 | 32.85 | ||||||||||||||||
10.2 | 4.6 | $ | 22.49 | 5.5 | $ | 19.36 | ||||||||||||||||
63
2011 | 2010 | 2009 | ||||
Suboptimal exercise factor
|
1.81 | 1.73 | 1.73 | |||
Range of risk-free interest rates
|
0.20% to 2.90% | 0.31% to 3.40% | 0.38% to 3.44% | |||
Range of expected stock price volatility
|
0.39 to 0.59 | 0.40 to 0.72 | 0.43 to 0.77 | |||
Weighted average expected volatility
|
0.52 | 0.57 | 0.55 | |||
Post-vesting termination rate
|
2.44% | 3.57% | 4.02% | |||
Dividend yield
|
| | | |||
Fair value
|
$11.42 | $17.09 | $9.05 |
ESPP | ||||||||||||
2011 | 2010 | 2009 | ||||||||||
Option life (in years)
|
1.25 | 1.24 | 1.30 | |||||||||
Risk-free interest rate
|
0.44 | % | 0.57 | % | 0.65 | % | ||||||
Stock price volatility
|
0.44 | 0.53 | 0.63 | |||||||||
Dividend yield
|
| | | |||||||||
Fair value
|
$ | 8.36 | $ | 10.02 | $ | 3.61 |
64
Weighted Average |
||||||||
Number |
Grant Date |
|||||||
of Shares | Fair Value | |||||||
RSUs outstanding at June 27, 2008
|
2.8 | $ | 21.75 | |||||
Granted
|
0.9 | 22.84 | ||||||
Vested
|
(0.5 | ) | 23.18 | |||||
Canceled or expired
|
(0.1 | ) | 22.62 | |||||
RSUs outstanding at July 3, 2009
|
3.1 | $ | 21.80 | |||||
Granted
|
1.2 | 38.42 | ||||||
Vested
|
(1.1 | ) | 20.60 | |||||
Canceled or expired
|
(0.1 | ) | 27.84 | |||||
RSUs outstanding at July 2, 2010
|
3.1 | $ | 28.43 | |||||
Granted
|
1.0 | 26.75 | ||||||
Vested
|
(0.8 | ) | 24.03 | |||||
Canceled or expired
|
(0.2 | ) | 32.41 | |||||
RSUs outstanding at July 1, 2011
|
3.1 | $ | 28.85 | |||||
Expected to vest after July 1, 2011
|
2.9 | $ | 28.82 | |||||
65
Number |
||||
of Shares | ||||
Maximum shares issuable in connection with:
|
||||
Outstanding awards and shares available for award grants
|
25.4 | |||
ESPP
|
3.5 | |||
Total
|
28.9 | |||
2011 | 2010 | 2009 | ||||||||||
Foreign
|
$ | 660 | $ | 1,418 | $ | 459 | ||||||
Domestic
|
120 | 102 | 42 | |||||||||
Income before income taxes
|
$ | 780 | $ | 1,520 | $ | 501 | ||||||
2011 | 2010 | 2009 | ||||||||||
Current:
|
||||||||||||
Foreign
|
$ | 12 | $ | 9 | $ | 13 | ||||||
Domestic-federal
|
21 | 101 | (7 | ) | ||||||||
Domestic-state
|
1 | 1 | 1 | |||||||||
Deferred:
|
||||||||||||
Domestic-federal
|
30 | 37 | 24 | |||||||||
Domestic-state
|
(10 | ) | (10 | ) | | |||||||
Income tax provision
|
$ | 54 | $ | 138 | $ | 31 | ||||||
66
2011 | 2010 | |||||||
Deferred tax assets:
|
||||||||
Sales related reserves and accrued expenses not currently
deductible
|
$ | 51 | $ | 50 | ||||
Accrued compensation and benefits not currently deductible
|
69 | 44 | ||||||
Domestic net operating loss (NOL) carryforward
|
49 | 52 | ||||||
Business credit carryforward
|
145 | 137 | ||||||
Other
|
53 | 47 | ||||||
Total deferred tax assets
|
367 | 330 | ||||||
Deferred tax liabilities:
|
||||||||
Depreciation
|
(116 | ) | (58 | ) | ||||
Other
|
(10 | ) | (11 | ) | ||||
Total deferred tax liabilities
|
(126 | ) | (69 | ) | ||||
Deferred tax assets, net
|
$ | 241 | $ | 261 | ||||
2011 | 2010 | |||||||
Deferred tax assets:
|
||||||||
Current portion (included in other current assets)
|
$ | 108 | $ | 81 | ||||
Non-current portion (included in other non-current assets)
|
259 | 249 | ||||||
Total deferred tax assets
|
367 | 330 | ||||||
Deferred tax liabilities:
|
||||||||
Current portion (included in other current assets)
|
(2 | ) | (2 | ) | ||||
Non-current portion (included in other non-current assets)
|
(124 | ) | (67 | ) | ||||
Total deferred tax liabilities
|
(126 | ) | (69 | ) | ||||
Deferred tax assets, net
|
$ | 241 | $ | 261 | ||||
67
2011 | 2010 | 2009 | ||||||||||
U.S. Federal statutory rate
|
35 | % | 35 | % | 35 | % | ||||||
Tax rate differential on international income
|
(26 | ) | (26 | ) | (30 | ) | ||||||
Tax effect of U.S. permanent differences
|
3 | 1 | 6 | |||||||||
State income tax, net of federal tax
|
(1 | ) | | 1 | ||||||||
Income tax credits
|
(4 | ) | (1 | ) | (8 | ) | ||||||
Other
|
| | 2 | |||||||||
Effective tax rate
|
7 | % | 9 | % | 6 | % | ||||||
68
Unrecognized tax benefit at July 2, 2010
|
$ | 230 | ||
Gross increases related to prior year tax positions
|
5 | |||
Gross decreases related to prior year tax positions
|
(11 | ) | ||
Gross increases related to current year tax positions
|
24 | |||
Settlements/lapse of statute of limitations
|
(3 | ) | ||
Unrecognized tax benefit at July 1, 2011
|
$ | 245 | ||
69
Fair Value Measurements at |
||||||||||||||||
Reporting Date Using | ||||||||||||||||
Quoted Prices |
||||||||||||||||
in Active |
Significant |
|||||||||||||||
Markets for |
Other |
Significant |
||||||||||||||
Identical |
Observable |
Unobservable |
||||||||||||||
Instruments |
Inputs |
Inputs |
||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents
|
||||||||||||||||
Money market funds
|
$ | 721 | $ | | $ | | $ | 721 | ||||||||
U.S. Treasury securities
|
| 60 | | 60 | ||||||||||||
U.S. Government agency securities
|
| 78 | | 78 | ||||||||||||
Total cash equivalents
|
721 | 138 | | 859 | ||||||||||||
Auction-rate securities
|
| | 15 | 15 | ||||||||||||
Total assets at fair value
|
$ | 721 | $ | 138 | $ | 15 | $ | 874 | ||||||||
Liabilities:
|
||||||||||||||||
Foreign exchange contracts
|
$ | | $ | (5 | ) | $ | | $ | (5 | ) | ||||||
Total liabilities at fair value
|
$ | | $ | (5 | ) | $ | | $ | (5 | ) | ||||||
Fair Value Measurements at |
||||||||||||||||
Reporting Date Using | ||||||||||||||||
Quoted Prices |
||||||||||||||||
in Active |
Significant |
|||||||||||||||
Markets for |
Other |
Significant |
||||||||||||||
Identical |
Observable |
Unobservable |
||||||||||||||
Assets |
Inputs |
Inputs |
||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Cash equivalents
|
||||||||||||||||
Money market funds
|
$ | 458 | $ | | $ | | $ | 458 | ||||||||
U.S. Treasury securities
|
| 385 | | 385 | ||||||||||||
U.S. Government agency securities
|
| 370 | | 370 | ||||||||||||
Total cash equivalents
|
458 | 755 | | 1,213 | ||||||||||||
Auction-rate securities
|
| | 15 | 15 | ||||||||||||
Foreign exchange contracts
|
| 17 | | 17 | ||||||||||||
Total assets at fair value
|
$ | 458 | $ | 772 | $ | 15 | $ | 1,245 | ||||||||
70
U.S. |
||||||||||||
Government |
||||||||||||
Agency |
Auction-rate |
|||||||||||
Securities | Securities | Total | ||||||||||
July 3, 2009
|
$ | 1 | $ | 18 | $ | 19 | ||||||
Sales
|
| (3 | ) | (3 | ) | |||||||
Maturities
|
(1 | ) | | (1 | ) | |||||||
July 2, 2010
|
$ | | $ | 15 | $ | 15 | ||||||
71
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||
Derivatives Designated as |
Balance Sheet |
Balance Sheet |
Balance Sheet |
Balance Sheet |
||||||||||||||||||||||||||||
Hedging Instruments | Location | Fair Value | Location | Fair Value | Location | Fair Value | Location | Fair Value | ||||||||||||||||||||||||
Foreign exchange contracts
|
| | Other current assets | $ | 17 | Accrued expenses | $ | 5 | | |
Amount of Gain (Loss) |
Amount of Gain (Loss) |
|||||||||||||||||||
Recognized in |
Location of Gain (Loss) |
Reclassified from |
||||||||||||||||||
Accumulated OCI |
Reclassified from |
Accumulated OCI into |
||||||||||||||||||
Derivatives in Cash |
on Derivatives |
Accumulated |
Income | |||||||||||||||||
Flow Hedging Relationships | 2011 | 2010 | OCI into Income | 2011 | 2010 | |||||||||||||||
Foreign exchange contracts
|
$ | 77 | $ | 64 | Cost of revenue | $ | 93 | $ | 55 |
Weighted Average |
Gross Carrying |
Accumulated |
Net Carrying |
|||||||||||||
Amortization Period | Amount | Amortization | Amount | |||||||||||||
(in years) | (in millions) | (in millions) | (in millions) | |||||||||||||
Existing technology
|
9 | $ | 127 | $ | 59 | $ | 68 | |||||||||
Supply agreement
|
2 | 6 | 3 | 3 | ||||||||||||
Total
|
$ | 133 | $ | 62 | $ | 71 | ||||||||||
Weighted Average |
Gross Carrying |
Accumulated |
Net Carrying |
|||||||||||||
Amortization Period | Amount | Amortization | Amount | |||||||||||||
(in years) | (in millions) | (in millions) | (in millions) | |||||||||||||
Existing technology
|
9 | $ | 127 | $ | 45 | $ | 82 | |||||||||
Supply agreement
|
2 | 6 | | 6 | ||||||||||||
Total
|
$ | 133 | $ | 45 | $ | 88 | ||||||||||
Note 13. | Restructuring and Sale of Facility |
72
Note 14. | Acquisitions |
73
June 30, |
||||
2010 | ||||
Tangible assets acquired and liabilities assumed:
|
||||
Inventories
|
$ | 35 | ||
Property and equipment
|
185 | |||
Accounts payables and other liabilities
|
(10 | ) | ||
Intangible assets
|
11 | |||
Goodwill
|
12 | |||
Total
|
$ | 233 | ||
March 27, |
||||
2009 | ||||
Tangible assets acquired and liabilities assumed, net
|
$ | 5 | ||
Intangible assets
|
24 | |||
In-process research and development
|
14 | |||
Goodwill
|
23 | |||
Total
|
$ | 66 | ||
74
Note 15. | Quarterly Results of Operations (unaudited) |
2011(1) | First | Second | Third | Fourth | ||||||||||||
Revenue, net
|
$ | 2,396 | $ | 2,475 | $ | 2,252 | $ | 2,403 | ||||||||
Gross margin
|
437 | 475 | 410 | 469 | ||||||||||||
Operating income
|
211 | 240 | 158 | 172 | ||||||||||||
Net income
|
197 | 225 | 146 | 158 | ||||||||||||
Basic income per common share
|
$ | 0.86 | $ | 0.98 | $ | 0.63 | $ | 0.68 | ||||||||
Diluted income per common share
|
$ | 0.84 | $ | 0.96 | $ | 0.62 | $ | 0.67 | ||||||||
2010(2)
|
||||||||||||||||
Revenue, net
|
$ | 2,208 | $ | 2,619 | $ | 2,641 | $ | 2,382 | ||||||||
Gross margin
|
514 | 687 | 665 | 535 | ||||||||||||
Operating income
|
319 | 473 | 441 | 293 | ||||||||||||
Net income
|
288 | 429 | 400 | 265 | ||||||||||||
Basic income per common share
|
$ | 1.28 | $ | 1.89 | $ | 1.75 | $ | 1.15 | ||||||||
Diluted income per common share
|
$ | 1.25 | $ | 1.85 | $ | 1.71 | $ | 1.13 | ||||||||
(1) | The third quarter of 2011 included $10 million of expenses related to the planned acquisition of HGST. The fourth quarter of 2011 included a $25 million accrual for litigation contingencies, $7 million of expenses related to the planned acquisition of HGST, and $2 million of debt commitment fees related to the planned acquisition of HGST. | |
(2) | The fourth quarter of 2010 included $27 million in expenses related to litigation settlements. |
75
Allowance for |
||||
Doubtful |
||||
Accounts | ||||
Balance at June 27, 2008
|
$ | 8 | ||
Additions charged to operations
|
9 | |||
Deductions
|
(3 | ) | ||
Balance at July 3, 2009
|
$ | 14 | ||
Recoveries credited to operations
|
(6 | ) | ||
Deductions
|
(2 | ) | ||
Balance at July 2, 2010
|
$ | 6 | ||
Additions charged to operations
|
| |||
Deductions
|
(1 | ) | ||
Balance at July 1, 2011
|
$ | 5 | ||
76
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
77
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
78
Item 15. | Exhibits and Financial Statement Schedules |
Exhibit |
||||
Number | Description | |||
2 | .1 | Stock Purchase Agreement, dated March 7, 2011, among Western Digital Corporation, Western Digital Ireland, Ltd., Hitachi, Ltd., and Viviti Technologies Ltd.(19)± | ||
2 | .2 | First Amendment to Stock Purchase Agreement, dated May 27, 2011, among Western Digital Corporation, Western Digital Ireland, Ltd., Hitachi, Ltd., and Viviti Technologies Ltd. | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Western Digital Corporation, as amended to date(7) | ||
3 | .2 | Amended and Restated Bylaws of Western Digital Corporation, as amended effective as of November 5, 2007(11) | ||
10 | .1 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan, amended and restated effective as of August 12, 2009(15)* | ||
10 | .1.1 | Form of Notice of Grant of Stock Option and Option Agreement Executives, under the Western Digital Corporation 2004 Performance Incentive Plan(8)* | ||
10 | .1.2 | Form of Notice of Stock Option Grant and Stock Option Agreement , under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(8)* | ||
10 | .1.3 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement Executives, under the Western Digital Corporation 2004 Performance Incentive Plan(5)* | ||
10 | .1.4 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement Non-Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(5)* | ||
10 | .1.5 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* |
79
Exhibit |
||||
Number | Description | |||
10 | .1.6 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.7 | Form of Notice of Grant of Long-Term Cash Award and Long-Term Cash Award Agreement Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.8 | Form of Notice of Grant of Long-Term Cash Award and Long-Term Cash Award Agreement Employees, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.9 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan Non-Employee Director Option Grant Program, as amended September 11, 2008, and Form of Notice of Grant of Stock Option and Option Agreement Non-Employee Directors(16)* | ||
10 | .1.10 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan Non-Employee Director Restricted Stock Unit Grant Program, as amended and restated effective November 6, 2008(16)* | ||
10 | .2 | Western Digital Corporation Amended and Restated Employee Stock Option Plan, as amended on November 5, 1998(1)* | ||
10 | .2.1 | First Amendment to the Western Digital Corporation Employee Stock Option Plan, dated April 6, 2001(3)* | ||
10 | .2.2 | Form of Notice of Grant of Stock Options and Stock Option Agreement under the Western Digital Corporation Amended and Restated Employee Stock Option Plan as amended(6)* | ||
10 | .3 | Western Digital Corporation Broad-Based Stock Incentive Plan(2)* | ||
10 | .3.1 | First Amendment to the Western Digital Corporation Broad-Based Stock Incentive Plan, dated April 6, 2001(3)* | ||
10 | .3.2 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement under the Western Digital Corporation Broad Based Stock Incentive Plan as amended(6)* | ||
10 | .4 | Western Digital Corporation Amended and Restated Stock Option Plan for Non-Employee Directors, effective as of May 25, 2000(3)* | ||
10 | .4.1 | First Amendment to the Western Digital Corporation Amended and Restated Stock Option Plan for Non-Employee Directors, dated April 6, 2001(3)* | ||
10 | .5 | Western Digital Corporation 2005 Employee Stock Purchase Plan, as amended August 11, 2010(17)* | ||
10 | .6 | Amended and Restated Western Digital Corporation Non-Employee Directors Stock-For-Fees Plan, as amended November 6, 2008(15)* | ||
10 | .7 | Western Digital Corporation Summary of Compensation Arrangements for Named Executive Officers and Directors* | ||
10 | .8 | Amended and Restated Deferred Compensation Plan, amended and restated effective November 10, 2010(18)* | ||
10 | .9 | Employment Agreement, dated as of March 7, 2011, between Western Digital Corporation and John Coyne(19)* | ||
10 | .9.1 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement between Western Digital Corporation and John Coyne(9)* | ||
10 | .9.2 | Form of Notice of Grant of Stock Option and Option Agreement between Western Digital Corporation and John Coyne(9)* | ||
10 | .10 | Employment Agreement, dated March 7, 2011, between Western Digital Corporation and Timothy Leyden(19)* | ||
10 | .11 | Western Digital Corporation Amended and Restated Change of Control Severance Plan, amended and restated as of May 17, 2011* | ||
10 | .12 | Western Digital Corporation Executive Severance Plan, amended and restated as of November 10, 2010(18)* | ||
10 | .13 | Form of Indemnity Agreement for Directors of Western Digital Corporation(4)* | ||
10 | .14 | Form of Indemnity Agreement for Officers of Western Digital Corporation(4)* |
80
Exhibit |
||||
Number | Description | |||
10 | .15 | Credit Agreement, dated February 11, 2008, among Western Digital Technologies, Inc.; lenders party thereto; JPMorgan Chase Bank, N.A., as administrative agent; Citigroup Global Markets Inc., as syndication agent; J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as arrangers; and Bank of America, N.A., HSBC Bank USA, National Association and The Royal Bank of Scotland plc, as co-documentation agents(12) | ||
10 | .16 | Commitment Letter, dated March 7, 2011, among Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Western Digital Corporation, Western Digital Technologies, Inc., and Western Digital Ireland, Ltd.(19) | ||
10 | .17 | Transition Services Agreement, dated March 7, 2011, among Hitachi, Ltd., Viviti Technologies Ltd. and Western Digital Corporation(19) | ||
21 | Subsidiaries of Western Digital Corporation | |||
23 | Consent of Independent Registered Public Accounting Firm | |||
31 | .1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32 | .2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101 | .INS | XBRL Instance Document** | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document** | ||
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document** | ||
101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document** | ||
101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document** | ||
101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document** |
| Filed with this report. | |
± | Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally copies of any of the omitted schedules upon request by the Securities and Exchange Commission. | |
* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to applicable rules of the Securities and Exchange Commission. | |
** | Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, except as expressly set forth by specific reference in such filing. | |
(1) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on February 8, 1999. | |
(2) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on May 15, 2000. | |
(3) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on September 27, 2001. | |
(4) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on November 8, 2002. | |
(5) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 23, 2004. | |
(6) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on September 14, 2005. |
81
(7) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on February 8, 2006. | |
(8) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on May 16, 2006. | |
(9) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 2, 2006. | |
(10) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on August 28, 2007. | |
(11) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 8, 2007. | |
(12) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on February 12, 2008. | |
(13) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 31, 2008. | |
(14) | Incorporated by reference to the Companys Registration Statement on Form S-8 (File No. 333-155661), as filed with the Securities and Exchange Commission on November 25, 2008. | |
(15) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 16, 2009. | |
(16) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 29, 2009. | |
(17) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 29, 2010. | |
(18) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on January 28, 2011. | |
(19) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on May 2, 2011. |
82
By: |
/s/ Wolfgang
U. Nickl
|
Signature | Title | Date | ||||
/s/ John
F. Coyne John F. Coyne |
President and Chief Executive Officer (Principal Executive Officer), Director |
August 11, 2011 | ||||
/s/ Wolfgang
U. Nickl Wolfgang U. Nickl |
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
August 11, 2011 | ||||
/s/ Joseph
R. Carrillo Joseph R. Carrillo |
Vice President and Chief Accounting Officer (Principal Accounting Officer) |
August 11, 2011 | ||||
/s/ Thomas
E. Pardun Thomas E. Pardun |
Chairman of the Board | August 11, 2011 | ||||
/s/ Peter
D. Behrendt Peter D. Behrendt |
Director | August 11, 2011 | ||||
/s/ Kathleen
A. Cote Kathleen A. Cote |
Director | August 11, 2011 | ||||
/s/ Henry
T. DeNero Henry T. DeNero |
Director | August 11, 2011 | ||||
/s/ William
L. Kimsey William L. Kimsey |
Director | August 11, 2011 | ||||
/s/ Michael
D. Lambert Michael D. Lambert |
Director | August 11, 2011 | ||||
/s/ Len
J. Lauer Len J. Lauer |
Director | August 11, 2011 | ||||
/s/ Matthew
E. Massengill Matthew E. Massengill |
Director | August 11, 2011 | ||||
/s/ Roger
H. Moore Roger H. Moore |
Director | August 11, 2011 | ||||
/s/ Arif
Shakeel Arif Shakeel |
Director | August 11, 2011 |
83
Exhibit |
||||
Number | Description | |||
2 | .1 | Stock Purchase Agreement, dated March 7, 2011, among Western Digital Corporation, Western Digital Ireland, Ltd., Hitachi, Ltd., and Viviti Technologies Ltd.(19)± | ||
2 | .2 | First Amendment to Stock Purchase Agreement, dated May 27, 2011, among Western Digital Corporation, Western Digital Ireland, Ltd., Hitachi, Ltd., and Viviti Technologies Ltd. | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Western Digital Corporation, as amended to date(7) | ||
3 | .2 | Amended and Restated Bylaws of Western Digital Corporation, as amended effective as of November 5, 2007(11) | ||
10 | .1 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan, amended and restated effective as of August 12, 2009(15)* | ||
10 | .1.1 | Form of Notice of Grant of Stock Option and Option Agreement Executives, under the Western Digital Corporation 2004 Performance Incentive Plan(8)* | ||
10 | .1.2 | Form of Notice of Stock Option Grant and Stock Option Agreement , under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(8)* | ||
10 | .1.3 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement Executives, under the Western Digital Corporation 2004 Performance Incentive Plan(5)* | ||
10 | .1.4 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement Non-Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(5)* | ||
10 | .1.5 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.6 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.7 | Form of Notice of Grant of Long-Term Cash Award and Long-Term Cash Award Agreement Executives, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.8 | Form of Notice of Grant of Long-Term Cash Award and Long-Term Cash Award Agreement Employees, under the Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan(13)* | ||
10 | .1.9 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan Non-Employee Director Option Grant Program, as amended September 11, 2008, and Form of Notice of Grant of Stock Option and Option Agreement Non-Employee Directors(16)* | ||
10 | .1.10 | Western Digital Corporation Amended and Restated 2004 Performance Incentive Plan Non-Employee Director Restricted Stock Unit Grant Program, as amended and restated effective November 6, 2008(16)* | ||
10 | .2 | Western Digital Corporation Amended and Restated Employee Stock Option Plan, as amended on November 5, 1998(1)* | ||
10 | .2.1 | First Amendment to the Western Digital Corporation Employee Stock Option Plan, dated April 6, 2001(3)* | ||
10 | .2.2 | Form of Notice of Grant of Stock Options and Stock Option Agreement under the Western Digital Corporation Amended and Restated Employee Stock Option Plan as amended(6)* | ||
10 | .3 | Western Digital Corporation Broad-Based Stock Incentive Plan(2)* | ||
10 | .3.1 | First Amendment to the Western Digital Corporation Broad-Based Stock Incentive Plan, dated April 6, 2001(3)* | ||
10 | .3.2 | Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement under the Western Digital Corporation Broad Based Stock Incentive Plan as amended(6)* | ||
10 | .4 | Western Digital Corporation Amended and Restated Stock Option Plan for Non-Employee Directors, effective as of May 25, 2000(3)* | ||
10 | .4.1 | First Amendment to the Western Digital Corporation Amended and Restated Stock Option Plan for Non-Employee Directors, dated April 6, 2001(3)* | ||
10 | .5 | Western Digital Corporation 2005 Employee Stock Purchase Plan, as amended August 11, 2010(17)* | ||
10 | .6 | Amended and Restated Western Digital Corporation Non-Employee Directors Stock-For-Fees Plan, as amended November 6, 2008(15)* | ||
10 | .7 | Western Digital Corporation Summary of Compensation Arrangements for Named Executive Officers and Directors* |
Exhibit |
||||
Number | Description | |||
10 | .8 | Amended and Restated Deferred Compensation Plan, amended and restated effective November 10, 2010(18)* | ||
10 | .9 | Employment Agreement, dated as of March 7, 2011, between Western Digital Corporation and John Coyne(19)* | ||
10 | .9.1 | Form of Notice of Grant of Stock Units and Stock Unit Award Agreement between Western Digital Corporation and John Coyne(9)* | ||
10 | .9.2 | Form of Notice of Grant of Stock Option and Option Agreement between Western Digital Corporation and John Coyne(9)* | ||
10 | .10 | Employment Agreement, dated March 7, 2011, between Western Digital Corporation and Timothy Leyden(19)* | ||
10 | .11 | Western Digital Corporation Amended and Restated Change of Control Severance Plan, amended and restated as of May 17, 2011* | ||
10 | .12 | Western Digital Corporation Executive Severance Plan, amended and restated as of November 10, 2010(18)* | ||
10 | .13 | Form of Indemnity Agreement for Directors of Western Digital Corporation(4)* | ||
10 | .14 | Form of Indemnity Agreement for Officers of Western Digital Corporation(4)* | ||
10 | .15 | Credit Agreement, dated February 11, 2008, among Western Digital Technologies, Inc.; lenders party thereto; JPMorgan Chase Bank, N.A., as administrative agent; Citigroup Global Markets Inc., as syndication agent; J.P. Morgan Securities Inc. and Citigroup Global Markets Inc., as arrangers; and Bank of America, N.A., HSBC Bank USA, National Association and The Royal Bank of Scotland plc, as co-documentation agents(12) | ||
10 | .16 | Commitment Letter, dated March 7, 2011, among Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Western Digital Corporation, Western Digital Technologies, Inc., and Western Digital Ireland, Ltd.(19) | ||
10 | .17 | Transition Services Agreement, dated March 7, 2011, among Hitachi, Ltd., Viviti Technologies Ltd. and Western Digital Corporation(19) | ||
21 | Subsidiaries of Western Digital Corporation | |||
23 | Consent of Independent Registered Public Accounting Firm | |||
31 | .1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32 | .2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101 | .INS | XBRL Instance Document** | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document** | ||
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document** | ||
101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document** | ||
101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document** | ||
101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document** |
| Filed with this report. | |
± | Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally copies of any of the omitted schedules upon request by the Securities and Exchange Commission. | |
* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to applicable rules of the Securities and Exchange Commission. | |
** | Furnished herewith. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to |
liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, except as expressly set forth by specific reference in such filing. | ||
(1) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on February 8, 1999. | |
(2) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on May 15, 2000. | |
(3) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on September 27, 2001. | |
(4) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on November 8, 2002. | |
(5) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 23, 2004. | |
(6) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on September 14, 2005. | |
(7) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on February 8, 2006. | |
(8) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on May 16, 2006. | |
(9) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 2, 2006. | |
(10) | Incorporated by reference to the Companys Annual Report on Form 10-K (File No. 1-8703), as filed with the Securities and Exchange Commission on August 28, 2007. | |
(11) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 8, 2007. | |
(12) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on February 12, 2008. | |
(13) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 31, 2008. | |
(14) | Incorporated by reference to the Companys Registration Statement on Form S-8 (File No. 333-155661), as filed with the Securities and Exchange Commission on November 25, 2008. | |
(15) | Incorporated by reference to the Companys Current Report on Form 8-K (File No. 1-8703), as filed with the Securities and Exchange Commission on November 16, 2009. | |
(16) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 29, 2009. | |
(17) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on October 29, 2010. | |
(18) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on January 28, 2011. | |
(19) | Incorporated by reference to the Companys Quarterly Report on Form 10-Q (File No. 1-8703), as filed with the Securities and Exchange Commission on May 2, 2011. |
BUYER PARENT WESTERN DIGITAL CORPORATION |
||||
By: | /s/ Michael Ray | |||
Name: | Michael Ray | |||
Title: | Senior Vice President, General Counsel | |||
BUYER WESTERN DIGITAL IRELAND, LTD. |
||||
By: | /s/ Michael C. Ray | |||
Name: | Michael C. Ray | |||
Title: | Vice President | |||
SELLER HITACHI, LTD. |
||||
By: | /s/ Toyoki Furuta | |||
Name: | Toyoki Furata | |||
Title: | General Manager, Business Development Office | |||
COMPANY VIVITI TECHNOLOGIES LTD. |
||||
By: | /s/ Christopher Dewees | |||
Name: | Christopher Dewees | |||
Title: | Senior Vice President | |||
WESTERN DIGITAL CORPORATION |
||||
By: | ||||
Name: | ||||
Title: | ||||
HITACHI, LTD. |
||||
By: | ||||
Name: | ||||
Title: | ||||
TERRITORY | NONCOMPETE PERIOD | |
Mexico
|
For a period of five (5) years following the Closing Date | |
Turkey
|
For a period of five (5) years following the Closing Date | |
Brazil
|
For a period of five (5) years following the Closing Date | |
Remainder of the world
|
For a period of ten (10) years following the Closing Date |
Current Annual | ||||
Type of Fee | Retainer Fees | |||
Annual Retainer |
$ | 75,000 | ||
Lead Independent Director Retainer |
$ | 20,000 | ||
Non-Executive Chairman of Board Retainer |
$ | 100,000 | ||
Additional Committee Retainers |
||||
Audit Committee |
$ | 10,000 | ||
Compensation Committee |
$ | 5,000 | ||
Governance Committee |
$ | 2,500 | ||
Additional Committee Chairman Retainers |
||||
Audit Committee |
$ | 15,000 | ||
Compensation Committee |
$ | 10,000 | ||
Governance Committee |
$ | 7,500 |
Current | ||||||
Named Executive Officer | Title | Base Salary | ||||
John F. Coyne |
President and Chief Executive Officer | $ | 1,000,000 | |||
Timothy M. Leyden |
Chief Operating Officer | $ | 600,000 |
Current Annual | ||||
Type of Fee | Retainer Fees | |||
Annual Retainer |
$ | 75,000 | ||
Lead Independent Director Retainer |
$ | 20,000 | ||
Non-Executive Chairman of Board Retainer |
$ | 100,000 | ||
Additional Committee Retainers |
||||
Audit Committee |
$ | 10,000 | ||
Compensation Committee |
$ | 5,000 | ||
Governance Committee |
$ | 2,500 | ||
Additional Committee Chairman Retainers |
||||
Audit Committee |
$ | 15,000 | ||
Compensation Committee |
$ | 10,000 | ||
Governance Committee |
$ | 7,500 |
2
3
4
5
6
7
8
9
10
11
12
13
14
State or Other Jurisdiction of | ||
Name of Entity |
Incorporation or Organization | |
Keen Personal Media, Inc.
|
Delaware | |
Keen Personal Technologies, Inc.
|
Delaware | |
Pacifica Insurance Corporation
|
Hawaii | |
Read-Rite International
|
Cayman Islands | |
Read-Rite Philippines, Inc.
|
Philippines | |
RS Patent Holding Corporation
|
Delaware | |
SiliconSystems Inc.
|
California | |
WD Media, Inc. (formerly Komag Incorporated)
|
Delaware | |
WD Media (Bermuda) Ltd. (formerly Komag (Bermuda) Ltd.)
|
Bermuda | |
WD Media (Johor) Sdn. Bhd. (formerly Komag Johor Sdn. Bhd.)
|
Malaysia | |
WD Media (Malaysia) Sdn. (formerly Komag USA (Malaysia) Sdn.)
|
Malaysia | |
WD Media (Singapore) Pte. Ltd.
|
Singapore | |
Western Digital Canada Corporation
|
Ontario, Canada | |
Western Digital Deutschland GmbH
|
Germany | |
Western Digital (France) S.A.R.L.
|
France | |
Western Digital (Fremont), LLC
|
Delaware | |
Western Digital Hong Kong Limited
|
Hong Kong | |
Western Digital Information Technology (Shanghai) Company Ltd. Western Digital International Ltd. Western Digital Ireland, Ltd. |
China Cayman Islands Cayman Islands |
|
Western Digital (I.S.) Limited
|
Ireland | |
Western Digital Japan Ltd.
|
Japan | |
Western Digital Korea, Ltd.
|
Republic of Korea | |
Western Digital Latin America, Inc.
|
Delaware | |
Western Digital (Malaysia) Sdn. Bhd.
|
Malaysia | |
Western Digital Netherlands B.V.
|
The Netherlands | |
Western Digital (S.E. Asia) Pte. Ltd.
|
Singapore | |
Western Digital Taiwan Co., Ltd.
|
Taiwan | |
Western Digital Technologies, Inc.
|
Delaware | |
Western Digital (Thailand) Company Limited
|
Thailand | |
Western Digital (U.K.) Limited
|
England | |
Western Digital Ventures, Inc.
|
Delaware |
/s/ John F. Coyne | ||
John F. Coyne | ||
President and Chief Executive Officer |
/s/ Wolfgang U. Nickl | ||
Wolfgang U. Nickl | ||
Senior Vice President and Chief Financial Officer |
/s/ John F. Coyne | ||
John F. Coyne | ||
President and Chief Executive Officer |
/s/ Wolfgang U. Nickl | ||
Wolfgang U. Nickl | ||
Senior Vice President and Chief Financial Officer |
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Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data |
Jul. 01, 2011
|
Jul. 02, 2010
|
---|---|---|
Shareholders' equity: | Â | Â |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5 | 5 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 450 | 450 |
Common stock, shares issued | 233 | 231 |
Common stock, shares outstanding | 233 | 231 |
Consolidated Statements of Income (USD $)
In Millions, except Per Share data |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Consolidated Statements of Income [Abstract] | Â | Â | Â |
Revenue, net | $ 9,526 | $ 9,850 | $ 7,453 |
Cost of revenue | 7,735 | 7,449 | 6,116 |
Gross margin | 1,791 | 2,401 | 1,337 |
Operating expenses: | Â | Â | Â |
Research and development | 703 | 611 | 509 |
Selling, general and administrative | 307 | 265 | 201 |
Acquired in-process research and development | Â | Â | 14 |
Restructuring and other, net | Â | Â | 94 |
Total operating expenses | 1,010 | 876 | 818 |
Operating income | 781 | 1,525 | 519 |
Other income (expense): | Â | Â | Â |
Interest income | 9 | 4 | 9 |
Interest and other expense | (10) | (9) | (27) |
Total other expense, net | (1) | (5) | (18) |
Income before income taxes | 780 | 1,520 | 501 |
Income tax provision | 54 | 138 | 31 |
Net income | $ 726 | $ 1,382 | $ 470 |
Income per common share: | Â | Â | Â |
Basic | $ 3.14 | $ 6.06 | $ 2.12 |
Diluted | $ 3.09 | $ 5.93 | $ 2.08 |
Weighted average shares outstanding: | Â | Â | Â |
Basic | 231 | 228 | 222 |
Diluted | 235 | 233 | 226 |
Fair Value Measurements (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Millions |
Jul. 01, 2011
|
Jul. 02, 2010
|
---|---|---|
Assets: | Â | Â |
Total cash equivalents | $ 859 | $ 1,213 |
Total assets at fair value | 874 | 1,245 |
Liabilities: | Â | Â |
Liabilities At Fair Value | (5) | Â |
Money Market Funds [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 721 | 458 |
Money Market Funds [Member] | Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 721 | 458 |
Money Market Funds [Member] | Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
Money Market Funds [Member] | Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
US Treasury Securities [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 60 | 385 |
US Treasury Securities [Member] | Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
US Treasury Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 60 | 385 |
US Treasury Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
U.S. Government agency securities [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 78 | 370 |
U.S. Government agency securities [Member] | Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
U.S. Government agency securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 78 | 370 |
U.S. Government agency securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
Auction Rate Securities [Member]
|
 |  |
Assets: | Â | Â |
Auction-rate securities | 15 | 15 |
Auction Rate Securities [Member] | Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Auction-rate securities | 0 | 0 |
Auction Rate Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Auction-rate securities | 0 | 0 |
Auction Rate Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Auction-rate securities | 15 | 15 |
Foreign Exchange Contract [Member]
|
 |  |
Assets: | Â | Â |
Foreign exchange contracts | Â | 17 |
Liabilities: | Â | Â |
Foreign exchange contracts | (5) | Â |
Foreign Exchange Contract [Member] | Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Foreign exchange contracts | Â | 0 |
Liabilities: | Â | Â |
Foreign exchange contracts | 0 | Â |
Foreign Exchange Contract [Member] | Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Foreign exchange contracts | Â | 17 |
Liabilities: | Â | Â |
Foreign exchange contracts | (5) | Â |
Foreign Exchange Contract [Member] | Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Foreign exchange contracts | Â | 0 |
Liabilities: | Â | Â |
Foreign exchange contracts | 0 | Â |
Quoted Prices in Active Markets for Identical Instruments (Level 1) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 721 | 458 |
Total assets at fair value | 721 | 458 |
Liabilities: | Â | Â |
Liabilities At Fair Value | 0 | Â |
Significant Other Observable Inputs (Level 2) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 138 | 755 |
Total assets at fair value | 138 | 772 |
Liabilities: | Â | Â |
Liabilities At Fair Value | (5) | Â |
Significant Unobservable Inputs (Level 3) [Member]
|
 |  |
Assets: | Â | Â |
Total cash equivalents | 0 | 0 |
Total assets at fair value | 15 | 15 |
Liabilities: | Â | Â |
Liabilities At Fair Value | $ 0 | Â |
Organization and Summary of Significant Accounting Policies (Policies)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies and Supplemental Financial Statement Data [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal Year |
Fiscal
Year
The Company has a 52 or 53-week fiscal year. The 2011 fiscal
year which ended on July 1, 2011 consisted of
52 weeks. The 2010 and 2009 fiscal years, which ended on
July 2, 2010 and July 3, 2009, respectively, consisted
of 52 and 53 weeks each, respectively.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation |
Basis of
Presentation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The accounts of foreign subsidiaries have been
remeasured using the U.S. dollar as the functional
currency. As such, gains or losses resulting from remeasurement
of these accounts from local currencies into U.S. dollars
are reflected in the results of operations. These gains and
losses were immaterial to the consolidated financial statements.
On June 30, 2010, the Company acquired the magnetic media
sputtering operations of Hoya Corporation and Hoya Magnetics
Singapore Pte. Ltd (together, “Hoya”). On
March 27, 2009, the Company acquired SiliconSystems, Inc.
(“SiliconSystems”). The acquisitions are further
described in Note 14. The results of operations of Hoya and
SiliconSystems since the dates of their acquisitions are
included in the consolidated financial statements.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents |
Cash and
Cash Equivalents
The Company’s cash equivalents represent highly liquid
investments in money market funds, which are invested in
U.S. Treasury securities, U.S. Treasury bills and
U.S. Government agency securities with original maturities
when purchased of three months or less.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments |
Investments
The Company’s investments consist of auction-rate
securities, which are primarily backed by insurance products
with original maturities greater than three months. The Company
has classified these investments as
available-for-sale
securities and they are carried at fair value within other
non-current assets in the consolidated balance sheets.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments |
Fair
Value of Financial Instruments
The carrying amounts of cash equivalents, accounts receivable,
investments, accounts payable and accrued expenses approximate
fair value for all periods presented because of the short-term
maturity of these assets and liabilities or, in the case of
investments, these are recorded using appropriate market
information. The carrying amount of debt approximates fair value
because of its variable interest rate.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of Credit Risk |
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. The
Company maintains allowances for potential credit losses, and
such losses have historically been within management’s
expectations. At any given point in time, the total amount
outstanding from any one of a number of its customers may be
individually significant to the Company’s financial
results. At July 1, 2011 and July 2, 2010, the Company
had reserves for potential credit losses of $5 million and
$6 million, respectively, and net accounts receivable of
$1.2 billion and $1.3 billion, respectively.
The Company also has cash equivalent and investment policies
that limit the amount of credit exposure to any one financial
institution or investment instrument and requires that
investments be made only with financial institutions or in
investment instruments evaluated as highly credit-worthy.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
Inventory
The Company values inventories at the lower of cost
(first-in,
first out and weighted average methods) or net realizable value.
The
first-in,
first-out (“FIFO”) method is used to value the cost of
the majority of the Company’s inventories, while the
weighted-average method is used to value precious metal
inventories. Weighted-average cost is calculated based upon the
cost of precious metals at the time they are received by the
Company. The Company has determined that it is not practicable
to assign specific costs to individual units of precious metals
and, as such, precious metals are relieved from inventory based
on the weighted-average cost of the inventory at the time the
inventory is used in production. The weighted average method of
valuing precious metals does not materially differ from a FIFO
method. As of July 1, 2011 and July 2, 2010, 85% and
82% of the inventory was valued using the FIFO method with the
remainder valued using the weighted average method. Inventory
write-downs are recorded for the valuation of inventory at the
lower of cost or net realizable value by analyzing market
conditions and estimates of future sales prices as compared to
inventory costs and inventory balances.
The Company evaluates inventory balances for excess quantities
and obsolescence on a regular basis by analyzing estimated
demand, inventory on hand, sales levels and other information,
and reduces inventory balances to net realizable value for
excess and obsolete inventory based on this analysis.
Unanticipated changes in technology or customer demand could
result in a decrease in demand for one or more of the
Company’s products, which may require a write down of
inventory that could materially affect operating results.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Property,
Plant and Equipment
The cost of property, plant and equipment is depreciated over
the estimated useful lives of the respective assets. The
Company’s buildings are depreciated over periods ranging
from fifteen to thirty years. The majority of the Company’s
equipment is depreciated over periods of three to seven years.
Depreciation is computed on a straight-line basis. Leasehold
improvements are amortized over the lesser of the estimated
useful lives of the assets or the related lease terms.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Long-Lived Assets |
Goodwill
and Other Long-Lived Assets
The total purchase price in a business combination is allocated
to the fair value of assets acquired and liabilities assumed
based on their fair values at the acquisition date, with amounts
exceeding the fair values being recorded as goodwill. Goodwill
is not amortized. Instead, it is tested for impairment on an
annual basis or more frequently whenever events or changes in
circumstances indicate that goodwill may be impaired. The
Company did not record any impairment of goodwill during 2011,
2010 or 2009.
Other intangible assets consist primarily of technology acquired
in business combinations. Acquired intangibles are amortized on
a straight-line basis over their respective estimated useful
lives. Long-lived assets are tested for recoverability whenever
events or changes in circumstances indicate that their carrying
amounts may not be recoverable.
The Company did not record any impairments to long-lived assets
during 2011 or 2010. The Company recorded impairments to certain
long-lived assets during 2009. See Note 13.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue and Accounts Receivable |
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 is fixed or determinable and
collectability is reasonably assured. The Company establishes
provisions against revenue and cost of revenue for estimated
sales returns in the same period that the related revenue is
recognized based on existing product return notifications. If
actual sales returns exceed expectations, an increase in the
sales return accrual would be required, which could materially
affect operating results.
In accordance with standard industry practice, the Company
provides distributors and retailers (collectively referred to as
“resellers”) with limited price protection for
inventories held by resellers at the time of published list
price reductions, and the Company provides resellers and OEMs
with other sales incentive programs. At the time the Company
recognizes revenue to resellers and OEMs, a reduction of revenue
is recorded for estimated price protection until the resellers
sell such inventory to their customers and the Company also
records a reduction of revenue for the other programs in effect.
The Company bases these adjustments on several factors including
anticipated price decreases during the reseller holding period,
reseller’s sell-through and inventory levels, estimated
amounts to be reimbursed to qualifying customers, historical
pricing information and customer claim processing. If customer
demand for hard drives or market conditions differ from the
Company’s expectations, the Company’s operating
results could be materially affected. The Company also has
programs under which it reimburses qualified distributors and
retailers for certain marketing expenditures, which are recorded
as a reduction of revenue. Sales incentive and marketing
programs are recorded as a reduction of revenue.
The Company records an allowance for doubtful accounts by
analyzing specific customer accounts and assessing the risk of
loss based on insolvency, disputes or other collection issues.
In addition, the Company routinely analyzes the different
receivable aging categories and establishes reserves based on a
combination of past due receivables and expected future losses
based primarily on its historical levels of bad debt losses. If
the financial condition of a significant customer deteriorates
resulting in its inability to pay its accounts when due, or if
the Company’s overall loss history changes significantly,
an adjustment in the Company’s allowance for doubtful
accounts would be required, which could materially affect
operating results.
The Company establishes provisions against revenue and cost of
revenue for sales returns in the same period that the related
revenue is recognized. These provisions are based on existing
product return notifications. If actual sales returns exceed
expectations, an increase in the sales return accrual would be
required, which could materially affect operating results.
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Warranty |
Warranty
The Company records an accrual for estimated warranty costs when
revenue is recognized. The Company generally warrants its
products for a period of one to five years. The warranty
provision considers estimated product failure rates and trends,
estimated repair or replacement costs and estimated costs for
customer compensatory claims related to product quality issues,
if any. A statistical warranty tracking model is used to 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’s
judgment is subject to a greater degree of subjectivity with
respect to newly introduced products because of limited field
experience with those products upon which to base warranty
estimates. Management reviews the warranty accrual quarterly for
products shipped in prior periods and which are still under
warranty. Any changes in the estimates underlying the accrual
may result in adjustments that impact current period gross
margin and income. Such changes are generally a result of
differences between forecasted and actual return rate experience
and costs to repair. If
actual product return trends, costs to repair returned products
or costs of customer compensatory claims differ significantly
from estimates, future results of operations could be materially
affected.
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Litigation and Other Contingencies |
Litigation
and Other Contingencies
When the Company becomes aware of a claim or potential claim,
the Company assesses the likelihood of any loss or exposure. The
Company discloses information regarding each material claim
where the likelihood of a loss contingency is probable or
reasonably possible. If a loss contingency is probable and the
amount of the loss can be reasonably estimated, the Company
records an accrual for the loss. In such cases, there may be an
exposure to potential loss in excess of the amount accrued.
Where a loss is not probable but is reasonably possible and
where a loss in excess of the amount accrued is reasonably
possible, the Company discloses an estimate of the amount of the
loss or range of possible losses for the claim if a reasonable
estimate can be made, unless the amount of such reasonably
possible losses is not material to the Company’s financial
position, results of operations or cash flows. The ability to
predict the ultimate outcome of such matters involves judgments,
estimates and inherent uncertainties. The actual outcome of such
matters could differ materially from management’s
estimates. See Note 5.
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Advertising Expense |
Advertising
Expense
Advertising costs are expensed as incurred. Selling, general and
administrative expenses of the Company included advertising
costs of $11 million, $7 million, and $5 million
in 2011, 2010 and 2009, respectively.
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Income Taxes |
Income
Taxes
The Company accounts for income taxes under the asset and
liability method, which provides that deferred tax assets and
liabilities be recognized for temporary differences between the
financial reporting basis and the tax basis of assets and
liabilities and expected benefits of utilizing net operating
loss (“NOL”) and tax credit carryforwards. The Company
records a valuation allowance when it is more likely than not
that the deferred tax assets will not be realized. Each period,
the Company evaluates the need for a valuation allowance for its
deferred tax assets and adjusts the valuation allowance so that
the Company records net deferred tax assets only to the extent
that it has concluded it is more likely than not that these
deferred tax assets will be realized.
The Company recognizes liabilities for uncertain tax positions
based on a two-step process. To the extent a tax position does
not meet a more-likely-than-not level of certainty, no benefit
is recognized in the financial statements. If a position meets
the more-likely-than-not level of certainty, it is recognized in
the financial statements at the largest amount that has a
greater than 50% likelihood of being realized upon ultimate
settlement. Interest and penalties related to unrecognized tax
benefits are recognized on liabilities recorded for uncertain
tax positions, as applicable, and are recorded in the provision
for income taxes. The actual liability for unrealized tax
benefits may be materially different from the Company’s
estimates, which could result in the need to record additional
liabilities for unrecognized tax benefits or potentially adjust
previously-recorded liabilities for unrealized tax benefits, and
may materially affect our operating results.
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Income per Common Share |
Income
per Common Share
The Company computes basic income per common share using net
income and the weighted average number of common shares
outstanding during the period. Diluted income per common share
is computed using net income and the weighted average number of
common shares and potentially dilutive common shares outstanding
during the period. Potentially dilutive common shares include
certain dilutive outstanding employee stock options, rights to
purchase shares of common stock under the Company’s
Employee Stock Purchase Plan (“ESPP”) and restricted
stock unit awards.
The following table illustrates the computation of basic and
diluted income per common share (in millions, except per share
data):
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Stock-Based Compensation |
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 over the vesting period. The fair values of all stock
options granted are estimated using a binomial model, and the
fair values of all ESPP purchase rights are estimated using the
Black-Scholes-Merton option-pricing model. Both the binomial and
the Black-Scholes-Merton option-pricing models require the input
of highly subjective assumptions. The Company is required to use
judgment in estimating the amount of stock-based awards that are
expected to be forfeited. If actual forfeitures differ
significantly from the original estimate, stock-based
compensation expense and the results of operations could be
materially affected.
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Other Comprehensive Income (Loss) |
Other
Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenue, expenses,
gains and losses that are recorded as an element of
shareholders’ equity but are excluded from net income. The
Company’s other comprehensive income (loss) is comprised of
unrealized gains and losses on foreign exchange contracts.
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Foreign Exchange Contracts |
Foreign
Exchange Contracts
Although the majority of the Company’s transactions are in
U.S. dollars, some transactions are based in various
foreign currencies. The Company purchases short-term, foreign
exchange contracts to hedge the impact of foreign currency
exchange fluctuations on certain underlying assets, revenue,
liabilities and commitments for operating expenses and product
costs denominated in foreign currencies. The purpose of entering
into these hedging transactions is to minimize the impact of
foreign currency fluctuations on the Company’s results of
operations. These contract maturity dates do not exceed
12 months. All foreign exchange contracts are for risk
management purposes only. The Company does not purchase foreign
exchange contracts for trading purposes. The Company had
outstanding foreign exchange contracts with commercial banks for
Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling
with aggregate notional amounts of $1.5 billion and
$1.1 billion at July 1, 2011 and July 2, 2010,
respectively. Thai Baht contracts are designated as either cash
flow or fair value hedges. Malaysian Ringgit contracts are
designated as cash flow hedges. Euro and British Pound Sterling
contracts are designated as fair value hedges.
If the derivative is designated as a cash flow hedge, the
effective portion of the change in fair value of the derivative
is initially deferred in other comprehensive income (loss), net
of tax. These amounts are subsequently recognized into earnings
when the underlying cash flow being hedged is recognized into
earnings. Recognized gains and losses on foreign exchange
contracts entered into for manufacturing-related activities are
reported in cost of revenue. Hedge effectiveness is measured by
comparing the hedging instrument’s cumulative change in
fair value from inception to maturity to the underlying
exposure’s terminal value. The Company determined the
ineffectiveness associated with its cash flow hedges to be
immaterial.
A change in the fair value of fair value hedges is recognized in
earnings in the period incurred and is reported as a component
of operating expenses. All fair value hedges were determined to
be effective. The fair value and the changes in fair value on
these contracts were not material to the consolidated financial
statements for all years presented. See Notes 10 and 11 for
additional disclosures related to foreign exchange contracts.
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Use of Estimates |
Use of
Estimates
Company management has made estimates and assumptions relating
to the reporting of certain assets and liabilities in conformity
with U.S. GAAP. These estimates and assumptions have been
applied using methodologies that are consistent throughout the
periods presented. However, actual results could differ
materially from these estimates.
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Recent Accounting Pronouncements |
Recent
Accounting Pronouncements
In September 2009, the FASB issued Accounting Standards Update
(“ASU”)
2009-13,
“Multiple-Deliverable Revenue Arrangements” (“ASU
2009-13”),
and ASU
2009-14,
“Certain Revenue Arrangements That Include Software
Elements” (“ASU
2009-14”).
ASU 2009-13
amends the revenue guidance under Subtopic
605-25,
“Multiple Element Arrangements,” and addresses how to
determine whether an arrangement involving multiple deliverables
contains more than one unit of accounting and how arrangement
consideration shall be measured and allocated to the separate
units of accounting in the arrangement. ASU
2009-14
excludes tangible products containing software components and
non-software components that function together to deliver the
product’s essential functionality from the scope of
Subtopic
985-605,
“Revenue Recognition.” ASU
2009-13 and
ASU 2009-14
are effective for fiscal periods beginning on or after
June 15, 2010, which for the Company was the first quarter
of fiscal 2011. The Company’s adoption of ASU
2009-13 and
ASU 2009-14
had no impact on its consolidated financial statements.
In May 2011, the FASB issued ASU
2011-04,
“Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs”
(“ASU
2011-04”).
ASU 2011-04
clarifies existing fair value measurement and disclosure
requirements by amending certain fair value measurement
principles and requiring additional disclosures regarding fair
value measurements. ASU 2011-04 is effective for fiscal periods
beginning after December 15, 2011, which for the Company is
the third quarter of fiscal 2012. The Company is currently
evaluating the impact that
ASU 2011-04
will have on its consolidated financial statements.
In June 2011, the FASB issued ASU
2011-05
“Presentation of Comprehensive Income” (“ASU
2011-05”).
ASU 2011-05
requires that all non-owner changes in shareholders’ equity
be presented either in a single continuous statement of
comprehensive income or in two separate but continuous
statements. If presented in two separate statements, the first
statement should present total net income and its components
followed immediately by a second statement of total other
comprehensive income, its components and the total comprehensive
income. ASU
2011-05 is
effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2011, which for
the Company is the first quarter of fiscal 2013. The Company is
currently evaluating the impact that ASU
2011-05 will
have on its consolidated financial statements.
|
Document and Entity Information (USD $)
In Billions, except Share data |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Aug. 03, 2011
|
Dec. 31, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | WESTERN DIGITAL CORP | Â | Â |
Entity Central Index Key | 0000106040 | Â | Â |
Document Type | 10-K | Â | Â |
Document Period End Date | Jul. 01, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | FY | Â | Â |
Current Fiscal Year End Date | --07-01 | Â | Â |
Entity Well-known Seasoned Issuer | Yes | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Large Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 7.9 |
Entity Common Stock, Shares Outstanding (actual number) | Â | 233,191,524 | Â |
Shareholders Equity (Details 5)
In Millions |
Jul. 01, 2011
|
---|---|
Summarizes table of all shares of common stock reserved for issuance | Â |
Shares of common stock reserved for issuance | 28.9 |
Outstanding Awards and Shares Available For Award [Member]
|
 |
Summarizes table of all shares of common stock reserved for issuance | Â |
Shares of common stock reserved for issuance | 25.4 |
Employee Stock [Member]
|
 |
Summarizes table of all shares of common stock reserved for issuance | Â |
Shares of common stock reserved for issuance | 3.5 |
Debt (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Debt [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt |
|
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Business Segment Geographic Information And Major Customers
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Business Segment Geographic Information and Major Customers [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Geographic Information and Major Customers |
Note 6. Business
Segment, Geographic Information and Major Customers
Segment
Information
The Company operates in one reportable operating segment, the
hard drive business.
Geographic
Information
The Company’s operations outside the United States include
manufacturing facilities in Malaysia, Singapore, and Thailand as
well as sales offices throughout the Americas, Asia Pacific,
Europe and the Middle East. The following table summarizes the
Company’s operations by geographic area for the three years
ended July 1, 2011 (in millions):
Major
Customer
For 2011 and 2010, no single customer accounted for 10%, or
more, of the Company’s net revenue. For 2009, sales to Dell
Inc. accounted for 10% of the Company’s net revenue.
|
Commitments and Contingencies (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
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Commitments, Contingencies and Legal Proceedings [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future minimum lease payments under operating leases |
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Changes in accrual warranty |
|
Supplemental Financial Statement Data (Details) (USD $)
In Millions |
Jul. 01, 2011
|
Jul. 02, 2010
|
---|---|---|
Property, Plant and Equipment: | Â | Â |
Total property, plant and equipment | $ 4,837 | $ 4,223 |
Accumulated depreciation and amortization | (2,613) | (2,064) |
Property and equipment, net | 2,224 | 2,159 |
Inventories: | Â | Â |
Raw materials and component parts | 172 | 159 |
Work-in-process | 263 | 255 |
Finished goods | 142 | 146 |
Total inventories | 577 | 560 |
Land and Building [Member]
|
 |  |
Property, Plant and Equipment: | Â | Â |
Total property, plant and equipment | 750 | 675 |
Machinery and Equipment [Member]
|
 |  |
Property, Plant and Equipment: | Â | Â |
Total property, plant and equipment | 3,963 | 3,470 |
Furniture and Fixtures [Member]
|
 |  |
Property, Plant and Equipment: | Â | Â |
Total property, plant and equipment | 9 | 9 |
Leasehold Improvements [Member]
|
 |  |
Property, Plant and Equipment: | Â | Â |
Total property, plant and equipment | $ 115 | $ 69 |
Supplemental Financial Statement Data (Tables)
|
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Jul. 01, 2011
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Organization and Summary of Significant Accounting Policies and Supplemental Financial Statement Data [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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Property, Plant and Equipment |
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Foreign Exchange Contracts
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
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Foreign Exchange Contracts [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Exchange Contracts |
Note 11. Foreign
Exchange Contracts
As of July 1, 2011, the net amount of existing gains
expected to be reclassified into earnings within the next twelve
months was $5 million and the Company did not have any
foreign exchange contracts with credit-risk-related contingent
features. The Company opened $4.7 billion and
$4.8 billion, and closed $3.2 billion and
$4.1 billion, in foreign
exchange contracts for the years ended July 1, 2011 and
July 2, 2010, respectively. The fair value and balance
sheet location of such contracts were as follows (in millions):
The impact on the consolidated financial statements was as
follows (in millions):
The total net realized transaction and foreign exchange contract
currency gains and losses were not material to the consolidated
financial statements during the years ended July 1, 2011
and July 2, 2010. See Notes 1 and 10 for additional
disclosures related to the Company’s foreign exchange
contracts.
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Supplemental Financial Statement Data
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Jul. 01, 2011
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Organization and Summary of Significant Accounting Policies and Supplemental Financial Statement Data [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Statement Data |
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Quarterly Results of Operations (unaudited) (Tables)
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Jul. 01, 2011
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Quarterly Results of Operations (unaudited) [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results of Operations (unaudited) |
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Shareholders Equity
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Jul. 01, 2011
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Shareholders Equity [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders Equity |
Note 8. Shareholders’
Equity
Stock
Incentive Plans
The Company maintains four stock-based incentive plans
(collectively referred to as the “Stock Plans”): the
amended and restated 2004 Performance Incentive Plan, the
Employee Stock Option Plan, the Broad-Based Stock Incentive Plan
and the Stock Option Plan for Non-Employee Directors. No new
awards may be granted under the Employee Stock Option Plan, the
Broad-Based Stock Incentive Plan or the Stock Option Plan for
Non-Employee Directors (collectively referred to as the
“Prior Stock Plans”). As of July 1, 2011, options
to purchase 1.2 million shares of the Company’s common
stock remained outstanding and exercisable under the Prior Stock
Plans. Other than for such options, no restricted stock or other
awards were outstanding under the Prior Stock Plans as of
July 1, 2011. Options granted under the Prior Stock Plans
expire either five or ten years from the date of grant.
The types of awards that may be granted under the 2004
Performance Incentive Plan include stock options, stock
appreciation rights, restricted stock units (“RSUs”),
stock bonuses and other forms of awards granted or denominated
in the Company’s common stock or units of the
Company’s common stock, as well as cash bonus awards.
Persons eligible to receive awards under the 2004 Performance
Incentive Plan include officers or employees of the Company or
any of its subsidiaries, directors of the Company and certain
consultants and advisors to the Company or any of its
subsidiaries. The vesting of awards under the Performance
Incentive Plan is determined at the date of grant. Each award
expires on a date determined at the date of grant; however, the
maximum term of options and stock appreciation rights under the
2004 Performance Incentive Plan is ten years after the grant
date of the award. RSUs granted under the 2004 Performance
Incentive Plan typically vest over periods ranging from one to
five years from the date of grant.
As of July 1, 2011, the maximum number of shares of the
Company’s common stock that was authorized for award grants
under the 2004 Performance Incentive Plan was 37.2 million
shares. Any shares subject to awards under the Prior Stock Plans
that are canceled, forfeited or otherwise terminate without
having vested or been exercised, as applicable, will become
available for other award grants under the 2004 Performance
Incentive Plan. Shares issued in respect of stock options and
stock appreciation rights granted under the 2004 Performance
Incentive Plan count against the plan’s share limit on a
one-for-one
basis, whereas shares issued in respect of any other type of
award granted under the plan count against the plan’s share
limit as 1.35 shares for every one share actually issued in
connection with such award. The 2004 Performance Incentive Plan
will terminate on September 20, 2014 unless terminated
earlier by the Company’s Board of Directors.
Employee
Stock Purchase Plan
The Company maintains an ESPP. Under the ESPP, eligible
employees may authorize payroll deductions of up to 10% of their
eligible compensation during prescribed offering periods to
purchase shares of the Company’s common stock at 95% of the
fair market value of common stock on either the first day of
that offering period or on the applicable exercise date,
whichever is less. A participant may participate in only one
offering period at a time, and a new offering period generally
begins each June 1st and December 1st. Each
offering period is generally 24 months and consists of four
exercise dates (each, generally six months following the start
of the offering period or the preceding exercise date, as the
case may be). If the fair market value of the Company’s
common stock is less on a given exercise date than on the date
of grant, employee participation in that offering period ends
and participants are automatically re-enrolled in the next new
offering period.
Stock-based
Compensation Expense
The Company recognized in expense $37 million,
$37 million and $24 million for stock-based
compensation related to the vesting of options granted by the
Company under the Stock Plans and the ESPP in 2011, 2010 and
2009, respectively. As of July 1, 2011, total compensation
cost related to unvested stock options granted under the Stock
Plans and ESPP rights issued to employees but not yet recognized
was $60 million and will be amortized on a straight-line
basis over a weighted average service period of approximately
2.2 years.
The Company recognized in expense $32 million,
$23 million and $23 million related to restricted
stock and restricted stock unit awards granted under the Stock
Plans that vested during 2011, 2010 and 2009, respectively. As
of July 1, 2011, the aggregate unamortized fair value of
all unvested restricted stock unit awards granted under the
Stock Plans was $41 million, which will be recognized on a
straight-line basis over a weighted average vesting period of
approximately 1.3 years.
Stock
Option Activity
The following table summarizes stock option activity under the
Stock Plans over the last three fiscal years (in millions,
except per share amounts and remaining contractual lives):
If an option has an exercise price that is less than the quoted
price of the Company’s common stock at the particular time,
the aggregate intrinsic value of that option at that time is
calculated based on the difference between the exercise price of
the options and the quoted price of the Company’s common
stock at that time. As of July 1, 2011, the Company had
options outstanding to purchase an aggregate of
10.1 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 $145 million at that date.
During 2011, 2010 and 2009, the aggregate intrinsic value of
options exercised under the Stock Plans was $25 million,
$72 million and $8 million, respectively, determined as of
the date of exercise.
The following table summarizes information about options
outstanding and exercisable under the Stock Plans as of
July 1, 2011 (in millions, except per share amounts):
Fair
Value Disclosure — Binomial Model
The fair value of stock options granted is estimated using a
binomial option-pricing model. The binomial model requires the
input of highly subjective assumptions including the expected
stock price volatility, the expected price
multiple at which employees are likely to exercise stock options
and the expected employee termination rate. The Company uses
historical data to estimate option exercise, employee
termination, and expected stock price volatility within the
binomial model. The risk-free rate for periods within the
contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant.
The fair value of stock options granted during the three years
ended July 1, 2011 was estimated using the following
weighted average assumptions:
The weighted average expected term of the Company’s stock
options granted during 2011, 2010 and 2009 was 4.7 years,
4.6 years and 4.9 years, respectively.
Fair
Value Disclosure — Black-Scholes-Merton
Model
The fair value of ESPP purchase rights issued is estimated at
the date of grant of the purchase rights using the
Black-Scholes-Merton
option-pricing model. The Black-Scholes-Merton option-pricing
model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully
transferable. The Black-Scholes-Merton option-pricing model
requires the input of highly subjective assumptions such as the
expected stock price volatility and the expected period until
options are exercised. Purchase rights under the current ESPP
provisions are granted on either June 1 or December 1 of each
year.
The fair values of all ESPP purchase rights granted on or prior
to July 1, 2011 have been estimated at the date of grant
using a Black-Scholes-Merton option-pricing model with the
following weighted average assumptions:
RSU
Activity
The following table summarizes RSU activity (in millions, except
weighted average grant date fair value):
The fair value of each RSU is the market price of our stock on
the date of grant. The aggregate value of RSUs that became
fully-vested during 2011 and 2010 was $23 million and
$43 million, respectively, determined as of the vest date.
RSUs are generally payable in an equal number of shares of the
Company’s common stock at the time of vesting of the units.
The grant-date fair value of the shares underlying the
restricted stock awards at the date of grant was
$26 million, $45 million and $19 million in 2011,
2010 and 2009, respectively. These amounts are being recognized
to expense over the corresponding vesting periods. For purposes
of valuing these awards, the Company has assumed a forfeiture
rate of 1.82%, 1.55%, and 0.0% during 2011, 2010, and 2009,
respectively, based on a historical analysis indicating
forfeitures for these types of awards.
Stock
Repurchase Program
The Company’s Board of Directors previously authorized the
repurchase of $750 million of common stock in open market
transactions under a stock repurchase program through
March 31, 2013. Since the inception of this program in
2005, through July 1, 2011, the Company has repurchased
20 million shares of its common stock for a total cost of
$334 million. The Company repurchased 1.8 million
shares for a total cost of $50 million during 2011. The
Company may continue to repurchase stock as the Company deems
appropriate and market conditions allow. The Company expects
stock repurchases to be funded principally by operating cash
flows.
Stock
Purchase Rights
On April 6, 2001, the Company adopted a plan to protect
shareholders’ rights in the event of a proposed takeover of
the Company (the “2001 Rights Plan”). The 2001 Rights
Plan expired on April 6, 2011. During the term of the 2001
Rights Plan, each share of the Company’s outstanding common
stock carried one Right to Purchase Series A Junior
Participating Preferred Stock (the “Right”). The Right
enabled the holder, under certain circumstances, to purchase
Series A Junior Participating Preferred Stock of Western
Digital at an exercise price of $50.00 per share ten days after
a person or group publicly announced it had acquired or had
tendered an offer for 15%, or more, of the Company’s
outstanding common stock. The Rights were redeemable by the
Company at $0.001 per Right.
Stock
Reserved for Issuance
The following table summarizes all shares of common stock
reserved for issuance at July 1, 2011 (in millions):
|
Restructuring and Sale of Facility
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12 Months Ended | ||||
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Jul. 01, 2011
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Restructuring and Sale of Facility [Abstract] | Â | ||||
Restructuring and Sale of Facility |
During 2009, the Company announced and completed a restructuring
plan to realign its cost structure as a result of a softer
demand environment. This resulted in the closure of one of the
Company’s hard drive manufacturing facilities in Thailand,
the disposal of its substrate manufacturing facility in Sarawak,
Malaysia, and headcount reductions throughout the world of
approximately 3,300 people. Restructuring costs totaled
$112 million and consisted of $81 million of asset
impairment charges, $27 million of employee termination
benefits and $4 million of contract termination and other
exit costs. Total cash expenditures related to the restructuring
activities were $31 million. The asset impairment charge of
$81 million consisted of $76 million primarily related
to the land, buildings, machinery and equipment at the
manufacturing facilities in Thailand and Malaysia and
$5 million related to a customer relationship intangible
asset acquired from Komag. The impairment charge is based on the
excess of the carrying values over the estimated fair values of
the assets. The fair values of the land, buildings, and
equipment were estimated using the market approach. The
intangible asset was valued using the income approach.
During the fourth quarter of 2009, the Company sold its
substrate manufacturing facility, and related assets, in
Sarawak, Malaysia for net proceeds of $29 million,
resulting in a gain of $18 million. The closure and
disposal of the Company’s manufacturing facilities was to
realign its manufacturing capacity with the Company’s
expectations regarding demand at that time. Total restructuring
charges of $112 million, partially offset by the
$18 million gain on sale of assets, is included in
restructuring and other, net within operating expenses in the
accompanying consolidated statements of income.
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Income Taxes
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Jul. 01, 2011
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Income Taxes [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
Note 9. Income
Taxes
Pre-tax
Income
The domestic and foreign components of income before income
taxes were as follows for the three years ended July 1,
2011 (in millions):
Income
Tax Provision
The components of the provision for income taxes were as follows
for the three years ended July 1, 2011 (in millions):
Remaining net undistributed earnings from foreign subsidiaries
at July 1, 2011 on which no U.S. tax has been provided
amounted to $4.7 billion. The net undistributed earnings
are intended to finance local operating requirements and capital
investments. Accordingly, an additional U.S. tax provision
has not been made on these earnings. The tax liability for these
earnings would be $1.6 billion if the Company repatriated
the $4.7 billion in undistributed earnings from the foreign
subsidiaries.
Deferred
Taxes
Temporary differences and carryforwards, which give rise to a
significant portion of deferred tax assets and liabilities as of
July 1, 2011 and July 2, 2010 were as follows (in
millions):
In addition to the deferred tax assets presented above, the
Company had additional NOL benefits related to stock-based
compensation deductions of $110 million and
$93 million at July 1, 2011 and July 2, 2010,
respectively. The increase in NOL benefits relates to the
current year stock based compensation deductions which will
result in a future benefit of $17 million. This
$17 million will be recorded as a credit to
shareholders’ equity when an incremental benefit is
recognized after considering all other tax attributes available
to the Company.
Effective
Tax Rate
Reconciliation of the U.S. Federal statutory rate to the
Company’s effective tax rate is as follows for the three
years ended July 1, 2011:
Tax
Holidays and Carryforwards
A substantial portion of the Company’s manufacturing
operations in Malaysia, Singapore and Thailand operate under
various tax holidays and tax incentive programs which will
expire in whole or in part at various dates through 2023.
Certain of the holidays may be extended if specific conditions
are met. The net impact of these tax holidays and tax incentives
was to increase the Company’s net earnings by
$362 million ($1.54 per diluted share), $560 million
($2.40 per diluted share), and $241 million ($1.07 per
diluted share) in 2011, 2010, and 2009, respectively.
As of July 1, 2011, the Company had federal and state NOL
carryforwards of $185 million and $52 million,
respectively. In addition, as of July 1, 2011, the Company
had various federal and state tax credit carryforwards of
$251 million combined. The NOL carryforwards available to
offset future federal and state taxable income expire at various
dates from 2021 to 2030 and 2015 to 2020, respectively.
Approximately $140 million of the credit carryforwards
available to offset future taxable income expire at various
dates from 2012 to 2030. The remaining amount is available
indefinitely. NOLs and credits relating to Komag, Incorporated
(“Komag”), which was acquired by the Company on
September 5, 2007, are subject to limitations under
Section 382 and 383 of the Internal Revenue Code. The
Company does not expect these limitations to result in a
reduction in the total amount of NOLs and credits ultimately
realized.
Uncertain
Tax Positions
The Company recognizes liabilities for uncertain tax positions
based on a two-step process. First, the tax position is
evaluated for recognition by determining if it is more likely
than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any.
If the tax position is deemed more-likely-than-not to be
sustained, the tax position is then assessed to determine the
amount of benefit to be recognized in the financial statements.
The amount of the benefit that may be recognized is the largest
amount that has a greater than 50% likelihood of being realized
upon ultimate settlement. With the exception of certain
unrecognized tax benefits that are directly associated with the
tax position taken, unrecognized tax benefits are presented
gross in the Company’s balance sheet. Interest and
penalties related to unrecognized tax benefits are recognized on
liabilities recorded for uncertain tax positions and are
recorded in the provision for income taxes. As of July 1,
2011, such interest and penalties were not material.
As of July 1, 2011, the Company had $245 million of
unrecognized tax benefits.
The following is a tabular reconciliation of the total amounts
of unrecognized tax benefits for the year ended July 1,
2011 (in millions):
The entire balance of unrecognized tax benefits at July 1,
2011, if recognized, would affect the effective tax rate.
The Company files U.S. Federal, U.S. state, and
foreign tax returns. For both federal and state tax returns,
with few exceptions, the Company is subject to examination for
fiscal years 2008 through 2011. In foreign jurisdictions, with
few exceptions, the Company is subject to examination for all
years subsequent to fiscal 2006. The Company is no longer
subject to examination by the Internal Revenue Service
(“IRS”) for periods prior to 2006, although carry
forwards generated prior to those periods may still be adjusted
upon examination by the IRS or state taxing authority if they
either have been or will be used in a subsequent period.
The IRS is currently examining fiscal years 2006 and 2007 for
the Company and calendar years 2005 and 2006 for Komag. The IRS
has completed its field work and proposed certain adjustments.
Certain issues have been agreed upon by the Company and the IRS
and certain issues remain unresolved. The Company has received
Revenue Agent Reports (“RARs”) for the agreed issues.
The Company has also received RARs from the IRS for the
unresolved issues which seek adjustments to income before income
taxes of $970 million for the Company and $380 million
for Komag. The issues in dispute relate primarily to transfer
pricing and certain other intercompany transactions. The Company
disagrees with the proposed adjustments. In May 2011, the
Company filed a protest with the IRS Appeals Office regarding
the proposed adjustments. The Company is continuing discussions
with the IRS to resolve the Komag issues.
The Company believes that adequate provision has been made for
any adjustments that may result from tax examinations. However,
the outcome of tax audits cannot be predicted with certainty. If
any issues addressed in the Company’s tax audits are
resolved in a manner not consistent with management’s
expectations, the Company could be required to adjust its
provision for income taxes in the period such resolution occurs.
As of July 1, 2011, it is not possible to estimate the
amount of change, if any, in the unrecognized tax benefits that
is reasonably possible within the next twelve months. Any
significant change in the amount of the Company’s
unrecognized tax benefits would most likely result from
additional information or settlements relating to the
examination of the Company’s uncertain tax positions.
|
Foreign Exchange Contracts (Tables)
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Jul. 01, 2011
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Foreign Exchange Contracts [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value and balance sheet location |
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Gains (Losses) of Derivatives in Cash Flow Hedging Relationships |
|
Western Digital Corporation 401(k) Plan
|
12 Months Ended |
---|---|
Jul. 01, 2011
|
|
Western Digital Corporation 401(k) Plan [Abstract] | Â |
Western Digital Corporation 401(k) Plan |
Note 7. Western
Digital Corporation 401(k) Plan
The Company has adopted the Western Digital Corporation 401(k)
Plan (the “Plan”). The Plan covers substantially all
domestic employees, subject to certain eligibility requirements.
The Company makes a basic matching contribution on behalf of
each participating eligible employee equal to fifty percent
(50%) of the eligible participant’s pre-tax contributions
for the contribution cycle not to exceed 5% of the eligible
participant’s compensation; provided, however, that each
eligible participant shall receive a minimum annual basic
matching contribution equal to fifty percent (50%) of the first
$4,000 of pre-tax contributions for any calendar year. Company
contributions vest over a
5-year
period of employment. For 2011, 2010 and 2009, the Company made
Plan contributions of $9 million, $9 million, and
$7 million, respectively.
|
Debt
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
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Debt [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
Note 3. Debt
Long-term debt consisted of the following as of July 1,
2011 and July 2, 2010 (in millions):
In February 2008, Western Digital Technologies, Inc.
(“WDTI”), a wholly-owned subsidiary of the Company,
entered into a five-year Credit Agreement that provided for a
$500 million term loan facility. As of July 1, 2011,
the term loan facility had a variable interest rate of 1.44% and
a remaining balance of $294 million, which requires
principal payments totaling $144 million in 2012 and
$150 million in 2013. The term loan facility has a maturity
date of February 11, 2013. The term loan facility requires
WDTI to comply with a leverage ratio and an interest coverage
ratio calculated on a consolidated basis for the Company and its
subsidiaries. In addition, the term loan facility contains
customary covenants, including covenants that limit or restrict
WDTI’s and its subsidiaries’ ability to incur liens,
incur indebtedness, make certain restricted payments, merge or
consolidate and enter into certain speculative hedging
arrangements. As of July 1, 2011, WDTI was in compliance
with all covenants.
See Note 14 for additional disclosures related to the
Company’s new credit facility to be entered into in
connection with the closing of the planned acquisition of Viviti
Technologies Ltd., until recently known as Hitachi Global
Storage Technologies Pte. Ltd (“HGST”).
|
Commitments and Contingencies (Details) (USD $)
In Millions |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Future minimum lease payments under operating leases | Â | Â | Â |
2012 | $ 18 | Â | Â |
2013 | 17 | Â | Â |
2014 | 14 | Â | Â |
2015 | 11 | Â | Â |
2016 | 9 | Â | Â |
Thereafter | 46 | Â | Â |
Total future minimum payments | 115 | Â | Â |
Changes in accrual warranty | Â | Â | Â |
Warranty accrual, beginning of period | 170 | 123 | 114 |
Charges to operations | 172 | 183 | 126 |
Utilization | (160) | (138) | (111) |
Changes in estimate related to pre-existing warranties | (12) | 2 | (6) |
Warranty accrual, end of period | 170 | 170 | 123 |
Commitments and Contingencies (Textuals) [Abstract] | Â | Â | Â |
Operating leases consist of leased property that expire at various dates | various dates through 2020 | Â | Â |
Rental Expense | 23 | 22 | 21 |
Accrued warranty includes in other liabilities | 38 | 41 | Â |
2012 | 636 | Â | Â |
2013 | 6 | Â | Â |
2014 | 6 | Â | Â |
2015 | 5 | Â | Â |
2016 | $ 1 | Â | Â |
Fair Value Measurements (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
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Fair Value Measurements [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets measured at fair value on a recurring basis |
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Changes in Level 3 financial assets measured on a recurring basis |
|
Acquisitions (Details) (USD $)
In Millions |
Jun. 30, 2010
Magnetic Media Operations [Member]
|
Mar. 27, 2009
Silicon Systems [Member]
|
---|---|---|
Tangible assets acquired and liabilities assumed: | Â | Â |
Inventories | $ 35 | Â |
Property and equipment | 185 | Â |
Accounts payables and other liabilities | (10) | Â |
Tangible assets acquired and liabilities assumed, net | Â | 5 |
Intangible assets | 11 | 24 |
In-process research and development | Â | 14 |
Goodwill | 12 | 23 |
Total | $ 233 | $ 66 |
Income Taxes (Details 1) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Effective Tax Rate | Â | Â | Â |
U.S. Federal statutory rate | 35.00% | 35.00% | 35.00% |
Tax rate differential on international income | (26.00%) | (26.00%) | (30.00%) |
Tax effect of U.S. permanent differences | 3.00% | 1.00% | 6.00% |
State income tax, net of federal tax | (1.00%) | Â | 1.00% |
Income tax credits | (4.00%) | (1.00%) | (8.00%) |
Other | Â | Â | 2.00% |
Effective tax rate | 7.00% | 9.00% | 6.00% |
Uncertain Tax Positions | Â | Â | Â |
Unrecognized tax benefit at July 2, 2010 | $ 230 | Â | Â |
Gross increases related to prior year tax positions | 5 | Â | Â |
Gross decreases related to prior year tax positions | (11) | Â | Â |
Gross increases related to current year tax positions | 24 | Â | Â |
Settlements/lapse of statute of limitations | (3) | Â | Â |
Unrecognized tax benefit at July 1, 2011 | $ 245 | $ 230 | Â |
Schedule II - Consolidated Valuation And Qualifying Accounts (Details) (Allowance for Doubtful Accounts [Member], USD $)
In Millions |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Allowance for Doubtful Accounts [Member]
|
 |  |  |
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS | Â | Â | Â |
Beginning Balance | $ 6 | $ 14 | $ 8 |
Additions charged to operations | 0 | Â | 9 |
Recoveries credited to operations | Â | (6) | Â |
Deductions | (1) | (2) | (3) |
Ending Balance | $ 5 | $ 6 | $ 14 |
Commitments and Contingencies
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Commitments, Contingencies and Legal Proceedings [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 4. Commitments
and Contingencies
Lease
Commitments
The Company leases certain facilities and equipment under
long-term, non-cancelable operating leases. The Company’s
operating leases consist of leased property and expire at
various dates through 2020. Rental expense under
these operating leases, including
month-to-month
rentals, was $23 million, $22 million and
$21 million in 2011, 2010 and 2009, respectively. Future
minimum lease payments under operating leases that have initial
or remaining non-cancelable lease terms in excess of one year at
July 1, 2011 are as follows (in millions):
Product
Warranty Liability
Changes in the warranty accrual for 2011, 2010 and 2009 were as
follows (in millions):
Accrued warranty also includes amounts classified in other
liabilities in the consolidated balance sheets of
$38 million at July 1, 2011 and $41 million at
July 2, 2010.
Long-term
Purchase Agreements
The Company has entered into long-term purchase agreements with
various component suppliers. The commitments depend on specific
products ordered and may be subject to minimum quality
requirements and future price negotiations. The Company expects
these commitments to total $636 million for 2012,
$6 million for 2013 and 2014, $5 million for 2015, and
$1 million for 2016.
|
Western Digital Corporation 401(k) Plan (Details) (USD $)
In Millions |
12 Months Ended | ||
---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Western Digital Corporation 401(k) Plan (Textuals) [Abstract] | Â | Â | Â |
Terms of employer contribution | The Company makes a basic matching contribution on behalf of each participating eligible employee equal to fifty percent (50%) of the eligible participant’s pre-tax contributions for the contribution cycle not to exceed 5% of the eligible participant’s compensation; provided, however, that each eligible participant shall receive a minimum annual basic matching contribution equal to fifty percent (50%) of the first $4,000 of pre-tax contributions for any calendar year | Â | Â |
Company contributions vest period | 5 years | Â | Â |
Company contributions | $ 9 | $ 9 | $ 7 |
Business Segment, Geographic Information and Major Customers (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Business Segment Geographic Information and Major Customers [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarize table of operations by geographic area |
|
Quarterly Results of Operations (unaudited) (Details) (USD $)
In Millions, except Per Share data |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
Apr. 01, 2011
|
Dec. 31, 2010
|
Oct. 01, 2010
|
Jul. 02, 2010
|
Apr. 02, 2010
|
Jan. 01, 2010
|
Oct. 02, 2009
|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Quarterly Results of Operations (unaudited) [Abstract] | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Revenue, net | $ 2,403 | $ 2,252 | $ 2,475 | $ 2,396 | $ 2,382 | $ 2,641 | $ 2,619 | $ 2,208 | $ 9,526 | $ 9,850 | $ 7,453 |
Gross margin | 469 | 410 | 475 | 437 | 535 | 665 | 687 | 514 | 1,791 | 2,401 | 1,337 |
Operating income | 172 | 158 | 240 | 211 | 293 | 441 | 473 | 319 | 781 | 1,525 | 519 |
Net income | $ 158 | $ 146 | $ 225 | $ 197 | $ 265 | $ 400 | $ 429 | $ 288 | $ 726 | $ 1,382 | $ 470 |
Basic income per common share | $ 0.68 | $ 0.63 | $ 0.98 | $ 0.86 | $ 1.15 | $ 1.75 | $ 1.89 | $ 1.28 | $ 3.14 | $ 6.06 | $ 2.12 |
Diluted income per common share | $ 0.67 | $ 0.62 | $ 0.96 | $ 0.84 | $ 1.13 | $ 1.71 | $ 1.85 | $ 1.25 | $ 3.09 | $ 5.93 | $ 2.08 |
Other Intangible Assets (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Other Intangible Assets [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets |
|
Business Segment, Geographic Information and Major Customers (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
Apr. 01, 2011
|
Dec. 31, 2010
|
Oct. 01, 2010
|
Jul. 02, 2010
|
Apr. 02, 2010
|
Jan. 01, 2010
|
Oct. 02, 2009
|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Net revenue: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Revenue, net (U.S) | Â | Â | Â | Â | Â | Â | Â | Â | $ 1,589 | $ 1,889 | $ 1,492 |
Revenue, net | 2,403 | 2,252 | 2,475 | 2,396 | 2,382 | 2,641 | 2,619 | 2,208 | 9,526 | 9,850 | 7,453 |
Long-lived assets: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Long-lived assets (U.S) | 1,285 | Â | Â | Â | 1,173 | Â | Â | Â | 1,285 | 1,173 | 1,043 |
Long-lived assets | 2,631 | Â | Â | Â | 2,608 | Â | Â | Â | 2,631 | 2,608 | 2,061 |
Business Segment Geographic Information and Major Customers (Textuals) [Abstract] | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Maximum contribution of customer in company's net revenue | Â | Â | Â | Â | Â | Â | Â | Â | 10%, or more | 10%, or more | Â |
Contribution of dell in company's net revenue | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 10.00% |
Asia [Member]
|
 |  |  |  |  |  |  |  |  |  |  |
Net revenue: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Revenue, net | Â | Â | Â | Â | Â | Â | Â | Â | 5,434 | 5,239 | 3,639 |
Long-lived assets: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Long-lived assets | 1,345 | Â | Â | Â | 1,379 | Â | Â | Â | 1,345 | 1,379 | 954 |
Europe, Middle East and Africa [Member]
|
 |  |  |  |  |  |  |  |  |  |  |
Net revenue: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Revenue, net | Â | Â | Â | Â | Â | Â | Â | Â | 2,196 | 2,260 | 2,008 |
Long-lived assets: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Long-lived assets | 1 | Â | Â | Â | 56 | Â | Â | Â | 1 | 56 | 64 |
Others [Member]
|
 |  |  |  |  |  |  |  |  |  |  |
Net revenue: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Revenue, net | Â | Â | Â | Â | Â | Â | Â | Â | $ 307 | $ 462 | $ 314 |
Income Taxes (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Income Taxes [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic and foreign components of income before income taxes |
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Components of the provision for income taxes |
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Deferred tax assets and liabilities |
|
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U.S. Federal statutory rate to the Company's effective tax rate |
|
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Total amounts of unrecognized tax benefits |
|
Other Intangible Assets
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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Other Intangible Assets [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets |
Note 12. Other
Intangible Assets
Other intangible assets consist primarily of technology acquired
in business combinations and are amortized on a straight-line
basis over the respective estimated useful lives of the assets.
Intangible assets as of July 1, 2011 were as follows:
In 2010, the Company acquired $11 million of intangibles as
a result of the Hoya acquisition, primarily related to a glass
substrate supply agreement and existing technology. Intangible
assets as of July 2, 2010 were as follows:
Amortization expense for intangible assets was $17 million,
$12 million and $11 million for 2011, 2010 and 2009,
respectively. As of July 1, 2011, estimated future
amortization expense for intangible assets is $16 million
for 2012, $13 million for 2013 and 2014, $12 million
for 2015, and $9 million for 2016.
|
Foreign Exchange Contracts (Details 1) (Cash Flow Hedging [Member], USD $)
In Millions |
12 Months Ended | |
---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
|
Foreign Exchange Contract [Member]
|
 |  |
Derivative Instruments, Gain (Loss) Recognized in Income, Net [Abstract] | Â | Â |
Amount of Gain (Loss) Recognized in accumulated OCI on Derivatives | $ 77 | $ 64 |
Cost of revenue [Member]
|
 |  |
Derivative Instruments, Gain (Loss) Recognized in Income, Net [Abstract] | Â | Â |
Amount of Gain (Loss) Reclassified from accumulated OCI into Income | $ 93 | $ 55 |
Acquisitions (Details Textuals) (USD $)
Share data in Millions, unless otherwise specified |
12 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
Jul. 01, 2011
Magnetic Media Operations [Member]
|
Jun. 30, 2010
Magnetic Media Operations [Member]
|
Jul. 01, 2011
Silicon Systems [Member]
|
Mar. 27, 2009
Silicon Systems [Member]
|
Jul. 01, 2011
Semiconductor Wafer Fabrication Facility [Member]
|
May 25, 2010
Semiconductor Wafer Fabrication Facility [Member]
|
Jul. 01, 2011
Hitachi Global Storage Technologies [Member]
|
Apr. 01, 2011
Hitachi Global Storage Technologies [Member]
|
Jul. 01, 2011
Hitachi Global Storage Technologies [Member]
|
Mar. 07, 2011
Hitachi Global Storage Technologies [Member]
|
|
Acquisitions (Textuals) [Abstract] | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Purchase price of planned acquisition | Â | Â | Â | Â | Â | Â | $ 35,000,000 | Â | Â | Â | $ 4,300,000,000 |
Company newly issued common stock | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 25 |
Fees to be paid to other party if acquisition does not close by a specified date | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 250,000,000 |
Expenses related to planned Acquisitions of HGST | 17,000,000 | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Total Senior Credit Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 3,000,000,000 |
Total Senior Revolving Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 500,000,000 |
Total Senior Term Loan Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 2,500,000,000 |
Committed Total Credit Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 2,500,000,000 |
Committed Revolving Credit Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 500,000,000 |
Committed Term loan Facility, Related to Acquisition | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 2,000,000,000 |
Debt commitment fee per annum as percentage of unfunded amount committed to be borrowed under the senior facility | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | 35.00% |
Debt commitment fee | Â | Â | Â | Â | Â | Â | Â | Â | Â | 2,000,000 | Â |
Total acquisition cost | Â | Â | 233,000,000 | Â | 66,000,000 | Â | Â | Â | Â | Â | Â |
Intangible assets | Â | Â | 11,000,000 | Â | 24,000,000 | Â | Â | Â | Â | Â | Â |
Amortized to cost of revenue over the weighted average useful life | Â | 3 | Â | 6 | Â | Â | Â | Â | Â | Â | Â |
Other direct acquisition costs | Â | Â | Â | Â | 1,000,000 | Â | Â | Â | Â | Â | Â |
Cash paid to shareholders | Â | Â | Â | Â | 65,000,000 | Â | Â | Â | Â | Â | Â |
Land and building | Â | Â | Â | Â | Â | Â | 20,000,000 | Â | Â | Â | Â |
Equipment | Â | Â | Â | Â | Â | 15,000,000 | Â | Â | Â | Â | Â |
In-process research and development | Â | Â | Â | Â | 14,000,000 | Â | Â | Â | Â | Â | Â |
Business Combination, Acquisition Related Costs | Â | Â | Â | Â | Â | Â | Â | $ 7,000,000 | $ 10,000,000 | Â | Â |
Legal Proceedings
|
12 Months Ended | ||||
---|---|---|---|---|---|
Jul. 01, 2011
|
|||||
Commitments, Contingencies and Legal Proceedings [Abstract] | Â | ||||
Legal Proceedings |
When the Company becomes aware of a claim or potential claim,
the Company assesses the likelihood of any loss or exposure. The
Company discloses information regarding each material claim
where the likelihood of a loss contingency is probable or
reasonably possible. If a loss contingency is probable and the
amount of the loss can be reasonably estimated, the Company
records an accrual for the loss. In such cases, there may be an
exposure to potential loss in excess of the amount accrued.
Where a loss is not probable but is reasonably possible and
where a loss in excess of the amount accrued is reasonably
possible, the Company discloses an estimate of the amount of the
loss or range of possible losses for the claim if a reasonable
estimate can be made, unless the amount of such reasonably
possible losses is not material to the Company’s financial
position, results of operations or cash flows. For the matters
described below, the Company has either recorded an accrual for
losses that are probable and reasonably estimable or has
determined that, while a loss is reasonably possible, a
reasonable estimate of the amount of loss or range of possible
losses with respect to the claim, including the amount of loss
in excess of the amount accrued, cannot be made. The ability to
predict the ultimate outcome of such matters involves judgments,
estimates and inherent uncertainties. The actual outcome of such
matters could differ materially from management’s estimates.
Intellectual
Property Litigation
On June 20, 2008, plaintiff Convolve, Inc.
(“Convolve”) filed a complaint in the Eastern District
of Texas against the Company and two other companies alleging
infringement of U.S. Patent Nos. 6,314,473 and 4,916,635.
The complaint sought unspecified monetary damages and injunctive
relief. On October 10, 2008, Convolve amended its complaint
to allege infringement of only the ‘473 patent. The
‘473 patent allegedly relates to interface technology to
select between certain modes of a disk drive’s operations
relating to speed and noise. A trial in the matter began on
July 18, 2011 and concluded on July 26, 2011 with a
verdict against the Company in an amount that is not material to
the Company’s financial position, results of operations or
cash flows. The Company is evaluating its
post-trial
and appellate options.
On July 15, 2009, plaintiffs Carl B. Collins and Farzin
Davanloo filed a complaint in the Eastern District of Texas
against the Company and ten other companies alleging
infringement of U.S. Patent Nos. 5,411,797 and 5,478,650.
Plaintiffs are seeking injunctive relief and unspecified
monetary damages, fees and costs. The asserted patents allegedly
relate to nanophase diamond films. The Company intends to defend
itself vigorously in this matter.
On December 7, 2009, plaintiff Nazomi Communications filed
a complaint in the Eastern District of Texas against the Company
and seven other companies alleging infringement of
U.S. Patent Nos. 7,080,362 and 7,225,436. Plaintiffs
dismissed the Eastern District of Texas suit after filing a
similar complaint in the Central District of California on
February 8, 2010. The case was subsequently transferred to
the Northern District of California on October 14, 2010.
Plaintiffs are seeking injunctive relief and unspecified
monetary damages, fees and costs. The asserted patents allegedly
relate to processor cores capable of Java hardware acceleration.
The Company intends to defend itself vigorously in this matter.
On January 5, 2010, plaintiff Enova Technology Corporation
filed a complaint in the District of Delaware against the
Company and Initio Corporation alleging infringement of
U.S. Patent Nos. 7,136,995 and 7,386,734. Plaintiff is
seeking injunctive relief and unspecified monetary damages, fees
and costs. The asserted patents allegedly relate to real time
full disk encryption application specific integrated circuits,
or ASICs. The Company intends to defend itself vigorously in
this matter.
On November 10, 2010, plaintiff Rembrandt Data Storage
filed a complaint in the Western District of Wisconsin against
the Company alleging infringement of U.S. Patent Nos.
5,995,342 and 6,195,232. Plaintiff is seeking injunctive relief
and unspecified monetary damages, fees and costs. The asserted
patents allegedly relate to specific thin film heads having
solenoid coils. The Company intends to defend itself vigorously
in this matter.
On August 1, 2011, plaintiff Guzik Technical Enterprises
filed a complaint in the Northern District of California against
the Company and various of its subsidiaries alleging
infringement of U.S. Patent Nos. 6,023,145 and 6,785,085,
breach of contract and misappropriation of trade secrets.
Plaintiff is seeking injunctive relief and unspecified monetary
damages, fees and costs. The asserted patents allegedly relate
to devices used to test hard disk drive heads and media. The
Company intends to defend itself vigorously in this matter.
On October 4, 2006, plaintiff Seagate Technology LLC
(“Seagate”) filed a complaint against the Company and
one of its employees formerly employed by Seagate in the
Minnesota Fourth Judicial District Court. The complaint alleges
claims based on supposed misappropriation of trade secrets and
seeks injunctive relief and unspecified monetary damages, fees
and costs. On June 19, 2007, the Company’s employee
filed a demand for arbitration with the American Arbitration
Association. A motion to stay the litigation as against all
defendants and to compel arbitration of all Seagate’s
claims was granted on September 19, 2007. On
September 23, 2010, Seagate filed a motion to amend its
claims and add allegations based on the supposed
misappropriation of additional confidential information, and the
arbitrator granted Seagate’s motion. The arbitration
hearing commenced on May 23, 2011 and concluded on
July 11, 2011. The parties will be filing post-arbitration
briefs in August 2011. The arbitrator is expected to render a
decision in the fall of 2011. The Company continues to defend
itself vigorously in this matter.
Employment
Litigation
On March 20, 2009, plaintiff Ghazala H. Durrani, a former
employee of the Company, filed a putative class action complaint
in the Alameda County (California) Superior Court. The complaint
alleged that certain of the Company’s engineers had been
misclassified as exempt employees under California state law and
were, therefore, due unspecified amounts for unpaid hourly
overtime wages and other amounts, as well as penalties for
allegedly missed meal and rest periods. By court order dated
April 24, 2009, the case was transferred to the Orange
County (California) Superior Court. On or about June 16,
2009, the Company was dismissed from the case without prejudice
by stipulation, leaving WDTI as the sole remaining defendant. On
or about June 4, 2009, WDTI filed its answer to the
complaint, denying the substantive allegations thereof and
raising several affirmative defenses. The parties participated
in a mediation of the case on June 3, 2010, which led to a
proposed settlement of the case. The proposed settlement, which
was ultimately approved by the court, resolved the case on a
class-wide
basis for an immaterial amount that was accrued by the Company
in the fourth quarter of fiscal 2010. The court granted final
approval of the settlement and entered judgment on
February 7, 2011. A final accounting hearing took place on
July 11, 2011, at which the court confirmed that the
settlement amount was fully paid in accordance with the
settlement agreement.
On February 26, 2010, and as thereafter amended on
August 23, 2010 and December 22, 2010, plaintiff Tariq
Sadaat, a former employee of the Company, filed a putative class
action complaint in the Orange County (California) Superior
Court against the Company, WDTI, Kelly Services, Inc., a
Delaware corporation (“Kelly Services”), and certain
other unnamed individuals. Plaintiff sought to represent certain
hourly employees who were assigned to work at certain of the
Company’s facilities by Kelly Services, a temporary
staffing agency. In this regard, the complaint alleged that the
hourly employees were due unspecified sums for unpaid overtime
wages and other amounts, as well as penalties for allegedly
missed meal and rest periods. The complaint sought unspecified
damages including lost wages, penalties under the California
Labor Code and other statutes, compensatory and punitive
damages, declaratory relief, injunctive relief, interest,
attorneys’ fees and costs. The Company’s response to
the complaint was filed and served in January 2011. The parties
participated in a mediation of the case, which led to a proposed
settlement of Sadaat’s individual claims for an immaterial
amount. The Court approved the proposed settlement on
July 26, 2011, and dismissed the complaint in its entirety,
with prejudice as to Sadaat’s individual claims and without
prejudice as to the alleged class claims.
Other
Matters
In the normal course of business, the Company is subject to
other legal proceedings, lawsuits and other claims. Although the
ultimate aggregate amount of probable monetary liability or
financial impact with respect to these other matters is subject
to many uncertainties and is therefore not predictable with
assurance, management believes that any monetary liability or
financial impact to the Company from these other matters,
individually and in the aggregate, would not be material to the
Company’s financial condition, results of operations or
cash flows. However, there can be no assurance with respect to
such result, and monetary liability or financial impact to the
Company from these other matters could differ materially from
those projected.
|
Quarterly Results of Operations (unaudited)
|
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Jul. 01, 2011
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Quarterly Results of Operations (unaudited) [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Results of Operations (unaudited) |
|
Quarterly Results of Operations (unaudited) (Details Textuals) (USD $)
In Millions |
3 Months Ended | |||
---|---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 01, 2011
Hitachi Global Storage Technologies [Member]
|
Apr. 01, 2011
Hitachi Global Storage Technologies [Member]
|
|
Quarterly Results of Operations unaudited (Textuals) [Abstract] | Â | Â | Â | Â |
Expenses related to the planned acquisition of HGST | Â | Â | $ 7 | $ 10 |
Accrual for litigation contingencies | 25 | Â | Â | Â |
Debt commitment fees related to planned acquisition of HGST | Â | Â | 2 | Â |
Expense related to litigation settlements | Â | $ 27 | Â | Â |
Debt (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||||
---|---|---|---|---|---|
Jul. 01, 2011
|
Jul. 02, 2010
|
Feb. 29, 2008
|
Jul. 01, 2011
Term Loan [Member]
|
Feb. 29, 2008
Term Loan [Member]
|
|
Long-term debt | Â | Â | Â | Â | Â |
Term loan | $ 294 | $ 400 | Â | $ 294 | Â |
Less amounts due in one year | (144) | (106) | Â | Â | Â |
Long-term debt | 150 | 294 | Â | Â | Â |
Debt (Textuals) [Abstract] | Â | Â | Â | Â | Â |
Term loan | Â | Â | Â | Â | 500 |
Variable interest rate of term loan | Â | Â | Â | 1.44% | Â |
Remaining balance amount of loan | 294 | 400 | Â | 294 | Â |
Total principle amount payable, 2012 | Â | Â | Â | 144 | Â |
Total principle amount payable, 2013 | Â | Â | Â | $ 150 | Â |
Maturity date of term loan | Feb. 11, 2013 | ||||
Debt (Additional) (Textuals) [Abstract] | Â | Â | Â | Â | Â |
Period of term loan facility | Â | Â | 5 years | Â | Â |
Shareholders' Equity (Tables)
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Jul. 01, 2011
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Shareholders Equity [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Option Activity |
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Options outstanding and exercisable under the Stock Plans |
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Fair value of stock options granted |
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Fair values of all employee stock purchase plan rights granted |
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Restricted Stock Unit |
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Summarizes table of all shares of common stock reserved for issuance |
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Schedule II - Consolidated Valuation And Qualifying Accounts
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Jul. 01, 2011
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Consolidated Valuation And Qualifying Accounts [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS |
WESTERN
DIGITAL CORPORATION
SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Three years ended July 1, 2011 (in millions)
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Organization and Summary of Significant Accounting Policies (Tables)
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Organization and Summary of Significant Accounting Policies and Supplemental Financial Statement Data [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income per Common Share |
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Organization and Summary of Significant Accounting Policies
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Organization and Summary of Significant Accounting Policies and Supplemental Financial Statement Data [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies |
Note 1. Organization
and Summary of Significant Accounting Policies
Western Digital Corporation (the “Company” or
“Western Digital” or “WD”) is a global
provider of solutions for the collection, storage, management,
protection and use of digital content, including audio and video. The Company’s principal products are hard drives,
which are devices that use one or more rotating magnetic disks
(“magnetic media”) to store and allow fast access to
data. Hard drives are currently the primary storage medium for
digital content. The Company’s hard drives are used in
desktop and notebook computers, corporate and cloud computing data centers, home
entertainment equipment and stand-alone consumer storage
devices. In addition to hard drives, the Company’s other
products include solid-state drives and home entertainment and
networking products.
The Company has prepared its consolidated financial statements
in accordance with accounting principles generally accepted in
the United States (“U.S. GAAP”) and has adopted
accounting policies and practices which are generally accepted
in the industry in which it operates. The Company’s
significant accounting policies are summarized below.
Fiscal
Year
The Company has a 52 or 53-week fiscal year. The 2011 fiscal
year which ended on July 1, 2011 consisted of
52 weeks. The 2010 and 2009 fiscal years, which ended on
July 2, 2010 and July 3, 2009, respectively, consisted
of 52 and 53 weeks each, respectively.
Basis of
Presentation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The accounts of foreign subsidiaries have been
remeasured using the U.S. dollar as the functional
currency. As such, gains or losses resulting from remeasurement
of these accounts from local currencies into U.S. dollars
are reflected in the results of operations. These gains and
losses were immaterial to the consolidated financial statements.
On June 30, 2010, the Company acquired the magnetic media
sputtering operations of Hoya Corporation and Hoya Magnetics
Singapore Pte. Ltd (together, “Hoya”). On
March 27, 2009, the Company acquired SiliconSystems, Inc.
(“SiliconSystems”). The acquisitions are further
described in Note 14. The results of operations of Hoya and
SiliconSystems since the dates of their acquisitions 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 are invested in
U.S. Treasury securities, U.S. Treasury bills and
U.S. Government agency securities with original maturities
when purchased of three months or less.
Investments
The Company’s investments consist of auction-rate
securities, which are primarily backed by insurance products
with original maturities greater than three months. The Company
has classified these investments as
available-for-sale
securities and they are carried at fair value within other
non-current assets in the consolidated balance sheets.
Fair
Value of Financial Instruments
The carrying amounts of cash equivalents, accounts receivable,
investments, accounts payable and accrued expenses approximate
fair value for all periods presented because of the short-term
maturity of these assets and liabilities or, in the case of
investments, these are recorded using appropriate market
information. The carrying amount of debt approximates fair 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. The
Company maintains allowances for potential credit losses, and
such losses have historically been within management’s
expectations. At any given point in time, the total amount
outstanding from any one of a number of its customers may be
individually significant to the Company’s financial
results. At July 1, 2011 and July 2, 2010, the Company
had reserves for potential credit losses of $5 million and
$6 million, respectively, and net accounts receivable of
$1.2 billion and $1.3 billion, respectively.
The Company also has cash equivalent and investment policies
that limit the amount of credit exposure to any one financial
institution or investment instrument and requires that
investments be made only with financial institutions or in
investment instruments evaluated as highly credit-worthy.
Inventory
The Company values inventories at the lower of cost
(first-in,
first out and weighted average methods) or net realizable value.
The
first-in,
first-out (“FIFO”) method is used to value the cost of
the majority of the Company’s inventories, while the
weighted-average method is used to value precious metal
inventories. Weighted-average cost is calculated based upon the
cost of precious metals at the time they are received by the
Company. The Company has determined that it is not practicable
to assign specific costs to individual units of precious metals
and, as such, precious metals are relieved from inventory based
on the weighted-average cost of the inventory at the time the
inventory is used in production. The weighted average method of
valuing precious metals does not materially differ from a FIFO
method. As of July 1, 2011 and July 2, 2010, 85% and
82% of the inventory was valued using the FIFO method with the
remainder valued using the weighted average method. Inventory
write-downs are recorded for the valuation of inventory at the
lower of cost or net realizable value by analyzing market
conditions and estimates of future sales prices as compared to
inventory costs and inventory balances.
The Company evaluates inventory balances for excess quantities
and obsolescence on a regular basis by analyzing estimated
demand, inventory on hand, sales levels and other information,
and reduces inventory balances to net realizable value for
excess and obsolete inventory based on this analysis.
Unanticipated changes in technology or customer demand could
result in a decrease in demand for one or more of the
Company’s products, which may require a write down of
inventory that could materially affect operating results.
Property,
Plant and Equipment
The cost of property, plant and equipment is depreciated over
the estimated useful lives of the respective assets. The
Company’s buildings are depreciated over periods ranging
from fifteen to thirty years. The majority of the Company’s
equipment is depreciated over periods of three to seven years.
Depreciation is computed on a straight-line basis. Leasehold
improvements are amortized over the lesser of the estimated
useful lives of the assets or the related lease terms.
Goodwill
and Other Long-Lived Assets
The total purchase price in a business combination is allocated
to the fair value of assets acquired and liabilities assumed
based on their fair values at the acquisition date, with amounts
exceeding the fair values being recorded as goodwill. Goodwill
is not amortized. Instead, it is tested for impairment on an
annual basis or more frequently whenever events or changes in
circumstances indicate that goodwill may be impaired. The
Company did not record any impairment of goodwill during 2011,
2010 or 2009.
Other intangible assets consist primarily of technology acquired
in business combinations. Acquired intangibles are amortized on
a straight-line basis over their respective estimated useful
lives. Long-lived assets are tested for recoverability whenever
events or changes in circumstances indicate that their carrying
amounts may not be recoverable.
The Company did not record any impairments to long-lived assets
during 2011 or 2010. The Company recorded impairments to certain
long-lived assets during 2009. See Note 13.
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 is fixed or determinable and
collectability is reasonably assured. The Company establishes
provisions against revenue and cost of revenue for estimated
sales returns in the same period that the related revenue is
recognized based on existing product return notifications. If
actual sales returns exceed expectations, an increase in the
sales return accrual would be required, which could materially
affect operating results.
In accordance with standard industry practice, the Company
provides distributors and retailers (collectively referred to as
“resellers”) with limited price protection for
inventories held by resellers at the time of published list
price reductions, and the Company provides resellers and OEMs
with other sales incentive programs. At the time the Company
recognizes revenue to resellers and OEMs, a reduction of revenue
is recorded for estimated price protection until the resellers
sell such inventory to their customers and the Company also
records a reduction of revenue for the other programs in effect.
The Company bases these adjustments on several factors including
anticipated price decreases during the reseller holding period,
reseller’s sell-through and inventory levels, estimated
amounts to be reimbursed to qualifying customers, historical
pricing information and customer claim processing. If customer
demand for hard drives or market conditions differ from the
Company’s expectations, the Company’s operating
results could be materially affected. The Company also has
programs under which it reimburses qualified distributors and
retailers for certain marketing expenditures, which are recorded
as a reduction of revenue. Sales incentive and marketing
programs are recorded as a reduction of revenue.
The Company records an allowance for doubtful accounts by
analyzing specific customer accounts and assessing the risk of
loss based on insolvency, disputes or other collection issues.
In addition, the Company routinely analyzes the different
receivable aging categories and establishes reserves based on a
combination of past due receivables and expected future losses
based primarily on its historical levels of bad debt losses. If
the financial condition of a significant customer deteriorates
resulting in its inability to pay its accounts when due, or if
the Company’s overall loss history changes significantly,
an adjustment in the Company’s allowance for doubtful
accounts would be required, which could materially affect
operating results.
The Company establishes provisions against revenue and cost of
revenue for sales returns in the same period that the related
revenue is recognized. These provisions are based on existing
product return notifications. If actual sales returns exceed
expectations, an increase in the sales return accrual would be
required, which could materially affect operating results.
Warranty
The Company records an accrual for estimated warranty costs when
revenue is recognized. The Company generally warrants its
products for a period of one to five years. The warranty
provision considers estimated product failure rates and trends,
estimated repair or replacement costs and estimated costs for
customer compensatory claims related to product quality issues,
if any. A statistical warranty tracking model is used to 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’s
judgment is subject to a greater degree of subjectivity with
respect to newly introduced products because of limited field
experience with those products upon which to base warranty
estimates. Management reviews the warranty accrual quarterly for
products shipped in prior periods and which are still under
warranty. Any changes in the estimates underlying the accrual
may result in adjustments that impact current period gross
margin and income. Such changes are generally a result of
differences between forecasted and actual return rate experience
and costs to repair. If
actual product return trends, costs to repair returned products
or costs of customer compensatory claims differ significantly
from estimates, future results of operations could be materially
affected.
Litigation
and Other Contingencies
When the Company becomes aware of a claim or potential claim,
the Company assesses the likelihood of any loss or exposure. The
Company discloses information regarding each material claim
where the likelihood of a loss contingency is probable or
reasonably possible. If a loss contingency is probable and the
amount of the loss can be reasonably estimated, the Company
records an accrual for the loss. In such cases, there may be an
exposure to potential loss in excess of the amount accrued.
Where a loss is not probable but is reasonably possible and
where a loss in excess of the amount accrued is reasonably
possible, the Company discloses an estimate of the amount of the
loss or range of possible losses for the claim if a reasonable
estimate can be made, unless the amount of such reasonably
possible losses is not material to the Company’s financial
position, results of operations or cash flows. The ability to
predict the ultimate outcome of such matters involves judgments,
estimates and inherent uncertainties. The actual outcome of such
matters could differ materially from management’s
estimates. See Note 5.
Advertising
Expense
Advertising costs are expensed as incurred. Selling, general and
administrative expenses of the Company included advertising
costs of $11 million, $7 million, and $5 million
in 2011, 2010 and 2009, respectively.
Income
Taxes
The Company accounts for income taxes under the asset and
liability method, which provides that deferred tax assets and
liabilities be recognized for temporary differences between the
financial reporting basis and the tax basis of assets and
liabilities and expected benefits of utilizing net operating
loss (“NOL”) and tax credit carryforwards. The Company
records a valuation allowance when it is more likely than not
that the deferred tax assets will not be realized. Each period,
the Company evaluates the need for a valuation allowance for its
deferred tax assets and adjusts the valuation allowance so that
the Company records net deferred tax assets only to the extent
that it has concluded it is more likely than not that these
deferred tax assets will be realized.
The Company recognizes liabilities for uncertain tax positions
based on a two-step process. To the extent a tax position does
not meet a more-likely-than-not level of certainty, no benefit
is recognized in the financial statements. If a position meets
the more-likely-than-not level of certainty, it is recognized in
the financial statements at the largest amount that has a
greater than 50% likelihood of being realized upon ultimate
settlement. Interest and penalties related to unrecognized tax
benefits are recognized on liabilities recorded for uncertain
tax positions, as applicable, and are recorded in the provision
for income taxes. The actual liability for unrealized tax
benefits may be materially different from the Company’s
estimates, which could result in the need to record additional
liabilities for unrecognized tax benefits or potentially adjust
previously-recorded liabilities for unrealized tax benefits, and
may materially affect our operating results.
Income
per Common Share
The Company computes basic income per common share using net
income and the weighted average number of common shares
outstanding during the period. Diluted income per common share
is computed using net income and the weighted average number of
common shares and potentially dilutive common shares outstanding
during the period. Potentially dilutive common shares include
certain dilutive outstanding employee stock options, rights to
purchase shares of common stock under the Company’s
Employee Stock Purchase Plan (“ESPP”) and restricted
stock unit awards.
The following table illustrates the computation of basic and
diluted income per common share (in millions, except per share
data):
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 over the vesting period. The fair values of all stock
options granted are estimated using a binomial model, and the
fair values of all ESPP purchase rights are estimated using the
Black-Scholes-Merton option-pricing model. Both the binomial and
the Black-Scholes-Merton option-pricing models require the input
of highly subjective assumptions. The Company is required to use
judgment in estimating the amount of stock-based awards that are
expected to be forfeited. If actual forfeitures differ
significantly from the original estimate, stock-based
compensation expense and the results of operations could be
materially affected.
Other
Comprehensive Income (Loss)
Other comprehensive income (loss) refers to revenue, expenses,
gains and losses that are recorded as an element of
shareholders’ equity but are excluded from net income. The
Company’s other comprehensive income (loss) is comprised of
unrealized gains and losses on foreign exchange contracts.
Foreign
Exchange Contracts
Although the majority of the Company’s transactions are in
U.S. dollars, some transactions are based in various
foreign currencies. The Company purchases short-term, foreign
exchange contracts to hedge the impact of foreign currency
exchange fluctuations on certain underlying assets, revenue,
liabilities and commitments for operating expenses and product
costs denominated in foreign currencies. The purpose of entering
into these hedging transactions is to minimize the impact of
foreign currency fluctuations on the Company’s results of
operations. These contract maturity dates do not exceed
12 months. All foreign exchange contracts are for risk
management purposes only. The Company does not purchase foreign
exchange contracts for trading purposes. The Company had
outstanding foreign exchange contracts with commercial banks for
Thai Baht, Malaysian Ringgit, Euro and British Pound Sterling
with aggregate notional amounts of $1.5 billion and
$1.1 billion at July 1, 2011 and July 2, 2010,
respectively. Thai Baht contracts are designated as either cash
flow or fair value hedges. Malaysian Ringgit contracts are
designated as cash flow hedges. Euro and British Pound Sterling
contracts are designated as fair value hedges.
If the derivative is designated as a cash flow hedge, the
effective portion of the change in fair value of the derivative
is initially deferred in other comprehensive income (loss), net
of tax. These amounts are subsequently recognized into earnings
when the underlying cash flow being hedged is recognized into
earnings. Recognized gains and losses on foreign exchange
contracts entered into for manufacturing-related activities are
reported in cost of revenue. Hedge effectiveness is measured by
comparing the hedging instrument’s cumulative change in
fair value from inception to maturity to the underlying
exposure’s terminal value. The Company determined the
ineffectiveness associated with its cash flow hedges to be
immaterial.
A change in the fair value of fair value hedges is recognized in
earnings in the period incurred and is reported as a component
of operating expenses. All fair value hedges were determined to
be effective. The fair value and the changes in fair value on
these contracts were not material to the consolidated financial
statements for all years presented. See Notes 10 and 11 for
additional disclosures related to foreign exchange contracts.
Use of
Estimates
Company management has made estimates and assumptions relating
to the reporting of certain assets and liabilities in conformity
with U.S. GAAP. These estimates and assumptions have been
applied using methodologies that are consistent throughout the
periods presented. However, actual results could differ
materially from these estimates.
Recent
Accounting Pronouncements
In September 2009, the FASB issued Accounting Standards Update
(“ASU”)
2009-13,
“Multiple-Deliverable Revenue Arrangements” (“ASU
2009-13”),
and ASU
2009-14,
“Certain Revenue Arrangements That Include Software
Elements” (“ASU
2009-14”).
ASU 2009-13
amends the revenue guidance under Subtopic
605-25,
“Multiple Element Arrangements,” and addresses how to
determine whether an arrangement involving multiple deliverables
contains more than one unit of accounting and how arrangement
consideration shall be measured and allocated to the separate
units of accounting in the arrangement. ASU
2009-14
excludes tangible products containing software components and
non-software components that function together to deliver the
product’s essential functionality from the scope of
Subtopic
985-605,
“Revenue Recognition.” ASU
2009-13 and
ASU 2009-14
are effective for fiscal periods beginning on or after
June 15, 2010, which for the Company was the first quarter
of fiscal 2011. The Company’s adoption of ASU
2009-13 and
ASU 2009-14
had no impact on its consolidated financial statements.
In May 2011, the FASB issued ASU
2011-04,
“Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs”
(“ASU
2011-04”).
ASU 2011-04
clarifies existing fair value measurement and disclosure
requirements by amending certain fair value measurement
principles and requiring additional disclosures regarding fair
value measurements. ASU 2011-04 is effective for fiscal periods
beginning after December 15, 2011, which for the Company is
the third quarter of fiscal 2012. The Company is currently
evaluating the impact that
ASU 2011-04
will have on its consolidated financial statements.
In June 2011, the FASB issued ASU
2011-05
“Presentation of Comprehensive Income” (“ASU
2011-05”).
ASU 2011-05
requires that all non-owner changes in shareholders’ equity
be presented either in a single continuous statement of
comprehensive income or in two separate but continuous
statements. If presented in two separate statements, the first
statement should present total net income and its components
followed immediately by a second statement of total other
comprehensive income, its components and the total comprehensive
income. ASU
2011-05 is
effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2011, which for
the Company is the first quarter of fiscal 2013. The Company is
currently evaluating the impact that ASU
2011-05 will
have on its consolidated financial statements.
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Fair Value Measurements |
Note 10. Fair
Value Measurements
Financial assets and liabilities that are remeasured and
reported at fair value at each reporting period are classified
and disclosed in one of the following three levels:
Level 1. Quoted prices in active markets
for identical assets or liabilities.
Level 2. Inputs other than Level 1
that are observable, either directly or indirectly, such as
quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3. Inputs that are unobservable for
the asset or liability and that are significant to the fair
value of the assets or liabilities.
The following table presents information about the
Company’s financial assets and liabilities that are
measured at fair value on a recurring basis as of July 1,
2011, and indicates the fair value hierarchy of the valuation
techniques utilized to determine such value (in millions):
The following table presents information about the
Company’s financial assets that are measured at fair value
on a recurring basis as of July 2, 2010, and indicates the
fair value hierarchy of the valuation techniques utilized to
determine such value (in millions):
Money Market Funds. The Company’s money
market funds are funds that invest in U.S. Treasury
securities and are recorded within cash and cash equivalents in
the consolidated balance sheets. Money market funds are valued
based on quoted market prices.
U.S. Treasury Securities. The
Company’s U.S. Treasury securities are investments in
Treasury bills with original maturities of three months or less,
are held in custody by a third party and are recorded within
cash and cash equivalents in the consolidated balance sheets.
U.S. Treasury securities are valued using a market approach
which is based on observable inputs including market interest
rates from multiple pricing sources.
U.S. Government Agency Securities. The
Company’s U.S. Government agency securities are
investments in fixed income securities sponsored by the
U.S. Government with original maturities of three months or
less, are held in custody by a third party and are recorded
within cash and cash equivalents in the consolidated balance
sheets. U.S. Government agency securities are valued using
a market approach which is based on observable inputs including
market interest rates from multiple pricing sources.
Auction-Rate Securities. The Company’s
auction-rate securities have maturity dates through 2050, are
primarily backed by insurance products and are accounted for as
available-for-sale
securities. These investments are expected to be held until
secondary markets become available and as a result, are
classified as long-term investments and recorded within other
non-current assets in the consolidated balance sheets.
Auction-rate securities are valued using an income approach
which is based on a discounted cash flow model or a credit
default model. The inputs to the discounted cash flow model
include market interest rates and a discount factor to reflect
the illiquidity of the investments. The inputs to the credit
default model include market interest rates, yields of similar
securities, and probability-weighted assumptions related to the
creditworthiness of the underlying assets.
Foreign Exchange Contracts. The Company’s
foreign exchange contracts are short-term contracts to hedge the
Company’s foreign currency risk related to the Thai Baht,
Malaysian Ringgit, Euro and British Pound Sterling. Foreign
exchange contracts are classified within other current assets in
the consolidated balance sheets. Foreign exchange contracts are
valued using an income approach which is based on a present
value of future cash flows model. The market-based observable
inputs for the model include forward rates and credit default
swap rates.
The following table presents the changes in Level 3
financial assets measured on a recurring basis (in millions):
For the year ended July 1, 2011, there were no changes in
Level 3 financial assets measured on a recurring basis. The
Company had no liabilities that were re-measured and reported at
fair value on a recurring basis during the year ended
July 2, 2010.
|
Foreign Exchange Contracts (Details) (Foreign Exchange Contract [Member], USD $)
In Millions |
Jul. 01, 2011
|
Jul. 02, 2010
|
---|---|---|
Fair value and balance sheet location | Â | Â |
Derivatives Designated as Hedging Instruments Fair value, Asset derivatives | $ 0 | Â |
Derivatives Designated as Hedging Instruments Fair Value, Liability derivatives | Â | 0 |
Other Current Assets [Member]
|
 |  |
Fair value and balance sheet location | Â | Â |
Derivatives Designated as Hedging Instruments Fair value, Asset derivatives | Â | 17 |
Accrued Expenses [Member]
|
 |  |
Fair value and balance sheet location | Â | Â |
Derivatives Designated as Hedging Instruments Fair Value, Liability derivatives | $ 5 | Â |
Restructuring And Sale Of Facility (Details Textuals) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended |
---|---|---|
Jul. 03, 2009
|
Jul. 03, 2009
|
|
Restructuring And Sale Of Facility (Textuals) [Abstract] | Â | Â |
Headcount reductions | Â | 3,300 |
Restructuring costs totaled | Â | $ 112 |
Asset impairment charges | Â | 81 |
Employee termination benefits | Â | 27 |
Contract termination and other exit costs | Â | 4 |
Cash expenditures related to the restructuring activities | Â | 31 |
Asset impairment related to land buildings machinery and equipment manufacturing facilities in Thailand and Malaysia | Â | 76 |
Asset impairment related to customer relationship intangible asset acquired from Komag | Â | 5 |
Sale of substrate manufacturing facility | 29 | 29 |
Gain on sale of assets | Â | $ 18 |
Acquisition (Tables)
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Jul. 01, 2011
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Acquisition of identifiable intangible assets, and liabilities assumed |
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Acquisitions
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Jul. 01, 2011
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Acquisitions |
Planned
Acquisition of Hitachi Global Storage Technologies
On March 7, 2011, the Company entered into a stock purchase
agreement (the “Purchase Agreement”) with Hitachi,
Ltd. (“Hitachi”), Viviti Technologies Ltd., until
recently known as Hitachi Global Storage Technologies Holdings
Pte. Ltd., a wholly owned subsidiary of Hitachi
(“HGST”), and Western Digital Ireland, Ltd., an
indirect wholly owned subsidiary of the Company
(“WDI”). Pursuant to the Purchase Agreement, WDI
agreed to acquire all of the issued and outstanding
paid-up
share capital of HGST from Hitachi. The planned acquisition is
intended to result in a more efficient and innovative
customer-focused storage company, with significant operating
scale, strong global talent and the industry’s broadest
product lineup backed by a rich technology portfolio. The
aggregate purchase price of the planned acquisition is estimated
to be approximately $4.3 billion, due at closing, and will
be funded with existing cash, new debt, and 25 million
newly issued shares of the Company’s common stock. The
Purchase Agreement contains certain termination rights for both
the Company and Hitachi, including the right to terminate the
Purchase Agreement if the planned acquisition has not closed by
March 7, 2012. If the planned acquisition has not closed by
March 7, 2012 due to the failure to receive any required
antitrust or competition authority’s consent, approval or
clearance or any action by any certain governmental entities to
prevent the planned acquisition for antitrust or competition
reasons, the Company will, concurrently with such termination,
be required to pay Hitachi a fee of $250 million in cash.
During 2011, the Company incurred $17 million of expenses
related to the planned acquisition of HGST which are included
within selling, general and administrative expense in the
consolidated statements of income.
On March 7, 2011, in connection with the planned
acquisition of HGST, the Company, WDTI and WDI entered into a
commitment letter with Bank of America, N.A. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated regarding a new
credit facility for an amount of $2.5 billion, consisting
of a $500 million revolving credit facility and
$2.0 billion in term loans, to be entered into in
connection with the closing of the planned acquisition (the
“Senior Facility”). Since entering into the commitment
letter, Bank of America N.A. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated led the effort to
syndicate the Senior Facility for an amount of up to
$3.0 billion, consisting of a $500 million revolving
credit facility and up to $2.5 billion in term loans. As a
result of such effort, the Company, WDTI and WDI have fully
negotiated definitive loan documents for the Senior Facility
with the syndicate members and, subject to customary closing
conditions including completion of the acquisition in accordance
with its terms, the Company, WDTI and WDI fully expect all of
these syndicate members to be part of the final lender group. In
addition, the Company is required to pay a commitment fee at the
rate of 0.35%, per annum, of the aggregate unfunded amount
committed to be borrowed under the Senior Facility. For 2011,
the Company incurred debt commitment fees of $2 million
related to the acquisition.
The planned acquisition of HGST is subject to several closing
conditions, including the receipt of antitrust approvals or the
expiration of applicable waiting periods in certain
jurisdictions. The Company has received requests for
additional information and is engaged in more in-depth reviews
of the pending acquisition initiated by regulatory authorities
in the United States, the European Union, the People’s
Republic of China, Japan and Korea. The Company is cooperating
fully with each of the regulatory authorities reviewing the
proposed transaction. Subject to obtaining the required
regulatory approvals or expiration of applicable waiting
periods, the Company expects the transaction to close in its
second quarter of fiscal 2012.
Magnetic
Media Operations
On June 30, 2010, the Company acquired the facilities,
equipment, intellectual property and working capital of the
magnetic media sputtering operations of Hoya. The cost of the
acquisition was $233 million and was funded with available
cash. The Company identified and recorded the assets, including
specifically identifiable intangible assets, and liabilities
assumed from Hoya at their estimated fair values as of the date
of acquisition, and allocated the remaining value to goodwill.
The allocation was as follows (in millions):
Intangible assets of $11 million primarily relate to a
glass substrate supply agreement and existing technology. These
intangibles will be amortized to cost of revenue over the
weighted average useful life of 3 years.
Semiconductor
Wafer Fabrication Facility
On May 25, 2010, the Company agreed to purchase a
semiconductor wafer fabrication facility consisting of land, a
building, equipment and certain intangible assets for a total
acquisition cost of $35 million. The land and building were
acquired for $20 million during the fourth fiscal quarter
of 2010. The Company completed the acquisition by acquiring the
equipment for $15 million during the fourth fiscal quarter
of 2011.
SiliconSystems
On March 27, 2009, the Company acquired SiliconSystems, a
supplier of solid-state drives for the embedded systems market.
The total acquisition cost of SiliconSystems was
$66 million, consisting of $65 million in cash paid to
SiliconSystems shareholders and $1 million of other direct
acquisition costs. The Company identified and recorded the
assets, including specifically identifiable intangible assets,
and liabilities assumed from SiliconSystems at their estimated
fair values as of the acquisition date, and allocated the
remaining value to goodwill. The allocation was as follows (in
millions):
Intangible assets of $24 million primarily relates to
existing technology that is amortized to cost of revenue over
the weighted average useful life of 6 years. In-process
research and development of $14 million relates to projects
that had not reached technological feasibility and had no
alternative future use, and therefore, did not qualify for
capitalization and was recorded as an operating expense during
2009 in the accompanying consolidated statements of income.
|
Organization and Summary of Significant Accounting Policies (Details) (USD $)
In Millions, except Per Share data |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
Apr. 01, 2011
|
Dec. 31, 2010
|
Oct. 01, 2010
|
Jul. 02, 2010
|
Apr. 02, 2010
|
Jan. 01, 2010
|
Oct. 02, 2009
|
Jul. 01, 2011
|
Jul. 02, 2010
|
Jul. 03, 2009
|
|
Computation of basic and diluted income per common share | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Net income | $ 158 | $ 146 | $ 225 | $ 197 | $ 265 | $ 400 | $ 429 | $ 288 | $ 726 | $ 1,382 | $ 470 |
Weighted average shares outstanding: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Basic | Â | Â | Â | Â | Â | Â | Â | Â | 231 | 228 | 222 |
Employee stock options and other | Â | Â | Â | Â | Â | Â | Â | Â | 4 | 5 | 4 |
Diluted | Â | Â | Â | Â | Â | Â | Â | Â | 235 | 233 | 226 |
Income per common share: | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
Basic income per common share | $ 0.68 | $ 0.63 | $ 0.98 | $ 0.86 | $ 1.15 | $ 1.75 | $ 1.89 | $ 1.28 | $ 3.14 | $ 6.06 | $ 2.12 |
Diluted income per common share | $ 0.67 | $ 0.62 | $ 0.96 | $ 0.84 | $ 1.13 | $ 1.71 | $ 1.85 | $ 1.25 | $ 3.09 | $ 5.93 | $ 2.08 |
Anti-dilutive potential common shares excluded | Â | Â | Â | Â | Â | Â | Â | Â | 3 | 1 | 6 |