Separate Financial Information of Guarantor Subsidiaries | Separate Financial Information of Guarantor Subsidiaries The 2026 Senior Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, subject to certain customary guarantor release conditions, by certain 100% owned material domestic subsidiaries of the Company (or the “Guarantor Subsidiaries”). The guarantee by a Guarantor Subsidiary will be released in the event of (i) the release of a Guarantor Subsidiary from its guarantee of indebtedness under the Credit Agreement or other indebtedness that would have required the Guarantor Subsidiary to guarantee the 2026 Senior Unsecured Notes , (ii) the sale, issuance or other disposition of capital stock of a Guarantor Subsidiary such that it is no longer a restricted subsidiary under the indenture governing the 2026 Senior Unsecured Notes , (iii) the sale of all or substantially all of a Guarantor Subsidiary’s assets, (iv) the Company’s exercise of its defeasance options under the indenture governing the 2026 Senior Unsecured Notes , (v) the dissolution or liquidation of a Guarantor Subsidiary or (vi) the sale of all the equity interest in a Guarantor Subsidiary. The Company’s other domestic subsidiaries and its foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) do not guarantee the 2026 Senior Unsecured Notes . The following condensed consolidating financial information reflects the summarized financial information of Western Digital Corporation (“Parent”), the Guarantor Subsidiaries on a combined basis, and the Non-Guarantor Subsidiaries on a combined basis. Condensed Consolidating Balance Sheet As of March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 118 $ 729 $ 4,116 $ — $ 4,963 Short-term investments — — 20 — 20 Accounts receivable, net — 1,232 779 — 2,011 Intercompany receivables 1,869 3,488 2,209 (7,566 ) — Inventories — 1,055 1,877 (262 ) 2,670 Other current assets 15 185 263 37 500 Total current assets 2,002 6,689 9,264 (7,791 ) 10,164 Property, plant and equipment, net — 1,078 1,933 — 3,011 Notes receivable and investments in Flash Ventures — — 2,160 — 2,160 Goodwill — 387 9,692 — 10,079 Other intangible assets, net — 40 2,916 — 2,956 Investments in consolidated subsidiaries 19,980 19,439 — (39,419 ) — Loans due from consolidated affiliates 1,406 15 — (1,421 ) — Other non-current assets 172 613 444 (595 ) 634 Total assets $ 23,560 $ 28,261 $ 26,409 $ (49,226 ) $ 29,004 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 255 $ 1,879 $ — $ 2,134 Accounts payable to related parties — — 282 — 282 Intercompany payables 916 4,277 2,373 (7,566 ) — Accrued expenses 175 434 369 37 1,015 Accrued compensation — 309 200 — 509 Accrued warranty — — 195 — 195 Current portion of long-term debt 124 — — — 124 Total current liabilities 1,215 5,275 5,298 (7,529 ) 4,259 Long-term debt 11,045 — 31 — 11,076 Loans due to consolidated affiliates — 342 1,079 (1,421 ) — Other liabilities — 2,458 506 (595 ) 2,369 Total liabilities 12,260 8,075 6,914 (9,545 ) 17,704 Total shareholders’ equity 11,300 20,186 19,495 (39,681 ) 11,300 Total liabilities and shareholders’ equity $ 23,560 $ 28,261 $ 26,409 $ (49,226 ) $ 29,004 Condensed Consolidating Balance Sheet As of June 30, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 18 $ 1,212 $ 5,124 $ — $ 6,354 Short-term investments — — 24 — 24 Accounts receivable, net — 1,247 701 — 1,948 Intercompany receivables 1,225 2,528 622 (4,375 ) — Inventories — 1,133 1,494 (286 ) 2,341 Other current assets 4 158 221 6 389 Total current assets 1,247 6,278 8,186 (4,655 ) 11,056 Property, plant and equipment, net — 1,124 1,909 — 3,033 Notes receivable and investments in Flash Ventures — — 1,340 — 1,340 Goodwill — 331 9,683 — 10,014 Other intangible assets, net — 11 3,812 — 3,823 Investments in consolidated subsidiaries 19,082 17,588 — (36,670 ) — Loans due from consolidated affiliates 4,700 16 — (4,716 ) — Other non-current assets 51 723 419 (599 ) 594 Total assets $ 25,080 $ 26,071 $ 25,349 $ (46,640 ) $ 29,860 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 257 $ 1,887 $ — $ 2,144 Accounts payable to Flash Ventures — — 206 — 206 Intercompany payables 270 4,039 66 (4,375 ) — Accrued expenses 270 360 439 — 1,069 Accrued compensation — 313 193 — 506 Accrued warranty — 4 182 — 186 Current portion of long-term debt 233 — — — 233 Total current liabilities 773 4,973 2,973 (4,375 ) 4,344 Long-term debt 12,889 — 29 — 12,918 Loans due to consolidated affiliates — 546 4,170 (4,716 ) — Other liabilities — 1,243 530 (593 ) 1,180 Total liabilities 13,662 6,762 7,702 (9,684 ) 18,442 Total shareholders’ equity 11,418 19,309 17,647 (36,956 ) 11,418 Total liabilities and shareholders’ equity $ 25,080 $ 26,071 $ 25,349 $ (46,640 ) $ 29,860 Condensed Consolidating Statement of Operations For the three months ended March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 3,685 $ 4,924 $ (3,596 ) $ 5,013 Cost of revenue — 3,209 3,499 (3,622 ) 3,086 Gross profit — 476 1,425 26 1,927 Operating expenses: Research and development — 361 241 — 602 Selling, general and administrative 3 264 109 — 376 Intercompany operating expense (income) (12 ) (391 ) 403 — — Employee termination, asset impairment, and other charges 1 9 25 — 35 Total operating expenses (8 ) 243 778 — 1,013 Operating income 8 233 647 26 914 Interest and other income (expense): Interest income 42 2 12 (40 ) 16 Interest expense (160 ) (5 ) (35 ) 40 (160 ) Other expense, net (894 ) (7 ) (7 ) 10 (898 ) Total interest and other expense, net (1,012 ) (10 ) (30 ) 10 (1,042 ) Income (loss) before taxes (1,004 ) 223 617 36 (128 ) Income tax expense (benefit) (228 ) 22 17 — (189 ) Equity in earnings from subsidiaries 837 562 — (1,399 ) — Net income $ 61 $ 763 $ 600 $ (1,363 ) $ 61 Condensed Consolidating Statement of Operations For the nine months ended March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 11,159 $ 15,178 $ (10,807 ) $ 15,530 Cost of revenue — 9,665 10,849 (10,837 ) 9,677 Gross profit — 1,494 4,329 30 5,853 Operating expenses: Research and development — 1,142 681 — 1,823 Selling, general and administrative 6 798 317 — 1,121 Intercompany operating expense (income) (12 ) (1,221 ) 1,233 — — Employee termination, asset impairment, and other charges 1 30 104 — 135 Total operating expenses (5 ) 749 2,335 — 3,079 Operating income 5 745 1,994 30 2,774 Interest and other income (expense): Interest income 189 6 38 (187 ) 46 Interest expense (561 ) (15 ) (173 ) 187 (562 ) Other income (expense), net (902 ) — (10 ) 10 (902 ) Total interest and other expense, net (1,274 ) (9 ) (145 ) 10 (1,418 ) Income (loss) before taxes (1,269 ) 736 1,849 40 1,356 Income tax expense (benefit) (319 ) 1,677 79 — 1,437 Equity in earnings from subsidiaries 869 1,747 — (2,616 ) — Net income (loss) $ (81 ) $ 806 $ 1,770 $ (2,576 ) $ (81 ) Condensed Consolidating Statement of Operations For the three months ended March 31, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 3,406 $ 4,333 $ (3,090 ) $ 4,649 Cost of revenue — 2,791 3,403 (3,068 ) 3,126 Gross profit — 615 930 (22 ) 1,523 Operating expenses: Research and development — 413 200 — 613 Selling, general and administrative 1 240 105 — 346 Intercompany operating expense (income) — (282 ) 282 — — Employee termination, asset impairment, and other charges — 30 9 — 39 Total operating expenses 1 401 596 — 998 Operating income (loss) (1 ) 214 334 (22 ) 525 Interest and other income (expense): Interest income 88 8 6 (95 ) 7 Interest expense (211 ) — (89 ) 95 (205 ) Other expense, net (9 ) (6 ) (8 ) — (23 ) Total interest and other income (expense), net (132 ) 2 (91 ) — (221 ) Income (loss) before taxes (133 ) 216 243 (22 ) 304 Income tax expense (benefit) (26 ) 56 26 — 56 Equity in earnings from subsidiaries 355 229 — (584 ) — Net income $ 248 $ 389 $ 217 $ (606 ) $ 248 Condensed Consolidating Statement of Operations For the nine months ended March 31, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 10,890 $ 12,871 $ (9,510 ) $ 14,251 Cost of revenue — 8,941 10,451 (9,532 ) 9,860 Gross profit — 1,949 2,420 22 4,391 Operating expenses: Research and development — 1,226 611 — 1,837 Selling, general and administrative 5 766 329 — 1,100 Intercompany operating expense (income) — (851 ) 851 — — Employee termination, asset impairment, and other charges — 88 64 — 152 Total operating expenses 5 1,229 1,855 — 3,089 Operating income (loss) (5 ) 720 565 22 1,302 Interest and other income (expense): Interest income 268 9 15 (275 ) 17 Interest expense (642 ) (5 ) (274 ) 275 (646 ) Other expense, net (283 ) (10 ) (26 ) — (319 ) Total interest and other expense, net (657 ) (6 ) (285 ) — (948 ) Income (loss) before taxes (662 ) 714 280 22 354 Income tax expense (benefit) (207 ) 177 267 — 237 Equity in earnings from subsidiaries 572 21 — (593 ) — Net income $ 117 $ 558 $ 13 $ (571 ) $ 117 Condensed Consolidating Statement of Comprehensive Income (Loss) For the three months ended March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 61 $ 763 $ 600 $ (1,363 ) $ 61 Other comprehensive income, before tax: Actuarial pension gain 1 1 1 (2 ) 1 Foreign currency translation adjustment 76 75 75 (150 ) 76 Net unrealized gain on derivative contracts 21 13 14 (27 ) 21 Net unrealized loss on available-for-sale securities (3 ) (3 ) (3 ) 6 (3 ) Total other comprehensive income, before tax 95 86 87 (173 ) 95 Income tax expense related to items of other comprehensive income (3 ) (2 ) (3 ) 5 (3 ) Other comprehensive income, net of tax 92 84 84 (168 ) 92 Total comprehensive income $ 153 $ 847 $ 684 $ (1,531 ) $ 153 Condensed Consolidating Statement of Comprehensive Income (Loss) For the nine months ended March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income (loss) $ (81 ) $ 806 $ 1,770 $ (2,576 ) $ (81 ) Other comprehensive income, before tax: Actuarial pension gain 1 1 1 (2 ) 1 Foreign currency translation adjustment 78 76 76 (152 ) 78 Net unrealized gain on derivative contracts 35 19 20 (39 ) 35 Net unrealized loss on available-for-sale securities (4 ) (4 ) (4 ) 8 (4 ) Total other comprehensive income, before tax 110 92 93 (185 ) 110 Income tax expense related to items of other comprehensive income (6 ) (2 ) (4 ) 6 (6 ) Other comprehensive income, net of tax 104 90 89 (179 ) 104 Total comprehensive income $ 23 $ 896 $ 1,859 $ (2,755 ) $ 23 Condensed Consolidating Statement of Comprehensive Income (Loss) For the three months ended March 31, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 248 $ 389 $ 217 $ (606 ) $ 248 Other comprehensive income, before tax: Actuarial pension gain 1 1 1 (2 ) 1 Foreign currency translation adjustment 58 58 58 (116 ) 58 Net unrealized gain on derivative contracts 45 42 41 (83 ) 45 Total other comprehensive income, before tax 104 101 100 (201 ) 104 Income tax expense related to items of other comprehensive income (3 ) (3 ) (2 ) 5 (3 ) Other comprehensive income, net of tax 101 98 98 (196 ) 101 Total comprehensive income $ 349 $ 487 $ 315 $ (802 ) $ 349 Condensed Consolidating Statement of Comprehensive Income (Loss) For the nine months ended March 31, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 117 $ 558 $ 13 $ (571 ) $ 117 Other comprehensive loss, before tax: Actuarial pension gain 7 7 7 (14 ) 7 Foreign currency translation adjustment (111 ) (111 ) (134 ) 245 (111 ) Net unrealized loss on derivative contracts (95 ) (98 ) (95 ) 193 (95 ) Total other comprehensive loss, before tax (199 ) (202 ) (222 ) 424 (199 ) Income tax benefit (expense) related to items of other comprehensive loss — — (1 ) 1 — Other comprehensive loss, net of tax (199 ) (202 ) (223 ) 425 (199 ) Total comprehensive income (loss) $ (82 ) $ 356 $ (210 ) $ (146 ) $ (82 ) Condensed Consolidating Statement of Cash Flows For the nine months ended March 30, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (130 ) $ 405 $ 3,284 $ (217 ) $ 3,342 Cash flows from investing activities Purchases of property, plant and equipment — (162 ) (481 ) — (643 ) Proceeds from the sale of property, plant and equipment — — 24 — 24 Acquisitions, net of cash acquired — (93 ) (6 ) — (99 ) Purchases of investments — (11 ) (55 ) — (66 ) Proceeds from sale of investments — — 39 — 39 Proceeds from maturities of investments — — 16 — 16 Notes receivable issuances to Flash Ventures — — (1,015 ) — (1,015 ) Notes receivable proceeds from Flash Ventures — — 308 — 308 Strategic investments and other, net — (1 ) 31 — 30 Intercompany loan from consolidated affiliates 3,295 — — (3,295 ) — Advances from (to) parent and consolidated affiliates (47 ) 47 — — — Net cash provided by (used in) investing activities 3,248 (220 ) (1,139 ) (3,295 ) (1,406 ) Cash flows from financing activities Issuance of stock under employee stock plans 146 — — — 146 Taxes paid on vested stock awards under employee stock plans (164 ) — — — (164 ) Repurchases of common stock (155 ) — — — (155 ) Dividends paid to shareholders (443 ) — — — (443 ) Settlement of debt hedge contracts 28 — — — 28 Repayment of debt and premiums (14,581 ) — — — (14,581 ) Proceeds from debt 11,384 — — — 11,384 Proceeds from revolving credit facility 500 — — — 500 Debt issuance costs (52 ) — — — (52 ) Intercompany loan to consolidated affiliates — (205 ) (3,090 ) 3,295 — Change in investment in consolidated subsidiaries 319 (463 ) (73 ) 217 — Net cash used in financing activities (3,018 ) (668 ) (3,163 ) 3,512 (3,337 ) Effect of exchange rate changes on cash — — 10 — 10 Net increase (decrease) in cash and cash equivalents 100 (483 ) (1,008 ) — (1,391 ) Cash and cash equivalents, beginning of year 18 1,212 5,124 — 6,354 Cash and cash equivalents, end of period $ 118 $ 729 $ 4,116 $ — $ 4,963 Condensed Consolidating Statement of Cash Flows For the nine months ended March 31, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (443 ) $ 617 $ 2,177 $ 147 $ 2,498 Cash flows from investing activities Purchases of property, plant and equipment — (185 ) (268 ) — (453 ) Proceeds from the sale of property, plant and equipment — — 21 — 21 Purchases of investments — — (274 ) — (274 ) Proceeds from sale of investments — — 75 — 75 Proceeds from maturities of investments — — 430 — 430 Investments in Flash Ventures — — (20 ) — (20 ) Notes receivable issuances to Flash Ventures — — (480 ) — (480 ) Notes receivable proceeds from Flash Ventures — — 276 — 276 Strategic investments and other, net — — (21 ) — (21 ) Intercompany loans from (to) consolidated affiliates 995 (258 ) — (737 ) — Advances from (to) consolidated affiliates 244 (236 ) — (8 ) — Net cash provided by (used in) investing activities 1,239 (679 ) (261 ) (745 ) (446 ) Cash flows from financing activities Issuance of stock under employee stock plans 123 — — — 123 Taxes paid on vested stock awards under employee stock plans (111 ) — — — (111 ) Excess tax benefits from employee stock plans 90 — — — 90 Proceeds from acquired call option — — 61 — 61 Dividends paid to shareholders (428 ) — — — (428 ) Repayment of debt and premiums (8,692 ) (2,995 ) (492 ) — (12,179 ) Proceeds from revolving credit facility — — — — — Proceeds from debt 7,908 — — — 7,908 Debt issuance costs (10 ) — — — (10 ) Intercompany loan to consolidated affiliates 298 (5,966 ) 4,931 737 — Change in investment in consolidated subsidiaries 296 8,673 (8,830 ) (139 ) — Net cash used in financing activities (526 ) (288 ) (4,330 ) 598 (4,546 ) Effect of exchange rate changes on cash — — (5 ) — (5 ) Net increase (decrease) in cash and cash equivalents 270 (350 ) (2,419 ) — (2,499 ) Cash and cash equivalents, beginning of year — 1,206 6,945 — 8,151 Cash and cash equivalents, end of period $ 270 $ 856 $ 4,526 $ — $ 5,652 |