Separate Financial Information of Guarantor Subsidiaries | Separate Financial Information of Guarantor Subsidiaries The Company’s senior unsecured notes due 2026 (the “2026 Senior Unsecured Notes”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, subject to certain customary guarantor release conditions, by certain 100% owned material domestic subsidiaries of the Company (or the “Guarantor Subsidiaries”). The guarantee by a Guarantor Subsidiary will be released in the event of (i) the release of a Guarantor Subsidiary from its guarantee of indebtedness under the credit agreement 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 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 9 $ 1,019 $ 2,654 $ — $ 3,682 Accounts receivable, net — 645 578 — 1,223 Intercompany receivables 2,602 5,564 1,924 (10,090 ) — Inventories — 1,115 2,517 (192 ) 3,440 Loans due from consolidated affiliates — — 50 (50 ) — Other current assets 11 273 273 — 557 Total current assets 2,622 8,616 7,996 (10,332 ) 8,902 Property, plant and equipment, net — 1,038 1,993 — 3,031 Notes receivable and investments in Flash Ventures — — 2,403 — 2,403 Goodwill — 388 9,687 — 10,075 Other intangible assets, net — 27 1,891 — 1,918 Investments in consolidated subsidiaries 20,540 16,822 — (37,362 ) — Loans due from consolidated affiliates — 557 — (557 ) — Other non-current assets 56 49 479 — 584 Total assets $ 23,218 $ 27,497 $ 24,449 $ (48,251 ) $ 26,913 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 216 $ 1,361 $ — $ 1,577 Accounts payable to related parties — — 312 — 312 Intercompany payables 1,704 3,969 4,417 (10,090 ) — Accrued expenses 169 614 862 — 1,645 Accrued compensation — 264 138 — 402 Loans due to consolidated affiliates — 50 — (50 ) — Current portion of long-term debt 276 — — — 276 Total current liabilities 2,149 5,113 7,090 (10,140 ) 4,212 Long-term debt 10,277 — 32 — 10,309 Loans due to consolidated affiliates 541 — 16 (557 ) — Other liabilities 37 1,684 457 — 2,178 Total liabilities 13,004 6,797 7,595 (10,697 ) 16,699 Total shareholders’ equity 10,214 20,700 16,854 (37,554 ) 10,214 Total liabilities and shareholders’ equity $ 23,218 $ 27,497 $ 24,449 $ (48,251 ) $ 26,913 Condensed Consolidating Balance Sheet As of June 29, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 40 $ 668 $ 4,297 $ — $ 5,005 Accounts receivable, net — 1,358 839 — 2,197 Intercompany receivables 1,903 4,256 2,674 (8,833 ) — Inventories — 990 2,159 (205 ) 2,944 Other current assets 20 195 277 — 492 Total current assets 1,963 7,467 10,246 (9,038 ) 10,638 Property, plant and equipment, net — 1,092 2,003 — 3,095 Notes receivable and investments in Flash Ventures — — 2,105 — 2,105 Goodwill — 387 9,688 — 10,075 Other intangible assets, net — 38 2,642 — 2,680 Investments in consolidated subsidiaries 20,847 19,893 — (40,740 ) — Loans due from consolidated affiliates 943 16 — (959 ) — Other non-current assets 182 29 431 — 642 Total assets $ 23,935 $ 28,922 $ 27,115 $ (50,737 ) $ 29,235 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 279 $ 1,986 $ — $ 2,265 Accounts payable to related parties — — 259 — 259 Intercompany payables 1,066 4,648 3,119 (8,833 ) — Accrued expenses 198 505 571 — 1,274 Accrued compensation — 297 182 — 479 Current portion of long-term debt 179 — — — 179 Total current liabilities 1,443 5,729 6,117 (8,833 ) 4,456 Long-term debt 10,962 — 31 — 10,993 Loans due to consolidated affiliates — 427 532 (959 ) — Other liabilities (1 ) 1,768 488 — 2,255 Total liabilities 12,404 7,924 7,168 (9,792 ) 17,704 Total shareholders’ equity 11,531 20,998 19,947 (40,945 ) 11,531 Total liabilities and shareholders’ equity $ 23,935 $ 28,922 $ 27,115 $ (50,737 ) $ 29,235 Condensed Consolidating Statement of Operations For the three months ended March 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 3,054 $ 3,817 $ (3,197 ) $ 3,674 Cost of revenue — 2,655 3,667 (3,227 ) 3,095 Gross profit — 399 150 30 579 Operating expenses: Research and development — 359 185 — 544 Selling, general and administrative 1 199 153 — 353 Intercompany operating expense (income) — (394 ) 394 — — Employee termination, asset impairment, and other charges — 42 34 — 76 Total operating expenses 1 206 766 — 973 Operating income (loss) (1 ) 193 (616 ) 30 (394 ) Interest and other income (expense): Interest income — 5 11 (3 ) 13 Interest expense (119 ) (1 ) (1 ) 3 (118 ) Other income, net — — 22 — 22 Total interest and other income (expense), net (119 ) 4 32 — (83 ) Income (loss) before taxes (120 ) 197 (584 ) 30 (477 ) Equity in earnings from subsidiaries (558 ) (732 ) — 1,290 — Income tax expense (benefit) (97 ) 52 149 — 104 Net loss $ (581 ) $ (587 ) $ (733 ) $ 1,320 $ (581 ) Condensed Consolidating Statement of Operations For the nine months ended March 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 9,931 $ 13,670 $ (10,666 ) $ 12,935 Cost of revenue — 8,602 11,706 (10,660 ) 9,648 Gross profit — 1,329 1,964 (6 ) 3,287 Operating expenses: Research and development — 1,056 603 — 1,659 Selling, general and administrative 2 664 352 — 1,018 Intercompany operating expense (income) — (1,148 ) 1,148 — — Employee termination, asset impairment, and other charges — 80 62 — 142 Total operating expenses 2 652 2,165 — 2,819 Operating income (loss) (2 ) 677 (201 ) (6 ) 468 Interest and other income (expense): Interest income 10 12 35 (14 ) 43 Interest expense (353 ) (9 ) (4 ) 14 (352 ) Other income (expense), net 1 (2 ) 29 — 28 Total interest and other income (expense), net (342 ) 1 60 — (281 ) Income (loss) before taxes (344 ) 678 (141 ) (6 ) 187 Equity in earnings from subsidiaries (551 ) (520 ) — 1,071 — Income tax expense (benefit) (338 ) 702 380 — 744 Net loss $ (557 ) $ (544 ) $ (521 ) $ 1,065 $ (557 ) 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 ) Equity in earnings from subsidiaries 837 562 — (1,399 ) — Income tax expense (benefit) (228 ) 22 17 — (189 ) 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 Equity in earnings from subsidiaries 869 1,747 — (2,616 ) — Income tax expense (benefit) (319 ) 1,677 79 — 1,437 Net income (loss) $ (81 ) $ 806 $ 1,770 $ (2,576 ) $ (81 ) Condensed Consolidating Statement of Comprehensive Income (Loss) For the three months ended March 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net loss $ (581 ) $ (587 ) $ (733 ) $ 1,320 $ (581 ) Other comprehensive income (loss), before tax: Actuarial pension gain — — — — — Foreign currency translation adjustment (2 ) (2 ) (2 ) 4 (2 ) Net unrealized gain (loss), on derivative contracts and available-for-sale securities (24 ) 1 1 (2 ) (24 ) Total other comprehensive income (loss), before tax (26 ) (1 ) (1 ) 2 (26 ) Income tax benefit (expense) related to items of other comprehensive income (loss) 5 — — 1 6 Other comprehensive income (loss), net of tax (21 ) (1 ) (1 ) 3 (20 ) Total comprehensive loss $ (602 ) $ (588 ) $ (734 ) $ 1,323 $ (601 ) Condensed Consolidating Statement of Comprehensive Income (Loss) For the nine months ended March 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net loss $ (557 ) $ (544 ) $ (521 ) $ 1,065 $ (557 ) Other comprehensive income (loss), before tax: Actuarial pension gain 1 1 1 (2 ) 1 Foreign currency translation adjustment (8 ) (4 ) (4 ) 8 (8 ) Net unrealized gain (loss), on derivative contracts and available-for-sale securities (18 ) 23 21 (44 ) (18 ) Total other comprehensive income (loss), before tax (25 ) 20 18 (38 ) (25 ) Income tax benefit (expense) related to items of other comprehensive income (loss) 9 (2 ) (1 ) 3 9 Other comprehensive income (loss), net of tax (16 ) 18 17 (35 ) (16 ) Total comprehensive loss $ (573 ) $ (526 ) $ (504 ) $ 1,030 $ (573 ) 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 and available-for-sale securities 18 10 11 (21 ) 18 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 and available-for-sale securities 31 15 16 (31 ) 31 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 Cash Flows For the nine months ended March 29, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ 87 $ (1,115 ) $ 2,461 $ (55 ) $ 1,378 Cash flows from investing activities Purchases of property, plant and equipment — (198 ) (524 ) — (722 ) Proceeds from the sale of property, plant and equipment — — 3 — 3 Purchases of investments — (11 ) (58 ) — (69 ) Proceeds from sale of investments — — 49 — 49 Proceeds from maturities of investments — — 7 — 7 Notes receivable issuances to Flash Ventures — — (858 ) — (858 ) Notes receivable proceeds from Flash Ventures — — 570 — 570 Strategic investments and other, net — 1 (23 ) — (22 ) Intercompany loan from (to) consolidated affiliates 943 (541 ) — (402 ) — Advances from (to) parent and consolidated affiliates (243 ) 243 — — — Net cash provided by (used in) investing activities 700 (506 ) (834 ) (402 ) (1,042 ) Cash flows from financing activities — Issuance of stock under employee stock plans 66 — — — 66 Taxes paid on vested stock awards under employee stock plans (109 ) — — — (109 ) Repurchases of common stock (563 ) — — — (563 ) Repayment of revolving credit facility — — — — — Dividends paid to shareholders (438 ) — — — (438 ) Repayment of debt (113 ) — — — (113 ) Proceeds from (repayment of) revolving credit facility (500 ) — — — (500 ) Intercompany loan from (to) consolidated affiliates 541 (377 ) (566 ) 402 — Change in investment in consolidated subsidiaries 298 2,349 (2,702 ) 55 — Net cash provided by (used in) financing activities (818 ) 1,972 (3,268 ) 457 (1,657 ) Effect of exchange rate changes on cash — — (2 ) — (2 ) Net increase (decrease) in cash and cash equivalents (31 ) 351 (1,643 ) — (1,323 ) Cash and cash equivalents, beginning of year 40 668 4,297 — 5,005 Cash and cash equivalents, end of period $ 9 $ 1,019 $ 2,654 $ — $ 3,682 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 (14,581 ) — — — (14,581 ) Proceeds from debt 11,384 — — — 11,384 Proceeds from (repayment of) 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 |