Separate Financial Information of Guarantor Subsidiaries | Separate Financial Information of Guarantor Subsidiaries The Company’s 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 June 28, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 8 $ 985 $ 2,462 $ — $ 3,455 Accounts receivable, net — 779 425 — 1,204 Intercompany receivables 2,409 5,808 1,581 (9,798 ) — Inventories — 990 2,438 (145 ) 3,283 Loans due from consolidated affiliates — — 50 (50 ) — Other current assets 2 251 282 — 535 Total current assets 2,419 8,813 7,238 (9,993 ) 8,477 Property, plant and equipment, net — 873 1,970 — 2,843 Notes receivable and investments in Flash Ventures — — 2,791 — 2,791 Goodwill — 388 9,688 — 10,076 Other intangible assets, net — 23 1,688 — 1,711 Investments in consolidated subsidiaries 20,772 16,355 — (37,127 ) — Loans due from consolidated affiliates — 674 — (674 ) — Other non-current assets 60 51 361 — 472 Total assets $ 23,251 $ 27,177 $ 23,736 $ (47,794 ) $ 26,370 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 195 $ 1,372 $ — $ 1,567 Accounts payable to related parties — — 331 — 331 Intercompany payables 1,871 3,515 4,412 (9,798 ) — Accrued expenses 195 522 579 — 1,296 Accrued compensation — 214 133 — 347 Loans due to consolidated affiliates — 50 — (50 ) — Current portion of long-term debt 276 — — — 276 Total current liabilities 2,342 4,496 6,827 (9,848 ) 3,817 Long-term debt 10,213 — 33 — 10,246 Loans due to consolidated affiliates 674 — — (674 ) — Other liabilities 55 1,795 490 — 2,340 Total liabilities 13,284 6,291 7,350 (10,522 ) 16,403 Total shareholders’ equity 9,967 20,886 16,386 (37,272 ) 9,967 Total liabilities and shareholders’ equity $ 23,251 $ 27,177 $ 23,736 $ (47,794 ) $ 26,370 Condensed Consolidating 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 year ended June 28, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 12,860 $ 17,189 $ (13,480 ) $ 16,569 Cost of revenue — 11,237 15,138 (13,558 ) 12,817 Gross profit — 1,623 2,051 78 3,752 Operating expenses: Research and development — 1,376 806 — 2,182 Selling, general and administrative 2 865 450 — 1,317 Intercompany operating expense (income) 16 (1,523 ) 1,507 — — Employee termination, asset impairment, and other charges — 85 81 — 166 Total operating expenses 18 803 2,844 — 3,665 Operating income (loss) (18 ) 820 (793 ) 78 87 Interest and other income (expense): Interest income 10 25 46 (24 ) 57 Interest expense (478 ) (9 ) (6 ) 24 (469 ) Other income (expense), net 1 (6 ) 43 — 38 Total interest and other income (expense), net (467 ) 10 83 — (374 ) Income (loss) before taxes (485 ) 830 (710 ) 78 (287 ) Equity in earnings from subsidiaries (418 ) (867 ) — 1,285 — Income tax expense (benefit) (149 ) 457 159 — 467 Net loss $ (754 ) $ (494 ) $ (869 ) $ 1,363 $ (754 ) Condensed Consolidating Statement of Operations For the year ended June 29, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 14,913 $ 20,155 $ (14,421 ) $ 20,647 Cost of revenue — 12,913 14,573 (14,544 ) 12,942 Gross profit — 2,000 5,582 123 7,705 Operating expenses: Research and development — 1,551 849 — 2,400 Selling, general and administrative 8 1,044 421 — 1,473 Intercompany operating expense (income) — (1,626 ) 1,626 — — Employee termination, asset impairment, and other charges 1 47 167 — 215 Total operating expenses 9 1,016 3,063 — 4,088 Operating income (loss) (9 ) 984 2,519 123 3,617 Interest and other income (expense): Interest income 211 8 51 (210 ) 60 Interest expense (674 ) (21 ) (191 ) 210 (676 ) Other expense, net (905 ) (9 ) (2 ) — (916 ) Total interest and other expense, net (1,368 ) (22 ) (142 ) — (1,532 ) Income (loss) before taxes (1,377 ) 962 2,377 123 2,085 Equity in earnings from subsidiaries 1,698 2,223 — (3,921 ) — Income tax expense (benefit) (354 ) 1,633 131 — 1,410 Net income $ 675 $ 1,552 $ 2,246 $ (3,798 ) $ 675 Condensed Consolidating Statement of Operations For the year ended June 30, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 14,732 $ 16,381 $ (12,020 ) $ 19,093 Cost of revenue — 12,786 12,203 (11,968 ) 13,021 Gross profit — 1,946 4,178 (52 ) 6,072 Operating expenses: Research and development — 1,619 822 — 2,441 Selling, general and administrative 6 1,006 433 — 1,445 Intercompany operating expense (income) — (1,736 ) 1,736 — — Employee termination, asset impairment, and other charges — 88 144 — 232 Total operating expenses 6 977 3,135 — 4,118 Operating income (loss) (6 ) 969 1,043 (52 ) 1,954 Interest and other income (expense): Interest income 347 11 22 (354 ) 26 Interest expense (843 ) (10 ) (348 ) 354 (847 ) Other income (expense), net (290 ) 49 (61 ) (62 ) (364 ) Total interest and other income (expense), net (786 ) 50 (387 ) (62 ) (1,185 ) Income (loss) before taxes (792 ) 1,019 656 (114 ) 769 Equity in earnings from subsidiaries 907 287 — (1,194 ) — Income tax expense (benefit) (282 ) 259 395 — 372 Net income $ 397 $ 1,047 $ 261 $ (1,308 ) $ 397 Condensed Consolidating Statement of Comprehensive Income (Loss) For the year ended June 28, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net loss $ (754 ) $ (494 ) $ (869 ) $ 1,363 $ (754 ) Other comprehensive income (loss), before tax: Actuarial pension loss (39 ) (39 ) (39 ) 78 (39 ) Foreign currency translation adjustment 28 31 31 (62 ) 28 Net unrealized gain (loss), on derivative contracts and available-for-sale securities (39 ) 40 38 (78 ) (39 ) Total other comprehensive income (loss), before tax (50 ) 32 30 (62 ) (50 ) Income tax benefit related to items of other comprehensive income (loss) 21 1 2 (3 ) 21 Other comprehensive income (loss), net of tax (29 ) 33 32 (65 ) (29 ) Total comprehensive loss $ (783 ) $ (461 ) $ (837 ) $ 1,298 $ (783 ) Condensed Consolidating Statement of Comprehensive Income (Loss) For the year ended June 29, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 675 $ 1,552 $ 2,246 $ (3,798 ) $ 675 Other comprehensive income, before tax: Actuarial pension loss (2 ) (2 ) (2 ) 4 (2 ) Foreign currency translation adjustment 18 15 15 (30 ) 18 Net unrealized gain on derivative contracts and available-for-sale securities 7 (10 ) (6 ) 16 7 Total other comprehensive income, before tax 23 3 7 (10 ) 23 Income tax benefit (expense) related to items of other comprehensive income (4 ) 1 (1 ) — (4 ) Other comprehensive income, net of tax 19 4 6 (10 ) 19 Total comprehensive income $ 694 $ 1,556 $ 2,252 $ (3,808 ) $ 694 Condensed Consolidating Statement of Comprehensive Income (Loss) For the year ended June 30, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 397 $ 1,047 $ 261 $ (1,308 ) $ 397 Other comprehensive loss, before tax: — Actuarial pension gain 39 39 39 (78 ) 39 Foreign currency translation adjustment (115 ) (113 ) (136 ) 249 (115 ) Net unrealized loss on derivative contracts and available-for-sale securities (75 ) (75 ) (73 ) 148 (75 ) Total other comprehensive loss, before tax (151 ) (149 ) (170 ) 319 (151 ) Income tax expense related to items of other comprehensive loss (10 ) (10 ) (8 ) 18 (10 ) Other comprehensive loss, net of tax (161 ) (159 ) (178 ) 337 (161 ) Total comprehensive income $ 236 $ 888 $ 83 $ (971 ) $ 236 Condensed Consolidating Statement of Cash Flows For the year ended June 28, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ 160 $ (1,286 ) $ 2,723 $ (50 ) $ 1,547 Cash flows from investing activities Purchases of property, plant and equipment — (250 ) (626 ) — (876 ) Proceeds from the sale of property, plant and equipment — 116 3 — 119 Purchases of investments — (11 ) (68 ) — (79 ) Proceeds from sale of investments — — 175 — 175 Proceeds from maturities of investments — — 7 — 7 Notes receivable issuances to Flash Ventures — — (1,364 ) — (1,364 ) Notes receivable proceeds from Flash Ventures — — 766 — 766 Strategic investments and other, net — 2 (22 ) — (20 ) Intercompany loan from (to) consolidated affiliates 943 (659 ) 1 (285 ) — Advances from (to) parent and consolidated affiliates (342 ) 342 — — — Net cash provided by (used in) investing activities 601 (460 ) (1,128 ) (285 ) (1,272 ) Cash flows from financing activities — Issuance of stock under employee stock plans 118 — — — 118 Taxes paid on vested stock awards under employee stock plans (115 ) — — — (115 ) Repurchases of common stock (563 ) — — — (563 ) Dividends paid to shareholders (584 ) — — — (584 ) Repayment of debt (181 ) — — — (181 ) Repayment of revolving credit facility (500 ) — — — (500 ) Debt issuance costs (4 ) — — — (4 ) Intercompany loan from (to) consolidated affiliates 674 (377 ) (582 ) 285 — Change in investment in consolidated subsidiaries 362 2,440 (2,852 ) 50 — Net cash provided by (used in) financing activities (793 ) 2,063 (3,434 ) 335 (1,829 ) Effect of exchange rate changes on cash — — 4 — 4 Net increase (decrease) in cash and cash equivalents (32 ) 317 (1,835 ) — (1,550 ) Cash and cash equivalents, beginning of year 40 668 4,297 — 5,005 Cash and cash equivalents, end of period $ 8 $ 985 $ 2,462 $ — $ 3,455 Condensed Consolidating Statement of Cash Flows For the year ended June 29, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (144 ) $ 211 $ 4,158 $ (20 ) $ 4,205 Cash flows from investing activities Purchases of property, plant and equipment — (220 ) (615 ) — (835 ) Proceeds from the sale of property, plant and equipment — — 26 — 26 Acquisitions, net of cash acquired — (94 ) (6 ) — (100 ) Purchases of investments — (21 ) (68 ) — (89 ) Proceeds from sale of investments — — 48 — 48 Proceeds from maturities of investments — — 19 — 19 Notes receivable issuances to Flash Ventures — — (1,313 ) — (1,313 ) Notes receivable proceeds from Flash Ventures — — 571 — 571 Strategic investments and other, net — (2 ) 20 — 18 Intercompany loan from consolidated affiliates 3,757 — — (3,757 ) — Advances from (to) parent and consolidated affiliates (86 ) 86 — — — Net cash provided by (used in) investing activities 3,671 (251 ) (1,318 ) (3,757 ) (1,655 ) Cash flows from financing activities Issuance of stock under employee stock plans 220 — — — 220 Taxes paid on vested stock awards under employee stock plans (171 ) — — — (171 ) Repurchases of common stock (591 ) — — — (591 ) Dividends paid to shareholders (593 ) — — — (593 ) Settlement of debt hedge contracts 28 — — — 28 Repayment of debt (17,074 ) — — — (17,074 ) Proceeds from debt 13,840 — — — 13,840 Proceeds from revolving credit facility 500 — — — 500 Debt issuance costs (59 ) — — — (59 ) Intercompany loan to consolidated affiliates — (119 ) (3,638 ) 3,757 — Change in investment in consolidated subsidiaries 395 (385 ) (30 ) 20 — Net cash used in financing activities (3,505 ) (504 ) (3,668 ) 3,777 (3,900 ) Effect of exchange rate changes on cash — — 1 — 1 Net increase (decrease) in cash and cash equivalents 22 (544 ) (827 ) — (1,349 ) Cash and cash equivalents, beginning of year 18 1,212 5,124 — 6,354 Cash and cash equivalents, end of year $ 40 $ 668 $ 4,297 $ — $ 5,005 Condensed Consolidating Statement of Cash Flows For the year ended June 30, 2017 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (360 ) $ (836 ) $ 4,593 $ 40 $ 3,437 Cash flows from investing activities Purchases of property, plant and equipment — (240 ) (338 ) — (578 ) Proceeds from the sale of property, plant and equipment — — 21 — 21 Purchases of investments — — (281 ) — (281 ) Proceeds from sale of investments — — 94 — 94 Proceeds from maturities of investments — — 417 — 417 Investments in Flash Ventures — — (20 ) — (20 ) Notes receivable issuances to Flash Ventures — — (549 ) — (549 ) Notes receivable proceeds from Flash Ventures — — 292 — 292 Strategic investments and other, net — (1 ) (31 ) — (32 ) Intercompany loans from consolidated affiliates 1,300 39 — (1,339 ) — Advances from (to) consolidated affiliates (158 ) 166 — (8 ) — Net cash provided by (used in) investing activities 1,142 (36 ) (395 ) (1,347 ) (636 ) Cash flows from financing activities Issuance of stock under employee stock plans 235 — — — 235 Taxes paid on vested stock awards under employee stock plans (124 ) — — — (124 ) Excess tax benefits from employee stock plans 119 — — — 119 Proceeds from acquired call option — — 61 — 61 Settlement of convertible debt — — (492 ) — (492 ) Dividends paid to shareholders (574 ) — — — (574 ) Settlement of debt hedge contracts — (21 ) — — (21 ) Repayment of debt (8,702 ) (2,995 ) — — (11,697 ) Proceeds from debt 7,908 — — — 7,908 Debt issuance costs (10 ) — — — (10 ) Intercompany loan to consolidated affiliates — (5,454 ) 4,115 1,339 — Change in investment in consolidated subsidiaries 384 9,348 (9,700 ) (32 ) — Net cash provided by (used in) financing activities (764 ) 878 (6,016 ) 1,307 (4,595 ) Effect of exchange rate changes on cash — — (3 ) — (3 ) Net increase (decrease) in cash and cash equivalents 18 6 (1,821 ) — (1,797 ) Cash and cash equivalents, beginning of year — 1,206 6,945 — 8,151 Cash and cash equivalents, end of year 18 1,212 5,124 — 6,354 |