Separate Financial Information of Guarantor Subsidiaries | Separate Financial Information of Guarantor Subsidiaries The Company’s 4.750% senior unsecured notes due 2026 (the “2026 Senior Unsecured Notes”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, subject to certain customary guarantor release conditions, by certain 100% owned material domestic subsidiaries of the Company (or the “Guarantor Subsidiaries”). The guarantee by a Guarantor Subsidiary will be released in the event of (i) the release of a Guarantor Subsidiary from its guarantee of indebtedness under the credit agreement governing the revolving credit facility and term loans or other indebtedness that would have required the Guarantor Subsidiary to guarantee the 2026 Senior Unsecured Notes, (ii) the sale, issuance or other disposition of capital stock of a Guarantor Subsidiary such that it is no longer a restricted subsidiary under the indenture governing the 2026 Senior Unsecured Notes, (iii) the sale of all or substantially all of a Guarantor Subsidiary’s assets, (iv) the Company’s exercise of its defeasance options under the indenture governing the 2026 Senior Unsecured Notes, (v) the dissolution or liquidation of a Guarantor Subsidiary or (vi) the sale of all the equity interest in a Guarantor Subsidiary. The Company’s other domestic subsidiaries and its foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) do not guarantee the 2026 Senior Unsecured Notes. The following condensed consolidating financial information reflects the summarized financial information of Western Digital Corporation (“Parent”), the Guarantor Subsidiaries on a combined basis, and the Non-Guarantor Subsidiaries on a combined basis. Condensed Consolidating Balance Sheet As of October 4, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) ASSETS Current assets: Cash and cash equivalents $ 7 $ 579 $ 2,662 $ — $ 3,248 Accounts receivable, net — 1,031 417 — 1,448 Intercompany receivables 2,514 6,248 1,738 (10,500 ) — Inventories — 797 2,602 (112 ) 3,287 Loans due from consolidated affiliates — — 58 (58 ) — Other current assets — 263 254 — 517 Total current assets 2,521 8,918 7,731 (10,670 ) 8,500 Property, plant and equipment, net — 857 1,939 — 2,796 Notes receivable and investments in Flash Ventures — — 2,629 — 2,629 Goodwill — 390 9,700 — 10,090 Other intangible assets, net — 19 1,495 — 1,514 Investments in consolidated subsidiaries 20,616 15,884 — (36,500 ) — Loans due from consolidated affiliates — 1,164 — (1,164 ) — Other non-current assets 58 237 456 — 751 Total assets $ 23,195 $ 27,469 $ 23,950 $ (48,334 ) $ 26,280 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ 166 $ 1,558 $ — $ 1,724 Accounts payable to related parties — 42 465 — 507 Intercompany payables 2,067 3,702 4,731 (10,500 ) — Accrued expenses 174 689 511 — 1,374 Accrued compensation — 263 169 — 432 Loans due to consolidated affiliates — 58 — (58 ) — Current portion of long-term debt 251 — — — 251 Total current liabilities 2,492 4,920 7,434 (10,558 ) 4,288 Long-term debt 9,927 — 34 — 9,961 Loans due to consolidated affiliates 1,141 — 23 (1,164 ) — Other liabilities 69 1,853 543 — 2,465 Total liabilities 13,629 6,773 8,034 (11,722 ) 16,714 Total shareholders’ equity 9,566 20,696 15,916 (36,612 ) 9,566 Total liabilities and shareholders’ equity $ 23,195 $ 27,469 $ 23,950 $ (48,334 ) $ 26,280 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 Statement of Operations For the three months ended October 4, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 3,361 $ 3,984 $ (3,305 ) $ 4,040 Cost of revenue — 2,952 3,690 (3,360 ) 3,282 Gross profit — 409 294 55 758 Operating expenses: Research and development — 364 210 — 574 Selling, general and administrative 1 203 101 — 305 Intercompany operating expense (income) 3 (425 ) 422 — — Employee termination, asset impairment, and other charges — — 8 — 8 Total operating expenses 4 142 741 — 887 Operating income (loss) (4 ) 267 (447 ) 55 (129 ) Interest and other income (expense): Interest income — 12 10 (10 ) 12 Interest expense (131 ) — (1 ) 10 (122 ) Other income, net — — 2 — 2 Total interest and other income (expense), net (131 ) 12 11 — (108 ) Income (loss) before taxes (135 ) 279 (436 ) 55 (237 ) Equity in earnings from subsidiaries (164 ) (460 ) — 624 — Income tax expense (benefit) (23 ) 39 23 — 39 Net loss $ (276 ) $ (220 ) $ (459 ) $ 679 $ (276 ) Condensed Consolidating Statement of Operations For the three months ended September 28, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Revenue, net $ — $ 3,485 $ 4,996 $ (3,453 ) $ 5,028 Cost of revenue — 3,005 3,824 (3,465 ) 3,364 Gross profit — 480 1,172 12 1,664 Operating expenses: Research and development — 363 213 — 576 Selling, general and administrative 1 251 104 — 356 Intercompany operating expense (income) — (407 ) 407 — — Employee termination, asset impairment, and other charges — 32 14 — 46 Total operating expenses 1 239 738 — 978 Operating income (loss) (1 ) 241 434 12 686 Interest and other income (expense): Interest income 8 3 12 (8 ) 15 Interest expense (116 ) (6 ) (2 ) 8 (116 ) Other income (expense), net 1 — (1 ) (2 ) (2 ) Total interest and other income (expense), net (107 ) (3 ) 9 (2 ) (103 ) Income (loss) before taxes (108 ) 238 443 10 583 Equity in earnings from subsidiaries 475 345 — (820 ) — Income tax expense (benefit) (144 ) 118 98 — 72 Net income $ 511 $ 465 $ 345 $ (810 ) $ 511 Condensed Consolidating Statement of Comprehensive Income (Loss) For the three months ended October 4, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net loss $ (276 ) $ (220 ) $ (459 ) $ 679 $ (276 ) Other comprehensive loss, before tax: Actuarial pension gain 1 1 1 (2 ) 1 Foreign currency translation adjustment 5 5 5 (10 ) 5 Net unrealized loss, on derivative contracts and available-for-sale securities (33 ) (8 ) (9 ) 17 (33 ) Total other comprehensive loss, before tax (27 ) (2 ) (3 ) 5 (27 ) Income tax benefit (expense) related to items of other comprehensive loss 5 (1 ) (1 ) 2 5 Other comprehensive loss, net of tax (22 ) (3 ) (4 ) 7 (22 ) Total comprehensive loss $ (298 ) $ (223 ) $ (463 ) $ 686 $ (298 ) Condensed Consolidating Statement of Comprehensive Income (Loss) For the three months ended September 28, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Net income $ 511 $ 465 $ 345 $ (810 ) $ 511 Other comprehensive loss, before tax: Foreign currency translation adjustment (37 ) (34 ) (34 ) 68 (37 ) Net unrealized loss, on derivative contracts and available-for-sale securities (1 ) (8 ) (10 ) 18 (1 ) Total other comprehensive loss, before tax (38 ) (42 ) (44 ) 86 (38 ) Income tax benefit related to items of other comprehensive loss 1 — 1 (1 ) 1 Other comprehensive loss, net of tax (37 ) (42 ) (43 ) 85 (37 ) Total comprehensive income $ 474 $ 423 $ 302 $ (725 ) $ 474 Condensed Consolidating Statement of Cash Flows For the three months ended October 4, 2019 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (178 ) $ 204 $ 200 $ 27 $ 253 Cash flows from investing activities Purchases of property, plant and equipment — (46 ) (99 ) — (145 ) Acquisitions, net of cash acquired — (2 ) (20 ) — (22 ) Notes receivable issuances to Flash Ventures — — (171 ) — (171 ) Notes receivable proceeds from Flash Ventures — — 357 — 357 Strategic investments and other, net — — 15 — 15 Intercompany loan from (to) consolidated affiliates — (490 ) (8 ) 498 — Advances from (to) parent and consolidated affiliates 126 (126 ) — — — Net cash provided by (used in) investing activities 126 (664 ) 74 498 34 Cash flows from financing activities — Issuance of stock under employee stock plans 26 — — — 26 Taxes paid on vested stock awards under employee stock plans (52 ) — — — (52 ) Dividends paid to shareholders (147 ) — — — (147 ) Repayment of debt (319 ) — — — (319 ) Intercompany loan from (to) consolidated affiliates 467 8 23 (498 ) — Change in investment in consolidated subsidiaries 76 46 (95 ) (27 ) — Net cash provided by (used in) financing activities 51 54 (72 ) (525 ) (492 ) Effect of exchange rate changes on cash — — (2 ) — (2 ) Net increase (decrease) in cash and cash equivalents (1 ) (406 ) 200 — (207 ) Cash and cash equivalents, beginning of year 8 985 2,462 — 3,455 Cash and cash equivalents, end of period $ 7 $ 579 $ 2,662 $ — $ 3,248 Condensed Consolidating Statement of Cash Flows For the three months ended September 28, 2018 Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total (in millions) Cash flows from operating activities Net cash provided by (used in) operating activities $ (101 ) $ (691 ) $ 1,244 $ 253 $ 705 Cash flows from investing activities Purchases of property, plant and equipment — (63 ) (214 ) — (277 ) Purchases of investments — (2 ) (9 ) — (11 ) Proceeds from sale of investments — — 6 — 6 Proceeds from maturities of investments — — 3 — 3 Notes receivable issuances to Flash Ventures — — (115 ) — (115 ) Notes receivable proceeds from Flash Ventures — — 144 — 144 Strategic investments and other, net — — (9 ) — (9 ) Intercompany loan from (to) consolidated affiliates 696 — — (696 ) — Advances from (to) parent and consolidated affiliates 97 (97 ) — — — Net cash provided by (used in) investing activities 793 (162 ) (194 ) (696 ) (259 ) Cash flows from financing activities Issuance of stock under employee stock plans 8 — — — 8 Taxes paid on vested stock awards under employee stock plans (66 ) — — — (66 ) Repurchases of common stock (563 ) — — — (563 ) Dividends paid to shareholders (148 ) — — — (148 ) Repayment of debt (38 ) — — — (38 ) Intercompany loan from (to) consolidated affiliates — (180 ) (516 ) 696 — Change in investment in consolidated subsidiaries 80 1,426 (1,253 ) (253 ) — Net cash provided by (used in) financing activities (727 ) 1,246 (1,769 ) 443 (807 ) Effect of exchange rate changes on cash — — 2 — 2 Net increase (decrease) in cash and cash equivalents (35 ) 393 (717 ) — (359 ) Cash and cash equivalents, beginning of year 40 668 4,297 — 5,005 Cash and cash equivalents, end of period $ 5 $ 1,061 $ 3,580 $ — $ 4,646 |