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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2021
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-8703

https://cdn.kscope.io/cfb3b6de6903eb6ea48369c64715b62e-wdc-20210402_g1.jpg
WESTERN DIGITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware33-0956711
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
5601 Great Oaks ParkwaySan Jose,California95119
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (408) 717-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.01 Par Value Per ShareWDCThe Nasdaq Stock Market LLC
 (Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
As of the close of business on April 29, 2021, 306,452,886 shares of common stock, par value $0.01 per share, were outstanding.



WESTERN DIGITAL CORPORATION
INDEX

PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets — As of April 2, 2021 and July 3, 2020
Condensed Consolidated Statements of Operations — Three and Nine Months Ended April 2, 2021 and April 3, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended April 2, 2021 and April 3, 2020
Condensed Consolidated Statements of Cash Flows — Nine Months Ended April 2, 2021 and April 3, 2020
Condensed Consolidated Statements of Shareholders' Equity — Nine Months Ended April 2, 2021 and April 3, 2020
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 6.Exhibits

Unless otherwise indicated, references herein to specific years and quarters are to our fiscal years and fiscal quarters, and references to financial information are on a consolidated basis. As used herein, the terms “we,” “us,” “our,” the “Company,” “WDC” and “Western Digital” refer to Western Digital Corporation and its subsidiaries, unless we state, or the context indicates, otherwise.

WDC, a Delaware corporation, is the parent company of our data storage business. Our principal executive offices are located at 5601 Great Oaks Parkway, San Jose, California 95119. Our telephone number is (408) 717-6000.

Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital or its affiliates in the U.S. and/or other countries. All other trademarks, registered trademarks and/or service marks, indicated or otherwise, are the property of their respective owners.


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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “would,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, or the use of future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Examples of forward-looking statements include, but are not limited to, statements concerning:

expectations regarding the effects of the COVID-19 pandemic and measures intended to reduce its spread;
expectations regarding demand conditions, the ramp of our new products and the impact on our revenues;
expectations regarding our Flash Ventures joint venture with Kioxia Corporation, the flash industry and our flash wafer output plans;
expectations regarding the outcome of legal proceedings in which we are involved;
our reinvestment in the business and ongoing deleveraging efforts;
our beliefs regarding tax benefits and the timing of future payments, if any, relating to the unrecognized tax benefits, and the adequacy of our tax provisions;
expectations regarding capital investments and sources of funding for those investments; and
our beliefs regarding the sufficiency of our available liquidity to meet our working capital, debt and capital expenditure needs as well as any future dividend plans.

These forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are based on management’s current views and assumptions. They are conditioned upon and involve a number of risks, uncertainties and other factors that could cause actual results or performance to differ materially from those expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to:

future responses to and effects of the COVID-19 pandemic;
volatility in global economic conditions;
impact of business and market conditions;
impact of competitive products and pricing;
our development and introduction of products based on new technologies and expansion into new data storage markets;
risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and our strategic relationships;
difficulties or delays in manufacturing or other supply chain disruptions;
hiring and retention of key employees;
our substantial level of debt and other financial obligations;
changes to our relationships with key customers;
disruptions in operations from cyberattacks or other system security risks;
actions by competitors;
risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; and
the other risks and uncertainties disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 3, 2020 (the “2020 Annual Report on Form 10-K”).

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Table of Contents
You are urged to carefully review the disclosures we make concerning these risks and review the additional disclosures we make concerning material risks and other factors that may affect the outcome of our forward-looking statements and our business and operating results, including those made in Part I, Item 1A of our 2020 Annual Report on Form 10-K and any of those made in our other reports filed with the Securities and Exchange Commission, including under “Risk Factors” in Item 1A of subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that may from time to time amend, supplement or supersede the risks and uncertainties disclosed in the 2020 Annual Report on Form 10-K. You are cautioned not to place undue reliance on the forward-looking statements included in this Quarterly Report on Form 10-Q, which speak only as of the date of this document. We do not intend, and undertake no obligation, to update or revise these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.
5

Table of Contents
PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements (unaudited)

WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
April 2,
2021
July 3,
2020
ASSETS
Current assets:
Cash and cash equivalents$2,734 $3,048 
Accounts receivable, net1,905 2,379 
Inventories3,683 3,070 
Other current assets710 551 
Total current assets9,032 9,048 
Property, plant and equipment, net3,061 2,854 
Notes receivable and investments in Flash Ventures1,694 1,875 
Goodwill10,066 10,067 
Other intangible assets, net519 941 
Other non-current assets1,037 877 
Total assets$25,409 $25,662 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,807 $1,945 
Accounts payable to related parties397 407 
Accrued expenses1,552 1,296 
Accrued compensation494 472 
Current portion of long-term debt251 286 
Total current liabilities4,501 4,406 
Long-term debt8,678 9,289 
Other liabilities2,281 2,416 
Total liabilities15,460 16,111 
Commitments and contingencies (Notes 9, 10, 12 and 15)
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized — 5 shares; issued and outstanding — none
  
Common stock, $0.01 par value; authorized — 450 shares; issued — 312 shares; outstanding — 306 shares and 302 shares, respectively
3 3 
Additional paid-in capital3,603 3,717 
Accumulated other comprehensive loss(210)(157)
Retained earnings6,917 6,725 
Treasury stock — common shares at cost; 6 shares and 10 shares, respectively
(364)(737)
Total shareholders’ equity9,949 9,551 
Total liabilities and shareholders’ equity$25,409 $25,662 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months EndedNine Months Ended
April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Revenue, net$4,137 $4,175 $12,002 $12,449 
Cost of revenue3,046 3,170 9,047 9,751 
Gross profit1,091 1,005 2,955 2,698 
Operating expenses:
Research and development555 563 1,645 1,715 
Selling, general and administrative287 281 808 884 
Employee termination, asset impairment, and other charges(68)8 (43)25 
Total operating expenses774 852 2,410 2,624 
Operating income317 153 545 74 
Interest and other income (expense):
Interest income2 6 6 26 
Interest expense(81)(99)(246)(326)
Other income (expense), net11 (14)26 (5)
Total interest and other expense, net(68)(107)(214)(305)
Income (loss) before taxes249 46 331 (231)
Income tax expense52 29 132 167 
Net income (loss)$197 $17 $199 $(398)
Income (loss) per common share
Basic$0.64 $0.06 $0.65 $(1.34)
Diluted$0.63 $0.06 $0.65 $(1.34)
Weighted average shares outstanding:
Basic306 299 305 298 
Diluted313 303 308 298 
Cash dividends declared per share$ $0.50 $ $1.50 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(Unaudited)
Three Months EndedNine Months Ended
April 2,
2021
April 3,
2020
April 2,
2021
April 3,
2020
Net income (loss)$197 $17 $199 $(398)
Other comprehensive loss, before tax:
Actuarial pension gain2 1 4 4 
Foreign currency translation adjustment(95)(11)(29)(21)
Net unrealized loss on derivative contracts and available-for-sale securities(84)(76)(34)(115)
Total other comprehensive loss, before tax(177)(86)(59)(132)
Income tax benefit related to items of other comprehensive loss, before tax17 13 6 17 
Other comprehensive loss, net of tax(160)(73)(53)(115)
Total comprehensive income (loss)$37 $(56)$146 $(513)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended
April 2,
2021
April 3,
2020
Cash flows from operating activities
Net income (loss)$199 $(398)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization961 1,189 
Stock-based compensation239 232 
Deferred income taxes(41)(53)
Gain on disposal of assets(65)(9)
Amortization of debt discounts30 30 
Other non-cash operating activities, net(26)(8)
Changes in:
Accounts receivable, net474 (774)
Inventories(613)179 
Accounts payable(139)131 
Accounts payable to related parties(10)66 
Accrued expenses251 331 
Accrued compensation22 87 
Other assets and liabilities, net(378)(351)
Net cash provided by operating activities904 652 
Cash flows from investing activities
Purchases of property, plant and equipment(820)(432)
Proceeds from the sale of property, plant and equipment121  
Acquisitions, net of cash acquired (22)
Notes receivable issuances to Flash Ventures(490)(353)
Notes receivable proceeds from Flash Ventures619 980 
Strategic investments and other, net8 19 
Net cash provided by (used in) investing activities(562)192 
Cash flows from financing activities
Issuance of stock under employee stock plans71 79 
Taxes paid on vested stock awards under employee stock plans(51)(69)
Dividends paid to shareholders (445)
Repayment of debt(673)(919)
Other(9) 
Net cash used in financing activities(662)(1,354)
Effect of exchange rate changes on cash6 (2)
Net decrease in cash and cash equivalents(314)(512)
Cash and cash equivalents, beginning of year3,048 3,455 
Cash and cash equivalents, end of period$2,734 $2,943 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$301 $303 
Cash paid for interest$245 $327 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at July 3, 2020312 $3 (10)$(737)$3,717 $(157)$6,725 $9,551 
Net loss— — — — — — (60)(60)
Adoption of new accounting standards— — — — — — (7)(7)
Employee stock plans— — 2 216 (256)— — (40)
Stock-based compensation— — — — 76 — — 76 
Actuarial pension gain— — — — — 1 — 1 
Foreign currency translation adjustment— — — — — 32 — 32 
Net unrealized gain on derivative contracts— — — — — 23 — 23 
Balance at October 2, 2020312 3 (8)(521)3,537 (101)6,658 9,576 
Net income— — — — — — 62 62 
Employee stock plans— — 2 131 (71)— — 60 
Stock-based compensation— — — — 80 — — 80 
Actuarial pension gain— — — — — 1 — 1 
Foreign currency translation adjustment— — — — — 34 — 34 
Net unrealized loss on derivative contracts— — — — — 16 — 16 
Balance at January 1, 2021312 $3 (6)$(390)$3,546 $(50)$6,720 $9,829 
Net income— — — — — — 197 197 
Employee stock plans— —  26 (26)— —  
Stock-based compensation— — — — 83 — — 83 
Actuarial pension gain— — — — — 2 — 2 
Foreign currency translation adjustment— — — — — (95)— (95)
Net unrealized loss on derivative contracts— — — — — (67)— (67)
Balance at April 2, 2021312 $3 (6)$(364)$3,603 $(210)$6,917 $9,949 

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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)

Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at June 28, 2019312 $3 (17)$(1,268)$3,851 $(68)$7,449 $9,967 
Net loss— — — — — — (276)(276)
Adoption of new accounting standards— — — — — — (5)(5)
Employee stock plans— — 3 181 (207)— — (26)
Stock-based compensation— — — — 77 — — 77 
Dividends to shareholders— — — — 7 — (156)(149)
Actuarial pension gain— — — — — 1 — 1 
Foreign currency translation adjustment— — — — — 4 — 4 
Net unrealized loss on derivative contracts— — — — — (27)— (27)
Balance at October 4, 2019312 3 (14)(1,087)3,728 (90)7,012 9,566 
Net loss— — — — — — (139)(139)
Employee stock plans— — 1125(81)— — 44
Stock-based compensation— — — — 77— — 77
Dividends to shareholders— — — — 7— (156)(149)
Actuarial pension gain— — — — — 1 — 1
Foreign currency translation adjustment— — — — — (13)— (13)
Net unrealized loss on derivative contracts— — — — — (8)— (8)
Balance at January 3, 2020312 $3 (13)$(962)$3,731 $(110)$6,717 $9,379 
Net income— — — — — — 1717
Employee stock plans— — 164(72)— — (8)
Stock-based compensation— — — — 78— — 78
Dividends to shareholders— — — — 6— (156)(150)
Actuarial pension gain— — — — — 1— 1
Foreign currency translation adjustment— — — — — (