|
|
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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Delaware
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33-0956711
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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|
|
3355 Michelson Drive, Suite 100
Irvine, California
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92612
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
|
¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
|
¨
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PAGE NO.
|
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|
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|
|
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|
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January 1,
2016 |
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July 3,
2015 |
||||
ASSETS
|
|||||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,363
|
|
|
$
|
5,024
|
|
Short-term investments
|
497
|
|
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262
|
|
||
Accounts receivable, net
|
1,650
|
|
|
1,532
|
|
||
Inventories
|
1,238
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|
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1,368
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|
||
Other current assets
|
200
|
|
|
331
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|
||
Total current assets
|
8,948
|
|
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8,517
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|
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Property, plant and equipment, net
|
2,801
|
|
|
2,965
|
|
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Goodwill
|
2,766
|
|
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2,766
|
|
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Other intangible assets, net
|
292
|
|
|
332
|
|
||
Other non-current assets
|
659
|
|
|
601
|
|
||
Total assets
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$
|
15,466
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|
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$
|
15,181
|
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LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
1,806
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|
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$
|
1,881
|
|
Accrued expenses
|
505
|
|
|
470
|
|
||
Accrued compensation
|
315
|
|
|
330
|
|
||
Accrued warranty
|
144
|
|
|
150
|
|
||
Accrued arbitration award
|
32
|
|
|
—
|
|
||
Revolving credit facility
|
255
|
|
|
255
|
|
||
Current portion of long-term debt
|
188
|
|
|
156
|
|
||
Total current liabilities
|
3,245
|
|
|
3,242
|
|
||
Long-term debt
|
2,062
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|
2,156
|
|
||
Other liabilities
|
602
|
|
|
564
|
|
||
Total liabilities
|
5,909
|
|
|
5,962
|
|
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Commitments and contingencies (Notes 4, 5, and 6)
|
|
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|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $.01 par value; authorized — 5 shares; issued and outstanding — none
|
—
|
|
|
—
|
|
||
Common stock, $.01 par value; authorized — 450 shares; issued — 261 shares; outstanding — 232 and 230 shares, respectively
|
3
|
|
|
3
|
|
||
Additional paid-in capital
|
2,421
|
|
|
2,428
|
|
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Accumulated other comprehensive loss
|
(8
|
)
|
|
(20
|
)
|
||
Retained earnings
|
9,407
|
|
|
9,107
|
|
||
Treasury stock — common shares at cost; 29 and 31 shares, respectively
|
(2,266
|
)
|
|
(2,299
|
)
|
||
Total shareholders’ equity
|
9,557
|
|
|
9,219
|
|
||
Total liabilities and shareholders’ equity
|
$
|
15,466
|
|
|
$
|
15,181
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||
Revenue, net
|
$
|
3,317
|
|
|
$
|
3,888
|
|
|
$
|
6,677
|
|
|
$
|
7,831
|
|
Cost of revenue
|
2,411
|
|
|
2,778
|
|
|
4,816
|
|
|
5,572
|
|
||||
Gross profit
|
906
|
|
|
1,110
|
|
|
1,861
|
|
|
2,259
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
389
|
|
|
426
|
|
|
774
|
|
|
863
|
|
||||
Selling, general and administrative
|
207
|
|
|
164
|
|
|
399
|
|
|
384
|
|
||||
Charges related to arbitration award
|
32
|
|
|
1
|
|
|
32
|
|
|
15
|
|
||||
Employee termination, asset impairment and other charges
|
27
|
|
|
53
|
|
|
83
|
|
|
62
|
|
||||
Total operating expenses
|
655
|
|
|
644
|
|
|
1,288
|
|
|
1,324
|
|
||||
Operating income
|
251
|
|
|
466
|
|
|
573
|
|
|
935
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest and other income
|
6
|
|
|
4
|
|
|
11
|
|
|
8
|
|
||||
Interest and other expense
|
(13
|
)
|
|
(12
|
)
|
|
(26
|
)
|
|
(25
|
)
|
||||
Total other expense, net
|
(7
|
)
|
|
(8
|
)
|
|
(15
|
)
|
|
(17
|
)
|
||||
Income before income taxes
|
244
|
|
|
458
|
|
|
558
|
|
|
918
|
|
||||
Income tax expense (benefit)
|
(7
|
)
|
|
20
|
|
|
24
|
|
|
57
|
|
||||
Net income
|
$
|
251
|
|
|
$
|
438
|
|
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$
|
534
|
|
|
$
|
861
|
|
Income per common share:
|
|
|
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|
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|
|
||||||||
Basic
|
$
|
1.08
|
|
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$
|
1.88
|
|
|
$
|
2.31
|
|
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$
|
3.70
|
|
Diluted
|
$
|
1.07
|
|
|
$
|
1.84
|
|
|
$
|
2.28
|
|
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$
|
3.60
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
232
|
|
|
233
|
|
|
231
|
|
|
233
|
|
||||
Diluted
|
234
|
|
|
238
|
|
|
234
|
|
|
239
|
|
||||
Cash dividends declared per share
|
$
|
0.50
|
|
|
$
|
0.40
|
|
|
$
|
1.00
|
|
|
$
|
0.80
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||
Net income
|
$
|
251
|
|
|
$
|
438
|
|
|
$
|
534
|
|
|
$
|
861
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Net unrealized gain (loss) on foreign exchange contracts
|
38
|
|
|
(18
|
)
|
|
13
|
|
|
(44
|
)
|
||||
Net unrealized loss on available-for-sale securities
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Other comprehensive income (loss), net of tax
|
36
|
|
|
(18
|
)
|
|
12
|
|
|
(44
|
)
|
||||
Total comprehensive income
|
$
|
287
|
|
|
$
|
420
|
|
|
$
|
546
|
|
|
$
|
817
|
|
|
Six Months Ended
|
||||||
|
January 1,
2016 |
|
January 2,
2015 |
||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
534
|
|
|
$
|
861
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
||||
Depreciation and amortization
|
488
|
|
|
579
|
|
||
Stock-based compensation
|
79
|
|
|
80
|
|
||
Deferred income taxes
|
15
|
|
|
31
|
|
||
Gain from insurance recovery
|
—
|
|
|
(37
|
)
|
||
Loss on disposal of assets
|
6
|
|
|
12
|
|
||
Non-cash portion of employee termination, asset impairment and other charges
|
18
|
|
|
19
|
|
||
Changes in:
|
|
|
|
||||
Accounts receivable, net
|
(118
|
)
|
|
109
|
|
||
Inventories
|
127
|
|
|
(56
|
)
|
||
Accounts payable
|
(58
|
)
|
|
94
|
|
||
Accrued arbitration award
|
32
|
|
|
(758
|
)
|
||
Accrued expenses
|
35
|
|
|
70
|
|
||
Accrued compensation
|
(15
|
)
|
|
(9
|
)
|
||
Other assets and liabilities, net
|
—
|
|
|
75
|
|
||
Net cash provided by operating activities
|
1,143
|
|
|
1,070
|
|
||
Investing Activities
|
|
|
|
||||
Purchases of property, plant and equipment
|
(300
|
)
|
|
(306
|
)
|
||
Proceeds from sale of property, plant and equipment
|
—
|
|
|
7
|
|
||
Proceeds from sales and maturities of investments
|
266
|
|
|
630
|
|
||
Purchases of investments
|
(408
|
)
|
|
(595
|
)
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(6
|
)
|
||
Other investing activities, net
|
(12
|
)
|
|
16
|
|
||
Net cash used in investing activities
|
(454
|
)
|
|
(254
|
)
|
||
Financing Activities
|
|
|
|
||||
Issuance of stock under employee stock plans
|
54
|
|
|
112
|
|
||
Taxes paid on vested stock awards under employee stock plans
|
(44
|
)
|
|
(59
|
)
|
||
Excess tax benefits from employee stock plans
|
(6
|
)
|
|
11
|
|
||
Repurchases of common stock
|
(60
|
)
|
|
(532
|
)
|
||
Dividends paid to shareholders
|
(231
|
)
|
|
(187
|
)
|
||
Repayment of debt
|
(63
|
)
|
|
(63
|
)
|
||
Net cash used in financing activities
|
(350
|
)
|
|
(718
|
)
|
||
Net increase in cash and cash equivalents
|
339
|
|
|
98
|
|
||
Cash and cash equivalents, beginning of period
|
5,024
|
|
|
4,804
|
|
||
Cash and cash equivalents, end of period
|
$
|
5,363
|
|
|
$
|
4,902
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid (received) for income taxes
|
$
|
21
|
|
|
$
|
(45
|
)
|
Cash paid for interest
|
$
|
22
|
|
|
$
|
23
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
||||
Accrual of cash dividend declared
|
$
|
116
|
|
|
$
|
93
|
|
|
January 1,
2016 |
|
July 3,
2015 |
||||
|
(in millions)
|
||||||
Inventories:
|
|
|
|
||||
Raw materials and component parts
|
$
|
130
|
|
|
$
|
168
|
|
Work-in-process
|
474
|
|
|
500
|
|
||
Finished goods
|
634
|
|
|
700
|
|
||
Total inventories
|
$
|
1,238
|
|
|
$
|
1,368
|
|
Property, plant and equipment:
|
|
|
|
||||
Property, plant and equipment
|
$
|
8,716
|
|
|
$
|
8,604
|
|
Accumulated depreciation
|
(5,915
|
)
|
|
(5,639
|
)
|
||
Property, plant and equipment, net
|
$
|
2,801
|
|
|
$
|
2,965
|
|
Other intangible assets:
|
|
|
|
||||
Other intangible assets
|
$
|
1,018
|
|
|
$
|
1,008
|
|
Accumulated amortization
|
(726
|
)
|
|
(676
|
)
|
||
Other intangible assets, net
|
$
|
292
|
|
|
$
|
332
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||
Warranty accrual, beginning of period
|
$
|
218
|
|
|
$
|
201
|
|
|
$
|
221
|
|
|
$
|
182
|
|
Charges to operations
|
43
|
|
|
50
|
|
|
88
|
|
|
99
|
|
||||
Utilization
|
(40
|
)
|
|
(44
|
)
|
|
(94
|
)
|
|
(93
|
)
|
||||
Changes in estimate related to pre-existing warranties
|
4
|
|
|
16
|
|
|
10
|
|
|
35
|
|
||||
Warranty accrual, end of period
|
$
|
225
|
|
|
$
|
223
|
|
|
$
|
225
|
|
|
$
|
223
|
|
|
January 1, 2016
|
||||||||||
|
Cost Basis
|
|
Unrealized Losses
|
|
Fair Value
|
||||||
Available-for-sale securities:
|
|
|
|
|
|
||||||
U.S. Treasury securities
|
$
|
306
|
|
|
$
|
(1
|
)
|
|
$
|
305
|
|
U.S. Government agency securities
|
116
|
|
|
—
|
|
|
116
|
|
|||
Commercial paper
|
50
|
|
|
—
|
|
|
50
|
|
|||
Certificates of deposit
|
260
|
|
|
—
|
|
|
260
|
|
|||
Total
|
$
|
732
|
|
|
$
|
(1
|
)
|
|
$
|
731
|
|
|
July 3, 2015
|
||||||||||
|
Cost Basis
|
|
Unrealized Gains (Losses)
|
|
Fair Value
|
||||||
Available-for-sale securities:
|
|
|
|
|
|
||||||
U.S. Treasury securities
|
$
|
287
|
|
|
$
|
—
|
|
|
$
|
287
|
|
U.S. Government agency securities
|
95
|
|
|
—
|
|
|
95
|
|
|||
Commercial paper
|
109
|
|
|
—
|
|
|
109
|
|
|||
Certificates of deposit
|
99
|
|
|
—
|
|
|
99
|
|
|||
Total
|
$
|
590
|
|
|
$
|
—
|
|
|
$
|
590
|
|
|
Cost Basis
|
|
Fair Value
|
||||
Due in less than one year (short-term investments):
|
$
|
497
|
|
|
$
|
497
|
|
Due in one to five years (included in other non-current assets):
|
235
|
|
|
234
|
|
||
Total
|
$
|
732
|
|
|
$
|
731
|
|
|
Actuarial Pension Gain
|
|
Unrealized Gain (Loss) on Foreign Exchange Contracts
|
|
Unrealized Loss on Available for Sale Securities
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
Balance at July 3, 2015
|
$
|
5
|
|
|
$
|
(25
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
Other comprehensive loss before reclassifications
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
(40
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
53
|
|
|
(1
|
)
|
|
52
|
|
||||
Net current-period other comprehensive income (loss)
|
—
|
|
|
13
|
|
|
(1
|
)
|
|
12
|
|
||||
Balance at January 1, 2016
|
$
|
5
|
|
|
$
|
(12
|
)
|
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
|
Actuarial Pension Gain
|
|
Unrealized Gain (Loss) on Foreign Exchange Contracts
|
|
Unrealized Gain (Loss) on Available for Sale Securities
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
Balance at June 27, 2014
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
12
|
|
Other comprehensive loss before reclassifications
|
—
|
|
|
(57
|
)
|
|
—
|
|
|
(57
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||
Net current-period other comprehensive loss
|
—
|
|
|
(44
|
)
|
|
—
|
|
|
(44
|
)
|
||||
Balance at January 2, 2015
|
$
|
7
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
$
|
(32
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||
Net income
|
$
|
251
|
|
|
$
|
438
|
|
|
$
|
534
|
|
|
$
|
861
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
232
|
|
|
233
|
|
|
231
|
|
|
233
|
|
||||
Employee stock options and other
|
2
|
|
|
5
|
|
|
3
|
|
|
6
|
|
||||
Diluted
|
234
|
|
|
238
|
|
|
234
|
|
|
239
|
|
||||
Income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.08
|
|
|
$
|
1.88
|
|
|
$
|
2.31
|
|
|
$
|
3.70
|
|
Diluted
|
$
|
1.07
|
|
|
$
|
1.84
|
|
|
$
|
2.28
|
|
|
$
|
3.60
|
|
Anti-dilutive potential common shares excluded*
|
6
|
|
|
1
|
|
|
4
|
|
|
2
|
|
*
|
For purposes of computing diluted income per common share, certain potentially dilutive securities have been excluded from the calculation because their effect would have been anti-dilutive.
|
|
Fair Value Measurements at
|
|
|
||||||||||||
|
January 1, 2016
|
|
|
||||||||||||
|
Using
|
|
|
||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
392
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
392
|
|
Total cash equivalents
|
392
|
|
|
—
|
|
|
—
|
|
|
392
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
—
|
|
|
121
|
|
|
—
|
|
|
121
|
|
||||
U.S. Government agency securities
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||
Commercial paper
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
||||
Certificates of deposit
|
—
|
|
|
260
|
|
|
—
|
|
|
260
|
|
||||
Total short-term investments
|
—
|
|
|
497
|
|
|
—
|
|
|
497
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
—
|
|
|
184
|
|
|
—
|
|
|
184
|
|
||||
U.S. Government agency securities
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
||||
Total long-term investments
|
—
|
|
|
234
|
|
|
—
|
|
|
234
|
|
||||
Foreign exchange contracts
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||
Total assets at fair value
|
$
|
392
|
|
|
$
|
734
|
|
|
$
|
—
|
|
|
$
|
1,126
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
Fair Value Measurements at
|
|
|
||||||||||||
|
July 3, 2015
|
|
|
||||||||||||
|
Using
|
|
|
||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
135
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
135
|
|
Total cash equivalents
|
135
|
|
|
—
|
|
|
—
|
|
|
135
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
||||
U.S. Government agency securities
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
Commercial paper
|
—
|
|
|
109
|
|
|
—
|
|
|
109
|
|
||||
Certificates of deposit
|
—
|
|
|
99
|
|
|
—
|
|
|
99
|
|
||||
Total short-term investments
|
—
|
|
|
262
|
|
|
—
|
|
|
262
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
—
|
|
|
237
|
|
|
—
|
|
|
237
|
|
||||
U.S. Government agency securities
|
—
|
|
|
91
|
|
|
—
|
|
|
91
|
|
||||
Total long-term investments
|
—
|
|
|
328
|
|
|
—
|
|
|
328
|
|
||||
Total assets at fair value
|
$
|
135
|
|
|
$
|
590
|
|
|
$
|
—
|
|
|
$
|
725
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
Derivatives Designated as
Hedging Instruments
|
Gross Amounts of Recognized Assets (Liabilities)
|
|
Gross Amounts Offset in the Balance Sheet
|
|
Net Amounts of Assets (Liabilities) Presented in the Balance Sheet
|
||||||
Foreign exchange contracts
|
|
|
|
|
|
||||||
Financial assets
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
Financial liabilities
|
(24
|
)
|
|
2
|
|
|
(22
|
)
|
|||
Total derivative instruments
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||||
|
January 1, 2016
|
|
January 2, 2015
|
|
January 1, 2016
|
|
January 2, 2015
|
||||||||||||||||||||||||
|
Expense
|
|
Tax Benefit
|
|
Expense
|
|
Tax Benefit
|
|
Expense
|
|
Tax Benefit
|
|
Expense
|
|
Tax Benefit
|
||||||||||||||||
Options and ESPP
|
$
|
13
|
|
|
$
|
4
|
|
|
$
|
18
|
|
|
$
|
7
|
|
|
$
|
32
|
|
|
$
|
8
|
|
|
$
|
37
|
|
|
$
|
12
|
|
RSUs
|
24
|
|
|
6
|
|
|
23
|
|
|
6
|
|
|
47
|
|
|
12
|
|
|
43
|
|
|
11
|
|
||||||||
Total
|
$
|
37
|
|
|
$
|
10
|
|
|
$
|
41
|
|
|
$
|
13
|
|
|
$
|
79
|
|
|
$
|
20
|
|
|
$
|
80
|
|
|
$
|
23
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
Aggregate Intrinsic Value
|
|||||
Options outstanding at July 3, 2015
|
6.8
|
|
|
$
|
50.00
|
|
|
|
|
|
||
Granted
|
1.6
|
|
|
84.41
|
|
|
|
|
|
|||
Exercised
|
(0.5
|
)
|
|
29.49
|
|
|
|
|
|
|||
Forfeited or expired
|
(0.1
|
)
|
|
49.08
|
|
|
|
|
|
|||
Options outstanding at October 2, 2015
|
7.8
|
|
|
58.58
|
|
|
|
|
|
|||
Exercised
|
(0.2
|
)
|
|
23.25
|
|
|
|
|
|
|||
Forfeited or expired
|
(0.1
|
)
|
|
68.75
|
|
|
|
|
|
|||
Options outstanding at January 1, 2016
|
7.5
|
|
|
$
|
59.54
|
|
|
4.5
|
|
$
|
107
|
|
Exercisable at January 1, 2016
|
3.8
|
|
|
$
|
43.58
|
|
|
3.3
|
|
$
|
88
|
|
Vested and expected to vest after January 1, 2016
|
7.4
|
|
|
$
|
58.92
|
|
|
4.4
|
|
$
|
107
|
|
|
Number of
Shares
|
|
Weighted Average
Grant-Date
Fair Value
|
|||
RSUs outstanding at July 3, 2015
|
3.0
|
|
|
$
|
73.80
|
|
Granted
|
1.2
|
|
|
84.39
|
|
|
Vested
|
(1.5
|
)
|
|
62.14
|
|
|
Forfeited
|
(0.1
|
)
|
|
81.55
|
|
|
RSUs outstanding at October 2, 2015
|
2.6
|
|
|
84.43
|
|
|
Granted
|
0.1
|
|
|
68.31
|
|
|
Vested
|
(0.1
|
)
|
|
61.61
|
|
|
Forfeited
|
(0.1
|
)
|
|
85.31
|
|
|
RSUs outstanding at January 1, 2016
|
2.5
|
|
|
84.71
|
|
|
Expected to vest after January 1, 2016
|
2.4
|
|
|
$
|
84.57
|
|
|
January 1,
2016 |
|
July 3,
2015 |
||||
Benefit obligation
|
$
|
240
|
|
|
$
|
231
|
|
Fair value of plan assets
|
(195
|
)
|
|
(185
|
)
|
||
Unfunded status
|
$
|
45
|
|
|
$
|
46
|
|
|
January 1,
2016 |
|
July 3,
2015 |
||||
Current liabilities
|
$
|
1
|
|
|
$
|
1
|
|
Non-current liabilities
|
44
|
|
|
45
|
|
||
Net amount recognized
|
$
|
45
|
|
|
$
|
46
|
|
|
March 9,
2015 |
||
Tangible assets acquired and liabilities assumed
|
$
|
(24
|
)
|
Intangible assets
|
76
|
|
|
Goodwill
|
215
|
|
|
Total
|
$
|
267
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||
Employee termination benefits
|
$
|
18
|
|
|
$
|
34
|
|
|
$
|
56
|
|
|
$
|
42
|
|
Impairment of assets
|
—
|
|
|
19
|
|
|
8
|
|
|
20
|
|
||||
Contract termination and other
|
9
|
|
|
—
|
|
|
19
|
|
|
—
|
|
||||
Total
|
$
|
27
|
|
|
$
|
53
|
|
|
$
|
83
|
|
|
$
|
62
|
|
|
July 3,
2015 |
|
Accruals
|
|
Payments
|
|
October 2,
2015 |
|
Accruals
|
|
Payments
|
|
January 1,
2016 |
||||||||||||||
Employee termination benefits
|
$
|
10
|
|
|
$
|
38
|
|
|
$
|
(12
|
)
|
|
$
|
36
|
|
|
$
|
18
|
|
|
$
|
(30
|
)
|
|
$
|
24
|
|
•
|
expectations concerning the planned SanDisk Corporation (“SanDisk”) merger;
|
•
|
expectations regarding the planned equity investment by Unisplendour Corporation Limited (“Unis”);
|
•
|
expectations regarding the integration of our HGST and WD subsidiaries following the decision by the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) in October 2015;
|
•
|
expectations regarding the growth of digital data and demand for digital storage;
|
•
|
our plans to develop and invest in new products and expand into new storage markets and into emerging economic markets;
|
•
|
expectations regarding the PC market and the emergence of new storage markets for our products;
|
•
|
expectations regarding the amount and timing of charges and cash expenditures associated with our restructuring activities;
|
•
|
our quarterly cash dividend policy;
|
•
|
expectations regarding the outcome of legal proceedings in which we are involved;
|
•
|
expectations regarding the repatriation of funds from our foreign operations;
|
•
|
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;
|
•
|
our beliefs regarding the sufficiency of our available liquidity to meet our working capital, debt, dividend and capital expenditure needs; and
|
•
|
expectations regarding our debt financing plans.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
January 1,
2016 |
|
January 2,
2015 |
|
January 1,
2016 |
|
January 2,
2015 |
||||||||||||||||||||
Net revenue
|
$
|
3,317
|
|
|
100.0
|
%
|
|
$
|
3,888
|
|
|
100.0
|
%
|
|
$
|
6,677
|
|
|
100.0
|
%
|
|
$
|
7,831
|
|
|
100.0
|
%
|
Gross profit
|
906
|
|
|
27.3
|
|
|
1,110
|
|
|
28.5
|
|
|
1,861
|
|
|
27.9
|
|
|
2,259
|
|
|
28.8
|
|
||||
Total operating expenses
|
655
|
|
|
19.7
|
|
|
644
|
|
|
16.6
|
|
|
1,288
|
|
|
19.3
|
|
|
1,324
|
|
|
16.9
|
|
||||
Operating income
|
251
|
|
|
7.6
|
|
|
466
|
|
|
12.0
|
|
|
573
|
|
|
8.6
|
|
|
935
|
|
|
11.9
|
|
||||
Net income
|
251
|
|
|
7.6
|
|
|
438
|
|
|
11.3
|
|
|
534
|
|
|
8.0
|
|
|
861
|
|
|
11.0
|
|
•
|
Consolidated net revenue totaled
$3.3 billion
.
|
•
|
Net revenue derived from enterprise SSDs was $
270 million
as compared to $
187 million
in the prior-year period.
|
•
|
HDD shipments
decreased
19%
from the prior-year period to
49.7 million
units.
|
•
|
Gross margin
decreased
to
27.3
% as compared to
28.5
% in the prior-year period.
|
•
|
Operating income
decreased
to $
251 million
as compared to $
466 million
in the prior-year period.
|
•
|
We generated
$598 million
in cash flow from operations and ended the quarter with
$5.4 billion
in cash and cash equivalents.
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||
(in millions, except percentages and
average selling price)
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage Change
|
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage
Change
|
||||||||||
Net revenue
|
$
|
3,317
|
|
|
$
|
3,888
|
|
|
(15
|
)%
|
|
$
|
6,677
|
|
|
$
|
7,831
|
|
|
(15
|
)%
|
Average selling price (per unit)*
|
$
|
61
|
|
|
$
|
60
|
|
|
2
|
%
|
|
$
|
61
|
|
|
$
|
59
|
|
|
3
|
%
|
Revenues by Geography (%)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Americas
|
31
|
%
|
|
27
|
%
|
|
|
|
31
|
%
|
|
27
|
%
|
|
|
||||||
Europe, Middle East and Africa
|
23
|
|
|
24
|
|
|
|
|
22
|
|
|
23
|
|
|
|
||||||
Asia
|
46
|
|
|
49
|
|
|
|
|
47
|
|
|
50
|
|
|
|
||||||
Revenues by Channel (%)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
OEM
|
65
|
%
|
|
63
|
%
|
|
|
|
66
|
%
|
|
63
|
%
|
|
|
||||||
Distributors
|
21
|
|
|
23
|
|
|
|
|
21
|
|
|
24
|
|
|
|
||||||
Retailers
|
14
|
|
|
14
|
|
|
|
|
13
|
|
|
13
|
|
|
|
||||||
Unit Shipments*
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
PC
|
27.8
|
|
|
36.6
|
|
|
|
|
55.3
|
|
|
76.3
|
|
|
|
||||||
Non-PC
|
21.9
|
|
|
24.4
|
|
|
|
|
46.1
|
|
|
49.5
|
|
|
|
||||||
Total units shipped
|
49.7
|
|
|
61.0
|
|
|
(19
|
)%
|
|
101.4
|
|
|
125.8
|
|
|
(19
|
)%
|
*
|
Based on sales of HDD units only.
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||
(in millions, except percentages)
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage Change
|
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage
Change
|
||||||||||
Net revenue
|
$
|
3,317
|
|
|
$
|
3,888
|
|
|
(15
|
)%
|
|
$
|
6,677
|
|
|
$
|
7,831
|
|
|
(15
|
)%
|
Gross profit
|
906
|
|
|
1,110
|
|
|
(18
|
)%
|
|
1,861
|
|
|
2,259
|
|
|
(18
|
)%
|
||||
Gross margin
|
27.3
|
%
|
|
28.5
|
%
|
|
|
|
27.9
|
%
|
|
28.8
|
%
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||||||
(in millions, except percentages)
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage Change
|
|
January 1,
2016 |
|
January 2,
2015 |
|
Percentage
Change
|
||||||||||
R&D expense
|
$
|
389
|
|
|
$
|
426
|
|
|
(9
|
)%
|
|
$
|
774
|
|
|
$
|
863
|
|
|
(10
|
)%
|
SG&A expense
|
207
|
|
|
164
|
|
|
26
|
%
|
|
399
|
|
|
384
|
|
|
4
|
%
|
||||
Charges related to arbitration award
|
32
|
|
|
1
|
|
|
3,100
|
%
|
|
32
|
|
|
15
|
|
|
113
|
%
|
||||
Employee termination, asset impairment and other charges
|
27
|
|
|
53
|
|
|
(49
|
)%
|
|
83
|
|
|
62
|
|
|
34
|
%
|
||||
Total operating expenses
|
$
|
655
|
|
|
$
|
644
|
|
|
|
|
$
|
1,288
|
|
|
$
|
1,324
|
|
|
|
|
Six Months Ended
|
||||||
|
January 1,
2016 |
|
January 2,
2015 |
||||
Net cash flow provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
1,143
|
|
|
$
|
1,070
|
|
Investing activities
|
(454
|
)
|
|
(254
|
)
|
||
Financing activities
|
(350
|
)
|
|
(718
|
)
|
||
Net increase in cash and cash equivalents
|
$
|
339
|
|
|
$
|
98
|
|
|
Six Months Ended
|
||||
|
January 1,
2016 |
|
January 2,
2015 |
||
Days sales outstanding
|
47
|
|
|
45
|
|
Days in inventory
|
48
|
|
|
44
|
|
Days payables outstanding
|
(71
|
)
|
|
(70
|
)
|
Cash conversion cycle
|
24
|
|
|
19
|
|
|
Contract
Amount
|
|
Weighted Average
Contract Rate*
|
|
Unrealized
Gains (Losses)
|
||||
Foreign exchange contracts:
|
|
|
|
|
|
||||
Cash flow hedges:
|
|
|
|
|
|
||||
Japanese Yen
|
$
|
155
|
|
|
121.26
|
|
$
|
1
|
|
Malaysian Ringgit
|
$
|
118
|
|
|
4.06
|
|
$
|
(5
|
)
|
Philippine Peso
|
$
|
50
|
|
|
46.91
|
|
$
|
—
|
|
Singapore Dollar
|
$
|
43
|
|
|
1.41
|
|
$
|
—
|
|
Thai Baht
|
$
|
582
|
|
|
35.47
|
|
$
|
(8
|
)
|
Fair value hedges:
|
|
|
|
|
|
||||
British Pound Sterling
|
$
|
(7
|
)
|
|
0.67
|
|
$
|
—
|
|
Euro
|
$
|
(3
|
)
|
|
0.91
|
|
$
|
—
|
|
Japanese Yen
|
$
|
77
|
|
|
120.22
|
|
$
|
—
|
|
Philippine Peso
|
$
|
28
|
|
|
47.38
|
|
$
|
—
|
|
Singapore Dollar
|
$
|
11
|
|
|
1.41
|
|
$
|
—
|
|
Thai Baht
|
$
|
75
|
|
|
36.17
|
|
$
|
—
|
|
*
|
Expressed in units of foreign currency per U.S. dollar.
|
|
•
|
|
(i) the merger having not been consummated by October 21, 2016 (or January 21, 2017, if either SanDisk or we elect to extend this date pursuant to the terms of the Merger Agreement) or (ii) any governmental entity having issued an order, decree or ruling or having taken any other action in respect of any antitrust law that has the effect of enjoining or otherwise prohibiting consummation of the merger substantially on the terms contemplated by the Merger Agreement, and such order, decree, ruling or other action has become final and non-appealable; and
|
|
•
|
|
at the time of such termination, all other conditions to closing have been satisfied other than (i) the condition requiring that there are no rulings or orders in respect of any antitrust law that have the effect of enjoining or prohibiting the consummation of the merger or (ii) the condition relating to: (a) expiration or termination of the waiting period (and any extensions thereof) applicable to the consummation of the merger under the HSR Act and (b) the receipt of all other required antitrust approvals.
|
|
•
|
|
delay, defer or cease purchasing goods or services from or providing goods or services to us;
|
|
•
|
|
delay or defer other decisions concerning us, or refuse to extend credit to us;
|
|
•
|
|
cease further joint development activities; or
|
|
•
|
|
otherwise seek to change the terms on which they do business with us.
|
|
•
|
|
difficulties entering new markets or manufacturing in new geographies where we have no or limited direct prior experience;
|
|
•
|
|
successfully managing relationships with our combined supplier and customer base;
|
|
•
|
|
coordinating and integrating independent research and development and engineering teams across technologies and product platforms to enhance product development while reducing costs;
|
|
•
|
|
coordinating sales and marketing efforts to effectively position the combined company’s capabilities and the direction of product development;
|
|
•
|
|
limitations or restrictions required by regulatory authorities on the ability of SanDisk’s and our management to conduct planning regarding the integration of the two companies;
|
|
•
|
|
difficulties in integrating the systems and process of two companies with complex operations including multiple manufacturing sites;
|
|
•
|
|
the increased scale and complexity of our operations resulting from the merger;
|
|
•
|
|
retaining key employees;
|
|
•
|
|
obligations that we will have to counterparties of SanDisk that arise as a result of the change in control of SanDisk; and
|
|
•
|
|
the diversion of management attention from other important business objectives.
|
|
•
|
|
Volatile Demand.
Our direct and indirect customers may delay or reduce their purchases of our products and systems containing our products. In addition, many of our customers rely on credit financing to purchase our products. If negative conditions in the global credit markets prevent our customers’ access to credit, product orders may decrease, which could result in lower revenue. Likewise, if our suppliers, sub-suppliers and sub-contractors (collectively referred to as “suppliers”) face challenges in obtaining credit, in selling their products or otherwise in operating their businesses, they may be unable to offer the materials we use to manufacture our products. These actions could result in reductions in our revenue and increased operating costs, which could adversely affect our business, results of operations and financial condition.
|
|
•
|
|
Restructuring Activities.
If demand for our products slows as a result of a deterioration in economic conditions, we may undertake restructuring activities to realign our cost structure with softening demand. The occurrence of restructuring activities could result in impairment charges and other expenses, which could adversely impact our results of operations or financial condition.
|
|
•
|
|
Credit Volatility and Loss of Receivables.
We extend credit and payment terms to some of our customers. In addition to ongoing credit evaluations of our customers’ financial condition, we traditionally seek to mitigate our credit risk by purchasing credit insurance on certain of our accounts receivable balances. As a result of the continued uncertainty and volatility in global economic conditions, however, we may find it increasingly difficult to be able to insure these accounts receivable. We could suffer significant losses if a customer whose accounts receivable we have not insured, or have underinsured, fails and is unable to pay us. Additionally, negative or uncertain global economic conditions increase the risk that if a customer whose accounts receivable we have insured fails, the financial condition of the insurance carrier for such customer account may have also deteriorated such that it cannot cover our loss. A significant loss of an accounts receivable that we cannot recover through credit insurance would have a negative impact on our financial results.
|
|
•
|
|
Impairment Charges.
We test goodwill for impairment annually as of the first day of our fourth fiscal quarter and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. Negative or uncertain global economic conditions could result in circumstances, such as a sustained decline in our stock price and market capitalization or a decrease in our forecasted cash flows such that they are insufficient, indicating that the carrying value of our long-lived assets or goodwill may be impaired. If we are required to record a significant charge to earnings in our consolidated financial statements because an impairment of our long-lived assets or goodwill is determined, our results of operations will be adversely affected. For example, given the recent volatility of our market capitalization, it is possible that our goodwill could become impaired in the near term which could result in a material charge and adversely affect our results of operations.
|
|
•
|
|
Mobile Devices.
There has been and continues to be a rapid growth in devices that do not contain a hard drive such as tablet computers and smart phones. As tablet computers and smart phones provide many of the same capabilities as PCs, they have displaced or materially affected, and we expect will continue to displace or materially affect, the demand for PCs. If we are not successful in adapting our product offerings to include disk drives or alternative storage solutions that address these devices, including through completion of the planned SanDisk merger, demand for our products in these markets may decrease and our financial results could be materially adversely affected.
|
|
•
|
|
Cloud Computing.
Consumers traditionally have stored their data on their PC, often supplemented with personal external storage devices. Most businesses also include similar local storage as a primary or secondary storage location. This storage is typically provided by HDDs. With cloud computing, applications and data are hosted, accessed and processed through a third-party provider over a broadband Internet connection, potentially reducing or eliminating the need for, among other things, significant storage inside the accessing computer. Even if we are successful at increasing revenues from sales to cloud computing customers, if we are not successful in manufacturing compelling products to address the cloud computing opportunity, demand for our products in these other markets may decrease and our financial results could be materially adversely affected. Demand for cloud computing solutions themselves may be volatile due to differing patterns of technology adoption and innovation, improved data storage efficiency by cloud computing service providers, and concerns about data protection by end users.
|
|
•
|
|
Obsolete Inventory.
In some cases, products we manufacture for these markets are uniquely configured for a single customer’s application, creating a risk of obsolete inventory if anticipated demand is not actually realized. In addition, rapid technological change in our industry increases the risk of inventory obsolescence.
|
|
•
|
|
Macroeconomic Conditions.
Consumer spending has been, and may continue to be, adversely affected in many regions due to negative macroeconomic conditions and high unemployment levels. Please see the risk factor entitled “
Adverse global economic conditions and credit market uncertainty could harm our business, results of operations and financial condition.
” for more risks and uncertainties relating to macroeconomic conditions.
|
|
•
|
|
difficulties faced in manufacturing ramp;
|
|
•
|
|
implementing at an acceptable cost product features expected by our customers;
|
|
•
|
|
market acceptance/qualification;
|
|
•
|
|
effective management of inventory levels in line with anticipated product demand;
|
|
•
|
|
quality problems or other defects in the early stages of new product introduction and problems with compatibility between our products and those of our customers that were not anticipated in the design of those products; and
|
|
•
|
|
our ability to increase our software development capability.
|
|
•
|
|
obtaining requisite governmental permits and approvals;
|
|
•
|
|
currency exchange rate fluctuations or restrictions;
|
|
•
|
|
political instability and civil unrest;
|
|
•
|
|
limited transportation availability, delays, and extended time required for shipping, which risks may be compounded in periods of price declines;
|
|
•
|
|
higher freight rates;
|
|
•
|
|
labor challenges, including difficulties finding and retaining talent or responding to labor disputes or disruptions;
|
|
•
|
|
trade restrictions or higher tariffs;
|
|
•
|
|
copyright levies or similar fees or taxes imposed in European and other countries;
|
|
•
|
|
exchange, currency and tax controls and reallocations;
|
|
•
|
|
increasing labor and overhead costs; and
|
|
•
|
|
loss or non-renewal of favorable tax treatment under agreements or treaties with foreign tax authorities.
|
|
•
|
|
our interests could diverge from our partners’ interests or we may not be able to agree with co-venturers on ongoing activities, or on the amount, timing or nature of further investments in the relationship;
|
|
•
|
|
we may experience difficulties and delays in ramping production at, and transferring technology to, such ventures;
|
|
•
|
|
our control over the operations of our ventures is limited;
|
|
•
|
|
due to financial constraints, our co-venturers may be unable to meet their commitments to us or may pose credit risks for our transactions with them;
|
|
•
|
|
due to differing business models or long-term business goals, our partners may decide not to join us in funding capital investment by our ventures, which may result in higher levels of cash expenditures by us;
|
|
•
|
|
we may lose the rights to technology or products being developed by the strategic relationship, including if our partner is acquired by another company, files for bankruptcy or experiences financial or other losses;
|
|
•
|
|
we may experience difficulties or delays in collecting amounts due to us from our co-venturers;
|
|
•
|
|
the terms of our arrangements may turn out to be unfavorable; and
|
|
•
|
|
changes in tax, legal or regulatory requirements may necessitate changes in the agreements with our co-venturers.
|
|
•
|
|
interrupting or otherwise disrupting the shipment of our product components;
|
|
•
|
|
damaging our reputation;
|
|
•
|
|
forcing us to find alternate component sources;
|
|
•
|
|
reducing demand for our products (for example, through a consumer boycott); or
|
|
•
|
|
exposing us to potential liability for our suppliers’ or customers’ wrongdoings.
|
|
•
|
|
the timing of orders from and shipment of products to major customers;
|
|
•
|
|
our product mix;
|
|
•
|
|
changes in the ASPs of our products;
|
|
•
|
|
manufacturing delays or interruptions;
|
|
•
|
|
acceptance by customers of competing products in lieu of our products;
|
|
•
|
|
variations in the cost of and lead times for components for our products;
|
|
•
|
|
limited availability of components that we obtain from a single or a limited number of suppliers;
|
|
•
|
|
seasonal and other fluctuations in demand for systems that use storage devices often due to technological advances; and
|
|
•
|
|
availability and rates of transportation.
|
|
•
|
|
price protection adjustments and other sales promotions and allowances on products sold to retailers, resellers and distributors;
|
|
•
|
|
inventory adjustments for write-down of inventories to lower of cost or market value (net realizable value);
|
|
•
|
|
testing of goodwill and other long-lived assets for impairment;
|
|
•
|
|
reserves for doubtful accounts;
|
|
•
|
|
accruals for product returns;
|
|
•
|
|
accruals for warranty costs related to product defects;
|
|
•
|
|
accruals for litigation and other contingencies;
|
|
•
|
|
liabilities for unrecognized tax benefits; and
|
|
•
|
|
expensing of stock-based compensation.
|
|
•
|
|
actual or anticipated fluctuations in our operating results, including those resulting from the seasonality of our business;
|
|
•
|
|
announcements of technological innovations by us or our competitors, which may decrease the volume and profitability of sales of our existing products and increase the risk of inventory obsolescence;
|
|
•
|
|
new products introduced by us or our competitors;
|
|
•
|
|
strategic actions by us or competitors, such as acquisitions and restructurings;
|
|
•
|
|
periods of severe pricing pressures due to oversupply or price erosion resulting from competitive pressures or industry consolidation;
|
|
•
|
|
developments with respect to patents or proprietary rights;
|
|
•
|
|
proposed or adopted regulatory changes or developments or anticipated or pending investigations, proceedings or litigation that involve or affect us or our competitors;
|
|
•
|
|
conditions and trends in the hard drive, solid state storage, computer, data and content management, storage and communication industries;
|
|
•
|
|
contraction in our operating results or growth rates that are lower than our previous high growth-rate periods;
|
|
•
|
|
failure to meet analysts’ revenue or earnings estimates or changes in financial estimates or publication of research reports and recommendations by financial analysts relating specifically to us or the storage industry in general; and
|
|
•
|
|
macroeconomic conditions that affect the market generally and, in particular, developments related to market conditions for our industry.
|
*
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to applicable rules of the Securities and Exchange Commission.
|
|
WESTERN DIGITAL CORPORATION
|
|
Registrant
|
|
|
|
/s/ O
LIVIER
C. L
EONETTI
|
|
Olivier C. Leonetti
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
1.
|
The number of shares subject to the option and the per-share exercise price of the option are subject to adjustment under Section 7.1 of the Plan (for example, and without limitation, in connection with stock splits).
|
2.
|
The option is subject to early termination under Section 5 of the attached Standard Terms and Conditions for Stock Options.
|
1.
|
Option Subject to Amended and Restated 2004 Performance Incentive Plan.
|
2.
|
Option Agreement.
|
3.
|
Type of Stock Option
|
4.
|
Vesting
|
5.
|
Expiration of Option
|
6.
|
Change in Control Event Generally
|
7.
|
Termination of Employment, Total Disability or Death
|
8.
|
Exercise of Option
|
•
|
a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise procedures as the Administrator may require from time to time;
|
•
|
payment in full for the purchase price (the per-share exercise price of the Option multiplied by the number of shares to be purchased) in cash, check or by electronic funds transfer to the Corporation, or (subject to compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any non-cash payment) in shares of Common Stock already owned by the Participant, valued at their fair market value on the exercise date;
|
•
|
any written statements or agreements required by the Administrator pursuant to Section 8.1 of the Plan; and
|
•
|
satisfaction of the tax withholding provisions of Section 8.5 of the Plan.
|
9.
|
Nontransferability
|
10.
|
No Right to Employment
|
11.
|
Rights as a Stockholder
|
12.
|
Notices
|
13.
|
Arbitration
|
14.
|
Governing Law
|
1.
|
The number of shares subject to the option and the per-share exercise price of the option are subject to adjustment under Section 7.1 of the Plan (for example, and without limitation, in connection with stock splits).
|
2.
|
The option is subject to early termination under Section 5 of the attached Standard Terms and Conditions for Stock Options.
|
1.
|
Option Subject to Amended and Restated 2004 Performance Incentive Plan.
|
2.
|
Option Agreement.
|
3.
|
Type of Stock Option
|
4.
|
Vesting
|
5.
|
Expiration of Option
|
6.
|
Termination of Employment, Total Disability or Death
|
7.
|
Exercise of Option
|
•
|
a written notice stating the number of shares of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative exercise procedures as the Administrator may require from time to time,
|
•
|
payment in full for the purchase price (the per-share exercise price of the Option multiplied by the number of shares to be purchased) in cash, check or by electronic funds transfer to the Corporation, or (subject to compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any non-cash payment) in shares of Common Stock already owned by the Participant, valued at their fair market value on the exercise date;
|
•
|
any written statements or agreements required by the Administrator pursuant to Section 8.1 of the Plan; and
|
•
|
satisfaction of the tax withholding provisions of Section 8.5 of the Plan.
|
8.
|
Nontransferability
|
9.
|
No Right to Employment
|
10.
|
Rights as a Stockholder
|
11.
|
Notices
|
12.
|
Arbitration
|
13.
|
Governing Law
|
14.
|
Severability
|
15.
|
Entire Agreement
|
16.
|
Section Headings
|
1.
|
Terms of Plan Participation for Non-U.S. Participants
|
2.
|
Tax Consequences, Withholding, and Liability
|
3.
|
Nature of Grant
|
4.
|
Data Privacy
|
5.
|
No Advice Regarding Grant
|
6.
|
Electronic Delivery and Acceptance
|
7.
|
Insider Trading/ Market Abuse Laws
|
8.
|
Foreign Asset/Account Reporting
|
9.
|
Language
|
1.
|
Stock Units Subject to 2004 Performance Incentive Plan
|
2.
|
Award Agreement
|
3.
|
Deferral of Stock Units
|
4.
|
Vesting
|
5.
|
Dividend Equivalent Rights Distributions
|
6.
|
Timing and Manner of Payment of Stock Units
|
7.
|
Change in Control Event Generally
|
8.
|
Termination of Employment
|
9.
|
Adjustments
|
10.
|
Withholding Taxes
|
11.
|
Nontransferability
|
12.
|
No Right to Employment
|
13.
|
Rights as a Stockholder
|
14.
|
Notices
|
15.
|
Arbitration
|
16.
|
Governing Law
|
17.
|
Severability
|
18.
|
Entire Agreement
|
19.
|
Section Headings
|
20.
|
Construction
|
21.
|
Clawback Policy
|
22.
|
No Advice Regarding Grant
|
1.
|
Stock Units Subject to 2004 Performance Incentive Plan
|
2.
|
Award Agreement
|
3.
|
Deferral of Stock Units
|
4.
|
Vesting
|
5.
|
Dividend Equivalent Rights Distributions
|
6.
|
Timing and Manner of Payment of Stock Units
|
7.
|
Termination of Employment
|
8.
|
Adjustments
|
9.
|
Withholding Taxes
|
10.
|
Nontransferability
|
11.
|
No Right to Employment
|
12.
|
Rights as a Stockholder
|
13.
|
Notices
|
14.
|
Arbitration
|
15.
|
Governing Law
|
16.
|
Severability
|
17.
|
Entire Agreement
|
18.
|
Section Headings
|
19.
|
Appendix
|
20.
|
Imposition of Other Requirements
|
21.
|
Construction
|
22.
|
Clawback Policy
|
23.
|
No Advice Regarding Grant
|
1.
|
Terms of Plan Participation for Non-U.S. Participants
|
2.
|
Withholding Taxes
|
3.
|
Nature of Grant
|
25.
|
|
4.
|
Data Privacy
|
5.
|
No Advice Regarding Grant
|
6.
|
Electronic Delivery and Acceptance
|
7.
|
Insider Trading/ Market Abuse Laws
|
8.
|
Foreign Asset/Account Reporting
|
9.
|
Language
|
1.
|
Stock Units Subject to 2004 Performance Incentive Plan
|
2.
|
Award Agreement
|
3.
|
Deferral of Stock Units
|
4.
|
Vesting
|
5.
|
Dividend Equivalent Rights Distributions
|
6.
|
Timing and Manner of Payment of Stock Units
|
7.
|
Change in Control Event Generally
|
8.
|
Termination of Employment
|
9.
|
Adjustments
|
10.
|
Withholding Taxes
|
11.
|
Nontransferability
|
12.
|
No Right to Employment
|
13.
|
Rights as a Stockholder
|
14.
|
Notices
|
15.
|
Arbitration
|
16.
|
Governing Law
|
17.
|
Severability
|
18.
|
Entire Agreement
|
19.
|
Section Headings
|
20.
|
Construction
|
21.
|
Clawback Policy
|
22.
|
No Advice Regarding Grant
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Western Digital Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ S
TEPHEN
D. M
ILLIGAN
|
|
Stephen D. Milligan
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Western Digital Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ O
LIVIER
C. L
EONETTI
|
|
Olivier C. Leonetti
|
|
Executive Vice President and Chief Financial Officer
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the period ended
January 1, 2016
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ S
TEPHEN
D. M
ILLIGAN
|
|
Stephen D. Milligan
|
|
Chief Executive Officer
|
(i)
|
the accompanying Quarterly Report on Form 10-Q of the Company for the period ended
January 1, 2016
(the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ O
LIVIER
C. L
EONETTI
|
|
Olivier C. Leonetti
|
|
Executive Vice President and Chief Financial Officer
|