01—Abstract
Summary
Summary of the 10-K filed August 20, 2012. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation's (WDC) 2012 10-K report details a transformative year, primarily driven by the significant acquisition of Hitachi Global Storage Technologies (HGST) in March 2012.
This strategic move aimed to create a more efficient, customer-focused storage company with enhanced scale and a broader product portfolio. The acquisition, funded by a combination of cash, debt, and newly issued shares, significantly impacted the company's financial statements, increasing assets, liabilities, and goodwill. The company also navigated operational challenges, most notably the severe flooding in Thailand in late 2011, which disrupted production and led to substantial charges.
Despite these headwinds, WDC reported a significant increase in net revenue and gross margin for fiscal year 2012, largely due to a substantial rise in average selling prices (ASPs) for hard drives, a consequence of industry-wide supply constraints stemming from the Thailand floods. The report also highlights ongoing investments in research and development and efforts to maintain competitive product offerings in a dynamic market.
02—Key points
Key Highlights
- Completed the acquisition of Hitachi Global Storage Technologies (HGST) for approximately $4.7 billion in March 2012, significantly expanding the company's scale and product offerings.
- Reported a substantial increase in net revenue to $12.5 billion in fiscal year 2012, up 31% from the prior year, driven by a higher average selling price (ASP) for hard drives.
- Experienced a significant improvement in gross margin percentage, rising to 29.2% in fiscal year 2012 from 18.8% in fiscal year 2011, attributed to higher ASPs.
- Recorded $214 million in charges related to the severe flooding in Thailand in fiscal year 2012, impacting fixed assets, inventory, and recovery efforts.
- Increased research and development expenses to $1.1 billion in fiscal year 2012, reflecting continued investment in new product development and the inclusion of HGST's R&D.
- Ended fiscal year 2012 with $3.2 billion in cash and cash equivalents, while also carrying $2.2 billion in long-term debt primarily related to the HGST acquisition.
- Repurchased $604 million of its common stock during fiscal year 2012 as part of its ongoing share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Western Digital Corp kept $0.13.
- Revenue$12.48B100.0%
- Cost of revenue−$8.84B70.8%
- Gross profit$3.64B29.2%
- Operating costs−$1.87B15.0%
- Operating income$1.77B14.2%
- Interest, other & tax−$159.0M1.3%
- Net income$1.61B12.9%
Where FY2012 revenue went
$12.48B- Cost of revenue: $8.84B, 71% of revenue
- Net income: $1.61B, 13% of revenue
- SG&A: $518.0M, 4.2% of revenue
- Other operating costs: $1.35B, 11% of revenue
- Interest, other & tax: $159.0M, 1.3% of revenue
Kept 13% as net incomeInterest, other & tax $159.0M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed August 20, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $12.48B$9.53B | +31.0% |
| Cost of Revenue | $8.84B$7.74B | +14.3% |
| Gross Profit | $3.64B$1.79B | +103.1% |
| SG&A Expenses | $518.00M$282.00M | +83.7% |
| Operating Expenses | $1.87B$1.01B | +84.9% |
| Operating Income | $1.77B$781.00M | +126.8% |
| Net Income | $1.61B$726.00M | +122.0% |
| EPS (Basic) | $6.69$3.14 | +113.1% |
| EPS (Diluted) | $6.58$3.09 | +112.9% |
| Shares Outstanding (Basic) | 241.00M231.00M | +4.3% |
| Shares Outstanding (Diluted) | 245.00M235.00M | +4.3% |
05—Questions
Frequently Asked Questions
What was the primary strategic move for Western Digital in fiscal year 2012?
The primary strategic move for Western Digital in fiscal year 2012 was the acquisition of Hitachi Global Storage Technologies (HGST) for approximately $4.7 billion. This acquisition significantly expanded the company's market presence, product portfolio, and technological capabilities in the storage industry.
How did the Thailand flooding impact Western Digital's financial performance?
The severe flooding in Thailand in late 2011 disrupted WDC's manufacturing operations, leading to production suspensions. The company recorded $214 million in charges related to the flooding in fiscal year 2012, impacting its results. However, the resulting industry-wide supply constraints also led to higher average selling prices for hard drives, which boosted revenue and gross margins.
What is the company's current financial position regarding debt and cash?
As of June 29, 2012, Western Digital had $3.2 billion in cash and cash equivalents and $2.2 billion in outstanding long-term debt, primarily from the credit facilities used to finance the HGST acquisition. The company's liquidity appears sufficient to meet its near-term obligations.
How did the acquisition of HGST affect the company's balance sheet?
The HGST acquisition significantly increased Western Digital's assets, including property, plant, and equipment, goodwill ($1.8 billion), and other intangible assets ($834 million). It also led to a substantial increase in liabilities, particularly long-term debt ($2.2 billion) and assumed pension liabilities. Shareholder equity also increased due to the issuance of new shares and retained earnings.
06—Continue