8-KEarnings & ResultsOther EventsExhibits & Filings

WESTERN DIGITAL CORP 8-K Report, Financial Results (Jan 25, 2018)

Filed January 25, 2018For Securities:WDC

Summary

Western Digital Corporation (WDC) filed an 8-K on January 25, 2018, primarily to announce its financial results for the second fiscal quarter ended December 29, 2017, and to discuss the impact of the recently enacted Tax Cuts and Jobs Act of 2017 (2017 Act). While specific financial figures for the quarter are referenced as being in an attached press release, the 8-K emphasizes the accounting and financial implications of the new tax legislation, which significantly alters the U.S. corporate tax landscape. The company provided an initial assessment of the 2017 Act's effects, noting provisional income tax expenses and benefits related to the one-time mandatory deemed repatriation of foreign earnings and the re-measurement of deferred tax balances. A substantial provisional expense of $1.66 billion was recognized for the mandatory repatriation tax, payable over eight years. The 2017 Act also introduces a lower U.S. federal corporate tax rate and new provisions for taxing foreign earnings, which the company is still analyzing. These changes are expected to impact WDC's effective tax rate and require ongoing adjustments as the company finalizes its accounting for these complex tax reforms.

Key Highlights

  • 1Western Digital announced its financial results for the second fiscal quarter ended December 29, 2017, with details available in an accompanying press release.
  • 2The company provided an initial assessment of the Tax Cuts and Jobs Act of 2017 (2017 Act) and its impact on financial reporting.
  • 3A provisional income tax expense of $1.66 billion was recognized for the one-time mandatory deemed repatriation tax on foreign earnings.
  • 4A provisional income tax benefit of $88 million was recognized related to the re-measurement of the company's deferred tax balances.
  • 5The mandatory deemed repatriation tax is payable over an 8-year period, with specific payment schedules outlined.
  • 6The U.S. federal corporate tax rate reduction to 21% (effective January 1, 2018) is expected to impact future tax expenses, with an estimated blended rate of 28% for fiscal year 2018.
  • 7The company is continuing to analyze other provisions of the 2017 Act, such as the global intangible low-tax income (GILTI) provision, and their impact on future tax obligations.

Frequently Asked Questions

This 8-K filing primarily serves to announce Western Digital Corporation's financial results for the second fiscal quarter ended December 29, 2017, and to provide an initial analysis of the financial impact of the U.S. Tax Cuts and Jobs Act of 2017 (2017 Act).

The 2017 Act requires companies to account for significant changes, including a mandatory repatriation tax on foreign earnings. Western Digital has recorded a provisional tax expense of $1.66 billion for this repatriation and a benefit of $88 million from re-measuring deferred tax assets and liabilities. The company is still finalizing these calculations, and adjustments are expected.

The $1.66 billion mandatory deemed repatriation tax is structured to be payable over an eight-year period. The filing details a payment schedule that begins in fiscal year 2019 and extends to fiscal year 2026, with varying percentages of the tax due each year.

The reduction in the U.S. federal corporate tax rate from 35% to 21% (effective January 1, 2018) will lower the company's tax expenses in future periods. For fiscal year 2018, an estimated blended rate of 28% will be used, and for fiscal year 2019 and beyond, the 21% rate will apply. This reduction had a small positive impact of $7 million on income tax expense for the quarter.