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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
[X] Annual Report pursuant to Section 15(d) of the Securities Exchange Act of
1934 [Fee Required]
For the fiscal year ended June 30, 2001
OR
[ ] Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from _____ to _____
Commission File Number 1-8703
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
WESTERN DIGITAL CORPORATION
20511 Lake Forest Drive
Lake Forest, California 92630
INTRODUCTION
Western Digital Corporation (the "Company") has established the Western
Digital Corporation Retirement Savings and Profit Sharing Plan (the "Plan"),
formerly known as the Western Digital Corporation Savings and Profit Sharing
Plan. The Plan is a cash or deferred arrangement plan intended to qualify under
Section 401(k) of the Internal Revenue Code of 1986, as amended.
REQUIRED INFORMATION
I. Financial Statements:
These statements are listed in the Index to the Financial Statements.
II. Exhibits:
Consent of Independent Auditors.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed on its behalf by the undersigned, hereunto duly authorized.
WESTERN DIGITAL CORPORATION RETIREMENT
SAVINGS AND PROFIT SHARING PLAN
Date: December 14, 2001 By: SCOTT MERCER
------------------- -----------------------------
D. Scott Mercer
Chairperson of the Retirement
Plan Committee
3
WESTERN DIGITAL CORPORATION
RETIREMENT SAVINGS AND PROFIT SHARING PLAN
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Independent Auditors' Report............................................................. 5
Statements of Net Assets Available for Plan Benefits as of June 30, 2000 and 2001........ 6
Statements of Changes in Net Assets Available for Plan Benefits
for the years ended June 30, 2000 and 2001....................................... 7
Notes to Financial Statements............................................................ 8-14
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) .......................... 15
All other schedules are omitted because they are not required by Department of
Labor regulations or are not applicable.
4
INDEPENDENT AUDITORS' REPORT
Retirement Plan Committee of the Board of Directors
Western Digital Corporation Retirement Savings and Profit Sharing Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Western Digital Corporation Retirement Savings and Profit
Sharing Plan (the "Plan") as of June 30, 2000 and 2001 and the related
statements of changes in net assets available for plan benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Western
Digital Corporation Retirement Savings and Profit Sharing Plan as of June 30,
2000 and 2001, and the changes in net assets available for plan benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
KPMG LLP
Orange County, California
December 4, 2001
5
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(IN THOUSANDS)
June 30,
-----------------------
2000 2001
--------- --------
Assets
Investments, at current value ................... $151,015 $125,742
Participant loans ............................... 3,546 2,579
-------- --------
Net assets available for Plan benefits.... $154,561 $128,321
======== ========
The accompanying notes are an integral part of these financial statements.
6
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(IN THOUSANDS)
Year ended June 30,
---------------------------
2000 2001
---------- ----------
Participants' contributions ...................... $ 9,014 $ 7,224
Employer's contributions ......................... 2,308 1,449
--------- ---------
Total contributions ......................... 11,322 8,673
--------- ---------
Interest and dividend income ..................... 11,366 9,638
Realized/unrealized gain (loss) .................. 1,878 (29,777)
--------- ---------
Total investment income (loss) .............. 13,244 (20,139)
Participant distributions paid ................... (29,217) (14,774)
--------- ---------
Decrease in net assets available for Plan benefits (4,651) (26,240)
Net assets available for Plan benefits at
beginning of year ......................... 159,212 154,561
--------- ---------
Net assets available for Plan benefits at
end of year ............................... $ 154,561 $ 128,321
========= =========
The accompanying notes are an integral part of these financial statements.
7
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 2001
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements of the Western Digital Corporation
Retirement Savings and Profit Sharing Plan (the "Plan"), formerly known as
the Western Digital Corporation Savings and Profit Sharing Plan, have been
prepared on an accrual basis of accounting and present the net assets
available for Plan benefits as of June 30, 2000 and 2001 and changes in net
assets available for Plan benefits for the years ended June 30, 2000 and
2001.
Valuation of Investments
Investments in marketable securities and common stock traded on national
securities exchanges are valued at current market values, determined
through reference to public market information on the last business day of
the Plan's fiscal year. Securities not traded on the last business day are
valued at the last reported bid price. At June 30, 2000 and 2001, the Plan
held investments in mutual funds, which are reported at fair market value.
Purchases and sales of securities are recorded on a trade-date basis.
Participant loans are carried at their outstanding balance which
approximates fair market value.
Income Tax Status
The Internal Revenue Service has determined and informed Western Digital
Corporation (the "Company") by a letter dated January 17, 1997, that the
Plan is designed in accordance with applicable sections of the Internal
Revenue Code ("IRC"). The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's tax
counsel believe that the Plan is designed and is currently being operated
in compliance with the requirements of the IRC.
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of additions and deductions during the reporting period. Actual
results could differ from those estimates.
(2) DESCRIPTION OF THE PLAN
General
The Plan is a defined contribution plan as defined by the Employee
Retirement Income Security Act of 1974. Participants should refer to the
Plan document for a more complete description of the Plan's provisions.
Contributions
U.S.-based employees of the Company, who meet the Plan's eligibility
criteria, are eligible to participate in the Plan and to receive employer
matching contributions. Eligible employees may elect to contribute up to
14% of their compensation on a pretax basis and 9% of their compensation on
an after tax basis (with an aggregate limit of 14%) for investment in 11
funds, provided that contributions do not exceed IRS limitations. The
Company may make contributions equal to 50% of pretax participant
contributions to the
8
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Plan, up to the first 5% of the participant's compensation. Effective
January 1, 2000 the Plan was amended to limit the Company's aggregate
maximum matching contribution to $2,000 for any calendar year. The Company
may also make additional contributions at its discretion. The Company may
suspend matching contributions when it does not have sufficient net profits
to make the applicable matching contribution. Contributions to the Plan are
recorded as soon as administratively possible after the Company makes
payroll deductions from Plan participants.
Investments
Participants designate their contributions, and those made by the Company,
for investment in any or all of the following funds:
Investment Strategy (Unaudited)
-------------------------------
Puritan Fund The Puritan Fund purchases shares in the Fidelity
Puritan Mutual Fund, which invests primarily in common
stock, preferred stock and bonds of corporations with an
emphasis on growth. During June 2001, this investment option
was removed from the plan.
Blue Chip The Blue Chip Fund purchases shares in the Fidelity Blue
Fund Chip Mutual Fund, which invests primarily in common stock of
well-known and established companies. During June 2001, this
investment option was removed from the plan.
Janus Fund The Janus Fund purchases shares in the Janus Mutual Fund,
which invests primarily in common stock of larger, more
established companies, although it may invest in common
stock of smaller companies that offer growth potential.
During June 2001, this investment option was added to the
plan.
PIMCO The PIMCO Return Fund purchases shares in the PIMCO Total
Return Fund Return II Mutual Fund, which invests in a diversified
portfolio of intermediate-term fixed income securities with
quality and foreign issuer restrictions. During June 2001,
this investment option was added to the plan.
Magellan The Magellan Fund purchases shares in the Fidelity
Fund Magellan Mutual Fund, which invests primarily in common
stock of corporations with an emphasis on long-term capital
growth.
Stable Value The Stable Value Fund purchases shares in the T. Rowe Price
Fund Stable Value Mutual Fund, which invests primarily in
guaranteed investment contracts ("GICs"), bank investment
contracts ("BICs") and structured investment contracts
("SICs").
Western The Western Digital Common Stock Fund invests in the
Digital Company's common stock.
Common
Stock Fund
International The International Stock Fund purchases shares in the T. Rowe
Stock Fund Price International Stock Mutual Fund, which invests
primarily in common stock of well-established, non-U.S.
corporations.
9
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund Investment Strategy (Unaudited)
---- -------------------------------
Small-Cap The Small-Cap Value Fund purchases shares in the T. Rowe
Value Fund Price Small-Cap Value Mutual Fund, which invests primarily
in common stock of corporations with a market capitalization
of $1 billion or less that appear to be undervalued.
Science & The Science and Technology Fund purchases shares in the T.
Technology Rowe Price Science and Technology Mutual Fund, which invests
Fund primarily in common stock of companies expected to benefit
from the development, advancement, and use of science and
technology.
Equity The Equity Income Fund purchases shares in the T. Rowe Price
Income Fund Equity Income Mutual Fund, which invests primarily in
dividend-paying common stock, particularly of established
companies with prospects for both increasing dividends and
capital appreciation.
Spectrum The Spectrum Income Fund purchases shares in the T.
Income Fund Rowe Price Spectrum Income Mutual Fund, which invests
primarily in a diversified group of T. Rowe Price mutual
funds that, in turn, invest principally in fixed income
securities. During June 2001, this investment option was
removed from the plan.
Equity Index The Equity Index Fund purchases shares in the T. Rowe Price
Trust Equity Index Trust, which invests in, to the extent
practicable, all 500 stocks the Standard & Poor's 500 Stock
Index comprises in proportion to their respective weighting
in the index.
Small The Small Company Growth Fund purchases shares in the Credit
Company Suisse Small Company Growth Mutual Fund, which invests
Growth Fund primarily in common stock of small-sized domestic
corporations with capital growth potential.
As of June 30, 2001, all of the Plan's assets were invested in mutual funds,
Western Digital common stock or participant loans. Participants may transfer all
or a portion of the balance in their accounts between investment funds on a
daily basis.
As of June 30, 2000 and 2001, the following investments represented greater than
5% of the Plan's net assets (in thousands):
Fund 2000 2001
---- ---- ----
Puritan Fund $ 13,432 $ *
Blue Chip Fund 12,316 *
Janus Fund * 8,514
PIMCO Return Fund * 8,009
Magellan Fund 36,114 28,423
Stable Value Fund 23,877 27,293
Western Digital Stock Fund 11,186 9,559
Science & Technology Fund 29,170 14,129
Equity Income Fund * 7,669
Equity Index Trust * 13,029
*Investment did not represent greater than 5% of the Plan's net assets.
10
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Participant Loans
Loans can be made to a participant up to an amount equal to the lesser of
$50,000 reduced by the participant's highest outstanding balance during the
preceding 12 months or 50% of a participant's vested account balance. The
loans bear interest at 1% above the current prime rate published by T. Rowe
Price Trust Company and are generally payable in installments over periods
ranging from one to five years, unless the loan is used for the purchase of
a primary residence, in which case the repayment period may be up to ten
years. Principal and interest payments are allocated to the participants'
accounts in the same manner as their current contributions. The Plan allows
participants to have no more than two active loans at a time. The annual
interest rate charged on employee loans during 2001 ranged from 7.0% to
10.5%.
Participant Accounts
A separate account is maintained for each participant in each designated
fund. Each account is adjusted for contributions and net investment income
or loss on a daily basis. Net investment income or loss is allocated to the
accounts in the same proportion as the participant's beginning account
balance invested in the fund (as defined in the Plan) bears to the total of
all participants' beginning account balances invested in the fund.
Payment of Benefits
Upon termination, participants may receive a lump-sum payment in cash
and/or shares of the Company's common stock. The nonvested portion of
terminated participants' accounts is forfeited subject to a five-year
reinstatement period. Forfeitures are allocated annually to remaining
participants in the same ratio as each participant's compensation for the
plan year bears to the total compensation for the plan year of all
participants eligible to share in the allocation.
Certain restrictions apply to withdrawals of amounts from the Plan while a
participant continues to be employed by the Company.
Vesting
Participants are at all times one hundred percent vested in the value of
their voluntary contributions and the Company's profit sharing
contributions. A participant is fully vested in the Company's matching
contributions and earnings thereon after five years of service (as defined
in the Plan), or upon retirement (at normal retirement age), permanent
disability or death. The Company has the right under the Plan to
discontinue its contributions at any time and to terminate the Plan,
subject to the provisions of the Employee Retirement Income Security Act of
1974. In the event of Plan termination, participants will become fully
vested in their accounts.
Administration of the Plan
The Retirement Plan Committee (the "Committee"), appointed by the Board of
Directors and consisting of at least three members, has the authority to
control and manage the operation and administration of the Plan. The assets
of the Plan are held in a non-discretionary trust by T. Rowe Price Trust
Company as trustee and are administered under a trust agreement which
requires that the trustee hold, administer and distribute the funds of the
Plan in accordance with the text of the Plan and the instructions of the
Committee or its designees. The compensation or fees of accountants,
counsel and other specialists and any other costs of administering the Plan
or the trust are paid by the Company or charged to the trust at the
discretion of the Company.
11
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(3) PROFIT SHARING FEATURE
The Company adopted an annual profit sharing feature effective as of the
beginning of the Company's 1992 fiscal year. All eligible domestic
employees of the Company who are employed on the last day of the Company's
fiscal year are eligible to participate in the profit sharing component.
The amount of profit sharing paid to participants is dependent upon their
eligible compensation earned during the fiscal year. A portion of each
eligible participant's allocation of the Company's profit sharing
contribution is deposited into an individual profit sharing account
established under the Plan (0% of eligible fiscal year compensation in 2000
and 2001, respectively) and the excess allocable to such participant, if
any, is paid as a fiscal year-end cash bonus. Benefits are generally
payable following retirement, disability, death, hardship or termination of
employment. During 2000 and 2001, the Company did not authorize any defined
pre-tax profits to be allocated to the participants and contributed $0 as
profit sharing to the Plan.
(4) INVESTMENTS
The Plan's investments consist of the following at June 30, 2000 (in
thousands):
Shares Current
Held Value
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Puritan Fund:
Fidelity Puritan Mutual Fund ........................................ 713 $ 13,432
Blue Chip Fund:
Fidelity Blue Chip Mutual Fund ...................................... 198 12,316
Magellan Fund:
Fidelity Magellan Mutual Fund ....................................... 268 36,114
Stable Value Fund:
T. Rowe Price Stable Value Mutual Fund ............................... 23,877 23,877
Western Digital Common Stock Fund ...................................... 2,237 11,186
International Stock Fund:
T. Rowe Price International Stock Mutual Fund ....................... 256 4,681
Small-Cap Value Fund:
T. Rowe Price Small-Cap Value Mutual Fund ........................... 193 3,719
Science & Technology Fund:
T. Rowe Price Science & Technology Mutual Fund ...................... 471 29,170
Equity Income Fund:
T. Rowe Price Equity Income Mutual Fund ............................. 269 6,232
Spectrum Income Fund:
T. Rowe Price Spectrum Income Mutual Fund ........................... 217 2,292
Equity Index Trust:
T. Rowe Price Equity Index Trust .................................... 161 6,186
Small Company Growth Fund:
Credit Suisse Small Company Growth Mutual Fund ....................... 72 1,810
Western Digital Participant Loans ...................................... -- 3,546
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$154,561
========
12
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Plan's investments consist of the following at June 30, 2001 (in thousands):
Shares Current
Held Value
------ -------
Janus Fund:
Janus Mutual Fund ................................................... 292 $ 8,514
PIMCO Return Fund:
PIMCO Total Return II Mutual Fund ................................... 789 8,009
Magellan Fund:
Fidelity Magellan Mutual Fund ....................................... 256 28,423
Stable Value Fund:
T. Rowe Price Stable Value Mutual Fund ............................... 27,293 27,293
Western Digital Common Stock Fund ...................................... 2,390 9,559
International Stock Fund:
T. Rowe Price International Stock Mutual Fund ....................... 246 2,989
Small-Cap Value Fund:
T. Rowe Price Small-Cap Value Mutual Fund ........................... 217 4,945
Science & Technology Fund:
T. Rowe Price Science & Technology Mutual Fund ...................... 546 14,129
Equity Income Fund:
T. Rowe Price Equity Income Mutual Fund ............................. 310 7,669
Equity Index Trust:
T. Rowe Price Equity Index Trust .................................... 399 13,029
Small Company Growth Fund:
Credit Suisse Small Company Growth
Mutual Fund ......................................................... 120 1,183
Western Digital Participant Loans ...................................... -- 2,579
--------
$128,321
========
13
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) PLAN AMENDMENTS
Effective January 1, 2000, the Plan was amended to clarify the definition
of an "Eligible Employee" and to specifically exclude individuals employed
as independent contractors and workers provided by temporary staffing
agencies. In addition, the Plan was amended to limit the Company's
aggregate maximum matching contribution to $2,000 per employee for any
calendar year.
14
WESTERN DIGITAL CORPORATION RETIREMENT SAVINGS AND PROFIT SHARING PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
JUNE 30, 2001
(IN THOUSANDS)
Identity of Issuer, Borrower, Description of Investment, Current
Lessor or Similar Party Including Collateral or Par Value Value
------------------------------ ------------------------------------------------- -------
Janus Capital Corporation 292 shares Janus Mutual Fund$ 8,514
Pacific Investment 789 shares PIMCO Total Return II Mutual Fund 8,009
Management Company
Fidelity Retirement Services 256 shares Fidelity Magellan Mutual Fund 28,423
* T. Rowe Price Trust 27,293 shares T. Rowe Price Stable
Company Value Mutual Fund 27,293
* T. Rowe Price Trust 246 shares T. Rowe Price International
Company Stock Mutual Fund 2,989
* T. Rowe Price Trust 217 shares T. Rowe Price Small-Cap
Company Value Mutual Fund 4,945
* T. Rowe Price Trust 546 shares T. Rowe Price Science
Company & Technology Mutual Fund 14,129
* T. Rowe Price Trust 310 shares T. Rowe Price Equity
Company Income Mutual Fund 7,669
* T. Rowe Price Trust 399 shares T. Rowe Price Equity Index Trust 13,029
Company
Credit Suisse Asset 120 shares of Credit Suisse Small Company
Management Securities, Inc. Growth Mutual Fund 1,183
* Western Digital Corporation 2,390 shares common stock; $.01 par value 9,559
* Plan Participants 402 participant loans with annual interest
rates ranging from 7.0% to 10.5% 2,579
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$128,321
========
* Parties in interest.
See accompanying independent auditors' report.
15
WESTERN DIGITAL CORPORATION
RETIREMENT SAVINGS AND PROFIT SHARING PLAN
INDEX TO EXHIBITS
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
23. Consent of Independent Auditors.............................. 17
16