Western Digital 2008 Annual Report Download - page 67

Download and view the complete annual report

Please find page 67 of the 2008 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

Rental expense under these operating leases, including month-to-month rentals, was $18 million, $15 million and
$16 million in 2008, 2007 and 2006, respectively. The Company’s capital leases consist of leased equipment. These leases
have maturity dates through July 2009 and interest rates averaging approximately 6.3%. Future minimum lease
payments under operating and capital leases that have initial or remaining non-cancelable lease terms in excess of one year
at June 27, 2008 are as follows (in millions):
Operating Capital
2009 ................................... $13 $ 8
2010 ................................... 12 1
2011 ................................... 9 —
2012 ................................... 7 —
2013 ................................... 6 —
Thereafter ............................... 9 —
Total future minimum payments ............. $56 $ 9
Less: interest on capital leases ................ —
Total principal payable on capital leases......... $ 9
Product Warranty Liability
Changes in the warranty accrual for 2008, 2007 and 2006 were as follows (in millions):
2008 2007 2006
Warranty accrual, beginning of period ......... $ 90 $89 $92
Charges to operations ................... 106 74 76
Utilization ........................... (73) (52) (49)
Changes in estimate related to pre-existing
warranties ......................... (9) (21) (30)
Warranty accrual, end of period .............. $114 $ 90 $ 89
Accrued warranty also includes amounts classified in non-current liabilities of $24 million at June 27, 2008 and
$17 million at June 29, 2007.
Long-term Purchase Agreements
The Company has entered into long-term purchase agreements with various component suppliers. The commit-
ments depend on specific products ordered and may be subject to minimum quality requirements and future price
negotiations. For 2009, 2010, 2011, 2012, 2013 and thereafter, the Company expects these commitments to total
approximately $673 million, $4 million, $4 million, $4 million, $3 million and $7 million, respectively. In conjunction
with these agreements, the Company has advanced approximately $36 million related to 2009 purchase commitments
which is included in advances to suppliers as of June 27, 2008.
Note 5. Legal Proceedings
In the normal course of business, the Company is subject to legal proceedings, lawsuits and other claims. Although
the ultimate aggregate amount of probable monetary liability or financial impact with respect to these matters is subject
to many uncertainties and is therefore not predictable with assurance, management believes that any monetary liability
or financial impact to the Company from these matters or the specified matters below, individually and in the aggregate
would not be material to the Company’s financial condition. However, there can be no assurance with respect to such
61
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)