Western Digital 2012 Annual Report Download - page 71

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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 4. Commitments and Contingencies
Lease Commitments
The Company leases certain facilities and equipment under long-term, non-cancelable operating leases. The
Company’s operating leases consist of leased property and equipment that expire at various dates through 2022.
Rental expense under these operating leases, including month-to-month rentals, was $41 million, $23 million and
$22 million in 2012, 2011 and 2010, respectively. Future minimum lease payments under operating leases that have
initial or remaining non-cancelable lease terms in excess of one year at June 29, 2012 are as follows (in millions):
2013 ................................................. $ 48
2014 ................................................. 33
2015 ................................................. 27
2016 ................................................. 18
2017 ................................................. 11
Thereafter ............................................. 55
Total future minimum payments ......................... $192
Product Warranty Liability
Changes in the warranty accrual for 2012, 2011 and 2010 were as follows (in millions):
2012 2011 2010
Warranty accrual, beginning of period ....... $170 $170 $123
Charges to operations .................. 154 172 183
Utilization ........................... (196) (160) (138)
Changes in estimate related to pre-existing
warranties ......................... (7) (12) 2
Warranty liabilities assumed as a result of the
Acquisition ........................ 139 — —
Warranty accrual, end of period ............. $260 $170 $170
Accrued warranty also includes amounts classified in other liabilities in the consolidated balance sheets of
$89 million at June 29, 2012 and $38 million at July 1, 2011. See Note 14 for a discussion of the warranty liabilities
assumed as a result of the Acquisition.
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. The Company expects these commitments to total $268 million for 2013, $11 million for 2014, $5
million for 2015, $3 million for 2016 and $1 million in 2017.
Note 5. Legal Proceedings
When the Company becomes aware of a claim or potential claim, the Company assesses the likelihood of any loss
or exposure. The Company discloses information regarding each material claim where the likelihood of a loss con-
tingency is probable or reasonably possible. If a loss contingency is probable and the amount of the loss can be reason-
ably estimated, the Company records an accrual for the loss. In such cases, there may be an exposure to potential loss
in excess of the amount accrued. Where a loss is not probable but is reasonably possible or where a loss in excess of the
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