Western Digital 2013 Annual Report Download - page 53

It is not possible to determine the maximum potential amount under these indemnification agreements due to
the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, we have not
incurred material costs as a result of obligations under these agreements.
Unrecognized Tax Benefits
As of June 28, 2013, the cash portion of our total recorded liability for unrecognized tax benefits was
$208 million. We estimate the timing of the future payments of these liabilities to be within the next one to eight
years. See Part II, Item 8, Note 9 in the Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K for information regarding our total tax liability for unrecognized tax benefits.
Stock Repurchase Program
On May 21, 2012, we announced that our Board of Directors authorized $1.5 billion for the repurchase of our
common stock through May 18, 2017. On September 13, 2012, we announced that the Board of Directors authorized
an additional $1.5 billion for the repurchase of our common stock and the extension of our stock repurchase program
until September 13, 2017. We repurchased 19.0 million shares of our common stock for a total cost of $842 million
in 2013. The remaining amount available to be purchased under our stock repurchase program as of June 28, 2013
was $2.0 billion. Subsequent to June 28, 2013 and through August 16, 2013, we repurchased an additional
2.3 million shares of our common stock for a total cost of $150 million. We may continue to repurchase our common
stock as we deem appropriate and market conditions allow. Repurchases under our stock repurchase program may be
made in the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan. We
expect stock repurchases to be funded principally by operating cash flows.
Cash Dividend Policy
On September 13, 2012, we announced that our Board of Directors had authorized the adoption of a quarterly
cash dividend policy. Under the cash dividend policy, holders of our common stock receive dividends when and as
declared by our Board of Directors. In 2013, we declared aggregate cash dividends of $1.00 per share of our common
stock, totaling $240 million, of which $181 million was paid during 2013. We may modify, suspend or cancel our
cash dividend policy in any manner and at any time. See Part II, Item 5 included in this Annual Report on Form 10-K
for further information.
Critical Accounting Policies and Estimates
We have prepared the accompanying consolidated financial statements in accordance with U.S. GAAP. The
preparation of the financial statements requires the use of judgments and estimates that affect the reported amounts of
revenues, expenses, assets, liabilities and shareholders’ equity. We have adopted accounting policies and practices that
are generally accepted in the industry in which we operate. We believe the following are our most critical accounting
policies that affect significant areas and involve judgment and estimates made by us. If these estimates differ sig-
nificantly from actual results, the impact to the consolidated financial statements may be material.
Revenue and Accounts Receivable
In accordance with standard industry practice, we provide distributors and retailers (collectively referred to as
“resellers”) with limited price protection for inventories held by resellers at the time of published list price reductions,
and we provide resellers and OEMs with other sales incentive programs. At the time we recognize revenue to resellers
and OEMs, we record a reduction of revenue for estimated price protection until the resellers sell such inventory to
their customers and we also record a reduction of revenue for the other programs in effect. We base these adjustments
on several factors including anticipated price decreases during the reseller holding period, resellers’ sell-through and
inventory levels, estimated amounts to be reimbursed to qualifying customers, historical pricing information and
customer claim processing. If customer demand for hard drives or market conditions differs from our expectations, our
operating results could be materially affected. We also have programs under which we reimburse qualified distrib-
utors and retailers for certain marketing expenditures, which are recorded as a reduction of revenue. These amounts
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