Western Digital 2014 Annual Report Download - page 76

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Product Warranty Liability
Changes in the warranty accrual for 2014, 2013 and 2012 were as follows (in millions):
2014 2013 2012
Warranty accrual, beginning of period ....... $187 $260 $170
Warranty liabilities assumed as a result of
acquisitions ........................ 4 — 139
Charges to operations .................. 170 178 154
Utilization ........................... (207) (221) (196)
Changes in estimate related to pre-existing
warranties ......................... 28 (30) (7)
Warranty accrual, end of period ............. $182 $187 $260
Accrued warranty also includes amounts classified in other liabilities in the consolidated balance sheets of $63
million at June 27, 2014 and $73 million at June 28, 2013.
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 $174 million for 2015, $55 million for 2016, $13
million for 2017, $6 million for 2018 and $3 million for 2019.
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
amount accrued is reasonably possible, the Company discloses an estimate of the amount of the loss or range of possi-
ble losses for the claim if a reasonable estimate can be made, unless the amount of such reasonably possible losses is
not material to the Company’s financial position, results of operations or cash flows. Unless otherwise stated below, for
each of the matters described below, the Company has either recorded an accrual for losses that are probable and
reasonably estimable or has determined that, while a loss is reasonably possible (including potential losses in excess of
the amounts accrued by the Company), a reasonable estimate of the amount of loss or range of possible losses with
respect to the claim or in excess of amounts already accrued by the Company cannot be made. The ability to predict
the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. The actual outcome of
such matters could differ materially from management’s estimates.
Solely for purposes of this footnote, “WD” refers to Western Digital Corporation or one or more of its sub-
sidiaries excluding HGST prior to the HGST Closing Date. HGST refers to Hitachi Global Storage Technologies
Holdings Pte. Ltd. or one or more of its subsidiaries as of the HGST Closing Date, and “the Company” refers to
Western Digital Corporation and all of its subsidiaries on a consolidated basis including HGST.
Intellectual Property Litigation
On June 20, 2008, plaintiff Convolve, Inc. (“Convolve”) filed a complaint in the Eastern District of Texas against
WD, HGST, and one other company alleging infringement of U.S. Patent Nos. 6,314,473 and 4,916,635. The complaint
sought unspecified monetary damages and injunctive relief. On October 10, 2008, Convolve amended its complaint to
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