15. Commitments and Contingencies

Operating Lease Commitments

As of October 25, 2013, future annual minimum lease payments under non-cancelable operating leases with an initial term in excess of one year totaled $215.7 million.

Purchase Orders and Other Commitments

In the normal course of business we make commitments to our third-party contract manufacturers, to manage manufacturer lead times and meet product forecasts, and to other parties, to purchase various key components used in the manufacture of our products. We establish accruals for estimated losses on purchased components to the extent we believe it is probable that such components will not be utilized in future operations. To the extent that such forecasts are not achieved, our commitments and associated accruals may change. As of October 25, 2013, we had $306.8 million in non-cancelable purchase commitments with our contract manufacturers. In addition, we recorded a liability for firm, non-cancelable and unconditional purchase commitments with contract manufacturers for quantities in excess of our future demand forecasts through a charge to cost of product sales. As of October 25, 2013 and April 26, 2013, such liability amounted to $10.9 million and $9.5 million, respectively, and is included in other current liabilities in our condensed consolidated balance sheets.

In addition to commitments with contract manufacturers and component suppliers, we have open purchase orders and contractual obligations associated with our ordinary course business for which we have not received goods or services. As of October 25, 2013, we had $33.6 million in capital purchase commitments and $202.4 million in other purchase commitments.

Product Warranties

We provide customers a warranty on software of ninety days to five years and a warranty on hardware of one to five years. The following table summarizes our warranty reserves (in millions):


	Three Months Ended						Six Months Ended
	October 25, 2013			October 26, 2012			October 25, 2013			October 26, 2012
Beginning balance	$	119.8		$	96.5		$	117.2		$	83.1
Expense accrued during the period		14.3			27.1			38.3			50.8
Warranty costs incurred		(18.1	)		(11.8	)		(39.5	)		(22.1	)

Ending balance	$	116.0		$	111.8		$	116.0		$	111.8

Our warranty reserves were reported in our condensed consolidated balance sheets as follows (in millions):


	October 25, 2013		April 26, 2013
Other current liabilities	$	78.1	$	81.6
Other long-term liabilities		37.9		35.6

Total	$	116.0	$	117.2

Financing Guarantees

Some of our customers have entered into recourse and non-recourse financing leasing arrangements using third-party financing companies, and in some situations, we enter into customer financing arrangements for our products and services that are contemporaneously sold on a recourse or non-recourse basis to third-party financing companies. Under the terms of recourse leases, which are generally three years or less, we remain liable for the aggregate unpaid remaining lease payments to the third-party leasing companies in the event of end-user customer default. These arrangements are generally collateralized by a security interest in the underlying assets. Under the terms of the nonrecourse leases, we do not have any continuing obligations or liabilities to the third-party financing companies. Where we provide a guarantee for recourse leases, we defer revenues subject to the industry-specific software revenue recognition guidance, and recognize revenues for non-software deliverables in accordance with our multiple deliverable revenue arrangement policy. In connection with certain recourse financing arrangements, we receive advance payments associated with undelivered elements that are subject to customer refund rights. We defer revenue associated with these advance payments until the related refund rights expire and we perform the services.

The following schedule of financing guarantees represents the total maximum potential future payments under financing arrangements with third parties, and the related deferred revenue (in millions):


	October 25, 2013			April 26, 2013
Maximum guaranteed payment contingencies	$	215.6		$	182.4
Deferred revenue associated with financing guarantees		(199.0	)		(168.6	)

Maximum potential future payments relating to financing guarantees, net of associated deferred revenue	$	16.6		$	13.8

To date, we have not experienced material losses under our lease financing programs or other financing arrangements.

Legal Contingencies

When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency.

We are subject to various legal proceedings and claims that arise in the normal course of business. No accrual has been recorded as of October 25, 2013 related to such matters as they are not probable and/or reasonably estimable.