Supplemental Financial Statement Data

9 Months Ended

Apr. 03, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Financial Statement Data

Supplemental Financial Statement Data

Accounts receivable, net

From time to time, in connection with factoring agreements, the Company sells trade accounts receivable without recourse to third party purchasers in exchange for cash. During the nine months ended April 3, 2020 and March 29, 2019, the Company sold trade accounts receivable and received cash proceeds of $298 million and $702 million, respectively. The discounts on the trade accounts receivable sold during the periods were not material and were recorded within Other income (expense), net in the Condensed Consolidated Statements of Operations. As of April 3, 2020 and June 28, 2019, the amount of factored receivables that remained outstanding was $100 million and $318 million, respectively.

Inventories

	April 3, 2020		June 28, 2019
	(in millions)
Inventories:
Raw materials and component parts	$	1,302	$	1,142
Work-in-process	842		968
Finished goods	947		1,173
Total inventories	$	3,091	$	3,283

Property, plant and equipment, net

	April 3, 2020		June 28, 2019
	(in millions)
Property, plant and equipment:
Land	$	294	$	294
Buildings and improvements	1,823		1,743
Machinery and equipment	7,290		7,267
Computer equipment and software	437		441
Furniture and fixtures	51		56
Construction-in-process	190		202
Property, plant and equipment, gross	10,085		10,003
Accumulated depreciation	(7,350)		(7,160)
Property, plant and equipment, net	$	2,735	$	2,843

Goodwill

	Carrying Amount
	(in millions)
Balance at June 28, 2019	$	10,076
Goodwill recorded in connection with an acquisition	14
Reduction in goodwill in connection with disposition of business	(21)
Foreign currency translation adjustment	(3)
Balance at April 3, 2020	$	10,066

Acquisition

On September 10, 2019, the Company acquired substantially all the assets of Kazan Networks, Inc., an innovator in high-performance networking and non-volatile memory express over fabrics technology ("NVMe-oF"), and an industry leader in application-specific integrated circuit and adapter solutions to connect storage platforms and systems over ethernet fabrics. The purchase price of this acquisition was $22 million in cash, with net assets acquired primarily consisting of in-process research and development (“IPR&D”) of $8 million and $14 million allocated to Goodwill. Goodwill is primarily attributable to the benefits the Company expects to derive from diversifying product offerings in its Data Center Devices and Solutions and Client Solutions end markets as well as the acquired workforce. The expenses incurred by the Company related to the acquisition as well as the revenues and earnings related to the acquisition were not material to the Condensed Consolidated Financial Statements.

Dispositions

In September 2019, the Company announced the sale of its IntelliFlash business and intention to exit Storage Systems, which consists of IntelliFlash and ActiveScale. These actions will allow the Company to redirect investments to other high value priorities. In November 2019, the Company completed its sale of IntelliFlash for a price of $28 million, to be collected over the next three years. The sale of the IntelliFlash business included an immaterial amount of inventory, other tangible and intangible assets, and goodwill and resulted in a gain of approximately $17 million recorded in Employee termination, asset impairment, and other charges in the Condensed Consolidated Statements of Operations for both the three and nine months ended April 3, 2020. Additionally, in March 2020, the Company completed the sale of ActiveScale. The net assets sold and the proceeds from the sale of ActiveScale were not material. The revenues and expenses related to these businesses were not material to the Condensed Consolidated Financial Statements and did not qualify to be reported as discontinued operations. The operating results of these businesses have been reflected in the Company’s results from continuing operations in the Condensed Consolidated Statements of Operations for all periods presented through the date of disposition.

Intangible assets

	April 3, 2020		June 28, 2019
	(in millions)
Finite-lived intangible assets	$	5,725	$	5,824
In-process research and development	80		72
Accumulated amortization	(4,679)		(4,185)
Intangible assets, net	$	1,126	$	1,711

As part of prior acquisitions, the Company recorded at the time of the acquisition acquired IPR&D for projects in progress that had not yet reached technological feasibility. IPR&D is initially accounted for as an indefinite-lived intangible asset. Once a project reaches technological feasibility, the Company reclassifies the balance to existing technology and begins to amortize the intangible asset over its estimated useful life.

Product warranty liability

Changes in the warranty accrual were as follows:

	Three Months Ended				Nine Months Ended
	April 3, 2020		March 29, 2019		April 3, 2020		March 29, 2019
	(in millions)
Warranty accrual, beginning of period	$	378	$	337	$	350	$	318
Charges to operations	45		38		144		119
Utilization	(41)		(40)		(124)		(108)
Changes in estimate related to pre-existing warranties	1		(4)		13		2
Warranty accrual, end of period	$	383	$	331	$	383	$	331

The current portion of the warranty accrual is classified in Accrued expenses and the long-term portion is classified in Other liabilities as noted below:

	April 3, 2020		June 28, 2019
	(in millions)
Warranty accrual
Current portion (included in Accrued expenses)	$	185	$	188
Long-term portion (included in Other liabilities)	198		162
Total warranty accrual	$	383	$	350

Other liabilities

	April 3, 2020		June 28, 2019
	(in millions)
Other liabilities:
Non-current net tax payable	$	830	$	928
Payables related to unrecognized tax benefits	716		699
Other non-current liabilities	906		713
Total other liabilities	$	2,452	$	2,340

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) (“AOCI”), net of tax refers to expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income. The following table illustrates the changes in the balances of each component of AOCI:

	Actuarial Pension Gains (Losses)		Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Derivative Contracts		Total Accumulated Comprehensive Income (Loss)
	(in millions)
Balance at June 28, 2019	$	(53)	$	4	$	(19)	$	(68)
Other comprehensive income (loss) before reclassifications	4		(21)		(98)		(115)
Amounts reclassified from accumulated other comprehensive income (loss)	—		—		(17)		(17)
Income tax benefit (expense) related to items of other comprehensive income (loss)	(1)		1		17		17
Net current-period other comprehensive income (loss)	3		(20)		(98)		(115)
Balance at April 3, 2020	$	(50)	$	(16)	$	(117)	$	(183)

During the three and nine months ended April 3, 2020 and March 29, 2019, the amounts reclassified out of AOCI related to derivative contracts were substantially all charged to Cost of revenue in the Condensed Consolidated Statements of Operations.