2. Supplemental Financial Statement Data

Inventories; Property, Plant and Equipment; and Other Intangible Assets



	October 3, 2014			June 27, 2014
	(in millions)
Inventories:
Raw materials and component parts	$	178		$	168
Work-in-process	509			493
Finished goods	585			565
Total inventories	$	1,272		$	1,226
Property, plant and equipment:
Property, plant and equipment	$	8,244		$	8,123
Accumulated depreciation	(5,042		)	(4,830		)
Property, plant and equipment, net	$	3,202		$	3,293
Other intangible assets:
Other intangible assets	$	980		$	984
Accumulated amortization	(574		)	(530		)
Other intangible assets, net	$	406		$	454

Warranty

The Company records an accrual for estimated warranty costs when revenue is recognized. The Company generally warrants its products for a period of one to five years. The warranty provision considers estimated product failure rates and trends, estimated replacement costs, estimated repair costs which include scrap costs, and estimated costs for customer compensatory claims related to product quality issues, if any. A statistical warranty tracking model is used to help prepare estimates and assist the Company in exercising judgment in determining the underlying estimates. The statistical tracking model captures specific detail on hard drive reliability, such as factory test data, historical field return rates, and costs to repair by product type. Management’s judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited field experience with those products upon which to base warranty estimates. Management reviews the warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact current period gross profit and income. Such changes are generally a result of differences between forecasted and actual return rate experience and costs to repair. If actual product return trends, costs to repair returned products or costs of customer compensatory claims differ significantly from estimates, future results of operations could be materially affected. Changes in the warranty accrual were as follows (in millions):



	Three Months Ended
	October 3, 2014			September 27, 2013
Warranty accrual, beginning of period	$	182		$	187
Warranty liability assumed as a result of acquisition	—			3
Charges to operations	49			40
Utilization	(49		)	(49		)
Changes in estimate related to pre-existing warranties	19			14
Warranty accrual, end of period	$	201		$	195

The long-term portion of the warranty accrual classified in other liabilities was $67 million at October 3, 2014 and $63 million at June 27, 2014.

Investments

The following table summarizes, by major type, the fair value and cost basis of the Company’s investments as of October 3, 2014 (in millions):



	Cost Basis		Unrealized Gains (Losses)		Fair Value
Available-for-sale securities:
U.S. Treasury securities	$	203	$	—	$	203
U.S. Government agency securities	79		—		79
Commercial paper	119		—		119
Certificates of deposit	53		—		53
Total	$	454	$	—	$	454

Short-term investments					$	222
Included in other non-current assets					232
Total					$	454

The fair value of the Company’s investments classified as available-for-sale securities at October 3, 2014, by remaining contractual maturity, were as follows (in millions):



	Cost Basis		Fair Value
Due in less than one year:	$	222	$	222
Due in one to five years:	232		232
Total	$	454	$	454

The following table summarizes, by major type, the fair value and cost basis of the Company’s investments as of June 27, 2014 (in millions):



	Cost Basis		Unrealized Gains (Losses)		Fair Value
Available-for-sale securities:
U.S. Treasury securities	$	180	$	—	$	180
U.S. Government agency securities	88		—		88
Commercial paper	165		—		165
Certificates of deposit	66		—		66
Total	$	499	$	—	$	499

Short-term investments					$	284
Included in other non-current assets					215
Total					$	499

The fair value of the Company’s investments classified as available-for-sale securities at June 27, 2014, by remaining contractual maturity, were as follows (in millions):



	Cost Basis		Fair Value
Due in less than one year:	$	284	$	284
Due in one to five years:	215		215
Total	$	499	$	499

The Company determined no available-for-sale securities were other-than-temporarily impaired in the three months ended October 3, 2014. For more information on the Company's available-for-sale securities, see Note 7 below.

In addition, the Company enters into certain strategic investments for the promotion of business and strategic objectives. These strategic investments are recorded at cost within other non-current assets in the consolidated balance sheets and were not material to the condensed consolidated financial statements as of October 3, 2014 and June 27, 2014.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income. The Company’s other comprehensive income (loss) is comprised of unrealized gains and losses on foreign exchange contracts. There were no unrealized gains or losses on the Company's available-for-sale securities or actuarial gains and losses related to pensions in the three months ended October 3, 2014. In addition, the income tax impact on components of other comprehensive income (loss) is immaterial for all periods presented.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive income (loss) for the three months ended October 3, 2014 (in millions):



	Actuarial Pension Gain		Unrealized Gain (Loss) on Foreign Exchange Contracts			Accumulated Other Comprehensive Income (Loss)
Balance at June 27, 2014	$	7	$	5		$	12
Other comprehensive income (loss) before reclassifications	—		(22		)	(22		)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(4		)	(4		)
Net current-period other comprehensive income (loss)	—		(26		)	(26		)
Balance at October 3, 2014	$	7	$	(21	)	$	(14	)

The following table illustrates the changes in the balances of each component of accumulated other comprehensive income (loss) for the three months ended September 27, 2013 (in millions):



	Actuarial Pension Gain		Unrealized Gain (Loss) on Foreign Exchange Contracts			Accumulated Other Comprehensive Income (Loss)
Balance at June 28, 2013	$	11	$	(46	)	$	(35	)
Other comprehensive income (loss) before reclassifications	—		(11		)	(11		)
Amounts reclassified from accumulated other comprehensive income (loss)	—		27			27
Net current-period other comprehensive income	—		16			16
Balance at September 27, 2013	$	11	$	(30	)	$	(19	)