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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2021
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-8703

https://cdn.kscope.io/248fbb40d47e08005bed3877e2d1cce0-wdc-20211001_g1.jpg
WESTERN DIGITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware33-0956711
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
5601 Great Oaks ParkwaySan Jose,California95119
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (408) 717-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.01 Par Value Per ShareWDCThe Nasdaq Stock Market LLC
 (Nasdaq Global Select Market)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
As of the close of business on October 28, 2021, 311,622,921 shares of common stock, par value $0.01 per share, were outstanding.



WESTERN DIGITAL CORPORATION
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets — As of October 1, 2021 and July 2, 2021
Condensed Consolidated Statements of Operations — Three Months Ended October 1, 2021 and October 2, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss) — Three Months Ended October 1, 2021 and October 2, 2020
Condensed Consolidated Statements of Cash Flows — Three Months Ended October 1, 2021 and October 2, 2020
Condensed Consolidated Statements of Shareholders' Equity — Three Months Ended October 1, 2021 and October 2, 2020
Notes to Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 6.Exhibits

Unless otherwise indicated, references herein to specific years and quarters are to our fiscal years and fiscal quarters, and references to financial information are on a consolidated basis. As used herein, the terms “we,” “us,” “our,” the “Company,” “WDC” and “Western Digital” refer to Western Digital Corporation and its subsidiaries, unless we state, or the context indicates, otherwise.

WDC, a Delaware corporation, is the parent company of our data storage business. Our principal executive offices are located at 5601 Great Oaks Parkway, San Jose, California 95119. Our telephone number is (408) 717-6000.

Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital or its affiliates in the U.S. and/or other countries. All other trademarks, registered trademarks and/or service marks, indicated or otherwise, are the property of their respective owners.


3

Table of Contents
FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “would,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” and the like, or the use of future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Examples of forward-looking statements include, but are not limited to, statements concerning: expectations regarding the effects of the COVID-19 pandemic and measures intended to reduce its spread; expectations regarding supply chain conditions and constraints; expectations regarding demand trends and market conditions for our products and expected future financial performance; expectations regarding our product momentum and product development and technology plans; expectations regarding capital expenditure plans and investments, including relating to our Flash Ventures joint venture with Kioxia Corporation (“Kioxia”), and sources of funding for those expenditures; and our beliefs regarding the sufficiency of our available liquidity to meet our working capital, debt and capital expenditure needs.

These forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are based on management’s current views and assumptions. They are conditioned upon and involve a number of risks, uncertainties and other factors that could cause actual results or performance to differ materially from those expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to:

future responses to and effects of the COVID-19 pandemic;
volatility in global economic conditions;
impact of business and market conditions;
impact of competitive products and pricing;
our development and introduction of products based on new technologies and expansion into new data storage markets;
risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and our strategic relationships;
difficulties or delays in manufacturing or other supply chain disruptions;
hiring and retention of key employees;
our substantial level of debt and other financial obligations;
changes to our relationships with key customers;
disruptions in operations from cyberattacks or other system security risks;
actions by competitors;
risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; and
the other risks and uncertainties disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended July 2, 2021 (the “2021 Annual Report on Form 10-K”).

You are urged to carefully review the disclosures we make concerning these risks and review the additional disclosures we make concerning material risks and other factors that may affect the outcome of our forward-looking statements and our business and operating results, including those made in Part I, Item 1A of our 2021 Annual Report on Form 10-K and any of those made in our other reports filed with the Securities and Exchange Commission, including under “Risk Factors” in Item 1A of subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that may from time to time amend, supplement or supersede the risks and uncertainties disclosed in the 2021 Annual Report on Form 10-K. You are cautioned not to place undue reliance on the forward-looking statements included in this Quarterly Report on Form 10-Q, which speak only as of the date of this document. We do not intend, and undertake no obligation, to update or revise these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.
4

Table of Contents
PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements (unaudited)

WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
October 1,
2021
July 2,
2021
ASSETS
Current assets:
Cash and cash equivalents$3,290 $3,370 
Accounts receivable, net2,446 2,257 
Inventories3,544 3,616 
Other current assets576 514 
Total current assets9,856 9,757 
Property, plant and equipment, net3,260 3,188 
Notes receivable and investments in Flash Ventures1,646 1,586 
Goodwill10,066 10,066 
Other intangible assets, net364 442 
Other non-current assets1,199 1,093 
Total assets$26,391 $26,132 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,896 $1,934 
Accounts payable to related parties378 398 
Accrued expenses1,617 1,653 
Accrued compensation567 634 
Current portion of long-term debt251 251 
Total current liabilities4,709 4,870 
Long-term debt8,270 8,474 
Other liabilities2,051 2,067 
Total liabilities15,030 15,411 
Commitments and contingencies (Notes 9, 10, 12 and 16)
Shareholders’ equity:
Preferred stock, $0.01 par value; authorized — 5 shares; issued and outstanding — none
  
Common stock, $0.01 par value; authorized — 450 shares; issued — 312 shares; outstanding — 311 shares and 308 shares, respectively
3 3 
Additional paid-in capital3,401 3,608 
Accumulated other comprehensive loss(167)(197)
Retained earnings8,149 7,539 
Treasury stock — common shares at cost; 1 shares and 4 shares, respectively
(25)(232)
Total shareholders’ equity11,361 10,721 
Total liabilities and shareholders’ equity$26,391 $26,132 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months Ended
October 1,
2021
October 2,
2020
Revenue, net$5,051 $3,922 
Cost of revenue3,386 3,018 
Gross profit1,665 904 
Operating expenses:
Research and development578 555 
Selling, general and administrative291 256 
Employee termination, asset impairment, and other charges18 23 
Total operating expenses887 834 
Operating income778 70 
Interest and other income (expense):
Interest income2 2 
Interest expense(78)(84)
Other income, net2 9 
Total interest and other expense, net(74)(73)
Income (loss) before taxes704 (3)
Income tax expense94 57 
Net income (loss)$610 $(60)
Income (loss) per common share
Basic$1.97 $(0.20)
Diluted$1.93 $(0.20)
Weighted average shares outstanding:
Basic310 303 
Diluted316 303 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(Unaudited)
Three Months Ended
October 1,
2021
October 2,
2020
Net income (loss)$610 $(60)
Other comprehensive income, before tax:
Actuarial pension gain1 1 
Foreign currency translation adjustment4 32 
Net unrealized gain on derivative contracts and available-for-sale securities33 30 
Total other comprehensive income, before tax38 63 
Income tax expense related to items of other comprehensive income, before tax(8)(7)
Other comprehensive income, net of tax30 56 
Total comprehensive income (loss)$640 $(4)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended
October 1,
2021
October 2,
2020
Cash flows from operating activities
Net income (loss)$610 $(60)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization250 374 
Stock-based compensation76 76 
Deferred income taxes27 11 
Loss on disposal of assets 1 
Amortization of debt discounts10 10 
Other non-cash operating activities, net(12)(6)
Changes in:
Accounts receivable, net(188)282 
Inventories73 (285)
Accounts payable(41)99 
Accounts payable to related parties(20)(3)
Accrued expenses(36)(23)
Accrued compensation(67)26 
Other assets and liabilities, net(161)(139)
Net cash provided by operating activities521 363 
Cash flows from investing activities
Purchases of property, plant and equipment(245)(337)
Proceeds from the sale of property, plant and equipment 7 
Notes receivable issuances to Flash Ventures(165)(114)
Notes receivable proceeds from Flash Ventures113 277 
Strategic investments and other, net(15)1 
Net cash used in investing activities(312)(166)
Cash flows from financing activities
Issuance of stock under employee stock plans2 1 
Taxes paid on vested stock awards under employee stock plans(78)(41)
Repayment of debt(213)(213)
Net cash used in financing activities(289)(253)
Effect of exchange rate changes on cash 3 
Net decrease in cash and cash equivalents(80)(53)
Cash and cash equivalents, beginning of year3,370 3,048 
Cash and cash equivalents, end of period$3,290 $2,995 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$221 $144 
Cash paid for interest$99 $104 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at July 2, 2021312 $3 (4)$(232)$3,608 $(197)$7,539 $10,721 
Net income— — — — — — 610 610 
Employee stock plans— — 3 207 (283)— — (76)
Stock-based compensation— — — — 76 — — 76 
Actuarial pension gain— — — — — 1 — 1 
Foreign currency translation adjustment— — — — — 4 — 4 
Net unrealized gain on derivative contracts— — — — — 25 — 25 
Balance at October 1, 2021312 $3 (1)$(25)$3,401 $(167)$8,149 $11,361 

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WESTERN DIGITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
Common StockTreasury StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Shareholders’ Equity
SharesAmountSharesAmount
Balance at July 3, 2020312 $3 (10)$(737)$3,717 $(157)$6,725 $9,551 
Net income— — — — — — (60)(60)
Adoption of new accounting standards— — — — — — (7)(7)
Employee stock plans— — 2 216 (256)— — (40)
Stock-based compensation— — — — 76 — — 76 
Actuarial pension gain— — — — — 1 — 1 
Foreign currency translation adjustment— — — — — 32 — 32 
Net unrealized loss on derivative contracts— — — — — 23 — 23 
Balance at October 2, 2020312 $3 (8)$(521)$3,537 $(101)$6,658 $9,576 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1.    Organization and Basis of Presentation

Western Digital Corporation (“Western Digital” or the “Company”) is a leading developer, manufacturer, and provider of data storage devices and solutions that address the evolving needs of the information technology (“IT”) industry and the infrastructure that enables the proliferation of data in virtually every other industry. The Company creates environments for data to thrive. The Company is driving the innovation needed to help customers capture, preserve, access and transform an ever-increasing diversity of data. Everywhere data lives, from advanced data centers to mobile sensors to personal devices, the Company’s industry-leading solutions deliver the possibilities of data.

The accounting policies followed by the Company are set forth in Part II, Item 8, Note 1, Organization and Basis of Presentation, of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10‑K for the fiscal year ended July 2, 2021. In the opinion of management, all adjustments necessary to fairly state the Condensed Consolidated Financial Statements have been made. All such adjustments are of a normal, recurring nature. Certain information and footnote disclosures normally included in the Consolidated Financial Statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10‑K for the fiscal year ended July 2, 2021. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

Fiscal Year

The Company’s fiscal year ends on the Friday nearest to June 30 and typically consists of 52 weeks. Approximately every five to six years, the Company reports a 53-week fiscal year to align the fiscal year with the foregoing policy. Fiscal years 2022, which ends on July 1, 2022, and 2021, which ended on July 2, 2021, are each comprised of 52 weeks, with all quarters presented consisting of 13 weeks.

Use of Estimates

Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with U.S. GAAP. These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented with consideration given to the potential impacts of the ongoing COVID-19 pandemic. However, actual results could differ materially from these estimates and be significantly affected by the severity and duration of the pandemic, the extent of actions to contain or treat COVID-19, the timing, distribution, efficacy and public acceptance of vaccines around the world, any possible resurgence of COVID-19, including the emergence of more contagious or vaccine-resistant variants and how quickly and to what extent normal economic and operating activity can resume.


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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 2.    Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The Company adopted this ASU on July 3, 2021, which is the beginning of fiscal 2022, and its adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock and results in fewer instruments with embedded conversion features being separately recognized from the host contract as compared with current standards. Those instruments that do not have a separately recognized embedded conversion feature will no longer recognize a debt issuance discount related to such a conversion feature and would recognize less interest expense on a periodic basis. Additionally, the ASU amends the calculation of the share dilution impact related to a conversion feature and eliminates the treasury method as an option. For instruments that do not have a component mandatorily settled in cash, the change will likely result in a higher amount of share dilution in the calculation of earnings per share. The Company expects to adopt this ASU in the first quarter of fiscal 2023, and is currently assessing the impact of adoption.
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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 3.    Segment Information

The Company manufactures, markets, and sells data storage devices and solutions in the U.S. and in foreign countries through its sales personnel, dealers, distributors, retailers, and subsidiaries. Historically, the Company had been managed and reported under a single operating segment. Late in the first quarter of fiscal 2021, the Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), announced a decision to reorganize the Company’s business by forming two separate product business units: hard disk drives (“HDD”) and flash-based products (“Flash”). To align with the new operating model and business structure, the Company made management organizational changes and implemented new reporting modules and processes to provide discrete information to manage the business. Effective July 3, 2021, the Company’s management finalized its assessment of the Company’s operating segments and concluded that the Company now has two reportable segments: HDD and Flash.

The CODM evaluates performance of the Company and makes decisions regarding allocation of resources based on each operating segment’s net revenue and gross margin, which are summarized below. Because of the integrated nature of the Company’s production and distribution activities, separate segment asset measures are not available or reviewed by the CODM to evaluate the performance of or to allocate resources to the segments.

The following table summarizes the operating performance of the Company’s reportable segments:

Three Months Ended
October 1,
2021
October 2,
2020
(in millions)
Net revenue:
HDD$2,561 $1,844 
Flash2,490 2,078 
Total net revenue$5,051 $3,922 
Gross profit
HDD$792 $483 
Flash921 548 
Total gross profit for segments1,713 1,031 
Unallocated corporate items:
Amortization of acquired intangible assets39 145 
Stock-based compensation expense9 12 
Charges related to a power outage incident and related recovery (30)
Total unallocated corporate items(48)(127)
Consolidated gross profit$1,665 $904 
Gross margin:
HDD30.9 %26.2 %
Flash37.0 %26.4 %
Consolidated gross margin33.0 %23.0 %











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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Disaggregated Revenue

The Company’s broad portfolio of technology and products address multiple end markets. In the fiscal first quarter of 2022, the Company refined the end markets it reports to be Cloud, Client and Consumer. Cloud represents a large and growing end market comprised primarily of products for public or private cloud environments and end customers, which the Company believes it is uniquely positioned to address as the only provider of both hard drive and flash products. Through the Client end market, the Company provides its original equipment manufacturer (“OEM”) and channel customers a broad array of high-performance flash and hard drive solutions across personal computer, mobile, gaming, automotive, virtual reality headsets, at-home entertainment, and industrial spaces. The Consumer end market is highlighted by the Company’s broad range of retail and other end-user products, which capitalize on the strength of the Company’s product brand recognition and vast points of presence around the world.

The Company’s disaggregated revenue information is as follows:
Three Months Ended
October 1,
2021
October 2,
2020
(in millions)
Revenue by End Market
Cloud$2,225 $1,291 
Client1,853 1,750 
Consumer973 881 
Total Revenue$5,051 $3,922 
Revenue by Geography
Americas$1,614 $1,079 
Europe, Middle East and Africa762 629 
Asia2,675 2,214 
Total Revenue$5,051 $3,922 

The Company’s top 10 customers accounted for 43% of its net revenue for the three months ended October 1, 2021, and 44% of its net revenue for the three months ended October 2, 2020. For the three months ended October 1, 2021 and October 2, 2020, no single customer accounted for 10% or more of the Company’s net revenue.

Goodwill

In connection with the Company’s determination of its reportable segments, effective July 3, 2021, the Company allocated its goodwill between its segments based on the estimated relative fair values of the business units. In addition, management performed a goodwill impairment assessment for each segment and concluded no impairment indicators as of both the beginning and end of the three months ended October 1, 2021. The following table provides a summary of goodwill activity for the period.

HDDFlashTotal
(in millions)
Balance at July 3, 2021$4,328 $5,738 $10,066 
Foreign currency translation adjustment   
Balance at October 1, 2021$4,328 $5,738 $10,066 

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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4.    Revenues

Contract assets represent the Company’s rights to consideration where performance obligations are completed but the customer payments are not due until another performance obligation is satisfied. The Company did not have any contract assets as of either October 1, 2021 or July 2, 2021.

The Company incurs sales commissions and other direct incremental costs to obtain sales contracts. The Company has applied the practical expedient to recognize the direct incremental costs of obtaining contracts as an expense when incurred if the amortization period is expected to be one year or less or the amount is not material, with these costs charged to Selling, general and administrative expenses. Other direct incremental costs to obtain contracts that have an expected benefit of greater than one year are amortized over the period of expected cash flows from the related contracts, and the amortization expense is recorded as a reduction to revenue. Total capitalized contract costs as of October 1, 2021 and July 2, 2021 as well as the related amortization for the three months ended October 1, 2021 and October 2, 2020 were not material.

Contract liabilities relate to customers’ payments in advance of performance under the contract and primarily relate to remaining performance obligations under support and maintenance contracts. As of October 1, 2021 and July 2, 2021, contract liabilities were not material.

The Company applies the practical expedients and does not disclose transaction price allocated to the remaining performance obligations for (i) arrangements that have an original expected duration of one year or less, which mainly consist of support and maintenance contracts, and (ii) variable consideration amounts for sale-based or usage-based royalties for IP license arrangements, which typically range longer than one year. Remaining performance obligations are mainly attributed to right-to-access patent license arrangements and customer support and service contracts, which will be recognized over the remaining contract period. The transaction price allocated to the remaining performance obligations as of October 1, 2021 was $61 million, which is mainly attributable to the functional IP license and service arrangements. The Company expects to recognize this amount as revenue as follows: $30 million during the remainder of fiscal 2022, $30 million in fiscal 2023, and $1 million in fiscal 2024 and thereafter.


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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 5.    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. The Company did not sell any trade accounts receivable during the three months ended October 1, 2021. During the three months ended October 2, 2020, the Company sold trade accounts receivable for cash proceeds of $128 million. The discounts on the trade accounts receivable sold were not material and were recorded within Other income, net in the Condensed Consolidated Statements of Operations. There were no factored receivables outstanding as of October 1, 2021 and July 2, 2021.

Inventories
October 1,
2021
July 2,
2021
(in millions)
Inventories:
Raw materials and component parts$1,720 $1,623 
Work-in-process1,036 1,088 
Finished goods788 905 
Total inventories$3,544 $3,616 

Property, plant and equipment, net
October 1,
2021
July 2,
2021
(in millions)
Property, plant and equipment:
Land$278 $278 
Buildings and improvements1,875 1,854 
Machinery and equipment8,102 7,860 
Computer equipment and software455 440 
Furniture and fixtures52 51 
Construction-in-process419 476 
Property, plant and equipment, gross11,181 10,959 
Accumulated depreciation(7,921)(7,771)
Property, plant and equipment, net$3,260 $3,188 

Intangible assets
October 1,
2021
July 2,
2021
(in millions)
Finite-lived intangible assets$5,508 $5,508 
In-process research and development80 80 
Accumulated amortization(5,224)(5,146)
Intangible assets, net$364 $442 

As part of prior acquisitions, the Company recorded at the time of the acquisition acquired in-process research and development (“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.
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WESTERN DIGITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Product warranty liability

Changes in the warranty accrual were as follows:
Three Months Ended
October 1,
2021
October 2,
2020
(in millions)
Warranty accrual, beginning of period$363 $408 
Charges to operations40 35 
Utilization(23)(31)
Changes in estimate related to pre-existing warranties(10)(21)
Warranty accrual, end of period$370 $391 

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:
October 1,
2021
July 2,
2021
(in millions)
Warranty accrual
Current portion (included in Accrued expenses)$175 $175 
Long-term portion (included in Other liabilities)195 188