Court of Appeals decision by the Minnesota Supreme Court is discretionary, we recorded an accrual of $681 million
for this matter in our financial statements for the three months ended June 28, 2013. This amount is in addition to
the $25 million previously accrued in the fourth quarter of fiscal 2011. The total amount accrued of $706 million
represents the amount of the final arbitration award, plus interest accrued on the initial arbitration award at the stat-
utory rate of 10% from January 24, 2012 through June 28, 2013.
pared to 207 million units for the prior year. The increase in net revenue resulted primarily from a $17 increase in
ASP from $45 to $62, partially offset by lower shipments. These changes were as a result of the severe supply con-
straints across the hard drive industry brought about by the Thailand floods.
allocate products to our customers as a result of the flooding in Thailand by balancing their immediate needs with
their prevailing inventory positions in order to maximize the availability of hard drive products to the end customer
within the shortest time horizon. In addition, as a result of our acquisition of HGST, our revenue by channel mix has
become more heavily weighted toward OEM.
enue. For 2012, these programs represented 6% of gross revenues compared to 11% in 2011. This decrease was
mainly driven by the severe supply constraints brought about by the Thailand floods. These amounts generally vary
according to several factors including industry conditions, seasonal demand, competitor actions, channel mix and
overall availability of product.
increase was primarily due to an increase in ASP brought about by the impact of the Thailand flooding, offset by $91
million for costs recognized upon the sale of inventory that was written-up to fair value and $48 million for amor-
tization of intangibles related to the Acquisition.
This increase in R&D expense was primarily due to increased expense related to the business of HGST and the con-
tinued investment in product development to support new programs. As a percentage of net revenue, R&D expense
increased to 8.5% in 2012 compared to 7.4% in 2011. SG&A expense was $518 million in 2012, an increase of
$211 million, or 69%, as compared to 2011. This increase in SG&A expense was primarily due to increased expense
related to the business of HGST, the expansion of sales and marketing to support new products and growing markets,
$37 million of incremental expenses related to the acquisition of HGST and $15 million for amortization of
intangibles related to the Acquisition. SG&A expense as a percentage of net revenue increased to 4.2% in 2012 com-
pared to 3.2% in 2011.
and $27 million in wage continuation during the shutdown period of our facilities, offset by $21 million of insurance
recoveries and other cost reimbursements.
ance and a $5 million increase in debt commitment fees incurred prior to the closing of the Acquisition, offset by $4