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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Maintenance of Competitive Requirement
In connection with the regulatory approval process of the Acquisition, the Company agreed to certain conditions
required by the Ministry of Commerce of the People's Republic of China ("MOFCOM"), including adopting measures
to maintain HGST as an independent competitor until MOFCOM agrees otherwise (with the minimum period being
two years from the Closing Date). The Company worked closely with MOFCOM to finalize an operations plan that
outlines in more detail the conditions of the competitive requirement.
Note 15.
Thailand Flooding
In October 2011, severe flooding in Thailand inundated all of the Company's Thailand manufacturing facilities
and submerged certain equipment located there. These facilities included the Company's magnetic head slider fab-
rication facilities, as well as its hard drive, head gimbal assembly and head stack assembly facilities. As a result, the
Company recorded $235 million of flood-related charges in fiscal 2012, offset by $21 million of insurance recoveries
and other cost reimbursements. These charges are separately stated as a line item, "Charges related to flooding, net,"
within operating expenses on the consolidated statements of income.
The Company maintains insurance coverage that provides property and business interruption coverage in the
event of losses arising from flooding. The Company has submitted claims to its insurers and is awaiting a determi-
nation of how much of its total losses will be covered by insurance.
Note 16.
Employee Termination Benefits and Other Charges
The Company incurred $138 million and $80 million of charges in 2013 and 2012, respectively, to realign its
operations with anticipated market demand. These charges were classified as operating expenses and included within
employee termination benefits and other charges in the consolidated statements of income. The following table
summarizes the charges in 2013 (in millions):
Employee
Termination
Benefits
Impairment
of Assets
Contract and
Other
Termination
Costs
Total
Accrual at June 29, 2012 . . . . . . . . . . . . . . . . . . . . . .
$ --
$ --
$ 16
$ 16
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
109
14
15
138
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(66)
--
(17)
(83)
Non-cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)
(14)
(5)
(25)
Accrual at June 28, 2013 . . . . . . . . . . . . . . . . . . . . . .
$ 37
$ --
$ 9
$ 46
The employee termination benefits relate to headcount reductions at various worldwide locations, including the
Company's voluntary separation program (the "Program") for the U.S.-based employees of its WD subsidiary, which
was announced on January 23, 2013. The remaining liabilities are expected to be primarily relieved and the Program
is expected to be substantially completed by the first quarter of fiscal 2014.
During 2012, the Company recorded $56 million of asset impairment charges, $16 million of contract termi-
nation and other exit costs and $8 million of employee termination benefits.
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