Supplemental Financial Statement Data

Inventories



	December 29, 2017		June 30, 2017
	(in millions)
Inventories:
Raw materials and component parts	$	634	$	646
Work-in-process	667		632
Finished goods	980		1,063
Total inventories	$	2,281	$	2,341

Property, plant and equipment, net



	December 29, 2017			June 30, 2017
	(in millions)
Property, plant, and equipment:
Land and buildings	$	1,913		$	1,855
Machinery and equipment	7,011			6,815
Computer equipment and software	433			404
Furniture and fixtures	50			49
Leasehold improvements	253			259
Construction-in-process	175			144
Property, plant and equipment, gross	9,835			9,526
Accumulated depreciation	(6,781		)	(6,493		)
Property, plant, and equipment, net	$	3,054		$	3,033

Goodwill



	Carrying Amount
	(in millions)
Balance at June 30, 2017	$	10,014
Goodwill recorded in connection with acquisitions	61
Foreign currency translation adjustment	1
Balance at December 29, 2017	$	10,076

On September 15, 2017, the Company acquired substantially all the assets of Tegile Systems, Inc., a provider of flash and persistent-memory storage solutions for enterprise data center applications. On August 25, 2017, the Company acquired substantially all the assets of Upthere, Inc., a cloud services company. These acquisitions are primarily intended to help meet the evolving needs of customers, while driving long-term growth for the Company's existing data center and client solution products over the long term.

The aggregate purchase price of acquisitions during the six months ended December 29, 2017 was $99 million in cash, with net assets acquired primarily consisting of developed technology and other intangibles assets, of which $61 million was allocated to goodwill. Goodwill is primarily attributable to the benefits the Company expects to derive from diversifying product offerings to its Data Center Devices and Solutions and Client Solutions end markets as well as the acquired workforce. Goodwill is expected to be deductible for tax purposes because the acquisitions were structured as asset acquisitions but accounted for as business combinations. Concurrent with these acquisitions, the Company received $36 million in proceeds on previously outstanding notes receivable due from these acquired entities.

During the six months ended December 29, 2017, the Company incurred $6 million of transaction expenses related to these acquisitions, which are primarily included within Selling, General and Administrative expenses in the Condensed Consolidated Statements of Operations. Revenues and earnings related to these acquisitions was not material.

Intangible assets



	December 29, 2017			June 30, 2017
	(in millions)
Finite-lived intangible assets	$	5,814		$	5,160
In-process research and development	80			696
Accumulated amortization	(2,664		)	(2,033		)
Intangible assets, net	$	3,230		$	3,823

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. During the three months ended December 29, 2017, two IPR&D projects reached technological feasibility totaling $616 million and commenced amortization over an estimated useful life of 4 years.

Product warranty liability

Changes in the warranty accrual were as follows:



	Three Months Ended						Six Months Ended
	December 29, 2017			December 30, 2016			December 29, 2017			December 30, 2016
	(in millions)
Warranty accrual, beginning of period	$	302		$	277		$	311		$	279
Charges to operations	46			44			90			91
Utilization	(43		)	(35		)	(81		)	(80		)
Changes in estimate related to pre-existing warranties	(1		)	27			(16		)	23
Warranty accrual, end of period	$	304		$	313		$	304		$	313

The long-term portion of the warranty accrual classified in Other liabilities was $110 million and $125 million as of December 29, 2017 and June 30, 2017, respectively.

Other liabilities



	December 29, 2017		June 30, 2017
	(in millions)
Non-current income taxes payable	$	1,425	$	—
Other non-current liabilities	1,013		1,180
Total other non-current liabilities	$	2,438	$	1,180

Accumulated other comprehensive income (loss)

Other comprehensive loss (“OCI”), 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 Accumulated other comprehensive income (loss) (“AOCI”):



	Actuarial Pension Gains (Losses)			Foreign Currency Translation Gains (Losses)			Unrealized Gains (Losses) on Available for Sale Securities			Unrealized Gains (Losses) on Derivative Contracts			Total Accumulated Comprehensive Income (Loss)
	(in millions)
Balance at June 30, 2017	$	(18	)	$	(39	)	$	2		$	(3	)	$	(58	)
Other comprehensive income (loss) before reclassifications	—			2			(1		)	15			16
Amounts reclassified from accumulated other comprehensive income	—			—			—			(1		)	(1		)
Income tax expense related to items of other comprehensive income	—			—			—			(3		)	(3		)
Net current-period other comprehensive income	—			2			(1		)	11			12
Balance at December 29, 2017	$	(18	)	$	(37	)	$	1		$	8		$	(46	)

During the three and six months ended December 29, 2017, there were no material reclassifications out of AOCI. The following table illustrates the significant amounts of each component reclassified out of AOCI to the Condensed Consolidated Statements of Operations:



	Three Months Ended				Six Months Ended
AOCI Component	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016		Statement of Operations Line Item
	(in millions)
Unrealized holding gain (loss) on designated hedging activities:
Foreign exchange contracts	$	4	$	16	$	1	$	40	Cost of revenue
Foreign exchange contracts	—		—		—		2		Research and development
Unrealized holding gain on designated hedging activities	4		16		1		42
Total reclassifications for the period	$	4	$	16	$	1	$	42