Annual report pursuant to Section 13 and 15(d)

Commitments and Guarantees

v3.19.3.a.u2
Commitments and Guarantees
 12 Months Ended
Dec. 28, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Guarantees Commitments and Guarantees
Operating Leases
The Company has entered into operating and finance leases for its corporate offices, data centers, research and development facilities and certain equipment. The leases expire at various dates through 2028, some of which include options to extend the lease for up to 5 years.
For 2019, 2018 and 2017, the Company recorded $56 million, $53 million and $44 million, respectively, of operating lease expense, including short-term lease expense. For the year ended December 28, 2019, the Company recorded $25 million of variable lease expense, which primarily included operating expenses and property taxes associated with the usage of facilities under the operating leases. For the year ended December 28, 2019, cash paid for operating leases included in operating cash flows was $47 million. The Company’s finance leases and short-term leases are immaterial.
Supplemental information related to leases is as follows:
 
December 28,
2019
Weighted-average remaining lease term – operating leases
6.26 years

Weighted-average discount rate – operating leases
5.55
%

Future minimum lease payments under non-cancellable operating lease liabilities as of December 28, 2019 are as follows:
Year
(In millions)
2020
$
54

2021
48

2022
44

2023
37

2024
33

2025 and thereafter
71

        Total minimum lease payments
287

Less: interest
(45
)
        Present value of net minimum lease payments
242

Less: current portion
(43
)
        Total long-term operating lease liabilities
$
199


Certain other operating leases contain provisions for escalating lease payments subject to changes in the consumer price index.
Purchase and Other Contractual Obligations
The Company’s purchase obligations primarily include the Company’s obligations to purchase wafers and substrates from third parties. The Company also had other contractual obligations, primarily included in Other long-term liabilities and Accrued liabilities on its consolidated balance sheet, which primarily consisted of $146 million of payments due under certain software and technology licenses and IP licenses that will be paid through 2022.
Total future unconditional purchase obligations as of December 28, 2019 were as follows:
 Year
(In millions)
2020
$
1,731

2021
642

2022
58

2023
5

2024
2

2025 and thereafter
7

 Total unconditional purchase commitments
$
2,445


Warranties and Indemnities
Changes in the Company’s estimated liability for product warranty during the years ended December 28, 2019 and December 29, 2018 are as follows:
 
December 28,
2019
 
December 29,
2018
 
(In millions)
Beginning balance
$
13

 
$
12

New warranties issued during the period
31

 
27

Settlements during the period
(29
)
 
(28
)
Changes in liability for pre-existing warranties during the period, including expirations
—

 
2

Ending balance
$
15

 
$
13


In addition to product warranties, the Company from time to time in its normal course of business indemnifies other parties with whom it enters into contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. In these limited matters, the Company has agreed to hold certain third parties harmless against specific types of claims or losses such as those arising from a breach of representations or covenants, third-party claims that the Company’s products when used for their intended purpose(s) and under specific conditions infringe the intellectual property rights
of a third party, or other specified claims made against the indemnified party. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.