Annual report pursuant to Section 13 and 15(d)

Commitments and Guarantees

Commitments and Guarantees
12 Months Ended
Dec. 26, 2020
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 five years.
For 2020, 2019 and 2018, the Company recorded $59 million, $56 million and $53 million, respectively, of operating lease expense, including short-term lease expense. For 2020 and 2019, the Company recorded $27 million and $25 million, respectively, of variable lease expense, which primarily included operating expenses and property taxes associated with the usage of facilities under the operating leases. For 2020 and 2019, cash paid for operating leases included in operating cash flows was $55 million and $47 million, respectively. The Company’s finance leases and short-term leases are immaterial.
Supplemental information related to leases is as follows:
December 26,
Weighted-average remaining lease term – operating leases 5.56 years
Weighted-average discount rate – operating leases 5.29  %
Future minimum lease payments under non-cancellable operating lease liabilities as of December 26, 2020 are as follows:
Year (In millions)
2021 $ 52 
2022 55 
2023 48 
2024 41 
2025 34 
2026 and thereafter 54 
        Total minimum lease payments 284 
Less: interest (42)
        Present value of net minimum lease payments 242 
Less: current portion (41)
        Total long-term operating lease liabilities $ 201 
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 sheets, which primarily consisted of $149 million of payments due under certain software and technology licenses and IP licenses that will be paid through 2025.
Total future unconditional purchase obligations as of December 26, 2020 were as follows:
 Year (In millions)
2021 $ 3,026 
2022 71 
2023 34 
2024 25 
2025 23 
2026 and thereafter 12 
 Total unconditional purchase commitments $ 3,191 
Warranties and Indemnities
The Company generally warrants that its products sold to its customers will conform to its approved specifications and be free from defects in material and workmanship under normal use and conditions for one year. The Company may also offer one to three-year limited warranties based on product type and negotiated warranty terms with certain customers. The Company accrues warranty costs to Cost of sales at the time of sale of warranted products.
Changes in the Company’s estimated liability for product warranty during the years ended December 26, 2020 and December 28, 2019 are as follows:
December 26,
December 28,
  (In millions)
Beginning balance $ 15  $ 13 
Provisions during the period 82  31 
Settlements during the period (60) (29)
Ending balance $ 37  $ 15 
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. In addition, the impact from changes in estimates for pre-existing warranties has been immaterial.