Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments

Unconditional Purchase Obligations

Unconditional purchase obligations consist of agreements that include firm and non-cancelable terms to transfer funds in the future for fixed or minimum amounts or quantities to be purchased at fixed or minimum prices. These obligations primarily result from contracts entered into for the acquisition of software development services and product development. For obligations with cancellation provisions, the amounts included in the preceding table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee.

The following table summarizes the Company’s unconditional purchase obligations for each of the next five years and thereafter as of December 31, 2019 (in millions):



Years Ending December 31,	Unconditional Purchase Obligations
2020	$	42.0
2021	28.8
2022	21.0
2023	13.7
2024	6.9
Thereafter	1.4
Total	$	113.8

In December 2018, the Company entered into a Master Services Agreement and certain Statements of Work, (collectively, the “Agreement”) with International Business Machines Corporation ("IBM") pursuant to which the Company will outsource significant portions of its IT and other administrative functions following a transition period. Under the Agreement, IBM will provide the Company a broad range of IT services such as applications, including support, development and maintenance; infrastructure management and support, including for servers, storage and network devices; and end user support including service desk. The Agreement has an initial term through 2026 over which period the Company will pay IBM a combination of fixed and variable fees, fluctuating based on the Company's actual need for the services utilized. As of December 31, 2019, the Company expects to pay IBM approximately $300.0 million. The table above does not include fees payable to IBM under the contract as the Company is unable to make a reasonably reliable estimate of the amount of the payments related to this contract due to uncertainties in the usage of the services.

In December 2019, the Company entered into a 15-year Energy Services Agreement with a Supplier to purchase energy and environmental attributes generated from a third-party fuel cell systems, which will be installed, operated, and maintained by the Supplier on the Company's premises. The Company will pay Supplier service fees that will fluctuate based on the actual amount of electricity delivered to the Company during a given operational year. As of December 31, 2019, the Company expects to pay Supplier approximately $29.0 million over a 15-year period. The table above does not include fees payable to this Supplier due to uncertainties associated with system outputs.

Leases

The Company leases its facilities and certain equipment under non-cancelable operating leases that have remaining lease terms of 1 to 10 years and 1 to 4 years, respectively. Each leased facility is subject to an individual lease or sublease, which could provide various options to extend or terminate the lease agreement. Facilities are primarily comprised of corporate offices, data centers, and R&D facilities. Equipment includes vehicles and various office equipment. The Company also has variable lease payments that are primarily comprised of common area maintenance and utility charges. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants.

The components of lease costs and other information related to leases were as follows (in millions, except years and percentages):



	December 31, 2019
Operating lease cost	$	50.3
Variable lease cost	12.6
Total lease cost	$	62.9

Operating cash outflows from operating leases	$	49.6
ROU assets obtained in exchange for new operating lease liabilities	$	14.0

Weighted average remaining lease term (years)	5.5
Weighted average discount rate	3.9		%

As of December 31, 2019, future operating lease payments for each of the next five years and thereafter is as follows (in millions):



Years Ending December 31,	Amount
2020	$	49.3
2021	45.3
2022	36.3
2023	30.6
2024	26.8
Thereafter	37.7
Total lease payments	226.0
Less: interest	(25.6		)
Total	$	200.4

Balance Sheet Information
Other accrued liabilities	42.3
Long-term operating lease liabilities	158.1
Total	$	200.4

As of December 31, 2018, prior to the adoption of ASC 842, future minimum payments under non-cancelable operating and other lease arrangements for each of the next five years and thereafter were as follows (in millions):



	Leases
Years Ending December 31,	Operating Leases		Other Lease Arrangement ^(*)
2019	$	33.7	$	13.1
2020	30.7		13.3
2021	24.3		13.6
2022	17.0		13.9
2023	14.3		14.2
Thereafter	26.3		32.9
Total	$	146.3	$	101.0

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^(*)	Represents a build-to-suit lease arrangement entered into in July 2015.

Rent expense for 2018 and 2017 was approximately $39.0 million and $39.3 million, respectively. Rent expense in prior years was recognized in accordance with ASC 840, Leases, using the straight-line method over the term of a lease.

Purchase Commitments with Contract Manufacturers and Suppliers

In order to reduce manufacturing lead times and in the interest of having access to adequate component supply, the Company enters into agreements with contract manufacturers and certain suppliers to procure inventory based on the Company's requirements. A significant portion of the Company's purchase commitments arising from these agreements consists of firm and non-cancelable commitments. The following table summarizes the Company’s purchase commitments for each of the next five years and thereafter as of December 31, 2019 (in millions):



Years Ending December 31,	Purchase Commitments
2020	$	794.3
2021	230.7
2022	220.1
2023	226.4
Thereafter	—
Total	$	1,471.5

The Company establishes a liability in connection with purchase commitments related to quantities in excess of its demand forecasts or obsolete materials charges for components purchased by the contract manufacturers based on the Company’s demand forecast or customer orders. As of December 31, 2019, the Company had accrued $28.6 million based on its estimate of such charges.

Debt and Interest Payment on Debt

As of December 31, 2019, the Company held total outstanding debt consisting of the Notes with a carrying value of $1,683.9 million. See Note 10, Debt and Financing, for further discussion of the Company's long-term debt and expected future principal maturities.

Tax Liability

In the fourth quarter of 2018, the Company completed its analysis to determine the effect of the Tax Act and recorded immaterial adjustments as of December 31, 2018. The Company has elected to pay its transition tax, net of applicable tax refunds, over the eight-year period provided in the Tax Act. The long-term income taxes payable of $245.2 million represents the remaining balance of the Company's transition tax obligation.

As of December 31, 2019, the Company had $127.4 million included in long-term income taxes payable on the Consolidated Balance Sheets for unrecognized tax positions. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments related to this amount due to uncertainties in the timing of tax audit outcomes.

Guarantees

The Company enters into agreements with customers that contain indemnification provisions relating to potential situations where claims could be alleged that the Company’s products solely, or in combination with other third-party products, infringe the intellectual property rights of a third-party. As of December 31, 2019 and 2018, the Company recorded $9.0 million and $11.9 million, respectively, for such indemnification obligations in other accrued liabilities and other long-term liabilities on the Consolidated Balance Sheets. The Company also has financial guarantees consisting of guarantees of product and service performance and standby letters of credit for certain lease facilities and insurance programs of $30.6 million and $23.1 million, as of December 31, 2019 and December 31, 2018, respectively.

Legal Proceedings

The Company is involved in investigations, disputes, litigations, and legal proceedings. The Company records an accrual for loss contingencies for legal proceedings when it believes that an unfavorable outcome is both (a) probable and (b) the amount or range of any possible loss is reasonably estimable. The Company intends to aggressively defend itself in these matters, and while there can be no assurances and the outcome of these matters is currently not determinable, the Company currently believes that none of these existing claims or proceedings are likely to have a material adverse effect on its financial position. Notwithstanding the

foregoing, there are many uncertainties associated with any litigation and these matters or other third-party claims against the Company may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If any of those events were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected. The actual liability in any such matters may be materially different from the Company's estimates, if any, which could result in the need to adjust the liability and record additional expenses.