Leases and Other Commitments

12 Months Ended

Jul. 03, 2020

Leases

The Company leases certain domestic and international facilities and data center space under long-term, non-cancelable operating leases that expire at various dates through 2034. These leases include no material variable or contingent lease payments. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate. Operating lease assets also include prepaid lease payments minus any lease incentives. Extension or termination options present in the Company’s lease agreements are included in determining the right-of-use asset and lease liability when it is reasonably certain the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. The following table summarizes supplemental balance sheet information related to operating leases as of July 3, 2020:


	Lease Amounts
Minimum lease payments by fiscal year:	(in millions)
2021	$	45
2022	32
2023	28
2024	28
2025	27
Thereafter	144
Total future minimum lease payments	304
Less: Imputed Interest	(59)
Present value of lease liabilities	245
Less: Current portion (included in Accrued expenses)	36
Long-term operating lease liabilities (included in Other liabilities)	$	209

Operating lease right-of-use assets (included in Other non-current assets)	$	230

Weighted average remaining lease term in years	9.2
Weighted average discount rate	4.2		%

The following table summarizes supplemental disclosures of operating cost and cash flow information related to operating leases for the year ended July 3, 2020:


	Year Ended
	July 3, 2020
	(in millions)
Cost of operating leases	$	55
Cash paid for operating leases	53
Operating lease assets obtained in exchange for operating lease liabilities	57

Cost of operating leases was as follows:


	2020		2019		2018
	(in millions)
Cost of operating leases	$	55	$	47	$	49

Purchase Agreements and Other Commitments

In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products. These purchase orders generally cover forecasted component supplies needed for production during the next quarter, are recorded as a liability upon receipt of the components, and generally may be changed or canceled at any time prior to shipment of the components. The Company also enters into long-term agreements with suppliers that contain fixed future commitments, which are contingent on certain conditions such as performance, quality and technology of the vendor’s components. As of July 3, 2020, the Company had the following minimum long-term commitments:


	Long-term commitments
	(in millions)
Fiscal year:
2021	$	448
2022	606
2023	521
2024	322
2025	148
Thereafter	190
Total	$	2,235

Sale-Leaseback

In April 2019, the Company completed a sale and leaseback of its manufacturing facility in Fremont, California. The Company received proceeds from the sale of $115 million and recognized a loss of $25 million. The property is being leased back over a term of 15 years at an annual lease rate of $7 million for the first year and increasing by 3% per year thereafter. The lease includes four 5-year renewal options for the ability to extend up to 20 years.