AMD (ADVANCED MICRO DEVICES) OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements as ofDecember 26, 2020 andDecember 28, 2019 and for each of the three years in the period endedDecember 26, 2020 and related notes, which are included in this Annual Report on Form 10-K as well as with the other sections of this Annual Report on Form 10-K, including "Part I, Item 1: Business," "Part II, Item 6: Selected Financial Data" and "Part II, Item 8: Financial Statements and Supplementary Data." Introduction In this section, we will describe the general financial condition and the results of operations ofAdvanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, "us," "our" or "AMD"), including a discussion of our results of operations for 2020 compared to 2019, an analysis of changes in our financial condition and a discussion of our contractual obligations and off-balance sheet arrangements. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedDecember 28, 2019 . Overview During 2020, we continued to build on our technical, operational and financial foundation to drive our long-term growth strategy. We delivered strong financial results and further extended our industry-leading product portfolio despite the backdrop of the COVID-19 pandemic. Net revenue for 2020 was$9.8 billion , an increase of 45% compared to 2019 net revenue of$6.7 billion . Gross margin, as a percentage of net revenue for 2020, was 45%, compared to 43% in 2019. Our operating income for 2020 improved to$1.4 billion compared to operating income of$631 million for 2019. Our net income for 2020 improved to$2.5 billion compared to$341 million in the prior year. We recognized a$1.3 billion income tax benefit upon the release of a portion of the valuation allowance on deferred tax assets. We made significant progress towards improving our balance sheet in 2020. Cash, cash equivalents and short-term investments as ofDecember 26, 2020 were$2.3 billion , compared to$1.5 billion at the end of 2019. The aggregate principal amount of total debt as ofDecember 26, 2020 was$338 million , compared to$563 million as ofDecember 28, 2019 . During 2020, we consistently executed our product roadmap and launched multiple products in leading-edge manufacturing technologies. We introduced a number of 7 nanometer (nm) products during the year, including new additions to our 3rd Gen AMD Ryzen™ desktop processor family, the AMD Ryzen 3 3100 and AMD Ryzen 3 3300X for the mainstream market, and the AMD Ryzen 9 3900XT, AMD Ryzen 7 3800XT and AMD Ryzen 5 3600XT processors for the enthusiast market. InJuly 2020 , we introduced the AMD Ryzen Threadripper™ PRO Processor family designed for professional workstations from OEMs to system integrators and AMD Ryzen 4000 Series desktop processors with Radeon™ graphics for consumers, gamers, streamers and creators. We also introduced AMD Athlon™ 3000 Series desktop processors using the same Zen core architecture and built-in Radeon graphics as the AMD Ryzen desktop processor family. Also, the AMD Ryzen PRO 4000 series and AMD Athlon PRO 3000 series desktop processors were introduced for the commercial market. InOctober 2020 , we introduced the AMD Ryzen 5000 Series desktop processor family powered by "Zen 3" core architecture. We also expanded our notebook products in 2020. InMay 2020 , we announced the global availability of the AMD Ryzen™ PRO 4000 Series Mobile family for commercial notebooks built with enterprise-gradeAMD PRO technologies, which deliver a set of security and manageability features for Enterprise IT deployments. Also, we announced the AMD Ryzen 3000 C-Series mobile processors and the AMD Athlon 3000 C-Series mobile processors for Chromebook platforms designed for multi-tasking and content creation in distance learning and remote working. With respect to our graphics products, we expanded our professional offerings with the AMD Radeon™ Pro VII workstation graphics card designed for broadcast and engineering professionals. InAugust 2020 , we announced the availability of the new AMD Radeon Pro 5000 series GPUs for the updated 27-inch iMac bringing a wide variety of graphically intensive applications and workloads to consumer and professional users. We also introduced the AMD Radeon RX 6000 Series graphics cards built on AMD RDNA™ 2 gaming architecture and designed for enthusiast-class PC gaming. InNovember 2020 , we introduced our data center graphics processor, the AMD Instinct™ MI100 GPU accelerator, the first accelerator to use new AMD CDNA architecture dedicated to HPC workloads. We expanded our EPYC server family during the year. InApril 2020 , we announced the extension of the 2nd Gen AMD EPYC processor family with three new processors: AMD EPYC 7F32 (8 cores), AMD EPYC 7F52 (16 cores) and AMD EPYC 7F72 (24 cores). These new processors leverage up to 500 MHz of additional base frequency and large amounts of cache. InOctober 2020 , we announced the AMD EPYC™ processor based Azure Dav4, Eav4, 39 -------------------------------------------------------------------------------- Easv4 and Lsv2 VMs for use to improve real-time analysis on large volumes of data streaming from applications, websites and more. We also expanded our embedded processor family with two new AMD Ryzen Embedded R1000 low-power processors that provide customers with a thermal design power (TDP) range of 6 up to 10 watts. InNovember 2020 , we launched the AMD Ryzen Embedded V2000 series processor built on 7 nm process technology, "Zen 2" cores and high-performance AMD Radeon graphics. While the current COVID-19 pandemic continues to impact our business operations and practices, and we expect that it may continue to impact our business, we experienced limited financial disruption during 2020. Although many of our offices remained open to enable critical on-site business functions in accordance with local government guidelines, most of our employees worked from home during 2020. During the second half of 2020, the majority of our employees inChina returned to work and we maintained normal business operations subject to local government health measures. We continue to monitor and take measures to protect the health and safety of our employees, and support those employees who work from home so that they can be productive. We monitor demand signals as we adjust our supply chain requirements based on changing customer needs and demands. We also assess our product schedules and roadmaps to make any adjustments that may be necessary to support remote working requirements and address the geographic and market demand shifts caused by COVID-19. As part of our strategy to establish AMD as the industry's high performance computing leader, we announced inOctober 2020 that we entered into a definitive agreement to acquire Xilinx, Inc. in an all-stock transaction. The transaction is currently expected to close by the end of calendar year 2021. We intend the discussion of our financial condition and results of operations that follows to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles (U.S. GAAP). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, goodwill and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual results have historically been reasonably consistent with management's expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions. Management believes the following critical accounting estimates are the most significant to the presentation of our financial statements and require the most difficult, subjective and complex judgments. Revenue Allowances. Revenue contracts with our customers include variable amounts which we evaluate under ASC 606-10-32-8 through 14 in order to determine the net amount of consideration to which we are entitled and which we recognize as revenue. We determine the net amount of consideration to which we are entitled by estimating the most likely amount of consideration we expect to receive from the customer after adjustments to the contract price for rights of return and rebates to our OEM customers and rights of return, rebates and price protection on unsold merchandise to our distributor customers. We base our determination of necessary adjustments to the contract price by reference to actual historical activity and experience, including actual historical returns, rebates and credits issued to OEM and distributor customers adjusted, as applicable, to include adjustments, if any, for known events or current economic conditions, or both. Our estimates of necessary adjustments for distributor price incentives and price protection on unsold products held by distributors are based on actual historical incentives provided to distributor customers and known future price movements based on our internal and external market data analysis. Our estimates of necessary adjustments for OEM price incentives utilize, in addition to known pricing agreements, actual historical rebate attainment rates and estimates of future OEM rebate program attainment based on internal and external market data analysis. 40 -------------------------------------------------------------------------------- We offer incentive programs through cooperative advertising and marketing promotions. Where funds provided for such programs can be estimated, we recognize a reduction to revenue at the time the related revenue is recognized; otherwise, we recognize such reduction to revenue at the later of when: i) the related revenue transaction occurs; or ii) the program is offered. For transactions where we reimburse a customer for a portion of the customer's cost to perform specific product advertising or marketing and promotional activities, such amounts are recognized as a reduction to revenue unless they qualify for expense recognition. We also provide limited product return rights to certain OEMs and to most distribution customers. These return rights are generally limited to a contractual percentage of the customer's prior quarter shipments, although, from time to time we may approve additional product returns beyond the contractual arrangements based on the applicable facts and circumstances. In order to estimate adjustments to revenue to account for these returns, including product restocking rights provided to distributor and OEM customers, we utilize relevant, trended actual historical product return rate information gathered, adjusted for actual known information or events, as applicable. Overall, our estimates of adjustments to contract price due to variable consideration under our contracts with OEM and distributor customers, based on our assumptions and include adjustments, if any, for known events, have been materially consistent with actual results; however, these estimates are subject to management's judgment and actual provisions could be different from our estimates and current provisions, resulting in future adjustments to our revenue and operating results. Inventory Valuation. We value inventory at standard cost, adjusted to approximate the lower of actual cost or estimated net realizable value using assumptions about future demand and market conditions. Material assumptions we use to estimate necessary inventory carrying value adjustments can be unique to each product and are based on specific facts and circumstances. In determining excess or obsolescence reserves for products, we consider assumptions such as changes in business and economic conditions, other-than-temporary decreases in demand for our products, and changes in technology or customer requirements. In determining the lower of cost or net realizable value reserves, we consider assumptions such as recent historical sales activity and selling prices, as well as estimates of future selling prices. If in any period we anticipate a change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs may be required and would be reflected in cost of sales, resulting in a negative impact to our gross margin in that period. If in any period we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, related revenue would be recorded with a lower or no offsetting charge to cost of sales resulting in a net benefit to our gross margin in that period. Overall, our estimates of inventory carrying value adjustments have been materially consistent with actual results.Goodwill . We perform our goodwill impairment analysis as of the first day of the fourth quarter of each year and, if certain events or circumstances indicate that an impairment loss may have been incurred, on a more frequent basis. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. We first analyze qualitative factors to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying amount. Qualitative factors include industry and market considerations, overall financial performance, share price trends and market capitalization and Company-specific events. If we conclude it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, we do not proceed to perform a quantitative impairment test. If we conclude it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative goodwill impairment test will be performed by comparing the fair value of each reporting unit to its carrying value. A quantitative impairment analysis, if necessary, considers the income approach, which requires estimates of the present value of expected future cash flows to determine a reporting unit's fair value. Significant estimates include revenue growth rates and operating margins used to calculate projected future cash flows, discount rates, and future economic and market conditions. A goodwill impairment charge is recognized for the amount by which a reporting unit's fair value is less than its carrying value, not to exceed the total amount of goodwill allocated to that reporting unit. Income Taxes. In determining taxable income for financial statement reporting purposes, we must make certain estimates and judgments. These estimates and judgments are applied in the calculation of certain tax liabilities and in the determination of the recoverability of deferred tax assets which arise from temporary differences between the recognition of assets and liabilities for tax and financial statement reporting purposes. 41 -------------------------------------------------------------------------------- We regularly assess the likelihood that we will be able to recover our deferred tax assets. Unless recovery is considered more-likely-than-not (a probability level of more than 50%), we will record a charge to income tax expense in the form of a valuation allowance for the deferred tax assets that we estimate will not ultimately be recoverable or maintain the valuation allowance recorded in prior periods. When considering all available evidence, if we determine it is more-likely-than-not we will realize our deferred tax assets, we will reverse some or all of the existing valuation allowance, which would result in a credit to income tax expense and the establishment of an asset in the period of reversal. In determining the need to establish or maintain a valuation allowance, we consider the four sources of jurisdictional taxable income: (i) carryback of net operating losses to prior years; (ii) future reversals of existing taxable temporary differences; (iii) viable and prudent tax planning strategies; and (iv) future taxable income exclusive of reversing temporary differences and carryforwards. Through the end of 2020, we demonstrated consistent, continued and increasing profitability over the preceding three-year period. Our ability to sustain and grow our profitability is supported by the continued positive momentum of our consumer and commercial products, including our newly released desktop, mobile and graphics processors, greater market acceptance for our server products, the successful adoption of our new game console processor products, and our leadership in the continued development of HPC products. In assessing the realizability of the deferred tax assets, we considered the highly dynamic and competitive landscape of our industry, the continued performance and market acceptance of our new products, and the impact of such market acceptance on our estimates of future profitability. As a result, in the fourth quarter of 2020, we concluded that our history of profitable operating results, including the current period results, along with increasingly favorable forecasts of continued future profitability, provided sufficient positive evidence supporting the realizability of a certain amount of ourU.S. deferred tax assets, accordingly, the release of the related valuation allowance previously recorded against these deferred tax assets, resulting in a tax benefit of$1.3 billion in the fourth quarter of 2020. We continue to maintain a valuation allowance of approximately$1.6 billion for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to current limitations, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. The state and foreign valuation allowance maintained is due to lack of sufficient sources of income. In addition, the calculation of our tax liabilities involves addressing uncertainties in the application of complex, multi-jurisdictional tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing authorities. If our estimates of these taxes are greater or less than actual results, an additional tax benefit or charge could result. Results of Operations We report our financial performance based on the following two reportable segments: the Computing and Graphics segment and the Enterprise, Embedded and Semi-Custom segment. Additional information on our reportable segments is contained in Note 14 - Segment Reporting of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K). Our operating results tend to vary seasonally. Historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact these trends. 42 --------------------------------------------------------------------------------
The following table provides a summary of net revenue and operating income (loss) by segment for 2020, 2019 and 2018.
2020 2019 2018
(In millions)
Net revenue:
Computing and Graphics $ 6,432 $ 4,709 $ 4,125 Enterprise, Embedded and Semi-Custom 3,331 2,022 2,350
Total net revenue$ 9,763 $ 6,731 $ 6,475 Operating income (loss): Computing and Graphics$ 1,266 $ 577 $ 470 Enterprise, Embedded and Semi-Custom 391 263 163 All Other (288) (209) (182) Total operating income$ 1,369 $ 631 $ 451 Computing and Graphics Computing and Graphics net revenue of$6.4 billion in 2020 increased by 37%, compared to$4.7 billion in 2019, primarily as a result of a 37% increase in unit shipments and a 2% increase in average selling price. The increase in unit shipments was primarily due to higher demand for our Ryzen processors. The increase in average selling price was primarily driven by a richer mix of client processors from higher sales of our Ryzen processors, which have a higher average selling price, partially offset by lower average selling price for our Radeon products due to product cycle timing. Computing and Graphics operating income was$1.3 billion in 2020 compared to$577 million in 2019. The increase in operating income was primarily driven by the margin contribution from higher sales which more than offset higher operating expenses. Operating expenses increased for the reasons outlined under "Expenses" below. Enterprise, Embedded and Semi-Custom Enterprise, Embedded and Semi-Custom net revenue of$3.3 billion in 2020 increased by 65% compared to net revenue of$2.0 billion in 2019, primarily driven by higher sales of our EPYC server processors and higher semi-custom revenue. Enterprise, Embedded and Semi-Custom operating income was$391 million in 2020 compared to$263 million in 2019. The increase in operating income was primarily due to the margin contribution from the increase in revenue which more than offset higher operating expenses in 2020 and a$60 million licensing gain recorded in 2019. Operating expenses increased for the reasons outlined under "Expenses" below. All Other All Other operating loss of$288 million in 2020 included stock-based compensation expense of$274 million and acquisition-related costs of$14 million . All Other operating loss of$209 million in 2019 included$197 million of stock-based compensation expense and a$12 million contingent loss accrual on a legal matter. 43 -------------------------------------------------------------------------------- Comparison of Gross Margin, Expenses, Licensing Gain, Interest Expense, Other Expense and Income Taxes The following is a summary of certain consolidated statement of operations data for 2020, 2019 and 2018: 2020 2019 2018 (In millions, except for percentages) Net revenue$ 9,763 $ 6,731 $ 6,475 Cost of sales 5,416 3,863 4,028 Gross profit 4,347 2,868 2,447 Gross margin 45 % 43 % 38 % Research and development 1,983 1,547 1,434 Marketing, general and administrative 995 750 562 Licensing gain - (60) - Interest expense (47) (94) (121) Other expense, net (47) (165) - Income tax provision (benefit) (1,210) 31 (9) Gross Margin Gross margin as a percentage of net revenue was 45% in 2020 compared to 43% in 2019. The increase in gross margin was primarily driven by sales of Ryzen and EPYC processors in 2020, which have a higher gross margin than the corporate average, partially offset by sales of semi-custom products and Radeon products, which have a lower gross margin than the corporate average. Expenses Research and Development Expenses Research and development expenses of$2.0 billion in 2020 increased by$436 million , or 28%, compared to$1.5 billion in 2019. The increase was primarily driven by an increase in product development costs in both the Computing and Graphics and Enterprise and Embedded and Semi-Custom segments, due to an increase in headcount and higher annual employee incentives driven by improved financial performance. Marketing, General and Administrative Expenses Marketing, general and administrative expenses of$995 million in 2020 increased by$245 million , or 33%, compared to$750 million in 2019. The increase was primarily due to an increase in go-to-market activities in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments, and an increase in headcount and higher annual employee incentives driven by improved financial performance. Licensing Gain During 2019, we recognized$60 million as licensing gain associated with the licensed IP to THATIC JV. See Note 4 of "Notes to Consolidated Financial Statements" for additional information. Interest Expense Interest expense of$47 million in 2020 decreased by$47 million compared to$94 million in 2019, primarily due to lower debt balances. Other Expense, Net Other expense, net decreased in 2020 by$118 million from net of$165 million in 2019. Other expense, net for both periods primarily comprised of losses on redemptions, repurchases and conversions of our outstanding debt and convertible debt instruments. 44 -------------------------------------------------------------------------------- Income Taxes Provision (Benefit) Through the end of 2020, we demonstrated consistent, continued and increasing profitability over the preceding three-year period. Our ability to sustain and grow such profitability is supported by the continued positive momentum of our consumer and commercial products including our newly released desktop, mobile and graphics processors, greater market acceptance for our server products, the successful adoption of our new game console processor products, and our continued leadership in the development of HPC products. In assessing the realizability of the deferred tax assets, we considered the highly dynamic and competitive landscape of our industry, the continued performance and market acceptance of our new products, and the impact of such market acceptance on forecasts of future profitability. As a result, in the fourth quarter of 2020, we concluded that our history of profitable operating results, including the current period results, along with increasingly favorable forecasts of continued future profitability, provided sufficient positive evidence supporting the realizability of a certain amount of ourU.S. deferred tax assets and, accordingly, the release of the related valuation allowance previously recorded against these deferred tax assets, resulting in a tax benefit of$1.3 billion in the fourth quarter of 2020. We continue to maintain a valuation allowance of approximately$1.6 billion for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to current limitations, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. The state and foreign valuation allowance maintained is due to lack of sufficient sources of income. We recorded an income tax benefit of$1.2 billion in 2020 and an income tax provision of$31 million in 2019. The income tax benefit in 2020 was primarily due to$1.3 billion of tax benefit from the valuation allowance release in theU.S. This benefit was partially offset by approximately$10 million of withholding tax expense related to cross-border transactions,$13 million of state and foreign taxes, and a$75 million increase in valuation allowance against certain state and foreign tax credits, which are reflected as part of the state taxes and foreign rate benefit in the reconciliation table in the tax footnote. The income tax provision in 2019 was primarily due to$22 million of withholding taxes related to cross-border transactions and$22 million of foreign income taxes in profitable locations, partially offset by a$13 million benefit for a reduction ofU.S. income taxes accrued in the prior year. International Sales International sales as a percentage of net revenue were 77% in 2020 and 74% in 2019. We expect that international sales will continue to be a significant portion of total sales in the foreseeable future. Substantially all of our sales transactions are denominated inU.S. dollars. FINANCIAL CONDITION Liquidity and Capital Resources As ofDecember 26, 2020 , our cash, cash equivalents and short-term investments were$2.3 billion compared to$1.5 billion as ofDecember 28, 2019 . The percentage of cash and cash equivalents held domestically was 94% as ofDecember 26, 2020 , and 90% as ofDecember 28, 2019 . Our operating, investing and financing cash flow activities for fiscal 2020, 2019 and 2018 were as follows: 2020 2019 2018 (In millions) Net cash provided by (used in): Operating activities$ 1,071 $ 493 $ 34 Investing activities (952) (149) (170) Financing activities 6 43 28
Net increase (decrease) in cash and cash equivalents, and restricted cash
$ 125
Our aggregate principal debt obligations were
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We believe our cash, cash equivalents and short-term investments balance along
with our Revolving Credit Facility entered into in June 2019 (refer to Note 6 of
"Notes to Consolidated Financial Statements for additional information) will be
sufficient to fund operations, including capital expenditures, over the next 12
months. We believe we will be able to access the capital markets should we
require additional funds. However, we cannot assure that such funds will be
available on favorable terms, or at all.
Operating Activities
Our working capital cash inflows and outflows from operations are primarily cash
collections from our customers, payments for inventory purchases and payments
for employee-related expenditures.
Net cash provided by operating activities was $1.1 billion in 2020, primarily
due to our net income of $2.5 billion , adjusted for non-cash adjustments of
$488 million and net cash outflows of $931 million from changes in our operating
assets and liabilities. The primary drivers of the changes in operating assets
and liabilities included a $219 million increase in accounts receivable driven
primarily by $1.1 billion higher revenue in the fourth quarter of 2020 compared
to the fourth quarter of 2019, partially offset by higher collections due to
better revenue linearity in the fourth quarter of 2020 compared to the fourth
quarter of 2019, a $417 million increase in inventories driven by an increase in
product build in support of customer demand, a $231 million increase in prepaid
expenses and other assets due primarily to an increase in vendor credits, a $513
million decrease in accounts payable primarily due to timing of payments to our
suppliers, offset by a $574 million increase in accrued liabilities and other
driven by higher marketing accruals and higher accrued annual employee
incentives due to improved financial performance.
Net cash provided by operating activities was $493 million in 2019, primarily
due to our net income of $341 million , adjusted for non-cash and non-operating
charges of $694 million and net cash outflows of $542 million from changes in
our operating assets and liabilities. The primary drivers of the changes in
operating assets and liabilities included a $623 million increase in account
receivable driven primarily by $708 million higher revenue during the fourth
quarter of 2019 compared to the fourth quarter of 2018, a $137 million increase
in inventories driven by an increase in wafer purchases during the fourth
quarter of 2019 compared to the fourth quarter of 2018, and a $176 million
increase in prepaid expenses and other assets due primarily to an increase in
vendor credits and other non-current assets, partially offset by a $153 million
increase in accounts payable due to an increase in inventory purchases and a
$220 million increase in accrued liabilities and other driven by higher
marketing accruals.
Investing Activities
Net cash used in investing activities was $952 million in 2020, which primarily
consisted of $850 million for purchases of short-term investments and
$294 million for purchases of property and equipment, partially offset by
$192 million for maturities of short-term investments.
Net cash used in investing activities was $149 million in 2019, which primarily
consisted of $217 million for purchases of property and equipment, partially
offset by a net cash inflow from purchases and maturities of available-for-sale
debt securities of $41 million .
Financing Activities
Net cash provided by financing activities was $6 million in 2020, which
primarily consisted of proceeds from the issuance of common stock under our
employee equity plans of $85 million , partially offset by $78 million of common
stock repurchased to cover employee withholding taxes on vesting of employee
equity grants. We borrowed $200 million of short-term debt during the second
quarter of 2020 and paid off the balance during the third quarter of 2020.
Net cash provided by financing activities was $43 million in 2019, which
primarily consisted of a cash inflow of $449 million from the warrant exercised
by West Coast Hitech L.P. (WCH) and $74 million from the issuance of common
stock under our stock-based compensation equity plans, partially offset by $473
million of cash used for debt reduction activities during the year.
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Contractual Obligations
The following table summarizes our consolidated principal contractual cash
obligations, as of December 26, 2020 , and is supplemented by the discussion
following the table:
Payment due by period
2026 and
(In millions) Total 2021 2022 2023 2024 2025 thereafter
Term debt (1) $ 338 $ - $ 312 $ - $ - $ - $ 26
Aggregate interest obligation (2) 54 25 25 1 1 1 1
Other long-term liabilities (3) 159 55 64 19 10 8 3
Operating leases (4) 284 52 55 48 41 34 54
Purchase obligations (5) 3,032 2,971 7 15 15 15 9
Total contractual obligations (6)
(1) See Note 6 - Debt and Revolving Credit Facility of the Notes to Consolidated
Financial Statements for additional information.
(2) Represents interest obligations, payable in cash, for our outstanding debt.
(3) Amounts primarily represent future fixed and non-cancellable cash payments
associated with software technology and licenses and IPlicenses, including the
payments due within the next 12 months.
(4) See Note 16 - Commitments and Guarantees of the Notes to Consolidated Financial
Statements for additional information.
(5) Represents purchase obligations for goods and services where payments are based, in
part, on the volume or type of services we acquire. In those cases, we only included
the minimum volume of purchase obligations in the table above. Purchase orders for
goods and services that are cancellable upon notice and without significant
penalties are not included in the amounts above.
(6) Total amount excludes contractual obligations already recorded on our consolidated
balance sheets except for debt obligations and other liabilities related to software
and technology licenses and IP licenses.
The expected timing of payments of the obligations in the preceding table is
estimated based on current information. Timing of payments and actual amounts
paid may be different, depending on the timing of receipt of goods or services,
or changes to agreed-upon amounts for some obligations.
Our total gross unrecognized tax benefits were $119 million as of December 26,
2020 . We have foreign and U.S. state tax audits in process at any one point in
time. At this time, we are unable to make a reasonably reliable estimate of the
timing of payments due to uncertainties in the timing of tax audit outcomes;
therefore, such amounts are not included in the above contractual obligations
table.
Off-Balance Sheet Arrangements
As of December 26, 2020 , we had no off-balance sheet arrangements.
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