Commitments and Contingencies

Commitments

The following table summarizes the Company’s unconditional purchase obligations and future minimum payments under non-cancelable operating and other lease arrangements for each of the next five years and thereafter as of December 31, 2017 (in millions):



			Leases
Years Ending December 31,	Unconditional Purchase Obligations		Operating Leases		Other Lease Arrangement
2018	$	47.1	$	36.1	$	9.8
2019	25.2		27.3		13.2
2020	13.3		20.8		13.5
2021	6.0		16.0		13.8
2022	3.1		10.7		14.6
Thereafter	0.1		28.8		47.1
Total	$	94.8	$	139.7	$	112.0

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.

Operating Leases

The Company leases its facilities and certain equipment under non-cancelable operating leases that expire at various dates through March 2028. Certain leases require the Company to pay variable costs such as taxes, maintenance, and insurance and include renewal options and escalation clauses. Rent expense for 2017, 2016, and 2015 was approximately $39.3 million, $37.9 million, and $43.2 million, respectively.

Other Lease Arrangement

In July 2015, the Company entered into a lease arrangement through March 2026 for approximately 63,000 square feet of space in the State of Washington. The space is used, among other things, to consolidate certain of the Company's laboratory operations currently located in Sunnyvale, California.

Due to certain contractual obligations during the construction period, the Company was deemed the owner of the property during that period. The Company capitalized the construction costs by recording a build-to-suit lease asset and a corresponding build-to-suit financing liability. Upon the completion of construction in 2016, the Company concluded that it had a certain form of continuing economic involvement in the facility, which precluded sale-leaseback accounting treatment. As a result, a total of $60.9 million of costs capitalized were placed in service and are being depreciated over the lease term. As of December 31, 2017, the total payment under the lease agreement over the ten-year term is approximately $112.0 million of which $62.6 million is included in other-long term liabilities on the Consolidated Balance Sheets.

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. These purchase commitments totaled $615.2 million as of December 31, 2017.

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, 2017, the Company had accrued $22.0 million based on its estimate of such charges.

Clock-Signal, Supplier Component Remediation Liability

As of December 31, 2017 and December 31, 2016, the Company had approximately zero and $10.8 million, respectively, in other accrued liabilities on the Consolidated Balance Sheets for the expected remediation costs for certain products containing a defect in a clock-signal component manufactured by a third-party supplier. The Company had been advised by the component supplier that components may begin to fail after the product has been in operation for 18 months. As of December 31, 2017, the Company has substantially completed the remediation process with its customers.

Debt and Interest Payment on Debt

As of December 31, 2017, the Company held long-term debt consisting of the Notes with a carrying value of $2,136.3 million. See Note 10, Debt and Financing, for further discussion of the Company's long-term debt and expected future principal maturities.

Tax Liability

As of December 31, 2017, the Company has made a reasonable estimate of the effects on the one-time transition tax as a result of the Tax Act, which includes estimated charges of $431.2 million of tax on the Company’s accumulated foreign earnings, of which $394.0 million is included within long-term income taxes payable in the Consolidated Balance Sheets. See Note 14, Income Taxes, for further discussion.

As of December 31, 2017, the Company had $256.6 million included in long-term income taxes payable in 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, 2017, the Company recorded $20.4 million 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 $23.0 million and $6.0 million, as of December 31, 2017 and December 31, 2016, respectively.

Legal Proceedings

Investigations

The Company previously disclosed that the U.S. Securities and Exchange Commission ("SEC") and the U.S. Department of Justice ("DOJ") were conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act ("FCPA"). The Company has been cooperating with these agencies regarding these matters. In the fourth quarter of 2017, the DOJ notified the Company that the DOJ has closed its investigation related to these matters without taking any action against the Company. The Company’s Audit Committee, with the assistance of independent advisors, has been investigating and conducting a thorough review of possible violations of the FCPA, and has made recommendations for remedial measures, including employee disciplinary actions in foreign jurisdictions, which the Company has implemented and continues to implement. The Company is unable to predict the duration, scope or outcome of the ongoing SEC investigation, but believes that an adverse outcome is reasonably possible. However, the Company is not able to estimate a reasonable range of possible loss. The SEC could take action against the Company or the Company could agree to settle. In such event, the Company could be required to pay substantial fines and sanctions and/or implement additional remedial measures; in addition, it may be determined that the Company violated the FCPA.

Other Litigations and Investigations

In addition to the investigations discussed above, the Company is involved in other 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.