Accrued Liabilities, Commitments and Contingencies

9 Months Ended

Oct. 01, 2022

Commitments and Contingencies Disclosure [Abstract]

Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

The components of Accrued liabilities are as follows (in millions):

	October 1, 2022		December 31, 2021
Settlement and related costs	$	180	$	—
Payroll and benefits	86		96
Incentive compensation	78		155
Warranty	27		26
Customer rebates	44		51
Leases	35		33
Unremitted cash collections due to banks on factored accounts receivable	113		141
Short-term interest rate swaps	—		15
Freight and duty	40		45
Other	72		77
Accrued liabilities	$	675	$	639

Warranties

The following table is a summary of the Company’s accrued warranty obligations (in millions):

	Nine Months Ended
	October 1, 2022		October 2, 2021
Balance at the beginning of the period	$	26	$	24
Warranty expense	23		25
Warranties fulfilled	(22)		(23)
Balance at the end of the period	$	27	$	26

Contingencies

The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

During the second quarter of 2022, the Company entered into a License and Settlement Agreement (“Settlement”) to resolve certain patent-related litigation. Under the Settlement, the Company and the counterparty each agreed to a mutual general release from all past claims asserted by the parties; entered into a covenant not to sue for patent infringement; agreed to a payment by the Company to the counterparty for past damages of $360 million and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the licensed patents. Based on the terms of the Settlement and a relative fair value analysis of each of the settlement provisions, the Company concluded that no significant portion of the payment resulted in a future benefit, and as such, the full $360 million was recorded as a charge in the second quarter. That charge, along with $12 million of external legal fees, is reflected within Settlement and related costs on the Consolidated Statement of Operations. The payment terms under the Settlement consist of 8 quarterly payments of $45 million that began in the second quarter. The portion payable in the next 12 months is included within Accrued liabilities, with the remaining amounts included within Other long-term liabilities on the Consolidated Balance Sheets. See Item 1, Legal Proceedings for additional information.