SEAGATE TECHNOLOGY HOLDINGS PLC The following is a discussion of the financial condition, changes in financial condition and results of operations for our fiscal quarters endedDecember 31, 2021 ,October 1, 2021 andJanuary 1, 2021 , referred to herein as the "December 2021 quarter," the "September 2021 quarter," and the "December 2020 quarter," respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest toJune 30 . TheDecember 2021 quarter, theSeptember 2021 quarter and theDecember 2020 quarter were each 13 weeks. You should read this discussion in conjunction with financial information and related notes included elsewhere in this report. Unless the context indicates otherwise, as used herein, the terms "we," "us," "Seagate," the "Company" and "our" refer collectively toSeagate Technology Holdings plc , an Irish public limited company, and its subsidiaries. References to "$" or "dollars" are toUnited States dollars. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, among other things, statements about our plans, strategies and prospects; market demand for our products; shifts in technology; estimates of industry growth; effects of the economic conditions worldwide resulting from the COVID-19 pandemic; our ability to effectively manage our cash liquidity position and debt obligations, and comply with the covenants in our credit facilities; our restructuring efforts; the sufficiency of our sources of cash to meet cash needs for the next 12 months; our expectations regarding capital expenditures; and projected cost savings for the fiscal year endingJuly 1, 2022 . Forward-looking statements generally can be identified by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "may," "will," "will continue," "can," "could," or negative of these words, variations of these words and comparable terminology. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements are based on information available to the Company as of the date of this Quarterly Report on Form 10-Q and are based on management's current views and assumptions. These forward-looking statements are conditioned upon and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to: •the uncertainty in global economic and political conditions, or adverse changes in the level of economic activity in the major regions in which we do business; •the development and introduction of products based on new technologies and expansion into new data storage markets and market acceptance of new products; •the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends; •the impact of variable demand, including ongoing demand variation related to the COVID-19 pandemic, changes in market demand and an adverse pricing environment for storage products; •the effects of the COVID-19 pandemic and related individual, business and government responses on the global economy and their impact on the Company's business, operations and financial results, including impacts to the Company's supply chain resulting from governments' policies and approaches to containing COVID-19; •the Company's ability to effectively manage its debt obligations and comply with certain covenants in its credit facilities with respect to financial ratios and financial condition tests and its ability to maintain a favorable cash liquidity position; •the Company's ability to successfully qualify, manufacture and sell its storage products in increasing volumes on a cost-effective basis and with acceptable quality; •any price erosion or volatility of sales volumes through the Company's distributor and retail channel; •disruptions to the Company's supply chain or production capabilities, including ongoing shortages of certain materials, any electricity restrictions and related increases in logistics and operation costs; •currency fluctuations that may impact the Company's margins, international sales and results of operations; •changes in tax laws, such as global tax developments applicable to multinational businesses; the impact of trade barriers, such as import/export duties and restrictions, sanctions, tariffs and quotas, imposed by theU.S. or other countries in which the Company conducts business; the evolving legal and regulatory, economic, environmental and administrative climate in the international markets where the Company operates; and •cyber-attacks or other data breaches that disrupt the Company's operations or result in the dissemination of proprietary or confidential information and cause reputational harm. 27 -------------------------------------------------------------------------------- Table of Contents Information concerning these and other risks, uncertainties and factors, among others, that could cause results to differ materially from our expectations are described in this Quarterly Report on Form 10-Q and in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year endedJuly 2, 2021 , which we encourage you to carefully read. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date on which they were made, and we undertake no obligation to update forward-looking statements except as required by law. Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows: •Overview of theDecember 2021 quarter. Highlights of events in theDecember 2021 quarter that impacted our financial position. •Results of Operations. Analysis of our financial results comparing theDecember 2021 quarter to theSeptember 2021 quarter and theDecember 2020 quarter. •Liquidity and Capital Resources. An analysis of changes in our balance sheet and cash flows, and discussion of our financial condition including potential sources of liquidity. •Critical Accounting Policies. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. For an overview of our business, see "Part I, Item 1. Financial Statements-Note 1. Basis of Presentation and Summary of Significant Accounting Policies-Organization". Overview of theDecember 2021 quarter During theDecember 2021 quarter, we shipped 163 exabytes of HDD storage capacity. We generated revenue of approximately$3.1 billion with a gross margin of 30% and our operating cash flow was$521 million . We borrowed$1.2 billion under our term loan facility and fully repaid the$475 million principal amount outstanding of ourSeptember 2019 Term Loan. We repurchased approximately 5 million of our ordinary shares for$471 million and paid$151 million in dividends. Impact of COVID-19 The COVID-19 pandemic has resulted in a widespread health crisis and numerous disease control measures being taken to limit its spread, the effects of which began during our quarter endedApril 3, 2020 . We continued to experience certain supply chain disruptions during theDecember 2021 quarter, as well as higher logistics and operational costs due to the COVID-19 pandemic, including supply chain constraints, which we expect to continue at least for the remainder of fiscal year 2022. Our customers also continued to experience certain supply chain and demand disruptions during theDecember 2021 quarter, resulting in demand variations across certain of our end markets, which we anticipate will continue at least for the remainder of fiscal year 2022. We are continuing to actively monitor the effects and potential impacts of the COVID-19 pandemic on all aspects of our business, supply chain, liquidity and capital resources, including governmental policies that could periodically shut down an entire city where we, our suppliers or our customers operate. We are also actively working on opportunities to lower our cost structure and drive further operational efficiencies. We are complying with governmental rules and guidelines across all of our sites. Although we are unable to predict the future impact of COVID-19 on our business, results of operations, liquidity or capital resources at this time, we expect we will continue to be negatively affected if the pandemic and related public and private health measures result in substantial manufacturing or supply chain problems, substantial reductions in demand due to disruptions in the operations of our customers or partners, disruptions in local and global economies, volatility in the global financial markets, sustained reductions or volatility in overall demand trends, restrictions on the export or shipment of our products, or other unexpected ramifications from the COVID-19 pandemic. For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see the section entitled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year endedJuly 2, 2021 . 28 -------------------------------------------------------------------------------- Table of Contents Results of Operations We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollars and as a percentage of revenue: For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1, (Dollars in millions) 2021 2021 2021 2021 2021 Revenue$ 3,116 $ 3,115 $ 2,623 $ 6,231 $ 4,937 Cost of revenue 2,168 2,159 1,927 4,327 3,645 Gross profit 948 956 696 1,904 1,292 Product development 228 233 221 461 444 Marketing and administrative 136 133 122 269 240 Amortization of intangibles 3 3 3 6 6 Restructuring and other, net 1 1 2 2 3 Income from operations 580 586 348 1,166 599 Other expense, net (66) (53) (57) (119) (87) Income before income taxes 514 533 291 1,047 512 Provision for income taxes 13 7 11 20 9 Net income$ 501 $ 526 $ 280 $ 1,027 $ 503 For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1, 2021 2021 2021 2021 2021 Revenue 100 % 100 % 100 % 100 % 100 % Cost of revenue 70 69 73 69 74 Gross margin 30 31 27 31 26 Product development 7 8 9 8 9 Marketing and administrative 4 4 5 4 5 Amortization of intangibles - - - - - Restructuring and other, net - - - - - Operating margin 19 19 13 19 12 Other expense, net (3) (2) (2) (2) (2) Income before income taxes 16 17 11 17 10 Provision for income taxes - - - - - Net income 16 % 17 % 11 % 17 % 10 % 29
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Revenue
The following table summarizes information regarding consolidated revenues by
channel, geography and market and HDD exabytes shipped by market and price per
terabyte:
For the Three Months Ended For the Six Months Ended
December 31, October 1, January 1, December 31, January 1,
2021 2021 2021 2021 2021
Revenues by Channel (%)
OEMs 70 % 74 % 66 % 72 % 68 %
Distributors 18 % 16 % 18 % 17 % 17 %
Retailers 12 % 10 % 16 % 11 % 15 %
Revenues by Geography (%) (1)
Asia Pacific 46 % 51 % 50 % 48 % 49 %
Americas 38 % 35 % 32 % 36 % 33 %
EMEA 16 % 14 % 18 % 16 % 18 %
Revenues by Market (%)
Mass capacity 66 % 65 % 58 % 65 % 58 %
Legacy 25 % 27 % 35 % 26 % 34 %
Other 9 % 8 % 7 % 9 % 8 %
HDD Exabytes Shipped by Market
Mass capacity 137 132 97 269 183
Legacy 26 27 32 53 60
Total 163 159 129 322 243
HDD Price per Terabyte $ 17 $ 18 $ 19 $ 18 $ 19 _________________________________
(1) Revenue is attributed to geography based on bill from locations. Revenue in theDecember 2021 quarter remained relatively flat from theSeptember 2021 quarter primarily due to a higher demand for our non-HDD products and an increase in mass capacity storage exabytes shipped, offset by a decrease in legacy market exabytes shipped and a decrease in price per terabyte. Revenue in theDecember 2021 quarter increased by$493 million from theDecember 2020 quarter primarily due to an increase in mass capacity storage exabytes shipped, partially offset by a decrease in legacy market exabytes shipped. Revenue for the six months endedDecember 31, 2021 increased by$1,294 million from the six months endedJanuary 1, 2021 primarily due to an increase in mass capacity storage exabytes shipped, partially offset by a decrease in legacy market exabytes shipped. 30 -------------------------------------------------------------------------------- Table of Contents We maintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 14% of gross revenue for theDecember 2021 quarter, 13% for theSeptember 2021 quarter and 15% for theDecember 2020 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented. Cost of Revenue and Gross Margin For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1, (Dollars in millions) 2021 2021 2021 2021 2021 Cost of revenue$ 2,168 $ 2,159 $ 1,927 $ 4,327 $ 3,645 Gross profit 948 956 696 1,904 1,292 Gross margin 30 % 31 % 27 % 31 % 26 % Gross margin for theDecember 2021 quarter decreased compared to theSeptember 2021 quarter primarily due to a decrease in price per terabyte and higher component and logistics costs resulting from the pandemic, partially offset by favorable mix in HDD products. Gross margin for theDecember 2021 quarter increased compared to theDecember 2020 quarter primarily due to improved product mix, partially offset by higher component and logistics costs resulting from the pandemic. Gross margin for the six months endedDecember 31, 2021 increased compared to the six months endedJanuary 1, 2021 primarily driven by improved product mix, partially offset by higher component and logistics costs resulting from the pandemic. In theDecember 2021 quarter, total warranty cost was 0.8% of revenue and included an unfavorable change in estimates of prior warranty accruals of 0.1% of revenue primarily due to changes to our estimated future product return rates. Warranty cost related to new shipments was 0.7%, 0.7% and 0.7% of revenue for theDecember 2021 quarter,September 2021 quarter andDecember 2020 quarter, respectively. Operating Expenses For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1, (Dollars in millions) 2021 2021 2021 2021 2021 Product development$ 228 $
233
Marketing and administrative 136 133 122 269 240 Amortization of intangibles 3 3 3 6 6 Restructuring and other, net 1 1 2 2 3 Operating expenses$ 368 $ 370 $ 348 $ 738$ 693 Product development expense. Product development expense for theDecember 2021 quarter decreased by$5 million compared to theSeptember 2021 quarter primarily due to a$6 million decrease in variable compensation expense and a$3 million decrease in compensation and other employee benefits, partially offset by a$4 million increase in materials expense. Product development expense increased by$7 million in theDecember 2021 quarter compared to theDecember 2020 quarter primarily due to a$7 million increase in materials expense and a$3 million increase in compensation and other employee benefits, partially offset by a$5 million decrease in outside services. Product development expense increased by$17 million for the six months endedDecember 31, 2021 compared to the six months endedJanuary 1, 2021 primarily due to a$10 million increase in materials expense, an$8 million increase in variable compensation expense and a$3 million increase in compensation and other employee benefits, partially offset by an$8 million decrease in outside services. 31 -------------------------------------------------------------------------------- Table of Contents Marketing and administrative expense. Marketing and administrative expense increased by$3 million for theDecember 2021 quarter compared to theSeptember 2021 quarter primarily due to a$3 million increase in advertising costs and a$2 million increase in compensation and other employee benefits, partially offset by a$3 million decrease in variable compensation expense. Marketing and administrative expense increased by$14 million in theDecember 2021 quarter compared to theDecember 2020 quarter primarily due to a$5 million increase in compensation and other employee benefits, a$4 million increase in advertising costs and a$2 million increase in travel expenses. Marketing and administrative expense increased by$29 million for the six months endedDecember 31, 2021 compared to the six months endedJanuary 1, 2021 primarily due to a$7 million increase in compensation and other employee benefits, a$6 million increase in variable compensation expense, a$5 million increase in advertising costs and a$4 million increase in outside services. Amortization of intangibles. Amortization of intangibles for theDecember 2021 quarter remained flat compared to theSeptember 2021 quarter. Amortization of intangibles for the three and six months endedDecember 31, 2021 remained flat, compared to the three and six months endedJanuary 1, 2021 , respectively. Restructuring and other, net. Restructuring and other, net was not material for any periods presented. Other Expense, Net For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1,
(Dollars in millions) 2021 2021 2021 2021 2021 Other expense, net$ (66) $ (53) $ (57) $ (119)$ (87) Other expense, net. Other expense, net for theDecember 2021 quarter increased by$13 million from theSeptember 2021 quarter primarily due to a non-recurring gain of$9 million from our strategic investments in theSeptember 2021 quarter and a$3 million increase in interest expense from the net issuance of long-term debt in theDecember 2021 quarter. Other expense, net for theDecember 2021 quarter increased by$9 million compared to theDecember 2020 quarter primarily due to a$10 million increase in interest expense from the issuance of long-term debt and a$2 million decrease in gain from foreign exchange transactions and remeasurements, net of cash flow hedges, partially offset by a$5 million decrease in losses from our strategic investments. Other expense, net for the six months endedDecember 31, 2021 increased by$32 million compared to the six months endedJanuary 1, 2021 primarily due to a$19 million increase in interest expense from the issuance of long-term debt and a$17 million net decrease in gains from our strategic investments, partially offset by a$5 million decrease in losses from foreign exchange transactions and remeasurements, net of cash flow hedges. Income Taxes For the Three Months Ended For the Six Months Ended December 31, October 1, January 1, December 31, January 1, (Dollars in millions) 2021 2021 2021 2021 2021 Provision for income taxes$ 13 $ 7$ 11 $ 20 $ 9 We recorded income tax provisions of$13 million and$20 million for the three and six months endedDecember 31, 2021 , respectively. The discrete items in the income tax provision were not material for the three months endedDecember 31, 2021 . The income tax provision for the six months endedDecember 31, 2021 included approximately$9 million of net discrete tax benefit, primarily associated with net excess tax benefits related to share-based compensation expense. 32 -------------------------------------------------------------------------------- Table of Contents During the six months endedDecember 31, 2021 , our unrecognized tax benefits excluding interest and penalties increased by approximately$7 million to$115 million , substantially all of which would impact the effective tax rate, if recognized, subject to certain future valuation allowance reversals. During the twelve months beginningJanuary 1, 2022 , we expect that our unrecognized tax benefits could be reduced by an immaterial amount, as a result of the expiration of certain statutes of limitation. We recorded income tax provisions of$11 million and$9 million for the three and six months endedJanuary 1, 2021 . The discrete items in the income tax provision were not material for the three months endedJanuary 1, 2021 . The income tax provision for the six months endedJanuary 1, 2021 included approximately$11 million of net discrete tax benefits, primarily associated with net excess tax benefits related to share-based compensation expense and postponement of the previously enactedUnited Kingdom tax rate change in the quarter endedOctober 2, 2020 . Our income tax provision recorded for the three and six months endedDecember 31, 2021 andJanuary 1, 2021 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of tax benefits related to (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside ofIreland and (ii) current year generation of research credits. Liquidity and Capital Resources The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash will continue to be sufficient to fund our operations and meet our cash needs for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs, will allow us to manage the potential impacts of the COVID-19 pandemic on our business operations for the foreseeable future. However, some challenges posed by the COVID-19 pandemic to our industry and to our business continue to remain uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the COVID-19 pandemic. We are not aware of any downgrades, losses or other significant deterioration in the fair value of our cash equivalents from the values reported as ofDecember 31, 2021 . Cash and Cash Equivalents December 31, July 2, (Dollars in millions) 2021 2021 Change Cash and cash equivalents$ 1,535 $ 1,209 $ 326 Our cash and cash equivalents as ofDecember 31, 2021 increased by$326 million fromJuly 2, 2021 primarily as a result of net proceeds of$1.2 billion from the issuance of long-term debt and net cash of$1.0 billion provided by operating activities, partially offset by the repurchases of our ordinary shares of$896 million , repayment of long-term debt of$481 million , dividends paid to our shareholders of$304 million and payments for capital expenditures of$212 million . Cash Provided by Operating Activities Cash provided by operating activities for the six months endedDecember 31, 2021 was$1.0 billion and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation and: •an increase of$241 million in accounts receivable, primarily due to linearity of sales in theDecember 2021 quarter; •an increase of$83 million in inventories, primarily due to timing of shipments and an increase in materials purchased for increased production of higher capacity drives; and •a decrease in accrued employee compensation of$54 million , primarily due to cash paid to our employees as part of our discretionary spending plans; •partially offset by an increase of$63 million in accounts payable, primarily due to an increase in material purchased. 33 -------------------------------------------------------------------------------- Table of Contents Cash Used in Investing Activities Cash used in investing activities for the six months endedDecember 31, 2021 was$196 million , primarily attributable to the following activities: •payments for the purchase of property, equipment and leasehold improvements of$212 million ; and •payments for the purchase of investments of$18 million ; •partially offset by proceeds from the sale of investments of$34 million . Cash Used in Financing Activities Cash used in financing activities of$495 million for the six months endedDecember 31, 2021 was primarily attributable to the following activities: •payments for the repurchase of our ordinary shares of$896 million ; •payments for the repurchase of long-term debt of$481 million ; •payments for dividends of$304 million ; and •payments for taxes related to net share settlement of equity awards of$45 million ; •partially offset by net proceeds from the issuance of long-term debt of$1.2 billion ; and •proceeds from the issuance of ordinary shares under employee share plans of$37 million . Liquidity Sources, Cash Requirements and Commitments Our primary sources of liquidity as ofDecember 31, 2021 consist of: (1) approximately$1.5 billion in cash and cash equivalents, (2) cash we expect to generate from operations and (3)$1.75 billion available for borrowing under our senior unsecured revolving credit facility ("Revolving Credit Facility"), which is part of our credit agreement (the "Credit Agreement"). OnOctober 14, 2021 , our subsidiarySeagate HDD Cayman entered into an amendment to the Credit Agreement ("Fifth Amendment"), which provides for a new term loan facility in the aggregate principal amount of$1.2 billion that was extended in two tranches of$600 million each. The Term Loans were drawn in full onOctober 14, 2021 . The proceeds of the Term Loans may be used for general corporate purposes, to refinance or repay ourSeptember 2019 Term Loan and to refinance or repay our 4.25% notes dueMarch 1, 2022 . OnOctober 14, 2021 , we utilized part of the proceeds of Term Loan A1 to fully repay the$475 million principal amount outstanding of ourSeptember 2019 Term Loan. In addition, pursuant to the Fifth Amendment, the maturity date for the revolving loan commitments was extended untilOctober 14, 2026 , the revolving commitments were increased to$1.75 billion and the interest rate margins for the Revolving Credit Facility was amended to LIBOR plus a variable margin ranging from 1.125% to 2.375% that will be determined based on the corporate credit rating of our Company. See "Part I, Item 1. Financial Statements-Note 3. Debt" for information regarding our amended Credit Agreement. As ofDecember 31, 2021 , no borrowings (including swingline loans) were outstanding and no commitments were utilized for letters of credit issued under the Revolving Credit Facility. The Revolving Credit Facility is available for borrowings, subject to compliance with financial covenants and other customary conditions to borrowing. The Credit Agreement includes three financial covenants: (1) interest coverage ratio, (2) total leverage ratio and (3) a minimum liquidity amount. Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness, and to fund our quarterly dividend and any future strategic investments. Our ability to fund these requirements will depend on our future cash flows, which are determined by future operating performance, and therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control. For fiscal year 2022, we expect capital expenditures to be at the low end of our long-term targeted range of 4% to 6% of revenue. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We may raise additional capital from time to time and will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital. From time to time, we may repurchase any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase outstanding senior notes pursuant to the terms of the applicable indenture. 34 -------------------------------------------------------------------------------- Table of Contents During theDecember 2021 quarter, our Board of Directors declared dividends of$0.70 per share, totaling$154 million , which were paid onJanuary 5, 2022 . OnJanuary 26, 2022 , our Board of Directors declared a quarterly cash dividend of$0.70 per share, payable onApril 6, 2022 to shareholders of record at the close of business onMarch 22, 2022 . From time to time, at our discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker-assisted purchases, tender offers, or other means, including through the use of derivative transactions. As ofDecember 31, 2021 ,$3.3 billion remained available for repurchases under our existing repurchase authorization. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with ourConstitution . Contractual Obligations and Commitments Our contractual cash obligations and commitments as ofDecember 31, 2021 , are summarized in the table below: Fiscal Year(s) (Dollars in millions) Total 2022 2023-2024 2025-2026 Thereafter Contractual Cash Obligations: Long-term debt$ 5,935 $ 220 $ 1,145 $ 1,125 $ 3,445 Interest payments on debt 1,477 133 430 325 589 Purchase obligations (1) 1,920 1,425 421 59 15 Operating leases, including imputed interest (2) 64 8 23 12 21 Capital expenditures 267 113 149 5 - Subtotal 9,663 1,899 2,168 1,526 4,070 Commitments: Letters of credit or bank guarantees 27 5 13 - 9 Total$ 9,690 $ 1,904 $ 2,181 $ 1,526 $ 4,079
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(1)Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. (2)Includes total future minimum rent expense under non-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income). Critical Accounting Policies Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates. Other than as described in "Part I, Item 1. Financial Statements-Note 1. Basis of Presentation and Summary of Significant Accounting Policies", there have been no other material changes in our critical accounting policies and estimates. Refer to "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year endedJuly 2, 2021 , as filed with theSEC onAugust 6, 2021 , for a discussion of our critical accounting policies and estimates. Recent Accounting Pronouncements See "Part I, Item 1. Financial Statements-Note 1. Basis of Presentation and Summary of Significant Accounting Policies" for information regarding the effect of new accounting pronouncements on our financial statements. 35
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