Other Financial Information

Inventories

The Company purchases and holds inventory to help ensure adequate component supplies over the life of the underlying products. The majority of the Company's inventory is production components to be used in the manufacturing process and finished goods inventory in transit. Inventories are reported both within prepaid expenses and other current assets and other long-term assets in the Condensed Consolidated Balance Sheets. Total inventories consisted of the following (in millions):



	As of
	June 30, 2015		December 31, 2014
Production materials	$	50.3	$	38.3
Finished goods	27.1		24.2
Inventories	$	77.4	$	62.5

In connection with the 2014 Restructuring Plan discussed in Note 8, Restructuring and Other Charges, the Company accelerated the end-of-service life of certain products resulting in inventory charges of $11.5 million and $15.5 million, recorded within cost of revenues in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2014, respectively.

Other Long-Term Assets

Other long-term assets consisted of the following (in millions):



	As of
	June 30, 2015		December 31, 2014
Privately-held investments	$	92.1	$	89.9
Licensed software	8.0		8.6
Federal income tax receivable	28.9		20.0
Customer financing receivable	3.0		16.9
Inventory	11.3		8.0
Prepaid costs, deposits, and other	61.6		35.5
Promissory note in connection with the sale of Junos Pulse	125.0		125.0
Interest receivable in connection with Promissory note	4.7		—
Other long-term assets	$	334.6	$	303.9

On October 1, 2014, the Company completed the sale of its Junos Pulse product portfolio. The Company received total consideration of $230.7 million, of which $105.7 million was in cash, net of a $19.3 million working capital adjustment, and $125.0 million was in the form of an 18-month non-contingent interest-bearing promissory note issued to the Company. As of June 30, 2015, the Company has not received scheduled interest payments of $3.1 million and expects further delayed payments beyond the original term of the agreement. The Company measures any impairment based on the present value of expected cash flows, discounted at the note’s effective interest rate, compared to the recorded investment of the note, including principal and accrued interest. Based on this calculation, no impairment charge was required.

The note receivable, along with the related interest receivable, is classified as a long-term asset based on expected collection beyond twelve months from the Condensed Consolidated Balance Sheet date.

Interest income on the note is accrued and credited to interest income as it is earned, unless it is not probable the Company will collect the amounts due or if the present value of expected future cash flow is less than the recorded investment. During the three months ended June 30, 2015, the related amount of interest income recognized was $1.6 million.

Warranties

The Company accrues for warranty costs based on associated material, labor for customer support, and overhead at the time revenue is recognized. This accrual is reported within other accrued liabilities in the Condensed Consolidated Balance Sheets. Changes in the Company’s warranty reserve during the six months ended June 30, 2015 were as follows (in millions):



Balance as of December 31, 2014	$	28.7
Provisions made during the period	13.6
Actual costs incurred during the period	(14.3		)
Balance as of June 30, 2015	$	28.0

Deferred Revenue

Details of the Company's deferred revenue, as reported in the Condensed Consolidated Balance Sheets, were as follows (in millions):



	As of
	June 30, 2015			December 31, 2014
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	185.6		$	180.3
Distributor inventory and other sell-through items	62.3			103.7
Deferred gross product revenue	247.9			284.0
Deferred cost of product revenue	(42.8		)	(58.4		)
Deferred product revenue, net	205.1			225.6
Deferred service revenue	899.3			850.1
Total	$	1,104.4		$	1,075.7
Reported as:
Current	$	795.4		$	780.8
Long-term	309.0			294.9
Total	$	1,104.4		$	1,075.7

Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not sold through to end-users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. In circumstances when costs are deferred, deferred product revenue is recorded net of the related costs of product revenue. Deferred service revenue represents billable amounts for service contracts, which include technical support, hardware and software maintenance, professional services, and training, for which services have not been rendered.

Other (Expense) Income, Net

Other (expense) income, net, consisted of the following (in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Interest income	$	6.7		$	2.1		$	10.5		$	4.2
Interest expense	(21.8		)	(17.8		)	(40.3		)	(33.3		)
Net gain on legal settlement	—			195.3			—			195.3
Gain on investments	0.2			0.8			0.8			167.0
Other	(2.2		)	(1.8		)	(3.9		)	(0.4		)
Other (expense) income, net	$	(17.1	)	$	178.6		$	(32.9	)	$	332.8

Interest income primarily includes interest earned on the Company’s cash, cash equivalents, investments, and on the promissory note issued to the Company in connection with the sale of Junos Pulse. Interest expense primarily includes interest, net of capitalized interest expense, from short-term debt, long-term debt, and customer financing arrangements. Other typically consists of investment and foreign exchange gains and losses and other non-operational income and expense items.

During the three months ended June 30, 2014, the Company entered into a settlement agreement with Palo Alto Networks, Inc. (“PAN”) resolving patent litigation between the two companies, which resulted in a realized gain on legal settlement of $195.3 million, net of legal fees. Under the terms of the settlement, PAN made a one-time payment to the Company of $75.0 million in cash and issued the Company PAN common stock and warrants. The fair value of the PAN common stock and warrants at the date of receipt was included in net realized gain. All such PAN securities were sold in the third quarter of 2014.

During the six months ended June 30, 2014, the Company recorded a gain of $163.0 million primarily related to the sale of investments which were converted from privately-held investments to publicly-traded equity upon initial public offering and subsequently sold.