Other Financial Information

Inventories

The Company purchases and holds inventory to provide 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 within both 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, 2016		December 31, 2015
Production materials	$	82.4	$	61.9
Finished goods	28.1		13.1
Inventories	$	110.5	$	75.0

Other Long-Term Assets

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



	As of
	June 30, 2016		December 31, 2015
Privately-held investments	$	88.5	$	102.4
Licensed software	6.2		7.1
Federal income tax receivable	40.8		28.9
Inventory	5.6		8.4
Prepaid costs, deposits, and other^(*)	47.2		43.3
Deferred tax asset	13.2		55.9
Promissory note in connection with the sale of Junos Pulse	57.9		132.9
Other long-term assets	$	259.4	$	378.9

________________________________


^(*)	During the six months ended June 30, 2016, the Company adopted ASU 2015-03. As a result, debt issuance costs included in prepaid costs, deposits, and other were reclassified to long-term debt as of December 31, 2015 to conform to the current-year presentation.

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 a non-contingent interest-bearing promissory note due to the Company on April 1, 2016 (the “Pulse Note”). On October 2, 2015, the Company and the issuer of the Pulse Note mutually agreed to amend the original terms of the Pulse Note to, among other things, extend the maturity date from April 1, 2016 to December 31, 2018, provided that interest due on the Pulse Note through December 31, 2015 shall be paid in kind by increasing the outstanding principal amount of the note and increasing the interest rate on the Pulse Note. In addition, under the amended terms of the Pulse Note, the issuer is required to make a minimum payment of $75.0 million on or prior to April 1, 2017, less any principal amount previously pre-paid to the Company. The $75.0 million portion of the note receivable, is classified as prepaid expenses and other current assets in the Condensed Consolidated Financial Statements. The remaining balance, along with interest paid in kind, is classified as a long-term asset based on expected collection beyond twelve months from the Condensed Consolidated Balance Sheet date.

The Company considers notes receivable to be impaired when, based on current information and events, it is probable that the Company will not be able to collect the scheduled payments of principal or interest when due. Further, the Company measures any impairment to the Pulse Note based on the present value of expected cash flows, which are discounted at the note's effective interest rate, compared to the recorded investment of the note, including principal and accrued interest. Based on the impairment assessment, no impairment charge was required to the Pulse Note as of June 30, 2016. Interest income on the Pulse 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 cash flows is less than the recorded investment. During the three and six months ended June 30, 2016, the related amount of interest income recognized was $2.7 million and $5.3 million, respectively.

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, 2016 were as follows (in millions):



Balance as of December 31, 2015	$	28.4
Provisions made during the period	13.6
Actual costs incurred during the period	(13.5		)
Balance as of June 30, 2016	$	28.5

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, 2016			December 31, 2015
Deferred product revenue:
Undelivered product commitments and other product deferrals	$	242.5		$	210.1
Distributor inventory and other sell-through items	99.9			81.8
Deferred gross product revenue	342.4			291.9
Deferred cost of product revenue	(51.6		)	(51.6		)
Deferred product revenue, net	290.8			240.3
Deferred service revenue	1,004.8			927.8
Total	$	1,295.6		$	1,168.1
Reported as:
Current	$	933.0		$	822.9
Long-term	362.6			345.2
Total	$	1,295.6		$	1,168.1

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, Net

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Interest income	$	8.5		$	6.7		$	16.4		$	10.5
Interest expense	(25.0		)	(21.8		)	(47.5		)	(40.3		)
Gain (loss) on investments	3.6			0.2			(1.8		)	0.8
Other	1.3			(2.2		)	(0.9		)	(3.9		)
Other expense, net	$	(11.6	)	$	(17.1	)	$	(33.8	)	$	(32.9	)

Interest income primarily includes interest earned on the Company’s cash, cash equivalents, investments, and 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.