Other Financial Information

12 Months Ended

Dec. 31, 2020

Other Financial Information [Abstract]

Note 7. Other Financial Information

Inventory

Total inventory consisted of the following (in millions):


	As of December 31,
	2020		2019
Production and service materials	$	158.1	$	69.0
Finished goods	63.8		25.2
Inventory	$	221.9	$	94.2

Reported as:
Prepaid expenses and other current assets	$	210.2	$	90.6
Other long-term assets	11.7		3.6
Total	$	221.9	$	94.2

Property and Equipment, Net

Property and equipment, net, consisted of the following (in millions):


	As of December 31,
	2020		2019
Computers and equipment	$	1,057.5	$	1,041.4
Software	231.1		228.6
Leasehold improvements	223.8		216.9
Furniture and fixtures	49.6		48.3
Building and building improvements	256.0		255.0
Land and land improvements	243.5		243.5
Construction-in-process	17.7		12.9
Property and equipment, gross	2,079.2		2,046.6
Accumulated depreciation	(1,316.9)		(1,215.7)
Property and equipment, net	$	762.3	$	830.9

Depreciation expense was $166.2 million, $184.0 million, and $193.2 million in 2020, 2019, and 2018, respectively.

Notes Receivable and Deposit

Total outstanding notes receivable and deposit, net of issuance costs, reported within other long-term assets in the Consolidated Balance Sheets were as follows (in millions):


	As of December 31,
	2020		2019
Pulse Note (including accumulated interest paid in kind)	$	—	$	78.9
Contract manufacturer deposit (non-interest bearing)	43.6		46.0
Total	$	43.6	$	124.9

In 2020, the Company received payment against the promissory note receivable, with a maturity date of September 30, 2022, in connection with the previously completed sale of Junos Pulse ("Pulse Note"). The borrower exercised its prepayment option and paid the outstanding principal of $50.0 million along with the accumulated interest of $37.7 million and other payments of $4.1 million, aggregating to $91.8 million, in full.

The Company has a non-interest bearing deposit balance of $43.6 million, net of an unamortized discount balance of $1.6 million, to a contract manufacturer. The discount is calculated based on an imputed interest rate of 5.0% at December 31, 2020. The imputed interest is amortized over the term of the deposit to interest income along with a corresponding charge to cost of revenues. The deposit was classified as an other long-term asset on the Consolidated Balance Sheets.

The Company considers contract manufacturer deposits to be impaired when, based on current information and events, it is probable that the Company will not be able to collect the outstanding amounts. No impairment charge was required as of December 31, 2020, 2019, and 2018.

Warranties

Changes in the Company’s warranty reserve were as follows (in millions):


	As of December 31,
	2020		2019
Beginning balance	$	31.4	$	28.0
Provisions made during the period, net	37.1		39.0

Actual costs incurred during the period	(38.3)		(35.6)

Ending balance	$	30.2	$	31.4

Deferred Revenue

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


	As of December 31,
	2020		2019
Deferred product revenue	$	104.7	$	132.6
Deferred service revenue	1,181.1		1,090.8
Total	$	1,285.8	$	1,223.4
Reported as:
Current	$	867.3	$	812.9
Long-term	418.5		410.5
Total	$	1,285.8	$	1,223.4

Revenue

See Note 12, Segments, for disaggregated revenue by product and service, customer vertical, and geographic region.

Product revenue of $72.3 million included in deferred revenue at January 1, 2020 was recognized during the year ended December 31, 2020. Service revenue of $717.3 million included in deferred revenue at January 1, 2020 was recognized during the year ended December 31, 2020.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of December 31, 2020 and when the Company expects to recognize the amounts as revenue (in millions):


	Revenue Recognition Expected by Period
	Total		Less than 1 year		1-3 years		More than 3 years
Product	$	105.5	$	85.4	$	17.0	$	3.1
Service(*)	1,194.4		789.6		332.0		72.8
Total	$	1,299.9	$	875.0	$	349.0	$	75.9

________________________________

(*) Represents unearned service revenue allocated to the performance obligations not delivered or partially delivered as of December 31, 2020. The unearned service revenue is comprised of deferred revenue and non-cancellable contract revenue which has not been invoiced yet.

Deferred Commissions

Deferred commissions were $27.4 million and $24.1 million as of December 31, 2020 and 2019, respectively. During the years ended December 31, 2020 and 2019, amortization expense for the deferred commissions were $145.9 million and $130.9 million, respectively, and there were no impairment charges recognized.

Other Expense, Net

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


	Years Ended December 31,
	2020		2019		2018
Interest income	$	36.3	$	79.1	$	72.7
Interest expense	(77.0)		(88.7)		(103.2)
Gain (loss) on investments, net	13.3		(3.8)		(7.4)
Other	(5.5)		0.9		(1.6)
Other expense, net	$	(32.9)	$	(12.5)	$	(39.5)

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 long-term debt and customer financing arrangements. (Loss) gain on investments, net, primarily includes (loss) gains from the sale of investments in public and privately-held companies, and any observable changes in fair value and impairment charges recorded on these investments. Other typically consists of foreign exchange gains and losses and other non-operational income and expense items.