Supplemental Balance Sheet Details

9 Months Ended

Oct. 03, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]


7. SUPPLEMENTAL BALANCE SHEET DETAILS

Accounts Receivable


In millions	October 3, 2021		January 3, 2021
Trade accounts receivable, gross	$	607	$	491
Allowance for credit losses	(3)		(4)
Total accounts receivable, net	$	604	$	487

Inventory


In millions	October 3, 2021		January 3, 2021
Raw materials	$	89	$	106
Work in process	286		244
Finished goods	26		22
Total inventory	$	401	$	372

Accrued Liabilities


In millions	October 3, 2021		January 3, 2021
Contract liabilities, current portion	$	198	$	186
Accrued compensation expenses	184		153
Accrued taxes payable	77		68

Operating lease liabilities, current portion	66		51
Contingent consideration liabilities	16		—
Other, including warranties (a)	125		83
Total accrued liabilities	$	666	$	541

(a) Changes in the reserve for product warranties were as follows:



In millions	Q3 2021		Q3 2020		YTD 2021		YTD 2020
Balance at beginning of period	$	16	$	10	$	13	$	14
Additions charged to cost of product revenue	5		6		20		11
Repairs and replacements	(6)		(6)		(18)		(15)
Balance at end of period	$	15	$	10	$	15	$	10

We generally provide a one-year warranty on instruments. Additionally, we provide a warranty on consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. At the time revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue.

Derivative Financial Instruments

We are exposed to foreign exchange rate risks in the normal course of business and use derivative financial instruments to partially offset this exposure. We do not use derivative financial instruments for speculative or trading purposes. All foreign exchange contracts are carried at fair value in other current assets or accrued liabilities on the condensed consolidated balance sheets.

We use foreign exchange forward contracts to manage foreign currency risks related to monetary assets and liabilities denominated in currencies other than the U.S. dollar. These derivative financial instruments have terms of one month or less and are not designated as hedging instruments. Changes in fair value of these derivatives are recognized in other income, net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of October 3, 2021, we had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, Chinese Yuan Renminbi, and British pound. As of October 3, 2021 and January 3, 2021, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $429 million and $405 million, respectively.

We also use foreign currency forward contracts to hedge portions of our foreign currency exposure associated with forecasted revenue transactions. These derivative financial instruments have terms up to 24 months and are designated as cash flow hedges. Changes in fair value of our cash flow hedges are recorded as a component of accumulated other comprehensive income and are reclassified to revenue in the same period the underlying hedged transactions are recorded. We regularly review the effectiveness of our cash flow hedges and consider them to be ineffective if it becomes probable that the forecasted transactions will not occur in the identified period. Changes in fair value of the ineffective portions of our cash flow hedges, if any, will be recognized in other income, net. As of October 3, 2021, we had foreign currency forward contracts in place to hedge exposures associated with forecasted revenue transactions denominated in the euro, Japanese yen, Australian dollar, and Canadian dollar. As of October 3, 2021 and January 3, 2021, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $421 million and $305 million, respectively.