4. Financial Statements Details

Cash, Cash Equivalents and Restricted Cash

The following table is a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of the same such amounts shown in the accompanying consolidated statements of cash flows (in thousands):



	December 31,
	2018		2017		2016
Cash and cash equivalents	$	649,950	$	859,192	$	567,923
Restricted cash included in other assets	4,214		5,505		4,245
Total cash, cash equivalents and restricted cash	$	654,164	$	864,697	$	572,168

Accounts Receivable, net

Accounts receivable, net consists of the following (in thousands):



	December 31,
	2018			2017
Accounts receivable	$	340,897		$	254,881
Allowance for doubtful accounts	(507		)	(112		)
Product sales rebate and returns reserve	(8,613		)	(7,423		)
Accounts receivable, net	$	331,777		$	247,346

Allowance for Doubtful Accounts

Activity in the allowance for doubtful accounts consists of the following (in thousands):



	Year Ended December 31,
	2018			2017			2016
Balance at the beginning of year	$	112		$	204		$	963
Additions (deductions) charged (credited) to expense	368			17			(292		)
Addition in connection with business acquisitions	132			—			—
Deductions/write-offs	(105		)	(109		)	(467		)
Balance at the end of year	$	507		$	112		$	204

Product Sales Rebate and Returns Reserve

Activity in the product sales rebate and returns reserve consists of the following (in thousands):



	Year Ended December 31,
	2018			2017			2016
Balance at the beginning of year	$	7,423		$	1,317		$	566
Additions charged against revenue	4,269			17,371			5,122
Consumption	(3,079		)	(11,265		)	(4,371		)
Balance at the end of year	$	8,613		$	7,423		$	1,317

The increase in activity in 2017 primarily relates to channel rebates that we began to offer during 2017.

Inventories

Inventories consist of the following (in thousands):



	December 31,
	2018		2017
Raw materials	$	76,795	$	69,673
Finished goods	187,762		236,525
Total inventories	$	264,557	$	306,198

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consists of the following (in thousands):



	December 31,
	2018		2017
Inventory deposit	$	14,639	$	34,141
Prepaid income taxes	38,636		38,134
Other current assets	95,730		96,215
Other prepaid expenses and deposits	13,316		8,840
Total prepaid expenses and other current assets	$	162,321	$	177,330

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):



	December 31,
	2018			2017
Equipment and machinery	$	55,912		$	47,711
Computer hardware and software	30,566			22,124
Furniture and fixtures	3,697			3,020
Leasehold improvements	36,447			30,548
Building	35,154			35,154
Construction-in-process	3,591			4,742
Property and equipment, gross	165,367			143,299
Less: accumulated depreciation	(90,012		)	(69,020		)
Property and equipment, net	$	75,355		$	74,279

Depreciation expense was $21.6 million, $20.2 million and $19.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):



	December 31,
	2018		2017
Accrued payroll related costs	$	70,755	$	56,626
Accrued manufacturing costs	31,336		35,703
Accrued product development costs	6,988		21,201
Accrued warranty costs	5,362		7,415
Accrued professional fees	5,678		7,086
Accrued taxes	839		794
Other	2,296		5,002
Total accrued liabilities	$	123,254	$	133,827

Warranty Accrual

The following table summarizes the activity related to our accrued liability for estimated future warranty costs (in thousands):



	Year Ended December 31,
	2018			2017
Warranty accrual, beginning of year	$	7,415		$	6,744
Liabilities accrued for warranties issued during the year	3,565			5,542
Warranty costs incurred during the year	(5,618		)	(4,871		)
Warranty accrual, end of year	$	5,362		$	7,415

There were no significant specific product warranty reserves recorded for the years ended December 31, 2018 or 2017.

Contract Balances

The following table summarizes the beginning and ending balances of our contract assets (in thousands):



	Year Ended December 31, 2018
Contract assets, beginning balance	$	—
Contract assets, ending balance	$	6,341

The following table summarizes the activity related to our contract liabilities (in thousands):



	Year Ended December 31, 2018
Contract liabilities, beginning balance	$	16,521
Less: Revenue recognized from beginning balance	(7,561		)
Less: Beginning balance reclassified to deferred revenue	(371		)
Add: Contract liabilities recognized	24,006
Contract liabilities, ending balance	$	32,595

As of December 31, 2018, $13.5 million of our contract liabilities was included in “Other current liabilities” with the remaining balance included in “Other long-term liabilities”.

Deferred Revenue and Performance Obligations

Deferred revenue is comprised mainly of unearned revenue related to multi-year PCS contracts, services and product deferrals related to acceptance clauses. The following table summarizes the activity related to our deferred revenue (in thousands):



	Year Ended December 31, 2018
Deferred revenue, beginning balance	$	498,740		⁽¹⁾
Less: Revenue recognized from beginning balance	(328,758		)
Add: Deferral of revenue in current period, excluding amounts recognized during the period	417,245
Deferred revenue, ending balance	$	587,227
_________________________________
(1) The beginning balance of the year ended December 31, 2018 excludes $16.5 million that was reclassified to other current liabilities and other long-term liabilities at January 1, 2018 as a result of our adoption of ASC 606. See Note 1 for details.

Revenue from Remaining Performance Obligations

Revenue from remaining performance obligations represents contracted revenue that has not yet been recognized, which primarily includes contract liabilities and deferred revenue that will be recognized as revenue in future periods. As of December 31, 2018, approximately $621.1 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 85% of these remaining performance obligations over the next 2 years and 15% during the 3rd to the 5th year.

Other Income (Expense), Net

Other income (expense), net consists of the following (in thousands):



	Year Ended December 31,
	2018			2017			2016
Interest income	$	31,666		$	8,093		$	2,995
Interest expense	(2,701		)	(2,780		)	(3,136		)
Loss on investments in privately-held companies, net	(13,800		)	—			—
Other income (expense)	289			(825		)	(1,043		)
Total other income (expense), net	$	15,454		$	4,488		$	(1,184	)