Balance Sheet Details

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Short-Term Marketable Securities

Short-term marketable securities, consisting of equity securities and debt securities, were as follows as of the dates indicated. We sold the equity investment in Tandem Diabetes Care, Inc. that we held as of December 31, 2018 during the first quarter of 2019.



	June 30, 2019
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
Debt securities, available for sale:
U.S. government agencies	$	531.2	$	0.4	$	—	$	531.6
Commercial paper	98.8		0.1		—		98.9
Corporate debt	37.8		—		—		37.8
Total debt securities, available for sale	667.8		0.5		—		668.3

Total marketable securities	$	667.8	$	0.5	$	—	$	668.3



	December 31, 2018
(In millions)	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Equity investment in Tandem Diabetes Care, Inc.	$	2.0	$	36.0	$	—		$	38.0

Debt securities, available for sale:
U.S. government agencies	173.2		—		(0.1		)	173.1
Commercial paper	36.2		—		—			36.2
Corporate debt	1.3		—		—			1.3
Total debt securities, available for sale	210.7		—		(0.1		)	210.6

Total marketable securities	$	212.7	$	36.0	$	(0.1	)	$	248.6

As of June 30, 2019 and December 31, 2018, all of our debt securities had contractual maturities of less than 12 months. Gross realized gains and losses on sales of our debt securities during the three and six months ended June 30, 2019 and 2018 were not significant.

We periodically review our portfolio of debt securities to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. We believe that the investments we held at June 30, 2019 were not other-than-temporarily impaired. Unrealized losses on available-for-sale debt securities at that date were not significant and were due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

Inventory



(In millions)	June 30, 2019		December 31, 2018
Raw materials	$	58.7	$	30.8
Work-in-process	11.4		11.2
Finished goods	47.8		28.7
Total inventory	$	117.9	$	70.7

During the three and six months ended June 30, 2019 we recorded excess and obsolete inventory charges of $1.7 million and $3.3 million, respectively, in cost of goods sold as a result of our ongoing assessment of sales demand and inventory on hand for

each product line. During the three and six months ended June 30, 2018 we recorded excess and obsolete inventory charges of $3.5 million and $5.5 million, respectively, in cost of goods sold primarily as a result of the approval and launch of our G6 system and our ongoing assessment of sales demand and inventory on hand for each product line.

Property and Equipment



(In millions)	June 30, 2019			December 31, 2018
Building and land	$	15.5		$	6.0
Furniture and fixtures	10.0			9.0
Computer software and hardware	33.0			29.2
Machinery and equipment	102.2			80.7
Leasehold improvements	95.4			80.7
Construction in progress	96.1			57.3
Total cost	352.2			262.9
Less accumulated depreciation and amortization	(99.0		)	(79.8		)
Total property and equipment, net	$	253.2		$	183.1

Building and Land. Although we do not legally own these premises, under previous lease accounting standards we were deemed the owner of the construction project during the construction period of our manufacturing facility in Mesa, Arizona under a build-to-suit lease arrangement. As a result of our adoption of ASC 842, we de-recognized the estimated fair value of the building shell that was included in “building and land” in our balance sheet as of December 31, 2018 and the related lease liability and recorded the difference between the asset and liability as an adjustment to retained earnings at the beginning of the first quarter of 2019. The June 30, 2019 balance in “building and land” represents our finance lease right-of-use assets as a result of our adoption of ASC 842.

Construction in Progress. The increase in construction in progress as of June 30, 2019 compared to December 31, 2018 is primarily due to continued investment in the expansion and automation of our production capabilities.

Accounts Payable and Accrued Liabilities



(In millions)	June 30, 2019		December 31, 2018
Accounts payable trade	$	97.1	$	75.5
Accrued tax, audit, and legal fees	16.6		11.7
Accrued rebates	55.3		36.1
Accrued warranty	6.8		6.8
Restructuring reserve	1.8		—
Other accrued liabilities	19.1		17.0
Total accounts payable and accrued liabilities	$	196.7	$	147.1

Accrued Rebates. The increase in the balance of accrued rebates as of June 30, 2019 compared with December 31, 2018 is due to increased sales volume in the pharmacy channel and to a lesser extent to pausing payments pending the outcome of ongoing discussions regarding the terms of one of our rebate agreements.

Restructuring Reserve. In February 2019, our Board of Directors approved a restructuring plan that will result in the transition of certain of our operations to the Philippines. We estimate that we will incur total pre-tax charges and costs of approximately $9.0 million, primarily for employee severance benefits under both ongoing and one-time benefit arrangements. We expect to incur these costs throughout 2019 but primarily in the first half of 2019, and we expect the restructuring activities to be substantially complete by the end of 2019.

Other Long-Term Liabilities



(In millions)	June 30, 2019		December 31, 2018
Finance lease liabilities	$	14.7	$	7.3
Deferred rent	—		9.4
Other liabilities	2.8		3.3
Total other long-term liabilities	$	17.5	$	20.0

Our adoption of ASC 842 during the first quarter of 2019 affected the balances of finance lease liabilities and deferred rent. See Note 2, “Leases,” for more information.