Balance Sheet Details

9 Months Ended

Sep. 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.



	September 30, 2019
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Debt securities, available for sale:
U.S. government agencies	$	698.6	$	0.4	$	—		$	699.0
Commercial paper	277.9		0.1		(0.1		)	277.9
Corporate debt	57.4		—		—			57.4
Total debt securities, available for sale	1,033.9		0.5		(0.1		)	1,034.3

Total marketable securities	$	1,033.9	$	0.5	$	(0.1	)	$	1,034.3



	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

The following table reconciles the net gain recognized on equity securities during the three and nine months ended September 30, 2019 and 2018 to the unrealized gain recognized during the periods on equity securities still held at the reporting date. We sold the equity investment in Tandem Diabetes Care, Inc. that we held as of December 31, 2018 during the first quarter of 2019 and did not have any outstanding equity securities as of September 30, 2019.



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2019		2018			2019			2018
Net gains and losses recognized during the period on equity securities	$	—	$	34.9		$	(4.2	)	$	85.0
Less: Net gains and losses recognized during the period on equity securities sold during the period	—		(14.1		)	4.2			(44.2		)
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$	—	$	20.8		$	—		$	40.8

As of September 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 nine months ended September 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 September 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)	September 30, 2019		December 31, 2018
Raw materials	$	57.9	$	30.8
Work-in-process	8.2		11.2
Finished goods	54.3		28.7
Total inventory	$	120.4	$	70.7

During the three and nine months ended September 30, 2019 we recorded excess and obsolete inventory charges of $6.8 million and $10.1 million, respectively, in cost of sales as a result of our ongoing assessment of sales demand and inventory on hand for each product line. During the three and nine months ended September 30, 2018 we recorded excess and obsolete inventory charges of $0.6 million and $6.1 million, respectively, in cost of sales 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)	September 30, 2019			December 31, 2018
Building and land	$	15.5		$	6.0
Furniture and fixtures	12.2			9.0
Computer software and hardware	32.8			29.2
Machinery and equipment	97.5			80.7
Leasehold improvements	96.6			80.7
Construction in progress	148.0			57.3
Total cost	402.6			262.9
Less accumulated depreciation and amortization	(101.6		)	(79.8		)
Total property and equipment, net	$	301.0		$	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 consolidated balance sheets 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 September 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 September 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)	September 30, 2019		December 31, 2018
Accounts payable trade	$	101.4	$	75.5
Accrued tax, audit, and legal fees	20.3		11.7
Accrued rebates	74.6		36.1
Accrued warranty	7.5		6.8
Restructuring reserve	0.7		—
Other accrued liabilities	27.9		17.0
Total accounts payable and accrued liabilities	$	232.4	$	147.1

Accrued Rebates. The increase in the balance of accrued rebates as of September 30, 2019 compared with December 31, 2018 is due to increased sales volume in the pharmacy channel and to a lesser extent liabilities 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 $8.0 million, primarily for employee severance benefits under both ongoing and one-time benefit arrangements. We have incurred most of these costs in the first half of 2019 and expect the restructuring activities to be substantially complete by the end of 2019.

Other Long-Term Liabilities



(In millions)	September 30, 2019		December 31, 2018
Finance lease liabilities	$	14.5	$	7.3
Deferred rent	—		9.4
Other liabilities	3.1		3.3
Total other long-term liabilities	$	17.6	$	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.