Balance Sheet Account Details

Investments

Debt Securities

Available-for-sale debt securities, included in short-term investments, consisted of the following (in millions):



	March 31, 2019									December 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Debt securities in government sponsored entities	$	21	$	—	$	—		$	21	$	21	$	—	$	—		$	21
Corporate debt securities	716		2		(1		)	717		1,060		—		(2		)	1,058
U.S. Treasury securities	566		—		—			566		1,250		1		(1		)	1,250
Total	$	1,303	$	2	$	(1	)	$	1,304	$	2,331	$	1	$	(3	)	$	2,329

Realized gains and losses are determined based on the specific identification method and are reported in interest income.

Contractual maturities of available-for-sale debt securities, as of March 31, 2019, were as follows (in millions):



	Estimated Fair Value
Due within one year	$	711
After one but within five years	593
Total	$	1,304

We have the ability, if necessary, to liquidate any of our cash equivalents and short-term investments to meet our liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying condensed consolidated balance sheets.

Equity Securities

Our equity securities are strategic investments primarily in privately held companies.

The carrying values of our non-marketable equity securities without readily determinable market values are initially measured at cost and adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Unrealized gains and losses on non-marketable equity securities are recognized in other income, net. As of March 31, 2019 and December 30, 2018, the aggregate carrying amounts of our non-marketable equity investments without readily determinable fair values were $230 million and $231 million, respectively, included in other assets.

One of our non-marketable equity investments is a VIE for which we have concluded that we are not the primary beneficiary, and therefore, we do not consolidate this VIE in our consolidated financial statements. We have determined our maximum exposure to loss, as a result of our involvement with the VIE, to be the carrying value of our investment, which was $189 million as of March 31, 2019 and December 30, 2018.

Our marketable equity security is measured at fair value. Unrealized gains and losses are recognized in other income, net. As of March 31, 2019 and December 30, 2018, the fair value of our marketable equity investment was $41 million and $39 million, respectively, included in short-term investments.

Revenue recognized from transactions with our strategic equity investees was $15 million and $36 million for the three months ended March 31, 2019 and April 1, 2018, respectively.

Venture Fund

We invest in a venture capital investment fund (the Fund) with a capital commitment of $100 million that is callable through April 2026, of which $66 million remained callable as of March 31, 2019. Our investment in the Fund is accounted for as an equity-method investment. The carrying amounts of the Fund, included in other assets, were $38 million and $29 million as of March 31, 2019 and December 30, 2018, respectively.

Inventory

Inventory consisted of the following (in millions):



	March 31, 2019		December 30, 2018
Raw materials	$	115	$	117
Work in process	234		218
Finished goods	63		51
Total inventory	$	412	$	386

Property and Equipment

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



	March 31, 2019			December 30, 2018
Leasehold improvements	$	622		$	567
Machinery and equipment	390			382
Computer hardware and software	256			217
Furniture and fixtures	48			45
Buildings	44			285
Construction in progress	46			100
Total property and equipment, gross	1,406			1,596
Accumulated depreciation	(554		)	(521		)
Total property and equipment, net	$	852		$	1,075

Property and equipment, net included non-cash expenditures of $17 million and $33 million for the three months ended March 31, 2019 and April 1, 2018, respectively, which were excluded from the condensed consolidated statements of cash flows. Such non-cash expenditures included $6 million recorded under build-to-suit lease accounting for the three months ended April 1, 2018.

As of December 30, 2018, property and equipment, net included $241 million of project construction costs paid or reimbursed by our landlord related to our build-to-suit leases that did not qualify for sale-leaseback accounting under Topic 840. Upon adoption of Topic 842 on December 31, 2018, we derecognized the Buildings related to our build-to-suit leasing arrangements and began to account for these leases as operating leases. See note “1. Basis of Presentation and Summary of Significant Accounting Policies” for further details on the adoption impact of Topic 842.

Leases

We lease approximately 2.7 million square feet of office, lab, and manufacturing facilities under various non-cancellable operating lease agreements (real estate leases). Our real estate leases have remaining lease terms of 1 to 20 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from 6 months to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms as well as payments for common-area-maintenance and administrative services. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases.

Operating lease right-of-use assets and liabilities on our condensed consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms. We do not allocate lease payments to non-lease components; therefore, fixed payments for common-area-maintenance and administrative services are included in our operating lease right-of-use assets and liabilities. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.

As of March 31, 2019, the maturities of our operating lease liabilities were as follows (in millions):



	Remaining Lease Payments
2019	$	64
2020	85
2021	82
2022	85
2023	86
Thereafter	621
Total remaining lease payments	1,023
Less: imputed interest	(253		)
Total operating lease liabilities	770
Less: current portion	(52		)
Long-term operating lease liabilities	$	718
Weighted-average remaining lease term	12 years
Weighted-average discount rate	4.6		%

The components of our lease costs included in our condensed consolidated statements of income were as follows (in millions):



	Three months ended
	March 31, 2019
Operating lease costs	$	22
Sublease income	(3		)
Total lease costs	$	19

Operating lease costs consist of the fixed lease payments included in our operating lease liabilities and are recorded on a straight-line basis over the lease terms. We sublease certain real estate to third parties and this sublease income is also recorded on a straight-line basis.

Derivatives

We are exposed to foreign exchange rate risks in the normal course of business. We enter into foreign exchange contracts to manage foreign currency risks related to monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. These foreign exchange contracts are carried at fair value in other current assets or accrued liabilities and are not designated as hedging instruments. Changes in the value of the derivatives are recognized in other income, net, along with the remeasurement gain or loss on the foreign currency denominated assets or liabilities.

As of March 31, 2019, we had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, and British pound. As of March 31, 2019 and December 30, 2018, the total notional amounts of outstanding forward contracts in place for foreign currency purchases were $272 million and $122 million, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in millions):



	March 31, 2019		December 30, 2018
Contract liabilities, current portion	$	169	$	175
Accrued compensation expenses	105		193
Accrued taxes payable	83		82
Operating lease liabilities, current portion	52		—
Other, including warranties	64		63
Total accrued liabilities	$	473	$	513

Warranties

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.

Changes in the reserve for product warranties during the three months ended March 31, 2019 and April 1, 2018 were as follows (in millions):



	Three Months Ended
	March 31, 2019			April 1, 2018
Balance at beginning of period	$	19		$	17
Additions charged to cost of product revenue	3			6
Repairs and replacements	(6		)	(7		)
Balance at end of period	$	16		$	16

Investment in Helix

In July 2015, we obtained a 50% voting equity ownership interest in Helix Holdings I, LLC (Helix), a limited liability company formed with unrelated third-party investors to pursue the development and commercialization of a marketplace for consumer genomics. We determined that Helix is a VIE as the holders of the at-risk equity investments as a group lack the power to direct the activities of Helix that most significantly impact Helix’s economic performance. Additionally, we determined that we have (a) unilateral power over one of the activities that most significantly impacts the economic performance of Helix through its contractual arrangements and no one individual party has unilateral power over the remaining significant activities of Helix and (b) the obligation to absorb losses of and the right to receive benefits from Helix that are potentially significant to Helix. As a result, we are deemed to be the primary beneficiary of Helix and are required to consolidate Helix.

As contractually committed, in July 2015, we contributed certain perpetual licenses, instruments, intangibles, initial laboratory setup, and discounted supply terms in exchange for voting equity interests in Helix. Such contributions were recorded at their historical basis as they remained within our control. Helix is financed through cash contributions made by us and third-party investors in exchange for voting equity interests in Helix. During the year ended December 30, 2018, we made additional investments of $100 million in exchange for voting equity interests in Helix. During the three months ended March 31, 2019, we did not provide any other financial or other support to Helix that we were not previously contractually required to provide. As of March 31, 2019, the noncontrolling shareholders and Illumina each held 50% of Helix’s outstanding voting equity interests.

Certain noncontrolling Helix investors may require us to redeem certain noncontrolling interests in cash at the then approximate redemption fair market value. Such redemption right is exercisable at the option of certain noncontrolling interest holders after January 1, 2021, provided that a bona fide pursuit of the sale of Helix has occurred and an initial public offering of Helix has not been completed. As the contingent redemption is outside of our control, the redeemable noncontrolling interests in Helix are classified outside of stockholders’ equity on the accompanying condensed consolidated balance sheets. The balance of the redeemable noncontrolling interests is reported at the greater of its carrying value after receiving its allocation of Helix’s profits and losses or its estimated redemption fair value at each reporting date. The fair value of the redeemable noncontrolling interests is considered a Level 3 instrument.

As of March 31, 2019, the accompanying condensed consolidated balance sheet included $106 million of cash, cash equivalents, and short-term investments attributable to Helix that will be used to settle its respective obligations and will not be available to settle obligations of Illumina. The remaining assets and liabilities of Helix were not significant to our financial position as of March 31, 2019. Helix had an immaterial impact on our condensed consolidated statements of income and cash flows for the three months ended March 31, 2019. Refer to note “10. Subsequent Event.”

Redeemable Noncontrolling Interests

The activity of the redeemable noncontrolling interests during the three months ended March 31, 2019 was as follows (in millions):



	Redeemable Noncontrolling Interests
Balance as of December 30, 2018	$	61
Vesting of redeemable equity awards	1
Net loss attributable to noncontrolling interests	(7		)
Adjustment down to the redemption value	(18		)
Balance as of March 31, 2019	$	37