ILLUMINA INC

Accounts Receivable

Inventory

Property and Equipment

Property and equipment, net included non-cash expenditures of $12 million, $16 million and $17 million in 2023, 2022, and 2021, respectively, which were excluded from the consolidated statements of cash flows.

Accrued Liabilities

(1)See note “8. Legal Proceedings” for additional details.

(2)Included employee separation costs related to restructuring activities.

(3)See table below for changes in the reserve for product warranties.

Changes in the reserve for product warranties were as follows:

Restructuring

In Q2 2023, we implemented a cost reduction initiative that included workforce reductions, the consolidation of certain facilities and other actions to reduce expenses, all as part of a plan to realign operating expenses while maintaining focus on our innovation roadmap and sustainable long-term growth. In 2023, we recorded pre-tax restructuring charges primarily consisting of asset impairment charges related to our facilities and employee separation costs.

A summary of the pre-tax restructuring charges recorded in 2023 are as follows:

(1)Primarily related to impairment of right-of-use assets and leasehold improvements for our i3 and Foster City campuses in California.

(2)For 2023, $122 million was recorded in SG&A expense, $24 million in R&D expense, with the remainder recorded in cost of revenue. These restructuring activities primarily relate to our Core Illumina segment.

During 2023, we fully exited our i3 campus in San Diego, California, which resulted in a right-of-use asset impairment of $38 million, and we exited a portion of our campus in Foster City, California, which resulted in a right-of-use asset impairment of $21 million. These impairments were recognized in selling, general and administrative expense. The impairments were determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date. The fair value of the right-of-use asset was estimated using the discounted future cash flows method, which includes estimates and assumptions for future sublease rental rates that reflect current sublease market conditions, as well as a discount rate. The estimates and assumptions used in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. We also recorded $16 million and $22 million of leasehold improvement impairments related to the exits of our i3 and Foster City campuses, respectively, in 2023, recognized in selling, general and administrative expense. We continue to evaluate our options with respect to the rest of our campus in Foster City, California. As of December 31, 2023, we had remaining assets, consisting primarily of right-of-use assets and leasehold improvements, related to our Foster City campus of approximately $136 million.

A summary of the restructuring liability is as follows:

(1)It is expected that substantially all of the employee separation related restructuring charges will be incurred and paid by the end of Q1 2024.

Other (Expense) Income, Net