Strong Earnings Expansion Year-Over-Year and Quarter-Over-Quarter
Q2 2014 Financial Highlights:
-
Revenue: $1,230 million, up 5% from Q1‘14 and up 7% from Q2‘13
-
Operating Margin: 9.4% GAAP, includes $86 million of restructuring
and other charges; 22.3% non-GAAP, up 3.4 pts from Q2‘13
-
GAAP Net Income Per Share: $0.46 diluted, includes a $0.41 benefit
from gain on legal settlements and a $0.18 impact from restructuring
and other charges
-
Non-GAAP Net Income Per Share: $0.40 diluted, up 38% from $0.29
diluted in Q1‘14 and up from $0.29 diluted in Q2‘13
SUNNYVALE, Calif.--(BUSINESS WIRE)--
Juniper Networks (NYSE: JNPR), the industry leader in network
innovation, today reported preliminary financial results for the three
months ended June 30, 2014 and provided its outlook for the three months
ending September 30, 2014.
Net revenues for the second quarter of 2014 increased 7% year-over-year
and increased 5% sequentially to $1,230 million.
Juniper’s operating margin for the second quarter of 2014 increased to
9.4% on a GAAP basis, including $86 million of restructuring and other
charges, from (0.5)% in the first quarter of 2014, and decreased from
12% in the second quarter of 2013. Non-GAAP operating margin for the
second quarter of 2014 increased to 22.3% from 17.2% in the first
quarter of 2014, and increased from 18.9% in the second quarter of 2013.
Juniper posted GAAP net income of $221.1 million, or $0.46 per diluted
share for the second quarter of 2014. The GAAP diluted income per share
includes a $0.41 benefit from gain on a legal settlement partly offset
by an $0.18 impact from restructuring and other charges. Non-GAAP net
income was $190.3 million, or $0.40 per diluted share for the second
quarter of 2014. Non-GAAP net income per diluted share increased 38%
compared to the first quarter of 2014, and increased 38% compared to the
second quarter of 2013.
The reconciliation between GAAP and non-GAAP results of operations is
provided in a table immediately following the Preliminary Net Revenue by
Market table below.
“Juniper delivered another solid quarter of revenue growth, with
continued diversification across our target verticals. With our focused
strategy, we are seeing clear signs of success with customers who are in
a build cycle for High-IQ networks and Cloud ecosystems,” said Shaygan
Kheradpir, chief executive officer, Juniper Networks. “We are
relentlessly executing on our Integrated Operating Plan and successfully
implemented several initiatives to drive greater efficiencies across our
organization. Throughout, we have been working to ignite our culture of
innovation and maintain our unwavering commitment to shareholders to
drive significant value through profitable growth.”
“I am pleased to report our sixth consecutive quarter of year-over-year
strong earnings expansion,” said
Robyn Denholm
, chief financial and
operations officer, Juniper Networks. “We continue to generate strong
operating cash flows and have made good progress toward our operating
expense and capital allocation goals. We have done so by being very
mindful of how we allocate resources to ensure we continue to invest in
R&D that will drive Juniper’s growth well into the future.”
Junos® Pulse Divestiture
Today, Juniper Networks also announced it has entered into a definitive
agreement to sell its Junos Pulse product portfolio to Siris Capital for
approximately $250 million. Siris is a leading private equity firm
focused on making control investments in data, telecommunications,
technology and technology-enabled business service companies. Juniper
and Siris have agreed to continued support of customers and partners
through the transition. Juniper’s sale of Pulse is consistent with the
Company’s overall strategy outlined in its Integrated Operating Plan
(IOP) and further aligns the Company’s security products to where its
customers and the market is heading with High-IQ networks and building
the next-generation of clouds.
Other Financial Highlights
Total cash, cash equivalents, and investments as of June 30, 2014 were
$3,960 million, compared to $3,479 million as of March 31, 2014, and
$3,819 million as of June 30, 2013.
Juniper’s net cash flow from operations for the second quarter of 2014
was $425 million, compared to $126 million in the first quarter of 2014,
and $284 million in the second quarter of 2013. This quarter’s net cash
flow reflects the gain of $75 million related to our litigation
settlement.
Days sales outstanding in accounts receivable or “DSO” was 41 days in
the second quarter of 2014, compared to 46 days in the prior quarter,
and 40 days in the second quarter of 2013.
During the first quarter of 2014, Juniper Networks initiated a $1.2
billion accelerated share repurchase (ASR) program, of which $900
million of shares were initially delivered. The Company expects the
remaining shares to be delivered no later than the end of August.
Juniper Networks also announced the initiation of a quarterly cash
dividend of $0.10 per share of common stock. This is the Company’s first
cash dividend in history. It will be payable on September 23, 2014 to
shareholders of record as of the close of business on September 2, 2014.
The Company’s Board of Directors anticipates declaring this dividend in
future quarters on a regular basis; however, future declarations of
dividends are subject to Board approval and may be adjusted as business
needs or market conditions change.
Capital expenditures were $41 million and depreciation and amortization
of intangible assets expense was $45.3 million during the second quarter
of 2014.
Outlook
In the near term, there are some customer-specific dynamics that the
Company is factoring into its outlook. This is partially offset by signs
of strength in emerging verticals. The Company is focused on continued
innovation and executing on its Integrated Operating Plan.
Juniper Networks estimates that for the quarter ending September 30,
2014:
-
Revenues will be in the range of $1,150 million to $1,200 million.
-
Non-GAAP gross margin will be approximately 64.0%, plus or minus 0.5%.
-
Non-GAAP operating expenses will be $505 million, plus or minus $5
million.
-
Non-GAAP operating margin will be roughly 21.0% at the midpoint of
revenue guidance.
-
Non-GAAP net income per share will range between $0.35 and $0.40 on a
diluted basis. This assumes a share count of 475 million and a
non-GAAP tax rate flat to the second quarter.
-
Capital Allocation: The Company intends to opportunistically
re-purchase a minimum of $550 million of common stock in addition to
the ASR, by the end of the year.
All forward-looking non-GAAP measures exclude estimates for amortization
of intangible assets, share-based compensation expense,
acquisition-related charges, restructuring and related costs, impairment
charges, litigation settlements and resolutions, non-routine stockholder
activities, gain or loss on equity investments, non-recurring income tax
adjustments, product quality-related remediation charges, valuation
allowance on deferred tax assets and income tax effect of non-GAAP
exclusions. A reconciliation of non-GAAP guidance measures to
corresponding GAAP measures is not available on a forward-looking basis.
Conference Call Webcast
Juniper Networks will host a conference call webcast today, July 22,
2014, at 2:00 pm (Pacific Daylight Time), to be broadcast live over the
Internet at http://investor.juniper.net/investor-relations/default.aspx.
To participate via telephone in the US, the toll free dial-in number is
1-877-407-8033. Outside the US, dial +1-201-689-8033. Please call 10
minutes prior to the scheduled conference call time. The webcast replay
will be archived on the Juniper Networks website.
About Juniper Networks
Juniper Networks (NYSE: JNPR) delivers innovation across routing,
switching and security. From the network core down to consumer devices,
Juniper Networks’ innovations in software, silicon and systems transform
the experience and economics of networking. Additional information can
be found at Juniper Networks (www.juniper.net)
or connect with Juniper on Twitter
and Facebook.
Juniper Networks and Junos, are registered trademarks of Juniper
Networks, Inc. in the United States and other countries. The Juniper
Networks logo and the Junos logo are trademarks of Juniper Networks,
Inc. All other trademarks, service marks, registered trademarks, or
registered service marks are the property of their respective owners.
Safe Harbor
Statements in this release concerning Juniper Networks' business
outlook, economic and market outlook, future financial and operating
results, and overall future prospects are forward-looking statements
that involve a number of uncertainties and risks. Actual results or
events could differ materially from those anticipated in those
forward-looking statements as a result of certain factors, including:
general economic and political conditions globally or regionally;
business and economic conditions in the networking industry; changes in
overall technology spending and spending by communication service
providers and major customers; the network capacity requirements of
communication service providers; contractual terms that may result in
the deferral of revenue; increases in and the effect of competition; the
timing of orders and their fulfillment; manufacturing and supply chain
constraints; ability to establish and maintain relationships with
distributors, resellers and other partners; variations in the expected
mix of products sold; changes in customer mix; changes in geography mix;
customer and industry analyst perceptions of Juniper Networks and its
technology, products and future prospects; delays in scheduled product
availability; market acceptance of Juniper Networks products and
services; rapid technological and market change; adoption of regulations
or standards affecting Juniper Networks products, services or the
networking industry; the ability to successfully acquire, integrate and
manage businesses and technologies; product defects, returns or
vulnerabilities; the ability to recruit and retain key personnel;
significant effects of tax legislation and judicial or administrative
interpretation of tax regulations; currency fluctuations; litigation
settlements and resolutions; the potential impact of activities related
to the execution of the Juniper Networks Integrated Operating Plan; and
other factors listed in Juniper Networks' most recent report on Form
10-Q filed with the Securities and Exchange Commission. All statements
made in this press release are made only as of the date set forth at the
beginning of this release. Juniper Networks undertakes no obligation to
update the information in this release in the event facts or
circumstances subsequently change after the date of this press release.
Juniper Networks believes that the presentation of non-GAAP financial
information provides important supplemental information to management
and investors regarding financial and business trends relating to the
company's financial condition and results of operations. For further
information regarding why Juniper Networks believes that these non-GAAP
measures provide useful information to investors, the specific manner in
which management uses these measures, and some of the limitations
associated with the use of these measures, please refer to the
discussion below. The following tables and reconciliations can also be
found on our Investor Relations website at http://investor.juniper.net/investor-relations/default.aspx.
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
$
|
929.2
|
|
|
|
$
|
863.8
|
|
|
|
|
|
$
|
1,805.2
|
|
|
|
$
|
1,645.6
|
|
Service
|
|
|
|
|
300.3
|
|
|
|
286.9
|
|
|
|
|
|
594.4
|
|
|
|
564.3
|
|
Total net revenues
|
|
|
|
|
1,229.5
|
|
|
|
1,150.7
|
|
|
|
|
|
2,399.6
|
|
|
|
2,209.9
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
359.3
|
|
|
|
321.3
|
|
|
|
|
|
685.9
|
|
|
|
599.5
|
|
Service
|
|
|
|
|
122.0
|
|
|
|
108.9
|
|
|
|
|
|
245.4
|
|
|
|
219.1
|
|
Total cost of revenues
|
|
|
|
|
481.3
|
|
|
|
430.2
|
|
|
|
|
|
931.3
|
|
|
|
818.6
|
|
Gross margin
|
|
|
|
|
748.2
|
|
|
|
720.5
|
|
|
|
|
|
1,468.3
|
|
|
|
1,391.3
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
255.5
|
|
|
|
257.7
|
|
|
|
|
|
519.5
|
|
|
|
519.9
|
|
Sales and marketing
|
|
|
|
|
258.0
|
|
|
|
267.1
|
|
|
|
|
|
531.4
|
|
|
|
523.2
|
|
General and administrative
|
|
|
|
|
60.6
|
|
|
|
49.2
|
|
|
|
|
|
135.5
|
|
|
|
107.7
|
|
Restructuring and other charges
|
|
|
|
|
58.2
|
|
|
|
8.0
|
|
|
|
|
|
172.2
|
|
|
|
15.0
|
|
Total operating expenses
|
|
|
|
|
632.3
|
|
|
|
582.0
|
|
|
|
|
|
1,358.6
|
|
|
|
1,165.8
|
|
Operating income
|
|
|
|
|
115.9
|
|
|
|
138.5
|
|
|
|
|
|
109.7
|
|
|
|
225.5
|
|
Other income (expense), net
|
|
|
|
|
178.6
|
|
|
|
(12.6
|
)
|
|
|
|
|
332.8
|
|
|
|
(22.7
|
)
|
Income before income taxes
|
|
|
|
|
294.5
|
|
|
|
125.9
|
|
|
|
|
|
442.5
|
|
|
|
202.8
|
|
Income tax provision
|
|
|
|
|
73.4
|
|
|
|
28.0
|
|
|
|
|
|
110.8
|
|
|
|
13.9
|
|
Net income
|
|
|
|
|
$
|
221.1
|
|
|
|
$
|
97.9
|
|
|
|
|
|
$
|
331.7
|
|
|
|
$
|
188.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.47
|
|
|
|
$
|
0.19
|
|
|
|
|
|
$
|
0.69
|
|
|
|
$
|
0.37
|
|
Diluted
|
|
|
|
|
$
|
0.46
|
|
|
|
$
|
0.19
|
|
|
|
|
|
$
|
0.68
|
|
|
|
$
|
0.37
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
470.3
|
|
|
|
503.0
|
|
|
|
|
|
478.1
|
|
|
|
503.8
|
|
Diluted
|
|
|
|
|
476.5
|
|
|
|
506.3
|
|
|
|
|
|
487.3
|
|
|
|
510.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Net Revenues by Product and Service
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
2013
|
Routing
|
|
|
|
|
$
|
617.8
|
|
|
$
|
577.5
|
|
|
|
|
|
$
|
1,167.6
|
|
|
$
|
1,091.2
|
Switching
|
|
|
|
|
199.8
|
|
|
160.2
|
|
|
|
|
|
391.8
|
|
|
291.7
|
Security
|
|
|
|
|
111.6
|
|
|
126.1
|
|
|
|
|
|
245.8
|
|
|
262.7
|
Total product
|
|
|
|
|
929.2
|
|
|
863.8
|
|
|
|
|
|
1,805.2
|
|
|
1,645.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service
|
|
|
|
|
300.3
|
|
|
286.9
|
|
|
|
|
|
594.4
|
|
|
564.3
|
Total
|
|
|
|
|
$
|
1,229.5
|
|
|
$
|
1,150.7
|
|
|
|
|
|
$
|
2,399.6
|
|
|
$
|
2,209.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
2013
|
Americas
|
|
|
|
|
$
|
711.0
|
|
|
$
|
675.1
|
|
|
|
|
|
$
|
1,392.5
|
|
|
$
|
1,267.2
|
Europe, Middle East, and Africa
|
|
|
|
|
324.8
|
|
|
300.9
|
|
|
|
|
|
620.5
|
|
|
591.5
|
Asia Pacific
|
|
|
|
|
193.7
|
|
|
174.7
|
|
|
|
|
|
386.6
|
|
|
351.2
|
Total
|
|
|
|
|
$
|
1,229.5
|
|
|
$
|
1,150.7
|
|
|
|
|
|
$
|
2,399.6
|
|
|
$
|
2,209.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
2014
|
|
|
2013
|
Service Provider
|
|
|
|
|
$
|
831.8
|
|
|
$
|
726.0
|
|
|
|
|
|
$
|
1,614.5
|
|
|
$
|
1,438.9
|
Enterprise
|
|
|
|
|
397.7
|
|
|
424.7
|
|
|
|
|
|
785.1
|
|
|
771.0
|
Total
|
|
|
|
|
$
|
1,229.5
|
|
|
$
|
1,150.7
|
|
|
|
|
|
$
|
2,399.6
|
|
|
$
|
2,209.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in millions, except percentages and per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
June 30,
2014
|
|
|
|
|
March 31,
2014
|
|
|
|
|
June 30,
2013
|
|
GAAP operating income (loss)
|
|
|
|
|
$
|
115.9
|
|
|
|
|
$
|
(6.2
|
)
|
|
|
|
$
|
138.5
|
|
GAAP operating margin
|
|
|
|
|
9.4
|
%
|
|
|
|
(0.5
|
)%
|
|
|
|
12.0
|
%
|
Share-based compensation expense
|
|
|
|
C
|
59.3
|
|
|
|
|
60.8
|
|
|
|
|
61.5
|
|
Share-based payroll tax expense
|
|
|
|
C
|
2.7
|
|
|
|
|
7.0
|
|
|
|
|
0.6
|
|
Amortization of purchased intangible assets
|
|
|
|
A
|
9.8
|
|
|
|
|
9.5
|
|
|
|
|
7.7
|
|
Restructuring and other charges
|
|
|
|
B
|
85.7
|
|
|
|
|
122.4
|
|
|
|
|
8.8
|
|
Acquisition-related charges
|
|
|
|
A
|
0.1
|
|
|
|
|
0.6
|
|
|
|
|
0.1
|
|
Professional services related to non-routine stockholder matters
|
|
|
|
B
|
0.4
|
|
|
|
|
7.3
|
|
|
|
|
—
|
|
Non-GAAP operating income
|
|
|
|
|
$
|
273.9
|
|
|
|
|
$
|
201.4
|
|
|
|
|
$
|
217.2
|
|
Non-GAAP operating margin
|
|
|
|
|
22.3
|
%
|
|
|
|
17.2
|
%
|
|
|
|
18.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
|
|
|
$
|
221.1
|
|
|
|
|
$
|
110.6
|
|
|
|
|
$
|
97.9
|
|
Share-based compensation expense
|
|
|
|
C
|
59.3
|
|
|
|
|
60.8
|
|
|
|
|
61.5
|
|
Share-based payroll tax expense
|
|
|
|
C
|
2.7
|
|
|
|
|
7.0
|
|
|
|
|
0.6
|
|
Amortization of purchased intangible assets
|
|
|
|
A
|
9.8
|
|
|
|
|
9.5
|
|
|
|
|
7.7
|
|
Restructuring and other charges
|
|
|
|
B
|
85.7
|
|
|
|
|
122.4
|
|
|
|
|
8.8
|
|
Acquisition-related charges
|
|
|
|
A
|
0.1
|
|
|
|
|
0.6
|
|
|
|
|
0.1
|
|
Professional services related to non-routine stockholder matters
|
|
|
|
B
|
0.4
|
|
|
|
|
7.3
|
|
|
|
|
—
|
|
Gain on equity investments
|
|
|
|
B
|
—
|
|
|
|
|
(164.0
|
)
|
|
|
|
(0.6
|
)
|
Gain on legal settlement, net
|
|
|
|
B
|
(195.3
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
Income tax effect of non-GAAP exclusions
|
|
|
|
B
|
6.5
|
|
|
|
|
(11.6
|
)
|
|
|
|
(27.9
|
)
|
Non-GAAP net income
|
|
|
|
|
$
|
190.3
|
|
|
|
|
$
|
142.6
|
|
|
|
|
$
|
148.1
|
|
GAAP diluted net income per share
|
|
|
|
|
$
|
0.46
|
|
|
|
|
$
|
0.22
|
|
|
|
|
$
|
0.19
|
|
Non-GAAP diluted net income per share
|
|
|
|
D
|
$
|
0.40
|
|
|
|
|
$
|
0.29
|
|
|
|
|
$
|
0.29
|
|
Shares used in computing diluted net income per share
|
|
|
|
|
476.5
|
|
|
|
|
496.5
|
|
|
|
|
506.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discussion of Non-GAAP Financial Measures
This press release, including the tables above and below, includes the
following non-GAAP financial measures derived from our Preliminary
Condensed Consolidated Statements of Operations: operating income;
operating margin; net income; and net income per share. These measures
are not presented in accordance with, nor are they a substitute for U.S.
generally accepted accounting principles or GAAP. In addition, these
measures may be different from non-GAAP measures used by other
companies, limiting their usefulness for comparison purposes. The
non-GAAP financial measures used in the table above should not be
considered in isolation from measures of financial performance prepared
in accordance with GAAP. Investors are cautioned that there are material
limitations associated with the use of non-GAAP financial measures as an
analytical tool. In particular, many of the adjustments to our GAAP
financial measures reflect the exclusion of items that are recurring and
will be reflected in our financial results for the foreseeable future.
We utilize a number of different financial measures, both GAAP and
non-GAAP, in analyzing and assessing the overall performance of our
business, in making operating decisions, forecasting and planning for
future periods, and determining payments under compensation programs. We
consider the use of the non-GAAP measures presented above to be helpful
in assessing the performance of the continuing operation of our
business. By continuing operations we mean the ongoing revenue and
expenses of the business excluding certain items that render comparisons
with prior periods or analysis of on-going operating trends more
difficult, such as expenses not directly related to the actual cash
costs of development, sale, delivery or support of our products and
services, or expenses that are reflected in periods unrelated to when
the actual amounts were incurred or paid. Consistent with this approach,
we believe that disclosing non-GAAP financial measures to the readers of
our financial statements provides such readers with useful supplemental
data that, while not a substitute for financial measures prepared in
accordance with GAAP, allows for greater transparency in the review of
our financial and operational performance. In addition, we have
historically reported non-GAAP results to the investment community and
believe that continuing to provide non-GAAP measures provides investors
with a tool for comparing results over time. In assessing the overall
health of our business for the periods covered by the table above and,
in particular, in evaluating the financial line items presented in the
table above, we have excluded items in the following three general
categories, each of which are described below: Acquisition-Related
Charges, Other Items, and Share-Based Compensation Related Items. We
also provide additional detail below regarding the shares used to
calculate our non-GAAP net income per share. Notes identified for line
items in the table above correspond to the appropriate note description
below. Additionally, with respect to future financial guidance provided
on a non-GAAP basis, we have excluded estimates for amortization of
intangible assets, share based compensation expenses, acquisition
related charges, restructuring charges, litigation settlement and
resolution charges, gain or loss on equity investments, non-recurring
income tax adjustments, valuation allowance on deferred tax assets, and
income tax effect of non-GAAP exclusions.
Note A: Acquisition-Related Charges. We
exclude certain expense items resulting from acquisitions including the
following, when applicable: (i) amortization of purchased intangible
assets associated with our acquisitions; (ii) compensation related to
acquisitions; and (iii) acquisition-related charges. The amortization of
purchased intangible assets associated with our acquisitions results in
our recording expenses in our GAAP financial statements that were
already expensed by the acquired company before the acquisition and for
which we have not expended cash. Moreover, had we internally developed
the products acquired, the amortization of intangible assets, and the
expenses of uncompleted research and development would have been
expensed in prior periods. Accordingly, we analyze the performance of
our operations in each period without regard to such expenses. In
addition, acquisitions result in non-continuing operating expenses,
which would not otherwise have been incurred by us in the normal course
of our business operations. We believe that providing non-GAAP
information for acquisition-related expense items in addition to the
corresponding GAAP information allows the users of our financial
statements to better review and understand the historic and current
results of our continuing operations, and also facilitates comparisons
to less acquisitive peer companies.
Note B: Other Items. We exclude certain
other items that are the result of either unique or unplanned events
including the following, when applicable: (i) restructuring and related
costs; (ii) impairment charges; (iii) gain or loss on legal settlement,
net of related transaction costs; (iv) significant effects of tax
legislation and judicial or administrative interpretation of tax
regulations; (v) gain or loss on equity investments; (vi) the income tax
effect on our financial statements of excluding items related to our
non-GAAP financial measures; (vii) professional services related to
non-routine stockholder matters; and (viii) memory-related, supplier
component remediation charge. It is difficult to estimate the amount or
timing of these items in advance. Restructuring and impairment charges
result from events, which arise from unforeseen circumstances, which
often occur outside of the ordinary course of continuing operations.
Although these events are reflected in our GAAP financials, these unique
transactions may limit the comparability of our on-going operations with
prior and future periods. In the case of legal settlements, these gains
or losses are recorded in the period in which the matter is concluded or
resolved even though the subject matter of the underlying dispute may
relate to multiple or different periods. As such, we believe that these
expenses do not accurately reflect the underlying performance of our
continuing operations for the period in which they are incurred.
Similarly, the significant effects of retroactive tax legislation are
unique events that occur in periods that are generally unrelated to the
level of business activity to which such settlement or legislation
applies. We believe this limits comparability with prior periods and
that these expenses do not accurately reflect the underlying performance
of our continuing business operations for the period in which they are
incurred. Whether we realize gains or losses on equity investments is
based primarily on the performance and market value of those independent
companies. Accordingly, we believe that these gains and losses do not
reflect the underlying performance of our continuing operations. We also
believe providing financial information with and without the income tax
effect of excluding items related to our non-GAAP financial measures
provide our management and users of the financial statements with better
clarity regarding the on-going performance and future liquidity of our
business. Because of these factors, we assess our operating performance
both with these amounts included and excluded, and by providing this
information, we believe the users of our financial statements are better
able to understand the financial results of what we consider our
continuing operations.
Note C: Share-Based Compensation Related Items.
We provide non-GAAP information relative to our expense for share-based
compensation and related payroll tax. We began to include share-based
compensation expense in our GAAP financial measures in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 718, Compensation - Stock Compensation (“FASB
ASC Topic 718”), in January 2006. Because of varying available valuation
methodologies, subjective assumptions and the variety of award types,
which affect the calculations of share-based compensation, we believe
that the exclusion of share-based compensation allows for more accurate
comparisons of our operating results to our peer companies. Further, we
believe that excluding share-based compensation expense allows for a
more accurate comparison of our financial results to previous periods
during which our equity-based awards were not required to be reflected
in our income statement. Share-based compensation is very different from
other forms of compensation. A cash salary or bonus has a fixed and
unvarying cash cost. For example, the expense associated with a $10,000
bonus is equal to exactly $10,000 in cash regardless of when it is
awarded and who it is awarded by. In contrast, the expense associated
with an award of an option for 1,000 shares of share is unrelated to the
amount of compensation ultimately received by the employee; and the cost
to the company is based on a share-based compensation valuation
methodology and underlying assumptions that may vary over time and that
does not reflect any cash expenditure by the company because no cash is
expended. Furthermore, the expense associated with granting an employee
an option is spread over multiple years unlike other compensation
expenses which are more proximate to the time of award or payment. For
example, we may be recognizing expense in a year where the stock option
is significantly underwater and is not going to be exercised or generate
any compensation for the employee. The expense associated with an award
of an option for 1,000 shares of stock by us in one quarter may have a
very different expense than an award of an identical number of shares in
a different quarter. Finally, the expense recognized by us for such an
option may be very different than the expense to other companies for
awarding a comparable option, which makes it difficult to assess our
operating performance relative to our competitors. Similar to
share-based compensation, payroll tax on stock option exercises is
dependent on our stock price and the timing and exercise by employees of
our share-based compensation, over which our management has little
control, and as such does not correlate to the operation of our
business. Because of these unique characteristics of share-based
compensation and the related payroll tax, management excludes these
expenses when analyzing the organization's business performance. We also
believe that presentation of such non-GAAP information is important to
enable readers of our financial statements to compare current period
results with periods prior to the adoption of FASB ASC Topic 718.
Note D: Non-GAAP Net Income Per Share Items.
We provide diluted non-GAAP net income per share. The diluted non-GAAP
income per share includes additional dilution from potential issuance of
common stock, except when such issuances would be anti-dilutive.
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
|
December 31,
2013
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
2,159.8
|
|
|
|
|
$
|
2,284.0
|
Short-term investments
|
|
|
|
|
460.5
|
|
|
|
|
561.9
|
Accounts receivable, net of allowances
|
|
|
|
|
560.8
|
|
|
|
|
578.3
|
Deferred tax assets, net
|
|
|
|
|
151.4
|
|
|
|
|
79.8
|
Prepaid expenses and other current assets
|
|
|
|
|
165.2
|
|
|
|
|
199.9
|
Total current assets
|
|
|
|
|
3,497.7
|
|
|
|
|
3,703.9
|
Property and equipment, net
|
|
|
|
|
889.9
|
|
|
|
|
882.3
|
Long-term investments
|
|
|
|
|
1,340.1
|
|
|
|
|
1,251.9
|
Restricted cash and investments
|
|
|
|
|
66.3
|
|
|
|
|
89.5
|
Purchased intangible assets, net
|
|
|
|
|
105.3
|
|
|
|
|
106.9
|
Goodwill
|
|
|
|
|
4,071.5
|
|
|
|
|
4,057.7
|
Other long-term assets
|
|
|
|
|
166.5
|
|
|
|
|
233.8
|
Total assets
|
|
|
|
|
$
|
10,137.3
|
|
|
|
|
$
|
10,326.0
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
$
|
246.3
|
|
|
|
|
$
|
200.4
|
Accrued compensation
|
|
|
|
|
232.4
|
|
|
|
|
273.9
|
Deferred revenue
|
|
|
|
|
803.2
|
|
|
|
|
705.8
|
Other accrued liabilities
|
|
|
|
|
291.6
|
|
|
|
|
261.3
|
Total current liabilities
|
|
|
|
|
1,573.5
|
|
|
|
|
1,441.4
|
Long-term debt
|
|
|
|
|
1,348.9
|
|
|
|
|
999.3
|
Long-term deferred revenue
|
|
|
|
|
370.1
|
|
|
|
|
363.5
|
Long-term income taxes payable
|
|
|
|
|
125.7
|
|
|
|
|
114.4
|
Other long-term liabilities
|
|
|
|
|
107.6
|
|
|
|
|
105.2
|
Total liabilities
|
|
|
|
|
3,525.8
|
|
|
|
|
3,023.8
|
Total stockholders' equity
|
|
|
|
|
6,611.5
|
|
|
|
|
7,302.2
|
Total liabilities and stockholders' equity
|
|
|
|
|
$
|
10,137.3
|
|
|
|
|
$
|
10,326.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
331.7
|
|
|
|
|
$
|
188.9
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
120.1
|
|
|
|
|
111.4
|
|
Depreciation, amortization, and accretion
|
|
|
|
95.6
|
|
|
|
|
94.6
|
|
Restructuring and other charges
|
|
|
|
208.1
|
|
|
|
|
16.5
|
|
Deferred income taxes
|
|
|
|
(82.3
|
)
|
|
|
|
26.6
|
|
Gain on investments, net
|
|
|
|
(167.0
|
)
|
|
|
|
(3.8
|
)
|
Gain on legal settlement, net
|
|
|
|
(120.3
|
)
|
|
|
|
—
|
|
Excess tax benefits from share-based compensation
|
|
|
|
(8.0
|
)
|
|
|
|
(1.3
|
)
|
Loss on disposal of fixed assets
|
|
|
|
0.8
|
|
|
|
|
0.1
|
|
Changes in operating assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
21.4
|
|
|
|
|
(92.3
|
)
|
Prepaid expenses and other assets
|
|
|
|
149.2
|
|
|
|
|
(86.9
|
)
|
Accounts payable
|
|
|
|
53.0
|
|
|
|
|
(3.4
|
)
|
Accrued compensation
|
|
|
|
(39.5
|
)
|
|
|
|
(64.0
|
)
|
Income taxes payable
|
|
|
|
(38.3
|
)
|
|
|
|
(18.5
|
)
|
Other accrued liabilities
|
|
|
|
(75.4
|
)
|
|
|
|
3.1
|
|
Deferred revenue
|
|
|
|
101.9
|
|
|
|
|
104.5
|
|
Net cash provided by operating activities
|
|
|
|
551.0
|
|
|
|
|
275.5
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(98.3
|
)
|
|
|
|
(142.3
|
)
|
Purchases of available-for-sale investments
|
|
|
|
(1,577.6
|
)
|
|
|
|
(895.0
|
)
|
Proceeds from sales of available-for-sale investments
|
|
|
|
1,504.6
|
|
|
|
|
587.5
|
|
Proceeds from maturities of available-for-sale investments
|
|
|
|
234.2
|
|
|
|
|
183.8
|
|
Purchases of trading investments
|
|
|
|
(2.4
|
)
|
|
|
|
(2.1
|
)
|
Proceeds from sales of privately-held investments
|
|
|
|
2.5
|
|
|
|
|
1.7
|
|
Purchases of privately-held investments
|
|
|
|
(5.0
|
)
|
|
|
|
(14.4
|
)
|
Payments for business acquisitions, net of cash and cash equivalents
acquired
|
|
|
|
(27.1
|
)
|
|
|
|
(10.0
|
)
|
Purchase of licensed software
|
|
|
|
—
|
|
|
|
|
(10.0
|
)
|
Changes in restricted cash
|
|
|
|
25.0
|
|
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
|
|
|
55.9
|
|
|
|
|
(300.8
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
|
121.2
|
|
|
|
|
74.3
|
|
Purchases and retirement of common stock
|
|
|
|
(907.1
|
)
|
|
|
|
(239.2
|
)
|
Purchase of equity forward contract
|
|
|
|
(300.0
|
)
|
|
|
|
—
|
|
Issuance of long-term debt, net
|
|
|
|
346.5
|
|
|
|
|
—
|
|
Payment for capital lease obligation
|
|
|
|
(0.4
|
)
|
|
|
|
(1.4
|
)
|
Customer financing arrangements
|
|
|
|
0.7
|
|
|
|
|
32.4
|
|
Excess tax benefits from share-based compensation
|
|
|
|
8.0
|
|
|
|
|
1.3
|
|
Net cash used in financing activities
|
|
|
|
(731.1
|
)
|
|
|
|
(132.6
|
)
|
Net decrease in cash and cash equivalents
|
|
|
|
(124.2
|
)
|
|
|
|
(157.9
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
2,284.0
|
|
|
|
|
2,407.8
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
2,159.8
|
|
|
|
|
$
|
2,249.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juniper Networks, Inc.
Cash, Cash Equivalents, and Investments
(in millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
|
|
|
December 31,
2013
|
Cash and cash equivalents
|
|
|
|
|
$
|
2,159.8
|
|
|
|
|
|
$
|
2,284.0
|
Short-term investments
|
|
|
|
|
460.5
|
|
|
|
|
|
561.9
|
Long-term investments
|
|
|
|
|
1,340.1
|
|
|
|
|
|
1,251.9
|
Total
|
|
|
|
|
$
|
3,960.4
|
|
|
|
|
|
$
|
4,097.8
|
Source: Juniper Networks