NYSE: JNPR Price: $ 27.84 -0.48 -1.69% Volume: 3,061,247 January 22, 2019

Juniper Networks Reports Preliminary Third Quarter 2012 Financial Results

10/23/2012

Oct 23, 2012 (Marketwire via COMTEX) --Juniper Networks (NYSE: JNPR)

  • Revenue: $1,118 million, up 4% from Q2'12 and up 1% from Q3'11
  • Operating Margin: 3.8% GAAP; 16.9% non-GAAP
  • GAAP Net Income Per Share: $0.03 diluted, includes $0.16 impact from restructuring and other charges
  • Non-GAAP Net Income Per Share: $0.22 diluted, up 16% from Q2'12 and down 21% from Q3'11

Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three and nine months ended September 30, 2012, and provided its outlook for the three months ending December 31, 2012.

Net revenues for the third quarter of 2012 increased 4% sequentially, and increased 1% on a year-over-year basis, to $1,118 million.

The Company posted GAAP net income of $17 million, or $0.03 per diluted share for the third quarter. The GAAP diluted income per share includes $0.16 impact from restructuring and other charges. Non-GAAP net income was $118 million, or $0.22 per diluted share, for the third quarter of 2012.

Non-GAAP net income per diluted share increased 16% compared to the second quarter of 2012 and decreased 21% compared to the third quarter of 2011. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Share-Based Compensation Related Payroll Tax by Category table below.

Juniper's operating margin for the third quarter of 2012 decreased to 3.8% on a GAAP basis from 8.1% in the second quarter of 2012, and from 12.4% in the third quarter 2011. Non-GAAP operating margin for the third quarter of 2012 increased to 16.9% from 15.0% in the second quarter of 2012 and decreased from 20.0% in the third quarter of 2011.

"Juniper delivered top line revenue growth in the third quarter as we focus on excellence in execution throughout our business," said Kevin Johnson, chief executive officer of Juniper Networks. "Our new products continue to gain traction in the marketplace, and we're aligning our organization to sharpen our focus, enable agility and drive efficiency as we position for 2013."

"Our third quarter results demonstrated a return to year-over-year revenue growth and improved operational performance," said Robyn Denholm, chief financial officer of Juniper Networks. "Long-term demand fundamentals for high-performance networking continue to be positive, yet customers remain cautious in the near-term environment. We remain focused on executing our strategy to drive revenue growth, and with our workforce restructuring largely complete, we're well prepared to capture the market opportunity ahead."

Other Financial Highlights
Total cash, cash equivalents and investments as of September 30, 2012 were $4,048 million, compared to $4,272 million as of the second quarter of 2012 and $4,130 million as of the third quarter of 2011.

Juniper generated net cash from operations for the third quarter of 2012 of $173 million, compared to net cash provided by operations of $212 million in the second quarter of 2012, and $185 million in the third quarter of 2011.

Days sales outstanding in accounts receivable ("DSO") was 32 days in the third quarter of 2012, compared to 34 days in the prior quarter and 36 days in the third quarter of 2011.

Juniper repurchased approximately 14 million shares in the third quarter of 2012, at an average price of $18.00 per share, or approximately $250 million.

Capital expenditures, as well as depreciation and amortization of intangible assets expense during the third quarter of 2012 were $87 million and $48 million, respectively.

Outlook
Long-term fundamentals driving demand for networking solutions are positive, and we are making good progress toward our revenue targets for our new products. Our outlook for the December quarter reflects our customers' continued caution in their investment decisions in what continues to be a challenging environment. 

  • Juniper estimates revenue for the fourth quarter ending December 31, 2012 to be in the range of $1,100 million to $1,130 million. 

  • Juniper estimates that its non-GAAP gross margin will be in the range of 63.5% to 64.5% for the fourth quarter.

  • Juniper estimates that its non-GAAP operating expenses will be flat compared to the September quarter.

  • Juniper expects its non-GAAP operating margin for the fourth quarter will be in the range of 14% to 16%.

  • Juniper estimates that its non-GAAP net income per share will range between $0.19 and $0.22 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 32%.

All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition-related charges, restructuring charges, litigation settlement 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. 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, October 23, 2012, at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.

To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call 10 minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website.

About Juniper Networks

Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that 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 and Junos logos are trademarks of Juniper Networks, Inc. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

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 conditions globally or regionally; business and economic conditions in the networking industry; changes in overall technology spending and spending by communication service providers; 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; 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.

Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Net revenues:
Product $ 838,179 $ 861,935 $ 2,414,714 $ 2,630,803
Service 280,132 243,861 809,854 697,149
Total net revenues 1,118,311 1,105,796 3,224,568 3,327,952
Cost of revenues:
Product 334,645 286,609 907,863 844,746
Service 109,835 107,583 340,946 313,551
Total cost of revenues 444,480 394,192 1,248,809 1,158,297
Gross margin 673,831 711,604 1,975,759 2,169,655
Operating expenses:
Research and development 288,178 257,096 826,514 776,325
Sales and marketing 261,026 254,933 778,200 747,859
General and administrative 49,442 44,455 152,883 133,639
Amortization of purchased intangible assets 1,148 1,263 3,562 4,139
Restructuring and other charges 31,018 16,813 36,218 15,550
Acquisition-related and other charges 250 18 1,186 6,804
Total operating expenses 631,062 574,578 1,798,563 1,684,316
Operating income 42,769 137,026 177,196 485,339
Other expense, net (3,956 ) (15,957 ) (25,617 ) (36,107 )
Income before income taxes and noncontrolling interest 38,813 121,069 151,579 449,232
Income tax provision 21,999 37,398 60,776 120,383
Consolidated net income 16,814 83,671 90,803 328,849
Adjust for net loss attributable to noncontrolling interest -- (8 ) -- 124
Net income attributable to Juniper Networks $ 16,814 $ 83,663 $ 90,803 $ 328,973
Net income per share attributable to Juniper Networks common stockholders:
Basic $ 0.03 $ 0.16 $ 0.17 $ 0.62
Diluted $ 0.03 $ 0.16 $ 0.17 $ 0.60
Shares used in computing net income per share:
Basic 521,178 529,286 525,419 530,994
Diluted 524,537 536,583 530,343 544,086
Juniper Networks, Inc.
Preliminary Net Revenues by Reportable Segment
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Platform Systems Division:
PSD Products:
Routing $ 488,112 $ 524,211 $ 1,433,049 $ 1,687,587
Switching 145,616 122,172 409,033 339,937
Security/Other 47,822 53,393 135,907 158,557
Total PSD Products $ 681,550 $ 699,776 $ 1,977,989 $ 2,186,081
PSD Services 211,400 180,018 610,608 509,233
Total Platform Systems Division Revenue $ 892,950 $ 879,794 $ 2,588,597 $ 2,695,314
Software Solutions Division:
SSD Products
Security/Other $ 129,848 $ 137,933 $ 369,515 $ 359,793
Routing 26,781 24,226 67,210 84,929
Total SSD Products $ 156,629 $ 162,159 $ 436,725 $ 444,722
SSD Services 68,732 63,843 199,246 187,916
Total Software Solutions Division Revenue $ 225,361 $ 226,002 $ 635,971 $ 632,638
Total $ 1,118,311 $ 1,105,796 $ 3,224,568 $ 3,327,952
Juniper Networks, Inc.
Preliminary Net Revenues by Product
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Routing $ 514,893 $ 548,437 $ 1,500,259 $ 1,772,516
Switching 145,616 122,172 409,033 339,937
Security/Other 177,670 191,326 505,422 518,350
Services 280,132 243,861 809,854 697,149
Total $ 1,118,311 $ 1,105,796 $ 3,224,568 $ 3,327,952
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Americas $ 560,258 $ 556,573 $ 1,678,912 $ 1,716,892
Europe, Middle East, and Africa 321,331 311,255 927,650 940,167
Asia Pacific 236,722 237,968 618,006 670,893
Total $ 1,118,311 $ 1,105,796 $ 3,224,568 $ 3,327,952
Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Service Provider $ 705,257 $ 685,013 $ 2,071,837 $ 2,156,530
Enterprise 413,054 420,783 1,152,731 1,171,422
Total $ 1,118,311 $ 1,105,796 $ 3,224,568 $ 3,327,952
Juniper Networks, Inc.
Segment Operating Results
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Platform Systems Division:
Product revenue $ 681,550 $ 699,776 $ 1,977,989 $ 2,186,081
Service revenue 211,400 180,018 610,608 509,233
Total PSD revenue 892,950 879,794 2,588,597 2,695,314
Non-GAAP PSD contribution margin $ 356,144 381,802 1,011,877 1,214,346
Non-GAAP PSD contribution margin % 39.9 % 43.4 % 39.1 % 45.1 %
Software Solutions Division:
Product revenue 156,629 162,159 436,725 444,722
Services revenue 68,732 63,843 199,246 187,916
Total SSD revenue 225,361 226,002 635,971 632,638
Non-GAAP SSD contribution margin $ 99,776 94,549 256,165 250,339
Non-GAAP SSD contribution margin % 44.3 % 41.8 % 40.3 % 39.6 %
Total revenue 1,118,311 1,105,796 3,224,568 3,327,952
Non-GAAP Segment contribution margin $ 455,920 476,351 1,268,042 1,464,685
Non-GAAP Segment contribution margin % 40.8 % 43.1 % 39.3 % 44.0 %
Corporate unallocated expenses 266,505 255,190 794,188 755,496
Non-GAAP Total segment operating margin $ 189,415 221,161 473,854 709,189
Non-GAAP Total segment operating margin % 16.9 % 20.0 % 14.7 % 21.3 %
Amortization of purchasedintangible assets A (9,041 ) (6,701 ) (25,081 ) (20,213 )
Share-based compensation expense A (59,115 ) (60,468 ) (186,002 ) (169,633 )
Share-based payroll tax expense A (103 ) (135 ) (1,052 ) (9,163 )
Restructuring and other charges B (83,418 ) (16,813 ) (88,618 ) (15,550 )
Acquisition-related and other charges A,B (250 ) (18 ) (1,186 ) (9,291 )
Other B 5,281 -- 5,281 --
GAAP Operating income $ 42,769 $ 137,026 $ 177,196 $ 485,339
Juniper Networks, Inc.
Share-Based Compensation by Category
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Cost of revenues - Product $ 1,162 $ 1,241 $ 3,499 $ 3,400
Cost of revenues - Service 3,872 3,705 13,217 12,110
Research and development 26,039 26,540 80,316 75,453
Sales and marketing 21,382 20,572 64,315 52,969
General and administrative 6,660 8,410 24,655 25,701
Total $ 59,115 $ 60,468 $ 186,002 $ 169,633
Juniper Networks, Inc.
Share-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Cost of revenues - Product $ 3 $ 4 $ 27 $ 299
Cost of revenues - Service 15 9 102 938
Research and development 29 35 277 3,385
Sales and marketing 51 79 556 4,048
General and administrative 5 8 90 493
Total $ 103 $ 135 $ 1,052 $ 9,163
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
GAAP Cost of revenues - Product $ 334,645 $ 292,589 $ 286,609 $ 907,863 $ 844,746
Share-based compensation expense C (1,162 ) (1,220 ) (1,241 ) (3,499 ) (3,400 )
Share-based compensation related payroll tax C (3 ) (12 ) (4 ) (27 ) (299 )
Amortization of purchased intangible assets A (7,893 ) (7,531 ) (5,438 ) (21,519 ) (16,074 )
Restructuring and other charges B (52,400 ) -- -- (52,400 ) --
Other B 5,281 -- -- 5,281 --
Acquisition-related and other charges A,B -- -- -- -- (2,487 )
Non-GAAP Cost of revenues - Product 278,468 283,826 279,926 835,699 822,486
GAAP Cost of revenues - Service 109,835 113,297 107,583 340,946 313,551
Share-based compensation expense C (3,872 ) (4,125 ) (3,705 ) (13,217 ) (12,110 )
Share-based compensation related payroll tax C (15 ) (53 ) (9 ) (102 ) (938 )
Non-GAAP Cost of revenues - Service 105,948 109,119 103,869 327,627 300,503
GAAP Gross margin - Product 503,534 512,073 575,326 1,506,851 1,786,057
Share-based compensation expense C 1,162 1,220 1,241 3,499 3,400
Share-based compensation related payroll tax C 3 12 4 27 299
Amortization of purchased intangible assets A 7,893 7,531 5,438 21,519 16,074
Restructuring and other charges B 52,400 -- -- 52,400 --
Other B (5,281 ) -- -- (5,281 ) --
Acquisition-related and other charges A,B -- -- -- -- 2,487
Non-GAAP Gross margin - Product 559,711 520,836 582,009 1,579,015 1,808,317
GAAP Product gross margin as a % of product revenue 60.1 % 63.6 % 66.7 % 62.4 % 67.9 %
Share-based compensation expense as a % of product revenue C 0.1 % 0.2 % 0.1 % 0.1 % 0.1 %
Share-based compensation related payroll tax as a % of product revenue C -- % -- % -- % -- % -- %
Amortization of purchased intangible assets as a % of product revenue A 0.9 % 0.9 % 0.7 % 0.9 % 0.6 %
Restructuring and other charges as a % of product revenue B 6.3 % -- % -- % 2.2 % -- %
Other as a % of product revenue B (0.6 )% -- % -- % (0.2 )% -- %
Acquisition-related and other charges as a % of product revenue A,B -- % -- % -- % -- % 0.1 %
Non-GAAP Product gross margin as a % of product revenue 66.8 % 64.7 % 67.5 % 65.4 % 68.7 %
GAAP Gross margin - Service 170,297 155,800 136,278 468,908 383,598
Share-based compensation expense C 3,872 4,125 3,705 13,217 12,110
Share-based compensation related payroll tax C 15 53 9 102 938
Non-GAAP Gross margin - Service $ 174,184 $ 159,978 $ 139,992 $ 482,227 $ 396,646
GAAP Service gross margin as a % of service revenue 60.8 % 57.9 % 55.9 % 57.9 % 55.0 %
Share-based compensation expense as a % of service revenue C 1.4 % 1.5 % 1.5 % 1.6 % 1.8 %
Share-based compensation related payroll tax as a % of service revenue C -- % -- % -- % -- % 0.1 %
Non-GAAP Service gross margin as a % of service revenue 62.2 % 59.4 % 57.4 % 59.5 % 56.9 %
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
GAAP Gross margin $ 673,831 $ 667,873 $ 711,604 $ 1,975,759 $ 2,169,655
Share-based compensation expense C 5,034 5,345 4,946 16,716 15,510
Share-based compensation related payroll tax C 18 65 13 129 1,237
Amortization of purchased intangible assets A 7,893 7,531 5,438 21,519 16,074
Restructuring and other charges B 52,400 -- -- 52,400 --
Other B (5,281 ) -- -- (5,281 ) --
Acquisition-related and other charges A,B -- -- -- -- 2,487
Non-GAAP Gross margin 733,895 680,814 722,001 2,061,242 2,204,963
GAAP Gross margin as a % of revenue 60.3 % 62.2 % 64.4 % 61.3 % 65.2 %
Share-based compensation expense as a % of revenue C 0.5 % 0.5 % 0.4 % 0.5 % 0.5 %
Share-based compensation related payroll tax as a % of revenue C -- % -- % -- % 0.1 % -- %
Amortization of purchased intangible assets as a % of revenue A 0.7 % 0.7 % 0.5 % 0.6 % 0.5 %
Restructuring and other charges as a % of revenue B 4.6 % -- % -- % 1.6 % -- %
Other as a % of revenue B (0.5 ) -- % -- % (0.2 )% -- %
Acquisition-related and other charges as a % of revenue A,B -- % -- % -- % -- % 0.1 %
Non-GAAP Gross margin as a % of revenue 65.6 % 63.4 % 65.3 % 63.9 % 66.3 %
GAAP Research and development expense 288,178 268,734 257,096 826,514 776,325
Share-based compensation expense C (26,039 ) (28,486 ) (26,540 ) (80,316 ) (75,453 )
Share-based compensation related payroll tax C (29 ) (122 ) (35 ) (277 ) (3,385 )
Non-GAAP Research and development expense 262,110 240,126 230,521 745,921 697,487
GAAP Sales and marketing expense 261,026 259,455 254,933 778,200 747,859
Share-based compensation expense C (21,382 ) (21,022 ) (20,572 ) (64,315 ) (52,969 )
Share-based compensation related payroll tax C (51 ) (329 ) (79 ) (556 ) (4,048 )
Non-GAAP Sales and marketing expense 239,593 238,104 234,282 713,329 690,842
GAAP General and administrative expense 49,442 48,775 44,455 152,883 133,639
Share-based compensation expense C (6,660 ) (7,027 ) (8,410 ) (24,655 ) (25,701 )
Share-based compensation related payroll tax C (5 ) (54 ) (8 ) (90 ) (493 )
Non-GAAP General and administrative expense 42,777 41,694 36,037 128,138 107,445
GAAP Operating expense 631,062 581,155 574,578 1,798,563 1,684,316
Share-based compensation expense C (54,081 ) (56,535 ) (55,522 ) (169,286 ) (154,123 )
Share-based compensation related payroll tax C (85 ) (505 ) (122 ) (923 ) (7,926 )
Amortization of purchased intangible assets A (1,148 ) (1,236 ) (1,263 ) (3,562 ) (4,139 )
Restructuring and other charges B (31,018 ) (3,161 ) (16,813 ) (36,218 ) (15,550 )
Acquisition-related and other charges A,B (250 ) 206 (18 ) (1,186 ) (6,804 )
Non-GAAP Operating expense $ 544,480 $ 519,924 $ 500,840 $ 1,587,388 $ 1,495,774
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
GAAP Operating income $ 42,769 $ 86,718 $ 137,026 $ 177,196 $ 485,339
Share-based compensation expense C 59,115 61,880 60,468 186,002 169,633
Share-based compensation related payroll tax C 103 570 135 1,052 9,163
Amortization of purchased intangible assets A 9,041 8,767 6,701 25,081 20,213
Restructuring and other charges B 83,418 3,161 16,813 88,618 15,550
Other B (5,281 ) -- -- (5,281 ) --
Acquisition-related and other charges A,B 250 (206 ) 18 1,186 9,291
Non-GAAP Operating income 189,415 160,890 221,161 473,854 709,189
GAAP Operating margin 3.8 % 8.1 % 12.4 % 5.5 % 14.6 %
Share-based compensation expense as a % of revenue C 5.3 % 5.8 % 5.5 % 5.9 % 5.1 %
Share-based compensation related payroll tax as a % of revenue C -- % 0.1 % -- % -- % 0.3 %
Amortization of purchased intangible assets as a % of revenue A 0.8 % 0.7 % 0.6 % 0.8 % 0.6 %
Restructuring and other charges as a % of revenue B 7.5 % 0.3 % 1.5 % 2.7 % 0.5 %
Other as a % of revenue B (0.5 )% -- % -- % (0.2 )% -- %
Acquisition-related and other charges as a % of revenue A,B -- % -- % -- % -- % 0.3 %
Non-GAAP Operating margin 16.9 % 15.0 % 20.0 % 14.7 % 21.4 %
GAAP Other income (expense), net E (3,956 ) 2,770 (15,957 ) (25,617 ) (36,107 )
(Gain) loss on equity investments B (5,842 ) (14,787 ) 1,116 (6,629 ) 982
Non-GAAP Other income (expense), net E (9,798 ) (12,017 ) (14,841 ) (32,246 ) (35,125 )
GAAP Income tax provision 21,999 31,769 37,398 60,776 120,383
Income tax effect of non-GAAP exclusions B 39,735 13,980 19,152 75,835 59,297
Non-GAAP Provision for income tax 61,734 45,749 56,550 136,611 179,680
Non-GAAP Income tax rate 34.4 % 30.7 % 27.4 % 30.9 % 26.7 %
Non-GAAP Income before income taxes and noncontrolling interest* $ 179,617 $ 148,873 $ 206,320 $ 441,608 $ 674,064

*Consists of non-GAAP operating income plus non-GAAP net other income and expense.

Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except per share amounts and percentages)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
GAAP Net income attributable to Juniper Networks $ 16,814 $ 57,719 $ 83,663 $ 90,803 $ 328,973
Share-based compensation expense C 59,115 61,880 60,468 186,002 169,633
Share-based compensation related payroll tax C 103 570 135 1,052 9,163
Amortization of purchased intangible assets A 9,041 8,767 6,701 25,081 20,213
Restructuring and other charges B 83,418 3,161 16,813 88,618 15,550
Other B (5,281 ) -- -- (5,281 ) --
Acquisition-related and other charges A,B 250 (206 ) 18 1,186 9,291
(Gain) loss on equity investments B (5,842 ) (14,787 ) 1,116 (6,629 ) 982
Income tax effect of non-GAAP exclusions B (39,735 ) (13,980 ) (19,152 ) (75,835 ) (59,297 )
Non-GAAP Net income $ 117,883 $ 103,124 $ 149,762 $ 304,997 $ 494,508
Non-GAAP Net income per share:
Basic D $ 0.23 $ 0.20 $ 0.28 $ 0.58 $ 0.93
Diluted D $ 0.22 $ 0.19 $ 0.28 $ 0.58 $ 0.91
Shares used in computing non-GAAP net income per share:
Basic D 521,178 527,756 529,286 525,419 530,994
Diluted D 524,537 531,755 536,583 530,343 544,086
GAAP Net income attributable to Juniper Networks as a % of revenue 1.5 % 5.4 % 7.6 % 2.8 % 9.9 %
Share-based compensation expense as a % of revenue C 5.3 % 5.8 % 5.5 % 5.9 % 5.1 %
Share-based compensation related payroll tax as a % of revenue C -- % 0.1 % -- % -- % 0.3 %
Amortization of purchased intangible assets as a % of revenue A 0.8 % 0.8 % 0.6 % 0.8 % 0.6 %
Restructuring and other charges as a % of revenue B 7.5 % 0.3 % 1.5 % 2.7 % 0.5 %
Other as a % of revenue B (0.5 )% -- % -- % (0.2 )% -- %
Acquisition-related and other charges as a % of revenue A,B -- % -- % -- % -- % 0.3 %
(Gain) loss on equity investments as a % of revenue B (0.5 )% (1.4 )% 0.1 % (0.2 )% -- %
Income tax effect of non-GAAP exclusions as a % of revenue B (3.6 )% (1.4 )% (1.8 )% (2.3 )% (1.8 )%
Non-GAAP Net income as a % of revenue 10.5 % 9.6 % 13.5 % 9.5 % 14.9 %

Discussion of Non-GAAP Financial Measures

The table above includes the following non-GAAP financial measures derived from our Preliminary Condensed Consolidated Statements of Operations: cost of product revenue; cost of service revenue; product gross margin, product gross margin as a percentage of product revenue; service gross margin; service gross margin as a percentage of service revenue; gross margin; gross margin as a percentage of revenue; research and development expense; sales and marketing expense; general and administrative expense; operating expense; operating income; operating margin; net other income and expense; income before income taxes and noncontrolling interest; provision for income taxes; income tax rate; net income; net income per share and net income as a percentage of revenue. 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 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. For example, we have incurred deferred compensation charges related to assumed options and transition and integration costs such as retention bonuses and acquisition-related milestone payments to acquired employees. 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) retroactive impacts of certain tax settlements; (v) significant effects of tax legislation and judicial or administrative interpretation of tax regulations; (vi) gain or loss on equity investments; and (vii) the income tax effect on our financial statements of excluding items related to our non-GAAP financial measures. 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 retroactive impacts of certain tax settlements and 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 basic non-GAAP net income per share and diluted non-GAAP net income per share. The basic non-GAAP net income per share amount was calculated based on our non-GAAP net income and the weighted-average number of shares outstanding during the reporting period. The diluted non-GAAP income per share included additional dilution from potential issuance of common stock, except when such issuances would be anti-dilutive.

Note E: Other Income and Expense. GAAP and non-GAAP other income (expense), net, consist primarily of interest income, interest expense and other non-operational income and expense items. As noted in Note B above, we exclude gains or losses from equity investments in our computation of non-GAAP other income (expense), net.

Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2012
(unaudited)
December 31,
2011
ASSETS
Current assets:
Cash and cash equivalents $ 2,707,940 $ 2,910,420
Short-term investments 439,278 641,323
Accounts receivable, net 397,082 577,386
Deferred tax assets, net 229,374 154,310
Prepaid expenses and other current assets 168,625 156,222
Total current assets 3,942,299 4,439,661
Property and equipment, net 768,530 598,581
Long-term investments 900,769 740,659
Restricted cash and investments 102,661 78,307
Purchased intangible assets, net 118,655 123,114
Goodwill 3,987,073 3,928,144
Other long-term assets 140,607 75,354
Total assets $ 9,960,594 $ 9,983,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 224,242 $ 324,843
Accrued compensation 230,102 223,018
Accrued warranty 29,776 28,276
Deferred revenue 771,709 712,663
Income taxes payable 66,996 12,545
Other accrued liabilities 178,976 165,358
Total current liabilities 1,501,801 1,466,703
Long-term debt 999,145 999,034
Long-term deferred revenue 221,217 254,364
Long-term income tax payable 116,929 108,471
Other long-term liabilities 41,622 65,590
Total liabilities 2,880,714 2,894,162
Total stockholders' equity 7,079,880 7,089,658
Total liabilities and stockholders' equity $ 9,960,594 $ 9,983,820
Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
2012 2011
Cash flows from operating activities:
Consolidated net income $ 90,803 $ 328,849
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Non-cash portion of share-based compensation 186,002 165,236
Depreciation and amortization 137,855 125,986
Deferred income taxes (75,064 ) (6,014 )
Restructuring and other charges 88,618 15,550
Gain (loss) on investments, net (7,810 ) 982
Excess tax benefits from share-based compensation (7,184 ) (44,524 )
Amortization of debt issuance costs 708 509
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net 180,368 152,019
Prepaid expenses and other assets (54,089 ) 14,103
Accounts payable (114,020 ) (25,962 )
Accrued compensation 5,608 (62,625 )
Income tax payable 64,715 70,241
Other accrued liabilities (24,838 ) 7,759
Deferred revenue 15,899 1,012
Net cash provided by operating activities 487,571 743,121
Cash flows from investing activities:
Purchases of property and equipment (256,753 ) (187,886 )
Purchases of trading investments (3,776 ) (4,575 )
Purchases of available-for-sale investments (1,009,076 ) (1,893,474 )
Proceeds from sales of available-for-sale investments 625,119 1,050,936
Proceeds from maturities of available-for-sale investments 431,705 446,150
Payment for business acquisition, net of cash and cash equivalents acquired (90,487 ) (31,101 )
Proceeds from sales of privately-held investments 32,715 2,143
Purchases of privately-held investments (11,123 ) (34,545 )
Purchase of licensed software (65,297 ) --
Changes in restricted cash (20,820 ) (1,144 )
Net cash used in investing activities (367,793 ) (653,496 )
Cash flows from financing activities:
Proceeds from issuance of common stock 88,225 341,063
Purchases and retirement of common stock (400,070 ) (548,590 )
Payment for capital lease obligation (1,430 ) --
Issuance of long-term debt, net -- 991,556
Change in customer financing arrangements (16,167 ) (7,616 )
Excess tax benefits from share-based compensation 7,184 44,524
Net cash (used in) provided by financing activities (322,258 ) 820,937
Net (decrease) increase in cash and cash equivalents (202,480 ) 910,562
Cash and cash equivalents at beginning of period 2,910,420 1,811,887
Cash and cash equivalents at end of period $ 2,707,940 $ 2,722,449
Juniper Networks, Inc.
Cash, Cash Equivalents, and Investments
(in thousands)
(unaudited)
September 30,
2012
December 31,
2011
Cash and cash equivalents $ 2,707,940 $ 2,910,420
Short-term investments 439,278 641,323
Long-term investments 900,769 740,659
Total $ 4,047,987 $ 4,292,402

Investor Relations:
Kathleen Nemeth
Juniper Networks
(408) 936-5397
kbela@juniper.net
       
Media Relations:
Cindy Ta
Juniper Networks
(408) 936-6131
cta@juniper.net