- Revenue: $1,106 million, up 9% from Q3’10 and down 1% from Q2’11
- Operating Margin: 12.4% GAAP; 20.0% non-GAAP
- GAAP Net Income Per Share: $0.16 diluted
- Non-GAAP Net Income Per Share: $0.28 diluted, down 13% from Q3’10 and down 10% from Q2’11
SUNNYVALE, Calif., Oct. 18, 2011 — Juniper Networks (NASDAQ:JNPR, news, filings), the industry leader in network innovation, today reported preliminary financial results for the three and nine months ended September 30, 2011, and provided its outlook for the three months ending December 31, 2011.
Net revenues for the third quarter of 2011 increased 9% on a year-over-year basis, and decreased 1% sequentially, to $1,105.8 million.
The Company posted GAAP net income of $83.7 million, or $0.16 per diluted share, and non-GAAP net income of $149.8 million, or $0.28 per diluted share, for the third quarter of 2011. Included in the GAAP diluted income per share for the quarter is a $0.02 dilutive impact associated with restructuring activities.
Non-GAAP net income per diluted share decreased 13% compared to the third quarter of 2010 and decreased 10% compared to the second 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 executed well this quarter, and we are seeing strong customer interest in our new innovations in the data center, enterprise mobility and Converged Supercore,” said Kevin Johnson, chief executive officer at Juniper Networks. “While the macroeconomic environment dictates we remain agile, Juniper is on the right strategic course to deliver continued growth.”
Juniper’s operating margin for the third quarter of 2011 decreased to 12.4% on a GAAP basis from 15.3% in the second quarter of 2011, and from 19.3% in the prior year third quarter. Included in the GAAP operating margin is a $16.8 million restructuring charge primarily related to workforce reductions. Non-GAAP operating margin for the third quarter of 2011 decreased to 20.0% from 21.6% in the second quarter of 2011 and from 24.1% in the prior year third quarter.
“The third quarter unfolded as we anticipated, and we achieved the performance objectives we had set for the September quarter,” said Robyn Denholm, chief financial officer at Juniper Networks. “We will continue to carefully manage our expense structure with a focus on investing prudently in the resources that support our growth agenda and maintain our commitment to innovation.”
Other Financial Highlights
Total cash, cash equivalents and investments as of the third quarter of 2011 was $4,130.3 million, compared to $4,220.5 million as of the second quarter of 2011 and $2,698.5 million as of the third quarter of 2010.
Juniper generated net cash from operations for the third quarter of 2011 of $185.2 million, compared to net cash provided by operations of $318.3 million, in the second quarter of 2011, and $131.4 million in the third quarter of 2010.
Days sales outstanding in accounts receivable (“DSO”) was 36 days in the third quarter of 2011, compared to 39 days in the prior quarter and 42 days in the third quarter of 2010.
Juniper repurchased approximately 8.9 million shares in the third quarter of 2011, at an average price of $21.47 per share, or approximately $191.0 million dollars.
Capital expenditures, as well as depreciation and amortization of intangible assets expense during the third quarter of 2011, were $71.9 million and $43.3 million, respectively.
Outlook
While the long-term fundamentals driving demand for networking solutions are healthy, the macro environment and the impact of the environment on customer capex purchases continues to be uncertain.
- Juniper estimates revenue for the fourth quarter ending December 31, 2011, to be in the range of $1.160 billion to $1.220 billion.
- Juniper estimates that its non-GAAP gross margin will be in the range of between 65% and 67% in the fourth quarter.
- Juniper estimates that its non-GAAP operating expenses will increase sequentially and be lower as a percentage of revenue in the fourth quarter.
- Juniper expects its non-GAAP operating margin for the fourth quarter will be in the range of 21% to 23%.
- Juniper estimates that its non-GAAP net income per share will range between $0.32 and $0.36 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 27.5%.
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 Web Cast
Juniper Networks will host a conference call web cast today, October 18, 2011, 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 ten minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website until December 13, 2011.
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).
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 Nine Months Ended September 30, September 30, ----------------------- ---------------------- 2011 2010 2011 2010 ---------- ----------- ---------- ---------- Net revenues: Product $ 861,935 $ 801,183 $2,630,803 $2,296,442 Service 243,861 211,224 697,149 606,883 ---------- ----------- ---------- ---------- Total net revenues 1,105,796 1,012,407 3,327,952 2,903,325 Cost of revenues: Product 286,609 247,033 844,746 701,166 Service 107,583 87,587 313,551 252,413 ---------- ----------- ---------- ---------- Total cost of revenues 394,192 334,620 1,158,297 953,579 ---------- ----------- ---------- ---------- Gross margin 711,604 677,787 2,169,655 1,949,746 Operating expenses: Research and development 257,096 231,151 776,325 662,913 Sales and marketing 254,933 204,704 747,859 599,382 General and administrative 44,455 43,773 133,639 132,791 Amortization of purchased intangible assets 1,263 917 4,139 3,258 Restructuring 16,813 181 15,550 8,550 Acquisition-related and other charges 18 1,525 6,804 2,066 ---------- ----------- ---------- ---------- Total operating expenses 574,578 482,251 1,684,316 1,408,960 ---------- ----------- ---------- ---------- Operating income 137,026 195,536 485,339 540,786 Other (expense) income, net (15,957) 205 (36,107) 5,729 ---------- ----------- ---------- ---------- Income before income taxes and noncontrolling interest 121,069 195,741 449,232 546,515 Income tax provision 37,398 61,404 120,383 117,225 ---------- ----------- ---------- ---------- Consolidated net income 83,671 134,337 328,849 429,290 Adjust for net (income) loss attributable to noncontrolling interest (8) 206 124 (1,121) ---------- ----------- ---------- ---------- Net income attributable to Juniper Networks $ 83,663 $ 134,543 $ 328,973 $ 428,169 ========== =========== ========== ========== Net income per share attributable to Juniper Networks common stockholders: Basic $ 0.16 $ 0.26 $ 0.62 $ 0.82 ========== =========== ========== ========== Diluted $ 0.16 $ 0.25 $ 0.60 $ 0.80 ========== =========== ========== ========== Shares used in computing net income per share: Basic 529,286 520,581 530,994 522,069 ========== =========== ========== ========== Diluted 536,583 534,880 544,086 537,158 ========== =========== ========== ==========
Juniper Networks, Inc. Preliminary Net Revenues by Reportable Segment (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2011 2010 2011 2010 ----------- ----------- ----------- ----------- Infrastructure: Routers - Product $ 550,391 $ 510,453 $ 1,780,859 $ 1,495,199 Routers - Service 152,609 132,097 432,637 376,871 ----------- ----------- ----------- ----------- Infrastructure Revenue - Routers 703,000 642,550 2,213,496 1,872,070 ----------- ----------- ----------- ----------- Switches - Product 121,852 97,140 336,096 258,733 Switches - Service 9,687 4,378 23,742 12,317 ----------- ----------- ----------- ----------- Infrastructure Revenue - Switches 131,539 101,518 359,838 271,050 Total Infrastructure Revenue $ 834,539 $ 744,068 $ 2,573,334 $ 2,143,120 =========== =========== =========== =========== Service Layer Technologies: Service Layer Technologies - Product $ 189,692 $ 193,590 $ 513,848 $ 542,510 Service Layer Technologies - Service 81,565 74,749 240,770 217,695 Total Service Layer Technologies Revenue $ 271,257 $ 268,339 $ 754,618 $ 760,205 =========== =========== =========== =========== ----------- ----------- ----------- ----------- Total Revenue $ 1,105,796 $ 1,012,407 $ 3,327,952 $ 2,903,325 =========== =========== =========== =========== Juniper Networks, Inc. Preliminary Net Revenues by Geographic Region (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- Americas $ 556,573 $ 532,747 $1,716,892 $1,515,436 Europe, Middle East, and Africa 311,255 275,927 940,167 829,505 Asia Pacific 237,968 203,733 670,893 558,384 ---------- ---------- ---------- ---------- Total $1,105,796 $1,012,407 $3,327,952 $2,903,325 ========== ========== ========== ========== Juniper Networks, Inc. Preliminary Net Revenues by Market (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2011 2010 2011 2010 ----------- ----------- ----------- ----------- Service Provider $ 685,013 $ 633,998 $ 2,156,530 $ 1,847,645 Enterprise 420,783 378,409 1,171,422 1,055,680 ----------- ----------- ----------- ----------- Total $ 1,105,796 $ 1,012,407 $ 3,327,952 $ 2,903,325 =========== =========== =========== =========== Juniper Networks, Inc. Share-Based Compensation by Category (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- Cost of revenues - Product $ 1,241 $ 991 $ 3,400 $ 3,093 Cost of revenues - Service 3,705 3,155 12,110 9,891 Research and development 26,540 19,315 75,453 54,980 Sales and marketing 20,572 13,439 52,969 39,020 General and administrative 8,410 7,491 25,701 22,571 ---------- ---------- ---------- ---------- Total $ 60,468 $ 44,391 $ 169,633 $ 129,555 ========== ========== ========== ========== Juniper Networks, Inc. Share-Based Compensation Related Payroll Tax by Category (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- Cost of revenues - Product $ 4 $ 20 $ 299 $ 131 Cost of revenues - Service 9 53 938 370 Research and development 35 228 3,385 1,413 Sales and marketing 79 153 4,048 1,735 General and administrative 8 39 493 247 ---------- ---------- ---------- ---------- Total $ 135 $ 493 $ 9,163 $ 3,896 ========== ========== ========== ==========
Juniper Networks, Inc. Reconciliation between GAAP and non-GAAP Financial Measures (in thousands, except percentages) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- ---------------------- 2011 2010 2011 2010 --------- --------- ---------- ---------- GAAP Cost of revenues - Product $ 286,609 $ 247,033 $ 844,746 $ 701,166 Share-based compensation expense C (1,241) (991) (3,400) (3,093) Share-based compensation related payroll tax C (4) (20) (299) (131) Amortization of purchased intangible assets A (5,438) (1,414) (16,074) (1,747) Acquisition-related and other charges A,B -- -- (2,487) -- --------- --------- ---------- ---------- Non-GAAP Cost of revenues - Product 279,926 244,608 822,486 696,195 ========= ========= ========== ========== GAAP Cost of revenues - Service 107,583 87,587 313,551 252,413 Share-based compensation expense C (3,705) (3,155) (12,110) (9,891) Share-based compensation related payroll tax C (9) (53) (938) (370) --------- --------- ---------- ---------- Non-GAAP Cost of revenues - Service 103,869 84,379 300,503 242,152 ========= ========= ========== ========== GAAP Gross margin - Product 575,326 554,150 1,786,057 1,595,276 Share-based compensation expense C 1,241 991 3,400 3,093 Share-based compensation related payroll tax C 4 20 299 131 Amortization of purchased intangible assets A 5,438 1,414 16,074 1,747 Acquisition-related and other charges A,B -- -- 2,487 -- --------- --------- ---------- ---------- Non-GAAP Gross margin - Product 582,009 556,575 1,808,317 1,600,247 ========= ========= ========== ========== GAAP Product gross margin as a % of product revenue 66.7% 69.2% 67.9% 69.5% Share-based compensation expense as a % of product revenue C 0.1% 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 0.7% 0.2% 0.6% 0.1% Acquisition-related and other charges as a % of product revenue A,B --% --% 0.1% --% --------- --------- ---------- ---------- Non-GAAP Product gross margin as a % of product revenue 67.5% 69.5% 68.7% 69.7% ========= ========= ========== ========== GAAP Gross margin - Service 136,278 123,637 383,598 354,470 Share-based compensation expense C 3,705 3,155 12,110 9,891 Share-based compensation related payroll tax C 9 53 938 370 --------- --------- ---------- ---------- Non-GAAP Gross margin - Service $ 139,992 $ 126,845 $ 396,646 $ 364,731 ========= ========= ========== ========== GAAP Service gross margin as a % of service revenue 55.9% 58.5% 55.0% 58.4% Share-based compensation expense as a % of service revenue C 1.5% 1.6% 1.8% 1.6% Share-based compensation related payroll tax as a % of service revenue C --% --% 0.1% 0.1% --------- --------- ---------- ---------- Non-GAAP Service gross margin as a % of service revenue 57.4% 60.1% 56.9% 60.1% ========= ========= ========== ==========
Juniper Networks, Inc. Reconciliation between GAAP and non-GAAP Financial Measures (in thousands, except percentages) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- GAAP Gross margin $ 711,604 $ 677,787 $2,169,655 $1,949,746 Share-based compensation expense C 4,946 4,146 15,510 12,984 Share-based compensation related payroll tax C 13 73 1,237 501 Amortization of purchased intangible assets A 5,438 1,414 16,074 1,747 Acquisition-related and other charges A,B -- -- 2,487 -- ---------- ---------- ---------- ---------- Non-GAAP Gross margin 722,001 683,420 2,204,963 1,964,978 ========== ========== ========== ========== GAAP Gross margin as a % of revenue 64.4% 66.9% 65.2% 67.2% Share-based compensation expense as a % of revenue C 0.4% 0.5% 0.5% 0.4% Share-based compensation related payroll tax as a % of revenue C --% --% --% --% Amortization of purchased intangible assets as a % of revenue A 0.5% 0.1% 0.5% 0.1% Acquisition-related and other charges as a % of revenue A,B --% --% 0.1% --% ---------- ---------- ---------- ---------- Non-GAAP Gross margin as a % of revenue 65.3% 67.5% 66.3% 67.7% ========== ========== ========== ========== GAAP Research and development expense 257,096 231,151 776,325 662,913 Share-based compensation expense C (26,540) (19,315) (75,453) (54,980) Share-based compensation related payroll tax C (35) (228) (3,385) (1,413) ---------- ---------- ---------- ---------- Non-GAAP Research and development expense 230,521 211,608 697,487 606,520 ========== ========== ========== ========== GAAP Sales and marketing expense 254,933 204,704 747,859 599,382 Share-based compensation expense C (20,572) (13,439) (52,969) (39,020) Share-based compensation related payroll tax C (79) (153) (4,048) (1,735) ---------- ---------- ---------- ---------- Non-GAAP Sales and marketing expense 234,282 191,112 690,842 558,627 ========== ========== ========== ========== GAAP General and administrative expense 44,455 43,773 133,639 132,791 Share-based compensation expense C (8,410) (7,491) (25,701) (22,571) Share-based compensation related payroll tax C (8) (39) (493) (247) ---------- ---------- ---------- ---------- Non-GAAP General and administrative expense 36,037 36,243 107,445 109,973 ========== ========== ========== ========== GAAP Operating expense 574,578 482,251 1,684,316 1,408,960 Share-based compensation expense C (55,522) (40,245) (154,123) (116,571) Share-based compensation related payroll tax C (122) (420) (7,926) (3,395) Amortization of purchased intangible assets A (1,263) (917) (4,139) (3,258) Restructuring B (16,813) (181) (15,550) (8,550) Acquisition-related and other charges A,B (18) (1,525) (6,804) (2,066) ---------- ---------- ---------- ---------- Non-GAAP Operating expense $ 500,840 $ 438,963 $1,495,774 $1,275,120 ========== ========== ========== ==========
Juniper Networks, Inc. Reconciliation between GAAP and non-GAAP Financial Measures (in thousands, except percentages) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- GAAP Operating income $ 137,026 $ 195,536 $ 485,339 $ 540,786 Share-based compensation expense C 60,468 44,391 169,633 129,555 Share-based compensation related payroll tax C 135 493 9,163 3,896 Amortization of purchased intangible assets A 6,701 2,331 20,213 5,005 Restructuring B 16,813 181 15,550 8,550 Acquisition-related and other charges A,B 18 1,525 9,291 2,066 ---------- ---------- ---------- ---------- Non-GAAP Operating income 221,161 244,457 709,189 689,858 ========== ========== ========== ========== GAAP Operating margin 12.4% 19.3% 14.6% 18.6% Share-based compensation expense as a % of revenue C 5.5% 4.4% 5.1% 4.5% Share-based compensation related payroll tax as a % of revenue C --% --% 0.3% 0.1% Amortization of purchased intangible assets as a % of revenue A 0.6% 0.2% 0.5% 0.2% Restructuring as a % of revenue B 1.5% --% 0.5% 0.3% Acquisition-related charges as a % of revenue A,B --% 0.2% 0.3% 0.1% ---------- ---------- ---------- ---------- Non-GAAP Operating margin 20.0% 24.1% 21.3% 23.8% ========== ========== ========== ========== GAAP Other (expense) income, net E (15,957) 205 (36,107) 5,729 Loss/(gain) on equity investments B 1,116 -- 982 (3,232) ---------- ---------- ---------- ---------- Non-GAAP Other (expense) income, net E (14,841) 205 (35,125) 2,497 ========== ========== ========== ========== GAAP Income tax provision 37,398 61,404 120,383 117,225 Non-recurring income tax adjustment B -- -- -- 54,069 Income tax effect of non-GAAP exclusions B 19,152 11,932 59,297 38,039 ---------- ---------- ---------- ---------- Non-GAAP Provision for income tax 56,550 73,336 179,680 209,333 ========== ========== ========== ========== Non-GAAP Income tax rate 27.4% 30.0% 26.7% 30.2% ========== ========== ========== ========== Non-GAAP Income before income taxes and noncontrolling interest* $ 206,320 $ 244,662 $ 674,064 $ 692,355 ========== ========== ========== ==========
*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, September 30, ------------------- ------------------- 2011 2010 2011 2010 -------- -------- -------- -------- GAAP Net income attributable to Juniper Networks $ 83,663 $134,543 $328,973 $428,169 Share-based compensation expense C 60,468 44,391 169,633 129,555 Share-based compensation related payroll tax C 135 493 9,163 3,896 Amortization of purchased intangible assets A 6,701 2,331 20,213 5,005 Restructuring B 16,813 181 15,550 8,550 Acquisition-related and other charges A,B 18 1,525 9,291 2,066 Loss/(gain) on equity investments B 1,116 -- 982 (3,232) Non-recurring income tax adjustments B -- -- -- (54,069) Income tax effect of non- GAAP exclusions B (19,152) (11,932) (59,297) (38,039) -------- -------- -------- -------- Non-GAAP Net income $149,762 $171,532 $494,508 $481,901 ======== ======== ======== ======== Non-GAAP Net income per share: Basic D $ 0.28 $ 0.33 $ 0.93 $ 0.92 ======== ======== ======== ======== Diluted D $ 0.28 $ 0.32 $ 0.91 $ 0.90 ======== ======== ======== ======== Shares used in computing non-GAAP net income per share: Basic D 529,286 520,581 530,994 522,069 ======== ======== ======== ======== Diluted D 536,583 534,880 544,086 537,158 ======== ======== ======== ======== GAAP Net income attributable to Juniper Networks as a % of revenue 7.6% 13.3% 9.9% 14.7% Share-based compensation expense as a % of revenue C 5.5% 4.4% 5.1% 4.5% Share-based compensation related payroll tax as a % of revenue C --% --% 0.3% 0.1% Amortization of purchased intangible assets as a % of revenue A 0.6% 0.2% 0.6% 0.2% Restructuring as a % of revenue B 1.5% --% 0.5% 0.3% Acquisition-related and other charges as a % of revenue A,B --% 0.2% 0.3% 0.1% Loss/(gain) on equity investments B 0.1% --% --% (0.1)% Non-recurring income tax adjustments as a % of revenue B --% --% --% (1.9)% Income tax effect of non- GAAP exclusions as a % of revenue B (1.8)% (1.2)% (1.8)% (1.3)% -------- -------- -------- -------- Non-GAAP Net income as a % of revenue 13.5% 16.9% 14.9% 16.6% ======== ======== ======== ========
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 (expense) income, 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 (expense) income.
Juniper Networks, Inc. Preliminary Condensed Consolidated Balance Sheets (in thousands) (unaudited) September 30, December 31, 2011 2010 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 2,722,449 $ 1,811,887 Short-term investments 632,396 474,514 Accounts receivable, net of allowances 444,000 596,622 Deferred tax assets, net 167,549 161,535 Prepaid expenses and other current assets 165,196 169,812 -------------- -------------- Total current assets 4,131,590 3,214,370 Property and equipment, net 576,415 493,881 Long-term investments 775,457 535,178 Restricted cash 90,546 119,346 Purchased intangible assets, net 130,034 121,803 Goodwill 3,928,525 3,927,807 Other long-term assets 74,525 55,466 -------------- -------------- Total assets $ 9,707,092 $ 8,467,851 ============== ============== LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 262,594 $ 292,270 Accrued compensation 192,621 256,746 Accrued warranty 38,946 35,931 Deferred revenue 668,824 660,264 Income taxes payable 36,742 25,000 Other accrued liabilities 166,953 201,765 -------------- -------------- Total current liabilities 1,366,680 1,471,976 Long-term debt 998,997 -- Long-term deferred revenue 216,968 224,165 Long-term income tax payable 111,642 103,823 Other long-term liabilities 74,621 59,087 -------------- -------------- Total liabilities 2,768,908 1,859,051 Total equity 6,938,184 6,608,800 -------------- -------------- Total liabilities and equity $ 9,707,092 $ 8,467,851 ============== ==============
Juniper Networks, Inc. Preliminary Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine Months Ended September 30, ------------------------------- 2011 2010 -------------- -------------- Cash flows from operating activities: Consolidated net income $ 328,849 $ 429,290 Adjustments to reconcile consolidated net income to net cash from operating activities: Depreciation and amortization 125,986 112,366 Non-cash portion of share-based compensation 165,236 129,555 Loss/(gain) on equity investments 982 (3,232) Excess tax benefits from share-based compensation (44,524) (32,932) Deferred income taxes (6,014) 26,425 Amortization of debt issuance costs 509 -- Changes in operating assets and liabilities: Accounts receivable, net 152,019 (15,093) Prepaid expenses and other assets 14,103 (67,813) Accounts payable (25,962) 8,464 Accrued compensation (62,625) 8,390 Accrued litigation settlements -- (169,330) Income tax payable 70,241 (16,900) Other accrued liabilities 23,309 836 Deferred revenue 1,012 31,274 -------------- -------------- Net cash provided by operating activities 743,121 441,300 Cash flows from investing activities: Purchases of property and equipment, net (187,886) (137,481) Purchases of trading investments (4,575) (2,338) Purchases of available-for-sale investments (1,893,474) (1,361,510) Proceeds from sales of available-for-sale investments 1,050,936 440,788 Proceeds from maturities of available-for- sale investments 446,150 744,464 Payment for business acquisition, net of cash and cash equivalents acquired (31,101) (133,333) Changes in restricted cash (1,144) (12,432) Purchases of privately-held and other equity investments, net (32,402) (5,288) -------------- -------------- Net cash used in investing activities (653,496) (467,130) Cash flows from financing activities: Proceeds from issuance of common stock 341,063 257,693 Purchases and retirement of common stock (548,590) (388,698) Issuance of long-term debt 991,556 -- Change in customer financing arrangements (7,616) (16,906) Excess tax benefits from share-based compensation 44,524 32,932 Return of capital to noncontrolling interest -- (3,000) -------------- -------------- Net cash provided by (used in) financing activities 820,937 (117,979) -------------- -------------- Net increase (decrease) in cash and cash equivalents 910,562 (143,809) Cash and cash equivalents at beginning of period 1,811,887 1,604,723 Cash and cash equivalents at end of period $ 2,722,449 $ 1,460,914 ============== ==============
Juniper Networks, Inc. Cash, Cash Equivalents, and Investments (in thousands) (unaudited) September 30, December 31, 2011 2010 ----------------- ---------------- Cash and cash equivalents $ 2,722,449 $ 1,811,887 Short-term investments 632,396 474,514 Long-term investments 775,457 535,178 ----------------- ---------------- Total $ 4,130,302 $ 2,821,579 ================= ================
Contact:
Investor Relations: Kathleen Nemeth Juniper Networks (408) 936-5397 kbela@juniper.net Media Relations: David Shane Juniper Networks (408) 936-4872 dshane@juniper.net Cindy Ta Juniper Networks (408) 936-6131 cta@juniper.net
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