SUNNYVALE, CA–(Marketwire – 10/19/10) – Juniper Networks (NYSE:JNPR – News)
- Record Revenue of $1,012.4 million, up 23% year-over-year and up 3% sequentially
- Operating Margin: 19.3% GAAP; 24.1% non-GAAP
- GAAP Net Income Per Share: $0.25 diluted
- Non-GAAP Net Income Per Share: $0.32 diluted, up 39% year-over-year and up 7% sequentially
Juniper Networks today reported preliminary financial results for the three months ended September 30, 2010.
Net revenues for the third quarter of 2010 increased 23% on a year-over-year basis, and increased 3% sequentially, to $1,012.4 million. The Company posted GAAP net income of $134.5 million, or $0.25 per diluted share, and non-GAAP net income of $171.5 million, or $0.32 per diluted share, for the third quarter of 2010. Non-GAAP net income per diluted share increased 39% compared to the third quarter of 2009 and increased 7% compared to last quarter. The reconciliation between GAAP and non-GAAP results of operations is provided in a table immediately following the Net Revenues by Market table below.
“Juniper’s results reflect our ability to deliver on the promise of the New Network with cost effective solutions that scale to meet growing network demand,” said Kevin Johnson, Juniper’s chief executive officer. “We anticipate customer demand to remain healthy and are well-positioned to drive further gains as we enable the deployment of secure, scalable wireless networks and deliver solutions to the growing cloud computing market.”
Juniper’s operating margin for the third quarter of 2010 increased to 19.3% on a GAAP basis from 18.9% in the second quarter of 2010, and increased from 15.5% in the prior year third quarter. Non-GAAP operating margin for the third quarter of 2010 increased to 24.1% from 23.9% in the second quarter of 2010 and increased from 20.8% in the prior year third quarter.
Juniper generated net cash from operations for the third quarter of 2010 of $131.4 million, compared to net cash provided by operations of $221.3 million, in the second quarter of 2010, and $223.9 million in the same quarter of the prior year.
Capital expenditures, as well as depreciation and amortization expense during the third quarter of 2010, were $54.3 million and $39.6 million, respectively.
During the quarter, Juniper acquired SMobile Systems, Inc. for $69 million, a privately-held software company focused solely on smartphone and tablet security solutions for the enterprise, service provider, and consumer markets. With SMobile’s product portfolio integrated with Junos® Pulse, the Company has extended its security focus.
“We continue to execute well against the operating principles that we set at the beginning of the year,” said Robyn Denholm, Juniper’s chief financial officer. “We exited this quarter with strong demand metrics and good momentum and we are on track to deliver 20% or higher revenue growth for the full year.”
Juniper Networks will host a conference call web cast today, October 19, 2010 at 1:45 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 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 14, 2010.
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. The company serves customers and partners worldwide, generating revenues exceeding $3 billion over the last year. Additional information can be found at 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; 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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net revenues:
Product $ 801,183 $ 634,074 $2,296,442 $1,828,896
Service 211,224 189,838 606,883 545,562
---------- ---------- ---------- ----------
Total net revenues 1,012,407 823,912 2,903,325 2,374,458
Cost of revenues:
Product 247,033 206,329 701,166 606,966
Service 87,587 74,300 252,413 215,535
---------- ---------- ---------- ----------
Total cost of revenues 334,620 280,629 953,579 822,501
---------- ---------- ---------- ----------
Gross margin 677,787 543,283 1,949,746 1,551,957
Operating expenses:
Research and development 231,151 185,204 662,913 554,498
Sales and marketing 204,704 183,424 599,382 547,843
General and administrative 43,773 39,877 132,791 118,263
Amortization of purchased
intangible assets 917 1,330 3,258 9,259
Restructuring charges 181 4,493 8,550 16,251
Acquisition-related and
other charges 1,525 1,000 2,066 1,000
---------- ---------- ---------- ----------
Total operating expenses 482,251 415,328 1,408,960 1,247,114
---------- ---------- ---------- ----------
Operating income 195,536 127,955 540,786 304,843
Interest and other
income, net 205 1,733 2,497 6,581
Gain (loss) on equity
investments - - 3,232 (3,311)
---------- ---------- ---------- ----------
Income before income taxes
and noncontrolling
interest 195,741 129,688 546,515 308,113
Income tax provision 61,404 45,902 117,225 214,018
---------- ---------- ---------- ----------
Consolidated net income 134,337 83,786 429,290 94,095
Adjust for net loss (income)
attributable to
noncontrolling interest 206 - (1,121) -
---------- ---------- ---------- ----------
Net income attributable to
Juniper Networks $ 134,543 $ 83,786 $ 428,169 $ 94,095
========== ========== ========== ==========
Net income per share
attributable to Juniper
Networks common
stockholders:
Basic $ 0.26 $ 0.16 $ 0.82 $ 0.18
========== ========== ========== ==========
Diluted $ 0.25 $ 0.16 $ 0.80 $ 0.18
========== ========== ========== ==========
Shares used in computing
net income per share:
Basic 520,581 523,878 522,069 523,802
========== ========== ========== ==========
Diluted 534,880 538,132 537,158 532,686
========== ========== ========== ==========
Juniper Networks, Inc.
Stock-Based Compensation by Category
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Cost of revenues - Product $ 991 $ 910 $ 3,093 $ 2,832
Cost of revenues - Service 3,155 2,615 9,891 7,565
Research and development 19,315 14,327 54,980 43,988
Sales and marketing 13,439 10,964 39,020 31,808
General and administrative 7,491 5,538 22,571 15,252
---------- ---------- ---------- ----------
Total $ 44,391 $ 34,354 $ 129,555 $ 101,445
========== ========== ========== ==========
Juniper Networks, Inc.
Stock-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Cost of revenues - Product $ 20 $ 32 $ 131 $ 48
Cost of revenues - Service 53 89 370 145
Research and development 228 353 1,413 540
Sales and marketing 153 276 1,735 669
General and administrative 39 38 247 81
---------- ---------- ---------- ----------
Total $ 493 $ 788 $ 3,896 $ 1,483
========== ========== ========== ==========
Juniper Networks, Inc.
Net Revenues by Reportable Segment
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Infrastructure - Product $ 607,593 $ 471,976 $1,753,932 $1,396,220
Infrastructure - Service 136,475 123,229 389,188 350,074
---------- ---------- ---------- ----------
Total Infrastructure $ 744,068 $ 595,205 $2,143,120 $1,746,294
---------- ---------- ---------- ----------
Service Layer
Technologies - Product $ 193,590 $ 162,098 $ 542,510 $ 432,676
Service Layer
Technologies - Service 74,749 66,609 217,695 195,488
---------- ---------- ---------- ----------
Total Service Layer
Technologies $ 268,339 $ 228,707 $ 760,205 $ 628,164
---------- ---------- ---------- ----------
Total $1,012,407 $ 823,912 $2,903,325 $2,374,458
========== ========== ========== ==========
Juniper Networks, Inc.
Net Revenues by Geographic Region
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Americas $ 532,747 $ 422,842 $1,515,436 $1,173,375
Europe, Middle East, and
Africa 275,927 243,149 829,505 698,319
Asia Pacific 203,733 157,921 558,384 502,764
---------- ---------- ---------- ----------
Total $1,012,407 $ 823,912 $2,903,325 $2,374,458
========== ========== ========== ==========
Juniper Networks, Inc.
Net Revenues by Market
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Service Provider $ 633,998 $ 523,999 $1,847,645 $1,557,800
Enterprise 378,409 299,913 1,055,680 816,658
---------- ---------- ---------- ----------
Total $1,012,407 $ 823,912 $2,903,325 $2,374,458
========== ========== ========== ==========
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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
GAAP Cost of
revenues - Product $ 247,033 $ 206,329 $ 701,166 $ 606,966
Stock-based compensation
expense C (991) (910) (3,093) (2,832)
Stock-based compensation
related payroll tax C (20) (32) (131) (48)
Amortization of purchased
intangible assets A (1,414) (1,369) (1,747) (4,107)
---------- ---------- ---------- ----------
Non-GAAP Cost of
revenues - Product 244,608 204,018 696,195 599,979
========== ========== ========== ==========
GAAP Cost of
revenues - Service 87,587 74,300 252,413 215,535
Stock-based compensation
expense C (3,155) (2,615) (9,891) (7,565)
Stock-based compensation
related payroll tax C (53) (89) (370) (145)
---------- ---------- ---------- ----------
Non-GAAP Cost of
revenues - Service 84,379 71,596 242,152 207,825
========== ========== ========== ==========
GAAP Gross
margin - Product 554,150 427,745 1,595,276 1,221,930
Stock-based compensation
expense C 991 910 3,093 2,832
Stock-based compensation
related payroll tax C 20 32 131 48
Amortization of purchased
intangible assets A 1,414 1,369 1,747 4,107
---------- ---------- ---------- ----------
Non-GAAP Gross
margin - Product 556,575 430,056 1,600,247 1,228,917
========== ========== ========== ==========
GAAP Product gross margin
as a % of product revenue 69.2% 67.5% 69.5% 66.8%
Stock-based compensation
expense as a % of
product revenue C 0.1% 0.1% 0.1% 0.2%
Stock-based compensation
related payroll tax as
a % of product revenue C -% -% -% -%
Amortization of purchased
intangible assets as a
% of product revenue A 0.2% 0.2% 0.1% 0.2%
---------- ---------- ---------- ----------
Non-GAAP Product gross
margin as a % of product
revenue 69.5% 67.8% 69.7% 67.2%
========== ========== ========== ==========
GAAP Gross
margin - Service 123,637 115,538 354,470 330,027
Stock-based compensation
expense C 3,155 2,615 9,891 7,565
Stock-based compensation
related payroll tax C 53 89 370 145
---------- ---------- ---------- ----------
Non-GAAP Gross
margin - Service $ 126,845 $ 118,242 $ 364,731 $ 337,737
========== ========== ========== ==========
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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
GAAP Service gross margin
as a % of service revenue 58.5% 60.9% 58.4% 60.5%
Stock-based compensation
expense as a % of
service revenue C 1.6% 1.4% 1.6% 1.4%
Stock-based compensation
related payroll tax as a
% of service revenue C -% -% 0.1% -%
---------- ---------- ---------- ----------
Non-GAAP Service gross
margin as a % of service
revenue 60.1% 62.3% 60.1% 61.9%
========== ========== ========== ==========
GAAP Gross margin $ 677,787 $ 543,283 $1,949,746 $1,551,957
Stock-based compensation
expense C 4,146 3,525 12,984 10,397
Stock-based compensation
related payroll tax C 73 121 501 193
Amortization of purchased
intangible assets A 1,414 1,369 1,747 4,107
---------- ---------- ---------- ----------
Non-GAAP Gross margin 683,420 548,298 1,964,978 1,566,654
========== ========== ========== ==========
GAAP Gross margin as a
% of revenue 66.9% 65.9% 67.2% 65.4%
Stock-based compensation
expense as a % of
revenue C 0.5% 0.4% 0.4% 0.4%
Stock-based compensation
related payroll tax as
a % of revenue C -% -% -% -%
Amortization of purchased
intangible assets as a
% of revenue A 0.1% 0.2% 0.1% 0.2%
---------- ---------- ---------- ----------
Non-GAAP Gross margin as
a % of revenue 67.5% 66.5% 67.7% 66.0%
========== ========== ========== ==========
GAAP Research and
development expense 231,151 185,204 662,913 554,498
Stock-based compensation
expense C (19,315) (14,327) (54,980) (43,988)
Stock-based compensation
related payroll tax C (228) (353) (1,413) (540)
---------- ---------- ---------- ----------
Non-GAAP Research and
development expense 211,608 170,524 606,520 509,970
========== ========== ========== ==========
GAAP Sales and marketing
expense 204,704 183,424 599,382 547,843
Stock-based compensation
expense C (13,439) (10,964) (39,020) (31,808)
Stock-based compensation
related payroll tax C (153) (276) (1,735) (669)
---------- ---------- ---------- ----------
Non-GAAP Sales and
marketing expense 191,112 172,184 558,627 515,366
========== ========== ========== ==========
GAAP General and
administrative expense 43,773 39,877 132,791 118,263
Stock-based compensation
expense C (7,491) (5,538) (22,571) (15,252)
Stock-based compensation
related payroll tax C (39) (38) (247) (81)
---------- ---------- ---------- ----------
Non-GAAP General and
administrative expense 36,243 34,301 109,973 102,930
========== ========== ========== ==========
GAAP Operating expense 482,251 415,328 1,408,960 1,247,114
Stock-based compensation
expense C (40,245) (30,829) (116,571) (91,048)
Stock-based compensation
related payroll tax C (420) (667) (3,395) (1,290)
Amortization of purchased
intangible assets A (917) (1,330) (3,258) (9,259)
Restructuring charges B (181) (4,493) (8,550) (16,251)
Acquisition-related and
other charges A,B (1,525) (1,000) (2,066) (1,000)
---------- ---------- ---------- ----------
Non-GAAP Operating expense $ 438,963 $ 377,009 $1,275,120 $1,128,266
========== ========== ========== ==========
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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
GAAP Operating income $ 195,536 $ 127,955 $ 540,786 $ 304,843
Stock-based compensation
expense C 44,391 34,354 129,555 101,445
Stock-based compensation
related payroll tax C 493 788 3,896 1,483
Amortization of purchased
intangible assets A 2,331 2,699 5,005 13,366
Restructuring charges B 181 4,493 8,550 16,251
Acquisition-related and
other charges A,B 1,525 1,000 2,066 1,000
---------- ---------- ---------- ----------
Non-GAAP Operating income 244,457 171,289 689,858 438,388
========== ========== ========== ==========
GAAP Operating margin 19.3% 15.5% 18.6% 12.8%
Stock-based compensation
expense as a % of
revenue C 4.4% 4.2% 4.5% 4.3%
Stock-based compensation
related payroll tax as
a % of revenue C -% 0.1% 0.1% 0.1%
Amortization of purchased
intangible assets as
a % of revenue A 0.2% 0.3% 0.2% 0.6%
Restructuring charges as
a % of revenue B -% 0.6% 0.3% 0.7%
Acquisition-related and
other charges as
a % of revenue A,B 0.2% 0.1% 0.1% -%
---------- ---------- ---------- ----------
Non-GAAP Operating margin 24.1% 20.8% 23.8% 18.5%
========== ========== ========== ==========
GAAP Other income and
expense, net 205 1,733 5,729 3,270
(Gain) loss on equity
investments B - - (3,232) 3,311
---------- ---------- ---------- ----------
Non-GAAP Other income and
expense, net 205 1,733 2,497 6,581
========== ========== ========== ==========
GAAP Income tax provision 61,404 45,902 117,225 214,018
Non-recurring income tax
adjustment B - (4,559) 54,069 (56,683)
Valuation allowance on
deferred tax assets B - - - (61,755)
Income tax effect of
non-GAAP exclusions B 11,932 9,162 38,039 31,498
---------- ---------- ---------- ----------
Non-GAAP Provision for
income tax 73,336 50,505 209,333 127,078
========== ========== ========== ==========
Non=GAAP Income tax rate 30.0% 29.2% 30.2% 28.6%
========== ========== ========== ==========
Non-GAAP Income before
income taxes and
noncontrolling interest* $ 244,662 $ 173,022 $ 692,355 $ 444,969
========== ========== ========== ==========
*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,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
GAAP Net income
attributable to Juniper
Networks $ 134,543 $ 83,786 $ 428,169 $ 94,095
Stock-based compensation
expense C 44,391 34,354 129,555 101,445
Stock-based compensation
related payroll tax C 493 788 3,896 1,483
Amortization of purchased
intangible assets A 2,331 2,699 5,005 13,366
Restructuring charges B 181 4,493 8,550 16,251
Acquisition-related and
other charges A,B 1,525 1,000 2,066 1,000
(Gain) loss on equity
investments B - - (3,232) 3,311
Non-recurring income tax
adjustments B - 4,559 (54,069) 56,683
Valuation allowance on
deferred tax assets B - - - 61,755
Income tax effect of
non-GAAP exclusions B (11,932) (9,162) (38,039) (31,498)
---------- ---------- ---------- ----------
Non-GAAP Net income $ 171,532 $ 122,517 $ 481,901 $ 317,891
========== ========== ========== ==========
Non-GAAP Net income
per share:
Basic D $ 0.33 $ 0.23 $ 0.92 $ 0.61
========== ========== ========== ==========
Diluted D $ 0.32 $ 0.23 $ 0.90 $ 0.60
========== ========== ========== ==========
Shares used in computing
non-GAAP net income
per share:
Basic D 520,581 523,878 522,069 523,802
========== ========== ========== ==========
Diluted D 534,880 538,132 537,158 532,686
========== ========== ========== ==========
GAAP Net income
attributable to Juniper
Networks as a
% of revenue 13.3% 10.2% 14.7% 4.0%
Stock-based compensation
expense as a % of
revenue C 4.4% 4.2% 4.5% 4.3%
Stock-based compensation
related payroll tax as
a % of revenue C -% 0.1% 0.1% 0.1%
Amortization of purchased
intangible assets as a
% of revenue A 0.2% 0.3% 0.2% 0.6%
Restructuring charges as
a % of revenue B -% 0.6% 0.3% 0.6%
Acquisition-related and
other charges as a
% of revenue A,B 0.2% 0.1% 0.1% -%
(Gain) loss on equity
investments B -% -% (0.1)% 0.1%
Non-recurring income tax
adjustments as a
% of revenue B -% 0.6% (1.9)% 2.4%
Valuation allowance on
deferred tax assets as a
% of revenue B -% -% -% 2.6%
Income tax effect of
non-GAAP exclusions as
a % of revenue B (1.2)% (1.2)% (1.3)% (1.3)%
---------- ---------- ---------- ----------
Non-GAAP Net income as
a % of revenue 16.9% 14.9% 16.6% 13.4%
========== ========== ========== ==========
Discussion of Non-GAAP Financial Measures
The table above includes the following non-GAAP financial measures 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 tables 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 Stock-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 stock based compensation expense and related payroll taxes, amortization of intangible assets, restructuring charges and acquisition-related and other charges.
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: Stock-Based Compensation Related Items. We provide non-GAAP information relative to our expense for stock-based compensation and related payroll tax. We began to include stock-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 stock-based compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Further, we believe that excluding stock-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. Stock-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 stock is unrelated to the amount of compensation ultimately received by the employee; and the cost to the company is based on a stock-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 stock-based compensation, payroll tax on stock option exercises is dependent on our stock price and the timing and exercise by employees of our stock-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 stock-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.
Juniper Networks, Inc.
Preliminary Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2010 2009
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,460,914 $ 1,604,723
Short-term investments 638,523 570,522
Accounts receivable, net of allowances 473,953 458,652
Deferred tax assets, net 181,955 196,318
Prepaid expenses and other current assets 111,466 48,744
------------- -------------
Total current assets 2,866,811 2,878,959
Property and equipment, net 484,802 455,651
Long-term investments 599,036 483,505
Restricted cash 79,080 53,732
Purchased intangible assets, net 47,629 13,834
Goodwill 3,759,631 3,658,602
Long-term deferred tax assets, net - 10,555
Other long-term assets 53,908 35,425
------------- -------------
Total assets $ 7,890,897 $ 7,590,263
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 251,431 $ 242,591
Accrued compensation 184,941 176,551
Accrued warranty 36,360 38,199
Deferred revenue 594,437 571,652
Income taxes payable 29,762 34,936
Accrued litigation settlements - 169,330
Other accrued liabilities 143,836 142,526
------------- -------------
Total current liabilities 1,240,767 1,375,785
Long-term deferred revenue 190,701 181,937
Long-term income tax payable 98,198 170,245
Other long-term liabilities 44,332 37,531
Commitments and Contingencies
Juniper Networks stockholders' equity:
Convertible preferred stock, $0.00001 par
value; 10,000 shares authorized; none
issued and outstanding
Common stock, $0.00001 par value; 1,000,000
shares authorized; 521,141 shares and
519,341 shares issued and outstanding at
September 30, 2010, and December 31, 2009,
respectively 5 5
Additional paid-in capital 9,449,553 9,060,089
Accumulated other comprehensive
income (loss) 4,427 (1,433)
Accumulated deficit (3,137,836) (3,236,525)
------------- -------------
Total Juniper Networks stockholders'
equity 6,316,149 5,822,136
Noncontrolling interest 750 2,629
------------- -------------
Total equity 6,316,899 5,824,765
------------- -------------
Total liabilities and stockholders'
equity $ 7,890,897 $ 7,590,263
============= =============
Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
----------------------------
2010 2009
------------- -------------
Cash flows from operating activities:
Consolidated net income $ 429,290 $ 94,095
Adjustments to reconcile consolidated net
income to net cash from operating activities:
Depreciation and amortization 112,366 111,803
Stock-based compensation 129,555 101,445
(Gain) loss on equity investments (3,232) 3,311
Change in excess tax benefits from
share-based compensation (32,932) 673
Deferred income taxes 26,425 41,996
Changes in operating assets and liabilities:
Accounts receivable, net (15,093) 56,729
Prepaid expenses and other assets (67,813) (11,444)
Accounts payable 8,464 (778)
Accrued compensation 8,390 (20,873)
Accrued litigation settlements (169,330) -
Income tax payable (16,900) 84,813
Other accrued liabilities 836 21,790
Deferred revenue 31,274 52,932
------------- -------------
Net cash provided by operating activities 441,300 536,492
Cash flows from investing activities:
Purchases of property and equipment, net (137,481) (113,210)
Purchases of trading investments (2,338) -
Purchases of available-for-sale investments (1,361,510) (1,164,833)
Proceeds from sales of available-for-sale
investments 440,788 202,276
Proceeds from maturities of available-for-sale
investments 744,464 262,325
Payment for business acquisition, net of cash
and cash equivalents acquired (133,333) -
Changes in restricted cash (12,432) (11,276)
Purchases of privately-held and other equity
investments, net (5,288) (5,289)
------------- -------------
Net cash used in investing activities (467,130) (830,007)
Cash flows from financing activities:
Proceeds from issuance of common stock 257,693 131,391
Purchases and retirement of common stock (388,698) (241,481)
Change in customer financing arrangements (16,906) 3,784
Change in excess tax benefits from
share-based compensation 32,932 (673)
Return of capital to noncontrolling interest (3,000) -
------------- -------------
Net cash used in financing activities (117,979) (106,979)
------------- -------------
Net decrease in cash and cash equivalents (143,809) (400,494)
Cash and cash equivalents at beginning
of period 1,604,723 2,019,084
------------- -------------
Cash and cash equivalents at end of period $ 1,460,914 $ 1,618,590
============= =============
Juniper Networks, Inc.
Cash, Cash Equivalents, Trading, and Available-For-Sale Investments
(in thousands)
(unaudited)
September 30, December 31,
2010 2009
------------- -------------
Cash and cash equivalents $ 1,460,914 $ 1,604,723
Short-term investments 638,523 570,522
Long-term investments 599,036 483,505
------------- -------------
Total $ 2,698,473 $ 2,658,750
============= =============
Contact:
Investor Relations: Kathleen Bela Juniper Networks (408) 936-7804 kbela@juniper.net Media Relations: David Shane Juniper Networks (408) 936-4872 dshane@juniper.net
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