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Press Release -- October 18th, 2011
Source: Juniper Networks
Tags: Equipment, Exchange, Router

JUNIPER NETWORKS REPORTS PRELIMINARY THIRD QUARTER 2011 FINANCIAL RESULTS

  • 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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