SUNNYVALE, CA, Jan 26, 2012 (MARKETWIRE via COMTEX) –Juniper Networks (NASDAQ:JNPR, news, filings)
Q4 Financial Highlights:
- Revenue: $1,120.8 million, down 6% from Q4’10 and up 1% from Q3’11
- Operating Margin: 11.9% GAAP; 18.6% non-GAAP
- GAAP Net Income Per Share: $0.18 diluted
- Non-GAAP Net Income Per Share: $0.28 diluted, down 33% from Q4’10 and flat from Q3’11
2011 Financial Highlights:
- Revenue: $4,448.7 million, up 9% from 2010
- Operating Margin: 13.9% GAAP; 20.6% non-GAAP
- GAAP Net Income Per Share: $0.79 diluted
- Non-GAAP Net Income Per Share: $1.19 diluted, down 10% from 2010
Juniper Networks (NYSE: JNPR), the industry leader in network innovation, today reported preliminary financial results for the three and twelve months ended December 31, 2011, and provided its outlook for the three months ending March 31, 2012.
Net revenues for the fourth quarter of 2011 decreased 6% on a year-over-year basis, and increased 1% sequentially, to $1,120.8 million.
For the year ended December 31, 2011, Juniper’s revenue increased 9% on a year-over-year basis to $4,448.7 million.
The Company posted GAAP net income of $96.2 million, or $0.18 per diluted share, and non-GAAP net income of $150.1 million, or $0.28 per diluted share, for the fourth quarter of 2011. Included in the GAAP diluted earnings per share was a $0.02 cents impact for restructuring and other charges. Non-GAAP net income per diluted share decreased 33% compared to the fourth quarter of 2010 and was flat compared to the third quarter of 2011.
For the year ended December 31, 2011, GAAP net income was $425.1 million, or $0.79 per diluted share, and non-GAAP net income was $644.6 million, or $1.19 per diluted share. Non-GAAP net income per diluted share for the year ended December 31, 2011 decreased 10% on a year-over-year basis. 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.
“While the fourth quarter was softer than we had anticipated primarily due to weak demand from service providers, Juniper delivered record revenues in a year where macro economic uncertainty increased as the year unfolded,” said Kevin Johnson, president and CEO. “During the year, we introduced innovative new products across our portfolio that we believe will enable Juniper to continue to grow faster than the markets we serve. We are confident in our strategy and our innovation pipeline, and we remain committed to delivering differentiated solutions that are highly relevant to our customers.”
Juniper’s GAAP operating margin for the fourth quarter of 2011 was 11.9% compared to 12.4% in the third quarter of 2011, and 19.1% in the prior year fourth quarter. Non-GAAP operating margin for the fourth quarter of 2011 was 18.6% compared to 20.0% in the third quarter of 2011, and 24.5% in the prior year fourth quarter. For the fiscal year 2011, Juniper’s GAAP operating margin was 13.9% compared to 18.8% for the prior fiscal year. Non-GAAP operating margin for the fiscal year 2011 was 20.6% compared to 24.0% in the fiscal year 2010.
“The December quarter was an atypical and unexpectedly weak finish to the year, with reduced spending by some of our largest customers,” said Robyn Denholm, Juniper’s chief financial officer. “While long-term industry fundamentals remain strong, we expect the near-term environment to remain challenging. We will invest in support of our strategy while continuing our focus on execution and prudent cost management.”
Other Financial Highlights Total cash, cash equivalents and investments as of the fourth quarter of 2011 was $4,292.4 million, compared to $4,130.3 million as of the third quarter of 2011 and $2,821.6 million as of the fourth quarter of 2010.
Juniper generated net cash from operations in the fourth quarter of 2011 of $243.6 million, compared to net cash provided by operations of $185.2 million in the third quarter of 2011, and $371.0 million in the fourth quarter of 2010. For the year ended December 31, 2011, Juniper generated net cash from operations of $986.7 million, compared to $812.3 million in 2010.
Days sales outstanding in accounts receivable (“DSO”) was 46 days in the fourth quarter of 2011, compared to 36 days in the prior quarter and 45 days in the fourth quarter of 2010.
For the year ended December 31, 2011, Juniper repurchased 17.5 million shares, at an average share price of $30.93 per share, for a total of $541.2 million, which largely offset stock issued through our employee equity programs.
Capital expenditures, as well as depreciation and amortization of intangible assets expense during the fourth quarter of 2011, were $78.4 million and $43.3 million, respectively. Capital expenditures, as well as depreciation and amortization of intangible assets expense during the fiscal year 2011, were $266.3 million and $169.3 million, respectively.
Outlook We believe the long-term demand fundamentals remain intact and we are confident about the growth potential of our new product portfolio. However, our outlook for the March quarter reflects near-term uncertainty in the macro-environment and the effect it may have on the level, timing, and prioritization of customer demand.
- Juniper estimates revenue for the first quarter ending March 31, 2012, to be in the range of $960 million to $990 million.
- Juniper estimates that its non-GAAP gross margin will be in the range of 63% and 64% in the first quarter.
- Juniper estimates that its non-GAAP operating expenses will increase in the first quarter compared to the fourth quarter 2011, primarily due to typical fringe-related employee expenses and variable compensation.
- Juniper expects its non-GAAP operating margin for the first quarter to be in the range of 11% and 13%.
- Juniper estimates that its non-GAAP net income per share will range between $0.11 and $0.14 on a diluted basis, assuming a flat share count and estimated non-GAAP tax rate of 29%. This tax rate includes an estimated $0.01 cent quarterly impact on non-GAAP earnings per share assuming no renewal of the R&D tax credit.
All forward-looking non-GAAP measures exclude estimates for amortization of intangible assets, share-based compensation expenses, acquisition related charges, restructuring charges, impairment 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, January 26, 2012, at 2:00 p.m. (Pacific Time), to be broadcast live over the Internet at: http://www.juniper.net/company/investor/conferencecall.html.
To participate via telephone, in the U.S. the toll free dial-in number is 877-407-8033; outside of the U.S. dial +1-201-689-8033. Please call ten minutes prior to the scheduled conference call time. The webcast replay of the conference call will be archived on the Juniper Networks website.
About Juniper Networks Juniper Networks is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking. Additional information can be found at Juniper Networks (www.juniper.net).
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 Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Net revenues:
Product $ 847,461 $ 962,209 $3,478,264 $3,258,651
Service 273,296 227,732 970,445 834,615
---------- ---------- ---------- ----------
Total net revenues 1,120,757 1,189,941 4,448,709 4,093,266
Cost of revenues:
Product 310,537 299,699 1,155,283 1,000,865
Service 111,285 98,241 424,836 350,654
---------- ---------- ---------- ----------
Total cost of revenues 421,822 397,940 1,580,119 1,351,519
---------- ---------- ---------- ----------
Gross margin 698,935 792,001 2,868,590 2,741,747
Operating expenses:
Research and development 250,465 254,942 1,026,790 917,855
Sales and marketing 253,201 257,690 1,001,060 857,072
General and administrative 45,493 45,068 179,132 177,859
Amortization of purchased
intangible assets 1,227 972 5,366 4,230
Restructuring and other
charges 15,014 2,255 30,564 10,805
Acquisition-related and other
charges 350 4,276 7,154 6,342
---------- ---------- ---------- ----------
Total operating expenses 565,750 565,203 2,250,066 1,974,163
---------- ---------- ---------- ----------
Operating income 133,185 226,798 618,524 767,584
Other (expense) income, net (10,701) 4,841 (46,808) 10,570
---------- ---------- ---------- ----------
Income before income taxes and
noncontrolling interest 122,484 231,639 571,716 778,154
Income tax provision 26,321 41,556 146,704 158,781
---------- ---------- ---------- ----------
Consolidated net income 96,163 190,083 425,012 619,373
Adjust for net loss (income)
attributable to noncontrolling
interest - 150 124 (971)
---------- ---------- ---------- ----------
Net income attributable to
Juniper Networks $ 96,163 $ 190,233 $ 425,136 $ 618,402
========== ========== ========== ==========
Net income per share
attributable to Juniper
Networks common stockholders:
Basic $ 0.18 $ 0.36 $ 0.80 $ 1.18
========== ========== ========== ==========
Diluted $ 0.18 $ 0.35 $ 0.79 $ 1.15
========== ========== ========== ==========
Shares used in computing net
income per share:
Basic 526,124 523,556 529,768 522,444
========== ========== ========== ==========
Diluted 533,335 541,464 541,417 538,790
========== ========== ========== ==========
Juniper Networks, Inc.
Preliminary Net Revenues by Reportable Segment
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Infrastructure:
Routers - Product $ 506,573 $ 639,289 $2,287,432 $2,134,488
Routers - Service 174,297 144,377 606,934 521,248
---------- ---------- ---------- ----------
Infrastructure Revenue -
Routers 680,870 783,666 2,894,366 2,655,736
---------- ---------- ---------- ----------
Switches - Product 157,053 118,363 493,149 377,096
Switches - Service 11,349 5,125 35,091 17,442
---------- ---------- ---------- ----------
Infrastructure Revenue -
Switches 168,402 123,488 528,240 394,538
Total Infrastructure
Revenue $ 849,272 $ 907,154 $3,422,606 $3,050,274
========== ========== ========== ==========
Service Layer Technologies:
Service Layer Technologies -
Product $ 183,835 $ 204,557 $ 697,683 $ 747,067
Service Layer Technologies -
Service 87,650 78,230 328,420 295,925
---------- ---------- ---------- ----------
Total Service Layer
Technologies Revenue $ 271,485 $ 282,787 $1,026,103 $1,042,992
========== ========== ========== ==========
---------- ---------- ---------- ----------
Total Revenue $1,120,757 $1,189,941 $4,448,709 $4,093,266
========== ========== ========== ==========
Juniper Networks, Inc.
Preliminary Net Revenues by Geographic Region
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Americas $ 521,157 $ 580,120 $2,238,049 $2,095,556
Europe, Middle East, and Africa 399,612 359,761 1,339,779 1,189,266
Asia Pacific 199,988 250,060 870,881 808,444
---------- ---------- ---------- ----------
Total $1,120,757 $1,189,941 $4,448,709 $4,093,266
========== ========== ========== ==========
Juniper Networks, Inc.
Preliminary Net Revenues by Market
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Service Provider $ 676,505 $ 783,841 $2,833,035 $2,631,486
Enterprise 444,252 406,100 1,615,674 1,461,780
---------- ---------- ---------- ----------
Total $1,120,757 $1,189,941 $4,448,709 $4,093,266
========== ========== ========== ==========
Juniper Networks, Inc.
Preliminary Share-Based Compensation by Category
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Cost of revenues - Product $ 1,219 $ 1,260 $ 4,619 $ 4,353
Cost of revenues - Service 3,626 3,632 15,736 13,523
Research and development 22,224 23,481 97,677 78,461
Sales and marketing 17,899 15,929 70,868 54,949
General and administrative 7,557 8,100 33,258 30,671
---------- ---------- ---------- ----------
Total $ 52,525 $ 52,402 $ 222,158 $ 181,957
========== ========== ========== ==========
Juniper Networks, Inc.
Preliminary Share-Based Compensation Related Payroll Tax by Category
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Cost of revenues - Product $ 2 $ 66 $ 301 $ 197
Cost of revenues - Service 4 319 942 689
Research and development 17 793 3,402 2,206
Sales and marketing 52 1,177 4,100 2,912
General and administrative 8 182 501 429
---------- ---------- ---------- ----------
Total $ 83 $ 2,537 $ 9,246 $ 6,433
========== ========== ========== ==========
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
GAAP Cost of revenues -
Product $ 310,537 $ 299,699 $1,155,283 $1,000,865
Share-based compensation
expense C (1,219) (1,260) (4,619) (4,353)
Share-based compensation
related payroll tax C (2) (66) (301) (197)
Amortization of
purchased intangible
assets A (5,693) (2,554) (21,767) (4,301)
Acquisition-related and
other charges A,B - - (2,487) -
---------- ---------- ---------- ----------
Non-GAAP Cost of
revenues - Product 303,623 295,819 1,126,109 992,014
========== ========== ========== ==========
GAAP Cost of revenues -
Service 111,285 98,241 424,836 350,654
Share-based compensation
expense C (3,626) (3,632) (15,736) (13,523)
Share-based compensation
related payroll tax C (4) (319) (942) (689)
---------- ---------- ---------- ----------
Non-GAAP Cost of
revenues - Service 107,655 94,290 408,158 336,442
========== ========== ========== ==========
GAAP Gross margin -
Product 536,924 662,510 2,322,981 2,257,786
Share-based compensation
expense C 1,219 1,260 4,619 4,353
Share-based compensation
related payroll tax C 2 66 301 197
Amortization of
purchased intangible
assets A 5,693 2,554 21,767 4,301
Acquisition-related and
other charges A,B - - 2,487 -
---------- ---------- ---------- ----------
Non-GAAP Gross margin -
Product 543,838 666,390 2,352,155 2,266,637
========== ========== ========== ==========
GAAP Product gross
margin as a % of
product revenue 63.4% 68.9% 66.8% 69.3%
Share-based compensation
expense as a % of
product revenue C 0.1% 0.1% 0.1% 0.2%
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% 0.3% 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 64.2% 69.3% 67.6% 69.6%
========== ========== ========== ==========
GAAP Gross margin -
Service 162,011 129,491 545,609 483,961
Share-based compensation
expense C 3,626 3,632 15,736 13,523
Share-based compensation
related payroll tax C 4 319 942 689
---------- ---------- ---------- ----------
Non-GAAP Gross margin -
Service $ 165,641 $ 133,442 $ 562,287 $ 498,173
========== ========== ========== ==========
GAAP Service gross
margin as a % of
service revenue 59.3% 56.9% 56.2% 58.0%
Share-based compensation
expense as a % of
service revenue C 1.3% 1.6% 1.6% 1.6%
Share-based compensation
related payroll tax as
a % of service revenue C -% 0.1% 0.1% 0.1%
---------- ---------- ---------- ----------
Non-GAAP Service gross
margin as a % of
service revenue 60.6% 58.6% 57.9% 59.7%
========== ========== ========== ==========
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
GAAP Gross margin $ 698,935 $ 792,001 $2,868,590 $2,741,747
Share-based compensation
expense C 4,845 4,892 20,355 17,876
Share-based compensation
related payroll tax C 6 385 1,243 886
Amortization of
purchased intangible
assets A 5,693 2,554 21,767 4,301
Acquisition-related and
other charges A,B - - 2,487 -
---------- ---------- ---------- ----------
Non-GAAP Gross margin 709,479 799,832 2,914,442 2,764,810
========== ========== ========== ==========
GAAP Gross margin as a %
of revenue 62.4% 66.6% 64.5% 67.0%
Share-based compensation
expense as a % of
revenue C 0.4% 0.4% 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% 0.2% 0.4% 0.1%
Acquisition-related and
other charges as a % of
revenue A,B -% -% 0.1% -%
---------- ---------- ---------- ----------
Non-GAAP Gross margin as
a % of revenue 63.3% 67.2% 65.5% 67.5%
========== ========== ========== ==========
GAAP Research and
development expense 250,465 254,942 1,026,790 917,855
Share-based compensation
expense C (22,224) (23,481) (97,677) (78,461)
Share-based compensation
related payroll tax C (17) (793) (3,402) (2,206)
---------- ---------- ---------- ----------
Non-GAAP Research and
development expense 228,224 230,668 925,711 837,188
========== ========== ========== ==========
GAAP Sales and marketing
expense 253,201 257,690 1,001,060 857,072
Share-based compensation
expense C (17,899) (15,929) (70,868) (54,949)
Share-based compensation
related payroll tax C (52) (1,177) (4,100) (2,912)
---------- ---------- ---------- ----------
Non-GAAP Sales and
marketing expense 235,250 240,584 926,092 799,211
========== ========== ========== ==========
GAAP General and
administrative expense 45,493 45,068 179,132 177,859
Share-based compensation
expense C (7,557) (8,100) (33,258) (30,671)
Share-based compensation
related payroll tax C (8) (182) (501) (429)
---------- ---------- ---------- ----------
Non-GAAP General and
administrative expense 37,928 36,786 145,373 146,759
========== ========== ========== ==========
GAAP Operating expense 565,750 565,203 2,250,066 1,974,163
Share-based compensation
expense C (47,680) (47,510) (201,803) (164,081)
Share-based compensation
related payroll tax C (77) (2,152) (8,003) (5,547)
Amortization of
purchased intangible
assets A (1,227) (972) (5,366) (4,230)
Restructuring and other
charges B (15,014) (2,255) (30,564) (10,805)
Acquisition-related and
other charges A,B (350) (4,276) (7,154) (6,342)
---------- ---------- ---------- ----------
Non-GAAP Operating
expense $ 501,402 $ 508,038 $1,997,176 $1,783,158
========== ========== ========== ==========
Juniper Networks, Inc.
Reconciliation between GAAP and non-GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
GAAP Operating income $ 133,185 $ 226,798 $ 618,524 $ 767,584
Share-based compensation
expense C 52,525 52,402 222,158 181,957
Share-based compensation
related payroll tax C 83 2,537 9,246 6,433
Amortization of
purchased intangible
assets A 6,920 3,526 27,133 8,531
Restructuring and other
charges B 15,014 2,255 30,564 10,805
Acquisition-related and
other charges A,B 350 4,276 9,641 6,342
---------- ---------- ---------- ----------
Non-GAAP Operating
income 208,077 291,794 917,266 981,652
========== ========== ========== ==========
GAAP Operating margin 11.9% 19.1% 13.9% 18.8%
Share-based compensation
expense as a % of
revenue C 4.7% 4.3% 5.0% 4.3%
Share-based compensation
related payroll tax as
a % of revenue C -% 0.2% 0.2% 0.2%
Amortization of
purchased intangible
assets as a % of
revenue A 0.7% 0.3% 0.6% 0.2%
Restructuring and other
charges as a % of
revenue B 1.3% 0.2% 0.7% 0.3%
Acquisition-related and
other charges as a % of
revenue A,B -% 0.4% 0.2% 0.2%
---------- ---------- ---------- ----------
Non-GAAP Operating
margin 18.6% 24.5% 20.6% 24.0%
========== ========== ========== ==========
GAAP Other (expense)
income, net E (10,701) 4,841 (46,808) 10,570
(Gain)/loss on equity
investments B (656) (5,421) 326 (8,653)
---------- ---------- ---------- ----------
Non-GAAP Other (expense)
income, net E (11,357) (580) (46,482) 1,917
========== ========== ========== ==========
GAAP Income tax
provision 26,321 41,556 146,704 158,781
Non-recurring income tax
adjustment B - - - 54,069
Income tax effect of
non-GAAP exclusions B 20,282 21,219 79,579 59,258
---------- ---------- ---------- ----------
Non-GAAP Provision for
income tax 46,603 62,775 226,283 272,108
========== ========== ========== ==========
Non-GAAP Income tax rate 23.7% 21.6% 26.0% 27.7%
========== ========== ========== ==========
Non-GAAP Income before
income taxes and
noncontrolling
interest* $ 196,720 $ 291,214 $ 870,784 $ 983,569
========== ========== ========== ==========
*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 Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
GAAP Net income
attributable to
Juniper Networks $ 96,163 $ 190,233 $ 425,136 $ 618,402
Share-based
compensation
expense C 52,525 52,402 222,158 181,957
Share-based
compensation
related payroll tax C 83 2,537 9,246 6,433
Amortization of
purchased
intangible assets A 6,920 3,526 27,133 8,531
Restructuring and
other charges B 15,014 2,255 30,564 10,805
Acquisition-related
and other charges A,B 350 4,276 9,641 6,342
(Gain)/loss on
equity investments B (656) (5,421) 326 (8,653)
Non-recurring income
tax adjustments B - - - (54,069)
Income tax effect of
non-GAAP exclusions B (20,282) (21,219) (79,579) (59,258)
---------- ---------- ---------- ----------
Non-GAAP Net income $ 150,117 $ 228,589 $ 644,625 $ 710,490
========== ========== ========== ==========
Non-GAAP Net income
per share:
Basic D $ 0.29 $ 0.44 $ 1.22 $ 1.36
========== ========== ========== ==========
Diluted D $ 0.28 $ 0.42 $ 1.19 $ 1.32
========== ========== ========== ==========
Shares used in
computing non-GAAP
net income per
share:
Basic D 526,124 523,556 529,768 522,444
========== ========== ========== ==========
Diluted D 533,335 541,464 541,417 538,790
========== ========== ========== ==========
GAAP Net income
attributable to
Juniper Networks as
a % of revenue 8.6% 16.0% 9.6% 15.1%
Share-based
compensation
expense as a % of
revenue C 4.7% 4.4% 5.0% 4.4%
Share-based
compensation
related payroll tax
as a % of revenue C -% 0.2% 0.2% 0.2%
Amortization of
purchased
intangible assets
as a % of revenue A 0.7% 0.3% 0.6% 0.2%
Restructuring and
other charges as a
% of revenue B 1.3% 0.2% 0.7% 0.3%
Acquisition-related
and other charges
as a % of revenue A,B -% 0.4% 0.2% 0.2%
(Gain)/loss on
equity investments B (0.1)% (0.5)% -% (0.2)%
Non-recurring income
tax adjustments as
a % of revenue B -% -% -% (1.3)%
Income tax effect of
non-GAAP exclusions
as a % of revenue B (1.8)% (1.8)% (1.8)% (1.5)%
---------- ---------- ---------- ----------
Non-GAAP Net income
as a % of revenue 13.4% 19.2% 14.5% 17.4%
========== ========== ========== ==========
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; other income and expense, net; 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. 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 common stock 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)
December 31, December 31,
2011 2010
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ASSETS
Current assets:
Cash and cash equivalents $ 2,910,420 $ 1,811,887
Short-term investments 641,323 474,514
Accounts receivable, net of allowances 577,386 596,622
Deferred tax assets, net 154,310 161,535
Prepaid expenses and other current assets 156,222 169,812
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Total current assets 4,439,661 3,214,370
Property and equipment, net 598,581 493,881
Long-term investments 740,659 535,178
Restricted cash 78,307 119,346
Purchased intangible assets, net 123,114 121,803
Goodwill 3,928,144 3,927,807
Other long-term assets 75,354 55,466
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Total assets $ 9,983,820 $ 8,467,851
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LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 324,843 $ 292,270
Accrued compensation 223,018 256,746
Deferred revenue 712,663 660,264
Other accrued liabilities 206,179 262,696
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Total current liabilities 1,466,703 1,471,976
Long-term debt 999,034 --
Long-term deferred revenue 254,364 224,165
Long-term income tax payable 108,471 103,823
Other long-term liabilities 65,590 59,087
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Total liabilities 2,894,162 1,859,051
Total equity 7,089,658 6,608,800
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Total liabilities and equity $ 9,983,820 $ 8,467,851
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Juniper Networks, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Years Ended December 31,
-------------------------
2011 2010
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Cash flows from operating activities:
Consolidated net income $ 425,012 $ 619,373
Adjustments to reconcile consolidated net income
to net cash from operating activities:
Depreciation and amortization 170,038 155,288
Non-cash portion of share-based compensation 217,761 177,825
Loss/(gain) on equity investments 326 (8,653)
Deferred income taxes 7,225 64,035
Excess tax benefits from share-based
compensation (44,961) (48,500)
Other charges 13,462 --
Changes in operating assets and liabilities:
Accounts receivable, net 18,633 (129,199)
Prepaid expenses and other assets 28,488 (129,292)
Accounts payable 33,871 48,217
Accrued compensation (32,228) 78,071
Accrued litigation settlements -- (169,330)
Other accrued liabilities 66,852 26,606
Deferred revenue 82,247 127,894
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Net cash provided by operating activities 986,726 812,335
Cash flows from investing activities:
Purchases of property and equipment, net (266,314) (185,291)
Purchases of trading investments (5,214) (2,754)
Purchases of available-for-sale investments (2,297,363) (1,577,758)
Proceeds from sales of available-for-sale
investments 1,281,236 537,916
Proceeds from maturities of available-for-sale
investments 645,362 1,086,514
Payment for business acquisition, net of cash and
cash equivalents acquired (30,720) (374,765)
Changes in restricted cash (1,174) (12,424)
Purchases of privately-held and other equity
investments, net (33,051) (4,188)
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Net cash used in investing activities (707,238) (532,750)
Cash flows from financing activities:
Proceeds from issuance of common stock 346,951 451,039
Purchases and retirement of common stock (548,590) (565,473)
Issuance of long-term debt, net 991,556 --
Change in customer financing arrangements (15,833) (3,487)
Excess tax benefits from share-based compensation 44,961 48,500
Return of capital to noncontrolling interest -- (3,000)
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Net cash provided by (used in) financing
activities 819,045 (72,421)
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Net increase in cash and cash equivalents 1,098,533 207,164
Cash and cash equivalents at beginning of period 1,811,887 1,604,723
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Cash and cash equivalents at end of period $ 2,910,420 $ 1,811,887
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Juniper Networks, Inc.
Cash, Cash Equivalents, and Investments
(in thousands)
(unaudited)
December 31, December 31,
2011 2010
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Cash and cash equivalents $ 2,910,420 $ 1,811,887
Short-term investments 641,323 474,514
Long-term investments 740,659 535,178
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Total $ 4,292,402 $ 2,821,579
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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
SOURCE: Juniper Networks
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