Juniper 10Q Master 03/31/13

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_________ to_________

Commission file number: 001-34501

JUNIPER NETWORKS, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
77-0422528
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1194 North Mathilda Avenue
 
 
Sunnyvale, California
 
94089
(Address of principal executive offices)
 
(Zip code)
(408) 745-2000
(Registrant's telephone number, including area code)
_________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days. Yes x No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
There were 506,253,607 shares of the Company's Common Stock, par value $0.00001, outstanding as of May 3, 2013.

 


Juniper Networks, Inc.
Table of Contents
 
 

 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 


2
Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Juniper Networks, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
Net revenues:
 
 
 
Product
$
781.8

 
$
771.9

Service
277.4

 
260.6

Total net revenues
1,059.2

 
1,032.5

Cost of revenues:
 
 
 
Product
278.2

 
280.6

Service
110.2

 
117.8

Total cost of revenues
388.4

 
398.4

Gross margin
670.8

 
634.1

Operating expenses:
 
 
 
Research and development
262.2

 
269.6

Sales and marketing
255.2

 
257.7

General and administrative
47.8

 
54.7

Amortization of purchased intangible assets
1.2

 
1.2

Restructuring charges
7.0

 
2.0

Acquisition and litigation charges
10.4

 
1.2

Total operating expenses
583.8

 
586.4

Operating income
87.0

 
47.7

Other expense, net
(10.1
)
 
(24.4
)
Income before income taxes
76.9

 
23.3

Income tax (benefit) provision
(14.1
)
 
7.0

Net income
$
91.0

 
$
16.3

 
 
 
 
Net income per share:
 
 
 
Basic
$
0.18

 
$
0.03

Diluted
$
0.18

 
$
0.03

Shares used in computing net income per share:
 
 
 
Basic
504.7

 
527.2

Diluted
512.7

 
533.7


See accompanying Notes to Condensed Consolidated Financial Statements


3
Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
Net income
$
91.0

 
$
16.3

Other comprehensive (loss) income, net of tax:
 
 
 
Available-for-sale securities:
 
 
 
Change in unrealized (losses) gains on available-for-sale securities
(0.2
)
 
3.1

Reclassification adjustment for realized net gains on available-for-sale
  securities included in net income
(0.4
)
 
(0.3
)
Net change in unrealized (losses) gains on available-for-sale securities
(0.6
)
 
2.8

Cash flow hedges:
 
 
 
Change in unrealized (losses) gains on cash flow hedges
(2.1
)
 
6.0

Reclassification adjustment for realized (gains) losses on cash flow hedges included
  in net income
(1.4
)
 
3.5

Net change in unrealized (losses) gains on cash flow hedges
(3.5
)
 
9.5

Change in foreign currency translation adjustments
(5.8
)
 
4.6

Other comprehensive (loss) income, net of tax
(9.9
)
 
16.9

Comprehensive income
$
81.1

 
$
33.2



See accompanying Notes to Condensed Consolidated Financial Statements


4
Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Balance Sheets
(In millions, except par values)
 
March 31,
2013
 
December 31,
2012
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,043.7

 
$
2,407.8

Short-term investments
613.1

 
441.5

Accounts receivable, net of allowances
532.6

 
438.4

Deferred tax assets, net
151.4

 
172.6

Prepaid expenses and other current assets
199.2

 
140.4

Total current assets
3,540.0

 
3,600.7

Property and equipment, net
839.0

 
811.9

Long-term investments
1,015.2

 
988.1

Restricted cash and investments
94.4

 
106.4

Purchased intangible assets, net
131.2

 
128.9

Goodwill
4,057.8

 
4,057.8

Other long-term assets
152.8

 
138.3

Total assets
$
9,830.4

 
$
9,832.1

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
223.8

 
$
209.3

Accrued compensation
204.5

 
279.3

Accrued warranty
29.4

 
29.7

Deferred revenue
774.7

 
693.5

Other accrued liabilities
191.3

 
210.2

Total current liabilities
1,423.7

 
1,422.0

Long-term debt
999.2

 
999.2

Long-term deferred revenue
206.0

 
229.9

Long-term income taxes payable
87.1

 
112.4

Other long-term liabilities
58.0

 
69.1

Total liabilities
2,774.0

 
2,832.6

Commitments and contingencies


 


Juniper Networks stockholders' equity:
 
 
 
Convertible preferred stock, $0.00001 par value; 10.0 shares authorized; none
   issued and outstanding
—

 
—

Common stock, $0.00001 par value; 1,000.0 shares authorized; 510.9 shares and
   508.4 shares issued and outstanding as of March 31, 2013 and December 31, 2012,
   respectively
—

 
—

Additional paid-in capital
9,923.1

 
9,905.7

Accumulated other comprehensive (loss) income
(5.2
)
 
4.7

Accumulated deficit
(2,862.0
)
 
(2,911.4
)
Total Juniper Networks stockholders' equity
7,055.9

 
6,999.0

Noncontrolling interest
0.5

 
0.5

Total stockholders' equity
7,056.4

 
6,999.5

Total liabilities and stockholders' equity
$
9,830.4

 
$
9,832.1


See accompanying Notes to Condensed Consolidated Financial Statements


5
Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
91.0

 
$
16.3

Adjustments to reconcile net income to net cash (used in) provided by operating
   activities:
 
 
 
Share-based compensation
49.9

 
65.0

Depreciation and amortization
51.6

 
43.4

Restructuring charges
7.7

 
2.0

Deferred income taxes
15.7

 
(13.9
)
(Gain) loss on investments, net
(2.3
)
 
14.0

Excess tax benefits from share-based compensation
(1.1
)
 
(4.3
)
Other non-cash charges
0.3

 
0.2

Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable, net
(94.3
)
 
126.5

Prepaid expenses and other assets
(53.6
)
 
(22.3
)
Accounts payable
9.1

 
(126.8
)
Accrued compensation
(75.2
)
 
(15.4
)
Income taxes payable
(38.4
)
 
(3.8
)
Other accrued liabilities
(26.5
)
 
(11.2
)
Deferred revenue
57.2

 
32.6

Net cash (used in) provided by operating activities
(8.9
)
 
102.3

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(71.5
)
 
(82.0
)
Purchases of trading investments
(1.5
)
 
(2.7
)
Purchases of available-for-sale investments
(582.2
)
 
(371.2
)
Proceeds from sales of available-for-sale investments
331.8

 
231.4

Proceeds from maturities of available-for-sale investments
54.0

 
222.8

Payments for business acquisitions, net of cash and cash equivalents acquired
(10.0
)
 
(90.5
)
Proceeds from sales of privately-held investments
1.6

 
—

Purchases of privately-held investments
(7.3
)
 
(1.1
)
Net cash used in investing activities
(285.1
)
 
(93.3
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock
65.0

 
37.8

Purchases and retirement of common stock
(132.5
)
 
(56.1
)
Payment for capital lease obligation
(1.4
)
 
—

Change in customer financing arrangements
(2.3
)
 
7.7

Excess tax benefits from share-based compensation
1.1

 
4.3

Net cash used in financing activities
(70.1
)
 
(6.3
)
Net (decrease) increase in cash and cash equivalents
(364.1
)
 
2.7

Cash and cash equivalents at beginning of period
2,407.8

 
2,910.4

Cash and cash equivalents at end of period
$
2,043.7

 
$
2,913.1


See accompanying Notes to Condensed Consolidated Financial Statements


6
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of Juniper Networks, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of December 31, 2012, is derived from the audited Consolidated Financial Statements for the year ended December 31, 2012. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or any future period. The information included in this Quarterly Report on Form 10-Q ("Report") should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. Certain amounts in the prior year Condensed Consolidated Financial Statements have been reclassified to conform to the current year presentation.

The preparation of the financial statements and related disclosures in accordance with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying notes. Actual results could differ materially from those estimates under different assumptions or conditions.

In the first quarter of 2013, the Company consolidated operational oversight and management of all security products within the Software Solutions Division ("SSD") segment. As a result of this product realignment, security products previously reported in the Platform Systems Division ("PSD") segment (including the Branch SRX, Branch Firewall, and J Series product families) are now reported in the SSD segment. The Company reclassified the segment data for the prior period to conform to the current period's presentation. This change did not impact previously reported consolidated net revenues, operating income, net income, and net income per share. See Note 13, Segments, for further discussion of the Company's product realignment.

The Company previously owned a 60 percent interest in a joint venture with Nokia Siemens Networks B.V. (“NSN”). Given the Company's majority ownership interest in the joint venture, the accounts of the joint venture were consolidated with the accounts of the Company, and a noncontrolling interest was recorded for the noncontrolling investor's interests in the net assets and operations of the joint venture. In July 2011, NSN and the Company entered into an agreement to cease operation of and dissolve the joint venture and subsequently NSN assumed the activities of the joint venture.

Note 2. Summary of Significant Accounting Policies

There have been no material changes to the Company's significant accounting policies as compared to the accounting policies described in Note 2, Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2012.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-02, Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"), which amends FASB Accounting Standards Codification ("ASC") 220, Comprehensive Income to include the reporting of reclassifications from accumulated other comprehensive income to the respective line items in net income. The Company adopted ASU 2013-02 in the first quarter of 2013 and presented the effects within the Condensed Consolidated Statements of Comprehensive Income and the accompanying notes.

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210)—Disclosures About Offsetting Assets and Liabilities ("ASU 2011-11"), and in January 2013 issued ASU No. 2013-01, Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities ("ASU 2013-01"). These standards create new disclosure requirements regarding the nature of an entity's rights of setoff and related arrangements associated with its derivative instruments, repurchase agreements, and securities lending transactions. Disclosures of certain instruments subject to enforceable master netting arrangements would be required, irrespective of whether the entity has elected to offset those instruments in the

7

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

statement of financial position. The Company adopted these standards during the first quarter of 2013 and presented the effects in the accompanying notes.

Note 3. Business Combinations

During the three months ended March 31, 2013, the Company completed a business combination for approximately $10.0 million in cash consideration, of which $0.1 million was allocated to net tangible assets acquired and $9.9 million to intangible assets. The Company's consolidated financial statements include the operating results of this business combination from the date of acquisition, and the inclusion of those results were not material to its consolidated balance sheets and results of operations.

The Company recognized $0.1 million and $1.2 million of acquisition-related costs during the three months March 31, 2013 and 2012, respectively. These acquisition-related charges were expensed in the period incurred and reported as a component of acquisition and litigation charges in the Company's Condensed Consolidated Statements of Operations.


8
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Note 4. Cash Equivalents and Investments

Investments in Available-for-Sale and Trading Securities

The following tables summarize the Company's unrealized gains and losses and fair value of investments designated as available-for-sale and trading securities as of March 31, 2013 and December 31, 2012 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
As of March 31, 2013
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Certificate of deposit
$
0.3

 
$
—

 
$
—

 
$
0.3

Money market funds
749.6

 
—

 
—

 
749.6

U.S. government securities
6.0

 
—

 
—

 
6.0

Total cash equivalents
755.9

 
—

 
—

 
755.9

Restricted investments:
 
 
 
 
 
 
 
Money market funds
89.5

 
—

 
—

 
89.5

Mutual funds
2.9

 
0.1

 
—

 
3.0

Total restricted investments
92.4

 
0.1

 
—

 
92.5

Fixed income securities:
 
 
 
 
 
 
 
Asset-backed securities
234.7

 
0.2

 
(0.1
)
 
234.8

Certificates of deposit
44.7

 
—

 
—

 
44.7

Corporate debt securities
614.0

 
2.0

 
(0.3
)
 
615.7

Foreign government debt securities
15.8

 
—

 
—

 
15.8

Government-sponsored enterprise obligations
270.4

 
0.2

 
—

 
270.6

U.S. government securities
430.1

 
0.2

 
—

 
430.3

Total fixed income securities
1,609.7

 
2.6

 
(0.4
)
 
1,611.9

Publicly-traded equity securities
2.9

 
—

 
(0.3
)
 
2.6

Total available-for-sale securities
2,460.9

 
2.7

 
(0.7
)
 
2,462.9

Trading securities in mutual funds(*)
13.8

 
—

 
—

 
13.8

Total
$
2,474.7

 
$
2.7

 
$
(0.7
)
 
$
2,476.7

 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
Cash equivalents
$
755.9

 
$
—

 
$
—

 
$
755.9

Restricted investments
92.4

 
0.1

 
—

 
92.5

Short-term investments
613.0

 
0.4

 
(0.3
)
 
613.1

Long-term investments
1,013.4

 
2.2

 
(0.4
)
 
1,015.2

Total
$
2,474.7

 
$
2.7

 
$
(0.7
)
 
$
2,476.7

________________________________
(*) 
Balance includes the Company's non-qualified deferred compensation plan assets.

9
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
As of December 31, 2012
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Certificate of deposit
$
0.6

 
$
—

 
$
—

 
$
0.6

Commercial paper
10.8

 
—

 
—

 
10.8

Government-sponsored enterprise obligations
6.1

 
—

 
—

 
6.1

Money market funds
1,042.6

 
—

 
—

 
1,042.6

U.S. government securities
165.8

 
—

 
—

 
165.8

Total cash equivalents
1,225.9

 
—

 
—

 
1,225.9

Restricted investments:
 
 
 
 
 
 
 
Money market funds
102.6

 
—

 
—

 
102.6

Mutual funds
2.9

 
0.1

 
—

 
3.0

Total restricted investments
105.5

 
0.1

 
—

 
105.6

Fixed income securities:
 
 
 
 
 
 
 
Asset-backed securities
226.2

 
0.3

 
(0.1
)
 
226.4

Certificates of deposit
41.9

 
—

 
—

 
41.9

Commercial paper
11.6

 
—

 
—

 
11.6

Corporate debt securities
533.4

 
2.3

 
(0.1
)
 
535.6

Foreign government debt securities
5.0

 
—

 
—

 
5.0

Government-sponsored enterprise obligations
264.6

 
0.3

 
—

 
264.9

U.S. government securities
328.6

 
0.1

 
—

 
328.7

Total fixed income securities
1,411.3

 
3.0

 
(0.2
)
 
1,414.1

Publicly-traded equity securities
3.0

 
—

 
(0.1
)
 
2.9

Total available-for-sale securities
2,745.7

 
3.1

 
(0.3
)
 
2,748.5

Trading securities in mutual funds(*)
12.6

 
—

 
—

 
12.6

Total
$
2,758.3

 
$
3.1

 
$
(0.3
)
 
$
2,761.1

 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
Cash equivalents
$
1,225.9

 
$
—

 
$
—

 
$
1,225.9

Restricted investments
105.5

 
0.1

 
—

 
105.6

Short-term investments
441.3

 
0.3

 
(0.1
)
 
441.5

Long-term investments
985.6

 
2.7

 
(0.2
)
 
988.1

Total
$
2,758.3

 
$
3.1

 
$
(0.3
)
 
$
2,761.1


________________________________
(*) 
Balance includes the Company's non-qualified deferred compensation plan assets.

The following table presents the maturities of the Company's total fixed income securities as of March 31, 2013 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
Due within one year
$
596.3

 
$
0.4

 
$
—

 
$
596.7

Due between one and five years
1,013.4

 
2.2

 
(0.4
)
 
1,015.2

Total
$
1,609.7

 
$
2.6

 
$
(0.4
)
 
$
1,611.9


The Company had 134 and 98 investments in unrealized loss positions as of March 31, 2013 and December 31, 2012, respectively. The gross unrealized losses related to these investments were primarily due to changes in market interest rates and stock prices. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company aggregates its investments by category and length of time the securities have been in a continuous

10
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

unrealized loss position to facilitate its evaluation. For the available-for-sale debt securities that have unrealized losses, the Company evaluates whether it (i) does not intend to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. For available-for-sale equity securities that have unrealized losses, the Company evaluates whether there is an indication of other-than-temporary impairments. This determination is based on several factors, including the financial condition and near-term prospects of the issuer and the Company's intent and ability to hold the publicly-traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value. During the three months ended March 31, 2013 and 2012, the Company did not recognize other-than-temporary impairments associated with these investments.

There were no material gross realized gains or losses from available-for-sale and trading securities during the three months ended March 31, 2013 and 2012. Realized gains and losses are determined based on the specific identification method.

The following tables present the Company's available-for-sale investments that were in an unrealized loss position as of March 31, 2013 and December 31, 2012 (in millions):
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
As of March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
$
112.5

 
$
(0.1
)
 
$
—

 
$
—

 
$
112.5

 
$
(0.1
)
Corporate debt securities
180.8

 
(0.3
)
 
—

 
—

 
180.8

 
(0.3
)
Foreign government debt securities
15.1

 
—

 
—

 
—

 
15.1

 
—

Government-sponsored enterprise obligations
85.3

 
—

 
—

 
—

 
85.3

 
—

U.S. government securities
10.0

 
—

 
—

 
—

 
10.0

 
—

Total fixed income securities
403.7

 
(0.4
)
 
—

 
—

 
403.7

 
(0.4
)
Publicly-traded equity securities
2.6

 
(0.3
)
 
—

 
—

 
2.6

 
(0.3
)
Total available-for sale securities
$
406.3

 
$
(0.7
)
 
$
—

 
$
—

 
$
406.3

 
$
(0.7
)

 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
As of December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities(*)
$
55.1

 
$
(0.1
)
 
$
0.1

 
$
—

 
$
55.2

 
$
(0.1
)
Certificates of deposit
0.3

 
—

 
—

 
—

 
0.3

 
—

Commercial paper
10.0

 
—

 
—

 
—

 
10.0

 
—

Corporate debt securities
116.0

 
(0.1
)
 
—

 
—

 
116.0

 
(0.1
)
Government-sponsored enterprise obligations
30.0

 
—

 
—

 
—

 
30.0

 
—

U.S. government securities
68.2

 
—

 
—

 
—

 
68.2

 
—

Total fixed income securities
279.6

 
(0.2
)
 
0.1

 
—

 
279.7

 
(0.2
)
Publicly-traded equity securities
2.9

 
(0.1
)
 
—

 
—

 
2.9

 
(0.1
)
Total available-for sale securities
$
282.5

 
$
(0.3
)
 
$
0.1

 
$
—

 
$
282.6

 
$
(0.3
)
 ________________________________
(*) Balance greater than 12 months includes investments that were in an immaterial unrealized loss position as of December 31, 2012.

11
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Restricted Cash and Investments

The Company classifies cash and investments designated as available-for-sale securities as restricted cash and investments on its Condensed Consolidated Balance Sheets for: (i) amounts held in escrow accounts, as required by certain acquisitions completed between 2005 and 2013; (ii) the India Gratuity Trust and Israel Retirement Trust, which cover statutory severance obligations in the event of termination of any of the Company's India and Israel employees, respectively; and (iii) the Directors and Officers ("D&O") indemnification trust.

The following table summarizes the Company's cash and investments that are classified as restricted cash and investments in the Condensed Consolidated Balance Sheets (in millions):
 
As of
 
March 31,
2013
 
December 31,
2012
Restricted cash
$
1.9

 
$
0.8

Restricted investments
92.5

 
105.6

  Total restricted cash and investments
$
94.4

 
$
106.4


Privately-Held Investments

As of March 31, 2013 and December 31, 2012, the carrying values of the Company’s privately-held investments of $39.2 million and $32.0 million, respectively, were included in other long-term assets in the Condensed Consolidated Balance Sheets.

The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis.

During the three months ended March 31, 2012, the Company determined that certain privately-held investment were other-than-temporarily impaired, which resulted in impairment charges of $14.0 million and were recorded within other expense, net in the Condensed Consolidated Statements of Operations. There were no such charges during the three months ended March 31, 2013.


12
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Note 5. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables provide a summary of assets and liabilities measured at fair value on a recurring basis and as reported in the Condensed Consolidated Balance Sheets (in millions):
 
Fair Value Measurements at March 31, 2013 Using:
 
 
 
Quoted Prices in
Active Markets For
Identical Assets
 
Significant Other
Observable
Remaining Inputs
 
Significant Other
Unobservable
Remaining Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets measured at fair value:
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Asset-backed securities
$
—

 
$
234.8

 
$
—

 
$
234.8

Certificate of deposit
—

 
45.0

 
—

 
45.0

Corporate debt securities
—

 
615.7

 
—

 
615.7

Foreign government debt securities
—

 
15.8

 
—

 
15.8

Government-sponsored enterprise obligations
265.6

 
5.0

 
—

 
270.6

Money market funds (1)
839.1

 
—

 
—

 
839.1

Mutual funds (2)
3.0

 
—

 
—

 
3.0

Publicly-traded equity securities
2.6

 
—

 
—

 
2.6

U.S. government securities
237.2

 
199.1

 
—

 
436.3

Total available-for-sale securities
1,347.5

 
1,115.4

 
—

 
2,462.9

Trading securities in mutual funds (3)
13.8

 
—

 
—

 
13.8

Derivative assets:
 
 
 
 
 
 
 
Foreign exchange contracts
—

 
1.6

 
—

 
1.6

Total assets measured at fair value
$
1,361.3

 
$
1,117.0

 
$
—

 
$
2,478.3

Liabilities measured at fair value:
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
Foreign exchange contracts
$
—

 
$
1.1

 
$
—

 
$
1.1

Total liabilities measured at fair value
$
—

 
$
1.1

 
$
—

 
$
1.1

 
 
 
 
 
 
 
 
Total assets measured at fair value, reported as:
 
 
 
 
 
 
 
Cash equivalents
$
749.6

 
$
6.3

 
$
—

 
$
755.9

Restricted investments
92.5

 
—

 
—

 
92.5

Short-term investments
262.5

 
350.6

 
—

 
613.1

Long-term investments
256.7

 
758.5

 
—

 
1,015.2

Prepaid expenses and other current assets
—

 
1.6

 
—

 
1.6

Total assets measured at fair value
$
1,361.3

 
$
1,117.0

 
$
—

 
$
2,478.3

 
 
 
 
 
 
 
 
Total liabilities measured at fair value, reported as:
 
 
 
 
 
 
 
Other accrued liabilities
$
—

 
$
1.1

 
$
—

 
$
1.1

Total liabilities measured at fair value
$
—

 
$
1.1

 
$
—

 
$
1.1

________________________________
(1) 
Balance includes $89.5 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisition-related escrows.
(2) 
Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) 
Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.

13
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

 
Fair Value Measurements at December 31, 2012 Using:
 
 
 
Quoted Prices in
Active Markets For
Identical Assets
 
Significant Other
Observable
Remaining Inputs
 
Significant Other
Unobservable
Remaining Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets measured at fair value:
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Asset-backed securities
$
—

 
$
226.4

 
$
—

 
$
226.4

Certificate of deposit
—

 
42.5

 
—

 
42.5

Commercial paper
—

 
22.4

 
—

 
22.4

Corporate debt securities
—

 
535.6

 
—

 
535.6

Foreign government debt securities
—

 
5.0

 
—

 
5.0

Government-sponsored enterprise obligations
254.9

 
16.1

 
—

 
271.0

Money market funds (1)
1,145.2

 
—

 
—

 
1,145.2

Mutual funds (2)
1.0

 
2.0

 
—

 
3.0

Publicly-traded equity securities
2.9

 
—

 
—

 
2.9

U.S. government securities
275.9

 
218.6

 
—

 
494.5

Total available-for-sale securities
1,679.9

 
1,068.6

 
—

 
2,748.5

Trading securities in mutual funds (3)
12.6

 
—

 
—

 
12.6

Derivative assets:
 
 
 
 
 
 
 
Foreign exchange contracts
—

 
3.5

 
—

 
3.5

Total assets measured at fair value
$
1,692.5

 
$
1,072.1

 
$
—

 
$
2,764.6

Liabilities measured at fair value:
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
Foreign exchange contracts
$
—

 
$
0.1

 
$
—

 
$
0.1

Total liabilities measured at fair value
$
—

 
$
0.1

 
$
—

 
$
0.1

 
 
 
 
 
 
 
 
Total assets measured at fair value, reported as:
 
 
 
 
 
 
 
Cash equivalents
$
1,048.7

 
$
177.2

 
$
—

 
$
1,225.9

Restricted investments
103.6

 
2.0

 
—

 
105.6

Short-term investments
224.4

 
217.1

 
—

 
441.5

Long-term investments
315.8

 
672.3

 
—

 
988.1

Prepaid expenses and other current assets
—

 
3.5

 
—

 
3.5

Total assets measured at fair value
$
1,692.5

 
$
1,072.1

 
$
—

 
$
2,764.6

 
 
 
 
 
 
 
 
Total liabilities measured at fair value, reported as:
 
 
 
 
 
 
 
Other accrued liabilities
$
—

 
$
0.1

 
$
—

 
$
0.1

Total liabilities measured at fair value
$
—

 
$
0.1

 
$
—

 
$
0.1

________________________________
(1) 
Balance includes $102.6 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisition-related escrows.
(2) 
Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) 
Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.

The Company's Level 2 available-for-sale fixed income securities are priced using quoted market prices for similar instruments or non-binding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, or alternative pricing sources with reasonable levels of price transparency which

14
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets. The Company's policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the three months ended March 31, 2013 and March 31, 2012, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain of the Company's assets, including intangible assets, goodwill, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. As of March 31, 2013 and December 31, 2012, the Company had no assets or liabilities measured at fair value on a nonrecurring basis.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of the Company's accounts receivable, financing receivables, accounts payable, and other accrued liabilities approximate fair value due to their short maturities. The fair value of the Company’s long-term debt is disclosed in Note 10, Long-Term Debt and Financing, and was determined using quoted market prices (Level 1).

Note 6. Derivative Instruments

The Company uses derivatives to partially offset its market exposure to fluctuations in certain foreign currencies and does not enter into derivatives for speculative or trading purposes.

The notional amount of Company's foreign currency derivatives are summarized as follows (in millions):
 
As of
 
March 31,
2013
 
December 31,
2012
Cash flow hedges
$
67.6

 
$
85.8

Non-designated derivatives
114.4

 
112.8

     Total
$
182.0

 
$
198.6


Cash Flow Hedges

The Company can use foreign currency forward or option contracts to hedge certain forecasted foreign currency transactions relating to cost of services and operating expenses. The derivatives are intended to hedge the U.S. Dollar equivalent of the Company's planned cost of services and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges. Execution of these cash flow hedge derivatives typically occurs every month with maturities of one year or less. The effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive (loss) income, and upon occurrence of the forecasted transaction, is subsequently reclassified into the cost of services or operating expense line item to which the hedged transaction relates. The Company records any ineffectiveness of the hedging instruments in other expense, net in its Condensed Consolidated Statements of Operations. Cash flows from such hedges are classified as operating activities. All amounts within other comprehensive income are expected to be reclassified into earnings within the next 12 months.

As of March 31, 2013 and December 31, 2012, the total fair value of the Company’s derivative assets recorded in other current assets on the Condensed Consolidated Balance Sheets was $1.6 million and $3.5 million, respectively. As of March 31, 2013 and December 31, 2012, the total fair value of the Company’s derivative liabilities recorded in other accrued liabilities on the Condensed Consolidated Balance Sheets was $1.1 million and $0.1 million, respectively.

During the three months ended March 31, 2013 and March 31, 2012, the Company recognized a loss of $2.1 million and a gain of $6.0 million, respectively, in accumulated other comprehensive (loss) income for the effective portion of its derivative instruments and reclassified a gain of $1.4 million and a loss of $3.5 million, respectively, from other comprehensive income to operating expense in the Condensed Consolidated Statements of Operations.

15
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

The ineffective portion of the Company's derivative instruments recognized in its Condensed Consolidated Statements of Operations was not material during the three months ended March 31, 2013 and March 31, 2012.

Non-Designated Derivatives

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in other expense, net in the Condensed Consolidated Statements of Operations. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have maturities within two months.

The Company recognized a net loss of $0.7 million and $0.1 million, during the three months ended March 31, 2013 and March 31, 2012, respectively, on non-designated derivative instruments within other expense, net, in its Condensed Consolidated Statements of Operations.

Offsetting of Derivatives

The Company presents its derivative assets and derivative liabilities on a gross basis in the Condensed Consolidated Balance Sheets. However, under master netting agreements with certain counterparties of foreign exchange contracts, subject to applicable requirements, the Company is allowed to net settle transactions on the same date in the same currency, with a single net amount payable by one party to the other. As of March 31, 2013 and December 31, 2012, the potential effect of rights of setoff associated with derivative instruments would be an offset to both assets and liabilities of $0.2 million and $0.1 million, respectively. The resulting net derivative assets and derivative liabilities of the potential offset impact are $1.4 million and $0.9 million as of March 31, 2013, respectively. The resulting net derivative assets are $3.4 million and not material for derivative liabilities as of December 31, 2012. The Company is not required to pledge nor is it entitled to receive cash collateral related to these derivative transactions.

Note 7. Goodwill and Purchased Intangible Assets

Goodwill
The following table presents the goodwill activity allocated to the Company's reportable segments during the three months ended March 31, 2013 (in millions):
 
PSD
 
SSD
 
Total
Balance as of December 31, 2012
$
1,866.3

 
$
2,191.5

 
$
4,057.8

Reclassifications
(179.0
)
 
179.0

 
—

Balance as of March 31, 2013
$
1,687.3

 
$
2,370.5

 
$
4,057.8


Goodwill associated with security products previously reported under PSD has been reclassified to SSD in connection with the Company's product realignment of all security products within SSD from PSD. See Note 13, Segments, for further discussion of the Company's product realignment. Goodwill was reclassified based on the relative fair value allocation of the reporting units affected. There were no impairments to goodwill during the three months ended March 31, 2013 and March 31, 2012.




16

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Purchased Intangible Assets

The Company’s purchased intangible assets were as follows (in millions):
 
Gross
 
Accumulated
Amortization
 
Impairments and
Other Charges
 
Net
As of March 31, 2013
 
 
 
 
 
 
 
Intangible assets with finite lives:
 
 
 
 
 
 
 
Technologies and patents
$
564.0

 
$
(431.7
)
 
$
(30.5
)
 
$
101.8

Customer contracts, support agreements, and
  related relationships
74.3

 
(60.1
)
 
(2.2
)
 
12.0

Other
18.8

 
(18.8
)
 
—

 
—

Total intangible assets with finite lives
657.1

 
(510.6
)
 
(32.7
)
 
113.8

IPR&D with indefinite lives
17.4

 
—

 
—

 
17.4

Total purchased intangible assets
$
674.5

 
$
(510.6
)
 
$
(32.7
)
 
$
131.2

 
 
 
 
 
 
 
 
As of December 31, 2012
 
 
 
 
 
 
 
Intangible assets with finite lives:
 
 
 
 
 
 
 
Technologies and patents
$
554.1

 
$
(425.0
)
 
$
(30.5
)
 
$
98.6

Customer contracts, support agreements, and
  related relationships
74.3

 
(59.2
)
 
(2.2
)
 
12.9

Other
18.8

 
(18.8
)
 
—

 
—

Total intangible assets with finite lives
647.2

 
(503.0
)
 
(32.7
)
 
111.5

IPR&D with indefinite lives
17.4

 
—

 
—

 
17.4

Total purchased intangible assets
$
664.6

 
$
(503.0
)
 
$
(32.7
)
 
$
128.9


The purchased intangible assets balance as of March 31, 2013, includes intangible assets acquired through the acquisition completed during the first quarter of 2013. Refer to Note 3, Business Combinations, for further details.

Amortization of purchased intangible assets included in operating expenses and cost of product revenues totaled $7.5 million and $7.3 million for the three months ended March 31, 2013 and March 31, 2012, respectively. There were no impairment charges with respect to the purchased intangible assets during the three months ended March 31, 2013 and March 31, 2012.

As of March 31, 2013, the estimated future amortization expense of purchased intangible assets with finite lives is as follows (in millions):
Years Ending December 31,
Amount
Remainder of 2013
$
22.9

2014
30.4

2015
26.8

2016
14.2

2017
10.5

Thereafter
9.0

Total
$
113.8



17

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Note 8. Other Financial Information

Inventories, Net

The Company purchases and holds inventory to provide adequate component supplies over the life of the underlying products. The majority of the Company's inventory is production components. Inventories, net are reported within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets and consisted of the following (in millions):
 
As of
 
March 31,
2013
 
December 31,
2012
Inventories, net:
 
 
 
Production materials
$
50.1

 
$
54.6

Finished goods
4.0

 
4.1

Total inventories, net
$
54.1

 
$
58.7


Warranties
The Company accrues for warranty costs as part of its cost of sales based on associated material costs, labor costs for customer support, and overhead at the time revenue is recognized. This provision is reported as accrued warranty within current liabilities on the Condensed Consolidated Balance Sheets. Changes in the Company’s warranty reserve during the three months ended March 31, 2013 were as follows (in millions):
Balance as of December 31, 2012
$
29.7

Provisions made during the period, net
7.3

Change in estimate
(0.3
)
Actual costs incurred during the period
(7.3
)
Balance as of March 31, 2013
$
29.4


Deferred Revenue

Details of the Company's deferred revenue, as reported on the Condensed Consolidated Balance Sheets, were as follows (in millions):
 
As of
 
March 31,
2013
 
December 31,
2012
Deferred product revenue:
 
 
 
Undelivered product commitments and other product deferrals
$
250.5

 
$
256.9

Distributor inventory and other sell-through items
122.7

 
138.4

Deferred gross product revenue
373.2

 
395.3

Deferred cost of product revenue
(86.4
)
 
(99.4
)
Deferred product revenue, net
286.8

 
295.9

Deferred service revenue
693.9

 
627.5

Total
$
980.7

 
$
923.4

Reported as:
 
 
 
Current
$
774.7

 
$
693.5

Long-term
206.0

 
229.9

Total
$
980.7

 
$
923.4


18

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not sold through to end-users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. Deferred product revenue is recorded net of the related costs of product revenue. Deferred service revenue represents customer payments made in advance for services, which include technical support, hardware and software maintenance, professional services, and training.

Other Expense, Net

Other expense, net consisted of the following (in millions):
 
Three Months Ended March 31,
 
2013
 
2012
Interest income
$
2.1

 
$
2.8

Interest expense
(14.3
)
 
(14.2
)
Other
2.1

 
(13.0
)
Other expense, net
$
(10.1
)
 
$
(24.4
)

Interest income primarily includes interest earned on the Company’s cash, cash equivalents, and investments. Interest expense primarily includes interest net of capitalized interest expense from long-term debt and customer financing arrangements. Other typically consists of investment and foreign exchange gains and losses and other non-operational income and expense items. During the three months ended March 31, 2013, Other was primarily comprised of a $1.6 million gain related to a privately-held investment. During the three months ended March 31, 2012, Other was primarily comprised of an other-than-temporary impairment charge of $14.0 million, related to a privately-held equity investment.

Note 9. Restructuring Charges

Restructuring charges are based on the Company's restructuring plans that were committed to by management. These restructuring charges are recorded within cost of revenues or restructuring charges in the Condensed Consolidated Statements of Operations, as applicable. Any changes in the estimates of executing the approved plans are reflected in the Company's results of operations. Restructuring liabilities are reported within other accrued liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

During 2012, the Company initiated a restructuring plan (the "2012 Restructuring Plan") to bring its cost structure more in line with its long-term financial and strategic model. The 2012 Restructuring Plan consists of workforce reductions, facility consolidations or closures, and supply chain and procurement efficiencies. During the three months ended March 31, 2013, the Company continued to implement restructuring activities under the 2012 Restructuring Plan and recorded $7.8 million in charges for workforce reductions, facility consolidations or closures, and contract terminations. Under the 2012 Restructuring Plan, total costs incurred through March 31, 2013, was $101.1 million of which $53.6 million was recorded within cost of revenues and $47.5 million was recorded within restructuring charges in the Condensed Consolidated Statements of Operations. The Company expects to incur charges related to this plan through the end of fiscal 2013.

During 2011, the Company implemented a restructuring plan (the "2011 Restructuring Plan") in an effort to better align its business operations with the current market and macroeconomic conditions. The 2011 Restructuring Plan consisted of certain workforce reductions, facility closures and to a lesser extent, contract terminations. The Company recorded the majority of the restructuring charges associated with this plan during the years ended 2012 and 2011 and recorded severance-related adjustments of $0.1 million during the three months ended March 31, 2013. As of March 31, 2013, the remaining restructuring liability under this plan relates to facility charges, which are expected to be completed by March 2018.


19

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

The following table presents restructuring charges included in cost of revenues and restructuring charges in the Condensed Consolidated Statements of Operations under the Company's restructuring plans (in millions):
 
Three Months Ended March 31,
 
2013
 
2012
Severance
$
4.4

 
$
3.0

Facilities
2.6

 
(0.2
)
Contract terminations and other
0.7

 
(0.8
)
Total
$
7.7

 
$
2.0


The following table provides a summary of changes in the restructuring liability related to the Company's plans during the three months ended March 31, 2013 (in millions):
 
December 31,
2012
 
Charges
 
Cash
Payments
 
Non-cash
Settlements and
Other
 
March 31,
2013
Severance
$
10.6

 
$
4.4

 
$
(8.2
)
 
$
(0.1
)
 
$
6.7

Facilities
5.2

 
2.6

 
(1.8
)
 
(0.2
)
 
5.8

Contract terminations and other
2.4

 
0.7

 
(2.1
)
 
0.5

 
1.5

Total
$
18.2

 
$
7.7

 
$
(12.1
)
 
$
0.2

 
$
14.0


In connection with the restructuring plans discussed above, the Company expects to record aggregate future charges of approximately $14.0 million through the remainder of 2013, consisting of approximately $1.0 million and $13.0 million related to workforce reductions and facility closures, respectively.

Note 10. Long-Term Debt and Financing

Long-Term Debt

The following table summarizes the Company's long-term debt (in millions, except percentages):
 
As of March 31, 2013
 
Amount
 
Effective Interest
Rates
Senior notes:
 
 
 
3.10% fixed-rate notes, due 2016 ("2016 Notes")
$
300.0

 
3.12
%
4.60% fixed-rate notes, due 2021 ("2021 Notes")
300.0

 
4.63
%
5.95% fixed-rate notes, due 2041 ("2041 Notes")
400.0

 
6.01
%
Total senior notes
1,000.0

 
 
Unaccreted discount
(0.8
)
 
 
Total
$
999.2

 
 

The effective interest rates for the 2016 Notes, 2021 Notes, and 2041 Notes (collectively the “Notes”) include the interest on the Notes, accretion of the discount, and amortization of issuance costs. As of March 31, 2013 and December 31, 2012, the estimated fair value of the Notes included in long-term debt in the Condensed Consolidated Balance Sheets was approximately $1,074.3 million and $1,090.7 million, respectively, based on quoted market prices (Level 1). As of March 31, 2013, the Company was in compliance with all of its debt covenants.
 

20

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Customer Financing Arrangements

The Company has customer financing arrangements to factor its accounts receivable to a third-party financing provider for certain customers that require longer payment terms than those typically provided by the Company. The program does not and is not intended to affect the timing of revenue recognition because the Company only recognizes revenue upon sell-through. Under the financing arrangements, proceeds from the financing provider are due to the Company 30 days from the sale of the receivable. In these transactions with the financing provider, the Company surrendered control over the transferred assets. The factored accounts receivable were isolated from the Company and put beyond the reach of creditors, even in the event of bankruptcy. The Company does not maintain effective control over the transferred assets through obligations or rights to redeem, transfer, or repurchase the receivables after they have been transferred.

Pursuant to the financing arrangements for the sale of receivables, the Company sold net receivables of $181.0 million and $120.6 million during the three months ended March 31, 2013 and March 31, 2012, respectively. The Company received cash proceeds from the financing provider of $162.7 million and $178.5 million during the three months ended March 31, 2013 and March 31, 2012, respectively. As of March 31, 2013 and December 31, 2012, the amounts owed by the financing provider were $159.2 million and $147.6 million, respectively, and were recorded in accounts receivable on the Company’s Condensed Consolidated Balance Sheets.

The portion of the receivable financed that has not been recognized as revenue is accounted for as a financing arrangement and is included in other accrued liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets. As of March 31, 2013 and December 31, 2012, the estimated cash received from the financing provider not recognized as revenue from distributors was $28.5 million and $30.7 million, respectively.

Note 11. Equity

Stock Repurchase Activities

The Company currently has authority granted by the Board of Directors (the "Board") to repurchase up to $1.0 billion of its common stock under its stock repurchase program. As of March 31, 2013, there is $438.3 million of authorized funds remaining under the Company's stock repurchase program. In addition to repurchases under the Company’s stock repurchase program, the Company can also repurchase common stock from its employees in connection with net issuance of shares to satisfy minimum tax withholding obligations for the vesting of certain stock awards.

The Company repurchased and retired approximately 6.2 million shares of its common stock at an average price of $20.99 per share for an aggregate purchase price of $129.9 million during the three months ended March 31, 2013, under its stock repurchase program. The Company repurchased and retired approximately 2.4 million shares of its common stock at an average price of $21.75 per share for an aggregate purchase price of $51.6 million during the three months ended March 31, 2012 under its stock repurchase program. Repurchases associated to net issuances were not significant during the three months ended March 31, 2013 and March 31, 2012.

All shares of common stock repurchased under the Company's stock repurchase program and from its employees in connection with net issuance have been retired. Future share repurchases under the Company’s stock repurchase program will be subject to a review of the circumstances in place at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. This program may be discontinued at any time. See Note 17, Subsequent Events, for discussion of the Company's stock repurchase activity subsequent to March 31, 2013.


21
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Accumulated Other Comprehensive (Loss) Income, Net of Tax

The components of accumulated other comprehensive (loss) income, net of related taxes, during the three months ended March 31, 2013 were as follows (in millions):
 
Unrealized
Gains (Losses)
on Available-for-
Sale Securities(1)
 
Unrealized
Gains (Losses)
on Cash Flow
Hedges(2)
 
Foreign
Currency
Translation
Adjustments
 
Total
Balance as of December 31, 2012
$
2.1

 
$
3.0

 
$
(0.4
)
 
$
4.7

Other comprehensive loss before reclassifications
(0.2
)
 
(2.1
)
 
(5.8
)
 
(8.1
)
Amount reclassified from accumulated other
   comprehensive (loss) income
(0.4
)
 
(1.4
)
 
—

 
(1.8
)
Other comprehensive loss(3)
(0.6
)
 
(3.5
)
 
(5.8
)
 
(9.9
)
Balance as of March 31, 2013
$
1.5

 
$
(0.5
)
 
$
(6.2
)
 
$
(5.2
)
________________________________
(1) 
The reclassifications out of accumulated comprehensive income during the three months ended March 31, 2013 for realized gains on available-for-sale securities of $0.4 million are included in other expense, net in the Condensed Consolidated Statements of Operations.
(2) 
The reclassifications out of accumulated comprehensive income during the three months ended March 31, 2013 for realized gains on cash flow hedges are included within cost of revenues of $0.2 million, research and development of $0.4 million, sales and marketing of $0.5 million, and general and administrative of $0.3 million for which the hedged transactions relate in the Condensed Consolidated Statements of Operations.
(3) 
Taxes related to each component of other comprehensive loss were not material for the three months ended March 31, 2013 and March 31, 2012.

Note 12. Employee Benefit Plans

Share-Based Compensation Plans

The Company’s share-based compensation plans include the 2006 Equity Incentive Plan (the “2006 Plan”), the 2000 Nonstatutory Stock Option Plan (the “2000 Plan”), the Amended and Restated 1996 Stock Plan (the “1996 Plan”), various equity incentive plans assumed through acquisitions, and the 2008 Employee Stock Purchase Plan (the "2008 Purchase Plan"). Under these plans, the Company has granted (or in the case of acquired plans assumed) stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), and performance share awards ("PSAs").

The 2006 Plan was adopted and approved by the Company’s stockholders in May 2006. To date, the Company's stockholders have approved a share reserve of 149.5 million shares of common stock plus the addition of any shares subject to options under the 2000 Plan and the 1996 Plan that were outstanding as of May 18, 2006, and that subsequently expire unexercised, up to a maximum of an additional 75.0 million shares. As of March 31, 2013, the 2006 Plan had 52.5 million shares subject to currently outstanding equity awards and 43.8 million shares available for future issuance.

The 2008 Purchase Plan was adopted in May 2008. To date, the Company's stockholders have approved a share reserve of 19.0 million shares of the Company's common stock for issuance under this plan. The 2008 Purchase Plan permits eligible employees to acquire shares of the Company’s common stock at a 15% discount to the offering price (as determined in the 2008 Purchase Plan) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year. As of March 31, 2013, approximately 11.4 million shares have been issued and 7.6 million shares remain available for future issuance under the 2008 Purchase Plan.

In connection with certain past acquisitions, the Company assumed stock options, RSU, and RSA awards under the assumed stock plans of the acquired companies and exchanged the assumed awards for Juniper Networks' stock options, RSUs, and RSAs, respectively. No new stock options, RSUs, and RSAs can be granted under these plans. As of March 31, 2013, stock options, RSUs and RSAs representing approximately 6.6 million shares of common stock were outstanding under all awards assumed through the Company's acquisitions.


22
Table of Contents

Juniper Networks, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Stock Option Activities

The following table summarizes the Company’s stock option activity and related information as of and for the three months ended March 31, 2013 (in millions, except for per share amounts and years):
 
Outstanding Options
 
Number of Shares
 
Weighted Average
Exercise Price
per Share
 
Weighted Average
Remaining
Contractual Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2012
34.1

 
$
24.13

 
 
 
 
Options granted
—

 
—

 
 
 
 
Options canceled
(0.4
)
 
31.35

 
 
 
 
Options exercised
(2.3
)
 
16.17

 
 
 
 
Options expired
(1.4
)
 
27.73

 
 
 
 
Balance as of March 31, 2013
30.0

 
$
24.46

 
3.1
 
$
35.8

 
 
 
 
 
 
 
 
As of March 31, 2013:
 
 
 
 
 
 
 
Vested and expected-to-vest options
29.2

 
$
24.50

 
3.0
 
$
32.5

Exercisable options
24.5

 
$
24.33

 
2.4
 
$
18.8


Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $18.54 per share as of March 31, 2013, and the exercise price multiplied by the number of related options. The pre-tax intrinsic value of options exercised, representing the difference between the fair market value of the Company’s common stock on the date of the exercise and the exercise price of each option, was $11.9 million for the three months ended March 31, 2013.

Restricted Stock Unit, Restricted Stock Award, and Performance Share Award Activities

The following table summarizes the Company’s RSU, RSA, and PSA activity and related information as of and for the three months ended March 31, 2013 (in millions, except per share amounts and years):
 
Outstanding RSUs, RSAs, and PSAs
 
Number of Shares
 
Weighted Average
Grant-Date Fair
Value per Share
 
Weighted Average
Remaining
Contractual Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2012
26.8

 
$
27.76

 
 
 
 
RSUs granted
7.7

 
20.41

 
 
 
 
PSAs granted (*)
2.0

 
21.36

 
 
 
 
RSUs vested
(3.8
)
 
28.80

 
 
 
 
PSAs vested
(1.0
)
 
28.26

 
 
 
 
RSAs vested
(0.2
)
 
19.59

 
 
 
 
RSUs canceled
(0.7
)
 
24.20

 
 
 
 
PSAs canceled
(1.8
)
 
29.05

 
 
 
 
Balance as of March 31, 2013
29.0

 
$
25.28

 
1.7
 
$
538.4