Juniper Networks, Inc. Reports Q3'03 Financial Results; Net Revenue $172.1M; GAAP EPS $0.02; Non-GAAP EPS $0.04

Juniper Networks, Inc. Reports Q3'03 Financial Results; Net Revenue $172.1M; GAAP EPS $0.02; Non-GAAP EPS $0.04

Sunnyvale, CA - October 9, 2003 -- Juniper Networks, Inc. (NASDAQ: JNPR) today reported its third quarter results for the period ending September 30, 2003.

Net revenues for the third quarter were $172.1 million, compared with $152.0 million for the same period last year, an increase of 13 percent.

GAAP net income for the third quarter was $7.2 million or $0.02 per share, compared with a GAAP net loss of $88.3 million or $0.24 per share in the third quarter of 2002. Non-GAAP net income, which excludes restructuring expenses, in-process research and development expenses, integration expenses, the amortization of purchased intangibles and deferred compensation, the write-down of investments and the gain on the partial retirement of the 4.75% Convertible Subordinated Notes was $14.7 million or $0.04 per share, compared with non-GAAP net loss of $8.4 million or $0.02 per share in the third quarter of 2002.

Net revenues for the nine months ended September 30, 2003 were $494.4 million, compared with $391.3 million for the same period last year, an increase of 26 percent.

GAAP net income for the nine months ended September 30, 2003 was $24.5 million or $0.06 per share, compared with a GAAP net loss of $128.1 million or $0.37 per share for the same period last year. Non-GAAP net income, which excludes an adjustment to the purchase price of an acquisition, restructuring expenses, in-process research and development expenses, integration expenses, the amortization of purchased intangibles and deferred compensation, the gain on the sale of investments, the write-down of investments and the gain on the partial retirement of the 4.75% Convertible Subordinated Notes was $31.3 million or $0.08 per share, compared with non-GAAP net loss of $7.5 million or $0.02 per share for the same period last year.

Cash provided by operations was $42.9 million for the third quarter, which brings cash provided by operations for the nine months ended September 30, 2003 to $115.6 million, compared to cash used in operations of $3.9 million for the nine months ended September 30, 2002. Capital expenditures and depreciation during the third quarter were $4.6 million and $11.1 million respectively.

"The quarter was once again strong, confirmed by all marketplace and financial metrics," said Scott Kriens, chairman and CEO of Juniper Networks. "Juniper continues to benefit immensely from the alignment we have built with the business and networking strategy of our customers."

Juniper Networks will host a conference call web cast today, October 9, 2003 at 1:45 p.m. PT/4:45 p.m. ET at: http://www.juniper.net/company/investor/conferencecall.html. In addition, there will be an audio replay available through November 9, 2003 at http://www.juniper.net/company/investor/conferencecall.html or you can call the replay at 800-633-8284 (or 402-977-9140) and enter the reservation number, 21162087, through October 16, 2003. The replays will be available 24 hours/day, including weekends.

About Juniper Networks, Inc.

Juniper Networks transforms the business of networking by converting a commodity - bandwidth - into a dependable, secure, and highly valuable corporate asset. Founded in 1996 to meet the stringent demands of service providers, Juniper Networks is now relied upon by the world's leading network operators, government agencies, research and education institutions, and information-intensive enterprises as the foundation for uncompromising networks. Juniper Networks is headquartered in Sunnyvale, California. Additional information can be found at www.juniper.net.

Juniper Networks is registered in the U.S. Patent and Trademark Office and in other countries as a trademark of Juniper Networks, Inc. ERX, ESP, E-series, Internet Processor, J-Protect, JUNOS, JUNOScript, JUNOSe, M5, M10, M20, M40, M40e, M160, M-series, NMC-RX, SDX, T320, T640, and T-series are trademarks of Juniper Networks, Inc. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.

Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the Company's SEC filings, including its most recent Form 10K.

 

Juniper Networks, Inc. Condensed Consolidated Balance Sheets (in thousands)
		September 30, 2003		December 31, 2002
ASSETS		(unaudited)		(A)
Current assets:
Cash and cash equivalents		$ 457,510		$ 194,435
Short-term investments		309,143		384,036
Accounts receivable, net		48,526		78,501
Prepaid expenses and other current assets		24,409		23,957
Total current assets		839,588		680,929
Property and equipment, net		243,526		266,962
Long-term investments		557,346		583,664
Restricted cash		24,983		–
Goodwill		983,397		987,661
Purchased intangible assets, net and other long-term assets		79,076		95,453
Total Assets		$ 2,727,916		$ 2,614,669
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$ 54,057	$ 51,747
Accrued warranty	32,598	32,358
Other accrued liabilities	120,723	111,773
Deferred revenue	53,779	46,146
Total current liabilities	261,157	242,024
Convertible subordinated notes	542,076	942,114
Convertible senior notes	400,000	–
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital	1,532,209	1,461,910
Deferred stock compensation	(1,849)	(11,113)
Accumulated other comprehensive income	7,175	17,052
Accumulated deficit	(12,852)	(37,318)
Total stockholders’ equity	1,524,683	1,430,531
Total liabilities and stockholders' equity	$ 2,727,916	$ 2,614,669
(A) The balance sheet at December 31, 2002 has been derived from the audited consolidated financial statements at that date.

Juniper Networks, Inc. Condensed Consolidated Statement of Operations (in thousands, except per share amounts) (unaudited)
		Three months ended September 30,				Nine months ended September 30,
		2003		2002		2003		2002
Net revenues:
Product		$ 147,110		$ 130,264	$ 423,351		$ 333,822
Service		25,018		21,762	71,087		57,459
Total net revenues		172,128	152,026	494,438	391,281
Cost of revenues:
Product	48,694	54,336	145,868	130,200
Service	14,245	14,529	40,852	36,816
Total cost of revenues	62,939	68,865	186,720	167,016
Gross margin	109,189	83,161	307,718	224,265
Operating expenses:
Research and development	44,932	48,771	131,409	117,610
Sales and marketing	34,710	37,749	101,404	91,221
General and administrative	6,524	9,108	21,292	27,761
Restructuring	13,985	22,830	13,985	22,830
In-process research and development	–	83,479	–	83,479
Integration	–	2,507	–	2,507
Amortization of purchased intangible assets and deferred stock compensation (1)	1,998	8,727	17,323	17,640
Total operating expenses	102,149	213,171	285,413	363,048
Operating income (loss)	7,040	(130,010)	22,305	(138,783)
Interest and other income	8,031	13,987	27,300	46,119
Interest and other expense	(9,386)	(13,631)	(33,689)	(43,526)
Gain on sale of investments	–	–	8,739	–
Write-down of investments	–	(19,851)	–	(50,451)
Gain on retirement of convertible subordinated notes	9,220	62,855	14,108	62,855
Equity in net loss of joint venture	–	(180)	–	(1,316)
Income (loss) before income taxes	14,905	(86,830)	38,763	(125,102)
Provision for income taxes	7,700	1,500	14,297	3,000
Net income (loss)	$ 7,205	$ (88,330)	$ 24,466	$ (128,102)
Net income (loss) per share:
Basic	$ 0.02	$ (0.24)	$ 0.06	$ (0.37)
Diluted	$ 0.02	$ (0.24)	$ 0.06	$ (0.37)
Shares used in computing net income (loss) per share:
Basic	384,795	369,944	379,792	343,423
Diluted	408,083	369,944	399,525	343,423
(1) Amortization of deferred stock compensation relates to the following cost and expense categories by period:

Cost of revenues		$ (287)		$ 294		$ (48)		$ 927
Research and development		(2,098)		2,197		1,414		5,356
Sales and marketing		(573)		609		127		1,705
General and administrative		(346)		325		(77)		1,058
Total		$ (3,304)	$ 3,425	$ 1,416		$ 9,046

Juniper Networks, Inc. Non-GAAP Condensed Consolidated Statement of Operations (1) (in thousands, except per share amounts) (unaudited)
		Three months ended September 30,				Nine months ended September 30,
		2003		2002		2003		2002
Net revenues:
Product		$ 147,110		$ 130,264	$ 423,351		$ 333,822
Service		25,018		21,762	71,087		57,459
Total net revenues		172,128	152,026	494,438	391,281
Cost of revenues:
Product	48,694	54,336	145,868	130,200
Service	14,245	14,529	40,852	36,816
Total cost of revenues	62,939	68,865	186,720	167,016
Gross profit	109,189	83,161	307,718	224,265
Operating expenses:
Research and development	44,932	48,771	131,409	117,610
Sales and marketing	34,710	37,749	101,404	91,221
General and administrative	6,524	9,108	21,292	27,761
Total operating expenses	86,166	95,628	254,105	236,592
Operating income (loss)	23,023	(12,467)	53,613	(12,327)
Interest income	8,031	13,987	26,110	46,119
Interest and other expense	(9,386)	(13,631)	(33,689)	(43,526)
Equity in net loss of joint venture	–	(180)	–	(1,316)
Income (loss) before income taxes	21,668	(12,291)	46,034	(11,050)
Provision for income taxes	6,934	(3,933)	14,731	(3,536)
Net income (loss)	$ 14,734	$ (8,358)	$ 31,303	$ (7,514)
Net income (loss) per share:
Basic	$ 0.04	$ (0.02)	$ 0.08	$ (0.02)
Diluted	$ 0.04	$ (0.02)	$ 0.08	$ (0.02)
Shares used in computing net income (loss) per share:
Basic	384,795	369,944	379,792	343,423
Diluted	408,083	369,944	399,525	343,423
(1) The non-GAAP statements exclude an adjustment to the purchase price of an acquisition, the restructuring expenses, the in-process research and development expenses, the integration expenses, the impact of the amortization of purchased intangibles and deferred stock compensation, the gain from the sale of investments, the impairment write-down of investments and the gain on the retirement of convertible subordinated notes. See reconciliation to GAAP information below.

Juniper Networks, Inc. Reconciliation of Non-GAAP to GAAP Condensed Consolidated Statements of Operations (in thousands)
		Three months ended September 30,				Nine months ended September 30,
		2003		2002		2003		2002
Non-GAAP net income (loss)		$ 14,734		$ (8,358)	$ 31,303		$ (7,514)
Acquisition related adjustment		–		–	1,190		–
Restructuring		(13,985)		(22,830)	(13,985)		(22,830)
In-process research and development		–		(83,479)	–		(83,479)
Integration		–		(2,507)	–		(2,507)
Amortization of purchased intangible assets and deferred stock compensation		(1,998)		(8,727)	(17,323)		(17,640)
Gain on sale of investments		–		–	8,739		–
Write-down of investments		–		(19,851)	–		(50,451)
Gain on retirement of convertible subordinated notes		9,220		62,855	14,108		62,855
Income tax effect		(766)		(5,433)	434		(6,536)
GAAP net income (loss)		$ 7,205	$ (88,330)	$ 24,466	$ (128,102)

Juniper Networks, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Nine months ended September 30,
		2003		2002
OPERATING ACTIVITIES:
Net income (loss)		$ 24,466	$ (128,102)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation		35,754	28,919
Amortization of purchased intangibles, deferred stock compensation, debt costs and other non-cash transactions		23,597	25,735
In-process research and development		–	83,479
Gain on sale of investments		(8,739)	–
Write-down of investments		–	50,451
Gain on retirement of convertible subordinated notes		(14,108)	(62,855)
Changes in operating assets and liabilities:
Accounts receivable, net		29,975	40,563
Prepaid expenses, other current assets and other assets		1,268	10,222
Accounts payable		5,783	(18,351)
Accrued warranty		240	3,778
Other accrued liabilities		9,740	(31,877)
Deferred revenue		7,633	(5,828)
Net cash provided by (used in) operating activities		115,609	(3,866)
INVESTING ACTIVITIES:
Purchases of property and equipment, net		(14,136)	(24,755)
Purchases of available-for-sale investments		(671,826)	(707,688)
Maturities and sales of available-for-sale investments		770,334	882,902
Increase in restricted cash		(25,000)	–
Cash paid in connection with the Unisphere Networks acquisition, net of cash and cash equivalents acquired		–	(375,803)
Minority equity investments		(900)	(1,075)
Net cash provided by (used in) investing activities		58,472	(226,419)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		77,403	18,185
Proceeds from issuance of convertible senior notes		392,750	–
Retirement of convertible subordinated notes		(381,159)	(145,975)
Net cash provided by (used in) financing activities		88,994	(127,790)
Net increase (decrease) in cash and cash equivalents		263,075	(358,075)
Cash and cash equivalents at beginning of period		194,435	606,845
Cash and cash equivalents at end of period		$ 457,510	$ 248,770
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest		$ 42,863	$ 53,787
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued in connection with the Unisphere Networks acquisition		$ –	$ 359,888
Common stock issued in connection with the Pacific Broadband earn out provision		$ –	$ 10,844