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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: https://www.juniper.net/company/investor/conferencecall.html. In addition, there will be an audio replay available through November 9, 2003 at https://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* 1,998 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
     
 
* 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*

(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
     
 
* 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