JUNIPER NETWORKS INC, 10-K filed on 2/22/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Feb. 15, 2019
Jun. 29, 2018
Document and Entity Information [Abstract]      
Entity Registrant Name JUNIPER NETWORKS INC    
Entity Central Index Key 0001043604    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Amendment Flag false    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Emerging Growth Company false    
Entity Small Business false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   347,922,460  
Entity Public Float     $ 9,483
v3.10.0.1
Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Net revenues:      
Net revenues $ 4,647.5 $ 5,027.2 $ 4,990.1
Cost of revenues:      
Cost of revenues 1,906.3 1,955.1 1,885.6
Gross margin 2,741.2 3,072.1 3,104.5
Operating expenses:      
Research and development 1,003.2 980.7 1,013.7
Sales and marketing 927.4 950.2 972.9
General and administrative 231.1 227.5 224.9
Restructuring charges 7.3 65.6 3.3
Total operating expenses 2,169.0 2,224.0 2,214.8
Operating income 572.2 848.1 889.7
Other expense, net (39.5) (36.3) (62.3)
Income before income taxes 532.7 811.8 827.4
Income tax (benefit) provision (34.2) 505.6 234.7
Net income $ 566.9 $ 306.2 $ 592.7
Net income per share:      
Basic (in dollars per share) $ 1.62 $ 0.81 $ 1.55
Diluted (in dollars per share) $ 1.60 $ 0.80 $ 1.53
Shares used in computing net income per share:      
Basic (in shares) 349.0 377.7 381.7
Diluted (in shares) 354.4 384.2 387.8
Product      
Net revenues:      
Net revenues $ 3,107.1 $ 3,446.2 $ 3,528.9
Cost of revenues:      
Cost of revenues 1,277.2 1,360.9 1,326.2
Service      
Net revenues:      
Net revenues 1,540.4 1,581.0 1,461.2
Cost of revenues:      
Cost of revenues $ 629.1 $ 594.2 $ 559.4
v3.10.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]      
Net income $ 566.9 $ 306.2 $ 592.7
Available-for-sale debt securities:      
Change in net unrealized gains and losses, net of tax benefit (provision) of $1.0, ($4.0), and $0.7 for 2018, 2017, and 2016, respectively 0.6 4.5 0.8
Net realized (gains) losses reclassified into net income, net of tax provisions of zero, $0.9, and $0.5 for 2018, 2017, and 2016, respectively 0.9 (2.1) (1.2)
Net change on available-for-sale debt securities, net of tax 1.5 2.4 (0.4)
Cash flow hedges:      
Change in net unrealized gains and losses, net of tax benefit (provision) of $2.3, ($4.4), and ($0.8) for 2018, 2017, and 2016, respectively (6.4) 15.7 (2.1)
Net realized (gains) losses reclassified into net income, net of tax provisions of $0.3, $2.4, and $0.7 for 2018, 2017, and 2016, respectively (1.2) (5.2) (1.1)
Net change on cash flow hedges, net of tax (7.6) 10.5 (3.2)
Change in foreign currency translation adjustments (12.4) 19.0 (14.5)
Other comprehensive (loss) income, net of tax (18.5) 31.9 (18.1)
Comprehensive income $ 548.4 $ 338.1 $ 574.6
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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]      
Change in net unrealized gains and losses, net of tax benefit (provision) of $1.0, ($4.0), and $0.7 for 2018, 2017, and 2016, respectively $ 1.0 $ (4.0) $ 0.7
Net realized (gains) losses reclassified into net income, net of tax provisions of zero, $0.9, and $0.5 for 2018, 2017, and 2016, respectively 0.0 0.9 0.5
Change in net unrealized gains and losses, net of tax benefit (provision) of $2.3, ($4.4), and ($0.8) for 2018, 2017, and 2016, respectively 2.3 (4.4) (0.8)
Net realized (gains) losses reclassified into net income, net of tax provisions of $0.3, $2.4, and $0.7 for 2018, 2017, and 2016, respectively $ 0.3 $ 2.4 $ 0.7
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 2,489.0 $ 2,006.5
Short-term investments 1,070.1 1,026.1
Accounts receivable, net of allowance for doubtful accounts of $4.9 and $5.7 as of December 31, 2018 and 2017, respectively 754.6 852.0
Prepaid expenses and other current assets 268.1 299.9
Total current assets 4,581.8 4,184.5
Property and equipment, net 951.7 1,021.1
Long-term investments 199.0 988.4
Purchased intangible assets, net 118.5 128.1
Goodwill 3,108.8 3,096.2
Other long-term assets 403.5 415.5
Total assets 9,363.3 9,833.8
Current liabilities:    
Accounts payable 208.8 217.6
Accrued compensation 221.0 186.0
Deferred revenue 829.3 1,030.3
Short-term portion of long-term debt 349.9 0.0
Other accrued liabilities 233.5 304.3
Total current liabilities 1,842.5 1,738.2
Long-term debt 1,789.1 2,136.3
Long-term deferred revenue 384.3 509.0
Long-term income taxes payable 404.4 650.6
Other long-term liabilities 119.8 118.8
Total liabilities 4,540.1 5,152.9
Commitments and contingencies (Note 16)
Stockholders' equity:    
Convertible preferred stock, $0.00001 par value; 10.0 shares authorized; none issued and outstanding 0.0 0.0
Common stock, $0.00001 par value; 1,000.0 shares authorized; 346.4 shares and 365.5 shares issued and outstanding as of December 31, 2018 and 2017, respectively 0.0 0.0
Additional paid-in capital 7,672.8 8,042.1
Accumulated other comprehensive loss (18.2) (5.4)
Accumulated deficit (2,831.4) (3,355.8)
Total stockholders' equity 4,823.2 4,680.9
Total liabilities and stockholders' equity $ 9,363.3 $ 9,833.8
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts receivable, current $ 4.9 $ 5.7
Convertible preferred stock - par value (in USD per share) $ 0.00001 $ 0.00001
Convertible preferred stock - shares authorized (in shares) 10,000,000 10,000,000
Convertible preferred stock - issued (in shares) 0 0
Convertible preferred stock - outstanding (in shares) 0 0
Common stock - par value (in USD per share) $ 0.00001 $ 0.00001
Common stock - shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock - shares issued (in shares) 346,400,000 365,500,000
Common stock - outstanding (in shares) 346,400,000 365,500,000
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:      
Net income $ 566.9 $ 306.2 $ 592.7
Adjustments to reconcile net income to net cash provided by operating activities:      
Share-based compensation expense 217.1 187.5 224.6
Depreciation, amortization, and accretion 210.5 225.6 206.7
Deferred income taxes 42.6 (139.6) 55.9
Other 9.6 (14.5) 3.5
Changes in operating assets and liabilities, net of acquisitions:      
Accounts receivable, net 96.3 203.8 (263.5)
Prepaid expenses and other assets (70.9) 43.0 (43.6)
Accounts payable 3.5 (10.1) 66.6
Accrued compensation 41.4 (42.8) (19.5)
Income taxes payable (269.2) 447.3 3.1
Other accrued liabilities (11.4) (2.1) (1.6)
Deferred revenue 24.7 55.0 301.7
Net cash provided by operating activities 861.1 1,259.3 1,126.6
Cash flows from investing activities:      
Purchases of property and equipment (147.4) (151.2) (214.7)
Purchases of available-for-sale debt securities (1,228.5) (1,882.9) (1,598.0)
Proceeds from sales of available-for-sale debt securities 1,070.2 944.0 1,182.1
Proceeds from maturities and redemptions of available-for-sale debt securities 910.2 741.6 342.3
Purchases of equity securities (17.5) (14.9) (25.2)
Proceeds from sales of equity securities 36.9 12.4 9.5
Proceeds from Pulse note receivable 0.0 75.0 0.0
Subsequent payments related to acquisitions in prior years (42.7) 0.0 0.0
Payments for business acquisitions, net of cash and cash equivalents acquired (16.4) (27.0) (113.0)
Net cash provided by (used in) investing activities 564.8 (303.0) (417.0)
Cash flows from financing activities:      
Repurchase and retirement of common stock (756.6) (725.8) (324.6)
Proceeds from issuance of common stock 56.9 64.5 62.3
Payment of dividends (249.3) (150.4) (152.5)
Change in customer financing arrangement (16.9) 16.9 0.0
Payment of debt 0.0 0.0 (300.0)
Issuance of debt, net 0.0 0.0 494.0
Other 2.7 0.0 15.5
Net cash used in financing activities (968.6) (794.8) (236.3)
Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash (10.6) 17.0 (14.0)
Net increase in cash, cash equivalents, and restricted cash 446.7 178.5 459.3
Cash, cash equivalents, and restricted cash at beginning of period 2,505.8 2,059.1 1,880.6
Cash, cash equivalents, and restricted cash at end of period 2,059.1 1,880.6 1,421.3
Supplemental disclosures of cash flow information:      
Cash paid for interest, net of amounts capitalized 94.0 93.9 92.8
Cash paid for income taxes, net 181.0 193.5 173.9
Non-cash investing and financing activities:      
Construction costs for building with financing obligation $ 0.0 $ 0.0 $ 15.3
v3.10.0.1
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Common Stock and Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Accumulated Deficit
Beginning balance (shares) at Dec. 31, 2015   384.0      
Stockholders' equity, Beginning balance at Dec. 31, 2015 $ 4,574.4   $ 8,334.8 $ (19.2) $ (3,741.2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 592.7       592.7
Other comprehensive income (loss), net (18.1)     (18.1)  
Issuance of common stock (in shares)   11.1      
Issuance of common stock 62.3   62.3    
Repurchase and retirement of common stock (in shares)   (14.0)      
Repurchase and retirement of common stock (324.6)   (191.3)   (133.3)
Share-based compensation expense 222.4   222.4    
Tax effects from employee stock option plans 5.9   5.9    
Payment of cash dividends (152.5)   (152.5)    
Ending balance (shares) at Dec. 31, 2016   381.1      
Stockholders' equity, Ending balance at Dec. 31, 2016 4,962.5   8,281.6 (37.3) (3,281.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 306.2       306.2
Other comprehensive income (loss), net 31.9     31.9  
Issuance of common stock (in shares)   10.7      
Issuance of common stock 64.5   64.5    
Repurchase and retirement of common stock (in shares)   (26.3)      
Repurchase and retirement of common stock (725.8)   (354.6)   (371.2)
Share-based compensation expense 188.2   188.2    
Payment of cash dividends $ (150.4)   (150.4)    
Ending balance (shares) at Dec. 31, 2017 365.5 365.5      
Stockholders' equity, Ending balance at Dec. 31, 2017 $ 4,680.9   8,042.1 (5.4) (3,355.8)
Beginning balance (shares) at Dec. 31, 2017 365.5 365.5      
Stockholders' equity, Beginning balance at Dec. 31, 2017 $ 4,680.9   8,042.1 (5.4) (3,355.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 566.9       566.9
Other comprehensive income (loss), net (18.5)     (18.5)  
Issuance of common stock (in shares)   10.4      
Issuance of common stock 56.9   56.9    
Repurchase and retirement of common stock (in shares)   (29.5)      
Repurchase and retirement of common stock (756.6)   (395.1)   (361.5)
Share-based compensation expense 218.2   218.2    
Payment of cash dividends $ (249.3)   (249.3)    
Reclassification of tax effects upon adoption of ASU 2018-02       5.7 (5.7)
Ending balance (shares) at Dec. 31, 2018 346.4 346.4      
Stockholders' equity, Ending balance at Dec. 31, 2018 $ 4,823.2   $ 7,672.8 $ (18.2) (2,831.4)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Cumulative adjustment upon adoption of ASU, net | Accounting Standards Update 2014-09 $ 324.7       $ 324.7
v3.10.0.1
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 26, 2018
Sep. 25, 2018
Jun. 22, 2018
Mar. 22, 2018
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Stockholders' Equity [Abstract]              
Payments of cash dividends (in dollars per share) $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.72 $ 0.40 $ 0.40
v3.10.0.1
Description of Business and Basis of Presentation
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation

Description of Business

Juniper Networks, Inc. (the “Company” or “Juniper”) designs, develops, and sells products and services for high-performance networks, to enable customers to build scalable, reliable, secure and cost-effective networks for their businesses, while achieving agility and improved operating efficiency through automation. The Company sells high-performance routing, switching, and security networking products and service offerings to customers within its verticals: Cloud, Service Provider, and Enterprise who view the network as critical to their success.

Basis of Presentation

The Consolidated Financial Statements, which include the Company and its wholly-owned subsidiaries, are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany balances and transactions have been eliminated.

The Company adopted Financial Accounting Standards Board ("FASB") ASU No. 2016-18 (Topic 230) Statement of Cash Flow: Restricted Cash, effective January 1, 2018, using the retrospective transition method. Restricted cash of $47.4 million and $52.6 million has been included within cash, cash equivalents, and restricted cash when reconciling the beginning and ending total amounts, respectively, on the statement of cash flows for the year ended December 31, 2017, and restricted cash of $0.4 million and $47.4 million has been included within cash, cash equivalents, and restricted cash when reconciling the beginning and ending total amounts, respectively, on the statement of cash flows for the year ended December 31, 2016, to conform to the current period presentation. The adoption did not have a material impact on the cash flow activity presented on the Company's Consolidated Statement of Cash Flows for the years ended December 31, 2017 and 2016. See Note 4, Cash Equivalents and Investments, for a reconciliation of the cash balances within the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets.
v3.10.0.1
Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies
Significant Accounting Policies

Use of Estimates

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 Consolidated Financial Statements and the accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent there are material differences between the Company's estimates and the actual results, the Company's future consolidated results of operation may be affected.

Cash, Cash Equivalents, and Investments

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with banks, highly liquid investments in money market funds, commercial paper, government securities, certificates of deposits, time deposits, and corporate debt securities, which are readily convertible into cash. All highly liquid investments with original maturities of three months or less from Juniper's purchase date are classified as cash equivalents.

Investments in Available-for-Sale Debt Securities

The Company's investments in debt securities are classified as available-for-sale and include the Company's fixed income securities and investments in privately-held companies, consisting of debt and redeemable preferred stock securities. Fixed income securities are initially recorded at cost and periodically adjusted to fair value in the Consolidated Balance Sheets. Unrealized gains and losses on these investments are reported as a separate component of accumulated other comprehensive loss in the Consolidated Balance Sheets. Realized gains and losses are determined based on the specific identification method and are reported in the Consolidated Statements of Operations.
Fixed income securities primarily consist of asset-backed securities, certificate of deposits, commercial paper, corporate debt securities, time deposits, foreign government debt securities, U.S. government agency securities, and U.S. treasury securities. The Company periodically evaluates these investments to determine if impairment charges are required. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value has been less than the Company's cost basis, the investment's financial condition, and the near-term prospects of the investee. If the Company determines that the decline in an investment's value is other than temporary, the difference is recognized as an impairment loss in its Consolidated Statements of Operations.

The Company's privately-held debt and redeemable preferred stock securities are included in other long-term assets in the Consolidated Balance Sheets and are recorded at fair value. Fair value is reassessed when the Company is made aware of information indicating a change in the enterprise value of the investee, including known acquisition offers, subsequent funding rounds, and investee's plans for liquidation. The Company periodically evaluates these securities for indicators of impairment, including the inability to recover a portion of or the entire carrying amount of the investment, the inability of the investee to sustain earnings, the reduction in or termination of financial commitment to the investee from other investors, the intention to sell the investment, and whether it is more likely than not that the Company will be required to sell the investment before recovery of the entire amortized cost basis. If the Company determines that the decline in an investment's value is other than temporary, the difference is recognized as an impairment loss in its Consolidated Statements of Operations.

Investments in Equity Securities

The Company's investments in equity securities with readily determinable fair values consist of money market funds, the non-qualified compensation plan ("NQDC") that is invested in mutual funds, and investments in public companies. These investments are measured at fair value with changes in fair value recognized in the Consolidated Statements of Operations.

Equity securities without readily determinable fair values include the Company's investments in privately-held companies consisting of non-redeemable preferred stock and common stock securities. The Company accounts for these securities at cost, adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairments. Fair value of these equity securities is reassessed when the Company identifies observable price changes indicating that an adjustment upward or downward to the carrying value is necessary. Any observable changes in fair value are recognized in earnings as of the date that the observable transaction took place, rather than the current reporting date. In addition, the Company periodically evaluates equity securities without readily determinable fair values to determine if impairment charges are required by evaluating whether an event or change in circumstance has occurred that may have a significant adverse effect on the fair value of the investment. A qualitative assessment is performed each reporting period to assess whether there are any impairment indicators, including, but not limited to, significant deterioration in the investee's earnings performance; credit rating; asset quality or business prospects; adverse change in the regulatory, economic, or technological environment; change in the general market condition of the geographic area or industry; acquisition offers; and the ability to continue as a going concern. If such indicators are present, the Company estimates the fair value of impaired investments and recognizes an impairment loss in the Consolidated Statement of Operations equal to the difference between the carrying value and fair value.

Fair Value

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts, and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. These inputs are valued using market based approaches.

Level 3 – Inputs are unobservable inputs based on the Company’s assumptions. These inputs, if any, are valued using internal financial models.

Derivatives

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

The Company uses foreign currency forward contracts to hedge certain forecasted foreign currency transactions relating to operating expenses. These derivatives are designated as cash flow hedges. These derivatives are carried at fair value and the effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive loss, and upon occurrence of the forecasted transaction, is subsequently reclassified into the costs 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, on its Consolidated Statements of Operations. Cash flows from such hedges are classified as operating activities.

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in non-functional currencies. These derivatives are carried at fair value with changes recorded in other expense, net in the Consolidated Statements of Operations in the same period as the changes in the fair value from the re-measurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities.

The Company presents its derivative assets and derivative liabilities on a gross basis in the Consolidated Balance Sheets. However, under agreements containing provisions on netting 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. The Company is neither required to pledge nor entitled to receive cash collateral related to these derivative transactions.

Inventory

Inventory consists primarily of component parts to be used in the manufacturing process and finished goods in-transit, and is stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. A charge is recorded to cost of product when inventory is determined to be in excess of anticipated demand or considered obsolete. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in the newly established cost basis.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method, over the estimated useful lives of the following assets:
 
Estimated Useful Life (years)
Computers, equipment, and software
1.5 to 7
Furniture and fixtures
5 to 7
Building and building improvements
7 to 40
Land improvements
10 to 40
Leasehold improvements
Lease term, not to exceed 10 years


Construction in progress is related to the construction or development of property and equipment that have not yet been placed in service for their intended use.

Goodwill and Other Long-Lived Assets

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recorded. The excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recognized as goodwill. Goodwill is tested for impairment annually during the fourth quarter or more frequently if certain circumstances indicate the carrying value of goodwill is impaired. A qualitative assessment is first made to determine whether it is necessary to quantitatively test goodwill for impairment. This initial assessment includes, among others, consideration of macroeconomic conditions and financial performance. If the qualitative assessment indicates that it is more likely than not that an impairment exists, a quantitative analysis is performed by determining the fair value of each reporting unit using a combination of the income approach and the market approach. Based on the outcome of the quantitative assessments, the Company compares the estimated fair value of each reporting unit with their respective carrying values, including goodwill. An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds the asset's implied fair value.

Other intangible assets acquired in a business combination related to in-process research and development ("IPR&D") projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. Indefinite-lived intangibles are not amortized into the results of operations but instead are evaluated for impairment. If and when development is complete, the associated assets would be deemed finite-lived and would be amortized as cost of revenues over their respective estimated useful lives at that point in time. If the research and development project is abandoned, the acquired IPR&D assets are written off and charged to expense in the period of abandonment.

Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset, or asset group, to estimated undiscounted future cash flows expected to be generated by the asset, or asset group. An impairment charge is recognized by the amount by which the carrying amount of the asset, or asset group, exceeds its fair value.

The Company amortizes intangible assets with estimable useful lives on a straight-line basis over their useful lives.

Revenue Recognition

Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process, (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

Identify the contract with a customer. The Company generally considers a sales contract or agreement with an approved purchase order as a customer contract provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The Company combines contracts with a customer if contracts are negotiated with a single commercial substance or contain price dependencies.

Identify the performance obligations in the contract. Product performance obligations include hardware and software licenses and service performance obligations include maintenance, software post-contract support, training, and professional services. Certain software licenses and related post-contract support are combined into a single performance obligation when the maintenance updates are critical to the continued functionality of the software.

Determine the transaction price. The transaction price for the Company’s contracts with its customers consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for rights of return, rebates, and price protection, which are based on historical sales returns and price protection credits, specific criteria outlined in rebate agreements, and other factors known at the time. The Company generally invoices customers for hardware, software licenses and related maintenance arrangements at time of delivery, and professional services either upfront or upon meeting certain milestones. Customer invoices are generally due within 30 to 90 days after issuance. The Company’s contracts with customers typically do not include significant financing components as the period between the transfer of performance obligations and timing of payment are generally within one year.

Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to historical discounting trends for products and services, pricing practices in different geographies and through different sales channels, gross margin objectives, internal costs, competitor pricing strategies, and industry technology lifecycles.

Recognize revenue when or as the Company satisfies a performance obligation. Revenue for hardware and certain software licenses, are recognized at a point in time, which is generally upon shipment or delivery. Certain software licenses combined with post-contract support are recognized over time on a ratable basis over the term of the license. Revenue for maintenance and software post-contract support is recognized over time on a ratable basis over the contract term. Revenue from training and professional services is recognized over time as services are completed or ratably over the contractual period of generally one year or less.

Deferred Commissions

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit which is typically over the term of the customer contracts as initial commission rates and renewal rates are the same. Amortization expense is included in sales and marketing expenses in the accompanying Consolidated Statements of Operations.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the Company's assessment of the collectability of customer accounts. The Company regularly reviews its receivables that remain outstanding past their applicable payment terms and establishes an allowance by considering factors such as historical experience, credit quality, and age of the accounts receivable balances, and current economic conditions that may affect a customer's ability to pay.

Warranty Reserves

The Company generally offers a one-year warranty on most of its hardware products, and a 90-day warranty on the media that contains the software embedded in the products. Warranty costs are recognized as part of the Company's cost of sales based on associated material costs, logistics costs, labor costs, and overhead at the time revenue is recognized. Material costs are estimated primarily based upon the historical costs to repair or replace product returns within the warranty period. Labor, logistics and overhead costs are estimated primarily based upon historical trends in the cost to support customer cases within the warranty period.

Contract Manufacturer Liabilities

The Company establishes a liability for non-cancelable, non-returnable purchase commitments with its contract manufacturers for carrying charges, quantities in excess of its demand forecasts, or obsolete material charges for components purchased by the contract manufacturers to meet the Company’s demand forecast or customer orders. The demand forecasts are based upon historical trends and analysis from the Company's sales and marketing organizations, adjusted for overall market conditions.

Research and Development

Costs to research, design, and develop the Company's products are expensed as incurred.

Software Development Costs

Capitalization of software development costs for software to be sold, leased, or otherwise marketed begins when a product's technological feasibility has been established and ends when a product is available for general release to customers. Generally, the Company's products are released soon after technological feasibility has been established. As a result, costs incurred between achieving technological feasibility and product general availability have not been significant.

The Company capitalizes costs associated with internal-use software systems during the application development stage. Such capitalized costs include external direct costs incurred in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with the development of the applications.

Advertising

Advertising costs are charged to sales and marketing expense as incurred. Advertising expense was $20.0 million, $19.9 million, and $15.8 million, for 2018, 2017, and 2016, respectively.

Foreign Currency

Assets and liabilities of foreign operations with non-U.S. Dollar functional currency are translated to U.S. Dollars using exchange rates in effect at the end of the period. Revenue and expenses are translated to U.S. Dollars using rates that approximate those in effect during the period. The resulting translation adjustments are included in the Company’s Consolidated Balance Sheets in the stockholders’ equity section as a component of accumulated other comprehensive loss. The Company records foreign exchange transaction gains and losses for assets and liabilities denominated in non-functional currencies. These remeasurement adjustments are recorded in other expense, net in the Consolidated Statements of Operations.

Loss Contingencies

The Company is subject to the possibility of various loss contingencies arising in the ordinary course of business. Management considers the likelihood of loss related to an asset, or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

Share-Based Compensation

The Company measures and recognizes compensation cost for all share-based awards made to employees and directors, including employee stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance share awards ("PSAs") and employee stock purchases related to the Employee Stock Purchase Plan ("ESPP"). For service condition only awards, share-based compensation expense is based on the fair value of the underlying awards and amortized on a straight-line basis. For PSAs and market-based RSUs, share-based compensation expense is amortized on a straight-line basis for each separate vesting portion of the awards. The Company accounts for forfeitures as they occur.

The Company utilizes the Black-Scholes-Merton (“BSM”) option-pricing model to estimate the fair value of its ESPP purchase rights. The BSM model requires various highly subjective assumptions that represent management's best estimates of volatility, risk-free interest rate, expected life, and dividend yield. The Company estimates expected volatility based on the implied volatility of market-traded options, on the Company's common stock, adjusted for other relevant factors including historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s ESPP. The expected life of ESPP purchase rights approximates the offering period.

The Company determines the grant date fair value of its RSUs, RSAs, and PSAs based on the closing market price of the Company’s common stock on the date of grant, adjusted by the present value of the dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested.

For market-based RSUs, the Company estimates the fair value and derived service period using the Monte Carlo simulation option pricing model ("Monte Carlo model"). The determination of the grant date fair value and derived service periods using the Monte Carlo model is affected by the Company's stock price, comparative market-based returns, as well as various highly subjective assumptions that represent management's best estimates of volatility, risk-free interest rate, and dividend yield. The Company estimates expected volatility based on the implied volatility of market-traded options, on the Company's common stock, adjusted for other relevant factors including historical volatility of the Company’s common stock over the contractual life of the Company's market-based RSUs.

Provision for Income Taxes

Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
The Company accounts for uncertainty in income taxes using a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Concentrations of Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivatives, and accounts receivable. The Company invests only in high-quality credit instruments and maintains its cash, cash equivalents and available-for-sale investments in fixed income securities with several high-quality institutions. Deposits held with banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. We mitigate the concentration of credit risk in our investment portfolio through diversification of the investments in various industries and asset classes, and limits to the amount of credit exposure to any single issuer and credit rating.

The Company’s derivatives expose it to credit risk to the extent that counterparties may be unable to meet the terms of the agreement. To mitigate concentration of risk related to its derivatives, the Company establishes counterparty limits to major credit-worthy financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored and the derivatives transacted with these entities are relatively short in duration. Therefore, the Company does not expect material losses as a result of defaults by counterparties.

Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company's customer base and their dispersion across different geographic locations throughout the world. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. During the years ended December 31, 2018, 2017, and 2016, no single customer accounted for 10% or more of net revenues.

The Company relies on sole suppliers for certain of its components such as application-specific integrated circuits ("ASICs") and custom sheet metal. Additionally, the Company relies primarily on a limited number of significant independent contract manufacturers and original design manufacturers for the production of its products. The inability of any supplier or manufacturer to fulfill supply requirements of the Company could negatively impact future operating results.

Recently Adopted Accounting Standard

Comprehensive Income: Effective January 1, 2018, the Company early adopted FASB ASU No. 2018-02 (Topic 220), Income Statement - Reporting Comprehensive Income, issued in February 2018, with an election to reclassify stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the "Tax Act"), from accumulated other comprehensive income to retained earnings. The adoption resulted in a reclassification of $5.7 million in income from accumulated other comprehensive loss to accumulated deficit as of the adoption date. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Financial Instruments: On January 1, 2018, the Company adopted FASB ASU No. 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities and FASB ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall, which changes how entities classify and measure equity investments and present changes in the fair value of financial liabilities measured under the fair value option. The guidance also updates certain presentation and disclosure requirements. The Company adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective method for its equity securities with readily determinable fair values and the prospective method for its equity securities without readily determinable fair values, resulting in no impact to the opening accumulated deficit balance. The Company has elected to use the measurement alternative for its equity investments without readily determinable fair value, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. See Note 4, Cash Equivalents and Investments for additional disclosures required upon adopting the standard.

Revenue Recognition: On January 1, 2018, the Company adopted FASB ASU No. 2014-09 (Topic 606) - Revenue from Contracts with Customers (“ASU 2014-09” or "Topic 606"), which provides guidance for revenue recognition that superseded the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition ("Topic 605") and most industry specific guidance. Under ASU 2014-09, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company adopted ASU 2014-09 under the modified retrospective approach, applying the amendments to prospective reporting periods. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605.
The cumulative effect of the changes made to the Company's Consolidated Balance Sheet as of January 1, 2018 for the adoption of Topic 606 to all contracts with customers that were not completed as of December 31, 2017 was recorded as an adjustment to accumulated deficit as of the adoption date as follows:
 
December 31,
2017
 
 
 
January 1,
2018
 
As reported
 
Adjustments
 
As adjusted
Assets:
 
 
 
 
 
Accounts receivable, net of allowances
$
852.0

 
$
(1.9
)
 
$
850.1

Prepaid expenses and other current assets
299.9

 
31.5

 
331.4

Other long-term assets
415.5

 
(21.1
)
 
394.4

Total assets
$
9,833.8

 
$
8.5

 
$
9,842.3

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Deferred revenue
$
1,030.3

 
$
(225.4
)
 
$
804.9

Other accrued liabilities
304.3

 
33.8

 
338.1

Long-term deferred revenue
509.0

 
(124.6
)
 
384.4

  Total liabilities
$
5,152.9

 
$
(316.2
)
 
$
4,836.7

 
 
 
 
 
 
Stockholders' Equity:
 
 
 
 
 
Accumulated deficit
$
(3,355.8
)
 
$
324.7

 
$
(3,031.1
)


Upon adoption, the Company recorded a cumulative effect adjustment of $324.7 million, net of tax adjustment of $63.9 million, which decreased the January 1, 2018 opening accumulated deficit balance on the Consolidated Balance Sheet, primarily as a result of the following items:

Distributor Sales: Under Topic 606, the Company recognizes revenue from sales to distributors upon delivery of the product to the distributor, rather than upon delivery of the product to the end-customer. Rebates and incentives offered to distributors, which are earned when sales to end-customers are completed, are estimated at the point of revenue recognition.

Software Revenue: Under Topic 605, the Company deferred revenue for software licenses where vendor-specific objective evidence of fair value had not been established for undelivered items (primarily services). Under Topic 606, revenue for software licenses is recognized at the time of delivery unless the ongoing services provide frequent, critical updates to the software, without which the software functionality would be rapidly diminished.

Variable Consideration: Some of the Company's contracts include penalties, extended payment terms, acceptance provisions or other price variability that precluded revenue recognition under Topic 605 because of the requirement for amounts to be fixed or determinable. Topic 606 requires the Company to estimate and account for variable consideration as a reduction of the transaction price.
 
Revenue Allocation: Similar to Topic 605, Topic 606 requires an allocation of revenue between deliverables, or performance obligations, within an arrangement. Topic 605 restricted the allocation of revenue that is contingent on future deliverables to current deliverables; however, Topic 606 removes this restriction. In addition, the nature of the performance obligations identified within a contract under Topic 606 as compared to Topic 605 will impact the allocation of the transaction price between product and services.

Contract Acquisition Costs: Topic 606 requires the deferral and amortization of “incremental” costs incurred to obtain a contract where the associated contract duration is greater than one year. The primary contract acquisition cost for the Company are sales commissions. Prior to January 1, 2018, the Company expensed sales commissions. The change required by Topic 606 resulted in the creation of an asset on January 1, 2018.

The impact of the adoption of Topic 606 on the Company's Consolidated Statements of Operations and Consolidated Balance Sheet was as follows (in millions):
 
 
Year Ended
 December 31, 2018*
 
 
 
As Reported
 
Without Adoption of Topic 606
 
Topic 606 Impact
 
Net revenues:
 
 
 
 
 
 
Product
$
3,107.1

 
$
3,006.8

 
$
100.3

 
Service
1,540.4

 
1,663.3

 
(122.9
)
 
     Total net revenues
$
4,647.5

 
$
4,670.1

 
$
(22.6
)
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Sales and marketing
$
927.4

 
$
929.3

 
$
(1.9
)
________________________________
* 
Except as disclosed, the adoption of Topic 606 did not have a material impact on the Company’s Consolidated Statements of Operations for the year ended December 31, 2018.

 
As of December 31, 2018
 
As Reported
 
Without Adoption of Topic 606
 
Topic 606 Impact
Assets:
 
 
 
 
 
Accounts receivable, net of allowances
$
754.6

 
$
746.3

 
$
8.3

Prepaid expenses and other current assets
268.1

 
241.6

 
26.5

Other long-term assets
403.5

 
400.4

 
3.1

   Total assets
$
9,363.3

 
$
9,325.6

 
$
37.7

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Deferred revenue
$
829.3

 
$
1,111.9

 
$
(282.6
)
Other accrued liabilities
233.5

 
178.6

 
54.9

Long-term deferred revenue
384.3

 
431.8

 
(47.5
)
  Total liabilities
$
4,540.1

 
$
4,815.2

 
$
(275.1
)
 
 
 
 
 
 
Stockholders' Equity:
 
 
 
 
 
Accumulated deficit
$
(2,831.4
)
 
$
(3,144.3
)
 
$
312.9



Recent Accounting Standards Not Yet Adopted

Cloud Computing Arrangement: In August 2018, the FASB issued ASU No. 2018-15 (Subtopic 350-40) Intangibles — Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which provides guidance on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by a service contract. The new standard is to be applied on either a retrospective or prospective basis to all implementation costs incurred after the date of adoption. The standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company early adopted the standard effective January 1, 2019 and will prospectively apply the standard to all implementation costs incurred after the adoption date.

Fair Value Measurement: In August 2018, the FASB issued ASU No. 2018-13 (Topic 820) Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of adoption on the Consolidated Financial Statements.

Derivatives and Hedging: In August 2017, the FASB issued ASU No. 2017-12 (Topic 815) Derivatives and Hedging — Targeted Improvements to Accounting for Hedging Activities, and an amendment thereafter, which expands an entity's ability to hedge financial and nonfinancial risk components and amends how companies assess effectiveness as well as changes the presentation and disclosure requirements. The new standard is to be applied on a modified retrospective basis, and its amendment and presentation and disclosure requirements will be applied on a prospective basis. This standard along with its amendment is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.

Amortization on Purchased Callable Debt Securities: In March 2017, the FASB issued ASU No. 2017-08 Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities which shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The ASU will not impact debt securities held at a discount. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, and is to be applied on a modified retrospective basis with early adoption permitted. The adoption of this standard will not have an impact on the Consolidated Financial Statements.

Simplifying the Test for Goodwill Impairment: In January 2017, the FASB issued ASU No. 2017-04 (Topic 350) Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU will be applied on a prospective basis and is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.

Credit Losses on Financial Instruments: In June 2016, the FASB issued ASU No. 2016-13 (Topic 326) Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. Further amendment issued by the FASB in November 2018 clarifies that receivables arising from operating leases are not within the scope of Topic 326 and should be accounted for in accordance with Topic 842. This pronouncement and its amendment are effective for reporting periods beginning after December 15, 2019, and interim periods within those fiscal years, using a modified retrospective adoption method. Early adoption is permitted. The Company is currently evaluating the impact of adoption on the Consolidated Financial Statements.

Leases: In February 2016, the FASB issued ASU No. 2016-02 (Topic 842), Leases, and several amendments thereafter, which require recognition of right-of-use ("ROU") assets and lease liabilities for most leases on the Consolidated Balance Sheets by lessees. The guidance also requires enhanced disclosures. The ASU is effective for annual reporting periods beginning after December 15, 2018.

The Company has adopted the standard on January 1, 2019 under the modified retrospective approach. Upon adoption, the Company elected:

the package of practical expedients which allows for not reassessing (1) whether existing contracts contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition.

the practical expedient in ASC Subtopic 842-10 to not separate non-lease components from lease components and instead account for each separate lease component and non-lease components associated with that lease component as a single lease component by class of the underlying asset.

not to recognize ROU assets and lease liabilities for short-term leases, which have a lease term of twelve months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

The adoption of the standard resulted in recognition of ROU assets and lease liabilities of approximately $200.0 million and $230.0 million, respectively, on the Company's Consolidated Balance Sheets, primarily relating to real estate operating leases. The adoption of the standard did not result in a material impact on the Company's Consolidated Statements of Operations. Additionally, the adoption of the standard had no impact on the Company’s debt-covenant compliance under its current agreements.
v3.10.0.1
Business Combinations
12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Business Combinations
Business Combinations

The Company's Consolidated Financial Statements include the operating results of acquired businesses from the date of each acquisition. Pro forma results of operations for these acquisitions have not been presented as the financial impact to the Company's consolidated results of operations, both individually and in aggregate, is not material. The primary areas of the preliminary purchase price allocation that are subject to change relate to certain legal and income tax matters and residual goodwill.
 
The Company acquired HTBase Corporation ("HTBase") in 2018; Cyphort Inc. ("Cyphort") in 2017; and AppFormix, Inc. ("AppFormix"), Aurrion, Inc. ("Aurrion"), and BTI Systems Inc. (“BTI”) in 2016. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition dates (in millions):
 
2018
 
2017
 
2016
 
HTBase(1)
 
Cyphort(2)
 
AppFormix
 
Aurrion
 
BTI(2)
Net tangible assets acquired/(liabilities) assumed
$
(1.0
)
 
$
1.4

 
$
(5.3
)
 
$
6.0

 
$
(19.7
)
Intangible assets
7.8

 
15.4

 
20.3

 
49.0

 
43.3

Goodwill (3)
14.4

 
16.7

 
32.9

 
46.9

 
20.2

Total
$
21.2

 
$
33.5

 
$
47.9

 
$
101.9

 
$
43.8


________________________________
(1) 
The primary areas of the preliminary purchase price allocation that are subject to change relate to certain legal and income tax matters.
(2) 
See Note 7, Goodwill and Purchased Intangible Assets, for adjustments made during the measurement period subsequent to the acquisition dates.
(3) 
The goodwill recognized for these acquisitions was primarily attributable to expected synergies and is not deductible for U.S. federal income tax purposes.

The following table summarizes the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized (in millions, except years):
 
2018
 
2017
 
2016
 
HTBase
 
Cyphort
 
AppFormix
 
Aurrion
 
BTI
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Existing technology
4
 
$
7.8

 
5
 
$
15.4

 
5
 
$
20.1

 
 
$

 
8
 
$
37.1

Customer relationships
 

 
 

 
1
 
0.2

 
 

 
8
 
5.3

Other
 

 
 

 
 

 
 

 
1
 
0.9

Total intangible assets with finite lives
 
 
7.8

 
 
 
15.4

 
 
 
20.3

 
 
 

 
 
 
43.3

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
IPR&D
 
 

 
 
 

 
 
 

 
 
 
49.0

 
 
 

Total intangible assets acquired
 
 
$
7.8

 
 
 
$
15.4

 
 
 
$
20.3

 
 
 
$
49.0

 
 
 
$
43.3



2018 Acquisition

HTBase

On December 7, 2018, the Company acquired 100% of the equity of HTBase for $19.6 million of cash. The acquisition of HTBase, a software company that has developed a unique and disruptive platform for software-defined enterprise multicloud, is expected to accelerate Juniper's leadership in multicloud and function with the compute orchestration capabilities of Contrail Enterprise Multicloud.

Prior to the acquisition, the Company had an outstanding promissory note and bridge notes totaling $1.6 million, measured at fair value, which were effectively settled upon acquisition.

Under the terms of the acquisition agreement with HTBase, the Company granted certain share-based awards to continuing employees in substitution of awards held by such employees, which were granted in contemplation of future services. The fair value of these share-based awards was $3.8 million, which will be expensed as share-based compensation over the remaining service period.

2017 Acquisition

Cyphort

On September 18, 2017, the Company acquired 100% of Cyphort for $33.5 million of cash. The acquisition of Cyphort, a software company providing security analytics for advanced threat defense, is expected to strengthen Juniper's security product portfolio.

Under the terms of the acquisition agreement with Cyphort, the Company assumed certain share-based awards for continuing employees, which were granted in contemplation of future services. The fair value of these share-based awards was $3.8 million, which will be expensed as share-based compensation over the remaining service period.

2016 Acquisitions

AppFormix

On December 6, 2016, the Company acquired 100% of AppFormix for $47.9 million of cash. AppFormix was a company focused on cloud infrastructure optimization software. The Company acquired AppFormix on the expectation that it would complement the analytics and capabilities of Contrail and help its customers enhance their cloud operations.

Under the terms of the acquisition agreement, the Company assumed share-based awards for continuing employees from the acquisition of AppFormix, which were granted in contemplation of future services. The fair value of these share-based awards was $23.9 million, which will be expensed as share-based compensation over the remaining service period.

Aurrion

On August 9, 2016, the Company acquired the remaining ownership interest in Aurrion, increasing its ownership from 18% to 100%, for $74.3 million of cash. Aurrion, was a privately-held provider of fabless silicon photonic technology. The Company acquired Aurrion on the expectation that it would strengthen the Company's long-term competitive advantage in cost-effective, high-density, high-speed networks.

Prior to the acquisition, the Company had a pre-existing investment in Aurrion's equity and also held convertible debt that were remeasured to fair value of $17.2 million and $10.4 million, respectively, based upon the perspective of a market participant when estimating the fair value.

Under the terms of the acquisition agreement, the Company assumed share-based awards for continuing employees from the acquisition of Aurrion, which were granted in contemplation of future services. The fair value of these share-based awards was $55.0 million, which will be expensed as share-based compensation over the remaining service period.

Additionally, the Company acquired IPR&D consisting of existing research and development projects that had not yet reached technological feasibility at the time of the acquisition. The acquired IPR&D involves technology for cost-effective, high-speed networks. The IPR&D was valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expected to result from the associated project.

BTI

On April 1, 2016, the Company acquired the remaining ownership interest in BTI, increasing its ownership from 12% to 100%, for $25.8 million of cash. BTI was a privately-held provider of cloud and metro networking systems and software to content, cloud, and service providers. The Company acquired BTI on the expectation that this would help to accelerate the Company's ability to deliver open and automated packet optical transport solutions.

Prior to the acquisition, the Company had a pre-existing investment in BTI's equity and remeasured the investment to its fair value of $17.1 million, which was based upon the perspective of a market participant when estimating the fair value. The Company also held $0.9 million of convertible debt measured at fair value and settled upon acquisition. The Company also repaid upon acquisition $18.6 million of certain outstanding BTI liabilities assumed.

Additionally, under the terms of the acquisition agreement, the Company assumed share-based awards for continuing employees from the acquisition of BTI, which were granted in contemplation of future services. The fair value of these share-based awards was $8.6 million, which will be expensed as share-based compensation over the remaining service period.

Acquisition Costs

The Company recognized $4.4 million, $2.1 million, and $11.8 million of acquisition-related costs during the years ended December 31, 2018, December 31, 2017, and December 31, 2016, respectively. These acquisition-related costs were expensed in the period incurred within general and administrative expense in the Company's Consolidated Statements of Operations.
v3.10.0.1
Cash Equivalents and Investments
12 Months Ended
Dec. 31, 2018
Cash Equivalents and Investments [Abstract]  
Cash Equivalents and Investments
Cash Equivalents and Investments

Investments in Available-for-Sale Debt Securities

The following table summarizes the Company's unrealized gains and losses and fair value of investments designated as available-for-sale debt securities as of December 31, 2018 and December 31, 2017 (in millions):
 
As of December 31, 2018
 
As of December 31, 2017
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
$
46.8

 
$

 
$
(0.3
)
 
$
46.5

 
$
287.1

 
$

 
$
(0.6
)
 
$
286.5

Certificates of deposit
152.9

 

 

 
152.9

 
83.8

 

 

 
83.8

Commercial paper
393.6

 

 

 
393.6

 
217.1

 

 

 
217.1

Corporate debt securities
416.1

 

 
(3.1
)
 
413.0

 
929.6

 
0.4

 
(3.0
)
 
927.0

Foreign government debt securities
20.0

 

 
(0.1
)
 
19.9

 
62.9

 

 
(0.2
)
 
62.7

Time deposits
278.6

 

 

 
278.6

 
239.2

 

 

 
239.2

U.S. government agency securities
87.2

 

 
(0.2
)
 
87.0

 
143.9

 

 
(0.7
)
 
143.2

U.S. government securities
811.8

 

 
(0.5
)
 
811.3

 
406.8

 
0.1

 
(0.9
)
 
406.0

Total fixed income securities
2,207.0

 

 
(4.2
)
 
2,202.8

 
2,370.4

 
0.5

 
(5.4
)
 
2,365.5

Privately-held debt and redeemable preferred stock securities
16.6

 
37.4

 

 
54.0

 
15.9

 
37.4

 

 
53.3

Total available-for-sale debt securities
$
2,223.6

 
$
37.4

 
$
(4.2
)
 
$
2,256.8

 
$
2,386.3

 
$
37.9

 
$
(5.4
)
 
$
2,418.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents
$
936.5

 
$

 
$

 
$
936.5

 
$
351.0

 
$

 
$

 
$
351.0

Short-term investments
1,069.2

 

 
(1.9
)
 
1,067.3

 
1,027.2

 
0.1

 
(1.2
)
 
1,026.1

Long-term investments
201.3

 

 
(2.3
)
 
199.0

 
992.2

 
0.4

 
(4.2
)
 
988.4

Other long-term assets
16.6

 
37.4

 

 
54.0

 
15.9

 
37.4

 

 
53.3

Total
$
2,223.6

 
$
37.4

 
$
(4.2
)
 
$
2,256.8

 
$
2,386.3

 
$
37.9

 
$
(5.4
)
 
$
2,418.8



The following table presents the contractual maturities of the Company's total fixed income securities as of December 31, 2018 (in millions):
 
Amortized
Cost
 
Estimated Fair
Value
Due in less than one year
$
2,005.7

 
$
2,003.8

Due between one and five years
201.3

 
199.0

Total
$
2,207.0

 
$
2,202.8


The following tables present the Company's total fixed income securities that were in an unrealized loss position as of December 31, 2018 and December 31, 2017 (in millions):
 
As of December 31, 2018
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
$
3.1

 
$

 
$
43

 
$
(0.3
)
 
$
46.1

 
$
(0.3
)
Corporate debt securities
72.6

 
(0.1
)
 
330.7

 
(3.0
)
 
403.3

 
(3.1
)
Foreign government debt securities
1.5

 

 
18.4

 
(0.1
)
 
19.9

 
(0.1
)
U.S. government agency securities
2.0

 

 
45.2

 
(0.2
)
 
47.2

 
(0.2
)
U.S. government securities
344.0

 

 
63.5

 
(0.5
)
 
407.5

 
(0.5
)
Total fixed income securities
$
423.2

 
$
(0.1
)
 
$
500.8

 
$
(4.1
)
 
$
924.0

 
$
(4.2
)


 
As of December 31, 2017
 
Less than 12 Months 
 
12 Months or Greater 
 
Total 
 
Fair
Value 
 
Unrealized
Loss 
 
Fair
Value 
 
Unrealized
Loss 
 
Fair
Value 
 
Unrealized
Loss 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
$
215.2

 
$
(0.4
)
 
$
38.4

 
$
(0.2
)
 
$
253.6

 
$
(0.6
)
Corporate debt securities
646.7

 
(2.1
)
 
108.6

 
(0.9
)
 
755.3

 
(3.0
)
Foreign government debt securities
47.3

 
(0.2
)
 
6.6

 

 
53.9

 
(0.2
)
U.S. government agency securities
68.3

 
(0.2
)
 
67.9

 
(0.5
)
 
136.2

 
(0.7
)
U.S. government securities
260.8

 
(0.7
)
 
51.8

 
(0.2
)
 
312.6

 
(0.9
)
Total fixed income securities
$
1,238.3

 
$
(3.6
)
 
$
273.3

 
$
(1.8
)
 
$
1,511.6

 
$
(5.4
)
 

As of December 31, 2018, the Company had 490 investments in unrealized loss positions. The gross unrealized losses related to these investments were primarily due to changes in market interest rates. The Company does not intend to sell these investments and does not believe that it is more likely than not it will be required to sell any of these investments before recovery of the entire amortized cost basis, therefore the Company has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the years ended December 31, 2018, 2017, and 2016.

During the years ended December 31, 2018, 2017, and 2016, there were no material gross realized gains or losses from available-for-sale debt securities.

Investments in Equity Securities

The following table presents the Company's investments in equity securities as of December 31, 2018 and 2017 (in millions):
 
As of December 31,
 
2018

2017
Equity investments with readily determinable fair value
 
 
 
  Money market funds(1)
$
996.9

 
$
969.8

  Mutual funds(2)
24.3

 
27.6

  Publicly-traded equity securities
2.8

 

Equity investments without readily determinable fair value(3)
36.4

 
29.7

  Total equity securities
$
1,060.4

 
$
1,027.1

 
 
 
 
Reported as:
 
 
 
Cash equivalents
$
985.3

 
$
928.0

Short-term investments
2.8

 

Prepaid expenses and other current assets
10.9

 
36.3

Other long-term assets
61.4

 
62.8

Total
$
1,060.4

 
$
1,027.1

________________________________
(1) 
Prior to January 1, 2018, money market funds were classified as available-for-sale securities and accounted for at fair value with unrealized gains and losses recognized in accumulated other comprehensive income (loss). Realized gains or losses from sales or impairments were recognized in the Consolidated Statements of Operations.
(2) 
Prior to January 1, 2018, mutual funds related to the Company's NQDC plan were classified as trading securities. Unrealized gains or losses were recognized in the Consolidated Statements of Operations.
(3) 
Prior to January 1, 2018, certain investments in privately-held companies were accounted for at cost less impairment. Realized gains or losses from sales or impairments were recognized in the Consolidated Statements of Operations.

During the year ended December 31, 2018, there were $3.2 million in unrealized losses recognized for equity investments. During the years ended 2017, and 2016, there were no material unrealized gains or losses recognized for equity investments.

Restricted Cash and Investments

The Company has restricted cash and investments for: (i) amounts held in escrow accounts, as required in connection with certain acquisitions completed primarily between 2015 and 2018; (ii) amounts held under the Company's short-term disability plan in California; and (iii) amounts under the NQDC plan for senior-level employees. Restricted investments are designated as equity investments. As of December 31, 2018, the carrying value of restricted cash and investments was $52.7 million, of which $27.6 million was included in prepaid expenses and other current assets and $25.1 million was included in other long-term assets on the Consolidated Balance Sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash included in the Consolidated Balance Sheets as of December 31, 2018 and December 31, 2017 (in millions):
 
As of December 31,
 
2018
 
2017
Cash and cash equivalents
$
2,489.0

 
$
2,006.5

Restricted cash included in Prepaid expenses and other current assets
16.8

 
49.6

Restricted cash included in Other long-term assets

 
3.0

  Total cash, cash equivalents, and restricted cash
$
2,505.8

 
$
2,059.1

v3.10.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of assets and liabilities measured at fair value on a recurring basis and as reported in the Consolidated Balance Sheets (in millions):
 
Fair Value Measurements at
December 31, 2018
 
Fair Value Measurements at
December 31, 2017
 
Quoted Prices in
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable
Remaining Inputs
(Level 2)
 
Significant Other
Unobservable
Remaining Inputs
(Level 3)
 
Total
 
Quoted Prices in
Active Markets For
Identical Assets
(Level 1)
 
Significant Other
Observable
Remaining Inputs
(Level 2)
 
Significant Other
Unobservable
Remaining Inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
$

 
$
46.5

 
$

 
$
46.5

 
$

 
$
286.5

 
$

 
$
286.5

Certificates of deposit

 
152.9

 

 
152.9

 

 
83.8

 

 
83.8

Commercial paper

 
393.6

 

 
393.6

 

 
217.1

 

 
217.1

Corporate debt securities

 
413.0

 

 
413.0

 

 
927.0

 

 
927.0

Foreign government debt securities

 
19.9

 

 
19.9

 

 
62.7

 

 
62.7

Time deposits

 
278.6

 

 
278.6

 

 
239.2

 

 
239.2

U.S. government agency securities

 
87.0

 

 
87.0

 

 
143.2

 

 
143.2

U.S. government securities
352.8

 
458.5

 

 
811.3

 
322.4

 
83.6

 

 
406.0

Privately-held debt and redeemable preferred stock securities

 

 
54.0

 
54.0