JUNIPER NETWORKS INC, 10-Q filed on 5/9/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 03, 2019
Document and Entity Information [Abstract]    
Entity Registrant Name JUNIPER NETWORKS INC  
Entity Central Index Key 0001043604  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Common Stock, Shares Outstanding   344,325,417
v3.19.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Total net revenues $ 1,001.7 $ 1,082.6
Cost of revenues:    
Total cost of revenues 419.4 464.2
Gross margin 582.3 618.4
Operating expenses:    
Research and development 227.6 269.4
Sales and marketing 228.5 239.4
General and administrative 68.2 56.0
Restructuring charges (benefits) 15.3 (1.9)
Total operating expenses 539.6 562.9
Operating income 42.7 55.5
Other income (expense), net 1.8 (14.1)
Income before income taxes 44.5 41.4
Income tax provision 13.4 7.0
Net income $ 31.1 $ 34.4
Net income per share:    
Basic (in dollars per share) $ 0.09 $ 0.10
Diluted, (in dollars per share) $ 0.09 $ 0.10
Shares used in computing net income per share:    
Basic (in shares) 348.1 355.3
Diluted (in shares) 352.7 360.6
Product    
Total net revenues $ 618.7 $ 710.8
Cost of revenues:    
Total cost of revenues 270.0 306.4
Service    
Total net revenues 383.0 371.8
Cost of revenues:    
Total cost of revenues $ 149.4 $ 157.8
v3.19.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net income $ 31.1 $ 34.4
Available-for-sale debt securities:    
Change in net unrealized gains and losses, net of tax (provision) benefit of ($0.6) and $1.4, respectively 1.8 (2.0)
Net realized losses reclassified into net income, net of tax provisions of zero and zero, respectively 0.0 0.9
Net change on available-for-sale debt securities, net of tax 1.8 (1.1)
Cash flow hedges:    
Change in net unrealized gains and losses, net of tax provision of $1.3 and $0.3, respectively 2.1 13.1
Net realized (gains) losses reclassified into net income, net of tax provisions of $0.2 and $0.6, respectively 1.2 (5.1)
Net change on cash flow hedges, net of tax 3.3 8.0
Change in foreign currency translation adjustments 2.2 5.3
Other comprehensive income, net of tax 7.3 12.2
Comprehensive income $ 38.4 $ 46.6
v3.19.1
Condensed Consolidated Statements of Comprehensive Income (Parentheticals) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Unrealized gain (loss) on available-for-sale securities, tax (provision) benefit $ (0.6) $ 1.4
Reclassification adjustment for realized net loss (gain) on available-for-sale securities included in net income, tax provisions 0.0 0.0
Unrealized (loss) gain on cash flow hedges, tax (provision) benefit (1.3) (0.3)
Reclassification adjustment for realized net loss (gain) on cash flow hedges included in net income, tax provisions (benefit) $ 0.2 $ 0.6
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 2,155.6 $ 2,489.0
Short-term investments 1,227.4 1,070.1
Accounts receivable, net of allowances 645.4 754.6
Prepaid expenses and other current assets 281.2 268.1
Total current assets 4,309.6 4,581.8
Property and equipment, net 892.4 951.7
Operating lease assets 184.2  
Long-term investments 119.7 199.0
Purchased intangible assets, net 113.5 118.5
Goodwill 3,109.3 3,108.8
Other long-term assets 409.2 403.5
Total assets 9,137.9 9,363.3
Current liabilities:    
Accounts payable 219.1 208.8
Accrued compensation 166.8 221.0
Deferred revenue 860.1 829.3
Short-term portion of long-term debt 0.0 349.9
Other accrued liabilities 243.1 233.5
Total current liabilities 1,489.1 1,842.5
Long-term debt 1,789.6 1,789.1
Long-term deferred revenue 370.8 384.3
Long-term income taxes payable 407.3 404.4
Long-term operating lease liabilities 176.7  
Other long-term liabilities 53.2 119.8
Total liabilities 4,286.7 4,540.1
Commitments and contingencies (Note 13)
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; 352.0 shares and 346.4 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively 0.0 0.0
Additional paid-in capital 7,668.6 7,672.8
Accumulated other comprehensive loss (10.9) (18.2)
Accumulated deficit (2,806.5) (2,831.4)
Total stockholders' equity 4,851.2 4,823.2
Total liabilities and stockholders' equity $ 9,137.9 $ 9,363.3
v3.19.1
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Mar. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Convertible preferred stock - par value (in dollars per share) $ 0.00001 $ 0.00001
Convertible preferred stock - shares authorized (shares) 10,000,000 10,000,000
Convertible preferred stock - issued (shares) 0 0
Convertible preferred stock - outstanding (shares) 0 0
Common stock - par value (in dollars per share) $ 0.00001 $ 0.00001
Common stock - shares authorized (shares) 1,000,000,000 1,000,000,000
Common stock - issued (shares) 352,000,000 346,400,000
Common stock - outstanding (shares) 352,000,000 346,400,000
v3.19.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash flows from operating activities:    
Net income $ 31.1 $ 34.4
Adjustments to reconcile net income to net cash provided by operating activities:    
Share-based compensation expense 33.9 70.4
Depreciation, amortization, and accretion 48.7 55.7
Other (2.2) 1.7
Changes in operating assets and liabilities, net of acquisitions:    
Accounts receivable, net 108.6 170.8
Prepaid expenses and other assets 0.5 (11.7)
Accounts payable 10.1 (31.2)
Accrued compensation (54.9) (14.1)
Income taxes payable (5.7) (7.6)
Other accrued liabilities (27.9) (51.1)
Deferred revenue 17.2 53.8
Net cash provided by operating activities 159.4 271.1
Cash flows from investing activities:    
Purchases of property and equipment (27.9) (42.2)
Purchases of available-for-sale debt securities (884.4) (8.1)
Proceeds from sales of available-for-sale debt securities 232.8 968.0
Proceeds from maturities and redemptions of available-for-sale debt securities 578.3 215.4
Purchases of equity securities (5.1) (2.0)
Proceeds from sales of equity securities 2.2 3.3
Subsequent payments related to acquisitions in prior years 0.0 (22.2)
Net cash (used in) provided by investing activities (104.1) 1,112.2
Cash flows from financing activities:    
Repurchase and retirement of common stock (2.9) (754.2)
Proceeds from issuance of common stock 29.5 29.3
Payment of dividends (66.2) (62.1)
Change in customer financing arrangement 0.0 (16.6)
Payment of debt (350.0) 0.0
Net cash used in financing activities (389.6) (803.6)
Effect of foreign currency exchange rates on cash, cash equivalents, and restricted cash 1.6 6.2
Net increase in cash, cash equivalents, and restricted cash (332.7) 585.9
Cash, cash equivalents, and restricted cash at beginning of period 2,505.8 2,059.1
Cash, cash equivalents, and restricted cash at end of period $ 2,173.1 $ 2,645.0
v3.19.1
Condensed 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) Income
Accumulated Deficit
Balance (in shares) at Dec. 31, 2017   365.5      
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 34.4       34.4
Other comprehensive income (loss), net 12.2     12.2  
Issuance of common stock (in shares)   7.0      
Issuance of common stock 29.3   29.3    
Repurchase and retirement of common stock (in shares)   (23.5)      
Repurchase and retirement of common stock (604.2)   (314.4)   (289.8)
Purchase of equity forward contract (150.0)        
Share-based compensation expense 70.6   70.6    
Payments of cash dividends (62.1)   (62.1)    
Balance (in shares) at Mar. 31, 2018   349.0      
Balance at Mar. 31, 2018 4,324.7   7,615.5 12.5 (3,303.3)
Balance (in shares) at Dec. 31, 2018   346.4      
Balance at Dec. 31, 2018 4,823.2   7,672.8 (18.2) (2,831.4)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 31.1       31.1
Other comprehensive income (loss), net 7.3     7.3  
Issuance of common stock (in shares)   5.7      
Issuance of common stock 29.5   29.5    
Repurchase and retirement of common stock (in shares)   (0.1)      
Repurchase and retirement of common stock (2.9)   (1.4)   (1.5)
Share-based compensation expense 33.9   33.9    
Payments of cash dividends (66.2)   (66.2)    
Balance (in shares) at Mar. 31, 2019   352.0      
Balance at Mar. 31, 2019 $ 4,851.2   $ 7,668.6 $ (10.9) $ (2,806.5)
v3.19.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares
3 Months Ended
Mar. 22, 2019
Mar. 31, 2019
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]      
Cash dividends (in dollars per share) $ 0.19 $ 0.19 $ 0.18
v3.19.1
Basis of Presentation
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
Basis of Presentation

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of Juniper Networks, Inc. (the “Company” or “Juniper”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of December 31, 2018 has been derived from the audited Consolidated Financial Statements at that date. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or any future period.

The information included in this Quarterly Report on Form 10-Q (“Report”) should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 (the "Form 10-K").

The preparation of the financial statements and related disclosures in accordance with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying notes. Actual results could differ materially from those estimates under different assumptions or conditions.
v3.19.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Except for the change in certain policies upon adoption of the accounting standards described below, there have been no material changes to the Company's significant accounting policies, compared to the accounting policies described in Note 2, Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Form 10-K.

Recently Adopted Accounting Standards

Cloud Computing Arrangement: On January 1, 2019, the Company early adopted FASB 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 Company has adopted the standard prospectively and had no material impact to all applicable implementation costs incurred after the adoption date.

Derivatives and Hedging: On January 1, 2019, the Company adopted FASB 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 Company adopted the standard under the modified retrospective approach, and its amendment and presentation and disclosure requirements on a prospective basis. The adoption did not have a material impact on the Condensed Consolidated Financial Statements. See Note 5, Derivative Instruments for additional disclosures required upon adopting the standard.

Amortization on Purchased Callable Debt Securities: On January 1, 2019, the Company adopted FASB 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 standard will not impact debt securities held at a discount. The Company adopted the standard under the modified retrospective approach. The adoption did not have a material impact on the Condensed Consolidated Financial Statements.

Leases: On January 1, 2019, the Company adopted FASB ASU No. 2016-02, Leases (Topic 842), and the related subsequent amendments ("ASC 842"), which require recognition by the lessees of right-of-use ("ROU") assets and lease liabilities for most leases on the Company's Consolidated Balance Sheets. The Company adopted the new standard under the modified retrospective approach, and recorded a cumulative-effect adjustment to the opening balance of accumulated deficit as of the effective date. Under the modified retrospective method, financial results reported in periods prior to 2019 are unchanged. The Company elected the package of practical expedients which did not require the reassessment of existing leases under the new guidance. The Company also elected not to separate non-lease components from lease components and to not recognize ROU assets and lease liabilities for short-term leases.

The cumulative effect of the adjustments made to the Company's Condensed Consolidated Balance Sheet as of the adoption date is detailed as follows (in millions):
 
December 31, 2018
 
 
 
January 1, 2019
 
As reported
 
Adjustments due to ASC 842
 
As adjusted
Assets:
 
 
 
 
 
Prepaid expenses and other current assets
$
268.1

 
$
(1.4
)
 
$
266.7

Property and equipment, net
951.7

 
(42.9
)
 
908.8

Operating lease assets

 
192.5

 
192.5

Other long-term assets
403.5

 
1.3

 
404.8

Total assets
$
9,363.3

 
$
149.5

 
$
9,512.8

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Other accrued liabilities
$
233.5

 
$
35.6

 
$
269.1

Long-term operating lease liabilities

 
185.5

 
185.5

Other long-term liabilities
119.8

 
(66.7
)
 
53.1

Total liabilities
$
4,540.1

 
$
154.4

 
$
4,694.5

 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
Accumulated deficit
$
(2,831.4
)
 
$
(4.9
)
 
$
(2,836.3
)


The adoption of the standard had no impact on the Company's Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows or debt-covenant compliance under its current agreements. See Note 13, Commitment and Contingencies, for additional disclosures required upon adopting the standard.

Leases

The Company determines if an arrangement is a lease at inception. The Company evaluates classification of leases at commencement and, as necessary, at modification. As of March 31, 2019, the Company did not have any finance leases. Operating leases are included in operating lease ROU assets, other accrued liabilities, and operating lease liabilities on the Company's Condensed Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and excludes lease incentives. Variable lease payments not dependent on an index or a rate, are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. The Company's lease terms are the noncancelable period including any rent-free periods provided by the lessor and include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. Lease costs are recognized on a straight-line basis over the lease term.

The Company does not separate non-lease components from lease components for all underlying classes of assets. In addition, the Company does not 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. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

Recent Accounting Standards Not Yet Adopted

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.

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.
v3.19.1
Cash Equivalents and Investments
3 Months Ended
Mar. 31, 2019
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 March 31, 2019 and December 31, 2018 (in millions):


As of March 31, 2019

As of December 31, 2018

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
$
30.4


$


$
(0.1
)

$
30.3


$
46.8


$


$
(0.3
)

$
46.5

Certificates of deposit
95.4






95.4


152.9






152.9

Commercial paper
377.5






377.5


393.6






393.6

Corporate debt securities
363.3




(1.3
)

362.0


416.1




(3.1
)

413.0

Foreign government debt securities
38.4




(0.1
)

38.3


20.0




(0.1
)

19.9

Time deposits
84.2






84.2


278.6






278.6

U.S. government agency securities
25.7




(0.1
)

25.6


87.2




(0.2
)

87.0

U.S. government securities
746.6


0.1


(0.3
)

746.4


811.8




(0.5
)

811.3

Total fixed income securities
1,761.5


0.1


(1.9
)

1,759.7


2,207.0




(4.2
)

2,202.8

Privately-held debt and redeemable preferred stock securities
14.6

 
37.4

 

 
52.0


16.6


37.4

 

 
54.0

Total available-for-sale debt securities
$
1,776.1


$
37.5


$
(1.9
)

$
1,811.7


$
2,223.6


$
37.4


$
(4.2
)

$
2,256.8























Reported as:























Cash equivalents
$
414.4


$


$


$
414.4


$
936.5


$


$


$
936.5

Short-term investments
1,226.7


0.1


(1.2
)

1,225.6


1,069.2




(1.9
)

1,067.3

Long-term investments
120.4




(0.7
)

119.7


201.3




(2.3
)

199.0

Other long-term assets
14.6

 
37.4

 

 
52.0

 
16.6

 
37.4

 

 
54.0

Total
$
1,776.1


$
37.5


$
(1.9
)

$
1,811.7


$
2,223.6


$
37.4


$
(4.2
)

$
2,256.8




The following table presents the contractual maturities of the Company's total fixed income securities as of March 31, 2019 (in millions):
 
Amortized
Cost
 
Estimated Fair
Value
Due in less than one year
$
1,641.1

 
$
1,640.0

Due between one and five years
120.4

 
119.7

Total
$
1,761.5

 
$
1,759.7



The following tables present the Company's total fixed income securities that were in an unrealized loss position as of March 31, 2019 and December 31, 2018 (in millions):
 
As of March 31, 2019
 
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
$
0.2

 
$

 
$
27.7

 
$
(0.1
)
 
$
27.9

 
$
(0.1
)
Corporate debt securities
47.3

 

 
278.1

 
(1.3
)
 
325.4

 
(1.3
)
Foreign government debt securities
5.5

 

 
17.3

 
(0.1
)
 
22.8

 
(0.1
)
U.S. government agency securities

 

 
23.6

 
(0.1
)
 
23.6

 
(0.1
)
U.S. government securities
312.0

 

 
46.4

 
(0.3
)
 
358.4

 
(0.3
)
Total fixed income securities
$
365.0

 
$

 
$
393.1

 
$
(1.9
)
 
$
758.1

 
$
(1.9
)


 
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

 
$
(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
)


For available-for-sale debt securities that have unrealized losses, the Company assesses impairment by evaluating various factors, including whether (i) it has the intention to sell any of these investments and (ii) whether it is more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. As of March 31, 2019, the Company had 382 investments in unrealized loss positions. The gross unrealized losses related to these investments were primarily due to changes in market interest rates. The Company anticipates that it will recover the entire amortized cost basis of such available-for-sale debt securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three months ended March 31, 2019 and March 31, 2018.

During the three months ended March 31, 2019 and March 31, 2018, 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 March 31, 2019 and December 31, 2018 (in millions):
 
As of
 
March 31,
2019
 
December 31,
2018
Equity investments with readily determinable fair value
 
 
 
  Money market funds(1)
$
836.7

 
$
996.9

  Mutual funds(2)
26.2

 
24.3

  Publicly-traded equity securities
1.8

 
2.8

  Equity investments without readily determinable fair value
42.1

 
36.4

  Total equity securities
$
906.8

 
$
1,060.4

 
 
 
 
Reported as:
 
 
 
Cash equivalents
$
825.1

 
$
985.3

Short-term investments
1.8

 
2.8

Prepaid expenses and other current assets
11.2

 
10.9

Other long-term assets
68.7

 
61.4

Total
$
906.8

 
$
1,060.4

________________________________
(1) 
Balance includes $11.6 million and $11.6 million in restricted investments measured at fair value, related to the Company's acquisition-related escrow accounts as of March 31, 2019 and December 31, 2018, respectively.
(2) 
Balance relates to restricted investments measured at fair value related to the Company's Deferred Compensation Plan.

For the three months ended March 31, 2019 and March 31, 2018, there were no material unrealized gains or losses recognized for equity investments.

Restricted Cash and Investments

As of March 31, 2019, the carrying value of restricted cash and investments was $55.3 million, of which $28.8 million was included in prepaid expenses and other current assets and $26.5 million was included in other long-term assets on the Condensed Consolidated Balance Sheet.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash included in the Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 (in millions):
 
As of
 
March 31,
2019
 
December 31,
2018
Cash and cash equivalents
$
2,155.6

 
$
2,489.0

Restricted cash included in Prepaid expenses and other current assets
17.5

 
16.8

  Total cash, cash equivalents, and restricted cash
$
2,173.1

 
$
2,505.8

v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2019
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 Condensed Consolidated Balance Sheets (in millions):

Fair Value Measurements at
March 31, 2019

Fair Value Measurements at
December 31, 2018

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
$


$
30.3


$


$
30.3


$


$
46.5


$


$
46.5

Certificates of deposit


95.4




95.4




152.9




152.9

Commercial paper


377.5




377.5




393.6




393.6

Corporate debt securities


362.0




362.0




413.0




413.0

Foreign government debt securities


38.3




38.3




19.9




19.9

Time deposits


84.2




84.2




278.6




278.6

U.S. government agency securities


25.6




25.6




87.0




87.0

U.S. government securities
412.9


333.5




746.4


352.8


458.5




811.3

Privately-held debt and redeemable preferred stock securities

 

 
52.0

 
52.0

 

 

 
54.0

 
54.0

Total available-for-sale debt securities
412.9


1,346.8


52.0


1,811.7


352.8


1,850.0


54.0


2,256.8

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
836.7

 

 

 
836.7

 
996.9

 

 

 
996.9

Mutual funds
26.2






26.2


24.3






24.3

Publicly-traded equity securities
1.8

 

 

 
1.8

 
2.8

 

 

 
2.8

Total equity securities
864.7

 

 

 
864.7

 
1,024.0

 

 

 
1,024.0

Derivative assets:























Foreign exchange contracts


8.4




8.4




5.3




5.3

Total assets measured at fair value
$
1,277.6


$
1,355.2


$
52.0


$
2,684.8


$
1,376.8


$
1,855.3


$
54.0


$
3,286.1

Liabilities:





















Derivative liabilities:





















Foreign exchange contracts
$


$
(5.8
)

$


$
(5.8
)

$


$
(7.1
)

$


$
(7.1
)
Total liabilities measured at fair value
$


$
(5.8
)

$


$
(5.8
)

$


$
(7.1
)

$


$
(7.1
)






















Total assets, reported as:





















Cash equivalents
$
825.1


$
414.4


$


$
1,239.5


$
1,025.2


$
896.6


$


$
1,921.8

Short-term investments
406.2


821.2




1,227.4


297.5


772.6




1,070.1

Long-term investments
8.5


111.2




119.7


18.2


180.8




199.0

Prepaid expenses and other current assets
11.3


8.4




19.7


10.8


5.3




16.1

Other long-term assets
26.5




52.0


78.5


25.1




54.0


79.1

Total assets measured at fair value
$
1,277.6


$
1,355.2


$
52.0


$
2,684.8


$
1,376.8


$
1,855.3


$
54.0


$
3,286.1























Total liabilities, reported as:





















Other accrued liabilities
$


$
(5.8
)

$


$
(5.8
)

$


$
(7.1
)

$


$
(7.1
)
Total liabilities measured at fair value
$


$
(5.8
)

$


$
(5.8
)

$


$
(7.1
)

$


$
(7.1
)


The Company's Level 2 available-for-sale debt securities are priced using quoted market prices for similar instruments or non-binding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, or alternative pricing sources with reasonable levels of price transparency which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets. The Company's derivative instruments are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs. The Company's policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 at the beginning of the quarter in which a change in circumstances resulted in a transfer. During the three months ended March 31, 2019, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

All of the Company's privately-held debt and redeemable preferred stock securities are classified as Level 3 assets due to the lack of observable inputs to determine fair value. The Company estimates the fair value of its privately-held debt and redeemable preferred stock securities on a recurring basis using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and the investee's capital structure. During the three months ended March 31, 2019, there were no significant activities related to privately-held debt and redeemable preferred stock securities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain of the Company's assets, including intangible assets and goodwill, are measured at fair value on a nonrecurring basis, when they are deemed to be other-than temporarily impaired. There were no impairment charges recognized during the three months ended March 31, 2019.

Equity investments without readily determinable fair value are measured at fair value, when they are deemed to be impaired or when there is an adjustment from observable price changes. For the three months ended March 31, 2019, there were no material impairment charges or adjustments resulting from observable price changes for equity investments without readily determinable fair value.

As of March 31, 2019 and December 31, 2018, the Company had no liabilities required to be measured at fair value on a nonrecurring basis.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of the Company's accounts receivable, accounts payable, and other accrued liabilities approximate fair value due to their short maturities. As of March 31, 2019 and December 31, 2018, the estimated fair value of the Company's total outstanding debt in the Condensed Consolidated Balance Sheets was $1,856.2 million and $2,158.7 million, respectively, based on observable market inputs (Level 2). The carrying value of the promissory note issued to the Company in connection with the previously completed sale of Junos Pulse, along with the accumulated interest paid in kind, of $69.0 million approximates its fair value as of March 31, 2019 and December 31, 2018. Notes receivable are generally classified as Level 3 asset due to the lack of observable inputs to determine fair value. The carrying value of a contract manufacturer deposit of $47.6 million, reported within other long-term assets, in the Condensed Consolidated Balance Sheets approximates its fair value as of March 31, 2019. See Note 6, Other Financial Information, for further information on the contract manufacturer deposit.
v3.19.1
Derivative Instruments
3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments

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

The notional amount of the Company's foreign currency derivatives are summarized as follows (in millions):
 
As of
 
March 31,
2019
 
December 31,
2018
Cash flow hedges
$
377.0

 
$
497.7

Non-designated derivatives
175.6

 
158.7

   Total
$
552.6

 
$
656.4



Cash Flow Hedges

The Company uses foreign currency forward contracts to hedge the Company's planned cost of revenues and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges. Execution of cash flow hedge derivatives typically occurs every month with maturities of eighteen months or less. As of March 31, 2019, an estimated $2.8 million of unrealized net gain within accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months.

The Company recognized an unrealized gain of $3.4 million and $13.4 million in accumulated other comprehensive income for the effective portion of its derivative instruments for the three months ended March 31, 2019 and March 31, 2018, respectively. The Company reclassified a loss of $1.0 million and a gain of $5.6 million out of accumulated other comprehensive income to cost of revenues and operating expenses in the Condensed Consolidated Statements of Operations during the three months ended March 31, 2019 and March 31, 2018, respectively.

See Note 4, Fair Value Measurements, for the fair values of the Company's derivative instruments in the Condensed Consolidated Balance Sheets.

Non-Designated Derivatives

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These foreign exchange forward contracts typically have maturities of approximately one to three months. The outstanding non-designated derivative instruments are carried at fair value. Changes in the fair value of these derivatives recorded in other expense, net within the Condensed Consolidated Statements of Operations were not material during the three months ended March 31, 2019 and March 31, 2018.
v3.19.1
Other Financial Information
3 Months Ended
Mar. 31, 2019
Other Financial Information [Abstract]  
Other Financial Information
Other Financial Information

Inventory

Total inventory consisted of the following (in millions):
 
As of

March 31,
2019
 
December 31,
2018
Production and service materials
$
72.6

 
$
60.6

Finished goods
21.3

 
21.4

Inventory
$
93.9

 
$
82.0

 
 
 
 
Reported as:
 
 
 
Prepaid expenses and other current assets
$
92.4

 
$
80.6

Other long-term assets
1.5

 
1.4

Total
$
93.9

 
$
82.0



Deposit

The Company has a non-interest bearing deposit balance of $47.6 million, net of an unamortized discount balance of $2.3 million, to a contract manufacturer per the terms of the agreement. The discount is calculated based on an imputed interest rate of 4.8% at March 31, 2019. The imputed interest will be amortized over the term of the deposit to interest income along with a corresponding charge to cost of revenues. The deposit is due on demand in the second quarter of 2020 and has been classified as other long-term assets on the Condensed Consolidated Balance Sheets.

Warranties

Changes during the three months ended March 31, 2019 in the Company’s warranty reserve as reported within other accrued liabilities in the Condensed Consolidated Balance Sheets were as follows (in millions):
Balance as of December 31, 2018
$
28.0

Provisions made during the period
8.6

Actual costs incurred during the period
(7.7
)
Balance as of March 31, 2019
$
28.9



Deferred Revenue

Details of the Company's deferred revenue, as reported in the Condensed Consolidated Balance Sheets, were as follows (in millions):
 
As of
 
March 31,
2019
 
December 31,
2018
Deferred product revenue:
 
 
 
Undelivered product commitments and other product deferrals
$
152.3

 
$
163.3

Deferred gross product revenue
152.3

 
163.3

Deferred cost of product revenue
(12.7
)
 
(18.9
)
Deferred product revenue, net
139.6

 
144.4

Deferred service revenue
1,091.3

 
1,069.2

Total
$
1,230.9

 
$
1,213.6

Reported as:
 
 
 
Current
$
860.1

 
$
829.3

Long-term
370.8

 
384.3

Total
$
1,230.9

 
$
1,213.6



Revenue

See Note 10, Segments, for disaggregated revenue by product and service, customer vertical, and geographic region.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of March 31, 2019 and when the Company expects to recognize the amounts as revenue (in millions):
 
Revenue Recognition Expected by Period
 
Total
 
Less than 1 year
 
1-3 years
 
More than 3 years
Product
$
152.3

 
$
122.8

 
$
26.0

 
$
3.5

Service
1,091.3

 
750.0

 
285.8

 
55.5

Total
$
1,243.6

 
$
872.8

 
$
311.8

 
$
59.0



Deferred Commissions

Deferred commissions were $26.1 million as of March 31, 2019. For the three months ended March 31, 2019, amortization expense for the deferred commissions was $34.9 million. There were no impairment charges recognized during the three months ended March 31, 2019.

Other Income (Expense), Net

Other income (expense), net, consisted of the following (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Interest income
$
23.5

 
$
14.9

Interest expense
(24.2
)
 
(26.0
)
Gain (loss) on investments, net
1.6

 
(0.5
)
Other
0.9

 
(2.5
)
Other income (expense), net
$
1.8

 
$
(14.1
)
v3.19.1
Restructuring Charges
3 Months Ended
Mar. 31, 2019
Restructuring and Related Activities [Abstract]  
Restructuring Charges
Restructuring Charges

During the first quarter of 2019, the Company initiated a restructuring plan (the "2019 Restructuring Plan") designed to realign its workforce with the Company's sales strategy, improve productivity, and enhance cost efficiencies. The 2019 Restructuring Plan consists of workforce reductions and facility closures.

In connection with the 2019 Restructuring Plan, the Company recorded $15.1 million of severance costs and $0.2 million of facility consolidations, respectively, to restructuring charges in the Condensed Consolidated Statements of Operations during the three months ended March 31, 2019

Restructuring liabilities are reported within other accrued liabilities in the Condensed Consolidated Balance Sheets. The following table provides a summary of changes in the restructuring liabilities for the Company's 2019 and prior year plans (in millions):
 
December 31,
2018
 
Charges
 
Cash
Payments