UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_________ to_________
Commission file number: 001-34501

JUNIPER NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
77-0422528
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1133 Innovation Way
 
 
Sunnyvale, California
 
94089
(Address of principal executive offices)
 
(Zip code)
(408) 745-2000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.00001 per share
JNPR
New York Stock Exchange
There were 344,325,417 shares of the Company's Common Stock, par value $0.00001, outstanding as of May 3, 2019.

 



Juniper Networks, Inc.
Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Juniper Networks, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended March 31,
 
2019

2018
Net revenues:
 
 
 
Product
$
618.7

 
$
710.8

Service
383.0

 
371.8

Total net revenues
1,001.7

 
1,082.6

Cost of revenues:
 
 
 
Product
270.0

 
306.4

Service
149.4

 
157.8

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
$
0.09

 
$
0.10

Diluted
$
0.09

 
$
0.10

Shares used in computing net income per share:
 
 
 
Basic
348.1

 
355.3

Diluted
352.7

 
360.6


See accompanying Notes to Condensed Consolidated Financial Statements


3

Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
31.1

 
$
34.4

Other comprehensive (loss) income, net of tax:
 
 
 
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

 
0.9

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


See accompanying Notes to Condensed Consolidated Financial Statements


4

Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Balance Sheets
(In millions, except par values)
 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
ASSETS
 
 
 
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

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
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

 
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

 

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

 

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


See accompanying Notes to Condensed Consolidated Financial Statements

5

Table of Contents

Juniper Networks, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
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


(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

 
(16.6
)
Payment of debt
(350.0
)
 

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


See accompanying Notes to Condensed Consolidated Financial Statements

6

Table of Contents

Juniper Networks, Inc.
 
Condensed Consolidated Statements of Changes in Stockholders' Equity
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended March 31, 2019
 
 
 
Common Stock and Additional Paid-in Capital
 
Accumulated Other Comprehensive Loss
 
Accumulated
Deficit 
 
Total Stockholders' Equity
 
Shares 
 
Balance at December 31, 2018
346.4

 
$
7,672.8

 
$
(18.2
)
 
$
(2,831.4
)
 
$
4,823.2

Net income

 

 

 
31.1

 
31.1

Other comprehensive income, net

 

 
7.3

 

 
7.3

Issuance of common stock
5.7

 
29.5

 

 

 
29.5

Repurchase and retirement of common stock
(0.1
)
 
(1.4
)
 

 
(1.5
)
 
(2.9
)
Share-based compensation expense

 
33.9

 

 

 
33.9

Payments of cash dividends ($0.19 per share
of common stock)

 
(66.2
)
 

 

 
(66.2
)
   Cumulative adjustment upon adoption of
Accounting Standards Update ("ASU")
2017-12 ("Topic 815"), net

 

 

 
0.1

 
0.1

   Cumulative adjustment upon adoption of
     ASU 2016-02 ("Topic 842"), net

 

 

 
(4.8
)
 
(4.8
)
Balance at March 31, 2019
352.0

 
$
7,668.6

 
$
(10.9
)
 
$
(2,806.5
)
 
$
4,851.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
Common Stock and Additional Paid-in Capital
 
Accumulated Other Comprehensive (Loss) Income
 
Accumulated
Deficit 
 
Total Stockholders' Equity
 
Shares 
 
Balance at December 31, 2017
365.5

 
$
8,042.1

 
$
(5.4
)
 
$
(3,355.8
)
 
$
4,680.9

Net income

 

 

 
34.4

 
34.4

Other comprehensive income, net

 

 
12.2

 

 
12.2

Issuance of common stock
7.0

 
29.3

 

 

 
29.3

Repurchase and retirement of common stock
(23.5
)
 
(314.4
)
 

 
(289.8
)
 
(604.2
)
Purchase of equity forward contract

 
(150.0
)
 

 

 
(150.0
)
Share-based compensation expense

 
70.6

 

 

 
70.6

Payments of cash dividends ($0.18 per share
of common stock)

 
(62.1
)
 

 

 
(62.1
)
   Cumulative adjustment upon adoption of
     ASU 2014-09 ("Topic 606"), net

 

 

 
313.6

 
313.6

Reclassification of tax effects upon
  adoption of ASU 2018-02 ("Topic 220"), net

 

 
5.7

 
(5.7
)
 

Balance at March 31, 2018
349.0

 
$
7,615.5

 
$
12.5

 
$
(3,303.3
)
 
$
4,324.7


 See accompanying Notes to Condensed Consolidated Financial Statements


7

Table of Contents

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

Note 1. 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.


8

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

Note 2. 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):

9

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

 
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.


10

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

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.


11

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

Note 3. 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



12

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

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.


13

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

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


14

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

Note 4. 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
)


15

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

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.



16

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

Note 5. 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.


17

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

Note 6. 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



18

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

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
)

19

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

Note 7. 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
 

Other
 
March 31,
2019
Severance
$
1.1

 
$
15.1

 
$
(10.1
)
 
$
(0.1
)
 
$
6.0

Facility consolidations

 
0.2

 
(0.1
)
 
(0.1
)
 

Total
$
1.1

 
$
15.3

 
$
(10.2
)
 
$
(0.2
)
 
$
6.0


The Company expects to pay the remaining restructuring liabilities by the end of the third quarter of 2019.

20

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

Note 8. Equity

The following table summarizes dividends paid, stock repurchases and retirements under the Company's stock repurchase program (in millions, except per share amounts):

 
Three Months Ended March 31,
 
2019
 
2018(1)(2)
Dividends
 
 
 
Per share
$
0.19

 
$
0.18

Amount
$
66.2

 
$
62.1

 
 
 
 
Stock repurchases
 
 
 
Shares

 
23.3

Average price per share
$

 
$
25.80

Amount
$

 
$
750.0

________________________________
(1) 
Shares repurchased under the 2018 Stock Repurchase Program.
(2) 
$750.0 million represents the full amount of the accelerated share repurchase program (the "ASR") for which 23.3 million shares were received initially during the first quarter of 2018, and an additional 6.0 million shares were received at final settlement during the third quarter of 2018.

Cash Dividends on Shares of Common Stock

During the three months ended March 31, 2019, the Company declared a quarterly cash dividend of $0.19 per share of common stock on January 29, 2019, which was paid on March 22, 2019 to stockholders of record on March 1, 2019. Any future dividends, and the establishment of record and payment dates, are subject to approval by the Board of Directors (the “Board”) of Juniper or an authorized committee thereof. See Note 14, Subsequent Event, for discussion of the Company's dividend declaration subsequent to March 31, 2019.

Stock Repurchase Activities

In January 2018, the Board approved a $2.0 billion share repurchase program ("2018 Stock Repurchase Program"). As part of the 2018 Stock Repurchase Program, in February 2018, the Company entered into an ASR to repurchase $750.0 million of its common stock. The Company made an up-front payment of $750.0 million pursuant to the ASR to repurchase its common stock. The aggregate number of shares ultimately repurchased of 29.3 million shares of common stock was determined based on a volume weighted average repurchase price, less an agreed upon discount, of $25.62 per share.

As of March 31, 2019, there were $1.3 billion of authorized funds remaining under the 2018 Stock Repurchase Program.

Future share repurchases under the 2018 Stock Repurchase Program will be subject to a review of the circumstances at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements. The Company's 2018 Stock Repurchase Program may be discontinued at any time.

In addition to repurchases under the 2018 Stock Repurchase Program, the Company also repurchases common stock from certain employees in connection with the net issuance of shares to satisfy applicable tax withholding requirements upon the vesting of certain stock awards issued to such employees. Repurchases associated with tax withholdings were not material during the three months ended March 31, 2019 and March 31, 2018.


21

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

Accumulated Other Comprehensive Loss, Net of Tax

The components of accumulated other comprehensive loss, net of related taxes, for the three months ended March 31, 2019 were as follows (in millions):
 
Unrealized
Gains/Losses
on Available-for-
Sale Debt Securities
 
Unrealized
 Gains/Losses
on Cash Flow
Hedges
 
Foreign
Currency
Translation
Adjustments
 
Total
Balance as of December 31, 2018
$
25.5

 
$
(0.9
)
 
$
(42.8
)
 
$
(18.2
)
Other comprehensive income before reclassifications
1.8

 
2.1

 
2.2

 
6.1

Amount reclassified from accumulated other comprehensive loss

 
1.2

 

 
1.2

Other comprehensive income, net
1.8

 
3.3

 
2.2

 
7.3

Balance as of March 31, 2019
$
27.3

 
$
2.4

 
$
(40.6
)
 
$
(10.9
)

    

22

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

Note 9. Employee Benefit Plans

Equity Incentive Plans

The Company has stock-based compensation plans pursuant to which it has granted stock options, restricted stock units (“RSUs”), and performance share awards (“PSAs”). The Company also maintains its 2008 Employee Stock Purchase Plan (the “ESPP”) for all eligible employees. As of March 31, 2019, 11.4 million and 7.4 million shares were available for future issuance under the Company's 2015 Equity Incentive Plan (the "2015 Plan") and the ESPP, respectively. In connection with past acquisitions, the Company also assumed or substituted stock options, RSUs, RSAs, and PSAs.

Restricted Stock Unit and Performance Share Award Activities

The Company’s RSU and PSA activity and related information as of and for the three months ended March 31, 2019 were as follows (in millions, except per share amounts and years):
 
Outstanding RSUs, RSAs and PSAs(4)
 
Number of Shares
 
Weighted Average
Grant-Date Fair
Value per Share
 
Weighted Average
Remaining
Contractual Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2018
17.4

 
$
25.32

 
 
 
 
RSUs granted (1)(3)
5.5

 
25.53

 
 
 
 
PSAs granted (2)(3)
0.7

 
25.06

 
 
 
 
RSUs vested
(3.9
)
 
26.00

 
 
 
 
RSAs vested
(0.1
)
 
23.13

 
 
 
 
PSAs vested
(0.5
)
 
26.76

 
 
 
 
RSUs canceled
(0.8
)
 
26.32

 
 
 
 
PSAs canceled
(0.6
)
 
23.25

 
 
 
 
Balance as of March 31, 2019
17.7

 
$
25.21

 
1.5
 
$
467.8

________________________________
(1) 
Includes service-based and market-based RSUs. The number of shares subject to market-based condition represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to market-based condition that would be issued if market criteria determined by the Compensation Committee of the Board are achieved at target is 0.2 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is zero to 0.4 million shares.
(2) 
The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee of the Board are achieved at target is 0.4 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is zero to 0.7 million shares.
(3) 
The grant date fair value of RSUs and PSAs were reduced by the present value of 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. During the three months ended March 31, 2019, the Company declared a quarterly cash dividend of $0.19 per share of common stock on January 29, 2019.
(4) 
0.3 million shares of PSAs were modified during the three months ended March 31, 2019, which relate to PSAs granted in 2018 and PSAs assumed by the Company in connection with acquisitions consummated in 2016. Compensation cost resulting from the modifications totaled $7.7 million to be recognized over the remaining terms of the modified awards.

Employee Stock Purchase Plan

The following table summarizes employee stock purchases through the ESPP (in millions, except per share amounts):
 
Three Months Ended March 31,
 
2019
 
2018
Shares purchased
1.2

 
1.3

Average exercise price per share
$
22.04

 
$
22.23



23

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

On November 6, 2017, the Company’s Compensation Committee amended and restated the ESPP to provide that the offering period that began on February 1, 2018 would be for 24 months with four 6-month purchase periods. A new 24-month offering period will commence every six months thereafter. The purchase price for the Company’s common stock under the ESPP is 85% of the lower of the fair market value of the shares at (1) the beginning of the applicable offering period or (2) the end of each 6-month purchase period during such offering period. The ESPP will continue in effect until February 25, 2028, unless terminated earlier under the provisions of the ESPP.

Share-Based Compensation Expense

Share-based compensation expense associated with stock options, RSUs, restricted stock awards ("RSAs"), PSAs, and the ESPP was recorded in the following cost and expense categories in the Condensed Consolidated Statements of Operations (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Cost of revenues - Product
$
1.9

 
$
1.9

Cost of revenues - Service
4.5

 
4.8

Research and development
12.2

 
44.1

Sales and marketing
9.4

 
13.5

General and administrative
5.9

 
6.1

Total
$
33.9

 
$
70.4


The following table summarizes share-based compensation expense by award type (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Stock options
$
0.1

 
$
0.1

RSUs, RSAs, and PSAs
29.1

 
65.6

ESPP
4.7

 
4.7

Total
$
33.9

 
$
70.4

As of March 31, 2019, the total unrecognized compensation cost related to unvested share-based awards was $369.5 million to be recognized over a weighted-average period of 1.9 years.

24

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

Note 10. Segments

The Company operates in one reportable segment. The Company's chief executive officer, who is the chief operating decision maker, reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance, accompanied by disaggregated information about net revenues by product and service, customer vertical, and geographic region as presented below.

The following table presents net revenues by product and service (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Routing
$
374.7

 
$
408.1

Switching
176.4

 
230.0

Security
67.6

 
72.7

Total product
618.7

 
710.8

 
 
 
 
Total service
383.0

 
371.8

Total
$
1,001.7

 
$
1,082.6


The following table presents net revenues by customer vertical(*) (in millions):
 
Three Months Ended March 31,
 
2019
 
2018
Cloud
$
223.1

 
$
270.9

Service Provider
435.6