Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined consolidated
financial information gives effect to the acquisition of Unisphere Networks
("Unisphere") by Juniper Networks, Inc. ("Juniper Networks"). The acquisition
will be accounted for under the purchase method of accounting in accordance with
Statement of Financial Accounting Standard (SFAS) No. 141, "Business
Combinations" (SFAS 141). Under the purchase method of accounting, the purchase
price is allocated to the assets acquired and liabilities assumed based on their
estimated fair values. Estimates of the fair values of the assets and
liabilities of Unisphere have been combined with the recorded values of the
assets and liabilities of Juniper Networks in the unaudited pro forma condensed
combined consolidated financial information. The purchase price allocation for
Unisphere is preliminary and unaudited. These allocations are subject to change
pending the completion of an analysis of the fair value of the assets acquired
and liabilities assumed. The impact of such changes could be material.
The unaudited pro forma condensed combined consolidated balance sheet as
of March 31, 2002 gives effect to the Unisphere acquisition as if it occurred on
March 31, 2002. The Juniper Networks consolidated balance sheet information
included therein was derived from its unaudited March 31, 2002 condensed
consolidated balance sheet. The Unisphere consolidated balance sheet information
included therein was derived from its unaudited March 31, 2002 consolidated
balance sheet. The unaudited pro forma condensed combined consolidated
statements of operations give pro forma effect to the acquisition as if the
transaction was consummated on January 1, 2001. The information included in the
2001 unaudited pro forma condensed combined consolidated statement of operations
includes the condensed consolidated statement of operations of Juniper Networks
for the year ended December 31, 2001 and the condensed consolidated statement of
operations of Unisphere for the year ended September 30, 2001, which were
derived from their respective audited consolidated statements of operations for
such years. The information included in the unaudited condensed combined
consolidated statement of operations for the three months ended March 31, 2002
was derived from the unaudited condensed consolidated statements of operations
of Juniper Networks and Unisphere for this three-month period. Unisphere's
revenues and net loss for the three-month period ended December 31, 2001, which
are not presented in the aforementioned unaudited condensed combined
consolidated statements of operations, were $60.3 million and $14.2 million,
respectively.
The unaudited pro forma condensed combined consolidated financial
information has been prepared by Company management for illustrative purposes
only and is not necessarily indicative of the condensed consolidated financial
position or results of operations in future periods or the results that actually
would have been realized had Juniper Networks and Unisphere been a combined
company during the specified periods. The pro forma adjustments are based on the
information available at the time of this Current Report on Form 8-K. The
unaudited pro forma condensed combined consolidated financial information,
including the notes thereto, is qualified in its entirety by reference to, and
should be read in conjunction with, the historical consolidated financial
statements of Juniper Networks included in its Form 10-K and Form 10-Q filed
April 1, 2001 and May 15, 2002, respectively, with the Securities and Exchange
Commission, and the historical consolidated financial statements of Unisphere
included as exhibit 99.1 in this Form 8-K.
JUNIPER NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2002
(IN THOUSANDS)
Historical
----------------------------------
Juniper Unisphere Pro Forma Pro Forma
Networks, Inc. Networks Adjustments Combined
------------- -------------- -------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 705,184 $ 26,943 $ (375,000) (1) $ 357,127
Short-term investments 346,882 -- -- 346,882
Accounts receivable, net 65,916 12,529 -- 78,445
Inventories -- 12,289 1,462 (2) 13,751
Prepaid expenses and other current assets 29,347 5,358 -- 34,705
Current assets of discontinued operations -- 3,685 (3,685) --
------------- -------------- -------------- --------------
Total current assets 1,147,329 60,804 (377,223) 830,910
Property and equipment, net 253,917 30,645 -- 284,562
Long-term investments 645,672 -- -- 645,672
Other long-term assets 274,073 178,100 600,936 (2)(3) 1,053,109
Non-current assets of discontinued operations -- 123,351 (123,351)(3) --
------------- -------------- -------------- --------------
Total assets $ 2,320,991 $ 392,900 $ 100,362 $ 2,814,253
============= ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 53,127 $ 11,461 $ -- $ 64,588
Other accrued liabilities 120,677 21,694 15,163 (1) 157,534
Deferred revenue 30,628 17,220 -- 47,848
Convertible promissory note -- 113,630 (113,630)(3) --
Current liabilities of discontinued operations -- 5,910 (5,910)(3) --
------------- -------------- -------------- --------------
Total current liabilities 204,432 169,915 (104,377) 269,970
Convertible subordinated notes 1,150,000 -- -- 1,150,000
Common stock and additional paid-in capital 974,074 1,330,060 (818,937)(1)(3) 1,485,197
Deferred stock compensation (49,435) (13,710) 13,211 (2)(3) (49,934)
Notes receivable from officers -- (26,879) 26,879 (3) --
Accumulated other comprehensive income (loss) 5,591 (274) 274 (3) 5,591
Retained earnings (accumulated deficit) 36,329 (1,066,212) 983,312 (2)(3) (46,571)
------------- -------------- -------------- --------------
Total stockholders' equity 966,559 222,985 204,739 1,394,283
------------- -------------- -------------- --------------
Total liabilities and stockholders' equity $ 2,320,991 $ 392,900 $ 100,362 $ 2,814,253
============= ============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined consolidated
financial information.
JUNIPER NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Historical
----------------------------------
Juniper Unisphere Pro Forma Pro Forma
Networks, Inc. Networks Adjustments Combined
------------- -------------- -------------- --------------
Net revenues $ 887,022 $ 169,882 $ -- $ 1,056,904
Cost of revenues 372,771 91,131 5,062 (2) 468,964
------------- -------------- -------------- --------------
Gross profit 514,251 78,751 (5,062) 587,940
Operating expenses:
Research and development 155,530 55,700 -- 211,230
Sales and marketing 140,407 48,400 -- 188,807
General and administrative 37,554 11,596 -- 49,150
Amortization of deferred stock compensation 74,080 9,443 (9,003)(2)(3) 74,520
Amortization of goodwill and purchased
intangibles 49,277 71,678 (56,973)(2)(3) 63,982
Restructuring costs 12,340 -- 12,340
In-Process research and development 4,200 -- 4,200
------------- -------------- -------------- --------------
Total operating expenses 473,388 196,817 (65,976) 604,229
------------- -------------- -------------- --------------
Operating income (loss) 40,863 (118,066) 60,914 (16,289)
Interest income 94,747 -- (13,538)(5) 81,209
Interest and other expense (61,377) (4,893) (66,270)
Loss on investments (53,620) -- (53,620)
Equity in net loss of joint venture (4,076) -- (4,076)
------------- -------------- -------------- --------------
Loss from continuing operations
before income taxes 16,537 (122,959) 47,376 (59,046)
Provision for income taxes 29,954 -- -- 29,954
------------- -------------- -------------- --------------
Loss from continuing operations (13,417) (122,959) 47,376 (89,000)
Loss from discontinued operations -- (89,740) 89,740 (3) --
------------- -------------- -------------- --------------
Net loss $ (13,417) $ (212,699) $ 137,116 $ (89,000)
============= ============== ============== ==============
Net loss per share:
Basic $ (0.04) $ (0.25)
============= ============== ============== ==============
Diluted $ (0.04) $ (0.25)
============= ============== ============== ==============
Shares used in computing net loss per share:
Basic 319,378 36,500 355,878
============= ============== ============== ==============
Diluted 319,378 36,500 355,878
============= ============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined consolidated
financial information.
JUNIPER NETWORKS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Historical
----------------------------------
Juniper Unisphere Pro Forma Pro Forma
Networks, Inc. Networks Adjustments Combined
------------- -------------- -------------- --------------
Net revenues $ 122,219 $ 50,468 $ -- $ 172,687
Cost of revenues 49,996 21,443 -- 71,439
------------- -------------- -------------- --------------
Gross profit 72,223 29,025 -- 101,248
Operating expenses:
Research and development 35,069 15,282 -- 50,351
Sales and marketing 27,578 13,019 -- 40,597
General and administrative 9,549 2,632 -- 12,181
Amortization of deferred stock
compensation 13,629 4,038 (4,018)(2)(3) 13,649
Amortization of purchased intangibles 1,646 -- 3,676 (2) 5,322
------------- -------------- -------------- --------------
Total operating expenses 87,471 34,971 (342) 122,100
------------- -------------- -------------- --------------
Operating income/(loss) (15,248) (5,946) 342 (20,852)
Interest income 16,752 -- (1,819)(5) 14,933
Interest and other expense (15,132) (1,632) (16,764)
Loss on investments (30,600) -- (30,600)
Equity in net loss of joint venture (1,025) -- (1,025)
------------- -------------- -------------- --------------
Loss from continuing operations
before income taxes (45,253) (7,578) (1,477) (54,308)
Provision for income taxes 750 -- -- 750
------------- -------------- -------------- --------------
Loss from continuing operations (46,003) (7,578) (1,477) (55,058)
Loss from discontinued operations -- (12,679) 12,679 (3) --
------------- -------------- -------------- --------------
Net loss $ (46,003) $ (20,257) $ 11,202 $ (55,058)
============= ============== ============== ==============
Net loss per share:
Basic $ (0.14) $ (0.15)
============= ============== ============== ==============
Diluted $ (0.14) $ (0.15)
============= ============== ============== ==============
Shares used in computing net loss per share:
Basic 329,367 36,500 365,867
============= ============== ============== ==============
Diluted 329,367 36,500 365,867
============= ============== ============== ==============
See accompanying notes to unaudited pro forma condensed combined consolidated
financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
Juniper Networks acquired Unisphere on July 1, 2002 for a total purchase
price of approximately $901.3 million in a transaction accounted for as a
purchase. Juniper Networks exchanged approximately $375 million of cash and 36.5
million shares of Juniper Networks common stock with a fair value of
approximately $359.9 million for all of the outstanding stock of Unisphere. The
common stock was valued using Juniper Networks' average closing stock price on
the 2 days before and after the transaction was announced, which was $9.86 per
share. Juniper Networks also assumed all of the outstanding stock options of
Unisphere with a fair value of approximately $151.2 million. The options were
valued using a Black-Scholes option pricing model with the inputs of 0.8 for
volatility, 2 years for expected life, 4% for the risk-free interest rate and a
market value of $9.86 per share as described above. The estimated aggregate
purchase price of $901.3 million includes an estimate of the direct costs
associated with this transaction aggregating approximately $9.7 million and an
estimated liability of approximately $5.5 million associated with the estimated
costs of terminating certain employees of Unisphere and other exit activities.
During the quarter ending September 30, 2002 Juniper Networks expects to incur
additional costs for severance (related to its employees whose positions were
eliminated) and other exit costs (related to facilities which will be closed) as
a result of the acquisition of Unisphere. These amounts have not been finalized
at this time.
The acquisition will be accounted for under the purchase method of
accounting in accordance with SFAS 141. Under the purchase method of accounting,
the purchase price is allocated to the assets acquired and liabilities assumed
based on their estimated fair values. Preliminary estimates based on
management's best estimates of the fair values of the assets and liabilities of
Unisphere have been combined with the recorded values of the assets and
liabilities of Juniper Networks in the unaudited pro forma condensed combined
financial information. This allocation is subject to change pending completion
of an analysis of the value of the assets acquired and liabilities assumed. The
impact of such changes could be material.
PRO FORMA ADJUSTMENTS
(1) To reflect the issuance of approximately $375.0 million in cash and 36.5
million shares of Juniper Networks Common Stock and the assumption of all
outstanding options in conjunction with the Unisphere acquisition, for an
aggregate purchase price of approximately $901.3 million, including
approximately $15.2 million of estimated transaction and exit costs.
(2) To reflect the excess of the purchase price over the fair value of assets
and liabilities acquired in connection with the Unisphere acquisition. The
purchase price allocation is based on management's preliminary estimates
of the fair values of the tangible and intangible assets, as well as
acquired technology, certain of which has not reached technological
feasibility and has no alternative future use. The purchased technology,
service contract relationships and non-compete agreements will be
amortized on a straight-line basis over two to six years. The backlog
valuation, as depicted below, and inventory fair value mark-up of
approximately $1.5 million, which is included in the fair value of net
tangible assets acquired, will be charged to costs of goods sold over the
period they are consumed, which is expected to be within the next six
months. Deferred compensation on unvested stock options will be amortized
over the vesting period using the graded vesting method. In accordance
with SFAS No. 142, "Goodwill and Other Intangible Assets", the goodwill
will not be amortized. The preliminary allocation of the total purchase
price paid for the acquisition is summarized as follows (in thousands):
Fair value of net tangible assets acquired $ 39,897
In-process research and development 82,900
Purchased technology 61,500
Service contract relationships 6,900
Non-compete agreements 2,400
Order backlog 3,600
Goodwill 703,591
Deferred compensation on unvested stock options 499
---------
Total $ 901,287
=========
(3) To reflect the elimination of the stockholders' equity accounts (including
deferred stock compensation and accumulated other comprehensive loss),
discontinued operation accounts (which were not purchased by Juniper
Networks), goodwill and amortization of goodwill of Unisphere. In
addition, the convertible promissory notes and notes receivable from
officers were eliminated because the convertible promissory notes
converted to 12,657 shares of Unisphere common stock prior to the
acquisition and the notes receivable from officers were forgiven by
Unisphere's former parent company prior to the acquisition of Unisphere by
Juniper Networks. There were no transactions between Juniper Networks and
Unisphere during the periods presented in the accompanying unaudited
condensed combined financial statements.
(4) Juniper Networks will record an immediate write-off of in-process research
and development at the consummation of the acquisition. The unaudited pro
forma condensed combined statements of operations do not include the
charge for in-process research and development of approximately $82.9
million since it is considered a non-recurring charge. The charge will be
recorded by Juniper Networks in the three months ended September 30, 2002.
(5) To reflect the effect on interest income for approximately $375 million of
cash paid by Juniper Networks.
PRO FORMA NET LOSS PER SHARE
The unaudited pro forma combined basic net loss per share is based upon
the weighted average number of outstanding shares of common stock of Juniper
Networks during the periods presented, plus the number of vested shares issued
to consummate the acquisition of Unisphere as if the acquisition occurred on
January 1, 2001. The unaudited pro forma combined diluted net loss per share is
the same as the unaudited pro forma combined basic net loss per share as all
common stock equivalents are anti-dilutive due to the loss position.
RECLASSIFICATIONS
Certain amounts in Unisphere's historical condensed financial information
have been reclassified to conform to Juniper Networks' historical financial
statement presentation.