JUNIPER NETWORKS INC, 10-K filed on 2/26/2014
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2013
Feb. 21, 2014
Jun. 28, 2013
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
JUNIPER NETWORKS INC 
 
 
Entity Central Index Key
0001043604 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2013 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
501,120,337 
 
Entity Public Float
 
 
$ 6,490,000,000 
Consolidated Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Net revenues:
 
 
 
Product
$ 3,519.9 
$ 3,262.1 
$ 3,478.3 
Service
1,149.2 
1,103.3 
970.4 
Total net revenues
4,669.1 
4,365.4 
4,448.7 
Cost of revenues:
 
 
 
Product
1,276.6 
1,204.0 
1,155.3 
Service
451.1 
452.6 
424.8 
Total cost of revenues
1,727.7 
1,656.6 
1,580.1 
Gross margin
2,941.4 
2,708.8 
2,868.6 
Operating expenses:
 
 
 
Research and development
1,043.2 
1,101.6 
1,026.8 
Sales and marketing
1,075.9 
1,045.5 
1,005.2 
General and administrative
217.3 
206.8 
187.5 
Restructuring and other charges
39.1 
46.8 
30.6 
Total operating expenses
2,375.5 
2,400.7 
2,250.1 
Operating income
565.9 
308.1 
618.5 
Other expense, net
(40.4)
(16.6)
(46.8)
Income before income taxes and noncontrolling interest
525.5 
291.5 
571.7 
Income tax provision
85.7 
105.0 
146.7 
Consolidated net income
439.8 
186.5 
425.0 
Adjust for net income attributable to noncontrolling interest
0.1 
Net income attributable to Juniper Networks
$ 439.8 
$ 186.5 
$ 425.1 
Net income per share attributable to Juniper Networks common stockholders:
 
 
 
Basic (in dollars per share)
$ 0.88 
$ 0.36 
$ 0.80 
Diluted (in dollars per share)
$ 0.86 
$ 0.35 
$ 0.79 
Shares used in computing net income per share:
 
 
 
Basic (in shares)
501.8 
520.9 
529.8 
Diluted (in shares)
510.3 
526.2 
541.4 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Consolidated net income
$ 439.8 
$ 186.5 
$ 425.0 
Available-for-sale securities:
 
 
 
Change in unrealized gains on available-for-sale securities, net of tax provision of ($37.9) and ($0.6) for 2013 and 2012, respectively
65.1 
3.2 
2.5 1
Reclassification adjustment for realized net gains on available-for- sale securities included in net income, net of tax provision of $0.4 and $0.2 for 2013 and 2012, respectively
(1.0)
(1.2)
(3.8)1
Net change in unrealized gains (losses) on available-for-sale securities, net of taxes
64.1 
2.0 
(1.3)1
Cash flow hedges:
 
 
 
Change in unrealized gains (losses) on cash flow hedges, net of tax benefit of $1.7 and $0.2 for 2013 and 2012, respectively
0.7 
7.4 
(7.9)1
Reclassification adjustment for realized (gains) losses included in net income, net of tax benefit of ($0.8) and ($1.0) for 2013 and 2012, respectively
(1.5)
6.5 
(0.7)1
Net change in unrealized (losses) gains on cash flow hedges, net of taxes
(0.8)
13.9 
(8.6)1
Change in foreign currency translation adjustments
(3.4)
6.4 
(6.4)
Other comprehensive income (loss), net of tax
59.9 
22.3 
(16.3)
Comprehensive income
499.7 
208.8 
408.7 
Comprehensive loss attributable to noncontrolling interest
0.1 
Comprehensive income attributable to Juniper Networks
$ 499.7 
$ 208.8 
$ 408.8 
Consolidated Statements of Comprehensive Income Parenthetical (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
Tax provision on change in unrealized gains on available-for-sale securities
$ (37.9)
$ (0.6)
Tax provision on reclassification adjustment for realized net gains on available-for-sale securities included in net income
0.4 
0.2 
Tax benefit on change in unrealized gains (losses) on cash flow hedges
1.7 
0.2 
Tax benefit on reclassification adjustment for realized losses (gains) included in net income
$ (0.8)
$ (1.0)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 2,284.0 
$ 2,407.8 
Short-term investments
561.9 
441.5 
Accounts receivable, net of allowance for doubtful accounts of $5.4 and $9.5 as of December 31, 2013 and 2012, respectively
578.3 
438.4 
Deferred tax assets, net
79.8 
172.6 
Prepaid expenses and other current assets
199.9 
140.4 
Total current assets
3,703.9 
3,600.7 
Property and equipment, net
882.3 
811.9 
Long-term investments
1,251.9 
988.1 
Restricted cash and investments
89.5 
106.4 
Purchased intangible assets, net
106.9 
128.9 
Goodwill
4,057.7 
4,057.8 
Other long-term assets
233.8 
138.3 
Total assets
10,326.0 
9,832.1 
Current liabilities:
 
 
Accounts payable
200.4 
209.3 
Accrued compensation
273.9 
279.3 
Deferred revenue
705.8 
693.5 
Other accrued liabilities
261.3 
239.9 
Total current liabilities
1,441.4 
1,422.0 
Long-term debt
999.3 
999.2 
Long-term deferred revenue
363.5 
229.9 
Long-term income tax payable
114.4 
112.4 
Other long-term liabilities
105.2 
69.1 
Total liabilities
3,023.8 
2,832.6 
Commitments and contingencies (Note 16)
   
   
Juniper Networks 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; 495.2 shares and 508.4 shares issued and outstanding as of December 31, 2013 and 2012, respectively
Additional paid-in capital
9,868.9 
9,905.7 
Accumulated other comprehensive income
64.6 
4.7 
Accumulated deficit
(2,631.3)
(2,911.4)
Total Juniper Networks stockholders' equity
7,302.2 
6,999.0 
Noncontrolling interest
0.5 
Total stockholders' equity
7,302.2 
6,999.5 
Total liabilities and stockholders' equity
$ 10,326.0 
$ 9,832.1 
Consolidated Balance Sheets Parentheticals (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Consolidated Balance Sheet Parenthetical [Abstract]
 
 
Convertible preferred stock - par value
$ 0.00001 
$ 0.00001 
Convertible preferred stock - shares authorized
10,000,000 
10,000,000 
Convertible preferred stock - issued
Convertible preferred stock - outstanding
Common stock - par value
$ 0.00001 
$ 0.00001 
Common stock - shares authorized
1,000,000,000 
1,000,000,000 
Common stock - issued
495,200,000 
508,400,000 
Common stock - outstanding
495,200,000 
508,400,000 
Allowance for doubtful accounts receivable, current
$ 5.4 
$ 9.5 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Cash flows from operating activities:
 
 
 
Consolidated net income
$ 439.8 
$ 186.5 
$ 425.0 
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
 
 
 
Non-cash share-based compensation expense
244.6 
242.7 
217.8 
Depreciation, amortization, and accretion
189.9 
187.9 
170.0 
Restructuring and other charges
47.5 1
99.7 1
30.6 1
Deferred income taxes
72.2 
(18.2)
7.2 
(Gain) loss on investments, net
(11.3)
(26.7)
0.3 
Excess tax benefits from share-based compensation
(1.9)
(7.2)
(45.0)
Loss on disposal of fixed assets
1.4 
0.6 
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable, net
(139.9)
139.1 
18.6 
Prepaid expenses and other assets
(127.4)
(29.2)
28.5 
Accounts payable
(9.5)
(121.2)
33.9 
Accrued compensation
(5.4)
54.8 
(32.2)
Income tax payable
(38.5)
(7.5)
53.2 
Other accrued liabilities
34.9 
(5.3)
(3.4)
Deferred revenue
145.9 
(53.6)
82.2 
Net cash provided by operating activities
842.3 
642.4 
986.7 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(233.1)
(348.7)
(266.3)
Purchases of available-for-sale investments
(1,776.0)
(1,496.5)
(2,297.3)
Proceeds from sales of available-for-sale investments
1,135.6 
894.2 
1,281.2 
Proceeds from maturities of available-for-sale investments
366.2 
559.7 
645.4 
Purchases of trading investments
(3.7)
(4.1)
(5.2)
Proceeds from the sales of privately-held investments
9.4 
36.5 
2.6 
Purchases of privately-held investments
(41.3)
(12.2)
(35.7)
Payment for business acquisitions, net of cash and cash equivalents acquired
(10.0)
(139.4)
(30.7)
Purchase of licensed software
(10.0)
(65.3)
Changes in restricted cash
(1.5)
(20.9)
(1.2)
Net cash used in investing activities
(564.4)
(596.7)
(707.2)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock
141.7 
99.1 
346.9 
Purchases and retirement of common stock
(577.8)
(650.6)
(548.6)
Payment for capital lease obligation
(1.4)
(1.4)
Issuance of long-term debt, net
991.6 
Customer financing arrangements
33.9 
(2.6)
(15.9)
Excess tax benefits from share-based compensation
1.9 
7.2 
45.0 
Net cash (used in) provided by financing activities
(401.7)
(548.3)
819.0 
Net (decrease) increase in cash and cash equivalents
(123.8)
(502.6)
1,098.5 
Cash and cash equivalents at beginning of period
2,407.8 
2,910.4 
1,811.9 
Cash and cash equivalents at end of period
2,284.0 
2,407.8 
2,910.4 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest, net of amounts capitalized
57.4 
50.1 
34.4 
Cash paid (received) for income taxes, net
105.1 
118.7 
(2.1)
Non-cash investing activities:
 
 
 
Issuance of common stock and equity awards assumed in business acquisitions
16.5 
Property and equipment acquired under capital lease
3.7 
Licensed software acquired
$ 0 
$ 19.0 
$ 0 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
USD ($)
Accumulated Other Comprehensive Income (Loss) [Member]
USD ($)
Accumulated Deficit [Member]
USD ($)
Noncontrolling Interest [Member]
USD ($)
Stockholders' equity, Beginning balance at Dec. 31, 2010
$ 6,608.8 
 
$ 9,717.8 
$ (1.3)
$ (3,108.3)
$ 0.6 
Number of shares, Beginning balance at Dec. 31, 2010
 
525.4 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Consolidated net income (loss)
425.0 
 
 
 
425.1 
(0.1)
Other comprehensive income (loss), net
(16.3)
 
 
(16.3)
 
 
Shares issued in connection with share-based compensation (in number of shares)
 
18.7 
 
 
 
 
Shares issued in connection with share-based compensation
345.5 
 
345.5 
 
 
 
Repurchase and retirement of common stock and net issuances (in number of shares)
 
(17.7)
 
 
 
 
Repurchase and retirement of common stock and net issuances
(548.6)
 
(259.4)
 
(289.2)
 
Share-based compensation expense
217.8 
 
217.8 
 
 
 
Tax benefit from employee stock option plans
57.5 
 
57.5 
 
 
 
Stockholders' equity, Ending balance at Dec. 31, 2011
7,089.7 
 
10,079.2 
(17.6)
(2,972.4)
0.5 
Number of shares, Ending balance at Dec. 31, 2011
 
526.4 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Consolidated net income (loss)
186.5 
 
 
 
186.5 
Other comprehensive income (loss), net
22.3 
 
 
22.3 
 
 
Shares issued in connection with share-based compensation (in number of shares)
 
12.2 
 
 
 
 
Shares issued in connection with share-based compensation
99.2 
 
99.2 
 
 
 
Shares assumed In connection with business acquisition, shares (in number of shares)
 
5.8 
 
 
 
 
Shares assumed in connection with business acquisitions
16.5 
 
16.5 
 
 
 
Repurchase and retirement of common stock and net issuances (in number of shares)
 
(36.0)
 
 
 
 
Repurchase and retirement of common stock and net issuances
(650.6)
 
(525.1)
 
(125.5)
 
Share-based compensation expense
242.7 
 
242.7 
 
 
 
Tax benefit from employee stock option plans
(6.8)
 
(6.8)
 
 
 
Stockholders' equity, Ending balance at Dec. 31, 2012
6,999.5 
 
9,905.7 
4.7 
(2,911.4)
0.5 
Number of shares, Ending balance at Dec. 31, 2012
 
508.4 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Consolidated net income (loss)
439.8 
 
 
 
439.8 
 
Other comprehensive income (loss), net
59.9 
 
 
59.9 
 
 
Shares issued in connection with share-based compensation (in number of shares)
 
16.0 
 
 
 
 
Shares issued in connection with share-based compensation
142.2 
 
142.2 
 
 
 
Dissolution of non-controlling interest
(0.5)
 
 
 
 
(0.5)
Repurchase and retirement of common stock and net issuances (in number of shares)
 
(29.2)
 
 
 
 
Repurchase and retirement of common stock and net issuances
(577.8)
 
(418.1)
 
(159.7)
 
Share-based compensation expense
244.9 
 
244.9 
 
 
 
Tax benefit from employee stock option plans
(5.8)
 
(5.8)
 
 
 
Stockholders' equity, Ending balance at Dec. 31, 2013
$ 7,302.2 
 
$ 9,868.9 
$ 64.6 
$ (2,631.3)
$ 0 
Number of shares, Ending balance at Dec. 31, 2013
 
495.2 
 
 
 
 
Description of Business and Basis of Presentation (Notes)
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation

Description of Business

Juniper Networks, Inc. (the “Company” or “Juniper”) designs, develops, and sells products and services for high-performance networks, which combine scale and performance with agility and efficiency, so customers can build the best networks for their businesses. The Company serves the high-performance networking requirements of global service providers, enterprises, governments, and research and public sector organizations that view the network as critical to their success.

Basis of Presentation

The Consolidated Financial Statements, which include the Company and its wholly-owned subsidiaries, are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). All inter-company balances and transactions have been eliminated. Certain amounts in the prior years' Consolidated Financial Statements have been reclassified to conform to the current year presentation.

During 2013, the Company consolidated operational oversight and management of all security products within the Software Solutions Division ("SSD") segment. As a result of this product realignment, security products previously reported in the Platform Systems Division ("PSD") segment (including the Branch SRX, Branch Firewall, and J Series product families) are now reported in the SSD segment. In addition, the Company realigned its Contrail products from the PSD segment to the SSD segment. The Company reclassified the segment data for the prior years to conform to the current year presentation. These changes did not impact previously reported consolidated net revenues, operating income, net income, and net income per share. See Note 13, Segments, for further discussion of the Company's product realignments.

The Company previously owned a 60 percent interest in a joint venture with Nokia Siemens Networks B.V. (“NSN”). Given the Company's majority ownership interest in the joint venture, the accounts of the joint venture have been consolidated with the accounts of the Company, and a noncontrolling interest was recorded for the noncontrolling investor's interests in the net assets and operations of the joint venture. In July 2011, NSN and the Company entered into an agreement to cease operation of and terminate the joint venture and subsequently NSN assumed the activities of the joint venture. The Company terminated the joint venture in 2013 and the termination did not have a material effect on the Company's financial position or results of operations.
Significant Accounting Policies (Notes)
Significant Accounting Policies
Significant Accounting Policies

Cash, Cash Equivalents and Investments

Cash and Cash Equivalents

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

Investments in Available-for-Sale and Trading Securities

The Company's investments in publicly-traded debt and equity securities are classified as available-for-sale. Available-for-sale investments are initially recorded at cost and periodically adjusted to fair value in the Consolidated Balance Sheets. Unrealized gains and losses on these investments are reported as a separate component of accumulated other comprehensive income. Realized gains and losses are determined based on the specific identification method and are reported in the Consolidated Statements of Operations.

The Company periodically evaluates its investments to determine if impairment charges are required. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value has been less than the Company's cost basis, the investment's financial condition, and near-term prospects of the investee. If the Company determines that the decline in an investment's fair value is other than temporary, the difference is recognized as an impairment loss in its Consolidated Statements of Operations.
The Company's non-qualified compensation plan is invested in mutual funds which are classified as trading securities and reported at fair value in the Consolidated Balance Sheets. The realized and unrealized holding gains and losses are reported in the Consolidated Statements of Operations.

Privately-Held Investments

The Company has privately-held investments, which are included in other long-term assets in the Consolidated Balance Sheets. These investments are carried at cost, adjusted for any impairment, as the Company does not have a controlling interest and does not have the ability to exercise significant influence over these companies. These investments are inherently high risk as the market for technologies or products manufactured by these companies are usually in their early stages at the time of the investment by the Company and such markets may never be significant. The Company measures the fair value of privately-held investments using an analysis of the financial conditions and near term prospects of the investees, including recent financing activities and their capital structure. Realized gains and losses, if any, are reported in the Consolidated Statements of Operations.

Fair Value

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

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

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

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

Derivatives

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

The Company uses foreign currency forward or option contracts to hedge certain forecasted foreign currency transactions relating to operating expenses. These derivatives are designated as cash flow hedges. Execution of these cash flow hedge derivatives typically occurs every month with maturities of one year or less. These derivatives are carried at fair value and the effective portion of the derivative's gain or loss is initially reported as a component of accumulated other comprehensive income, and upon occurrence of the forecasted transaction, is subsequently reclassified into the costs of services or operating expense line item to which the hedged transaction relates. The Company records any ineffectiveness of the hedging instruments in other expense, net, on its Consolidated Statements of Operations. Cash flows from such hedges are classified as operating activities. All amounts within other comprehensive income are expected to be reclassified into earnings within the next twelve months.

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 derivatives do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in other expense, net in the Consolidated Statements of Operations. Changes in the fair value of these derivatives are largely offset by remeasurement of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. These foreign exchange forward contracts have maturities of one year or less.

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

Property and Equipment

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


Construction in progress is related to the construction or development of property and equipment that have not yet been placed in service for their intended use. Depreciation for equipment commences once it is placed in service and depreciation for buildings and leasehold improvements commences once they are ready for their intended use.

Effective April 1, 2013, the Company extended the useful lives of certain computers and equipment based on actual historical usage, which demonstrated longer useful lives, as well as the planned use of these assets. The change was accounted for as a change in estimate and applied prospectively. During the year ended December 31, 2013, this change in accounting estimate decreased depreciation expense by approximately $28.3 million or $0.04 per diluted share.

Goodwill and Other Long-Lived Assets

Goodwill represents the future economic benefits arising from other assets acquired in a business combination or an acquisition that are not individually identified and separately recorded. The excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recognized as goodwill. Goodwill is tested for impairment annually during the fourth quarter or more frequently if certain indicators are present. Other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are assessed for potential impairment annually or when events or circumstances indicate that their carrying amounts might be impaired.

The Company performs its annual goodwill impairment analysis at its reporting unit level, which may be one level below its operating segment level during the fourth quarter of each year or more frequently if certain indicators are present. The fair value of the Company's reporting units is determined using both the income and market valuation approaches. Under the income approach, the fair value of the reporting unit is based on the present value of estimated future cash flows that the reporting unit is expected to generate over its remaining life. Under the market approach, the value of the reporting unit is based on an analysis that compares the value of the reporting unit to values of publicly traded companies in similar lines of business. In the application of the income and market valuation approaches, the Company is required to make estimates of future operating trends and judgments on discount rates and other variables. Actual future results related to assumed variables could differ from these estimates.

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

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

Revenue Recognition

Revenue is recognized when all of the following criteria have been met:

Persuasive evidence of an arrangement exists. The Company generally relies upon sales contracts or agreements, and customer purchase orders to determine the existence of an arrangement.

Delivery has occurred. The Company uses shipping terms and related documents, or written evidence of customer acceptance, when applicable, to verify delivery or performance.

Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment.

Collectability is reasonably assured. The Company assesses collectability based on creditworthiness of customers as determined by its credit checks, their payment histories, or changes in circumstances that indicate that collectability is not reasonably assured.

When sales arrangements contain multiple elements, including software and non-software components that function together to deliver the tangible products' essential functionality, the Company allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on either vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. VSOE of selling price is based on the price charged when the element is sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices fall within a reasonable range based on historical discounting trends for specific products and services. TPE of selling price is established by evaluating largely interchangeable competitor products or services in stand-alone sales to similarly situated customers. However, as the Company's products contain a significant element of proprietary technology and its solutions offer substantially different features and functionality, the comparable pricing of third-party products with similar functionality typically cannot be obtained. ESP is established considering multiple factors including, but not limited to pricing practices in different geographies and through different sales channels, gross margin objectives, internal costs, competitor pricing strategies, and industry technology lifecycles.

In multiple element arrangements where software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the residual method when VSOE of fair value of the undelivered items exists. Under the residual method, the amount of revenue allocated to delivered elements equals the total arrangement consideration less the aggregate fair value of any undelivered elements. If VSOE of one or more undelivered items does not exist, revenue from the entire arrangement is deferred and recognized at the earlier of: (i) delivery of those elements or (ii) when fair value can be established unless maintenance services is the only undelivered element, in which case, the entire arrangement fee is recognized ratably over the maintenance service period.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or subject to customer-specific return or refund privileges.

The Company records reductions to revenue for estimated product returns and pricing adjustments, such as rebates and price protection, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns and price protection credits, specific criteria outlined in rebate agreements, and other factors known at the time.

A portion of the Company's sales is made through distributors under agreements allowing for pricing credits or rights of return. As reliable estimates of these credits or returns cannot be made, product revenue on sales made through these distributors is recognized upon sell-through as reported by the distributors to the Company. Deferred revenue on shipments to distributors reflects the effects of distributor pricing credits given and the amount of gross margin expected to be realized upon sell-through. Deferred revenue is recorded net of the related product costs of revenue.

Service revenues include revenue from maintenance, training, and professional services. Maintenance is offered under renewable contracts. Revenue from maintenance service contracts is deferred and recognized ratably over the contractual support period, which is generally one to three years. Revenue from training and professional services is recognized as services are completed or ratably over the contractual period, which is generally one year or less.

Allowance for Doubtful Accounts

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

Warranty Reserves

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

Contract Manufacturer Liabilities

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

Research and Development

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

Software Development Costs

Capitalization of software development costs for software to be sold, leased, or otherwise marketed begins when a product's technological feasibility has been established and ends when a product is available for general release to customers. Generally, the Company's products are released soon after technological feasibility has been established. As a result, costs incurred between achieving technological feasibility and product general availability have not been significant. The Company capitalizes costs associated with internal-use software systems that have reached the application development stage and are primarily attributable to the Company's enterprise resource planning ("ERP") implementation. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with the development of the applications.

Advertising

Advertising costs are charged to sales and marketing expense as incurred. Advertising expense was $20.1 million, $20.0 million, and $17.2 million, for 2013, 2012, and 2011, respectively.

Foreign Currency

Assets and liabilities of foreign operations with non-U.S. Dollar functional currency are translated to U.S. Dollars using exchange rates in effect at the end of the period. Revenue and expenses are translated to U.S. Dollars using average exchange rates for the period. The resulting translation adjustments are included in the Company’s Consolidated Balance Sheets in the stockholders’ equity section as a component of accumulated other comprehensive income. For the Company’s international subsidiaries in which the functional currency is the U.S. dollar, the Company records foreign exchange gains and losses for assets and liabilities in the Consolidated Statements of Operations. Remeasurement adjustments are recorded in other expense, net in the Consolidated Statements of Operations.
Loss Contingencies

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

Share-Based Compensation

The Company utilizes the Black-Scholes-Merton (“BSM”) option-pricing model to estimate the fair value of its stock options and Employee Stock Purchase Plan ("ESPP") shares. The Company determines the fair value of its restricted stock units ("RSUs"), restricted stock awards ("RSAs"), and performance share awards ("PSAs") based on the closing market price of the Company’s common stock on the date of grant. Share-based compensation expense is based on the fair value of the underlying awards and amortized on a straight-line basis, net of estimated forfeitures. With respect to PSAs, that generally vest after three years, for the portion of the award attributable to each performance year, the Company recognizes PSA expense on a straight-line basis over the remaining vesting period starting in the period in which the annual performance targets are set for each such performance year, to the extent that the performance target is expected to be met.

The BSM model requires various highly subjective assumptions that represent management's best estimates of volatility, risk-free interest rate, expected life, and dividend yield. The expected volatility is based on the implied volatility of market-traded options on the Company's common stock, adjusted for other relevant factors including historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected life of a stock option award is based on historical experience.

Provision for Income Taxes

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

Concentrations of Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, and accounts receivable. The Company invests only in high-quality credit instruments and maintains its cash, cash equivalents and available-for-sale investments in fixed income securities with several high-quality institutions. Deposits held with banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and, therefore, bear minimal credit risk.

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

Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company's customer base and their dispersion across different geographic locations throughout the world. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. During the years ended December 31, 2013 and December 31, 2011, no single customer accounted for 10% or more of net revenues. During the year ended December 31, 2012, Verizon Communications, Inc. ("Verizon") accounted for 10.3% of net revenues.

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

Use of Estimates

The preparation of the financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent there are material differences between the Company's estimates and the actual results, the Company's future consolidated results of operation may be affected.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11") to provide explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2013. The Company intends to adopt this standard prospectively in the first quarter of 2014 and the adoption will not result in a change to the tax provision. The Company does not expect a significant impact to its presentation of long-term taxes payable or its deferred tax assets.
Business Combinations (Notes)
Business Combinations
Business Combinations

The Company's Consolidated Financial Statements include the operating results of acquired businesses from the date of each acquisition. Pro forma results of operations for these acquisitions have not been presented as the financial impact to the Company's consolidated results of operations, both individually and in aggregate, is not material. Additional information, if any, existing as of the acquisition dates but unknown to the Company may become known during the remainder of the measurement period, not to exceed 12 months from the acquisition date, which may result in changes to the amounts and allocations recorded.

The Company completed one business combination in 2013, three business combinations in 2012, and two business combinations in 2011 for cash consideration including the fair value of vested share-based awards assumed, if any, of approximately $10.0 million, $187.3 million, and $30.5 million, respectively.

The following table presents the purchase consideration allocations for these acquisitions based upon acquisition-date fair values, including cash and cash equivalents acquired (in millions):
 
2013 Acquisitions
 
2012 Acquisitions
 
2011 Acquisitions
Net tangible assets acquired
$
0.1

 
$
3.5

 
$
1.7

Intangible assets acquired
9.9

 
54.1

 
28.4

Goodwill

 
129.7

 
0.4

    Total
$
10.0

 
$
187.3

 
$
30.5



The Company recognized $0.9 million, $2.0 million, and $9.6 million of acquisition-related costs during the years ended December 31, 2013, 2012, and 2011, respectively. These acquisition-related costs were expensed in the period incurred as general and administrative expenses in the Consolidated Statements of Operations.

The goodwill recognized for the 2012 and 2011 acquisitions was primarily attributable to expected synergies and was not deductible for U.S. federal income tax purposes.

2013 Acquisition

During 2013, the Company completed a business combination for approximately $10.0 million in cash consideration of which $0.1 million was allocated to net tangible assets acquired and $9.9 million to intangible assets. Intangible assets acquired consisted of existing technology with a weighted-average estimated useful life of five years.

2012 Acquisitions

Contrail

On December 14, 2012, the Company acquired the remaining ownership interest in Contrail, increasing its ownership from 12% to 100%, in a cash and stock transaction for approximately $91.7 million. Contrail, a privately-held software networking company, provides software-defined networking solutions technology that augments Juniper's portfolio of products and services.
The aggregate consideration of $91.7 million was allocated as follows: net tangible assets acquired of $3.6 million, including cash and cash equivalents of $8.6 million; intangible assets of $17.4 million; and recognized goodwill of $70.7 million, which was assigned to the Company's PSD segment. Refer to Note 7, Goodwill and Purchased Intangible Assets, for discussion of the reclassification of goodwill from its PSD segment to its SSD segment related to this acquisition.
The Company previously accounted for its investment in Contrail at cost, which was $3.0 million prior to the acquisition. As of the acquisition date, the fair value of the Company's previous equity interest in Contrail was remeasured to its fair value of $17.7 million, which was based upon adjustments market participants would consider when estimating the fair value of the previously held interest in Contrail. This resulted in a $14.7 million gain, which was reported within other expense, net in the Consolidated Statements of Operations.
Mykonos Software, Inc.

On February 13, 2012, the Company acquired 100% of the equity securities of Mykonos Software, Inc. ("Mykonos") for $82.6 million in cash. The acquisition of Mykonos extended Juniper Networks' security portfolio with an intrusion deception system capable of detecting an attacker before an attack is in process. In connection with this acquisition, the Company acquired net tangible liabilities of $0.2 million, intangible assets of $24.3 million, and recognized goodwill of $58.5 million, which was assigned to the Company's SSD segment.
BitGravity, Inc.

On March 8, 2012, the Company acquired a source code license and patent joint-ownership related to the service management layer of BitGravity, Inc.'s ("BitGravity") Content Delivery Network ("CDN") technology for $13.0 million in cash. In connection with this acquisition, the Company acquired net tangible assets of $0.1 million, intangible assets of $12.4 million, and recognized goodwill of $0.5 million, which was assigned to the Company's SSD segment.

Intangible Assets Acquired

The following table presents details of the intangible assets acquired for the business combinations completed during 2012 as of their respective acquisition dates (in millions, except years):
 
Contrail
 
Mykonos
 
BitGravity
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
Existing technology
 
$

 
6
 
$
19.3

 
3
 
$
12.4

Trade name and trademarks
 

 
7
 
1.0

 
 

In-process research and development
N/A
 
17.4

 
N/A
 
4.0

 
 

Total
 
$
17.4

 
6
 
$
24.3

 
3
 
$
12.4



Acquired in-process research and development (“IPR&D”) consists of existing research and development projects at the time of the acquisition. Projects that qualify as IPR&D assets represent those that have not yet reached technological feasibility and have no alternative future use. After initial recognition, acquired IPR&D assets are accounted for as indefinite-lived intangible assets. Development costs incurred after acquisition on acquired development projects are expensed as incurred. Upon completion of development, acquired IPR&D assets are considered amortizable intangible assets. If the IPR&D project is abandoned, the Company writes off the related purchased intangible asset in the period it is abandoned.
2011 Acquisitions

OpNext

On February 9, 2011, the Company acquired certain IP assets of OpNext for $26.0 million in cash, which was accounted for as a business combination. The acquisition of OpNext's ASIC technology furthered Juniper's next-generation development of converged packet optical solutions for the Company's service provider customers. In connection with this acquisition, the Company acquired the fair value of intangible assets of $25.7 million and recognized goodwill of $0.3 million.

Brilliant

On February 18, 2011, the Company acquired certain assets of Brilliant, including all the intellectual property ("IP") for $4.5 million in cash. This IP assisted the Company in extending its market position by delivering solutions that offer greater flexibility for service providers as they deployed 3G and 4G networks. In connection with this acquisition, the Company acquired net tangible assets of $1.7 million, intangible assets of $2.7 million, and recognized goodwill of $0.1 million.

Intangible Assets Acquired

The following table presents details of the intangible assets acquired for the business combinations completed during 2011 as of their respective acquisition dates (in millions, except years):
 
OpNext
 
Brilliant
 
Weighted Average
Estimated Useful
Life (In Years)
 
Amount
 
Weighted Average
Estimated Useful
Life (In Years)
 
Amount
Existing or core technology
10
 
$
20.6

 
5
 
$
1.3

Support agreements and related relationships
4
 
5.1

 
 

Patents
 

 
5
 
1.4

Total
9
 
$
25.7

 
5
 
$
2.7

Cash Equivalents and Investments (Notes)
Cash Equivalents and Investments
Cash Equivalents and Investments

Investments in Available-for-Sale and Trading Securities

The following tables summarize the Company's unrealized gains and losses and fair value of investments designated as available-for-sale and trading securities as of December 31, 2013 and December 31, 2012 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
As of December 31, 2013
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
Asset-backed securities
$
249.9

 
$
0.1

 
$
(0.1
)
 
$
249.9

Certificates of deposit
27.6

 

 

 
27.6

Commercial paper
6.9

 

 

 
6.9

Corporate debt securities
813.6

 
2.0

 
(0.3
)
 
815.3

Foreign government debt securities
10.7

 

 

 
10.7

Government-sponsored enterprise obligations
306.2

 
0.1

 
(0.1
)
 
306.2

U.S. government securities
303.3

 
0.1

 
(0.1
)
 
303.3

Total fixed income securities
1,718.2

 
2.3

 
(0.6
)
 
1,719.9

Money market funds
1,043.7

 

 

 
1,043.7

Mutual funds
3.9

 
0.1

 

 
4.0

Publicly-traded equity securities
12.0

 
104.5

 
(1.9
)
 
114.6

Total available-for-sale securities
2,777.8

 
106.9

 
(2.5
)
 
2,882.2

Trading securities in mutual funds(*)
15.4

 

 

 
15.4

Total
$
2,793.2

 
$
106.9

 
$
(2.5
)
 
$
2,897.6

 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
Cash equivalents
$
996.2

 
$

 
$

 
$
996.2

Restricted investments
87.5

 
0.1

 

 
87.6

Short-term investments
459.0

 
104.9

 
(2.0
)
 
561.9

Long-term investments
1,250.5

 
1.9

 
(0.5
)
 
1,251.9

Total
$
2,793.2

 
$
106.9

 
$
(2.5
)
 
$
2,897.6

________________________________
(*)
Balance includes the Company's non-qualified deferred compensation plan assets.

 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
As of December 31, 2012
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
Asset-backed securities
$
226.2

 
$
0.3

 
$
(0.1
)
 
$
226.4

Certificates of deposit
42.5

 

 

 
42.5

Commercial paper
22.4

 

 

 
22.4

Corporate debt securities
533.4

 
2.3

 
(0.1
)
 
535.6

Foreign government debt securities
5.0

 

 

 
5.0

Government-sponsored enterprise obligations
270.7

 
0.3

 

 
271.0

U.S. government securities
494.4

 
0.1

 

 
494.5

Total fixed income securities
1,594.6

 
3.0

 
(0.2
)
 
1,597.4

Money market funds
1,145.2

 

 

 
1,145.2

Mutual funds
2.9

 
0.1

 

 
3.0

Publicly-traded equity securities
3.0

 

 
(0.1
)
 
2.9

Total available-for-sale securities
2,745.7

 
3.1

 
(0.3
)
 
2,748.5

Trading securities in mutual funds(*)
12.6

 

 

 
12.6

Total
$
2,758.3

 
$
3.1

 
$
(0.3
)
 
$
2,761.1

 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
Cash equivalents
$
1,225.9

 
$

 
$

 
$
1,225.9

Restricted investments
105.5

 
0.1

 

 
105.6

Short-term investments
441.3

 
0.3

 
(0.1
)
 
441.5

Long-term investments
985.6

 
2.7

 
(0.2
)
 
988.1

Total
$
2,758.3

 
$
3.1

 
$
(0.3
)
 
$
2,761.1


_______________________________
(*)
Balance includes the Company's non-qualified deferred compensation plan assets.

The following table presents the maturities of the Company's fixed income securities as of December 31, 2013 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
Due within one year
$
467.7

 
$
0.3

 
$

 
$
468.0

Due between one and five years
1,250.5

 
2.0

 
(0.6
)
 
1,251.9

Total
$
1,718.2

 
$
2.3

 
$
(0.6
)
 
$
1,719.9



The Company had 178 and 98 investments in unrealized loss positions as of December 31, 2013 and December 31, 2012, respectively. The gross unrealized losses related to these investments were primarily due to changes in market interest rates and stock prices. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company aggregates its investments by category and length of time the securities have been in a continuous unrealized loss position to facilitate its evaluation.

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) it has the intention to sell any of these investments and (ii) whether it is not 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 December 31, 2013, 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 year ended December 31, 2013, 2012, and 2011.

For available-for-sale equity securities that have unrealized losses, the Company evaluates whether there is an indication of other-than-temporary impairments. This determination is based on several factors, including the financial condition and near-term prospects of the issuer and the Company’s intent and ability to hold the publicly-traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value. During the years ended December 31, 2013, 2012, and 2011, the Company did not recognize other-than-temporary impairments associated with these investments.

There were no material gross realized gains or losses from available-for-sale and trading securities during the years ended December 31, 2013, 2012, and 2011.
 
The following tables present the Company's available-for-sale securities that were in an unrealized loss position as of December 31, 2013 and December 31, 2012 (in millions):
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
 
Fair
Value
 
Unrealized
Loss
As of December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities(1)
$
153.0

 
$
(0.1
)
 
$
0.6

 
$

 
$
153.6

 
$
(0.1
)
Corporate debt securities(1)
156.1

 
(0.3
)
 
9.7

 

 
165.8

 
(0.3
)
Foreign government debt securities(2)
10.0

 

 

 

 
10.0

 

Government-sponsored enterprise obligations
123.1

 
(0.1
)
 

 

 
123.1

 
(0.1
)
U.S. government securities
119.7

 
(0.1
)
 

 

 
119.7

 
(0.1
)
Total fixed income securities
561.9

 
(0.6
)
 
10.3

 

 
572.2

 
(0.6
)
Publicly-traded equity securities
6.8

 
(1.9
)
 

 

 
6.8

 
(1.9
)
Total available-for sale securities
$
568.7

 
$
(2.5
)
 
$
10.3

 
$

 
$
579.0

 
$
(2.5
)
 ________________________________
(1) Balance greater than 12 months includes investments that were in an immaterial unrealized loss position as of December 31, 2013.
(2) Balance for less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013.

 
Less than 12 Months 
 
12 Months or Greater 
 
Total 
 
Fair
Value 
 
Unrealized
Loss 
 
Fair
Value 
 
Unrealized
Loss 
 
Fair
Value 
 
Unrealized
Loss 
As of December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities (1)
$
55.1

 
$
(0.1
)
 
$
0.1

 
$

 
$
55.2

 
$
(0.1
)
Certificates of deposit(2)
0.3

 

 

 

 
0.3

 

Commercial paper(2)
10.0

 

 

 

 
10.0

 

Corporate debt securities
116.0

 
(0.1
)
 

 

 
116.0

 
(0.1
)
Government-sponsored enterprise obligations(2)
30.0

 

 

 

 
30.0

 

U.S. government securities(2)
68.2

 

 

 

 
68.2

 

Total fixed income securities
279.6

 
(0.2
)
 
0.1

 

 
279.7

 
(0.2
)
Publicly-traded equity securities
2.9

 
(0.1
)
 

 

 
2.9

 
(0.1
)
Total available-for-sale securities
$
282.5

 
$
(0.3
)
 
$
0.1

 
$

 
$
282.6

 
$
(0.3
)
 ________________________________
(1) Balance greater than 12 months includes investments that were in an immaterial unrealized loss position as of December 31, 2012.
(2) Balance for less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2012.

Restricted Cash and Investments

The Company classifies cash and investments designated as available-for-sale securities as restricted cash and investments on its Consolidated Balance Sheets for: (i) amounts held in escrow accounts, as required in connection with certain acquisitions completed between 2005 and 2013; (ii) the India Gratuity Trust and Israel Retirement Trust, which cover statutory severance obligations in the event of termination of any of the Company's India and Israel employees, respectively; and (iii) the Directors and Officers ("D&O") indemnification trust.

Privately-Held Investments

As of December 31, 2013 and December 31, 2012, the carrying values of the Company’s privately-held investments of $57.2 million and $32.0 million, respectively, were included in other long-term assets in the Consolidated Balance Sheets. During 2013, certain privately-held investments with carrying values of $12.2 million became public and were reclassified to short-term investments and resulted in net unrealized gains of $102.7 million and recorded as a component of accumulated comprehensive income in the Consolidated Balance Sheets.

The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis.

During the years ended December 31, 2013, 2012, and 2011, the Company determined that certain privately-held investments were other-than-temporarily impaired, resulting in impairment charges of $2.8 million, $20.0 million, and $1.8 million, respectively, that were recorded within other expense, net in the Consolidated Statements of Operations.
Fair Value Measurements (Notes)
Fair Value Measurements
Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables provide a summary of assets and liabilities measured at fair value on a recurring basis and as reported in the Consolidated Balance Sheets (in millions):
 
Fair Value Measurements at December 31, 2013 Using:
 
 
 
Quoted Prices in
Active Markets For
Identical Assets
 
Significant Other
Observable
Remaining Inputs
 
Significant Other
Unobservable
Remaining Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets measured at fair value:
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Asset-backed securities
$

 
$
249.9

 
$

 
$
249.9

Certificates of deposit

 
27.6

 

 
27.6

Commercial paper

 
6.9

 

 
6.9

Corporate debt securities

 
815.3

 

 
815.3

Foreign government debt securities

 
10.7

 

 
10.7

Government-sponsored enterprise obligations

 
306.2

 

 
306.2

Money market funds (1)
1,043.7

 

 

 
1,043.7

Mutual funds (2)
4.0

 

 

 
4.0

Publicly-traded equity securities
114.6

 

 

 
114.6

U.S. government securities
197.2

 
106.1

 

 
303.3

Total available-for-sale securities
1,359.5

 
1,522.7

 

 
2,882.2

Trading securities in mutual funds (3)
15.4

 

 

 
15.4

Derivative assets:
 
 
 
 
 
 
 
Foreign exchange contracts

 
3.0

 

 
3.0

Total assets measured at fair value
$
1,374.9

 
$
1,525.7

 
$

 
$
2,900.6

Liabilities measured at fair value:
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
Foreign exchange contracts
$

 
$
(0.7
)
 
$

 
$
(0.7
)
Total liabilities measured at fair value
$

 
$
(0.7
)
 
$

 
$
(0.7
)
 
 
 
 
 
 
 
 
Total assets measured at fair value, reported as:
 
 
 
 
 
 
 
Cash equivalents
$
965.1

 
$
31.1

 
$

 
$
996.2

Restricted investments
87.6

 

 

 
87.6

Short-term investments
246.5

 
315.4

 

 
561.9

Long-term investments
75.7

 
1,176.2

 

 
1,251.9

Prepaid expenses and other current assets

 
3.0

 

 
3.0

Total assets measured at fair value
$
1,374.9

 
$
1,525.7

 
$

 
$
2,900.6

 
 
 
 
 
 
 
 
Total liabilities measured at fair value, reported as:
 
 
 
 
 
 
 
Other accrued liabilities
$

 
$
(0.7
)
 
$

 
$
(0.7
)
Total liabilities measured at fair value
$

 
$
(0.7
)
 
$

 
$
(0.7
)

________________________________
(1) 
Balance includes $83.6 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisitions related escrows.
(2) 
Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) 
Balance relates to the investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.
 
Fair Value Measurements at December 31, 2012 Using:
 
 
 
Quoted Prices in
Active Markets For
Identical Assets
 
Significant Other
Observable
Remaining Inputs
 
Significant Other
Unobservable
Remaining Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets measured at fair value:
 
 
 
 
 
 
 
Available-for-sale securities:
 
 
 
 
 
 
 
Asset-backed securities
$

 
$
226.4

 
$

 
$
226.4

Certificates of deposit

 
42.5

 

 
42.5

Commercial paper

 
22.4

 

 
22.4

Corporate debt securities

 
535.6

 

 
535.6

Foreign government debt securities

 
5.0

 

 
5.0

Government-sponsored enterprise obligations
254.9

 
16.1

 

 
271.0

Money market funds (1)
1,145.2

 

 

 
1,145.2

Mutual funds (2)
1.0

 
2.0

 

 
3.0

Publicly-traded equity securities
2.9

 

 

 
2.9

U.S. government securities
275.9

 
218.6

 

 
494.5

Total available-for-sale securities
1,679.9

 
1,068.6

 

 
2,748.5

Trading securities in mutual funds (3)
12.6

 

 

 
12.6

Derivative assets:
 
 
 
 
 
 
 
Foreign exchange contracts

 
3.5

 

 
3.5

Total assets measured at fair value
$
1,692.5

 
$
1,072.1

 
$

 
$
2,764.6

Liabilities measured at fair value:
 
 
 
 
 
 
 
Derivative liabilities:
 
 
 
 
 
 
 
Foreign exchange contracts
$

 
$
0.1

 
$

 
$
0.1

Total liabilities measured at fair value
$

 
$
0.1

 
$

 
$
0.1

 
 
 
 
 
 
 
 
Total assets measured at fair value, reported as:
 
 
 
 
 
 
 
Cash equivalents
$
1,048.7

 
$
177.2

 
$

 
$
1,225.9

Restricted investments
103.6

 
2.0

 

 
105.6

Short-term investments
224.4

 
217.1

 

 
441.5

Long-term investments
315.8

 
672.3

 

 
988.1

Prepaid expenses and other current assets

 
3.5

 

 
3.5

Total assets measured at fair value
$
1,692.5

 
$
1,072.1

 
$

 
$
2,764.6

 
 
 
 
 
 
 
 
Total liabilities measured at fair value, reported as:
 
 
 
 
 
 
 
Other accrued liabilities
$

 
$
0.1

 
$

 
$
0.1

Total liabilities measured at fair value
$

 
$
0.1

 
$

 
$
0.1

_______________________________
(1) 
Balance includes $102.6 million of restricted investments measured at fair market value, related to the Company's D&O trust and acquisition related escrows.
(2) 
Balance relates to the restricted investments measured at fair market value of the Company's India Gratuity Trust.
(3) 
Balance relates to the investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.

The Company's Level 2 available-for-sale fixed income 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 year ended December 31, 2013, the Company transferred approximately $287.4 million of government agency bonds within government sponsored enterprise obligations from Level 1 to Level 2 primarily due to the use of additional valuation inputs more appropriately classified as Level 2 inputs. During the year ended December 31, 2013, the Company had no transfers to Level 3. During the year ended December 31, 2012, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain of the Company's assets, including intangible assets, goodwill, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated.
Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of investments. The Company estimates the fair value of its privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and their capital structure. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections.
The following table presents assets measured at fair value on a nonrecurring basis and the related impairment losses included in the Consolidated Statements of Operations (in millions):
 
As of December 31,
 
2013
 
2012
 
Fair Value
 
Losses
 
Fair Value
 
Losses
Privately-held investments
$
2.0

 
$
(2.8
)
 
$

 
$
(20.0
)
Purchased intangible assets, net
$

 

 
$

 
(5.4
)
Total losses for nonrecurring basis
 
 
$
(2.8
)
 
 
 
$
(25.4
)

These assets were classified as Level 3 assets due to the absence of quoted market prices and/or inherent lack of liquidity.
As of December 31, 2013 and 2012, the Company had no liabilities 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, financing receivables, accounts payable, and other accrued liabilities approximate fair value due to their short maturities. As of December 31, 2013 and December 31, 2012, the estimated fair value of the Company’s long-term debt was approximately $1,023.5 million and $1,090.7 million, respectively, based on quoted market prices (Level 1).
Derivative Instruments (Notes)
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 December 31,
 
2013
 
2012
Cash flow hedges
$
137.6

 
$
85.8

Non-designated derivatives
144.4

 
112.8

     Total
$
282.0

 
$
198.6



Cash Flow Hedges

The Company uses foreign currency forward or option contracts to hedge the Company's planned cost of services and operating expenses denominated in foreign currencies. These derivatives are designated as cash flow hedges. Execution of these cash flow hedge derivatives typically occurs every month with maturities of one year or less.

See Note 5, Fair Value Measurements, for the fair values of the Company’s derivative instruments in the Consolidated Balance Sheets.

As of December 31, 2013, the Company recognized a loss of $1.0 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a gain of $0.7 million during the year ended December 31, 2013 from other comprehensive income to operating expense in the Consolidated Statements of Operations. As of December 31, 2012, the Company recognized a gain of $7.2 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a loss of $7.5 million during the year ended December 31, 2012 from other comprehensive income to operating expense in the Consolidated Statements of Operations. As of December 31, 2011, the Company recognized a loss of $7.9 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a gain of $0.7 million during the year ended December 31, 2011 from other comprehensive income to operating expense in the Consolidated Statements of Operations.

The ineffective portion of the Company's derivative instruments recognized in its Consolidated Statements of Operations was not material during the years ended December 31, 2013, 2012, and 2011.

Non-Designated Derivatives

During the years ended December 31, 2013, 2012, and 2011, the Company recognized a net gain of $0.9 million, a net gain of $1.0 million, and a gain of $1.5 million, respectively, on non-designated derivative instruments within other expense, net, in its Consolidated Statements of Operations.

Offsetting of Derivatives

The Company presents its derivative assets and derivative liabilities on a gross basis in the Consolidated Balance Sheets. However, under agreements containing provisions on netting with certain counterparties of foreign exchange contracts, subject to applicable requirements, the Company is allowed to net-settle transactions on the same date in the same currency, with a single net amount payable by one party to the other. As of December 31, 2013 and December 31, 2012, the potential effect of rights of setoff associated with derivative instruments was not material. The Company is neither required to pledge nor entitled to receive cash collateral related to these derivative transactions.
Goodwill and Purchased Intangible Assets (Notes)
Goodwill and Purchased Intangible Assets
Goodwill and Purchased Intangible Assets

Goodwill
The following table presents the goodwill activity allocated to the Company's reportable segments (in millions):
 
PSD
 
SSD
 
Total
December 31, 2011
$
1,795.6

 
$
2,132.5

 
$
3,928.1

Additions due to business combinations
70.7

 
59.6

 
130.3

Adjustments to goodwill

 
(0.6
)
 
(0.6
)
December 31, 2012
1,866.3

 
2,191.5

 
4,057.8

Reclassifications
(249.6
)
 
249.6

 

Foreign currency translation adjustment
(0.1
)
 

 
(0.1
)
December 31, 2013
$
1,616.6

 
$
2,441.1

 
$
4,057.7



The additions to goodwill in 2012 were based on the purchase price allocations of the acquisitions completed during 2012. The adjustments to goodwill during 2012 were related to adjustments to net tangible assets assumed from certain businesses acquired in 2010 and 2011. The Company also recorded adjustments to net tangible assets assumed related to the acquisitions completed in 2012.
During 2013, goodwill of $179.0 million associated with security products previously reported under the PSD segment was reclassified to the SSD segment in connection with the Company's product realignment of all security products. In addition, the Company realigned its Contrail products from the PSD segment to the SSD segment resulting in a reclassification of goodwill of $70.6 million. Goodwill was reclassified based on the relative fair value allocation of the reporting units affected.

There were no impairments to goodwill during the years ended December 31, 2013, 2012, and 2011.

Purchased Intangible Assets

The Company’s purchased intangible assets were as follows (in millions):
 
Gross
 
Accumulated
Amortization
 

Impairments and
Other Charges
 
Net
As of December 31, 2013
 
 
 
 
 
 
 
Intangible assets with finite lives:
 
 
 
 
 
 
 
Technologies and patents
$
581.4

 
$
(453.4
)
 
$
(30.5
)
 
$
97.5

Customer contracts, support agreements, and
   related relationships
74.3

 
(62.7
)
 
(2.2
)
 
9.4

Total purchased intangible assets
$
655.7

 
$
(516.1
)
 
$
(32.7
)
 
$
106.9

 
 
 
 
 
 
 
 
As of December 31, 2012
 
 
 
 
 
 
 
Intangible assets with finite lives:
 
 
 
 
 
 
 
Technologies and patents
$
554.1

 
$
(425.0
)
 
$
(30.5
)
 
$
98.6

Customer contracts, support agreements, and
   related relationships
74.3

 
(59.2
)
 
(2.2
)
 
12.9

Total intangible assets with finite lives
628.4

 
(484.2
)
 
(32.7
)
 
111.5

IPR&D with indefinite lives
17.4

 

 

 
17.4

Total purchased intangible assets
$
645.8

 
$
(484.2
)
 
$
(32.7
)
 
$
128.9



During 2013, research and development efforts were completed and IPR&D accounted for as an indefinite-lived asset was reclassified as an amortizable finite-lived asset.

The following table presents the amortization of intangible assets included in the Consolidated Statements of Operations (in millions):
 
Years Ended December 31,
 
2013
 
2012
 
2011
Cost of revenues
$
27.3

 
$
27.6

 
$
21.7

Operating expenses: