JUNIPER NETWORKS INC, 10-Q filed on 5/8/2014
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2014
May 2, 2014
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
JUNIPER NETWORKS INC 
 
Entity Central Index Key
0001043604 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2014 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q1 
 
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
 
473,761,619 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Net revenues:
 
 
Product
$ 876.0 
$ 781.8 
Service
294.1 
277.4 
Total net revenues
1,170.1 
1,059.2 
Cost of revenues:
 
 
Product
326.6 
278.2 
Service
123.4 
110.2 
Total cost of revenues
450.0 
388.4 
Gross margin
720.1 
670.8 
Operating expenses:
 
 
Research and development
264.0 
262.2 
Sales and marketing
273.4 
256.1 
General and administrative
74.9 
58.5 
Restructuring and other charges
114.0 
7.0 
Total operating expenses
726.3 
583.8 
Operating (loss) income
(6.2)
87.0 
Other income (expense), net
154.2 
(10.1)
Income before income taxes
148.0 
76.9 
Income tax provision (benefit)
37.4 
(14.1)
Net income
$ 110.6 
$ 91.0 
Net income per share:
 
 
Basic (in dollars per share)
$ 0.23 
$ 0.18 
Diluted (in dollars per share)
$ 0.22 
$ 0.18 
Shares used in computing net income per share:
 
 
Basic (in shares)
486.2 
504.7 
Diluted (in shares)
496.5 
512.7 
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Statement of Comprehensive Income [Abstract]
 
 
Net income
$ 110.6 
$ 91.0 
Available-for-sale securities:
 
 
Change in unrealized gains on available-for-sale securities, net of tax provision of ($22.1) for 2014
38.1 
(0.2)1
Reclassification adjustment for realized net gains on available-for-sale securities included in net income, net of tax provision of $60.3 for 2014
(103.5)
(0.4)1
Net change in unrealized gains on available-for-sale securities
(65.4)
(0.6)1
Cash flow hedges:
 
 
Change in unrealized gains on cash flow hedges, net of tax provision of ($0.6) for 2014
2.1 
(2.1)1
Reclassification adjustment for realized net gains on cash flow hedges included in net income, net of tax benefit of ($0.1) for 2014
(1.1)
(1.4)1
Net change in unrealized gains on cash flow hedges, net of taxes
1.0 
(3.5)1
Change in foreign currency translation adjustments
1.7 
(5.8)
Other comprehensive loss, net of tax
(62.7)
(9.9)
Comprehensive income
$ 47.9 
$ 81.1 
Condensed Consolidated Statements of Comprehensive Income Parentheticals (Unaudited) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
 
Tax provision on change in unrealized gains on available-for-sale securities
$ (22.1)
Tax provision on reclassification adjustment for realized net gains on available-for-sale securities included in net income
60.3 
Tax provision on change in unrealized gains on cash flow hedges
(0.6)
Tax benefit on reclassification adjustment for realized gains included in net income
$ (0.1)
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 2,579.4 
$ 2,284.0 
Short-term investments
378.1 
561.9 
Accounts receivable, net of allowances
597.9 
578.3 
Deferred tax assets, net
140.4 
79.8 
Prepaid expenses and other current assets
184.0 
199.9 
Total current assets
3,879.8 
3,703.9 
Property and equipment, net
905.7 
882.3 
Long-term investments
521.2 
1,251.9 
Restricted cash and investments
71.6 
89.5 
Purchased intangible assets, net
115.1 
106.9 
Goodwill
4,071.3 
4,057.7 
Other long-term assets
158.9 
233.8 
Total assets
9,723.6 
10,326.0 
Current liabilities:
 
 
Accounts payable
222.2 
200.4 
Accrued compensation
180.6 
273.9 
Deferred revenue
772.5 
705.8 
Other accrued liabilities
271.0 
261.3 
Total current liabilities
1,446.3 
1,441.4 
Long-term debt
1,348.9 
999.3 
Long-term deferred revenue
381.7 
363.5 
Long-term income taxes payable
121.7 
114.4 
Other long-term liabilities
115.5 
105.2 
Total liabilities
3,414.1 
3,023.8 
Commitments and contingencies (Note 16)
   
   
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; 473.4 shares and 495.2 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively
Additional paid-in capital
9,255.4 
9,868.9 
Accumulated other comprehensive income
1.9 
64.6 
Accumulated deficit
(2,947.8)
(2,631.3)
Total stockholders' equity
6,309.5 
7,302.2 
Total liabilities and stockholders' equity
$ 9,723.6 
$ 10,326.0 
Condensed Consolidated Balance Sheets Parentheticals (Unaudited) (USD $)
Mar. 31, 2014
Dec. 31, 2013
Statement of Financial Position [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
473,400,000 
495,200,000 
Common stock - outstanding
473,400,000 
495,200,000 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash flows from operating activities:
 
 
Net income
$ 110.6 
$ 91.0 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
Share-based compensation expense
60.8 
49.9 
Depreciation, amortization, and accretion
48.1 
51.8 
Restructuring and other charges
122.4 
7.7 
Deferred income taxes
(44.5)
15.7 
Gain on investments, net
(166.2)
(2.3)
Excess tax benefits from share-based compensation
(6.7)
(1.1)
Loss on disposal of fixed assets
0.8 
0.1 
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
Accounts receivable, net
(15.7)
(94.3)
Prepaid expenses and other assets
35.5 
(53.6)
Accounts payable
19.2 
9.1 
Accrued compensation
(92.0)
(75.2)
Income taxes payable
21.2 
(38.4)
Other accrued liabilities
(50.3)
(26.5)
Deferred revenue
82.8 
57.2 
Net cash provided by (used in) operating activities
126.0 
(8.9)
Cash flows from investing activities:
 
 
Purchases of property and equipment
(57.3)
(71.5)
Purchases of available-for-sale investments
(327.1)
(582.2)
Proceeds from sales of available-for-sale investments
1,221.4 
331.8 
Proceeds from maturities of available-for-sale investments
79.3 
54.0 
Purchases of trading investments
(1.8)
(1.5)
Proceeds from sales of privately-held investments
2.5 
1.6 
Purchases of privately-held investments
(1.7)
(7.3)
Payments for business acquisitions, net of cash and cash equivalents acquired
(27.1)
(10.0)
Changes in restricted cash
25.0 
Net cash provided by (used in) investing activities
913.2 
(285.1)
Cash flows from financing activities:
 
 
Proceeds from issuance of common stock
101.2 
65.0 
Purchases and retirement of common stock
(905.8)
(132.5)
Purchase of equity forward contract
(300.0)
Issuance of long-term debt, net
346.5 
Payment for capital lease obligation
(0.4)
(1.4)
Customer financing arrangements
8.0 
(2.3)
Excess tax benefits from share-based compensation
6.7 
1.1 
Net cash used in financing activities
(743.8)
(70.1)
Net increase (decrease) in cash and cash equivalents
295.4 
(364.1)
Cash and cash equivalents at beginning of period
2,284.0 
2,407.8 
Cash and cash equivalents at end of period
$ 2,579.4 
$ 2,043.7 
Basis of Presentation
Basis of presentation
Basis of Presentation

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with United States ("U.S.") generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of December 31, 2013, is derived from the audited Consolidated Financial Statements for the year ended December 31, 2013. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or any future period. The information included in this Quarterly Report on Form 10-Q ("Report") should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. Certain amounts in the prior year Condensed Consolidated Financial Statements contained in this Report have been reclassified to conform to the current year presentation.

The preparation of the financial statements and related disclosures in accordance with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying notes. Actual results could differ materially from those estimates under different assumptions or conditions.

In the first quarter of 2014, the Company announced an integrated operating plan ("IOP") to refocus the Company's strategy, optimize its structure, and improve operational efficiencies. In connection with the IOP, the Company realigned its organization into a One-Juniper structure which includes consolidating the Company's R&D and go-to-market functions to reduce complexity, increase clarity of responsibilities, and improve efficiency. As a result of these changes, the consolidated business is considered to be one reportable segment. In fiscal 2013, the Company operated under two reportable segments: Platform Systems Division ("PSD") and Software Solutions Division ("SSD"). This change did not impact previously reported consolidated results of operation. See Note 13, Segments, for further discussion of the Company's segment reorganization.
Summary of Significant Accounting Policies
Summary of significant accounting policies
Summary of Significant Accounting Policies

There have been no material changes to the Company's significant accounting policies as compared to the accounting policies described in Note 2, Significant Accounting Policies, in Notes to Consolidated Financial Statements in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08") which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In July 2013, the FASB issued 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 became effective for the Company in the first quarter of 2014. The adoption did not result in a change to the tax provision and it did not have a significant impact to the presentation of long-term taxes payable or deferred tax assets.
Business Combinations
Business Combinations
Business Combinations

On January 7, 2014, the Company acquired 100% of the equity securities of WANDL, Inc. ("WANDL"), for $28.7 million of cash and stock consideration. WANDL, a provider of software solutions for advanced planning, management, design and optimization of next-generation multi-layer networks will provide the Company with technology and experience in traffic engineering, multi-layer optimization and path computation, to help service provider customers optimize the performance and cost of their networks.

The aggregate consideration of $28.7 million was allocated as follows: intangible assets of $17.8 million, recognized goodwill of $13.6 million, and net liabilities of $2.7 million. The goodwill recognized for the acquisition of WANDL was primarily attributable to expected synergies and is not deductible for U.S. federal income tax purposes.

Additionally, under the terms of the purchase agreement, the Company assumed share-based awards for employees with a fair value of $34.9 million, which were granted in contemplation of future services and will be expensed as share-based compensation over the remaining service period.

Intangible Assets Acquired

The following table presents details of the Company's intangible assets acquired through the business combination completed during the three months ended March 31, 2014 (in millions, except years):
 
Weighted
Average
Estimated
Useful
Life
(In Years)
 
Amount
Existing technology
7
 
$
10.7

Customer relationships
7
 
6.0

Trade name
4
 
0.6

Backlog
1
 
0.2

Non-compete agreements
2
 
0.3

Total
7
 
$
17.8



The Company's Condensed Consolidated Financial Statements include the operating results of this business combination from the date of acquisition. Pro forma results of operations for this acquisition have not been presented as the financial impact to the Company's consolidated results of operations is not material.

The Company recognized $0.6 million and $0.1 million of acquisitions-related costs during the three months ended March 31, 2014 and March 31, 2013, respectively. These acquisition-related costs were expensed in the period incurred within general and administrative expense in the Company's Condensed Consolidated Statements of Operations.
Cash Equivalents and Investments
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 March 31, 2014 and December 31, 2013 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
As of March 31, 2014
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
Asset-backed securities
$
135.4

 
$

 
$
(0.1
)
 
$
135.3

Certificates of deposit
12.0

 

 

 
12.0

Commercial paper
1.2

 

 

 
1.2

Corporate debt securities
411.0

 
1.3

 
(0.1
)
 
412.2

Foreign government debt securities
5.0

 

 

 
5.0

Government-sponsored enterprise obligations
88.3

 

 

 
88.3

U.S. government securities
241.5

 
0.1

 

 
241.6

Total fixed income securities
894.4

 
1.4

 
(0.2
)
 
895.6

Money market funds
1,183.0

 

 

 
1,183.0

Mutual funds
4.0

 
0.1

 

 
4.1

Publicly-traded equity securities
7.2

 

 
(0.8
)
 
6.4

Total available-for-sale securities
2,088.6

 
1.5

 
(1.0
)
 
2,089.1

Trading securities in mutual funds(*)
16.1

 

 

 
16.1

Total
$
2,104.7

 
$
1.5

 
$
(1.0
)
 
$
2,105.2

 
 
 
 
 
 
 
 
Reported as:
 
 
 
 
 
 
 
Cash equivalents
$
1,135.1

 
$

 
$

 
$
1,135.1

Restricted investments
70.7

 
0.1

 

 
70.8

Short-term investments
378.6

 
0.3

 
(0.8
)
 
378.1

Long-term investments
520.3

 
1.1

 
(0.2
)
 
521.2

Total
$
2,104.7

 
$
1.5

 
$
(1.0
)
 
$
2,105.2


________________________________
(*) 
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, 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.

The following table presents the contractual maturities of the Company's total fixed income securities as of March 31, 2014 (in millions):
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Estimated Fair
Value
Due within one year
$
374.0

 
$
0.3

 
$

 
$
374.3

Due between one and five years
520.4

 
1.1

 
(0.2
)
 
521.3

Total
$
894.4

 
$
1.4

 
$
(0.2
)
 
$
895.6



The Company had 95 and 178 investments in an unrealized loss position as of March 31, 2014 and December 31, 2013, 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 more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. As of March 31, 2014, the Company anticipates that it will recover the entire amortized cost basis of such available-for-sale debt securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three months ended March 31, 2014 and March 31, 2013.

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 three months ended March 31, 2014, the Company determined that certain available-for-sale equity securities were other-than-temporarily impaired, resulting in an impairment charge of $1.6 million recorded within other income (expense), net, in the Condensed Consolidated Statements of Operations. There were no such charges during the three months ended March 31, 2013.

During the three months ended March 31, 2014, gross realized gains from available-for-sale securities were $165.5 million and gross realized losses were not material, excluding the impairment charge noted above. During the three months ended March 31, 2013, there were no material gross realized gains or losses from available-for-sale securities and there were no material gross realized gains or losses from trading securities during the three months ended March 31, 2014 and March 31, 2013.

The following tables present the Company's available-for-sale securities that were in an unrealized loss position as of March 31, 2014 and December 31, 2013 (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 March 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities(1)
$
65.9

 
$
(0.1
)
 
$
6.0

 
$

 
$
71.9

 
$
(0.1
)
Corporate debt securities
54.1

 
(0.1
)
 

 

 
54.1

 
(0.1
)
Foreign government debt securities(1)

 

 
5.0

 

 
5.0

 

Government-sponsored enterprise obligations(2)
34.9

 

 

 

 
34.9

 

U.S. government securities(2)
6.9

 

 

 

 
6.9

 

Total fixed income securities
161.8

 
(0.2
)
 
11.0

 

 
172.8

 
(0.2
)
Publicly-traded equity securities
6.4

 
(0.8
)
 

 

 
6.4

 
(0.8
)
Total available-for-sale securities
$
168.2

 
$
(1.0
)
 
$
11.0

 
$

 
$
179.2

 
$
(1.0
)
________________________________
(1) 
Balances greater than 12 months include investments that were in an immaterial unrealized loss position as of March 31, 2014.
(2) 
Balances less than 12 months include investments that were in an immaterial unrealized loss position as of March 31, 2014.

 
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) 
Balances greater than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013.
(2) 
Balances less than 12 months include investments that were in an immaterial unrealized loss position as of December 31, 2013.

Restricted Cash and Investments

The Company classifies cash and investments designated as available-for-sale securities as restricted cash and investments on its Condensed Consolidated Balance Sheets for: (i) amounts held in escrow accounts, as required in connection with certain acquisitions completed between 2005 and 2014; (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 indemnification trust ("D&O Trust").

Privately-Held Investments

As of March 31, 2014 and December 31, 2013, the carrying values of the Company’s privately-held investments of $58.7 million and $57.2 million, respectively, were included in other long-term assets in the Condensed 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 three months ended March 31, 2014 and March 31, 2013, the Company determined that no privately-held investments were other-than-temporarily impaired.
Fair Value Measurements
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 Condensed Consolidated Balance Sheets (in millions):
 
Fair Value Measurements at March 31, 2014 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
$

 
$
135.3

 
$

 
$
135.3

Certificates of deposit

 
12.0

 

 
12.0

Commercial paper

 
1.2

 

 
1.2

Corporate debt securities

 
412.2

 

 
412.2

Foreign government debt securities

 
5.0

 

 
5.0

Government-sponsored enterprise obligations

 
88.3

 

 
88.3

Money market funds(1)
1,183.0

 

 

 
1,183.0

Mutual funds(2)
4.1

 

 

 
4.1

Publicly-traded equity securities
6.4

 

 

 
6.4

U.S. government securities
140.9

 
100.7

 

 
241.6

Total available-for-sale securities
1,334.4

 
754.7

 

 
2,089.1

Trading securities in mutual funds(3)
16.1

 

 

 
16.1

Derivative assets:
 
 
 
 
 
 
 
Foreign exchange contracts

 
3.7

 

 
3.7

Total assets measured at fair value
$
1,350.5

 
$
758.4

 
$

 
$
2,108.9

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
$
1,116.3

 
$
18.8

 
$

 
$
1,135.1

Restricted investments
70.8

 

 

 
70.8

Short-term investments
135.7

 
242.4

 

 
378.1

Long-term investments
27.7

 
493.5

 

 
521.2

Prepaid expenses and other current assets

 
3.7

 

 
3.7

Total assets measured at fair value
$
1,350.5

 
$
758.4

 
$

 
$
2,108.9

 
 
 
 
 
 
 
 
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 $66.7 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 restricted investments measured at fair market value related to the Company's India Gratuity Trust.
(3) 
Balance relates to investments measured at fair value related to the Company's non-qualified deferred compensation plan assets.
 
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 restricted investments measured at fair market value related to the Company's India Gratuity Trust.
(3) 
Balance relates to 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 three months ended March 31, 2014, 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 the investee's capital structure. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections.

As of March 31, 2014, the Company had no assets measured at fair value on a nonrecurring basis. As of December 31, 2013, the Company had $2.0 million of privately-held investments measured at fair value on a nonrecurring basis and were classified as Level 3 assets due to the absence of quoted market prices and inherent lack of liquidity.

As of March 31, 2014 and December 31, 2013, 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 March 31, 2014 and December 31, 2013, the estimated fair value of the Company's long-term debt in the Condensed Consolidated Balance Sheets was approximately $1,398.6 million and $1,023.5 million, respectively, based on observable market inputs (Level 2).
Derivative Instruments
Derivative Instruments
Derivative Instruments

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

The notional amount of the Company's foreign currency derivatives are summarized as follows (in millions):
 
As of
 
March 31,
2014
 
December 31,
2013
Cash flow hedges
$
117.1

 
$
137.6

Non-designated derivatives
153.8

 
144.4

     Total
$
270.9

 
$
282.0



Cash Flow Hedges

The Company uses foreign currency forward or option contracts to hedge certain forecasted foreign currency transactions relating to cost of services and operating expenses. The derivatives are intended to hedge the U.S. Dollar equivalent of 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. 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 cost of services or operating expense line item to which the hedged transaction relates. The Company records any ineffectiveness of the hedging instruments in other income (expense), net, in its Condensed 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.

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

During the three months ended March 31, 2014, the Company recognized a gain of $2.7 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a gain of $1.0 million from other comprehensive loss to operating expense in the Condensed Consolidated Statements of Operations. During the three months ended March 31, 2013, the Company recognized a loss of $2.1 million in accumulated other comprehensive income for the effective portion of its derivative instruments and reclassified a gain of $1.4 million from other comprehensive loss to operating expense in the Condensed Consolidated Statements of Operations.

The ineffective portion of the Company's derivative instruments recognized in its Condensed Consolidated Statements of Operations was not material during the three months ended March 31, 2014 and March 31, 2013.

Non-Designated Derivatives

The Company also uses foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in other income (expense), net, in the Condensed 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. The derivatives have maturities within two months.

During the three months ended March 31, 2014 and March 31, 2013, the Company recognized net losses of $0.6 million and $0.7 million, respectively, on non-designated derivative instruments within other income (expense), net in its Condensed Consolidated Statements of Operations.

Offsetting of Derivatives

The Company presents its derivative assets and derivative liabilities on a gross basis in the Condensed 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 March 31, 2014 and December 31, 2013, 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
Goodwill and Purchased Intangible Assets
Goodwill and Purchased Intangible Assets

Goodwill
The following table presents goodwill activity during the three months ended March 31, 2014 (in millions):
Balance as of December 31, 2013
$
4,057.7

Additions due to business combinations
13.6

Balance as of March 31, 2014
$
4,071.3



The additions to goodwill were based on the purchase price allocation of the acquisition completed during the first quarter of 2014. There were no impairments to goodwill during the three months ended March 31, 2014 and March 31, 2013.

Purchased Intangible Assets

The Company’s purchased intangible assets were as follows (in millions):
 
Gross
 
Accumulated
Amortization
 
Impairments and
Other Charges
 
Net
As of March 31, 2014
 
 
 
 
 
 
 
Intangible assets with finite lives:
 
 
 
 
 
 
 
Technologies and patents
$
592.1

 
$
(461.9
)
 
$
(30.5
)
 
$
99.7

Customer contracts, support agreements, and
  related relationships
80.3

 
(63.7
)
 
(2.2
)
 
14.4

Other
1.1

 
(0.1
)
 

 
1.0

Total purchased intangible assets
$
673.5

 
$
(525.7
)
 
$
(32.7
)
 
$
115.1

 
 
 
 
 
 
 
 
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



The following table presents the amortization of intangible assets included in the Condensed Consolidated Statements of Operations (in millions):
 
Three Months Ended March 31,
 
2014
 
2013
Cost of revenues
$
8.2

 
$
6.3

Operating expenses:
 
 
 
Sales and marketing
1.0

 
0.9

General and administrative
0.3

 
0.3

Total operating expenses
1.3

 
1.2

Total
$
9.5

 
$
7.5



There were no impairment charges related to purchased intangible assets during the three months ended March 31, 2014 and March 31, 2013.

As of March 31, 2014, the estimated future amortization expense of purchased intangible assets with finite lives is as follows (in millions):
Years Ending December 31,
Amount
Remainder of 2014
$
29.3

2015
35.3

2016
21.1

2017
13.0

2018
6.1

Thereafter
10.3

Total
$
115.1

Other Financial Information
Other Financial Information
Other Financial Information

Inventories

The Company purchases and holds inventory to provide adequate component supplies over the life of the underlying products. The majority of the Company's inventory is production components. Inventories are reported within prepaid expenses and other current assets and other long-term assets in the Condensed Consolidated Balance Sheets and consisted of the following (in millions):
 
As of
 
March 31,
2014
 
December 31,
2013
Production materials
$
53.5

 
$
51.3

Finished goods
1.2

 
1.4

Inventories
$
54.7

 
$
52.7



In connection with the 2014 Restructuring Plan discussed in Note 9, Restructuring and Other Charges, the Company commenced a product rationalization initiative and accelerated the end-of-service life of certain products resulting in inventory charges of $8.4 million recorded within cost of revenues in the Condensed Consolidated Statement of Operations.

Other Long-Term Assets

Other long-term assets consisted of the following (in millions):
 
As of
 
March 31,
2014
 
December 31,
2013
Privately-held investments
$
58.7

 
$
57.2

Licensed software
9.5

 
90.4

Federal income tax receivable
20.0

 
20.0

Financed customer receivable
20.9

 
19.9

Inventory
14.9

 
15.2

Prepaid costs, deposits, and other
34.9

 
31.1

Other long-term assets
$
158.9

 
$
233.8



In connection with the 2014 Restructuring Plan discussed in Note 9, Restructuring and Other Charges, the Company reviewed its product portfolio and determined to cease development of the application delivery controller software technology licensed in July 2012. As a result, the Company recognized a charge of $84.7 million recorded within operating expenses in the Condensed Consolidated Statement of Operations. There were no revenues associated with this technology.

Warranties

The Company accrues for warranty costs based on associated material, labor for customer support, and overhead at the time revenue is recognized. This accrual is reported as accrued warranty within current liabilities on the Condensed Consolidated Balance Sheets. Changes in the Company’s warranty reserve during the three months ended March 31, 2014 were as follows (in millions):
Balance as of December 31, 2013
$
28.0

Provisions made during the period, net
7.3

Adjustments related to pre-existing warranties

Actual costs incurred during the period
(6.9
)
Balance as of March 31, 2014
$
28.4


Deferred Revenue

Details of the Company's deferred revenue, as reported on the Condensed Consolidated Balance Sheets, were as follows (in millions):
 
As of
 
March 31,
2014
 
December 31,
2013
Deferred product revenue:
 
 
 
Undelivered product commitments and other product deferrals
$
186.3

 
$
184.9

Distributor inventory and other sell-through items
93.8

 
118.7

Deferred gross product revenue
280.1

 
303.6

Deferred cost of product revenue
(48.9
)
 
(58.6
)
Deferred product revenue, net
231.2

 
245.0

Deferred service revenue
923.0

 
824.3

Total
$
1,154.2

 
$
1,069.3

Reported as:
 
 
 
Current
$
772.5

 
$
705.8

Long-term
381.7

 
363.5

Total
$
1,154.2

 
$
1,069.3



Deferred product revenue represents unrecognized revenue related to shipments to distributors that have not sold through to end-users, undelivered product commitments, and other shipments that have not met all revenue recognition criteria. Deferred product revenue is recorded net of the related costs of product revenue. Deferred service revenue represents billable amounts for service contracts, which include technical support, hardware and software maintenance, professional services, and training, for which services have not been rendered.

Other Income (Expense), Net

Other income (expense), net, consisted of the following (in millions):
 
Three Months Ended March 31,
 
2014
 
2013
Interest income
$
2.1

 
$
2.1

Interest expense
(15.4
)
 
(14.3
)
Other
167.5

 
2.1

Other income (expense), net
$
154.2

 
$
(10.1
)


Interest income primarily includes interest earned on the Company’s cash, cash equivalents, and investments. Interest expense primarily includes interest, net of capitalized interest expense, from long-term debt and customer financing arrangements. Other typically consists of investment and foreign exchange gains and losses and other non-operational income and expense items.

During the three months ended March 31, 2014, Other was primarily comprised of net realized gains of $164.0 million related to certain publicly-traded equity and privately-held investments. During the three months ended March 31, 2013, Other was primarily comprised of a $1.6 million gain related to the sale of a privately-held investment.
Restructuring and Other Charges
Restructuring and Other Charges
Restructuring and Other Charges

The following table presents restructuring and other charges included in cost of revenues and restructuring and other charges in the Condensed Consolidated Statements of Operations under the Company's restructuring plans (in millions):
 
Three Months Ended March 31,
 
2014
 
2013
Severance
$
28.3

 
$
4.4

Facilities
0.2

 
2.6

Contract terminations
0.8

 
0.7

Asset impairment and write-downs
93.1

 

Total
$
122.4

 
$
7.7

 
 
 
 
Reported as:
 
 
 
Cost of revenues
$
8.4

 
$
0.7

Restructuring and other charges
114.0

 
7.0

Total
$
122.4

 
$
7.7



Restructuring charges are based on the Company's restructuring plans that were committed to by management. Any changes in the estimates of executing the approved plans are reflected in the Company's results of operations.

2014 Restructuring Plan

In connection with IOP announced in the first quarter of 2014, the Company initiated a restructuring plan (the “2014 Restructuring Plan”) to refocus the Company's strategy, optimize its structure, and improve operational efficiencies. The 2014 Restructuring Plan consists of workforce reductions, facility consolidations or closures, asset write-downs, contract terminations and other charges.

During the three months ended March 31, 2014, the Company recorded $28.0 million of severance costs, $84.7 million of impairment charges related to licensed software, and contract terminations of $0.8 million that were recorded to restructuring and other charges in the Condensed Consolidated Statement of Operations. The Company also recorded inventory write-downs related to the acceleration of the end-of-service life of certain products totaling $8.4 million to cost of revenues in the Condensed Consolidated Statement of Operations during the three months ended March 31, 2014. In connection with the 2014 Restructuring Plan, the Company expects to record aggregate future charges of approximately $60.0 million to $90.0 million allocated to the following restructuring activities: $9.0 million to $11.0 million for severance, $45.0 million to $55.0 million for facility consolidations or closures, $6.0 million to $12.0 million for asset write-downs, and up to $12.0 million for contract terminations and other charges.

Other Plans

Restructuring plans initiated by the Company in fiscal 2013, 2012, and 2011 have been substantially completed as of March 31, 2014 with minor adjustments recorded during the three months ended March 31, 2014 in connection with these plans. The Company expects to record aggregate future charges of approximately $2.5 million related to severance under these restructuring plans. The remaining restructuring liability under these plans related to facility charges are expected to be completed by March 2018.

Restructuring liabilities are reported within other accrued liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. The following table provides a summary of changes in the restructuring liability related to the Company's plans during the three months ended March 31, 2014 (in millions):
 
December 31,
2013
 
Charges
 
Cash
Payments
 
Non-cash
Settlements and
Other
 
March 31,
2014
Severance
$
5.6

 
$
28.3

 
$
(3.7
)
 
$
(0.6
)
 
$
29.6

Facilities
5.1

 
0.2

 
(0.9
)
 

 
4.4

Contract terminations and other
7.1

 
0.8

 
(7.0
)
 
(0.8
)
 
0.1

Total
$
17.8

 
$
29.3

 
$
(11.6
)
 
$
(1.4
)
 
$
34.1

Long-Term Debt and Financing
Long-Term Debt and Financing
Long-Term Debt and Financing

Long-Term Debt

The following table summarizes the Company's long-term debt (in millions, except percentages):
 
As of March 31, 2014
 
Amount
 
Effective Interest
Rates
Senior notes:
 
 
 
3.10% fixed-rate notes, due 2016 ("2016 Notes")
$
300.0

 
3.25
%
4.60% fixed-rate notes, due 2021 ("2021 Notes")
300.0

 
4.69
%
4.50% fixed-rate notes, due 2024 ("2024 Notes")
350.0

 
4.63
%
5.95% fixed-rate notes, due 2041 ("2041 Notes")
400.0

 
6.03
%
Total senior notes
1,350.0

 
 
Unaccreted discount
(1.1
)
 
 
Total
$
1,348.9

 
 

In February 2014, the Company issued $350.0 million aggregate principal amount of 4.50% senior notes due 2024. The 2024 Notes are senior unsecured obligations and rank equally with all of the Company's other existing and future senior unsecured indebtedness. Interest on the 2024 Notes is payable in cash semiannually. The Company may redeem the 2024 Notes, at any time in whole or from time to time in part, subject to a make-whole premium, and in the event of a change in control, the holders of the 2024 Notes may require the Company to repurchase for cash all or part of the 2024 Notes at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any. The indenture that governs the 2024 Notes also contains various covenants, including limitations on the Company's ability to incur liens or enter into sale-leaseback transactions over certain dollar thresholds.

The effective interest rates for the 2016 Notes, 2021 Notes, 2024 Notes, and 2041 Notes (collectively the “Notes”) include the interest on the Notes, accretion of the discount, and amortization of issuance costs. As of March 31, 2014, the Company was in compliance with all of its debt covenants.

Customer Financing Arrangements

The Company provides distribution partners access to extended financing arrangements for certain end-user customers that require longer payment terms than those typically provided by the Company through factoring accounts receivable to third-party financing providers ("financing providers"). The program does not and is not intended to affect the timing of the Company's revenue recognition. Under the financing arrangements, proceeds from the financing provider are due to the Company 30 days from the sale of the receivable. In these transactions with the financing provider, the Company surrenders control over the transferred assets. The factored accounts receivable are isolated from the Company and put beyond the reach of creditors, even in the event of bankruptcy. The Company does not maintain effective control over the transferred assets through obligations or rights to redeem, transfer, or repurchase the receivables after they have been transferred.
Pursuant to the financing arrangements for the sale of receivables, the Company sold net receivables of $133.0 million and $181.0 million during the three months ended March 31, 2014 and March 31, 2013, respectively. The Company received cash proceeds from the financing provider of $192.3 million and $162.7 million during the three months ended March 31, 2014 and March 31, 2013, respectively. As of March 31, 2014 and December 31, 2013, the amounts owed by the financing provider were $127.9 million and $189.8 million, respectively, and were recorded in accounts receivable on the Condensed Consolidated Balance Sheets.

The Company has provided guarantees for third-party financing arrangements extended to end-user customers, which have terms of up to four years. The Company is liable for the aggregate unpaid payments to the third-party financing company in the event of customer default. As of March 31, 2014, the Company has not been required to make any payments under these arrangements. Pursuant to these arrangements, the Company has guarantees for third-party financing arrangements of $21.9 million as of March 31, 2014.

The portion of the receivable financed that has not been recognized as revenue is accounted for as a financing arrangement and is included in other accrued liabilities and other long-term liabilities in the Consolidated Balance Sheets. As of March 31, 2014 and December 31, 2013, the estimated cash received from the financing provider not recognized as revenue was $61.5 million and $62.3 million, respectively.
Equity
Equity
Equity

Stock Repurchase Activities

In February 2014, the Company's Board of Directors (the "Board") approved a stock repurchase program that authorized the Company to repurchase up to $2.0 billion of its common stock through the end of the first quarter of 2015, including $1.2 billion to be used pursuant to an accelerated share repurchase program ("2014 Stock Repurchase Program"). The $2.0 billion authorization replaced the $1.0 billion authorization approved by the Board in July 2013 ("2013 Stock Repurchase Program").

As part of the 2014 Stock Repurchase Program, the Company entered into two separate accelerated share repurchase agreements (collectively, the "ASR") with two financial institutions to repurchase $1.2 billion of the Company’s common stock. During the three months ended March 31, 2014, the Company made an up-front payment of $1.2 billion pursuant to the ASR and received and retired an initial 33.3 million shares ("Initial Shares") of the Company’s common stock for an aggregate price of $900.0 million based on the market value of the Company’s common stock on the date of the transaction and was accounted for as a reduction to stockholders' equity in the Condensed Consolidated Balance Sheets. The remaining $300.0 million was recorded as a forward contract within stockholders' equity in the Condensed Consolidated Balance Sheets.

The total number of shares of the Company's common stock to be ultimately received under the ASR, will be based upon the average daily volume weighted average price of the Company's stock during the repurchase period, less an agreed upon discount. Final settlement of the transactions under the ASR is expected to be completed no sooner than May 27, 2014 or no later than August 27, 2014. If the Initial Shares are less than the total number of shares that will be ultimately received under the ASR, then the financial institution will be required to deliver additional shares of common stock to the Company at settlement. If however, the Initial Shares received are greater than the total number of shares that will be ultimately received, the Company has the option to either issue shares of common stock or make cash payments to the financial institutions.

As of March 31, 2014, there was $800.0 million of authorized funds remaining under the 2014 Stock Repurchase Program.

During the three months ended March 31, 2013, the Company repurchased and retired approximately 6.2 million shares of its common stock at an average price of $20.99 per share for an aggregate purchase price of $129.9 million under its 2013 Stock Repurchase Program.

In addition to repurchases under the Company’s stock repurchase program, the Company also repurchases common stock from its employees in connection with the net issuance of shares to satisfy minimum tax withholding obligations for the vesting of certain stock awards. Repurchases associated with tax withholdings were not significant during the three months ended March 31, 2014 and March 31, 2013.
Future share repurchases under the Company’s stock repurchase program will be subject to a review of the circumstances at that time and will be made from time to time in private transactions or open market purchases as permitted by securities laws and other legal requirements.

Accumulated Other Comprehensive Income, Net of Tax

The components of accumulated other comprehensive income, net of related taxes, during the three months ended March 31, 2014 were as follows (in millions):
 
Unrealized
Gains (Losses)
on Available-for-
Sale Securities(1)
 
Unrealized
Gains (Losses)
on Cash Flow
Hedges(2)
 
Foreign
Currency
Translation
Adjustments
 
Total
Balance as of December 31, 2013
$
66.2

 
$
2.2

 
$
(3.8
)
 
$
64.6

Other comprehensive gain before reclassifications
38.1

 
2.1

 
1.7

 
41.9

Amount reclassified from accumulated other
   comprehensive income
(103.5
)
 
(1.1
)
 

 
(104.6
)
Net other comprehensive loss
(65.4
)
 
1.0

 
1.7

 
(62.7
)
Balance as of March 31, 2014
$
0.8

 
$
3.2

 
$
(2.1
)
 
$
1.9

________________________________
(1) 
The reclassifications out of accumulated other comprehensive income during the three months ended March 31, 2014 for realized gains on available-for-sale securities of $103.5 million are included in other income (expense), net, in the Condensed Consolidated Statements of Operations.
(2) 
The reclassifications out of accumulated other comprehensive income during the three months ended March 31, 2014 for realized gains on cash flow hedges are included within cost of revenues of $0.2 million, sales and marketing of $1.1 million, and general and administrative of $0.1 million and for realized losses of $0.3 million within research and development for which the hedged transactions relate in the Condensed Consolidated Statements of Operations.
Employee Benefit Plans
Employee Benefit Plans
Employee Benefit Plans

Equity Incentive Plans

The Company’s equity incentive plans include the 2006 Equity Incentive Plan (the “2006 Plan”), the 2000 Nonstatutory Stock Option Plan (the “2000 Plan”), the Amended and Restated 1996 Stock Plan (the “1996 Plan”), various equity incentive plans assumed through acquisitions, and the 2008 Employee Stock Purchase Plan (the "ESPP"). Under these plans, the Company has granted (or in the case of acquired plans assumed) stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), and performance share awards ("PSAs").

The 2006 Plan was adopted and approved by the Company’s stockholders in May 2006. To date, the Company's stockholders have approved a share reserve of 149.5 million shares of common stock plus the addition of any shares subject to options under the 2000 Plan and the 1996 Plan that were outstanding as of May 18, 2006, and that subsequently expire unexercised, up to a maximum of an additional 75.0 million shares. As of March 31, 2014, the 2006 Plan, the 2000 Plan, and the 1996 Plan, in the aggregate, had 33.9 million shares subject to currently outstanding equity awards. As of March 31, 2014, the 2006 Plan had 49.8 million shares available for future issuance and no shares are available for future issuance under either the 2000 Plan or the 1996 Plan.

The ESPP was adopted in May 2008. To date, the Company's stockholders have approved a share reserve of 19.0 million shares of the Company's common stock for issuance under this plan. The ESPP permits eligible employees to acquire shares of the Company’s common stock at a 15% discount to the offering price (as determined in the ESPP) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year. As of March 31, 2014, approximately 14.4 million shares have been issued and 4.6 million shares remain available for future issuance under the ESPP.

In connection with certain past acquisitions, the Company assumed stock options, RSUs, RSAs and PSAs under the assumed stock plans of the acquired companies and exchanged the assumed awards for the Company's stock options, RSUs, RSAs and PSAs, respectively. No new stock options, RSUs, RSAs and PSAs can be granted under these plans. As of March 31, 2014, stock options, RSUs, RSAs and PSAs representing approximately 5.7 million shares of common stock were outstanding under all awards assumed through the Company's acquisitions.

Stock Option Activities

The following table summarizes the Company’s stock option activity and related information as of and for the three months ended March 31, 2014 (in millions, except for per share amounts and years):
 
Outstanding Options
 
Number of Shares
 
Weighted Average
Exercise Price
per Share
 
Weighted Average
Remaining
Contractual Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2013
23.1

 
$
25.15

 
 
 
 
Canceled
(0.3
)
 
30.34

 
 
 
 
Exercised
(3.7
)
 
20.24

 
 
 
 
Expired
(0.6
)
 
28.76

 
 
 
 
Balance as of March 31, 2014
18.5

 
$
25.92

 
2.2
 
$
52.9

 
 
 
 
 
 
 
 
As of March 31, 2014:
 
 
 
 
 
 
 
Vested and expected-to-vest options
18.2

 
$
26.04

 
2.1
 
$
50.1

Exercisable options
16.7

 
$
26.48

 
1.8
 
$
36.3



The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $25.76 per share as of March 31, 2014, and the exercise price multiplied by the number of related options. The pre-tax intrinsic value of options exercised, representing the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option, was $23.8 million for the three months ended March 31, 2014, respectively.

Restricted Stock Unit, Restricted Stock Award, and Performance Share Award Activities

The following table summarizes the Company’s RSU, RSA, and PSA activity and related information as of and for the three months ended March 31, 2014 (in millions, except per share amounts and years):
 
Outstanding RSUs, RSAs, and PSAs
 
Number of Shares
 
Weighted Average
Grant-Date Fair
Value per Share
 
Weighted Average
Remaining
Contractual Term
(In Years)
 
Aggregate
Intrinsic
Value
Balance as of December 31, 2013
25.4

 
$
23.44

 
 
 
 
RSUs granted (1)(4)
1.9

 
22.14

 
 
 
 
RSUs assumed (2)
0.4

 
22.66

 
 
 
 
RSAs assumed (2)
0.9

 
22.66

 
 
 
 
PSAs granted (3)(4)
0.8

 
25.22

 
 
 
 
PSAs assumed (2)
0.2

 
22.66

 
 
 
 
RSUs vested
(4.6
)
 
24.05

 
 
 
 
RSAs vested
(0.3
)
 
19.59

 
 
 
 
PSAs vested
(1.0
)
 
38.10

 
 
 
 
RSUs canceled
(0.5
)
 
21.55

 
 
 
 
PSAs canceled
(2.1
)
 
33.85

 
 
 
 
Balance as of March 31, 2014
21.1

 
$
21.57

 
1.4
 
$
543.3

________________________________
(1) 
Includes service-based and market-based RSUs granted under the 2006 Plan according to its terms.
(2) 
RSUs, RSAs, and PSAs assumed in connection with the acquisition of WANDL.
(3) 
The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee are achieved at target is 0.4 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 0.8 million shares.
(4) 
On February 20, 2014, the Company announced its intention to initiate a quarterly cash dividend of $0.10 per share of common stock in the third quarter of 2014. As a result of the Company's announcement, the grant date fair value of RSUs and PSAs granted after the announcement date were reduced by the present value of the dividends expected to be paid on the underlying shares of common stock during the requisite and derived service period as these awards are not entitled to receive dividends until vested.

Employee Stock Purchase Plan

The Company's ESPP is implemented in a series of offering periods, each six months in duration, or a shorter period as determined by the Board. Employees purchased 1.5 million and 1.9 million shares of common stock through the ESPP at an average exercise price of $18.67 and $15.05 per share for the three months ended March 31, 2014 and March 31, 2013, respectively.

Valuation Assumptions