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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 14, 2007
---------------------
Network Appliance, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 0-27130 77-0307520
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
495 East Java Drive
Sunnyvale, CA 94089
(Address of principal executive offices) (Zip Code)
(408) 822-6000
(Registrant's telephone number, including area code)
---------------------
================================================================================
Item 2.02.
On February 14, 2007, Network Appliance, Inc. issued a press release
announcing its earnings for the third quarter fiscal year 2007. The press
release is attached as an exhibit to this Form 8-K, and the information set
forth therein is hereby incorporated by reference into this Item 2.02.
Item 9.01(c).
Network Appliance, Inc.'s February 14, 2007, press release is hereby
furnished as Exhibit 99.1 to this Form 8-K in connection with the disclosures
under Item 2.02 of this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
February 14, 2007 By: /s/ Steven Gomo
-------------------------------------
Steven J. Gomo
Chief Financial Officer
================================================================================
Index to Exhibits
Exhibit Description
- ------- -----------
99.1 Press release of Network Appliance, Inc. issued on February 14, 2007
Exhibit 99.1
Network Appliance Announces Results for Third Quarter Fiscal Year 2007
Achieves 36% Year-over-Year Revenue Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 14, 2007--Network
Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked
storage solutions, today reported results for the third quarter of
fiscal year 2007. Revenues for the third fiscal quarter were $729.3
million, an increase of 36% compared to revenues of $537.0 million for
the same period a year ago and an increase of 12% compared to $652.5
million in the prior quarter.
For the third fiscal quarter, GAAP net income was $66.5 million,
or $0.17 per share(1)compared to GAAP net income of $76.4 million, or
$0.20 per share for the same period in the prior year. Non-GAAP(2) net
income for the third fiscal quarter increased 31% to $111.1 million,
or $0.29 per share, compared to non-GAAP net income of $84.7 million,
or $0.22 per share for the same period a year ago.
Revenues for the first nine months of the current fiscal year
totaled $2.0 billion, compared to revenues of $1.47 billion for the
first nine months of the prior year, an increase of 36% year over
year.
For the first nine months of the current fiscal year, GAAP net
income totaled $208.1 million, or $0.53 per share, compared with GAAP
net income of $207.2 million, or $0.54 per share for the same period
in the prior year. Non-GAAP net income for the first nine months of
the current fiscal year totaled $316.5 million, or $0.81 per share,
compared to non-GAAP net income of $226 million, or $0.58 per share
for the first nine months of the prior fiscal year.
"Our third quarter performance again demonstrates that customers
increasingly understand the NetApp data management value proposition,"
said Dan Warmenhoven, chief executive officer. "With revenues up 36%
over Q3 of last year, and 100 petabytes of storage shipped during the
quarter, NetApp is quickly becoming the vendor of choice for
enterprise customers' storage and data management needs."
Outlook
-- Network Appliance estimates that sequential growth in revenue
for the fourth quarter of fiscal year 2007 will be in the
range of 8% to 10%, which translates to 32% to 34% growth year
over year.
-- Including the implementation of SFAS123(R) and with current
information and assumptions, the company expects fourth
quarter GAAP earnings per share to finish between $0.19 and
$0.20 per share. Network Appliance expects fourth quarter
non-GAAP earnings to round to $0.30 per share.
-- For the full fiscal year 2007, Network Appliance estimates
that revenues will finish in the range of 35% to 36% higher
than fiscal year 2006.
-- Including the implementation of SFAS123(R) and with current
information and assumptions, the company expects GAAP earnings
per share for fiscal year 2007 to be about $0.73 per share.
Network Appliance estimates full-year non-GAAP earnings per
share will finish between $1.11 to $1.12 per share.
Quarterly Highlights
During the third quarter of fiscal year 2007, Network Appliance
continued to enhance its data management and data protection
portfolios with a key acquisition and several product announcements.
It also extended its data center portfolio with several additions
including new midrange platforms, broader Fibre Channel (FC) storage
area network (SAN) capabilities and significant enhancements in the
NetApp(R) Manageability Software Family. The company also continued to
gain momentum in the storage area network (SAN) market while
maintaining strong leadership in both the network-attached storage
(NAS) and iSCSI markets.
This quarter, NetApp completed the acquisition of Topio, a
privately held Santa Clara, California-based company with R&D in
Haifa, Israel. The acquisition continues to expand the NetApp data
protection portfolio by adding heterogeneous disaster recovery
capabilities to existing heterogeneous disk-to-disk backup solutions
from NetApp. In addition to delivering a broader range of data
protection, data migration, and data cloning capabilities, this
acquisition expands the NetApp heterogeneous data protection portfolio
by simplifying the replication of data from other storage arrays to
NetApp storage systems.
Also during the third quarter, NetApp extended its data center
portfolio with the addition of its highest-performing midrange
platforms, the FAS3070 and V3070 series; broader FC SAN capabilities;
significant enhancements and introductions in the NetApp Manageability
Software Family; and new professional services, all aimed at making
enterprise data center management easier for customers who demand
high-performance SAN solutions and increased application uptime to
meet their business needs.
From a market perspective, according to IDC's Worldwide Quarterly
Disk Storage Systems Tracker Q3 2006(3), NetApp gained share in both
capacity shipped and revenue for the FC SAN market. NetApp also
continued to grow faster than the market in FC SAN in both revenue and
capacity, year over year. For capacity shipped, NetApp grew at 210.2%,
while the market grew at 46.3%. In terms of revenue, NetApp grew
faster than the market for the 11th consecutive quarter at 62.1%,
while the market grew at 14.1%. Sequentially, NetApp grew at 16.0%,
while the market grew at 6.4%.
NetApp also demonstrated continued leadership in the NAS and iSCSI
storage markets in the third quarter, according to IDC. NetApp
maintained the number-one market share position in capacity shipped
for NAS (42.0%) and in iSCSI for both capacity shipped (32.6%) and
revenue (21.5%).
In IDC's calculations of the network storage market (which
includes SAN, NAS, and iSCSI), NetApp grew faster than the market,
year over year, in both capacity shipped and revenue. For capacity
shipped, NetApp grew at 106.8%, while the market grew at 62.6%. In
terms of revenue, NetApp grew 18.9%, while the market grew at 17.2%.
Also this quarter, NetApp continued its midrange leadership with
the news that it has been positioned by Gartner, Inc., in the
"Leaders" quadrant for midrange enterprise disk arrays in its research
note, "Magic Quadrant for Midrange Enterprise Disk Array, 2H06"(4) .
On the partner front, NetApp announced general availability of two
software products in support of Microsoft(R) Exchange Server 2007.
NetApp SnapManager(R) 4.0 for Exchange Server and NetApp Single
Mailbox Recovery 4.2, a near-instantaneous backup and recovery
software solution for Exchange Server 2007, provide customers with
enterprise-class backup, recovery, and restoration solutions. With the
availability of these products, NetApp is helping Exchange Server 2007
customers achieve near-instantaneous, granular recovery of Exchange
Server data without a prohibitive--and expensive--increase in storage
capacity needs.
In corporate news, NetApp was named by FORTUNE magazine as one of
the "100 Best Companies to Work For" for the fifth consecutive year.
This year, NetApp ranked in the top 10 of the list, at number six,
reflecting the company's emphasis on attracting and retaining the best
talent in the industry and continuing to demonstrate the values of
what NetApp CEO Dan Warmenhoven calls a "model company." Also this
quarter, NetApp was named to Forbes magazine's "400 Best Big Companies
in America" list for 2007.
This quarter, Dave Hitz, EVP and cofounder of Network Appliance,
was inducted into the CRN Industry Hall of Fame for developing a
disruptive technology that altered the landscape of the storage
industry.
And finally, NetApp was honored as the 2006 Entrepreneurial
Company of the Year by the Peninsula Chapter of the Stanford Business
School Alumni Association.
Webcast and Conference Call Information
-- The NetApp quarterly results conference call will be broadcast
live via the Internet at http://investors.netapp.com on
Wednesday, February 14, 2006, at 2:00 p.m. Pacific time. This
press release and any other information related to the call
will also be posted to the Website at that location.
-- The conference call will also be available live in a
listen-only format at (866) 543-6411 in the United States and
(617) 213-8900 outside the United States. The passcode for
both numbers is 25453306.
-- A replay will be available for 72 hours following the
completion of the live call by dialing (888) 286-8010 in the
United States and (617) 801-6888 outside the United States,
using replay code 86129226. The Webcast replay will be posted
on our Web site for at least one year.
About Network Appliance
Network Appliance is a world leader in unified storage solutions
for today's data-intensive enterprise. Since its inception in 1992,
Network Appliance has delivered technology, product, and partner
firsts that simplify data management. Information about Network
Appliance(TM) solutions and services is available at www.netapp.com.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include all of the statements under the Outlook section
relating to our forecasted operating results and metrics for the
fourth quarter of fiscal 2007 and for all of fiscal 2007; statements
regarding our optimism for our 2007 fiscal year generally; statements
regarding the anticipated benefits of our products, technologies, and
services relative to the offerings of our competitors; statements
regarding anticipated benefits from partner offerings; and statements
regarding anticipated benefits from our acquisition of Topio. These
forward-looking statements involve risks and uncertainties, and actual
results could vary. Important factors that could cause actual results
to differ materially from those in the forward-looking statements
include general economic and industry conditions, including
expenditure trends for storage-related products; risks associated with
the anticipated growth in network storage and content delivery
markets; our ability to deliver new product architectures and
enterprise service offerings; competition risks, including our ability
to design products and services that compete effectively from a price
and performance perspective; risks with new product introductions; our
reliance on a limited number of suppliers; our ability to accurately
forecast demand for our products and successfully manage our
relationships with our contract manufacturers; our ability to expand
our direct sales operations and reseller distribution channels; our
ability to develop, maintain, and strengthen our relationships and
product offerings with strategic partners; risks associated with
international operations; our ability to successfully acquire and
integrate complementary businesses and technologies; foreign currency
exchange rate fluctuations; and other important factors as described
in Network Appliance, Inc. reports and documents filed from time to
time with the Securities and Exchange Commission, including the
factors described under the sections captioned "Risk Factors" in our
most recently submitted 10-K and 10-Q. We disclaim any obligation to
update information contained in these forward-looking statements
whether as a result of new information, future events, or otherwise.
(1)Earnings per share represents the diluted number of shares for
all periods presented.
(2)Non-GAAP results of operations exclude amortization of
intangible assets, stock-based compensation expenses, other
acquisition-related cost, in-process research and development,
restructuring charges/recoveries, gain/loss on sale of assets and
investments, specified nonrecurring discrete events, and the related
effects on income taxes.
(3)IDC's Worldwide Quarterly Disk Storage Systems Tracker Q3 2006.
(4)Gartner, Inc. "Magic Quadrant for Midrange Enterprise Disk
Array, 2H06."
NetApp and SnapManager are registered trademark and Network
Appliance is a trademark of Network Appliance Inc. in the U.S. and
other countries. All other brands or products are trademarks or
registered trademarks of their respective holders and should be
treated as such.
Network Appliance Usage of Non-GAAP Financials
The Company refers to the non-GAAP financial measures cited above
in making operating decisions because they provide meaningful
supplemental information regarding the Company's operational
performance. These non-GAAP financial measures exclude amortization of
intangible assets, in-process research and development, stock
compensation, other acquisition-related cost, restructuring
charges/recoveries, net gain/loss on investments, and the related
effects on income taxes as well as certain discrete GAAP provision for
income tax matters recognized ratably for non-GAAP purposes. We have
excluded these items in order to enhance investors' understanding of
our ongoing operations. The use of these non-GAAP financial measures
has material limitations because they should not be used to evaluate
our company without reference to their corresponding GAAP financial
measures. As such, we compensate for these material limitations by
using these non-GAAP financial measures in conjunction with GAAP
financial measures.
These non-GAAP financial measures facilitate management's internal
comparisons to the Company's historical operating results and
comparisons to competitors' operating results. We include these
non-GAAP financial measures in our earnings announcement because we
believe they are useful to investors in allowing for greater
transparency with respect to supplemental information used by
management in its financial and operational decision making, such as
employee compensation planning. In addition, we have historically
reported similar non-GAAP financial measures to our investors and
believe that the inclusion of comparative numbers provides consistency
in our financial reporting at this time.
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
January 26, April 30,
2007 2006
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $490,216 $461,256
Short-term investments 805,094 861,636
Accounts receivable, net 438,818 415,295
Inventories 61,474 64,452
Prepaid expenses and other assets 48,266 43,536
Short-term restricted cash
and investments 126,014 138,539
Deferred income taxes 63,542 48,496
----------- -----------
Total current assets 2,033,424 2,033,210
PROPERTY AND EQUIPMENT, net 586,578 513,193
GOODWILL 601,318 487,535
INTANGIBLE ASSETS, net 89,994 75,051
LONG-TERM RESTRICTED CASH AND INVESTMENTS 59,702 108,371
OTHER ASSETS 122,273 43,605
----------- -----------
$3,493,289 $3,260,965
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $123,951 $166,211
Accounts payable 124,262 101,278
Income taxes payable 39,305 51,577
Accrued compensation and related benefits 147,832 129,636
Other accrued liabilities 91,119 69,073
Deferred revenue 546,562 399,388
----------- -----------
Total current liabilities 1,073,031 917,163
----------- -----------
LONG-TERM DEBT 27,180 133,789
LONG-TERM DEFERRED REVENUE 398,326 282,149
LONG-TERM OBLIGATIONS 19,883 4,411
----------- -----------
1,518,420 1,337,512
----------- -----------
STOCKHOLDERS' EQUITY 1,974,869 1,923,453
----------- -----------
$3,493,289 $3,260,965
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------- -----------------------
January 26, January 27, January 26, January 27,
2007 2006 2007 2006
----------- ----------- ----------- -----------
REVENUES:
Product $550,882 $413,489 $1,497,777 $1,122,135
Software
subscriptions 84,969 60,747 242,052 171,507
Service 93,427 62,795 263,260 174,853
----------- ----------- ----------- -----------
Total revenues 729,278 537,031 2,003,089 1,468,495
----------- ----------- ----------- -----------
COST OF REVENUES:
Cost of product 211,211 161,349 585,437 432,131
Cost of software
subscriptions 2,710 2,156 7,458 6,232
Cost of service 71,248 46,502 191,708 130,530
----------- ----------- ----------- -----------
Total cost of
revenues 285,169 210,007 784,603 568,893
----------- ----------- ----------- -----------
GROSS MARGIN 444,109 327,024 1,218,486 899,602
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Sales and
marketing 236,433 153,333 636,214 430,377
Research and
development 97,516 65,087 276,555 175,391
General and
administrative 37,724 25,022 105,337 68,011
In process research
and development - - - 5,000
Restructuring
charges
(recoveries) - 117 (74) (495)
Gain on sale of
assets - - (25,339) -
----------- ----------- ----------- -----------
Total operating
expenses 371,673 243,559 992,693 678,284
----------- ----------- ----------- -----------
INCOME FROM
OPERATIONS 72,436 83,465 225,793 221,318
OTHER INCOME
(EXPENSES), net:
Interest income 17,086 9,891 51,220 28,590
Interest expense (2,335) 17 (11,377) (34)
Other income
(expense), net 533 984 3,191 487
Net gain (loss)
on investments 884 - (1,116) 101
----------- ----------- ----------- -----------
Total other
income, net 16,168 10,892 41,918 29,144
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 88,604 94,357 267,711 250,462
PROVISION FOR INCOME
TAXES 22,090 17,964 59,597 43,231
----------- ----------- ----------- -----------
NET INCOME $66,514 $76,393 $208,114 $207,231
=========== =========== =========== ===========
NET INCOME PER SHARE:
BASIC $0.18 $0.21 $0.56 $0.56
=========== =========== =========== ===========
DILUTED $0.17 $0.20 $0.53 $0.54
=========== =========== =========== ===========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 371,287 371,768 371,938 370,069
=========== =========== =========== ===========
DILUTED 389,120 389,149 389,555 386,991
=========== =========== =========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
------------------- ---------------------
January January January 26, January
26, 2007 27, 2006 2007 27, 2006
--------- --------- ----------- ---------
Cash Flows from Operating
Activities:
Net income $66,514 $76,393 $208,114 $207,231
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 22,936 16,091 62,316 46,175
In process research and
development - - - 5,000
Amortization of
intangible assets 5,597 4,806 14,970 11,329
Amortization of patents 495 496 1,486 1,487
Stock-based compensation 39,234 4,070 124,679 9,442
Acquisition-related
retention cost 581 - 581 -
Net (gain) loss on
investments (884) - 1,116 (101)
Gain on sale of assets - - (25,339) -
Net loss on disposal of
equipment 384 158 686 1,318
Allowance for doubtful
accounts (8) 575 186 921
Deferred income taxes - 14 - 14
Deferred rent 239 (68) 979 301
Excess tax benefit from
stock-based compensation (19,618) - (43,463)
Changes in assets and
liabilities:
Accounts receivable (38,376) (41,882) (22,996) (70,153)
Inventories (4,700) (24,832) 3,495 (38,397)
Prepaid expenses and
other assets (4,123) (3,525) (981) (6,590)
Accounts payable (2,759) 6,300 4,446 16,072
Income taxes payable 19,268 15,462 31,569 39,606
Accrued compensation and
related benefits 22,616 24,050 16,289 12,992
Other accrued
liabilities 17,144 3,849 12,127 970
Deferred revenue 125,767 58,962 263,449 144,737
--------- --------- ----------- ---------
Net cash provided by
operating activities 250,307 140,919 653,709 382,354
--------- --------- ----------- ---------
Cash Flows from Investing
Activities:
Purchases of investments (410,623) (116,758) (1,938,191) (450,555)
Redemptions of investments 463,169 53,182 2,007,726 471,755
Redemptions of restricted
investments 10,598 - 63,236 -
Increase (decrease) in
restricted cash (72) 69 333 (1,997)
Proceeds from sale of
assets - - 23,914 -
Purchases of property and
equipment (36,398) (33,464) (112,411) (96,476)
Proceeds from sales of
investments 1,757 - 1,774 130
Purchases of equity
securities - (150) (1,333) (7,100)
Purchase of business, net
of cash acquired (131,241) - (131,241) (53,747)
--------- --------- ----------- ---------
Net cash used in
investing activities (102,810) (97,121) (86,193) (137,990)
--------- --------- ----------- ---------
Cash Flows from Financing
Activities:
Proceeds from sale of
common stock related to
employee stock
transactions 84,965 69,236 177,425 141,725
Excess tax benefit from
stock-based compensation 19,618 - 43,463 -
Repayment of debt (42,297) - (148,869) -
Tax withholding payments
reimbursed by restricted
stock (369) (192) (4,692) (794)
Repurchases of common stock (241,800) (145,583) (605,708) (390,147)
--------- --------- ----------- ---------
Net cash used in
financing activities (179,883) (76,539) (538,381) (249,216)
--------- --------- ----------- ---------
Effect of Exchange Rate
Changes on Cash (736) (847) (175) (565)
Net Increase (Decrease) in
Cash and Cash Equivalents (33,122) (33,588) 28,960 (5,417)
Cash and Cash Equivalents:
Beginning of period 523,338 221,713 461,256 193,542
--------- --------- ----------- ---------
End of period $490,216 $188,125 $490,216 $188,125
========= ========= =========== =========
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
THREE MONTHS ENDED JANUARY 26, 2007
------------------------------------------------------
Amortization Stock-based Acquisition- Restructuring
of Compensation Related charges
Intangible Expenses Retention (recoveries)
Assets Cost
Cost of product
revenues $4,572 $922 - -
Cost of service
revenues - 2,533 - -
Sales and
marketing
expense 788 17,315 581 -
Research and
development
expense - 12,276 - -
General and
administrative
expense 237 6,188 - -
In process
research and
development - - - -
Restructuring
charges
(recoveries) - - - -
Gain on sale of
assets - - - -
Net (gain) loss
on investments - - - -
------------ ------------- ------------ --------------
Effect on pre-
tax income $5,597 $39,234 $581 -
THREE MONTHS ENDED JANUARY 26,
2007
-------------------------------
Gain on Net (Gain) Total
Sale Loss on
of Investments
Assets
Cost of product revenues - - $5,494
Cost of service revenues - - 2,533
Sales and marketing expense - - 18,684
Research and development expense - - 12,276
General and administrative expense - - 6,425
In process research and development - - -
Restructuring charges (recoveries) - - -
Gain on sale of assets - - -
Net (gain) loss on investments - (884) (884)
------- ------------ --------
Effect on pre-tax income - ($884) $44,528
NINE MONTHS ENDED JANUARY 26, 2007
- ----------------------------------------------------------------------
Amortization Stock-based Acquisition- Restructuring
of Compensation Related charges
Intangible Expenses Retention (recoveries)
Assets Cost
Cost of product
revenues $12,303 $2,660 - -
Cost of service
revenues - 7,657 - -
Sales and
marketing
expense 1,955 54,747 581 -
Research and
development
expense - 39,166 - -
General and
administrative
expense 712 20,449 - -
In process
research and
development - - - -
Restructuring
charges
(recoveries) - - - (74)
Gain on sale of
assets - - - -
Net (gain) loss
on investments - - - -
------------ ------------- ------------ --------------
Effect on pre-
tax income $14,970 $124,679 $581 ($74)
NINE MONTHS ENDED JANUARY 26, 2007
- ----------------------------------------------------------------------
Gain on Net (Gain) Total
Sale of Loss on
Assets Investments
Cost of product revenues - - $14,963
Cost of service revenues - - 7,657
Sales and marketing expense - - 57,283
Research and development expense - - 39,166
General and administrative expense - - 21,161
In process research and development - - -
Restructuring charges (recoveries) - - (74)
Gain on sale of assets (25,339) - (25,339)
Net (gain) loss on investments - 1,116 1,116
--------- ------------ ---------
Effect on pre-tax income ($25,339) $1,116 $115,933
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
THREE MONTHS ENDED JANUARY 27, 2006
------------------------------------------------------
Amortization Stock-based In process Restructuring
of Compensation research charges
Intangible Expenses and (recoveries)
Assets development
Cost of product
revenues $3,866 - - -
Cost of service
revenues - - - -
Sales and
marketing
expense 703 1,325 - -
Research and
development
expense - 2,465 - -
General and
administrative
expense 237 280 - -
In process
research and
development - - - -
Restructuring
charges
(recoveries) - - - 117
Net (gain) loss
on investments - - - -
------------ ------------- ------------ --------------
Effect on pre-
tax income $4,806 $4,070 - $117
THREE MONTHS ENDED JANUARY 27,
2006
------------------------------
Gain on Net (Gain) Total
Sale Loss on
of Investments
Assets
Cost of product revenues - - $3,866
Cost of service revenues - - -
Sales and marketing expense - - 2,028
Research and development expense - - 2,465
General and administrative expense - - 517
In process research and development - - -
Restructuring charges (recoveries) - - 117
Net (gain) loss on investments - - -
------- ------------ -------
Effect on pre-tax income - - $8,993
NINE MONTHS ENDED JANUARY 27, 2006
- ----------------------------------------------------------------------
Amortization Stock-based In process Restructuring
of Compensation research charges
Intangible Expenses and (recoveries)
Assets development
Cost of product
revenues $7,920 - - -
Cost of service
revenues - - - -
Sales and
marketing
expense 1,417 2,851 - -
Research and
development
expense - 5,929 - -
General and
administrative
expense 1,992 662 - -
In process
research and
development - - 5,000 -
Restructuring
charges
(recoveries) - - - (495)
Net (gain) loss
on investments - - - -
------------ ------------- ------------ --------------
Effect on pre-
tax income $11,329 $9,442 $5,000 ($495)
NINE MONTHS ENDED JANUARY 27,
2006
- ----------------------------------------------------------------------
Gain on Net (Gain) Total
Sale Loss on
of Investments
Assets
Cost of product revenues - - $7,920
Cost of service revenues - - -
Sales and marketing expense - - 4,268
Research and development expense - - 5,929
General and administrative expense - - 2,654
In process research and development - - 5,000
Restructuring charges (recoveries) - - (495)
Net (gain) loss on investments - (101) (101)
------- ------------ --------
Effect on pre-tax income - ($101) $25,175
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------- -------------------
January January January January
26, 2007 27, 2006 26, 2007 27, 2006
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF NET INCOME
- ----------------------------------------
NET INCOME $66,514 $76,393 $208,114 $207,231
Adjustments:
Amortization of intangible
assets 5,597 4,806 14,970 11,329
Stock-based compensation
expenses 39,234 4,070 124,679 9,442
Acquisition-related
retention cost 581 - 581 -
In process research and
development - - - 5,000
Restructuring charges
(recoveries) - 117 (74) (495)
Gain on sale of assets - - (25,339) -
Net (gain) loss on
investments (884) - 1,116 (101)
Discrete GAAP tax
provision items
ratably for non-GAAP
purposes 257 (1,358) 257 (3,799)
Tax effect on sale of
assets 399 - 5,005 -
Discrete GAAP tax
provision items (336) - (2,495) -
Income tax effect (276) 719 (10,308) (2,585)
--------- --------- --------- ---------
NON-GAAP NET INCOME $111,086 $84,747 $316,506 $226,022
========= ========= ========= =========
EARNINGS PER SHARE $0.171 $0.196 $0.534 $0.535
Adjustments:
Amortization of intangible
assets 0.014 0.012 0.038 0.029
Stock-based compensation
expenses 0.101 0.010 0.320 0.024
Acquisition-related
retention cost 0.001 - 0.001 -
In process research and
development - - - 0.013
Restructuring charges
(recoveries) - - - (0.001)
Gain on sale of assets - - (0.065) -
Net (gain) loss on
investments (0.002) - 0.003 -
Discrete GAAP tax
provision items
ratably for non-GAAP
purposes 0.001 (0.003) 0.001 (0.010)
Tax effect on sale of
assets 0.001 - 0.013 -
Discrete GAAP tax
provision items (0.001) - (0.006) -
Income tax effect (0.001) 0.002 (0.027) (0.007)
--------- --------- --------- ---------
NON-GAAP EARNINGS PER SHARE $0.285 $0.217 $0.812 $0.583
========= ========= ========= =========
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
FOURTH QUARTER and FULL YEAR FISCAL 2007
(Unaudited)
Fourth Quarter Full Year
2007 2007
-------------- --------------
Non-GAAP Guidance $0.30 $1.11 - $1.12
Adjustments of Specific Items to
Earnings Per Share for the Fourth
Quarter and Full Year Fiscal 2007:
Amortization of intangible assets (0.02) (0.06)
Stock based compensation expense (0.09 - 0.10) (0.41 - 0.42)
Gain on sale of assets - 0.07
Income tax effect 0.01 0.02
-------------- --------------
Total Adjustments (0.10 - 0.11) (0.38 - 0.39)
GAAP Guidance - Earnings Per Share $0.19 - $0.20 $0.73
CONTACT: Network Appliance, Inc.
Press:
Dave Black, 408-822-3287
dblack@voce.com
Investors:
Tara Dhillon, 408-822-6909
tara@netapp.com
Billie Fagenstrom, 408-822-6428
billief@netapp.com