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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): May 24, 2006
----------------
Network Appliance, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 0-27130 77-0307520
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) 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 May 24, 2006, Network Appliance, Inc. issued a press release announcing
its earnings for the fourth quarter and fiscal year 2006. 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 May 24, 2006 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.
May 24, 2006 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 May 24, 2006.
Exhibit 99.1
Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2006;
Q4 Revenues $598.0 Million, up 32% Year-over-Year;
Fiscal Year 2006 Revenues $2.07 Billion, up 29% Year-over-Year
SUNNYVALE, Calif.--(BUSINESS WIRE)--May 24, 2006--Network
Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked
storage solutions, today reported results for the fourth quarter and
fiscal year 2006. Revenues for the fourth fiscal quarter were $598.0
million, an increase of 32% compared to revenues of $451.8 million for
the same period a year ago and an increase of 11% compared to $537.0
million in the prior quarter.
For the fourth fiscal quarter, GAAP net income was $59.2 million,
or $0.15 per share(1) which includes a non-recurring income tax
expense of $22.5 million, associated with the Repatriation of Foreign
Profits under the Jobs Creation Act of 2004. This compares to GAAP net
income of $63.4 million, or $0.16 per share for the same period in the
prior year. Non-GAAP(2) net income for the fourth fiscal quarter
increased 34% to $89.3 million, or $0.23 per share, compared to
non-GAAP net income of $66.6 million, or $0.17 per share for the same
period a year ago.
Revenues for fiscal year 2006 totaled $2.07 billion, an increase
of 29% compared to revenues of $1.6 billion for fiscal year 2005.
For fiscal year 2006, GAAP net income increased 18% to $266.5
million, or $0.69 per share, compared to GAAP net income of $225.8
million, or $0.59 per share for fiscal year 2005. Non-GAAP net income
for fiscal year 2006 increased 33% to $315.3 million, or $0.81 per
share, compared to non-GAAP net income of $237.7 million, or $0.62 per
share for fiscal year 2005.
"Our fourth quarter performance tops a year of accelerating
quarterly growth. This year we broadened our portfolio of enterprise
data management solutions, and our results demonstrate how our value
proposition resonates with customers," said Dan Warmenhoven, CEO of
Network Appliance. "By helping customers reduce the cost and
complexity of their storage and data management environment, Network
Appliance has established itself as the innovative alternative in the
storage market. We look forward to fiscal year 2007 with optimism, as
we further increase our market opportunity with a new ultra high-end
product and launch our next-generation operating system."
Outlook
-- Network Appliance estimates that growth in revenue for the
first quarter of fiscal year 2007 will be in the range of 2%
to 4%, which translates to 36% to 39% growth year-over-year.
-- Including the implementation of SFAS 123R and with current
information and assumptions, the company expects first quarter
GAAP earnings per share to finish between $0.13 and $0.16 per
share. Network Appliance expects first quarter non-GAAP
earnings per share to be in the range of $0.23 to $0.24 per
share.
-- For the full fiscal year 2007, Network Appliance estimates
that revenues will finish in the range of 28% to 30% higher
than fiscal year 2006.
-- The company expects GAAP earnings per share for fiscal year
2007 to be in the target range of $0.62 and $0.72 per share.
Network Appliance estimates full-year non-GAAP earnings per
share to be in the range of $0.99 to $1.04 per share.
Quarterly Highlights
During the fourth quarter of fiscal year 2006, Network Appliance
further expanded its breadth of disk-to-disk backup and security
solutions, enhanced its Fibre Channel data management offerings, and
continued its leadership position in the iSCSI and network-attached
storage (NAS) markets.
Earlier in the quarter, NetApp introduced an array of products,
technologies, and services that highlight the broad range of NetApp(R)
disk-to-disk backup and security solutions which simplify data backup
procedures, improve recoverability, and lower backup infrastructure
expenses. The new products included a significant expansion of the
NetApp disk-to-disk backup family, including two offerings in the new
NearStore(R) Virtual Tape Library (VTL) family, new Decru DataFort(TM)
E-Series functionality for unified NAS-iSCSI protocol support, and
enhanced capabilities for NetApp customers to protect their remote
office/branch office (ROBO) data as well as that in their data
centers. Complementary new services announced this quarter included a
VTL Design and Implementation Service, a Disaster Recovery Design and
Implementation Service, and a Backup and Recovery Design and
Implementation Service.
NetApp SnapManager(R) for Microsoft(R) Exchange software achieved
Microsoft Simple SAN designation for Microsoft Windows(R) Server
Backup/Quick Restore. Achieving the Microsoft Simple SAN Component
designation demonstrates to the market that NetApp and Microsoft are
providing solutions for quick recovery of Exchange Server 2003 SP2.
This quarter, the company introduced its SnapSearch and Recovery
software, the industry's first solution for search and recovery of
online backup data. The new software enables customers to quickly and
efficiently recover specific files from backup and archive data in
minutes.
In other product news, NetApp announced its storage solutions will
now support 4Gb Fibre Channel (FC). 4Gb FC combined with NetApp
unified storage systems and leading-edge data management software
gives customers a compelling and powerful solution for managing large
and ever-growing amounts of data. NetApp 4Gb FC will allow customers
to increase the performance and availability of critical data and
applications, while simplifying complex data management environments,
improving productivity in application administration, and lowering
storage costs.
This quarter, NetApp announced that according to IDC's Worldwide
Quarterly Disk Storage Systems Tracker Q4 2005(3) (as of December
2005), it maintained its position as the market leader in iSCSI in
both revenue and capacity for the prior 11 quarters and continued its
leadership in capacity market share in NAS. NetApp demonstrated
continued leadership in the iSCSI storage market, with number-one
market share in capacity shipped (34.6%) and revenue (32.0%) for the
full year 2005. In FC SAN, NetApp nearly doubled its year-end 2005
revenue market share to 1.6%, up from 0.9% in 2004, doubled its unit
share to 2.2% from 1.1%, and grew capacity shipped by 230%. Finally,
NetApp maintained leadership in its core NAS market, with a 42.6%
capacity market share, and grew capacity shipped by 56% from year end
2004.
Also this quarter, NetApp extended its position in the NAS and
unified storage market according to Gartner's report "Market Share:
NAS/Unified Storage, Worldwide, 2000-2005."(4) The total NAS and
unified storage market grew 16.1% in 2005 and NetApp grew more quickly
than the market, posting annual revenue growth of 22.4%. According to
Gartner, the company increased its market share from 52.4% in 2004 to
55.2% in 2005. NetApp leads in both the high-end and midrange parts of
the market, with 88.9% market share and 70.5% market share by revenue
respectively.
On the partner front, NetApp unveiled several new solution
enhancements and partner offerings with BakBone, Bocada, LogLogic,
Microsoft, Syncsort and Topio to address a variety of data concerns,
including data protection, compliance, data management, backup and
recovery, and data replication.
In corporate news, NetApp debuted at number 929 on the FORTUNE
1000 list, the magazine's annual ranking of America's largest
corporations determined by revenue. This quarter NetApp also announced
the 2005 NetApp Innovation Award winners. The NetApp Innovation Awards
recognize customers and partners who have implemented NetApp solutions
in an innovative way to positively impact their business.
Internationally, NetApp inaugurated its new development center
facility, the only one outside of the United States, at Golf Links
Software Parks, Bangalore. The facility currently has the capacity to
seat up to 750 people and will be a strategic center for research and
product development, creating technologies that enable the largest
enterprises to store, move, and manage data more effectively. A large
number of Fortune 500 enterprises are global customers of NetApp, and
in India the enterprise customer base is over 250 strong.
Webcast Information and Conference Call Information
-- The NetApp quarterly results conference call will be broadcast
live via the Internet at http://investors.netapp.com on
Wednesday, May 24, 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 Web site at that location.
-- The conference call will also be available live in a
listen-only format at (866) 383-8009 in the United States and
(617) 597-5432 outside the United States. The passcode for
both numbers is 49211508.
-- 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,
with replay code 63342796. The Webcast replay will be posted
on our Web site for at least one year.
About Network Appliance
Network Appliance(TM) 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 solutions and services is available at
www.netapp.com.
"Safe Harbor" Statement under U.S. Private Securities Litigation
Reform Act of 1995
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 first
quarter of fiscal 2007 and for all of fiscal 2007, statements
regarding our optimism for its 2007 fiscal year generally, statements
regarding the anticipated benefits of our new products, technologies
and services, including VTL, Decru DataFort E-Series, ROBO, Exchange
Server, 4Gb products and SnapSearch and Recovery software, and
statements regarding anticipated benefits from partner offerings and
our Bangalore development center. 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.'s 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 represent the diluted number of shares for
all periods presented.
(2) Non-GAAP results of operations exclude amortization of
intangible assets, in process research and development, stock
compensation, restructuring charges/recoveries, net gain/loss on
investments and the related effects on income taxes, as well as
nonrecurring American Jobs Creation Act income tax expense and certain
discrete GAAP provision for income tax matters recognized ratably for
non-GAAP purposes.
(3) IDC's Worldwide Quarterly Disk Storage Systems Tracker Q4 2005
(4) Market Share: NAS/Unified Storage, Worldwide, 2000-2005
NetApp, NearStore and SnapManager are registered trademarks and
Network Appliance is a trademark of Network Appliance Inc. in the
United States and other countries. Decru DataFort is a trademark of
Decru Inc., a NetApp company. All other trademarks belong to their
respective owners 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, 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 because
they derive from unusual events that are not attributable to normal on
going operations and thus makes it more difficult for an investor to
understand our recurring operational performance. 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)
April 30, 2006 April 30, 2005
-------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $461,256 $193,542
Short-term investments 861,636 976,423
Accounts receivable, net 415,295 296,885
Inventories 64,452 38,983
Prepaid expenses and other 43,536 30,773
Short-term restricted cash 138,539 1,699
Deferred income taxes 48,496 37,584
-------------- --------------
Total current assets 2,033,210 1,575,889
PROPERTY AND EQUIPMENT, net 513,193 418,749
GOODWILL 487,535 291,816
INTANGIBLE ASSETS, net 75,051 21,448
LONG-TERM RESTRICTED CASH 108,371 2,361
OTHER ASSETS 43,605 62,384
-------------- --------------
$3,260,965 $2,372,647
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $101,278 $83,572
Income taxes payable 51,577 20,823
Accrued compensation and related
benefits 129,636 100,534
Other accrued liabilities 69,073 53,262
Short-term debt 166,211 -
Deferred revenue 399,388 261,998
-------------- --------------
Total current liabilities 917,163 520,189
-------------- --------------
LONG-TERM DEFERRED REVENUE 282,149 187,180
LONG-TERM DEBT 133,790 -
LONG-TERM OTHER OBLIGATIONS 4,410 4,474
-------------- --------------
1,337,512 711,843
-------------- --------------
STOCKHOLDERS' EQUITY 1,923,453 1,660,804
-------------- --------------
$3,260,965 $2,372,647
============== ==============
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Year Ended
------------------- -----------------------
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
--------- --------- ----------- -----------
REVENUES:
Product revenue $455,299 $351,580 $1,577,435 $1,260,611
Software subscription
revenue 67,632 49,423 239,139 169,726
--------- --------- ----------- -----------
Product revenue 522,931 401,003 1,816,574 1,430,337
Service revenue 75,029 50,826 249,882 167,794
--------- --------- ----------- -----------
Total revenues 597,960 451,829 2,066,456 1,598,131
--------- --------- ----------- -----------
COST OF REVENUES:
Cost of product revenue 186,582 134,820 624,946 487,880
Cost of service revenue 54,519 40,213 185,049 135,203
--------- --------- ----------- -----------
Total cost of revenues 241,101 175,033 809,995 623,083
--------- --------- ----------- -----------
GROSS MARGIN 356,859 276,796 1,256,461 975,048
--------- --------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing 167,628 134,946 595,154 466,032
Research and development 73,526 48,093 242,988 171,049
General and
administrative 24,504 22,014 91,852 76,903
In process research and
development - - 5,000 -
Stock compensation 3,851 1,716 13,293 8,148
Restructuring charges
(recoveries) 378 (1) (117) (271)
--------- --------- ----------- -----------
Total operating
expenses 269,887 206,768 948,170 721,861
--------- --------- ----------- -----------
INCOME FROM OPERATIONS 86,972 70,028 308,291 253,187
OTHER INCOME (EXPENSES),
net:
Interest income 12,929 8,034 41,519 24,249
Other income (expense),
net (91) 72 361 (1,249)
Net gain on investments - - 101 41
--------- --------- ----------- -----------
Total other income,
net 12,838 8,106 41,981 23,041
--------- --------- ----------- -----------
INCOME BEFORE INCOME TAXES 99,810 78,134 350,272 276,228
PROVISION FOR INCOME TAXES 40,589 14,698 83,820 50,474
--------- --------- ----------- -----------
NET INCOME $59,221 $63,436 $266,452 $225,754
========= ========= =========== ===========
NET INCOME PER SHARE:
BASIC $ 0.16 $ 0.17 $ 0.72 $ 0.63
========= ========= =========== ===========
DILUTED $ 0.15 $ 0.16 $ 0.69 $ 0.59
========= ========= =========== ===========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 374,035 366,941 371,061 361,009
========= ========= =========== ===========
DILUTED 392,549 387,733 388,381 380,412
========= ========= =========== ===========
NETWORK APPLIANCE, INC.
NON-GAAP(1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Year Ended
------------------- -----------------------
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
--------- --------- ----------- -----------
REVENUES:
Product revenue $455,299 $351,580 $1,577,435 $1,260,611
Software subscription
revenue 67,632 49,423 239,139 169,726
--------- --------- ----------- -----------
Product Revenue 522,931 401,003 1,816,574 1,430,337
Service revenue 75,029 50,826 249,882 167,794
--------- --------- ----------- -----------
Total revenues 597,960 451,829 2,066,456 1,598,131
--------- --------- ----------- -----------
COST OF REVENUES:
Cost of product revenue 182,716 133,962 613,161 484,448
Cost of service revenue 54,519 40,213 185,049 135,203
--------- --------- ----------- -----------
Total cost of revenues 237,235 174,175 798,210 619,651
--------- --------- ----------- -----------
GROSS MARGIN 360,725 277,654 1,268,246 978,480
--------- --------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing 166,925 134,739 593,033 465,205
Research and development 73,526 48,093 242,988 171,049
General and
administrative 24,266 20,746 89,622 71,830
--------- --------- ----------- -----------
Total operating
expenses 264,717 203,578 925,643 708,084
--------- --------- ----------- -----------
INCOME FROM OPERATIONS 96,008 74,076 342,603 270,396
OTHER INCOME, net 12,838 8,106 41,880 23,000
--------- --------- ----------- -----------
INCOME BEFORE INCOME TAXES 108,846 82,182 384,483 293,396
PROVISION FOR INCOME TAXES 19,593 15,614 69,207 55,745
--------- --------- ----------- -----------
NET INCOME $89,253 $66,568 $315,276 $237,651
========= ========= =========== ===========
NET INCOME PER SHARE:
BASIC $ 0.24 $ 0.18 $ 0.85 $ 0.66
========= ========= =========== ===========
DILUTED $ 0.23 $ 0.17 $ 0.81 $ 0.62
========= ========= =========== ===========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 374,035 366,941 371,061 361,009
========= ========= =========== ===========
DILUTED 392,549 387,733 388,381 380,412
========= ========= =========== ===========
(1) Non-GAAP results of operations exclude amortization of intangible
assets, in process research and development, stock compensation,
restructuring charges/recoveries, net gain on investments and the
related effects on income taxes, as well as non-recurring American
Jobs Creation Act income tax expense and certain discrete GAAP
provision for income tax matters recognized ratably for non-GAAP
purposes.
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
Quarter Ended Year Ended
------------------- ---------------------
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
--------- --------- ----------- ---------
SUMMARY RECONCILIATION OF
NET INCOME
- -----------------------------
NET INCOME $59,221 $63,436 $266,452 $225,754
Adjustments:
Amortization of intangible
assets 4,807 2,333 16,136 9,332
Stock compensation 3,851 1,716 13,293 8,148
In process research and
development - - 5,000 -
Restructuring charges
(recoveries) 378 (1) (117) (271)
Net gain on investments - - (101) (41)
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes (1,358) - (5,157) -
Non-recurring American
Jobs Creation Act income
tax expense 22,482 - 22,482 -
Income tax effect (128) (916) (2,712) (5,271)
--------- --------- ----------- ---------
NON-GAAP NET INCOME $89,253 $66,568 $315,276 $237,651
========= ========= =========== =========
DETAILED RECONCILIATION OF
SPECIFIC ITEMS:
- ----------------------------
COST OF REVENUES $241,101 $175,033 $809,995 $623,083
Adjustment:
Amortization of intangible
assets (3,866) (858) (11,785) (3,432)
--------- --------- ----------- ---------
NON-GAAP COST OF REVENUES $237,235 $174,175 $798,210 $619,651
========= ========= =========== =========
GROSS MARGIN $356,859 $276,796 $1,256,461 $975,048
Adjustment:
Amortization of intangible
assets 3,866 858 11,785 3,432
--------- --------- ----------- ---------
NON-GAAP GROSS MARGIN $360,725 $277,654 $1,268,246 $978,480
========= ========= =========== =========
SALES AND MARKETING EXPENSES $167,628 $134,946 $595,154 $466,032
Adjustments:
Amortization of intangible
assets (703) (207) (2,121) (827)
--------- --------- ----------- ---------
NON-GAAP SALES AND MARKETING
EXPENSES $166,925 $134,739 $593,033 $465,205
========= ========= =========== =========
GENERAL AND ADMINISTRATIVE
EXPENSES $24,504 $22,014 $91,852 $76,903
Adjustments:
Amortization of intangible
assets (238) (1,268) (2,230) (5,073)
--------- --------- ----------- ---------
NON-GAAP GENERAL AND
ADMINISTRATIVE EXPENSES $24,266 $20,746 $89,622 $71,830
========= ========= =========== =========
OPERATING EXPENSES $269,887 $206,768 $948,170 $721,861
Adjustments:
Stock compensation (3,851) (1,716) (13,293) (8,148)
In process research and
development - - (5,000) -
Amortization of intangible
assets (941) (1,475) (4,351) (5,900)
Restructuring charges
(recoveries) (378) 1 117 271
--------- --------- ----------- ---------
NON-GAAP OPERATING EXPENSES $264,717 $203,578 $925,643 $708,084
========= ========= =========== =========
INCOME FROM OPERATIONS $86,972 $70,028 $308,291 $253,187
Adjustments:
In process research and
development - - 5,000 -
Amortization of intangible
assets 4,807 2,333 16,136 9,332
Stock compensation 3,851 1,716 13,293 8,148
Restructuring charges
(recoveries) 378 (1) (117) (271)
--------- --------- ----------- ---------
NON-GAAP INCOME FROM
OPERATIONS $96,008 $74,076 $342,603 $270,396
========= ========= =========== =========
TOTAL OTHER INCOME
(EXPENSES), NET $12,838 $8,106 $41,981 $23,041
Adjustments:
Net gain on investments - - (101) (41)
--------- --------- ----------- ---------
NON-GAAP TOTAL OTHER INCOME
(EXPENSES), NET $12,838 $8,106 $41,880 $23,000
========= ========= =========== =========
INCOME BEFORE INCOME TAXES $99,810 $78,134 $350,272 $276,228
Adjustments:
Amortization of intangible
assets 4,807 2,333 16,136 9,332
In process research and
development - - 5,000 -
Stock compensation 3,851 1,716 13,293 8,148
Restructuring charges
(recoveries) 378 (1) (117) (271)
Net gain on investments - - (101) (41)
--------- --------- ----------- ---------
NON-GAAP INCOME BEFORE
INCOME TAXES $108,846 $82,182 $384,483 $293,396
========= ========= =========== =========
PROVISION FOR INCOME TAXES $40,589 $14,698 $83,820 $50,474
Adjustments:
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes 1,358 - 5,157 -
Non-recurring American
Jobs Creation Act income
tax expense (22,482) - (22,482) -
Income tax effect 128 916 2,712 5,271
--------- --------- ----------- ---------
NON-GAAP PROVISION FOR
INCOME TAXES $19,593 $15,614 $69,207 $55,745
========= ========= =========== =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended Year Ended
--------------------- -----------------------
April 30, April 30, April 30, April 30,
2006 2005 2006 2005
---------- ---------- ------------ ----------
Cash Flows from
Operating Activities:
Net income $ 59,221 $ 63,436 $ 266,452 $ 225,754
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation 17,504 14,590 63,679 54,459
In process research
and development - - 5,000 -
Amortization of
intangible assets 4,807 2,333 16,136 9,332
Amortization of
patents 495 481 1,982 1,833
Stock compensation 3,851 1,716 13,293 8,148
Net gain on
investments - - (101) (70)
Net loss on disposal
of equipment 63 1,083 1,381 1,990
Allowance
(reduction) for
doubtful accounts (875) 785 46 1,110
Deferred income
taxes 1,531 5,591 1,545 6,321
Deferred rent 368 66 669 294
Changes in assets
and liabilities:
Accounts
receivable (46,663) (63,287) (116,816) (103,352)
Inventories (7,850) (2,613) (46,247) (14,996)
Prepaid expenses
and other assets (6,374) (5,347) (12,964) (2,336)
Accounts payable 1,333 15,105 17,405 30,460
Income taxes
payable 33,063 7,964 72,669 32,541
Accrued
compensation and
related benefits 15,361 17,320 28,353 33,828
Other accrued
liabilities 7,601 (639) 8,571 7,369
Deferred revenue 88,492 58,899 233,229 169,433
---------- ---------- ------------ ----------
Net cash
provided by
operating
activities 171,928 117,483 554,282 462,118
---------- ---------- ------------ ----------
Cash Flows from
Investing Activities:
Purchases of
investments (578,857) (202,675) (1,029,412) (872,237)
Redemptions of
investments 429,108 149,039 900,863 605,426
Purchase of patents - (895) - (895)
Increase (decrease) in
restricted cash 319 - (1,678) -
Purchases of property
and equipment (36,407) (28,812) (132,915) (93,568)
Proceeds from disposal
of fixed assets - - 32 -
Proceeds from sales of
investments - - 130 347
Purchases of equity
securities (2,175) (300) (9,275) (425)
Purchase of business,
net of cash acquired - - (53,747) -
Payments for split-
dollar insurance
premiums - (183) - (183)
Reimbursements for
split-dollar
insurance premiums - 10,227 - 10,227
---------- ---------- ------------ ----------
Net cash
provided by
(used in)
investing
activities (188,012) (73,599) (326,002) (351,308)
---------- ---------- ------------ ----------
Cash Flows from
Financing Activities:
Proceeds from sale of
common stock related
to employee stock
transactions 91,020 28,462 232,745 181,922
Proceeds from long-
term debt 300,000 - 300,000 -
Tax withholding
payments reimbursed
by restricted stock (268) (1,079) (1,062) (1,122)
Repurchases of common
stock (98,761) (59,910) (488,908) (192,903)
---------- ---------- ------------ ----------
Net cash
provided by
(used in)
financing
activities 291,991 (32,527) 42,775 (12,103)
---------- ---------- ------------ ----------
Effect of Exchange Rate
Changes on Cash (2,776) 812 (3,341) 2,507
Net Increase in Cash and
Cash Equivalents 273,131 12,169 267,714 101,214
Cash and Cash
Equivalents:
Beginning of period 188,125 181,373 193,542 92,328
---------- ---------- ------------ ----------
End of period $ 461,256 $ 193,542 $ 461,256 193,542
========== ========== ============ ==========
Noncash Investing and
Financing Activities:
Conversion of
evaluation inventory
to fixed assets $ 7,525 $ 1,654 $ 21,918 $ 10,122
Deferred stock
compensation, net of
reversals $ 24,071 $ (358) $ 26,968 $ 154
Income tax benefit
from employee stock
transactions $ 19,821 $ - $ 42,155 $ 27,829
Acquisition
(reduction) of
property and
equipment on account $ (6,540) $ - $ 4,618 $ -
Reclassification to
restricted cash $ 241,152 $ - $ 241,152 $ -
Stock issued for
acquisition $ - $ - $ 191,874 $ -
Options assumed for
acquired business $ - $ - $ 38,456 $ -
Interest accrued for
long-term debt $ 44 $ - $ 44 $ -
Supplemental cash flow
information:
Income taxes paid $ 8,105 $ 1,309 $ 13,730 $ 13,284
Income taxes refund $ 1,917 $ 1,811 $ 4,262 $ 12,399
Interest paid for
long-term debt $ 1,187 $ - $ 1,187 $ -
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
FIRST QUARTER AND FULL YEAR FISCAL 2007
(Unaudited)
Q107 FY07
--------------- ---------------
ADJUSTMENTS OF SPECIFIC ITEMS TO
EARNINGS PER SHARE FOR THE FIRST
QUARTER AND FULL YEAR 2007 ($):
COST OF REVENUES
Adjustment:
Amortization of intangible assets (0.010) (0.039)
Stock compensation including
adoption of SFAS 123R (0.009 - 0.011) (0.034 - 0.041)
OPERATING EXPENSES
Adjustments:
Amortization of intangible assets (0.002) (0.010)
Stock compensation including
adoption of SFAS 123R (0.091 - 0.110) (0.347 - 0.416)
PROVISION FOR INCOME TAXES
Adjustments:
Income tax effect 0.029 - 0.035 0.113 - 0.134
--------------- ---------------
NET DECREASE IN EARNINGS PER SHARE (0.083 - 0.098) (0.317 - 0.372)
=============== ===============
CONTACT: Network Appliance, Inc.
Jodi Baumann, 408-822-3974 (Press)
jodi@netapp.com
Tara Calhoun, 408-822-6909 (Investors)
tara@netapp.com
Billie Fagenstrom, 408-822-6428 (Investors)
billief@netapp.com