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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 15, 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 February 15, 2006, Network Appliance, Inc. issued a press release
announcing its earnings for the third quarter of its 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 February 15, 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.
February 15, 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 February 15,
2006.
EXHIBIT 99.1
Network Appliance Announces Results for Third Quarter Fiscal Year 2006;
Achieves 30% Year-over-Year Revenue Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 15, 2006--Network
Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked
storage solutions, today reported results for the third quarter of
fiscal year 2006. Revenues for the third fiscal quarter were $537.0
million, an increase of 30% compared to revenues of $412.7 million for
the same period a year ago and an increase of 11% compared to $483.1
million in the prior quarter.
For the third fiscal quarter, GAAP net income was $76.4 million,
or $0.20 per share(1) compared to GAAP net income of $60.1 million, or
$0.16 per share for the same period in the prior year. Non-GAAP(2) net
income for the third fiscal quarter increased 35% to $84.7 million, or
$0.22 per share, compared to non-GAAP net income of $62.8 million, or
$0.16 per share for the same period a year ago.
Revenues for the first nine months of the current fiscal year
totaled $1.5 billion, compared to revenues of $1.1 billion for the
first nine months of the prior fiscal year, an increase of 28% year
over year.
For the first nine months of the current fiscal year, GAAP net
income increased 28% to $207.2 million, or $0.54 per share, compared
with GAAP net income of $162.3 million, or $0.43 per share for the
same period in the prior year. Non-GAAP net income for the first nine
months of the current fiscal year increased 32% to $226.0 million, or
$0.58 per share, compared to non-GAAP net income of $171.1 million, or
$0.45 per share for the first nine months of the prior fiscal year.
"NetApp achieved significant growth in revenue and profitability
during the quarter, driven in large part by the compelling value
proposition of our new FAS3000 midrange product line," said Dan
Warmenhoven, CEO of Network Appliance. "We provide customers with the
best storage utilization rates in the industry, allowing them to
decrease their total cost of ownership and increase their return on
investment. Combining this with the performance and ease-of-use
inherent in our full line of systems and data protection solutions, we
are seeing increased uptake of NetApp in data centers around the
globe."
Outlook
-- Network Appliance estimates that year-over-year growth in
revenue for the fourth quarter of fiscal year 2006 will be in
the range of 28% to 30%.
-- The company expects fourth quarter GAAP earnings per share to
finish between $0.20 and $0.21 per share. Network Appliance
expects fourth quarter non-GAAP earnings per share to be in
the range of $0.22 to $0.23 per share.
-- For the full fiscal year, Network Appliance estimates that
revenues will finish in the range of 28% to 29% higher than
fiscal year 2005.
-- The company expects GAAP earnings per share for fiscal year
2006 to be between $0.73 and $0.74 per share. Network
Appliance estimates full-year non-GAAP earnings per share to
be in the range of $0.80 to $0.81 per share.
Quarterly Highlights
This quarter, NetApp(R) was listed in the "leader" quadrant for
midrange enterprise disk arrays in Gartner's research note, "Magic
Quadrant for Midrange Enterprise Disk Array, 2H05."(3) NetApp SAN
solutions provide an unmatched combination of high-performance,
robustness, and ease-of-use for Windows(R), Solaris(R), HP/UX, IBM
AIX, and Linux(R) computing platforms.
Also this quarter, according to IDC's Worldwide Quarterly Disk
Storage Systems Tracker Q3 2005(4), NetApp demonstrated continued
leadership in the iSCSI storage market, with number-one market share
in capacity shipped (38.4%) and revenue (35.1%). NetApp maintained
leadership in its core NAS market, with a 44.3% capacity share. Of the
vendors tracked, NetApp posted the strongest year-over-year increase
in FC SAN revenue, with a growth rate of 118%. Also according to IDC,
NetApp experienced the fastest growth among the top five vendors in
storage software with 49.4% year-over-year growth from Q2 2004 to Q2
2005 versus a market growth rate of 11.8% for the same period. Total
NetApp market share in storage software grew from 5% in Q2 2004 to
6.6% in Q2 2005.
Earlier in the quarter, NetApp unveiled its Uncompromised Security
Initiative, a visionary program that challenges the status quo of data
security and promises to deliver industry-best solutions to the
enterprise. NetApp has numerous product lines shipping today that
enable it to deliver uncompromised security, including Decru(R)
DataFort(TM) storage security appliances, NetApp disk systems running
Data ONTAP(R) security features, and NetCache(R) internet access and
security appliances, as well as strong partnerships with leading
vendors such as Symantec that enhance the security portfolio. The
NetApp Uncompromised Security Initiative provides a vision and a
roadmap for customers who expect best-in-class data management,
coupled with military-grade security.
In other product news, Network Appliance announced the NetCache
C1300 system, the first enterprise Web security appliance delivering
unmatched value for highly distributed environments and another
component in the NetApp Uncompromised Security portfolio.
Furthering the relationship with NetApp, this quarter IBM
announced the introduction of the IBM(R) System Storage(TM) N5000, a
new series of networked storage systems designed to help midrange
customers dramatically reduce their total cost of ownership,
particularly enterprises operating distributed networks across remote
sites. The N5000 series represents the second major technology
offering resulting from IBM's relationship with NetApp announced in
April 2005.
During the quarter, the FAS3020c was named "Best NAS Solution of
the Year" in InfoWorld's 2006 Technology of the Year honors. This
marked the second consecutive year that NetApp won Best NAS from
InfoWorld. In 2005, the NetApp FAS200 series also received the award.
On the partner front, NetApp unveiled several new solution
enhancements and partner offerings with Acopia Networks, Cisco,
Microsoft and Network Intelligence to address a variety of data
concerns, including backup and recovery, file virtualization, data
migration, log management lifecycles, storage management and
consolidation.
In corporate news, NetApp was named by FORTUNE magazine as one of
the "100 Best Companies to Work For" for the fourth consecutive year.
This year, NetApp again ranked in the top half of the list, at number
27, 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."
Internationally, NetApp established a regional headquarters in
Hong Kong as part of the company's continuing worldwide expansion and
growth. The NetApp Hong Kong office will offer regional headquarters'
functions to NetApp offices, distribution, channel and systems
integrator partners in Asia Pacific, including Australia, Greater
China, India, Japan, New Zealand, South Korea and Southeast Asia.
NetApp celebrated 10 years as a publicly traded company on
November 21, 2005. Tom Mendoza, president of NetApp, rang the opening
bell at NASDAQ in New York, along with Dan Warmenhoven, CEO and David
Hitz and James Lau, both founders and executive vice presidents.
Conference Call and Webcast Information
-- The NetApp quarterly results conference call will be broadcast
live via the Internet at http://investors.netapp.com on
Wednesday, February 15, 2006, at 1:30 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 (800) 591-6930 in the United States and (617)
614-4908 outside the United States. The passcode for both
numbers is 29758742.
-- A replay will be available for seven days following 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 12867394. 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 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
fourth quarter of fiscal 2006 and for all of fiscal 2006, statements
regarding the anticipated benefits of our FAS3000 product line, our
Uncompromised Security Initiative, and regarding our OEM relationship
with IBM or our partner offerings and solution enhancements. 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; 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 with strategic partners; 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
certain discrete GAAP provision for income tax matters recognized
ratably for non-GAAP purposes.
(3) Magic Quadrant for Midrange Enterprise Disk Array, 2H05
(4) IDC's Worldwide Quarterly Disk Storage Systems Tracker Q3 2005
NetApp, Data ONTAP, Decru and NetCache are registered trademarks
and Network Appliance and DataFort are trademarks of Network Appliance
Inc. in the United States and other countries. Decru DataFort is a
trademark of Decru Inc., a Network Appliance company, in the United
States and other countries. IBM is a registered trademark of IBM. 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)
January April
27, 30,
2006 2005
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $188,125 $193,542
Short-term investments 952,819 976,423
Accounts receivable, net 367,490 296,885
Inventories 64,072 38,983
Prepaid expenses and other 35,768 32,472
Deferred income taxes 35,544 37,584
----------- -----------
Total current assets 1,643,818 1,575,889
PROPERTY AND EQUIPMENT, net 492,793 418,749
GOODWILL 491,089 291,816
INTANGIBLE ASSETS, net 82,433 21,448
OTHER ASSETS 59,817 64,745
----------- -----------
$2,769,950 $2,372,647
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $99,720 $83,572
Income taxes payable 38,226 20,823
Accrued compensation and related benefits 113,067 100,534
Other accrued liabilities 66,790 53,262
Deferred revenue 336,944 261,998
----------- -----------
Total current liabilities 654,747 520,189
LONG-TERM DEFERRED REVENUE 256,528 187,180
LONG-TERM OBLIGATIONS 3,427 4,474
----------- -----------
914,702 711,843
----------- -----------
STOCKHOLDERS' EQUITY 1,855,248 1,660,804
----------- -----------
$2,769,950 $2,372,647
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------- -----------------------
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
--------- --------- ----------- -----------
REVENUES:
Product revenue $474,236 $367,903 $1,293,642 $1,029,334
Service revenue 62,795 44,803 174,853 116,969
--------- --------- ----------- -----------
Total revenues 537,031 412,706 1,468,495 1,146,303
--------- --------- ----------- -----------
COST OF REVENUES:
Cost of product revenue 163,505 127,118 438,363 353,060
Cost of service revenue 46,502 33,454 130,530 94,990
--------- --------- ----------- -----------
Total cost of
revenues 210,007 160,572 568,893 448,050
--------- --------- ----------- -----------
GROSS MARGIN 327,024 252,134 899,602 698,253
--------- --------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing 152,008 118,668 427,526 331,087
Research and
development 62,622 43,603 169,462 122,957
General and
administrative 24,742 20,136 67,349 54,888
In process research
and development - - 5,000 -
Stock compensation 4,070 2,189 9,442 6,432
Restructuring charges 117 (270) (495) (270)
--------- --------- ----------- -----------
Total operating
expenses 243,559 184,326 678,284 515,094
--------- --------- ----------- -----------
INCOME FROM OPERATIONS 83,465 67,808 221,318 183,159
OTHER INCOME (EXPENSES),
net:
Interest income 9,891 6,031 28,590 16,216
Other expenses, net 1,001 (500) 453 (1,322)
Net gain on
investments - 41 101 41
--------- --------- ----------- -----------
Total other
income, net 10,892 5,572 29,144 14,935
--------- --------- ----------- -----------
INCOME BEFORE INCOME TAXES 94,357 73,380 250,462 198,094
PROVISION FOR INCOME TAXES 17,964 13,253 43,231 35,776
--------- --------- ----------- -----------
NET INCOME $76,393 $60,127 $207,231 $162,318
========= ========= =========== ===========
NET INCOME PER SHARE:
BASIC $0.21 $0.17 $0.56 $0.45
========= ========= =========== ===========
DILUTED $0.20 $0.16 $0.54 $0.43
========= ========= =========== ===========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 371,768 362,563 370,069 359,031
========= ========= =========== ===========
DILUTED 389,149 385,869 386,991 377,972
========= ========= =========== ===========
NETWORK APPLIANCE, INC.
NON-GAAP(1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------- -----------------------
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
----------- ----------- ----------- -----------
REVENUES:
Product revenue $474,236 $367,903 $1,293,642 $1,029,334
Service revenue 62,795 44,803 174,853 116,969
----------- ----------- ----------- -----------
Total revenues 537,031 412,706 1,468,495 1,146,303
----------- ----------- ----------- -----------
COST OF REVENUES:
Cost of product
revenue 159,639 126,260 430,443 350,486
Cost of service
revenue 46,502 33,454 130,530 94,990
----------- ----------- ----------- -----------
Total cost of
revenues 206,141 159,714 560,973 445,476
----------- ----------- ----------- -----------
GROSS MARGIN 330,890 252,992 907,522 700,827
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Sales and
marketing 151,305 118,461 426,109 330,467
Research and
development 62,622 43,603 169,462 122,957
General and
administrative 24,505 18,868 65,357 51,083
----------- ----------- ----------- -----------
Total
operating
expenses 238,432 180,932 660,928 504,507
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 92,458 72,060 246,594 196,320
OTHER INCOME
(EXPENSES), net 10,892 5,531 29,043 14,894
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 103,350 77,591 275,637 211,214
PROVISION FOR INCOME
TAXES 18,603 14,742 49,615 40,131
----------- ----------- ----------- -----------
NET INCOME $84,747 $62,849 $226,022 $171,083
=========== =========== =========== ===========
NET INCOME PER SHARE:
BASIC $0.23 $0.17 $0.61 $0.48
=========== =========== =========== ===========
DILUTED $0.22 $0.16 $0.58 $0.45
=========== =========== =========== ===========
SHARES USED IN PER
SHARE CALCULATION:
BASIC 371,768 362,563 370,069 359,031
=========== =========== =========== ===========
DILUTED 389,149 385,869 386,991 377,972
=========== =========== =========== ===========
(1) 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 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, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------- -------------------
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF NET
INCOME
- ------------------------------
NET INCOME $76,393 $60,127 $207,231 $162,318
Adjustments:
Amortization of
intangible assets 4,806 2,333 11,329 6,999
Stock compensation 4,070 2,189 9,442 6,432
In process research and
development - - 5,000 -
Restructuring charges
(recoveries) 117 (270) (495) (270)
Net gain on investments - (41) (101) (41)
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes (1,358) - (3,799) -
Income tax effect 719 (1,489) (2,585) (4,355)
--------- --------- --------- ---------
NON-GAAP NET INCOME $84,747 $62,849 $226,022 $171,083
========= ========= ========= =========
DETAILED RECONCILIATION OF
SPECIFIC ITEMS:
- ------------------------------
COST OF REVENUES $210,007 $160,572 $568,893 $448,050
Adjustment:
Amortization of
intangible assets (3,866) (858) (7,920) (2,574)
--------- --------- --------- ---------
NON-GAAP COST OF REVENUES $206,141 $159,714 $560,973 $445,476
========= ========= ========= =========
GROSS MARGIN $327,024 $252,134 $899,602 $698,253
Adjustment:
Amortization of
intangible assets 3,866 858 7,920 2,574
--------- --------- --------- ---------
NON-GAAP GROSS MARGIN $330,890 $252,992 $907,522 $700,827
========= ========= ========= =========
SALES AND MARKETING EXPENSES $152,008 $118,668 $427,526 $331,087
Adjustments:
Amortization of
intangible assets (703) (207) (1,417) (620)
--------- --------- --------- ---------
NON-GAAP SALES AND MARKETING
EXPENSES $151,305 $118,461 $426,109 $330,467
========= ========= ========= =========
GENERAL AND ADMINISTRATIVE
EXPENSES $24,742 $20,136 $67,349 $54,888
Adjustments:
Amortization of
intangible assets (237) (1,268) (1,992) (3,805)
--------- --------- --------- ---------
NON-GAAP GENERAL AND
ADMINISTRATIVE EXPENSES $24,505 $18,868 $65,357 $51,083
========= ========= ========= =========
OPERATING EXPENSES $243,559 $184,326 $678,284 $515,094
Adjustments:
Stock compensation (4,070) (2,189) (9,442) (6,432)
In process research and
development - - (5,000) -
Amortization of
intangible assets (940) (1,475) (3,409) (4,425)
Restructuring charges (117) 270 495 270
--------- --------- --------- ---------
NON-GAAP OPERATING EXPENSES $238,432 $180,932 $660,928 $504,507
========= ========= ========= =========
INCOME FROM OPERATIONS $83,465 $67,808 $221,318 $183,159
Adjustments:
In process research and
development - - 5,000 -
Amortization of
intangible assets 4,806 2,333 11,329 6,999
Stock compensation 4,070 2,189 9,442 6,432
Restructuring charges
(recoveries) 117 (270) (495) (270)
--------- --------- --------- ---------
NON-GAAP INCOME FROM
OPERATIONS $92,458 $72,060 $246,594 $196,320
========= ========= ========= =========
TOTAL OTHER INCOME
(EXPENSES), NET $10,892 $5,572 $29,144 $14,935
Adjustments:
Net gain on investments - (41) (101) (41)
--------- --------- --------- ---------
NON-GAAP TOTAL OTHER INCOME
(EXPENSES), NET $10,892 $5,531 $29,043 $14,894
========= ========= ========= =========
INCOME BEFORE INCOME TAXES $94,357 $73,380 $250,462 $198,094
Adjustments:
Amortization of
intangible assets 4,806 2,333 11,329 6,999
In process research and
development - - 5,000 -
Stock compensation 4,070 2,189 9,442 6,432
Restructuring charges
(recoveries) 117 (270) (495) (270)
Net gain on investments - (41) (101) (41)
--------- --------- --------- ---------
NON-GAAP INCOME BEFORE INCOME
TAXES $103,350 $77,591 $275,637 $211,214
========= ========= ========= =========
PROVISION FOR INCOME TAXES $17,964 $13,253 $43,231 $35,776
Adjustments:
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes 1,358 - 3,799 -
Income tax effect (719) 1,489 2,585 4,355
--------- --------- --------- ---------
NON-GAAP PROVISION FOR INCOME
TAXES $18,603 $14,742 $49,615 $40,131
========= ========= ========= =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
--------------------- -------------------
January January January January
27, 28, 27, 28,
2006 2005 2006 2005
----------- --------- --------- ---------
Cash Flows from Operating
Activities:
Net income $76,393 $60,127 $207,231 $162,318
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 16,091 13,217 46,175 39,869
In process research and
development - - 5,000 -
Amortization of
intangible assets 4,806 2,333 11,329 6,999
Amortization of patents 496 451 1,487 1,352
Stock compensation 4,070 2,189 9,442 6,432
Net gain on investments - (41) (101) (70)
Net loss on disposal of
equipment 158 388 1,318 907
Allowance for doubtful
accounts 575 (78) 921 325
Deferred income taxes 14 730 14 730
Deferred rent (68) 2 301 228
Changes in assets and
liabilities:
Accounts receivable (41,882) (14,712) (70,153) (40,065)
Inventories (24,832) (6,390) (38,397) (12,383)
Prepaid expenses and
other assets (3,525) (2,988) (6,590) 3,011
Accounts payable 6,300 10,684 16,072 15,355
Income taxes payable 15,462 11,066 39,606 24,577
Accrued compensation
and related benefits 24,050 12,707 12,992 16,508
Other accrued
liabilities 3,849 8,228 970 8,008
Deferred revenue 58,962 50,179 144,737 110,534
----------- --------- --------- ---------
Net cash provided
by operating
activities 140,919 148,092 382,354 344,635
----------- --------- --------- ---------
Cash Flows from Investing
Activities:
Purchases of investments (116,758) (320,614) (450,555) (669,562)
Redemptions of investments 53,182 193,085 471,755 456,387
Increase in restricted
cash 69 - (1,997) -
Purchases of property and
equipment (33,464) (17,245) (96,476) (64,756)
Proceeds from sales of
investments - 49 130 347
Purchases of equity
securities (150) (125) (7,100) (125)
Purchase of business, net
of cash acquired - - (53,747) -
----------- --------- --------- ---------
Net cash used in
investing
activities (97,121) (144,850) (137,990) (277,709)
----------- --------- --------- ---------
Cash Flows from Financing
Activities:
Proceeds from sale of
common stock related to
employee stock
transactions 69,236 106,743 141,725 153,460
Tax withholding payments
reimbursed by restricted
stock (192) - (794) (43)
Repurchases of common
stock (145,583) (49,980) (390,147) (132,993)
----------- --------- --------- ---------
Net cash provided
by (used in)
financing
activities (76,539) 56,763 (249,216) 20,424
----------- --------- --------- ---------
Effect of Exchange Rate
Changes on Cash (847) 824 (565) 1,695
Net Increase (Decrease) in
Cash and Cash Equivalents (33,588) 60,829 (5,417) 89,045
Cash and Cash Equivalents:
Beginning of period 221,713 120,544 193,542 92,328
----------- --------- --------- ---------
End of period $188,125 $181,373 $188,125 $181,373
=========== ========= ========= =========
Noncash Investing and
Financing Activities:
Conversion of evaluation
inventory to fixed assets $5,282 3,717 14,393 8,468
Deferred stock
compensation, net of
reversals 708 885 2,897 512
Income tax benefit from
employee stock
transactions 6,045 13,152 22,334 27,829
Acquisition of property
and equipment on account 5,033 - 11,158 -
Stock issued for
acquisition - - 191,874 -
Options assumed for
acquired business - - 38,456 -
Supplemental cash flow
information:
Income taxes paid 1,936 1,803 5,625 11,975
Income tax refund 13 16 2,345 10,588
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
FOURTH QUARTER AND FISCAL YEAR 2006
(Unaudited)
Projected Year Projected Year
Over Year Fourth Over Year
Quarter Revenue Annual FY06
Growth Range Revenue Growth
Range
------------------- ---------------
28% 30% 28% 29%
------- ---------- ------- -------
ADJUSTMENTS OF SPECIFIC ITEMS TO
EARNINGS PER SHARE FOR THE
FOURTH QUARTER AND FISCAL
YEAR 2006 ($):
COST OF REVENUES
Adjustment:
Amortization of intangible
assets (0.010) (0.010) (0.030) (0.030)
OPERATING EXPENSES
Adjustments:
Stock compensation (0.010) (0.010) (0.035) (0.035)
Amortization of intangible
assets (0.002) (0.002) (0.011) (0.011)
Restructuring charges - - 0.001 0.001
In-process research and
development - - (0.013) (0.013)
TOTAL OTHER INCOME (EXPENSES), NET
Adjustments:
Net (gain)/loss on investments - - - -
PROVISION FOR INCOME TAXES
Adjustments: 0.001 0.001 0.018 0.018
Income tax effect
------- ---------- ------- -------
NET DECREASE IN EARNINGS PER SHARE (0.021) (0.021) (0.070) (0.070)
======= ========== ======= =======
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