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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): November 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 November 15, 2006, Network Appliance, Inc. issued a press release
announcing its earnings for the second quarter and 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 November 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.
November 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 November 15, 2006.
Exhibit 99.1
Network Appliance Announces Results
for Second Quarter Fiscal Year 2007
Achieves 35% Year-over-Year Revenue Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 15, 2006--Network Appliance, Inc.
(NASDAQ:NTAP), the leader in advanced networked storage solutions, today
reported results for the second quarter of fiscal year 2007. Revenues for the
second fiscal quarter were $652.5 million, an increase of 35% compared to
revenues of $483.1 million for the same period a year ago and an increase of 5%
compared to $621.3 million in the prior quarter.
For the second fiscal quarter, GAAP net income was $86.9 million, or $0.22
per share(1) compared to GAAP net income of $70.7 million, or $0.18 per share
for the same period in the prior year. Non-GAAP(2) net income for the second
fiscal quarter increased 38% to $108.9 million, or $0.28 per share, compared to
non-GAAP net income of $79.1 million, or $0.21 per share for the same period a
year ago.
Revenues for the first six months of the current fiscal year totaled $1.27
billion, compared to revenues of $931.5 million for the first six months of the
prior year, an increase of 37% year over year.
For the first six months of the current fiscal year, GAAP net income
increased 8% to $141.6 million, or $0.36 per share, compared with GAAP net
income of $130.8 million, or $0.34 per share for the same period in the prior
year. Non-GAAP net income for the first six months of the current fiscal year
totaled $205.4 million, or $0.53 per share, compared to non-GAAP net income of
$141.3 million, or $0.37 per share for the first six months of the prior fiscal
year.
"NetApp continues to gain momentum in enterprise data centers because we
provide customers with the best value in the storage industry," said Dan
Warmenhoven, CEO. "Our performance this quarter highlights our success around
the world as we increase our market share and expand our reach."
Outlook
-- Network Appliance estimates that sequential growth in revenue for the
third quarter of fiscal year 2007 will be in the range of 7% to 8%,
which translates to 30% to 31% growth year over year.
-- Including the implementation of SFAS123R and with current information
and assumptions, the company expects third quarter GAAP earnings per
share to finish between $0.17 and $0.18 per share. Network Appliance
expects third quarter non-GAAP earnings per share to be about $0.28
per share.
-- For the full fiscal year 2007, Network Appliance estimates that
revenues will finish in the range of 33% to 34% higher than fiscal
year 2006.
-- Including the implementation of SFAS123R and with current information
and assumptions, the company expects GAAP earnings per share for
fiscal year 2007 to be in the target range of $0.73 to $0.76 per
share. Network Appliance estimates that full-year non-GAAP earnings
per share will finish between $1.10 to $1.11 per share.
Quarterly Highlights
During the second quarter of fiscal year 2007, Network Appliance
demonstrated growth in several key areas including market share, customer
deployments, product lines, and functionality in archive and compliance, VTL,
data migration and data retention. The company also continued its leadership
position in the iSCSI and network-attached storage markets and showed strong
growth in the Fibre Channel SAN market.
In the second quarter, NetApp outlined its comprehensive strategy for a
unified approach to both archive and compliance, offering a product and service
portfolio to help customers solve their growing and changing data challenges.
The NetApp announcement challenged the industry's conventional approach of
forcing customers to deploy separate storage silos for their backup, archive,
compliance, and primary storage needs and urged customers to save time, money,
and manpower with a unified archive and compliance solution. The NetApp approach
offers solutions to five standard storage needs to satisfy data management
regulations including data classification, data discovery, data migration, data
permanence, and data security and privacy.
Evolving corporate governance policies and a heightened emphasis on storage
efficiency demand that today's enterprise deploy archival solutions that will
easily scale and adapt with changing business needs. E-mail leads the list of
applications that are being archived in data centers around the world. This
quarter, a study commissioned by NetApp and conducted by VeriTest found that
Symantec(R) Enterprise Vault(TM) software for e-mail archival environments
running on NetApp storage delivers customers up to twice the performance of EMC
Centera Gen4 storage. The VeriTest study compared the performance of the
NetApp(R) FAS3050 and NearStore(R) R200 storage systems to that of EMC Centera
Gen4 storage. The results are further proof that NetApp storage provides
customers with a fast, flexible, and cost-effective solution for e-mail archival
and various compliance needs.
Also on the product front, NetApp introduced three Virtual Tape Library
(VTL) solutions designed for demanding data center backup environments.
NearStore VTL300, VTL700, and VTL1400 provide customers with the ability to
substantially increase backup and recovery service levels by doubling to
tripling the amount of backup data that can be stored on disk while also
increasing VTL write performance by over 50% compared to the industry-leading
performance of existing NetApp VTL systems.
From a market perspective, according to IDC's Worldwide Quarterly Disk
Storage Systems Tracker Q2 2006(3), NetApp led the networked storage market in
capacity share, growing to 21%, which is a statistical tie with EMC. NetApp also
grew faster than the market in capacity shipped in networked storage, growing at
111% year over year while the market grew at 59%. In terms of revenue, NetApp
grew faster than the market from Q2 2005 to Q2 2006 at 21%, while the market
grew at 11%.
NetApp demonstrated continued leadership in the iSCSI market in terms of
revenue and capacity in both Q2 2006 and the first half of 2006, with
first-place market share for Q2 2006 in capacity shipped (44%) and in revenue
(28%).
In its core NAS market, NetApp was number one in Q2 2006 for capacity
shipped, with 47% market share. Year over year, the NAS market grew 77% in terms
of capacity shipped while NetApp grew 85%. Sequentially, the NAS market grew at
11.3% while NetApp grew at 13.5%.
Of all the vendors tracked by IDC in Fibre Channel (FC) SAN, NetApp
continues to grow faster than the market in both revenue and capacity,
sequentially and year over year. For capacity shipped, NetApp grew at 240% year
over year while the market grew at 47%. In terms of revenue, NetApp grew at 66%
year over year while the market grew at 8%.
In the SAN market, NetApp announced a new milestone this quarter with
10,000 production deployments of NetApp storage area network (SAN) solutions,
including 3,000 FC SANs and 7,000 IP SANs. The NetApp SAN growth is the result
of the company's innovative solutions which enable the easiest provisioning and
management, affordable business continuity, and nondisruptive backups with
instant data recovery in all data center environments -- central, departmental,
and distributed.
On the partner front, NetApp joined the Microsoft Technology Center (MTC)
Alliance Member Program. As part of this program, NetApp storage has been
installed in Microsoft Technology Centers worldwide.
Additionally, NetApp announced that more than 5,000 enterprises worldwide
use the Oracle(R) on NetApp solution to help simplify the management of their
backup/recovery, archiving, data protection, compliance, and primary storage
processes.
In corporate news, Dan Warmenhoven received a CEO Ambassador Award from
Boardroom Bound, a nonprofit organization that helps corporations identify and
prequalify women and minority director candidates for corporate board service.
Warmenhoven was honored for instilling the value of diversity at NetApp and on
the company's board. NetApp was also honored for the third year in a row by the
Triangle Business Journal as a "Best Place to Work" in Research Triangle Park
(RTP) for 2006. NetApp earned first place honors in the large company category,
which included companies with 150 employees or more. NetApp employees based in
RTP who responded to a survey from the publication gave the company high marks
for its team-oriented work environment, exceptional people practices, strong
executive leadership, and effective manager relationships.
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, November
15, 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 (800) 260-8140 in the United States and (617) 614-3672
outside the United States. The passcode for both numbers is 51700684.
-- 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 38201788. 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 third 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; and statements regarding anticipated benefits from partner
offerings. 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, 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 Q2 2006.
NetApp and NearStore are registered trademarks and Network Appliance is a
trademark of Network Appliance, Inc. in the United States 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, 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)
October 27, April 30,
2006 2006
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $523,338 $461,256
Short-term investments 856,068 861,636
Accounts receivable, net 399,657 415,295
Inventories 56,778 64,452
Prepaid expenses and other assets 42,761 43,536
Short-term restricted cash and investments 124,748 138,539
Deferred income taxes 47,187 48,496
----------- -----------
Total current assets 2,050,537 2,033,210
PROPERTY AND EQUIPMENT, net 555,815 513,193
GOODWILL 486,355 487,535
INTANGIBLE ASSETS, net 64,687 75,051
LONG-TERM RESTRICTED CASH AND INVESTMENTS 70,390 108,371
OTHER ASSETS 92,424 43,605
----------- -----------
$3,320,208 $3,260,965
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $122,918 $166,211
Accounts payable 109,392 101,278
Income taxes payable 34,454 51,577
Accrued compensation and related benefits 123,916 129,636
Other accrued liabilities 70,832 69,073
Deferred revenue 472,761 399,388
----------- -----------
Total current liabilities 934,273 917,163
----------- -----------
LONG-TERM DEBT 70,510 133,789
LONG-TERM DEFERRED REVENUE 345,821 282,149
LONG-TERM OBLIGATIONS 7,052 4,411
----------- -----------
1,357,656 1,337,512
----------- -----------
STOCKHOLDERS' EQUITY 1,962,552 1,923,453
----------- -----------
$3,320,208 $3,260,965
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
--------------------- ---------------------
October October October October
27, 2006 28, 2005 27, 2006 28, 2005
---------- ---------- ---------- ----------
REVENUES:
Product $481,284 367,721 $946,895 708,646
Software subscriptions 82,253 57,055 157,083 110,759
Service 88,986 58,286 169,833 112,059
---------- ---------- ---------- ----------
Total revenues 652,523 483,062 1,273,811 931,464
---------- ---------- ---------- ----------
COST OF REVENUES:
Cost of product 186,261 139,284 374,226 270,782
Cost of software
subscriptions 2,456 1,820 4,748 4,076
Cost of service 62,499 42,866 120,460 84,028
---------- ---------- ---------- ----------
Total cost of revenues 251,216 183,970 499,434 358,886
---------- ---------- ---------- ----------
GROSS MARGIN 401,307 299,092 774,377 572,578
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing 204,264 139,229 399,782 277,043
Research and development 90,360 58,143 179,038 110,303
General and
administrative 35,217 21,793 67,613 42,989
In process research and
development - 5,000 - 5,000
Restructuring charges
(recoveries) - 645 (74) (611)
Gain on sale of assets (25,339) - (25,339) -
---------- ---------- ---------- ----------
Total operating
expenses 304,502 224,810 621,020 434,724
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 96,805 74,282 153,357 137,854
OTHER INCOME (EXPENSES),
net:
Interest income 17,478 9,651 34,134 18,699
Interest expense (5,170) (3) (9,042) (51)
Other income (expense),
net 1,878 (274) 2,657 (498)
Net gain (loss) on
investments (2,000) 68 (2,000) 101
---------- ---------- ---------- ----------
Total other income, net 12,186 9,442 25,749 18,251
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 108,991 83,724 179,106 156,105
PROVISION FOR INCOME TAXES 22,060 13,006 37,506 25,267
---------- ---------- ---------- ----------
NET INCOME $86,931 $70,718 $141,600 $130,838
========== ========== ========== ==========
NET INCOME PER SHARE:
BASIC $0.23 $0.19 $0.38 $0.35
========== ========== ========== ==========
DILUTED $0.22 $0.18 $0.36 $0.34
========== ========== ========== ==========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 370,659 371,002 372,264 369,220
========== ========== ========== ==========
DILUTED 388,226 385,442 389,773 385,912
========== ========== ========== ==========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
--------------------- ----------------------
October October October 27, October
27, 2006 28, 2005 2006 28, 2005
---------- ---------- ----------- ----------
Cash Flows from Operating
Activities:
Net income $86,931 $70,718 $141,600 $130,838
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation 20,666 15,328 39,380 30,084
In process research
and development - 5,000 - 5,000
Amortization of
intangible assets 4,687 3,852 9,373 6,523
Amortization of
patents 496 496 991 991
Stock-based
compensation 42,423 3,344 85,445 5,372
Net loss (gain) on
investments 2,000 (68) 2,000 (101)
Gain on sale of
assets (25,339) - (25,339) -
Net loss on disposal
of equipment 221 756 302 1,160
Allowance for
doubtful accounts 50 725 194 346
Deferred income taxes (22,634) - (22,634) -
Deferred rent 541 321 740 369
Excess tax benefit
from stock-based
compensation (19,356) - (23,845) -
Changes in assets and
liabilities:
Accounts receivable (22,807) (86,163) 15,380 (28,271)
Inventories (513) (8,567) 8,195 (13,565)
Prepaid expenses
and other assets (2,249) 932 3,142 (3,065)
Accounts payable 8,344 12,463 7,205 9,772
Income taxes
payable 41,849 14,496 34,935 24,144
Accrued
compensation and
related benefits 32,637 21,360 (6,327) (11,058)
Other accrued
liabilities 5,963 (1,577) (5,017) (2,879)
Deferred revenue 75,700 49,059 137,682 85,775
---------- ---------- ----------- ----------
Net cash provided
by operating
activities 229,610 102,475 403,402 241,435
---------- ---------- ----------- ----------
Cash Flows from Investing
Activities:
Purchases of short-term
investments (653,152) (111,010) (1,527,568) (333,797)
Redemptions of short-
term investments 638,134 204,596 1,544,557 418,573
Redemptions of
restricted investments 36,316 - 52,638
Increase (decrease) in
restricted cash 153 (562) 405 (2,066)
Proceeds from sale of
assets 23,914 - 23,914 -
Purchases of property
and equipment (43,729) (29,474) (76,013) (63,012)
Proceeds from sales of
investments - 68 17 130
Purchases of equity
securities (150) (6,675) (1,333) (6,950)
Purchase of business,
net of cash acquired - (41,916) - (53,747)
---------- ---------- ----------- ----------
Net cash provided
by (used in)
investing
activities 1,486 15,027 16,617 (40,869)
---------- ---------- ----------- ----------
Cash Flows from Financing
Activities:
Proceeds from sale of
common stock related
to employee stock
transactions 55,629 21,726 92,460 72,489
Excess tax benefit from
stock-based
compensation 19,356 - 23,845 -
Repayment of debt (78,706) - (106,572) -
Tax withholding
payments reimbursed by
restricted stock (3,343) (183) (4,323) (602)
Repurchases of common
stock (143,908) (149,021) (363,908) (244,564)
---------- ---------- ----------- ----------
Net cash used in
financing
activities (150,972) (127,478) (358,498) (172,677)
---------- ---------- ----------- ----------
Effect of Exchange Rate
Changes on Cash 885 104 561 282
Net Increase (Decrease)
in Cash and Cash
Equivalents 81,009 (9,872) 62,082 28,171
Cash and Cash
Equivalents:
Beginning of period 442,329 231,585 461,256 193,542
---------- ---------- ----------- ----------
End of period $523,338 $221,713 $523,338 $221,713
========== ========== =========== ==========
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
THREE MONTHS ENDED OCTOBER 27, 2006
---------------------------------------------------------
Amortization In process
of Stock-based research Restructuring
Intangible Compensation and (recoveries)
Assets Expenses development charges
Cost of product
revenues $3,866 $1,069 - -
Cost of service
revenues - 2,489 - -
Sales and
marketing
expense 583 18,715 - -
Research and
development
expense - 13,022 - -
General and
administrative
expense 238 7,128 - -
In process
research and
development - - - -
Restructuring
(recoveries)
charges - - - -
Gain on sale of
assets - - - -
Net (gain) loss
on investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $4,687 $42,423 - -
Net (Gain)
Gain on Sale Loss on
of Assets Investments Total
Cost of product
revenues - - $4,935
Cost of service
revenues - - 2,489
Sales and
marketing
expense - - 19,298
Research and
development
expense - - 13,022
General and
administrative
expense - - 7,366
In process
research and
development - - -
Restructuring
(recoveries)
charges - - -
Gain on sale of
assets (25,339) - (25,339)
Net (gain) loss
on investments - 2,000 2,000
------------- ------------ -------------
Effect on pre-
tax income ($25,339) $2,000 $23,771
SIX MONTHS ENDED OCTOBER 27, 2006
-----------------------------------------------------
Amortization In process
of Stock-based research Restructuring
Intangible Compensation and (recoveries)
Assets Expenses development charges
Cost of product
revenues $7,731 $1,739 - -
Cost of service
revenues - 5,124 - -
Sales and
marketing
expense 1,167 37,431 - -
Research and
development
expense - 26,891 - -
General and
administrative
expense 475 14,260 - -
In process
research and
development - - - -
Restructuring
(recoveries)
charges - - - (74)
Gain on sale of
assets - - - -
Net (gain) loss
on investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $9,373 $85,445 - ($74)
Net (Gain)
Gain on Sale Loss on
of Assets Investments Total
Cost of product
revenues - - $9,470
Cost of service
revenues - - 5,124
Sales and
marketing
expense - - 38,598
Research and
development
expense - - 26,891
General and
administrative
expense - - 14,735
In process
research and
development - - -
Restructuring
(recoveries)
charges - - (74)
Gain on sale of
assets (25,339) - (25,339)
Net (gain) loss
on investments - 2,000 2,000
------------- ------------ -------------
Effect on pre-
tax income ($25,339) $2,000 $71,405
THREE MONTHS ENDED OCTOBER 28, 2005
-----------------------------------------------------
Amortization In process
of Stock-based research Restructuring
Intangible Compensation and (recoveries)
Assets Expenses development charges
Cost of product
revenues $2,946 - - -
Cost of service
revenues - - - -
Sales and
marketing
expense 507 1,011 - -
Research and
development
expense - 2,106 - -
General and
administrative
expense 399 227 - -
In process
research and
development - - 5,000 -
Restructuring
(recoveries)
charges - - - 645
Net (gain) loss
on investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $3,852 $3,344 $5,000 $645
Net (Gain)
Gain on Sale Loss on
of Assets Investments Total
Cost of product
revenues - - $2,946
Cost of service
revenues - - -
Sales and
marketing
expense - - 1,518
Research and
development
expense - - 2,106
General and
administrative
expense - - 626
In process
research and
development - - 5,000
Restructuring
(recoveries)
charges - - 645
Net (gain) loss
on investments - (68) (68)
------------- ------------ -------------
Effect on pre-
tax income - ($68) $12,773
SIX MONTHS ENDED OCTOBER 28, 2005
-----------------------------------------------------
Amortization In process
of Stock-based research Restructuring
Intangible Compensation and (recoveries)
Assets Expenses development charges
Cost of product
revenues $4,054 - - -
Cost of service
revenues - - - -
Sales and
marketing
expense 714 1,526 - -
Research and
development
expense - 3,464 - -
General and
administrative
expense 1,755 382 - -
In process
research and
development - - 5,000 -
Restructuring
(recoveries)
charges - - - (611)
Net (gain) loss
on investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $6,523 $5,372 $5,000 ($611)
Net (Gain)
Gain on Sale Loss on
of Assets Investments Total
Cost of product
revenues - - $4,054
Cost of service
revenues - - -
Sales and
marketing
expense - - 2,240
Research and
development
expense - - 3,464
General and
administrative
expense - - 2,137
In process
research and
development - - 5,000
Restructuring
(recoveries)
charges - - (611)
Net (gain) loss
on investments - (101) (101)
------------ ------------ -------------
Effect on pre-
tax income - ($101) $16,183
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
October October October October
27, 2006 28, 2005 27, 2006 28, 2005
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF NET
INCOME
- ------------------------------
NET INCOME $86,931 $70,718 $141,600 $130,838
Adjustments:
Amortization of intangible
assets 4,687 3,852 9,373 6,523
Stock-based compensation
expenses 42,423 3,344 85,445 5,372
In process research and
development - 5,000 - 5,000
Restructuring (recoveries)
charges - 645 (74) (611)
Gain on sale of assets (25,339) - (25,339) -
Net (gain) loss on
investments 2,000 (68) 2,000 (101)
Discrete GAAP tax provision
items ratably for non-GAAP
purposes - (2,437) - (2,437)
Tax effect on sale of assets 4,606 - 4,606 -
Discrete GAAP tax provision
item (2,159) - (2,159) -
Income tax effect (4,284) (1,927) (10,033) (3,308)
--------- --------- --------- ---------
NON-GAAP NET INCOME $108,865 $79,127 $205,419 $141,276
========= ========= ========= =========
EARNINGS PER SHARE $0.224 $0.183 $0.363 $0.339
Adjustments:
Amortization of intangible
assets 0.012 0.010 0.024 0.017
Stock-based compensation
expenses 0.109 0.009 0.219 0.014
In process research and
development - 0.013 - 0.013
Restructuring (recoveries)
charges - 0.002 - (0.002)
Gain on sale of assets (0.065) - (0.065) -
Net (gain) loss on
investments 0.005 - 0.005 -
Discrete GAAP tax provision
items ratably for non-GAAP
purposes - (0.006) - (0.006)
Tax effect on sale of assets 0.012 - 0.012 -
Discrete GAAP tax provision
item (0.006) - (0.006) -
Income tax effect (0.011) (0.005) (0.026) (0.009)
--------- --------- --------- ---------
NON-GAAP EARNINGS PER SHARE $0.280 $0.206 $0.526 $0.366
========= ========= ========= =========
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
THIRD QUARTER and FULL YEAR FISCAL 2007
(Unaudited)
Third Quarter Full Year
2007 2007
-------------- --------------
Non-GAAP Guidance $0.28 $1.10 - $1.11
Adjustments of Specific Items to Earnings
Per Share for the Third Quarter and Full
Year Fiscal 2007:
Amortization of intangible assets (0.01) (0.05)
Stock based compensation expense (0.11 - 0.12) (0.42 - 0.44)
Restructuring recoveries - -
Gain on sale of assets - 0.07
Loss on investment - (0.01)
Income tax effect 0.02 0.06
-------------- --------------
Total Adjustments (0.10 - 0.11) (0.35 - 0.37)
GAAP Guidance - Earnings Per Share $0.17 - $0.18 $0.73 - $0.76
CONTACT: Network Appliance, Inc.
Jodi Baumann, 408-822-3974
jodi@netapp.com
Tara Dhillon, 408-822-6909
tara@netapp.com
Billie Fagenstrom, 408-822-6428
billief@netapp.com