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): August 18,
2010
NETAPP,
INC.
(Exact
name of Registrant as specified in its charter)
|
Delaware
|
0-27130
|
77-0307520
|
||
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File
Number)
|
(IRS
Employer
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)
|
||||
|
Not
Applicable
|
||||
|
(Former
name or former address, if changed since last report
)
|
||||
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 2.02 Results
of Operations and Financial Condition.
On August
18, 2010, NetApp, Inc. (“NetApp” or the “Company”) issued a press release and
supplemental commentary reporting financial results for the first quarter ended
July 30, 2010. The press release and supplemental commentary are
furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, and
are incorporated herein by reference.
These
exhibits shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
Non-GAAP Financial
Measures
To
supplement NetApp’s condensed consolidated financial statement
information presented on a GAAP basis, the press release and supplemental
commentary furnished herewith as Exhibit 99.1 and Exhibit 99.2,
respectively, provide investors with certain non-GAAP measures, including, but
not limited to, historical non-GAAP operating results and net income and
historical and future non-GAAP net income per diluted share. For purposes of
internal planning, performance measurement and resource allocation, NetApp’s
management uses non-GAAP measures of net income that exclude:
(a) amortization of intangible assets, (b) stock-based compensation
expenses, (c) acquisition related income and expenses, (d) restructuring
and other charges, (e) asset impairments, (f) non-cash interest expense
associated with our convertible debt, (g) net losses or gains on investments,
and (h) our GAAP tax provision, but includes a non-GAAP tax provision based upon
our projected annual non-GAAP effective tax rate for the first three quarters of
the fiscal year and an actual non-GAAP tax provision for the fourth quarter of
the fiscal year. NetApp’s management uses these non-GAAP measures in making
operating decisions because it believes the measurements provide meaningful
supplemental information regarding NetApp’s ongoing operational performance.
These non-GAAP financial measures are used to: (1) measure company performance
against historical results, (2) facilitate comparisons to our competitors’
operating results, and (3) allow greater transparency with respect to
information used by management in financial and operational decision making. In
addition, these non-GAAP financial measures are used to measure company
performance for the purposes of determining employee incentive plan
compensation.
As
described above, NetApp excludes the following items from its non-GAAP
measures:
A. Amortization of intangible
assets. NetApp records amortization of intangible assets that were
acquired in connection with its business combinations. The amortization of
intangible assets varies depending on the level of acquisition activity.
Management finds it useful to exclude these charges to assess the appropriate
level of various operating expenses to assist in budgeting, planning and
forecasting future periods and in measuring operational
performance.
B. Stock-based compensation
expenses. NetApp excludes stock-based compensation expenses
from its non-GAAP measures primarily because they are non-cash expenses. While
management views stock-based compensation as a key element of our employee
retention and long-term incentives, it does not view it as an expense to be used
in evaluating operational performance in any given period. In addition, the
valuation of stock-based awards and associated expense are based on factors and
assumptions that management believes are, in large part, outside of management’s
control.
C.
Acquisition related income
and expense. NetApp excludes acquisition related income
and expenses, including merger termination proceeds, from its non-GAAP measures
primarily because they are not related to our on-going business and, therefore,
cannot be relied upon for future planning and forecasting.
D.
Restructuring and other
charges. These charges include restructuring charges that are incurred
based on the particular facts and circumstances of restructuring decisions,
including employment and contractual settlement terms, and other related
charges, and can vary in size and frequency. These items are not ordinarily
included in our annual operating plan and related budget due to the
unpredictability of the timing and size of these events. We therefore exclude
them in our assessment of operational performance.
E. Asset impairments. These are
non-cash charges to write down assets when there is an indication that the asset
has become impaired. Management finds it useful to exclude these non-cash
charges due to the unpredictability of these events in its assessment of
operational performance.
F. Non-cash interest
expense. These are non-cash charges from the amortization of
debt discount and issuance costs. Management does not believe that
these charges reflect the underlying performance of our business.
G. Net losses or gains. These
include realized gains and losses on and other-than-temporary impairments of our
investments related to significant investment impairments or liquidation
events. Management believes that these gains and losses do not
reflect the results of our underlying, on-going businesses and, therefore, finds
it useful to exclude them in assessing our performance.
H. Income tax effects. NetApp
excludes its GAAP tax provision from its non-GAAP measure of net
income, but includes a non-GAAP tax provision based upon its projected annual
non-GAAP effective tax rate for the first three quarters of the
fiscal year and an actual non-GAAP tax provision for the fourth quarter of the
fiscal year. Management believes the use of a non-GAAP tax provision provides a
more meaningful measure of the company’s operational performance in any given
period.
There are
limitations in using non-GAAP financial measures because the non-GAAP financial
measures are not prepared in accordance with generally accepted accounting
principles and may be different from non-GAAP financial measures used by other
companies. In addition, the non-GAAP financial measures are limited in value
because they exclude certain items that may have a material impact upon our
reported financial results. Management compensates for these limitations by
analyzing current and future results on a GAAP basis as well as a non-GAAP basis
and also by providing GAAP measures in our earnings release and prepared
remarks. The presentation of non-GAAP financial information is not meant to be
considered in isolation or as a substitute for the directly comparable financial
measures prepared in accordance with generally accepted accounting principles in
the United States. The non-GAAP financial measures are meant to supplement, and
be viewed in conjunction with, GAAP financial measures. Investors should review
the information regarding non-GAAP financial measures provided in our press
release and prepared remarks.
Item
9.01 Financial Statements and
Exhibits.
(d) Exhibits.
|
Exhibit
|
Description
|
|
Press
release, dated August 18, 2010, reporting earnings for the fiscal quarter
ended July 30, 2010.
|
|
|
Supplemental
Commentary, dated August 18, 2010.
|
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.
| NETAPP, INC. | |
| (Registrant) |
|
August
18, 2010
|
By:
|
/s/
Andrew Kryder
|
|
Andrew
Kryder
|
||
|
Secretary,
General Counsel, and
Senior
Vice President, Legal
|
Index
to Exhibits
|
Exhibit
|
Description
|
|
Press
release, dated August 18, 2010, reporting earnings for the fiscal quarter
ended
July
30, 2010.
|
|
|
Prepared
remarks, dated August 18, 2010.
|
Exhibit
99.1
Press
Contact: Investor
Contacts:
Ryan
Lowry Shauna
O’Boyle
NetApp NetApp
(408)
822-7544 (408)
822-7655
ryanl@netapp.com oboyle@netapp.com
NETAPP
ANNOUNCES RESULTS FOR FIRST QUARTER FISCAL YEAR 2011
Record
Q1; Company Records Q1 FY’11 Revenues of $1.14 Billion, Up 36% Year Over
Year
Sunnyvale, Calif.—August 18,
2010—NetApp (NASDAQ: NTAP) today reported results for the first quarter
of fiscal year 2011, which ended July 30, 2010. Revenues for the first fiscal
quarter of 2011 totaled $1.14 billion compared to revenues of $838 million for
the same period a year ago.
For the
first fiscal quarter of fiscal year 2011, GAAP net income was $142 million or
$0.38 per share1compared
to GAAP net income of $52 million, or $0.15 per share for the same period in the
prior year. Non-GAAP net income for the first fiscal quarter of fiscal year 2011
was $183 million, or $0.49 per share2,
compared to non-GAAP net income of $76 million, or $0.22 per share for the same
period a year ago.
“With
total revenue growth for the quarter of 36% and product revenue growth of 51%
year over year, NetApp has begun our fiscal year with great momentum,” said Tom
Georgens, president and CEO. “The NetApp value proposition allows customers to
implement more flexible and efficient storage infrastructures at a lower cost.
Our results indicate we are achieving clear customer preference as IT
organizations transform their data centers.”
Outlook
|
·
|
NetApp
estimates revenue for the second quarter of fiscal year 2011 to be in the
range of $1.16 billion to $1.21
billion.
|
|
·
|
NetApp
estimates share count for the second quarter of fiscal year 2011 to
increase by about 6 million shares.
|
|
·
|
NetApp
estimates that the second quarter of fiscal year 2011 GAAP earnings per
share will be approximately $0.35 to $0.38 per share. NetApp estimates
that the second quarter fiscal year 2011 non-GAAP earnings per share will
be approximately $0.47 to $0.50 per
share.
|
Business
Highlights
In the
first quarter of fiscal year 2011, NetApp expanded its strategic relationships
with Microsoft and other partners to help customers and service providers make
the transition to a cloud computing environment. NetApp, VMware, and Cisco also
strengthened their trilateral collaboration by unveiling new solutions to
increase data center efficiencies for customers. In addition, NetApp achieved
several milestones and earned several awards during the quarter related to
customer adoption of key technologies and its unique corporate culture. Key
business highlights included the following:
NetApp
Strengthens Relationship with Microsoft
|
·
|
NetApp and Microsoft streamline
data center management and accelerate cloud computing. NetApp
announced closer integration with Microsoft®
technology to help joint customers and service providers more easily
manage their virtualized environments and build internal and public
clouds. This tighter integration will allow customers to make their data
centers more efficient, agile, and
dynamic.
|
|
·
|
NetApp integrates with
Microsoft toolkit to help service providers take small and medium-sized
businesses (SMBs) to the cloud. While enterprise-class data
protection has historically been too expensive for most SMBs, NetApp’s
integration with the Microsoft Dynamic Data Center Toolkit for Hosters
enables service providers to make data protection a reality for their SMB
customers.
|
|
·
|
NetApp unveils solutions for
Microsoft SharePoint® Server 2010 environments.
NetApp®
SnapManager®
6.0 for Microsoft SharePoint 2010 and other new storage solutions enable
customers to make a smooth transition to SharePoint 2010. As storage
demands continue to increase for SharePoint 2010, SnapManager 6.0 will
help customers improve scalability, optimize storage resources, and reduce
costs.
|
NetApp
and Partners Enable Flexible IT
|
·
|
NetApp, Cisco, and VMware
unveil end-to-end Fibre Channel over Ethernet (FCoE) solution for the
dynamic data center. These three partners delivered the industry’s
first certified end-to-end FCoE solution for VMware®
virtual environments. With NetApp FCoE solutions and Cisco data center
switches now validated to support VMware virtualized environments, this
significant milestone helps customers achieve greater data center
efficiencies and progress on their journey to the
cloud.
|
|
·
|
NetApp increases focus on
service providers to help customers move to cloud computing.
NetApp’s integration of service providers into its 2010–2011 NetApp
Partner Program tightens the relationship between NetApp, its key service
provider partners, and its value-added reseller partners, allowing them to
more effectively work together to help customers make the transition to a
cloud environment.
|
Milestones
and Awards
|
·
|
NetApp exceeds exabyte barrier
with storage efficiency technologies. NetApp became the first
storage vendor to achieve more than an exabyte of storage with deduped
storage-system deployments. As a leader in primary storage deduplication,
NetApp has deployed more than 87,000 deduped storage systems while more
than 12,000 customers have benefitted from its portfolio of storage
efficiency products.
|
|
·
|
NetApp customers have purchased
more than a petabyte of Flash Cache. Since its introduction in
September 2009, NetApp Flash Cache has helped customers improve storage
efficiency and performance. NetApp’s incorporating flash memory as
intelligent cache in its unified storage systems allows NetApp customers
to optimize performance while decreasing both capital and operating
expenses.
|
|
·
|
NetApp ranked #3 in best place
to work in D.C. area list. The Washington Business
Journal named NetApp #3 in the Large Company category (with
nonlocal headquarters) on its “Best Places to Work” list in the D.C. area
for 2010. The honor marks the second consecutive year that NetApp has
finished in the top five in this ranking and is further testament to
NetApp’s strong corporate culture.
|
|
·
|
NetApp ranked #1 in Switzerland
by the Great Place to Work Institute®. NetApp was recognized
as the “Best Employer in Switzerland” by the Great Place to Work Institute
for 2010. NetApp now ranks in the top 20 in 10 different regions,
including #7 in the United States.
|
|
·
|
NetApp RTP data center earns
EPA’s ENERGY STAR®. The NetApp RTP dynamic
data center became the first ever data center to earn the U.S.
Environmental Protection Agency’s (EPA’s) prestigious ENERGY STAR for its
superior energy efficiency. Achieving a near- perfect score of 99 out of
100, the unique RTP data center has reduced CO2
emissions for NetApp by approximately 95,000 tons per year, which is
equivalent to removing 16,000 cars per year from the
road.
|
|
·
|
NetApp recognizes cutting-edge
customers with NetApp Innovation Awards. NetApp held its sixth
annual Innovation Awards to honor cutting-edge customers from around the
world who leveraged NetApp solutions in an innovative way to improve their
business. Winning organizations included Microsoft, Weta Digital, BT
Global Services, WNS Global Services, T-Systems, and the Pennsylvania
Office of the Attorney
General.
|
Webcast
and Conference Call Information
The
NetApp first quarter fiscal year 2011 results conference call will be broadcast
live on the Internet at http://investors.netapp.com
on Wednesday, August 18, 2010, at 2:00 p.m. Pacific Time. This press release and
any other information related to the call will also be posted on the Web site at
that location. An audio replay Webcast will also be available after 4:00 p.m.
Pacific Time on our Web site.
NetApp
now uses a new hybrid format for disclosing key financial information associated
with our quarterly results. Concurrent with the press release, NetApp will post
and distribute a separate document with financial commentary and statistics that
was previously disclosed during our earnings calls. These prepared remarks will
be available prior to the conference call in order to provide the investment
community with additional time to analyze our results. This commentary will not
be read during the earnings call.
About
NetApp
NetApp
creates innovative storage and data management solutions that deliver
outstanding cost efficiency and accelerate business breakthroughs. Discover our
passion for helping companies around the world go further, faster 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, share count, and metrics for the second quarter of fiscal year 2011,
our expectations regarding our current and new partnerships and strategic
alliances, and the benefits that we expect our customers to realize from using
our products and those from our strategic alliances and partnerships. 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 customer demand
for our products and services; our ability to increase revenue and manage our
operating costs; increased competition risks associated with the anticipated
growth in network storage market; general economic and market conditions; our
ability to deliver new product architectures and enterprise service offerings;
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 other
important factors as described in NetApp reports and documents filed from time
to time with the Securities and Exchange Commission (SEC), 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.
###
NetApp,
the NetApp logo, Go further, faster, and SnapManager are trademarks or
registered trademarks of NetApp, Inc. in the United States and/or other
countries. VMware is a registered trademark of VMware, Inc. Microsoft and
SharePoint are registered trademarks of Microsoft Corporation. All other brands
or products are trademarks or registered trademarks of their respective holders
and should be treated as such.
|
|
1GAAP
earnings per share is calculated using the diluted number of shares for
all periods presented.
|
|
|
2Non-GAAP
net income excludes the amortization of intangible
assets, stock-based compensation expenses, acquisition related
income and expenses, restructuring and other charges, asset impairments,
non-cash interest expense associated with our convertible debt, net losses
or gains on investments, and our GAAP tax provision, but includes a
non-GAAP tax provision based upon our projected annual non-GAAP effective
tax rate for the first three quarters of the fiscal year and an actual
non-GAAP tax provision for the fourth quarter of the fiscal year. Non-GAAP
earnings per share is calculated using the diluted number of shares for
all periods presented.
|
NetApp
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 ongoing operational performance. Non-GAAP net income
excludes the amortization of intangible assets, stock-based compensation
expenses, acquisition related income and expenses, restructuring and other
charges, asset impairments, non-cash interest expense associated with our
convertible debt, net losses or gains on investments, and our GAAP tax
provision, but includes a non-GAAP tax provision based upon our projected annual
non-GAAP effective tax rate for the first three quarters of the fiscal year and
an actual non-GAAP tax provision for the fourth quarter of the fiscal year. 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 are used to: (1) measure company performance against
historical results, (2) facilitate comparisons to our competitors’ operating
results, and (3) allow greater transparency with respect to information used by
management in financial and operational decision making. In addition, these
non-GAAP financial measures are used to measure company performance for the
purposes of determining employee incentive plan compensation. 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.
|
NETAPP,
INC.
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(In
millions)
|
||||||||
|
(Unaudited)
|
||||||||
|
July
30, 2010
|
April
30, 2010
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash,
cash equivalents and investments
|
$ | 3,920.9 | $ | 3,724.0 | ||||
|
Accounts
receivable, net
|
372.5 | 471.5 | ||||||
|
Inventories
|
90.4 | 112.9 | ||||||
|
Other
current assets
|
210.4 | 228.7 | ||||||
|
Total
current assets
|
4,594.2 | 4,537.1 | ||||||
|
Property
and equipment, net
|
825.4 | 804.4 | ||||||
|
Goodwill
and other intangible assets, net
|
780.2 | 706.1 | ||||||
|
Long-term
investments and restricted cash
|
71.2 | 72.8 | ||||||
|
Other
non-current assets
|
374.8 | 374.0 | ||||||
| $ | 6,645.8 | $ | 6,494.4 | |||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 149.9 | $ | 184.6 | ||||
|
Accrued
compensation and other current liabilities
|
388.7 | 591.3 | ||||||
|
Short-term
deferred revenue
|
1,126.8 | 1,135.1 | ||||||
|
Total
current liabilities
|
1,665.4 | 1,911.0 | ||||||
|
Long-term
debt and other obligations
|
1,309.5 | 1,273.4 | ||||||
|
Long-term
deferred revenue
|
821.0 | 779.5 | ||||||
| 3,795.9 | 3,963.9 | |||||||
|
Stockholders'
equity
|
2,849.9 | 2,530.5 | ||||||
| $ | 6,645.8 | $ | 6,494.4 | |||||
|
NETAPP,
INC.
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
|
(In
millions, except net income per share amounts)
|
||||||||
|
(Unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
|
July
30, 2010
|
July
31, 2009
|
|||||||
|
Revenues:
|
||||||||
|
Product
|
$ | 720.8 | $ | 478.2 | ||||
|
Software
entitlements and maintenance
|
174.7 | 165.3 | ||||||
|
Service
|
242.3 | 194.4 | ||||||
|
Net
revenues
|
1,137.8 | 837.9 | ||||||
|
Cost
of revenues:
|
||||||||
|
Cost
of product
|
307.7 | 212.5 | ||||||
|
Cost
of software entitlements and maintenance
|
3.4 | 3.1 | ||||||
|
Cost
of service
|
102.3 | 99.8 | ||||||
|
Total
cost of revenues
|
413.4 | 315.4 | ||||||
|
Gross
profit
|
724.4 | 522.5 | ||||||
|
Operating
expenses:
|
||||||||
|
Sales
and marketing
|
354.2 | 301.4 | ||||||
|
Research
and development
|
149.5 | 130.3 | ||||||
|
General
and administrative
|
56.2 | 59.6 | ||||||
|
Restructuring
and other charges
|
- | 1.5 | ||||||
|
Acquisition
related (income) expense, net
|
0.3 | (41.1 | ) | |||||
|
Total
operating expenses
|
560.2 | 451.7 | ||||||
|
Income
from operations
|
164.2 | 70.8 | ||||||
|
Other
income (expenses), net
|
||||||||
|
Interest
income
|
9.8 | 8.6 | ||||||
|
Interest
expense
|
(18.6 | ) | (19.2 | ) | ||||
|
Other
income (expenses), net
|
2.2 | (1.0 | ) | |||||
|
Total
other expenses, net
|
(6.6 | ) | (11.6 | ) | ||||
|
Income
before income taxes
|
157.6 | 59.2 | ||||||
|
Provision
for income taxes
|
15.8 | 7.5 | ||||||
|
Net
income
|
$ | 141.8 | $ | 51.7 | ||||
|
Net
income per share:
|
||||||||
|
Basic
|
$ | 0.40 | $ | 0.15 | ||||
|
Diluted
|
$ | 0.38 | $ | 0.15 | ||||
|
Shares
used in net income per share calculations:
|
||||||||
|
Basic
|
352.4 | 334.5 | ||||||
|
Diluted
|
374.3 | 338.9 | ||||||
|
NETAPP,
INC.
|
||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
|
||||||||
|
(In
millions)
|
||||||||
|
(Unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
|
July
30, 2010
|
July
31, 2009
|
|||||||
|
Cash
Flows from Operating Activities:
|
||||||||
| Net income | $ | 141.8 | $ | 51.7 | ||||
|
Adjustments
to reconcile net income to net cash provided
|
||||||||
|
by
operating activities:
|
||||||||
|
Depreciation
and amortization
|
40.7 | 43.0 | ||||||
|
Stock-based
compensation
|
44.3 | 52.2 | ||||||
|
Accretion
of discount and issue costs on notes
|
12.9 | 13.1 | ||||||
|
Unrealized
losses on derivative activities
|
10.8 | - | ||||||
|
Tax
benefit from stock-based compensation
|
(12.0 | ) | 19.0 | |||||
|
Other,
net
|
11.1 | (2.0 | ) | |||||
|
Changes
in assets and liabilities:
|
||||||||
|
Accounts
receivable
|
100.0 | 117.2 | ||||||
|
Inventories
|
22.5 | (0.4 | ) | |||||
|
Accounts
payable
|
(34.4 | ) | (14.5 | ) | ||||
|
Accrued
compensation and other current liabilities
|
(221.6 | ) | (230.9 | ) | ||||
|
Deferred
revenue
|
33.2 | (9.8 | ) | |||||
|
Changes
in other operating assets and liabilities, net
|
28.0 | (0.4 | ) | |||||
|
Net
cash provided by operating activities
|
177.3 | 38.2 | ||||||
|
Cash
Flows from Investing Activities:
|
||||||||
|
Purchases
and redemptions of investments, net
|
(293.9 | ) | 233.6 | |||||
|
Purchases
of property and equipment
|
(40.2 | ) | (24.7 | ) | ||||
|
Acquisition
of business, net of cash acquired
|
(74.9 | ) | - | |||||
|
Other
investing activities, net
|
0.1 | (0.4 | ) | |||||
|
Net
cash provided by (used in) investing activities
|
(408.9 | ) | 208.5 | |||||
|
Cash
Flows from Financing Activities:
|
||||||||
|
Issuance
of common stock
|
139.9 | 33.3 | ||||||
|
Net
cash provided by financing activities
|
139.9 | 33.3 | ||||||
|
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
(1.3 | ) | 10.2 | |||||
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(93.0 | ) | 290.2 | |||||
|
Cash
and Cash Equivalents:
|
||||||||
|
Beginning
of period
|
1,705.0 | 1,494.2 | ||||||
|
End
of period
|
$ | 1,612.0 | $ | 1,784.4 | ||||
|
NETAPP,
INC.
|
||||||||||||||||||||||||||||
|
SUPPLEMENTAL
INFORMATION
|
||||||||||||||||||||||||||||
|
(In
millions)
|
||||||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||||||
|
Three
Months Ended July 30, 2010
|
||||||||||||||||||||||||||||
|
Amortization
of Intangible Assets
|
Stock-based
Compensation Expenses
|
Restructuring
and Other Charges
|
Acquisition
related (income) expense, net
|
Non-Cash
Interest Expense
|
Gain
on Investments
|
Total
|
||||||||||||||||||||||
|
Cost
of product revenues
|
$ | 4.4 | $ | 0.9 | $ | - | $ | - | $ | - | $ | - | $ | 5.3 | ||||||||||||||
|
Cost
of service revenues
|
- | 3.9 | - | - | - | - | 3.9 | |||||||||||||||||||||
|
Sales
and marketing expense
|
1.1 | 20.6 | - | - | - | - | 21.7 | |||||||||||||||||||||
|
Research
and development expense
|
- | 11.1 | - | - | - | - | 11.1 | |||||||||||||||||||||
|
General
and administrative expense
|
- | 7.8 | - | - | - | - | 7.8 | |||||||||||||||||||||
|
Acquisition
related (income) expense, net
|
- | - | - | 0.3 | - | - | 0.3 | |||||||||||||||||||||
|
Interest
expense
|
- | - | - | - | 12.9 | - | 12.9 | |||||||||||||||||||||
|
Other
income (expenses), net
|
- | - | - | - | - | (2.5 | ) | (2.5 | ) | |||||||||||||||||||
|
Effect
on income before income taxes
|
$ | 5.5 | $ | 44.3 | $ | - | $ | 0.3 | $ | 12.9 | $ | (2.5 | ) | $ | 60.5 | |||||||||||||
|
Three
Months Ended July 31, 2009
|
||||||||||||||||||||||||||||
|
Amortization
of Intangible Assets
|
Stock-based
Compensation Expenses
|
Restructuring
and Other Charges
|
Acquisition
related (income) expense, net
|
Non-Cash
Interest Expense
|
Gain
on Investments
|
Total
|
||||||||||||||||||||||
|
Cost
of product revenues
|
$ | 4.7 | $ | 1.2 | $ | - | $ | - | $ | - | $ | - | $ | 5.9 | ||||||||||||||
|
Cost
of service revenues
|
- | 4.5 | - | - | - | - | 4.5 | |||||||||||||||||||||
|
Sales
and marketing expense
|
0.8 | 24.0 | - | - | - | - | 24.8 | |||||||||||||||||||||
|
Research
and development expense
|
- | 12.7 | - | - | - | - | 12.7 | |||||||||||||||||||||
|
General
and administrative expense
|
- | 9.8 | - | - | - | - | 9.8 | |||||||||||||||||||||
|
Restructuring
and other charges
|
- | - | 1.5 | - | - | - | 1.5 | |||||||||||||||||||||
|
Acquisition
related (income) expense, net
|
- | - | - | (41.1 | ) | - | - | (41.1 | ) | |||||||||||||||||||
|
Interest
expense
|
- | - | - | - | 13.1 | - | 13.1 | |||||||||||||||||||||
|
Effect
on income before income taxes
|
$ | 5.5 | $ | 52.2 | $ | 1.5 | $ | (41.1 | ) | $ | 13.1 | $ | - | $ | 31.2 | |||||||||||||
|
NETAPP,
INC.
|
||||||||
|
RECONCILIATION
OF NON-GAAP AND GAAP
|
||||||||
|
IN
THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
|
(In
millions, except net income per share amounts)
|
||||||||
|
(Unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
|
July
30, 2010
|
July
31, 2009
|
|||||||
|
SUMMARY RECONCILIATION OF NET
INCOME
|
||||||||
|
NET
INCOME
|
$ | 141.8 | $ | 51.7 | ||||
|
Adjustments:
|
||||||||
|
Amortization
of intangible assets
|
5.5 | 5.5 | ||||||
|
Stock-based
compensation expenses
|
44.3 | 52.2 | ||||||
|
Restructuring
and other charges
|
- | 1.5 | ||||||
|
Acquisition
related (income) expense, net
|
0.3 | (41.1 | ) | |||||
|
Non-cash
interest expense
|
12.9 | 13.1 | ||||||
|
Gain
on investments
|
(2.5 | ) | - | |||||
|
Income
tax effect of non-GAAP adjustments
|
(19.7 | ) | (7.0 | ) | ||||
|
NON-GAAP
NET INCOME
|
$ | 182.6 | $ | 75.9 | ||||
|
NET
INCOME PER SHARE
|
$ | 0.379 | $ | 0.152 | ||||
|
Adjustments:
|
||||||||
|
Amortization
of intangible assets
|
0.015 | 0.016 | ||||||
|
Stock-based
compensation expenses
|
0.118 | 0.154 | ||||||
|
Restructuring
and other charges
|
- | 0.004 | ||||||
|
Acquisition
related (income) expense, net
|
0.001 | (0.121 | ) | |||||
|
Non-cash
interest expense
|
0.034 | 0.039 | ||||||
|
Gain
on investments
|
(0.007 | ) | - | |||||
|
Income
tax effect of non-GAAP adjustments
|
(0.053 | ) | (0.020 | ) | ||||
|
NON-GAAP
NET INCOME PER SHARE
|
$ | 0.487 | $ | 0.224 | ||||
|
NETAPP,
INC.
|
||||
|
RECONCILIATION
OF NON GAAP GUIDANCE TO GAAP
|
||||
|
EXPRESSED
AS EARNINGS PER SHARE
|
||||
|
SECOND
QUARTER 2011
|
||||
|
(Unaudited)
|
||||
|
Second
Quarter
|
||||
|
2011
|
||||
|
Non-GAAP
Guidance
|
$0.47 - $0.50 | |||
|
Adjustments
of Specific Items to
|
||||
|
Net
Income Per Share for the Second
|
||||
|
Quarter
2011:
|
||||
|
Stock
based compensation expense
|
(0.12 | ) | ||
|
Amortization
of intangible assets
|
(0.01 | ) | ||
|
Non
cash interest expense
|
(0.03 | ) | ||
|
Income
tax effect
|
0.04 | |||
|
Total
Adjustments
|
(0.12 | ) | ||
|
GAAP
Guidance -Net Income Per Share
|
$0.35 - $0.38 | |||
Exhibit 99.2
|
NetApp
Q1 FY2011 Earnings Results
Supplemental
Commentary
August 18, 2010
|
This
supplemental commentary is being provided concurrently with our earnings press
release to allow for additional time for review and analysis prior to
commencement of the company’s earnings call. These prepared remarks will not be
read during the live call. The call will focus on strategic commentary from the
CEO and CFO, followed by a question and answer session.
Safe
Harbor Statement
These
prepared remarks contain forward-looking statements and projections that involve
risk and uncertainty, including the statements under the Q2 FY11 outlook section
regarding our forecasted financial performance and share count for the second
quarter of fiscal 2011. Actual results may differ materially from our statements
or projections. Factors that could cause actual results to differ from our
projections include, but are not limited to, customer demand for our products
and services; our ability to increase revenue and manage our operating costs;
increased competition risks associated with the anticipated growth in the
networked storage market; general economic and market conditions; our ability to
deliver new product architectures and enterprise service offerings; our ability
to design products and services that compete effectively from a price and
performance perspective; our reliance on a limited number of suppliers; and our
ability to accurately forecast demand for our products. Other equally important
factors are detailed in our accompanying press release as well as in our 10-K
and 10-Q reports on file with the SEC and also available on our website, all of
which are incorporated by reference into today’s commentary.
All
numbers herein are stated in accordance with U.S. Generally Accepted Accounting
Principles (GAAP) unless indicated otherwise. To see the reconciling items
between our non-GAAP and GAAP financial information, refer to the table at the
end of this document, as well as in our press release and on our
website.
Q1
Fiscal 2011 Overview
Fiscal
year 2011 is off to a good start for NetApp. With a 51% year over year increase
in product revenue and higher than expected profitability, this is the strongest
first quarter in our history. The strength of our business is evident in many
aspects, with year over year increases in revenue across all geographies,
greater contributions from channel partners and strong cash
generation.
Revenue
|
Q1
FY11 Revenue
|
%
of Q1 FY11 Revenue
|
Sequential Growth1
|
Year/Year
Growth
|
|
|
Product
Revenue
|
$721M
|
63%
|
(5%)
|
51%
|
|
Software
Entitlements
&
Maintenance
|
$175M
|
15%
|
0%
|
6%
|
|
Service
|
$242M
|
21%
|
1%
|
25%
|
|
Net
Revenue
|
$1,138M
|
(3%)
|
36%
|
Net
revenue for the first quarter was $1.14 billion, a decrease of 3% sequentially
and an increase of 36% year over year. Foreign currency effects2 decreased our sequential results by
approximately one percentage point and had an immaterial effect on our year over
year revenue growth rate.
Product
revenue declined 5% sequentially to $721 million and increased 51% year over
year. This is the second consecutive quarter of at least 50% year over year
product revenue growth. The product component of revenue decreased slightly as
part of the overall revenue mix to 63% of total revenue, from 65% last
quarter.
1
Sequential growth calculation based upon Q4FY10 results, which can be found at
www.investor.netapp.com
2
Foreign currency effects represent the translation effect of changes in average
foreign exchange rates between the current period and the comparative prior
periods (or, in the case of deferred revenue, the exchange rate in effect when
the transaction was invoiced), less current period actual net gains or losses on
revenue hedging activities.
Revenue
from software entitlements and maintenance (SEM), which is a deferred revenue
element and is recognized over the related contract period, was $175 million or
15% of total revenue. SEM revenue was flat
sequentially and increased 6% year over year.
Service
revenue was $242 million, an increase of 1% sequentially and 25% year over
year. Service
revenue was up slightly from last quarter to 21% of total revenue and is
comprised mainly of hardware maintenance support contracts and professional
services.
|
·
|
Revenue
from hardware maintenance support contracts, which is also a deferred
revenue element, comprised approximately 65% of our services revenue this
quarter, and increased 6% sequentially and 23% year over
year.
|
|
·
|
Professional
services were down 5% sequentially, and up 29% year over
year.
|
Gross
Margin
|
Q1
FY11
|
Q4
FY10
|
Q1
FY10
|
|
|
Non-GAAP
Gross Margin
|
64.5%
|
64.6%
|
63.6%
|
|
Product
|
58.1%
|
59.7%
|
56.8%
|
|
S/W
Entitlements & Maintenance
|
98.1%
|
98.2%
|
98.1%
|
|
Services
|
59.4%
|
55.8%
|
51.0%
|
On a
non-GAAP basis, consolidated gross margin was 64.5% of revenue for the first
quarter, a slight decrease from the prior quarter with lower product gross
margins partially offset by higher service gross margins.
Operating
Expenses
|
Q1
FY11
|
Q4
FY10
|
Q1
FY10
|
|
|
Non-GAAP
Operating Expenses
|
$519M
|
$541M
|
$444M
|
Non-GAAP
operating expenses were $519 million, a decrease of 4% sequentially and an
increase of 17% year over year. Q1 operating expenses remained at 46% of
revenue, similar to Q4.
In
keeping with our plan to grow our sales and engineering staff worldwide, our
headcount increased by 640 people from Q4, ending Q1 with 8,973 employees.
Approximately 200 of the increase came from a combination of employees from the
Bycast acquisition and new college hires.
On a GAAP
basis, Q1 operating expenses include stock compensation expense and
amortization of intangible assets. Stock compensation was $40 million in Q1
compared to $33 million in Q4, due in large part to higher valuation of employee
equity awards.
Income
from Operations & Other Income
|
Q1
FY11
|
Q4
FY10
|
Q1
FY10
|
|
|
Non-GAAP
Income from Operations
|
$214M
|
$217M
|
$89M
|
|
%
of Revenue
|
18.9%
|
18.5%
|
10.6%
|
|
Non-GAAP
Other Income (Expense), Net
|
$4M
|
$3M
|
$1M
|
|
Non-GAAP
Income Before Income Taxes
|
$218M
|
$220M
|
$90M
|
|
Non-GAAP
Effective Tax Rate
|
16.3%
|
16.6%
|
16.0%
|
|
Non-GAAP
Net Income
|
$183M
|
$183M
|
$76M
|
|
Non-GAAP
Net Income per Share, Diluted
|
$0.49
|
$0.50
|
$0.22
|
Non-GAAP
income from operations decreased 1% sequentially and increased 141% year over
year to $214 million, or 18.9% of revenue.
Non-GAAP
other income and expense, net was $4 million. GAAP other income and expense, net
includes approximately $13 million of non-cash interest expense associated with
our convertible debt.
Non-GAAP
income before income taxes was $218 million or 19.2% of revenue, up from 18.7%
in Q4. Our non-GAAP provision for income taxes was $36 million, similar to
Q4 levels, and our effective tax rate was 16.3%. Diluted share count was 374
million shares, approximately 4 million shares higher than we had projected, due
primarily to significantly more option exercises in the quarter than
expected.
Non-GAAP
net income totaled $183 million, or $0.49 per share. GAAP net income totaled
$142 million, or $0.38 per share.
Select
Balance Sheet Items
|
Q1
FY11
|
Q4
FY10
|
Q1FY10
|
|
|
Cash,
Cash Equivalents & Investments
|
$3.9B
|
$3.7B
|
$2.7B
|
|
Deferred
Revenue
|
$1.9B
|
$1.9B
|
$1.7B
|
|
DSO
(days)3
|
30
|
37
|
39
|
|
Inventory
Turns4
|
17.9
|
14.7
|
19.9
|
During
Q1, our cash and short term investments grew by $197 million, ending the quarter
at $3.9 billion, up 5% sequentially and 47% year over year. Of this cash
balance, 55% was held in the United States. The total deferred revenue balance
of $1.9 billion increased 2% sequentially and 14% year over year.
Accounts
receivable days sales outstanding (DSO) declined in the first quarter to 30 days
compared to 37 days in fourth quarter of fiscal year 2010. Inventory turns
improved from 14.7 turns in Q4 to 17.9 turns in Q1 as component supplies became
more in balance with demand.
Select
Cash Flow Statement Items
|
Q1
FY11
|
Q4
FY10
|
Q1
FY10
|
|
|
Net
Cash Provided by Operating Activities
|
$177M
|
$475M
|
$38M
|
|
Purchases
of Property and Equipment
|
$40M
|
$38M
|
$25M
|
|
Free
Cash Flow5
|
$137M
|
$436M
|
$14M
|
|
Free
Cash Flow as % of Total Revenue
|
12%
|
37%
|
2%
|
Net cash
provided by operating activities was $177 million, a decrease of 63% from Q4 and
an increase of 364% year over year. The decrease in cash provided by operations
is mainly attributable to payouts to our employees related to last year’s
variable and incentive compensation plans. Capital expenditures were $40
million, an increase of $2 million from Q4. Free cash flow totaled $137 million,
down 69% from Q4 but up 916% year over year. Q1 free cash flow represented 12%
of total revenue.
3
Days sales outstanding are defined as accounts receivable net divided by net
revenue, multiplied by number of days in the quarter.
5 Free cash
flow is defined as net cash provided by operating activities less cash purchases
of property and equipment.
Q2
FY11 Outlook
|
Q2
FY11 Outlook |
|
|
Revenue
|
$1,160M
– $1,210M
|
|
Share
Count
|
Approximately
380M
|
|
Non-GAAP
Net Income per Share, Diluted
|
$0.47
- $0.50
|
|
GAAP
Net Income per Share, Diluted
|
$0.35
- $0.38
|
This
forecast is based on current business expectations and current market
conditions.
Other
Business Metrics
Geographic
Mix
|
%
of Q1 FY11 Revenue
|
Q1
FY11 Revenue
|
Year/Year
Growth
|
|
|
Americas
|
56%
|
$634M
|
31%
|
|
U.S.
Public Sector
|
14%
|
$161M
|
45%
|
|
EMEA
|
34%
|
$383M
|
44%
|
|
AsiaPacific
|
11%
|
$121M
|
37%
|
The
Americas generated $634 million in revenue, down 1% sequentially and up 31% year
over year, contributing 56% of total revenue. The US Public Sector, which is
included in the Americas number, accounted for 14% of total revenue, an increase
of 21% from Q4 and 45% year over year.
EMEA
revenue declined 9% sequentially but increased 44% year over year to $383
million, comprising 34% of total revenue. AsiaPacific revenue was $121
million, an increase of 6% sequentially and 37% year over year, for a total
of 11% of revenue this quarter.
Channel
Mix
|
%
of Q1 FY11 Revenue
|
%
of Q4 FY10 Revenue
|
%
of Q1 FY10 Revenue
|
|
|
Direct
|
31%
|
29%
|
31%
|
|
Indirect
|
69%
|
71%
|
69%
|
|
Arrow
|
16%
|
16%
|
11%
|
|
Avnet
|
11%
|
11%
|
11%
|
|
IBM
|
4%
|
3%
|
5%
|
Direct
revenue was 31% of total revenue in Q1, increasing 5% sequentially and 37% year
over year. Our indirect channel accounted for 69% of total revenue in Q1.
Indirect revenues decreased 6% sequentially, but increased 35% over Q1 last
year. Within the indirect channel, Arrow was 16% of Q1 revenue and Avnet was 11%
of Q1 revenue; similar to Q4 percentages. Revenue from our IBM OEM partnership
was 4% of revenue in Q1, up from 3% in Q4.
Platform
Trends
Total
system units shipped grew 1% sequentially this quarter and increased 78% year
over year. Unit growth was driven primarily by small systems, with a 12%
sequential increase and 107% increase from Q1 last year. Units of large systems
were flat sequentially but grew 102% year over year. Units of medium-sized
systems declined 16% in the first quarter although they grew 37% year over
year.
Following
robust shipments in Q4, units of the V-series platform declined 38% in Q1 and
increased 42% year over year.
Capacity
Trends
| ( in Petabytes) |
Q1
FY10
|
Q2
FY10
|
Q3
FY10
|
Q4
FY10
|
Q1
FY11
|
|
Fibre
Channel
|
69
|
79
|
88
|
99
|
79
|
|
ATA
|
175
|
173
|
209
|
298
|
323
|
|
SAS
|
7
|
8
|
29
|
49
|
68
|
|
Total
|
251
|
260
|
326
|
446
|
470
|
Total
petabytes shipped grew 6% sequentially and 88% year over year to 470 petabytes.
ATA and SAS drives continue to increase in the mix.
Additional
Information
For more
detailed information about our solutions, corporate strategy and our
go-to-market initiatives, please visit our website at
www.netapp.com.
NetApp
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 ongoing operational performance. Non-GAAP net income
excludes the amortization of intangible assets, stock-based compensation
expenses, acquisition related income and expenses, restructuring and other
charges, asset impairments, non-cash interest expense associated with our
convertible debt, net losses or gains on investments, and our GAAP tax
provision, but includes a non-GAAP tax provision based upon our projected annual
non-GAAP effective tax rate for the first three quarters of the fiscal year and
an actual non-GAAP tax provision for the fourth quarter of the fiscal year. 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 are used to: (1) measure company performance against
historical results, (2) facilitate comparisons to our competitors’ operating
results, and (3) allow greater transparency with respect to information used by
management in financial and operational decision making. In addition, these
non-GAAP financial measures are used to measure company performance for the
purposes of determining employee incentive plan compensation. 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.
GAAP to NON-GAAP
Reconciliation
|
NETAPP,
INC.
|
||||||||||||
|
RECONCILIATION
OF NON-GAAP AND GAAP
|
||||||||||||
|
IN
THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||
|
(In
millions, except net income per share amounts)
|
||||||||||||
|
(Unaudited)
|
||||||||||||
|
Three
Months Ended
|
||||||||||||
|
July
30, 2010
|
July
31, 2009
|
April
30, 2010
|
||||||||||
|
SUMMARY RECONCILIATION OF NET
INCOME
|
||||||||||||
|
NET
INCOME
|
$ | 141.8 | $ | 51.7 | $ | 145.1 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
5.5 | 5.5 | 4.9 | |||||||||
|
Stock-based
compensation expenses
|
44.3 | 52.2 | 37.8 | |||||||||
|
Restructuring
and other charges
|
- | 1.5 | (0.2 | ) | ||||||||
|
Acquisitions
related (income) expense, net
|
0.3 | (41.1 | ) | 1.2 | ||||||||
|
Non-cash
interest expense
|
12.9 | 13.1 | 13.1 | |||||||||
|
Gain
on investments
|
(2.5 | ) | - | (1.2 | ) | |||||||
|
Income
tax effect of non-GAAP adjustments
|
(19.7 | ) | (7.0 | ) | (17.6 | ) | ||||||
|
NON-GAAP
NET INCOME
|
$ | 182.6 | $ | 75.9 | $ | 183.1 | ||||||
|
DETAILED RECONCILIATION OF SPECIFIC
ITEMS:
|
||||||||||||
|
COST
OF REVENUES
|
$ | 413.4 | $ | 315.4 | $ | 423.3 | ||||||
|
Adjustment:
|
||||||||||||
|
Amortization
of intangible assets
|
(4.4 | ) | (4.7 | ) | (4.1 | ) | ||||||
|
Stock-based
compensation expenses
|
(4.8 | ) | (5.7 | ) | (4.8 | ) | ||||||
|
NON-GAAP
COST OF REVENUES
|
$ | 404.2 | $ | 305.0 | $ | 414.4 | ||||||
|
COST
OF PRODUCT REVENUES
|
$ | 307.7 | $ | 212.5 | $ | 310.9 | ||||||
|
Adjustment:
|
||||||||||||
|
Amortization
of intangible assets
|
(4.4 | ) | (4.7 | ) | (4.1 | ) | ||||||
|
Stock-based
compensation expenses
|
(0.9 | ) | (1.2 | ) | (1.3 | ) | ||||||
|
NON-GAAP
COST OF PRODUCT REVENUES
|
$ | 302.4 | $ | 206.6 | $ | 305.5 | ||||||
|
COST
OF SERVICE REVENUES
|
$ | 102.3 | $ | 99.8 | $ | 109.3 | ||||||
|
Adjustment:
|
||||||||||||
|
Stock-based
compensation expenses
|
(3.9 | ) | (4.5 | ) | (3.5 | ) | ||||||
|
NON-GAAP
COST OF SERVICE REVENUES
|
$ | 98.4 | $ | 95.3 | $ | 105.8 | ||||||
|
GROSS
PROFIT
|
$ | 724.4 | $ | 522.5 | $ | 748.5 | ||||||
|
Adjustment:
|
||||||||||||
|
Amortization
of intangible assets
|
4.4 | 4.7 | 4.1 | |||||||||
|
Stock-based
compensation expenses
|
4.8 | 5.7 | 4.8 | |||||||||
|
NON-GAAP
GROSS PROFIT
|
$ | 733.6 | $ | 532.9 | $ | 757.4 | ||||||
|
SALES
AND MARKETING EXPENSES
|
$ | 354.2 | $ | 301.4 | $ | 366.7 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
(1.1 | ) | (0.8 | ) | (0.8 | ) | ||||||
|
Stock-based
compensation expenses
|
(20.6 | ) | (24.0 | ) | (16.9 | ) | ||||||
|
NON-GAAP
SALES AND MARKETING EXPENSES
|
$ | 332.5 | $ | 276.6 | $ | 349.0 | ||||||
|
RESEARCH
AND DEVELOPMENT EXPENSES
|
$ | 149.5 | $ | 130.3 | $ | 143.7 | ||||||
|
Adjustments:
|
||||||||||||
|
Stock-based
compensation expenses
|
(11.1 | ) | (12.7 | ) | (9.0 | ) | ||||||
|
NON-GAAP
RESEARCH AND DEVELOPMENT EXPENSES
|
$ | 138.4 | $ | 117.6 | $ | 134.7 | ||||||
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
$ | 56.2 | $ | 59.6 | $ | 64.2 | ||||||
|
Adjustments:
|
||||||||||||
|
Stock-based
compensation expenses
|
(7.8 | ) | (9.8 | ) | (7.1 | ) | ||||||
|
NON-GAAP
GENERAL AND ADMINISTRATIVE EXPENSES
|
$ | 48.4 | $ | 49.8 | $ | 57.1 | ||||||
|
OPERATING
EXPENSES
|
$ | 560.2 | $ | 451.7 | $ | 575.6 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
(1.1 | ) | (0.8 | ) | (0.8 | ) | ||||||
|
Stock-based
compensation expenses
|
(39.5 | ) | (46.5 | ) | (33.0 | ) | ||||||
|
Restructuring
and other charges
|
- | (1.5 | ) | 0.2 | ||||||||
|
Acquisitions
related (income) expense, net
|
(0.3 | ) | 41.1 | (1.2 | ) | |||||||
|
NON-GAAP
OPERATING EXPENSES
|
$ | 519.3 | $ | 444.0 | $ | 540.8 | ||||||
|
INCOME
FROM OPERATIONS
|
$ | 164.2 | $ | 70.8 | $ | 172.9 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
5.5 | 5.5 | 4.9 | |||||||||
|
Stock-based
compensation expenses
|
44.3 | 52.2 | 37.8 | |||||||||
|
Restructuring
and other charges
|
- | 1.5 | (0.2 | ) | ||||||||
|
Acquisitions
related (income) expense, net
|
0.3 | (41.1 | ) | 1.2 | ||||||||
|
NON-GAAP
INCOME FROM OPERATIONS
|
$ | 214.3 | $ | 88.9 | $ | 216.6 | ||||||
|
TOTAL
OTHER INCOME (EXPENSES), NET
|
$ | (6.6 | ) | $ | (11.6 | ) | $ | (9.0 | ) | |||
|
Adjustments:
|
||||||||||||
|
Non-cash
interest expense
|
12.9 | 13.1 | 13.1 | |||||||||
|
Gain
on investments
|
(2.5 | ) | - | (1.2 | ) | |||||||
|
NON-GAAP
TOTAL OTHER INCOME (EXPENSES), NET
|
$ | 3.8 | $ | 1.5 | $ | 2.9 | ||||||
|
INCOME
BEFORE INCOME TAXES
|
$ | 157.6 | $ | 59.2 | $ | 163.9 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
5.5 | 5.5 | 4.9 | |||||||||
|
Stock-based
compensation expenses
|
44.3 | 52.2 | 37.8 | |||||||||
|
Restructuring
and other charges
|
- | 1.5 | (0.2 | ) | ||||||||
|
Acquisitions
related (income) expense, net
|
0.3 | (41.1 | ) | 1.2 | ||||||||
|
Non-cash
interest expense
|
12.9 | 13.1 | 13.1 | |||||||||
|
Gain
on investments
|
(2.5 | ) | - | (1.2 | ) | |||||||
|
NON-GAAP
INCOME BEFORE INCOME TAXES
|
$ | 218.1 | $ | 90.4 | $ | 219.5 | ||||||
|
PROVISION
FOR INCOME TAXES
|
$ | 15.8 | $ | 7.5 | $ | 18.8 | ||||||
|
Adjustments:
|
||||||||||||
|
Income
tax effect of non-GAAP adjustments
|
19.7 | 7.0 | 17.6 | |||||||||
|
NON-GAAP
PROVISION FOR INCOME TAXES
|
$ | 35.5 | $ | 14.5 | $ | 36.4 | ||||||
|
NET
INCOME PER SHARE
|
$ | 0.379 | $ | 0.152 | $ | 0.398 | ||||||
|
Adjustments:
|
||||||||||||
|
Amortization
of intangible assets
|
0.015 | 0.016 | 0.013 | |||||||||
|
Stock-based
compensation expenses
|
0.118 | 0.154 | 0.104 | |||||||||
|
Restructuring
and other charges
|
- | 0.004 | (0.001 | ) | ||||||||
|
Acquisitions
related (income) expense, net
|
0.001 | (0.121 | ) | 0.003 | ||||||||
|
Non-cash
interest expense
|
0.034 | 0.039 | 0.036 | |||||||||
|
Gain
on investments
|
(0.007 | ) | - | (0.003 | ) | |||||||
|
Income
tax effect of non-GAAP adjustments
|
(0.053 | ) | (0.020 | ) | (0.048 | ) | ||||||
|
NON-GAAP
NET INCOME PER SHARE
|
$ | 0.487 | $ | 0.224 | $ | 0.502 | ||||||
Reg
G Schedule
|
NETAPP,
INC.
|
|||
|
RECONCILIATION
OF NON-GAAP GUIDANCE TO GAAP
|
|||
|
EXPRESSED
AS EARNINGS PER SHARE
|
|||
|
SECOND
QUARTER FISCAL YEAR 2011
|
|||
|
(Unaudited)
|
|||
|
Second
Quarter
|
|||
|
2011
|
|||
|
Non-GAAP
Guidance
|
$0.47
- $0.50
|
||
|
Adjustments
of Specific Items to
|
|||
|
Net
Income Per Share for the Second
|
|||
|
Quarter
2011:
|
|||
|
Stock
based compensation expense
|
(0.12)
|
||
|
Amortization
of intangible assets
|
(0.01)
|
||
|
Non
cash interest expense
|
(0.03)
|
||
|
Income
tax effect
|
0.04
|
||
|
Total
Adjustments
|
(0.12)
|
||
|
GAAP
Guidance -Net Income Per Share
|
$0.35
- $0.38
|
||