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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 16, 2005
-----------------
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 16, 2005, Network Appliance, Inc. issued a press release
announcing its earnings for the second 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 November 16, 2005 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 16, 2005 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 16, 2005.
================================================================================
Exhibit 99.1
Network Appliance Announces Results
for Second Quarter Fiscal Year 2006; Achieves 29% Year-over-Year
Revenue Growth and Record Operating Income
SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 16, 2005--Network
Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked
storage solutions, today reported results for the second quarter of
fiscal year 2006. Revenues for the second fiscal quarter were $483.1
million, an increase of 29% compared to revenues of $375.2 million for
the same period a year ago and an increase of 8% compared to $448.4
million in the prior quarter.
For the second fiscal quarter, GAAP net income was $70.7 million,
or $0.18 per share(1) compared to GAAP net income of $55.3 million, or
$0.15 per share for the same period in the prior year. Non-GAAP(2) net
income for the second fiscal quarter was $79.1 million, or $0.21 per
share, compared to non-GAAP net income of $58.4 million, or $0.16 per
share for the same period a year ago.
Revenues for the first six months of the current fiscal year
totaled $931.5 million, compared to revenues of $733.6 million for the
first six months of the prior fiscal year, an increase of 27% year
over year.
For the first six months of the current fiscal year, GAAP net
income increased 28% to $130.8 million, or $0.34 per share, compared
with GAAP net income of $102.2 million, or $0.27 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 $141.3 million, or $0.37 per
share, compared to non-GAAP net income of $108.2 million, or $0.29 per
share for the first six months of the prior fiscal year.
"We achieved significant growth in revenue and profitability
during the quarter driven by the compelling value proposition of our
new FAS3000 midrange product line," said Dan Warmenhoven, CEO of
Network Appliance. "NetApp provides 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."
Outlook
-- Network Appliance estimates that year-over-year growth in
revenue for the third quarter of fiscal year 2006 will be in
the range of 25% to 28%.
-- 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 in the
range of $0.20 to $0.21 per share.
-- For the full fiscal year, Network Appliance estimates that
revenues will finish in the range of 26% to 28% higher than
fiscal year 2005.
-- The company expects GAAP earnings per share for fiscal year
2006 to be between $0.70 and $0.73 per share. Network
Appliance estimates full-year non-GAAP earnings per share to
be in the range of $0.77 to $0.80 per share.
Quarterly Highlights
During the second quarter of fiscal year 2006, Network Appliance
solidified its leadership in data security with the completion of the
Decru acquisition; demonstrated growth in iSCSI, NAS, and SAN; and
expanded its operations in Research Triangle Park, North Carolina.
This quarter, NetApp maintained its position as market leader in
iSCSI, grew its capacity market share lead in NAS, and grew the
fastest among vendors tracked in the Fibre Channel (FC) SAN arena.
According to IDC's Worldwide Quarterly Disk Storage Systems Tracker Q2
2005, NetApp demonstrated continued leadership in its core NAS market,
with a 44.6% capacity share, up almost three (3) percentage points
over Q1. NetApp also maintained its strong lead in the iSCSI storage
market, with number-one share positions in capacity shipped (45.2%),
revenue (41.6%), and units (36%). NetApp was also the fastest growing
of the vendors tracked in iSCSI revenue, with a year-over-year growth
rate of 120.9%. Finally, of the vendors tracked, NetApp posted the
strongest year-over-year increase in FC SAN revenue, with a growth
rate of 130.2%.
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. Additional details are
available in IDC's Worldwide Quarterly Storage Software Tracker Q2
2005.
During the quarter, NetApp completed the acquisition of Decru, a
privately held company based in Redwood City, California. The
acquisition of Decru allows NetApp to offer the strongest security
option in the industry. Decru is a clear market leader in storage
security, helping enterprise and government customers address
requirements including regulatory compliance, privacy, secure
consolidation, and outsourcing. Decru DataFort(TM) appliances protect
the core of the storage network by seamlessly inserting a layer of
data encryption, authentication, key management, and
compartmentalization.
The first new products from Decru since the completion of the
acquisition occurred during the quarter with the unveiling of
next-generation storage security platforms. The new 10-port and SCSI
models of Decru DataFort appliances, DataFort FC1020 and DataFort
S115, deliver increased enterprise-class scalability native support
for legacy tape environments, simplified management, and greater
price/performance.
Also this quarter, NetApp announced that it plans to join IBM as
one of 10 founding members in a new open-source community, initially
working under the project name Aperi, to give customers more choices
for deploying open-standards-based storage infrastructure software.
The organization plans to develop a common storage software management
platform that will give customers greater flexibility in the way they
manage their storage environments.
Earlier this quarter, NetApp introduced NetApp(R) SnapManager(R)
for Oracle(R) Database environments, which leverages the unique power
of NetApp Snapshot(TM) technology and is a tightly integrated
disk-based backup and granular recovery solution for Oracle customers
using Oracle Automatic Storage Management technology. The solution
provides customers with continuous uptime for online backups. NetApp
SnapManager turns a multi-step backup and restore process into two
simple commands from a single host machine.
On the partner front, NetApp unveiled several new solution
enhancements and partner offerings with Bus-Tech Inc., Cisco, NeoPath
Networks, Network Intelligence, NuView, Oracle, SAP, and Symantec to
address a variety of data concerns, including management and
monitoring of enterprise grid environments, data replication,
enterprise compliance, ILM management, data analysis, file storage
management and utilization, mainframe tape replacement, storage
virtualization, and consolidation of remote office/branch office
(ROBO) data.
Also this quarter, NetApp and Kazeon, a leading provider of
information classification and management solutions for the
enterprise, signed an OEM, development, and marketing agreement to
integrate the intelligent data classification and search capabilities
of Kazeon's Information Server with Network Appliance(TM) storage
systems. Additionally, NetApp will resell Kazeon's Information Server
as part of a jointly marketed solution.
In corporate news, NetApp expanded to a new facility in Research
Triangle Park, North Carolina. The company currently employs 360
employees in the Kit Creek Road facility and operates a 24x7 global
service and support center in addition to a state-of-the-art data
center with a capacity of multiple petabytes.
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, November 16, 2005, 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) 299-7089 in the United States and (617)
801-9714 outside the United States. The passcode for both
numbers is 19259021.
-- 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 51378149. 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 third
quarter of fiscal 2006 and for all of fiscal 2006, statements
regarding the anticipated benefits our FAS3000 product line, Decru
network storage platforms, the Aperi open source community, our
partner offerings and solution enhancements and our OEM, development
and marketing agreement with Kazeon. 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.
NetApp and SnapManager are registered trademarks and Network
Appliance and Snapshot 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. Oracle is a registered trademark of Oracle
Corporation. 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. In addition, 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 28, April 30,
2005 2005
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $221,713 $193,542
Short-term investments 887,886 976,423
Accounts receivable, net 325,855 296,885
Inventories 44,111 38,983
Prepaid expenses and other 30,444 32,472
Deferred income taxes 35,558 37,584
----------- -----------
Total current assets 1,545,567 1,575,889
PROPERTY AND EQUIPMENT, net 465,587 418,749
GOODWILL 491,089 291,816
INTANGIBLE ASSETS, net 87,735 21,448
OTHER ASSETS 60,493 64,745
----------- -----------
$2,650,471 $2,372,647
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $93,370 $83,572
Income taxes payable 28,759 20,823
Accrued compensation and related
benefits 88,974 100,534
Other accrued liabilities 57,760 53,262
Deferred revenue 307,007 261,998
----------- -----------
Total current liabilities 575,870 520,189
LONG-TERM DEFERRED REVENUE 227,547 187,180
LONG-TERM OBLIGATIONS 3,441 4,474
----------- -----------
806,858 711,843
----------- -----------
STOCKHOLDERS' EQUITY 1,843,613 1,660,804
----------- -----------
$2,650,471 $2,372,647
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
2005 2004 2005 2004
--------- --------- --------- ---------
REVENUES:
Product revenue $424,776 $336,804 $819,405 $661,431
Service revenue 58,286 38,372 112,059 72,166
--------- --------- --------- ---------
Total revenues 483,062 375,176 931,464 733,597
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product revenue 141,104 111,728 274,858 225,943
Cost of service revenue 42,866 32,287 84,028 61,535
--------- --------- --------- ---------
Total cost of revenues 183,970 144,015 358,886 287,478
--------- --------- --------- ---------
GROSS MARGIN 299,092 231,161 572,578 446,119
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 138,218 109,109 275,517 212,420
Research and development 56,037 40,650 106,839 79,353
General and administrative 21,566 17,870 42,607 34,752
In process research and
development 5,000 - 5,000 -
Stock compensation 3,344 2,139 5,372 4,243
Restructuring charges 645 - (611) -
--------- --------- --------- ---------
Total operating
expenses 224,810 169,768 434,724 330,768
--------- --------- --------- ---------
INCOME FROM OPERATIONS 74,282 61,393 137,854 115,351
OTHER INCOME (EXPENSES), net:
Interest income 9,651 6,103 18,699 10,185
Other expenses, net (277) 90 (549) (822)
Net gain on investments 68 - 101 -
--------- --------- --------- ---------
Total other income,
net 9,442 6,193 18,251 9,363
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 83,724 67,586 156,105 124,714
PROVISION FOR INCOME TAXES 13,006 12,257 25,267 22,523
--------- --------- --------- ---------
NET INCOME $70,718 $55,329 $130,838 $102,191
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC $0.19 $0.15 $0.35 $0.29
========= ========= ========= =========
DILUTED $0.18 $0.15 $0.34 $0.27
========= ========= ========= =========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 371,002 357,787 369,220 357,265
========= ========= ========= =========
DILUTED 385,442 375,074 385,912 374,024
========= ========= ========= =========
NETWORK APPLIANCE, INC.
NON-GAAP (1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
-----------------------------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
2005 2004 2005 2004
--------- --------- --------- ---------
REVENUES:
Product revenue $424,776 $336,804 $819,405 $661,431
Service revenue 58,286 38,372 112,059 72,166
--------- --------- --------- ---------
Total revenues 483,062 375,176 931,464 733,597
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product revenue 138,158 110,870 270,804 224,227
Cost of service revenue 42,866 32,287 84,028 61,535
--------- --------- --------- ---------
Total cost of
revenues 181,024 143,157 354,832 285,762
--------- --------- --------- ---------
GROSS MARGIN 302,038 232,019 576,632 447,835
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 137,711 108,903 274,803 212,007
Research and
development 56,037 40,650 106,839 79,353
General and
administrative 21,167 16,601 40,852 32,215
--------- --------- --------- ---------
Total operating
expenses 214,915 166,154 422,494 323,575
--------- --------- --------- ---------
INCOME FROM OPERATIONS 87,123 65,865 154,138 124,260
OTHER INCOME (EXPENSES),
net 9,374 6,193 18,150 9,363
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 96,497 72,058 172,288 133,623
PROVISION FOR INCOME TAXES 17,370 13,691 31,012 25,388
--------- --------- --------- ---------
NET INCOME $79,127 $58,367 $141,276 $108,235
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC $0.21 $0.16 $0.38 $0.30
========= ========= ========= =========
DILUTED $0.21 $0.16 $0.37 $0.29
========= ========= ========= =========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 371,002 357,787 369,220 357,265
========= ========= ========= =========
DILUTED 385,442 375,074 385,912 374,024
========= ========= ========= =========
(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 Six Months Ended
------------------- -------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
2005 2004 2005 2004
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF NET
INCOME
- -----------------------------
NET INCOME $70,718 $55,329 $130,838 $102,191
Adjustments:
Amortization of intangible
assets 3,852 2,333 6,523 4,666
Stock compensation 3,344 2,139 5,372 4,243
In process research and
development 5,000 - 5,000 -
Restructuring charges 645 - (611) -
Net gain on investments (68) - (101) -
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes (2,437) - (2,437) -
Income tax effect (1,927) (1,434) (3,308) (2,865)
--------- --------- --------- ---------
NON-GAAP NET INCOME $79,127 $58,367 $141,276 $108,235
========= ========= ========= =========
DETAILED RECONCILIATION OF
SPECIFIC ITEMS:
- --------------------------
COST OF REVENUES $183,970 $144,015 $358,886 $287,478
Adjustment:
Amortization of intangible
assets (2,946) (858) (4,054) (1,716)
--------- --------- --------- ---------
NON-GAAP COST OF REVENUES $181,024 $143,157 $354,832 $285,762
========= ========= ========= =========
GROSS MARGIN $299,092 $231,161 $572,578 $446,119
Adjustment:
Amortization of intangible
assets 2,946 858 4,054 1,716
--------- --------- --------- ---------
NON-GAAP GROSS MARGIN $302,038 $232,019 $576,632 $447,835
========= ========= ========= =========
SALES AND MARKETING EXPENSES $138,218 $109,109 $275,517 $212,420
Adjustments:
Amortization of intangible
assets (507) (206) (714) (413)
--------- --------- --------- ---------
NON-GAAP SALES AND MARKETING
EXPENSES $137,711 $108,903 $274,803 $212,007
========= ========= ========= =========
GENERAL AND ADMINISTRATIVE
EXPENSES $21,566 $17,870 $42,607 $34,752
Adjustments:
Amortization of intangible
assets (399) (1,269) (1,755) (2,537)
--------- --------- --------- ---------
NON-GAAP GENERAL AND
ADMINISTRATIVE EXPENSES $21,167 $16,601 $40,852 $32,215
========= ========= ========= =========
OPERATING EXPENSES $224,810 $169,768 $434,724 $330,768
Adjustments:
Stock compensation (3,344) (2,139) (5,372) (4,243)
In process research and
development (5,000) - (5,000) -
Amortization of intangible
assets (906) (1,475) (2,469) (2,950)
Restructuring charges (645) - 611 -
--------- --------- --------- ---------
NON-GAAP OPERATING EXPENSES $214,915 $166,154 $422,494 $323,575
========= ========= ========= =========
INCOME FROM OPERATIONS $74,282 $61,393 $137,854 $115,351
Adjustments:
In process research and
development 5,000 - 5,000 -
Amortization of intangible
assets 3,852 2,333 6,523 4,666
Stock compensation 3,344 2,139 5,372 4,243
Restructuring charges 645 - (611) -
--------- --------- --------- ---------
NON-GAAP INCOME FROM
OPERATIONS $87,123 $65,865 $154,138 $124,260
========= ========= ========= =========
TOTAL OTHER INCOME (EXPENSES),
NET $9,442 $6,193 $18,251 $9,363
Adjustments:
Net gain on investments (68) - (101) -
--------- --------- --------- ---------
NON-GAAP TOTAL OTHER INCOME
(EXPENSES), NET $9,374 $6,193 $18,150 $9,363
========= ========= ========= =========
INCOME BEFORE INCOME TAXES $83,724 $67,586 $156,105 $124,714
Adjustments:
Amortization of intangible
assets 3,852 2,333 6,523 4,666
In process research and
development 5,000 - 5,000 -
Stock compensation 3,344 2,139 5,372 4,243
Restructuring charges 645 - (611) -
Net gain on investments (68) - (101) -
--------- --------- --------- ---------
NON-GAAP INCOME BEFORE INCOME
TAXES $96,497 $72,058 $172,288 $133,623
========= ========= ========= =========
PROVISION FOR INCOME TAXES $13,006 $12,257 $25,267 $22,523
Adjustments:
Discrete GAAP provision
matters recognized
ratably for non-GAAP
purposes 2,437 - 2,437 -
Income tax effect 1,927 1,434 3,308 2,865
--------- --------- --------- ---------
NON-GAAP PROVISION FOR INCOME
TAXES $17,370 $13,691 $31,012 $25,388
========= ========= ========= =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
2005 2004 2005 2004
--------- --------- --------- ---------
Cash Flows from Operating
Activities:
Net income $70,718 $55,329 $130,838 $102,191
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 15,328 13,410 30,084 26,652
In process research and
development 5,000 - 5,000 -
Amortization of
intangible assets 3,852 2,333 6,523 4,666
Amortization of patents 496 451 991 901
Stock compensation 3,344 2,139 5,372 4,243
Income tax benefit from
employee stock
transactions - 8,942 16,289 14,677
Net gain on investments (68) - (101) (29)
Net loss on disposal of
equipment 756 512 1,160 519
Allowance for doubtful
accounts 725 557 346 403
Deferred rent 321 136 369 226
Changes in assets and
liabilities:
Accounts receivable (86,163) (19,596) (28,271) (25,353)
Inventories (8,567) (2,662) (13,565) (5,993)
Prepaid expenses and
other assets 932 7,428 (3,065) 5,999
Accounts payable 12,463 5,746 9,772 4,671
Income taxes payable 14,496 (325) 7,855 (1,166)
Accrued compensation
and related
benefits 21,360 18,336 (11,058) 3,801
Other accrued
liabilities (1,577) (2,917) (2,879) (220)
Deferred revenue 49,059 30,013 85,775 60,355
------------------- --------- ---------
Net cash provided
by operating
activities 102,475 119,832 241,435 196,543
------------------- --------- ---------
Cash Flows from Investing
Activities:
Purchases of investments (111,010) (200,302) (333,797) (348,948)
Redemptions of investments 204,596 124,257 418,573 263,302
Increase in restricted
cash (562) - (2,066) -
Purchases of property and
equipment (29,474) (15,246) (63,012) (47,511)
Proceeds from sales of
investments 68 - 130 298
Purchases of equity
securities (6,675) - (6,950) -
Purchase of businesses,
net of cash acquired (41,916) - (53,747) -
--------- --------- --------- ---------
Net cash provided
by (used in) investing
activities 15,027 (91,291) (40,869) (132,859)
--------- --------- --------- ---------
Cash Flows from Financing
Activities:
Proceeds from sale of
common stock related to
employee stock
transactions 21,726 23,515 72,489 46,717
Tax withholding payments
reimbursed by restricted
stock (183) - (602) (43)
Repurchases of common
stock (149,021) (35,271) (244,564) (83,013)
--------- --------- --------- ---------
Net cash used in
financing
activities (127,478) (11,756) (172,677) (36,339)
--------- --------- --------- ---------
Effect of Exchange Rate
Changes on Cash 104 537 282 871
Net Increase (Decrease) in
Cash and Cash Equivalents (9,872) 17,322 28,171 28,216
Cash and Cash Equivalents:
Beginning of period 231,585 103,222 193,542 92,328
------------------- --------- ---------
End of period $221,713 $120,544 $221,713 $120,544
=================== ========= =========
Noncash Investing and
Financing Activities:
Conversion of evaluation
inventory to fixed assets $5,473 $2,022 $9,111 $4,751
Deferred stock
compensation, net of
reversals (445) 173 2,189 (373)
Acquisition of property and
equipment on account 2,564 - 6,125 -
Common stock issued and
options assumed for
acquired businesses 228,016 - 230,330 -
Supplemental cash flow
information: -
Income taxes paid 1,675 3,346 3,689 10,172
Income Tax Refund 2,264 9,156 2,332 10,572
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
THIRD QUARTER AND FISCAL YEAR 2006
(Unaudited)
Projected Year Projected Year
Over Year Third Over Year
Quarter Revenue Annual FY06
Growth Range Revenue Growth
Range
---------------------------------
25% 28% 26% 28%
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ADJUSTMENTS OF SPECIFIC ITEMS TO
EARNINGS PER SHARE FOR THE THIRD
QUARTER AND FISCAL YEAR 2006 ($):
COST OF REVENUES
Adjustment:
Amortization of intangible assets (0.010) (0.010) (0.031) (0.031)
OPERATING EXPENSES
Adjustments:
Stock compensation (0.011) (0.011) (0.036) (0.036)
Amortization of intangible assets (0.002) (0.002) (0.011) (0.011)
Restructuring charges (0.001) (0.001) 0.003 0.003
In-process research and
development - - (0.013) (0.013)
TOTAL OTHER INCOME (EXPENSES), NET
Adjustments:
Net (gain)/loss on investments 0.000 0.000
PROVISION FOR INCOME TAXES
Adjustments:
Income tax effect 0.002 0.001 0.017 0.017
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NET DECREASE IN EARNINGS PER SHARE (0.022) (0.022) (0.070) (0.070)
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CONTACT: Network Appliance, Inc.
Jodi Baumann, 408-822-3974 (Press)
jodi@netapp.com
Tara Calhoun, 408-822-6909 (Investor)
tara@netapp.com
Billie Fagenstrom, 408-822-6428 (Investor)
billief@netapp.com