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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 14, 2007
------------------------
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)
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:
[ ] 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 November 14, 2007, Network Appliance, Inc. issued a press release
announcing its earnings for the second quarter of fiscal year 2008. 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 Financial Statements and Exhibits
(d) Exhibits.
Network Appliance, Inc.'s November 14, 2007 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 14, 2007 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 14, 2007.
- --------------------------------------------------------------------------------
Exhibit 99.1
Network Appliance Announces Results for Second Quarter Fiscal Year 2008
SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 14, 2007--Network Appliance, Inc.
(NASDAQ:NTAP), the leader in advanced networked storage solutions, today
reported results for the second quarter of fiscal year 2008. Revenues for the
second fiscal quarter were $792.2 million, an increase of 21% compared to
revenues of $652.5 million for the same period a year ago and an increase of 15%
compared to $689.2 million in the prior quarter.
For the second fiscal quarter, GAAP net income was $83.8 million, or $0.23
per share(1) compared to GAAP net income of $86.9 million, or $0.22 per share
for the same period in the prior year. Non-GAAP(2) net income for the second
fiscal quarter was $116.4 million, or $0.32 per share, compared to non-GAAP net
income of $108.9 million, or $0.28 per share for the same period a year ago.
Revenues for the first six months of the current fiscal year totaled $1.48
billion, compared to revenues of $1.27 billion for the first six months of the
prior year, an increase of 16% year over year.
GAAP net income for the first six months of the current fiscal year totaled
$118.1 million, or $0.32 per share, compared to GAAP net income of $141.6
million, or $0.36 per share for the first six months of the prior fiscal year.
Non-GAAP net income for the first six months of the current fiscal year totaled
$192.4 million, or $0.52 per share, compared to non-GAAP net income of $205.4
million, or $0.53 per share for the first six months of the prior fiscal year.
"The NetApp team delivered an outstanding quarter, with a combination of
high revenue growth and good expense management," said Dan Warmenhoven, chief
executive officer. "The revenue growth was driven by strength in U. S. Federal
and much of Europe and Asia, and largely offset the continued sluggishness in
U.S. enterprise spending. Our innovative solutions provide customers with higher
utilization, simpler operations, and reduced costs, and those advantages enable
us to continue to gain share in a more constrained spending environment."
Outlook
-- Network Appliance ("NetApp") expects revenue for the third quarter of
fiscal year 2008 to be between $872 million and $883 million, with
year-over-year growth of approximately 20% to 21% and sequential
growth of approximately 10% to 12%.
-- Including the effect of SFAS123(R) and with current information and
assumptions, the company estimates that the third quarter fiscal year
2008 GAAP earnings per share will be approximately $0.23 to $0.24 per
share.
-- Network Appliance expects third quarter fiscal year 2008 non-GAAP
earnings per share to be approximately $0.33 to $0.34 per share.
Quarterly Highlights
During the second quarter of fiscal year 2008, NetApp brought the market a
new storage system for Midsize Enterprise customers with the unveiling of the
NetApp(R) FAS2000 series. The new solutions with deployment and auditing
services are designed to help simplify data management and maximize IT
investments for customers and offer them the ability to accomplish more with
fewer resources. The architectural advantage of all NetApp storage systems, and
the new FAS2000 series in particular, allows customers to readily consolidate
direct-attached storage (DAS) into a single networked solution and scale on
demand.
NetApp also introduced the new StoreVault(TM) S300, an all-in-one storage
solution for small and medium-sized businesses (SMB), with features and
capabilities at a cost that had previously been unavailable to customers in this
market segment. The StoreVault S500 was named a winner of the "Editors' Best
Awards" in the storage category by Penton Media's Windows(R) IT Pro and was
honored as a "Best Solution" at the Government Technology Conference (GTC) East
2007.
NetApp strengthened its relationship with VMware, underscoring the fact
that the value of server virtualization is dramatically increased with the
addition of networked storage on the back end. To make disaster recovery more
affordable, flexible, and simpler to manage for customers, NetApp integrated its
data protection portfolio of solutions with VMware(R) Site Recovery Manager.
Also during the quarter, leveraging its experience delivering simplified
storage solutions for production grid environments, NetApp joined with Oracle on
the development of the Direct NFS Client, a significant innovation included in
Oracle(R) Database 11g(TM) that helps provide customers with improved
performance, simplified management, increased flexibility, and better
application availability.
For channel partners, NetApp opened more service opportunities to NetApp
VIP Program partners with a new Installation Accreditation initiative, giving
partners the opportunity to sell NetApp installation services independently or
utilizing NetApp best practices. The company also received a 2007 Rising Star
award, presented by the Global Technology Distribution Council (GTDC), which
recognizes the IT industry's fastest-growing manufacturers doing business with
GTDC member distributors. In addition, channel partners and readers of CMP
Technology's VARBusiness recognized NetApp for outstanding product innovation as
evidenced by the Annual Report Card (ARC) award program.
From a market perspective, NetApp gained share in both the storage software
and hardware markets in the first half of 2007, as reported in IDC's Worldwide
Quarterly Storage Software Tracker Q2 2007(3) and Worldwide Quarterly Disk
Storage Systems Tracker Q2 2007(4).
NetApp grew twice as fast as the overall storage software market from Q1'07
to Q2'07, and posted share gains across each submarket segment in which it
provides offerings. This marks the eighth consecutive quarter in which the
company outpaced the overall storage software market. IDC also found that in
that time period NetApp grew fastest among the top five storage replication
software vendors and that it currently holds the number two position. In
addition, NetApp continues to lead the iSCSI market in terms of revenue and
capacity, and gained both revenue and capacity share in the FC SAN market.
NetApp also continues to lead in its core market of NAS in terms of capacity.
In industry news, NetApp joined the newly created Storage Networking
Industry Association (SNIA) Green Storage Initiative, dedicated to advancing
energy efficiency and conservation in storage technologies in an effort to
minimize the environmental impact of data storage operations.
In corporate news, NetApp broke ground on an engineering lab facility
located at the NetApp technology center in Research Triangle Park (RTP) to
expand its engineering and development efforts in the region. Also, for the
fourth year in a row, NetApp earned top workplace honors from the Triangle
Business Journal, ranking as one of the top 15 "Best Places to Work" in RTP. The
company was also honored as a "Top Corporate Philanthropist in Silicon Valley"
by the Silicon Valley/San Jose Business Journal.
As part of the company's continuing worldwide expansion and growth, NetApp
announced a strengthened commitment to the Asia Pacific (APAC) region with the
inauguration of a new Technical Support Center (TSC) in Dalian, China, and by
opening new manufacturing and logistics centers in Shanghai and Singapore,
respectively, furthering the ability of NetApp to serve more customers and
partners in the region.
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
14, 2007, at 2:00 p.m. Pacific time. This press release and any other
information related to the call will also be posted on the Website at
that location.
-- The conference call will also be available live in a listen-only
format at (866) 356-4281 in the United States and (617) 597-5395
outside the United States. The pass code for both numbers is 15908718.
-- 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, using replay code 48003480. The
Webcast replay will be posted on our Web site for at least one year.
About Network Appliance
Network Appliance is a leading provider of innovative data management
solutions that simplify the complexities of storing, managing, protecting, and
retaining enterprise data. Market leaders around the world choose NetApp to help
them reduce cost, minimize risk, and adapt to change. For solutions that deliver
unmatched simplicity and value, visit us on the Web 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 2008,
statements regarding our growth opportunity, and statements regarding the
anticipated benefits of our products, technologies, and services relative to the
offerings of our competitors. 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 our ability to build non-deferred backlog to levels consistent with our
past results and to increase our revenue over the next several quarters; 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 expenses, acquisition-related retention costs,
gain on sale of investment, restructuring charges/recoveries, prior
acquisition-related costs, and the related effects on income taxes as well as
certain discrete GAAP provisions for income tax matters recognized ratably for
non-GAAP purposes.
(3) IDC Worldwide Quarterly Storage Software Tracker Q2 2007.
(4) IDC Worldwide Quarterly Disk Storage Systems Tracker Q2 2007.
NetApp is a registered trademark and Network Appliance and StoreVault are
trademarks of Network Appliance, Inc. in the U.S. 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 results of
operations exclude amortization of intangible assets, stock-based compensation
expenses, acquisition-related retention costs, gain on sale of investment,
restructuring charges/recoveries, prior acquisition-related costs, and the
related effects on income taxes as well as certain discrete GAAP provisions 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 26, 2007 April 27, 2007
---------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $625,707 $489,079
Short-term investments 357,370 819,702
Accounts receivable, net 427,854 548,249
Inventories 62,690 54,880
Prepaid expenses and other assets 94,684 99,840
Short-term restricted cash and
investments 84,034 118,312
Short-term deferred income taxes 116,324 110,741
---------------- --------------
Total current assets 1,768,663 2,240,803
PROPERTY AND EQUIPMENT, net 646,157 603,523
GOODWILL 601,056 601,056
INTANGIBLE ASSETS, net 69,321 83,009
LONG-TERM RESTRICTED CASH AND
INVESTMENTS 304,937 3,639
LONG-TERM DEFERRED INCOME TAXES AND
OTHER ASSETS 167,880 126,448
---------------- --------------
$3,558,014 $3,658,478
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $47,770 $85,110
Accounts payable 119,099 144,112
Income taxes payable 9,962 53,371
Accrued compensation and related
benefits 149,727 177,327
Other accrued liabilities 100,936 97,017
Deferred revenue 702,134 630,610
---------------- --------------
Total current liabilities 1,129,628 1,187,547
---------------- --------------
LONG-TERM DEBT 250,000 -
LONG-TERM DEFERRED REVENUE 516,445 472,423
OTHER LONG-TERM OBLIGATIONS 74,105 9,487
---------------- --------------
1,970,178 1,669,457
---------------- --------------
STOCKHOLDERS' EQUITY 1,587,836 1,989,021
---------------- --------------
$3,558,014 $3,658,478
================ ==============
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except net income per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
----------------- --------------------
October October October October
26, 27, 26, 27,
2007 2006 2007 2006
-------- -------- ---------- ---------
REVENUES:
Product $541,392 $481,284 $1,004,725 $946,895
Software entitlements and
maintenance 117,134 82,253 225,061 157,083
Service 133,672 88,986 251,647 169,833
-------- -------- ---------- ---------
Total revenues 792,198 652,523 1,481,433 1,273,811
-------- -------- ---------- ---------
COST OF REVENUES:
Cost of product 217,396 186,261 404,147 374,226
Cost of software entitlements
and maintenance 1,914 2,456 3,998 4,748
Cost of service 88,883 62,499 172,086 120,460
-------- -------- ---------- ---------
Total cost of revenues 308,193 251,216 580,231 499,434
-------- -------- ---------- ---------
GROSS MARGIN 484,005 401,307 901,202 774,377
-------- -------- ---------- ---------
OPERATING EXPENSES:
Sales and marketing 255,374 204,264 500,017 399,782
Research and development 108,964 90,360 215,520 179,038
General and administrative 39,507 35,217 80,956 67,613
Restructuring recoveries - - - (74)
Gain on sale of assets - (25,339) - (25,339)
-------- -------- ---------- ---------
Total operating
expenses 403,845 304,502 796,493 621,020
-------- -------- ---------- ---------
INCOME FROM OPERATIONS 80,160 96,805 104,709 153,357
OTHER INCOME (EXPENSES), net:
Interest income 16,296 17,478 33,332 34,134
Interest expense (1,410) (5,170) (2,492) (9,042)
Net gain (loss) on
investments 13,619 (2,000) 13,619 (2,000)
Other income, net 231 1,878 1,062 2,657
-------- -------- ---------- ---------
Total other income,
net 28,736 12,186 45,521 25,749
-------- -------- ---------- ---------
INCOME BEFORE INCOME TAXES 108,896 108,991 150,230 179,106
PROVISION FOR INCOME TAXES 25,138 22,060 32,135 37,506
-------- -------- ---------- ---------
NET INCOME $83,758 $86,931 $118,095 $141,600
======== ======== ========== =========
NET INCOME PER SHARE:
BASIC $0.24 $0.23 $0.33 $0.38
======== ======== ========== =========
DILUTED $0.23 $0.22 $0.32 $0.36
======== ======== ========== =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 355,665 370,659 360,061 372,264
======== ======== ========== =========
DILUTED 365,458 388,226 371,544 389,773
======== ======== ========== =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Quarter Ended Six Months Ended
------------------- ---------------------
October October October October
26, 2007 27, 2006 26, 2007 27, 2006
--------- --------- --------- -----------
Cash Flows from Operating
Activities:
Net income $83,758 $86,931 $118,095 $141,600
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 28,282 20,666 55,016 39,380
Amortization of
intangible assets 6,299 4,687 12,697 9,373
Amortization of patents 496 496 991 991
Stock-based compensation 38,370 42,423 78,781 85,445
Net (gain) loss on
investments (13,619) 2,000 (13,619) 2,000
Gain on sale of assets - (25,339) - (25,339)
Net loss on disposal of
equipment 128 221 245 302
Allowance for doubtful
accounts 164 50 248 194
Deferred income taxes (17,376) (22,634) (35,179) (22,634)
Deferred rent 113 541 512 740
Excess tax benefit from
stock-based compensation (7,247) (19,356) (15,586) (23,845)
Changes in assets and
liabilities:
Accounts receivable (22,364) (89,508) 165,708 (19,593)
Inventories (4,558) (513) (7,703) 8,195
Prepaid expenses and
other assets 6,173 64,452 (21,219) 38,115
Accounts payable (26,095) 8,344 (40,177) 7,205
Income taxes payable 38,352 41,849 56,786 34,935
Accrued compensation and
related benefits 40,005 32,637 (29,884) (6,327)
Other accrued
liabilities 10,942 5,963 (9,538) (5,017)
Deferred revenue 65,849 75,700 112,397 137,682
--------- --------- --------- -----------
Net cash provided by
operating activities 227,672 229,610 428,571 403,402
--------- --------- --------- -----------
Cash Flows from Investing
Activities:
Purchases of investments (111,097) (653,152) (439,990) (1,527,568)
Redemptions of investments 145,116 638,134 592,138 1,544,557
Redemptions of restricted
investments 20,496 36,316 35,426 52,638
Decrease (increase) in
restricted cash 324 153 (1,443) 405
Proceeds from sale of
assets - 23,914 - 23,914
Proceeds from sales of
nonmarketable securities - - - 17
Proceeds from sales of
marketable securities 18,256 - 18,256 -
Purchases of property and
equipment (37,572) (43,729) (71,158) (76,013)
Purchases of nonmarketable
securities - (150) (4,035) (1,333)
--------- --------- --------- -----------
Net cash provided by
investing activities 35,523 1,486 129,194 16,617
--------- --------- --------- -----------
Cash Flows from Financing
Activities:
Proceeds from sale of
common stock related to
employee stock
transactions 16,076 55,629 66,067 92,460
Tax withholding payments
reimbursed by restricted
stock (2,460) (3,343) (5,202) (4,323)
Excess tax benefit from
stock-based compensation 7,247 19,356 15,586 23,845
Proceeds from revolving
credit facility 249,754 - 249,754 -
Repayment of debt (21,380) (78,706) (37,340) (106,572)
Repurchases of common stock (499,973) (143,908) (699,973) (363,908)
--------- --------- --------- -----------
Net cash used in
financing activities (250,736) (150,972) (411,108) (358,498)
--------- --------- --------- -----------
Effect of Exchange Rate
Changes on Cash (10,742) 885 (10,029) 561
Net Increase in Cash and
Cash Equivalents 1,717 81,009 136,628 62,082
Cash and Cash Equivalents:
Beginning of period 623,990 442,329 489,079 461,256
--------- --------- --------- -----------
End of period $625,707 $523,338 $625,707 $523,338
========= ========= ========= ===========
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
QUARTER ENDED OCTOBER 26, 2007
- ---------------------------------------------------------------- - ---
Amortization Stock-based Acquisition- Restructuring
of Compensation Related Recoveries
Intangible Expenses Retention
Assets Cost
------------ ------------- ------------ -------------
Cost of product
revenues $5,278 $768 - -
Cost of service
revenues - 2,606 - -
Sales and
marketing
expense 971 17,135 1,162 -
Research and
development
expense - 12,332 - -
General and
administrative
expense 50 5,529 - -
Net gain on
investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $6,299 $38,370 $1,162 -
Prior Gain on Net Gain on Total
Acquisition- Sale Investments
related of
Costs Assets
------------- ------- ------------ --------
Cost of product revenues - - - $6,046
Cost of service revenues - - - 2,606
Sales and marketing
expense - - - 19,268
Research and development
expense - - - 12,332
General and administrative
expense - - - 5,579
Net gain on investments - - (13,619) (13,619)
------------- ------- ------------ --------
Effect on pre-tax income - - ($13,619) $32,212
SIX MONTHS ENDED OCTOBER 26, 2007
- ---------------------------------------------------------------- - - -
Amortization Stock-based Acquisition- Restructuring
of Compensation Related Recoveries
Intangible Expenses Retention
Assets Cost
------------ ------------- ------------ -------------
Cost of product
revenues $10,556 $1,713 - -
Cost of service
revenues - 5,277 - -
Sales and
marketing
expense 1,941 34,626 2,324 -
Research and
development
expense - 25,507 - -
General and
administrative
expense 200 11,658 - -
Net gain on
investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $12,697 $78,781 $2,324 -
Prior Gain on Net Gain on Total
Acquisition- Sale Investments
related of
Costs Assets
------------- ------- ------------ --------
Cost of product revenues - - - $12,269
Cost of service revenues - - - 5,277
Sales and marketing
expense - - - 38,891
Research and development
expense - - - 25,507
General and administrative
expense 2,800 - - 14,658
Net gain on investments - - (13,619) (13,619)
------------- ------- ------------ --------
Effect on pre-tax income $2,800 - ($13,619) $82,983
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
QUARTER ENDED OCTOBER 27, 2006
- -------------------------------------------------------------- - - - -
Amortization Stock-based Acquisition- Restructuring
of Compensation Related Recoveries
Intangible Expenses Retention
Assets Cost
------------ ------------- ------------ -------------
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 - -
Restructuring
recoveries - - - -
Gain on sale of
assets - - - -
Net loss on
investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $4,687 $42,423 - -
Prior Gain on Net Loss on Total
Acquisition- Sale of Investments
related Assets
Costs
------------- --------- ------------ --------
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
Restructuring recoveries - - - -
Gain on sale of assets - (25,339) - (25,339)
Net 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 Stock-based Acquisition- Restructuring
of Compensation Related Recoveries
Intangible Expenses Retention
Assets Cost
------------ ------------- ------------ -------------
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 - -
Restructuring
recoveries - - - (74)
Gain on sale of
assets - - - -
Net loss on
investments - - - -
------------ ------------- ------------ -------------
Effect on pre-
tax income $9,373 $85,445 - ($74)
Prior Gain on Net Loss on Total
Acquisition- Sale of Investments
related Assets
Costs
------------- --------- ------------ --------
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
Restructuring recoveries - - - (74)
Gain on sale of assets - (25,339) - (25,339)
Net loss on investments - - 2,000 2,000
------------- --------- ------------ --------
Effect on pre-tax income - ($25,339) $2,000 $71,405
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except net income per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
----------------- -----------------
October October October October
26, 27, 26, 27,
2007 2006 2007 2006
-------- -------- -------- --------
SUMMARY RECONCILIATION OF NET
INCOME
- ----------------------------------
NET INCOME $83,758 $86,931 $118,095 $141,600
Adjustments:
Amortization of intangible
assets 6,299 4,687 12,697 9,373
Stock-based compensation
expenses 38,370 42,423 78,781 85,445
Acquisition-related retention cost 1,162 - 2,324 -
Prior acquisition-related costs - - 2,800 -
Restructuring recoveries - - - (74)
Gain on sale of assets - (25,339) - (25,339)
Net (gain) loss on investments (13,619) 2,000 (13,619) 2,000
Tax effect on sale of
investments 5,477 - 5,477 -
Tax effect on sale of assets - 4,606 - 4,606
Discrete GAAP tax provision
items (1,127) (2,159) (684) (2,159)
Income tax effect (3,906) (4,284) (13,470) (10,033)
-------- -------- -------- --------
NON-GAAP NET INCOME $116,414 $108,865 $192,401 $205,419
======== ======== ======== ========
NET INCOME PER SHARE $0.229 $0.224 $0.318 $0.363
Adjustments:
Amortization of intangible
assets 0.017 0.012 0.034 0.024
Stock-based compensation
expenses 0.105 0.109 0.212 0.219
Acquisition-related retention cost 0.003 - 0.006 -
Prior acquisition-related costs - - 0.008 -
Restructuring recoveries - - - -
Gain on sale of assets - (0.065) - (0.065)
Net (gain) loss on investments (0.037) 0.005 (0.037) 0.005
Tax effect on sale of
investments 0.015 - 0.015 -
Tax effect on sale of assets - 0.012 - 0.012
Discrete GAAP tax provision
items (0.003) (0.006) (0.002) (0.006)
Income tax effect (0.011) (0.011) (0.036) (0.026)
-------- -------- -------- --------
NON-GAAP NET INCOME PER SHARE $0.318 $0.280 $0.518 $0.526
======== ======== ======== ========
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
THIRD QUARTER 2008
(Unaudited)
Third Quarter
2008
-----------------
Non-GAAP Guidance $0.33 - $0.34
Adjustments of Specific Items to
Earnings Per Share for the Third
Quarter 2008:
Amortization of intangible assets (0.02)
Stock based compensation expense (0.10)
Income tax effect 0.02
-----------------
Total Adjustments (0.10)
GAAP Guidance - Earnings Per Share $0.23 - $0.24
CONTACT: Network Appliance, Inc.
Press:
NetApp PR Hotline, 408-822-3287
xdl-uspr@netapp.com
Investor:
Tara Dhillon, 408-822-6909
tara@netapp.com
Billie Fagenstrom, 408-822-6428
billief@netapp.com