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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): August 17, 2004
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 12.
The information is furnished pursuant to "Item 12. Results of Operations
and Financial Condition" in accordance with SEC Release No. 33-8216 (March 27,
2003).
On August 17, 2004, Network Appliance, Inc. issued a press release
announcing its earnings for the first quarter fiscal year 2005. The press
release, attached hereto as Exhibit 99.1, is being furnished on 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.
August 17, 2004 By: /s/ Steven Gomo
------------------------------------
Steven J. Gomo
Chief Financial Officer
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Index to Exhibits
Exhibit Description
- ------- -----------
99.1 Press release of Network Appliance, Inc. issued on August 17, 2004.
- --------------------------------------------------------------------------------
Exhibit 99.1
Network Appliance Announces Results
for First Quarter Fiscal Year 2005;
Q1 Revenue Up 38% Year over Year;
Eleventh Consecutive Quarter of Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Aug. 17, 2004--Network
Appliance, Inc. (Nasdaq:NTAP), the leader in advanced networked
storage solutions, today reported results for the first quarter of
fiscal year 2005. Revenues for the first fiscal quarter were $358.4
million, an increase of 38% compared to revenues of $260.5 million for
the same period a year ago and a 6% increase compared to $337.0
million in the prior quarter.
For the first fiscal quarter, GAAP net income increased 73% to
$46.9 million, or $0.13 per share(1) compared to GAAP net income of
$27.1 million, or $0.08 per share for the same period in the prior
year. Pro forma(2) net income for the first fiscal quarter increased
73% to $49.9 million, or $0.13 per share, compared to pro forma net
income of $28.7 million, or $0.08 per share for the same period a year
ago.
"NetApp demonstrated exceptional execution, a strong balance
sheet, and continued cash generation during the quarter. We continue
to drive our solutions deeper into our customers' data centers and
mission-critical areas to solve significant issues around business
continuity, regulatory compliance, and high data availability," said
Dan Warmenhoven, CEO of Network Appliance. "Our focus is on expanding
our market share and our results demonstrate that the market is
continuing to move toward us."
Quarterly Highlights
Throughout the first quarter of fiscal year 2005, Network
Appliance reinforced its leadership position by deploying new tier-one
storage solutions, expanding partnerships, and enhancing its storage
grid architecture. Customers deploying NetApp during the quarter for a
variety of database, collaborative, and other data center and
mission-critical applications included Audi AG, Canon, Catholic
Healthcare West, China Everbright Bank, Ciena, City of Concord,
ConocoPhillips, Fujitsu LTD, Gap Inc., GE Healthcare, Hearst
Corporation, ING BHF Bank, Pixar, Progress Energy, Qualcomm, Sprint,
Telstra, and University of Georgia. All levels of enterprise customers
have chosen to deploy NetApp for a variety of reasons -- reduced
complexity, a low total cost of ownership (TCO), and advanced
management capabilities made possible through Data ONTAP(TM) and a
range of additional storage software packages that unleash the value
of enterprise data.
On the partners front, NetApp unveiled several new solution
enhancements and partner offerings with McData, Ontrack Data Recovery,
Oracle, Secure Computing, Symantec, Trend Micro, and VERITAS to
address a variety of data concerns, including e-mail recovery, unified
storage, and security issues facing enterprise customers.
For storage grid architectures, the company continued to set the
pace for the rest of the industry in iSCSI and IP SAN (storage area
network), with more than 700 real-world production deployments to
date, and reinforced its leadership in other storage application areas
such as data protection/recovery, disk-based nearline storage, and
database storage. In database storage in particular, NetApp
demonstrated its prowess with large Oracle(R) deployments at Universal
Tax Systems and the South China Morning Post and received a
prestigious SAP Pinnacle Award for innovation around storage for SAP
environments. Finally, Network Appliance also debuted its new midrange
unified storage models, the FAS920 and FAS920c. Designed to provide
affordable enterprise-class performance, reliability and advanced data
management features for midrange applications, the FAS920 can power
applications in Fibre Channel and iSCSI SANs and network-attached
storage (NAS) simultaneously.
In corporate news, Network Appliance recently announced that it is
the recipient of a Job Development Investment Grant (JDIG) from the
governor of North Carolina to assist in any expansion of newly
acquired NetApp offices in Research Triangle Park, North Carolina.
NetApp also added two new members to its board of directors: Mark
Leslie and George Shaheen.
Conference Call Information
-- The NetApp quarterly results conference call will be broadcast
live via the Internet at http://investors.netapp.com/ on
Tuesday, August 17, 2004 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 (866) 800-8649 in the United States and (617)
614-2703 outside the United States. The passcode for both
numbers is 19115940.
-- A replay will be available for 72 hours following completion
of the live call by dialing (888) 286-8010 in the United
States and (617) 801-6888 outside the United States, replay
code 62837719.
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 continue to drive "The evolution of storage.(TM)"
Information about Network Appliance(TM) 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 market and marketshare trends which benefit the
Company, and continued customer acceptance of the Company's products.
These forward-looking statements involve risks and uncertainties, and
actual results could vary. Factors that could impact our ability to
achieve our goals include: general economic and industry conditions,
including expenditure trends for storage- related products; our
ability to deliver new product architectures and products which meet
market acceptance; our ability to design products which compete
effectively from a price and performance perspective; 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 our most recently submitted 10-K and 10-Q.
(1) Earnings per share represents the diluted number of shares for
all periods presented.
(2) Pro forma results for all periods presented exclude
amortization of intangible assets, stock compensation, net gain on
investments, and the related effects on income taxes.
NetApp is a registered trademark and Network Appliance, Data
ONTAP, and The evolution of storage 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 Pro Forma 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)
July 30, April 30,
2004 2004
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $228,045 $241,149
Short-term investments 598,596 566,816
Accounts receivable, net 199,746 193,942
Inventories 34,710 34,109
Prepaid expenses and other 39,290 29,057
Deferred income taxes 24,719 24,163
----------- ------------
Total current assets 1,125,106 1,089,236
PROPERTY AND EQUIPMENT, net 392,588 370,717
GOODWILL 291,816 291,816
INTANGIBLE ASSETS, net 28,935 31,718
OTHER ASSETS 82,642 93,779
----------- ------------
1,921,087 1,877,266
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 51,691 $ 52,719
Income taxes payable 15,172 16,033
Accrued compensation and related benefits 50,866 65,186
Other accrued liabilities 46,775 43,683
Deferred revenue 182,801 166,602
----------- ------------
Total current liabilities 347,305 344,223
LONG-TERM DEFERRED REVENUE 126,355 112,337
LONG-TERM OBLIGATIONS 4,787 4,858
----------- ------------
478,447 461,418
----------- ------------
STOCKHOLDERS' EQUITY 1,442,640 1,415,848
----------- ------------
1,921,087 1,877,266
=========== ============
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
-------------------
July 30, August 1,
2004 2003
--------- ---------
REVENUES:
Product revenue $324,627 $235,786
Service revenue 33,794 24,723
--------- ---------
Total revenues 358,421 260,509
--------- ---------
COST OF REVENUES:
Cost of product revenue 114,215 85,039
Cost of service revenue 29,248 19,347
--------- ---------
Total cost of revenues 143,463 104,386
--------- ---------
GROSS MARGIN 214,958 156,123
--------- ---------
OPERATING EXPENSES:
Sales and marketing 103,311 79,356
Research and development 38,703 31,541
General and administrative 16,882 12,265
Stock compensation 2,104 654
--------- ---------
Total operating expenses 161,000 123,816
--------- ---------
INCOME FROM OPERATIONS 53,958 32,307
OTHER INCOME (EXPENSES), net:
Interest income 4,082 3,045
Other expenses, net (912) (47)
Net gain on investments -- 145
--------- ---------
Total other income, net 3,170 3,143
--------- ---------
INCOME BEFORE INCOME TAXES 57,128 35,450
PROVISION FOR INCOME TAXES 10,266 8,377
--------- ---------
NET INCOME $ 46,862 $ 27,073
========= =========
NET INCOME PER SHARE:
BASIC $ 0.13 $ 0.08
========= =========
DILUTED $ 0.13 $ 0.08
========= =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 356,743 341,687
========= =========
DILUTED 372,974 358,497
========= =========
NETWORK APPLIANCE, INC.
PRO FORMA (1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
-------------------
July 30, August 1,
2004 2003
--------- ---------
REVENUES:
Product revenue $324,627 $235,786
Service revenue 33,794 24,723
--------- ---------
Total revenues 358,421 260,509
--------- ---------
COST OF REVENUES:
Cost of product revenue 113,357 83,675
Cost of service revenue 29,248 19,347
--------- ---------
Total cost of revenues 142,605 103,022
--------- ---------
GROSS MARGIN 215,816 157,487
--------- ---------
OPERATING EXPENSES:
Sales and marketing 103,104 79,356
Research and development 38,703 31,541
General and administrative 15,614 12,265
--------- ---------
Total operating expenses 157,421 123,162
--------- ---------
INCOME FROM OPERATIONS 58,395 34,325
OTHER INCOME (EXPENSES), net 3,170 2,998
--------- ---------
INCOME BEFORE INCOME TAXES 61,565 37,323
PROVISION FOR INCOME TAXES 11,697 8,584
--------- ---------
NET INCOME $ 49,868 $ 28,739
========= =========
NET INCOME PER SHARE:
BASIC $ 0.14 $ 0.08
========= =========
DILUTED $ 0.13 $ 0.08
========= =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 356,743 341,687
========= =========
DILUTED 372,974 358,497
========= =========
(1) Pro forma results of operations exclude amortization of
intangible assets, stock compensation, net gain on investments and the
related effects on income taxes.
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
-------------------
July 30, August 1,
2004 2003
--------- ---------
SUMMARY RECONCILIATION OF NET INCOME
- ------------------------------------
NET INCOME $46,862 $27,073
Adjustments:
Amortization of intangible assets 2,333 1,364
Stock compensation 2,104 654
Net gain on investments -- (145)
Income tax effect (1,431) (207)
--------- ---------
PRO FORMA NET INCOME $49,868 $28,739
========= =========
DILUTED PRO FORMA NET INCOME PER SHARE $0.13 $0.08
========= =========
SHARES USED IN DILUTED PRO FORMA NET INCOME
PER SHARE CALCULATION: 372,974 358,497
========= =========
DETAILED RECONCILIATION OF SPECIFIC ITEMS:
- ------------------------------------------
COST OF REVENUES $143,463 $104,386
Adjustment:
Amortization of intangible assets (858) (1,364)
--------- ---------
PRO FORMA COST OF REVENUES $142,605 $103,022
========= =========
GROSS MARGIN $214,958 $156,123
Adjustment:
Amortization of intangible assets 858 1,364
--------- ---------
PRO FORMA GROSS MARGIN $215,816 $157,487
========= =========
SALES AND MARKETING EXPENSES $103,311 $79,356
Adjustments:
Amortization of intangible assets (207) --
--------- ---------
PRO FORMA SALES AND MARKETING EXPENSES $103,104 $79,356
========= =========
GENERAL AND ADMINISTRATIVE EXPENSES $16,882 $12,265
Adjustments:
Amortization of intangible assets (1,268) --
--------- ---------
PRO FORMA GENERAL AND ADMINISTRATIVE EXPENSES $15,614 $12,265
========= =========
OPERATING EXPENSES $161,000 $123,816
Adjustments:
Stock compensation (2,104) (654)
Amortization of intangible assets (1,475) --
--------- ---------
PRO FORMA OPERATING EXPENSES $157,421 $123,162
========= =========
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON-GAAP AND GAAP
IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
INCOME FROM OPERATIONS $53,958 $32,307
Adjustments:
Amortization of intangible assets 2,333 1,364
Stock compensation 2,104 654
--------- ---------
PRO FORMA INCOME FROM OPERATIONS $58,395 $34,325
========= =========
TOTAL OTHER INCOME (EXPENSES), NET $3,170 $3,143
Adjustments:
Net gain on investments -- (145)
--------- ---------
PRO FORMA TOTAL OTHER INCOME (EXPENSES), NET $3,170 $2,998
========= =========
INCOME BEFORE INCOME TAXES $57,128 $35,450
Adjustments:
Amortization of intangible assets 2,333 1,364
Stock compensation 2,104 654
Net gain on investments -- (145)
--------- ---------
PRO FORMA INCOME BEFORE INCOME TAXES $61,565 $37,323
========= =========
PROVISION FOR INCOME TAXES $10,266 $8,377
Adjustments:
Income tax effect 1,431 207
--------- ---------
PRO FORMA PROVISION FOR INCOME TAXES $11,697 $8,584
========= =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands - unaudited)
Three Months Ended
--------------------
July 30, August 1,
2004 2003
---------- ---------
Cash Flows from Operating Activities:
Net income $46,862 $27,073
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 13,239 13,426
Amortization of patents 451 150
Amortization of intangible assets 2,333 1,364
Stock compensation 2,104 654
Net (gain) loss on investments (29) (145)
Allowance for doubtful accounts (reversal) (154) (290)
Deferred rent 90 271
Changes in assets and liabilities:
Accounts receivable (5,650) 9,638
Inventories (3,330) (5,796)
Prepaid expenses and other assets (1,261) (2,306)
Accounts payable (1,029) 2,202
Income taxes payable 4,831 2,602
Accrued compensation and related benefits (14,319) (5,271)
Other accrued liabilities 3,669 (1,708)
Deferred revenue 30,216 14,912
---------- ---------
Net cash provided by operating
activities 78,023 56,776
---------- ---------
Cash Flows from Investing Activities:
Purchases of short and long-term investments (69,245) (89,136)
Redemptions of short and long-term investments 35,645 92,581
Purchases of property and equipment (33,285) (12,318)
Proceeds from disposal of property and equipment -- 105
Proceeds from sales of investments 298 419
Purchase of patents -- (9,015)
Purchases of equity securities -- (325)
---------- ---------
Net cash used in investing
activities (66,587) (17,689)
---------- ---------
Cash Flows from Financing Activities:
Proceeds from sale of common stock related to
employee stock transactions 23,202 24,256
Repurchases of common stock (47,742) (26,825)
---------- ---------
Net cash used in financing
activities (24,540) (2,569)
---------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents (13,104) 36,518
Cash and Cash Equivalents:
Beginning of period 241,149 284,161
--------------------
End of period $228,045 $320,679
====================
Noncash Investing and Financing Activities:
Deferred stock compensation, net of reversals $(546) $1,668
Conversion of evaluation inventory to fixed assets 2,729 661
Income tax benefit from employee stock
transactions 5,692 9,874
Supplemental cash flow information:
Income taxes paid 6,826 1,456
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