View:
Download DOC
Download PDF
Download XLS

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 12, 2008

______________

NetApp, Inc.
(Exact name of Registrant as specified in its charter)

Delaware

0-27130

77-0307520

(State or other jurisdiction of

incorporation or organization)

(Commission

File Number)

(I.R.S. 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)

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 12, 2008, NetApp, Inc. issued a press release announcing its earnings for the second quarter fiscal year 2009.  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.

NetApp, Inc.’s November 12, 2008 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 12, 2008

By:

/s/ Steven Gomo

 

Steven J. Gomo

Chief Financial Officer

Index to Exhibits

Exhibit

Description

 
99.1

Press release of NetApp, Inc. issued on November 12, 2008.

Exhibit 99.1

NetApp Announces Results for Second Quarter of Fiscal Year 2009

Q2 Revenues of $912 Million, Up 15% Year over Year

SUNNYVALE, Calif.--(BUSINESS WIRE)--November 12, 2008--NetApp (NASDAQ: NTAP) today reported results for the second fiscal quarter of 2009. Revenues for the second fiscal quarter of 2009 were $912 million, an increase of 15% compared to revenues of $792 million for the same period a year ago.

For the second fiscal quarter of 2009, GAAP net income was $49 million, or $0.15 per share1 compared to GAAP net income of $84 million, or $0.23 per share for the same period in the prior year. Non-GAAP2 net income for the second fiscal quarter of 2009 was $92 million, or $0.28 per share, compared to non-GAAP net income of $116 million, or $0.32 per share for the same period a year ago.

Revenues for the first six months of the current fiscal year totaled $1.78 billion, compared to revenues of $1.48 billion for the first six months of the prior year, an increase of 20% year over year.

GAAP net income for the first six months of the current fiscal year totaled $87 million, or $0.26 per share, compared to GAAP net income of $118 million, or $0.32 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 $168 million, or $0.50 per share, compared to non-GAAP net income of $192 million, or $0.52 per share for the first six months of the prior fiscal year.

“NetApp produced solid revenue and earnings results despite a challenging economic environment,” said Dan Warmenhoven, chairman and CEO. “More and more customers are turning to NetApp to drive down their storage costs by increasing their storage utilization. We expect NetApp's unique storage efficiency offerings to resonate well with customers, particularly during periods of constrained IT spending.”

Outlook

Given the reduced visibility caused by the recent changes in the macroeconomic environment, NetApp will not be providing formal revenue guidance for the third quarter of fiscal year 2009.

Quarterly Highlights

In the second quarter of fiscal year 2009, NetApp introduced new solutions that continue to help customers transform their data center architectures through higher efficiencies and asset utilization, greater power and space savings, and innovative data management techniques. NetApp also received many industry awards that recognize its leadership in quality, innovation, and service in the storage market.

NetApp launched a global program that offers customers a guarantee3 that they will use 50% less storage in their virtual environments with NetApp® compared to traditional storage. NetApp wants to assure customers who choose NetApp and leverage its unique storage efficiency technologies that they will reduce their overall storage usage while improving performance.

During the second quarter, NetApp announced that it will be the first storage vendor to offer native Fibre Channel over Ethernet (FCoE) SAN storage solutions. FCoE support extends NetApp's unified storage architecture, enabling customers to address changing business needs and opportunities with flexible data access across all protocols.

NetApp announced the availability of deduplication on NetApp Virtual Tape Library (VTL) systems, enabling customers to lower the disk capacity required to back up any storage system, including EMC and HP, up to 95%.4

During the quarter, NetApp announced the NetApp GetSuccessful™ Partner Enablement Program to help partners maximize strategic opportunities and distinguish themselves with their customers. The program is a new benefit of NetApp’s current VIP Partner Program and complements the Authorized Professional Service Provider and the Virtualization Specialization programs announced earlier this year.

NetApp continues to receive industry recognition from third parties. During the quarter, NetApp received the following awards:

Webcast and Conference Call Information

About NetApp

NetApp creates innovative storage and data management solutions that accelerate business breakthroughs and deliver outstanding cost efficiency. Discover NetApp’s 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 and metrics for the third quarter of fiscal year 2009 and statements regarding our product and service offerings. These forward-looking statements involve risks and uncertainties, and actual results could vary. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the material and adverse global economic and market conditions that currently exist (particularly in the credit markets) and that are expected to persist well into calendar 2009; our ability to build nondeferred backlog to levels consistent with our past results and to increase our revenue over the next several quarters; 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 NetApp 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 is calculated using 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, prior acquisition related costs, net gain or loss on investments, 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 The description of the guarantee program in this press release is a summary and does not purport to be complete. For a full description of the terms and conditions of the program, go to www.netapp.com/guarantee. The description of the guarantee program is not incorporated by reference into this press release.

4 Based on NetApp internal testing, October 2008.

NetApp, the NetApp logo, Go further, faster, and GetSuccessful are trademarks or registered trademarks of NetApp, Inc. in the United States and/or other countries. All other brands or products are trademarks or registered trademarks of their respective holders and should be treated as such.

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 operational performance. These non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, acquisition-related retention costs, prior acquisition-related costs, net gain or loss on investments, 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.

NetApp Use of Corporate Web Site

In accordance with SEC guidance published on August 22, 2008 (Release No. 34-58288), NetApp will begin to disseminate material information about the company through its corporate Web site within the next several fiscal quarters. NetApp intends to designate a separate portion of its corporate Web site for purposes of these disclosures and will include a prominent link on its Web site to allow visitors to locate this material information, which will be routinely updated. The Web site will supplement, rather than replace, NetApp's current existing channels of information distribution.

NETAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
   
October 24, 2008 April 25, 2008
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 1,479,152 $ 936,479
Short-term investments 819,366 227,911
Accounts receivable, net 362,317 582,110
Inventories 78,214 70,222
Prepaid expenses and other assets 139,136 120,561
Short-term restricted cash 2,022 2,953
Short-term deferred income taxes   165,852   127,197
Total current assets 3,046,059 2,067,433
 
PROPERTY AND EQUIPMENT, net 717,849 693,792
GOODWILL 680,054 680,054
INTANGIBLE ASSETS, net 73,671 90,075
LONG-TERM INVESTMENTS AND RESTRICTED CASH 211,832 331,105
LONG-TERM DEFERRED INCOME TAXES AND OTHER ASSETS   348,921   208,529
$ 5,078,386 $ 4,070,988
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Accounts payable 156,842 178,233
Accrued compensation and related benefits 161,450 202,929
Other accrued liabilities 153,419 154,331
Income taxes payable 5,559 6,245
Deferred revenue   919,910   872,364
Total current liabilities   1,397,180   1,414,102
 
LONG-TERM DEBT AND OTHER OBLIGATIONS 1,483,958 318,658
LONG-TERM DEFERRED REVENUE   657,714   637,889
  3,538,852   2,370,649
 
STOCKHOLDERS' EQUITY   1,539,534   1,700,339
$ 5,078,386 $ 4,070,988
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except net income per share amounts)
(Unaudited)
       
 
Quarter Ended Six Months Ended
October 24, 2008 October 26, 2007 October 24, 2008 October 26, 2007
 
REVENUES:
Product $ 570,436 $ 541,392 $ 1,118,291 $ 1,004,725
Software entitlements and maintenance 152,722 117,134 297,134 225,061
Service   188,473     133,672     364,982     251,647  
Total revenues   911,631     792,198     1,780,407     1,481,433  
 
COST OF REVENUES:
Cost of product 260,332 223,832 510,110 416,279
Cost of software entitlements and maintenance 2,259 1,914 4,445 3,998
Cost of service   102,884     82,447     203,048     159,954  
Total cost of revenues   365,475     308,193     717,603     580,231  
GROSS MARGIN   546,156     484,005     1,062,804     901,202  
 
OPERATING EXPENSES:
Sales and marketing 304,045 255,374 607,152 500,017
Research and development 125,496 108,964 250,848 215,520
General and administrative   51,011     39,507     100,474     80,956  
Total operating expenses   480,552     403,845     958,474     796,493  
 
INCOME FROM OPERATIONS 65,604 80,160 104,330 104,709
 
OTHER INCOME (EXPENSES), net:
Interest income 17,619 16,296 33,094 33,332
Interest expense (7,542 ) (1,410 ) (12,117 ) (2,492 )
Net (loss) gain on investments (22,613 ) 13,619 (25,234 ) 13,619
Other income (expense), net   (479 )   231     (2,468 )   1,062  
Total other income, net   (13,015 )   28,736     (6,725 )   45,521  
 
INCOME BEFORE INCOME TAXES 52,589 108,896 97,605 150,230
 
PROVISION FOR INCOME TAXES   3,407     25,138     10,752     32,135  
 
NET INCOME $ 49,182   $ 83,758   $ 86,853   $ 118,095  
 
NET INCOME PER SHARE:
BASIC $ 0.15   $ 0.24   $ 0.26   $ 0.33  
 
DILUTED $ 0.15   $ 0.23   $ 0.26   $ 0.32  
 
SHARES USED IN PER SHARE CALCULATION:
BASIC   327,319     355,665     330,587     360,061  
 
DILUTED   333,385     365,458     337,253     371,544  
NETAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
               
Quarter Ended Six Months Ended
October 24, 2008 October 26, 2007 October 24, 2008 October 26, 2007
Cash Flows from Operating Activities:
Net income $ 49,182 $ 83,758 $ 86,853 $ 118,095

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 35,866 28,282 69,063 55,016
Amortization of intangible assets and patents 8,052 6,795 16,404 13,688
Stock-based compensation 27,763 38,370 64,167 78,781
Net loss (gain) on investments (638 ) (13,619 ) 1,983 (13,619 )
Impairment on investments 13,953 - 13,953 -
Net loss on disposal of equipment 581 128 760 245
Allowance for doubtful accounts 1,740 164 1,704 248
Deferred income taxes (31,718 ) (17,706 ) (40,846 ) (40,398 )
Deferred rent 2,184 113 3,011 512
Income tax benefit from stock-based compensation 25,503 31,853 45,220 42,642
Excess tax benefit from stock-based compensation (24,169 ) (7,247 ) (34,311 ) (15,586 )
Changes in assets and liabilities:
Accounts receivable 60,915 (22,364 ) 211,207 122,633
Inventories (14,756 ) (4,558 ) (8,014 ) (7,703 )
Prepaid expenses and other assets (28,260 ) 6,173 (18,128 ) 21,856
Accounts payable 13,740 (26,095 ) (16,333 ) (40,177 )
Accrued compensation and related benefits 23,683 40,005 (30,756 ) (29,884 )
Other accrued liabilities 6,312 11,198 4,909 (8,930 )
Income taxes payable 1,857 3,718 (536 ) (43,989 )
Other liabilities 401 2,855 (818 ) 62,744
Deferred revenue   35,249     65,849     88,143     112,397  
Net cash provided by operating activities   207,440     227,672     457,635     428,571  
Cash Flows from Investing Activities:
Purchases of investments (219,024 ) (111,097 ) (483,962 ) (439,990 )
Redemptions of investments 155,711 165,612 263,643 627,564
Reclassification from cash and cash equivalents to short-term investments (289,851 ) - (289,851 ) -
Change in restricted cash 457 324 682 (1,443 )
Proceeds from sales of marketable securities - 18,256 - 18,256
Proceeds from sales of nonmarketable securities 1,057 - 1,057 -
Purchases of property and equipment (27,354 ) (37,572 ) (103,967 ) (71,158 )
Purchases of nonmarketable securities   (125 )   -     (250 )   (4,035 )
Net cash (used in) provided by investing activities   (379,129 )   35,523     (612,648 )   129,194  
Cash Flows from Financing Activities:

Proceeds from sale of common stock related to employee stock transactions

10,038 16,076 45,566 66,067
Tax withholding payments reimbursed by restricted stock (37 ) (2,460 ) (2,591 ) (5,202 )
Excess tax benefit from stock-based compensation 24,169 7,247 34,311 15,586
Proceeds from revolving credit facility - 249,754 - 249,754
Proceeds from issuance of convertible notes - - 1,265,000 -
Payment of financing costs (1,136 ) - (26,581 ) -
Sale of common stock warrants - - 163,059 -
Purchase of note hedge - - (254,898 ) -
Repayment of debt - (21,380 ) - (37,340 )
Repayment of revolving credit facility (65,416 ) - (107,251 ) -
Repurchases of common stock   -     (499,973 )   (399,982 )   (699,973 )
Net cash provided by (used in) financing activities   (32,382 )   (250,736 )   716,633     (411,108 )
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents (19,172 ) (10,742 ) (18,947 ) (10,029 )
 
Net Increase in Cash and Cash Equivalents (223,243 ) 1,717 542,673 136,628
Cash and Cash Equivalents:
Beginning of period   1,702,395     623,990     936,479     489,079  
End of period $ 1,479,152   $ 625,707   $ 1,479,152   $ 625,707  
NETAPP, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
         
QUARTER ENDED OCTOBER 24, 2008
 
Amortization of Intangible Assets   Stock-based Compensation Expenses   Acquisition-Related Retention Cost   Prior Acquisition-related Costs   Net Loss (Gain) on Investments   Total
 
Cost of product revenues $ 6,748 $ 624 - - - $ 7,372
Cost of service revenues - 2,419 - - - 2,419
Sales and marketing expense 1,259 12,849 - - - 14,108
Research and development expense - 7,482 - - - 7,482
General and administrative expense - 4,389 - - - 4,389
Net loss (gain) on investments   -     -     -     -     22,613       22,613  
Effect on pre-tax income $ 8,007 $ 27,763 - - $ 22,613 $ 58,383
 
 
 
SIX MONTHS ENDED OCTOBER 24, 2008
 
Amortization of Intangible Assets   Stock-based Compensation Expenses   Acquisition-Related Retention Cost   Prior Acquisition-related Costs   Net Loss (Gain) on Investments   Total
 
Cost of product revenues $ 13,496 $ 1,572 - - - $ 15,068
Cost of service revenues - 5,460 - - - 5,460
Sales and marketing expense 2,518 29,191 - - - 31,709
Research and development expense - 17,669 - - - 17,669
General and administrative expense - 10,275 - - - 10,275
Net loss (gain) on investments   -     -     -     -     25,234       25,234  
Effect on pre-tax income $ 16,014 $ 64,167 - - $ 25,234 $ 105,415
 
QUARTER ENDED OCTOBER 26, 2007
 
Amortization of Intangible Assets   Stock-based Compensation Expenses   Acquisition-Related Retention Cost   Prior Acquisition-related Costs   Net Loss (Gain) on Investments   Total
 
Cost of product revenues $ 5,278 $ 768 - - - $ 6,046
Cost of service revenues - 2,606 - - - 2,606
Sales and marketing expense 971 17,135 1,162 - - 19,268
Research and development expense - 12,332 - - - 12,332
General and administrative expense 50 5,529 - - - 5,579
Net loss (gain) on investments   -     -     -     -     (13,619 )     (13,619 )
Effect on pre-tax income $ 6,299 $ 38,370 $ 1,162 - ($13,619 ) $ 32,212
 
SIX MONTHS ENDED OCTOBER 26, 2007
 
Amortization of Intangible Assets   Stock-based Compensation Expenses   Acquisition-Related Retention Cost   Prior Acquisition-related Costs   Net Loss (Gain) on Investments   Total
 
Cost of product revenues $ 10,556 $ 1,713 - - - $ 12,269
Cost of service revenues - 5,277 - - - 5,277
Sales and marketing expense 1,941 34,626 2,324 - - 38,891
Research and development expense - 25,507 - - - 25,507
General and administrative expense 200 11,658 - 2,800 - 14,658
Net loss (gain) on investments   -     -     -     -     (13,619 )     (13,619 )
Effect on pre-tax income $ 12,697 $ 78,781 $ 2,324 $ 2,800 ($13,619 ) $ 82,983
NETAPP, 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 24, 2008 October 26, 2007 October 24, 2008 October 26, 2007
 
SUMMARY RECONCILIATION OF NET INCOME
NET INCOME $ 49,182 $ 83,758 $ 86,853 $ 118,095
 
Adjustments:
Amortization of intangible assets 8,007 6,299 16,014 12,697
Stock-based compensation expenses 27,763 38,370 64,167 78,781
Acquisition-related retention cost - 1,162 - 2,324
Prior acquisition-related costs - - - 2,800
Net (gain) loss on investments 22,613 (13,619 ) 25,234 (13,619 )
Tax effect on sale of investments - 5,477 - 5,477
Discrete GAAP tax provision items 3,816 (1,127 ) 4,308 (684 )
Income tax effect (19,274 ) (3,906 ) (28,530 ) (13,470 )
       
NON-GAAP NET INCOME $ 92,107   $ 116,414   $ 168,046   $ 192,401  
 
 
 
NET INCOME PER SHARE $ 0.148 $ 0.229 $ 0.258 $ 0.318
 
Adjustments:
Amortization of intangible assets 0.024 0.017 0.047 0.034
Stock-based compensation expenses 0.083 0.105 0.190 0.212
Acquisition-related retention cost - 0.003 - 0.006
Prior acquisition-related costs - - - 0.008
Net (gain) loss on investments 0.068 (0.037 ) 0.075 (0.037 )
Tax effect on sale of investments - 0.015 - 0.015
Discrete GAAP tax provision items 0.011 (0.003 ) 0.013 (0.002 )
Income tax effect (0.058 ) (0.011 ) (0.085 ) (0.036 )
       
NON-GAAP NET INCOME PER SHARE $ 0.276   $ 0.318   $ 0.498   $ 0.518  

CONTACT:
NetApp
David Naumann, 408-822-6551 (Press)
david.nauman@netapp.com
Tara Dhillon, 408-822-6909 (Investors)
tara@netapp.com
Billie Fagenstrom, 408-822-6428 (Investors)
billief@netapp.com