Network Appliance Announces Results for First Quarter Fiscal Year 2007; Achieves 39% Year-Over-Year Revenue Growth.SUNNYVALE Sunnyvale, city (1990 pop. 117,229), Santa Clara co., W Calif., near San Francisco; settled 1849, inc. 1912. A city in Silicon Valley, its many manufactures include semiconductors; machinery and instruments; electrical, electronic, and aerospace products; , Calif. -- Network Appliance (1) A specialized device for use on a network. For example, Web servers, cache servers and file servers can be implemented as general-purpose computers with the appropriate software or as network appliances, which are computers dedicated to a single function and cannot do anything , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NTAP NTAP Network Appliance, Inc. (stock symbol) NTAP Never Take Another Puff NTAP National Track Analysis Program NTAP Notices to Airmen Publication NTAP Windows NT Application Processors NTAP Naval Training Acquisition Process ), the leader in advanced networked storage solutions, today reported results for the first quarter of fiscal year 2007. Revenues for the first fiscal quarter were $621.3 million, an increase of 39% compared to revenues of $448.4 million for the same period a year ago and an increase of 4% compared to $598.0 million in the prior quarter. For the first fiscal quarter, GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income was $54.7 million, or $0.14 per share(1) compared to GAAP net income of $60.1 million, or $0.16 per share for the same period in the prior year. This first quarter of fiscal year 2007 is the first quarter in which Network Appliance adopted the implementation of FAS 123R expensing of stock options in the GAAP results. Non-GAAP(2) net income for the first fiscal quarter increased 55% to $96.6 million, or $0.25 per share, compared to non-GAAP net income of $62.1 million, or $0.16 per share for the same period a year ago. "NetApp See Network Appliance and NetApp Filer. delivered another strong quarter, driven by strong growth in every region of the world," said Dan Warmenhoven, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Network Appliance. "Our new products and new relationships are gaining momentum, and our business with enterprise customers reached record levels. Our results demonstrate that the NetApp value proposition resonates with customers and continues to drive our competitive success." Outlook --Network Appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. estimates that growth in revenue for the second quarter of fiscal year 2007 will be in the range of 2 1/2% to 4%, which translates to 32% to 34% growth year over year. --Including the implementation of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R and with current information and assumptions, the company expects second quarter GAAP earnings per share to finish between $0.13 and $0.16 per share. Network Appliance expects second quarter non-GAAP earnings per share to be in the range of $0.25 to $0.26 per share. --For the full fiscal year 2007, Network Appliance estimates that revenues will finish in the range of 32% to 33% higher than fiscal year 2006. --Including the implementation of SFAS123R and with current information and assumptions, the company expects GAAP earnings per share for fiscal year 2007 to be in the target range of $0.61 to $0.69 per share. Network Appliance estimates full-year non-GAAP earnings per share to be in the range of $1.04 to $1.06 per share. Quarterly Highlights During the first quarter of fiscal year 2007, Network Appliance demonstrated value and leadership in the data center with new products and solutions for the enterprise, introduced the industry's first all-in-one (1) A combination computer printer, scanner, copy machine and fax machine. Some all-in-ones exclude the fax capability or make it an option. (2) A desktop computer that houses every component except the keyboard and mouse inside the same case as the monitor. solution for the small and medium business (SMB (1) (Small to Medium-sized Business) Also called "SME" (small to medium-sized enterprise), it refers to companies that are larger than the small office/home office (SOHO), but not huge. ) market, and continued its leadership position in the iSCSI (Internet SCSI) A protocol that serializes SCSI commands and converts them to TCP/IP. See IP storage. and network-attached storage See NAS. markets. This quarter, NetApp challenged the largest storage competitors for data center leadership by introducing a new line of products and services designed to enhance customers' data management capabilities, offer the best total cost of ownership, and achieve the highest productivity. The FAS6030 and FAS6070, new flagship systems that greatly extend the breadth and scale of the NetApp storage systems portfolio, extend the NetApp FAS line to a substantially higher level of performance and scalability How much a system can be expanded. See scalable. scalability - How well a solution to some problem will work when the size of the problem increases. For example, a central server of some kind with ten clients may perform adequately but with a thousand clients it . Additionally, NetApp debuted an enhanced NetApp Manageability man·age·a·ble adj. That can be managed or controlled: manageable problems. man Software family and new Fibre Channel (FC) SAN capabilities as well as Premium Support Services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services for the FAS6070 and Rapid Deployment Services for Storage Implementation. Highlighting its greater value in data center environments, the expanded NetApp portfolio offers modular, transparent scalability for the largest data center applications and consolidations; maximum flexibility to help customers adapt to business changes; and the highest availability of application data, ultimately enabling more productivity for IT administrators and achieving the best overall total cost of ownership. These offerings are aimed at enterprises that have vast data requirements and demanding service-level agreements and that operate large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. Oracle(R), SAP sap, fluid in plants consisting of water and dissolved substances. Cell sap refers to this fluid present in the large vacuole, or cell cavity, that occupies most of the central portion of mature plant cells. , and Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. (R) enterprise applications. During the quarter, NetApp announced the availability of its new Data ONTAP ONTAP Open Network Technology for Appliance Products (R) GX operating system operating system (OS) Software that controls the operation of a computer, directs the input and output of data, keeps track of files, and controls the processing of computer programs. , giving customers with high-performance computing High-speed computing, which typically refers to supercomputers used in scientific research. (HPC (Handheld PC) A palmtop computer that weighs less than one pound and runs specialized versions of popular applications. Microsoft coined the term for its Windows CE operating system, which is an abbreviated version of Windows. See Pocket PC. ) applications extreme throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. , flexibility, and NetApp hallmark hallmark, mark impressed on silverwork or goldwork to signify official approval of the standard of purity of the metal, also called plate mark. The hallmark was introduced by statute in England in 1300 and enforced by the Goldsmiths' Hall, London. simplicity and reliability. Data ONTAP GX combines the global namespace A Global Namespace is a heterogeneous, enterprise-wide abstraction of all file information, open to dynamic customization based on user-defined parameters. This becomes of particular importance as multiple network based file systems proliferate within an organization -- the challenge functionality of SpinOS (acquired through the Spinnaker Networks(R) acquisition) with the key data management, performance, and high-availability features of Data ONTAP 7G. Although the needs of NetApp enterprise customers are well served by the performance, features, and functionality of Data ONTAP 7G, HPC customers in the areas of energy, entertainment, and electronic design automation have an insatiable demand for extreme levels of performance. Coupled with the new FAS6070 and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. FAS3050 systems, HPC customers can leverage the clustered file system A clustered file system is a file system which is simultaneously mounted on multiple servers. There are several approaches to clustering, most of which do not employ a clustered file system. technology inherent in Data ONTAP GX, which enables individual files or datasets to be striped striped adj. Having lines or bands of different color or texture. Adj. 1. striped - marked or decorated with stripes stripy patterned - having patterns (especially colorful patterns) across multiple nodes to achieve far greater performance than can be achieved with a traditional storage system. Data ONTAP GX, coupled with the new FAS6070, scales in capacity up to 6PB and achieves the unprecedented industry performance of more than one million operations per second, based on the SPEC (1) See specs and specification. (2) (SPEC) (Standard Performance Evaluation Corporation, Warrenton, VA, www.specbench.org) An organization founded in 1988 to establish standard benchmarks for computers. SFS (1) (Self-certifying File System) A global, network file system sponsored by DARPA that runs under Unix. Providing strong security in an untrusted environment, it enables any client to access any server that supports it. benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. . During the quarter, NetApp unveiled the StoreVault(TM) S500, aimed at the small and medium business market segment. StoreVault S500 combines enterprise-proven storage technology from NetApp with the scalability, simplicity, security, and affordability that are missing in today's network storage solutions for SMBs. The StoreVault S500 is the industry's first scalable all-in-one network storage appliance for the SMB market See SMB. segment that supports NAS (1) See network access server. (2) (Network Attached Storage) A specialized file server that connects to the network. A NAS device contains a slimmed-down operating system and a file system and processes only I/O requests by supporting the popular , iSCSI SAN, and FC SAN, providing SMB customers unparalleled flexibility compared to direct-attached storage Direct-attached storage (DAS) refers to a digital storage system directly attached to a server or workstation, without a storage network in between. It is a retronym, mainly used to differentiate non-networked storage from SAN and NAS. . Continuing disclosures of privacy breaches are driving requirements for enterprise-wide encryption The reversible transformation of data from the original (the plaintext) to a difficult-to-interpret format (the ciphertext) as a mechanism for protecting its confidentiality, integrity and sometimes its authenticity. Encryption uses an encryption algorithm and one or more encryption keys. and key management. This quarter, Decru, a NetApp company, unveiled a new key management platform, the Decru(R) Lifetime Key Management(TM) 3.0 Appliance (LKM LKM Loadable Kernel Module LKM Linux Kernel Module LKM League of Kansas Municipalities LKM Local Key Manager Appliance). The LKM Appliance extends Decru's capabilities for secure, automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. , enterprise-class management of storage encryption keys and adds integration capabilities for third-party encryption products. In other product news, NetApp was awarded Storage Vendor of the Year and NAS Product of the Year for the NetApp(R) NearStore(R) R200 storage system at the Storage Awards: The Storries III. Judged by the readers of Storage Magazine, the UK's leading IT storage magazine, the Storage Awards recognize excellence and innovation in the UK storage industry. From a market perspective, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. IDC's Worldwide Quarterly Disk Storage Systems Tracker Q1 2006,(3) NetApp gained revenue share in the networked storage market, growing to a 9.6% share in Q1 2006, up from an 8.5% share at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005. NetApp also gained capacity share in networked storage, growing to 19.5% from 15.8% in the same period. In the FC SAN market, NetApp continued to grow faster than the market in both revenue and capacity, both sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and year over year. Sequentially, FC SAN market revenue dropped 12.9% while NetApp grew 17.4%. Year over year, the FC SAN market revenue grew 14.8% while NetApp grew 60.2%. In the NAS market, NetApp grew faster than the market in both revenue and capacity, both sequentially and year over year. Sequentially, the NAS market revenue dropped 1.5% while NetApp grew 7.3%. Year over year, the NAS market revenue grew 14.7% while NetApp grew 17.8%. NetApp continues to lead the NAS market in terms of capacity, with a 45.8% share in Q1 2006, up from a 42.6% share at year-end 2005. NetApp demonstrated continued leadership in the iSCSI market in terms of revenue and capacity, with first place market share for Q1 2006 in capacity shipped (40.0%) and in revenue (29.7%). In Q1 2006, the iSCSI market revenue dropped 7.2% sequentially, while NetApp grew 10.0%. Also this quarter, NetApp announced it has shown the strongest market share growth among the top 10 vendors of storage software and has moved into the top four vendors for market share in 2005. According to Gartner's report "Market Share: Storage Management Software, Worldwide, 2005,"(4) the total market for new license revenue in 2004 to 2005 grew at a rate of 8.8%, with NetApp beating the market with a growth rate of 42.3% for the same period. For the third year in a row, this was the fastest growth rate among the top 10 vendors in the space and for the first year places NetApp in the top four, with a total overall market share of 6.5%. On the partner front, NetApp unveiled several new solution enhancements and partner offerings with Attune at·tune tr.v. at·tuned, at·tun·ing, at·tunes 1. To bring into a harmonious or responsive relationship: an industry that is not attuned to market demands. 2. Systems, Brocade brocade (brōkād`), fabric, originally silk, generally reputed to have been developed to a high state of perfection in the 16th and 17th cent. in France, Italy, and Spain. , Cisco, Emulex Emulex NYSE: ELX is a California based manufacturer of storage networking infrastructure solutions. Products include host bus adapters (HBAs), embedded storage switches, storage I/O controller and SAN storage switch products. , Microsoft, Symantec (Symantec Corporation, Cupertino, CA, www.symantec.com) A software company founded in 1982 by Dr. Gary Hendrix. It was acquired by Gordon Eubanks in 1984 and released its Q&A file manager the following year. In 1990, it merged with Peter Norton Computing, Inc. , and Reconnex, to address a variety of data concerns, including network file management, data content monitoring, data protection, and FC SAN scalability. In corporate news, NetApp entered into a definitive agreement to sell its NetCache A family of Web cache servers from Network Appliance that come in a wide range of sizes for use in branch offices to large service providers. NetCache devices support video-on-demand and broadcast streaming and use Network Appliance's innovative Data ONTAP microkernel OS and Write (TM) business to Blue Coat Systems. Also during the quarter, Edward Edward killed his father at his mother’s instigation. [Br. Balladry: Edward in Benét, 302] See : Patricide Kozel, a member of the Yahoo! board of directors and CEO of cRight, Inc., a developer of anti-piracy See SIIA. software, joined the NetApp board of directors. Webcast and Conference Call Information --The NetApp quarterly results conference call will be broadcast live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http://investors.netapp.com on Wednesday Wednesday: see week. , August 16, 2006, at 1:30 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) 700-0133 in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and (617) 213-8831 outside the United States. The passcode for both numbers is 31954843. --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, with replay code 85474493. 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 The capability of combining different data formats such as files, folders, contacts and e-mail messages into collections that can be viewed and manipulated as one group. See WinFS. 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. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements include all of the statements under the Outlook section relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our forecasted operating results and metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. for second quarter of fiscal 2007 and for all of fiscal 2007; statements regarding our optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. for our 2007 fiscal year generally; statements regarding the anticipated benefits of our new products, technologies, and services, including Data ONTAP GX, Decru Lifetime Key Management 3.0 Appliance, StoreVault, the FAS6030, and the FAS6070; and statements regarding anticipated benefits from partner 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 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 An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. distribution channels; our ability to develop, maintain, and strengthen our relationships and product offerings with strategic partners; risks associated with international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. ; 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 dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. 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 di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. number of shares for all periods presented. (2) Non-GAAP results of operations exclude amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , stock-based compensation, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). charges/recoveries, net gain/loss on investments, and the related effects on income taxes. (3) IDC's Worldwide Quarterly Disk Storage Systems Tracker Q1 2006. (4) Gartner (Gartner, Inc., Stamford, CT, www.gartner.com) The largest information technology consulting firm that specializes in research and analysis. Founded in 1979 by Gideon Gartner, it has grown through acquisitions, including Dataquest in 1995 and Techrepublic in 2000. Dataquest (Dataquest Inc., San Jose, CA, www.dataquest.com) A major market research and analysis firm in the information field. Dataquest offers market intelligence on more than 25 topics and provides conferences, annual subscriptions and custom research. , "Market Share: Storage Management Software, Worldwide, 2005," Aman Munglani and Nikhil Nikhil is a Hindi and Sanskrit word that means "complete" or "universal". Sanskrit fragmentation of the word yields: Ni (without) + Kh (sky or boundary) + L (agreed or liked). It also has connotations with the colour blue, possibly because of the word "sky" being one of its roots. Pank, June June: see month. 28, 2006. NetApp, Data ONTAP, NearStore, and Spinnaker Networks are registered trademarks and Network Appliance, NetCache, and StoreVault are trademarks of Network Appliance Inc. in the United States and other countries. Decru is a registered trademark and Lifetime Key Management is a trademark of Decru Inc., a NetApp company. 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 financial measures 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 A component or device that is separate and distinct and treated as a singular unit. GAAP provision 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 (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. 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 28, April 30,
2006 2006
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $442,329 $461,256
Short-term investments 830,051 861,636
Accounts receivable, net 376,920 415,295
Inventories 56,242 64,452
Prepaid expenses and other assets 41,140 43,536
Short-term restricted cash and investments 135,141 138,539
Deferred income taxes 48,496 48,496
----------- -----------
Total current assets 1,930,319 2,033,210
PROPERTY AND EQUIPMENT, net 533,121 513,193
GOODWILL 487,535 487,535
INTANGIBLE ASSETS, net 69,869 75,051
LONG-TERM RESTRICTED CASH AND INVESTMENTS 96,632 108,371
OTHER ASSETS 63,193 43,605
----------- -----------
$3,180,669 $3,260,965
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $163,354 $166,211
Accounts payable 99,927 101,278
Income taxes payable 33,527 51,577
Accrued compensation and related benefits 90,979 129,636
Other accrued liabilities 65,122 69,073
Deferred revenue 433,599 399,388
----------- -----------
Total current liabilities 886,508 917,163
----------- -----------
LONG-TERM DEBT 108,780 133,789
LONG-TERM DEFERRED REVENUE 309,611 282,149
LONG-TERM OBLIGATIONS 4,943 4,411
----------- -----------
1,309,842 1,337,512
----------- -----------
STOCKHOLDERS' EQUITY 1,870,827 1,923,453
----------- -----------
$3,180,669 $3,260,965
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
-------------------
July 28, July 29,
2006 2005
--------- ---------
REVENUES:
Product $465,611 $340,926
Software subscriptions 74,830 53,704
Service 80,847 53,773
--------- ---------
Total revenues 621,288 448,403
--------- ---------
COST OF REVENUES:
Cost of product 187,965 131,499
Cost of software subscriptions 2,292 2,256
Cost of service 57,961 41,162
--------- ---------
Total cost of revenues 248,218 174,917
--------- ---------
GROSS MARGIN 373,070 273,486
--------- ---------
OPERATING EXPENSES:
Sales and marketing 195,518 137,814
Research and development 88,678 52,160
General and administrative 32,396 21,196
Restructuring recoveries (74) (1,256)
--------- ---------
Total operating expenses 316,518 209,914
--------- ---------
INCOME FROM OPERATIONS 56,552 63,572
OTHER INCOME (EXPENSES), net:
Interest income 16,656 9,048
Interest expense (3,871) (48)
Other income (expense), net 779 (224)
Net gain on investments - 33
--------- ---------
Total other income, net 13,564 8,809
---------- --------
INCOME BEFORE INCOME TAXES 70,116 72,381
PROVISION FOR INCOME TAXES 15,446 12,261
--------- ---------
NET INCOME $ 54,670 $ 60,120
========= =========
NET INCOME PER SHARE:
BASIC $ 0.15 $ 0.16
========= =========
DILUTED $ 0.14 $ 0.16
========= =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 373,869 367,438
========= =========
DILUTED 391,319 386,383
========= =========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended
--------------------
July 28, July 29,
2006 2005
---------- ----------
Cash Flows from Operating Activities:
Net income $ 54,670 $ 60,120
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 18,714 14,756
Amortization of intangible assets 4,686 2,671
Amortization of patents 495 495
Stock-based compensation 43,022 2,028
Net loss (gain) on investments 6 (33)
Net loss on disposal of equipment 81 404
Allowance (reduction) for doubtful
accounts 144 (379)
Deferred rent 199 48
Excess tax benefit from stock-based
compensation (4,489) -
Changes in assets and liabilities:
Accounts receivable 38,187 57,892
Inventories (520) (4,998)
Prepaid expenses and other assets 5,384 (3,997)
Accounts payable (1,139) (2,691)
Income taxes payable (6,914) 9,648
Accrued compensation and related
benefits (38,964) (32,418)
Other accrued liabilities (10,980) (1,302)
Deferred revenue 61,982 36,716
---------- ----------
Net cash provided by operating
activities 164,564 138,960
---------- ----------
Cash Flows from Investing Activities:
Purchases of investments (874,416) (222,787)
Redemptions of investments 906,423 213,977
Redemptions of restricted investments 16,322 -
Increase (decrease) in restricted cash 252 (1,504)
Purchases of property and equipment (23,056) (33,538)
Proceeds from sales of investments 17 62
Purchases of equity securities (1,183) (275)
Purchase of business, net of cash acquired - (11,831)
---------- ----------
Net cash provided by (used in)
investing activities 24,359 (55,896)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from sale of common stock related to
employee stock transactions 36,831 50,763
Excess tax benefit from stock-based
compensation 4,489 -
Repayment of debt (27,866) -
Tax withholding payments reimbursed by
restricted stock (980) (419)
Repurchases of common stock (220,000) (95,543)
---------- ----------
Net cash used in financing activities (207,526) (45,199)
---------- ----------
Effect of Exchange Rate Changes on Cash (324) 178
Net Increase (Decrease) in Cash and Cash
Equivalents (18,927) 38,043
Cash and Cash Equivalents:
Beginning of period 461,256 193,542
---------- ----------
End of period $ 442,329 231,585
========== ==========
NETWORK APPLIANCE, INC.
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
QUARTER ENDED JULY 28, 2006
----------------------------------------------------
Stock- Net
Amortizat based (Gain)/
-ion of Compensat Restructuring Loss on
Intangible -ion (Recoveries)/ Invest
Assets Expenses Charges -ments Total
----------------------------------------------------
Cost of product
revenues $3,866 $670 - - $4,536
Cost of service
revenues - 2,634 - - 2,634
Sales and
marketing
expenses 583 18,717 - - 19,300
Research and
development
expenses - 13,868 - - 13,868
General and
administrative
expenses 237 7,133 - - 7,370
Restructuring
(recoveries)/
charges - - (74) - (74)
----------------------------------------------------
Effect on pre-tax
income $4,686 $43,022 ($74) - $47,634
QUARTER ENDED JULY 29, 2005
----------------------------------------------------
Stock- Net
Amortizat based (Gain)/
-ion of Compensat Restructuring Loss on
Intangible -ion (Recoveries)/ Invest
Assets Expenses Charges -ments Total
----------------------------------------------------
Cost of product
revenues $1,108 - - - $1,108
Cost of service
revenues - - - - -
Sales and
marketing
expenses 207 515 - - 722
Research and
development
expenses - 1,358 - - 1,358
General and
administrative
expenses 1,356 155 - - 1,511
Restructuring
(recoveries)/
charges - - (1,256) - (1,256)
Net (gain)/loss
on investments - - - (33) (33)
----------------------------------------------------
Effect on pre-tax
income $2,671 $2,028 ($1,256) ($33) $3,410
NETWORK APPLIANCE, INC.
RECONCILIATION OF NET INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
-----------------
July 28, July 29,
2006 2005
-------- --------
NET INCOME $54,670 $60,120
Adjustments:
Amortization of intangible assets 4,686 2,671
Stock-based compensation expenses 43,022 2,028
Restructuring (recoveries)/charges (74) (1,256)
Net (gain)/loss on investments - (33)
Income tax effect (5,749) (1,381)
-------- --------
NON-GAAP NET INCOME $96,555 $62,149
======== ========
EARNINGS PER SHARE $0.140 $0.156
Adjustments:
Amortization of intangible assets 0.012 0.007
Stock-based compensation expenses 0.110 0.005
Restructuring (recoveries)/charges (0.000) (0.003)
Net (gain)/loss on investments 0.000 (0.000)
Income tax effect (0.015) (0.004)
-------- --------
NON-GAAP EARNINGS PER SHARE $0.247 $0.161
======== ========
NETWORK APPLIANCE, INC.
RECONCILIATION OF NON GAAP GUIDANCE TO GAAP
EXPRESSED AS EARNINGS PER SHARE
SECOND QUARTER and FULL YEAR 2007
(Unaudited)
Second Quarter Full Year
2007 2007
--------------- ---------------
ADJUSTMENTS OF SPECIFIC ITEMS
TO EARNINGS PER SHARE FOR
THE SECOND QUARTER AND FULL
YEAR 2007 ($):
Adjustment:
Amortization of intangible assets (0.012) (0.048)
Stock based compensation expense (0.100 - 0.122) (0.389 - 0.456)
Restructuring (recoveries)/charges - -
Income tax effect 0.016 - 0.018 0.063 - 0.073
--------------- ---------------
NET DECREASE IN EARNINGS PER SHARE (0.096 - 0.116) (0.374 - 0.431)
=============== ===============
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