-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EUYxKXqYuG23pm/uIqmsH0Ihi1DJ77UdFHNtcV0muT5peRw4NMsvUhW0KxTVNosZ KGbKB+FqbNRSDKXoc2b/UA== 0001157523-05-001486.txt : 20050215 0001157523-05-001486.hdr.sgml : 20050215 20050215160443 ACCESSION NUMBER: 0001157523-05-001486 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050215 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050215 DATE AS OF CHANGE: 20050215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK APPLIANCE INC CENTRAL INDEX KEY: 0001002047 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 770307520 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27130 FILM NUMBER: 05617234 BUSINESS ADDRESS: STREET 1: 495 EAST JAVA DR CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4088226000 MAIL ADDRESS: STREET 1: 495 EAST JAVA DR CITY: SUNNYVALE STATE: CA ZIP: 94089 8-K 1 a4823391.txt NETWORK APPLIANCE, INC. 8-K 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): February 15, 2005 ---------------------- Network Appliance, Inc. (Exact name of Registrant as specified in its charter) Delaware 0-27130 77-0307520 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification Number) 495 East Java Drive Sunnyvale, CA 94089 (Address of principal executive offices) (Zip Code) (408) 822-6000 (Registrant's telephone number, including area code) ================================================================================ ================================================================================ Item 2.02. On February 15, 2005, Network Appliance, Inc. issued a press release announcing its earnings for the third quarter of its fiscal year 2005. The press release is attached as an exhibit to this Form 8-K, and the information set forth therein is hereby incorporated by reference into this Item 2.02. Item 9.01(c). Network Appliance, Inc.'s February 15, 2005 press release is hereby furnished as Exhibit 9.01(c)(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. February 15, 2005 By: /s/ Steven Gomo ----------------------- Steven J. Gomo Chief Financial Officer ================================================================================ Index to Exhibits Exhibit Description - ------- ----------- 9.01(c)(1) Press release of Network Appliance, Inc. issued on February 15, 2005. ================================================================================ EX-99.1 2 a4823391ex991.txt NETWORK APPLIANCE, INC. EXHIBIT 99.1 Exhibit 99.1 Network Appliance Announces Results for Third Quarter Fiscal Year 2005; Generates a Record $148.5 Million in Cash from Operations SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 15, 2005--Network Appliance, Inc. (Nasdaq:NTAP), the leader in advanced networked storage solutions, today reported results for the third quarter of fiscal year 2005. Revenues for the third fiscal quarter were $412.7 million, an increase of 39% compared to revenues of $297.3 million for the same period a year ago and a 10% increase compared to $375.2 million in the prior quarter. For the third fiscal quarter, GAAP net income increased 50% to $60.1 million, or $0.16 per share(1) compared to GAAP net income of $40.2 million, or $0.11 per share for the same period in the prior year. Pro forma(2) net income for the third fiscal quarter increased 57% to $62.8 million, or $0.16 per share, compared to pro forma net income of $40.1 million, or $0.11 per share for the same period a year ago. Revenues for the first nine months of the current fiscal year totaled $1.1 billion, compared to revenues of $833.3 million for the first nine months of the prior fiscal year, an increase of 38% year over year. For the first nine months of the current fiscal year, GAAP net income increased 40% to $162.3 million, or $0.43 per share, compared with GAAP net income of $115.6 million, or $0.32 per share for the same period in the prior year. Pro forma net income for the first nine months of the current fiscal year totaled $171.1 million, or $0.45 per share, compared to pro forma net income of $102.4 million, or $0.28 per share for the first nine months of the prior fiscal year. "This quarter's strong, well-rounded results demonstrate that our investments in sales, services and innovation are paying off, both in product and services revenue growth," said Dan Warmenhoven, CEO of Network Appliance. "Customers' increasing need for data protection, including compliance, disk-to-disk backup, and business continuity solutions, is one of the key drivers of our growth this quarter. In addition, we expect our leadership in emerging technologies such as iSCSI, virtualization, and the storage grid to increasingly contribute to our growth over the long term." Outlook -- Network Appliance estimates that revenue for the fourth quarter will grow sequentially by 6% to 9%. This projection reflects year over year growth rates of 30% to 33%. -- The company expects fourth quarter pro forma earnings per share to finish at $0.16 to $0.17 per share. Fourth quarter GAAP earnings per share are projected at $0.16 per share. -- For the full fiscal year 2005, Network Appliance estimates that revenues will finish 35% to 36% higher than fiscal year 2004. -- Network Appliance estimates full year pro forma earnings per share to finish at $0.60 to $0.62 per share. GAAP earnings per share are projected for fiscal year 2005 at $0.57 to $0.59 per share. Quarterly Highlights Throughout the third quarter of fiscal year 2005, Network Appliance reinforced its leadership position by introducing the latest version of its powerful enterprise storage software, expanding partnerships, and continuing to demonstrate leadership in the iSCSI market. Customers deploying NetApp(R) solutions during the quarter for a variety of database, security, and other data center and mission-critical applications included AIRBUS France, Defense Finance and Accounting Service, The Dow Chemical Company, GlaxoSmithKline, IKON Digital Express, Mayo Clinic, Mentor Graphics Corporation, NASA, Philips Semiconductors, RadioShack Corporation, Synopsys, Inc., and Time Warner Cable. Network Appliance achieved a critical milestone in expanding and delivering its storage grid vision by shipping the latest version of its powerful enterprise storage software, Data ONTAP(TM) 7G, during the third quarter. Customers using Data ONTAP 7G and its advanced virtualization capabilities can double their storage utilization, dramatically increase I/O performance for enterprise-class applications, and significantly reduce storage management costs for multi-application environments. The two primary new features of Data ONTAP 7G that offer users compelling benefits are FlexVol(TM) and FlexClone(TM) software. FlexVol creates dynamically virtualized, flexible data containers that eliminate performance and utilization tradeoffs and renders obsolete the notion of storage volumes being statically tied to specific physical or logical disks. In short, FlexVol is the feature of Data ONTAP 7G that provides dynamic virtualization. FlexClone enables the near-instantaneous creation of multiple, independently writable images of FlexVol data sets, with zero storage overhead. Competitive approaches for cloning data take up the same amount of storage space as the full original data set. FlexClone represents a breakthrough innovation for database applications and modeling. Additionally, the NetApp enterprise gFiler(TM) storage systems will now provide Fibre Channel data access and fully leverage the new enterprise storage virtualization capabilities in Data ONTAP 7G for multi-vendor storage environments. The NetApp gFiler solution has extended its storage systems support to include the HP(R) StorageWorks XP Disk Array family and the IBM(R) TotalStorage DS4000 series (formerly named "FAStT"), complementing existing support for Hitachi Data Systems(R), Hitachi Limited(R), Sun(TM) StorEdge(R) 9900 Disk Array family, and IBM Enterprise Storage Server disk array systems. During the quarter, NetApp also introduced the next addition to its data management software portfolio with SnapValidator(TM). SnapValidator can now be applied across the full line of NetApp storage systems, across any protocol, supporting the Oracle(R) Databases, adding to a robust, highly reliable, and available data environment. In the iSCSI arena, NetApp continued to drive iSCSI adoption. According to IDC, NetApp maintained a strong lead in the iSCSI SAN storage market for the third quarter of calendar year 2004 (3Q04). In its core NAS market, NetApp demonstrated continued leadership in NAS hardware for 3Q04 in both revenue and terabytes shipped. Also according to IDC, the company posted a 36.3% revenue market share, with a 13.8% increase in revenue year over year (vs. the third quarter of calendar 2003). On the partner front, the company achieved Gold Certified status in the Microsoft Partner Program with a competency in Advanced Infrastructure Solutions recognizing NetApp expertise and total impact in the technology marketplace. NetApp also unveiled several new solution enhancements and partner offerings with Alacritus Software, Atempo, CommVault Systems, Inc., NetEx, QLogic Corporation, Red Hat Inc., Secure Computing Corporation, Sophos, and Syncsort, Inc. to address a variety of data concerns, including Internet access and security, virtual backup, data management, virus protection, data protection and recovery, iSCSI software for Linux environments and other business-critical initiatives facing enterprise customers. In corporate news, NetApp executives, products and the overall company were honored for a variety of achievements. Chief Executive Officer Dan Warmenhoven was honored with the Ernst & Young Entrepreneur Of The Year(R) 2004 Award in the technology category for his outstanding vision, leadership, and achievement as CEO of Network Appliance. Cited for its "unrivaled" unified storage architecture and its "unmatched" flexibility, scalability, and continuity in the storage industry, the Network Appliance FAS270c was named "Best NAS Solution of the Year" in InfoWorld's 2005 Technology of the Year honors. NetApp was also honored by FORTUNE magazine as one of the "100 Best Companies to Work For" for the third consecutive year. This year, NetApp ranked at number 24, up from number 48 last year, reflecting the company's specific emphasis on attracting and retaining the best talent in the industry and continuing to demonstrate the values of what NetApp CEO Dan Warmenhoven calls a "model company." The elite and prestigious FORTUNE listing is largely determined by employee feedback. Conference Call Information -- The NetApp quarterly results conference call will be broadcast live via the Internet at http://investors.netapp.com/ on Tuesday, February 15, 2005, at 2:00 p.m. Pacific time. This press release and any other information related to the call will also be posted to the Web site at that location. The conference call will also be available live in a listen-only format at 800-638-5439 in the United States and 617-614-3945 outside the United States. The passcode for both numbers is 60737727. -- 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, with replay code 34738667. 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 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 service and product growth, leadership in emerging technologies, and all of the statements under the Outlook section. 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 enterprise service offerings, and our ability to design products and services that 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 represent the diluted number of shares for all periods presented. (2) Pro forma results for all periods presented and the projections in the Outlook section exclude amortization of intangible assets, stock compensation, restructuring charges, net gain/loss on investments, and the related effects on income taxes, as well as an income tax benefit from a nonrecurring foreign tax ruling. NetApp is a registered trademark and Network Appliance, Data ONTAP, FlexVol, FlexClone, gFiler, SnapValidator 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) January 28, April 30, 2005 2004 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents (1) $181,373 $92,328 Short-term investments (1) 925,061 715,637 Accounts receivable, net 234,339 193,942 Inventories 38,024 34,109 Prepaid expenses and other 35,764 29,057 Deferred income taxes 34,260 24,163 ------------ ------------ Total current assets 1,448,821 1,089,236 PROPERTY AND EQUIPMENT, net 405,907 370,717 GOODWILL 291,816 291,816 INTANGIBLE ASSETS, net 23,367 31,718 OTHER ASSETS 73,855 93,779 ------------ ------------ 2,243,766 1,877,266 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $68,501 $52,719 Income taxes payable 12,879 16,033 Accrued compensation and related benefits 83,261 65,186 Other accrued liabilities 55,734 43,683 Deferred revenue 228,996 166,602 ------------ ------------ Total current liabilities 449,371 344,223 LONG-TERM DEFERRED REVENUE 161,340 112,337 LONG-TERM OBLIGATIONS 4,525 4,858 ------------ ------------ 615,236 461,418 ------------ ------------ STOCKHOLDERS' EQUITY 1,628,530 1,415,848 ------------ ------------ 2,243,766 1,877,266 ============ ============ (1) In the third quarter, the Company began to classify its investment in auction-rate securities as short term investments. These investments were included in cash and equivalents in previous periods ($148.8 million at April 30, 2004), and such amounts have been reclassified in the accompanying interim financial statements to conform to the current period classification. This change in classification had no effect on the amounts of total current assets, total assets, net income or cash flow from operations of the Company. NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Quarter Ended Nine Months Ended ----------------------- ----------------------- January 28, January 30, January 28, January 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- REVENUES: Product revenue $367,903 $268,955 $1,029,334 $754,273 Service revenue 44,803 28,332 116,969 79,073 ----------- ----------- ----------- ----------- Total revenues 412,706 297,287 1,146,303 833,346 ----------- ----------- ----------- ----------- COST OF REVENUES: Cost of product revenue 127,118 93,442 353,060 266,571 Cost of service revenue 33,454 23,722 94,990 65,466 ----------- ----------- ----------- ----------- Total cost of revenues 160,572 117,164 448,050 332,037 ----------- ----------- ----------- ----------- GROSS MARGIN 252,134 180,123 698,253 501,309 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Sales and marketing 118,668 85,975 331,087 247,516 Research and development 43,603 32,948 122,957 96,002 General and administrative 20,136 13,744 54,888 38,737 Stock compensation 2,189 465 6,432 2,012 Restructuring charges (270) - (270) 1,110 ----------- ----------- ----------- ----------- Total operating expenses 184,326 133,132 515,094 385,377 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 67,808 46,991 183,159 115,932 OTHER INCOME (EXPENSES), net: Interest income 6,031 3,862 16,216 9,737 Other expenses, net (500) (833) (1,322) (2,089) Net gain on investments 41 217 41 362 ----------- ----------- ----------- ----------- Total other income, net 5,572 3,246 14,935 8,010 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 73,380 50,237 198,094 123,942 PROVISION FOR INCOME TAXES 13,253 10,085 35,776 8,304 ----------- ----------- ----------- ----------- NET INCOME $60,127 $40,152 $162,318 $115,638 =========== =========== =========== =========== NET INCOME PER SHARE: BASIC $0.17 $0.12 $0.45 $0.34 =========== =========== =========== =========== DILUTED $0.16 $0.11 $0.43 $0.32 =========== =========== =========== =========== SHARES USED IN PER SHARE CALCULATION: BASIC 362,563 346,305 359,031 343,906 =========== =========== =========== =========== DILUTED 385,869 366,429 377,972 363,214 =========== =========== =========== =========== NETWORK APPLIANCE, INC. PRO FORMA (1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Quarter Ended Nine Months Ended ----------------------- ----------------------- January 28, January 30, January 28, January 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- REVENUES: Product revenue $367,903 $268,955 $1,029,334 $754,273 Service revenue 44,803 28,332 116,969 79,073 ----------- ----------- ----------- ----------- Total revenues 412,706 297,287 1,146,303 833,346 ----------- ----------- ----------- ----------- COST OF REVENUES: Cost of product revenue 126,260 93,215 350,486 263,616 Cost of service revenue 33,454 23,722 94,990 65,466 ----------- ----------- ----------- ----------- Total cost of revenues 159,714 116,937 445,476 329,082 ----------- ----------- ----------- ----------- GROSS MARGIN 252,992 180,350 700,827 504,264 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Sales and marketing 118,461 85,975 330,467 247,516 Research and development 43,603 32,948 122,957 96,002 General and administrative 18,868 13,744 51,083 38,737 ----------- ----------- ----------- ----------- Total operating expenses 180,932 132,667 504,507 382,255 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 72,060 47,683 196,320 122,009 OTHER INCOME (EXPENSES), net 5,531 3,029 14,894 7,648 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 77,591 50,712 211,214 129,657 PROVISION FOR INCOME TAXES 14,742 10,649 40,131 27,228 ----------- ----------- ----------- ----------- NET INCOME $62,849 $40,063 $171,083 $102,429 =========== =========== =========== =========== NET INCOME PER SHARE: BASIC $0.17 $0.12 $0.48 $0.30 =========== =========== =========== =========== DILUTED $0.16 $0.11 $0.45 $0.28 =========== =========== =========== =========== SHARES USED IN PER SHARE CALCULATION: BASIC 362,563 346,305 359,031 343,906 =========== =========== =========== =========== DILUTED 385,869 366,429 377,972 363,214 =========== =========== =========== =========== (1) Pro forma results of operations exclude amortization of intangible assets, stock compensation, restructuring charges, net gain/loss on investments and the related effects on income taxes, as well as an income tax benefit from a non-recurring foreign tax ruling. 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 Nine Months Ended ----------------------- ----------------------- January 28, January 30, January 28, January 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- SUMMARY RECONCILIATION OF NET INCOME NET INCOME $60,127 $40,152 $162,318 $115,638 Adjustments: Amortization of intangible assets 2,333 227 6,999 2,955 Stock compensation 2,189 465 6,432 2,012 Restructuring charges (270) - (270) 1,110 Net gain on investments (41) (217) (41) (362) Income tax effect (1,489) (564) (4,355) (2,093) Income tax benefit from foreign tax ruling - - - (16,831) ----------- ----------- ----------- ----------- PROFORMA NET INCOME $62,849 $40,063 $171,083 $102,429 =========== =========== =========== =========== DILUTED PRO FORMA NET INCOME PER SHARE $0.16 $0.11 $0.45 $0.28 =========== =========== =========== =========== SHARES USED IN DILUTED PRO FORMA NET INCOME PER SHARE CALCULATION: 385,869 366,429 377,972 363,214 =========== =========== =========== =========== DETAILED RECONCILIATION OF SPECIFIC ITEMS: COST OF REVENUES $160,572 $117,164 $448,050 $332,037 Adjustment: Amortization of intangible assets (858) (227) (2,574) (2,955) ----------- ----------- ----------- ----------- PRO FORMA COST OF REVENUES $159,714 $116,937 $445,476 $329,082 =========== =========== =========== =========== GROSS MARGIN $252,134 $180,123 $698,253 $501,309 Adjustment: Amortization of intangible assets 858 227 2,574 2,955 ----------- ----------- ----------- ----------- PRO FORMA GROSS MARGIN $252,992 $180,350 $700,827 $504,264 =========== =========== =========== =========== SALES AND MARKETING EXPENSES $118,668 $85,975 $331,087 $247,516 Adjustments: Amortization of intangible assets (207) - (620) - ----------- ----------- ----------- ----------- PRO FORMA SALES AND MARKETING EXPENSES $118,461 $85,975 $330,467 $247,516 =========== =========== =========== =========== GENERAL AND ADMINISTRATIVE EXPENSES $20,136 $13,744 $54,888 $38,737 Adjustments: Amortization of intangible assets (1,268) - (3,805) - ----------- ----------- ----------- ----------- PRO FORMA GENERAL AND ADMINISTRATIVE EXPENSES $18,868 $13,744 $51,083 $38,737 =========== =========== =========== =========== OPERATING EXPENSES $184,326 $133,132 $515,094 $385,377 Adjustments: Stock compensation (2,189) (465) (6,432) (2,012) Amortization of intangible assets (1,475) - (4,425) - Restructuring charges 270 - 270 (1,110) ----------- ----------- ----------- ----------- PRO FORMA OPERATING EXPENSES $180,932 $132,667 $504,507 $382,255 =========== =========== =========== =========== INCOME FROM OPERATIONS $67,808 $46,991 $183,159 $115,932 Adjustments: Amortization of intangible assets 2,333 227 6,999 2,955 Stock compensation 2,189 465 6,432 2,012 Restructuring charges (270) - (270) 1,110 ----------- ----------- ----------- ----------- PRO FORMA INCOME FROM OPERATIONS $72,060 $47,683 $196,320 $122,009 =========== =========== =========== =========== TOTAL OTHER INCOME (EXPENSES), NET $5,572 $3,246 $14,935 $8,010 Adjustments: Net gain on investments (41) (217) (41) (362) ----------- ----------- ----------- ----------- PRO FORMA TOTAL OTHER INCOME (EXPENSES), NET $5,531 $3,029 $14,894 $7,648 =========== =========== =========== =========== INCOME BEFORE INCOME TAXES $73,380 $50,237 $198,094 $123,942 Adjustments: Amortization of intangible assets 2,333 227 6,999 2,955 Stock compensation 2,189 465 6,432 2,012 Restructuring charges (270) 0 (270) 1,110 Net gain on investments (41) (217) (41) (362) ----------- ----------- ----------- ----------- PRO FORMA INCOME BEFORE INCOME TAXES $77,591 $50,712 $211,214 $129,657 =========== =========== =========== =========== PROVISION FOR INCOME TAXES $13,253 $10,085 $35,776 $8,304 Adjustments: Income tax effect 1,489 564 4,355 2,093 Income tax benefit from foreign tax ruling - - - 16,831 ----------- ----------- ----------- ----------- PRO FORMA PROVISION FOR INCOME TAXES $14,742 $10,649 $40,131 $27,228 =========== =========== =========== =========== NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Nine Months Ended ----------------------- January 28, January 30, 2005 2004 ----------- ----------- Cash Flows from Operating Activities: Net income $162,318 $115,638 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 39,761 40,016 Amortization of patents 1,352 1,052 Amortization of intangible assets 6,999 2,954 Stock compensation 6,432 2,012 Net gain on investments (70) (362) Net loss on disposal of equipment 907 5 Allowance for doubtful accounts 325 (221) Deferred income taxes 726 (16,184) Deferred rent 228 142 Changes in assets and liabilities: Accounts receivable (40,722) (42,416) Inventories (12,383) (13,170) Prepaid expenses and other assets 446 (14,610) Accounts payable 15,782 3,400 Income taxes payable 24,632 22,589 Accrued compensation and related benefits 18,075 14,640 Other accrued liabilities 11,621 (192) Deferred revenue 111,397 62,424 ----------- ----------- Net cash provided by operating activities 347,826 177,717 ----------- ----------- Cash Flows from Investing Activities: Net purchases of short and long-term investments (213,176) (119,144) Purchases of property and equipment (66,294) (35,609) Proceeds from disposal of property and equipment - 105 Proceeds from sales of investments 347 636 Purchase of patents - (9,015) Purchases of equity securities (125) (325) ----------- ----------- Net cash used in investing activities (279,248) (163,352) ----------- ----------- Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 153,460 71,213 Repurchases of common stock (132,993) (44,862) ----------- ----------- Net cash provided by financing activities 20,467 26,351 ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents 89,045 40,716 Cash and Cash Equivalents: Beginning of period 92,328 91,866 ----------- ----------- End of period $181,373 $132,582 =========== =========== Noncash Investing and Financing Activities: Deferred stock compensation, net of reversals $512 $2,387 Conversion of evaluation inventory to fixed assets $8,468 $6,025 Income tax benefit from employee stock transactions $27,786 $48,003 Supplemental cash flow information: Income taxes paid $11,975 $9,280 Income taxes refund $10,588 $10,361 NETWORK APPLIANCE, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE Q4 OF FISCAL YEAR 2005 (Unaudited) Projected Fourth Projected Annual Quarter Revenue FY05 Revenue Growth Range Growth Range ----------------- ----------------- 6% 9% 35% 36% -------- -------- -------- -------- ADJUSTMENTS OF SPECIFIC ITEMS TO EARNINGS PER SHARE FOR Q4 OF FISCAL YEAR 2005 ($) : COST OF REVENUES Adjustment: Amortization of intangible assets (0.0022) (0.0022) (0.0090) (0.0090) OPERATING EXPENSES Adjustments: Stock compensation (0.0054) (0.0054) (0.0216) (0.0216) Amortization of intangible assets (0.0038) (0.0038) (0.0155) (0.0155) Restructuring charges - - - - TOTAL OTHER INCOME (EXPENSES), NET Adjustments: Net (gain)/loss on investments - - - - PROVISION FOR INCOME TAXES Adjustments: Income tax effect 0.0040 0.0042 0.0158 0.0160 Income tax benefit from foreign tax ruling - - - - -------- -------- -------- -------- NET DECREASE IN EARNINGS PER SHARE (0.0075) (0.0073) (0.0304) (0.0302) ======== ======== ======== ======== CONTACT: Network Appliance, Inc. Jodi Baumann, 408-822-3974 (press) jodi@netapp.com Tara Calhoun, 408-822-6909 (investors) tara@netapp.com Billie Fagenstrom, 408-822-6428 (investors) billief@netapp.com -----END PRIVACY-ENHANCED MESSAGE-----