EX-99.1 2 a5156506ex991.txt EXHIBIT 99.1 Exhibit 99.1 Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2006; Q4 Revenues $598.0 Million, up 32% Year-over-Year; Fiscal Year 2006 Revenues $2.07 Billion, up 29% Year-over-Year SUNNYVALE, Calif.--(BUSINESS WIRE)--May 24, 2006--Network Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked storage solutions, today reported results for the fourth quarter and fiscal year 2006. Revenues for the fourth fiscal quarter were $598.0 million, an increase of 32% compared to revenues of $451.8 million for the same period a year ago and an increase of 11% compared to $537.0 million in the prior quarter. For the fourth fiscal quarter, GAAP net income was $59.2 million, or $0.15 per share(1) which includes a non-recurring income tax expense of $22.5 million, associated with the Repatriation of Foreign Profits under the Jobs Creation Act of 2004. This compares to GAAP net income of $63.4 million, or $0.16 per share for the same period in the prior year. Non-GAAP(2) net income for the fourth fiscal quarter increased 34% to $89.3 million, or $0.23 per share, compared to non-GAAP net income of $66.6 million, or $0.17 per share for the same period a year ago. Revenues for fiscal year 2006 totaled $2.07 billion, an increase of 29% compared to revenues of $1.6 billion for fiscal year 2005. For fiscal year 2006, GAAP net income increased 18% to $266.5 million, or $0.69 per share, compared to GAAP net income of $225.8 million, or $0.59 per share for fiscal year 2005. Non-GAAP net income for fiscal year 2006 increased 33% to $315.3 million, or $0.81 per share, compared to non-GAAP net income of $237.7 million, or $0.62 per share for fiscal year 2005. "Our fourth quarter performance tops a year of accelerating quarterly growth. This year we broadened our portfolio of enterprise data management solutions, and our results demonstrate how our value proposition resonates with customers," said Dan Warmenhoven, CEO of Network Appliance. "By helping customers reduce the cost and complexity of their storage and data management environment, Network Appliance has established itself as the innovative alternative in the storage market. We look forward to fiscal year 2007 with optimism, as we further increase our market opportunity with a new ultra high-end product and launch our next-generation operating system." Outlook -- Network Appliance estimates that growth in revenue for the first quarter of fiscal year 2007 will be in the range of 2% to 4%, which translates to 36% to 39% growth year-over-year. -- Including the implementation of SFAS 123R and with current information and assumptions, the company expects first quarter GAAP earnings per share to finish between $0.13 and $0.16 per share. Network Appliance expects first quarter non-GAAP earnings per share to be in the range of $0.23 to $0.24 per share. -- For the full fiscal year 2007, Network Appliance estimates that revenues will finish in the range of 28% to 30% higher than fiscal year 2006. -- The company expects GAAP earnings per share for fiscal year 2007 to be in the target range of $0.62 and $0.72 per share. Network Appliance estimates full-year non-GAAP earnings per share to be in the range of $0.99 to $1.04 per share. Quarterly Highlights During the fourth quarter of fiscal year 2006, Network Appliance further expanded its breadth of disk-to-disk backup and security solutions, enhanced its Fibre Channel data management offerings, and continued its leadership position in the iSCSI and network-attached storage (NAS) markets. Earlier in the quarter, NetApp introduced an array of products, technologies, and services that highlight the broad range of NetApp(R) disk-to-disk backup and security solutions which simplify data backup procedures, improve recoverability, and lower backup infrastructure expenses. The new products included a significant expansion of the NetApp disk-to-disk backup family, including two offerings in the new NearStore(R) Virtual Tape Library (VTL) family, new Decru DataFort(TM) E-Series functionality for unified NAS-iSCSI protocol support, and enhanced capabilities for NetApp customers to protect their remote office/branch office (ROBO) data as well as that in their data centers. Complementary new services announced this quarter included a VTL Design and Implementation Service, a Disaster Recovery Design and Implementation Service, and a Backup and Recovery Design and Implementation Service. NetApp SnapManager(R) for Microsoft(R) Exchange software achieved Microsoft Simple SAN designation for Microsoft Windows(R) Server Backup/Quick Restore. Achieving the Microsoft Simple SAN Component designation demonstrates to the market that NetApp and Microsoft are providing solutions for quick recovery of Exchange Server 2003 SP2. This quarter, the company introduced its SnapSearch and Recovery software, the industry's first solution for search and recovery of online backup data. The new software enables customers to quickly and efficiently recover specific files from backup and archive data in minutes. In other product news, NetApp announced its storage solutions will now support 4Gb Fibre Channel (FC). 4Gb FC combined with NetApp unified storage systems and leading-edge data management software gives customers a compelling and powerful solution for managing large and ever-growing amounts of data. NetApp 4Gb FC will allow customers to increase the performance and availability of critical data and applications, while simplifying complex data management environments, improving productivity in application administration, and lowering storage costs. This quarter, NetApp announced that according to IDC's Worldwide Quarterly Disk Storage Systems Tracker Q4 2005(3) (as of December 2005), it maintained its position as the market leader in iSCSI in both revenue and capacity for the prior 11 quarters and continued its leadership in capacity market share in NAS. NetApp demonstrated continued leadership in the iSCSI storage market, with number-one market share in capacity shipped (34.6%) and revenue (32.0%) for the full year 2005. In FC SAN, NetApp nearly doubled its year-end 2005 revenue market share to 1.6%, up from 0.9% in 2004, doubled its unit share to 2.2% from 1.1%, and grew capacity shipped by 230%. Finally, NetApp maintained leadership in its core NAS market, with a 42.6% capacity market share, and grew capacity shipped by 56% from year end 2004. Also this quarter, NetApp extended its position in the NAS and unified storage market according to Gartner's report "Market Share: NAS/Unified Storage, Worldwide, 2000-2005."(4) The total NAS and unified storage market grew 16.1% in 2005 and NetApp grew more quickly than the market, posting annual revenue growth of 22.4%. According to Gartner, the company increased its market share from 52.4% in 2004 to 55.2% in 2005. NetApp leads in both the high-end and midrange parts of the market, with 88.9% market share and 70.5% market share by revenue respectively. On the partner front, NetApp unveiled several new solution enhancements and partner offerings with BakBone, Bocada, LogLogic, Microsoft, Syncsort and Topio to address a variety of data concerns, including data protection, compliance, data management, backup and recovery, and data replication. In corporate news, NetApp debuted at number 929 on the FORTUNE 1000 list, the magazine's annual ranking of America's largest corporations determined by revenue. This quarter NetApp also announced the 2005 NetApp Innovation Award winners. The NetApp Innovation Awards recognize customers and partners who have implemented NetApp solutions in an innovative way to positively impact their business. Internationally, NetApp inaugurated its new development center facility, the only one outside of the United States, at Golf Links Software Parks, Bangalore. The facility currently has the capacity to seat up to 750 people and will be a strategic center for research and product development, creating technologies that enable the largest enterprises to store, move, and manage data more effectively. A large number of Fortune 500 enterprises are global customers of NetApp, and in India the enterprise customer base is over 250 strong. Webcast Information and Conference Call Information -- The NetApp quarterly results conference call will be broadcast live via the Internet at http://investors.netapp.com on Wednesday, May 24, 2006, 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) 383-8009 in the United States and (617) 597-5432 outside the United States. The passcode for both numbers is 49211508. -- 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 63342796. The Webcast replay will be posted on our Web site for at least one year. About Network Appliance Network Appliance(TM) 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 simplify data management. 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 all of the statements under the Outlook section relating to our forecasted operating results and metrics for the first quarter of fiscal 2007 and for all of fiscal 2007, statements regarding our optimism for its 2007 fiscal year generally, statements regarding the anticipated benefits of our new products, technologies and services, including VTL, Decru DataFort E-Series, ROBO, Exchange Server, 4Gb products and SnapSearch and Recovery software, and statements regarding anticipated benefits from partner offerings and our Bangalore development center. 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 distribution channels; our ability to develop, maintain and strengthen our relationships and product offerings with strategic partners; risks associated with international operations; our ability to successfully acquire and integrate complementary businesses and technologies; foreign currency exchange rate fluctuations; and other important factors as described in Network Appliance, Inc.'s 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 represent the diluted number of shares for all periods presented. (2) Non-GAAP results of operations 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 nonrecurring American Jobs Creation Act income tax expense and certain discrete GAAP provision for income tax matters recognized ratably for non-GAAP purposes. (3) IDC's Worldwide Quarterly Disk Storage Systems Tracker Q4 2005 (4) Market Share: NAS/Unified Storage, Worldwide, 2000-2005 NetApp, NearStore and SnapManager are registered trademarks and Network Appliance is a trademark of Network Appliance Inc. in the United States and other countries. Decru DataFort is a trademark of Decru Inc., a NetApp company. All other trademarks belong to their respective owners 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 GAAP provision for income tax matters recognized ratably for non-GAAP purposes. We have excluded these items because they derive from unusual events that are not attributable to normal on going operations and thus makes it more difficult for an investor to understand our recurring operational performance. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures. These non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making such as employee compensation planning. In addition, we have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time. NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) April 30, 2006 April 30, 2005 -------------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $461,256 $193,542 Short-term investments 861,636 976,423 Accounts receivable, net 415,295 296,885 Inventories 64,452 38,983 Prepaid expenses and other 43,536 30,773 Short-term restricted cash 138,539 1,699 Deferred income taxes 48,496 37,584 -------------- -------------- Total current assets 2,033,210 1,575,889 PROPERTY AND EQUIPMENT, net 513,193 418,749 GOODWILL 487,535 291,816 INTANGIBLE ASSETS, net 75,051 21,448 LONG-TERM RESTRICTED CASH 108,371 2,361 OTHER ASSETS 43,605 62,384 -------------- -------------- $3,260,965 $2,372,647 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $101,278 $83,572 Income taxes payable 51,577 20,823 Accrued compensation and related benefits 129,636 100,534 Other accrued liabilities 69,073 53,262 Short-term debt 166,211 - Deferred revenue 399,388 261,998 -------------- -------------- Total current liabilities 917,163 520,189 -------------- -------------- LONG-TERM DEFERRED REVENUE 282,149 187,180 LONG-TERM DEBT 133,790 - LONG-TERM OTHER OBLIGATIONS 4,410 4,474 -------------- -------------- 1,337,512 711,843 -------------- -------------- STOCKHOLDERS' EQUITY 1,923,453 1,660,804 -------------- -------------- $3,260,965 $2,372,647 ============== ============== NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Quarter Ended Year Ended ------------------- ----------------------- April 30, April 30, April 30, April 30, 2006 2005 2006 2005 --------- --------- ----------- ----------- REVENUES: Product revenue $455,299 $351,580 $1,577,435 $1,260,611 Software subscription revenue 67,632 49,423 239,139 169,726 --------- --------- ----------- ----------- Product revenue 522,931 401,003 1,816,574 1,430,337 Service revenue 75,029 50,826 249,882 167,794 --------- --------- ----------- ----------- Total revenues 597,960 451,829 2,066,456 1,598,131 --------- --------- ----------- ----------- COST OF REVENUES: Cost of product revenue 186,582 134,820 624,946 487,880 Cost of service revenue 54,519 40,213 185,049 135,203 --------- --------- ----------- ----------- Total cost of revenues 241,101 175,033 809,995 623,083 --------- --------- ----------- ----------- GROSS MARGIN 356,859 276,796 1,256,461 975,048 --------- --------- ----------- ----------- OPERATING EXPENSES: Sales and marketing 167,628 134,946 595,154 466,032 Research and development 73,526 48,093 242,988 171,049 General and administrative 24,504 22,014 91,852 76,903 In process research and development - - 5,000 - Stock compensation 3,851 1,716 13,293 8,148 Restructuring charges (recoveries) 378 (1) (117) (271) --------- --------- ----------- ----------- Total operating expenses 269,887 206,768 948,170 721,861 --------- --------- ----------- ----------- INCOME FROM OPERATIONS 86,972 70,028 308,291 253,187 OTHER INCOME (EXPENSES), net: Interest income 12,929 8,034 41,519 24,249 Other income (expense), net (91) 72 361 (1,249) Net gain on investments - - 101 41 --------- --------- ----------- ----------- Total other income, net 12,838 8,106 41,981 23,041 --------- --------- ----------- ----------- INCOME BEFORE INCOME TAXES 99,810 78,134 350,272 276,228 PROVISION FOR INCOME TAXES 40,589 14,698 83,820 50,474 --------- --------- ----------- ----------- NET INCOME $59,221 $63,436 $266,452 $225,754 ========= ========= =========== =========== NET INCOME PER SHARE: BASIC $ 0.16 $ 0.17 $ 0.72 $ 0.63 ========= ========= =========== =========== DILUTED $ 0.15 $ 0.16 $ 0.69 $ 0.59 ========= ========= =========== =========== SHARES USED IN PER SHARE CALCULATION: BASIC 374,035 366,941 371,061 361,009 ========= ========= =========== =========== DILUTED 392,549 387,733 388,381 380,412 ========= ========= =========== =========== NETWORK APPLIANCE, INC. NON-GAAP(1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Quarter Ended Year Ended ------------------- ----------------------- April 30, April 30, April 30, April 30, 2006 2005 2006 2005 --------- --------- ----------- ----------- REVENUES: Product revenue $455,299 $351,580 $1,577,435 $1,260,611 Software subscription revenue 67,632 49,423 239,139 169,726 --------- --------- ----------- ----------- Product Revenue 522,931 401,003 1,816,574 1,430,337 Service revenue 75,029 50,826 249,882 167,794 --------- --------- ----------- ----------- Total revenues 597,960 451,829 2,066,456 1,598,131 --------- --------- ----------- ----------- COST OF REVENUES: Cost of product revenue 182,716 133,962 613,161 484,448 Cost of service revenue 54,519 40,213 185,049 135,203 --------- --------- ----------- ----------- Total cost of revenues 237,235 174,175 798,210 619,651 --------- --------- ----------- ----------- GROSS MARGIN 360,725 277,654 1,268,246 978,480 --------- --------- ----------- ----------- OPERATING EXPENSES: Sales and marketing 166,925 134,739 593,033 465,205 Research and development 73,526 48,093 242,988 171,049 General and administrative 24,266 20,746 89,622 71,830 --------- --------- ----------- ----------- Total operating expenses 264,717 203,578 925,643 708,084 --------- --------- ----------- ----------- INCOME FROM OPERATIONS 96,008 74,076 342,603 270,396 OTHER INCOME, net 12,838 8,106 41,880 23,000 --------- --------- ----------- ----------- INCOME BEFORE INCOME TAXES 108,846 82,182 384,483 293,396 PROVISION FOR INCOME TAXES 19,593 15,614 69,207 55,745 --------- --------- ----------- ----------- NET INCOME $89,253 $66,568 $315,276 $237,651 ========= ========= =========== =========== NET INCOME PER SHARE: BASIC $ 0.24 $ 0.18 $ 0.85 $ 0.66 ========= ========= =========== =========== DILUTED $ 0.23 $ 0.17 $ 0.81 $ 0.62 ========= ========= =========== =========== SHARES USED IN PER SHARE CALCULATION: BASIC 374,035 366,941 371,061 361,009 ========= ========= =========== =========== DILUTED 392,549 387,733 388,381 380,412 ========= ========= =========== =========== (1) Non-GAAP results of operations exclude amortization of intangible assets, in process research and development, stock compensation, restructuring charges/recoveries, net gain on investments and the related effects on income taxes, as well as non-recurring American Jobs Creation Act income tax expense and certain discrete GAAP provision for income tax matters recognized ratably for non-GAAP purposes. NETWORK APPLIANCE, INC. RECONCILIATION OF NON-GAAP AND GAAP IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands) (Unaudited) Quarter Ended Year Ended ------------------- --------------------- April 30, April 30, April 30, April 30, 2006 2005 2006 2005 --------- --------- ----------- --------- SUMMARY RECONCILIATION OF NET INCOME ----------------------------- NET INCOME $59,221 $63,436 $266,452 $225,754 Adjustments: Amortization of intangible assets 4,807 2,333 16,136 9,332 Stock compensation 3,851 1,716 13,293 8,148 In process research and development - - 5,000 - Restructuring charges (recoveries) 378 (1) (117) (271) Net gain on investments - - (101) (41) Discrete GAAP provision matters recognized ratably for non-GAAP purposes (1,358) - (5,157) - Non-recurring American Jobs Creation Act income tax expense 22,482 - 22,482 - Income tax effect (128) (916) (2,712) (5,271) --------- --------- ----------- --------- NON-GAAP NET INCOME $89,253 $66,568 $315,276 $237,651 ========= ========= =========== ========= DETAILED RECONCILIATION OF SPECIFIC ITEMS: ---------------------------- COST OF REVENUES $241,101 $175,033 $809,995 $623,083 Adjustment: Amortization of intangible assets (3,866) (858) (11,785) (3,432) --------- --------- ----------- --------- NON-GAAP COST OF REVENUES $237,235 $174,175 $798,210 $619,651 ========= ========= =========== ========= GROSS MARGIN $356,859 $276,796 $1,256,461 $975,048 Adjustment: Amortization of intangible assets 3,866 858 11,785 3,432 --------- --------- ----------- --------- NON-GAAP GROSS MARGIN $360,725 $277,654 $1,268,246 $978,480 ========= ========= =========== ========= SALES AND MARKETING EXPENSES $167,628 $134,946 $595,154 $466,032 Adjustments: Amortization of intangible assets (703) (207) (2,121) (827) --------- --------- ----------- --------- NON-GAAP SALES AND MARKETING EXPENSES $166,925 $134,739 $593,033 $465,205 ========= ========= =========== ========= GENERAL AND ADMINISTRATIVE EXPENSES $24,504 $22,014 $91,852 $76,903 Adjustments: Amortization of intangible assets (238) (1,268) (2,230) (5,073) --------- --------- ----------- --------- NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $24,266 $20,746 $89,622 $71,830 ========= ========= =========== ========= OPERATING EXPENSES $269,887 $206,768 $948,170 $721,861 Adjustments: Stock compensation (3,851) (1,716) (13,293) (8,148) In process research and development - - (5,000) - Amortization of intangible assets (941) (1,475) (4,351) (5,900) Restructuring charges (recoveries) (378) 1 117 271 --------- --------- ----------- --------- NON-GAAP OPERATING EXPENSES $264,717 $203,578 $925,643 $708,084 ========= ========= =========== ========= INCOME FROM OPERATIONS $86,972 $70,028 $308,291 $253,187 Adjustments: In process research and development - - 5,000 - Amortization of intangible assets 4,807 2,333 16,136 9,332 Stock compensation 3,851 1,716 13,293 8,148 Restructuring charges (recoveries) 378 (1) (117) (271) --------- --------- ----------- --------- NON-GAAP INCOME FROM OPERATIONS $96,008 $74,076 $342,603 $270,396 ========= ========= =========== ========= TOTAL OTHER INCOME (EXPENSES), NET $12,838 $8,106 $41,981 $23,041 Adjustments: Net gain on investments - - (101) (41) --------- --------- ----------- --------- NON-GAAP TOTAL OTHER INCOME (EXPENSES), NET $12,838 $8,106 $41,880 $23,000 ========= ========= =========== ========= INCOME BEFORE INCOME TAXES $99,810 $78,134 $350,272 $276,228 Adjustments: Amortization of intangible assets 4,807 2,333 16,136 9,332 In process research and development - - 5,000 - Stock compensation 3,851 1,716 13,293 8,148 Restructuring charges (recoveries) 378 (1) (117) (271) Net gain on investments - - (101) (41) --------- --------- ----------- --------- NON-GAAP INCOME BEFORE INCOME TAXES $108,846 $82,182 $384,483 $293,396 ========= ========= =========== ========= PROVISION FOR INCOME TAXES $40,589 $14,698 $83,820 $50,474 Adjustments: Discrete GAAP provision matters recognized ratably for non-GAAP purposes 1,358 - 5,157 - Non-recurring American Jobs Creation Act income tax expense (22,482) - (22,482) - Income tax effect 128 916 2,712 5,271 --------- --------- ----------- --------- NON-GAAP PROVISION FOR INCOME TAXES $19,593 $15,614 $69,207 $55,745 ========= ========= =========== ========= NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Three Months Ended Year Ended --------------------- ----------------------- April 30, April 30, April 30, April 30, 2006 2005 2006 2005 ---------- ---------- ------------ ---------- Cash Flows from Operating Activities: Net income $ 59,221 $ 63,436 $ 266,452 $ 225,754 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 17,504 14,590 63,679 54,459 In process research and development - - 5,000 - Amortization of intangible assets 4,807 2,333 16,136 9,332 Amortization of patents 495 481 1,982 1,833 Stock compensation 3,851 1,716 13,293 8,148 Net gain on investments - - (101) (70) Net loss on disposal of equipment 63 1,083 1,381 1,990 Allowance (reduction) for doubtful accounts (875) 785 46 1,110 Deferred income taxes 1,531 5,591 1,545 6,321 Deferred rent 368 66 669 294 Changes in assets and liabilities: Accounts receivable (46,663) (63,287) (116,816) (103,352) Inventories (7,850) (2,613) (46,247) (14,996) Prepaid expenses and other assets (6,374) (5,347) (12,964) (2,336) Accounts payable 1,333 15,105 17,405 30,460 Income taxes payable 33,063 7,964 72,669 32,541 Accrued compensation and related benefits 15,361 17,320 28,353 33,828 Other accrued liabilities 7,601 (639) 8,571 7,369 Deferred revenue 88,492 58,899 233,229 169,433 ---------- ---------- ------------ ---------- Net cash provided by operating activities 171,928 117,483 554,282 462,118 ---------- ---------- ------------ ---------- Cash Flows from Investing Activities: Purchases of investments (578,857) (202,675) (1,029,412) (872,237) Redemptions of investments 429,108 149,039 900,863 605,426 Purchase of patents - (895) - (895) Increase (decrease) in restricted cash 319 - (1,678) - Purchases of property and equipment (36,407) (28,812) (132,915) (93,568) Proceeds from disposal of fixed assets - - 32 - Proceeds from sales of investments - - 130 347 Purchases of equity securities (2,175) (300) (9,275) (425) Purchase of business, net of cash acquired - - (53,747) - Payments for split- dollar insurance premiums - (183) - (183) Reimbursements for split-dollar insurance premiums - 10,227 - 10,227 ---------- ---------- ------------ ---------- Net cash provided by (used in) investing activities (188,012) (73,599) (326,002) (351,308) ---------- ---------- ------------ ---------- Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 91,020 28,462 232,745 181,922 Proceeds from long- term debt 300,000 - 300,000 - Tax withholding payments reimbursed by restricted stock (268) (1,079) (1,062) (1,122) Repurchases of common stock (98,761) (59,910) (488,908) (192,903) ---------- ---------- ------------ ---------- Net cash provided by (used in) financing activities 291,991 (32,527) 42,775 (12,103) ---------- ---------- ------------ ---------- Effect of Exchange Rate Changes on Cash (2,776) 812 (3,341) 2,507 Net Increase in Cash and Cash Equivalents 273,131 12,169 267,714 101,214 Cash and Cash Equivalents: Beginning of period 188,125 181,373 193,542 92,328 ---------- ---------- ------------ ---------- End of period $ 461,256 $ 193,542 $ 461,256 193,542 ========== ========== ============ ========== Noncash Investing and Financing Activities: Conversion of evaluation inventory to fixed assets $ 7,525 $ 1,654 $ 21,918 $ 10,122 Deferred stock compensation, net of reversals $ 24,071 $ (358) $ 26,968 $ 154 Income tax benefit from employee stock transactions $ 19,821 $ - $ 42,155 $ 27,829 Acquisition (reduction) of property and equipment on account $ (6,540) $ - $ 4,618 $ - Reclassification to restricted cash $ 241,152 $ - $ 241,152 $ - Stock issued for acquisition $ - $ - $ 191,874 $ - Options assumed for acquired business $ - $ - $ 38,456 $ - Interest accrued for long-term debt $ 44 $ - $ 44 $ - Supplemental cash flow information: Income taxes paid $ 8,105 $ 1,309 $ 13,730 $ 13,284 Income taxes refund $ 1,917 $ 1,811 $ 4,262 $ 12,399 Interest paid for long-term debt $ 1,187 $ - $ 1,187 $ - NETWORK APPLIANCE, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE FIRST QUARTER AND FULL YEAR FISCAL 2007 (Unaudited) Q107 FY07 --------------- --------------- ADJUSTMENTS OF SPECIFIC ITEMS TO EARNINGS PER SHARE FOR THE FIRST QUARTER AND FULL YEAR 2007 ($): COST OF REVENUES Adjustment: Amortization of intangible assets (0.010) (0.039) Stock compensation including adoption of SFAS 123R (0.009 - 0.011) (0.034 - 0.041) OPERATING EXPENSES Adjustments: Amortization of intangible assets (0.002) (0.010) Stock compensation including adoption of SFAS 123R (0.091 - 0.110) (0.347 - 0.416) PROVISION FOR INCOME TAXES Adjustments: Income tax effect 0.029 - 0.035 0.113 - 0.134 --------------- --------------- NET DECREASE IN EARNINGS PER SHARE (0.083 - 0.098) (0.317 - 0.372) =============== =============== 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