-----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, TgVqb2HabFz5ib3XgmDsmn/mmypQ0PHFqcwcVaiWi9a1yDNQ239c1K6kFd6j9FSq g+YkDx5jNXUGSzdPq23jtQ== 0001157523-07-005541.txt : 20070523 0001157523-07-005541.hdr.sgml : 20070523 20070523160535 ACCESSION NUMBER: 0001157523-07-005541 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070523 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070523 DATE AS OF CHANGE: 20070523 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: 07874046 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 a5410635.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): May 23, 2007 ----------------- 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 May 23, 2007, Network Appliance, Inc. issued a press release announcing its earnings for the fourth quarter and fiscal year 2007. 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 May 23, 2007 press release is hereby furnished as Exhibit 99.1 to this Form 8-K in connection with the disclosures under Item 2.02 of this Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 23, 2007 By: /s/ Steven Gomo -------------------------------------- Steven J. Gomo Chief Financial Officer - -------------------------------------------------------------------------------- Index to Exhibits Exhibit Description - ------- ----------- 99.1 Press release of Network Appliance, Inc. issued on May 23, 2007. EX-99.1 2 a5410635ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2007 Q4 Revenues $801.2 Million, up 34% Year over Year; Fiscal Year 2007 Revenues $2.8 Billion, up 36% Year over Year SUNNYVALE, Calif.--(BUSINESS WIRE)--May 23, 2007--Network Appliance, Inc. (NASDAQ:NTAP), the leader in advanced networked storage solutions, today reported results for the fourth quarter and fiscal year 2007. Revenues for the fourth fiscal quarter were $801.2 million, an increase of 34% compared to revenues of $598.0 million for the same period a year ago and an increase of 10% compared to $729.3 million in the prior quarter. For the fourth fiscal quarter, GAAP net income increased 51% to $89.6 million, or $0.23 per share(1) compared to GAAP net income of $59.2 million, or $0.15 per share for the same period in the prior year. Non-GAAP(2) net income for the fourth fiscal quarter increased 28% to $114.2 million, or $0.30 per share, compared to non-GAAP net income of $89.3 million, or $0.23 per share for the same period a year ago. Revenues for fiscal year 2007 totaled $2.8 billion, an increase of 36% compared to revenues of $2.07 billion for fiscal year 2006. For fiscal year 2007, GAAP net income increased 12% to $297.7 million, or $0.77 per share, compared to GAAP net income of $266.5 million, or $0.69 per share for fiscal year 2006. Non-GAAP net income for fiscal year 2007 increased 37% to $430.7 million, or $1.11 per share, compared to non-GAAP net income of $315.3 million, or $0.81 per share for fiscal year 2006. "Network Appliance had a great finish to a great year. With 36% annual growth, NetApp clearly provides to customers the best value in the industry," said Dan Warmenhoven, chief executive officer. "And while we weren't immune from the March macroeconomic spending slowdown, our competitive differentiation and business fundamentals have never been stronger." Outlook -- Network Appliance expects sequential revenue for the first quarter of fiscal year 2008 to decline by 6% to 7%, which translates to about 20% to 21% growth year over year. -- Including the implementation of SFAS123R and with current information and assumptions, the company estimates that the first quarter of fiscal year 2008 GAAP earnings per share will be approximately $0.14 to $0.15 per share. Network Appliance expects first quarter non-GAAP earnings per share to be approximately $0.24 to $0.25 per share. Quarterly Highlights During the fourth quarter of fiscal year 2007, NetApp broadened its Fibre Channel (FC) storage area network (SAN) portfolio and enhanced data management and data protection solutions with new products as well as broader and deeper partnerships. The company also continued to gain momentum in the SAN market while maintaining market leadership in both network-attached storage (NAS) and iSCSI. Continuing its extension into the data center, NetApp announced two new midrange platforms aimed at making enterprise data center management easier for customers. The NetApp(R) FAS3040 and NetApp V3040 series created additional market opportunities for NetApp as it broadened its enterprise lineup and added functionality for FC SAN environments. The NetApp FC SAN portfolio was further strengthened with the worldwide availability of new switches, including two new blades for the Brocade(R) 48000 Director, and the QLogic(R) SANbox(R) 9000 Core and SANbox 5600 Stackable Series of switches. NetApp expanded its enterprise-class software line with NetApp ReplicatorX(TM) and NetApp SnapManager(R) software for use with SAP(R) solutions. NetApp ReplicatorX (formerly Topio TDPS) provides continuous data replication and recovery across a range of locations and storage systems, including EMC, HDS, HP, IBM, and NetApp. NetApp SnapManager software for use with SAP enhances application availability and provides increased storage management flexibility in SAP environments. From a market perspective, according to IDC's Worldwide Quarterly Disk Storage Systems Tracker Q4 2006(3), NetApp continued to grow faster than the market in FC SAN in both revenue and capacity, year over year. The company grew FC SAN revenue at more than seven times the rate of both the market leader and the overall FC SAN market, and grew FC SAN capacity at more than four times the rate of the overall market. In addition to FC SAN, NetApp continued to demonstrate leadership in the NAS and iSCSI storage markets, maintaining the number-one market share position in capacity shipped for NAS (38.9%) and in iSCSI for both capacity and revenue. NetApp also continued to show significant gains in storage software, growing six times faster than the overall storage software market from 2005 to 2006, according to IDC's Worldwide Quarterly Storage Software Tracker Q4 2006(4). NetApp leadership in innovation remained strong with the news that it has been positioned by Gartner, Inc., in the "Visionaries" quadrant in the Gartner Magic Quadrant for Storage Resource Management (SRM) and SAN Management Software, 2007(5). On the partner front, NetApp unveiled several new solution enhancements and partner offerings with Brocade, Cisco, Fujitsu, Onaro, RSA, SAP, Symantec, and VMware to address a variety of data concerns, including data management, data protection, and data replication. In corporate news, NetApp topped the "Most Admired Company" list in the computer peripherals industry in FORTUNE Magazine's 2007 "America's Most Admired Companies" rankings. NetApp StoreVault(TM) S500 also received accolades in the fourth quarter as it was voted "Best Product of the Year" in Small Business Computing's 2007 Product Excellence Awards. Webcast 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 23, 2007, at 2:00 p.m. Pacific time. This press release and any other information related to the call will also be posted on the Website at that location. -- The conference call will also be available live in a listen-only format at (800) 901-5231 in the United States and (617) 786-2961 outside the United States. The pass code for both numbers is 67805785. -- 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, using replay code 37079987. The Webcast replay will be posted on our Website for at least one year. 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 simplify data management. Information about Network Appliance(TM) solutions and services is available at www.netapp.com. 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 2008; statements regarding the anticipated benefits of our products, technologies, and services relative to the offerings of our competitors; 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 our ability to build non-deferred backlog to levels consistent with our past results and to increase our revenue over the next several quarters; 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. 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 represents the diluted number of shares for all periods presented. (2) Non-GAAP results of operations exclude amortization of intangible assets, stock-based compensation expenses, other acquisition-related costs, in-process research and development, restructuring charges/recoveries, gain/loss on sale of assets and investments, certain other nonrecurring events, and the related effects on income taxes. (3) IDC's Worldwide Quarterly Disk Storage Systems Tracker, Q4 2006. (4) IDC's Worldwide Quarterly Storage Software Tracker, March 2007. (5) Gartner Inc., "Magic Quadrant for Storage Resource Management (SRM) and SAN Management Software, 2007." NetApp and SnapManager are registered trademarks and Network Appliance, ReplicatorX, and StoreVault 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 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, other acquisition-related cost, restructuring charges/recoveries, gain/loss on sales of assets and investments, certain other nonrecurring events, and the related effects on income taxes as well as certain discrete GAAP provisions for income tax matters recognized ratably for non-GAAP purposes. We have excluded these items in order to enhance investors' understanding of our ongoing operations. The use of these non-GAAP financial measures has material limitations because they should not be used to evaluate our company without reference to their corresponding GAAP financial measures. As such, we compensate for these material limitations by using these non-GAAP financial measures in conjunction with GAAP financial measures. These non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. In addition, we have historically reported similar non-GAAP financial measures to our investors and believe that the inclusion of comparative numbers provides consistency in our financial reporting at this time. NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) April 30, April 30, 2007 2006 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 489,079 $ 461,256 Short-term investments 819,702 861,636 Accounts receivable, net 591,324 415,295 Inventories 54,880 64,452 Prepaid expenses and other assets 56,765 43,536 Short-term restricted cash and investments 118,312 138,539 Deferred income taxes 110,741 48,496 ----------- ----------- Total current assets 2,240,803 2,033,210 PROPERTY AND EQUIPMENT, net 603,523 513,193 GOODWILL 601,056 487,535 INTANGIBLE ASSETS, net 83,009 75,051 LONG-TERM RESTRICTED CASH AND INVESTMENTS 3,639 108,371 OTHER ASSETS 126,448 43,605 ----------- ----------- $3,658,478 $3,260,965 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 85,110 $ 166,211 Accounts payable 144,112 101,278 Income taxes payable 53,371 51,577 Accrued compensation and related benefits 177,327 129,636 Other accrued liabilities 97,017 69,073 Deferred revenue 630,610 399,388 ----------- ----------- Total current liabilities 1,187,547 917,163 ----------- ----------- LONG-TERM DEBT - 133,789 LONG-TERM DEFERRED REVENUE 472,423 282,149 LONG-TERM OBLIGATIONS 9,487 4,411 ----------- ----------- 1,669,457 1,337,512 ----------- ----------- STOCKHOLDERS' EQUITY 1,989,021 1,923,453 ----------- ----------- $3,658,478 $3,260,965 =========== =========== 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, 2007 2006 2007 2006 ---------- ---------- ----------- ----------- REVENUES: Product $ 588,121 $ 455,299 $2,085,898 $1,577,435 Software subscriptions 99,206 67,632 341,258 239,139 Service 113,866 75,029 377,126 249,882 ---------- ---------- ----------- ----------- Total revenues 801,193 597,960 2,804,282 2,066,456 ---------- ---------- ----------- ----------- COST OF REVENUES: Cost of product 230,491 184,444 815,928 616,576 Cost of software subscriptions 2,752 2,138 10,210 8,370 Cost of service 81,936 54,519 273,644 185,049 ---------- ---------- ----------- ----------- Total cost of revenues 315,179 241,101 1,099,782 809,995 ---------- ---------- ----------- ----------- GROSS MARGIN 486,014 356,859 1,704,500 1,256,461 ---------- ---------- ----------- ----------- OPERATING EXPENSES: Sales and marketing 259,599 168,763 895,813 599,140 Research and development 108,802 75,939 385,357 251,330 General and administrative 42,164 24,807 147,501 92,817 In process research and development - - - 5,000 Restructuring charges (recoveries) - 378 (74) (117) Gain on sale of assets - - (25,339) - ---------- ---------- ----------- ----------- Total operating expenses 410,565 269,887 1,403,258 948,170 ---------- ---------- ----------- ----------- INCOME FROM OPERATIONS 75,449 86,972 301,242 308,291 OTHER INCOME (EXPENSES), net: Interest income 17,617 12,929 68,837 41,519 Interest expense (1,831) (1,249) (13,208) (1,283) Other income (expense), net 1,204 1,158 4,395 1,644 Net gain (loss) on investments (422) - (1,538) 101 ---------- ---------- ----------- ----------- Total other income, net 16,568 12,838 58,486 41,981 ---------- ---------- ----------- ----------- INCOME BEFORE INCOME TAXES 92,017 99,810 359,728 350,272 PROVISION FOR INCOME TAXES 2,397 40,589 61,993 83,820 ---------- ---------- ----------- ----------- NET INCOME $ 89,620 $ 59,221 $ 297,735 $ 266,452 ========== ========== =========== =========== NET INCOME PER SHARE: BASIC $ 0.24 $ 0.16 $ 0.80 $ 0.72 ========== ========== =========== =========== DILUTED $ 0.23 $ 0.15 $ 0.77 $ 0.69 ========== ========== =========== =========== SHARES USED IN PER SHARE CALCULATION: BASIC 369,002 374,035 371,204 371,061 ========== ========== =========== =========== DILUTED 385,151 392,549 388,454 388,381 ========== ========== =========== =========== NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Quarter Ended Year Ended --------------------- ------------------------- April 30, April 30, April 30, April 30, 2007 2006 2007 2006 ---------- ---------- ------------ ------------ Cash Flows from Operating Activities: Net income $ 89,620 $ 59,221 $ 297,735 $ 266,452 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 25,075 17,504 87,391 63,679 In process research and development - - - 5,000 Amortization of intangible assets 6,490 4,807 21,460 16,136 Amortization of patents 496 495 1,982 1,982 Stock-based compensation 38,354 3,851 163,033 13,293 Net (gain) loss on investments 422 - 1,538 (101) Gain on sale of assets - - (25,339) - Net loss on disposal of equipment 87 63 773 1,381 Allowance for doubtful accounts 742 (875) 928 46 Deferred income taxes (19,523) 1,531 (19,523) 1,545 Deferred rent 54 368 1,033 669 Excess tax benefit from stock-based compensation (19,696) - (63,159) - Changes in assets and liabilities: Accounts receivable (152,234) (46,663) (175,231) (116,816) Inventories 6,413 (7,850) 9,908 (46,247) Prepaid expenses and other assets (5,385) (6,374) (6,366) (12,964) Accounts payable 32,143 1,333 36,589 17,405 Income taxes payable 18,557 33,063 50,126 72,669 Accrued compensation and related benefits 26,742 15,361 43,612 28,353 Other accrued liabilities 4,511 7,601 16,638 8,571 Deferred revenue 157,879 88,492 421,328 233,229 ---------- ---------- ------------ ------------ Net cash provided by operating activities 210,747 171,928 864,456 554,282 ---------- ---------- ------------ ------------ Cash Flows from Investing Activities: Purchases of investments (692,159) (578,857) (2,630,350) (1,029,412) Redemptions of investments 682,600 429,108 2,690,326 900,863 Redemptions of restricted investments 64,645 - 127,881 - Increase (decrease) in restricted cash (43) 319 290 (1,678) Proceeds from sale of assets - - 23,914 - Purchases of property and equipment (53,417) (36,407) (165,828) (132,883) Proceeds from sales of investments 1,039 - 2,813 130 Purchases of equity securities (250) (2,175) (1,583) (9,275) Purchase of business, net of cash acquired - - (131,241) (53,747) ---------- ---------- ------------ ------------ Net cash provided by (used in) investing activities 2,415 (188,012) (83,778) (326,002) ---------- ---------- ------------ ------------ Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 38,028 91,020 215,453 232,745 Excess tax benefit from stock-based compensation 19,696 - 63,159 - Proceeds from debt - 300,000 - 300,000 Repayment of debt (66,021) - (214,890) - Tax withholding payments reimbursed by restricted stock (580) (268) (5,272) (1,062) Repurchases of common stock (200,000) (98,761) (805,708) (488,908) ---------- ---------- ------------ ------------ Net cash (used in) provided by financing activities (208,877) 291,991 (747,258) 42,775 ---------- ---------- ------------ ------------ Effect of Exchange Rate Changes on Cash (5,422) (2,776) (5,597) (3,341) Net (Decrease) Increase in Cash and Cash Equivalents (1,137) 273,131 27,823 267,714 Cash and Cash Equivalents: Beginning of period 490,216 188,125 461,256 193,542 ---------- ---------- ------------ ------------ End of period $ 489,079 $ 461,256 $ 489,079 $ 461,256 ========== ========== ============ ============ NETWORK APPLIANCE, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) QUARTER ENDED APRIL 30, 2007 --------------------------------------------- Amortization of Stock-based Acquisition- Intangible Compensation Related Assets Expenses Retention Cost Cost of product revenues $ 5,278 $ 1,059 - Cost of service revenues - 2,431 - Sales and marketing expense 974 16,955 1,162 Research and development expense - 12,157 - General and administrative expense 238 5,752 - Restructuring charges (recoveries) - - - Gain on sale of assets - - - Net (gain) loss on investments - - - --------------- -------------- --------------- Effect on pre-tax income $ 6,490 $ 38,354 $ 1,162 Restructuring Gain on Net (Gain) charges Sale of Loss on (recoveries) Assets Investments Total Cost of product revenues - - - $ 6,337 Cost of service revenues - - - 2,431 Sales and marketing expense - - - 19,091 Research and development expense - - - 12,157 General and administrative expense - - - 5,990 Restructuring charges (recoveries) - - - - Gain on sale of assets - - - - Net (gain) loss on investments - - 422 422 ------------- --------- ------------ -------- Effect on pre-tax income - - $ 422 $46,428 YEAR ENDED APRIL 30, 2007 --------------------------------------------- Acquisition- Amortization of Stock-based Related Intangible Compensation Retention Assets Expenses Cost Cost of product revenues $ 17,580 $ 3,720 - Cost of service revenues - 10,088 - Sales and marketing expense 2,930 71,701 1,743 Research and development expense - 51,323 - General and administrative expense 950 26,201 - Restructuring charges (recoveries) - - - Gain on sale of assets - - - Net (gain) loss on investments - - - --------------- -------------- -------------- Effect on pre-tax income $ 21,460 $ 163,033 $ 1,743 Restructuring Gain on Net (Gain) charges Sale of Loss on (recoveries) Assets Investments Total Cost of product revenues - - - $ 21,300 Cost of service revenues - - - 10,088 Sales and marketing expense - - - 76,374 Research and development expense - - - 51,323 General and administrative expense - - - 27,151 Restructuring charges (recoveries) (74) - - (74) Gain on sale of assets - (25,339) - (25,339) Net (gain) loss on investments - - 1,538 1,538 ------------- --------- ------------ --------- Effect on pre-tax income ($74) ($25,339) $ 1,538 $162,361 NETWORK APPLIANCE, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) QUARTER ENDED APRIL 30, 2006 --------------------------------------------- Amortization of Stock-based In process Intangible Compensation research and Assets Expenses development Cost of product revenues $ 3,866 - - Cost of service revenues - - - Sales and marketing expense 703 1,135 - Research and development expense - 2,413 - General and administrative expense 238 303 - In process research and development - - - Restructuring charges (recoveries) - - - Net (gain) loss on investments - - - --------------- -------------- -------------- Effect on pre-tax income $ 4,807 $ 3,851 - Restructuring Gain on Net (Gain) Total charges Sale of Loss on (recoveries) Assets Investments Cost of product revenues - - - $3,866 Cost of service revenues - - - - Sales and marketing expense - - - 1,838 Research and development expense - - - 2,413 General and administrative expense - - - 541 In process research and development - - - - Restructuring charges (recoveries) 378 - - 378 Net (gain) loss on investments - - - - ------------- ---------- ------------ ------- Effect on pre-tax income $ 378 - - $9,036 YEAR ENDED APRIL 30, 2006 --------------------------------------------- Amortization Stock-based In process of Intangible Compensation research and Assets Expenses development Cost of product revenues $ 11,785 - - Cost of service revenues - - - Sales and marketing expense 2,121 3,986 - Research and development expense - 8,342 - General and administrative expense 2,230 965 - In process research and development - - 5,000 Restructuring charges (recoveries) - - - Net (gain) loss on investments - - - -------------- -------------- -------------- Effect on pre-tax income $ 16,136 $ 13,293 $ 5,000 Restructuring Gain on Net (Gain) Total charges Sale of Loss on (recoveries) Assets Investments Cost of product revenues - - - $11,785 Cost of service revenues - - - - Sales and marketing expense - - - 6,107 Research and development expense - - - 8,342 General and administrative expense - - - 3,195 In process research and development - - - 5,000 Restructuring charges (recoveries) (117) - - (117) Net (gain) loss on investments - - (101) (101) ------------- --------- ------------ -------- Effect on pre-tax income ($117) - ($101) $34,211 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 Year Ended -------------------- ------------------- April 30, April 30, April 30, April 30, 2007 2006 2007 2006 --------- ---------- --------- --------- SUMMARY RECONCILIATION OF NET INCOME - ----------------------------- NET INCOME $ 89,620 $ 59,221 $297,735 $266,452 Adjustments: Amortization of intangible assets 6,490 4,807 21,460 16,136 Stock-based compensation expenses 38,354 3,851 163,033 13,293 Acquisition-related retention cost 1,162 - 1,743 - In process research and development - - - 5,000 Restructuring charges (recoveries) - 378 (74) (117) Gain on sale of assets - - (25,339) - Net (gain) loss on investments 422 - 1,538 (101) Discrete GAAP tax provision items ratably for non-GAAP purposes (3,024) (1,358) (2,767) (5,157) Tax effect on sale of assets (2,012) - 2,993 - Discrete GAAP tax provision items 1,924 - (571) - Non-recurring American Jobs Creation Act income tax expense - 22,482 - 22,482 Income tax effect (18,719) (128) (29,028) (2,712) --------- ---------- --------- --------- NON-GAAP NET INCOME $114,217 $ 89,253 $430,723 $315,276 ========= ========== ========= ========= EARNINGS PER SHARE $ 0.233 $ 0.151 $ 0.766 $ 0.686 Adjustments: Amortization of intangible assets 0.017 0.012 0.055 0.042 Stock-based compensation expenses 0.100 0.010 0.420 0.034 Acquisition-related retention cost 0.003 - 0.004 - In process research and development - - - 0.013 Restructuring charges (recoveries) - 0.001 - - Gain on sale of assets - - (0.065) - Net (gain) loss on investments 0.001 - 0.004 - Discrete GAAP tax provision items ratably for non-GAAP purposes (0.008) (0.003) (0.007) (0.013) Tax effect on sale of assets (0.005) - 0.008 - Discrete GAAP tax provision items 0.005 - (0.001) - Non-recurring American Jobs Creation Act income tax expense - 0.057 - 0.058 Income tax effect (0.049) - (0.075) (0.007) --------- ---------- --------- --------- NON-GAAP EARNINGS PER SHARE $ 0.297 $ 0.228 $ 1.109 $ 0.813 ========= ========== ========= ========= NETWORK APPLIANCE, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE FIRST QUARTER 2008 (Unaudited) First Quarter 2008 ------------------ Non-GAAP Guidance $0.24 - $0.25 Adjustments of Specific Items to Earnings Per Share for the First Quarter 2008: Amortization of intangible assets (0.01) Stock based compensation expense (0.10) Income tax effect 0.01 ------------------ Total Adjustments (0.10) GAAP Guidance - Earnings Per Share $0.14 - $0.15 CONTACT: Network Appliance, Inc. Jodi Baumann, 408-822-3974 (Press) jodi@netapp.com Tara Dhillon, 408-822-6909 (Investor) tara@netapp.com Billie Fagenstrom, 408-822-6428 (Investor) billief@netapp.com -----END PRIVACY-ENHANCED MESSAGE-----