-----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, PK/yTTkajI7/hSvOudBYDofP1zh4nl/VVzIYymfzaJCX6q0h9x10bnY2ChBnWndm gdK8gAZZmC0SQAkqw+rtpw== 0001157523-07-008454.txt : 20070815 0001157523-07-008454.hdr.sgml : 20070815 20070815160513 ACCESSION NUMBER: 0001157523-07-008454 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070815 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070815 DATE AS OF CHANGE: 20070815 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: 071059854 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 a5472815.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): August 15, 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) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ - -------------------------------------------------------------------------------- Item 2.02. Results of Operations and Financial Condition On August 15, 2007, Network Appliance, Inc. issued a press release announcing its earnings for the first quarter of fiscal year 2008. The press release is attached as an exhibit to this Form 8-K, and the information set forth therein is hereby incorporated by reference into this Item 2.02. Item 9.01 Financial Statements and Exhibits (d) Exhibits. Network Appliance, Inc.'s August 15, 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. August 15, 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 August 15, 2007. - -------------------------------------------------------------------------------- EX-99.1 2 a5472815ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Network Appliance Announces Results for First Quarter Fiscal Year 2008 SUNNYVALE, Calif.--(BUSINESS WIRE)--Aug. 15, 2007--Network Appliance, Inc. (NASDAQ: NTAP), the leader in advanced networked storage solutions, today reported results for the first quarter and fiscal year 2008. Revenues for the first fiscal quarter were $689.2 million, an increase of 11% compared to revenues of $621.3 million for the same period a year ago and a decrease of 14% compared to $801.2 million in the prior quarter. For the first fiscal quarter, GAAP net income was $34.3 million, or $0.09 per share(1) compared to GAAP net income of $54.7 million, or $0.14 per share for the same period in the prior year. Non-GAAP(2) net income for the first fiscal quarter was $76.0 million, or $0.20 per share, compared to non-GAAP net income of $96.6 million, or $0.25 per share for the same period a year ago. "We are clearly disappointed with our revenue growth this quarter, yet confident about our underlying business strength and continued health," said Dan Warmenhoven, chief executive officer. "Our bookings growth and cash flow are both very encouraging, and we are optimistic about getting back on track for higher growth in revenue and profits going forward." Outlook -- Network Appliance ("NetApp") expects revenue for the second quarter fiscal year 2008 to be between $752 million and $768 million, with year-over-year growth of 15% to 18% and sequential growth of 9% to 11%. -- Including the implementation of SFAS123R and with current information and assumptions, the company estimates that the second quarter fiscal year 2008 GAAP earnings per share will be approximately $0.16 to $0.18 per share. -- Network Appliance expects second quarter fiscal year 2008 non-GAAP earnings per share to be approximately $0.24 to $0.26 per share. Quarterly Highlights During the first quarter of fiscal year 2008, NetApp(R) continued to offer customer solutions to reduce power and manage costs and complexity in the data center through several new product announcements, membership in The Green Grid, and solution enhancements with key partners. The company also continued to gain momentum in all of its key storage markets, including software, services, Fibre Channel (FC) storage area network (SAN), network-attached storage (NAS), and iSCSI. This quarter NetApp set a new industry standard for deduplication technology by offering NetApp advanced single-instance storage (A-SIS) deduplication for NetApp NearStore(R) and FAS storage systems. This technology helps customers achieve the cost benefits of deduplication across a wide variety of environments, including backup, archival, compliance storage, and primary data sets as diverse as home directories and genomic data. The introduction of NetApp A-SIS deduplication provides customers with the ability to reduce capital expenditures and management costs by dramatically reducing the amount of storage they need to purchase and manage. The reduction in quantity of physical storage translates into savings in power and cooling costs and data center real estate costs. Strengthening customer data manageability, NetApp also enhanced both SnapDrive(R), for server storage management, and Virtual File Manager(TM) Enterprise Edition (VFM(R)-EE), for file data management, which customers leverage for increased productivity and flexibility by allowing application administrators to manage their data and react quickly to changing business conditions. From a market perspective, according to IDC's Worldwide Quarterly Disk Storage Systems Tracker Q1 2007(3), NetApp gained revenue share in networked storage, growing to a 10.5% share in Q1 2007, up from a 9.3% share at year-end 2006. NetApp also gained capacity share in networked storage, growing to 20.4% from 17.5% in the same period. In Fibre Channel (FC) SAN, NetApp continues to grow faster than the market in both revenue and capacity, both sequentially and year over year. Sequentially, the FC SAN market revenue dropped 10.4%, while NetApp grew 12.6%. Year over year, the FC SAN market revenue grew 12.6%, while NetApp grew 103.0%. NetApp dramatically outpaced the FC SAN market in terms of capacity, growing at 263.7% year over year, compared to market growth of 57.1% during that period. In its core NAS market, NetApp grew faster than the market sequentially in terms of both revenue and capacity. Sequentially, the NAS market revenue dropped 8.0%, while NetApp grew 10.7%. NetApp continues to lead the NAS market in terms of capacity, with a 39.3% share in Q1 2007, up from a 32.4% share in Q4 2006. NetApp demonstrated continued leadership in the iSCSI market in terms of revenue and capacity, with first-place market share for Q1 2007 in capacity shipped (33.3%) and in revenue (24.3%). In Q1 2006, the iSCSI market revenue grew 8.6% sequentially, while NetApp grew 14.9%. In the storage software market, NetApp grew 10 times faster than the overall storage software market from Q4'06 to Q1'07 and maintained or gained share in each submarket segment in which it provides offerings. According to IDC's Worldwide Quarterly Storage Software Tracker Q1 2007(4), NetApp also maintained the number two market share position in the storage replication software market, closing the gap on the market leader. NetApp continued its leadership in storage services with a position in the Leaders quadrant of the Gartner Magic Quadrant for Storage Services, Q2'07(5) report. In corporate news, NetApp was honored by the Boston Business Journal as a "Best Place to Work" in the Boston area for 2007. The NetApp New England office ranked number six in the mid-size company category, which included companies with 101 to 500 employees. NetApp was also recognized by Indiatimes Infotech, a leading technology media Website in India, as one of the "Best Tech Companies to Work For" in India for 2007. In other corporate news, NetApp received a second Job Development Investment Grant (JDIG) from the State of North Carolina to expand its operations in Research Triangle Park. 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, August 15, 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 (866) 510-0707 in the United States and (617) 597-5376 outside the United States. The pass code for both numbers is 35531174. -- 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 65528258. 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 second quarter of fiscal 2008 and statements regarding the anticipated benefits of our products, technologies, and services relative to the offerings of our competitors. 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, acquisition-related retention costs, gain on sale of investment, restructuring charges/recoveries, prior acquisition-related costs, and the related effects on income taxes as well as certain discrete GAAP provisions for income tax matters recognized ratably for non-GAAP purposes. (3) IDC's Worldwide Quarterly Disk Storage Systems Tracker, Q1 2007. (4) IDC's Worldwide Quarterly Storage Software Tracker, Q1 2007. (5) Gartner Inc., Magic Quadrant for Storage Services, Q2'07. NetApp, NearStore, SnapDrive, and VFM are registered trademarks and Network Appliance and Virtual File Manager 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 results of operations exclude amortization of intangible assets, stock-based compensation expenses, acquisition-related retention costs, gain on sale of investment, restructuring charges/recoveries, prior acquisition-related costs, 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) July 27, April 27, 2007 2007 ---------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 623,990 $ 489,079 Short-term investments 706,270 819,702 Accounts receivable, net (1) 403,159 548,249 Inventories 58,019 54,880 Prepaid expenses and other assets (1) 86,696 99,840 Short-term restricted cash and investments 103,906 118,312 Short-term deferred income taxes 106,810 110,741 ---------- ---------- Total current assets 2,088,850 2,240,803 PROPERTY AND EQUIPMENT, net 629,124 603,523 GOODWILL 601,056 601,056 INTANGIBLE ASSETS, net 76,115 83,009 LONG-TERM RESTRICTED CASH AND INVESTMENTS 5,242 3,639 LONG-TERM DEFERRED INCOME TAXES AND OTHER ASSETS 155,037 126,448 ---------- ---------- $3,555,424 $3,658,478 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 69,150 $ 85,110 Accounts payable 136,077 144,112 Income taxes payable 5,675 53,371 Accrued compensation and related benefits 107,377 177,327 Other accrued liabilities 89,887 97,017 Deferred revenue 663,865 630,610 ---------- ---------- Total current liabilities 1,072,031 1,187,547 ---------- ---------- LONG-TERM DEFERRED REVENUE 485,970 472,423 OTHER LONG-TERM OBLIGATIONS 70,288 9,487 ---------- ---------- 1,628,289 1,669,457 ---------- ---------- STOCKHOLDERS' EQUITY 1,927,135 1,989,021 ---------- ---------- $3,555,424 $3,658,478 ========== ========== (1) In the first quarter of fiscal 2008, the Company began to classify VAT and sales tax receivable balances from its customers within prepaid expenses and other assets. These balances were included in accounts receivable, net, in previous periods ($43,075 at April 27, 2007) and such amounts have been reclassified in the accompanying interim financial statements to conform to the current period classification. NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except net income per share amounts) (Unaudited) Quarter Ended ------------------- July 27, July 28, 2007 2006 --------- --------- REVENUES: Product $463,333 $465,611 Software entitlements and maintenance 107,927 74,830 Service 117,975 80,847 --------- --------- Total revenues 689,235 621,288 --------- --------- COST OF REVENUES: Cost of product 186,751 187,965 Cost of software entitlements and maintenance 2,084 2,292 Cost of service 83,203 57,961 --------- --------- Total cost of revenues 272,038 248,218 --------- --------- GROSS MARGIN 417,197 373,070 --------- --------- OPERATING EXPENSES: Sales and marketing 244,643 195,518 Research and development 106,556 88,678 General and administrative 41,450 32,396 Restructuring recoveries - (74) --------- --------- Total operating expenses 392,649 316,518 --------- --------- INCOME FROM OPERATIONS 24,548 56,552 OTHER INCOME (EXPENSES), net: Interest income 17,035 16,656 Interest expense (1,081) (3,871) Other income, net 832 779 --------- --------- Total other income, net 16,786 13,564 --------- --------- INCOME BEFORE INCOME TAXES 41,334 70,116 PROVISION FOR INCOME TAXES 6,997 15,446 --------- --------- NET INCOME $ 34,337 $ 54,670 ========= ========= NET INCOME PER SHARE: BASIC $ 0.09 $ 0.15 ========= ========= DILUTED $ 0.09 $ 0.14 ========= ========= SHARES USED IN PER SHARE CALCULATION: BASIC 364,457 373,869 ========= ========= DILUTED 377,631 391,319 ========= ========= NETWORK APPLIANCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Quarter Ended --------------------- July 27, July 28, 2007 2006 ---------- ---------- Cash Flows from Operating Activities: Net income $ 34,337 $ 54,670 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 26,734 18,714 Amortization of intangible assets 6,398 4,686 Amortization of patents 495 495 Stock-based compensation 40,411 43,022 Net loss on disposal of equipment 117 81 Allowance for doubtful accounts 84 144 Deferred income taxes (22,692) - Deferred rent 399 199 Excess tax benefit from stock-based compensation (8,339) (4,489) Changes in assets and liabilities: Accounts receivable 188,072 69,914 Inventories (3,145) (520) Prepaid expenses and other assets (27,392) (26,337) Accounts payable (14,082) (1,139) Income taxes payable 18,434 (6,914) Accrued compensation and related benefits (69,889) (38,964) Other accrued liabilities (15,591) (10,980) Deferred revenue 46,548 61,982 ---------- ---------- Net cash provided by operating activities 200,899 164,564 ---------- ---------- Cash Flows from Investing Activities: Purchases of investments (328,893) (874,416) Redemptions of investments 447,022 906,423 Redemptions of restricted investments 14,930 16,322 (Increase) decrease in restricted cash (1,767) 252 Proceeds from sales of nonmarketable securities - 17 Purchases of property and equipment (33,586) (23,056) Purchases of nonmarketable securities (4,035) (1,183) ---------- ---------- Net cash provided by investing activities 93,671 24,359 ---------- ---------- Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 49,991 36,831 Excess tax benefit from stock-based compensation 8,339 4,489 Repayment of debt (15,960) (27,866) Tax withholding payments reimbursed by restricted stock (2,742) (980) Repurchases of common stock (200,000) (220,000) ---------- ---------- Net cash used in financing activities (160,372) (207,526) ---------- ---------- Effect of Exchange Rate Changes on Cash 713 (324) Net (Decrease) Increase in Cash and Cash Equivalents 134,911 (18,927) Cash and Cash Equivalents: Beginning of period 489,079 461,256 ---------- ---------- End of period $ 623,990 $ 442,329 ========== ========== NETWORK APPLIANCE, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) QUARTER ENDED JULY 27, 2007 --------------------------------------------- Amortization of Acquisition- Intangible Stock-based Related Assets Compensation Retention Expenses Cost -------------------------------------------- Cost of product revenues $5,278 $945 - Cost of service revenues - 2,671 - Sales and marketing expense 970 17,491 1,162 Research and development expense - 13,175 - General and administrative expense 150 6,129 - Restructuring recoveries - - - -------------------------------------------- Effect on pre-tax income $6,398 $40,411 $1,162 QUARTER ENDED JULY 28, 2006 --------------------------------------------- Acquisition- Amortization of Stock-based Related Intangible Compensation Retention Assets Expenses Cost -------------------------------------------- Cost of product revenues $3,866 $670 - Cost of service revenues - 2,634 - Sales and marketing expense 583 18,717 - Research and development expense - 13,868 - General and administrative expense 237 7,133 - Restructuring recoveries - - - -------------------------------------------- Effect on pre-tax income $4,686 $43,022 - QUARTER ENDED JULY 27, 2007 ------------------------------------- Prior Restructuring Acquisition- Recoveries related Costs Total ------------------------------------- Cost of product revenues - - $6,223 Cost of service revenues - - 2,671 Sales and marketing expense - - 19,623 Research and development expense - - 13,175 General and administrative expense - 2,800 9,079 Restructuring recoveries - - - ------------------------------------- Effect on pre-tax income - $2,800 $50,771 QUARTER ENDED JULY 28, 2006 ------------------------------------- Prior Restructuring Acquisition- Recoveries related Costs Total ------------------------------------- Cost of product revenues - - $4,536 Cost of service revenues - - 2,634 Sales and marketing expense - - 19,300 Research and development expense - - 13,868 General and administrative expense - - 7,370 Restructuring recoveries (74) - (74) ------------------------------------- Effect on pre-tax income ($74) - $47,634 NETWORK APPLIANCE, INC. RECONCILIATION OF NON-GAAP AND GAAP IN THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except net income per share amounts) (Unaudited) Quarter Ended ----------------- July 27, July 28, 2007 2006 -------- -------- SUMMARY RECONCILIATION OF NET INCOME - ---------------------------------------------------- NET INCOME $34,337 $54,670 Adjustments: Amortization of intangible assets 6,398 4,686 Stock-based compensation expenses 40,411 43,022 Acquisition-related retention cost 1,162 - Restructuring recoveries - (74) Prior acquisition-related costs 2,800 - Discrete GAAP tax provision items 443 - Income tax effect (9,564) (5,749) -------- -------- NON-GAAP NET INCOME $75,987 $96,555 ======== ======== NET INCOME PER SHARE $ 0.091 $ 0.140 Adjustments: Amortization of intangible assets 0.017 0.012 Stock-based compensation expenses 0.107 0.110 Acquisition-related retention cost 0.003 - Restructuring recoveries - - Prior acquisition-related costs 0.007 - Discrete GAAP tax provision items 0.001 - Income tax effect (0.025) (0.015) -------- -------- NON-GAAP NET INCOME PER SHARE $ 0.201 $ 0.247 ======== ======== NETWORK APPLIANCE, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE SECOND QUARTER 2008 (Unaudited) Second Quarter 2008 -------------- Non-GAAP Guidance $0.24 - $0.26 Adjustments of Specific Items to Earnings Per Share for the Second Quarter 2008: Amortization of intangible assets (0.02) Stock based compensation expense (0.11) Gain on sale of investment 0.04 Income tax effect 0.01 -------------- Total Adjustments (0.08) GAAP Guidance - Earnings Per Share $0.16 - $0.18 CONTACT: Network Appliance, Inc. Jodi Baumann, 408-822-3974 (Press) jodi@netapp.com Ingemar Lanevi, 919-476-5750 (Investors) ingemar@netapp.com Billie Fagenstrom, 408-822-6428 (Investors) billief@netapp.com -----END PRIVACY-ENHANCED MESSAGE-----