Exhibit 99.1
Network Appliance Announces Results for Second Quarter Fiscal Year
2004; Eighth Consecutive Quarter of Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 18, 2003--Network
Appliance, Inc. (Nasdaq:NTAP) today announced results for the second
quarter of fiscal year 2004. Revenues for the second fiscal quarter
were $275.6 million, an increase of 28% compared to revenues of $215.2
million for the same period a year ago and a 6% increase compared to
$260.5 million in the prior quarter.
For the second quarter, GAAP net income increased 206% to $48.4
million, or $0.13 per share(1) compared to GAAP net income of $15.8
million, or $0.05 per share for the same period in the prior year.
GAAP net income for the second quarter of fiscal year 2004 includes a
non-recurring tax benefit of $16.8 million, or approximately $0.045
per share, associated with a favorable foreign tax ruling, which
transpired during the current quarter. Pro forma(2) net income for the
second quarter increased 92% to $33.6 million, or $0.09 per share,
compared to pro forma net income of $17.5 million, or $0.05 per share
for the same period a year ago.
Revenues for the first six months of the current fiscal year
totaled $536.1 million, compared to revenues of $422.0 million for the
first six months of the prior fiscal year.
For the first six months of the current fiscal year, GAAP net
income was $75.5 million, or $0.21 per share, compared with income of
$32.0 million, or $0.09 per share for the same period in the prior
year. Pro forma net income for the first six months of the current
fiscal year totaled $62.4 million, or $0.17 per share, compared to pro
forma net income of $35.5 million, or $0.10 per share for the first
six months of the prior fiscal year.
"I am very pleased with our results and our continued growth,
which exceeded 25% year-over-year for the second consecutive quarter,"
said Dan Warmenhoven, Chief Executive Officer at Network Appliance.
"Our entry-level FAS systems achieved significant market momentum, and
we continue to lead in enterprise iSCSI storage systems. We have
expanded SnapLock(TM) for general enterprise as well as regulatory
compliance needs. Most importantly, our growth reflects our strong
customer commitment, growing services expertise, and sales emphasis on
enterprise accounts."
Quarterly Highlights
In the second quarter of fiscal year 2004, Network Appliance
continued to reinforce its position as a storage leader by expanding
its iSCSI, unified storage, and NearStore(R) solutions, extending its
partnerships with other technology leaders, and winning customers
across all target industries.
The company reaffirmed its commitment to iSCSI technology by
becoming the first to support Windows(R), Novell(R), NetWare(R), and
Linux(R) native iSCSI initiators on Intel(R) technology-based
platforms, enabling customers to share and network more of their data
currently in direct-attached configurations using their existing
network infrastructures. In addition, Network Appliance announced its
program to qualify iSCSI adapter vendors as NetApp(R) supported
solutions in conjunction with NetApp iSCSI storage systems, allowing
vendors to develop affordable, certified, and interoperable storage
consolidation solutions.
During the second quarter, customers worldwide also chose Network
Appliance to store, manage, protect, and consolidate a wide range of
data. Unified storage, iSCSI, SAN, and NAS wins included 1-800
CONTACTS, Antwerp Municipal Port Authority, Bacardi, Bronson
Healthcare, DHL International, Egmont IT, National Instruments,
National Oceanic and Atmospheric Administration, TF1, U.S. Department
of State, and Xerox Corporation. NearStore customer wins included
Constellation Energy Group, Discovery Communications, Inc., L'Equipe,
Magellan Health, and The College Board.
The company also expanded its data protection and regulatory
compliance initiatives by extending the SnapLock solutions for
regulated data and data permanence storage. Network Appliance
introduced SnapLock Compliance, which meets the storage safeguards
required by SEC Rule 17a-3 and 17a-4. Network Appliance also released
SnapLock Enterprise, which provides customers with the assurance that
important data and business records remain accurate, safe, accessible,
and unmodified. In addition, Network Appliance teamed up with Decru
DataFort(TM) and MDY Advanced Technologies to achieve U.S. Department
of Defense 5015.2-STD certification for electronic records management
applications, enabling defense users to meet stringent data protection
and shredding regulations regarding national security.
During the quarter, Network Appliance reinforced its commitment to
partners by launching the NetApp Partner Program to support the
companies who continue to play an integral role in developing and
expanding Network Appliance's enterprise solutions and services. The
program enables partners to more tightly integrate and synergize their
products and services for optimal performance in NetApp environments
by providing the tools, training, collateral, education programs, and
online partner and support portals to assist them in addressing the
end user needs.
The company also extended its strategic partnership with Fujitsu
Siemens Computers to deliver integrated server and storage solutions
for Oracle database technology to European customers. In addition,
Network Appliance signed an agreement with VERITAS Software
Corporation expanding their strategic partnership to cooperatively
develop and deliver integrated solutions for customers through joint
sales and marketing and cooperative technical support.
Footnotes:
1. Earnings per share represents the diluted number of shares for
all periods presented.
2. Pro forma results exclude amortization of intangible assets,
stock compensation, restructuring charges, net gain or loss on
investments, gain on sale of intangible assets, and the related
effects on income taxes, as well as the benefit of a non-recurring
foreign tax ruling.
Acquisition Highlights
On November 4, 2003, Network Appliance signed a merger agreement
with Spinnaker Networks, Inc., a privately held company based in
Pittsburgh, Pennsylvania, for approximately $300 million in an
all-stock transaction. The software technology acquisition reaffirms
the Network Appliance business model and accelerates the company's
vision for a storage grid future, enabling customers to leverage more
value from their storage and data infrastructures. The transaction is
expected to close in January 2004.
Conference Call Information
The NetApp quarterly results conference call will be broadcast
live via the Internet from the investors section of Network
Appliance's Web site at http://investors.netapp.com on Tuesday,
November 18, 2003 at 2:00 p.m. Pacific time. The conference call will
also be available live in a listen-only format at (800) 257-2101 in
the United States and (303) 262-0075 outside the United States. A
replay will be available for 72 hours following completion of the live
call by dialing (800) 405-2236 in the United States, and (303)
590-3000 outside the United States, replay code 556284.
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.
NetApp is a registered trademark and Network Appliance,
NearStore, SnapLock, 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. 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.
"Safe Harbor" Statement under U.S. Private Securities Litigation
Reform Act of 1995
This press release contains forward-looking statements within the
meeting of the Private Securities Litigation Reform Act of 1995. These
statements include comments regarding our continued position as a
storage leader, our ability to meet regulatory standards in certain of
the markets we serve, market acceptance of unified storage and other
Network Appliance solutions and expected benefits of the proposed
acquisition with Spinnaker Networks. 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 products which meet market acceptance, our ability
to design products which compete effectively from a price and
performance perspective, our ability to successfully complete and
integrate our proposed acquisition of Spinnaker Networks 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.
Note to Shareholder.com: NTAP - FIN
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
October 31, April 30,
2003 2003
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 315,060 $ 284,161
Short-term investments 407,035 334,677
Accounts receivable, net 160,861 151,637
Inventories 36,831 31,559
Prepaid expenses and other 23,965 24,014
Deferred income taxes 27,942 27,444
----------- -----------
Total current assets 971,694 853,492
PROPERTY AND EQUIPMENT, net 361,955 362,862
GOODWILL 48,212 48,212
INTANGIBLE ASSETS, net 8,641 2,954
OTHER ASSETS 53,356 51,653
----------- -----------
$1,443,858 $1,319,173
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,054 $ 39,600
Income taxes payable 11,875 30,256
Accrued compensation and related benefits 45,609 40,647
Other accrued liabilities 46,252 43,841
Deferred revenue 125,588 110,672
----------- -----------
Total current liabilities 270,378 265,016
LONG-TERM DEFERRED REVENUE 83,483 63,698
LONG-TERM OBLIGATIONS 4,781 3,102
----------- -----------
358,642 331,816
----------- -----------
STOCKHOLDERS' EQUITY 1,085,216 987,357
----------- -----------
$1,443,858 $1,319,173
=========== ===========
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
------------------- -------------------
Oct. 31, Oct. 25, Oct. 31, Oct. 25,
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUES:
Product revenue $249,532 $193,357 $485,318 $380,097
Service revenue 26,018 21,814 50,741 41,902
--------- --------- --------- ---------
Total revenues 275,550 215,171 536,059 421,999
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product revenue 88,090 67,378 173,129 131,033
Cost of service revenue 22,397 14,803 41,744 30,261
--------- --------- --------- ---------
Total cost of revenues 110,487 82,181 214,873 161,294
--------- --------- --------- ---------
GROSS MARGIN 165,063 132,990 321,186 260,705
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 82,185 76,207 161,541 148,109
Research and development 31,513 28,373 63,054 56,241
General and
administrative 12,728 9,132 24,993 16,570
Stock compensation 893 885 1,547 1,868
Restructuring charges 1,110 - 1,110 -
--------- --------- --------- ---------
Total operating
expenses 128,429 114,597 252,245 222,788
--------- --------- --------- ---------
INCOME FROM OPERATIONS 36,634 18,393 68,941 37,917
OTHER INCOME (EXPENSE), net:
Interest income 2,831 2,880 5,876 6,031
Other expense, net (1,209) (189) (1,256) (1,189)
Net gain/(loss) on
investments - - 145 (726)
Gain on sale of
intangible asset - - - 604
--------- --------- --------- ---------
Total other income,
net 1,622 2,691 4,765 4,720
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 38,256 21,084 73,706 42,637
PROVISION FOR (BENEFIT FROM)
INCOME TAXES (10,157) 5,271 (1,780) 10,659
--------- --------- --------- ---------
NET INCOME $ 48,413 $ 15,813 $ 75,486 $ 31,978
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC $ 0.14 $ 0.05 $ 0.22 $ 0.10
========= ========= ========= =========
DILUTED $ 0.13 $ 0.05 $ 0.21 $ 0.09
========= ========= ========= =========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 343,725 336,605 342,706 336,194
========= ========= ========= =========
DILUTED 364,715 347,110 361,606 348,616
========= ========= ========= =========
NETWORK APPLIANCE, INC.
PRO FORMA(1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Six Months Ended
------------------- -------------------
Oct. 31, Oct. 25, Oct. 31, Oct. 25,
2003 2002 2003 2002
--------- --------- --------- ---------
REVENUES
Product revenue $249,532 $193,357 $485,318 $380,097
Service revenue 26,018 21,814 50,741 41,902
--------- --------- --------- ---------
Total revenues 275,550 215,171 536,059 421,999
--------- --------- --------- ---------
COST OF REVENUES
Cost of product revenue 86,726 66,014 170,401 128,283
Cost of service revenue 22,397 14,803 41,744 30,261
--------- --------- --------- ---------
Total cost of revenues 109,123 80,817 212,145 158,544
--------- --------- --------- ---------
GROSS MARGIN 166,427 134,354 323,914 263,455
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 82,185 76,207 161,541 148,109
Research and development 31,513 28,373 63,054 56,241
General and
administrative 12,728 9,132 24,993 16,570
--------- --------- --------- ---------
Total operating
expenses 126,426 113,712 249,588 220,920
--------- --------- --------- ---------
INCOME FROM OPERATIONS 40,001 20,642 74,326 42,535
OTHER INCOME, net 1,622 2,691 4,620 4,842
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 41,623 23,333 78,946 47,377
PROVISION FOR INCOME TAXES 7,995 5,833 16,579 11,844
--------- --------- --------- ---------
NET INCOME $ 33,628 $ 17,500 $ 62,367 $ 35,533
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC $ 0.10 $ 0.05 $ 0.18 $ 0.11
========= ========= ========= =========
DILUTED $ 0.09 $ 0.05 $ 0.17 $ 0.10
========= ========= ========= =========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 343,725 336,605 342,706 336,194
========= ========= ========= =========
DILUTED 364,715 347,110 361,606 348,616
========= ========= ========= =========
(1) Pro forma results of operations exclude amortization of intangible
assets, stock compensation, restructuring charges net gain/loss on
investments, gain on sale of intangible asset 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 Six Months Ended
------------------- -------------------
Oct. 31, Oct. 25, Oct. 31, Oct. 25,
2003 2002 2003 2002
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF
NET INCOME:
NET INCOME $ 48,413 $ 15,813 $ 75,486 $ 31,978
Adjustments:
Amortization of
intangible assets 1,364 1,364 2,728 2,750
Stock compensation 893 885 1,547 1,868
Restructuring charges 1,110 - 1,110 -
Net (gain)/loss on
investments - - (145) 726
Gain on sale of
intangible asset - - - (604)
Income tax effect (1,321) (562) (1,528) (1,185)
Income tax benefit from
foreign tax ruling (16,831) - (16,831) -
--------- --------- --------- ---------
PRO FORMA NET INCOME $ 33,628 $ 17,500 $ 62,367 $ 35,533
========= ========= ========= =========
DILUTED PRO FORMA NET INCOME
PER SHARE $ 0.09 $ 0.05 $ 0.17 $ 0.10
========= ========= ========= =========
SHARES USED IN DILUTED
PRO FORMA NET INCOME
PER SHARE CALCULATION: 364,715 347,110 361,606 348,616
========= ========= ========= =========
DETAILED RECONCILIATION OF
SPECIFIC ITEMS:
COST OF REVENUES $110,487 $ 82,181 $214,873 $161,294
Adjustment:
Amortization of
intangible assets (1,364) (1,364) (2,728) (2,750)
--------- --------- --------- ---------
PRO FORMA COST OF REVENUES $109,123 $ 80,817 $212,145 $158,544
========= ========= ========= =========
GROSS MARGIN $165,063 $132,990 $321,186 $260,705
Adjustment:
Amortization of
intangible assets 1,364 1,364 2,728 2,750
--------- --------- --------- ---------
PRO FORMA GROSS MARGIN $166,427 $134,354 $323,914 $263,455
========= ========= ========= =========
OPERATING EXPENSES $128,429 $114,597 $252,245 $222,788
Adjustments:
Stock compensation (893) (885) (1,547) (1,868)
Restructuring charges (1,110) - (1,110) -
--------- --------- --------- ---------
PRO FORMA OPERATING EXPENSES $126,426 $113,712 $249,588 $220,920
========= ========= ========= =========
INCOME FROM OPERATIONS $ 36,634 $ 18,393 $ 68,941 $ 37,917
Adjustments:
Amortization of
intangible assets 1,364 1,364 2,728 2,750
Stock compensation 893 885 1,547 1,868
Restructuring charges 1,110 - 1,110 -
--------- --------- --------- ---------
PRO FORMA INCOME FROM
OPERATIONS $ 40,001 $ 20,642 $ 74,326 $ 42,535
========= ========= ========= =========
TOTAL OTHER INCOME, NET $ 1,622 $ 2,691 $ 4,765 $ 4,720
Adjustments:
Net (gain)/loss on
investments - - (145) 726
Gain on sale of
intangible asset - - - (604)
--------- --------- --------- ---------
PRO FORMA TOTAL OTHER
INCOME, NET $ 1,622 $ 2,691 $ 4,620 $ 4,842
========= ========= ========= =========
INCOME BEFORE INCOME TAXES $ 38,256 $ 21,084 $ 73,706 $ 42,637
Adjustments:
Amortization of
intangible assets 1,364 1,364 2,728 2,750
Stock compensation 893 885 1,547 1,868
Restructuring charges 1,110 - 1,110 -
Net (gain)/loss on
investments - - (145) 726
Gain on sale of
intangible asset - - - (604)
--------- --------- --------- ---------
PRO FORMA INCOME BEFORE
INCOME TAXES $ 41,623 $ 23,333 $ 78,946 $ 47,377
========= ========= ========= =========
PROVISION FOR (BENEFIT FROM)
INCOME TAXES ($10,157) $ 5,271 ($1,780) $ 10,659
Adjustments:
Income tax effect 1,321 562 1,528 1,185
Income tax benefit from
foreign tax ruling 16,831 - 16,831 -
--------- --------- --------- ---------
PRO FORMA PROVISION FOR
(BENEFIT FROM) INCOME TAXES $ 7,995 $ 5,833 $ 16,579 $ 11,844
========= ========= ========= =========
CONTACT: Network Appliance
Marla Dierkes, 408-822-3580 (Press)
marla@netapp.com
Billie Fagenstrom, 408-822-6428 (Investors)
billief@netapp.com