Exhibit 99.1
Network Appliance Announces Record Fiscal Third Quarter Results as
Revenues Grow 30% Year-Over-Year; Ninth Consecutive Quarter of Growth
SUNNYVALE, Calif.--(BUSINESS WIRE)--Feb. 17, 2004--Network
Appliance, Inc. (NASDAQ:NTAP) today announced results for the third
quarter of fiscal year 2004. Revenues for the third fiscal quarter
were $297.3 million, an increase of 30% compared to revenues of $228.5
million for the same period a year ago and an 8% increase compared to
$275.6 million in the prior quarter.
For the third fiscal quarter, GAAP net income increased 104% to
$40.2 million, or $0.11 per share(1) compared to GAAP net income of
$19.7 million, or $0.06 per share for the same period in the prior
year. Pro forma(2) net income for the third fiscal quarter increased
76% to $40.1 million, or $0.11 per share, compared to pro forma net
income of $22.7 million, or $0.06 per share for the same period a year
ago.
Revenues for the first nine months of the current fiscal year
totaled $833.3 million, compared to revenues of $650.5 million for the
first nine months of the prior fiscal year.
For the first nine months of the current fiscal year, GAAP net
income was $115.6 million, or $0.32 per share, compared with income of
$51.6 million, or $0.15 per share for the same period in the prior
year. Pro forma net income for the first nine months of the current
fiscal year totaled $102.4 million, or $0.28 per share, compared to
pro forma net income of $58.3 million, or $0.17 per share for the
first nine months of the prior fiscal year.
"I am extremely pleased with our performance this quarter. Revenue
for the third fiscal quarter grew year-over-year by 30% to record
levels and we also achieved our highest-ever net profit level," said
Dan Warmenhoven, CEO of Network Appliance. "Our results this quarter
mark the return to our target business model, and we remain confident
about the market opportunity ahead of us."
Quarterly Highlights
In the third quarter of fiscal year 2004, Network Appliance
continued to reinforce its position as a storage leader by expanding
its unified storage, iSCSI, and NearStore(R) solutions, extending its
partnerships, and winning enterprise customers across all target
industries.
The company announced its Storage Grid strategy to enable
customers to leverage more value from their storage and data
infrastructures. As part of the strategy, Network Appliance announced
the FAS980 and FAS980c, the newest members of the NetApp(R) FAS900
platform, along with key elements in extending the NetApp unified
storage systems into the high-end. Also unveiled during the quarter,
the NetApp NearStore R200 storage system and SnapVault(TM) software
solution for backup, compliance, reference, archive, and "secondary"
data needs. NetApp also announced the integration of RAID-DP
(double-disk parity) into its full line of enterprise storage systems
to increase data protection in the event of multiple storage-related
disk failures. In addition, the company announced that its NetApp
gFiler(TM) supports unified NAS and SAN consolidation for IBM storage
system platforms.
During the third quarter of fiscal year 2004, Network Appliance
also announced deeper and more strategic partnerships with Cisco,
VERITAS, FileNet, IXOS Software, and Princeton Softech to address a
variety of data management, information life cycle management (ILM),
backup and recovery, and compliance/retention issues central to
enterprise customers today.
Global customers from a variety of industries worldwide also
selected Network Appliance to store, manage, and consolidate their
business- and mission-critical data in the third quarter. Unified
storage, iSCSI, SAN, NAS, and NetCache(R) wins included AutoNation
Inc., Bibliotheque nationale de France, Inc., HDFC Standard Life,
Interval International, Kimberly-Clark, Oracle, Telefonica de
Argentina, and Volvo IT AB. NearStore customer wins included Centraal
Bureau voor de Statistiek, Cisco, Dassault Systemes, E.ON, First
Assist, Inc., and Nielsen//NetRatings.
The company reaffirmed its commitment to iSCSI technology by
completing Microsoft's Design for Windows Logo testing for the NetApp
FAS960, FAS960c, FAS940c, F825, F825c, FAS250, and NearStore R150 to
ensure that they meet Microsoft standards for iSCSI compatibility and
interoperability with the Windows(R) platform. In addition, Network
Appliance extended support for IBM Lotus applications by announcing
iSCSI support for NetApp SnapManager(R) for Lotus Domino.
Network Appliance also furthered its Linux(R) strategy by joining
the Open Source Development Labs, a global consortium dedicated to
accelerating the adoption of Linux.
Also during the quarter, Network Appliance announced its intention
to acquire Spinnaker Networks, Inc., a privately held company based in
Pittsburgh, Pennsylvania. The proposed software technology acquisition
reaffirms the Network Appliance business model and accelerates the
company's vision for a Storage Grid future.
Footnotes:
1. Earnings per share represents the diluted number of shares for all
periods presented.
2. Pro forma results for all periods presented 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 an income tax
benefit from a nonrecurring foreign tax ruling.
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,
February 17, 2004 at 2:00 p.m. Pacific time. This press release and
any other information related to the call will also be posted to the
Web site at that location. The conference call will also be available
live in a listen-only format at (800) 867-1054 in the United States
and (303) 262-2175 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 568756.
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(TM) solutions and services is
available at www.netapp.com.
NetApp, NearStore, SnapManager, and NetCache are registered
trademarks and Network Appliance, gFiler, SnapVault, 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: the return to our target
business model and our confidence in the opportunity ahead of us; our
Storage Grid strategy; the nature and goals of our strategic
partnerships; our proposed acquisition of Spinnaker Networks and the
expected benefits thereof; and our vision for a Storage Grid future.
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.
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
January 30, April 30,
2004 2003
---------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $263,644 $284,161
Short-term investments 514,460 334,677
Accounts receivable, net 194,274 151,637
Inventories 38,704 31,559
Prepaid expenses and other 26,036 24,014
Deferred income taxes 44,390 27,444
---------------- ---------------
Total current assets 1,081,508 853,492
PROPERTY AND EQUIPMENT, net 366,749 362,862
GOODWILL 48,212 48,212
INTANGIBLE ASSETS, net 7,963 2,954
OTHER ASSETS 62,883 51,653
---------------- ---------------
$1,567,315 $1,319,173
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $43,000 $39,600
Income taxes payable 5,809 30,256
Accrued compensation and
related benefits 55,287 40,647
Other accrued liabilities 43,942 43,841
Deferred revenue 142,260 110,672
---------------- ---------------
Total current
liabilities 290,298 265,016
LONG-TERM DEFERRED REVENUE 94,534 63,698
LONG-TERM OBLIGATIONS 4,453 3,102
---------------- ---------------
389,285 331,816
---------------- ---------------
STOCKHOLDERS' EQUITY 1,178,030 987,357
---------------- ---------------
$1,567,315 $1,319,173
================ ===============
NETWORK APPLIANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Nine Months Ended
------------------- -------------------
January January January January
30, 2004 24, 2003 30, 2004 24, 2003
--------- --------- --------- ---------
REVENUES:
Product revenue $268,955 $205,046 $754,273 $585,143
Service revenue 28,332 23,418 79,073 65,320
--------- --------- --------- ---------
Total revenues 297,287 228,464 833,346 650,463
--------- --------- --------- ---------
COST OF REVENUES:
Cost of product revenue 93,442 72,865 266,571 203,898
Cost of service revenue 23,722 16,911 65,466 47,172
--------- --------- --------- ---------
Total cost of revenues 117,164 89,776 332,037 251,070
--------- --------- --------- ---------
GROSS MARGIN 180,123 138,688 501,309 399,393
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 85,975 76,969 247,516 225,078
Research and development 32,948 28,289 96,002 84,530
General and administrative 13,744 9,833 38,737 26,403
Stock compensation 465 1,238 2,012 3,106
Restructuring charges - 1,257 1,110 1,257
--------- --------- --------- ---------
Total operating expenses 133,132 117,586 385,377 340,374
--------- --------- --------- ---------
INCOME FROM OPERATIONS 46,991 21,102 115,932 59,019
OTHER INCOME (EXPENSE), net:
Interest income 3,862 3,068 9,737 9,099
Other income (expense), net (833) 270 (2,089) (919)
Net gain/(loss) on
investments 217 - 362 (726)
Gain on sale of intangible
asset - - - 604
--------- --------- --------- ---------
Total other income, net 3,246 3,338 8,010 8,058
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 50,237 24,440 123,942 67,077
PROVISION FOR INCOME TAXES 10,085 4,769 8,304 15,428
--------- --------- --------- ---------
NET INCOME $40,152 $19,671 $115,638 $51,649
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC $0.12 $0.06 $0.34 $0.15
========= ========= ========= =========
DILUTED $0.11 $0.06 $0.32 $0.15
========= ========= ========= =========
SHARES USED IN PER SHARE
CALCULATION:
BASIC 346,305 338,345 343,906 336,911
========= ========= ========= =========
DILUTED 366,429 351,114 363,214 349,449
========= ========= ========= =========
NETWORK APPLIANCE, INC.
PRO FORMA (1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Nine Months Ended
-------------------- -------------------
January January January January
30, 2004 24, 2003 30, 2004 24, 2003
---------- --------- --------- ---------
REVENUES:
Product revenue $268,955 $205,046 $754,273 $585,143
Service revenue 28,332 23,418 79,073 65,320
---------- --------- --------- ---------
Total revenues 297,287 228,464 833,346 650,463
---------- --------- --------- ---------
COST OF REVENUES:
Cost of product revenue 93,215 71,501 263,616 199,784
Cost of service revenue 23,722 16,911 65,466 47,172
---------- --------- --------- ---------
Total cost of revenues 116,937 88,412 329,082 246,956
---------- --------- --------- ---------
GROSS MARGIN 180,350 140,052 504,264 403,507
---------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 85,975 76,969 247,516 225,078
Research and development 32,948 28,289 96,002 84,530
General and administrative 13,744 9,833 38,737 26,403
---------- --------- --------- ---------
Total operating expenses 132,667 115,091 382,255 336,011
---------- --------- --------- ---------
INCOME FROM OPERATIONS 47,683 24,961 122,009 67,496
OTHER INCOME, net 3,029 3,338 7,648 8,180
---------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 50,712 28,299 129,657 75,676
PROVISION FOR INCOME TAXES 10,649 5,562 27,228 17,406
---------- --------- --------- ---------
NET INCOME $40,063 $22,737 $102,429 $58,270
========== ========= ========= =========
NET INCOME PER SHARE:
BASIC $0.12 $0.07 $0.30 $0.17
========== ========= ========= =========
DILUTED $0.11 $0.06 $0.28 $0.17
========== ========= ========= =========
SHARES USED IN PER
SHARE CALCULATION:
BASIC 346,305 338,345 343,906 336,911
========== ========= ========= =========
DILUTED 366,429 351,114 363,214 349,449
========== ========= ========= =========
(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 Nine Months Ended
------------------- -------------------
January January January January
30, 2004 24, 2003 30, 2004 24, 2003
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF
NET INCOME
- ------------------------------
NET INCOME $40,152 $19,671 $115,638 $51,649
Adjustments:
Amortization of intangible
assets 227 1,364 2,955 4,114
Stock compensation 465 1,238 2,012 3,106
Restructuring charges - 1,257 1,110 1,257
Net (gain)/loss on
investments (217) - (362) 726
Gain on sale of intangible
asset - - - (604)
Income tax effect (564) (793) (2,093) (1,978)
Income tax benefit from
foreign tax ruling - - (16,831) -
--------- --------- --------- ---------
PROFORMA NET INCOME $40,063 $22,737 $102,429 $58,270
========= ========= ========= =========
DILUTED PRO FORMA NET INCOME
PER SHARE $0.11 $0.06 $0.28 $0.17
=======================================
SHARES USED IN DILUTED PRO
FORMA NET INCOME
PER SHARE CALCULATION: 366,429 351,114 363,214 349,449
========= ========= ========= =========
DETAILED RECONCILIATION OF
SPECIFIC ITEMS:
- ------------------------------
COST OF REVENUES $117,164 $89,776 $332,037 $251,070
Adjustment:
Amortization of intangible
assets (227) (1,364) (2,955) (4,114)
--------- --------- --------- ---------
PRO FORMA COST OF REVENUES $116,937 $88,412 $329,082 $246,956
========= ========= ========= =========
GROSS MARGIN $180,123 $138,688 $501,309 $399,393
Adjustment:
Amortization of
intangible assets 227 1,364 2,955 4,114
--------- --------- --------- ---------
PRO FORMA GROSS MARGIN $180,350 $140,052 $504,264 $403,507
========= ========= ========= =========
OPERATING EXPENSES $133,132 $117,586 $385,377 $340,374
Adjustments:
Stock compensation (465) (1,238) (2,012) (3,106)
Restructuring charges - (1,257) (1,110) (1,257)
--------- --------- --------- ---------
PRO FORMA OPERATING EXPENSES $132,667 $115,091 $382,255 $336,011
========= ========= ========= =========
INCOME FROM OPERATIONS $46,991 $21,102 $115,932 $59,019
Adjustments:
Amortization of intangible
assets 227 1,364 2,955 4,114
Stock compensation 465 1,238 2,012 3,106
Restructuring charges - 1,257 1,110 1,257
--------- --------- --------- ---------
PRO FORMA INCOME FROM
OPERATIONS $47,683 $24,961 $122,009 $67,496
========= ========= ========= =========
TOTAL OTHER INCOME, NET $3,246 $3,338 $8,010 $8,058
Adjustments:
Net (gain)/loss on
investments (217) - (362) 726
Gain on sale of intangible
asset - - - (604)
--------- --------- --------- ---------
PRO FORMA TOTAL OTHER
INCOME, NET $3,029 $3,338 $7,648 $8,180
========= ========= ========= =========
INCOME BEFORE INCOME TAXES $50,237 $24,440 $123,942 $67,077
Adjustments:
Amortization of intangible
assets 227 1,364 2,955 4,114
Stock compensation 465 1,238 2,012 3,106
Restructuring charges - 1,257 1,110 1,257
Net (gain)/loss on
investments (217) - (362) 726
Gain on sale of intangible
asset - - - (604)
--------- --------- --------- ---------
PRO FORMA INCOME BEFORE
INCOME TAXES $50,712 $28,299 $129,657 $75,676
========= ========= ========= =========
PROVISION FOR INCOME TAXES $10,085 $4,769 $8,304 $15,428
Adjustments:
Income tax effect 564 793 2,093 1,978
Income tax benefit from
foreign tax ruling - - 16,831 -
--------- --------- --------- ---------
PRO FORMA PROVISION FOR
INCOME TAXES $10,649 $5,562 $27,228 $17,406
========= ========= ========= =========
CONTACT: Network Appliance
Marla Dierkes, 408-822-3580 (PRESS)
marla@netapp.com
Tara Calhoun, 408-822-6909 (INVESTOR)
tara@netapp.com
Billie Fagenstrom, 408-822-6428 (INVESTOR)
billief@netapp.com