Exhibit 99.1
Network Appliance Announces Results for Fourth Quarter and Fiscal Year 2004
SUNNYVALE, Calif.--(BUSINESS WIRE)--May 18, 2004--
Q4 Revenues $337.0 Million, up 39.5% Year over Year;
Fiscal Year 2004 Revenues $1.17 Billion, up 31% Year over Year
Network Appliance, Inc. (Nasdaq:NTAP) today announced results for
the fourth quarter and fiscal year 2004. Revenues for the fourth
fiscal quarter were $337.0 million, an increase of 39.5% compared to
revenues of $241.6 million for the same period a year ago and a 13%
increase compared to $297.3 million in the prior quarter.
For the fourth fiscal quarter, GAAP net income increased 47% to
$36.4 million, or $0.10 per share(1) compared to GAAP net income of
$24.8 million, or $0.07 per share for the same period in the prior
year. Pro forma(2) net income for the fourth fiscal quarter increased
71% to $43.5 million, or $0.12 per share, compared to pro forma net
income of $25.5 million, or $0.07 per share for the same period a year
ago.
Revenues for fiscal year 2004 were $1.17 billion, an increase of
31% compared to revenues of $892.1 million for fiscal year 2003.
For fiscal year 2004, GAAP net income was $152.1 million, or $0.42
per share, compared to GAAP net income of $76.5 million, or $0.22 per
share for fiscal year 2003. Pro forma net income for fiscal year 2004
increased 74% to $146.0 million, or $0.40 per share, compared to pro
forma net income of $83.8 million, or $0.24 per share for fiscal year
2003.
"NetApp posted exceptional performance during the quarter with
revenues growing 39.5% year over year. Our accelerating growth during
the year was driven by the adoption of our new systems platforms,
secondary storage for compliance applications, and our extended
interconnect offerings for SAN and iSCSI," said Dan Warmenhoven, CEO
of Network Appliance. "Investments we made over the past several years
are paying off in our growth today and we plan to continue investing
in our business to take full advantage of current and emerging market
opportunities that will fuel our growth in the future."
Quarterly Highlights
Throughout the fourth quarter of fiscal year 2004, Network
Appliance reinforced its position as a storage leader with milestone
deployments, expanded partnerships, and continued market acceptance
for its unified storage, NearStore(R), and NetCache(R) families.
Network Appliance completed its acquisition of Spinnaker Networks,
Inc. which will accelerate the delivery of the NetApp(R) "Storage
Grid" architecture, enabling customers to leverage even more value
from their storage and data infrastructures. Also during the quarter,
the company announced several key industry milestones, including
reaching the 100th iSCSI installation and the deployment of over a
petabyte (1000 TB) of compliance storage in enterprise customer
environments.
During the fourth quarter of fiscal year 2004, Network Appliance
announced strategic partnerships with Agfa, AppIQ, BearingPoint,
CreekPath, FileNet, Fujitsu, SmarTeam, Sun Microsystems and VERITAS to
address a variety of data management, information lifecycle management
(ILM), backup and recovery, and compliance/retention issues central to
enterprise customers today. The company also announced support for the
SNIA SMI-S standard to simplify SAN management and joined the
Enterprise Grid Alliance (EGA) to drive industry adoption of Grid
computing.
Also during the fourth quarter, global customers from a variety of
industries worldwide selected Network Appliance to store, manage, and
consolidate their business- and mission-critical data. Customer wins
included AT&T, Baring Asset Management, Continental Teves AG, Cross
Country Healthcare, Inc., Honda Motor Company, Lockheed-Martin, NASA
Flight Dynamics, PDI/DreamWorks SKG, Renault-Nissan, State of
Kentucky, The United States Federal Aviation Administration (FAA),
University of Phoenix Online and Volkswagen Coordination Center.
Network Appliance(TM) product- and service-related highlights
during the fourth quarter included three key awards, including the
selection of Network Appliance customer Mustang Engineering for
Storage Network World's (SNW's) "Best Practices in Storage" award for
Data Lifecycle Management (DLM). Network Appliance also won Australian
Technology & Business Magazine's coveted Editor's Choice award for the
NetApp FAS250 unified storage system. Additionally, the company won
the Service & Support Professionals Association (SSPA) prestigious
WebStar Service Award for the fourth consecutive year.
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, in process research and
development, 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 at http://investors.netapp.com/ on
Tuesday, May 18, 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) 240-8621 in the United States and (303)
262-2190 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 577898.
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, NearStore and NetCache are registered trademarks and
Network Appliance 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: investing in our business to
take full advantage of market opportunities and the acquisition of
Spinnaker Networks which will accelerate the delivery of the NetApp
"Storage Grid" architecture. 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)
April 30, April 30,
2004 2003
---------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $241,149 $284,161
Short-term investments 566,816 334,677
Accounts receivable, net 193,942 151,637
Inventories 34,109 31,559
Prepaid expenses and other 29,057 24,014
Deferred income taxes 24,163 27,444
---------- -----------
Total current assets 1,089,236 853,492
PROPERTY AND EQUIPMENT, net 370,717 362,862
GOODWILL 291,816 48,212
INTANGIBLE ASSETS, net 31,718 2,954
OTHER ASSETS 93,779 51,653
---------- -----------
1,877,266 $1,319,173
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $52,719 $39,600
Income taxes payable 16,033 30,256
Accrued compensation and related
benefits 65,186 40,647
Other accrued liabilities 43,683 43,841
Deferred revenue 166,602 110,672
---------- -----------
Total current liabilities 344,223 265,016
LONG-TERM DEFERRED REVENUE 112,337 63,698
LONG-TERM OBLIGATIONS 4,858 3,102
---------- -----------
461,418 331,816
---------- -----------
STOCKHOLDERS' EQUITY 1,415,848 987,357
---------- -----------
1,877,266 $1,319,173
========== ===========
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,
2004 2003 2004 2003
--------- --------- ----------- ---------
REVENUES:
Product revenue $303,931 $217,138 $1,058,204 $802,281
Service revenue 33,033 24,467 112,106 89,787
--------- --------- ----------- ---------
Total revenues 336,964 241,605 1,170,310 892,068
--------- --------- ----------- ---------
COST OF REVENUES:
Cost of product revenue 104,910 75,791 371,480 279,689
Cost of service revenue 28,842 18,781 94,309 65,953
--------- --------- ----------- ---------
Total cost of revenues 133,752 94,572 465,789 345,642
--------- --------- ----------- ---------
GROSS MARGIN 203,212 147,033 704,521 546,426
--------- --------- ----------- ---------
OPERATING EXPENSES:
Sales and marketing 101,974 79,158 349,490 304,236
Research and development 35,855 28,333 131,856 112,863
General and administrative 15,813 10,419 54,550 36,822
In process research and
development 4,940 - 4,940 -
Stock compensation 1,882 536 3,895 3,642
Restructuring charges 217 - 1,327 1,257
--------- --------- ----------- ---------
Total operating expenses 160,681 118,446 546,058 458,820
--------- --------- ----------- ---------
INCOME FROM OPERATIONS 42,531 28,587 158,463 87,606
OTHER INCOME (EXPENSES), net:
Interest income 3,967 3,116 13,704 12,215
Other expenses, net (372) (462) (2,460) (1,381)
Net gain/(loss) on
investments 385 (503) 747 (1,229)
Gain on sale of intangible
asset - - - 604
--------- --------- ----------- ---------
Total other income, net 3,980 2,151 11,991 10,209
--------- --------- ----------- ---------
INCOME BEFORE INCOME TAXES 46,511 30,738 170,454 97,815
PROVISION FOR INCOME TAXES 10,062 5,915 18,367 21,343
--------- --------- ----------- ---------
NET INCOME $36,449 $24,823 $152,087 $76,472
========= ========= =========== =========
NET INCOME PER SHARE:
BASIC $0.10 $0.07 $0.44 $0.23
========= ========= =========== =========
DILUTED $0.10 $0.07 $0.42 $0.22
========= ========= =========== =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 356,142 339,854 346,965 337,647
========= ========= =========== =========
DILUTED 375,140 352,144 366,195 350,122
========= ========= =========== =========
NETWORK APPLIANCE, INC.
PRO FORMA (1) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended Year Ended
------------------- ---------------------
April 30, April 30, April 30, April 30,
2004 2003 2004 2003
--------- --------- ----------- ---------
REVENUES:
Product revenue $303,931 $217,138 $1,058,204 $802,281
Service revenue 33,033 24,467 112,106 89,787
--------- --------- ----------- ---------
Total revenues 336,964 241,605 1,170,310 892,068
--------- --------- ----------- ---------
COST OF REVENUES:
Cost of product revenue 104,195 74,427 367,811 274,211
Cost of service revenue 28,842 18,781 94,309 65,953
--------- --------- ----------- ---------
Total cost of revenues 133,037 93,208 462,120 340,164
--------- --------- ----------- ---------
GROSS MARGIN 203,927 148,397 708,190 551,904
--------- --------- ----------- ---------
OPERATING EXPENSES:
Sales and marketing 101,802 79,158 349,318 304,236
Research and
development 35,855 28,333 131,856 112,863
General and
administrative 14,756 10,419 53,493 36,822
--------- --------- ----------- ---------
Total operating
expenses 152,413 117,910 534,667 453,921
--------- --------- ----------- ---------
INCOME FROM OPERATIONS 51,514 30,487 173,523 97,983
OTHER INCOME (EXPENSES), net 3,595 2,654 11,244 10,834
--------- --------- ----------- ---------
INCOME BEFORE INCOME TAXES 55,109 33,141 184,767 108,817
PROVISION FOR INCOME TAXES 11,573 7,622 38,801 25,028
--------- --------- ----------- ---------
NET INCOME $43,536 $25,519 $145,966 $83,789
========= ========= =========== =========
NET INCOME PER SHARE:
BASIC $0.12 $0.08 $0.42 $0.25
========= ========= =========== =========
DILUTED $0.12 $0.07 $0.40 $0.24
========= ========= =========== =========
SHARES USED IN PER SHARE CALCULATION:
BASIC 356,142 339,854 346,965 337,647
========= ========= =========== =========
DILUTED 375,140 352,144 366,195 350,122
========= ========= =========== =========
(1) Pro forma results of operations exclude amortization of intangible
assets, in process research and development, 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 Year Ended
------------------- -------------------
April 30, April 30, April 30, April 30,
2004 2003 2004 2003
--------- --------- --------- ---------
SUMMARY RECONCILIATION OF NET INCOME
- ------------------------------------
NET INCOME $36,449 $24,823 $152,087 $76,472
Adjustments:
Amortization of intangible
assets 1,944 1,364 4,898 5,478
Stock compensation 1,882 536 3,895 3,642
In process research and
development 4,940 - 4,940 -
Restructuring charges 217 - 1,327 1,257
Net (gain)/loss on
investments (385) 503 (747) 1,229
Gain on sale of intangible
asset - - - (604)
Income tax effect (1,511) (1,707) (3,603) (3,685)
Income tax benefit from
foreign tax ruling - - (16,831) -
--------- --------- --------- ---------
PRO FORMA NET INCOME $43,536 $25,519 $145,966 $83,789
========= ========= ========= =========
DILUTED PRO FORMA NET INCOME
PER SHARE $0.12 $0.07 $0.40 $0.24
========= ========= ========= =========
SHARES USED IN DILUTED PRO
FORMA NET INCOME PER SHARE
CALCULATION: 375,140 352,144 366,195 350,122
========= ========= ========= =========
DETAILED RECONCILIATION OF SPECIFIC ITEMS:
- ------------------------------------------
COST OF REVENUES $133,752 $94,572 $465,789 $345,642
Adjustment:
Amortization of intangible
assets (715) (1,364) (3,669) (5,478)
--------- --------- --------- ---------
PRO FORMA COST OF REVENUES $133,037 $93,208 $462,120 $340,164
========= ========= ========= =========
GROSS MARGIN $203,212 $147,033 $704,521 $546,426
Adjustment:
Amortization of intangible
assets 715 1,364 3,669 5,478
--------- --------- --------- ---------
PRO FORMA GROSS MARGIN $203,927 $148,397 $708,190 $551,904
========= ========= ========= =========
SALES AND MARKETING EXPENSES $101,974 $79,158 $349,490 $304,236
Adjustments:
Amortization of intangible
assets (172) - (172) -
--------- --------- --------- ---------
PRO FORMA SALES AND MARKETING
EXPENSES $101,802 $79,158 $349,318 $304,236
========= ========= ========= =========
GENERAL AND ADMINISTRATIVE
EXPENSES $15,813 $10,419 $54,550 $36,822
Adjustments:
Amortization of intangible
assets (1,057) - (1,057) -
--------- --------- --------- ---------
PRO FORMA GENERAL AND
ADMINISTRATIVE EXPENSES $14,756 $10,419 $53,493 $36,822
========= ========= ========= =========
OPERATING EXPENSES $160,681 $118,446 $546,058 $458,820
Adjustments:
Stock compensation (1,882) (536) (3,895) (3,642)
Restructuring charges (217) - (1,327) (1,257)
Amortization of intangible
assets (1,229) - (1,229) -
In process research and
development (4,940) - (4,940) -
--------- --------- --------- ---------
PRO FORMA OPERATING EXPENSES $152,413 $117,910 $534,667 $453,921
========= ========= ========= =========
INCOME FROM OPERATIONS $42,531 $28,587 $158,463 $87,606
Adjustments:
Amortization of intangible
assets 1,944 1,364 4,898 5,478
Stock compensation 1,882 536 3,895 3,642
Restructuring charges 217 - 1,327 1,257
In process research and
development 4,940 - 4,940 -
--------- --------- --------- ---------
PRO FORMA INCOME FROM
OPERATIONS $51,514 $30,487 $173,523 $97,983
========= ========= ========= =========
TOTAL OTHER INCOME, NET $3,980 $2,151 $11,991 $10,209
Adjustments:
Net (gain)/loss on
investments (385) 503 (747) 1,229
Gain on sale of intangible
asset - - - (604)
--------- --------- --------- ---------
PRO FORMA TOTAL OTHER INCOME,
NET $3,595 $2,654 $11,244 $10,834
========= ========= ========= =========
INCOME BEFORE INCOME TAXES $46,511 $30,738 $170,454 $97,815
Adjustments:
Amortization of intangible
assets 1,944 1,364 4,898 5,478
In process research and
development 4,940 - 4,940 -
Stock compensation 1,882 536 3,895 3,642
Restructuring charges 217 - 1,327 1,257
Net (gain)/loss on
investments (385) 503 (747) 1,229
Gain on sale of intangible
asset - - - (604)
--------- --------- --------- ---------
PRO FORMA INCOME BEFORE INCOME
TAXES $55,109 $33,141 $184,767 $108,817
========= ========= ========= =========
PROVISION FOR INCOME TAXES $10,062 $5,915 $18,367 $21,343
Adjustments:
Income tax effect 1,511 1,707 3,603 3,685
Income tax benefit from
foreign tax ruling - - 16,831 -
--------- --------- --------- ---------
PRO FORMA PROVISION FOR INCOME
TAXES $11,573 $7,622 $38,801 $25,028
========= ========= ========= =========
CONTACT: Voce Communications for Network Appliance, Inc.
Dave Black, 408-822-3287 (Press)
dblack@vocepr.com
or
Network Appliance, Inc.
Tara Calhoun, 408-822-6909 (Investor)
tara@netapp.com
Billie Fagenstrom, 408-822-6428 (Investor)
billief@netapp.com