Record Revenues of $1.01 Billion; Non-GAAP EPS of $0.40
NETAPP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) January 29, April 24, 2010 2009 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,975,826 $ 1,494,153 Short-term investments 1,257,445 1,110,053 Accounts receivable, net 457,536 446,537 Inventories 72,048 61,104 Prepaid expenses and other assets 143,950 119,887 Short-term deferred income taxes 110,596 207,050 ------------ ------------ Total current assets 4,017,401 3,438,784 PROPERTY AND EQUIPMENT, net 797,961 807,923 GOODWILL 680,986 680,986 INTANGIBLE ASSETS, net 30,024 45,744 LONG-TERM INVESTMENTS AND RESTRICTED CASH 72,824 127,317 LONG-TERM DEFERRED INCOME TAXES AND OTHER ASSETS 369,438 283,625 ------------ ------------ $ 5,968,634 $ 5,384,379 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 139,145 $ 137,826 Accrued compensation and related benefits 269,816 204,168 Other accrued liabilities 201,186 190,315 Accrual for GSA settlement - 128,715 Income taxes payable 6,803 4,732 Deferred revenue 1,064,579 1,013,569 ------------ ------------ Total current liabilities 1,681,529 1,679,325 ------------ ------------ LONG-TERM DEBT AND OTHER OBLIGATIONS 1,229,751 1,219,216 LONG-TERM DEFERRED REVENUE 730,374 701,649 ------------ ------------ 3,641,654 3,600,190 ------------ ------------ STOCKHOLDERS' EQUITY 2,326,980 1,784,189 ------------ ------------ $ 5,968,634 $ 5,384,379 ============ ============ NETAPP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except net income per share amounts) (Unaudited) Three Months Ended Nine Months Ended ---------------------- ---------------------- January January January January 29, 2010 23, 2009 29, 2010 23, 2009 ---------- ---------- ---------- ---------- REVENUES: Product $ 618,955 $ 528,198 $1,622,349 $1,646,489 Software entitlements and maintenance 170,863 156,546 505,968 453,680 Service 221,832 189,599 631,321 554,581 GSA settlement - (128,000) - (128,000) ---------- ---------- ---------- ---------- Net revenues 1,011,650 746,343 2,759,638 2,526,750 ---------- ---------- ---------- ---------- COST OF REVENUES: Cost of product 253,907 252,327 665,576 762,437 Cost of software entitlements and maintenance 2,944 2,320 9,162 6,765 Cost of service 113,259 98,480 314,186 301,528 ---------- ---------- ---------- ---------- Total cost of revenues 370,110 353,127 988,924 1,070,730 ---------- ---------- ---------- ---------- GROSS MARGIN 641,540 393,216 1,770,714 1,456,020 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Sales and marketing 324,768 291,634 927,036 898,786 Research and development 129,329 122,662 392,000 373,509 General and administrative 58,079 51,048 174,569 151,523 Restructuring and other charges 68 18,955 2,743 18,955 Merger termination proceeds, net - - (41,120) - ---------- ---------- ---------- ---------- Total operating expenses 512,244 484,299 1,455,228 1,442,773 ---------- ---------- ---------- ---------- INCOME (LOSS) FROM OPERATIONS 129,296 (91,083) 315,486 13,247 OTHER INCOME (EXPENSES), net: Interest income 7,464 12,799 23,060 45,894 Interest expense (18,226) (17,674) (55,343) (44,993) Gain (loss) on investments, net 733 (1,691) 3,446 (26,926) Other expenses, net (1,369) (1,249) (3,587) (3,717) ---------- ---------- ---------- ---------- Total other expenses, net (11,398) (7,815) (32,424) (29,742) ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 117,898 (98,898) 283,062 (16,495) PROVISION (BENEFIT) FOR INCOME TAXES 10,018 (17,275) 27,841 (12,648) ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 107,880 ($ 81,623) $ 255,221 ($ 3,847) ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE: BASIC $ 0.32 $ (0.25) $ 0.76 $ (0.01) ========== ========== ========== ========== DILUTED $ 0.30 $ (0.25) $ 0.73 $ (0.01) ========== ========== ========== ========== SHARES USED IN PER SHARE CALCULATION: BASIC 341,439 329,026 337,478 330,067 ========== ========== ========== ========== DILUTED 360,321 329,026 349,438 330,067 ========== ========== ========== ========== NETAPP, INC. SUPPLEMENTAL INFORMATION (In thousands) (Unaudited) Three Months Ended January 29, 2010 ------------------------------------------------------ Amortization Restructu- of Stock-based ring and GSA Intangible Compensation Asset Other Settlement Assets Expenses Impairment Charges ---------- ---------- ---------- ---------- ---------- Cost of product revenues - $ 4,053 $ 1,017 - - Cost of service revenues - - 3,317 - - Sales and marketing expense - 848 17,175 - - Research and development expense - - 8,906 - - General and administrative expense - - 6,243 - - Restructuring and other charges - - - - 68 Interest expense - - - - - (Gain) loss on investments, net - - - - - ---------- ---------- ---------- ---------- ---------- Effect on income before income taxes - $ 4,901 $ 36,658 - $ 68 Three Months Ended January 29, 2010 ------------------------------------------ Mergers (Gain) Termination Non-Cash Loss on Proceeds, Interest Investments, Net Expense Net Total --------- ---------- --------- --------- Cost of product revenues - - - $ 5,070 Cost of service revenues - - - 3,317 Sales and marketing expense - - - 18,023 Research and development expense - - - 8,906 General and administrative expense - - - 6,243 Restructuring and other charges - - - 68 Interest expense - 12,464 - 12,464 (Gain) loss on investments, net - - (733) (733) --------- ---------- --------- --------- Effect on income before income taxes - $ 12,464 ($ 733) $ 53,358 Nine Months Ended January 29, 2010 ------------------------------------------------------ Amortization Restructu- of Stock-based ring and GSA Intangible Compensation Asset Other Settlement Assets Expenses Impairment Charges ---------- ---------- ---------- ---------- ---------- Cost of product revenues - $ 13,041 $ 2,747 - - Cost of service revenues - - 10,778 - - Sales and marketing expense - 2,545 56,830 - - Research and development expense - - 29,531 - - General and administrative expense - - 22,201 - - Restructuring and other charges - - - - 2,743 Mergers termination proceeds, net - - - - - Interest expense - - - - - (Gain) loss on investments, net - - - - - ---------- ---------- ---------- ---------- ---------- Effect on pre-tax income - $ 15,586 $ 122,087 - $ 2,743 Nine Months Ended January 29, 2010 ------------------------------------------ Mergers (Gain) Termination Non-Cash Loss on Proceeds, Interest Investments, Net Expense Net Total --------- ---------- --------- --------- Cost of product revenues - - - $ 15,788 Cost of service revenues - - - 10,778 Sales and marketing expense - - - 59,375 Research and development expense - - - 29,531 General and administrative expense - - - 22,201 Restructuring and other charges - - - 2,743 Mergers termination proceeds, net (41,120) - - (41,120) Interest expense - 37,755 - 37,755 (Gain) loss on investments, net - - (3,538) (3,538) --------- ---------- --------- --------- Effect on pre-tax income ($ 41,120) $ 37,755 ($ 3,538) $ 133,513 Three Months Ended January 23, 2009 ------------------------------------------------------ Amortization Restructu- of Stock-based ring and GSA Intangible Compensation Asset Other Settlement Assets Expenses Impairment Charges ---------- ---------- ---------- ---------- ---------- Total revenues $ 128,000 - - - - Cost of product revenues - 6,161 775 - - Cost of service revenues - - 2,889 - - Sales and marketing expense - 1,053 15,787 9,431 - Research and development expense - - 8,982 - - General and administrative expense - - 5,997 - - Restructuring and other charges - - - - 18,955 Interest expense - - - - - (Gain) loss on investments, net - - - - - ---------- ---------- ---------- ---------- ---------- Effect on income before income taxes $ 128,000 $ 7,214 $ 34,430 $ 9,431 $ 18,955 Three Months Ended January 23, 2009 ------------------------------------------ Mergers (Gain) Termination Non-Cash Loss on Proceeds, Interest Investments, Net Expense Net Total --------- ---------- --------- --------- Total revenues - - - $ 128,000 Cost of product revenues - - - 6,936 Cost of service revenues - - - 2,889 Sales and marketing expense - - - 26,271 Research and development expense - - - 8,982 General and administrative expense - - - 5,997 Restructuring and other charges - - - 18,955 Interest expense - 10,436 - 10,436 (Gain) loss on investments, net - - 1,691 1,691 --------- ---------- --------- --------- Effect on income before income taxes - $ 10,436 $ 1,691 $ 210,157 Nine Months Ended January 23, 2009 ------------------------------------------------------ Amortization Restructu- of Stock-based ring and GSA Intangible Compensation Asset Other Settlement Assets Expenses Impairment Charges ---------- ---------- ---------- ---------- ---------- Total revenues $ 128,000 - - - - Cost of product revenues - 19,657 2,347 - - Cost of service revenues - - 8,349 - - Sales and marketing expense - 3,571 44,978 9,431 - Research and development expense - - 26,651 - - General and administrative expense - - 16,272 - - Restructuring and other charges - - - - 18,955 Interest expense - - - - - (Gain) loss on investments, net - - - - - ---------- ---------- ---------- ---------- ---------- Effect on pre-tax income $ 128,000 $ 23,228 $ 98,597 $ 9,431 $ 18,955 Nine Months Ended January 23, 2009 ------------------------------------------ Mergers (Gain) Termination Non-Cash Loss on Proceeds, Interest Investments, Net Expense Net Total --------- ---------- --------- --------- Total revenues - - - $ 128,000 Cost of product revenues - - - 22,004 Cost of service revenues - - - 8,349 Sales and marketing expense - - - 57,980 Research and development expense - - - 26,651 General and administrative expense - - - 16,272 Restructuring and other charges - - - 18,955 Interest expense - 25,638 - 25,638 (Gain) loss on investments, net - - 26,926 26,926 --------- ---------- --------- --------- Effect on pre-tax income - $ 25,638 $ 26,926 $ 330,775 NETAPP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) Three Months Ended Nine Months Ended ---------------------- ---------------------- January 29, January 23, January 29, January 23, 2010 2009 2010 2009 ---------- ---------- ---------- ---------- Cash Flows from Operating Activities: Net income (loss) $ 107,880 $ (81,623) $ 255,221 $ (3,847) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 40,774 44,367 125,963 129,834 Stock-based compensation 36,658 34,430 122,087 98,597 (Gain) loss on investments 108 1,691 (2,429) 17,627 Asset impairment and write-offs 577 27,505 1,717 28,265 Allowance for doubtful accounts 239 199 248 1,903 Accretion of discount and issue costs on notes 12,464 11,693 37,755 28,769 Deferred income taxes (487) (35,043) (2,406) (82,343) Deferred rent (2,010) 26 (2,839) 3,037 Tax benefit from stock-based compensation (17,135) (4,612) (2,725) 40,937 Excess tax benefit from stock-based compensation 323 (617) (1,027) (34,928) Changes in assets and liabilities: Accounts receivable (139,663) 19,060 (7,946) 230,267 Inventories (11,231) (3,945) (10,897) (11,959) Prepaid expenses and other assets (26,234) 19,539 (27,305) (463) Accounts payable 16,498 (25,823) (360) (42,156) Accrued compensation and related benefits 51,885 24,662 61,446 (6,094) Other accrued liabilities 25,504 13,807 6,048 18,716 Accrual for GSA settlement - 128,000 (128,715) 128,000 Income taxes payable 3,727 863 2,119 327 Long term other liabilities 20,736 11,966 14,402 11,148 Deferred revenue 74,300 49,855 60,085 137,998 ---------- ---------- ---------- ---------- Net cash provided by operating activities 194,913 236,000 500,442 693,635 ---------- ---------- ---------- ---------- Cash Flows from Investing Activities: Purchases of investments (451,710) (227,526) (1,334,941) (711,488) Redemptions of investments 462,688 622,928 1,243,496 886,571 Reclassification from cash and cash equivalents to short-term investments - - - (597,974) Change in restricted cash 173 (1,126) (654) (444) Proceeds from nonmarketable securities 306 - 4,786 807 Purchases of property and equipment (49,732) (50,934) (97,222) (154,901) ---------- ---------- ---------- ---------- Net cash provided by (used in) investing activities (38,275) 343,342 (184,535) (577,429) ---------- ---------- ---------- ---------- Cash Flows from Financing Activities: Proceeds from sale of common stock related to employee stock transactions 103,491 27,852 169,379 73,417 Tax withholding payments reimbursed by employee stock transactions (6,981) (1,593) (12,698) (4,184) Excess tax benefit from stock-based compensation (323) 617 1,027 34,928 Proceeds from issuance of convertible notes - - - 1,265,000 Payment of financing costs - - - (26,581) Sale of common stock warrants - - - 163,059 Purchase of note hedge - - - (254,898) Repayment of revolving credit facility - (65,349) - (172,600) Repurchases of common stock - - - (399,981) ---------- ---------- ---------- ---------- Net cash provided by (used in) financing activities 96,187 (38,473) 157,708 678,160 ---------- ---------- ---------- ---------- Effect of Exchange Rate Changes on Cash and Cash Equivalents (5,840) (3,698) 8,058 (22,645) Net Increase in Cash and Cash Equivalents 246,985 537,171 481,673 771,721 Cash and Cash Equivalents: Beginning of period 1,728,841 1,171,029 1,494,153 936,479 ---------- ---------- ---------- ---------- End of period $1,975,826 $1,708,200 $1,975,826 $1,708,200 ========== ========== ========== ========== NETAPP, INC. RECONCILIATION OF NON-GAAP AND GAAP IN THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except net income per share amounts) (Unaudited) Three Months Ended Nine Months Ended -------------------- -------------------- January January January January 29, 2010 23, 2009 29, 2010 23, 2009 --------- --------- --------- --------- SUMMARY RECONCILIATION OF NET INCOME NET INCOME (LOSS) $ 107,880 ($ 81,623) $ 255,221 ($ 3,847) Adjustments: GSA settlement - 128,000 - 128,000 Amortization of intangible assets 4,901 7,214 15,586 23,228 Stock-based compensation expenses 36,658 34,430 122,087 98,597 Asset impairment - 9,431 - 9,431 Restructuring and other charges 68 18,955 2,743 18,955 Merger termination proceeds, net - - (41,120) - Non-cash interest expense 12,464 10,436 37,755 25,638 (Gain) loss on investments, net (733) 1,691 (3,538) 26,926 Discrete GAAP tax provision items 572 (3,880) (7,265) 428 Income tax effect (17,955) (31,197) (31,546) (65,851) --------- --------- --------- --------- NON-GAAP NET INCOME $ 143,855 $ 93,457 $ 349,923 $ 261,505 ========= ========= ========= ========= NET INCOME (LOSS) PER SHARE $ 0.299 ($ 0.248) $ 0.730 ($ 0.012) Adjustments: GSA settlement - 0.387 - 0.382 Amortization of intangible assets 0.013 0.022 0.045 0.069 Stock-based compensation expenses 0.102 0.104 0.349 0.294 Asset impairment - 0.029 - 0.028 Restructuring and other charges - 0.057 0.008 0.057 Merger termination proceeds, net - - (0.118) - Non-cash interest expense 0.035 0.032 0.108 0.077 (Gain) loss on investments, net (0.002) 0.005 (0.010) 0.080 Discrete GAAP tax provision items 0.002 (0.012) (0.021) 0.001 Income tax effect (0.050) (0.094) (0.090) (0.197) --------- --------- --------- --------- NON-GAAP NET INCOME PER SHARE $ 0.399 $ 0.282 $ 1.001 $ 0.779 ========= ========= ========= ========= NETAPP, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE FOURTH QUARTER 2010 (Unaudited) Fourth Quarter 2010 ------------------- Non-GAAP Guidance $0.42 - $0.44 Adjustments of Specific Items to Net Income Per Share for the Fourth Quarter 2010: Stock based compensation expense (0.10) Amortization of intangible assets (0.01) Non cash interest expense (0.04) Income tax effect 0.04 ------------------- Total Adjustments (0.11) GAAP Guidance -Net Income Per Share $0.31 - $0.33
Contact Information: Press Contact: NetApp Jodi Baumann Ph: (408) 822-3974 Jodi.Baumann@netapp.com Investor Contacts: NetApp Tara Dhillon Ph: (408) 822-6909 tara@netapp.com NetApp Billie Fagenstrom Ph: (408) 822-6428 billief@netapp.com