Company Reports Record Q2 FY'11 Revenues of $1.207 Billion, Up 33% Year Over Year
NETAPP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) October 29, April 30, 2010 2010 ----------- ----------- ASSETS Current assets: Cash, cash equivalents and investments $ 4,381.5 $ 3,724.0 Accounts receivable, net 446.6 471.5 Inventories 84.7 112.9 Other current assets 218.3 228.7 ----------- ----------- Total current assets 5,131.1 4,537.1 Property and equipment, net 845.3 804.4 Goodwill and other intangible assets, net 775.8 706.1 Long-term investments and restricted cash 69.8 72.8 Other non-current assets 415.8 374.0 ----------- ----------- $ 7,237.8 $ 6,494.4 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 175.9 $ 184.6 Accrued compensation and other current liabilities 523.0 591.3 Short-term deferred revenue 1,135.6 1,135.1 ----------- ----------- Total current liabilities 1,834.5 1,911.0 ----------- ----------- Long-term debt and other obligations 1,329.5 1,273.4 Long-term deferred revenue 866.4 779.5 ----------- ----------- 4,030.4 3,963.9 ----------- ----------- Stockholders' equity 3,207.4 2,530.5 ----------- ----------- $ 7,237.8 $ 6,494.4 =========== =========== NETAPP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except net income per share amounts) (Unaudited) Three Months Ended Six Months Ended ------------------------ ------------------------ October 29, October 30, October 29, October 30, 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Revenues: Product $ 780.0 $ 525.1 $ 1,500.8 $ 1,003.4 Software entitlements and maintenance 177.9 169.8 352.6 335.1 Service 249.5 215.1 491.8 409.5 ----------- ----------- ----------- ----------- Net revenues 1,207.4 910.0 2,345.2 1,748.0 ----------- ----------- ----------- ----------- Cost of revenues: Cost of product 296.1 199.1 603.8 411.7 Cost of software entitlements and maintenance 3.5 3.1 6.9 6.2 Cost of service 106.7 101.1 209.0 200.9 ----------- ----------- ----------- ----------- Total cost of revenues 406.3 303.3 819.7 618.8 ----------- ----------- ----------- ----------- Gross profit 801.1 606.7 1,525.5 1,129.2 ----------- ----------- ----------- ----------- Operating expenses: Sales and marketing 382.8 300.8 737.0 602.3 Research and development 156.6 132.4 306.1 262.7 General and administrative 64.2 56.9 120.4 116.4 Restructuring and other charges 0.1 1.2 0.1 2.7 Acquisition related (income) expense, net - - 0.3 (41.1) ----------- ----------- ----------- ----------- Total operating expenses 603.7 491.3 1,163.9 943.0 ----------- ----------- ----------- ----------- Income from operations 197.4 115.4 361.6 186.2 Other income (expenses), net Interest income 9.5 7.0 19.3 15.6 Interest expense (18.6) (17.9) (37.2) (37.1) Other income (expenses), net (1.4) 1.5 0.8 0.4 ----------- ----------- ----------- ----------- Total other expenses, net (10.5) (9.4) (17.1) (21.1) ----------- ----------- ----------- ----------- Income before income taxes 186.9 106.0 344.5 165.1 Provision for income taxes 22.3 10.3 38.1 17.8 ----------- ----------- ----------- ----------- Net income $ 164.6 $ 95.7 $ 306.4 $ 147.3 =========== =========== =========== =========== Net income per share: Basic $ 0.46 $ 0.28 $ 0.86 $ 0.44 =========== =========== =========== =========== Diluted $ 0.42 $ 0.27 $ 0.80 $ 0.43 =========== =========== =========== =========== Shares used in net income per share calculations: Basic 359.1 336.7 355.8 335.6 =========== =========== =========== =========== Diluted 391.7 349.8 383.0 344.3 =========== =========== =========== =========== NETAPP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In millions) (Unaudited) Three Months Ended Six Months Ended ---------------------- ---------------------- October 29, October 30, October 29, October 30, 2010 2009 2010 2009 ---------- ---------- ---------- ---------- Cash Flows from Operating Activities: Net income $ 164.6 $ 95.7 $ 306.4 $ 147.3 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 41.6 42.2 82.3 85.2 Stock-based compensation 37.7 33.2 82.0 85.4 Accretion of discount and issue costs on notes 13.0 12.2 25.9 25.3 Unrealized losses on derivative activities (4.1) - 6.7 - Tax benefit from stock-based compensation 52.9 (4.6) 40.9 14.4 Excess tax benefit from stock-based compensation (32.7) (1.4) (32.7) (1.4) Other, net (28.9) (2.1) (17.8) (4.1) Changes in assets and liabilities: Accounts receivable (72.7) 14.5 27.3 131.7 Inventories 5.7 0.7 28.2 0.3 Accounts payable 15.8 (2.4) (18.6) (16.9) Accrued compensation and other current liabilities 125.5 90.8 (96.1) (140.1) Deferred revenue 48.4 (4.4) 81.6 (14.2) Changes in other operating assets and liabilities, net (2.1) (7.1) 25.9 (7.4) ---------- ---------- ---------- ---------- Net cash provided by operating activities 364.7 267.3 542.0 305.5 ---------- ---------- ---------- ---------- Cash Flows from Investing Activities: Purchases and redemptions of investments, net (300.9) (336.0) (594.8) (102.4) Purchases of property and equipment (43.3) (22.8) (83.5) (47.5) Acquisition of business, net of cash acquired - - (74.9) - Other investing activities, net (0.1) 4.1 - 3.6 ---------- ---------- ---------- ---------- Net cash used in investing activities (344.3) (354.7) (753.2) (146.3) ---------- ---------- ---------- ---------- Cash Flows from Financing Activities: Issuance of common stock 96.2 26.8 236.1 60.1 Excess tax benefit from stock-based compensation 32.7 1.4 32.7 1.4 Payment of financing arrangements (2.0) - (2.0) - ---------- ---------- ---------- ---------- Net cash provided by financing activities 126.9 28.2 266.8 61.5 ---------- ---------- ---------- ---------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 11.8 3.6 10.5 13.9 Net Increase (Decrease) in Cash and Cash Equivalents 159.1 (55.6) 66.1 234.6 Cash and Cash Equivalents: Beginning of period 1,612.0 1,784.4 1,705.0 1,494.2 ---------- ---------- ---------- ---------- End of period $ 1,771.1 $ 1,728.8 $ 1,771.1 $ 1,728.8 ========== ========== ========== ========== NETAPP, INC. RECONCILIATION OF NON-GAAP AND GAAP IN THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except net income per share amounts) (Unaudited) Three Months Ended Six Months Ended ---------------------- ---------------------- October 29, October 30, October 29, October 30, 2010 2009 2010 2009 ---------- ---------- ---------- ---------- SUMMARY RECONCILIATION OF NET INCOME NET INCOME $ 164.6 $ 95.7 $ 306.4 $ 147.3 Adjustments: Amortization of intangible assets 4.4 5.1 9.9 10.7 Stock-based compensation expenses 37.7 33.2 82.0 85.4 Restructuring and other charges 0.1 1.2 0.1 2.7 Acquisition related (income) expense, net - - 0.3 (41.1) Non-cash interest expense 13.0 12.2 25.9 25.3 Gain on investments - (2.8) (2.5) (2.8) Income tax effect of non-GAAP adjustments (17.1) (14.5) (36.8) (21.4) ---------- ---------- ---------- ---------- NON-GAAP NET INCOME $ 202.7 $ 130.1 $ 385.3 $ 206.1 ========== ========== ========== ========== NET INCOME PER SHARE $ 0.420 $ 0.274 $ 0.800 $ 0.428 Adjustments: Amortization of intangible assets 0.011 0.015 0.026 0.031 Stock-based compensation expenses 0.096 0.095 0.214 0.248 Restructuring and other charges - 0.003 - 0.008 Acquisition related (income) expense, net - - 0.001 (0.119) Non-cash interest expense 0.033 0.035 0.068 0.073 Gain on investments - (0.008) (0.007) (0.008) Income tax effect of non-GAAP adjustments (0.043) (0.042) (0.096) (0.062) NON-GAAP NET INCOME PER ---------- ---------- ---------- ---------- SHARE $ 0.517 $ 0.372 $ 1.006 $ 0.599 ========== ========== ========== ========== NETAPP, INC. SUPPLEMENTAL INFORMATION (In millions) (Unaudited) Three Months Ended October 29, 2010 --------------------------------------------------- Acquisition Amortization related of Stock-based Restructuring (income) Intangible Compensation and Other expense, Assets Expenses Charges net ------------ ------------ ------------- ----------- Cost of product revenues $ 3.3 $ 0.8 $ - $ - Cost of service revenues - 3.1 - - Sales and marketing expense 1.1 17.3 - - Research and development expense - 9.2 - - General and administrative expense - 7.3 - - Restructuring and other charges - - 0.1 - Interest expense - - - - ------------ ------------ ------------- ----------- Effect on income before income taxes $ 4.4 $ 37.7 $ 0.1 $ - Three Months Ended October 29, 2010 ----------------------------------- Non-Cash Interest Gain on Expense Investments Total ----------- ----------- ----------- Cost of product revenues $ - $ - $ 4.1 Cost of service revenues - - 3.1 Sales and marketing expense - - 18.4 Research and development expense - - 9.2 General and administrative expense - - 7.3 Restructuring and other charges - - 0.1 Interest expense 13.0 - 13.0 ----------- ----------- ----------- Effect on income before income taxes $ 13.0 $ - $ 55.2 Six Months Ended October 29, 2010 --------------------------------------------------- Acquisition Amortization related of Stock-based Restructuring (income) Intangible Compensation and Other expense, Assets Expenses Charges net ------------ ------------ ------------- ----------- Cost of product revenues $ 7.7 $ 1.7 $ - $ - Cost of service revenues - 7.0 - - Sales and marketing expense 2.2 37.9 - - Research and development expense - 20.3 - - General and administrative expense - 15.1 - - Restructuring and other charges - - 0.1 - Acquisition related (income) expense, net - - - 0.3 Interest expense - - - - Other income (expenses), net - - - - ------------ ------------ ------------- ----------- Effect on income before income taxes $ 9.9 $ 82.0 $ 0.1 $ 0.3 Six Months Ended October 29, 2010 ----------------------------------- Non-Cash Interest Gain on Expense Investments Total ----------- ---------- ---------- Cost of product revenues $ - $ - $ 9.4 Cost of service revenues - - 7.0 Sales and marketing expense - - 40.1 Research and development expense - - 20.3 General and administrative expense - - 15.1 Restructuring and other charges - - 0.1 Acquisition related (income) expense, net - - 0.3 Interest expense 25.9 - 25.9 Other income (expenses), net - (2.5) (2.5) ----------- ---------- ---------- Effect on income before income taxes $ 25.9 $ (2.5) $ 115.7 Three Months Ended October 30, 2009 --------------------------------------------------- Acquisition Amortization related of Stock-based Restructuring (income) Intangible Compensation and Other expense, Assets Expenses Charges net ------------ ------------ ------------- ----------- Cost of product revenues $ 4.3 $ 0.5 $ - $ - Cost of service revenues - 2.9 - - Sales and marketing expense 0.8 15.7 - - Research and development expense - 7.9 - - General and administrative expense - 6.2 - - Restructuring and other charges - - 1.2 - Interest expense - - - - Other income (expenses), net - - - - ------------ ------------ ------------- ----------- Effect on income before income taxes $ 5.1 $ 33.2 $ 1.2 $ - Three Months Ended October 30, 2009 ----------------------------------- Non-Cash Interest Gain on Expense Investments Total ----------- ---------- ---------- Cost of product revenues $ - $ - $ 4.8 Cost of service revenues - - 2.9 Sales and marketing expense - - 16.5 Research and development expense - - 7.9 General and administrative expense - - 6.2 Restructuring and other charges - - 1.2 Interest expense 12.2 - 12.2 Other income (expenses), net - (2.8) (2.8) ----------- ---------- ---------- Effect on income before income taxes $ 12.2 $ (2.8) $ 48.9 Six Months Ended October 30, 2009 --------------------------------------------------- Acquisition Amortization related of Stock-based Restructuring (income) Intangible Compensation and Other expense, Assets Expenses Charges net ------------ ------------ ------------- ---------- Cost of product revenues $ 9.0 $ 1.7 $ - $ - Cost of service revenues - 7.4 - - Sales and marketing expense 1.7 39.7 - - Research and development expense - 20.6 - - General and administrative expense - 16.0 - - Restructuring and other charges - - 2.7 - Acquisition related (income) expense, net - - - (41.1) Interest expense - - - - Other income (expenses), net - - - - ------------ ------------ ------------- ---------- Effect on income before income taxes $ 10.7 $ 85.4 $ 2.7 $ (41.1) Six Months Ended October 30, 2009 ----------------------------------- Non-Cash Interest Gain on Expense Investments Total ----------- ---------- ---------- Cost of product revenues $ - $ - $ 10.7 Cost of service revenues - - 7.4 Sales and marketing expense - - 41.4 Research and development expense - - 20.6 General and administrative expense - - 16.0 Restructuring and other charges - - 2.7 Acquisition related (income) expense, net - - (41.1) Interest expense 25.3 - 25.3 Other income (expenses), net - (2.8) (2.8) ----------- ---------- ---------- Effect on income before income taxes $ 25.3 $ (2.8) $ 80.2 NETAPP, INC. RECONCILIATION OF NON GAAP GUIDANCE TO GAAP EXPRESSED AS EARNINGS PER SHARE THIRD QUARTER 2011 (Unaudited) Third Quarter 2011 --------------- Non-GAAP Guidance $0.48 - $0.50 Adjustments of Specific Items to Net Income Per Share for the Third Quarter 2011: Stock based compensation expense (0.09) Amortization of intangible assets (0.01) Non cash interest expense (0.03) Income tax effect 0.04 --------------- Total Adjustments (0.09) GAAP Guidance -Net Income Per Share $0.39 - $0.41
Contact Information: Press Contact: Ryan Lowry NetApp (408) 822-7544 ryanl@netapp.com Investor Contacts: Shauna O'Boyle NetApp (408) 822-7655 oboyle@netapp.com