NetApp Reports Fiscal Year 2014 First Quarter Results

NetApp Reports Fiscal Year 2014 First Quarter Results 
Achieves Strongest Branded Revenue Growth in 7 Quarters, Up 9%
Year-Over-Year 
SUNNYVALE, CA -- (Marketwired) -- 08/14/13 --  NetApp (NASDAQ: NTAP) 


 
--  Revenues of $1.516 billion, up 5% year-over-year
--  Non-GAAP EPS of $0.53, up 26% year-over-year
--  Cash from Operations of $286 million, up 25% year-over-year
--  $900 million returned to shareholders in share repurchases and cash
    dividends

  
NetApp (NASDAQ: NTAP) today reported financial results for the first
quarter of fiscal year 2014 ended July 26, 2013.  
First Quarter Financial Results
 Total revenues for the first quarter
of fiscal year 2014 were $1.516 billion, an increase of 5% from the
comparable period of the prior year. GAAP net income for the first
quarter of fiscal year 2014 was $82 million, or $0.23 per share,(1)
compared to GAAP net income of $64 million, or $0.17 per share, for
the comparable period of the prior year. Non-GAAP net income for the
first quarter of fiscal year 2014 was $192 million, or $0.53 per
share,(2) compared to non-GAAP net income of $156 million, or $0.42
per share, for the first quarter of fiscal 2013. 
Cash, Cash Equivalents and Investments 
 NetApp ended the first
quarter of 2014 with $5.084 billion of total cash, cash equivalents
and investments and during the quarter generated approximately $286
million in cash from operations. The company returned $900 million to
shareholders during the quarter through share repurchases and a cash
dividend. The next dividend in the amount of $0.15 per share will be
paid on October 25, 2013 to shareholders of record as of the close of
business on October 21, 2013. 
"NetApp delivered solid results and innovation with the latest
release to our clustered Data ONTAP(R) operating system," said Tom
Georgens, president and CEO. "Despite an uneven macro environment,
our branded business was strong, with 9% year-over-year growth. This
is evidence of the tremendous value we are delivering to customers
today and their confidence in our long-term strategy to enable them
to navigate the future." 
Q2 Fiscal Year 2014 Outlook
 The Company provided the following
financial guidance for the second quarter of fiscal year 2014:  


 
--  Total revenue is expected to be in the range of $1.560 billion to
    $1.660 billion
--  GAAP earnings per share is expected to be in the range of $0.41 to
    $0.46 per share
--  Non-GAAP earnings per share is expected to be in the range of $0.60 to
    $0.65 per share
--  Diluted shares(3) outstanding of approximately 351 million shares

  
Business Highlights 
 In its first quarter of fiscal year 2014, NetApp
delivered technology innovation focused on helping customers
capitalize on cloud and mobility trends, while also strengthening its
strategic relationships with industry-leading partners. Highlights
include:  


 
--  NetApp Introduces Data ONTAP 8.2. New enhancements to clustered Data
    ONTAP 8.2 provide organizations and cloud service providers the
    capability to rapidly and cost effectively deliver new services and
    capacity with maximum application uptime. Clustered Data ONTAP
    delivers native multi-tenant, policy-based storage services via
    programmable APIs and application integrations that are core tenants
    of a software-defined storage environment.
    
    
--  NetApp Connect Delivers Mobile Access with Enterprise Level Data
    Protection. By keeping all data securely behind the corporate
    firewall, NetApp Connect offers mobile access to corporate data while
    maintaining the tight security and control that enterprise IT requires
    for keeping its data and business protected.
    
    
--  NetApp and Cisco Expand the FlexPod(R) Platform. In a continuing
    effort to make data center infrastructures more responsive to
    applications' dynamic needs, Cisco and NetApp broadened the FlexPod
    portfolio with a new offering called FlexPod Select and introduced new
    validated designs across the entire suite. FlexPod Select components
    include NetApp E-Series and FAS storage systems.
    
    
--  NetApp Teams up with Microsoft to Accelerate Cloud Deployments. NetApp
    will invest $15 million in new ecosystem sales collaboration and
    continued technology integration with Microsoft to accelerate the
    adoption of enterprise cloud deployments.
    
    
--  Clustered Data ONTAP integrates with Citrix Technologies. New solution
    integrations from NetApp and Citrix combine the benefits of clustered
    Data ONTAP with Citrix technologies for desktop and application
    virtualization, mobile collaboration, and cloud services.
    
    
--  Microsoft's Server Platform Partner of the Year. NetApp was named
    Microsoft's Server Platform Partner of the Year for innovative storage
    solutions that enable nondisruptive operations and deliver optimal
    operational efficiency for virtualized environments and file
    services.

  
Editor's Note 


 
--  Financial information previously found in the Supplemental Commentary
    document will now be included in the accompanying Supplemental Data
    tables of the quarterly financial press release.
--  In addition, historical supplemental data tables, providing historical
    multi-period financial information, will be available on our investor
    relations website at investors.netapp.com.

  
Webcast and Conference Call Information
 NetApp will host a conference
call to discuss these results today at 2:30 p.m. Pacific Time. To
access the live webcast of this event, visit the NetApp Investor
Relations website at investors.netapp.com. In addition, this press
release and any other information related to the call will be posted
on the Investor Relations website. An audio replay will also be
available after 4:30 p.m. Pacific Time today on the website. 
About NetApp
 NetApp creates innovative storage and data management
solutions that deliver outstanding cost efficiency and accelerate
business breakthroughs. Our commitment to living our core values and
consistently being recognized as a great place to work around the
world are fundamental to our long-term growth and success, as well as
the success of our pathway partners and customers. Discover our
passion for helping companies around the world go further, faster at
www.netapp.com. 
"Safe Harbor" Statement Under U.S. Private Securities Litigation
Reform Act of 1995
 This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements include all of the statements
under the Outlook section relating to the financial guidance for the
second quarter of fiscal year 2014, the benefits to us and our
customers of our products and services, and the expected benefits of
partnerships and alliances. All of these forward-looking statements
involve risk and uncertainty. Actual results may differ materially
from these statements for a variety of reasons, including, without
limitation, general economic and market conditions, revenue
seasonality, our stock price and matters specific to our business,
such as customer demand for and acceptance of our products and
services. These and other equally important factors are described in
reports and documents we file from time to time with the Securities
and Exchange Commission (SEC), including the factors described under
the sections titled "Risk Factors" in our most recently sub
mitted
Annual and Quarterly Reports on Forms 10-K and 10-Q, respectively. We
disclaim any obligation to update information contained in these
forward-looking statements whether as a result of new information,
future events, or otherwise. 
NetApp, the NetApp logo, Go further, faster, Data ONTAP and FlexPod
are trademarks or registered trademarks of NetApp, Inc. All other
marks are the property of their respective owners. 
(1) GAAP earnings per share is calculated using the diluted number of
shares for all periods presented.
 (2) Non-GAAP net income excludes
the amortization of intangible assets, stock-based compensation,
acquisition-related income and expenses, restructuring and other
charges, asset impairments, non-cash interest expense associated with
our debt, net losses or gains on investments, and our GAAP tax
provision, but includes a non-GAAP tax provision based upon our
projected annual non-GAAP effective tax rate for the first three
quarters of the fiscal year and an actual non-GAAP tax provision for
the fourth quarter of the fiscal year. Non-GAAP earnings per share is
calculated using the diluted number of shares for all periods
presented. A detailed reconciliation of our non-GAAP to GAAP results
can be found at http://investors.netapp.com. 
 (3) Dilutive share
count includes the estimated impact of our warrants, calculated based
upon our average stock price of $41.56 for the first 10 trading days
of our second quarter. Please refer to the table on our investor
relations website which shows the impact on diluted share count for a
range of stock prices. 
NetApp Usage of Non-GAAP Financials 
 The Company refers to the
non-GAAP financial measures in making operating decisions because
they provide meaningful supplemental information regarding the
Company's ongoing operational performance. Non-GAAP net income
excludes the amortization of intangible assets, stock-based
compensation, acquisition-related income and expenses, restructuring
and other charges, asset impairments, non-cash interest expense
associated with our debt, net losses or gains on investments, and our
GAAP tax provision, but includes a non-GAAP tax provision based upon
our projected annual non-GAAP effective tax rate for the first three
quarters of the fiscal year and an actual non-GAAP tax provision for
the fourth quarter of the fiscal year. We have excluded these items
in order to enhance investors' understanding of our ongoing
operations. The use of these non-GAAP financial measures has material
limitations because they should not be used to evaluate our Company
without reference to their corresponding GAAP financial measures. As
such, we compensate for these material limitations by using these
non-GAAP financial measures in conjunction with GAAP financial
measures. 
These non-GAAP financial measures are used to: (1) measure Company
performance against historical results, (2) facilitate comparisons to
our competitors' operating results, and (3) allow greater
transparency with respect to information used by management in
financial and operational decision making. In addition, these
non-GAAP financial measures are used to measure Company performance
for the purposes of determining employee incentive plan compensation.
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. 


 
                                                                            
                                                                            
                                NETAPP, INC.                                
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                (In millions)                               
                                 (Unaudited)                                
                                                                            
                                               July 26, 2013  April 26, 2013
                                              --------------  --------------
                                                                            
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash, cash equivalents and investments      $      5,084.0  $      6,952.6
  Accounts receivable, net                             533.3           800.9
  Inventories                                          116.5           139.5
  Other current assets                                 467.8           525.2
                                              --------------  --------------
    Total current assets                             6,201.6         8,418.2
                                                                            
Property and equipment, net                          1,163.4         1,170.9
Goodwill and purchased intangible assets, net        1,153.8         1,168.7
Other non-current assets                               499.1           484.6
                                              --------------  --------------
      Total assets                            $      9,017.9  $     11,242.4
     
                                         ==============  ==============
                                                                            
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Accounts payable                            $        218.7  $        259.7
  Accrued compensation and other current                                    
   liabilities                                         582.3           749.8
  Current portion of long-term debt                        -         1,257.8
  Short-term deferred revenue                        1,529.1         1,563.3
                                              --------------  --------------
    Total current liabilities                        2,330.1         3,830.6
                                                                            
Long-term debt                                         994.8           994.6
Other long-term liabilities                            262.8           253.5
Long-term deferred revenue                           1,412.2         1,446.2
                                              --------------  --------------
      Total liabilities                              4,999.9         6,524.9
                                                                            
Stockholders' equity                                 4,018.0         4,717.5
                                              --------------  --------------
        Total liabilities and stockholders'                                 
         equity                               $      9,017.9  $     11,242.4
                                              ==============  ==============
                                                                            
                                                                            
                                                                            
                                NETAPP, INC.                                
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                  (In millions, except per share amounts)                   
                                (Unaudited)                                 
                                                    Three Months Ended      
                                               ---------------------------- 
                                               July 26, 2013  July 27, 2012 
                                               -------------  ------------- 
                                                                            
Revenues:                                                                   
  Product                                      $       930.8  $       898.0 
  Software entitlements and mainten
ance                228.5          218.5 
  Service                                              356.9          328.1 
                                               -------------  ------------- 
    Net revenues                                     1,516.2        1,444.6 
                                               -------------  ------------- 
                                                                            
Cost of revenues:                                                           
  Cost of product                                      449.9          452.2 
  Cost of software entitlements and maintenance          7.5            6.6 
  Cost of service                                      149.2          135.7 
                                               -------------  ------------- 
    Total cost of revenues                             606.6          594.5 
                                               -------------  ------------- 
  Gross profit                                         909.6          850.1 
                                               -------------  ------------- 
                                                                            
Operating expenses:                                                         
  Sales and marketing                                  467.8          482.9 
  Research and development                             228.1          221.4 
  General and administrative                            68.4           65.6 
  Restructuring and other charges                       48.4              - 
                                               -------------  ------------- 
    Total operating expenses                           812.7          769.9 
                                               -------------  ------------- 
                                                                            
Income from operations                                  96.9           80.2 
                                                       
                     
Other expense, net:                                                         
Interest income                                         10.0           10.8 
Interest expense                                       (16.5)         (19.9)
Other income, net                                        1.9            3.1 
                                               -------------  ------------- 
Total other expense, net                                (4.6)          (6.0)
                                               -------------  ------------- 
                                                                            
Income before income taxes                              92.3           74.2 
                                                                            
Provision for income taxes                              10.7           10.4 
                                               -------------  ------------- 
                                                                            
Net income                                     $        81.6  $        63.8 
                                               =============  ============= 
                                                                            
Net income per share:                                                       
  Basic                                        $        0.23  $        0.17 
                                               =============  ============= 
                                                                            
  Diluted                                      $        0.23  $        0.17 
                                               =============  ============= 
                                                                            
Shares used in net income per share                                         
 calculations:                                                              
  Basic                                                350.9          366.1 
                                               =============  ============= 
                                                                            
  Diluted                                              359.9          371.2 
                                               =============  ============= 
                                                                            
Cash dividends declared per share              $        0.15  $           - 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                                NETAPP, INC.                                
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW               
                               (In millions)                                
                                (Unaudited)                                 
                                                                            
                                                                            
                                                    Three Months Ended      
                                               ---------------------------- 
                                               July 26, 2013  July 27, 2012 
                                               -------------  ------------- 
                                                                            
Cash flows from operating activities:                                       
  Net income                                   $        81.6  $        63.8 
  Adjustments to reconcile net income to net                                
   cash provided by operating activities:                                   
    Depreciation and amortization                       85.9           82.4 
    Stock-based compensation                            66.3           79.2 
    Accretion of discount and issuance costs on                             
     debt                                                8.2           14.3 
    Excess tax benefit from stock-based                                     
     compensation                                       (0.1)          (4.9)
    Other, net                                         (35.4)         (32.8)
  Changes in assets and liabilities                                         
    Accounts receivable                                265.2          244.2 
    Inventories                                         22.9          (42.2)
    Accounts payable                                   (37.9)          41.9 
    Accrued compensation and other current                                  
     liabilities                                      (175.4)        (146.7)
    Deferred revenue                                   (54.3)         (47.0)
    Changes in other operat
ing assets and                                   
     liabilities, net                                   58.8          (23.0)
                                               -------------  ------------- 
      Net cash provided by operating activities        285.8          229.2 
                                               -------------  ------------- 
Cash flows from investing activities:                                       
  Redemptions (purchases) of investments, net          390.0          (66.1)
  Purchases of property and equipment                  (65.3)         (61.9)
  Other investing activities, net                        1.2            1.3 
                                               -------------  ------------- 
    Net cash provided by (used in) investing                                
     activities                                        325.9         (126.7)
                                               -------------  ------------- 
Cash flows from financing activities:                                       
  Issuance of common stock                              71.5           35.0 
  Repurchase of common stock                          (849.5)        (150.0)
  Excess tax benefit from stock-based                                       
   compensation                                          0.1            4.9 
  Repayment of debt                                 (1,264.9)             - 
  Dividends paid                                       (51.4)             - 
  Other financing activities, net                        9.5           (2.0)
                                               -------------  ------------- 
    Net cash used in financing activities           (2,084.7)        (112.1)
                                               -------------  ------------- 
                                                                            
Effect of exchange rate changes on cash and                                 
 cash equivalents                              
         (7.3)         (10.8)
                                                                            
Net decrease in cash and cash equivalents           (1,480.3)         (20.4)
Cash and cash equivalents:                                                  
  Beginning of period                                3,277.1        1,549.8 
                                               -------------  ------------- 
  End of period                                $     1,796.8  $     1,529.4 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                                NETAPP, INC.                                
                              SUPPLEMENTAL DATA                             
          (In millions except percentages, DSO and Inventory Turns)         
                                 (Unaudited)                                
                                                                            
                                                                            
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
  Revenues                                                                  
Product Revenue                                     $930.8 $1,137.8   $898.0
Software Entitlements & Maintenance Revenue (SEM)    228.5    227.0    218.5
Service Revenue:                                     356.9    351.7    328.1
  Hardware Maintenance Support Contracts Revenue     273.6    262.9    234.2
  Professional & Other Services Revenue               83.2     88.8     93.9
                                                  -------- -------- --------
    Net Revenue                                   $1,516.2 $1,716.5
 $1,444.6
                                                                            
  Branded and OEM Revenues                                                  
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Branded Revenue                                   $1,349.7 $1,551.0 $1,235.7
OEM Revenue                                          166.5    165.5    208.9
                                                  -------- -------- --------
    Net Revenue                                   $1,516.2 $1,716.5 $1,444.6
                                                                            
  Branded revenue includes revenue from all products and services sold      
  directly by us or our partners under the NetApp brand, including NetApp   
  branded E-Series products and solutions.                                  
  OEM revenue comprises revenue from the sale of our products by other      
  companies under their brands and includes revenue from IBM, Fujitsu, and  
  other E-Series OEM relationships.                                         
                                                                            
  Geographic Mix                                                            
                                                   % of Q1  % of Q4  % of Q1
                                 
                    FY'14    FY'13    FY'13
                                                   Revenue  Revenue  Revenue
                                                  -------- -------- --------
Americas*                                              57%      57%      55%
  Americas Commercial                                  44%      46%      43%
  U.S. Public Sector                                   12%      11%      12%
EMEA                                                   30%      30%      30%
Asia Pacific                                           14%      13%      14%
                                                                            
  * Historical Americas Commercial and USPS revenue is recast as a result of
  reporting certain healthcare revenue in Americas Commercial revenue that  
  was previously included in U.S. Public Sector revenue. A reconciliation of
  this change is posted to our website at investors.netapp.com.             
                                                                            
  Pathways Mix                                                              
----------------------------------------------------------------------------
                                                   % of Q1  % of Q4  % of Q1
                                                     FY'14    FY'13    FY'13
                                                   Revenue  Revenue  Revenue
                                                  -------- -------- --------
Direct                                                 20%      19%      22%
Indirect                                               80%      81%      78%
                                                                            
  Indirect revenues include those sold through value-added resellers, system
  integrators, OEM's and distributors.                                      
  Direct revenues are those sold through our direct sales force. The Direct 
  / Indirect revenue mix reflects order fulfillment, not who owns the       
  customer relationship.                                                    
                                                                            
  Non-GAAP Gross Margins                                                    
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Non-GAAP Gross Margin                                61.3%    61.3%    60.3%
  Product                                            53.3%    55.8%    51.4%
  Software Entitlements & Maintenance (SEM)          96.7%    96.7%    97.0%
  Service                                            59.5%    56.2%    60.3%
                                                                            
                                                                            
Non-GAAP Income from Operations, Income before                              
 Income Taxes & Effective Tax Rate                                          
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Non-GAAP Income from Operations                     $226.5   $291.0   $180.8
  % of Net Revenue                                   14.9%    17.0%    12.5%
Non-GAAP Income before Income Taxes                 $230.1   $291.7   $189.1
Non-GAAP Effective Tax Rate                          16.6%    13.4%    17.3%
                                                                            
                                                                            
                                                                            
  Non-GAAP Net Income                                                       
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Non-GAAP Net Income                                 $191.9   $252.5   $156.4
Weighted Average Common Shares Outstanding,                                 
 Diluted                                             359.9    368.2    371.2
Non-GAAP Net Income per Share, Diluted               $0.53    $0.69    $0.42
                                                                            
  Included in the dilutied weighted average common shares outstanding are   
  2.6 million, 3.2 million and 0.2 million shares in Q1 FY'14, Q4 FY'13 and 
  Q1 FY'13 respectively, related to the impact of our convertible notes.    
                                                                            
                                                                            
                                                                            
  Select Balance Sheet Items                                                
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Deferred Revenue                                  $2,941.3 $3,009.5 $2,767.5
DSO (days)                                              32       42       37
Inventory Turns                                         20       19       11
                                                                            
  Days sales outstanding are defined as accounts receivable net divided by  
  net revenue, multiplied by the number of days in the quarter.             
  Inventory turns are defined as annualized non-GAAP cost of revenues       
  divided by net inventories.                                               
                                                                            
                                                                            
  Select Cash Flow Statement Items                                          
                                                  Q1 FY'14 Q4 FY'13 Q1 FY'13
                                                  -------- -------- --------
Net Cash Provided by Operating Activities           $285.8   $455.6   $229.2
Purchases of Property and Equipment                  $65.3    $63.6    $61.9
Free Cash Flow                                      $220.5   $392.0   $167.3
Free Cash Flow as % of Total Revenue                 14.5%    22.8%    11.6%
                                                                            
  Free cash flow is a non-GAAP measure and is defined as net cash provided  
  by operating activities less purchases of property and equipment.         
                                                                            
  Some items may not add or recalculate due to rounding                     
                                                                            
                                                                            
                                                                            
                                NETAPP, INC.                                
                     RECONCILIATION OF NON-GAAP TO GAAP                     
                      FINANCIAL STATEMENT INFORMATION                       
             (In millions, except net income per share amounts)             
                                (Unaudited)                                 
                                                                            
                                                   Three Months Ended       
                                            ------------------------------- 
                                             July 26,  April 26,   July 27, 
                                               2013       2013       2012   
                                            ---------  ---------  --------- 
                                                                            
NET INCOME                                  $    81.6  $   173.8  $    63.8 
Adjustments:                                                                
  Amortization of intangible assets              14.9       21.5       21.4 
  Stock-based compensation                       66.3       65.1       79.2 
  Restructuring and other charges                48.4          -          - 
  Non-cash interest expense                       8.2       16.2       14.3 
  Income tax effect of non-GAAP adjustments     (27.5)     (24.1)     (22.3)
                                            ---------  ---------  --------- 
NON-GAAP NET INCOME                         $   191.9  $   252.5  $   156.4 
                                            =========  =========  ========= 
                                                                            
COST OF REVENUES                            $   606.6  $   684.3  $   594.5 
Adjustments:                                                                
  Amortization of intangible assets             (14.3)     (14.1)     (14.0)
  Stock-based compensation                       (5.3)      (5.8)      (7.4)
                                            ---------  ---------  --------- 
NON-GAAP COST OF REVENUES                   $   587.0  $   664.4  $   573.1 
                                            =========  =========  ========= 
                                                                            
COST OF PRODUCT REVENUES                    $   449.9  $   517.9  $   452.2 
Adjustments:                                                                
  Amortization of intangible assets             (13.7)     (13.5)     (14.0)
  Stock-based compensation                       (1.3)      (1.4)      (1.8)
                                            ---------  ---------  --------- 
NON-GAAP COST OF PRODUCT REVENUES           $   434.9  $   503.0  $   436.4 
                                            =========  =========  ========= 
                                                                            
COST OF SERVICE REVENUES                    $   149.2  $   159.0  $   135.7 
Adjustments:                                                                
  Amortization of intangible assets              (0.6)      (0.6)         - 
  Stock-based compensation                       (4.0)      (4.4)      (5.6)
                                            ---------  ---------  --------- 
NON-GAAP COST OF SERVICE REVENUES           $   144.6  $   154.0  $   130.1 
                                            =========  =========  ========= 
                                                                            
GROSS PROFIT                                $   909.6  $ 1,032.2  $   850.1 
Adjustments:                                                                
  Amortization of intangible assets              14.3       14.1       14.0 
  Stock-based compensation                        5.3        5.8        7.4 
                                            ---------  ---------  --------- 
NON-GAAP GROSS PROFIT                       $   929.2  $ 1,052.1  $   871.5 
                                            =========  =========  ========= 
                                                                            
SALES AND MARKETING EXPENSES                $   467.8  $   510.2  $   482.9 
Adjustments:                                                                
  Amortization of intangible assets              (0.6)      (7.4)      (7.4)
  Stock-based compensation                      (30.5)     (30.4)     (39.0)
                                            ---------  ---------  --------- 
NON-GAAP SALES AND MARKETING EXPENSES       $   436.7  $   472.4  $   436.5 
                                            =========  =========  ========= 
                                                                            
RESEARCH AND DEVELOPMENT EXPENSES           $   228.1  $   243.4  $   221.4 
Adjustment:                                                                 
  Stock-based compensation                      (21.4)     (20.3)     (23.7)
                                            ---------  ---------  --------- 
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES  $   206.7  $   223.1  $   197.7 
                                            =========  =========  ========= 
                                                                            
GENERAL AND ADMINISTRATIVE EXPENSES         $    68.4  $    74.2  $    65.6 
Adjustment:                                                                 
  Stock-based compensation                       (9.1)      (8.6)      (9.1)
                                            ---------  ---------  --------- 
NON-GAAP GENERAL AND ADMINISTRATIVE                                         
 EXPENSES                                   $    59.3  $    65.6  $    56.5 
                                            =========  =========  ========= 
                                                                            
RESTRUCTURING AND OTHER CHARGES             $    48.4  $       -  $       - 
Adjustment:                                                                 
  Restructuring and other charges               (48.4)         -          - 
                                            ---------  ---------  --------- 
NON-GAAP RESTRUCTURING AND OTHER CHARGES    $       -  $       -  $       - 
                                            =========  =========  ========= 
                                                                            
OPERATING EXPENSES                          $   812.7  $   827.8  $   769.9 
Adjustments:                                                                
  Amortization of intangible assets              (0.6)      (7.4)      (7.4)
  Stock-based compensation                      (61.0)     (59.3)     (71.8)
  Restructuring and other charges               (48.4)         -          - 
                                            ---------  ---------  --------- 
NON-GAAP OPERATING EXPENSES                 $   702.7  $   761.1  $   690.7 
                                            =========  =========  ========= 
                                                                            
INCOME FROM OPERATIONS                      $    96.9  $   204.4  $    80.2 
Adjustments:                                                                
  Amortization of intangible assets              14.9       21.5       21.4 
  Stock-based compensation                       66.3       65.1       79.2 
  Restructuring and other charges                48.4          -          - 
                                            ---------  ---------  --------- 
NON-GAAP INCOME FROM OPERATIONS             $   226.5  $   291.0  $   180.8 
                                            =========  =========  ========= 
                                                                            
TOTAL OTHER EXPENSE, NET                    $    (4.6) $   (15.5) $    (6.0)
Adjustment:                                                                 
  Non-cash interest expense                       8.2       16.2       14.3 
                                            ---------  ---------  --------- 
NON-GAAP TOTAL OTHER INCOME, NET            $     3.6  $     0.7  $     8.3 
                                            =========  =========  ========= 
                                                                            
INCOME BEFORE INCOME TAXES                  $    92.3  $   188.9  $    74.2 
Adjustments:                                                                
  Amortization of intangible assets              14.9       21.5       21.4 
  Stock-based compensation                       66.3       65.1       79.2 
  Restructuring and other charges                48.4          -          - 
  Non-cash interest expense                       8.2       16.2       14.3 
                                            ---------  ---------  --------- 
NON-GAAP INCOME BEFORE INCOME TAXES         $   230.1  $   291.7  $   189.1 
                                            =========  =========  ========= 
                                                                            
PROVISION FOR INCOME TAXES                  $    10.7  $    15.1  $    10.4 
Adjustment:                                                                 
  Income tax effect of non-GAAP adjustments      27.5       24.1       22.3 
                                            ---------  ---------  --------- 
NON-GAAP PROVISION FOR INCOME TAXES         $    38.2  $    39.2  $    32.7 
                                            =========  =========  ========= 
                                                                            
NET INCOME PER SHARE                        $   0.227  $   0.472  $   0.172 
Adjustments:                                                                
  Amortization of intangible assets             0.041      0.058      0.058 
  Stock-based compensation                      0.184      0.177      0.213 
  Restructuring and other charges               0.134          -          - 
  Non-cash interest expense                     0.023      0.044      0.038 
  Income tax effect of non-GAAP adjustments    (0.076)    (0.065)    (0.060)
                                            ---------  ---------  --------- 
NON-GAAP NET INCOME PER SHARE               $   0.533  $   0.686  $   0.421 
                                            =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                           NETAPP, INC.                          
           RECONCILIATION OF NON-GAAP GUIDANCE TO GAAP           
                 EXPRESSED AS EARNINGS PER SHARE                 
                       SECOND QUARTER 2014                       
                           (Unaudited)                           
                                                                 
                                                                 
                                                                 
                                                 Second Quarter  
                                                      2014       
                                              -------------------
                                                                 
Non-GAAP Guidance - Net Income Per Share         $0.60 - $0.65   
                                                                 
                                                                 
Adjustments of Specific Items to                                 
Net Income Per Share for the Second                              
Quarter 2014:                                                    
                                                                 
Amortization of intangible assets                    (0.04)      
Stock-based compensation expense                     (0.20)      
Income tax effect                                     0.05       
                                              -------------------
Total Adjustments                                    (0.19)      
                                                                 
GAAP Guidance - Net Income Per Share             $0.41 - $0.46   

  
Press Contact:
Ryan Lowry
NetApp
(408) 822-7544
ryanl@netapp.com 
Investor Contact:
Kris Newton
NetApp
(408) 822-3312
kris.newton@netapp.com