01—Abstract
Summary
Summary of the 10-K filed July 12, 1999. Cited figures are marked; the original filing is the authoritative source.
Network Appliance, Inc. (later renamed NetApp, Inc.; ticker NTAP) reported its annual results for the fiscal year ended April 30, 1999, in this Form 10-K.
Net sales rose to $289.4 milliona from $166.2 million in fiscal 1998, an increase of 74.2% stated in the filing. Income from operations was $55.1 million and net income was $35.6 million, or $0.46 per diluted share, compared with $21.0 million, or $0.29 per diluted share, the prior year. Gross margin held roughly flat at 59.2% of net sales.
Fiscal 1999 was a 53-week year. The company describes itself as the leading supplier of network attached data storage and access devices, called filers, and also sells NetCache Internet caching appliances. Growth was driven mainly by higher unit volume from the F700 filer family, cluster failover and NetCache solutions, and multi-protocol software licensing.
International sales were $88.8 millionb, or 30.7% of net sales. The company said it expects a modest decline in gross margin and pre-tax income as a percentage of net sales in fiscal 2000, and that research and development expenses will keep rising in absolute dollars. Balance sheet strength improved markedly.
Cash, cash equivalents and short-term investments reached $227.1 millionc, boosted by net proceeds of $138.8 million from a March 1999 follow-on public offering. Shareholders' equity rose to $295.7 million from $86.3 million.
Management stated that existing liquidity and capital resources are sufficient for at least the next twelve months. The filing also details several Sunnyvale facility leases and a $5.0 milliond revolving credit line, and it notes the company has never paid cash dividends.
02—Key points
Key Highlights
- Net sales grew 74.2% to $289.4 million in fiscal 1999 from $166.2 million in fiscal 1998, driven mainly by higher unit shipments.
- Net income was $35.6 million ($0.46 per diluted share), up from $21.0 million ($0.29 per diluted share) in fiscal 1998.
- Gross margin was essentially flat at 59.2% of net sales versus 59.3% in fiscal 1998.
- International net sales were $88.8 million, or 30.7% of total net sales, up 116.3% year over year.
- A March 1999 follow-on public offering raised net proceeds of $138.8 million, lifting cash and short-term investments to $227.1 million.
- Management expects a modest decline in gross margin and pre-tax income as a percentage of net sales in fiscal 2000 due to higher-configured systems with more disk drive content.
- Company has no legal proceedings reported, has never paid cash dividends, and has no customer accounting for 10% or more of net sales in fiscal 1999.
03—Questions
Frequently Asked Questions
What drove the revenue growth in fiscal 1999?
The filing attributes the 74.2% increase in net sales to a higher volume of units shipped, principally from the launch of the F700 filer family in the second quarter of fiscal 1999, along with increased NetApp cluster failover and NetCache shipments, expansion of the direct sales force, and higher multi-protocol software licensing and service revenues.
Is the company's gross margin under pressure?
Gross margin was relatively stable at 59.2% in fiscal 1999 compared with 59.3% in fiscal 1998. However, the company warned that its gross margin may decline modestly in fiscal 2000 as it sells more highly configured systems with greater disk drive content, which carry lower margin percentages.
How strong is the company's liquidity after the offering?
Cash, cash equivalents and short-term investments increased by $179.0 million to $227.1 million at April 30, 1999, mainly from $138.8 million in net offering proceeds. Working capital rose to $264.8 million, and operating cash flow was $45.9 million. Management said existing resources are sufficient for at least the next twelve months.
What risks does the filing highlight for investors?
Key risks include quarterly results fluctuating due to factors beyond the company's control, dependence on growth in the network file server market and on NetCache caching technology, competition from larger vendors such as Sun Microsystems, Hewlett-Packard and Cisco Systems, reliance on a limited number of suppliers (particularly for disk drives), and no purchase commitments yet from its Dell and Fujitsu OEM partners.
04—Continue