01—Abstract
Summary
Summary of the 10-K filed July 26, 2001. Cited figures are marked; the original filing is the authoritative source.
Network Appliance, Inc. reported net sales of $1,006.2 milliona for the fiscal year ended April 30, 2001 (fiscal 2001), up from $579.3 million in fiscal 2000, with net sales growth across all geographies, products and markets.
Net income was $74.9 millionb, or $0.21 per diluted share, compared with $73.8 million, or $0.21 per diluted share, in fiscal 2000. Gross margin improved to 60.1% of net sales from 59.3%, while total operating expenses rose to 49.2% of net sales from 41.1%, driven by sales and marketing, research and development, and acquisition-related charges including $26.7 million of in-process research and development from the Orca acquisition and $11.7 million of intangible amortization. Management stated that demand declined in the second half of fiscal 2001 and that the network storage and content delivery market growth declined significantly beginning in the third quarter.
Quarterly net income fell to $479 thousandc in the fourth quarter from $34.1 million in the third quarter, and management does not expect net sales or international sales to grow in fiscal 2002 at the rate achieved in fiscal 2001. Sales and marketing expenses are not expected to increase materially in fiscal 2002, and research and development expenses are expected to increase moderately. The balance sheet strengthened, with total assets of $1,036.3 million and shareholders' equity of $804.4 million at April 30, 2001.
Cash, cash equivalents and short-term investments totaled $364.0 milliond, and operating cash flow was $218.4 million. However, $193.7 million of cash was classified as restricted to collateralize operating leases tied to the Sunnyvale headquarters, and the company has never paid cash dividends.
02—Key points
Key Highlights
- Net sales rose 73.7% to $1,006.2 million in fiscal 2001 from $579.3 million in fiscal 2000, with international sales at $382.5 million, or 38.0% of net sales.
- Net income was $74.9 million ($0.21 per diluted share), essentially flat with $73.8 million ($0.21 per diluted share) in fiscal 2000, after $26.7 million of in-process R&D charges from the Orca acquisition.
- Gross margin increased to 60.1% of net sales from 59.3%, helped by add-on software licensing, software subscriptions and lower component costs.
- Operating expenses rose to 49.2% of net sales from 41.1%, with sales and marketing up 87.8% to $289.0 million and R&D up 96.4% to $120.9 million.
- Demand weakened in the second half of fiscal 2001; fourth-quarter net income was $479 thousand on net sales of $225.8 million.
- Cash, cash equivalents and short-term investments were $364.0 million, and operating cash flow was $218.4 million, but $193.7 million was restricted as collateral for operating leases.
- Acquired Orca Systems ($50.0 million) and WebManage Technologies ($59.4 million) during fiscal 2001; the company has never paid cash dividends.
03—Questions
Frequently Asked Questions
How did revenue and profitability trend during fiscal 2001?
Net sales grew 73.7% to $1,006.2 million, but growth slowed in the second half of the year. Net income was $74.9 million, with quarterly net income of $4.98 million in Q1, $35.4 million in Q2, $34.1 million in Q3 and $0.5 million in Q4, reflecting weaker demand and higher operating expenses.
What drove the higher operating expenses?
Sales and marketing expenses rose 87.8% to $289.0 million, driven by worldwide expansion of sales and customer service organizations and headcount growth from 775 to 1,277. R&D rose 96.4% to $120.9 million, mainly from headcount growth and the Orca and WebManage acquisitions. Acquisition-related charges included $26.7 million of in-process R&D and $11.7 million of amortization of intangible assets.
What does management expect for fiscal 2002?
Management said net sales and international net sales will not increase at the rate they grew in fiscal 2001, sales and marketing expenses are not expected to increase materially, R&D expenses are expected to increase moderately in absolute dollars, and general and administrative expenses are not expected to increase significantly. The company believes existing liquidity is sufficient for at least the next twelve months.
Why is restricted cash shown on the balance sheet?
The company holds $193.7 million in a certificate of deposit that is restricted to collateralize operating lease commitments for its Sunnyvale headquarters, which total $309.0 million under the purchase options. This cash reduced working capital and is classified as a non-current asset.
Does the company have significant customer concentration or dividend plans?
No single customer accounted for 10% or more of net sales in fiscal 2001, 2000 or 1999. The company has never paid cash dividends and intends to retain available funds to finance internal growth and product development.
04—Continue