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Xyratex Ltd Announces Final Results for the First Quarter Fiscal Year 2010
Mar 31, 2010 (04:03 PM EDT)


HAVANT, United Kingdom, March 31 /PRNewswire-FirstCall/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and storage process technology, today announced final results for the first fiscal quarter ended February 28, 2010. Revenues for the first quarter were $319.0 million, an increase of 73.5% compared to revenues of $183.9 million for the same period last year.

For the first quarter, GAAP net income was $26.3 million, or $0.85 per diluted share, compared to GAAP net loss of $16.1 million, or $0.55 per share, in the same period last year. Non-GAAP net income was $29.4 million, or $0.96 per diluted share, compared to non-GAAP net loss of $10.5 million, or $0.36 per share, in the same quarter a year ago (1).

Gross profit margin in the first quarter increased to 18.1%, compared to 11.4% in the same period last year, primarily due to significantly increased volumes and also changes in product and segment mix.

Revenues from our Networked Storage Solutions products were $271.0 million as compared to $165.7 million in the same quarter a year ago, an increase of 63.5%. Gross profit margin in the Networked Storage Solutions business was 15.2% as compared to 11.1% a year ago. Revenues from our Storage Infrastructure products were $48.0 million as compared to $18.2 million in the same quarter a year ago, an increase of 164%. Gross profit margin in the Storage Infrastructure business was 34.7% as compared to 15.2% a year ago.

"I am very pleased with the strong results for the quarter. We increased revenues by more than 30% over the prior quarter, and the results represent a very dramatic turnaround from the position faced 12 months ago. Given the strong demand and actions needed to secure additional supply of components, I felt we did a good job of executing to our customers' requirements," said Steve Barber, CEO of Xyratex. "I feel our continued strategic investments during 2009, a period of economic uncertainty, combined with our focus on strong execution, innovation and improved efficiencies, enabled our record revenues and profits. The fundamentals of the markets we serve continue to be very good and I believe we continue to improve on our competitive position and technology. We will continue to work with our customers to make them more competitive in their respective markets and remain flexible in meeting their technology and product demands."

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

  • Revenue in the second quarter of 2010 is projected to be in the range $400 to $460 million.
  • Fully diluted earnings per share is anticipated to be between $1.00 and $1.53 on a GAAP basis in the second quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $1.10 and $1.63. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.

Conference Call/Webcast Information

Xyratex quarterly results conference call will be broadcast live via the internet at http://www.xyratex.com/investors on Wednesday, March 31, 2010 at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time. You can also access the conference call by dialing +1 (866) 700-6293 in the United States and +1 (617) 213-8835 outside of the United States, passcode 21461915. The press release will be posted to the company web site www.xyratex.com.

A replay will be available through April 7, 2010 following the live call by dialing +1 (888) 286-8010 in the United States and +1 (617) 801-6888 outside the United States, replay code 58870632.

(1) Non-GAAP net income (loss) and diluted earnings (loss) per share excludes (a) amortization of intangible assets, (b) equity compensation expense, (c) specified non-recurring items such as restructuring costs and (d) the related tax effects. Reconciliation of non-GAAP net income (loss) and diluted earnings (loss) per share to GAAP net income (loss) and GAAP diluted earnings (loss) per share is included in a table immediately following the condensed consolidated statements of cash flow below.

The intention in providing these non-GAAP measures is to provide supplemental information regarding the Company's operational performance while recognizing that they have material limitations and that they should only be referred to with reference to the corresponding GAAP measure.

The Company believes that the provision of these non-GAAP financial measures is useful to investors and investment analysts because it enables comparison to the Company's historical operating results, those of competitors and other industry participants and also provides transparency to the measures used by management in operational and financial decision making. In relation to the specific items excluded: (a) intangible assets represent costs incurred by the acquired business prior to acquisition, are not cash costs and will not be replaced when the assets are fully amortized and therefore the exclusion of these costs provides management and investors with better visibility of the costs required to generate revenue over time; (b) equity compensation expense is non-cash in nature, is outside the control of management during the period in which the expense is incurred; (c) restructuring costs are not comparable across periods or with other companies; (d) the exclusion of the related tax effects of excluding items (a) to (c) is necessary to show the effect on net income of the change in tax expense that would have been recorded if these items had not been incurred.

Safe Harbor Statement

This press release contains forward–looking statements. These statements relate to future events or our future financial performance, including our projected revenue and fully diluted earnings per share data (on a GAAP and non-GAAP basis) for the second quarter. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects and adverse general economic conditions in the United States and internationally. These risks and other factors include those listed under "Risk Factors" and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission (File No. 000-50799). In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

About Xyratex

Xyratex is a leading provider of enterprise class data storage subsystems and storage process technology. The company designs and manufactures enabling technology that provides OEM and disk drive manufacturer customers with data storage products to support high-performance storage and data communication networks. Xyratex has over 25 years of experience in research and development relating to disk drives, storage systems and high-speed communication protocols.

Founded in 1994 in an MBO from IBM, and with headquarters in the UK, Xyratex has an established global base with R&D and operational facilities in Europe, the United States and South East Asia.

For more information, visit www.xyratex.com.

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS










Three Months Ended,




February 28,


February 28,




2010


2009




(US dollars in thousands, except per share amounts)







Revenues:





Networked Storage Solutions

$ 270,983


$ 165,725


Storage Infrastructure

47,983


18,160

Total revenues

318,966


183,885







Cost of revenues

261,368


162,993

Gross profit:





Networked Storage Solutions

41,313


18,389


Storage Infrastructure

16,636


2,768


Equity compensation

(351)


(265)

Total gross profit

57,598


20,892

Operating expenses:





Research and development

18,115


18,747


Selling, general and administrative

11,572


13,827


Amortization of intangible assets

978


966


Restructuring costs

-


3,116



Total operating expenses

30,665


36,656

Operating income (loss)

26,933


(15,764)

Interest income (expense), net  

(24)


60

Income (loss) before income taxes

26,909


(15,704)

Provision for income taxes

632


424

Net income (loss)

$ 26,277


$ (16,128)







Net earnings (loss) per share:





Basic

$ 0.88


$ (0.55)


Diluted

$ 0.85


$ (0.55)







Weighted average common shares (in thousands), used in





computing net earnings (loss) per share:





Basic

29,719


29,236


Diluted

30,762


29,236



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
















February 28,


November 30,




2010


2009




(US dollars and amounts in thousands)







ASSETS




Current assets:





Cash and cash equivalents

$ 53,720


$ 51,935


Accounts receivable, net

201,552


124,715


Inventories

158,771


108,625


Prepaid expenses

4,192


4,784


Deferred income taxes

405


405


Other current assets

3,715


5,825



Total current assets

422,355


296,289


Property, plant and equipment, net

43,617


44,485


Intangible assets, net

6,226


7,207


Deferred income taxes

6,269


6,269



Total assets

$ 478,467


$ 354,250







LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Accounts payable

$ 180,770


$ 96,386


Employee compensation and benefits payable

13,039


8,580


Deferred revenue

24,182


10,620


Income taxes payable

2,614


2,013


Other accrued liabilities

13,601


17,413



Total current liabilities

234,206


135,012


Long-term debt

-


-



Total liabilities

234,206


135,012







Shareholders' equity





Common shares (in thousands), par value $0.01 per share






70,000 authorized, 30,144 and 29,461 issued and outstanding

301


295


Additional paid-in capital

373,542


370,925


Accumulated other comprehensive income (loss)

(279)


3,598


Accumulated deficit

(129,303)


(155,580)



Total shareholders' equity

244,261


219,238



Total liabilities and shareholders' equity

$ 478,467


$ 354,250









XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
















Three Months Ended




February 28,


February 28,




2010


2009




(US dollars in thousands)

Cash flows from operating activities:




Net income (loss)

$ 26,277


$ (16,128)

Adjustments to reconcile net income (loss) to net cash





provided by operating activities:




Depreciation

4,460


4,493

Amortization of intangible assets

978


966

Non-cash equity compensation

2,157


1,530

Loss on sale of assets

61


-

Changes in assets and liabilities, net of impact of acquisitions and divestitures





Accounts receivable

(76,837)


54,394


Inventories

(50,146)


16,581


Prepaid expenses and other current assets

(896)


(327)


Accounts payable

84,384


(44,903)


Employee compensation and benefits payable

4,459


(1,827)


Deferred revenue

13,562


(3,240)


Income taxes payable

601


354


Deferred income taxes

-


1


Other accrued liabilities

(4,088)


(1,566)



Net cash provided by operating activities

4,972


10,328







Cash flows from investing activities:





Investments in property, plant and equipment

(3,653)


(4,606)



Net cash used in investing activities

(3,653)


(4,606)







Cash flows from financing activities:





Proceeds from issuance of shares

466


87



Net cash provided by financing activities

466


87

Change in cash and cash equivalents

1,785


5,809

Cash and cash equivalents at beginning of period

51,935


28,013

Cash and cash equivalents at end of period

$ 53,720


$ 33,822









XYRATEX LTD

SUPPLEMENTAL INFORMATION













Three Months Ended

Summary Reconciliation Of GAAP Net Income (Loss) To Non-GAAP Net Income (Loss)

February 28,
2010


February 28,
2009



(US dollars in thousands, except per share amounts)






GAAP net income (loss)

$26,277


($16,128)







Amortization of intangible assets

978


966


Equity compensation

2,157


1,530


Restructuring costs

-


3,116






Non-GAAP net income (loss)

$29,412


($10,516)











Summary Reconciliation Of Diluted GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings (Loss) Per Share









Diluted GAAP earnings (loss) per share

$ 0.85


$ (0.55)







Amortization of intangible assets

0.03


0.03


Equity compensation

0.08


0.05


Restructuring costs

-


0.11


Tax effect of non-GAAP adjustments

-


-






Diluted non-GAAP earnings (loss) per share

$0.96


($0.36)











Summary Of Equity Compensation










Cost of revenues

351


265


Research and development

718


510


Selling, general and administrative

1,088


755







Total equity compensation

2,157


1,530



SOURCE Xyratex Ltd