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Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2010

Jun 30, 2010 (04:06 PM EDT)
URL: http://www.techweb.com/show-press-release/X810000/xyratex-ltd-announces-results-for-the-second-quarter-fiscal-year-2010.html

HAVANT, England, June 30 /PRNewswire-FirstCall/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and storage process technology, today announced results for the second fiscal quarter ended May 31, 2010. Revenues for the second quarter were $455.9 million, an increase of 134.1% compared to revenues of $194.7 million for the same period last year.

For the second quarter, GAAP net income was $43.7 million, or $1.39 per diluted share, compared to GAAP net loss of $9.6 million, or $0.33 per share, in the same period last year. Non-GAAP net income was $46.8 million, or $1.49 per diluted share, compared to non-GAAP net loss of $6.6 million, or $0.22 per share, in the same quarter a year ago (1).

Gross profit margin in the second quarter increased to 18.1%, compared to 12.9% in the same period last year, primarily due to significantly increased volumes of Storage Infrastructure products.

Revenues from our Networked Storage Solutions products were $343.9 million as compared to $184.3 million in the same quarter a year ago, an increase of 86.6%. Gross profit margin in the Networked Storage Solutions business was 12.8% as compared to 12.7% a year ago. Revenues from our Storage Infrastructure products were $112.0 million as compared to $10.5 million in the same quarter a year ago. Gross profit margin in the Storage Infrastructure business was 34.6% as compared to 18.0% a year ago.

"Xyratex had an outstanding quarter with record revenue and earnings. We executed very well and were able to meet the strong demand from our customers, while continuing to invest in technologies and resources that will position us for growth going forward," said Steve Barber, CEO of Xyratex. "Our priorities for the remainder of 2010 include strategic investment in new growth opportunities and securing new customers. We feel we are well positioned to capitalize on the positive industry dynamics that are creating significant demand for our storage products."

Business Outlook

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

  • Revenue in the third quarter of 2010 is projected to be in the range $385 to $435 million.
  • Fully diluted earnings per share is anticipated to be between $0.77 and $1.06 on a GAAP basis in the third quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.87 and $1.16. 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, June 30, 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) 383-8008 in the United States and +1 (617) 597-5341 outside of the United States, passcode 55518071. The press release will be posted to the company web site www.xyratex.com.

A replay will be available through July 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 69420917.

(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 third 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


Six Months Ended




May 31,


May 31,


May 31,


May 31,




2010


2009


2010


2009




(US dollars in thousands,
except per share amounts)











Revenues:









Networked Storage Solutions

$ 343,900


$ 184,257


$ 614,883


$ 349,982


Storage Infrastructure

111,999


10,482


159,982


28,642

Total revenues

455,899


194,739


774,865


378,624











Cost of revenues

373,405


169,540


634,773


332,533

Gross profit:









Networked Storage Solutions

44,070


23,469


85,383


41,858


Storage Infrastructure

38,770


1,892


55,406


4,660


Equity compensation

(346)


(162)


(697)


(427)

Total gross profit

82,494


25,199


140,092


46,091

Operating expenses:









Research and development

21,890


17,512


40,005


36,259


Selling, general and administrative

15,305


14,833


26,877


28,660


Amortization of intangible assets

979


1,011


1,957


1,977


Restructuring costs

-


1,099


-


4,215



Total operating expenses

38,174


34,455


68,839


71,111

Operating income (loss)

44,320


(9,256)


71,253


(25,020)

Interest income (expense), net  

5


25


(19)


85

Income (loss) before income taxes

44,325


(9,231)


71,234


(24,935)

Provision for income taxes

663


412


1,295


836

Net income (loss)

$ 43,662


$ (9,643)


$ 69,939


$ (25,771)











Net earnings (loss) per share:









Basic

$ 1.45


$ (0.33)


$ 2.33


$ (0.88)


Diluted

$ 1.39


$ (0.33)


$ 2.25


$ (0.88)











Weighted average common shares (in thousands),
used in computing net earnings (loss) per share:









Basic

30,202


29,462


29,960


29,349


Diluted

31,391


29,462


31,022


29,349



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
















May 31,


November 30,




2010


2009




(US dollars and amounts in
thousands)







ASSETS




Current assets:





Cash and cash equivalents

$ 58,307


$ 51,935


Accounts receivable, net

245,260


124,715


Inventories

188,959


108,625


Prepaid expenses

3,878


4,784


Deferred income taxes

405


405


Other current assets

3,507


5,825



Total current assets

500,316


296,289


Property, plant and equipment, net

44,072


44,485


Intangible assets, net

5,248


7,207


Deferred income taxes

6,075


6,269



Total assets

$ 555,711


$ 354,250







LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Accounts payable

$ 201,060


$ 96,386


Employee compensation and benefits payable

14,429


8,580


Deferred revenue

31,368


10,620


Income taxes payable

1,808


2,013


Other accrued liabilities

17,709


17,413



Total current liabilities

266,374


135,012


Long-term debt

-


-



Total liabilities

266,374


135,012







Shareholders' equity





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






70,000 authorized, 30,259 and 29,461 issued and outstanding

303


295


Additional paid-in capital

377,127


370,925


Accumulated other comprehensive income (loss)

(2,452)


3,598


Accumulated deficit

(85,641)


(155,580)



Total shareholders' equity

289,337


219,238



Total liabilities and shareholders' equity

$ 555,711


$ 354,250









XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
















Six Months Ended




May 31,


May 31,




2010


2009




(US dollars in thousands)

Cash flows from operating activities:




Net income (loss)

$ 69,939


$ (25,771)

Adjustments to reconcile net income (loss) to net cash





provided by operating activities:




Depreciation

8,943


9,162

Amortization of intangible assets

1,957


1,977

Non-cash equity compensation

4,277


2,472

Loss on sale of assets

69


-

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





Accounts receivable

(120,545)


37,813


Inventories

(80,334)


26,035


Prepaid expenses and other current assets

(374)


1,896


Accounts payable

104,674


(35,477)


Employee compensation and benefits payable

5,849


(1,841)


Deferred revenue

20,748


(3,459)


Income taxes payable

(10)


39


Deferred income taxes

(1)


1


Other accrued liabilities

(2,154)


(3,669)



Net cash provided by operating activities

13,038


9,178







Cash flows from investing activities:





Investments in property, plant and equipment

(8,599)


(10,055)



Net cash used in investing activities

(8,599)


(10,055)







Cash flows from financing activities:





Proceeds from issuance of shares

1,933


87



Net cash provided by financing activities

1,933


87

Change in cash and cash equivalents

6,372


(790)

Cash and cash equivalents at beginning of period

51,935


28,013

Cash and cash equivalents at end of period

$ 58,307


$ 27,223



XYRATEX LTD

SUPPLEMENTAL INFORMATION





















Three Months Ended


Six Months Ended

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

May 31,
2010


May 31,
2009


May 31,
2010


May 31,
2009



(US dollars in thousands,
except per share amounts)


(US dollars in thousands,
except per share amounts)










GAAP net income (loss)

$43,662


($9,643)


$69,939


($25,771)











Amortization of intangible assets

979


1,011


1,957


1,977


Equity compensation

2,120


942


4,277


2,472


Restructuring costs

-


1,099


-


4,215










Non-GAAP net income (loss)

$46,761


($6,591)


$76,173


($17,107)



















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

















Diluted GAAP earnings (loss) per share

$ 1.39


$ (0.33)


$ 2.25


$ (0.88)











Amortization of intangible assets

0.03


0.03


0.06


0.07


Equity compensation

0.07


0.03


0.14


0.08


Restructuring costs

-


0.04


-


0.14










Diluted non-GAAP earnings (loss) per share

$1.49


($0.22)


$2.46


($0.58)



















Summary Of Equity Compensation


















Cost of revenues

346


162


697


427


Research and development

706


317


1,424


827


Selling, general and administrative

1,068


463


2,156


1,218











Total equity compensation

2,120


942


4,277


2,472



SOURCE Xyratex Ltd