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Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2010

Sep 29, 2010 (04:09 PM EDT)
URL: http://www.techweb.com/show-press-release/X815573/xyratex-ltd-announces-results-for-the-third-quarter-fiscal-year-2010.html

HAVANT, England, Sept. 29 /PRNewswire-FirstCall/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and storage process technology, today announced results for the third fiscal quarter ended August 31, 2010.  Revenues for the third quarter were $430.2 million, an increase of 74.7% compared to revenues of $246.3 million for the same period last year.

For the third quarter, GAAP net income was $37.2 million, or $1.19 per diluted share, compared to $7.8 million, or $0.26 per diluted share, in the same period last year. Non-GAAP net income was $37.6 million or $1.20 per diluted share, compared to $10.7 million, or $0.36 per diluted share, in the same quarter a year ago (1).

Gross profit margin in the third quarter was 17.6%, compared to 16.7% in the same period last year. The increase in overall gross margin primarily resulted from a higher proportion of Storage Infrastructure revenue in the 2010 quarter.

Revenues from our Networked Storage Solutions products were $317.2 million as compared to $208.6 million in the same quarter a year ago, an increase of 52.1%. Gross profit margin in the Networked Storage Solutions business was 12.0% as compared to 14.0% a year ago due primarily to changes in product mix.  Revenues from our Storage Infrastructure products were $113.0 million as compared to $37.7 million in the same quarter a year ago. Gross profit margin in the Storage Infrastructure business was 33.8% compared to 32.4% a year ago.

"Our third quarter results reflect our excellent execution in meeting the strong demand from customers in both of our businesses, including some pull-forward from the fourth quarter by one of our Storage Infrastructure customers. This has resulted in profit being above our expectations for the quarter and while the pull-forward has had some impact on our 4Q profitability, our overall expectations for profit and Storage Infrastructure revenues for the full year have increased." said Steve Barber, Xyratex CEO. "We continue to make very good progress in areas in which we have made strategic investments, and anticipate capitalizing on a number of these new growth opportunities. I am very pleased with the progress we have made with regard to securing new customers and programs in both businesses, which should further diversify our customer base."

Business Outlook

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

  • Revenue in the fourth quarter of 2010 is projected to be in the range $395 to $445 million.
  • Fully diluted earnings per share is anticipated to be between $0.48 and $0.74 on a GAAP basis in the fourth quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.60 and $0.86. 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 www.xyratex.com/investors on Wednesday, September 29, 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) 730-5765 in the United States and +1 (857) 350-1589 outside of the United States, passcode 85065379. The press release will be posted to the company web site www.xyratex.com.

A replay will be available through October 6, 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 69195513.

(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 taxation expense. 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 and 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 fourth 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,


Nine Months Ended,




August 31,


August 31,


August 31,


August 31,




2010


2009


2010


2009




(US dollars in thousands, except per share amounts)











Revenues:









Networked Storage Solutions

$ 317,249


$ 208,607


$ 932,132


$ 558,589


Storage Infrastructure

112,987


37,687


272,969


66,329

Total revenues

430,236


246,294


1,205,101


624,918











Cost of revenues

354,310


205,068


989,083


537,601

Gross profit:









Networked Storage Solutions

38,061


29,249


123,444


71,107


Storage Infrastructure

38,232


12,194


93,638


16,854


Equity compensation

(367)


(217)


(1,064)


(644)

Total gross profit

75,926


41,226


216,018


87,317

Operating expenses:









Research and development

23,950


17,243


63,955


53,502


Selling, general and administrative

15,899


14,265


42,776


42,925


Amortization of intangible assets

1,018


1,011


2,975


2,988


Restructuring costs

-


513


-


4,728



Total operating expenses

40,867


33,032


109,706


104,143

Operating income (loss)

35,059


8,194


106,312


(16,826)

Interest income, net  

29


25


10


110

Income (loss) before income taxes

35,088


8,219


106,322


(16,716)

Provision (benefit) for income taxes

(2,146)


412


(851)


1,248

Net income (loss)

$ 37,234


$ 7,807


$ 107,173


$ (17,964)











Net earnings (loss) per share:









Basic

$ 1.23


$ 0.26


$ 3.57


$ (0.61)


Diluted

$ 1.19


$ 0.26


$ 3.45


$ (0.61)











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


















Basic

30,259


29,462


30,059


29,387


Diluted

31,271


29,666


31,028


29,387



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
















August 31,


November 30,




2010


2009




(US dollars and amounts in thousands)







ASSETS




Current assets:





Cash and cash equivalents

$ 84,908


$ 51,935


Accounts receivable, net

227,509


124,715


Inventories

229,481


108,625


Prepaid expenses

4,992


4,784


Deferred income taxes

405


405


Other current assets

6,505


5,825



Total current assets

553,800


296,289


Property, plant and equipment, net

45,018


44,485


Intangible assets, net

9,720


7,207


Deferred income taxes

9,222


6,269



Total assets

$ 617,760


$ 354,250







LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Accounts payable

$ 213,415


$ 96,386


Employee compensation and benefits payable

18,721


8,580


Deferred revenue

33,477


10,620


Income taxes payable

2,668


2,013


Other accrued liabilities

16,714


17,413



Total current liabilities

284,995


135,012


Long-term debt

-


-



Total liabilities

284,995


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

379,582


370,925


Accumulated other comprehensive income

1,287


3,598


Accumulated deficit

(48,407)


(155,580)



Total shareholders' equity

332,765


219,238



Total liabilities and shareholders' equity

$ 617,760


$ 354,250









XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
















Nine Months Ended




August 31,


August 31,




2010


2009




(US dollars in thousands)

Cash flows from operating activities:




Net income (loss)

$ 107,173


$ (17,964)

Adjustments to reconcile net income (loss) to net cash





provided by operating activities:




Depreciation

13,523


13,702

Amortization of intangible assets

2,975


2,988

Non-cash equity compensation

6,732


3,867

Loss on sale of assets

171


-

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





Accounts receivable

(102,469)


(4,487)


Inventories

(120,462)


28,137


Prepaid expenses and other current assets

(4,476)


1,617


Accounts payable

116,801


(5,347)


Employee compensation and benefits payable

10,141


(1,236)


Deferred revenue

22,168


1,268


Income taxes payable

655


(100)


Deferred income taxes

(2,953)


-


Other accrued liabilities

90


183



Net cash provided by operating activities

50,069


22,628







Cash flows from investing activities:





Investments in property, plant and equipment

(14,121)


(12,404)


Acquisition of businesses

(4,908)


-



Net cash used in investing activities

(19,029)


(12,404)







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

32,973


10,311

Cash and cash equivalents at beginning of period

51,935


28,013

Cash and cash equivalents at end of period

$ 84,908


$ 38,324



XYRATEX LTD





SUPPLEMENTAL INFORMATION

























Three Months Ended


Nine Months Ended



August 31,


August 31,


August 31,


August 31,

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

2010


2009


2010


2009



(US dollars in thousands, except per share amounts)


(US dollars in thousands, except per share amounts)










GAAP net income (loss)

$37,234


$7,807


$107,173


($17,964)











Amortization of intangible assets

1,018


1,011


2,975


2,988


Equity compensation

2,455


1,395


6,732


3,867


Restructuring costs

-


513


-


4,728


Deferred tax on equity compensation

(3,148)


-


(3,148)


-










Non-GAAP net income (loss)

$37,559


$10,726


$113,732


($6,381)



















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

















Diluted GAAP earnings (loss) per share

$ 1.19


$ 0.26


$ 3.45


$ (0.61)











Amortization of intangible assets

0.03


0.03


0.10


0.10


Equity compensation

0.08


0.05


0.22


0.13


Restructuring costs

-


0.02


-


0.16


Deferred tax on equity compensation

(0.10)


-


(0.10)


-










Diluted non-GAAP earnings (loss) per share

$1.20


$0.36


$3.67


($0.22)



















Summary Of Equity Compensation


















Cost of revenues

367


217


1,064


644


Research and development

721


458


2,145


1,285


Selling, general and administrative

1,367


720


3,523


1,938











Total equity compensation

2,455


1,395


6,732


3,867



SOURCE Xyratex Ltd