TechWeb

Xyratex Ltd Announces Results for the Fourth Quarter and Fiscal Year 2011

Jan 05, 2012 (03:01 PM EST)
URL: http://www.techweb.com/show-press-release/X882195/xyratex-ltd-announces-results-for-the-fourth-quarter-and-fiscal-year-2011.html

HAVANT, UK, Jan. 5, 2012 /PRNewswire/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and hard disk drive capital equipment, today announced results for the fourth quarter and fiscal year ended November 30, 2011.  Revenues for the fourth quarter were $387.6 million, a decrease of 2.3% compared to revenues of $396.8 million for the same period last year.

For the fourth quarter, GAAP net income was $18.5 million, or $0.65 per diluted share, compared to GAAP net income of $32.3 million, or $1.02 per diluted share, in the same period last year. Non-GAAP net income was $20.8 million, or a diluted earnings per share of $0.73, compared to non-GAAP net income of $21.9 million, or $0.69 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the fourth quarter was 17.7%, compared to 16.1% in the same period last year and 16.7% in the prior quarter. The change from the prior quarter was primarily due to a higher gross margin for Storage Infrastructure (SI) products.

Revenues from sales of our Networked Storage Solutions (NSS) products were $352.6 million in the fourth quarter as compared to $326.8 million in the same quarter a year ago, an increase of 8%. Gross profit margin for NSS products in the fourth quarter was 17.7% as compared to 13.3% in the same quarter a year ago due to favorable changes in customer and product mix. Revenues from sales of our SI products in the fourth quarter were $35 million as compared to $70 million in the same quarter a year ago, a decrease of 50%. Gross profit margin in the SI business in the fourth quarter was 18.0% as compared to 29.7% in the same quarter a year ago, primarily due to the decrease in revenues relative to fixed costs.

Revenues for fiscal year 2011 were $1,448.5 million, a decrease of 9.6% compared to revenues of $1,601.9 million for fiscal year 2010. Revenues from sales of our NSS products were $1,324.5 million for the year as compared to $1,258.9 million in fiscal 2010, an increase of 5.2%. Revenues from sales of our SI products in fiscal 2011 were $123.9 million as compared to $342.9 million in 2010, a decrease of 63.9%. Gross profit margin for fiscal 2011 was 15.3% compared to 17.5% in the previous year. The decrease in gross profit margin from the prior year was primarily due to the decrease in SI revenues, partially offset by increased gross margins for NSS products related to favorable changes in customer and product mix.

GAAP net income for fiscal 2011 was $28.3 million, or $0.92 per diluted share, compared to GAAP net income of $139.4 million, or $4.46 per diluted share, for fiscal 2010. Non-GAAP net income for fiscal 2011 decreased to $39.0 million, or $1.27 per diluted share, compared to non-GAAP net income of $135.7 million, or $4.34 per diluted share, for fiscal 2010(1).

During the quarter, the Company repurchased 986,707 of its common shares at a total cost of $8.4 million. For the full fiscal year, the Company repurchased a total of 3,601,903 shares, representing 11.6% of issued and outstanding shares as of February 28, 2011, at a total cost of $32.3 million. The shares were repurchased under the previously announced share repurchase plan. Also, the Company announced its second dividend in the quarter. The cash dividend was set at $0.055 a share. The Company's cash balance was $132.6 million at the end of the fiscal year, an increase of $41.8 million during the 2011 fiscal year.

"Overall, I am pleased with our results for the fiscal year. Our NSS business had a very good year as a result of good execution and a more diverse customer base. The Enterprise Storage market is strong, and we did a very good job in meeting the technology requirements and demands of our customer base. Our SI business results reflect the many challenges that affected the wider Hard Disk Drive industry in 2011, including reduced capital expenditures resulting from delays in regulatory approvals for the two acquisitions by Seagate and Western Digital, the two natural disasters in Japan and Thailand, and increased competition. As a result of the reduction in capital expenditures by our customers, we took decisive cost reduction actions in the SI business to better align our cost structure with our business expectations," said Steve Barber, CEO of Xyratex. "Looking forward, I believe we are well positioned to capitalize on the many business opportunities that we have been working on, including our entry into the High Performance Computing storage market. We believe that this, together with cost realignment within the business, provides us with a good opportunity to improve our profitability and continue our cash generation."

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Our forecast ranges are wider than normal due to the uncertainty surrounding disk drive availability following the recent flooding in Thailand.   

  • Revenue in the first quarter of fiscal 2012 is projected to be in the range of $275 million to $355 million.
  • Fully diluted earnings (loss) per share is anticipated to be between $(0.02) and $0.32 on a GAAP basis in the first quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between $0.07 and $0.41. 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

The company will host a conference call to discuss its results at 1:30 p.m. PT/4:30 p.m. ET on Thursday, January 5, 2012.

The conference call can be accessed online via the company's website www.xyratex.com/investors, or by telephone as follows:

United States

(800) 561-2693

Outside the United States

(617) 614-3523

Passcode

64545968

A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through January 12, 2012 as follows:

United States

(888) 286-8010

Outside the United States

(617) 801-6888

Passcode

87022751

(1) Non-GAAP net income and diluted earnings per share exclude (a) amortization and impairment of intangible assets, (b) equity compensation expense, (c) specified non-recurring items, such as the release of the valuation allowance against a deferred tax asset and the reduction in acquisition deferred consideration, (d) the tax effects related to (a) through (c), and (e) the tax expense resulting from a reduction in the deferred tax asset caused by a fall in U.K. tax rates. Reconciliation of non-GAAP net income and diluted earnings per share to GAAP net income and GAAP diluted earnings 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, and not considered to be a substitute for, or superior to, the corresponding GAAP measure. The financial results calculated in accordance with GAAP and reconciliations of these non-GAAP measures to the comparable GAAP measures should be carefully evaluated. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

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) the release of the valuation allowance against a deferred tax asset and the reduction in acquisition deferred consideration are non-cash and not comparable across periods or with other companies; (d) the exclusion of the related tax effects of excluding items (a) through (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 and (e) the impact of the reduction in tax rates is non-cash and not comparable across periods or with other companies due to the existence of a significant U.K. related deferred tax asset that is expected to reduce over time.

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 (loss) per share data (on a GAAP and non-GAAP basis) for the first quarter of fiscal year 2012. 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, changes in our customers' volume requirements, cancellation or delay of projects, adverse general economic conditions in the United States and internationally, and the impact of natural disasters. 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 hard disk drive capital equipment. The company designs and manufactures enabling technology that provides OEM and disk drive manufacturers 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,

 

Year Ended,

 

 

 

 

 

 

November 30,

 

November 30,

 

November 30,

 

November 30,

 

 

 

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Networked Storage Solutions

 

 

$ 352,578

 

$ 326,808

 

$ 1,324,547

 

$ 1,258,940

 

Storage Infrastructure

 

 

35,015

 

69,974

 

123,929

 

342,943

Total revenues

 

 

 

387,593

 

396,782

 

1,448,476

 

1,601,883

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues 

 

 

 

318,993

 

333,032

 

1,226,404

 

1,322,115

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

Networked Storage Solutions

 

 

62,467

 

43,438

 

212,654

 

166,882

 

Storage Infrastructure

 

 

6,295

 

20,789

 

10,242

 

114,427

 

Equity compensation

 

 

(162)

 

(477)

 

(824)

 

(1,541)

Total gross profit

 

 

 

68,600

 

63,750

 

222,072

 

279,768

Operating expenses: 

 

 

 

 

 

 

 

 

 

 

 

 Research and development 

 

 

27,286

 

28,750

 

115,558

 

92,705

 

 Selling, general and administrative 

 

 

14,263

 

17,226

 

66,377

 

60,002

 

 Restructuring costs 

 

 

2,750

 

-

 

2,750

 

-

 

 Impairment of intangible assets 

 

 

2,230

 

-

 

2,230

 

-

 

 Amortization of intangible assets 

 

 

897

 

694

 

4,176

 

3,669

 

 

Total operating expenses 

 

 

47,426

 

46,670

 

191,091

 

156,376

Operating income

 

 

 

21,174

 

17,080

 

30,981

 

123,392

Interest income, net  

 

 

 

104

 

35

 

392

 

45

Income before income taxes 

 

 

21,278

 

17,115

 

31,373

 

123,437

Provision (benefit) for income taxes

 

 

2,762

 

(15,140)

 

3,076

 

(15,991)

Net income

 

 

 

$ 18,516

 

$ 32,255

 

$ 28,297

 

$ 139,428

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

$ 0.67

 

$ 1.07

 

$ 0.96

 

$ 4.63

 

Diluted

 

 

 

$ 0.65

 

$ 1.02

 

$ 0.92

 

$ 4.46

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares (in thousands), used in

 

 

 

 

 

 

 

 

computing net earnings per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

27,544

 

30,262

 

29,605

 

30,101

 

Diluted

 

 

 

28,505

 

31,703

 

30,631

 

31,270

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

$ 0.06

 

$ -

 

$ 0.11

 

$ -



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 30,

 

November 30,

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

(US dollars and amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

$ 132,630

 

$ 90,842

 

Accounts receivable, net

 

 

 

 

 

 

200,742

 

209,044

 

Inventories

 

 

 

 

 

 

 

164,180

 

195,936

 

Prepaid expenses

 

 

 

 

 

 

 

3,296

 

3,154

 

Deferred income taxes

 

 

 

 

 

 

9,020

 

8,204

 

Other current assets

 

 

 

 

 

 

7,016

 

3,876

 

 

Total current assets

 

 

 

 

 

 

516,884

 

511,056

 

Property, plant and equipment, net

 

 

 

 

 

45,215

 

45,687

 

Intangible assets, net

 

 

 

 

 

 

18,128

 

9,326

 

Deferred income taxes

 

 

 

 

 

 

13,476

 

14,913

 

 

Total assets

 

 

 

 

 

 

 

$ 593,703

 

$ 580,982

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

 

$ 168,696

 

$ 155,792

 

Employee compensation and benefits payable

 

 

 

 

 

21,786

 

22,638

 

Deferred revenue

 

 

 

 

 

 

 

7,692

 

17,958

 

Income taxes payable

 

 

 

 

 

 

43

 

730

 

Other accrued liabilities

 

 

 

 

 

 

26,312

 

16,533

 

 

Total current liabilities

 

 

 

 

 

 

224,529

 

213,651

 

Long-term debt

 

 

 

 

 

 

 

-

 

-

 

 

Total liabilities

 

 

 

 

 

 

224,529

 

213,651

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

70,000 authorized, 27,568 and 30,276 issued and outstanding

 

 

 

 

276

 

303

 

Additional paid-in capital

 

 

 

 

 

 

361,070

 

382,684

 

Accumulated other comprehensive income (deficit)

 

 

 

 

(1,337)

 

496

 

Accumulated income (deficit)

 

 

 

 

 

 

9,165

 

(16,152)

 

 

Total shareholders' equity

 

 

 

 

 

 

369,174

 

367,331

 

 

Total liabilities and shareholders' equity

 

 

 

 

 

$ 593,703

 

$ 580,982



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

November 30,

 

November 30,

 

 

 

2011

 

2010

 

 

 

 (US dollars in thousands) 

Cash flows from operating activities: 

 

 

 

Net income

$ 28,297

 

$ 139,428

Adjustments to reconcile net income to net cash

 

 

 

 

provided by operating activities:

 

 

 

Depreciation

19,405

 

18,436

Amortization of intangible assets

4,176

 

3,669

Impairment of intangible assets

2,230

 

-

Non-cash equity compensation

7,127

 

9,654

Loss on sale of assets

1,299

 

796

Deferred income taxes

1,438

 

(16,443)

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

 

 

 

 

Accounts receivable 

8,753

 

(84,004)

 

Inventories

31,846

 

(86,917)

 

Prepaid expenses and other current assets

(3,971)

 

487

 

Accounts payable 

15,162

 

59,178

 

Employee compensation and benefits payable

(852)

 

14,058

 

Deferred revenue

(10,266)

 

6,649

 

Income taxes payable 

(687)

 

(1,283)

 

Other accrued liabilities 

2,975

 

(4,052)

 

 

Net cash provided by operating activities 

106,932

 

59,656

 

 

 

 

 

 

Cash flows from investing activities: 

 

 

 

 

Investments in property, plant and equipment 

(20,232)

 

(20,328)

 

Acquisition of intangible assets

(4,700)

 

-

 

Acquisition of businesses

(7,433)

 

(4,908)

 

 

Net cash used in investing activities 

(32,365)

 

(25,236)

 

 

 

 

 

 

Cash flows from financing activities: 

 

 

 

 

Proceeds from issuance of shares

3,344

 

2,113

 

Repurchase of shares

(32,290)

 

-

 

Dividends to shareholders

(1,459)

 

-

 

Increase (decrease) in book overdraft

(2,374)

 

2,374

 

 

Net cash provided by (used in) financing activities 

(32,779)

 

4,487

Change in cash and cash equivalents 

41,788

 

38,907

Cash and cash equivalents at beginning of period

90,842

 

51,935

Cash and cash equivalents at end of period

$ 132,630

 

$ 90,842

 

 

 

 

 

 

 

XYRATEX LTD

SUPPLEMENTAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

 

 

 

 

 

 

November 30,

 

November 30,

 

November 30,

 

November 30,

Summary Reconciliation Of GAAP Net Income To Non-GAAP Net Income

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

(US dollars in thousands, except per share amounts)

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

$18,516

 

$32,255

 

$28,297

 

$139,428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

897

 

694

 

4,176

 

3,669

 

Equity compensation

859

 

2,922

 

7,127

 

9,654

 

Reduction in acquisition deferred consideration

(676)

 

-

 

(676)

 

-

 

Impairment of intangible assets

2,230

 

-

 

2,230

 

-

 

Tax effect of above non-GAAP adjustments

(1,074)

 

-

 

(3,214)

 

-

 

Effect of change in tax rates

-

 

-

 

1,044

 

-

 

Deferred tax on equity compensation 

-

 

(93)

 

-

 

(3,241)

 

Release of deferred tax valuation allowance

-

 

(13,845)

 

-

 

(13,845)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income 

 

 

 

 

$20,752

 

$21,933

 

$38,984

 

$135,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Reconciliation Of Diluted GAAP Earnings Per Share To Diluted Non-GAAP Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted GAAP earnings per share

$ 0.65

 

$ 1.02

 

$ 0.92

 

$ 4.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

0.03

 

0.02

 

0.14

 

0.12

 

Equity compensation

0.03

 

0.09

 

0.23

 

0.31

 

Reduction in acquisition deferred consideration

(0.02)

 

-

 

(0.02)

 

-

 

Impairment of intangible assets

0.08

 

-

 

0.07

 

-

 

Tax effect of above non-GAAP adjustments

(0.04)

 

-

 

(0.10)

 

-

 

Effect of change in tax rates

-

 

-

 

0.03

 

-

 

Deferred tax on equity compensation 

-

 

(0.00)

 

-

 

(0.10)

 

Release of deferred tax valuation allowance

-

 

(0.44)

 

-

 

(0.44)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted non-GAAP earnings per share

$0.73

 

$0.69

 

$1.27

 

$4.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Of Equity Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

$162

 

$477

 

$824

 

$1,541

 

Research and development

290

 

962

 

2,534

 

3,107

 

Selling, general and administrative

407

 

1,483

 

3,769

 

5,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity compensation

$859

 

$2,922

 

$7,127

 

$9,654

 

 

SOURCE Xyratex Ltd