Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2012 Declares Quarterly Cash Dividend PR Newswire HAVANT, England, Oct. 2, 2012 HAVANT,England, Oct. 2, 2012 /PRNewswire/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the third fiscal quarter ended August 31, 2012. Revenues for the third quarter were $275.7 million, a decrease of 24% compared to revenues of $361.8 million for the same period last year. For the third quarter, GAAP net income was $7.7 million, or $0.28 per diluted share, compared to GAAP net income of $9.7 million, or $0.32 per share, in the same period last year. Non-GAAP net income was $10.3 million, or $0.37 per diluted share, compared to non-GAAP net income of $12.7 million, or $0.42 per share, in the same quarter a year ago^(1). Gross profit margin in the third quarter was 18.5%, compared to 16.7% in the same period last year and 16.5% in the prior quarter. The increase from last year primarily reflects improved gross margins for HDD Capital Equipment products. Today, the Company also announced that its Board of Directors has approved a quarterly cash dividend of $0.075 per share, unchanged from the prior quarter. The dividend will be payable on October 30, 2012 to shareholders of record as of the close of business on October 16, 2012. This dividend represents a quarterly payout of approximately $2.0 million in aggregate, or $8.0 million on an annualized basis. During the quarter the Company repurchased 892,922 of its common shares at a total cost of $10.0 million under its previously announced share repurchase plan, bringing the total repurchases in the first nine months of the 2012 fiscal year to 1,199,275 common shares at a total cost of $13.6 million. The Company's cash balance amounted to $103.2 million at the end of the third quarter, a decrease of $28.6 million from the prior quarter due primarily to increased inventories resulting from reduced sales. "Our third quarter proved to be a very challenging quarter due to a number of factors as we stated in our press release last month. Over the last few weeks, we have been able to resolve most of the technical and performance issues with our latest Capital Equipment and High Performance Computing products that prevented us from recognizing the associated product revenue prior to the end of the third quarter and we are working very closely with our customers to resolve the remaining issues. I am confident that we will be able to successfully meet all the required technical requirements for the respective products. With regard to the weaker than expected enterprise storage demand that impacted our quarterly results, I do believe that the industry dynamics are weaker than what was expected a few months ago and as a result we have taken a more cautious outlook going forward," said Steve Barber, CEO of Xyratex. "Over the next 18 to 24 months we have a number of new opportunities, particularly in the area of Big Data/High Performance Computing that I believe will be positive for the company. We will continue to focus on new growth opportunities while also managing our costs and investments. With a strong balance sheet, I believe we are well positioned to capitalize on these opportunities." Business Outlook The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.^ oRevenue in the fourth fiscal quarter of 2012 is projected to be in the range of $235 million to $285 million. oWe anticipate recording a loss per share of between $0.15 and $0.43 on a non-GAAP basis in the fourth quarter. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense. Conference Call Information The company will host a conference call to discuss its results at 1:30 p.m. PT/4:30 p.m. ET on Tuesday, October 2, 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) 561-2731 Outside the United States (617) 614-3528 Passcode 86990813 A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through October 9, 2012 as follows: United States (888) 286-8010 Outside the United States (617) 801-6888 Passcode 33193526 (1) Non-GAAP net income and diluted earnings per share exclude (a) amortization of intangible assets, (b) equity compensation expense, (c) the tax effects related to (a) and (b), (d) the recognition of a Malaysia deferred tax asset in the first quarter of fiscal 2012 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. 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 the company 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 exclusion of the related tax effects of excluding items (a) and (b) 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 (d) the recognition of the Malaysia deferred tax asset relates to the potential for the non-renewal of certain tax incentive arrangements in 2012; (d) is non-recurring and will reverse if the incentive arrangements are renewed 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 which 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 per share data on a 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 retain major customers and meet the required technical and performance specifications of our products in a timely manner or at all, the cyclical nature of the markets in which we operate, changes in our customers' volume requirements, our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, deterioration in global economic conditions, diminished growth in the volume of digital information, patent infringement claims and our inability to protect our intellectual property 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," "projects," "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 data storage technology, including modular solutions for the enterprise data storage industry, and hard disk drive (HDD) capital equipment for the HDD industry. Xyratex enterprise data storage platforms provide a range of advanced, scalable data storage solutions for the Original Equipment Manufacturer and High Performance Computing communities. As the largest capital equipment supplier to the HDD industry, Xyratex enables disk drive manufacturers and their component suppliers to meet today's technology and productivity requirements. Xyratex has over 25 years of experience in research and development relating to disk drives, storage systems and manufacturing process technology. 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 North America, Asia and Europe. Website: 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, 2012 2011 2012 2011 (US dollars in thousands, except per share amounts) Revenues $ 275,670 $ 361,836 $ 893,452 $ 1,060,883 Cost of revenues 224,653 301,465 736,121 907,411 Gross profit 51,017 60,371 157,331 153,472 Operating expenses: Research and development 25,308 30,047 77,231 88,272 Selling, general and 17,192 16,698 50,925 52,114 administrative Amortization of intangible 617 1,230 2,537 3,279 assets Total operating 43,117 47,975 130,693 143,665 expenses Operating income 7,900 12,396 26,638 9,807 Interest income, net 283 209 623 288 Income before income taxes 8,183 12,605 27,261 10,095 Provision for income taxes 437 2,948 1,658 314 Net income $ 7,746 $ 9,657 $ 25,603 $ 9,781 Net earnings per share: Basic $ 0.29 $ 0.33 $ 0.93 $ 0.32 Diluted $ 0.28 $ 0.32 $ 0.90 $ 0.31 Weighted average common shares (in thousands), used in computing net earnings per share: Basic 27,171 29,499 27,674 30,280 Diluted 27,764 30,299 28,423 31,232 Cash dividends declared per $ 0.08 $ 0.05 $ 0.22 $ 0.05 share XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS August 31, November 30, 2012 2011 (US dollars and amounts in thousands) ASSETS Current assets: Cash and cash equivalents $ 103,177 $ 132,630 Accounts receivable, net 143,205 200,742 Inventories 209,108 164,180 Prepaid expenses 4,389 3,296 Deferred income taxes 1,411 9,020 Other current assets 3,528 7,016 Total current assets 464,818 516,884 Property, plant and equipment, net 43,072 45,215 Intangible assets, net 15,591 18,128 Deferred income taxes 20,468 13,476 Total assets $ 543,949 $ 593,703 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 104,873 $ 168,696 Employee compensation and benefits 16,391 21,786 payable Deferred revenue 24,350 7,692 Income taxes payable 221 43 Other accrued liabilities 15,874 26,312 Total current liabilities 161,709 224,529 Long-term debt - - Total liabilities 161,709 224,529 Shareholders' equity Common shares (in thousands), par value $0.01 per share 70,000 authorized, 27,024 and 27,568 270 276 issued and outstanding Additional paid-in capital 353,185 361,070 Accumulated other comprehensive deficit - (1,337) Accumulated income 28,785 9,165 Total shareholders' equity 382,240 369,174 Total liabilities and shareholders' $ 543,949 $ 593,703 equity XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended, August 31, August 31, 2012 2011 (US dollars in thousands) Cash flows from operating activities: Net income $ 25,603 $ 9,781 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,528 15,031 Amortization of intangible assets 2,537 3,279 Non-cash equity compensation 5,048 6,268 Loss (gain) on sale of assets 1,183 (44) Deferred income taxes 171 (2,016) Changes in assets and liabilities, net of impact of acquisitions and divestitures Accounts receivable 57,537 34,302 Inventories (44,928) 38,739 Prepaid expenses and other current assets 2,395 (3,654) Accounts payable (63,823) 3,793 Employee compensation and benefits payable (5,395) (4,118) Deferred revenue 16,658 (6,451) Income taxes payable 178 365 Other accrued liabilities (3,634) 4,141 Net cash provided by operating 6,058 99,416 activities Cash flows from investing activities: Investments in property, plant and equipment (11,568) (15,521) Payment for acquisition of intangible assets (3,500) (4,700) Acquisition of business - (6,084) Net cash used in investing (15,068) (26,305) activities Cash flows from financing activities: Proceeds from issuance of shares 661 2 Repurchase of shares (13,600) (23,884) Dividends to shareholders (7,504) (1,459) Decrease in book overdraft - (2,374) Net cash used in financing (20,443) (27,715) activities Change in cash and cash equivalents (29,453) 45,396 Cash and cash equivalents at beginning of period 132,630 90,842 Cash and cash equivalents at end of period $ 103,177 $ 136,238 XYRATEX LTD SUPPLEMENTAL INFORMATION Three Months Ended Nine Months Ended Summary Reconciliation Of August 31, August 31, August 31, August 31, GAAP Net Income To Non-GAAP Net Income 2012 2011 2012 2011 (US dollars in (US dollars in thousands, thousands, except per except per share amounts) share amounts) GAAP net income $7,746 $9,657 $25,603 $9,781 Amortization of 617 1,230 2,537 3,279 intangible assets Equity compensation 1,203 1,855 5,048 6,268 Tax effect of above (482) (1,127) (1,924) (2,140) non-GAAP adjustments Effect of changes in tax 1,239 1,044 1,239 1,044 rates Malaysia deferred tax - - (1,489) - asset recognized Non-GAAP net income $10,323 $12,659 $31,014 $18,232 Summary Reconciliation Of Diluted GAAP Earnings Per Share To Diluted Non-GAAP Earnings Per Share Diluted GAAP earnings per $ 0.28 $ 0.32 $ 0.90 $ 0.31 share Amortization of $ 0.02 0.04 0.09 $ 0.11 intangible assets Equity compensation $ 0.04 0.06 0.18 $ 0.21 Tax effect of above $ (0.02) (0.04) (0.07) $ (0.07) non-GAAP adjustments Effect of changes in tax $ 0.05 0.03 0.04 $ 0.03 rates Malaysia deferred tax $ - - (0.05) $ - asset recognized Diluted non-GAAP earnings $ 0.37 $0.42 $1.09 $ 0.59 per share Segmental Information Revenues: Enterprise Data Storage $ 223,380 $ 336,621 $ 773,908 $ 971,969 Solutions HDD Capital Equipment 52,290 25,215 119,544 88,914 Total $275,670 $361,836 $893,452 $1,060,883 Gross profit: Enterprise Data Storage $34,370 $58,063 $126,839 $150,187 Solutions HDD Capital Equipment 16,872 2,420 31,177 3,947 Equity compensation (225) (112) (685) (662) Total $51,017 $60,371 $157,331 $153,472 Summary Of Equity Compensation Cost of revenues $225 $112 $685 $662 Research and development 403 697 1,778 2,244 Selling, general and 575 1,046 2,585 3,362 administrative Total equity compensation $1,203 $1,855 $5,048 $6,268 SOURCE Xyratex Ltd Website: http://www.xyratex.com Contact: Brad Driver, Vice President of Investor Relations, +1-510-687-5260, firstname.lastname@example.org
Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2012
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