Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2012

     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,
bdriver@xyratex.com
 
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