Xyratex Ltd Announces Results for the Fourth Quarter and Fiscal Year 2012

  Xyratex Ltd Announces Results for the Fourth Quarter and Fiscal Year 2012  PR Newswire  HAVANT, United Kingdom, Jan. 10, 2013  HAVANT, United Kingdom, Jan. 10, 2013 /PRNewswire/ --Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the fourth quarter and fiscal year ended November 30, 2012. Revenues for the fourth quarter were $265.4 million, a decrease of 31.5% compared to revenues of $387.6 million for the same period in the prior year.  For the fourth quarter of fiscal 2012, GAAP net loss was $7.9 million, or $0.29 per share, compared to GAAP net income of $18.5 million, or $0.65 per diluted share, in the same period in the prior year. Non-GAAP net loss was $6.4 million, or $0.24 per share, compared to non-GAAP net income of $20.8 million, or $0.73 per diluted share, in the same quarter a year ago^(1).  Gross profit margin in the fourth quarter was 14.5%, compared to 17.7% in the same period in the prior year and 18.6% in the prior quarter. The decrease from the prior year primarily reflects a decline in gross margins for the Enterprise Data Storage Solutions products due to the effect of fixed costs relative to lower revenues.  Revenues for fiscal year 2012 were $1,158.9 million, a decrease of 20% compared to revenues of $1,448.5 million for fiscal year 2011. Gross profit margin for fiscal year 2012 was 16.9% compared to 15.3% in the previous year. The increase from the prior year was primarily due to higher margins for HDD Capital Equipment products.  GAAP net income for fiscal year 2012 was $17.7 million, or $0.63 per diluted share, compared to GAAP net income of $28.3 million, or $0.92 per diluted share, for fiscal year 2011. Non-GAAP net income for fiscal year 2012 decreased to $24.6 million, or $0.87 per diluted share, compared to non-GAAP net income of $39.0 million, or $1.27 per diluted share, for fiscal year 2011.  On December 17, 2012, the Company declared a one-time, special cash dividend of$2.00per common share and an accelerated quarterly dividend of $0.075 per common share. These dividends, which totaled $56.1 million, were paid onDecember 31, 2012to shareholders of record as ofDecember 27, 2012. The Company did not repurchase any of its common shares under its previously announced share repurchase plan during the fourth quarter. Repurchases in the 2012 fiscal year totaled 1,199,275 common shares at a total cost of $13.6 million. The Company's cash balance amounted to $117.2 million at the end of the fiscal year, an increase of $14 million from the end of the third quarter.  "Fiscal year 2012 was a challenging year for Xyratex. The macro-economic conditions certainly shifted midway through the year and both markets we serve experienced dynamic changes that caused our customers to be more cautious than our original expectations. Throughout the year we made adjustments to our business plan model to react to these unexpected changes in both the global economy as well as those specific to the markets in which we participate. I believe that we are executing well on the long-term strategy that we outlined in October and we have positive results with new customer wins and opportunities heading into fiscal year 2013. We have made significant progress in the High Performance Computing data storage market with partners such as Cray Computing, DELL and HP, and I believe we are well positioned with our unique IP to deliver greater value for our customers and partners," said Steve Barber, CEO of Xyratex. "Over the next 18 to 24 months, we have a number of new opportunities, particularly in the areas of High Performance Computing data storage and Big Data, 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. 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 first quarter of 2013 is projected to be in the range of     $159 million to $189 million.   oThe company anticipates recording a net loss per share of between $0.08     and $0.28 on a GAAP basis in the first quarter. On a non-GAAP basis the     company anticipates recording a net loss per share of between $0.01 and     $0.21 in the first quarter. Non-GAAP net loss 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 Thursday, January 10, 2013.  The conference call can be accessed online via the company's website www.xyratex.com/investors, or by telephone as follows:  United States             (800) 706-7745 Outside the United States (617) 614-3472 Passcode                  41863387  A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through January 17, 2013 as follows:  United States             (888) 286-8010 Outside the United States (617) 801-6888 Passcode                  35785028  (1) Non-GAAP net income (loss) and diluted earnings (loss) per share exclude (a) amortization and impairment of intangible assets, (b) equity compensation expense, (c) the reduction in acquisition deferred consideration, (d) the tax effects related to (a) through (c), (e) the recognition of a Malaysia deferred tax asset in the first quarter of fiscal 2012 and (f) 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 (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.  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 reduction in acquisition deferred consideration is 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; (e) the recognition of the Malaysia deferred tax asset relates to the non-renewal of certain tax incentive arrangements in 2012, is non-recurring and will reverse if the incentive arrangements are renewed; and (f) 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 net loss per share data on a GAAP and non-GAAP basis for the first 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,   Year Ended,                                     November   November   November   November                                     30,        30,        30,        30,                                     2012       2011       2012       2011                                     (US dollars in thousands, except per share                                     amounts) Revenues                            $ 265,446  $ 387,593  $          $                                                           1,158,898  1,448,476 Cost of revenues                   226,941    318,993    963,062    1,226,404 Gross profit                        38,505     68,600     195,836    222,072 Operating expenses:      Research and development     26,436     27,286     103,667    115,558      Selling, general and          17,507     14,263     68,432     66,377      administrative      Restructuring costs          4,120      2,750      4,120      2,750      Impairment of intangible      -          2,230      -          2,230      assets      Amortization of intangible    617        897        3,154      4,176      assets             Total operating         48,680     47,426     179,373    191,091             expenses Operating income (loss)             (10,175)   21,174     16,463     30,981 Interest income, net              176        104        799        392 Income (loss) before income         (9,999)    21,278     17,262     31,373 taxes Provision (benefit) for income      (2,056)    2,762      (398)      3,076 taxes Net income (loss)                   $ (7,943)  $ 18,516   $ 17,660   $ 28,297 Net earnings (loss) per share:      Basic                          $ (0.29)   $ 0.67     $ 0.64     $ 0.96      Diluted                        $ (0.29)   $ 0.65     $ 0.63     $ 0.92 Weighted average common shares (in thousands), used in computing net earnings (loss) per share:      Basic                          27,024     27,544     27,513     29,605      Diluted                        27,024     28,505     28,199     30,631 Cash dividends declared per share   $ 0.08     $ 0.06     $ 0.29     $ 0.11    XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS                                                     November 30,    November                                                                     30,                                                     2012            2011                                                     (US dollars and amounts in                                                     thousands) ASSETS Current assets:  Cash and cash equivalents                          $ 117,174       $ 132,630  Accounts receivable, net                           132,917         200,742  Inventories                                        171,605         164,180  Prepaid expenses                                   3,134           3,296  Deferred income taxes                              228             9,020  Other current assets                               7,121           7,016         Total current assets                        432,179         516,884  Property, plant and equipment, net                 40,194          45,215  Intangible assets, net                             14,975          18,128  Deferred income taxes                              23,929          13,476         Total assets                                $ 511,277       $ 593,703 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:  Accounts payable                                   $ 82,125        $ 168,696  Employee compensation and benefits payable         17,961          21,786  Deferred revenue                                   18,521          7,692  Income taxes payable                               369             43  Other accrued liabilities                          17,767          26,312         Total current liabilities                   136,743         224,529  Long-term debt                                     -               -         Total liabilities                           136,743         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                         354,593         361,070  Accumulated other comprehensive income             863             (1,337)  (deficit)  Accumulated income                                 18,808          9,165         Total shareholders' equity                  374,534         369,174         Total liabilities and shareholders'         $ 511,277       $ 593,703         equity    XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                     Year Ended,                                                     November 30,  November 30,                                                     2012          2011                                                     (US dollars in                                                     thousands) Cash flows from operating activities: Net income                                          $ 17,660      $ 28,297 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation                                        17,936        19,405 Amortization of intangible assets                   3,155         4,176 Impairment of intangible assets                     -             2,230 Non-cash equity compensation                        6,602         7,127 Loss on sale of assets                              2,297         1,299 Deferred income taxes                               (2,541)       1,438 Changes in assets and liabilities, net of impact of acquisitions and divestitures   Accounts receivable                              67,825        8,753   Inventories                                       (7,425)       31,846   Prepaid expenses and other current assets         1,208         (3,971)   Accounts payable                                 (86,571)      15,162   Employee compensation and benefits payable        (3,825)       (852)   Deferred revenue                                  10,829        (10,266)   Income taxes payable                             326           (687)   Other accrued liabilities                        (1,743)       2,975                Net cash provided by operating       25,733        106,932                activities Cash flows from investing activities:   Investments in property, plant and equipment     (15,212)      (20,232)   Payment for acquisition of intangible assets      (3,500)       (4,700)   Acquisition of business                           -             (7,433)                Net cash used in investing           (18,712)      (32,365)                activities Cash flows from financing activities:   Proceeds from issuance of shares                  661           3,344   Repurchase of shares                              (13,600)      (32,290)   Dividends to shareholders                         (9,538)       (1,459)   Decrease in book overdraft                        -             (2,374)                Net cash used in financing           (22,477)      (32,779)                activities Change in cash and cash equivalents                (15,456)      41,788 Cash and cash equivalents at beginning of           132,630       90,842 period Cash and cash equivalents at end of period          $ 117,174     $ 132,630    XYRATEX LTD SUPPLEMENTAL INFORMATION                                 Three Months Ended       Year Ended                                 November 30,  November   November    November                                               30,        30,         30, Summary Reconciliation Of GAAP Net Income (Loss) To Non-GAAP   2012          2011       2012        2011 Net Income (Loss)                                 (US dollars in           (US dollars in                                 thousands, except per    thousands, except per                                 share amounts)           share amounts) GAAP net income (loss)          $ (7,943)     $ 18,516   $ 17,660    $ 28,297       Amortization of           617           897        3,154       4,176       intangible assets       Equity compensation       1,554         859        6,602       7,127       Reduction in acquisition  -             (676)      -           (676)       deferred consideration       Impairment of intangible  -             2,230      -           2,230       assets       Tax effect of above       (526)         (1,074)    (2,450)     (3,214)       non-GAAP adjustments       Effect of changes in tax  (134)         -          1,105       1,044       rates       Malaysia deferred tax     -             -          (1,489)     -       asset recognized Non-GAAP net income (loss)      $ (6,432)     $ 20,752   $ 24,582    $ 38,984 Summary Reconciliation Of Diluted GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings (Loss) Per Share Diluted GAAP earnings (loss)    $ (0.29)      $ 0.65     $ 0.63      $ 0.92 per share       Amortization of           0.02          0.03       0.11        0.14       intangible assets       Equity compensation       0.06          0.03       0.23        0.23       Reduction in acquisition  -             (0.02)     -           (0.02)       deferred consideration       Impairment of intangible  -             0.08       -           0.07       assets       Tax effect of above       (0.02)        (0.04)     (0.09)      (0.10)       non-GAAP adjustments       Effect of changes in tax  (0.01)        -          0.04        0.03       rates       Malaysia deferred tax     -             -          (0.05)      -       asset recognized Diluted non-GAAP earnings       $ (0.24)      $ 0.73     $ 0.87      $ 1.27 (loss) per share Segmental Information Revenues:       Enterprise Data Storage   $ 200,135     $ 352,578  $ 974,043   $       Solutions                                                      1,324,547       HDD Capital Equipment     65,311        35,015     184,855     123,929       Total                     $ 265,446     $ 387,593  $           $                                                          1,158,898   1,448,476 Gross profit:       Enterprise Data Storage   $28,487       $62,467    $155,326    $212,654       Solutions       HDD Capital Equipment     10,298        6,295      41,475      10,242       Equity compensation       (280)         (162)      (965)       (824)       Total                     $38,505       $68,600    $195,836    $222,072 Summary Of Equity Compensation       Cost of revenues          $280          $162       $965        $824       Research and development  522           290        2,300       2,534       Selling, general and      752           407        3,337       3,769       administrative       Total equity              $1,554        $859       $6,602      $7,127       compensation    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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