Cray Reports 2012 Full Year and Fourth Quarter Financial Results

Cray Reports 2012 Full Year and Fourth Quarter Financial Results 
Company Reports Record Revenue and Operating Income 
SEATTLE, WA -- (Marketwire) -- 02/14/13 --  Global supercomputer
leader Cray Inc. (NASDAQ: CRAY) today announced financial results for
the year and fourth quarter ended December 31, 2012. For 2012, Cray
reported total revenue of $421.1 million, which compares with $236.0
million for 2011. Net income for 2012 was $161.2 million, or $4.27
per share, compared to $14.3 million, or $0.40 per share, for 2011.
Income from operations for 2012 was $168.1 million compared to $1.2
million for 2011.  
All figures in this release are based on U.S. GAAP unless otherwise
noted. A reconciliation of GAAP to non-GAAP measures is included in
the financial tables in this press release. 
Non-GAAP net income, which adjusts for selected unusual and non-cash
items (incl
uding the $139.1 million pre-tax gain from the Intel
transaction), was $33.3 million, or $0.88 per share, for 2012,
compared to non-GAAP net income of $4.7 million, or $0.13 per share,
for 2011.  
For the fourth quarter of 2012, revenue was $188.8 million compared
to $91.6 million in the prior year period. The Company reported net
income for the fourth quarter of $14.0 million, or $0.36 per share,
compared to $31.0 million, or $0.85 per share, in the fourth quarter
of 2011. Non-GAAP net income was $17.2 million, or $0.44 per share,
for the fourth quarter of 2012, compared to non-GAAP net income of
$17.1 million, or $0.47 per share for the same period last year. 
Overall gross profit margin for 2012 was 36 percent compared to 40
percent in 2011. Product margin for 2012 was 35 percent, consistent
with 2011 results; service margin for 2012 was 43 percent compared to
49 percent for 2011. 
Operating expenses for 2012 were $122.2 million compared to $93.2
million in 2011. Compared to 2011, 2012 operating expenses were
impacted by higher incentive based compensation, increased
investments in our storage and big data initiatives, fewer R&D
co-funding credits and additional expenses which resulted from our
acquisition of Appro International. 
As of December 31, 2012, cash and investments totaled $323 million. 
"We had a great year across the board in 2012, highlighted by the
completion of the largest supercomputer and storage system in our
company's history," said Peter Ungaro, president and CEO of Cray. "We
grew substantially in 2012, posting record revenue and operating
profit for the year, and have put ourselves on a path to continue to
grow faster than our overall market. With our new cluster solutions
and XC30 supercomputer, we've expanded our offerings in the
supercomputing market, while our storage and Big Data products
continue to gain momentum with new customers. I'm excited about our
prospects for 2013 and what we're building for the future." 
Outlook 
While a wide range of results remains possible for 2013, we expect
revenue to be approximately $500 million for the year. Revenue is
expected to ramp quarterly during 2013 with roughly $70 million in
the first quarter and about 45% of the annual revenue expected in the
fourth quarter. For 2013, overall gross margins are anticipated to be
in the mid-30% range. Total operating expenses for 2013 are expected
to be in the range of $160 million, which includes approximately $8
million in stock-based compensation and amortization of purchased
intangibles. Based on this outlook, we expect to be profitable for
2013. 
The Company's 2013 effective income tax rate is currently projected
to be about 40% but is dependent on a number of variables. Based on
this outlook, due to the Company's substantial net operating loss
carryforwards, annual income tax provision is expected to be largely
non-cash and our effective cash-tax rate is expected to be 8-10%. 
Actual results for any future period are subject to large
fluctuations given the nature of Cray's business. 
Recent Highlights 


 
--  In January, Cray announced a $23 million contract to provide two Cray
    XC30 supercomputers and Sonexion 1600 storage systems to Germany's
    National Meteorological Service -- the Deutscher Wetterdienst (DWD),
    one of the world's premier numerical weather prediction centers.
    
    
--  In December, Cray announced it was awarded a $39 million contract from
    the North-German Supercomputing Alliance (HLRN) to deliver a
    distributed Cray XC30 supercomputing system, which will be operated at
    sites in Berlin and Hannover, Germany.
    
    
--  In the first quarter of 2013, the Pittsburgh Supercomputing Center
    (PSC) launched its uRiKA graph-analytics appliance from YarcData for
    efficiently discovering unknown relationships in extremely large and
    complex bodies of information. Funded through the Strategic
    Technologies for Cyberinfrastructure program of the National Science
    Foundation, "Sherlock" features innovative hardware and software, as
    well as PSC-specific enhancements, designed to extend the range of
    applicability to scales not otherwise feasible.
    
    
--  In November, Cray completed the acquisition of Appro International,
    Inc.
    
    
--  In November, Cray expanded its Sonexion storage product line with the
    launch of the Cray Sonexion 1600 system. This next generation of
    Cray's integrated storage appliance offers substantial improvements in
    performance, density, installation time and ease of use.
    
    
--  In November, Cray announced the completion of the final milestone of
    its Defense Advanced Research Projects Agency (DARPA) contract related
    to the development of its next generation "Cascade" supercomputer.
    Cray began shipping this system as the Cray XC30 supercomputer late in
    2012.

  
Conference Call Information
 Cray will host a conference call today,
Thursday, Feb. 14, 2013 at 1:30 p.m. PST (4:30 p.m. EST) to discuss
its full year and fourth quarter 2012 financial results. To access
the call, please dial into the conference at least 10 minutes prior
to the beginning of the call at (855) 894-4205 and enter access code
97433832. International callers may dial (832) 900-4685 and enter the
access code 97433832. To listen to the audio webcast, go to the
Investors section of the Cray website at http://investors.cray.com. 
If you are unable to attend the live conference call, an audio
webcast replay will be available in the Investors section of the Cray
website for 180 days. A replay of the call will be available by
dialing (855) 859-2056, and entering the access code 97433832. The
conference call replay will be available for 72 hours, beginning at
4:30 p.m. PST (7:30 p.m. EST) on Thursday, February 14. 
Use of Non-GAAP Financial Measures
 This press release contains
"non-GAAP financial measures" under the rules of the U.S. Securities
and Exchange Commission. A reconciliation of GAAP to non-GAAP results
is included in the financial tables included in this press release.
Management believes that the non-GAAP financial measures provide
additional insight for analysts and investors in evaluating Cray's
financial and operational performance in the same way that the
management evaluates the company's financial performance. However,
these non-GAAP financial measures have limitations as an analytical
tool, as they exclude the financial impact of transactions necessary
or advisable for the conduct of Cray's business, such as the granting
of equity compensation awards, and are not intended to be an
alternative to financial measures prepared in accordance with GAAP.
Hence, to compensate for these limitations, management does not
review these non-GAAP financial metrics in isolation from its GAAP
results, nor should investors. 
Non-GAAP financial measures are not based on a comprehensive set of
accounting rules or principles. This non-GAAP information
supplements, and is not intended to represent a measure of
performance in accordance with, or disclosures, required by generally
accepted accounting principles, or GAAP. These measures are adjusted
as described in the reconciliation of GAAP to non-GAAP numbers at the
end of this release, but these adjustments should not be construed as
an inference that all of these adjustments or costs are unusual,
infrequent or non-recurring. Non-GAAP financial measures should be
considered in addition to, not as a substitute for or superior to,
financial measures determined in accordance with GAAP. Investors are
advised to carefully review and consider this non-GAAP information as
well as the GAAP financial results that are disclosed in Cray's SEC
filings. 
About Cray Inc.
 Global supercomputing leader Cray Inc. (NASDAQ:
CRAY) provides innovative systems and solutions enabling scientists
and engineers in industry, academia and government to meet existing
and future simulation and analytics challenges. Leveraging 40 years
of experience in developing and servicing the world's most advanced
supercomputers, Cray 
offers a comprehensive portfolio of high
performance computing (HPC) systems, storage, and Big Data solutions
delivering unrivaled performance, efficiency and scalability. Cray's
Adaptive Supercomputing vision is focused on delivering innovative
next-generation products that integrate diverse processing
technologies into a unified architecture, allowing customers to
surpass today's limitations and meeting the market's continued demand
for realized performance. Go to www.cray.com for more information. 
Safe Harbor Statement
 This press release contains forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and Section 27A of the Securities Act of 1933,
including, but not limited to, statements related to Cray's financial
guidance and expected future operating results and its product
delivery plans. These statements involve current expectations,
forecasts of future events and othe
r statements that are not
historical facts. Inaccurate assumptions as well as known and unknown
risks and uncertainties can affect the accuracy of forward-looking
statements and cause actual results to differ materially from those
anticipated by these forward-looking statements. Factors that could
affect actual future events or results include, but are not limited
to, the risk that Cray does not achieve the operational or financial
results that it expects, the risk that Cray is not able to
successfully complete its planned product development efforts in a
timely fashion or at all, the risk that Cray is not able to realize
the expected benefits of the acquisition of Appro, the risk that
Cray's Big Data and storage growth initiatives are not successful,
the risk that Cray will not be able to secure orders for Cray systems
to be delivered and accepted in 2013 when or at the levels expected,
the risk that the systems ordered by customers are not delivered when
expected or do not perform as expected once delivered, the risk that
customer acceptances are not received when expected or at all, the
risk that Cray is not able to achieve anticipated gross margin or
expense levels, and such other risks as identified in the company's
quarterly report on Form 10-Q for the period ended September 30,
2012, and from time to time in other reports filed by Cray with the
U.S. Securities and Exchange Commission. You should not rely unduly
on these forward-looking statements, which apply only as of the date
of this release. Cray undertakes no duty to publicly announce or
report revisions to these statements as new information becomes
available that may change the company's expectations. 
Cray is a registered trademark of Cray Inc. in the United States and
other countries and Cray XC, Sonexion, uRiKA and YarcData are
trademarks of Cray Inc. Other product and service names mentioned
herein are the trademarks of their respective owners. 


 
                                                                            
                                                                            
                                                                            
                         CRAY INC. AND SUBSIDIARIES                         
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
            (Unaudited and in thousands, except per share data)             
                                                                            
                                  Three Months Ended    Twelve Months Ended 
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
REVENUE:                                                                    
  Product                        $ 170,961  $  75,223  $ 353,767  $ 155,561 
  Service                           17,868     16,331     67,291     80,485 
                                 ---------  ---------  ---------  --------- 
                                                                            
    Total revenue                  188,829     91,554    421,058    236,046 
                                 ---------  ---------  ---------  --------- 
                                                                            
COST OF REVENUE:                                                            
  Cost of product revenue          123,692     46,894    231,237    101,000 
  Cost of service revenue           10,942      9,532     38,643     40,680 
                                 ---------  ---------  ---------  --------- 
                                                                            
    Total cost of revenue          134,634     56,426    269,880    141,680 
                                 ---------  ---------  ---------  --------- 
     
                                                                       
    Gross profit                    54,195     35,128    151,178     94,366 
                                 ---------  ---------  ---------  --------- 
OPERATING EXPENSES:                                                         
  Research and development, net     18,177      6,583     64,303     49,452 
  Sales and marketing               12,579      7,172     37,180     26,134 
  General and administrative         7,282      4,233     20,707     15,840 
  Restructuring                          0        (80)         0      1,783 
                                 ---------  ---------  ---------  --------- 
                                                                            
    Total operating expenses        38,038     17,908    122,190     93,209 
                                                                            
Net gain on sale of interconnect                                            
 hardware development program            0          0    139,068          0 
                                 ---------  ---------  ---------  --------- 
  Income (Loss) from operations     16,157     17,220    168,056      1,157 
Other income (expense), net           (101)      (652)       472       (989)
Interest income (expense), net          60        (93)       204        (33)
                                 ---------  ---------  ---------  --------- 
  Income (Loss) before income                                               
   taxes                            16,116     16,475    168,732        135 
Income tax (expense) benefit        (2,110)    14,529     (7,491)    14,194 
                                 ---------  ---------  ---------  --------- 
    Net Income (Loss)            $  14,006  $  31,004  $ 161,241  $  14,329 
                                 =========  =========  =========  ========= 
                                                                            
  Basic net income (loss) per                                               
   common share                  $    0.38  $    0.88  $    4.42  $    0.41 
                                 ---------  ---------  ---------  --------- 
  Diluted net income (loss) per                                             
   common share                  $    0.36  $    0.85  $    4.27  $    0.40 
                                 =========  =========  =========  ========= 
                                                                            
  Basic weighted average shares     37,130     35,380     36,509     35,122 
  Diluted weighted average                                                  
   shares                           38,917     36,432     37,789     36,072 
                                                                            
                                                                            
                                                                            
                         CRAY INC. AND SUBSIDIARIES                         
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                        (Unaudited and in thousands)                        
                                                                            
                                                 December 31,  December 31, 
                                                     2012          2011     
                                                 ------------  ------------ 
                     ASSETS                                                 
Current assets:                                                             
  Cash and cash equivalents                      $    253,065  $     50,411 
  Restricted cash                                           -         3,776 
  Short-term investments
                               52,563             - 
  Accounts and other receivables, net                  13,440        72,381 
  Inventory                                            89,796        97,881 
  Prepaid expenses and other current assets            11,823        12,932 
                                                 ------------  ------------ 
    Total current assets                              420,687       237,381 
                                                                            
Long-term investments                                  17,577             - 
Property and equipment, net                            25,543        16,462 
Service inventory, net                                  1,490         1,611 
Goodwill                                               14,182             - 
Purchased intangible assets, net                        7,981             - 
Deferred tax assets                                    10,041        13,352 
Other non-current assets                               12,813        14,293 
                                                 ------------  ------------ 
    TOTAL ASSETS                                 $    510,314  $    283,099 
                                                 ============  ============ 
                                                                            
      LIABILITIES AND SHAREHOLDERS' EQUITY                                  
Current liabilities:                                                        
  Accounts payable                               $     34,732  $     38,328 
  Accrued payroll and related expenses                 25,927        11,270 
  Other accrued liabilities                             8,616         5,414 
  Deferred revenue                                     68,060        44,636 
                                                 ------------  ------------ 
    Total current liabilities                         137,335        99,648 
                                                                            
Long-term deferred revenue                             29,254        14,184 
Other non-current liabilities                           3,179         2,453 
                                                 ------------  ------------ 
    TOTAL LIABILITIES                                 169,768       116,285 
                                                                            
Shareholders' equity:                                                       
  Preferred stock                                           -             - 
  Common stock and additional paid-in capital         577,938       564,148 
  Accumulated other comprehensive income                5,181         6,480 
  Accumulated deficit                                (242,573)     (403,814)
                                                 ------------  ------------ 
    TOTAL SHAREHOLDERS' EQUITY                        340,546       166,814 
                                                 ------------  ------------ 
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $    510,314  $    283,099 
                                                 ------------  ------------ 
                                                                            
                                                                            
                                                                            
                         CRAY INC. AND SUBSIDIARIES                         
     Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures     
                        GAAP to non-GAAP Net Income                         
             (Unaudited; in millions except per share amounts)              
                                                                            
                                  Three months ended    Twelve months ended 
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
GAAP Net Income                  $    14.0  $    31.0  $   161.2  $    14.3 
                                                                            
  Non-GAAP adjustments                                                      
   impacting gross profit                                                   
    Share-based                                                             
     compensation            (1) $     0.1  $     0.1  $     0.3  $     0.5 
    Amortization of                                                         
     acquired intangibles    (3) $     0.2  $       -  $     0.2  $       - 
                                 ---------  ---------  ---------  --------- 
  Total adjustments                                                         
   impacting gross profit        $     0.3  $     0.1  $     0.5  $     0.5 
                                                                            
  Non-GAAP adjustments                                                      
   impacting operating                                                      
   expenses                                                                 
    Share-based                                                             
     compensation            (1) $     1.6  $     0.8  $     5.6  $     3.1 
    Restructuring charges    (2) $       -  $    (0.1) $       -  $     1.8 
    Amortization of                                                         
     acquired intangibles    (3) $     0.1  $       -  $     0.1  $       - 
    Acquisition costs        (3) $     0.9  $       -  $     0.9  $       - 
                                 ---------  ---------  ---------  --------- 
  Total adjustments                                                         
   impacting operating                                                      
   expenses                      $     2.6  $     0.7  $     6.6  $     4.9 
                                                                            
  Gain on sale to Intel    
  (4) $       -  $       -  $  (139.1) $       - 
                                                                            
  Non-GAAP adjustments                                                      
   impacting tax provision                                                  
    Income tax on                                                           
     reconciling items       (5) $    (0.1) $       -  $     4.4  $    (0.3)
    Other items impacting                                                   
     tax provision           (6) $     0.4  $   (14.7) $    (0.3) $   (14.7)
                                 ---------  ---------  ---------  --------- 
  Total adjustments                                                         
   impacting tax provision       $     0.3  $   (14.7) $     4.1  $   (15.0)
                                                                            
Non-GAAP Net Income              $    17.2  $    17.1  $    33.3  $     4.7 
                                 =========  =========  =========  ========= 
                                                                            
Non-GAAP Net Income per                                                     
 common share                    $    0.44  $    0.47  $    0.88  $    0.13 
                                 =========  =========  =========  ========= 
                                                                            
Diluted weighted average                                                    
 shares                               38.9       36.4       37.8       36.1 
                                                                            
----------------------------------------------------------------------------
Notes                                                                       
(1) Adjustments to exclude non-cash expenses related to share-based         
compensation                                                                
(2) Restructuring charges consisted primarily of severance expense          
(3) Adjustments to exclude amortization of acquired intangible assets and   
other acquisition-related charges related to recent Appro acquisition.      
(4) Adjustment to exclude gain on divestiture of interconnect hardware      
development program in Q2 2012                                              
(5) Tax impact associated with reconciling items at non-GAAP tax rate       
(6) Adjustments to reflect cash tax impact considering benefits principally 
related to Company's net operating loss carryforwards and changes in        
Company's valuation allowance held against deferred tax assets              
----------------------------------------------------------------------------

  
Cray Media:
Nick Davis
206/701-2123
pr@cray.com 
Investors:
Paul Hiemstra
206/701-2044
ir@cray.com 
 
 
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