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Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2013

    Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2013  PR Newswire  HAVANT, United Kingdom, July 1, 2013  HAVANT, United Kingdom, July 1, 2013 /PRNewswire/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the second fiscal quarter ended May 31, 2013. Revenues for the second quarter were $216.2 million, a decrease of 33% compared to revenues of $322.1 million for the same period in the prior year.  For the second quarter, GAAP net income was $2.9 million, or $0.11 per diluted share, compared to GAAP net income of $7.0 million, or $0.24 per diluted share, in the same period last year. Non-GAAP net income was $2.7 million, or $0.10 per share, compared to non-GAAP net income of $9.3 million, or $0.32 per diluted share, in the same quarter a year ago^(1).  Gross profit margin in the second quarter was 22.0%, compared to 16.5% in the same period last year and 18.9% in the prior quarter. The increases from last year and the prior quarter primarily reflect a favorable variation in product mix in both our Enterprise Data Storage Solutions and Hard Disk Drive (HDD) Capital Equipment product segments.  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 July 30, 2013 to shareholders of record as of the close of business on July 15, 2013. This dividend represents a quarterly payout of approximately $2.1 million in aggregate, or $8.4 million on an annualized basis.  "After three months in the CEO position, my perspectives on the important role Xyratex plays in the data storage market and the significant opportunities for the Company in terms of future growth have been confirmed for me. The capability and expertise that Xyratex possesses to deliver storage technology that enables its customers to be successful in their markets is proven, repeatable and verifiable. I have conducted a detailed analysis of the business with the Board, including our most recently appointed Board members, Vadim Perelman and Ken Traub, who represent our largest investor, Baker Street Capital. Our core businesses of Capital Equipment and Storage Solutions are both profitable and cash generative. I am encouraged by the longer term opportunities for growth in these businesses. The gradual revenue decline from our previously largest customer NetApp will cease after 2014 and this revenue is being replaced with new OEM business wins. With our new ClusterStor product line, which addresses the HPC/Big Data marketplace, we have achieved incremental design wins, added a number of new customers in just the last 3 months and are on course to meet our revenue target of $60m in fiscal 2013. I am very encouraged that ClusterStor is approaching the inflection point where, as revenue ramps year over year, the product line can generate a positive contribution to the overall business," said Ernie Sampias, CEO. "I can also confirm that the Board is unanimously supportive of our long-term growth strategy."  Business Outlook  The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.^    oRevenue in the third fiscal quarter of 2013 is projected to be in the     range of $195 million to $225 million.   oFully diluted earnings (loss) per share is anticipated to be between a     loss of $0.16 and earnings of $0.08 on a GAAP basis in the third quarter.     On a non-GAAP basis, fully diluted earnings (loss) per share is     anticipated to be between a loss of $0.04 and earnings of $0.20.     Anticipated non-GAAP earnings (loss) per share in our third quarter     excludes amortization of intangible assets, equity compensation expense,     specified non-recurring items, the related taxation expense and an     additional tax expense of approximately $2 million resulting from a     reduction in the deferred tax asset caused by a fall in U.K. tax rates.  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 Monday July 1, 2013.  The conference call can be accessed online via the company's website, or by telephone as follows: United States                           (866) 270-6057 Outside the United States              (617) 213-8891 Passcode                               16554089 A replay will be available via the company's website, or can be accessed by telephone through July 8, 2013 as follows: United States                          (888) 286-8010 Outside the United States              (617) 801-6888 Passcode                               510829919  (1) Non-GAAP net income (loss) and diluted earnings (loss) per share exclude (a) amortization of intangible assets, (b) equity compensation expense, (c) the tax effects related to (a) and (b) and (d) the recognition of a Malaysia deferred tax asset in the first quarter of fiscal 2012. 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 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 exclusion of the related tax effects of excluding items (a) and (b) is necessary to show the effect on net income (loss) 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 non-renewal of certain tax incentive arrangements in 2012, is non-recurring and will reverse if the incentive arrangements are renewed.  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 third 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. 001-35766). 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 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:    XYRATEX LTD CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                     Three Months Ended,   Six Months Ended,                                     May 31,    May 31,   May 31,    May 31,                                     2013       2012       2013       2012                                     (US dollars in thousands, except per share                                     amounts) Revenues                            $ 216,185  $ 322,116  $ 411,782  $ 617,782 Cost of revenues                   168,652    268,841    327,315    511,468 Gross profit                        47,533     53,275     84,467     106,314 Operating expenses:     Research and development      25,786     27,255     50,195     51,923     Selling, general and           16,917     16,955     34,715     33,733     administrative     Restructuring costs           1,742      -          1,742      -     Amortization of intangible     556        950        1,048      1,920     assets           Total operating expenses 45,001     45,160     87,700     87,576 Operating income (loss)             2,532      8,115      (3,233)    18,738 Interest income, net              47         154        127        340 Income (loss) before income taxes  2,579      8,269      (3,106)    19,078 Provision (benefit) for income      (366)      1,273      (916)      1,221 taxes Net income (loss)                   $ 2,945    $ 6,996    $ (2,190)  $ 17,857 Net earnings (loss) per share:     Basic                           $ 0.11     $ 0.25     $ (0.08)   $ 0.64     Diluted                         $ 0.11     $ 0.24     $ (0.08)   $ 0.62 Weighted average common shares (in thousands), used in     computing net earnings (loss)     per share:     Basic                           27,558     28,099     27,380     27,927     Diluted                         27,744     28,786     27,380     28,764 Cash dividends declared per share   $ 0.08     $ 0.08     $ 2.15     $ 0.15 Comprehensive income (loss): Net income (loss)                   $ 2,945    $ 6,996    $ (2,190)  $ 17,857 Unrealized gain (loss) on forward   182        (1,338)    (2,049)    (258) foreign currency contract Reclassification of loss into net   437        (86)       202        336 income (loss) Total comprehensive income (loss)   $ 3,564    $ 5,572    $ (4,037)  $ 17,935  XYRATEX LTD CONDENSED CONSOLIDATED BALANCE SHEETS                                          May 31,              November 30,                                          2013                 2012                                          (US dollars and amounts in thousands) ASSETS Current assets:  Cash and cash equivalents               $ 84,864             $ 117,174  Accounts receivable, net                120,245              132,917  Inventories                             156,515              171,605  Prepaid expenses                        3,677                3,134  Deferred income taxes                   205                  228  Other current assets                    6,078                7,121    Total current assets                  371,584              432,179  Property, plant and equipment, net      40,392               40,194  Intangible assets, net                  15,282               14,975  Deferred income taxes                   25,969               23,929    Total assets                          $ 453,227            $ 511,277 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:  Accounts payable                        $ 92,535             $ 82,125  Employee compensation and benefits      16,118               17,961  payable  Deferred revenue                        11,040               18,521  Income taxes payable                    33                   369  Other accrued liabilities               20,437               17,767    Total current liabilities             140,163              136,743  Long-term debt                          -                    -    Total liabilities                     $ 140,163            $ 136,743 Shareholders' equity  Common shares (in thousands), par value  $0.01 per share    70,000 authorized, 27,558 and 27,024  $ 276                $ 270    issued and outstanding  Additional paid-in capital              312,661              354,593  Accumulated other comprehensive income  (984)                863  (deficit)  Accumulated income                      1,111                18,808    Total shareholders' equity            313,064              374,534    Total liabilities and shareholders'   $ 453,227            $ 511,277    equity  XYRATEX LTD CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                    Six Months Ended,                                                    May 31,         May 31,                                                    2013            2012                                                    (US dollars in thousands) Cash flows from operating activities: Net income (loss)                                  $ (2,190)       $ 17,857 Adjustments to reconcile net income (loss) to net cash      provided by operating activities: Depreciation                                       8,023           8,290 Amortization of intangible assets                  1,048           1,920 Non-cash equity compensation                       672             3,845 Loss on sale of assets                             -               1,157 Deferred income taxes                              (1,426)         (297) Changes in assets and liabilities, net of impact of acquisitions and divestitures:      Accounts receivable                          12,672          37,147      Inventories                                   15,090          (16,160)      Prepaid expenses and other current assets     (651)           (2,382)      Accounts payable                             10,410          (33,425)      Employee compensation and benefits payable    (1,843)         (7,256)      Deferred revenue                              (7,481)         7,601      Income taxes payable                         (336)           964      Other accrued liabilities                    1,383           (1,231)               Net cash provided by operating       35,371          18,030               activities Cash flows from investing activities:      Investments in property, plant and equipment (8,221)         (6,964)      Payment for acquisition of intangible assets  (1,355)         (3,500)               Net cash used in investing           (9,576)         (10,464)               activities Cash flows from financing activities:      Proceeds from issuance of shares              -               601      Repurchase of shares                          -               (3,574)      Dividends to shareholders                     (58,105)        (5,471)               Net cash used in financing           (58,105)        (8,444)               activities Change in cash and cash equivalents               (32,310)        (878) Cash and cash equivalents at beginning of period   117,174         132,630 Cash and cash equivalents at end of period         $ 84,864        $ 131,752  XYRATEX LTD SUPPLEMENTAL INFORMATION                           Three Months Ended       Six Months Ended                           May 31,       May 31,   May 31,     May 31, Summary Reconciliation Of GAAP Net Income (Loss) To 2013          2012       2013        2012 Non-GAAP Net Income (Loss)                           (US dollars in           (US dollars in                           thousands, except per    thousands, except per                           share amounts)           share amounts) GAAP net income (loss)    $ 2,945       $ 6,996    $ (2,190)   $ 17,857    Amortization of        556           950        1,048       1,920    intangible assets    Equity compensation    (860)         2,132      672         3,845    Tax effect of above    70            (771)      (396)       (1,442)    non-GAAP adjustments    Malaysia deferred tax  -             -          -           (1,489)    asset recognized Non-GAAP net income       $ 2,711       $ 9,307    $ (866)     $ 20,691 (loss) Summary Reconciliation Of Diluted GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings (Loss) Per Share Diluted GAAP earnings     $ 0.11        $ 0.24     $ (0.08)    $ 0.62 (loss) per share    Amortization of        0.02          0.03       0.04        0.07    intangible assets    Equity compensation    (0.03)        0.07       0.02        0.13    Tax effect of above    0.00          (0.03)     (0.01)      (0.05)    non-GAAP adjustments    Malaysia deferred tax  -             -          -           (0.05)    asset recognized Diluted non-GAAP earnings $ 0.10        $ 0.32     $ (0.03)    $ 0.72 (loss) per share Segmental Information Revenues:    Enterprise Data        $ 169,342     $ 278,459  $ 345,888   $ 550,528    Storage Solutions    HDD Capital Equipment  46,843        43,657     65,894      67,254    Total                  $ 216,185     $ 322,116  $ 411,782   $ 617,782 Gross profit:    Enterprise Data        $31,463       $45,356    $62,994     $92,469    Storage Solutions    HDD Capital Equipment  16,025        8,278      21,533      14,305    Equity compensation    45            (359)      (60)        (460)    Total                  $47,533       $53,275    $84,467     $106,314 Summary Of Equity Compensation    Cost of revenues       $ (45)        $359       $60         $460    Research and           (381)         713        79          1,375    development    Selling, general and   (434)         1,060      533         2,010    administrative    Total equity           $ (860)       $2,132     $672        $3,845    compensation    SOURCE Xyratex Ltd  Website: Contact: Brad Driver, Vice President of Investor Relations, +1 (510) 687-5260,  
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