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 www.xyratex.com/investors, 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 www.xyratex.com/investors, 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: www.xyratex.com 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: http://www.xyratex.com Contact: Brad Driver, Vice President of Investor Relations, +1 (510) 687-5260, email@example.com
Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2013
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