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
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,
brad_driver@xyratex.com
 
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