Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2013 PR Newswire HAVANT, United Kingdom, Oct. 3, 2013 HAVANT, United Kingdom, Oct. 3, 2013 /PRNewswire/ --Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the third fiscal quarter ended August 31, 2013. Revenues for the third quarter were $217.3 million, a decrease of 21% compared to revenues of $275.7 million for the same period in the prior year. The decline year over year was principally related to the continued reduction in revenue from NetApp with the current program coming to an end in our current quarter as previously announced. For the third quarter, GAAP net income was $2.4 million, or $0.08 per diluted share, compared to GAAP net income of $7.7 million, or $0.28 per diluted share, in the same period last year. Non-GAAP net income was $5.9 million, or $0.21 per diluted share, compared to non-GAAP net income of $10.3 million, or $0.37 per diluted share, in the same quarter a year ago^(1). Gross profit margin in the third quarter was 20.9%, compared to 18.5% in the same period last year and 22.0% in the prior quarter. The increase from last year primarily reflected a favorable variation in customer and product mix in our Enterprise Data Storage Solutions product segment. The decrease from the prior quarter primarily reflected a variation in product mix in our Hard Disk Drive (HDD) Capital Equipment segment. 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 November 1, 2013 to shareholders of record as of the close of business on October 17, 2013. This dividend represents a quarterly payout of approximately $2.1 million in aggregate, or $8.4 million on an annualized basis. "Our third quarter results were at the higher end of our expectations, reflecting lower overall expenses and approximately $5 million of revenue from the HDD Capital Equipment business which had previously been planned for the fourth quarter. I am encouraged by the improvements in our customer relationships and our investments in technology, specifically around cloud and flash, and the opportunities that I believe will be created as a result. In our Enterprise Data Storage Solutions business, we recently introduced our 12Gb/s SAS technology into our Onestor line of enterprise class modular storage enclosure. This first-to-market technology has recently been accepted as the next generation technology by one of our significant Tier 1 customers, which is a significant opportunity for Xyratex," said Ernie Sampias, CEO. "Within our Clusterstor product line, we achieved a number of design wins during the third quarter in vertical markets including academia, oil and gas and the financial sector. Our HDD Capital Equipment business continues to work very closely with our HDD partners. I am encouraged with the opportunities that are being created as a result of these partnerships such as technologies that support higher capacity HDDs." Business Outlook The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.^ oRevenue in the fourth fiscal quarter of 2013 is projected to be in the range of $190 million to $220 million. oFully diluted earnings (loss) per share is anticipated to be between a loss of $0.09 and earnings of $0.15 on a GAAP basis in the fourth 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 fourth quarter 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 October 3, 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) 543-6403 Outside the United States (617) 213-8896 Passcode 90934976 A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through October 10, 2013 as follows: United States (888) 286-8010 Outside the United States (617) 801-6888 Passcode 48412946 (1) Non-GAAP net income and diluted earnings per share exclude (a) amortization of intangible assets, (b) equity compensation expense, (c) the tax effects related to (a) and (b), (d) the recognition of a Malaysia deferred tax asset in the first quarter of fiscal 2012 and (e) 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 and diluted earnings per share to GAAP net income and GAAP diluted earnings 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 of the change in tax expense that would have been recorded if these items had not been incurred; (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 and (e) the impact of the reduction in U.K. 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 fully diluted earnings (loss) per share data (on a GAAP and non-GAAP basis) for the fourth 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, Nine Months Ended, August 31, August August August 31, 31, 31, 2013 2012 2013 2012 (US dollars in thousands, except per share amounts) Revenues $ 217,282 $ 275,670 $ 629,064 $ 893,452 Cost of revenues 171,783 224,653 499,098 736,121 Gross profit 45,499 51,017 129,966 157,331 Operating expenses: Research and development 23,610 25,308 73,805 77,231 Selling, general and 16,418 17,192 51,133 50,925 administrative Restructuring costs 1,073 - 2,815 - Amortization of intangible 557 617 1,605 2,537 assets Total operating 41,658 43,117 129,358 130,693 expenses Operating income 3,841 7,900 608 26,638 Interest income, net 80 283 207 623 Income before income taxes 3,921 8,183 815 27,261 Provision for income taxes 1,571 437 655 1,658 Net income $ 2,350 $ 7,746 $ 160 $ 25,603 Net earnings per share: Basic $ 0.09 $ 0.29 $ 0.01 $ 0.93 Diluted $ 0.08 $ 0.28 $ 0.01 $ 0.90 Weighted average common shares (in thousands), used in computing net earnings per share: Basic 27,558 27,171 27,439 27,674 Diluted 27,876 27,764 27,855 28,423 Cash dividends declared per share $ 0.08 $ 0.08 $ 2.23 $ 0.22 Comprehensive income (loss): Net income $ 2,350 $ 7,746 $ 160 $ 25,603 Unrealized gain (loss) on forward (259) 885 (2,308) 627 foreign currency contract Reclassification of loss into net 183 374 385 710 income Total comprehensive income (loss) $ 2,274 $ 9,005 $ (1,763) $ 26,940 XYRATEX LTD CONDENSED CONSOLIDATED BALANCE SHEETS August 31, November 30, 2013 2012 (US dollars and amounts in thousands) ASSETS Current assets: Cash and cash equivalents $ 79,416 $ 117,174 Accounts receivable, net 127,580 132,917 Inventories 149,525 171,605 Prepaid expenses 5,233 3,134 Deferred income taxes 205 228 Other current assets 7,831 7,121 Total current assets 369,790 432,179 Property, plant and equipment, net 41,076 40,194 Intangible assets, net 14,725 14,975 Deferred income taxes 25,977 23,929 Total assets $ 451,568 $ 511,277 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 87,393 $ 82,125 Employee compensation and benefits 16,637 17,961 payable Deferred revenue 13,390 18,521 Income taxes payable 938 369 Other accrued liabilities 18,713 17,767 Total current liabilities 137,071 136,743 Long-term debt - - Total liabilities $ 137,071 $ 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 313,887 354,593 Accumulated other comprehensive income (1,060) 863 (deficit) Accumulated income 1,394 18,808 Total shareholders' equity 314,497 374,534 Total liabilities and shareholders' $ 451,568 $ 511,277 equity XYRATEX LTD CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended, August 31, August 31, 2013 2012 (US dollars in thousands) Cash flows from operating activities: Net income $ 160 $ 25,603 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 11,998 12,528 Amortization of intangible assets 1,605 2,537 Non-cash equity compensation 1,898 5,048 Loss on sale of assets - 1,183 Deferred income taxes (1,414) 171 Changes in assets and liabilities, net of impact of acquisitions and divestitures: Accounts receivable 5,337 57,537 Inventories 22,080 (44,928) Prepaid expenses and other current assets (3,960) 2,395 Accounts payable 5,268 (63,823) Employee compensation and benefits payable (1,324) (5,395) Deferred revenue (5,131) 16,658 Income taxes payable 569 178 Other accrued liabilities (437) (3,634) Net cash provided by operating 36,649 6,058 activities Cash flows from investing activities: Investments in property, plant and (12,880) (11,568) equipment Payment for acquisition of intangible assets (1,355) (3,500) Net cash used in investing (14,235) (15,068) activities Cash flows from financing activities: Proceeds from issuance of shares - 661 Repurchase of shares - (13,600) Dividends to shareholders (60,172) (7,504) Net cash used in financing (60,172) (20,443) activities Change in cash and cash equivalents (37,758) (29,453) Cash and cash equivalents at beginning of period 117,174 132,630 Cash and cash equivalents at end of period $ 79,416 $ 103,177 XYRATEX LTD SUPPLEMENTAL INFORMATION Three Months Ended Nine Months Ended August 31, August August 31, August 31, 31, Summary Reconciliation Of GAAP Net Income To Non-GAAP Net 2013 2012 2013 2012 Income (US dollars in (US dollars in thousands, except per thousands, except per share amounts) share amounts) GAAP net income $ 2,350 $ 7,746 $ 160 $ 25,603 Amortization of intangible 557 617 1,605 2,537 assets Equity compensation 1,226 1,203 1,898 5,048 Tax effect of above (357) (482) (753) (1,924) non-GAAP adjustments Effect of changes in tax 2,104 1,239 2,104 1,239 rates Malaysia deferred tax asset - - - (1,489) recognized Non-GAAP net income $ 5,880 $ 10,323 $ 5,014 $ 31,014 Summary Reconciliation Of Diluted GAAP Earnings Per Share To Diluted Non-GAAP Earnings Per Share Diluted GAAP earnings per $ 0.08 $ 0.28 $ 0.01 $ 0.90 share Amortization of intangible 0.02 0.02 0.06 0.09 assets Equity compensation 0.04 0.04 0.07 0.18 Tax effect of above (0.01) (0.02) (0.03) (0.07) non-GAAP adjustments Effect of changes in tax 0.07 0.04 0.08 0.04 rates Malaysia deferred tax asset - - - (0.05) recognized Diluted non-GAAP earnings per $ 0.21 $ 0.37 $ 0.18 $ 1.09 share Segmental Information Revenues: Enterprise Data Storage $ 160,973 $ 223,380 $ 506,861 $ 773,908 Solutions HDD Capital Equipment 56,309 52,290 122,203 119,544 Total $ 217,282 $ 275,670 $ 629,064 $ 893,452 Gross profit: Enterprise Data Storage $29,323 $34,370 $92,317 $126,839 Solutions HDD Capital Equipment 16,264 16,872 37,797 31,177 Equity compensation (88) (225) (148) (685) Total $45,499 $51,017 $129,966 $157,331 Summary Of Equity Compensation Cost of revenues $ 88 $225 $148 $685 Research and development 330 403 409 1,778 Selling, general and 808 575 1,341 2,585 administrative Total equity compensation $ 1,226 $1,203 $1,898 $5,048 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 Third Quarter Fiscal Year 2013
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