Xyratex Ltd Announces Results for the Third Quarter Fiscal Year 2013

     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,
brad_driver@xyratex.com
 
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