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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