Xyratex Ltd Announces Results for the Fourth Quarter and Fiscal Year 2013

  Xyratex Ltd Announces Results for the Fourth Quarter and Fiscal Year 2013

PR Newswire

HAVANT, UK, Jan. 13, 2014

HAVANT, UK, Jan. 13, 2014 /PRNewswire/ --Xyratex Ltd (Nasdaq: XRTX), a
leading provider of data storage technology, today announced results for the
fourth fiscal quarter and fiscal year ended November 30, 2013.

Revenues for the fourth quarter were $185.3 million, a decrease of 30.2%
compared to revenues of $265.4 million for the same period in the prior year.
Revenues for fiscal year 2013 were $814 million, a decrease of 29.7% compared
to revenues of $1,159 million for fiscal year 2012. These year over year
declines were 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.

Gross profit margin in the fourth quarter was 22.2%, compared to 14.5% in the
same period in the prior year and 20.9% in the prior quarter. Gross profit
margin for fiscal year 2013 was 21% compared to 16.9% in the previous year.
The increases from last year reflect a favorable variation in customer and
product mix in our Enterprise Data Storage Solutions product segment as well
as improved margins for newer products in our Capital Equipment segment.

For the fourth quarter of fiscal 2013, GAAP net loss was $21.4 million, or
$0.78 per share, compared to a GAAP net loss of $7.9 million, or $0.29 per
share, in the same period in the prior year. Non-GAAP net loss was $0.8
million, or $0.03 per share, compared to a non-GAAP net loss of $6.4 million,
or $0.24 per share, in the same quarter a year ago^(1).

GAAP net loss for fiscal year 2013 was $21.2 million, or $0.77 per share,
compared to GAAP net income of $17.7 million, or $0.63 per diluted share, for
fiscal year 2012. Non-GAAP net income for fiscal year 2013 decreased to $4.2
million, or $0.15 per diluted share, compared to $24.6 million, or $0.87 per
diluted share, for fiscal year 2012.

Included in both the 2013 fiscal fourth quarter and full year GAAP results,
but excluded from the non-GAAP results, is a non-cash valuation allowance
against the deferred tax asset of $19.2 million. This valuation allowance
relates primarily to UK tax losses which have been recorded as a result of
certain tax concessions in the UK and the tax structure of the overall Xyratex
Ltd group. This valuation allowance does not indicate in itself that the
overall Xyratex Ltd group will not be profitable in future fiscal periods.

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 February 17, 2014 to shareholders of record as
of the close of business on February 4, 2014. This dividend represents a
quarterly payout of approximately $2.1 million in aggregate, or $8.4 million
on an annualized basis.

Business Outlook and Conference Call
Given the Company's announcement on December 23, 2013 that it has entered into
a definitive agreement to be acquired by Seagate Technology plc, the Company
is not providing an outlook for its fiscal 2014 first quarter and will not be
hosting a conference call to discuss its results.

(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), (d) the tax expense resulting from
recording a valuation allowance against the UK deferred tax asset, (e) the tax
expense resulting from a reduction in the deferred tax asset caused by a fall
in UK tax rates prior to the recording of a valuation allowance and (f) the
recognition of a Malaysia deferred tax asset in the first quarter of fiscal
2012. A reconciliation of non-GAAP net income (loss) and diluted earnings
(loss) per share to GAAP net income and GAAP diluted earnings (loss) per share
is included in a table immediately following the condensed consolidated
statements of cash flows.

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; (d) and (e) the recording of a valuation
allowance against the UK deferred tax asset and the impact of the reduction in
UK tax rates are non-cash and not comparable across periods or with other
companies; and (f) 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. 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. 000-50799). 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 hard disk drive (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,    Year Ended,
                                November    November   November    November
                                30,         30,        30,         30,
                                2013        2012       2013        2012
                                (US dollars in thousands, except per share
                                amounts)
Revenues                        $ 185,254   $ 265,446  $ 814,318   $ 1,158,898
Cost of revenues               144,139     226,941    643,237     963,062
Gross profit                    41,115      38,505     171,081     195,836
Operating expenses:
     Research and development 24,296      26,436     98,101      103,667
     Selling, general and      18,333      17,507     69,466      68,432
     administrative
     Restructuring costs      857         4,120      3,672       4,120
     Amortization of           452         617        2,057       3,154
     intangible assets
          Total operating       43,938      48,680     173,296     179,373
          expenses
Operating income (loss)         (2,823)     (10,175)   (2,215)     16,463
Interest income, net          50          176        257         799
Income (loss) before income     (2,773)     (9,999)    (1,958)     17,262
taxes
Provision (benefit) for income  18,598      (2,056)    19,253      (398)
taxes
Net income (loss)               $ (21,371)  $ (7,943)  $ (21,211)  $ 17,660
                                .
Net earnings (loss) per share:
     Basic                      $ (0.78)    $ (0.29)   $ (0.77)    $ 0.64
     Diluted                    $ (0.78)    $ (0.29)   $ (0.77)    $ 0.63
Weighted average common shares
(in thousands), used in
computing net earnings (loss)
per share:
     Basic                      27,560      27,024     27,463      27,513
     Diluted                    27,560      27,024     27,463      28,199
Cash dividends declared per     $ 0.08      $ 0.08     $ 2.30      $ 0.29
share
Comprehensive income (loss):
Net income (loss)               $ (21,371)  $ (7,943)  $ (21,211)  $ 17,660
Unrealized gain (loss) on
forward foreign currency        2,746       696        438         1,323
contracts
Reclassification of loss (gain) 438         167        822         877
into net income
Total comprehensive income      $ (18,187)  $ (7,080)  $ (19,951)  $ 19,860
(loss)

XYRATEX LTD
CONDENSED CONSOLIDATED BALANCE SHEETS
                                         November 30,          November 30,
                                         2013                  2012
                                         (US dollars and amounts in thousands)
ASSETS
Current assets:
 Cash and cash equivalents               $ 102,992             $ 117,174
 Accounts receivable, net                90,835                132,917
 Inventories                             132,227               171,605
 Prepaid expenses                        3,316                 3,134
 Deferred income taxes                   762                   228
 Other current assets                    11,612                7,121
   Total current assets                  341,744               432,179
 Property, plant and equipment, net      41,595                40,194
 Intangible assets, net                  14,274                14,975
 Deferred income taxes                   6,583                 23,929
   Total assets                          $ 404,196             $ 511,277
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable                        $ 67,061              $ 82,125
 Employee compensation and benefits      18,896                17,961
 payable
 Deferred revenue                        4,880                 18,521
 Income taxes payable                    1,649                 369
 Other accrued liabilities               16,886                17,767
   Total current liabilities             109,372               136,743
 Long-term debt                          -                     -
   Total liabilities                     $ 109,372             $ 136,743
Shareholders' equity
 Common shares (in thousands), par value
 $0.01 per share
   70,000 authorized, 27,563 and 27,024  $ 275                 $ 270
   issued and outstanding
 Additional paid-in capital              314,465               354,593
 Accumulated other comprehensive income  2,123                 863
 Accumulated income (deficit)            (22,039)              18,808
   Total shareholders' equity            294,824               374,534
   Total liabilities and shareholders'   $ 404,196             $ 511,277
   equity

XYRATEX LTD
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   Year Ended,
                                                   November 30,   November 30,
                                                   2013           2012
                                                   (US dollars in thousands)
Cash flows from operating activities:
Net income (loss)                                  $ (21,211)     $ 17,660
Adjustments to reconcile net income (loss) to net
cash
     provided by operating activities:
Depreciation                                       15,760         17,936
Amortization of intangible assets                  2,057          3,155
Non-cash equity compensation                       3,158          6,602
Loss on sale of assets                             -              2,297
Deferred income taxes                              16,387         (2,541)
Changes in assets and liabilities, net of impact
of acquisitions and divestitures:
     Accounts receivable                          42,082         67,825
     Inventories                                   39,378         (7,425)
     Prepaid expenses and other current assets     (3,701)        1,208
     Accounts payable                             (15,064)       (86,571)
     Employee compensation and benefits payable    935            (3,825)
     Deferred revenue                              (13,641)       10,829
     Income taxes payable                         1,280          326
     Other accrued liabilities                    (882)          (1,743)
              Net cash provided by operating       66,538         25,733
              activities
Cash flows from investing activities:
     Investments in property, plant and equipment (17,161)       (15,212)
     Payment for acquisition of intangible assets  (1,355)        (3,500)
              Net cash used in investing           (18,516)       (18,712)
              activities
Cash flows from financing activities:
     Proceeds from issuance of shares              30             661
     Repurchase of shares                          -              (13,600)
     Dividends to shareholders                     (62,234)       (9,538)
              Net cash used in financing           (62,204)       (22,477)
              activities
Change in cash and cash equivalents               (14,182)       (15,456)
Cash and cash equivalents at beginning of period   117,174        132,630
Cash and cash equivalents at end of period         $ 102,992      $ 117,174

XYRATEX LTD
SUPPLEMENTAL INFORMATION
                          Three Months Ended         Year Ended
Summary Reconciliation Of November 30,   November    November      November
GAAP Net Income (Loss) To                30,         30,           30,
Non-GAAP Net Income       2013
(Loss)                                   2012        2013          2012
                          (US dollars in thousands,  (US dollars in thousands,
                          except per share amounts)  except per share amounts)
GAAP net income (loss)    $ (21,371)     $ (7,943)   $ (21,211)    $ 17,660
   Amortization of        452            617         2,057         3,154
   intangible assets
   Equity compensation    1,260          1,554       3,158         6,602
   Tax effect of above    (342)          (526)       (1,095)       (2,450)
   non-GAAP adjustments
   Valuation allowance
   against UK deferred    19,225         -           19,225        -
   tax asset
   Effect of changes in   -              (134)       2,104         1,105
   tax rates
   Malaysia deferred tax  -              -           -             (1,489)
   asset recognized
Non-GAAP net income       $ (776)        $ (6,432)   $ 4,238       $ 24,582
(loss)
Summary Reconciliation Of Diluted GAAP
Earnings (Loss) Per Share To Diluted
Non-GAAP Earnings (Loss) Per Share
Diluted GAAP earnings     $ (0.78)       $ (0.29)    $ (0.77)      $ 0.63
(loss) per share
   Amortization of        0.02           0.02        0.07          0.11
   intangible assets
   Equity compensation    0.05           0.06        0.11          0.23
   Tax effect of above    (0.01)         (0.02)      (0.04)        (0.09)
   non-GAAP adjustments
   Valuation allowance
   against UK deferred    0.70           -           0.70          -
   tax asset
   Effect of changes in   -              (0.00)      0.08          0.04
   tax rates
   Malaysia deferred tax  -              -           -             (0.05)
   asset recognized
Diluted non-GAAP earnings $ (0.03)       $ (0.24)    $ 0.15        $ 0.87
(loss) per share
Segmental Information
Revenues:
   Enterprise Data        $ 148,323      $ 200,135   $ 655,184     $ 974,043
   Storage Solutions
   HDD Capital Equipment  36,931         65,311      159,134       184,855
   Total                  $ 185,254      $ 265,446   $ 814,318     $ 1,158,898
Gross profit:
   Enterprise Data        $29,895        $28,487     $122,212      $155,326
   Storage Solutions
   HDD Capital Equipment  11,296         10,298      49,093        41,475
   Equity compensation    (76)           (280)       (224)         (965)
   Total                  $41,115        $38,505     $171,081      $195,836
Summary Of Equity
Compensation
   Cost of revenues       $ 76           $280        $224          $965
   Research and           329            522         738           2,300
   development
   Selling, general and   855            752         2,196         3,337
   administrative
   Total equity           $ 1,260        $1,554      $3,158        $6,602
   compensation

SOURCE Xyratex Ltd

Website: http://www.xyratex.com
Contact: Vice President of Investor Relations, Brad Driver, +1-510-687-5260,
bdriver@xyratex.com
 
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