XYRATEX LTD. 
By 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.( )
-- Revenue in the fourth fiscal quarter of 2013 is projected to be in the
range of $190 million to $220 million.
-- Fully 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 Nine Months
Ended, Ended,
------------- ------------
August 31, August 31, August 31, August 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
administrative 16,418 17,192 51,133 50,925
Restructuring
costs 1,073 - 2,815 -
Amortization of
intangible
assets 557 617 1,605 2,537
Total operating
expenses 41,658 43,117 129,358 130,693
------
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
foreign currency contract (259) 885 (2,308) 627
Reclassification of loss into net income 183 374 385 710
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
payable 16,637 17,961
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
issued and outstanding $276 $270
Additional
paid-in
capital 313,887 354,593
Accumulated
other
comprehensive
income
(deficit) (1,060) 863
Accumulated
income 1,394 18,808
------
Total shareholders' equity 314,497 374,534
------- -------
Total liabilities and shareholders'
equity $451,568 $511,277
======== ========
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 activities 36,649 6,058
------ -----
Cash flows from investing
activities:
Investments
in
property,
plant and
equipment (12,880) (11,568)
Payment for
acquisition
of
intangible
assets (1,355) (3,500)
Net cash used in investing
activities (14,235) (15,068)
------- -------
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
activities (60,172) (20,443)
------- -------
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 Nine Months
Ended Ended
August 31, August 31, August 31, August 31,
Summary
Reconciliation Of
GAAP Net Income
To Non-GAAP Net
Income 2013 2012 2013 2012
---- ---- ---- ----
(US dollars (US dollars in
in thousands,
thousands, except per
except per share amounts)
share
amounts)
GAAP net income $2,350 $7,746 $160 $25,603
Amortization of
intangible assets 557 617 1,605 2,537
Equity
compensation 1,226 1,203 1,898 5,048
Tax effect of
above non-GAAP
adjustments (357) (482) (753) (1,924)
Effect of changes
in tax rates 2,104 1,239 2,104 1,239
Malaysia deferred
tax asset
recognized - - - (1,489)
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
share $0.08 $0.28 $0.01 $0.90
Amortization of
intangible assets 0.02 0.02 0.06 0.09
Equity
compensation 0.04 0.04 0.07 0.18
Tax effect of
above non-GAAP
adjustments (0.01) (0.02) (0.03) (0.07)
Effect of changes
in tax rates 0.07 0.04 0.08 0.04
Malaysia deferred
tax asset
recognized - - - (0.05)
Diluted non-GAAP
earnings per
share $0.21 $0.37 $0.18 $1.09
===== ===== ===== =====
Segmental
Information
Revenues:
Enterprise Data
Storage Solutions $160,973 $223,380 $506,861 $773,908
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 Solutions $29,323 $34,370 $92,317 $126,839
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
administrative 808 575 1,341 2,585
Total equity
compensation $1,226 $1,203 $1,898 $5,048
====== ====== ====== ======
SOURCE Xyratex Ltd
