Xyratex Ltd Announces Results for the First Quarter Fiscal Year 200624 March 2006
Xyratex Ltd (Nasdaq: XRTX), a leading provider of modular enterprise class data storage subsystems and storage process technology, today announced results for the first fiscal quarter ended February 28, 2006. Revenues for the first quarter were $190.5 million, an increase of 33.7% compared to revenues of $142.5 million for the same period last year.
For the first quarter, GAAP net income was $6.4 million, or $0.22 per diluted share, compared to GAAP net income of $9.4 million, or $0.33 per diluted share, in the same period last year. Non-GAAP net income from continuing operations declined 14.7% to $8.3 million, or a diluted earnings per share of $0.28, compared to non-GAAP net income of $9.9 million, or $0.34 per diluted share, in the same quarter a year ago. A reconciliation between net income on a GAAP basis and net income on a non-GAAP basis is provided in a table immediately following the "Consolidated Statements of Cash Flows", below.
Gross profit margin in the first quarter was 19.7%, compared to 20.8% in the same period last year, primarily due to business segment mix and customer mix, particularly related to an increased proportion of Storage and Network Systems revenues and an increased proportion of sales to our largest customer within our Storage and Network Systems business.
Revenues from sales of our Storage and Network Systems products were $128.8 million as compared to $88.8 million in the same quarter a year ago, an increase of 45%. Gross profit margin in the Storage and Network Systems business was 15.1% as compared to 15.9% a year ago. Revenues from sales of our Storage Infrastructure products were $61.7 million as compared to $53.7 million in the same quarter a year ago, an increase of 14.9%. Gross profit margin in the Storage Infrastructure business was 29.4% as compared to 28.9% a year ago.
"With strong demand for our products, our first quarter results demonstrate our continued progress in executing our strategic plan, as we continue to grow our portfolio of offerings and build on a solid customer base," said Steve Barber, CEO of Xyratex. "After a very strong fiscal 2005, we enter 2006 with continued momentum in the markets that our two business segments serve and we feel we are well positioned to capitalize on the positive industry dynamics that are creating significant demand for our storage products."
Business Highlights
* We were the first storage subsystem manufacturer to qualify and
integrate Seagate's 146GB Cheetah 15K.4, 4Gb/sec Fibre Channel (FC),
disc drives.
* We demonstrated the F5402E, a 4G FC-SAS/SATA solution that utilizes
reliable and backward compatible Fibre Channel connectivity together
with high-performing SAS drives and low-cost SATA drives in a single
expandable solution at CeBIT. This new solution also features
StorView(TM), Xyratex's latest system configuration and management
software.
* We secured new design wins with Terrascale Technologies, Disk Array and
System Design, Inc., Storage Engine, Globalstor and Nimbus Data
Systems, as well as with a number of other Tier 2 and Tier 3 customers.
* We shipped our first seven module precision disc cleaning system with
additional sonic and cascade scrubbing capabilities, aimed at meeting
the increased requirements of media cleanliness driven by increasing
areal density and reduced fly heights in disc drive design.
Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any future acquisitions or divestitures.
* Revenue in the second quarter of 2006 is projected to be in the range
$268 to $283 million.
* Fully diluted earnings per share is anticipated to be between $0.80 and
$0.90 on a GAAP basis in the second quarter. On a non-GAAP basis, fully
diluted earnings per share is anticipated to be between $0.83 and
$0.93. Non-GAAP earnings per share excludes non-cash equity
compensation, amortization of intangible assets, certain non-recurring
benefits and related taxation expense.
Conference Call/Webcast Information
Xyratex quarterly results conference call will be broadcast live via the internet at http://www.xyratex.com/investors on Wednesday, March 22, 2006 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. You can also access the conference call by dialing +1 (888) 396-2386 in the United States and +1 (617) 847-8712 outside of the United States, passcode 25537395. The press release will be posted to the company web site http://www.xyratex.com.
A replay will be available through March 29, 2006 following the live call by dialing +1 (888) 286-8010 in the United States and +1 (617) 801-6888 outside the United States, replay code 30510771.
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 per share data (on a GAAP and non-GAAP basis) for the second 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 compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, cancellation or delay of projects and adverse general economic conditions in the United States and internationally. 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," "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 enterprise class data storage subsystems and network technology. The company designs and manufactures enabling technology that provides OEM and disk drive manufacturer customers with data storage products to support high-performance storage and data communication networks. Xyratex has over 20 years of experience in research and development relating to disk drives, storage systems and high-speed communication protocols.
Founded in 1994 in a management buy-out from IBM, and with its headquarters in the UK, Xyratex has an established global base with R&D and operational facilities in Europe, the United States and South East Asia. For more information, visit http://www.xyratex.com.
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended,
February 28, February 28,
2006 2005
(US dollars in thousands, except
per share amounts)
Revenues:
Storage and Network Systems $128,830 $88,831
Storage Infrastructure 61,687 53,692
Total revenues 190,517 142,523
Cost of revenues 152,948 112,840
Gross profit:
Storage and Network Systems 19,511 14,169
Storage Infrastructure 18,166 15,514
Equity compensation (108) --
Total gross profit 37,569 29,683
Operating expenses:
Research and development 16,462 10,562
Selling, general and administrative 12,868 8,595
Amortization of intangible assets 1,185 398
Total operating expenses 30,515 19,555
Operating income 7,054 10,128
Interest income, net 205 349
Income before income taxes 7,259 10,477
Provision for income taxes 822 1,034
Net income 6,437 9,443
Net earnings per share:
Basic $0.23 $0.34
Diluted $0.22 $0.33
Weighted average common shares
(in thousands), used in
computing net earnings per share:
Basic 28,509 28,121
Diluted 29,172 28,900
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
February 28, November 30,
2006 2005
(US dollars and amounts in
thousands)
ASSETS
Current assets:
Cash and cash equivalents $41,426 $41,240
Accounts receivable, net 87,805 82,449
Inventories 97,317 71,543
Prepaid expenses 3,042 2,244
Deferred income taxes 7,570 6,480
Other current assets 3,325 3,236
Total current assets 240,485 207,192
Property, plant and equipment, net 29,035 25,643
Intangible assets, net 50,397 50,904
Deferred income taxes 15,818 17,551
Total assets $335,735 $301,290
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $104,888 $79,927
Acquisition note payable 3,000 3,000
Short-term borrowings 4,000 4,000
Employee compensation and benefits
payable 9,271 13,620
Deferred revenue 22,540 16,434
Income taxes payable 324 421
Other accrued liabilities 14,017 15,506
Total current liabilities 158,040 132,908
Long-term debt 6,000 7,000
Total liabilities 164,040 139,908
Shareholders' equity
Common shares of Xyratex Ltd (in
thousands), par value $0.01 per
share 70,000 authorized, 28,625 and
28,437 issued and outstanding 286 284
Additional paid-in capital 337,052 333,886
Accumulated other comprehensive
loss (648) (1,356)
Accumulated deficit (164,995) (171,432)
Total shareholders' equity 171,695 161,382
Total liabilities and
shareholders' equity $335,735 $301,290
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
February 28, February 28,
2006 2005
(US dollars in thousands)
Cash flows from operating activities:
Net income from continuing operations $6,437 $9,443
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 1,998 1,588
Amortization of intangible assets 1,185 398
Non-cash equity compensation 1,369 190
Bonus paid by trust -- 144
Changes in assets and liabilities,
net of impact of acquisitions and
divestitures
Accounts receivable (5,356) (29,353)
Inventories (25,774) (7,726)
Prepaid expenses and other current
assets (887) (117)
Accounts payable 24,961 22,122
Employee compensation and benefits
payable (4,349) (2,734)
Deferred revenue 6,106 2,580
Income taxes payable (97) (167)
Deferred income taxes 790 2,464
Amount payable to related party -- 137
Other accrued liabilities 407 (1,234)
Net cash provided by (used in) operating
activities 6,790 (2,265)
Cash flows from investing activities:
Investments in property, plant and
equipment (5,390) (2,168)
Acquisition of business, net of
cash received (2,013) (253)
Net cash used in investing
activities (7,403) (2,421)
Cash flows from financing activities:
Net payments of long-term
borrowings (1,000) (1,000)
Payment of acquisition note payable -- (2,000)
Proceeds from issuance of shares 1,799 631
Net cash provided by (used in)
financing activities 799 (2,369)
Change in cash and cash equivalents 186 (7,055)
Cash and cash equivalents at
beginning of period 41,240 63,495
Cash and cash equivalents at end of
period $41,426 $56,440
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
Three Months Ended
GAAP Non-GAAP Non-GAAP
February 28, Adjustment February 28,
2006 (a) 2006
(US dollars in thousands, except per
share amounts)
Revenues:
Storage and Network Systems $128,830 $128,830
Storage Infrastructure 61,687 61,687
Total revenues 190,517 190,517
Cost of revenues 152,948 (108) 152,840
Gross profit:
Storage and Network Systems 19,511 19,511
Storage Infrastructure 18,166 18,166
Equity compensation (108) 108 --
Total gross profit 37,569 37,677
Operating expenses:
Research and development 16,462 (285) 16,177
Selling, general and
administrative 12,868 (976) 11,892
Amortization of intangible assets 1,185 (1,185) --
Total operating expenses 30,515 28,069
Operating income 7,054 9,608
Interest income, net 205 205
Income before income taxes 7,259 9,813
Provision for income taxes 822 698 1,520
Net income 6,437 8,293
Net earnings per share:
Basic $0.23 $0.29
Diluted $0.22 $0.28
Weighted average common shares (in
thousands), used in
computing net earnings per share:
Basic 28,509 28,509
Diluted 29,172 254 29,426
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME
Three Months Ended
GAAP Non-GAAP Non-GAAP
February 28, Adjustment February 28,
2005 (a) 2005
(US dollars in thousands, except per
share amounts)
Revenues:
Storage and Network Systems $88,831 $88,831
Storage Infrastructure 53,692 53,692
Total revenues 142,523 142,523
Cost of revenues 112,840 112,840
Gross profit:
Storage and Network Systems 14,169 14,169
Storage Infrastructure 15,514 15,514
Total gross profit 29,683 29,683
Operating expenses:
Research and development 10,562 10,562
Selling, general and
administrative 8,595 (190) 8,405
Amortization of intangible assets 398 (398) --
Total operating expenses 19,555 18,967
Operating income 10,128 10,716
Interest income, net 349 349
Income before income taxes 10,477 11,065
Provision for income taxes 1,034 119 1,153
Net income 9,443 9,912
Net earnings per share:
Basic $0.34 $0.35
Diluted $0.33 $0.34
Weighted average common shares (in
thousands), used in
computing net earnings per share:
Basic 28,121 28,121
Diluted 28,900 28,900
(a) Non-GAAP Adjustment for the three month periods ended February 28,
2006 and February 28, 2005 includes non-cash amortization of
intangible assets and non-cash equity compensation expense, together
with the related tax effects.
We believe these Non-GAAP measures are useful to investors because
they provide an alternative method of measuring the operating
performance of our business by excluding certain expenses, gains and
losses which we believe are not indicative of our core operating
results.
Source: prnewswire
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