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Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 200524 June 2005
Xyratex Ltd (Nasdaq: XRTX - News), a leading provider of modular enterprise class data storage subsystems and storage process technology, today announced results for the second fiscal quarter, ended May 31, 2005. Revenues for the quarter were $169.6 million, an increase of 56.9% compared to revenues of $108.1 million for the same period last year and an increase of 19% compared to $142.5 million in the prior quarter.
For the second fiscal quarter, GAAP net income was $11.0 million, or $0.38 per diluted share. Non-GAAP net income was $13.0 million, or a diluted earnings per share of $0.45, compared to non-GAAP net income of $5.7 million 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 second quarter was 22%, compared to 21.5% in the same period last year and 20.8% in the prior quarter.
"This was a very strong quarter for us in so many ways. We executed very well in meeting the demands of our partners, we expanded our product portfolio with the launch of a number of new products, and we increased our customer base with a number of new wins in the quarter. Finally, we successfully completed the strategic acquisition of Oliver Design," said Steve Barber, CEO of Xyratex. "We continue to see strong demand for our products and technologies within both businesses. The company is in an excellent position to benefit from the strong industry dynamics driving growth."
Business Highlights
* We acquired Oliver Design, a privately held developer and manufacturer
of disk drive media cleaning technology. We are now able to combine
Xyratex's industry-leading expertise in high volume disk drive test,
servo writing and automated media handling technologies with Oliver
Design's extensive experience in the complex media cleaning process.
This important technology acquisition enables the company to better
address the immediate growth opportunity in magnetic media
contamination process controls.
* We announced the ultra-high density near-line mass storage system,
Model 4835, to the Original Equipment Manufacturer (OEM) storage
market. The Xyratex 4835 near-line storage system is aimed at
applications requiring large-capacity and low-cost disk storage
incorporating Xyratex RAID technology.
* We acquired rights to a Linux based software library and invested in a
new team with key software skills to accelerate the capabilities and
scope of our Storage Appliance product line into the SMB market.
* We demonstrated our newest Serial Attached SCSI (SAS) expander-based
storage enclosure at Storage Networking World in April. The new 3U 16
drive enclosure offers Xyratex's OEM customers SAS expandability up to
48 TB (16 x 500 GB drive capacity and up to 6 enclosures).
Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Following the acquisition of Oliver Design last month, we are providing expectations for the fiscal year. Going forward, as per our guidance policy, we will provide guidance for the next quarter only. These statements do not include the potential impact of any future acquisitions or divestitures.
* Revenue in the third fiscal quarter of 2005 is projected to be in the
range $155 to $165 million. Revenue for fiscal year 2005 is expected
to increase to a range of $660 to $675 million.
* Fully diluted earnings per share is anticipated to be between $0.18
and $0.25 on a GAAP basis in the third quarter. On a non-GAAP basis
fully diluted earnings per share is anticipated to be between $0.20
and $0.27.
* Fully diluted earnings per share for fiscal year 2005 is expected to
be between $1.35 and $1.45 on a GAAP basis. On a non-GAAP basis fully
diluted earnings per share is expected to be between $1.50 and $1.60,
including a contribution of $0.13 to $0.17 associated with the
acquisition of Oliver Design. Non-GAAP earnings per share excludes
non-cash equity compensation, amortization of intangible assets,
certain other acquisition related charges and related taxation
expense.
Conference Call/Webcast Information
The Xyratex quarterly results conference call will be held on Thursday, June 23, 2005 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time and can be accessed by dialing (800) 599-9795 in the United States or (617) 786-2905 outside the United States, using passcode 11795616. The call will also be broadcast as a live audio webcast, which can be accessed via www.xyratex.com/investor.
A replay of the conference call can be accessed by dialing 888-286-8010 in the United States or (617) 801-6888 outside the United States, using replay code 48048666. The replay will be available through June 30, 2005. The webcast will be archived on the company website for future reference.
Safe Harbor Statement
The foregoing information contains forward-looking statements. These statements relate to future events or our future financial performance 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. 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 modular enterprise class data storage subsystems and storage process 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.
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
2005 2004 2005 2004
(US dollars in thousands, except per share amounts)
Revenues $169,604 $108,122 $312,127 $227,407
Cost of revenues 132,353 84,884 245,193 175,259
Gross profit 37,251 23,238 66,934 52,148
Operating expenses:
Research and
development -
development
arrangement -- -- -- (6,000)
Research and
development - other 12,858 9,222 23,420 17,172
Total research and
development 12,858 9,222 23,420 11,172
Selling, general and
administrative
- non cash equity
compensation 191 -- 381 --
Selling, general and
administrative - other 8,914 6,257 17,319 12,583
Total selling, general
and administrative 9,105 6,257 17,700 12,583
Amortization of intangible
assets 328 362 726 394
In process research and
development 2,230 -- 2,230 --
Other costs -- 439 -- 1,863
Total operating
expenses 24,521 16,280 44,076 26,012
Operating income 12,730 6,958 22,858 26,136
Interest income
(expense), net 320 (20) 669 828
Income before income
taxes 13,050 6,938 23,527 26,964
Provision for income
taxes 2,000 1,881 3,034 4,036
Net income 11,050 5,057 20,493 22,928
Net income per share:
Basic $0.39 $0.46 $0.73 $2.07
Diluted $0.38 $0.46 $0.71 $2.07
Weighted average common
shares and class B
preferred ordinary
shares, respectively
(in thousands), used
in computing net income
per share
Basic 28,372 11,099 28,246 11,099
Diluted 29,089 11,099 28,993 11,099
Pro forma net income
per common share
from continuing
operations (a)
Basic $0.39 $0.20 $0.73 $0.97
Diluted $0.38 $0.20 $0.71 $0.94
Weighted-average
common shares (in
thousands), used in
computing the pro forma
net income per share:
Basic 28,372 25,146 28,246 23,628
Diluted 29,089 25,822 28,993 24,421
(a) Pro forma net income per share reflects the conversion of Xyratex
Group Limited class A and class B preferred ordinary shares and class
C ordinary shares to common shares of Xyratex Ltd on completion of
its initial public offering, on June 29, 2004.
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
May 31, November 30,
2005 2004
(US dollars and amounts in
thousands)
ASSETS
Current assets:
Cash and cash equivalents $66,595 $63,495
Accounts receivable, net 65,473 49,656
Inventories 71,738 43,014
Prepaid expenses 2,499 2,594
Deferred income taxes 9,925 6,774
Other current assets 3,216 2,855
Total current assets 219,446 168,388
Property, plant and equipment, net 16,290 14,495
Intangible assets, net 27,598 7,911
Deferred income taxes 9,172 14,448
Total assets $272,506 $205,242
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $73,590 $47,067
Acquisition note payable 3,000 2,000
Short-term borrowings 4,000 4,000
Employee compensation and benefits
payable 11,149 10,811
Deferred revenue 20,063 1,887
Income taxes payable 302 462
Deferred income taxes 788 536
Other accrued liabilities 10,975 10,778
Total current liabilities 123,867 77,541
Long-term debt 9,000 11,000
Total liabilities 132,867 88,541
Shareholders' equity
Common shares of Xyratex Ltd (in
thousands), par value $0.01 per
share
70,000 authorized, 28,403 and
28,043 issued and outstanding 284 280
Additional paid-in capital 332,862 329,267
Accumulated other comprehensive
income (399) 755
Accumulated deficit (193,108) (213,601)
Total shareholders' equity 139,639 116,701
Total liabilities and
shareholders' equity $272,506 $205,242
XYRATEX LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
May 31, May 31,
2005 2004
(US dollars in thousands)
Cash flows from operating activities:
Net income $20,493 $22,928
Adjustments to reconcile net income
to net cash
provided by (used in) operating
activities:
Depreciation 3,166 2,516
Amortization of intangible assets 726 394
Non-cash equity compensation 381 --
Bonus paid by trust 144 --
Gain on sale of assets -- (36)
Supplier note receivable -- (6,000)
Changes in assets and liabilities,
net of impact of acquisitions and
divestitures
Accounts receivable (15,291) (4,728)
Inventories (18,696) (4,083)
Prepaid expenses and other current
assets (1,658) (2,506)
Accounts payable 21,715 2,416
Customer advance -- (920)
Employee compensation and benefits
payable 284 (4,137)
Deferred revenue 1,069 (9,362)
Income taxes payable (160) 234
Deferred income taxes 4,104 3,400
Other accrued liabilities (1,364) 1,602
Net cash provided by operating
activities 14,913 1,718
Cash flows from investing activities:
Investments in property, plant and
equipment (4,524) (3,766)
Dispositions of property, plant and
equipment -- 36
Acquisition of business, net of
cash received (5,131) (6,015)
Net cash used in investing
activities (9,655) (9,745)
Cash flows from financing activities:
Net proceeds from short-term
borrowings -- 3,841
Payment of acquisition note payable (2,000) --
Payments of long-term borrowings (2,000) (2,000)
Proceeds from issuance of shares 1,842 4,255
Net cash provided by (used in)
financing activities (2,158) 6,096
Change in cash and cash equivalents 3,100 (1,931)
Cash and cash equivalents at
beginning of period 63,495 2,008
Cash and cash equivalents at end of
period 66,595 $77
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME
Three Months Ended
GAAP Non-GAAP Non-GAAP
May 31, Adjustment May 31,
2005 (a) 2005
(US dollars in thousands, except per
share amounts)
Revenues $169,604 $169,604
Cost of revenues 132,353 132,353
Gross profit 37,251 37,251
Operating expenses:
Research and development - other 12,858 12,858
Total research and development 12,858 12,858
Selling, general and
administrative - non cash equity
compensation 191 (191) --
Selling, general and
administrative - other 8,914 8,914
Total selling, general and
administrative 9,105 8,914
Amortization of intangible assets 328 (328) --
In process research and
development 2,230 (2,230) --
Total operating expenses 24,521 21,772
Operating income 12,730 15,479
Interest income, net 320 320
Income before income taxes 13,050 15,799
Provision for income taxes 2,000 767 2,767
Net income $11,050 $13,032
Pro forma net income per common
share
Basic $0.39 $0.46
Diluted $0.38 $0.45
Weighted-average common shares (in
thousands), used in computing the
pro forma net income per share:
Basic 28,372 28,372
Diluted 29,089 29,089
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME
Six Months Ended
GAAP Non-GAAP Non-GAAP
May 31, Adjustment May 31,
2005 (a) 2005
(US dollars in thousands, except per
share amounts)
Revenues $312,127 $312,127
Cost of revenues 245,193 245,193
Gross profit 66,934 66,934
Operating expenses:
Research and development - other 23,420 23,420
Total research and development 23,420 23,420
Selling, general and
administrative - non cash equity
compensation 381 (381) --
Selling, general and
administrative - other 17,319 17,319
Total selling, general and
administrative 17,700 17,319
Amortization of intangible assets 726 (726) --
In process research and
development 2,230 (2,230) --
Total operating expenses 44,076 40,739
Operating income 22,858 26,195
Interest income, net 669 669
Income before income taxes 23,527 26,864
Provision for income taxes 3,034 887 3,921
Net income $20,493 $22,943
Pro forma net income per common
share
Basic $0.73 $0.81
Diluted $0.71 $0.79
Weighted-average common shares (in
thousands), used in computing the
pro forma net income per share:
Basic 28,246 28,246
Diluted 28,993 28,993
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME
Three Months Ended
GAAP Non-GAAP Non-GAAP
May 31, Adjustment May 31,
2004 (a) 2004
(US dollars in thousands, except per
share amounts)
Revenues $108,122 $108,122
Cost of revenues - other 84,884 84,884
Gross profit 23,238 23,238
Operating expenses:
Research and development -
development arrangement -- -- --
Research and development - other 9,222 9,222
Total research and development 9,222 9,222
Selling, general and
administrative - other 6,257 6,257
Total selling, general and
administrative 6,257 6,257
Amortization of intangible assets 362 (362) --
Other costs 439 (439) --
Total operating expenses 16,280 15,479
Operating income 6,958 7,759
Interest income (expense), net (20) (20)
Income before income taxes 6,938 7,739
Provision for income taxes 1,881 109 1,990
Net income $5,057 $5,749
Pro forma net income per common
share
Basic $0.20 $0.23
Diluted $0.20 $0.22
Weighted-average common shares (in
thousands), used in computing
pro forma net income per share:
Basic 25,146 25,146
Diluted 25,822 25,822
XYRATEX LTD
UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME
Six Months Ended
GAAP Non-GAAP Non-GAAP
May 31, Adjustment May 31,
2004 (a) 2004
(US dollars in thousands, except per
share amounts)
Revenues $227,407 $227,407
Cost of revenues - other 175,259 175,259
Gross profit 52,148 52,148
Operating expenses:
Research and development -
development arrangement (6,000) 6,000 --
Research and development - other 17,172 17,172
Total research and development 11,172 17,172
Selling, general and
administrative - other 12,583 12,583
Total selling, general and
administrative 12,583 12,583
Amortization of intangible assets 394 (394) --
Other costs 1,863 (1,863) --
Total operating expenses 26,012 29,755
Operating income 26,136 22,393
Interest income (expense), net 828 (933) (105)
Income before income taxes 26,964 22,288
Provision for income taxes 4,036 (162) 3,874
Net income $22,928 $18,414
Pro forma net income per common
share
Basic $0.97 $0.78
Diluted $0.94 $0.75
Weighted-average common shares (in
thousands), used in computing
pro forma net income per share:
Basic 23,628 23,628
Diluted 24,421 24,421
(a) Non-GAAP Adjustment for the three and six month periods ended May 31,
2005 includes non-cash equity compensation expense and non-cash
amortization of intangible assets and the related tax effect. Non-GAAP
adjustment for the three months ended May 31, 2005
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 op
(b) Pro forma earnings per share reflects the conversion of Xyratex Group
Limited class A and class B preferred ordinary shares and class C
ordinary shares to common shares of Xyratex Ltd on completion of its
initial public offering, on June 29, 2004.
--------------------------------------------------------------------------------
Source: Xyratex Ltd
Source: PR Newswire
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