Xyratex Ltd Announces Results for the First Quarter Fiscal Year 2012 Declares Quarterly Cash Dividend

HAVANT, England, March 29, 2012 /PRNewswire/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the first fiscal quarter ended February 29, 2012. Revenues for the first quarter were $295.7 million, a decrease of 18% compared to revenues of $360.5 million for the same period last year.

For the first quarter, GAAP net income was $10.9 million, or $0.38 per diluted share, compared to GAAP net income of $4.7 million, or $0.15 per diluted share, in the same period last year. Non-GAAP net income was $11.4 million, or $0.40 per diluted share, compared to non-GAAP net income of $7.5 million, or $0.24 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the first quarter was 17.9%, compared to 13.7% in the same period last year and 17.7% in the prior quarter. The increase from last year primarily reflects changes in customer mix of sales of our enterprise data storage solutions.

The Company declared its third dividend in the first quarter. The cash dividend was set at $0.065 per share. The Company's cash balance amounted to $155.8 million at the end of the first quarter, an increase of $23.2 million from the prior quarter.

Today, the Company also announced that its Board of Directors has approved a quarterly cash dividend of $0.075 per share, which represents an increase of $0.01 per share from the prior quarter. The dividend will be payable on April 26, 2012 to shareholders of record as of the close of business on April 12, 2012. This dividend represents a quarterly payout of approximately $1.8 million in aggregate, or $7.2 million on an annualized basis.

"I was pleased with our first quarter results, with revenues in line with our expectations and net income at the high end of our expectations as a result of better than expected gross margins across our product ranges and lower expenditures. As we had anticipated in January, our ability to meet our enterprise data storage customers' demand requirements has been slightly impacted by a limited supply of enterprise disk drives. While the situation is improving each day, we are working hard to ensure we secure as many drives as possible to meet the demand of our customers," said Steve Barber, CEO of Xyratex. "We are extremely focused on executing with regard to all the new opportunities that we have as a result of entering into the High Performance Computing space this year with our ClusterStor product line and working closely with our HDD customers now that the acquisitions by Seagate and Western Digital have been completed. The opportunities in both industries that we serve are numerous, and I believe we are well positioned to capitalize on them through the end of the year and beyond."

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Our forecast ranges are wider than normal due to the uncertainty surrounding disk drive availability following the flooding in Thailand last fall.    

  • Revenue in the second fiscal quarter of 2012 is projected to be in the range of $297 to $357 million.
  • Fully diluted earnings per share is anticipated to be between $0.08 and $0.35 on a GAAP basis in the second quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between $0.16 and $0.43. Non-GAAP earnings per share 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, March 29, 2012.

The conference call can be accessed online via the company's website www.xyratex.com/investors, or by telephone as follows:
United States                     (866) 202-1971
Outside the United States  (617) 213-8842  
Passcode                            70245357

A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through April 5, 2012 as follows:
United States                       (888) 286-8010
Outside the United States    (617) 801-6888
Passcode                              68830210

(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) and (d) the recognition of a Malaysia deferred tax asset. 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 below.

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 and (d) the recognition of the Malaysia deferred tax asset relates to the potential for the non-renewal of certain tax incentive arrangements in 2012. Item (d) 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, 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 retain major customers, 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," "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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
















Three Months Ended,







February 29,


February 28,







2012


2011







(US dollars in thousands, except per share amounts)










Revenues




$ 295,666


$ 360,499

Cost of revenues




242,627


311,045

Gross profit




53,039


49,454










Operating expenses:







Research and development



24,668


28,255


Selling, general and administrative


16,778


17,448


Amortization of intangible assets


970


754



Total operating expenses



42,416


46,457

Operating income




10,623


2,997

Interest income, net  




186


37

Income before income taxes



10,809


3,034

Benefit for income taxes



(52)


(1,652)

Net income




$ 10,861


$ 4,686










Net earnings per share:







Basic




$ 0.39


$ 0.15


Diluted




$ 0.38


$ 0.15










Weighted average common shares (in thousands), used in





computing net earnings per share:






Basic




27,750


30,496


Diluted




28,786


31,761










Cash dividends declared per share

$ 0.07


$ -



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS





































February 29,


November 30,











2012


2011











(US dollars and amounts in thousands)














ASSETS











Current assets:












Cash and cash equivalents







$ 155,840


$ 132,630


Accounts receivable, net







152,143


200,742


Inventories








152,452


164,180


Prepaid expenses








5,354


3,296


Deferred income taxes







10,354


9,020


Other current assets







4,557


7,016



Total current assets







480,700


516,884


Property, plant and equipment, net






45,273


45,215


Intangible assets, net







17,158


18,128


Deferred income taxes







12,395


13,476



Total assets








$ 555,526


$ 593,703














LIABILITIES AND SHAREHOLDERS' EQUITY









Current liabilities:












Accounts payable







$ 122,359


$ 168,696


Employee compensation and benefits payable






21,214


21,786


Deferred revenue








13,193


7,692


Income taxes payable







707


43


Other accrued liabilities







16,623


26,312



Total current liabilities







174,096


224,529


Long-term debt








-


-



Total liabilities







174,096


224,529














Shareholders' equity











Common shares (in thousands), par value $0.01 per share










70,000 authorized, 28,114 and 30,276 issued and outstanding





282


276


Additional paid-in capital







362,791


361,070


Accumulated other comprehensive income (deficit)






165


(1,337)


Accumulated income







18,192


9,165



Total shareholders' equity






381,430


369,174



Total liabilities and shareholders' equity






$ 555,526


$ 593,703



XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





































Three Months Ended











February 29,


February 28,











2012


2011











(US dollars in thousands)

Cash flows from operating activities:









Net income








$ 10,861


$ 4,686

Adjustments to reconcile net income to net cash










provided by operating activities:










Depreciation








4,160


5,319

Amortization of intangible assets







970


754

Non-cash equity compensation







1,713


2,650

Gain (loss) on sale of assets







(50)


4

Deferred income taxes







(754)


(2,219)

Changes in assets and liabilities, net of impact of acquisitions and divestitures








Accounts receivable







48,599


17,660


Inventories








11,728


19,141


Prepaid expenses and other current assets






865


(5,437)


Accounts payable







(46,337)


(15,907)


Employee compensation and benefits payable






(572)


(4,274)


Deferred revenue








5,501


(574)


Income taxes payable







664


97


Other accrued liabilities







(3,123)


1,539



Net cash provided by operating activities






34,225


23,439














Cash flows from investing activities:










Investments in property, plant and equipment






(4,168)


(7,203)


Acquisition of intangible assets







(3,500)


(1,200)


Acquisition of business







-


(5,380)



Net cash used in investing activities






(7,668)


(13,783)














Cash flows from financing activities:










Proceeds from issuance of shares






8


-


Dividends to shareholders







(3,355)


-


Decrease in book overdraft







-


(2,374)



Net cash used in financing activities






(3,347)


(2,374)

Change in cash and cash equivalents






23,210


7,282

Cash and cash equivalents at beginning of period






132,630


90,842

Cash and cash equivalents at end of period






$ 155,840


$ 98,124



XYRATEX LTD

SUPPLEMENTAL INFORMATION































Three Months Ended









February 29,


February 28,

Summary Reconciliation Of GAAP Net Income To Non-GAAP Net Income


2012


2011









(US dollars in thousands, except per share amounts)












GAAP net income






$10,861


$4,686













Amortization of intangible assets





970


754


Equity compensation





1,713


2,650


Tax effect of above non-GAAP adjustments




(671)


(587)


Malaysia deferred tax asset recognized




(1,489)


-












Non-GAAP net income





$11,384


$7,503























Summary Reconciliation Of Diluted GAAP Earnings Per Share To Diluted Non-GAAP Earnings Per Share












Diluted GAAP earnings per share





$ 0.38


$ 0.15













Amortization of intangible assets





0.03


0.02


Equity compensation





0.06


0.08


Tax effect of above non-GAAP adjustments




(0.02)


(0.02)


Malaysia deferred tax asset recognized




(0.05)


-












Diluted non-GAAP earnings per share




$0.40


$0.24























Segmental Information



















Revenues:










Enterprise Data Storage Solutions





$ 272,069


$ 334,186


HDD Capital Equipment





23,597


26,313


Total






$295,666


$360,499












Gross profit:










Enterprise Data Storage Solutions





$47,113


$47,347


HDD Capital Equipment





6,027


2,551


Equity compensation





(101)


(444)


Total






$53,039


$49,454























Summary Of Equity Compensation



















Cost of revenues






$101


$444


Research and development





662


883


Selling, general and administrative





950


1,323













Total equity compensation





$1,713


$2,650



SOURCE Xyratex Ltd



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