Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2012

Declares Quarterly Cash Dividend

Jul 05, 2012, 16:05 ET from Xyratex Ltd

HAVANT, England, July 5, 2012 /PRNewswire/ -- Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the second fiscal quarter ended May 31, 2012. Revenues for the second quarter were $322.1 million, a decrease of 4.9% compared to revenues of $338.5 million for the same period last year.

For the second quarter, GAAP net income was $7.0 million, or $0.24 per diluted share, compared to GAAP net loss of $4.6 million, or $0.15 per share, in the same period last year. Non-GAAP net income was $9.3 million, or $0.32 per diluted share, compared to non-GAAP net loss of $1.9 million, or $0.06 per share, in the same quarter a year ago(1).

Gross profit margin in the second quarter was 16.5%, compared to 12.9% in the same period last year and 17.9% in the prior quarter. The increase from last year primarily reflects improved gross margins for HDD Capital Equipment products, which had been impacted by significantly reduced revenue and specific inventory provisions in the prior year.

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 August 1, 2012 to shareholders of record as of the close of business on July 19, 2012. This dividend represents a quarterly payout of approximately $2.0 million in aggregate, or $8.0 million on an annualized basis.

During the quarter the Company recommenced repurchases of shares under the previously announced share repurchase plan. The Company repurchased 306,353 of its common shares during the quarter at a total cost of $3.6 million. The Company's cash balance amounted to $131.8 million at the end of the second quarter, a decrease of $24.1 million from the prior quarter due primarily to a short term increase in working capital.

"I was pleased with our second quarter results, with revenues and net income in line with our expectations. We did a very good job of meeting the demand requirements of our customers, and I am encouraged by the progress within our technology roadmap, as evidenced by our recent ClusterStor™ 6000 High Performance Computing announcement," said Steve Barber, CEO of Xyratex. "Over the next 18 months we have a number of new opportunities that I believe will be positive for the company. We will continue to focus on new growth opportunities while also managing our costs and investments. With a strong balance sheet, I believe we are well positioned to capitalize on these opportunities 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.  

  • Revenue in the third fiscal quarter of 2012 is projected to be in the range of $313 million to $373 million.
  • Fully diluted earnings per share is anticipated to be between $0.31 and $0.69 on a GAAP basis in the third quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between $0.39 and $0.77. 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, July 5, 2012.

The conference call can be accessed online via the company's website www.xyratex.com/investors, or by telephone as follows:

United States           

(800) 215-2410

Outside the United States

(617) 597-5410  

Passcode                 

72622408

A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through July 12, 2012 as follows:

United States                

(888) 286-8010

Outside the United States  

(617) 801-6888

Passcode                    

90034946

(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) and (d) the recognition of a Malaysia deferred tax asset. Reconciliation of non-GAAP net income (loss) and diluted earnings (loss) per share to GAAP net income (loss) and GAAP diluted earnings (loss) 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 (loss) 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 third 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.

 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended,

Six Months Ended,

May 31,

May 31,

May 31,

May 31,

2012

2011

2012

2011

(US dollars in thousands, except per share amounts)

Revenues

$322,116

$338,548

$617,782

$699,047

Cost of revenues 

268,841

294,901

511,468

605,946

Gross profit

53,275

43,647

106,314

93,101

Operating expenses: 

 Research and development 

27,255

29,970

51,923

58,225

 Selling, general and administrative 

16,955

17,968

33,733

35,416

 Amortization of intangible assets 

950

1,295

1,920

2,049

Total operating expenses 

45,160

49,233

87,576

95,690

Operating income (loss)

8,115

(5,586)

18,738

(2,589)

Interest income, net  

154

42

340

79

Income (loss) before income taxes 

8,269

(5,544)

19,078

(2,510)

Provision (benefit) for income taxes

1,273

(982)

1,221

(2,634)

Net income (loss)

$ 6,996

$ (4,562)

$ 17,857

$ 124

Net earnings (loss) per share:

Basic

$ 0.25

$ (0.15)

$ 0.64

$ 0.00

Diluted

$ 0.24

$ (0.15)

$ 0.62

$ 0.00

Weighted average common shares (in thousands), used in computing net earnings (loss) per share:

Basic

28,099

30,844

27,927

30,670

Diluted

28,786

30,844

28,764

31,691

Cash dividends declared per share

$ 0.08

$ -

$ 0.15

$ -

 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

May 31,

November 30,

2012

2011

(US dollars and amounts in thousands)

ASSETS

Current assets:

Cash and cash equivalents

$ 131,752

$ 132,630

Accounts receivable, net

163,595

200,742

Inventories

180,340

164,180

Prepaid expenses

4,799

3,296

Deferred income taxes

10,000

9,020

Other current assets

7,895

7,016

Total current assets

498,381

516,884

Property, plant and equipment, net

42,732

45,215

Intangible assets, net

16,208

18,128

Deferred income taxes

12,767

13,476

Total assets

$ 570,088

$ 593,703

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 135,271

$ 168,696

Employee compensation and benefits payable

14,530

21,786

Deferred revenue

15,293

7,692

Income taxes payable

1,007

43

Other accrued liabilities

19,951

26,312

Total current liabilities

186,052

224,529

Long-term debt

-

-

Total liabilities

186,052

224,529

Shareholders' equity

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

70,000 authorized, 27,912 and 27,568 issued and outstanding

279

276

Additional paid-in capital

361,944

361,070

Accumulated other comprehensive deficit

(1,259)

(1,337)

Accumulated income

23,072

9,165

Total shareholders' equity

384,036

369,174

Total liabilities and shareholders' equity

$ 570,088

$ 593,703

 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended,

May 31,

May 31,

2012

2011

(US dollars in thousands)

Cash flows from operating activities:

Net income

$ 17,857

$ 124

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation

8,290

10,212

Amortization of intangible assets

1,920

2,049

Non-cash equity compensation

3,845

4,413

Loss (gain) on sale of assets

1,157

(15)

Deferred income taxes

(297)

(3,844)

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

Accounts receivable

37,147

32,299

Inventories

(16,160)

42,943

Prepaid expenses and other current assets

(2,382)

(2,888)

Accounts payable

(33,425)

(10,774)

Employee compensation and benefits payable

(7,256)

(6,703)

Deferred revenue

7,601

(6,989)

Income taxes payable

964

(730)

Other accrued liabilities

(1,231)

5,664

Net cash provided by operating activities

18,030

65,761

Cash flows from investing activities:

Investments in property, plant and equipment

(6,964)

(11,225)

Acquisition of intangible assets

(3,500)

(4,700)

Acquisition of business

-

(6,084)

Net cash used in investing activities

(10,464)

(22,009)

Cash flows from financing activities:

Proceeds from issuance of shares

601

2

Repurchase of shares

(3,574)

(5,303)

Dividends to shareholders

(5,471)

-

Decrease in book overdraft

-

(2,374)

Net cash used in financing activities

(8,444)

(7,675)

Change in cash and cash equivalents

(878)

36,077

Cash and cash equivalents at beginning of period

132,630

90,842

Cash and cash equivalents at end of period

$ 131,752

$ 126,919

 

XYRATEX LTD

SUPPLEMENTAL INFORMATION

Three Months Ended

Six Months Ended

Summary Reconciliation Of GAAP Net Income (loss) To Non-GAAP Net Income (loss)

May 31, 2012

May 31, 2011

May 31, 2012

May 31, 2011

(US dollars in thousands, except per share amounts)

(US dollars in thousands, except per share amounts)

GAAP net income (loss)

$6,996

($4,562)

$17,857

$124

Amortization of intangible assets

950

1,295

1,920

2,049

Equity compensation

2,132

1,763

3,845

4,413

Tax effect of above non-GAAP adjustments

(771)

(426)

(1,442)

(1,013)

Malaysia deferred tax asset recognized

-

-

(1,489)

-

Non-GAAP net income (loss)

$9,308

($1,930)

$20,692

$5,573

Summary Reconciliation Of Diluted GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings (Loss) Per Share

Diluted GAAP earnings (loss) per share

$ 0.24

$ (0.15)

$ 0.62

$ 0.00

Amortization of intangible assets

0.03

0.04

0.07

0.06

Equity compensation

0.07

0.06

0.13

0.14

Tax effect of above non-GAAP adjustments

(0.03)

(0.01)

(0.05)

(0.03)

Malaysia deferred tax asset recognized

-

-

(0.05)

-

Diluted non-GAAP earnings (loss) per share

$0.32

($0.06)

$0.72

$0.18

Segmental Information

Revenues:

Enterprise Data Storage Solutions

$ 278,459

$ 301,162

$ 550,528

$ 635,348

HDD Capital Equipment

43,657

37,386

67,254

63,699

Total

$322,116

$338,548

$617,782

$699,047

Gross profit:

Enterprise Data Storage Solutions

$45,356

$44,777

$92,469

$92,124

HDD Capital Equipment

8,278

(1,024)

14,305

1,527

Equity compensation

(359)

(106)

(460)

(550)

Total

$53,275

$43,647

$106,314

$93,101

Summary Of Equity Compensation

Cost of revenues

$359

$106

$460

$550

Research and development

713

664

1,375

1,547

Selling, general and administrative

1,060

993

2,010

2,316

Total equity compensation

$2,132

$1,763

$3,845

$4,413

 

SOURCE Xyratex Ltd



RELATED LINKS

http://www.xyratex.com