Xyratex Ltd. Announces Results for the Fourth Quarter and Fiscal Year 2009

Jan 12, 2010, 16:10 ET from Xyratex Ltd.

HAVANT, England, Jan. 12 /PRNewswire-FirstCall/ -- Xyratex Ltd. (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and storage process technology, today announced results for the fourth quarter and fiscal year ended November 30, 2009.  Revenues for the fourth quarter were $243.0 million, a decrease of 14.9% compared to revenues of $285.4 million for the same period last year.

For the fourth quarter, GAAP net income was $1.6 million, or $0.05 per diluted share compared to a GAAP net loss of $55.7 million in the same period last year. Non-GAAP net income increased to $7.9 million, or a diluted earnings per share of $0.26, compared to non-GAAP net income of $0.4 million, or $0.02 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the fourth quarter was 15.6%, compared to 12.5% in the same period last year and 16.7% in the prior quarter.

Revenues from sales of our Networked Storage Solutions (NSS) products were $203.4 million in the fourth quarter as compared to $222.3 million in the same quarter a year ago, a decrease of 8.5%. Gross profit margin in the Networked Storage Solutions business was 13.2% as compared to 8.4% a year ago. Revenues from sales of our Storage Infrastructure (SI) products were $39.5 million as compared to $63.1 million in the same quarter a year ago, a decrease of 37.4%. Gross profit margin in the Storage Infrastructure business was 28.7% as compared to 27.3% a year ago.

Revenues for fiscal year 2009 were $867.9 million, a decrease of 17.3%, compared to revenues of $1,049.7 million for fiscal year 2008. Revenues from sales of our NSS products were $762.0 million for the year as compared to $855.8 million in 2008, a decrease of 11.0%. Revenues from sales of our SI products were $105.9 million as compared to $193.9 million in 2008, a decrease of 45.4%.

GAAP net loss for fiscal year 2009 was $16.4 million or $0.56 per diluted share compared to a GAAP net loss of $47.9 million for fiscal year 2008. Non-GAAP net income for fiscal year 2009 decreased to $1.5 million, or a diluted earnings per share of $0.05, compared to non-GAAP net income of $16.2 million, or $0.54 per diluted share, for fiscal year 2008.

When comparing with the prior year it should be noted that the 2008 fourth quarter and full year results included some significant non-recurring charges related to the deterioration in the macroeconomic climate in that quarter. GAAP net loss and non-GAAP net income included additional inventory and vendor claim provisions totaling approximately $7 million. These charges reduced the NSS gross profit margin in the fourth quarter of fiscal 2008 by 3.2%. GAAP net loss also included non-cash charges totaling approximately $54 million, being an impairment of goodwill and a valuation allowance against the deferred tax asset.          

"Although our Fiscal Year 2009 proved to be very challenging, I believe we delivered a good overall performance through reducing our cost base and supporting our customers' changing needs. The results of the fourth quarter reflect the component supply issues, primarily related to semi conductors, that we have been working to address, which have constrained our NSS shipment capability through the second half of the year. I continue to be encouraged with the demand environment we are seeing for 2010 and believe that component supply will improve from the actions we are taking," said Steve Barber, CEO of Xyratex. "We are confident that the fundamentals within the markets we serve are improving and that our technology and strong execution will benefit us over the longer term."  

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. They reflect a significant improvement in the outlook for the SI business including customer forecasts of approximately $140 million for delivery in the first half of 2010.

  • Revenue in the first quarter of 2010 is projected to be in the range $245 million to $285 million.
  • Fully diluted earnings per share is anticipated to be between $0.24 and $0.52 on a GAAP basis in the first quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.32 and $0.60. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.

Conference Call/Webcast Information

The company will host a conference call to discuss its results at 1:30 p.m. PT/4:30 p.m. ET on Tuesday, January 12, 2010.

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

United States

(866) 272-9941

Outside the United States

(617) 213-8895

Passcode

66286501



A replay will be available via the company's website www.xyratex.com/investors, or can be accessed by telephone through January 19, 2010 as follows:

United States

(888) 286-8010

Outside the United States

(617) 801-6888

Passcode

33869460


(1) Non-GAAP net income (loss) and diluted earnings (loss) per share excludes (a) amortization of intangible assets, (b) equity compensation expense, (c) specified non-recurring items, such as restructuring costs, the impairment of goodwill and valuation allowance against a deferred tax asset, (d) the related tax effects and (e) the effect of changes in exchange rates on the income tax expense. 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 the corresponding GAAP measure.

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) restructuring costs are not comparable across periods or with other companies and the impairment of goodwill and the valuation allowance against the deferred tax asset are non-recurring, non-cash and are not comparable across periods or with other companies; (d) the exclusion of the related tax effects of excluding items (a) to (c) 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; (e) the effect of changes in exchange rates on deferred tax balances is non-cash and is not comparable across periods or with other companies.

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 first 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, changes in our customers volume requirements, 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 storage process technology. The company designs and manufactures enabling technology that provides OEM and disk drive manufacturers with data storage products to support high-performance storage and data communication networks. Xyratex has over 25 years of experience in research and development relating to disk drives, storage systems and high-speed communication protocols.

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 Europe, the United States and South East Asia.

For more information, visit www.xyratex.com.

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS














Three Months Ended,


Year Ended




November 30,


November 30,


November 30,


November 30,




2009


2008


2009


2008




(US dollars in thousands, except per share amounts)











Revenues:









Networked Storage Solutions

$ 203,439 


$ 222,300 


$ 762,028 


$ 855,770 


Storage Infrastructure

39,534 


63,127 


105,863 


193,946 

Total revenues

242,973 


285,427 


867,891 


1,049,716 











Cost of revenues

205,014 


249,827 


742,615 


891,139 

Gross profit:









Networked Storage Solutions

26,874 


18,643 


97,981 


107,275 


Storage Infrastructure

11,348 


17,234 


28,202 


52,566 


Equity compensation

(263)


(277)


(907)


(1,264)

Total gross profit

37,959 


35,600 


125,276 


158,577 

Operating expenses:









Research and development

17,560 


22,726 


71,062 


85,897 


Selling, general and administrative

13,538 


15,984 


56,463 


63,686 


Amortization of intangible assets

951 


1,223 


3,939 


4,882 


Impairment of goodwill


34,256 



34,256 


Restructuring costs

1,170 



5,898 




Total operating expenses

33,219 


74,189 


137,362 


188,721 

Operating income (loss)

4,740 


(38,589)


(12,086)


(30,144)

Interest income, net  


166 


114 


1,618 

Income (loss) before income taxes

4,744 


(38,423)


(11,972)


(28,526)

Provision for income taxes

3,194 


17,324 


4,442 


19,383 

Net income (loss)

$ 1,550 


$ (55,747)


$ (16,414)


$ (47,909)











Net earnings (loss) per share:









Basic

$ 0.05 


$ (1.92)


$ (0.56)


$ (1.64)


Diluted

$ 0.05 


$ (1.92)


$ (0.56)


$ (1.64)











Weighted average common shares (in thousands), used in









computing net earnings (loss) per share:









Basic

29,462 


29,096 


29,402 


29,157 


Diluted

30,588 


29,096 


29,402 


29,157 


XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
















November 30,


November 30,




2009


2008




(US dollars and amounts in thousands)







ASSETS




Current assets:





Cash and cash equivalents

$ 51,935 


$ 28,013 


Accounts receivable, net

124,715 


140,879 


Inventories

108,625 


128,183 


Prepaid expenses

4,784 


2,746 


Deferred income taxes

405 


1,000 


Other current assets

5,825 


4,430 



Total current assets

296,289 


305,251 


Property, plant and equipment, net

44,485 


47,229 


Intangible assets, net

7,207 


11,162 


Deferred income taxes

6,269 


9,545 



Total assets

$ 354,250 


$ 373,187 







LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:





Accounts payable

$ 96,386 


$ 111,295 


Employee compensation and benefits payable

8,580 


9,745 


Deferred revenue

10,620 


8,386 


Income taxes payable

2,013 


2,573 


Foreign currency contracts


13,266 


Other accrued liabilities

17,413 


14,333 



Total current liabilities

135,012 


159,598 


Long-term debt




Total liabilities

135,012 


159,598 







Shareholders' equity





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






70,000 authorized, 29,461 and 29,146 issued and outstanding

294 


291 


Additional paid-in capital

370,926 


366,067 


Accumulated other comprehensive income (loss)

3,598 


(13,603)


Accumulated deficit

(155,580)


(139,166)



Total shareholders' equity

219,238 


213,589 



Total liabilities and shareholders' equity

$ 354,250 


$ 373,187 








XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
















Year Ended,




November 30,


November 30,




2009


2008




(US dollars in thousands)

Cash flows from operating activities:




Net income (loss)

$ (16,414)


$ (47,909)

Adjustments to reconcile net income (loss) to net cash





provided by (used in) operating activities:




Depreciation

18,197 


15,770 

Amortization of intangible assets

3,939 


4,882 

Impairment of intangible assets


34,256 

Non-cash equity compensation

5,625 


7,646 

Loss on sale of assets


185 

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





Accounts receivable

16,164 


(18,552)


Inventories

19,558 


(36,521)


Prepaid expenses and other current assets

165 


1,455 


Accounts payable

(14,909)


15,249 


Employee compensation and benefits payable

(1,165)


(3,535)


Deferred revenue

2,234 


(6,826)


Income taxes payable

(560)


1,408 


Deferred income taxes

3,021 


16,944 


Other accrued liabilities

3,433 


2,718 



Net cash provided by (used in) operating activities

39,288 


(12,830)







Cash flows from investing activities:





Investments in property, plant and equipment

(15,453)


(25,763)



Net cash used in investing activities

(15,453)


(25,763)







Cash flows from financing activities:





Repurchases of common shares


(6,116)


Proceeds from issuance of shares

87 


2,044 



Net cash provided by (used in) financing activities

87 


(4,072)

Change in cash and cash equivalents

23,922 


(42,665)

Cash and cash equivalents at beginning of period

28,013 


70,678 

Cash and cash equivalents at end of period

$ 51,935 


$ 28,013 








XYRATEX LTD





SUPPLEMENTAL INFORMATION

























Three Months Ended


Year Ended



November 30,


November 30,


November 30,


November 30,

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

2009


2008


2009


2008



(US dollars in thousands, except per share amounts)


(US dollars in thousands, except per share amounts)










GAAP net income (loss)

$1,550 


($55,747)


($16,414)


($47,909)











Amortization of intangible assets

951 


1,223 


3,939 


4,882 


Impairment of goodwill


34,256 



34,256 


Equity compensation

1,758 


1,755 


5,625 


7,646 


Restructuring costs

1,170 



5,898 



Tax effect of impairment of goodwill


(9,592)



(9,592)


Tax effect of other non-GAAP adjustments

2,460 


(1,024)


2,460 


(3,791)


Valuation allowance against UK deferred tax asset


29,466 



29,466 


Effect on deferred tax of changes to UK tax rates and exchange rates


110 



1,254 










Non-GAAP net income

$7,889 


$447 


$1,508 


$16,212 



















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










Diluted GAAP earnings (loss) per share

$ 0.05 


$ (1.92)


$ (0.56)


$ (1.64)











Amortization of intangible assets

0.03 


0.04 


0.13 


0.17 


Impairment of goodwill


1.18 



1.17 


Equity compensation

0.06 


0.06 


0.19 


0.26 


Restructuring costs

0.04 



0.20 



Tax effect of impairment of goodwill


(0.33)



(0.33)


Tax effect of other non-GAAP adjustments

0.08 


(0.04)


0.08 


(0.13)


Valuation allowance against UK deferred tax asset


1.01 



1.00 


Effect on deferred tax of changes to UK tax rates and exchange rates


0.00 



0.04 










Diluted non-GAAP earnings per share

$0.26 


$0.02 


$0.05 


$0.54 



















Summary Of Equity Compensation


















Cost of revenues

263 


277 


907 


1,264 


Research and development

571 


567 


1,856 


2,469 


Selling, general and administrative

924 


911 


2,862 


3,913 











Total equity compensation

1,758 


1,755 


5,625 


7,646 


SOURCE Xyratex Ltd.



RELATED LINKS

http://www.xyratex.com