XYRATEX LTD. 
By 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 November November November
30, 30, 30, 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 4 166 114 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 November
30, 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 November
30, 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
Summary Reconciliation Of November November November November
GAAP Net Income (Loss) To Non- 30, 30, 30, 30,
GAAP Net Income (Loss) 2009 2008 2009 2008
---- ---- ---- ----
(US dollars in (US dollars in
thousands, except thousands, except
per share amounts) 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.
