XRTX XORTX Therapeutics Inc

Q3 Revenues $163.9 Million, Up 42.7% Year Over Year HAVANT, United Kingdom, Sept. 21 /PRNewswire-FirstCall/ -- Xyratex Ltd (NASDAQ:XRTX), a leading provider of modular enterprise class data storage subsystems and storage process technology, today announced results for the third fiscal quarter, ended August 31, 2005. Revenues for the quarter were $163.9 million, an increase of 42.7% compared to revenues of $114.9 million for the same period last year. For the third fiscal quarter, GAAP net income was $7.9 million, or $0.27 per diluted share. Non-GAAP net income was $8.5 million, or a diluted earnings per share of $0.29, compared to non-GAAP net income of $7.0 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 third quarter was 20.2%, compared to 22.7% in the same period last year and 22% in the prior quarter. The decrease in gross margin is primarily due to business revenue and product mix. "With 43% revenue growth, we continue to execute and expand our market at a significant pace. We expanded our technology and product portfolio with the acquisition of nStor Technologies, and we increased our customer base with a number of new design wins in the quarter," said Steve Barber, CEO of Xyratex. "Our priority continues to be superb execution on meeting the demands of our customers and investing resources to develop leading technologies and products that will expand our market opportunities and improve our margins." Business Highlights * Subsequent to the quarter end Xyratex acquired nStor Technologies, a developer of data storage solutions that are ideally suited for both large enterprises as well as small to mid-sized businesses. nStor's flagship controller technology and StorView software form the foundation for the OneStor and NexStor family of solutions that support Microsoft Windows, Linux, UNIX and Macintosh operating environments. For Xyratex, the acquisition of nStor augments the company's already strong portfolio of storage technology and platform solutions. The acquisition of nStor will combine Xyratex's industry-leading expertise in high volume, high availability storage system enclosure design with nStor's extensive experience and value-added RAID Controller and Storage Solution software to provide a highly scalable set of offerings to meet customer requirements. * As a leading provider of capital equipment to Seagate's manufacturing sites, Xyratex was honored as Seagate's Outstanding Supplier in the Manufacturing Capital Equipment category. * Xyratex continued to strengthen its relationship with its largest Storage and Network Systems customer, broadening the range of products in support of their expanding channel to market, and winning a number of new development and operational programs. Business Outlook The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements include the effect of the acquisition of nStor Technologies on September 8, 2005, but do not include the potential impact of any further future acquisitions or divestitures. * Revenue in the fourth fiscal quarter of 2005 is projected to be in the range $189 to $199 million. Revenue for fiscal year 2005 is expected to increase to a range of $665 to $675 million. * Fully diluted earnings per share is anticipated to be between $0.41 and $0.48 on a GAAP basis in the fourth quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.45 and $0.52, which includes the dilutive impact of the acquisition of nStor Technologies. * Fully diluted earnings per share for fiscal year 2005 is expected to be between $1.38 and $1.45 on a GAAP basis. On a non-GAAP basis fully diluted earnings per share is expected to be between $1.53 and $1.60, including the dilution impact of the acquisition of nStor Technologies. * 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 Xyratex quarterly results conference call will be broadcast live via the internet at http://www.xyratex.com/investors on Wednesday, September 21, 2005 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. You can also access the conference call by dialing (800) 259-0251 in the United States and (617) 614-3671 outside of the United States, passcode 28309687. The press release will be posted to the company web site http://www.xyratex.com/. A replay will be available through September 28, 2005 following the live call by dialing (888) 286-8010 in the United States and (617) 801-6888 outside the United States, replay code 26718479. Safe Harbor Statement This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include projected revenue and fully diluted earnings per share data (on a GAAP and non-GAAP basis) for the fourth quarter and fiscal year 2005, statements regarding future results or financial performance of Xyratex, including statements relating to the acquisition of nStor, strengthening Xyratex's position in the storage market and enabling Xyratex to build future storage and disk cleaning products. Such statements are only predictions and involve risks and uncertainties such that actual results and performance may differ materially. Factors that might cause such a difference include successful integration of NStor's assets and employees into Xyratex, building future disk cleaning products, Xyratex's inability to compete successfully in the competitive and rapidly changing marketplace, failure to retain key employees, cancellation or delay of projects and continued adverse general economic conditions in the U.S. and internationally. These risks and other factors include those listed under "Risk Factors" and elsewhere in Xyratex's 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 network 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. For more information, visit http://www.xyratex.com/. Contacts: Xyratex Investor Relations Brad Driver Tel: +1 (408) 325-7260 Email: Website: http://www.xyratex.com/ Xyratex Public Relations Curtis Chan CHAN & ASSOCIATES, INC. Tel: +1 (714) 447-4993 Email: XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended, Nine Months Ended August 31, August 31, August 31, August 31, 2005 2004 2005 2004 (US dollars in thousands, except per share amounts) Revenues $163,918 $114,906 $476,045 $342,313 Cost of revenues - non cash equity compensation -- 7,791 -- 7,791 Cost of revenues - other 130,788 88,848 375,981 264,107 Total cost of revenues 130,788 96,639 375,981 271,898 Gross profit 33,130 18,267 100,064 70,415 Operating expenses: Research and development - development arrangement -- -- -- (6,000) Research and development - non cash equity compensation -- 23,876 -- 23,876 Research and development - other 14,062 9,660 37,482 26,832 Total research and development 14,062 33,536 37,482 44,708 Selling, general and administrative - non cash equity compensation 240 135,885 621 135,885 Selling, general and administrative - other 9,164 7,538 26,483 20,121 Total selling, general and administrative 9,404 143,423 27,104 156,006 Amortization of intangible assets 834 378 1,560 772 In process research and development -- -- 2,230 -- Other costs -- 726 -- 2,589 Total operating expenses 24,300 178,063 68,376 204,075 Operating income (loss) 8,830 (159,796) 31,688 (133,660) Interest income, net 351 77 1,020 905 Income (loss) from continuing operations before income taxes 9,181 (159,719) 32,708 (132,755) Provision (benefit) for income taxes 1,324 (6,338) 4,358 (2,302) Net income (loss) from continuing operations 7,857 (153,381) 28,350 (130,453) Loss from discontinued operations (net of taxes of zero) -- (12,924) -- (12,924) Net income (loss) $7,857 $(166,305) $28,350 $(143,377) Net earnings (loss) per share - basic: Net income (loss) from continuing operations $0.28 $(6.80) $1.00 $(8.74) Loss from discontinued operations, net of income tax -- (0.57) -- (0.87) Net earnings (loss) per share $0.28 $(7.37) $1.00 $(9.61) Net earnings (loss) per share - diluted: Net income (loss) from continuing operations $0.27 $(6.80) $0.98 $(8.74) Loss from discontinued operations, net of income tax - (0.57) -- (0.87) Net earnings (loss) per share $0.27 $(7.37) $0.98 $(9.61) Weighted average common shares and class B preferred ordinary shares (in thousands), used in computing net earnings (loss) per share: Basic 28,413 22,565 28,302 14,921 Diluted 29,079 22,565 29,052 14,921 Pro forma net earnings (loss) per common share from continuing operations (a) Basic $0.28 $(5.67) $1.00 $(5.26) Diluted $0.27 $(5.67) $0.98 $(5.26) Weighted-average common shares (in thousands), used in computing the pro forma net earnings (loss) per share: Basic 28,413 27,060 28,302 24,797 Diluted 29,079 27,060 29,052 24,797 (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 August 31, November 30, 2005 2004 (US dollars and amounts in thousands) ASSETS Current assets: Cash and cash equivalents $62,440 $63,495 Accounts receivable, net 61,558 49,656 Inventories 79,731 43,014 Prepaid expenses 3,027 2,594 Deferred income taxes 9,451 6,774 Other current assets 6,264 2,855 Total current assets 222,471 168,388 Property, plant and equipment, net 19,646 14,495 Intangible assets, net 28,453 7,911 Deferred income taxes 9,070 14,448 Total assets $279,640 $205,242 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $65,988 $47,067 Acquisition note payable 3,000 2,000 Short-term borrowings 4,000 4,000 Employee compensation and benefits payable 11,054 10,811 Deferred revenue 24,598 1,887 Income taxes payable 279 462 Deferred income taxes 865 536 Other accrued liabilities 14,177 10,778 Total current liabilities 123,961 77,541 Long-term debt 8,000 11,000 Total liabilities 131,961 88,541 Shareholders' equity Common shares of Xyratex Ltd (in thousands), par value $0.01 per share 70,000 authorized, 28,425 and 28,043 issued and outstanding 284 280 Additional paid-in capital 333,515 329,267 Accumulated other comprehensive income (loss) (869) 755 Accumulated deficit (185,251) (213,601) Total shareholders' equity 147,679 116,701 Total liabilities and shareholders' equity $279,640 $205,242 XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended August 31, August 31, 2005 2004 (US dollars in thousands) Cash flows from operating activities: Net income $28,350 $(130,453) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,952 3,890 Amortization of intangible assets 1,560 773 Non-cash equity compensation 621 167,552 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 (11,376) (7,314) Inventories (26,689) (5,009) Prepaid expenses and other current assets (2,648) (2,686) Accounts payable 14,113 7,775 Customer advance -- (1,073) Employee compensation and benefits payable 189 (3,587) Deferred revenue 5,604 (9,806) Income taxes payable (183) 225 Deferred income taxes 5,172 (3,510) Amount payable to related party -- 339 Other accrued liabilities 734 940 Net cash provided by operating activities 20,543 12,020 Cash flows from investing activities: Investments in property, plant and equipment (9,666) (6,403) Dispositions of property, plant and equipment -- 36 Loan to acquiree (2,500) -- Acquisition of business, net of cash received (6,473) (6,015) Repayment of supplier note receivable -- 6,000 Net cash used in investing activities (18,639) (6,382) Cash flows from financing activities: Net payments of short-term borrowings -- (133) Payment of acquisition note payable (2,000) -- Payments of long-term borrowings (3,000) (3,000) Proceeds from issuance of shares 2,041 52,984 Net cash provided by (used in) financing activities (2,959) 49,851 Change in cash and cash equivalents (1,055) 55,489 Cash and cash equivalents at beginning of period 63,495 2,008 Cash and cash equivalents at end of period $62,440 $57,497 XYRATEX LTD UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME Three Months Ended GAAP Non-GAAP Non-GAAP August 31, Adjustment August 31, 2005 (a) 2005 (US dollars in thousands, except per share amounts) Revenues $163,918 $163,918 Cost of revenues 130,788 130,788 Gross profit 33,130 33,130 Operating expenses: Research and development - other 14,062 14,062 Total research and development 14,062 14,062 Selling, general and administrative - non cash equity compensation 240 (240) -- Selling, general and administrative - other 9,164 9,164 Total selling, general and administrative 9,404 9,164 Amortization of intangible assets 834 (834) -- In process research and development -- -- Total operating expenses 24,300 23,226 Operating income 8,830 9,904 Interest income, net 351 351 Income before income taxes 9,181 10,255 Provision for income taxes 1,324 459 1,783 Net income $7,857 $8,472 Pro forma net earnings per common share Basic $0.28 $0.30 Diluted $0.27 $0.29 Weighted-average common shares (in thousands), used in computing the pro forma net earnings per share: Basic 28,413 28,413 Diluted 29,079 29,079 XYRATEX LTD UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME Nine Months Ended GAAP Non-GAAP Non-GAAP August 31, Adjustment August 31, 2005 (a) 2005 (US dollars in thousands, except per share amounts) Revenues $476,045 $476,045 Cost of revenues 375,981 375,981 Gross profit 100,064 100,064 Operating expenses: Research and development - other 37,482 37,482 Total research and development 37,482 37,482 Selling, general and administrative - non cash equity compensation 621 (621) -- Selling, general and administrative - other 26,483 26,483 Total selling, general and administrative 27,104 26,483 Amortization of intangible assets 1,560 (1,560) -- In process research and development 2,230 (2,230) -- Total operating expenses 68,376 63,965 Operating income 31,688 36,099 Interest income, net 1,020 1,020 Income before income taxes 32,708 37,119 Provision for income taxes 4,358 1,346 5,704 Net income $28,350 $31,415 Pro forma net earnings per common share Basic $1.00 $1.11 Diluted $0.98 $1.08 Weighted-average common shares (in thousands), used in computing the pro forma net earnings per share: Basic 28,302 28,302 Diluted 29,052 29,052 XYRATEX LTD UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME Three Months Ended GAAP Non-GAAP Non-GAAP August 31, Adjustment August 31, 2004 (a) 2004 (US dollars in thousands, except per share amounts) Revenues $114,906 $114,906 Cost of revenues - non cash equity compensation 7,791 (7,791) -- Cost of revenues - other 88,848 88,848 Total cost of revenues 96,639 88,848 Gross profit 18,267 26,058 Operating expenses: Research and development - non cash equity compensation 23,876 (23,876) -- Research and development - other 9,660 9,660 Total research and development 33,536 9,660 Selling, general and administrative - non cash equity compensation 135,885 (135,885) -- Selling, general and administrative - other 7,538 7,538 Total selling, general and administrative 143,423 7,538 Amortization of intangible assets 378 (378) -- Other costs 726 (726) -- Total operating expenses 178,063 17,198 Operating income (loss) (159,796) 8,860 Interest income, net 77 77 Income (loss) from continuing operations before income taxes (159,719) 8,937 Provision (benefit) for income taxes (6,338) 8,287 1,949 Net income (loss) from continuing operations $(153,381) $6,988 Pro forma net earnings per common share Basic $(5.67) $0.26 Diluted $(5.67) $0.25 Weighted-average common shares (in thousands), used in computing pro forma net earnings per share: Basic 27,060 27,060 Diluted 27,060 27,625 XYRATEX LTD UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME Nine Months Ended GAAP Non-GAAP Non-GAAP August 31, Adjustment August 31, 2004 (a) 2004 (US dollars in thousands, except per share amounts) Revenues $342,313 $342,313 Cost of revenues - non cash equity compensation 7,791 (7,791) -- Cost of revenues - other 264,107 264,107 Total cost of revenues 271,898 264,107 Gross profit 70,415 78,206 Operating expenses: Research and development - development arrangement (6,000) 6,000 -- Research and development - non cash equity compensation 23,876 (23,876) -- Research and development - other 26,832 26,832 Total research and development 44,708 26,832 Selling, general and administrative - non cash equity compensation 135,885 (135,885) -- Selling, general and administrative - other 20,121 20,121 Total selling, general and administrative 156,006 20,121 Amortization of intangible assets 772 (772) -- Other costs 2,589 (2,589) -- Total operating expenses 204,075 46,953 Operating income (loss) (133,660) 31,253 Interest income (expense), net 905 (933) (28) Income (loss) from continuing operations before income taxes (132,755) 31,225 Provision (benefit) for income taxes (2,302) 8,125 5,823 Net income (loss) from continuing operations $(130,453) $25,402 Pro forma net earnings per common share Basic $(5.26) $1.02 Diluted $(5.26) $1.00 Weighted-average common shares (in thousands), used in computing pro forma net earnings per share: Basic 24,797 24,797 Diluted 24,797 25,458 (a) Non-GAAP Adjustment for the three and nine month periods ended August 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 nine months ended August 31, 2005 also includes in process research and development expense and the related tax effect. Non-GAAP Adjustment for the three and nine month periods ended August 31, 2004 includes non cash equity compensation expense and the related tax effect, expenses recorded in connection with our preparation for our initial public offering and non-cash amortization of intangible assets and the related tax effect. Non-GAAP Adjustment for the nine months ended August 31, 2004 also includes elimination of the bad debt allowance on a supplier loan of $6,000,000 and accrued interest of $933,000 together with the related tax on the accrued interest. 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 operating results. (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. DATASOURCE: Xyratex Ltd CONTACT: Investor Relations, Brad Driver of Xyratex, +1-408-325-7260, ; or Public Relations, Curtis Chan of CHAN & ASSOCIATES, INC., +1-714-447-4993, , for Xyratex Ltd Web site: http://www.xyratex.com/investors Web site: http://www.xyratex.com/

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