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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