HAVANT, England, March 27 /PRNewswire-FirstCall/ -- Xyratex Ltd
(NASDAQ:XRTX), a leading provider of enterprise class data storage
subsystems and storage process technology, today announced results
for the first fiscal quarter ended February 29, 2008. Revenues for
the first quarter were $217.1 million, a decrease of 8.2% compared
to revenues of $236.4 million for the same period last year. For
the first quarter, GAAP net loss was $2.2 million, or $0.07 per
diluted share, compared to GAAP net income of $10.1 million, or
$0.34 per diluted share, in the same period last year. Non-GAAP net
income decreased 94% to $0.7 million, or a diluted earnings per
share of $0.03, compared to non- GAAP net income of $11.9 million,
or $0.40 per diluted share, in the same quarter a year ago (1).
Gross profit margin in the first quarter was 15.1%, compared to
19.0% in the same period last year, primarily due to the decrease
in Storage Infrastructure revenues. Revenues from our Networked
Storage Solutions products were $187.8 million as compared to
$163.6 million in the same quarter a year ago, an increase of
14.8%. Gross profit margin in the Networked Storage Solutions
business was 14.7% as compared to 13.6% a year ago. Revenues from
our Storage Infrastructure products were $29.3 million as compared
to $72.8 million in the same quarter a year ago, a decrease of
59.8%. Gross profit margin in the Storage Infrastructure business
was 18.9% as compared to 31.6% a year ago. "I was pleased with our
first quarter results which were towards the top end of our
expectations, which reflected the continued capital spending
constraints in the Hard Drive Industry. As anticipated we are now
seeing evidence of an increase in demand for capital equipment from
our customers and I am encouraged with regard to the healthy
fundamentals we see within the two markets we serve," said Steve
Barber, CEO of Xyratex. "Though the global economic conditions
remain uncertain, I believe the markets we serve will remain
healthy and that our customers are well positioned within their
respective markets. We will continue to work with our customers to
make them more competitive in their respective markets and remain
flexible in meeting their technology and product demands. We remain
focused on executing as efficiently and effectively as possible in
this uncertain economic environment." The company today also
announced that, effective immediately, Adam Wray has stepped down
from his role as its Executive Vice President of the Storage
Infrastructure Division and that Steve Barber will take a more
active role in leading this division. "I would like to personally
thank Adam for his contribution to the company and in his most
recent role, for his dedication and leadership in developing the
Storage Infrastructure business to where it is today. I wish Adam
every success as he pursues other interests," said Steve Barber.
Business Highlights -- We announced a new High-Performance RAID
Controller and Advanced Power Management Software for our
High-Density RAID System. The Xyratex F6412E sets a new standard
for performance and efficiency, delivering up to twice the
performance (IOPS) of the previous generation controller while
minimizing electronic waste through optimal battery design. In
addition, the company's new Advanced Power Management software can
save up to 40 percent in power dissipation by automatically
spinning down disk drives when not needed. -- We announced that the
Xyratex F5412E RAID system is certified for VMware ESX Server 3.5.
The Xyratex F5412E 4Gb FC-SAS/SATA-II RAID product joins the
company's F5402 system as products certified for use in VMware
virtualization environments. -- We commenced installation of
equipment as part of a major process automation project within a
new production facility for a current Storage Infrastructure
customer. -- We undertook significant steps to prepare our
facilities in Sacramento and Seremban, Malaysia in anticipation of
volume ramps as we move through the fiscal year. Business Outlook
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. These statements do not include the potential impact of
any future acquisitions or divestitures. -- Revenue in the second
quarter of 2008 is projected to be in the range $232 to $252
million. -- Fully diluted earnings are anticipated to be between
$(0.06) loss per share and $0.06 earnings per share on a GAAP basis
in the second quarter. On a non-GAAP basis, fully diluted earnings
per share are anticipated to be between $0.03 and $0.15. Non-GAAP
earnings per share excludes non-cash equity compensation,
amortization of intangible assets, certain non-recurring items 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 Thursday,
March 27, 2008 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. It
can also be accessed by a conference call by dialing +1 (888)
679-8018 in the United States and +1 (617) 213-4845 outside of the
United States, passcode 72136533. The press release will be posted
to the company web site http://www.xyratex.com/. A replay will be
available through April 3, 2008 following the live call by dialing
+1 (888) 286-8010 in the United States and +1 (617) 801-6888
outside the United States, replay code 42753368. (1) Non-GAAP net
income and diluted earnings per share excludes (a) amortization of
intangible assets, (b) equity compensation expense, (c) specified
non-recurring items, such as income from sale of a product line,
(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 and diluted earnings 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, is outside the control of management
during the period in which the expense is incurred and in addition
has not been measured consistently as a result of the
implementation of FAS123R; (c) the income from the sale of the
product line is non-recurring and does not form part of the
Company's core operations; (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 second 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, 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 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 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 Southeast Asia. For more information, visit
http://www.xyratex.com/. XYRATEX LTD UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended, February
29, February 28, 2008 2007 (US dollars in thousands, except per
share amounts) Revenues: Networked Storage Solutions $187,776
$163,616 Storage Infrastructure 29,278 72,791 Total revenues
217,054 236,407 Cost of revenues 184,283 191,372 Gross profit:
Networked Storage Solutions 27,599 22,286 Storage Infrastructure
5,526 22,994 Equity compensation (354) (245) Total gross profit
32,771 45,035 Operating expenses: Research and development 19,279
18,794 Selling, general and administrative 14,979 14,800
Amortization of intangible assets 1,379 1,651 Total operating
expenses 35,637 35,245 Operating income (loss) (2,866) 9,790 Other
income - 890 Interest income, net 899 655 Income (loss) before
income taxes (1,967) 11,335 Provision (benefit) for income taxes
252 1,221 Net income (loss) $(2,219) $10,114 Net earnings (loss)
per share: Basic $(0.08) $0.35 Diluted $(0.07) $0.34 Weighted
average common shares (in thousands), used in computing net
earnings (loss) per share: Basic 29,125 28,847 Diluted 29,738
29,699 XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
February 29, November 30, 2008 2007 (US dollars and amounts in
thousands) ASSETS Current assets: Cash and cash equivalents $57,866
$70,678 Accounts receivable, net 101,544 122,327 Inventories
113,131 91,662 Prepaid expenses 3,934 2,994 Deferred income taxes
2,926 3,000 Other current assets 6,281 8,275 Total current assets
285,682 298,936 Property, plant and equipment, net 37,952 37,421
Intangible assets, net 54,282 54,175 Deferred income taxes 18,953
19,743 Total assets $396,869 $410,275 LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities: Accounts payable $92,747 $96,046
Employee compensation and benefits payable 11,385 13,280 Deferred
revenue 8,194 15,212 Income taxes payable 1,537 1,165 Other accrued
liabilities 12,907 11,311 Total current liabilities 126,770 137,014
Long-term debt - - Total liabilities 126,770 137,014 Shareholders'
equity Common shares of Xyratex Ltd (in thousands), par value $0.01
per share 70,000 authorized, 29,214 and 29,117 issued and
outstanding 292 291 Additional paid-in capital 359,099 356,268
Accumulated other comprehensive income 688 1,847 Accumulated
deficit (89,980) (85,145) Total shareholders' equity 270,099
273,261 Total liabilities and shareholders' equity $396,869
$410,275 XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS Three Months Ended February 29, February 28, 2008 2007
(US dollars in thousands) Cash flows from operating activities: Net
income (loss) $(2,219) $10,114 Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Depreciation
3,485 3,037 Amortization of intangible assets 1,379 1,651 Non-cash
equity compensation 2,200 1,660 Changes in assets and liabilities,
net of impact of acquisitions and divestitures Accounts receivable
20,783 (6,996) Inventories (21,469) 6,443 Prepaid expenses and
other current assets (602) (2,995) Accounts payable (3,299) 3,451
Employee compensation and benefits payable (1,895) (5,306) Deferred
revenue (7,018) (3,458) Income taxes payable 372 558 Deferred
income taxes (125) 608 Other accrued liabilities 1,596 (502) Net
cash provided by/(used in) operating activities (6,812) 8,265 Cash
flows from investing activities: Investments in property, plant and
equipment (4,016) (3,642) Acquisition of intangible assets -
(4,790) Acquisition of business, net of cash received - (1,661) Net
cash used in investing activities (4,016) (10,093) Cash flows from
financing activities: Payments of long-term borrowings - (1,000)
Repurchases of common shares (2,618) - Proceeds from issuance of
shares 634 502 Net cash used in financing activities (1,984) (498)
Change in cash and cash equivalents (12,812) (2,326) Cash and cash
equivalents at beginning of period 70,678 56,921 Cash and cash
equivalents at end of period $57,866 $54,595 XYRATEX LTD
SUPPLEMENTAL INFORMATION Summary Reconciliation Of GAAP Net Three
Months Ended Income (Loss) To Non-GAAP Net February 29, February
28, Income 2008 2007 (US dollars in thousands, except per share
amounts) GAAP net income (loss) ($2,219) $10,114 Amortization of
intangible assets 1,379 1,651 Equity compensation 2,200 1,660 Other
income - (890) Tax effect of non-GAAP adjustments (1,073) (674)
Effect on deferred tax of changes to UK exchange rates 462 -
Non-GAAP net income $749 $11,861 Summary Reconciliation Of Diluted
GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings Per
Share Diluted GAAP earnings (loss) per share ($0.07) $0.34
Amortization of intangible assets 0.05 0.06 Equity compensation
0.07 0.05 Other income - (0.03) Tax effect of non-GAAP adjustments
(0.04) (0.02) Effect on deferred tax of changes to UK exchange
rates 0.02 - Diluted non-GAAP earnings per share $0.03 $0.40
Summary Of Equity Compensation Cost of revenues $354 $245 Research
and development 708 491 Selling, general and administrative 1,138
924 Total equity compensation $2,200 $1,660 DATASOURCE: Xyratex Ltd
CONTACT: Brad Driver of Xyratex, +1-408-325-7260, Web site:
http://www.xyratex.com/
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