Xyratex: Fiscal 4Q10 Financial Results

Xyratex Ltd. announced results for the fourth quarter and fiscal year ended November 30, 2010. 

Revenues for the fourth quarter were $396.8 million, an increase of 63.3% compared to revenues of $243 million for the same period last year.

For the fourth quarter, GAAP net income was $32.3 million, or $1.02 per diluted share compared to a GAAP net income of $1.6 million in the same period last year. Non-GAAP net income increased to $21.9 million, or a diluted earnings per share of $0.69, compared to non-GAAP net income of $7.9 million, or $0.26 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the fourth quarter was 16.1%, compared to 15.6% in the same period last year and 17.6% in the prior quarter. The change from the prior quarter was primarily due to the decrease in the proportion of Storage Infrastructure (SI) revenues. Gross profit margin for fiscal year 2010 was 17.5% compared to 14.4% in the previous year. The increase from the prior year was primarily due to the increase in SI revenues.

Revenues from sales of our Networked Storage Solutions (NSS) products were $326.8 million in the fourth quarter as compared to $203.4 million in the same quarter a year ago, an increase of 60.6%. Gross profit margin in the NSS business was 13.3% as compared to 13.2% a year ago. Revenues from sales of our SI products were $70 million as compared to $39.5 million in the same quarter a year ago, an increase of 77%. Gross profit margin in the SI business was 29.7% as compared to 28.7% a year ago.

Revenues for fiscal year 2010 were $1,601.9 million, an increase of 84.6%, compared to revenues of $867.9 million for fiscal year 2009. Revenues from sales of our NSS products were $1,258.9 million for the year as compared to $762 million in 2009, an increase of 65.2%. Revenues from sales of our SI products were $342.9 million as compared to $105.9 million in 2009, an increase of 223.9%.

GAAP net income for fiscal year 2010 was $139.4 million or $4.46 per diluted share compared to a GAAP net loss of $16.4 million for fiscal year 2009. Non-GAAP net income for fiscal year 2010 increased to $135.7 million, or a diluted earnings per share of $4.34, compared to non-GAAP net income of $1.5 million, or $0.05 per diluted share, for fiscal year 2009.

Board of Directors Approves
Shareholder Dividend Program
Additionally, the Company announced that it intends to initiate a quarterly dividend program commencing in the third fiscal quarter 2011 providing an annual yield of approximately 2%.

"Our results for Fiscal Year 2010 were outstanding and well above our original expectations. We achieved record revenue and earnings through excellent execution and meeting the strong demand from our customers in both businesses. The results for the year support our strong position in the industries we serve and our ongoing effort and focus in expanding our partnership with our existing customers and in developing partnerships with new customers. We have consciously increased our R&D investments during the year to ensure, in a competitive market place, that we are able to provide leading innovation and technology to benefit our customers’ solutions. I continue to be encouraged by the industry dynamics and the demand environment we are seeing for 2011 and believe that our business strategies are aligned with the industry dynamics over the next few years," said Steve Barber, CEO of Xyratex. "Finally, I am pleased we have been able to announce our intention to pay dividends to our shareholders. This demonstrates our confidence in the long term strategy."

Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

• Revenue in the first quarter of 2011 is projected to be in the range of $355 to $405 million.
• Fully diluted earnings per share is anticipated to be between $0.04 and $0.40 on a GAAP basis in the first quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.12 and $0.48. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.