U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

 

June 23, 2005

 


 

XYRATEX LTD

(Registrant’s name)

 

Langstone Road

Havant

PO9 ISA

(Address of Principal Executive Offices)

 


 

Indicate by check mark whether the registrant files annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ý    Form 40-F o

 

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes o    No ý

 

 



 

Xyratex Ltd Announces Results for the Second Quarter Fiscal Year 2005

Q2 Revenues $169.6 million, up 56.9% Year over Year, 19% quarter over quarter

 

Havant, UK – June 23, 2005 – Xyratex Ltd (Nasdaq: XRTX), a leading provider of modular enterprise class data storage subsystems and storage process technology, today announced results for the second fiscal quarter, ended May 31, 2005.  Revenues for the quarter were $169.6 million, an increase of 56.9% compared to revenues of $108.1 million for the same period last year and an increase of 19% compared to $142.5 million in the prior quarter.

 

For the second fiscal quarter, GAAP net income was $11.0 million, or $0.38 per diluted share. Non-GAAP net income was $13.0 million, or a diluted earnings per share of $0.45, compared to non-GAAP net income of $5.7 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 second quarter was 22%, compared to 21.5% in the same period last year and 20.8% in the prior quarter.

 

“This was a very strong quarter for us in so many ways. We executed very well in meeting the demands of our partners, we expanded our product portfolio with the launch of a number of new products, and we increased our customer base with a number of new wins in the quarter. Finally, we successfully completed the strategic acquisition of Oliver Design,” said Steve Barber, CEO of Xyratex. “We continue to see strong demand for our products and technologies within both businesses. The company is in an excellent position to benefit from the strong industry dynamics driving growth.”

 

Business Highlights

 

      We acquired Oliver Design, a privately held developer and manufacturer of disk drive media cleaning technology. We are now able to combine Xyratex’s industry-leading expertise in high volume disk drive test, servo writing and automated media handling technologies with Oliver Design’s extensive experience in the complex media cleaning process. This important technology acquisition enables the company to better address the immediate growth opportunity in magnetic media contamination process controls.

 

      We announced the ultra-high density near-line mass storage system, Model 4835, to the Original Equipment Manufacturer (OEM) storage market. The Xyratex 4835 near-line storage system is aimed at applications requiring large-capacity and low-cost disk storage incorporating Xyratex RAID technology.

 

2



 

      We acquired rights to a Linux based software library and invested in a new team with key software skills to accelerate the capabilities and scope of our Storage Appliance product line into the SMB market.

 

      We demonstrated our newest Serial Attached SCSI (SAS) expander-based storage enclosure at Storage Networking World in April. The new 3U 16 drive enclosure offers Xyratex’s OEM customers SAS expandability up to 48 TB (16 x 500 GB drive capacity and up to 6 enclosures).

 

Business Outlook

 

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Following the acquisition of Oliver Design last month, we are providing expectations for the fiscal year. Going forward, as per our guidance policy, we will provide guidance for the next quarter only. These statements do not include the potential impact of any future acquisitions or divestitures.

 

      Revenue in the third fiscal quarter of 2005 is projected to be in the range $155 to $165 million. Revenue for fiscal year 2005 is expected to increase to a range of $660 to $675 million.

      Fully diluted earnings per share is anticipated to be between $0.18 and $0.25 on a GAAP basis in the third quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.20 and $0.27.

      Fully diluted earnings per share for fiscal year 2005 is expected to be between $1.35 and $1.45 on a GAAP basis. On a non-GAAP basis fully diluted earnings per share is expected to be between $1.50 and $1.60, including a contribution of $0.13 to $0.17 associated with the acquisition of Oliver Design.  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

The Xyratex quarterly results conference call will be held on Thursday, June 23, 2005 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time and can be accessed by dialing (800) 599-9795 in the United States or  (617) 786-2905 outside the United States, using passcode 11795616. The call will also be broadcast as a live audio webcast, which can be accessed via www.xyratex.com/investor.

 

A replay of the conference call can be accessed by dialing 888-286-8010 in the United States or (617) 801-6888 outside the United States, using replay code 48048666. The replay will be available through June 30, 2005. The webcast will be archived on the company website for future reference.

 

3



 

Safe Harbor Statement

 

The foregoing information contains forward-looking statements. These statements relate to future events or our future financial performance 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. 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 modular 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 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.

 

Contacts:

 

Xyratex Investor Relations

 

Brad Driver

Tel: +1 (408) 325-7260

Email: bdriver@us.xyratex.com

Website: www.xyratex.com

 

Xyratex Public Relations

 

Curtis Chan

CHAN & ASSOCIATES, INC.

Tel: +1 (714) 447-4993

Email: cj_chan@chanandassoc.com

 

4



 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

May 31,

 

May 31,

 

May 31,

 

May 31,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

169,604

 

$

108,122

 

$

312,127

 

$

227,407

 

Cost of revenues

 

132,353

 

84,884

 

245,193

 

175,259

 

Gross profit

 

37,251

 

23,238

 

66,934

 

52,148

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development - development arrangement

 

 

 

 

(6,000

)

Research and development - other

 

12,858

 

9,222

 

23,420

 

17,172

 

Total research and development

 

12,858

 

9,222

 

23,420

 

11,172

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative - non cash equity compensation

 

191

 

 

381

 

 

Selling, general and administrative - other

 

8,914

 

6,257

 

17,319

 

12,583

 

Total selling, general and administrative

 

9,105

 

6,257

 

17,700

 

12,583

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

328

 

362

 

726

 

394

 

In process research and development

 

2,230

 

 

2,230

 

 

Other costs

 

 

439

 

 

1,863

 

Total operating expenses

 

24,521

 

16,280

 

44,076

 

26,012

 

Operating income

 

12,730

 

6,958

 

22,858

 

26,136

 

Interest income (expense), net

 

320

 

(20

)

669

 

828

 

Income before income taxes

 

13,050

 

6,938

 

23,527

 

26,964

 

Provision for income taxes

 

2,000

 

1,881

 

3,034

 

4,036

 

Net income

 

11,050

 

5,057

 

20,493

 

22,928

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.46

 

$

0.73

 

$

2.07

 

Diluted

 

$

0.38

 

$

0.46

 

$

0.71

 

$

2.07

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and class B preferred ordinary shares, respectively (in thousands), used in computing net income per share

 

 

 

 

 

 

 

 

 

Basic

 

28,372

 

11,099

 

28,246

 

11,099

 

Diluted

 

29,089

 

11,099

 

28,993

 

11,099

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income per common share from continuing operations (a)

 

 

 

 

 

 

 

 

 

Basic

 

$

0.39

 

$

0.20

 

$

0.73

 

$

0.97

 

Diluted

 

$

0.38

 

$

0.20

 

$

0.71

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares (in thousands), used in computing the pro forma net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

28,372

 

25,146

 

28,246

 

23,628

 

Diluted

 

29,089

 

25,822

 

28,993

 

24,421

 

 


(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.

 

5



 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

May 31,

 

November 30,

 

 

 

2005

 

2004

 

 

 

(US dollars and amounts in
thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

66,595

 

$

63,495

 

Accounts receivable, net

 

65,473

 

49,656

 

Inventories

 

71,738

 

43,014

 

Prepaid expenses

 

2,499

 

2,594

 

Deferred income taxes

 

9,925

 

6,774

 

Other current assets

 

3,216

 

2,855

 

Total current assets

 

219,446

 

168,388

 

Property, plant and equipment, net

 

16,290

 

14,495

 

Intangible assets, net

 

27,598

 

7,911

 

Deferred income taxes

 

9,172

 

14,448

 

Total assets

 

$

272,506

 

$

205,242

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

73,590

 

$

47,067

 

Acquisition note payable

 

3,000

 

2,000

 

Short-term borrowings

 

4,000

 

4,000

 

Employee compensation and benefits payable

 

11,149

 

10,811

 

Deferred revenue

 

20,063

 

1,887

 

Income taxes payable

 

302

 

462

 

Deferred income taxes

 

788

 

536

 

Other accrued liabilities

 

10,975

 

10,778

 

Total current liabilities

 

123,867

 

77,541

 

Long-term debt

 

9,000

 

11,000

 

Total liabilities

 

132,867

 

88,541

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common shares of Xyratex Ltd (in thousands), par value $0.01 per share 70,000 authorized, 28,403 and 28,043 issued and outstanding

 

284

 

280

 

Additional paid-in capital

 

332,862

 

329,267

 

Accumulated other comprehensive income

 

(399

)

755

 

Accumulated deficit

 

(193,108

)

(213,601

)

Total shareholders’ equity

 

139,639

 

116,701

 

Total liabilities and shareholders’ equity

 

$

272,506

 

$

205,242

 

 

6



 

XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Six Months Ended

 

 

 

May 31,
2005

 

May 31,
2004

 

 

 

(US dollars in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

20,493

 

$

22,928

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation

 

3,166

 

2,516

 

Amortization of intangible assets

 

726

 

394

 

Non-cash equity compensation

 

381

 

 

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

 

(15,291

)

(4,728

)

Inventories

 

(18,696

)

(4,083

)

Prepaid expenses and other current assets

 

(1,658

)

(2,506

)

Accounts payable

 

21,715

 

2,416

 

Customer advance

 

 

(920

)

Employee compensation and benefits payable

 

284

 

(4,137

)

Deferred revenue

 

1,069

 

(9,362

)

Income taxes payable

 

(160

)

234

 

Deferred income taxes

 

4,104

 

3,400

 

Other accrued liabilities

 

(1,364

)

1,602

 

Net cash provided by operating activities

 

14,913

 

1,718

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Investments in property, plant and equipment

 

(4,524

)

(3,766

)

Dispositions of property, plant and equipment

 

 

36

 

Acquisition of business, net of cash received

 

(5,131

)

(6,015

)

Net cash used in investing activities

 

(9,655

)

(9,745

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net proceeds from short-term borrowings

 

 

3,841

 

Payment of acquisition note payable

 

(2,000

)

 

Payments of long-term borrowings

 

(2,000

)

(2,000

)

Proceeds from issuance of shares

 

1,842

 

4,255

 

Net cash provided by (used in) financing activities

 

(2,158

)

6,096

 

Change in cash and cash equivalents

 

3,100

 

(1,931

)

Cash and cash equivalents at beginning of period

 

63,495

 

2,008

 

Cash and cash equivalents at end of period

 

66,595

 

$

77

 

 

7



 

XYRATEX LTD

UNAUDITED RECONCILIATION OF GAAP NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME

 

 

 

Three Months Ended

 

 

 

GAAP
May 31,
2005

 

Non-GAAP
Adjustment
(a)

 

Non-GAAP
May 31,
2005

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

Revenues

 

$

169,604

 

 

 

$

169,604

 

Cost of revenues

 

132,353

 

 

 

132,353

 

Gross profit

 

37,251

 

 

 

37,251

 

Operating expenses:

 

 

 

 

 

 

 

Research and development - other

 

12,858

 

 

 

12,858

 

Total research and development

 

12,858

 

 

 

12,858

 

 

 

 

 

 

 

 

 

Selling, general and administrative - non cash equity compensation

 

191

 

(191

)

 

Selling, general and administrative - other

 

8,914

 

 

 

8,914

 

Total selling, general and administrative

 

9,105

 

 

 

8,914

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

328

 

(328

)

 

In process research and development

 

2,230

 

(2,230

)

 

Total operating expenses

 

24,521

 

 

 

21,772

 

Operating income

 

12,730

 

 

 

15,479

 

Interest income, net

 

320

 

 

 

320

 

Income before income taxes

 

13,050

 

 

 

15,799

 

Provision for income taxes

 

2,000

 

767

 

2,767

 

Net income

 

$

11,050

 

 

 

$

13,032

 

 

 

 

 

 

 

 

 

Pro forma net income per common share

 

 

 

 

 

 

 

Basic

 

$

0.39

 

 

 

$

0.46

 

Diluted

 

$

0.38

 

 

 

$

0.45

 

 

 

 

 

 

 

 

 

Weighted-average common shares (in thousands), used in computing the pro forma net income per share:

 

 

 

 

 

 

 

Basic

 

28,372

 

 

 

28,372

 

Diluted

 

29,089

 

 

 

29,089

 

 

8



 

 

 

Six Months Ended

 

 

 

GAAP

 

Non-GAAP

 

Non-GAAP

 

 

 

May 31,

 

Adjustment

 

May 31,

 

 

 

2005

 

(a)

 

2005

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Revenues

 

$

312,127

 

 

 

$

312,127

 

Cost of revenues

 

245,193

 

 

 

245,193

 

Gross profit

 

66,934

 

 

 

66,934

 

Operating expenses:

 

 

 

 

 

 

 

Research and development - other

 

23,420

 

 

 

23,420

 

Total research and development

 

23,420

 

 

 

23,420

 

 

 

 

 

 

 

 

 

Selling, general and administrative - non cash equity compensation

 

381

 

(381

)

 

Selling, general and administrative - other

 

17,319

 

 

 

17,319

 

Total selling, general and administrative

 

17,700

 

 

 

17,319

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

726

 

(726

)

 

In process research and development

 

2,230

 

(2,230

)

 

Total operating expenses

 

44,076

 

 

 

40,739

 

Operating income

 

22,858

 

 

 

26,195

 

Interest income, net

 

669

 

 

 

669

 

Income before income taxes

 

23,527

 

 

 

26,864

 

Provision for income taxes

 

3,034

 

887

 

3,921

 

Net income

 

$

20,493

 

 

 

$

22,943

 

 

 

 

 

 

 

 

 

Pro forma net income per common share

 

 

 

 

 

 

 

Basic

 

$

0.73

 

 

 

$

0.81

 

Diluted

 

$

0.71

 

 

 

$

0.79

 

 

 

 

 

 

 

 

 

Weighted-average common shares (in thousands), used in computing the pro forma net income per share:

 

 

 

 

 

 

 

Basic

 

28,246

 

 

 

28,246

 

Diluted

 

28,993

 

 

 

28,993

 

 

9



 

 

 

Three Months Ended

 

 

 

GAAP

 

Non-GAAP

 

Non-GAAP

 

 

 

May 31,

 

Adjustment

 

May 31,

 

 

 

2004

 

(a)

 

2004

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Revenues

 

$

108,122

 

 

 

$

108,122

 

Cost of revenues - other

 

84,884

 

 

 

84,884

 

Gross profit

 

23,238

 

 

 

23,238

 

Operating expenses:

 

 

 

 

 

 

 

Research and development - development arrangement

 

 

 

 

Research and development - other

 

9,222

 

 

 

9,222

 

Total research and development

 

9,222

 

 

 

9,222

 

 

 

 

 

 

 

 

 

Selling, general and administrative - other

 

6,257

 

 

 

6,257

 

Total selling, general and administrative

 

6,257

 

 

 

6,257

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

362

 

(362

)

 

Other costs

 

439

 

(439

)

 

Total operating expenses

 

16,280

 

 

 

15,479

 

Operating income

 

6,958

 

 

 

7,759

 

Interest income (expense), net

 

(20

)

 

 

(20

)

Income before income taxes

 

6,938

 

 

 

7,739

 

Provision for income taxes

 

1,881

 

109

 

1,990

 

Net income

 

$

5,057

 

 

 

$

5,749

 

 

 

 

 

 

 

 

 

Pro forma net income per common share

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

 

$

0.23

 

Diluted

 

$

0.20

 

 

 

$

0.22

 

 

 

 

 

 

 

 

 

Weighted-average common shares (in thousands), used in computing pro forma net income per share:

 

 

 

 

 

 

 

Basic

 

25,146

 

 

 

25,146

 

Diluted

 

25,822

 

 

 

25,822

 

 

10



 

 

 

Six Months Ended

 

 

 

GAAP

 

Non-GAAP

 

Non-GAAP

 

 

 

May 31,

 

Adjustment

 

May 31,

 

 

 

2004

 

(a)

 

2004

 

 

 

(US dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Revenues

 

$

227,407

 

 

 

$

227,407

 

Cost of revenues - other

 

175,259

 

 

 

175,259

 

Gross profit

 

52,148

 

 

 

52,148

 

Operating expenses:

 

 

 

 

 

 

 

Research and development - development arrangement

 

(6,000

)

6,000

 

 

Research and development - other

 

17,172

 

 

 

17,172

 

Total research and development

 

11,172

 

 

 

17,172

 

 

 

 

 

 

 

 

 

Selling, general and administrative - other

 

12,583

 

 

 

12,583

 

Total selling, general and administrative

 

12,583

 

 

 

12,583

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

394

 

(394

)

 

Other costs

 

1,863

 

(1,863

)

 

Total operating expenses

 

26,012

 

 

 

29,755

 

Operating income

 

26,136

 

 

 

22,393

 

Interest income (expense), net

 

828

 

(933

)

(105

)

Income before income taxes

 

26,964

 

 

 

22,288

 

Provision for income taxes

 

4,036

 

(162

)

3,874

 

Net income

 

$

22,928

 

 

 

$

18,414

 

 

 

 

 

 

 

 

 

Pro forma net income per common share

 

 

 

 

 

 

 

Basic

 

$

0.97

 

 

 

$

0.78

 

Diluted

 

$

0.94

 

 

 

$

0.75

 

 

 

 

 

 

 

 

 

Weighted-average common shares (in thousands), used in computing pro forma net income per share:

 

 

 

 

 

 

 

Basic

 

23,628

 

 

 

23,628

 

Diluted

 

24,421

 

 

 

24,421

 

 


(a)           Non-GAAP Adjustment for the three and six month periods ended May 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 three months ended May 31, 2005 also includes in process research and development expense and the related tax effect. Non-GAAP Adjustment for the three and six month periods ended May 31, 2004 includes 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 six months ended May 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.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

XYRATEX LTD

 

 

(Registrant)

 

 

 

 

By

/s/ STEVE BARBER

 

 

 

Name: Steve Barber

 

 

Title: Chief Executive Officer

 

 

Date: June 23, 2005

 

 

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