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

March 27, 2007


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 x    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 x

 

 




NEWS RELEASE

For Immediate Release

Xyratex Ltd Announces Results for the First Quarter Fiscal Year 2007

Q1 Revenues $236.4 million, up 24.1% Year over Year

Havant, UK – March 27, 2007 – Xyratex Ltd (Nasdaq: XRTX), a leading provider of modular enterprise class data storage subsystems and storage process technology, today announced results for the first fiscal quarter ended February 28, 2007.  Revenues for the first quarter were $236.4 million, an increase of 24.1% compared to revenues of $190.5 million for the same period last year.

For the first quarter, GAAP net income was $10.1 million, or $0.34 per diluted share, compared to GAAP net income of $6.4 million, or $0.22 per diluted share, in the same period last year. Non-GAAP net income increased 45.8% to $11.9 million, or a diluted earnings per share of $0.40, compared to non-GAAP net income of $8.3 million, or $0.28 per diluted share, in the same quarter a year ago (1).

Gross profit margin in the first quarter was 19.0%, compared to 19.7% in the same period last year, primarily due to product mix within the Networked Storage Solutions business.

Revenues from sales of our Networked Storage Solutions (formerly Storage and Network Systems) products were $163.6 million as compared to $128.8 million in the same quarter a year ago, an increase of 27%. Gross profit margin in the Networked Storage Solutions business was 13.6% as compared to 15.1% a year ago. Revenues from sales of our Storage Infrastructure products were $72.8 million as compared to $61.7 million in the same quarter a year ago, an increase of 18%. Gross profit margin in the Storage Infrastructure business was 31.6% as compared to 29.4% a year ago.

“Our first quarter results were ahead of our expectation. With strong demand for our products, particularly in our Networked Storage Solutions business, I am encouraged with regard to our continued progress in executing our strategic plan and expansion of our customer base,” said Steve Barber, CEO of Xyratex. “The fundamentals of the

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markets we serve continue to be very good and I believe we continue to improve on our competitive and technology position. 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. I believe we are well positioned to capitalize on the positive industry dynamics that are creating significant demand for our storage products.”

Business Highlights

·                  We announced full compliance with the administrative requirements of the Restriction of Hazardous Substances (RoHS) of China’s Ministry of Information Industry (MII).  All Xyratex’s Networked Storage Solutions products shipped on the market are now fully compliant with the legislation. The achievement of RoHS compliance in China demonstrates Xyratex’s ongoing environmental compliance strategy through diligence and monitoring of emerging legislation worldwide.

·                  We secured new design wins with Data Domain, Leitch Technology, Overland Storage, Quantel, CorData, and Impediment, as well as with a number of other Tier 2 and Tier 3 customers.

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 2007 is projected to be in the range $203 to $218 million.

·                  Fully diluted earnings per share is anticipated to be between $0.01 and $0.11 on a GAAP basis in the second quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between $0.09 and $0.19. Non-GAAP earnings per share excludes non-cash equity compensation, amortization of intangible assets,

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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 www.xyratex.com/investors on Tuesday, March 27, 2007 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. You can also access the conference call by dialing +1 (866) 543-6405 in the United States and +1 (617) 213-8897 outside of the United States, passcode 97621584. The press release will be posted to the company web site www.xyratex.com.

A replay will be available through April 3, 2007 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 23791630.

(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, and (d) the related tax effects. Reconciliation of non-GAAP net income and diluted earnings per share to GAAP net income and GAAP diluted earnings 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 whilst 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

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in addition has not been measured consistently as a result of the implementation of FAS 123R; (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.

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

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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 South East Asia.

For more information, visit www.xyratex.com.

Contacts:

Xyratex Investor Relations
Brad Driver
Tel: +1 (408) 325-7260
Email: bdriver@us.xyratex.com
Website: www.xyratex.com

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months Ended,

 

 

 

February 28,

 

February 28,

 

 

 

2007

 

2006

 

 

 

(US dollars in thousands, except per
share amounts)

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

Networked Storage Solutions

 

$

163,616

 

$

128,830

 

Storage Infrastructure

 

72,791

 

61,687

 

Total revenues

 

236,407

 

190,517

 

 

 

 

 

 

 

Cost of revenues

 

191,372

 

152,948

 

Gross profit:

 

 

 

 

 

Networked Storage Solutions

 

22,286

 

19,511

 

Storage Infrastructure

 

22,994

 

18,166

 

Equity compensation

 

(245

)

(108

)

Total gross profit

 

45,035

 

37,569

 

Operating expenses:

 

 

 

 

 

Research and development

 

18,794

 

16,462

 

Selling, general and administrative

 

14,800

 

12,868

 

Amortization of intangible assets

 

1,651

 

1,185

 

Total operating expenses

 

35,245

 

30,515

 

Operating income

 

9,790

 

7,054

 

Other income

 

890

 

 

Interest income, net

 

655

 

205

 

Income before income taxes

 

11,335

 

7,259

 

Provision for income taxes

 

1,221

 

822

 

Net income

 

$

10,114

 

$

6,437

 

 

 

 

 

 

 

Net earnings per share:

 

 

 

 

 

Basic

 

$

0.35

 

$

0.23

 

Diluted

 

$

0.34

 

$

0.22

 

 

 

 

 

 

 

Weighted average common shares (in thousands), used in computing net earnings per share:

 

 

 

 

 

Basic

 

28,847

 

28,509

 

Diluted

 

29,699

 

29,172

 

 

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

February 28,

 

November 30,

 

 

 

2007

 

2006

 

 

 

(US dollars and amounts in
thousands)

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

54,595

 

$

56,921

 

Accounts receivable, net

 

112,320

 

105,324

 

Inventories

 

86,668

 

93,111

 

Prepaid expenses

 

3,367

 

2,390

 

Deferred income taxes

 

5,000

 

2,513

 

Other current assets

 

8,078

 

7,247

 

Total current assets

 

270,028

 

267,506

 

Property, plant and equipment, net

 

35,076

 

34,471

 

Intangible assets, net

 

61,365

 

58,109

 

Deferred income taxes

 

13,275

 

15,594

 

Total assets

 

$

379,744

 

$

375,680

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

88,347

 

$

84,896

 

Short-term borrowings

 

4,000

 

4,000

 

Employee compensation and benefits payable

 

11,339

 

16,645

 

Deferred revenue

 

12,845

 

16,303

 

Income taxes payable

 

2,199

 

1,641

 

Other accrued liabilities

 

13,075

 

14,701

 

Total current liabilities

 

131,805

 

138,186

 

Long-term debt

 

2,000

 

3,000

 

Total liabilities

 

133,805

 

141,186

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common shares of Xyratex Ltd (in thousands), par value $0.01 per share 70,000 authorized, 28,928 and 28,793 issued and outstanding

 

289

 

288

 

Additional paid-in capital

 

346,847

 

344,686

 

Accumulated other comprehensive income

 

1,943

 

2,774

 

Accumulated deficit

 

(103,140

)

(113,254

)

Total shareholders’ equity

 

245,939

 

234,494

 

Total liabilities and shareholders’ equity

 

$

379,744

 

$

375,680

 

 

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Three Months Ended,

 

 

 

February 28,

 

February 28,

 

 

 

2007

 

2006

 

 

 

(US dollars in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

Net income from continuing operations

 

$

10,114

 

$

6,437

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

Depreciation

 

3,037

 

1,998

 

Amortization of intangible assets

 

1,651

 

1,185

 

Non-cash equity compensation

 

1,660

 

1,369

 

Changes in assets and liabilities, net of impact of acquisitions and divestitures

 

 

 

 

 

Accounts receivable

 

(6,996

)

(5,356

)

Inventories

 

6,443

 

(25,774

)

Prepaid expenses and other current assets

 

(2,995

)

(887

)

Accounts payable

 

3,451

 

24,961

 

Employee compensation and benefits payable

 

(5,306

)

(4,349

)

Deferred revenue

 

(3,458

)

6,106

 

Income taxes payable

 

558

 

(97

)

Deferred income taxes

 

608

 

790

 

Other accrued liabilities

 

(502

)

407

 

Net cash provided by operating activities

 

8,265

 

6,790

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Investments in property, plant and equipment

 

(3,642

)

(5,390

)

Acquisition of intangible assets

 

(4,790

)

 

Acquisition of business, net of cash received

 

(1,661

)

(2,013

)

Net cash used in investing activities

 

(10,093

)

(7,403

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Payments of long-term borrowings

 

(1,000

)

(1,000

)

Proceeds from issuance of shares

 

502

 

1,799

 

Net cash used in financing activities

 

(498

)

799

 

Change in cash and cash equivalents

 

(2,326

)

186

 

Cash and cash equivalents at beginning of period

 

56,921

 

41,240

 

Cash and cash equivalents at end of period

 

$

54,595

 

$

41,426

 

 

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XYRATEX LTD

SUPPLEMENTAL INFORMATION

 

 

Three Months Ended

 

 

 

February 28,

 

February 28,

 

 

 

2007

 

2006

 

 

 

(US dollars in thousands, except per
share amounts)

 

Summary Reconciliation Of GAAP Net Income To Non-GAAP Net Income

 

 

 

 

 

GAAP net income

 

$

10,114

 

$

6,437

 

 

 

 

 

 

 

Amortization of intangible assets

 

1,651

 

1,185

 

Equity compensation

 

1,660

 

1,369

 

Other income

 

(890

)

 

 

 

 

 

 

 

Tax effect of non-GAAP adjustments

 

(674

)

(698

)

 

 

 

 

 

 

Non-GAAP net income

 

$

11,861

 

$

8,293

 

 

 

 

 

 

 

Summary Reconciliation Of Diluted GAAP Earnings Per Share To Diluted Non-GAAP Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

Diluted GAAP earnings per share

 

$

0.34

 

$

0.22

 

 

 

 

 

 

 

Amortization of intangible assets

 

0.06

 

0.04

 

Equity compensation

 

0.05

 

0.04

 

Other income

 

(0.03

)

 

 

 

 

 

 

 

Tax effect of non-gaap adjustments

 

(0.02

)

(0.02

)

 

 

 

 

 

 

Diluted non-GAAP earnings per share

 

$

0.40

 

$

0.28

 

 

 

 

 

 

 

Summary Of Equity Compensation

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

245

 

108

 

Research and development

 

491

 

285

 

Selling, general and administrative

 

924

 

976

 

 

 

 

 

 

 

Total equity compensation

 

1,660

 

1,369

 

 

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Signatures

Pursuant to the requirements of the Securities and 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/ Richard Pearce

 

 

Name: Richard Pearce

 

 

Title: Chief Financial Officer

 

 

 

Date: 27 March 2007

 

 

 

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