HAVANT, England, Sept. 30 /PRNewswire-FirstCall/ -- Xyratex Ltd , a leading provider of enterprise class data storage subsystems and storage process technology, today announced results for the third fiscal quarter ended August 31, 2009. Revenues for the third quarter were $246.3 million, a decrease of 12.3% compared to revenues of $280.8 million for the same period last year.

For the third quarter, GAAP net income was $7.8 million, or $0.26 per diluted share, compared to GAAP net income of $7.8 million, or $0.26 per diluted share, in the same period last year. Non-GAAP net income was $10.7 million, or a diluted earnings per share of $0.36, flat as compared to non-GAAP net income of $10.8 million, or $0.36 per diluted share, in the same quarter a year ago (1).

Gross profit margin in the third quarter was 16.7%, compared to 17.6% in the same period last year. The reduction in overall gross margin resulted from a higher proportion of Networked Storage Solutions revenue in the 2009 quarter.

Revenues from our Networked Storage Solutions products were $208.6 million as compared to $213.1 million in the same quarter a year ago, a decrease of 2.1%. Gross profit margin in the Networked Storage Solutions business was 14.0% as compared to 13.3% a year ago. Revenues from our Storage Infrastructure products were $37.7 million as compared to $67.7 million in the same quarter a year ago, a decrease of 44.3%. Gross profit margin in the Storage Infrastructure business was 32.4% as compared to 31.6% a year ago.

"Our third quarter results reflect the apparent improvement in the overall economy and the operational progress we have made over the last nine months. This has resulted in profit being above our expectations in the quarter and demonstrates our commitment to returning to sustained profitability," said Steve Barber, Xyratex CEO. "I was pleased with our execution along with recent new design wins at a number of our major customers. I remain confident that the storage industry will continue to grow, providing incremental opportunities for our technology."

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 30, 2009 at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. You can also access the conference call by dialing +1 (866) 362-4820 in the United States and +1 (617) 597-5345 outside of the United States, passcode 20291919. The press release will be posted to the company web site http://www.xyratex.com/.

A replay will be available through October 7, 2009 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 82870347.

(1) Non-GAAP net income (loss) and diluted earnings (loss) per share excludes (a) amortization of intangible assets, (b) equity compensation expense, (c) specified non-recurring items, such as restructuring costs, the impairment of goodwill and valuation allowance against a deferred tax asset, (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 (loss) and diluted earnings (loss) 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 and is outside the control of management during the period in which the expense is incurred; (c) restructuring costs are not comparable across periods or with other companies and the impairment of goodwill and the valuation allowance against the deferred tax asset are non-recurring, non-cash and are not comparable across periods or with other companies; (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. 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 25 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 http://www.xyratex.com/. XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Nine Months Ended, Ended ------------ ----------- August 31, August 31, August 31, August 31, 2009 2008 2009 2008 ---- ---- ---- ---- (US dollars in thousands, except per share amounts) Revenues: Networked Storage Solutions $208,607 $213,100 $558,589 $633,470 Storage Infrastructure 37,687 67,680 66,329 130,819 ------ ------ ------ ------- Total revenues 246,294 280,780 624,918 764,289 ------- ------- ------- ------- Cost of revenues 205,068 231,293 537,601 641,312 Gross profit: Networked Storage Solutions 29,249 28,401 71,107 88,632 Storage Infrastructure 12,194 21,386 16,854 35,332 Equity compensation (217) (300) (644) (987) ---- ---- ---- ---- Total gross profit 41,226 49,487 87,317 122,977 ------ ------ ------ ------- Operating expenses: Research and development 17,243 22,279 53,502 63,171 Selling, general and administrative 14,265 17,050 42,925 47,702 Amortization of intangible assets 1,011 1,122 2,988 3,659 Restructuring costs 513 - 4,728 - --- --- ----- --- Total operating expenses 33,032 40,451 104,143 114,532 ------ ------ ------- ------- Operating income (loss) 8,194 9,036 (16,826) 8,445 Interest income, net 25 185 110 1,452 --- --- --- ----- Income (loss) before income taxes 8,219 9,221 (16,716) 9,897 Provision for income taxes 412 1,408 1,248 2,059 --- ----- ----- ----- Net income (loss) $7,807 $7,813 $(17,964) $7,838 ====== ====== ======== ====== Net earnings (loss) per share: Basic $0.26 $0.27 $(0.61) $0.27 ===== ===== ====== ===== Diluted $0.26 $0.26 $(0.61) $0.26 ===== ===== ====== ===== Weighted average common shares (in thousands), used in computing net earnings (loss) per share: Basic 29,462 29,166 29,387 29,178 ====== ====== ====== ====== Diluted 29,666 29,914 29,387 29,905 ====== ====== ====== ====== XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS August 31, November 30, 2009 2008 ---- ---- (US dollars and amounts in thousands) ASSETS Current assets: Cash and cash equivalents $38,324 $28,013 Accounts receivable, net 145,366 140,879 Inventories 100,046 128,183 Prepaid expenses 3,680 2,746 Deferred income taxes 1,000 1,000 Other current assets 1,879 4,430 ----- ----- Total current assets 290,295 305,251 Property, plant and equipment, net 45,931 47,229 Intangible assets, net 8,173 11,162 Deferred income taxes 8,709 9,545 ----- ----- Total assets $353,108 $373,187 ======== ======== LIABILITIES AND SHAREHOLDERS'' EQUITY Current liabilities: Accounts payable $105,948 $111,295 Employee compensation and benefits payable 8,509 9,745 Deferred revenue 9,654 8,386 Income taxes payable 2,473 2,573 Foreign currency contracts - 13,266 Other accrued liabilities 13,815 14,333 ------ ------ Total current liabilities 140,399 159,598 Long-term debt - - --- --- Total liabilities 140,399 159,598 ======= ======= Shareholders'' equity Common shares (in thousands), par value $0.01 per share 70,000 authorized, 29,462 and 29,146 issued and outstanding 294 291 Additional paid-in capital 369,183 366,067 Accumulated other comprehensive income (loss) 362 (13,603) Accumulated deficit (157,130) (139,166) -------- -------- Total shareholders'' equity 212,709 213,589 ------- ------- Total liabilities and shareholders'' equity $353,108 $373,187 ======== ======== XYRATEX LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended, ------------------ August 31, August 31, 2009 2008 ---- ---- (US dollars in thousands) Cash flows from operating activities: Net income (loss) $(17,964) $7,838 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 13,702 11,098 Amortization of intangible assets 2,988 3,659 Non-cash equity compensation 3,867 5,891 Changes in assets and liabilities, net of impact of acquisitions and divestitures Accounts receivable (4,487) (32,835) Inventories 28,137 (64,947) Prepaid expenses and other current assets 1,617 1,623 Accounts payable (5,347) 49,106 Employee compensation and benefits payable (1,236) (1,900) Deferred revenue 1,268 (3,668) Income taxes payable (100) 652 Deferred income taxes - 775 Other accrued liabilities 183 1,008 --- ----- Net cash provided by (used in) operating activities 22,628 (21,700) ------ ------- Cash flows from investing activities: Investments in property, plant and equipment (12,404) (17,252) Net cash used in investing activities (12,404) (17,252) ------- ------- Cash flows from financing activities: Repurchases of common shares - (6,037) Proceeds from issuance of shares 87 1,527 --- ----- Net cash provided by (used in) financing activities 87 (4,510) --- ------ Change in cash and cash equivalents 10,311 (43,462) Cash and cash equivalents at beginning of period 28,013 70,678 ------ ------ Cash and cash equivalents at end of period $38,324 $27,216 ======= ======= XYRATEX LTD SUPPLEMENTAL INFORMATION Summary Reconciliation Of GAAP Net (Income) Three Months Ended Nine Months Ended Loss To Non-GAAP August 31, August 31, August 31, August 31, Net Income (Loss) 2009 2008 2009 2008 ---- ---- ---- ---- (US dollars in (US dollars in thousands, except per thousands, except per share amounts) share amounts) GAAP net income (loss) $7,807 $7,813 ($17,964) $7,838 Amortization of intangible assets 1,011 1,122 2,988 3,659 Equity compensation 1,395 1,715 3,867 5,891 Restructuring costs 513 - 4,728 - Tax effect of non-GAAP adjustments - (794) - (2,767) Effect on deferred tax of changes to UK tax rates and exchange rates - 900 - 1,444 ------- ------- ------- ------- Non-GAAP net income (loss) $10,726 $10,756 ($6,381) $16,065 ======= ======= ======= ======= Summary Reconciliation Of Diluted GAAP Earnings (Loss) Per Share To Diluted Non-GAAP Earnings (Loss) Per Share Diluted GAAP earnings (loss) per share $0.26 $0.26 $(0.61) $0.26 Amortization of intangible assets 0.03 0.04 0.10 0.12 Equity compensation 0.05 0.06 0.13 0.20 Restructuring costs 0.02 - 0.16 - Tax effect of other non-GAAP adjustments 0.00 (0.03) - (0.09) Effect on deferred tax of changes to UK tax rates and exchange rates - 0.03 - 0.05 ----- ----- ------ ----- Diluted non-GAAP earnings (loss) per share $0.36 $0.36 ($0.22) $0.54 ===== ===== ====== ===== Summary Of Equity Compensation Cost of revenues 217 300 644 987 Research and development 458 555 1,285 1,902 Selling, general and administrative 720 860 1,938 3,002 ----- ----- ----- ----- Total equity compensation 1,395 1,715 3,867 5,891 ===== ===== ===== =====

Xyratex

CONTACT: Brad Driver , Xyratex Investor Relations, +1-408-325-7260,
bdriver@us.xyratex.com

Web Site: http://www.xyratex.com/