Press Release

Xyratex Ltd Announces Results for the First Quarter Fiscal Year 2012

Thursday, March 29, 2012

Declares Quarterly Cash Dividend

Havant, UK – March 29, 2012 – Xyratex Ltd (Nasdaq: XRTX), a leading provider of data storage technology, today announced results for the first fiscal quarter ended February 29, 2012. Revenues for the first quarter were $295.7 million, a decrease of 18% compared to revenues of $360.5 million for the same period last year.

Click here to view the financial tables (19KB PDF file).

For the first quarter, GAAP net income was $10.9 million, or $0.38 per diluted share, compared to GAAP net income of $4.7 million, or $0.15 per diluted share, in the same period last year. Non-GAAP net income was $11.4 million, or $0.40 per diluted share, compared to non-GAAP net income of $7.5 million, or $0.24 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the first quarter was 17.9%, compared to 13.7% in the same period last year and 17.7% in the prior quarter. The increase from last year primarily reflects changes in customer mix of sales of our enterprise data storage solutions.

The Company declared its third dividend in the first quarter. The cash dividend was set at $0.065 per share. The Company’s cash balance amounted to $155.8 million at the end of the first quarter, an increase of $23.2 million from the prior quarter.

Today, the Company also announced that its Board of Directors has approved a quarterly cash dividend of $0.075 per share, which represents an increase of $0.01 per share from the prior quarter. The dividend will be payable on April 26, 2012 to shareholders of record as of the close of business on April 12, 2012. This dividend represents a quarterly payout of approximately $1.8 million in aggregate, or $7.2 million on an annualized basis.

“I was pleased with our first quarter results, with revenues in line with our expectations and net income at the high end of our expectations as a result of better than expected gross margins across our product ranges and lower expenditures. As we had anticipated in January, our ability to meet our enterprise data storage customers’ demand requirements has been slightly impacted by a limited supply of enterprise disk drives. While the situation is improving each day, we are working hard to ensure we secure as many drives as possible to meet the demand of our customers,” said Steve Barber, CEO of Xyratex. “We are extremely focused on executing with regard to all the new opportunities that we have as a result of entering into the High Performance Computing space this year with our ClusterStor product line and working closely with our HDD customers now that the acquisitions by Seagate and Western Digital have been completed. The opportunities in both industries that we serve are numerous, and I believe we are well positioned to capitalize on them through the end of the year and beyond.”

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Our forecast ranges are wider than normal due to the uncertainty surrounding disk drive availability following the flooding in Thailand last fall.   

• Revenue in the second fiscal quarter of 2012 is projected to be in the range of $297 to $357 million.
• Fully diluted earnings per share is anticipated to be between $0.08 and $0.35 on a GAAP basis in the second quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between $0.16 and $0.43. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense. 
 

Conference Call Information
 
The company will host a conference call to discuss its results at 1:30 p.m. PT/4:30 p.m. ET on Thursday, March 29, 2012.
 
The conference call can be accessed online via the company’s website www.xyratex.com/investors, or by telephone as follows:
United States                     (866) 202-1971
Outside the United States  (617) 213-8842 
Passcode                             70245357
 
A replay will be available via the company’s website www.xyratex.com/investors, or can be accessed by telephone through April 5, 2012 as follows:
United States                       (888) 286-8010
Outside the United States    (617) 801-6888
Passcode                              68830210

(1) Non-GAAP net income and diluted earnings per share exclude (a) amortization of intangible assets, (b) equity compensation expense, (c) the tax effects related to (a) and (b) and (d) the recognition of a Malaysia deferred tax asset. 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 while recognizing that they have material limitations and that they should only be referred to with reference to, and not considered to be a substitute for, or superior to, the corresponding GAAP measure. The financial results calculated in accordance with GAAP and reconciliations of these non-GAAP measures to the comparable GAAP measures should be carefully evaluated. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

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) the exclusion of the related tax effects of excluding items (a) and (b) 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 and (d) the recognition of the Malaysia deferred tax asset relates to the potential for the non-renewal of certain tax incentive arrangements in 2012. Item (d) is non-recurring and will reverse if the incentive arrangements are renewed.
 

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 retain major customers, the cyclical nature of the markets in which we operate, changes in our customers’ volume requirements, our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, deterioration in global economic conditions, diminished growth in the volume of digital information, patent infringement claims and our inability to protect our intellectual property and the impact of natural disasters. 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 data storage technology, including modular solutions for the enterprise data storage industry, and hard disk drive (HDD) capital equipment for the HDD industry. Xyratex enterprise data storage platforms provide a range of advanced, scalable data storage solutions for the Original Equipment Manufacturer and High Performance Computing communities. As the largest capital equipment supplier to the HDD industry, Xyratex enables disk drive manufacturers and their component suppliers to meet today’s technology and productivity requirements. Xyratex has over 25 years of experience in research and development relating to disk drives, storage systems and manufacturing process technology.
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 North America, Asia and Europe.

Contacts:

Vice President of Investor Relations
Brad Driver
Tel: +1 (510) 687-5260
Email: bdriver@xyratex.com