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News Release

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Cray Inc. Reports First Quarter 2009 Financial Results

Reports Record Net Cash of $104 Million

SEATTLE, WA, Apr 29, 2009 (MARKET WIRE via COMTEX) -- Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced financial results for the first quarter ended March 31, 2009. Revenue for the quarter was $74.5 million compared to $26.1 million in the prior year period. The company reported a net loss for the quarter of ($4.9 million) or ($0.15) per share compared to a net loss of ($12.0 million) or ($0.37) per share in the first quarter of 2008.

Total gross profit margin for the first quarter was 24 percent compared to 43 percent in the first quarter of 2008. As anticipated, product margin declined to 22 percent driven by a large, low-margin contract (on which $36 million was recognized in the first quarter of 2009). The first quarter 2009 service margin of 32 percent was impacted by a delay in the signing of a contract and revenue recognition issues relating to a custom engineering project on which we have been incurring costs.

Operating expenses for the first quarter of 2009 were $21.4 million compared to $22.8 million in the prior year period. The first quarter 2009 results included non-cash items of $2.2 million for gross depreciation and amortization and $2.4 million related to stock compensation expense, which includes approximately $1.4 million in accelerated amortization related to the stock option tender offer completed in the first quarter of 2009. Additionally, interest expense included $0.5 million of non-cash interest expense related to the adoption of a new accounting principle.

As of March 31, 2009, cash and short-term investments totaled $131.8 million and net cash was a record $104.1 million (cash and short-term investments less the face value of outstanding convertible notes of $27.7 million). Net cash at Dec. 31, 2008 was $52.7 million.

"We had a solid first quarter marked by strong revenue performance and excellent growth in our cash position," said Peter Ungaro, president and CEO of Cray. "With the hiring of Skip Richardson to lead our Custom Engineering business development team and the recent announcement of the XT5m, our new midrange supercomputer, we now have the pieces in place to deliver on our long-term strategic vision. We have more than doubled our addressable market in the last 18 months and, with the momentum created by the Cray XT5 supercomputer, we will continue to expand our position in the high performance computing industry."

Outlook

For the full-year 2009, a wide range of potential outcomes remain possible. Cray continues to expect revenue in the range of $260 million for the year with a small operating loss. Overall gross profit margin is expected to be in the low to mid-30 percent range, much improved from first quarter levels. Core operating expenses are anticipated to be lower by roughly $2 million from 2008 levels. We currently anticipate the balance of the annual revenue target to be weighted relatively evenly by quarter through the remainder of 2009, though results could fluctuate significantly depending on the timing of system acceptances.

Recent Highlights

--  During the first quarter, Cray announced the formation of a new
    subsidiary in India aimed at strengthening its presence in that country's
    growing high performance computing marketplace.  Also during the quarter,
    the Saha Institute of Nuclear Physics (SINP) in Calcutta, India selected
    the Cray XT5 supercomputer for its Theory Division.  SINP is the first
    customer in Cray's Asia Pacific region to acquire a Cray XT5 system.

--  During the first quarter, Cray was awarded a contract with a U.S.
    government agency for a new Cray XT5 system and services totaling
    approximately $31 million.  The first phase of the new system is scheduled
    for delivery in the second half of 2009.

--  In March, the company launched its new line of Cray XT5m midrange
    supercomputers.  The Cray XT5m system builds on the success of the Cray XT5
    system to deliver performance, efficiency and manageability unrivaled in
    its price range with capabilities that previously were only available to
    the world's largest research facilities.  The High Performance Computing
    Center Stuttgart (HLRS) at the University of Stuttgart, Germany is the
    first Cray XT5m customer.

--  In April, Cray announced continued momentum in the establishment of a
    worldwide reseller network for the Cray CX1 deskside supercomputer.  Cray
    has signed contracts with a dozen resellers around the world, including
    several in the U.S. and others in Italy, Spain, Korea and Japan. These
    resellers provide broad, global access to the high performance computing
    industry, including the scientific research and commercial market segments.

--  In April, Cray announced the appointment of Skip Richardson to the
    position of vice president of business development for the company's custom
    engineering team.  Richardson, who has more than 20 years of business
    development experience in the technology and aerospace industries, will be
    responsible for promoting Cray's custom engineering solutions to government
    agencies, commercial customers and systems integrators.


Conference Call Information

Cray will host a conference call today, Wednesday, April 29, 2009 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss 2009 first quarter financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at 1-877-941-1469. International callers should dial 1-480-629-9674. To listen to the live audio webcast, go to the Investors section of the Cray website at http://investors.cray.com.

If you are unable to attend the live conference call, an audio webcast replay will be available in the Investors section of the Cray website for 180 days. If you do not have Internet access, a replay of the call will be available by dialing 1-800-406-7325 and entering access code 4063244. International callers can listen to the replay by dialing 1-303-590-3030, access code 4063244. The conference call replay will be available for 72 hours, beginning at 4:30 p.m. Pacific Time on Wednesday, April 29, 2009.

About Cray Inc.

As a global leader in supercomputing, Cray provides highly advanced supercomputers and world-class services and support to government, industry and academia. Cray technology enables scientists and engineers to achieve remarkable breakthroughs by accelerating performance, improving efficiency and extending the capabilities of their most demanding applications. Cray's Adaptive Supercomputing vision will result in innovative next-generation products that integrate diverse processing technologies into a unified architecture, allowing customers to surpass today's limitations and meeting the market's continued demand for realized performance. Go to www.cray.com for more information.

Safe Harbor Statement

This press release contains forward-looking statements. There are certain factors that could cause Cray's execution to differ materially from those anticipated by the statements above. These factors include significantly fluctuating quarterly operating results; significant reliance on third-party development service and parts suppliers; the timing and successful passing of customer acceptance tests; the level, timing and continuation of government funding for supercomputer purchases and research and development activities, including the large DARPA HPCS contract; lower margin and operating results due to many variables; the technical challenges of developing high performance computing systems, including potential delays or changes in development programs that can result in lost revenue and delayed payment milestones; the possible adverse effects of the current economic uncertainty on government budgets; the successful porting of application programs to Cray supercomputer systems; winning and timing of new Custom Engineering contracts for 2009 performance; successful rate of customer adoption of the Cray CX1 system; anticipated revenue subject to complex revenue recognition rules; Cray's ability to compete against larger, more established companies and innovative competitors; and general economic and market conditions. For a discussion of these and other risks, see "Risk Factors" in Cray's most recent Annual Report on Form 10-K filed with the SEC.

Cray is a registered trademark, and Cray XT5m, Cray XT5 and Cray CX1 are trademarks of Cray Inc. All other trademarks are the property of their respective owners.

                        CRAY INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited and in thousands, except per share data)
                                               Quarter Ended
                                                 March 31,
                                             2009       2008
                                           ---------  ---------
                                                        (as
                                                      Adjusted)  (1)
REVENUE:
  Product                                  $  59,462  $  10,690
  Service                                     15,019     15,438
                                           ---------  ---------
    Total revenue                             74,481     26,128
                                           ---------  ---------
COST OF REVENUE:
  Cost of product revenue                     46,334      6,412
  Cost of service revenue                     10,276      8,359
                                           ---------  ---------
    Total cost of revenue                     56,610     14,771
    Gross profit                              17,871     11,357
                                           ---------  ---------
OPERATING EXPENSES:
  Research and development, net               11,215     13,719
  Sales and marketing                          6,063      5,382
  General and administrative                   4,146      3,696
                                           ---------  ---------
    Total operating expenses                  21,424     22,797
                                           ---------  ---------
    Loss from operations                      (3,553)   (11,440)
Other (expense) income, net                     (754)       253
Interest expense, net                           (533)      (496) (2)
                                           ---------  ---------
    Loss before income taxes                  (4,840)   (11,683)
Income tax expense                               (48)      (282)
                                           ---------  ---------
    Net loss                               $  (4,888) $ (11,965) (2)
                                           =========  =========
    Diluted net loss per common share      $   (0.15) $   (0.37) (3)
                                           =========  =========
    Diluted weighted average shares
     outstanding                              33,197     32,371
                                           =========  =========
(1) March 31, 2008 results have been adjusted for the adoption of FASB
Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) ("FSP APB 14-1").
(2) Summary of adjustments due to retrospective application of FSP APB 14-1
to Previously Reported March 31, 2008 balances:
                                         As
                                     Previously                    As
                                      Reported     Adjustment   Adjusted
                                     -----------  -----------  -----------
Interest income (expense), net       $       837  $    (1,333) $      (496)
Net loss                                 (10,632)      (1,333)     (11,965)
(3) Previously reported net loss per common share for the three months
period ended March 31, 2008 was $(0.33) per share
                 CRAY INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED BALANCE SHEETS
              (Unaudited and in thousands)
                                                      December
                                           March 31,     31,
                                             2009       2008
                                           ---------  ---------
                                                         (As
                                                      Adjusted) (1)
                   ASSETS
Current assets:
  Cash and cash equivalents                $ 123,428  $  72,373
  Restricted cash                              2,691      2,691
  Short-term investments,
   available-for-sale                          5,641      5,350
  Accounts receivable, net                    23,756     95,667
  Inventory                                   53,726     80,437
  Prepaid expenses and other current
   assets                                     23,630     29,993 (2)
                                           ---------  ---------
    Total current assets                     232,872    286,511
Property and equipment, net                   18,246     18,396
Service inventory, net                         1,734      1,917
Deferred tax asset                             1,716      1,200
Other non-current assets                       6,533      5,837
                                           ---------  ---------
    TOTAL ASSETS                           $ 261,101  $ 313,861
                                           =========  =========
     LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                         $  20,012  $  16,730
  Accrued payroll and related expenses        10,267     23,672
  Advance research and development
   payments                                    1,432     13,887
  Convertible notes                           26,218     25,681 (2)
  Other accrued liabilities                    6,173     24,670
  Deferred revenue                            56,847     67,692
                                           ---------  ---------
    Total current liabilities                120,949    172,332
Long-term deferred revenue                    17,782     18,154
Other non-current liabilities                  3,070      3,170
                                           ---------  ---------
    TOTAL LIABILITIES                        141,801    193,656
Shareholders' equity:
  Common stock and additional paid-in
   capital                                   546,431    543,442 (2)
  Accumulated other comprehensive income      10,358      9,364
  Accumulated deficit                       (437,489)  (432,601)(2)
                                           ---------  ---------
    TOTAL SHAREHOLDERS' EQUITY               119,300    120,205
                                           ---------  ---------
    TOTAL LIABILITIES AND
     SHAREHOLDERS' EQUITY                  $ 261,101  $ 313,861
                                           =========  =========
(1) December 31, 2008 balances have been adjusted for the adoption of FASB
Staff Position No. APB 14-1, Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement) ("FSP APB 14-1").
(2) Summary of adjustments due to retrospective application of FSP APB 14-1
to Previously Reported December 31, 2008 balances:
                                         As
                                     Previously                    As
                                       Reported   Adjustment     Adjusted
                                     -----------  -----------  -----------
Prepaid expenses and other
 current assets                    $    30,023  $       (30) $    29,993
Convertible notes                       27,727       (2,046)      25,681
Common stock and additional
 paid-in capital                       518,727       24,715      543,442
Accumulated deficit                   (409,902)     (22,699)    (432,601)

Cray Media:
Nick Davis
206/701-2123
pr@cray.com

Investors:
Paul Hiemstra
206/701-2044
ir@cray.com

SOURCE: Cray Inc.

mailto:pr@cray.com
mailto:ir@cray.com

 

   

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