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News Release

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Cray Inc. Reports Fourth Quarter and Full Year 2009 Results
Company Posts Record Annual Revenue
SEATTLE, WA, Feb 16, 2010 (MARKETWIRE via COMTEX) -- Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced 2009 financial results for the fourth quarter and full-year. Revenue for the fourth quarter of 2009 was $88.2 million compared to $155.4 million in the fourth quarter of 2008. The fourth quarter of 2008 revenue included approximately $100 million from a single transaction, the Cray XT5 supercomputer at Oak Ridge National Laboratory, known as "Jaguar" (currently the fastest supercomputer in the world). The company reported net income for the fourth quarter of 2009 of $3.0 million, or $0.08 per share, compared to a net loss of ($26.0 million), or ($0.79) per share, in the fourth quarter 2008. A non-cash, goodwill impairment of $54.5 million was taken in the fourth quarter of 2008.

For 2009, Cray reported record revenue of $284.0 million and a net loss of ($0.6 million), or ($0.02) per share. For 2008, revenue was $282.9 million and net loss was ($40.7 million), or ($1.25) per share.

For the fourth quarter 2009, overall gross profit margin was 41 percent compared to 36 percent in the fourth quarter 2008. Product margin for the quarter was 43 percent compared to 36 percent in the prior year period, and fourth quarter 2009 service margin was 37 percent. Overall gross profit margin for 2009 was 37 percent compared to 39 percent in 2008. Product margin for 2009 was 34 percent compared to 39 percent in 2008 and service margin for 2009 was 44 percent compared to 40 percent for 2008.

Core operating expenses, consisting of research and development, sales and marketing, and general and administrative expenses, increased to $106.1 million in 2009 from $93.5 million in 2008. The increase in operating expenses in 2009 was primarily due to increased research and development ("R&D") expenses resulting from a delayed Defense Advanced Research Projects Agency ("DARPA") contract modification and related development milestones. Included in the 2009 results were $8.5 million for depreciation and amortization and $5.8 million related to stock compensation. Additionally, 2009 results were negatively impacted by $2.0 million of non-cash items related to recent changes in accounting guidelines applicable to our now retired convertible notes.

Core operating expenses in the fourth quarter 2009 were $33.7 million compared to $27.2 million in the prior year period. Included in the fourth quarter 2009 results were non-cash items of $2.1 million for depreciation and amortization and $1.2 million related to stock compensation.

As of December 31, 2009, cash and short-term investments totaled $113.2 million.

"I am very pleased that we were able to post another year of record revenues, including strong growth in our custom engineering initiative," said Peter Ungaro, president and CEO of Cray. "While we didn't reach our goal of profitability, driven by a delay in our development contract modification and associated milestone with DARPA, we continued to improve our balance sheet by eliminating all of our debt and ended the year in a very solid net cash position -- another record for us."

Ungaro added, "For 2010, we have already finalized this DARPA contract modification and are on our way toward a strong year. Building on the broad strength of our XT supercomputer line and through our new initiatives, our business is stronger and more diversified than in the past. Our addressable market continues to expand with planned product introductions over the course of 2010 and we expect custom engineering to continue to grow at a very fast pace. With the recent announcement of our XT6 supercomputer and the planned release of our next-generation system we call 'Baker,' which builds on the system architecture of the world's fastest supercomputer and improves it in every dimension, we are in an excellent position to have an outstanding 2010."

Outlook

A wide range of results remains possible for 2010. Many variables may impact our results, but one significant item is the timing of the availability and release of our next generation supercomputer, code-named "Baker," including its new interconnect chipset, known as "Gemini," and associated system software.

Assuming a successful release of Baker in the third quarter of 2010 as currently planned, we anticipate revenue in the range of $305 to $325 million for 2010. As a result of the timing of the Baker system release, we expect a significant majority of 2010 revenue to be recognized in the fourth quarter. Service revenue is expected to be in the range of $110 million for 2010, driven by strong growth in our custom engineering initiative. Gross margins for 2010 are expected to be in the mid-30 percent range. Operating expenses are expected to be lower in 2010 than in 2009, driven primarily by lower research and development expenses for the year. Based on this outlook, we expect to be profitable for 2010.

We expect to use cash in 2010, with the majority of the decline coming in the third quarter as we build inventory for product deliveries during the second half of 2010.

Recent Highlights

--  During the fourth quarter, Cray successfully installed and received
    acceptance for the upgrade to the Cray XT5 supercomputer named "Jaguar"
    at the Oak Ridge National Laboratory. With this system clocking in at
    over two petaflops of peak performance, several real-world applications
    were run at speeds well beyond anything previously achieved. An Oak
    Ridge research team recorded an unprecedented sustained performance of
    over one petaflops on an important quantum chemistry problem and
    another in material science research that may facilitate new storage
    mediums and the development of lighter, stronger motors for electric
    vehicles. Also, following the upgrade, the Jaguar system was recognized
    by the Top 500 list (www.top500.org) as the world's fastest
    supercomputer.
--  In November, Cray announced that Dell will be the exclusive reseller of
    its latest deskside supercomputer, the Cray CX1-iWS system. The Cray
    CX1-iWS combines a powerful Microsoft Windows 7 workstation with a
    fully integrated high-performance computing (HPC) cluster running
    Microsoft Windows HPC Server 2008. With a list price beginning at
    under $40,000, the Cray CX1-iWS is designed to address a market need
    for a new generation of workstations.
--  In early 2010, Cray's custom engineering group was awarded a contract
    with a large commercial customer to research and prototype a system
    infrastructure for future use in the customer's cloud computing data
    centers. The one-year contract represents the custom engineering
    group's first breakthrough into the commercial market.
--  During the first quarter of 2010, an amendment to our development
    agreement with DARPA was finalized. Consistent with previous
    disclosure, the remaining amount of the contract was reduced by
    $60 million, to $92.5 million. The contract reduces the project's
    overall scope, and consequently we expect future R&D expenses related
    to this program, net of reimbursement, to be lower than previously
    anticipated. As with the previous contract, the balance of the modified
    contract is expected to be received through achievement of a series of
    pre-defined milestones culminating in the delivery of a prototype
    system in 2012. The next payable milestone is expected to be completed
    later in the first quarter of 2010.

Conference Call Information

Cray will host a conference call today, Tuesday, February 16, 2010 at 1:15 p.m. Pacific Time (4:15 p.m. Eastern Time) to discuss fourth quarter and full-year 2009 financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at 1-800-762-8795. International callers should dial 1-480-629-9774. 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 4220054. International callers can listen to the replay by dialing 1-303-590-3030, access code 4220054. The conference call replay will be available for 72 hours, beginning at 4:15 p.m. Pacific Time on Tuesday, February 16, 2010.

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 is designed to enable 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 is focused on delivering 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 within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but not limited to, statements related to Cray's financial guidance and expected future operating results, its product development plans, including its planned release of the Baker system, its ability to complete and receive payment on co-funded development milestones pursuant to its DARPA agreement, its ability to grow revenue from its Custom Engineering business and its ability to expand and penetrate its addressable market. These statements involve current expectations, forecasts of future events and other statements that are not historical facts. Inaccurate assumptions as well as known and unknown risks and uncertainties can affect the accuracy of forward-looking statements and cause actual results to differ materially from those anticipated by these forward-looking statements. Factors that could affect actual future events or results include, but are not limited to, the risk that Cray does not achieve the operational or financial results that it expects, the risk that customer acceptances are not received when expected or at all, the risk that Cray is not able to successfully complete its planned product development efforts or to ship the Baker system within the planned timeframe or at all, the risk that Cray is not able to achieve and obtain acceptance of co-funded development milestones when or as expected or at all, the risk that Cray will not be successful in growing revenue from its strategic initiatives, including Custom Engineering, the risk that Cray will not be able to expand and penetrate its addressable market as expected or at all and such other risks as identified in the Company's quarterly report on Form 10-Q for the period ended September 30, 2009, and from time to time in other reports filed by Cray with the U.S. Securities and Exchange Commission. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. Cray undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change the Company's expectations.

Cray is a registered trademark and Cray XT6, Cray XT5 and Cray CX1-iWS are trademarks of Cray Inc. Other product and service names mentioned herein are the trademarks of their respective owners.

                        CRAY INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited and in thousands, except per share data)
                           Three Months Ended           Year Ended
                              December 30,             December 30,
                            2009       2008          2009       2008
                          ---------  ---------     ---------  ---------
                                   (As Adjusted)            (As Adjusted)
                                        (1)                      (1)
REVENUE:
  Product                 $  65,177  $ 137,364     $ 199,114  $ 218,970
  Service                    23,070     18,035        84,933     63,883
                          ---------  ---------     ---------  ---------
     Total revenue           88,247    155,399       284,047    282,853
                          ---------  ---------     ---------  ---------
COST OF REVENUE:
  Cost of product revenue    37,063     88,034       130,444    133,715
  Cost of service revenue    14,624     11,100        47,719     38,062
                          ---------  ---------     ---------  ---------
     Total cost of
      revenue                51,687     99,134       178,163    171,777
                          ---------  ---------     ---------  ---------
     Gross profit            36,560     56,265       105,884    111,076
                          ---------  ---------     ---------  ---------
OPERATING EXPENSES:
  Research and
   development, net          20,701     13,802        62,947     51,775
  Sales and marketing         7,918      7,623        26,601     24,988
  General and
   administrative             5,056      5,806        16,579     16,742
  Restructuring and
   impairment                     -     54,450             -     54,450
                          ---------  ---------     ---------  ---------
    Total operating
     expenses                33,675     81,681       106,127    147,955
                          ---------  ---------     ---------  ---------
    Income (loss) from
     operations               2,885    (25,416)         (243)   (36,879)
Other income (expense),
 net                            145        227 (1)      (430)       588 (1)
Interest income
 (expense), net                  44       (686)(1)      (805)    (4,068)(1)
                          ---------  ---------     ---------  ---------
    Income (loss) before
     income taxes             3,074    (25,875)       (1,478)   (40,359)
Income tax benefit
 (expense)                     (103)       (85)          874       (387)
                          ---------  ---------     ---------  ---------
    Net income (loss)     $   2,971  $ (25,960)(1) $    (604) $ (40,746)(1)
                          =========  =========     =========  =========
    Diluted net income
     (loss) per common
     share                $    0.08  $   (0.79)(1) $   (0.02) $   (1.25)(1)
                          =========  =========     =========  =========
    Diluted weighted
     average shares
     outstanding             35,015     32,769        33,559     32,573
                          =========  =========     =========  =========
(1) December 31, 2008 results have been adjusted for new guidance included
in Accounting Standards Codification Topic 470, Debt, related to
convertible debt instruments that may be settled in cash upon conversion
A summary of adjustments due to retrospective application to previously
reported results for the three months and year ended December 31, 2008:
For the three months ended December 31, 2008:
                                            As
                                        Previously                  As
                                         Reported   Adjustment   Adjusted
                                        ----------  ----------  ----------
Other income (expense), net             $    4,772  $   (4,545) $      227
Interest income (expense), net                  37        (723)       (686)
Net loss                                   (20,692)     (5,268)    (25,960)
Diluted net loss per common share            (0.63)      (0.16)      (0.79)
For the year ended December 31, 2008:
                                            As
                                        Previously                  As
                                         Reported   Adjustment   Adjusted
                                        ----------  ----------  ----------
Other income (expense), net             $    5,133  $   (4,545) $      588
Interest income (expense), net                 787      (4,855)     (4,068)
Net loss                                   (31,346)     (9,400)    (40,746)
Diluted net loss per common share            (0.96)      (0.29)      (1.25)
                        CRAY INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                       (Unaudited and in thousands)
                                                   December   December
                                                      31,        31,
                                                     2009       2008
                                                   ---------  ---------
                                                                 (As
                                                              Adjusted)(1)
                      ASSETS
Current assets:
   Cash and cash equivalents                       $ 105,018  $  72,373
   Restricted cash                                     5,161      2,691
   Short term investments, available-for-sale          2,999      5,350
   Accounts and other receivables, net                38,207     95,667
   Inventory                                          29,011     80,437
   Prepaid expenses and other current assets           5,514     29,993 (1)
                                                   ---------  ---------
          Total current assets                       185,910    286,511
Property and equipment, net                           19,809     18,396
Service inventory, net                                 1,719      1,917
Deferred tax asset                                     2,661      1,200
Other non-current assets                              13,561      5,837
                                                   ---------  ---------
          TOTAL ASSETS                             $ 223,660  $ 313,861
                                                   =========  =========
      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                $  18,783  $  16,730
   Accrued payroll and related expenses               16,219     23,672
   Advance research and development payments               -     13,887
   Short-term convertible notes                            -     25,681 (1)
   Other accrued liabilities                           9,735     24,670
   Deferred revenue                                   42,414     67,692
                                                   ---------  ---------
          Total current liabilities                   87,151    172,332
Long-term deferred revenue                             9,627     18,154
Other non-current liabilities                          2,719      3,170
                                                   ---------  ---------
          TOTAL LIABILITIES                           99,497    193,656
Shareholders'  equity:
   Common stock and additional paid-in capital       551,220    543,442 (1)
   Accumulated other comprehensive income              6,148      9,364
   Accumulated deficit                              (433,205)  (432,601)(1)
                                                   ---------  ---------
          TOTAL SHAREHOLDERS' EQUITY                 124,163    120,205
                                                   ---------  ---------
          TOTAL LIABILITIES AND SHAREHOLDERS'
           EQUITY                                  $ 223,660  $ 313,861
                                                   =========  =========
(1) December 31, 2008 results have been adjusted for new guidance included
in Accounting Standards Codification Topic 470, Debt, related to
convertible debt instruments that may be settled in cash upon conversion
A summary of adjustments due to retrospective application 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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