SEATTLE--(BUSINESS WIRE)--May 9, 2005--Global supercomputer leader
Cray Inc. (Nasdaq:CRAY) today reported financial results for the first
quarter ended March 31, 2005. Total revenue for the quarter was $37.6
million, compared to $42.1 million in the same period a year ago. Net
loss for the quarter was ($21.0) million, or a loss of ($.24) per
share, compared to a net loss of ($3.8) million or loss of ($.05) per
share in the first quarter last year.
Revenue for the first quarter did not include several systems that
were shipped and installed for which the Company did not recognize
revenue due to pending customer acceptances. The Company expects that
the revenue for those systems will be recognized over the second and
third quarters.
"We began the year with a weak quarter. Operationally, we met a
number of our milestones including shipments and bookings. However,
financial results were impacted by large manufacturing variances and
abnormally high research and development costs. And, on a positive
note, our twelve month product backlog grew to $127 million, up $44
million from December 31, 2004," commented Jim Rottsolk, Chairman and
CEO. "Bookings continue to grow and demonstrate that our three new
products, the Cray X1E, XT3 and XD1 systems, are beginning to gain
traction in their respective markets," said Rottsolk.
Gross margin was negatively impacted by approximately $5.0 million
of manufacturing variances, which includes a $2.2 million charge
related to the absorption of manufacturing overhead, a $1.0 million
non-recurring charge related to termination of a manufacturing
agreement with IBM, a $290,000 non-cash charge related to the
recognition of an unfunded pension liability in one of our European
subsidiaries and $144,000 of inventory write-offs.
In addition, operating expenses were $23.7 million in the first
quarter, primarily due to sharply higher than planned net research and
development costs related to a deployment of engineering resources
during the quarter from funded projects to the Sandia Red Storm
program, as well as the timing of funding for certain engineering
projects, and higher than normal amortization charges relating to
deferred compensation expenses. In addition, general and
administrative expenses continued to be impacted by increased auditing
fees and ongoing costs related to Sarbanes-Oxley compliance
initiatives.
Inventory increased from $71.5 million to $103.2 million as the
result of ramp up of all three new Cray products during the quarter.
At the end of the quarter, approximately $37.3 million of the
inventory value was installed at customer sites awaiting acceptance
and revenue recognition.
Cash and short-term investments at the end of the quarter were
$43.1 million, down from $87.4 million as of December 31, 2004. At the
end of last year, the Company raised capital to fund anticipated costs
of inventory ramp and losses early in 2005. The Company expects cash
and inventory levels will return to more normal levels by the end of
the year as systems are accepted and paid for. In the meantime, the
Company is focused on expense controls and working capital
efficiencies to maintain adequate levels of cash, and is working to
improve flexibility under its banking relationships.
Recent Highlights
- Cray promoted Peter Ungaro to the position of President from
his previous position as Senior Vice President responsible for
worldwide sales, marketing and service. Peter now oversees
operations, including engineering, worldwide sales and
marketing, manufacturing and service.
- Margaret (Peg) Williams was named Senior Vice President and
will be responsible for all of Cray engineering. She joins
Cray from IBM where she served as Vice President of Database
Technology.
- The first customer acceptance of the new Cray XT3 system was
by the Japan Advanced Institute of Science and Technology, one
of Japan's premier academic research centers.
- Cray installed a Cray XT3 system at the Swiss National
Supercomputing Center, the first such installation in Europe,
and continued major installations at Oak Ridge National
Laboratory and Pittsburgh Supercomputing Center.
- The Army High Performance Computing Research Center acquired
and installed a Cray X1E upgrade vector supercomputer that
will nearly triple the performance of the previously installed
Cray X1. This system was accepted in the second quarter.
- Cray announced multiple orders for its Cray XD1 supercomputer,
including installations at CINECA in Italy; Air Force's Maui
Center; National Institutes of Health; CERFACS in France;
Ashton University in England and international consulting and
software firm, CD-adapco.
Outlook
"With a solid product backlog at $127 million over the next 12
months and all three products in full production, we expect improved
results for the next six months, but do not yet have a clear picture
of the full year," said Rottsolk.
"In the meantime, we will appeal the Nasdaq delisting notice that
we discussed in a separate press release, and continue to work on our
selection process to replace Cray's independent auditor and recruit a
new chief financial officer," he said. "We take our Sarbanes Oxley
efforts seriously and will continue our efforts to achieve full
compliance."
Conference Call Information
Management will discuss first quarter financial results and the
Company's outlook, followed by a question and answer session for
investors today, Monday, May 9, at 2:00 p.m. Pacific Time.
To access the call, please dial into the conference at least 10
minutes prior to the beginning of the call at 1-800-257-3401.
International callers should dial 303-262-2006. To listen to the live
audio webcast, go to in the Investors section of the Cray website at
http://investors.cray.com or to www.streetevents.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 365 days.
If you do not have Internet access, a replay of the call will be
available by dialing 1-800-405-2236 and entering access code
11028847#. International callers can listen to the replay by dialing
303-590-3000, access code 11028847#. The conference call replay will
be available for 48 hours, beginning at 5:00 p.m. Pacific Time, May 9,
2005.
Safe Harbor Statement
This press release contains forward-looking statements. There are
certain factors that could cause Cray's execution plans to differ
materially from those anticipated by the statements above. These
include the technical challenges of developing high performance
computing systems, fluctuating quarterly operating results, lower
margins and earnings due to significant pricing pressure and new
product introduction expenses, government support and timing of
supercomputer system purchases, the successful porting of application
programs to Cray computer systems, reliance on third-party suppliers,
Cray's ability to keep up with rapid technological change, 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 "Factors That Could
Affect Future Results" in Cray's most recent Annual Report on Form
10-K filed with the SEC.
About Cray
As the global leader in high performance computing (HPC), Cray
provides innovative supercomputing systems that enable scientists and
engineers in government, industry and academia to meet both existing
and future computational challenges. Building on years of experience
in designing, developing, marketing and servicing the world's most
advanced supercomputers, Cray offers a comprehensive portfolio of HPC
systems that deliver unrivaled sustained performance on a wide range
of applications. Go to www.cray.com for more information.
Cray is a registered trademark of Cray Inc. All other trademarks
are the property of their respective owners.
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
2004 2005
------------ -------------
REVENUE:
Product $ 28,368 $ 26,310
Service 13,767 11,324
------------ -------------
Total revenue 42,135 37,634
------------ -------------
OPERATING EXPENSES:
Cost of product revenue 19,755 26,352
Cost of service revenue 8,581 7,575
Research and development 9,042 13,032
Marketing and sales 7,646 6,599
General and administrative 2,873 4,267
Restructuring credit - (215)
------------ -------------
Total operating expenses 47,897 57,610
------------ -------------
Loss from operations (5,762) (19,976)
OTHER EXPENSE, NET (386) (502)
INTEREST INCOME (EXPENSE), NET 143 (437)
------------ -------------
Loss before income taxes (6,005) (20,915)
PROVISION (BENEFIT) FOR INCOME TAXES (2,162) 120
------------ -------------
Net loss $ (3,843) $(21,035)
============ =============
Net loss per common share:
Basic $ (0.05) $ (0.24)
============ =============
Diluted $ (0.05) $ (0.24)
============ =============
Weighted average shares outstanding:
Basic 72,977 88,114
============ =============
Diluted 72,977 88,114
============ =============
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
December 31, March 31,
2004 2005
-------------- --------------
(unaudited)
Current assets:
Cash and cash equivalents $ 41,732 $ 3,939
Restricted cash 11,437 11,434
Short-term investments, available for
sale 34,253 27,740
Accounts receivable, net of allowance
of $1,439 and $1,359, respectively 33,185 41,978
Inventory 71,521 103,159
Prepaid expenses and other current
assets 5,225 7,119
-------------- --------------
Total current assets 197,353 195,369
Property and equipment, net 36,875 38,865
Service spares, net 3,590 3,439
Goodwill 55,644 55,103
Intangible assets, net 6,197 5,774
Other non-current assets 9,130 10,439
-------------- --------------
TOTAL $ 308,789 $ 308,989
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,875 $ 45,134
Accrued payroll and related expenses 14,970 11,283
Other accrued liabilities 8,214 7,606
Deferred revenue 54,246 55,514
-------------- --------------
Total current liabilities 101,305 119,537
Deferred tax liability 1,662 1,507
Other non-current liabilities 522 2,181
Notes payable 80,000 80,000
Commitments and Contingencies
Shareholders' equity:
Common stock and additional paid in
capital , par $.01 - Authorized,
150,000,000 shares; issued and
outstanding, 87,348,641 and
87,849,354 shares, respectively 413,911 415,734
Exchangeable shares, no par value,
unlimited shares authorized; issued
and outstanding, 570,963 and 506,017
shares, respectively 4,173 3,698
Deferred compensation (4,220) (2,974)
Accumulated other comprehensive income 4,560 3,465
Accumulated deficit (293,124) (314,159)
-------------- --------------
125,300 105,764
-------------- --------------
TOTAL $ 308,789 308,989
============== ==============
CONTACT: Cray/Media:
Steve Conway, 651/592-7441
sttico@aol.com
or
Investors:
John Snyder, 206/262-0291
john@snyderir.com
SOURCE: Cray Inc.
Investors
