SEATTLE--(BUSINESS WIRE)--April 29, 2004--Global supercomputer
leader Cray Inc. (Nasdaq NM:CRAY) today reported financial results for
the first quarter ended March 31, 2004.
The company reported total revenue of $42.1 million for the first
quarter, compared to $44.1 million in the same period last year.
Operations for the period resulted in a loss of $3.8 million, or $.05
per share, compared to net income of $1.2 million, or $.02 per share,
in the first quarter of 2003.
Product gross margin declined to 30.4 percent from 42.1 percent in
the first quarter of 2003 due primarily to product mix. The company
shipped fewer-than-anticipated Cray X1(TM) systems and shipped some
lower-margin cluster systems. Additionally, low-margin revenue was
generated from continued performance on the Red Storm and Cascade
engineering projects.
Service revenue declined as expected to $13.8 million, from $16.8
million in the first quarter of 2003. Service margin, at 37.7 percent,
was above target.
"Quarter one results were affected by government procurement
delays and a general slow-down in the defense segment," said Jim
Rottsolk, CEO of Cray Inc. "While we are making progress on the sales
front and orders have begun to pick up, the weakness in revenue
experienced in the first quarter will continue through the first half.
Until we introduce the Cray X1E(TM), Red Storm and Cray XD1(TM)
products in the second half, the Cray X1 system remains our major
source of revenue.
"Once these new products become available, we anticipate
significant, accelerating growth. However, it is unlikely that we will
make up for the first half shortfall in time to meet our 2004 plan,"
said Rottsolk. "We are focused on building our order pipeline,
delivering new products and positioning the company for substantial
growth and profitability.
"By the end of 2004, we will have the strongest product portfolio
in the industry," Rottsolk added. "With the Cray XD1 system along with
our previously announced Red Storm and Cray X1 systems, we can address
the entire HPC market with high-bandwidth, purpose-built solutions."
Recent Highlights
We are pleased to announce that Korea's Public Procurement Service
has selected Cray to supply the next-generation supercomputer to the
Korea Meteorological Administration. This award, based on the Cray X1
product family, is worth more than $43 million and is subject to
contract completion.
Separately, the Pittsburgh Supercomputing Center (PSC) has advised
Cray that it is placing an advance order for the company's upcoming
product based on the Sandia "Red Storm" supercomputer. This is the
first disclosed customer for the new product line, which will be
launched later this year.
Cray previously announced an order for a Cray X1 supercomputer
system from Madison Research Corporation for the U.S. Army Space and
Missile Defense Command (SMDC). The company also announced the first
Cray X1 system order in the subcontinent of India from the Tata
Institute of Fundamental Research.
On April 1, Cray completed the acquisition of Vancouver-based
OctigaBay Systems Corporation and announced the naming of its high
bandwidth product now known as the Cray XD1 system. According to IDC,
this acquisition, together with the Red Storm product, more than
quadruples Cray's addressable market. The first Cray XD1 beta system
has already shipped, with other beta systems expected to follow during
the second quarter. Said Rottsolk, "The addition of the Cray Canada
team is very exciting for us. The XD1 system rounds out our HPC
product line and opens the door to market expansion beyond traditional
HPC users."
Investor Conference Call
Management will discuss results and the company's outlook followed
by a question and answer session for investors today, April 29 at 8:00
a.m. Pacific Time (11:00 a.m. Eastern Time). The call-in number is
800-867-0448. International callers should dial 303-275-2170. If you
are unable to participate, a replay will be available from 10 a.m.
Pacific Time on April 29, 2004 for 48 hours. To access, dial
800-405-2236 or 303-590-3000 (international) -- enter access code
576111. The conference call will be webcast live and will be archived
for 90 days. It will be available in the Investors section of the Cray
website at http://investors.cray.com.
About Cray Inc.
Cray's mission is to be the premier provider of supercomputing
solutions for its customers' most challenging scientific and
engineering problems. Go to www.cray.com for more information about
the company.
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, 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 Annual Report on
Form 10-K filed with the SEC on March 12, 2004.
Cray is a registered trademark of Cray Inc. All other trademarks
are the property of their respective owners.
TABLES TO FOLLOW
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
2003 2004
------------ ------------
REVENUE:
Product $ 27,284 $ 28,368
Service 16,845 13,767
------------ ------------
Total revenue 44,129 42,135
------------ ------------
OPERATING EXPENSES:
Cost of product revenue 17,675 19,755
Cost of service revenue 10,281 8,581
Research and development 7,475 9,042
Marketing and sales 5,521 7,646
General and administrative 1,874 2,873
------------ ------------
Total operating expenses 42,826 47,897
------------ ------------
Income (loss) from operations 1,303 (5,762)
OTHER EXPENSE, NET (53) (386)
INTEREST INCOME, NET 6 143
------------ ------------
Income (loss) before income taxes 1,256 (6,005)
INCOME TAX EXPENSE (BENEFIT) 59 (2,162)
------------ ------------
Net income (loss) $ 1,197 $ (3,843)
============ ============
Net income (loss) per common share:
Basic $ 0.02 $ (0.05)
============ ============
Diluted $ 0.02 $ (0.05)
============ ============
Weighted average shares outstanding:
Basic 59,780 72,977
============ ============
Diluted 72,764 72,977
============ ============
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 31, March 31,
2003 2004
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 39,773 $ 33,319
Short term investments, available for
sale 34,570 38,690
Accounts receivable, net of allowance of
$1,125 in 2003 and 2004 48,474 43,506
Inventory 43,022 46,836
Prepaid expenses and other assets 18,932 17,036
------------- -------------
Total current assets 184,771 179,387
Property and equipment, net 26,157 29,536
Service spares, net 4,925 3,636
Goodwill 13,344 13,344
Deferred tax asset 58,595 61,933
Other assets 3,797 3,734
------------- -------------
TOTAL $ 291,589 $ 291,570
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,553 $ 14,074
Accrued payroll and related expenses 19,035 16,127
Deferred revenue 33,233 36,473
Other accrued liabilities 3,480 1,540
Warranty reserves 655
------------- -------------
Total current liabilities 68,956 68,214
Shareholders' equity:
Common Stock, par $.01 -- Authorized,
120,000 shares; issued and outstanding,
72,601 and 73,280 shares, respectively 312,646 316,918
Deferred compensation (105) (60)
Accumulated other comprehensive loss (807) (558)
Accumulated deficit (89,101) (92,944)
------------- -------------
222,633 223,356
------------- -------------
TOTAL $ 291,589 $ 291,570
============= =============
CONTACT: Cray Inc.
Investor Contact:
Victor Chynoweth, 206-701-2280
victorc@cray.com
SOURCE: Cray Inc.
Investors
