Cray Inc. Announces Third Quarter 2002 Financial Results.Business Editors/High-Tech Writers SEATTLE--(BUSINESS WIRE)--Oct. 23, 2002 Company Records Profitable Quarter with Revenues of $42.1 Million, Up 30 Percent over Last Year; $90-Million Sandia Sandia may refer to: Places
Contract Completed Global supercomputer supercomputer, a state-of-the-art, extremely powerful computer capable of manipulating massive amounts of data in a relatively short time. Supercomputers are very expensive and are employed for specialized scientific and engineering applications that must handle very leader Cray (Cray, Inc., Seattle, WA, www.cray.com) A supercomputer manufacturer founded in 1972 as Cray Research, Inc., by Seymour Cray, a leading designer of large-scale computers at Control Data. In 1976, it shipped its first computer to Los Alamos National Laboratory. Inc. (Nasdaq:CRAY) today reported financial results for the third quarter ended September September: see month. 30, 2002. Total revenue for the quarter was $42.1 million compared to $29.4 million in the same quarter last year. Net income for the third quarter was $2.1 million or $.04 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to a loss of $10.8 million or ($.26) cents per diluted share last year. For the nine-month period ended September 30, 2002, the company reported total revenue of $115.9 million compared to $107.5 million for the comparable period in 2001. Net income for the nine months was $4.1 million, or $.08 cents per diluted share, compared to a loss of $17.9 million or ($.45) cents per diluted share in the same period last year. Product revenue more than doubled and third quarter 2002 also benefited from continued expense controls. Year-over-year net research and development costs decreased as a percentage of revenue from $13.2 million or 45 percent last year to $7.3 million or 17 percent in the third quarter of 2002. The company reported cash of $27.4 million and a generally strengthened balance sheet at the end of the quarter. The company's backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $85.5 million. "Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2002, we have delivered improved financial performance and profitability in each of the three quarters. The third quarter, our strongest this year, came in slightly ahead of expectations, and year-over-year comparisons for the quarter were very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. , demonstrating the significant progress the company has made over the last twelve months," commented Jim Rottsolk, Cray chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Earlier this year we set three major goals for 2002: have a profit for the year, raise at least $20 million of additional funding and have our first customer ship of a production Cray X1(TM) system by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . At this juncture junc·ture n. The point, line, or surface of union of two parts. , we are on schedule to accomplish all three goals. Despite difficult economic conditions, Cray is performing better than ever," Rottsolk said. Recent Highlights "Recently we've we've Contraction of we have. we've have had a number of significant announcements. Earlier this week we reported the successful completion of the Sandia Laboratories contract to deliver a new massively parallel See MPP. processing (MPP (Massively Parallel Processing or Massively Parallel Processor) A multiprocessing architecture that uses up to thousands of processors. Some might contend that a computer system with 64 or more CPUs is a massively parallel processor. ) supercomputer called 'Red Storm.' This is a multi-year, $90-million procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. that we will co-develop with Sandia for delivery in 2004," Rottsolk continued. "We also announced the delivery of five early-production Cray X1 systems, three of which have now been accepted. This is a significant milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. in the Cray X1 rollout, and our customers, both government and commercial, are eager to begin working with this powerful new 'extreme performance' supercomputer," Rottsolk said. Rottsolk added that the company continues to negotiate the contract with Oak Ridge National Laboratory Oak Ridge National Laboratory (ORNL) is a multiprogram science and technology national laboratory managed for the United States Department of Energy by UT-Battelle, LLC. ORNL is located in Oak Ridge, Tennessee, near Knoxville. announced in August. "The Cray X1 system, as well as the Red Storm project, have the potential to match or exceed the computing computing - computer capabilities of Japan's Earth Simulator Not to be confused with the videogame, SimEarth. The Earth Simulator (ES) was the fastest supercomputer in the world from 2002 to 2004. The system was developed for NASDA, JAERI, and JAMSTEC in 1997 for running global climate models to evaluate the effects of global , currently the world's most powerful supercomputer," said Rottsolk. Other third quarter highlights include: -- Cray received acceptance from the Naval Research Laboratory for the 40-processor, all-CMOS Cray MTA-2(TM) system. This system, with its 160 gigabytes of flat shared memory, programming ease and fast IO (input-output), will enable unprecedented performance of a range of important, currently intractable problems. -- Cray signed an agreement with the U.S. government to share the costs of developing next-generation supercomputer technologies, with the common goal of producing a petaflops system by the end of the decade. -- Cray sold two Cray SX-6(TM) supercomputers to the University of Toronto that will support University of Toronto's research related to the Earth's interior and atmosphere. -- Cray raised $10 million in a new financing through the sale of common stock and warrants. -- Cray was ranked third among the 500 fastest growing technology companies in North America in Deloitte & Touche's annual Technology Fast 500. The ranking is based on percentage revenue growth over a five-year period, 1997 to 2001. Guidance Cray reaffirms its guidance for 2002 of revenue in the $150 to $160 million range, a profitable second half and a backlog of $100 million by year-end. The company also reaffirmed its previous 2003 guidance for revenue of at least $200 million. Initial forecast for 2003 profitability is in the range of 5 to 10 percent of revenue. These forecasts anticipate that the Cray X1 system shipments will stay on schedule, that government appropriations supporting Red Storm and other procurements are not delayed, and that general economic conditions do not deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. further. Investor Conference Call Management will discuss the results and the company's outlook and hold a question and answer session for investors today, October October: see month. 23 at 11:00 a.m. Eastern (8:00 a.m. Pacific). To participate, call 888/211-8103 a few minutes ahead of time (no passcode required). International callers dial 706/643-3311. If you are unable to participate, a replay will be available from 2:00 p.m. Eastern Time on October 23, 2002 for 48 hours. To access, dial 800/642-1687, or 706/645-9291 (international), reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number 6135918. In addition, the replay will be available for 90 days on the company's website at www.cray.com. About Cray Inc. Cray is 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . There are certain factors that could cause Cray's execution plans to differ materially from those anticipated by the statements above. Among these factors are the technical challenges of developing new high performance computer systems, the ability of Cray supercomputer systems Three firms have held, simultaneously, the name Supercomputer Systems or Supercomputing Systems. The first was founded by Steve Chen, architect of the Cray X-MP and Cray Y-MP. The second was based in San Diego, California, USA. to pass individual customer acceptance tests, timely availability of commercially acceptable components from third-party suppliers and general economic and market conditions. For a discussion of these and other risks, see "Factors That Could Affect Future Results" in Cray's current Report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , dated September 3, 2002. Cray is a registered trademark, and CraySV1ex, Cray T3E The Cray T3E was Cray Research's second-generation massively parallel supercomputer architecture, launched in 1995. Like the previous Cray T3D It was a fully distributed memory machine using a 3D torus topology interconnection network. , Cray MTA-2, Cray SX-6, and Cray X1 are trademarks, of Cray Inc. All other trademarks are the property of their respective owners.
FINANCIAL TABLES TO FOLLOW
CRAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2002 2001 2002
--------- -------- --------- --------
REVENUE:
Product $ 9,124 $21,322 $ 45,333 $ 55,491
Service 20,252 20,729 62,213 60,397
--------- -------- --------- ---------
Total
revenue 29,376 42,051 107,546 115,888
--------- -------- --------- ---------
OPERATING EXPENSES:
Cost of product
revenue 5,996 12,367 24,777 29,242
Cost of service
revenue 11,116 12,063 29,780 32,755
Research and
development 13,211 7,301 40,398 26,440
Marketing and
sales 5,276 5,158 14,859 14,935
General and
administrative 1,937 2,108 6,320 6,041
Restructuring
charge 1,284 1,284 1,878
Amortization of
goodwill 1,772 5,318
--------- -------- --------- ---------
Total operating
expenses 40,592 38,997 122,736 111,291
--------- -------- --------- ---------
Income (loss)
from
operations (11,216) 3,054 (15,190) 4,597
OTHER INCOME
(EXPENSE), NET 1,105 62 (255) 2,464
INTEREST INCOME
(EXPENSE), NET (209) (503) (1,490) (1,537)
--------- -------- --------- ---------
Income (loss)
before income
taxes (10,320) 2,613 (16,935) 5,524
PROVISION FOR
INCOME TAXES 479 474 961 1,449
--------- -------- --------- ---------
Net income
(loss) $(10,799) $ 2,139 $(17,896) $ 4,075
========= ======== ========= =========
Net income
(loss) per
common share:
Basic $ (0.26) $ 0.04 $ (0.45) $ 0.09
========= ======== ========= =========
Diluted $ (0.26) $ 0.04 $ (0.45) $ 0.08
========= ======== ========= =========
Weighted average
shares outstanding:
Basic 41,529 49,221 40,130 46,221
========= ======== ========= =========
Diluted 41,529 59,923 40,130 51,291
========= ======== ========= =========
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December September
31, 30,
2001 2002
----------- -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 12,377 $ 27,350
Restricted cash 353 38
Accounts receivable, net of allowance
of $936 in 2001 and 2002 24,764 25,285
Inventory, net 18,950 18,221
Prepaid expenses and other assets 3,954 6,889
----------- -----------
Total current assets 60,398 77,783
Property and equipment, net 27,668 26,024
Service spares, net 12,267 9,365
Goodwill, net 22,680 22,680
Long-term receivable 550 550
Deferred tax asset 743 998
Other assets 2,781 3,297
----------- -----------
TOTAL $ 127,087 $ 140,697
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,295 $ 6,600
Accrued payroll and related expenses 12,063 15,588
Accrued loss on purchase commitment 4,602
Other accrued liabilities 5,850 6,581
Deferred revenue 22,762 19,807
Current portion of warranty reserves 6,574 4,262
Current portion of obligations under
capital leases 347 286
Current portion of term loan 2,143 2,143
Current portion of notes payable 486 265
----------- -----------
Total current liabilities 66,122 55,532
Warranty reserves 8,479 3,262
Obligations under capital leases 421 262
Term loan payable 3,928 2,321
Convertible subordinated debentures 8,387 8,494
Shareholders' equity:
Series A Convertible Preferred Stock,
par $.01 - Authorized, issued
and outstanding, 3,125 shares 24,946 24,946
Common Stock, par $.01 - Authorized,
100,000 shares; issued and
outstanding, 42,187 and 51,464 shares 173,318 199,904
Accumulated other comprehensive loss (762) (347)
Accumulated deficit (157,752) (153,677)
----------- -----------
39,750 70,826
----------- -----------
TOTAL $ 127,087 $ 140,697
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