Cray Inc. Reports 2001 Fourth Quarter and Year End Results.Business Editors SEATTLE--(BUSINESS WIRE)--Feb. 12, 2002 New 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. Michael Haydock Expects Profitable 2002 First Half and Full Year As Company Benefits From Expanded Range of Supercomputing Solutions 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 company's fourth quarter and year-end 2001. The company said it is building a strong, diverse order backlog and expects to be profitable and cash flow positive for the 2002 first half and full year. Cray will hold an investor teleconference at 11:00 a.m. EST/8:00 a.m. PST PST Paroxysmal supraventricular tachycardia, see there today to discuss the results and the company's outlook (details are provided below). Financial Results For the fourth quarter ended December 31, 2001, Cray(R) revenues were $26.1 million, compared with revenues of $33.7 million for the fourth quarter of 2000. Excluding amortization of goodwill and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. related to the acquisition of the Cray Research See Cray. business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $2.5 million incurred during the quarter, the company reported a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss for fourth-quarter 2001 of $13.1 million, or ($0.31) per share. Including amortization of goodwill and intangible assets and the restructuring charge, the company's net loss for the fourth quarter was $17.4 million, or ($0.41) per share. Fourth-quarter revenues were affected by the delay of the Cray SV1ex(TM) enhanced-memory product, which, as previously reported, began shipping on November 26, 2001. The $2.5 million restructuring charge was primarily related to severance expenses in connection with personnel reductions. The company had other one-time reserves and charges to various balance sheet items totaling $4.8 million. Taking all of these reserves and charges into account, the fourth-quarter operating results were substantially similar to those of the third quarter even with lower product revenue. For the year ended December 31, 2001, the company reported revenues of $133.6 million, compared with revenues of $118.1 million for the prior year. The company reported a net loss of $35.3 million, or ($0.87) per share for the year ended December 31, 2001, compared with a net loss for the prior year of $25.4 million, or ($0.81) per share. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were $25.1 million, and cash and cash equivalents were $12.8 million, at December 31, 2001. Financial Guidance The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. President and CEO Michael P. Haydock, who joined the company from IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) on October 1, 2001, said he expects Cray Inc. to be profitable and cash flow positive for the 2002 first half and full year. "We are building a strong, diverse order backlog. We expect a record backlog at the close of the first quarter, and a backlog of $100 million or more on December 31, 2002. We have announced orders for our Cray SV1ex and Cray MTA-2(TM) solutions. In the past week, we have received orders valued at more than $7 million. We are also closing in fast on multiple orders each for our Cray SX-6(TM) and 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. (TM) solutions. Pending orders for next-generation Cray SV2(TM) solutions already total nearly $40 million. "We have a shot at profitability in the first quarter, but this business is lumpy lumpy characterized by the presence of a lump or lumps. lumpy disease see lumpy-skin disease (below). lumpy jaw see actinomycosis. on the product side," Haydock said. "There are a couple of orders that could fall into the first or second quarter, which is why I'm more confident saying we expect profitability for the first half." Cray expects initial revenue from the new Dell relationship in the second quarter of 2002. For the full year 2002, the company expects total revenues of approximately $160 million, with $80-90 million of the total occurring in the first half. These revenue expectations do not include any contribution from the previously reported large government procurement Government procurement, also called public tendering, is the procurement of goods and services on behalf of a public authority, such as a government agency. With 10 to 15% of GDP in developed countries, and up to 20% in developing countries, government procurement accounts for which Cray remains a finalist. Cray expects the successful introduction of the Cray SV2 solution to drive strong product revenues and accelerating profitability in 2003 and beyond. Management Discussion "Financially, the fourth quarter resembled the third quarter as expected, mainly because the bread-and-butter Cray SV1ex enhanced-memory product didn't start shipping until late in the quarter," said Haydock. "Strategically, however, we laid the groundwork for 2002 profitability and long-term growth." On December 21, Haydock announced that he realigned operations to evolve Cray quickly from a platform-based company to a solutions-based company. The realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. created a professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. unit, reduced the workforce while making several strategic new hires, reduced R&D expenditures, and positioned the company to offer additional high-performance computing High-speed computing, which typically refers to supercomputers used in scientific research. solutions and services through OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and relationships and customer-funded initiatives. Other fourth-quarter 2001 highlights: -- Cray announced it was number one in the new, more comprehensive rankings of supercomputer performance reported in November 2001 by industry analyst firm IDC. On the new test, developed with extensive input from supercomputer users in government, industry and academia, Cray supercomputers dominated in both of the top two categories. -- Cray Inc. announced the Cray SX-6 Series of high-performance, high-efficiency supercomputers, scheduled for general availability in the first quarter of 2002. This series is available through a previously announced long-term OEM agreement with NEC Corp. -- The company shipped the first Cray SV1ex enhanced memory system to the Arctic Region Supercomputing Center (ARSC) at the University of Alaska Fairbanks. -- At the SC2001 annual supercomputer industry conference, Cray Inc. previewed technologies for the Cray SV2 Series, expected to be the world's most powerful supercomputer product. The Cray SV2 product remains on schedule for availability in the second half of 2002. After the close of the fourth quarter: -- Cray shipped the first Cray MTA-2 supercomputer system to a Japanese research customer. Cray shipped the first, 16-processor installment of another Cray MTA-2 system this week to the U.S. Naval Research Laboratory Noun 1. Naval Research Laboratory - the United States Navy's defense laboratory that conducts basic and applied research for the Navy in a variety of scientific and technical disciplines NRL , in conjunction with a previously announced $5.4 million order from Logicon Inc., a Northrop Grumman Northrop Grumman Corporation (NYSE: NOC) is an aerospace and defense conglomerate that is the result of the 1994 purchase of Grumman by Northrop. The company is the third largest defense contractor for the U.S. company. -- Cray announced $9.4 million in new orders for Cray SV1ex supercomputer solutions from undisclosed non-U.S. customers. Approximately $1 million of the revenue is expected in the first quarter of 2002, with the remainder occurring in the second, third and fourth quarters. -- Cray and Dell announced a definitive three-year, renewable agreement for Cray to market high-performance cluster solutions and services worldwide using Dell PowerEdge This article or section needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. servers. Investor Conference Call Management will discuss the results and the company's outlook and hold a question and answer session for investors today, February 12, 2002, at 11:00 a.m. Eastern / 8:00 a.m. Pacific. To participate, call 888/443-9985 a few minutes ahead of time (no passcode required). If you are unable to participate, a replay will be available from 2:00 p.m. Eastern on February 12 for 48 hours. To access, dial 800/642-1687, or 706/645-9291 (international), reservation number 3215057. In addition, the replay will be available for 90 days via the Internet at www.cray.com. Please RSVP (ReSerVation Protocol) A communications protocol that signals a router to reserve bandwidth for real time transmission. RSVP is designed to clear a path for audio and video traffic, eliminating annoying skips and hesitations. as participation may be limited to those with reservations. About Cray Inc. Cray is the premier provider of supercomputing solutions for 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 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, 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 Form 10-Q Form 10-Q See 10-Q. and "Additional 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. filed on November 28, 2001. Note to Editors: Cray is a registered trademark, and Cray SV1ex, Cray T3E, Cray MTA-2, Cray SX-6 and Cray SV2 are trademarks, of Cray Inc. All other trademarks are the property of their respective owners.
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2000 2001
ASSETS
Cash and cash equivalents $ 5,387 $ 12,754
Accounts receivable 25,159 25,134
Inventory, net 23,637 18,950
Service spares, net 21,139 12,267
Property and equipment, net 25,535 27,668
Intangible assets, net 29,578 22,769
Other assets 5,758 6,735
TOTAL $ 136,193 $ 126,277
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable $ 16,247 $ 11,319
Accrued payroll and
related expenses 12,028 12,056
Deferred revenue 17,666 22,684
Current portion of
warranty reserve 17,996 6,467
Term loan payable 6,071
Investor notes payable 7,553 8,173
Other current liabilities 13,733 10,630
Other non-current
liabilities 14,823 9,114
Shareholders' equity 36,147 39,763
TOTAL $ 136,193 $ 126,277
CRAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2000 2001 2000 2001
REVENUE:
Product $ 10,404 $ 5,771 $ 46,617 $ 51,105
Service 23,284 20,289 71,455 82,502
Total revenue 33,688 26,060 118,072 133,607
OPERATING EXPENSES:
Cost of product
revenue 7,017 5,880 32,505 30,657
Cost of service
revenue 11,409 11,528 34,077 41,308
Research and
development 13,272 13,528 48,426 53,926
Marketing and sales 4,397 5,102 14,365 19,961
General and
administrative 1,645 2,906 7,033 9,226
Restructuring
charges 2,518 3,802
Amortization of
goodwill and
intangible assets 1,675 1,773 5,217 7,091
Total operating
expenses 39,415 43,235 141,623 165,971
Loss loss from
operations (5,727) (17,175) (23,551) (32,364)
OTHER INCOME
(EXPENSE), NET 114 100 675 (156)
INTEREST INCOME
(EXPENSE), NET (484) (299) (1,681) (1,789)
Loss before income
taxes (6,097) (17,374) (24,557) (34,309)
PROVISION FOR
INCOME TAXES 33 831 994
Net loss for
common share $ (6,097) $ (17,407) $ (25,388) $ (35,303)
Net loss per
common share,
basic and
diluted $ (0.18) $ (0.41) $ (0.81) $ (0.87)
Weighted average
shares
outstanding,
basic and
diluted 33,401 42,122 31,500 40,632
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