Cray Inc. Reports First Quarter 2004 Financial Results; Company announces $43 million international procurement win.Business Editors SEATTLE--(BUSINESS WIRE)--April 29, 2004 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 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 A connected series of devices or images. It often implies that the second and subsequent device takes over after the previous one is used up. For example, cascading tapes in a dual-tape backup system means the second tape is written after the first one is full. 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 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 delays and a general slow-down in the defense segment," said Jim Rottsolk, 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. 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 Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. 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 (Handheld PC) A palmtop computer that weighs less than one pound and runs specialized versions of popular applications. Microsoft coined the term for its Windows CE operating system, which is an abbreviated version of Windows. See Pocket PC. market with high-bandwidth, purpose-built purpose-built Adjective made to serve a specific purpose Adj. 1. purpose-built - designed and constructed to serve a particular purpose purpose-made solutions." Recent Highlights We are pleased to announce that Korea's Public Procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. Service has selected Cray to supply the next-generation supercomputer to the Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. Meteorological me·te·or·ol·o·gy n. The science that deals with the phenomena of the atmosphere, especially weather and weather conditions. [French météorologie, from Greek 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 The Pittsburgh Supercomputing Center (PSC) is a joint effort between Carnegie Mellon University, University of Pittsburgh, and Westinghouse Electric Company. PSC was founded in 1986 by its two Scientific Directors, Dr. Ralph Roskies of University of Pittsburgh and Dr. (PSC (Public Service Commission) Same as PUC. ) has advised Cray that it is placing an advance order for the company's upcoming product based on the Sandia Sandia may refer to: Places
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 Space and Missile Defense Command (SMDC) is a specialized major command within the United States Army. The SMDC is an organization composed of five components:
SMDC Server Management Daughter Card SMDC St. Mary's Duluth Clinic (Duluth, MN) SMDC Shielded Mild Detonating Cord ). The company also announced the first Cray X1 system order in the subcontinent sub·con·ti·nent n. 1. A large landmass, such as India, that is part of a continent but is considered either geographically or politically as an independent entity. 2. of India from the Tata Institute of Fundamental Research The Tata Institute of Fundamental Research (TIFR) is the premier Indian institute for higher education that is primarily dedicated to carrying out research in natural sciences, mathematics and computer science. It is located at Navy Nagar Colaba, Mumbai. . 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 according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. IDC, this acquisition, together with the Red Storm product, more than quadruples Cray's addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be 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 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. These include the technical challenges of developing high performance computing computing - computer systems, fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. quarterly operating results, government support and timing of supercomputer system purchases, the successful porting of application programs to Cray computer The Colorado Springs-based supercomputer company founded in 1989 by Seymour Cray after he left Cray Research. Cray developed the Cray-3, an incredibly fast gallium arsenide-based computer that ran at a 1 GHz clock rate. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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
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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
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