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Cray Inc. Reports 2010 Full Year and Fourth Quarter Results


February 16, 2011 - SEATTLE, WA

Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced 2010 financial results for the full-year and fourthquarter. For 2010, Cray reported record revenue of $319.4 million and netincome of $15.1 million, or $0.43 per share. For 2009, revenue was $284.0million and net loss was ($0.6 million), or ($0.02) per share.

Revenue for the fourth quarter of 2010 was $219.4 million compared to $88.2million in the fourth quarter of 2009. The Company reported net income forthe fourth quarter of 2010 of $52.1 million, or $1.46 per share, comparedto $3.0 million, or $0.08 per share, in the fourth quarter of 2009.

Overall gross profit margin for 2010 was 34 percent compared to 37 percentin 2009. Product margin for 2010 was 35 percent compared to 34 percent in2009 and service margin for 2010 was 32 percent compared to 44 percent for2009. For the fourth quarter of 2010, overall gross profit margin was 37percent compared to 41 percent in the fourth quarter of 2009.

Operating expenses for 2010 decreased to $92.5 million compared to $106.1million in 2009. 2010 operating expenses benefited from higher R&Dco-funding credits related to the Company's DARPA contract. Included inthe 2010 results were $9.4 million for depreciation and amortization and$4.9 million related to stock compensation.

Operating expenses for the fourth quarter of 2010 were $27.4 millioncompared to $33.7 million in the prior year period. Included in the fourthquarter 2010 results were non-cash items of $2.6 million for depreciationand amortization and $1.3 million related to stock compensation.

As of December 31, 2010, cash balances totaled $61.3 million and accountsreceivable totaled $106.3 million.

"2010 was a remarkable year for the company and I am extremely pleased withour results," said Peter Ungaro, president and CEO of Cray. "We grewrevenue for a third straight year and posted strong profits -- bothsignificant achievements of which we are all very proud. Our CustomEngineering business remained on a fast growth pace in 2010, more thandoubling revenue over 2009. We launched the Cray XE6 supercomputer inmid-2010 and total orders for the system have now exceeded over $300million. I am especially pleased with our execution in 2010 as wesuccessfully developed an industry-leading supercomputer, built andinstalled a record number of systems over a six-month period, and achievedall of the acceptances necessary to make 2010 a record year."

Ungaro added, "Our focus now shifts to delivering on our strategic plansfor 2011. With two major enhancements planned for the Cray XE6 line andcontinued momentum in Custom Engineering, we are positioned for continuedgrowth in 2011."

Outlook

While a wide range of results remains possible for 2011, total revenue forthe year is anticipated to be in the range of $320 to $340 million.Revenue in the first quarter of 2011 is expected to be approximately $35 to$40 million, and revenue is expected to ramp through the third quarter withapproximately half of the annual revenue being recognized in the fourthquarter. For the year, gross margins are expected to be in the range of2010 levels and operating expenses are expected to be higher than 2010,driven primarily by lower anticipated R&D co-funding credits. Based onthis outlook, we expect to be profitable for 2011.

Cash balances are expected to increase significantly from fourth quarterlevels by the end of the first quarter of 2011.

Actual results for any future period are subject to large fluctuationsgiven the nature of Cray's business.

Recent Highlights


-- In November, Cray announced the launch of the Cray XE6m -- the latest
addition to the Company's line of Cray XE supercomputers. This
midrange version of the Cray XE6 system includes the same innovative
features and technologies of the Gemini-based supercomputers while
offering both new and existing customers the same functionality at a
lower entry point.

-- Cray announced several new wins in the university segment during the
fourth quarter expanding a growing, worldwide list of academic
institutions that have purchased Cray supercomputers. New universities
include the City University of New York, George Washington University
in Washington D.C., Yokohama City University in Japan, Colorado State
University, University of Chicago and University of Stuttgart.

-- In the fourth quarter, Cray signed multiple Custom Engineering
contracts valued at a combined total of more than $12 million.
The various contracts were signed across all three Custom Engineering
practices -- special purpose systems, knowledge management and data
management.

-- At the 2010 Supercomputing Conference held in New Orleans, Louisiana,
Cray's new Gemini interconnect was named "Best HPC Interconnect
Product or Technology" by the editors of HPCwire. The Cray XE6 and
Cray XE6m supercomputers include a mix of features and performance
designed specifically for the petascale environment, and it is all
made possible by Cray's Gemini interconnect. Cray is honored to
achieve this prestigious award, which is reflective of all the hard
work by Cray employees company-wide.

-- During the fourth quarter, Cray joined Data Direct Networks,
Lawrence Livermore National Laboratory and Oak Ridge National
Laboratory in launching Open Scalable File Systems, Inc. (OpenSFS)
-- a technical organization focused on high-end, open-source file
system technologies. This includes Lustre which plays an important
role for Cray customers who need high performance I/O capabilities.

-- In early 2011, Cray appointed Larry Hoelzeman to the position of
vice president of worldwide sales. Hoelzeman previously was vice
president of Americas sales and will also continue in that role
with the Company.

Conference Call Information

Cray will host a conference call today, Wednesday, February 16, 2011 at1:15 p.m. Pacific Time (4:15 p.m. Eastern Time) to discuss fourth quarterand full-year 2010 financial results. To access the call, please dial intothe conference at least 10 minutes prior to the beginning of the call at1-866-225-8754. International callers should dial 1-480-629-9692. Tolisten to the audio webcast, go to the Investors section of the Craywebsite at http://investors.cray.com.

If you are unable to attend the live conference call, an audio webcastreplay will be available in the Investors section of the Cray website for180 days. If you do not have Internet access, a replay of the call will beavailable by dialing 1-800-406-7325, international callers dial1-303-590-3030, and entering the access code 4413914. The conference callreplay will be available for 72 hours, beginning at 4:15 p.m. PST onWednesday, February 16, 2011.

About Cray Inc.

As a global leader in supercomputing, Cray provides highly advancedsupercomputers and world-class services and support to government, industryand academia. Cray technology is designed to enable scientists andengineers to achieve remarkable breakthroughs by accelerating performance,improving efficiency and extending the capabilities of their most demandingapplications. Cray's Adaptive Supercomputing vision is focused ondelivering innovative next-generation products that integrate diverseprocessing technologies into a unified architecture, allowing customers tosurpass today's limitations and meeting the market's continued demand forrealized performance. Go to www.cray.com for more information.

Safe Harbor Statement

This press release contains forward-looking statements within the meaningof Section 21E of the Securities Exchange Act of 1934 and Section 27A ofthe Securities Act of 1933, including, but not limited to, statementsrelated to Cray's financial guidance and expected future operating results,its product development plans, including its ability to complete two majorenhancements for the Cray XE6 system, and its ability to continue to growrevenue from its Custom Engineering business. These statements involvecurrent expectations, forecasts of future events and other statements thatare not historical facts. Inaccurate assumptions as well as known andunknown risks and uncertainties can affect the accuracy of forward-lookingstatements and cause actual results to differ materially from thoseanticipated by these forward-looking statements. Factors that could affectactual future events or results include, but are not limited to, the riskthat Cray does not achieve the operational or financial results that itexpects, the risk that Cray will not be able to secure orders for Cray XE6systems (including enhanced Cray XE6 systems) when or at the levelsexpected, the risk that Cray is not able to successfully complete itsplanned product development efforts and deliver enhancements to the CrayXE6 system within the planned timeframe or at all, the risk that Cray isnot able to achieve and obtain acceptance of co-funded developmentmilestones when or as expected or at all, the risk that Cray will not besuccessful in growing revenue from Custom Engineering, the risk thatcustomer acceptances are not received when expected or at all, the riskthat Cray is not able to achieve anticipated gross margin or expenselevels, and such other risks as identified in the Company's quarterlyreport on Form 10-Q for the period ended September 30, 2010, and from timeto time in other reports filed by Cray with the U.S. Securities andExchange Commission. You should not rely unduly on these forward-lookingstatements, which apply only as of the date of this release. Crayundertakes no duty to publicly announce or report revisions to thesestatements as new information becomes available that may change theCompany's expectations.

Cray is a registered trademark of Cray Inc. in the United States and othercountries and Cray XE6, Cray XE6m, Cray XE and Gemini are trademarks ofCray Inc. Other product and service names mentioned herein are thetrademarks of their respective owners.

 CRAY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited and in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, 2010 2009 2010 2009 --------- --------- --------- --------- REVENUE: Product $ 197,305 $ 65,177 $ 239,085 $ 199,114 Service 22,126 23,070 80,303 84,933 --------- --------- --------- --------- Total revenue 219,431 88,247 319,388 284,047 --------- --------- --------- --------- COST OF REVENUE: Cost of product revenue 124,079 37,063 155,027 130,444 Cost of service revenue 14,087 14,624 54,404 47,719 --------- --------- --------- --------- Total cost of revenue 138,166 51,687 209,431 178,163 --------- --------- --------- --------- Gross profit 81,265 36,560 109,957 105,884 --------- --------- --------- --------- OPERATING EXPENSES: Research and development, net 10,317 20,701 43,618 62,947 Sales and marketing 11,737 7,918 31,085 26,601 General and administrative 5,296 5,056 17,767 16,579 --------- --------- --------- --------- Total operating expenses 27,350 33,675 92,470 106,127 --------- --------- --------- --------- Income (Loss) from operations 53,915 2,885 17,487 (243) Other income (expense), net (566) 145 (766) (430) Interest income (expense), net 119 44 219 (805) --------- --------- --------- --------- Income (Loss) before income taxes 53,468 3,074 16,940 (1,478) Income tax (expense) benefit (1,395) (103) (1,878) 874 --------- --------- --------- --------- Net Income (Loss) $ 52,073 $ 2,971 $ 15,062 $ (604) ========= ========= ========= ========= Basic net income (loss) per common share $ 1.50 $ 0.09 $ 0.44 $ (0.02) Diluted net income (loss) per common share $ 1.46 $ 0.08 $ 0.43 $ (0.02) ========= ========= ========= ========= Basic weighted average shares outstanding 34,610 33,761 34,313 33,559 Diluted weighted average shares outstanding 35,732 35,015 35,278 33,559 ========= ========= ========= ========= CRAY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and in thousands) December 31, December 31, 2010 2009 ------------ ------------ ASSETSCurrent assets: Cash and cash equivalents $ 57,381 $ 105,018 Restricted cash 3,914 5,161 Short term investments, available-for-sale - 2,999 Accounts and other receivables, net 106,268 38,207 Inventory 49,241 29,011 Prepaid expenses and other current assets 5,901 5,514 ------------ ------------ Total current assets 222,705 185,910 Property and equipment, net 17,953 19,809Service inventory, net 1,887 1,719Deferred tax assets 3,105 2,661Other non-current assets 14,978 13,561 ------------ ------------ TOTAL ASSETS $ 260,628 $ 223,660 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 20,384 $ 18,783 Accrued payroll and related expenses 20,668 16,219 Other accrued liabilities 6,380 9,735 Deferred revenue 49,896 42,414 ------------ ------------ Total current liabilities 97,328 87,151 Long-term deferred revenue 14,954 9,627Other non-current liabilities 2,526 2,719 ------------ ------------ TOTAL LIABILITIES 114,808 99,497 Shareholders' equity: Common stock and additional paid-in capital 559,058 551,220 Accumulated other comprehensive income 4,906 6,148 Accumulated deficit (418,144) (433,205) ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 145,820 124,163 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 260,628 $ 223,660 ============ ============

Cray Media:
Nick Davis
206/701-2123
pr@cray.com

Investors:
Paul Hiemstra
206/701-2044
ir@cray.com

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