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| Cray Inc. Announces Second Quarter 2003 Financial Results
Record quarterly revenue of $61.8 million and earnings of $.10 cents per diluted share SEATTLE--(BUSINESS WIRE)--July 31, 2003--Global supercomputer leader Cray Inc. (Nasdaq NM:CRAY) today reported record financial results for the second quarter ended June 30, 2003. BizVantage – When knowing counts: Business, Investing, Technology. Total revenue for the quarter was $61.8 million compared to $38.6 million in the same quarter last year. Net income was $7.9 million or $.10 cents per diluted share, up from $1.2 million or $.02 cents per diluted share reported in the second quarter of 2002. Second quarter results benefited from previously announced revenue of approximately $6 million that was deferred from first quarter 2003. For the six months ended June 30, 2003, Cray reported total revenue of $105.9 million compared to $73.8 million last year. Net income for the first six months was $9.1 million or $.12 cents per diluted share compared to first half 2002 net income of $1.9 million and $.04 cents per diluted share respectively. "The first half of 2003 came in as planned, thanks to the tremendous efforts of the entire Cray team as well as our customers," said Jim Rottsolk, Chairman and CEO of Cray Inc. "Improved profitability in the second quarter indicates we're getting closer to our target business model and we are beginning to see the leverage in the model as revenue increases. With the Cray X1 system now in full-production mode, we are focused on product delivery and successfully meeting increasingly challenging customer acceptance tests for the second half of the year," said Rottsolk. Product margins in the second quarter improved due to higher volumes, lower component costs and improved yields. Service margins were negatively affected by bid costs associated with Cray's successful DARPA funding award and by severance costs. "We used cash in the second quarter to retire remaining bank debt and to fund inventory and accounts receivable accompanying the growth of our business," Rottsolk said. "The effect was exaggerated due to the timing of acceptances late in the quarter, and due to our decision to assemble large systems for software testing in advance of deliveries. The balance sheet strengthened during the second quarter, with working capital increasing by over $12 million. We expect strong positive cash flow in the second half the year," Rottsolk said. Second Quarter Highlights -- In April, Cray reported the first customer acceptance of a full-production version of the new Cray X1(TM) supercomputer system. The system was accepted by Network Computing Services, Inc., systems integrator and computing facilities manager for the Army High Performance Computing Research Center. -- In May, Cray reported $16.0 million in orders for Cray X1 equipment and related technology and services from undisclosed customers. -- In June, Cray announced that all 3,125,000 shares of its Series A Convertible Preferred Stock held by NEC Corporation had been converted and sold. With this transaction, the company has no preferred stock outstanding. Recently, Cray announced that it would receive $49.9 million in funding over the next three years from the Defense Advanced Research Projects Agency (DARPA) through participation in the second phase of DARPA's High Productivity Computing Systems Program. "Participating in the second phase of this program is a great win for Cray and further validation of our HPC experience and ability to innovate," said Rottsolk. "The selection process was very competitive and the Cray team deserves high marks for their hard work." Guidance Full year 2003 guidance remains unchanged, with anticipated revenue of at least $220 million and profitability in the higher range of 5 to 10 percent of revenue. Cray remains confident that revenue, profitability and overall financial performance will be stronger in the second half of 2003 compared to the first half. Investor Conference Call Management will discuss the results and the company's outlook and hold a question and answer session for investors today, July 31 at 8 a.m. Pacific Time (11 a.m. Eastern). 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 1 p.m. Pacific Time on July 31, 2003 for 48 hours. To access, dial 800-642-1687, or 706-645-9291 (international), reservation number 1636194. In addition, the replay will be available for 90 days on the company's website at www.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, government support of supercomputer systems research and purchases, Cray's ability to keep up with rapid technological change, 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 Quarterly Report on Form 10-Q. 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 Six Months Ended
June 30, June 30,
2002 2003 2002 2003
-------- -------- -------- ---------
REVENUE:
Product $19,098 $45,952 $34,169 $ 73,236
Service 19,539 15,808 39,668 32,653
-------- -------- -------- ---------
Total revenue 38,637 61,760 73,837 105,889
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OPERATING EXPENSES:
Cost of product revenue 12,247 24,325 16,875 42,000
Cost of service revenue 9,767 10,862 20,692 21,143
Research and development 8,588 10,363 19,139 17,838
Marketing and sales 4,920 6,185 9,777 11,706
General and administrative 1,893 2,664 3,933 4,538
Restructuring charge 1,878
-------- -------- -------- ---------
Total operating expenses 37,415 54,399 72,294 97,225
-------- -------- -------- ---------
Income from operations 1,222 7,361 1,543 8,664
OTHER INCOME (EXPENSE), NET 1,018 777 2,402 724
INTEREST INCOME (EXPENSE), NET (463) 103 (1,034) 109
-------- -------- -------- ---------
Income before income taxes 1,777 8,241 2,911 9,497
PROVISION FOR INCOME TAXES 590 383 975 442
-------- -------- -------- ---------
Net income $ 1,187 $ 7,858 $ 1,936 $ 9,055
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Net income per common share:
Basic $ 0.03 $ 0.12 $ 0.04 $ 0.14
======== ======== ======== =========
Diluted $ 0.02 $ 0.10 $ 0.04 $ 0.12
======== ======== ======== =========
Weighted average shares outstanding:
Basic 45,765 66,009 44,696 62,912
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Diluted 51,562 78,776 48,903 75,616
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CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 31, June 30,
2002 2003
------------ -----------
(unaudited)
Current assets:
Cash and cash equivalents $ 23,916 $ 20,197
Short term investments, available for sale 19,739
Accounts receivable, net of allowance of
$1,098 in 2002 and 2003 31,017 52,968
Inventory, net 24,033 48,382
Prepaid expenses and other assets 5,805 8,182
------------ -----------
Total current assets 84,771 149,468
Property and equipment, net 24,799 22,900
Service spares, net 9,279 6,669
Goodwill, net 22,680 22,680
Deferred tax asset 263 263
Other assets 3,453 3,151
------------ -----------
TOTAL $ 145,245 $ 205,131
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,173 $ 17,084
Accrued payroll and related expenses 15,573 12,382
Other accrued liabilities 4,396 3,514
Deferred revenue 18,406 20,294
Notes payable 215 88
Current portion of warranty reserves 3,273 2,433
Current portion of obligations under
capital leases 241 280
Current portion of term loan 2,143
------------ -----------
Total current liabilities 57,420 56,075
Warranty reserves 2,326 625
Obligations under capital leases 152
Term loan payable 1,786
Shareholders' equity:
Series A Convertible Preferred Stock, par
$.01 - Authorized, issued and outstanding,
3,125 and zero shares, respectively 24,946
Common Stock, par $.01 - Authorized,
100,000 shares; issued and outstanding,
56,039 and 69,310 shares, respectively 211,255 291,789
Accumulated other comprehensive loss (291) (64)
Accumulated deficit (152,349) (143,294)
------------ -----------
83,561 148,431
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TOTAL $ 145,245 $ 205,131
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