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Year Ended November 30,2005 2004 2003 2002 2001(U.S. dollars in thousands)Consolidated Statement of Operations Data:Revenues:Storage and Network Systems .............. $415,379 $ 318,692 $221,714 $177,783 $117,697Storage Infrastructure .................... 264,230 140,322 112,055 74,749 57,197Total revenues ........................... 679,609 459,014 333,769 252,532 174,894Cost of revenues:Non-cash equity compensation(1) ............. — 7,827 690 — —Other ................................. 535,315 356,558 260,020 198,758 127,786Total cost of revenues ..................... 535,315 364,385 260,710 198,758 127,786Gross profit ............................ 144,294 94,629 73,059 53,774 47,108Operating expenses:Research and development:Development arrangement(2) .............. — (6,000) — 7,800 —Non-cash equity compensation(1) ........... — 23,959 2,428 — —Other ............................... 54,327 37,429 29,797 22,424 19,313Total research and development .............. 54,327 55,388 32,225 30,224 19,313Selling, general and administrative:Non-cash equity compensation(1) ........... 828 136,363 54,143 — —Other ............................... 38,014 28,005 22,426 17,448 15,480Total selling, general and administrative ........ 38,842 164,368 76,569 17,448 15,480Loss (gain) on derivative financial instruments . . . — — — (1,763) 138Amortization of intangible assets ............. 3,218 1,169 — — —In process research and development .......... 3,230 852 — — —Other costs(1) ........................... — 2,388 11,625 2,771 334Total operating expenses ................... 99,617 224,165 120,419 48,680 35,265Operating income (loss) .................... 44,677 (129,536) (47,360) 5,094 11,843Interest income (expense), net(3) ............. 1,176 1,052 (209) (923) (882)Income (loss) from continuing operations beforeincome taxes .......................... 45,853 (128,484) (47,569) 4,171 10,961Provision (benefit) for income taxes ........... 3,964 (6,239) (11,754) (791) 1,272Net income (loss) from continuing operations .... 41,889 (122,245) (35,815) 4,962 9,689Income (loss) from discontinued operations ..... 280 (12,924) (20,194) (3,326) (4,512)Gain (loss) from sale of discontinued operations . . — — (185) — —Net income (loss) ........................ $ 42,169 $(135,169) $(56,194) $ 1,636 $ 5,177Net earnings (loss) from continuing operations percommon share, class B ordinary and preferredordinary share—basic(4) .................. $ 1.48 $ (6.72) $ (9.60) $ 2.67 $ 5.22Net earnings (loss) per common share, class Bordinary and preferred ordinary share—basic(4) . $ 1.49 $ (7.43) $ (15.07) $ 0.88 $ 2.79Net earnings (loss) from continuing operations percommon share, class B ordinary and preferredordinary share—diluted(5) ................ $ 1.44 $ (6.72) $ (9.60) $ 2.67 $ 5.22Net earnings (loss) per common share, class Bordinary and preferred ordinary share—diluted(5) ............................ $ 1.45 $ (7.43) $ (15.07) $ 0.88 $ 2.79Unaudited pro forma diluted net loss per commonshare from continuing operations(6) ......... — $ (4.78) $ (1.60) — —4
(1) In accordance with U.S. GAAP, we were required to record a non-cash equity compensationexpense of $168.1 million in continuing operations and $12.9 million in discontinued operations inour 2004 fiscal year in connection with our initial public offering. We were also required to recorda non-cash equity compensation expense of $57.3 million in continuing operations and$19.9 million in discontinued operations in our 2003 fiscal year in connection with a transaction inwhich funds managed by HgCapital acquired a significant shareholding in Xyratex Group Limited.These expenses resulted from the removal of transferability restrictions on the shares and optionsas a consequence of the initial public offering or which were sold to funds managed by HgCapital.We also recorded expenses of the initial public offering and the HgCapital transaction totaling$2.4 million and $11.6 million in our 2004 and 2003 fiscal years, respectively.(2) Relates to a loan of $6.0 million and other payments of $1.8 million associated with a developmentarrangement with a supplier. These payments were recorded as an expense in our fiscal year endedNovember 30, 2002 as it was believed that repayment was dependent on the successful efforts ofthe related research and development. In February 2004, this supplier was acquired by anothercompany and in August 2004 the loan was repaid. Accordingly, we have reduced operatingexpenses by $6.0 million in our 2004 fiscal year. However, it is not possible to predict whether thepayment of $1.8 million will have any significant future benefit.(3) Interest income in our 2004 fiscal year includes interest received of $1.1 million on the $6.0 millionloan described in footnote (2) above.(4) Based on the weighted average (in thousands) of 28,329, 18,195, 3,730, 1,856 and 1,856Xyratex Ltd common shares and Xyratex Group Limited, class B ordinary and preferred ordinaryshares outstanding for the years ended November 30, 2005, 2004, 2003, 2002 and 2001,respectively. The computation of earnings per share does not include outstanding Xyratex GroupLimited class A ordinary and preferred ordinary shares and class C ordinary shares, which weresubject to transferability restrictions that lapsed on the earlier of an initial public offering or a saleor liquidation of Xyratex Group Limited. Under U.S. GAAP, these shares are not treated asoutstanding when computing net earnings per share.(5) Based on the weighted average (in thousands) of 29,031 Xyratex Ltd common shares outstandingfor the year ended November 30, 2005. The number of shares used in the computation of dilutedearnings per share for earlier fiscal years is the same as that used in the computation of basicearnings per share.(6) As described in Note 1 to the consolidated financial statements, upon completion of our IPO, theshareholders of Xyratex Group Limited exchanged the outstanding class A and class B preferredordinary shares and class C ordinary shares for common shares of Xyratex Ltd in the ratios1.036378, 0.945 and 1.071671, respectively. The pro forma effects of this exchange have beenreflected in the unaudited pro forma net loss per common share for the years ended November 30,2004 and 2003.The weighted average number of common shares used in the calculation of pro forma basic anddiluted net loss per common share for the year ended November 30, 2004 and November 30, 2003assumes the conversion of the class A and B ordinary and preferred ordinary shares, and the class Cordinary shares to common shares occurred on December 1, 2002 using the conversion ratios above.5
Page 3: XYRATEX LTDANNUAL REPORT FOR THE YE
Page 6 and 7: INTRODUCTIONWe are incorporated und
Page 10 and 11: The computations for the weighted a
Page 12 and 13: The markets in which we operate are
Page 14 and 15: technological capabilities. This co
Page 16 and 17: may cease production of components,
Page 18 and 19: • potentially adverse tax consequ
Page 20 and 21: We could incur substantial costs, i
Page 22 and 23: influence by voting at a meeting of
Page 24 and 25: Xyratex Ltd to the former sharehold
Page 26 and 27: In addition to the rapid growth of
Page 28 and 29: RAID controller technology is proje
Page 30 and 31: Our Competitive StrengthsDisk drive
Page 32 and 33: the storage subsystem and disk driv
Page 34 and 35: Our storage subsystems are internal
Page 36 and 37: systems are capable of testing a fu
Page 38 and 39: Research and DevelopmentWe have ove
Page 40 and 41: • sets forth procedures for the p
Page 42 and 43: Item 4C: Organization StructureXyra
Page 44 and 45: ecame the parent company of our bus
Page 46 and 47: Foreign Exchange Rate FluctuationsT
Page 48 and 49: we recorded in the year ended Novem
Page 50 and 51: Fiscal Year Ended November 30, 2005
Page 52 and 53: Research and Development—otherThe
Page 54 and 55: Fiscal Year Ended November 30, 2004
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Quarterly Results of OperationsThe
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sales growth. The increase in defer
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choose to make or alliances we have
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compete. Identifiable intangible as
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ITEM 6: DIRECTORS, SENIOR MANAGEMEN
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Ernest Sampias has served as a dire
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Audit CommitteeOur Audit Committee
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Employee Benefit/Share Option Plans
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The maximum amount that any partici
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Restricted StockRestricted stock aw
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the options, warrants or rights, bu
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Quarterly high and low market price
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whose functional currency is not th
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on the Nasdaq National Market and,
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Interest RatesWe had cash and cash
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aggregate in any fiscal year and th
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XYRATEX LTDAUDITED CONSOLIDATED BAL
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F-4XYRATEX LTDAUDITED CONSOLIDATED
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XYRATEX LTDNOTES TO AUDITED CONSOLI
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