UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
September 30, 2003
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-26820
| Washington | 93-0962605 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
411 First Avenue South, Suite 600
Seattle, WA 98104-2860
(206) 701- 2000
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [x] No [ ]
As of November 11, 2003, 72,399,563 shares of the Company’s Common Stock, par value $0.01 per share, were outstanding.
TABLE OF CONTENTS
CRAY INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| Page No. | ||||||
PART I FINANCIAL INFORMATION |
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Item 1. Unaudited Condensed Consolidated Financial Statements: |
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Balance Sheets as of December 31, 2002 and September 30, 2003 |
3 | |||||
Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2003 |
4 | |||||
Statement of Shareholders’ Equity for the Three Month period Ended March 31, 2003,
June 30, 2003, and September 30, 2003 |
5 | |||||
Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2003 |
6 | |||||
Notes to Financial Statements |
7 | |||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | |||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
25 | |||||
Item 4. Controls and Procedures |
25 | |||||
PART II OTHER INFORMATION |
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Item 6. Exhibits and Reports on Form 8-K |
25 | |||||
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge at our web site at www.cray.com as soon as reasonably practicable after we file electronically such reports with the SEC.
Cray is a federally registered trademark of Cray Inc., and Cray SV1ex, Cray X1, Cray X1E, Cray SX-6, Cray T90, Cray MTA-2, Cray SV1 and Cray T3E are trademarks of Cray Inc.
2
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | September 30, | ||||||||||
| 2002 | 2003 | ||||||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 23,916 | $ | 42,915 | |||||||
Short-term investments, available for sale |
26,019 | ||||||||||
Accounts receivable, net of allowance of $1,098 in 2002 and 2003 |
31,017 | 47,507 | |||||||||
Inventory, net |
24,033 | 50,031 | |||||||||
Prepaid expenses and other assets |
5,805 | 13,355 | |||||||||
Total current assets |
84,771 | 179,827 | |||||||||
Property and equipment, net |
24,799 | 25,173 | |||||||||
Service spares, net |
9,279 | 5,663 | |||||||||
Goodwill |
22,680 | 22,680 | |||||||||
Deferred tax asset |
263 | 263 | |||||||||
Other assets |
3,453 | 3,323 | |||||||||
TOTAL |
$ | 145,245 | $ | 236,929 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
$ | 13,173 | $ | 18,210 | |||||||
Accrued payroll and related expenses |
15,573 | 13,269 | |||||||||
Other accrued liabilities |
4,396 | 2,219 | |||||||||
Deferred revenue |
18,406 | 34,838 | |||||||||
Notes payable |
215 | 29 | |||||||||
Current portion of warranty reserves |
3,273 | 1,984 | |||||||||
Current portion of obligations under capital leases |
241 | 212 | |||||||||
Current portion of term loan |
2,143 | ||||||||||
Total current liabilities |
57,420 | 70,761 | |||||||||
Warranty reserves |
2,326 | ||||||||||
Obligations under capital leases |
152 | ||||||||||
Term loan payable |
1,786 | ||||||||||
Shareholders’ equity: |
|||||||||||
Preferred Stock, par $.01 - Authorized, 5,000,000 shares;
issued and outstanding, 3,125,000 Series A Convertible
and zero shares, respectively |
24,946 | ||||||||||
Common Stock, par $.01 - Authorized, 120,000,000 shares; issued
and outstanding, 56,039,016 and 71,353,811 shares, respectively |
211,255 | 301,073 | |||||||||
Accumulated other comprehensive loss |
(291 | ) | (74 | ) | |||||||
Accumulated deficit |
(152,349 | ) | (134,831 | ) | |||||||
| 83,561 | 166,168 | ||||||||||
TOTAL |
$ | 145,245 | $ | 236,929 | |||||||
See accompanying notes
3
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2002 | 2003 | 2002 | 2003 | |||||||||||||||||
Revenue: |
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Product |
$ | 21,322 | $ | 49,014 | $ | 55,491 | $ | 122,250 | ||||||||||||
Service |
20,729 | 14,831 | 60,397 | 47,484 | ||||||||||||||||
Total revenue |
42,051 | 63,845 | 115,888 | 169,734 | ||||||||||||||||
Operating expenses: |
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Cost of product revenue |
12,367 | 25,707 | 29,242 | 67,707 | ||||||||||||||||
Cost of service revenue |
12,063 | 9,632 | 32,755 | 30,775 | ||||||||||||||||
Research and development |
7,301 | 10,533 | 26,440 | 28,371 | ||||||||||||||||
Marketing and sales |
5,158 | 6,727 | 14,935 | 18,433 | ||||||||||||||||
General and administrative |
2,108 | 3,164 | 6,041 | 7,702 | ||||||||||||||||
Restructuring charge |
1,878 | |||||||||||||||||||
Total operating expenses |
38,997 | 55,763 | 111,291 | 152,988 | ||||||||||||||||
Income from operations |
3,054 | 8,082 | 4,597 | 16,746 | ||||||||||||||||
Other income, net |
62 | 307 | 2,464 | 1,031 | ||||||||||||||||
Interest income (expense), net |
(503 | ) | 160 | (1,537 | ) | 269 | ||||||||||||||
Income before income taxes |
2,613 | 8,549 | 5,524 | 18,046 | ||||||||||||||||
Provision for income taxes |
474 | 86 | 1,449 | 528 | ||||||||||||||||
Net income |
$ | 2,139 | $ | 8,463 | $ | 4,075 | $ | 17,518 | ||||||||||||
Net income per common share: |
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Basic |
$ | 0.04 | $ | 0.12 | $ | 0.09 | $ | 0.27 | ||||||||||||
Diluted |
$ | 0.04 | $ | 0.10 | $ | 0.08 | $ | 0.23 | ||||||||||||
Weighted average shares outstanding: |
||||||||||||||||||||
Basic |
49,221 | 70,307 | 46,221 | 65,404 | ||||||||||||||||
Diluted |
59,923 | 82,963 | 51,291 | 75,973 | ||||||||||||||||
See accompanying notes
4
CRAY INC. AND SUBSIDIARIES
| Series A | |||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Accumulated | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||
| Number of | Number of | Accumulated | Comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Deficit | Loss | Total | |||||||||||||||||||||||||
BALANCE, January 1, 2003 |
3,125 | $ | 24,946 | 56,039 | $ | 211,255 | $ | (152,349 | ) | $ | (291 | ) | $ | 83,561 | |||||||||||||||||
Public sale of common stock, less
issuance costs of $3,517,000 |
8,480 | 49,059 | 49,059 | ||||||||||||||||||||||||||||
Issuance of shares under Employee
Stock Purchase Plan |
70 | 437 | 437 | ||||||||||||||||||||||||||||
Exercise of stock options |
352 | 1,362 | 1,362 | ||||||||||||||||||||||||||||
Exercise of warrants |
228 | 979 | 979 | ||||||||||||||||||||||||||||
Other comprehensive income: |
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Unrealized gain on available for sale
investments |
8 | 8 | |||||||||||||||||||||||||||||
Cumulative currency translation
adjustment |
(43 | ) | (43 | ) | |||||||||||||||||||||||||||
Net income |
1,197 | 1,197 | |||||||||||||||||||||||||||||
BALANCE, March 31, 2003 |
3,125 | $ | 24,946 | 65,169 | $ | 263,092 | $ | (151,152 | ) | $ | (326 | ) | $ | 136,560 | |||||||||||||||||
Common stock issued in conversion
of preferred stock |
(3,125 | ) | (24,946 | ) | 3,269 | 24,946 | |||||||||||||||||||||||||
Issuance of shares under Employee
Stock Purchase Plan |
67 | 402 | 402 | ||||||||||||||||||||||||||||
Issuance of shares under 401k Plan |
76 | 550 | 550 | ||||||||||||||||||||||||||||
Exercise of stock options |
452 | 1,706 | 1,706 | ||||||||||||||||||||||||||||
Exercise of warrants |
277 | 1,093 | 1,093 | ||||||||||||||||||||||||||||
Other comprehensive income: |
|||||||||||||||||||||||||||||||
Unrealized gain on available for sale
investments |
24 | 24 | |||||||||||||||||||||||||||||
Cumulative currency translation
adjustment |
238 | 238 | |||||||||||||||||||||||||||||
Net income |
7,858 | 7,858 | |||||||||||||||||||||||||||||
BALANCE, June 30, 2003 |
$ | — | 69,310 | $ | 291,789 | $ | (143,294 | ) | $ | (64 | ) | $ | 148,431 | ||||||||||||||||||
Issuance of shares under Employee
Stock Purchase Plan |
56 | 381 | 381 | ||||||||||||||||||||||||||||
Exercise of stock options |
1,454 | 6,929 | 6,929 | ||||||||||||||||||||||||||||
Exercise of warrants |
534 | 1,974 | 1,974 | ||||||||||||||||||||||||||||
Other comprehensive income: |
|||||||||||||||||||||||||||||||
Unrealized loss on available for sale
investments |
(12 | ) | (12 | ) | |||||||||||||||||||||||||||
Cumulative currency translation adjustment
|
2 | 2 | |||||||||||||||||||||||||||||
Net income |
8,463 | 8,463 | |||||||||||||||||||||||||||||