Cray Inc. Reports Fourth Quarter and Full-Year 2006 Financial Results

Cray Inc. Reports Fourth Quarter and Full-Year 2006 Financial Results

Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced financial results for the fourth quarter and full-year 2006. Total revenue for the fourth quarter was $101.4 million compared to $65.3 million in the prior year period. Net income for the quarter improved significantly to $8.7 million or $0.33 per share compared to a net loss of ($9.2 million) or ($0.42) per share in the fourth quarter of 2005.

Total gross margin for the fourth quarter was 25.4 percent compared to 24.4 percent in the prior year period. Product margin for the fourth quarter was 22.1 percent and included a low margin contract entered into in 2004 of approximately $38 million of product revenue. Service margin for the fourth quarter was 42.1 percent.

Core operating expenses, consisting of research and development (R&D), sales and marketing, and general and administrative (SG&A), were $16.6 million in the fourth quarter compared to $18.3 million in the fourth quarter of 2005. As anticipated, R&D expense was sequentially lower in the fourth quarter, compared to the 2006 third quarter, due primarily to the timing of the Defense Advanced Research Projects Agency’s (DARPA) High Productivity Computing Systems Phase III contract, which was signed in the fourth quarter of 2006. SG&A expenses were sequentially higher than the 2006 third quarter due primarily to higher commissions and variable incentive expense.

Fourth quarter income from operations was $9.2 million compared to a loss from operations in the prior year period of ($9.2 million). Included in fourth quarter 2006 results from operations were non-cash items of $0.6 million related to stock compensation and $3.5 million for depreciation and amortization.

For the year 2006, Cray reported improved results throughout the income statement, with revenue of $221 million and a net loss of ($12.1 million) or ($0.53) per share compared to $201 million and net loss of ($64.3 million) or ($2.91) per share in 2005. Total gross margin for 2006 improved to 28.9 percent compared to 16.2 percent in 2005, while core operating expenses declined to $69.8 million from $83.7 million in 2005. Loss from operations declined significantly to ($7.2 million) in 2006 compared to ($60.9 million) in 2005. Included in 2006 results were non-cash items of $2.1 million related to stock compensation and $16.2 million for depreciation and amortization.

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