For additional information contact: Media: Frank Parisi 612/683-7130 Financial: Bill Gacki or Brad Allen 612/683-7395 CRAY RESEARCH REPORTS IMPROVED THIRD QUARTER RESULTS, SYSTEMS INSTALLED IN 1994 EXPECTED TO DOUBLE OVER 1993 1995 Revenues, Earnings Expected To Decline Reflecting Lower Average System Prices On Sharply Higher Unit Volumes EAGAN, Minn., October 25, 1994 -- Cray Research, Inc. (NYSE:CYR) today reported net earnings of $16,042,000 or $ .62 per share, on revenue of $219,859,000 for the third quarter ended September 30, 1994, compared to net earnings of $15,264,000 or $ .58 per share, on revenue of $201,975,000 for the same period a year ago. For the nine months ended September 30, 1994, the company reported net earnings of $46,198,000 or $1.78 per share, on revenue of $684,542,000 compared to net earnings of $36,529,000, or $1.40 per share, on revenue of $592,242,000 for the comparable 1993 period. In commenting on the company's performance, Cray chairman and chief executive John Carlson said, "We are pleased with third quarter performance in that we surpassed last year's results and exceeded our quarterly targets." He said the company had also achieved its goal of signing orders in the third quarter nearly equal to the total for the first half of 1994. The value of orders signed in the third quarter was $154 million compared with $171 million in the 1993 third quarter. For the first nine months Cray recorded orders totalling $311 million compared to $483 million for the first nine months of 1993. Backlog at the end of the third quarter was $177 million, compared with $197 million at the end of the second quarter and $460 million at the end of the 1993 third quarter. "We have successfully attracted new customers," Carlson added, and have signed orders from 63 new-to-Cray customers year-to- date, principally for our lower-priced systems." Carlson also predicted "an exceptionally busy" fourth quarter when half of the company's 1994 orders are expected to occur. He noted that Cray expected to double the number of systems being installed in 1994 over 1993. "As for the balance of 1994, we expect to grow revenues for the full year, but we won't achieve our goal of 10 percent revenue growth. Net earnings for the year are expected to be slightly below our 1993 results due to a previously announced charge of approximately $ .25 cents per share to be taken in the fourth quarter to cover costs of restructuring our Wisconsin manufacturing operations," he said. "In 1995 we will install more systems in the technical simulation market than ever before but at lower average system prices. This will more than double the number of systems being installed in this market in 1995. We will also continue our growth in the commercial simulation market and will at least double this revenue with strong unit growth in 1995. However, this will result in lower consolidated revenues and earnings in 1995 than those achieved in 1994," Carlson said. "In 1995, we expect our revenues to start slowly and pick up in the second half. Our installation and new customer growth rates speak well to the growing use of simulation in both technical simulation and the emerging commercial simulation markets." Cray Research provides leading supercomputing tools to help solve customers' most challenging problems. (Summarized financial data follows.) CRAY RESEARCH, INC. and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 ---------------------- ---------------------- 1994 1993 1994 1993 ---------- ---------- ---------- ---------- (In thousands, except per share data) Revenue: Sales $ 165,767 $ 147,899 $ 526,342 $ 427,426 Leased systems 5,741 5,670 15,934 18,580 Service fees 48,351 48,406 142,266 146,236 ---------------------------- --------- --------- --------- --------- Total revenue 219,859 201,975 684,542 592,242 ---------------------------- --------- --------- --------- --------- Cost of revenue: Cost of sales 83,034 75,153 270,879 211,507 Cost of leased systems 4,537 3,288 10,338 10,207 Cost of services 36,012 35,695 110,721 107,364 ---------------------------- --------- --------- --------- --------- Total cost of revenue 123,583 114,136 391,938 329,078 ---------------------------- --------- --------- --------- --------- Gross profit 96,276 87,839 292,604 263,164 ---------------------------- --------- --------- --------- --------- Operating expenses: Development and engineering 34,793 33,610 108,921 102,853 Marketing 33,743 29,007 101,981 90,380 General and administrative 5,987 5,649 18,080 17,538 ---------------------------- --------- --------- --------- --------- Total operating expenses 74,523 68,266 228,982 210,771 ---------------------------- --------- --------- --------- --------- Operating income 21,753 19,573 63,622 52,393 Other income (expense), net 147 (96) 1,309 (1,708) ---------------------------- --------- --------- --------- --------- Earnings before taxes 21,900 19,477 64,931 50,685 Income tax expense (5,858) (4,213) (18,733) (14,156) ---------------------------- --------- --------- --------- --------- Net earnings $ 16,042 $ 15,264 $ 46,198 $ 36,529 ---------------------------- ========= ========= ========= ========= Earnings per common and common equivalent share $ 0.62 $ .58 $ 1.78(1)$ 1.40 ---------------------------- ========= ========= ========= ========= Average number of common and common equivalent shares outstanding 25,725 26,258 25,884 26,094 ---------------------------- ========= ========= ========= ========= (1) Includes $2.6M gain on the repurchase of $23M of convertible debentures; $.07 equivalent earnings per share. ----------------------------------------------------------------------------- CRAY RESEARCH, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) September 30 December 31 1994 1993 ------------ ------------ Assets (In thousands) ------------------------------------------- Current assets: Cash and equivalents $ 11,785 $ 78,373 Receivables 244,612 186,852 Inventories 292,843 315,100 Other current assets 47,235 46,988 ------------------------------------------- ---------- ---------- Total current assets 596,475 627,313 Long-term receivables 27,253 10,593 Leased systems and spares, net 98,864 99,859 Property, plant and equipment, net 225,345 225,649 Investments and other assets 187,747 206,354 ------------------------------------------- ---------- ---------- $1,135,684 $1,169,768 ========== ========== Liabilities and Stockholders• Equity ------------------------------------------- Current liabilities: Current installments of long-term debt $ 7,201 $ 2,216 Accounts payable 20,219 41,679 Accrued expenses 96,406 109,300 Income taxes payable 19,095 30,422 Deferred income and customer advances 62,953 88,346 ------------------------------------------- ---------- ---------- Total current liabilities 205,874 271,963 ------------------------------------------- ---------- ---------- Long-term debt, excluding current installments 97,000 105,478 Other long-term obligations 10,565 12,986 Stockholders' equity: Common stock 31,511 31,511 Additional paid-in capital 92,113 102,489 Retained earnings 913,063 866,864 Foreign currency translation adjustments 2,032 (3,024) Treasury stock, at cost (216,474) (218,499) ------------------------------------------- ---------- ---------- Total stockholders' equity 822,245 779,341 ------------------------------------------- ---------- ---------- $1,135,684 $1,169,768 ========== ========== ----------------------------------------------------------------------------- CRAY RESEARCH, INC. CUSTOMER SYSTEMS INSTALLED DURING THE YEAR Three Months Ended Nine Months Ended September 30 September 30 ------------------ ------------------ 1994 1993 1994 1993 -------- -------- -------- -------- High-end systems installed: Parallel Vector Processing 12 14 47 38 Massively Parallel Processing 11 1 20 1 -------- -------- -------- -------- 23 15 67 39 -------- -------- -------- -------- Low-end systems installed: Parallel Vector Processing 23 5 58 13 Symmetric Multiprocessing 7 4 24 5 -------- -------- -------- -------- 30 9 82 18 -------- -------- -------- -------- Total system installations 53 24 149 57 ======== ======== ======== ======== GEOGRAPHIC REGION: United States, Canada and Latin America 27 19 67 37 Europe 17 0 43 10 Japan 8 3 37 6 Asia Pacific 1 2 2 4 ------------------ ------------------ 53 24 149 57 ================== ================== MARKET SECTOR: Government 23 14 62 34 Commercial 22 6 49 15 University 8 4 38 8 ----------------- ----------------- 53 24 149 57 ================= =================