CRAY RESEARCH REPORTS FOURTH QUARTER AND FISCAL 1994 RESULTS RECORD ANNUAL REVENUES IN 1994 TOP $920 MILLION Fourth Quarter Orders Grow 18 Percent Breakeven 1995 Outlook Repeated Company Indicates Continuation of Stock Buy-Back EAGAN, Minnesota, January 25, 1995 -- Cray Research, Inc. (NYSE: CYR) reported net earnings of $9,499,000 or $0.38 per share, on revenues of $237,066,000 for the fourth quarter of fiscal 1994, ended December 31, compared with net earnings of $24,326,000 or $0.93 per share, on revenues of $302,615,000 for the comparable period a year ago. The fourth quarter results include a charge of $8,296,000 pre-tax, or $0.23 per share after tax, for restructuring actions taken to improve efficiency in the Company's Chippewa Falls, Wisconsin manufacturing operations. For the full fiscal year 1994, Cray Research reported net earnings of $55,696,000, or $2.16 per share, on record revenues of $921,609,000, compared with net earnings of $60,855,000 or $2.33 per share, on revenues of $894,857,000 for 1993. The net contract value of orders signed in 1994 was $581 million, compared with $711 million in 1993. Orders in the fourth quarter of 1994 totaled $270 million, up 18 percent from the $228 million of the fourth quarter a year ago. Backlog at the end of 1994 was $237 million, compared with $177 million at the end of the third quarter and $409 million at year-end 1993. Commenting on the results, Cray's President and Chief Operating Officer, Robert H. Ewald, said: "Our fourth quarter results demonstrated progress in many dimensions. Our strong order growth in the quarter reflects demand for the new CRAY J916 supercomputer and the soon-to-be-announced high-end system, code named Triton. The company finished the year with orders for more than 90 Cray J916 systems and seven orders for 'Triton' systems. "However, we did not build shareholder value in 1994. We are making changes and intend to turn that around. While the company sold substantially more systems in 1994 compared with the previous year, they were at lower average price points, so revenue growth was modest, and earnings came in about even with the previous year, prior to restructuring." "1995 will be a year of change," Ewald added, "as we aggressively move to achieve a more competitive cost structure, introduce new products and become much more market-focused." The company currently anticipates revenues in 1995 to decline compared with 1994, with operating losses in the first half of the year, improvement in the second half compared with the first, and break-even results for the full year, prior to any restructuring charges. Revenues in 1995 will be driven by new products, both the J916 and "Triton" systems. The "Triton" family will not ship in volume until the second half of the year. "Even with the challenge we face in 1995, many of the signposts we see are positive," Ewald added. "Our efforts to boost manufacturing efficiency are already paying off. Inventories declined by $85 million in the quarter and more than $100 million for the full year. The company achieved record revenues and gained a record number of new customers in 1994. Better than one out of every three orders we received was from a new-to-Cray customer. We continued our expansion into emerging new geographies with wins in China, Singapore, and Bahrain in 1994 and Russia early this year, for example. "At the current levels, we believe that the company's stock represents an excellent value and we intend to continue our share buyback program in 1995," Ewald added. The company bought back 199,800 shares during the fourth quarter and has bought back 829,200 shares throughout 1994. Outstanding authorization remains for repurchase of an additional 662,728 shares. "We ended the year with a strong balance sheet, and solid financial position to see us through the transition year ahead. Our confidence is bolstered by our people, our products, our competitive position, and by customers' response to the high performance, high bandwidth computing solutions that Cray is delivering today and in the future," he concluded. 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 Twelve Months Ended December 31 December 31 ---------------------- ---------------------- 1994 1993 1994 1993 ---------- ---------- ---------- ---------- (In thousands, except per share data) Revenue: Sales $ 180,654 $ 248,066 $ 706,997 $ 675,492 Leased systems 4,794 5,071 20,728 23,651 Service fees 51,618 49,478 193,884 195,714 ---------------------------- --------- --------- --------- --------- Total revenue 237,066 302,615 921,609 894,857 ---------------------------- --------- --------- --------- --------- Cost of revenue: Cost of sales 99,662 132,545 370,491 344,052 Cost of leased systems 4,208 2,550 14,545 12,757 Cost of services 40,685 39,573 151,407 146,937 ---------------------------- --------- --------- --------- --------- Total cost of revenue 144,555 174,668 536,443 503,746 ---------------------------- --------- --------- --------- --------- Gross profit 92,511 127,947 385,166 391,111 ---------------------------- --------- --------- --------- --------- Operating expenses: Development and engineering 31,661 42,847 140,632 145,700 Marketing 41,475 42,154 143,456 132,534 General and administrative 8,526 7,544 26,606 25,082 ---------------------------- --------- --------- --------- --------- Total operating expenses 81,662 92,545 310,694 303,316 ---------------------------- --------- --------- --------- --------- Operating income 10,849 35,402 74,472 87,795 Other income (expense), net 1,954 (1,644) 3,261 (3,352) ---------------------------- --------- --------- --------- --------- Earnings before taxes 12,803 33,758 77,733 84,443 Income tax expense (3,304) (9,432) (22,037) (23,588) ---------------------------- --------- --------- --------- --------- Net earnings $ 9,499 $ 24,326 $ 55,696 $ 60,855 ---------------------------- ========= ========= ========= ========= Earnings per common and common equivalent share $ 0.38 $ .93 $ 2.16 $ 2.33 ---------------------------- ========= ========= ========= ========= Average number of common and common equivalent shares outstanding 25,648 26,200 25,845 26,118 ---------------------------- ========= ========= ========= ========= ----------------------------------------------------------------------------- CRAY RESEARCH, INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) December 31 December 31 1994 1993 ------------ ------------ Assets (In thousands) ------------------------------------------- Current assets: Cash and equivalents $ 55,543 $ 78,373 Receivables 229,808 186,852 Inventories 207,496 315,100 Other current assets 41,191 46,988 ------------------------------------------- ---------- ---------- Total current assets 534,038 627,313 Long-term receivables 20,959 10,593 Leased systems and spares, net 110,207 99,859 Property, plant and equipment, net 265,116 225,649 Investments and other assets 251,559 206,354 ------------------------------------------- ---------- ---------- $1,181,879 $1,169,768 ========== ========== Liabilities and Stockholders' Equity ------------------------------------------- Current liabilities: Current installments of long-term debt $ 7,344 $ 2,216 Accounts payable 37,999 41,679 Accrued expenses 103,454 109,300 Income taxes payable 7,009 30,422 Deferred income and customer advances 75,214 88,346 ------------------------------------------- ---------- ---------- Total current liabilities 231,020 271,963 ------------------------------------------- ---------- ---------- Long-term debt, excluding current installments 97,000 105,478 Other long-term obligations 24,949 12,986 Stockholders' equity: Common stock 31,511 31,511 Additional paid-in capital 91,973 102,489 Retained earnings 922,560 866,864 Foreign currency translation adjustments 2,774 (3,024) Treasury stock, at cost (219,908) (218,499) ------------------------------------------- ---------- ---------- Total stockholders' equity 828,910 779,341 ------------------------------------------- ---------- ---------- $1,181,879 $1,169,768 ========== ========== ----------------------------------------------------------------------------- CRAY RESEARCH, INC. SELECTED INSTALLATION DATA (UNITS) Three Months Ended Year Ended December 31 December 31 ------------------ ------------------ 1994 1993 1994 1993 ------------------ ------------------ PRODUCT TYPE: High-end systems installed: Parallel Vector Processing 12 21 59 59 Massively Parallel Processing 9 - 29 1 -------- -------- -------- -------- 21 21 88 60 -------- -------- -------- -------- Low-end systems: Parallel Vector Processing 15 15 73 28 Symmetric Multiprocessing 10 8 34 13 -------- -------- -------- -------- 25 23 107 41 -------- -------- -------- -------- 46 44 195 101 ======== ======== ======== ======== GEOGRAPHIC REGION: United States, Canada and Latin America 20 15 87 52 Europe 17 16 60 26 Japan 5 6 42 12 Asia Pacific 4 7 6 11 ------------------ ------------------ 46 44 195 101 ================== ================== MARKET SECTOR: Government 22 10 84 44 Commercial 10 14 59 29 University 14 20 52 28 ----------------- ----------------- 46 44 195 101 ================= ================= ------------------------------------------------------------------------------ SELECTED ORDER DATA (UNITS) --------------------------- Three Months Ended Year Ended December 31 December 31 ------------------ ------------------ 1994 1994 ------------------ ------------------ PRODUCT TYPE: High-end systems: 21 61 Low-end systems: Parallel Vector Processing 61 162 Symmetric Multiprocessing 11 36 ------------------ ------------------ 93 259 ------------------ ------------------ ------------------------------------------------------------------------------ CRAY RESEARCH, INC. SUPPLEMENTAL INFORMATION (in thousands, except employee number & customer count) Three Months Ended Year Ended December 31 December 31 ---------------- ---------------- 1994 1994 ---------------- ---------------- SELECTED CASH FLOW ITEMS: ------------------------- Interest received 3,029 10,799 Interest paid (1,399) (8,529) Depreciation and amortization 35,151 126,250 Expenditure for property, plant and equipment (30,642) (87,266) Repurchase of common stock (3,779) (19,407) Number of shares repurchased 200 829 Remaining share repurchase authorization (shares) 663 663 Effect of exchange rate changes on cash 177 3,594 Total cash & investments 255,543 255,543 ------------------------------------------------------------------------------ MISCELLANEOUS DATA ------------------ Overall gross profit margin 39% 42% Sales gross profit margin 45% 48% Service gross profit margin 21% 22% Lease gross profit margin 12% 30% ------------------------------------------------------------------------------ Number of New-to-Cray Customers (orders) High-end systems (units) 2 8 Low-end systems Parallel Vector Processing (units) 28 64 Symmetric Multiprocessing (units) 6 25 ---------------- ---------------- 36 97 ---------------- ---------------- ------------------------------------------------------------------------------ Revenue U.S. 140,420 59% 491,518 53% Revenue International 96,646 41% 430,091 47% ------------------------------------------------------------------------------ Total number of employees 4,840 ------------------------------------------------------------------------------