Revenue for the six-month period ended June 30, 2012 was $196.5 million compared with $107.8 million in the prior year period. Net income was $152.4 million or $4.12 diluted income per share for the first half of 2012 compared to a net loss of ($4.4 million) or ($0.13) per share in the prior year period. Operating income for the first six months of 2012, excluding the $139.1 million pre-tax gain from the asset sale to Intel, was $20.8 million.
The first half of 2012 results included non-cash items of $4.0 million for depreciation and amortization and $2.4 million related to stock compensation expense.
Total gross profit margin for the second quarter of 2012 was 41% compared to 38% for the second quarter of 2011. For the second quarter of 2012, product margin was 42% and service margin was 35%.
Operating expenses for the second quarter of 2012 were $22.1 million compared to $28.7 million in the prior year period. The company's second quarter and first half of 2012 results were impacted by higher accrued incentive-based compensation due to strong operating results, as well as increased spending toward our growth initiatives compared to 2011. Second quarter of 2012 operating expenses benefited from $15 million in R&D co-funding credits related to the company's DARPA contract. The second quarter of 2012 results also included non-cash items of $2.1 million for depreciation and amortization and $1.2 million for stock compensation expense.
Cray's effective tax rate for the first half of the year was 5% and benefited from the recognition of a capital loss and the partial release of a valuation allowance provided against deferred tax assets. The deferred tax asset balance primarily resulted from net operating loss carryforwards that were generated in previous periods.
As of June 30, 2012, cash balances totaled $223 million compared to $112 million as of March 31, 2012. Working capital increased by $168 million during the second quarter to $315 million as of June 30, 2012.
"We had a very strong quarter, led by the acceptance of our first petaflops system at a large commercial customer and the completion of a $140 million asset sale", stated Peter Ungaro, president and CEO of Cray. "During the first half of the year, we made good progress on each of our three growth initiatives while also delivering strong operating results. We were recently awarded a number of exciting new wins for our next-generation supercomputer, called 'Cascade', which is planned for general availability next year. We have a lot of work left to do in order to achieve our outlook for this year, but our business is in excellent shape as we continue to build on our strong market position now and into the future."
A wide range of results remains possible for 2012. While many variables may impact our results, one significant item is the timing of a single planned customer acceptance, which would represent approximately $150 million in product revenue. This is the largest system Cray has ever built and its acceptance is dependent on several items, including third-party components, all on a tight timeline due to previous delays. Assuming acceptance of this system occurs in 2012, as currently planned, Cray continues to anticipate total revenue to be in the range of $430-$450 million for the year.
Revenue in the third quarter of 2012 is expected to be about $30 million. For the year, overall gross margins are anticipated to be in the 35 percent range and total operating expenses are expected to be about $120 million. Based on this outlook, Cray expects to be solidly profitable for 2012, independent of the $139 million pre-tax gain on the sale of its interconnect hardware development programme that occurred during the second quarter.
The company's 2012 effective income tax rate is currently projected to be about 5-8% but is dependent on a number of variables. Actual results for any future period are subject to large fluctuations given the nature of Cray's business.
Recent highlights include the following: