Seagate Technology plc (NASDAQ: STX) (the “Company” or “Seagate”) today
reported financial results for the quarter and fiscal year ended June
27, 2014. For the fourth quarter, the Company reported revenue of
approximately $3.3 billion, gross margin of 28.0%, net income of $320
million and diluted earnings per share of $0.95. On a non-GAAP basis,
which excludes the net impact of certain items, Seagate reported gross
margin of 28.5%, net income of $370 million and diluted earnings per
share of $1.10.
During the fourth quarter, the Company generated approximately $577
million in operating cash flow and returned $166 million to shareholders
in the form of dividends and share redemptions.
For the fiscal year ended June 27, 2014, the Company reported revenue of
$13.7 billion, gross margin of 28.0%, net income of $1.6 billion and
diluted earnings per share of $4.52. On a non-GAAP basis, Seagate
reported gross margin of 28.5%, net income of $1.8 billion and diluted
earnings per share of $5.04.
In fiscal year 2014, the Company returned $2.5 billion to shareholders
in the form of dividends and share redemptions. The Company also
successfully raised $1.8 billion in investment grade debt in fiscal
2014, extending its weighted average maturity to approximately 7 years
and decreasing its weighted average interest to approximately 5%. Cash,
cash equivalents, restricted cash, and short-term investments totaled
approximately $2.7 billion at the end of the fiscal year. There were 327
million ordinary shares issued and outstanding as of the end of the
fiscal year.
“Throughout fiscal year 2014, Seagate delivered strong financial and
operational performance and returned significant value to shareholders.
We made strategic investments in our technology portfolio, which enabled
us to continue to innovate into higher capacity and power efficient
storage solutions, and expanding our capabilities to serve a broader
storage customer base in the future through new cloud systems and
solutions and flash technology for connected storage,” said Steve Luczo,
Seagate’s chairman and chief executive officer.
“The shifting information technology market dynamics are disrupting the
traditional storage industry in meaningful ways and continue to create
more opportunities for Seagate. As we plan for our next fiscal year, we
remain focused on investing in our storage technology product portfolio
to deliver high quality storage products and solutions for our
customers, as well as continuing to create long-term value for our
shareholders.”
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Commentary document. The Supplemental
Commentary will not be read during today's call, but rather it is
available on Seagate’s Investor Relations website at www.seagate.com/investors.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of $0.43
per share, which will be payable on August 22, 2014 to shareholders of
record as of the close of business on August 8, 2014. The payment of any
future quarterly dividends will be at the discretion of the Board and
will be dependent upon Seagate's financial position, results of
operations, available cash, cash flow, capital requirements and other
factors deemed relevant by the Board.
Investor Communications
Seagate management will hold a public webcast today at 2:30 p.m. Pacific
Time that can be accessed on its Investor Relations website at www.seagate.com/investors.
During today's webcast, the Company will provide an outlook for its
first fiscal quarter of 2015, including key underlying assumptions.
Seagate is planning an investor and analyst meeting on September 12,
2014 to discuss the Company’s longer-term strategic plan.
Replay
A replay will be available beginning today at approximately 6:00 p.m.
Pacific Time at www.seagate.com/investors.
About Seagate
Seagate is a world leader in hard disk drives and storage solutions.
Learn more at www.seagate.com.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, each as amended, including, in
particular, statements about our plans, strategies and prospects and
estimates of industry growth for the fiscal quarter ending October 3,
2014 and beyond. These statements identify prospective information and
include words such as “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “projects” and similar expressions. These
forward-looking statements are based on information available to the
Company as of the date of this press release and are based on
management’s current views and assumptions. These forward-looking
statements are conditioned upon and also involve a number of known and
unknown risks, uncertainties, and other factors that could cause actual
results, performance or events to differ materially from those
anticipated by these forward-looking statements. Such risks,
uncertainties, and other factors may be beyond the Company’s control and
may pose a risk to the Company’s operating and financial condition. Such
risks and uncertainties include, but are not limited to: the uncertainty
in global economic conditions, as consumers and businesses may defer
purchases in response to tighter credit and financial news; the impact
of the variable demand and adverse pricing environment for disk drives,
particularly in view of current business and economic conditions;
dependence on the Company’s ability to successfully qualify, manufacture
and sell its disk drive products in increasing volumes on a
cost-effective basis and with acceptable quality, particularly the new
disk drive products with lower cost structures; the impact of
competitive product announcements; possible excess industry supply with
respect to particular disk drive products; and the Company’s ability to
achieve projected cost savings in connection with restructuring plans.
Information concerning risks, uncertainties and other factors that could
cause results to differ materially from the expectations described in
this press release is contained in the Company’s Quarterly Report on
Form 10-Q filed with the U.S. Securities and Exchange Commission on
April 30, 2014, the “Risk Factors” section of which is incorporated into
this press release by reference, and other documents filed with or
furnished to the Securities and Exchange Commission. These
forward-looking statements should not be relied upon as representing the
Company’s views as of any subsequent date and the Company undertakes no
obligation to update forward-looking statements to reflect events or
circumstances after the date they were made.
|
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
June 27, 2014
|
|
June 28, 2013 (a)
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,634
|
|
|
$
|
1,708
|
Short-term investments
|
|
20
|
|
|
480
|
Restricted cash and investments
|
|
4
|
|
|
101
|
Accounts receivable, net
|
|
1,729
|
|
|
1,670
|
Inventories
|
|
985
|
|
|
854
|
Deferred income taxes
|
|
126
|
|
|
115
|
Other current assets
|
|
279
|
|
|
484
|
Total current assets
|
|
5,777
|
|
|
5,412
|
Property, equipment and leasehold improvements, net
|
|
2,136
|
|
|
2,269
|
Goodwill
|
|
537
|
|
|
476
|
Other intangible assets, net
|
|
359
|
|
|
405
|
Deferred income taxes
|
|
499
|
|
|
456
|
Other assets, net
|
|
184
|
|
|
225
|
Total Assets
|
|
$
|
9,492
|
|
|
$
|
9,243
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,549
|
|
|
$
|
1,690
|
Accrued employee compensation
|
|
296
|
|
|
335
|
Accrued warranty
|
|
144
|
|
|
176
|
Accrued expenses
|
|
409
|
|
|
407
|
Current portion of long-term debt
|
|
—
|
|
|
3
|
Total current liabilities
|
|
2,398
|
|
|
2,611
|
Long-term accrued warranty
|
|
125
|
|
|
144
|
Long-term accrued income taxes
|
|
90
|
|
|
87
|
Other non-current liabilities
|
|
127
|
|
|
121
|
Long-term debt, less current portion
|
|
3,920
|
|
|
2,774
|
Total Liabilities
|
|
6,660
|
|
|
5,737
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
Total Equity
|
|
2,832
|
|
|
3,506
|
Total Liabilities and Equity
|
|
$
|
9,492
|
|
|
$
|
9,243
|
|
|
|
|
|
|
|
|
(a) The information in this column was derived from the Company’s
audited Consolidated Balance Sheet as of June 28, 2013.
|
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Fiscal Years Ended
|
|
|
June 27, 2014
|
|
June 28, 2013
|
|
June 27, 2014
|
|
June 28, 2013 (a)
|
Revenue
|
|
$
|
3,301
|
|
|
$
|
3,425
|
|
|
$
|
13,724
|
|
|
$
|
14,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
2,376
|
|
|
2,486
|
|
|
9,878
|
|
|
10,411
|
|
Product development
|
|
323
|
|
|
294
|
|
|
1,226
|
|
|
1,133
|
|
Marketing and administrative
|
|
161
|
|
|
176
|
|
|
722
|
|
|
635
|
|
Amortization of intangibles
|
|
27
|
|
|
20
|
|
|
98
|
|
|
79
|
|
Restructuring and other, net
|
|
4
|
|
|
1
|
|
|
24
|
|
|
2
|
|
Total operating expenses
|
|
2,891
|
|
|
2,977
|
|
|
11,948
|
|
|
12,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
410
|
|
|
448
|
|
|
1,776
|
|
|
2,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1
|
|
|
2
|
|
|
8
|
|
|
8
|
|
Interest expense
|
|
(50
|
)
|
|
(50
|
)
|
|
(195
|
)
|
|
(214
|
)
|
Other, net
|
|
(77
|
)
|
|
(97
|
)
|
|
(33
|
)
|
|
(54
|
)
|
Other expense, net
|
|
(126
|
)
|
|
(145
|
)
|
|
(220
|
)
|
|
(260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
284
|
|
|
303
|
|
|
1,556
|
|
|
1,831
|
|
Benefit from income taxes
|
|
(36
|
)
|
|
(45
|
)
|
|
(14
|
)
|
|
(7
|
)
|
Net income
|
|
$
|
320
|
|
|
$
|
348
|
|
|
$
|
1,570
|
|
|
$
|
1,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.98
|
|
|
$
|
0.97
|
|
|
$
|
4.66
|
|
|
$
|
4.97
|
|
Diluted
|
|
0.95
|
|
|
0.94
|
|
|
4.52
|
|
|
4.81
|
|
Number of shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
326
|
|
|
359
|
|
|
337
|
|
|
370
|
|
Diluted
|
|
337
|
|
|
371
|
|
|
347
|
|
|
382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.43
|
|
|
$
|
0.38
|
|
|
$
|
1.67
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The information in this column was derived from the Company’s
audited Consolidated Statement of Operations for the year ended June 28,
2013.
|
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
|
|
|
|
For the Fiscal Years Ended
|
|
|
June 27, 2014
|
|
June 28, 2013 (a)
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income
|
|
$
|
1,570
|
|
|
$
|
1,838
|
|
Adjustments to reconcile net income to net cash from operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
879
|
|
|
873
|
|
Share-based compensation
|
|
118
|
|
|
76
|
|
Loss on redemption and repurchase of debt
|
|
81
|
|
|
141
|
|
Gain on sale of investments
|
|
(32
|
)
|
|
(61
|
)
|
Gain on sale of property and equipment
|
|
(4
|
)
|
|
(36
|
)
|
Deferred income taxes
|
|
(24
|
)
|
|
(70
|
)
|
Other non-cash operating activities, net
|
|
14
|
|
|
12
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Restricted cash
|
|
104
|
|
|
—
|
|
Accounts receivable, net
|
|
4
|
|
|
661
|
|
Inventories
|
|
(20
|
)
|
|
102
|
|
Accounts payable
|
|
(190
|
)
|
|
(538
|
)
|
Accrued employee compensation
|
|
(55
|
)
|
|
(14
|
)
|
Accrued expenses, income taxes and warranty
|
|
(123
|
)
|
|
(170
|
)
|
Vendor non-trade receivables
|
|
217
|
|
|
272
|
|
Other assets and liabilities
|
|
19
|
|
|
(39
|
)
|
Net cash provided by operating activities
|
|
2,558
|
|
|
3,047
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Acquisition of property, equipment and leasehold improvements
|
|
(559
|
)
|
|
(786
|
)
|
Proceeds from the sale of property and equipment
|
|
3
|
|
|
29
|
|
Proceeds from the sale of strategic investments
|
|
72
|
|
|
—
|
|
Purchases of short-term investments
|
|
(88
|
)
|
|
(351
|
)
|
Sales of short-term investments
|
|
508
|
|
|
296
|
|
Maturities of short-term investments
|
|
61
|
|
|
38
|
|
Cash used in acquisition of businesses, net of cash acquired
|
|
(285
|
)
|
|
(36
|
)
|
Other investing activities, net
|
|
(34
|
)
|
|
(15
|
)
|
Net cash used in investing activities
|
|
(322
|
)
|
|
(825
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Net proceeds from issuance of long-term debt
|
|
1,781
|
|
|
986
|
|
Repayments of long-term debt
|
|
(725
|
)
|
|
(1,224
|
)
|
Proceeds from issuance of ordinary shares under employee stock plans
|
|
107
|
|
|
259
|
|
Dividends to shareholders
|
|
(557
|
)
|
|
(518
|
)
|
Repurchases of ordinary shares
|
|
(1,912
|
)
|
|
(1,654
|
)
|
Other financing activities, net
|
|
(5
|
)
|
|
(71
|
)
|
Net cash used in financing activities
|
|
(1,311
|
)
|
|
(2,222
|
)
|
Effects of foreign currency exchange rate changes on cash and cash
equivalents
|
|
1
|
|
|
1
|
|
Increase in cash and cash equivalents
|
|
926
|
|
|
1
|
|
Cash and cash equivalents at the beginning of the year
|
|
1,708
|
|
|
1,707
|
|
Cash and cash equivalents at the end of the year
|
|
$
|
2,634
|
|
|
$
|
1,708
|
|
(a) The information in this column was derived from the Company’s
audited Consolidated Statement of Cash Flows for the year ended June 28,
2013.
Use of non-GAAP financial information
To supplement the preliminary consolidated financial information
presented in accordance with generally accepted accounting principles
(GAAP), the Company provides non-GAAP measures of net income, diluted
net income per share, gross margin, gross margin as a percentage of
revenue, operating margin, operating expenses, and operating income
which are adjusted from results based on GAAP to exclude certain
expenses, gains and losses. These non-GAAP financial measures are
provided to enhance the user's overall understanding of the Company's
current financial performance and its prospects for the future.
Specifically, the Company believes non-GAAP results provide useful
information to both management and investors as these non-GAAP results
exclude certain expenses that the Company believes are not indicative of
its core operating results and because they are consistent with the
financial models and estimates published by financial analysts who
follow the Company.
These non-GAAP results are some of the primary measurements management
uses to assess the Company's performance, allocate resources and plan
for future periods. Reported non-GAAP results should only be considered
as supplemental to results prepared in accordance with GAAP, and not
considered as a substitute for, or superior to, GAAP results. These
non-GAAP measures may differ from the non-GAAP measures reported by
other companies in the Company's industry.
|
SEAGATE TECHNOLOGY PLC
ADJUSTMENTS TO GAAP NET INCOME, DILUTED NET INCOME PER SHARE
AND OPERATING CASH FLOW
(In millions, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 27, 2014
|
|
For the Fiscal Year Ended June 27, 2014
|
Reconciliation of GAAP Net Income:
|
|
|
|
|
|
|
|
GAAP Net Income
|
|
|
$
|
320
|
|
|
$
|
1,570
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
Cost of revenue
|
|
A
|
14
|
|
|
62
|
|
Product development
|
|
B
|
—
|
|
|
6
|
|
Marketing and administrative
|
|
C
|
(25
|
)
|
|
(2
|
)
|
Amortization of intangibles
|
|
D
|
27
|
|
|
98
|
|
Restructuring and other, net
|
|
E
|
4
|
|
|
24
|
|
Other expense, net
|
|
F
|
76
|
|
|
45
|
|
Benefit from income taxes
|
|
G
|
(46
|
)
|
|
(52
|
)
|
Non-GAAP net income
|
|
|
$
|
370
|
|
|
$
|
1,751
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Diluted Net Income Per Share:
|
|
|
|
|
|
|
|
GAAP
|
|
|
$
|
0.95
|
|
|
$
|
4.52
|
|
Non-GAAP
|
|
|
$
|
1.10
|
|
|
$
|
5.04
|
|
Shares used in diluted net income per share calculation
|
|
|
337
|
|
|
347
|
|
|
|
|
|
|
|
|
|
Reconciliation of operating cash flow:
|
|
|
|
|
|
|
|
GAAP operating cash flow
|
|
|
$
|
577
|
|
|
$
|
2,558
|
|
Less: acquisition of property, equipment and leasehold improvements
|
|
|
(131
|
)
|
|
(559
|
)
|
Free cash flow
|
|
|
$
|
446
|
|
|
$
|
1,999
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
For the three months and fiscal year ended June 27, 2014, Cost of
revenue on a GAAP basis totaled $2.4 billion and $9.9 billion,
respectively, while non-GAAP Cost of revenue, which excludes the
impact of certain adjustments, was $2.4 billion and $9.8 billion,
respectively. These non-GAAP adjustments include amortization of
intangibles and other acquisition related expenses associated with
the December 2011 acquisition of Samsung Electronics Co., Ltd.'s
hard disk drive business (the "Samsung HDD business"), the August
2012 acquisition of LaCie S.A. ("LaCie") and the March 31, 2014
acquisition of Xyratex Ltd. ("Xyratex").
|
|
B
|
|
For the three months and fiscal year ended June 27, 2014, Product
development expense has been adjusted on a non-GAAP basis to exclude
the impact of acquisition and integration costs associated with the
acquisitions of the Samsung HDD business, LaCie and Xyratex.
|
|
C
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|
For the three months ended June 27, 2014, Marketing and
administrative expense has been adjusted on a non-GAAP basis
primarily to exclude the impact of a legal cost reimbursement.
|
|
|
|
For the fiscal year ended June 27, 2014, Marketing and
administrative expense has been adjusted on a non-GAAP basis to
exclude the impact of a legal cost reimbursement, partially offset
by the impact of acquisition and integration costs associated with
the acquisition of Samsung HDD business, LaCie and Xyratex.
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D
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|
For the three months and fiscal year ended June 27, 2014,
Amortization of intangibles primarily related to our Samsung HDD
business and LaCie acquisitions have been excluded on a non-GAAP
basis.
|
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E
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|
For the three months and fiscal year ended June 27, 2014,
Restructuring and other, net, has been adjusted on a non-GAAP basis
primarily to exclude the impact from our existing restructuring
plans.
|
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F
|
|
For the three months ended June 27, 2014, Other expense, net, has
been adjusted on a non-GAAP basis to exclude the net impact of
losses recognized on the early redemption and repurchase of debt.
|
|
|
|
For the fiscal year ended June 27, 2014, Other expense, net, has
been adjusted on a non-GAAP basis primarily to exclude the net
impact of losses recognized on the early redemption and repurchase
of debt, partially offset by gains recognized upon sales of certain
strategic investments.
|
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G
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|
For the three months and fiscal year ended June 27, 2014, Benefit
from income taxes has been adjusted on a non-GAAP basis to exclude
certain changes in deferred tax assets including a valuation
allowance release associated with the Xyratex acquisition.
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