Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”) today
reported financial results for the second quarter of fiscal year 2015
ended January 2, 2015. For the second quarter, the Company reported
revenue of approximately $3.7 billion, gross margin of 27.8%, net income
of $933 million and diluted earnings per share of $2.78. On a non-GAAP
basis, which excludes the net impact of certain items, including a $620
million net gain on the arbitration award, Seagate reported gross margin
of 28.2%, net income of $452 million and diluted earnings per share of
$1.35. For a detailed reconciliation of GAAP to non-GAAP results, see
the accompanying financial tables.
During the second quarter, the Company generated approximately $1.4
billion in operating cash flow, paid cash dividends of $177 million and
repurchased approximately 0.3 million ordinary shares for $18 million.
There were 329 million ordinary shares issued and outstanding as of the
end of the quarter. Cash, cash equivalents, restricted cash, and
short-term investments totaled approximately $3.3 billion at the end of
the quarter.
“Seagate’s second fiscal quarter performance is the result of consistent
execution and our solid competitive positioning in the storage
technology marketplace,” said Steve Luczo, Seagate’s chairman and chief
executive officer. “In addition, our cash flow generation remains strong
as we continue to effectively balance investing in our business with
returning capital to shareholders.”
Seagate has issued a Supplemental Financial Information document. The
Supplemental Financial Information is available on Seagate’s Investors
website at www.seagate.com/investors.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of $0.54
per share, which will be payable on February 24, 2015 to shareholders of
record as of the close of business on February 10, 2015. 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 6:00 a.m. Pacific
Time that can be accessed on its Investors website at www.seagate.com/investors.
During today's webcast, the Company will provide an outlook for its
third fiscal quarter of 2015 including key underlying assumptions.
Replay
A replay will be available beginning today at approximately 9:00 a.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 April 3, 2015
and beyond as well as our plans with respect to future dividend
payments. These statements identify prospective information and may
include words such as “expects,” “intends,” “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; 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; the Company’s ability to achieve projected cost savings in
connection with restructuring plans and fluctuations in interest rates.
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 Annual Report on Form
10-K filed with the U.S. Securities and Exchange Commission on August 7,
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.
The inclusion of Seagate’s website address in this press release is
intended to be an inactive textual reference only and not an active
hyperlink. The information contained in, or that can be accessed
through, Seagate’s website is not part of this press release.
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|
|
|
|
|
|
SEAGATE TECHNOLOGY PLC
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
|
June 27,
|
|
|
|
2015
|
|
|
2014 (a)
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
3,296
|
|
|
|
$
|
2,634
|
Short-term investments
|
|
|
6
|
|
|
|
20
|
Restricted cash and investments
|
|
|
4
|
|
|
|
4
|
Accounts receivable, net
|
|
|
1,829
|
|
|
|
1,729
|
Inventories
|
|
|
1,129
|
|
|
|
985
|
Deferred income taxes
|
|
|
123
|
|
|
|
126
|
Other current assets
|
|
|
245
|
|
|
|
279
|
Total current assets
|
|
|
6,632
|
|
|
|
5,777
|
Property, equipment and leasehold improvements, net
|
|
|
2,155
|
|
|
|
2,136
|
Goodwill
|
|
|
872
|
|
|
|
537
|
Other intangible assets, net
|
|
|
449
|
|
|
|
359
|
Deferred income taxes
|
|
|
498
|
|
|
|
499
|
Other assets, net
|
|
|
208
|
|
|
|
184
|
Total Assets
|
|
|
$
|
10,814
|
|
|
|
$
|
9,492
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
1,736
|
|
|
|
$
|
1,549
|
Accrued employee compensation
|
|
|
272
|
|
|
|
296
|
Accrued warranty
|
|
|
153
|
|
|
|
148
|
Accrued expenses
|
|
|
658
|
|
|
|
405
|
Total current liabilities
|
|
|
2,819
|
|
|
|
2,398
|
Long-term accrued warranty
|
|
|
129
|
|
|
|
125
|
Long-term accrued income taxes
|
|
|
33
|
|
|
|
90
|
Other non-current liabilities
|
|
|
186
|
|
|
|
127
|
Long-term debt
|
|
|
3,932
|
|
|
|
3,920
|
Total Liabilities
|
|
|
7,099
|
|
|
|
6,660
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Total Equity
|
|
|
3,715
|
|
|
|
2,832
|
Total Liabilities and Equity
|
|
|
$
|
10,814
|
|
|
|
$
|
9,492
|
(a) The information as of June 27, 2014 was derived from the Company’s
audited Consolidated Balance Sheet as of June 27, 2014.
|
|
|
|
|
|
|
SEAGATE TECHNOLOGY PLC
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
January 2,
|
|
|
December 27,
|
|
|
January 2,
|
|
|
December 27,
|
|
|
|
2015
|
|
|
2013
|
|
|
2015
|
|
|
2013
|
Revenue
|
|
|
$
|
3,696
|
|
|
|
$
|
3,528
|
|
|
|
$
|
7,481
|
|
|
|
$
|
7,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
2,669
|
|
|
|
2,541
|
|
|
|
5,403
|
|
|
|
5,055
|
|
Product development
|
|
|
341
|
|
|
|
312
|
|
|
|
683
|
|
|
|
606
|
|
Marketing and administrative
|
|
|
218
|
|
|
|
190
|
|
|
|
434
|
|
|
|
371
|
|
Amortization of intangibles
|
|
|
32
|
|
|
|
25
|
|
|
|
62
|
|
|
|
45
|
|
Restructuring and other, net
|
|
|
3
|
|
|
|
16
|
|
|
|
10
|
|
|
|
18
|
|
Gain on arbitration award, net
|
|
|
(620
|
)
|
|
|
—
|
|
|
|
(620
|
)
|
|
|
—
|
|
Total operating expenses
|
|
|
2,643
|
|
|
|
3,084
|
|
|
|
5,972
|
|
|
|
6,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,053
|
|
|
|
444
|
|
|
|
1,509
|
|
|
|
922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
|
6
|
|
Interest expense
|
|
|
(50
|
)
|
|
|
(49
|
)
|
|
|
(104
|
)
|
|
|
(93
|
)
|
Other, net
|
|
|
122
|
|
|
|
46
|
|
|
|
109
|
|
|
|
47
|
|
Other income (expense), net
|
|
|
73
|
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,126
|
|
|
|
442
|
|
|
|
1,517
|
|
|
|
882
|
|
Provision for income taxes
|
|
|
193
|
|
|
|
14
|
|
|
|
203
|
|
|
|
27
|
|
Net income
|
|
|
$
|
933
|
|
|
|
$
|
428
|
|
|
|
$
|
1,314
|
|
|
|
$
|
855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to Seagate Technology plc ordinary
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
2.84
|
|
|
|
$
|
1.27
|
|
|
|
$
|
4.02
|
|
|
|
$
|
2.46
|
|
Diluted
|
|
|
2.78
|
|
|
|
1.24
|
|
|
|
3.91
|
|
|
|
2.39
|
|
Number of shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
328
|
|
|
|
336
|
|
|
|
327
|
|
|
|
347
|
|
Diluted
|
|
|
336
|
|
|
|
346
|
|
|
|
336
|
|
|
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per Seagate Technology plc ordinary share
|
|
|
$
|
0.54
|
|
|
|
$
|
0.43
|
|
|
|
$
|
0.97
|
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEAGATE TECHNOLOGY PLC
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
January 2,
|
|
|
December 27,
|
|
|
|
2015
|
|
|
2013
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,314
|
|
|
|
$
|
855
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
426
|
|
|
|
457
|
|
Share-based compensation
|
|
|
73
|
|
|
|
57
|
|
Deferred income taxes
|
|
|
(4
|
)
|
|
|
(15
|
)
|
(Gain) loss on sale of property and equipment
|
|
|
1
|
|
|
|
(4
|
)
|
Gain on sale of investments
|
|
|
—
|
|
|
|
(32
|
)
|
Loss on redemption and repurchase of debt
|
|
|
52
|
|
|
|
—
|
|
Other non-cash operating activities, net
|
|
|
2
|
|
|
|
8
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Restricted cash and investments
|
|
|
—
|
|
|
|
104
|
|
Accounts receivable, net
|
|
|
(99
|
)
|
|
|
51
|
|
Inventories
|
|
|
(107
|
)
|
|
|
(94
|
)
|
Accounts payable
|
|
|
209
|
|
|
|
(46
|
)
|
Accrued employee compensation
|
|
|
(24
|
)
|
|
|
(68
|
)
|
Accrued expenses, income taxes and warranty
|
|
|
167
|
|
|
|
41
|
|
Vendor non-trade receivables
|
|
|
28
|
|
|
|
199
|
|
Other assets and liabilities
|
|
|
7
|
|
|
|
25
|
|
Net cash provided by operating activities
|
|
|
2,045
|
|
|
|
1,538
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Acquisition of property, equipment and leasehold improvements
|
|
|
(387
|
)
|
|
|
(304
|
)
|
Proceeds from the sale of strategic investments
|
|
|
—
|
|
|
|
72
|
|
Purchases of short-term investments
|
|
|
(5
|
)
|
|
|
(87
|
)
|
Sales of short-term investments
|
|
|
4
|
|
|
|
463
|
|
Maturities of short-term investments
|
|
|
19
|
|
|
|
61
|
|
Cash used in acquisition of business
|
|
|
(450
|
)
|
|
|
—
|
|
Other investing activities, net
|
|
|
(34
|
)
|
|
|
(28
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(853
|
)
|
|
|
177
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Redemption and repurchase of debt
|
|
|
(535
|
)
|
|
|
—
|
|
Net proceeds from issuance of long-term debt
|
|
|
498
|
|
|
|
791
|
|
Repurchases of ordinary shares
|
|
|
(201
|
)
|
|
|
(1,702
|
)
|
Dividends to shareholders
|
|
|
(317
|
)
|
|
|
(277
|
)
|
Proceeds from issuance of ordinary shares under employee stock plans
|
|
|
49
|
|
|
|
61
|
|
Other financing activities, net
|
|
|
(12
|
)
|
|
|
(5
|
)
|
Net cash used in financing activities
|
|
|
(518
|
)
|
|
|
(1,132
|
)
|
Effect of foreign currency exchange rate changes on cash and cash
equivalents
|
|
|
(12
|
)
|
|
|
2
|
|
Increase in cash and cash equivalents
|
|
|
662
|
|
|
|
585
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
2,634
|
|
|
|
1,708
|
|
Cash and cash equivalents at the end of the period
|
|
|
$
|
3,296
|
|
|
|
$
|
2,293
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of non-GAAP financial information
To supplement the condensed consolidated financial statements 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
our 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, gains and
losses that we believe are not indicative of our core operating results
and because we believe they are generally consistent with 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 our industry.
|
|
|
|
|
|
|
|
SEAGATE TECHNOLOGY PLC
|
ADJUSTMENTS TO GAAP NET INCOME AND DILUTED NET INCOME PER SHARE
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Six
|
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
|
January 2, 2015
|
|
|
January 2, 2015
|
GAAP net income
|
|
|
|
$
|
933
|
|
|
|
$
|
1,314
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
A
|
14
|
|
|
|
26
|
|
Product development
|
|
|
B
|
6
|
|
|
|
10
|
|
Marketing and administrative
|
|
|
B
|
7
|
|
|
|
11
|
|
Amortization of intangibles
|
|
|
C
|
32
|
|
|
|
62
|
|
Restructuring and other, net
|
|
|
D
|
3
|
|
|
|
10
|
|
Gain on arbitration award, net
|
|
|
E
|
(620
|
)
|
|
|
(620
|
)
|
Other income (expense), net
|
|
|
F
|
(104
|
)
|
|
|
(89
|
)
|
Provision for income taxes
|
|
|
G
|
181
|
|
|
|
181
|
|
Non-GAAP net income
|
|
|
|
$
|
452
|
|
|
|
$
|
905
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
GAAP
|
|
|
|
$
|
2.78
|
|
|
|
$
|
3.91
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
|
|
|
|
$
|
1.35
|
|
|
|
$
|
2.69
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in diluted net income per share calculation
|
|
|
|
$
|
336
|
|
|
|
$
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
For the three and six months ended January 2, 2015, Cost of revenue
on a GAAP basis totaled $2.7 billion and $5.4 billion, while
non-GAAP Cost of revenue, which excludes the net impact of certain
adjustments, was $2.7 billion and $5.4 billion, respectively. The
non-GAAP adjustments include amortization of intangibles associated
with acquisitions and other acquisition related expenses.
|
|
|
|
|
B
|
|
|
For the three and six months ended January 2, 2015, Product
development and Marketing and administrative expenses have been
adjusted on a non-GAAP basis to exclude the impact of acquisition
and integration costs associated with acquisitions.
|
|
|
|
|
C
|
|
|
For the three and six months ended January 2, 2015, Amortization of
intangibles primarily related to our acquisitions has been excluded
on a non-GAAP basis.
|
|
|
|
|
D
|
|
|
For the three and six months ended January 2, 2015, Restructuring
and other, net, primarily related to a reduction in our work force
as a result of our ongoing focus on cost efficiencies in all areas
of our business.
|
|
|
|
|
E
|
|
|
For the three and six months ended January 2, 2015, Gain on
arbitration award, net, has been adjusted on a non-GAAP basis to
exclude the final award amount of $630 million, less litigation and
other related costs of $10 million, related to the arbitration award
in the Company’s case against Western Digital for the
misappropriation of the Company’s trade secrets.
|
|
|
|
|
F
|
|
|
For the three and six months ended January 2, 2015, Other income
(expense), net, has been adjusted on a non-GAAP basis mostly to
exclude the partial payment of $143 million for interest accrued on
the final arbitration award amount in the Company's case against
Western Digital and the net impact of losses recognized on the early
redemption and repurchase of debt.
|
|
|
|
|
G
|
|
|
For the three and six months ended January 2, 2015, Provision for
income taxes, has been adjusted on a non-GAAP basis primarily to
exclude the net tax expense associated with the final audit
assessment from the Jiangsu Province State Tax Bureau of the
People's Republic of China for changes to the Company's tax filings
for the calendar years 2007 through 2013.
|
|
|
|
|
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