Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”) today
reported financial results for the first quarter of fiscal year 2016
ended October 2, 2015. For the first quarter, the Company reported
revenue of approximately $2.9 billion, gross margin of 23.6%, net income
of $34 million and diluted earnings per share of $0.11. On a non-GAAP
basis, which excludes the net impact of certain items, Seagate reported
gross margin of 24.2%, net income of $165 million and diluted earnings
per share of $0.54. For a detailed reconciliation of GAAP to non-GAAP
results, see the accompanying financial tables.
During the first quarter, the Company generated approximately $824
million in operating cash flow, paid cash dividends of $163 million and
repurchased approximately 20 million ordinary shares for $983 million.
There were 299 million ordinary shares issued and outstanding as of the
end of the quarter. Cash, cash equivalents, and short-term investments
totaled approximately $1.9 billion at the end of the quarter.
“During the quarter, we made solid progress against our core initiatives
to bolster our product portfolio, contain costs and return capital to
shareholders,” said Steve Luczo, Seagate’s chairman and chief executive
officer. “While lower than planned nearline enterprise demand
temporarily impacted our financial results, we are pleased with the
momentum we have across our products, which will be further supported by
the newly acquired assets of Dot Hill and our ability to now completely
integrate the Samsung hard drive business. As we look forward, we are
focused on delivering storage solutions for a significant range of
existing, growing and emerging areas, and believe we have the right
strategy and portfolio to deliver value to shareholders.”
Seagate has issued a Supplemental Financial Information document, which
is available on Seagate’s Investors website at www.seagate.com/investors.
Quarterly Cash Dividend
As previously disclosed on October 21, 2015, the Board has approved a
quarterly cash dividend of $0.63 per share, which will be payable on
November 20, 2015 to shareholders of record as of the close of business
on November 6, 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
second fiscal quarter of 2016 including key underlying assumptions.
Replay
A replay will be available beginning today at approximately 9:00 a.m.
Pacific Time at http://www.seagate.com/investors.
About Seagate
Seagate creates space for the human experience by innovating how data is
stored, shared and used. Learn more at www.seagate.com.
Follow Seagate on Twitter, Facebook, LinkedIn, Spiceworks,
YouTube
and subscribe to our blog.
The contents of our website and social media channels are not a part of
this release.
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 January 1,
2016 and the fiscal year ending July 1, 2016 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; 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;
currency fluctuations that may impact the Company’s margins and
international sales; possible excess industry supply with respect to
particular disk drive products; disruptions to our supply chain or
production capabilities; unexpected advances in competing technologies;
the development and introduction of products based on new technologies
and expansion into new data storage markets; and 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 11, 2015, 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
|
|
|
July 3,
|
|
|
|
|
2015
|
|
|
2015 (a)
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
1,915
|
|
|
|
$
|
2,479
|
Short-term investments
|
|
|
|
6
|
|
|
|
6
|
Accounts receivable, net
|
|
|
|
1,522
|
|
|
|
1,735
|
Inventories
|
|
|
|
1,098
|
|
|
|
993
|
Deferred income taxes
|
|
|
|
120
|
|
|
|
122
|
Other current assets
|
|
|
|
221
|
|
|
|
233
|
Total current assets
|
|
|
|
4,882
|
|
|
|
5,568
|
Property, equipment and leasehold improvements, net
|
|
|
|
2,247
|
|
|
|
2,278
|
Goodwill
|
|
|
|
874
|
|
|
|
874
|
Other intangible assets, net
|
|
|
|
329
|
|
|
|
370
|
Deferred income taxes
|
|
|
|
497
|
|
|
|
496
|
Other assets, net
|
|
|
|
250
|
|
|
|
259
|
Total Assets
|
|
|
|
$
|
9,079
|
|
|
|
$
|
9,845
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
1,890
|
|
|
|
$
|
1,540
|
Accrued employee compensation
|
|
|
|
196
|
|
|
|
256
|
Accrued warranty
|
|
|
|
124
|
|
|
|
135
|
Accrued expenses
|
|
|
|
508
|
|
|
|
412
|
Total current liabilities
|
|
|
|
2,718
|
|
|
|
2,343
|
Long-term accrued warranty
|
|
|
|
101
|
|
|
|
113
|
Long-term accrued income taxes
|
|
|
|
26
|
|
|
|
33
|
Other non-current liabilities
|
|
|
|
172
|
|
|
|
183
|
Long-term debt
|
|
|
|
4,140
|
|
|
|
4,155
|
Total Liabilities
|
|
|
|
7,157
|
|
|
|
6,827
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
1,922
|
|
|
|
3,018
|
Total Liabilities and Equity
|
|
|
|
$
|
9,079
|
|
|
|
$
|
9,845
|
(a) The information as of July 3, 2015 was derived from the Company’s
audited Consolidated Balance Sheet as of July 3, 2015.
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SEAGATE TECHNOLOGY PLC
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
October 2,
|
|
|
October 3,
|
|
|
|
|
2015
|
|
|
2014
|
Revenue
|
|
|
|
$
|
2,925
|
|
|
|
$
|
3,785
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
2,236
|
|
|
|
2,734
|
|
Product development
|
|
|
|
328
|
|
|
|
342
|
|
Marketing and administrative
|
|
|
|
182
|
|
|
|
216
|
|
Amortization of intangibles
|
|
|
|
34
|
|
|
|
31
|
|
Restructuring and other, net
|
|
|
|
59
|
|
|
|
6
|
|
Total operating expenses
|
|
|
|
2,839
|
|
|
|
3,329
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
86
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
1
|
|
|
|
1
|
|
Interest expense
|
|
|
|
(47
|
)
|
|
|
(54
|
)
|
Other, net
|
|
|
|
(9
|
)
|
|
|
(11
|
)
|
Other income (expense), net
|
|
|
|
(55
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
31
|
|
|
|
392
|
|
(Benefit from) provision for income taxes
|
|
|
|
(3
|
)
|
|
|
11
|
|
Net income
|
|
|
|
$
|
34
|
|
|
|
$
|
381
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.11
|
|
|
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$
|
1.17
|
|
Diluted
|
|
|
|
0.11
|
|
|
|
1.13
|
|
Number of shares used in per share calculations:
|
|
|
|
|
|
|
|
Basic
|
|
|
|
302
|
|
|
|
327
|
|
Diluted
|
|
|
|
308
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per Seagate Technology plc ordinary share
|
|
|
|
$
|
0.54
|
|
|
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$
|
0.43
|
|
|
|
|
|
|
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|
|
|
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SEAGATE TECHNOLOGY PLC
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
October 2,
|
|
|
October 3,
|
|
|
|
|
2015
|
|
|
2014
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
34
|
|
|
|
$
|
381
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
208
|
|
|
|
218
|
|
Share-based compensation
|
|
|
|
33
|
|
|
|
42
|
|
Deferred income taxes
|
|
|
|
—
|
|
|
|
2
|
|
Loss on redemption and repurchase of debt
|
|
|
|
—
|
|
|
|
14
|
|
Other non-cash operating activities, net
|
|
|
|
10
|
|
|
|
(2
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
213
|
|
|
|
(179
|
)
|
Inventories
|
|
|
|
(105
|
)
|
|
|
(49
|
)
|
Accounts payable
|
|
|
|
426
|
|
|
|
183
|
|
Accrued employee compensation
|
|
|
|
(60
|
)
|
|
|
(51
|
)
|
Accrued expenses, income taxes and warranty
|
|
|
|
63
|
|
|
|
29
|
|
Vendor non-trade receivables
|
|
|
|
16
|
|
|
|
21
|
|
Other assets and liabilities
|
|
|
|
(14
|
)
|
|
|
(7
|
)
|
Net cash provided by operating activities
|
|
|
|
824
|
|
|
|
602
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Acquisition of property, equipment and leasehold improvements
|
|
|
|
(209
|
)
|
|
|
(172
|
)
|
Purchases of short-term investments
|
|
|
|
—
|
|
|
|
(5
|
)
|
Maturities of short-term investments
|
|
|
|
—
|
|
|
|
14
|
|
Cash used in acquisition of business
|
|
|
|
—
|
|
|
|
(450
|
)
|
Other investing activities, net
|
|
|
|
—
|
|
|
|
(6
|
)
|
Net cash used in investing activities
|
|
|
|
(209
|
)
|
|
|
(619
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Redemption and repurchase of debt
|
|
|
|
(15
|
)
|
|
|
(124
|
)
|
Taxes paid related to net share settlement of equity awards
|
|
|
|
(53
|
)
|
|
|
—
|
|
Repurchases of ordinary shares
|
|
|
|
(983
|
)
|
|
|
(183
|
)
|
Dividends to shareholders
|
|
|
|
(163
|
)
|
|
|
(140
|
)
|
Proceeds from issuance of ordinary shares under employee stock plans
|
|
|
|
40
|
|
|
|
39
|
|
Other financing activities, net
|
|
|
|
(4
|
)
|
|
|
(12
|
)
|
Net cash used in financing activities
|
|
|
|
(1,178
|
)
|
|
|
(420
|
)
|
Effect of foreign currency exchange rate changes on cash and cash
equivalents
|
|
|
|
(1
|
)
|
|
|
(7
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
(564
|
)
|
|
|
(444
|
)
|
Cash and cash equivalents at the beginning of the period
|
|
|
|
2,479
|
|
|
|
2,634
|
|
Cash and cash equivalents at the end of the period
|
|
|
|
$
|
1,915
|
|
|
|
$
|
2,190
|
|
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 revenue, 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 it is 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 our industry.
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|
|
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|
SEAGATE TECHNOLOGY PLC
|
ADJUSTMENTS TO GAAP NET INCOME AND DILUTED NET INCOME PER SHARE
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
|
|
|
Ended October 2, 2015
|
GAAP net income
|
|
|
|
|
$
|
34
|
Non-GAAP adjustments:
|
|
|
|
|
|
Revenue
|
|
|
|
A
|
2
|
Cost of revenue
|
|
|
|
B
|
17
|
Product development
|
|
|
|
C
|
6
|
Marketing and administrative
|
|
|
|
D
|
4
|
Amortization of intangibles
|
|
|
|
E
|
33
|
Restructuring and other, net
|
|
|
|
F
|
59
|
Other expense, net
|
|
|
|
G
|
10
|
Non-GAAP net income
|
|
|
|
|
$
|
165
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
GAAP
|
|
|
|
|
$
|
0.11
|
Non-GAAP
|
|
|
|
|
$
|
0.54
|
|
|
|
|
|
|
Shares used in diluted net income per share calculation
|
|
|
|
|
308
|
|
|
|
|
|
|
A
|
|
|
For the three months ended October 2, 2015, Revenue has been
adjusted on a non-GAAP basis to exclude sales return provision for
certain products that will be discontinued.
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|
|
|
B
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|
For the three months ended October 2, 2015, Cost of revenue has been
adjusted on a non-GAAP basis to exclude amortization of intangibles
associated with acquisitions, other acquisition related expenses,
and write off of certain discontinued inventory and assets.
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|
|
|
|
C
|
|
|
For the three months ended October 2, 2015, Product development
expenses have been adjusted on a non-GAAP basis to exclude the
impact of integration costs associated with acquisitions.
|
|
|
|
|
D
|
|
|
For the three months ended October 2, 2015, Marketing and
administrative expenses have been adjusted on a non-GAAP basis to
exclude the write off of certain fixed assets and the impact of
integration costs associated with acquisitions.
|
|
|
|
|
E
|
|
|
For the three months ended October 2, 2015, Amortization of
intangibles primarily related to our acquisitions has been excluded
on a non-GAAP basis.
|
|
|
|
|
F
|
|
|
For the three months ended October 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, has been excluded on a non-GAAP basis.
|
|
|
|
|
G
|
|
|
For the three months ended October 2, 2015, Other income (expense),
net has been adjusted on a non-GAAP basis to exclude the impairment
of a certain strategic investment.
|
|
|
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