Seagate Technology plc (NASDAQ: STX) (the “Company”) today reported financial results for the quarter ended March 29, 2013. During the fiscal third quarter, the Company reported revenue of approximately $3.5 billion, gross margin of 26.9%, net income of $416 million and diluted earnings per share of $1.13. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported gross margin of 27.6%, net income of $464 million and diluted earnings per share of $1.26.
The Company generated $678 million in operating cash flow, repurchased three million ordinary shares for approximately $102 million and paid $379 million for the early redemption of long-term debt. For the first nine months of the fiscal year, the Company has returned 75% of its operating cash flow to shareholders in dividends and share redemptions. Cash, cash equivalents, restricted cash, and short-term investments totaled approximately $2 billion at the end of the fiscal third quarter.
“Seagate’s operational results this quarter again reflect strong execution,” said Steve Luczo, Seagate’s chairman, president and chief executive officer. “The continued advancement of cloud, mobile and open source computing are trends that are shifting data volumes toward personal and corporate cloud environments, creating tremendous opportunities for Seagate’s leading storage technology portfolio. Looking ahead, our top priorities are focused on the efficiency of our operations, extending our leadership in storage technology innovation and returning value to shareholders.”
For a detailed reconciliation of GAAP to non-GAAP results, see accompanying financial tables.
Seagate has issued a Supplemental Commentary document, which will not be read during today's call, but is available in the “Investors” section of seagate.com.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of $0.38 per share, which will be payable on May 29, 2013 to shareholders of record as of the close of business on May 15, 2013. 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 2:00 p.m. Pacific Daylight 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 fourth fiscal quarter of 2013, including key underlying assumptions.
Replay
A replay will be available beginning today at approximately 6:00 p.m. Pacific Daylight 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 June 28, 2013 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 those projected in the forward-looking statements are contained in the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on August 8, 2012, and in the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 29, 2013, which statements are incorporated into this press release by reference. 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)
|
|
March 29, |
|
June 29, 2012 |
||||
|
ASSETS |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
1,433 |
|
|
$ |
1,707 |
|
|
Short-term investments |
476 |
|
411 |
|
|||
|
Restricted cash and investments |
101 |
|
|
93 |
|
||
|
Accounts receivable, net |
1,562 |
|
|
2,319 |
|
||
|
Inventories |
833 |
|
|
909 |
|
||
|
Deferred income taxes |
111 |
|
|
104 |
|
||
|
Other current assets |
471 |
|
|
767 |
|
||
|
Total current assets |
4,987 |
|
|
6,310 |
|
||
|
Property, equipment and leasehold improvements, net |
2,256 |
|
|
2,284 |
|
||
|
Goodwill |
476 |
|
|
463 |
|
||
|
Other intangible assets, net |
442 |
|
|
506 |
|
||
|
Deferred income taxes |
413 |
|
|
396 |
|
||
|
Other assets, net |
169 |
|
|
147 |
|
||
|
Total Assets |
$ |
8,743 |
|
|
$ |
10,106 |
|
|
LIABILITIES AND EQUITY |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
1,698 |
|
|
$ |
2,286 |
|
|
Accrued employee compensation |
264 |
|
|
344 |
|
||
|
Accrued warranty |
184 |
|
|
235 |
|
||
|
Accrued expenses |
451 |
|
|
531 |
|
||
|
Current portion of long-term debt |
4 |
|
|
— |
|
||
|
Total current liabilities |
2,601 |
|
|
3,396 |
|
||
|
Long-term accrued warranty |
138 |
|
|
128 |
|
||
|
Long-term accrued income taxes |
87 |
|
|
84 |
|
||
|
Other non-current liabilities |
131 |
|
|
138 |
|
||
|
Long-term debt, less current portion |
2,474 |
|
|
2,863 |
|
||
|
Total Liabilities |
5,431 |
|
|
6,609 |
|
||
|
|
|
|
|
||||
|
Equity: |
|
|
|
||||
|
Total Equity |
3,312 |
|
|
3,497 |
|
||
|
Total Liabilities and Equity |
$ |
8,743 |
|
|
$ |
10,106 |
|
The information as of June 29, 2012 was derived from the Company’s audited Consolidated Balance Sheet as of June 29, 2012.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
||||||||||||
|
|
March 29, |
|
March 30, |
|
March 29, |
|
March 30, |
||||||||
|
Revenue |
$ |
3,526 |
|
|
$ |
4,450 |
|
|
$ |
10,927 |
|
|
$ |
10,457 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cost of revenue |
2,578 |
|
|
2,809 |
|
|
7,926 |
|
|
7,257 |
|
||||
|
Product development |
294 |
|
|
270 |
|
|
839 |
|
|
737 |
|
||||
|
Marketing and administrative |
168 |
|
|
142 |
|
|
457 |
|
|
388 |
|
||||
|
Amortization of intangibles |
20 |
|
|
18 |
|
|
59 |
|
|
20 |
|
||||
|
Restructuring and other, net |
1 |
|
|
1 |
|
|
2 |
|
|
4 |
|
||||
|
Total operating expenses |
3,061 |
|
|
3,240 |
|
|
9,283 |
|
|
8,406 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income from operations |
465 |
|
|
1,210 |
|
|
1,644 |
|
|
2,051 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Interest income |
2 |
|
|
2 |
|
|
6 |
|
|
5 |
|
||||
|
Interest expense |
(53 |
) |
|
(59 |
) |
|
(163 |
) |
|
(185 |
) |
||||
|
Other, net |
16 |
|
|
6 |
|
|
41 |
|
|
(2 |
) |
||||
|
Other expense, net |
(35 |
) |
|
(51 |
) |
|
(116 |
) |
|
(182 |
) |
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income before income taxes |
430 |
|
|
1,159 |
|
|
1,528 |
|
|
1,869 |
|
||||
|
Provision for income taxes |
14 |
|
|
13 |
|
|
38 |
|
|
20 |
|
||||
|
Net income |
416 |
|
|
1,146 |
|
|
1,490 |
|
|
1,849 |
|
||||
|
Less: Net income attributable to noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
||||
|
Net income attributable to Seagate Technology plc |
$ |
416 |
|
|
$ |
1,146 |
|
|
$ |
1,490 |
|
|
$ |
1,849 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income per share attributable to Seagate Technology plc ordinary shareholders: |
|
|
|
|
|
|
|
||||||||
|
Basic |
$ |
1.16 |
|
|
$ |
2.57 |
|
|
$ |
3.98 |
|
|
$ |
4.29 |
|
|
Diluted |
1.13 |
|
|
2.48 |
|
|
3.86 |
|
|
4.16 |
|
||||
|
Number of shares used in per share calculations: |
|
|
|
|
|
|
|
||||||||
|
Basic |
358 |
|
|
446 |
|
|
374 |
|
|
431 |
|
||||
|
Diluted |
369 |
|
|
463 |
|
|
386 |
|
|
445 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash dividends declared per Seagate Technology plc ordinary share |
$ |
— |
|
|
$ |
0.25 |
|
|
$ |
1.02 |
|
|
$ |
0.61 |
|
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
For the Nine Months Ended |
||||||
|
|
March 29, |
|
March 30, |
||||
|
OPERATING ACTIVITIES |
|
|
|
||||
|
Net income |
$ |
1,490 |
|
|
$ |
1,849 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
|
Depreciation and amortization |
651 |
|
|
597 |
|
||
|
Share-based compensation |
56 |
|
|
38 |
|
||
|
Deferred income taxes |
(14 |
) |
|
(5 |
) |
||
|
Gain on sale of investments |
(51 |
) |
|
(12 |
) |
||
|
Gain on sale of property and equipment |
(34 |
) |
|
(18 |
) |
||
|
Loss on redemption and repurchase of debt |
31 |
|
|
17 |
|
||
|
Other non-cash operating activities, net |
1 |
|
|
7 |
|
||
|
Changes in operating assets and liabilities: |
|
|
|
||||
|
Accounts receivable, net |
769 |
|
|
(983 |
) |
||
|
Inventories |
123 |
|
|
167 |
|
||
|
Accounts payable |
(462 |
) |
|
191 |
|
||
|
Accrued employee compensation |
(85 |
) |
|
63 |
|
||
|
Accrued expenses, income taxes and warranty |
(124 |
) |
|
(28 |
) |
||
|
Other assets and liabilities |
308 |
|
|
(66 |
) |
||
|
Net cash provided by operating activities |
2,659 |
|
|
1,817 |
|
||
|
INVESTING ACTIVITIES |
|
|
|
||||
|
Acquisition of property, equipment and leasehold improvements |
(658 |
) |
|
(497 |
) |
||
|
Proceeds from the sale of property and equipment |
29 |
|
|
11 |
|
||
|
Purchases of short-term investments |
(227 |
) |
|
(382 |
) |
||
|
Sales of short-term investments |
201 |
|
|
330 |
|
||
|
Maturities of short-term investments |
26 |
|
|
118 |
|
||
|
Cash used in acquisition of LaCie S.A., net of cash acquired |
(36 |
) |
|
— |
|
||
|
Cash used in acquisition of Samsung HDD assets and liabilities |
— |
|
|
(561 |
) |
||
|
Other investing activities, net |
(16 |
) |
|
16 |
|
||
|
Net cash used in investing activities |
(681 |
) |
|
(965 |
) |
||
|
FINANCING ACTIVITIES |
|
|
|
||||
|
Repayments of long-term debt and capital lease obligations |
(421 |
) |
|
(670 |
) |
||
|
Repurchases of ordinary shares |
(1,612 |
) |
|
(1,172 |
) |
||
|
Dividends to shareholders |
(381 |
) |
|
(266 |
) |
||
|
Proceeds from issuance of ordinary shares under employee stock plans |
233 |
|
|
214 |
|
||
|
Escrow deposit for acquisition of noncontrolling shares of LaCie S.A. |
(72 |
) |
|
— |
|
||
|
Other financing activities, net |
— |
|
|
3 |
|
||
|
Net cash used in financing activities |
(2,253 |
) |
|
(1,891 |
) |
||
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
1 |
|
|
— |
|
||
|
Decrease in cash and cash equivalents |
(274 |
) |
|
(1,039 |
) |
||
|
Cash and cash equivalents at the beginning of the period |
1,707 |
|
|
2,677 |
|
||
|
Cash and cash equivalents at the end of the period |
$ |
1,433 |
|
|
$ |
1,638 |
|
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 and gross margin as a percentage of revenue, 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.
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 |
|
For the Nine Months Ended |
||||
|
|
|
March 29, 2013 |
|
March 29, 2013 |
||||
|
|
|
|
|
|
||||
|
GAAP net income |
|
$ |
416 |
|
|
$ |
1,490 |
|
|
Non-GAAP adjustments: |
|
|
|
|
||||
|
Cost of revenue |
A |
24 |
|
|
63 |
|
||
|
Product development |
B |
11 |
|
|
18 |
|
||
|
Marketing and administrative |
C |
5 |
|
|
(8 |
) |
||
|
Amortization of intangibles |
D |
20 |
|
|
59 |
|
||
|
Restructuring and other, net |
D |
1 |
|
|
2 |
|
||
|
Other expense, net |
E |
(13 |
) |
|
(43 |
) |
||
|
Non-GAAP net income |
|
$ |
464 |
|
|
$ |
1,581 |
|
|
|
|
|
|
|
||||
|
Diluted net income per share: |
|
|
|
|
||||
|
GAAP |
|
$ |
1.13 |
|
|
$ |
3.86 |
|
|
|
|
|
|
|
||||
|
Non-GAAP |
|
$ |
1.26 |
|
|
$ |
4.10 |
|
|
|
|
|
|
|
||||
|
Shares used in diluted net income per share calculation |
|
369 |
|
|
386 |
|
||
A For the three months ended March 29, 2013, Cost of revenue on a GAAP basis totaled $2,578 million, while non-GAAP Cost of revenue, which excludes the net impact of certain adjustments, was $2,554 million. For the nine months ended March 29, 2013, Cost of revenue on a GAAP basis totaled $7,926 million, while non-GAAP Cost of revenue, which excludes the net impact of certain adjustments, was $7,863 million. The non-GAAP adjustments include amortization of intangibles, other acquisition related expenses associated with the December 2011 acquisition of Samsung Electronics Co., Ltd's hard disk drive business (the "Samsung HDD business") and the August 2012 acquisition of LaCie S.A. ("LaCie") as well as the impact of the 2013 voluntary early retirement program (“2013 VERP”) offered by the Company to certain of its employees in the U.S. in January 2013.
B For the three and nine months ended March 29, 2013, Product development expense has been adjusted on a non-GAAP basis to exclude the net impact of acquisition and integration costs associated with the Samsung HDD business and costs associated with the 2013 VERP.
C For the three months ended March 29, 2013, Marketing and administrative expense has been adjusted on a non-GAAP basis to exclude acquisition and integration costs associated with LaCie and costs associated with the 2013 VERP. For the nine months ended March 29, 2013, Marketing and administrative expense has been adjusted on a non-GAAP basis to exclude the net impact of legal cost reimbursements, which were partially offset by acquisition and integration costs associated with the Samsung HDD business and LaCie and costs associated with the 2013 VERP.
D For the three and nine months ended March 29, 2013, Amortization of intangibles related to our Samsung HDD business and LaCie acquisitions and Restructuring and other, net, primarily related to prior year restructuring plans, have been excluded on a non-GAAP basis.
E For the three and nine months ended March 29, 2013, Other expense has been adjusted on a non-GAAP basis primarily to exclude the net impact of a gain recognized upon sales of investments, and a gain recognized from an insurance reimbursement related to the severe flooding in Thailand, partially offset by a loss recognized on the early redemption and repurchase of debt.