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 ThreeMonths
EndedJune 27, 2014
For the FiscalYear
EndedJune 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
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.
D
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.
E
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.
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.
G
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.
Seagate Technology plcClive Over, 408-658-1617 (Media
Relations)clive.j.over@seagate.com
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