Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the first quarter of fiscal
year 2015 ended October 3, 2014. For the first quarter, the Company
reported revenue of approximately $3.8 billion, gross margin of
27.8%, net income of $381 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 28.1%, net income
of $453 million and diluted earnings per share of $1.34. For a
detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
During the first quarter, the Company generated approximately
$602 million in operating cash flow, paid cash dividends of $140
million and repurchased approximately 3 million ordinary shares for
$183 million. There were 327 million ordinary shares issued and
outstanding as of the end of the quarter. Cash, cash equivalents,
restricted cash, and short-term investments totaled approximately
$2.2 billion at the end of the quarter.
“We achieved strong financial results in the first fiscal
quarter, driven by consistent execution and better-than-anticipated
market demand for our PC and Cloud storage products,” said Steve
Luczo, Seagate’s chairman and chief executive officer. “We continue
to improve our position in the evolving storage market by
leveraging and investing in our core storage technology and
expanding our product portfolio with Cloud systems and
solutions and integrated flash technology. We remain confident in
our cash flow generation and the opportunities ahead for Seagate as
evidenced by our recently announced target annual dividend increase
of 26% to $2.16.”
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
As previously disclosed on October 22, 2014, the Board of
Directors has approved a quarterly cash dividend of $0.54 per
share, which will be payable on November 25, 2014 to shareholders
of record as of the close of business on November 11, 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 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 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 January 2, 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.
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED
BALANCE SHEETS (In millions) (Unaudited)
October 3, 2014 June 27,2014
(a) ASSETS Current assets: Cash and cash equivalents $
2,190 $ 2,634 Short-term investments 11 20 Restricted cash and
investments 4 4 Accounts receivable, net 1,909 1,729 Inventories
1,071 985 Deferred income taxes 125 126 Other current assets 273
279 Total current assets 5,583 5,777 Property, equipment and
leasehold improvements, net 2,156 2,136 Goodwill 873 537 Other
intangible assets, net 468 359 Deferred income taxes 499 499 Other
assets, net 186 184 Total Assets $ 9,765 $ 9,492
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 1,740 $ 1,549 Accrued employee compensation 245 296 Accrued
warranty 145 148 Accrued expenses 466 405 Total current liabilities
2,596 2,398 Long-term accrued warranty 128 125 Long-term accrued
income taxes 87 90 Other non-current liabilities 199 127 Long-term
debt 3,809 3,920 Total Liabilities 6,819 6,660
Equity: Total Equity 2,946 2,832 Total Liabilities and
Shareholders' Equity $ 9,765 $ 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 October 3, 2014
September 27, 2013 Revenue $ 3,785 $ 3,489
Cost of revenue 2,734 2,514 Product development 342 294 Marketing
and administrative 216 181 Amortization of intangibles 31 20
Restructuring and other, net 6 2 Total operating
expenses 3,329 3,011 Income from operations
456 478 Interest income 1 5 Interest expense (54 ) (44 )
Other, net (11 ) 1 Other expense, net (64 ) (38 )
Income before income taxes 392 440 Provision for income taxes 11
13 Net income 381 427 Less: Net income attributable
to noncontrolling interest — — Net income
attributable to Seagate Technology plc $ 381 $ 427
Net income per share attributable to Seagate Technology plc
ordinary shareholders: Basic $ 1.17 $ 1.20 Diluted 1.13 1.16 Number
of shares used in per share calculations: Basic 327 357 Diluted 337
368 Cash dividends declared per Seagate Technology plc
ordinary share $ 0.43 $ 0.38
SEAGATE TECHNOLOGY
PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited) For the
Three Months Ended October 3, 2014
September 27, 2013 OPERATING ACTIVITIES Net
income $ 381 $ 427 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization 218
228 Share-based compensation 42 27 Deferred income taxes 2 (1 )
Gain on sale of property and equipment — (2 ) Loss on repurchase of
debt 14 — Other non-cash operating activities, net (2 ) 4 Changes
in operating assets and liabilities: Accounts receivable, net (179
) 49 Inventories (49 ) (17 ) Accounts payable 183 47 Accrued
employee compensation (51 ) (115 ) Accrued expenses, income taxes
and warranty 29 37 Vendor non-trade receivables 21 — Other assets
and liabilities (7 ) (2 ) Net cash provided by operating activities
602 682
INVESTING ACTIVITIES Acquisition of
property, equipment and leasehold improvements (172 ) (161 )
Purchases of short-term investments (5 ) (87 ) Sales of short-term
investments — 49 Maturities of short-term investments 14 32 Cash
used in acquisition of business (450 ) — Other investing
activities, net (6 ) (19 ) Net cash used in investing activities
(619 ) (186 )
FINANCING ACTIVITIES Repayments of long-term
debt (124 ) — Repurchases of ordinary shares (183 ) (182 )
Dividends to shareholders (140 ) (135 ) Proceeds from issuance of
ordinary shares under employee stock plans 39 39 Other financing
activities, net (12 ) (4 ) Net cash used in financing activities
(420 ) (282 ) Effect of foreign currency exchange rate changes on
cash and cash equivalents (7 ) 2 (Decrease) increase in cash
and cash equivalents (444 ) 216 Cash and cash equivalents at the
beginning of the period 2,634 1,708 Cash and cash
equivalents at the end of the period $ 2,190 $ 1,924
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 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 October 3, 2014 September
27, 2013 GAAP net income $ 381 $ 427 Non-GAAP adjustments: Cost
of revenue A 12 20 Product development B 4 3 Marketing and
administrative C 4 3 Amortization of intangibles D 31 20
Restructuring and other, net E 6 2 Other expense, net F 15
(2 ) Non-GAAP net income $ 453 $ 473 Diluted
net income per share: GAAP $ 1.13 $ 1.16 Non-GAAP $ 1.34 $
1.29 Shares used in diluted net income per share calculation
$ 337 $ 368
A
For the three months ended October 3, 2014, Cost of revenue
on a GAAP basis totaled $2.7 billion, while non-GAAP Cost of
revenue, which excludes the net impact of certain adjustments, was
$2.7 billion. The 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"), March 31, 2014
acquisition of Xyratex Ltd. ("Xyratex") and the September 2014
acquisition of LSI Corporation's ("LSI") Accelerated Solutions
Division (“ASD”) and Flash Components Division (“FCD”)
(collectively, the "Flash Business").
B
For the three months ended October 3, 2014, Product development
expense has been adjusted on a non-GAAP basis primarily to exclude
the impact of acquisition and integration costs associated with the
acquisition of LSI’s Flash Business and Xyratex.
C
For the three months ended October 3, 2014, Marketing and
administrative expense has been adjusted on a non-GAAP basis
primarily to exclude the impact of acquisition and integration
costs associated with the acquisition of LSI’s Flash Business,
Xyratex, and LaCie.
D
For the three months ended October 3, 2014, Amortization of
intangibles primarily related to our acquisitions have been
excluded on a non-GAAP basis.
E
For the three months ended October 3, 2014, Restructuring and
other, net, includes a restructuring charge recorded during the
September 2014 quarter associated with a reduction in the work
force.
F
For the three months ended October 3, 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.
Seagate Technology plcMedia Relations Contact:Clive Over,
408-658-1617clive.over@seagate.comorInvestor Relations
Contact:408-658-1222stx@seagate.com
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