Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the first quarter of fiscal
year 2017 ended September 30, 2016. For the first quarter, the
Company reported revenue of $2.8 billion, gross margin of 28.6%,
net income of $167 million and diluted earnings per share of $0.55.
On a non-GAAP basis, which excludes the net impact of certain
items, Seagate reported gross margin of 29.5%, net income of $299
million and diluted earnings per share of $0.99.
During the first quarter, the Company generated $592 million in
operating cash flow and repurchased 3 million ordinary shares for
$101 million. Cash, cash equivalents, and short-term investments
totaled approximately $1.5 billion at the end of the quarter. There
were 299 million ordinary shares issued and outstanding as of the
end of the quarter.
“In response to strong cloud storage customer demand, Seagate
delivered record levels of exabyte shipments, and generated strong
revenues, margin and cash flow in the September quarter. In
addition, as a result of our operating expense management, the
company's non-GAAP earnings per share increased by 85% year over
year,” said Steve Luczo, Seagate’s chairman and chief executive
officer. “As the demand for HDD storage continues to benefit from
the shift to data driven cloud based architectures, Seagate is in a
strong position to grow its businesses, improve margins and
continue with its dividend and buyback capital allocation
objectives.”
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Financial Information
document, which is available on Seagate’s Investors website at
www.seagate.com/investors.
Quarterly Cash Dividend
The Board of Directors of the Company (the “Board”) has approved
a quarterly cash dividend of $0.63 per share, which will be payable
on January 4, 2017 to shareholders of record as of the close of
business on December 21, 2016. 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 Investor Relations website
at www.seagate.com/investors. During today’s webcast, the Company
will provide an outlook for its second fiscal quarter of 2017,
including key underlying assumptions.
An archived audio webcast of this event will be available
shortly following the event conclusion.
About Seagate
To learn more about the Company’s products and services, visit
www.seagate.com and follow us 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 the Company’s
plans, strategies and prospects, estimates of industry growth, and
dividend and share repurchase plans for the fiscal quarter ending
December 30, 2016 and beyond. These statements identify
prospective information and may include words such as “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “projects,” “should” and similar expressions. These
forward-looking statements are based on information available to
the Company as of the date of this report 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: items that may be identified during its financial
statement closing process that cause adjustments to the estimates
included in this report; 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; the
Company’s ability to achieve projected cost savings in connection
with restructuring plans; possible excess industry supply with
respect to particular disk drive products; disruptions to its
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; our ability to comply with certain covenants in
our credit facilities with respect to financial ratios and
financial condition tests ; currency fluctuations that may impact
the Company’s margins and international sales; cyber-attacks or
other data breaches that disrupt its operations or results in the
dissemination of proprietary or confidential information; 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 5,
2016, 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 and social media channels are
not part of this press release.
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED
BALANCE SHEETS (In millions) (Unaudited)
September 30, 2016
July 1,2016 (a) ASSETS Current assets:
Cash and cash equivalents $ 1,489 $ 1,125 Short-term investments 5
6 Accounts receivable, net 1,307 1,318 Inventories 914 868 Deferred
income taxes — — Other current assets 213 216 Total current
assets 3,928 3,533 Property, equipment and leasehold improvements,
net 2,093 2,160 Goodwill 1,237 1,237 Other intangible assets, net
406 448 Deferred income taxes 615 616 Other assets, net 216
219 Total Assets $ 8,495 $ 8,213
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 1,568 $ 1,517
Accrued employee compensation 216 184 Accrued warranty 111 104
Accrued expenses 713 444 Total current liabilities 2,608
2,249 Long-term accrued warranty 105 102 Long-term accrued income
taxes 11 14 Other non-current liabilities 155 164 Long-term debt
4,092 4,091 Total Liabilities 6,971 6,620 Equity:
Total Equity 1,524 1,593 Total Liabilities and Equity $
8,495 $ 8,213
(a) The information in this column was derived from the
Company’s audited Consolidated Balance Sheet as of July 1,
2016.
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In millions, except per share
data) (Unaudited) For the Three Months
Ended September 30, 2016 October 2,
2015 Revenue $ 2,797 $ 2,925 Cost of revenue 1,996
2,236 Product development 315 328 Marketing and administrative 155
182 Amortization of intangibles 28 34 Restructuring and other, net
82 59 Total operating expenses 2,576 2,839
Income from operations 221 86 Interest income
1 1 Interest expense (50 ) (47 ) Other, net 1 (9 ) Other
(expense) income, net (48 ) (55 ) Income before income taxes
173 31 Provision for (benefit from) income taxes 6 (3 ) Net
income $ 167 $ 34 Net income per share: Basic
$ 0.56 $ 0.11 Diluted 0.55 0.11 Number of shares used in per share
calculations: Basic 299 302 Diluted 301 308 Cash dividends
declared per ordinary share $ 0.63 $ 0.54
SEAGATE
TECHNOLOGY PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In millions) (Unaudited) For the
Three Months Ended
September 30, 2016
October 2, 2015
OPERATING ACTIVITIES Net income $ 167 $ 34 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 200 208 Share-based compensation 40
33 Deferred income taxes 1 — Other non-cash operating activities,
net (7 ) 10 Changes in operating assets and liabilities: Accounts
receivable, net 12 213 Inventories (46 ) (105 ) Accounts payable
101 426 Accrued employee compensation 32 (60 ) Accrued expenses,
income taxes and warranty 89 63 Vendor non-trade receivables (2 )
16 Other assets and liabilities 5 (14 ) Net cash provided by
operating activities 592 824
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (140 ) (209 ) Maturities of short-term investments 1
— Net cash used in investing activities (139 ) (209 )
FINANCING ACTIVITIES Redemption and repurchase of debt — (15
) Taxes paid related to net share settlement of equity awards (23 )
(53 ) Repurchases of ordinary shares (101 ) (983 ) Dividends to
shareholders — (163 ) Proceeds from issuance of ordinary shares
under employee stock plans 35 40 Other financing activities, net —
(4 ) Net cash used in financing activities (89 ) (1,178 )
Effect of foreign currency exchange rate changes on cash and cash
equivalents — (1 ) Increase (decrease) in cash and cash
equivalents 364 (564 ) Cash and cash equivalents at the beginning
of the period 1,125 2,479 Cash and cash equivalents
at the end of the period $ 1,489 $ 1,915
Use of non-GAAP financial information
The Company uses non-GAAP measures of gross margin, net income
and diluted earnings per share which are adjusted from results
based on GAAP to exclude certain expenses, gains and losses. These
non-GAAP financial measures may be 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, gains and losses that it believes are not
indicative of its 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 its
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 MonthsEnded
September 30, 2016
For the Three MonthsEnded
October 2, 2015
Reconciliation of GAAP Net Income: GAAP Net Income $ 167 $ 34
Non-GAAP adjustments: Revenue A — 2 Cost of revenue B 25 17 Product
development C — 6 Marketing and administrative D (1 ) 4
Amortization of intangibles E 27 33 Restructuring and other, net F
82 59 Other expense (income), net G (1 ) 10 Non-GAAP net income $
299 $ 165 Reconciliation of GAAP Diluted Net Income
Per Share: GAAP $ 0.55 $ 0.11 Non-GAAP $ 0.99 $ 0.54 Shares used in
diluted net income per share calculation 301 308
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.
B
For the three months ended September 30, 2016, Cost of revenue has
been adjusted on a non-GAAP basis to exclude amortization of
intangibles associated with acquisitions and write off of certain
fixed assets. 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.
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 September 30, 2016, Marketing and
administrative expenses have been adjusted on a non-GAAP basis
primarily to reflect the impact of our disposed data services
business. 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 September 30, 2016 and 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 September 30, 2016 and October 2, 2015,
Restructuring and other net, has been adjusted on a non-GAAP basis
primarily related to reductions in our workforce as a result of our
ongoing focus on cost efficiencies in all areas of our business.
G
For the three months ended September 30, 2016, Other expense
(income), net has been adjusted on a non-GAAP basis primarily to
reflect the impact of our disposed data services business. For the
three months ended October 2, 2015, Other expense (income), net has
been adjusted on a non-GAAP basis to exclude the impairment of a
certain strategic investment.
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version on businesswire.com: http://www.businesswire.com/news/home/20161019005225/en/
Seagate Technology plcEric DeRitis,
408-658-1561eric.deritis@seagate.com
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