Revenue up 3% year-over-year
Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the third quarter of fiscal
year 2017 ended March 31, 2017. For the third quarter, the Company
reported revenue of $2.7 billion, gross margin of 30.5%, net income
of $194 million and diluted earnings per share of $0.65. On a
non-GAAP basis, which excludes the net impact of certain items,
Seagate reported gross margin of 31.4%, net income of $329 million
and diluted earnings per share of $1.10.
During the third quarter, the Company generated $426 million in
cash flow from operations, paid cash dividends of $186 million, and
successfully raised $1.25 billion in investment grade debt. Cash,
cash equivalents, and short-term investments totaled approximately
$3.0 billion at the end of the quarter. There were 297 million
ordinary shares issued and outstanding as of the end of the
quarter.
“The results of our financial performance this quarter reflect a
stable demand environment, good operational execution and momentum
in the stabilization of our business model,” said Steve Luczo,
Seagate’s chairman and chief executive officer. “With a
market-leading and cost-efficient storage solution portfolio,
Seagate is well positioned to support our existing and new
customers in a world of accelerated data creation and increased
storage needs driven by emerging technologies and new business
models. We will continue to focus on future growth opportunities,
generating profits and building lasting value for our
shareholders.”
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 July 5, 2017 to shareholders of record as of the close of
business on June 21, 2017. 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 fourth fiscal quarter of 2017,
including key underlying assumptions.
An archived audio webcast of this event will be available on
Seagate’s Investors website at www.seagate.com/investors 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,
market demand, and dividend issuance plans for the fiscal quarter
ending June 30, 2017 and beyond. These statements identify
prospective information and may include words such as “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “projects,” “should,” “may,” “will,” or the negative of
these words, variations of these words and comparable terminology.
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; 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 or changes in market trends; 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 our operations or results in the dissemination of
proprietary or confidential information and cause reputational
harm; 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)
March 31, 2017
July 1,2016 (a)
ASSETS Current assets: Cash and cash equivalents $ 3,026 $
1,125 Short-term investments — 6 Accounts receivable, net 1,156
1,318 Inventories 1,038 868 Other current assets 240 216
Total current assets 5,460 3,533 Property, equipment and leasehold
improvements, net 1,911 2,160 Goodwill 1,237 1,237 Other intangible
assets, net 323 448 Deferred income taxes 605 616 Other assets, net
203 219 Total Assets $ 9,739 $ 8,213
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 1,591 $
1,517 Accrued employee compensation 245 184 Accrued warranty 112
104 Current portion of long-term debt 158 — Accrued expenses 683
444 Total current liabilities 2,789 2,249 Long-term accrued
warranty 111 102 Long-term accrued income taxes 16 14 Other
non-current liabilities 142 164 Long-term debt, less current
portion 5,073 4,091 Total Liabilities 8,131 6,620
Total Equity 1,608 1,593 Total Liabilities and Equity
$ 9,739 $ 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 For the Nine Months Ended March 31,
2017 April 1, 2016 March 31,
2017 April 1, 2016 Revenue $ 2,674 $
2,595 $ 8,365 $ 8,506 Cost of revenue 1,858 2,071 5,857
6,553 Product development 324 298 944 930 Marketing and
administrative 150 150 457 491 Amortization of intangibles 28 29 85
94 Restructuring and other, net 48 20 164 95
Total operating expenses 2,408 2,568 7,507
8,163 Income from operations 266 27 858 343
Interest income 5 1 7 2 Interest expense (60 ) (47 ) (160 )
(142 ) Other, net 1 28 (10 ) 18 Other expense,
net (54 ) (18 ) (163 ) (122 ) Income before income taxes 212
9 695 221 Provision for income taxes 18 30 37
43 Net income (loss) $ 194 $ (21 ) $ 658 $ 178
Net income (loss) per share: Basic $ 0.66 $ (0.07 ) $
2.22 $ 0.59 Diluted 0.65 (0.07 ) 2.20 0.59 Number of shares used in
per share calculations: Basic 296 298 297 300 Diluted 300 298 299
303 Cash dividends declared per ordinary share $ 0.63 $ 0.63
$ 1.89 $ 1.80
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
millions) (Unaudited) For the Nine Months
Ended March 31, 2017 April 1,
2016 OPERATING ACTIVITIES Net income $ 658 $ 178
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 573 615
Share-based compensation 110 95 Impairment of long-lived assets 35
25 Deferred income taxes 12 1 Other non-cash operating activities,
net 17 10 Changes in operating assets and liabilities:
Accounts receivable, net 165 531 Inventories (170 ) 85 Accounts
payable 124 (31 ) Accrued employee compensation 61 (92 ) Accrued
expenses, income taxes and warranty 69 1 Other assets and
liabilities 19 (7 ) Net cash provided by operating
activities 1,673 1,411
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements (330
) (441 ) Maturities of short-term investments 6 — Cash used in
acquisition of business, net of cash acquired — (634 ) Other
investing activities, net (13 ) 10 Net cash used in
investing activities (337 ) (1,065 )
FINANCING ACTIVITIES
Redemption and repurchase of debt (97 ) (22 ) Net proceeds from
issuance of long-term debt 1,232 — Taxes paid related to net share
settlement of equity awards (25 ) (55 ) Repurchases of ordinary
shares (248 ) (1,090 ) Dividends to shareholders (374 ) (539 )
Proceeds from issuance of ordinary shares under employee stock
plans 83 78 Other financing activities, net — (4 ) Net cash
provided by (used in) financing activities 571 (1,632 )
Effect of foreign currency exchange rate changes on cash, cash
equivalents, and restricted cash (8 ) — Increase (decrease)
in cash, cash equivalents, and restricted cash 1,899 (1,286 ) Cash,
cash equivalents, and restricted cash at the beginning of the
period 1,132 2,486 Cash, cash equivalents, and
restricted cash at the end of the period $ 3,031 $ 1,200
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 similar
to the approach used in connection 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 ThreeMonths
EndedMarch 31, 2017
For the NineMonths
EndedMarch 31, 2017
Reconciliation of GAAP Net Income: GAAP Net income $ 194 $ 658
Non-GAAP adjustments: Revenue A 1 (1 ) Cost of revenue B 24 79
Product development C 30 31 Marketing and administrative D 2 1
Amortization of intangibles E 27 81 Restructuring and other, net F
48 164 Other expense, net G — 24 Provision for income taxes H 3
3 Non-GAAP net income $ 329 $ 1,040
Reconciliation of GAAP Diluted Net Income Per Share: GAAP $
0.65 $ 2.20 Non-GAAP $ 1.10 $ 3.48 Shares used in diluted net
income per share calculation 300 299 A For the three and
nine months ended March 31, 2017, Revenue has been adjusted on a
non-GAAP basis for changes in the sales provision for discontinued
products. B For the three and nine months ended March 31, 2017,
Cost of revenue has been adjusted on a non-GAAP basis to exclude
amortization of intangibles associated with acquisitions,
accelerated depreciation, the write off of certain fixed assets
related to restructuring and other charges. C For the three and
nine months ended March 31, 2017, Product development expenses have
been adjusted on a non-GAAP basis to exclude accelerated
depreciation and the write off of certain fixed assets related to
restructuring and other charges. D For the three and nine months
ended March 31, 2017, Marketing and administrative expenses have
been adjusted on a non-GAAP basis primarily to reflect the impact
of certain strategic development costs and the write off of certain
fixed assets. E For the three and nine months ended March 31, 2017,
Amortization of intangibles primarily related to our acquisitions
has been excluded on a non-GAAP basis. F For the three and nine
months ended March 31, 2017, 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 nine months ended March 31,
2017, Other expense, net has been adjusted on a non-GAAP basis to
exclude the impairment of a certain strategic investment. H For the
three and nine months ended March 31, 2017, Provision for income
taxes represents the tax effects of non-GAAP adjustments determined
using a hybrid with and without method and effective tax rate for
the applicable adjustment and jurisdiction.
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version on businesswire.com: http://www.businesswire.com/news/home/20170426005382/en/
Seagate Technology plcEric DeRitis,
408-658-1561eric.deritis@seagate.com
Seagate Technology (NASDAQ:STX)
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