Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for the quarter ended
December 29, 2017. For the second quarter, the Company reported
revenue of $2.9 billion, gross margin of 30.1%, net income of $159
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 30.4%, net income of $431 million and
diluted earnings per share of $1.48.
During the second quarter, the Company generated $850 million in
cash flow from operations and $773 million in free cash flow. Cash
and cash equivalents totaled approximately $2.6 billion at the end
of the quarter. There were 285 million ordinary shares issued and
outstanding as of the end of the quarter.
“Achieving year-over-year revenue and profitability growth and
significant cash flow generation in the December quarter reflects
Seagate’s solid execution and competitiveness of our storage
solutions portfolio, particularly in the cloud-based environments.
With our leading storage technology platforms, manufacturing and
supply-chain management capabilities, Seagate is in a strong
position to support ever-increasing storage demand from diverse
markets and applications. Looking ahead, we will continue to focus
on operational excellence and accomplishing our financial and
shareholder-return objectives,” said Dave Mosley, Seagate’s chief
executive officer.
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 Relations
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 April 4, 2018 to shareholders of record as of the close of
business on March 21, 2018. 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 third fiscal quarter of 2018,
including key underlying assumptions.
An archived audio webcast of this event will be available on
Seagate’s Investors Relations 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, financial projections, estimates
of industry growth, market demand, shifts in technology, its
supply-chain management capabilities and dividend issuance plans
for the fiscal quarter ending March 30, 2018 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; 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; the Company’s ability to comply with certain
covenants in its 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 the Company’s operations or
result 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 4, 2017, 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)
December 29, 2017
June 30,2017 (a)
ASSETS
Current assets: Cash and cash equivalents $ 2,556 $ 2,539 Accounts
receivable, net 1,055 1,199 Inventories 1,014 982 Other current
assets 285 321 Total current assets 4,910 5,041 Property,
equipment and leasehold improvements, net 1,762 1,875 Goodwill
1,238 1,238 Other intangible assets, net 222 281 Deferred income
taxes 402 609 Other assets, net 216 224 Total Assets $ 8,750
$ 9,268
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 1,620 $ 1,626 Accrued employee compensation 183
237 Accrued warranty 111 113 Current portion of long-term debt 560
— Accrued expenses 639 650 Total current liabilities 3,113
2,626 Long-term accrued warranty 125 120 Long-term accrued income
taxes 12 15 Other non-current liabilities 123 122 Long-term debt
4,316 5,021 Total Liabilities 7,689 7,904 Total
Equity 1,061 1,364 Total Liabilities and Equity $ 8,750
$ 9,268
(a) The information in this column was derived from the
Company’s audited Consolidated Balance Sheet as of June 30,
2017.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months Ended For the
Six Months Ended
December 29, 2017
December 30, 2016 December 29,
2017 December 30, 2016 Revenue $ 2,914
$ 2,894 $ 5,546 $ 5,691 Cost of revenue 2,037 2,003 3,933
3,999 Product development 250 305 513 620 Marketing and
administrative 142 155 287 308 Amortization of intangibles 19 28 41
57 Restructuring and other, net 33 33 84 115
Total operating expenses 2,481 2,524 4,858
5,099 Income from operations 433 370 688 592
Interest income 6 1 13 2 Interest expense (61 ) (50 ) (122 )
(100 ) Other, net (7 ) (11 ) (20 ) (11 ) Other expense, net (62 )
(60 ) (129 ) (109 ) Income before income taxes 371 310 559
483 Provision for income taxes 212 13 219 19
Net income $ 159 $ 297 $ 340 $ 464
Net income per share: Basic $ 0.55 $ 1.00 $ 1.18 $
1.56 Diluted 0.55 1.00 1.17 1.55 Number of shares used in per share
calculations: Basic 288 296 289 297 Diluted 291 298 291 299
Cash dividends declared per ordinary share $ 0.63 $ 0.63 $ 1.26 $
1.26
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Six Months Ended December 29,
2017 December 30, 2016 OPERATING
ACTIVITIES Net income $ 340 $ 464 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 318 391 Share-based compensation 59 73 Impairment
of long-lived assets — 9 Deferred income taxes 204 3 Other non-cash
operating activities, net 3 18 Changes in operating assets and
liabilities:
Accounts receivable, net 145 110 Inventories (32 ) (140 ) Accounts
payable 59 170 Accrued employee compensation (54 ) 70 Accrued
expenses, income taxes and warranty 3 69 Vendor receivables 42 19
Other assets and liabilities — (9 ) Net cash provided by
operating activities 1,087 1,247
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (201 ) (235 ) Proceeds from the sale of property and
equipment 2 (1 ) Maturities of short-term investments — 6 Other
investing activities, net (11 ) (4 ) Net cash used in investing
activities (210 ) (234 )
FINANCING ACTIVITIES Redemption and
repurchase of debt (152 ) — Taxes paid related to net share
settlement of equity awards (21 ) (24 ) Repurchases of ordinary
shares (361 ) (248 ) Dividends to shareholders (366 ) (188 )
Proceeds from issuance of ordinary shares under employee stock
plans 35 47 Net cash used in financing activities
(865 ) (413 ) Effect of foreign currency exchange rate changes on
cash, cash equivalents, and restricted cash 5 (12 ) Increase
in cash, cash equivalents, and restricted cash 17 588 Cash, cash
equivalents, and restricted cash at the beginning of the period
2,543 1,132 Cash, cash equivalents, and restricted
cash at the end of the period $ 2,560 $ 1,720
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross
margin, net income, diluted earnings per share and operating
expenses 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 Three MonthsEnded
December 29, 2017
For the Six MonthsEnded December
29, 2017
Reconciliation of GAAP Net Income: GAAP Net income $ 159 $ 340
Non-GAAP adjustments: Revenue A (6 ) (6 ) Cost of revenue B 14 40
Product development C 2 3 Marketing and administrative D 1 1
Amortization of intangibles E 18 39 Restructuring and other, net F
33 84 Other expense, net G 3 2 Provision for income taxes H 207
207 Non-GAAP net income $ 431 $ 710
Reconciliation of GAAP Diluted Net Income Per Share: GAAP $
0.55 $ 1.17 Non-GAAP $ 1.48 $ 2.44 Shares used in diluted net
income per share calculation 291 291 A For the
three and six months ended December 29, 2017, Revenue has been
adjusted on a non-GAAP basis to exclude the favorable adjustments
for sales of certain discontinued products. B For the three
and six months ended December 29, 2017, Cost of revenue has been
adjusted on a non-GAAP basis to exclude amortization of intangibles
associated with acquisitions and write off of certain inventory and
other charges related to restructuring. C For the three and
six months ended December 29, 2017, Product development expenses
have been adjusted on a non-GAAP basis to exclude the impact of
write off of certain fixed assets and other charges related to
restructuring. D For the three and six months ended December
29, 2017, Marketing and administrative expenses have been adjusted
on a non-GAAP basis to exclude the write off of certain fixed
assets related to restructuring. E For the three and six
months ended December 29, 2017, Amortization of intangibles
primarily related to our acquisitions has been excluded on a
non-GAAP basis. F For the three and six months ended
December 29, 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 three and six months
ended December 29, 2017, 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 and impact of our
disposed data service business. H For the three and six
months ended December 29, 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 and a provisional tax
expense of $208 million for the re-measurement of our U.S. deferred
tax assets at the lower 21% tax rate resulting from the Tax Cuts
and Jobs Act enacted on December 22, 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180129005204/en/
Seagate Technology plcHelen Farrier,
408-658-1616helen.farrier@seagate.com
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