Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the third quarter of fiscal
year 2016 ended April 1, 2016. For the third quarter, the Company
reported revenue of approximately $2.6 billion, gross margin of
20.2%, net loss of $21 million and diluted loss per share of $0.07.
On a non-GAAP basis, which excludes the net impact of certain
items, Seagate reported gross margin of 22.7%, net income of $66
million and diluted earnings per share of $0.22. For a detailed
reconciliation of GAAP to non-GAAP results, see the accompanying
financial tables.
During the third quarter, the Company generated approximately
$205 million in operating cash flow and paid cash dividends of $188
million. There were 298 million ordinary shares issued and
outstanding as of the end of the quarter. Cash, cash equivalents
and short-term investments totaled approximately $1.2 billion at
the end of the quarter.
“Our quarterly results fell short of our expectations as a
result of several near-term demand factors. Despite these
challenges, we believe we have the product portfolio, technology
roadmap and operational leverage to ensure we are well-positioned
for long-term success,” said Steve Luczo, Seagate’s chairman and
chief executive officer. “Accordingly, we are aggressively working
to position Seagate to respond to new demand levels and are
committed to ongoing financial discipline.”
Luczo continued, “Although the short-term dynamics of our
industry are challenging, we continue to see significant and
growing Exabyte demand, particularly as enterprise applications
shift to cloud environments. As we look forward, our strategic
focus is unchanged -- we are broadening our storage portfolio to
meet the needs of our growing global customer base, building upon
our strong competitive position and optimizing our business for
continued financial performance. These focus areas will enable us
to build lasting value for shareholders.”
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 Company’s Board of Directors has approved a quarterly cash
dividend of $0.63 per share, which will be payable on May 24, 2016
to shareholders of record as of the close of business on May 10,
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 of Directors.
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 fourth fiscal quarter of 2016 including
key underlying assumptions.
Replay
A replay will be available beginning today at approximately 9:00
a.m. Pacific Time at http://www.seagate.com/investors.
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 and estimates of industry growth
for the fiscal quarter ended July 1, 2016 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 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: 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; currency fluctuations that
may impact the Company’s margins and international sales; 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; cyber-attacks or
other data breaches that disrupt its operations or results in the
dissemination of proprietary or confidential information; and 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 report is contained in the Company’s Annual
Report on Form 10-K filed with the U.S. Securities and
Exchange Commission on August 11, 2015, the “Risk Factors”
section of which is incorporated into this report 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) April 1, July 3,
2016 2015 (a)
ASSETS
Current assets: Cash and cash equivalents $ 1,193 $ 2,479
Short-term investments 6 6 Accounts receivable, net 1,250 1,735
Inventories 928 993 Deferred income taxes — 122 Other current
assets 223 233 Total current assets 3,600 5,568 Property,
equipment and leasehold improvements, net 2,165 2,278 Goodwill
1,238 874 Other intangible assets, net 492 370 Deferred income
taxes 619 496 Other assets, net 260 259 Total Assets $ 8,374
$ 9,845
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 1,504 $ 1,540 Accrued employee compensation 170
256 Accrued warranty 108 135 Accrued expenses 477 412 Total
current liabilities 2,259 2,343 Long-term accrued warranty 97 113
Long-term accrued income taxes 28 33 Other non-current liabilities
177 183 Long-term debt 4,130 4,155 Total Liabilities 6,691
6,827 Equity: Total Equity 1,683 3,018 Total
Liabilities and Equity $ 8,374 $ 9,845 (a) The information
as of July 3, 2015 was derived from the Company’s audited
Consolidated Balance Sheet as of July 3, 2015.
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 April 1,
April 3, April 1,
April 3, 2016 2015 2016 2015
Revenue $ 2,595 $ 3,330 $ 8,506 $ 10,811 Cost of revenue
2,071 2,375 6,553 7,778 Product development 298 346 930 1,029
Marketing and administrative 150 219 491 654 Amortization of
intangibles 29 33 94 95 Restructuring and other, net 20 14 95 24
Gain on arbitration award, net — — — (620 )
Total operating expenses 2,568 2,987 8,163
8,960 Income from operations 27 343 343 1,851
Interest income 1 1 2 4 Interest expense (47 ) (48 ) (142 ) (152 )
Other, net 28 8 18 118 Other (expense)
income, net (18 ) (39 ) (122 ) (30 ) Income before income
taxes 9 304 221 1,821 Provision for income taxes 30 13
43 216 Net income (loss) $ (21 ) $ 291
$ 178 $ 1,605 Net income (loss) per share:
Basic $ (0.07 ) $ 0.90 $ 0.59 $ 4.92 Diluted (0.07 ) 0.88 0.59 4.81
Number of shares used in per share calculations: Basic 298 323 300
326 Diluted 298 330 303 334 Cash dividends declared per
ordinary share $ 0.63 $ 0.54 $ 1.80 $ 1.51
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In millions) (Unaudited)
For the Nine Months Ended April 1,
April 3, 2016 2015 OPERATING ACTIVITIES
Net income $ 178 $ 1,605 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 615 629 Share-based compensation 95 106 Impairment of
long-lived assets 25 — Deferred income taxes 1 (3 ) Loss on sale of
property and equipment — 1 (Gain) loss on redemption and repurchase
of debt (3 ) 52 Other non-cash operating activities, net 13 (9 )
Changes in operating assets and liabilities: Accounts receivable,
net 531 (36 ) Inventories 85 (61 ) Accounts payable (31 ) 149
Accrued employee compensation (92 ) (40 ) Accrued expenses, income
taxes and warranty 1 (9 ) Vendor non-trade receivables 17 30 Other
assets and liabilities (24 ) 5 Net cash provided by
operating activities 1,411 2,419
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (441 ) (546 ) Purchases of short-term investments — (5
) Sales of short-term investments — 4 Maturities of short-term
investments — 19 Cash used in acquisition of business, net of cash
acquired (634 ) (450 ) Other investing activities, net 10
(90 ) Net cash used in investing activities (1,065 ) (1,068 )
FINANCING ACTIVITIES Redemption and repurchase of debt (22 )
(536 ) Net proceeds from issuance of long-term debt — 498 Taxes
paid related to net share settlement of equity awards (55 ) —
Repurchases of ordinary shares (1,090 ) (907 ) Dividends to
shareholders (539 ) (493 ) Proceeds from issuance of ordinary
shares under employee stock plans 78 91 Other financing activities,
net (4 ) (12 ) Net cash used in financing activities (1,632 )
(1,359 ) Effect of foreign currency exchange rate changes on cash
and cash equivalents — (22 ) (Decrease) in cash and cash
equivalents (1,286 ) (30 ) Cash and cash equivalents at the
beginning of the period 2,479 2,634 Cash and cash
equivalents at the end of the period $ 1,193 $ 2,604
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 earnings per share and gross margin, 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 (LOSS) AND DILUTED NET INCOME PER SHARE (In millions,
except per share amounts) (Unaudited)
For the Three MonthsEnded April
1, 2016
For the Nine MonthsEnded April
1, 2016
GAAP net income (loss) $ (21 ) $ 178 Non-GAAP
adjustments: Revenue A (4 ) (3 ) Cost of revenue B 67 107 Product
development C 2 11 Marketing and administrative D 9 23 Amortization
of intangibles E 27 89 Restructuring and other, net F 20 96 Other
expense (income), net G (34 ) (24 ) Non-GAAP
net income $ 66 $ 477
Diluted net income (loss) per share: GAAP $ (0.07 ) $ 0.59 Non-GAAP
$ 0.22 $ 1.57 Shares used in diluted net income (loss) per
share calculation GAAP 298 303 Non-GAAP 299 303 A For the
three and nine months ended April 1, 2016, Revenue has been
adjusted on a non-GAAP basis to exclude sales return provision for
certain products that will be discontinued and revenue associated
with our disposed data services business. B For the three
and nine months ended April 1, 2016, Cost of revenue has been
adjusted on a non-GAAP basis to exclude amortization of intangibles
associated with acquisitions, recognition of certain terminated
contracts and write down of inventory, other acquisition related
expenses, and write off of certain fixed assets. C For the
three and nine months ended April 1, 2016, 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 and nine months ended April 1, 2016, Marketing and
administrative expenses have been adjusted on a non-GAAP basis to
exclude the write off of certain fixed assets, the impact of
integration costs associated with acquisitions, and marketing and
administrative expenses of our disposed data services business.
E For three and nine months ended April 1, 2016,
Amortization of intangibles primarily related to our acquisitions
has been excluded on a non-GAAP basis. F For three and nine
months ended April 1, 2016, Restructuring and other net, primarily
related to a reduction in our work force as a result of our ongoing
focus on cost efficiencies in all areas of our business, has been
excluded on a non-GAAP basis. G For three and nine months
ended April 1, 2016, Other expense (income), net has been adjusted
on a non-GAAP basis to exclude the payment of the unpaid interest
of $33 million on the final arbitration award amount in the
Company's case against Western Digital, the net impact of gains
recognized on the early repurchase of debt, and the impairment of
certain strategic investments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160429005215/en/
Seagate Technology plcEric DeRitis,
408-658-1561eric.deritis@seagate.com
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