Seagate Technology plc (NASDAQ: STX) today reported financial
results for the quarter and fiscal year ended June 29, 2012. During
the fourth quarter, on a GAAP basis the company reported revenue of
approximately $4.5 billion, gross margin of 33.1%, net income of
$1.0 billion and diluted earnings per share of $2.37. On a non-GAAP
basis, which excludes the net impact of certain items, Seagate
reported gross margin of 33.6% and diluted earnings per share of
$2.41.
In the June quarter, Seagate generated approximately $1.4
billion in cash from operations, paid cash dividends of $106
million and used approximately $1.2 billion to redeem approximately
45 million ordinary shares. Through the first half of the 2012
calendar year, Seagate has redeemed approximately 88 million
ordinary shares, representing approximately 19% of the company’s
market capitalization. Cash, cash equivalents, restricted cash, and
short-term investments totaled $2.2 billion at the end of the
fourth quarter, a sequential increase of approximately $67
million.
For the fiscal year ended June 29, 2012, on a GAAP basis Seagate
reported revenue of $14.9 billion, gross margin of 31.4%, net
income of $2.9 billion and diluted earnings per share of $6.49. On
a non-GAAP basis, the company reported gross margin of 31.7% and
diluted earnings per share of $6.75. In fiscal year 2012, Seagate
returned over 85% of its operating cash flow to shareholders in the
form dividends and share redemptions.
“As we announced previously, we were disappointed not to meet
our revenue and margin plan for the fourth quarter as a result of
the industry’s faster recovery from the supply chain disruption and
an isolated supplier issue that we experienced,” said Steve Luczo,
Seagate chairman and chief executive officer. “Nevertheless, we are
pleased to have achieved record revenue and unit shipments for the
June quarter, which enabled Seagate to continue to return
significant value to shareholders through dividends and share
repurchases.”
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Commentary document. The
Supplemental Commentary will not be read during today's call, but
rather it is available in the investors section of seagate.com.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of
$0.32 per share, which will be payable on August 29, 2012 to
shareholders of record as of the close of business on August 14,
2012. 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 2:00 p.m.
Pacific Time on its Investor Relations website at
www.seagate.com/investors. During today's conference call, the
company will provide an outlook for its first fiscal quarter of
2013 and its view of the remainder of the calendar year, including
key underlying assumptions. Seagate is planning an investor and
analyst meeting on September 21, 2012 to discuss the Company's
longer-term strategic plan.
Replay
A replay will be available beginning today at approximately 6:00
p.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, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, including, in particular, statements about our
plans, strategies and prospects and estimates of industry growth
for the fiscal quarter ending September 30, 2012 and beyond. These
statements identify prospective information and include words such
as “expects,” “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. Current
expectations, forecasts and assumptions involve a number of risks,
uncertainties, and other factors that could cause actual results to
differ materially from those anticipated by these forward-looking
statements. Such risks, uncertainties, and other factors may be
beyond the Company’s control. In particular, the uncertainty in
global economic conditions continues to pose a risk to the
Company’s operating and financial performance as consumers and
businesses may defer purchases in response to tighter credit and
financial news. Such risks and uncertainties also include, but are
not limited to, the impact of the variable demand and adverse
pricing environment for disk drives, particularly in view of
current business and economic conditions; dependence on 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; and 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 significant disruption to the industry supply chain due
to the severe flooding throughout parts of Thailand. Information
concerning risks, uncertainties and other factors that could cause
results to differ materially from those projected in the
forward-looking statements is contained in the Company’s Annual
Report on Form 10-K and Form 10-K/A as filed with the
U.S. Securities and Exchange Commission on August 17, 2011 and
August 24, 2011 respectively, and in the Company’s Quarterly
Report on Form 10-Q as filed with the U.S. Securities and
Exchange Commission on April 30, 2012 which statements are
incorporated into this press release by reference. 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.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
June 29, 2012
July 1,
2011(a)
ASSETS Current assets: Cash and cash equivalents $ 1,707 $
2,677 Short-term investments 411 474 Restricted cash and
investments 93 102 Accounts receivable, net 2,319 1,495 Inventories
909 872 Deferred income taxes 104 99 Other current assets 767
706 Total current assets 6,310 6,425 Property, equipment and
leasehold improvements, net 2,284 2,245 Goodwill 463 31 Other
intangible assets 506 1 Deferred income taxes 396 374 Other assets,
net 147 149 Total Assets $ 10,106 $ 9,225
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 2,286 $ 2,063 Accrued employee compensation 344
199 Accrued warranty 235 189 Accrued expenses 531 452 Current
portion of long-term debt — 560 Total current liabilities
3,396 3,463 Long-term accrued warranty 128 159 Long-term accrued
income taxes 84 67 Other non-current liabilities 138 121 Long-term
debt, less current portion 2,863 2,952 Total Liabilities
6,609 6,762 Shareholders' equity: Total Shareholders' Equity
3,497 2,463 Total Liabilities and Shareholders' Equity $
10,106 $ 9,225
(a) The information in this column was derived from the
Company's audited Consolidated Balance Sheet as of July 1,
2011.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
data)
(Unaudited)
For the Three Months
Ended For the Fiscal Years Ended June 29,
2012 July 1, 2011 June
29, 2012
July 1,2011(a)
Revenue $ 4,482 $ 2,859 $ 14,939 $ 10,971 Cost of revenue
2,998 2,308 10,255 8,825 Product development 269 229 1,006 875
Marketing and administrative 140 128 528 445 Amortization of
intangibles 18 — 38 2 Restructuring and other, net — 4
4 18 Total operating expenses 3,425
2,669 11,831 10,165 Income from
operations 1,057 190 3,108 806 Interest income 2 1 8 7
Interest expense (55 ) (63 ) (241 ) (214 ) Other, net 9 1
7 (20 ) Other expense, net (44 ) (61 ) (226 ) (227 )
Income before income taxes 1,013 129 2,882 579 Provision for
income taxes — 10 20 68 Net income $
1,013 $ 119 $ 2,862 $ 511 Net
income per share: Basic $ 2.46 $ 0.28 $ 6.72 $ 1.13 Diluted 2.37
0.27 6.49 1.09 Number of shares used in per share calculations:
Basic 411 427 426 451 Diluted 427 444 441 467 Cash dividends
declared per share $ 0.25 $ 0.18 $ 0.86 $ 0.18
(a) The information in this column was derived
from the Company's audited Consolidated Statement of Operations for
the year ended July 1, 2011.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Fiscal Years Ended June 29,
2012
July 1,2011(a)
OPERATING ACTIVITIES Net income $ 2,862 $ 511 Adjustments to
reconcile net income to net cash from operating activities:
Depreciation and amortization 814 754 Share-based compensation 51
51 Loss on redemption of debt 17 26 Gain on sale of property and
equipment (25 ) (23 ) Deferred income taxes (28 ) 46 Other non-cash
operating activities, net (5 ) 15 Changes in operating
assets and liabilities: Accounts receivable, net (824 ) (95 )
Inventories 99 (115 ) Accounts payable 157 386 Accrued employee
compensation 145 (64 ) Accrued expenses, income taxes and warranty
54 (28 ) Other assets and liabilities (55 ) (200 ) Net cash
provided by operating activities 3,262 1,264
INVESTING ACTIVITIES Acquisition of property, equipment and
leasehold improvements (636 ) (843 ) Proceeds from the sale of
property and equipment 20 77 Purchases of short-term investments
(454 ) (487 ) Sales of short-term investments 397 159 Maturities of
short-term investments 119 101 Change in restricted cash and
investments 7 14 Cash used in acquisition of Samsung HDD assets and
liabilities (561 ) — Other investing activities, net (6 ) (2 ) Net
cash used in investing activities (1,114 ) (981 )
FINANCING ACTIVITIES Net proceeds from issuance of long-term
debt — 1,324 Repayments of long-term debt and capital lease
obligations (670 ) (377 ) Change in restricted cash and investments
— 2 Proceeds from issuance of ordinary shares under employee stock
plans 344 83 Dividends to shareholders (372 ) (74 ) Repurchases of
ordinary shares (2,426 ) (822 ) Other financing activities, net 6
(5 ) Net cash (used in) provided by financing activities
(3,118 ) 131 (Decrease) increase in cash and cash
equivalents (970 ) 414 Cash and cash equivalents at the beginning
of the year 2,677 2,263 Cash and cash equivalents at
the end of the year $ 1,707 $ 2,677
(a) The information in this column was derived from the
Company's audited Consolidated Statement of Cash flows for the year
ended July 1, 2011.
Use of non-GAAP financial information
To supplement the preliminary financial information presented in
accordance with generally accepted accounting principles (GAAP),
the Company provides non-GAAP measures of gross margin which are
adjusted from results based on GAAP to exclude certain expenses.
These non-GAAP financial measures are 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 that the Company 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 the Company's
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
June 29, 2012
For the Fiscal Year
Ended
June 29, 2012
GAAP net income $ 1,013 $ 2,862 Non-GAAP adjustments: Cost of
revenue A 20 51 Product development B 4 30 Marketing and
administrative B 1 15 Amortization of intangibles C 18 38
Restructuring and other, net C — 4 Other expense, net D — 12
Provision for (benefit from) income taxes E (28 ) (35 ) Non-GAAP
net income $ 1,028 $ 2,977 Diluted net income
per share: GAAP $ 2.37 $ 6.49 Non-GAAP $ 2.41 $ 6.75
Shares used in diluted net income per share calculation 427 441
A
For the three months ended June 29, 2012, Cost of revenue on
a GAAP basis totaled $2,998 million, while non-GAAP Cost of
revenue, which excludes the net impact of certain adjustments, was
$2,978 million. The non-GAAP adjustments include amortization
expense of other intangible assets plus integration costs
associated with the December 2011 acquisition of Samsung's HDD
business. For the fiscal year ended June 29, 2012, Cost of
revenue on a GAAP basis totaled $10,255 million, while non-GAAP
Cost of revenue, which excludes the net impact of certain
adjustments, was $10,204 million. The non-GAAP adjustments include
amortization expense of other intangible assets, acquisition and
integration costs associated with the acquisition of Samsung's HDD
business and the 2012 voluntary early retirement program (“VERP”)
offered by the Company to certain of its employees in the U.S. in
January 2012.
B
For the three months ended June 29, 2012, Product development and
Marketing and administrative expenses have been adjusted on a non-
GAAP basis to exclude the net impact of acquisition and integration
costs associated with the acquisition of Samsung's HDD business,
and
costs associated with our pending
acquisition of LaCie S.A. These exclusions were offset partially by
a gain recorded on
the sale of a building. For the fiscal year ended June 29,
2012, Product development and marketing and administrative expenses
have been adjusted on a non- GAAP basis to exclude the net impact
of acquisition and integration costs associated with the
acquisition of Samsung's HDD business, adjustments to the expected
retirement obligations of certain leased and subleased facilities,
costs associated with our pending acquisition of LaCie S.A., and
costs associated with the accrual of the 2012 VERP. These were
offset partially by the reversal of previously accrued
litigation costs and a gain recorded on
the sale of a building.
C
For the three months and the fiscal year ended June 29, 2012,
Amortization of intangibles related to the acquisition of Samsung's
HDD business and Restructuring and other, net, which primarily
related to prior year restructuring plans, have been excluded on a
non-GAAP basis.
D
For the fiscal year ended June 29, 2012, Other expense, net on a
GAAP basis was an expense of $226 million, while non-GAAP Other
expense, net, which excludes the net impact of certain adjustments,
was an expense of $214 million. The non-GAAP adjustments include a
loss related to the redemption of our 10% secured notes and a
write-down of an equity investment, offset partially by a gain
recognized upon sales of certain strategic investments.
E
For the three months and the fiscal year ended June 29, 2012,
non-GAAP net income excludes discrete tax items related to the
release of valuation allowance on U.S. deferred tax assets
associated with increases in the Company's forecasted U.S. taxable
income.
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