Seagate Technology plc (NASDAQ: STX) (the “Company”) today
reported financial results for the quarter ended March 29, 2013.
During the fiscal third quarter, the Company reported revenue of
approximately $3.5 billion, gross margin of 26.9%, net income of
$416 million and diluted earnings per share of $1.13. On a non-GAAP
basis, which excludes the net impact of certain items, Seagate
reported gross margin of 27.6%, net income of $464 million and
diluted earnings per share of $1.26.
The Company generated $678 million in operating cash flow,
repurchased three million ordinary shares for approximately $102
million and paid $379 million for the early redemption of long-term
debt. For the first nine months of the fiscal year, the Company has
returned 75% of its operating cash flow to shareholders in
dividends and share redemptions. Cash, cash equivalents, restricted
cash, and short-term investments totaled approximately $2 billion
at the end of the fiscal third quarter.
“Seagate’s operational results this quarter again reflect strong
execution,” said Steve Luczo, Seagate’s chairman, president and
chief executive officer. “The continued advancement of cloud,
mobile and open source computing are trends that are shifting data
volumes toward personal and corporate cloud environments, creating
tremendous opportunities for Seagate’s leading storage technology
portfolio. Looking ahead, our top priorities are focused on the
efficiency of our operations, extending our leadership in storage
technology innovation and returning value to shareholders.”
For a detailed reconciliation of GAAP to non-GAAP results, see
accompanying financial tables.
Seagate has issued a Supplemental Commentary document, which
will not be read during today's call, but is available in the
“Investors” section of seagate.com.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of
$0.38 per share, which will be payable on May 29, 2013 to
shareholders of record as of the close of business on May 15, 2013.
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 Daylight 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 2013, including key underlying assumptions.
Replay
A replay will be available beginning today at approximately 6:00
p.m. Pacific Daylight 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 and
Section 21E of the Securities Exchange Act of 1934, each as
amended, including, in particular, statements about our plans,
strategies and prospects and estimates of industry growth for the
fiscal quarter ending June 28, 2013 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 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, as
consumers and businesses may defer purchases in response to tighter
credit and financial news; 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; possible excess industry supply with respect
to particular disk drive products; and the Company’s ability to
achieve projected cost savings in connection with restructuring
plans. Information concerning risks, uncertainties and other
factors that could cause results to differ materially from those
projected in the forward-looking statements are contained in the
Company's Annual Report on Form 10-K filed with the U.S. Securities
and Exchange Commission on August 8, 2012, and in the Company’s
Quarterly Report on Form 10-Q filed with the SEC on January 29,
2013, 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)
March 29,2013
June 29,2012
ASSETS Current assets: Cash and cash equivalents $ 1,433 $
1,707 Short-term investments 476 411 Restricted cash and
investments 101 93 Accounts receivable, net 1,562 2,319 Inventories
833 909 Deferred income taxes 111 104 Other current assets 471
767 Total current assets 4,987 6,310 Property, equipment and
leasehold improvements, net 2,256 2,284 Goodwill 476 463 Other
intangible assets, net 442 506 Deferred income taxes 413 396 Other
assets, net 169 147 Total Assets $ 8,743 $ 10,106
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 1,698 $ 2,286 Accrued employee compensation 264 344 Accrued
warranty 184 235 Accrued expenses 451 531 Current portion of
long-term debt 4 — Total current liabilities 2,601 3,396
Long-term accrued warranty 138 128 Long-term accrued income taxes
87 84 Other non-current liabilities 131 138 Long-term debt, less
current portion 2,474 2,863 Total Liabilities 5,431 6,609
Equity: Total Equity 3,312 3,497 Total Liabilities
and Equity $ 8,743 $ 10,106
The information as of June 29, 2012 was
derived from the Company’s audited Consolidated Balance Sheet as of
June 29, 2012.
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 29,2013
March 30,2012
March 29,2013
March 30,2012
Revenue $ 3,526 $ 4,450 $ 10,927 $ 10,457 Cost of revenue
2,578 2,809 7,926 7,257 Product development 294 270 839 737
Marketing and administrative 168 142 457 388 Amortization of
intangibles 20 18 59 20 Restructuring and other, net 1 1
2 4 Total operating expenses 3,061
3,240 9,283 8,406 Income from
operations 465 1,210 1,644 2,051 Interest income 2 2 6 5
Interest expense (53 ) (59 ) (163 ) (185 ) Other, net 16 6
41 (2 ) Other expense, net (35 ) (51 ) (116 ) (182 )
Income before income taxes 430 1,159 1,528 1,869 Provision
for income taxes 14 13 38 20 Net income
416 1,146 1,490 1,849 Less: Net income attributable to
noncontrolling interest — — — — Net
income attributable to Seagate Technology plc $ 416 $ 1,146
$ 1,490 $ 1,849 Net income per share
attributable to Seagate Technology plc ordinary shareholders: Basic
$ 1.16 $ 2.57 $ 3.98 $ 4.29 Diluted 1.13 2.48 3.86 4.16 Number of
shares used in per share calculations: Basic 358 446 374 431
Diluted 369 463 386 445 Cash dividends declared per Seagate
Technology plc ordinary share $ — $ 0.25 $ 1.02 $ 0.61
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In millions)
(Unaudited) For the Nine Months Ended
March 29,2013
March 30,2012
OPERATING ACTIVITIES Net income $ 1,490 $ 1,849 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 651 597 Share-based
compensation 56 38 Deferred income taxes (14 ) (5 ) Gain on sale of
investments (51 ) (12 ) Gain on sale of property and equipment (34
) (18 ) Loss on redemption and repurchase of debt 31 17 Other
non-cash operating activities, net 1 7 Changes in operating assets
and liabilities: Accounts receivable, net 769 (983 ) Inventories
123 167 Accounts payable (462 ) 191 Accrued employee compensation
(85 ) 63 Accrued expenses, income taxes and warranty (124 ) (28 )
Other assets and liabilities 308 (66 ) Net cash provided by
operating activities 2,659 1,817
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (658 ) (497 ) Proceeds from the sale of property and
equipment 29 11 Purchases of short-term investments (227 ) (382 )
Sales of short-term investments 201 330 Maturities of short-term
investments 26 118 Cash used in acquisition of LaCie S.A., net of
cash acquired (36 ) — Cash used in acquisition of Samsung HDD
assets and liabilities — (561 ) Other investing activities, net (16
) 16 Net cash used in investing activities (681 ) (965 )
FINANCING ACTIVITIES Repayments of long-term debt and
capital lease obligations (421 ) (670 ) Repurchases of ordinary
shares (1,612 ) (1,172 ) Dividends to shareholders (381 ) (266 )
Proceeds from issuance of ordinary shares under employee stock
plans 233 214 Escrow deposit for acquisition of noncontrolling
shares of LaCie S.A. (72 ) — Other financing activities, net —
3 Net cash used in financing activities (2,253 )
(1,891 ) Effect of foreign currency exchange rate changes on cash
and cash equivalents 1 — Decrease in cash and cash
equivalents (274 ) (1,039 ) Cash and cash equivalents at the
beginning of the period 1,707 2,677 Cash and cash
equivalents at the end of the period $ 1,433 $ 1,638
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 income per share and gross margin as a
percentage of revenue, 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 AND DILUTED NET INCOME PER SHARE (In
millions, except per share amounts) (Unaudited)
For the
ThreeMonthsEnded
For the
NineMonthsEnded
March 29,2013
March 29,2013
GAAP net income $ 416 $ 1,490 Non-GAAP adjustments: Cost of
revenue A 24 63 Product development B 11 18 Marketing and
administrative C 5 (8 ) Amortization of intangibles D 20 59
Restructuring and other, net D 1 2 Other expense, net E (13 ) (43 )
Non-GAAP net income $ 464 $ 1,581 Diluted net
income per share: GAAP $ 1.13 $ 3.86 Non-GAAP $ 1.26 $ 4.10
Shares used in diluted net income per share calculation 369
386
A
For the three months ended March 29, 2013, Cost of revenue
on a GAAP basis totaled $2,578 million, while non-GAAP Cost of
revenue, which excludes the net impact of certain adjustments, was
$2,554 million. For the nine months ended March 29, 2013, Cost of
revenue on a GAAP basis totaled $7,926 million, while non-GAAP Cost
of revenue, which excludes the net impact of certain adjustments,
was $7,863 million. The non-GAAP adjustments include amortization
of intangibles, other acquisition related expenses associated with
the December 2011 acquisition of Samsung Electronics Co., Ltd's
hard disk drive business (the "Samsung HDD business") and the
August 2012 acquisition of LaCie S.A. ("LaCie") as well as the
impact of the 2013 voluntary early retirement program (“2013 VERP”)
offered by the Company to certain of its employees in the U.S. in
January 2013.
B
For the three and nine months ended March 29, 2013, Product
development expense has been adjusted on a non-GAAP basis to
exclude the net impact of acquisition and integration costs
associated with the Samsung HDD business and costs associated with
the 2013 VERP.
C
For the three months ended March 29, 2013, Marketing and
administrative expense has been adjusted on a non-GAAP basis to
exclude acquisition and integration costs associated with LaCie and
costs associated with the 2013 VERP. For the nine months ended
March 29, 2013, Marketing and administrative expense has been
adjusted on a non-GAAP basis to exclude the net impact of legal
cost reimbursements, which were partially offset by acquisition and
integration costs associated with the Samsung HDD business and
LaCie and costs associated with the 2013 VERP.
D
For the three and nine months ended March 29, 2013, Amortization of
intangibles related to our Samsung HDD business and LaCie
acquisitions and Restructuring and other, net, primarily related to
prior year restructuring plans, have been excluded on a non-GAAP
basis.
E
For the three and nine months ended March 29, 2013, Other expense
has been adjusted on a non-GAAP basis primarily to exclude the net
impact of a gain recognized upon sales of investments, and a gain
recognized from an insurance reimbursement related to the severe
flooding in Thailand, partially offset by a loss recognized on the
early redemption and repurchase of debt.
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