- Operating cash flow of $856
million
- Quarter-over-quarter growth in revenue
and EPS
Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for the second quarter
of fiscal year 2014 ended December 27, 2013. During the second
quarter, the Company reported revenue of $3.53 billion, gross
margin of 28.0%, net income of $428 million and diluted earnings
per share of $1.24. On a non-GAAP basis, which excludes the net
impact of certain items, Seagate reported gross margin of 28.5%,
net income of $455 million and diluted earnings per share of
$1.32.
During the second quarter, the Company generated approximately
$856 million in operating cash flow, paid cash dividends of $142
million and repurchased 33 million ordinary shares for
approximately $1.5 billion. There were 328 million ordinary shares
issued and outstanding as of the end of the quarter. Cash, cash
equivalents, restricted cash, and short-term investments totaled
approximately $2.3 billion at the end of the quarter.
“Seagate’s results in the December quarter reflect discipline in
managing the profitability of our business and strong operational
execution. We continue to strategically invest in our product
portfolio and enhance our vertically integrated manufacturing
capabilities to effectively capitalize on the cloud, mobile and
open source storage trends that are being fueled by data growth,”
said Steve Luczo, Seagate’s chairman and chief executive officer.
“Our cash flow was very strong this quarter, and combined with the
execution of our capital allocation strategy, we are on track to
meet our goal of returning 70% of our operating cash flow to
shareholders this fiscal year.”
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
is available on Seagate’s Investors website at
www.seagate.com/investors.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of
$0.43 per share, which will be payable on February 24, 2014 to
shareholders of record as of the close of business on February 10,
2014. 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 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 third fiscal quarter of 2014, including
key underlying assumptions.
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 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 March 28, 2014 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 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 7, 2013 and
the Quarterly Report on Form 10-Q filed with the U.S. Securities
and Exchange Commission on October 29, 2013, the “Risk Factors”
sections of which 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)
December 27,2013
June 28,2013
ASSETS Current assets: Cash and cash equivalents $ 2,293 $
1,708 Short-term investments 46 480 Restricted cash and investments
4 101 Accounts receivable, net 1,615 1,670 Inventories 948 854
Deferred income taxes 116 115 Other current assets 267 484
Total current assets 5,289 5,412 Property, equipment and leasehold
improvements, net 2,128 2,269 Goodwill 477 476 Other intangible
assets, net 329 405 Deferred income taxes 465 456 Other assets, net
202 225 Total Assets $ 8,890 $ 9,243
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 1,577 $
1,690 Accrued employee compensation 267 335 Accrued warranty 158
176 Accrued expenses 455 407 Current portion of long-term debt —
3 Total current liabilities 2,457 2,611 Long-term accrued
warranty 141 144 Long-term accrued income taxes 103 87 Other
non-current liabilities 122 121 Long-term debt, less current
portion 3,572 2,774 Total Liabilities 6,395 5,737
Equity: Total Equity 2,495 3,506 Total Liabilities and
Equity $ 8,890 $ 9,243
The information as of June 28, 2013 was derived from the
Company’s audited Consolidated Balance Sheet as of June 28,
2013.
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 27,2013
December 28,2012
December 27,2013
December 28,2012
Revenue $ 3,528 $ 3,668 $ 7,017 $ 7,400 Cost of revenue
2,541 2,676 5,055 5,347 Product development 312 277 606 545
Marketing and administrative 190 139 371 289 Amortization of
intangibles 25 20 45 39 Restructuring and other, net 16 1
18 1 Total operating expenses 3,084
3,113 6,095 6,221 Income from
operations 444 555 922 1,179 Interest income 1 2 6 4
Interest expense (49 ) (55 ) (93 ) (111 ) Other, net 46 (3 )
47 27 Other expense, net (2 ) (56 ) (40 ) (80 )
Income before income taxes 442 499 882 1,099 Provision for
income taxes 14 7 27 25 Net income 428
492 855 1,074 Less: Net income attributable to noncontrolling
interest — — — — Net income
attributable to Seagate Technology plc $ 428 $ 492 $
855 $ 1,074 Net income per share attributable
to Seagate Technology plc ordinary shareholders: Basic $ 1.27 $
1.33 $ 2.46 $ 2.81 Diluted 1.24 1.30 2.39 2.73 Number of shares
used in per share calculations: Basic 336 369 347 382 Diluted 346
379 357 394 Cash dividends declared per Seagate Technology
plc ordinary share $ 0.43 $ 0.70 $ 0.81 $ 1.02
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Six Months Ended
December 27,2013
December 28,2012
OPERATING ACTIVITIES Net income $ 855 $ 1,074 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 457 430 Share-based compensation 57
36 Deferred income taxes (15 ) (11 ) Gain on sale of investments
(32 ) (33 ) Gain on sale of property and equipment (4 ) (8 ) Loss
on redemption and repurchase of debt — 6 Other non-cash operating
activities, net 8 5 Changes in operating assets and liabilities:
Restricted cash 104 — Accounts receivable, net 51 683 Inventories
(94 ) 156 Accounts payable (46 ) (496 ) Accrued employee
compensation (68 ) (62 ) Accrued expenses, income taxes and
warranty 41 (97 ) Vendor non-trade receivables 199 305 Other assets
and liabilities 25 (12 ) Net cash provided by operating
activities 1,538 1,976
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements (304
) (427 ) Proceeds from the sale of property and equipment — 4
Proceeds from the sale of strategic investments 72 42 Purchases of
short-term investments (87 ) (168 ) Sales of short-term investments
463 125 Maturities of short-term investments 61 21 Cash used in
acquisition of LaCie S.A., net of cash acquired — (36 ) Other
investing activities, net (28 ) (14 ) Net cash provided by (used
in) investing activities 177 (453 )
FINANCING
ACTIVITIES Repayments of long-term debt and capital lease
obligations — (58 ) Net proceeds from issuance of 3.75% Senior
Notes 791 — Repurchases of ordinary shares (1,702 ) (1,510 )
Dividends to shareholders (277 ) (377 ) Proceeds from issuance of
ordinary shares under employee stock plans 61 168 Escrow deposit
for acquisition of noncontrolling shares of LaCie S.A. — (72 )
Other financing activities, net (5 ) — Net cash used in
financing activities (1,132 ) (1,849 ) Effect of foreign currency
exchange rate changes on cash and cash equivalents 2 2
Increase (decrease) in cash and cash equivalents 585 (324 )
Cash and cash equivalents at the beginning of the period 1,708
1,707 Cash and cash equivalents at the end of the
period $ 2,293 $ 1,383
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 ThreeMonths
EndedDecember 27, 2013
For the Six MonthsEnded December
27,
2013
GAAP net income $ 428 $ 855 Non-GAAP adjustments: Cost of revenue A
17 37 Product development B 3 6 Marketing and administrative B 3 6
Amortization of intangibles C 25 45 Restructuring and other, net D
16 18 Other expense, net E (31 ) (33 ) Benefit from income taxes F
(6 ) (6 ) Non-GAAP net income $ 455 $ 928
Diluted net income per share: GAAP $ 1.24 $ 2.39 Non-GAAP $
1.32 $ 2.60 Shares used in diluted net income per share
calculation 346 357
A
For the three and six months ended December 27, 2013, Cost
of revenue on a GAAP basis totaled $2,541 million and $5,055
million, respectively, while non-GAAP Cost of revenue, which
excludes the net impact of certain adjustments, was $2,524 million
and $5,018 million, respectively. The non-GAAP adjustments include
amortization of intangibles and 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").
B
For the three and six months ended December 27, 2013, Product
development and Marketing and administrative expenses have been
adjusted on a non-GAAP basis to exclude the impact of acquisition
and integration costs associated with the Samsung HDD business and
LaCie.
C
For the three and six months ended December 27, 2013, Amortization
of intangibles related to our Samsung HDD business and LaCie
acquisitions.
D
For the three and six months ended December 27, 2013, Restructuring
and other, net, includes a restructuring charge recorded during the
December 2013 quarter associated with a reduction in the work
force.
E
For the three and six months ended December 27, 2013, Other
expense, net, has been adjusted on a non-GAAP basis primarily to
exclude the impact of a gain recognized upon the sale of certain
strategic investments.
F
For the three and six months ended December 27, 2013, Benefit from
income taxes has been adjusted on a non-GAAP basis primarily to
exclude the impact 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.
Seagate Technology plcBrian Ziel,
408-658-1540brian.ziel@seagate.com
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