Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for the quarter and
fiscal year ended July 3, 2015. For the fourth quarter, the Company
reported revenue of $2.9 billion, gross margin of 26.5%, net income
of $138 million and diluted earnings per share of $0.43. On a
non-GAAP basis, which excludes the net impact of certain items,
Seagate reported gross margin of 27.2%, net income of $250 million
and diluted earnings per share of $0.77.
During the fourth quarter, the Company generated $228 million in
operating cash flow and returned $351 million to shareholders in
the form of dividends and share redemptions.
For the fiscal year ended July 3, 2015, the Company reported
revenue of $13.7 billion, gross margin of 27.7%, net income of $1.7
billion and diluted earnings per share of $5.26. On a non-GAAP
basis, Seagate reported gross margin of 28.1%, net income of $1.5
billion and diluted earnings per share of $4.57.
In fiscal year 2015, the Company generated approximately $2.6
billion in operating cash flow and returned $1.8 billion to
shareholders in the form of dividends and share redemptions. The
Company also successfully raised $1.2 billion in investment grade
debt in fiscal 2015, extending its weighted average maturity to
approximately 9 years and decreasing its weighted average interest
to 4.8%. Cash, cash equivalents, restricted cash, and short-term
investments totaled approximately $2.5 billion at the end of the
fiscal year. There were 315 million ordinary shares issued and
outstanding as of the end of the fiscal year.
“Over the last few years, Seagate has refined our financial
model and global supply chain to allow us to continuously deliver
significant value to shareholders and adapt effectively to
short-term fluctuations in our business and geographic markets,”
said Steve Luczo, Seagate’s chairman and chief executive officer.
“While shifting information technology market dynamics have been
challenging to accurately predict, we achieved many of our
financial goals in fiscal 2015 and remain confident in our
long-term growth prospects driven by data growth, cloud and
hyperscale deployments and data analytics. Our product portfolio is
very well positioned in the traditional storage marketplace, our
pipeline of innovation is strong, and our strategic investments in
cloud systems and solutions and flash technology are expanding our
opportunities with new and existing customers.”
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 website at
www.seagate.com/investors.
Quarterly Cash Dividend
The Board of Directors has approved a quarterly cash dividend of
$0.54 per share, which will be payable on August 25, 2015 to
shareholders of record as of the close of business on August 11,
2015. 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 first fiscal quarter of 2016,
including key underlying assumptions. Seagate is planning an
investor and analyst meeting on September 2, 2015 to discuss the
Company’s longer-term strategic plan.
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, Google+ 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 our plans,
strategies and prospects and estimates of industry growth for the
fiscal quarter ending October 2, 2015 and the fiscal year ending
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 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; 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 our margins
and international sales; possible excess industry supply with
respect to particular disk drive products; disruptions to our
supply chain or production capabilities; 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 7, 2014, 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)
July 3, 2015
June 27,
2014 (a)
ASSETS Current assets: Cash and cash equivalents $ 2,479 $
2,634 Short-term investments 6 20 Restricted cash and investments 7
4 Accounts receivable, net 1,735 1,729 Inventories 993 985 Deferred
income taxes 122 126 Other current assets 226 279 Total
current assets 5,568 5,777 Property, equipment and leasehold
improvements, net 2,278 2,136 Goodwill 874 537 Other intangible
assets, net 370 359 Deferred income taxes 496 499 Other assets, net
259 184 Total Assets $ 9,845 $ 9,492
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 1,540 $
1,549 Accrued employee compensation 256 296 Accrued warranty 135
148 Accrued expenses 412 405 Current portion of long-term debt —
— Total current liabilities 2,343 2,398 Long-term accrued
warranty 113 125 Long-term accrued income taxes 33 90 Other
non-current liabilities 183 127 Long-term debt, less current
portion 4,155 3,920 Total Liabilities 6,827 6,660
Equity: Total Equity 3,018 2,832 Total
Liabilities and Equity $ 9,845 $ 9,492
(a) The information in this column
was derived from the Company’s audited Consolidated Balance Sheet
as of June 27, 2014.
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 July 3, 2015 June
27, 2014 July 3, 2015
June 27,
2014 (a)
Revenue $ 2,927 $ 3,301 $ 13,739 $ 13,724 Cost of revenue
2,151 2,376 9,930 9,878 Product development 324 323 1,353 1,226
Marketing and administrative 203 161 857 722 Amortization of
intangibles 34 27 129 98 Restructuring and other, net 9 4 32 24
Gain on arbitration award, net — — (620 ) —
Total operating expenses 2,721 2,891 11,681
11,948 Income from operations 206 410 2,058 1,776
Interest income 2 1 6 8 Interest expense (55 ) (50 ) (207 )
(195 ) Other, net (4 ) (77 ) 113 (33 ) Other income
(expense), net (57 ) (126 ) (88 ) (220 ) Income before
income taxes 149 284 1,970 1,556 Provision for (benefit from)
income taxes 11 (36 ) 228 (14 ) Net income $ 138
$ 320 $ 1,742 $ 1,570 Net income
per share: Basic $ 0.44 $ 0.98 $ 5.38 $ 4.66 Diluted 0.43 0.95 5.26
4.52 Number of shares used in per share calculations: Basic 316 326
324 337 Diluted 323 337 331 347 Cash dividends declared per
share $ 0.54 $ 0.43 $ 2.05 $ 1.67
(a) The information in this column
was derived from the Company’s audited Consolidated Statement of
Operations for the year ended June 27, 2014.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Fiscal Years Ended July 3, 2015
June 27, 2014
OPERATING ACTIVITIES Net income $ 1,742 $ 1,570 Adjustments
to reconcile net income to net cash from operating activities:
Depreciation and amortization 841 879 Share-based compensation 137
118 Loss on redemption and repurchase of debt 74 81 Gain on sale of
investments — (32 )
Loss (gain) on sale of property and
equipment
2 (4 ) Deferred income taxes 2 (67 ) Other non-cash operating
activities, net (9 ) 14 Changes in operating assets and
liabilities: Restricted cash (3 ) 104 Accounts receivable, net (2 )
4 Inventories 29 (20 ) Accounts payable (58 ) (190 ) Accrued
employee compensation (40 ) (55 ) Accrued expenses, income taxes
and warranty (112 ) (80 ) Vendor non-trade receivables 47 217 Other
assets and liabilities (3 ) 19 Net cash provided by
operating activities 2,647 2,558
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (747 ) (559 ) Proceeds from the sale of property and
equipment — 3 Proceeds from the sale of strategic investments — 72
Purchases of short-term investments (5 ) (88 ) Sales of short-term
investments 4 508 Maturities of short-term investments 19 61 Cash
used in acquisition of businesses, net of cash acquired (453 ) (285
) Other investing activities, net (105 ) (34 ) Net cash used in
investing activities (1,287 ) (322 )
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 1,196 1,781 Redemption
and repurchase of debt (1,026 ) (725 ) Proceeds from issuance of
ordinary shares under employee stock plans 98 107 Dividends to
shareholders (664 ) (557 ) Repurchases of ordinary shares (1,087 )
(1,912 ) Other financing activities, net (12 ) (5 ) Net cash used
in financing activities (1,495 ) (1,311 ) Effects of foreign
currency exchange rate changes on cash and cash equivalents (20 ) 1
Increase (decrease) in cash and cash equivalents (155 ) 926
Cash and cash equivalents at the beginning of the year 2,634
1,708 Cash and cash equivalents at the end of the year $
2,479 $ 2,634
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, gross margin, gross margin as
a percentage of revenue, operating margin, operating expenses, and
operating income 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 they are consistent with the financial models
and estimates published by financial analysts who follow the
Company. The Company also presents free cash flow, which is a
non-GAAP measure calculated as the sum of net cash provided by
operating activities, less acquisition of property, equipment and
leasehold improvements. Free cash flow does not reflect all of the
Company's expenses and non-cash items and does not reflect the
Company's uses of cash in financing and investment activities.
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 Three
Months Ended
July 3, 2015
For the Fiscal
Year Ended
July 3, 2015
Reconciliation of GAAP Net Income: GAAP Net Income $ 138 $ 1,742
Non-GAAP adjustments: Cost of revenue A 19 53 Product development B
2 17 Marketing and administrative C 12 31 Amortization of
intangibles D 32 126 Restructuring and other, net E 9 32 Gain on
litigation settlement, net F — (620 ) Other income (expense), net G
17 (71 ) Provision for (benefit from) income taxes H 21 202
Non-GAAP net income $ 250 $ 1,512
Reconciliation of GAAP Diluted Net Income Per Share: GAAP $ 0.43 $
5.26 Non-GAAP $ 0.77 $ 4.57 Shares used in diluted net income per
share calculation 323 331
A For the three months and fiscal year ended July 3,
2015, Cost of revenue on a GAAP basis totaled $2.2 billion and $9.9
billion, respectively, while non-GAAP Cost of revenue, which
excludes the impact of certain adjustments, was $2.1 billion and
$9.9 billion, respectively. These non-GAAP adjustments include the
write off of certain discontinued inventory and the amortization of
intangibles associated with acquisitions and other acquisition
related expenses.
B For the three months and fiscal year ended July 3,
2015, Product development expense has been adjusted on a non-GAAP
basis to exclude the impact of integration costs associated
with acquisitions.
C For the three months and fiscal year ended July 3,
2015, Marketing and administrative expense has been adjusted on a
non-GAAP basis primarily to exclude the write off of certain fixed
assets and the impact of integration costs associated with
acquisitions.
D For the three months and fiscal year ended July 3,
2015, Amortization of intangibles primarily related to our
acquisitions has been excluded on a non-GAAP basis.
E For the three months and fiscal year ended July 3,
2015, Restructuring and other, net, has been adjusted on a non-GAAP
basis 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.
F For the fiscal year ended July 3, 2015, Gain on
arbitration award, net, has been adjusted on a non-GAAP basis to
exclude the final award amount of $630 million, less litigation and
other related costs of $10 million, related to the arbitration
award in the Company’s case against Western Digital for the
misappropriation of the Company’s trade secrets.
G For the three months ended July 3, 2015, Other income
(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, partially offset by gains recognized upon sales
of certain strategic investments.
For the fiscal year ended July 3, 2015, Other income (expense),
net, has been adjusted on a non-GAAP basis primarily to exclude the
net impact of losses recognized on the early redemption and
repurchase of debt and impairment, partially offset by partial
payment of $143 million for interest accrued on the final
arbitration award amount in the Company’s case against Western
Digital and gains recognized upon sales of certain strategic
investments.
H For the three months ended July 3, 2015, Provision for
(benefit from) income taxes, has been adjusted on a non-GAAP basis
to exclude the net tax expense associated with establishing a
valuation allowance on U.K. deferred tax assets due to cumulative
book losses incurred in the Company’s U.K. subsidiaries.
For the fiscal year ended July 3, 2015, Provision for (benefit
from) income taxes, has been adjusted on a non-GAAP basis to
exclude the net tax expense associated with establishing a
valuation allowance on U.K. deferred tax assets due to cumulative
book losses incurred in the Company's U.K. subsidiaries and the net
tax expense associated with the final audit assessment from the
Jiangsu Province State Tax Bureau of the People’s Republic of China
for changes to the Company’s tax filings for the calendar years
2007 through 2013.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150731005098/en/
Seagate Technology plcKimberly Myers,
971-246-8211kimberly.myers@seagate.com
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