Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the first quarter of fiscal
year 2016 ended October 2, 2015. For the first quarter, the Company
reported revenue of approximately $2.9 billion, gross margin of
23.6%, net income of $34 million and diluted earnings per share of
$0.11. On a non-GAAP basis, which excludes the net impact of
certain items, Seagate reported gross margin of 24.2%, net income
of $165 million and diluted earnings per share of $0.54. For a
detailed reconciliation of GAAP to non-GAAP results, see the
accompanying financial tables.
During the first quarter, the Company generated approximately
$824 million in operating cash flow, paid cash dividends of $163
million and repurchased approximately 20 million ordinary shares
for $983 million. There were 299 million ordinary shares issued and
outstanding as of the end of the quarter. Cash, cash equivalents,
and short-term investments totaled approximately $1.9 billion at
the end of the quarter.
“During the quarter, we made solid progress against our core
initiatives to bolster our product portfolio, contain costs and
return capital to shareholders,” said Steve Luczo, Seagate’s
chairman and chief executive officer. “While lower than planned
nearline enterprise demand temporarily impacted our financial
results, we are pleased with the momentum we have across our
products, which will be further supported by the newly acquired
assets of Dot Hill and our ability to now completely integrate the
Samsung hard drive business. As we look forward, we are focused on
delivering storage solutions for a significant range of existing,
growing and emerging areas, and believe we have the right strategy
and portfolio to deliver value to 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
As previously disclosed on October 21, 2015, the Board has
approved a quarterly cash dividend of $0.63 per share, which will
be payable on November 20, 2015 to shareholders of record as of the
close of business on November 6, 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 Investors website at
www.seagate.com/investors. During today's webcast, the Company will
provide an outlook for its second 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
Seagate creates space for the human experience by innovating how
data is stored, shared and used. Learn more
at www.seagate.com. Follow Seagate
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 our plans,
strategies and prospects and estimates of industry growth for the
fiscal quarter ending January 1, 2016 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; 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 our 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; 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 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 11, 2015, 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 is not part of this press
release.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions) (Unaudited) October 2,
July 3, 2015 2015 (a) ASSETS Current
assets: Cash and cash equivalents $ 1,915 $ 2,479 Short-term
investments 6 6 Accounts receivable, net 1,522 1,735 Inventories
1,098 993 Deferred income taxes 120 122 Other current assets 221
233 Total current assets 4,882 5,568 Property, equipment and
leasehold improvements, net 2,247 2,278 Goodwill 874 874 Other
intangible assets, net 329 370 Deferred income taxes 497 496 Other
assets, net 250 259 Total Assets $ 9,079 $ 9,845
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 1,890 $ 1,540 Accrued employee compensation 196 256 Accrued
warranty 124 135 Accrued expenses 508 412 Total current
liabilities 2,718 2,343 Long-term accrued warranty 101 113
Long-term accrued income taxes 26 33 Other non-current liabilities
172 183 Long-term debt 4,140 4,155 Total Liabilities 7,157
6,827 Equity: Total Equity 1,922 3,018 Total
Liabilities and Equity $ 9,079 $ 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 October 2, October 3,
2015 2014 Revenue $ 2,925 $ 3,785 Cost of
revenue 2,236 2,734 Product development 328 342 Marketing and
administrative 182 216 Amortization of intangibles 34 31
Restructuring and other, net 59 6 Total operating
expenses 2,839 3,329 Income from operations 86
456 Interest income 1 1 Interest expense (47 ) (54 ) Other,
net (9 ) (11 ) Other income (expense), net (55 ) (64 )
Income before income taxes 31 392 (Benefit from) provision for
income taxes (3 ) 11 Net income $ 34 $ 381
Net income per share: Basic $ 0.11 $ 1.17 Diluted 0.11 1.13
Number of shares used in per share calculations: Basic 302 327
Diluted 308 337 Cash dividends declared per Seagate
Technology plc ordinary share $ 0.54 $ 0.43
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In millions)
(Unaudited) For the three months ended
October 2, October 3, 2015
2014 OPERATING ACTIVITIES Net income $ 34 $ 381
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 208 218
Share-based compensation 33 42 Deferred income taxes — 2 Loss on
redemption and repurchase of debt — 14 Other non-cash operating
activities, net 10 (2 ) Changes in operating assets and
liabilities: Accounts receivable, net 213 (179 ) Inventories (105 )
(49 ) Accounts payable 426 183 Accrued employee compensation (60 )
(51 ) Accrued expenses, income taxes and warranty 63 29 Vendor
non-trade receivables 16 21 Other assets and liabilities (14 ) (7 )
Net cash provided by operating activities 824 602
INVESTING ACTIVITIES Acquisition of property, equipment and
leasehold improvements (209 ) (172 ) Purchases of short-term
investments — (5 ) Maturities of short-term investments — 14 Cash
used in acquisition of business — (450 ) Other investing
activities, net — (6 ) Net cash used in investing activities
(209 ) (619 )
FINANCING ACTIVITIES Redemption and repurchase
of debt (15 ) (124 ) Taxes paid related to net share settlement of
equity awards (53 ) — Repurchases of ordinary shares (983 ) (183 )
Dividends to shareholders (163 ) (140 ) Proceeds from issuance of
ordinary shares under employee stock plans 40 39 Other financing
activities, net (4 ) (12 ) Net cash used in financing activities
(1,178 ) (420 ) Effect of foreign currency exchange rate changes on
cash and cash equivalents (1 ) (7 ) (Decrease) increase in cash and
cash equivalents (564 ) (444 ) Cash and cash equivalents at the
beginning of the period 2,479 2,634 Cash and cash
equivalents at the end of the period $ 1,915 $ 2,190
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
revenue, 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 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 Three Months Ended October 2, 2015 GAAP net
income $ 34 Non-GAAP adjustments: Revenue A 2 Cost of revenue B 17
Product development C 6 Marketing and administrative D 4
Amortization of intangibles E 33 Restructuring and other, net F 59
Other expense, net G 10 Non-GAAP net income $ 165 Diluted
net income per share: GAAP $ 0.11 Non-GAAP $ 0.54 Shares
used in diluted net income per share calculation 308
A
For the three months ended October 2, 2015, Revenue
has been adjusted on a non-GAAP basis to exclude sales return
provision for certain products that will be discontinued.
B
For the three months ended October 2, 2015, Cost of revenue has
been adjusted on a non-GAAP basis to exclude amortization of
intangibles associated with acquisitions, other acquisition related
expenses, and write off of certain discontinued inventory and
assets.
C
For the three months ended October 2, 2015, 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 months ended October 2, 2015, Marketing and
administrative expenses have been adjusted on a non-GAAP basis to
exclude the write off of certain fixed assets and the impact of
integration costs associated with acquisitions.
E
For the three months ended October 2, 2015, Amortization of
intangibles primarily related to our acquisitions has been excluded
on a non-GAAP basis.
F
For the three months ended October 2, 2015, 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 the three months ended October 2, 2015, Other income (expense),
net has been adjusted on a non-GAAP basis to exclude the impairment
of a certain strategic investment.
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version on businesswire.com: http://www.businesswire.com/news/home/20151030005182/en/
SEAGATEEric DeRitis 408-658-1561eric.deritis@seagate.com
Seagate Technology (NASDAQ:STX)
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