Seagate Technology plc (NASDAQ: STX) (the “Company” or
“Seagate”) today reported financial results for the quarter and
fiscal year ended July 1, 2016. For the fourth quarter, the Company
reported revenue of $2.7 billion, gross margin of 24.9%, net income
of $70 million and diluted earnings per share of $0.23. On a
non-GAAP basis, which excludes the net impact of certain items,
Seagate reported gross margin of 25.8%, net income of $207 million
and diluted earnings per share of $0.69.
During the fourth quarter, the Company generated $269 million in
operating cash flow and paid cash dividends of $188 million.
For the fiscal year ended July 1, 2016, the Company reported
revenue of $11.2 billion, gross margin of 23.4%, net income of $248
million and diluted earnings per share of $0.82. On a non-GAAP
basis, Seagate reported gross margin of 24.6%, net income of $684
million and diluted earnings per share of $2.26.
In fiscal year 2016, the Company generated approximately $1.7
billion in operating cash flow and paid cash dividends of $727
million. Cash, cash equivalents, restricted cash, and short-term
investments totaled approximately $1.1 billion at the end of the
fiscal year. There were 299 million ordinary shares issued and
outstanding as of the end of the fiscal year.
“I am proud of our resilient operational performance and
financial discipline through the dynamic technology shifts taking
place in our industry,” said Steve Luczo, Seagate’s chairman and
chief executive officer. “I am confident of the Company’s long-term
sustainability and prosperity in a world of significant data
creation and high-capacity storage demand driven by emerging
technologies, and cloud infrastructure deployments. We believe we
have the leading storage technology product portfolio, technology
roadmap and operational leverage to ensure we are well-positioned
for long-term success and shareholder value.”
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 of the Company (the “Board”) has approved
a quarterly cash dividend of $0.63 per share, which will be payable
on October 5, 2016 to shareholders of record as of the close of
business on September 21, 2016. 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 2017,
including key underlying assumptions.
An archived audio webcast of this event will be available
shortly following the event conclusion.
About Seagate
To learn more about the Company’s products and services, visit
www.seagate.com and follow us 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 the
Company’s plans, strategies and prospects and estimates of
industry growth for the fiscal quarter ending September 30, 2016
and the fiscal year ending June 30, 2017 and beyond. 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 report 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; the Company’s ability to
achieve projected cost savings in connection with restructuring
plans; possible excess industry supply with respect to particular
disk drive products; disruptions to its 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;
currency fluctuations that may impact the Company’s margins and
international sales; cyber-attacks or other data breaches that
disrupt its operations or results in the dissemination of
proprietary or confidential information; 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 report 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 report 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)
July
1, 2016
July 3, 2015(a)
ASSETS Current assets: Cash and cash equivalents $ 1,125 $
2,479 Short-term investments 6 6 Accounts receivable, net 1,318
1,735 Inventories 868 993 Deferred income taxes — 122 Other current
assets 216 233 Total current assets 3,533 5,568 Property,
equipment and leasehold improvements, net 2,160 2,278 Goodwill
1,237 874 Other intangible assets, net 448 370 Deferred income
taxes 616 496 Other assets, net 258 259 Total Assets $ 8,252
$ 9,845
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 1,517 $ 1,540 Accrued employee compensation 184
256 Accrued warranty 104 135 Accrued expenses 444 412 Total
current liabilities 2,249 2,343 Long-term accrued warranty 102 113
Long-term accrued income taxes 14 33 Other non-current liabilities
164 183 Long-term debt, less current portion 4,130 4,155
Total Liabilities 6,659 6,827 Equity: Total Equity 1,593
3,018 Total Liabilities and Equity $ 8,252 $ 9,845
(a) The information in this column 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 For the Fiscal Years
Ended July 1, 2016 July 3,
2015 July 1, 2016
July 3, 2015(a)
Revenue $ 2,654 $ 2,927 $ 11,160 $ 13,739 Cost of revenue
1,992 2,151 8,545 9,930 Product development 307 324 1,237 1,353
Marketing and administrative 143 203 635 857 Amortization of
intangibles 29 34 123 129 Restructuring and other, net 80 9 175 32
Gain on arbitration award, net — — — (620 )
Total operating expenses 2,551 2,721 10,715
11,681 Income from operations 103 206 445 2,058
Interest income 1 2 3 6 Interest expense (51 ) (55 ) (193 )
(207 ) Other, net 1 (4 ) 19 113 Other income
(expense), net (49 ) (57 ) (171 ) (88 ) Income before income
taxes 54 149 274 1,970 Provision for (benefit from) income taxes
(16 ) 11 26 228 Net income $ 70 $ 138
$ 248 $ 1,742 Net income per share:
Basic $ 0.23 $ 0.44 $ 0.83 $ 5.38 Diluted 0.23 0.43 0.82 5.26
Number of shares used in per share calculations: Basic 299 316 299
324 Diluted 300 323 302 331 Cash dividends declared per
share $ 0.63 $ 0.54 $ 2.43 $ 2.05
(a) The information in this column was derived from the
Company’s audited Consolidated Statement of Operations for the year
ended July 3, 2015.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
For the Fiscal Years Ended
July
1, 2016
July 3, 2015(a)
OPERATING ACTIVITIES Net income $ 248 $ 1,742 Adjustments to
reconcile net income to net cash from operating activities:
Depreciation and amortization 815 841 Share-based compensation 120
137 (Gain) Loss on redemption and repurchase of debt (3 ) 74 Loss
on sale of property and equipment — 2 Impairment of other
long-lived assets 26 — Deferred income taxes (2 ) 2 Other non-cash
operating activities, net 12 (9 ) Changes in operating assets and
liabilities: Restricted cash and investments — (3 ) Accounts
receivable, net 464 (2 ) Inventories 145 29 Accounts payable (24 )
(58 ) Accrued employee compensation (78 ) (40 ) Accrued expenses,
income taxes and warranty (42 ) (112 ) Vendor non-trade receivables
— 47 Other assets and liabilities (1 ) (3 ) Net cash provided by
operating activities 1,680 2,647
INVESTING
ACTIVITIES Acquisition of property, equipment and leasehold
improvements (587 ) (747 ) Proceeds from the sale of strategic
investments 1 — Purchases of short-term investments — (5 ) Sales of
short-term investments — 4 Maturities of short-term investments —
19 Cash used in acquisition of businesses, net of cash acquired
(634 ) (453 ) Other investing activities, net 9 (105 ) Net
cash used in investing activities (1,211 ) (1,287 )
FINANCING
ACTIVITIES Net proceeds from issuance of long-term debt — 1,196
Redemption and repurchase of debt (22 ) (1,026 ) Proceeds from
issuance of ordinary shares under employee stock plans 79 98
Dividends to shareholders (727 ) (664 ) Taxes paid related to net
share settlement of equity awards (56 ) — Repurchases of ordinary
shares (1,090 ) (1,087 ) Other financing activities, net (4 ) (12 )
Net cash used in financing activities (1,820 ) (1,495 ) Effect of
foreign currency exchange rate changes on cash and cash equivalents
(3 ) (20 ) Decrease in cash and cash equivalents (1,354 ) (155 )
Cash and cash equivalents at the beginning of the year 2,479
2,634 Cash and cash equivalents at the end of the year $
1,125 $ 2,479
(a) The information in this column was derived from the
Company’s audited Consolidated Statement of Cash Flows for the year
ended July 3, 2015.
Use of non-GAAP financial information
The Company uses non-GAAP measures of gross margin, net income
and diluted earnings per share which are adjusted from results
based on GAAP to exclude certain expenses, gains and losses. These
non-GAAP financial measures may be 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, gains and losses that it 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 its
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 1, 2016
For the Fiscal
Year Ended
July 1, 2016
Reconciliation of GAAP Net Income: GAAP Net Income $ 70 $ 248
Non-GAAP adjustments: Revenue A (1 ) (4 ) Cost of revenue B 23 130
Product development C 5 16 Marketing and administrative D 3 27
Amortization of intangibles E 28 117 Restructuring and other, net F
80 175 Other income (expense), net G (1 ) (25 ) Non-GAAP net income
$ 207 $ 684 Reconciliation of GAAP Diluted Net
Income Per Share: GAAP $ 0.23 $ 0.82 Non-GAAP $ 0.69 $ 2.26 Shares
used in diluted net income per share calculation 300 302
A For the three months and fiscal year ended July 1,
2016, Revenue has been adjusted on a non-GAAP basis to exclude
revenue associated with our disposed data services business and
sales return provision for certain products that will be
discontinued.
B For the three months and fiscal year ended July 1,
2016, Cost of revenue on a GAAP basis totaled $2.0 billion and $8.5
billion, respectively, while non-GAAP Cost of revenue, which
excludes the impact of certain adjustments, was $2.0 billion and
$8.4 billion, respectively. These non-GAAP adjustments exclude
amortization of intangibles associated with acquisitions,
recognition of certain terminated contracts and write down of
inventory, other acquisition related expenses, and write
off of certain fixed assets.
C For the three months and fiscal year ended July 1,
2016, Product development expense has been adjusted on a non-GAAP
basis to exclude the impact of integration costs associated with
acquisitions and write off of certain fixed assets.
D For the three months and fiscal year ended July 1,
2016, 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, and marketing and administrative expenses of our
disposed data services business.
E For the three months and fiscal year ended July 1,
2016, Amortization of intangibles primarily related to our
acquisitions has been excluded on a non-GAAP basis.
F For the three months and fiscal year ended July 1,
2016, Restructuring and other, net, has been adjusted on a non-GAAP
basis primarily related to a reduction in our workforce as a result
of our ongoing focus on cost efficiencies in all areas of our
business.
G For the three months and fiscal year ended July 1,
2016, Other income (expense), net, has been adjusted on a non-GAAP
basis to exclude the receipt of interest of $33 million on the
final arbitration award amount in the Company’s case against
Western Digital, the impact of net gains recognized on the early
repurchase of debt, and the impairment of certain strategic
investments.
View source version on
businesswire.com: http://www.businesswire.com/news/home/20160802005685/en/
Seagate Technology plcEric DeRitis,
408-658-1561eric.deritis@seagate.com
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