01Nov, 2012

Seagate Technology Reports Fiscal First Quarter 2013 Financial Results

Seagate_Logo_1JAKARTA– November 1, 2012 – Seagate Technology plc (NASDAQ: STX) today reported financial results for the quarter ended September 28, 2012. During the first quarter, on a GAAP basis the company reported revenue of approximately $3.7 billion, gross margin of 28.4%, net income of $582 million and diluted earnings per share of $1.42. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported gross margin of 29.0%, net income of $594 million, and diluted earnings per share of $1.45.

In the September quarter, Seagate generated approximately $1.1 billion in cash from operations, paid cash dividends of $127 million and redeemed approximately 20.5 million ordinary shares or approximately 5% of ordinary shares at the beginning of the fiscal quarter for approximately $669 million. During the nine months ended September 28, 2012, Seagate redeemed approximately 109 million ordinary shares, resulting in an approximate reduction of 17% of the Company’s share count. Cash, cash equivalents, restricted cash, and short-term investments totaled approximately $2.5 billion at the end of the first quarter, a sequential increase of approximately $259 million.

“Seagate continues to adapt to dynamic industry conditions, managing inventory and demand with our customers while maintaining investments in our technology portfolio that will position us for continued success in the marketplace over the long-term,” said Steve Luczo, Seagate chairman and chief executive officer. “Returning value to shareholders remains a top priority with over 70% of our operating cash flow going towards share redemptions and dividends this quarter.”

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 rather it is available in the investors section of seagate.com.

Quarterly Cash Dividend

The Board of Directors has approved a quarterly cash dividend of $0.32 per share, which will be payable on November 29, 2012 to shareholders of record as of the close of business on November 14, 2012. 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 5:30 a.m. Pacific Time on its Investor Relations website at www.seagate.com/investors. During today’s webcast, the company will provide an outlook for its second fiscal quarter of 2013 including key underlying assumptions.

Replay

A replay will be available beginning today at approximately 10:00 a.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.

SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

 

September 28,
2012

 

June 29, 2012 (a)

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,894

 

 

$

1,707

 

Short-term investments

476

 

 

411

 

Restricted cash and investments

100

 

 

93

 

Accounts receivable, net

1,684

 

 

2,319

 

Inventories

845

 

 

909

 

Deferred income taxes

112

 

 

104

 

Other current assets

638

 

 

767

 

Total current assets

5,749

 

 

6,310

 

Property, equipment and leasehold improvements, net

2,243

 

 

2,284

 

Goodwill

475

 

 

463

 

Other intangible assets

517

 

 

506

 

Deferred income taxes

403

 

 

396

 

Other assets, net

135

 

 

147

 

Total Assets

$

9,522

 

 

$

10,106

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,808

 

 

$

2,286

 

Accrued employee compensation

217

 

 

344

 

Accrued warranty

209

 

 

235

 

Accrued expenses

516

 

 

531

 

Current portion of long-term debt

3

 

 

 

Total current liabilities

2,753

 

 

3,396

 

Long-term accrued warranty

128

 

 

128

 

Long-term accrued income taxes

87

 

 

84

 

Other non-current liabilities

152

 

 

138

 

Long-term debt, less current portion

2,867

 

 

2,863

 

Total Liabilities

5,987

 

 

6,609

 

 

 

 

 

Equity:

 

 

 

Total Equity

3,535

 

 

3,497

 

Total Liabilities and Equity

$

9,522

 

 

$

10,106

 

 

  1. 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

 

September 28,
2012

 

September 30,
2011

Revenue

$

3,732

 

 

$

2,811

 

 

 

 

 

Cost of revenue

2,671

 

 

2,262

 

Product development

268

 

 

208

 

Marketing and administrative

150

 

 

105

 

Amortization of intangibles

19

 

 

 

Restructuring and other, net

 

 

 

Total operating expenses

3,108

 

 

2,575

 

 

 

 

 

Income from operations

624

 

 

236

 

 

 

 

 

Interest income

2

 

 

1

 

Interest expense

(55

)

 

(69

)

Other, net

29

 

 

(16

)

Other expense, net

(24

)

 

(84

)

 

 

 

 

Income before income taxes

600

 

 

152

 

Provision for income taxes

18

 

 

12

 

Net income

582

 

 

140

 

Less: Net income attributable to noncontrolling interest

 

 

 

Net income attributable to Seagate Technology plc

$

582

 

 

$

140

 

 

 

 

 

Net income per share attributable to Seagate Technology plc ordinary shareholders:

 

 

 

Basic

$

1.48

 

 

$

0.33

 

Diluted

1.42

 

 

0.32

 

Number of shares used in per share calculations:

 

 

 

Basic

394

 

 

421

 

Diluted

409

 

 

433

 

 

 

 

 

Cash dividends declared per Seagate Technology plc ordinary share

$

0.32

 

 

$

0.18

 

 


 

SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

For the Three Months Ended

 

September 28,
2012

 

September 30,
2011

OPERATING ACTIVITIES

 

 

 

Net income

$

582

 

 

$

140

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

Depreciation and amortization

212

 

 

182

 

Share-based compensation

17

 

 

12

 

Loss on redemption of debt

 

 

5

 

Gain on sale of property and equipment

(6

)

 

(10

)

Gain on sale of strategic investments

(33

)

 

 

Deferred income taxes

(5

)

 

 

Other non-cash operating activities, net

 

 

10

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

648

 

 

49

 

Inventories

110

 

 

47

 

Accounts payable

(373

)

 

(298

)

Accrued employee compensation

(132

)

 

(57

)

Accrued expenses, income taxes and warranty

(57

)

 

12

 

Other assets and liabilities

169

 

 

68

 

Net cash provided by operating activities

1,132

 

 

160

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

Acquisition of property, equipment and leasehold improvements

(263

)

 

(218

)

Proceeds from the sale of property and equipment

4

 

 

8

 

Proceeds from the sale of equity investments

41

 

 

 

Purchases of short-term investments

(74

)

 

(254

)

Sales of short-term investments

64

 

 

214

 

Maturities of short-term investments

5

 

 

87

 

Cash used in acquisition of LaCie S.A., net of cash acquired

(36

)

 

 

Change in restricted cash and investments

(6

)

 

14

 

Net cash used in investing activities

(265

)

 

(149

)

 

 

 

 

FINANCING ACTIVITIES

 

 

 

Repayments of long-term debt and capital lease obligations

 

 

(34

)

Repurchases of ordinary shares

(639

)

 

(128

)

Escrow deposit for acquisition of noncontrolling shares of LaCie S.A.

(72

)

 

 

Proceeds from issuance of ordinary shares under employee stock plans

157

 

 

26

 

Dividends to shareholders

(127

)

 

(78

)

Net cash used in by financing activities

(681

)

 

(214

)

 

 

 

 

Effect of foreign currency exchange rate changes on cash and cash equivalents

1

 

 

 

Increase (decrease) in cash and cash equivalents

187

 

 

(203

)

Cash and cash equivalents at the beginning of the period

1,707

 

 

2,677

 

Cash and cash equivalents at the end of the period

$

1,894

 

 

$

2,474

 

 

Use of non-GAAP financial information

To supplement the preliminary financial information presented in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP measures of net income, diluted EPS and gross margin which are adjusted from results based on GAAP to exclude certain expenses. These non-GAAP financial measures are 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 that the Company 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 the Company’s 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

 

 

September 28, 2012

 

September 30, 2011

 

 

 

 

 

GAAP net income

 

$

582

 

 

$

140

 

Non-GAAP adjustments:

 

 

 

 

Cost of revenue

A

20

 

 

 

Product development

B

4

 

 

 

Marketing and administrative

B

4

 

 

(6

)

Amortization of intangibles

C

19

 

 

 

Other expense, net

D

(35

)

 

12

 

Non-GAAP net income

 

$

594

 

 

$

146

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

GAAP

 

$

1.42

 

 

$

0.32

 

 

 

 

 

 

Non-GAAP

 

$

1.45

 

 

$

0.34

 

 

 

 

 

 

Shares used in diluted net income per share calculation

 

409

 

 

433

 

 

A For the three months ended September 28, 2012, Cost of revenue on a GAAP basis totaled $2,671 million, while non-GAAP Cost of revenue was $2,651 million. The non-GAAP adjustments include amortization expense of other intangible assets, and other acquisition related expenses related to our December 2011 acquisition of Samsung Electronics Co., Ltd’s hard disk drive business (“Samsung HDD business”) and the August 2012 acquisition of LaCie S.A (“LaCie”).

B For the three months ended September 28, 2012, Product development and Marketing and administrative expenses have been adjusted on a non-GAAP basis to exclude the net impact of acquisition and integration costs associated with our acquisitions of Samsung’s HDD business, and LaCie.

For the three months ended September 30, 2011, non-GAAP adjustments to Product development and Marketing and administrative expenses reflect the net impact from the reversal of previously accrued litigation costs and a gain on the sale of a building, offset by costs associated with the previously announced transaction with Samsung and an adjustment to the expected exit costs related to certain sub-leased facilities.

C For the three months ended September 28, 2012, Amortization of intangibles related to the acquisitions of Samsung’s HDD business and LaCie have been excluded on a non-GAAP basis.

D For the three months ended September 28, 2012, Other expense, net on a GAAP basis was $24 million, while non-GAAP Other expense, net, was $59 million. The non-GAAP adjustment includes a gain recognized upon sales of certain strategic investments.

For the three months ended September 30, 2011, non-GAAP adjustments to Other expense, net reflect a loss related to the early retirement of the principal amount of our 10% secured notes and a write-down of an equity investment.

 

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