Seagate Technology plc (NASDAQ:STX) (the “Company” or “Seagate”)
today reported financial results for the second quarter of fiscal
year 2016 ended January 1, 2016. For the second quarter, the
Company reported revenue of approximately $3.0 billion, gross
margin of 24.8%, net income of $165 million and diluted earnings
per share of $0.55. On a non-GAAP basis, which excludes the net
impact of certain items, Seagate reported gross margin of 25.6%,
net income of $246 million and diluted earnings per share of $0.82.
For a detailed reconciliation of GAAP to non-GAAP results, see the
accompanying financial tables.
During the second quarter, the Company generated approximately
$382 million in operating cash flow, paid cash dividends of $188
million and repurchased approximately 2.9 million ordinary shares
for $107 million. There were 296 million ordinary shares issued and
outstanding as of the end of the quarter. Cash, cash equivalents
and short-term investments totaled approximately $1.3 billion at
the end of the quarter.
“Our results this quarter reflect the achievement of many of our
operational goals, including improved profitability in our product
portfolio and effective cost controls,” said Steve Luczo, Seagate’s
chairman and chief executive officer. “Seagate sits in a favorable
position as a leading storage solutions provider and we continue to
believe that the long-term prospects for storage growth are strong.
We are confident we have the right strategy and portfolio to
continue delivering market-leading value to customers and
generating strong returns for our investors through financial
discipline.”
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 Company’s Board has approved a quarterly cash dividend of
$0.63 per share, which will be payable on February 23, 2016 to
shareholders of record as of the close of business on February 9,
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 Investors website at
www.seagate.com/investors. During today's webcast, the Company will
provide an outlook for its third 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
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 our plans,
strategies and prospects and estimates of industry growth for the
fiscal quarter ending April 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) January 1, July 3,
2016 2015 (a) ASSETS Current assets: Cash and
cash equivalents $ 1,258 $ 2,479 Short-term investments 6 6
Accounts receivable, net 1,398 1,735 Inventories 1,046 993 Deferred
income taxes — 122 Other current assets 223 233 Total
current assets 3,931 5,568 Property, equipment and leasehold
improvements, net 2,230 2,278 Goodwill 1,238 874 Other intangible
assets, net 535 370 Deferred income taxes 617 496 Other assets, net
245 259 Total Assets $ 8,796 $ 9,845
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 1,759 $
1,540 Accrued employee compensation 175 256 Accrued warranty 119
135 Accrued expenses 486 412 Total current
liabilities 2,539 2,343 Long-term accrued warranty 104 113
Long-term accrued income taxes 27 33 Other non-current liabilities
165 183 Long-term debt 4,140 4,155 Total Liabilities
6,975 6,827 Equity: Total Equity 1,821 3,018
Total Liabilities and Equity $ 8,796 $ 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 For the Six Months Ended
January 1, January 2, January 1,
January 2, 2016 2015 2016
2015 Revenue $ 2,986 $ 3,696 $ 5,911 $ 7,481 Cost of
revenue 2,245 2,669 4,482 5,403 Product development 304 341 632 683
Marketing and administrative 160 218 341 434 Amortization of
intangibles 31 32 65 62 Restructuring and other, net 17 3 76 10
Gain on arbitration award, net — (620 )
— (620 ) Total operating expenses 2,757
2,643 5,596 5,972
Income from operations 229 1,053 315 1,509 Interest income 1
1 2 3 Interest expense (48 ) (50 ) (95 ) (104 ) Other, net
(2 ) 122 (11 ) 109 Other
(expense) income, net (49 ) 73 (104 )
8 Income before income taxes 180 1,126 211
1,517 Provision for income taxes 15 193
13 203 Net income $ 165 $ 933
$ 198 $ 1,314 Net income per share:
Basic $ 0.55 $ 2.84 $ 0.66 $ 4.02 Diluted 0.55 2.78 0.65 3.91
Number of shares used in per share calculations: Basic 299 328 301
327 Diluted 301 336 304 336 Cash dividends declared per
ordinary share $ 0.63 $ 0.54 $ 1.17 $ 0.97
SEAGATE TECHNOLOGY PLC CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In millions) (Unaudited)
For the Six Months Ended January 1,
January 2, 2016 2015 OPERATING
ACTIVITIES Net income $ 198 $ 1,314 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 417 426 Share-based compensation 65
73 Deferred income taxes — (4 ) Loss on redemption and repurchase
of debt — 52 Other non-cash operating activities, net 11 3 Changes
in operating assets and liabilities: Accounts receivable, net 384
(99 ) Inventories (32 ) (107 ) Accounts payable 257 209 Accrued
employee compensation (87 ) (24 ) Accrued expenses, income taxes
and warranty (5 ) 167 Vendor non-trade receivables 10 28 Other
assets and liabilities (12 ) 7 Net cash
provided by operating activities 1,206 2,045
INVESTING ACTIVITIES Acquisition of property,
equipment and leasehold improvements (346 ) (387 ) Purchases of
short-term investments — (5 ) Sales of short-term investments — 4
Maturities of short-term investments — 19 Cash used in acquisition
of business, net of cash acquired (634 ) (450 ) Other investing
activities, net — (34 ) Net cash used in
investing activities (980 ) (853 )
FINANCING
ACTIVITIES Redemption and repurchase of debt (15 ) (535 ) Net
proceeds from issuance of long-term debt — 498 Taxes paid related
to net share settlement of equity awards (54 ) — Repurchases of
ordinary shares (1,061 ) (201 ) Dividends to shareholders (351 )
(317 ) Proceeds from issuance of ordinary shares under employee
stock plans 41 49 Other financing activities, net (4 )
(12 ) Net cash used in financing activities (1,444 )
(518 ) Effect of foreign currency exchange rate changes on
cash and cash equivalents (3 ) (12 ) (Decrease)
increase in cash and cash equivalents (1,221 ) 662 Cash and cash
equivalents at the beginning of the period 2,479
2,634 Cash and cash equivalents at the end of the
period $ 1,258 $ 3,296
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 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 For the Six Months Ended January 1,
Ended January 1, 2016 2016 GAAP
net income $ 165 $ 198 Non-GAAP adjustments: Revenue A (1 ) 1 Cost
of revenue B 23 40 Product development C 3 9 Marketing and
administrative D 10 14 Amortization of intangibles E 29 62
Restructuring and other, net F 17 76 Other expense, net G —
10 Non-GAAP net income $ 246
$ 410 Diluted net income per share: GAAP $
0.55 $ 0.65 Non-GAAP $ 0.82 $ 1.35 Shares used in diluted
net income per share calculation 301 304 A For the
three and six months ended January 1, 2016, Revenue has been
adjusted on a non-GAAP basis for changes in the sales return
provision for certain products that will be discontinued. B
For the three and six months ended January 1, 2016, Cost of revenue
has been adjusted on a non-GAAP basis to exclude amortization of
intangibles associated with acquisitions, and write off of certain
fixed assets and discontinued inventory. C For the three and
six months ended January 1, 2016, 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 and six months ended January 1, 2016, 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 and six months ended January 1, 2016, Amortization of
intangibles primarily related to our acquisitions has been excluded
on a non-GAAP basis. F For the three and six months ended
January 1, 2016, 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 six months ended January 1,
2016, Other expense, net has been adjusted on a non-GAAP basis to
exclude the impairment of a certain strategic investment.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160129005251/en/
SEAGATEEric DeRitis, 408-658-1561eric.deritis@seagate.com
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