SEAGATE TECHNOLOGY REPORTS FISCAL THIRD QUARTER 2015 FINANCIAL RESULTS
BANGKOK, Thailand – April 21, 2015 – Seagate Technology plc (NASDAQ: STX) (the “Company” or “Seagate”) today reported financial results for the third quarter of fiscal year 2015 ended April 3, 2015. For the third quarter, the Company reported revenue of approximately $3.3 billion, gross margin of 28.7%, net income of $291 million and diluted earnings per share of $0.88. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported gross margin of 28.9%, net income of $357 million and diluted earnings per share of $1.08. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial tables.
During the third quarter, the Company generated approximately $374 million in operating cash flow, paid cash dividends of $176 million and repurchased approximately 12 million ordinary shares for $706 million. Year to date, the Company has returned approximately $1.4 billion to shareholders in dividend and stock redemptions. Cash, cash equivalents, restricted cash, and short-term investments totaled approximately $2.6 billion at the end of the quarter.
“In light of dynamic market conditions this quarter we are quite satisfied with our operational performance and ability to return value to shareholders,” said Steve Luczo, Seagate’s chairman and chief executive officer. “Near-term macro uncertainty is affecting certain areas of our addressable market however we remain optimistic that market demand for exabytes of storage will continue to increase over the long-term. Looking ahead, we are focused on aligning our storage technology portfolio effectively to capitalize on market growth opportunities, demonstrating operating profitability and returning 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
The Board of Directors has approved a quarterly cash dividend of $0.54 per share, which will be payable on May 15, 2015 to shareholders of record as of the close of business on May 1, 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.
Seagate management will hold a public webcast on April 17 at 6:00 a.m. Pacific Time that can be accessed on its Investors website at www.seagate.com/investors. During the webcast, the Company provided an outlook for its fourth fiscal quarter of 2015 including key underlying assumptions.
A replay is available at http://www.seagate.com/investors/.
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, Google+ and subscribe to our blog.
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 July 3, 2015 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 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 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 is not part of this press release.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
|Cash and cash equivalents||$||2,604||$||2,634|
|Restricted cash and investments||4||4|
|Accounts receivable, net||1,769||1,729|
|Deferred income taxes||121||126|
|Other current assets||244||279|
|Total current assets||5,831||5,777|
|Property, equipment and leasehold improvements, net||2,182||2,136|
|Other intangible assets, net||410||359|
|Deferred income taxes||499||499|
|Other assets, net||243||184|
|LIABILITIES AND EQUITY|
|Accrued employee compensation||256||296|
|Current portion of long-term debt||474||—|
|Total current liabilities||3,043||2,398|
|Long-term accrued warranty||126||125|
|Long-term accrued income taxes||34||90|
|Other non-current liabilities||185||127|
|Total Liabilities and Equity||$||10,036||$||9,492|
(a) The information as of June 27, 2014 was derived from the Company’s audited Consolidated Balance Sheet as of June 27, 2014.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
|For the Three Months Ended||For the Nine Months Ended|
|Cost of revenue||2,375||2,447||7,778||7,502|
|Marketing and administrative||219||190||654||561|
|Amortization of intangibles||33||26||95||71|
|Restructuring and other, net||14||2||24||20|
|Gain on arbitration award, net||—||—||(620||)||—|
|Total operating expenses||2,987||2,962||8,960||9,057|
|Income from operations||343||444||1,851||1,366|
|Other income (expense), net||(39||)||(54||)||(30||)||(94||)|
|Income before income taxes||304||390||1,821||1,272|
|Provision for income taxes||13||(5||)||216||22|
|Net income per share attributable to Seagate Technology plc ordinary shareholders:|
|Number of shares used in per share calculations:|
|Cash dividends declared per Seagate Technology plc ordinary share||$||0.54||$||0.43||$||1.51||$||1.24|
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|For the Nine Months Ended|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||629||668|
|Deferred income taxes||(3||)||(17||)|
|(Gain) loss on sale of property and equipment||1||(6||)|
|Gain on sale of investments||—||(32||)|
|Loss on redemption and repurchase of debt||52||7|
|Other non-cash operating activities, net||(9||)||16|
|Changes in operating assets and liabilities:|
|Restricted cash and investments||—||104|
|Accounts receivable, net||(36||)||32|
|Accrued employee compensation||(40||)||(123||)|
|Accrued expenses, income taxes and warranty||(9||)||16|
|Vendor non-trade receivables||30||204|
|Other assets and liabilities||5||41|
|Net cash provided by operating activities||2,419||1,981|
|Acquisition of property, equipment and leasehold improvements||(546||)||(428||)|
|Proceeds from the sale of strategic investments||—||72|
|Purchases of short-term investments||(5||)||(87||)|
|Sales of short-term investments||4||463|
|Maturities of short-term investments||19||61|
|Cash used in acquisition of business||(450||)||—|
|Other investing activities, net||(90||)||(29||)|
|Net cash (used in) provided by investing activities||(1,068||)||52|
|Redemption and repurchase of debt||(536||)||(64||)|
|Net proceeds from issuance of long-term debt||498||791|
|Repurchases of ordinary shares||(907||)||(1,886||)|
|Dividends to shareholders||(493||)||(417||)|
|Proceeds from issuance of ordinary shares under employee stock plans||91||98|
|Other financing activities, net||(12||)||(5||)|
|Net cash used in financing activities||(1,359||)||(1,483||)|
|Effect of foreign currency exchange rate changes on cash and cash equivalents||(22||)||1|
|Increase in cash and cash equivalents||(30||)||551|
|Cash and cash equivalents at the beginning of the period||2,634||1,708|
|Cash and cash equivalents at the end of the period||$||2,604||$||2,259|
Use of non-GAAP financial information
To supplement the condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP measures of net income, diluted net income per share, gross margin, gross margin as a percentage of revenue, operating margin, operating expenses, and operating income which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Company’s current financial performance and our prospects for the future. Specifically, the Company believes non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because we believe they are generally consistent with financial models and estimates published by financial analysts who follow the Company.
These non-GAAP results are some of the primary measurements management uses to assess the Company’s performance, allocate resources and plan for future periods. Reported non-GAAP results should only be considered as supplemental to results prepared in accordance with GAAP, and not considered as a substitute for, or superior to, GAAP results. These non-GAAP measures may differ from the non-GAAP measures reported by other companies in our industry.
SEAGATE TECHNOLOGY PLC
ADJUSTMENTS TO GAAP NET INCOME AND DILUTED NET INCOME PER SHARE
(In millions, except per share amounts)
|For the Three Months Ended April 3, 2015||For the Nine Months Ended April 3, 2015|
|GAAP net income||$||291||$||1,605|
|Cost of revenue||A||8||34|
|Marketing and administrative||B||7||18|
|Amortization of intangibles||C||32||94|
|Restructuring and other, net||D||14||23|
|Gain on arbitration award, net||E||—||(620||)|
|Other income (expense), net||F||1||(88||)|
|Provision for income taxes||G||—||181|
|Non-GAAP net income||$||357||$||1,261|
|Diluted net income per share:|
|Shares used in diluted net income per share calculation||330||334|
A For the three and nine months ended April 3, 2015, Cost of revenue on a GAAP basis totaled $2.4 billion and $7.8 billion, while non-GAAP Cost of revenue, which excludes the net impact of certain adjustments, was $2.4 billion and $7.7 billion, respectively. The non-GAAP adjustments include amortization of intangibles associated with acquisitions and other acquisition related expenses.
B For the three and nine months ended April 3, 2015, Product development and Marketing and administrative expenses have been adjusted on a non-GAAP basis to exclude the impact of integration costs associated with acquisitions.
C For the three and nine months ended April 3, 2015, Amortization of intangibles primarily related to our acquisitions has been excluded on a non-GAAP basis.
D For the three and nine months ended April 3, 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.
E For the nine months ended April 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.
F For the three and nine months ended April 3, 2015, Other income (expense), net has been adjusted on a non-GAAP basis mostly to exclude the partial payment of $143 million for interest accrued on the final arbitration award amount in the Company’s case against Western Digital and the net impact of losses recognized on the early redemption and repurchase of debt.
G For the nine months ended April 3, 2015, Provision for income taxes, has been adjusted on a non-GAAP basis primarily to exclude 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.