Seagate Technology Reports Fiscal Second Quarter 2013 Financial Results

Mon Jan 28, 2013 4:01pm EST

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CUPERTINO, Calif.--(Business Wire)--
Seagate Technology plc (NASDAQ: STX) (the "Company") today reported financial
results for the quarter ended December 28, 2012. During the fiscal second
quarter, the Company reported revenue of approximately $3.7 billion, shipping 58
million units. On a GAAP basis, Seagate reported gross margin of 27.0%, net
income of $492 million and diluted earnings per share of $1.30. On a non-GAAP
basis, which excludes the net impact of certain items, Seagate reported gross
margin of 27.6%, net income of $523 million and diluted earnings per share of
$1.38. Cash flow from operations in the quarter was $844 million and the Company
returned $1.1 billion to shareholders in dividends and share redemptions. Cash,
cash equivalents, restricted cash, and short-term investments totaled
approximately $2.0 billion at the end of the fiscal second quarter. 

"Seagate is executing well in an environment where customer demand forecasting
is challenging," said Steve Luczo, Seagate`s chairman, president and chief
executive officer. "Looking ahead, we will continue to manage our business
conservatively to the demand environment, focus on profitability and effectively
invest for market leadership in storage for mobility, cloud and open source.
Creating value for shareholders remains a top priority, and in the first half of
fiscal 2013, we returned over 95% of operating cash flows through share
redemptions and dividends." 

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 approved an increase in our quarterly cash dividend to
$0.38 per share which was paid on December 28, 2012, rather than in the March
2013 quarter. 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 2:00 p.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 third fiscal quarter of 2013 including key underlying
assumptions. 

Replay

A replay will be available beginning today at approximately 6:00 p.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. 

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 March 29, 2013 and beyond. These statements identify
prospective information and include words such as "expects," "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 controland 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; dependence on 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; 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. Information
concerning additional factors that could cause results to differ materially from
those projected in the forward-looking statements are contained in the Company's
Annual Report on Form 10-K as filed with the SEC on August 8, 2012 and Quarterly
Report on Form 10-Q as filed with the SEC on October 31, 2012, which statements
are incorporated into this press release by reference. 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.

                                                                                                 
 SEAGATE TECHNOLOGY PLC                                                                          
 
CONDENSED CONSOLIDATED BALANCE SHEETS                                                          
 
(In millions)                                                                                  
 
(Unaudited)                                                                                    
                                                                                                 
                                                        December 28,           June 29,          
                                                        2012                   2012              
 ASSETS                                                                                          
 Current assets:                                                                                 
 Cash and cash equivalents                              $      1,383           $        1,707    
 Short-term investments                                 489                    411               
 Restricted cash and investments                        98                     93                
 Accounts receivable, net                               1,648                  2,319             
 Inventories                                            800                    909               
 Deferred income taxes                                  112                    104               
 Other current assets                                   487                    767               
 Total current assets                                   5,017                  6,310             
 Property, equipment and leasehold improvements, net    2,228                  2,284             
 Goodwill                                               476                    463               
 Other intangible assets, net                           480                    506               
 Deferred income taxes                                  409                    396               
 Other assets, net                                      132                    147               
 Total Assets                                           $      8,742           $        10,106   
 LIABILITIES AND EQUITY                                                                          
 Current liabilities:                                                                            
 Accounts payable                                       $      1,685           $        2,286    
 Accrued employee compensation                          287                    344               
 Accrued warranty                                       195                    235               
 Accrued expenses                                       473                    531               
 Current portion of long-term debt                      3                      -                 
 Total current liabilities                              2,643                  3,396             
 Long-term accrued warranty                             135                    128               
 Long-term accrued income taxes                         84                     84                
 Other non-current liabilities                          140                    138               
 Long-term debt, less current portion                   2,815                  2,863             
 Total Liabilities                                      5,817                  6,609             
                                                                                                 
 Equity:                                                                                         
 Total Equity                                           2,925                  3,497             
 Total Liabilities and Equity                           $      8,742           $        10,106   


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                        For the Six Months Ended                        
                                                                                       December 28,               December 30,           December 28,               December 30,         
                                                                                       2012                       2011                   2012                       2011                 
 Revenue                                                                               $      3,668               $      3,195           $      7,400               $      6,007         
                                                                                                                                                                                         
 Cost of revenue                                                                       2,676                      2,185                  5,347                      4,448                
 Product development                                                                   277                        259                    545                        467                  
 Marketing and administrative                                                          139                        141                    289                        245                  
 Amortization of intangibles                                                           20                         2                      39                         3                    
 Restructuring and other, net                                                          1                          3                      1                          3                    
 Total operating expenses                                                              3,113                      2,590                  6,221                      5,166                
                                                                                                                                                                                         
 Income from operations                                                                555                        605                    1,179                      841                  
                                                                                                                                                                                         
 Interest income                                                                       2                          2                      4                          3                    
 Interest expense                                                                      (55           )            (58           )        (111          )            (127          )      
 Other, net                                                                            (3            )            9                      27                         (8            )      
 Other expense, net                                                                    (56           )            (47           )        (80           )            (132          )      
                                                                                                                                                                                         
 Income before income taxes                                                            499                        558                    1,099                      709                  
 Provision for (benefit from) income taxes                                             7                          (5            )        25                         6                    
 Net income                                                                            492                        563                    1,074                      703                  
 Less: Net income attributable to noncontrolling interest                              -                          -                      -                          -                    
 Net income attributable to Seagate Technology plc                                     $      492                 $      563             $      1,074               $      703           
                                                                                                                                                                                         
 Net income per share attributable to Seagate Technology plc ordinary shareholders:                                                                                                      
 Basic                                                                                 $      1.33                $      1.32            $      2.81                $      1.66          
 Diluted                                                                               1.30                       1.28                   2.73                       1.61                 
 Number of shares used in per share calculations:                                                                                                                                        
 Basic                                                                                 369                        427                    382                        424                  
 Diluted                                                                               379                        439                    394                        436                  
                                                                                                                                                                                         
 Cash dividends declared per Seagate Technology plc ordinary share                     $      0.70                $      0.18            $      1.02                $      0.36          
                                                                                                                                                                                         


 SEAGATE TECHNOLOGY PLC                                                                                                               
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                     
 
(In millions)                                                                                                                       
 
(Unaudited)                                                                                                                         
                                                                                                                                      
                                                                                      For the Six Months Ended                        
                                                                                      December 28,               December 30,         
                                                                                      2012                       2011                 
 OPERATING ACTIVITIES                                                                                                                 
 Net income                                                                           $      1,074               $      703           
 Adjustments to reconcile net income to net cash provided by operating activities:                                                    
 Depreciation and amortization                                                        430                        373                  
 Share-based compensation                                                             36                         26                   
 Deferred income taxes                                                                (11           )            (4            )      
 Gain on sale of strategic investments                                                (33           )            -                    
 Gain on sale of property and equipment                                               (8            )            (14           )      
 Loss on redemption of debt                                                           6                          5                    
 Other non-cash operating activities, net                                             5                          10                   
 Changes in operating assets and liabilities:                                                                                         
 Accounts receivable, net                                                             683                        (130          )      
 Inventories                                                                          156                        181                  
 Accounts payable                                                                     (496          )            (500          )      
 Accrued employee compensation                                                        (62           )            56                   
 Accrued expenses, income taxes and warranty                                          (97           )            (34           )      
 Other assets and liabilities                                                         293                        207                  
 Net cash provided by operating activities                                            1,976                      879                  
                                                                                                                                      
 INVESTING ACTIVITIES                                                                                                                 
 Acquisition of property, equipment and leasehold improvements                        (427          )            (361          )      
 Proceeds from the sale of property and equipment                                     4                          9                    
 Purchases of short-term investments                                                  (168          )            (309          )      
 Sales of short-term investments                                                      125                        260                  
 Maturities of short-term investments                                                 21                         115                  
 Proceeds from the sale of strategic investments                                      42                         (5            )      
 Cash used in acquisition of LaCie S.A., net of cash acquired                         (36           )            -                    
 Cash used in acquisition of Samsung HDD assets and liabilities                       -                          (561          )      
 Other investing activities, net                                                      (14           )            9                    
 Net cash used in investing activities                                                (453          )            (843          )      
                                                                                                                                      
 FINANCING ACTIVITIES                                                                                                                 
 Repayments of long-term debt and capital lease obligations                           (58           )            (594          )      
 Repurchases of ordinary shares                                                       (1,510        )            (191          )      
 Dividends to shareholders                                                            (377          )            (154          )      
 Proceeds from issuance of ordinary shares under employee stock plans                 168                        51                   
 Escrow deposit for acquisition of noncontrolling shares of LaCie S.A.                (72           )            -                    
 Net cash used in financing activities                                                (1,849        )            (888          )      
 Effect of foreign currency exchange rate changes on cash and cash equivalents        2                          -                    
 Decrease in cash and cash equivalents                                                (324          )            (852          )      
 Cash and cash equivalents at the beginning of the period                             1,707                      2,677                
 Cash and cash equivalents at the end of the period                                   $      1,383               $      1,825         
                                                                                                                                      


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 and gross
margin as a percentage of revenue, 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          For the Six          
                                                               Months                 Months               
                                                               Ended                  Ended                
                                                               December 28,           December 28,         
                                                               2012                   2012                 
                                                                                                           
 GAAP net income                                               $      492             $      1,074         
 Non-GAAP adjustments:                                                                                     
 Cost of revenue                                            A  19                     39                   
 Product development                                        B  3                      7                    
 Marketing and administrative                               C  (17           )        (13           )      
 Amortization of intangibles                                D  20                     39                   
 Restructuring and other, net                               D  1                      1                    
 Other expense, net                                         E  5                      (30           )      
 Non-GAAP net income                                           $      523             $      1,117         
                                                                                                           
 Diluted net income per share:                                                                             
 GAAP                                                          $      1.30            $      2.73          
                                                                                                           
 Non-GAAP                                                      $      1.38            $      2.84          
                                                                                                           
 Shares used in diluted net income per share calculation       379                    394                  
                                                                                                           


 A    For the three months ended December 28, 2012, Cost of revenue on a GAAP basis totaled $2,676 million, while non-GAAP Cost of revenue, which excludes the net impact of    
      certain adjustments, was $2,657 million. For the six months ended December 28, 2012, Cost of revenue on a GAAP basis totaled $5,347 million, while non-GAAP Cost of       
      revenue, which excludes the net impact of certain adjustments, was $5,308 million. The non-GAAP adjustments include amortization of intangibles and other acquisition     
      related expenses associated with the December 2011 acquisition of Samsung Electronics Co., Ltd's hard disk drive business (the "Samsung HDD business") and the August 2012 
      acquisition of LaCie S.A. ("LaCie").                                                                                                                                      
                                                                                                                                                                                
 B    For the three and six months ended December 28, 2012, Product development expense has been adjusted on a non-GAAP basis to exclude the net impact of acquisition and      
      integration costs associated with the acquisition of the Samsung HDD business.                                                                                            
                                                                                                                                                                                
 C    For the three and six months ended December 28, 2012, Marketing and administrative expense has been adjusted on a non-GAAP basis to exclude the net impact of legal cost  
      reimbursements, which were partially offset by acquisition and integration costs associated with the acquisitions of Samsung's HDD business and LaCie.                    
                                                                                                                                                                                
 D    For the three and six months ended December 28, 2012, Amortization of intangibles related to our Samsung HDD business and LaCie acquisitions and Restructuring and other, 
      net, primarily related to prior year restructuring plans, have been excluded on a non-GAAP basis.                                                                         
                                                                                                                                                                                
 E    For the three months ended December 28, 2012, Other expense has been adjusted on a non-GAAP basis primarily to exclude the net impact of a loss recognized on the         
      redemption of certain of our 7.75% senior notes.                                                                                                                          
                                                                                                                                                                                
      For the six months ended December 28, 2012, Other expense has been adjusted on a non-GAAP basis primarily to exclude the net impact of a gain recognized upon sales of    
      certain strategic investments, partially offset by a loss recognized on the redemption of certain of our 7.75% senior notes.                                              


Seagate Technology plc
Brian Ziel, 408-658-1540
brian.ziel@seagate.com



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