Seagate Technology Reports Fiscal Second Quarter 2013 Financial Results

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Seagate Technology Reports Fiscal Second Quarter 2013 Financial Results

CUPERTINO, Calif.--(BUSINESS WIRE)-- Seagate Technology plc (NAS: 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,
2012

    June 29,    
2012

ASSETS
Current assets:
Cash and cash equivalents$1,383$1,707
Short-term investments489411
Restricted cash and investments9893
Accounts receivable, net1,6482,319
Inventories800909
Deferred income taxes112104
Other current assets487 767
Total current assets5,0176,310
Property, equipment and leasehold improvements, net2,2282,284
Goodwill476463
Other intangible assets, net480506
Deferred income taxes409396
Other assets, net132 147
Total Assets$8,742 $10,106
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$1,685$2,286
Accrued employee compensation287344
Accrued warranty195235
Accrued expenses473531
Current portion of long-term debt3 
Total current liabilities2,6433,396
Long-term accrued warranty135128
Long-term accrued income taxes8484
Other non-current liabilities140138
Long-term debt, less current portion2,815 2,863
Total Liabilities5,8176,609
 
Equity:
Total Equity2,925 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 EndedFor the Six Months Ended
December 28,
2012
 December 30,
2011
December 28,
2012
 December 30,
2011
Revenue$3,668$3,195$7,400$6,007
 
Cost of revenue2,6762,1855,3474,448
Product development277259545467
Marketing and administrative139141289245
Amortization of intangibles202393
Restructuring and other, net1 3 1 3 
Total operating expenses3,113 2,590 6,221 5,166 
 
Income from operations5556051,179841
 
Interest income2243
Interest expense(55)(58)(111)(127)
Other, net(3)9 27 (8)
Other expense, net(56)(47)(80)(132)
 
Income before income taxes4995581,099709
Provision for (benefit from) income taxes7 (5)25 6 
Net income4925631,074703
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
Diluted1.301.282.731.61
Number of shares used in per share calculations:
Basic369427382424
Diluted379439394436
 
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,
2012
 December 30,
2011
OPERATING ACTIVITIES
Net income$1,074$703
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization430373
Share-based compensation3626
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 debt65
Other non-cash operating activities, net510
Changes in operating assets and liabilities:
Accounts receivable, net683(130)
Inventories156181
Accounts payable(496)(500)
Accrued employee compensation(62)56
Accrued expenses, income taxes and warranty(97)(34)
Other assets and liabilities293 207 
Net cash provided by operating activities1,976 879 
 
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements(427)(361)
Proceeds from the sale of property and equipment49
Purchases of short-term investments(168)(309)
Sales of short-term investments125260
Maturities of short-term investments21115
Proceeds from the sale of strategic investments42(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 plans16851
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 equivalents2  
Decrease in cash and cash equivalents(324)(852)
Cash and cash equivalents at the beginning of the period1,707 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 wh

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