Seagate Technology plc Reports Fiscal Third Quarter 2011 Financial Results

SCOTTS VALLEY, Calif.--()--Seagate Technology plc (NASDAQ:STX) today reported financial results for the quarter ended April 1, 2011. The company shipped 49 million disk drives and reported revenue of $2.7 billion, gross margin of 19.1%, net income of $93 million and diluted earnings per share of $0.21. On a non-GAAP basis, which excludes the net impact of loss on redemption of debt, purchased intangibles amortization, restructuring and tax adjustments related to prior fiscal years, Seagate reported net income of $113 million and diluted earnings per share of $0.25 for the quarter ended April 1, 2011.

For the nine months ended April 1, 2011, the company reported revenue of $8.1 billion, gross margin of 19.7%, net income of $392 million and diluted earnings per share of $0.83. On a non-GAAP basis, which excludes the net impact of loss on redemption of debt, purchased intangibles amortization, restructuring and tax adjustments related to prior fiscal years, Seagate reported net income of $452 million and diluted earnings per share of $0.95.

For reconciliation of non-GAAP to GAAP results, see accompanying financial tables.

Investor Communications

Seagate will hold a conference call to review the recently announced strategic alignment with Samsung as well as Seagate’s third fiscal quarter results today at 5:30 a.m. Pacific Time. This call will replace the call formerly scheduled for 3:45 p.m. today. The conference call will consist of comments from Steve Luczo, CEO, and Pat O’Malley, CFO, followed by a question and answer session with the executive management team. During today’s conference call, the company will provide an outlook for its fourth fiscal quarter of 2011, including key underlying assumptions.

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 investor relations section of seagate.com.

Conference Call

The conference call can be accessed online at seagate.com or by phone as follows:

USA: (800) 299-9630

International: (617) 786-2904

Participant Passcode: 22585275

Replay

A replay will be available beginning today at 8:00 a.m. Pacific Time. The replay can be accessed from seagate.com.

About Seagate

Seagate is the world leader in hard disk drives and storage solutions. Learn more at 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used, the words “anticipates”, “believes”, “expects”, “may”, “should” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are based on information available to the Company as of the date of this press release. Current expectations, forecasts and assumptions involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties, and other factors may be beyond the Company’s control. In particular, global economic conditions may pose a risk to the Company’s operating and financial performance. Such risks and uncertainties also include the impact of variable demand; 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; and the Company’s ability to achieve projected cost savings. Information concerning risks, uncertainties and other factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the Company’s Annual Report on Form 10-K, Form 10-K/A and Quarterly Reports on Form 10-Q as filed with the U.S. Securities and Exchange Commission on August 20, 2010, October 6, 2010, November 3, 2010 and February 3, 2011, respectively, 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)

   

April 1,
2011

July 2,
2010 (a)

ASSETS
Current assets:
Cash and cash equivalents $ 2,201 $ 2,263
Short-term investments 279 252
Restricted cash and investments 103 114
Accounts receivable, net 1,394 1,400
Inventories 834 757
Deferred income taxes 107 118
Other current assets   586   514
Total current assets 5,504 5,418
 
Property, equipment and leasehold improvements, net 2,208 2,263
Deferred income taxes 373 395
Other assets, net   195   171
Total assets $ 8,280 $ 8,247
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,778 $ 1,780
Accrued employee compensation 136 263
Accrued warranty 198 189
Accrued expenses 419 422
Accrued income taxes 14 14
Current portion of long-term debt   560   329
Total current liabilities 3,105 2,997
 
Long-term accrued warranty 163 183
Long-term accrued income taxes 68 59
Other non-current liabilities 105 111
Long-term debt, less current portion   2,352   2,173
Total liabilities 5,793 5,523
 
Shareholders’ equity:
Total shareholders’ equity   2,487   2,724
Total liabilities and shareholders’ equity $ 8,280 $ 8,247
 

(a) The information in this column was derived from the Company’s audited Consolidated Balance Sheet as of July 2, 2010.

 

SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

       
For the Three Months Ended For the Nine Months Ended
April 1,
2011

April 2,
2010

April 1,
2011

April 2,
2010

 
Revenue $ 2,695 $ 3,049 $ 8,112 $ 8,738
Cost of revenue 2,179 2,148 6,517 6,261
Product development 224 224 646 658
Marketing and administrative 110 105 317 323
Amortization of intangibles 8 2 23
Restructuring and other, net 3 4 14 50
Impairment of long-lived assets   64  
Total operating expenses   2,516     2,489     7,496     7,379  
Income from operations 179 560 616 1,359
 
Interest income 2 2 6 4
Interest expense (59 ) (41 ) (151 ) (127 )
Other, net   1     (21 )   (7 )
Other expense, net   (57 )   (38 )   (166 )   (130 )
 
Income before income taxes 122 522 450 1,229
Provision for (benefit from) income taxes   29     4     58     (1 )
Net income $ 93   $ 518   $ 392   $ 1,230  
 
Net income per share:
Basic $ 0.21 $ 1.05 $ 0.85 $ 2.48
Diluted 0.21 1.00 0.83 2.38

Number of shares used in per share

calculations:

Basic 437 493 459 495
Diluted 453 520 475 519
 
   

SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
For the Nine Months Ended
April 1,
2011
April 2,
2010
OPERATING ACTIVITIES
Net income $ 392 $ 1,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 567 584
Share-based compensation 38 38

Loss on redemption of debt

 

26

 

Impairment of long-lived assets

64
Deferred income taxes 35 10
Other non-cash operating activities, net (5 ) 22
 
Changes in operating assets and liabilities:
Accounts receivable, net 7 (418 )
Inventories (77 ) (98 )
Accounts payable 181 242
Accrued employee compensation (127 ) 70
Accrued expenses, income taxes and warranty (10 ) (131 )
Other assets and liabilities   (80 )   (5 )
Net cash provided by operating activities   947     1,608  
 
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements (685 ) (372 )
Purchases of short-term investments (208 ) (278 )
Sales of short-term investments 118 75
Maturities of short-term investments 59 101
Change in restricted cash and investments 13 26
Other investing activities, net  

    1  
Net cash used in investing activities   (703 )   (447 )
 
FINANCING ACTIVITIES
Proceeds from short-term borrowings

15
Repayment of short-term borrowings (365 )
Repayments of long-term debt and capital lease obligations (377 ) (385 )
Net proceeds from issuance of long-term debt 736
Repurchases of ordinary shares (710 ) (251 )
Change in restricted cash and investments 2 379
Proceeds from issuance of ordinary shares under employee stock plans 48 81
Other financing activities, net   (5 )  

 
Net cash used in financing activities   (306 )   (526 )
 
Increase (decrease) in cash and cash equivalents (62 ) 635
Cash and cash equivalents at the beginning of the period   2,263     1,427  
Cash and cash equivalents at the end of the period $ 2,201   $ 2,062  
 

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 and diluted net income per share, 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 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, gains and losses 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
April 1,
2011

 

For the
Nine Months Ended
April 1,
2011

 
GAAP net income $ 93 $ 392
Non-GAAP adjustments:
Loss on redemption of debt A 2 26
Restructuring charges B 3 14
Amortization of purchased intangible assets C 1 6
Adjustments for taxes D   14   14
 
Non-GAAP net income $ 113 $ 452
 
Diluted net income per share:
GAAP $ 0.21 $ 0.83
 
Non-GAAP $ 0.25 $ 0.95
 

Shares used in diluted net income per share calculation:

453 475
 

A For the three months ended April 1, 2011, the Company incurred a loss upon the partial redemption of its 10.00% Senior Secured Second-Priority Notes due 2014. The nine months ended April 1, 2011, included the loss upon redemption of its 5.75% Subordinated Debentures due March 2012 and its 2.375% Convertible Senior Notes due August 2012.

 

B For the three and nine months ended April 1, 2011, the Company recorded restructuring charges associated with previously announced restructuring activities.

 

C For the three and nine months ended April 1, 2011, amortization of purchased intangible assets acquired in acquisitions was allocated as follows:

 

For the
Three Months Ended
April 1,
2011

For the
Nine Months Ended
April 1,
2011

 
Cost of revenue $ 1 $ 4
Amortization of intangibles  

  2
 
Total amortization of purchased intangible assets $ 1 $ 6
 

D To exclude the tax effects, where applicable, of adjustments to GAAP net income. In addition, during the three and nine months ended April 1, 2011, the Company recorded discrete tax charges of approximately $14 million primarily as a result of information obtained during the March quarter related to ongoing negotiations with non-U.S. tax authorities on tax positions taken in prior fiscal years.

 

Contacts

Seagate Technology plc
Brian Ziel, 831-439-5429 (Media Relations)
brian.ziel@seagate.com
Rod Cooper, 831-439-2371 (Investor Relations)
rod.j.cooper@seagate.com

Release Summary

Seagate Technology plc (NASDAQ:STX) today reported financial results for the quarter ended April 1, 2011.

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Contacts

Seagate Technology plc
Brian Ziel, 831-439-5429 (Media Relations)
brian.ziel@seagate.com
Rod Cooper, 831-439-2371 (Investor Relations)
rod.j.cooper@seagate.com