Seagate Technology Reports Fiscal First Quarter 2013 Financial Results

  Seagate Technology Reports Fiscal First Quarter 2013 Financial Results

Business Wire

CUPERTINO, Calif. -- October 31, 2012

Seagate Technology plc (NASDAQ: STX) today reported financial results for the
quarter ended September 28, 2012. During the first quarter, on a GAAP basis
the company reported revenue of approximately $3.7 billion, gross margin of
28.4%, net income of $582 million and diluted earnings per share of $1.42. On
a non-GAAP basis, which excludes the net impact of certain items, Seagate
reported gross margin of 29.0%, net income of $594 million, and diluted
earnings per share of $1.45.

In the September quarter, Seagate generated approximately $1.1 billion in cash
from operations, paid cash dividends of $127 million and redeemed
approximately 20.5 million ordinary shares or approximately 5% of ordinary
shares at the beginning of the fiscal quarter for approximately $669 million.
During the nine months ended September 28, 2012, Seagate redeemed
approximately 109 million ordinary shares, resulting in an approximate
reduction of 17% of the Company’s share count. Cash, cash equivalents,
restricted cash, and short-term investments totaled approximately $2.5 billion
at the end of the first quarter, a sequential increase of approximately $259
million.

“Seagate continues to adapt to dynamic industry conditions, managing inventory
and demand with our customers while maintaining investments in our technology
portfolio that will position us for continued success in the marketplace over
the long-term,” said Steve Luczo, Seagate chairman and chief executive
officer. “Returning value to shareholders remains a top priority with over 70%
of our operating cash flow going towards share redemptions and dividends this
quarter.”

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 has approved a quarterly cash dividend of $0.32 per
share, which will be payable on November 29, 2012 to shareholders of record as
of the close of business on November 14, 2012. 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 5:30 a.m. Pacific Time
on its Investor Relations website at www.seagate.com/investors. During today's
webcast, the company will provide an outlook for its second fiscal quarter of
2013 including key underlying assumptions.

Replay

A replay will be available beginning today at approximately 10:00 a.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 December 28, 2012 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 document 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 our 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 the 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; and possible
excess industry supply with respect to particular disk drive products; the
Company’s ability to achieve projected cost savings in connection with
restructuring plans and the risk that we will incur significant incremental
costs in connection with the implementation of our recently executed
transaction with Samsung Electronics Co., Ltd or that we will not achieve the
benefits expected from such transactions. 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 with the U.S. Securities and Exchange
Commission on August 8, 2012 which statements are incorporated into this
document 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)
                                                               
                                                September 28,         June 29,
                                                2012                  2012 (a)
ASSETS
Current assets:
Cash and cash equivalents                       $   1,894             $ 1,707
Short-term investments                          476                   411
Restricted cash and investments                 100                   93
Accounts receivable, net                        1,684                 2,319
Inventories                                     845                   909
Deferred income taxes                           112                   104
Other current assets                            638                  767
Total current assets                            5,749                 6,310
Property, equipment and leasehold               2,243                 2,284
improvements, net
Goodwill                                        475                   463
Other intangible assets                         517                   506
Deferred income taxes                           403                   396
Other assets, net                               135                  147
Total Assets                                    $   9,522            $ 10,106
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                $   1,808             $ 2,286
Accrued employee compensation                   217                   344
Accrued warranty                                209                   235
Accrued expenses                                516                   531
Current portion of long-term debt               3                    —
Total current liabilities                       2,753                 3,396
Long-term accrued warranty                      128                   128
Long-term accrued income taxes                  87                    84
Other non-current liabilities                   152                   138
Long-term debt, less current portion            2,867                2,863
Total Liabilities                               5,987                 6,609
                                                                      
Equity:
Total Equity                                    3,535                3,497
Total Liabilities and Equity                    $   9,522            $ 10,106

(a)  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
                                         September 28,      September 30,
                                         2012                    2011
Revenue                                  $   3,732               $   2,811
                                                                 
Cost of revenue                          2,671                   2,262
Product development                      268                     208
Marketing and administrative             150                     105
Amortization of intangibles              19                      —
Restructuring and other, net             —                      —          
Total operating expenses                 3,108                  2,575      
                                                                 
Income from operations                   624                     236
                                                                 
Interest income                          2                       1
Interest expense                         (55        )            (69        )
Other, net                               29                     (16        )
Other expense, net                       (24        )            (84        )
                                                                 
Income before income taxes               600                     152
Provision for income taxes               18                     12         
Net income                               582                     140
Less: Net income attributable to         —                      —          
noncontrolling interest
Net income attributable to Seagate       $   582                $   140    
Technology plc
                                                                 
Net income per share attributable to
Seagate Technology plc ordinary
shareholders:
Basic                                    $   1.48                $   0.33
Diluted                                  1.42                    0.32
Number of shares used in per share
calculations:
Basic                                    394                     421
Diluted                                  409                     433
                                                                 
Cash dividends declared per Seagate      $   0.32                $   0.18
Technology plc ordinary share
                                                                            

SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                                      
                                         For the Three Months Ended
                                         September 28,      September 30,
                                         2012                    2011
OPERATING ACTIVITIES
Net income                               $   582                 $   140
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation and amortization            212                     182
Share-based compensation                 17                      12
Loss on redemption of debt               —                       5
Gain on sale of property and             (6         )            (10        )
equipment
Gain on sale of strategic                (33        )            —
investments
Deferred income taxes                    (5         )            —
Other non-cash operating activities,     —                       10
net
                                                                 
Changes in operating assets and
liabilities:
Accounts receivable, net                 648                     49
Inventories                              110                     47
Accounts payable                         (373       )            (298       )
Accrued employee compensation            (132       )            (57        )
Accrued expenses, income taxes and       (57        )            12
warranty
Other assets and liabilities             169                    68         
Net cash provided by operating           1,132                  160        
activities
                                                                 
INVESTING ACTIVITIES
Acquisition of property, equipment       (263       )            (218       )
and leasehold improvements
Proceeds from the sale of property       4                       8
and equipment
Proceeds from the sale of equity         41                      —
investments
Purchases of short-term investments      (74        )            (254       )
Sales of short-term investments          64                      214
Maturities of short-term investments     5                       87
Cash used in acquisition of LaCie        (36        )            —
S.A., net of cash acquired
Change in restricted cash and            (6         )            14         
investments
Net cash used in investing               (265       )            (149       )
activities
                                                                 
FINANCING ACTIVITIES
Repayments of long-term debt and         —                       (34        )
capital lease obligations
Repurchases of ordinary shares           (639       )            (128       )
Escrow deposit for acquisition of        (72        )            —
noncontrolling shares of LaCie S.A.
Proceeds from issuance of ordinary       157                     26
shares under employee stock plans
Dividends to shareholders                (127       )            (78        )
Net cash used in by financing            (681       )            (214       )
activities
                                                                 
Effect of foreign currency exchange
rate changes on cash and cash            1                       —
equivalents
Increase (decrease) in cash and cash     187                     (203       )
equivalents
Cash and cash equivalents at the         1,707                  2,677      
beginning of the period
Cash and cash equivalents at the end     $   1,894              $   2,474  
of the period
                                                                            

Use of non-GAAP financial information

To supplement the preliminary financial information presented in accordance
with generally accepted accounting principles (GAAP), the Company provides
non-GAAP measures of net income, diluted EPS and gross margin which are
adjusted from results based on GAAP to exclude certain expenses. 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 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
                                         September 28,      September 30,
                                         2012                    2011
                                                                 
GAAP net income                          $   582                 $   140
Non-GAAP adjustments:
Cost of revenue                    A     20                      —
Product development                B     4                       —
Marketing and administrative       B     4                       (6         )
Amortization of intangibles        C     19                      —
Other expense, net                 D     (35        )            12         
Non-GAAP net income                      $   594                $   146    
                                                                 
Diluted net income per share:
GAAP                                     $   1.42                $   0.32
                                                                 
Non-GAAP                                 $   1.45                $   0.34
                                                                 
Shares used in diluted net               409                     433
income per share calculation
                                                                            

    For the three months ended September 28, 2012, Cost of revenue on a GAAP
    basis totaled $2,671 million, while non-GAAP Cost of revenue was $2,651
    million. The non-GAAP adjustments include amortization expense of other
A  intangible assets, and other acquisition related expenses related to our
    December 2011 acquisition of Samsung Electronics Co., Ltd’s hard disk
    drive business ("Samsung HDD business") and the August 2012 acquisition of
    LaCie S.A. (“LaCie”).
    
    For the three months ended September 28, 2012, Product development and
B   Marketing and administrative expenses have been adjusted on a non-GAAP
    basis to exclude the net impact of acquisition and integration costs
    associated with our acquisitions of Samsung's HDD business, and LaCie.
    
    For the three months ended September 30, 2011, non-GAAP adjustments to
    Product development and Marketing and administrative expenses reflect the
    net impact from the reversal of previously accrued litigation costs and a
    gain on the sale of a building, offset by costs associated with the
    previously announced transaction with Samsung and an adjustment to the
    expected exit costs related to certain sub-leased facilities.
    
    For the three months ended September 28, 2012, Amortization of intangibles
C   related to the acquisitions of Samsung's HDD business and LaCie have been
    excluded on a non-GAAP basis.
    
    For the three months ended September 28, 2012, Other expense, net on a
D   GAAP basis was $24 million, while non-GAAP Other expense, net, was $59
    million. The non-GAAP adjustment includes a gain recognized upon sales of
    certain strategic investments.
    
    For the three months ended September 30, 2011, non-GAAP adjustments to
    Other expense, net reflect a loss related to the early retirement of the
    principal amount of our 10% secured notes and a write-down of an equity
    investment.

Contact:

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