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Seagate Technology Reports Fiscal Second Quarter 2013 Financial Results



  Seagate Technology Reports Fiscal Second Quarter 2013 Financial Results

Business Wire

CUPERTINO, Calif. -- January 28, 2013

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 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; 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              2,228          2,284
improvements, net
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              277            259            545            467
development
Marketing and        139            141            289            245
administrative
Amortization of      20             2              39             3
intangibles
Restructuring and    1              3              1              3          
other, net
Total operating      3,113          2,590          6,221          5,166      
expenses
                                                                   
Income from          555            605            1,179          841
operations
                                                                   
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        499            558            1,099          709
income taxes
Provision for
(benefit from)       7              (5        )    25             6          
income taxes
Net income           492            563            1,074          703
Less: Net income
attributable to      —              —              —              —          
noncontrolling
interest
Net income
attributable to      $  492         $  563         $  1,074       $  703     
Seagate Technology
plc
                                                                   
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         $  0.70        $  0.18        $  1.02        $  0.36
Seagate Technology
plc ordinary share
                                                                             

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   (427      )    (361      )
improvements
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     (36       )    —
cash acquired
Cash used in acquisition of Samsung HDD assets     —              (561      )
and liabilities
Other investing activities, net                    (14       )    9          
Net cash used in investing activities              (453      )    (843      )
                                                                   
FINANCING ACTIVITIES
Repayments of long-term debt and capital lease     (58       )    (594      )
obligations
Repurchases of ordinary shares                     (1,510    )    (191      )
Dividends to shareholders                          (377      )    (154      )
Proceeds from issuance of ordinary shares under    168            51
employee stock plans
Escrow deposit for acquisition of noncontrolling   (72       )    —          
shares of LaCie S.A.
Net cash used in financing activities              (1,849    )    (888      )
Effect of foreign currency exchange rate changes   2              —          
on cash and cash equivalents
Decrease in cash and cash equivalents              (324      )    (852      )
Cash and cash equivalents at the beginning of      1,707          2,677      
the period
Cash and cash equivalents at the end of the        $  1,383       $  1,825   
period
                                                                             

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       379             394
calculation
                                                                             

    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
A   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").
     
    For the three and six months ended December 28, 2012, Product development
B   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.
     
    For the three and six months ended December 28, 2012, Marketing and
    administrative expense has been adjusted on a non-GAAP basis to exclude
C   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.
     
    For the three and six months ended December 28, 2012, Amortization of
D   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.
     
    For the three months ended December 28, 2012, Other expense has been
E   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.

Contact:

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