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Press release from Business Wire

Seagate Technology Reports Fiscal Second Quarter 2012 Financial Results

Tuesday, January 31, 2012

Seagate Technology Reports Fiscal Second Quarter 2012 Financial Results16:08 EST Tuesday, January 31, 2012 CUPERTINO, Calif. (Business Wire) -- Seagate Technology plc (NASDAQ: STX) today reported financial results for the quarter ended December 30, 2011. The company shipped 47 million disk drives and reported revenue of $3.2 billion, gross margin of 31.6%, net income of $563 million and diluted earnings per share of $1.28. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported net income of $581 million and diluted earnings per share of $1.32 for the quarter ended December 30, 2011. For the six months ended December 30, 2011, the company reported revenue of $6.0 billion, gross margin of 26.0%, net income of $703 million and diluted earnings per share of $1.61. On a non-GAAP basis, which excludes the net impact of certain items, Seagate reported net income of $727 million and diluted earnings per share of $1.67. Seagate returned $151 million to shareholders in the form of a dividend and repurchased $191 million of Seagate ordinary shares which equates to approximately 13 million ordinary shares. For a detailed reconciliation of non-GAAP to GAAP results, see accompanying financial tables. Acquisition of Samsung's Hard Disk Drive Assets Seagate announced on December 19, 2011 the closing of the acquisition of the hard disk drive business of Samsung Electronics Co., Ltd. Related to this transaction, amortization of acquisition-related intangibles of $5 million (non-cash expense) is included in the GAAP basis net income for the fiscal second quarter and six months ended December 30, 2011. For Seagate's third fiscal quarter, which ends on March 30, 2012, it is expected that amortization of acquisition-related intangibles will be approximately $35 million. Investor Communications Seagate will hold a conference call to review its second fiscal quarter today at 2:00 p.m. Pacific Time. The conference call will consist of opening comments from Steve Luczo, CEO, 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 third and fourth fiscal quarters of 2012 and its view of the remainder of the calendar year, 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 http://www.seagate.com/investors or by telephone as follows: USA: (866) 383-8108International: (617) 597-5343Participant Passcode: 13482450 Replay A replay will be available beginning today at approximately 6:00 p.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 StatementsThis 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, each as amended, including, in particular, statements about our plans, strategies and prospects and estimates of industry growth for the fiscal quarter ending December 30, 2011 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. 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, the uncertainty in global economic conditions continues to pose a risk to the Company's operating and financial performance as consumers and businesses may defer purchases in response to tighter credit and financial news. Such risks and uncertainties also include, but are not limited to, 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; 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; the risk that we will incur significant incremental costs in connection with our recently executed transaction with Samsung Electronics Co., Ltd. ("Samsung") or that we will not achieve the benefits expected from such transaction; and significant disruption to the industry supply chain due to the severe flooding throughout parts of Thailand. 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 and Form 10-K/A as filed with the U.S. Securities and Exchange Commission on August 17, 2011 and August 24, 2011 respectively, and in the Company's Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on October 27, 2011 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 PLCCONDENSED CONSOLIDATED BALANCE SHEETS(In millions)(Unaudited)       December 30, 2011   July 1, 2011(a)ASSETS Current assets: Cash and cash equivalents $ 1,825 $ 2,677 Short-term investments 407 474 Restricted cash and investments 93 102 Accounts receivable, net 1,627 1,495 Inventories 827 872 Deferred income taxes 99 99 Other current assets   522   706 Total current assets 5,400 6,425 Property, equipment and leasehold improvements, net 2,210 2,245 Goodwill 468 31 Other intangible assets 576 1 Deferred income taxes 376 374 Other assets, net   141   149 Total Assets $ 9,171 $ 9,225   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,461 $ 2,063 Accrued employee compensation 255 199 Accrued warranty 218 189 Accrued expenses 438 452 Current portion of long-term debt   -   560 Total current liabilities 2,372 3,463 Long-term accrued warranty 183 159 Long-term accrued income taxes 75 67 Other non-current liabilities 151 121 Long-term debt, less current portion   2,925   2,952 Total Liabilities 5,706 6,762   Commitments and contingencies   Shareholders' equity: Total Shareholders' Equity   3,465   2,463 Total Liabilities and Shareholders' Equity $ 9,171 $ 9,225   (a) The information in this column was derived from the Company's audited Consolidated Balance Sheet as of July 1, 2011.   SEAGATE TECHNOLOGY PLCCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In millions, except per share data)(Unaudited)     For the Three Months Ended     For the Six Months EndedDecember 30, 2011   December 31, 2010December 30, 2011   December 31, 2010   Revenue $ 3,195 $ 2,719 $ 6,007 $ 5,417   Cost of revenue 2,185 2,190 4,448 4,338 Product development 259 213 467 422 Marketing and administrative 141 102 245 206 Amortization of intangibles 2 1 3 2 Restructuring and other, net   3     7     3     11   Total operating expenses   2,590     2,513     5,166     4,979   - Income from operations 605 206 841 438   Interest income 2 2 3 4 Interest expense (58 ) (46 ) (127 ) (92 ) Other, net   9     13     (8 )   (22 ) Other expense, net   (47 )   (31 )   (132 )   (110 )   Income before income taxes 558 175 709 328 Provision for income taxes   (5 )   25     6     29   Net income   563   $ 150   $ 703   $ 299     Net income per share: Basic $ 1.32 $ 0.32 $ 1.66 $ 0.64 Diluted 1.28 0.31 1.61 0.61 Number of shares used in per share calculations Basic 427 469 424 470 Diluted 439 486 436 487   SEAGATE TECHNOLOGY PLCCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)     For the Six Months EndedDecember 30,2011   December 31,2010OPERATING ACTIVITIES   Net income $ 703 $ 299 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 373 379 Share-based compensation 26 26 Loss on redemption of debt 5 24 (Gain) loss on sale of property and equipment (14 ) (3 ) Deferred income taxes (4 ) 27 Other non-cash operating activities, net 10 (6 )   Changes in operating assets and liabilities: Accounts receivable, net (130 ) 9 Inventories 181 (51 ) Accounts payable (500 ) 243 Accrued employee compensation 56 (134 ) Accrued expenses, income taxes and warranty (34 ) 20 Other assets and liabilities   207     (81 ) Net cash provided by operating activities   879     752     INVESTING ACTIVITIES Acquisition of property, equipment and leasehold improvements (361 ) (560 ) Purchases of short-term investments (309 ) (145 ) Sales of short-term investments 260 96 Maturities of short-term investments 115 13 Change in restricted cash and investments 9 17 Cash used in acquisition of Samsung HDD assets and liabilities (561 ) - Other investing activities, net   4     (1 ) Net cash used in investing activities   (843 )   (580 )   FINANCING ACTIVITIES Repayments of long-term debt and capital lease obligations (594 ) (362 ) Net proceeds from issuance of long-term debt - 736 Repurchases of ordinary shares (191 ) (305 ) Proceeds from issuance of ordinary shares under employee stock plans 51 24 Dividends to shareholders   (154 )   -   Net cash (used in) provided by financing activities   (888 )   93     (Decrease) increase in cash and cash equivalents (852 ) 265 Cash and cash equivalents at the beginning of the period   2,677     2,263   Cash and cash equivalents at the end of the period $ 1,825   $ 2,528     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 PLCADJUSTMENTS TO GAAP NET INCOME AND DILUTED NET INCOME PER SHARE(In millions, except per share amounts)(Unaudited)   For the ThreeMonths EndedDecember 30,2011   For the SixMonths EndedDecember 30,2011   GAAP net income $ 563 $ 703 Non-GAAP adjustments: Total operating expenses A 25   19 Other expense, net B - 12 Provision for (benefit from) income taxes C   (7 )   (7 ) Non-GAAP net income $ 581   $ 727     Diluted net income per share: GAAP $ 1.28 $ 1.61   Non-GAAP $ 1.32 $ 1.67   Shares used in diluted net income per share calculation 439 436   A   For the three months ended December 30, 2011, Total operating expenses on a GAAP basis totaled $2,590 million, while Non-GAAP Total operating expenses, which excludes the net impact of certain adjustments was $2,565 million. The non-GAAP adjustments include costs associated with the Samsung acquisition completed in December 2011, amortization expense of other intangible assets, an increase in expected exit costs related to certain leased facilities exited during the three months ended December 30, 2011, and an increase in reserves related to post-employment benefits related to existing restructuring plans.   For the six months ended December 30, 2011, Total operating expenses on a GAAP basis totaled $5,166 million, while Non-GAAP Total operating expenses, which excludes the net impact of certain adjustments was $5,147 million. The non-GAAP adjustments reflect the net impact from costs associated with the Samsung acquisition completed in December 2011, amortization expense of other intangible assets, adjustments to the expected exit costs related to certain leased and sub-leased facilities and an increase in reserves related to post-employment benefits related to existing restructuring plans, offset by the reversal of previously accrued litigation costs and a gain on the sale of a building.   B For the six months ended December 30, 2011, Non-GAAP adjustments to Other expense, net on a GAAP basis was an expense of 132 million, which includes a $5 million loss related to the early retirement of $30 million of the principal amount of our 10% secured notes and a $7 million write-down of an equity investment. Excluding these items, non-GAAP other expense, net was $120 million.   C For the three and six months ended December 30, 2011, Non-GAAP net income excludes $7 million discrete tax item for release of valuation allowance on U.S. deferred tax assets associated with increases in the Company's forecasted U.S. taxable income. Seagate Technology plcMedia Relations Contact:Brian Ziel, 408-658-1540brian.ziel@seagate.comInvestor Relations Contact:Rod Cooper, 408-658-1099rod.j.cooper@seagate.com