Seagate Technology Reports Fiscal First Quarter 2009 Results

2008-10-22 00:00:00.0

SCOTTS VALLEY, Calif. - Seagate Technology (NASDAQ: STX) today reported disk drive unit shipments of 48 million, revenue of $3.03 billion, net income of $60 million, and diluted net income per share of $0.12 for the quarter ended October 3, 2008. Net income and diluted net income per share for the quarter includes $20 million of purchased intangibles amortization and other charges associated with Seagate’s acquisitions, and charges related to restructuring activities of $51 million. The net impact of these items is a $71 million reduction to net income and a decrease of approximately $0.14 per share on a diluted basis. Of the $51 million related to restructuring activities, approximately $28 million was accelerated depreciation recorded in cost of revenue and $23 million was for severance and other closing costs recorded in restructuring.

“This quarter was marked by Seagate’s measurable progress toward regaining our longstanding product leadership position across all markets,” said Bill Watkins, Seagate chief executive officer. “With a strong balance sheet, Seagate is operating from a position of strength. Looking forward, in the face of a challenging macro-economic environment, we will focus on cost controls and inventory management while continuing to invest in the key technologies that will solidify product leadership. As a result, we remain highly confident in our ability to convert the long-term growth in demand for storage into superior value for our shareholders.”

Additional information relating to the financial results for the first fiscal quarter of 2009 can be found online at seagate.com.

Business Outlook
For the December quarter, Seagate expects to report revenue of $2.85 - $3.05 billion, and diluted net income per share of $0.12 - $0.16. Included in the December quarter outlook is the following:

  • Approximately $20 million for purchased intangibles amortization and other charges associated with recent acquisitions
  • Approximately $7 million for restructuring charges related to previously announced restructuring events
  • Approximately $7 million for accelerated depreciation expenses related to the planned closing of the Pittsburgh research facility (R&D)

The net impact of these items is an estimated reduction to net income of approximately $34 million, and an aggregate decrease in diluted earnings per share by approximately $0.07. The outlook does not include the impact of any future mergers, acquisitions, dispositions or other business combinations, stock repurchases or potential new restructuring activities the company may undertake during the quarter.

Current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that Seagate’s actual results could differ materially from current expectations.

Dividend
The company has declared a quarterly dividend of $0.12 per share to be paid on or before November 21, 2008 to all common shareholders of record as of November 7, 2008.

Conference Call

Seagate will hold a conference call to review the fiscal first quarter results at 2:00 p.m. Pacific Time today. The conference call can be accessed online at seagate.com or by phone as follows:

USA: (877) 223-6202
International: (706) 679-3742
Conference ID: 64605834

Replay
A replay will be available beginning today at 6:00 p.m. Pacific Time through October 29 at 8:59 p.m. Pacific Time. The replay can be accessed from seagate.com or by phone as follows:

USA: (800) 642-1687
International: (706) 645-9291
Conference ID: 64605834

About Seagate
Seagate is the worldwide leader in the design, manufacture and marketing of hard disk drives and storage solutions, providing products for a wide-range of applications, including Enterprise, Desktop, Mobile Computing, Consumer Electronics and Branded Solutions. Seagate's business model leverages technology leadership and world-class manufacturing to deliver industry-leading innovation and quality to its global customers, with the goal of being the time-to-market leader in all markets in which it participates. The company is committed to providing award-winning products, customer support and reliability to meet the world's growing demand for information storage. Seagate can be found around the globe and at http://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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements related to the company’s future operating and financial performance, including expected revenue, net income and diluted earnings per share, price and product competition, customer demand for our products, and general market conditions. These forward-looking statements are based on information available to Seagate 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, uncertainty in global economic conditions pose a risk to the overall economy as consumers and businesses may defer purchases in response to tighter credit and negative financial news. Such risks and uncertainties also include the impact of the variable demand and the aggressive pricing environment for disk drives, particularly in view of current business and economic conditions; dependence on Seagate’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; our ability to achieve projected cost savings in connection with our announced restructuring plans; and market conditions and alternative cash imperatives that could impact our ability to repurchase additional common shares pursuant to Seagate's previously announced share repurchase program. Information concerning risk, 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 as filed with the U.S. Securities and Exchange Commission on August 13, 2008, 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 Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

#  #  #

 

Seagate Technology
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)

 
October 3,
2008
   
June 27,
2008(a)
Assets        
Cash and cash equivalents
$
1,005
 
$
990
  Short-term investments
148
 
151
 
  Accounts receivable, net
1,393
 
1,410
 
  Inventories
909
 
945
 
  Deferred income taxes
272
274
 
  Other current assets
640
 
502
 
   
 
  Total Current Assets
4,367
 
4,272
 
               
Property, equipment and leasehold  improvements, net
2,509
 
2,464
 
  Goodwill
2,349
 
2,352
 
  Other intangible assets
94
 
111
 
  Deferred income taxes
616
616
 
  Other assets, net
234
 
305
 
   
 
  Total Assets
$
10,169
   
$
10,120
 
Liabilities and Shareholders' Equity        
  Accounts payable
$
1,930
   
$
1,652
 
  Accrued employee compensation
153
 
440
 
  Accrued expenses, other
838
 
825
 
  Accrued income taxes
6
 
10
 
  Current portion of long-term debt
660
 
360
 
   
 
  Total Current Liabilities
3,587
 
3,287
 
         
  Accrued warranty
231
 
219
 
  Other non-current liabilities
336
 
358
 
  Long-term debt, less current portion
1,370
  1,670  
   
 
  Total Liabilities
5,524
 
5,534
 
       
  Shareholders' Equity
4,645
 
4,586
 
 
 
  Total Liabilities and Shareholders'  Equity
$
10,169
   
$
10,120
 
 
(a)
The information in this column was derived from the Company’s audited consolidated balance sheet as of June 27, 2008.







Seagate Technology
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
null
For the Three Months Ended
null
 
October 3,
2008
null
null
September 28,
2007
null
Revenue
$
3,033
$
3,285
null
   
   
Cost of revenue
2,508
2,476
Product development
260
242
Marketing and administrative
148
153
Amortization of intangibles   14     13  
Restructuring, net
23
5
null null
null
null  
null
null  
  Total operating expenses
2,953
 
2,889
 
      null     null  
null null    
Income from operations
80
396
null    
Interest income
7
16
Interest expense
(30)  
(32)  
Other, net
(13)  
(5)  
null null
null
null  
null
null  
  Other income (expense), net
(36)
 
(21)
 
      null     null  
null null    
Income before income taxes
44
375
Provision for (benefit from) income taxes
(16)
20
 
null
null  
null
null  
Net income
$
60
$
355
 
null
null
Net income per share:
  Basic
$
0.12
$
0.67
  Diluted
0.12
 
0.64
 
Number of shares used in per share  calculations:
  Basic
485
 
531
 
  Diluted
494
560
     


 

Seagate Technology
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
For the Three Months Ended
null

October 3,
2008
September 28,
2007
Operating Activities        
Net income
$
60
   
$
355
 
Adjustments to reconcile net income to net cash from operating activities:            
Depreciation and amortization
253
 
205
 
  Stock-based compensation 27   29  
  Deferred income taxes 2   8  
Other non-cash operating activities, net
(13)
 
7
 
Changes in operating assets and liabilities:    
    Accounts receivable  
16
     
(133)
 
    Inventories  
36
     
31
 
    Accounts payable  
278
     
250
 
    Accrued expenses, employee  compensation and warranty  
(309)
     
(2)
 
  Other assets and liabilities  
(46)
     
4
 
   
 
  Net cash provided by operating  activities
304
 
754
 
   
 
 
Investing Activities        
Acquisition of property, equipment and  leasehold improvements  
(280)
     
(150)
 
Purchases of short-term investments
(90)
 
(198)
 
Maturities and sales of short-term investments  
93
     
119
 
Proceeds from sale of investment in equity  securities   10        
Acquisitions, net of cash acquired         (6)  
Other investing activities, net
2
 
(3)
 
   
 
Net cash used in investing activities
(265)
 
(238)
 
   
 
               
Financing Activities        
Proceeds from exercise of employee stock  options and employee stock purchase plan   35       62  
Dividends to shareholders   (59)       (54)  
Repurchases of common shares         (249)  
   
 
Net cash used in financing activities
(24)
 
(241)
 
   
 
               
Increase in cash and cash equivalents
15
 
275
 
Cash and cash equivalents at the beginning of  the period
990
 
988
 
 
 
Cash and cash equivalents at the end of the  period
$
1,005
 
$
1,263