Seagate Technology Reports Fiscal Second Quarter 2010 Results

Jan 20, 2010

SCOTTS VALLEY, Calif. - Seagate Technology (NASDAQ: STX) today reported financial results for the quarter ended January 1, 2010 of 49.9 million disk drive unit shipments, revenue of $3.03 billion, gross margin of 30.5%, net income of $533 million and diluted earnings per share of $1.03. The financial results for the quarter include $10 million of purchased intangibles amortization expense or approximately $0.02 per diluted share.

For the six months ended January 1, 2010 the company reported 96.2 million disk drive unit shipments, revenue of $5.69 billion, gross margin of 27.7%, net income of $712 million and diluted earnings per share of $1.38. The financial results for the six months ended January 1, 2010 include $20 million of purchased intangibles amortization expense, $46 million of restructuring costs and a write down of long-lived assets of $64 million. The aggregate impact of these expense items is $130 million or approximately $0.25 per diluted share.

“Our strong financial performance in the December quarter was the result of our ongoing progress in driving operational efficiencies, our leadership position in high capacity, high performance products, an improved product mix and the overall strength of demand for digital storage,” said Steve Luczo, Seagate CEO.

Additional information relating to the financial results for the fiscal second quarter of 2010 can be found online at seagate.com.

Conference Call
Seagate will hold a conference call to review the fiscal second quarter results at 2:00 p.m. Pacific Time today. During today’s conference call, the company will provide an outlook for its third fiscal quarter of 2010, including key underlying assumptions.

The conference call can be accessed online at seagate.com or by phone as follows:
USA: (866) 713-8562
International: (617) 597-5310
Participant Passcode: 79349419

Replay
A replay will be available beginning today at 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 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 in the March 2010 quarter, and thereafter, and include statements regarding expected revenue, gross margin, customer demand for disk drives 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, the present global economic environment conditions may pose a risk to the Company’s operating and financial performance as consumers and businesses defer purchases in response to financial conditions. Such risks and uncertainties also include the impact of the variable demand, 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 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 Quarterly Report on Form 10-K as filed with the U.S. Securities and Exchange Commission on August 19, 2009 and in the Company’s Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on November 4, 2009, 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)

 
January 1,
2010
   
July 3,
2009 (a)
Assets              
Cash and cash equivalents
$
1,891
 
$
1,427
  Short-term investments  
201
     
114
 
  Restricted cash and investments   118       508  
  Accounts receivable, net  
1,333
     
1,033
 
  Inventories  
645
     
587
 
  Deferred income taxes  
99
 
 
 
97
 
  Other current assets  
594
     
528
 
   
 
  Total Current Assets  
4,881
     
4,294
 
               
Property, equipment and leasehold   improvements, net  
1,983
     
2,229
 
  Deferred income taxes
 
364
 
 
 
372
 
  Other assets, net  
160
     
192
 
   
 
  Total Assets
$
7,388
   
$
7,087
 
Liabilities and Shareholders' Equity              
  Short-term borrowings
$
15
   
$
350
 
  Accounts payable
 
1,810
   
 
1,573
 
  Accrued employee compensation  
207
     
144
 
  Accrued warranty  
200
     
213
 
  Accrued expenses  
467
     
483
 
  Accrued income taxes  
13
     
10
 
  Current portion of long-term debt  
81
     
421
 
   
 
  Total Current Liabilities
 
2,793
     
3,194
 
               
  Long-term accrued warranty  
201
     
224
 
  Long-term accrued income taxes  
63
     
69
 
  Other non-current liabilities  
101
     
120
 
  Long-term debt, less current portion  
1,895
     
1,926
 
   
 
  Total Liabilities
 
5,053
     
5,533
 
             
  Shareholders' Equity  
2,335
     
1,554
 
 
 
  Total Liabilities and Shareholders'  Equity
$
7,388
   
$
7,087
 
 
(a)  As adjusted due to changes to the accounting for convertible debt instruments implemented in the first quarter of fiscal year 2010.






 

Seagate Technology
Condensed Consolidated Statements of Operations
(In millions, except per share data)
(Unaudited)
     
For the 3 Months Ended
For the 6 Months Ended
 
January 1,
2010
January 2,
2009(a)
January 1,
2010
January 2,
2009(a)
Revenue
$
3,027
 
$
2,270
 
$
5,690
 
$
5,302
 
                       
Cost of revenue  
2,104
   
1,954
   
4,114
   
4,460
 
Product development  
227
   
235
   
434
   
495
 
Marketing and administrative  
110
   
142
   
217
   
290
 
Amortization of intangibles   8     14     16     28  
Restructuring and other, net   blank space     78    
46
    101  
Impairment of goodwill and other long-lived assets   blank space     2,320    
64
    2,320  
  Total operating expenses  
2,449
   
4,743
   
4,891
   
7,694
 
   
       
Income (loss) from operations
 
578
   
(2,473)
   
799
   
(2,392)
 
       
Interest income  
1
   
5
   
2
   
12
 
Interest expense   (41)     (32)     (87)     (65)  
Other, net  
(11)
    (8)    
(7)
    22)  
  Other income (expense), net   (51)     (35)     (92)     (75)  
   
       
Income (loss) before income taxes
 
527
   
(2,508)
   
707
   
(2,467)
 
Provision for (benefit from) income   taxes
 
(6)
   
316
   
(5)
   
300
 
 
Net income (loss)
$
533
 
$
(2,824)
 
$
712
 
$
(2,767)
 
 
Net income (loss) per share:        
  Basic
$
1.07
 
$
(5.80)
 
$
1.43
 
$
(5.69)
 
  Diluted  
1.03
   
(5.80)
   
1.38
   
(5.69)
 
Number of shares used in per share calculations:        
  Basic  
498
   
487
   
496
   
486
 
  Diluted  
520
   
487
   
518
   
486
 



(a)  As adjusted due to changes to the accounting for convertible debt instruments implemented in the first quarter of fiscal year 2010.


 

Seagate Technology
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
For the 6 Months Ended
null

January 1,
2010
January 2,
2009 (a)
Operating Activities              
Net income (loss)
$
712
   
$
(2,767)
 
Adjustments to reconcile net income to net  cash provided by (used in) operating activities:              
Depreciation and amortization  
396
     
481
 
  Stock-based compensation   25       53  
  Impairment of goodwill and other long-lived assets   64       2,320  
  Deferred income taxes   6       305  
Other non-cash operating activities, net  
22
     
(8)
 
Changes in operating assets and liabilities:              
    Accounts receivable  
(300)
     
368
 
    Inventories  
(58)
     
149
 
    Accounts payable  
229
     
(282)
 
    Accrued employee compensation   63       (284)  
    Accrued expenses and warranty   (90)       (105)  
  Other assets and liabilities  
(38)
     
162
 
   
 
  Net cash provided by (used in) operating  activities
 
1,031
     
392
 
   
 
 
Investing Activities              
Acquisition of property, equipment and  leasehold   improvements  
(192)
     
(494)
 
Purchases of short-term investments  
(190)
     
(116)
 
Maturities and sales of short-term investments  
101
     
120
 
Decrease in restricted cash and investments   11       space  
Proceeds from sale of investment in equity securities   space       11  
Other investing activities, net  
(3)
     
4
 
   
 
Net cash provided by (used in) investing activities  
(273)
     
(475)
 
   
 
               
Financing Activities              
Proceeds from short-term borrowings   15       350  
Repayment of short-term borrowings   (350)       space  
Repayment of long-term debt   (380)       (15)  
Decrease in restricted cash and investments   379       space  
Proceeds from exercise of employee stock              
     options and employee stock purchase plan   42       36  
Dividends to shareholders         (117)  
   
 
Net cash provided by (used in) financing activities  
(294)
     
254
 
   
 
               
  Increase (decrease) in cash and cash              
       equivalents   464       171  
             
Cash and cash equivalents at the beginning of the period  
1,427
     
990
 
 
 
Cash and cash equivalents at the end of the period
$
1,891
   
$
1,161
 
(a) 

As adjusted due to changes to the accounting for convertible debt instruments implemented in the first quarter of fiscal year 2010.