Apr 20, 2010

Seagate Technology Reports Fiscal Third Quarter 2010 Results

SCOTTS VALLEY, Calif – Seagate Technology (NASDAQ:STX) today reported financial results for the quarter ended April 2, 2010 of 50.3 million disk drive unit shipments, revenue of $3.05 billion, gross margin of 29.6%, net income of $518 million and diluted earnings per share of $1.00. The financial results for the quarter include $9 million of purchased intangibles amortization expense and $4 million of restructuring charges. The aggregate impact of these expense items is $13 million or approximately $0.03 per diluted share

For the nine months ended April 2, 2010 the company reported 146.5 million disk drive unit shipments, revenue of $8.74 billion, gross margin of 28.3%, net income of $1.23 billion and diluted earnings per share of $2.38. The financial results for the nine months ended April 2, 2010 include $29 million of purchased intangibles amortization expense, $50 million of restructuring costs and a write down of long-lived assets of $64 million. The aggregate impact of these expense items is $143 million or approximately $0.28 per diluted share.

“I'm very encouraged by our financial and operational performance throughout fiscal 2010. In fiscal year 2010 Seagate delivered record shipments, profitability and operating margin. The company responded well to the increase in global hard drive demand, which grew 22% year-over-year, and remained focused on improving key business fundamentals to position the company for future growth.

“Consistent with our expectations at the beginning of the March quarter, we achieved strong operational and financial results,” said Steve Luczo, Seagate CEO. “We delivered record shipments while our inventory levels at our OEM and distribution customers remained at nearly all time lows across all geographies and all product offerings. Demand for Seagate products remains very strong and we expect to see tight supply throughout the remainder of the calendar year.”

Additional information relating to the financial results for the fiscal third quarter and fiscal year 2010 can be found online at seagate.com.

Conference Call
Seagate will hold a conference call to review the third quarter results today at 3:00 p.m. Pacific Time. During today’s conference call, the company will provide an outlook for its fourth fiscal quarter of 2010, including key underlying assumptions.

Seagate has issued a Supplemental Commentary document that contains information historically presented during the live conference call. The Supplemental Commentary will not be read during today’s call, but rather it is available in the investor relations section of seagate.com.

The conference call can be accessed online at seagate.com or by phone as follows:
USA: (800) 299-7928
International: (617) 614-3926
Participant Passcode: 19009043

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 September 2011 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, global economic conditions may pose a risk to the Company’s operating and financial performance. Such risks and uncertainties also include the impact of variable demand; 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 Annual 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 April 4, 2010, 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)

 
April 2,
2010
   
July 3,
2009 (a)
Assets              
Cash and cash equivalents
$
2,062
 
$
1,427
  Short-term investments  
214
     
114
 
  Restricted cash and investments   103       508  
  Accounts receivable, net  
1,451
     
1,033
 
  Inventories  
685
     
587
 
  Deferred income taxes  
81
 
 
 
97
 
  Other current assets  
560
     
528
 
   
 
  Total Current Assets  
5,156
     
4,294
 
               
Property, equipment and leasehold   improvements, net  
2,054
     
2,229
 
  Deferred income taxes
 
384
 
 
 
372
 
  Other assets, net  
153
     
192
 
   
 
  Total Assets
$
7,747
   
$
7,087
 
Liabilities and Shareholders' Equity              
  Short-term borrowings
$
blank space
   
$
350
 
  Accounts payable
 
1,895
   
 
1,573
 
  Accrued employee compensation  
214
     
144
 
  Accrued warranty  
193
     
213
 
  Accrued expenses  
445
     
483
 
  Accrued income taxes  
12
     
10
 
  Current portion of long-term debt  
377
     
421
 
   
 
  Total Current Liabilities
 
3,136
     
3,194
 
               
  Long-term accrued warranty  
201
     
224
 
  Long-term accrued income taxes  
60
     
69
 
  Other non-current liabilities  
95
     
120
 
  Long-term debt, less current portion  
1,598
     
1,926
 
   
 
  Total Liabilities
 
5,090
     
5,533
 
             
  Shareholders' Equity  
2,657
     
1,554
 
 
 
  Total Liabilities and Shareholders'  Equity
$
7,747
   
$
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 Three Months Ended
For the Nine Months Ended
 
April 2,
2010
April 3,
2009(a)
April 2,
2010
April 3,
2009(a)
Revenue
$
3,049
 
$
2,150
 
$
8,738
 
$
7,452
 
                       
Cost of revenue  
2,148
   
1,997
   
6,261
   
6,457
 
Product development  
224
   
243
   
658
   
738
 
Marketing and administrative  
105
   
134
   
323
   
424
 
Amortization of intangibles   8     13     23     41  
Restructuring and other, net   4     25    
50
    126  
Impairment of goodwill and other long-lived assets   blank space     _blank space    
64
    2,320  
  Total operating expenses  
2,489
   
2,412
   
7,739
   
10,106
 
   
       
Income (loss) from operations  
560
   
(262)
   
1,359
   
(2,654)
 
       
Interest income  
2
   
3
   
4
   
15
 
Interest expense   (41)     (27)     (127)     (102)  
Other, net  
1
    5    
(7)
    (17)  
  Other income (expense), net   (38)     (29)     (130)     (104)  
   
       
Income (loss) before income taxes  
522
   
(291)
   
1,229
   
(2,758)
 
Provision for (benefit from) income   taxes  
4
   
16
   
(1)
   
284
 
 
Net income (loss)
$
518
 
$
(275)
 
$
1,230
 
$
(3,042)
 
 
Net income (loss) per share:        
  Basic
$
1.05
 
$
(0.56)
 
$
2.48
 
$
(6.25)
 
  Diluted  
1.00
   
(0.56)
   
2.38
   
(6.25)
 
Number of shares used in per share calculations:        
  Basic  
493
   
489
   
495
   
487
 
  Diluted  
520
   
489
   
519
   
487
 
Dividends declared per share
$
blank space
 
$
 0.03
 
$
blank space
 
$
0.27
 



(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 Nine Months Ended
null

April 2,
2010
April 3,
2009 (a)
Operating Activities              
Net income (loss)
$
1,203
   
$
(3,042)
 
Adjustments to reconcile net income to net  cash provided by (used in) operating activities:              
Depreciation and amortization  
584
     
707
 
  Stock-based compensation   38       70  
  Impairment of goodwill and other long-lived assets   64       2,320  
  Deferred income taxes   10       295  
Other non-cash operating activities, net  
22
     
(1)
 
Changes in operating assets and liabilities:              
    Accounts receivable  
(418)
     
534
 
    Inventories  
(98)
     
368
 
    Accounts payable  
242
     
(263)
 
    Accrued employee compensation   70       (323)  
    Accrued expenses and warranty   (124)       (150)  
  Other assets and liabilities  
12
     
116
 
   
 
  Net cash provided by (used in) operating  activities
 
1,608
     
631
 
   
 
 
Investing Activities              
Acquisition of property, equipment and  leasehold   improvements  
(372)
     
(553)
 
Purchases of short-term investments  
(278)
     
(124)
 
Maturities and sales of short-term investments  
176
     
146
 
Decrease (increase) in restricted cash and investments   26       -  
Proceeds from liquidation of deferred compensation plan investments   _       -  
Proceeds from sale of investment in equity securities   _       11  
Other investing activities, net  
1
     
8
 
   
 
Net cash provided by (used in) investing activities  
(752)
     
(618)
 
   
 
               
Financing Activities              
Proceeds from short-term borrowings   15       350  
Repayment of short-term borrowings   (365)       _space  
               
Repayment of long-term debt   385       (20)  
Decrease (increase) in restricted cash and investments   379       -  
Proceeds from exercise of employee stock and employee stock purchase plan   81       45  
Repurchase of common shares   (251)       _  
Dividends to shareholders   _       (132)  
Other financing activities, net   _       -  
   
 
Net cash provided by (used in) financing activities  
(526)
     
243
 
   
 
               
  Increase (decrease) in cash and cash              
       equivalents   635       362  
             
Cash and cash equivalents at the beginning of the period  
1,427
     
990
 
 
 
Cash and cash equivalents at the end of the period
$
2,062
   
$
1,352
 
(a) 

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