STX 8-K
Seagate Technology Holdings plc (STX)
8-K
2020-04-22
For: 2020-04-22
View Original
Added on
April 08, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________
FORM 8-K
____________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 2020
____________________________
SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
____________________________
| (State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer | ||||||
| incorporation or organization) | Identification Number) | |||||||
| (Address of principal executive office) | (Zip Code) | ||||
Registrant’s telephone number, including area code: (353 ) (1) 234-3136
N/A
(Former name or former address, if changed since last report)
_______________________________________________________________________________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 22, 2020 , Seagate Technology plc (the “Company” or “Seagate”) issued a press release reporting its financial results for the fiscal third quarter ended April 3, 2020. The press release is attached to this Current Report on Form 8-K as Exhibit 99.1.
The information in this Item 2.02 and the exhibit hereto are “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section.
Item 7.01 Regulation FD Disclosure.
On April 21, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.65 per share, which will be payable on July 8, 2020 to shareholders of record as of the close of business on June 24, 2020.
Seagate has issued a Supplemental Financial Information document. The Supplemental Financial Information is available on Seagate’s Investor Relations website at investors.seagate.com.
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 investors.seagate.com. During today’s webcast, the Company will provide an outlook for its fiscal fourth quarter of 2020 including key underlying assumptions. A replay will be available on Seagate’s Investor Relations website at investors.seagate.com shortly following the conclusion of the event and will be archived for approximately one year. Investors and others should note that the Company routinely uses the Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that the Company posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in the Company to review the information that it shares on investors.seagate.com.
The information in this Item 7.01 is “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of such section.
Item 8.01 Other Events
The Company is filing this Current Report on Form 8-K to supplement the risk factors described in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended June 28, 2019. The following risk factor disclosure should be read in conjunction with the risk factors described in the Annual Report on Form 10-K.
The outbreak of COVID-19 may negatively impact our business, operating results and financial condition, as well as the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related effects will adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.
The COVID-19 pandemic has resulted in a widespread health crisis and numerous disease control measures being taken to limit its spread. The impact of the pandemic on our business has included or could in the future include:
•disruptions to or restrictions on our ability to ensure the continuous manufacture and supply of our products and services, including insufficiency of our existing inventory levels;
•temporary closures or reductions in operational capacity of our facilities or the facilities of our direct or indirect suppliers or customers;
•permanent closures of our direct and indirect suppliers, resulting in adverse effects to our supply chain;
•temporary shortages of skilled employees available to staff manufacturing facilities due to stay at home orders and travel restrictions within as well as into and out of countries;
•increases in operational expenses and other costs related to requirements implemented to mitigate the impact of the pandemic;
•supply chain disruptions;
•delays or limitations on the ability of our customers to perform or make timely payments;
•reductions in short- and long-term demand for our products, or other disruptions in technology buying patterns;
•adverse effects on economies and financial markets globally, potentially leading to a prolonged economic downturn;
•delays to and/or lengthening of our sales or development cycles or qualification activity;
•challenges in obtaining financing due to turmoil in financial markets;
•workforce disruptions due to illness, quarantines, governmental actions, other restrictions, and/or the social distancing measures we have taken to mitigate the impact of COVID-19 at certain of our locations around the world in an effort to protect the health and well-being of our employees, customers, suppliers and of the communities in which we operate (including working from home, restricting the number of employees attending events or meetings in person, limiting the number of people in our buildings and factories at any one time, further restricting access to our facilities and suspending employee travel); and
•our management team continuing to commit significant time, attention and resources to monitoring the COVID-19 pandemic and seeking to mitigate its effects on our business and workforce.
The ultimate extent of the impact of COVID-19 on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time. These impacts, individually or in the aggregate, could have a material and adverse effect on our business, results of operations and financial condition. Such effect may be exacerbated in the event the outbreak and the measures taken in response to it persist for an extended period of time, or if there is a resurgence of the outbreak. Under any of these circumstances, the resumption of normal business operations may be delayed or hampered by lingering effects of COVID-19 on our operations, direct and indirect suppliers, partners, and customers.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is attached to this Current Report on Form 8-K:
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY | ||||||||
Date: April 22, 2020 | By: | /s/ Gianluca Romano | ||||||
| Name: | Gianluca Romano | |||||||
| Title: | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |||||||
Exhibit 99.1
Investor Relations Contact:
Shanye Hudson, (510) 661-1714
Media Contact:
Gregory Belloni, (408) 658-1018
SEAGATE TECHNOLOGY REPORTS FISCAL THIRD QUARTER 2020 FINANCIAL RESULTS
–Achieved revenue of $2.72 billion
–Reported GAAP operating margin of 13.8%; non-GAAP operating margin of 15.5%
–Delivered GAAP diluted earnings per share (EPS) of $1.22; non-GAAP diluted EPS of $1.38
–Generated $390 million in operating cash flow and $260 million in free cash flow
CUPERTINO, CA - April 22, 2020 - Seagate Technology plc (NASDAQ: STX) (the “Company” or “Seagate”) today reported financial results for its fiscal third quarter ended April 3, 2020.
“Seagate executed very well in the third quarter while navigating the unprecedented challenges brought on by the COVID-19 pandemic. Our teams worked tirelessly to safeguard the health of their colleagues, support customer demand, and execute our product roadmap. In this challenging environment, we achieved strong financial performance, delivering revenue and non-GAAP EPS that were above our guidance midpoint and continuing to generate solid free cash flow,” said Dave Mosley, Seagate’s chief executive officer.
“Our results demonstrate the resilience of our business model, which combined with our strong balance sheet and liquidity offer stability to manage through this uncertain environment. Over the long-term, we believe the strength of our technology innovation and product portfolio position Seagate well to capitalize on secular demand for mass capacity storage as well as the growing necessity for cost effective data management solutions driven by the transition to IT 4.0.”
Quarterly Financial Results
| GAAP | Non-GAAP | ||||||||||||||||||||||
| FQ3 2020 | FQ3 2019 | FQ3 2020 | FQ3 2019 | ||||||||||||||||||||
| Revenue ($M) | $ | 2,718 | $ | 2,313 | $ | 2,718 | $ | 2,313 | |||||||||||||||
| Gross Margin | 27.4 | % | 26.0 | % | 28.0 | % | 26.8 | % | |||||||||||||||
| Operating Margin | 13.8 | % | 10.2 | % | 15.5 | % | 12.7 | % | |||||||||||||||
| Net Income ($M) | $ | 320 | $ | 195 | $ | 363 | $ | 263 | |||||||||||||||
| Diluted Earnings Per Share | $ | 1.22 | $ | 0.69 | $ | 1.38 | $ | 0.93 | |||||||||||||||
The Company generated $390 million in cash flow from operations and $260 million in free cash flow during the fiscal third quarter 2020. Seagate maintained a healthy balance sheet and during the fiscal third quarter 2020, the Company paid cash dividends of $170 million and repurchased 4 million ordinary shares for $195 million. Cash and cash equivalents totaled $1.6 billion at the end of the quarter. There were 257 million ordinary shares issued and outstanding as of the end of the quarter.
All periods presented exclude share-based compensation from non-GAAP results. For a detailed reconciliation of GAAP to non-GAAP results, see accompanying financial tables.
Seagate has issued a Supplemental Financial Information document, which is available on Seagate’s Investor Relations website at investors.seagate.com.
Quarterly Cash Dividend
The Board of Directors of the Company (the “Board”) declared a quarterly cash dividend of $0.65 per share, which will be payable on July 8, 2020 to shareholders of record as of the close of business on June 24, 2020. 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.
Business Outlook
The business outlook for the fiscal fourth quarter 2020 is based on our current assumptions and expectations; actual results may differ materially, as a result of, among other things, the important factors discussed in the Cautionary Note Regarding Forward-Looking Statements section of this release.
The Company is providing the following guidance for its fiscal fourth quarter 2020:
•Revenue of $2.6 billion, plus or minus 7%
•Non-GAAP diluted EPS of $1.28, plus or minus 10%
Guidance regarding non-GAAP diluted EPS excludes known charges related to amortization of acquired intangible assets and estimated share-based compensation expenses of $0.05 per share and $0.11 per share, respectively.
We have not reconciled our non-GAAP diluted EPS to the most directly comparable GAAP measure because material items that may impact these measures are out of our control and/or cannot be reasonably predicted, including, but not limited to, accelerated depreciation, impairment and other charges related to cost saving efforts, restructuring charges, strategic investment losses or impairment recognized, income tax adjustments on these measures, and other charges or benefits that may arise. The amounts of these measures are not currently available, but may be material to future results. A reconciliation of the non-GAAP diluted EPS to the corresponding GAAP measures is not available without unreasonable effort. A reconciliation of our historical non-GAAP financial measures to their nearest GAAP equivalent is contained in this release.
Investor Communications
Seagate management will hold a public webcast today at 2:00 p.m. Pacific / 5:00 p.m. Eastern that can be accessed on its Investor Relations website at investors.seagate.com.
An archived audio webcast of this event will be available on Seagate’s Investor Relations website at investors.seagate.com shortly following the event conclusion.
About Seagate
Seagate crafts the datasphere, helping to maximize humanity’s potential by innovating world-class, precision-engineered data management solutions with a focus on sustainable partnerships. Learn more about Seagate by visiting www.seagate.com or following us on Twitter, Facebook, LinkedIn, YouTube, and subscribing to our blog.
© 2020 Seagate Technology LLC. All rights reserved. Seagate, Seagate Technology, and the Spiral logo are registered trademarks of Seagate Technology LLC in the United States and/or other countries.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements include, among other things, statements about the Company’s plans, strategies and prospects, financial outlook for future periods, including the fiscal fourth quarter 2020, expectations regarding the Company’s products, our ability to ramp production, storage industry trends and market demand, shifts in technology, the Company’s ability to meet market and industry expectations, and the effects of these future trends, the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic, and expectations on the Company’s business as well as dividend issuance plans for the fiscal quarter ending July 3, 2020 and beyond. Forward-looking statements generally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “should,” “may,” “will,” "will continue," "can," "could" or the negative of these words, variations of these words and comparable terminology. Information concerning risks, uncertainties and other factors that could cause results to differ materially from the expectations described in this press release include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on August 2, 2019, and in Item 8.01 in our Form 8-K filed with the SEC on April 22, 2020, both of which are available on our investor relations website at investors.seagate.com. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended April 3, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on, and which speak only as of, the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, unless required by applicable law.
The inclusion of Seagate’s website addresses in this press release are intended to be inactive textual references only and not active hyperlinks. The information contained in, or that can be accessed through, Seagate’s websites and social media channels are not part of this press release.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
| April 3, 2020 | June 28, 2019 | ||||||||||
(unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,612 | $ | 2,220 | |||||||
| Accounts receivable, net | 1,160 | 989 | |||||||||
| Inventories | 1,102 | 970 | |||||||||
| Other current assets | 141 | 184 | |||||||||
| Total current assets | 4,015 | 4,363 | |||||||||
| Property, equipment and leasehold improvements, net | 2,093 | 1,869 | |||||||||
| Goodwill | 1,237 | 1,237 | |||||||||
| Other intangible assets, net | 70 | 111 | |||||||||
| Deferred income taxes | 1,112 | 1,114 | |||||||||
| Other assets, net | 302 | 191 | |||||||||
| Total Assets | $ | 8,829 | $ | 8,885 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,830 | $ | 1,420 | |||||||
| Accrued employee compensation | 155 | 169 | |||||||||
| Accrued warranty | 76 | 91 | |||||||||
| Current portion of long-term debt | 12 | — | |||||||||
| Accrued expenses | 617 | 552 | |||||||||
| Total current liabilities | 2,690 | 2,232 | |||||||||
| Long-term accrued warranty | 87 | 104 | |||||||||
| Long-term accrued income taxes | 3 | 4 | |||||||||
| Other non-current liabilities | 166 | 130 | |||||||||
| Long-term debt | 4,091 | 4,253 | |||||||||
| Total Liabilities | 7,037 | 6,723 | |||||||||
| Total Equity | 1,792 | 2,162 | |||||||||
| Total Liabilities and Equity | $ | 8,829 | $ | 8,885 | |||||||
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| April 3, 2020 | March 29, 2019 | April 3, 2020 | March 29, 2019 | ||||||||||||||||||||
| Revenue | $ | 2,718 | $ | 2,313 | $ | 7,992 | $ | 8,019 | |||||||||||||||
| Cost of revenue | 1,972 | 1,712 | 5,817 | 5,711 | |||||||||||||||||||
| Product development | 246 | 238 | 751 | 750 | |||||||||||||||||||
| Marketing and administrative | 119 | 110 | 361 | 345 | |||||||||||||||||||
| Amortization of intangibles | 3 | 6 | 11 | 17 | |||||||||||||||||||
| Restructuring and other, net | 2 | 11 | 19 | 41 | |||||||||||||||||||
| Total operating expenses | 2,342 | 2,077 | 6,959 | 6,864 | |||||||||||||||||||
| Income from operations | 376 | 236 | 1,033 | 1,155 | |||||||||||||||||||
| Interest income | 4 | 21 | 19 | 67 | |||||||||||||||||||
| Interest expense | (49) | (55) | (152) | (169) | |||||||||||||||||||
| Other, net | 7 | 13 | (28) | 28 | |||||||||||||||||||
| Other expense, net | (38) | (21) | (161) | (74) | |||||||||||||||||||
| Income before income taxes | 338 | 215 | 872 | 1,081 | |||||||||||||||||||
| Provision for income taxes | 18 | 20 | 34 | 52 | |||||||||||||||||||
| Net income | $ | 320 | $ | 195 | $ | 838 | $ | 1,029 | |||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | 1.23 | $ | 0.69 | $ | 3.19 | $ | 3.62 | |||||||||||||||
| Diluted | 1.22 | 0.69 | 3.15 | 3.57 | |||||||||||||||||||
| Number of shares used in per share calculations: | |||||||||||||||||||||||
| Basic | 261 | 281 | 263 | 284 | |||||||||||||||||||
| Diluted | 263 | 284 | 266 | 288 | |||||||||||||||||||
| Cash dividends declared per ordinary share | $ | 0.65 | $ | 0.63 | $ | 1.93 | $ | 1.89 | |||||||||||||||
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| For the Nine Months Ended | |||||||||||
| April 3, 2020 | March 29, 2019 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 838 | $ | 1,029 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 279 | 407 | |||||||||
| Share-based compensation | 80 | 73 | |||||||||
| Deferred income taxes | 3 | 15 | |||||||||
| Other non-cash operating activities, net | 55 | (69) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | (172) | 296 | |||||||||
| Inventories | (126) | 49 | |||||||||
| Accounts payable | 424 | (366) | |||||||||
| Accrued employee compensation | (14) | (108) | |||||||||
| Accrued expenses, income taxes and warranty | (18) | (32) | |||||||||
| Other assets and liabilities | (23) | 19 | |||||||||
| Net cash provided by operating activities | 1,326 | 1,313 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Acquisition of property, equipment and leasehold improvements | (471) | (451) | |||||||||
| Proceeds from settlement of foreign currency forward exchange contracts | — | 66 | |||||||||
| Proceeds from sale of strategic investments | — | 10 | |||||||||
| Proceeds from the sale of assets | 1 | 30 | |||||||||
| Purchases of investments | (57) | (14) | |||||||||
| Net cash used in investing activities | (527) | (359) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Redemption and repurchase of debt | (685) | (499) | |||||||||
| Dividends to shareholders | (505) | (539) | |||||||||
| Repurchases of ordinary shares | (795) | (613) | |||||||||
| Taxes paid related to net share settlement of equity awards | (39) | (30) | |||||||||
| Net proceeds from issuance of long-term debt | 498 | 196 | |||||||||
| Proceeds from issuance of ordinary shares under employee stock plans | 100 | 68 | |||||||||
| Other financing activities, net | (2) | — | |||||||||
| Net cash used in financing activities | (1,428) | (1,417) | |||||||||
| Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | (8) | (3) | |||||||||
| Decrease in cash, cash equivalents and restricted cash | (637) | (466) | |||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 2,251 | 1,857 | |||||||||
| Cash, cash equivalents and restricted cash at the end of the period | $ | 1,614 | $ | 1,391 | |||||||
Use of non-GAAP financial information
The Company uses non-GAAP measures of adjusted revenue, gross margin, gross margin as a percentage of revenue, operating expenses, income from operations, operating margin as a percentage of revenue, net income, diluted EPS, and free cash flow, which are adjusted from results based on GAAP to exclude certain benefits, 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 benefits, expenses, gains and losses that it believes are not indicative of its core operating results and because it is similar to the approach used in connection with the financial models and estimates published by financial analysts who follow the Company. Free cash flow does not reflect all of the Company's expenses and non-cash items, and does not reflect the Company's uses of cash in financing and investing activities.
These non-GAAP results are some of the 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 or replacement for, or superior to, GAAP results. These non-GAAP measures may differ from the non-GAAP measures reported by other companies in its industry.
SEAGATE TECHNOLOGY PLC
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts and gross margin)
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| April 3, 2020 | March 29, 2019 (a) | April 3, 2020 | March 29, 2019 (a) | ||||||||||||||||||||
| GAAP Revenue | $ | 2,718 | $ | 2,313 | $ | 7,992 | $ | 8,019 | |||||||||||||||
| Adjustment to discontinued products | — | — | — | 1 | |||||||||||||||||||
| Non-GAAP Revenue | $ | 2,718 | $ | 2,313 | $ | 7,992 | $ | 8,020 | |||||||||||||||
| GAAP Gross Margin | $ | 746 | $ | 601 | $ | 2,175 | $ | 2,308 | |||||||||||||||
| Adjustment to discontinued products | — | — | — | 1 | |||||||||||||||||||
| Amortization of acquired intangible assets | 9 | 14 | 29 | 40 | |||||||||||||||||||
| Share-based compensation | 7 | 6 | 20 | 17 | |||||||||||||||||||
| Restructuring and other, net | — | — | — | (1) | |||||||||||||||||||
| Non-GAAP Gross Margin | $ | 762 | $ | 621 | $ | 2,224 | $ | 2,365 | |||||||||||||||
| GAAP Gross Margin | 27.4 | % | 26.0 | % | 27.2 | % | 28.8 | % | |||||||||||||||
| Non-GAAP Gross Margin | 28.0 | % | 26.8 | % | 27.8 | % | 29.5 | % | |||||||||||||||
| GAAP Operating Expenses | $ | 370 | $ | 365 | $ | 1,142 | $ | 1,153 | |||||||||||||||
| Accelerated depreciation, impairment and other charges related to cost saving efforts | — | — | — | (2) | |||||||||||||||||||
| Amortization of acquired intangible assets | (3) | (5) | (9) | (14) | |||||||||||||||||||
| Restructuring and other, net | (2) | (11) | (19) | (41) | |||||||||||||||||||
| Share-based compensation | (20) | (22) | (60) | (56) | |||||||||||||||||||
| Other charges | (5) | — | (5) | — | |||||||||||||||||||
| Non-GAAP Operating Expenses | $ | 340 | $ | 327 | $ | 1,049 | $ | 1,040 | |||||||||||||||
| GAAP Income From Operations | $ | 376 | $ | 236 | $ | 1,033 | $ | 1,155 | |||||||||||||||
| Adjustment to discontinued products | — | — | — | 1 | |||||||||||||||||||
| Accelerated depreciation, impairment and other charges related to cost saving efforts | — | — | — | 2 | |||||||||||||||||||
| Amortization of acquired intangible assets | 12 | 19 | 38 | 54 | |||||||||||||||||||
| Restructuring and other, net | 2 | 11 | 19 | 41 | |||||||||||||||||||
| Share-based compensation | 27 | 28 | 80 | 73 | |||||||||||||||||||
| Other charges | 5 | — | 5 | (1) | |||||||||||||||||||
| Non-GAAP Income From Operations | $ | 422 | $ | 294 | $ | 1,175 | $ | 1,325 | |||||||||||||||
| GAAP Operating Margin | 13.8 | % | 10.2 | % | 12.9 | % | 14.4 | % | |||||||||||||||
| Non-GAAP Operating Margin | 15.5 | % | 12.7 | % | 14.7 | % | 16.5 | % | |||||||||||||||
SEAGATE TECHNOLOGY PLC
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts and gross margin)
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| April 3, 2020 | March 29, 2019 (a) | April 3, 2020 | March 29, 2019 (a) | ||||||||||||||||||||
| GAAP Net Income | $ | 320 | $ | 195 | $ | 838 | $ | 1,029 | |||||||||||||||
| Adjustment to discontinued products | — | — | — | 1 | |||||||||||||||||||
| Accelerated depreciation, impairment and other charges related to cost saving efforts | — | — | — | 2 | |||||||||||||||||||
| Amortization of acquired intangible assets | 12 | 19 | 38 | 54 | |||||||||||||||||||
| Restructuring and other, net | 2 | 11 | 19 | 41 | |||||||||||||||||||
| Losses recognized on the early redemption and repurchase of debt | — | — | 30 | — | |||||||||||||||||||
| Strategic investment losses or impairment recognized | — | — | 1 | 2 | |||||||||||||||||||
| Share-based compensation | 27 | 28 | 80 | 73 | |||||||||||||||||||
| Other charges | 4 | — | 4 | (1) | |||||||||||||||||||
| Income tax adjustments | (2) | 10 | (10) | 8 | |||||||||||||||||||
| Non-GAAP Net Income | $ | 363 | $ | 263 | $ | 1,000 | $ | 1,209 | |||||||||||||||
| Shares used in diluted net income per share calculation | 263 | 284 | 266 | 288 | |||||||||||||||||||
| GAAP Diluted Net Income Per Share | $ | 1.22 | $ | 0.69 | $ | 3.15 | $ | 3.57 | |||||||||||||||
| Non-GAAP Diluted Net Income Per Share | 1.38 | 0.93 | 3.76 | 4.20 | |||||||||||||||||||
| GAAP Net Cash Provided by Operating Activities | $ | 390 | $ | 438 | $ | 1,326 | $ | 1,313 | |||||||||||||||
| Acquisition of property, equipment and leasehold improvements | 130 | 147 | 471 | 451 | |||||||||||||||||||
| Free Cash Flow | $ | 260 | $ | 291 | $ | 855 | $ | 862 | |||||||||||||||
(a) In the fiscal first quarter of 2020, the Company began excluding share-based compensation from non-GAAP results. To provide improved visibility and comparability, the Company has reflected this change to its non-GAAP results retrospectively to the earliest date presented.
The Company’s Non-GAAP measures are adjusted for the following items:
Adjustment to discontinued products
These adjustments relate to sales of certain discontinued products or changes in sales provision for discontinued products. These adjustments are inconsistent in amount and frequency and are excluded in the non-GAAP measures as these adjustments are not indicative of the underlying ongoing operating performance.
Accelerated depreciation, impairment and other charges related to cost saving efforts
These expenses are excluded in the non-GAAP measures due to the inconsistency in amount and frequency and are excluded to facilitate a more meaningful evaluation of the Company’s current operating performance and comparison to its past periods’ operating performance.
Amortization of acquired intangible assets
The Company records expense from amortization of intangible assets that were acquired in connection with its business combinations over their estimated useful lives. Such charges are inconsistent in size and are significantly impacted by the timing and magnitude of the Company’s acquisitions. Consequently, these expenses are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Share-based compensation
As disclosed in the Company’s fiscal fourth quarter 2019 earnings release, share-based compensation expense is excluded from its non-GAAP results. These expenses consist primarily of expenses for employee share-based compensation. Given the variety of equity awards used by companies, the varying methodologies for determining share-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the Company’s control, the Company believes excluding share-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the Company’s peers, a majority of whom also exclude share-based compensation expense from their non-GAAP results.
Other charges
The other charges primarily include impairments or write-offs of other assets and certain discontinued inventory and expense related to disposed business. These charges are inconsistent in amount and frequency and are excluded in the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Restructuring and other, net
Restructuring and other, net are costs associated with restructuring plans that are primarily related to costs associated with reduction in the Company’s workforce, exiting certain facilities and other related costs. These also exclude charges or gains from sale of properties. These costs or benefits do not reflect the Company’s ongoing operating performance and consequently are excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Losses recognized on the early redemption and repurchase of debt
From time to time, the Company incurs losses or gains from the early redemption and repurchase of certain long-term debt instruments. These losses or gains represent the difference between the reacquisition costs and the par value of the debt extinguished and include the write off of any related unamortized debt issuance costs. The amount of these charges may be inconsistent in size and varies depending on the timing of the repurchase of debt.
Strategic investment losses or impairment recognized
From time to time, the Company incurs losses or gains from strategic investments accounted for under the equity method of accounting or records impairment charges which are not considered as part of its ongoing operating performance. The resulting expense or gain is inconsistent in amount and frequency and consequently is excluded from the non-GAAP measures to facilitate a more meaningful evaluation of its current operating performance and comparison to its past periods’ operating performance.
Income tax adjustments
Provision or benefit for income taxes represents the tax effects of non-GAAP adjustments determined using a hybrid with and without method and effective tax rate for the applicable adjustment and jurisdiction.
Free cash flow
Free cash flow is a non-GAAP measure defined as net cash provided by operating activities less acquisition of property, equipment and leasehold improvements. This non-GAAP financial measure is used by management to assess the Company's sources of liquidity, capital structure and operating performance.