10-QPeriod: Q2 FY2014

Seagate Technology Holdings plc Quarterly Report for Q2 Ended Dec 27, 2013

Filed January 28, 2014For Securities:STX

Summary

Seagate Technology Holdings plc (STX) reported its quarterly results for the period ending December 27, 2013. The company generated $3.528 billion in revenue, a slight decrease of 4% compared to the same quarter in the prior year, primarily due to lower unit shipments. Despite the revenue dip, gross margins remained stable at 28%, reflecting a balance between pricing and product mix. Key financial activities during the quarter included significant share repurchases totaling $1.52 billion and the issuance of $800 million in senior notes. The company also announced its intention to acquire Xyratex Ltd. for approximately $374 million. While operating expenses, particularly in product development and marketing/administrative areas, saw an increase, the company maintained profitability. The balance sheet reflects a strengthening cash position, with cash and cash equivalents increasing substantially, driven by strong operating cash flow and debt issuance.

Financial Highlights

55 data points
Beta

Revenue

$3.53B

28.0% Gross Margin

Net Income

$428.00M

12.1% Net Margin

EPS (Diluted)

$1.24

Total Assets

$8.89B

Cash & Equivalents

$2.29B

Free Cash Flow

$713.00M

Financial Statements
Beta
Revenue$3.53B
Cost of Revenue$2.54B
Gross Profit$987.00M
R&D Expenses$312.00M
SG&A Expenses$190.00M
Operating Expenses$3.08B
Operating Income$444.00M
Interest Expense$49.00M
Net Income$428.00M
EPS (Basic)$1.27
EPS (Diluted)$1.24
Shares Outstanding (Basic)336.00M
Shares Outstanding (Diluted)346.00M

Key Highlights

  • 1Revenue for the quarter was $3.528 billion, a decrease of 4% year-over-year, primarily driven by lower unit shipments.
  • 2Gross margin remained stable at 28% of revenue, indicating a consistent pricing environment and product mix.
  • 3The company repurchased approximately $1.52 billion of its ordinary shares in the quarter, demonstrating a commitment to returning capital to shareholders.
  • 4Seagate issued $800 million in 3.75% Senior Notes due November 2018 to strengthen its financial position.
  • 5The company announced an agreement to acquire Xyratex Ltd. for approximately $374 million, a move aimed at expanding its business.
  • 6Cash and cash equivalents increased significantly to $2.293 billion, up from $1.708 billion at the beginning of the fiscal year, bolstered by operating cash flow and debt proceeds.
  • 7Product development expenses increased by 13% year-over-year, reflecting continued investment in storage technologies and headcount.

Frequently Asked Questions

Seagate reported revenue of $3.528 billion for the quarter ending December 27, 2013, which represents a decrease of 4% compared to the same quarter in the prior year. This decline was primarily attributed to a decrease in the number of units shipped.

Seagate actively managed its capital by repurchasing approximately $1.52 billion of its ordinary shares and issuing $800 million in 3.75% Senior Notes due November 2018. The company also saw a significant increase in its cash and cash equivalents to $2.293 billion, driven by operating activities and debt issuance.

Product development expenses increased by 13% year-over-year, reflecting increased investments in storage technologies and related headcount. Marketing and administrative expenses also saw a substantial increase of 37% year-over-year, partly due to higher legal expenses and headcount costs. Amortization of intangibles rose due to the commencement of amortization for an in-process R&D asset.

Seagate's liquidity appears strong, with significant cash reserves, expected operating cash flow, and an available revolving credit facility. The company plans to manage its working capital, product development, capital expenditures, debt obligations, and dividends. Management expects to remain in compliance with debt covenants over the next 12 months.