UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2017

July 3, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from from:to

Commission FileNo. Number 001-31560

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

Ireland98-0648577

(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification Number)

38/39 Fitzwilliam Square

Dublin 2, Ireland

(Address of principal executive offices)

D02 NX53
(Zip Code)
Registrant’s telephone number, including area code:(353) (1) 234-3136

Securities registered pursuant to Section 12 (b)12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange
on Which Registered

Ordinary Shares, par value $0.00001 per shareSTXThe NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  Yes     NO      No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.    YES  Act. Yes     NO      No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  Yes     NO      No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  Yes     NO      No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and, “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer:Accelerated filer
Non-accelerated filer:Smaller reporting company:
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.
Non-accelerated filer☐  (Do not       Indicate by check ifmark whether the registrant has filed a smallerreport on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting company)Smaller reporting company
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). YES  Yes     NO      No 

The aggregate market value of the voting andnon-voting ordinary shares held bynon-affiliates of the registrant as of December 30, 2016,January 3, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $11.2$15.4 billion based upon the closing price reported for such date by the NASDAQ.

The number of outstanding ordinary shares of the registrant as of July 31, 2017August 3, 2020 was 291,813,271.

257,461,532.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the registrant’s Annual General Meeting of Shareholders, to be held on October 18, 2017,22, 2020, will be incorporated by reference in this Form10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC no later than 120 days after the registrant’sregistrant's fiscal year ended June 30, 2017.

July 3, 2020.



SEAGATE TECHNOLOGY PLC

TABLE OF CONTENTS

Item

    Page No. 
 PART I  

1.

 

Business

   2 

1A.

 

Risk Factors

   12 

1B.

 

Unresolved Staff Comments

   27 

2.

 

Properties

   28 

3.

 

Legal Proceedings

   28 

4.

 

Mine Safety Disclosures

   28 
 PART II  

5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

   29 

6.

 

Selected Financial Data

   31 

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   34 

7A.

 

Quantitative and Qualitative Disclosures About Market Risk

   48 

8.

 

Financial Statements and Supplementary Data

   50 

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

   95 

9A.

 

Controls and Procedures

   95 

9B.

 

Other Information

   95 
 PART III  

10.

 

Directors, Executive Officers and Corporate Governance

   96 

11.

 

Executive Compensation

   96 

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

   96 

13.

 

Certain Relationships and Related Transactions, and Director Independence

   96 

14.

 

Principal Accountant Fees and Services

   96 
 PART IV  

15.

 

Exhibits and Financial Statement Schedules

   96 
 

SIGNATURES

   98 
 

EXHIBIT INDEX

   100 

Item Page No.
 
1
1A.
1B.
2
3
4
 
5
6
7
7A.
8
9
9A.
9B.
 
10
11
12
13
14
 
15




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Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this Annual Report onForm 10-K (the“Form “Form 10-K”), unless the context indicates otherwise, as used herein, the terms “we,” “us,” “Seagate,” the “Company” and “our” refer to Seagate Technology public limited company (“plc”), an Irish public limited company, and its subsidiaries. References to “$” and “dollars” are to United States dollars.

We have compiled the market size information in thisForm 10-K using statistics and other information obtained from several third-party sources.

Various amounts and percentages used in thisForm 10-K have been rounded and, accordingly, they may not total 100%.

Seagate, Seagate Technology, LaCie, Maxtor and the Spiral Logo, are trademarks or registered trademarks of Seagate Technology LLC or one of its affiliated companies in the United States and/or other countries. All other trademarks or registered trademarks are the property of their respective owners.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements and assumptions included in this

This Annual Report onForm 10-K are contains forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933 or Section 21E1995. Forward-looking statements provide current expectations of the Securities Exchange Act of 1934, each as amended, including,future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements contained in particular,this Annual Report on Form 10-K include, among other things, statements about our plans, strategies and prospects,prospects; market demand for our products,products; shifts in technology,technology; estimates of industry growth,growth; effects of the economic conditions worldwide resulting from the COVID-19 pandemic; our ability to effectively manage our cash liquidity position and debt obligations, and comply with the covenants in our credit facilities; our restructuring effortsefforts; the sufficiency of our sources of cash to meet cash needs for the next 12 months; our expectations regarding capital expenditures; and the projected costscost savings for the fiscal quarter ending September 29, 2017 and the fiscal year ending June 29, 2018 and beyond. TheseJuly 2, 2021. Forward-looking statements identify prospective information and may includegenerally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “may,” “will,” “will continue,” “can,” “could,” or negative of these words, variations of these words and comparable terminology. These forward-looking statements are based on information available to the Company as of the date of this Annual Report onForm 10-K and are based on management’s current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to:

the uncertainty in global economic and political conditions;

the development and introduction of products based on new technologies and expansion into new data storage markets, and market acceptance of new products;
the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends;
the impact of variable demand, changes in market demand, and thean adverse pricing environment for disk drives;storage products;

any regulatory, legal, logistical or other impediments to the Company’s ability to execute on its restructuring efforts;

the Company’s ability to achieve projected cost savings in connection with its restructuring plans and consolidation of its manufacturing activities;

the Company’s ability to effectively manage its debt obligations and comply with certain covenants in its credit facilities with respect to financial ratios and financial condition tests;tests and its ability to maintain a favorable cash liquidity position;

the Company’s ability to successfully qualify, manufacture and sell its disk drivestorage products in increasing volumes on a cost-effective basis and with acceptable quality, particularlyquality;
any price erosion or volatility of sales volumes through the new disk drive products with lower cost structures;Company’s distributor and retail channel;

possible excess industry supply with respect to particular disk drive products;the effects of the COVID-19 pandemic and related individual, business and government responses on the global economy and their impact on the Company’s business, operations and financial results;

disruptions to the Company’s supply chain or production capabilities;

the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends;

the development and introduction of products based on new technologies and expansion into new data storage markets;

consolidation trends in the data storage industry;

currency fluctuations and fluctuations in interest rates that may impact the Company’s margins, international sales and international sales;results of operations;

the riskimpact ofnon-compliance with trade barriers, such as import/export duties and restrictions, tariffs and quotas, imposed by the U.S. or other countries in which the Company conducts business;
the evolving legal and regulatory, administrativeeconomic, environmental and environmentaladministrative climate in the international markets where the Company operates; and

cyber-attacks or other data breaches that disrupt itsthe Company’s operations or result in the dissemination of proprietary or confidential information.information and cause reputational harm.

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Information concerning these and other risks, uncertainties and other factors, among others, that could cause results to differ materially from those projected in such forward-lookingour expectations statements is also set forth in “Item"Item 1A. Risk Factors”Factors" of this Annual Report onForm 10-K, which we encourage you to carefully read. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date on which they were made and we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

except as required by law.

4


Table of Contents
PART I

ITEM 1.BUSINESS

ITEM 1.BUSINESS
We are a leading provider of data storage technology and solutions. Our principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. In addition to HDDs, we produce a broad range of data storage products including solid state drives (“SSD”SSDs”) and their related controllers,, solid state hybrid drives (“SSHD”SSHDs”) and storage subsystems.

Hard disk drives

HDDs are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drivesHDDs continue to be the primary medium of mass data storage due to their performance attributes, reliability, high quality and cost effectiveness. Complementing existing data center storage architecture, solid-state storage devicesarchitectures, SSDs use integrated circuit assemblies as memory to store data, and most SSDs use NAND-basedNAND flash memory. In additioncontrast to HDDs and SSDs, SSHDs combine the features of SSDs and HDDs in the same unit, containing a large hard disk drivehigh-capacity HDD and ana smaller SSD acting as a cache to improve performance of frequently accessed data.

Our HDD products are designed for mission criticalmass capacity storage and nearline applications inlegacy markets. These markets were previously categorized as enterprise servers and storage systems; clientsystems, edge non-compute applications and edge compute applications, where our products are designed primarily for desktopapplications. Our HDD and mobile computing;SSD product portfolio includes Serial Advanced Technology Attachment (“SATA”), Serial Attached SCSI (“SAS”) and clientnon-compute applications, where our products are designed forNon-Volatile Memory Express (“NVMe”) based designs to support a wide variety of end user devices such as portable externalmass capacity and legacy applications.
Our enterprise data solutions (“EDS”) portfolio includes storage systems, surveillance systems, network-attachedsubsystems for enterprises, cloud service providers, scale-out storage (“NAS”), digital video recorders (“DVRs”)servers and gaming consoles.

Our cloud systemsoriginal equipment manufacturers (“OEMs”). Engineered for modularity, mobility, capacity and performance, these solutions extend innovationinclude our enterprise HDDs and SSDs, enabling customers to integrate powerful, scalable storage within legacy environments or build new ecosystems from the device into the information infrastructure, onsite andground up in the cloud. Our portfolio includes modular original equipment manufacturer (“OEM”) storage systems andscale-out storage servers.

a secure, cost-effective manner.


Industry Overview

Data Storage Industry

The data storage industry is comprised ofincludes companies that manufacture components or subcomponents designed for data storage devices, andas well as companies that provide storage solutions, software and services for enterprise cloud, big data, computing platforms and computing platforms.

Markets

consumer markets. The principal markets served byrapid growth of data generation and the intelligent application of data are driving demand for data storage. As more data is created at endpoints outside traditional data centers, requiring processing at the edge and in the core or cloud, the need for data storage industry are:

Enterprise Storage.We define enterprise storage as dedicated storage area networks and hyperscale cloud storage environments. Enterprise data centers run solutions which are designed for mission critical performancemanagement has also increased. These use cases include autonomous vehicles, smart manufacturing systems and nearline high capacity applications.

Mission critical applications are defined as those that are vital to the operation of large-scale enterprise workloads, requiring high performance and high reliability storage solutions. We expect the market for mission critical enterprise storage solutions to continue to be driven by enterprises utilizing dedicated storage area networks. Our storage solutions are comprised principally of high performance enterprise class disk drives with sophisticated firmware and communications technologies.

Nearline applications are defined as those which require high capacity and energy efficient storage solutions. We expect such applications, which include storage for cloud computing, content delivery and backup services, will continue to grow and drive demand for solutions designed with these attributes. With the increased requirements for storage driven by the creation and consumption of media-rich digital content, we expect the increased exabyte demand will require furtherbuild-out of data centers by cloud service providers and other enterprises which utilize high capacity nearline devices.

Enterprise serial attached SCSI (“SAS”) SSDs are designed to deliver superior performance, reliability and enterprise features to meet the demands ofI/O-intensive applications, with potential for substantial powersavings. Non-Volatile Memory Express (“NVMe”) SSDs andadd-in cards are designed to optimize enterprise applications with a persistent, high-performance, high-capacity memory design. They also leverage flash and software to accelerate any server virtualized deployment and moves any big data to the realm of real time.

Client Compute. We define client compute applications as solutions designed for desktop and mobile compute applications ranging from traditional laptops, tablets and convertible systems. As the storage of digital content in the cloud becomes more prominent and accessible, some client compute applications rely less onbuilt-in storage, which is supplemented by cloud computing solutions and branded external hard drives.

ClientNon-Compute. We define clientnon-compute applications as solutions designed for consumer electronic devices and disk drives used for external storage. Disk drives designed for consumer electronic devices are primarily used in applications such as surveillance systems, NAS and DVRs that require a higher capacity, lowcost-per-gigabyte storage solution. Disk drives for external storage is designed for purposes such as portable external storage, and to augment storage capacity in the consumer’s current desktop, notebook, tablet or DVR devices.smart cities. We believe the proliferation and personal creation of media-rich digital content, further enabled by fifth-generation wireless (“5G”), the edge, the Internet of Things (“IoT”) and artificial intelligence (“AI”), will continue to create increasing consumer demand for higher capacity storage solutions.

Cloud Systems The new ecosystem is expected to require increasing amounts of data storage both at the edge and Solutions. We define cloud systemsin the core.


Markets
The principal data storage markets include:
Mass Capacity Storage Markets
Mass capacity storage supports high capacity, low-cost per terabyte (“TB”) storage applications, including nearline, video and solutionsimage applications and network-attached storage (“NAS”). Mass capacity storage markets represent growing markets that have been increasing as a percentage of our total revenue and in total exabytes shipped in fiscal years 2020, 2019 and 2018, with this trend expected to continue in fiscal year 2021.
Nearline.Nearline applications require mass capacity devices, HDDs as well as mass capacity EDS subsystems that provide cloud basedend-to-end solutions to businesses for the purpose ofscale-out modular and scalable storage. Enterprise storage applications require both high-capacity and energy efficient storage devices to support low total cost of ownership. The EDS solutions and modular systems. Systems can contain HDDs and SSDs and canmay also offer file management systems, software, and even compute power.

capabilities to enable both private and public data center applications. We expect this market, which includes storage for cloud computing, content delivery and backup services, to continue to grow and drive increasing exabyte demand.

Video and image and NAS. Video and image applications and NAS drives are specifically designed to ensure the appropriate performance and reliability of the system for surveillance environments (video and image) and network storage environments (NAS). We expect these markets, which includes storage for security and smart video installations, to show long term secular growth in exabyte demand.
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Table of Contents
Legacy Markets
Legacy markets include mission critical, desktop, notebook, consumer, DVR, and gaming applications. We continue to service these markets but do not plan significant additional investment. These markets have been decreasing as a percentage of our total revenue in fiscal years 2020, 2019, and 2018 and this trend is expected to continue in fiscal year 2021, and the long term outlook is for a decrease in demand for exabytes in these markets.
Mission critical storage. Mission critical applications are defined as those that use very high performance enterprise class HDDs and SSDs with sophisticated firmware to reliably support very high workloads. We expect that enterprises utilizing dedicated storage area networks will continue to drive market demand for mission critical enterprise storage solutions.
Consumer storage. Consumer applications are externally connected storage, both HDD and SSD-based, used to provide backup capabilities, augmented storage capacity, or portable storage for PCs and mobile devices.
Desktop and notebook storage. These applications rely on low cost-per-HDD and SSD devices to provide built-in storage for a wide variety of consumer and business applications.
Gaming storage. This market includes storage for PC-based gaming rigs as well as console gaming applications. The products are optimized for the speed and responsiveness gamers require, and include both internal and external storage options based on HDDs and SSDs.
DVR. DVR applications are HDD storage for video streaming in always-on consumer premise equipment like DVRs and media centers.
Participants in the data storage industry include:

Major subcomponent manufacturers.Companies that manufacture components or subcomponents used in data storage devices or solutions include companies that supply spindle motors, heads and media, and application specific integrated circuits (“ASICs”).

Hardware storage solutions

Storage device manufacturers.Companies that transform components into storage products include disk drive manufacturers and semiconductor storage manufacturers which include integratingthat integrate flash memory into storage products such as SSDs.

System

Storage solutions manufacturers and system integrators.Companies, such as OEMs, that bundle and package storage solutions, into client compute, clientnon-compute or enterprise applications as well as enterprise storage solutions. Distributorsdistributors that integrate storage hardware and software intoend-user applications, and Cloud Service Providerscloud service providers (“CSP”CSPs”) that provide cloud based solutions to businesses for the purpose ofscale-out storage solutions and modular systems, that are also included in this category.

Storage services. Companies that provide and host services andproducers of solutions which includesuch as storage backup, archiving, recovery and discovery of data.

racks.

Hyperscale Data Centers. Increasingly, largedata centers. Large hyperscale data center companies, many of which are CSPs, are increasingly designing their own storage subsystems and having thosethem built by contract manufacturers for use inside their own data centers. This trend is reshaping the storage system and subsystem market, and driving both innovation in system design and changes in the competitive landscape of the large storage system vendors.

Storage services. Companies that provide and host services and solutions, which include storage, backup, archiving, recovery and discovery of data.
Demand for Data Storage

The continued advancementInternational Data Corporation (“IDC”) forecasts in the 2020 Seagate-sponsored Data Age 2025 study that the global datasphere should grow from 59 zettabytes in 2020 to 175 zettabytes by 2025. According to IDC, we are fast approaching a new era of the cloud,Data Age, which we expect will have a positive impact on storage demand. The digital transformation has given rise to many new applications, all of which rely on faster access to and secure storage of data proliferating from endpoints through edge to cloud.
The Data Age 2025 study found that data is shifting to both the proliferation of a variety of mobile devices globally, developmentcore and the edge, and by 2025 nearly 80% of the Internetworld’s data will be stored in the core and edge, up from 35% in 2015.
As more applications require real-time decision making, some data processing and storage is moving closer to the network edge. We believe this will result in a buildup of Things (“IoT”), increasingly pervasive useprivate and edge cloud environments that will enable fast and secure access to data throughout the IoT ecosystem. According to IDC, nearly 25% of video surveillance, evolution of consumer electronic devices, and enterprise use of big data analytics are driving the growth of digital content. global datasphere will be real-time by 2025.
Factors contributing to the growth of digital content include:

Creation, sharing and consumption of media-rich digital content, such as high-resolution photos, high definition video,videos and digital music through smart phones, tablets, digital cameras, personal video cameras, DVRs, gaming consoles or other digital devices;

Creation, aggregation and distribution of digital content through services and other offerings such as Facebook®, Instagram®, iTunes®, Netflix®, Google® and YouTube®;

New
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Increasing use of video and imaging sensors to collect and analyze data used to improve traffic flow, emergency response times and manufacturing production costs, as well as for new surveillance systems whichthat feature higher resolution digital cameras and thus require larger data storage capacities;

Creation and collection of data through the development and evolution of the IoT ecosystem, big data analytics, AI and new technology trends such as self-driving carsautonomous vehicles and drones;drones, smart manufacturing, and smart cities;

BuildThe growing use of analytics, especially for action on data created at the edge instead of processing and analyzing at the data center, which is particularly important for verticals such as autonomous vehicles, property monitoring systems, smart manufacturing and others;
Cloud migration initiatives and the ongoing advancement of the cloud, including the build out of large numbers of cloud data centers by cloud service providersCSPs and private companies transitioningon-site data centers into the cloud; and

ProtectionNeed for protection of increased digital content through redundant storage on backup devices and externally provided storage services.

As a result of these factors, we anticipate that the nature and volume of contentdata being created requireswill require greater storage capability, which is more efficiently and economically facilitated by higher capacity mass storage devices in order to store, manage, distribute, analyze and backup such content. We expect this to support the growth in demand for data storage solutions in developed and emerging economies well into the future.

The amount of data created as well as where and how data is stored continues to evolve with the proliferation of mobile devices, the growth of cloud computing, and the evolving IoT. devices.

In addition, the economics of storage infrastructure are also evolving with theevolving. The utilization of public and private hyper-scalehyperscale storage and open-source solutions is reducing the total cost of ownership of storage while increasing the speed and efficiency with which customers can leverage massive computing and storage devices. Accordingly, we expect these trends will continue to create significant demand for data storage products and solutions going forward.


Demand Trends for Disk Drives

We believe that continued growth in digital content requirescreation will require increasingly higher storage capacity in order to store, aggregate, host, distribute, analyze, manage, backupprotect, back up and use such content. We also believe that as architectures evolve to serve thea growing commercial and consumer user base throughout the world, the manner in which hard drives are delivered to market and utilized by our customersstorage solutions will evolve as well.

Mass capacity is and will continue to be the enabler of scale. We expect increased data creation will lead to the expansion of the need for storage in the form of HDDs, EDS and SSDs. While the advance of solid state technology in many end markets is expected to increase, we believe that in the foreseeable future, thecloud, edge and traditional enterprise and client compute markets thatwhich require high-capacity storage solutions and the data intensive clientnon-compute markets will continue to be best served by hard disk drivesHDDs due to the industry’stheir ability to deliver the most cost effective, reliable and energy efficientenergy-efficient mass storage devices although the advance of solid state technology in the above markets is expected to increase as well. Furthermore, the increased use of clientnon-compute devices that both consume media-rich digital content streamed from the cloud and create rich digital content that is stored in the cloud, increases the demand for high capacity hard disk drives in enterprise nearline applications.

devices. We also believe that as hard disk driveHDD capacities continue to increase, a focus exclusively on unit demand does not reflect the increase in exabytes demand. In recent years, this trend has resulted in demand for exabytes. As demand for higher capacity drives increases, the demand profile has shifted to reflect fewer total HDD units, but with higher average capacity per drive.

drive and higher overall exabyte demand.


Industry Supply Balance

From time to time, the HDDstorage industry has experienced periods of imbalance between supply and demand. To the extent that the disk drivestorage industry builds or maintains capacity based on expectations of demand that do not materialize, price erosion may become more pronounced. Conversely, during periods where demand exceeds supply, price erosion is generally muted.


Our Business

Disk Drive Technology

Data Storage Technologies
The design and manufacturing of disk drivesHDDs depends on highly advanced technology and manufacturing techniques and thereforetechniques. Therefore, it requires high levels of research and development spending and capital equipment investments. We design, fabricate and assemble a number of the most important components found in our disk drives, including read/write heads and recording media. Our design and manufacturing operations are based on technology platforms that are used to produce various disk drive products that serve multiple data storage applications and markets. Our core technology platforms, are focused aroundincluding innovations like the throughput-optimizing multi actuator MACH.2 technology and the high-capacity enabling heat-assisted magnetic recording (“HAMR”) technology, focus on the areal density of media and read/write head technologies. Using an integrated platformThis design and manufacturing leverage approach allows us to deliver a portfolio of disk drivestorage products to service a wide range of data storage applications and industries.

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Disk drives that we manufacture are commonly differentiated by the following key characteristics:

storage capacity, commonly expressed in gigabytes (“GB”) or terabytes (“TB”), which is the amount of data that can be stored on the disk drive;

spindle rotation speed, commonly expressed in revolutions per minute (“RPM”), which has an effect on speed of access to data;

interface transfer rate, commonly expressed in megabytes per second, which is the rate at which data moves between the disk drive and the computer controller;

average seek time, commonly expressed in milliseconds, which is the time needed to position the heads over a selected track on the disk surface;

data transfer rate, commonly expressed in megabytes per second, which is the rate at which data is transferred to and from the disk drive;

input/output operations per second (“IOPS”), commonly expressed in megabytes per second, which is the maximum number of reads and writes to a storage location;

storage capacity, commonly expressed in TB, which is the amount of data that can be stored on the disk drive;
spindle rotation speed, commonly expressed in revolutions per minute (“RPM”), which has an effect on speed of access to data;
interface transfer rate, commonly expressed in megabytes per second, which is the rate at which data moves between the disk drive and the computer controller;
average seek time, commonly expressed in milliseconds, which is the time needed to position the heads over a selected track on the disk surface;
data transfer rate, commonly expressed in megabytes per second, which is the rate at which data is transferred to and from the disk drive;
product quality and reliability, commonly expressed in annualized return rates; and

energy efficiency, commonly measured by the power output necessary to operate the disk drive.

Areal density is measured by storage capacity per square inch on the recording surface of a disk. The storage capacity of a disk drive is determined by the size and number of disks it contains as well as the areal density capability of these disks.
We have been pursuing, and will continue to pursue, a number of technologies to increase areal densities across the entire rangealso offer SSDs as part of our products for expanding disk drive capacitiesstorage solutions portfolio. Our portfolio includes devices with SATA, SAS and reducing the numberNVMe interfaces. The SSDs differ from HDDs in that they are without mechanical parts.
SSDs store data on NAND flash memory cells, or metal-oxide semiconductor transistors using a charge on a capacitor to represent a binary digit. SSD technology offers fast access to data and robust performance. SSDs complement hyperscale applications, high-density data centers, cloud environments and web servers. They are also used in mission-critical enterprise applications, consumer, gaming and NAS applications.
The SSHDs that we manufacture contain technology that fuses some features of disksSSDs and heads per driveHDDs. They include high capacity HDDs with flash memory that acts as a cache to further reduce product costs.

improve performance of frequently accessed data and are primarily targeted at PC gaming applications.


Manufacturing

We primarily design and producemanufacture our own read/write heads and recording media, which are critical technologies for disk drives. This integrated approach enables us to lower costs and to improve the functionality of components so that they work together efficiently.

We believe that because of our vertical design and manufacturing strategy, we are well suitedpositioned to take advantage of the opportunities to leverage the close interdependence of components for disk drives. Our manufacturing efficiency and flexibility are critical elements of our integrated business strategy. We continuously seek to improve our manufacturing efficiency and reduce manufacturing costcosts by:

employing manufacturing automation;

employing machine learning algorithms and artificial intelligence;
improving product quality and reliability;

integrating our supply chain with suppliers and customers to enhance our demand visibility and reduce our working capital requirements;

coordinating between our manufacturing group and our research and development organization to rapidly achieve volume manufacturing; and

operating our facilities at optimal capabilities.capacities.

A vertically integrated model, however, tends to have less flexibility when demand moderatesdeclines as it exposes us to higher unit costs aswhen capacity utilization is not optimized.


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Components and Raw Materials

Disk drives incorporate certain components, including a head disk assembly and a printed circuit board mounted to the head disk assembly, which are sealed inside a rigid base and top cover containing the recording components in a contamination controlled environment. We maintain a highly integrated approach to our business by designing and manufacturing a significant portion of the components we view as critical to our products, such as recordingread/write heads and recording media.

Read/Write Heads.The function of the read/write head is to scan across the disk as it spins, magnetically recording or reading information. The tolerances of recordingread/write heads are extremely demanding and requirestate-of-the-art equipment and processes. Our read/write heads are manufactured with thin-film and photolithographic processes similar to those used to produce semiconductor integrated circuits, though challenges inrelated to magnetic film properties and topographical structures are unique to the disk drive industry. We perform all primary stages of design and manufacture of read/write heads at our facilities. We use a combination of internally manufactured and externally sourced read/write heads, the mix of which varies based on product mix, technology and our internal capacity levels.

Media.InformationData is written to or read from the media, or disk, as it rotates at very high speeds past the read/write head. The media is made fromnon-magnetic material, substrates, usually an aluminum alloy or glass and is coated with thin layers of magnetic materials. We use a combination of internally manufactured and externally sourced finished media and aluminum substrates, the mix of which varies based on product mix, technology and our internal capacity levels. We purchase all of our glass substrates from third parties.

Printed Circuit Board Assemblies.The printed circuit board assemblies (“PCBAs”) are comprised of standard and custom ASICs and ancillary electronic control chips. The ASICs control the movement of data to and from the read/write heads and through the internal controller and interface, which communicates with the host computer. The ASICs and control chips form electronic circuitry that delivers instructions to a head positioning mechanism called an actuator to guide the heads to the selected track of a disk where the data is recorded or retrieved. Disk drive manufacturers use one or more industry standard interfaces such as serial advanced technology architecture (“SATA”); small computer system interface (“SCSI”); SAS;SATA, SCSI, or Fibre Channel (“FC”)SAS to communicate to the host systems. We outsource to third parties the manufacture and assembly of the PCBAs used in our disk drives. We do not manufacture any ASICs, but we participate in their proprietary design.

Head Disk Assembly.The head disk assembly consists of one or more disks attached to a spindle assembly powered by a spindle motor that rotates the disks at a high constant speed around a hub. Read/write heads, mounted on an arm assembly, similar in concept to that of a record player, fly extremely close to each disk surface and record data on and retrieve it from concentric tracks in the magnetic layers of the rotating disks. The read/write heads are mounted vertically on anE-shaped assembly(“E-block”) that is actuated by a voice-coil motor to allow the heads to move from track to track. TheE-block and the recording media are mounted inside the head disk assembly. We purchase spindle motors from outside vendors and from time to time participate in the design of the motors that go into our products. We use a combination of internally manufactured and externally sourced head disk assemblies.

Disk Drive Assembly.Following the completion of the head disk assembly, it is mated to the PCBA, and the completed unit goes through extensive defect mapping and testingmachine learning prior to packaging and shipment. Disk drive assembly and testmachine learning operations occur primarily at our facilities located in China and Thailand. We perform subassembly and component manufacturing operations at our facilities in China, Malaysia, Northern Ireland, Singapore, Thailand and in the United States. In addition,
Contract Manufacturing. We outsource the manufacturing and assembly of certain components and products to third parties manufacture and assemble components and disk drive assemblies for us in various countries worldwide.

This includes outsourcing the PCBAs used in our disk drives, SSDs and storage subsystems. We continue to participate in the design of our components and products and are directly involved in qualifying key suppliers and components used in our products.

Suppliers of Components and Industry Constraints.There are a limited number of independent suppliers of components, such as recording heads and media, available to disk drive manufacturers. Vertically integrated disk drive manufacturers like us, who manufacture their own components, are less dependent on external component suppliers than less vertically integrated disk drive manufacturers.

However, our business has been adversely affected by our suppliers’ capacity constraints in the past and this could occur in the future.

Commodity and Other Manufacturing Costs.The production of disk drives requires rare earth elements, precious metals, scarce alloys and industrial commodities, which are subject to fluctuations in pricesprice and the supply of which has at times been constrained. In addition to increased costs of components and commodities, volatility in fuel and other transportation costs may also increase our costs related to commodities, manufacturing and freight. As a result, we may increase our use of ocean shipmentsalternative shipment methods to help offset any increase in freight costs, and we will continually review various forms of shipments and routes in order to minimize the exposure to higher freight costs.

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Products

We offer a broad range of storage solutions for the enterprise, data center, client computemass capacity storage and clientnon-computelegacy applications. We offersupply more than one product within each product category and differentiate products on the basis of capacity, performance, product quality, reliability, price, performance, form factor, capacity, interface, power consumption efficiency, security features and other customer integration requirements. Our industry is characterized by continuous and significant advances in technology whichthat contribute to rapid product life cycles. We listCurrently our main current product offerings below.

include:

Mass Capacity Storage
Enterprise Storage

Enterprise PerformanceNearline HDDs.Our 10,000 and 15,000 RPM Enterprise Performance disk drives feature increased throughput and improved energy efficiency, targeted at high random performance server application needs. Performance 10,000 RPMhigh-capacity enterprise HDDs ship in storage capacities ranging from 300GB to 2.4TB, and our 15,000 RPM HDDs ship in storage capacities ranging from 146GB to 900GB.

Enterprise Capacity and Archive HDDs. Our Enterprise Capacity disk drives ship in2.5-inch and3.5-inch form factors and in storage capacities of up to 12TB that mainly rotate at a speed of 7,200 RPM.18TB. These products are designed for bulkmass capacity data storage in the core and at the edge, server environments and cloud systems that require high capacity, enterprise reliability, energy efficiency and integrated security, andsecurity. They are available in SATA and SAS interfaces.

Enterprise Nearline SSDs. Our Archive HDDs provide up to 8TB oflow-cost storageenterprise SSDs are designed specifically for active archive storage environments inhigh-performance, hyperscale, high-density and cloud data centers where very low costapplications. They are offered with multiple interfaces, including SAS, SATA, and power are paramount.

Enterprise SSDs. Our SAS SSD are availableNVMe and in capacities up to 3.8TB15TB.

Enterprise Nearline Systems. Our systems portfolio provides modular storage system components to expand and upgrade data centers and other enterprise applications. They feature 12GB per second interface to deliver the speed, scalability and consistency needed for demanding enterprise storagesecurity. Our capacity-optimized systems feature multiple configurations and server applications. We also offer a wide range of NVMe and SATA interface SSDs andadd-in cards in our Nytro family with capacitiescan accommodate up to 7.7TB.

Client Compute

Desktop106 16TB drives. Our performance-optimized systems include an all-flash array for critical workloads demanding the highest performance.

Video and Image. Our video and image HDDs and SSHDs. Our3.5-inch desktop drives ship in both traditional HDD and SSHD configurations and offer up to 10TB of capacity. Desktop drives are designed for applications such as personal computers and workstations.

Mobile HDDs and SSHDs. Our family of2.5-inch laptop drives ship in a variety of capacities (up to 5TB) and technologies (HDD and SSHD) to support mobile needs. Used in applications ranging from traditional laptops, convertible systems and external storage, our drives are built to address a range of performance needs and sizes for affordable, high capacity storage.

ClientNon-Compute

Surveillance HDDs. Our surveillance drives are built to support the high-write workload of analways-on, always-recording video surveillance system. These surveillance optimized drives are built to support the growing needs of the surveillancevideo imaging market with support for multiple hard drive (“HD”) streams and capacities up to 10TB.

NAS HDDs.16TB.

NAS. Our NAS drives are built to support the performance and reliability demanded by small and medium businesses, and incorporate interface software with custom-built health management, error recovery controls, power settings and vibration tolerance. Our NAS HDD solutions are available in capacities up to 10TB.

Video HDDs.16TB. We also offer NAS SSDs with capacities up to 3.8TB.

Legacy Applications
Mission Critical HDDs and SSDs. We continue to support 10,000 and 15,000 RPM HDDs, offered in capacities up to 2.4TB, which enable increased throughput while improving energy efficiency. Our Videoenterprise SSDs are available in capacities up to 15TB, with endurance options up to 10 drive writes per day and various interfaces. Our SSDs deliver the speed and consistency required for demanding enterprise storage and server applications.
Consumer Solutions. Our external storage solutions are shipped under the Seagate Backup Plus and Expansion product lines, as well as under the LaCie and Maxtor brand names. These product lines are available in capacities up to 16TB. We strive to deliver the best customer experience by leveraging our core technologies, offering services such as Seagate Recovery Services (data recovery) and partnering with leading brands such as Xbox, Sony and Adobe.
Desktop Drives. Our 3.5-inch desktop drives offer up to 14TB of capacity for HDD and up to 2TB for SSD. Desktop drives are designed for applications such as personal computers and workstations.
Notebook Drives. Our 2.5-inch notebook drives offer up to 5TB for HDD and up to 2TB for SSD. Used in applications such as traditional notebooks, convertible systems and external storage, our drives are built to address a range of performance needs and sizes for affordable, high-capacity storage.
DVR. Our DVR HDDs are used in video applications like DVR’s and media centers. These disk drives are optimized for video streaming inalways-on consumer premise equipment applications with capacities up to 4TB to support leading-edge digital entertainment.

Gaming HDDs.Gaming HDDs

Gaming. Ourgaming SSDs are specifically optimized internal storage for console gaming usage.rigs. These products are designed to enhance the gaming experience during game-loadgame load and game-playgame play and are available in capacities up to 2TB.

Branded Solutions. Our external backup storage solutions are shipped under the Backup Plus and Expansion product lines, as well as under the Maxtor and LaCie brand names. These product lines are available in capacities up to 120TB.

4TB for SSD.

Customers

Customers

We sell our products to major OEMs, distributors and retailers.

The following table summarizes our HDD revenue by channel

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OEM customers, including large hyperscale data center companies and by geography:

                                                                        
     Fiscal Years Ended 
     June 30,
2017
  July 1,
2016
  July 3,
2015
 

Revenues by Channel (%)

      

OEM

     67  69  71

Distributors

     18  17  18

Retail

     15  14  11

Revenues by Geography (%)(1)

      

Americas

     31  29  27

EMEA

     17  17  16

Asia Pacific

     52  54  57

(1)Revenue is attributed to countries based on the shipping location.

OEM customersCSPs, typically enter into master purchase agreements with us. These agreements provide for pricing, volume discounts, order lead times, product support obligations and other terms and conditions including sales programs offered to promote selected products. Deliveries are scheduled only after receipt of purchase orders. In addition, with limited lead-time, customers may defer most purchase orders without significant penalty. Anticipated orders from many of our customers have in the past failed to materialize or OEM delivery schedules have been deferred or altered as a result of changes in their business needs.

Our distributors generally enter intonon-exclusive agreements for the resale of our products. They typically furnish us with anon-binding indication of their near-term requirements and product deliveries are generally scheduled accordingly. The agreements and related sales programs typically provide the distributors with limited rightrights of return and price protection rights. In addition, we offer sales programs to distributors on a quarterly and periodic basis to promote the sale of selected products in the sales channel.

Our retail channel consists of our branded storage products sold to retailers either by us directly or by our distributors. Retail sales made by us or our distributors typically require greater marketing support, sales incentives and price protection periods.

In fiscal years 2017, 2016 and 2015, Dell Inc. accounted for approximately 10%, 12% and 14% of consolidated revenue, respectively. In fiscal year 2015, Hewlett-Packard Company accounted for approximately 12% of consolidated revenue. In fiscal year 2016, HP Inc., formerly known as Hewlett-Packard Company, completed its separation with Hewlett Packard Enterprise Company, and each company accounted for less than 10% of our consolidated revenue in both fiscal year 2016 and 2017.

See “Item 1A. Risk Factors—Risks Related to Our Business—We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more8. Financial Statements and Supplementary Data—Note 16. Business Segment and Geographic Information” contained in this report for a description of our major customers.

Competition

We compete primarily with manufacturers of hard drives used in the enterprise, client computemass capacity storage and clientnon-compute applications. We are also a supplier of Enterprise SSDs, NVMeadd-in cards, cloud storage solutionslegacy markets and storage subsystems through our acquisitions. The markets that we participate in are highly competitive. Disk drive manufacturers compete for a limited number of major disk drive customers but also compete with other companies in the data storage industry that provide SSDs and NVMeadd-in technology.EDS. Some of the principal factors used by customers to differentiate among data storage solutions manufacturers are storage capacity, product performance, product quality and reliability, price per unit and price per gigabyte,time-to-market andtime-to-volume leadership,TB, storage/retrieval access times, data transfer rates, form factor, product warranty and support capabilities, supply continuity and flexibility, power consumption, total cost of ownership and brand. While different markets and customers place varying levels of emphasis on these factors, we believe that our products are competitive with respect to many of these factors in the markets that we currently address.

compete in.

Principal Disk Drive Competitors. There are three companiesWe compete with manufacturers of storage solutions and the other principal manufacturers in the data storage solution industry that manufacture disk drives:

include:
Seagate, selling the Seagate, LaCieMicron Technology, Inc.;
Samsung Electronics;
SK hynix, Inc.;
Kioxia Holdings Corporation;
Toshiba Corporation; and Maxtor brands;

Western Digital Corporation, operating the Western Digital, Hitachi Global Storage Technologies subsidiaries and SanDisk; andSanDisk brands.

Toshiba Corporation

Other Competition. We are seeing direct competition from SSD’s that is adversely impacting demand for HDD in some markets including Notebook and Enterprise Mission Critical. We expect that this trend will continue although we believe both product types will be required in the market to satisfy the growing demand for data storage.

Price Erosion.Historically, our industry has been characterized by price declines for disk drivedata storage products with comparablecapacity, performance and feature sets(“ (“like-for-like products”). Price declines forlike-for-like products (“price erosion”) tend to be more pronounced during periods of:

economic contraction in which competitors may use discounted pricing to attempt to maintain or gain market share;

few new product introductions when competitors have comparable or alternative product offerings; and

industry supply exceeding demand.

Disk drive

Data storage manufacturers typically attempt to offset price erosion with an improved mix of disk drivedata storage products characterized by higher capacity, better performance and additional feature sets and product cost reductions.

We believe the HDD industry experienced modest price erosion in fiscal years 2015, 20162020, 2019 and 2017.

2018.

Product Life Cycles and Changing Technology.Success in our industry has been dependent to a large extent on the ability to balance the introduction and transition of new products withtime-to-volume, performance, capacity and quality metrics at a competitive price, level of service and support that our customers expect. Generally, the drive manufacturer that introduces a new product first benefits from improved product mix, favorable profit margins and less pricing pressure until comparable products are introduced. Changing technology also necessitateson-going investments in research and development, which may be difficult to recover due to rapid product life cycles and economic declines. Further, there is a continued need to successfully execute product transitions and new product introductions, as factors such as quality, reliability and manufacturing yields continue to be of significant competitive importance.

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Seasonality

The disk drive industry

Variability of sales can be related to the timing of IT spending or a reflection of cyclical demand from CSPs based on the timing of their procurement and deployment requirements and the supply and demand balance of other components such as NAND and DRAM. Our legacy markets traditionally experiencesexperience seasonal variability in demand with higher levels of demand in the second half of the calendar year. This seasonality is driven by consumer spending in theback-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. We believe fiscal year 2015 reflected seasonality consistent with historical patterns. In fiscal year 2016, beyond traditional seasonality, variability of sales was a reflection of more cyclical demand from CSPs based on the timing of large systems installations and the shift of the underlying technology. We believe fiscal year 2017 reflected seasonality consistent with historical patterns.

Research and Development

We are committed to developing new component technologies, products and alternative storage technologies. Our research and development focus is designed to bring new products to market in high volume, with quality attributes that our customers expect, before our competitors. Part of our product development strategy is to leverage a design platform and/or subsystem within product families to serve different market needs. This platform strategy allows for more efficient resource utilization, leverages best design practices, reduces exposure to changes in demand, and allows for achievement of lower costs through purchasing economies. Our advanced technology integration effort focuses disk drive and component research on recording subsystems, including read/write heads and recording media; market-specific product technology; and technology focused towardswe believe may lead to new business opportunities. The primary purpose of our advanced technology integration effort is to ensure timely availability of mature component technologies tofor our product development teams as well as allowingto allow us to leverage and coordinate those technologies in the design centers across our products in order to take advantage of opportunities in the marketplace. During fiscal years 2017, 2016 and 2015, we had product development expenses of approximately $1,232 million, $1,237 million and $1,353 million, respectively, which represented 11%, 11% and 10% of our consolidated revenue, respectively.

Patents and Licenses

As of June 30, 2017,July 3, 2020, we had approximately 5,6005,300 U.S. patents and 1,3001,200 patents issued in various foreign jurisdictions as well as approximately 1,100700 U.S. and 900400 foreign patent applications pending. The number of patents and patent applications will vary at any given time as part of our ongoing patent portfolio management activity. Due to the rapid technological change that characterizes the data storage industry, we believe that, in addition to patent protection, the improvement of existing products, reliance upon trade secrets, protection of unpatented proprietaryknow-how and development of new products are also important to our business in establishing and maintaining a competitive advantage. Accordingly, we intend to continue our efforts to broadly protect our intellectual property, including obtaining patents, where available, in connection with our research and development program.

We have patent licenses with a number of companies. Additionally, as part of our normal intellectual property practices, we may be engaged in negotiations with other major data storage companies and component manufacturers with respect to patent licenses.

The data storage industry is characterized by significant litigation arising from time to time relating to patent and other intellectual property rights. Because of rapid technological development in the data storage industry, some of our products have been, and in the future could be, alleged to infringe existing patents of third parties. From time to time, we receive claims that our products infringe patents of third parties. Although we have been able to resolve some of those claims or potential claims by obtaining licenses or rights under the patents in question without a material adverse effect on us, other claims have resulted in adverse decisions or settlements. In addition, other claims are pending, which if resolved unfavorably to us could have a material adverse effect on our business and results of operations. For more information on these claims, see “Item 8. Financial Statements and Supplementary Data—Note 14.Legal, Environmental and Other Contingencies.Contingencies.” The costs of engaging in intellectual property litigation in the past have been, and in the future may be, substantial, irrespective of the merits of the claim or the outcome.

Backlog

In view of industry practice, whereby customers may cancel or defer orders with little or no penalty, we believe backlog in the disk drive industryfor our business is of limited indicative value in estimating future performance and results.

Environmental Matters

Our operations are subject to U.S. and foreign laws and regulations in the various jurisdictions in which we operate relating to the protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities.

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We have established environmental management systems and continually update environmental policies and standard operating procedures for our operations worldwide. We believe that our operations are in material compliance with applicable environmental laws, regulations and permits. We budget for operating and capital costs on an ongoing basis to comply with environmental laws. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures.

Some environmental laws, such as the U.S. Comprehensive Environmental Response Compensation and Liability Act of 1980 (as amended, the “Superfund” law) and its state equivalents, can impose liability for the cost of cleanup of contaminated sites upon any of the current or former site owners or operators or upon parties who sent waste to these sites, regardless of whether the owner or operator owned the site at the time of the release of hazardous substances or the lawfulness of the original disposal activity. We have been identified as a responsible or potentially responsible party at several sites. At each of these sites, we have an assigned portion of the financial liability based on the type and amount of hazardous substances disposed of by each party at the site and the number of financially viable parties. We have fulfilled our responsibilities at some of these sites and remain involved in only a few at this time.

While our ultimate costs in connection with these sites is difficult to predict with complete accuracy, basedBased on current estimates of cleanup costs and our expected allocation of these costs, we do not expect costs in connection with these sites to be material.

We may be subject to various state, federal and international laws and regulations governing the environment,environmental matters, including those restricting the presence of certain substances in electronic products. For example, the European Union (“EU”) enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (2011/65/EU), which prohibits the use of certain substances, including lead, in certain products, including disk drives and server storage products, put on the market after July 1, 2006. Similar legislation has been or may be enacted in other jurisdictions, including in the United States,U.S., Canada, Mexico, Taiwan, China Japan and others.Japan. The European UnionEU REACH Directive (Registration, Evaluation, Authorization, and Restriction of Chemicals, EC 1907/2006) also restricts substances of very high concern (“SVHCs”) in products.

If we or our suppliers fail to comply with the substance restrictions, recycle requirements or other environmental requirements as they are enacted worldwide, it could have a materially adverse effect on our business.

Employees

Employees

At June 30, 2017,July 3, 2020, we employed approximately 41,00042,000 employees and temporary employees worldwide, of which approximately 33,00035,000 were located in our AsianAsia operations. We believe that our future success will depend, in part, on our ability to attract and retain qualified employees at all levels. We believe that our employee relations are good.

Financial Information

Financial information for our reportable business segment and about geographic areas is set forth in “Item 8. Financial Statements and Supplementary Data—Note 13.16. Business Segment and Geographic Information.”

Corporate Information

Seagate Technology public limited company is a public limited company organized under the laws of Ireland.

Available Information

Availability of Reports. We are a reporting company under the Securities Exchange Act of 1934, as amended (the “1934 Exchange Act”), and we file reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the “SEC”). The public may read and copy any of our filings at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 from 10:00 a.m. until 3:00 p.m. EST. The public may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330 or (202)551-6551.Because we make filings to the SEC electronically, the public may access this information at the SEC’sSEC's website: www.sec.gov. This site contains reports, proxiesproxy and information statements and other information regarding issuers that file electronically with the SEC.

Website Access. Our website is www.seagate.com. We make available, free of charge at the “Investors”“Investor Relations” section of our website (investors.seagate.com), our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Exchange Act as soon as reasonably practicable after we electronically file such materialmaterials with, or furnish itthem to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Exchange Act are also available on our website.

Investors.Investors and others should note that we routinely use the InvestorsInvestor Relations section of our 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 www.seagate.com. Information in, or that can be accessed through, our website is not incorporated into thisForm 10-K.

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Information About Our Executive Officers

On July 25, 2017 the Company’s board of directors (the “Board of Directors”) appointed William D. Mosley to serve as Chief Executive Officer of the Company, effective October 1, 2017. The Board of Directors also appointed Mr. Mosley to serve as a director of the Company, effective July 25, 2017. Mr. Mosley will serve as a director until the Company’s next annual general meeting of shareholders when he is expected to stand for election by a vote of the Company’s shareholders. On July 25, 2017, the Company also announced that Stephen J. Luczo will step down from his position as Chief Executive Officer, effective October 1, 2017. Mr. Luczo will remain with the Company in the role of Executive Chairman effective October 1, 2017 and will continue to serve as Chairman of the Board of Directors.

The following sets forth the name, age and positionsposition of each of the persons who were serving as executive officers as of August 4, 2017.7, 2020. There are no family relationships among any of our executive officers.

Name

Age

Positions

Stephen J. Luczo

Dr. William D. Mosley
5360

ChairmanDirector and Chief Executive Officer

William D. Mosley

Gianluca Romano
5150

President and Chief Operating Officer

Philip G. Brace(a)

46

President, Cloud Systems and Silicon Group

David H. Morton Jr.

45

Executive Vice President Finance and Chief Financial Officer

James J. Murphy

Jeffrey D. Nygaard
5658

Executive Vice President, Worldwide Sales and Marketing

Global Operations

Katherine E. Schuelke


5754

Senior Vice President, Chief Legal Officer and Corporate Secretary

Ban Seng Teh54Senior Vice President, Global Sales and Sales Operations
Jeffrey Fochtman46Senior Vice President, Business and Marketing

(a)Mr. Brace is leaving the Company and will remain for an interim transition period until October 2, 2017.

Stephen J. Luczo. Mr. Luczo, 60,

Dr. William D. Mosley, 53, has served as our CEOChief Executive Officer (“CEO”) since January 2009 and as Chairman of the Board of Directors since 2002. Mr. Luczo joined Seagate in October 1993 as Senior Vice President of Corporate Development. In September 1997, he was promoted to President and Chief Operating Officer of Seagate Technology (Seagate Technology plc’s predecessor) and, in July 1998, he was promoted to CEO at which time he joined the Board of Directors as a director of Seagate Technology. Mr. Luczo resigned as CEO effective as of July 2004, but remained as Chairman of the Board of Directors. He served asnon-employee Chairman from October 2006 to January 2009. From October 2006 until he rejoined us in January 2009, Mr. Luczo was a private investor. Prior to joining Seagate in 1993, Mr. Luczo was Senior Managing Director of the Global Technology Group of Bear, Stearns & Co. Inc., an investment banking firm, from February 1992 to October 1993. Mr. Luczo served on the board of directors of Microsoft Corporation from May 2012 to March 2014.

William D. Mosley. Mr. Mosley, 50, has served as our President, Chief Operating Officer since June 20162017 and as a member of the Board since July 25, 2017. He was previously our President and Chief Operating Officer (“COO”) from June 2016 to September 2017. He also served as our President of Operations and Technology from October 2013 to June 2016 and as our Executive Vice President of Operations from March 2011 until October 2013. Prior to that, hethese positions, Dr. Mosley served as Executive Vice President, Sales and Marketing from February 2009 through March 2011; Senior Vice President of Global Disk Storage Operations from 2007 to 2009; and Vice President of Research and Development, Engineering from 2002 to 2007. Mr. MosleyHe joined Seagate in 1996 as a Senior Engineer andwith a PhD in solid state physics. From 1996 to 2002, he served at Seagate in other positionsvarying roles of increasing responsibility until his promotion to Vice President in 2002.

Philip G. Brace. Mr. Brace, 46, has served as our President, Cloud Systems and Silicon Group since July 2015. On June 2, 2017, we announced that Mr. Brace will leave the Company. Mr. Brace will remain with us for an interim period, ending on October 2, 2017, in order to assist with the transition of his responsibilities. Mr. Brace joined Seagate in September 2014 as Executive Vice President and Chief Technology Officer of Silicon Solutions, and was promoted to Interim President of Cloud Systems and Silicon group on April 30, 2015. He was previously employed by LSI Corporation (“LSI”) from August 2005 through September 2014. At LSI, he was the Executive Vice President of the Storage Solutions Group from July 2012 to September 2014 and Senior Vice President and General Manager from January 2009 to July 2012.

David H. Morton Jr. Mr. Morton, 45, President.

Gianluca Romano, 51, has served as our Executive Vice President and Chief Financial Officer since 2015January 2019. From October 2011 to December 2018, Mr. Romano served as Corporate Vice President, Business Finance and our Principal Accounting Officer since 2014. He was previously our Seniorat Micron Technology, Inc (“Micron”), a producer of computer memory and computer data storage. Prior to his role at Micron, Mr. Romano served as Vice President Finance, TreasurerCorporate Controller at Numonyx, Inc., a flash memory company which was acquired by Micron in February 2010, from 2008 to 2010. From 1994 until 2008, Mr. Romano held various finance positions at STMicroelectronics, an electronics and Principalsemiconductor manufacturer, most recently as Group Vice-President, Central & North Europe Finance Director, Shared Accounting Officer from April 2014 to October 2015 and our Vice President, Finance, Treasurer and Principal Accounting Officer from October 2009 to April 2014; Vice President of Finance, Sales and Marketing from March 2009 to October 2009; Vice President of Sales Operations from July 2007 to March 2009; Vice President of Finance, Storage Markets from October 2006 to July 2007; Executive Director of Consumer Electronics Finance from October 2005 to October 2006; and Executive Director of Corporate FP&A from June 2004 to October 2005.

James J. Murphy, 58,Services Director.

Jeffrey D. Nygaard, 56, has served as our Executive Vice President, Worldwide SalesOperations, Product Development and MarketingTechnology Development since January 2017. From 2003 to 2016,November 2018. Mr. Murphy was employed by Western Digital Corporation where heNygaard also served in a variety of executive leadership roles including President of Western Digital Corporation,as our Executive Vice President, of Worldwide Sales & SalesGlobal Operations from October 2017 to November 2018; Senior Vice President, Global Operations and Supply Chain from March 2017 to October 2017; Senior Vice President, Recording Head Operations from May 2013 to February 2017; Vice President Slider, HGA, HSA Operations from 2011 to April 2013; Vice President and Country Manager, Thailand and Penang Operations from 2009 to 2011; Vice President and Country Manager, Thailand Operations and Asia Drive Engineering from 2006 to 2009; and Vice President, Product and Process Development from 2004 to 2006. From 1994 to 2006, Mr. Nygaard served in varying roles of Asia Pacific sales.increasing responsibilities in engineering at Seagate until his promotion to Vice President. Mr. MurphyNygaard began his career with Raytheon and IBM in 1984 in the sales organization, where he held positions as a number of sales roles with increasing responsibilities over a seven-year period.

design engineer and senior engineer.

Katherine E. Schuelke, 54,57, has served as our Senior Vice President, Chief Legal Officer and Corporate Secretary since June 2017. She was previously employed by Altera Corporation (“Altera”) from March 1996 throughFrom 2011 to January 2016. At Altera,2016, Ms. Schuelke was the Senior Vice President, General Counsel and Secretary from 2011 through 2016 andat Altera Corporation (“Altera”), a manufacturer of programmable logic devices. Prior to that, Ms. Schuelke was Vice President, General Counsel, and Secretary at Altera from 2001 to 2011. At Altera, she held other positions of increasing responsibility from 1996 through 2001.

Ms. Schuelke began her career at an international law firm. Ms. Schuelke serves on the board of directors of SiTime Corporation, a provider of silicon timing solutions, and on its Compensation and Nominating and Corporate Governance Committees.

Ban Seng Teh, 54, has served as our Senior Vice President of Global Sales and Sales Operations since November 2014, and is based in Singapore. Mr. Teh also served as our Senior Vice President of Asia-Pacific and Japan Sales and marketing from July 2010 to November 2014. Mr. Teh joined Seagate in 1989 as a field customer engineer and has served in varying roles of increasing responsibilities, including as Vice President, Asia Pacific Sales and Marketing (Singapore) from January 2008 to July 2010; Vice President, Sales Operations from 2006 to 2008; Vice President, Asia Pacific Sales from 2003 to 2006; Director, Marketing and APAC Distribution Sales from 1999 to 2003; and Country Manager, South Asia Sales from 1996 to 1999.
Jeffrey Fochtman, 46, has served as our Senior Vice President, Business and Marketing since April 2020. Prior to that Mr. Fochtman served as our Vice President, Global Marketing and Consumer Solutions Group from February 2019 to April 2020; as VP, Global Marketing from August 2015 to February 2019; as Senior Director of Global Marketing from April 2012 to August 2015; and as Director of Marketing from October 2007 to October 2009. Prior to re-joining Seagate, he was VP of Marketing and Sales at Pogoplug from October 2009 to March 2012; and he served as a Product Marketing Manager at Hitachi from February 2001 to October 2007.
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ITEM 1A.RISK FACTORS
The ongoing COVID-19 pandemic has impacted 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 or in various markets throughout the world, potentially leading to a prolonged economic downturn or reductions in business and consumer spending, which may result in decreased net revenue, gross margins, or earnings and/or in increased expenses and difficulty in managing inventory levels;
delays to and/or lengthening of our sales or development cycles or qualification activity;
challenges for us, our direct and indirect suppliers and our customers 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, suspending employee travel and inability to meet in person with customers);
increased vulnerability to cyberattacks due to the significant number of employees working remotely; 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 pandemic and the measures taken in response to it, and their effects, 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.
We operate in highly competitive markets and our failure to anticipate and respond to technological changes and other market developments, including price, could harm our ability to compete.
We face intense competition in the data storage industry. Our principal sources of competition include:
disk drive and SSD manufacturers, such as Micron Technology, Inc., Samsung Electronics, SK hynix, Inc., Toshiba Corporation, Kioxia Holdings Corporation and Western Digital Corporation; and
companies that provide storage subsystems and components to OEMs, including electronic manufacturing services (“EMS”) and contract electronic manufacturing (“CEM”).
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The markets for our data storage products are characterized by technological change, which is driven in part by the adoption of new industry standards. These standards provide mechanisms to ensure technology component interoperability but they also hinder our ability to innovate or differentiate our products. When this occurs, our products may be deemed commodities, which could result in downward pressure on prices.
We also experience competition from other companies that produce alternative storage technologies such as flash memory, where increasing capacity, decreasing cost, energy efficiency and improvements in performance have resulted in increased competition with our lower capacity, smaller form factor disk drives. Some customers for both mass capacity storage and legacy markets have adopted SSDs as an alternative to hard drives in certain applications. Further adoption of alternative storage technologies may limit our total addressable HDD market, impact the competitiveness of our product portfolio and reduce our market share. Any resulting increase in competition could have a material adverse effect on our business, financial condition and results of operations.
In addition, the barriers to entry into our markets could be lowered, allowing large EMS and CEM companies that utilize general-purpose design skills to enter our markets and reduce the value of our specialized research and design skills. If our markets become more commoditized and we fail to deliver innovative, alternative products to our customers or match the price declines or cost efficiencies, we will have difficulty competing against the large EMS and CEM companies. This could result in lower profit margins or a loss of market share. Any significant decline in our market share in any of our principal markets would adversely affect our results of operations.
We must plan our investments in our products and incur costs before we have customer orders or know about the market conditions at the time the products are produced. If we fail to predict demand accurately for our products in any quarter,or if the markets for our products change, we may not be ableunable to recapture the cost of our investmentsmeet demand or we may have insufficient demand, which may materially adversely affect our financial resultscondition and the results of our operations.

Our industry operates primarily on quarterly purchasing cycles, with muchmost of the order flow in any given quarterorders typically coming at the end of thateach quarter. Our quarterly results are subject to substantial fluctuations and can be difficult to predict. Our manufacturing process requires us to make significant product-specific investments in inventory in each quarter for production in that quarter’s production. Since we typically receive the bulk of our orders late inquarter or a specific quarter after we have made our investments, there is a risk that our orders will not be sufficient to allow us to recapture the costs of our investment before the products resulting from that investment have become obsolete. We cannot provide any assurance that we will be able to accurately predict demand in the future.

Our revenues As a result, we incur inventory and manufacturing costs in any quarter areadvance of anticipated sales that may never materialize or that may be substantially dependent upon customer orders inlower than expected. If actual demand for our products is lower than the forecast, we may also experience higher inventory carrying costs, manufacturing rework costs and product obsolescence. Conversely, if we underestimate demand, we may have insufficient inventory to satisfy demand and may have to forego sales.

Other factors that quarter. We attempthave affected and may continue to project future orders based in part on estimates from our major customers. Our customers’ estimated requirements are not always accurate and we therefore cannot predict our quarterly revenues with any degree of certainty. In addition, we derive a portion of our revenues in each quarter from a number of relatively large orders. If one or more of our major customers decide to defer a purchase order or delays product acceptance in any given quarter, this is likely to result in reduced total revenues for that quarter.

The difficulty in forecasting demand also increases the difficulty in anticipating our inventory requirements, which may cause us to over-produce finished goods, resulting in increased working capital requirements, or under-produce finished goods, adversely affectingaffect our ability to anticipate or meet customer requirementsthe demand for our products and maintainadversely affect our market share. Additionally, the riskresults of inventory write-offs could increase if we were to continue to hold higher inventory levels. Our uneven sales cycle makes inventory management challenging and future financial results less predictable. We cannot be certain that we will be able to recover the costs associated with increased inventory.

Other factors that may negatively impact our ability to recapture the cost of investments in any given quarteroperations include:

the impact of variable demand and an aggressive pricing environment for disk drives;

the impact of competitive product announcements and possibleor technological advances that result in excess industry supply both with respect to particular disk drive products and with respect to competing alternative storage technology solutions such as solid state drives (“SSDs”)when customers cancel purchases in tablet, notebook and enterprise compute applications;

our inability to reduce our fixed costs to match sales in any quarter becauseanticipation of our vertical manufacturing strategy may increase our capital expenditures;newer products;

dependence on variable demand resulting from unanticipated upward or downward pricing pressures;
our ability to successfully qualify, manufacture and sell our data storage products;
changes in increasing volumes on a cost-effective basis and with acceptable quality our disk drive products, particularly the new disk drive products with lower cost structures;

uncertainty in the amount of purchases from our distributor customers who from time to time constitute a large portion of our total sales;

our product mix, and the related margins of the various products;

accelerated reduction in the price ofwhich may adversely affect our disk drives due to technological advances and/or an oversupply of disk drives in the market and shifting trends in demand which can create supply and demand imbalances;gross margins;

manufacturing delays or interruptions, particularly at our manufacturing facilities in China, Malaysia, Northern Ireland, Singapore, Thailand or the United States;

limited access to components that we obtain from a single or a limited number of suppliers; and

the impact of changes in foreign currency exchange rates on the cost of producing our products and the effective price of our products to foreign consumers;non-U.S. customers.
In addition, we derive a portion of our revenues in each quarter from a small number of relatively large orders. If one or more of our key customers decides to defer or cancel a purchase order or delay product acceptance in any given quarter, our revenues for that quarter may be significantly reduced and fall below our expectations. Conversely, if one of our key customers unexpectedly increases its orders, we may be unable to produce the additional product volumes in a timely manner or take advantage of any overall increased market demand. This could damage our customer relationships and reputation, which may adversely affect our results of operations.

operational issues arising out
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Changes in demand for computer systems, data storage subsystems and consumer electronic devices may in the future cause a decline in demand for our products.
Our products are components in computers, data storage systems and consumer electronic devices. Historically, the demand for these products has been volatile. Unexpected slowdowns in demand for computers, data storage subsystems or consumer electronic devices generally result in sharp declines in demand for our products. Declines in customer spending on the systems and devices that incorporate our products could have a material adverse effect on demand for our products and on our financial condition and results of operations. Uncertain global economic and business conditions can exacerbate these risks.
Sales to the legacy markets remain an important part of our business. These markets, however, have been, and we expect them to continue to be, adversely affected by:
announcements or introductions of major new operating systems or semiconductor improvements or shifts in customer preferences, performance requirements and behavior, such as the shift to tablet computers, smart phones, NAND flash memory or similar devices;
longer product life cycles; and
changes in macroeconomic conditions that cause customers to spend less, such as the imposition of new tariffs, increased laws and regulations, and increased unemployment levels.
We believe these announcements and introductions from time to time have caused customers to defer or cancel their purchases, making certain inventory obsolete. Whenever an oversupply of products in the market causes participants in our industry to have higher than anticipated inventory levels, we experience even more intense price competition from other manufacturers than usual, which may materially adversely affect our financial results. We believe that the deterioration of demand for disk drives in certain of the increasingly automated nature oflegacy markets has accelerated, and this deterioration may continue or further accelerate, which could cause our manufacturing processes.operating results to suffer.

In addition, the demand for clientnon-computelegacy markets products canis volatile. This volatility may be even more volatile and unpredictable than the demand for client compute products. In some cases, our products manufactured for clientnon-compute applications are uniquely configured for a single customer’s application, which creates a risk of unwanted and unsellable inventory if the anticipated volumes are not realized. This potential for unpredictable volatility is increasedexacerbated by the possibility of competing alternative storage technologies, likesuch as flash memory, meeting thewhich meet customers’ cost and capacity metrics, resulting in a rapid shift in demand from our products and disk drive technology, generally, to alternative storage technologies.metrics. Unpredictable fluctuations in demand for our products or rapid shifts in demand from our products to alternative storage technologies in new clientnon-compute applications could materially adversely impact our future results of operations.

We are dependent on our long-term investments to manufacture adequate products. Our investment decisions in adding new assembly and test capacity require significant planning and lead-time, and a failure to accurately forecast demand for our products could cause us to over-invest or under-invest, which would lead to excess capacity, under-utilization charges, impairments or loss of sales and revenue opportunities.

Market

Our ability to increase our revenue and maintain our market share depends on our ability to successfully introduce and achieve market acceptance of new product introductions cannot be accurately predicted, and our results of operations will suffer if there is less demand for our new products than is anticipated.

on a timely basis.

The markets for our products are characterized by rapid technological change, frequent new product introductions and technology enhancements, uncertain product life cycles and changes in customer demand. The success
Historically, our results of our new product introductions is dependent on a number of factors, including market acceptance,operations have substantially depended upon our ability to managebe among the risks associatedfirst-to-market with new data storage product transitions,offerings. We may face technological, operational and financial challenges in developing new products. In addition, our investments in new product development may not yield the effective managementanticipated benefits. Our market share, revenue and results of inventory levelsoperations in linethe future may be adversely affected if we fail to:
consistently maintain our time-to-market performance with anticipated product demand and the risk that our new products;
produce these products will havein adequate volume;
qualify these products with key customers on a timely basis by meeting our customers’ performance and quality problemsspecifications; or other defects in the early stages of introduction that were not anticipated in the design of those
achieve acceptable manufacturing yields, quality and costs with these products.
Accordingly, we cannot accurately determine the ultimate effect that our new products will have on our results of operations. FailureOur failure to accurately anticipate customers’ needneeds and accurately identify the shift in technological changes could materially adversely affect our long-term financial results.

Historically, our results of operations have substantially depended upon our ability to be among thefirst-to-market with new product offerings. We may face technological, operational and financial challenges in developing new products. In addition, our investments directed toward new product development may not yield the anticipated benefits. Our market share and results of operations in the future may be adversely affected if we fail to:

consistently maintain ourtime-to-maturity performance with our new products;

produce these products in sufficient volume;

qualify these products with key customers on a timely basis by meeting our customers’ performance and quality specifications; or

achieve acceptable manufacturing yields, quality and costs with these products.

In addition, the success of our new product introductions is dependent upon our ability to qualify as a primary source of supply with our OEM customers. In order for our products to be considered by our customers for qualification, we must be among the leaders intime-to-market with those new products. Once a product is accepted, any failure or delay in the qualification process or a requirement that we requalify can result in our losing sales to that customer until new products are introduced. The limited number of high-volume OEMs magnifies the potential effect of missing a product qualification opportunity. These risks are further magnified because we expect competitive pressures to result in declining sales, eroding prices, and declining gross margins on our current generation products. If the delivery of our products is delayed, our OEM customers may use our competitors’ products to meet their production requirements.

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We cannot assure you that we will be among the leaders intime-to-market with new products or that we will be able to successfully qualify new products with our customers in the future.

We face the related risk that consumers and businesses may wait to make their purchases if they want to buy a new product that has been announced but not yet released. future. If this were to occur, we may be unable to sell our existing inventory of products that may be less efficient and cost effective compared to new products. As a result, even if we are among thefirst-to-market with a given product, subsequent introductions or announcements by our competitors of new products could cause us to lose revenue andare not achieve a positive return on our investment in existing products and inventory.

If we cannot successfully deliver competitive products,successful, our future results of operations may be adversely affected.

Our industries are highly competitive and our failure to anticipate and respond to technological and market developments could harm our ability to compete.

We operate in markets that are highly competitive and subject to rapid change and that are significantly affected by new product introductions, substantial price erosion and lower prices as part of a strategy to gain or retain market share and customers. Should these practices continue, we may need to continually reduce our prices for existing products to retain our market share, which could adversely affect our results of operations.

Our ability to offset the effect of price erosion through new product introductions at higher average prices is diminished to the extent competitors introduce products into particular markets ahead of our similar, competing products. Our ability to offset the effect of price erosion is also diminished during times when supply exceeds demand for a particular product.

Market share for

If our products can be negatively affected by our customers’ diversifying their sources of supply as our competitors enter the market for particular products, as well as by our ability to ramp volume production of new product offerings. When our competitors successfully introduce product offerings that are competitive with our recently introduced products, our customers may quickly diversify their sources of supply. Any significant decline in our market share in any of our principal market applications would adversely affect our results of operations.

Our principal sources of competition include:

disk drive manufacturers, such as Western Digital Corporation and Toshiba;

companies providing storage subsystems and components to OEMs;

electronic manufacturing services (“EMS”) companies acquiring the necessary skills and intellectual property to enter the enterprise data storage marketplace; and

collaborations betweenin-house development teams of existing and potential customers and a combination of EMS, contract electronic manufacturing (“CEM”) or emerging technology companies.

We also experience competition from other companies that produce alternative storage technologies like flash memory, where increasing capacity, decreasing cost, energy efficiency and improvements in performance ruggedness have resulted in competition with our lower capacity, smaller form factor disk drives. This competition has traditionally been in the markets for handheld consumer electronics applications and now it also includes SSDs for tablet, notebook and enterprise compute applications. Certain customers for both notebook and enterprise compute applications are adopting SSDs as alternatives to hard drives in certain applications. Further adoption of these alternative storage technologies may impact the competitiveness of our product portfolio and reduce our market share and adversely affect our results of operation.

The markets for our data storage system products are also characterized by technological change driven in part by the adoption of new industry standards. These standards provide mechanisms to ensure technology component interoperability can occur and may reduce our capability for differentiation or innovation and our affected products would revert to commodity status. This could lower the barriers to entry to our market away from our specialist research and development skills and enable entry for the general-purpose design skills found in some large EMS and CEM companies. Commodity markets are driven by extremely low margins and very aggressive competitive pricing. If our market becomes more commoditized and we fail to deliver innovative value-added alternatives to our customers, we will have difficulty competing against the larger EMS and CEM companies. If we are unable to compete successfully against our current and future competitors, we could experience profit margin reductions or loss of market share, which could significantly harm our financial condition.

We may be unable to effectively plan and make strategic changes in our business which may materially adversely affect our financial and business results. Additionally, we may not achieve the intended benefits of our strategic change efforts.

We may not be able to identify suitable strategic alliances, acquisitions, joint ventures or investment opportunities, to successfully acquire and integrate companies that provide complementary products or technologies or to realize the anticipated benefits of such transactions.

Our growth strategy involves pursuing strategic alliances with, making acquisitions of, forming joint ventures with or making investments in other companies that are complementary to our business. There is substantial competition for attractive strategic alliance, acquisition, joint venture and investment candidates. Additionally, the current trend of consolidation in the data storage industry may materially adversely affect our business and financial results and our future growth prospects. Accordingly, we may not be able to identify suitable strategic alliances, acquisition, joint venture, or investment candidates. Even if we can identify them, we cannot assure you that we will be able to partner with, acquire or invest in suitable candidates, or integrate acquired technologies or operations successfully into our existing technologies and operations. Moreover, our ability to finance potential strategic alliances, acquisitions, joint ventures or investments may be limited by our leverage level, the covenants contained in the instruments that govern our outstanding indebtedness, and any agreements governing any other debt we may incur.

If we are successful in forming strategic alliances or acquiring, forming joint ventures or making investments in other companies, any of these transactions may have an adverse effect on our results of operations, particularly while the operations of an acquired business are being integrated. It is also likely that integration of acquired companies would lead to the loss of key employees from those companies or the loss of customers of those companies. In addition, the integration of any acquired companies would require substantial attention from our senior management, which may limit the amount of time available to be devoted to ourday-to-day operations or to the execution of our strategy. Growth by strategic alliance, acquisition, joint venture or investment involves an even higher degree of risk to the extent we combine new product offerings and enter new markets in which we have limited experience, and no assurance can be given that acquisitions of entities with new or alternative business models will be successfully integrated or achieve their stated objectives. There can be no assurance that we will realize the anticipated benefits of any strategic alliance, acquisition, joint venture or investment that we make or, if we do, how long it will take to achieve such benefits.

Furthermore, the expansion of our business involves the risk that we might not manage our growth effectively, that we would incur additional debt to finance these acquisitions or investments, that we may have impairment of goodwill or acquired intangible assets associated with these acquisitions and that we would incur substantial charges relating to thewrite-off ofin-process research and development. Each of these items could have a material adverse effect on our financial condition and results of operations.

In addition, we could issue additional ordinary shares in connection with future strategic alliances, acquisitions, joint ventures or investments. Issuing shares in connection with such transactions would have the effect of diluting your ownership percentage of the ordinary shares and could cause the price of our ordinary shares to decline.

If we do not develop products in time to keep pace with technological changes, our results of operations will be adversely affected.

affected.

Our customers demand new generations of disk drivestorage products as advances in computer hardware and software have created the need for improved storage products, with features such as increased storage capacity, enhanced security, improved performance and reliability and lower cost. We, and our competitors, have developed improved products, and we will need to continue to do so in the future. Such product development requires significant investments in research and development. We cannot assure you thatIf we will be ableare unable to successfully complete the design or introduction ofdevelop new products, in aidentify business strategies and timely manner, thatintroduce competitive product offerings to meet technological shifts, or we willare unable to execute successfully, our business and results of operations may be able to manufacture new products in sufficient volumes with acceptable manufacturing yields, that we will be able to successfully market these new products or that these products will perform to specifications on a long-term basis. In addition, the impact of slowing areal density growth may adversely impact our ability to be successful.

affected.

When we develop new products with higher capacity and more advanced technology, our results of operations may decline because the increased difficulty and complexity associated with producing these products increases the likelihood of reliability, quality or operability problems. If our products sufferexperience increases in failures,failure rates, are of low quality or are not reliable, customers may reduce their purchases of our products, our factory utilization may decrease and our manufacturing rework and scrap costs and our service and warranty costs may increase. In addition, a decline in the reliability of our products may make it more difficult for us less competitive as comparedto effectively compete with other disk drive manufacturersour competitors.
Additionally, we may be unable to produce new products that have higher capacities and more advanced technologies in the volumes and timeframes that are required to meet customer demand. We are transitioning to key areal density recording technologies that use HAMR technology to increase HDD capacities. If our transitions to more advanced technologies, including the transition to HDDs utilizing HAMR technology, require development and production cycles that are longer than anticipated or competing technologies.

if we otherwise fail to implement new HDD technologies successfully, we may lose sales and market share, which could significantly harm our financial results.

We may failnot be able to successfully anticipate technological shifts,generate sufficient cash flows from operations and our investments to meet our liquidity requirements, including servicing our indebtedness.
Our business opportunitiesmay not generate sufficient cash flows to enable us to meet our liquidity requirements, including working capital, capital expenditures, product development efforts, investments, servicing our indebtedness and market demand. Additionally, the barriersother general corporate requirements. If we cannot fund our liquidity requirements, we may have to entry in developing NAND flash memory productsreduce or delay capital expenditures, product development efforts, investments and SSDs may materially adverselyother general corporate expenditures. We cannot assure you that any of these remedies would, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our obligations, which would affect our future growth prospects. We may fail to develop new products, identify business strategies and introduce competitive product offerings to meet those technological shifts which may materially adversely affect our ability to compete effectively and may impact our future financial results.

Servicing our indebtedness requires a significant amountresults of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

operations.

We are leveraged and haverequire significant debtamounts of cash to service obligations.our debt. Our significant debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities and reduce our options for capital allocation. For example, ourOur high level of debt presents the following risks:

we are required to use a substantial portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements;

our substantial leverage increases our vulnerability to economic downturns, decreased availability of capital, and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;

our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and our industry, and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies;

our level of debt may restrict us from raising, or make it more costly to raise, additional financing on satisfactory terms to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements; and

covenants in our debt instruments limit our ability to pay future dividends or make other restricted payments and investments.

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In addition, in the event that we need to refinance all or a portion of our outstanding debt as it matures or incur additional debt to fund our operations, we may not be able to obtain terms as favorable as the terms of our existing debt or refinance our existing debt at all. If prevailing interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced debt would increase. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our ability to refinance existing debt or raise additional capital.

In addition, our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness or to fund our other liquidity needs, including working capital capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements.

Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that:

.
our business will generate sufficient cash flow from operations;

we will continue to realize the cost savings, revenue growth and operating improvements that result from the execution of our long-term strategic plan; or

future sources of funding will be available to us in amounts sufficient to enable us to fund our liquidity needs.

If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. In addition if we incur additional debt, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could intensify.

Changes in demand for computer systems and storage subsystems may in the future cause a decline in demand for our products.

Our products are components in computers, data storage systems, and consumer electronics devices. The demand for these products has been volatile. Unexpected slowdowns in demand for computer systems, storage subsystems or consumer electronics devices generally cause sharp declines in demand for our products. Declines in consumer spending could have a material adverse effect on demand for our products and services and on our financial condition and results of operations.

While sales to ClientNon-Compute and Cloud Systems and Solutions markets are becoming a more significant source of revenue, sales to the Client Compute market remain an important part of our business. The Client Compute market, however, has been, and we expect it to continue to be, adversely affected by the growth of tablet computers, smart phones and similar devices and that perform many of the same capabilities as computers, the lengthening of product life cycles and macroeconomic conditions. We believe that the deterioration of the Client Compute market has accelerated recently, and that this accelerated deterioration may continue or further accelerate, which could cause our operating results to suffer. Additionally, if demand in the Client Compute market is worse than expected as a result of these or other conditions, demand for our products in the Client Compute market may decrease at a faster rate and our operating results may be adversely affected.

The Enterprise Storage market has been adversely affected by the growth of the utilization of NAND flash in mission critical applications. This deterioration of the Enterprise Storage market could cause our operating results to suffer. The potential migration of the Enterprise Storage market to NAND flash memory products and an acceleration of the pace of migration may materially adversely affect our financial results.

Causes of declines in demand for our products in the past have included weakness in macroeconomic environments, announcements or introductions of major new operating systems or semiconductor improvements or changes in consumer preferences, such as the shift to mobile devices. We believe these announcements and introductions have from time to time caused consumers to defer their purchases and made inventory obsolete. Whenever an oversupply of our products causes participants in our industry to have higher than anticipated inventory levels, we experience even more intense price competition from other manufacturers than usual which may materially adversely affect our financial results.

Increases in the areal density of disk drives may outpace customers’ demand for storage capacity.

The rate of increase in areal density, or storage capacity per square inch on a disk, may be greater than the increase in our customers’ demand for aggregate storage capacity, particularly in certain market applications like client compute. As a result, our customers’ storage capacity needs may be satisfied with lower priced, low capacity disk drives. These factors could decrease our sales, especially when combined with continued price erosion, which could adversely affect our results of operations.

We may not be successful in our efforts to grow our cloud systemsEDS and silicon group.

SSD revenues.

We have made and are continuingcontinue to make investments to developgrow our Cloud SystemsEDS and Silicon group.SSD revenues. Our Cloud Systemsability to grow EDS and Silicon groupSSD revenues is subject to the following risks:

the cloud systems and solutions market may develop more slowly than we expect;

we may be unable to accurately estimate and predict data center capacity and requirements;

we may not be able to offer compelling solutions to enterprises and consumers;

we may be unable to obtain cost effective supply of NAND flash memory in order to offer competitive SSD solutions; and
our Cloud Systems and Silicon groupcloud systems revenues generally hashave a long and unpredictablelonger sales cycle, and growth in this business is likely to depend on relatively large customer orders, which may increase the variability of our results of operations and the difficulty of matching revenues with expenses; andexpenses.

the current uncertainty surrounding net neutrality may cause the data center and cloud business to grow at a slower rate than expected.

Our results of operations and share price may be adversely affected if we are not successful in our efforts to grow our cloud computing businessrevenues as anticipated. In addition, our growth in this sectorthese markets may bring us into closer competition with some of our customers or potential customers, which may decrease their willingness to do business with us.

Changes in the macroeconomic environment have negatively impacted, and may continue to,in the future negatively impact our results of operations.

Due to the continuing uncertainty about current

Changes in macroeconomic conditions affectingmay affect consumer and enterprise spending, we believeand as a result, our customers may postpone or cancel spending in response to volatility in credit and equity markets, negative financial news and/or declines in income or asset values, all of which couldmay have a material adverse effect on the demand for our products. Additionally, enterprise spending continues to remain cautiousproducts and/or result in many regions around the world.significant decreases in our product prices. Other factors that could influencehave a material adverse effect on demand for our products and on our financial condition and results of operations include conditions in the labor market, healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer and business spending behavior. These and other economic factors could have a material adverse effect on demand for our products and on our financial condition and operating results.

Macroeconomic developments likesuch as the ongoing withdrawal of the United Kingdom (“U.K.”) from the European Union the debt crisis in certain countries in the European Union and(“EU”), slowing economies in parts of Asia and South Americathe Americas, increased tariffs between the U.S. and China, Mexico and other countries, or adverse economic conditions worldwide resulting from the COVID-19 pandemic and efforts of governments and private industry to slow the pandemic through stay at home orders, social distancing requirements and other disease control measures could negatively affect our business, operating results or financial condition which, in turn, could adversely affect the price of our stock price.ordinary shares. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending could cause current or potential customers to reduce their ITinformation technology (“IT”) budgets or be unable to fund hardwaredata storage systems, which could cause customers to delay, decrease or cancel purchases of our products or cause customers not to pay us or to delay paying us for previously purchased products and services.

services.

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Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause our share price to decline.

decline.

Our quarterly revenue and results of operations may fluctuate, sometimes significantly, from period to period. These fluctuations, which we expect to continue, have been and may continue to be occasionedprecipitated by a variety of factors, including:

current uncertainty in global economic and political conditions which may pose a risk to the overall economy;economy or specific geographies or industries and adversely affect our customers’ purchasing behavior;

adverse changes in the level of economic activity in the major regions in which we do business;

competitive pressures resulting in lower selling prices by our competitors targeted to encourage shiftingwhich may shift demand away from our products toward those of customer demand;our competitors;

delays or problems in our introduction of new, more cost-effective products, the inability to achieve high production yields or delays in customer qualification or initial product quality issues;

changes in purchasing patterns byof our distributor customers;

application of new or revised industry standards;

disruptions in our supply chain;

increased costs or adverse changes in availability of supplies of raw materials or components;

the impact of corporate restructuring activities that we have and may continue to engage in;

changes in the demand for the computer systems and data storage products that contain our products due to seasonality, economic conditions and other factors;

changes in purchases from period to period by our primary customers;

shifting trends in customer demand which, when combined with overproduction of particular products, particularly when the industry is served by multiple suppliers, results in unfavorable supply/supply and demand imbalances;

our high proportion of fixed costs, including research and development expenses;

any impairments in goodwill or other long-lived assets;

announcements of new products, services or technological innovations by us or our competitors;
changes in tax laws, regulatory requirements, including export regulations or tariffs, or accounting standards; and

adverse changes in the performance of our products.

As a result, we believe thatquarter-to-quarter and year-over-year comparisons of our revenue and results of operations may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance. Our results of operations in one or more future quarters may fail to meet the expectations of investment research analysts or investors, which could cause an immediate and significant decline in the trading priceour market value.
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Table of our ordinary shares.

Because weContents

We experience seasonalityseasonal declines in the sales of our products our results of operations will generally be adversely impacted during the second half of our fiscal year.

year which may adversely affect our results of operations.

Sales of computer systems,computers, storage subsystems and consumer electronicselectronic devices tend to be seasonal, and therefore, we expect to continue to experience seasonality in our business as we respond to variations in our customers’ demand for our products. In particular, we anticipate that sales of our products will continue to be lower during the second half of our fiscal year. In the client computedesktop and clientnon-compute marketnotebook, consumer and gaming storage legacy markets applications of our disk drivedata storage business, this seasonality is partially attributable to the historical trend in our results derived fromof our customers’ increased sales of desktop computers, notebook computers and consumer electronics during theback-to-school and winter holiday season. In the enterprise marketdesktop and notebook, consumer and gaming storage legacy markets, our sales are seasonal because of the capital budgeting and purchasing cycles of our end users. We also experience seasonal reductions in the business activities of our customers during international holidays like Lunar New Year, as well as in the summer months (particularly in Europe), which typically result in lower sales during those periods. Since our working capital needs peak during periods in which we are increasing production in anticipation of orders that have not yet been received, our results of operations will fluctuate seasonally even if the forecasted demand for our products proves accurate. Furthermore, it is difficult for us to evaluate the degree to which this seasonality may affect our business in future periods because of the rate and unpredictability of product transitions and new product introductions, particularly in the clientnon-compute market, as well as macroeconomic conditions.

We have a long and unpredictable sales cycle for enterprise datanearline and mission critical storage solutions.

solutions, which impairs our ability to accurately predict our financial and operating results in any period and may adversely affect our ability to forecast the need for investments and expenditures.

Our enterprise datanearline and mission critical storage solutions are technically complex and we typically supply them in high quantities to a small number of customers. Many of our products are also tailored to meet the specific requirements of individual customers, and are often integrated by our customers into the systems and products that they sell. Factors that affect the length of our sales cycle include:

the time required for developing, testing and evaluating our products before they are deployed;

the size of the deployment; and

the degreecomplexity of system configuration necessary to deploy our products.

As a result, our sales cycle for enterprise datanearline and mission critical storage solutions is often in excess of one year and frequently unpredictable. Given the length of ourdevelopment and qualification programs and unpredictability of the sales cycle, is frequently unpredictable. In addition, the emergingwe may be unable to accurately forecast product demand, which may result in lost sales or excess inventory and evolving natureassociated inventory reserves or write-downs, each of the market for the products that we sell may lead prospective customers to postpone their purchasing decisions. We invest resourceswhich could harm our business, financial condition and incur costs during this cycle that may not be recovered if we do not successfully conclude sales. These factors lead to difficulty in matching revenues with expenses, and to increased expenditures which together may adversely impact our results of operations.

operations.

We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more of our major customers.

key customers.

Some of our key customers account for a large portion of our disk drive revenue. While we have longstandinglong-standing relationships with many of our customers, if any of our key customers were to significantly reduce their purchases from us, or we were prohibited or restricted by law, regulation or other governmental action from selling to those key customers, our results of operations would be adversely affected. WhileAlthough sales to majorkey customers may vary from period to period, a majorkey customer that permanently discontinues or significantly reduces its relationship with us could be difficult to replace. In line with industry practice, new key customers usually require that we pass a lengthy and rigorous qualification process at the customer’s cost.expense. Accordingly, it may be difficult or costly for us to attract new major customers. key customers.
Additionally, mergers, acquisitions, consolidations or other significant transactions involvingif there is consolidation among our customer base, our customers generally entail risksmay be able to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our business.profitability. Furthermore, if, as a result of increased leverage, customer pressures require us to reduce our pricing such that our gross margins are diminished, it might not be feasible to sell our products to a particular customer, which could result in a decrease in our revenue. Consolidation among our customer base may also lead to reduced demand for our products, replacement of our products by the combined entity with those of our competitors and cancellations of orders, each of which could adversely affect our results of operations. If a significant transaction or regulatory impact involving any of our key customers results in the loss of or reduction in purchases by these key customers, it could have a materially adverse effect on our business, results of operations and financial condition and prospects.

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We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of our sales.

sales.

A substantial portion of our sales has been to distributors of disk drive products. Certain of our distributors may also market other products that compete with our products. Product qualification programs in this distribution channel are limited, which increases the number of competing products that are available to satisfy demand, particularly in times of lengthening product cycles. As a result, purchasing decisions in this channel are based largely on price, terms and product availability. Sales volumes through this channel are also less predictable and subject to greater volatility than sales to our OEM customers. In addition, deterioration in business and economic conditions could exacerbate price erosion and volatility as distributors lower prices to compensate for lower demand and higher inventory levels. Our distributors’ ability to access credit for purposes of funding their operations may also affect purchases of our products by these customers.

If distributors reduce their purchases of our products or prices decline significantly in thethis distribution channel or if distributors experience financial difficulties or terminate their relationships with us, our revenues and results of operations would be adversely affected.

We believe that industry demand for storage products in the long-term is increasing due to the proliferation of media-rich digital content in consumer applications and is fueling increased consumer demand for storage. This has led to the expansion of our branded solutions such as external storage products to provide additional storage capacity and to secure data in case of disaster or system failure, or to provide independent storage solutions for multiple users in home or small business environments. Consumer spending on

In addition, retail sales of our branded solutions has deteriorated in somelegacy markets and may continue to do so if poor global economic conditions continue and higher levels of unemployment persist. This could have a material adverse effect on demand for our products and services and on our financial condition and results of operations.

In addition, such retail sales of our branded solutions traditionally experience seasonal variability in demand with higher levels of demand in the first half of our fiscal year driven by consumer spending in theback-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. Additionally, ourOur ability to reach such consumers depends on us maintaining effective working relationships with major retailers and distributors. Failure to anticipate consumer demand for our branded solutions as well as an inability to maintain effective working relationships with retail and online distributors may adversely impact our future results of operations.

operations.

Our internationalworldwide sales and manufacturing operations subject us to risks that may adversely affect our business related to disruptions in foreigninternational markets, currency exchange fluctuations, longer payment cycles, seasonality, limitations imposed by a variety of legal and regulatory regimes, potential adverse tax consequences, increased costs, our customers’ credit and access to capital, health-related risks (including pandemics such as COVID-19), investment risks, tariffs, privacy and protection of data, and access to personnel.

personnel.

We have significant sales and manufacturing operations in foreign countries,outside of the United States, including manufacturing facilities, sales personnel and customer support operations. We have manufacturing facilities in China, Malaysia, Northern Ireland, Singapore, and Thailand, in addition to those inand the United States. Additionally, the manufacturing of some of our products is concentrated in certain geographical locations. The production of certain drive subassemblies are limited to Thailand and the production of media is limited to Singapore. We also generate a significant portion of our revenue from sales outside the United States. Disruptions in the economic, environmental, political, legal or regulatory landscape in these countries may have a material adverse impact on our manufacturing and sales operations.

Our internationalworldwide operations are subject to economic, regulatory and other risks inherent in doing business internationally, including the following:

Disruptions in foreignInternational Markets. Disruptions in financial markets and the deterioration of the underlying economic conditions in the past in some countries, including the following:

Disruptions in Foreign Markets.Disruptions in financial markets and the deterioration of the underlying economic conditions in the past in some countries, including those in Asia, United Kingdom and the European Union have had an impact on our sales to customers located in, or whoseend-user customers are located in, these countries.

Fluctuations in Currency Exchange Rates. Prices for our products are denominated predominately in U.S. dollars, even when sold to customers that are located outside the United States. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside of the U.S. where we sell in dollars. This could adversely impact our sales and market share in such areas or increase pressure on us to lower our price, and adversely impact our profit margins. A weakened dollar could increase the cost of expenses such as payroll, utilities, tax, and marketing expenses, as well as overseas capital expenditures. Any of these events could have a material adverse effect on our results of operations. We may attempt to manage the impact of foreign currency exchange rate changes by, among other things, entering into foreign currency forward exchange contracts. However, these contracts may not cover our full exposure and subject us to certain counterparty credit risks. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Risk” of this report for additional information about our foreign currency exchange risk.

Longer Payment Cycles.Our customers outside of the United States are sometimes allowed longer time periods for payment than our U.S. customers. This increases the risk of nonpayment due to the possibility that the financial condition of particular customers may worsen during the course of the payment period.

Seasonality.Seasonal reductions in the business activities of our customers during the summer months, particularly in Europe, and the impact of international holidays like the Chinese New Year, typically result in lower earnings during those periods.

Legal and Regulatory Limitations.Our international operations are affected by limitations on imports, tariffs, duties, currency exchange control regulations, price controls, export control laws, antitrust matters including the trade and economic sanctions administered by the Office of Foreign Assets Control, and other restraints on trade. In addition, China, Malaysia, Northern Ireland, Singapore and Thailand, in which we have significant operating assets, and the European Union have exercised and continue to exercise significant influence over many aspects of their domestic economies including, but not limited to, fair competition, tax practices, anti-corruption, antitrust, price controls and international trade. Although we have implemented policies and procedures designed to ensure compliance, there can be no assurance that our employees, contractors, or agents will not violate these or other applicable laws, rules and regulations to which we may be subject. Violations of these laws and regulations could lead to significant penalties, restraints on our export or import privileges, monetary fines, government investigations, disruption of our operating activities, criminal proceedings and regulatory or other actions that could materially adversely affect our results of operations.

Potential Adverse Tax Consequences.Our international operations create a risk of potential adverse tax consequences, including imposition of withholding or other taxes on payments by our subsidiaries. In addition, our taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm’s length basis. Due to inconsistencies in application of the arm’s length standard among taxing authorities, as well as a lack of adequate treaty-based protection, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense. We are subject to tax audits around the world, and are under audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax positions are reasonable, the final determination of tax audits could be materially different from our recorded income tax provisions and accruals. The ultimate results of an audit could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods. In light of the ongoing fiscal challenges many countries are facing, various levels of government are increasingly focused on tax reform and other legislative action to increase tax revenue. In addition, the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting recommendations are reshaping international tax rules in numerous countries. These actual and potential changes in the relevant tax laws applicable to corporate multinationals along with potential changes in accounting and other laws, regulations, administrative practices, principles, and interpretations could increase the risk of double taxation, cause increased tax audit activity, and could impact our effective tax rate.

United Kingdom and those in Asia and the European Union have had an impact on our sales to customers located in, or whose end-user customers are located in, these countries.

Fluctuations in Currency Exchange Rates. Prices for our products are denominated predominantly in dollars, even when sold to customers that are located outside the U.S. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside of the U.S. where we sell in dollars. This could adversely impact our sales and market share in such areas or increase pressure on us to lower our price, and adversely impact our profit margins. In addition, we have revenue and expenses denominated in currencies other than the dollar, primarily the Thai Baht, Singaporean dollar, Chinese Renminbi and British Pound Sterling, which further exposes us to adverse movements in foreign currency exchange rates. A weakened dollar could increase the effective cost of our expenses such as payroll, utilities, tax and marketing expenses, as well as overseas capital expenditures. Any of these events could have a material adverse effect on our results of operations. We have attempted to manage the impact of foreign currency exchange rate changes by, among other things, entering into foreign currency forward exchange contracts from time to time, which could be designated as cash flow hedges or not designated as hedging instruments. Our hedging strategy may be ineffective, and specific hedges may expire and not be renewed or may not offset any or more than a portion of the adverse financial impact resulting from currency variations. The hedging activities may not cover our full exposure, subject us to certain counterparty credit risks and may impact our results of operations. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk— Foreign Currency Exchange Risk” of this report for additional information about our foreign currency exchange risk.
Increased Costs.The shipping and transportation costs associated with our international operations are typically higher than those associated with our U.S. operations, resulting in decreased operating margins in some foreign countries.

Credit and Access to Capital Risks.Our international customers could have reduced access to working capital due to higher interest rates, reduced bank lending resulting from contractions in the money supply or the deterioration in the customer’s or its bank’s financial condition, or the inability to access other financing.

Global Health Outbreaks.The occurrence of a pandemic disease may adversely impact our operations, and some of our key customers. Such diseases could also potentially disrupt the timeliness and reliability of the distribution network we rely on.

Tariffs or Other Restrictions on Foreign Imports. The U.S. government could impose tariffs or other restrictions on foreign imports. The implementation of a border tax, tariff or higher customs duties on our products manufactured abroad or components that we import into the U.S., or any potential corresponding actions by other countries in which we do business, could negatively impact our financial performance.

Access to Personnel.There is substantial competition for qualified and capable personnel in certain jurisdictions in which we operate, including China, which may make it difficult for us to recruit and retain qualified employees in sufficient numbers. Increased difficulty in recruiting or retaining sufficient and adequate personnel in our international operations may lead to increased manufacturing and employment compensation costs, which could adversely affect our results of operations.

Longer Payment Cycles. Our customers outside of the United States are sometimes allowed longer time periods for payment than our U.S. customers. This increases the risk of nonpayment due to the possibility that the financial condition of particular customers may worsen during the course of the payment period.
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Potential Adverse Tax Consequences. We are incorporated in Ireland and have offices, operations, and subsidiaries in many countries around the world. Our international operations create a risk of potential adverse tax consequences, including imposition of withholding or other taxes on payments by our subsidiaries. In addition, our taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm’s length basis. Due to inconsistencies in application of the arm’s length standard among taxing authorities, as well as a lack of adequate treaty-based protection, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense. We are subject to tax audits around the world, and are under audit in various jurisdictions, and such jurisdictions have in the past assessed and may in the future assess additional income tax against us. Although we believe our tax positions are reasonable, the final determination of tax audits could be materially different from our recorded income tax provisions and accruals. The ultimate results of an audit could have a material adverse effect on our results of operations or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods. In light of the ongoing fiscal challenges many countries are facing, various levels of government are increasingly focused on tax reform and other legislative or regulatory action to increase tax revenue. In addition, the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting recommendations are reshaping international tax rules in numerous countries. These actual and potential changes in the relevant tax laws applicable to corporate multinationals along with potential changes in accounting and other laws, regulations, administrative practices, principles and interpretations could increase the risk of double taxation, cause increased tax audit activity, and could impact our effective tax rate.
Increased Costs. The shipping and transportation costs associated with our international operations are typically higher than those associated with our U.S. operations, resulting in decreased operating margins in some countries. Volatility in fuel costs, political instability or constraints in or increases in the costs of air transportation may lead us to develop alternative shipment methods, which could disrupt our ability to receive raw materials, or ship finished product, and as a result our business and results of operations may be harmed.
Credit and Access to Capital Risks. Our customers could have reduced access to working capital due to global economic conditions, higher interest rates, reduced bank lending resulting from contractions in the money supply or the deterioration in the customer’s, or their bank’s financial condition or the inability to access other financing, which would increase our credit and non-payment risk, and could result in an increase in our operating costs or a reduction in our revenue. In addition, some of our OEM customers have adopted a subcontractor model that requires us to contract directly with companies, such as original design manufacturers, that provide manufacturing and fulfillment services to our OEM customers. Because these subcontractors are generally not as well capitalized as our direct OEM customers, this subcontractor model exposes us to increased credit risks. Our agreements with our OEM customers may not permit us to increase our product prices to alleviate this increased credit risk.
Global Health Outbreaks. The occurrence of a pandemic disease, such as the recent COVID-19 pandemic, has impacted and may adversely impact our operations (including, without limitation, logistical and other operational costs) and the operations of some of our key direct and indirect suppliers and customers. The reactions by governments and private industry to such diseases have also disrupted and could continue to disrupt the availability, timeliness and reliability of the supply chains and distribution networks we rely on. 
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Privacy and Protection of Data. Our business is subject to a number of laws, rules and regulations in the countries where we operate pertaining to the collection, processing, security, use, retention and transfer of information about our customers, consumers and employees. For example, the General Data Protection Regulation (“GDPR”), which is in effect in the European Economic Area (“EEA”), applies to our operations. The GDPR imposes stringent data protection requirements in the EEA and provides for greater penalties for noncompliance of up to the greater of 4% of worldwide annual revenue or €20 million. In China, we are monitoring legal and government advisory developments regarding the Chinese Cybersecurity Law and Draft Cybersecurity Review Measures for impacts to our business related to cross-border transfer limitations and evolving privacy, security, or data protection requirements. In the U.S., numerous federal and state laws, rules and regulations apply to our data handling practices. For example, California recently enacted legislation, the California Consumer Privacy Act (“CCPA”) which, among other things, requires new disclosures to California consumers and affords such consumers new abilities to opt-out of certain sales of personal information. The CCPA has required us to modify our data processing practices and policies and incur substantial compliance-related costs and expenses. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), recently was certified by the California Secretary of State to appear on the ballot for the November 3, 2020 election. If this initiative is approved by California voters, the CPRA would significantly modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses. The U.S. federal government and other states in the U.S. also have proposed or enacted similar laws and regulations relating to privacy and data protection. Some countries have passed or are considering legislation limiting extraterritorial transfers of data, including requiring the local storage and processing of data or similar requirements. As a result of the July 16, 2020, European Court of Justice (“ECJ”), opinion in Case C-311/18 (Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems), the EU-U.S. Privacy Shield Framework was deemed an invalid method of compliance with restrictions set forth in the GDPR regarding the transfer of personal data from EEA member states to the U.S. and uncertainty was expressed regarding viability of the Standard Contractual Clauses option as a method of transferring personal data outside of the EEA. Present solutions to legitimize transfers of personal data from the EEA may be challenged or deemed insufficient, whether as a result of future ECJ rulings, changes in the GDPR (and EEA member states’ implementations thereof), successor EEA data protection regulations, or otherwise, and may have a material adverse effect on our business, including our data transfers, financial condition, operating results and reputation. Laws, rules and regulations relating to privacy and data protection evolve frequently and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement, and may be inconsistent from one jurisdiction to another. Compliance with various laws, rules, rulings, and regulations relating to privacy and data protection have required and may continue to require us to change our data practices, which resulted and may continue to result in increased costs, require significant changes to our business and operations and could otherwise have an adverse effect on our business and results of operations. Actual or perceived violations of privacy or data protection laws could result in adverse effects on our business and results of operations including damage to our brand and reputation, significant financial penalties and liability, governmental investigations and proceedings, private actions, and unanticipated changes to our data handling and processing practices. We cannot ensure that any limitation-of-liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts are enforceable or adequate or would protect us from any liabilities or damages with respect to claims relating to a security breach or other security-related matter. Although our insurance policies include some liability coverage, if we experienced a widespread security breach or other incident then we could be subject to indemnity claims or other damages that either aren’t covered or exceed our insurance coverage. We also cannot be certain that our insurance coverage is adequate for data-handling or data-security liabilities incurred, or that insurance will continue to be available to us on economically reasonable terms or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more claims against us that exceed our insurance coverage, or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results and reputation.
Access to Personnel. There is substantial competition for qualified and capable personnel in certain jurisdictions in which we operate, including the U.S., Thailand, China and Singapore, which may make it difficult for us to recruit and retain qualified employees in sufficient numbers. The reductions in workforce that result from our historical restructurings have made and may continue to make it difficult for us to recruit and retain personnel. Increased difficulty in access to, or recruiting or retaining sufficient and adequate personnel in our international operations may lead to increased manufacturing and employment compensation costs, which could adversely affect our results of operations.
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We are subject to counterparty default risks.
We have numerous arrangements with financial institutions that subject us to counterparty default risks, including cash and investment deposits, and foreign currency forward exchange contracts and other derivative instruments. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will, voluntarily or involuntarily, default on its performance obligations. In times of market distress in particular, a counterparty may not comply with its contractual commitments that could then lead to it defaulting on its obligations with little or no notice to us, thereby limiting our ability to take action to lessen or cover our exposure. Additionally, our ability to mitigate our counterparty exposures could be limited by the terms of the relevant agreements or because market conditions prevent us from taking effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceedings. In the event of any such counterparty default, we could incur significant losses, which could have a material adverse effect on our business, results of operations, or financial condition.
Our business is subject to various laws, regulations and governmental policies that may cause us to incur significant expense.
Our business is subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies. There can be no assurance that laws, regulations and policies will not be changed in ways that will require us to modify our business model and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright. In particular, legislative, regulatory or other areas of significance for our businesses that U.S. and non-U.S. governments have focused and continue to focus on, including antitrust and competition law, improper payments, data privacy and sovereignty, currency exchange controls that could restrict the movement of liquidity from particular jurisdictions, trade controls or tariffs on imports and exports in the U.S. or other countries, complex economic sanctions and the enactment of U.S. tax reform and potential further changes to global tax laws, have had and may continue to have an effect on our corporate structure, operations, sales, liquidity, capital requirements, effective tax rate and financial performance. China, Malaysia, Northern Ireland, Singapore and Thailand, in which we have significant operating assets, and the European Union each have exercised and continue to exercise significant influence over many aspects of their domestic economies including, but not limited to, fair competition, tax practices, anti-corruption, anti-trust, price controls and international trade.
In addition, regulation or government scrutiny may impact the requirements for marketing our products and slow our ability to introduce new products, resulting in an adverse impact on our business. Although we have implemented policies and procedures designed to ensure compliance, there can be no assurance that our employees, contractors or agents will not violate these or other applicable laws, rules and regulations to which we are and may be subject. Violations of these laws and regulations could lead to significant penalties, restraints on our export or import privileges, monetary fines, government investigations, disruption of our operating activities, damage to our reputation and corporate brand, criminal proceedings and regulatory or other actions that could materially adversely affect our results of operations. The political and media scrutiny surrounding a governmental investigation for the violation of such laws, even if an investigation does not result in a finding of violation, could cause us significant expense and collateral consequences, including reputational harm, that could have an adverse impact on our business, results of operations and financial condition.
Changes in U.S. trade policy, including the imposition of sanctions or tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.
The U.S. government has adopted a new approach to trade policy including in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The U.S. government has also imposed tariffs on certain non-U.S. goods, including information and communication technology products. These measures may materially increase costs for goods imported into the United States. This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we are unable to increase prices to adequately address any tariffs, quotas or duties result in lowering our margin on products sold. Changes in U.S. trade policy have resulted in, and could result in more, U.S. trading partners adopting responsive trade policies, including imposition of increased tariffs, quotas or duties, making it more difficult or costly for us to export our products to those countries. The implementation of a border tax, tariff or higher customs duties on our products manufactured abroad or components that we import into the U.S., or any potential corresponding actions by other countries in which we do business, could negatively impact our financial performance. The U.S. government also imposes sanctions through executive orders restricting U.S. companies from conducting business activities with specified individuals and companies, and the sanctions imposed by the U.S. government could be expanded in the future. If we are unable to conduct business with new or existing customers, our business, including revenue, profitability and cash flows, could be materially adversely affected.
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We could suffer a loss of revenue and increased costs, exposure to significant liability including legal and regulatory consequences, reputational harm and other serious negative consequences if we encounterin the event of cyber-attacks, ransomware or other datacyber security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our customers or other third-parties.

third parties.

Our operations are dependent upon our ability to protect our computer equipment and the electronic data stored in our databases from damage by, among other things, earthquake, floods, fire, natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, employee misconduct, physical or electronicbreak-ins, cyber-attacks, ransomware, system security breaches or similar events or disruptions.databases. We manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, our outsourcing services and cloud computing businesses routinely process, store, and transmit large amounts of data for our customers and vendors, including sensitive and personally identifiable information. As our operations become more automated and increasingly interdependent, our exposure to the risks posed by thesestorage and maintenance of data will continue to increase. The measures we have implemented to secure our computer equipment and electronic data have been and may continue to be vulnerable to phishing, employee error, hacking, malfeasance, system error or other irregularities and may not be sufficient for all eventualities, including sustained maintenance of remote working requirements. The insurance coverage we maintain that is intended to address certain data security risks, may be insufficient to cover all types of events will increase.claims or losses that may arise. We have been, and will likely continue to be, subject to computer viruses or other malicious codes, cyber-attacks or other computer-related attempts to breach the information technology (“IT”)IT systems we use for these purposes. We have been and may also continue be subject to IT system failures and network disruptions due to these factors. Experienced computer programmers and hackers may be able to penetrate our network security, and misappropriate or compromise our confidential information or that of third-parties, create system disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. Such attempts are increasing in technical sophistication, number and the ability to evade detection or to obscure such activities. Although we take steps to protect against and detect such attempts, our efforts may not be sufficient for all eventualities, including sustained maintenance of remote working requirements. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system.

system.

The costs to us to eliminate or address the foregoing security problems and security vulnerabilities before or after a cyber-incident could be significant. System redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions. We could lose existing or potential customers for outsourcing services or other IT solutions in connection with any actual or perceived security vulnerabilities in our products. In addition, breachesSome of our products contain encryption and other measures to protect third-party content stored on our products. Such measures may be compromised, breached or circumvented by sophisticated attackers and losses or unauthorized access to or releases of confidential information may occur. Breaches of our security measures and the unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or other third-parties, has exposed us and could expose us, our vendors and customers or other third-parties affected to a risk of loss or misuse of this information, result in litigation or governmental investigations and potential liability for us, damage our brand and reputation or otherwise harm our business. Failure to meet our contractual obligations to promote information security with certain customers may result in liability, including additional costs, indemnification claims, litigation and damage to our brand and reputation. In addition, we rely in certain limited capacities on third-party data management providers whose possible security problems and security vulnerabilities may have similar effects on us.

Our business, brand and reputation could also be adversely affected by media or other reports of perceived security vulnerabilities in our products, network or processes, even if unsubstantiated.

We are subject to laws, rules and regulations in the U.S., U.K., European UnionEU and other countries relating to the collection, use, and security of user data. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, and among us, our subsidiaries and other parties with which we have commercial relations. Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify vendors, customers or employees of a data security breach. We have incurred, and will continue to incur, significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards orand contractual obligations. These laws, protocols and standards continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing international requirements has caused and may continue to cause us to incur substantial costs or required or may continue to require us to change our business practices. If we fail to comply with applicable federal, state or international privacy-related or data protection laws we may be subject to proceedings by governmental entities and incur penalties, or significant legal liability.

liability or reputational harm.

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We must successfully maintain and upgrade our IT systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.
From time to time, we may be subjectexpand and improve our IT systems to litigation, government investigations or governmental proceedings, which may adversely impactsupport our results of operations and financial condition.

From time to time, the Company may be involved in various legal, regulatory or administrative investigations, negotiations or proceedings arisingbusiness going forward. Consequently, we are in the normal courseprocess of business.

Inimplementing, and will continue to invest in and implement, modifications and upgrades to our IT systems and procedures, including making changes to legacy systems or acquiring new systems with new functionality, and building new policies, procedures, training programs and monitoring tools, including in connection with the eventsustained maintenance of litigation, government investigations or governmental proceedings, we areremote working requirements. These types of activities subject us to the inherent costs and risks associated with changing and acquiring these systems, policies, procedures and monitoring tools, including capital expenditures, additional operating expenses, demands on management time and other risks and uncertaintiescosts of delays or difficulties in transitioning to or integrating new systems policies, procedures or monitoring tools into our current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that may result if outcomes differ from our expectations.outweighs the costs of implementation, or at all. In the event of adverse outcomes in any litigation, investigation or government proceeding, we could be required to pay substantial damages, fines or penalties, and cease certain practices or activities, which could materially harm our business.

The costs associatedaddition, difficulties with litigation and government investigations can also be unpredictable depending on the complexity and length of time devoted to such litigation or investigation. Litigation, investigations or government proceedings may also divert the efforts and attention of our key personnel, which could also harm our business.

If we do not control our fixed costs, we will not be able to compete effectivelyimplementing new technology systems, delays in our industry.

We continually seektimeline for planned improvements, significant system failures or our inability to makesuccessfully modify our cost structure andIT systems, policies, procedures or monitoring tools to respond to changes in our business processes more efficient. We are focused on increasing workforce flexibility and scalability, and improving overall competitiveness by leveraging our global capabilities, as well as external talent and skills, worldwide. Our strategy involves, to a substantial degree, increasing revenue and product volume while at the same time controlling operating expenses. If we do not control our operating expenses, our ability to compete in the marketplace may be impaired. In the past, activities to reduce operating costsneeds have included closures and transfers of facilities, significant personnel reductions, restructuring efforts and efforts to increase automation. Our restructuring efforts may not yield the intended benefitscaused and may be unsuccessful or disruptivecontinue to cause disruptions in our business operations whichand may materially adversely affecthave a material adverse effect on our business, financial results.

condition and results of operations.

If we experience shortages or delays in the receipt of, or cost increases in, critical components, equipment or raw materials necessary to manufacture our products, we may suffer lower operating margins, production delays and other material adverse effects.

The cost, quality, availability and supply of components, subassemblies, certain equipment and raw materials used to manufacture our products and key components like recording media and heads are critical to our success. TheParticularly important for our products are components such as read/write heads, substrates for recording media, ASICs, spindle motors, printed circuit boards, suspension assemblies and NAND flash memory. In addition, the equipment we use to manufacture our products and components is frequently custom made and comes from a few suppliers and the lead times required to obtain manufacturing equipment can be significant. Particularly important for our products include read/write heads, aluminum or glass substrates for recording media, ASICs, spindle motors, printed circuit boards, and suspension assemblies.

We rely on sole direct and indirect suppliers or a limited number of direct and indirect suppliers for some or all of these components that we do not manufacture, including aluminum and glass substrates for recording media, read/write heads, ASICs, spindle motors, printed circuit boards, suspension assemblies and suspension assemblies.NAND flash memory. Many of such direct and indirect component suppliers are geographically concentrated, which makesmaking our supply chain more vulnerable to regional disruptions such as severe weather, the occurrence of local or global health issues or pandemics (such as COVID-19), acts of terrorism and an unpredictablegeo-political geopolitical climate, which may have a material impact on the production, availability and availabilitytransportation of many components. For example, we have experienced and continue to experience disruptions in our supply chain due to the impact of the COVID-19 pandemic. If our direct and indirect vendors for these components are unable to meet our cost, quality, supply and supplytransportation requirements, continue to remain financially viable or fulfill their contractual commitments and obligations, we could experience a shortagedisruption in our supply chain, including shortages in supply or an increaseincreases in production costs, which would materially adversely affect our results of operations and our financial results.

operations.

Certain rare earth elements are critical in the manufacture of our products. We purchase components that contain rare earth elements from a number of countries, including the People’s Republic of China. We cannot predict whether any nation will impose regulations or trade barriers including tariffs, duties, quotas or embargoes upon the rare earth elements incorporated into our products that would restrict the worldwide supply of such metals or increase their cost. We have experienced increased costs and production delays when we were unable to obtain the necessary equipment or sufficient quantities of some components, and/or have been forced to pay higher prices or make volume purchase commitments or advance deposits for some components, equipment or raw materials that were in short supply in the industry in general. Further, if our customers experience shortages of components or materials used in their products it could result in a decrease in demand for our products and have an adverse effect on our results of operations. If any major supplier were to restrict the supply available to us or increase the cost of the rare earth elements used in our products, we could experience a shortage in supply or an increase in production costs, which would adversely affect our results of operations.

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Consolidation among component manufacturers has resulted


Table of Contents
From time to time, we may be subject to litigation, government investigations or governmental proceedings, which may adversely impact our results of operations and financial condition.
From time to time, we have been and may continue to be involved in various legal, regulatory or administrative investigations, negotiations or proceedings arising in the normal course of business. In the event of litigation, government investigations or governmental proceedings, we are subject to the inherent risks and uncertainties that may result if outcomes differ from our expectations. In the event of adverse outcomes in some component manufacturers exitingany litigation, investigation or government proceeding, we could be required to pay substantial damages, fines or penalties and cease certain practices or activities, which could materially harm our business.
The costs associated with litigation and government investigations can also be unpredictable depending on the industrycomplexity and length of time devoted to such litigation or investigation. Litigation, investigations or government proceedings may also divert the efforts and attention of our key personnel, which could also harm our business.
If we do not making sufficient investmentscontrol our fixed costs, we will not be able to compete effectively in researchour industry.
We continually seek to develop newmake our cost structure and business processes more efficient. We are focused on increasing workforce flexibility and scalability, and improving overall competitiveness by leveraging our global capabilities, as well as external talent and skills, worldwide. Our strategy involves, to a substantial degree, increasing revenue and exabytes volume while at the same time controlling operating expenses. If we do not control our operating expenses, our ability to compete in the marketplace may be impaired. In the past, activities to reduce operating costs have included closures and transfers of facilities, significant personnel reductions, restructuring efforts and efforts to increase automation. Our restructuring efforts may not yield the intended benefits and may be unsuccessful or disruptive to our business operations which may materially adversely affect our financial results.
Shortages or delays in critical components, as well as reliance on single-source suppliers, can affect our production and development of products and may harm our operating results.
We are dependent on a limited number of qualified suppliers who provide critical materials or components.

If there is a shortage of, or delay in supplying us with, critical components, equipment or raw materials, then:

then
:
it is likely that our suppliers would raise their prices and, if we could not pass these price increases to our customers, our operating margin would decline;

we mightmay have to reengineer some products, which would likely cause production and shipment delays, make the reengineered products more costly and provide us with a lower rate of return on these products;

we would likely have to allocate the components we receive to certain of our products and ship less of others, which could reduce our revenues and could cause us to lose sales to customers who could purchase more of their required products from manufacturers that either did not experience these shortages or delays or that made different allocations; and

we mightmay be late in shipping products, causing potential customers to make purchases from our competitors, thus causing our revenue and operating margin to decline.

We cannot assure you that we will be able to obtain critical components in a timely and economic manner.

Many of our suppliers’ manufacturing facilities are fully utilized. If they fail to invest in additional capacity or deliver components in the required timeframe, such failure would have an impact on our ability to ramp new products, and may result in a loss of revenue or market share if our competitors did not utilize the same components and were not affected.

We often aim to lead the market in new technology deployments and leverage unique and customized technology from single source suppliers who are early adopters in the emerging market. Our options in supplier selection in these cases are limited and the supplier based technology has been and may consequentlycontinue to be single sourced until wider adoption of the technology occurs and any necessary licenses become available. In such cases, any technical issues in the supplier’s technology may cause us to delay shipments of our new technology deployments and therefore harm our financial position.

position.

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If revenues fall or customer demand decreases significantly, we may not meet all of our purchase commitments to certain suppliers.

suppliers.

From time to time, we enter into long-term,non-cancelable purchase commitments or make largeup-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. If our actual revenues in the future are lower than our projections or if customer demand decreases significantly below our projections, we may not meet all of our purchase commitments with these suppliers. As a result, it is possible that our revenues will not be sufficient to recoup ourup-front investments, in which case we will have to shift output from our internal manufacturing facilities to these suppliers or make penalty-type payments under the terms of these contracts.

Conflict minerals regulations Additionally, because our markets are volatile, competitive and subject to rapid technology and price changes, we face inventory and other asset risks in the event we do not fully utilize firm purchase commitments.

The loss of key executive officers and employees could negatively impact our business prospects.
Our future performance depends to a significant degree upon the continued service of key members of management as well as marketing, sales and product development personnel. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, sales and product development personnel. We have experienced intense competition for personnel, and we cannot assure you that we will be able to retain our key employees or that we will be successful in attracting, assimilating and retaining personnel in the future. Additionally, because a portion of our key personnel’s compensation is contingent upon the performance of our business, including through cash bonuses and equity compensation, when our results of operations or financial condition are negatively impacted, we may causebe at a competitive disadvantage for retaining and hiring employees. The loss of one or more of our key personnel or the inability to hire and retain key personnel could have a material adverse effect on our business, results of operations and financial condition.
Due to the complexity of our products, some defects may only become detectable after deployment.
Our products are highly complex and are designed to operate in and form part of larger complex networks and storage systems. Our products may contain a defect or be perceived as containing a defect by our customers, as a result of improper use or maintenance. Lead times required to manufacture certain components are significant, and a quality excursion may take significant time and resources to remediate. Defects in our products, third-party components or in the networks and systems of which they form a part, directly or indirectly, have resulted in and may in the future result in:
increased costs and product delays until complex solution level interoperability issues are resolved;
costs associated with the remediation of any problems attributable to our products;
loss of or delays in revenues;
loss of customers;
failure to achieve market acceptance and loss of market share;
increased service and warranty costs; and
increased insurance costs.
Defects in our products could also result in legal actions by our customers for property damage, injury or death. Such legal actions, including but not limited to product liability claims could exceed the level of insurance coverage that we have obtained. Any significant uninsured claims could significantly harm our financial condition.
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We may pursue strategic alliances, acquisitions, joint ventures and investment opportunities that involve risks that could adversely affect our results of operations.
From time to time, we pursue strategic alliances, acquisitions, joint ventures and investments in other companies that are complementary to our business. There is substantial competition for attractive strategic alliance, acquisition, joint venture and investment candidates. Therefore, we may not be able to identify suitable strategic alliances, acquisition, joint venture, or investment candidates. Even if we can identify them, the terms on which we are able to consummate a transaction may not be commercially reasonable for us to pursue. We cannot assure you that we will be able to partner with, acquire or invest in suitable candidates, or integrate acquired technologies or operations successfully into our existing technologies and operations. Moreover, our ability to finance potential strategic alliances, acquisitions, joint ventures or investments may be limited by market conditions, our leverage level, the covenants contained in the instruments that govern our outstanding indebtedness, and any agreements governing any other debt we may incur. In addition, our cash reserves could diminish significantly as a result of any acquisitions, joint ventures, strategic alliances or other investments we pursue. Even if we are successful in forming strategic alliances or acquiring, forming joint ventures with or making investments in other companies, we cannot be certain that we will realize the anticipated benefits or synergies of any strategic alliance, acquisition, joint venture or investment that we pursue, which could cause, among other things, an impairment of goodwill or intangible assets. If our goodwill or net intangible assets become impaired, we may be required to record a charge to our Consolidated Statements of Comprehensive Income which would adversely affect our financial results.
Political events, war, terrorism, natural disasters, public health issues and other circumstances could materially adversely affect our results of operations and financial condition.
War, terrorism, geopolitical uncertainties, natural disasters, public health issues and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on our business, our direct and indirect suppliers, logistics providers, manufacturing vendors and customers. Our business operations are subject to interruption by natural disasters such as floods and earthquakes, fires, power or water shortages, terrorist attacks, other hostile acts, labor disputes, public health issues (such as the COVID-19 pandemic), and other events beyond our control. Such events may decrease demand for our products, make it difficult or impossible for us to make and deliver products to our customers or to receive components from our direct and indirect suppliers, and create delays and inefficiencies in our supply chain. In the event of a natural disaster, losses and significant recovery time could be required to resume operations and our financial condition and results of operations could be materially adversely affected. Should major public health issues, including pandemics, arise, we could be negatively affected by stringent employee travel restrictions, additional limitations or cost increases in freight and other logistical services, governmental actions limiting the movement of products or employees between regions, increases in or changes to data collection and reporting obligations, delays in production ramps of new products, and disruptions in our operations and those of some of our key direct and indirect suppliers and customers. For example, the recent COVID-19 pandemic has resulted in government-imposed travel restrictions, border closures, stay-at-home orders, facility closures or operating constraints in a number of locations including, but not limited to, China, Malaysia, Singapore and the United States, disruptions in our operations and those of our suppliers, partners, and customers, increases in air freight rates, limited numbers of employees available to staff manufacturing operations, and shortages of supplies of personal protective equipment required for our manufacturing operations. If any of these circumstances continue for an extended period of time, our manufacturing ability and capacity, or those of our key direct and indirect suppliers or customers, could be impacted, and our results of operations and financial condition could be adversely affected.
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Failure to comply with applicable environmental laws and regulations, customer requirements and regulations regarding conflicts minerals and other laws and regulations applicable to our business could have a material adverse effect on our business, results of operations and financial condition.
The sale and manufacturing of products in certain states and countries has and may continue to subject us and our suppliers to state, federal and international laws and regulations governing protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites, restrictions on the presence of certain substances in electronic products and the responsibility for environmentally safe disposal or recycling. We endeavor to ensure that we and our suppliers comply with all applicable environmental laws and regulations, however, compliance has increased and may continue to increase our operating costs and may otherwise impact future financial results. If additional or more stringent requirements are imposed on us in the future, we could incur additional expensesoperating costs and capital expenditures. If we fail to comply with applicable environmental laws, regulations, initiatives, or standards of conduct, our customers may refuse to purchase our products and we could limit the supplybe subject to fines, penalties and increase the costpossible prohibition of sales of our products into one or more states or countries, liability to our customers and damage to our reputation, which could result in a material adverse effect on our financial condition or results of operations.
SEC rules require certain metals used in manufacturing our products.

In August 2012, the SEC adopted rules establishing additional disclosure and reporting requirementsdisclosures regarding the use of specified minerals, oroften referred to as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. These rules will require us to determine, disclose and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or an adjoining country. These rules could affect our ability to source, directly or indirectly, certain materials used in our products at competitive prices and could impact the availability of certain minerals used in the manufacture of our products, including gold, tantalum, tin and tungsten. As there may be only a limited number of suppliers of “conflict free” minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Our customers, including our OEM customers, may require that our products be free of conflict minerals, and our revenues and margins may be harmed if we are unable to procure conflict free minerals at a reasonable price, or at all, or are unable to pass through any increased costs associated with meeting these demands. Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. We expect that there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used inFurthermore, our products, as well as costs related to possible changes to products, processes, or sources of supply as a consequence of such verificationcustomers and disclosure requirements. Additionally, the regulatory and compliance framework for conflict minerals may undergo changes which may further increase the cost of compliance. Ourmanufacturing stakeholders and customers may place increased demands on our compliance framework which may in turn negatively impact our relationships with our suppliers.

The loss of key executive officers and employees could negatively impact our business prospects.

Our future performance depends to a significant degree upon the continued service of key members of management as well as marketing, sales and product development personnel. The loss of one or more of our key personnel may have a material adverse effect on our business, results of operations and financial condition. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, sales and product development personnel. We have experienced intense competition for personnel, and If we cannot assure you that we will be able to retain our key employees or that we will be successful in attracting, assimilating and retaining personnel in the future.

Due to the complexity of our products, some defects may only become detectable after deployment.

Our products are highly complex and are designed to operate in and form part of larger complex networks and storage systems. Defects in our products, or in the networks and systems of which they form a part, directly or indirectly, have resulted in and may in the future result in:

increased costs and product delays until complex solution level interoperability issues are resolved;

costs associated with the remediation of any problems attributable to our products;

loss of or delays in revenues;

loss of customers;

failure to achieve market acceptance and loss of market share;

increased service and warranty costs; and

increased insurance costs.

Defects in our products could also result in legal actions by our customers for property damage, injury or death. Product liability claims could exceed the level of insurance coverage that we have obtained to cover defects in our products. Any significant uninsured claims could significantly harm our financial condition.

Political events, war, terrorism, natural disasters, public health issues and other circumstances could materially adversely affect our results of operations and financial condition.

War, terrorism, geopolitical uncertainties, natural disasters, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on our business, our suppliers, logistics providers, manufacturing vendors and customers. Our business operations are subject to interruption by natural disasters such as floods and earthquakes, fires, power shortages, terrorist attacks, other hostile acts, labor disputes, public health issues, and other events beyond our control. Such events could decrease demand for our products, make it difficult or impossible for us to make and deliver products to our customers, or to receive components from our suppliers, and create delays and inefficiencies in our supply chain. In the event of a natural disaster, losses and significant recovery time could be required to resume operations and our financial condition and operating results could be materially adversely affected. Should major public health issues, including pandemics, arise, we could be negatively affected by stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in our operations and some of our key customers.

Failureunable to comply with applicable environmental lawsrequirements regarding the use of conflict and regulations could have a material adverse effect onother minerals, our business, results of operations and financial condition.

The sale and manufacturing of products in certain states and countries may subject us and our suppliers to state, federal and international laws and regulations governing protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites, restrictions on the presence of certain substances in electronic products and the responsibility for environmentally safe disposal or recycling. We endeavor to ensure that we and our suppliers comply with all applicable environmental laws and regulations, however, compliance may increase our operating costs and otherwise impact future financial results. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures. If we fail to comply with applicable environmental laws, regulations, initiatives, or standards of conduct, our customers may refuse to purchase our products and we could be subject to fines, penalties and possible prohibition of sales of our products into one or more states or countries, liability to our customers and damage to our reputation, which could result in a material adverse effect on the financial condition or results of operations.

operations may be materially adversely affected.

Any cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.

business.

From time to time, we engage in restructuring plans that have resulted and may continue to result in workforce reduction and consolidation of our real estate facilities and our manufacturing footprint. In addition, management will continue to evaluate our global footprint and cost structure, and additional restructuring plans are expected to be formalized. As a result of our restructuring,restructurings, we have experienced and may in the future experience a loss of continuity, loss of accumulated knowledge, disruptions to our operations and/orand inefficiency during transitional periods. Additionally, global footprint consolidation and reduction in excess capacity may result in us being unable to respond to increases in forecasted volume of customer demand and loss of revenue opportunity if our competitors have underutilized factories. Any cost-cutting measures could impact employee retention. In addition, we cannot be sure that theany future cost reduction andreductions or global footprint consolidationconsolidations will deliver the results we expect, be successful in reducing our overall expenses as we expect or that additional costs will not offset any such reductions or global footprint consolidation. If our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, our resultresults of operations may suffer.

be adversely affected.

Our ability to use our net operating loss and tax credit carryforwards mightmay be limited.

limited.

The use of a portion of our U.S. net operating loss and tax credit carryforwards is subject to annual limitations pursuant to U.S. tax law. SectionSections 382 and 383 of the U.S. Internal Revenue Code generally imposes animpose annual limitationlimitations on the amount of net operating loss orand tax credit carryforwards that mightmay be used to offset taxable income when a corporation has undergone significant changes in ownership. As a result, future changes in ownership could put further limitations on the availability of our net operating loss or tax credit carryforwards.

Deteriorationcarryforwards. See “Item 8. Financial Statements and Supplementary DataNote 5. Income Taxes” contained in globalthis report for, among other things, a description of current net operating loss and tax credit and financial market conditions could negatively impact the valuecarryforward limitations.

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Table of our current portfolio of cash equivalents or short-term investments and our ability to meet our financing objectives.

Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. Our investment policy has as its principal objectives the preservation of principal and maintenance of liquidity. We mitigate default risk by investing in high-quality investment grade securities, limiting the time to maturity and by monitoring the counter-parties and underlying obligors closely.

While as of the date of this filing, we are not aware of any material downgrades, losses, or other significant deterioration in the fair value of our cash equivalents or short-term investments, no assurance can be given that future deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or short-term investments or our ability to meet our financing objectives.

Contents

We are at times subject to intellectual property legal proceedings and claims which could cause us to incur significant additional costs or prevent us from selling our products, and which could adversely affect our results of operations and financial condition.

condition.

We are subject fromtime-to-time to legal proceedings and claims, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us, or our customers, in connection with theirthe use of our products. Intellectual property litigation can be expensive and time-consuming, regardless of the merits of any claim, and could divert our management’s attention from operating our business. In addition, intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, which may cause actual results to differ materially from our expectations. Patent litigation has increased due to the current uncertainty of the law and the increasing competition and overlap of product functionality in the field. Some of the actions that we face fromtime-to-time seek injunctions against the sale of our products and/or substantial monetary damages, which, if granted or awarded, could materially harm our business, financial condition and operating results.

results.

We cannot be certain that our products do not and will not infringe issued patents or other intellectual property rights of others. We may not be aware of currently filed patent applications that relate to our products or technology. If patents are later issued on these applications, we may be liable for infringement. If our products were found to infringe the intellectual property rights of others, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products in one or more geographic locations, expend significant resources to developnon-infringing technology, discontinue the use of specific processes or obtain licenses to the technology infringed. We might not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to reengineer our products successfully to avoid infringement. Any of the foregoing could cause us to incur significant costs and prevent us from selling our products, which could adversely affect our results of operations and financial condition. See “Item“Item 8. Financial Statements and Supplementary Data-NoteDataNote 14.Legal, Environmental and Other Contingencies”Contingencies contained in this report for a description of pending intellectual property proceedings.

proceedings.

We may be unable to protect our intellectual property rights, which could adversely affect our business, financial condition and results of operations.

operations.

We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality proceduresagreements, security measures and licensing arrangements to protect our IPintellectual property rights. In the past, we have been involved in significant and expensive disputes regarding our IPintellectual property rights and those of others, including claims that we may be infringing patents, trademarks and other IPintellectual property rights of third-parties. We expect that we will be involved in similar disputes in the future.

future.

There can be no assurance that:

tha
t:
any of our existing patents will continue to be held valid, if challenged;

patents will be issued for any of our pending applications;

any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;

our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage;

we will be able to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers and employees and through other security measures; and

others will not gain access to our trade secrets.

In addition, our competitors may be able to design their products around our patents and other proprietary rights. Enforcement of our rights often requires litigation. If we bring a patent infringement action and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable.

unenforceable.

Furthermore, we have significant operations and sales in foreign countries where intellectual property laws and enforcement policies are often less developed, less stringent or more difficult to enforce than in the United States.

Therefore, we cannot be certain that we will be able to protect our intellectual property rights in jurisdictions outside the United States.

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Table of Contents
The price of our ordinary shares may be volatile and could decline significantly.

The stock market, in general, and the market for technology stocks in particular, has recently experienced volatility that has often been unrelated to the operating performance of companies. If these market or industry-based fluctuations continue, the trading price of our ordinary shares could decline significantly independent of our actual operating performance, and you could lose all or a substantial part of your investment. .

The market price of our ordinary shares has experienced price fluctuations and could be subject to wide fluctuations in the future. The market price of our ordinary shares has fluctuated and may continue to fluctuate significantly in response to severalvarious factors including among others:

:
general uncertainty in stock market conditions occasioned by global economic conditions and negative financial news unrelated to our business or industry, including the impact of the recent COVID-19 pandemic;
the timing and the continued instabilityamount of several large financial institutions;our share repurchases;

actual or anticipated variations in our results of operations;

announcements of innovations, new products or significant price reductions by us or our competitors, including those competitors who offer alternative storage technology solutions;

our failure to meet our guidance or the performance estimates of investment research analysts;

the timing of announcements by us or our competitors of significant contracts or acquisitions;

significant announcements by or changes in financial condition of a large customer;
general stock market conditions;

actual or perceived security breaches or security vulnerabilities;
the occurrence of major catastrophic events;

changes in financial estimates by investment research analysts;

actual or anticipated changes in the credit ratings of our indebtedness by rating agencies; and

the sale of our ordinary shares held by certain equity investors or members of management.

Market price fluctuations of our ordinary shares has impacted and could continue to impact the value of our equity compensation, which could affect our ability to recruit and retain employees. In addition, in the past, following periods of decline in the market price of a company’s securities, class action lawsuits have often been pursued against that company. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management’s attention and resources, which could materially adversely affect our results of operations, financial condition and liquidity.
Any decision to reduce or discontinue the payment of cash dividends to our shareholders or the repurchase of our ordinary shares pursuant to our previously announced share repurchase program could cause the market price of our ordinary shares to decline significantly.

significantly.

Although historically we have announced targeted regular cash dividend amountspayments and a share repurchase program, we are under no obligation to pay cash dividends to our shareholders in the future at the announced targetedhistorical levels or at all or to repurchase our ordinary shares at any particular price or at all. The declaration and payment of any future dividends is at the discretion of our Board of Directors and ourDirectors. Our previously announced share repurchase program may be suspended or discontinued at any time. Our payment of quarterly cash dividends and the repurchase of our ordinary shares pursuant to our share repurchase program are subject to, among other things, our financial position and results of operations, available cash and cash flow, capital and regulatory requirements, market and economic conditions, our ordinary share price and other factors. Any reduction or discontinuance by us of the payment of quarterly cash dividends or the repurchase of our ordinary shares pursuant to our share repurchase program could cause the market price of our ordinary shares to decline significantly. Moreover, in the event our payment of quarterly cash dividends or repurchases of our ordinary shares are reduced or discontinued, our failure to resume such activities at historical levels could result in a persistent lower market valuation of our ordinary shares.

Significant fluctuations in the market priceshares.

ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
33

Table of our ordinary shares could result in securities class action claims against us.

Significant price and value fluctuations have occurred with respect to the publicly traded securities of technology companies. The price of our ordinary shares is likely to be volatile in the future. In the past, following periods of decline in the market price of a company’s securities, class action lawsuits have often been pursued against that company. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management’s attention and resources, which could materially adversely affect our results of operations, financial condition and liquidity.

ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

Contents

ITEM 2.PROPERTIES
ITEM 2.PROPERTIES

Our company headquarters are located in Ireland, while our U.S.principal executive offices are located in Cupertino, California.Ireland. Our principal manufacturing facilities are located in China, Malaysia, Northern Ireland, Singapore, Thailand and the United States. Our principal product development facilities are located in California, Colorado, Minnesota and Singapore. Our leased facilities are occupied under leases that expire aton various timesdates through 2082.

Our main material manufacturing, product development and marketing and administrative facilities at June 30, 2017July 3, 2020 are as follows:

Location

Building(s)

Owned or Leased

Approximate
Square Footage

Primary Use

United States

California

Location
Owned/Building(s) Owned or LeasedApproximate Square Footage642,000Primary Use
Europe
Northern Ireland
SpringtownOwned479,000 Manufacture of recording heads
United States
CaliforniaOwned412,000 Product development, and marketing and administrative and operational offices

Colorado

Owned/LeasedOwned528,000 664,000Product development

Minnesota

Owned/Leased1,096,000 1,104,000Manufacture of recording heads and product development

Europe

Asia
China

Northern Ireland

WuxiLeased738,000 

Springtown

Owned479,000Manufacture of recording heads

Asia

China

Wuxi

Leased704,000Manufacture of drives and drive subassemblies

Malaysia

Johor
Owned (1)
631,000 Manufacture of substrates

Johor

Owned (1)631,000Manufacture of substrates

Singapore

Woodlands

Singapore
Woodlands
Owned/Leased (1)
1,511,000 1,504,000Manufacture of media

Shugart

Owned (1)
410,000 410,000Product development

Thailand

Korat

Thailand
KoratOwned/Leased2,739,000 2,725,000Manufacture of drives and drive subassemblies

Teparuk

Owned/Leased422,000 421,000Manufacture of drive subassemblies

(1)Land leases for these facilities expire at varying dates through 2067.

(1) Land leases for these facilities expire on various dates through 2068.
As of June 30, 2017,July 3, 2020, we owned or leased a total of approximately 12.49.8 million square feet of space worldwide. We occupied approximately 6.9 million square feet for the purpose of manufacturing, 2.0 million square feet for product development, 1.1 million square feet for marketing and administrative purposes. Included in the 12.4The 9.8 million square feet of owned or leased space isincludes a total of 2.4 million142,000 square feet that is currently unoccupied. Substantially all of this unoccupied space relates to owned facilities that are being actively marketed for disposition and have been classified as held for sale assets included in Other current assets in the Consolidated Balance Sheet as of June 30, 2017.subleased. We believe that our existing properties are in good operating condition and are suitable for the operations for which they are used.

ITEM 3.LEGAL PROCEEDINGS

ITEM 3.LEGAL PROCEEDINGS
See “Item 8. Financial Statements and Supplementary Data—Note 14. Legal, Environmental and Other Contingencies.Contingencies.

ITEM 4.MINE SAFETY DISCLOSURES

ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our ordinary shares trade on the NASDAQ Global Select Market under the symbol “STX.” The high and low sales prices
34

Table of our shares, as reported by the NASDAQ Global Select Market, are set forth below for the periods indicated.

                                                
     Price Range 

Fiscal Quarter

    High   Low 

Quarter ended October 2, 2015

    $52.88   $41.59 

Quarter ended January 1, 2016

    $49.50   $32.38 

Quarter ended April 1, 2016

    $37.45   $26.25 

Quarter ended July 1, 2016

    $35.79   $18.42 

Quarter ended September 30, 2016

    $39.04   $22.09 

Quarter ended December 30, 2016

    $41.45   $32.45 

Quarter ended March 31, 2017

    $49.79   $35.54 

Quarter ended June 30, 2017

    $50.96   $38.28 

Contents

As of July 31, 2017August 3, 2020, there were approximately 600535 holders of record of our ordinary shares. We did not sell any of our equity securities during fiscal year 20172020 that were not registered under the Securities Act of 1933, as amended.

Performance Graph

The performance graph below shows the cumulative total shareholder return on our ordinary shares for the period from June 29, 2012July 3, 2015 to June 30, 2017.July 3, 2020. This is compared with the cumulative total return of the Dow Jones US Computer Hardware Index and the Standard & Poor’s 500 Stock Index (“S&P 500”) over the same period. The graph assumes that on June 29, 2012,July 3, 2015, $100 was invested in our ordinary shares and $100 was invested in each of the other two indices, with dividends reinvested on the date of payment without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance.
stx-20200703_g1.jpg
7/3/2015 (1)
7/1/20166/30/20176/29/20186/28/20197/3/2020
Seagate Technology plc$100.00  $60.06  $91.81  $129.07  $116.50  $117.16  
S&P 500100.00  103.08  119.26  134.53  146.52  155.90  
Dow Jones US Computer Hardware100.00  79.81  118.26  152.87  156.67  264.36  

COMPARISON OF 60 MONTH

CUMULATIVE TOTAL RETURN*

Among Seagate Technology plc, The S&P 500 Index

And The Down Jones US Computer Hardware Index

(1) $100 invested on 7/3/2015 in shares and in indices, including reinvestment of dividends.
                                                                                                                                                
     6/29/2012   6/28/2013   6/27/2014   7/3/2015   7/1/2016   6/30/2017 

Seagate Technology plc

    $100.00   $186.97   $242.71   $215.71   $128.28   $198.37 

S&P 500

     100.00    120.36    129.42    149.14    160.76    192.94 

Dow Jones US Computer Hardware

     100.00    79.30    121.57    150.96    124.19    183.03 

*$100 invested on 6/29/2012 in stock and in indices, including reinvestment of dividends.

Copyright© 2017 Bloomberg Finance L.P. All rights reserved.

Dividends

Our ability to pay dividends in the future will be subject to, among other things, general business conditions within the disk drivedata storage industry, our financial results, the impact of paying dividends on our credit ratings and legal and contractual restrictions on the payment of dividends by our subsidiaries to us or by us to our ordinary shareholders, including restrictions imposed by covenants on our debt instruments.

The following were dividends declared in the last two fiscal years:

                                                

Record Date

  

Paid Date

  Dividend
per Share
 
August 11, 2015  August 25, 2015  $0.54 
November 6, 2015  November 20, 2015  $0.63 
February 9, 2016  February 23, 2016  $0.63 
May 10, 2016  May 24, 2016  $0.63 
September 21, 2016  October 5, 2016  $0.63 
December 21, 2016  January 4, 2017  $0.63 
March 22, 2017  April 5, 2017  $0.63 
June 21, 2017  July 5, 2017  $0.63 

In addition, on July 25, 2017, the Board of Directors of the Company declared a quarterly cash dividend of $0.63 per share, which will be payable on October 4, 2017 to shareholders of record as of the close of business on September 20, 2017.

From the closing of our initial public offering in December 2002 through fiscal year 2017, we have paid dividends, pursuant to our dividend policy then in effect, totaling approximately $4.9 billion in the aggregate.

Repurchases of Our Equity Securities

On April 22, 2015, theOctober 29, 2018, our Board of Directors authorized the companyrepurchase of an additional $2.3 billion of our outstanding ordinary shares and as a result, we had an aggregate authority to repurchase an additional $2.5approximately $3.0 billion of its outstandingour ordinary shares. As of June 30, 2017,July 3, 2020, $1.3 billion remained available for repurchase of ordinary shares under the existing repurchase authorization limits. All repurchases are effected as redemptions in accordance with the Company’s Articles of Association.our Constitution. There is no expiration date on theseour repurchase authorizations.

35

Table of Contents
The following table sets forth information with respect to all repurchases of our shares made during the fiscal year ended June 30, 2017,July 3, 2020, including shares withheld for statutory tax withholdings related to vesting of employee equity awards:
Period

(In millions, except average price paid per share)
Total Number of Shares Purchased (1)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
1st Quarter through 3rd Quarter of Fiscal Year 202018  $50.61  18  $1,341  
April 4, 2020 through May 1, 2020—  49.30  —  1,304  
May 2, 2020 through May 29, 2020—  —  —  1,304  
May 30, 2020 through July 3, 2020—  —  —  1,304  
Through 4th Quarter of Fiscal Year 202018  18  $1,304  

                                                                                                                        

Period

(In millions, except average price paid per share)

    Total
Number of
Shares
Purchased
   Average
Price
Paid per
Share
   Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
   Approximate
Dollar Value
of Shares
Purchased
Under the
Plans or
Programs
   Approximate
Dollar Value
of Shares
that May
Yet Be
Purchased
Under the
Plans or
Programs
 

1st Quarter through 3rd Quarter of Fiscal Year 2017

     8   $34.80    8   $273   $1,484 

April 1, 2017 through April 28, 2017

     —      41.89    —      20    1,464 

April 29, 2017 through May 26, 2017

     5    42.67    5    193    1,271 

May 27, 2017 through June 30, 2017

     —      42.62    —      1    1,270 
    

 

 

     

 

 

   

 

 

   

Through 4th Quarter of Fiscal Year 2017

     13    37.84    13   $487    1,270 
    

 

 

     

 

 

   

 

 

   

ITEM 6.SELECTED FINANCIAL DATA

(1) Repurchase of shares including tax withholdings.
ITEM 6.SELECTED FINANCIAL DATA
The following selected consolidated financial data set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report onForm 10-K, which are incorporated herein by reference, to fully understand factors that may affect the comparability of the information presented below.

The Consolidated Statements of Operations data for the fiscal years ended June 30, 2017, July 1, 2016 and July 3, 2015,2020, June 28, 2019 and June 29, 2018, and the Consolidated Balance Sheets data as of July 3, 2020 and June 30, 2017 and July 1, 2016,28, 2019, are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report onForm 10-K. The Consolidated Statements of Operations data for the fiscal years ended June 27, 201430, 2017 and June 28, 2013,July 1, 2016, and the Consolidated Balance Sheets data at June 29, 2018, June 30, 2017 and July 3, 2015, June 27, 2014 and June 28, 2013,1, 2016, are derived from our audited Consolidated Financial Statements that are not included in this Annual Report onForm 10-K. The fiscal year ended July 3, 2020 comprised 53 weeks and the fiscal years ended June 28, 2019, June 29, 2018, June 30, 2017, and July 1, 2016 comprised 52 weeks.
 Fiscal Years Ended
(Dollars in millions, except per share data)July 3,
2020
June 28,
2019
June 29,
2018
June 30,
2017
July 1,
2016
Revenue$10,509  $10,390  $11,184  $10,771  $11,160  
Gross profit2,842  2,932  3,364  3,174  2,615  
Income from operations1,300  1,487  1,634  1,054  445  
Net income (1)
1,004  2,012  1,182  772  248  
Total assets (2)
8,930  8,885  9,410  9,268  8,213  
Total debt (2)
4,175  4,253  4,819  5,021  4,091  
Equity$1,787  $2,162  $1,665  $1,364  $1,593  
Net income per share:   
Basic$3.83  $7.13  $4.10  $2.61  $0.83  
Diluted3.79  7.06  4.05  2.58  0.82  
Number of shares used in per share calculations:     
Basic262  282  288  296  299  
Diluted265  285  292  299  302  
Cash dividends declared per ordinary share$2.58  $2.52  $2.52  $2.52  $2.43  
36

Table of Contents

(1) The Company recorded an income tax benefit of $640 million for fiscal year 2019. The Company’s fiscal year 2019 income tax benefit included a net tax benefit of $761 million primarily associated with the release of valuation allowance on deferred tax assets driven by improvements in its profitability outlook in the U.S., including its efforts to structurally and operationally align its EDS business with the rest of the Company.
                                                                                                                        
     Fiscal Years Ended 

(Dollars in millions, except per share data)

    June 30,
2017
   July 1,
2016
   July 3,
2015
   June 27,
2014
   June 28,
2013
 

Revenue

    $10,771   $11,160   $13,739   $13,724   $14,351 

Gross margin

     3,174    2,615    3,809    3,846    3,940 

Income from operations

     1,054    445    2,058    1,776    2,091 

Net income

     772    248    1,742    1,570    1,838 

Total assets(a)

     9,268    8,213    9,801    9,445    9,204 

Total debt(a)

     5,021    4,091    4,111    3,873    2,738 

Equity

    $1,364   $1,593   $3,018   $2,832   $3,506 

Net income per share:

            

Basic

    $2.61   $0.83   $5.38   $4.66   $4.97 

Diluted

     2.58    0.82    5.26    4.52    4.81 

Number of shares used in per share calculations:

            

Basic

     296    299    324    337    370 

Diluted

     299    302    331    347    382 

Cash dividends declared per ordinary share

    $2.52   $2.43   $2.05   $1.67   $1.40 

(a)The Company adopted ASU 2015-03 in the September 2016 quarter on a retrospective basis. The adoption of this guidance resulted in a reduction to Other assets, net and Long-term debt previously disclosed as of the fiscal years ended 2013 through 2016 by $39 million, $47 million, $44 million and $39 million, respectively within the Consolidated Balance Sheets.

(2) The Company adopted Accounting Standard Update (“ASU”) 2015-03, Interest - Imputation of interest: Simplifying the presentation of debt issuance costs, in fiscal year 2017 on a retrospective basis. The adoption of this guidance resulted in a reduction to Other assets, net and Long-term debt previously disclosed as of the fiscal year ended 2016 by $39 million, within the Consolidated Balance Sheets.
Supplementary Financial Data (Unaudited)

Quarterly Data

The Company operated and reported financial results based on a 14-week quarter in its first quarter of fiscal year 2020 ending on the Friday closest to September 30, 2019 and 13-week quarters infor the remaining quarters of fiscal years 2017 and 2016,year 2020 as well as all four quarters of fiscal year 2019, which ended on the Friday closest to September 30, December 31, March 31 and June 30.
 Fiscal Year 2020 Quarters Ended
(In millions, except per share data)July 3,
2020
April 3,
2020
January 3,
2020
October 4,
2019
Revenue$2,517  $2,718  $2,696  $2,578  
Gross profit667  746  758  671  
Income from operations267  376  384  273  
Net income166  320  318  200  
Net income per share: 
Basic$0.65  $1.23  $1.21  $0.75  
Diluted0.64  1.22  1.20  0.74  
 Fiscal Year 2019 Quarters Ended
(In millions, except per share data)June 28,
2019
March 29,
2019
December 28,
2018
September 28,
2018
Revenue$2,371  $2,313  $2,715  $2,991  
Gross profit624  601  794  913  
Income from operations332  236  416  503  
Net income (1)
983  195  384  450  
Net income per share: 
Basic$3.57  $0.69  $1.35  $1.57  
Diluted3.54  0.69  1.34  1.54  

                                                                                                
     Fiscal Year 2017 Quarters Ended 

(In millions, except per share data)

    June 30,
2017
   March 31,
2017
   December 30,
2016
   September 30,
2016
 

Revenue

    $2,406   $2,674   $2,894   $2,797 

Gross margin

     666    816    891    801 

Income from operations

     196    266    370    221 

Net income

     114    194    297    167 

Net income per share:

          

Basic

    $0.39   $0.66   $1.00   $0.56 

Diluted

     0.38    0.65    1.00    0.55 

(1) The Company recorded an income tax benefit of $692 million in the quarter ended June 28, 2019. The Company’s quarter ended June 28, 2019 income tax benefit included a net tax benefit of $761 million primarily associated with the release of valuation allowance on deferred tax assets driven by improvements in its profitability outlook in the U.S., including its efforts to structurally and operationally align its EDS business with the rest of the Company.
37
                                                                                                
     Fiscal Year 2016 Quarters Ended 

(In millions, except per share data)

    July 1,
2016
   April 1,
2016
   January 1,
2016
   October 2,
2015
 

Revenue

    $2,654   $2,595   $2,986   $2,925 

Gross margin

     662    524    741    689 

Income from operations

     103    27    229    86 

Net income (loss)

     70    (21   165    34 

Net income (loss) per share:

          

Basic

    $0.23   $(0.07  $0.55   $0.11 

Diluted

     0.23    (0.07   0.55    0.11 


Table of Contents
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal years ended June 30, 2017, July 1, 2016 and July 3, 2015.

2020, June 28, 2019 and June 29, 2018.

You should read this discussion in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data” included elsewhere in this Annual Report on Form10-K. Except as noted, references to any fiscal year mean the twelve-month period ending on the Friday closest to June 30 of that year. Accordingly, fiscal year 2017 comprised 52 weeks and ended on June 30, 2017. Fiscal year 2016 comprised 52 weeks and ended on July 1, 2016. Fiscal year 20152020 comprised 53 weeks and ended on July 3, 2015.2020. Fiscal year 2019 comprised 52 weeks and ended on June 28, 2019. Fiscal year 2018 comprised 52 weeks and ended on June 29, 2018. Fiscal year 2026 will also be 52comprised of 53 weeks and will end on June 29, 2018.

Some of the statements and assumptions included in this Annual Report onForm 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects, demand for our products, shifts in technology, estimates of industry growth, our ability to effectively manage our debt obligations, our restructuring efforts and the projected costs savings for the fiscal quarter ending September 29, 2017 and the fiscal year ending June 29, 2018 and beyond. These statements identify prospective information and may include words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “may,” “will,” or negative of these words, variations of these words and comparable terminology. These forward-looking statements are based on information available to the Company as of the date of this Annual Report onForm 10-K and are based on management’s current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to: uncertainty in global economic conditions, the impact of the variable demand and adverse pricing environment for disk drives, any regulatory, legal, logistical or other impediments to our ability to execute on our restructuring efforts, our ability to achieve projected cost savings in connection with restructuring plans and consolidation of our manufacturing activities; our ability to successfully qualify, manufacture and sell our 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; possible excess industry supply with respect to particular disk drive products; disruptions to our supply chain or production capabilities; the development and introduction of products based on new technologies and expansion into new data storage markets; the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends; consolidation trends in the data storage industry; currency fluctuations that may impact the Company’s margins and international sales; cyber-attacks or other data breaches that disrupt its operations or results in the dissemination of proprietary or confidential information and cause reputational harm; our ability to comply with certain covenants in our credit facilities with respect to financial ratios and financial condition tests; the risk ofnon-compliance with the legal, regulatory, administrative and environmental climate in the international markets where we operate; and fluctuations in interest rates. Information concerning risks, uncertainties and other factors that could cause results to differ materially from those projected in such forward-looking statements is also set forth in “Item 1A. Risk Factors” of this Annual Report onForm 10-K, which we encourage you to carefully read. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

July 3, 2026.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

Our Company.Discussion of our business.

Business Overview.Discussion of industry trends and their impact on our business.

Fiscal Year 2017 Summary.
Fiscal Year 2020 Summary.Overview of financial and other highlights affecting us for fiscal year 2017.

Results of Operations.Analysis of our financial results comparing fiscal years 2017 to 2016 and comparing fiscal years 2016 to 2015.

Liquidity and Capital Resources.An analysis of changes in our balance sheets and cash flows, and discussion of our financial condition including the credit quality of our investment portfolio and potential sources of liquidity.

Contractual Obligations andOff-Balance Sheet Arrangements.Overview of contractual obligations and contingent liabilities and commitments outstanding as of June 30, 2017 and an explanation ofoff-balance sheet arrangements.

Critical Accounting Estimates.Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

Our Company

We are a leading provider of data storage technologyfinancial and solutions. Our principal products are hard disk drives, commonly referredother highlights affecting us in fiscal year 2020.

Results of Operations. Analysis of our financial results comparing fiscal years 2020 and 2019 to the prior-year periods.
Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, and discussion of our financial condition including potential sources of liquidity.
Contractual Obligations and Off-Balance Sheet Arrangements. Overview of contractual obligations and contingent liabilities and commitments outstanding as disk drives, hard drives or HDDs. In addition to HDDs, we produce a broad range of data storage products including solid state drives (“SSD”) and their related controllers, solid state hybrid drives (“SSHD”) and storage subsystems.

Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives continue to be the primary medium of mass data storage due to their performance attributes, high quality and cost effectiveness. Complementing existing data center storage architecture, solid-state storage devices use integrated circuit assemblies as memory to store data, and most SSDs use NAND-based flash memory. In addition to HDDs and SSDs, SSHDs combine the features of SSDs and HDDs in the same unit, containing a large hard disk driveJuly 3, 2020 and an SSD cacheexplanation of off-balance sheet arrangements.

Critical Accounting Estimates. Accounting estimates that we believe are important to improve performance of frequently accessed data.

Our products are designed for mission criticalunderstanding the assumptions and nearline applications in enterprise servers and storage systems; client compute applications, where our products are designed primarily for desktop and mobile computing; and clientnon-compute applications, where our products are designed for a wide variety of end user devices such as portable external storage systems, surveillance systems, network-attached storage (“NAS”), digital video recorders (“DVRs”) and gaming consoles.

Our cloud systems and solutions extend innovation from the device into the information infrastructure, onsite and in the cloud. Our portfolio includes modular original equipment manufacturer (“OEM”) storage systems andscale-out storage servers.

Business Overview

Our industry is characterized by several trends and factors that have a material impact on our strategic planning, financial condition and results of operations.

Demand for Data Storage

The continued advancement of the cloud, the proliferation of a variety of mobile devices globally, development of the Internet of Things (“IoT”), increasingly pervasive use of video surveillance, evolution of consumer electronic devices, and enterprise use of big data analytics are driving the growth of digital content. Factors contributing to the growth of digital content include:

Creation, sharing, and consumption of media-rich digital content, such as high-resolution photos, high definition video, and digital music through smart phones, tablets, digital cameras, personal video cameras, DVRs, gaming consoles or other digital devices;

Creation, aggregation and distribution of digital content through services and other offerings such as Facebook®, Instagram®, iTunes®, Netflix®, Google® and YouTube®;

New surveillance systems which feature higher resolution digital cameras and thus require larger data storage capacities;

Creation and collection of data through the evolution of the IoT ecosystem, big data analytics and new technology trends such as self-driving cars and drones;

Build out of large numbers of cloud data centers by cloud service providers and private companies transitioningon-site data centers into the cloud; and

Protection of increased digital content through redundant storage on backup devices and externally provided storage services.

As a result of these factors, the nature and volume of content being created requires greater storage, which is more efficiently and economically facilitated by higher capacity storage devices in order to store, manage, distribute, analyze and backup such content. We expect this to support the growth in demand for data storage solutions in developed and emerging economies well into the future.

The amount of data created as well as where and how data is stored continues to evolve with the proliferation of mobile devices, the growth of cloud computing, and the evolving IoT. In addition, the economics of storage infrastructure are also evolving with the utilization of public and private hyper-scale storage and open-source solutions reducing the total cost of ownership of storage while increasing the speed and efficiency with which customers can leverage massive computing and storage devices. Accordingly, we expect these trends will continue to create significant demand for data storage solutions going forward.

Demand Trends for Disk Drives

We believe that continued growth in digital content requires increasingly higher storage capacity in order to store, aggregate, host, distribute, analyze, manage, backup and use such content. We also believe that as architectures evolve to serve the growing commercial and consumer user base throughout the world, the manner in which hard drives are delivered to market and utilized by our customers will evolve as well.

We believe that in the foreseeable future the traditional enterprise and client compute markets that require high-capacity storage solutions, and the data intensive clientnon-compute markets will continue to be best served by hard disk drives due to the industry’s ability to deliver the most cost effective, reliable and energy efficient mass storage devices although the advance of solid state technology in the above markets is expected to increase as well. Furthermore, the increased use of clientnon-compute devices that both consume media-rich digital content streamed from the cloud and create rich digital content that is stored in the cloud, increases the demand for high capacity hard disk drives in enterprise nearline applications.

We also believe that as hard disk drive capacities continue to increase, unit demand does not reflect the increase in exabytes demand. In recent years, this trend has resulted in demand for fewer units, but with higher average capacity per drive.

Industry Supply Balance

From time to time the HDD industry has experienced periods of imbalance between supply and demand. To the extent that the disk drive industry builds or maintains capacity based on expectations of demand that do not materialize, price erosion may become more pronounced. Conversely, during periods where demand exceeds supply, price erosion is generally muted.

Price Erosion

Historically, our industry has been characterized by price declines for disk drive products with comparable capacity, performance and feature sets(“like-for-like products”). Price declines forlike-for-like products (“price erosion”) tend to be more pronounced during periods of:

economic contraction in which competitors may use discounted pricing to attempt to maintain or gain market share;

few new product introductions when competitors have comparable or alternative product offerings; and

industry supply exceeding demand.

Disk drive manufacturers typically attempt to offset price erosion with an improved mix of disk drive products characterized by higher capacity, better performance and additional feature sets and product cost reductions.

We believe the HDD industry experienced modest price erosion in fiscal years 2015, 2016 and 2017.

Product Life Cycles and Changing Technology

Successjudgments incorporated in our industry has been dependent to a large extent on the ability to balance the introduction and transitionreported financial results.

For an overview of new products withtime-to-volume, performance, capacity and quality metrics at a competitive price, level of service and support that our customers expect. Generally, the drive manufacturer that introduces a new product first benefits from improved product mix, favorable profit margins and less pricing pressure until comparable products are introduced. Changing technology also necessitateson-going investments in research and development, which may be difficult to recover due to rapid product life cycles and economic declines. Further, there is a continued need to successfully execute product transitions and new product introductions, as factors such as quality, reliability and manufacturing yields continue to be of significant competitive importance.

Seasonality

The disk drive industry traditionally experiences seasonal variability in demand with higher levels of demand in the second half of the calendar year. This seasonality is driven by consumer spending in theback-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. We believebusiness, see “Part I - Item 1. Business—Overview.”

Fiscal Year 2020 Summary
During fiscal year 2015 reflected seasonality consistent with historical patterns. In fiscal year 2016, beyond traditional seasonality, variability of sales was a reflection of more cyclical demand from CSPs based on the timing of large systems installations and the shift of the underlying technology. We believe fiscal year 2017 reflected seasonality consistent with historical patterns.

Fiscal Year 2017 Summary

During the fiscal year 2017,2020, we shipped 263442 exabytes generatingof HDD storage capacity. We generated revenue of $10.8$10.5 billion and gross margins of 29%. Our27% and our operating cash flow was $1.9$1.7 billion. We repurchased $1,137 million of certain outstanding senior notes, exchanged $456 million of certain senior notes to longer duration notes, borrowed $500 million under our term loan facility (“Term Loan”) and issued $500 million of new senior notes. We repurchased approximately 1217 million of our ordinary shares for $850 million and paid $673 million in dividends. Additionally, we changed our estimate of the useful lives of our manufacturing equipment from a range of three to five years to a range of three to seven years. The effect of this change in estimate increased the fiscal year 2020 net income by $134 million.

Impact of COVID-19
The COVID-19 pandemic has resulted in a widespread health crisis and numerous disease control measures being taken to limit its spread, the effects of which began during our quarter ended April 3, 2020. We incurred certain supply chain and demand disruptions during the fiscal year for approximately $460 million. We issued $750 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024 and paid $316 million for the redemption and repurchase of our outstanding debt,2020, as well as paid $561 million in dividends infactory under-utilization and higher logistics and operational costs and softer demand across our markets due to the COVID-19 pandemic, which we expect to continue into our fiscal year 2017.

2021. Our customers also experienced certain supply chain and demand disruptions in our fourth fiscal quarter 2020, which we anticipate will continue into fiscal year 2021. We are continuing to actively monitor the effects and potential impacts of the COVID-19 pandemic on all aspects of our business, liquidity and capital resources. We are complying with governmental rules and guidelines across all of our sites and are actively working on opportunities to lower our cost structure and drive further operational efficiencies. Although we are unable to predict the impact of COVID-19 on our business, results of operations, liquidity or capital resources at this time, we expect we will be negatively affected if the pandemic and related public and private health measures result in substantial manufacturing or supply chain problems, substantial reductions in demand due to disruptions in the operations of our customers or partners, disruptions in local and global economies, volatility in the global financial markets, sustained reductions or volatility in overall demand trends, restrictions on the export or shipment of our products, or other ramifications from the COVID-19 pandemic. For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report.

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Table of Contents
Results of Operations

We list in the tables below summarized information from our Consolidated Statements of Operations by dollarsdollar amounts and as a percentage of revenue:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Revenue

    $10,771   $11,160   $13,739 

Cost of revenue

     7,597    8,545    9,930 
    

 

 

   

 

 

   

 

 

 

Gross margin

     3,174    2,615    3,809 

Product development

     1,232    1,237    1,353 

Marketing and administrative

     606    635    857 

Amortization of intangibles

     104    123    129 

Restructuring and other, net

     178    175    32 

Gain on arbitration award, net

     —      —      (620
    

 

 

   

 

 

   

 

 

 

Income from operations

     1,054    445    2,058 

Other expense, net

     (239   (171   (88
    

 

 

   

 

 

   

 

 

 

Income before income taxes

     815    274    1,970 

Provision for income taxes

     43    26    228 
    

 

 

   

 

 

   

 

 

 

Net income

    $772   $248   $1,742 
    

 

 

   

 

 

   

 

 

 

                                                                        
     Fiscal Years Ended 
     June 30,
2017
   July 1,
2016
   July 3,
2015
 

Revenue

     100%    100%    100% 

Cost of revenue

     71       77       72    
    

 

 

   

 

 

   

 

 

 

Gross margin

     29       23       28    

Product development

     11       11       10    

Marketing and administrative

     5       6       7    

Amortization of intangibles

     1       1       1    

Restructuring and other, net

     2       2       —      

Gain on arbitration award, net

     —         —         (5)   
    

 

 

   

 

 

   

 

 

 

Income from operations

     10       4       15    

Other expense, net

     (2)      (2)      (1)   
    

 

 

   

 

 

   

 

 

 

Income before income taxes

     8       2       14    

Provision for income taxes

     1       —         2    
    

 

 

   

 

 

   

 

 

 

Net income

     7%    2%    12% 
    

 

 

   

 

 

   

 

 

 

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Revenue$10,509  $10,390  $11,184  
Cost of revenue7,667  7,458  7,820  
Gross profit2,842  2,932  3,364  
Product development973  991  1,026  
Marketing and administrative473  453  562  
Amortization of intangibles14  23  53  
Restructuring and other, net82  (22) 89  
Income from operations1,300  1,487  1,634  
Other expense, net(268) (115) (216) 
Income before income taxes1,032  1,372  1,418  
Provision (Benefit) for income taxes28  (640) 236  
Net income$1,004  $2,012  $1,182  

 Fiscal Years Ended
July 3,
2020
June 28,
2019
June 29,
2018
Revenue100 %100 %100 %
Cost of revenue73  72  70  
Gross margin27  28  30  
Product development 10   
Marketing and administrative   
Amortization of intangibles—  —  —  
Restructuring and other, net —   
Income from operations12  14  15  
Other expense, net(2) (1) (2) 
Income before income taxes10  13  13  
(Benefit) provision for income taxes—  (6)  
Net income10 %19 %11 %
39

Table of Contents
The following table summarizes HDD information regarding average drive selling prices (“ASPs”), exabytes shipped, andconsolidated revenues by channel, geography, and geography:market and HDD exabytes shipped by market and price per terabyte:
 Fiscal Years Ended
July 3,
2020
June 28,
2019
June 29,
2018
Revenues by Channel (%)   
OEMs71 %70 %70 %
Distributors17 %17 %17 %
Retailers12 %13 %13 %
Revenues by Geography (%) (1)
   
Asia Pacific48 %49 %49 %
Americas34 %32 %33 %
EMEA18 %19 %18 %
Revenues by Market (%)
Mass capacity53 %43 %42 %
Legacy39 %50 %51 %
Other%%%
HDD Exabytes Shipped by Market
Mass capacity317  202  193  
Legacy125  145  145  
Total442  347  338  
HDD Price per Terabyte$22  $28  $31  

                                                                        
     Fiscal Years Ended 
     June 30,
2017
  July 1,
2016
  July 3,
2015
 

ASPs (per unit)

    $66  $61  $61 

Exabytes Shipped

     263   233   228 

Revenues by Channel (%)

      

OEMs

     67  69  71% 

Distributors

     18  17  18% 

Retailers

     15  14  11% 

Revenues by Geography (%)

      

Americas

     31  29  27% 

EMEA

     17  17  16% 

Asia Pacific

     52  54  57% 

(1) Revenue is attributed to countries based on the bill from location.
Fiscal Year 20172020 Compared to Fiscal Year 2016

2019

Revenue

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change   %
Change
 

Revenue

    $10,771   $11,160   $(389   (3)% 

Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Change%
Change
Revenue$10,509  $10,390  $119  %
Revenue in fiscal year 2017 decreased2020 increased approximately 3%1%, or $0.4 billion,$119 million, from fiscal year 2016, as a result of price erosion2019, primarily due to an increase in mass capacity storage exabytes shipped, partially offset by an increaseprice erosion and a decrease in legacy exabytes shipped.

Cost of Revenue and Gross Margin

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
  July 1,
2016
  Change   %
Change
 

Cost of revenue

    $7,597  $8,545  $(948   (11)% 

Gross margin

    $3,174  $2,615  $559    21% 

Gross margin percentage

     29  23   

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Change%
Change
Cost of revenue$7,667  $7,458  $209  %
Gross profit2,842  2,932  (90) (3)%
Gross margin27 %28 %  
For fiscal year 2017,2020, gross margin as a percentage of revenue increased by 600 basis pointsdecreased compared to the prior fiscal year due to a favorableprice erosion and higher logistics costs and factory under-utilization due to COVID-19-related disruptions, partially offset by improved product mix and improved factory utilization resulting from cost savingslower depreciation expense due to the change in useful lives of our ongoing workforce reductions and manufacturing consolidation activities, partially offset by price erosion.

equipment in the quarter ended October 4, 2019.

40

Table of Contents
Operating Expenses

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change   %
Change
 

Product development

    $1,232   $1,237   $(5   —  % 

Marketing and administrative

     606    635    (29   (5)% 

Amortization of intangibles

     104    123    (19   (15)% 

Restructuring and other, net

     178    175    3    2% 
    

 

 

   

 

 

   

 

 

   

Operating expenses

    $2,120   $2,170   $(50  
    

 

 

   

 

 

   

 

 

   

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Change%
Change
Product development$973  $991  $(18) (2)%
Marketing and administrative473  453  20  %
Amortization of intangibles14  23  (9) (39)%
Restructuring and other, net82  (22) 104  (473)%
Operating expenses$1,542  $1,445  $97  

Product Development Expense.Product development expenses for fiscal year 20172020 decreased by $18 million from fiscal year 20162019 primarily due to a $102$21 million decrease in salariesdepreciation expense and related benefits as a result of an increase$18 million decrease in operational efficiencies in our business and the restructuring of our workforce in the prior periods,materials expense, partially offset by a $71$13 million increase in outside services expense, an $8 million increase in variable compensation and share-based compensation driven by better financial performanceexpense and a $26$7 million increase in impairment charges related to the closure of our Korea design center.

compensation and other employee benefits.

Marketing and Administrative Expense.Marketing and administrative expenses for fiscal year 2017 decreased2020 increased by $20 million from fiscal year 20162019 primarily due to a decrease in salaries and related benefits of $52$13 million as a result of the restructuring of our workforce in prior periods, a $28 million cost reduction resulting from an increase in operational efficienciesother general expenses, an $11 million increase in our businessoutside services expense, a $6 million increase in share-based compensation expense and the completion of certain promotional and branding activities in fiscal year 2016, partially offset by a $51$5 million increase in variable compensation expense, partially offset by a $5 million decrease in compensation and share-based compensation driven by better financial performance.

other employee benefits and a $4 million decrease in depreciation expense.

Amortization of Intangibles.Amortization of intangibles for fiscal year 20172020 decreased by $19$9 million, as compared to fiscal year 2016,2019, due to certain intangible assets reachingthat reached the end of their useful life.

lives.

Restructuring and Other, net.Restructuring and other, net for fiscal year 20172020 was $82 million, primarily comprised primarily of restructuring charges recorded duringrelated to the September 2016 quarter and March 2017 quarterrestructuring plan the Company committed to on June 1, 2020 to reduce our workforce by approximately 6,800500 employees as we continueand charges related to consolidate our global footprint across Asia, EMEAa voluntary early exit program and the Americas.

other restructuring plans.

Restructuring and other, net for fiscal year 20162019 was comprised of restructuringa $75 million net gain from the sale of a certain property partially offset by charges recorded during the September 2015 quarter, March 2016 quarter and June 2016 quarter,related to reduce our workforce by approximately 4,600 employees and align our manufacturing footprint with current macroeconomic conditions.

a voluntary early exit program.

Other expense,Expense, net

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change   %
Change
 

Other expense, net

    $(239  $(171  $(68   40% 

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Change%
Change
Other expense, net$(268) $(115) $(153) 133 %
Other expense, net for fiscal year 20172020 increased by $68$153 million as compared to fiscal year 2016 primarily2019 mainly due to the $33$80 million of othernon-recurring income, associated with the final payment of unpaid interest on the arbitration award amount in the Company’s case against Western Digitalnet in fiscal year 20162019 related to our previous investment in Toshiba Memory Holdings Corporation (“TMHC”), now known as Kioxia, which did not recurwas redeemed in fiscal year 2017,2019, a $12$62 million increaseloss resulting from impairmentthe repurchase of certain long-term debt, an $18 million strategic investmentsinvestment impairment and $24an $11 million net increase in losses due to unfavorable changes in foreign currency exchange rates, partially offset by a $20 million decrease in interest expense onrelated to the issuancerepurchase of $750 millioncertain long-term debt.
Income Taxes
 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Change%
Change
Provision (benefit) for income taxes$28  $(640) $668  (104)%
41

Table of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024.

Income Taxes

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change   %
Change
 

Provision for income taxes

    $43   $26   $17    65% 

Contents

We recorded an income tax provision of $43$28 million for fiscal year 20172020 compared to an income tax provisionbenefit of $26$640 million for fiscal year 2016.2019. Our fiscal year 20172020 income tax provision included approximately $2 million of net tax expensebenefits of approximately $12 million associated with variousnon-recurring items.share-based compensation expense and $16 million associated with the release of valuation allowance on deferred tax assets driven by our profitability outlook in the U.S. Our fiscal year 20162019 income tax provisionbenefit included approximately $22a net tax benefit of $761 million of income tax benefits primarily associated with the release of valuation allowance on deferred tax reserves dueassets driven by improvements in our profitability outlook in the U.S., including our efforts to structurally and operationally align our EDS business with the expirationrest of certain statutes of limitation.

the Company.

Our Irish tax resident parent holding company owns various U.S. andnon-U.S. non-Irish subsidiaries that operate in multiplenon-Irish income tax jurisdictions. Our worldwide operating income is either subject to varying rates of income tax or is exempt from income tax due to tax holidayincentive programs we operate under in Malaysia, Singapore and Thailand. These tax holidaysincentives are scheduled to expire in whole or in part at various dates through 2024.

2025. Certain tax incentives may be extended if specific conditions are met.

Our income tax provision recorded for fiscal year 20172020 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. and non-Irish earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland,Ireland; and (ii) a decrease in valuation allowance for certain deferred tax assets, and (iii) permanent differences.benefits related to research credits. Our income tax provisionbenefit recorded for fiscal year 20162019 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) a decrease in valuation allowance for certain deferred tax assets, primarily driven by improvements in our profitability outlook in the U.S.; and (ii) tax benefits related tonon-U.S. and non-Irish earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, (ii) tax benefits associated with the reversal of previously recorded taxes, and (iii) a decrease in valuation allowance for certain deferred tax assets. The acquisition of Dot Hill System Corporation did not have a material impactIreland.
Based on our effective tax rate.

Based on ournon-U.S.non-Irish ownership structure and subject to (i) potential future increases in our valuation allowance for deferred tax assets; and (ii) a future change in our intention to indefinitely reinvest earnings from our subsidiaries outside of Ireland, we anticipate that our effective tax rate in future periods will generally be less than the Irish statutory rate.

At June 30, 2017,

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. We have concluded the tax provisions of the CARES Act did not have a material impact to our deferred tax asset valuation allowance was approximately $966 million.

At June 30, 2017, we had net deferred tax assets of $602 million, excluding $2 million of deferred taxes on intra-entity transactions. The realization of most of these deferred tax assets is primarily dependent on our ability to generate sufficient U.S. and certainnon-U.S. taxable income in future periods. Although realization is not assured, we believe that it is more likely than not that these deferred tax assets will be realized. The amount of deferred tax assets considered realizable, however, may increase or decrease in subsequent periods when were-evaluate the underlying basisconsolidated financial statements for our estimates of future U.S. and certainnon-U.S. taxable income.

As of June 30, 2017, approximately $560 million and $101 million of our total U.S. net operating loss and tax credit carryforwards, respectively, are subject to annual limitations from $1 million to $45 million pursuant to U.S. tax law.

We are required to file U.S. federal, U.S. state, andnon-U.S income tax returns. We are no longer subject to tax examination of U.S. federal income tax returns for years prior to fiscal year 2014. With respect to U.S. state andnon-U.S. income tax returns, we are generally no longer subject to tax examination for years ending prior to2020.

During the fiscal year 2006.

ended July 3, 2020, tax legislation was enacted, which becomes effective in our fiscal years 2020 and 2021. We have concluded these tax legislation changes have no material impact to our consolidated financial statements for fiscal year 2020.

Fiscal Year 20162019 Compared to Fiscal Year 2015

2018

Revenue

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    July 1,
2016
   July 3,
2015
   Change   %
Change
 

Revenue

    $11,160   $13,739   $(2,579   (19)% 

 Fiscal Years Ended
(Dollars in millions)June 28,
2019
June 29,
2018
Change%
Change
Revenue$10,390  $11,184  $(794) (7)%
Revenue in fiscal year 20162019 decreased approximately 19%7%, or $2.6$0.8 billion, from fiscal year 2015, as a result2018, primarily due to less favorable market conditions during the first half of the fiscal year and price erosion, and a decreasepartially offset by an increase in mass capacity storage exabytes shipped in the client compute market.

shipped.

Cost of Revenue and Gross Margin

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    July 1,
2016
  July 3,
2015
  Change   %
Change
 

Cost of revenue

    $8,545  $9,930  $(1,385   (14)% 

Gross margin

    $2,615  $3,809  $(1,194   (31)% 

Gross margin percentage

     23  28   

 Fiscal Years Ended
(Dollars in millions)June 28,
2019
June 29,
2018
Change%
Change
Cost of revenue$7,458  $7,820  $(362) (5)%
Gross profit2,932  3,364  (432) (13)%
Gross margin percentage28 %30 %  
42

Table of Contents
For fiscal year 2016,2019, gross margin as a percentage of revenue decreased by 500 basis points compared to the prior fiscal year due to price erosion and reduced demand in legacy hard drives resulting in underutilization of certain factories, partially offset by improved product mix in the second half of fiscal year 2016.

mix.

Operating Expenses

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    July 1,
2016
   July 3,
2015
   Change   %
Change
 

Product development

    $1,237   $1,353   $(116   (9)% 

Marketing and administrative

     635    857    (222   (26)% 

Amortization of intangibles

     123    129    (6   (5)% 

Restructuring and other, net

     175    32    143    447% 

Gain on arbitration award, net

     —      (620   620    (100)% 
    

 

 

   

 

 

   

 

 

   

Operating expenses

    $2,170   $1,751   $419   
    

 

 

   

 

 

   

 

 

   

 Fiscal Years Ended
(Dollars in millions)June 28,
2019
June 29,
2018
Change%
Change
Product development$991  $1,026  $(35) (3)%
Marketing and administrative453  562  (109) (19)%
Amortization of intangibles23  53  (30) (57)%
Restructuring and other, net(22) 89  (111) (125)%
Operating expenses$1,445  $1,730  $(285)  
Product Development Expense.Product development expenses for fiscal year 20162019 decreased by $35 million from fiscal year 20152018 primarily due to a $38 million decrease in variable compensation expense, partially offset by a $5 million increase in other employee benefits.
Marketing and Administrative Expense. Marketing and administrative expenses for fiscal year 2019 decreased by $109 million from fiscal year 2018 primarily due to a $27 million decrease in salaries and other employeerelated benefits of $63 million as a result of the restructuring of our workforce beginning in the second half of fiscal year 2015,prior periods, a $29$44 million decrease in other general expenses due to related operational efficiencies, a $24 million decrease in variable compensation expense and other cost reduction efforts, partially offset by the consolidation of Dot Hill in fiscal year 2016 and LSI’s Flash Business in fiscal year 2015.

Marketing and Administrative Expense. Marketing and administrative expenses for fiscal year 2016 decreased from fiscal year 2015 primarily due to a decrease in salaries and other employee benefits of $82 million as a result of a restructuring of our workforce beginning in the second half of fiscal year 2015, a $45$14 million decrease in variable compensation and share-based compensation a $33 million reduction in advertising due to the completion of certain promotional and branding activities in fiscal year 2016, and increased operational efficiencies in our business.

expense.

Amortization of Intangibles. Amortization of intangibles for fiscal year 20162019 decreased by $6$30 million as compared to fiscal year 2015, as a result of2018, due to certain intangible assets reaching the end of their useful lives, partially offset by the amortization of intangibles acquired from the Dot Hill acquisition in fiscal 2016.

lives.

Restructuring and Other, net. Restructuring and other, net for fiscal year 20162019 was comprised of restructuringa $75 million net gain from the sale of a certain property partially offset by charges recorded during the September 2015 quarter, March 2016 quarter and June 2016 quarter,related to reduce our workforce by approximately 4,600 employees and align our manufacturing footprint with current macroeconomic conditions. a voluntary early exit program.
Restructuring and other, net for fiscal year 20152018 was due tocomprised primarily of restructuring charges to reduce our workforce asby approximately 1,100 employees. Restructuring and other, net also included a resultgain of our ongoing focus on cost efficiencies in all areas$25 million from the sale of our business.

Gain on arbitration award, net. Gain on arbitration award, net forcertain properties during fiscal year 2015 was related to the final award amount of $630 million, less litigation and other related costs of $10 million, in the Company’s case against Western Digital for the misappropriation of the Company’s trade secrets.

2018.

Other expense,Expense, net

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    July 1,
2016
   July 3,
2015
   Change   %
Change
 

Other expense, net

    $(171  $(88  $(83   94% 

 Fiscal Years Ended
(Dollars in millions)June 28,
2019
June 29,
2018
Change%
Change
Other expense, net$(115) $(216) $101  (47)%
Other expense, net for fiscal year 2016 increased2019 decreased by $83$101 million as compared to fiscal year 2015 primarily2018 mainly due to a $56 million increase in interest income on our investment in TMHC, a $37 million net increase in gains on settlement of derivatives and a $13 million net decrease in interest expense due to the absencerepayment of partial receiptcertain long-term debt.
Income Taxes
 Fiscal Years Ended
(Dollars in millions)June 28,
2019
June 29,
2018
Change%
Change
(Benefit) provision for income taxes$(640) $236  $(876) (371)%
43

Table of $143 million for interest accrued on the final arbitration award amount in the Company’s case against Western Digital in fiscal year 2015 compared to $33 million in fiscal year 2016, and a $33 million change in foreign currency remeasurement related to net gains and losses from changes in foreign exchange rates, which were more pronounced in the prior year, partially offset by $74 million of losses from the early redemptions and repurchases of debt in fiscal year 2015 compared to a $3 million gain from the early redemptions and repurchases of debt in fiscal year 2016.

Income Taxes

                                                                                                
     Fiscal Years Ended 

(Dollars in millions)

    July 1,
2016
   July 3,
2015
   Change   %
Change
 

Provision for income taxes

    $26   $228   $(202   (89)% 

Contents

We recorded an income tax provisionbenefit of $26$640 million for fiscal year 20162019 compared to an income tax provision of $228$236 million for fiscal year 2015.2018. Our fiscal year 20162019 income tax provisionbenefit included approximately $22a net tax benefit of $761 million of income tax benefits primarily associated with the release of valuation allowance on deferred tax reserves dueassets driven by improvements in our profitability outlook in the U.S., including our efforts to structurally and operationally align our EDS business with the expirationrest of certain statutes of limitation.the Company. Our fiscal year 20152018 income tax provision included approximately $193$204 million of nettax expense associated with the revaluation of U.S. deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act of 2017 on December 22, 2017, offset by the reversal of previously recorded unrecognized tax benefits of $7 million, and certain non-recurring items.

Our income tax expensebenefit recorded for fiscal year 2019 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the final audit assessment received fromnet effect of (i) a decrease in valuation allowance for certain deferred tax assets, primarily driven by improvements in our profitability outlook in the Jiangsu Province State Tax BureauU.S.; and (ii) tax benefits related to non-U.S. and non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of the People’s Republic of China (China assessment) for calendar years 2007 through 2013.

Ireland. Our income tax provision recorded for fiscal year 20162018 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. and non-Irish earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland,Ireland; and (ii) tax benefits associated witha reduction in the reversal of previously recorded taxes, and (iii) a decrease in valuation allowance for certain deferred tax assets. The acquisition of Dot Hill System Corporation did not have a material impact on our effective tax rate. Our income tax provision recorded for fiscal year 2015 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, (ii) tax expense associated with the China assessment recorded during the December 2014 quarter, and (iii) an increase in valuation allowance for certain deferred tax assets. The acquisition of LSI’s Flash Business did not have a material impact on our effective tax rate.

On December 18, 2015, the Protecting Americans from Tax Hikes (“PATH”) Act of 2015 was enacted. Among other provisions, the PATH Act retroactively reinstated and permanently extended the federal Research and Development (“R&D”) tax credit from December 31, 2014. The permanent extension of the R&D credit had no immediate impact on our income tax provision due to valuation allowances on our U.S. deferred tax assets. None of the other PATH Act changes hadassets associated with revaluation to a material impact on our incomelower U.S. tax provision.

rate.

Liquidity and Capital Resources

The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of money market funds, time deposits and certificates of deposit. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents and short-term investments are liquid and accessible. During fiscal year 2020, we reduced and restructured our long-term debt portfolio through a combination of new issuances, repurchases and exchanges to lower annual repayment levels by extending the maturity dates of certain notes and lowering the average interest rates. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash have been and will continue to be sufficient to meet our cash needs for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs, will allow us to manage the potential impacts of the COVID-19 pandemic on our business operations for the foreseeable future. However, the challenges posed by COVID-19 to our industry and to our business are evolving rapidly and are highly uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19.
We are not aware of any downgrades, losses or other significant deterioration in the fair value of our cash equivalents or short-term investments and we do not believe the fair value of our short-term investments has significantly changed from the values reported as of June 30, 2017.

July 3, 2020.

Cash and Cash Equivalents and Short-term Investments

                                                                        
     As of 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change 

Cash and cash equivalents

    $2,539   $1,125   $1,414 

Short-term investments

     —      6    (6
    

 

 

   

 

 

   

 

 

 

Total

    $2,539   $1,131   $1,408 
    

 

 

   

 

 

   

 

 

 

 As of
(Dollars in millions)July 3,
2020
June 28,
2019
Change
Cash and cash equivalents$1,722  $2,220  $(498) 

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Table of Contents
Our cash and cash equivalents and short-term investments increaseddecreased by $1,408$498 million from July 1, 2016June 28, 2019 primarily as a result of repurchases of certain long-term debt of $1,137 million, repurchases of our ordinary shares of $850 million, dividends to our shareholders of $673 million and payments for capital expenditures of $585 million, partially offset by net cash of $1,714 million provided by operating activities and thenet proceeds of $994 million from the issuance of $750 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024. These cash inflows were partially offset by net cash outflows for capital expenditures of $434 million, dividends paid to our shareholders of $561 million, repurchase of our ordinary shares of $460 million and early redemption and repurchase of debt of $316 million.long-term debt. The following table summarizes results from the statementConsolidated Statement of cash flowsCash Flows for the periods indicated:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Net cash flow provided by (used in):

        

Operating activities

    $1,916   $1,680   $2,650 

Investing activities

     (459   (1,211   (1,287

Financing activities

     (46   (1,820   (1,495

Effect of foreign currency exchange rates

     —      (3   (20
    

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

    $1,411   $(1,354  $(152
    

 

 

   

 

 

   

 

 

 

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Net cash flow provided by (used in):   
Operating activities$1,714  $1,761  $2,113  
Investing activities(635) 846  (1,588) 
Financing activities(1,605) (2,212) (1,211) 
Effect of foreign currency exchange rates(1) (1) —  
Net (decrease) increase in cash, cash equivalents and restricted cash$(527) $394  $(686) 
Cash Provided by Operating Activities

Cash provided by operating activities for fiscal year 2017 was approximately $1.9 billion and includes the effects of net income adjusted fornon-cash items including depreciation and amortization, share-based compensation, and:

a decrease of $122 million in accounts receivable, primarily due to a decrease in revenue and improved collections; and

an increase of $121 million in accounts payable, primarily due to timing of payments of material purchases; offset by

an increase of $114 million in inventory, primarily due to an increase in units built in connection with our manufacturing footprint consolidating activities.

Cash provided by operating activities for fiscal year 20162020 was approximately $1.7 billion and includes the effects of net income adjusted fornon-cash items including depreciation, and amortization, share-based compensation and:

a decreasean increase of $394 million in revenue acceleratedaccounts payable, primarily due to timing of payments and an increase in materials purchased; partially offset by a reduction
an increase of $166 million in inventories, primarily due to an increase in materials purchased for new product ramps and the cash conversion cycle, leadingpotential for supply chain disruptions due to a decreaseCOVID-19; and
an increase of $127 million in working capital.accounts receivable, primarily due to the timing of shipments.

Cash provided by operating activities for fiscal year 20152019 was approximately $2.7$1.8 billion and includes the effects of net income adjusted fornon-cash items including depreciation, amortization, share-based compensation, a release of valuation allowance related to our U.S. deferred tax assets and:
a decrease of $204 million in accounts receivable, primarily due to lower revenue; and
a decrease of $80 million in inventories, primarily due to a decrease in units built; partially offset by
a decrease of $268 million in accounts payable, primarily due to a decrease in direct material purchases; and
a decrease of $84 million in accrued employee compensation, primarily due to a decrease in our variable compensation expense.
Cash provided by operating activities for fiscal year 2018 was approximately $2.1 billion and includes the effects of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes primarily due to the remeasurement of our U.S. deferred tax assets at the lower corporate tax rate, share-based compensation and:

• an increase of $65 million in accounts payable, primarily due to timing of payments of capital expenditures; and
• a partial paymentdecrease of $773$71 million for the arbitration award and related accrued interest received from Western Digital; andin vendor receivables, primarily due to improved collections; partially offset by

a $225• an increase of $71 million payment relatedin inventories, primarily due to the final audit assessment received from the Jiangsu Province State Tax Bureau of the People’s Republic of China for tax and interest associated with changes to our tax filings for the calendar years 2007 through 2013.an increase in units built.

Cash Used in(Used in) Provided by Investing Activities

In fiscal year 2017,2020, we used $459 million for net cash investing activities, which was primarily due to payments for the purchase of property, equipment and leasehold improvements of approximately $434 million.

In fiscal year 2016, we used $1.2$0.6 billion for net cash investing activities, which was primarily due to payments for the purchase of property, equipment and leasehold improvements of approximately $587$585 million and payments for the acquisitionpurchase of Dot Hill, netinvestments of cash acquired for $634$58 million.

In fiscal year 2015,2019, we used $1.3received $0.8 billion orfor net cash investing activities, which was primarily due to proceeds of $1.3 billion from the redemption of an investment in non-convertible preferred stock of TMHC and the proceeds of $144 million primarily from the sale of certain properties, partially offset by the payments for the purchase of property, equipment and leasehold improvements of approximately $747 million$602 million.
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In fiscal year 2018, we used $1.6 billion for net cash investing activities, which was primarily due to our investment in TMHC of $1.3 billion and the acquisitionpayments for the purchase of LSI’s Flash Business for $450 million.

property, equipment and leasehold improvements of approximately $366 million, partially offset by the proceeds of $69 million from the sale of properties.

Cash Used in Financing Activities

Net cash used in financing activities of $46 million$1.6 billion for fiscal year 20172020 was primarily attributable to the following activities:

$1,137 million net repurchases of long-term debt;
$850 million in payments for repurchases of our ordinary shares;
$673 million in dividend payments; partially offset by
$498 million in net proceeds of $1.2 billion received from borrowings under the Term Loan;
$496 million from the issuance of $750 million of 4.25% Senior Notes due 2022Notes; and $500 million of 4.875% Senior Notes due 2024;

$86103 million in proceeds from the issuance of ordinary shares under employee stock plans, offset by

plans.
$561 million in dividend payments;

$460 million paid to repurchase 12 million of our ordinary shares;

$316 million of redemption and repurchase of long-term debt; and

$27 million paid for taxes related to net share settlement of equity awards.

Net cash used in financing activities of $1.8$2.2 billion for fiscal year 20162019 was primarily attributable to the following activities:

$1.1 billion paid to repurchase 24963 million in payments for repurchases of our ordinary shares;
$713 million in dividend payments; and

$0.7 billion in dividends paid to our shareholders.574 million net repurchases of long-term debt.

Net cash used in financing activities of $1.5$1.2 billion for fiscal year 20152018 was primarily attributable to the following activities:

$1.1 billion paid to repurchase 19726 million in dividend payments;
$361 million in payments for repurchases of ordinary shares; and
$214 million of our ordinary shares;

$1.0 billion for the repurchase and redemptionrepurchases of long-term debt; offset by

$0.7 billion113 million in dividends paid to our shareholders; partially offset by

proceeds of $1.2 billion from aggregate cash generated from the issuance of our 5.75% Senior Notes due 2034 and 4.875% Senior Notes due 2027.ordinary shares under employee stock plans.

Liquidity Sources

Our primary sources of liquidity as of June 30, 2017, consistedJuly 3, 2020, consist of: (1) approximately $2.5$1.7 billion in cash and cash equivalents, (2) a $700 million senior revolving credit facility and (3) cash we expect to generate from operations.

operations and (3) subject to compliance with certain requirements under our control, up to $1.5 billion available for borrowing under our senior unsecured revolving credit facility (“Revolving Credit Facility”), which is part of our credit agreement (the “Credit Agreement”).

As of June 30, 2017,July 3, 2020, no borrowings had been drawn under the revolving credit facility orand no borrowings had been utilized for letters of credit or swing line loans issued under this credit facility.the Revolving Credit Facility. The line of creditRevolving Credit Facility is available for borrowings, through January 15, 2020, subject to compliance with financial covenants and other customary conditions to borrowing and investment grade ratings. If the Company does not have investment grade ratings (as defined in the revolving credit facility) on August 15, 2018, then the maturity date will be August 16, 2018 unless certain extension conditions have been satisfied.

borrowing.

The credit agreement that governs our revolving credit facility, as amended, contains certain covenants that we must satisfy in order to remain in compliance with the credit agreement, as amended. The agreementCredit Agreement includes three financial covenants: (1) minimum cash, cash equivalents and marketable securities;interest coverage ratio, (2) a fixed charge coverage ratio;total leverage ratio and (3) a net leverage ratio. On April 28, 2016,minimum liquidity amount. The term of the Revolving Credit Agreement was amended in order to increaseFacility is through February 20, 2024, and the allowable net leverage ratio to adjust for our current financial liquidity position. We were in compliance withmaturity date of the modified covenants as Term Loan is September 16, 2025.
As of June 30, 2017 and expect to be in compliance for the next 12 months.

As of June 30, 2017,July 3, 2020, cash and cash equivalents held bynon-Irish subsidiaries was $2.5 $1.7billion. This amount is potentially subject to taxation in Ireland upon repatriation by means of a dividend into our Irish parent. However, it is our intent to indefinitely reinvest earnings ofnon-Irish subsidiaries outside of Ireland and our current plans do not demonstrate a need to repatriate such earnings by means of a taxable Irish dividend. Should funds be needed in the Irish parent company and should we be unable to fund parent company activities through means other than a taxable Irish dividend, we would be required to accrue and pay Irish taxes on such dividend.

We believe that our sources of cash will be sufficient to fund our operations and meet our cash requirements for at least the next 12 months.

For additional information on factors that could impact our ability to fund our operations and meet our cash requirements, including the COVID-19 pandemic, see the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report.

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Table of Contents
Cash Requirements and Commitments

Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness, and to fund our quarterly dividend.dividend and any future strategic investments. Our ability to fund these requirements will depend on our future cash flows, which are determined by future operating performance, and therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

OnJuly 25, 2017,22, 2020, our Board of Directors declared a quarterly cash dividend of $0.63$0.65 per share, which will be payable on October 4, 20177, 2020 to shareholders of record as of the close of business onSeptember 20, 2017.

23, 2020.

As of June 30, 2017,July 3, 2020, we were in compliance with all of the covenants under our debt agreements. Based on our current outlook and the information we currently have available to us, we expect to be in compliance with the covenants ofin our debt agreements over the next 12 months.

The carrying value of our long-term debt as of July 3, 2020 and June 30, 2017 and July 1, 201628, 2019 was 5.0$4.2 billion and $4.1$4.3 billion, respectively. The table below presents the principal amounts of our outstanding long-term debt:

                                                                        
     As of 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   Change 

3.75% Senior Notes due November 2018

    $710   $800   $(90

7.00% Senior Notes due November 2021

     —      158    (158

4.250% Senior Notes due March 2022

     750    —      750 

4.75% Senior Notes due June 2023

     951    990    (39

4.875% Senior Notes due March 2024

     500    —      500 

4.75% Senior Notes due January 2025

     975    995    (20

4.875% Senior Notes due June 2027

     697    700    (3

5.75% Senior Notes due December 2034

     490    490    —   
    

 

 

   

 

 

   

 

 

 
    $5,073   $4,133   $940 
    

 

 

   

 

 

   

 

 

 

 As of
(Dollars in millions)July 3,
2020
June 28,
2019
Change
4.250% Senior Notes due March 2022$229  $750  $(521) 
4.750% Senior Notes due June 2023546  941  (395) 
4.875% Senior Notes due March 2024500  500  —  
4.750% Senior Notes due January 2025479  920  (441) 
4.875% Senior Notes due June 2027505  690  (185) 
4.091% Senior Notes due June 2029500  —  500  
4.125% Senior Notes due January 2031500  —  500  
5.75% Senior Notes due December 2034490  490  —  
LIBOR based Term Loan due September 2025500  —  500  
$4,249  $4,291  $(42) 
From time to time, we may repurchase any of our outstanding ordinary shares through private, open market, tender offers,or broker assisted purchases, tender offers, or other means. During fiscal year 2017,2020, we repurchased approximately 1318 million of our ordinary shares including shares withheld for statutory tax withholdings related to vesting of employee equity awards. See “Item 5. Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Repurchases of Our Equity Securities.” As of June 30, 2017,July 3, 2020, $1.3 billion remained available for repurchase under our existing repurchase authorization limit. All repurchases are effected as redemptions in accordance with the Company’s Articles of Association.

our Constitution.

For fiscal year 2018,2021, we expect capital expenditures to be less than 5%at or below our long-term targeted range of 6% to 8% of revenue. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

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Table of Contents
Contractual Obligations and Commitments

Our contractual cash obligations and commitments as of June 30, 2017, have beenJuly 3, 2020, are summarized in the table below:

                                                                                                                        
         Fiscal Year(s) 

(Dollars in millions)

    Total   2018   2019-2020   2021-2022   Thereafter 

Contractual Cash Obligations:

            

Long-term debt

    $5,073   $—     $710   $750   $3,613 

Interest payments on debt

     1,848    241    433    420    754 

Purchase obligations(1)

     1,484    959    525    —      —   

Operating leases(2)

     135    19    26    15    75 

Capital expenditures

     107    107    —      —      —   

Other funding requirements(3)

     30    12    18    —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     8,677    1,338    1,712    1,185    4,442 

Commitments:

            

Letters of credit or bank guarantees

     106    106    —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    $8,783   $1,444   $1,712   $1,185   $4,442 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms.
(2)Includes total future minimum rent expense undernon-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income).
(3)Consists of funding requirements related to strategic commitments.

  Fiscal Year(s)
(Dollars in millions)Total20212022-20232024-2025Thereafter
Contractual Cash Obligations:     
Long-term debt$4,249  $19  $825  $1,029  $2,376  
Interest payments on debt1,352  183  360  283  526  
Purchase obligations (1)
1,251  1,088  68  95  —  
Operating leases, including imputed interest (2)
148  15  25   100  
Capital expenditures326  274  51   —  
Subtotal7,326  1,579  1,329  1,416  3,002  
Commitments:     
Letters of credit or bank guarantees104  94   —   
Total$7,430  $1,673  $1,330  $1,416  $3,011  

(1)Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms.
(2)Includes total future minimum rent expense under non-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income). Refer toItem 8. Financial Statements and Supplementary Data—Note 6.Leases” for details.

As of June 30, 2017,July 3, 2020, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $15$2 million, none of which is expected to be settled within one year. Outside of one year, we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur.

Off-Balance Sheet Arrangements

As of June 30, 2017,July 3, 2020, we did not have any materialoff-balance sheet arrangements (as defined in Item 303(a)(4)(ii) ofRegulation S-K).

Critical Accounting Policies

and Estimates

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and operating results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are highly uncertain at the time of estimation. Based on this definition, our most critical accounting policies include: establishment of sales program accruals, establishment of warranty accruals, accounting for incomeRevenue - Sales Program Accruals, Warranty, Income taxes and the accountingAssessing Goodwill and Other Long-lived Assets for goodwill and other long-lived assets.Impairment. Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other accounting policies and accounting estimates relating to uncollectible customer accounts, valuation of inventory,inventories, valuation of share-based payments and restructuring. We believe that these other accounting policies and accounting estimates either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period.

Establishment of

Revenue - Sales Program Accruals. We establish certain distributorrecord estimated variable consideration at the time of revenue recognition as a reduction to revenue. Variable consideration generally consists of sales incentive programs, such as price protection and OEM sales programsvolume incentives aimed at increasing customer demand. For OEM sales, rebates are typically established by estimating the most likely amount of consideration expected to be received based on an OEM customer’scustomer's volume of purchases from us or other agreed upon rebate programs. For the distribution and retail channel, these sales incentive programs typically involve estimating the most likely amount of rebates related to a distributor’scustomer's level of sales, order size, advertising or point of sale activity andas well as the expected value of price protection adjustments. We provide for these obligations at the time that revenue is recorded based on estimated requirements. We estimate these contra-revenue rebates and adjustments based on various factors, including price reductions during the period reported, estimated future price erosion, customer orders, distributor sell-throughhistorical analysis and inventory levels, program participation, customer claim submittals and sales returns. Our estimates reflect contractual arrangements but also our judgment relating to variables such as customer claim rates and attainment of program goals, and inventory and sell-through levels reported by our distribution customers. Currently, our distributors’ inventories are within the historical range.

While we believe we have sufficient experience and knowledge of the market and customer buying patterns to reasonably estimate such rebates and adjustments, actual market conditions or customer behavior could differ from our expectations. As a result, actual payments under these programs, which may spread over several months after the related sale, may vary from the amount accrued. Accordingly, revenues and margins in the period in which the adjustment occurs may be affected.

Significant actual variations in any of the factors upon which we base our contra-revenue estimates could have a material effect on our operating results. In fiscal year 2017,forecasted pricing environment. Total sales programs were approximately 11%12% of gross revenue. Forrevenue in fiscal years 2016year 2020 and 2015, total sales programs11% for each of gross revenues were 13%the 2019 and 10%, respectively.2018 fiscal years. Adjustments to revenues due to under or over accruals for sales programs related to revenues reported in prior quarterly periods were less than1% of gross revenue in fiscal years 2017, 20162020, 2019 and 2015. Any future shifts in the industry supply-demand balance as well as other factors may result in a more competitive pricing environment and may cause sales programs as a percentage2018.

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Table of gross revenue to increase from the current or historical levels. If such rebates and incentives trend upwards, revenues and margins may be reduced.

Establishment of Warranty Accruals.Contents

Warranty. We estimate probable product warranty costs at the time revenue is recognized. We generally warrantprovide a warranty on our products for a period of 1 to 5 years. Our warranty provision considers estimated product failure rates and trends (including the timing of product returns during the warranty periods), and estimated repair or replacement costs related to product quality issues, if any. We also exercise judgment in estimating our ability to sell certain repaired products. Should actual experience in any future period differ significantly from our estimates, our future results of operations could be materially affected.refurbished products based on historical experience. Our judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited experience with those products upon which to base our warranty estimates.

The actual results with regard to warranty expenditures could have an adverse or favorable effect on our results of operations if the actual rate of unit failure, the cost to repair a unit, or the actual cost required to satisfy customer claims differs from those estimates we used in determining the warranty accrual. Since we typically outsource our warranty repairs, our repair cost is subject to periodic negotiations with vendors and may vary from our estimates. We also exercise judgment in estimating our ability to sell certain repaired products. To the extent such sales fall below our forecast, warranty cost will be adversely impacted.

We review our warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact the current period gross margins and net income. In fiscal years 2017, 2016 and 2015 net changes in estimates of prior warranty accruals as a percentage of revenue were immaterial. Our total warranty cost was 1.3%, 1.0% and 1.1% of revenue during fiscal years 2017, 2016 and 2015, respectively, while warranty cost related to new shipments (exclusive of the impact ofre-estimates ofpre-existing liabilities) were 1.2%, 1.1% and 1.1% respectively, for the same periods. Changes in anticipated failure rates of specific products and significant changes in repair or replacement costs have historically been the major reasons for significant changes in prior estimates. Any future changes in failure rates of certain products, as well as changes in repair costs or the cost of replacement parts, may result in increased or decreased warranty accruals.

Accounting for Income Taxes. We account for income taxes pursuant to Accounting Standards Codification (“ASC”) Topic 740 (“ASC 740”),Income Taxes. In applying, ASC 740, we make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, recognition of income and deductions and calculation of specific tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for income tax and financial statement purposes, as well as tax liabilities associated with uncertain tax positions. The calculation of tax liabilities involves uncertainties in the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other tax jurisdictions.various taxing authorities. If estimates of these tax liabilities are greater or less than actual results, an additional tax benefitprovision or provisionbenefit will result. The deferred tax assets we record each period depend primarily on our ability to generate future taxable income in the United States and certainnon-U.S. jurisdictions. Each period, we evaluate the need for a valuation allowance for our deferred tax assets and, if necessary, we adjust the valuation allowance so that net deferred tax assets are recorded only to the extent we conclude it is more likely than not that these deferred tax assets will be realized. If our outlook for future taxable income changes significantly, our assessment of the need for, and the amount of, a valuation allowance may also change.

Assessing Goodwill and Other Long-lived Assets for Impairment. We account for goodwill in accordance with ASC Topic 350, Intangibles—Goodwill and Other. As permitted by ASC 350, we perform a qualitative assessment in the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount. Based on the qualitative assessment, if it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company is not required to perform the quantitative goodwill impairment test. If it is determined in the qualitative assessment that the fair value of a reporting unit is more likely than not below its carrying amount, including goodwill, then we perform a quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. Any excess in the carrying value of a reporting unit’s goodwillunit over its fair value is recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit.

In accordance with ASC360-05-4,Impairment or Disposal of Long-lived Assets, we test

We evaluate other long-lived assets, including property, equipment and leasehold improvements and other intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying values of those assets may not be recoverable. We assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability testassessment indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group and compare it to its carrying value. The excess of the carrying value over the fair value is allocated pro rata to derive the adjusted carrying value of each asset in the asset group. The adjusted carrying value of each asset in the asset group is not reduced below its fair value.

Recent Accounting Pronouncements

See “Item 8. Financial Statements and Supplementary Data—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have exposure to market risks due to the volatility of interest rates, foreign currency exchange rates, credit rating changes and equity and bond markets. A portion of these risks may be hedged, but fluctuations could impact our results of operations, financial position and cash flows.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our cash investment portfolio. As of June 30, 2017, the CompanyJuly 3, 2020, we had noavailable-for-sale debt securities that had been in a continuous unrealized loss position for a period greater than 12 months. The CompanyWe determined noavailable-for-sale debt securities were other-than-temporarily impaired as of June 30, 2017. We currently do not use derivative financial instruments in our investment portfolio.

July 3, 2020.

We have fixed rate and variable rate debt obligations. We enter into debt obligations for general corporate purposes including capital expenditures and working capital needs.

Our Term Loan bears interest at a variable rate equal to London Interbank Offered Rate (“LIBOR”) plus a variable margin set on June 19, 2020.

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In the quarter ended October 4, 2019, we entered into certain interest rate swap agreements with a notional amount of $500 million to convert the variable interest rate on the Term Loan to fixed interest rates. The contracts were effective as of October 4, 2019 and will mature on September 16, 2025. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with the variable interest rate on the Term Loan. The Company designated the interest rate swaps as cash flow hedges.
The table below presents principal amounts and related fixed or weighted-average interest rates by year of maturity for our investment portfolio and debt obligations as of June 30, 2017.

                                                                                                                                                                                                
     Fiscal Years Ended       

(Dollars in millions, except percentages)

    2018  2019  2020   2021   2022  Thereafter  Total  Fair Value at
June 30,
2017
 

Assets

             

Cash equivalents:

             

Fixed rate

    $1,178  $—    $—     $—     $—    $—    $1,178  $1,178 

Average interest rate

     1.21         1.21 
    

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total fixed income

    $1,178  $—    $—     $—     $—    $—    $1,178  $1,178 

Debt

             

Fixed rate

    $—    $710  $—     $—     $750  $3,613  $5,073  $5,159 

Average interest rate

      3.75      4.25  4.93  4.66 

July 3, 2020.

Fiscal Years Ended
(Dollars in millions, except percentages)20212022202320242025ThereafterTotalFair Value at July 3, 2020
Assets       
Cash equivalents:      
Floating rate$551  $—  $—  $—  $—  $—  $551  $551  
Average interest rate0.48 %     0.48 %
Other debt securities
Fixed rate$10  $—  $—  $—  $—  $ $18  $18  
Fixed interest rate5.00 %5.00 %
Debt      
Fixed rate$—  $229  $546  $500  $479  $1,995  $3,749  $4,010  
Average interest rate4.25 %4.75 %4.88 %4.75 %4.71 %4.71 % 
Variable rate$19  $25  $25  $25  $25  $381  $500  $490  
Average interest rate3.04 %3.04 %3.04 %3.04 %3.04 %3.04 %3.04 %
Foreign Currency Exchange Risk.From time to time, we may enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments and anticipated foreign currency denominated expenditures. Our policy prohibits us from entering into derivative financial instruments for speculative or trading purposes. At this time, we have not identified any material exposure associated with the changes as a result of the British vote to exitUnited Kingdom’s withdrawal from the European Union.

We hedge portions of our foreign currency denominated balance sheet positions with foreign currency forward exchange contracts to reduce the risk that our earnings will be adversely affected by changes in currency exchange rates. The changeschange in fair value of these hedges arecontracts is recognized in earnings in the same period as the gains and losses from the remeasurement of the assets and liabilities. TheseAll foreign currency forward exchange contracts are not designated as hedging instruments under ASC 815, Derivativesmature within 12 months.
We recognized $4 million in Other expense, net related to hedge ineffectiveness and Hedging. The Company has no outstanding foreign currency forward exchange contracts as of June 30, 2017.

We evaluate hedging effectiveness prospectively and retrospectively and record any ineffective portion of the hedging instruments in Cost of revenue on the Consolidated Statements of Operations.discontinued cash flow hedges during fiscal year 2020. We did not have any material net gains (losses)or losses recognized in Cost of revenue, or Other expense, net for cash flow hedges due to hedge ineffectiveness or discontinued cash flow hedges during fiscal year 2019.

The table below provides information as of July 3, 2020 about our foreign currency forward exchange contracts. The table is provided in dollar equivalent amounts and presents the fiscal years 2017notional amounts (at the contract exchange rates) and 2016.

the weighted-average contractual foreign currency exchange rates.

(Dollars in millions, except average contract rate)Notional
Amount
Average
Contract Rate
Estimated Fair Value(1)
Foreign currency forward exchange contracts:   
Thai Baht$199  $31.67  $ 
Singapore Dollar243  $1.39  (2) 
Chinese Renminbi106  $7.17   
British Pound Sterling84  $0.81  —  
Total$632  $ 

(1)Equivalent to the unrealized net gain (loss) on existing contracts.
Other Market Risks. We have exposure to counterparty credit downgrades in the form of credit risk related to our foreign currency forward exchange contracts and our fixed income portfolio. We monitor and limit our credit exposure for our foreign currency forward exchange contracts by performing ongoing credit evaluations. We also manage the notional amount of
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contracts entered into with any one counterparty, and we maintain limits on maximum tenor of contracts based on the credit rating of the financial institution. Additionally, the investment portfolio is diversified and structured to minimize credit risk.
Changes in our corporate issuer credit ratings have minimal impact on our near term financial results, but downgrades may negatively impact our future transaction costs andability to raise capital, our ability to execute transactions with various counterparties.

counterparties and may increase the cost of such capital.

We are subject to equity market risks due to changes in the fair value of the notional investments selected by itsour employees as part of itsour Non-qualified Deferred Compensation Plan—the Seagate Deferred Compensation Plan (the “SDCP”). The SDCP is a successor plan to the prior Seagate Deferred Compensation Plans, as amended from time to time, under which no additional deferrals may be made after December 31, 2014. In fiscal year 2014, the Companywe entered into a Total Return Swap (“TRS”) in order to manage the equity market risks associated with the SDCP liabilities. The Company paysWe pay a floating rate, based on the LIBOR plus an interest rate spread, on the notional amount of the TRS. The TRS is designed to substantially offset changes in the SDCP liabilityliabilities due to changes in the value of the investment options made by employees. See “Item 8. Financial Statements and Supplementary Data—Note 8.Derivative Financial Instruments” of this Report on Form10-K.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Table of ContentsPagePage

51

52

53

54

55

56

56

61

64

Note 4.   Goodwill and Other Intangible Assets

67

69

72

75

77

80

82

87

87

88

Note 15. Commitments

90

Note 16. Guarantees

91

Note 17. Subsequent Events

92

93


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SEAGATE TECHNOLOGY PLC

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

                                                
     June 30,
2017
   July 1,
2016
 
ASSETS      

Current assets:

      

Cash and cash equivalents

    $2,539   $1,125 

Short-term investments

     —      6 

Accounts receivable, net

     1,199    1,318 

Inventories

     982    868 

Other current assets

     321    216 
    

 

 

   

 

 

 

Total current assets

     5,041    3,533 

Property, equipment and leasehold improvements, net

     1,875    2,160 

Goodwill

     1,238    1,237 

Other intangible assets, net

     281    448 

Deferred income taxes

     609    616 

Other assets, net

     224    219 
    

 

 

   

 

 

 

Total Assets

    $9,268   $8,213 
    

 

 

   

 

 

 
LIABILITIES AND EQUITY      

Current liabilities:

      

Accounts payable

    $1,626   $1,517 

Accrued employee compensation

     237    184 

Accrued warranty

     113    104 

Accrued expenses

     650    444 
    

 

 

   

 

 

 

Total current liabilities

     2,626    2,249 

Long-term accrued warranty

     120    102 

Long-term accrued income taxes

     15    14 

Othernon-current liabilities

     122    164 

Long-term debt

     5,021    4,091 
    

 

 

   

 

 

 

Total Liabilities

     7,904    6,620 

Commitments and contingencies (See Notes 14 and 15)

      

Shareholders’ Equity:

      

Preferred shares, $0.00001 par value per share—100,000,000 authorized; no shares issued or outstanding

     —      —   

Ordinary shares, $0.00001 par value per share—1,250,000,000 authorized; 291,799,561 issued and outstanding at June 30, 2017 and 298,572,217 issued and outstanding at July 1, 2016

     —      —   

Additionalpaid-in capital

     6,152    5,929 

Accumulated other comprehensive loss

     (17   (25

Accumulated deficit

     (4,771   (4,311
    

 

 

   

 

 

 

Total Shareholders’ Equity

     1,364    1,593 
    

 

 

   

 

 

 

Total Liabilities and Equity

    $9,268   $8,213 
    

 

 

   

 

 

 

Fiscal Years Ended
July 3,
2020
June 28,
2019
ASSETS
Current assets:  
Cash and cash equivalents$1,722  $2,220  
Accounts receivable, net1,115  989  
Inventories1,142  970  
Other current assets135  184  
Total current assets4,114  4,363  
Property, equipment and leasehold improvements, net2,129  1,869  
Goodwill1,237  1,237  
Other intangible assets, net58  111  
Deferred income taxes1,120  1,114  
Other assets, net272  191  
Total Assets$8,930  $8,885  
LIABILITIES AND EQUITY
Current liabilities:  
Accounts payable$1,808  $1,420  
Accrued employee compensation224  169  
Accrued warranty69  91  
Current portion of long-term debt19  —  
Accrued expenses602  552  
Total current liabilities2,722  2,232  
Long-term accrued warranty82  104  
Long-term accrued income taxes  
Other non-current liabilities181  130  
Long-term debt, less current portion4,156  4,253  
Total Liabilities7,143  6,723  
Commitments and contingencies (See Notes 14 and 15)
Shareholders’ Equity:  
Preferred shares, $0.00001 par value per share—100,000,000 authorized; 0 shares issued or outstanding—  —  
Ordinary shares, $0.00001 par value per share—1,250,000,000 authorized; 256,718,840 issued and outstanding at July 3, 2020 and 269,097,971 issued and outstanding at June 28, 2019—  —  
Additional paid-in capital6,757  6,545  
Accumulated other comprehensive loss(66) (34) 
Accumulated deficit(4,904) (4,349) 
Total Shareholders’ Equity1,787  2,162  
Total Liabilities and Shareholders’ Equity$8,930  $8,885  
See notesNotes to consolidated financial statements.

Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

                                                                        
     Fiscal Years Ended 
     June 30,
2017
   July 1,
2016
   July 3,
2015
 

Revenue

    $10,771   $11,160   $13,739 

Cost of revenue

     7,597    8,545    9,930 

Product development

     1,232    1,237    1,353 

Marketing and administrative

     606    635    857 

Amortization of intangibles

     104    123    129 

Restructuring and other, net

     178    175    32 

Gain on arbitration award, net

     —      —      (620
    

 

 

   

 

 

   

 

 

 

Total operating expenses

     9,717    10,715    11,681 
    

 

 

   

 

 

   

 

 

 

Income from operations

     1,054    445    2,058 

Interest income

     12    3    6 

Interest expense

     (222   (193   (207

Other, net

     (29   19    113 
    

 

 

   

 

 

   

 

 

 

Other expense, net

     (239   (171   (88
    

 

 

   

 

 

   

 

 

 

Income before income taxes

     815    274    1,970 

Provision for income taxes

     43    26    228 
    

 

 

   

 

 

   

 

 

 

Net income

    $772   $248   $1,742 
    

 

 

   

 

 

   

 

 

 

Net income per share:

        

Basic

    $2.61   $0.83   $5.38 

Diluted

     2.58    0.82    5.26 

Number of shares used in per share calculations:

        

Basic

     296    299    324 

Diluted

     299    302    331 

Cash dividends declared per ordinary share

    $2.52   $2.43   $2.05 

 Fiscal Years Ended
 July 3,
2020
June 28,
2019
June 29,
2018
Revenue$10,509  $10,390  $11,184  
Cost of revenue7,667  7,458  7,820  
Product development973  991  1,026  
Marketing and administrative473  453  562  
Amortization of intangibles14  23  53  
Restructuring and other, net82  (22) 89  
Total operating expenses9,209  8,903  9,550  
Income from operations1,300  1,487  1,634  
Interest income20  84  38  
Interest expense(201) (224) (236) 
Other, net(87) 25  (18) 
Other expense, net(268) (115) (216) 
Income before income taxes1,032  1,372  1,418  
Provision (benefit) for income taxes28  (640) 236  
Net income$1,004  $2,012  $1,182  
Net income per share:   
Basic$3.83  $7.13  $4.10  
Diluted3.79  7.06  4.05  
Number of shares used in per share calculations:   
Basic262  282  288  
Diluted265  285  292  
Cash dividends declared per ordinary share$2.58  $2.52  $2.52  
See notesNotes to consolidated financial statements.

Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

                                                                        
     Fiscal Years Ended 
     June 30,
2017
   July 1,
2016
   July 3,
2015
 

Net income

    $772   $248   $1,742 

Other comprehensive income (loss), net of tax:

        

Cash flow hedges

        

Change in net unrealized (loss) gain on cash flow hedges

     (3   (4   (11

Less: reclassification for amounts included in net income

     4    2    13 
    

 

 

   

 

 

   

 

 

 

Net change

     1    (2   2 
    

 

 

   

 

 

   

 

 

 

Marketable securities

        

Change in net unrealized gain (loss) on marketable securities

     —      —      —   

Less: reclassification for amounts included in net income

     —      —      —   
    

 

 

   

 

 

   

 

 

 

Net change

     —      —      —   
    

 

 

   

 

 

   

 

 

 

Post-retirement plans

        

Change in unrealized gain (loss) on post-retirement plans

     —      8    (5

Less: reclassification for amounts included in net income

     2    —      —   
    

 

 

   

 

 

   

 

 

 

Net change

     2    8    (5
    

 

 

   

 

 

   

 

 

 

Foreign currency translation adjustments

        

Foreign currency translation adjustments

     5    (1   (25
    

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     8    5    (28
    

 

 

   

 

 

   

 

 

 

Comprehensive income

    $780   $253   $1,714 
    

 

 

   

 

 

   

 

 

 


 Fiscal Years Ended
 July 3,
2020
June 28,
2019
June 29,
2018
Net income$1,004  $2,012  $1,182  
Other comprehensive income (loss), net of tax:
Change in net unrealized loss on cash flow hedges:
Net unrealized (losses) gains arising during the period(27) —  —  
Losses (gains) reclassified into earnings —  —  
Net change(24) —  —  
Change in unrealized components of post-retirement plans:
Net unrealized (losses) gains arising during the period(7) (16)  
Losses (gains) reclassified into earnings —  —  
Net change(6) (16)  
Foreign currency translation adjustments(2) (2) —  
Total other comprehensive (loss) income, net of tax(32) (18)  
Comprehensive income$972  $1,994  $1,183  
See notesNotes to consolidated financial statements.

Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

                                                         
  Fiscal Years Ended 
  June 30,
2017
  July 1,
2016
  July 3,
2015
 

OPERATING ACTIVITIES

   

Net income

 $772  $248  $1,742 

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation and amortization

  749   815   841 

Share-based compensation

  137   120   137 

Loss (gain) on redemption and repurchase of debt

  7   (3  74 

Loss on sale of property and equipment

  —     —     2 

Impairment of long-lived assets

  42   26   —   

Deferred income taxes

  3   (2  2 

Othernon-cash operating activities, net

  20   12   (9

Changes in operating assets and liabilities:

   

Accounts receivable, net

  122   464   (2

Inventories

  (114  145   29 

Accounts payable

  121   (24  (58

Accrued employee compensation

  53   (78  (40

Accrued expenses, income taxes and warranty

  47   (42  (112

Other assets and liabilities

  (43  (1  44 
 

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

  1,916   1,680   2,650 
 

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES

   

Acquisition of property, equipment and leasehold improvements

  (434  (587  (747

Purchases of strategic investments

  (37  —     —   

Purchases of short-term investments

  —     —     (5

Sales of short-term investments

  —     —     4 

Maturities of short-term investments

  6   —     19 

Cash used in acquisition of businesses, net of cash acquired

  —     (634  (453

Other investing activities, net

  6   10   (105
 

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

  (459  (1,211  (1,287
 

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES

   

Net proceeds from issuance of long-term debt

  1,232   —     1,196 

Redemption and repurchase of debt

  (316  (22  (1,026

Taxes paid related to net share settlement of equity awards

  (27  (56  —   

Repurchases of ordinary shares

  (460  (1,090  (1,087

Dividends to shareholders

  (561  (727  (664

Proceeds from issuance of ordinary shares under employee stock plans

  86   79   98 

Other financing activities, net

  —     (4  (12
 

 

 

  

 

 

  

 

 

 

Net cash used in financing activities

  (46  (1,820  (1,495
 

 

 

  

 

 

  

 

 

 

Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash

  —     (3  (20
 

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

  1,411   (1,354  (152

Cash, cash equivalents and restricted cash at the beginning of the year

  1,132   2,486   2,638 
 

 

 

  

 

 

  

 

 

 

Cash, cash equivalents and restricted cash at the end of the year

 $2,543  $1,132  $2,486 
 

 

 

  

 

 

  

 

 

 

Supplemental Disclosure of Cash Flow Information

   

Cash paid for interest

 $172  $200  $216 

Cash paid for income taxes, net of refunds

 $33  $40  $285 

 Fiscal Years Ended
 July 3,
2020
June 28,
2019
June 29,
2018
OPERATING ACTIVITIES   
Net income$1,004  $2,012  $1,182  
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization379  541  598  
Share-based compensation109  99  112  
Loss on redemption and repurchase of debt58  —   
Deferred income taxes(6) (690) 193  
Other non-cash operating activities, net52  (97) (14) 
Changes in operating assets and liabilities:   
Accounts receivable, net(127) 204  16  
Inventories(166) 80  (71) 
Accounts payable394  (268) 65  
Accrued employee compensation55  (84) 16  
Accrued expenses, income taxes and warranty(39) (81) (46) 
Other assets and liabilities 45  59  
Net cash provided by operating activities1,714  1,761  2,113  
INVESTING ACTIVITIES   
Acquisition of property, equipment and leasehold improvements(585) (602) (366) 
Proceeds from the sale of assets 144  71  
Proceeds from settlement of foreign currency forward exchange contracts—  29  —  
Purchase of debt security—  —  (1,279) 
Proceeds from redemption of debt security—  1,283  —  
Purchases of investments(58) (18) (6) 
Proceeds from sale of strategic investments 10  —  
Other investing activities, net—  —  (8) 
Net cash (used in) provided by investing activities(635) 846  (1,588) 
FINANCING ACTIVITIES   
Redemption and repurchase of debt(1,137) (819) (214) 
Dividends to shareholders(673) (713) (726) 
Repurchases of ordinary shares(850) (963) (361) 
Taxes paid related to net share settlement of equity awards(40) (31) (23) 
Net proceeds from issuance of long-term debt994  245  —  
Proceeds from issuance of ordinary shares under employee stock plans103  69  113  
Other financing activities, net(2) —  —  
Net cash used in financing activities(1,605) (2,212) (1,211) 
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash(1) (1) —  
(Decrease) increase in cash, cash equivalents and restricted cash(527) 394  (686) 
Cash, cash equivalents and restricted cash at the beginning of the year2,251  1,857  2,543  
Cash, cash equivalents and restricted cash at the end of the year$1,724  $2,251  $1,857  
Supplemental Disclosure of Cash Flow Information   
Cash paid for interest$226  $223  $237  
Cash (received) paid for income taxes, net of refunds$(51) $39  $43  
See notesNotes to consolidated financial statements.

Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For Fiscal Years Ended June 30, 2017, July 1, 2016 and July 3, 2015

2020, June 28, 2019 and June 29, 2018

(In millions)

                                                                                                                  
   Number
of
Ordinary
Shares
  Par Value
of Shares
  Additional
Paid-in
Capital
  Accumulated
Other
Comprehensive
Loss
  Accumulated
Deficit
  Total 

Balance at, June 27, 2014

   327  $—    $5,511  $(2 $(2,677 $2,832 

Net income

       1,742   1,742 

Other comprehensive loss

      (28   (28

Issuance of ordinary shares under employee stock plans

   7    98     98 

Repurchases of ordinary shares

   (19     (1,087  (1,087

Dividends to shareholders

       (664  (664

Share-based compensation

     137     137 

Other

     (12  —      (12
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at, July 3, 2015

   315   —     5,734   (30  (2,686  3,018 

Net income

       248   248 

Other comprehensive income

      5    5 

Issuance of ordinary shares under employee stock plans

   8    79     79 

Repurchases of ordinary shares

   (23     (1,090  (1,090

Tax withholding related to vesting of restricted stock units

   (1     (56  (56

Dividends to shareholders

       (727  (727

Share-based compensation

     120     120 

Other

     (4  —      (4
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at, July 1, 2016

   299   —     5,929   (25  (4,311  1,593 

Net income

       772   772 

Other comprehensive income

      8    8 

Issuance of ordinary shares under employee stock plans

   6    86     86 

Repurchases of ordinary shares

   (12     (460  (460

Tax withholding related to vesting of restricted stock units

   (1     (27  (27

Dividends to shareholders

       (745  (745

Share-based compensation

     137     137 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at, June 30, 2017

   292  $—    $6,152  $(17 $(4,771 $1,364 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

millions)

 Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at, June 30, 2017292  $—  $6,152  $(17) $(4,771) $1,364  
Net income1,182  1,182  
Other comprehensive income  
Issuance of ordinary shares under employee stock plans 113  113  
Repurchases of ordinary shares(10) (361) (361) 
Tax withholding related to vesting of restricted share units(1) (23) (23) 
Dividends to shareholders(723) (723) 
Share-based compensation112  112  
Balance at, June 29, 2018287  —  6,377  (16) (4,696) 1,665  
Cumulative effect of adoption of new revenue standard34  34  
Net income2,012  2,012  
Other comprehensive loss(18) (18) 
Issuance of ordinary shares under employee stock plans 69  69  
Repurchases of ordinary shares(21) (966) (966) 
Tax withholding related to vesting of restricted share units(1) (31) (31) 
Dividends to shareholders(702) (702) 
Share-based compensation99  99  
Balance at, June 28, 2019269  —  6,545  (34) (4,349) 2,162  
Impact of adoption of new lease standard (Note 1)(2) (2) 
Net income1,004  1,004  
Other comprehensive loss(32) (32) 
Issuance of ordinary shares under employee stock plans 103  103  
Repurchases of ordinary shares(17) (847) (847) 
Tax withholding related to vesting of restricted share units
(1) (40) (40) 
Dividends to shareholders(670) (670) 
Share-based compensation109  109  
Balance at, July 3, 2020257  $—  $6,757  $(66) $(4,904) $1,787  
See notesNotes to consolidated financial statements.

Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Basis of Presentation and Summary of Significant Accounting Policies


1.Basis of Presentation and Summary of Significant Accounting Policies
Organization

Seagate Technology plc (the(“STX”) and its subsidiaries (collectively, unless the context otherwise indicates, the “Company”) is a leading provider of data storage technology and solutions. Its principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. In addition to HDDs, the Company produces a broad range of data storage products including solid state drives (“SSD”SSDs”) and their related controllers,, solid state hybrid drives (“SSHD”SSHDs”) and storage subsystems.

Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives continue to be the primary medium of mass data storage due to their performance attributes, high quality and cost effectiveness. Complementing existing data center storage architecture, solid-state storage devices use integrated circuit assemblies as memory to store data, and most SSDs use NAND-based flash memory. In addition to HDDs and SSDs, SSHDs combine the features of SSDs and HDDs in the same unit, containing a large hard disk drive and an SSD cache to improve performance of frequently accessed data.

The Company’s products are designed for mission critical and nearline applications in enterprise servers and storage systems; client compute applications, where its products are designed primarily for desktop and mobile computing; and clientnon-compute applications, where its products are designed for a wide variety of end user devices such as portable external storage systems, surveillance systems, network-attached storage (“NAS”), digital video recorders (“DVRs”) and gaming consoles.

The Company’s cloud systems and solutions extend innovation from the device into the information infrastructure, onsite and in the cloud. Its portfolio includes modular original equipment manufacturers (“OEM”) storage systems andscale-out storage servers.

Basis of Presentation and Consolidation

The Company’s consolidated financial statements include the accounts of the Company and all its wholly-owned and majority-owned subsidiaries, after elimination of intercompany transactions and balances.

The preparation of financial statements in accordance with the United States (“U.S.”) generally accepted accounting principles also requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. These estimates and assumptions include the impact of the COVID-19 pandemic. Actual results could differ materially from those estimates. The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. Certain prior years amounts reported in the consolidated financial statements and notes thereto have been reclassified to conform to the current year’s presentation.

Fiscal Year
The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal years 2017 and 2016 were comprised of 52 weeks and ended on June 30, 2017 and July 1, 2016, respectively. Fiscal year 20152020 was comprised of 53 weeks and ended on July 3, 2015.2020. Fiscal years 2019 and 2018 were comprised of 52 weeks and ended on June 28, 2019 and June 29, 2018, respectively. All references to years in these Notes to Consolidated Financial Statements represent fiscal years unless otherwise noted. Fiscal year 20182026 will also be 52comprised of 53 weeks and will end on June 29, 2018.

July 3, 2026.

Summary of Significant Accounting Policies

Cash and Cash Equivalents and Short-Term Investments.Equivalents. The Company considers all highly liquid investments with a remaining maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value. The Company’s short-termhighly liquid investments are primarily comprised of money market funds, time deposits and certificates of deposits. The Company has classified its marketable securities asavailable-for-sale and they are stated at fair value with unrealized gains and losses included in Accumulated other comprehensive loss, which is a component of Shareholders’ Equity. The Company evaluates theavailable-for sale securities in an unrealized loss position for other-than-temporary impairment. Realized gains and losses are included in Other, net on the Company’s Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method.

Other cash equivalents are carried at cost, which approximates fair value.

Restricted Cash and Investments.Cash Equivalents. Restricted cash and investmentscash equivalents represent cash and cash equivalents and investments that are restricted as to withdrawal or use for other than current operations.

Allowances for Doubtful Accounts.The Company maintains an allowanceallowances for uncollectible accounts receivable based upon expected collectability. This reserve is established based upon historical trends, global macroeconomic conditions and an analysis of specific exposures. The provision for doubtful accounts is recorded as a charge to Marketing and administrative expense on the Company’s Consolidated Statements of Operations.

Inventory.Inventories. Inventories are valued at the lower of cost (using thefirst-in,first-out method) or market. Marketand net realizable value. Net realizable value is based upon anthe estimated average selling price reduced by estimatedprices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Adjustments to reduce cost of completion and disposal.

inventories to its net realizable value are made, if required, for estimated excess or obsolescence determined primarily by future demand forecasts.

Property, Equipment and Leasehold Improvements.Property, equipment and leasehold improvements are stated at cost. Equipment and buildings are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated life of the asset or the remaining term of the lease. The costs of additions and substantial improvements to property, equipment and leasehold improvements, which extend the economic life of the underlying assets, are capitalized. The cost of maintenance and repairs to property, equipment and leasehold improvements areis expensed as incurred.

Assessment

58

Table of Goodwill and Other Long-lived Assets for Impairment.The Company accounts for goodwill in accordance with Accounting Standards Codification (“ASC”) Topic 350 (“ASC 350”),Intangibles—Goodwill and Other. During fiscal year 2017, the Company adopted Accounting Standard Update (“ASU”)No. 2017-04,Intangibles—Goodwill and Other (ASC Topic 350)—Simplifying the Test for Goodwill Impairment.Contents
Goodwill. The Company performs a qualitative assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. If it is determined in the qualitative assessment that the fair value of a reporting unit is more likely than not below its carrying amount, including goodwill, then the Company will perform a quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. Any excess in the carrying value of a reporting unit’s goodwillunit over its fair value is recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit.

Other Long-lived Assets.The Company tests other long-lived assets, including property, equipment and leasehold improvements and other intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. The Company performs a recoverability test to assess the recoverability of an asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group and the excess of the carrying value over the fair value is allocated pro rata to derive the adjusted carrying value of assets in the asset group. The adjusted carrying value of each asset in the asset group is not reduced below its fair value.

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets on an ongoing basis. This review indicated that the actual lives of certain manufacturing equipment at its manufacturing facilities were longer than the estimated useful lives used for depreciation purposes in the Company’s consolidated financial statements. As a result, effective June 29, 2019, the Company changed its estimate of the useful lives of its manufacturing equipment from a range of three to five years to a range of three to seven years. The effect of this change in estimate increased the net income by $134 million for the fiscal year ended July 3, 2020 and increased the diluted earnings per share by $0.51 for the fiscal year ended July 3, 2020.
The Company tests other intangible assets not subject to amortization whenever events occur or circumstances change, such as declining financial performance, deterioration in the environment in which the entity operates or deteriorating macroeconomic conditions that have a negative effect on future expected earnings and cash flows that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset.

Assets Held for Sale. The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.
Leases. Effective June 29, 2019, the Company adopted a new accounting policy for leases in accordance with Accounting Standard Codification (“ASC”) 842, Leases, using the modified retrospective approach. Accordingly, the Company applied the new lease accounting standard prospectively to leases existing or commencing on or after June 29, 2019. The Company elected to apply the practical expedients which allow for not reassessing whether existing contracts contain leases, the classification of existing leases and whether the existing initial direct costs meet the new definition. In addition, the Company elected to combine lease and non-lease components for facility leases and to not recognize right-of-use (“ROU”) assets and lease liabilities for leases with an initial term of 12 months or less on the balance sheet.
The Company determines if an arrangement is a lease or contains a lease at inception. ROU assets are included in Other assets, net and lease liabilities are included in Accrued expenses and Other non-current liabilities on the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and the corresponding lease liabilities represent its obligation to make lease payments arising from the lease.
Lease liabilities are measured at the present value of the remaining lease payments and ROU assets are based on the lease liability, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. As the Company’s leases do not provide an implicit rate, the net present value of future minimum lease payments is determined using the Company’s estimated incremental borrowing rate based on the information available at the lease commencement date. Additionally, the Company’s lease term may include options to extend or terminate the lease. These options are reflected in the ROU asset and lease liability when it is reasonably certain that the Company will exercise the option. The Company’s lease agreements do not contain any material residual value guarantees.
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The Company recognizes lease expense on a straight-line basis over the lease term. Variable lease payments not dependent on an index or a rate primarily consist of common area maintenance charges, are expensed as incurred, and are not included in the ROU asset and lease liability calculation. The total operating and variable lease costs were included in operating expenses in the Company’s Consolidated Statements of Operations.
Payment-in-Kind (“PIK”) Income. The Company had a debt investment in non-convertible preferred stock of Toshiba Memory Holdings Corporation (TMHC), now known as Kioxia, that was fully redeemed by TMHC in June 2019. Transaction costs incurred by the Company to acquire this investment were capitalized and amortized as a reduction of interest income on the Consolidated Statements of Operations over the respective term of the investment. The investment contained a PIK income provision, which represented contractual interest that was due upon redemption, and was accrued and recorded as Interest income each reporting period and added to the carrying value of the Investment in debt security.
Derivative Financial Instruments. The Company applies the requirements of ASC Topic 815 (“ASC 815”),Derivatives and Hedging. ASC 815 requires thatrecords all derivatives be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships.

Establishment The Company continues to exclude the change in forward points from the assessment of Warranty Accruals.hedge effectiveness and recognizes the excluded component in Other, net in the Consolidated Statements of Operations. Foreign currency forward exchange contracts not designated as hedge instruments are used to economically hedge the foreign currency exposure on forecasted expenditures in currencies other than U.S. dollar. The Company recognizes the unrealized gains and losses due to the changes in the fair value of these contracts, as well as the related costs in Other, net in the Consolidated Statements of Operations.

Warranty. The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrantsprovides warranty on its products for a period of 1 to 5 years. The Company’sCompany's warranty provision considers estimated product failure rates and trends (including the timing of product returns during the warranty periods), and estimated repair or replacement costs related to product quality issues, if any. The Company also exercises judgment in estimating its ability to sell certain repairedrefurbished products. Should actualThe Company's judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited experience in any future period differ significantly from its estimates, the Company’s future results of operations could be materially affected.

with those products upon which to base our warranty estimates.

Revenue Recognition Sales Returns and Allowances, and Sales Incentive Programs. The Company’sEffective June 30, 2018, the Company adopted a new revenue recognition policy compliesin accordance with ASC Topic606, Revenue from Contracts with Customers, using the modified retrospective transition approach. Prior to fiscal year 2019, the revenue recognition policy was in accordance with ASC 605, (“ASC 605”),Revenue Recognition. The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, the Company satisfies a performance obligation.
Revenue from sales of products including sales to distribution customers, is generally recognized when title and riskupon transfer of loss has passedcontrol to customers in an amount that reflects the buyer, whichconsideration the Company expects to receive in exchange for those products, net of sales taxes. This typically occurs upon shipment from the Company. When applicable, the Company or third party’s warehouse facilities, persuasive evidence of an arrangement exists, including a fixed or determinable price to the buyer, and when collectability is reasonably assured. Revenue from sales of products to certain direct retail customers andincludes shipping charges billed to customers in certain indirect retail channels is recognizedRevenue and includes the related shipping costs in Cost of revenue on a sell-through basis.

the Company's Consolidated Statements of Operations.

The Company records estimated product returnsvariable consideration at the time of shipment. The Company also estimates reductionsrevenue recognition as a reduction to revenue forrevenue. Variable consideration generally consists of sales incentive programs, such as price protection and volume incentives and records such reductions when revenue is recorded. The Company establishes certain distributor and OEM sales programs aimed at increasing customer demand. For OEM sales, rebates are typically established by estimating the most likely amount of consideration expected to be received based on an OEM customer’s volume of purchases from Seagatethe Company or other agreed upon rebate programs. For the distribution and retail channel, these programs typically involve estimating the most likely amount of rebates related to a distributor’scustomer’s level of sales, order size, advertising or point of sale activity andas well as the expected value of price protection adjustments. The Company provides for these obligations at the time that revenue is recordedadjustments based on estimated requirements.historical analysis and forecasted pricing environment. Marketing development programsprogram costs are accrued and recorded as a reduction to revenue.

Shipping and Handling.revenue at the same time that the related revenue is recognized.

The Company includesexpenses sales commissions as incurred because the amortization period would have been one year or less. These costs related to shippingare recorded as Marketing and handling in Cost of revenue inadministrative on the Company’s Consolidated Statements of Operations for all periods presented.

Operations.

Restructuring Costs. The Company records restructuring activities including costs forone-time termination benefits in accordance with ASC Topic 420 (“ASC 420”),Exit or Disposal Cost Obligations.The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Employee termination benefitsbenefit costs covered by existing benefit arrangements are recorded in accordance with ASC Topic 712,Non-retirement Postemployment Benefits. These costs are recognized when management has committed to a restructuring plan and the severance costs are probable and estimable.

Advertising Expense.The cost of advertising is expensed as incurred. Advertising costs were approximately $16$19 million, $31$22 million and $64$28 million in fiscal years 2017, 20162020, 2019 and 2015,2018, respectively.

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Share-Based Compensation. The Company accounts for share-based compensation under the provisions of ASC Topic 718 (ASC 718),Compensation-Stock Compensation. The Company has elected to apply thewith-and-without method to assess the realization of related excess tax benefits.

The Company also elected to continue to account for share-based compensation expense net of estimated forfeitures. Refer to Note 11. Compensation for details.

Accounting for Income Taxes. The Company accounts for income taxes pursuant to ASC Topic 740 (“ASC 740”), Income Taxes.In applying ASC 740, the Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, recognition of income and deductions and calculation of specific tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for income tax and financial statement purposes, as well as tax liabilities associated with uncertain tax positions. The calculation of tax liabilities involves uncertainties in the application of complex tax rules and the potential for future adjustment of the Company’s uncertain tax positions by the Internal Revenue Service or other tax jurisdictions.various taxing authorities. If estimates of these tax liabilities are greater or less than actual results, an additional tax benefitprovision or provisionbenefit will result. The deferred tax assets the Company records each period depend primarily on the Company’s ability to generate future taxable income in the United States and certainnon-U.S. jurisdictions. Each period, the Company evaluates the need for a valuation allowance for its deferred tax assets and, if necessary, adjusts the valuation allowance so that net deferred tax assets are recorded only to the extent the Company concludes it is more likely than not that these deferred tax assets will be realized. If the Company’s outlook for future taxable income changes significantly, the Company’s assessment of the need for, and the amount of, a valuation allowance may also change.

Financial Instruments Remeasurement. The Company’s equity investments in privately-held companies without readily determinable fair values are measured using the measurement alternative method as cost, less impairments, and adjusted up or down based on observable price changes in orderly transactions for identical or similar investments of the same issuer. Any adjustments resulting from impairments and/or observable price changes are recorded as Other, net in the Company's Consolidated Statements of Operations.
Comprehensive Income.The Company presents comprehensive income in a separate statement. Comprehensive income is comprised of net income and other gains and losses affecting equity that are excluded from net income.

Foreign Currency Remeasurement and Translation.The U.S. dollar is the functional currency for the majority of the Company’sCompany's foreign operations. Monetary assets and liabilities denominated in foreign currencies are remeasured into the functional currency of the subsidiary at the balance sheet date. The gains and losses from the remeasurement of foreign currency denominated balances into the functional currency of the subsidiary are included in Other, net on the Company’sCompany's Consolidated Statements of Operations. The Company had $4 millionCompany’s subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and $0 millionliabilities at exchange rates in remeasurement losses in fiscal years 2017effect at the end of each period, and 2016, respectively, with $30 million in remeasurement gains in fiscal year 2015.

nonmonetary assets and liabilities at historical rates.

The Company translates the assets and liabilities of itsnon-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in Accumulated Otherother comprehensive loss, which is a component of shareholders’ equity. The Company’s subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property, and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were not significant and have been included in the Company’s results of operations.

Shareholders’ Equity.

Concentrations

Concentration of Credit Risk.The Company’s customer base for disk drive products is concentrated with a small number of OEMs and distributors.customers. The Company does not generally require collateral or other security to support accounts receivable. To reduce credit risk, the Company performs ongoing credit evaluations on its customers’ financial condition. The Company establishes an allowanceallowances for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. Arrow Electronics Inc. and Dell Inc. each accounted for more than 10% of the Company’s accounts receivable as of July 3, 2020 and Dell Inc. accounted for more than10%than 10% of the Company’s accounts receivable as of June 30, 2017.

28, 2019.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments and foreign currency forward exchange contracts. The Company further mitigates concentrations of credit risk in its investmentsfinancial instruments through diversification, by limiting its investments in the debt securities of a single issuer, and investing in highly-rated securities.

securities and/or major multinational companies.

In entering into foreign currency forward exchange contracts, the Company assumes the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The counterparties to these contracts are major multinational commercial and investment banks, and the Company has not incurred and does not expect any losses as a result of counterparty defaults.

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Supplier Concentration.Certain of the raw materials, components and equipment used by the Company in the manufacture of its products are available from single-sourced direct and indirect vendors. Shortages could occur in these essential materials and components due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain materials, components or equipment at all or acceptable prices, it would be required to reduce its manufacturing operations, which could have a material adverse effect on its results of operations. In addition, the Company may make prepayments to certain suppliers or enter into minimum volume commitment agreements. Should these suppliers be unable to deliver on their obligations or experience financial difficulty, the Company may not be able to recover these prepayments.

Recently Issued Accounting Pronouncements

In May 2014, August 2015, April 2016, May 2016 and DecemberJune 2016, the Financial Accounting Standards Board (“FASB”) issued ASU2014-09Accounting Standards Update (“ASU”) 2016-13 (ASC Topic 606)326), Revenue from Contracts with Customers,ASU2015-14 (ASC Topic 606)Revenue from Contracts with Customers, Deferral Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU amends the Effective Date,ASU2016-10 (ASC Topic 606)Revenue from Contracts with Customers, Identifying Performance Obligationsrequirement on the measurement and Licensing, ASU2016-12 (ASC Topic 606)Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients,and ASU2016-20 (ASC Topic 606)Technical Corrections and Improvementsrecognition of expected credit losses for financial assets held to Topic 606, Revenue from Contracts with Customers,respectively.ASC Topic 606 outlines a single comprehensive model for entities to useinclude future conditions in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertaintyits estimate of revenue and cash flows arising from contracts with customers.expected credit losses. The Company is required to adopt thethis guidance in the first quarter of fiscal 2019. This standard may be applied retrospectively to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoption (“modified retrospective transition approach”). Based2021. The Company will adopt this ASU on its assessment, the Company plans to adopt the new revenue standard in the first quarter of fiscal 2019, utilizing the modified retrospective method of transition.

While management hasJuly 4, 2020 and does not yet completed its assessment of the impact of adopting this new standard on the Company’s consolidated financial statements, the Company expectsexpect the adoption of the new standard will result in the recognition of revenues generally upon shipment(sell-in basis) for sales of products to certain direct retail customers and customers in certain indirect retail channels which are currently being recognized on a sell-through basis. Accordingly, the Company will need to estimate variable consideration (e.g. rebates) related to customer incentives on these arrangements. These changes are not expected to have a material impacteffect on the Company’sits consolidated financial statements.

In July 2015,

In August 2018, the FASB issued ASU2015-11 2018-15 (ASC Topic 330)Subtopic 350-40), Inventory: SimplifyingIntangibles—Goodwill and Other - Internal-Use Software—Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the Measurement of Inventory. The amendmentsaccounting for capitalizing implementation costs incurred in this ASU require inventory measurement ata hosting arrangement that is a service contract with the lower of cost and net realizable value.accounting for implementation costs incurred to develop or obtain internal-use software. The Company is required and intends to adopt thethis guidance in the first quarter of fiscal 2018.year 2021. The Company will adopt this ASU on July 4, 2020 and does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In January 2016,December 2019, the FASB issued ASU2016-01 2019-12 (ASC Subtopic825-10)Topic 740),Financial Instruments—Overall Recognition and Measurement of Financial Assets and Financial Liabilities.The amendments in thisSimplifying the Accounting for Income Taxes. This ASU require entities to measure all investments in equity securities at fair value with changes recognized through net income. This requirement does not apply to investments that qualifysimplifies accounting for the equity method of accounting, to those that result in consolidation of the investee, or for which the entity meets a practicability exception to fair value measurement. Additionally, the amendments eliminateincome taxes by removing certain disclosure requirements related to financial instruments measured at amortized cost and add disclosures relatedexceptions to the measurement categories of financial assetsgeneral principles and financial liabilities.amending existing guidance to improve consistent application. The Company is required to adopt thethis guidance in the first quarter of fiscal 2019. Early adoption is permitted for only certain portions of the ASU. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

In February 2016, the FASB issued ASU2016-02 (ASC Topic 842),Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as aright-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The Company is required to adopt the guidance in the first quarter of fiscal 2020.2022. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

In March 2016,2020, the FASB issued ASU2016-09 2020-04 (ASC Topic 718)848), Stock Compensation—ImprovementsReference Rate Reform. This ASU provides optional expedients and exceptions for applying U.S. generally accepted accounting principles to Employee Share-Based Payment Accounting. The amendments in this ASUcontracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax consequences, classification on the consolidated statement of cash flows and treatment of forfeitures. The Company is required and intends to adopt the guidance in the first quarter of fiscal 2018. Upon adoption, the Company anticipates that this ASU will result in an increase in deferred tax assets relating to net operating losses of approximately $0.5 billion, offset by an equivalent increase in the valuation allowance. This guidance, however, is not expected to have a material impact on the Company’s Consolidated balance sheets, statements of operations or cash flows.

In October 2016, the FASB issued ASU2016-16 (ASC Topic 740),Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the recognitionmet. Adoption of the income tax consequences for intra-entity transfersexpedients and exceptions is permitted upon issuance of assets other than inventory when the transfer occurs. Under current GAAP, current and deferred income taxes for intra-entity asset transfers are not recognized until the asset has been sold to an outside party. The Company is required to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted.this update through December 31, 2022. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

Recently Adopted Accounting Pronouncements
In January 2017,February 2016, the FASB issued ASU2017-01 2016-02 (ASC Topic 805)842),Business Combination: ClarifyingLeases, and subsequently issued certain interpretive clarifications on this new guidance which amend a number of aspects of lease accounting, including requiring a lessee to recognize an ROU asset and corresponding lease liability for operating leases and enhanced disclosures. As of June 29, 2019, adoption of the Definitionstandard resulted in the recognition of a Business.ROU assets and corresponding current and non-current lease liabilities of $115 million, $17 million and $57 million, respectively, on the Company’s Consolidated Balance Sheet, primarily relating to real estate operating leases. The amendments inadoption of this ASU changedid not have a material impact on the definitionCompany’s other consolidated financial statements. For information regarding the impact of ASC 842 adoption, see Summary of Significant Accounting Policies—Leases above and Note 6. Leases.
In February 2018, the FASB issued ASU 2018-02 (ASC Topic 220), Income Statement—Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU was issued following the enactment of the U.S. Tax Cuts and Jobs Act 2017 (“Tax Act”) and permits entities to elect a businessreclassification from accumulated other comprehensive income to assist with evaluating when a set of transferred assetsretained earnings for stranded tax effects resulting from the Tax Act. This ASU became effective and activities is a business. Thethe Company is required to adoptadopted the guidance in the first quarter of fiscalended October 4, 2019. Early adoption is permitted. The Company is inhas elected not to reclassify the process of assessing the impact of this ASU on its consolidated financial statements.

In May 2017, the FASB issued ASU2017-09 (ASC Topic 718),Stock Compensation: Scope of Modification Accounting. The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company is required to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In April 2015 and August 2015, the FASB issued ASU2015-03 (ASC Subtopic835-30),Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costsand ASU2015-15 (ASC Subtopic835-30),Presentation and Subsequent Measurement of Debt Issuance Costs Associated withLine-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, respectively.The ASUs require that debt issuance costs related to a recognized debt liability, with the exception of those related toline-of-credit arrangements, be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU2015-03 became effective and was adopted by the Company in the September 2016 quarter on a retrospective basis.stranded amounts. The adoption of this guidance resulted indid not have a reduction to Other assets, net and Long-term debt by $39 million, within the Consolidated Balance Sheet as of July 1, 2016. ASU2015-15 became effective and was adopted by the Company in the September 2016 quarter on a retrospective basis with no material impact on the Company’s consolidated financial statements and disclosures.

In September 2015,

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2.Balance Sheet Information
Available-for-sale Debt Securities
The following table summarizes, by major type, the FASB issued ASU2015-16 (ASC Topic 805),Business Combinations Simplifyingfair value and amortized cost of the Accounting for Measurement-Period Adjustments. The amendments in this update require that an acquirer recognize measurement period adjustments in the period in which the adjustments are determined. The income effects of such measurement period adjustments are to be recorded in the same period’s financial statements but calculated as if the accounting had been completedCompany’s investments as of the acquisition date. The impactJuly 3, 2020:
(Dollars in millions)Amortized
Cost
Unrealized
Gain/(Loss)
Fair
Value
Available-for-sale debt securities:   
Money market funds$495  $—  $495  
Time deposits and certificates of deposit56  —  56  
Other debt securities18  —  18  
Total$569  $—  $569  
Included in Cash and cash equivalents $549  
Included in Other current assets  
Included in Other assets, net18  
Total $569  
As of measurement period adjustments to earnings that relate to prior period financial statements are to be presented separately on the income statement or disclosed by line item. The amendments in this update are for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2015. This ASU became effective and was adopted by the Company in the September 2016 quarter on a prospective basis with no material impact onJuly 3, 2020, the Company’s consolidated financial statements and disclosures.

In November 2016, the FASB issued ASU2016-18 (ASC Topic 230),Statement of Cash Flows: Restricted Cash. The amendments in this update provide guidance on the classification and presentation of changesOther current assets included $2 million in restricted cash onequivalents held as collateral at banks for various performance obligations.

As of July 3, 2020, the statement of cash flows. The ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the total beginning and ending balancesCompany had 0 material available-for-sale debt securities that had been in a continuous unrealized loss position for the periods presented on the statement of cash flows. The amendments in this update are for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017.a period greater than 12 months. The Company elected to adopt this ASU in the December 2016 quarter on a retrospective basis with no material impact ondetermined 0 available-for-sale debt securities were other-than-temporarily impaired as of July 3, 2020.
The fair value and amortized cost of the Company’s consolidated financial statements and disclosures. The Company classifies restricted cash within Other current assets in the consolidated balance sheets.

In January 2017, the FASB issued ASU2017-04 (ASC Topic 350),Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment. The amendments in this ASU eliminate Step 2 from the goodwill impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in step 1. The Company elected to adopt this ASU in the March 2017 quarter on a prospective basis with no material impact on the Company’s consolidated financial statements and disclosures.

In August 2016, the FASB issued ASU2016-15 (ASC Topic 230), Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU are intended to clarify how certain cash receipts and cash payment are presented andinvestments classified in the statement of cash flows. The Company elected to adopt this ASU in the June 2017 quarter on a retrospective basis. The adoption of this guidance had no material impact on the Company’s consolidated financial statements and disclosures.

as available-for-sale debt securities at July 3, 2020 by remaining contractual maturity were as follows:

(Dollars in millions)Amortized
Cost
Fair
Value
Due in less than 1 year$551  $551  
Due in 1 to 5 years10  10  
Due in 6 to 10 years—  —  
Thereafter  
Total$569  $569  

2. Balance Sheet Information

Investments

The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of June 30, 2017:

                                                                        

(Dollars in millions)

    Amortized
Cost
   Unrealized
Gain/
(Loss)
   Fair
Value
 

Available-for-sale securities:

        

Money market funds

    $594   $—     $594 

Time deposits and certificates of deposit

     584    —      584 
    

 

 

   

 

 

   

 

 

 

Total

    $1,178   $—     $1,178 
    

 

 

   

 

 

   

 

 

 

Included in Cash and cash equivalents

        $1,174 

Included in Other current assets

         4 
        

 

 

 

Total

        $1,178 
        

 

 

 

28, 2019:

(Dollars in millions)Amortized
Cost
Unrealized
Gain/(Loss)
Fair
Value
Available-for-sale securities:   
Money market funds$417  $—  $417  
Time deposits and certificates of deposits133  —  133  
Other debt securities —   
Total$557  $—  $557  
Included in Cash and cash equivalents $548  
Included in Other current assets  
Included in Other assets, net  
Total $557  
As of June 30, 2017,28, 2019, the Company’s Other current assets included $4$2 million in restricted cash and investments held as collateral at banks for various performance obligations.

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As of June 30, 2017,28, 2019, the Company had no0 materialavailable-for-sale debt securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no0 available-for-sale debt securities were other-than-temporarily impaired as of June 30, 2017.

The fair value and amortized cost of the Company’s investments classified asavailable-for-sale at June 30, 2017 by remaining contractual maturity was as follows:

                                                

(Dollars in millions)

    Amortized
Cost
   Fair
Value
 

Due in less than 1 year

    $1,178   $1,178 

Due in 1 to 5 years

     —      —   

Due in 6 to 10 years

     —      —   

Thereafter

     —      —   
    

 

 

   

 

 

 

Total

    $1,178   $1,178 
    

 

 

   

 

 

 

Equity securities which do not have a contractual maturity date are not included in the above table.

28, 2019.

The Company reclassified demand deposits from certificates of deposit and money market funds to cash as of July 1, 2016 in the table below to conform to the current year’s presentation. This reclassification did not result in any change to the cash and cash equivalents balance as reported in the Consolidated Balance Sheets and Statements of Cash Flows for all periods presented.

The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of July 1, 2016:

                                                                        

(Dollars in millions)

    Amortized
Cost
   Unrealized
Gain/
(Loss)
   Fair
Value
 

Available-for-sale securities:

        

Money market funds

    $232   $—     $232 

Corporate bonds

     6    —      6 

Certificates of deposit

     5    —      5 
    

 

 

   

 

 

   

 

 

 

Total

    $243   $—     $243 
    

 

 

   

 

 

   

 

 

 

Included in Cash and cash equivalents

        $230 

Included in Short-term investments

         6 

Included in Other current assets

         7 
        

 

 

 

Total

        $243 
        

 

 

 

As of July 1, 2016, the Company’s Other current assets included $7 million in restricted cash and investments held as collateral at banks for various performance obligations.

As of July 1, 2016, the Company had noavailable-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined noavailable-for-sale securities were other-than-temporarily impaired as of July 1, 2016.

Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that reconciles to the corresponding amount in the Consolidated Statements of Cash Flows:

                                                                            

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
   June 27,
2014
 

Cash and cash equivalents

    $2,539   $1,125   $2,479   $2,634 

Restricted cash included in Other current assets

     4    7    7    4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents, and restricted cash shown in the Statements of Cash Flows

    $2,543   $1,132   $2,486   $2,638 
    

 

 

   

 

 

   

 

 

   

 

 

 

(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
June 30,
2017
Cash and cash equivalents$1,722  $2,220  $1,853  $2,539  
Restricted cash included in Other current assets 31    
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows$1,724  $2,251  $1,857  $2,543  
As of June 28, 2019, the Company’s Other current assets included $31 million in restricted cash and cash equivalents in an escrow account for the sale of certain properties and cash equivalents held as collateral at banks for various performance obligations
Accounts Receivable, net

The following table provides details of the accounts receivable, net balance sheet item:

                                                

(Dollars in millions)

    June 30,
2017
   July 1,
2016
 

Accounts receivable

    $1,204   $1,327 

Allowance for doubtful accounts

     (5   (9
    

 

 

   

 

 

 
    $1,199   $1,318 
    

 

 

   

 

 

 

(Dollars in millions)July 3,
2020
June 28,
2019
Accounts receivable$1,120  $993  
Allowances for doubtful accounts(5) (4) 
Account receivable, net$1,115  $989  

Activity in the allowanceallowances for doubtful accounts is as follows:
(Dollars in millions)Balance at Beginning of PeriodCharges (Credit) to Operations
Deductions (1)
Balance at End of Period
Fiscal year ended June 29, 2018$ —  (1) $ 
Fiscal year ended June 28, 2019$ —  —  $ 
Fiscal year ended July 3, 2020$  —  $ 

                                                                                                

(Dollars in millions)

    Balance at
Beginning of
Period
   Charges
(Credit) to
Operations
   Deductions (a)   Balance at
End of
Period
 

Fiscal year ended July 3, 2015

    $12    —      (3  $9 

Fiscal year ended July 1, 2016

    $9    1    (1  $9 

Fiscal year ended June 30, 2017

    $9    (4   —     $5 

(a)Uncollectible accounts written off, net of recoveries.

(1) Uncollectible accounts written off, net of recoveries.

In connection with an existing factoring agreement, the Company sells trade receivables to a third party for cash proceeds less a discount. During fiscal year 2020, the Company sold trade receivables without recourse for cash proceeds of $89 million, of which $10 million remained subject to servicing by the Company as of July 3, 2020. The discounts on trade receivables sold were not material for fiscal year 2020.
Inventories

The following table provides details of the inventory balance sheet item:

                                                

(Dollars in millions)

    June 30,
2017
   July 1,
2016
 

Raw materials and components

    $350   $307 

Work-in-process

     257    297 

Finished goods

     375    264 
    

 

 

   

 

 

 
    $982   $868 
    

 

 

   

 

 

 

(Dollars in millions)July 3,
2020
June 28,
2019
Raw materials and components$451  $336  
Work-in-process313  217  
Finished goods378  417  
Total inventories$1,142  $970  
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Property, Equipment and Leasehold Improvements, net

The components of property, equipment and leasehold improvements, net were as follows:
(Dollars in millions)
Useful Life in Years (1)
July 3,
2020
June 28,
2019
Land and land improvements $48  $48  
Equipment3 – 78,033  7,726  
Buildings and leasehold improvementsUp to 301,848  1,795  
Construction in progress 283  266  
 10,212  9,835  
Less: accumulated depreciation and amortization (8,083) (7,966) 
Property, equipment and leasehold improvements, net $2,129  $1,869  

                                                                        

(Dollars in millions)

    Useful Life
in Years
   June 30,
2017
   July 1,
2016
 

Land and land improvements

      $54   $69 

Equipment

     3 – 5    7,536    7,681 

Buildings and leasehold improvements

     Up to 30    1,899    1,900 

Construction in progress

       144    234 
      

 

 

   

 

 

 
       9,633    9,884 

Less: accumulated depreciation and amortization

       (7,758   (7,724
      

 

 

   

 

 

 
      $1,875   $2,160 
      

 

 

   

 

 

 

(1) Effective June 29, 2019, the Company changed its estimate of the useful lives of its manufacturing equipment from a range of three to five years to a range of three to seven years. Please refer to Note 1.Basis of Presentation and Summary of Significant Accounting Policies for more details.
Depreciation expense, which includes amortization of leasehold improvements, was $581$325 million, $641$464 million and $689$487 million for fiscal years 2017, 20162020, 2019 and 2015,2018, respectively. Interest on borrowings related to eligible capital expenditures is capitalized as part of the cost of the qualified assets and amortized over the estimated useful lives of the assets. During fiscal years 2017, 20162020, 2019 and 2015,2018, the Company capitalized interest of $4$6 million, $13$3 million and $15$1 million, respectively.

In fiscal years 2017 and 2016, the Company determined it would discontinue the use of certain manufacturing property and equipment in the short-term, and that certain other buildings, land and manufacturing property and equipment were permanently impaired. As a result,year 2020 the Company recognized chargesa charge of $72$3 million and $53for the accelerated depreciation of certain fixed assets, which was recorded to Cost of revenue in the Consolidated Statement of Operations. In fiscal year 2019, the Company did not have any material write-offs or accelerated depreciation of fixed assets. In fiscal year 2018, the Company recognized a charge of $7 million in fiscal years 2017 and 2016, respectively, from thewrite-off and accelerated depreciation of thesecertain fixed assets, included $35of which $1 million, impairment on land and buildings in fiscal year 2017, classified as held for sale under Other current assets in the Consolidated Balance Sheet. Please refer to Note 9.Fair Valuefor more details. In fiscal year 2017, total charges of $35 million, $35$4 million and $2 million was recorded to Cost of revenue, Product development and Marketing and administrative, respectively, in the Consolidated Statement of Operations. In fiscal year 2016, the entire amount was recorded in Cost of revenue in the Consolidated Statement of Operations. The Company did not record any material impairment in fiscal year 2015.

Accrued Expenses

The following table provides details of the accrued expenses balance sheet item:

                                                

(Dollars in millions)

  June 30,
2017
   July 1,
2016
 

Dividends payable

  $184   $—   

Other accrued expenses

   466    444 
  

 

 

   

 

 

 

Total

  $650   $444 
  

 

 

   

 

 

 

(Dollars in millions)July 3,
2020
June 28,
2019
Dividends payable$167  $170  
Other accrued expenses435  382  
Total$602  $552  

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Accumulated Other Comprehensive Income (Loss)Loss (“AOCI”AOCL”)

The components of AOCI,AOCL, net of tax, were as follows:

                                                                                                                        

(Dollars in millions)

  Unrealized
Gains (Losses)
on Cash Flow
Hedges
  Unrealized
Gains (Losses)
on Marketable
Securities(a)
   Unrealized
Gains (Losses)
on Post-
Retirement Plans
  Foreign
Currency
Translation
Adjustments
  Total 

Balance at July 3, 2015

  $1  $—     $(15 $(16 $(30

Other comprehensive income (loss) before reclassifications

   (4  —      8   (1  3 

Amounts reclassified from AOCI

   2   —      —     —     2 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss)

   (2  —      8   (1  5 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at July 1, 2016

   (1  —      (7  (17  (25

Other comprehensive income (loss) before reclassifications

   (3  —      —     5   2 

Amounts reclassified from AOCI

   4   —      2   —     6 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss)

   1   —      2   5   8 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at June 30, 2017

  $—    $—     $(5 $(12 $(17
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

(a)The cost of a security sold or the amount reclassified out of AOCI into earnings was determined using the specific identification method.

3.Acquisitions

Dot Hill Systems Corp.

On October 6, 2015, the Company acquired all of the outstanding shares of Dot Hill Systems Corp. (“Dot Hill”), a supplier of software

(Dollars in millions)Unrealized Gains/(Losses) on Cash Flow HedgesUnrealized Gains/(Losses) on Post-Retirement PlansForeign Currency Translation AdjustmentsTotal
Balance at June 29, 2018$—  $(4) $(12) $(16) 
Other comprehensive loss before reclassifications—  (16) (2) (18) 
Amounts reclassified from AOCL—  —  —  —  
Other comprehensive loss—  (16) (2) (18) 
Balance at June 28, 2019—  (20) (14) (34) 
Other comprehensive loss before reclassifications(27) (7) (2) (36) 
Amounts reclassified from AOCL  —   
Other comprehensive loss(24) (6) (2) (32) 
Balance at July 3, 2020$(24) $(26) $(16) $(66) 

3.Goodwill and hardware storage systems. Other Intangible Assets
Goodwill
The Company paid $9.75 per share, or $674 million, in cash for the acquisition. The acquisition of Dot Hill further expands the Company’sOEM-focused cloud storage systems business and advances the Company’s strategic efforts.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

                        

(Dollars in millions)

    Amount 

Cash and cash equivalents

    $40 

Accounts receivable, net

     48 

Inventories

     21 

Other current andnon-current assets

     7 

Property, plant and equipment

     10 

Intangible assets

     252 

Goodwill

     364 
    

 

 

 

Total assets

     742 
    

 

 

 

Accounts payable, accrued expenses and other

     (68
    

 

 

 

Total liabilities

     (68
    

 

 

 

Total

    $674 
    

 

 

 

The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized:

                                                

(Dollars in millions)

    Fair Value   Weighted-Average
Amortization Period
 

Existing technology

    $164    5.0 years 

Customer relationships

     71    7.0 years 

Trade names

     3    5.0 years 
    

 

 

   

Total amortizable intangible assets acquired

     238    5.5 years 

In-process research and development

     14   
    

 

 

   

Total acquired identifiable intangible assets

    $252   
    

 

 

   

The recognized goodwill, which is not deductible for income tax purposes, is primarily attributable to cost synergies expected to arise after the acquisition and the benefits the Company expects to derive from enhanced market opportunities.

The expenses related to the acquisition of Dot Hill for the fiscal year ended July 1, 2016, which are included within Marketing and administrative expense on the Consolidated Statement of Operations, are not significant.

The amounts of revenue and earnings of Dot Hill included in the Company’s Consolidated Statement of Operations from the acquisition date were not significant.

LSI’s Flash Business

On September 2, 2014, the Company completed the acquisition of certain assets and liabilities of LSI Corporation’s (“LSI”) Accelerated Solutions Division and Flash Components Division (collectively, the “Flash Business”) from Avago Technologies Limited for $450 million in cash. The transaction is intended to strengthen Seagate’s strategy to deliver a full suite of storage solutions, providing Seagate with established enterprise PCIe flash and SSD controller capabilities to deliver solutions for the growing flash storage market.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

                        

(Dollars in millions)

    Amount 

Inventories

    $37 

Property, plant and equipment

     22 

Intangible assets

     141 

Other assets

     6 

Goodwill

     337 
    

 

 

 

Total assets

     543 
    

 

 

 

Liabilities

     (93
    

 

 

 

Total liabilities

     (93
    

 

 

 

Total

    $450 
    

 

 

 

The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the weighted-average period over which intangible assets within each category will be amortized:

                                                

(Dollars in millions)

    Fair Value   Weighted-Average
Amortization Period
 

Existing technology

    $84    3.5 years 

Customer relationships

     40    3.8 years 

Trade names

     17    4.5 years 
    

 

 

   

Total acquired identifiable intangible assets

    $141    3.7 years 
    

 

 

   

The goodwill recognized is primarily attributable to the benefits the Company expects to derive from enhanced market opportunities, and is not deductible for income tax purposes.

The Company incurred approximately $1 million of expenses related to the acquisition of LSI’s Flash Business in fiscal year 2015, which are included within Marketing and administrative expense on the Consolidated Statement of Operations.

The amounts of revenue and earnings of LSI’s Flash Business included in the Company’s Consolidated Statement of Operations from the acquisition date through the end of fiscal year ended July 3, 2015 were not significant.

4.Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill arewas $1,237 million as follows:

                        

(Dollars in millions)

    Amount 

As of July 3, 2015

    $874 

Goodwill acquired

     364 

Goodwill disposed

     (1

Foreign currency translation effect

     —   
    

 

 

 

As of July 1, 2016

    $1,237 

Goodwill acquired

     —   

Goodwill disposed

     —   

Foreign currency translation effect

     1 
    

 

 

 

As of June 30, 2017

    $1,238 
    

 

 

 

of July 3, 2020 and June 28, 2019. There were 0 additions to, disposals of, impairments of or translation adjustments to goodwill in fiscal years 2020, 2019 and 2018.

Other Intangible Assets

Other intangible assets consist primarily of existing technology, customer relationships and trade names acquired in business combinations. During fiscal year 2017, thein-process research and development (“IPR&D”) of $14 million was completed and reclassified to existing technology. Intangibles are amortized on a straight-line basis over the respective estimated useful lives of the assets. Amortization is charged to Operating expenses in the Consolidated Statements of Operations.

In fiscal years 2017, 20162020, 2019 and 2015,2018, amortization expense for other intangible assets was $168$53 million, $174$77 million and $152$111 million, respectively.

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of July 3, 2020, is set forth in the following table:
(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful Life
Existing technology$199  $(179) $20  1.5 years
Customer relationships71  (48) 23  2.2 years
Trade name (2) —  0.2 years
Other intangible assets19  (4) 15  2.9 years
Total amortizable other intangible assets$291  $(233) $58  2.1 years

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Table of Contents
The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of June 30, 2017,28, 2019 is set forth in the following table:

                                                                                                

(Dollars in millions)

    Gross Carrying
Amount
   Accumulated
Amortization
   Net Carrying
Amount
   Weighted Average
Remaining Useful Life
 

Existing technology

    $280   $(112  $168    3.6 years 

Customer relationships

     487    (395   92    3.4 years 

Trade name

     27    (19   8    2.1 years 

Other intangible assets

     29    (16   13    2.6 years 
    

 

 

   

 

 

   

 

 

   

Total amortizable other intangible assets

    $823   $(542  $281    3.4 years 
    

 

 

   

 

 

   

 

 

   

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as

(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful Life
Existing technology$201  $(143) $58  1.9 years
Customer relationships71  (38) 33  3.3 years
Trade name (2)  1.2 years
Other intangible assets41  (22) 19  2.9 years
Total amortizable other intangible assets$316  $(205) $111  2.5 years
As of July 1, 2016 is set forth in the following table:

                                                                                                

(Dollars in millions)

    Gross Carrying
Amount
   Accumulated
Amortization
   Net Carrying
Amount
   Weighted Average
Remaining Useful Life
 

Existing technology

    $297   $(79  $218    4.1 years 

Customer relationships

     510    (328   182    3.2 years 

Trade name

     29    (14   15    2.6 years 

Other intangible assets

     29    (10   19    3.2 years 
    

 

 

   

 

 

   

 

 

   

Total amortizable other intangible assets

    $865   $(431  $434    3.6 years 
    

 

 

   

 

 

   

 

 

   

The carrying value of IPR&D not subject to amortization was $14 million on July 1, 2016.

As of June 30, 2017,3, 2020, expected amortization expense for other intangible assets for each of the next five years and thereafter is as follows:

                        

(Dollars in millions)

    Amount 

2018

    $108 

2019

     71 

2020

     53 

2021

     25 

2022

     17 

Thereafter

     7 
    

 

 

 
    $281 
    

 

 

 

5.Restructuring and Exit Costs

During fiscal years 2017, 2016 and 2015, the Company recorded restructuring charges of $178 million, $175 million and $32 million, respectively, comprised primarily of charges related to workforce reduction costs and facility exit costs associated with restructuring of its workforce during each fiscal year.

(Dollars in millions)Amount
2021$28  
202220  
202310  
2024—  
2025—  
Thereafter—  
Total$58  
4.Debt
Credit Agreement
The Company’s significant restructuring plans are described below. All restructuring charges are reported in Restructuring and other, net on the Consolidated Statements of Operations.

March 2017 Plan—On March 9, 2017, the Company committed to an additional restructuring plan (the “March 2017 Plan”) in connection with the continued consolidation of its global footprint. The Company closed its design center in Korea, resulted in the reduction of the Company’s headcount by approximately 300 employees. The March 2017 Plan was largely completed by the end of fiscal year 2017. In addition, the Company committed to sell its land and building in Korea as part of the plan. This land and building met the criteria to be classified as assets held for sale and were included in Other current assets on the Consolidated Balance Sheet as of June 30, 2017. The Company recorded an impairment charge of $26 million as part of the fair value measurement to reduce the carrying amount of its land and building to its estimated fair value less costs to sell, which is included in Operating expenses on the Consolidated Statements of Operations.

July 2016 Plan—On July 11, 2016, the Company committed to a restructuring plan (the “July 2016 Plan”) for continued consolidation of its global footprint across Asia, EMEA and the Americas. The July 2016 Plan included reducing worldwide headcount by approximately 6,500 employees. The July 2016 Plan, was largely completed by the end of fiscal year 2017.

June 2016 Plan—On June 27, 2016, the Company committed to a restructuring plan (the “June 2016 Plan”) as part of the Company’s efforts to reduce its cost structure to align with the then current macroeconomic conditions. The June 2016 Plan included reducing worldwide headcount by approximately 1,600 employees. The June 2016 Plan was largely completed by the fiscal quarter ended December 30, 2016 with no material future costs expected to be incurred.

The following table summarizes the Company’s restructuring activities under all of the Company’s active restructuring plans for fiscal years 2017, 2016 and 2015:

                                                                                                            
  March 2017 Plan  July 2016 Plan  June 2016 Plan  Other Plans    

(Dollars in millions)

 Workforce
Reduction
Costs
  Facilities
and Other
Exit Costs
  Workforce
Reduction
Costs
  Facilities
and Other
Exit Costs
  Workforce
Reduction
Costs
  Facilities
and Other
Exit Costs
  Workforce
Reduction
Costs
  Facilities
and Other
Exit Costs
  Total 

All Restructuring Activities

         

Accrual balances at June 27, 2014

 $—    $—    $—    $—    $—    $—    $2  $12  $14 

Restructuring charges

  —     —     —     —     —     —     23   7   30 

Cash payments

  —     —     —     —     —     —     (17  (10  (27

Adjustments

  —     —     —     —     —     —     3   (1  2 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accrual balances at July 3, 2015

  —     —     —     —     —     —     11   8   19 

Restructuring charges

  —     —     —     —     69   —     82   24   175 

Cash payments

  —     —     —     —     (24  —     (89  (18  (131

Adjustments

  —     —     —     —     —     —     1   (1  —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accrual balances at July 1, 2016

  —     —     —     —     45   —     5   13   63 

Restructuring charges

  28   3   72   20   —     1   31   12   167 

Cash payments

  (29  (3  (57  (18  (41  (1  (33  (16  (198

Adjustments

  1   —     7   —     (1  —     —     4   11 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accrual balances at June 30, 2017

 $—    $—    $22  $2  $3  $—    $3  $13  $43 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total costs incurred to date as of June 30, 2017

 $29  $3  $79  $20  $68  $1  $158  $49  $407 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total expected costs to be incurred as of June 30, 2017

 $1  $3  $1  $13  $—    $—    $—    $3  $21 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Of the accrued restructuring balance of $43 million at June 30, 2017, $38 million is included in Accrued expenses and $5 million is included in Othernon-current liabilities in the Company’s Consolidated Balance Sheet. Of the accrued restructuring balance of approximately $63 million at July 1, 2016, $61 million is included in Accrued expenses and $2 million is included in Othernon-current liabilities in the Company’s Consolidated Balance Sheet.

6.Debt

Short-Term Borrowings

The credit agreement entered into by the Company and its subsidiary, Seagate HDD Cayman, entered into a credit agreement (the “Credit Agreement”) on January 18, 2011 and subsequentlyFebruary 20, 2019, which was most recently amended (the “Revolvingon September 16, 2019. The Credit Agreement provides an up to $1.5 billion senior unsecured revolving credit facility (“Revolving Credit Facility”) provides the Company withand a $700term loan facility in an aggregate principal amount of $500 million senior secured revolving credit facility.(“Term Loan”). The term of the Revolving Credit Facility is through January 15, 2020, provided that ifhas a final maturity of February 20, 2024 and the Company does not have Investment Grade Ratings (as defined in the Revolving Credit Facility) on August 15, 2018, then theTerm Loan has a final maturity date will be Augustof September 16, 2018 unless certain extension conditions have been satisfied.2025. The loans made under the Revolving Credit Facility and Term Loan will bear interest at a rate of LIBORthe London Interbank Offered Rate (“LIBOR”) plus a variable margin for each facility that will be determined based on the corporate credit rating of the Company. The CompanySTX and certain of its material subsidiaries fully and unconditionally guarantee both the Revolving Credit Facility.Facility and Term Loan. The Revolving Credit Facility also allows such facility to increase by an additional $100 million, provided that (i) there has been, and will be after giving effect to such increase, no default, (ii) the increase is at least $25 million and (iii) the existing commitments under the facility receive 0.50% most favored nation protection. An aggregate amount of up to $75 million of the Revolving Credit Facility is available for cash borrowings, subject to compliance with certain covenants and other customary conditions to borrowing, and for the issuance of letters of credit, and an aggregate amount of up to asub-limit$50 million of $75 million.

such facility is also available for swing line loans.

On September 17, 2019, Seagate HDD Cayman borrowed the $500 million principal amount under the Term Loan and the proceeds were used to repurchase a portion of its outstanding senior notes. The RevolvingTerm Loan is repayable in quarterly installments of 1.25% of the original principal amount beginning on December 31, 2020, with the remaining balance payable upon maturity.
The Credit Facility, as amended,Agreement includes three financial covenants: (1) minimum cash, cash equivalents and marketable securities;interest coverage ratio, (2) a fixed charge coverage ratio;total leverage ratio and (3) a net leverage ratio. On April 27, 2016, the Revolving Credit Agreement was amended in order to increase the allowable net leverage ratio to allow for higher net leverage levels.minimum liquidity amount. The Company was in compliance with the modified covenants as of June 30, 2017July 3, 2020 and expects to be in compliance for the next 12 months.

As of June 30, 2017, noJuly 3, 2020, 0 borrowings had beenwere drawn orand 0 letters of credit or swing line loans have been utilized under the Revolving Credit Facility.

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Table of Contents
Long-Term Debt

$800 million Aggregate Principal Amount of 3.75% Senior Notes due November 2018 (the “2018 Notes”).On November 5, 2013, Seagate HDD Cayman, issued $800 million in aggregate principal amount of3.75% Senior Notes. The obligations under the 2018 Notes which maturewere fully and unconditionally guaranteed on November 15, 2018, in a private placement.senior unsecured basis by STX. The interest on the Notes iswas payable semi-annually on May 15 and November 15 of each year. The Notes are redeemable at the option of Seagate HDD Cayman in whole or in part, on not less than 30, nor more than 60 days’ notice, at a “make-whole” premium redemption price. The “make-whole” premium redemption price will be equal to the greater of (1) 100% of the principal amount of the notes being redeemed, or (2) the sum of the present values of the remaining schedule payments of principal and interest on the Notes being redeemed, discounted at the redemption date on a semi-annual basis at a rate equal to the sum of the applicable Treasury rate plus 50 basis points. Accrued and unpaid interest, if any will be paid to, but excluding, the redemption date. The Notes are fully and unconditionally guaranteed by the Company on a senior unsecured basis. During fiscal year 2017, the Company repurchased $902018, $211 million aggregate principal amount of the 2018 Notes were repurchased for cash at a premium to their principal amount, plus accrued and unpaid interest. TheDuring fiscal year 2018, the Company recorded a loss on the repurchase of approximately $3$4 million which is included in Other, net in the Company’s Consolidated Statements of Operations.

$600 millionAggregate Principal Amount of6.875%Senior On November 15, 2018, the 2018 Notes due May 2020 (the “2020 Notes”). OnMay 13, 2010,matured and the Company’s subsidiary, Seagate HDD Cayman, completed the sale of $600 million aggregateentire outstanding principal amount of the 2020 Notes, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The obligations under the 2020 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. The interest on the 2020 Notes is payable semi-annually on May 1 and November 1 of each year. The 2020 Notes were redeemable any time prior to May 1, 2015 at the option of the Company, in whole or in part, at a redemption price of 100% of the principal amount plus an “applicable premium” and accrued and unpaid interest, if any, to the redemption date. The “applicable premium”$499 million was equal to the greater of (1) 1% of the principal amount of the 2020 Notes, or (2) the excess, if any, of (a) the present value of the redemption price on May 1, 2015 plus interest payments due through May 1, 2015, discounted at the applicable Treasury rate as of the redemption date plus 50 basis points; over (b) the principal amount of such note. The 2020 Notes are redeemable at any time on or after May 1, 2015 at various prices expressed as a percentage of principal amount, as set forth in the indentures,repaid, plus accrued and unpaid interest, if any, to the redemption date. The issuer under the 2020 Notes is Seagate HDD Cayman, and the obligations under the 2020 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During fiscal year 2015, the 2020 Notes were fully extinguished through repurchase and redemption for cash at a premium to their principal amount, plus accrued and unpaid interest. The Company recorded a loss on the repurchase of approximately $26 million, which is included in Other, net in the Company’s Consolidated Statement of Operations.

$600 millionAggregate Principal Amount of7.00%Senior Notes due November 2021 (the2021 Notes).OnMay 18, 2011, the Company’s subsidiary, Seagate HDD Cayman, completed the sale of $600 million aggregate principal amount of the 2021 Notes, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The obligations under the 2021 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. The interest on the 2021 Notes is payable semi-annually on January 1 and July 1 of each year. The 2021 Notes are redeemable any time prior to May 1, 2016 at the option of the Company, in whole or in part, at a redemption price of 100% of the principal amount plus an “applicable premium” and accrued and unpaid interest, if any, to the redemption date. The “applicable premium” will be equal to the greater of (1) 1% of the principal amount of the 2021 Notes, or (2) the excess, if any, of (a) the present value of the redemption price on May 1, 2016 plus interest payments due through May 1, 2016, discounted at the applicable Treasury rate as of the redemption date plus 50 basis points; over (b) the principal amount of such note. The 2021 Notes are redeemable at any time on or after May 1, 2016 at various prices expressed as a percentage of principal amount, as set forth in the indentures, plus accrued and unpaid interest, if any, to the redemption date. In addition, any time before May 1, 2014, the Company may redeem up to 35% of the principal amount with the net cash proceeds from permitted sales of the Company’s stock at a redemption price of 107% of the principal amount plus accrued interest to the redemption date. The issuer under the 2021 Notes is Seagate HDD Cayman and the obligations under the 2021 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During fiscal years 2016 and 2015, the Company repurchased $1 million and $93 million, respectively, aggregate principal amount of its 2021 Notes for cash at a premium to their principal amount, plus accrued and unpaid interest. For fiscal year 2016, the loss recorded on the repurchase was immaterial and for fiscal year 2015, the Company recorded a loss on the repurchase of approximately $13 million, which were included in Other, net in the Company’s Consolidated Statement of Operations. During fiscal year 2017, the 2021 Notes were fully extinguished through redemption for cash at a premium to their principal amount of $158 million, plus accrued and unpaid interest. For fiscal year 2017, the Company recorded a loss on the redemption of approximately $5 million, which is included in Other, net in the Company’s Consolidated Statement of Operations.

$750 million Aggregate Principal Amount of4.25% Senior Notes due March 2022 (the “2022 Notes”).On February 3, 2017, Seagate HDD Cayman issued, in a private placement, $750 million in aggregate principal amount of 4.25% Senior Notes which will mature on March 1, 2022. The obligations under the 2022 Notes are fully and unconditionally guaranteed on a senior unsecured basis by STX. The interest on the 2022 Notes is payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2017. At any time before February 1, 2022, Seagate HDD Cayman may redeem some or all of the 2022 Notes at a “make whole” redemption price, plus accrued and unpaid interest, if any. The “make-whole”‘‘make-whole’’ redemption price will be equal to (1)100% of the principal amount of the 2022 Notes redeemed, plus (2) the excess, if any, of (a) the sum of the present values of the remaining scheduled payments of principal and interest on the 2022 Notes being redeemed, discounted to the redemption date on a semi-annual basis at a rate equal to the sum of the Treasury Rate (as defined in the relevant Indenture) plus 40 basis points, minus accrued and unpaid interest, if any, on the 2022 Notes being redeemed to, but excluding, the redemption date over (b) the principal amount of the 2022 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2022 Notes being redeemed to, but excluding, the redemption date. The issuer underDuring fiscal year 2020, $521 million aggregate principal amount of the 2022 Notes were repurchased for cash at a premium to their principal amount, plus accrued and unpaid interest, $250 million and $248 million principal amount of which were repurchased pursuant to cash tender offers for certain senior notes on September 18, 2019and June 18, 2020 (the “Tender Offers”), respectively. The Company recorded a loss of $29 million on repurchases during fiscal year 2020 which is Seagate HDD Cayman, andincluded in Other, net in the obligations under the 2022 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

Company’s Consolidated Statements of Operations.

$1 billionAggregate Principal Amount of4.75% Senior Notes due June 2023 (the “2023 Notes”).OnMayOnMay 22, 2013, Seagate HDD Cayman issued, in a private placement, $1 billion in aggregate principal amount of 4.75% Senior Notes, which will mature on June 1, 2023, in a private placement.2023. The obligations under the 2023 Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company.STX. The interest on the 2023 Notes is payable semi-annually on June 1 and December 1 of each year. TheSeagate HDD Cayman may redeem the 2023 Notes are redeemable at the option of the Company in whole or in part, on not less than 30, nor more than 60 days’ notice, at a “make-whole” premium redemption price. The “make-whole” redemption price will be equal to the greater of (1) 100% of the principal amount of the notes2023 Notes being redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the 2023 Notes being redeemed, discounted at the redemption date on a semi-annual basis at a rate equal to the sum of the applicable Treasury rateRate plus 50 basis points. Accrued and unpaid interest, if any, will be paid to, but excluding, the redemption date. During fiscal year 2016,2020, $395 million aggregate principal amount of the Company2023 Notes were repurchased for cash at a premium to their principal amount, plus accrued and unpaid interest, $200 million and $178 million principal amount of which was repurchased pursuant to the Tender Offers on September 18, 2019 and June 18, 2020, respectively. During fiscal year 2019, $10 million aggregate principal amount of its 2023 Notes for cash at a discount to their principal amount, plus accrued and unpaid interest. The gain recorded on the repurchase was immaterial, which is included in Other, net in the Company’s Consolidated Statement of Operations. During fiscal year 2017, the Companywere repurchased $39 million aggregate principal amount of its 2023 Notes for cash at a premium to their principal amount, plus accrued and unpaid interest. The Company recorded a loss recorded on the repurchase was immaterial,of $20 millionfor fiscal year 2020, which is included in Other, net in the Company’s Consolidated Statement of Operations.

The loss recorded on the repurchases in fiscal year 2019 was immaterial.

$500 million Aggregate Principal Amount of 4.875% Senior Notes due March 2024 (the “2024 Notes”).On February 3, 2017, Seagate HDD Cayman issued, in a private placement, $500 million in aggregate principal amount of 4.875% Senior Notes which will mature on March 1, 2024. The obligations under the 2024 Notes are fully and unconditionally guaranteed, on a senior unsecured basis by STX. The interest on the 2024 Notes is payable semi-annually on March 1 and September 1 of each year, commencing on September 1, 2017. At any time before January 1, 2024, Seagate HDD Cayman may redeem some or all of the 2024 Notes at a “make whole”“make-whole” redemption price, plus accrued and unpaid interest, if any. The “make-whole”‘‘make-whole’’ redemption price will be equal to (1) 100% of the principal amount of the 2024 Notes redeemed, plus (2) the excess, if any, of (a) the sum of the present values of the remaining scheduled payments of principal and interest on the 2024 Notes being redeemed, discounted to the redemption date on a semi-annual basis at a rate equal to the sum of the Treasury Rate plus 45 basis points, minus accrued and unpaid interest, if any, on the 2024 Notes being redeemed to, but excluding, the redemption date over (b) the principal amount of the 2024 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2024 Notes being redeemed to, but excluding, the redemption date. The issuer under the 2024 Notes is Seagate HDD Cayman, and the obligations under the 2024 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

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$1 billion Aggregate principalPrincipal amount of 4.75% Senior Notes due January 2025 (the “2025 Notes”). On May 28, 2014, Seagate HDD Cayman issued, in a private placement, $1 billion in aggregate principal amount of 4.75% Senior Notes due 2025, which will mature on January 1, 2025. The obligations under the 2025 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The interest on the 2025 Notes will be payable in cash semiannually on January 1 and July 1 of each year, commencing on January 1, 2015. At any time, upon not less than 30 nor more than 60 days’ notice, Seagate HDD may redeem some or all of the 2025 Notes at a “make-whole”‘‘make-whole’’ redemption price. The “make-whole”‘‘make-whole’’ redemption price will be equal to the greater of (1) 100% of the principal amount of the 2025 Notes redeemed, and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the 2025 Notes being redeemed, discounted to the redemption date on a semi-annual basis at a rate equal to the sum of the Treasury Rate plus 50 basis points. Accrued and unpaid interest, if any, will be paid to, but excluding, the redemption date. TheOn September 18, 2019, $170 million principal amount of the 2025 Notes are fully and unconditionally guaranteed bywas repurchased at a premium pursuant to the Company on a senior unsecured basis.Tender Offers. During fiscal year 2016, the Company repurchased $52019, $55 million aggregate principal amount of itsthe 2025 Notes were repurchased for cash at a discount to their principal amount, plus accrued and unpaid interest. The gain recorded onFor fiscal years 2020 and 2019, the repurchase was immaterial, which is included in Other, net in the Company’s Consolidated Statement of Operations. During fiscal year 2017, the Company repurchased $20 million aggregate principal amount of the 2025 Notes for cash at a discount to their principal amount, plus accrued and unpaid interest. The Company recorded a loss of $8 million and a gain on the repurchase of approximately $1 million on the repurchases respectively, which is included in Other, net in the Company’s Consolidated Statements of Operations.

On June 18, 2020, Seagate HDD Cayman completed an exchange offer in which the principal amount of $271 million of the 2025 Notes was exchanged for the principal amount of $297 million of the 2029 Notes (as defined below). The exchange was accounted for as a debt modification with no gain or loss recognized.

$700 million Aggregate Principal Amount of 4.875% Senior Notes due June, 2027 (the “2027 Notes”). On May 14, 2015, Seagate HDD Cayman issued, in a private placement, $700 million in aggregate principal amount of 4.875% Senior Notes, which will mature on June 1, 2027. The obligations under the 2027 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The interest on the 2027 Notes is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2015. At any time before March 1, 2027, Seagate HDD Cayman may redeem some or all of the 2027 Notes at a “make-whole” redemption price. The “make-whole”‘‘make-whole’’ redemption price will be equal to (1) 100% of the principal amount of the 2027 Notes redeemed, plus (2) the excess, if any of (x) the sum of the present values of the remaining scheduled payments of principal and interest on the 2027 Notes being redeemed, discounted to the redemption date on a semi-annual basis at a rate equal to the sum of the Treasury Rate plus 40 basis points, minus accrued and unpaid interest, if any, on the 2027 Notes being redeemed to, but excluding, the redemption date over (y) the principal amount of the 2027 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2027 Notes being redeemed to, but excluding, the redemption date. At any time on or after March 1, 2027, the CompanySeagate HDD Cayman may redeem some or all of the 2027 Notes at a redemption price equal to 100% of the principal amount of the 2027 Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The issuer under the 2027 Notes is Seagate HDD Cayman, and the obligations under the 2027 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During fiscal year 2017, the Company repurchased $42019, $6 million aggregate principal amount of the 2027 Notes were repurchased for cash at a discount to their principal amount, plus accrued and unpaid interest. TheFor fiscal year 2019, the Company recorded an immaterial gain on the repurchase, which is included in Other, net in the Company’s Consolidated Statements of Operations.

On June 18, 2020, Seagate HDD Cayman completed an exchange offer in which the principal amount of $185 million of the 2027 Notes was exchanged for the principal amount of $203 million of the 2029 Notes (as defined below). The exchange was accounted for as a debt modification with no gain or loss recognized.

$500 million Aggregate Principal Amount of 4.091% Senior Notes due June, 2029 (the “2029 Notes”). On June 18, 2020, Seagate HDD Cayman issued, in a private placement, $500 million in aggregate principal amount of4.091% Senior Notes in connection with Seagate HDD Cayman’s exchange offers to certain eligible holders of Seagate HDD Cayman’s outstanding 2025 Notes and 2027 Notes (the “Exchange Offers”). The obligations under the 2029 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The 2029 Notes will mature on June 1, 2029. Interest on the 2029 Notes will be payable in cash semiannually on June 1 and December 1 of each year, commencing on December 1, 2020. At any time before March 1, 2029, Seagate HDD Cayman may redeem any or all of the 2029 Notes at a “make-whole” redemption price. The “make-whole” redemption price will be equal to (1) 100% of the principal amount of the 2029 Notes redeemed, plus (2) the excess, if any, of (x) the sum of the present values of the remaining scheduled payments of principal and interest on the 2029 Notes being redeemed (as if the 2029 Notes matured on the Notes Par Call Date, as defined below), discounted to the redemption date on a semi-annual basis (assuming a 360-day year of twelve 30-day months) at a rate equal to the sum of the Treasury Rate plus 50 basis points, minus accrued and unpaid interest, if any, on the 2029 Notes being redeemed to, but excluding, the redemption date over (y) the principal amount of the 2029 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2029 Notes being redeemed to, but excluding, the redemption date. At any time on or after March 1, 2029 (the “Notes Par Call Date”), Seagate HDD Cayman may redeem some or all of the 2029 Notes at a redemption price equal to 100% of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date.
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$500 million Aggregate Principal Amount of 4.125% Senior Notes due January, 2031 (the “2031 Notes”). On June 10, 2020, Seagate HDD Cayman issued, in a private placement,$500 million in aggregate principal amount of 4.125% Senior Notes, which will mature on January 15, 2031. The obligations under the 2031 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. Interest on the Notes will be payable in cash semiannually on January 15 and July 15 of each year, commencing on January 15, 2021. At any time before October 15, 2030, Seagate HDD Cayman may redeem any or all of the Notes at a “make-whole” redemption price. The “make-whole” redemption price will be equal to (1) 100% of the principal amount of the 2031 Notes redeemed, plus (2) the excess, if any, of (x) the sum of the present values of the remaining scheduled payments of principal and interest on the 2031 Notes being redeemed (as if the 2031 Notes matured on the 2031 Notes Par Call Date, as defined below), discounted to the redemption date on a semi-annual basis (assuming a 360-day year of twelve 30-day months) at a rate equal to the sum of the Treasury Rate plus 50 basis points, minus accrued and unpaid interest, if any, on the 2031 Notes being redeemed to, but excluding, the redemption date over (y) the principal amount of the 2031 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2031 Notes being redeemed to, but excluding, the redemption date. At any time on or after October 15, 2030 (the “2031 Notes Par Call Date”), Seagate HDD Cayman may redeem some or all of the 2031 Notes at a redemption price equal to 100% of the principal amount of the 2031 Notes redeemed, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date.
$500 million Aggregate Principal Amount of 5.75% Senior Notes due December, 2034 (the “2034 Notes”). On December 2, 2014, Seagate HDD Cayman issued, in a private placement, $500 million in aggregate principal amount of 5.75% Senior Notes, which will mature on December 1, 2034. The obligations under the 2034 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing on June 1, 2015. At any time before June 1, 2034, Seagate HDD Cayman may redeem some or all of the 2034 Notes at a “make-whole” redemption price. The “make-whole”make-whole redemption price will be equal to (1) 100% of the principal amount of the 2034 Notes redeemed, plus (2) the excess, if any of (x) the sum of the present values of the remaining scheduled payments of principal and interest on the 2034 Notes being redeemed, discounted to the redemption date on a semi-annual basis at a rate equal to the sum of the Treasury Rate plus 50 basis points, minus accrued and unpaid interest, if any, on the 2034 Notes being redeemed to, but excluding, the redemption date over (y) the principal amount of the 2034 Notes being redeemed, plus (3) accrued and unpaid interest, if any, on the 2034 Notes being redeemed to, but excluding, the redemption date. At any time on or after June 1, 2034, the CompanySeagate HDD Cayman may redeem some or all of the 2034 Notes at a redemption price equal to 100% of the principal amount of the 2034 Notes redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The issuer under the 2034 Notes is Seagate HDD Cayman, and the obligations under the 2034 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During fiscal year 2016, the Company repurchased $10 million aggregate principal amount of its 2034 Notes for cash at a discount to their principal amount, plus accrued and unpaid interest. The Company recorded a gain on the repurchase of approximately $3 million, which is included in Other, net in the Company’s Consolidated Statement of Operations.

At June 30, 2017,July 3, 2020, future principal payments on long-term debt were as follows (in millions):

                        

Fiscal Year

    Amount 

2018

    $—   

2019

     710 

2020

     —   

2021

     —   

2022

     750 

Thereafter

     3,613 
    

 

 

 

Total

    $5,073 
    

 

 

 

7.Income Taxes

The provision for (benefit from) income taxes consisted of the following:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Current income tax expense (benefit):

        

U.S. Federal

    $—     $1   $—   

U.S. State

     1    2    4 

Non-U.S.

     39    25    222 
    

 

 

   

 

 

   

 

 

 

Total Current

     40    28    226 
    

 

 

   

 

 

   

 

 

 

Deferred income tax expense (benefit):

        

U.S. Federal

     (5   —      (6

U.S. State

     —      —      (2

Non-U.S.

     8    (2   10 
    

 

 

   

 

 

   

 

 

 

Total Deferred

     3    (2   2 
    

 

 

   

 

 

   

 

 

 

Provision for (benefit from) income taxes

    $43   $26   $228 
    

 

 

   

 

 

   

 

 

 

Fiscal YearAmount
2021$19  
2022254  
2023571  
2024525  
2025504  
Thereafter2,376  
Total$4,249  
5.Income (loss)Taxes
Income before income taxes consisted of the following:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

U.S.

    $(22  $—     $101 

Non-U.S.

     837    274    1,869 
    

 

 

   

 

 

   

 

 

 
    $815   $274   $1,970 
    

 

 

   

 

 

   

 

 

 

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
U.S. $121  $275  $(29) 
Non-U.S.911  1,097  1,447  
$1,032  $1,372  $1,418  
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The Company recorded no excess tax benefits associated with stock option deductions in fiscal year 2017. The Company recorded $0.6 million and $2.0 million of excess tax benefits associated with stock option deductions in fiscal years 2016 and 2015, respectively.

Deferredprovision (benefit) for income taxes reflectconsisted of the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. following:

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Current income tax expense:   
U.S. Federal$—  $—  $—  
U.S. State—  —   
Non-U.S. 36  45  38  
Total Current36  45  43  
Deferred income tax (benefit) expense:   
U.S. Federal(16) (690) 201  
U.S. State(2) 12  —  
Non-U.S. 10  (7) (8) 
Total Deferred(8) (685) 193  
Provision (benefit) for income taxes$28  $(640) $236  
The significant components of the Company’s deferred tax assets and liabilities were as follows:

                                                
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
 

Deferred tax assets

      

Accrued warranty

    $85   $74 

Inventory carrying value adjustments

     43    32 

Receivable allowance

     19    11 

Accrued compensation and benefits

     99    85 

Depreciation

     109    173 

Restructuring accruals

     (1   14 

Other accruals and deferred items

     51    50 

Net operating losses and tax credit carry-forwards

     1,224    1,252 

Other assets

     11    2 
    

 

 

   

 

 

 

Total deferred tax assets

     1,640    1,693 

Valuation allowance

     (966   (984
    

 

 

   

 

 

 

Net deferred tax assets

     674    709 
    

 

 

   

 

 

 

Deferred tax liabilities

      

Unremitted earnings of certainnon-U.S. entities

     (7   (11

Acquisition-related items

     (65   (92
    

 

 

   

 

 

 

Total deferred tax liabilities

     (72   (103
    

 

 

   

 

 

 

Deferred taxes on intra-entity transactions

     2    —   
    

 

 

   

 

 

 

Total net deferred tax assets

    $604   $606 
    

 

 

   

 

 

 

As Reported on the Balance Sheet

      

Deferred income taxes

    $609   $616 

Othernon-current liabilities

     (5   (10
    

 

 

   

 

 

 

Total net deferred income taxes

    $604   $606 
    

 

 

   

 

 

 

The deferred tax asset valuation allowance decreased by $18 million in fiscal year 2017 and increased by $55 million and $41 million in fiscal years 2016 and 2015, respectively.

follows (in millions):

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
Deferred tax assets  
Accrued warranty$35  $46  
Inventory carrying value adjustments30  34  
Receivable allowances11  10  
Accrued compensation and benefits55  53  
Depreciation59  89  
Restructuring accruals  
Other accruals and deferred items22  15  
Net operating losses735  743  
Tax credit carryforwards603  582  
Other assets  
Gross: Deferred tax assets1,566  1,583  
Less: Valuation allowance(438) (460) 
Net: Deferred tax assets1,128  1,123  
Deferred tax liabilities  
Unremitted earnings of certain non-U.S. entities(16) (16) 
Acquisition-related items(8) (13) 
Other liabilities(5) —  
Net: Deferred tax liabilities(29) (29) 
Total net deferred tax assets$1,099  $1,094  
At June 30, 2017,July 3, 2020, the Company recorded $602 million$1.1 billion of net deferred tax assets, excluding $2 million of deferred taxes on intra-entity transactions.assets. The realization of most of these deferred tax assets is primarily dependent on the Company’s ability to generate sufficient U.S. and certainnon-U.S. non-Irish taxable income in future periods. Although realization is not assured, the Company’s management believes it is more likely than not that these deferred tax assets will be realized. The amount of deferred tax assets considered realizable, however, may increase or decrease in subsequent periods when the Company reevaluatesre-evaluates the underlying basis for its estimates of future U.S. and certainnon-U.S. non-Irish taxable income.

The deferred tax asset valuation allowance decreased by $22 million in fiscal year 2020 primarily driven by the Company’s profitability outlook in the U.S.
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At June 30, 2017,July 3, 2020, the Company had U.S. federal, U.S. state andnon-U.S. tax net operating loss carryforwards of approximately $3.4$3.0 billion, $2.0$1.7 billion and $173$113 million, respectively, which will expire at various dates beginning in fiscal year 2018,2021, if not utilized. Net operating loss carryforwards of approximately $68$6 million are scheduled to expire in fiscal year 2018.2021. At June 30, 2017,July 3, 2020, the Company had U.S. federal and state tax credit carryforwards of $444$554 million and $105$148 million, respectively, which will expire at various dates beginning in fiscal year 2018,2021 if not utilized.

As of June 30, 2017,July 3, 2020, approximately $560$371 million and $101$114 million of the Company’s total U.S. net operating loss and tax credit carryforwards, respectively, are subject to annual limitations ranging from $1 million to $45 million pursuant to U.S. tax law.

For purposes of the reconciliation between the provision (benefit) for (benefit from) income taxes at the statutory rate and the effective tax rate, the Irish statutory rate of 25% was applied as follows:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Provision at statutory rate

    $204   $69   $493 

Net U.S. federal and state income taxes

     1    3    7 

Permanent differences

     19    10    2 

Valuation allowance

     (11   (1   15 

Non-U.S. losses with no tax benefits

     17    1    2 

Non-U.S. earnings taxed at other than statutory rate

     (186   (37   (463

Audit assessment

     —      —      173 

Reversal of previously recorded taxes

     (4   (19   (5

Other individually immaterial items

     3    —      4 
    

 

 

   

 

 

   

 

 

 

Provision for (benefit from) income taxes

    $43   $26   $228 
    

 

 

   

 

 

   

 

 

 

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Provision at statutory rate$258  $343  $355  
Permanent differences(1)  (2) 
Effect of U.S. corporate tax rate change—  —  524  
Valuation allowance(16) (742) (297) 
Earnings taxed at less than statutory rate(193) (234) (317) 
Research Credit(27) (38) (25) 
Tax expense related to intercompany transactions—  23  —  
Other individually immaterial items  (2) 
Provision (benefit) for income taxes$28  $(640) $236  
A substantial portion of the Company’sCompany's operations in Malaysia, Singapore and Thailand operate under various tax holidayincentive programs, which expire in whole or in part at various dates through 2024.2025. Certain tax holidaysincentives may be extended if specific conditions are met. The net impact of these tax holidayincentive programs was to increase the Company’sCompany's net income by approximately $163$206 million in fiscal year 20172020 ($0.540.78 per share, diluted), to increase the Company’sCompany's net income by approximately $67$194 million in fiscal year 20162019 ($0.220.68 per share, diluted), and to increase the Company’s net income by approximately $349$269 million in fiscal year 20152018 ($1.050.92 per share, diluted).

The Company consists of an Irish tax resident parent holding company with various U.S. andnon-U.S. subsidiaries that operate in multiplenon-Irish taxing jurisdictions. The amount of temporary differences (including undistributed earnings) related to outside basis differences in the stock ofnon-Irish resident subsidiaries considered indefinitely reinvested outside of Ireland for which Irish income taxes have not been provided as of June 30, 2017,July 3, 2020, was approximately $1.5$1.9 billion. If such amountamounts were remitted to Ireland as a dividend, it is likely that tax at 25%, or approximately $375$475 million would result.

As of July 3, 2020 and June 30, 2017 and July 1, 2016,28, 2019, the Company had approximately $74$89 million and $76$83 million, respectively, of unrecognized tax benefits excluding interest and penalties. The amount of unrecognized tax benefits that,These amounts, if recognized, would impact the effective tax rate are $74 million and $76 million as of June 30, 2017 and July 1, 2016, respectively, subject to certain future valuation allowance offsets.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Balance of unrecognized tax benefits at the beginning of the year

    $76   $89   $120 

Gross increase for tax positions of prior years

     2    12    12 

Gross decrease for tax positions of prior years

     (7   (8   (4

Gross increase for tax positions of current year

     16    11    9 

Gross decrease for tax positions of current year

     —      —      —   

Settlements

     —      —      (45

Lapse of statutes of limitation

     (13   (27   (3

Non-U.S. exchange (gain)/loss

     —      (1   —   
    

 

 

   

 

 

   

 

 

 

Balance of unrecognized tax benefits at the end of the year

    $74   $76   $89 
    

 

 

   

 

 

   

 

 

 

Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Balance of unrecognized tax benefits at the beginning of the year$83  $60  $74  
Gross increase for tax positions of prior years—  22   
Gross decrease for tax positions of prior years(1) (9) (3) 
Gross increase for tax positions of current year 16   
Gross decrease for tax positions of current year—  —  —  
Settlements(1) —  —  
Lapse of statutes of limitation—  (6) (20) 
Non-U.S. exchange gain—  —  —  
Balance of unrecognized tax benefits at the end of the year$89  $83  $60  
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It is the Company’s policy to include interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Operations. During fiscal year 2017,2020, the Company recognized net income tax benefit for interest and penalties of less than $1 million, as compared to net income tax benefit of $8$2 million during fiscal year 2016,2019, and incomenet tax expensebenefit of $26$2 million during fiscal year 2015.2018. As of June 30, 2017,July 3, 2020, the Company had $4less than $1 million of accrued interest and penalties related to unrecognized tax benefits compared to $6$1 million in fiscal year 2016.

2019.

During the 12 months beginning July 1, 2017,4, 2020, the Company expects that its unrecognized tax benefits could be reduced by approximately $14less than $1 million as a result of the expiration of certain statutes of limitation.

The Company is required to file U.S. federal, U.S. state andnon-U.S. income tax returns. The Company is no longer subject to examination of its U.S. federal income tax returns for years prior to fiscal year 2014. With respect to U.S. state andnon-U.S. income tax returns, the2017. The Company is generally no longer subject to tax examination for years ending prior to fiscal year 2006.

2008 for U.S. state income tax returns and prior to fiscal year 2009 for non-U.S. income tax returns.
6.Leases
The Company is a lessee in several operating leases related to real estate facilities for warehouse and office space.
The Company’s lease arrangements comprise operating leases with various expiration dates through 2082. The lease term includes the non-cancelable period of the lease, adjusted for options to extend or terminate the lease when it is reasonably certain that an option will be exercised.
Operating lease costs include short-term lease costs and are shown net of immaterial sublease income. The components of lease costs and other information related to leases were as follows:
8.Derivative Financial Instruments
Fiscal Year Ended
(Dollars in millions)July 3,
2020
Operating lease cost$22 
Variable lease cost
Total lease cost$26 
Operating cash outflows from operating leases$18 

July 3,
2020
Weighted-average remaining lease term13.2 years
Weighted-average discount rate6.53 %
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Table of Contents
ROU assets and lease liabilities are included on the Company’s Consolidated Balance Sheet as follows:
(Dollars in millions)Balance Sheet LocationJuly 3,
2020
ROU assetsOther assets, net$103 
Current lease liabilitiesAccrued expenses$14 
Non-current lease liabilitiesOther non-current liabilities$49 
At July 3, 2020, future lease payments included in the measurement of lease liabilities were as follows (in millions):

Fiscal YearAmount
2021$15  
202215  
202310  
2024 
Thereafter103  
Total lease payments148  
Less: imputed interest(85) 
Present value of lease liabilities$63  
Prior to fiscal year 2020, the Company recognized rent expense for operating leases under the legacy guidance ASC 840. Total rent expense for all land, facility and equipment operating leases, net of sublease income, was $18 million and $22 million for fiscal years 2019 and 2018, respectively.
7.Restructuring and Exit Costs
During fiscal years 2020 and 2018, the Company recorded restructuring charges of $82 million and $89 million, respectively, comprised primarily of charges related to workforce reduction costs and facilities and other exit costs associated with the restructuring of its workforce. During fiscal year 2019, the Company recorded a net gain of $22 million that included a gain from the sale of a certain property. The Company’s significant restructuring plans are described below. All restructuring charges are reported in Restructuring and other, net on the Consolidated Statements of Operations.
June 2020 Plan - On June 1, 2020, the Company committed to a restructuring plan (the “June 2020 Plan”) consistent with its long-term strategy to drive operational efficiencies, reduce its cost structure and invest in future opportunities. The June 2020 Plan included consolidating the Company’s Minnesota facilities into one location and reducing its headcount worldwide by approximately 500 employees. The June 2020 Plan is expected to be substantially completed during the first quarter of fiscal year 2021.
December 2017 Plan - On December 8, 2017, the Company committed to a restructuring plan (the “December 2017 Plan”) to reduce its cost structure. The December 2017 Plan included reducing the Company’s global headcount by approximately 500 employees. The December 2017 Plan was substantially completed during fiscal year 2018.
July 2017 Plan- On July 25, 2017, the Company committed to a restructuring plan (the “July 2017 Plan”) to reduce its cost structure. The July 2017 Plan included reducing the Company’s global headcount by approximately 600 employees. The July 2017 Plan was substantially completed during fiscal year 2018.
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Table of Contents
The following table summarizes the Company’s restructuring activities under all of the Company’s active restructuring plans for fiscal years 2020, 2019 and 2018:
June 2020 PlanDecember 2017 PlanJuly 2017 PlanOther Plans
(Dollars in millions)Workforce Reduction CostsFacilities and Other Exit CostsWorkforce Reduction CostsFacilities and Other Exit CostsWorkforce Reduction CostsFacilities and Other Exit CostsWorkforce Reduction CostsFacilities and Other Exit CostsTotal
Accrual balances at June 30, 2017$—  $—  $—  $—  $—  $—  $28  $15  $43  
Restructuring charges—  —  28   38   14  15  105  
Cash payments—  —  (21) (2) (37) (3) (33) (19) (115) 
Adjustments—  —  (2) —  (1) —     
Accrual balances at June 29, 2018—  —    —   14  18  42  
Restructuring charges—  —  —   —  —  41  10  54  
Cash payments—  —  (5) (5) —  —  (43) (12) (65) 
Adjustments—  —  —  (1) —  (1)  —  (1) 
Accrual balances at June 28, 2019—  —  —   —  —  13  16  30  
Lease adoption adjustment—  —  —  —  —  —  —  (11) (11) 
Restructuring charges56   —  —  —  —  26   86  
Cash payments(18) —  —  (1) —  —  (30) (4) (53) 
Adjustments—  —  —  —  —  —  (4) —  (4) 
Accrual balances at July 3, 2020$38  $ $—  $—  $—  $—  $ $ $48  
Total costs incurred to date as of July 3, 2020$56  $ $26  $ $37  $ $192  $82  $406  
Total expected costs to be incurred as of July 3, 2020$—  $ $—  $—  $—  $—  $—  $—  $ 
Of the accrued restructuring balance of $48 million at July 3, 2020, $45 million is included in Accrued expenses and $3 million is included in Other non-current liabilities in the Company’s Consolidated Balance Sheet.
During fiscal year 2019, the Company sold a certain property, which was previously classified as assets held for sale and recognized a gain of approximately $78 million. The Company also recorded an impairment charge of $3 million on its held for sale land and building during fiscal year 2019. The gain and impairment charge were included in Restructuring and other, net in the Company’s Consolidated Statements of Operations.
8.Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate, interest rate and to a lesser extent, equity market risks relating to its ongoing business operations. TheFrom time to time, the Company enters into cash flow hedges in the form of foreign currency forward exchange contracts in order to manage the foreign currency exchange rate risk on forecasted expenses and investments denominated in foreign currencies.
In the quarter ended October 4, 2019, the Company entered into certain interest rate swap agreements with a notional amount of $500 million to convert the variable interest rate on its Term Loan to fixed interest rates. The contracts will mature on September 16, 2025. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with the variable interest rates under the Term Loan. The Company designated the interest rate swaps as cash flow hedges.
The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated ornon-designated hedging instruments. The Company records all derivatives in theon its Consolidated Balance Sheets at fair value. The changes in the fair value of thehighly effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive loss until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedgesor are not assessed to be highly effective are adjusted to fair value through earnings. The Company has no outstandingamount of net unrealized loss on cash flow
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hedges was $24 million as of June 30, 2017. TheJuly 3, 2020, and the amount of net unrealized loss on cash flow hedges was $2 millionnot material as of June 28, 2019. As of July 1, 2016.

3, 2020, the amount of existing net losses related to cash flow hedges recorded in Accumulated other comprehensive loss included $3 million that is expected to be reclassified to earnings within twelve months.

The Companyde-designates its cash flow hedges when the forecasted hedged transactions are realizedaffects earnings or it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated other comprehensive loss on the Company’s Consolidated Balance Sheets are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative instruments are immediately reflected in earnings. The Company did not recognize anyrecognized a net gains or lossesloss of $3 million in Other expense, net related to the loss of hedge designation on discontinued cash flow hedges during fiscal year 2017 and2020. The Company did not recognize any material amounts related to the loss of hedge designation on discontinued cash flow hedges during fiscal years 20162019 and 2015.

As2018.

Other derivatives not designated as hedging instruments consist of June 30, 2017, the Company does not have outstanding foreign currency forward exchange contracts. contracts that the Company uses to hedge the foreign currency exposure on forecasted expenditures denominated in currencies other than the U.S. dollar. The Company recognizes gains and losses on these contracts, as well as the related costs in Other, net on its Consolidated Statements of Operations.
The following tables show the total notional value of the Company’s outstanding foreign currency forward exchange contracts as of July 1, 2016:

                                                
     As of July 1, 2016 

(Dollars in millions)

    Contracts
Designated as
Hedges
   Contracts Not
Designated as
Hedges
 

British Pound Sterling

    $47   $10 

3, 2020 and June 28, 2019. All of the foreign currency forward exchange contracts mature within 12 months.

As of July 3, 2020
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Thai Baht$157  $42  
Singapore Dollar187  56  
Chinese Renminbi81  25  
British Pound Sterling64  20  
$489  $143  

As of June 28, 2019
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Singapore Dollar$60  $40  
Chinese Renminbi79  20  
British Pound Sterling 12  
$145  $72  
The Company is subject to equity market risks due to changes in the fair value of the notional investments selected by its employees as part of itsNon-qualified Deferred Compensation Plan— non-qualified deferred compensation plan: the Seagate Deferred Compensation Plan (the “SDCP”). In fiscal year 2014, the Company entered into a Total Return Swap (“TRS”) in order to manage the equity market risks associated with the SDCPSDCP’s liabilities. The Company pays a floating rate, based on LIBOR plus an interest rate spread, on the notional amount of the TRS. The TRS is designed to substantially offset changes in the SDCP liabilitySDCP’s liabilities due to changes in the value of the investment options made by employees. As of June 30, 2017,July 3, 2020, the notional investments underlying the TRS amounted to $105 million. The contract term of the TRS is through January 20182021 and is settled on a monthly basis, therefore limiting counterparty performance risk. The Company did not designate the TRS as a hedge. Rather, the Company records all changes in the fair value of the TRS to earnings to offset the market value changes of the SDCPSDCP’s liabilities.

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As


Table of June 30, 2017, the Company has no outstanding foreign currency forward exchange contracts and the gross fair value of the TRS reflected in the Consolidated Balance Sheets is immaterial.

Contents

The following tables show the Company’sCompany's derivative instruments measured at gross fair value as reflected in the Consolidated Balance SheetSheets as of July 1, 2016:

                                                                                                
     As of July 1, 2016 
     Derivative Assets   Derivative Liabilities 

(Dollars in millions)

    Balance Sheet
Location
   Fair
Value
   Balance Sheet
Location
   Fair
Value
 

Derivatives designated as hedging instruments:

          

Foreign currency forward exchange contracts

     Other current assets   $—      Accrued expenses   $(2

Derivatives not designated as hedging instruments:

          

Foreign currency forward exchange contracts

     Other current assets    —      Accrued expenses    (1

Total return swap

     Other current assets    3    Accrued expenses    —   
      

 

 

     

 

 

 

Total derivatives

      $3     $(3
      

 

 

     

 

 

 

3, 2020 and June 28, 2019:

As of July 3, 2020
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$ Accrued expenses$—  
Interest rate swapOther current assets—  Accrued expenses(27) 
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assets Accrued expenses(2) 
Total return swapOther current assets Accrued expenses—  
Total derivatives $  $(29) 
As of June 28, 2019
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$—  Accrued expenses$—  
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assets Accrued expenses(1) 
Total return swapOther current assets—  Accrued expenses—  
Total derivatives $  $(1) 
The following tables show the effect of the Company’s derivative instruments on the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Operations for the fiscal year ended June 30, 2017:

                                                                                                                        

(Dollars in millions)

Derivatives Designated as Cash Flow Hedges

    Amount of
Gain or
(Loss)
Recognized
in OCI on
Derivatives
(Effective
Portion)
   Location of
Gain or (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
   Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
   Location of
Gain or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)
   Amount of
Gain
or (Loss)
Recognized in
Income
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)(a)
 

Foreign currency forward exchange contracts

    $(3   Cost of revenue   $(4   Cost of revenue   $—   

                                                

Derivatives Not Designated as Hedging Instruments

    Location of Gain or
(Loss) Recognized in
Income on Derivatives
  Amount of Gain or
(Loss) Recognized in
Income on Derivatives
 

Foreign currency forward exchange contracts

    Other, net  $1 

Total return swap

    Operating expenses  $10 

July 3, 2020:
(a)The amounts
Derivatives Not Designated as Hedging InstrumentsLocation of gain or (loss) recognizedGain/(Loss) Recognized in income related to the ineffective portion
Income on Derivatives
Amount of the hedging relationships and to the amount excluded from the assessment of hedge effectiveness were less than $1 million for the fiscal year ended June 30, 2017.Gain/(Loss) Recognized in
Income on Derivatives
Foreign currency forward exchange contractsOther, net$(2)
Total return swapOperating expenses


(Dollars in millions)

Derivatives Designated as Hedging Instruments
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Location of Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)Amount of Gain/(Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign currency forward exchange contracts$ Other expense, net$(3) Other expense, net$(1) 
Interest rate swap(29) Other expense, net—  Other expense, net—  

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Table of Contents
The following tables showtable shows the effect of the Company’s derivative instruments on the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Operations for the fiscal year ended July 1, 2016:

                                                                                                                        

(Dollars in millions)

Derivatives Designated as Cash Flow Hedges

    Amount of
Gain or
(Loss)
Recognized
in OCI on
Derivatives
(Effective
Portion)
   Location of
Gain or (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
   Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)
   Location of
Gain or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)
   Amount of
Gain
or (Loss)
Recognized in
Income
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)(a)
 

Foreign currency forward exchange contracts

    $(4   Cost of revenue  $(2   Cost of revenue   $—   

                                                

Derivatives Not Designated as Hedging Instruments

    Location of Gain or
(Loss) Recognized in
Income on Derivatives
  Amount of Gain or
(Loss) Recognized in
Income on Derivatives
 

Foreign currency forward exchange contracts

    Other, net  $(5

Total return swap

    Operating expenses  $(1

June 28, 2019:
(a)The amounts
Derivatives Not Designated as Hedging InstrumentsLocation of gain or (loss) recognizedGain/(Loss) Recognized in income related to the ineffective portion
Income on Derivatives
Amount of the hedging relationships and to the amount excluded from the assessment of hedge effectiveness were less than $1 million for the fiscal year ended July 1, 2016.Gain/(Loss) Recognized in
Income on Derivatives
Foreign currency forward exchange contractsOther, net$20 
Total return swapOperating expenses

The amount of gain or loss recognized in the Consolidated Statement of Comprehensive Income on derivatives designated as cash flow hedges was not material for fiscal year 2019. The amount of gain or loss recognized in income related to the ineffective portion of the hedging relationships and to the amount excluded from the assessment of hedge ineffectiveness was not material for the fiscal year 2019.
9.Fair Value

9.Fair Value
Measurement of Fair Value

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

A fair value hierarchy is based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflects the Company’sCompany's own assumptions of market participant valuation (unobservable inputs). A financial instrument’sinstrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value:

value are:

Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

Level 3 - Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.

The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, the Company’s or the counterparty’snon-performance risk is considered in determining the fair values of liabilities and assets, respectively.

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Table of Contents
Items Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of June 30, 2017:

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active

Markets for
Identical
Instruments
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
   Total
Balance
 

Assets:

          

Money market funds

    $592   $—     $—     $592 

Time deposits

     —      582    —      582 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents and short-term investments

     592    582    —      1,174 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     1    —      —      1 

Time deposits and certificates of deposit

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $593   $585   $—     $1,178 
    

 

 

   

 

 

   

 

 

   

 

 

 

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active

Markets for
Identical
Instruments
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
   Total
Balance
 

Assets:

          

Cash and cash equivalents

    $592   $582   $—     $1,174 

Other current assets

     1    3    —      4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $593   $585   $—     $1,178 
    

 

 

   

 

 

   

 

 

   

 

 

 

The Company reclassified demand deposits from certificates of deposit and money market funds to cash as of July 1, 2016 in the table below to conform to the current year’s presentation. This reclassification did not result in any change to the cash and cash equivalents balance as reported in the Consolidated Balance Sheets and Statements of Cash Flows for all periods presented.

The following tables present the Company’s assets and liabilities, by financial instrument type and balance sheet line item that are measured at fair value on a recurring basis, excluding accrued interest components, as of July 1, 2016:

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active

Markets for
Identical
Instruments
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
   Total
Balance
 

Assets:

          

Money market funds

    $230   $—     $—     $230 

Corporate bonds

     —      6    —      6 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents and short-term investments

     230    6    —      236 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     2    —      —      2 

Certificates of deposit

     —      5    —      5 

Derivative assets

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $232   $14   $—     $246 
    

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

          

Derivative liabilities

    $—     $(3  $—     $(3
    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    $—     $(3  $—     $(3
    

 

 

   

 

 

   

 

 

   

 

 

 

3, 2020:

 Fair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Balance
Assets:    
Money market funds$494  $—  $—  $494  
Time deposits and certificates of deposit—  55  —  55  
Total cash equivalents494  55  —  549  
Restricted cash and investments:    
Money market funds —  —   
Time deposits and certificates of deposit—   —   
Other debt securities—  —  18  18  
Derivative assets—   —   
Total assets$495  $62  $18  $575  
Liabilities:    
Derivative liabilities$—  $29  $—  $29  
Total liabilities$—  $29  $—  $29  
 Fair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Balance
Assets:    
Cash and cash equivalents$494  $55  $—  $549  
Other current assets  —   
Other assets, net—  —  18  18  
Total assets$495  $62  $18  $575  
Liabilities:
Accrued expenses$—  $29  $—  $29  
Total liabilities$—  $29  $—  $29  
                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active

Markets for
Identical
Instruments
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
   Total
Balance
 

Assets:

          

Cash and cash equivalents

    $230   $—     $—     $230 

Short-term investments

     —      6    —      6 

Other current assets

     2    8    —      10 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $232   $14   $—     $246 
    

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

          

Accrued expenses

    $—     $(3  $—     $(3
    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    $—     $(3  $—     $(3
    

 

 

   

 

 

   

 

 

   

 

 

 

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Table of Contents
The following tables present the Company’s assets and liabilities, by financial instrument type and balance sheet line item that are measured at fair value on a recurring basis, excluding accrued interest components, as of June 28, 2019:
 Fair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Balance
Assets:    
Money market funds$416  $—  $—  $416  
Time deposits and certificates of deposit—  132  —  132  
Total cash equivalents416  132  —  548  
Restricted cash and investments:    
Money market funds —  —   
Time deposits and certificates of deposit—   —   
Other debt securities—  —    
Derivative assets—   —   
Total assets$417  $134  $ $558  
Liabilities:
Derivative liabilities$—  $ $—  $ 
Total liabilities$—  $ $—  $ 
 Fair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Balance
Assets:    
Cash and cash equivalents$416  $132  $—  $548  
Other current assets  —   
Other assets, net—  —    
Total assets$417  $134  $ $558  
Liabilities:
Accrued expense$—  $ $—  $ 
Total liabilities$—  $ $—  $ 

The Company classifies items in Level 1 if the financial assets consist of securities for which quoted prices are available in an active market.

The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds, commercial paper, municipal bonds, U.S. Treasuries, time deposits and certificates of deposit. These debt investments are priced using observable inputs and valuation models which vary by asset class. The Company uses a pricing service to assist in determining the fair valuesvalue of all of its cash equivalents and short-term investments.equivalents. For the cash equivalents and short-term investments in the Company’s portfolio, multiple pricing sources are generally available. The pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the pricing service against other independent sources and, as of June 30, 2017,July 3, 2020, has not found it necessary to make any adjustments to the prices obtained. The Company’s derivative financial instruments are also classified within Level 2. The Company’s derivative financial instruments consist of foreign currency forward exchange contracts, interest rate swaps and the TRS. The Company recognizes derivative financial instruments in its consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount it would pay or receive to terminate these agreements at the reporting date.

As

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Table of June 30, 2017 and July 1, 2016, we had no Level 3 assets or liabilities measured at fair value on a recurring basis.

Contents

Items Measured at Fair Value on aNon-Recurring Basis

From time to time, the Company enters into certain strategic investments for the promotion of business and strategic objectives. These strategic investments primarily include cost basis investments representing those where the Company does not have the ability to exercise significant influence as well as equity method investments representing those where the Company does have the ability to exercise significant influence but does not have control.influence. These investments are included in Other assets, net in the Company's Consolidated Balance Sheets and are periodically analyzed to determine whether or not there are indicators of impairment. The
As of July 3, 2020 and June 28, 2019, the carrying value of the Company’s strategic investments was $135 million and $114 million, respectively. The Company’s strategic investments are recorded at June 30, 2017 and July 1, 2016 totaled $125fair value only if an impairment or observable price adjustment is recognized in the current period. If an observable price adjustment or impairment is recognized on the Company’s strategic investments during the period, the Company classifies these assets as Level 3 within the fair value hierarchy based on the nature of the fair value inputs. For fiscal year 2020, the Company recorded downward adjustments of $18 million and $113 million, respectively, and consisted primarilyin order to write down the carrying amount of privately held equity securities without a readily determinablecertain investments to their fair value.

These amounts were recorded in Other, net in the Consolidated Statements of Operations. For fiscal year 2019, there were 0 upward or downward adjustments on equity investments as a result of adoption of the measurement alternative. During the fiscal years 2017, 2016 and 2015,year 2018, the Company determined that certain of its equity investments accounted for under the cost method were other-than-temporarily impaired, and recognized charges of $25$11 million $13 million and $7 million, respectively, in order to write down the carrying amount of the investments to its estimated fair value. Since there was no active market for the equity securities

As of the investee,June 28, 2019, the Company estimated fair valuehad $23 million of the investee by analyzing the underlying cash flows and future prospects of the investee. These amounts were recorded in Other, net in the Consolidated Statements of Operations.

In connection with the Company’s manufacturing footprint reduction, the Company has $77 million held for sale assetsland and building (collectively, the “properties”) included in Other current assets on theits Consolidated Balance Sheet as of June 30, 2017. These assets primarily consisted of $37 million of land and building in Korea and $26 million of land and building in China, withSheets. In July 2019, the remainderCompany completed the sale of the balance comprisedproperties. As of property at other locations (collectively,July 3, 2020, the “properties”). The respective properties to be sold met the criteria to be classified asCompany had 0 held for sale during the June 2017 and March 2017 quarters. Depreciation related to the properties ceased as of the date these were determined to be held for sale. During fiscal year 2017, the Company recorded impairment charges of $35 million in order to write down the carrying amount of such properties to their estimated fair values less costs to sell. The impairment charges were recorded in Operating expenses in the Consolidated Statement of Operations. The fair values were measured with the assistance of third-party valuation models which used inputs such as market comparable data for similar land sale transactions adjusted for difference to indicate value of the subject properties and the cost approach valuation techniques for buildings as part of the analysis. The fair value measurement was categorized as Level 3 as significant unobservable inputs were used in the valuation analysis.

or buildings.

OtherFair Value Disclosures

The Company’s debt is carried at amortized cost. The estimated fair value of the Company’s debt is derived using the closing price of the same debt instruments as of the date of valuation, which takes into account the yield curve, interest rates and other observable inputs. Accordingly, these fair value measurements are categorized as Level 2. The following table presents the fair value and amortized cost of the Company’s debt in order of maturity:

                                                                                                
     June 30, 2017   July 1, 2016 

(Dollars in millions)

    Carrying
Amount
   Estimated
Fair Value
   Carrying
Amount
   Estimated
Fair Value
 

3.75% Senior Notes due November 2018

    $710   $726   $800   $804 

7.00% Senior Notes due November 2021

     —      —      158    164 

4.250% Senior Notes due March 2022

     748    765    —      —   

4.75% Senior Notes due June 2023

     951    987    990    857 

4.875% Senior Notes due March 2024

     497    511    —      —   

4.75% Senior Notes due January 2025

     975    984    995    795 

4.875% Senior Notes due June 2027

     695    698    698    514 

5.75% Senior Notes due December 2034

     489    488    489    357 
    

 

 

   

 

 

   

 

 

   

 

 

 
     5,065    5,159    4,130    3,491 

Less: debt issuance costs

     (44   —      (39   —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, net of debt issuance costs

    $5,021   $5,159   $4,091   $3,491 
    

 

 

   

 

 

   

 

 

   

 

 

 

10.Shareholders’ Equity

 July 3, 2020June 28, 2019
(Dollars in millions)Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
4.250% Senior Notes due March 2022$229  $237  $749  $763  
4.750% Senior Notes due June 2023546  576  941  973  
4.875% Senior Notes due March 2024498  541  498  514  
4.750% Senior Notes due January 2025479  517  920  929  
4.875% Senior Notes due June 2027504  549  689  688  
4.091% Senior Notes due June 2029456  523  —  —  
4.125% Senior Notes due January 2031499  524  —  —  
5.750% Senior Notes due December 2034489  543  489  482  
LIBOR Based Term Loan due September 2025500  490  —  —  
$4,200  $4,500  $4,286  $4,349  
Less: debt issuance costs(25) —  (33) —  
Debt, net of debt issuance costs$4,175  $4,500  $4,253  $4,349  
Less: current portion of debt, net of debt issuance costs(19) (19) —  —  
Long-term debt, less current portion, net of debt issuance costs$4,156  $4,481  $4,253  $4,349  
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10.Shareholders’ Equity
Share Capital

The Company’s authorized share capital is $13,500 and consists of 1,250,000,000 ordinary shares, par value $0.00001, of which 291,799,561256,718,840 shares were outstanding as of June 30, 2017,July 3, 2020, and 100,000,000 preferred shares, par value $0.00001, of which noneNaN were issued or outstanding as of June 30, 2017.

July 3, 2020.

Ordinary shares—shares - Holders of ordinary shares are entitled to receive dividends when and as declared by the Company’s board of directors (the “Board of Directors”). Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of preferred shares, any remaining assets of the Company will be distributed ratably to holders of the preferred and ordinary shares. Holders of shares are entitled to one vote per share on all matters upon which the ordinary shares are entitled to vote, including the election of directors.

Preferred shares—shares - The Company may issue preferred shares in one1 or more series, up to the authorized amount, without shareholder approval. The Board of Directors is authorized to establish from time to time the number of shares to be included in each series, and to fix the rights, preferences and privileges of the shares of each wholly unissued series and any of its qualifications, limitations or restrictions. The Board of Directors can also increase or decrease the number of shares of a series, but not below the number of shares of that series then outstanding, without any further vote or action by the shareholders.

The Board of Directors may authorize the issuance of preferred shares with voting or conversion rights that could harm the voting power or other rights of the holders of the ordinary shares. The issuance of preferred shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company and might harm the market price of its ordinary shares and the voting and other rights of the holders of ordinary shares.

Repurchases of Equity Securities

On April 22, 2015, the Board of Directors authorized the Company to repurchase an additional $2.5 billion of its outstanding ordinary shares.

All repurchases are effected as redemptions in accordance with the Company’s Articles of Association.

Constitution.

As of June 30, 2017,July 3, 2020, $1.3 billion remained available for repurchase under the existing repurchase authorization limit.

The following table sets forth information with respect to repurchases of the Company’s ordinary shares during fiscal years 2017, 20162020, 2019 and 2015:2018:
(In millions)Number of Shares RepurchasedDollar Value of Shares Repurchased
Cumulative repurchased through June 30, 2017
341  $10,118  
Repurchased in fiscal year 2018(1)
11  384  
Cumulative repurchased through June 29, 2018
352  10,502  
Repurchased in fiscal year 2019(1)
22  997  
Cumulative repurchased through June 28, 2019374  11,499  
Repurchased in fiscal year 2020(1)
18  887  
Cumulative repurchased through July 3, 2020392  $12,386  

                                                

(In millions)

    Number of Shares
Repurchased
   Dollar Value of
Shares
Repurchased
 

Cumulative repurchased through June 27, 2014

     285   $7,398 

Repurchased in fiscal year 2015

     19    1,087 
    

 

 

   

 

 

 

Cumulative repurchased through July 3, 2015

     304    8,485 

Repurchased in fiscal year 2016(a)

     24    1,146 
    

 

 

   

 

 

 

Cumulative repurchased through July 1, 2016

     328    9,631 

Repurchased in fiscal year 2017(a)

     13    487 
    

 

 

   

 

 

 

Cumulative repurchased through June 30, 2017

     341   $10,118 
    

 

 

   

 

 

 

(a)For fiscal years 2017 and 2016, including net share settlement of $27 million and $56 million, for 1 million and 1 million shares in connection with tax withholding related to vesting of restricted stock units, respectively.

(1) For fiscal years 2020, 2019 and 2018, includes net share settlements of $40 million, $31 million and $23 million for1 million, 1 million and 1 million shares, respectively, in connection with tax withholding related to vesting of restricted share units.
11.Share-based Compensation

11.Share-Based Compensation
Share-Based Compensation Plans

The Company’s share-based compensation plans have been established to promote the Company’s long-term growth and financial success by providing incentives to its employees, directors and consultants through grants of share-based awards. The provisions of the Company’sCompany's share-based benefit plans, which allow for the grant of various types of equity-based awards, are also intended to provide greater flexibility to maintain the Company’sCompany's competitive ability to attract, retain and motivate participants for the benefit of the Company and its shareholders.

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Seagate Technology plc 2012 Equity Incentive Plan (the “EIP”). On October 26, 2011, the shareholders approved the EIP and authorized the issuance of up to a total of approximately 27.0 million ordinary shares, par value $0.0001$0.00001 per share, plus any shares remaining available for grant under the Seagate Technology plc 2004 Share Compensation Plan (the “SCP”) as of the effective date of the EIP (which was equal to approximately 11.0 million ordinary shares as of the effective date of the EIP and which will increase by such additional number of shares as will be returned to the share reserve in respect of awards previously granted under the SCP) (together, the “Share Reserve”). On October 22, 2014, the shareholders authorized the issuance fromunder the EIP of an additional 2525.0 million ordinary shares, par value $0.0001$0.00001 per share. On October 19, 2016, the shareholders authorized the issuance under the EIP of an additional 7.5 million ordinary shares, par value $0.00001 per share. On October 29, 2019, the shareholders authorized the issuance under the EIP of an additional 12.1 million ordinary shares, par value $0.00001 per share. Any shares that are subject to options or share appreciation rights granted under the EIP will be counted against the Share Reserve as one share for every one share granted, and any shares that are subject to restricted share bonus awards, restrictedunits (“RSUs”) or performance-based share units performance share bonus awards or performance share awards(“PSU”) (collectively, “Full-Value“Full-Value Share Awards”) will generally be counted, after October 29, 2019, against the Share Reserve as two and five-tenths2.25 shares for every one share granted. On October 19, 2016, the shareholders authorized the issuance from the EIP of an additional 7.5 million ordinary shares, par value $0.0001 per share. As of June 30, 2017,July 3, 2020, there were approximately 30.827.0 million ordinary shares available for issuance of Full-Value Share Awards under the EIP.

Dot Hill Systems 2009 Equity Incentive Plan (the “DHEIP”). Seagate Technology plc acquired the Dot Hill Systems 2009 Equity Incentive Plan effective October 6, 2015. The Company assumed the remaining authorized but unused share reserve of approximately 22.0 million shares, based on the conversion ratio, from the DHEIP on the acquisition date. Any shares that are subject to options or share appreciation rightsEffective April 24, 2019, the Company terminated the DHEIP and thus, no further grants will be made under the DHEIP. Outstanding awards granted under the DHEIP will be counted against the Share Reserve as one share for every one share granted, and any shares that areremain subject to restricted share bonus awards, restricted share units, performance share bonus awards or performance share awards (collectively, “Full-Value Share Awards”) will generally be counted against the Share Reserve as one and five-tenths shares for every one share granted. Asterms of June 30, 2017, there were approximately 1 million ordinary shares available for issuance under the DHEIP.

Seagate Technology plc Employee Stock Purchase Plan (the “ESPP”). There are 50.060.0 million ordinary shares authorized to be issued under the ESPP. The ESPP consists of asix-monthsix-month offering period with a maximum issuance of 1.5 million ordinary shares per offering period. The ESPP permits eligible employees to purchase ordinary shares through payroll deductions generally at 85% of the fair market value of the ordinary shares. As of June 30, 2017July 3, 2020, there were approximately 4.89.9 million ordinary shares available for issuance under the ESPP.

Equity Awards

Full-Value Share Awards (e.g. restricted share units, “RSU”)

RSUs generally vest over a period of three to four years, with cliff vesting of a portion of each award occurring annually, subject to continuous employment with the Company through the vesting date. Options generally vest as follows: 25% of the options will vest on the first anniversary of the vesting commencement date and the remaining 75% will vest ratably each month thereafter over the next 36 months. Options granted under the EIP and SCP have an exercise price equal to the fair market value of the Company’s ordinary shares on the grant date. Fair market value is defined as the closing price of the Company’sCompany's ordinary shares on NASDAQ on the grant date.

The Company granted awards of performance-based share units (“PSU”)PSUs to its senior executive officers under the SCP and the EIP where vesting is subject to both the continued employment of the participant by the Company and the achievement of certain financial and operational performance goals established by the Compensation Committee of the Company’s Board of Directors, including market-based performance goals.Directors. A single PSU represents the right to receive a single ordinary share of the Company. During fiscal years 2017, 20162020, 2019 and 2015,2018, the Company granted 0.60.3 million, 0.4 million and 0.30.4 million PSUs, respectively, where performance is measured based on a three-year average return on invested capital (“ROIC”) goal and a relative total shareholder return (“TSR”) goal, which is based on the Company’s ordinary shares measured against a benchmark TSR of a peer group over the same three-year period (the “TSR/ROIC” awards). These awards vest after the end of the performance period of three years from the grant date. A percentage of these units may vest only if at least the minimum ROIC goal is met regardless of whether the TSR goal is met. The number of share units to vest will range from 0% to 200% of the targeted units. In evaluating the fair value of these units, the Company used a Monte Carlo simulation on the grant date, taking the market-based TSR goal into consideration. Compensation expense related to these units is only recorded in a period if it is probable that the ROIC goal will be met, and it is to be recorded at the expected level of achievement.

The Company also granted 0.20.1 million, 0.20.1 million and 0.40.2 million PSUs during fiscal years 2017, 20162020, 2019 and 20152018, respectively, to its senior executive officers which are subject to a performance goal related to the Company’sCompany's adjusted earnings per share (the “AEPS” awards)(“AEPS”). These awards have a maximum seven-yearseven-year vesting period, with 25% annual vesting starting on the first anniversary of the grant date. If the performanceAEPS goal is not achieved, vesting is delayed to a following year in which the AEPS goal is achieved. Any unvested awards from prior years may vest cumulatively in a future year within the seven-yearseven-year vesting period if the annual AEPS goal is achieved during a subsequent year. If the AEPS goal has not been met by the end of the seven year period, any unvested shares will be forfeited.

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Determining Fair Value of Seagate Technology StockShare Plans

Valuation and amortization method—method - The Company estimates the fair value of stockgranted share options, RSURSUs and performance awardsPSUs subject to an AEPS condition granted using the Black-Scholes-Merton valuation model and a single share award approach. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period or the remaining service (vesting) period.

Expected Term—Term - Expected term represents the period that the Company’s share-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the share-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its share-based awards.

Expected Volatility—Volatility - The Company uses a combination of the implied volatility of its traded options and historical volatility of its share price.

Expected Dividend—Dividend - The Black-Scholes-Merton valuation model calls for a single expected dividend yield as an input. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date share price. The expected dividend assumption is based on the Company’s current expectations about its anticipated dividend policy. Also, because the expected dividend yield should reflect marketplace participants’ expectations, the Company does not incorporate changes in dividends anticipated by management unless those changes have been communicated to or otherwise are anticipated by marketplace participants.

Risk-Free Interest Rate—Rate - The Company bases the risk-free interest rate used in the Black-Scholes-Merton valuation model on the implied yield currently available on U.S. Treasuryzero-coupon issues with an equivalent remaining term. Where the expected term of the Company’sCompany's share-based awards do not correspond with the terms for which interest rates are quoted, the Company performed a straight-line interpolation to determine the rate from the available term maturities.

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The fair value of the Company’s shares related to options and RSURSUs granted to employees, shares issued from the ESPP and PSUs subject to TSR/ROIC or AEPS conditions for fiscal years 2017, 20162020, 2019 and 20152018 were estimated using the following assumptions:

                                                                        
   Fiscal Years 
   2017  2016  2015 

Options

    

Expected term (in years)

   4.2   2.1 - 4.2   4.2 

Volatility

   38 - 42  33 - 48  33 - 35

Weighted-average volatility

   39  36  34

Expected dividend rate

   4.9 - 6.4  4.6 - 11.0  2.9 - 4.0

Weighted-average expected dividend rate

   6.3  5.6  3.0

Risk-free interest rate

   1.1 - 1.8  0.6 - 1.5  1.1 - 1.5

Weighted-average fair value

  $6.83  $12.28  $12.98 

RSU

    

Expected term (in years)

   4.2   4.2   4.2 

Expected dividend rate

   4.6 - 7.7  4.6 - 11.0  2.9% - 4.0

Weighted-average expected dividend rate

   6.4  5.16  3.11

Weighted-average fair value

  $30.85  $41.47  $46.1 

ESPP

    

Expected term (in years)

   0.5   0.5   0.5 

Volatility

   36 - 49  28 - 46  28 - 29

Weighted-average volatility

   43  39  28

Expected dividend rate

   5.6 - 7.8  4.6 - 8.3  3.0 - 3.8

Weighted-average expected dividend rate

   6.8  6.9  3.4

Risk-free interest rate

   0.4 - 0.6  0.2 - 0.5  0.1

Weighted-average fair value

  $9.78  $9.08  $12.21 

PSUs subject to market condition

    

Expected term (in years)

   3.0   3.0   3.0 

Volatility

   41 - 42  30  40

Weighted-average volatility

   41  30  40

Expected dividend rate

   6.3 - 7.0  4.3  2.8

Weighted-average expected dividend rate

   7.0  4.3  2.8

Risk-free interest rate

   0.9 - 1.3  1.1  1.1

Weighted-average fair value

  $32.41  $47.34  $58.31 

PSUs subject to an AEPS condition

    

Expected term (in years)

   4.2   4.2   4.2 

Expected dividend rate

   5.9 - 6.4  4.6 - 7.3  3.0 - 4.0

Weighted-average expected dividend rate

   6.2  5.9  3.3

Weighted-average fair value

  $31.61  $42.09  $46.52 

Share-based

 Fiscal Years
 202020192018
Options   
Expected term (in years)4.24.24.2
Volatility39 %39 - 40%38 - 42%
Weighted-average volatility39 %39 %40 %
Expected dividend rate4.2 %4.6 - 5.0%3.8 - 7.4%
Weighted-average expected dividend rate4.2 %4.7 %6.8 %
Risk-free interest rate1.4 %2.5 - 2.8%1.5 - 2.7%
Weighted-average fair value$12.41  $11.49  $6.56  
RSUs
Expected term (in years)1 - 2.51 - 2.51 - 2.5
Expected dividend rate3.9 - 5.8%4.1 - 6.4%3.5 - 7.4%
Weighted-average expected dividend rate4.25 %4.68 %7.11 %
Weighted-average fair value$49.49  $44.37  $26.69  
ESPP   
Expected term (in years)0.50.50.5
Volatility32 - 35%34 - 42%37 - 38%
Weighted-average volatility33 %38 %37 %
Expected dividend rate4.3 - 5.4%4.8 - 5.6%4.6 - 7.6%
Weighted-average expected dividend rate4.9 %5.2 %6.5 %
Risk-free interest rate1.6 - 2.0%2.2 - 2.4%1.1 - 1.6%
Weighted-average fair value$12.23  $12.18  $10.10  
PSUs subject to TSR/ROIC conditions   
Expected term (in years)3.03.03.0
Volatility37 %46 %45 %
Weighted-average volatility37 %46 %45 %
Expected dividend rate4.6 %5.0 %8.1 %
Weighted-average expected dividend rate4.6 %5.0 %8.1 %
Risk-free interest rate1.5 %2.8 %1.4 %
Weighted-average fair value$52.39  $46.38  $25.90  
PSUs subject to an AEPS condition
Expected term (in years)1 - 2.51 - 2.51 - 2.5
Expected dividend rate4.2 %4.6 - 5.0%5.8 - 7.2%
Weighted-average expected dividend rate4.2 %4.7 %7.0 %
Weighted-average fair value$49.27  $43.92  $27.10  
Share-Based Compensation Expense

The Company recorded $137$109 million, $120$99 million and $137$112 million of share-based compensation during fiscal years 2017, 20162020, 2019 and 2015,2018, respectively. Management has made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. When estimating forfeitures, the Company considers voluntary termination behavior as well as the historical analysis of actual forfeited awards.


Stock

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Share Option Activity

The Company issues new ordinary shares upon exercise of stockshare options. The following is a summary of option activities:

                                                                                                

Options

    Number of
Shares
   Weighted-
Average
Exercise
Price
   Weighted-
Average
Remaining
Contractual
Term
   Aggregate
Intrinsic
Value
 
     (In millions)       (In years)   (Dollars in millions) 

Outstanding at July 1, 2016

     5.4   $34.91    4.6   $14 

Granted

     2.3   $36.78     

Exercised

     (1.6  $19.87     

Forfeitures

     (0.3  $41.07     

Expirations

     (0.1  $47.66     
    

 

 

       

Outstanding at June 30, 2017

     5.7   $39.24    5.0   $22 
    

 

 

       

Vested and expected to vest at June 30, 2017

     5.5   $39.28    5.0   $21 
    

 

 

       

Exercisable at June 30, 2017

     2.1   $39.82    3.6   $12 
    

 

 

       

Options
Number of Shares
(In millions)
Weighted-Average Exercise Price
Weighted-Average Remaining Contractual Term
(In years)
Aggregate Intrinsic Value
(Dollars in millions)
Outstanding at June 28, 20193.5  $41.04  4.2$29  
Granted0.2  $54.78    
Exercised(1.2) $37.30    
Forfeitures(0.1) $37.73    
Expirations—  $—    
Outstanding at July 3, 20202.4  $44.18  3.7$15  
Vested and expected to vest at July 3, 20202.4  $44.14  3.7$15  
Exercisable at July 3, 20201.6  $44.05  3.0$11  
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s ordinary shares for the options that werein-the-money at June 30, 2017.July 3, 2020. During fiscal years 2017, 20162020, 2019 and 2015,2018, the aggregate intrinsic value of options exercised under the Company’s stockshare option plans was $29$22 million, $44$5 million and $92$34 million, respectively, determined as of the date of option exercise. The aggregate fair value of options vested during fiscal years 2017, 20162020, 2019 and 2015 were2018 was approximately $15$6 million, $18$9 million and $10$12 million, respectively.

At June 30, 2017,July 3, 2020, the total compensation cost related to options granted to employees but not yet recognized was approximately $25$7 million, net of an immaterial amount of estimated forfeitures. This cost is being amortized on a straight-line basis over a weighted-average remaining term of approximately 2.0 years and will be adjusted for subsequent changes in estimated forfeitures.
Unvested Awards Activity
The following is a summary of unvested award activities which do not contain a performance condition:
Unvested Awards
Number of Shares
(In millions)
Weighted-Average Grant-Date Fair Value
Unvested at June 28, 20195.4  $36.01  
Granted2.2  $49.49  
Forfeitures(0.8) $39.86  
Vested(2.0) $35.33  
Unvested at July 3, 20204.8  $41.77  
At July 3, 2020, the total compensation cost related to unvested awards granted to employees but not yet recognized was approximately $134 million, net of estimated forfeitures of approximately $1$18 million. This cost is being amortized on a straight-line basis over a weighted-average remaining term of approximately 2.5 years and will be adjusted for subsequent changes in estimated forfeitures.

Nonvested Awards Activity

The following is a summary of nonvested award activities which do not contain a performance condition:

                                                

Nonvested Awards

    Number of
Shares
   Weighted-
Average
Grant-
Date
Fair Value
 
     (In millions)     

Nonvested at July 1, 2016

     4.8   $39.95 

Granted

     3.1   $30.85 

Forfeitures

     (0.7  $39.72 

Vested

     (2.0  $37.02 
    

 

 

   

Nonvested at June 30, 2017

     5.2   $35.75 
    

 

 

   

At June 30, 2017, the total compensation cost related to nonvested awards granted to employees but not yet recognized was approximately $135 million, net of estimated forfeitures of approximately $8 million. This cost is being amortized on a straight-line basis over a weighted-average remaining term of 2.62.2 years and will be adjusted for subsequent changes in estimated forfeitures. The aggregate fair value of nonvestedunvested awards vested during fiscal years 2017, 20162020, 2019 and 20152018 were approximately $73$71 million, $102$57 million and $156$76 million, respectively.

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Performance Awards

The following is a summary of nonvestedunvested award activities which contain a performance condition:

                                                

Performance Awards

    Number of
Shares
   Weighted-
Average
Grant-
Date
Fair Value
 
     (In millions)     

Performance units at July 1, 2016

     1.4   $47.41 

Granted

     0.8   $32.16 

Forfeitures

     (0.3  $41.06 

Vested

     (0.4  $41.91 
    

 

 

   

Performance units at June 30, 2017

     1.5   $41.88 
    

 

 

   

Performance Awards
Number of Shares
(In millions)
Weighted-Average Grant-Date Fair Value
Performance units at June 28, 20191.0  $43.81  
Granted0.5  $44.75  
Forfeitures(0.1) $38.39  
Vested(0.5) $33.20  
Performance units at July 3, 20200.9  $42.77  
At June 30, 2017,July 3, 2020, the total compensation cost related to performance awards granted to employees but not yet recognized was approximately $36$16 million, net of estimated forfeitures of approximately $2 million. This cost is being amortized on a straight-line basis over a weighted-average remaining term of 3.291.9 years.

The aggregate fair value of performance awards vested during fiscal years 2020, 2019 and 2018 were approximately $12 million, $12 million and $11 million, respectively.

ESPP

During fiscal years 2017, 20162020, 2019 and 2015,2018, the aggregate intrinsic value of shares purchased under the Company’sCompany's ESPP was approximately $24$19 million, $12$10 million and $15$31 million, respectively. At June 30, 2017,July 3, 2020, the total compensation cost related to options to purchase the Company’sCompany's ordinary shares under the ESPP but not yet recognized was approximately $1.7$1.3 million. This cost will be amortized on a straight-line basis over a weighted-average period of approximately one month. During fiscal year 2017,2020, the Company issued 2.01.5 million ordinary shares with a weighted-average purchaseexercise price of $26.68$38.90 per share.

Tax-Deferred Savings Plan

The Company has atax-deferred savings plan, the Seagate 401(k) Plan (the “401(k) plan”"401(k) plan"), for the benefit of qualified employees. The
401(k) plan is designed to provide employees with an accumulation of funds at retirement. Qualified employees may elect to make contributions to the 401(k) plan on abi-weekly basis. Pursuant to the 401(k) plan, the Company matches 50% of employee contributions, up to 6% of compensation, subject to maximum annual contributions of $4,500$6,000 per participating employee. During fiscal years 2017, 20162020, 2019 and 2015,2018, the Company made matching contributions of $18$15 million, $19$16 million and $18$16 million, respectively.

Deferred Compensation Plan

On January 1, 2001, the

The Company has adopted the SDCP for the benefit of eligible employees. ThisThe plan is designed to permit certain discretionary employer contributions, in excess of the tax limits applicable to the 401(k) plan, and to permit employee deferrals in excess of certain tax limits. During fiscal year 2014, the Company entered into a TRS in order to manage the equity market risks associated with the SDCP liabilities. See “NoteNote 8. Derivative Financial Instruments”Instruments contained in this report for additional information about the TRS.

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12.Guarantees
Indemnifications of Officers and Directors
Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Seagate-Cayman”) and wholly-owned subsidiary of STX, from time to time enters into indemnification agreements with the directors, officers, employees and agents of STX or any of its subsidiaries (each, an “Indemnitee”). The indemnification agreements provide indemnification in addition to any of Indemnitee’s indemnification rights under any relevant Articles of Association (or similar constitutional document), applicable law or otherwise, and indemnifies an Indemnitee for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts actually and reasonably incurred by him or her in any action or proceeding, including any action by or in the right of STX or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of STX or any of its subsidiaries or of any other entity to which he or she provides services at the Company’s request. However, Indemnitees are not indemnified under the indemnification agreements for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to STX or the applicable subsidiary or (ii) Indemnitee’s conscious, intentional or willful failure to act honestly, lawfully and in good faith with a view to the best interests of the Company. In addition, the indemnification agreements provide that Seagate-Cayman will advance expenses incurred by an Indemnitee in connection with enforcement of the indemnification agreement or with the investigation, settlement or appeal of any action or proceeding against him or her as to which he or she could be indemnified.
The nature of these indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay on behalf of its officers and directors. Historically, the Company has not made any significant indemnification payments under such agreements and 0 amount has been accrued in the Company’s consolidated financial statements with respect to these indemnification obligations.
Indemnification Obligations
The Company from time to time enters into agreements with customers, suppliers, partners and others in the ordinary course of business that provide indemnification for certain matters including, but not limited to, intellectual property infringement claims, environmental claims and breach of agreement claims. The nature of the Company’s indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any significant indemnification payments under such agreements and 0 amount has been accrued in the Company’s consolidated financial statements with respect to these indemnification obligations.
Product Warranty
The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of 1 to 5 years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to determine its warranty obligation. As of July 3, 2020, the Company’s reserve for product warranty was $151 million compared to $195 million as of June 28, 2019. This decrease of $44 million was primarily driven by a continued decline in cost to repair and a decrease in the Company’s warranty return rate as compared to prior year.
Changes in the Company’s product warranty liability during the fiscal years ended July 3, 2020, June 28, 2019 and June 29, 2018 were as follows:
 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Balance, beginning of period$195  $237  $233  
Warranties issued86  112  147  
Repairs and replacements(85) (99) (106) 
Changes in liability for pre-existing warranties, including expirations(45) (55) (37) 
Balance, end of period$151  $195  $237  
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13.Earnings Per Share
Basic earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options, unvested RSUs and PSUs and shares to be purchased under the ESPP. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in fair market value of the Company’s share price can result in a greater dilutive effect from potentially dilutive securities. The following table sets forth the computation of basic and diluted net income per share:

                                                                        
     Fiscal Years Ended 

(In millions, except per share data)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Numerator:

        

Net income

    $772   $248   $1,742 
    

 

 

   

 

 

   

 

 

 

Number of shares used in per share calculations:

        

Total shares for purposes of calculating basic net income per share

     296    299    324 

Weighted-average effect of dilutive securities:

        

Employee equity award plans

     3    3    7 
    

 

 

   

 

 

   

 

 

 

Total shares for purpose of calculating diluted net income per share

     299    302    331 
    

 

 

   

 

 

   

 

 

 

Net income per share

        

Basic

    $2.61   $0.83   $5.38 

Diluted

    $2.58   $0.82   $5.26 

share attributable to the shareholders of the Company: 

 Fiscal Years Ended
(In millions, except per share data)July 3,
2020
June 28,
2019
June 29,
2018
Numerator:   
Net income$1,004  $2,012  $1,182  
Number of shares used in per share calculations:   
Total shares for purposes of calculating basic net income per share262  282  288  
Weighted-average effect of dilutive securities:   
Employee equity award plans   
Total shares for purposes of calculating diluted net income per share265  285  292  
Net income per share   
Basic$3.83  $7.13  $4.10  
Diluted3.79  7.06  4.05  
The following potential shares were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive:

                                                                        
     Fiscal Years Ended 

(In millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Employee equity award plans

     1    3    —   

13.Business Segment and Geographic Information
Fiscal Years Ended
(In millions)July 3,
2020
June 28,
2019
June 29,
2018
Employee equity award plans— — 

The Company has concluded that its manufacture

14.Legal, Environmental and distribution of storage solutions constitutes one reporting segment. The Company’s manufacturing operations are based on technology platforms that are used to produce various storage and systems solutions that serve multiple applications and markets. The Company’s main technology platforms are primarily focused around areal density of media and read/write head technologies. In addition, the Company also invests in certain other technology platforms including motors, servo formatting read/write channels, solid state and other technologies. The Company has determined that its Chief Executive Officer is the Company’s chief operating decision maker (“CODM”) as he is responsible for reviewing and approving investments in the Company’s technology platforms and manufacturing infrastructure.

In fiscal years 2017, 2016 and 2015, Dell Inc. accounted for approximately 10%, 12% and 14% of consolidated revenue, respectively. In fiscal year 2015, Hewlett-Packard Company accounted for approximately 12% of consolidated revenue. In fiscal year 2016, HP Inc., formerly known as Hewlett-Packard Company, completed its separation with Hewlett Packard Enterprise Company, and each company accounted for less than 10% of our consolidated revenue in both fiscal year 2016 and 2017. No other customer accounted for more than 10% of consolidated revenue in any year presented.

Other long-lived assets consist of property, equipment and leasehold improvements, other intangible assets, capital leases, equity investments and othernon-current assets as recorded by the Company’s operations in each area.

Contingencies

The following table summarizes the Company’s operations by geographic area:

                                                                        
     Fiscal Years Ended 

(Dollars in millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Revenue from external customers(a):

        

Singapore

    $5,070   $5,354   $6,844 

United States

     3,535    3,376    3,929 

The Netherlands

     1,501    1,813    2,291 

Other

     665    617    675 
    

 

 

   

 

 

   

 

 

 

Consolidated

    $10,771   $11,160   $13,739 
    

 

 

   

 

 

   

 

 

 

Long-lived assets:

        

United States

    $920   $1,029   $725 

Singapore

     683    726    900 

Thailand

     414    349    328 

Malaysia

     100    201    248 

China

     61    115    138 

Other

     202    444    568 
    

 

 

   

 

 

   

 

 

 

Consolidated

    $2,380   $2,864   $2,907 
    

 

 

   

 

 

   

 

 

 

(a)Revenue is attributed to countries based on the shipping location.

14.Legal, Environmental and Other Contingencies

The Company assesses the probability of an unfavorable outcome of all its material litigation, claims or assessments to determine whether a liability had been incurred and whether it is probable that one or more future events will occur confirming the fact of the loss. In the event that an unfavorable outcome is determined to be probable and the amount of the loss can be reasonably estimated, the Company establishes an accrual for the litigation, claim or assessment. In addition, in the event an unfavorable outcome is determined to be less than probable, but reasonably possible, the Company will disclose an estimate of the possible loss or range of such loss; however, when a reasonable estimate cannot be made, the Company will provide disclosure to that effect. Litigation is inherently uncertain and may result in adverse rulings or decisions. Additionally, the Company may enter into settlements or be subject to judgments that may, individually or in the aggregate, have a material adverse effect on its results of operations. Accordingly, actual results could differ materially.

Intellectual Property

Litigation

Convolve, Inc. (“Convolve”) and Massachusetts Institute of Technology (“MIT”) v. Seagate Technology LLC, et al.-OnOn July 13, 2000, Convolve and MIT filed suit against Compaq Computer Corporation and Seagate Technology LLC in the U.S. District Court for the Southern District of New York, alleging infringement of U.S. Patent No. 4,916,635 (the “‘635 patent”) and U.S. Patent No. 5,638,267 (the “‘267 patent”), misappropriation of trade secrets, breach of contract and other claims. On January 16, 2002, Convolve filed an amended complaint, alleging defendants infringewere infringing U.S. Patent No. 6,314,473 (the “‘473 patent”). The district court ruled in 2010 that the ‘267 patent was out of the case.

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On August 16, 2011, the district court granted in part and denied in part the Company’s motion for summary judgment. On July 1, 2013, the U.S. Court of Appeals for the Federal Circuit: 1) affirmed the district court’s summary judgment rulings that Seagatethe Company did not misappropriate any of the alleged trade secrets and that the asserted claims of the ‘635 patent are invalid; 2) reversed and vacated the district court’s summary judgment ofnon-infringement with respect to the ‘473 patent; and 3) remanded the case for further proceedings on the ‘473 patent. On July 11, 2014, the district court granted the Company’s further summary judgment motion regarding the ‘473 patent. On February 10, 2016, the U.S. Court of Appeals for the Federal Circuit: 1) affirmed the district court’s summary judgment of no direct infringement by Seagatethe Company because Seagate’sthe Company’s ATA/SCSI disk drives do not meet the “user interface” limitation of the asserted claims of the ‘473 patent; 2) affirmed the district court’s summary judgment ofnon-infringement by Compaq’s products as to claims 1, 3, and 5 of the ‘473 patent because Compaq’s F10 BIOS interface does not meet the “commands” limitation of those claims; 3) vacated the district court’s summary judgment ofnon-infringement by Compaq’s accused products as to claims7-15 of the ‘473 patent; 4) reversed the district court’s summary judgment ofnon-infringement based on intervening rights; and 5) remanded the case to the district court for further proceedings on the ‘473 patent. In view of the rulings made by the district court and the Court of Appeals and the uncertainty regarding the amount of damages, if any, that could be awarded Convolve in this matter, the Company does not believe that it is currently possible to determine a reasonable estimate of the possible range of loss related to this matter.

Alexander Shukh v. Seagate Technology-On February 12, 2010, Alexander Shukh filed a complaint against the Company in the U.S. District Court for the District of Minnesota, alleging, among other things, employment discrimination and wrongful failure to name him as an inventor on certain Seagate patents. On March 31, 2014, the district court granted Seagate’s summary judgment motion. Mr. Shukh filed a notice of appeal on April 7, 2014. On October 2, 2015, the U.S. Court of Appeals for the Federal Circuit vacated and remanded the district court’s grant of summary judgment on Mr. Shukh’s claim for correction of inventorship and affirmed the district court’s grant of summary judgment as to all other claims. On October 29, 2015, Mr. Shukh filed a petition for rehearing en banc with the court of appeals; the petition was denied on December 17, 2015. On March 16, 2016, Shukh filed a petition for writ of certiorari to the U.S. Supreme Court; the petition was denied on June 27, 2016. On March 30, 2017, the parties entered into a confidential settlement to resolve this matter. This settlement did not have a material impact on the Company’s consolidated financial statements.

Enova Technology Corporation v. Seagate Technology (US) Holdings, Inc., et al.-On June 5, 2013, Enova Technology Corporation (“Enova”) filed a complaint against Seagate Technology (US) Holdings, Inc. and Seagate Technology LLC in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent No. 7,136,995 (the “‘995 patent”), “Cryptographic Device,” and U.S. Patent No. 7,900,057 (the “‘057 patent”), “Cryptographic Serial ATA Apparatus and Method.” The Company believes the claims are without merit and intends to vigorously defend this case. On April 27, 2015, the district court ordered a stay of the case, in view of proceedings regarding the ‘995 and ‘057 patents before the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. On September 2, 2015, PTAB issued its final written decision that claims1-15 of the ‘995 patent are held unpatentable. On December 18, 2015, PTAB issued its final written decisions that claims1-32 and40-53 of the ‘057 patent are held unpatentable. On February 4, 2016, PTAB issued its final written decision that claims33-39 of the ‘057 patent are held unpatentable. Enova has appealed PTAB’s decisions on the ‘995 patent and the ‘057 patent to the U.S. Court of Appeals for the Federal Circuit. Oral argument for the appeal from PTAB’s decision on the ‘995 patent was held on March 13, 2017, at the court of appeals. On March 20, 2017, the court of appeals issued its judgment affirming PTAB’s decision on the ‘995 patent. Oral argument before the court of appeals for the appeal from PTAB’s decision on the ‘057 patent is scheduled for August 11, 2017. In view of the uncertainty regarding the amount of damages, if any, that could be awarded in this matter, the Company does not believe that it is currently possible to determine a reasonable estimate of the possible range of loss related to this matter.

Lambeth Magnetic Structures LLC v. Seagate Technology (US) Holdings, Inc., et al.-OnOn April 29, 2016, Lambeth Magnetic Structures LLC filed a complaint against Seagate Technology (US) Holdings, Inc. and Seagate Technology LLC in the U.S. District Court for the Western District of Pennsylvania, alleging infringement of U.S. Patent No. 7,128,988, “Magnetic Material Structures, Devices and Methods.” The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend this case. In view of the uncertainty regarding the amount of damages, if any, that could be awarded in this matter, the Company does not believe that itThe court issued its claim construction ruling on October 18, 2017. The trial is currently possiblescheduled to determine a reasonable estimate ofbegin on November 30, 2020. While the possible range of loss relatedfor this matter remains uncertain, the Company estimates the amount of loss to this matter.

be immaterial to the financial statements.

Seagate Technology LLC, et al. v. NHK Spring Co. Ltd. and TDK Corporation, et al. On February 18, 2020, Seagate Technology LLC, Seagate Technology (Thailand) Ltd., Seagate Singapore International Headquarters Pte. Ltd., and Seagate Technology International filed a complaint in the United States District Court for the Northern District of California against defendant suppliers of HDD suspension assemblies. Defendants include NHK Spring Co. Ltd., TDK Corporation, Hutchinson Technology Inc., and several of their subsidiaries and affiliates. The complaint includes federal and state antitrust law claims, as well as a breach of contract claim. The complaint alleges that defendants and their co-conspirators knowingly conspired for more than twelve years not to compete in the supply of suspension assemblies; that defendants misused confidential information that the Company had provided pursuant to nondisclosure agreements, in breach of their contractual obligations; and that the Company paid artificially high prices on its purchases of suspension assemblies. The Company seeks to recover the overcharges it paid for suspension assemblies, as well as additional relief permitted by law.
Environmental Matters

The Company’s operations are subject to U.S. and foreign laws and regulations relating to the protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Some of the Company’s operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities.

The Company has established environmental management systems and continually updates its environmental policies and standard operating procedures for its operations worldwide. The Company believes that its operations are in material compliance with applicable environmental laws, regulations and permits. The Company budgets for operating and capital costs on an ongoing basis to comply with environmental laws. If additional or more stringent requirements are imposed on the Company in the future, it could incur additional operating costs and capital expenditures.

Some environmental laws, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (as amended, the “Superfund” law) and its state equivalents, can impose liability for the cost of cleanup of contaminated sites upon any of the current or former site owners or operators or upon parties who sent waste to these sites, regardless of whether the owner or operator owned the site at the time of the release of hazardous substances or the lawfulness of the original disposal activity. The Company has been identified as a responsible or potentially responsible party at several sites. At each of these sites, the Company has an assigned portion of the financial liability based on the type and amount of hazardous substances disposed of by each party at the site and the number of financially viable parties. The Company has fulfilled its responsibilities at some of these sites and remains involved in only a few at this time.

While the Company’s ultimate costs in connection with these sites is difficult to predict with complete accuracy, based on its current estimates of cleanup costs and its expected allocation of these costs, the Company does not expect costs in connection with these sites to be material.

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The Company may be subject to various state, federal and international laws and regulations governing the environment, including those restricting the presence of certain substances in electronic products. For example, the European Union (“EU”) enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (2011/65/EU), which prohibits the use of certain substances, including lead, in certain products, including disk drives and server storage products, put on the market after July 1, 2006. Similar legislation has been or may be enacted in other jurisdictions, including in the United States,U.S., Canada, Mexico, Taiwan, China, Japan and others. The European UnionEU REACH Directive (Registration, Evaluation, Authorization, and Restriction of Chemicals, EC 1907/2006) also restricts substances of very high concern (“SVHCs”) in products. If the Company or its suppliers fails to comply with the substance restrictions, recycle requirements or other environmental requirements as they are enacted worldwide, it could have a materially adverse effect on the Company’s business.

Other Matters

The Company is involved in a number of other judicial, andregulatory or administrative proceedings and investigations incidental to its business, and the Company may be involved in various legalsuch proceedings and investigations arising in the normal course of its business in the future. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position or results of operations.

15.Commitments

Leases. The Company leases certain property, facilities and equipment undernon-cancelable lease agreements. Land and facility leases expire at various dates through 2082 and contain various provisions for rental adjustments including, in certain cases, a provision based on increases in the Consumer Price Index. Also, certain leases provide for renewal of the lease at the Company’s option at expiration of the lease. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception. All of the leases require the Company to pay property taxes, insurance and normal maintenance costs which are expensed as incurred.

Future minimum lease payments for operating leases (including accrued lease payments relating to restructuring plans) with initial or remaining terms of one year or more were as follows at June 30, 2017 (lease payments are shown net of sublease income):

                        

Fiscal Years Ending

    Operating Leases 
(Dollars in millions)      

2018

    $19 

2019

     15 

2020

     11 

2021

     9 

2022

     6 

Thereafter

     75 
    

 

 

 
    $135 
    

 

 

 

Total rent expense for all land, facility and equipment operating leases, net of sublease income, was $29 million, $43 million and $50 million for fiscal years 2017, 2016 and 2015, respectively. Total sublease rental income for fiscal years 2017, 2016 and 2015 was $2 million, $3 million and $3 million, respectively. The Company subleases a portion of its facilities that it considers to be in excess of current requirements.

15.Commitments
Unconditional Long-Term Purchase Obligations. As of June 30, 2017, total future lease income to be recognized for the Company’s existing subleases is approximately $9 million

Capital Expenditures. The Company’snon-cancelable commitments for construction of manufacturing and product development facilities and purchases of equipment approximated $107 million at June 30, 2017.

Unconditional Purchase Obligations. During fiscal year 2017,July 3, 2020, the Company had unconditional long-term purchase obligations of approximately $1.1 billion in the aggregate,$163 million, primarily related to purchases of which $900 million in the aggregate remains outstanding as of June 30, 2017, to purchase minimum quarterly amounts of inventory components at fixed and variablecontractual prices. The Company expects the commitment to total $375$33 million, $350$35 million, $32 million and $175$63 million for fiscal years 2018, 20192022, 2023, 2024, and 2020,2025, respectively with no remaining commitment thereafter.

16.Guarantees

Indemnifications to Officers and Directors

On May 4, 2009, Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Seagate-Cayman”), then the parent company, entered into a new form of indemnification agreement (the “Revised Indemnification Agreement”) with its officers and directors of Seagate-Cayman and its subsidiaries (each, an “Indemnitee”)Unconditional Long-term Capital Expenditures. The Revised Indemnification Agreement provides indemnification in addition to anyAs of Indemnitee’s indemnification rights under Seagate-Cayman’s Articles of Association, applicable law or otherwise, and indemnifies an Indemnitee for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts actually and reasonably incurred by him or her in any action or proceeding, including any action by or in the right of Seagate-Cayman or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of Seagate-Cayman or any of its subsidiaries or of any other entity to which he or she provides services at Seagate-Cayman’s request. However, an Indemnitee shall not be indemnified under the Revised Indemnification Agreement for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to Seagate-Cayman or the applicable subsidiary of Seagate-Cayman or (ii) Indemnitee’s conscious, intentional or willful failure to act honestly, lawfully and in good faith with a view to the best interests of Seagate-Cayman or the applicable subsidiary of Seagate-Cayman. In addition, the Revised Indemnification Agreement provides that Seagate-Cayman will advance expenses incurred by an Indemnitee in connection with enforcement of the Revised Indemnification Agreement or with the investigation, settlement or appeal of any action or proceeding against him or her as to which he or she could be indemnified.

On July 3, 2010, pursuant2020, the Company had $52 million unconditional long-term commitment primarily related to a corporate reorganization,purchases of equipment.

16.Business Segment and Geographic Information
The Company’s manufacturing operations are based on technology platforms that are used to produce various data storage and systems solutions that serve multiple applications and markets. The Company has determined that its Chief Operating Decision Maker, the common shareholders of Seagate-Cayman became ordinary shareholders of Seagate Technology plc (the “Company”) and Seagate-Cayman became a wholly owned subsidiaryChief Executive Officer, evaluates performance of the Company as described more fullyand makes decisions regarding investments in the Current ReportCompany’s technology platforms and manufacturing infrastructure based on Form8-K filed by the Company on July 6, 2010 (the “Redomestication”). On July 27, 2010, in connection with the Redomestication, the Company, as sole shareholder of Seagate-Cayman, approved a form of deed of indemnity (the “Deed of Indemnity”), which provides for the indemnification by Seagate-Cayman of any director, officer, employee or agent of the Company, Seagate-Cayman or any subsidiary of the Company (each, a “Deed Indemnitee”), in addition to any of a Deed Indemnitee’s indemnification rights under the Company’s Articles of Association, applicable law or otherwise, withconsolidated results. As a similar scope to the Revised Indemnification Agreement. Seagate-Cayman entered into the Deed of Indemnity with certain Deed Indemnitees effective as of July 3, 2010 and continues to enter into the Deed of Indemnity with additional Deed Indemnitees from time to time.

The nature of these indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay on behalf of its officers and directors. Historically,result, the Company has not made any significant indemnification payments under such agreementsconcluded that its manufacture and distribution of storage solutions constitutes one reporting segment.

In fiscal years 2020, 2019 and 2018, no amount has been accrued in the accompanyingcustomer accounted for more than 10% of consolidated financial statements with respect to these indemnification obligations.

Intellectual Property Indemnification Obligations

revenue.

The Company has entered into agreements with customers and suppliers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers and suppliers. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations.

Product Warranty

The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of 1 to 5 years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to determine its warranty obligation. Changes infollowing table summarizes the Company’s product warranty liability duringoperations by geographic area:

 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Revenue from external customers (1):
   
Singapore$5,032  $5,085  $5,445  
United States3,583  3,310  3,719  
The Netherlands1,572  1,630  1,598  
Other322  365  422  
Consolidated$10,509  $10,390  $11,184  
Long-lived assets:   
Thailand$681  $558  $426  
Singapore601  556  600  
United States567  523  565  
Other376  286  257  
Consolidated$2,225  $1,923  $1,848  

(1) Revenue is attributed to countries based on the fiscal years ended June 30, 2017, July 1, 2016bill from location.
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17.Revenue
The following table provides information about disaggregated revenue by sales channel and July 3, 2015 were as follows:geographical region for the Company’s single reportable segment:
 Fiscal Years Ended
(Dollars in millions)July 3,
2020
June 28,
2019
June 29,
2018
Revenues by Channel 
OEMs$7,504  $7,261  $7,863  
Distributors1,738  1,780  1,906  
Retailers1,267  1,349  1,415  
Total$10,509  $10,390  $11,184  
Revenues by Geography(1)
Asia Pacific$5,060  $5,115  $5,482  
Americas3,583  3,310  3,719  
EMEA1,866  1,965  1,983  
Total$10,509  $10,390  $11,184  

                                                                        
     Fiscal Years Ended 

(In millions)

    June 30,
2017
   July 1,
2016
   July 3,
2015
 

Balance, beginning of period

    $206   $248   $273 

Warranties issued

     131    125    147 

Repairs and replacements

     (114   (152   (187

Changes in liability forpre-existing warranties, including expirations

     10    (17   7 

Warranty liability assumed from acquisitions

     —      2    8 
    

 

 

   

 

 

   

 

 

 

Balance, end of period

    $233   $206   $248 
    

 

 

   

 

 

   

 

 

 

17.Subsequent Events

July 2017 Restructuring Plan

(1) Revenue is attributed to countries based on bill from locations.
18.Subsequent Events
Dividend Declared
On July 25, 2017, the Company committed to an additional restructuring plan (the “July 2017 Plan”) to reduce its cost structure. The July 2017 Plan included reducing the Company’s global headcount by approximately 600 employees. The July 2017 Plan, which the Company expects to be substantially completed by the end of the first quarter of fiscal year 2018, is expected to result intotal pre-tax charges of approximately $50 million, primarily in the first quarter of fiscal year 2018. These charges are expected to be comprised of cash expenditures on severance and employee-related costs.

Planned Leadership Transition

On July 25, 201722, 2020, the Company’s Board of Directors appointed William D. Mosley to serve as Chief Executive Officer, of the Company effective October 1, 2017. The Board of Directors also appointed Mr. Mosley to serve as a director of the Company, effective July 25, 2017. Mr. Mosley will serve as a director until the Company’s next annual general meeting of shareholders when he is expected to stand for election by a vote of the Company’s shareholders. On July 25, 2017, the Company also announced that Stephen J. Luczo will step down from his position as Chief Executive Officer, effective October 1, 2017. Mr. Luczo will remain with the Company in the role of Executive Chairman effective October 1, 2017 and will continue to serve as Chairman of the Board of Directors.

As previously announced on June 2, 2017, Philip G. Brace, President of Cloud Systems and Silicon group, will be leaving the Company. On July 20, 2017, the Company and Mr. Brace agreed that the effective date of his departure will be October 2, 2017.

Dividend Declared

On July 25, 2017, the Company’s Board of Directors approved and declared a quarterly cash dividend of $0.63$0.65 per share, which will be payable on October 4, 20177, 2020 to shareholders of record as of the close of business on September 20, 2017.

23, 2020.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The


To the Shareholders and the Board of Directors and Shareholders of Seagate Technology public limited company


Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Seagate Technology public limited company (plc) (the Company) as of July 3, 2020 and June 30, 201728, 2019, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended July 1, 2016,3, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at July 3, 2020 and June 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended July 3, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of July 3, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 7, 2020 expressed an unqualified opinion thereon.
Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition—Sales incentive program rebates and discounts
Description of the MatterThe Company sells its products to original equipment manufacturers, distributors and retailers (collectively, “customers”). As explained in Note 1 to the consolidated financial statements, the Company reduces revenue for estimated future reductions to the final selling prices for shipped products including sales incentive programs, such as price protection and volume incentives.
Auditing management’s estimates of future reductions to the final selling prices is complex as it requires management to make subjective assumptions including the amount of price adjustments on products as well as the timing of its channel sales of products through to end customers.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the completeness of sales incentive programs, the accuracy and completeness of the underlying data used in the calculations and management’s assumptions of the amount of future reductions to the final selling prices as well as the timing of its channel sales of products through to end customers.
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To test the estimated sales incentive programs, our audit procedures included, among others, testing the completeness of sales incentive programs as well as the accuracy and completeness of the underlying data used in the calculations and evaluating the significant assumptions used by management to estimate its reserves related to remaining channel inventory. To test the completeness of the sales incentive programs, we inspected significant new sales contracts and agreements that include the contractual rights to discounts and rebates to validate they are being properly considered in the incentives reserve calculations and examined credit memos issued after year end. We also directly confirmed terms and conditions of agreements with a sample of the Company’s customers as well as inquired of sales representatives and other members of management to assess whether all contractual terms were provided to the Finance Department. To test the underlying data used in the sales incentive program reserve calculations, we confirmed ending on hand inventory at a sample of distributors and retailers. To test management’s assumptions of the amount of future reductions to the final selling prices as well as the timing of its distributors’ sales of products through to end customers we inquired with operations management and compared estimates with industry and analysts’ forecasts. In addition, we performed a retrospective review comparing prior period assumptions to the actual results in subsequent periods and performed sensitivity analyses to evaluate the potential effect of changes in the Company's significant assumptions.
Realizability of deferred income taxes
Description of the MatterAt July 3, 2020, the Company had gross deferred tax assets of $1,566 million, partially offset by a valuation allowance of $438 million. As discussed in Note 5 to the consolidated financial statements, the Company recognizes a valuation allowance to reduce the carrying value of its deferred tax assets to the amount that management believes is more likely than not to be realized.
Auditing the realizability of the deferred tax assets was complex as the assessment process includes forecasting future sources of taxable income and scheduling the use of the applicable deferred tax assets which includes subjective management assumptions, and the amounts involved are material to the financial statements as a whole.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability of deferred tax assets. This included controls over management’s determination of sources and amount of future taxable income including income from operations and scheduling of the future reversal of existing taxable temporary differences.
Among other audit procedures performed, we evaluated the assumptions used by the Company to develop projections of future taxable income by jurisdiction and tested the completeness and accuracy of the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends. We also assessed the historical accuracy of management’s projections and compared the projections of future taxable income with other forecasted financial information prepared by the Company. In addition, we tested the Company’s scheduling of the reversal of existing temporary taxable differences.
Accrual for product warranties
Description of the MatterAt July 3, 2020, the Company’s accrual for product warranties was $151 million. As disclosed in Note 12 to the consolidated financial statements, the Company issues various types of product warranties under which the performance of products delivered is generally guaranteed for a specified contractual period.
Auditing the Company’s product warranty accrual was complex as the calculation of the accrual for product warranties is based on estimates of product failure rates and changes in the estimates can materially affect the accrual recorded in the consolidated financial statements.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for recording product warranties, including controls over management’s review of the estimated failure rates, estimated return rates, and completeness and accuracy of the underlying data used in the calculation.
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To test the Company’s accrual for product warranties, our audit procedures included, among other procedures, evaluating the reasonableness of the estimated failure rate and estimated return rates and testing the accuracy and completeness of the underlying data used in the calculations. We also performed retrospective reviews of the actual rates to the estimated product failure rates used by the Company and performed sensitivity analyses to evaluate the impact of changes to the warranty accrual based on changes in product failure rates. This included testing, on a sample basis, the historical product return and current period shipments data used in the warranty accrual calculation, and benchmarking to peer company data.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1980.
San Jose, California
August 7, 2020

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Seagate Technology public limited company

Opinion on Internal Control Over Financial Reporting

We have audited Seagate Technology public limited company (plc)’s internal control over financial reporting as of July 3, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Seagate Technology public limited company (plc) (the Company) maintained, in all material respects, effective internal control over financial reporting as of July 3, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of July 3, 2020 and June 28, 2019, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended June 30, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Seagate Technology plc at June 30, 2017 and July 1, 2016,3, 2020 and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Seagate Technology plc’s internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)related notes and our report dated August 4, 20177, 2020 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Jose, California

August 4, 2017


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Basis for Opinion

The Board of Directors and Shareholders of Seagate Technology public limited company

We have audited Seagate Technology public limited company (plc)’s internal control over financial reporting as of June 30, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Seagate Technology plc’sCompany's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Seagate Technology plc maintained, in all material respects, effective internal control over financial reporting as of June 30, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Seagate Technology plc as of June 30, 2017 and July 1, 2016, and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended June 30, 2017 and our report dated August 4, 2017 expressed an unqualified opinion thereon.


/s/ ERNSTErnst & YOUNGYoung LLP

San Jose, California

August 4, 2017

7, 2020

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SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

For quarterly financial data see “Part"Part II, Item 6. Selected Financial Data.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

"

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.

ITEM 9A.CONTROLS AND PROCEDURES

ITEM 9A.CONTROLS AND PROCEDURES
Conclusions Regarding Disclosure Controls and Procedures

Our chief executive officer and our chief financial officer have concluded, based on the evaluation of the effectiveness of our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended) by our management, with the participation of our chief executive officer and our chief financial officer, that our disclosure controls and procedures were effective as of June 30, 2017.

July 3, 2020.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRules 13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934, as amended). Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Based on our evaluation under the 2013 framework inInternal Control—Integrated Framework, our management has concluded that our internal control over financial reporting was effective as of June 30, 2017.July 3, 2020. The effectiveness of our internal control over financial reporting as of June 30, 2017July 3, 2020 has been audited by Ernst & Young LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form10-K, as stated in their report that is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our fourth fiscal quarter that have materially affected, or arewere reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our disclosure controls and procedures and our internal controls have been designed to provide reasonable assurance of achieving their objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Seagate have been detected. An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2017.July 3, 2020. Based on that evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

ITEM 9B.OTHER INFORMATION

ITEM 9B.OTHER INFORMATION
Not applicable.

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PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding our directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, set forth in the sections entitled “Proposal 1—Election of Directors,” “Corporate Governance” and “Section“Delinquent Section 16(A) Beneficial Ownership Reporting Compliance,Reports,” in our Proxy Statement to be filed with the CommissionSEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) toForm 10-K are hereby incorporated by reference in this section. In addition, the information set forth in Part I of this report under “Item"Item 1. Business—Executive Officers”Officers" is also incorporated by reference in this section.

We have adopted a Code of Ethics that applies to the Chief Executive officer,Officer, the Chief Financial Officer, and the principal accounting officer or controller or persons performing similar functions. This Code of Ethics is available on our Website. The Internet address for our Website iswww.seagate.com, and the Code of Ethics may be found from our main Web page by clicking first on “Investors,” next on “Corporate Governance”“Governance” and then on “Code of Ethics.”

We intend to satisfy any disclosure requirements under Item 5.05 ofForm 8-K regarding an amendment to, or waiver from, a provision of this Code of Ethics by posting such information on our Website atin the Internet address and location specified above.

ITEM 11.EXECUTIVE COMPENSATION

above for the Code of Ethics.

ITEM 11.EXECUTIVE COMPENSATION
The information regarding executive compensation required by this Item 11 set forth in the section entitled “Compensation"Compensation of Named Executive Officers”Officers" in our Proxy Statement to be filed with the CommissionSEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) toForm 10-K is hereby incorporated by reference in this section.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information regarding security ownership beneficial owners and management and related shareholders and equity compensation plans required by this Item 12 set forth in the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” respectively, in our Proxy Statement to be filed with the CommissionSEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) toForm 10-K is hereby incorporated by reference in this section.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

section.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information regarding certain relationships, related transactions and director independence required by this Item 13 set forth in the section entitled “Certain"Certain Relationships and Related Transactions”Transactions" in our Proxy Statement to be filed with the CommissionSEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) toForm 10-K is hereby incorporated by reference in this section.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information regarding principal accountant fees and services required by this Item 14 set forth in the section entitled “Fees of the"Fees to Independent Auditors”Auditors" in our Proxy Statement to be filed with the CommissionSEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) toForm 10-K is hereby incorporated by reference in this section.


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PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as part of this Report:

ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Report:
1.Financial Statements. The following Consolidated Financial Statements of Seagate Technology plc and Report of Independent Registered Public Accounting Firm are included in Item 8:

Page No.

Consolidated Balance Sheets

51

Consolidated Statements of Operations

52

Consolidated Statements of Comprehensive Income

53

Consolidated Statements of Cash Flows

54

Consolidated Statements of Shareholders’Shareholders' Equity

55

Notes to Consolidated Financial Statements

56

Reports of Independent Registered Public Accounting Firm

2.Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is included in the Financial Statements or in the notes thereto.


(b)Exhibits. The following exhibits, as required by Item 601 of Regulation S-K are attached or incorporated by reference as stated below.

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EXHIBIT INDEX
  Incorporated by Reference 
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
2.1DEF 14A001-31560Annex A3/5/2010 
3.1

8-K001-315603.110/24/2016
 
3.210-K001-315603.28/20/2010 
4.110-K001-315604.18/2/2019
4.210-K001-315604.18/20/2010 
4.3


8-K001-315604.15/22/2013
4.48-K001-315604.15/22/2013
4.5

8-K001-315604.35/22/2013
4.6

8-K001-315604.15/28/2014
4.7

8-K001-315604.15/28/2014
4.8

8-K001-315604.35/28/2014
4.9

8-K001-315604.112/2/2014
4.108-K001-315604.112/2/2014
4.118-K001-315604.312/2/2014
4.12

8-K001-31560
4.12/3/2017
4.13

8-K001-315604.12/3/2017


4.14

8-K001-31560
4.32/3/2017


4.15

8-K001-31560
4.32/3/2017


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  Incorporated by Reference 
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
4.16

8-K001-31560
4.52/3/2017


4.17

8-K001-31560
4.62/3/2017


4.188-K001-31560
4.15/14/2015
4.198-K001-31560
4.15/14/2015
4.208-K001-31560
4.35/14/2015
4.218-K001-315604.16/10/2020
4.228-K001-315604.16/10/2020
4.238-K001-315604.36/10/2020
4.248-K001-315604.16/18/2020
4.258-K001-315604.16/18/2020
4.268-K001-315604.36/18/2020
10.1+10-K001-3156010.28/20/2010 
10.2+10-K001-3156010.38/20/2010 
10.3+10-K001-3156010.68/20/2010 
10.4+10-Q001-3156010.711/4/2009 
10.5+10-K001-3156010.138/20/2010 
10.6+10-K001-3156010.168/20/2010 
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(b)Exhibits. The information required
Incorporated by this Item is set forthReference
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
10.7+10-Q001-3156010.1911/3/2010
10.8+10-Q001-3156010.5610/27/2011
10.9+10-Q001-3156010.410/27/2017
10.10+

10-Q001-3156010.41/26/2017
10.11+

10-Q001-3156010.31/26/2017
10.12+

10-Q001-3156010.21/26/2017
10.13+

10-Q001-3156010.11/26/2017
10.14+8-K001-3156010.110/18/2017
10.15+10-Q001-3156010.11/29/2016
10.16+

10-Q001-3156010.31/30/2015
10.16(a)+10-Q001-3156010.110/30/2015
10.16(b)+10-K001-3156010.16(b)8/2/2019
10.16(c)+10-Q001-3156010.62/4/2019
10.16(d)+10-Q001-3156010.12/5/2020
10.17+10-K001-3156010.178/2/2019
10.17(a)+10-Q001-3156010.265/5/2010
10.17(b)+10-Q001-3156010.215/3/2011
10.17(c)+10-Q/A001-3156010.561/31/2013
10.17(d)+10-Q001-3156010.41/30/2015
10.17(e)+10-Q001-3156010.72/4/2019
10.17(f)+X
102

Table of Contents
  Incorporated by Reference 
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
10.18+10-Q001-3156010.274/30/2012
10.18(a)+10-Q001-3156010.42/4/2019
10.18(b)+X
10.19+10-Q001-3156010.285/5/2010
10.19(a)+10-Q001-3156010.52/4/2019
10.19(b)+X
10.20+8-K001-3156010.111/4/2013
10.21+10-K001-3156010.18/8/2014 
10.22+10-K001-3156010.468/8/2013 
10.23+10-Q001-3156010.202/10/2009 
10.2410-Q001-31560 10.4(b)5/6/2009
10.258-K001-3156010.27/6/2010
10.2610-Q001-3156010.310/27/2017
10.27+10-K001-3156010.528/3/2018
10.28+10-Q001-3156010.111/2/2018
10.29+10-Q001-3156010.32/4/2019
10.3010-Q001-3516010.14/30/2019
103

Table of Contents
  Incorporated by Reference 
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
10.3110-Q001-3156010.24/30/2019
10.3210-Q001-3156010.34/30/2019
10.33(a)10-Q001-3156010.111/1/2019
10.33(b)10-Q001-3156010.211/1/2019
10.34+8.K001-3156010.111/4/2019
10.35+X
10.36+X
10.37+X
10.38+X
21.1 X
23.1 X
24.1  X
31.1 X
31.2    X
104

Table of Contents
Incorporated by Reference
Exhibit
No.
Exhibit DescriptionFormFile No.ExhibitFiling
Date
Filed
Herewith
32.1†X
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
104Inline XBRL Cover Page contained in Exhibit 101

+ Management contract or compensatory plan or arrangement.
† The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Seagate Technology plc under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

105


Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY
/s/ DR. WILLIAM D. MOSLEY
Date:August 7, 2020

/s/ STEPHEN J. LUCZO

Date: August 4, 2017

(Stephen J. Luczo, (Dr. William D. Mosley, Chief Executive Officer

Director and Chairman of the Board of Directors)

Director)


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Stephen J. Luczo, David H. Morton, Jr.,Dr. William D. Mosley, Gianluca Romano, and Katherine E. Schuelke, and each of them, as hishis/her true and lawfulattorneys-in-fact and agents, with power to act with or without the others and with full power of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agents and each of them may deem necessary or desirable to enable the registrant to comply with the U.S. Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder in connection with the registrant’sregistrant's Annual Report onForm 10-K for the fiscal year ended June 30, 2017July 3, 2020 (the “Annual Report”"Annual Report"), including specifically, but without limiting the generality of the foregoing, power and authority to sign the name of the registrant and the name of the undersigned, individually and in hishis/her capacity as a director or officer of the registrant, to the Annual Report as filed with the U.S. Securities and Exchange Commission, to any and all amendments thereto, and to any and all instruments or documents filed as part thereof or in connection therewith; and each of the undersigned hereby ratifies and confirms all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ STEPHEN J. LUCZO

(Stephen J. Luczo)

Chief Executive Officer, Director and Chairman of the

Board of Directors (Principal Executive Officer)

August 4, 2017

/s/ DAVID H. MORTON, JR.

(David H. Morton, Jr.)

Executive Vice President, Finance and Chief Financial

Officer (Principal Financial and Accounting Officer)

August 4, 2017

/s/ WILLIAM D. MOSLEY

(William D. Mosley)

President, Chief Operating Officer and DirectorAugust 4, 2017

/s/ MARK W. ADAMS

(Mark W. Adams)

DirectorAugust 4, 2017

/s/ FRANK J. BIONDI, JR.

(Frank J. Biondi, Jr.)

DirectorAugust 4, 2017

/s/ MICHAEL R. CANNON

(Michael R. Cannon)

DirectorAugust 4, 2017

/s/ MEI-WEI CHENG

(Mei-Wei Cheng)

DirectorAugust 4, 2017

/s/ WILLIAM T. COLEMAN III

(William T. Coleman III)

DirectorAugust 4, 2017

/s/ JAY L. GELDMACHER

(Jay L. Geldmacher)

DirectorAugust 4, 2017

/s/ DAMBISA F. MOYO

(Dr. Dambisa F. Moyo)

DirectorAugust 4, 2017

/s/ CHONG SUP PARK

(Dr. Chong Sup Park)

DirectorAugust 4, 2017

/s/ STEPHANIE TILENIUS

(Stephanie Tilenius)

DirectorAugust 4, 2017

/s/ EDWARD J. ZANDER

(Edward J. Zander)

DirectorAugust 4, 2017

EXHIBIT INDEX

      

Incorporated by Reference

    

Exhibit No.

  

Exhibit Description

  

Form

  

File No.

   

Exhibit

   

Filing

Date

   

Filed

Herewith

    2.1  Scheme of Arrangement among Seagate Technology (“Seagate-Cayman”), Seagate Technology plc (“Seagate-Ireland”) and the Scheme Shareholders (incorporated by reference to Annex A to Seagate Technology’s Definitive Proxy Statement on Schedule 14A filed on March 5, 2010)  DEF 14A   001-31560    Annex A    3/5/2010   
    3.1  Constitution of Seagate Technology Public Limited Company as amended and restated by Special Resolution dated October 19, 2016  8-K   001-31560    3.10    10/24/2016   
    3.2  Certificate of Incorporation of Seagate Technology plc  10-K   001-31560    3.20    8/20/2010   
    4.1  Specimen Ordinary Share Certificate  10-K   001-31560    4.10    8/20/2010   
    4.2  Indenture dated September 20, 2006 among Seagate Technology, Seagate Technology HDD Holdings and U.S. Bank National Association  8-K   001-31560    4.10    9/21/2006   
    4.3  Forms of Global Note for the Senior Notes due 2011 and Senior Notes due 2016 of Seagate Technology HDD Holdings issued pursuant to the Indenture  8-K   001-31560    4.10    9/21/2006   
    4.4  First Supplemental Indenture, dated as of March 1, 2010, among Seagate Technology HDD Holdings, Seagate HDD Cayman, Seagate Technology and U.S. Bank National Association, as trustee, amending and supplementing the Indenture, dated as of September 20, 2006, among Seagate Technology HDD Holdings, Seagate Technology and U.S. Bank National Association, as trustee  8-K   001-31560    10.20    3/3/2010   
    4.5  Indenture dated as of May 13, 2010, among Seagate HDD Cayman, as Issuer, Seagate Technology, as Guarantor, and Wells Fargo Bank, National Association, as Trustee  8-K   001-31560    4.10    5/14/2010   
    4.6  Registration Rights Agreement dated as of May 13, 2010, among Seagate HDD Cayman, Seagate Technology and Morgan Stanley & Co. Incorporated and Bank of America Securities LLC  8-K   001-31560    4.30    5/14/2010   
    4.7  Supplemental Indenture, dated as of July 3, 2010, among Seagate HDD Cayman, as issuer, Seagate Technology, as original guarantor, Seagate Technology plc, as successor guarantor, and Wells Fargo Bank, National Association, as trustee, amending and supplementing the Indenture, dated as of May 13, 2010, among Seagate HDD Cayman, as issuer, Seagate Technology, as guarantor, and Wells Fargo Bank, National Association, as trustee  8-K   001-31560    10.10    7/6/2010   
    4.8  Indenture dated as of May 18, 2011, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and Wells Fargo Bank, National Association, as Trustee  8-K   001-31560    4.10    5/18/2011   

      

Incorporated by Reference

    

Exhibit No.

  

Exhibit Description

  

Form

  

File No.

   

Exhibit

   

Filing

Date

   

Filed

Herewith

    4.9  Form of 7.000% Senior Note due 2021  8-K   001-31560    4.10    5/18/2011   
    4.10  Registration Rights Agreement dated as of May 18, 2011, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. Incorporated  8-K   001-31560    4.30    5/18/2011   
    4.11  Indenture dated as of May 22, 2013, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and U.S. Bank National Association, as Trustee  8-K   001-31560    4.10    5/22/2013   
    4.12  Form of 4.75% Senior Note due 2023  8-K   001-31560    4.10    5/22/2013   
    4.13  Registration Rights Agreement dated as of May 22, 2013, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC.  8-K   001-31560    4.30    5/22/2013   
    4.14  Indenture dated as of November 5, 2013, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and U.S. Bank National Association, as Trustee  8-K   001-31560    4.10    11/5/2013   
    4.15  Form of 3.75% Senior Note due 2018  8-K   001-31560    4.10    11/5/2013   
    4.16  Registration Rights Agreement dated as of November 5, 2013, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC.  8-K   001-31560    4.30    11/5/2013   
    4.17  Indenture dated as of May 28, 2014, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and U.S. Bank National Association, as Trustee  8-K   001-31560    4.10    5/28/2014   
    4.18  Form of 4.75% Senior Note due 2025  8-K   001-31560    4.10    5/28/2014   
    4.19  Registration Rights Agreement dated as of May 28, 2014, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC.  8-K   001-31560    4.30    5/28/2014   
    4.20  Indenture dated as of December 2, 2014, among Seagate HDD Cayman, as issuer, the Company, as guarantor, and U.S. Bank National Association, as trustee.  8-K   001-31560    4.10    12/2/2014   
    4.21  Form of 5.75% Senior Note due 2034  8-K   001-31560    4.10    12/2/2014   
    4.22  Registration Rights Agreement dated as of December 2, 2014, among Seagate HDD Cayman, the Company and Morgan Stanley & Co. LLC.  8-K   001-31560    4.30    12/2/2014   
    4.23  Indenture for the 2022 Notes, dated as of February 3, 2017, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and Wells Fargo Bank, National Association, as Trustee  8-K   001-31560    4.10    2/3/2017   

      

Incorporated by Reference

    

Exhibit No.

  

Exhibit Description

  

Form

  

File No.

   

Exhibit

   

Filing

Date

   

Filed

Herewith

    4.24  Form of 4.250% Senior Note due 2022  8-K   001-31560    4.10    2/3/2017   
    4.25  Indenture for the 2024 Notes, dated as of February 3, 2017, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and Wells Fargo Bank, National Association, as Trustee  8-K   001-31560    4.30    2/3/2017   
    4.26  Form of 4.875% Senior Note due 2024  8-K   001-31560    4.30    2/3/2017   
    4.27  Registration Rights Agreement for the 2022 Notes, dated as of February 3, 2017, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC  8-K   001-31560    4.50    2/3/2017   
    4.28  Registration Rights Agreement for the 2024 Notes, dated as of February 3, 2017, among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC  8-K   001-31560    4.60    2/3/2017   
    4.29  Indenture dated as of May 14, 2015, among Seagate HDD Cayman, as Issuer, Seagate Technology plc, as Guarantor, and Wells Fargo Bank, National Association, as Trustee  8-K   001-31560    4.1    05/14/2015   
    4.30  Form of 4.875% Senior Note due 2027  8-K   001-31560    4.1    05/14/2015   
    4.31  Registration Rights Agreement dated as of May 14, 2015 among Seagate HDD Cayman, Seagate Technology plc and Morgan Stanley & Co. LLC  8-K   001-31560    4.3    05/14/2015   
  10.1+  Amended Seagate Technology plc 2001 Share Option Plan  10-K   001-31560    10.10    8/20/2010   
  10.2+  Seagate Technology plc 2001 Share Option Plan Form of Notice of Stock Option Grant and Option Agreement (includes Compensation Recovery Policy)  10-K   001-31560    10.30    8/20/2010   
  10.3+  Amended Seagate Technology plc 2004 Share Compensation Plan  10-K   001-31560    10.60    8/20/2010   
  10.4+  Seagate Technology 2004 Stock Compensation Plan Form of Option Agreement (For Outside Directors)  10-Q   001-31560    10.70    11/4/2009   
  10.5+  Seagate Technology plc 2004 Share Compensation Plan Form of Notice of Stock Option Grant and Option Agreement (includes Compensation Recovery Policy)  10-K   001-31560    10.13    8/20/2010   
  10.6+  Seagate Technology plc 2004 Share Compensation Plan Form of Notice of Performance Share Bonus Grant and Agreement (includes Compensation Recovery Policy)  10-K   001-31560    10.16    8/20/2010   
  10.7+  Seagate Technology plc 2004 Share Compensation Plan Form of Restricted Share Unit Agreement (includes Compensation Recovery Policy)  10-Q   001-31560    10.19    11/3/2010   
  10.8+  Seagate Technology plc 2004 Share Compensation Plan Form of Executive Performance Unit Agreement  10-Q   001-31560    10.56    10/27/2011   
  10.9+  Amended and Restated Seagate Technology plc 2012 Equity Incentive Plan  8-K   001-31560    10.10    10/24/2014   
  10.10+  Form of Outside Directors Restricted Share Unit Agreement for Seagate Technology Public Limited Company pursuant to the 2012 Equity Incentive Plan  10-Q   001-31560    10.40    1/26/2017   

SignatureTitle

Incorporated by Reference

Date

Exhibit No.

/s/ DR. WILLIAM D. MOSLEY
Chief Executive Officer and Director
(Principal Executive Officer)

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Filed

Herewith

August 7, 2020
(Dr. William D. Mosley)
  10.11+/s/ GIANLUCA ROMANOExecutive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)FormAugust 7, 2020
(Gianluca Romano)
/s/ MICHAEL R. CANNONChairperson of Executive Performance Unit Agreement for Seagate Technology Public Limited Company pursuant to the 2012 Equity Incentive PlanBoardAugust 7, 2020
(Michael R. Cannon)10-Q
/s/ MARK W. ADAMSDirector001-31560August 7, 2020
(Mark W. Adams)
/s/ JUDY BRUNERDirector10.30August 7, 2020
(Judy Bruner)1/26/2017
  10.12+/s/ WILLIAM T. COLEMAN IIIDirectorForm of Employee Restricted Share Unit Agreement for Seagate Technology Public Limited Company pursuant to the 2012 Equity Incentive Plan10-Q001-3156010.201/26/2017August 7, 2020
(William T. Coleman III)
  10.13+/s/ JAY L. GELDMACHERDirectorForm of Employee Stock Option Agreement for Seagate Technology Public Limited Company pursuant to the 2012 Equity Incentive Plan10-Q001-3156010.101/26/2017August 7, 2020
(Jay L. Geldmacher)
  10.14+/s/ DYLAN HAGGARTDirectorSeagate Technology plc Amended and Restated Employee Stock Purchase Plan10-K001-3156010.378/8/2014August 7, 2020
(Dylan Haggart)
  10.15+/s/ STEPHEN J. LUCZODirectorDot Hill Systems Corp. 2009 Equity Incentive Plan, as amended, as assumed by Seagate Technology PLC by Deed Poll on October 21, 201510-Q001-3156010.101/29/2016August 7, 2020
(Stephen J. Luczo)
  10.16+/s/ STEPHANIE TILENIUSDirectorDot Hill Systems Corp. 2009 Equity Incentive Plan, as amended10-Q001-1331710.105/10/2012August 7, 2020
(Stephanie Tilenius)
  10.17+/s/ EDWARD J. ZANDERDirectorRestated Seagate Deferred Compensation Plan10-Q001-3156010.275/5/2010August 7, 2020
(Edward J. Zander)
  10.18+First Amendment to Seagate Deferred Compensation Plan10-Q001-3156010.265/5/2010
  10.19+Second Amendment to Seagate Deferred Compensation Plan10-Q001-3156010.215/3/2011
  10.20+Third Amendment to Seagate Deferred Compensation Plan10-Q/A001-3156010.561/31/2013
  10.21+Fourth Amendment to the Seagate Deferred Compensation Plan10-Q001-3156010.401/30/2015
  10.22+Seagate Deferred CompensationSub-Plan10-Q001-3156010.285/5/2010
  10.23+2015 Seagate Deferred Compensation Plan10-Q001-3156010.301/30/2015
  10.24+First Amendment to the 2015 Seagate Deferred Compensation Plan10-Q001-3156010.1010/30/2015
  10.25+Seagate Technology Amended and Restated Executive Officer Performance Bonus Plan8-K001-3156010.1011/1/2013
  10.26+Fifth Amended and Restated Seagate Technology Executive Severance and Change in Control Plan10-K001-3156010.108/8/2014
  10.27+Summary description of Seagate Technology plc’s Compensation Policy forNon-Management Members of the Board of Directors with an Effective date of October 30, 201310-K001-3156010.468/7/2013
  10.28+Offer Letter, dated as of January 29, 2009, by and between Seagate Technology and Stephen J. Luczo10-Q001-3156010.202/10/2009
  10.29+Offer letter, dated as of July 30, 2014, by and between Seagate Technology and Philip Brace8-K001-3156010.107/22/2015
  10.30+Memo Agreement with Albert A. “Rocky” Pimentel dated January 27, 201610-Q001-3156010.201/29/2016

106

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Filed

Herewith

  10.31(a)Form of Revised Indemnification Agreement between Seagate Technology and the director or officer named therein10-Q001-3156010.4(b) 5/6/2009
  10.31(b)Indemnity, Subrogation and Contribution Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Subsidiary parties thereto and The Bank of Nova Scotia, as Administrative Agents8-K001-3156010.107/29/2010

      

Incorporated by Reference

    

Exhibit No.

  

Exhibit Description

  

Form

  

File No.

   

Exhibit

   

Filing

Date

   

Filed

Herewith

  10.32  Second Priority Mortgage of Shares in Seagate Technology, dated March 1, 2010, between Seagate Technology plc, as mortgagor, and Wells Fargo Bank, National Association, as mortgagee  8-K   001-31560    10.23    3/3/2010   
  10.33  Deed Poll of Assumption by Seagate Technology plc, dated July 2, 2010  8-K   001-31560    10.47    7/6/2010   
  10.34  Credit Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the lending institutions thereto, the Bank of Nova Scotia, as administrative agent, Merrill Lynch Pierce Fenner and Smith Incorporated and BNP Paribas as Syndication agents and Wells Fargo Bank, National Association, as Documentation Agent  10-Q   001-31560    10.47    2/3/2011   
  10.35  First Amendment, dated August 31, 2011, to the Credit Agreement, dated as of January 18, 2011  10-K   001-31560    10.35    8/5/2016   
  10.36  Second Amendment, dated April 30, 2013, to the Credit Agreement, dated as of January 18, 2011  10-Q   001-31560    10.10    5/24/2013   
  10.37  Third Amendment, dated January 15, 2015, to the Credit Agreement, dated as of January 18, 2011  8-K   001-31560    10.10    1/16/2015   
  10.38  Fourth Amendment, dated April 28, 2016, to the Credit Agreement, dated as of January 18, 2011  10-Q   001-31560    10.10    4/29/2016   
  10.39  U.S. Guarantee Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Guarantor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-Q   001-31560    10.48    2/2/2011   
  10.40  Supplement no. 1 dated February 7, 2012, to the U.S. Guarantee agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Guarantor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.45    8/8/2012   
  10.41  Supplement no. 2 dated February 22, 2012, to the U.S. Guarantee agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Guarantor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.48    8/8/2012   
  10.42  Supplement no. 3 dated March 19, 2012, to the U.S. Guarantee agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Guarantor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.50    8/8/2012   

      

Incorporated by Reference

    

Exhibit No.

  

Exhibit Description

  

Form

  

File No.

   

Exhibit

   

Filing

Date

   

Filed

Herewith

  10.43  First Amendment, dated April 30, 2013, to the U.S. Guarantee Agreement, dated as of January 18, 2011  10-Q   001-31560    10.20    5/2/2013   
  10.44  U.S. Security Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Guarantor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-Q   001-31560    10.49    2/3/2011   
  10.45  U.S. Pledge Agreement Dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Subsidiary Pledgor parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-Q   001-31560    10.52    2/3/2011   
  10.46  Indemnity, Subrogation and Contribution Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, the Subsidiary parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-Q   001-31560    10.52    2/3/2011   
  10.47  Supplement No. 1, dated February 7, 2012, to the Indemnity, Subrogation and Contribution Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, The Subsidiary Parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.46    8/8/2012   
  10.48  Supplement No. 2, dated February 22, 2012, to the Indemnity, Subrogation and Contribution Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, The Subsidiary Parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.49    8/8/2012   
  10.49  Supplement No. 3, dated March 19 2012, to the Indemnity, Subrogation and Contribution Agreement, dated as of January 18, 2011, among Seagate Technology Public Limited Company, Seagate HDD Cayman, as Borrower, The Subsidiary Parties thereto and The Bank of Nova Scotia, as Administrative Agent  10-K   001-31560    10.51    8/8/2012   

Incorporated by Reference

Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing

Date

Filed

Herewith

  21.1List of SubsidiariesX
  23.1Consent of Independent Registered Public Accounting FirmX
  24.1Power of Attorney (see signature page to this annual report)X
  31.1Certification of the Chief Executive Officer pursuant torules 13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
  31.2Certification of the Chief Financial Officer pursuant torules 13a-14(a) and15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002X
  32.1†Certification of the Chief Executive Officer and Chief Financial Officer pursuant toRule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
101.INSXBRL Instance Document.X
101.SCHXBRL Taxonomy Extension Schema Document.X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.X
101.LABXBRL Taxonomy Extension Label Linkbase Document.X
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.X

+Management contract or compensatory plan or arrangement.
The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Seagate Technology plc under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of thisForm 10-K, irrespective of any general incorporation language contained in such filing.

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