UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________________________ 
FORM 10-Q

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

___________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2017

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

January 1, 2021

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

Commission File Number001-31560

 _______________________________________
SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

 _______________________________________
Ireland98-0648577

(State or other jurisdiction of

(I.R.S. Employer
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)
Telephone: (353)(1) 234-3136

(Registrant’s telephone number, including area code)

_______________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, par value $0.00001 per shareSTXThe NASDAQ Global Select Market
_______________________________________ 
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 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 of RegulationS-T (§232.405 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 No

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”filer,” and “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer:filerAccelerated filer Accelerated filer:
Non-accelerated filerSmaller reporting company 
Emerging growth company
Non-accelerated filer: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.   (Do not check if a smaller reporting company)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.  ☐

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

As of January 23, 2018, 284,827,40125, 2021, 236,682,057 of the registrant’s ordinary shares, par value $0.00001 per share, were issued and outstanding.





INDEX

SEAGATE TECHNOLOGY PLC


PAGE NO.

9

28

36

37
PART II

Item 1.

38

38

38

38

38

38

Item 6.

Exhibits

39

40


2

Table of Contents
PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
ITEM 1.FINANCIAL STATEMENTS

Table of Contents

Page

9

9

11

13

14

15

16

Note 7. Restructuring and Exit Costs

17

18

19

23

23

24

25

25

27

Note 16.14. Subsequent Events

27


See Notes to Condensed Consolidated Financial Statements.

3


Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

                                                
     December 29,
2017
   June 30,
2017
 
ASSETS      

Current assets:

      

Cash and cash equivalents

    $2,556   $2,539 

Accounts receivable, net

     1,055    1,199 

Inventories

     1,014    982 

Other current assets

     285    321 
    

 

 

   

 

 

 

Total current assets

     4,910    5,041 

Property, equipment and leasehold improvements, net

     1,762    1,875 

Goodwill

     1,238    1,238 

Other intangible assets, net

     222    281 

Deferred income taxes

     402    609 

Other assets, net

     216    224 
    

 

 

   

 

 

 

Total Assets

    $8,750   $9,268 
    

 

 

   

 

 

 
LIABILITIES AND EQUITY      

Current liabilities:

      

Accounts payable

    $1,620   $1,626 

Accrued employee compensation

     183    237 

Accrued warranty

     111    113 

Current portion of long-term debt

     560    —   

Accrued expenses

     639    650 
    

 

 

   

 

 

 

Total current liabilities

     3,113    2,626 

Long-term accrued warranty

     125    120 

Long-term accrued income taxes

     12    15 

Othernon-current liabilities

     123    122 

Long-term debt

     4,316    5,021 
    

 

 

   

 

 

 

Total Liabilities

     7,689    7,904 

Commitments and contingencies (See Notes 12, 14 and 15)

      

Shareholders’ Equity:

      

Ordinary shares and additionalpaid-in capital

     6,246    6,152 

Accumulated other comprehensive loss

     (11   (17

Accumulated deficit

     (5,174   (4,771
    

 

 

   

 

 

 

Total Equity

     1,061    1,364 
    

 

 

   

 

 

 

Total Liabilities and Equity

    $8,750   $9,268 
    

 

 

   

 

 

 

The information as of June 30, 2017 was derived from the Company’s audited Consolidated Balance Sheet as of June 30, 2017.


 January 1,
2021
July 3,
2020
(unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$1,799 $1,722 
Accounts receivable, net801 1,115 
Inventories1,318 1,142 
Other current assets163 135 
Total current assets4,081 4,114 
Property, equipment and leasehold improvements, net2,218 2,129 
Goodwill1,237 1,237 
Other intangible assets, net40 58 
Deferred income taxes1,120 1,120 
Other assets, net290 272 
Total Assets$8,986 $8,930 
LIABILITIES AND EQUITY  
Current liabilities:  
Accounts payable$1,730 $1,808 
Accrued employee compensation206 224 
Accrued warranty61 69 
Current portion of long-term debt25 19 
Accrued expenses599 602 
Total current liabilities2,621 2,722 
Long-term accrued warranty76 82 
Other non-current liabilities179 183 
Long-term debt5,120 4,156 
Total Liabilities7,996 7,143 
Commitments and contingencies (See Notes 11 and 13)
Shareholders’ Equity:
Ordinary shares and additional paid-in capital6,855 6,757 
Accumulated other comprehensive loss(36)(66)
Accumulated deficit(5,829)(4,904)
Total Equity990 1,787 
Total Liabilities and Equity$8,986 $8,930 




See Notes to Condensed Consolidated Financial Statements.

4


Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

                                                                                                
     For the Three Months Ended   For the Six Months Ended 
     December 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Revenue

    $2,914   $2,894   $5,546   $5,691 
          

Cost of revenue

     2,037    2,003    3,933    3,999 

Product development

     250    305    513    620 

Marketing and administrative

     142    155    287    308 

Amortization of intangibles

     19    28    41    57 

Restructuring and other, net

     33    33    84    115 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,481    2,524    4,858    5,099 
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Income from operations

     433    370    688    592 
          

Interest income

     6    1    13    2 

Interest expense

     (61   (50   (122   (100

Other, net

     (7   (11   (20   (11
    

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

     (62   (60   (129   (109
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Income before income taxes

     371    310    559    483 

Provision for income taxes

     212    13    219    19 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    $159   $297   $340   $464 
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Net income per share:

          

Basic

    $0.55   $1.00   $1.18   $1.56 

Diluted

     0.55    1.00    1.17    1.55 

Number of shares used in per share calculations:

          

Basic

     288    296    289    297 

Diluted

     291    298    291    299 

Cash dividends declared per ordinary share

    $0.63   $0.63   $1.26   $1.26 

 For the Three Months EndedFor the Six Months Ended
 January 1,
2021
January 3,
2020
January 1,
2021
January 3,
2020
Revenue$2,623 $2,696 $4,937 $5,274 
 
Cost of revenue1,927 1,938 3,645 3,845 
Product development221 250 444 505 
Marketing and administrative122 120 240 242 
Amortization of intangibles
Restructuring and other, net17 
Total operating expenses2,275 2,312 4,338 4,617 
 
Income from operations348 384 599 657 
 
Interest income15 
Interest expense(52)(48)(102)(103)
Other, net(5)(4)14 (35)
Other expense, net(57)(48)(87)(123)
 
Income before income taxes291 336 512 534 
Provision for income taxes11 18 16 
Net income$280 $318 $503 $518 
 
Net income per share:
Basic$1.12 $1.21 $1.99 $1.96 
Diluted1.12 1.20 1.97 1.93 
Number of shares used in per share calculations:  
Basic249 262 253 264 
Diluted251 265 255 268 
Cash dividends declared per ordinary share$0.67 $0.65 $1.32 $1.28 


See Notes to Condensed Consolidated Financial Statements.

5


Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

                                                                                                
     For the Three Months Ended   For the Six Months Ended 
     December 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Net income

    $159   $297   $340   $464 

Other comprehensive income (loss), net of tax:

          

Cash flow hedges

          

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

     —      (2   —      (3

Less: reclassification for amounts included in net income

     —      —      —      1 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net change

     —      (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

     —      —      —      —   

Less: reclassification for amounts included in net income

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Net change

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Foreign currency translation adjustments

     2    (7   6    (6
    

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     2    (9   6    (8
    

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

    $161   $288   $346   $456 
    

 

 

   

 

 

   

 

 

   

 

 

 

 For the Three Months EndedFor the Six Months Ended
 January 1,
2021
January 3,
2020
January 1,
2021
January 3,
2020
Net income$280 $318 $503 $518 
Other comprehensive income (loss), net of tax:
Change in net unrealized loss on cash flow hedges:
Net unrealized gains arising during the period12 16 
(Gains) losses reclassified into earnings(2)(2)
Net change10 14 
Change in unrealized components of post-retirement plans:
Net unrealized (losses) gains arising during the period(1)(1)
Losses reclassified into earnings
Net change
Foreign currency translation adjustments15 (2)
Total other comprehensive income, net of tax10 30 
Comprehensive income$290 $325 $533 $519 

See Notes to Condensed Consolidated Financial Statements.

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Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

                                                
     For the Six Months Ended 
     December 29,
2017
   December 30,
2016
 

OPERATING ACTIVITIES

      

Net income

    $340   $464 

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

      

Depreciation and amortization

     318    391 

Share-based compensation

     59    73 

Impairment of long-lived assets

     —      9 

Deferred income taxes

     204    3 

Othernon-cash operating activities, net

     3    18 

Changes in operating assets and liabilities:

      

Accounts receivable, net

     145    110 

Inventories

     (32   (140

Accounts payable

     59    170 

Accrued employee compensation

     (54   70 

Accrued expenses, income taxes and warranty

     3    69 

Vendor receivables

     42    19 

Other assets and liabilities

     —      (9
    

 

 

   

 

 

 

Net cash provided by operating activities

     1,087    1,247 
    

 

 

   

 

 

 

INVESTING ACTIVITIES

      

Acquisition of property, equipment and leasehold improvements

     (201   (235

Proceeds from the sale of property and equipment

     2    (1

Maturities of short-term investments

     —      6 

Other investing activities, net

     (11   (4
    

 

 

   

 

 

 

Net cash used in investing activities

     (210   (234
    

 

 

   

 

 

 

FINANCING ACTIVITIES

      

Redemption and repurchase of debt

     (152   —   

Taxes paid related to net share settlement of equity awards

     (21   (24

Repurchases of ordinary shares

     (361   (248

Dividends to shareholders

     (366   (188

Proceeds from issuance of ordinary shares under employee stock plans

     35    47 
    

 

 

   

 

 

 

Net cash used in financing activities

     (865   (413
    

 

 

   

 

 

 

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

     5    (12
    

 

 

   

 

 

 

Increase in cash, cash equivalents, and restricted cash

     17    588 

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

     2,543    1,132 
    

 

 

   

 

 

 

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

    $2,560   $1,720 
    

 

 

   

 

 

 

 For the Six Months Ended
 January 1,
2021
January 3,
2020
OPERATING ACTIVITIES  
Net income$503 $518 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization195 185 
Share-based compensation58 53 
Deferred income taxes(13)(4)
Other non-cash operating activities, net47 
Changes in operating assets and liabilities: 
Accounts receivable, net315 (124)
Inventories(176)(172)
Accounts payable(75)458 
Accrued employee compensation(18)22 
Accrued expenses, income taxes and warranty(36)(38)
Other assets and liabilities13 (9)
Net cash provided by operating activities770 936 
INVESTING ACTIVITIES  
Acquisition of property, equipment and leasehold improvements(270)(341)
Proceeds from sale of investments11 
Proceeds from the sale of assets
Purchases of investments(4)(45)
Net cash used in investing activities(263)(385)
FINANCING ACTIVITIES 
Redemption and repurchase of debt(21)(645)
Dividends to shareholders(334)(335)
Repurchases of ordinary shares(1,068)(600)
Taxes paid related to net share settlement of equity awards(32)(39)
Proceeds from issuance of long-term debt1,000 498 
Proceeds from issuance of ordinary shares under employee share plans40 69 
Other financing activities, net(15)(2)
Net cash used in financing activities(430)(1,054)
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash(2)
Increase (decrease) in cash, cash equivalents and restricted cash77 (505)
Cash, cash equivalents and restricted cash at the beginning of the period1,724 2,251 
Cash, cash equivalents and restricted cash at the end of the period$1,801 $1,746 

See Notes to Condensed Consolidated Financial Statements.

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Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF SHAREHOLDERS’ EQUITY

For the SixThree Months Ended December 29, 2017

January 1, 2021 and January 3, 2020

(In millions)

(Unaudited)

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

Balance at June 30, 2017

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

Net income

           340    340 

Other comprehensive income

         6      6 

Issuance of ordinary shares under employee stock plans

   4      35        35 

Repurchases of ordinary shares

   (10         (361   (361

Tax withholding related to vesting of restricted stock units

   (1         (21   (21

Dividends to shareholders

           (361   (361

Share-based compensation

       59        59 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 29, 2017

   285   $—     $6,246   $(11  $(5,174  $1,061 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at October 2, 2020258 $$6,814 $(46)$(4,947)$1,821 
Net income280 280 
Other comprehensive income10 10 
Issuance of ordinary shares under employee share plans11 11 
Repurchases of ordinary shares(18)(1,000)(1,000)
Tax withholding related to vesting of restricted share units(1)(1)
Dividends to shareholders(161)(161)
Share-based compensation30 30 
Balance at January 1, 2021240 $$6,855 $(36)$(5,829)$990 

 Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at October 4, 2019263 $$6,610 $(40)$(4,800)$1,770 
Net income318 318 
Other comprehensive income
Issuance of ordinary shares under employee share plans30 30 
Repurchases of ordinary shares(3)(150)(150)
Tax withholding related to vesting of restricted share units(2)(2)
Dividends to shareholders(170)(170)
Share-based compensation27 27 
Balance at January 3, 2020261 $$6,667 $(33)$(4,804)$1,830 






See Notes to Condensed Consolidated Financial Statements.

8


Table of Contents
SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 
For the Six Months EndedJanuary 1, 2021 and January 3, 2020
(In millions)
(Unaudited)
Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at July 3, 2020257 $$6,757 $(66)$(4,904)$1,787 
Net income503 503 
Other comprehensive income30 30 
Issuance of ordinary shares under employee share plans40 40 
Repurchases of ordinary shares(19)(1,068)(1,068)
Tax withholding related to vesting of restricted share units(1)(32)(32)
Dividends to shareholders(328)(328)
Share-based compensation58 58 
Balance at January 1, 2021240 $$6,855 $(36)$(5,829)$990 

 Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at June 28, 2019269 $$6,545 $(34)$(4,349)$2,162 
Impact of adopting new lease standard(2)(2)
Net income518 518 
Other comprehensive income
Issuance of ordinary shares under employee share plans69 69 
Repurchases of ordinary shares(12)(597)(597)
Tax withholding related to vesting of restricted share units(1)(39)(39)
Dividends to shareholders(335)(335)
Share-based compensation53 53 
Balance at January 3, 2020261 $$6,667 $(33)$(4,804)$1,830 

See Notes to Condensed Consolidated Financial Statements.
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Table of Contents
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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, withand most SSDs using NAND-baseduse NAND 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.

The Company’s HDD products are designed for mass capacity storage and legacy markets. Mass capacity storage supports high capacity, low-cost per terabyte storage applications, including nearline, video and image applications and network-attached storage. Legacy markets include mission critical, desktop, notebook, consumer, digital video recorders and nearline applications ingaming applications. These markets were previously categorized as enterprise servers and storage systems;systems, edge non-compute applications and edge compute / client compute applications, where its products are designed primarily for desktopapplications. The Company’s HDD and mobile computing;SSD product portfolio includes Serial Advanced Technology Attachment, Serial Attached SCSI and edgenon-compute /client non-compute applications, where its products are designed forNon-Volatile Memory Express based designs to support a wide variety of end user devices such as portable external storage systems, surveillance systems, network-attached storage (“NAS”), digital video recorders (“DVRs”)mass capacity and gaming consoles.

legacy applications.

The Company’s enterprise data solutions portfolio includes storage subsystems and mass capacity optimized private cloud systemsstorage solutions for enterprises and cloud and managed service providers. Engineered for modularity, mobility, mass capacity and performance, these solutions extend innovationinclude the Company’s enterprise HDDs and SSDs, enabling customers to integrate powerful, scalable storage within legacy enterprise IT environments or build new on premises private storage clouds from the device into the information infrastructure, onsite andground up in the cloud. Its portfolio includes modular original equipment manufacturers (“OEM”) storage systemsand scale-out storage servers.

a secure, cost-effective manner.

Basis of Presentation and Consolidation

The Company’s unaudited condensed 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 requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed 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 condensed consolidated financial statements.
The condensedCompany’s consolidated financial statements reflect, in the opinion of management, all material adjustments necessary to present fairly the condensed consolidated financial position, results of operations, comprehensive income, cash flows and shareholders’ equity for the periods presented. Such adjustments are of a normal and recurring nature. Certain prior period amounts in the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

The Company’s Consolidated Financial Statements for the fiscal year ended June 30, 2017,July 3, 2020 are included in its Annual Report onForm 10-K, as filed with the United StatesU.S. Securities and Exchange Commission (“SEC”) on August 4, 2017.7, 2020. The Company believes that the disclosures included in thethese unaudited condensed consolidated financial statements, when read in conjunction with its Consolidated Financial Statementsconsolidated financial statements as of June 30, 2017,July 3, 2020, and the notes thereto, are adequate to make the information presented not misleading.

The results

10

Table of operations for the three and six months ended December 29, 2017, are not necessarily indicative of the results of operations to be expected for any subsequent interim period in the Company’s fiscal year ending June 29, 2018. Contents
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. BothIn fiscal years with 53 weeks, the first quarter consists of 14 weeks and the remaining quarters consist of 13 weeks each. The three and six months ended December 29, 2017January 1, 2021 consisted of 13 and 26 weeks, respectively, and the three and six months ended December 30, 2016January 3, 2020 consisted of 13 weeks and 2627 weeks, respectively. Fiscal year 2018 will be2021, which ends on July 2, 2021, is comprised of 52 weeks and will endfiscal year 2020, which ended on June 29, 2018.July 3, 2020, was comprised of 53 weeks. The fiscal quarters ended December 29, 2017, September 29, 2017,January 1, 2021, October 2, 2020 and December 30, 2016,January 3, 2020, are also referred to herein as the “December 20172020 quarter”, the “September 20172020 quarter”, and the “December 20162019 quarter”, respectively.

The results of operations for the three and six months ended January 1, 2021 are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the Company’s fiscal year ending July 2, 2021.

Summary of Significant Accounting Policies

There have been no significantmaterial changes into the Company’s significant accounting policies. Please refer topolicies disclosed in Note 11. Basis of Presentation and Summary of Significant Accounting Policies of “Financial Statements and Supplementary Data” contained in Part II, Item 88. of the Company’s Annual Report onForm 10-K for the fiscal year ended June 30, 2017,July 3, 2020, as filed with the SEC on August 4, 2017 for a discussion of the Company’s other significant accounting policies.

7, 2020.

Recently IssuedAdopted Accounting Pronouncements

In May 2014, August 2015, April 2016, May 2016 and DecemberJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 (ASC Topic 326), Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. This ASU 2014-09 (ASC Topic 606), Revenue from Contracts with Customers, ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferralamends the requirement on the measurement and recognition of the Effective Date, ASU 2016-10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing,ASU 2016-12 (ASC Topic 606) Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, andASU 2016-20 (ASC Topic 606) Technical Corrections and Improvementsexpected 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 the guidanceadopted this new accounting pronouncement 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”). Based 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 has not yet completed its assessment of the impact of adopting this new standard on the Company’s consolidated financial statements, the Company expects theSeptember 2020 quarter. The adoption of the new standard will result in the recognition of revenues generally uponshipment (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 arethis ASU did not expected to have a material impact on the Company’s condensed consolidated financial statements.

In January 2016,August 2018, the FASB issuedASU 2016-01 (ASCSubtopic 825-10)2018-15 (ASC Subtopic 350-40), Financial Instruments—Overall RecognitionIntangibles—Goodwill and MeasurementOther—Internal-Use Software—Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software. The Company adopted this new accounting pronouncement in the September 2020 quarter. The adoption of Financial Assets and Financial Liabilities. The amendments in this ASU require entities to measure all investments in equity securities at fair value with changes recognized through net income.did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12 (ASC Topic 740), Simplifying the Accounting for Income Taxes. This requirement does not apply to investments that qualifyASU simplifies 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 the guidancethis new accounting pronouncement in the first quarter of fiscal 2019. Early adoption is permitted for only certain portions of the ASU. The Company expects to elect the measurement alternative for measurement of equity investments, defined as cost, less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Price Changes”) until the equity investments’ fair value becomes readily determinable. The amount of the impact to equity investments will depend on any Price Changes observed after adoption in the first quarter of fiscal 2019.

In February 2016, the FASB issuedASU 2016-02 (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 asa right-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 condensed consolidated financial statements.

In January 2017,March 2020, the FASB issuedASU 2017-012020-04 (ASC Topic 805)848), Business Combination: ClarifyingReference Rate Reform. This ASU provides optional expedients and exceptions for applying U.S. generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. Adoption of the Definitionexpedients and exceptions is permitted upon issuance of a Business. The amendments in this ASU change the definition of a business to assist with evaluating when a set of transferred assets and activities is a business. The Company plans to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted.update through December 31, 2022. The Company is in the process of assessing the impact of this ASU on its condensed consolidated financial statements.

In May 2017, the FASB issuedASU 2017-09 (ASC Topic 718), Stock Compensation: Scope

11

Table 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 plans 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 condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In July 2015, the FASB issuedASU 2015-11 (ASC Topic 330), Inventory: Simplifying the Measurement of Inventory. The amendments in this ASU require inventory measurement at the lower of cost and net realizable value. This ASU became effective and was adopted by the Company in the September 2017 quarter on a prospective basis. The adoption of this guidance had no material impact on the Company’s condensed consolidated financial statements and disclosures.

In March 2016, the FASB issuedASU 2016-09 (ASC Topic 718), Stock Compensation—Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU 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. This ASU became effective and was adopted by the Company in the September 2017 quarter. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the condensed consolidated statements of operations as a component of the provision for income taxes, whereas they previously were recognized in the Shareholder’s equity in the condensed consolidated balance sheets. The Company also elected to continue to account for share-based compensation expense net of estimated forfeitures. The adoption of this ASU resulted in an increase in deferred tax assets relating to net operating losses of approximately $0.6 billion, offset by an equivalent increase in the valuation allowance with no impact to retained earnings. The adoption of this guidance had no material impact on the Company’s condensed consolidated financial statements and disclosures.

In October 2016, the FASB issuedASU 2016-16 (ASC Topic 740), Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the recognition of the income tax consequences for intra-entity transfers of assets other than inventory when the transfer occurs. The Company elected to adopt this ASU in the September 2017 quarter on a modified retrospective basis with no material impact on the Company’s condensed consolidated financial statements and disclosures.

2.Balance Sheet Information

Investments

Contents

2.Balance Sheet Information
Available-for-sale Debt Securities
The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of December 29, 2017:

                                                                        

(Dollars in millions)

    Amortized
Cost
   Unrealized
Gain/(Loss)
   Fair
Value
 

Available-for-sale securities:

        

Money market funds

    $674   $—     $674 

Time deposits and certificates of deposit

     390    —      390 
    

 

 

   

 

 

   

 

 

 

Total

    $1,064   $—     $1,064 
    

 

 

   

 

 

   

 

 

 
        

Included in Cash and cash equivalents

        $1,060 

Included in Other current assets

         4 
        

 

 

 

Total

        $1,064 
        

 

 

 

January 1, 2021:

(Dollars in millions)Amortized CostUnrealized Gain/(Loss)Fair Value
Available-for-sale debt securities:   
Money market funds$992 $$992 
Time deposits and certificates of deposit56 56 
Other debt securities18 18 
Total$1,066 $$1,066 
Included in Cash and cash equivalents  $1,043 
Included in Other current assets  
Included in Other assets, net18 
Total  $1,066 
As of December 29, 2017,January 1, 2021, the Company’s Other current assets included $4$2 million in restricted cash and investments held as collateral at banks for various performance obligations.

As of December 29, 2017,January 1, 2021, 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 that no0 impairment related to credit losses for available-for-sale debt securities were other-than-temporarily impaired as of December 29, 2017.

January 1, 2021.

The fair value and amortized cost of the Company’s investments classified asavailable-for-sale debt securities as of December 29, 2017,January 1, 2021, by remaining contractual maturity were as follows:

                                                

(Dollars in millions)

    Amortized
Cost
   Fair
Value
 

Due in less than 1 year

    $1,064   $1,064 

Due in 1 to 5 years

     —      —   

Due in 6 to 10 years

     —      —   

Thereafter

     —      —   
    

 

 

   

 

 

 

Total

    $1,064   $1,064 
    

 

 

   

 

 

 

(Dollars in millions)Amortized CostFair Value
Due in less than 1 year$1,048 $1,048 
Due in 1 to 5 years10 10 
Due in 6 to 10 years
Thereafter
Total$1,066 $1,066 

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 
        

 

 

 

July 3, 2020:

(Dollars in millions)Amortized CostUnrealized 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 

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Table of Contents
As of June 30, 2017,July 3, 2020, the Company’s Other current assets included $4$2 million in restricted cash and investments held as collateral at banks for various performance obligations.

As of June 30, 2017,July 3, 2020, 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.

July 3, 2020.

Cash, Cash Equivalents and Restricted Cash

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

                                                                                                

(Dollars in millions)

    December 29,
2017
   June 30,
2017
   December 30,
2016
   July 1,
2016
 

Cash and cash equivalents

    $2,556   $2,539   $1,716   $1,125 

Restricted cash included in Other current assets

     4    4    4    7 
    

 

 

   

 

 

   

 

 

   

 

 

 

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

    $2,560   $2,543   $1,720   $1,132 
    

 

 

   

 

 

   

 

 

   

 

 

 

(Dollars in millions)January 1,
2021
July 3,
2020
January 3,
2020
June 28,
2019
Cash and cash equivalents$1,799 $1,722 $1,744 $2,220 
Restricted cash included in Other current assets31 
Total cash, cash equivalents and restricted cash presented in the Statements of Cash Flows$1,801 $1,724 $1,746 $2,251 

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
In connection with an existing factoring agreement, the Company sells trade receivables to a third party for cash proceeds less a discount. During the six months ended January 1, 2021, the Company sold trade receivables without recourse for cash proceeds of $148 million, of which an immaterial amount remained subject to servicing by the Company as of January 1, 2021. The discounts on receivables sold were not material for the six months ended January 1, 2021.
Inventories

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

                                                

(Dollars in millions)

    December 29,
2017
   June 30,
2017
 

Raw materials and components

    $303   $350 

Work-in-process

     296    257 

Finished goods

     415    375 
    

 

 

   

 

 

 
    $1,014   $982 
    

 

 

   

 

 

 

(Dollars in millions)January 1,
2021
July 3,
2020
Raw materials and components$421 $451 
Work-in-process427 313 
Finished goods470 378 
Total inventories$1,318 $1,142 
Property, Equipment and Leasehold Improvements, net

The components of property, equipment and leasehold improvements, net, were as follows:

                                                

(Dollars in millions)

    December 29,
2017
   June 30,
2017
 

Property, equipment and leasehold improvements

    $9,422   $9,633 

Accumulated depreciation and amortization

     (7,660   (7,758
    

 

 

   

 

 

 
    $1,762   $1,875 
    

 

 

   

 

 

 

(Dollars in millions)January 1,
2021
July 3,
2020
Property, equipment and leasehold improvements$10,345 $10,212 
Accumulated depreciation and amortization(8,127)(8,083)
Property, equipment and leasehold improvements, net$2,218 $2,129 
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Table of Contents
Accrued Expenses

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

                                                

(Dollars in millions)

    December 29,
2017
   June 30,
2017
 

Dividends payable

    $179   $184 

Other accrued expenses

     460    466 
    

 

 

   

 

 

 

Total

    $639   $650 
    

 

 

   

 

 

 

(Dollars in millions)January 1,
2021
July 3,
2020
Dividends payable$161 $167 
Other accrued expenses438 435 
Total accrued expenses$599 $602 
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
   Unrealized
Gains (Losses)
on Post-
Retirement
Plans
   Foreign
Currency
Translation
Adjustments
   Total 

Balance at June 30, 2017

    $—     $—     $(5  $(12  $(17

Other comprehensive income (loss) before reclassifications

     —      —      —      6    6 

Amounts reclassified from AOCI

     —      —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     —      —      —      6    6 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 29, 2017

    $—     $—     $(5  $(6  $(11
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
            

Balance at July 1, 2016

    $(1  $—     $(7  $(17  $(25

Other comprehensive income (loss) before reclassifications

     (3   —      —      (6   (9

Amounts reclassified from AOCI

     1    —      —      —      1 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (2   —      —      (6   (8
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 30, 2016

    $(3  $—     $(7  $(23  $(33
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

3.Debt

Short-Term Borrowings

(Dollars in millions)Unrealized Gains/(Losses) on Cash Flow HedgesUnrealized Gains/(Losses) on Post-Retirement PlansForeign Currency Translation AdjustmentsTotal
Balance at July 3, 2020$(24)$(26)$(16)$(66)
Other comprehensive income (loss) before reclassifications16 (1)15 
Amounts reclassified from AOCL(2)15 15 
Other comprehensive income14 15 30 
Balance at January 1, 2021$(10)$(25)$(1)$(36)
Balance at June 28, 2019$$(20)$(14)$(34)
Other comprehensive income (loss) before reclassifications(2)
Amounts reclassified from AOCL
Other comprehensive income (loss)(2)
Balance at January 3, 2020$$(20)$(16)$(33)

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Table of Contents
3.Debt
Credit Agreement
The credit agreement entered into by the Company and itsCompany’s subsidiary, Seagate HDD Cayman, entered into a credit agreement (the “Credit Agreement”) on February 20, 2019. As of January 18, 2011 and subsequently amended (the “Revolving1, 2021, the Credit Agreement provided 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 the 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 CompanyAs of January 1, 2021, STX and certain of its material subsidiaries fully and unconditionally guaranteeguaranteed both the Revolving Credit Facility. TheFacility and the Term Loan. As of January 1, 2021, the Revolving Credit Facility also allowed 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 such 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.

Thesuch facility is also available for swing line loans. On January 13, 2021, the Company and Seagate HDD Cayman entered into an amendment to the Credit Agreement which increased the size of the Revolving Credit Facility to $1.725 billion and allows such facility to increase by an additional $275 million, subject to the same terms and conditions as amended,stated above. The amendment also reduced the indebtedness guaranteed by certain of Seagate HDD Cayman’s material subsidiaries to an amount $100 million less than the amount that would give rise to a guarantee requirement by such subsidiaries in respect of any series of senior notes.

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 Term 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 Company repaid $6 million principal amount of the Term Loan during the three and six months ended January 1, 2021.
The Credit 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 December 29, 2017January 1, 2021 and expects to be in compliance for the next 12 months.

As of December 29, 2017,January 1, 2021, 0 borrowings were drawn and no borrowings had been drawn or letters of credit or swing line loans had been utilized under the Revolving Credit Facility.

Other Long-Term Debt

$800 million Aggregate Principal Amount of 3.75% Senior Notes due November 2018 (the “2018 Notes”). The interest on the 2018 Notes is payable semi-annually on May 15 and November 15 of each year. The issuer under the 2018 Notes is Seagate HDD Cayman, and the obligations under the 2018 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During the three and six months ended December 29, 2017, the Company repurchased $128 million and $150 million aggregate principal amount of the 2018 Notes, respectively, for cash at a premium to their principal amount, plus accrued and unpaid interest. The Company recorded a loss of approximately $2 million on repurchases during the three and six months ended December 29, 2017 which is included in Other, net on the Condensed Consolidated Statements of Operations. The remainder of the 2018 Notes are classified as Current portion of long-term debt on the Company’s Condensed Consolidated Balance Sheet at December 29, 2017.

$750 million Aggregate Principal Amount of 4.25% Senior Notes due March, 2022 (the “2022 Notes”). The interest on the 2022 Notes is payable semi-annually on March 1 and September 1 of each year. The issuer under the 2022 Notes is Seagate HDD Cayman, and the obligations under the 2022 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. During the Company.

six months ended January 1, 2021, $9 million aggregate principal amount of the 2022 Notes was repurchased for cash at a premium to their principal amount, plus accrued and unpaid interest. During the six months ended January 3, 2020, $250 million aggregate principal amount was repurchased pursuant to cash tender offers for certain senior notes (“the Tender Offers”). The Company recorded an immaterial loss and a loss of $10 million, respectively, on repurchases during the six months ended January 1, 2021 and January 3, 2020, which is included in Other, net in the Company’s Condensed Consolidated Statements of Operations.

$1 billion Aggregate Principal Amount of 4.75% Senior Notes due June, 2023 (the “2023 Notes”). The interest on the 2023 Notes is payable semi-annually on June 1 and December 1 of each year. The issuer under the 2023 Notes is Seagate HDD Cayman, and the obligations under the 2023 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. During the Company.

six months ended January 1, 2021, $5 million aggregate principal amount of the 2023 Notes was repurchased for cash at a premium to their principal amount, plus accrued and unpaid interest. During the six months ended January 3, 2020, $200 million aggregate principal amount was repurchased pursuant to the Tender Offers. The Company recorded a loss of $1 million and $10 million, respectively, on repurchases during the six months ended January 1, 2021 and January 3, 2020, which is included in Other, net in the Company’s Condensed Consolidated Statements of Operations.

$500 million Aggregate Principal Amount of 4.875% Senior Notes due March, 2024 (the “2024 Notes”).The interest on the 2024 Notes is payable semi-annually on March 1 and September 1 of each year. 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.

STX.

15

Table of Contents
$1 billion Aggregate Principal Amount of 4.75% Senior Notes due January, 2025 (the “2025 Notes”). The interest on the 2025 Notes is payable semi-annually on January 1 and July 1 of each year. The issuer under the 2025 Notes is Seagate HDD Cayman, and the obligations under the 2025 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. During the Company.

six months ended January 3, 2020, $170 million aggregate principal amount was repurchased pursuant to the Tender Offers. The Company recorded a loss of $8 million on repurchases during the six months ended January 3, 2020, which is included in Other, net in the Company’s Condensed Consolidated Statements of Operations.

$700 million Aggregate Principal Amount of 4.875% Senior Notes due June, 2027 (the “2027 Notes”). The interest on the 2027 Notes is payable semi-annually on June 1 and December 1 of each year. 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 STX.
$500 million Aggregate Principal Amount of 4.091% Senior Notes due June, 2029 (the “June 2029 Notes”). The interest on the Company.

June 2029 Notes is payable semi-annually on June 1 and December 1 of each year. The issuer under the June 2029 Notes is Seagate HDD Cayman, and the obligations under the June 2029 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX.

$500 million Aggregate Principal Amount of 3.125% Senior Notes due July, 2029 (the “July 2029 Notes”). On December 8, 2020, Seagate HDD Cayman issued, in a private placement, $500 million in aggregate principal amount of the July 2029 Notes, which will mature on July 15, 2029.The obligations under the July 2029 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The interest on the July 2029 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2021. At any time before January 15, 2024, Seagate HDD Cayman may redeem some or all of the July 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 July 2029 Notes redeemed, plus (2) the greater of (a) 1.0% of the principal amount of the July 2029 Notes and (b) the excess, if any, of (i) the present value at such redemption date of (x) the applicable redemption price of such July 2029 Notes that would apply if such July 2029 Notes were redeemed on January 15, 2024, plus (y) all remaining scheduled payments of interest due on such July 2029 Notes to and including January 15, 2024, computed using a discount rate equal to the applicable Treasury Rate as of such redemption date plus 50 basis points; over (ii) the sum of accrued and unpaid interest, if any, to, but excluding, the redemption date, plus the principal amount of such July 2029 Notes, plus (3) accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time on or after January 15, 2024, Seagate HDD Cayman may redeem some or all of such July 2029 Notes at a price of 101.563%, 100.781% and 100.000%, after January 15, 2024, January 15, 2025 and January 15, 2026, respectively, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date. In addition, Seagate HDD Cayman may redeem with the net cash proceeds from one or more equity offerings up to 40% of the July 2029 Notes before January 15, 2024, at a redemption price of 103.125%, plus accrued and unpaid interest to, but excluding, the redemption date.
$500 million Aggregate Principal Amount of 4.125% Senior Notes due January, 2031 (the “January 2031 Notes”). The interest on the January 2031 Notes is payable semi-annually on January 15 and July 15 of each year. The issuer under the January 2031 Notes is Seagate HDD Cayman, and the obligations under the January 2031 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX.
$500 million Aggregate Principal Amount of 3.375% Senior Notes due July, 2031 (the “July 2031 Notes”). On December 8, 2020, Seagate HDD Cayman issued, in a private placement, $500 million in aggregate principal amount of the July 2031 Notes, which will mature on July 15, 2031.The obligations under the July 2031 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by STX. The interest on the July 2031 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on July 15, 2021. At any time before January 15, 2026, Seagate HDD Cayman may redeem some or all of the July 2031 Notes at a “make-whole” redemption price. The “make-whole” redemption price will be equal to (1) 100% of the principal amount of the July 2031 Notes redeemed, plus (2) the greater of (a) 1.0% of the principal amount of the July 2031 Notes and (b) the excess, if any, of (i) the present value at such redemption date of (x) the applicable redemption price of such July 2031 Notes that would apply if such July 2031 Notes were redeemed on January 15, 2026, plus (y) all remaining scheduled payments of interest due on such July 2031 Notes to and including January 15, 2026, computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (ii) the sum of accrued and unpaid interest, if any, to, but excluding, the redemption date, plus the principal amount of such July 2031 Notes, plus (3) accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time on or after January 15, 2026, Seagate HDD Cayman may redeem some or all of such July 2031 Notes at a price of 101.688%, 101.125%, 100.563% and 100.000%, after January 15, 2026, January 15, 2027, January 15, 2028 and January 15, 2029, respectively, plus accrued and unpaid interest thereon, if any, to, but excluding, the redemption date. In addition, Seagate HDD Cayman may redeem with the net cash proceeds from one or more equity offerings up to 40% of the July 2031 Notes before January 15, 2024, a redemption price of 103.375%, accrued and unpaid interest to, but excluding, the redemption date.
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Table of Contents
$500 million Aggregate Principal Amount of 5.75% Senior Notes due December, 2034 (the “2034 Notes”). The interest on the 2034 Notes is payable semi-annually on June 1 and December 1 of each year. 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.

STX.

At December 29, 2017,January 1, 2021, future principal payments on long-term debt were as follows (in millions):

                        

Fiscal Year

    Amount 

Remainder of 2018

    $—   

2019

     560 

2020

     —   

2021

     —   

2022

     750 

Thereafter

     3,613 
    

 

 

 

Total

    $4,923 
    

 

 

 

4.Income Taxes

Fiscal YearAmount
Remainder of 2021$13 
2022245 
2023566 
2024525 
2025504 
Thereafter3,376 
Total$5,229 

4.Income Taxes
The Company recorded income tax provisions of $212$11 million and $219$9 million in the three and six months ended December 29, 2017,January 1, 2021, respectively.The discrete items in the income tax provision were not material for the three months ended January 1, 2021. The income tax provision for the three and six months ended December 29, 2017January 1, 2021 included approximately $197$11 million of net discrete tax expense,benefit, primarily associated with the revaluation of U.S. deferrednet excess tax assets as a resultbenefits related to share-based compensation expense and postponement of the enactment ofpreviously enacted United Kingdom (“U.K.”) tax rate change in the Tax Cuts and Jobs Act on December 22, 2017, partially offset by the recognition of previously unrecognized tax benefits associated with the expiration of certain statutes of limitation.

September 2020 quarter.

The Company’s income tax provision recorded for the three and six months ended December 29, 2017 January 1, 2021 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. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a reduction in the net U.S. deferred tax assets associated with revaluation to a lower U.S. tax rate.

current year generation of research credits.

During the six months ended December 29, 2017,January 1, 2021, the Company’s unrecognized tax benefits excluding interest and penalties increased by approximately $1 million to $75 million. The unrecognized tax benefits that, if recognized,$90 million, substantially all of which would impact the effective tax rate, were $75 million at December 29, 2017,if recognized, subject to certain future changes in valuation allowance.allowance reversals. During the 12twelve months beginning December 30, 2017,January 2, 2021, the Company expects that its unrecognized tax benefits could be reduced by approximately $2 million, primarilyan immaterial amount, as a result of the expiration of certain statutes of limitation.

The Company recorded an income tax provisionprovisions of $13$18 million and $19$16 million in the three and six months ended December 30, 2016,January 3, 2020, respectively. The discrete items in the income tax provision were not material for the three months ended January 3, 2020. The income tax provision for the six months ended December 30, 2016January 3, 2020 included approximately $4$10 million of net discrete tax benefits, primarily associated with the release ofnet excess tax reserves associated with the expiration of certain statutes of limitation and prior year tax adjustments.

benefits related to share-based compensation expense.

The Company’s income tax provision recorded for the three and six months ended December 30, 2016 January 3, 2020 differed from the provision fromfor 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. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) current year generation of research credits.

5.Leases
The Company is a decreaselessee in valuation allowanceseveral 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 deferred tax assets.

On December 22, 2017, the Tax Cutsthat an option will be exercised.

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Table of Contents
Operating lease costs include short-term lease costs and Jobs Act (the “Act”are shown net of immaterial sublease income. The components of lease costs and other information related to leases were as follows:
For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
January 3,
2020
January 1,
2021
January 3,
2020
Operating lease cost$$$$11 
Variable lease cost
Total lease cost$$$$13 
Operating cash outflows from operating leases$$$$

January 1,
2021
July 3,
2020
Weighted-average remaining lease term12.6 years13.2 years
Weighted-average discount rate6.21 %6.53 %

Right-of-use (“ROU”) was enacted into law in the United States. The Act significantly revises U.S. corporate income tax law by, among other things, lowering U.S. corporate income tax rates from 35% to 21%, implementing a territorial tax systemassets and imposing a tax on deemed repatriated earnings ofnon-U.S. subsidiaries. The Act’s new international rules, including the Global IntangibleLow-Taxed Income, the Foreign Derived Intangible Income and the Base Erosion Anti-Avoidance Tax,lease liabilities are not expected to have a material impactincluded on the Company’s financial statements. However, these assessments are based on preliminary review and analysis of the Act and are subject to changeCondensed Consolidated Balance Sheets as the Company continues to evaluate these highly complex rules as additional interpretive guidance is issued.

Pursuant to SEC Staff Accounting Bulletin (SAB) 118 (regarding the application of ASC 740 associated with the enactment of the Act), the Company recorded a provisional tax expense of approximately $208 million for the three months ended December 29, 2017 tore-measure its U.S. deferred tax assets at the newly enacted 21% tax rate. The tax expense is provisional because the Company continues to evaluate the impact of various domestic and international provisions of the Act as well as the impact of additional guidance that may be provided. This provisional tax expense increased the Company’s effective tax rate for the three months ended December 29, 2017 to approximately 56%. Many of the other U.S. tax changes are not expected to impact the Company’s tax expensefollows:

(Dollars in millions)Balance Sheet LocationJanuary 1,
2021
July 3,
2020
ROU assetsOther assets, net$105 $103 
Current lease liabilitiesAccrued expenses$17 $14 
Non-current lease liabilitiesOther non-current liabilities$52 $49 

At January 1, 2021, future lease payments included in the short-term due the Company’s large net operating lossmeasurement of lease liabilities were as follows (in millions):
Fiscal YearAmount
Remainder of 2021$
202216 
202312 
2024
2025
Thereafter104 
Total lease payments154 
Less: imputed interest(85)
Present value of lease liabilities$69 

6.Restructuring and tax credit carryovers.

5.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 and hardware storage systems. 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.

6.Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the six months ended December 29, 2017, are as follows:

                        

(Dollars in millions)

    Amount 

Balance at June 30, 2017

    $1,238 

Goodwill acquired

     —   

Goodwill disposed

     (1

Foreign currency translation effect

     1 
    

 

 

 

Balance at December 29, 2017

    $1,238 
    

 

 

 

Other Intangible Assets

Other intangible assets consist primarily of existing technology, customer relationships and trade names acquired in business combinations. 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 Condensed Consolidated Statements of Operations.

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of December 29, 2017, 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

    $279   $(138  $141    3.2 years 

Customer relationships

     105    (50   55    4.3 years 

Trade name

     17    (11   6    1.7 years 

Other intangible assets

     36    (16   20    2.2 years 
    

 

 

   

 

 

   

 

 

   

Total amortizable other intangible assets

    $437   $(215  $222    3.2 years 
    

 

 

   

 

 

   

 

 

   

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of June 30, 2017 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 
    

 

 

   

 

 

   

 

 

   

Exit Costs

For the three and six months ended December 29, 2017, the amortization expense of other intangible assets were $33 million and $69 million, respectively. For the three and six months ended December 30, 2016, the amortization expense of other intangible assets was $42 million and $84 million, respectively. As of December 29, 2017, expected amortization expense for other intangible assets for each of the next five fiscal years and thereafter is as follows:

                        

(Dollars in millions)

    Amount 

Remainder of 2018

    $40 

2019

     71 

2020

     53 

2021

     25 

2022

     17 

Thereafter

     16 
    

 

 

 

Total

    $222 
    

 

 

 

7.Restructuring and Exit Costs

For the three and six months ended December 29, 2017,January 1, 2021, the Company recorded restructuring charges of approximately $33$2 millionand $84$3 million, respectively,respectively.The Company’s restructuring plans are comprised primarily of charges related to workforce reduction costs and facilityfacilities and other exit costs associated with the restructuring of its workforce during the fiscal year. The Company’s significant restructuring plans are described below.costs. All restructuring charges are reported in Restructuring and other, net on the Company’s Condensed Consolidated Statements of Operations.

December 2017

June 2020 Plan - On December 8, 2017,June 1, 2020, the Company committed to a restructuring plan (the “December 2017“June 2020 Plan”) consistent with its long-term strategy to drive operational efficiencies, reduce its cost structure.structure and invest in future opportunities. The December 2017June 2020 Plan included reducingconsolidating the Company’s globalMinnesota facilities into one location and reducing its headcount worldwide by approximately 500 employees. The December 2017June 2020 Plan is expected to bewas substantially completed byduring the endSeptember 2020 quarter.
18

Table of 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. Contents

The July 2017 Plan included reducingfollowing tables summarize the Company’s global headcount by approximately 600 employees. The July 2017 Plan was largely completed by the end of the September 2017 quarter.

March 2017 Plan -On March 9, 2017, the Company committed to a restructuring plan (the “March 2017 Plan”) in connection with the continued consolidation of its global footprint. The Company closed its design center in Korea, resulting in the reduction ofactivities under the Company’s headcount by approximately 300 employees. The March 2017 Plan was largely completed by the end of fiscal year 2017.

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 the December 2017 quarter.

In addition, during fiscal year 2017, the Company committed to sell certain land and buildings primarily in Asia as part of the March 2017 and July 2016 plans, which accordingly met the criteria to be classified as assets held for sale and were reclassified to Other current assets at that time. These assets remained included in Other current assets on the Condensed Consolidated Balance Sheet as of December 29, 2017.

  December 2017 Plan  July 2017 Plan  March 2017 Plan  July 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
  Workforce
Reduction
Costs
  Facilities
and
Other
Exit
Costs
  Total 
Accrual balances at June 30, 2017 $—    $—    $—    $—    $—    $—    $22  $2  $6  $13  $43 

Restructuring charges

  27   —     38   4   —     —     1   9   2   —     81 

Cash payments

  (3  —     (35  (3  —     —     (21  (11  (7  —     (80

Adjustments

  —     —     (1  —     2   —     2   —     —     —     3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Accrual balances at December 29, 2017 $24  $—    $2  $1  $2  $—    $4  $—    $1  $13  $47 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Total costs incurred to date as of December 29, 2017 $27  $—    $37  $4  $31  $3  $82  $29  $228  $51  $492 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Total expected charges to be incurred as of December 29, 2017 $3  $7  $—    $—    $—    $1  $1  $4  $—    $3  $19 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
           
Restructuring charges for the three months ended December 29, 2017 $27  $—    $(1 $—    $1  $—    $2  $3  $1  $—    $33 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

8.Derivative Financial Instruments

plans:

June 2020 PlanOther Plans
(Dollars in millions)Workforce Reduction CostsFacilities and Other Exit CostsWorkforce Reduction CostsFacilities and Other Exit CostsTotal
Accrual balances at July 3, 2020$38 $$$$48 
Restructuring charges
Cash payments(36)(1)(6)(43)
Adjustments
Accrual balances at January 1, 2021$$$$$
Total costs incurred to date as of January 1, 2021$56 $$19 $28 $105 
Total expected charges to be incurred as of January 1, 2021$$$$$

Restructuring Plans
(Dollars in millions)Workforce Reduction CostsFacilities and Other Exit CostsTotal
Accrual balances at June 28, 2019$13 $17 $30 
Lease adoption adjustment(11)(11)
Restructuring charges20 21 
Cash payments(15)(3)(18)
Adjustments(4)(4)
Accrual balances at January 3, 2020$14 $$18 

7.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 notional amount of the interest rate swap agreements was $494 million as of January 1, 2021. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with the variable interest rate 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 Condensed 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 had no outstandingamount of net unrealized loss on cash flow hedges was $10 million and $24 million as of December 29, 2017January 1, 2021 and June 30, 2017.

as of July 3, 2020, respectively. As of January 1, 2021, the amount of existing net losses related to cash flow hedges recorded in Accumulated other comprehensive loss included a net gain of $7 million that is expected to be reclassified to earnings within twelve months.

The Company dedesignatesde-designates its cash flow hedges when the forecasted hedged transactions are realizedaffect 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 Condensed 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 lossesgain of $4 million in Cost of revenue related to the loss of hedge designation on discontinued cash flow hedges during the three and six months ended December 29, 2017.

AsJanuary 1, 2021. The Company recognized a net loss of December 29, 2017$2 million and June 30, 2017,$4 million in Other, net related to the loss of hedge designation on discontinued cash flow hedges during the three and six months ended January 1, 2021, respectively. The Company recognized a net loss of $1 million in Other, net related to the loss of hedge designation on discontinued cash flow hedges during the three and six months ended January 3, 2020.

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Table of Contents
Other derivatives not designated as hedging instruments consist of foreign currency forward exchange contracts that the Company does not haveuses 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 Condensed Consolidated Statements of Operations.
The following tables show the total notional value of the Company’s outstanding foreign currency forward exchange contracts.

contracts as of January 1, 2021 and July 3, 2020. All foreign currency forward exchange contracts mature within 12 months.

 As of January 1, 2021
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Singapore Dollar$118 $54 
Thai Baht93 45 
Chinese Renminbi43 19 
British Pound Sterling45 16 
$299 $134 

 As of July 3, 2020
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Singapore Dollar$187 $56 
Thai Baht157 42 
Chinese Renminbi81 25 
British Pound Sterling64 20 
$489 $143 

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 ofits Non-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 December 29, 2017,January 1, 2021, the notional investments underlying the TRS amounted to $117 million. The$118 million and the contract term was through January 2021, settled on a monthly basis, limiting counterparty performance risk. As of January 26, 2021, the contract term of the TRS iswas extended through January 2019 and is settled on a monthly basis, therefore limiting counterparty performance risk.2022. The Company did not designate the TRS as a hedge. Rather,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.

As of December 29, 2017 and June 30, 2017,

The following tables show the Company had no outstanding foreign currency forward exchange contracts and theCompany’s derivative instruments measured at gross fair value of the TRSas reflected in the Condensed Consolidated Balance Sheets respectively, is immaterial.

as of January 1, 2021 and July 3, 2020:

As of January 1, 2021
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$14 Accrued expenses$
Interest rate swapOther current assetsAccrued expenses(24)
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assetsAccrued expenses
Total return swapOther current assetsAccrued expenses
Total derivatives $23  $(24)

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Table of Contents
As of July 3, 2020
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$Accrued expenses$
Interest rate swapOther current assetsAccrued expenses(27)
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assetsAccrued expenses(2)
Total return swapOther current assetsAccrued expenses
Total derivatives $ $(29)

The following tables show the effect of the Company’s derivative instruments on the Condensed Consolidated StatementStatements of Comprehensive Income and the Condensed Consolidated StatementStatements of Operations for the three and six months ended December 29, 2017.

                                                                        

(Dollars in millions)

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
 
        For the Three Months     For the Six Months 

Foreign currency forward exchange contracts

    Other, net    $—       $—   

Total return swap

    Operating expenses     4      7 

January 1, 2021:    

Amount of Gain/(Loss) Recognized in Income on Derivatives
(Dollars in millions)
Derivatives Not Designated as Hedging Instruments
Location of Gain/(Loss) Recognized in Income on DerivativesFor the Three MonthsFor the Six Months
Foreign currency forward exchange contractsOther, net$$14 
Total return swapOperating expenses11 16 



(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)
For the Three MonthsFor the Six MonthsFor the Three MonthsFor the Six MonthsFor the Three MonthsFor the Six Months
Foreign currency forward exchange contracts$11 $15 Cost of revenue$$Other, net$$
Interest rate swapOther, net(2)(4)Other, net


The following tables show the effect of the Company’s derivative instruments on the Condensed Consolidated StatementStatements of Comprehensive Income and the Condensed Consolidated StatementStatements of Operations for the three and six months ended December 30, 2016:

                                                                                                                                                                                                

(Dollars in millions)

Derivatives Designated as Hedging Instruments

    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)
 
    For the
Three
Months
   For the
Six
Months
     For the
Three
Months
   For the
Six
Months
     For the
Three
Months
   For the
Six
Months
 

Foreign currency forward exchange contracts

    $(2  $(3   Cost of revenue   $  —     $(1   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
 
        For the Three Months     For the Six Months 

Foreign currency forward exchange contracts

    Other, net    $(2    $(3

Total return swap

    Operating expenses     1     $4 

(a)The amount of gain or (loss) recognized in income related to the ineffective portion of the hedging relationships and the amount excluded from the assessment of hedge effectiveness were less than $1 million for the three and six months ended December 30, 2016.

9.Fair Value

January 3, 2020:

(Dollars in millions)
Derivatives Not Designated as Hedging Instruments
Location of Gain/(Loss) Recognized in Income on DerivativesAmount of Gain/(Loss) Recognized in Income on Derivatives
For the Three MonthsFor the Six Months
Foreign currency forward exchange contractsOther, net$$(2)
Interest rate swapOperating expenses$$

21

Table of Contents

(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)
For the Three MonthsFor the Six MonthsFor the Three MonthsFor the Six MonthsFor the Three MonthsFor the Six Months
Foreign currency forward exchange contracts$$Other, net$(1)$(1)Other, net$$
Interest rate swapOther, netOther, net

8.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 reflectsreflect the Company’s own assumptions of market participant valuation (unobservable inputs). A financial instrument’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 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.

22

Table of Contents
Items Measured at Fair Value on a Recurring Basis

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 December 29, 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

    $673   $—     $—     $673 

Time deposits

     —      387    —      387 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

     673    387    —      1,060 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     1    —      —      1 

Time deposits and certificates of deposit

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $674   $390   $—     $1,064 
    

 

 

   

 

 

   

 

 

   

 

 

 

                                                                                                
     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

    $673   $387   $—     $1,060 

Other current assets

     1    3    —      4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $674   $390   $—     $1,064 
    

 

 

   

 

 

   

 

 

   

 

 

 

January 1, 2021:

 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$992 $$$992 
Time deposits and certificates of deposit51 51 
Total cash equivalents992 51 1,043 
Restricted cash and investments:    
  Money market funds
  Time deposits and certificates of deposit
Other debt securities18 18 
Derivative assets23 23 
Total assets$992 $79 $18 $1,089 
Liabilities:    
Derivative liabilities$$24 $$24 
Total liabilities$$24 $$24 

 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$992 $51 $$1,043 
Other current assets28 28 
Other assets, net18 18 
Total assets$992 $79 $18 $1,089 
Liabilities:    
Accrued expenses$$24 $$24 
Total liabilities$$24 $$24 

23

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 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

    $593   $—     $—     $593 

Time deposits

     —      581    —      581 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

     593    581    —      1,174 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     1    —      —      1 

Time deposits and certificates of deposit

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $594   $584   $—     $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

    $593   $581   $—     $1,174 

Other current assets

     1    3    —      4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $594   $584   $—     $1,178 
    

 

 

   

 

 

   

 

 

   

 

 

 

July 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 $$$494 
Time deposits and certificates of deposit55 55 
Total cash equivalents494 55 549 
Restricted cash and investments:    
  Money market funds
  Time deposits and certificates of deposit
Other debt securities18 18 
Derivative assets
Total assets$495 $62 $18 $575 
Liabilities:    
Derivative liabilities$$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 $$549 
Other current assets
Other assets, net18 18 
Total assets$495 $62 $18 $575 
Liabilities:    
Accrued expenses$$29 $$29 
Total liabilities$$29 $$29 

24

Table of Contents
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. 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 standardindustry-standard data providers or other third partythird-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 December 29, 2017,January 1, 2021, 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 condensed 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 of December 29, 2017 and June 30, 2017, the Company had no Level 3 assets or liabilities measured at fair value on a recurring basis.

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 inon the Company’s Condensed Consolidated Balance Sheets, and are periodically analyzed to determine whether or not there are indicators of impairment. The
As of January 1, 2021 and July 3, 2020, the carrying value of the Company’s strategic investments at December 29, 2017 and June 30, 2017 totaled $129was $150 million and $125$135 million respectively, and consisted primarily, respectively. The Company’s strategic investments are recorded at fair value only if an impairment or observable price change is recognized in the current period. If an observable price change 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 privately held equity securities without a readily determinablethe fair value.

value inputs. For the three and six months ended December 29, 2017,January 1, 2021, the Company did not have any equityrecorded downward adjustments of $7 million to write down the carrying amount of certain investments accountedto their fair value, which are included in Other, net in the Company’s Condensed Consolidated Statement of Operations. For the three months ended January 1, 2021, there were 0 upward adjustments for understrategic investments. For the cost method that were other-than-temporarily impaired and did not record any impairment charges.six months ended January 1, 2021, the Company recorded an upward adjustment of $23 million due to an observable price change of a strategic investment, which is included in Other, net in the Company’s Condensed Consolidated Statement of Operations. For the three and six months ended December 30, 2016,January 3, 2020, the Company determined thatrecorded a certain equity investment accounted for under the cost method was other-than-temporarily impaired, and recognized a chargedownward adjustment of $25$1 million in order to write down the carrying amount of thean investment to zero. Since there was no active market for the equity securities of the investee, the Company estimatedits fair value of the investee by analyzing the underlying cash flows and future prospects of the investee. These amounts were recorded in Other, net in the Condensed Consolidated Statements of Operations. The Company did not record any impairment charges in the three months ended December 30, 2016.

As of December 29, 2017 and June 30, 2017, the Company had $77 million held for sale assets included in Other current assets on the Condensed Consolidated Balance Sheets, which primarily consisted of $37 million of land and building in Korea and $26 million of land and building in China, with the remainder of the balance comprised of property at other locations (collectively, the “properties”). The respective properties to be sold met the criteria to be classified as held for sale during the quarters ended March 31, 2017 and June 30, 2017. 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 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 Condensed Consolidated Statement of Operations. No additional impairment charges related to these properties were recorded duringvalue. For the three and six months period ended December 29, 2017. The fair valuesJanuary 3, 2020, there were measured with the assistance0 upward adjustments for strategic investments.

25

Table of third-party valuation models which used inputs such as comparable market data for similar land sale transactions adjusted for differences in comparable properties to derive the estimated fair 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.

Contents

Other Fair 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:

                                                                                                
     December 29, 2017   June 30, 2017 

(Dollars in millions)

    Carrying
Amount
   Estimated
Fair Value
   Carrying
Amount
   Estimated
Fair Value
 

3.75% Senior Notes due November 2018

    $560   $567   $710   $726 

4.25% Senior Notes due March 2022

     748    758    748    765 

4.75% Senior Notes due June 2023

     951    972    951    987 

4.875% Senior Notes due March 2024

     497    504    497    511 

4.75% Senior Notes due January 2025

     975    961    975    984 

4.875% Senior Notes due June 2027

     695    668    695    698 

5.75% Senior Notes due December 2034

     489    473    489    488 
    

 

 

   

 

 

   

 

 

   

 

 

 
    $4,915   $4,903   $5,065   $5,159 

Less: debt issuance costs

     (39   —      (44   —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, net of debt issuance costs

    $4,876   $4,903   $5,021   $5,159 

Less: current portion of long-term debt

     (560   (567   —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, less current portion

    $4,316   $4,336   $5,021   $5,159 
    

 

 

   

 

 

   

 

 

   

 

 

 

10.Equity

 January 1, 2021July 3, 2020
(Dollars in millions)Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
4.250% Senior Notes due March 2022$220 $227 $229 $237 
4.750% Senior Notes due June 2023540 584 546 576 
4.875% Senior Notes due March 2024499 544 498 541 
4.750% Senior Notes due January 2025479 522 479 517 
4.875% Senior Notes due June 2027504 569 504 549 
4.091% Senior Notes due June 2029459 536 456 523 
3.125% Senior Notes due July 2029500 500 — — 
4.125% Senior Notes due January 2031499 535 499 524 
3.375% Senior Notes due July 2031500 502 — — 
5.750% Senior Notes due December 2034489 578 489 543 
LIBOR Based Term Loan due September 2025494 482 500 490 
5,183 5,579 4,200 4,500 
Less: debt issuance costs(38)(25)
Debt, net of debt issuance costs5,145 5,579 4,175 4,500 
Less: current portion of debt, net of debt issuance costs(25)(24)(19)(19)
Long-term debt, less current portion, net of debt issuance costs$5,120 $5,555 $4,156 $4,481 

9.Equity
Share Capital

The Company’s authorized share capital isis $13,500 and consists of 1,250,000,000 ordinary shares, par value $0.00001, of which 284,573,784239,750,208 shares were outstanding as of December 29, 2017, January 1, 2021, and 100,000,000 preferred shares, par value $0.00001, of which none0ne were issued or outstanding as of December 29, 2017.

January 1, 2021.

Ordinary shares—Holders of ordinary shares are entitled to receive dividends as and when declared by the Company’s boardBoard of directors (the “Board of Directors”).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—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 $2.5 billion of its outstanding ordinary shares.

All repurchases are effected as redemptions in accordance with the Company’s ArticlesConstitution.
On October 21, 2020, the Company’s Board of Association.

Directors increased the authorization for the repurchase of its outstanding ordinary shares by $3.0 billion. As of December 29, 2017, $0.9January 1, 2021, $3.2 billion remained available for repurchase under the existing repurchase authorization limit.

26

Table of Contents
The following table sets forth information with respect to repurchases of the Company’sordinary shares during the six months ended December 29, 2017:

                                                

(In millions)

    Number of Shares
Repurchased
   Dollar Value of Shares
Repurchased
 

Repurchases of ordinary shares

     10   $361 

Tax withholding related to vesting of equity awards

     1    21 
    

 

 

   

 

 

 

Total

     11   $382 
    

 

 

   

 

 

 

11.Share-based Compensation

January 1, 2021:

(In millions)Number of Shares RepurchasedDollar Value of Shares Repurchased
Repurchases of ordinary shares19 $1,068 
Tax withholding related to vesting of equity awards32 
Total20 $1,100 

10.Revenue
The Company recorded approximately $27 millionfollowing table provides information about disaggregated revenue by sales channel and $59 milliongeographical region for the Company’s single reportable segment:
For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
January 3,
2020
January 1,
2021
January 3,
2020
Revenues by Channel 
Original equipment manufacturers$1,741 $1,843 $3,349 $3,663 
Distributors475 463 842 924 
Retailers407 390 746 687 
Total$2,623 $2,696 $4,937 $5,274 
Revenues by Geography (1)
Asia Pacific$1,306 $1,377 $2,412 $2,655 
Americas838 761 1,643 1,596 
EMEA479 558 882 1,023 
Total$2,623 $2,696 $4,937 $5,274 

(1) Revenue is attributed to countries based on bill from locations.

11.Guarantees
Indemnifications of share-based compensation expense during the three and six months ended December 29, 2017, respectively. The Company recorded approximately $33 million and $73 million of share-based compensation expense during the three and six months ended December 30, 2016, respectively.

12.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 and wholly-owned subsidiary of STX, from time to time enters into indemnification agreements with the parent company, entered into a new formdirectors, officers, employees and agents of indemnification agreement (the “Revised Indemnification Agreement”) with its officers and directorsSTX or any of Seagate-Cayman and its subsidiaries (each, an “Indemnitee”). The Revised Indemnification Agreement providesindemnification agreements provide indemnification in addition to any of Indemnitee’s indemnification rights under Seagate-Cayman’sany 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 Seagate-CaymanSTX or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of Seagate-CaymanSTX or any of its subsidiaries or of any other entity to which he or she provides services at Seagate-Cayman’sthe Company’s request. However, an Indemnitee shallIndemnitees are not be indemnified under the Revised Indemnification Agreementindemnification agreements for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to Seagate-CaymanSTX 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.Company. In addition, the Revised Indemnification Agreement providesindemnification agreements provide that Seagate-Cayman will advance expenses incurred by an Indemnitee in connection with enforcement of the Revised Indemnification Agreementindemnification 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, pursuant to a corporate reorganization, the common shareholders of Seagate-Cayman became ordinary shareholders of Seagate Technology plc (the “Company”) and Seagate-Cayman became a wholly owned subsidiary of the Company, as described more fully in the Current Report 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, with 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, the Company has not made any significant indemnification payments under such indemnification agreements and no0 amount has been accrued in the accompanyingCompany’s condensed consolidated financial statements with respect to these indemnification obligations.

Intellectual Property

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Indemnification Obligations

The Company has enteredfrom time to time enters into agreements with customers, suppliers, partners and suppliersothers in the ordinary course of business that includeprovide indemnification for certain matters including, but not limited to, intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damagesinfringement claims, environmental claims and costs incurred as a resultbreach of third party intellectual property claims arising from these transactions.agreement claims. The nature of the intellectual propertyCompany’s 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.pay. Historically, the Company has not made any significant indemnification payments under such agreements and no0 amount has been accrued in the accompanyingCompany’s condensed 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 warranty return rates in order to determine its warranty obligation. Changes in the Company’s product warranty liability during the three and six months ended December 29, 2017January 1, 2021 and December 30, 2016January 3, 2020 were as follows:

                                                                                                
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Balance, beginning of period

    $230   $216   $233   $206 

Warranties issued

     40    34    75    65 

Repairs and replacements

     (27   (29   (54   (59

Changes in liability forpre-existing warranties, including expirations

     (7   1    (18   10 
    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

    $236   $222   $236   $222 
    

 

 

   

 

 

   

 

 

   

 

 

 

13.Earnings Per Share

 For the Six Months Ended
(Dollars in millions)January 1,
2021
January 3,
2020
Balance, beginning of period$151 $195 
Warranties issued37 46 
Repairs and replacements(42)(44)
Changes in liability for pre-existing warranties, including expirations(9)(28)
Balance, end of period$137 $169 

12.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 restricted stockshare units and performance-based share units and shares to be purchased under the Company’s Employee Stock Purchase Plan (“ESPP”).Plan. 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 attributable to the shareholders of the Company:

                                                                                                
     For the Three Months Ended   For the Six Months Ended 

(In millions, except per share data)

    December 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Numerator:

          

Net income

    $159   $297   $340   $464 
    

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares used in per share calculations:

          

Total shares for purposes of calculating basic net income per share

     288    296    289    297 

Weighted-average effect of dilutive securities:

          

Employee equity award plans

     3    2    2    2 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total shares for purpose of calculating diluted net income per share

     291    298    291    299 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

          

Basic

    $0.55   $1.00   $1.18   $1.56 

Diluted

    $0.55   $1.00   $1.17   $1.55 

 For the Three Months EndedFor the Six Months Ended
(In millions, except per share data)January 1,
2021
January 3,
2020
January 1,
2021
January 3,
2020
Numerator:  
Net income$280 $318 $503 $518 
Number of shares used in per share calculations:  
Total shares for purposes of calculating basic net income per share249 262 253 264 
Weighted-average effect of dilutive securities:  
Employee equity award plans
Total shares for purpose of calculating diluted net income per share251 265 255 268 
Net income per share:  
Basic$1.12 $1.21 $1.99 $1.96 
Diluted1.12 1.20 1.97 1.93 

The anti-dilutive shares related to employee equity award plans that were excluded from the computation of diluted net income per share were 1 million and 2 millionnot material for the three and six months ended December 29, 2017, respectively,January 1, 2021 and 1 millionJanuary 3, 2020.
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13.Legal, Environmental and 2 million for the three and six months ended December 30, 2016, respectively.

14.Legal, Environmental and Other Contingencies

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.On 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.

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 judgmentof non-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 of non-

infringementnon-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 judgmentof non-infringement by Compaq’s accused products as toclaims 7-15 of the ‘473 patent; 4) reversed the district court’s summary judgmentof non-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.

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 thatclaims 1-15 of the ‘995 patent are held unpatentable. On December 18, 2015, PTAB issued its final written decisions thatclaims 1-32 and 40-53 of the ‘057 patent are held unpatentable. On February 4, 2016, PTAB issued its final written decision thatclaims 33-39 of the ‘057 patent are held unpatentable. Enova appealed PTAB’s decisions on the ‘995 patent and the ‘057 patent to the U.S. Court of Appeals for the Federal Circuit. On March 20, 2017, the court of appeals issued its judgment affirming PTAB’s decision on the ‘995 patent. On September 6, 2017, the court of appeals issued its judgment affirming PTAB’s decision on the ‘057 patent. On November 27, 2017, Enova filed a petition for writ of certiorari with the U.S. Supreme Court challenging the court of appeals’ decision on the ‘057 Patent. The Supreme Court has not yet ruled on this petition. The district court case remains stayed. 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.On 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. The court issued its claim construction ruling on October 18, 2017. NoThe trial date has been set. In viewis scheduled to begin on June 21, 2021. While the possible range of loss for this matter remains uncertain, the uncertainty regardingCompany estimates the amount of loss to 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.
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Nidec Corporation v. Seagate Technology LLC, et al. On January 18, 2021, Nidec Corporation filed a complaint against Seagate Technology LLC, Seagate Singapore International Headquarters Pte. Ltd., and Seagate Technology (Netherlands) B.V. in the United States District Court for the District of Delaware, alleging infringement of the following patents: U.S. Patent No. 8,737,017, titled “Spindle Motor and Disk Drive Apparatus,” U.S. Patent No. 9,742,239, titled “Spindle Motor and Disk Drive Apparatus,” U.S. Patent No. 9,935,528, titled “Spindle Motor and Disk Drive Apparatus,” U.S. Patent No. 10,407,775, titled “Base Plate, Hard Disk Drive, and Method of Manufacturing Base Plate,” and U.S. Patent No. 10,460,767, titled “Base Member Including Information Mark and Insulating Coating Layer, and Disk Drive Apparatus Including the Same.” The complaint seeks unspecified compensatory damages if any, that could be awardedand other relief. The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend this matter, thecase. 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.

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.

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, regulatory or administrative proceedings and investigations incidental to its business, and the Company may be involved in such 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.


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Table of Contents15. Commitments

Investment commitment to acquire preferred equity securities.On September 28, 2017,

14.Subsequent Events
Dividend Declared
On January 21, 2021, the Company entered into an Equity Commitment Letter (“ECL”) with a consortium of investors led by Bain Capital Private Equity for the acquisition of Toshiba Memory Corporation (“TMC”). The ECL contemplates that, upon the closing of the acquisition, the Company or one of its subsidiaries would purchase up to JPY 139.5 billion (approximately USD 1.24 billion based on an exchange rate as of December 29, 2017), of a newly issuednon-convertible preferred equity security of a newly formed company, K. K. Pangea, for the purpose of acquiring TMC. The closing of the acquisition is subject to regulatory approvals and other closing conditions.

16. Subsequent Events

Dividend Declared

On January 29, 2018, the Company’sCompany’s Board of Directors announceddeclared a quarterly cash dividend of $0.63$0.67 per share, which will be payable on April 4, 2018 7, 2021to shareholders of record as of the close of business on March 21, 2018.

24, 2021.


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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition, changes in financial condition and results of operations for our fiscal quarters ended December 29, 2017, September 29, 2017January 1, 2021, October 2, 2020 and December 30, 2016,January 3, 2020, referred to herein as the “December 20172020 quarter,” the “September 20172020 quarter,” and the “December 20162019 quarter,” respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The December 2017,2020 quarter, the September 20172020 quarter and the December 2016 quarters2019 quarter were alleach 13 weeks.

You should read this discussion in conjunction with financial information and related notes included elsewhere in this report. Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “Seagate,” the “Company” and “our” refer collectively to Seagate Technology plc, an Irish public limited company, and its subsidiaries. References to “$” or “dollars” are to United States dollars.

Some of the statements and assumptions included in this

This Quarterly Reporton Form 10-Q arecontains 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 Quarterly Report on Form 10-Q 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 efforts,efforts; the impactsufficiency of our sources of cash to meet cash needs for the Tax Cutsnext 12 months; our expectations regarding capital expenditures; and Jobs Act on our financial statements, and the projected costscost savings for the fiscal quarter ending March 30, 2018 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 negativesnegative 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 Quarterly Reporton Form 10-Q 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 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 our 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; political conditions;
the development and introduction of products based on new technologies and expansion into new data storage markets; markets, and market acceptance of new products;
the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends; consolidation trends
the impact of variable demand, changes in market demand, and an adverse pricing environment for storage products;
the dataimpact of 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 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 and its ability to maintain a favorable cash liquidity position;
the Company’s ability to successfully qualify, manufacture and sell its storage industry; products in increasing volumes on a cost-effective basis and with acceptable quality;
any price erosion or volatility of sales volumes through the Company’s distributor and retail channel;
the effects of the outbreak of COVID-19 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;
currency fluctuations that may impact the Company’s margins, international sales and results of operations;
the evolving legal and regulatory, economic, environmental and administrative climate in the international sales; markets where the Company operates; and
cyber-attacks or other data breaches that disrupt itsthe Company’s operations or resultsresult 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 ratiosharm.
Information concerning these and financial condition tests; the riskof non-compliance with the legal, regulatory, administrative and environmental regimes in the markets where we operate; and fluctuations in interest rates. Information concerningother risks, uncertainties and other factors, among others, that could cause results to differ materially from those projectedour expectations are described in such forward-looking statements is also set forththis Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” of theour Annual Reporton Form 10-K for the fiscal year ended June 30, 2017,July 3, 2020, 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.

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Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying condensed 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. Overview of our business.

Overview of the December 2017 Quarter. Highlights of events in the December 2017 quarter that impacted our financial position.

Results of Operations. An analysis of our financial results comparing the December 2017 quarter to the September 2017 quarter and the December 2016 quarter.

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

Contractual Obligations and Commitments. Overview of contractual obligations and contingent liabilities and commitments outstanding as of December 29, 2017.

Critical Accounting Policies. Accounting policies and 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 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”) 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 with most SSDs using 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.

Our products are designed for mission critical and nearline applications in enterprise servers and storage systems; edge compute / client compute applications, where our products are designed primarily for desktop and mobile computing; and edgenon-compute /client non-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 systemsand scale-out storage servers.

Overview of the December 2017 Quarter

2020 quarter. Highlights of events in the December 2020 quarter that impacted our financial position.

Results of Operations. Analysis of our financial results comparing the December 2020 quarter to the September 2020 quarter and the December 2019 quarter.
Liquidity and Capital Resources. An analysis of changes in our balance sheet and cash flows, and discussion of our financial condition including potential sources of liquidity.
Critical Accounting Policies. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
For an overview of our business, see “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies—Organization”.
Overview of the December 2020 quarter
During the December 20172020 quarter, we shipped 88129 exabytes of HDD storage capacity, generatingcapacity. We generated revenue of approximately $2.9$2.6 billion and gross margin of 30%. Our27% and our operating cash flow was $850 million.$473 million. We issued $1 billion of new senior notes, repurchased 5approximately 18 million of our ordinary shares for $195 million,$1 billion and paid $182$167 million in dividends,dividends.
Impact of COVID-19
The COVID-19 pandemic has resulted in a widespread health crisis and numerous disease control measures are being taken to limit its spread, the effects of which began during our quarter ended April 3, 2020. We continued to incur certain supply chain and demand disruptions during the December 2020 quarter, as well as paid $130 millionhigher logistics and operational costs, factory under-utilization and softer demand across certain markets due to the COVID-19 pandemic, which we expect to continue during fiscal year 2021. Our customers also continued to experience certain supply chain and demand disruptions during the December 2020 quarter, which we anticipate will continue during 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 “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the repurchasefiscal year ended July 3, 2020.
33

Table of certain of our outstanding debt.

Contents

Results of Operations

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

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

(Dollars in millions)

    December 29,
2017
 September 29,
2017
 December 30,
2016
 December 29,
2017
 December 30,
2016

Revenue

    $2,914  $2,632  $2,894  $5,546  $5,691 

Cost of revenue

     2,037   1,896   2,003   3,933   3,999 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

     877   736   891   1,613   1,692 

Product development

     250   263   305   513   620 

Marketing and administrative

     142   145   155   287   308 

Amortization of intangibles

     19   22   28   41   57 

Restructuring and other, net

     33   51   33   84   115 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

     433   255   370   688   592 

Other expense, net

     (62  (67  (60  (129  (109
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

     371   188   310   559   483 

Provision for income taxes

     212   7   13   219   19 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

    $159  $181  $297  $340  $464 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     For the Three Months Ended For the Six Months Ended

 

    December 29,
2017
 September 29,
2017
 December 30,
2016
 December 29,
2017
 December 30,
2016

Revenue

     100  100  100  100  100

Cost of revenue

     70   72   69   71   70 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

     30   28   31   29   30 

Product development

     9   10   11   9   11 

Marketing and administrative

     5   5   5   5   6 

Amortization of intangibles

     —     1   1   1   1 

Restructuring and other, net

     1   2   1   2   2 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

     15   10   13   12   10 

Other expense, net

     (3  (3  (2  (2  (2
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

     12   7   11   10   8 

Provision for income taxes

     7   —     1   4   —   
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

     5  7  10  6  8
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Revenue$2,623 $2,314 $2,696 $4,937 $5,274 
Cost of revenue1,927 1,718 1,938 3,645 3,845 
Gross profit696 596 758 1,292 1,429 
Product development221 223 250 444 505 
Marketing and administrative122 118 120 240 242 
Amortization of intangibles
Restructuring and other, net— 17 
Income from operations348 251 384 599 657 
Other expense, net(57)(30)(48)(87)(123)
Income before income taxes291 221 336 512 534 
Provision (benefit) for income taxes11 (2)18 16 
Net income$280 $223 $318 $503 $518 
 For the Three Months EndedFor the Six Months Ended
January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Revenue100 %100 %100 %100 %100 %
Cost of revenue73 74 72 74 73 
Gross profit27 26 28 26 27 
Product development10 10 
Marketing and administrative
Amortization of intangibles— — — — — 
Restructuring and other, net— — — — — 
Income from operations13 11 15 12 12 
Other expense, net(2)(1)(2)(2)(2)
Income before income taxes11 10 13 10 10 
Provision (benefit) for income taxes— — — — 
Net income11 %10 %12 %10 %10 %
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Revenue

The following table summarizes HDD information regarding average drive selling prices (“ASPs”), exabytes shipped, andconsolidated revenues by channel, geography and geography:

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

 

    December 29,
2017
 September 29,
2017
 December 30,
2016
 December 29,
2017
 December 30,
2016

ASPs (per unit)

    $68  $64  $67  $66  $67 

Exabytes Shipped

     88   70   68   158   135 

Revenues by Channel (%)

        

OEMs

     67  67  66  67  68

Distributors

     17  17  18  17  18

Retailers

     16  16  16  16  14

Revenues by Geography (%)

        

Americas

     26  26  30  26  32

EMEA

     19  18  19  18  17

Asia Pacific

     55  56  51  56  51

market, HDD exabytes shipped by market and HDD price per terabyte:

 For the Three Months EndedFor the Six Months Ended
January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Revenues by Channel (%)  
Original equipment manufacturers66 %69 %68 %68 %69 %
Distributors18 %16 %17 %17 %18 %
Retailers16 %15 %15 %15 %13 %
Revenues by Geography (%)   
Asia Pacific50 %48 %51 %49 %50 %
Americas32 %35 %28 %33 %30 %
EMEA18 %17 %21 %18 %20 %
Revenues by Market (%)
Mass capacity58 %58 %49 %58 %48 %
Legacy35 %34 %43 %34 %44 %
Other%%%%%
HDD Exabytes Shipped by Market
Mass capacity97 86 71 183 135 
Legacy32 28 36 60 70 
Total129 114 107 243 205 
HDD Price per Terabyte$19 $19 $23 $19 $24 

Revenue in the December 20172020 quarter increased by $282$309 million from the September 20172020 quarter as a result ofprimarily due to an increase in exabytes shipped, driven primarily by higher seasonal demandimproved market conditions and seasonality.
Revenue in the consumerDecember 2020 quarter decreased by $73 million from the December 2019 quarter primarily due to price erosion, a decrease in legacy market exabytes shipped and higherlower demand foras a result of the Company’s high capacity HDD product portfolio,COVID-19 pandemic, partially offset by price erosion.

Compared to the December 2016 quarter, revenue in the December 2017 quarter increased modestly primarily due toan increase in mass capacity storage exabytes shipped, offset by price erosion.

shipped.

Revenue for the six months ended December 2017 quarterJanuary 1, 2021 decreased by $145$337 million from the six months ended December 2016 quarterJanuary 3, 2020 primarily as a result of price erosion, a decrease in legacy market exabytes shipped and lower demand as a result of the COVID-19 pandemic, partially offset by an improved product mix.

increase in mass capacity storage exabytes shipped.

We maintain various sales incentive programs such as channel rebates and price masking.original equipment manufacturers rebates. Sales incentive programs were approximately 12%, 11% and 11%15% of gross drive revenue for the December 2020 quarter, 15% for the September 2020 quarter and 12% for the December 20172019 quarter September 2017 quarter and December 2016 quarter, respectively.. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.

Cost of Revenue and Gross Margin

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

(Dollars in millions)

    December 29,
2017
 September 29,
2017
 December 30,
2016
 December 29,
2017
 December 30,
2016

Cost of revenue

    $2,037  $1,896  $2,003  $3,933  $3,999 

Gross margin

     877   736   891   1,613   1,692 

Gross margin percentage

     30  28  31  29  30

 For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Cost of revenue$1,927 $1,718 $1,938 $3,645 $3,845 
Gross profit696 596 758 1,292 1,429 
Gross margin27 %26 %28 %26 %27 %

Gross margin as a percentage of revenue for the December 20172020 quarterincreased by 200 basis points fromcompared to the September 20172020 quarter primarily driven by favorable product mix and improved absorption of factories due to higher demandimproved product mix.
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Gross margin for the Company’s high capacity HDD product portfolio, partially offset by price erosion.

ComparedDecember 2020 quarter decreased compared to the corresponding three and six months ended December 20162019 quarter gross margin as a percentage of revenue for the three and six months ended December 2017 quarter decreased by 100 basis points in both periods, primarily driven by price erosion and higher logistics costs as a result of the COVID-19 pandemic, partially offset by favorableimproved product mixmix.

Gross margin for the six months ended January 1, 2021 decreased compared to the six months ended January 3, 2020 primarily driven by price erosion and higher logistics costs as a result of the COVID-19 pandemic, partially offset by improved factory utilization resulting from cost savings due to our workforce reductions and manufacturing consolidation activities.

product mix.

In the December 20172020 quarter, total warranty cost was within the historical range of 1% to 1.5%0.6% of revenue and included a favorable change in estimates of prior warranty accruals of less than 0.2%0.1% of revenue.revenue primarily due to lower repair costs and a decrease in the number of drives under warranty. Warranty cost related to new shipments was 1.4%0.7%, 1.3%,0.8% and 1.2%0.8% of revenuerevenue for each of the December 2017,2020 quarter, September 20172020 quarter and December 2016 quarters,2019 quarter, respectively.

Operating Expenses

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017
   September 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Product development

    $250   $263   $305   $513   $620 

Marketing and administrative

     142    145    155    287    308 

Amortization of intangibles

     19    22    28    41    57 

Restructuring and other, net

     33    51    33    84    115 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

    $444   $481   $521   $925   $1,100 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Product development$221 $223 $250 $444 $505 
Marketing and administrative122 118 120 240 242 
Amortization of intangibles
Restructuring and other, net— 17 
Operating expenses$348 $345 $374 $693 $772 

Product development expense. Product development expense for the December 20172020 quarter decreased by $13$2 million fromcompared to the September 20172020 quarter primarily due to a $5 million decrease in compensation and other employee benefits, partially offset by a $4 million increase in variable compensation expense.
Product development expense decreased by $29 million in the December 2020 quarter compared to the December 2019 quarter primarily due to an $18 million decrease in compensation and other employee benefits from the reduction in headcount as a result of our June 2020 restructuring plan, a $4 million decrease in salariestravel expenses mainly as a result of disruptions related to COVID-19, and a $3 million decrease in materials expense, partially offset by a $4 million increase in variable compensation expense.
Product development expense decreased by $61 million for the six months ended January 1, 2021 compared to the six months ended January 3, 2020 primarily due to a $36 million decrease in compensation and other employee benefitsfrom the reduction in headcount as a result of our June 2020 restructuring plan and the additional fourteenth week in the quarter ended October 4, 2019, a $7 million decrease in travel expenses mainly as a result of the restructuring of our workforce in prior periods,disruptions related to COVID-19, a $13$6 million decrease due to related operational efficiencies,in information technology costs, a $3 million decrease in equipment expense, a $3 million decrease in materials expense, and a $2 million decrease in software expense, partially offset by ana $6 million increase in variable compensation expense.

Compared to the December 2016 quarter, product development expense decreased by $55 million primarily due to a $17 million decrease in salaries and employee benefits as a result of the restructuring of our workforce in prior periods, a $25 million decrease due to related operational efficiencies and a $13 million decrease in variable compensation and share-based compensation expenses.

Compared to corresponding six months ended December 2016 quarter, product development expense decreased by $107 million primarily due to a $47 million decrease in salaries and employee benefits as a result of the restructuring of our workforce in prior periods, a $36 million decrease due to related operational efficiencies and a $24 million decrease in variable compensation and share-based compensation expenses.

Marketing and administrative expense. Marketing and administrative expense increased by $4 million for the December 20172020 quarter decreased by $3 million fromcompared to the September 20172020 quarter primarily due to a $3 million increase in outside services expense and a $2 million increase in variable compensation expense.
Marketing and administrative expense increased by $2 million in the December 2020 quarter compared to the December 2019 quarter primarily due to a $13 million increase in information technology costs, partially offset by a $4 million decrease in salariesequipment expense, a $4 million decrease in compensation and relatedother employee benefits and a $3 million decrease in travel expenses mainly as a result of the restructuring of our workforce in prior periods, partially offset by an increase in variable compensation expense.

Compareddisruptions related to the December 2016 quarter, COVID-19.

Marketing and administrative expense decreased by $13$2 million for the six months ended January 1, 2021 compared to the six months ended January 3, 2020 primarily due to a $9 million decrease in salaries and related benefitstravel expenses mainly as a result of disruptions related to COVID-19, a $7 million decrease in compensation and other employee benefits from the restructuring of our workforceadditional fourteenth week in prior periods,the quarter ended October 4, 2019, a $7 million decrease in equipment expense, and a $6 million decrease in depreciation expense, primarily offset by a $23 million increase in information technology costs and a $4 million decreaseincrease in variable compensation expense.

Compared to corresponding six months ended December 2016 quarter, marketing and administrative expense decreased by $21 million primarily due to a $13 million decrease in salaries and related benefits as a result

Amortization of the restructuring of our workforce in prior periods and a $8 million decrease in variable compensation expense.

intangibles.Amortization of intangibles for the December 2020 quarter remained flat compared to the September 2020 quarter.

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Table of Contents
Amortization of intangibles for the three and six months ended December 2017 quarterJanuary 1, 2021 decreased by $3 million, $9$1 million and $16$2 million, respectively, from the three months ended September 2017 quarter andcompared to the three and six months ended December 2016 quarterJanuary 3, 2020, due to certain intangible assets reachingthat reached the end of their useful life.

lives.

Restructuring and other, net. net. Restructuring and other, net for the three and six months ended December 2017 quarterJanuary 1, 2021 was comprised of restructuring charges to reduce our global workforce by 500 and 1100 employees, respectively.

not material.

Restructuring and other, net for the three and six months ended December 2016 quarterJanuary 3, 2020 was primarily comprised of restructuring charges primarily related to reduce our global workforce by 6,500 employees. Each of these restructuring activities have reduced our workforce as we continue to consolidate our global footprint across Asia, EMEA and the Americas. See “Part I, Item 1. Financial Statements—Note 7. Restructuring and Exit Costs” for more details.

a voluntary early exit program.

Other Expense, Net

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017
   September 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Other expense, net

    $(62  $(67  $(60  $(129  $(109

 For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Other expense, net$(57)$(30)$(48)$(87)$(123)

Other expense, net. Other expense, net decreasedfor the December 2020 quarter increased by $5$27 million from the September 20172020 quarter primarily due to $31 million of strategic investment gains in the September 2020 quarter, of which $23 million is an upward adjustment and $8 million is a gain upon sale of an investment and a $7 million impairment charge in the December 2020 quarter, partially offset by an $11 million decrease in foreign exchange remeasurement expense in the December 2020 quarter.
Other expense, net for the December 2020 quarter increased by $9 million compared to the December 2019 quarter primarily due to a favorable $9 million change in foreign currency exchange rates, partially offset by a $2 million loss on repurchase of debt in the December 2017 quarter.

Compared to December 2016 quarter, Other expense, net increased by $2 million in the December 2017 quarter primarily due to a $16 million of unfavorable change in foreign currency exchange rates and a $10$14 million increase in interest expense onfrom the issuance of $750 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024 in the quarter ended March 31, 2017, offset by the absence of a $25 million charge related to the impairment of a strategic investmentlong-term debt in the December 2016 quarter.

2020 quarter and the September 2020 quarter and a $7 million impairment charge in the December 2020 quarter, partially offset by an $11 million decrease in interest expense due to the repurchase of certain long-term debt.

Other expense, net for the six months ended December 2017 quarter increasedJanuary 1, 2021 decreased by $20$36 million fromcompared to the corresponding period in the prior year,six months ended January 3, 2020 primarily due to $31 million of strategic investment gains in the September 2020 quarter, of which $23 million is an upward adjustment and $8 million is a $22gain upon sale of an investment, a $31 million decrease in interest expense due to the repurchase of certain long-term debt, a $28 million non-recurring loss from the repurchase and exchange of certain long-term debt in the quarter ended October 4, 2019 and a $12 million increase in gains on de-designated cash flow hedges. The decrease was partially offset by a $26 million increase in interest expense onfrom the issuance of $750long-term debt in the December 2020 quarter and the September 2020 quarter, a $14 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024, a $26 million unfavorable changeincrease in foreign currency exchange remeasurement expense, a $13 million decrease in interest income primarily due to a decline in interest rates offset by the absence ofand a $25$7 million charge related to the impairment of a strategic investmentcharge in the December 20162020 quarter.

Income Taxes

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017
   September 29,
2017
   December 30,
2016
   December 29,
2017
   December 30,
2016
 

Provision for income taxes

    $212   $7   $13   $219   $19 

 For the Three Months EndedFor the Six Months Ended
(Dollars in millions)January 1,
2021
October 2,
2020
January 3,
2020
January 1,
2021
January 3,
2020
Provision (benefit) for income taxes$11 $(2)$18 $$16 

We recorded income tax provisions of $212$11 millionand $219$9 million in the three and six months ended December 2017 quarter,January 1, 2021, respectively. The discrete items in the income tax provision were not material for the three months ended January 1, 2021. The income tax provision for the three and six months ended December 2017 quarterJanuary 1, 2021 included approximately $197$11 million of net discrete tax expense,benefits, primarily associated with the revaluation of U.S. deferrednet excess tax assets as a resultbenefits related to share-based compensation expense and postponement of the enactment ofpreviously enacted United Kingdom (“U.K.”) tax rate change in the Tax Cuts and Jobs Act on December 22, 2017, partially offset by the recognition of previously unrecognized tax benefits associated with the expiration of certain statutes of limitation.

September 2020 quarter.

Our income tax provision recorded for the three and six months ended December 2017 quarter January 1, 2021 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. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a reduction in the net U.S. deferred tax assets associated with revaluation to a lower U.S. tax rate.

current year generation of research credits.

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Table of Contents
During the six months ended December 2017 quarter,January 1, 2021, our unrecognized tax benefits excluding interest and penalties increased by approximately $1 million to $75 million. The unrecognized tax benefits that, if recognized,$90 million, substantially all of which would impact the effective tax rate, were $75 million at December 29, 2017,if recognized, subject to certain future changes in valuation allowance.allowance reversals. During the twelve months beginning December 30, 2017,January 2, 2021, we expect that our unrecognized tax benefits could be reduced by approximately $2 million, primarilyan immaterial amount, as a result of the expiration of certain statutes of limitation.

Our

We recorded income tax provisions of $18 million and $16 million in the three and six months ended January 3, 2020. The discrete items in the income tax provision recordedwere not material for the three months ended January 3, 2020. The income tax provision for the six months ended December 2016 quarterJanuary 3, 2020 included approximately $4$10 million of net discrete tax benefits, primarily associated with the release ofnet excess tax reserves associated with the expiration of certain statutes of limitation.

benefits related to share-based compensation expense.

Our income tax provision recorded for the three and six months ended December 2016 quarter January 3, 2020 differed from the provision fromfor 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. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a decrease in valuation allowance for certain deferred tax assets.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law in the United States. The Act significantly revises U.S. corporate income tax law by, among other things, lowering corporate income tax rates from 35% to 21%, implementing a territorial tax system and imposing a tax on deemed repatriated earningscurrent year generation ofnon-U.S. subsidiaries. The Act’s new international rules, including the Global IntangibleLow-Taxed Income, the Foreign Derived Intangible Income and the Base Erosion Anti-Avoidance Tax, are not expected to have a material impact on our financial statements. However, these assessments are based on preliminary review and analysis of the Act and are subject to change as we continue to evaluate these highly complex rules as additional interpretive guidance is issued.

Pursuant to SEC Staff Accounting Bulletin (SAB) 118 (regarding the application of ASC 740 associated with the enactment of the Act), we recorded a provisional tax expense of approximately $208 million for the three months ended December 29, 2017 tore-measure our U.S. deferred tax assets at the newly enacted 21% tax rate. The tax expense is provisional because we continue to evaluate the impact of various domestic and international provisions of the Act as well as the impact of additional guidance that may be provided. This provisional tax expense increased our effective tax rate for the three months ended December 29, 2017 to approximately 56%. Many of the other U.S. tax changes are not expected to impact our tax expense in the short-term due to our large net operating loss and tax credit carryovers.

research credits.

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. 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 the COVID-19 pandemic to our industry and to our business are evolving rapidly, 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 the COVID-19 pandemic.
We are not aware of any downgrades, losses or other significant deterioration in the fair value of our cash equivalents or short-term investments.

from the values reported as of January 1, 2021.

Cash and Cash Equivalents and Short-term Investments

                                                                        

(Dollars in millions)

    December 29,
2017
   June 30,
2017
   Change 

Cash and cash equivalents

    $2,556   $2,539   $17 

(Dollars in millions)January 1,
2021
July 3,
2020
Change
Cash and cash equivalents$1,799 $1,722 $77 
Our cash and cash equivalents as of January 1, 2021increased by $77 million from June 30, 2017 July 3, 2020 primarily as a result of an increase innet proceeds of $986 million from the issuance of long-term debt and net cash of $770 millionprovided by operating activities, partially offset by net cash outflows forthe repurchases of our ordinary shares of $1 billion, dividends paid to our shareholders repurchase of our ordinary shares,$334 million, and payments for capital expenditures and repayments of long-term debt.

$270 million.

Cash Provided by Operating Activities

Cash provided by operating activities for the six months ended December 29, 2017 of $1,087January 1, 2021 was $770 million and includes the effects of net income adjusted fornon-cash items including depreciation, 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:

a decrease of $145$315 million in accounts receivable, primarily due to improvedin-quarterlinearity of shipments, sales in the December 2020 quarter and a decrease in revenue;
partially offset by higher revenue;

anan increase of $59$176 million in accounts payable, inventories, primarily due to timing of material purchases;

shipments and an increase in materials purchased, including strategic purchases;
a decrease of $32$75 million in inventory,accounts payable, primarily due to an increase in units built;lower operating expenses and timing of payments; and

a decrease of $54$40 million in accrued employee compensation,restructuring, primarily due to cash paidseverance payments to our employees as partimpacted employees.
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Table of our variable compensation plans in the September 2017 quarter; andContents

a decrease of $42 million in vendor receivables, primarily due to timing of receipt of vendor payments.

Cash Used in Investing Activities

Cash used forin investing activities for the six months ended December 29, 2017January 1, 2021 was $210$263 million, which was primarily attributableattributable to the following activities:
payments for the purchase of property, equipment and leasehold improvements of $270 million; and
payments for the purchase of $201investments of $4 million;
offset by proceeds from the sale of investments of $11 million.

Cash Used in Financing Activities

Cash used in financing activitiesactivities of $865$430 million for the six months ended December 29, 2017January 1, 2021 was primarily attributable to the following activities:

$366 million in dividend payments;

$361 million paid topayments for the repurchase of our ordinary shares;

$152 millionshares of repayments$1 billion;
payments for dividends of long-term debt;$334 million;

$21 million paid payments for taxes related to net share settlement of equity awards of $32 million; and
payments for the repurchase of long-term debt of $21 million;
partially offset by;by net proceeds from the issuance of long-term debt of $986 million; and

$35 million in proceedsproceeds from the issuance of ordinary shares under employee stock plans.share plans of $40 million.

Liquidity Sources, Cash Requirements and Commitments

Our primary sources of liquidity as of December 29, 2017January 1, 2021 consisted of: (1) approximately $2.6approximately $1.8 billion in cash and cash equivalents, (2) cash we expect to generate from operations, and (3) a $700 million senior revolving credit facility.

subject to compliance with certain requirements under our control, up to $1.5 billion available for borrowing under our Revolving Credit Facility. On January 13, 2021, we entered into an amendment to the Revolving Credit Facility which increased the amount available for borrowing to $1.725 billion.

As of December 29, 2017,January 1, 2021, 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, subject to compliance with financial covenants and other customary conditions to borrowing.

The credit agreement that governs our revolving credit facility, as amended,Credit 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, the Revolving Credit Agreement was amended in order to increase the allowable net leverage ratio to adjust for our current financialminimum liquidity position.amount. The term of the revolving credit facilityRevolving Credit Facility is through January 15, 2020 provided that if we do not have Investment Grade Ratings (as defined in the revolving credit facility) on August 15, 2018, thenFebruary 20, 2024, and the maturity date will be Augustof the Term Loan is September 16, 2018 unless certain extension conditions have been satisfied.2025. We were in compliance with the modified covenants as of December 29, 2017January 1, 2021 and expect to be in compliance for the next 12 months.

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.

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 may raise additional capital from time to time and 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. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

From time to time, we may repurchase any of our outstanding senior notes in open market or privately negotiated purchases or otherwise,otherwise, or we may repurchase outstanding senior notes pursuant to the terms of the applicable indenture.

Dividends declared in

During the December 20172020 quarter, our Board of $179Directors declared dividends of $0.67 per share, totaling $161 million, which were subsequently paid on January 3, 2018. The Company’s6, 2021. On January 21, 2021, our Board of Directors announceddeclared a quarterly cash dividend of $0.63$0.67 per share, on January 29, 2018, which is payable on April 4, 20187, 2021 to shareholders of record at the close of business on March 21, 2018.

24, 2021.

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From time to time, at the Company’s discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker-assisted purchases. broker assisted purchases, tender offers, or other means, including through the use of derivative transactions. On October 21, 2020, our Board of Directors increased the authorization for the repurchase of our outstanding ordinary shares by $3.0 billion. As of December 29, 2017, $0.9January 1, 2021, $3.2 billion remained remained available for repurchaserepurchases under our existing repurchase authorization limit.authorization. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with the Company’s Articles of Association.

Contractual Obligations and Commitments

Our contractual cash obligations and commitments as of December 29, 2017, have been summarized in the table below:

                                                                                                                        
         Fiscal Year(s) 

(Dollars in millions)

    Total   Remainder of
2018
   2019-2020   2021-2022   Thereafter 

Contractual Cash Obligations:

            

Long-term debt

    $4,923   $—     $560   $750   $3,613 

Interest payments on debt

     1,720    115    430    420    755 

Purchase obligations(2)

     764    764    —      —      —   

Operating leases(1)

     122    9    25    13    75 

Capital expenditures

     127    116    10    1    —   

Other funding requirements(3)

     24    12    12    —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     7,680    1,016    1,037    1,184    4,443 

Commitments:

            

Letters of credit or bank guarantees

     107    15    91    1    —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    $7,787   $1,031   $1,128   $1,185   $4,443 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)Includes total future minimum rent expense undernon-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income).
(2)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.
(3)Consists of funding requirements related to strategic commitments.

On September 28, 2017, we entered into an Equity Commitment Letter (“ECL”) with a consortium of investors led by Bain Capital Private Equity for the acquisition of Toshiba Memory Corporation (“TMC”). The ECL contemplates that, upon the closing of the acquisition, we would purchase up to JPY 139.5 billion (approximately USD 1.24 billion based on an exchange rate as of December 29, 2017), of a newlyissued non-convertible preferred equity security of a newly formed company, K. K. Pangea, for the purpose of acquiring TMC. The closing of the acquisition is subject to regulatory approvals and other closing conditions.

As of December 29, 2017, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $11 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.

our Constitution.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our Condensed Consolidated Financial Statements,condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates.

Since our fiscal year ended June 30, 2017,

Other than as described in “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies”, there have been no other material changes in our critical accounting policies and estimates. Refer to “Management’s“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report onForm 10-K for the fiscal year ended June 30, 2017,July 3, 2020, as filed with the SEC on August 4, 2017,7, 2020, for a discussion of our critical accounting policies and estimates.

Recent Accounting Pronouncements

See “Part I, Item 1. Financial Statements—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 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3.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 December 29, 2017,January 1, 2021, we hadno available-for-sale debt securities that had been in a continuous unrealized loss position for a period greater than 12 months. We determined no impairment related to credit losses for available-for-sale debt securities as of January 1, 2021.
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 notional amount of the interest rate swap agreements was $494 million as of January 1, 2021. 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 determinedno available-for-sale securities were other-than-temporarily impaireddesignated the interest rate swaps as of December 29, 2017. We currently do not use derivative financial instruments in our investment portfolio.

cash flow hedges.

We have fixed-ratefixed rate and variable rate debt obligations. We enter into these debt obligations to supportfor general corporate purposes including capital expenditures and working capital needs.

Our Term Loan bears interest at a variable rate equal to LIBOR plus a variable margin set on December 17, 2020. At this time, we have not identified any material exposure associated with the phase out of LIBOR by the end of 2021.

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 December 29, 2017.

     Fiscal Years Ended     

(Dollars in millions, except percentages)

    2018 2019 2020   2021   2022 Thereafter Total Fair Value at
December 29, 2017
 

Assets

             

Cash equivalents:

             

Fixed rate

    $1,064  $—    $—     $—     $—    $—    $1,064  $1,064 

Average interest rate

     1.49         1.49 
    

 

 

 

 

 

 

 

 

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fixed income

    $1,064  $—    $—     $—     $—    $—    $1,064  $1,064 

Average interest rate

     1.49         1.49 

Debt

             

Fixed rate

    $—    $560  $—     $—     $750  $3,613  $4,923  $4,903 

Average interest rate

      3.75      4.25  4.93  4.69 

January 1, 2021.

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Fiscal Years EndedTotalFair Value at January 1, 2021
(Dollars in millions, except percentages)20212022202320242025Thereafter
Assets        
Money market funds, time deposits and certificates of deposit
Floating rate$1,048 $— $— $— $— $— $1,048 $1,048 
Average interest rate0.11 %0.11 %
Other debt securities        
Fixed rate$10 $— $— $— $— $$18 $18 
Fixed interest rate5.00 %5.00 %
Debt        
Fixed rate$— $220 $541 $500 $479 $2,995 $4,735 $5,097 
Average interest rate4.25 %4.75 %4.88 %4.75 %4.22 %4.40 %
Variable rate$13 $25 $25 $25 $25 $381 $494 $482 
Average interest rate3.29 %3.29 %3.29 %3.29 %3.29 %3.29 %3.29 %
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 exit 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 aremature within 12 months.
We recognized a net gain of $4 million in Cost of revenue related to the loss of hedge designation on discontinued cash flow hedges and a net gain of $1 million in Other, net related to derivatives not designated as hedging instruments under ASC 815,Derivativesor amounts excluded from effectiveness testing during the three and Hedging.six months ended January 1, 2021. We had no outstanding foreign currency forward exchange contracts asrecognized a net loss of December 29, 2017.

We evaluate hedging effectiveness prospectively$2 million and retrospectively and record any ineffective portion$4 million in Other, net related to the loss of the hedging instruments in Cost of revenuehedge designation on the Condensed Consolidated Statements of Operations. We did not have any material net gains (losses) recognized in Cost of revenue for cash flow hedges due to hedge ineffectiveness or discontinued cash flow hedges during the three and six months ended December 29, 2017.January 1, 2021, respectively.

The table below provides information as of January 1, 2021 about our foreign currency forward exchange contracts. The table is provided in dollar equivalent amounts and presents the notional amounts (at the contract exchange rates) and the weighted-average contractual foreign currency exchange rates.
(Dollars in millions, except weighted-average contract rate)Notional AmountWeighted-Average Contract Rate
Estimated Fair Value(1)
Foreign currency forward exchange contracts:  
Singapore Dollar$172 $1.38 $
Thai Baht138 $31.09 
Chinese Renminbi62 $7.06 
British Pound Sterling61 $0.79 
Total$433  $22 

(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 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 and our ability to raise capital and execute transactions with various counterparties.

counterparties, and may increase the cost of such capital.

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We are subject to equity market risks due to changes in the fair value of the notional investments selected by our employees as part of our SDCP. The SDCP is a successor plan to the prior Seagate Deferred Compensation Plan (the “SDCP”).Plans, as amended from time to time, under which no additional deferrals may be made after December 31, 2014. In fiscal year 2014, we entered into a Total Return Swap (“TRS”)TRS in order to manage the equity market risks associated with the SDCP liabilities. We pay 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 liabilityliabilities due to changes in the value of the investment options made by employees. See “Part I, Item 1. Financial Statements—Note 8.7. Derivative Financial Instruments” of this Quarterly Report onForm 10-Q.

ITEM 4.CONTROLS AND PROCEDURES

An

ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by the Exchange Act Rule 13a-15, we carried out 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 the end of the period covered by this Quarterly Report. Based on the evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of December 29, 2017. January 1, 2021. 
Changes in Internal Control over Financial Reporting
During the quarter ended December 29, 2017,January 1, 2021, there were no changes in our internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.


PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

ITEM 1.LEGAL PROCEEDINGS
For a discussion of legal proceedings, see “Part I, Item 1. Financial Statements—Note 14.13. Legal, Environmental and Other Contingencies” of this Quarterly Report onForm 10-Q.

ITEM 1A.  RISK FACTORS

ITEM 1A.RISK FACTORS
There have been no material changes to the description of the risk factors associated with our business previously disclosed in “Risk Factors” in Part I, Item 1A, “Risk Factors”1A. in our Annual Report onForm 10-K for the fiscal year ended June 30, 2017.July 3, 2020. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our Annual Report onForm 10-K as they could materially affect our business, financial condition and future results.

The Risk Factors are not the only risks facing us.we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchase of Equity Securities

All repurchases of our outstanding ordinary shares are effected as redemptions in accordance with the Company’s Articles of Association.

our Constitution.

On April 22, 2015, theOctober 21, 2020, our Board of Directors authorizedincreased the Company toauthorization for the repurchase $2.5 billion of itsour outstanding ordinary shares.

shares by $3.0 billion. As of December 29, 2017, $0.9January 1, 2021, $3.2 billion remained available for repurchaserepurchases under the existing repurchase authorization limit.authorization. There is no expiration date on this authorization.

The timing of purchases will depend upon prevailing market conditions, alternative uses of capital, distributable reserves and other factors. We may limit or terminate the repurchase program at any time.

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The following table sets forth information with respect to all repurchases of our ordinary shares made during the fiscal quarter ended December 29, 2017,January 1, 2021, including statutory tax withholdings related to vesting of employee equity awards:awards (in millions, except average price paid per share):
Period
Total Number of Shares Repurchased(1)
Average Price Paid Per Share(1)
Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
October 3, 2020 through October 30, 2020$49.44 $4,074 
October 31, 2020 through November 27, 202011 53.30 11 3,503 
November 28, 2020 through January 1, 202161.72 3,204 
Total18 18 

                                                                                                

(In millions, except average price paid per share)

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

September 30, 2017 through October 27, 2017

     —     $34.02    —     $1,084 

October 28, 2017 through November 24, 2017

     —      39.59    —      1,084 

November 25, 2017 through December 29, 2017

     5.0    39.21    5.0    888 
    

 

 

     

 

 

   

Total

     5.0   $39.17    5.0   $888 
    

 

 

     

 

 

   

(1) Repurchase of shares including tax withholdings.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

ITEM 5.OTHER INFORMATION

Not applicable

applicable.

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ITEM 6.EXHIBITS
Incorporated by Reference
Exhibit No. Description of ExhibitFormFile No.ExhibitFiling DateFiled Herewith
3.18-K001-315603.110/24/2016
3.210-K001-315603.28/20/2010
4.18-K001-315604.112/9/2020
4.28-K001-315604.112/9/2020
4.38-K001-315604.312/9/2020
4.48-K001-315604.412/9/2020
4.58-K001-315604.412/9/2020
4.68-K001-315604.612/9/2020
10.1+X
10.2+X
10.3+X
10.4X
10.5X
31.1 X
31.2 X
32.1† X
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
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ITEM 6.EXHIBITS

See Exhibit Index on the page to this Quarterly Report for a list of exhibits to this Quarterly Report, which Exhibit Index is incorporated herein by reference.

EXHIBIT INDEX

Incorporated by Reference
Exhibit Number

No.

Description of Exhibit

FormFile No.ExhibitFiling DateFiled Herewith
101.PRE
    3.1Constitution of Seagate Technology Public Limited Company, as amended and restated by Special Resolution dated October  19, 2016, filed as Exhibit 3.1 to the Company’s current report on Form8-K filed on October 24, 2016 and incorporated herein by reference.
    3.2Certificate of Incorporation of the Company, filed as Exhibit 3.2 to the Company’s annual report on Form10-K filed on August 20, 2010 and incorporated herein by reference.
  10.1*Seagate Technology Public Limited Company Second Amended and Restated Employee Stock Purchase Plan filed as Exhibit 10.1 to the Company’s current report on Form8-K filed on October 18, 2017 and incorporated herein by reference.
  10.2*Amended and Restated Seagate Technology Public Limited Company 2012 Equity Incentive Plan as amended and restated on October  19, 2016 filed as Exhibit 10.4 to the Company’s quarterly report on Form10-Q filed on October 27, 2017 and incorporated herein by reference.
  31.1+Certification of William D. Mosley, Chief Executive Officer and Director of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2+Certification of David H. Morton, Jr., Executive Vice President, Finance and Chief Financial Officer of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1†Certification of William D. Mosley, Chief Executive Officer and Director of the Company and David H. Morton, Jr., Executive Vice President, Finance and Chief Financial Officer of the Company, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+XBRL Instance Document.
101.SCH+XBRL Taxonomy Extension Schema Document.
101.CAL+XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF+XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+Inline XBRL Taxonomy Extension Presentation Linkbase Document.

+Filed herewith.
101.DEFThe certifications attached as Exhibit 32.1 that accompany thisForm 10-Q are not deemed filed with the SecuritiesInline XBRL Taxonomy Extension Definition Linkbase.
104Inline XBRL Cover page 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-Q, irrespective of any general incorporation language contained in such filing.Exhibit 101.
*Management contract or compensatory plan or arrangement.

+ Management contract or compensatory plan or arrangement.
† The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q 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-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

DATE:January 29, 201828, 2021BY:      BY:

/s/ WILLIAM D. MOSLEY

Gianluca Romano

William D. Mosley

Gianluca Romano

Chief Executive Officer and Director

(Principal Executive Officer)

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

DATE: January 29, 2018      BY:/s/ DAVID H. MORTON, JR.
David H. Morton, Jr.

Executive Vice President Finance and Chief Financial Officer


(Principal Financial and Accounting Officer)

40


46