EXHIBIT 99.1
SEAGATE TECHNOLOGY ANNOUNCES FISCAL FIRST QUARTER 2006 RESULTS
Seagate Technology today reported revenue of $2.09 billion, net income of $272 million, and diluted earnings per share of $0.54 for the quarter ended September 30, 2005. Included in these results are expenses of $16 million for non-cash stock based compensation and $4 million of restructuring charges. Of the $16 million in non-cash stock based compensation, $6 million is reflected in cost of sales and $10 million in operating expenses. These results compare to revenue of $1.56 billion, net income of $54 million and diluted earnings per share of $0.11 in the year-ago quarter. The year-ago results did not include costs associated with non-cash stock based compensation.
Consumer Electronics Products
In the September quarter, Seagate increased its consumer electronics (CE) shipments over the prior year quarter and maintained its leadership position in the CE market despite product transitions in some handheld digital music players and gaming applications. The company shipped a total of 3.9 million drives into CE applications, an increase of 34% from the year-ago quarter. Shipments into DVR applications increased over 100% from the year-ago quarter. Shipments of the ST1 series, the industry’s most widely used 1-inch disc drive, grew in new applications such as handheld GPS (global positioning systems) and photo printers, while the 8GB version is qualified at 12 customers with five more underway.
Mobile Computing Products
Demand for Seagate’s Momentus family disc drives remained strong and drove continued share growth in this space. More importantly, Seagate’s areal density leadership drove a 42% sequential growth in capacities of 80GB and greater. Seagate’s shipments grew to 2.4 million units, a 250% increase from the year-ago quarter and a 19% increase from the June quarter.
Enterprise Products
As expected in the September quarter, the total available market for enterprise disc drives decreased from the prior quarter and increased from the year-ago quarter. Seagate shipped a total of 3.1 million enterprise drives and maintained its leadership position in this market. Seagate’s Savvio 2.5-inch enterprise disc drives entered new accounts during the quarter, resulting in shipments increasing 69% sequentially.
Desktop Products
Seagate remained the leading supplier of desktop drives with shipments of 17.4 million units during the quarter, an increase of 16% year-over-year. Product mix in this space also improved as shipments of capacities of 200GB and greater increased 35% sequentially. Channel sales for Seagate desktop products remained healthy throughout the quarter and Seagate exited the quarter with under four weeks of distribution channel inventory.
Pricing
The average selling price for all Seagate products, on a blended basis, decreased approximately $2.00 over the June quarter. Price decreases on a “like for like” product basis during the September quarter were slightly less than the June quarter, and lower than historical norms. However, the price decreases were within the company’s expectations at the beginning of the quarter.
Dividend
The company has declared a quarterly cash distribution of $0.08 per share to be paid on or before November 18, 2005 to all common shareholders of record as of November 4, 2005.
Stock Buy Back Authorization
Seagate’s Board of Directors has authorized the repurchase of up to $400 million of the company’s outstanding shares of common stock. On October 18, 2005, Seagate repaid its existing term loan of $341 million and is in the process of restructuring its existing revolving line of credit in order to permit the company to repurchase its shares.
Safe Harbor
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements related to future financial performance, price and product competition, customer demand for our products, and general market conditions. These forward-looking statements are based on information available to Seagate as of the date of this announcement and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond the company’s control. In particular, such risks and uncertainties include the variable demand and the aggressive pricing environment for disc drives; dependence on the company’s ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality its current disc drive products; and the adverse impact of competitive product announcements and possible excess industry supply with respect to particular disc drive products. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in the company’s Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission on August 1, 2005. These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent date and Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
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| | | Three Months Ended
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| | | September 30, 2005
| | | October 1, 2004
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Revenue | | $ | 2,088 | | | $ | 1,558 | |
Cost of revenue | | | 1,553 | | | | 1,283 | |
Product development | | | 180 | | | | 152 | |
Marketing and administrative | | | 86 | | | | 65 | |
Restructuring, net | | | 4 | | | | 1 | |
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Total operating expenses | | | 1,823 | | | | 1,501 | |
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Income from operations | | | 265 | | | | 57 | |
Interest income | | | 15 | | | | 6 | |
Interest expense | | | (13 | ) | | | (11 | ) |
Other, net | | | 5 | | | | 4 | |
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Other income (expense), net | | | 7 | | | | (1 | ) |
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Income before income taxes | | | 272 | | | | 56 | |
Provision for (benefit from) income taxes | | | — | | | | 2 | |
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Net income | | $ | 272 | | | $ | 54 | |
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Net income per share: | | | | | | | | |
Basic | | $ | 0.57 | | | $ | 0.12 | |
Diluted | | | 0.54 | | | | 0.11 | |
Number of shares used in per share calculations: | | | | | | | | |
Basic | | | 479 | | | | 462 | |
Diluted | | | 506 | | | | 494 | |
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
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| | | September 30,
2005
| | July 1,
2005 (a)
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ASSETS | | | | | | |
Cash and cash equivalents | | $ | 831 | | $ | 746 |
Short-term investments | | | 961 | | | 1,090 |
Accounts receivable, net | | | 1,116 | | | 1,094 |
Inventories | | | 477 | | | 431 |
Other current assets | | | 144 | | | 141 |
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Total Current Assets | | | 3,529 | | | 3,502 |
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Property, equipment and leasehold improvements, net | | | 1,565 | | | 1,529 |
Other assets, net | | | 284 | | | 213 |
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Total Assets | | $ | 5,378 | | $ | 5,244 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
Accounts payable | | $ | 1,000 | | $ | 1,108 |
Accrued employee compensation | | | 174 | | | 266 |
Accrued expenses | | | 401 | | | 356 |
Accrued income taxes | | | 43 | | | 46 |
Current portion of long-term debt | | | 4 | | | 4 |
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Total Current Liabilities | | | 1,622 | | | 1,780 |
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Other liabilities | | | 195 | | | 187 |
Long-term debt, less current portion | | | 736 | | | 736 |
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Total Liabilities | | | 2,553 | | | 2,703 |
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Shareholders’ Equity | | | 2,825 | | | 2,541 |
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Total Liabilities and Shareholders’ Equity | | $ | 5,378 | | $ | 5,244 |
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| (a) | The information in this column was derived from the Company’s audited consolidated balance sheet as of July 1, 2005. |
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
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| | | Three Months Ended
| |
| | | September 30,
2005
| | | October 1,
2004
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OPERATING ACTIVITIES | | | | | | | | |
Net income | | $ | 272 | | | $ | 54 | |
Adjustments to reconcile net income to net cash from operating activities: | | | | | | | | |
Depreciation and amortization | | | 137 | | | | 112 | |
Stock-based compensation | | | 16 | | | | 1 | |
Tax benefit from stock options | | | (5 | ) | | | — | |
Other non-cash operating activities, net | | | (2 | ) | | | 1 | |
Changes in operating assets and liabilities: | | | | | | | | |
Current assets and liabilities | | | (207 | ) | | | (48 | ) |
Other assets and liabilities | | | (5 | ) | | | (4 | ) |
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Net cash provided by operating activities | | | 206 | | | | 116 | |
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INVESTING ACTIVITIES | | | | | | | | |
Acquisition of property, equipment and leasehold improvements | | | (169 | ) | | | (97 | ) |
Purchases of short-term investments | | | (1,159 | ) | | | (963 | ) |
Maturities and sales of short-term investments | | | 1,284 | | | | 981 | |
Acquisition of Mirra, Inc., net of cash acquired | | | (15 | ) | | | — | |
Other investing activities, net | | | (57 | ) | | | (2 | ) |
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Net cash used in investing activities | | | (116 | ) | | | (81 | ) |
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FINANCING ACTIVITIES | | | | | | | | |
Proceeds from exercise of employee stock options and employee stock purchase plan | | | 28 | | | | 29 | |
Dividends to shareholders | | | (38 | ) | | | (28 | ) |
Tax benefit from stock options | | | 5 | | | | — | |
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Net cash provided by (used) in financing activities | | | (5 | ) | | | 1 | |
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Increase in cash and cash equivalents | | | 85 | | | | 36 | |
Cash and cash equivalents at the beginning of the period | | | 746 | | | | 422 | |
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Cash and cash equivalents at the end of the period | | $ | 831 | | | $ | 458 | |
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