EXHIBIT 99.1
Safe Harbor
This exhibit 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 planned capital expenditures. These forward-looking statements are based on information available to Seagate as of the date of this filing 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 impact of 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; the adverse impact of competitive product announcements and possible excess industry supply with respect to particular disc drive products; and the impact of the announced transaction between the company and Maxtor Corporation on current customer demand during the period prior to a closing of the transaction. 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 and in the company’s Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on October 28, 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.
Quarterly Results
On January 18, 2006, Seagate Technology reported quarterly revenue of $2.3 billion, net income of $287 million, and diluted earnings per share of $0.57 for the quarter ended December 30, 2005. These results compare to revenue of $1.85 billion, net income of $144 million and diluted earnings per share of $0.29 in quarter ended December 31, 2004.
Pricing
The average selling price for Seagate products, on a blended basis, increased approximately $2.00 over the September quarter, notwithstanding price decreases on a “like for like” product basis during the December quarter. These decreases were in line with the company’s expectations at the beginning of the quarter and were offset by improved product mix.
Capital Expenditures
For the first six months of fiscal 2006, capital investment was $353 million, with December quarter capital investment being $184 million. Based on the demand for Seagate’s products expected for the remainder of fiscal 2006 and in order to position Seagate to meet demand during the seasonally strong quarters beginning in September, Seagate expects capital investment for fiscal year 2006 will need to grow to between $950 million to $1 billion. This compares to the prior expectation of $700-800 million, and reflects expectations regarding demand and the need to restore some manufacturing flexibility.
Share Repurchases
Because of the announced transaction with Maxtor, Seagate did not repurchase any shares during the quarter ended December 30, 2005.
Maxtor Transaction
On January 13, 2006, Seagate made its Hart-Scott-Rodino pre-merger notification filing and expects to be meeting with the U.S. Federal Trade Commission to discuss the merger in the coming weeks.
Dividend
The company has declared a quarterly cash distribution of $0.08 per share to be paid on or before February 17, 2006 to all common shareholders of record as of February 3, 2006.
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
December 30, 2005 | December 31, 2004 | December 30, 2005 | December 31, 2004 | |||||||||||||
Revenue | $ | 2,300 | $ | 1,847 | $ | 4,388 | $ | 3,405 | ||||||||
Cost of revenue | 1,709 | 1,467 | 3,262 | 2,749 | ||||||||||||
Product development | 199 | 158 | 378 | 310 | ||||||||||||
Marketing and administrative | 108 | 75 | 195 | 140 | ||||||||||||
Restructuring, net | — | — | 4 | 2 | ||||||||||||
Total operating expenses | 2,016 | 1,700 | 3,839 | 3,201 | ||||||||||||
Income from operations | 284 | 147 | 549 | 204 | ||||||||||||
Interest income | 14 | 7 | 29 | 13 | ||||||||||||
Interest expense | (11 | ) | (11 | ) | (24 | ) | (22 | ) | ||||||||
Other, net | 4 | 5 | 9 | 9 | ||||||||||||
Other income (expense), net | 7 | 1 | 14 | — | ||||||||||||
Income before income taxes | 291 | 148 | 563 | 204 | ||||||||||||
Provision for income taxes | 4 | 4 | 4 | 6 | ||||||||||||
Net income | $ | 287 | $ | 144 | $ | 559 | $ | 198 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.60 | $ | 0.31 | $ | 1.16 | $ | 0.43 | ||||||||
Diluted | 0.57 | 0.29 | 1.10 | 0.40 | ||||||||||||
Number of shares used in per share calculations: | ||||||||||||||||
Basic | 482 | 466 | 480 | 464 | ||||||||||||
Diluted | 507 | 500 | 506 | 497 | ||||||||||||
SEAGATE TECHNOLOGY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
December 30, 2005 | July 1, 2005 (a) | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 768 | $ | 746 | ||
Short-term investments | 983 | 1,090 | ||||
Accounts receivable, net | 1,091 | 1,094 | ||||
Inventories | 505 | 431 | ||||
Other current assets | 151 | 141 | ||||
Total Current Assets | 3,498 | 3,502 | ||||
Property, equipment and leasehold improvements, net | 1,606 | 1,529 | ||||
Other assets, net | 330 | 213 | ||||
Total Assets | $ | 5,434 | $ | 5,244 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Accounts payable | $ | 1,057 | $ | 1,108 | ||
Accrued employee compensation | 225 | 266 | ||||
Accrued expenses | 405 | 356 | ||||
Accrued income taxes | 41 | 46 | ||||
Current portion of long-term debt | — | 4 | ||||
Total Current Liabilities | 1,728 | 1,780 | ||||
Other liabilities | 192 | 187 | ||||
Long-term debt, less current portion | 400 | 736 | ||||
Total Liabilities | 2,320 | 2,703 | ||||
Shareholders’ Equity | 3,114 | 2,541 | ||||
Total Liabilities and Shareholders’ Equity | $ | 5,434 | $ | 5,244 | ||
| (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)
| Six Months Ended | ||||||||
| December 30, 2005 | December 31, 2004 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 559 | $ | 198 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 286 | 233 | ||||||
Stock-based compensation | 36 | 2 | ||||||
Tax benefit from stock options | (14 | ) | — | |||||
Other non-cash operating activities, net | 4 | 9 | ||||||
Changes in operating assets and liabilities: | ||||||||
Current assets and liabilities | (70 | ) | 46 | |||||
Non-current assets and liabilities | (33 | ) | 9 | |||||
Net cash provided by operating activities | 768 | 497 | ||||||
INVESTING ACTIVITIES | ||||||||
Acquisition of property, equipment and leasehold improvements | (353 | ) | (185 | ) | ||||
Purchases of short-term investments | (1,911 | ) | (2,030 | ) | ||||
Maturities and sales of short-term investments | 2,015 | 1,960 | ||||||
Acquisitions, net of cash acquired | (28 | ) | — | |||||
Other investing activities, net | (105 | ) | (17 | ) | ||||
Net cash used in investing activities | (382 | ) | (272 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Repayment of long-term debt | (340 | ) | (1 | ) | ||||
Issuance of common shares for employee stock plans | 38 | 41 | ||||||
Dividends to shareholders | (76 | ) | (41 | ) | ||||
Tax benefit from stock options | 14 | — | ||||||
Net cash used in financing activities | (364 | ) | (1 | ) | ||||
Increase in cash and cash equivalents | 22 | 224 | ||||||
Cash and cash equivalents at the beginning of the period | 746 | 422 | ||||||
Cash and cash equivalents at the end of the period | $ | 768 | $ | 646 | ||||
