UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2011
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
Commission File Number 001-31560
SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
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Ireland |
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98-0648577 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
Arthur Cox Building, Earlsfort Terrace
Dublin 2, Ireland
(Address of Principal Executive Offices)
Telephone: (353) (1) 618-0517
(Registrant’s Telephone Number, Including Area Code)
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 x No o
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 Regulation S-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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer: x |
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Accelerated filer: o |
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Non-accelerated filer: o |
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Smaller reporting company: o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 26, 2011, 430,085,128 shares of the registrant’s ordinary shares, par value $0.00001 per share, were issued and outstanding.
SEAGATE TECHNOLOGY PLC
FINANCIAL INFORMATION
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
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April 1, |
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July 2, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
2,201 |
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$ |
2,263 |
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Short-term investments |
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279 |
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252 |
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Restricted cash and investments |
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103 |
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114 |
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Accounts receivable, net |
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1,394 |
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1,400 |
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Inventories |
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834 |
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757 |
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Deferred income taxes |
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107 |
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118 |
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Other current assets |
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586 |
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514 |
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Total current assets |
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5,504 |
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5,418 |
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Property, equipment and leasehold improvements, net |
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2,208 |
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2,263 |
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Deferred income taxes |
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373 |
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395 |
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Other assets, net |
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195 |
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171 |
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Total assets |
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$ |
8,280 |
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$ |
8,247 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
1,778 |
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$ |
1,780 |
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Accrued employee compensation |
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136 |
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263 |
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Accrued warranty |
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198 |
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189 |
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Accrued expenses |
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419 |
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422 |
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Accrued income taxes |
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14 |
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14 |
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Current portion of long-term debt |
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560 |
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329 |
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Total current liabilities |
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3,105 |
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2,997 |
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Long-term accrued warranty |
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163 |
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183 |
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Long-term accrued income taxes |
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68 |
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59 |
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Other non-current liabilities |
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105 |
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111 |
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Long-term debt, less current portion |
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2,352 |
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2,173 |
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Total liabilities |
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5,793 |
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5,523 |
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Commitments and contingencies (See Notes 10 and 12) |
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Shareholders’ equity: |
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Ordinary shares and additional paid-in capital |
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3,930 |
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3,851 |
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Accumulated other comprehensive income (loss) |
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(2 |
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(4 |
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Retained earnings (accumulated deficit) |
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(1,441 |
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(1,123 |
) | ||
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Total shareholders’ equity |
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2,487 |
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2,724 |
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Total liabilities and shareholders’ equity |
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$ |
8,280 |
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$ |
8,247 |
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(a) The information in this column was derived from the Company’s audited Consolidated Balance Sheet as of July 2, 2010.
See Notes to Condensed Consolidated Financial Statements.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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April 1, |
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April 2, |
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April 1, |
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April 2, |
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Revenue |
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$ |
2,695 |
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$ |
3,049 |
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$ |
8,112 |
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$ |
8,738 |
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Cost of revenue |
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2,179 |
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2,148 |
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6,517 |
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6,261 |
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Product development |
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224 |
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224 |
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646 |
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658 |
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Marketing and administrative |
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110 |
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105 |
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317 |
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323 |
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Amortization of intangibles |
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¾ |
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8 |
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2 |
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23 |
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Restructuring and other, net |
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3 |
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4 |
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14 |
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50 |
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Impairment of long-lived assets |
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¾ |
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¾ |
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¾ |
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64 |
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Total operating expenses |
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2,516 |
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2,489 |
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7,496 |
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7,379 |
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Income from operations |
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179 |
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560 |
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616 |
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1,359 |
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Interest income |
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2 |
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2 |
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6 |
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4 |
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Interest expense |
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(59 |
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(41 |
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(151 |
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(127 |
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Other, net |
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¾ |
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1 |
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(21 |
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(7 |
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Other income (expense), net |
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(57 |
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(38 |
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(166 |
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(130 |
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Income before income taxes |
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122 |
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522 |
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450 |
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1,229 |
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Provision for (benefit from) income taxes |
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29 |
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4 |
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58 |
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(1 |
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Net income |
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$ |
93 |
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$ |
518 |
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$ |
392 |
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$ |
1,230 |
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Net income per share: |
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Basic |
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$ |
0.21 |
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$ |
1.05 |
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$ |
0.85 |
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$ |
2.48 |
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Diluted |
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0.21 |
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1.00 |
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0.83 |
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2.38 |
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Number of shares used in per share calculations: |
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Basic |
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437 |
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493 |
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459 |
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495 |
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Diluted |
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453 |
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520 |
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475 |
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519 |
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See Notes to Condensed Consolidated Financial Statements.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
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For the Nine Months Ended |
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April 1, |
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April 2, |
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OPERATING ACTIVITIES |
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Net income |
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$ |
392 |
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$ |
1,230 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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567 |
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584 |
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Share-based compensation |
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38 |
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38 |
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Loss on redemption of debt |
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26 |
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¾ |
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Impairment of long-lived assets |
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¾ |
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64 |
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Deferred income taxes |
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35 |
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10 |
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Other non-cash operating activities, net |
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(5 |
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22 |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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7 |
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(418 |
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Inventories |
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(77 |
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(98 |
) | ||
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Accounts payable |
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181 |
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242 |
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Accrued employee compensation |
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(127 |
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70 |
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Accrued expenses, income taxes and warranty |
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(10 |
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(131 |
) | ||
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Other assets and liabilities |
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(80 |
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(5 |
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Net cash provided by operating activities |
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947 |
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1,608 |
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INVESTING ACTIVITIES |
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Acquisition of property, equipment and leasehold improvements |
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(685 |
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(372 |
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Purchases of short-term investments |
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(208 |
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(278 |
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Sales of short-term investments |
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118 |
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75 |
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Maturities of short-term investments |
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59 |
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101 |
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Change in restricted cash and investments |
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13 |
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26 |
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Other investing activities, net |
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¾ |
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1 |
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Net cash used in investing activities |
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(703 |
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(447 |
) | ||
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FINANCING ACTIVITIES |
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Proceeds from short-term borrowings |
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¾ |
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15 |
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Repayment of short-term borrowings |
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¾ |
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(365 |
) | ||
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Repayments of long-term debt and capital lease obligations |
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(377 |
) |
(385 |
) | ||
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Net proceeds from issuance of long-term debt |
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736 |
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¾ |
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Repurchases of ordinary shares |
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(710 |
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(251 |
) | ||
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Change in restricted cash and investments |
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2 |
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379 |
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Proceeds from issuance of ordinary shares under employee stock plans |
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48 |
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81 |
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Other financing activities, net |
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(5 |
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¾ |
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Net cash used in financing activities |
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(306 |
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(526 |
) | ||
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Increase (decrease) in cash and cash equivalents |
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(62 |
) |
635 |
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Cash and cash equivalents at the beginning of the period |
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2,263 |
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1,427 |
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Cash and cash equivalents at the end of the period |
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$ |
2,201 |
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$ |
2,062 |
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See Notes to Condensed Consolidated Financial Statements.
SEAGATE TECHNOLOGY PLC
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Nine Months Ended April 1, 2011
(In millions)
(Unaudited)
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Number |
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Par |
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Additional |
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Accumulated |
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Retained |
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Total |
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Balance at July 2, 2010 |
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470 |
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$ |
— |
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$ |
3,851 |
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$ |
(4 |
) |
$ |
(1,123 |
) |
$ |
2,724 |
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Comprehensive income (loss), net of tax: |
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|
|
|
|
|
|
|
|
|
|
|
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Change in unrealized gain (loss) on marketable securities, net |
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— |
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— |
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— |
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(1 |
) |
— |
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(1 |
) | |||||
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Change in unrealized gain (loss) on cash flow hedges, net |
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— |
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— |
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— |
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3 |
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— |
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3 |
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Net income |
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— |
|
— |
|
— |
|
— |
|
392 |
|
392 |
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Comprehensive income |
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|
|
|
|
|
|
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|
394 |
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Issuance of ordinary shares under employee stock plans |
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6 |
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— |
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48 |
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— |
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— |
|
48 |
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Share repurchase |
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(50 |
) |
— |
|
— |
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— |
|
(710 |
) |
(710 |
) | |||||
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Adjustment to equity component of convertible debt upon redemption |
|
— |
|
— |
|
(7 |
) |
— |
|
— |
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(7 |
) | |||||
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Share-based compensation |
|
— |
|
— |
|
38 |
|
— |
|
— |
|
38 |
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Balance at April 1, 2011 |
|
426 |
|
$ |
— |
|
$ |
3,930 |
|
$ |
(2 |
) |
$ |
(1,441 |
) |
$ |
2,487 |
|
See Notes to Condensed Consolidated Financial Statements.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
Organization and Basis of Presentation and Consolidation
Effective as of July 3, 2010, Seagate Technology public limited company, an Irish public limited company, (“Seagate-Ireland”, “Seagate” or the “Company”) became the successor to Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Seagate-Cayman”). In connection with the reorganization, all issued and outstanding Seagate-Cayman common shares were cancelled and ceased to exist, and Seagate-Ireland issued ordinary shares on a one-for-one basis to the holders of Seagate-Cayman common shares for each Seagate-Cayman common share that was cancelled. For presentation purposes, unless otherwise noted, common shares prior to the reorganization and ordinary shares subsequent to the reorganization are referred to herein as ordinary shares (see Note 8).
The Company designs, manufactures, markets and sells hard disk drives. Hard disk drives, which are commonly referred to as disk drives or hard drives, are used as the primary medium for storing electronic data. The Company produces a broad range of disk drive products addressing enterprise applications, where its products are primarily used in enterprise servers, mainframes and workstations; client compute applications, where its products are used in desktop and notebook computers; and client non-compute applications, where its products are used in a wide variety of devices such as digital video recorders (DVRs), and other consumer electronic devices such as personal data backup systems, portable external storage systems and digital media systems. The Company sells its disk drives primarily to major original equipment manufacturers (OEMs), distributors and retailers. In addition to manufacturing and selling disk drives, the Company provides storage services for small- to medium-sized businesses, including online backup, data protection and recovery solutions.
The Condensed Consolidated Financial Statements include the accounts of the Company and all of its wholly-owned subsidiaries, after elimination of intercompany transactions and balances. The Condensed Consolidated Financial Statements have been prepared by the Company and have not been audited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments necessary to summarize fairly the consolidated financial position, results of operations, cash flows and shareholders’ equity for the periods presented. Such adjustments are of a normal and recurring nature. The Company’s Consolidated Financial Statements for the fiscal year ended July 2, 2010 are included in its Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (SEC) on August 20, 2010. The Company believes that the disclosures included in the unaudited Condensed Consolidated Financial Statements, when read in conjunction with its Consolidated Financial Statements as of July 2, 2010 and the notes thereto, are adequate to make the information presented not misleading.
The results of operations for the three and nine months ended April 1, 2011, are not necessarily indicative of the results of operations to be expected for any subsequent interim period in the Company’s fiscal year ending July 1, 2011. The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The three and nine months ended April 1, 2011 and April 2, 2010, consisted of 13 weeks and 39 weeks, respectively. Fiscal year 2011 will be comprised of 52 weeks and will end on July 1, 2011.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are highly uncertain at the time of estimation. Based on this definition, the Company’s most critical policies include: establishment of sales program accruals, establishment of warranty accruals, the accounting for income taxes and the accounting for goodwill and other long-lived assets.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The Company also has other accounting policies and accounting estimates relating to uncollectible customer accounts, valuation of inventory, valuation of share-based payments and restructuring and exit costs. The Company believes that these other accounting policies and accounting estimates either do not generally require it to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on the Company’s reported results of operations for a given period.
Since the Company’s fiscal year ended July 2, 2010, there have been no significant changes in the Company’s critical accounting policies and estimates. Please refer to Note 1 of “Financial Statements and Supplementary Data” contained in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2010, as filed with the SEC on August 20, 2010, for a discussion of the Company’s critical accounting policies and estimates.
Accounting Changes
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (ASC Topic 605) — Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force. This guidance modifies the fair value requirements of ASC subtopic 605-25, Revenue Recognition-Multiple Element Arrangements by allowing the use of the best estimate of selling price in addition to vendor-specific objective evidence and verifiable objective evidence (now referred to as third-party evidence) for determining the selling price of a deliverable. A vendor is now required to use its best estimate of the selling price when vendor-specific objective evidence or third-party evidence of the selling price cannot be determined. In addition, the residual method of allocating arrangement consideration is no longer permitted. The Company implemented the provisions of this guidance beginning on July 3, 2010 on a prospective basis for all new or materially modified arrangements entered into on or after that date. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-14, Software (ASC Topic 985) — Certain Revenue Arrangements That Include Software Elements, a consensus of the FASB Emerging Issues Task Force. This guidance modifies the scope of ASC subtopic 985-605, Software-Revenue Recognition to exclude from its requirements (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. The Company implemented the provisions of this guidance beginning on July 3, 2010 on a prospective basis for all new or materially modified arrangements entered into on or after that date. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
2. Balance Sheet Information
Investments
The Company’s short-term investments are primarily comprised of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. With the exception of securities held for its non-qualified deferred compensation plan, which are classified as trading securities, the Company classifies its investment portfolio as available-for-sale. The Company recognizes its available-for-sale investments at fair value with unrealized gains and losses included in Accumulated other comprehensive income (loss), which is a component of shareholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. Realized gains and losses are included in Other, net. The cost of securities sold is based on the specific identification method.
The Company’s available-for-sale securities include investments in auction rate securities. Beginning in fiscal year 2008, the Company’s auction rate securities failed to settle at auction and have continued to fail through April 1, 2011. Since the Company continues to earn interest on its auction rate securities at the maximum contractual rate, there have been no payment defaults with respect to such securities, and they are all collateralized, the Company expects to recover the entire amortized cost basis of these auction rate securities. The Company does not intend to sell these securities and has concluded it is not more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. As such, the Company believes the impairments totaling $2 million are not other-than-temporary and therefore have been recorded in Accumulated other comprehensive income (loss). Given the uncertainty as to when the liquidity issues associated with these securities will improve, these securities were classified as long-term investments in the Company’s Condensed Consolidated Balance Sheets.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
As of April 1, 2011, the Company’s restricted cash and investments consisted of $85 million in cash and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $18 million in cash and investments held as collateral at banks for various performance obligations. As of July 2, 2010, the Company’s restricted cash and investments consisted of $76 million in cash and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $38 million in cash and investments held as collateral at banks for various performance obligations.
Effective January 3, 2011, the Company cancelled its Total Return Swap (TRS), which had been used to manage the equity market risks associated with its Non-qualified Deferred Compensation Plan — the Seagate Deferred Compensation Plan (the “SDCP”). Currently, the Company manages its exposure to equity market risks associated with the deferred compensation liabilities by investing directly in mutual funds that mirror the employees’ investment options. The Company classified investments held to satisfy the deferred compensation liabilities as trading securities.
The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of April 1, 2011:
|
(Dollars in millions) |
|
Amortized |
|
Unrealized |
|
Fair |
| |||
|
Available-for-sale securities: |
|
|
|
|
|
|
| |||
|
Commercial paper |
|
$ |
1,477 |
|
$ |
— |
|
$ |
1,477 |
|
|
Money market funds |
|
655 |
|
— |
|
655 |
| |||
|
U.S. treasuries and agency bonds |
|
131 |
|
— |
|
131 |
| |||
|
Corporate bonds |
|
47 |
|
— |
|
47 |
| |||
|
Asset-backed securities |
|
47 |
|
— |
|
47 |
| |||
|
Certificates of deposit |
|
27 |
|
— |
|
27 |
| |||
|
Auction rate securities |
|
19 |
|
(2 |
) |
17 |
| |||
|
Sovereigns and supranationals |
|
15 |
|
— |
|
15 |
| |||
|
Municipal bonds |
|
14 |
|
— |
|
14 |
| |||
|
|
|
2,432 |
|
(2 |
) |
2,430 |
| |||
|
Trading securities: |
|
|
|
|
|
|
| |||
|
Mutual funds |
|
79 |
|
4 |
|
83 |
| |||
|
Money market funds |
|
2 |
|
— |
|
2 |
| |||
|
|
|
81 |
|
4 |
|
85 |
| |||
|
Total |
|
$ |
2,513 |
|
$ |
2 |
|
$ |
2,515 |
|
|
|
|
|
|
|
|
|
| |||
|
Included in Cash and cash equivalents |
|
|
|
|
|
$ |
2,116 |
| ||
|
Included in Short-term investments |
|
|
|
|
|
279 |
| |||
|
Included in Restricted cash and investments |
|
|
|
|
|
103 |
| |||
|
Included in Other assets, net |
|
|
|
|
|
17 |
| |||
|
Total |
|
|
|
|
|
$ |
2,515 |
| ||
As of April 1, 2011, with the exception of the Company’s auction rate securities, the Company had no available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no available-for-sale securities were other-than-temporarily impaired as of April 1, 2011.
The fair value of the Company’s investments in debt securities classified as available-for-sale at April 1, 2011 by remaining contractual maturity was as follows:
|
(Dollars in millions) |
|
Amortized |
|
Fair |
|
|
|
| ||
|
Due in less than 1 year |
|
$ |
2,323 |
|
$ |
2,323 |
|
|
|
|
|
Due in 1 to 3 years |
|
90 |
|
90 |
|
|
|
| ||
|
Thereafter |
|
19 |
|
17 |
|
|
|
| ||
|
Total |
|
$ |
2,432 |
|
$ |
2,430 |
|
|
|
|
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of July 2, 2010:
|
(Dollars in millions) |
|
Amortized |
|
Unrealized |
|
Fair |
| |||
|
Available-for-sale securities: |
|
|
|
|
|
|
| |||
|
Commercial paper |
|
$ |
1,231 |
|
$ |
— |
|
$ |
1,231 |
|
|
Money market funds |
|
833 |
|
— |
|
833 |
| |||
|
U.S. treasuries and agency bonds |
|
154 |
|
1 |
|
155 |
| |||
|
Asset-backed securities |
|
45 |
|
— |
|
45 |
| |||
|
Corporate bonds |
|
41 |
|
— |
|
41 |
| |||
|
Certificates of deposit |
|
25 |
|
— |
|
25 |
| |||
|
Sovereigns and supranationals |
|
20 |
|
— |
|
20 |
| |||
|
Auction rate securities |
|
19 |
|
(2 |
) |
17 |
| |||
|
Municipal bonds |
|
3 |
|
— |
|
3 |
| |||
|
Total |
|
$ |
2,371 |
|
$ |
(1 |
) |
$ |
2,370 |
|
|
Included in Cash and cash equivalents |
|
|
|
|
|
$ |
2,101 |
| ||
|
Included in Short-term investments |
|
|
|
|
|
252 |
| |||
|
Included in Other assets, net |
|
|
|
|
|
17 |
| |||
|
Total |
|
|
|
|
|
$ |
2,370 |
| ||
As of July 2, 2010, with the exception of the Company’s auction rate securities, the Company had no available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no available-for-sale securities were other-than-temporarily impaired as of July 2, 2010.
Inventories
|
(Dollars in millions) |
|
April 1, |
|
July 2, |
| ||
|
Raw materials and components |
|
$ |
281 |
|
$ |
263 |
|
|
Work-in-process |
|
176 |
|
145 |
| ||
|
Finished goods |
|
377 |
|
349 |
| ||
|
|
|
$ |
834 |
|
$ |
757 |
|
Other Current Assets
|
(Dollars in millions) |
|
April 1, |
|
July 2, |
| ||
|
Vendor non-trade receivables |
|
$ |
404 |
|
$ |
351 |
|
|
Other |
|
182 |
|
163 |
| ||
|
|
|
$ |
586 |
|
$ |
514 |
|
Other current assets include non-trade receivables from certain manufacturing vendors resulting from the sale of components to these vendors, who use the components to manufacture completed sub-assemblies that they sell back to the Company. The Company does not reflect the sale of these components in Revenue and does not recognize any profits on these sales. The costs of the completed sub-assemblies are included in inventory upon purchase from the vendors.
Property, Equipment and Leasehold Improvements, net
|
(Dollars in millions) |
|
April 1, |
|
July 2, |
| ||
|
Property, equipment and leasehold improvements |
|
$ |
7,267 |
|
$ |
6,842 |
|
|
Accumulated depreciation and amortization |
|
(5,059 |
) |
(4,579 |
) | ||
|
|
|
$ |
2,208 |
|
$ |
2,263 |
|
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
3. Restructuring and Exit Costs
The Company’s significant restructuring plans are described below. All restructuring charges are reported in Restructuring and other, net on the Condensed Consolidated Statements of Operations, unless otherwise noted.
California Facility Consolidation. During the nine months ended April 1, 2011, the Company recorded restructuring charges of $3 million related to lease termination costs for the Company’s Sunnyvale, California facility as a result of the Company’s planned consolidation of its California facilities. The Company made cash payments of $3 million related to these plans during the six months ended December 31, 2010. This plan was substantially complete by the second quarter of fiscal year 2011.
2010 Plan. From the inception of the Company’s restructuring plans announced in fiscal year 2010 as a result of the ongoing focus on cost efficiencies in all areas of its business, the Company has recorded $4 million related to employee termination costs. The Company made cash payments of $2 million relating to this plan during the three months ended October 1, 2010. This plan was substantially complete by the first quarter of fiscal year 2011.
AMK Plan. In August 2009, the Company announced that it will close its Ang Mo Kio (AMK) facility in Singapore (the “AMK Plan”). The Company expects to complete the closure during fiscal year 2011. The hard drive manufacturing operations have been relocated to other existing Seagate facilities and the Company’s Asia International Headquarters remains in Singapore. This closure and relocation is part of the Company’s ongoing focus on cost efficiencies in all areas of its business and is intended to facilitate leveraging manufacturing investments across fewer sites. The Company does not expect the closure to meaningfully change production capacity. The Company currently estimates total restructuring charges of approximately $60 million, all in cash, including approximately $40 million for severance, approximately $10 million for the relocation of manufacturing equipment, and approximately $10 million for other plant closure and relocation costs. From the inception of this plan through April 1, 2011 the Company has recorded restructuring charges of approximately $45 million. During the nine months ended April 1, 2011, the Company recorded an additional $4 million in restructuring charges for other exit costs for the AMK Plan and another $2 million related to an adjustment of previously accrued post-employment benefits. The Company made cash payments of $29 million relating to this plan during the nine months ended April 1, 2011.
Other Restructuring and Exit Costs. Through April 1, 2011, the Company has recorded restructuring charges of approximately $119 million, net of adjustments, related to the previously announced closures of its Pittsburgh, Pennsylvania and Milpitas, California facilities, and also has recorded certain exit costs aggregating $270 million related to its acquisition of Maxtor. During the nine months ended April 1, 2011, the Company recorded restructuring charges of $3 million related to facility lease obligations and $2 million related to post-employment benefits and made cash payments of $15 million on these and other smaller restructuring plans. The remaining balance as of April 1, 2011, is primarily associated with the exit of certain facilities or facility lease obligations. Payment of these exit costs are expected to continue through the end of fiscal year 2017.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
During the three months ended April 1, 2011, the Company recorded restructuring charges and adjustments of $3 million, comprised primarily of charges related to the planned closure of the Company’s AMK manufacturing operations in Singapore. The following table summarizes the Company’s restructuring activities for the nine months ended April 1, 2011:
|
(Dollars in millions) |
|
Employee |
|
Operating |
|
Other |
|
Total |
| ||||
|
All Restructuring Activities |
|
|
|
|
|
|
|
|
| ||||
|
Accrual balances at July 2, 2010 |
|
$ |
38 |
|
$ |
46 |
|
$ |
— |
|
$ |
84 |
|
|
Restructuring charges |
|
— |
|
2 |
|
1 |
|
3 |
| ||||
|
Cash payments |
|
(5 |
) |
(4 |
) |
(1 |
) |
(10 |
) | ||||
|
Adjustments |
|
1 |
|
— |
|
— |
|
1 |
| ||||
|
Accrual balances at October 1, 2010 |
|
34 |
|
44 |
|
— |
|
78 |
| ||||
|
Restructuring charges |
|
1 |
|
3 |
|
1 |
|
5 |
| ||||
|
Cash payments |
|
(6 |
) |
(8 |
) |
(1 |
) |
(15 |
) | ||||
|
Adjustments |
|
1 |
|
1 |
|
— |
|
2 |
| ||||
|
Accrual balances at December 31, 2010 |
|
30 |
|
40 |
|
— |
|
70 |
| ||||
|
Restructuring charges |
|
1 |
|
— |
|
3 |
|
4 |
| ||||
|
Cash payments |
|
(17 |
) |
(4 |
) |
(3 |
) |
(24 |
) | ||||
|
Adjustments |
|
— |
|
(1 |
) |
— |
|
(1 |
) | ||||
|
Accrual balances at April 1, 2011 |
|
$ |
14 |
|
$ |
35 |
|
$ |
— |
|
$ |
49 |
|
Of the $49 million balance in accrued restructuring at April 1, 2011, $24 million is included in Accrued expenses and $25 million is included in Other non-current liabilities on the accompanying Condensed Consolidated Balance Sheet.
4. Debt and Convertible Notes
Short-Term Borrowings
On January 18, 2011, the Company and its subsidiary, Seagate HDD Cayman (“the Borrower”), entered into a credit agreement which provides for a $350 million senior secured revolving credit facility. Seagate Technology plc and certain of its material subsidiaries fully and unconditionally guarantee, on a senior secured basis, the revolving credit facility. The revolving credit facility matures in January 2015. There were no borrowings against the revolving credit facility as of April 1, 2011.
Long-Term Debt
$430 Million Aggregate Principal Amount of 10.00% Senior Secured Second-Priority Notes due May 2014 (the “2014 Notes”). On March 31, 2011, Seagate Technology International, an exempt limited liability company organized under the laws of the Cayman Islands and an indirect wholly-owned subsidiary of Seagate Technology plc, redeemed approximately $14 million aggregate principal amount of its 2014 Notes for cash at 110% of their principal amount, plus accrued and unpaid interest to the redemption date. The Company recorded a loss on the redemption of approximately $2 million, which is included in Other, net on the Company’s Condensed Consolidated Statement of Operations for the three and nine months ended April 1, 2011.
$750 Million Aggregate Principal Amount of 7.75% Senior Notes due December 2018 (the “2018 Notes”). On December 14, 2010, the Company’s subsidiary, Seagate HDD Cayman, completed the sale of $750 million aggregate principal amount of the 2018 Notes in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The obligations under the 2018 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. The net proceeds from the offering of the 2018 Notes were approximately $736 million, which the Company intends to use for general corporate purposes, which may include the repayment, redemption and/or repurchase of a portion of its outstanding indebtedness. The 2018 Notes bear interest at the rate of 7.75% per year, payable semi-annually on June 15 and December 15 of each year. The 2018 Notes are redeemable at any time after December 15, 2014 at the option of the Company in whole or in part, on not less than 30, nor more than 60 days notice, at a “make-whole” premium redemption price. The “make-whole” redemption price will be equal to the greater of (1) 100% of the principal amount of the notes being redeemed, or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the 2018 Notes being redeemed, discounted at the redemption date on a semi-annual basis at a rate equal to the sum of the applicable Treasury rate plus 50 basis points.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
$600 Million Aggregate Principal Amount of 6.375% Senior Notes due October 2011 (the “2011 Notes”). The 2011 Notes are included in Current portion of long-term debt on the Condensed Consolidated Balance Sheet at April 1, 2011.
$600 Million Aggregate Principal Amount of 6.875% Senior Notes due May 2020 (the “2020 Notes”). The 2020 Notes were issued by the Company’s subsidiary, Seagate HDD Cayman, in fiscal year 2010. The obligations under the 2020 Notes were fully and unconditionally guaranteed, on a senior unsecured basis, by Seagate-Cayman through July 2, 2010. On July 3, 2010, Seagate-Cayman entered into a Supplemental Indenture (the “Supplemental Indenture”) with Seagate HDD Cayman, Seagate-Ireland, and Wells Fargo Bank, National Association, as trustee (the “Trustee”), whereby Seagate-Ireland agreed to fully and unconditionally guarantee the 2020 Notes and Seagate-Cayman was released from all obligations and covenants thereunder.
$55 Million Aggregate Principal Amount of 5.75% Subordinated Debentures due March 2012 (the “5.75% Debentures”). On July 27, 2010, the Company redeemed the entire outstanding aggregate principal amount of the 5.75% Debentures for cash at 100% of their principal amount, plus accrued and unpaid interest to the redemption date for approximately $34 million. The Company recorded a loss on the redemption of approximately $2 million, which is included in Other, net on the Company’s Condensed Consolidated Statement of Operations for the nine months ended April 1, 2011.
Convertible Notes
$326 Million Aggregate Principal Amount of 2.375% Convertible Senior Notes due August 2012 (the “2.375% Notes”). On August 19, 2010, the Company redeemed the entire $326 million outstanding aggregate principal amount of the 2.375% Notes for cash at a redemption price equal to 100.68% of their principal amount, plus accrued and unpaid interest to the redemption date for approximately $328 million. The Company recorded a loss on the redemption of approximately $22 million, which is included in Other, net on the Company’s Condensed Consolidated Statement of Operations for the nine months ended April 1, 2011.
5. Income Taxes
The Company recorded an income tax provision of $29 million and $58 million for the three and nine months ended April 1, 2011, respectively. The income tax provision for the three and nine months ended April 1, 2011 included approximately $15 million and $4 million, respectively, of net discrete charges, primarily related to increases in income tax reserves recorded for non-U.S. income tax positions taken in prior fiscal years partially offset by the release of income tax reserves associated with settlements of income tax audits and the expiration of certain statutes of limitations. In addition, the nine month period ended April 1, 2011 included an $11 million discrete income tax benefit from the loss recognized in the three months ending October 1, 2010 on the redemption of debt which was offset by a corresponding increase in the valuation allowance for U.S. deferred tax assets.
The Company’s provision for income taxes recorded for the three and nine months ended April 1, 2011 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) the indefinite reinvestment of the Company’s earnings outside of Ireland, (ii) income tax benefits related to tax holiday and tax incentive programs, (iii) income tax expense related to intercompany transactions, (iv) an increase in valuation allowance for U.S. deferred tax assets, and (v) income tax reserves related to non-U.S. tax positions taken in prior fiscal years and the release of income tax reserves from settlements of income tax audits and the expiration of certain statutes of limitations.
During the nine months ended April 1, 2011, the Company’s unrecognized income tax benefits excluding interest and penalties increased by $9 million to $124 million. The unrecognized income tax benefits that, if recognized, would impact the effective tax rate were $124 million as of April 1, 2011, subject to certain future valuation allowance reversals. During the 12 months beginning April 2, 2011, the Company expects to reduce its unrecognized income tax benefits by approximately $9 million as a result of settlements and the expiration of certain statutes of limitations.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The income tax provision for the three months ended April 2, 2010 included approximately $11 million of discrete income tax benefits recorded primarily for the reversal of valuation allowance previously recorded for certain non-U.S. deferred tax assets and the release of income tax reserves as a result of the U.S. 9th Circuit Court of Appeals’ affirmation of the Tax Court decision in Xilinx v. Commissioner. The income tax benefit recognized for the nine months ended April 2, 2010 included approximately $39 million of discrete income tax benefits primarily for the release of income tax reserves associated with settlements, expiration of certain statutes of limitations, and the U.S. 9th Circuit Court decision, as mentioned above, the reversal of valuation allowance previously recorded for certain non-U.S. deferred tax assets, and U.S. federal income tax legislative changes.
During the nine months ended April 2, 2010, and prior to the Company’s reorganization, the Company’s publicly traded parent was incorporated in the Cayman Islands and not subject to income tax. The Company’s income tax provision and benefit recorded for the three and nine months ended April 2, 2010 differed from the provision for income taxes that would be derived by applying a notional U.S. 35% rate to income before income taxes primarily due to the net effect of (i) income tax benefits related to tax holiday and tax incentive programs, (ii) a decrease in valuation allowance for certain non-U.S. deferred tax assets, (iii) income tax expense related to intercompany transactions, and (iv) the release of certain income tax reserves.
During the nine months ended April 2, 2010, the Company’s unrecognized tax benefits excluding interest and penalties decreased by $4 million to $114 million.
6. Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate, interest rate, and to a lesser extent, equity price risks relating to its ongoing business operations. The Company enters into foreign currency forward exchange contracts in order to manage the foreign currency exchange rate risk on forecasted expenses denominated in foreign currencies and to mitigate the remeasurement risk of certain foreign currency denominated liabilities. The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives on the Condensed Consolidated Balance Sheets at fair value. The effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings. As of April 1, 2011 and July 2, 2010, the Company had net unrealized gains on cash flow hedges of approximately $6 million and $3 million, respectively.
The Company dedesignates its cash flow hedges when the forecasted hedged transactions are realized 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 income (loss) are reclassified into earnings in the same period that the underlying hedged transaction is included in earnings. Any subsequent changes in the fair value of such derivative instruments are immediately reflected in earnings. As of April 1, 2011, the Company’s existing foreign currency forward exchange contracts mature within 12 months. The deferred amount currently recorded in Accumulated other comprehensive income (loss) expected to be recognized into earnings over the next 12 months is a net gain of $7 million.
The following tables show the total notional value of the Company’s outstanding foreign currency forward exchange contracts as of April 1, 2011 and July 2, 2010:
As of April 1, 2011
|
(Dollars in millions) |
|
Contracts Designated as Hedges |
|
Contracts Not Designated as Hedges |
| ||
|
Thai baht |
|
$ |
266 |
|
$ |
258 |
|
|
Singapore dollars |
|
146 |
|
19 |
| ||
|
Czech koruna |
|
— |
|
11 |
| ||
|
|
|
$ |
412 |
|
$ |
288 |
|
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
As of July 2, 2010
|
(Dollars in millions) |
|
Contracts Designated as Hedges |
|
Contracts Not Designated as Hedges |
| ||
|
Thai baht |
|
$ |
406 |
|
$ |
163 |
|
|
Singapore dollars |
|
84 |
|
8 |
| ||
|
Japanese yen |
|
1 |
|
— |
| ||
|
Czech koruna |
|
— |
|
10 |
| ||
|
|
|
$ |
491 |
|
$ |
181 |
|
The Company is subject to equity market risks due to changes in the fair value of the notional investments selected by its employees as part of its SDCP. Through December 31, 2010, the Company had a TRS in order to manage the equity market risks associated with the SDCP liabilities. Effective January 3, 2011, the Company cancelled the TRS, and currently manages its exposure to equity market risks associated with the SDCP liabilities by investing directly in mutual funds that mirror the employees’ investment options.
The following tables show the Company’s derivative instruments measured at fair value as reflected in the Condensed Consolidated Balance Sheets as of April 1, 2011 and July 2, 2010:
Fair Values of Derivative Instruments as of April 1, 2011
|
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||
|
(Dollars in millions) |
|
Balance |
|
Fair |
|
Balance |
|
Fair |
| ||
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
| ||
|
Foreign currency forward exchange contracts |
|
Other current |
|
$ |
8 |
|
Accrued |
|
$ |
(2 |
) |
|
|
|
|
|
|
|
|
|
|
| ||
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
| ||
|
Foreign currency forward exchange contracts |
|
Other current |
|
8 |
|
Accrued |
|
— |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
Total derivatives |
|
|
|
$ |
16 |
|
|
|
$ |
(2 |
) |
Fair Values of Derivative Instruments as of July 2, 2010
|
|
|
Asset Derivatives |
|
Liability Derivatives |
| ||||||
|
(Dollars in millions) |
|
Balance |
|
Fair |
|
Balance |
|
Fair |
| ||
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
| ||
|
Foreign currency forward exchange contracts |
|
Other current |
|
$ |
5 |
|
Accrued |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
| ||
|
Foreign currency forward exchange contracts |
|
Other current |
|
2 |
|
Accrued |
|
— |
| ||
|
Total return swap |
|
Other current |
|
— |
|
Accrued |
|
(1 |
) | ||
|
|
|
|
|
|
|
|
|
|
| ||
|
Total derivatives |
|
|
|
$ |
7 |
|
|
|
$ |
(1 |
) |
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following tables show the effect of the Company’s derivative instruments on Other comprehensive income (OCI) and the Condensed Consolidated Statement of Operations for the three and nine months ended April 1, 2011:
The Effect of Derivative Instruments on the Statement of Operations
for the Three and Nine Months Ended April 1, 2011
(Dollars in millions)
|
Derivatives |
|
Amount of Gain or |
|
Location of |
|
Amount of Gain or |
|
Location of |
|
Amount of Gain or |
| ||||||||||||
|
as Cash |
|
For the |
|
For the |
|
Income |
|
For the |
|
For the |
|
Excluded from |
|
For the |
|
For the |
| ||||||
|
Foreign exchange forward contracts |
|
$ |
(2 |
) |
$ |
35 |
|
Cost of revenue |
|
$ |
10 |
|
$ |
32 |
|
Cost of revenue |
|
$ |
(2 |
) |
$ |
(1 |
) |
|
|
|
Location of Gain or |
|
Amount of Gain or (Loss) Recognized in |
| ||||
|
Derivatives Not Designated as |
|
(Loss) Recognized in |
|
For the Three |
|
For the Nine |
| ||
|
Foreign exchange forward contracts |
|
Other, net |
|
$ |
(1 |
) |
$ |
19 |
|
|
Total return swap |
|
Operating expenses |
|
1 |
|
14 |
| ||
|
|
|
|
|
$ |
— |
|
$ |
33 |
|
(a) The amount of gain or (loss) recognized in income represents $0 related to the ineffective portion of the hedging relationships for both the three and nine months ended April 1, 2011. The amounts excluded from the assessment of hedge effectiveness, for the three and nine months ended April 1, 2011, were losses of $2 million and $1 million, respectively.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following tables show the effect of the Company’s derivative instruments on OCI and the Condensed Consolidated Statement of Operations for the three and nine months ended April 2, 2010:
The Effect of Derivative Instruments on the Statement of Operations
for the Three and Nine Months Ended April 2, 2010
(Dollars in millions)
|
Derivatives |
|
Amount of Gain or |
|
Location of Reclassified |
|
Amount of Gain or |
|
Location of |
|
Amount of Gain or |
| ||||||||||||
|
as Cash |
|
For the |
|
For the |
|
Income |
|
For the |
|
For the |
|
Excluded from |
|
For the |
|
For the |
| ||||||
|
Foreign exchange forward contracts |
|
$ |
6 |
|
$ |
11 |
|
Cost of revenue |
|
$ |
2 |
|
$ |
6 |
|
Cost of revenue |
|
$ |
— |
|
$ |
1 |
|
|
|
|
Location of Gain or |
|
Amount of Gain or (Loss) Recognized in |
| ||||
|
Derivatives Not Designated as |
|
(Loss) Recognized in |
|
For the Three |
|
For the Nine |
| ||
|
Foreign exchange forward contracts |
|
Other, net |
|
$ |
8 |
|
$ |
12 |
|
|
Total return swap |
|
Operating expenses |
|
4 |
|
17 |
| ||
|
|
|
|
|
$ |
12 |
|
$ |
29 |
|
(a) The amount of gain or (loss) recognized in income represents $0 related to the ineffective portion of the hedging relationships for both the three and nine months ended April 2, 2010. The amounts excluded from the assessment of hedge effectiveness, for the three and nine months ended April 2, 2010, were $0 and $1 million, respectively.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
7. Fair Value
Measurement of Fair Value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Fair Value Hierarchy
A fair value hierarchy is based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflects the Company’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:
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’s non-performance risk is considered in determining the fair values of liabilities and assets, respectively.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Items Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of April 1, 2011:
|
|
|
Fair Value Measurements at Reporting Date Using |
| ||||||||||
|
(Dollars in millions) |
|
Quoted |
|
Significant |
|
Significant |
|
Total |
| ||||
|
Assets: |
|
|
|
|
|
|
|
|
| ||||
|
Commercial paper |
|
$ |
— |
|
$ |
1,477 |
|
$ |
— |
|
$ |
1,477 |
|
|
Money market funds |
|
639 |
|
— |
|
— |
|
639 |
| ||||
|
U.S. treasuries and agency bonds |
|
— |
|
131 |
|
— |
|
131 |
| ||||
|
Corporate bonds |
|
— |
|
47 |
|
— |
|
47 |
| ||||
|
Asset-backed securities |
|
— |
|
47 |
|
— |
|
47 |
| ||||
|
Certificates of deposit |
|
— |
|
25 |
|
— |
|
25 |
| ||||
|
Sovereigns and supranationals |
|
— |
|
15 |
|
— |
|
15 |
| ||||
|
Municipal bonds |
|
— |
|
14 |
|
— |
|
14 |
| ||||
|
Total cash equivalents and short-term investments |
|
639 |
|
1,756 |
|
— |
|
2,395 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Restricted cash and investments: |
|
|
|
|
|
|
|
|
| ||||
|
Mutual funds |
|
83 |
|
— |
|
— |
|
83 |
| ||||
|
Money market funds |
|
18 |
|
— |
|
— |
|
18 |
| ||||
|
Certificates of deposit |
|
— |
|
2 |
|
— |
|
2 |
| ||||
|
Derivative assets |
|
— |
|
16 |
|
— |
|
16 |
| ||||
|
Auction rate securities |
|
— |
|
— |
|
17 |
|
17 |
| ||||
|
Total assets |
|
$ |
740 |
|
$ |
1,774 |
|
$ |
17 |
|
$ |
2,531 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
— |
|
$ |
(2 |
) |
$ |
— |
|
$ |
(2 |
) |
|
Total liabilities |
|
$ |
— |
|
$ |
(2 |
) |
$ |
— |
|
$ |
(2 |
) |
|
|
|
Fair Value Measurements at Reporting Date Using |
| ||||||||||
|
(Dollars in millions) |
|
Quoted |
|
Significant |
|
Significant |
|
Total |
| ||||
|
Assets: |
|
|
|
|
|
|
|
|
| ||||
|
Cash and cash equivalents |
|
$ |
639 |
|
$ |
1,477 |
|
$ |
— |
|
$ |
2,116 |
|
|
Short-term investments |
|
— |
|
279 |
|
— |
|
279 |
| ||||
|
Restricted cash and investments |
|
101 |
|
2 |
|
— |
|
103 |
| ||||
|
Other current assets |
|
— |
|
16 |
|
— |
|
16 |
| ||||
|
Other assets, net |
|
— |
|
— |
|
17 |
|
17 |
| ||||
|
Total assets |
|
$ |
740 |
|
$ |
1,774 |
|
$ |
17 |
|
$ |
2,531 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Accrued expenses |
|
$ |
— |
|
$ |
(2 |
) |
$ |
— |
|
$ |
(2 |
) |
|
Total liabilities |
|
$ |
— |
|
$ |
(2 |
) |
$ |
— |
|
$ |
(2 |
) |
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of July 2, 2010:
|
|
|
Fair Value Measurements at Reporting Date Using |
| ||||||||||
|
(Dollars in millions) |
|
Quoted |
|
Significant |
|
Significant |
|
Total |
| ||||
|
Assets: |
|
|
|
|
|
|
|
|
| ||||
|
Commercial paper |
|
$ |
— |
|
$ |
1,231 |
|
$ |
— |
|
$ |
1,231 |
|
|
Money market funds |
|
833 |
|
— |
|
— |
|
833 |
| ||||
|
U.S. treasuries and agency bonds |
|
— |
|
155 |
|
— |
|
155 |
| ||||
|
Asset-backed securities |
|
— |
|
45 |
|
— |
|
45 |
| ||||
|
Corporate bonds |
|
— |
|
41 |
|
— |
|
41 |
| ||||
|
Certificates of deposit |
|
— |
|
25 |
|
— |
|
25 |
| ||||
|
Sovereigns and supranationals |
|
— |
|
20 |
|
— |
|
20 |
| ||||
|
Municipal bonds |
|
— |
|
3 |
|
— |
|
3 |
| ||||
|
Total cash equivalents and short-term investments |
|
833 |
|
1,520 |
|
— |
|
2,353 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Restricted cash and investments: |
|
|
|
|
|
|
|
|
| ||||
|
Money market funds |
|
76 |
|
— |
|
— |
|
76 |
| ||||
|
Certificates of deposit |
|
— |
|
5 |
|
— |
|
5 |
| ||||
|
Auction rate securities |
|
— |
|
— |
|
17 |
|
17 |
| ||||
|
Derivative assets |
|
— |
|
7 |
|
— |
|
7 |
| ||||
|
Total assets |
|
$ |
909 |
|
$ |
1,532 |
|
$ |
17 |
|
$ |
2,458 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Derivative liabilities |
|
$ |
— |
|
$ |
(1 |
) |
$ |
— |
|
$ |
(1 |
) |
|
Total liabilities |
|
$ |
— |
|
$ |
(1 |
) |
$ |
— |
|
$ |
(1 |
) |
|
|
|
Fair Value Measurements at Reporting Date Using |
| ||||||||||
|
(Dollars in millions) |
|
Quoted |
|
Significant |
|
Significant |
|
Total |
| ||||
|
Assets: |
|
|
|
|
|
|
|
|
| ||||
|
Cash and cash equivalents |
|
$ |
833 |
|
$ |
1,268 |
|
$ |
— |
|
$ |
2,101 |
|
|
Short-term investments |
|
— |
|
252 |
|
— |
|
252 |
| ||||
|
Restricted cash and investments |
|
76 |
|
5 |
|
— |
|
81 |
| ||||
|
Other current assets |
|
— |
|
7 |
|
— |
|
7 |
| ||||
|
Other assets, net |
|
— |
|
— |
|
17 |
|
17 |
| ||||
|
Total assets |
|
$ |
909 |
|
$ |
1,532 |
|
$ |
17 |
|
$ |
2,458 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
|
Accrued expenses |
|
$ |
— |
|
$ |
(1 |
) |
$ |
— |
|
$ |
(1 |
) |
|
Total liabilities |
|
$ |
— |
|
$ |
(1 |
) |
$ |
— |
|
$ |
(1 |
) |
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Level 1 assets consist of money market funds and mutual funds 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, and U.S. Treasuries. 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 values of all of its cash equivalents and short-term investments. For the cash equivalents and short-term investments in the Company’s portfolio, multiple pricing sources are generally available. The pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the pricing service against other independent sources and, as of April 1, 2011, 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 and the TRS. The Company recognizes derivative financial instruments in its consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount it would pay or receive to terminate these agreements at the reporting date.
The Company’s Level 3 assets consist of auction rate securities with a par value of approximately $19 million, all of which are collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in fiscal year 2008, these securities failed to settle at auction and have continued to fail through April 1, 2011. Since there is no active market for these securities, the Company valued them using a discounted cash flow model. The valuation model is based on the income approach and reflects both observable and significant unobservable inputs.
The table below presents a reconciliation of assets measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the nine months ended April 1, 2011:
|
|
|
Fair Value Measurements |
| |
|
(Dollars in millions) |
|
Auction Rate Securities |
| |
|
Balance at July 2, 2010 |
|
$ |
17 |
|
|
Total net gains (losses) (realized and unrealized): |
|
|
| |
|
Realized gains (losses)(1) |
|
— |
| |
|
Unrealized gains (losses)(2) |
|
— |
| |
|
Balance at April 1, 2011 |
|
$ |
17 |
|
(1) Realized gains (losses) on auction rate securities are recorded in Other, net on the Condensed Consolidated Statements of Operations.
(2) Unrealized gains (losses) on auction rate securities are recorded as a separate component of Other comprehensive income (loss) in Accumulated other comprehensive income (loss), which is a component of Shareholders’ Equity.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Other Fair Value Disclosures
The Company’s debt is carried at amortized cost. The fair value of the Company’s debt is derived from quoted prices in active markets in the following table in order of priority:
|
|
|
April 1, 2011 |
|
July 2, 2010 |
| ||||||||
|
(Dollars in millions) |
|
Carrying |
|
Estimated |
|
Carrying |
|
Estimated |
| ||||
|
Capital Leases |
|
$ |
1 |
|
$ |
1 |
|
$ |
2 |
|
$ |
2 |
|
|
10.0% Senior Secured Second-Priority Notes due May 2014 |
|
403 |
|
485 |
|
413 |
|
490 |
| ||||
|
6.375% Senior Notes due October 2011 |
|
559 |
|
573 |
|
559 |
|
577 |
| ||||
|
5.75% Subordinated Debentures due March 2012 |
|
— |
|
— |
|
31 |
|
33 |
| ||||
|
2.375% Convertible Senior Notes due August 2012 |
|
— |
|
— |
|
298 |
|
329 |
| ||||
|
6.8% Senior Notes due October 2016 |
|
599 |
|
622 |
|
599 |
|
587 |
| ||||
|
7.75% Senior Notes due December 2018 |
|
750 |
|
783 |
|
— |
|
— |
| ||||
|
6.875% Senior Notes due May 2020 |
|
600 |
|
603 |
|
600 |
|
574 |
| ||||
|
|
|
2,912 |
|
3,067 |
|
2,502 |
|
2,592 |
| ||||
|
Less current portion of long-term debt |
|
(560 |
) |
(574 |
) |
(329 |
) |
(362 |
) | ||||
|
Long-term debt, less current portion |
|
$ |
2,352 |
|
$ |
2,493 |
|
$ |
2,173 |
|
$ |
2,230 |
|
8. Shareholders’ Equity
Share Capital
On July 3, 2010, the Company consummated its previously announced reorganization pursuant to which Seagate-Ireland became the publicly traded parent of the Seagate corporate family. In connection with the reorganization, all issued and outstanding Seagate-Cayman common shares were cancelled and ceased to exist, and Seagate-Ireland issued ordinary shares on a one-for-one basis to the holders of Seagate-Cayman common shares for each Seagate-Cayman common share that was cancelled. In addition, Seagate-Ireland assumed Seagate-Cayman’s equity incentive related plans, sub-plans and agreements, including, but not limited to, the Seagate Technology 2001 Share Option Plan, the Amended Seagate Technology 2004 Share Compensation Plan, the Seagate Technology Employee Stock Purchase Plan, the Maxtor Corporation 2005 Performance Incentive Plan, the Maxtor Corporation Amended and Restated 1996 Stock Option Plan, and the Quantum Corporation Supplemental Stock Option Plan.
The Company’s authorized share capital is $13,500 and consists of 1,250,000,000 ordinary shares, par value $0.00001, of which 426,407,528 shares were outstanding as of April 1, 2011, and 100,000,000 preferred shares, par value $0.00001, of which none were issued or outstanding as of April 1, 2011.
Ordinary shares—Holders of ordinary shares are entitled to receive dividends when and as declared by the Company’s board of directors (the “Board of Directors”). Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of preferred shares, any remaining assets of the Company will be distributed ratably to holders of the preferred and ordinary shares. Holders of shares are entitled to one vote per share on all matters upon which the ordinary shares are entitled to vote, including the election of directors.
Preferred shares—The Company is authorized to issue up to a total of 100,000,000 preferred shares in one or more series, 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.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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. As of April 1, 2011, there were no preferred shares outstanding.
Issuance of Ordinary Shares
During the nine months ended April 1, 2011, the Company issued approximately 3.4 million of its ordinary shares from the exercise of stock options, release of restricted units and performance shares and approximately 3 million of its ordinary shares related to employee stock purchases.
Repurchases of Equity Securities
On January 27, 2010, the Company’s Board of Directors authorized an Anti-Dilution Share Repurchase Program, which was publicly announced on February 1, 2010. The repurchase program authorizes the Company to repurchase its ordinary shares to offset increases in diluted shares, such as those caused by employee stock plans and convertible debt, used in the determination of diluted net income per share. The timing and number of shares to be repurchased by the Company will be dependent on general business and market conditions, cash flows generated by future operations, the price of its ordinary shares, cash requirements for other investing and financing activities, and maintaining compliance with its debt covenants. Additionally, there is no minimum or maximum number of shares to be repurchased under the program and the authority for the Anti-Dilution Share Repurchase Program will continue until terminated by the Company’s Board of Directors.
On November 29, 2010, the Company’s Board of Directors authorized repurchases up to an additional $2 billion of the Company’s outstanding ordinary shares.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table sets forth information with respect to repurchases of the Company’s shares made during fiscal year 2011:
January 2010 Anti-Dilution Share Repurchase Program
|
(In millions) |
|
Number of |
|
Dollar Value |
| |
|
|
|
|
|
|
| |
|
Cumulative repurchased through July 2, 2010 |
|
32.4 |
|
$ |
584 |
|
|
July 3, 2010 through October 1, 2010 |
|
— |
|
— |
| |
|
October 2, 2010 through December 31, 2010 |
|
20.7 |
|
305 |
| |
|
January 1, 2011 through April 1, 2011 |
|
— |
|
— |
| |
|
Cumulative repurchased through April 1, 2011 |
|
53.1 |
|
$ |
889 |
|
November 2010 Share Repurchase Program
|
(In millions) |
|
Number of |
|
Dollar Value |
| |
|
|
|
|
|
|
| |
|
Cumulative repurchased through December 31, 2010 |
|
— |
|
$ |
— |
|
|
January 1, 2011 through April 1, 2011 |
|
29.5 |
|
405 |
| |
|
Cumulative repurchased through April 1, 2011 |
|
29.5 |
|
$ |
405 |
|
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
9. Compensation
The Company recorded approximately $12 million and $38 million of stock-based compensation during the three and nine months ended April 1, 2011, respectively. The Company recorded approximately $13 million and $38 million of stock-based compensation during the three and nine months ended April 2, 2010, respectively.
Seagate Technology plc 2001 Share Option Plan (the “SOP”). A maximum of 100 million ordinary shares are issuable under the SOP. Options granted to employees generally vest as follows: 25% of the options on the first anniversary of the vesting commencement date and the remaining 75% proportionately each month over the next 36 months. Options granted under the SOP were granted at fair market value, with options granted up through September 5, 2004 expiring ten years from the date of grant and options granted subsequent to September 5, 2004 expiring seven years from the date of grant. On February 1, 2011, the SOP expired and as a result the Company will no longer be issuing shares under this plan.
Seagate Technology plc 2004 Share Compensation Plan (the “SCP”). A maximum of 63.5 million ordinary shares are issuable under the SCP, including 10 million authorized for issuance of share awards and restricted units. Share awards and restricted units granted to employees generally vest 25% annually. Options granted to employees generally vest as follows: 25% of the options on the first anniversary of the vesting commencement date and the remaining 75% proportionately each month over the next 36 months. Options granted under the SCP were granted at fair market value. As of April 1, 2011, there were approximately 16 million ordinary shares available for issuance under the SCP.
Seagate Technology plc Stock Purchase Plan (the “ESPP”). There are 40 million ordinary shares authorized to be issued under the ESPP. In no event shall the total number of shares issued under the ESPP exceed 75 million ordinary shares. The ESPP consists of a six-month offering period with a maximum issuance of 1.5 million ordinary shares per offering period. The ESPP permits eligible employees to purchase ordinary shares through payroll deductions generally at 85% of the fair market value of the ordinary shares. As of April 1, 2011 there were approximately 7 million ordinary shares available for issuance under the ESPP.
On September 13, 2010, the Company granted performance-based restricted units to its senior executive officers under the SCP. A single restricted unit represents the right to receive a single ordinary share of the Company. The performance-based restricted units vest after the end of the performance period of three years from the grant date. Vesting is subject to both the continued employment of the participant by the Company and the achievement of certain performance goals established by the Compensation Committee of the Company’s Board of Directors. The performance goals are a three-year average return on invested capital (ROIC) goal and a relative total shareholder return (TSR) goal, which is based on the Company’s ordinary shares measured against a benchmark TSR of a peer group over the same three-year period. A percentage of the performance-based restricted units may vest only if at least the minimum ROIC goal is met regardless of whether the TSR goal is met. The number of stock units to vest will range from 0% to 200% of the targeted 324,310 units. In evaluating the fair value of the performance-based restricted stock unit, the Company used a Monte Carlo simulation on the grant date, taking the TSR goal into consideration, and determined the fair value to be $12.13 per unit. Compensation expense related to the performance-based restricted units is only recorded in a period if it is probable that the ROIC goal will be met, and it is to be recorded at the expected level of achievement. Compensation expense related to these restricted units for the three and nine months ended April 1, 2011 was not material.
i365, Inc. 2010 Equity Incentive Plan (the “i365 Plan”). In October 2010, i365, Inc. (“i365”), a wholly owned subsidiary of the Company, adopted the i365, Inc. 2010 Equity Incentive Plan (the “i365 Plan”). A maximum of 5 million shares of i365’s common stock are issuable under the i365 Plan. Options granted to employees generally vest as follows: 25% of the options on the first anniversary of the vesting commencement date and the remaining 75% proportionately each month over the next 36 months. Options expire ten years from the date of grant.
During the three months ended April 1, 2011, the Company issued options for the purchase of approximately 4 million i365 common shares with an exercise price of $0.71. As of April 1, 2011, there were approximately 1 million shares of common stock available for issuance under the i365 Plan. The compensation expense associated with options granted to date under the i365 Plan is not material.
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
10. Guarantees
Indemnifications to Officers and Directors
The Company has entered into indemnification agreements with the officers and directors of the Company and its subsidiaries (each, an “Indemnitee”). The agreements provide indemnification in addition to any of an Indemnitee’s indemnification rights under the Company’s Articles of Association, applicable law or otherwise, and indemnifies an Indemnitee for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts actually and reasonably incurred by him or her in any action or proceeding, including any action by or in the right of the Company or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of the Company or any of its subsidiaries or of any other entity to which he or she provides services at the Company’s request. However, an Indemnitee shall not be indemnified under the indemnification agreement for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to the Company or the applicable subsidiary of the Company or (ii) Indemnitee’s conscious, intentional or willful failure to act honestly, lawfully and in good faith with a view to the best interests of the Company or the applicable subsidiary of the Company. In addition, the indemnification agreement provides that the Company will advance expenses incurred by an Indemnitee in connection with enforcement of the indemnification agreement or with the investigation, settlement or appeal of any action or proceeding against him or her as to which he or she could be indemnified. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay on behalf of its officers and directors. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying condensed consolidated financial statements with respect to these indemnification obligations.
Intellectual Property Indemnification Obligations
The Company has entered into agreements with customers and suppliers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers and suppliers. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying 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 one to five years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to determine its warranty obligation. In addition, estimated settlements for customer compensatory claims relating to product quality issues, if any, are accrued as warranty expense. Changes in the Company’s product warranty liability during the three and nine months ended April 1, 2011 and April 2, 2010 were as follows:
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
| ||||||||
|
(Dollars in millions) |
|
April 1, |
|
April 2, |
|
April 1, |
|
April 2, |
| ||||
|
Balance, beginning of period |
|
$ |
367 |
|
$ |
401 |
|
$ |
372 |
|
$ |
437 |
|
|
Warranties issued |
|
54 |
|
56 |
|
151 |
|
167 |
| ||||
|
Repairs and replacements |
|
(53 |
) |
(53 |
) |
(152 |
) |
(167 |
) | ||||
|
Changes in liability for pre-existing warranties, including expirations |
|
(7 |
) |
(10 |
) |
(10 |
) |
(43 |
) | ||||
|
Balance, end of period |
|
$ |
361 |
|
$ |
394 |
|
$ |
361 |
|
$ |
394 |
|
SEAGATE TECHNOLOGY PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
11. 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, shares to be purchased under the ESPP, and unvested restricted stock units. 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:
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
| ||||||||
|
(Dollars in millions, except per share data) |
|
April 1, |
|
April 2, |
|
April 1, |
|
April 2, |
| ||||
|
Numerator: |
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
93 |
|
$ |
518 |
|
$ |
392 |
|
$ |
1,230 |
|
|
Adjustment for interest expense on 6.8% Convertible Senior Notes due April 2010 |
|
— |
|
2 |
|
— |
|
4 |
| ||||
|
Net income, as adjusted |
|
$ |
93 |
|
$ |
520 |
|
$ |
392 |
|
$ |
1,234 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Number of shares used in per share calculations: |
|
|
|
|
|
|
|
|
| ||||
|
Weighted-average shares outstanding |
|
437 |
|
493 |
|
459 |
|
495 |
| ||||
|
Weighted-average nonvested shares |
|
— |
|
— |
|
— |
|
— |
| ||||
|
Total shares for purpose of calculating basic net income per share |
|
437 |
|
493 |
|
459 |
|
495 |
| ||||
|
Weighted-average effect of dilutive securities: |
|
|
|
|
|
|
|
|
| ||||
|
Employee equity award plans |
|
16 |
|
23 |
|
16 |
|
20 |
| ||||
|
6.8% Convertible Senior Notes due April 2010 |
|
— |
|
4 |
|
— |
|
4 |
| ||||
|
Dilutive potential shares: |
|
16 |
|
27 |
|
||||||||