Seagate Technology ends fiscal first quarter with $3.8 billion of debt

By Lisa Kerner

Charlotte, N.C., Oct. 27 – Seagate Technology plc repurchased $110 million of debt in its first quarter of fiscal 2015, according to chairman and chief executive officer Steve Luczo.

“The debt that was repurchased was our highest-coupon debt, which works towards lowering our overall debt service costs and maintaining our investment-grade status,” Luczo said during the company’s earnings conference call on Monday.

The company is rated investment grade by Standard & Poor’s and Fitch Ratings and speculative grade by Moody’s Investors Service.

Additionally, the company repurchased about 3 million ordinary shares for $183 million during the quarter.

Going forward, Luczo said Seagate will be “opportunistic” in its debt and equity repurchases.

According to the earnings presentation, during the quarter Seagate achieved revenue of $3.8 billion, generated operating cash of $602 million and free cash flow of $430 million and returned a total of $323 million to shareholders through dividends and share redemptions.

Seagate ended its fiscal first quarter on Oct. 3 with cash, cash equivalents and short-term investments of $2.2 billion and debt of $3.8 billion.

This compares with $2.5 billion and $2.8 billion, respectively, for the year-ago period, according to the earnings news release.

Long-term debt-to-LTM adjusted EBITDA is 1.4 times, compared with 1.44 times for the same period last year, according to the earnings presentation.

Seagate’s senior notes have an average interest rate of 5.1%.

“We achieved strong financial results in the first fiscal quarter, driven by consistent execution and better-than-anticipated market demand for our PC and cloud storage products,” Luczo said.

“We remain confident in our cash flow generation and the opportunities ahead for Seagate as evidenced by our recently announced target annual dividend increase of 26% to $2.16.”

Seagate, based in Dublin and with an office in Cupertino, Calif., designs, manufactures, markets and sells hard disk drives.

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