Seagate Technology Holdings plc
For the period ended Sep 27, 2024. Filed Oct 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 27, 2024 · Filed Oct 25, 2024
STX$460.99-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-29; filed 2024-04-26.
0001137789-24-000034
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-27; filed 2024-10-25.
0001137789-24-000182
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 81 current paragraphs.
37 unchanged; 32 reworded; 10 added; 31 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 8 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Recent Developments, Economic Conditions and Challenges
Current report
During the September 2024 quarter, revenue growth was driven by continued improvement in cloud customer demand for our high capacity nearline drives along with an increase in demand from the enterprise and OEM markets. We continue to exercise cost discipline and implement pricing actions to improve operational efficiency and profitability. The macroeconomic environment remains dynamic, which may impact our business and results of operations. However, we expect our HDD storage business to benefit from further growth in data demand, including potential demand driven by the adoption of Generative AI applications.
Current report
Gross margin for the September 2024 quarter increased compared to the June 2024 quarter, primarily driven by favorable product mix and an improved pricing environment.
Current report
Product development expenses increased by $10 million in the September 2024 quarter compared to the September 2023 quarter primarily due to an $11 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter and temporary salary reductions in the September 2023 quarter, a $1 million increase in equipment expense, a $1 million increase in travel expense and a $1 million increase in lease expense, partially offset by a $5 million decrease in materials expense.
Current report
Marketing and administrative expenses increased by $24 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $20 million increase in compensation and other employee benefits as a result of the variable compensation expense in the September 2024 quarter and temporary salary reductions in the September 2023 quarterand a $2 million increase in travel expense.
Current report
For the three months ended September 27, 2024 and September 29, 2023, we recorded income tax expense of $11 million and $37 million, respectively. For further discussion, refer to“Part I, Item 1. Financial Statements—Note 4. Income Taxes”.
Current report
•an increase of $37 million in accrued employee compensation, primarily due to an increase in our variable compensation expense; partially offset by
Current report
•an increase of $144 million in inventories, primarily due to an increase in purchased materials.
Current report
As of September 27, 2024, the Credit Agreement includes two financial covenants: (1) interest coverage ratio and (2) net leverage ratio. We continue to evaluate our debt portfolio and structure to comply with our financial debt covenants. As of September 27, 2024, we were in compliance with all of the covenants under our debt agreements. Refer to “Part I, Item 1. Financial Statements—Note 3. Debt” for more details.
Current report
As of September 27, 2024, cash and cash equivalents held by our subsidiaries was $1.2 billion. This amount is potentially subject to taxation in Singapore upon repatriation by means of an intercompany dividend into our parent company, unless certain exemption is given, or a special approval is granted by the Ministry of Finance in Singapore. However, it is our intent to indefinitely reinvest earnings of subsidiaries in excess of the amount paid as dividends to shareholders. Our current plans do not demonstrate a need to repatriate such excess earnings. Should funds be needed in the parent company and should we be unable to fund parent company activities through means other than a taxable repatriation, we would be required to accrue and pay taxes on such dividend.
Removed paragraphs (31)
Previous report
Recent Developments, Economic Conditionsand Challenges
Previous report
During the March 2024 quarter, we experienced ongoing recovery within the cloud market, reflecting continued progress in customer inventory adjustments which we believe are now mostly complete, along with an improvement in end-market demand. We continued to execute cost discipline and implement pricing actions to improve operational efficiency and profitability. We believe that we are in the early stage of an industry-wide demand recovery, however we expect the macroeconomic environment to remain dynamic and continue to impact our business and results of operations.
Previous report
As described in “Part I, Item 1. Financial Statements —Note 14. Subsequent Events”, on April 23, 2024, we sold certain intellectual property, equipment and other assets related to the design, development and manufacture of our System-on-Chip products to Avago Technologies International Sales Pte. Limited, a subsidiary of Broadcom Inc., for $600 million.
Previous report
Revenue for the three and nine months ended March 29, 2024 decreased by $205 million and $1.1 billion from the three and nine months ended March 31, 2023, respectively, primarily due to a decrease in exabytes shipped due to lower broad-based market demand, slightly offset by an increase in revenue as a result of favorable pricing actions.
Previous report
Gross margin for the March 2024 quarter increased compared to the December 2023 quarter, primarily driven by favorable pricing actions undertaken by the Company and, to a lesser extent, favorable product mix, partially offset by a $7 million increase in factory underutilization charges due to the transition of some production lines to new products.
Previous report
Gross margin for the nine months ended March 29, 2024 increased compared to the nine months ended March 31, 2023 primarily driven by favorable pricing actions undertaken by the Company, a $72 million reduction in factory underutilization charges which included the decrease in depreciation expense due to the extension of useful lives of certain manufacturing equipment, a decrease of $44 million in accelerated depreciation expense for certain capital equipment, and pandemic-related lockdown in one of our factories in fiscal year 2023 that did not recur, partially offset by an increase of $5 million in order cancellation fees and less favorable product mix.
Previous report
Product development expenses decreased by $27 million in the March 2024 quarter compared to the March 2023 quarter, primarily due to a $23 million decrease in compensation and other employee benefits as a result of workforce reductions, a $9 million decrease in depreciation expense, and a $2 million decrease in materials expense, partially offset by a $7 million increase in lease expense as we sold and leased back certain properties.
Previous report
Product development expenses decreased by $129 million for the nine months ended March 29, 2024 compared to the nine months ended March 31, 2023, primarily due to a $98 million decrease in compensation and other employee benefits as a result of workforce and temporary salary reductions, a $46 million decrease in depreciation expense and a $4 million decrease in materials expense, partially offset by a $19 million increase in lease expense as we sold and leased back certain properties.
Previous report
Marketing and administrative expenses decreased by $7 million in the March 2024 quarter compared to the March 2023 quarter primarily due to a $5 million decrease in compensation and other employee benefits as a result of workforce reductions, a $3 million decrease in advertising costs, a $2 million decrease in travel expenses and a $2 million decrease in outside services expense, partially offset by a $5 million increase in legal cost.
Previous report
Marketing and administrative expenses decreased by $48 million for thenine months ended March 29, 2024 compared to thenine months ended March 31, 2023 primarily due to a $31 million decrease in compensation and other employee benefits as a result of workforce and temporary salary reductions, a $12 million decrease in advertising costs, a $6 million decrease in travel expenses, a $6 million decrease in outside services expense and a $2 million increase in tax credit, partially offset by a $7 million recovery in the December 2022 quarter of an accounts receivable previously written off in prior years and a $2 million increase in depreciation expenses.
Previous report
Restructuring and other, net. Restructuring and other, net for the March 2024 quarter was $2 million. For the nine months ended March 29, 2024, we recorded a benefit of $27 million primarily related to the net gain of $30 million from the sale and leaseback transaction during the December 2023 quarter.
Previous report
We recorded income tax provisions of $33 million and $85 million for the three and nine months ended March 29, 2024, respectively. The discrete items in the income tax provision were not material for the three months ended March 29, 2024. The income tax provision for the nine months ended March 29, 2024 included approximately $42 million of net discrete expense, primarily associated with an increase in our valuation allowance to account for the impacts of new tax guidance which clarifies the treatment of specified research and experimental expenditures issued by the U.S. Treasury Department under Internal Revenue Code Section 174 during the September 2023 quarter, partially offset by net excess tax benefits related to share-based compensation expense. Additional guidance issued by the U.S. Treasury Department in December 2023 did not result in any impacts. We will have income taxes payable based on profits generated in various jurisdictions.
Previous report
During the nine months ended March 29, 2024, our unrecognized tax benefits, excluding interest and penalties decreased by approximately $6 million to $110 million, substantially all of which would impact the effective tax rate, if recognized, subject to certain future valuation allowance reversals. We do not expect material changes to our unrecognized tax benefits in the next twelve months beginning March 30, 2024.
Previous report
We recorded income tax provisions of $33 million and $26 million for the three and nine months ended March 31, 2023, respectively. The discrete items in the income tax provisions were not material for the three and nine months ended March 31, 2023.
Previous report
During the third quarter of fiscal year 2024, we established Singapore as our principal executive offices. Our income tax provisions recorded for the three and nine months ended March 29, 2024 differed from the provisions for income taxes that would be derived by applying the Singaporean statutory rate of 17% to income before income taxes, primarily due to the net effect of (i) earnings generated in jurisdictions that are subject to tax incentive programs, (ii) non-Singaporean earnings taxed at different rates, and (iii) changes in valuation allowance.
Previous report
Our income tax provisions recorded for the three and nine months ended March 31, 2023 differed from the provisions 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 tax benefits related to (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) current year generation of research credits.
Previous report
•an increase of $108 million in accounts payable, primarily due to timing of payments; and
Previous report
•an increase of $25 million cash proceeds received from the settlement of certain interest rate swap agreements; partially offset by
Previous report
•an increase of $51 million in inventories, net, primarily due to an increase in raw materials;
Previous report
•a decrease of $50 million in accrued expenses primarily due to restructuring activities and BIS settlement penalty payment; and
Previous report
•a decrease of $25 million in accrued employee compensation, primarily due to timing of payments.
Previous report
•$1.3 billion redemption of term loans;
Previous report
•$438 million in dividend payments;
Previous report
•$128 million debt fees relating to issuance of long-term debt and capped call transaction; and
Previous report
•$1.5 billion in net proceeds from the issuance of 2028 Notes and
Previous report
As of March 29, 2024, the existing Credit Agreement includes two financial covenants: (1) interest coverage ratio and (2) total net leverage ratio. The interest coverage ratio and total net leverage ratio covenants did not apply for the fiscal quarter ended March 29, 2024. Refer to “Part I, Item 1. Financial Statements—Note 3. Debt”for details of the financial covenants which will apply for the fiscal quarter ending June 28, 2024 and thereafter.
Previous report
In addition, as described in “Part I, Item 1. Financial Statements—Note 14. Subsequent Events”, on April 23, 2024, we sold certain intellectual property, equipment and other assets related to the design, development and manufacture of our SoC products for $600 million.
Previous report
On September 13, 2023, we issued the 2028 Notes of $1.5 billion and repaid Term Loans A1, A2 and A3 of $1.3 billion.
Previous report
Restructuring
Previous report
During the nine months ended March 29, 2024, we made cash payments of $115 million related to the workforce reduction costs under the restructuring plans.
Previous report
As of March 29, 2024, the future cash payments related to our remaining active restructuring plans were $7 million, which is expected to be paid within one year.
Reworded paragraphs (32)
Previous wording
The following is a discussion of the financial condition, changes in financial condition and results of operations for our fiscal quarters ended March 29, 2024, December 29, 2023 and March 31, 2023, referred to herein as the “March 2024 quarter”, the “December 2023 quarter” and the “March 2023 quarter”, respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The March 2024 quarter, December 2023 quarter and March 2023 quarter were each 13 weeks.
Current wording
The following is a discussion of the Company’s financial condition, changes in financial condition and results of operations for the fiscal quarters ended September 27, 2024, June 28, 2024 and September 29, 2023, referred to herein as the “September 2024 quarter”, the “June 2024 quarter” and the “September 2023 quarter”, respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The September 2024 quarter, June 2024 quarter and September 2023 quarter were each 13 weeks.
Previous wording
•Liquidity and Capital Resources. Analysis of changes in our balance sheet and cash flows, and discussion of our financial condition including potential sources of liquidity, material cash requirements and their general purpose.
Current wording
•Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows and discussion of our financial condition, including potential sources of liquidity, material cash requirements and their general purpose.
Previous wording
•Critical Accounting Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
Current wording
•Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
Previous wording
During the March 2024 quarter, we shipped 99 exabytes of HDD storage capacity. We generated revenue of approximately $1.7 billion with a gross margin of 26%. Ouroperating cash flow was $188 million and we paid $147 million in divi dends.
Current wording
During the September 2024 quarter, we shipped 138 exabytes of HDD storage capacity. We generated revenue of approxima tely $2.2 billion with a gross margin of 33%. Our operating cash flow was $95 million and we paid $147 million in dividends.
Previous wording
We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollars and as a percentage of revenue:
Current wording
We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollar amounts and as a percentage of revenue:
Previous wording
(1) Revenue is attributed to geography based on bill from locations.
Current wording
(1) Revenue is attributed to geography based on the bill from location.
Previous wording
Revenue in the March 2024 quarter increased by $100 million compared to the December 2023 quarter, primarily due to an increase in mass capacity exabytes shipped, as we experienced ongoing recovery within the cloud market and favorable pricing actions undertaken by the Company, partially offset by seasonal decreases in legacy market exabytes shipped.
Current wording
Revenue in the September 2024 quarter increased by $281 million compared to the June 2024 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.
Previous wording
Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 15%of gross revenue for the March 2024 quarter, 18% for the December 2023 quarter and 16% for the March 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.
Current wording
Wemaintain various sales incentive programs such as channel and OEM rebates. Sales incentive programs were approximately 13%of gross revenue for the September 2024 quarter, 12% for the June 2024 quarter and 20% for the September 2023 quarter. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.
Previous wording
Gross margin for the March 2024 quarter increased compared to the March 2023 quarter, primarily driven by favorable pricing actions undertaken by the Company, a $30 million decrease in depreciation expense due to the extension of useful lives of certain manufacturing equipment, which was partially reflected in the reduction in factory underutilization charges, and $18 million of accelerated depreciation expense for certain capital equipment in March 2023 quarter that did not recur.
Current wording
Gross margin for the September 2024 quarter increased compared to the September 2023 quarter, primarily driven by favorable product mix and pricing actions undertaken by the Company, as well as $118 million of order cancellation fees, $59 million of factory underutilization charges, and $13 million of accelerated depreciation expense for certain capital equipment in the September 2023 quarter that did not recur.
Previous wording
In the March 2024 quarter, total warranty cost was 0.5% of revenue and includeda favorable change in estimates of prior warranty accruals of 0.2% of revenue primarily due to decreases to our estimated future product return rates. Warranty cost related to new shipments was 0.8%, 0.9% and 0.8% of revenue for the March 2024 quarter, December 2023 quarter and March 2023 quarter, respectively.
Current wording
Warranty cost related to new shipments was 0.7%, 0.7% and 0.9% of revenue for the September 2024 quarter, June 2024 quarter and September 2023 quarter, respectively.
Previous wording
Product development expense. Product development expenses increased by $3 million in the March 2024 quarter compared to the December 2023 quarter, primarily due to a $6 million increase in compensation and other employee benefits as a result of completion of temporary salary reductions and a $2 million increase in lease expense as we sold and leased back certain properties, partially offset by a $5 million decrease in materials expense.
Current wording
Product Development Expense. Product development expenses increased by $23 million in the September 2024 quarter compared to the June 2024 quarter primarily due to a $19 million increase in compensation and other employee benefits as a result of the variable compensation expense recognized in the September 2024 quarter, and a $3 million increase in materials expense.
Previous wording
Marketing and administrative expense. Marketing and administrative expenses increased by $8 million in the March 2024 quarter compared to the December 2023 quarter primarily due to a $5 million increase in compensation and other employee benefits due to the completion of the temporary salary reduction and a $3 million increase in legal costs.
Current wording
Marketing and Administrative Expense. Marketing and administrative expenses decreased by $2 million in the September 2024 quarter compared to the June 2024 quarter primarily due to an $8 million decrease in outside services expense, partially offset by a $5 million net increase in compensation and other employee benefits due to the variable compensation expense recognized in the September 2024 quarter.
Previous wording
Other expense, net. Other expense decreased by $43 million for the March 2024 quarter compared to the December 2023 quarter primarily due to $43 million of net loss from equity investments in the December 2023 quarter that did not recur.
Current wording
Other (expense) income, net. Other expense, net increased by $311 million in the September 2024 quarter compared to the June 2024 quarter primarily due to a $313 million gain from the sale of System-on-Chip operations in the June 2024 quarter, partially offset by a $7 million decrease in net loss from equity investments.
Previous wording
Other expense increased by $188 million for the nine months ended March 29, 2024 compared to the nine months ended March 31, 2023 primarily due to $207 million of net gain recognized from the early redemption of debt in the nine months ended March 31, 2023, a $43 million net loss from equity investments, a $29 million net loss recognized from early redemption of debt and a $17 million net increase in interest expense in the nine months ended March 29, 2024. The increase is partially offset by $104 million of net gain recognized from the termination of interest rate swaps associated with the repayment of term loans in the nine months ended March 29, 2024.
Current wording
Other expense, net increased by $69 million in the September 2024 quarter compared to the September 2023 quarter primarily due to a $104 million net gain recognized from the termination of interest rate swaps associated with the repayment of term loans in the September 2023 quarter, partially offset by a $29 million net loss recognized from early redemption of debt in the September 2023 quarter and a $5 million increase in interest income in the September 2024 quarter.
Previous wording
The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash will continue to be sufficient to fund our operations and meet our cash requirements for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs and capital expenditures, will allow us to manage the ongoing impacts of macroeconomic headwinds including higher inflationary pressures, inventory adjustments by our customers and the overall market demand disruptions on our business operations for the foreseeable future. However, some challenges to our industry and to our business continue to remain uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the global economic factors.
Current wording
The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash will continue to be sufficient to fund our operations and meet our cash requirements for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs and capital expenditures, will allow us to manage the ongoing impact of market demand disruptions on our business operations for the foreseeable future. However, some challenges to our industry and to our business continue to remain uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the global economic factors.
Previous wording
Our cash and cash equivalents as of March 29, 2024 increasedby $9 million from June 30, 2023 primarily as a result of net cash of $484 million provided by operating activities and net proceeds of $1.5 billion from the issuance of exchangeable senior notes, partially offset by $1.3 billion redemption of term loans, $438 million dividends paid to our shareholders, $128 million debt fees relating to issuance of long-term exchangeable debt and capped call transaction and $200 million payments for capital expenditures.
Current wording
Our cash and cash equivalents as of September 27, 2024 decreased by $119 million from June 28, 2024 primarily as a result of $147 million dividends paid to our shareholders and $68 million payments for capital expenditures, partially offset by net cash of $95 million provided by operating activities.
Previous wording
Cash provided by operating activities for the nine months ended March 29, 2024 was $484 million and includes the effects of net loss adjusted for non-cash items including depreciation, amortization, share-based compensation and:
Current wording
Cash provided by operating activities for thethree months ended September 27, 2024 was $95 million and includes the effects of net income adjusted for non-cash items including depreciation, amortization, share-based compensation, and:
Previous wording
•a decrease of $289 million in accounts receivable, primarily due to lower revenue and higher accounts receivable factoring;
Current wording
•an increase of $199 million in accounts receivable, primarily due to increased revenue; and
Previous wording
Net cash used in investing activities for the nine months ended March 29, 2024 was $157 million, primarily attributable to payments of $200 million for the purchase of property, equipment and leasehold improvements, partially offset by proceeds of $38 million from the sale of assets which primarily included $34 million from the sale and leaseback transaction during the December 2023 quarter, as well as proceeds of $5 million from the sale of investments in the March 2024 quarter.
Current wording
Net cash used in investing activities for thethree months ended September 27, 2024 was $68 million, attributable to payments for the purchase of property, equipment and leasehold improvements.
Previous wording
Net cash used in financing activities of $319 million for the nine months ended March 29, 2024 was primarily attributable to the following activities:
Current wording
Net cash used in financing activities of $146 million for thethree months ended September 27, 2024 was primarily attributable to the following activities:
Previous wording
•$31 million taxes paid related to net share settlement of equity awards; partially offset by
Current wording
•$28 million taxes paid related to net share settlement of equity awards; partially offset by
Previous wording
•$66 million proceeds from the issuance of ordinary shares under employee stock purchase plans.
Current wording
•$29 million in proceeds from the issuance of ordinary shares under employee stock plans.
Previous wording
Our primary sources of liquidity as of March 29, 2024 consist of: (1) approximately $795 million in cash and cash equivalents, (2) cash we expect to generate from operations and (3) $1.5 billion available for borrowing under the revolving credit facility of the Credit Agreement (the “Revolving Credit Facility”).
Current wording
Our primary sources of liquidity as of September 27, 2024, consist of: (1) approximately $1.2 billion in cash and cash equivalents, (2) cash we expect to generate from operations and (3) $1.5 billion available for borrowing under our senior unsecured revolving credit facility (“Revolving Credit Facility”), which is part of our Credit Agreement (as defined below).
Previous wording
For information on risks and factors that could impact our ability to fund our operations and meet our cash requirements, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.
Current wording
For additional information on risks and factors that could impact our ability to fund our operations and meet our cash requirements, among others, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.
Previous wording
Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness and to fund our quarterly dividend and any future strategic investments. As of March 29, 2024, our contractual cash requirements have not changed materially since our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, except for the purchase obligations and long-term debt obligations.
Current wording
Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness, and to fund our quarterly dividend and any future strategic investments. As of September 27, 2024, our contractual cash requirements have not changed materially outside of the normal course of business since our fiscal year ended June 28, 2024.
Previous wording
Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of March 29, 2024, we had unconditional purchase obligations of approximately $3.4 billion primarily related to purchases of inventory components with our suppliers. We expect $926 million of these short-term commitments to be paid within one year and expect $2.5 billion of these long-term commitments to be paid thereafter.
Current wording
Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms. From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. As of September 27, 2024, we had unconditional purchase obligations of approximately $862 million, primarily related to purchases of inventory components with our suppliers. We expect $809 million of these commitments to be paid within one year. In addition, we also had certain long-term, market share-based, non-cancellable inventory purchase commitments as of September 27, 2024.
Previous wording
We recorded order cancellation fees to terminate certain purchase commitments related to the purchase of inventory components and equi pment. As of March 29, 2024, cumulative unpaid order cancellation fees on the Condensed Consolidated Balance Sheets were $134 million, with $121 million in Accrued expenses and $13 million in Accounts payable, all of which is expected to be paid within one year In certain instances, our unpaid order cancellation fees may change based on the expected timing or ongoing negotiations with our suppliers.
Current wording
We recorded order cancellation fees to terminate certain purchase commitments related to the purchase of inventory components and equi pment. As of September 27, 2024, the cumulative unpaid order cancellation fees on the Condensed Consolidated Balance Sheets were $58 million, with $32 million in Accounts payable and $26 million in Accrued expenses, all of which is expected to be paid within one year. In certain instances, our unpaid order cancellation fees may change based on the expected timing or ongoing negotiations with our suppliers.
Previous wording
As of March 29, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million will mature within one year. As of March 29, 2024, future interest payments on this outstanding debt are estimated to be approximately $2.1 billion, of which $323 million is expected to be paid within one year. From time to time, we may repurchase any of our outstanding senior notes in open market or privately negotiated purchases or we may repurchase outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.
Current wording
As of September 27, 2024, the future principal payment obligation on our long-term debt was $5.7 billion, of which $479 million will mature within one year. As of September 27, 2024, future interest payments on this outstanding debt is estimated to be approximately $1.9 billion, of which $312 million is expected to be paid within one year. From time to time, we may repurchase, redeem or otherwise extinguish any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase or redeem outstanding senior notes pursuant to the terms of the applicable indenture. Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.
Previous wording
We accrued a settlement penalty of $300 million in the quarter ended March 31, 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of$15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $210 million thereafter. Refer to “Item 1. Financial Statements—Note 12. Legal, Environmental and Other Contingencies” for more details.
Current wording
We accrued a settlement penalty of $300 million for fiscal year 2023, related to BIS’ allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023. As part of the Settlement Agreement with BIS, quarterly payments of $15 million are made over the course of five years beginning October 31, 2023, of which $60 million is expected to be paid within one year and $180 million thereafter. Refer to “Item 1. Financial Statements—Note 11. Legal, Environmental and Other Contingencies” for more details.
Previous wording
During the March 2024 quarter, we declared dividends of $0.70 per share, totaling $147 million, which was paid on April 4, 2024. On April 23, 2024, we declared a quarterly cash dividend of $0.70 per share, payable on July 5, 2024 to shareholders of record at the close of business on June 20, 2024. Our ability to pay dividends in the future will be subject to, among other things, general business conditions within the data storage industry, our financial results, the impact of paying dividends on our credit ratings and legal and contractual restrictions on the payment of dividends by our subsidiaries to us or by us to our ordinary shareholders, including restrictions imposed by covenants on our debt instruments.
Current wording
On October 22, 2024, our Board of Directors declared a quarterly cash dividend of $0.72 per share, which will be payable on January 6, 2025 to shareholders of record as of the close of business on December 15, 2024. Our ability to pay dividends in the future will be subject to, among other things, general business conditions within the data storage industry, our financial results, the impact of paying dividends on our credit ratings and legal and contractual restrictions on the payment of dividends by our subsidiaries to us or by us to our ordinary shareholders, including restrictions imposed by covenants on our debt instruments.
Previous wording
For fiscal year 2024, we expect capital expenditures to be lower than fiscal year 2023. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.
Current wording
For fiscal year 2025, we expect capital expendituresto be higher than fiscal year 2024. We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.
Previous wording
See “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.
Current wording
See “Item 8. Financial Statements and Supplementary Data—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Revenue in the September 2024 quarter increased by $714 million compared to the September 2023 quarter, primarily due to an increase in mass capacity exabytes shipped as we experienced improved demand for our nearline products, and favorable pricing actions undertaken by the Company.
Current report — wording carried from elsewhere
•$147 million in dividends paid to our shareholders; and
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
BIS Settlement Penalty. BIS settlement penalty for the three and nine months ended March 31, 2023 was $300 million related to BIS allegations of violations of the U.S. EAR, which were subsequently resolved by the Settlement Agreement in April 2023.