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Micron Technology, Inc. Reports Results for the First Quarter of Fiscal 2020

Solid results through challenging environment; well-positioned for anticipated recovery starting in the fiscal third quarter

BOISE, Idaho, Dec. 18, 2019 (GLOBE NEWSWIRE) -- Micron Technology, Inc. (MU) today announced results for its first quarter of fiscal 2020, which ended November 28, 2019.

Fiscal Q1 2020 highlights

  • Revenues of $5.14 billion versus $4.87 billion for the prior quarter and $7.91 billion for the same period last year
  • GAAP net income of $491 million, or $0.43 per diluted share
  • Non-GAAP net income of $548 million, or $0.48 per diluted share
  • Operating cash flow of $2.01 billion versus $2.23 billion for the prior quarter and $4.81 billion for the same period last year

"Micron posted solid first quarter results, delivering good profitability and positive free cash flow. With our strong execution and improving industry conditions, we are optimistic that Micron's fiscal second quarter will be the cyclical bottom for our financial performance," said Micron Technology President and CEO Sanjay Mehrotra. "Our significantly improved competitive position, dramatically stronger product portfolio, structurally higher profitability and investment-grade balance sheet position Micron very well to drive long-term shareholder value."

Quarterly Financial Results
(in millions, except per share amounts) GAAP (1)   Non-GAAP (2)
FQ1-20 FQ4-19 FQ1-19   FQ1-20 FQ4-19 FQ1-19
               
Revenue $ 5,144   $ 4,870   $ 7,913     $ 5,144   $ 4,870   $ 7,913  
Gross margin 1,366   1,395   4,615     1,405   1,491   4,670  
percent of revenue 26.6 % 28.6 % 58.3 %   27.3 % 30.6 % 59.0 %
Operating expenses 848   745   856     811   797   783  
Operating income 518   650   3,759     594   694   3,88   
percent of revenue 10.1 % 13.3 % 47.5 %   11.5 % 14.3 % 49.1 %
Net income attributable to Micron 491   561   3,293     548   637   3,508  
Diluted earnings per share 0.43   0.49   2.81     0.48   0.56   2.97  

Investments in capital expenditures, net of amounts funded by partners, were $1.93 billion for the first quarter of fiscal 2020, which resulted in adjusted free cash flows(3) of $79 million. Micron repurchased an aggregate of 1 million shares of its common stock for $50 million during the first quarter of fiscal 2020 and ended the quarter with cash, marketable investments, and restricted cash of $8.31 billion, for a net cash(4) position of $2.66 billion.

Business Outlook

The following table presents Micron’s guidance for the second quarter of fiscal 2020:

FQ2-20 GAAP (1) Outlook Non-GAAP (2) Outlook
     
Revenue $4.5 billion - $4.8 billion $4.5 billion - $4.8 billion
Gross margin 26% ± 1.5% 27% ± 1.5%
Operating expenses $878 million ± $25 million $825 million ± $25 million
Interest (income) expense, net $5 million $0 million
Diluted earnings per share $0.25 ± $0.06 $0.35 ± $0.06

Further information regarding Micron’s business outlook is included in the prepared remarks and slides, which have been posted at investors.micron.com.

Investor Webcast

Micron will host a conference call on Wednesday, December 18, 2019 at 2:30 p.m. MT to discuss its first fiscal quarter financial results and provide forward-looking guidance for its second fiscal quarter. A live webcast of the call will be available online at investors.micron.com. A webcast replay will be available for one year after the call. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech.

About Micron Technology, Inc.

We are an industry leader in innovative memory and storage solutions. Through our global brands — Micron®, Crucial®, and Ballistix® — our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, 3D XPoint™ memory, and NOR, is transforming how the world uses information to enrich life. Backed by 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, 5G, machine learning, and autonomous vehicles, in key market segments like mobile, data center, client, consumer, industrial, graphics, automotive, and networking. Our common stock is traded on the Nasdaq under the MU symbol. To learn more about Micron Technology, Inc., visit micron.com.

Micron and the Micron orbit logo are trademarks of Micron Technology, Inc. All other trademarks are the property of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements regarding the industry, our strategic position, and financial and operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. Please refer to the documents we file with the Securities and Exchange Commission, specifically our most recent Form 10-K. These documents contain and identify important factors that could cause our actual results to differ materially from those contained in these forward-looking statements. These certain factors can be found at www.micron.com/certainfactors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this release to conform these statements to actual results.

(1) GAAP represents U.S. Generally Accepted Accounting Principles.
(2) Non-GAAP represents GAAP excluding the impact of certain activities, which management excludes in analyzing our operating results and understanding trends in our earnings. Non-GAAP shares used in per share calculations also include the impact of our outstanding capped call transactions and the effect of stock-based compensation.
(3) Adjusted free cash flow consists of cash provided by operating activities less investments in capital expenditures, net of amounts funded by partners.
(4) Net cash consists of cash, marketable investments, and restricted cash less current and long-term debt.


Further information regarding Micron’s use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures are included within this press release.


MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)

  1st Qtr. 4th Qtr. 1st Qtr.
  November 28,
2019
August 29,
2019
November 29,
2018
       
Revenue $ 5,144    $ 4,870    $ 7,913   
Cost of goods sold 3,778    3,475    3,298   
Gross margin 1,366    1,395    4,615   
       
Selling, general, and administrative 211    212    209   
Research and development 640    623    611   
Other operating (income) expense, net (3 ) (90 ) 36   
Operating income 518    650    3,759   
       
Interest income 44    57    38   
Interest expense (47 ) (39 ) (33 )
Other non-operating income (expense), net 46    (13 )  
  561    655    3,773   
       
Income tax (provision) benefit (55 ) (71 ) (477 )
Equity in net income (loss) of equity method investees     —   
Net income 508    586    3,296   
       
Net income attributable to noncontrolling interests (17 ) (25 ) (3 )
Net income attributable to Micron $ 491    $ 561    $ 3,293   
       
Earnings per share      
Basic $ 0.44    $ 0.51    $ 2.91   
Diluted 0.43    0.49    2.81   
       
Number of shares used in per share calculations      
Basic 1,107    1,104    1,133   
Diluted 1,129    1,128    1,174   



MICRON TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

As of November 28,
2019
August 29,
2019
     
Assets    
Cash and equivalents $ 6,969    $ 7,152   
Short-term investments 619    803   
Receivables 3,419    3,195   
Inventories 4,943    5,118   
Other current assets 217    235   
Total current assets 16,167    16,503   
Long-term marketable investments 599    1,164   
Property, plant, and equipment 29,352    28,240   
Intangible assets 333    340   
Deferred tax assets 783    837   
Goodwill 1,228    1,228   
Operating lease right-of-use assets 608    —   
Other noncurrent assets 579    575   
Total assets $ 49,649    $ 48,887   
     
Liabilities and equity    
Accounts payable and accrued expenses $ 5,408    $ 4,626   
Current debt 462    1,310   
Other current liabilities 447    454   
Total current liabilities 6,317    6,390   
Long-term debt 5,188    4,541   
Noncurrent operating lease liabilities 511    —   
Noncurrent unearned government incentives 609    636   
Other noncurrent liabilities 426    452   
Total liabilities 13,051    12,019   
     
Commitments and contingencies    
     
Redeemable noncontrolling interest 98    98   
     
Micron shareholders’ equity    
Common stock 119    118   
Additional capital 8,428    8,214   
Retained earnings 31,218    30,761   
Treasury stock (3,271 ) (3,221 )
Accumulated other comprehensive income    
Total Micron shareholders’ equity 36,500    35,881   
Noncontrolling interest in subsidiary —    889   
Total equity 36,500    36,770   
Total liabilities and equity $ 49,649    $ 48,887   



MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

Three months ended November 28,
2019
November 29,
2018
     
Cash flows from operating activities    
Net income $ 508    $ 3,296   
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation expense and amortization of intangible assets 1,296    1,335   
Amortization of debt discount and other costs 10    18   
Stock-based compensation 72    61   
Gain on debt prepayments, repurchases, and conversions (42 ) (14 )
Change in operating assets and liabilities    
Receivables (208 ) 189   
Inventories 175    (286 )
Accounts payable and accrued expenses 178    (46 )
Deferred income taxes, net 19    192   
Other   65   
Net cash provided by operating activities 2,011    4,810   
     
Cash flows from investing activities    
Expenditures for property, plant, and equipment (1,943 ) (2,700 )
Purchases of available-for-sale securities (407 ) (2,047 )
Proceeds from sales of available-for-sale securities 988    77   
Proceeds from maturities of available-for-sale securities 163    60   
Proceeds from government incentives 22    236   
Other (12 ) (53 )
Net cash provided by (used for) investing activities (1,189 ) (4,427 )
     
Cash flows from financing activities    
Repayments of debt (1,415 ) (577 )
Acquisition of noncontrolling interest in IMFT (744 ) —   
Payments to acquire treasury stock (89 ) (1,836 )
Payments on equipment purchase contracts (11 ) (20 )
Proceeds from issuance of debt 1,250    —   
Other 17    (2 )
Net cash provided by (used for) financing activities (992 ) (2,435 )
     
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash (14 ) (10 )
     
Net decrease in cash, cash equivalents, and restricted cash (184 ) (2,062 )
Cash, cash equivalents, and restricted cash at beginning of period 7,279    6,587   
Cash, cash equivalents, and restricted cash at end of period $ 7,095    $ 4,525   


MICRON TECHNOLOGY, INC.
NOTES
(Unaudited)

Property, Plant, and Equipment

We periodically assess the estimated useful lives of our property, plant, and equipment. Based on our assessment of planned technology node transitions, capital spending, and re-use rates, we revised the estimated useful lives of equipment in our NAND wafer fabrication facilities and our research and development facilities from five years to seven years as of the beginning in the first quarter of fiscal 2020. As a result, we estimate the reduction in non-cash depreciation expense benefited operating income and net income by approximately $74 million and diluted earnings per share by approximately $0.07 for the first quarter of fiscal 2020.

Acquisition of Intel's Interests in IMFT

On October 31, 2019, we purchased Intel’s noncontrolling interests in IMFT and IMFT member debt for $1.25 billion. We recognized a non-operating gain of $72 million for the difference between the $505 million of cash consideration allocated to the extinguishment of IMFT member debt and its $577 million carrying value, and a $160 million adjustment to equity for the difference between the $744 million of cash consideration allocated to the purchase of Intel’s noncontrolling interest and its $904 million carrying value.

Adoption of Lease Accounting Standard

In the first quarter of fiscal 2020, we adopted ASU 2016-02 – Leases (as amended, “ASC 842”), which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of lease payments. In adoption, we applied the modified retrospective method and elected to not recast prior periods. As a result, we recognized $567 million for operating lease liabilities and right-of-use assets and reclassified an additional $66 million of other balances to right-of-use assets to conform to the new presentation requirements of ASC 842.

Debt Activity

On November 18, 2019, we prepaid $519 million of our 2025 Notes and recognized a loss of $18 million in other non-operating income (expense), net. On October 30, 2019, we drew all of the $1.25 billion available under our term loan credit facility. Prior to our acquisition of Intel's interests in IMFT, IMFT repaid Intel $116 million of IMFT member debt in the first quarter of fiscal 2020.


MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

  1st Qtr. 4th Qtr. 1st Qtr.
  November 28,
2019
August 29,
2019
November 29,
2018
       
GAAP gross margin $ 1,366    $ 1,395    $ 4,615   
Stock-based compensation 31    29    26   
Start-up and preproduction costs —    12     
Employee severance   47    13   
Other      
Non-GAAP gross margin $ 1,405    $ 1,491    $ 4,670   
       
GAAP operating expenses $ 848    $ 745    $ 856   
Stock-based compensation (41 ) (38 ) (35 )
Employee severance —    (32 ) (7 )
Restructure and asset impairments   122    (30 )
Other —    —    (1 )
Non-GAAP operating expenses $ 811    $ 797    $ 783   
       
GAAP operating income $ 518    $ 650    $ 3,759   
Stock-based compensation 72    67    61   
Start-up and preproduction costs —    12     
Employee severance   79    20   
Restructure and asset impairments (4 ) (122 ) 30   
Other      
Non-GAAP operating income $ 594    $ 694    $ 3,887   
       
GAAP net income attributable to Micron $ 491    $ 561    $ 3,293   
Stock-based compensation 72    67    61   
Start-up and preproduction costs —    12     
Employee severance   79    20   
Restructure and asset impairments (4 ) (122 ) 30   
Amortization of debt discount and other costs 10    10    18   
(Gain) loss on debt repurchases and conversions (42 ) 10    (14 )
Other   13    15   
Impact of U.S. income tax reform —    —    47   
Estimated tax effects of above, non-cash changes in net deferred income taxes, and assessments of tax exposures 13      30   
Non-GAAP net income attributable to Micron $ 548    $ 637    $ 3,508   
       
GAAP weighted-average common shares outstanding - Diluted 1,129    1,128    1,174   
Adjustment for capped calls and stock-based compensation      
Non-GAAP weighted-average common shares outstanding - Diluted 1,138    1,134    1,179   
       
GAAP diluted earnings per share $ 0.43    $ 0.49    $ 2.81   
Effects of the above adjustments 0.05    0.07    0.16   
Non-GAAP diluted earnings per share $ 0.48    $ 0.56    $ 2.97   


RECONCILIATION OF GAAP TO NON-GAAP MEASURES, Continued

  1st Qtr. 4th Qtr. 1st Qtr.
  November 28,
2019
August 29,
2019
November 29,
2018
       
GAAP net cash provided by operating activities $ 2,011    $ 2,233    $ 4,810   
Expenditures for property, plant, and equipment (1,943 ) (2,028 ) (2,700 )
Payments on equipment purchase contracts (11 ) (21 ) (20 )
Amounts funded by partners 22    79    236   
Adjusted free cash flow $ 79    $ 263    $ 2,326   


As of November 28,
2019
August 29,
2019
     
Cash and short-term investments $ 7,588    $ 7,955   
Current and noncurrent restricted cash 126    127   
Long-term marketable investments 599    1,164   
Current and long-term debt (5,650 ) (5,851 )
Net cash $ 2,663    $ 3,395   

The tables above reconcile GAAP to non-GAAP measures of gross margin, operating income, net income attributable to Micron, diluted shares, diluted earnings per share, adjusted free cash flow, and net cash. The non-GAAP adjustments above may or may not be infrequent or nonrecurring in nature, but are a result of periodic or non-core operating activities. We believe this non-GAAP information is helpful in understanding trends and in analyzing our operating results and earnings. We are providing this information to investors to assist in performing analysis of our operating results. When evaluating performance and making decisions on how to allocate our resources, management uses this non-GAAP information and believes investors should have access to similar data when making their investment decisions. We believe these non-GAAP financial measures increase transparency by providing investors with useful supplemental information about the financial performance of our business, enabling enhanced comparison of our operating results between periods and with peer companies. The presentation of these adjusted amounts varies from numbers presented in accordance with U.S. GAAP and therefore may not be comparable to amounts reported by other companies. Our management excludes the following items in analyzing our operating results and understanding trends in our earnings:

  • Stock-based compensation;
  • Flow-through of business acquisition-related inventory adjustments;
  • Acquisition-related costs;
  • Start-up and preproduction costs;
  • Employee severance;
  • Restructure and asset impairments;
  • Amortization of debt discount and other costs, including the accretion of non-cash interest expense associated with our convertible debt and MMJ creditor debt;
  • Gains and losses from debt repurchases and conversions;
  • Gains and losses from business acquisition activities;
  • Impact of U.S. income tax reform for the one-time transition tax, release of U.S. valuation allowance, and remeasurement of net deferred taxes reflecting lower U.S. corporate tax rates; and
  • The estimated tax effects of above, non-cash changes in net deferred income taxes, and assessments of tax exposures.

Our outstanding capped call transactions are anti-dilutive in GAAP earnings per share but are expected to mitigate the dilutive effect of our convertible notes. In periods with non-GAAP income attributable to Micron, non-GAAP diluted shares include the impact of capped calls based on the average share price for the period the capped calls are outstanding. Non-GAAP diluted shares are also adjusted for the impact of additional shares resulting from the exclusion of stock-based compensation from non-GAAP income.


MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
(In millions, except per share amounts)

    GAAP Outlook   Adjustments   Non-GAAP Outlook
                 
Revenue $4.5 billion - $4.8 billion   —        $4.5 billion - $4.8 billion
Gross margin 26% ± 1.5%   1%   A   27% ± 1.5%
Operating expenses $878 million ± $25 million   $53 million   B   $825 million ± $25 million
Interest (income) expense, net $5 million   $5 million   C   $0 million
Diluted earnings per share (1) $0.25 ± $0.06   $0.10   A, B, C, D   $0.35 ± $0.06


Non-GAAP Adjustments 
   
A Stock-based compensation – cost of goods sold $ 32   
A Other – cost of goods sold  
B Stock-based compensation – sales, general, and administrative 20   
B Stock-based compensation – research and development 21   
B Other - operating expenses 12   
C Amortization of debt discount and other costs  
D Tax effects of the above items and non-cash changes in net deferred income taxes 14   
    $ 111   

(1)   GAAP earnings per share based on approximately 1.13 billion diluted shares and non-GAAP earnings per share based on approximately 1.14 billion diluted shares.

The tables above reconcile our GAAP to non-GAAP guidance based on the current outlook. The guidance does not incorporate the impact of any potential business combinations, divestitures, restructuring activities, balance sheet valuation adjustments, strategic investments, financing transactions, and other significant transactions. The timing and impact of such items are dependent on future events that may be uncertain or outside of our control.

Contacts:

Farhan Ahmad
Investor Relations
farhanahmad@micron.com
(408) 834-1927

Erica Rodriguez Pompen
Media Relations
epompen@micron.com
(408) 834-1873