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

Strong execution drives higher profitability

/EIN News/ -- BOISE, Idaho, June 29, 2020 (GLOBE NEWSWIRE) -- Micron Technology, Inc. (Nasdaq: MU) today announced results for its third quarter of fiscal 2020, which ended May 28, 2020.

Fiscal Q3 2020 highlights

  • Revenue of $5.44 billion versus $4.80 billion for the prior quarter and $4.79 billion for the same period last year
  • GAAP net income of $803 million, or $0.71 per diluted share
  • Non-GAAP net income of $941 million, or $0.82 per diluted share
  • Operating cash flow of $2.02 billion versus $2.00 billion for the prior quarter and $2.71 billion for the same period last year

“Micron’s exceptional execution in the fiscal third quarter drove strong sequential revenue and EPS growth, despite challenges in the macro environment,” said Micron Technology President and CEO Sanjay Mehrotra. “We are ramping the industry’s most advanced DRAM technology into production and have delivered more than 75% of our NAND volume as high-value solutions, supported by record SSD revenue in the quarter. Our portfolio momentum positions us exceedingly well to leverage the long-term growth across our end markets.”

 
Quarterly Financial Results
(in millions, except per share amounts) GAAP(1)   Non-GAAP(2)
FQ3-20 FQ2-20 FQ3-19   FQ3-20 FQ2-20 FQ3-19
               
Revenue $ 5,438   $ 4,797   $ 4,788     $ 5,438   $ 4,797   $ 4,788  
Gross margin 1,763   1,355   1,828     1,804   1,398   1,884  
percent of revenue 32.4 % 28.2 % 38.2 %   33.2 % 29.1 % 39.3 %
Operating expenses 875   915   818     823   856   774  
Operating income 888   440   1,010     981   542   1,110  
percent of revenue 16.3 % 9.2 % 21.1 %   18.0 % 11.3 % 23.2 %
Net income attributable to Micron 803   405   840     941   517   1,198  
Diluted earnings per share 0.71   0.36   0.74     0.82   0.45   1.05  
                           

Investments in capital expenditures, net(2) were $1.92 billion for the third quarter of fiscal 2020, which resulted in adjusted free cash flows(2) of $101 million. Micron repurchased approximately 929,000 shares of its common stock for $40 million during the third quarter of fiscal 2020 and ended the quarter with cash, marketable investments, and restricted cash of $9.29 billion, for a net cash(2) position of $2.60 billion.

Business Outlook

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

FQ4-20 GAAP(1) Outlook Non-GAAP(2) Outlook
     
Revenue $5.75 billion - $6.25 billion $5.75 billion - $6.25 billion
Gross margin 34.5% ± 1.5% 35.5% ± 1.5%
Operating expenses $900 million ± $25 million $850 million ± $25 million
Interest (income) expense, net $33 million $30 million
Diluted earnings per share $0.88 ± $0.10 $1.05 ± $0.10
     

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 Monday, June 29, 2020 at 2:30 p.m. MT to discuss its third fiscal quarter financial results and provide forward-looking guidance for its fourth 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® and Crucial® — 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 more than 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 and Form 10-Q. 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, adjusted free cash flow, net cash, and business outlook. 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)

  3rd Qtr. 2nd Qtr. 3rd Qtr. Nine Months Ended
  May 28,
2020
February 27,
2020
May 30,
2019
May 28,
2020
May 30,
2019
           
Revenue $ 5,438     $ 4,797     $ 4,788     $ 15,379     $ 18,536  
Cost of goods sold 3,675     3,442     2,960     10,895     9,229  
Gross margin 1,763     1,355     1,828     4,484     9,307  
           
Selling, general, and administrative 216     223     206     650     624  
Research and development 649     681     606     1,970     1,818  
Other operating (income) expense, net 10     11     6     18     139  
Operating income 888     440     1,010     1,846     6,726  
           
Interest income 23     34     52     101     148  
Interest expense (51 )   (46 )   (29 )   (144 )   (89 )
Other non-operating income (expense), net 10     (1 )   (317 )   55     (392 )
  870     427     716     1,858     6,393  
           
Income tax (provision) benefit (68 )   (21 )   135     (144 )   (622 )
Equity in net income (loss) of equity method investees 3     1         6     1  
Net income 805     407     851     1,720     5,772  
           
Net income attributable to noncontrolling interests (2 )   (2 )   (11 )   (21 )   (20 )
Net income attributable to Micron $ 803     $ 405     $ 840     $ 1,699     $ 5,752  
           
Earnings per share          
Basic $ 0.72     $ 0.37     $ 0.76     $ 1.53     $ 5.15  
Diluted 0.71     0.36     0.74     1.50     5.01  
           
Number of shares used in per share calculations          
Basic 1,111     1,111     1,105     1,110     1,117  
Diluted 1,129     1,133     1,129     1,131     1,148  
                             

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

As of May 28,
2020
February 27,
2020
August 29,
2019
       
Assets      
Cash and equivalents $ 8,267     $ 7,118     $ 7,152  
Short-term investments 391     363     803  
Receivables 3,603     3,049     3,195  
Inventories 5,405     5,208     5,118  
Other current assets 233     238     235  
Total current assets 17,899     15,976     16,503  
Long-term marketable investments 577     586     1,164  
Property, plant, and equipment 30,081     29,647     28,240  
Intangible assets 332     332     340  
Deferred tax assets 775     764     837  
Goodwill 1,228     1,228     1,228  
Operating lease right-of-use assets 599     605      
Other noncurrent assets 514     510     575  
Total assets $ 52,005     $ 49,648     $ 48,887  
       
Liabilities and equity      
Accounts payable and accrued expenses $ 5,364     $ 5,077     $ 4,626  
Current debt 330     237     1,310  
Other current liabilities 491     508     454  
Total current liabilities 6,185     5,822     6,390  
Long-term debt 6,356     5,188     4,541  
Noncurrent operating lease liabilities 540     548      
Noncurrent unearned government incentives 553     586     636  
Other noncurrent liabilities 453     383     452  
Total liabilities 14,087     12,527     12,019  
       
Commitments and contingencies      
       
Redeemable noncontrolling interest 98     98     98  
       
Micron shareholders’ equity      
Common stock 119     119     118  
Additional capital 8,764     8,725     8,214  
Retained earnings 32,402     31,602     30,761  
Treasury stock (3,454 )   (3,414 )   (3,221 )
Accumulated other comprehensive income (loss) (11 )   (9 )   9  
Total Micron shareholders’ equity 37,820     37,023     35,881  
Noncontrolling interest in subsidiary         889  
Total equity 37,820     37,023     36,770  
Total liabilities and equity $ 52,005     $ 49,648     $ 48,887  
                       

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

Nine months ended May 28,
2020
May 30,
2019
     
Cash flows from operating activities    
Net income $ 1,720     $ 5,772  
Adjustments to reconcile net income to net cash provided by operating activities    
Depreciation expense and amortization of intangible assets 4,083     4,008  
Amortization of debt discount and other costs 20     39  
Stock-based compensation 239     176  
(Gain) loss on debt prepayments, repurchases, and conversions (40 )   386  
Change in operating assets and liabilities    
Receivables (461 )   2,373  
Inventories (286 )   (1,315 )
Accounts payable and accrued expenses 700     (703 )
Deferred income taxes, net 26     195  
Other 34     25  
Net cash provided by operating activities 6,035     10,956  
     
Cash flows from investing activities    
Expenditures for property, plant, and equipment (5,943 )   (7,752 )
Purchases of available-for-sale securities (793 )   (3,814 )
Proceeds from sales of available-for-sale securities 1,157     1,271  
Proceeds from maturities of available-for-sale securities 636     626  
Proceeds from government incentives 140     668  
Other (48 )   16  
Net cash provided by (used for) investing activities (4,851 )   (8,985 )
     
Cash flows from financing activities    
Repayments of debt (4,286 )   (2,376 )
Acquisition of noncontrolling interest in IMFT (744 )    
Payments to acquire treasury stock (203 )   (2,727 )
Payments on equipment purchase contracts (49 )   (54 )
Proceeds from issuance of debt 5,000     1,800  
Other 147     27  
Net cash provided by (used for) financing activities (135 )   (3,330 )
     
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash (8 )   6  
     
Net increase (decrease) in cash, cash equivalents, and restricted cash 1,041     (1,353 )
Cash, cash equivalents, and restricted cash at beginning of period 7,279     6,587  
Cash, cash equivalents, and restricted cash at end of period $ 8,320     $ 5,234  
               

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 the existing equipment in our NAND wafer fabrication facilities and our research and development facilities from five years to seven years as of the beginning of the first quarter of fiscal 2020. This revision reduced our aggregate depreciation expense by approximately $510 million in the first nine months of fiscal 2020, of which approximately $150 million remained capitalized in inventory as of the end of the third quarter of fiscal 2020. Adjusting for the effect of the reduced amount of depreciation expense remaining in inventory, the revision in estimated useful lives benefited both operating income and net income by approximately $160 million and diluted earnings per share by approximately $0.14 for the third quarter of fiscal 2020, and benefited both operating income and net income by approximately $360 million and diluted earnings per share by approximately $0.32 for the first nine months of fiscal 2020.

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 April 24, 2020, we issued $1.25 billion aggregate principal amount of our 2.497% senior notes due 2023 in a public offering.

On March 13, 2020, we drew the $2.50 billion available under our revolving credit facility and on April 24, 2020, we repaid the $2.50 billion outstanding principal amount under our revolving credit facility. As of May 28, 2020, $2.50 billion was available to us under the revolving credit facility.


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

  3rd Qtr. 2nd Qtr. 3rd Qtr.
  May 28,
2020
February 27,
2020
May 30,
2019
       
GAAP gross margin $ 1,763     $ 1,355     $ 1,828  
Stock-based compensation 34     37     24  
Start-up and preproduction costs         23  
Other 7     6     9  
Non-GAAP gross margin $ 1,804     $ 1,398     $ 1,884  
       
GAAP operating expenses $ 875     $ 915     $ 818  
Stock-based compensation (48 )   (48 )   (34 )
Restructure and asset impairments (4 )   (10 )   (9 )
Other     (1 )   (1 )
Non-GAAP operating expenses $ 823     $ 856     $ 774  
       
GAAP operating income $ 888     $ 440     $ 1,010  
Stock-based compensation 82     85     58  
Start-up and preproduction costs         23  
Restructure and asset impairments 4     10     9  
Other 7     7     10  
Non-GAAP operating income $ 981     $ 542     $ 1,110  
       
GAAP net income attributable to Micron $ 803     $ 405     $ 840  
Stock-based compensation 82     85     58  
Start-up and preproduction costs         23  
Restructure and asset impairments 4     10     9  
Amortization of debt discount and other costs 4     6     10  
(Gain) loss on debt repurchases and conversions 2         317  
Other 7     7     13  
Impact of U.S. income tax reform         (42 )
Estimated tax effects of above, non-cash changes in net deferred income taxes, and assessments of tax exposures 39     4     (30 )
Non-GAAP net income attributable to Micron $ 941     $ 517     $ 1,198  
       
GAAP weighted-average common shares outstanding - Diluted 1,129     1,133     1,129  
Adjustment for stock-based compensation and capped calls 13     11     6  
Non-GAAP weighted-average common shares outstanding - Diluted 1,142     1,144     1,135  
       
GAAP diluted earnings per share $ 0.71     $ 0.36     $ 0.74  
Effects of the above adjustments 0.11     0.09     0.31  
Non-GAAP diluted earnings per share $ 0.82     $ 0.45     $ 1.05  
                       

RECONCILIATION OF GAAP TO NON-GAAP MEASURES, Continued

  3rd Qtr. 2nd Qtr. 3rd Qtr.
  May 28,
2020
February 27,
2020
May 30,
2019
       
GAAP net cash provided by operating activities $ 2,023     $ 2,001     $ 2,711  
Investments in capital expenditures, net      
Expenditures for property, plant, and equipment, net(1) (1,937 )   (2,013 )   (2,345 )
Payments on equipment purchase contracts (20 )   (18 )   (17 )
Amounts funded by partners 35     93     213  
Adjusted free cash flow $ 101     $ 63     $ 562  


(1) Expenditures for property, plant, and equipment, net include proceeds from sales of property, plant, and equipment of $7 million for the third quarter of fiscal 2020, $43 million for the second quarter of fiscal 2020, and $58 million for the third quarter of fiscal 2019.
   


As of May 28,
2020
February 27,
2020
August 29,
2019
       
Cash and short-term investments $ 8,658     $ 7,481     $ 7,955  
Current and noncurrent restricted cash 53     53     127  
Long-term marketable investments 577     586     1,164  
Current and long-term debt (6,686 )   (5,425 )   (5,851 )
Net cash $ 2,602     $ 2,695     $ 3,395  
                       

The tables above reconcile GAAP to non-GAAP measures of gross margin, operating expenses, 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.

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


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

    GAAP Outlook   Adjustments   Non-GAAP Outlook
                 
Revenue $5.75 billion - $6.25 billion           $5.75 billion - $6.25 billion
Gross margin 34.5% ± 1.5%       1%   A   35.5% ± 1.5%
Operating expenses $900 million ± $25 million   $50 million   B   $850 million ± $25 million
Interest (income) expense, net $33 million   $3 million   C   $30 million
Diluted earnings per share(1) $0.88 ± $0.10       $0.17   A, B, C, D   $1.05 ± $0.10
                   


Non-GAAP Adjustments            
               
A Stock-based compensation – cost of goods sold   $ 37  
A Other – cost of goods sold   7  
B Stock-based compensation – sales, general, and administrative   27  
B Stock-based compensation – research and development   23  
C Amortization of debt discount and other costs   3  
D Tax effects of the above items and non-cash changes in net deferred income taxes   99  
              $ 196  
                   


(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

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