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

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

Fiscal Q1 2020 highlights

"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)
FQ1-20FQ4-19FQ1-19 FQ1-20FQ4-19FQ1-19
        
Revenue$5,144 $4,870 $7,913  $5,144 $4,870 $7,913 
Gross margin1,366 1,395 4,615  1,405 1,491 4,670 
percent of revenue26.6%28.6%58.3% 27.3%30.6%59.0%
Operating expenses848 745 856  811 797 783 
Operating income518 650 3,759  594 694 3,88  
percent of revenue10.1%13.3%47.5% 11.5%14.3%49.1%
Net income attributable to Micron491 561 3,293  548 637 3,508 
Diluted earnings per share0.43 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:

FQ2-20GAAP (1) OutlookNon-GAAP (2) Outlook
   
Revenue$4.5 billion - $4.8 billion$4.5 billion - $4.8 billion
Gross margin26% ± 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 sold3,778  3,475  3,298  
Gross margin1,366  1,395  4,615  
    
Selling, general, and administrative211  212  209  
Research and development640  623  611  
Other operating (income) expense, net(3)(90)36  
Operating income518  650  3,759  
    
Interest income44  57  38  
Interest expense(47)(39)(33)
Other non-operating income (expense), net46  (13) 
 561  655  3,773  
    
Income tax (provision) benefit(55)(71)(477)
Equity in net income (loss) of equity method investees  —  
Net income508  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  
Diluted0.43  0.49  2.81  
    
Number of shares used in per share calculations   
Basic1,107  1,104  1,133  
Diluted1,129  1,128  1,174  



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

As ofNovember 28,
2019
August 29,
2019
   
Assets  
Cash and equivalents$6,969  $7,152  
Short-term investments619  803  
Receivables3,419  3,195  
Inventories4,943  5,118  
Other current assets217  235  
Total current assets16,167  16,503  
Long-term marketable investments599  1,164  
Property, plant, and equipment29,352  28,240  
Intangible assets333  340  
Deferred tax assets783  837  
Goodwill1,228  1,228  
Operating lease right-of-use assets608  —  
Other noncurrent assets579  575  
Total assets$49,649  $48,887  
   
Liabilities and equity  
Accounts payable and accrued expenses$5,408  $4,626  
Current debt462  1,310  
Other current liabilities447  454  
Total current liabilities6,317  6,390  
Long-term debt5,188  4,541  
Noncurrent operating lease liabilities511  —  
Noncurrent unearned government incentives609  636  
Other noncurrent liabilities426  452  
Total liabilities13,051  12,019  
   
Commitments and contingencies  
   
Redeemable noncontrolling interest98  98  
   
Micron shareholders’ equity  
Common stock119  118  
Additional capital8,428  8,214  
Retained earnings31,218  30,761  
Treasury stock(3,271)(3,221)
Accumulated other comprehensive income  
Total Micron shareholders’ equity36,500  35,881  
Noncontrolling interest in subsidiary—  889  
Total equity36,500  36,770  
Total liabilities and equity$49,649  $48,887  



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

Three months endedNovember 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 assets1,296  1,335  
Amortization of debt discount and other costs10  18  
Stock-based compensation72  61  
Gain on debt prepayments, repurchases, and conversions(42)(14)
Change in operating assets and liabilities  
Receivables(208)189  
Inventories175  (286)
Accounts payable and accrued expenses178  (46)
Deferred income taxes, net19  192  
Other 65  
Net cash provided by operating activities2,011  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 securities988  77  
Proceeds from maturities of available-for-sale securities163  60  
Proceeds from government incentives22  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 debt1,250  —  
Other17  (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 period7,279  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 compensation31  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 compensation72  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 compensation72  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 costs10  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 exposures13   30  
Non-GAAP net income attributable to Micron$548  $637  $3,508  
    
GAAP weighted-average common shares outstanding - Diluted1,129  1,128  1,174  
Adjustment for capped calls and stock-based compensation   
Non-GAAP weighted-average common shares outstanding - Diluted1,138  1,134  1,179  
    
GAAP diluted earnings per share$0.43  $0.49  $2.81  
Effects of the above adjustments0.05  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 partners22  79  236  
Adjusted free cash flow$79  $263  $2,326  


As ofNovember 28,
2019
August 29,
2019
   
Cash and short-term investments$7,588  $7,955  
Current and noncurrent restricted cash126  127  
Long-term marketable investments599  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:

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 margin26% ± 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 
  
AStock-based compensation – cost of goods sold$32  
AOther – cost of goods sold 
BStock-based compensation – sales, general, and administrative20  
BStock-based compensation – research and development21  
BOther - operating expenses12  
CAmortization of debt discount and other costs 
DTax effects of the above items and non-cash changes in net deferred income taxes14  
  $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

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