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MICRON TECHNOLOGY, INC. REPORTS RESULTS FOR THE SECOND QUARTER OF FISCAL 2020

Strong execution drives profitability and 13th consecutive quarter of free cash flow

BOISE, Idaho, March 25, 2020 (GLOBE NEWSWIRE) -- Micron Technology, Inc. (Nasdaq: MU) today announced results for its second quarter of fiscal 2020, which ended February 27, 2020.

Fiscal Q2 2020 highlights

“Micron delivered solid second quarter results and revenue at the high end of the guidance range, despite the unfolding COVID-19 pandemic,” said Micron Technology President and CEO Sanjay Mehrotra. “I am grateful to our team ​for the excellent business execution we have achieved during this unprecedented situation. Their resilience, together with Micron’s technology leadership, stronger product portfolio, and healthy balance sheet, give us confidence that we will emerge from this challenging time well-positioned to capture the robust long-term demand opportunities for memory and storage.”

 
Quarterly Financial Results
(in millions, except per share amounts)GAAP (1) Non-GAAP (2)
FQ2-20FQ1-20FQ2-19 FQ2-20FQ1-20FQ2-19
        
Revenue$4,797  $5,144  $5,835   $4,797  $5,144  $5,835  
Gross margin1,355  1,366  2,864   1,398  1,405  2,928  
percent of revenue28.2 %26.6 %49.1 % 29.1 %27.3 %50.2 %
Operating expenses915  848  907   856  811  818  
Operating income440  518  1,957   542  594  2,110  
percent of revenue9.2 %10.1 %33.5 % 11.3 %11.5 %36.2 %
Net income attributable to Micron405  491  1,619   517  548  1,971  
Diluted earnings per share0.36  0.43  1.42   0.45  0.48  1.71  
              

Investments in capital expenditures, net(2) were $1.94 billion for the second quarter of fiscal 2020, which resulted in adjusted free cash flows(2) of $63 million. Micron repurchased approximately 785,000 shares of its common stock for $44 million during the second quarter of fiscal 2020 and ended the quarter with cash, marketable investments, and restricted cash of $8.12 billion, for a net cash(2) position of $2.70 billion.

Business Outlook

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

   
FQ3-20GAAP (1) OutlookNon-GAAP (2) Outlook
   
Revenue$4.6 billion - $5.2 billion$4.6 billion - $5.2 billion
Gross margin30% ± 1.5%31% ±1.5%
Operating expenses$891 million ± $25 million$825 million ± $25 million
Interest (income) expense, net$38 million$35 million
Diluted earnings per share$0.41 ± $0.15$0.55 ± $0.15
   

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, March 25, 2020 at 2:30 p.m. MT to discuss its second fiscal quarter financial results and provide forward-looking guidance for its third 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, and net cash. 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)

 2nd Qtr.1st Qtr.2nd Qtr.Six Months Ended
 February 27,
2020
November 28,
2019
February 28,
2019
February 27,
2020
February 28,
2019
      
Revenue$4,797  $5,144  $5,835  $9,941  $13,748  
Cost of goods sold3,442  3,778  2,971  7,220  6,269  
Gross margin1,355  1,366  2,864  2,721  7,479  
      
Selling, general, and administrative223  211  209  434  418  
Research and development681  640  601  1,321  1,212  
Other operating (income) expense, net11  (3) 97  8  133  
Operating income440  518  1,957  958  5,716  
      
Interest income34  44  58  78  96  
Interest expense(46) (47) (27) (93) (60) 
Other non-operating income (expense), net(1) 46  (84) 45  (75) 
 427  561  1,904  988  5,677  
      
Income tax (provision) benefit(21) (55) (280) (76) (757) 
Equity in net income (loss) of equity method investees1  2  1  3  1  
Net income407  508  1,625  915  4,921  
      
Net income attributable to noncontrolling interests(2) (17) (6) (19) (9) 
Net income attributable to Micron$405  $491  $1,619  $896  $4,912  
      
Earnings per share     
Basic$0.37  $0.44  $1.45  $0.81  $4.37  
Diluted0.36  0.43  1.42  0.79  4.24  
      
Number of shares used in per share calculations     
Basic1,111  1,107  1,114  1,109  1,123  
Diluted1,133  1,129  1,141  1,131  1,157  
                


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

As ofFebruary 27,
2020
November 28,
2019
August 29,
2019
    
Assets   
Cash and equivalents$7,118  $6,969  $7,152  
Short-term investments363  619  803  
Receivables3,049  3,419  3,195  
Inventories5,208  4,943  5,118  
Other current assets238  217  235  
Total current assets15,976  16,167  16,503  
Long-term marketable investments586  599  1,164  
Property, plant, and equipment29,647  29,352  28,240  
Intangible assets332  333  340  
Deferred tax assets764  783  837  
Goodwill1,228  1,228  1,228  
Operating lease right-of-use assets605  608    
Other noncurrent assets510  579  575  
Total assets$49,648  $49,649  $48,887  
    
Liabilities and equity   
Accounts payable and accrued expenses$5,077  $5,408  $4,626  
Current debt237  462  1,310  
Other current liabilities508  447  454  
Total current liabilities5,822  6,317  6,390  
Long-term debt5,188  5,188  4,541  
Noncurrent operating lease liabilities548  511    
Noncurrent unearned government incentives586  609  636  
Other noncurrent liabilities383  426  452  
Total liabilities12,527  13,051  12,019  
    
Commitments and contingencies   
    
Redeemable noncontrolling interest98  98  98  
    
Micron shareholders’ equity   
Common stock119  119  118  
Additional capital8,725  8,428  8,214  
Retained earnings31,602  31,218  30,761  
Treasury stock(3,414) (3,271) (3,221) 
Accumulated other comprehensive income(9) 6  9  
Total Micron shareholders’ equity37,023  36,500  35,881  
Noncontrolling interest in subsidiary    889  
Total equity37,023  36,500  36,770  
Total liabilities and equity$49,648  $49,649  $48,887  
             

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

Six months endedFebruary 27,
2020
February 28,
2019
   
Cash flows from operating activities  
Net income$915  $4,921  
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation expense and amortization of intangible assets2,661  2,648  
Amortization of debt discount and other costs16  29  
Stock-based compensation157  118  
Gain on debt prepayments, repurchases, and conversions(42) 69  
Change in operating assets and liabilities  
Receivables104  1,202  
Inventories(90) (800) 
Accounts payable and accrued expenses257  (326) 
Deferred income taxes, net38  320  
Other(4) 64  
Net cash provided by operating activities4,012  8,245  
   
Cash flows from investing activities  
Expenditures for property, plant, and equipment(3,999) (5,349) 
Purchases of available-for-sale securities(566) (2,566) 
Proceeds from sales of available-for-sale securities1,059  160  
Proceeds from maturities of available-for-sale securities523  391  
Proceeds from government incentives105  455  
Other(21) (10) 
Net cash provided by (used for) investing activities(2,899) (6,919) 
   
Cash flows from financing activities  
Repayments of debt(1,676) (705) 
Acquisition of noncontrolling interest in IMFT(744)   
Payments to acquire treasury stock(159) (2,568) 
Payments on equipment purchase contracts(29) (37) 
Proceeds from issuance of debt1,250  1,800  
Other151  27  
Net cash provided by (used for) financing activities(1,207) (1,483) 
   
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash(14) (1) 
   
Net decrease in cash, cash equivalents, and restricted cash(108) (158) 
Cash, cash equivalents, and restricted cash at beginning of period7,279  6,587  
Cash, cash equivalents, and restricted cash at end of period$7,171  $6,429  
         

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 of the first quarter of fiscal 2020. As a result, we estimate the reduction in non-cash depreciation expense for assets existing at that time benefited operating income and net income by approximately $125 million and diluted earnings per share by approximately $0.11 for the second quarter of fiscal 2020, and benefited operating income and net income by approximately $200 million and diluted earnings per share by approximately $0.17 for the first six 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

Subsequent to the second quarter of fiscal 2020, on March 13, 2020, we drew the $2.5 billion available under our revolving credit facility. Borrowings under the revolving credit facility are scheduled to mature on July 3, 2023, and we may repay amounts borrowed any time without penalty. The revolving credit facility bears interest at a rate equal to LIBOR plus 1.25% based on our current corporate credit rating and leverage ratio.


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

 2nd Qtr.1st Qtr.2nd Qtr.
 February 27,
2020
November 28,
2019
February 28,
2019
    
GAAP gross margin$1,355  $1,366  $2,864  
Stock-based compensation37  31  23  
Start-up and preproduction costs    15  
Employee severance  1  13  
Other6  7  13  
Non-GAAP gross margin$1,398  $1,405  $2,928  
    
GAAP operating expenses$915  $848  $907  
Stock-based compensation(48) (41) (34) 
Employee severance    (4) 
Restructure and asset impairments(10) 4  (51) 
Other(1)     
Non-GAAP operating expenses$856  $811  $818  
    
GAAP operating income$440  $518  $1,957  
Stock-based compensation85  72  57  
Start-up and preproduction costs    15  
Employee severance  1  17  
Restructure and asset impairments10  (4) 51  
Other7  7  13  
Non-GAAP operating income$542  $594  $2,110  
    
GAAP net income attributable to Micron$405  $491  $1,619  
Stock-based compensation85  72  57  
Start-up and preproduction costs    15  
Employee severance  1  17  
Restructure and asset impairments10  (4) 51  
Amortization of debt discount and other costs6  10  11  
(Gain) loss on debt repurchases and conversions  (42) 83  
Other7  7  16  
Impact of U.S. income tax reform    (14) 
Estimated tax effects of above, non-cash changes in net deferred income taxes, and assessments of tax exposures4  13  116  
Non-GAAP net income attributable to Micron$517  $548  $1,971  
    
GAAP weighted-average common shares outstanding - Diluted1,133  1,129  1,141  
Adjustment for capped calls and stock-based compensation11  9  8  
Non-GAAP weighted-average common shares outstanding - Diluted1,144  1,138  1,149  
    
GAAP diluted earnings per share$0.36  $0.43  $1.42  
Effects of the above adjustments0.09  0.05  0.29  
Non-GAAP diluted earnings per share$0.45  $0.48  $1.71  

RECONCILIATION OF GAAP TO NON-GAAP MEASURES, Continued

 2nd Qtr.1st Qtr.2nd Qtr.
 February 27,
2020
November 28,
2019
February 28,
2019
    
GAAP net cash provided by operating activities$2,001  $2,011  $3,435  
Investments in capital expenditures, net   
Expenditures for property, plant, and equipment, net (1) (2,013) (1,936) (2,629) 
Payments on equipment purchase contracts(18) (11) (17) 
Amounts funded by partners93  22  225  
Adjusted free cash flow$63  $86  $1,014  


  
(1)Expenditures for property, plant and equipment, net include proceeds from sales of property, plant, and equipment of $43 million for the second quarter of fiscal 2020, $7 million for the first quarter of fiscal 2020, and $20 million for the second quarter of fiscal 2019.
  

   

As ofFebruary 27,
2020
November 28,
2019
August 29,
2019
    
Cash and short-term investments$7,481  $7,588  $7,955  
Current and noncurrent restricted cash53  126  127  
Long-term marketable investments586  599  1,164  
Current and long-term debt(5,425) (5,650) (5,851) 
Net cash$2,695  $2,663  $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:

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$4.6 billion - $5.2 billion  —  $4.6 billion - $5.2 billion
Gross margin30% ± 1.5% 1% A 31% ±1.5%
Operating expenses$891 million ± $25 million $66 million B $825 million ± $25 million
Interest (income) expense, net$38 million $3 million C $35 million
Diluted earnings per share (1)$0.41 ± $0.15 $0.14  A, B, C, D $0.55 ± $0.15
        


Non-GAAP Adjustments      
        
AStock-based compensation – cost of goods sold $41  
AOther – cost of goods sold  
BStock-based compensation – sales, general, and administrative 26  
BStock-based compensation – research and development 21  
BOther – operating expenses 19  
CAmortization of debt discount and other costs  
DTax effects of the above items and non-cash changes in net deferred income taxes 41  
       $158  


  
(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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