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

6/29, 10:01 PM (Source: GlobeNewswire)

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)
FQ3-20FQ2-20FQ3-19 FQ3-20FQ2-20FQ3-19
        
Revenue$5,438 $4,797 $4,788  $5,438 $4,797 $4,788 
Gross margin1,763 1,355 1,828  1,804 1,398 1,884 
percent of revenue32.4%28.2%38.2% 33.2%29.1%39.3%
Operating expenses875 915 818  823 856 774 
Operating income888 440 1,010  981 542 1,110 
percent of revenue16.3%9.2%21.1% 18.0%11.3%23.2%
Net income attributable to Micron803 405 840  941 517 1,198 
Diluted earnings per share0.71 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:

FQ4-20GAAP(1) OutlookNon-GAAP(2) Outlook
   
Revenue$5.75 billion - $6.25 billion$5.75 billion - $6.25 billion
Gross margin34.5% ± 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 sold3,675  3,442  2,960  10,895  9,229 
Gross margin1,763  1,355  1,828  4,484  9,307 
      
Selling, general, and administrative216  223  206  650  624 
Research and development649  681  606  1,970  1,818 
Other operating (income) expense, net10  11  6  18  139 
Operating income888  440  1,010  1,846  6,726 
      
Interest income23  34  52  101  148 
Interest expense(51) (46) (29) (144) (89)
Other non-operating income (expense), net10  (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 investees3  1    6  1 
Net income805  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 
Diluted0.71  0.36  0.74  1.50  5.01 
      
Number of shares used in per share calculations     
Basic1,111  1,111  1,105  1,110  1,117 
Diluted1,129  1,133  1,129  1,131  1,148 
               

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

As ofMay 28,
2020
February 27,
2020
August 29,
2019
    
Assets   
Cash and equivalents$8,267  $7,118  $7,152 
Short-term investments391  363  803 
Receivables3,603  3,049  3,195 
Inventories5,405  5,208  5,118 
Other current assets233  238  235 
Total current assets17,899  15,976  16,503 
Long-term marketable investments577  586  1,164 
Property, plant, and equipment30,081  29,647  28,240 
Intangible assets332  332  340 
Deferred tax assets775  764  837 
Goodwill1,228  1,228  1,228 
Operating lease right-of-use assets599  605   
Other noncurrent assets514  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 debt330  237  1,310 
Other current liabilities491  508  454 
Total current liabilities6,185  5,822  6,390 
Long-term debt6,356  5,188  4,541 
Noncurrent operating lease liabilities540  548   
Noncurrent unearned government incentives553  586  636 
Other noncurrent liabilities453  383  452 
Total liabilities14,087  12,527  12,019 
    
Commitments and contingencies   
    
Redeemable noncontrolling interest98  98  98 
    
Micron shareholders’ equity   
Common stock119  119  118 
Additional capital8,764  8,725  8,214 
Retained earnings32,402  31,602  30,761 
Treasury stock(3,454) (3,414) (3,221)
Accumulated other comprehensive income (loss)(11) (9) 9 
Total Micron shareholders’ equity37,820  37,023  35,881 
Noncontrolling interest in subsidiary    889 
Total equity37,820  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 endedMay 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 assets4,083  4,008 
Amortization of debt discount and other costs20  39 
Stock-based compensation239  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 expenses700  (703)
Deferred income taxes, net26  195 
Other34  25 
Net cash provided by operating activities6,035  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 securities1,157  1,271 
Proceeds from maturities of available-for-sale securities636  626 
Proceeds from government incentives140  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 debt5,000  1,800 
Other147  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 cash1,041  (1,353)
Cash, cash equivalents, and restricted cash at beginning of period7,279  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 compensation34  37  24 
Start-up and preproduction costs    23 
Other7  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 compensation82  85  58 
Start-up and preproduction costs    23 
Restructure and asset impairments4  10  9 
Other7  7  10 
Non-GAAP operating income$981  $542  $1,110 
    
GAAP net income attributable to Micron$803  $405  $840 
Stock-based compensation82  85  58 
Start-up and preproduction costs    23 
Restructure and asset impairments4  10  9 
Amortization of debt discount and other costs4  6  10 
(Gain) loss on debt repurchases and conversions2    317 
Other7  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 exposures39  4  (30)
Non-GAAP net income attributable to Micron$941  $517  $1,198 
    
GAAP weighted-average common shares outstanding - Diluted1,129  1,133  1,129 
Adjustment for stock-based compensation and capped calls13  11  6 
Non-GAAP weighted-average common shares outstanding - Diluted1,142  1,144  1,135 
    
GAAP diluted earnings per share$0.71  $0.36  $0.74 
Effects of the above adjustments0.11  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 partners35  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 ofMay 28,
2020
February 27,
2020
August 29,
2019
    
Cash and short-term investments$8,658  $7,481  $7,955 
Current and noncurrent restricted cash53  53  127 
Long-term marketable investments577  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 margin34.5% ± 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      
        
AStock-based compensation – cost of goods sold $37 
AOther – cost of goods sold 7 
BStock-based compensation – sales, general, and administrative 27 
BStock-based compensation – research and development 23 
CAmortization of debt discount and other costs 3 
DTax 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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