Micron Technology, Inc., Reports Results for the Third Quarter of Fiscal 2018

BOISE, Idaho, June 20, 2018 (GLOBE NEWSWIRE) — Micron Technology, Inc., (NASDAQ:MU) today announced results of operations for its third quarter of fiscal 2018, which ended May 31, 2018.

Fiscal Q3 2018 Highlights

  • Revenues of $7.80 billion, up 40 percent compared with the same period last year
  • GAAP net income of $3.82 billion, or $3.10 per diluted share
  • Non-GAAP net income of $3.90 billion, or $3.15 per diluted share
  • Operating cash flow of $4.26 billion, compared with $2.41 billion for the same period last year
  • Ended the quarter with a net cash positive position

“Micron delivered record results in financial performance for the third fiscal quarter, supported by strong execution and ongoing secular demand trends,” said Micron President and CEO Sanjay Mehrotra. “We strengthened our competitive position and grew our revenue across virtually all of our high-value product segments. We set new records for revenue in SSDs, Mobile Managed NAND and Automotive solutions along with Cloud/Enterprise and Graphics DRAM Memory. We see ongoing momentum and healthy industry fundamentals in the fourth quarter to close out an exceptionally strong fiscal 2018.”

 
Quarterly Financial Results
(in millions except per share amounts) GAAP (1)   Non-GAAP (2)
FQ3-18 FQ2-18 FQ3-17   FQ3-18 FQ2-18 FQ3-17
Net sales $ 7,797   $ 7,351   $ 5,566     $ 7,797   $ 7,351   $ 5,566  
Gross margin $ 4,723   $ 4,270   $ 2,609     $ 4,750   $ 4,296   $ 2,671  
percent of net sales 60.6%   58.1%   46.9%     60.9%   58.4%   48.0%  
Operating income $ 3,953   $ 3,567   $ 1,963     $ 4,017   $ 3,630   $ 2,071  
percent of net sales 50.7%   48.5%   35.3%     51.5%   49.4%   37.2%  
Net income attributable to Micron $ 3,823   $ 3,309   $ 1,647     $ 3,898   $ 3,495   $ 1,896  
Diluted earnings per share $ 3.10   $ 2.67   $ 1.40     $ 3.15   $ 2.82   $ 1.62  
                                       

Revenues for the third quarter of 2018 were 6 percent higher compared to the second quarter of 2018, reflecting increased demand broadly across our products and end markets. Our overall consolidated gross margin of 60.6 percent for the third quarter of 2018 was higher compared to 58.1 percent for the second quarter of 2018 primarily due to execution across our product portfolio.

Investments in capital expenditures, net of amounts funded by partners, were $2.10 billion, which resulted in adjusted free cash flows(3) of $2.16 billion for the third quarter of 2018. During the quarter, we repurchased or converted $2.31 billion principal amount of our debt, lowering our total carrying value of debt to $7.34 billion exiting the quarter. We ended the third quarter in a net cash positive position with cash, marketable investments, and restricted cash of $7.68 billion.

We will host a conference call on Wednesday, June 20, 2018 at 2:30 p.m. MT to discuss our financial results. The call, audio, and slides will be available online at investors.micron.com. A webcast replay will be available on our website until June 20, 2019. A taped audio replay of the conference call will also be available at 1-404-537-3406 or 1-855-859-2056 (conference number: 5788319) beginning at 5:30 p.m. MT, Wednesday, June 20, 2018 and continuing through Wednesday, June 27, 2018. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech.

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, NOR Flash, and 3D XPoint™ memory, is transforming how the world uses information to enrich life. Backed by nearly 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles, in key market segments like cloud, data center, networking, and mobile. Our common stock is traded on the NASDAQ under the MU symbol. To learn more about Micron Technology, Inc., visit micron.com.

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

This press release contains forward-looking statements regarding the industry and our strategic position and financial 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 our management excludes in analyzing our operating results and understanding trends in our earnings. Non-GAAP also includes the impact on shares used in per share calculations of our outstanding capped call transactions and from the exclusion of stock-based compensation. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.
(3) Adjusted free cash flow consists of cash provided by operating activities of $4.26 billion less investments in capital expenditures, net of amounts funded by partners. 

 
MICRON TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL SUMMARY
(in millions except per share amounts)
               
  3rd Qtr.   2nd Qtr.   3rd Qtr.   Nine Months Ended
  May 31, 2018   March 1, 2018   June 1, 2017   May 31, 2018   June 1, 2017
Net sales $ 7,797     $ 7,351     $ 5,566     $ 21,951     $ 14,184  
Cost of goods sold 3,074     3,081     2,957     9,211     8,860  
Gross margin 4,723     4,270     2,609     12,740     5,324  
Selling, general, and administrative 211     196     204     598     550  
Research and development 603     523     434     1,574     1,377  
Other operating (income) expense, net (44 )   (16 )   8     (49 )   31  
Operating income 3,953     3,567     1,963     10,617     3,366  
Interest income (expense), net (1) (44 )   (61 )   (143 )   (206 )   (428 )
Other non-operating income (expense), net (1) (193 )   (53 )   (83 )   (450 )   (63 )
Income tax (provision) benefit (2) 109     (143 )   (92 )   (148 )   (161 )
Equity in net income (loss) of equity method investees (2 )   1     2     (1 )   7  
Net (income) attributable to noncontrolling interests     (2 )       (2 )    
Net income attributable to Micron $ 3,823     $ 3,309     $ 1,647     $ 9,810     $ 2,721  
                   
Earnings per share                  
Basic $ 3.30     $ 2.86     $ 1.49     $ 8.53     $ 2.52  
Diluted 3.10     2.67     1.40     7.96     2.38  
                   
Number of shares used in per share calculations                  
Basic 1,159     1,156     1,106     1,150     1,082  
Diluted 1,235     1,238     1,177     1,233     1,142  
                             

CONSOLIDATED FINANCIAL SUMMARY, Continued

             
As of   May 31, 2018   March 1, 2018   August 31, 2017
Cash and short-term investments   $ 7,071     $ 8,042     $ 5,428  
Receivables   4,912     4,437     3,759  
Inventories   3,369     3,184     3,123  
Total current assets   15,499     15,836     12,457  
Long-term marketable investments   487     520     617  
Property, plant, and equipment, net   22,705     21,864     19,431  
Restricted cash   119     113     107  
Total assets   41,845     41,263     35,336  
             
Accounts payable and accrued expenses   3,998     4,194     3,664  
Current debt (1)   1,454     1,514     1,262  
Total current liabilities   5,883     6,135     5,334  
Long-term debt (1)   5,890     7,802     9,872  
             
Total Micron shareholders’ equity (3)   28,649     25,697     18,621  
Noncontrolling interests in subsidiaries   869     869     849  
Total equity   29,518     26,566     19,470  
                   
     
    Nine Months Ended
    May 31, 2018   June 1, 2017
Net cash provided by operating activities (a)   $ 12,245     $ 4,950  
Net cash provided by (used for) investing activities (a)   (6,087 )   (6,259 )
Net cash provided by (used for) financing activities   (4,443 )   1,207  
         
Depreciation and amortization   3,552     2,888  
Investments in capital expenditures   (6,798 )   (3,730 )
Acquisition of Inotera       (2,634 )
Repayments of debt   (6,767 )   (1,774 )
Proceeds from issuance of stock   1,636     108  
Proceeds from issuance of debt   969     3,136  
             
(a) June 1, 2017 amount adjusted for the retrospective adoption of ASU 2016-18 — Restricted Cash.
 
  1. In the third quarter of 2018, we prepaid debt with an aggregate principal amount of $2.08 billion for cash of $2.11 billion and recognized non-operating losses of $42 million. We repurchased or settled convertible notes with an aggregate principal amount of $228 million for cash of $1.11 billion and recognized non-operating losses of $32 million. Additionally, as of May 31, 2018, $101 million of aggregate principal amount of our convertible notes had converted but will not settle until the fourth quarter of 2018. As a result of the unsettled conversions, the carrying values increased by $456 million as of May 31, 2018 and we recognized non-operating losses of $94 million in the third quarter of 2018. In the second quarter of 2018, we settled convertible notes with an aggregate principal amount of $65 million for cash of $295 million. In the first quarter of 2018, we redeemed notes with an aggregate principal amount of $2.25 billion for cash of $2.42 billion and recognized non-operating losses of $190 million.In the first nine months of 2018, Intel Corporation provided non-interest bearing convertible debt financing of $969 million to IM Flash Technologies, LLC (“IMFT”) pursuant to the terms of the IMFT joint venture agreement.

  1. On December 22, 2017, the United States enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate will be 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and 21% for subsequent years. The Tax Act imposes a one-time transition tax in 2018 on the higher of our accumulated foreign income, as determined as of November 2, 2017 or December 31, 2017 (the “Repatriation Tax”); provides a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a new minimum tax on certain foreign earnings in excess of a deemed return on tangible assets (the “Foreign Minimum Tax”). The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we are continuing to evaluate whether to account for the Foreign Minimum Tax provisions that begin for us in 2019 as a period cost or in our measurement of deferred taxes.The Securities and Exchange Commission Staff Accounting Bulletin No. 118 allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements are issued. Provisional amounts may be adjusted during a one-year measurement period as accounting for the income tax effects of the Tax Act are completed or as estimates are revised. Our income tax (provision) benefit consisted of the following:

               
  3rd Qtr.   2nd Qtr.   3rd Qtr.   Nine Months Ended
  May 31, 2018   March 1, 2018   June 1, 2017   May 31, 2018   June 1, 2017
Provisional estimate for the Repatriation Tax, net of adjustments related to uncertain tax positions $ 222     $ (1,335 )   $     $ (1,113 )   $  
Remeasurement of deferred tax assets and liabilities reflecting the lower U.S. corporate tax rates     (133 )       (133 )    
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations     1,337         1,337      
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW (35 )   (17 )   (31 )   (78 )   (52 )
Other income tax (provision) benefit (78 )   5     (61 )   (161 )   (109 )
  $ 109     $ (143 )   $ (92 )   $ (148 )   $ (161 )
                                       
  1. In October 2017, we issued 34 million shares of our common stock for $41.00 per share in a public offering, for proceeds of $1.36 billion, net of underwriting fees and other offering costs.
 
MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in millions except per share amounts)
           
  3rd Qtr.   2nd Qtr.   3rd Qtr.
  May 31, 2018   March 1, 2018   June 1, 2017
  GAAP Adj Non-
GAAP
  GAAP Adj Non-
GAAP
    GAAP Adj Non-
GAAP
Net sales $ 7,797   $   $ 7,797     $ 7,351   $   $ 7,351     $ 5,566   $   $ 5,566  
Cost of goods sold 3,074   (27 ) 3,047     3,081   (26 ) 3,055     2,957   (62 ) 2,895  
Gross margin 4,723   27   4,750     4,270   26   4,296     2,609   62   2,671  
percent of net sales 60.6%     60.9%     58.1%     58.4%     46.9%     48.0%  
                                   
Selling, general, and administrative 211   (14 ) 197     196   (16 ) 180     204   (20 ) 184  
Research and development 603   (15 ) 588     523   (14 ) 509     434   (14 ) 420  
Other operating (income) expense, net (44 ) (8 ) (52 )   (16 ) (7 ) (23 )   8   (12 ) (4 )
Operating expenses 770   (37 ) 733     703   (37 ) 666     646   (46 ) 600  
Operating income 3,953   64   4,017     3,567   63   3,630     1,963   108   2,071  
percent of net sales 50.7%     51.5%     48.5%     49.4%     35.3%     37.2%  
                                   
Interest income (expense), net (44 ) 23   (21 )   (61 ) 26   (35 )   (143 ) 30   (113 )
Other non-operating income (expense), net (193 ) 194   1     (53 ) 53       (83 ) 83    
  3,716   281   3,997     3,453   142   3,595     1,737   221   1,958  
                       
Income tax (provision) benefit 109   (206 ) (97 )   (143 ) 44   (99 )   (92 ) 28   (64 )
Equity in net income (loss) of equity method investees (2 )   (2 )   1     1     2     2  
Net income 3,823   75   3,898     3,311   186   3,497     1,647   249   1,896  
                       
Net income (loss) attributable to noncontrolling interests         (2 )   (2 )        
Net income attributable to Micron $ 3,823   $ 75   $ 3,898     $ 3,309   $ 186   $ 3,495     $ 1,647   $ 249   $ 1,896  
                       
Shares used in calculations 1,235   3   1,238     1,238   2   1,240     1,177   (8 ) 1,169  
Diluted earnings per share $ 3.10   $ 0.05   $ 3.15     $ 2.67   $ 0.15   $ 2.82     $ 1.40   $ 0.22   $ 1.62  
                                                           
 
MICRON TECHNOLOGY, INC.
NON-GAAP ADJUSTMENTS
(in millions)
           
  3rd Qtr.   2nd Qtr.   3rd Qtr.
  May 31, 2018   March 1, 2018   June 1, 2017
Non-GAAP adjustments          
Cost of goods sold          
Stock-based compensation $ 20     $ 22     $ 24  
Flow-through of Inotera inventory step up         36  
Other 7     4     2  
  27     26     62  
           
Selling, general, and administrative          
Stock-based compensation 14     16     20  
  14     16     20  
           
Research and development          
Stock-based compensation 14     14     13  
Other 1         1  
  15     14     14  
           
Other operating (income) expense, net          
Restructure and asset impairments 8     7     12  
           
Interest income (expense), net          
Amortization of debt discount and other costs 23     26     30  
           
Other non-operating income (expense)          
Loss on debt repurchases and conversions 168     23     61  
(Gain) loss from changes in currency exchange rates 24     27     22  
Other 2     3      
  194     53     83  
           
Income taxes          
Impact of U.S. income tax reform (222 )   131      
Estimated tax effects of above, including tax benefits from stock-based compensation, and non-cash changes in net deferred taxes 16     (87 )   28  
  (206 )   44     28  
  $ 75     $ 186     $ 249  

The tables above reconcile GAAP to non-GAAP results, diluted shares, and diluted earnings per share. 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 to 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 vary 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;
  • 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 installment debt;
  • Losses from debt repurchases and conversions;
  • Gains and losses from changes in currency exchange rates;
  • Gains and losses from business acquisition activities;
  • Impact of the U.S. income tax reform for provisional estimate of Repatriation Tax, release of U.S. valuation allowance, and remeasurement of net deferred taxes reflecting the lower U.S. corporate tax rates; and
  • The estimated tax effects of above, including tax benefits from stock-based compensation, and non-cash changes in net deferred taxes.

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 the 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.

Contacts:

Shanye Hudson    
Investor Relations    
shudson@micron.com   
(208) 492-1205 

David Oro
Media Relations
davidoro@micron.com 
(707) 558-8585