Micron Technology, Inc.
Sep 26, 2017
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Micron Technology, Inc., Reports Results for The Fourth Quarter and Full Year of 2017

Delivered record results, reflecting solid operational execution, healthy product demand, and positive industry dynamics

BOISE, Idaho, Sept. 26, 2017 (GLOBE NEWSWIRE) -- Micron Technology, Inc., (NASDAQ:MU) today announced results of operations for its fourth quarter and full year of 2017, which ended August 31, 2017.

Fiscal Q4 2017 highlights

Fiscal 2017 highlights

"Micron delivered exceptional fourth quarter and fiscal year results, reflecting solid execution and robust demand for our memory and storage solutions," said Micron President and CEO Sanjay Mehrotra. "We expect healthy industry fundamentals to continue into 2018, supported by increasingly diverse end markets and applications. We believe our focus on accelerating the deployment of advanced technologies and solutions will address our customers' evolving requirements, further strengthen our financial foundation, and enhance shareholder value."

 
Quarterly Financial Results
(in millions, except per share amounts)GAAP (1) Non-GAAP (2)
FQ4-17FQ3-17FQ4-16 FQ4-17FQ3-17FQ4-16
Revenue$6,138 $5,566 $3,217  $6,138 $5,566 $3,217 
Gross margin$3,112 $2,609 $579  $3,147 $2,671 $598 
percent of revenue 50.7%  46.9%  18.0%   51.3%  48.0%  18.6% 
Operating income (loss)$2,502 $1,963 $(32) $2,546 $2,071 $66 
percent of revenue 40.8%  35.3%  (1.0)%   41.5%  37.2%  2.1% 
Net income (loss) attributable to Micron$2,368 $1,647 $(170) $2,386 $1,896 $(9)
Diluted earnings (loss) per share$1.99 $1.40 $(0.16) $2.02 $1.62 $(0.01)


Annual Financial Results  
(in millions, except per share amounts)GAAP (1) Non-GAAP (2)  
FY 17FY 16 FY 17FY 16  
Revenue  $20,322 $12,399  $20,322 $12,399   
Gross margin  $8,436 $2,505  $8,639 $2,592   
percent of revenue   41.5%  20.2%   42.5%  20.9%   
Operating income  $5,868 $168  $6,232 $450   
percent of revenue   28.9%  1.4%   30.7%  3.6%   
Net income (loss) attributable to Micron  $5,089 $(276) $5,648 $273   
Diluted earnings (loss) per share  $4.41 $(0.27) $4.96 $0.26   
                  

Revenues for the fourth quarter of 2017 were 10 percent higher compared to the third quarter of 2017, with DRAM sales volumes 5 percent higher and NAND sales volumes 3 percent higher. DRAM and NAND average selling prices for the quarter increased 8 percent and 5 percent, respectively. Our overall consolidated gross margin of 50.7 percent for the fourth quarter of 2017 was higher compared to 46.9 percent in the third quarter due to expansion of margins for DRAM products.

Investments in capital expenditures, net of amounts funded by partners, were $1.51 billion for the fourth quarter of 2017 and $5.13 billion for the full year of 2017. We ended the fourth quarter with cash, marketable investments, and restricted cash of $6.15 billion.

We will host a conference call on Tuesday, September 26, 2017 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 September 26, 2018. A taped audio replay of the conference call will also be available at 1-404-537-3406 or 1-855-859-2056 (conference number: 76102815) beginning at 5:30 p.m. MT, Tuesday, September 26, 2017 and continuing through Tuesday, October 3, 2017. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech.

We are a world leader in innovative memory solutions. Through our global brands — Micron®, Crucial®, and Ballistix® — our broad portfolio of high-performance memory technologies, including DRAM, NAND, NOR Flash, and 3D XPoint™ memory, is transforming how the world uses information. Backed by more than 35 years of technology leadership, our memory solutions enable the world's most innovative computing, consumer, enterprise storage, data center, mobile, embedded, and automotive applications. Our common stock is traded on the NASDAQ under the MU symbol. To learn more about Micron Technology, Inc., visit www.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. Fiscal 2016 amounts have been adjusted to conform with current period presentation to exclude stock-based compensation and the amortization of acquisition related intangibles from our non-GAAP reporting. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

 
MICRON TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL SUMMARY
(in millions except per share amounts)
         
  4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
  August 31,
2017
 June 1,
2017
 September 1,
2016
 August 31,
2017
 September 1,
2016
Net sales $6,138  $5,566  $3,217  $20,322  $12,399 
Cost of goods sold 3,026  2,957  2,638  11,886  9,894 
Gross margin 3,112  2,609  579  8,436  2,505 
Selling, general, and administrative 193  204  157  743  659 
Research and development 447  434  411  1,824  1,617 
Restructure and asset impairments (1) (27) 12  51  18  67 
Other operating (income) expense, net (3) (4) (8) (17) (6)
Operating income (loss) 2,502  1,963  (32) 5,868  168 
Interest income (expense), net (2) (132) (143) (126) (560) (395)
Other non-operating income (expense), net (2) (49) (83) (10) (112) (54)
Income tax (provision) benefit (3) 47  (92) (3) (114) (19)
Equity in net income (loss) of equity method investees 1  2  1  8  25 
Net (income) attributable to noncontrolling interests (1)     (1) (1)
Net income (loss) attributable to Micron $2,368  $1,647  $(170) $5,089  $(276)
           
Earnings (loss) per share          
Basic $2.13  $1.49  $(0.16) $4.67  $(0.27)
Diluted 1.99  1.40  (0.16) 4.41  (0.27)
           
Number of shares used in per share calculations          
Basic 1,109  1,106  1,037  1,089  1,036 
Diluted 1,187  1,177  1,037  1,154  1,036 


CONSOLIDATED FINANCIAL SUMMARY, Continued
 
As of August 31,
 2017
 June 1,
 2017
 September 1,
 2016
Cash and short-term investments $5,428  $4,330  $4,398 
Receivables 3,759  3,497  2,068 
Inventories 3,123  3,064  2,889 
Total current assets 12,457  11,023  9,495 
Long-term marketable investments 617  471  414 
Property, plant, and equipment, net 19,431  19,014  14,686 
Total assets 35,336  33,267  27,540 
       
Accounts payable and accrued expenses 3,664  3,656  3,879 
Current debt (2) 1,262  1,161  756 
Total current liabilities 5,334  5,143  4,835 
Long-term debt (2) 9,872  10,485  9,154 
       
Total Micron shareholders' equity 18,621  16,171  12,080 
Noncontrolling interests in subsidiaries 849  848  848 
Total equity 19,470  17,019  12,928 


  Year Ended
  August 31,
 2017
 September 1,
 2016
Net cash provided by operating activities $8,153  $3,168 
Net cash provided by (used for) investing activities (a) (7,537) (3,044)
Net cash provided by (used for) financing activities 349  1,745 
     
Depreciation and amortization 3,986  3,106 
Investments in capital expenditures (5,253) (5,863)
Acquisition of Inotera (2,634)  
Proceeds from issuance of debt and equipment sale-leaseback transactions 3,311  2,964 
Repayments of debt (2,558) (870)
(a) 2016 amount adjusted for the retrospective adoption of ASU 2016-18 — Restricted Cash. 
  

Inotera Acquisition

On December 6, 2016, we acquired the remaining 67% interest in Inotera Memories, Inc. ("Inotera") and began consolidating Inotera's operating results. Cash paid for the Inotera acquisition was funded, in part, with proceeds from a term loan and the sale of shares of our common stock to Nanya. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taiwan, and previously sold such products exclusively to us through supply agreements.

The aggregate fair value of consideration consisted of $3.11 billion of cash, $995 million for the fair value of Micron shares exchanged for Inotera shares, and $1.44 billion for the fair value of our previously-held equity interest in Inotera, net of $361 million for payments attributed to intercompany balances with Inotera. The provisional fair values of assets and liabilities acquired include, among other items, cash of $118 million; inventories of $285 million; property, plant, and equipment of $3.72 billion; goodwill of $1.12 billion; and accounts payable and accrued expenses of ($232) million, and could change as additional information becomes available. In connection with the acquisition, we revalued our 33% interest in Inotera to its fair value and recognized a non-operating gain of $71 million in the second quarter of 2017.

In connection with our acquisition of Inotera, in the second quarter of 2017, we sold 58 million shares of our common stock to Nanya for $986 million, of which 54 million were issued from treasury stock. As a result, treasury stock decreased by $1.03 billion, which resulted in a decrease in retained earnings of $104 million for the difference between the carrying value of the treasury stock and its $925 million fair value. These shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and subject to certain restrictions on transfers.

(1) In the fourth quarter of 2017, we recognized gains related to announced restructure and exit activities, primarily from the disposition of assets. In the third quarter of 2017, we recognized a loss of $11 million in connection with the disposition of our assembly and test facility located in Akita, Japan. In the fourth quarter of 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities. As a result, we incurred charges of $33 million in 2017 and $58 million in the fourth quarter of 2016.

(2) In connection with the Inotera acquisition, on December 6, 2016, we drew 80 billion New Taiwan dollars under a collateralized, five-year variable-rate term loan. Principal under the term loan is payable in six equal semi-annual installments, commencing in June 2019.

In November 2016, we entered into a five-year variable-rate facility agreement to obtain up to $800 million of financing, collateralized by certain production equipment and drew $800 million under the facility in 2017. Principal is payable in 16 equal quarterly installments beginning in March 2018.

On August 11, 2017, we redeemed our 2022 Notes with an aggregate carrying value of $592 million and recognized a non-operating loss of $34 million in the fourth quarter of 2017. On April 11, 2017, we repurchased $952 million in aggregate principal of our 2025 Notes and 2026 Notes, with an aggregate carrying value of $943 million, and recognized a non-operating loss of $60 million in the third quarter of 2017.

(3) Our income taxes reflect operations in tax jurisdictions, including Singapore and Taiwan, where our earnings are indefinitely reinvested and the tax rates are significantly lower than the U.S. statutory rate; operations outside the U.S., including Singapore, where we have tax incentive arrangements that further decrease our effective tax rates; and a valuation allowance against substantially all of our U.S. net deferred tax assets. Income tax (provision) benefit consisted of the following (in millions):

         
  4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
  August 31,
 2017
 June 1,
 2017
 September 1,
 2016
 August 31,
2017
 September 1,
2016
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and Inotera $106  $(31) $(12) $54  $(114)
U.S. valuation allowance release resulting from business acquisition         41 
Other income tax (provision) benefit, primarily other non-U.S. operations (59) (61) 9  (168) 54 
  $47  $(92) $(3) $(114) $(19)
 

Income taxes for the full year of 2017 and 2016 included tax benefits of $28 million and $58 million, respectively, related to the favorable resolution of certain tax matters, which were previously reserved as uncertain tax positions.

 
MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in millions, except per share amounts)
 
 4th Qtr. 3rd Qtr. 4th Qtr.
 August 31, 2017 June 1, 2017 September 1, 2016
 GAAPAdjNon-GAAP GAAPAdjNon-GAAP
 GAAPAdjNon-GAAP
Net sales$6,138 $ $6,138  $5,566 $ $5,566  $3,217 $ $3,217 
Cost of goods sold3,026 (35)2,991  2,957 (62)2,895  2,638 (19)2,619 
Gross margin3,112 35 3,147  2,609 62 2,671  579 19 598 
percent of revenue50.7%  51.3%  46.9%  48.0%  18.0%  18.6% 
                  
Selling, general, and administrative193 (22)171  204 (20)184  157 (15)142 
Research and development447 (14)433  434 (14)420  411 (13)398 
Restructure and asset impairments(27)27   12 (12)  51 (51) 
Other operating (income) expense, net(3) (3) (4) (4) (8) (8)
Operating expenses610 (9)601  646 (46)600  611 (79)532 
Operating income (loss)2,502 44 2,546  1,963 108 2,071  (32)98 66 
percent of revenue40.8%  41.5%  35.3%  37.2%  (1.0)%  2.1% 
                  
Interest income (expense), net(132)32 (100) (143)30 (113) (126)32 (94)
Other non-operating income (expense), net(49)49   (83)83   (10)11 1 
 2,321 125 2,446  1,737 221 1,958  (168)141 (27)
            
Income tax (provision) benefit47 (107)(60) (92)28 (64) (3)23 20 
Equity in net income (loss) of equity method investees1  1  2  2  1 (3)(2)
Net income (loss)2,369 18 2,387  1,647 249 1,896  (170)161 (9)
            
Net income (loss) attributable to noncontrolling interests(1) (1)        
Net income (loss) attributable to Micron$2,368 $18 $2,386  $1,647 $249 $1,896  $(170)$161 $(9)
            
Shares used in calculations1,187 (6)1,181  1,177 (8)1,169  1,037  1,037 
Diluted earnings (loss) per share$1.99 $0.03 $2.02  $1.40 $0.22 $1.62  $(0.16)$0.15 $(0.01)


 Year Ended Year Ended
 August 31, 2017 September 1, 2016
 GAAPAdjNon-GAAP GAAPAdjNon-GAAP
Net sales$20,322 $ $20,322  $12,399 $ $12,399 
Cost of goods sold11,886 (203)11,683  9,894 (87)9,807 
Gross margin8,436 203 8,639  2,505 87 2,592 
percent of revenue41.5%  42.5%  20.2%  20.9% 
            
Selling, general, and administrative743 (88)655  659 (69)590 
Research and development1,824 (55)1,769  1,617 (59)1,558 
Restructure and asset impairments18 (18)  67 (67) 
Other operating (income) expense, net(17) (17) (6) (6)
Operating expenses2,568 (161)2,407  2,337 (195)2,142 
Operating income (loss)5,868 364 6,232  168 282 450 
percent of revenue28.9%  30.7%  1.4%  3.6% 
            
Interest income (expense), net(560)125 (435) (395)126 (269)
Other non-operating income (expense), net(112)112   (54)23 (31)
 5,196 601 5,797  (281)431 150 
        
Income tax (provision) benefit(114)(59)(173) (19)85 66 
Equity in net income (loss) of equity method investees8 17 25  25 33 58 
Net income (loss)5,090 559 5,649  (275)549 274 
        
Net income (loss) attributable to noncontrolling interests(1) (1) (1) (1)
Net income (loss) attributable to Micron$5,089 $559 $5,648  $(276)$549 $273 
        
Shares used in calculations1,154 (14)1,140  1,036 14 1,050 
Diluted earnings (loss) per share$4.41 $0.55 $4.96  $(0.27)$0.53 $0.26 


MICRON TECHNOLOGY, INC.
NON-GAAP ADJUSTMENTS
(in millions)
 
 4th Qtr. 3rd Qtr. 4th Qtr. Year Ended
 August 31, 2017 June 1, 2017 September 1, 2016 August 31, 2017 September 1, 2016
Non-GAAP adjustments         
Cost of goods sold         
Flow-through of Inotera inventory step up$11  $36  $  $107  $ 
Stock-based compensation22  24  18  88  76 
Other2  2  1  8  11 
 35  62  19  203  87 
          
Selling, general, and administrative         
Stock-based compensation22  20  14  75  66 
Inotera acquisition costs    1  13  3 
 22  20  15  88  69 
          
Research and development         
Stock-based compensation13  13  11  52  49 
Other1  1  2  3  10 
 14  14  13  55  59 
          
Restructure and asset impairments(27) 12  51  18  67 
          
Interest income (expense), net         
Amortization of debt discount and other costs32  30  32  125  126 
          
Other non-operating income (expense)         
(Gain) loss from changes in currency exchange rates12  22  11  74  24 
Loss on debt repurchases and conversions37  61    100  4 
(Gain) loss from business acquisition activities      (71) (5)
Other      9   
 49  83  11  112  23 
          
Income taxes         
Estimated tax effects of above and non-cash changes in net deferred income taxes(107) 28  23  (59) 85 
          
Equity in net income (loss) of equity method investments         
Impairment of equity method investments      16  25 
Other    (3) 1  8 
     (3) 17  33 
 $18  $249  $161  $559  $549 
 

The tables above reconcile GAAP to non-GAAP results, diluted shares, and diluted earnings (loss) 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. In the first quarter of fiscal 2017, we began excluding stock-based compensation and amortization of acquisition-related intangible assets from non-GAAP results. Comparative periods have been restated.

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 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 HudsonMarc Musgrove
 Investor RelationsMedia Relations
 shudson@micron.commmusgrove@micron.com
 (208) 492-1205(208) 363-2405