10-KPeriod: FY2016

MICRON TECHNOLOGY INC Annual Report, Year Ended Sep 1, 2016

Filed October 28, 2016For Securities:MU

Summary

Micron Technology Inc. reported a challenging fiscal year 2016, marked by a significant decline in net sales and a shift to a net loss. This downturn was primarily driven by substantial decreases in average selling prices across its DRAM and NAND Flash product segments, which outpaced improvements in gigabit sales volumes and manufacturing cost reductions. The company's consolidated net sales decreased by 23% year-over-year, and gross margins fell to 20% from 32% in the prior year. Looking ahead, Micron is undertaking a significant acquisition of the remaining interest in Inotera, a DRAM memory company, for approximately $4.1 billion. This acquisition is being financed through a term loan facility and potentially equity and convertible notes, which will increase the company's leverage. Despite the current market headwinds, Micron is investing in R&D and new technologies like 3D NAND Flash and 3D XPoint memory, anticipating future growth opportunities in these areas. The company's strategic focus remains on technological advancement and cost efficiency to navigate the competitive semiconductor memory market.

Financial Highlights

55 data points
Beta

Revenue

$12.40B

20.2% Gross Margin

Net Income

-$276.00M

-2.2% Net Margin

EPS (Diluted)

$-0.27

Total Assets

$27.54B

Cash & Equivalents

$4.14B

Free Cash Flow

-$2.65B

Financial Statements
Beta
Revenue$12.40B
Cost of Revenue$9.89B
Gross Profit$2.50B
R&D Expenses$1.62B
SG&A Expenses$659.00M
Operating Income$168.00M
Interest Expense$437.00M
Net Income-$276.00M
EPS (Basic)$-0.27
EPS (Diluted)$-0.27
Shares Outstanding (Basic)1.04B
Shares Outstanding (Diluted)1.04B

Key Highlights

  • 1Net sales decreased by 23% to $12.4 billion in fiscal year 2016 compared to $16.2 billion in fiscal year 2015.
  • 2The company reported a net loss of $276 million in fiscal year 2016, a significant reversal from a net income of $2.9 billion in fiscal year 2015.
  • 3Gross margin declined to 20% in fiscal year 2016, down from 32% in fiscal year 2015, largely due to falling average selling prices.
  • 4Micron is in the process of acquiring the remaining interest in Inotera for approximately $4.1 billion, a move expected to increase leverage.
  • 5Research and Development expenses increased by 5% to $1.6 billion, reflecting continued investment in new technologies.
  • 6The company is implementing a restructuring plan expected to yield approximately $80 million in quarterly savings starting in 2017.
  • 7Sales to Intel represented 14% of net sales in 2016, up from 8% in the prior two years.

Frequently Asked Questions

Micron Technology reported a challenging fiscal year 2016 with net sales decreasing by 23% to $12.4 billion and a net loss of $276 million, a stark contrast to the $2.9 billion net income in fiscal year 2015. This performance was primarily due to a significant drop in average selling prices for its memory products.

The most significant event is the planned acquisition of the remaining interest in Inotera for approximately $4.1 billion, which is expected to close in December 2016. This strategic move aims to strengthen Micron's position in the DRAM market. Additionally, the company continued its investment in R&D, particularly in emerging technologies like 3D NAND Flash and 3D XPoint memory, and initiated a restructuring plan to improve operational efficiency.

Micron faces intense competition in the semiconductor memory market, which is characterized by cyclical pricing and rapid technological advancements. Key risks include dramatic declines in average selling prices, the inability to reduce per-gigabit manufacturing costs to maintain gross margins, potential integration issues with acquisitions, and the significant capital expenditures required to stay competitive. The company also carries substantial debt obligations, which could adversely affect its financial condition.

The acquisition of Inotera is primarily being financed through a $2.5 billion term loan facility. Additionally, Micron has the option to fund a portion of the acquisition through the issuance of its common stock (up to approximately $991 million) and/or 2.00% convertible senior notes due 2021 (up to approximately $396 million).