10-QPeriod: Q2 FY2017

MICRON TECHNOLOGY INC Quarterly Report for Q1 Ended Dec 1, 2016

Filed January 9, 2017For Securities:MU

Summary

Micron Technology Inc. (MU) reported strong financial results for the quarter ending November 30, 2016, with net sales increasing significantly to $3.97 billion from $3.35 billion in the prior year quarter, representing a 19% year-over-year increase. This growth was driven by a 57% increase in DRAM gigabits sold and improved average selling prices in key segments. The company demonstrated a healthy recovery in profitability, with operating income more than doubling to $359 million from $232 million in the prior year quarter, and net income attributable to Micron also saw an increase. The acquisition of the remaining 67% interest in Inotera, completed on December 6, 2016, is expected to enhance operational flexibility and optimize cash flow deployment across Micron's operations. Despite the positive top-line and bottom-line performance, the company's financial position shows a slight increase in total liabilities to $14.64 billion, primarily driven by new debt taken on to finance the Inotera acquisition, bringing total debt to $9.65 billion. However, cash and equivalents remained strong at $4.14 billion. Investors should monitor the company's ability to integrate the Inotera acquisition successfully and manage its increased debt load, while continuing to navigate the competitive and cyclical semiconductor memory market.

Financial Highlights

53 data points
Beta

Revenue

$4.65B

36.7% Gross Margin

Net Income

$894.00M

19.2% Net Margin

EPS (Diluted)

$0.77

Total Assets

$32.35B

Cash & Equivalents

$3.63B

Free Cash Flow

$241.00M

Financial Statements
Beta
Revenue$4.65B
Cost of Revenue$2.94B
Gross Profit$1.70B
R&D Expenses$473.00M
SG&A Expenses$187.00M
Operating Income$1.04B
Interest Expense$161.00M
Net Income$894.00M
EPS (Basic)$0.81
EPS (Diluted)$0.77
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Net sales surged by 19% year-over-year to $3.97 billion, driven by increased DRAM gigabits sold and improved pricing.
  • 2Operating income more than doubled to $359 million, reflecting improved sales and cost management.
  • 3Net income attributable to Micron was $180 million, up from $206 million in the prior year quarter, reflecting the positive operational improvements.
  • 4The company completed the acquisition of the remaining 67% of Inotera for $4.1 billion, aiming for greater operational flexibility and optimized cash flow.
  • 5Total debt increased to $9.65 billion, largely due to financing for the Inotera acquisition, though cash and equivalents remained robust at $4.14 billion.
  • 6Capital expenditures for property, plant, and equipment are projected to be between $4.8 billion and $5.2 billion for the full year 2017, indicating continued investment in growth.
  • 7The company experienced strong performance in its Compute and Networking (CNBU) and Embedded (EBU) business units, with significant sales growth.

Frequently Asked Questions

The primary driver of Micron's revenue growth was a significant increase in the volume of DRAM gigabits sold, coupled with improved average selling prices across its key segments, particularly in the Compute and Networking (CNBU) and Embedded Business Unit (EBU).

The acquisition of the remaining 67% of Inotera for $4.1 billion, largely financed by new debt, led to an increase in total debt to $9.65 billion. While this strengthens Micron's control over DRAM production and is expected to enhance operational flexibility, it also increases the company's leverage. Cash reserves remain strong at $4.14 billion, providing a buffer.

Micron anticipates significant capital expenditures for property, plant, and equipment, estimated between $4.8 billion and $5.2 billion for the full fiscal year 2017. This indicates a strong commitment to investing in manufacturing technology, facilities, and R&D to maintain competitiveness and support future growth.

Micron is involved in several legal proceedings, including patent infringement lawsuits from entities like Elm 3DS Innovations, Innovative Memory Solutions, and Harvard University. Additionally, there is an ongoing challenge from the Qimonda insolvency administrator regarding the acquisition of Inotera shares from Qimonda. The company states it cannot predict the outcome or estimate the range of possible losses for these matters, which could materially affect its business.