10-QPeriod: Q3 FY2017

MICRON TECHNOLOGY INC Quarterly Report for Q2 Ended Mar 2, 2017

Filed March 28, 2017For Securities:MU

Summary

Micron Technology, Inc. reported a significant turnaround in its financial performance for the quarter and six months ended March 2, 2017, compared to the prior year. Revenue experienced a substantial increase, driven by improved average selling prices and higher unit volumes, particularly in DRAM products. This revenue growth translated into a strong recovery in profitability, with the company reporting a net income of $894 million for the quarter, a stark contrast to the net loss of $97 million in the same period last year. The company also highlighted the completion of its acquisition of the remaining 67% interest in Inotera on December 6, 2016, a move expected to enhance operational flexibility and optimize cash flow deployment. While this acquisition increased debt levels, it also provided significant strategic advantages. Management expressed confidence in the company's ability to meet its financial obligations, projecting sufficient cash and investments to cover requirements for at least the next 12 months.

Financial Highlights

53 data points
Beta

Revenue

$5.57B

46.9% Gross Margin

Net Income

$1.65B

29.6% Net Margin

EPS (Diluted)

$1.40

Total Assets

$33.27B

Cash & Equivalents

$4.05B

Free Cash Flow

$1.37B

Financial Statements
Beta
Revenue$5.57B
Cost of Revenue$2.96B
Gross Profit$2.61B
R&D Expenses$434.00M
SG&A Expenses$204.00M
Operating Income$1.96B
Interest Expense$153.00M
Net Income$1.65B
EPS (Basic)$1.49
EPS (Diluted)$1.40
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Substantial revenue growth of 58% year-over-year for the second quarter, reaching $4.65 billion, driven by strong DRAM performance.
  • 2Significant improvement in profitability, with net income of $894 million in Q2 FY17, compared to a net loss of $97 million in Q2 FY16.
  • 3Completion of the acquisition of the remaining 67% of Inotera for $4.1 billion, enhancing operational flexibility and strategic positioning.
  • 4Gross margin improved dramatically to 37% from 20% year-over-year, reflecting improved pricing and cost efficiencies.
  • 5Operating income of $1.04 billion, a significant turnaround from an operating loss of $5 million in the prior year period.
  • 6Increased capital expenditures planned for FY17, estimated between $4.8 billion and $5.2 billion, indicating investment in future growth and technology.
  • 7The company successfully managed its debt, with tender offers to reduce outstanding notes, and maintained adequate liquidity to meet its obligations.

Frequently Asked Questions

The primary driver for Micron's strong financial performance was the significant improvement in the DRAM market. This included an increase in average selling prices (ASPs) and higher unit volumes sold, particularly in the Compute and Networking Business Unit (CNBU). Additionally, improvements in manufacturing cost per gigabit and the successful integration of Inotera contributed to the robust results.

The acquisition of the remaining 67% of Inotera is expected to provide Micron with greater operational flexibility, enable better optimization of cash flows across its operations, and enhance its ability to adapt product offerings to market changes. It also brings Inotera's DRAM manufacturing facility fully under Micron's control, potentially leading to better integration and cost efficiencies.

Micron has taken steps to manage its debt, including commencing tender offers to repurchase senior notes. The company stated that its cash and investments, cash flows from operations, and available financing are expected to be sufficient to meet its requirements for at least the next 12 months. The acquisition of Inotera did increase debt levels, but management seems confident in their ability to service this debt.

Yes, the report highlights several risks. These include the highly competitive nature of the semiconductor memory industry with intense price pressure, the potential for future declines in average selling prices, risks associated with the integration of the Inotera acquisition, substantial debt obligations, and the continuous need for innovation and development of new memory technologies. Legal proceedings, particularly the patent infringement cases and the Qimonda matter, are also noted as potential risks.