Micron Technology, Inc. Reports Results for the Third Quarter of Fiscal 2021

Strong execution drives robust free cash flow

BOISE, Idaho, June 30, 2021 (GLOBE NEWSWIRE) -- Micron Technology , Inc. (Nasdaq: MU) today announced results for its third quarter of fiscal 2021, which ended June 3, 2021.

Fiscal Q3 2021 highlights

  • Revenue of $7.42 billion versus $6.24 billion for the prior quarter and $5.44 billion for the same period last year
  • GAAP net income of $1.74 billion, or $1.52 per diluted share
  • Non-GAAP net income of $2.17 billion, or $1.88 per diluted share
  • Operating cash flow of $3.56 billion versus $3.06 billion for the prior quarter and $2.02 billion for the same period last year

Micron Technology set multiple market and product revenue records in our third quarter and achieved the largest sequential earnings improvement in our history,” said Micron Technology President and CEO Sanjay Mehrotra. “Our industry-leading 1α DRAM and 176-layer NAND now represent a meaningful portion of our production, and Micron Technology is in the best position ever to capitalize on the long-term demand trends across the data center, intelligent edge and user devices.”

Quarterly Financial Results 
  GAAP(1)  Non-GAAP(2) 
(in millions, except per share amounts)FQ3-21FQ2-21FQ3-20FQ3-21FQ2-21FQ3-20
Revenue$7,422 $6,236 $5,438 $7,422 $6,236 $5,438 
Gross margin 3,126  1,649  1,763  3,185  2,054  1,804 
percent of revenue 42.1% 26.4% 32.4% 42.9% 32.9% 33.2%
Operating expenses 1,327  986  875  821  797  823 
Operating income 1,799  663  888  2,364  1,257  981 
percent of revenue 24.2% 10.6% 16.3% 31.9% 20.2% 18.0%
Net income attributable to Micron Technology  1,735  603  803  2,173  1,128  941 
Diluted earnings per share 1.52  0.53  0.71  1.88  0.98  0.82 

Investments in capital expenditures, net(2) were $2.04 billion for the third quarter of 2021, which resulted in adjusted free cash flows(2) of $1.52 billion. Micron Technology ended the quarter with cash, marketable investments, and restricted cash of $9.82 billion, for a net cash(2) position of $3.10 billion.

Business Outlook

The following table presents Micron Technology ’s guidance for the fourth quarter of 2021:

FQ4-21GAAP(1) OutlookNon-GAAP(2) Outlook
Revenue$8.2 billion ± $200 million$8.2 billion ± $200 million
Gross margin46.0% ± 1%47.0% ± 1%
Operating expenses$955 million ± $25 million$900 million ± $25 million
Diluted earnings per share$2.23 ± $0.10$2.30 ± $0.10

Further information regarding Micron Technology ’s business outlook is included in the prepared remarks and slides, which have been posted at investors.micron.com.

Investor Webcast

Micron Technology will host a conference call on Wednesday, June 30, 2021, at 2:30 p.m. MT, to discuss its third quarter financial results and provide forward-looking guidance for its fourth quarter. A live webcast of the call will be available online at investors.micron.com. A webcast replay will be available for one year after the call. For Investor Relations and other company updates, follow @MicronTech on Twitter at twitter.com/MicronTech.

About Micron Technology , Inc.

We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all. With a relentless focus on our customers, technology leadership, and manufacturing and operational excellence, Micron Technology delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron Technology ® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence and 5G applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience. To learn more about Micron Technology , Inc. (Nasdaq: MU), visit micron.com.

© 2021 Micron Technology , Inc. All rights reserved. Micron Technology , the Micron Technology logo, and all other Micron Technology trademarks are the property of Micron Technology , Inc. All other trademarks are the property of their respective owners.

Forward-Looking Statements

This press release contains forward-looking statements regarding our industry, our strategic position, the completion of and timing for closing the pending sale of our Lehi facility, and our financial and operating 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 management excludes in analyzing our operating results and understanding trends in our earnings, adjusted free cash flow, net cash, and business outlook. Further information regarding Micron Technology ’s use of non-GAAP measures and reconciliations between GAAP and non-GAAP measures are included within this press release.


MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)

 3rd Qtr.2nd Qtr. 3rd Qtr.Nine Months Ended
 June 3,
2021
March 4,
2021
May 28,
2020
June 3,
2021
May 28,
2020
      
Revenue$7,422 $6,236 $5,438 $19,431 $15,379 
Cost of goods sold 4,296  4,587  3,675  12,920  10,895 
Gross margin 3,126  1,649  1,763  6,511  4,484 
      
Research and development 670  641  649  1,958  1,970 
Selling, general, and administrative 230  214  216  658  650 
Restructure and asset impairments 453  5  4  466  10 
Other operating (income) expense, net (26) 126  6  101  8 
Operating income 1,799  663  888  3,328  1,846 
      
Interest income 8  10  23  28  101 
Interest expense (46) (42) (51) (136) (144)
Other non-operating income (expense), net 45  4  10  62  55 
  1,806  635  870  3,282  1,858 
      
Income tax (provision) benefit (65) (48) (68) (164) (144)
Equity in net income (loss) of equity method investees (6) 16  3  23  6 
Net income 1,735  603  805  3,141  1,720 
      
Net income attributable to noncontrolling interests     (2)   (21)
Net income attributable to Micron Technology $1,735 $603 $803 $3,141 $1,699 
      
Earnings per share
Basic$1.55 $0.54 $0.72 $2.81 $1.53 
Diluted 1.52  0.53  0.71  2.75  1.50 
      
Number of shares used in per share calculations     
Basic 1,121  1,120  1,111  1,119  1,110 
Diluted 1,145  1,144  1,129  1,141  1,131 



MICRON TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

 June 3,March 4,September 3, 
As of202120212020 
Assets 
Cash and equivalents$        7,759$        6,507$        7,624 
Short-term investments 590 677 518 
Receivables 4,231 3,353 3,912 
Inventories 4,537 4,743 5,373 
Assets held for sale 966 1,461  
Other current assets 478 538 538 
Total current assets 18,561 17,279 17,965 
Long-term marketable investments 1,399 1,316 1,048 
Property, plant, and equipment 32,209 31,848 31,031 
Operating lease right-of-use assets 558 575 584 
Intangible assets 350 342 334 
Deferred tax assets 822 726 707 
Goodwill 1,228 1,228 1,228 
Other noncurrent assets 816 821 781 
Total assets$        55,943$        54,135$        53,678 
    
Liabilities and equity   
Accounts payable and accrued expenses$        4,427$        4,550$        5,817 
Current debt 297 323 270 
Other current liabilities 738 560 548 
Total current liabilities 5,462 5,433 6,635 
Long-term debt 6,418 6,298 6,373 
Noncurrent operating lease liabilities 513 528 533 
Noncurrent unearned government incentives 722 661 643 
Other noncurrent liabilities 569 552 498 
Total liabilities 13,684 13,472 14,682 
    
Commitments and contingencies
   
Shareholders’ equity
Common stock120  120   119 
Additional capital9,285  9,234   8,917 
Retained earnings36,452  34,723   33,384 
Treasury stock(3,645) (3,495)  (3,495)
Accumulated other comprehensive income (loss)  47  81   71 
Total equity  42,259  40,663   38,996 
Total liabilities and equity$        55,943$   54,135$          53,678 


MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

   June 3,  May 28, 
Nine months ended 2021  2020 
Cash flows from operating activities      
Net income$3,141 $1,720 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation expense and amortization of intangible assets 4,593  4,083 
Amortization of debt discount and other costs 22  20 
Noncash restructure and asset impairment 446  (7)
Stock-based compensation 285  239 
(Gain) loss on debt prepayments, repurchases, and conversions 1  (40)
Change in operating assets and liabilities  
Receivables (340) (461)
Inventories 814  (248)
Accounts payable and accrued expenses (309) 700 
Deferred income taxes, net (94) 26 
Other 25  3 
Net cash provided by operating activities 8,584  6,035 
   
Cash flows from investing activities  
Expenditures for property, plant, and equipment (8,015) (5,943)
Purchases of available-for-sale securities (1,919) (793)
Proceeds from maturities of available-for-sale securities 1,024  636 
Proceeds from sales of available-for-sale securities 473  1,157 
Proceeds from government incentives 335  140 
Other 47  (48)
Net cash provided by (used for) investing activities (8,055) (4,851)
   
Cash flows from financing activities  
Repayments of debt (1,344) (4,286)
Payments on equipment purchase contracts (139) (49)
Acquisition of noncontrolling interest in IMFT   (744)
Proceeds from issuance of debt 1,188  5,000 
Other (142) (56)
Net cash provided by (used for) financing activities (437) (135)
   
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash 44  (8)
   
Net increase (decrease) in cash, cash equivalents, and restricted cash 136  1,041 
Cash, cash equivalents, and restricted cash at beginning of period 7,690  7,279 
Cash, cash equivalents, and restricted cash at end of period$7,826 $8,320 


MICRON TECHNOLOGY, INC. NOTES
(Unaudited)

Inventory

Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to FIFO. This change in accounting principle is preferable because in an environment with continuously changing production costs FIFO more closely matches the actual cost of goods sold with the revenues from sales of those specific units, better represents the actual cost of inventories remaining on hand at any period- end, and improves comparability with our semiconductor industry peers. The change to FIFO was not material to any prior periods, nor was the cumulative effect of $133 million material to the second quarter of 2021. As such, prior periods were not retrospectively adjusted, and the cumulative effect was reported as an increase to cost of goods sold for the second quarter of 2021 of $133 million, with an offsetting reduction to beginning inventories. This charge resulted in a corresponding reduction to operating income, a $128 million reduction to net income, and an $0.11 reduction to diluted earnings per share for both the second quarter and first nine months of 2021.

Beginning in the second quarter of 2021, we changed the classification of spare parts for equipment to better align with the manner in which they are used in operations. As a result, we now present spare parts as other current assets and no longer as a component of raw materials inventories. This reclassification was applied on a retrospective basis. As a result, $256 million of spare parts were presented in other current assets as of June 3, 2021, and we reclassified spare parts from inventories to other current assets of $270 million and $234 million in the accompanying balance sheets as of March 4, 2021 and September 3, 2020, respectively.

Lehi, Utah, Fab and 3D XPoint Change

In the second quarter of 2021, we updated our portfolio strategy to further strengthen our focus on memory and storage innovations for the data center market. In connection therewith, we determined that there was insufficient market validation to justify the ongoing investments required to commercialize 3D XPointTM at scale. Accordingly, we ceased development of 3D XPoint technology and engaged in discussions with potential buyers for the sale of our facility located in Lehi that was dedicated to 3D XPoint production. As a result, we classified the property, plant, and equipment as held-for-sale and ceased depreciating the assets. On June 30, 2021, we announced that we have entered into a definitive agreement to sell our Lehi facility to Texas Instruments for cash consideration of $900 million. The sale is anticipated to close later this calendar year.

In the third quarter of 2021, we recognized a charge of $435 million included in restructure and asset impairments (and a tax benefit of $104 million included in income tax (provision) benefit) to write down the assets held for sale to the expected consideration, net of estimated selling costs, to be realized from the sale of these assets and liabilities. The impairment charge was based on Level 3 inputs including expected consideration and the composition of assets included in the sale, which were derived from the agreement with TI. In the second quarter of 2021, we also recognized a charge of $49 million to cost of goods sold to write down 3D XPoint inventory due to our decision to cease further development of this technology.

As of June 3, 2021, the significant balances of assets held-for-sale in connection with our Lehi facility were as follows:

  June 3, 
As of 2021 
Property, plant, and equipment$        1,343 
Other current assets 52 
Impairment (435)
Lehi assets held for sale$        960 

As of June 3, 2021, we also had a $51 million finance lease obligation included in the current portion of long-term debt and $12 million of other liabilities that we expect to transfer with the sale. The expected cash consideration, net of estimated selling expenses, approximates the carrying value of the net assets and liabilities expected to transfer in the sale, after giving effect to the impairment charge discussed above.


MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In millions, except per share amounts)

 3rd Qtr.
June 3,
2021
2nd Qtr.
March 4,
2021
3rd Qtr.
May 28,
2020
GAAP gross margin$3,126 $1,649 $1,763 
Stock-based compensation 45  57  34 
Inventory accounting policy change to FIFO   133   
Change in inventory cost absorption   160   
3D XPoint inventory write-down   49   
Other 14  6  7 
Non-GAAP gross margin$3,185 $2,054 $1,804 
    
GAAP operating expenses$1,327 $986 $875 
Stock-based compensation (53) (55) (48)
Patent license charges   (128)  
Restructure and asset impairments (453) (5) (4)
Other   (1)  
Non-GAAP operating expenses$821 $797 $823 
    
GAAP operating income$1,799 $663 $888 
Stock-based compensation 98  112  82 
Inventory accounting policy change to FIFO   133   
Change in inventory cost absorption   160   
3D XPoint inventory write-down   49   
Patent license charges   128   
Restructure and asset impairments 453  5  4 
Other 14  7  7 
Non-GAAP operating income$2,364 $1,257 $981 
    
GAAP net income attributable to Micron Technology $1,735 $603 $803 
Stock-based compensation 98  112  82 
Inventory accounting policy change to FIFO   133   
Change in inventory cost absorption   160   
3D XPoint inventory write-down   49   
Patent license charges   128   
Restructure and asset impairments 453  5  4 
Amortization of debt discount and other costs 7  8  4 
Other 15  7  9 
Estimated tax effects of above and other tax adjustments (135) (77) 39 
Non-GAAP net income attributable to Micron Technology $2,173 $1,128 $941 
    
GAAP weighted-average common shares outstanding - Diluted 1,145  1,144  1,129 
Adjustment for stock-based compensation and capped calls 9  10  13 
Non-GAAP weighted-average common shares outstanding - Diluted 1,154  1,154  1,142 
    
GAAP diluted earnings per share$1.52 $0.53 $0.71 
Effects of the above adjustments 0.36  0.45  0.11 
Non-GAAP diluted earnings per share$1.88 $0.98 $0.82 


RECONCILIATION OF GAAP TO NON-GAAP MEASURES, Continued

  3rd Qtr.
June 3,
2021
 2nd Qtr.
March 4,
2021
3rd Qtr.
May 28,
2020
    
GAAP net cash provided by operating activities$3,560 $3,057 $2,023 
Investments in capital expenditures, net   
Expenditures for property, plant, and equipment, net(1) (2,185) (3,000) (1,937)
Payments on equipment purchase contracts (16) (26) (20)
Amounts funded by partners 159  143  35 
Adjusted free cash flow$1,518 $174 $101 

(1) Expenditures for property, plant, and equipment, net include proceeds from sales of property, plant, and equipment of $74 million for the third quarter of 2021, $18 million for the second quarter of 2021, and $7 million for the third quarter of 2020.

          
          
  June 3,
  March 4,
  September 3,
 
As of 2021  2021  2020 
Cash and short-term investments$8,349 $7,184 $8,142 
Current and noncurrent restricted cash 67  67  66 
Long-term marketable investments 1,399  1,316  1,048 
Current and long-term debt (6,715) (6,621) (6,643)
Net cash$3,100 $1,946 $2,613 

The tables above reconcile GAAP to non-GAAP measures of gross margin, operating expenses, operating income, net income attributable to Micron Technology , diluted shares, diluted earnings per share, adjusted free cash flow, and net cash. 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 in 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 varies from amounts 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;
  • Acquisition-related costs;
  • Start-up and preproduction costs;
  • Employee severance;
  • Patent license charges;
  • Restructure and asset impairments;
  • Amortization of debt discount and other costs, including the accretion of non-cash interest expense associated with our convertible notes and other debt;
  • Gains and losses from debt repurchases and conversions;
  • Gains and losses from business acquisition activities;
  • Initial impact of inventory accounting policy change to FIFO and change in inventory cost absorption in the second quarter of 2021; and
  • The estimated tax effects of above, non-cash changes in net deferred income taxes, assessments of tax exposures, certain tax matters related to prior fiscal periods, and significant changes in tax law.

Non-GAAP diluted shares are adjusted for the impact of additional shares resulting from the exclusion of stock- based compensation from non-GAAP income. Non-GAAP diluted shares also include the impact of capped calls, which are anti-dilutive in GAAP earnings per share but are expected to mitigate the dilutive effect of convertible notes, based on the average share price for the period the capped calls were outstanding.

MICRON TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK

FQ4-21 GAAP Outlook Adjustments
 Non-GAAP Outlook
Revenue $8.2 billion ± $200 million   $8.2 billion ± $200 million 
Gross margin46.0% ± 1% 1% A 47.0% ± 1%
Operating expenses$955 million ± $25 million $55 million B $900 million ± $25 million
Diluted earnings per share(1)$2.23 ± $0.10 $0.07 A, B, C $2.30 ± $0.10
        
Non-GAAP Adjustments     
(in millions)       
A   Stock-based compensation – cost of goods sold$45
A   Other – cost of goods sold   6
B   Stock-based compensation – research and development30
B   Stock-based compensation – sales, general, and administrative25
C   Tax effects of the above items and non-cash changes in net deferred income taxes    (25)
      $81

(1) GAAP and non-GAAP earnings per share based on approximately 1.15 billion diluted shares.

The tables above reconcile our GAAP to non-GAAP guidance based on the current outlook. The guidance does not incorporate the impact of any potential business combinations, divestitures, restructuring activities, balance sheet valuation adjustments, strategic investments, financing transactions, and other significant transactions. The timing and impact of such items are dependent on future events that may be uncertain or outside of our control.

CONTACT: Contacts:

Farhan Ahmad
 Investor  Relations
farhanahmad@micron.com
(408) 834-1927

Erica Rodriguez Pompen 
Media Relations 
epompen@micron.com
(408) 834-1873