Micron: Fiscal 2Q14 Financial Results

(in $ million)	2Q13	2Q14	6 mo. 13	6 mo. 14
Revenues	2,078	4,107	3,912	8,149
*Growth*		98%		*108%*
Net income (loss)	(286)	731	(561)	1,089

Micron Technology, Inc. announced results of operations for its second quarter of fiscal 2014, which ended February 27, 2014.

Revenues in the second quarter of fiscal 2014 were $4.11 billion and were 2% higher compared to the first quarter of fiscal 2014 and 98% higher compared to the second quarter of fiscal 2013.

GAAP Income and Per Share Data – On a GAAP basis, net income attributable to Micron shareholders in the second quarter of fiscal 2014 was $731 million, or $0.61 per diluted share, compared to net income of $358 million, or $0.30 per diluted share, in the first quarter of fiscal 2014 and a net loss of ($286) million, or ($0.28) per diluted share, in the second quarter of fiscal 2013.

Non-GAAP Income and Per Share Data – On a non-GAAP basis, net income attributable to Micron shareholders in the second quarter of fiscal 2014 was $989 million, or $0.85 per diluted share, compared to net income of $881 million, or $0.77 per diluted share, in the first quarter of fiscal 2014. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

Revenues from sales of Trade NAND Flash products were 11% higher in the second quarter of fiscal 2014 compared to the first quarter of fiscal 2014 primarily due to a 35% increase in sales volume offset by an 18% decrease in ASPs. Revenues from sales of DRAM products were essentially unchanged in the second quarter of fiscal 2014 compared to the first quarter of fiscal 2014 as both sales volumes and ASPs remained stable. The company’s overall consolidated gross margin was 34% in the second quarter of fiscal 2014 compared to 32% in the first quarter of fiscal 2014 as a result of a higher DRAM gross margin.

Cash flows from operations for the second quarter of fiscal 2014 were $1.39 billion, while investments in capital expenditures were $565 million. The company ended the second fiscal quarter with cash and marketable investments of $5.06 billion.

Comments

Mark Durcan, CEO:
"For NAND, we're projecting industry growth in the low 40% range for 2014. This includes an increase in industry wafer production of just over 10% with the remaining supply growth coming from technology. We expect 2015 to be in a similar range, but we could see a reduction in the growth rate beyond 2015 as 3D production becomes more predominant and there is a subsequent reduction in wafer output given the additional cleaning space required for 3D NAND. We are forecasting a five-year NAND demand CAGR in the high 30% to low 40% range."

Ron Foster, CFO:
"On the Trade NAND side, sales volume increased primarily as a result of the continued conversion of our same four fab operations to NAND. Trade NAND gross margins in the second quarter were in the high 20% range, down approximately 5 percentage points quarter-over-quarter. Selling prices came under pressure during the second quarter partially due to seasonality and partially due to increased sales in the channel for our incremental production. NAND bit cost reductions were achieved through higher sales volumes of advanced technology products and cost efficiencies associated with expanding production in our NAND focused Singapore operations.
"On a like-for-like product basis we expect to see some market price reductions for NAND in the third quarter. We expect a higher mix of Trade NAND sales in the third quarter to be in the form of SSDs, which have higher bit selling prices and higher costs. Notably SSDs also have longer manufacturing cycle times which impacts our Q3 bit production as we ramp to higher volumes."

Mark Adams, president:
"Our Trade NAND revenue was over $1 billion in the quarter, up 11% as we continue the conversion of fab seven in Singapore from DRAM to NAND. This conversion is now essentially complete as of Q3 although we will have a small amount of legacy specialty DRAM remaining for another quarter or so.
"We are continuing to shift our overall NAND production to our industry leading 16 nanometer technology which in our early ramp is shipping into consumer markets such as memory cards, USB storage devices and embedded consumer products. These transitions in our manufacturing output will enable a lower cost product mix in the future. We are currently in the qualification process at Q1 OEMs for our 20 nanometer M550 SSD products and anticipate shipping and volume for the back half of calendar 2014. Our Crucial branded M550 client SSD shipments will begin in volume in Q3.
"We continue to invest in our underlying NAND technology as well. Our 16 nanometer NAND yields have been very positive and position us well from a cost perspective. We are currently planning to ship 60 nanometer to TLC in calendar Q4 in order to better position our portfolio from a cost perspective in the retail and consumer segments. We are excited about our 3D NAND technology aimed at higher performance applications, still targeting volume production planned for fiscal 2015. While our DRAM business is performing well, we are committed to improving our long-term margin structure of this business."