Micron: Fiscal 1Q15 Financial Results

(in $ million)	1Q14	1Q15
Revenue	4,042	4,573
*Growth*		13%
Net income (loss)	358	1,003

Micron Technology, Inc. announced results of operations for its first quarter of fiscal 2015, which ended December 4, 2014.

Revenues for the first quarter of fiscal 2015 were $4.57 billion and were 8% higher compared to the fourth quarter of fiscal 2014 and 13% higher compared to the first quarter of fiscal 2014.

Cash flows from operations were $1.59 billion for the first quarter of fiscal 2015.

“Micron’s execution and continued favorable market conditions led to a strong first quarter with record revenues and operating cash flows,” said CEO Mark Durcan.

GAAP Income and Per Share Data
On a GAAP basis, net income attributable to Micron shareholders for the first quarter of fiscal 2015 was $1.00 billion, or $0.84 per diluted share, compared to net income of $1.15 billion, or $0.96 per diluted share, for the fourth quarter of fiscal 2014 and net income of $358 million, or $0.30 per diluted share, for the first quarter of fiscal 2014. The fourth quarter of fiscal 2014 included gains aggregating approximately $400 million from increases in deferred tax assets of Micron Memory Japan and Micron Memory Taiwan, the sale of the company’s interest in Aptina and Inotera’s issuance of shares.

Non-GAAP Income and Per Share Data
On a non-GAAP basis, net income attributable to Micron shareholders for the first quarter of fiscal 2015 was $1.14 billion, or $0.97 per diluted share, compared to net income of $961 million, or $0.82 per diluted share, for the fourth quarter of fiscal 2014. For a reconciliation of GAAP to non-GAAP results, see the accompanying financial tables and footnotes.

The company’s overall consolidated gross margin of 36% for the first quarter of fiscal 2015 was up from 33% for the fourth quarter of fiscal 2014.

Investments in capital expenditures were $669 million for the first quarter of fiscal 2015. The company ended the first quarter of fiscal 2015 with cash and marketable investments of $5.31 billion.

In the first quarter of fiscal 2015, the company continued to restructure its debt, resulting in aggregate losses of $30 million. The debt restructure transactions included settlements of conversions of the company’s 2031B Notes for $389 million in cash; repurchases of $36 million principal amount the company’s 2032 series notes in privately-negotiated transactions for $125 million; and the repayment of a $121 million note prior to its scheduled maturity. In the fourth and first quarters of fiscal 2014, the company recognized losses of $13 million and $75 million, respectively, from transactions to restructure its debt, including conversions, settlements, repurchases and exchange transactions.

The company previously held an equity interest in Aptina Imaging Corporation, which was accounted for under the equity method. On August 15, 2014, ON Semiconductor Corporation completed its acquisition of Aptina. In connection therewith, the company recognized a gain of $119 million in the fourth quarter of fiscal 2014 based on its diluted ownership interest in Aptina of approximately 27%.

Other non-operating income in the fourth quarter of fiscal 2014 included a gain of $93 million recognized in connection with the issuance of common shares by Inotera Memory, Inc., an equity method investment of the company, in May 2014. As a result of the issuance, the company’s interest in Inotera decreased to 33% in May 2014.

Comments

Mark Durcan, CEO:
"We expect continued favorable market conditions for 2015 led by constrained supply in DRAM and solid demand for both DRAM and NAND.
"We are projecting industry supply growth in the high 30% to mid-40% range for 2015 with a significant portion of the range based on deployment of TLC.
"We also remained very comfortable with the status of our 3D NAND technology development which of course is occurring in collaboration with our JV partner, Intel. 3D NAND enables cost and performance optimization beyond the capabilities of Planar NAND with enhanced product performance across a broad portfolio of applications and significant cost per bit reductions overtime. We commenced early 3D samples in calendar Q4 of 2014 and expect volume commercial production in the second half of calendar year 2015.
"Given the confidence in our technology we recently announced plans to add additional clean room space in Singapore to enable our ramp of 3D NAND as well as other emerging memory technologies. This addition effectively doubles the existing fab 10 clean room space and once completed will create additional economies of scale for our non-volatile memory operations in Singapore.
"The CapEx for this project is estimated to be about $4 billion spent over a number of years with tool installs and production expected to begin in calendar ‘16 and calendar ‘17 respectively. We expect to reserve a portion of this capacity for Intel under our supply agreement.
"Our Q2 revenue guidance is $4.1 billion to $4.3 billion.
"Turning to bit supply and our NAND business, Q2 is marked by a significant shift in the mix towards the mobile segment. The mobile NAND is characterized by higher ASPs, higher cost per bit and lower bit output per wafer compared to our portfolio average.
"This shift in mobile or to mobile is a part of reason our NAND bit growth will also be below the market for calendar year 2015."

Mark Adams, president:
"Our Storage Business Unit or SBU achieved $987 million in revenue in Q1, up 9% quarter-on-quarter. Our SBU operating margins were stable this quarter despite some challenging pricing dynamics. It appears there has been some additional TLC capacity, in both the channel components and client SSD segments which applied downward pressure on pricing towards the end of our first quarter and into our current quarter.
"We expect to have 50% of our client-SSD shipments on 16-nanometer by the end of our first quarter.
"Micron will continue to increase our leadership in overall NAND scaling demonstrated by our vertical cell 256 gigabit MLC and 384 gigabit TLC 3D NAND devices, which we believe will have the highest density per square inch of silicon in the industry. We are now sampling our 3D NAND component and remain on track for initial commercial production during the second half of calendar 2015.
" (...) revenue for NAND sold into the mobile segment was up over 45% quarter-over-quarter.
"Our Enterprise SSD business set a revenue record in Q1 and margins were up quarter-over-quarter as the team drove qualifications of our M500DC product into cloud and datacenter customers
"It is worthy of note that we have recorded our fourth consecutive quarter of growth in NOR product shipments with over 470% now on our 45-nanometer process.
"On the NAND front pricing saw some softness during the last month of Q1 and the first month of Q2. That being said we are seeing some signs of improved price in NAND of late including tightened of supply in certain segments such as low density consumer NAND. Our sense is that client SSD inventory at Tier 1 OEM is still somewhat high post-Christmas."

Ronald Foster, CFO:
"On the trade NAND side revenue increased 14% in the first quarter with a 20% increase in bit sales volume, partially offset by a 6% decrease in average selling price. Trade NAND gross margin was down slightly to the mid-20% range as cost reductions per bit partially offset decreases in selling prices. Trade NAND gross margins for the second quarter using quarter-to-date ASP and projected mix for the quarter are expected to be down low to mid-single digits compared to Q1 based on bit production flat to down low-single digits with the normal 13 week period in Q2 as I mentioned. ASPs flat to down low-single digits and cost per bit up mid-single digits primarily relating to mix."