Micron Technology, Inc., Reports Results for the Second Quarter of Fiscal 2019

(1) In the first quarter of 2019, we adopted ASU 2014-09 – Revenue from Contracts with Customers (as amended, "ASC 606"), which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of ASC 606 is that an entity should recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted ASC 606 in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments to our opening balances as of August 31, 2018. Adjustments to opening balances included an increase to receivables of $114 million, reduction of deferred tax assets of $92 million, increase of other current assets of $30 million, and an increase to retained earnings of $50 million.

(2) On February 6, 2019, we issued $600 million, $500 million, and $700 million in principal of senior unsecured notes due in 2024, 2026, and 2029, respectively. On February 8, 2019, we notified the holders of our convertible senior notes due in 2043 ("2043G Notes") that we would redeem all of the outstanding 2043G Notes on March 13, 2019. In connection with our notice, we made an irrevocable election to settle any conversions in cash. As a result, we reclassified $336 million from equity to a derivative debt liability.  As of February 28, 2019, current debt included an aggregate of $1.11 billion for the settlement obligation (including principal and amounts in excess of principal) of all of our 2043G Notes. In the second quarter of 2019, we recognized non-operating losses of $84 million related to the redemption of the 2043G notes. On March 13, 2019, we paid $1.43 billion to settle the conversions.

(3) On December 22, 2017, the United States enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"), which imposed a one-time transition tax in 2018 (the "Repatriation Tax") and created a new minimum tax on certain foreign earnings. Our income tax provision consisted of the following:

   2nd Qtr.  1st Qtr.  2nd Qtr.  Six Months Ended
   February 28,
 2019
  November 29,
 2018
  March 1,
 2018
  February 28,
 2019
  March 1,
 2018
Income tax (provision) benefit, excluding items below $(216) $(378) $5  $(594) $(83)
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW (78) (52) (17) (130) (43)
Repatriation Tax, net of adjustments related to uncertain tax positions 14  (47) (1,335) (33) (1,335)
Release of the valuation allowance on the net deferred tax assets of our U.S. operations     1,337    1,337 
Remeasurement of deferred tax assets and liabilities reflecting the lower U.S. corporate tax rates     (133)   (133)
  $(280) $(477) $(143) $(757) $(257)

(4) On January 14, 2019, we exercised our option to acquire Intel's interest in our joint venture, IM Flash Technologies, LLC ("IMFT"). Intel can elect to set the closing date of the transaction to be any time between approximately six months to one year from the date we exercised our call option. At the time of closing, we expect to pay Intel approximately $1.5 billion in cash for Intel's noncontrolling interest in IMFT and IMFT member debt. Current debt as of February 28, 2019 included $1.0 billion for IMFT member debt.

(5) In the second quarter of 2019, we repurchased 21 million shares of our common stock for $702 million through a Rule 10b5-1 plan. The shares were recorded as treasury stock. In the first quarter of 2019, we repurchased 42 million shares of our common stock for $1.80 billion.


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

   2nd Qtr.  1st Qtr.  2nd Qtr.
    February 28,
2019
  November 29,
2018
  March 1,
2018
GAAP gross margin   $ 2,864     $ 4,615     $ 4,270  
Stock-based compensation   23     26     22  
Start-up and preproduction costs   15     8      
Employee severance   13     13      
Other   13     8     4  
Non-GAAP gross margin   $ 2,928     $ 4,670     $ 4,296  
             
GAAP operating income   $ 1,957     $ 3,759     $ 3,567  
Stock-based compensation   57     61     52  
Start-up and preproduction costs   15     8      
Employee severance   17     20      
Restructure and asset impairments   51     30     7  
Other   13     9     4  
Non-GAAP operating income   $ 2,110     $ 3,887     $ 3,630  
             
GAAP net income attributable to Micron   $ 1,619     $ 3,293     $ 3,309  
Stock-based compensation   57     61     52  
Start-up and preproduction costs   15     8      
Employee severance   17     20      
Restructure and asset impairments   51     30     7  
Amortization of debt discount and other costs   11     18     26  
(Gain) loss on debt repurchases and conversions   83     (14 )   23  
(Gain) loss from changes in currency exchange rates   3     5     27  
Other   13     10     7  
Impact of U.S. income tax reform   (14 )   47     131  
Estimated tax effects of above, non-cash changes in net deferred income taxes, and assessments of tax exposures   116     30     (87 )
Non-GAAP net income attributable to Micron   $ 1,971     $ 3,508     $ 3,495  
             
GAAP weighted-average common shares outstanding - Diluted   1,141     1,174     1,238  
Adjustment for capped calls and stock-based compensation   8     5     2  
Non-GAAP weighted-average common shares outstanding - Diluted   1,149     1,179     1,240  
             
GAAP diluted earnings per share   $ 1.42     $ 2.81     $ 2.67  
Effects of the above adjustments   0.29     0.16     0.15  
Non-GAAP diluted earnings per share   $ 1.71     $ 2.97     $ 2.82  
                         

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