Micron Technology, Inc., Reports Results for the Third Quarter of Fiscal 2016

(1) Other non-operating income (expense) consisted of the following:

   3rd Qtr.  2nd Qtr.  3rd Qtr.  Nine Months Ended
   June 2,
 2016
  March 3,
 2016
  June 4,
 2015
  June 2,
 2016
  June 4,
 2015
Loss from changes in currency exchange rates $(5) $(5) $1  $(13) $(26)
Loss on restructure of debt (3)   (18) (4) (48)
Other (26) (1) 1  (27) 3 
  $(34) $(6) $(16) $(44) $(71)
                     

In the third quarter of fiscal 2016, the company recognized other non-operating expense of $30 million to write off indemnification receivables upon the resolution of uncertain tax positions. In the first nine months of fiscal 2015, the company recognized losses of $48 million from transactions to restructure its debt, including conversions, settlements, and repurchases of convertible notes, and the early repayment of a note.

(2) Income taxes for the third quarter of fiscal 2016, second quarter of fiscal 2016, and third quarter of fiscal 2015 included provisions of $71 million, $10 million and $67 million, respectively, related to utilization of, and other changes in, deferred tax assets of MMJ and MMT. Income taxes for the third and second quarters of fiscal 2016 also included tax benefits of $52 million and $6 million, respectively, related to the favorable resolution of certain prior year tax matters. Income taxes in the first quarter of fiscal 2016 included a benefit of $41 million from business acquisition activities. Remaining taxes for fiscal 2016 and 2015 primarily reflect taxes for the company's non-U.S. operations. Income taxes for U.S. operations in fiscal 2016 and 2015 were substantially offset by changes in the valuation allowance.

(3) On April 26, 2016, the company entered into the 2022 Term Loan B and drew an aggregate principal amount of $750 million due April 2022. The 2022 Term Loan B is collateralized by substantially all of the assets of Micron Technology, Inc. (the parent company) and Micron Semiconductor Products, Inc. ("MSP"), a subsidiary of the parent company, subject to certain exceptions and permitted liens on such assets. The assets collateralizing the 2022 Term Loan B also collateralize the 2023 Secured Notes, described below, on an equal and ratable basis, subject to certain limitations. Issuance costs for the 2022 Term Loan B totaled $16 million, which included an original issue discount of 1% of the initial aggregate principal amount.

On April 26, 2016, the company issued $1.25 billion in principal amount of 2023 Secured Notes due September 2023. The 2023 Secured Notes are collateralized by substantially all of the assets of Micron Technology, Inc. and MSP, subject to certain exceptions and permitted liens on such assets, on an equal and ratable right with the 2022 Term Loan B described above, subject to certain exceptions. Issuance costs for the 2023 Secured Notes totaled $13 million.

In connection with entering into the 2022 Term Loan B, on April 25, 2016, the company terminated its revolving credit facility entered into on December 2, 2014, and repaid the $50 million outstanding principal amount.

In the third and second quarters of fiscal 2016, the company recorded capital lease obligations aggregating $130 million and $424 million, respectively, at weighted-average effective interest rates of 3.5% and 2.7%, respectively. In the first quarter of fiscal 2016, the company drew the remaining $174 million of financing under a term loan agreement, collateralized by certain property, plant, and equipment.

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

     3rd Qtr.  2nd Qtr.
     June 2,
 2016
  March 3,
 2016
GAAP net income (loss) attributable to Micron   $(215) $(97)
Non-GAAP adjustments:         
Restructure and asset impairments       25     1  
Amortization of debt discount and other costs       30     31  
Loss on restructure of debt       3      
(Gain) loss from changes in currency exchange rates       5     5  
Other       2      
Estimated tax effects of above items           (1 )
Non-cash taxes from MMJ, MMT, and Inotera       71     13  
Total non-GAAP adjustments       136     49  
Non-GAAP net income (loss) attributable to Micron       $ (79 )   $ (48 )
             
Number of shares used in diluted per share calculations:            
GAAP       1,036     1,036  
Effect of capped calls            
Non-GAAP       1,036     1,036  
             
Diluted earnings (loss) per share:            
GAAP       $ (0.21 )   $ (0.09 )
Effects of above       0.13     0.04  
Non-GAAP       $ (0.08 )   $ (0.05 )
                     

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