We are developing new products, including system-level memory and storage products and solutions, which complement our traditional products or leverage their underlying design or process technology. We have made significant investmentsinvested and expect to continue to invest in product and process technology and anticipate expending significant resources for new semiconductor product development overand system-level solution development. We are increasingly differentiating our products and solutions to meet the next several years.specific demands of our customers, which increases our reliance on our customers’ ability to accurately forecast the needs and preferences of their customers. As a result, our product demand forecasts may be impacted significantly by the strategic actions of our customers. In addition, our ability to successfully introduce new products often requires us to make product specification decisions multiple years in advance of when new products enter the market.
We have entered into strategic relationships, including our IMFT joint venture with Intel, to manufacture products and develop new manufacturing process technologies and products. These joint ventures and strategic relationships are subject to various risks that could adversely affect the value of our investments and our results of operations. These risks include the following:
our interests could diverge from our partners' interests or we may not be able to agree with our partners on ongoing manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint ventures;
our joint venture partners' products may compete with our products;
we may experience difficulties in transferring technology to joint ventures;
we may experience difficulties and delays in ramping production at joint ventures;
our control over the operations of our joint ventures is limited;
due to financial constraints, our joint venture partners may be unable to meet their commitments to us or our joint ventures and may pose credit risks for our transactions with them;
due to differing business models or long-term business goals, we and our partners may not participate to the same extent on funding capital investments in our joint ventures;
cash flows may be inadequate to fund increased capital requirements of our joint ventures;
we may experience difficulties or delays in collecting amounts due to us from our joint ventures and partners;
the terms of our partnering arrangements may turn out to be unfavorable; and
changes in tax, legal, or regulatory requirements may necessitate changes in the agreements with our partners.
Our joint ventures and strategic relationships, if unsuccessful, could have a material adverse effect on our business, results of operations, or financial condition.
A significant concentrationportion of our net sales are torevenue is concentrated with a select number of customers.
In each of the last three years, approximately one-half of our total net sales were torevenue was from our top ten customers. A disruption in our relationship with any of these customers could adversely affect our business. We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. Our customers’ demand for our products may fluctuate due to factors beyond our control. In addition, any consolidation of our customers could reduce the number of customers to whom our products couldmay be sold. Our inability to meet our customers'customers’ requirements or to qualify our products with them could adversely impact our sales.revenue. A meaningful change in the inventory strategy of our customers could impact our industry bit demand growth outlook. The loss of, or restrictions on our ability to sell to, one or more of our major customers, or any significant reduction in orders from, or a shift in product mix by, these customers could have a material adverse effect on our business, results of operations, or financial condition.
We face geopolitical and other risks associated with our international operations that could materially adversely affect our business, results of operations, or financial condition.
In addition to our U.S. operations, a substantial portion of our operations are conducted in Taiwan, Singapore, Japan, Malaysia, China, and India, and many of our customers, suppliers, and vendors also operate internationally. In 2022, nearly half of our revenue was from sales to customers who have headquarters located outside the United States, while over 80% of our revenue in 2022 was from products shipped to customer locations outside the United States.
Our international operations are subject to a number of risks, including:
•export and import duties, changes to import and export regulations, customs regulations and processes, and restrictions on the transfer of funds, including currency controls in China, which could negatively affect the amount and timing of payments from certain of our customers and, as a result, our cash flows;
•imposition of bans on sales of goods or services to one or more of our significant foreign customers;
•public health issues;
•compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, sanctions and anti-corruption laws, export and import laws, and similar rules and regulations;
•theft of intellectual property;
•political and economic instability, including the effects of disputes between China and Taiwan and Russia’s invasion of Ukraine;
•government actions or civil unrest preventing the flow of products and materials, including delays in shipping and obtaining products and materials, cancellation of orders, or loss or damage of products;
•problems with the transportation or delivery of products and materials;
•issues arising from cultural or language differences and labor unrest;
•longer payment cycles and greater difficulty in collecting accounts receivable;
•compliance with trade, technical standards, and other laws in a variety of jurisdictions;
•contractual and regulatory limitations on the ability to maintain flexibility with staffing levels;
•disruptions to manufacturing or R&D activities as a result of actions imposed by foreign governments;
•changes in economic policies of foreign governments; and
•difficulties in staffing and managing international operations.
If we or our customers, suppliers, or vendors are impacted by any of these risks, it could have a material adverse effect on our business, results of operations, or financial condition. For example, political, economic, or other actions may adversely affect our operations in Taiwan. A majority of our DRAM production output in 2022 was from our fabrication facilities in Taiwan and any loss of output could have a material adverse effect on us. Any political, economic, or other actions may also adversely affect our customers and the technology industry supply chain, for which Taiwan is a central hub, and as a result, could have a material adverse impact on us.
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In addition, the U.S. government has in the past restricted American firms from selling products and software to certain of our customers and may in the future impose similar restrictions on one or more of our significant customers. These restrictions may not prohibit our competitors from selling similar products to our customers, which may result in our loss of sales and market share. Even when such restrictions are lifted, financial or other penalties or continuing export restrictions imposed with respect to our customers could have a continuing negative impact on our future revenue and results of operations, and we may not be able to recover any customers or market share we lose, or make such recoveries at acceptable average selling prices, while complying with such restrictions.
Our business, results of operations, or financial condition could be adversely affected by the limited availability and quality of materials, supplies, and capital equipment, or dependency on third-party service providers.
Our supply chain and operations are dependent on the availability of materials that meet exacting standards and the use of third parties to provide us with components and services. We generally have multiple sources of supply for our materials and services. However, only a limited number of suppliers are capable of delivering certain materials, components, and services that meet our standards and, in some cases, materials, components, or services are provided by a single or sole source, and we may be unable to qualify new suppliers on a timely basis. The availability of materials or components such as chemicals, silicon wafers, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, targets, and reticle glass blanks is impacted by various factors. These factors could include a shortage of raw materials or a disruption in the processing or purification of those raw materials into finished goods. Shortages or increases in lead times have occurred in the past, are currently occurring with respect to some materials and components, and may occur from time to time in the future. Constraints within our supply chain for certain materials and integrated circuit components could limit our bit shipments, which could have a material adverse effect on our business, results of operations, or financial condition.
Our manufacturing processes are also dependent on our relationships with third-party manufacturers of controllers, analog integrated circuits, and other components used in some of our products and with outsourced semiconductor foundries, assembly and test providers, contract manufacturers, logistics carriers, and other service providers, including providers of electricity and other utilities. Although we have certain long-term contracts with some of our suppliers, many of these contracts do not provide for long-term capacity or pricing commitments. To the extent we do not have firm commitments from our third-party suppliers over a specific time period or for any specific capacity, quantity, and/or pricing, our suppliers may allocate capacity to their other customers and capacity and/or materials may not be available when needed or at reasonable prices. Inflationary pressures and shortages have increased, and may continue to increase, costs for materials, supplies, and services. Regardless of contract structure, large swings in demand may exceed our contracted supply and/or our suppliers’ capacity to meet those demand changes resulting in a shortage of parts, materials, or capacity needed to manufacture our products. In addition, if any of our suppliers was to cease operations or become insolvent, this could impact their ability to provide us with necessary supplies, and we may not be able to obtain the needed supply in a timely way or at all from other providers.
Certain materials are primarily available in a limited number of countries, including rare earth elements, minerals, and metals. Trade disputes, geopolitical tensions, economic circumstances, political conditions, or public health issues, such as COVID-19, may limit our ability to obtain such materials. Although these rare earth and other materials are generally available from multiple suppliers, China is the predominant producer of certain of these materials. If China were to restrict or stop exporting these materials, our suppliers’ ability to obtain such supply may be constrained and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost. Constrained supply of rare earth elements, minerals, and metals may restrict our ability to manufacture certain of our products and make it difficult or impossible to compete with other semiconductor memory manufacturers who are able to obtain sufficient quantities of these materials from China.
We and/or our suppliers and service providers could be affected by regional conflicts, sanctions, tariffs, embargoes, or other trade restrictions, as well as laws and regulations enacted in response to concerns regarding climate change, conflict minerals, responsible sourcing practices, public health crises, contagious disease outbreaks, or other matters, which could limit the supply of our materials and/or increase the cost. Environmental regulations could limit our ability to procure or use certain chemicals or materials in our operations or products. In addition, disruptions in transportation lines could delay our receipt of materials. Our ability to procure components to repair equipment essential for our manufacturing processes could also be negatively impacted by various restrictions or disruptions in supply chains, among other items. The disruption of our supply of materials, components, or services, or the extension of our lead times could have a material adverse effect on our business, results of operations, or financial condition.
Our operations are dependent on our ability to procure advanced semiconductor manufacturing equipment that enables the transition to lower cost manufacturing processes. For certain key types of equipment, including photolithography tools, we are sometimes dependent on a single supplier. From time to time, we have experienced difficulties in obtaining some equipment on a timely basis due to suppliers’ limited capacity. Our inability to obtain equipment on a timely basis could adversely affect our ability to transition to next generation manufacturing processes and reduce our costs. Delays in obtaining equipment could also impede our ability to ramp production and could increase our overall costs of a ramp. Our inability to obtain advanced semiconductor manufacturing equipment in a timely manner could have a material adverse effect on our business, results of operations, or financial condition.
Our construction projects to expand production and R&D capacity are highly dependent on available sources of labor, materials, equipment, and services. Increasing demand, supply constraints, inflation, and other market conditions could result in increasing shortages and higher costs for these items. Difficulties in obtaining these resources could result in significant delays in completion of our construction projects and cost increases, which could have a material adverse effect on our business, results of operations, or financial condition.
Our inability to source materials, supplies, capital equipment, or third-party services could affect our overall production output and our ability to fulfill customer demand. Significant or prolonged shortages of our products could halt customer manufacturing and damage our relationships with these customers. Any damage to our customer relationships as a result of a shortage of our products could have a material adverse effect on our business, results of operations, or financial condition.
Similarly, if our customers experience disruptions to their supplies, materials, components, or services, or the extension of their lead times, they may reduce, cancel, or alter the timing of their purchases with us, which could have a material adverse effect on our business, results of operations, or financial condition.
The continued effects of the COVID-19 pandemic could adversely affect our business, results of operations, and financial condition.
The ongoing effects of the public health crisis caused by the COVID-19 pandemic and the measures being taken to limit COVID-19’s impact on our business, results of operations, and financial condition are uncertain and difficult to predict, but may include, and in some cases, have included and may continue to include:
•Disruptions to our supply chain and our operations, or those of our suppliers, especially as a result of public health measures, including zero-COVID policies in China or elsewhere;
•Impacts to customer demand, resulting in industry oversupply and declines in pricing for our products;
•Adverse impacts to our business activities and increased costs from our efforts to mitigate the impact of COVID-19;
•Increased costs for, or unavailability of, transportation, raw materials, components, electricity and/or other energy sources, or other inputs necessary for the operation of our business;
•Reductions in, or cessation of operations at one or more of our sites or those of our subcontractors or suppliers, resulting from government restrictions and/or our own measures to prevent and/or mitigate the spread of COVID-19; and
•Adverse impacts to our construction projects, which could hamper our ability to introduce new technologies, reduce costs, or meet customer demand.
These effects and other impacts of the pandemic, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition.
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Increases in sales of system solutions may increase our dependency upon specific customers and our costs to develop, qualify, and qualifymanufacture our system solutions.
Our development of system-level memory and storage products is dependent, in part, upon successfully identifying and meeting our customers'customers’ specifications offor those products. Developing and manufacturing system-level products with specifications unique to a customer increases our reliance upon that customer for purchasing our products inat sufficient volume, quantity,volumes and prices in a timely manner. If we fail to identify or develop products on a timely basis, or at all, that comply with our customers' specifications or achieve design wins with our customers, we may experience a significant adverse impact on our sales and margins. Even if our products meet customer specifications, our sales of system-level solutions are dependent upon our customers choosing our products over those of our competitors and purchasing our products at sufficient volumes and prices. Our competitors'competitors’ products may be less costly, provide better performance, or include additional features when compared to our products. Our long-term ability to sell system-level memory and storage products is reliant upon our customer'scustomers’ ability to create, market, and sell their products containing our system-level solutions at sufficient volumes and prices in a timely manner. If we fail to successfully develop and market system-level products, our business, results of operations, or financial condition may be materially adversely affected.
Manufacturing system-level solutions, such as SSDs and managed NAND, typically results in higher per-unit manufacturing costs as compared to other products. Even if we are successful in selling system-level solutions to our customers in sufficient volume, we may be unable to generate sufficient profit if our per-unit manufacturing costs exceed ourare not offset by higher per-unit selling prices. Manufacturing system-level solutions to customer specifications requires a longer development cycle, as compared to discreetdiscrete products, to design, test, and qualify, which may increase our costs. Additionally, someSome of our system solutions are increasingly dependent on sophisticated firmware that may require significant customization to meet customer specifications, which increases our costs and time to market. Additionally, we may need to update our controller and hardware design as well as our firmware or develop new firmware as a result of new product introductions or changes in customer specifications and/or industry standards, which increases our costs. System complexities and extended warranties for system-level products could also increase our warranty costs. Our failure to cost-effectively manufacture system-level solutions and/or controller, hardware design, and firmware in a timely manner may result in reduced demand for our system-level products and could have a material adverse effect on our business, results of operations, or financial condition.
Products that fail to meet specifications, are defective, or that are otherwise incompatible with end uses could impose significant costs on us.
Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise materially adversely affect our business, results of operations, or financial condition. From time to time, we experience problems with nonconforming, defective, or incompatible products after we have shipped such products. In recent periods, we have further diversified and expanded our product offerings, which could potentially increase the chance that one or more of our products could fail to meet specifications in a particular application. AsOur products and solutions may be deemed fully or partially responsible for functionality in our customers’ products and may result in sharing or shifting of product or financial liability from our customers to us for costs incurred by the end user as a result weof our customers’ products failing to perform as specified. In addition, if our products and solutions perform critical functions in our customers’ products or are used in high-risk consumer end products, such as autonomous driver assistance programs, home and enterprise security, smoke and noxious gas detectors, medical monitoring equipment, or wearables for child and elderly safety, our potential liability may increase. We could be adversely affected in several ways, including the following:
•we may be required or agree to compensate customers for costs incurred or damages caused by defective or incompatible products and to replace products;
•we could incur a decrease in revenue or adjustment to pricing commensurate with the reimbursement of such costs or alleged damages; and
•we may encounter adverse publicity, which could cause a decrease in sales of our products or harm our reputation or relationships with existing or potential customers.
Any of the foregoing items could have a material adverse effect on our business, results of operations, or financial condition.
We may be unable to protect our intellectual property or retain key employees who are knowledgeable
We maintain a system of controls over our intellectual property, including U.S. and foreign patents, trademarks, copyrights, trade secret laws, licensing arrangements, confidentiality procedures, non-disclosure agreements with employees, consultants, and vendors, and a general system of internal controls. Despite our system of controls over our intellectual property, it may be possible for our current or future competitors to obtain, copy, use, or disclose, illegally or otherwise, our product and process technology. The laws of some foreign countries may not protect our intellectual property to the same degree as do U.S. laws and our confidentiality, non-disclosure, and non-compete agreements may be unenforceable or difficult and costly to enforce.
Additionally, our ability to maintain and develop intellectual property is dependent upon our ability to attract, develop, and retain highly skilled employees. Global competition for such skilled employees in our industry is intense. Due to the volatile nature of our industry and our operating results, a decline in our operating results and/or stock price may adversely affect our ability to retain key employees whose compensation is dependent, in part, upon the market price of our common stock, achieving certain performance metrics, levels of company profitability, or other financial or company-wide performance. If our competitors or future entrants into our industry are successful in hiring our employees, they may directly benefit from the knowledge these employees gained while they were under our employment.
Our inability to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property could have a material adverse effect on our business, results of operations, or financial condition.
A determination that our products or manufacturing processes infringe the intellectual property rights of others, or entering into a license agreement covering such intellectual property, could materially adversely affect our business, results of operations, or financial condition.
As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights. We are unable to predict the outcome of assertions of infringement made against us. A determination that our products or manufacturing
processes infringe upon the intellectual property rights of others, or entering a license agreement covering such intellectual property, could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. (See "Part II Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies.")
We have a number of intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable to us. Any of the foregoing results could have a material adverse effect on our business, results of operations, or financial condition.
If our manufacturing process is disrupted by operational issues, natural disasters, or other events, our business, results of operations, or financial condition could be materially adversely affected.
We and our subcontractors manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. We and our subcontractors maintain operations and continuously implement new product and process technology at our manufacturing operations,facilities, which are widely dispersed in multiple locations in several countries including the United States, Singapore, Taiwan, Japan, Malaysia, and China. Additionally,As a result of the necessary interdependence within our control over operationsnetwork of manufacturing facilities, an operational disruption at IMFT is limited byone of our agreements with Intel. or a subcontractor’s facilities may have a disproportionate impact on our ability to produce many of our products.
From time to time, wethere have experiencedbeen disruptions in our manufacturing processoperations as a result of power outages, improperly functioning equipment, disruptions in supply of raw materials or components, or equipment failures, earthquakes,failures. We have manufacturing and other operations in locations subject to natural occurrences and possible climate changes, such as severe and variable weather and geological events resulting in increased costs, or other environmental events. disruptions to our manufacturing operations or those of our suppliers or customers. In addition, climate change may pose physical risks to our manufacturing facilities or our suppliers’ facilities, including increased extreme weather events that could result in supply delays or disruptions. Other events, including political or public health crises, such as an outbreak of contagious diseases like COVID-19 may also affect our production capabilities or that of our suppliers, including as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or shipping. Events of the types noted above have occurred from time to time and may occur in the future. As a result, in addition to disruptions to operations, our insurance premiums may increase or we may not be able to fully recover any sustained losses through insurance.
If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected, or we may be unable to meet our customers'customers’ requirements and they may purchase products from other suppliers. This could result in a significant increase in manufacturing costs, loss of revenues,revenue, or damage to customer relationships, any of which could have a material adverse effect on our business, results of operations, or financial condition.
The acquisition of our ownership interest in Inotera from Qimonda has been challenged by the administrator of the insolvency proceedings for Qimonda.
On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda's insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary ("Micron B.V."), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda's shares of Inotera (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.
Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the court issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera Shares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on the Inotera Shares and all other benefits; (4) denying Qimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by Micron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by Micron B.V. from ownership of the Inotera Shares. The interlocutory judgments have no immediate, enforceable effect on us, and, accordingly, we expect to be able to continue to operate with full control of the Inotera Shares subject to further developments in the case. We have filed a notice of appeal, and the parties have submitted briefs to the appeals court.
We are unable to predict the outcome of the matter and, therefore, cannot estimate the range of possible loss. The final resolution of this lawsuit could result in the loss of the Inotera Shares or monetary damages, unspecified damages based on the benefits derived by Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operations, or financial condition.
We may incur additional restructuring charges in future periods.
In separate transactions in 2017, we sold our assembly and test facility located in Akita, Japan and our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets related to our Lexar brand. In 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities. The plan included the elimination of certain projects and programs, the permanent closure of a number of open headcount requisitions, workforce reductions in certain areas of our business, and other non-headcount related spending reductions. As a result of these and other actions, we incurred charges of $18 million, $67 million, and $3 million in 2017, 2016, and 2015, respectively.
We may not realize expected savings or other benefits from our restructure activities and may incur additional restructure charges or other losses in future periods associated with other initiatives. In connection with any restructure initiatives, we could incur restructure charges, loss of production output, loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products, which could have a material adverse effect on our business, results of operations, or financial condition.
Breaches of our security systems or products, or those of our customers, suppliers, or business partners, could expose us to losses.
We maintain a system of controls over the physical security of our facilities. We also manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, we process, store, and transmit large amounts of data relating to our customers and employees, including sensitive personal information. Unauthorized persons, employees, former employees, or employeesother third parties may gain access to our facilities or networktechnology infrastructure and systems to steal trade secrets or other proprietary information, compromise confidential information, create system disruptions, or cause shutdowns. TheseThis risk is exacerbated as competitors for talent, particularly engineering talent, increasingly attempt to hire our employees. Through cyberattacks on technology infrastructure and systems, unauthorized parties may also be ableobtain access to developcomputer systems, networks, and deploy viruses,data, including cloud-based platforms. The technology infrastructure and systems of our suppliers, vendors, service providers, cloud solution providers, and partners have in the past experienced, and may in the future experience, such attacks, which could impact our operations. Cyberattacks can include ransomware, computer denial-of-service attacks, worms, supply chain attacks, social engineering, and other malicious software programs or other attacks, including those using techniques that disrupt our operationschange frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, impersonation of authorized users, and efforts to discover and exploit any design flaws, “bugs,” security vulnerabilities, as well as intentional or unintentional acts by employees or other insiders with access privileges. Globally, cyberattacks are increasing in number and the attackers are increasingly organized and well-financed, or supported by state actors, and are developing increasingly sophisticated systems to not only attack, but also to evade detection. In addition, geopolitical tensions or conflicts may create security vulnerabilities.a heightened risk of cyberattacks. Breaches of our physical security, and attacks on our networktechnology infrastructure and systems, or breaches or attacks on our customers, suppliers, or business partners who have confidential or sensitive information regarding us and our customers and suppliers, could result in significant losses and damage our reputation with customers and suppliers and may expose us to litigation if the confidential information of our customers, suppliers, or employees is compromised.
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Our products are also targets for cyberattacks, including those products utilized in cloud-based environments. While some of our products contain encryption or security algorithms to protect third-party content or user-generated data stored on our products, these products could still be hacked or the encryption schemes could be compromised, whichbreached, or circumvented by motivated and sophisticated attackers. Further, our products contain sophisticated hardware and firmware and applications that may contain security vulnerabilities or defects in design or manufacture, including “bugs” and other problems that could interfere with the intended operation of our products. To the extent our products are hacked, or the encryption schemes are compromised or breached, this could harm our business by requiring us to employ additional resources to fix the errors or defects, exposing us to litigation, claims, and harm to our reputation.
Any of the foregoing security risks could have a material adverse effect on our business, results of operations, or financial condition.
ChangesWe must attract, retain, and motivate highly skilled employees.
To remain competitive, we must attract, retain, and motivate executives and other highly skilled, diverse employees, as well as effectively manage succession for key employees. Competition for experienced employees in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.
Acrossindustry is intense. Hiring and retaining qualified executives and other employees is critical to our global operations, significant transactionsbusiness. If our total compensation programs, employment benefits, and balancesworkplace culture are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Singapore dollar, New Taiwan dollar,not viewed as competitive and yen. We recorded net losses from changes in currency exchange rates of $74 million for 2017, $24 million for 2016, and $27 million for 2015. Based on our foreign currency balances of monetary assets and liabilities, as of August 31, 2017, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $391 million. Although we hedge our primary exposures to changes in currency exchange rates from our monetary assets and liabilities, the effectiveness of these hedges is dependent uponinclusive, our ability to accurately forecastattract, retain, and motivate employees could be compromised.
At times, we experience higher levels of attrition, increasing compensation costs, and more intense competition for talent across our monetary assetsindustry. To the extent we experience significant attrition and liabilities. In addition,are unable to timely replace employees, we could experience a significant portionloss of critical skills and reduced employee morale, potentially resulting in business disruptions or increased expenses to address any disruptions. Additionally, changes to immigration policies in the countries in which we operate, as well as restrictions on travel due to public health crises or other causes, may limit our manufacturing costs are denominatedability to hire and/or retain talent in, foreign currencies. Exchange ratesor transfer talent to, specific locations.
Our inability to attract, retain, and motivate executives and other employees or effectively manage succession of key roles may inhibit our ability to maintain or expand our business operations.
We may not be able to achieve expected returns from capacity expansions.
We have announced our intent to expand our DRAM production capacity in the United States and we also make capital investments in projects outside the United States.
These expansions involve several risks including the following:
•capital expenditure requirements for somecapacity expansions during periods of these currencies againstrelatively low free cash flow generation, resulting from challenging memory and storage industry conditions;
•availability of necessary funding, which may include external sources;
•ability to realize expected grants, investment tax credits, and other government incentives, including through the U.S. dollar, particularlyCHIPS and Science Act of 2022 (“CHIPS Act”) and foreign, state, and local grants;
•potential changes in laws or provisions of grants, investment tax credits, and other government incentives;
•potential restrictions on expanding in certain geographies;
•availability of equipment and construction materials;
•ability to complete construction as scheduled and within budget;
•availability of the yen, have been volatilenecessary workforce;
•ability to timely ramp production in recent periods. If these currencies strengthen against the U.S. dollar,a cost-effective manner;
•increases to our manufacturing costscost structure until new production is ramped to adequate scale; and
•sufficient growth in customer demand to meet our increased output.
We invest our capital in areas that we believe best align with our business strategy and optimize future returns. Investments in capital expenditures may not generate expected returns or cash flows. Significant judgment is required to determine which capital investments will result in optimal returns, and we could invest in projects that are ultimately less profitable than those projects we do not select. Delays in completion and ramping of new production facilities, or failure to optimize our investment choices, could significantly increase. Exchange rates forimpact our ability to realize expected returns on our capital expenditures.
Any of the U.S. dollar that adversely change against our foreign currency exposuresabove factors could have a material adverse effect on our business, results of operations, or financial condition.
Our incentives from various governments are conditional upon achieving or maintaining certain performance obligations and are subject to reduction, termination, or clawback.
We have received, and may makein the future acquisitionscontinue to receive, benefits and incentives from national, state, and local governments in various regions of the world designed to encourage us to establish, maintain, or increase investment, workforce, or production in those regions. These incentives may take various forms, including grants, loan subsidies, and tax arrangements, and typically require us to achieve or maintain certain levels of investment, capital spending, employment, technology deployment, or research and development activities to qualify for such incentives or could restrict us from undertaking certain activities. We may be unable to obtain significant future incentives to continue to fund a portion of our capital expenditures and operating costs, without which our cost structure would be adversely impacted. We also cannot guarantee that we will successfully achieve performance obligations required to qualify for these incentives or that the granting agencies will provide such funding. These incentive arrangements typically provide the granting agencies with rights to audit our compliance with their terms and obligations. Such audits could result in modifications to, or termination of, the applicable incentive program. The incentives we receive could be subject to reduction, termination, or clawback, and any decrease or clawback of government incentives could have a material adverse effect on our business, results of operations, or financial condition.
Acquisitions and/or alliances which involve numerous risks.
Acquisitions and the formation or operation of alliances, such as joint ventures and other partnering arrangements, involve numerous risks, including the following:
•integrating the operations, technologies, and products of acquired or newly formed entities into our operations;
•increasing capital expenditures to upgrade and maintain facilities;
•increased debt levels;
•the assumption of unknown or underestimated liabilities;
•the use of cash to finance a transaction, which may reduce the availability of cash to fund working capital, capital expenditures, R&D expenditures, and other business activities;
•diverting management'smanagement’s attention from daily operations;
•managing larger or more complex operations and facilities and employees in separate and diverse geographic areas;
•hiring and retaining key employees;
•requirements imposed by governmentalgovernment authorities in connection with the regulatory review of a transaction, which may include, among other things, divestitures or restrictions on the conduct of our business or the acquired business;
inability•underestimating the costs or overestimating the benefits, including product, revenue, cost and other synergies and growth opportunities that we expect to realize, synergies or other expectedand we may not achieve those benefits;
•failure to maintain customer, vendor, and other relationships;
•inadequacy or ineffectiveness of an acquired company'scompany’s internal financial controls, disclosure controls and procedures, compliance programs, and/or environmental, health and safety, anti-corruption, human resource, or other policies or practices; and
•impairment of acquired intangible assets, goodwill, or other assets as a result of changing business conditions or technological advancements, or worse-than-expected performance of the acquired business.advancements.
In previous years, supply of memory and storage products has significantly exceeded customer demand resulting in significant declines in average selling prices for DRAM and NAND. The global memory and storage industry has experienced consolidation and may continue to consolidate. We engage, from time to time, in discussions regarding potential acquisitions and similar opportunities. To the extent we are successful in completing any such transactions, we could be subject to some or all of the risks described above, including the risks pertaining to funding, assumption of liabilities, integration challenges, and increases in debt that may accompany such transactions. Acquisitions of, or alliances with, technology companies are inherently risky and may not be successful and could have a material adverse effect on our business, results of operations, or financial condition.
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We may incur restructure charges in future periods and may not realize expected savings or capital equipment could materially adversely affect our business, results of operations, or financial condition.other benefits from restructure activities.
Our operations require raw materials, and in certain cases, third party services, that meet exacting standards. We generally have multiple sources of supply for our raw materials and services. However, only a limited number of suppliers are capable of delivering certain raw materials and services that meet our standards. In some cases, materials, components, or services are provided by a single supplier. Various factors could reduce the availability of raw materials or components such as chemicals, silicon wafers, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, targets, and reticle glass blanks. Shortages may occur, fromFrom time to time, we have, and may in the future.future, enter into restructure initiatives in order to, among other items, streamline our operations, respond to changes in business conditions, our markets, or product offerings, or to centralize certain key functions. We and/may not realize expected savings or other benefits from our suppliersrestructure activities and may incur additional restructure charges or other losses in future periods associated with other initiatives. In connection with any restructure initiatives, we could be affected by laws and regulations enacted in response to concerns regarding climate change, which could increase the cost and limit the supplyincur restructure charges, loss of our raw materials. In addition,production output, loss of key personnel, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extendedoperations, and difficulties in the past. The disruptiontimely delivery of our supply of raw materials or services or the extension of our lead timesproducts, which could have a material adverse effect on our business, results of operations, or financial condition.
Our operations are dependentCompliance with responsible sourcing requirements and any related regulations could increase our operating costs, or limit the supply and increase the cost of certain materials, supplies, and services, and if we fail to comply, customers may reduce purchases from us or disqualify us as a supplier.
We and many of our customers have adopted responsible sourcing programs that require us to meet certain ESG criteria, and to periodically report on our abilityperformance against these requirements, including that we source the materials, supplies, and services we use and incorporate into the products we sell as prescribed by these programs. Many customer programs require us to procure advanced semiconductor manufacturing equipment that enables the transitionremove a supplier within a prescribed period if such supplier ceases to lower cost manufacturing processes. For certain key typescomply with prescribed criteria, and our supply chain may at any time contain suppliers at risk of equipment, including photolithography tools,being removed due to non-compliance with responsible sourcing requirements. Some of our customers may elect to disqualify us as a supplier (resulting in a permanent or temporary loss of sales to such customer) or reduce purchases from us if we are sometimes dependentunable to verify that our performance or products (including the underlying supply chain) meet the specifications of our customers’ responsible sourcing programs on a single supplier.continuous basis. Meeting responsible sourcing requirements may increase operating requirements and costs or limit the sourcing and availability of some of the materials, supplies, and services we use, particularly when the availability of such materials, supplies, and services is concentrated to a limited number of suppliers. From time to time, we have experienced difficultiesremove suppliers or require our suppliers to remove suppliers from their supply chains based on our responsible sourcing requirements or customer requirements, and we or our suppliers may be unable to replace such removed suppliers in obtaining some equipment on a timely basis dueor cost-effective manner. Any inability to suppliers' limited capacity.replace removed suppliers in a timely or cost effective manner may affect our ability and/or the cost to obtain sufficient quantities of materials, supplies, and services necessary for the manufacture of our products. Our inability to obtain equipment on a timely basis could adversely affect our ability to transition to next generation manufacturing processes and reduce our costs. Delays in obtaining equipment could also impede our ability to ramp production at new facilities and could increase our overall costs of a ramp. Our inability to obtain advanced semiconductor manufacturing equipmentreplace suppliers we have removed in a timely or cost-effective manner or comply with customers’ responsible sourcing requirements or with any related regulations could have a material adverse effect on our business, results of operations, or financial condition.
A downturn in the worldwide economy may harmFailure to meet ESG expectations or standards or achieve our business.
Downturns in the worldwide economy have harmed our business in the past and future downturnsESG goals could also adversely affect our business. Adverse economic conditions affect demand for devicesbusiness, results of operations, financial condition, or stock price.
In recent years, there has been an increased focus from stakeholders on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility. Given our commitment to ESG, we actively manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that incorporatewe will be able to achieve them. Evolving stakeholder expectations and our products, such as personal computers, mobile devices, SSDs,efforts to manage these issues, report on them, and servers. Reduced demand for these productsaccomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could result in significant decreases inhave a material adverse impact, including on our average selling pricesreputation and product sales. A deterioration of current conditions in worldwide credit markets could limitstock price.
Such risks and uncertainties include:
•reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders;
•adverse impacts on our ability to obtain external financingsell and manufacture products;
•the success of our collaborations with third parties;
•increased risk of litigation, investigations, or regulatory enforcement action;
•unfavorable ESG ratings or investor sentiment;
•diversion of resources and increased costs to fund control, assess, and report on ESG metrics;
•our operationsability to achieve our goals, commitments, and capital expenditures. In addition, we may experience lossestargets within timeframes announced;
•increased costs to achieve our goals, commitments, and targets;
•unforeseen operational and technological difficulties;
•access to and increased cost of capital; and
•adverse impacts on our holdingsstock price.
Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments, and targets could have an adverse effect on our business, results of cashoperations, financial condition, or stock price.
Risks Related to Intellectual Property and investments dueLitigation
We may be unable to failuresprotect our intellectual property or retain key employees who are knowledgeable of financial institutions and develop our intellectual property.
We maintain a system of controls over our intellectual property, including U.S. and foreign patents, trademarks, copyrights, trade secrets, licensing arrangements, confidentiality procedures, non-disclosure agreements with employees, consultants, and vendors, and a general system of internal controls. Despite our system of controls over our intellectual property, it may be possible for our current or future competitors to obtain, copy, use, or disclose, illegally or otherwise, our product and process technology or other parties. Difficult economic conditionsproprietary information. The laws of some foreign countries may not protect our intellectual property to the same degree as do U.S. laws, and our confidentiality, non-disclosure, and non-compete agreements may be unenforceable or difficult and costly to enforce.
Additionally, our ability to maintain and develop intellectual property is dependent upon our ability to attract, develop, and retain highly skilled employees. If our competitors or future entrants into our industry are successful in hiring our employees, they may directly benefit from the knowledge these employees gained while they were under our employment, and this may also result in a higher ratenegatively impact our ability to maintain and develop intellectual property.
Our inability to protect our intellectual property or retain key employees who are knowledgeable of losses onand develop our accounts receivables due to credit defaults. As a result, a downturn in the worldwide economyintellectual property could have a material adverse effect on our business, results of operations, or financial condition.
Our results of operations could be affected by natural disastersLegal proceedings and other events in the locations in which we or our customers or suppliers operate.
We have manufacturing and other operations in locations subject to natural occurrences such as severe weather and geological events, such as earthquakes or tsunamis, that could disrupt operations. In addition, our suppliers and customers also have operations in such locations. A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our
operations, or the operations of our customers or suppliers,claims could have a material adverse effect on our business, results of operations, or financial condition.
The operations of MMJFrom time to time, we are subject to continued oversight by the Japan Court during the pendencyvarious legal proceedings and claims that arise out of the corporate reorganization proceedings.
Because MMJ's plan of reorganization provides for ongoing payments to creditors following the closingordinary conduct of our acquisitionbusiness or otherwise, both domestically and internationally. Such claims include, but are not limited to, allegations of MMJ, the reorganization proceedingsanticompetitive conduct and infringement of intellectual property. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies.”
Any claim, with or without merit, could result in Japan (the "Japan Proceedings") are continuingsignificant legal fees that could negatively impact our financial results, disrupt our operations, and MMJ remainsrequire significant attention from our management. We may be associated with and subject to litigation, claims, or arbitration disputes arising from, or as a result of:
•our relationships with vendors or customers, supply agreements, or contractual obligations with our subcontractors or business partners;
•the oversightactions of our vendors, subcontractors, or business partners;
•our indemnification obligations, including obligations to defend our customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, trademarks, copyrights, or trade secrets; and
•the Japan Courtterms of our product warranties or from product liability claims.
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As we continue to focus on developing system solutions with manufacturers of consumer products, including autonomous driving, augmented reality, and others, we may be exposed to greater potential for personal liability claims against us as a result of the trustees (including a trustee designated by us, who we referconsumers’ use of those products. We, our officers, or our directors could also be subject to as the business trustee, and a trustee designated by the Japan Court, who we refer to as the legal trustee), pending completion of the reorganization proceedings. The business trustee is responsible for overseeing the operation of the business of MMJ, other than oversight in relation to acts that need to be carried out in connection with the Japan Proceedings, which are the responsibility of the legal trustee. MMJ's reorganization proceedings in Japan, and oversight of the Japan Court, will continue until the final creditor payment is made under MMJ's plan of reorganization, which is scheduled to occur in December 2019, but may occur on a later date to the extent any claims of creditors remain unfixed on the final scheduled installment payment date. MMJ may petition the Japan Court for an early terminationalleged violations of the reorganization proceedings once two-thirds of all payments under the plan of reorganization are made. Although such early terminations are customarily granted, theresecurities laws. There can be no assurance that the Japan Court will grant any such petition in this particular case.
During the pendency of the reorganization proceedings in Japan, MMJ is obligatedwe are adequately insured to provide periodic financial reports to the Japan Courtprotect against all claims and may be required to obtain the consent of the Japan Court prior to taking a number of significant actions relating to its businesses, including transferring or disposing of, or acquiring, certain material assets, incurring or guaranteeing material indebtedness, settling material disputes, or entering into certain material agreements. The consent of the legal trustee may also be required for matters that would likely have a material impact on the operations or assets of MMJ or for transfers of material assets, to the extent the matters or transfers would reasonably be expected to materiallypotential liabilities, and adversely affect execution of MMJ's plan of reorganization. Accordingly, during the pendency of the reorganization proceedings in Japan, our ability to operate MMJ as part of our global business or to cause MMJ to take certain actions that we deem advisable for its business could be adversely affected if the Japan Court or the legal trustee is unwilling to consent to various actions that we may wishelect to takeself-insure with respect to MMJ.
The operationscertain matters. Exposures to various legal proceedings and claims could lead to significant costs and expenses as we defend claims, are required to pay damage awards, or enter into settlement agreements, any of MMJ being subject to the continued oversight by the Japan Court during the pendency of the corporate reorganization proceedingswhich could have a material adverse effect on our business, results of operations, or financial condition.
Claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others, or failure to obtain or renew license agreements covering such intellectual property, could materially adversely affect our business, results of operations, or financial condition.
As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon, misappropriate, misuse, or otherwise violate their intellectual property rights. We are unable to predict the outcome of these assertions made against us. Any of these types of claims, regardless of the merits, could subject us to significant costs to defend or resolve such claims and may consume a substantial portion of management’s time and attention. As a result of these claims, we may be required to:
•pay significant monetary damages, fines, royalties, or penalties;
•enter into license or settlement agreements covering such intellectual property rights;
•make material changes to or redesign our products and/or manufacturing processes; and/or
•cease manufacturing, having made, selling, offering for sale, importing, marketing, or using products and/or manufacturing processes in certain jurisdictions.
We may incur additional tax expensenot be able to take any of the actions described above on commercially reasonable terms and any of the foregoing results could have a material adverse effect on our business, results of operations, or become subjectfinancial condition. See “Part II – Item 8. Financial Statements and Supplementary Data – Notes to additional tax exposure.Consolidated Financial Statements – Contingencies.”
We operate inhave a number of locations outsideintellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable to us. The failure to obtain or renew licenses as necessary could have a material adverse effect on our business, results of operations, or financial condition.
Risks Related to Laws and Regulations
Government actions and regulations, such as export restrictions, tariffs, and trade protection measures, may limit our ability to sell our products to certain customers or markets, or could otherwise restrict our ability to conduct operations.
International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers or markets, limit our ability to procure, or increase our costs for, components or raw materials, impede or slow the movement of our goods across borders, impede our ability to perform R&D activities, or otherwise restrict our ability to conduct operations. Increasing protectionism, economic nationalism, and national security concerns may lead to further changes in trade policy, domestic sourcing initiatives, or other formal and informal measures that could make it more difficult to sell our products in, or restrict our access to, some markets and/or customers.
We cannot predict what further actions may ultimately be taken with respect to export regulations, tariffs or other trade regulations between the United States and other countries, what products or companies may be subject to such actions, or what actions may be taken by other countries in retaliation. Further changes in trade policy, tariffs, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including Singapore, whererare earth minerals, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies. Such changes may also result in reputational harm to us, the development or adoption of technologies that compete with our products, long-term changes in global trade and technology supply chains, or negative impacts on our customers’ products which incorporate our solutions. Any of the effects described in this risk factor could have a material adverse effect on our business, results of operations, or financial condition.
The technology industry is subject to intense media, political, and regulatory scrutiny, which can increase our exposure to government investigations, legal actions, and penalties. Although we have tax incentive arrangementspolicies, controls, and procedures designed to help ensure compliance with applicable laws, there can be no assurance that are conditional,our employees, contractors, suppliers, or agents will not violate such laws or our policies. Violations of trade laws, restrictions, or regulations can result in part, upon meeting certain business operations and employment thresholds. Our domestic and international taxes are dependent uponfines; criminal sanctions against us or our officers, directors, or employees; prohibitions on the geographic mixconduct of our earnings among thesebusiness; and damage to our reputation.
Tax-related matters could have a material adverse effect on our business, results of operations, or financial condition.
We are subject to income taxes in the United States and many foreign jurisdictions. Our provision for income taxes and cash tax liabilities in the future could be adversely affected by numerous factors, including changes in the geographic mix of our earnings among jurisdictions, mandatory capitalization of R&D expenses beginning in 2023, challenges by tax authorities to our tax positions and intercompany transfer pricing agreements, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities,arrangements, failure to meet performance obligations with respect to tax incentive agreements, and changesexpanding our operations in tax laws and regulations. We file income tax returns with the U.S. federal government, various U.S. states, and various other jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2013 through 2017. In addition, tax returns that remain open to examinationcountries, fluctuations in Japan range from the years 2011 to 2017 and in Singapore and Taiwan from 2012 to 2017. The resultsforeign currency exchange rates, adverse resolution of audits and examinations of previously filed tax returns, and continuing assessmentschanges in tax laws and regulations.
Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax exposures mayrate and ultimately reduce our cash flows from operating activities and otherwise have ana material adverse effect on our provisionfinancial condition. Beginning in 2024, the Inflation Reduction Act of 2022 imposes a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion. We are in the process of assessing whether the book minimum tax would impact our effective tax rate. Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for income taxesEconomic Co-operation and cash tax liability. The foregoing itemsDevelopment. If implemented by taxing authorities in countries where we do business, such changes, could have a material adverse effect on our business, results of operations, or financial condition.
We may not utilize alland others are subject to a variety of our net deferred tax assets.
We have substantial deferred tax assets,laws, regulations, or industry standards, including with respect to ESG considerations, which include, among others, net operating loss and credit carryforwards. As of August 31, 2017, our U.S. federal and state net operating loss carryforwards, including uncertain tax benefits, were $3.88 billion and $1.95 billion, respectively, which, if not utilized, will expire at various dates from 2028 through 2037 and 2018 through 2037, respectively. As of August 31, 2017, our foreign net operating loss carryforwards were $6.30 billion, which will, if not utilized, substantially all expire at various dates from 2019 through 2026. As of August 31, 2017, we had gross deferred tax assets of $3.78 billion and valuation allowances of $2.32 billion against our deferred tax assets. If we repatriate earnings from our subsidiaries whose earnings are deemed to be indefinitely reinvested, a portion of our net operating losses would be utilized. Utilization of all of our net operating loss and credit carryforwards would increase the amount of our annual cash taxes
reducing the overall amount of cash available to be used in other areas of the business and couldmay have a material adverse effect on our business, results of operations, or financial condition.
A change in ownership may limit our ability to utilize our net operating loss carryforwards.
On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each share of common stock outstanding, which entitles certain shareholders to purchase additional shares of our common stock at a significant discount in the event of certain transactions that may result in an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur when the percentage of our ownership by one or more 5% shareholders has increased by more than 50% at any time during the prior three years. Rights will attach to all shares of the Company’s common stock issued prior to the earlier of the rights' distribution date or expiration date as set forth in the Rights Agreement. Pursuant to the Rights Agreement, if a shareholder (or group) acquires beneficial ownership of 4.99% or more of the outstanding shares of our common stock without prior approval of our Board or without meeting certain customary exceptions, the rights (other than rights held by the acquiring shareholder (or group) and certain related persons) would become exercisable. The Rights Agreement is intended to avoid an adverse ownership change, thereby preserving our current ability to utilize certain net operating loss and credit carryforwards; however, there is no assurance that the Rights Agreement will prevent all transfers that could result in such an ownership change.
If we experience a 50% or greater change in ownership involving shareholders owning 5% or more of our common stock, it could adversely impact our ability to utilize our existing net operating loss and credit carryforwards. The inability to utilize existing net operating loss and credit carryforwards would significantly increase the amount of our annual cash taxes and reduce the overall amount of cash available to be used in other areas of the business which could have a material adverse effect on our business, results of operations, or financial condition.
Compliance with regulations regarding the use of conflict minerals could limit the supply and increase the cost of certain metals used in manufacturing our products.
Increased focus on environmental protection and social responsibility initiatives led to the passage of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and its implementing SEC regulations. The Dodd-Frank Act imposes supply chain diligence and disclosure requirements for certain manufacturers of products containing specific minerals that may originate in or near the Democratic Republic of the Congo (the "DRC") and finance or benefit local armed groups. These "conflict minerals" are commonly found in materials used in the manufacture of semiconductors. The implementation of these new regulations may limit the sourcing and availability of some of these materials. This in turn may affect our ability to obtain materials necessary for the manufacture of our products in sufficient quantities and may affect related material pricing. Some of our customers may elect to disqualify us as a supplier or reduce purchases from us if we are unable to verify that our products are DRC conflict free. Our inability to comply with the regulations regarding the use of conflict minerals could have a material adverse effect on our business, results of operations, or financial condition.
We are subject to a variety of laws and regulations that may result in additional costs and liabilities.
The manufacturingmanufacture of our products requires the use of facilities, equipment, and materials that are subject to a broad array of laws and regulations in numerous jurisdictions in which we operate. Additionally, we are subject to a variety of other laws and regulations relative to the construction, maintenance, and operations of our facilities. Any of thesechanges in laws, regulations, or regulationsindustry standards could cause us to incur additional direct costs, as well as increased indirect costs related to our relationships with our customers and suppliers, and otherwise harm our operations and financial condition. Any failure to comply with these laws, regulations, or regulationsindustry standards could adversely impact our reputation and our financial results. Additionally, we partner with other companies inengage various third parties as sales channel partners or to represent us or otherwise act on our joint ventures, whichbehalf who are also subject to a broad array of laws, regulations, and regulations.industry standards. Our ownership inengagement with these joint venturesthird parties may also expose us to risks associated with their respective compliance with these laws and regulations.
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New ESG considerations, including those related to climate change and the potential resulting environmental impact, may result in new laws, regulations, or industry standards that may affect us, our suppliers, and our customers. Such laws, regulations, or industry standards could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers, or both incurring additional compliance costs that are passed on to us. These costs may adversely impact our results of operations and financial condition.
As a result of thesethe items detailed in this risk factor, we could experience the following:
•suspension of production;production or sales of our products;
•remediation costs;
•increased compliance costs;
•alteration of our manufacturing processes;
•regulatory penalties, fines, and legal liabilities; and
•reputational challenges.
OurCompliance with, or our failure, or the failure of our joint ventures,third-party sales channel partners or agents, to comply with, these laws, and regulations, or industry standards could have a material adverse effect on our business, results of operations, or financial condition.
Risks Related to Capitalization and Financial Markets
We face risks associated withmay be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our international salesoperations, make scheduled debt payments, pay our dividend, and make adequate capital investments.
Our cash flows from operations that could materially adversely affect our business, results of operations, or financial condition.
Sales to customers outside the United States approximated 86% of our consolidated net sales for 2017. In addition, a substantial portion of our manufacturing operations are located outside the United States. In particular, a significant portion of our manufacturing operations are concentrated in Singapore, Taiwan, and Japan. Our international sales and operations are subject to a variety of risks, including:
export and import duties, changes to import and export regulations, customs regulations and processes, and restrictionsdepend primarily on the transfervolume of funds;semiconductor memory and storage products sold, average selling prices, and manufacturing costs. To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital equipment, facilities, R&D, and product and process technology. We estimate capital expenditures in 2023 for property, plant, and equipment, net of partner contributions, will be around $8 billion.
compliance with U.S. and international laws involving international operations, including
In the Foreign Corrupt Practices Actpast we have utilized external sources of 1977, as amended, export and import laws, and similar rules and regulations;
theft of intellectual property;
political and economic instability;
problems with the transportation or delivery of our products;
issues arising from cultural or language differences and labor unrest;
longer payment cycles and greater difficulty in collecting accounts receivable;
compliance with trade, technical standards, and other laws in a variety of jurisdictions;
contractual and regulatory limitations on our ability to maintain flexibility with our staffing levels;
disruptions to our manufacturing operations asfinancing when needed. As a result of actions imposedour debt levels, expected debt amortization, and general capital market and other economic conditions, it may be difficult for us to obtain financing on terms acceptable to us or at all. We have experienced volatility in our cash flows and operating results and may continue to experience such volatility in the future, which may negatively affect our credit rating. Our credit rating may also be affected by foreign governments;
changesour liquidity, financial results, economic risk, or other factors, which may increase the cost of future borrowings and make it difficult for us to obtain financing on terms acceptable to us or at all. There can be no assurance that we will be able to generate sufficient cash flows, access capital or credit markets, or find other sources of financing to fund our operations, make debt payments, pay our quarterly dividend, and make adequate capital investments to remain competitive in economic policiesterms of foreign governments;technology development and
difficulties in staffing and managing international operations.
These factors cost efficiency. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.
Debt obligations could adversely affect our financial condition.
We have incurred in the past, and expect to incur in the future, debt to finance our capital investments, business acquisitions, and to realign our capital structure. As of September 1, 2022, we had debt with a carrying value of $6.91 billion and may incur additional debt, including under our $2.50 billion Revolving Credit Facility. Our debt obligations could adversely impact us as follows:
•require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of cash flow available to fund our business activities;
•adversely impact our credit rating, which could increase future borrowing costs;
•limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D, and other general corporate requirements;
•restrict our ability to incur specified indebtedness, create or incur certain liens, and enter into sale-leaseback financing transactions;
•increase our vulnerability to adverse economic and industry conditions;
•increase our exposure to rising interest rates from variable rate indebtedness; and
•result in certain of our debt instruments becoming immediately due and payable or being deemed to be in default if applicable cross default, cross-acceleration and/or similar provisions are triggered.
Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash flows or obtain external financing in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to not be able to satisfy applicable draw-down conditions and utilize our Revolving Credit Facility. If we are unable to generate sufficient cash flows to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, which could have a material adverse effect on our business, results of operations, or financial condition.
Changes in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.
Across our global operations, significant transactions and balances are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Malaysian ringgit, Singapore dollar, New Taiwan dollar, and yen. In addition, a significant portion of our manufacturing costs are denominated in foreign currencies. Exchange rates for some of these currencies against the U.S. dollar have been volatile and may be volatile in future periods. If these currencies strengthen against the U.S. dollar, our manufacturing costs could significantly increase. Exchange rates for the U.S. dollar that adversely change against our foreign currency exposures could have a material adverse effect on our business, results of operations, or financial condition.
We are subject to counterparty default risks.
We have numerous arrangements with financial institutions that subject us to counterparty default risks, including cash deposits, investments, capped call contracts on our common stock, and derivative instruments. Additionally, we are subject to counterparty default risk from our customers for amounts receivable from them. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will default on its performance obligations. A counterparty may not comply with theirits contractual commitments which could then lead to theirits defaulting on theirits obligations with little or no notice to us, which could limit our ability to take action to mitigate our exposure. Additionally, our ability to mitigate our exposures may be constrained by the terms of our contractual arrangements or because market conditions prevent us from taking effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty'scounterparty’s default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceedings. In the event of such default, we could incur significant losses, which could have a material adverse effect on our business, results of operations, or financial condition.
The trading price of our common stock has been and may continue to be volatile.
Our common stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, we, the technology industry, and the stock market as a whole have on occasion experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to the specific operating performance of individual companies. The trading price of our common stock may fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results, changes in financial forecasts or estimates by us or financial or other market estimates and ratings by securities and other analysts, changes in our capital structure, including issuance of additional debt or equity to the public, interest rate changes, regulatory changes, news regarding our products or products of our competitors, and broad market and industry fluctuations.
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For these reasons, investors should not rely on recent or historical trends to predict future trading prices of our common stock, financial condition, results of operations, or cash flows. Investors in our common stock may not realize any return on their investment in us and may lose some or all of their investment. Volatility in the trading price of our common stock could also result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources.
The amount and frequency of our share repurchases may fluctuate, and we cannot guarantee that we will fully consummate our share repurchase authorization, or that it will enhance long-term shareholder value. Share repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.
The amount, timing, and execution of our share repurchases pursuant to our share repurchase authorization may fluctuate based on our operating results, cash flows, and priorities for the use of cash for other purposes. Our expenditures for share repurchases were $2.43 billion in 2022, $1.20 billion in 2021, $176 million in 2020, and $2.66 billion in 2019. These other purposes include, but are not limited to, operational spending, capital spending, acquisitions, and repayment of debt. Other factors, including changes in tax laws, could also impact our share repurchases. Although our Board of Directors has authorized share repurchases of up to $10 billion of our outstanding common stock, the authorization does not obligate us to repurchase any common stock.
We cannot guarantee that our share repurchase authorization will be fully consummated or that it will enhance long-term shareholder value. The repurchase authorization could affect the trading price of our stock and increase volatility, and any announcement of a pause in, or termination of, this program may result in a decrease in the trading price of our stock. In addition, this program will diminish our cash reserves.
There can be no assurance that we will continue to declare cash dividends in any particular amounts or at all.
Our Board of Directors has adopted a dividend policy pursuant to which we currently pay a cash dividend on our common shares on a quarterly basis. The declaration and payment of any dividend is subject to the approval of our Board of Directors and our dividend may be discontinued or reduced at any time. There can be no assurance that we will declare cash dividends in the future in any particular amounts, or at all.
Future dividends, if any, and their timing and amount, may be affected by, among other factors: our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments could have a negative effect on the trading price of our stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are located in Boise, Idaho. In addition to our principal facilities described below, we own or lease numerous other facilities in locations throughout the world used for design, R&D, and sales and marketing activities. The following is a summary of our principal facilities as of August 31, 2017:September 1, 2022:
|
| | | | |
| Location | | Principal Operations |
United States | |
| Taiwan | R&D, wafer fabrication, facilities, reticle manufacturing,component assembly and test, module assembly and test |
| Singapore | | WaferR&D, wafer fabrication, component assembly and test, and module assembly and test |
ChinaJapan | R&D, wafer fabrication |
| United States | Assembly,R&D, wafer fabrication, reticle manufacturing |
| Malaysia | Component assembly and test, and module assembly and test |
MalaysiaChina | | AssemblyComponent assembly and test, |
Taiwan | | Wafer fabrication |
Japan | | Wafer fabrication module assembly and R&Dtest |
CertainWe generally utilize all of our properties are collateral to secured borrowing arrangements. (See "Part II – Item 8. Financial Statementsmanufacturing capacity; however, a portion of our MTU facility was underutilized for 2022, 2021, and Supplementary Data – Notes to Consolidated Financial Statements – Debt.") We also own or lease a number2020. Our MTU facility was sold in the first quarter of other facilities2022.
To support expected memory demand in locations throughout the world that are used for design, R&D, and sales and marketing activities. Substantially allsecond half of the capacitydecade, we will need to add new DRAM wafer capacity. Following the enactment of the facilities listed aboveCHIPS Act in 2022, we announced plans to invest in two leading-edge memory manufacturing fabs in the United States, contingent on CHIPS Act support through grants and investment tax credits. As part of this plan, in September 2022, we broke ground on a leading-edge memory manufacturing fab in Boise, Idaho. Construction of the fab is fully utilized.expected to begin in calendar 2023 with DRAM production targeted to start in calendar 2025. In addition, in October 2022, we announced plans to build a second leading-edge DRAM manufacturing fab in Clay, New York. We plan to start site preparation work in calendar 2023 and expect construction to begin in calendar 2024, with production anticipated to ramp in the latter half of the decade. We expect these new fabs to fulfill our requirements for additional wafer capacity starting in the second half of the decade and beyond, in line with industry demand trends.
Our facility in Lehi, Utah is owned and operated by our IMFT joint venture with Intel. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Noncontrolling Interests in Subsidiaries – IMFT.")
We believe that our existing facilities are suitable and adequate for our present purposes. We do not identify or allocate assets by operating segment, other than goodwill. (See "PartSee “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Lehi, Utah Fab and 3D XPoint” and “ – Geographic Information.")”
40
ITEM 3. LEGAL PROCEEDINGS
See "PartFor a discussion of legal proceedings, see “Part II Financial Information – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies"Contingencies” and "Item“Item 1A. Risk Factors." for a discussionFactors” of other legal proceedings.this Annual Report on Form 10-K.
Reorganization ProceedingsSEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the MMJ Companies
In 2013, we completed the acquisition of Elpida, now known as MMJ, a Japanese corporation, pursuant to the terms and conditions of an Agreement on Support for Reorganization Companies (as amended, the "Sponsor Agreement") that we entered into in 2012 with the trustees of the MMJ Companies' pending corporate reorganization proceedings under the Corporate Reorganization Act of Japan. Under the Sponsor Agreement, we agreed to provide certain support for the reorganization of the MMJ Companies and the trustees agreed to prepare and seek approval from the Japan Court and the MMJ Companies' creditors of plan of reorganization consistent with such support.
The plan of reorganization provides for payments by the MMJ Companies to their secured and unsecured creditors in an aggregate amount of 200 billion yen, less certain expenses of the reorganization proceedings and certain other items. The plan of reorganization also provided for the investment by us pursuant to the Sponsor Agreement of 60 billion yen paid at closing in cash into MMJ in exchange for 100% ownership of MMJ's equity and the use of such investment to fund the initial installment payment by the MMJ Companies to their creditors of 60 billion yen, subject to reduction for certain items specified in the Sponsor Agreement and plan of reorganization.
Under MMJ's plan of reorganization, secured creditors will recover 100% of the amount of their fixed claims and unsecured creditors will recover at least 17.4% of the amount of their fixed claims. The actual recovery of unsecured creditorsrelated monetary sanctions, if any, will be higher, however, based, in part, on events and circumstances occurring following the plan approval. The remaining portionless than a specified threshold. We use a threshold of the unsecured claims will be discharged, without payment, over the period that payments are made pursuant to the plan of reorganization. The secured creditors will be paid in full on or before the sixth installment payment date, while the unsecured creditors will be paid in seven installments. The unsecured creditors of MAI were scheduled to be paid in seven installments; however, in connection with our sale of MAI in 2017, the remaining MAI creditor obligation was paid in full and MAI's reorganization proceedings were closed.$1 million for this purpose.
Because MMJ's plan of reorganization provides for ongoing payments to creditors following the closing of the MMJ acquisition, the reorganization proceedings in Japan are continuing and MMJ remains subject to the oversight of the Japan Court and of the trustees (including a trustee designated by us, who we refer to as the business trustee, and a trustee designated by the Japan Court, who we refer to as the legal trustee), pending completion of the reorganization proceedings. The business trustee is responsible for overseeing the operation of the businesses of the MMJ Companies, other than oversight in relation to acts that need to be carried out in connection with the Japan Proceedings, which are the responsibility of the legal trustee. MMJ's reorganization proceedings in Japan, and oversight of the Japan Court, will continue until the final creditor payment is made under MMJ's plan of reorganization, which is scheduled to occur in December 2019, but may occur on a later date to the extent any claims of creditors remain unfixed on the final scheduled installment payment date. MMJ may petition the Japan Court for an early termination of the reorganization proceedings once two-thirds of all payments under the plan of reorganization are made. Although such early terminations are customarily granted, there can be no assurance that the Japan Court will grant any such petition in this particular case.
During the pendency of the reorganization proceedings in Japan, MMJ is obligated to provide periodic financial reports to the Japan Court and may be required to obtain the consent of the Japan Court prior to taking a number of significant actions relating to its businesses, including transferring or disposing of, or acquiring, certain material assets, incurring or guaranteeing material indebtedness, settling material disputes, or entering into certain material agreements. The consent of the legal trustee may also be required for matters that would likely have a material impact on the operations or assets of MMJ or for transfers of material assets, to the extent the matters or transfers would reasonably be expected to materially and adversely affect execution of MMJ's plan of reorganization. Accordingly, during the pendency of the reorganization proceedings in Japan, our ability to effectively integrate MMJ as part of our global operations or to cause MMJ to take certain actions that we deem advisable for its businesses could be adversely affected if the Japan Court or the legal trustee is unwilling to consent to various actions that we may wish to take with respect to MMJ.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Common StockInformation
Our common stock is listed on the NASDAQThe Nasdaq Global Select Market and trades under the trading symbol "MU." The following table represents the high and low closing prices for our common stock as reported by NASDAQ for each quarter of 2017 and 2016:“MU.”
|
| | | | | | | | | | | | | | | | |
| | | Fourth Quarter | | Third Quarter | | Second Quarter | | First Quarter |
| 2017 | | | | | | | | |
| High | | $ | 32.50 |
| | $ | 30.77 |
| | $ | 24.79 |
| | $ | 20.13 |
|
| Low | | 27.49 |
| | 25.15 |
| | 18.61 |
| | 16.62 |
|
| | | | | | | | | |
| 2016 | | | | | | | | |
| High | | $ | 16.91 |
| | $ | 13.11 |
| | $ | 15.50 |
| | $ | 19.16 |
|
| Low | | 11.73 |
| | 9.56 |
| | 9.69 |
| | 14.06 |
|
Holders of Record
As of October 20, 2017,September 30, 2022, there were 2,170approximately 1,768 shareholders of record of our common stock. A substantially greater number of holders of our common stock are "street name" or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions.
Dividends
On September 29, 2022, we announced that our Board of Directors had declared a quarterly dividend of $0.115 per share, payable in cash on October 26, 2022, to shareholders of record as of the close of business on October 11, 2022.
We have not declared or paidcurrently expect quarterly dividends to continue in future periods and aim to grow our dividend payments over time. However, the declaration and payment of any future cash dividends since 1996are at the discretion and do not intendsubject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, such as our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant. We cannot guarantee that we will continue to pay cash dividends for the foreseeable future.a dividend in any future period.
As a result of the Japan Proceedings, for so long as such proceedings continue, MMJ is subject to certain restrictions on dividends, loans, and advances. In addition, the 2021 MSTW Term Loan contains covenants that limit or restrict the ability of MSTW and/or MTTW to distribute cash dividends. Our ability to access IMFT's cash and other assets through dividends, loans, or advances, including to finance our other operations, is subject to agreement by Intel.
Equity Compensation Plan Information
The information required by this item is incorporated by reference from the information to be included in our 20172022 Proxy Statement under the section entitled "Equity“Equity Compensation Plan Information,"” which will be filed with the Securities and Exchange CommissionSEC within 120 days after August 31, 2017.September 1, 2022.
Issuer PurchasesPurchase of Equity Securities
OurCommon Stock Repurchase Authorization
In May 2018, we announced that our Board hasof Directors authorized the discretionary repurchase of up to $1.25$10 billion of our outstanding common stock inthrough open-market purchases, block trades, privately-negotiated transactions, or derivative transactions. Through 2017, we had repurchased a total of 49 million shares for $956 million through open-market transactions, and/or pursuant to such authorization. Repurchases areRule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. In the fourth quarter of 2017, we did not repurchase any shares and, as of August 31, 2017, the maximum dollar value of shares that we may repurchase under the authorization of the Board was $294 million.
| | | | | | | | | | | | | | | | | | | | |
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under publicly announced plans or programs (in millions) |
| | | | | | |
| June 3, 2022 | – | July 7, 2022 | 4,038,489 | | $ | 58.69 | | 4,038,489 | | |
| July 8, 2022 | – | August 4, 2022 | 8,643,182 | | 59.15 | | 8,643,182 | | |
| August 5, 2022 | – | September 1, 2022 | 575,794 | | 62.53 | | 575,794 | | |
| | | 13,257,465 | | $ | 59.16 | | 13,257,465 | | $3,531 |
Shares of common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are also treated as common stock repurchases. Those withheld shares of common stock are not considered common stock repurchasesrequired to be disclosed under an authorized common stock repurchase plan.Item 703 of Regulation S-K and accordingly are excluded from the amounts in the table above.
Performance Graph
The following graph illustrates a five-year comparison of cumulative total returns for our common stock, the S&P 500 Composite Index, and the Philadelphia Semiconductor Index (SOX) from August 31, 2012,2017, through August 31, 2017.2022. We operate on a 52 or 53 week53-week fiscal year which ends on the Thursday closest to August 31. Accordingly, the last day of our fiscal year varies. For consistent presentation and comparison to the industry indices shown herein, we have calculated our stock performance graph assuming an August 31 year end.
Note: Management cautions that the stock price performance information shown in the graph above may not be indicative of current stock price levels or future stock price performance.
42
The performance graph above assumes $100 was invested on August 31, 20122017 in common stock of Micron Technology, Inc., the S&P 500 Composite Index, and the Philadelphia Semiconductor Index (SOX). Any dividends paid during the period presented were assumed to be reinvested. The performance was plotted using the following data: | | | | | | | | | | | | | | | | | | | | |
| | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| | | | | | |
| Micron Technology, Inc. | $ | 100 | | $ | 164 | | $ | 142 | | $ | 142 | | $ | 231 | | $ | 178 | |
| S&P 500 Composite Index | 100 | | 120 | | 123 | | 150 | | 197 | | 175 | |
| Philadelphia Semiconductor Index (SOX) | 100 | | 128 | | 140 | | 214 | | 328 | | 260 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Micron Technology, Inc. | | $ | 100 |
| | $ | 219 |
| | $ | 525 |
| | $ | 264 |
| | $ | 266 |
| | $ | 515 |
|
| S&P 500 Composite Index | | 100 |
| | 119 |
| | 149 |
| | 149 |
| | 168 |
| | 195 |
|
| Philadelphia Semiconductor Index (SOX) | | 100 |
| | 118 |
| | 169 |
| | 164 |
| | 219 |
| | 309 |
|
ITEM 6. SELECTED FINANCIAL DATA[RESERVED]
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| | | | | | | | | | | |
| | | (in millions except per share amounts) |
| Net sales | | $ | 20,322 |
| | $ | 12,399 |
| | $ | 16,192 |
| | $ | 16,358 |
| | $ | 9,073 |
|
| Gross margin | | 8,436 |
| | 2,505 |
| | 5,215 |
| | 5,437 |
| | 1,847 |
|
| Operating income | | 5,868 |
| | 168 |
| | 2,998 |
| | 3,087 |
| | 236 |
|
| Net income (loss) | | 5,090 |
| | (275 | ) | | 2,899 |
| | 3,079 |
| | 1,194 |
|
| Net income (loss) attributable to Micron | | 5,089 |
| | (276 | ) | | 2,899 |
| | 3,045 |
| | 1,190 |
|
| Diluted earnings (loss) per share | | 4.41 |
| | (0.27 | ) | | 2.47 |
| | 2.54 |
| | 1.13 |
|
| | | | | | | | | | | |
| Cash and short-term investments | | 5,428 |
| | 4,398 |
| | 3,521 |
| | 4,534 |
| | 3,101 |
|
| Total current assets | | 12,457 |
| | 9,495 |
| | 8,596 |
| | 10,245 |
| | 8,911 |
|
| Property, plant, and equipment, net | | 19,431 |
| | 14,686 |
| | 10,554 |
| | 8,682 |
| | 7,626 |
|
| Total assets | | 35,336 |
| | 27,540 |
| | 24,143 |
| | 22,416 |
| | 19,068 |
|
| Total current liabilities | | 5,334 |
| | 4,835 |
| | 3,905 |
| | 4,791 |
| | 4,122 |
|
| Long-term debt | | 9,872 |
| | 9,154 |
| | 6,252 |
| | 4,893 |
| | 4,406 |
|
| Redeemable convertible notes | | 21 |
| | — |
| | 49 |
| | 68 |
| | — |
|
| Total Micron shareholders’ equity | | 18,621 |
| | 12,080 |
| | 12,302 |
| | 10,760 |
| | 9,142 |
|
| Noncontrolling interests in subsidiaries | | 849 |
| | 848 |
| | 937 |
| | 802 |
| | 864 |
|
| Total equity | | 19,470 |
| | 12,928 |
|
| 13,239 |
|
| 11,562 |
|
| 10,006 |
|
Through December 6, 2016, we held a 33% ownership interest in Inotera (now known as MTTW), Nanya and certain of its affiliates held a 32% ownership interest, and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% remaining interest in Inotera and began consolidating Inotera's operating results. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan, and previously sold such products exclusively to us through supply agreements. The cash paid for the Inotera Acquisition was funded, in part, with a term loan of 80 billion New Taiwan dollars and $986 million from the sale of 58 million shares of our common stock.
On July 31, 2013, we completed the MMJ acquisition, in which we acquired Elpida, now known as MMJ, and a controlling interest in Rexchip Electronics Corporation, now known as MMT. The MMJ Group's products include mobile DRAM targeted to mobile phones and tablets and computing DRAM targeted to desktop PCs, servers, notebooks, and workstations. The MMJ acquisition included a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan, a 300mm DRAM wafer fabrication facility in Taichung City, Taiwan, and an assembly and test facility located in Akita, Japan. We recorded a gain on the transaction of $1.48 billion in 2013.
ITEM 7. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements such as those made regarding future restructure charges; our expectation, from time to time, to engage in additional financing transactions; the sufficiency of our cash and investments, cash flows from operations, and available financing to meet our requirements for at least the next 12 months; capital spending in 2018; and the timing of payments for certain contractual obligations. We are under no obligation to update these forward-looking statements. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in "Part I, Item 1A. Risk Factors." This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended August 31, 2017.September 1, 2022. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Our fiscal 2017Fiscal 2022 and 2016 each contain2021 contained 52 weeks and fiscal 20152020 contained 53 weeks. All production data includesOur fourth quarter of fiscal 2020 contained 14 weeks and all other fiscal quarters in the production of IMFT and Inotera.years presented contained 13 weeks. All tabular dollar amounts are in millions, except per share amounts.
Our Management's Discussion and Analysis is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. This discussion is organized as follows:
Results of Operations: An analysis of our financial results consisting of the following:
| |
◦ | Operating results by business segment; |
| |
◦ | Operating results by product; and |
| |
◦ | Operating expenses and other. |
Liquidity and Capital Resources: An analysis of changes in our balance sheet and cash flows and discussion of our financial condition and liquidity.
Off-Balance Sheet Arrangements:Description of off-balance sheet arrangements.
Critical Accounting Estimates:Accounting estimates that we believe are most important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
Recently Adopted and Issued Accounting Standards
For an overview of our business and certain related trends, see "Part“Part I – Item 1. – Business – Overview."”
Results of Operations
Consolidated Results
| | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | | | | |
| Revenue | $ | 30,758 | | 100 | % | $ | 27,705 | | 100 | % | $ | 21,435 | | 100 | % |
| Cost of goods sold | 16,860 | | 55 | % | 17,282 | | 62 | % | 14,883 | | 69 | % |
| Gross margin | 13,898 | | 45 | % | 10,423 | | 38 | % | 6,552 | | 31 | % |
| | | | | | |
| Research and development | 3,116 | | 10 | % | 2,663 | | 10 | % | 2,600 | | 12 | % |
| Selling, general, and administrative | 1,066 | | 3 | % | 894 | | 3 | % | 881 | | 4 | % |
| Restructure and asset impairments | 48 | | — | % | 488 | | 2 | % | 60 | | — | % |
| Other operating (income) expense, net | (34) | | — | % | 95 | | — | % | 8 | | — | % |
| Operating income | 9,702 | | 32 | % | 6,283 | | 23 | % | 3,003 | | 14 | % |
| | | | | | |
| Interest income (expense), net | (93) | | — | % | (146) | | (1) | % | (80) | | — | % |
| Other non-operating income (expense), net | (38) | | — | % | 81 | | — | % | 60 | | — | % |
| Income tax (provision) benefit | (888) | | (3) | % | (394) | | (1) | % | (280) | | (1) | % |
| Equity in net income (loss) of equity method investees | 4 | | — | % | 37 | | — | % | 7 | | — | % |
| Net income attributable to noncontrolling interests | — | | — | % | — | | — | % | (23) | | — | % |
| Net income attributable to Micron | $ | 8,687 | | 28 | % | $ | 5,861 | | 21 | % | $ | 2,687 | | 13 | % |
|
| | | | | | | | | | | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 20,322 |
| | 100 | % | | $ | 12,399 |
| | 100 | % | | $ | 16,192 |
| | 100 | % |
| Cost of goods sold | | 11,886 |
| | 58 | % | | 9,894 |
| | 80 | % | | 10,977 |
| | 68 | % |
| Gross margin | | 8,436 |
| | 42 | % | | 2,505 |
| | 20 | % | | 5,215 |
| | 32 | % |
| | | | | | | | | | | | | |
| Selling, general, and administrative | | 743 |
| | 4 | % | | 659 |
| | 5 | % | | 719 |
| | 4 | % |
| Research and development | | 1,824 |
| | 9 | % | | 1,617 |
| | 13 | % | | 1,540 |
| | 10 | % |
| Restructure and asset impairments | | 18 |
| | — | % | | 67 |
| | 1 | % | | 3 |
| | — | % |
| Other operating (income) expense, net | | (17 | ) | | — | % | | (6 | ) | | — | % | | (45 | ) | | — | % |
| Operating income | | 5,868 |
| | 29 | % | | 168 |
| | 1 | % | | 2,998 |
| | 19 | % |
| | | | |
|
| | | | | | | | |
| Interest income (expense), net | | (560 | ) | | (3 | )% | | (395 | ) | | (3 | )% | | (336 | ) | | (2 | )% |
| Other non-operating income (expense), net | | (112 | ) | | (1 | )% | | (54 | ) | | — | % | | (53 | ) | | — | % |
| Income tax (provision) benefit | | (114 | ) | | (1 | )% | | (19 | ) | | — | % | | (157 | ) | | (1 | )% |
| Equity in net income (loss) of equity method investees | | 8 |
| | — | % | | 25 |
| | — | % | | 447 |
| | 3 | % |
| Net income attributable to noncontrolling interests | | (1 | ) | | — | % | | (1 | ) | | — | % | | — |
| | — | % |
| Net income (loss) attributable to Micron | | $ | 5,089 |
| | 25 | % | | $ | (276 | ) | | (2 | )% | | $ | 2,899 |
| | 18 | % |
Net Sales
|
| | | | | | | | | | | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| CNBU | | $ | 8,624 |
| | 42 | % | | $ | 4,529 |
| | 37 | % | | $ | 6,725 |
| | 42 | % |
| SBU | | 4,514 |
| | 22 | % | | 3,262 |
| | 26 | % | | 3,687 |
| | 23 | % |
| MBU | | 4,424 |
| | 22 | % | | 2,569 |
| | 21 | % | | 3,692 |
| | 23 | % |
| EBU | | 2,695 |
| | 13 | % | | 1,939 |
| | 16 | % | | 1,999 |
| | 12 | % |
| All Other | | 65 |
| | — | % | | 100 |
| | 1 | % | | 89 |
| | 1 | % |
| | | $ | 20,322 |
| |
| | $ | 12,399 |
| |
|
| | $ | 16,192 |
| |
|
|
Percentages of total net sales reflect rounding and may not total 100%.
Total net salesRevenue: Total revenue for 20172022 increased 64%11% as compared to 20162021 primarily due to strong conditions across our primary markets, particularly for enterprise, mobile, client, and SSD storage. The strong market conditions drove higher sales in 2017 for all
operating segments and significant increases in sales volumesof both DRAM and NAND products.
•Sales of DRAM products increased 12% primarily due to increases in bit shipments of slightly over 10%.
•Sales of NAND products increased 11% primarily due to a high-single-digit percent increase in bit shipments and a low-single-digit percent increase in average selling prices.
In the fourth quarter of 2022, the memory and storage industry environment deteriorated sharply due to global and macroeconomic challenges combined with downward inventory adjustments by customers, leading to significant reductions in bit shipments and average selling prices for both DRAM and TradeNAND resulting in a 23% decline in revenue as compared to the third quarter of 2022. For the first quarter of 2023, continuation of these challenging conditions and inventory adjustments by customers have resulted in further reductions in near-term demand for both DRAM and NAND and we expect bit shipments and pricing to decline as compared to the fourth quarter of 2022.
Total revenue for 2021 increased 29% as compared to 2020 primarily due to increases in sales of both DRAM and NAND products.
•Sales of DRAM products increased 38% primarily due to growth in bit shipments in the high-20% range and a high single-digit percent increase in average selling prices.
•Sales of NAND products as well asincreased 14% primarily due to increases in bit shipments in the high-20% range, partially offset by a decline in average selling prices for DRAM products. Increases in sales volumes for 2017 as compared 2016 were enabled by higher manufacturing output due to improvements in product and process technology and solid execution.of slightly over 10%.
Total net sales for 2016 decreased 23% as compared to 2015 primarily due to lower CNBU, MBU, and SBU sales as declines in average selling prices outpaced increases in sales volumes. The increases in sales volumes for 2016 were primarily attributable to higher manufacturing output due to improvements in product and process technology partially offset by reductions resulting from technology node transitions.
Consolidated Gross Margin
:Our overallconsolidated gross margin percentage increased to 42%45% for 20172022 from 20%38% for 2016 reflecting increases2021, as a result of improvements in the gross margin percentagesmargins for all operating segments,both DRAM and NAND products, primarily due to strong markets that drove favorable pricing conditions and toreductions in manufacturing costs. Manufacturing cost reductions from improvementswere driven by strong execution in productramping our 1α DRAM and process176-layer NAND technology and solid execution.
nodes. Our overallconsolidated gross margin percentage declined to 20% for 2016 from 32% for 2015 primarily due to declines in the gross margin percentages for CNBU, MBU, and SBU, as decreases in average selling prices outpaced manufacturing cost reductions. EBU's gross margin percentage for 2016 was relatively unchanged from 2015 as manufacturing cost reductions offset declines in average selling prices.
We periodically assess the estimated useful lives of our property, plant, and equipment. In the fourth quarter of 2016, we identified factors such as the lengthening period of time between DRAM product technology node transitions, an increased re-use rate of equipment, and industry trends. As a result, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years39% in the fourth quarter of 2016. The effect2022 from 47% in the third quarter of 2022 and we expect that in the revision was not material for 2016 and reduced depreciation costs by approximately $100 million perfirst quarter in 2017.
From January 2013 through December 2015, we purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components. After December 2015 through December 6, 2016,2023 the date we acquired the remaining interest in Inotera, the price for DRAM products purchased by us from Inotera was based on a formula that equally shared margin between Inotera and us. Under these agreements, we purchased $504 million, $1.43 billion, and $2.37 billion of DRAM products from Inotera in 2017, 2016, and 2015, respectively, which represented 9% of our aggregate DRAM gigabit production for 2017, 30% for 2016, and 35% for 2015. In accounting for the Inotera Acquisition, Inotera's work in process inventories were recorded at fair value, based on their estimated future selling prices, estimated costs to complete, and other factors, and was approximately $107 million higher than the cost of work in process inventory recorded by Inotera prior to the acquisition. The acquired inventory was sold in 2017.
Operating Results by Business Segments
CNBU
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 8,624 |
| | $ | 4,529 |
| | $ | 6,725 |
|
| Operating income (loss) | | 3,755 |
| | (25 | ) | | 1,549 |
|
CNBU sales for 2017 increased 90% as compared to 2016percentage will decline further due to increases in average selling prices for our products sold in the client market, growth in the cloud market driven by significant increases in DRAM content per server, and increases in sales of our GDDR5 and GDDR5X products into the graphics market driven by strong demand from the gaming industry. Growth in CNBU markets drove increases for 2017 in average selling prices and sales volumes as compared to 2016. CNBU operating margin for 2017 improved from 2016 primarily due to improved pricing from strong market conditions, manufacturing cost reductions, and product mix. See "Operating Results by Product – DRAM" for further detail.
CNBU sales for 2016 decreased 33% as compared to 2015 primarily due to declinesdecreases in average selling prices as a result of weaknessthe challenging industry environment for memory and storage products. To address our elevated inventory levels and reduce supply growth, in the PC sector,first quarter of 2023, we are selectively reducing facility utilization in both DRAM and NAND. We also expect that inflationary pressure will continue to be a headwind to costs in the first quarter of 2023.
Our consolidated gross margin percentage increased to 38% for 2021 from 31% for 2020, primarily due to the increases in DRAM average selling prices and cost reductions resulting from strong execution in delivering products featuring advanced technologies, partially offset by declines in NAND average selling prices. Our gross margins included the impact of underutilization costs at MTU of $335 million for 2021 and $557 million for 2020. Underutilization costs at MTU declined in 2021 primarily due to the plan to sell MTU’s Lehi facility and classification of assets as held for sale at the end of the second quarter of 2021, which resulted in the cessation of depreciation on those assets. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Lehi, Utah Fab and 3D XPoint.”
Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to first-in, first-out (“FIFO”). Concurrently, as of the beginning of the second quarter of 2021, we modified our inventory cost absorption processes used to estimate inventory values, which affects the timing of when costs are recognized. These changes resulted in a one-time increase to cost of goods sold of approximately $293 million in 2021.
44
Revenue by Business Unit
| | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | | | | |
| CNBU | $ | 13,693 | | 45 | % | $ | 12,280 | | 44 | % | $ | 9,184 | | 43 | % |
| MBU | 7,260 | | 24 | % | 7,203 | | 26 | % | 5,702 | | 27 | % |
| EBU | 5,235 | | 17 | % | 4,209 | | 15 | % | 2,759 | | 13 | % |
| SBU | 4,553 | | 15 | % | 3,973 | | 14 | % | 3,765 | | 18 | % |
| All Other | 17 | | — | % | 40 | | — | % | 25 | | — | % |
| | $ | 30,758 | | | $ | 27,705 | | | $ | 21,435 | | |
Percentages of total revenue may not total 100% due to rounding.
Changes in revenue for each business unit for 2022 as compared to 2021 were as follows:
•CNBU revenue increased 12% primarily due to increases in sales volumes. bit shipments to cloud, enterprise, and networking markets.
•MBU revenue was relatively unchanged as both DRAM and NAND revenue was relatively flat.
•EBU revenue increased 24% primarily due to strong demand growth in industrial and automotive markets.
•SBU revenue increased 15% primarily due to higher average selling prices and increases in shipments of SSD products.
Changes in revenue for each business unit for 2021 as compared to 2020 were as follows:
•CNBU revenue increased 34% primarily due to broad-based increases in bit shipments across markets and higher average selling prices for DRAM.
•MBU revenue increased 26% primarily due to increases in bit shipments for high-value mobile MCP products.
•EBU revenue increased 53% primarily due to increases in bit shipments driven by strong demand growth in automotive, industrial, and consumer markets and improved pricing in industrial and consumer markets.
•SBU revenue increased 6% as increases in bit shipments for NAND products outpaced declines in average selling prices.
Operating Income (Loss) by Business Unit
| | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | | | | |
| CNBU | $ | 5,844 | | 43 | % | $ | 4,295 | | 35 | % | $ | 2,010 | | 22 | % |
| MBU | 2,160 | | 30 | % | 2,173 | | 30 | % | 1,074 | | 19 | % |
| EBU | 1,752 | | 33 | % | 1,006 | | 24 | % | 301 | | 11 | % |
| SBU | 513 | | 11 | % | 173 | | 4 | % | 36 | | 1 | % |
| All Other | 12 | | 71 | % | 20 | | 50 | % | (2) | | (8) | % |
| | $ | 10,281 | | | $ | 7,667 | | | $ | 3,419 | | |
Percentages reflect operating income (loss) as a percentage of revenue for each business unit.
Changes in operating income or loss for each business unit for 2022 as compared to 2021 were as follows:
•CNBU operating margin for 2016 declinedincome increased primarily due to higher bit shipments and manufacturing cost reductions.
•MBU operating income was relatively unchanged as slight increases in gross margins were offset by higher operating expenses.
•EBU operating income increased primarily due to manufacturing cost reductions from 2015 as decreasesan increasing mix of leading-edge bits, higher bit shipments, and improved DRAM pricing in industrial and consumer markets, partially offset by higher R&D expenses.
•SBU operating income increased primarily due to improved product mix driving increases in average selling prices, outpacedincreases in SSD shipments, and manufacturing cost reductions.reductions, partially offset by higher R&D expenses.
SBU
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 4,514 |
| | $ | 3,262 |
| | $ | 3,687 |
|
| Operating income (loss) | | 552 |
| | (123 | ) | | (39 | ) |
SBU sales of Trade NAND productsChanges in operating income or loss for 2017 increased 41%each business unit for 2021 as compared to 20162020 were as follows:
•CNBU operating income increased primarily due to increases in bit shipments, higher average selling prices, manufacturing cost reductions, and lower MTU underutilization costs.
•MBU operating income increased primarily due to increases in sales volumesof high-value MCP products, manufacturing cost reductions for low-power DRAM, and increases in DRAM bit shipments.
•EBU operating income increased primarily due to improved pricing in industrial and consumer markets, cost reductions from strong demand, particularly for component NANDan increasing mix of leading-edge bits, and clienthigher bit shipments.
•SBU operating income increased primarily due to lower manufacturing costs and cloud SSD storage products,increases in bit shipments, partially offset by declinesdecreases in average selling prices. SBU salesprices and higher R&D costs.
Operating Expenses and Other
Research and Development: R&D expenses vary primarily with the number of SSD storagedevelopment and pre-qualification wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through internal reviews and tests for performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification.
R&D expenses for 2022 increased by 137% for 201717% as compared to 2016 primarily as a result of the launch of new SSD products incorporating our 3D TLC NAND technology. SBU sales included Non-Trade sales of $553 million, $501 million, and $463 million, for 2017, 2016, and 2015, respectively. SBU operating margin for 2017 improved from 20162021 primarily due to manufacturing cost reductions,higher employee compensation from increases in headcount, higher volumes of development and prequalification wafers, and higher depreciation expense. R&D expenses for 2021 increased 2% as compared to 2020 primarily due to increases in employee compensation and depreciation expense resulting from higher capital spending, partially offset by declines in average selling prices. See "Operating Results by Product – Trade NAND"lower volumes of development and prequalification wafers.
Selling, General, and Administrative: SG&A expenses for further details.
SBU sales of Trade NAND products for 2016 decreased 16% from 20152022 were 19% higher as compared to 2021 primarily due to declines in average selling prices partially offset by increases in sales volumes. SBU operating marginemployee compensation, professional services, and legal fees. SG&A expenses for 2016 declined from 2015 as decreases in average selling prices outpaced manufacturing cost reductions.
MBU
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 4,424 |
| | $ | 2,569 |
| | $ | 3,692 |
|
| Operating income | | 927 |
| | 97 |
| | 1,166 |
|
MBU sales are comprised primarily of DRAM and NAND, with mobile DRAM products accounting for a significant majority of the sales. MBU sales for 2017 increased 72%2021 were relatively unchanged as compared to 20162020.
Restructure and Asset Impairments: In the first quarter of 2022, we sold our Lehi, Utah facility to TI. In 2021, the Lehi facility was classified as held for sale and we recognized a restructure charge of $435 million to write down the assets held for sale to the expected consideration to be received under our agreement with TI. For further discussion see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Lehi, Utah Fab and 3D XPoint.”
Interest Income (Expense): Net interest expense for 2022 decreased by $53 million as compared to 2021 primarily due to significant increasesan increase of $59 million in sales
volumes, driven by customer qualifications for LPDRAM and managed NAND products, combined with higher memory content in smartphones and growth in sales of eMCP products. Sales growth in 2017 was partially offset by declines in average selling prices for Trade NAND products. MBU operatinginterest income for 2017 improved from 2016 primarily due to manufacturing cost reductions and higher sales volumes, partially offset by higher R&D costs and declines in average selling prices for Trade NAND products.
MBU sales for 2016 decreased 30% as compared to 2015 primarily due to declines in average selling prices and DRAM sales volumes. MBU operating income for 2016 declined from 2015 as decreases in average selling prices outpaced manufacturing cost reductions.
EBU
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 2,695 |
| | $ | 1,939 |
| | $ | 1,999 |
|
| Operating income | | 975 |
| | 473 |
| | 459 |
|
EBU sales are comprised of DRAM, NAND, and NOR Flash in decreasing order of revenue. EBU sales for 2017 increased 39% as compared to 2016 primarily due to strong demand and higher sales volumes for DRAM and eMCP in consumer markets and DRAM and eMMC products in the automotive markets. EBU operating income for 2017 increased as compared to 2016 as a result of manufacturing cost reductions, which outpaced declines in average selling prices, and increases in sales volumes.
EBU sales for 2016 decreased 3% as compared to 2015 primarily due to declines in average selling prices for DRAM and NAND products, which were partially offset by higher sales volumes as a result of increases in demand. EBU operating incomeinterest rates on our cash and investments. Net interest expense for 2016 was relatively unchanged from 2015 as manufacturing cost reductions offset declines in average selling prices.
Operating Results2021 increased by Product
Net Sales by Product
|
| | | | | | | | | | | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| DRAM | | $ | 12,963 |
| | 64 | % | | $ | 7,207 |
| | 58 | % | | $ | 10,339 |
| | 64 | % |
| Trade NAND | | 6,228 |
| | 31 | % | | 4,138 |
| | 33 | % | | 4,811 |
| | 30 | % |
| Non-Trade | | 553 |
| | 3 | % | | 501 |
| | 4 | % | | 463 |
| | 3 | % |
| Other | | 578 |
| | 3 | % | | 553 |
| | 4 | % | | 579 |
| | 4 | % |
| | | $ | 20,322 |
| | | | $ | 12,399 |
| | | | $ | 16,192 |
| | |
Percentages of total net sales reflect rounding and may not total 100%.
Non-Trade primarily consists of NAND and 3D XPoint products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost. Information regarding products that combine both NAND and DRAM components is reported within Trade NAND. Other includes sales of NOR and trade 3D XPoint products.
DRAM
|
| | | | | | |
| For the year ended | | 2017 | | 2016 |
| | | | | |
| | | (percentage change from prior year) |
| Net sales | | 80 | % | | (30 | )% |
| Average selling prices per gigabit | | 19 | % | | (35 | )% |
| Gigabits sold | | 52 | % | | 7 | % |
| Cost per gigabit | | (21 | )% | | (17 | )% |
Strong conditions in 2017 for enterprise, client, mobile, graphics, and networking markets as well as key customer qualifications drove increases in sales volumes and prices$66 million as compared to 2016. The reductions in cost for 2017 and 2016 as compared to prior years were2020 primarily due to improvementsa decrease of $77 million in product and process technology. For 2017 compared to 2016, lower depreciation due to the change made in the fourth quarter of 2016 in estimated useful lives for equipment at our DRAM wafer fabrication facilities contributed to cost reductions.
Our gross margin percentage on sales of DRAM products for 2017 improved from 2016 primarily due to manufacturing cost reductions, increases in average selling prices, and shifts in product mix, while our gross margin percentage for 2016 declined as compared to 2015 as decreases in average selling prices outpaced manufacturing cost reductions.
Trade NAND
|
| | | | | | |
| For the year ended | | 2017 | | 2016 |
| | | | | |
| | | (percentage change from prior year) |
| Net sales | | 50 | % | | (14 | )% |
| Average selling prices per gigabit | | (9 | )% | | (20 | )% |
| Gigabits sold | | 65 | % | | 8 | % |
| Cost per gigabit | | (26 | )% | | (16 | )% |
Strong conditions in 2017 for SSD, mobile, and client storage markets drove increases in net sales as compared to 2016, particularly for SSD and mobile products. Our ability to meet this demand was due in part to increases in production, primarily from the ramp of capacity and improvements in product and process technology, including our transition to 3D NAND products. The increase in sales volumes of Trade NAND for 2016 as compared to 2015 was primarily due to increases in demand and increases in production due to improvements in product and process technology. Increases in production for 2016 were constrained in connection with transitioning to 3D NAND products.
Our gross margin percentage on sales of Trade NAND for 2017 improved from 2016 as manufacturing cost reductions outpaced declines in average selling prices, while our gross margin percentage for 2016 declined from 2015 as decreases in average selling prices outpaced manufacturing cost reductions.
Operating Expenses and Other
Selling, General, and Administrative
SG&A expenses for 2017 were 13% higher than 2016 primarily due to increases in performance-based pay, transaction costs related to the Inotera Acquisition, and stock-based compensation, partially offset by a reduction in other payroll costs. SG&A expenses for 2016 were 8% lower than 2015 due to decreases in performance-based pay and travel costs and to an additional week in 2015.
Research and Development
R&D expenses for 2017 were 13% higher than 2016 primarily due to higher volumes of product being processed that had not been qualified and increases in performance-based pay, partially offset by lower subcontracted engineering and other professional services costs. R&D expenses for 2016 were 5% higher than 2015 primarily due to higher volumes of product being processed that had not been qualified, higher payroll costs, an increase in depreciation expense from R&D capital expenditures, partially offset by an additional week in 2015.
We generally share with Intel the costs of product design and process development activities for NAND and 3D XPoint memory at IMFT and our other facilities. Our R&D expenses reflect net reductionsinterest income as a result of reimbursements underdecreases in interest rates on our cost-sharing arrangements with Intelcash and investments.
Income Taxes: Our income tax (provision) benefit consisted of $213 million, $205 million, and $224 millionthe following: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Income before taxes | $ | 9,571 | | $ | 6,218 | | $ | 2,983 | |
| Income tax (provision) benefit | (888) | | (394) | | (280) | |
| Effective tax rate | 9.3 | % | 6.3 | % | 9.4 | % |
Our effective tax rate increased in 2017, 2016, and 2015, respectively.
See further discussion2022 as compared to 2021 primarily due to the geographic mix of our R&Dearnings and a valuation allowance recorded against our Idaho deferred tax assets of $189 million, partially offset by tax impacts of changes in "Part I – Item 1. – Business – Research and Development."foreign currency exchange rates. Our effective tax rate decreased in 2021 as compared to 2020 primarily as a result of a $104 million tax benefit recorded for the discrete $435 million charge to write down the Lehi assets held for sale.
Income Taxes46
Our income taxes reflect operationsWe operate in taxa number of jurisdictions including Singapore and Taiwan, where our earnings are indefinitely reinvested and the tax rates are significantly lower than the U.S. statutory rate; operations outside the United States, including Singapore, where we have tax incentive arrangements that further decrease our effective tax rates;arrangements. These incentives expire, in whole or in part, at various dates through 2034 and a valuation allowance against substantially all of our net deferred tax assets in the United States. Income tax (provision) benefit consisted of the following:
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Utilization of and other changes in net deferred tax assets of MMJ, MMT, and Inotera | | $ | 54 |
| | $ | (114 | ) | | $ | (80 | ) |
| U.S. valuation allowance release resulting from business acquisition | | — |
| | 41 |
| | — |
|
| Other income tax (provision) benefit, primarily other non-U.S. operations | | (168 | ) | | 54 |
| | (77 | ) |
| | | $ | (114 | ) | | $ | (19 | ) | | $ | (157 | ) |
| | | | | | | |
| Effective tax rate | | 2.2 | % | | (6.8 | )% | | 6.0 | % |
Income taxes for 2017 and 2016 included tax benefits of $28 million and $58 million, respectively, related to the favorable resolution of certain tax matters, which were previously reserved as uncertain tax positions.
We have a full valuation allowance for our net deferred tax asset associated with our U.S. operations. Management continues to evaluate future projected financial performance to determine whether such performance is sufficient evidence to support a reduction in or reversal of the valuation allowance. The amount of the deferred tax asset considered realizable could be adjusted if sufficient positive evidence exists.
We operate in a number of locations outside the Unites States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements which expire in whole or in part at various dates through 2030, reduced our tax provision by $742 million$1.12 billion (benefiting our diluted earnings per share by $0.64)$1.00) for 2017, were not material in 2016, and2022, by $338$758 million ($0.290.66 per diluted share) for 2015.2021, and by $215 million ($0.19 per diluted share) for 2020.
(Beginning in 2023, provisions in the Tax Cuts and Jobs Act of 2017 will require us to capitalize and amortize R&D expenditures rather than deducting the costs as incurred. Unless the effective date is deferred or the law is repealed, we expect an increase to our effective tax rate for several years. In addition, the mix of our income, together with U.S. and foreign tax rules, results in taxes becoming more fixed at lower profitability levels. As a result of these factors, we estimate tax expense of at least $300 million for 2023. Beyond this level, our actual tax expense will depend on the level of operating income through the year.
Beginning in 2024, the Inflation Reduction Act of 2022 imposes a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion. We are in the process of assessing whether the book minimum tax would impact our effective tax rate.
Various tax reforms are being considered in multiple jurisdictions that, if enacted, contain provisions that could increase our tax expense. We continue to monitor the potential impact of these various tax reform proposals to our overall global effective tax rate and financial statements.
See "Item“Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Income Taxes.")”
Equity in Net Income (Loss) of Equity Method Investees
We recognize our share of earnings or losses from equity method investments generally on a two-month lag. Equity in net income (loss) of equity method investees, net of tax, included the following:
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Inotera | | $ | 9 |
| | $ | 32 |
| | $ | 445 |
|
| Tera Probe | | (3 | ) | | (11 | ) | | 1 |
|
| Other | | 2 |
| | 4 |
| | 1 |
|
| | | $ | 8 |
| | $ | 25 |
| | $ | 447 |
|
On December 6, 2016, we ceased accounting for Inotera as an equity method investment due to our acquisition of the remaining interest in Inotera. Our equity in net income (loss) of Inotera declined for 2016 as compared to 2015 primarily due to the effect to Inotera, under our supply agreements with them, of declines in average selling prices and Inotera's cost of technology node transitions. Included in our earnings for 2015 was $49 million from our equity share of Inotera's full release of its valuation allowance against net deferred tax assets related to its net operating loss carryforward.
In 2017, we ceased recognizing our share of Tera Probe's earnings due to our sale of our equity interest in Tera Probe. We recorded impairment charges of $16 million, $25 million, and $10 million in 2017, 2016, and 2015, respectively, within equity in net income (loss) of equity method investees to write down the carrying value of our investment in Tera Probe to its then fair value in each of those periods based on its trading price.
Other
Net interest expense increased 42% for 2017 as compared to 2016 primarily due to increases in debt obligations, including our borrowings of 80 billion New Taiwan dollars at an effective interest rate of 3.02% on December 6, 2016 in connection with our acquisition of Inotera and $1.25 billion at an effective interest rate of 7.69% in April 2016 under the 2023 Secured Notes. Net interest expense increased 18% for 2016 as compared to 2015 primarily due to increases in debt obligations.
Other:Further discussion of other operating and non-operating income and expensesinformation can be found in the following notes contained in "Item“Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements":
Equity Plans
Restructure and Asset Impairments
Statements – Other Operating Income (Expense), Net
(Income) Expense, Net”; “ – Other Non-Operating Income (Expense), NetNet”; and other notes to the financial statements.
Liquidity and Capital Resources
Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. Cash and marketable investments totaled $10.98 billion as of September 1, 2022, and $10.40 billion as of September 2, 2021. Our cash and investments consist primarily of bank deposits, money market funds, and liquid investment-grade, fixed-income securities, which are diversified among industries and individual issuers. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor. As of September 1, 2022, $3.79 billion of our cash and marketable investments was held by our foreign subsidiaries.
We are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We expect, from time to time, in the future, to engage in a variety of financing transactions for such purposes, including the issuance of securities. We have a revolving credit facility that expires in February 2020As of September 1, 2022, $2.50 billion was available to draw under our Revolving Credit Facility. Funding of certain significant capital projects is also dependent on the receipt of government incentives, which are subject to conditions and provides for additional borrowings of up to $750 million based on eligible receivables. We expect that our cash and investments, cash flows from operations, and available financing willmay not be sufficient to meet our requirements at least through the next 12 months.obtained.
To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate thatcapital expenditures in 20182023 for property, plant, and equipment, net of partner contributions, to be in the range of $7.5 billion plus or minus 5 percent, focused on technology transitions and product enablement. The actualaround $8 billion. Actual amounts for 20182023 will vary depending on market conditions. As of August 31, 2017,September 1, 2022, we had commitmentspurchase obligations of approximately $1.1$4.04 billion for the acquisition of property, plant, and equipment, substantially all of which approximately $2.97 billion is expected to be paid within one year.
Cash For a description of other contractual obligations, such as debt, leases, and marketable investments totaled $6.05 billion and $4.81 billion as of August 31, 2017 and September 1, 2016, respectively. Our investments consist primarily of liquid investment-grade fixed-income securities, diversified among industries
and individual issuers. As of August 31, 2017, $2.82 billion of our cash and marketable investments was held by our foreign subsidiaries. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor.
In October 2017, subsequent to the end of 2017, we issued 34 million shares of our common stock for $41.00 per share in a public offering, for net proceeds of $1.36 billion, net of underwriting fees and other offering costs. On October 12, 2017, we issued a notice to redeem $438 million of principal amount of our 2023 Secured Notes on November 13, 2017 for $470 million in cash, excluding accrued and unpaid interest. The amount redeemed represents 35% of the original principal amount of the 2023 Secured Notes issued and will be settled with proceeds from our common stock issuance in October 2017. On October 17, 2017, we issued a notice to redeem the remaining $812 million of principal amount of our 2023 Secured Notes on November 16, 2017 for approximately $885 million, excluding accrued and unpaid interest. Additionally, on October 17, 2017, we issued a notice to redeem all of our 2023 Notes on November 16, 2017 for approximately $1.05 billion in cash, excluding accrued and unpaid interest. In connection with these redemptions, we expect to recognize non-operating losses of approximately $170 million in the first quarter of 2018.
Acquisition of Inotera
Through December 6, 2016, we held a 33% ownership interest in Inotera, Nanya and certain of its affiliates held a 32% ownership interest, and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% interest in Inotera for an aggregate of $4.1 billion in cash. The cash paid for the Inotera Acquisition was funded with 80 billion New Taiwan dollars of proceeds from the 2021 MSTW Term Loan (see "Acquisition Financing" below), $986 million of proceeds from the sale of 58 million shares of our common stock, and cash on hand.
Acquisition Financing
2021 MSTW Term Loan: On December 6, 2016, we drew 80 billion New Taiwan dollars under a collateralized, five-year term loan that bears interest at a variable per annum rate equal to the three-month or six-month TAIBOR, at our option, plus a margin of 2.05%. Principal under the 2021 MSTW Term Loan is payable in six equal semi-annual installments, commencing in June 2019, through December 2021. The 2021 MSTW Term Loan contains financial covenants, which if not maintained, could in certain cases constitute an event of default and result in allpurchase obligations, owed under the 2021 MSTW Term Loan being accelerated to be immediately due and payable. The 2021 MSTW Term Loan also contains customary events of default. The 2021 MSTW Term Loan is collateralized by certain assets and is guaranteed by Micron. To hedge our currency exposure of this borrowing, we are party to a series of currency forward contracts to purchase New Taiwan dollars under a rolling hedge strategy. As of August 31, 2017, the forward contracts expire at various dates through March 2018. (See "Itemsee “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.")Debt,” “ – Leases,” and “ – Commitments.”
To support expected memory demand in the second half of the decade, we will need to add new DRAM wafer capacity. Following the enactment of the CHIPS Act in 2022, we announced plans to invest in two leading-edge memory manufacturing fabs in the United States, contingent on CHIPS Act support through grants and investment tax credits. As part of this plan, in September 2022, we broke ground on a leading-edge memory manufacturing fab in Boise, Idaho. Construction of the Usefab is expected to begin in calendar 2023 with DRAM production targeted to start in calendar 2025. In addition, in October 2022, we announced plans to build a second leading-edge DRAM manufacturing fab in Clay, New York. We plan to start site preparation work in calendar 2023 and expect construction to begin in calendar 2024, with production anticipated to ramp in the latter half of Cashthe decade. We expect these new fabs to fulfill our requirements for additional wafer capacity starting in the second half of the decade and Investmentsbeyond, in line with industry demand trends.
MMJ Group:CashOn November 1, 2021, we issued $1 billion in aggregate principal amount of unsecured 2032 Green Bonds. Over time, we plan to allocate an amount equal to the net proceeds to fund eligible sustainability-focused projects involving renewable energy, green buildings, energy efficiency, water management, waste abatement, and marketable investments includeda circular economy.
Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. Through September 1, 2022, we have repurchased an aggregate of $580 million held by MMJ as of August 31, 2017. As a result$6.47 billion of the corporate reorganization proceedings of the MMJ Companies initiated in March 2012, and for so long as such proceedings are continuing, MMJ is prohibited from paying dividends to us. In addition, pursuant to an order of the Japan Court, MMJ cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court and may, under certain circumstances, be subject to the approval of the legal trustee. As a result, the assets of MMJ are not available for use by us in our other operations. Furthermore, certain uses of the assets of MMJ, including investments in certain capital expenditures and in MMT, may require consent of MMJ's trustees and/or the Japan Court.
MSTW and MTTW: Cash and marketable investments included an aggregate of $56 million held by MSTW and MTTW as of August 31, 2017. The 2021 MSTW Term Loan contains covenants that limit or restrict the ability of MSTW and MTTW to pay dividends. As a result, the assets of MSTW and MTTW are not available for use by us in our other operations.
IMFT: Cash and marketable investments included $87 million held by IMFT as of August 31, 2017. Our ability to access funds held by IMFT to finance our other operations is subject to agreement by Intel and contractual limitations. Amounts held by IMFT are not anticipated to be available to finance our other operations.
Indefinitely Reinvested: As of August 31, 2017, $1.29 billion of cash and marketable investments, including substantially all of the amounts held by MMJ, MSTW, and MTTW, was held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested and repatriation of these funds to the United States would be subject to U.S. federal income taxes. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.
Cash Flows
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net cash provided by operating activities | | $ | 8,153 |
| | $ | 3,168 |
| | $ | 5,208 |
|
| Net cash provided by (used for) investing activities | | (7,537 | ) | | (3,044 | ) | | (6,216 | ) |
| Net cash provided by (used for) financing activities | | 349 |
| | 1,745 |
| | (718 | ) |
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | | (12 | ) | | 19 |
| | (133 | ) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | | $ | 953 |
| | $ | 1,888 |
| | $ | (1,859 | ) |
Operating Activities:For 2017, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $1.65 billion of cash used for increases in receivables, $361 million of payments attributed to intercompany balances in connection with the Inotera Acquisition, and $564 million of cash provided from increases in accounts payable and accrued expenses.
For 2016, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $465 million of cash provided from decreases in receivables due to a lower level of net sales, offset by $549 million of cash used for net increases in inventories.
For 2015, cash provided by operating activities was due primarily to cash generated by operations and the effect of working capital adjustments, which included $393 of cash provided from decreases in receivables due to a lower level of net sales, offset by $691 million of cash used for reductions in accounts payable and accrued expenses.
Investing Activities: For 2017, net cash used for investing activities consisted primarily of $4.73 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners), $2.63 billion of net cash paid for the Inotera Acquisition (net of $361 million of payments attributed to intercompany balances with Inotera included in operating activities), and $269 million of net outflows from sales, maturities, and purchases of available-for-sale securities.
For 2016, net cash used for investing activities consisted primarily of $5.82 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners) and $148 million for the acquisition of Tidal Systems, Ltd., partially offset by $2.66 billion of net inflows from sales, maturities, and purchases of available-for-sale securities.
For 2015, net cash used for investing activities consisted primarily of $4.02 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners) and $2.14 billion of net outflows for purchases, sales, and maturities of available-for-sale securities.
Financing Activities: For 2017, net cash provided by financing activities consisted primarily of $2.48 billion of net proceeds from the 2021 MSTW Term Loan, and $795 million of net proceeds from the 2021 MSAC Term Loan, partially offset by repurchases of $952 million in aggregate principal of our 2025 Notes and 2026 Notes for an aggregate of $1.00 billion in cash, redemption of $600 million principal amount of our 2022 Notes for $626 million in cash, repayments of $381 million of capital lease obligations, repayments of $550 million of other debt and convertible notes, and payments of $519 million on equipment purchase contracts.
For 2016, net cash provided by financing activities consisted primarily of $1.24 billion of proceeds (net of $13 million of issuance costs) from the 2023 Secured Notes, $734 million (net of $8 million of issuance costs and $8 million of original issue discount) from the 2022 Term Loan B, and $765 million from equipment sale-leaseback financing transactions, partially offset by repurchases of $870 million of repayments of debt and $125 million for the open-market repurchases of 7 million shares of our common stock.
For 2015, net cash used for financing activities consisted primarily of $2.33 billion for repayments of debt (including $932 million for the amount in excess of principal of our convertible notes), $831 million for the open-market repurchases of 42 million shares of our common stock, and $95 million of payments on equipment purchase contracts, partially offset by $1.98 billion in aggregate proceeds (net of $21 million of issuance costs) from our 5.25% senior notes due 2023 Notes, 2024 Notes, and 2026 Notes, $291 million of proceeds of sale-leaseback transactions, $125 million of proceeds from draws on our revolving credit facilities, and $87 million of net proceeds from term loans.
authorized amount. See "Item“Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt."Equity.”
On September 29, 2022, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on October 26, 2022, to shareholders of record as of the close of business on October 11, 2022. The declaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, including, but not limited to, our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant.
Potential Settlement ObligationsWe expect that our cash and investments, cash flows from operations, and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeable future.
Cash Flows
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Net cash provided by operating activities | $ | 15,181 | | $ | 12,468 | | $ | 8,306 | |
| Net cash provided by (used for) investing activities | (11,585) | | (10,589) | | (7,589) | |
| Net cash provided by (used for) financing activities | (2,980) | | (1,781) | | (317) | |
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | (106) | | 41 | | 11 | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 510 | | $ | 139 | | $ | 411 | |
Operating Activities: Cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation expense, amortization of Convertible Notesintangible assets, asset impairments, and stock-based compensation, and the effects of changes in operating assets and liabilities. The increase in cash provided by operating activities for 2022 as compared to 2021 was primarily due to higher net income adjusted for non-cash items and the effect of lower receivables, partially offset by an increase in inventories.
SinceThe increase in cash provided by operating activities for 2021 as compared to 2020 was primarily due to higher net income adjusted for non-cash items and the closing priceeffect of lower inventories, partially offset by an increase in receivables due to a higher level of sales.
48
Investing Activities: For 2022, net cash used for investing activities consisted primarily of $12.07 billion of expenditures for property, plant, and equipment; inflows of $115 million of partner contributions for capital expenditures; $888 million of net inflows from the sale of the Lehi, Utah fab; and $155 million of net outflows from purchases, sales, and maturities of available-for-sale securities.
For 2021, net cash used for investing activities consisted primarily of $10.03 billion of expenditures for property, plant, and equipment, partially offset by inflows of $502 million of partner contributions for capital expenditures, and $1.06 billion of net outflows from purchases, sales, and maturities of available-for-sale securities.
For 2020, net cash used for investing activities consisted primarily of $8.22 billion of expenditures for property, plant, and equipment, partially offset by inflows of $272 million of partner contributions for capital expenditures, and $415 million of net inflows from purchases, sales, and maturities of available-for-sale securities.
Financing Activities: For 2022, net cash used for financing activities included $2.43 billion for the acquisition of 35.4 million shares of our common stock under our share repurchase authorization, $2.03 billion of repayments of debt primarily to redeem the 2023 Notes and 2024 Notes, $461 million of cash payments of dividends to shareholders, and $141 million of payments on equipment purchase contracts. Cash used for at least 20 trading days infinancing activities was partially offset by aggregate proceeds of $2.00 billion from the 30 trading day period ended on September 30, 2017 exceeded 130%issuance of the conversion price per shareunsecured 2032 Green Bonds, 2041 Notes, and 2051 Notes.
For 2021, net cash used for financing activities consisted primarily of $1.20 billion for the acquisition of 15.6 million shares of our 2032 Notes and 2033 Notes, holders may convert these notes through the calendar quarter ended December 31, 2017. The following table summarizes the potential settlements that we could be requiredcommon stock under our share repurchase authorization, $295 million of payments on equipment purchase contracts, $185 million of cash payments to make for the calendar quarter ending December 31, 2017 if all holders converted their 2032 Notes and 2033 Notes. The amounts in the table below are based on our closing share price of $31.97 as of August 31, 2017.
|
| | | | | | | | | | | | | | | | | | |
| | | Settlement Option for | | | | If Settled With Minimum Cash Required Per the Terms | | If Settled Entirely With Cash |
| | | Principal Amount | | Amount in Excess of Principal | | Underlying Shares | | Cash | | Remainder in Shares | |
| 2032C Notes | | Cash and/or shares | | Cash and/or shares | | 23 |
| | $ | — |
| | 23 |
| | $ | 742 |
|
| 2032D Notes | | Cash and/or shares | | Cash and/or shares | | 18 |
| | — |
| | 18 |
| | 567 |
|
2033E Notes(1) | | Cash | | Cash and/or shares | | 16 |
| | 204 |
| | 9 |
| | 425 |
|
| 2033F Notes | | Cash | | Cash and/or shares | | 27 |
| | 297 |
| | 18 |
| | 869 |
|
| | | | |
| | 84 |
| | $ | 501 |
| | 68 |
| | $ | 2,603 |
|
| |
(1)
| In August 2017, holders of our 2033E Notes with an aggregate principal amount of $58 million converted their notes, which were settled in the first quarter of 2018. For converted notes with an aggregate principal amount of $16 million, we elected to settle the conversion obligation in excess of the principal amount in cash. We elected to settle the remaining notes with an aggregate principal amount of $42 million with a combination of cash for the principal amount and shares of our common stock for the remainder of the settlement amount. In the first quarter of 2018, we settled the conversions for $92 million in cash and 3 million shares of our treasury stock. |
Contractual Obligations
|
| | | | | | | | | | | | | | | | | | | | |
| | | Payments Due by Period |
| As of August 31, 2017 | | Total | | Less than 1 year | | 1-3 years |
| | 3-5 years |
| | More than 5 years |
Notes payable(1)(2) | | $ | 12,611 |
| | $ | 1,037 |
| | $ | 3,625 |
| | $ | 3,050 |
| | $ | 4,899 |
|
Capital lease obligations(2) | | 1,351 |
| | 401 |
| | 563 |
| | 159 |
| | 228 |
|
Operating leases(3) | | 154 |
| | 29 |
| | 51 |
| | 36 |
| | 38 |
|
Purchase obligations(4) | | 2,219 |
| | 1,895 |
| | 293 |
| | 9 |
| | 22 |
|
Other long-term liabilities(5) | | 860 |
| | 366 |
| | 447 |
| | 26 |
| | 21 |
|
| Total | | $ | 17,195 |
| | $ | 3,728 |
| | $ | 4,979 |
| | $ | 3,280 |
| | $ | 5,208 |
|
| |
(1)
| Amounts include MMJ Creditor Payments, convertible notes, and other notes. |
| |
(2)
| Amounts include principal and interest. |
| |
(3)
| Amounts include contractually obligated minimum lease payments for operating leases having an initial noncancelable term in excess of one year. |
| |
(4)
| Purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that meet any of the following criteria: (1) they are noncancelable, (2) we would incur a penalty if the agreement was canceled, or (3) we must make specified minimum payments even if we do not take delivery of the contracted products or services. If the obligation to purchase goods or services is noncancelable, the entire value of the contract was included in the above table. If the obligation is cancelable, but we would incur a penalty if canceled, only the dollar amount of the penalty was included as a purchase obligation. Contracted minimum amounts specified in any take-or-pay contracts were included in the above table as they represent the portion of each contract that is a firm commitment. |
| |
(5)
| Amounts represent future cash payments to satisfy other long-term liabilities recorded on our consolidated balance sheet, including $366 million for the current portion of these long-term liabilities. We are unable to reliably estimate the timing of future certain payments related to uncertain tax positions and deferred tax liabilities; therefore, the amount has been excluded from the preceding table. However, other noncurrent liabilities recorded on our consolidated balance sheet included these uncertain tax positions and deferred tax liabilities. |
The expected timing of payment amounts of the obligations discussed above is estimated based on current information. Timing and actual amounts paid may differ depending on redemptions, repurchase, or conversions of our 2032D Notes, and $147 million of repayments of finance leases and other debt. In addition, we received proceeds of $1.19 billion under an unsecured 2024 Term Loan A and used the proceeds to repay the $1.19 billion Extinguished 2024 Term Loan A.
For 2020, net cash used for financing activities consisted primarily of $4.37 billion of cash payments to reduce our debt, including $2.50 billion to pay down borrowings under our Revolving Credit Facility, $621 million for repayments of IMFT’s debt obligations to Intel, $534 million to prepay our 2025 Notes, $266 million to settle conversions of notes, and $248 million for scheduled repayment of finance leases; $744 million for the timingacquisition of receiptIntel’s noncontrolling interest in IMFT; and $176 million for the acquisition of goods or services, market prices, changes to agreed-upon amounts, or timing of certain events for some obligations.
The contractual obligations in the table above include the current portions of the related long-term obligations. All other current liabilities are excluded.
Off-Balance Sheet Arrangements
We entered into capped call transactions in connection with certain3.6 million shares of our convertible notes and are intended to reduce the effectcommon stock under our share repurchase authorization. Cash used for financing activities was partially offset by proceeds of potential dilution. The capped calls provide for our receipt of cash or shares, at our election,$2.50 billion from our counterparties ifRevolving Credit Facility, $1.25 billion from the trading price of our stock is above strike prices on2023 Notes, and $1.25 billion from the expiration dates. As of August 31, 2017, the dollar value of cash or shares that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our stock is below strike prices for all of the capped calls at expiration, to $527 million, if the trading price of our stock is at or above the cap prices for all capped calls. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration. For further details of our capped call arrangements, see "ItemExtinguished 2024 Term Loan A.
See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Micron Shareholders' Equity – Outstanding Capped Calls."Debt.”
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions.conditions and involve a significant level of uncertainty. We evaluate our estimates and judgments on an ongoing basis. Our management believes the accounting policies below are critical in the portrayal of our financial condition and results of operations and require management'smanagement’s most difficult, subjective, or complex judgments.
Business acquisitionsContingencies: Accounting for acquisitions requires us to estimate the fair value of consideration paid and the individual assets and liabilities acquired, which involves a number of judgments, assumptions, and estimates that could materially affect the amount and timing of costs recognized in subsequent periods. Accounting for acquisitions can also involve significant judgment to determine when control of the acquired entity is transferred. We typically obtain independent third party valuation studies to assist in determining fair values, including assistance in determining future cash flows, discount rates, and comparable market values. The items involving significant assumptions, estimates, and judgments include the following:
Debt, including discount rate and timing of payments;
Deferred tax assets, including projections of future taxable income and tax rates;
Fair value of consideration paid or transferred;
Intangible assets, including valuation methodology, estimations of future revenue and costs, profit allocation rates attributable to the acquired technology, and discount rates;
Inventory, including estimated future selling prices, timing of product sales, and completion costs for work in process; and
Property, plant, and equipment, including determination of values in a continued-use model.
Consolidation: We have interests in entities that are VIEs. Determining whether to consolidate a VIE requires judgment in assessing whether an entity is a VIE and if we are the entity's primary beneficiary. If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIEs require significant assumptions and judgments.
Contingencies: We are subject to the possibility of losses from various contingencies. Significant judgment is necessary to estimate the probability and amount of a loss, if any, from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. We accrue a liability and charge operations for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as
of the balance sheet date. In accounting for the resolution of contingencies, significant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods.
Goodwill and intangible assets: We test goodwill for impairment in theour fourth quarter of our fiscaleach year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired, and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, then we would record an impairment loss up to the difference between the carrying value and implied fair value. Our qualitative assessment for the current year indicated that the fair value for all of our reporting units substantially exceeded their carrying value and that a quantitative assessment was unnecessary.
Determining when to test for impairment, the reporting units, the assets and liabilities of the reporting unit, and the fair value of the reporting unit requires significant judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates, forecasted manufacturing costs, and other expenses and are developed as part of our long-range planning process. The same estimates are used in business planning, forecasting, and capital budgeting as part of our long-term manufacturing capacity analysis. We test the reasonableness of the output of our long-range planning process by calculating an implied value per share and comparing that to current stock prices, analysts'analysts’ consensus pricing, and management'smanagement’s expectations. These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value. The discount rate requires determination of appropriate market comparables. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
We test other identified intangible assets with definite useful lives when events and circumstances indicate the carrying value may not be recoverable by comparing the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We test intangible assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. Estimating fair values involves significant assumptions, including future sales prices, sales volumes, costs, and discount rates.
Income taxes:We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscalthe applicable year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of our performance and other relevant factors. Realization of deferred tax assets is dependent on our ability to generate future taxable income. In recent periods, our results of operations have benefitted from increases in the amount of deferred taxes we expect to realize, primarily from the levels of capital spending and increases in the amount of taxable income we expect to realize in Japan and Taiwan. Our income tax provision or benefit is dependent, in part, on our ability to forecast future taxable income in theseJapan, the United States, Malaysia, and other jurisdictions. Such forecasts are inherently difficult and involve significant judgments including, among others, projecting future average selling prices and sales volumes, manufacturing and overhead costs, levels of capital spending, and other factors that significantly impact our analyses of the amount of net deferred tax assets that are more likely than not to be realized.
Inventories: Inventories are stated at the lower of average cost or net realizable value.value, with cost being determined on a FIFO basis. Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to FIFO. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of inventories involves significant judgments, including projecting future average selling prices and future sales volumes, and costs to complete products in work in process inventories.volumes. To project average selling prices and sales volumes, we review recent sales volumes, existing customer orders, current contract prices, industry analyses of supply and demand, seasonal factors, general economic trends, and other information. Actual selling prices and volumes may vary significantly from projected prices and volumes due to the volatile nature of the semiconductor memory and storage markets. When these analyses reflect estimated net realizable values below our manufacturing costs, we record a charge to cost of goods sold in advance of when inventories are actually sold. As a result, the timing of when product costs are charged to costs of goods sold can vary significantly. Differences in forecasted average selling prices used in calculating lower of cost or net realizable value adjustments can result in significant changes in the estimated net realizable value of product inventories and accordingly the amount of write-down recorded. For example, a 5% variance in the estimated selling prices would have changed the estimated net realizable value of our inventory by approximately $439$337 million as of August 31, 2017.September 1, 2022. Due to the volatile nature of the semiconductor memory and storage markets, actual selling prices and
volumes often vary significantly from projected prices and volumes; as a result, the timing of when product costs are charged to operations can vary significantly.
50
U.S. GAAP provides for products to be grouped into categories in order to compare costs to net realizable values. The amount of any inventory write-down can vary significantly depending on the determination of inventory categories. InWe review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of average cost or net realizable value analysis and categorize all inventories are primarily categorized as memory (including DRAM, NAND, and other memory) based on the major characteristics of product type and markets. The major characteristics we consider in determining inventory categories are product type and markets.as a single group.
Property, plant, and equipment: We periodically assess the estimated useful lives of our property, plant, and equipment based on technology node transitions, capital spending, and equipment re-use rates. We also review the carrying value of property, plant, and equipment for impairment when events and circumstances indicate that the carrying value of an asset or group of assets may not be recoverable from the estimated future cash flows expected to result from its use and/or disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the estimated fair value of the assets. The estimate of future cash flows involves numerous assumptions which require significant judgment by us, including, but not limited to, future use of the assets for our operations versus sale or disposal of the assets, future selling prices for our products, and future production and sales volumes. In addition, significant judgment is required in determining the groups of assets for which impairment tests are separately performed.
We periodically assess the estimated useful lives of our property, plant, and equipment. We revised the estimated useful lives of equipmentRevenue recognition: Revenue is primarily recognized at a point in our DRAM wafer fabrication facilities from five to seven years in the fourth quarter of 2016. The effecttime when control of the revision was not materialpromised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for 2016 and reduced depreciation costs by approximately $100 million per quarterthose goods. Contracts with our customers are generally short-term in 2017. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies.")
Research and development: Costs related to the conceptual formulation and design of products and processes are expensed as R&D as incurred. Determining when product development is complete requires significant judgment by us.duration at fixed, negotiated prices with payment generally due shortly after delivery. We deem development ofestimate a product complete once the product has been thoroughly reviewed and testedliability for performance and reliability. Subsequent to product qualification, product costs are included in cost of goods sold.
Stock-based compensation: Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expensereturns using the straight-line amortizationexpected value method over the requisite service period. For performance-based stock awards, the expense recognized is dependent on our assessment of the likelihood of the performance measure being achieved. We utilize forecasts of future performance to assess these probabilities and this assessment requires significant judgment.
Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires significant judgment, including estimating stock price volatility and expected option life. We develop these estimates based on historical data and market informationreturns. In addition, we generally offer price protection to our distributors, which can change significantly over time. A small change inis a form of variable consideration that decreases the estimates used can result in a relatively large change in the estimated valuation.transaction price. We use the Black-Scholes option valuation model toexpected value employee stock options. We estimate stock price volatilitymethod, based on an averagehistorical price adjustments and current pricing trends, to estimate the amount of historical volatilityrevenue recognized from sales to distributors. Differences between the estimated and the implied volatility derived from traded options on our stock.actual amounts are recognized as adjustments to revenue.
Recently Adopted Accounting Standards
See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Adopted Accounting Standards."No material items.
Recently Issued Accounting Standards
See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards."No material items.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are exposed to interest rate risk related to our indebtedness and our investment portfolio. As of August 31, 2017September 1, 2022 and September 1, 2016,2, 2021, we had fixed-rate debt with fixed interest ratesan aggregate carrying value of $5.7$4.03 billion and $7.5$3.89 billion, respectively, and as a result, the fair value of our debt fluctuates with changes in market interest rates. In 2022, we issued new debt and repaid other debt, which significantly increased the average remaining maturity of our fixed-rate debt resulting in increased variability of its fair value from interest rate changes. We estimate that, as of August 31, 2017September 1, 2022 and September 1, 2016,2, 2021, a hypothetical 1% decrease in market interest rates of 1% would increase the fair value of our fixed-rate debt by approximately $273$275 million and $420$200 million, respectively.
Interest rate risk related to our investment portfolio is managed by primarily investing in shorter term securities. As of August 31, 2017 and September 1, 2016, we had debt with variable interest rates of $4.2 billion and $1.0 billion, respectively. As of August 31, 2017 and September 1, 2016,2022, a hypothetical 1% increase in the interest rates of our variable-rate debt would result in an increase in interest expense of approximately $43 million and $10 million per year, respectively.
As of August 31, 2017 and September 1, 2016, we held fixed-rate debt investment securities of $1.48 billion and $1.11 billion, respectively, which were subject to interest rate risk. We estimate that a 0.5% increase in market interest rates would decrease the fair value of these instrumentsour portfolio by approximately $2 million as$30 million. Such impact would only be realized if investments were sold prior to maturity.
As of August 31, 2017September 1, 2022 and $1September 2, 2021, we had floating-rate debt and fixed-rate debt that is swapped to floating-rate debt with an aggregate principal amount of $2.09 billion. A hypothetical 1% increase in the interest rates of this floating-rate debt would result in an increase in annual interest expense of approximately $21 million as of September 1, 2016.2022 and September 2, 2021.
Foreign Currency Exchange Rate Risk
The information in this section should be read in conjunction with the information related to changes in the currency exchange rates in "Part“Part I – Item 1A. Risk Factors."” Changes in currency exchange rates could materially adversely affect our results of operations or financial condition.
The functional currency for all of our operations is the U.S. dollar. The substantial majority of our sales are transacted in the U.S. dollar; however, significant amounts of our debt, operating expenditures and capital purchases, and certain assets and liabilities, are incurred in or exposed to other currencies, primarily the euro, Malaysian ringgit, New Taiwan dollar, Singapore dollar, and yen. We have established currency risk management programs for our monetary assets and liabilities denominated in foreign currencies to hedge against fluctuations in the fair value and volatility of future cash flows caused by changes in currency exchange rates. We generally utilize currency forward contracts in these hedging programs, which reduce, but do not always entirely eliminate, the impact of currency exchange rate movements. We do not use derivative financial instruments for trading or speculative purposes.
Based on monetary assets and liabilities denominated in foreign currencies, we estimate that a hypothetical 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $391 million as of August 31, 2017 and $241$186 million as of September 1, 2016.2022 and $122 million as of September 2, 2021. We hedge our exposure to changes in currency exchange rates by utilizing a rolling hedge strategy for our primary currency exposures with currency forward contracts that generally mature within ninethree months. In addition, we have entered into foreign currency forward contracts that mature in December 2017 and December 2018 to hedge our currency exchange rate risk on certain debt. The effectiveness of our hedges is dependent, among other factors, upon our ability to accurately forecast our monetary assets and liabilities.measure exposures on a timely basis. To hedge the exposure of changes in cash flows from changes in currency exchange rates for certain capital expenditures and manufacturing costs, we may utilize currency forward contracts that generally mature within 12 months. (See "Itemtwo years. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Derivative Instruments.")
”
52
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
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Consolidated Financial Statements as of August 31, 2017 and September 1, 2016 and for the fiscal years ended August 31, 2017, September 1, 2016, and September 3, 2015 | |
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MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONSMicron Technology, Inc.
Consolidated Statements of Operations
(inIn millions, except per share amounts)
| | | | | | | | | | | |
| For the year ended | September 1,
2022 | September 2,
2021 | September 3,
2020 |
| | | |
| Revenue | $ | 30,758 | | $ | 27,705 | | $ | 21,435 | |
| Cost of goods sold | 16,860 | | 17,282 | | 14,883 | |
| Gross margin | 13,898 | | 10,423 | | 6,552 | |
| | | |
| Research and development | 3,116 | | 2,663 | | 2,600 | |
| Selling, general, and administrative | 1,066 | | 894 | | 881 | |
| Restructure and asset impairments | 48 | | 488 | | 60 | |
| Other operating (income) expense, net | (34) | | 95 | | 8 | |
| Operating income | 9,702 | | 6,283 | | 3,003 | |
| | | |
| Interest income | 96 | | 37 | | 114 | |
| Interest expense | (189) | | (183) | | (194) | |
| Other non-operating income (expense), net | (38) | | 81 | | 60 | |
| 9,571 | | 6,218 | | 2,983 | |
| | | |
| Income tax (provision) benefit | (888) | | (394) | | (280) | |
| Equity in net income (loss) of equity method investees | 4 | | 37 | | 7 | |
| Net income | 8,687 | | 5,861 | | 2,710 | |
| | | |
| Net income attributable to noncontrolling interests | — | | — | | (23) | |
| Net income attributable to Micron | $ | 8,687 | | $ | 5,861 | | $ | 2,687 | |
| | | |
| Earnings per share | | | |
| Basic | $ | 7.81 | | $ | 5.23 | | $ | 2.42 | |
| Diluted | 7.75 | | 5.14 | | 2.37 | |
| | | |
| Number of shares used in per share calculations | | | |
| Basic | 1,112 | | 1,120 | | 1,110 | |
| Diluted | 1,122 | | 1,141 | | 1,131 | |
|
| | | | | | | | | | | | |
| For the year ended | | August 31,
2017 | | September 1,
2016 | | September 3,
2015 |
| Net sales | | $ | 20,322 |
| | $ | 12,399 |
| | $ | 16,192 |
|
| Cost of goods sold | | 11,886 |
| | 9,894 |
| | 10,977 |
|
| Gross margin | | 8,436 |
| | 2,505 |
| | 5,215 |
|
| | | | | | | |
| Selling, general, and administrative | | 743 |
| | 659 |
| | 719 |
|
| Research and development | | 1,824 |
| | 1,617 |
| | 1,540 |
|
| Restructure and asset impairments | | 18 |
| | 67 |
| | 3 |
|
| Other operating (income) expense, net | | (17 | ) | | (6 | ) | | (45 | ) |
| Operating income | | 5,868 |
| | 168 |
| | 2,998 |
|
| | | | | | | |
| Interest income | | 41 |
| | 42 |
| | 35 |
|
| Interest expense | | (601 | ) | | (437 | ) | | (371 | ) |
| Other non-operating income (expense), net | | (112 | ) | | (54 | ) | | (53 | ) |
| | | 5,196 |
| | (281 | ) | | 2,609 |
|
| | | | | | | |
| Income tax (provision) benefit | | (114 | ) | | (19 | ) | | (157 | ) |
| Equity in net income (loss) of equity method investees | | 8 |
| | 25 |
| | 447 |
|
| Net income (loss) | | 5,090 |
| | (275 | ) | | 2,899 |
|
| | | | | | | |
| Net (income) loss attributable to noncontrolling interests | | (1 | ) | | (1 | ) | | — |
|
| Net income (loss) attributable to Micron | | $ | 5,089 |
| | $ | (276 | ) | | $ | 2,899 |
|
| | | | | | | |
| Earnings (loss) per share | | | | | | |
| Basic | | $ | 4.67 |
| | $ | (0.27 | ) | | $ | 2.71 |
|
| Diluted | | 4.41 |
| | (0.27 | ) | | 2.47 |
|
| | | | | | | |
| Number of shares used in per share calculations | | | | | | |
| Basic | | 1,089 |
| | 1,036 |
| | 1,070 |
|
| Diluted | | 1,154 |
| | 1,036 |
| | 1,170 |
|
See accompanying notes to consolidated financial statements.
54
Micron Technology, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)Consolidated Statements of Comprehensive Income
(inIn millions)
| | | | | | | | | | | |
| For the year ended | September 1,
2022 | September 2,
2021 | September 3,
2020 |
| | | |
| Net income | $ | 8,687 | | $ | 5,861 | | $ | 2,710 | |
| | | |
| Other comprehensive income (loss), net of tax | | | |
| Gains (losses) on derivative instruments | (516) | | (67) | | 46 | |
| Gains (losses) on investments | (48) | | (7) | | 1 | |
| Foreign currency translation adjustments | (1) | | 2 | | — | |
| Pension liability adjustments | 3 | | 3 | | 15 | |
| Other comprehensive income (loss) | (562) | | (69) | | 62 | |
| Total comprehensive income | 8,125 | | 5,792 | | 2,772 | |
| Comprehensive income attributable to noncontrolling interests | — | | — | | (23) | |
| Comprehensive income attributable to Micron | $ | 8,125 | | $ | 5,792 | | $ | 2,749 | |
|
| | | | | | | | | | | | |
| For the year ended | | August 31,
2017 | | September 1,
2016 | | September 3,
2015 |
| Net income (loss) | | $ | 5,090 |
| | $ | (275 | ) | | $ | 2,899 |
|
| | | | | | | |
| Other comprehensive income (loss), net of tax | | | | | | |
| Foreign currency translation adjustments | | 48 |
| | (49 | ) | | (42 | ) |
| Gain (loss) on derivatives, net | | 15 |
| | 7 |
| | (18 | ) |
| Pension liability adjustments | | 1 |
| | (9 | ) | | 20 |
|
| Gain (loss) on investments, net | | — |
| | 3 |
| | (4 | ) |
| Other comprehensive income (loss) | | 64 |
| | (48 | ) | | (44 | ) |
| Total comprehensive income (loss) | | 5,154 |
| | (323 | ) | | 2,855 |
|
| Comprehensive (income) loss attributable to noncontrolling interests | | (1 | ) | | (1 | ) | | 1 |
|
| Comprehensive income (loss) attributable to Micron | | $ | 5,153 |
| | $ | (324 | ) | | $ | 2,856 |
|
See accompanying notes to consolidated financial statements.
Micron Technology, Inc.
CONSOLIDATED BALANCE SHEETSConsolidated Balance Sheets
(inIn millions, except par value amounts) | | | | | | | | |
| As of | September 1,
2022 | September 2,
2021 |
| | |
| Assets | | |
| Cash and equivalents | $ | 8,262 | | $ | 7,763 | |
| Short-term investments | 1,069 | | 870 | |
| Receivables | 5,130 | | 5,311 | |
| Inventories | 6,663 | | 4,487 | |
| Assets held for sale | 13 | | 974 | |
| Other current assets | 644 | | 502 | |
| Total current assets | 21,781 | | 19,907 | |
| Long-term marketable investments | 1,647 | | 1,765 | |
| Property, plant, and equipment | 38,549 | | 33,213 | |
| Operating lease right-of-use assets | 678 | | 551 | |
| Intangible assets | 421 | | 349 | |
| Deferred tax assets | 702 | | 782 | |
| Goodwill | 1,228 | | 1,228 | |
| Other noncurrent assets | 1,277 | | 1,054 | |
| Total assets | $ | 66,283 | | $ | 58,849 | |
| | |
| Liabilities and equity | | |
| Accounts payable and accrued expenses | $ | 6,090 | | $ | 5,325 | |
| Current debt | 103 | | 155 | |
| Other current liabilities | 1,346 | | 944 | |
| Total current liabilities | 7,539 | | 6,424 | |
| Long-term debt | 6,803 | | 6,621 | |
| Noncurrent operating lease liabilities | 610 | | 504 | |
| Noncurrent unearned government incentives | 589 | | 808 | |
| Other noncurrent liabilities | 835 | | 559 | |
| Total liabilities | 16,376 | | 14,916 | |
| | |
| Commitments and contingencies | | |
| | |
| Shareholders’ equity | | |
| Common stock, $0.10 par value, 3,000 shares authorized, 1,226 shares issued and 1,094 outstanding (1,216 shares issued and 1,119 outstanding as of September 2, 2021) | 123 | | 122 | |
| Additional capital | 10,197 | | 9,453 | |
| Retained earnings | 47,274 | | 39,051 | |
| Treasury stock, 132 shares held (97 shares as of September 2, 2021) | (7,127) | | (4,695) | |
| Accumulated other comprehensive income (loss) | (560) | | 2 | |
| Total equity | 49,907 | | 43,933 | |
| Total liabilities and equity | $ | 66,283 | | $ | 58,849 | |
|
| | | | | | | | |
| As of | | August 31,
2017 | | September 1,
2016 |
| Assets | | | | |
| Cash and equivalents | | $ | 5,109 |
| | $ | 4,140 |
|
| Short-term investments | | 319 |
| | 258 |
|
| Receivables | | 3,759 |
| | 2,068 |
|
| Inventories | | 3,123 |
| | 2,889 |
|
| Other current assets | | 147 |
| | 140 |
|
| Total current assets | | 12,457 |
| | 9,495 |
|
| Long-term marketable investments | | 617 |
| | 414 |
|
| Property, plant, and equipment, net | | 19,431 |
| | 14,686 |
|
| Equity method investments | | 16 |
| | 1,364 |
|
| Intangible assets, net | | 387 |
| | 464 |
|
| Deferred tax assets | | 766 |
| | 657 |
|
| Goodwill | | 1,228 |
| | 104 |
|
| Other noncurrent assets | | 434 |
| | 356 |
|
| Total assets | | $ | 35,336 |
| | $ | 27,540 |
|
| | | | | |
| Liabilities and equity | | | | |
| Accounts payable and accrued expenses | | $ | 3,664 |
| | $ | 3,879 |
|
| Deferred income | | 408 |
| | 200 |
|
| Current debt | | 1,262 |
| | 756 |
|
| Total current liabilities | | 5,334 |
| | 4,835 |
|
| Long-term debt | | 9,872 |
| | 9,154 |
|
| Other noncurrent liabilities | | 639 |
| | 623 |
|
| Total liabilities | | 15,845 |
| | 14,612 |
|
| | | | | |
| Commitments and contingencies | |
|
| |
|
|
| | | | | |
| Redeemable convertible notes | | 21 |
| | — |
|
| | | | | |
| Micron shareholders' equity | | | | |
| Common stock, $0.10 par value, 3,000 shares authorized, 1,116 shares issued and 1,112 outstanding (1,094 shares issued and 1,040 outstanding as of September 1, 2016) | | 112 |
| | 109 |
|
| Additional capital | | 8,287 |
| | 7,736 |
|
| Retained earnings | | 10,260 |
| | 5,299 |
|
| Treasury stock, 4 shares held (54 shares as of September 1, 2016) | | (67 | ) | | (1,029 | ) |
| Accumulated other comprehensive income (loss) | | 29 |
| | (35 | ) |
| Total Micron shareholders' equity | | 18,621 |
| | 12,080 |
|
| Noncontrolling interests in subsidiaries | | 849 |
| | 848 |
|
| Total equity | | 19,470 |
| | 12,928 |
|
| Total liabilities and equity | | $ | 35,336 |
| | $ | 27,540 |
|
See accompanying notes to consolidated financial statements.
56
MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Micron Shareholders | | | | |
| | | Common Stock | | Additional Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Total Micron Shareholders' Equity | | Noncontrolling Interests in Subsidiaries | | Total Equity |
| | | Number of Shares | | Amount | | | | | | | |
| Balance at August 28, 2014 | | 1,073 |
| | $ | 107 |
| | $ | 7,868 |
| | $ | 2,729 |
| | $ | — |
| | $ | 56 |
| | $ | 10,760 |
| | $ | 802 |
| | $ | 11,562 |
|
| Net income | | | | | | | | 2,899 |
| | | | | | 2,899 |
| | — |
| | 2,899 |
|
| Other comprehensive income (loss), net | | | | | | | | | | | | (43 | ) | | (43 | ) | | (1 | ) | | (44 | ) |
| Stock issued under stock plans | | 13 |
| | 1 |
| | 73 |
| | | | | | | | 74 |
| | | | 74 |
|
| Stock-based compensation expense | | | | | | 168 |
| | | | | | | | 168 |
| | | | 168 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | | — |
| | 142 |
| | 142 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | | — |
| | (6 | ) | | (6 | ) |
| Repurchase and retirement of stock | | (2 | ) | | — |
| | (13 | ) | | (40 | ) | | | | | | (53 | ) | | | | (53 | ) |
| Repurchase of treasury stock | | | | | | | | | | (831 | ) | | | | (831 | ) | | | | (831 | ) |
| Settlement of capped calls | | | | | | 50 |
| | | | (50 | ) | | | | — |
| | | | — |
|
| Reclassification of redeemable convertible notes, net | | | | | | 19 |
| | | | | | | | 19 |
| | | | 19 |
|
| Conversion and repurchase of convertible notes | | | | | | (691 | ) | | | | | | | | (691 | ) | | | | (691 | ) |
| Balance at September 3, 2015 | | 1,084 |
| | $ | 108 |
| | $ | 7,474 |
| | $ | 5,588 |
| | $ | (881 | ) | | $ | 13 |
| | $ | 12,302 |
| | $ | 937 |
| | $ | 13,239 |
|
| Net income (loss) | | | | | | | | (276 | ) | | | | | | (276 | ) | | 1 |
| | (275 | ) |
| Other comprehensive income (loss), net | | | | | | | | | | | | (48 | ) | | (48 | ) | | — |
| | (48 | ) |
| Stock issued under stock plans | | 11 |
| | 1 |
| | 47 |
| | | | | | | | 48 |
| | | | 48 |
|
| Stock-based compensation expense | | | | | | 191 |
| | | | | | | | 191 |
| | | | 191 |
|
| Contributions from noncontrolling interests | | | | | | | | | | | | | | — |
| | 37 |
| | 37 |
|
| Distributions to noncontrolling interests | | | | | | | | | | | | | | — |
| | (34 | ) | | (34 | ) |
| Acquisitions of noncontrolling interests | | | | | | | | | | | | | | — |
| | (93 | ) | | (93 | ) |
| Repurchase and retirement of stock | | (1 | ) | | — |
| | (10 | ) | | (13 | ) | | | | | | (23 | ) | | | | (23 | ) |
| Repurchase of treasury stock | | | | | | | | | | (125 | ) | | | | (125 | ) | | | | (125 | ) |
| Settlement of capped calls | | | | | | 23 |
| | | | (23 | ) | | | | — |
| | | | — |
|
| Reclassification of redeemable convertible notes, net | | | | | | 49 |
| | | | | | | | 49 |
| | | | 49 |
|
| Conversion and repurchase of convertible notes | | | | | | (38 | ) | | | | | | | | (38 | ) | | | | (38 | ) |
| Balance at September 1, 2016 | | 1,094 |
| | $ | 109 |
| | $ | 7,736 |
| | $ | 5,299 |
| | $ | (1,029 | ) | | $ | (35 | ) | | $ | 12,080 |
| | $ | 848 |
| | $ | 12,928 |
|
| Net income | | | | | | | | 5,089 |
| | | | | | 5,089 |
| | 1 |
| | 5,090 |
|
| Other comprehensive income (loss), net | | | | | | | | | | | | 64 |
| | 64 |
| | — |
| | 64 |
|
| Stock issued under stock plans | | 20 |
| | 3 |
| | 139 |
| | | | | | | | 142 |
| | | | 142 |
|
| Stock-based compensation expense | | | | | | 217 |
| | (2 | ) | | | | | | 215 |
| | | | 215 |
|
| Repurchase and retirement of stock | | (2 | ) | | — |
| | (13 | ) | | (22 | ) | |
|
| | | | (35 | ) | | | | (35 | ) |
| Stock issued to Nanya for Inotera Acquisition | | 4 |
| | — |
| | 70 |
| | (104 | ) | | 1,029 |
| | | | 995 |
| | | | 995 |
|
| Settlement of capped calls | | | | | | 192 |
| | | | (67 | ) | | | | 125 |
| | | | 125 |
|
| Reclassification of redeemable convertible notes, net | | | | | | (21 | ) | | | | | | | | (21 | ) | | | | (21 | ) |
| Conversion and repurchase of convertible notes | | | | | | (33 | ) | | | | | | | | (33 | ) | | | | (33 | ) |
| Balance at August 31, 2017 | | 1,116 |
| | $ | 112 |
| | $ | 8,287 |
| | $ | 10,260 |
| | $ | (67 | ) | | $ | 29 |
| | $ | 18,621 |
| | $ | 849 |
| | $ | 19,470 |
|
Micron Technology, Inc.
Consolidated Statements of Changes in Equity
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Micron Shareholders | | |
| Common Stock | Additional Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive
Income (Loss) | Total Micron Shareholders’ Equity | Noncontrolling Interests in Subsidiaries | Total Equity |
| Number
of Shares | Amount |
| | | | | | | | | |
| Balance at August 29, 2019 | 1,182 | $ | 118 | | $ | 8,214 | | $ | 30,761 | | $ | (3,221) | | $ | 9 | | $ | 35,881 | | $ | 889 | | $ | 36,770 | |
| Net income | — | | — | | — | | 2,687 | | — | | — | | 2,687 | | 15 | | 2,702 | |
| Other comprehensive income (loss), net | — | | — | | — | | — | | — | | 62 | | 62 | | — | | 62 | |
| Stock issued under stock plans | 14 | 1 | | 224 | | — | | — | | — | | 225 | | — | | 225 | |
| Stock-based compensation expense | — | | — | | 328 | | — | | — | | — | | 328 | | — | | 328 | |
| Repurchase of stock - repurchase program | — | | — | | — | | — | | (176) | | — | | (176) | | — | | (176) | |
| Repurchase of stock - withholdings on employee equity awards | (2) | | — | | (11) | | (64) | | — | | — | | (75) | | — | | (75) | |
| Settlement of capped calls | — | | — | | 98 | | — | | (98) | | — | | — | | — | | — | |
| Acquisitions of noncontrolling interest | — | | — | | 120 | | — | | — | | — | | 120 | | (904) | | (784) | |
| Cash settlement of convertible notes | — | | — | | (56) | | — | | — | | — | | (56) | | — | | (56) | |
| Balance at September 3, 2020 | 1,194 | $ | 119 | | $ | 8,917 | | $ | 33,384 | | $ | (3,495) | | $ | 71 | | $ | 38,996 | | $ | — | | $ | 38,996 | |
| Net income | — | | — | | — | | 5,861 | | — | | — | | 5,861 | | — | | 5,861 | |
| Other comprehensive income (loss), net | — | | — | | — | | — | | — | | (69) | | (69) | | — | | (69) | |
| Stock issued under stock plans | 13 | 2 | | 223 | | — | | — | | — | | 225 | | — | | 225 | |
| Stock-based compensation expense | — | | — | | 378 | | — | | — | | — | | 378 | | — | | 378 | |
| Repurchase of stock - repurchase program | — | | — | | — | | — | | (1,200) | | — | | (1,200) | | — | | (1,200) | |
| Repurchase of stock - withholdings on employee equity awards | (2) | | — | | (12) | | (82) | | | — | | (94) | | — | | (94) | |
| Stock issued for convertible notes | 11 | | 1 | | (1) | | — | | — | | — | | — | | — | | — | |
| Cash settlement of convertible notes | — | | — | | (52) | | — | | — | | — | | (52) | | | (52) | |
| Dividends and dividend equivalents declared ($0.10 per share) | — | | — | | — | | (112) | | — | | — | | (112) | | — | | (112) | |
| Balance at September 2, 2021 | 1,216 | $ | 122 | | $ | 9,453 | | $ | 39,051 | | $ | (4,695) | | $ | 2 | | $ | 43,933 | | $ | — | | $ | 43,933 | |
| Net income | — | | — | | — | | 8,687 | | — | | — | | 8,687 | | — | | 8,687 | |
| Other comprehensive income (loss), net | — | | — | | — | | — | | — | | (562) | | (562) | | — | | (562) | |
| Stock issued under stock plans | 12 | 1 | | 244 | | — | | — | | — | | 245 | | — | | 245 | |
| Stock-based compensation expense | — | | — | | 514 | | — | | — | | — | | 514 | | — | | 514 | |
| Repurchase of stock - repurchase program | — | | — | | — | | — | | (2,432) | | — | | (2,432) | | — | | (2,432) | |
| Repurchase of stock - withholdings on employee equity awards | (2) | — | | (14) | | (112) | | — | | — | | (126) | | — | | (126) | |
| Dividends and dividend equivalents declared ($0.315 per share) | — | | — | | — | | (352) | | — | | — | | (352) | | — | | (352) | |
| Balance at September 1, 2022 | 1,226 | $ | 123 | | $ | 10,197 | | $ | 47,274 | | $ | (7,127) | | $ | (560) | | $ | 49,907 | | $ | — | | $ | 49,907 | |
See accompanying notes to consolidated financial statements.
MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
|
| | | | | | | | | | | | |
| For the year ended | | August 31,
2017 | | September 1,
2016 | | September 3,
2015 |
| Cash flows from operating activities | | | | | | |
| Net income (loss) | | $ | 5,090 |
| | $ | (275 | ) | | $ | 2,899 |
|
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | | |
| | |
| | |
| Depreciation expense and amortization of intangible assets | | 3,861 |
| | 2,980 |
| | 2,667 |
|
| Amortization of debt discount and other costs | | 125 |
| | 126 |
| | 138 |
|
| Stock-based compensation | | 215 |
| | 191 |
| | 168 |
|
| Loss on debt repurchases and conversions | | 99 |
| | 4 |
| | 49 |
|
| Gain on remeasurement of previously-held equity interest in Inotera | | (71 | ) | | — |
| | — |
|
| Equity in net (income) loss of equity method investees | | (8 | ) | | (25 | ) | | (447 | ) |
| Change in operating assets and liabilities | | |
| | |
| | |
| Receivables | | (1,651 | ) | | 465 |
| | 393 |
|
| Inventories | | 50 |
| | (549 | ) | | 116 |
|
| Accounts payable and accrued expenses | | 564 |
| | 272 |
| | (691 | ) |
| Payments attributed to intercompany balances with Inotera | | (361 | ) | | — |
| | — |
|
| Deferred income | | 218 |
| | (6 | ) | | (105 | ) |
| Other | | 22 |
| | (15 | ) | | 21 |
|
| Net cash provided by operating activities | | 8,153 |
| | 3,168 |
| | 5,208 |
|
| | | | | | | |
| Cash flows from investing activities | | |
| | |
| | |
| Expenditures for property, plant, and equipment | | (4,734 | ) | | (5,817 | ) | | (4,021 | ) |
| Acquisition of Inotera | | (2,634 | ) | | — |
| | — |
|
| Purchases of available-for-sale securities | | (1,239 | ) | | (1,026 | ) | | (4,392 | ) |
| Payments to settle hedging activities | | (274 | ) | | (152 | ) | | (132 | ) |
| Proceeds from sales and maturities of available-for-sale securities | | 970 |
| | 3,690 |
| | 2,248 |
|
| Proceeds from settlement of hedging activities | | 184 |
| | 335 |
| | 56 |
|
| Other | | 190 |
| | (74 | ) | | 25 |
|
| Net cash provided by (used for) investing activities | | (7,537 | ) | | (3,044 | ) | | (6,216 | ) |
| | | | | | | |
| Cash flows from financing activities | | |
| | |
| | |
| Proceeds from issuance of debt | | 3,311 |
| | 2,199 |
| | 2,212 |
|
| Proceeds from issuance of stock under equity plans | | 142 |
| | 48 |
| | 74 |
|
| Proceeds from equipment sale-leaseback transactions | | — |
| | 765 |
| | 291 |
|
| Repayments of debt | | (2,558 | ) | | (870 | ) | | (2,329 | ) |
| Payments on equipment purchase contracts | | (519 | ) | | (46 | ) | | (95 | ) |
| Cash paid to acquire treasury stock | | (35 | ) | | (148 | ) | | (884 | ) |
| Other | | 8 |
| | (203 | ) | | 13 |
|
| Net cash provided by (used for) financing activities | | 349 |
| | 1,745 |
| | (718 | ) |
| | | | | | | |
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | | (12 | ) | | 19 |
| | (133 | ) |
| | | | | | | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | | 953 |
| | 1,888 |
| | (1,859 | ) |
| Cash, cash equivalents, and restricted cash at beginning of period | | 4,263 |
| | 2,375 |
| | 4,234 |
|
| Cash, cash equivalents, and restricted cash at end of period | | $ | 5,216 |
| | $ | 4,263 |
| | $ | 2,375 |
|
| | | | | | | |
| Supplemental disclosures | | |
| | |
| | |
| Income taxes paid, net | | $ | (99 | ) | | $ | (90 | ) | | $ | (63 | ) |
| Interest paid, net of amounts capitalized | | (468 | ) | | (267 | ) | | (226 | ) |
| Noncash investing and financing activity | | | | | | |
| Equipment acquisitions on contracts payable and capital leases | | 813 |
| | 993 |
| | 345 |
|
Micron Technology, Inc.
Consolidated Statements of Cash Flows
(In millions) | | | | | | | | | | | | | |
| For the year ended | September 1,
2022 | September 2,
2021 | September 3,
2020 | | |
| | | | | |
| Cash flows from operating activities | | | | | |
| Net income | $ | 8,687 | | $ | 5,861 | | $ | 2,710 | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation expense and amortization of intangible assets | 7,116 | | 6,214 | | 5,650 | | | |
| Stock-based compensation | 514 | | 378 | | 328 | | | |
| (Gain) loss on debt repurchases and conversions | 83 | | 1 | | (40) | | | |
| Restructure and asset impairments | 44 | | 454 | | 40 | | | |
| Change in operating assets and liabilities: | | | | | |
| Receivables | 190 | | (1,446) | | (723) | | | |
| Inventories | (2,179) | | 866 | | (435) | | | |
| Accounts payable and accrued expenses | 744 | | 210 | | 725 | | | |
| Other | (18) | | (70) | | 51 | | | |
| Net cash provided by operating activities | 15,181 | | 12,468 | | 8,306 | | | |
| | | | | |
| Cash flows from investing activities | | | | | |
| Expenditures for property, plant, and equipment | (12,067) | | (10,030) | | (8,223) | | | |
| Purchases of available-for-sale securities | (1,770) | | (3,163) | | (1,857) | | | |
| Proceeds from maturities of available-for-sale securities | 1,321 | | 1,250 | | 814 | | | |
| Proceeds from sale of Lehi, Utah fab | 888 | | — | | — | | | |
| Proceeds from sales of available-for-sale securities | 294 | | 856 | | 1,458 | | | |
| Proceeds from government incentives | 115 | | 495 | | 262 | | | |
| Other | (366) | | 3 | | (43) | | | |
| Net cash provided by (used for) investing activities | (11,585) | | (10,589) | | (7,589) | | | |
| | | | | |
| Cash flows from financing activities | | | | | |
| Repurchases of common stock - repurchase program | (2,432) | | (1,200) | | (176) | | | |
| Repayments of debt | (2,032) | | (1,520) | | (4,366) | | | |
| Payments of dividends to shareholders | (461) | | — | | — | | | |
| Payments on equipment purchase contracts | (141) | | (295) | | (63) | | | |
| Repurchases of common stock - withholdings on employee equity awards | (125) | | (94) | | (75) | | | |
| Acquisition of noncontrolling interest in IMFT | — | | — | | (744) | | | |
| Proceeds from issuance of debt | 2,000 | | 1,188 | | 5,000 | | | |
| Other | 211 | | 140 | | 107 | | | |
| Net cash provided by (used for) financing activities | (2,980) | | (1,781) | | (317) | | | |
| | | | | |
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | (106) | | 41 | | 11 | | | |
| | | | | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 510 | | 139 | | 411 | | | |
| Cash, cash equivalents, and restricted cash at beginning of period | 7,829 | | 7,690 | | 7,279 | | | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 8,339 | | $ | 7,829 | | $ | 7,690 | | | |
| | | | | |
| Supplemental disclosures | | | | | |
| Income taxes paid, net | $ | (493) | | $ | (361) | | $ | (167) | | | |
| Interest paid, net of amounts capitalized | (154) | | (171) | | (165) | | | |
| Noncash equipment acquisitions on contracts payable | 157 | | 289 | | 171 | | | |
See accompanying notes to consolidated financial statements.
58
Micron Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in millions, except per share amounts)
Significant Accounting Policies
Basis of Presentation: Micron Technology, Inc., including its consolidated subsidiaries, isPresentation
We are an industry leader in innovative memory and storage solutions. Through our global brands – Micron, Crucial, and Ballistix – our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPoint memory, issolutions transforming how the world uses information to enrich life. Backed by more than 35 years oflife for all. With a relentless focus on our customers, technology leadership, ourand manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage solutions enable disruptive trends, includingproducts through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence machine learning, and autonomous vehicles in key market segments like cloud,5G applications that unleash opportunities — from the data center networking,to the intelligent edge and mobile. across the client and mobile user experience.
The accompanying consolidated financial statements include the accounts of Micron Technology, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to current period presentation. See
“Inventories” below for changes to our significant accounting policies, and the “Inventories” note for additional
information.
Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 20172022 and 20162021 each contained 52 weeks and fiscal year 20152020 contained 53 weeks. Our fourth quarter of fiscal 2020 contained 14 weeks and all other fiscal quarters in the years presented contained 13 weeks. All period references are to our fiscal periods unless otherwise indicated.
Derivative and Hedging Instruments:Instruments
We use derivative instruments to manage our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities denominated in currencies other than the U.S. dollar and (2) forecasted cash flows for certain capital expenditures.expenditures and manufacturing costs. We also use derivative instruments to manage our exposure to changes in commodity prices for manufacturing supplies and to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. Derivative instruments are measured at their fair values and recognized as either assets or liabilities.
The accounting for changes in the fair value of derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments that are not designated as hedges for hedge accounting, purposes, gains or losses from changes in fair values are recognized in other non-operating income (expense). For derivative forward contractsinstruments designated as cash-flowcash flow hedges, we exclude changes in the time value from the effectiveness assessment. The effective portion of the gaingains or loss islosses are included as a component of other comprehensive income (loss) and the ineffective or excluded portion of the gain or loss is included in other non-operating income (expense). Amounts in accumulated other comprehensive income (loss) from these cash flow hedges areand reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. EffectivenessFor derivative instruments designated as cash flow hedges, time value is measured by comparingexcluded from the cumulative changeassessment of effectiveness and the gains and losses attributable to time value are recognized in earnings. For derivative instruments designated as fair value hedges, changes in the fair valuevalues of the hedge contract withderivative instruments and the cumulative changeoffsetting changes in the forecasted cash flowsfair values of the underlying hedged item.items are both recognized in earnings.
We enter into master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions. These master netting arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled with each counterparty have been presented in our consolidated balance sheet on a net basis.
Financial Instruments:Instruments
Cash equivalents include highly liquid short-term investments with original maturities to us of three months or less that are readily convertible to known amounts of cash. Other investments with remaining maturities of less than one year are included in short-term investments. Investments with remaining maturities greater than one year are included in long-term marketable investments. The carrying value of investment securities sold is determined using the specific identification method.
Functional Currency:Currency
The U.S. dollar is the functional currency for us and all of our consolidated subsidiaries.
Goodwill and Non-Amortizing Intangible Assets:
We perform an annual impairment assessment for goodwill in our fourth quarter each year.
Government Incentives
We receive incentives from governmental entities related to expenses, assets, and non-amortizing intangible assetsother activities. Our government incentives may require that we meet or maintain specified spending levels and other operational metrics and may be subject to reimbursement if such conditions are not met or maintained. Government incentives are recorded in the fourthfinancial statements in accordance with their purpose: as a reduction of expenses, a reduction of asset costs, or other income. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. Incentives related to the acquisition or construction of fixed assets are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Other incentives are recognized as other operating income. Government incentives received prior to being earned are recognized in current or noncurrent deferred income or restricted cash, whereas government incentives earned prior to being received are recognized in current or noncurrent receivables. Cash received from government incentives related to operating expenses is included as an operating activity in the statement of cash flows, whereas cash received from incentives related to the acquisition of property, plant, and equipment is included as an investing activity.
Inventories
Effective as of the beginning of the second quarter of our fiscal year.2021, we changed the method of inventory costing from average cost to FIFO. The difference between average cost and FIFO was not material to any previously reported financial statements. Therefore, we have recognized the cumulative effect of the change as a reduction of inventories and a charge to cost of goods sold of $133 million as of the beginning of the second quarter of 2021.
Inventories:Inventories are stated at the lower of average cost or net realizable value.value, with cost being determined on a FIFO basis. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. DeterminingWhen net realizable value of inventories involves numerous judgments, including(which requires projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. When net realizable valueinventories) is below cost, we record a charge to cost of goods sold to write down inventories to their estimated net realizable value in advance of when inventories are actually sold. In determining the lower of average cost or net realizable value, inventories are primarily categorized as memory (including DRAM, NAND, and other memory) based onWe review the major characteristics of product type and markets.markets in determining the unit of account for which we perform the lower of cost or net realizable value analysis and categorize all inventories (including DRAM, NAND, and other memory) as a single group. We remove amounts from inventory and charge such amounts to cost of goods sold on a FIFO basis.
60
Leases
We determine if an average cost basis.arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluate whether the lease is an operating lease or a finance lease at the commencement date. We recognize right-of-use assets and lease liabilities for operating and finance leases with terms greater than 12 months. Right-of-use assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments. We do not separate lease and non-lease components for real-estate and gas plant leases. Sublease income is included within lease expense.
Product and Process Technology:Technology
Costs incurred to (1) acquire product and process technology, (2) patent technology, and (3) maintain patent technology, are capitalized and amortized on a straight-line basis over periods ranging up to 12.5 years. We capitalize a portion of the costs incurred to patent technology based on historical data of patents issued as a percent of patents we file. Capitalized productProduct and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement. Fully-amortized assets are removed from product and process technology and accumulated amortization.
Product Warranty:Warranty
We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our standard terms and conditions. Our warranty obligations are not material.
Property, Plant, and Equipment:Equipment
Property, plant, and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of generally 10 to 30 years for buildings, 5 to 7 years for equipment, and 3 to 5 years for software. Assets held for sale are carried at the lower of costestimated fair value or estimated faircarrying value and are included in other noncurrentcurrent assets. When property, plant, or equipment is retired or otherwise disposed, the net book value is removed and we recognize any gain or loss in our results of operations.
We capitalize interest on borrowings during the period of time we carry out the activities necessary to bring assets to the condition of their intended use and location. Capitalized interest becomes part of the cost and amortized over the useful lives of the assets.
We periodically assess the estimated useful lives of our property, plant, and equipment. In the fourth quarter of 2016, we identified factors such as the lengthening period of time between DRAM product technology node transitions, an increased re-use rate of equipment, and industry trends. As a result, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years in the fourth quarter of 2016. The effect of the revision was not material for 2016 and reduced depreciation costs by approximately $100 million per quarter in 2017.
Research and Development:Development
Costs related to the conceptual formulation and design of products and processes are expensed ascharged to R&D expense as incurred. Development of a product is deemed complete when it is qualified through thorough reviews and tests for performance and reliability. Subsequent to product qualification, product costs are included in cost of goods sold. Product design and other R&D costs for certain technologies may be shared with a development partner. Amounts receivable from cost-sharing arrangements are reflected as a reduction of R&D expense.
Revenue Recognition:Recognition
Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Contracts with our customers are generally short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. We recognize product or license revenue when persuasive evidence thatestimate a sales arrangement exists, delivery has occurred,liability for returns using the expected value method based on historical returns. In addition, we generally offer price is fixed or determinable, and collectibility is reasonably assured,protection to our distributors, which is generally ata form of variable consideration that decreases the timetransaction price. We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of shipmentrevenue recognized from sales to our customers. If wedistributors. Differences between the estimated and actual amounts are unablerecognized as adjustments to reasonably estimate returns or the price is not fixed or determinable, sales made under agreements allowing rightsrevenue.
Stock-based Compensation:Compensation
Stock-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period. We account for forfeitures as they occur. We issue new shares upon the exercise of stock options, or conversion of share units.units, or issuance of shares under our ESPP.
Treasury Stock:Stock
Treasury stock is carried at cost. When we retire our treasury stock, any excess of the repurchase price paid over par value is allocated between additional capital and retained earnings.
Use of Estimates:Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may differ under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Actual results could differ from estimates.
Lehi, Utah Fab and 3D XPoint
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 XPoint 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, Utah that was dedicated to 3D XPoint production. As a result, we classified the property, plant, and equipment as held for sale as of the second quarter of 2021 and ceased depreciating the assets. On June 30, 2021, we announced a definitive agreement to sell our Lehi facility to TI and closed the sale on October 22, 2021.
In the first quarter of 2022, we received $893 million from TI for the sale of the Lehi facility and disposed of $918 million of net assets, consisting primarily of property, plant, and equipment of $921 million; $55 million of other assets, consisting primarily of a receivable for reimbursement of property taxes, equipment spare parts, and raw materials; and $58 million of liabilities, consisting primarily of a finance lease obligation. As a result of the disposition of the Lehi facility and other related adjustments, we recognized a loss of $23 million included in restructure and asset impairments in the first quarter of 2022.
In 2021, we recognized a charge of $435 million included in restructure and asset impairments in connection with the definitive agreement with TI (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. 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. We also recognized a charge of $49 million to cost of goods sold in 2021 to write down 3D XPoint inventory due to our decision to cease further development of this technology. Our 3D XPoint technology development and Lehi facility operations were primarily included in our CNBU segment results.
62
As of September 2, 2021, the significant balances of assets held for sale in connection with our Lehi facility were as follows:
| | | | | |
| As of | September 2,
2021 |
| |
| Property, plant, and equipment | $ | 1,334 | |
| Other current assets | 50 | |
| Impairment | (435) | |
| Lehi assets held for sale | $ | 949 | |
As of September 2, 2021, we also had a $50 million finance lease obligation included in the current portion of long-term debt and $11 million of other liabilities that were subsequently transferred with the sale. As of September 2, 2021, the carrying value of the Lehi assets held for sale approximated the expected cash consideration, net of estimated selling expenses.
Variable Interest Entities
We have interests in entities that are VIEs.variable interest entities (“VIEs”). If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE'sVIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIEs require significant assumptions and judgments.
Unconsolidated VIEs
Inotera: Prior to our acquisitionThrough the first quarter of the remaining interest2020, IMFT, which operated a facility in Inotera on December 6, 2016, InoteraLehi, Utah, was a VIE because of the terms of its supply agreement with us. We had previously determined that we did not have the power to direct the activities of Inotera that most significantly impacted its economic performance, primarily due to limitations on our governance rights that required the consent of other parties for key operating decisions and due to Inotera's dependence on Nanya for financing and the ability of Inotera to operate in Taiwan. Therefore, we did not consolidate Inotera and we accounted for our interest under the equity method. (See "Acquisition of Inotera" and "Equity Method Investments – Inotera" notes.)
PTI Xi'an: Powertech Technology Inc. Xi'an ("PTI Xi'an") is a wholly-owned subsidiary of Powertech Technology Inc. ("PTI") and was created to provide assembly services to us at our manufacturing site in Xi'an, China. In connection therewith, we had capital lease obligations of $80 million and net property, plant, and equipment of $76 million as of August 31, 2017. We do not have an equity interest in PTI Xi'an. PTI Xi'an is a VIE because of the terms of its service agreement with us and its dependency on PTI to finance its operations. We have determined that we do not have the power to direct the activities of PTI Xi'an that most significantly impact its economic performance, primarily because we have no governance rights. Therefore, we do not consolidate PTI Xi'an.
Consolidated VIE
IMFT:IMFT is a VIE because all of its costs arewere passed to us and its other member, Intel, through product purchase agreements and because IMFT iswas dependent upon us or Intel for additional cash requirements. The primary activities of IMFT arewere driven by the constant introduction of product and process technology. Because we performperformed a significant majority of the technology development, we havehad the power to direct its key activities. In addition,We consolidated IMFT manufactures certain products exclusively for us usingdue to this power and our product designs. We consolidate IMFT because we have the power to direct the activities of IMFT that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from IMFT that could have been potentially be significant to it. (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)
Recently Adopted Accounting Standards
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04 – Simplifying the Test for Goodwill Impairment, which modified the goodwill impairment test and required an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeded its fair value. We adopted this ASU as of the beginning of the fourth quarter of 2017 in connection with our annual impairment test. The adoption of the ASU did not have a material impact on our financial statements.
In November 2016, the FASB issued ASU 2016-18 – Restricted Cash, which required amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. We adopted this ASU in the fourth quarter of 2017 on a retrospective basis. As of September 1, 2016, September 3, 2015, and August 28, 2014, restricted cash was $123 million, $88 million, and $84 million, respectively. The adoption of this ASU did not have a material impact on our cash flows.
In March 2016, the FASB issued ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification within the statement of cash flows. We adopted this ASU as of the beginning of the first quarter of 2017 and elected to account for forfeitures when they occur, on a
modified retrospective basis. At the time of adoption in the first quarter of 2017, we recognized deferred tax assets of $325 million for the excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting and also recognized an increase of an equal amount in the valuation allowance against those deferred tax assets. The adoption did not have any other material impacts on our financial statements.
In April 2015, the FASB issued ASU 2015-05 – Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provided additional guidance to customers about whether a cloud computing arrangement includes a software license. Under ASU 2015-05, cloud computing arrangements that contain a software license should be accounted for in a manner consistent with the acquisition of other software licenses, otherwise customers should account for the arrangement as a service contract. ASU 2015-05 also removed the requirement to analogize to ASC 840-10 – Leases, to determine the asset acquired in a software licensing arrangement. We adopted this ASU as of the beginning of the first quarter of 2017 on a prospective basis. The adoption of this ASU did not have a material impact on our financial statements.
In February 2015, the FASB issued ASU 2015-02 – Amendments to the Consolidation Analysis, which amended the consolidation requirements in Accounting Standards Codification 810 – Consolidation. ASU 2015-02 made targeted amendments to the consolidation guidance for VIEs. We adopted this ASU as of the beginning of the first quarter of 2017 under a modified-retrospective approach. The adoption of this ASU did not have an impact on our financial statements.
Recently Issued Accounting Standards
In October 2016, the FASB issued ASU 2016-16 – Intra-Entity Transfers Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU will be effective for us in the first quarter of 2019 with early adoption permitted and requires modified retrospective adoption. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.
In June 2016, the FASB issued ASU 2016-13 – Measurement of Credit Losses on Financial Instruments, which requires a financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected. This ASU requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This ASU requires that credit losses of debt securities designated as available-for-sale be recorded through an allowance for credit losses and limits the credit loss to the amount by which fair value is below amortized cost. This ASU will be effective for us in the first quarter of 2021 with adoption permitted as early as the first quarter of 2020. This ASU requires modified retrospective adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.
In February 2016, the FASB issued ASU 2016-02 – Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of- use asset and corresponding liability, measured at the present value of the lease payments. This ASU will be effective for us in the first quarter of 2020, with early adoption permitted and requires modified retrospective adoption. The adoption of this ASU will result in an increasewe paid $1.25 billion to our consolidated balance sheets for these right-of-use assets and corresponding liabilities. We are evaluating the timing and other effects of our adoption of this ASU on our financial statements.
In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for us in the first quarter of 2019 and requires modified retrospective adoption. We are evaluating the effects of our adoption of this ASU on our financial statements.
In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of this ASU, as amended, is that an entity should recognize revenue when it transfers 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. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We are required to adopt this ASU in the first quarter of 2019 with adoption permitted as early as the first quarter of 2018. This ASU allows for either full retrospective or modified retrospective adoption. We expect that, as a result of the adoption of this ASU, the timing of recognizing revenue from sales of products to our distributors under
agreements allowing rights of return or price protection will be generally earlier than under the existing revenue recognition guidance. Revenue recognized upon resale by our customers under these arrangements was 20%, 25%, and 21% of our consolidated revenue for 2017, 2016, and 2015, respectively. After adoption, the impact of this change in any reporting period would be the net effect of changes to revenue recognized as of the beginning and end of each period. We are evaluating the timing, method, and other effects of our adoption of this ASU on our financial statements.
Acquisition of Inotera
Through December 6, 2016, we held a 33% ownershipacquire Intel’s noncontrolling interest in Inotera, now known as Micron Technology Taiwan, Inc. ("MTTW"), NanyaIMFT and certain of its affiliates heldsettle IMFT’s debt obligations to Intel, at which time IMFT became a 32% ownership interest, and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% remaining interest in Inotera not owned by us (the "Inotera Acquisition") and began consolidating Inotera's operating results. The cash paid for the Inotera Acquisition was funded, in part, with proceeds from the 2021 MSTW Term Loan and the sale of the Micron Shares (as defined below) to Nanya. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan, and previously sold such products exclusively to us through supply agreements. SG&A expenses for 2017 and 2016 included transaction costs of $13 million and $3 million, respectively, incurred in connection with the Inotera Acquisition.
wholly-owned subsidiary. In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value. In determining the fair value, we used various valuation techniques, including the share price of Inotera prior to the announcement of the Inotera Acquisition and discounted cash flow projections using inputs including discount rate and terminal growth rate (Level 3). As a result,therewith, we recognized a non-operating gain$160 million adjustment to equity for the difference between the $744 million of $71cash consideration allocated to Intel’s noncontrolling interest and its $904 million in 2017.carrying value.
IMFT manufactured semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost. In connection with2020, IMFT manufactured 3D XPoint memory and its sales to Intel were $158 million through the Inotera Acquisition, we sold 58 million sharesdate of our common stock to Nanya (the "Micron Shares") and received cash proceedspurchase of $986 million. Because the saleIntel’s noncontrolling interest.
We provisionally estimated the fair value of the Inotera assets acquired and liabilities assumed as of the December 6, 2016 acquisition date. In 2017, we incorporated additional information in our analysis about facts and circumstances that existed as of the acquisition date and adjusted our provisional values, which resulted in a decrease in the amount of purchase price allocated to property, plant, and equipment of $59 million and increases in the amounts allocated to other noncurrent assets of $13 million, deferred income taxes of $8 million, and goodwill of $38 million. The allocation of purchase price to assets acquired and liabilities assumed of Inotera could further change as additional information becomes available. The consideration and provisional valuation of assets acquired and liabilities assumed, as adjusted in 2017, were as follows:
|
| | | | |
| Consideration | | |
| Cash paid for Inotera Acquisition | | $ | 4,099 |
|
| Less cash received from sale of Micron Shares | | (986 | ) |
| Net cash paid for Inotera Acquisition | | 3,113 |
|
| Fair value of our previously-held equity interest in Inotera | | 1,441 |
|
| Fair value of Micron Shares exchanged for Inotera shares | | 995 |
|
| Other | | 3 |
|
| Payments attributed to intercompany balances with Inotera | | (361 | ) |
| | | $ | 5,191 |
|
| | | |
| Assets acquired and liabilities assumed | | |
| Cash and equivalents | | $ | 118 |
|
| Inventories | | 285 |
|
| Other current assets | | 27 |
|
| Property, plant, and equipment | | 3,722 |
|
| Deferred tax assets | | 82 |
|
| Goodwill | | 1,124 |
|
| Other noncurrent assets | | 130 |
|
| Accounts payable and accrued expenses | | (232 | ) |
| Debt | | (56 | ) |
| Other noncurrent liabilities | | (9 | ) |
| | | $ | 5,191 |
|
The Inotera Acquisition enhances our flexibility to drive new technology, optimize the deployment of capital, and adapt our product offerings to changes in market conditions. As a result of these synergies, we allocated goodwill of $829 million, $198 million, and $97 million to CNBU, MBU, and EBU, respectively. Goodwill resulting from the Inotera Acquisition is not deductible for Taiwan corporate income tax purposes; however, it is deductible for Taiwan surtax purposes.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations as if the Inotera Acquisition had occurred on September 4, 2015. The pro forma financial information includes the accounting effects of the business combination, including adjustments for depreciation of property, plant, and equipment, interest expense, elimination of intercompany activities, and revaluation of inventories. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the Inotera Acquisition occurred on September 4, 2015.
|
| | | | | | | | |
| | | Year ended |
| | | August 31,
2017 | | September 1,
2016 |
| Net sales | | $ | 20,317 |
| | $ | 12,341 |
|
| Net income (loss) | | 5,172 |
| | (543 | ) |
| Net income (loss) attributable to Micron | | 5,171 |
| | (544 | ) |
| Earnings (loss) per share | | | | |
| Basic | | 4.68 |
| | (0.50 | ) |
| Diluted | | 4.42 |
| | (0.50 | ) |
The unaudited pro forma financial information for 2017 includes our results for the year ended August 31, 2017 (which includes the results of Inotera since our acquisition of Inotera on December 6, 2016), the results of Inotera for the three months ended November 30, 2016, and the adjustments described above. The pro forma information for 2016 includes our results for the year ended September 1, 2016, the results of Inotera for the twelve months ended August 31, 2016, and the adjustments described above.
Technology Transfer and License Agreements with Nanya
Effective December 6, 2016, under the terms of technology transfer and license agreements, Nanya has options to require us to transfer to Nanya certain technology for Nanya's use and deliverables related to the next DRAM process node generation after our 20nm process node (the "1X Process Node") and the next DRAM process node generation after the 1X Process Node. Under the terms of the agreements, Nanya would pay royalties to us for a license to the transferred technologies based on revenues from products utilizing the technologies, subject to specified caps, and we would also receive an equity interest in Nanya upon the achievement of certain milestones.
Cash and Investments
All of our marketable debt investments were classified as available-for-sale as of the dates noted below. Cash and equivalents and the fair values of our available-for-sale investments, which approximated amortized costs, were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2021 |
| As of | Cash and Equivalents | Short-term Investments | Long-term Marketable Investments(1) | Total Fair Value | | Cash and Equivalents | Short-term Investments | Long-term Marketable Investments(1) | Total Fair Value |
| | | | | | | | | |
| Cash | $ | 6,055 | | $ | — | | $ | — | | $ | 6,055 | | | $ | 5,796 | | $ | — | | $ | — | | $ | 5,796 | |
Level 1(2) | | | | | | | | | |
| Money market funds | 1,196 | | — | | — | | 1,196 | | | 38 | | — | | — | | 38 | |
Level 2(3) | | | | | | | | | |
| Certificates of deposits | 976 | | 50 | | — | | 1,026 | | | 1,907 | | 69 | | — | | 1,976 | |
| Corporate bonds | — | | 759 | | 995 | | 1,754 | | | 9 | | 429 | | 1,134 | | 1,572 | |
| Asset-backed securities | — | | 20 | | 608 | | 628 | | | 8 | | 95 | | 509 | | 612 | |
| Government securities | 2 | | 155 | | 44 | | 201 | | | 1 | | 190 | | 122 | | 313 | |
| Commercial paper | 33 | | 85 | | — | | 118 | | | 4 | | 87 | | — | | 91 | |
| 8,262 | | $ | 1,069 | | $ | 1,647 | | $ | 10,978 | | | 7,763 | | $ | 870 | | $ | 1,765 | | $ | 10,398 | |
Restricted cash(4) | 77 | | | | | | 66 | | | | |
| Cash, cash equivalents, and restricted cash | $ | 8,339 | | | | | | $ | 7,829 | | | | |
(1)The maturities of long-term marketable securities primarily range fromone tofour years. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of | | 2017 | | 2016 |
| | | Cash and Equivalents | | Short-term Investments | | Long-term Marketable Investments(1) | | Total Fair Value | | Cash and Equivalents | | Short-term Investments | | Long-term Marketable Investments(1) | | Total Fair Value |
| Cash | | $ | 2,237 |
| | $ | — |
| | $ | — |
| | $ | 2,237 |
| | $ | 2,258 |
| | $ | — |
| | $ | — |
| | $ | 2,258 |
|
Level 1(2) | | | | | | | | | | | | | | | | |
| Money market funds | | 2,332 |
| | — |
| | — |
| | 2,332 |
| | 1,507 |
| | — |
| | — |
| | 1,507 |
|
Level 2(3) | | | | | | | | | | | | | | | | |
| Certificates of deposit | | 483 |
| | 24 |
| | 3 |
| | 510 |
| | 373 |
| | 33 |
| | — |
| | 406 |
|
| Corporate bonds | | — |
| | 193 |
| | 315 |
| | 508 |
| | — |
| | 142 |
| | 235 |
| | 377 |
|
| Government securities | | 1 |
| | 90 |
| | 126 |
| | 217 |
| | 2 |
| | 62 |
| | 82 |
| | 146 |
|
| Asset-backed securities | | — |
| | 2 |
| | 173 |
| | 175 |
| | — |
| | 12 |
| | 97 |
| | 109 |
|
| Commercial paper | | 56 |
| | 10 |
| | — |
| | 66 |
| | — |
| | 9 |
| | — |
| | 9 |
|
| | | 5,109 |
| | $ | 319 |
| | $ | 617 |
| | $ | 6,045 |
| | 4,140 |
| | $ | 258 |
| | $ | 414 |
| | $ | 4,812 |
|
Restricted cash(4) | | 107 |
| | | | | | | | 123 |
| | | | | | |
| Cash, cash equivalents, and restricted cash | | $ | 5,216 |
| | | | | | | | $ | 4,263 |
| | | | | | |
| |
(1)
| The maturities of long-term marketable securities range from one to four years. |
| |
(2)
| The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets. |
| |
(3)
| The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from these pricing services. No adjustments were made to such pricing information as of August 31, 2017 or September 1, 2016. |
| |
(4)
| Restricted cash is included in other noncurrent assets and generally represents balances related to the MMJ Creditor Payments and interest reserve balances related to the 2021 MSTW Term Loan. The restrictions on the MMJ Creditor Payments lapse upon approval by the trustees and/or Japan Court. The restrictions on the interest reserve balances lapse in proportion to the reduction in the amount of interest expected to be paid under the 2021 MSTW Term Loan for the subsequent six months. (See "Debt" note.) |
(2)The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.
Proceeds(3)The fair value of Level 2 securities is measured using information obtained from salespricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of available-for-sale securitiesSeptember 1, 2022 or September 2, 2021.
(4)Restricted cash is included in other current assets and other noncurrent assets and primarily relates to certain government incentives received prior to being earned and for 2017, 2016, and 2015 were $776 million, $2.31 billion, and $1.49 billion, respectively. which restrictions lapse upon achieving certain performance conditions.
Gross realized gains and losses from sales of available-for-sale securities were not materialsignificant for any period presented.
Non-marketable Equity Investments
presented.
In addition to the amounts included in the table above, we had $222 million and $153 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of September 1, 2022 and September 2, 2021, respectively. We recognized net gains in other non-operating income on these non-marketable investments of $36 million and $70 million for 2022 and 2021, respectively. These gains primarily resulted from adjustments of these investments to the value indicated by transactions in the same or similar investments.
64
Receivables
| | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Trade receivables | $ | 4,765 | | $ | 4,920 | |
| Income and other taxes | 251 | | 264 | |
| Other | 114 | | 127 | |
| $ | 5,130 | | $ | 5,311 | |
Inventories
| | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Finished goods | $ | 1,028 | | $ | 513 | |
| Work in process | 4,830 | | 3,469 | |
| Raw materials and supplies | 805 | | 505 | |
| $ | 6,663 | | $ | 4,487 | |
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 August 31, 2017, there were no available-for-sale securities that had beengoods sold for the second quarter of 2021 of $133 million, with an offsetting reduction to beginning inventories. This charge resulted in a loss positioncorresponding reduction to operating income, a $128 million reduction to net income, and an $0.11 reduction to diluted earnings per share for longer than 12 months.both the second quarter and the year ended 2021.
Receivables
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Trade receivables | | $ | 3,490 |
| | $ | 1,765 |
|
| Income and other taxes | | 100 |
| | 119 |
|
| Other | | 169 |
| | 184 |
|
| | | $ | 3,759 |
| | $ | 2,068 |
|
Inventories
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Finished goods | | $ | 856 |
| | $ | 899 |
|
| Work in process | | 1,968 |
| | 1,761 |
|
| Raw materials and supplies | | 299 |
| | 229 |
|
| | | $ | 3,123 |
| | $ | 2,889 |
|
Property, Plant, and Equipment | | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Land | $ | 280 | | $ | 280 | |
| Buildings | 16,676 | | 14,776 | |
Equipment(1) | 61,354 | | 51,902 | |
Construction in progress(2) | 1,897 | | 1,517 | |
| Software | 1,124 | | 987 | |
| | 81,331 | | 69,462 | |
| Accumulated depreciation | (42,782) | | (36,249) | |
| | $ | 38,549 | | $ | 33,213 | |
(1)Includes costs related to equipment not placed into service of $3.35 billion as of September 1, 2022 and $1.99 billion as of September 2, 2021.
(2)Includes building-related construction, tool installation, and software costs for assets not placed into service. |
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Land | | $ | 345 |
| | $ | 145 |
|
| Buildings (includes $475 and $347, respectively, under capital leases) | | 7,958 |
| | 6,653 |
|
Equipment(1) (includes $1,331 and $1,374, respectively, under capital leases) | | 32,187 |
| | 25,910 |
|
Construction in progress(2) | | 499 |
| | 475 |
|
| Software | | 544 |
| | 422 |
|
| | | 41,533 |
| | 33,605 |
|
| Accumulated depreciation (includes $626 and $492, respectively, under capital leases) | | (22,102 | ) | | (18,919 | ) |
| | | $ | 19,431 |
| | $ | 14,686 |
|
| |
(1)
| Included costs related to equipment not placed into service of $994 million and $1.47 billion, as of August 31, 2017 and September 1, 2016, respectively. |
| |
(2)
| Included building-related construction and tool installation costs for assets not placed into service. |
Depreciation expense was $3.76$7.03 billion,, $2.86 $6.13 billion,, and $2.55$5.57 billion for 2017, 2016,2022, 2021, and 2015,2020, respectively. As of August 31, 2017, production equipment, buildings, and land with an aggregate carrying value of $6.14 billion were pledged as collateral under various notes payable. Interest capitalized as part of the cost of property, plant, and equipment was $7$77 million, $43$66 million, and $20$77 million for 2017, 2016,2022, 2021, and 2015,2020, respectively. In the fourth quarter of 2016, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years, which reduced depreciation costs by approximately $100 million per quarter in 2017.
Equity Method Investments
|
| | | | | | | | | | | | | | |
| As of | | 2017 | | 2016 |
| | | Investment Balance | | Ownership Percentage | | Investment Balance | | Ownership Percentage |
| Inotera | | $ | — |
| | — | % | | $ | 1,314 |
| | 33 | % |
| Tera Probe | | — |
| | — | % | | 36 |
| | 40 | % |
| Other | | 16 |
| | Various |
| | 14 |
| | Various |
|
| | | $ | 16 |
| | |
| | $ | 1,364 |
| | |
|
Equity in net income (loss) of equity method investees, net of tax, included the following:
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Inotera | | $ | 9 |
| | $ | 32 |
| | $ | 445 |
|
| Tera Probe | | (3 | ) | | (11 | ) | | 1 |
|
| Other | | 2 |
| | 4 |
| | 1 |
|
| | | $ | 8 |
| | $ | 25 |
| | $ | 447 |
|
The summarized financial information in the tables below reflects aggregate amounts for our equity method investees. Financial information is presented for equity method investments as of the respective dates and for the periods through which we recorded our proportionate share of each investee's results of operations. Summarized results of operations are presented only for the periods subsequent to the acquisition, or through the disposition of, our ownership interests.
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Current assets | | $ | 107 |
| | $ | 1,222 |
|
| Noncurrent assets | | 256 |
| | 4,294 |
|
| Current liabilities | | 19 |
| | 604 |
|
| Noncurrent liabilities | | 66 |
| | 411 |
|
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net sales | | $ | 557 |
| | $ | 1,671 |
| | $ | 2,647 |
|
| Gross margin | | 82 |
| | 155 |
| | 1,253 |
|
| Operating income | | 126 |
| | 199 |
| | 1,191 |
|
| Net income | | 76 |
| | 184 |
| | 1,361 |
|
Inotera
We held a 33% interest in Inotera, a Taiwan DRAM memory company, through December 6, 2016, at which time we acquired the remaining 67% interest in Inotera. Historically, we accounted for our interest in Inotera on a two-month lag under the equity method. As a result of the Inotera Acquisition, we account for Inotera without a lag, consistent with our other wholly-owned subsidiaries.
From January 2013 through December 2015, we purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components. After December 2015 and until our acquisition of the remaining interest in Inotera, the price for DRAM products purchased by us was based on a formula that equally shared margin between Inotera and us. Under these agreements, we purchased $504 million, $1.43 billion and $2.37 billion of DRAM products in 2017 through the date of our acquisition, 2016, and 2015 respectively. In 2016, we manufactured and sold specialized equipment to Inotera and recognized net sales of $55 million and margin of $16 million.
Tera Probe
In 2017, we sold our 40% interest in Tera Probe, which provided semiconductor wafer testing and probe services to us, in a transaction that included the sale of our assembly and test facility located in Akita, Japan. (See "Restructure and Asset Impairments" note.) In 2017, 2016, and 2015, we recorded impairment charges of $16 million, $25 million, and $10 million, respectively, within equity in net income (loss) of equity method investees to write down the carrying value of our investment
in Tera Probe to its fair value based on its trading price (Level 1). We incurred manufacturing costs for services performed by Tera Probe of $47 million, $70 million, and $90 million in 2017 through the date of sale, 2016, and 2015, respectively.
Intangible Assets and Goodwill
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 |
| As of | Gross
Amount | Accumulated
Amortization | | Gross
Amount | Accumulated
Amortization |
| | | | | |
| Product and process technology | $ | 742 | | $ | (321) | | | $ | 633 | | $ | (284) | |
| Goodwill | 1,228 | | | | 1,228 | | |
|
| | | | | | | | | | | | | | | | |
| As of | | 2017 | | 2016 |
| | | Gross Amount | | Accumulated Amortization | | Gross Amount | | Accumulated Amortization |
| Amortizing assets | | | | | | | | |
| Product and process technology | | $ | 755 |
| | $ | (476 | ) | | $ | 757 |
| | $ | (402 | ) |
| Other | | 1 |
| | (1 | ) | | 1 |
| | — |
|
| | | 756 |
| | (477 | ) | | 758 |
| | (402 | ) |
| Non-amortizing assets | | | | | | | | |
| In-process R&D | | 108 |
| | — |
| | 108 |
| | — |
|
| | | | | | | | | |
| Total intangible assets | | $ | 864 |
| | $ | (477 | ) | | $ | 866 |
| | $ | (402 | ) |
| | | | | | | | | |
| Goodwill | | $ | 1,228 |
| | | | $ | 104 |
| | |
In 2017, 2016,2022, 2021, and 2015,2020, we capitalized $29$158 million, $30$106 million, and $98$73 million, respectively, for product and process technology with weighted-average useful lives of 119 years, 109 years, and 710 years, respectively. Amortization expense was $106$85 million,, $117 $82 million,, and $117$78 million for 2017, 2016,2022, 2021, and 2015,2020, respectively. Expected amortization expense is $99$83 million for 2018, $492023, $72 million for 2019, $332024, $52 million for 2020, $282025, $43 million for 2021,2026, and $17$37 million for 2022.2027.
In 2016,
Leases
We have finance and operating leases through which we acquired Tidal Systems, Ltd.,obtain the right to use facilities, land, and equipment that support our business operations. Our finance leases consist primarily of gas or other supply agreements that are deemed to contain embedded leases. Our operating leases consist primarily of offices, laboratories, other facilities, and land. Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 30 years for land.
Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a developerlease. Our assessment includes determining whether we or the supplier control the assets used to fulfill the agreements by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of PCIe NAND Flash storage controllers,the output of the assets. Our gas supply arrangements generally are deemed to enhance our NAND Flash controller technology for $148 million. In connection therewith,contain a lease because we recognized $108 million of in-process R&D; $81 million of goodwill, which was derived from expected cost reductions and other synergies and was assignedhave the right to SBU; and $41 million of deferred tax liabilities; which, in aggregate, represented substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets. In determining the lease term, we assess whether we are reasonably certain to exercise any options to renew or terminate a lease or to purchase price. the right-of-use asset. Measuring the present value of the initial lease liability requires judgment to determine the discount rate, which we base on interest rates for borrowings with similar terms and collateral issued by entities with credit ratings similar to ours.
The in-process R&Dcomponents of lease cost are presented below:
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Finance lease cost | | | |
| Amortization of right-of-use asset | $ | 99 | | $ | 69 | | $ | 140 | |
| Interest on lease liability | 24 | | 20 | | 22 | |
Operating lease cost(1) | 125 | | 108 | | 102 | |
| $ | 248 | | $ | 197 | | $ | 264 | |
(1)Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.
66
Supplemental cash flow information related to leases was valued usingas follows:
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Cash flows used for operating activities | | | |
| Finance leases | $ | 23 | | $ | 21 | | $ | 24 | |
Operating leases(1) | 110 | | 106 | | 39 | |
| Cash flows used for financing activities – Finance leases | 103 | | 85 | | 248 | |
| Noncash acquisitions of right-of-use assets | | | |
| Finance leases | 309 | | 395 | | 107 | |
| Operating leases | 197 | | 27 | | 11 | |
(1)Includes $48 million of reimbursements received for tenant improvements for 2020.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of | 2022 | 2021 |
| | | | | | | |
| Finance lease right-of-use assets (included in property, plant, and equipment and assets held for sale) | $ | 904 | | | $ | 766 | |
| Current operating lease liabilities (included in accounts payable and accrued expenses) | 60 | | | 55 | |
| | | |
| Weighted-average remaining lease term (in years) | | | | | | | |
| Finance leases | 12 | | | 11 | |
| Operating leases | 12 | | | 12 | |
| Weighted-average discount rate | | | | | | | |
| Finance leases | 2.65 | % | | 3.14 | % |
| Operating leases | 2.90 | % | | 2.63 | % |
As of September 1, 2022, maturities of lease liabilities were as follows: | | | | | | | | |
| For the year ending | Finance Leases | Operating Leases |
| | |
| 2023 | $ | 123 | | $ | 66 | |
| 2024 | 100 | | 80 | |
| 2025 | 87 | | 70 | |
| 2026 | 87 | | 67 | |
| 2027 | 86 | | 64 | |
| 2028 and thereafter | 534 | | 463 | |
| Less imputed interest | (131) | | (140) | |
| $ | 886 | | $ | 670 | |
The table above excludes obligations for leases that have been executed but have not yet commenced. As of September 1, 2022, excluded obligations consisted of $212 million of finance lease obligations over a replacement cost approach, which included inputsweighted-average period of reproduction cost, including developer's profit, and opportunity cost.14 years for gas supply arrangements deemed to contain embedded leases. We will begin amortizingrecognize right-of-use assets and associated lease liabilities at the in-process R&D when development is complete, estimated to be in 2018, and will amortize it over its then estimated useful life. The goodwill is not deductibletime such assets become available for tax purposes.our use.
Accounts Payable and Accrued Expenses
| | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Accounts payable | $ | 2,142 | | $ | 1,744 | |
| Property, plant, and equipment | 2,170 | | 1,887 | |
| Salaries, wages, and benefits | 877 | | 984 | |
| Income and other taxes | 420 | | 364 | |
| Other | 481 | | 346 | |
| $ | 6,090 | | $ | 5,325 | |
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Accounts payable | | $ | 1,333 |
| | $ | 1,186 |
|
| Property, plant, and equipment payables | | 1,018 |
| | 1,649 |
|
| Salaries, wages, and benefits | | 603 |
| | 289 |
|
| Related party payables | | — |
| | 273 |
|
| Customer advances | | 197 |
| | 132 |
|
| Income and other taxes | | 163 |
| | 41 |
|
| Other | | 350 |
| | 309 |
|
| | | $ | 3,664 |
| | $ | 3,879 |
|
As of September 1, 2016, related party payables included $266 million due to Inotera primarily for the purchase of DRAM products.
Debt
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2021 |
| | | | Net Carrying Amount | | | Net Carrying Amount |
| As of | Stated Rate | Effective Rate | Principal | Current | Long-Term | Total | | Principal | Current | Long-Term | Total |
| | | | | | | | | | | |
| 2024 Term Loan A | 3.700 | % | 3.74 | % | $ | 1,188 | | $ | — | | $ | 1,187 | | $ | 1,187 | | | $ | 1,188 | | $ | — | | $ | 1,186 | | $ | 1,186 | |
| 2026 Notes | 4.975 | % | 5.07 | % | 500 | | — | | 498 | | 498 | | | 500 | | — | | 498 | | 498 | |
2027 Notes(1) | 4.185 | % | 4.27 | % | 900 | | — | | 806 | | 806 | | | 900 | | — | | 901 | | 901 | |
| 2029 Notes | 5.327 | % | 5.40 | % | 700 | | ��� | | 697 | | 697 | | | 700 | | — | | 696 | | 696 | |
| 2030 Notes | 4.663 | % | 4.73 | % | 850 | | — | | 846 | | 846 | | | 850 | | — | | 846 | | 846 | |
| 2032 Green Bonds | 2.703 | % | 2.77 | % | 1,000 | | — | | 994 | | 994 | | | — | | — | | — | | — | |
| 2041 Notes | 3.366 | % | 3.41 | % | 500 | | — | | 496 | | 496 | | | — | | — | | — | | — | |
| 2051 Notes | 3.477 | % | 3.52 | % | 500 | | — | | 496 | | 496 | | | — | | — | | — | | — | |
Finance lease obligations | N/A | 2.65 | % | 886 | | 103 | | 783 | | 886 | | | 804 | | 155 | | 649 | | 804 | |
| 2023 Notes | N/A | N/A | — | | — | | — | | — | | | 1,250 | | — | | 1,247 | | 1,247 | |
| 2024 Notes | N/A | N/A | — | | — | | — | | — | | | 600 | | — | | 598 | | 598 | |
| | | | $ | 7,024 | | $ | 103 | | $ | 6,803 | | $ | 6,906 | | | $ | 6,792 | | $ | 155 | | $ | 6,621 | | $ | 6,776 | |
(1) In 2021, we entered into fixed-to-floating interest rate swaps on the 2027 Notes with an aggregate $900 million notional amount equal to the principal amount of the 2027 Notes. The resulting variable interest paid is at a rate equal to SOFR plus approximately 3.33%. The fixed-to-floating interest rate swaps are accounted for as fair value hedges, as a result, the carrying values of our 2027 Notes reflect adjustments in fair value. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 |
| | | | | | | | | Net Carrying Amount | | | | Net Carrying Amount |
| Instrument | | Stated Rate | | Effective Rate | | Principal | | Current | | Long-Term | | Total(1) | | Principal | | Current | | Long-Term | | Total(1) |
| MMJ Creditor Payments | | N/A |
| | 6.52 | % | | $ | 695 |
| | $ | 157 |
| | $ | 474 |
| | $ | 631 |
| | $ | 985 |
| | $ | 189 |
| | $ | 680 |
| | $ | 869 |
|
| Capital lease obligations | | N/A |
| | 3.68 | % | | 1,190 |
| | 357 |
| | 833 |
| | 1,190 |
| | 1,406 |
| | 380 |
| | 1,026 |
| | 1,406 |
|
| 2021 MSAC Term Loan | | 3.61 | % | | 3.85 | % | | 800 |
| | 99 |
| | 697 |
| | 796 |
| | — |
| | — |
| | — |
| | — |
|
| 2021 MSTW Term Loan | | 2.85 | % | | 3.02 | % | | 2,652 |
| | — |
| | 2,640 |
| | 2,640 |
| | — |
| | — |
| | — |
| | — |
|
| 2022 Notes | | 5.88 | % | | 6.14 | % | | — |
| | — |
| | — |
| | — |
| | 600 |
| | — |
| | 590 |
| | 590 |
|
| 2022 Term Loan B | | 3.80 | % | | 4.22 | % | | 743 |
| | 5 |
| | 725 |
| | 730 |
| | 750 |
| | 5 |
| | 730 |
| | 735 |
|
| 2023 Notes | | 5.25 | % | | 5.43 | % | | 1,000 |
| | — |
| | 991 |
| | 991 |
| | 1,000 |
| | — |
| | 990 |
| | 990 |
|
| 2023 Secured Notes | | 7.50 | % | | 7.69 | % | | 1,250 |
| | — |
| | 1,238 |
| | 1,238 |
| | 1,250 |
| | — |
| | 1,237 |
| | 1,237 |
|
| 2024 Notes | | 5.25 | % | | 5.38 | % | | 550 |
| | — |
| | 546 |
| | 546 |
| | 550 |
| | — |
| | 546 |
| | 546 |
|
| 2025 Notes | | 5.50 | % | | 5.56 | % | | 519 |
| | — |
| | 515 |
| | 515 |
| | 1,150 |
| | — |
| | 1,139 |
| | 1,139 |
|
| 2026 Notes | | 5.63 | % | | 5.73 | % | | 129 |
| | — |
| | 128 |
| | 128 |
| | 450 |
| | — |
| | 446 |
| | 446 |
|
2032C Notes(2) | | 2.38 | % | | 5.95 | % | | 223 |
| | — |
| | 211 |
| | 211 |
| | 223 |
| | — |
| | 204 |
| | 204 |
|
2032D Notes(2) | | 3.13 | % | | 6.33 | % | | 177 |
| | — |
| | 159 |
| | 159 |
| | 177 |
| | — |
| | 154 |
| | 154 |
|
2033E Notes(2) | | 1.63 | % | | 4.50 | % | | 173 |
| | 202 |
| | — |
| | 202 |
| | 176 |
| | — |
| | 168 |
| | 168 |
|
2033F Notes(2) | | 2.13 | % | | 4.93 | % | | 297 |
| | 278 |
| | — |
| | 278 |
| | 297 |
| | — |
| | 271 |
| | 271 |
|
2043G Notes(3) | | 3.00 | % | | 6.76 | % | | 1,025 |
| | — |
| | 671 |
| | 671 |
| | 1,025 |
| | — |
| | 657 |
| | 657 |
|
| Other notes | | 2.13 | % | | 2.66 | % | | 216 |
| | 164 |
| | 44 |
| | 208 |
| | 512 |
| | 182 |
| | 316 |
| | 498 |
|
| | | | | | | $ | 11,639 |
| | $ | 1,262 |
| | $ | 9,872 |
| | $ | 11,134 |
| | $ | 10,551 |
| | $ | 756 |
| | $ | 9,154 |
| | $ | 9,910 |
|
| |
(1)
| Net carrying amount is the principal amount less unamortized debt discount and issuance costs. In addition, the net carrying amount for our 2033E Notes for 2017 included $31 million of derivative debt liabilities recognized as a result of our election to settle entirely in cash converted notes with an aggregate principal amount of $16 million. |
| |
(2)
| Since the closing price of our common stock exceeded 130% of the conversion price per share for at least 20 trading days in the 30 trading day period ended on June 30, 2017, these notes are convertible by the holders through the calendar quarter ended September 30, 2017. The closing price of our common stock also exceeded the thresholds for the calendar quarter ended September 30, 2017; therefore, these notes are convertible by the holders through December 31, 2017. The 2033 Notes were classified as current as of August 31, 2017 because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of that date. |
| |
(3)
| The 2043G Notes have an original principal amount of $820 million that accretes up to $917 million through the expected term in November 2028 and $1.03 billion at maturity in 2043. |
Our convertible andAs of September 1, 2022, all of our debt, other senior notesthan our finance leases, are unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness and are effectively subordinated to all of our other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness. As of August 31, 2017,September 1, 2022, Micron had $3.70 billion of unsecured debt (netwith a carrying value of unamortized discount and debt issuance costs), including all of its convertible notes and the 2023 Notes, 2024 Notes, 2025 Notes, and 2026 Notes,$6.02 billion that was structurally subordinated to all liabilities of its subsidiaries, including trade payables. The terms of our indebtedness generally contain cross payment default and cross acceleration provisions. MicronMicron’s guarantees of certain debt obligationsliabilities of its subsidiaries but does not guarantee the MMJ Creditor Payments. Micron's guarantees of its subsidiary debt obligations are unsecured obligations ranking equally in right of payment with all of Micron'sMicron’s other existing and future unsecured indebtedness.
MMJ Creditor Payments68
UnderSenior Unsecured Notes
On November 1, 2021, we issued $2.00 billion aggregate principal amount of unsecured 2032 Green Bonds, 2041 Notes, and 2051 Notes in a public offering. Issuance costs for these notes were $14 million. Over time, we plan to allocate an amount equal to the MMJ Companies' corporate reorganization proceedings, which set forth the treatmentnet proceeds of the MMJ Companies' pre-petition creditors2032 Green Bonds to fund eligible sustainability-focused projects involving renewable energy, green buildings, energy efficiency, water management, waste abatement, and their claims, the MMJ Companies were required to pay 200 billion yen, less certain expenses of thea circular economy.
reorganization proceedingsWe may redeem our 2026 Notes, 2027 Notes, 2029 Notes, 2030 Notes, 2032 Green Bonds, 2041 Notes, and other items,2051 Notes (the “Senior Unsecured Notes”), in whole or in part, at our option prior to their secured and unsecured creditors in seven annual installment payments (the "MMJ Creditor Payments"). The MMJ Creditor Payments do not provide for interest and, asrespective maturity date at a resultredemption price equal to the greater of our acquisition of the MMJ Companies in 2013, we recorded the MMJ Creditor Payments at fair value. The fair-value discount is accreted to interest expense over the term of the installment payments.
Under the MMJ Companies' corporate reorganization proceedings, the secured creditors of MMJ will recover(i) 100% of the principal amount of their fixed claims in six annual installment payments through December 2018the notes to be redeemed and (ii) the unsecured creditors will recover at least 17.4%present value of the amountremaining scheduled payments of their fixed claimsprincipal, in seven annual installment payments through December 2019. The unsecured creditorseach case plus accrued interest. We may also redeem any series of MAI were scheduledour Senior Unsecured Notes, in whole or in part, at a price equal to be paidpar between two and six months prior to maturity in seven installments; however, in connectionaccordance with our sale of MAI in 2017, the remaining MAI creditor obligations were paid in full. The remaining portion of the unsecured claims of the creditors of MMJ not recovered pursuant to the corporate reorganization proceedings will be discharged, without payment, through December 2019. The following table presents the remaining amounts of MMJ Creditor Payments (stated in Japanese yen and U.S. dollars) and the amount of unamortized discount as of August 31, 2017:
|
| | | | | | | | |
| 2018 | | ¥ | 17,675 |
| | $ | 160 |
|
| 2019 | | 27,154 |
| | 246 |
|
| 2020 | | 31,762 |
| | 289 |
|
| | | 76,591 |
| | 695 |
|
| Less unamortized discount | | (7,075 | ) | | (64 | ) |
| | | ¥ | 69,516 |
| | $ | 631 |
|
Pursuant to therespective terms of an Agreement on Support for Reorganization Companies that we executed in the fourth quarter of 2012 with the trustees of the MMJ Companies' pending corporate reorganization proceedings, we entered into asuch series.
Each series of agreements with the MMJ Companies, including supply agreements, research and development services agreements, and general services agreements, which are intended to generate operating cash flows to meet the requirements of the MMJ Companies' businesses, including the funding of the MMJ Creditor Payments.
Capital Lease Obligations
In 2017, we recorded capital lease obligations aggregating $220 million at a weighted-average effective interest rate of 5.1%, with a weighted-average expected term of ten years. In 2016, we recorded capital lease obligations aggregating $882 million, including $765 million related to equipment sale-leaseback transactions.
2021 MSAC Senior Secured Term Loan
In November 2016, we entered into a five-year variable-rate facility agreement to obtain up to $800 million of financing, collateralized by certain production equipment, and drew $800 million under the facility in 2017. Interest is payable quarterly at a per annum rate equal to three-month LIBOR plus 2.4%. Principal is payable in 16 equal quarterly installments beginning in March 2018. The 2021 MSAC Term LoanUnsecured Notes contains covenants which are customary for financings of this type, including negative covenants that limit or restrict our ability to create liens or dispose of the equipment securing the facility agreement. The 2021 MSAC Term Loan also contains customary events of default which could result in the acceleration of all amounts to be immediately due and payable. The 2021 MSAC Term Loan is guaranteed by Micron.
2021 MSTW Senior Secured Term Loan
In connection with the Inotera Acquisition, on December 6, 2016, we drew 80 billion New Taiwan dollars under a collateralized, five-year term loan that bears interest at a variable per annum rate equal to the three-month TAIBOR plus a margin of 2.05%. Principal under the 2021 MSTW Term Loan is payable in six equal semi-annual installments from June 2019 through December 2021. The 2021 MSTW Term Loan is collateralized by certain assets, including a real estate mortgage on MTTW's main production facility and site, a chattel mortgage over certain equipment of MTTW, all of the stock of our MSTW subsidiary, and the 82% of stock of MTTW owned by MSTW. The 2021 MSTW Term Loan is guaranteed by Micron.
The 2021 MSTW Term Loan contains affirmative and negative covenants, including covenants that limit or restrict our ability to create liens in or dispose of collateral securing obligations under the 2021 MSTW Term Loan, mergers involving MSTW and/or MTTW, loans or guarantees to third parties by MTTW and/or MSTW, and MSTW's and/or MTTW's distribution of cash dividends. The 2021 MSTW Term Loan also contains financial covenants, which are tested semi-annually, as follows:
MSTW must maintain a consolidated ratio of total liabilities to adjusted EBITDA not higher than 5.5x in 2017 and 2018, and not higher than 4.5x in 2019 through 2021;
MSTW must maintain adjusted consolidated tangible net worth of not less than 4.0 billion New Taiwan dollars in 2017 and 2018, not less than 6.5 billion New Taiwan dollars in 2019 and 2020, and not less than 12.0 billion New Taiwan dollars in 2021;
on a consolidated basis, Micron must maintain a ratio of total liabilities to adjusted EBITDA not higher than 3.5x in 2017, not higher than 3.0x in 2018 and 2019, and not higher than 2.5x in 2020 and 2021; and
on a consolidated basis, Micron must maintain adjusted tangible net worth not less than $9.0 billion in 2017, not less than $12.5 billion in 2018 and 2019, and not less than $16.5 billion in 2020 and 2021.
If MSTW fails to maintain a required financial covenant, the interest rate will be increased by 0.25% until such time as the required financial ratios are maintained. If MSTW's failure continues for two consecutive semi-annual periods, such failure will constitute an event of default that could result in all obligations owed under the loan being accelerated to be immediately due and payable. Micron's failure to maintain a required financial covenant will only result in a 0.25% increase to the interest rate but will not constitute an event of default. The loan also contains customary events of default.
Unsecured Senior Notes
The unsecured notes in the table below (the " Unsecured Senior Notes") contain covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our domestic restricted subsidiaries (which are generally domestic subsidiaries in the U.S. in which we own at least 80% of the voting stock)stock and which own principal property, as defined in the indenture governing such notes) to (1) create or incur certain liens; (2) enter into certain sale and lease-back transactions; and (3) consolidate with or merge with or into, or convey, transfer, or lease all or substantially all of our properties and assets, to another entity. These covenants are subject to a number of limitations and exceptions. Additionally, if a change of control triggering event occurs, as defined in the indentures governing our senior unsecured notes, we will be required to offer to purchase such notes at 101% of the outstanding aggregate principal amount plus accrued interest up to the purchase date.
Revolving Credit Facility
In 2021, we terminated our existing undrawn credit facility and entered into a new five-year unsecured Revolving Credit Facility. Under the Revolving Credit Facility, we can draw up to $2.50 billion which would generally bear interest at a rate equal to LIBOR plus 1.00% to 1.75%, depending on our corporate credit ratings. The credit facility agreement provides for a transition to SOFR or other alternate benchmark rate upon the retirement of LIBOR in 2023. Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid without penalty. As of September 1, 2022, no amounts were outstanding under the Revolving Credit Facility and $2.50 billion was available to us.
Under the terms of the Revolving Credit Facility, we must maintain a leverage ratio, calculated as of the last day of each fiscal quarter, of total indebtedness to adjusted EBITDA not to exceed 3.25 to 1.00. The Revolving Credit Facility contains other covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries to (1) create or incur certain liens and enter into sale and lease-back transactions, (2) create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our domestic restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer, lease, or leaseotherwise dispose of all or substantially all of our assets, to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications.
Cash Redemption at Our Option: We have the option to redeem the Unsecured Senior Notes. The applicable redemption price will be determined as follows:2024 Term Loans
|
| | | | | | | | | | | |
| | Maturity Date | | Redemption Period
Requiring Payment of:
| | Redemption of up to 35% of Original Principal Amount Using Cash Proceeds From an Equity Offering(3)
|
| | | Make-Whole(1)
| | Premium(2)
| | Date | | Specified Price |
2023 Notes(4)
| | Aug 2023 | | Prior to Feb 1, 2018 | | On or after Feb 1, 2018 | | Prior to Feb 1, 2018 | | 105.250 | % |
In 2021, we drew $1.19 billion under an unsecured 2024 Notes | | Jan 2024 | | Prior to May 1, 2018 | | On or after May 1, 2018 | | Prior to May 1, 2018 | | 105.250 | % |
2025 Notes | | Feb 2025 | | Prior to Aug 1, 2019 | | On or after Aug 1, 2019 | | N/A | | N/A |
2026 Notes | | Jan 2026 | | Prior to May 1, 2020 | | On or after May 1, 2020 | | N/A | | N/A |
| |
(1)
| If we redeem prior to the applicable date, the redemption price is principal plus a make-whole premium as described in the applicable indenture. |
| |
(2)
| If we redeem on or after the applicable date, the redemption price is principal plus a premium which declines over time as specified in the applicable indenture. |
| |
(3)
| If we redeem prior to the applicable date with net cash proceeds of one or more equity offerings, the redemption price is equal to the amount specified above, together with accrued and unpaid interest, subject to a maximum redemption of 35% of the aggregate original principal amount of the respective series of notes being redeemed. The 2025 Notes and 2026 Notes can not be redeemed with cash proceeds from an equity offering because the principal amount outstanding as of August 31, 2017 of such notes is less than 65% of the original principal amount issued. |
| |
(4)
| In the first quarter of 2018, we issued a notice to redeem our 2023 Notes. See "Debt Repurchases and Conversions" below. |
Senior Secured Borrowings
2022 Senior Secured Term Loan B: In April 2016, we issued $750 million in principal amount of 2022A and used the proceeds to repay the $1.19 billion Extinguished 2024 Term Loan B notes due April 2022. Interest was payableA. The 2024 Term Loan A bears interest at a rate equal to LIBOR plus 6.00%. In April 2017 and October 2016, we amended0.625% to 1.375% based on our
2022 Term Loan B, substantially all current corporate credit ratings. The term loan agreement provides for a transition to SOFR or other alternate benchmark rate upon the retirement of which was treated as a debt modification, to reduce the interest rate margins, and as of August 31, 2017, the 2022 Term Loan B generally bears interest at LIBOR plus 2.50%. We may elect to convert outstanding term loans to other variable-rate indexes. Principal payments are due quarterly in an amount equal to 0.25% of the initial aggregate2023. The principal amount with the balanceis due at maturityOctober 2024 and may be prepaid without penalty. Interest is payable at least quarterly.
2023 Senior Secured Notes: In April 2016, we issued $1.25 billion in principal amount of 2023 Secured Notes due September 2023. In the first quarter of 2018, we issued notices to redeem our 2023 Secured Notes. See "Debt Repurchases and Conversions" below.
Senior Secured Borrowings Collateral and Covenants:The 20222024 Term Loan BA contains the same leverage ratio and 2023 Secured Notes are collateralized by substantially allthe same other covenants as the Revolving Credit Facility.
Debt Activity
The 2022 Term Loan Btable below presents the effects of issuances and 2023 Secured Notes each contain covenants that, among other things, limit,prepayments of debt in certain circumstances, the ability of Micron and/or its domestic restricted subsidiaries to (1) create or incur certain liens and enter into sale-leaseback financing transactions; (2) in the case of domestic restricted subsidiaries, create, assume, incur, or guarantee additional indebtedness; and (3) in the case of Micron, consolidate or merge with or into, or sell, assign, convey, transfer, lease, or otherwise dispose of all or substantially all of its assets to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications.2022:
| | | | | | | | | | | | | | |
| Increase (Decrease) in Principal | Increase (Decrease) in Carrying Value | Increase (Decrease) in Cash | Gain (Loss) |
| | | | |
| Issuances | | | | |
| 2032 Green Bonds | $ | 1,000 | | $ | 994 | | $ | 994 | | $ | — | |
| 2041 Notes | 500 | | 496 | | 496 | | — | |
| 2051 Notes | 500 | | 496 | | 496 | | — | |
| Prepayments | | | | |
| 2023 Notes | (1,250) | | (1,247) | | (1,281) | | (34) | |
| 2024 Notes | (600) | | (598) | | (647) | | (49) | |
| $ | 150 | | $ | 141 | | $ | 58 | | $ | (83) | |
Convertible Senior Notes
|
| | | | | | | | | | | | | | | | | | | | | |
| | | Holder Put
Date(1) | | Maturity Date | | Conversion Price Per Share | | Conversion Price Per Share Threshold(2) | | Underlying Shares of Common Stock | | Conversion Value in Excess of Principal(3) | | Principal Settlement Option(4) |
| 2032C Notes | | May 2019 | | May 2032 | | $ | 9.63 |
| | $ | 12.52 |
| | 23 |
| | $ | 519 |
| | Cash and/or shares |
| 2032D Notes | | May 2021 | | May 2032 | | 9.98 |
| | 12.97 |
| | 18 |
| | 390 |
| | Cash and/or shares |
2033E Notes(5) | | Feb 2018 | | Feb 2033 | | 10.93 |
| | 14.21 |
| | 16 |
| | 332 |
| | Cash |
2033F Notes(5) | | Feb 2020 | | Feb 2033 | | 10.93 |
| | 14.21 |
| | 27 |
| | 572 |
| | Cash |
| 2043G Notes | | Nov 2028 | | Nov 2043 | | 29.16 |
| | 37.91 |
| | 35 |
| | 99 |
| | Cash and/or shares |
| | | | | | | | | | | 119 |
| | $ | 1,912 |
| | |
| |
(1)
| Debt discount and debt issuance costs are amortized through the earliest holder put date. |
| |
(2)
| Represents 130% of the conversion price per share. If the trading price of our common stock price exceeds such threshold for a specified period, holders may convert such notes. See "Conversion Rights" below. |
| |
(3)
| Based on the trading price of our common stock of $31.97 as of August 31, 2017. |
| |
(4)
| It is our current intent to settle in cash the principal amount of our convertible notes upon conversion. As a result, only the amounts payable in excess of the principal amounts upon conversion of our convertible notes are considered in diluted earnings per share under the treasury stock method. For each of our convertible notes, we may elect to settle any amounts in excess of the principal in cash, shares of our common stock, or a combination thereof. |
| |
(5)
| Holders of the 2033E Notes and 2033F Notes may also put their notes to us on February 15, 2023. |
Conversion Rights: Holders of our convertible notes may convert their notes under the following circumstances: (1) if the notes are called for redemption; (2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price (see "Conversion Price Per Share Threshold" in the table above); (3) if the trading price of the notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the notes during the periods specified in the indentures; (4) if specified distributions or corporate events occur, as set forth in the indenture for the notes; or (5) during the last three months prior to the maturity date of the notes. For the calendar quarter ended September 30, 2017, the closing price of our common stock exceeded 130% of the conversion price for our 2032 Notes and 2033 Notes; therefore, those notes are convertible by the holders through December 31, 2017.
In August 2017,2021, substantially all holders of our 2033E2032D Notes converted their notes. We settled these conversions and all remaining 2032D Notes with an aggregate principal amount of $58 million converted their notes, which were settled in the first quarter of 2018. For converted notes with an aggregate principal amount of $16 million, we
elected to settle the conversion obligation in excess of the principal amount in cash. We elected to settle the remaining notes with an aggregate principal amount of $42 million with a combination of cash for the principal amount and shares of our common stock for the remainder of the settlement amount. As a result of our election to settle all amounts due upon conversion in cash for some of these notes, such settlement obligations became derivative debt liabilities subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common stock over a period of 20 consecutive trading days. Accordingly, at the dates of our elections to settle the conversions in cash, we reclassified the fair values of the equity components of each of the converted notes from additional capital to derivative debt liabilities within current debt in our consolidated balance sheet. The net carrying amount for 2017 included $31 million for the fair values of the derivative debt liabilities as of August 31, 2017. The 20 consecutive trading day period ended in the first quarter of 2018, and we settled the conversion for $92$185 million in cash and 311.1 million shares of our treasury stock.
Cash Redemption at Our Option: We may redeem our convertible notes under the circumstances listed in the table below. The redemption price for the notes will equal the principal amount at maturity, or the accreted principal amount in the case of the 2043G Notes redeemed on or after November 20, 2018, plus accrued and unpaid interest.
|
| | | | | | |
| | Conditional Redemption Period
at Our Option(1)
| | Unconditional Redemption Period
at Our Option
| | Redemption Period Requiring
Make-Whole
|
2032C Notes | | On or after May 1, 2016 | | On or after May 4, 2019 | | Prior to May 4, 2019(2)
|
2032D Notes | | On or after May 1, 2017 | | On or after May 4, 2021 | | Prior to May 4, 2021(2)
|
2033E Notes | | N/A | | On or after Feb 20, 2018 | | N/A |
2033F Notes | | N/A | | On or after Feb 20, 2020 | | N/A |
2043G Notes | | Prior to Nov 20, 2018 | | On or after Nov 20, 2018 | | Prior to Nov 20, 2018(3)
|
| |
(1)
| We may redeem for cash on or after the applicable dates if the volume weighted average price of our common stock, has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period. |
| |
(2)
| If we redeem prior to the applicable date, we will pay a make-whole premium in cash equal to the present value of the remaining scheduled interest payments from the redemption date to May 4, 2019 for the 2032C Notes and to May 4, 2021 for the 2032D Notes. |
| |
(3)
| If we redeem prior to the applicable date, we will be required to pay a make-whole premium only if, as a result of our redemption notice, holders convert their notes. The make-whole premium will be based on the price of our common stock and the conversion date, as set forth in the indenture, and is payable at our election in cash and/or shares. |
Cash Repurchase at the Option of the Holders: We may be required by the holders of our convertible notes to repurchase for cash all or a portion of the notes on the "Holder Put Date" listed in the table above. The repurchase price would equal the principal amount, or the accreted principal amount in the case of the 2043G Notes, plus accrued and unpaid interest. Also, upon a change in control or a termination of trading, as defined in the respective indentures, holders of our convertible notes may require us to repurchase for cash all or a portion of their notes.
Other: Interest expense for our convertible notes consisted of contractual interest of $51 million, $51 million, and $59 million for 2017, 2016, and 2015, respectively and amortization of discount and issuance costs of $37 million, $36 million, and $42 million for 2017, 2016, and 2015, respectively. As of August 31, 2017 and September 1, 2016, the carrying amounts of the equity components of our convertible notes, which are included in additional capital in the accompanying consolidated balance sheets, were $287 million and $308 million, respectively.
Available Revolving Credit Facility
We have a senior secured revolving credit facility that expires in 2020, under which we can draw up to the lesser of $750 million or 80% of the net outstanding balance of certain trade receivables, as defined in the facility agreement. Any amounts drawn are collateralized by a security interest in such trade receivables. The credit facility contains customary covenants and conditions, including as a funding condition the absence of any event or circumstance that has a material adverse effect on certain of our operations, assets, prospects, business, or condition, and including negative covenants that limit or restrict our ability to create liens on, or dispose of, the collateral underlying the obligations under this facility. Interest is payable on any outstanding principal balance at a variable rate equal to the LIBOR plus an applicable margin ranging between 1.75% to 2.25%, depending upon the utilized portion of the facility. As of August 31, 2017, there were no outstanding amounts drawn under this facility and $750 million was available for us to draw.
Debt Repurchases and Conversions
On October 12, 2017, subsequent to the end of 2017, we issued a notice to redeem $438 million of principal amount of our 2023 Secured Notes on November 13, 2017 for $470 million in cash, excluding accrued and unpaid interest. The amount redeemed represents 35% of the original principal amount of the 2023 Secured Notes issued and will be settled with proceeds from our common stock issuance in October 2017. On October 17, 2017, we issued a notice to redeem the remaining $812 million of principal amount of our 2023 Secured Notes on November 16, 2017 for approximately $885 million, excluding accrued and unpaid interest. Additionally, on October 17, 2017, we issued a notice to redeem all of our 2023 Notes on November 16, 2017 for approximately $1.05 billion in cash, excluding accrued and unpaid interest. In connection with these redemptions, we expect to recognize non-operating losses of approximately $170 million in the first quarter of 2018.
In 2017, we repurchased $631 million of principal amount of our 2025 Notes (carrying value of $625 million), repurchased $321 million of principal amount of our 2026 Notes (carrying value of $318 million), and redeemed $600 million principal amount of our 2022 Notes (carrying value of $592 million) for an aggregate of $1.63 billion in cash. In connection with the transactions, we recognized aggregate non-operating losses of $94 million in 2017.
In 2016, we repurchased $57 million of principal amount of our 2033E Notes (carrying value of $54 million) for $94 million in cash. The liability and equity components of the repurchased notes had previously been stated separately within debt and equity in our consolidated balance sheet. As a result, the repurchase decreasedapproximated the carrying value of debt by $54 million and equity by $38 million.for those notes.
In 2015, we consummated a number of transactions to restructure our debt, including repurchases, conversions and settlements of convertible notes, and the early repayment of a note. As a result, $489 million of aggregate principal amount of our convertible notes was settled for $1.43 billion in cash. The liability and equity components of the repurchased convertible notes had previously been stated separately within debt and equity in our consolidated balance sheet. As a result, the repurchases, conversions and settlements decreased the carrying value of debt by $686 million (including $275 million for the fair value of our derivative debt liability to settle the conversions entirely in cash) and equity by $691 million. In connection with these transactions,2020, we recognized aggregate non-operating lossesgains of $49 million.$40 million in connection with debt prepayments and conversions of $3.77 billion of principal amount of notes (carrying value of $3.90 billion) for an aggregate of $3.92 billion in cash.
Maturities of Notes Payable and Future Minimum Lease Payments
As of August 31, 2017,September 1, 2022, maturities of notes payable (including the MMJ Creditor Payments) and future minimum lease payments under capital lease obligationsby fiscal year were as follows: | | | | | |
| 2023 | $ | — | |
| 2024 | — | |
| 2025 | 1,188 | |
| 2026 | 500 | |
| 2027 | 900 | |
| 2028 and thereafter | 3,550 | |
| Unamortized discounts | (27) | |
| Hedge accounting fair value adjustment | (91) | |
| $ | 6,020 | |
|
| | | | | | | | |
| | | Notes Payable | | Capital Lease Obligations |
| 2018 | | $ | 641 |
| | $ | 402 |
|
| 2019 | | 1,166 |
| | 334 |
|
| 2020 | | 1,727 |
| | 229 |
|
| 2021 | | 1,269 |
| | 97 |
|
| 2022 | | 1,204 |
| | 62 |
|
| 2023 and thereafter | | 4,365 |
| | 227 |
|
| Unamortized discounts and interest, respectively | | (428 | ) | | (161 | ) |
| | | $ | 9,944 |
| | $ | 1,190 |
|
Commitments
As of August 31, 2017,September 1, 2022, we had commitments of approximately $1.10$7.1 billion for purchase obligations, of which approximately $5.4 billion will be due within one year. Purchase obligations include payments for the acquisition of property, plant, and equipment. We lease certain facilitiesequipment, and equipment under operatingother goods or services of either a fixed or minimum quantity and exclude any payments for leases for which expense was $52 million, $46 million, and $48 million for 2017, 2016, and 2015, respectively. Minimum future operating lease commitments asthat have been executed but have not yet commenced.
70
|
| | | | |
| 2018 | | $ | 29 |
|
| 2019 | | 28 |
|
| 2020 | | 23 |
|
| 2021 | | 19 |
|
| 2022 | | 17 |
|
| 2023 and thereafter | | 38 |
|
| | | $ | 154 |
|
Contingencies
We have accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below. We are currently a party to other legal actions other than those described below arising from the normal course of business, none of which isare expected to have a material adverse effect on our business, results of operations, or financial condition.
Patent Matters
As is typical in the semiconductor and other high-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights.
On November 21, 2014, Elm 3DS Innovations, LLC ("Elm") filed a patent infringement action against Micron, MSP, and Micron Consumer Products Group, Inc. in the U.S. District Court for the District of Delaware. On March 27, 2015, Elm filed an amended complaint against the same entities. The amended complaint alleges that unspecified semiconductor products of ours that incorporate multiple stacked die infringe thirteen U.S. patents and seeks damages, attorneys' fees, and costs.
On December 15, 2014, Innovative Memory Solutions, Inc. filed a patent infringement action against Micron in the U.S. District Court for the District of Delaware. The complaint alleges that a variety of our NAND products infringe eight U.S. patents and seeks damages, attorneys'attorneys’ fees, and costs. Subsequently, six patents were invalidated or withdrawn, leaving two asserted patents in the District Court.
On March 19, 2018, Micron Semiconductor (Xi’an) Co., Ltd. (“MXA”) was served with a patent infringement complaint filed by Fujian Jinhua Integrated Circuit Co., Ltd. (“Jinhua”) in the Fuzhou Intermediate People’s Court in Fujian Province, China (the “Fuzhou Court”). On April 3, 2018, Micron Semiconductor (Shanghai) Co. Ltd. (“MSS”) was served with the same complaint. The complaint alleges that MXA and MSS infringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 98 million Chinese yuan plus court fees incurred.
On March 21, 2018, MXA was served with a patent infringement complaint filed by United Microelectronics Corporation (“UMC”) in the Fuzhou Court. On April 3, 2018, MSS was served with the same complaint. The complaint alleges that MXA and MSS infringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 90 million Chinese yuan plus court fees incurred. On November 26, 2021, pursuant to a settlement agreement between UMC and Micron, UMC filed an application to the Fuzhou Court to withdraw its complaints against MXA and MSS.
On April 3, 2018, MSS was served with another patent infringement complaint filed by Jinhua and an additional complaint filed by UMC in the Fuzhou Court. The additional complaints allege that MSS infringes two Chinese patents by manufacturing and selling certain Crucial MX300 SSDs. The complaint filed by UMC seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 90 million Chinese yuan plus court fees incurred. The complaint filed by Jinhua seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 98 million Chinese yuan plus court fees incurred. On November 26, 2021, pursuant to a settlement agreement between UMC and Micron, UMC filed an application to the Fuzhou Court to withdraw its complaint against MSS.
On July 5, 2018, MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing, selling, or importing certain Crucial and Ballistix-branded DRAM modules and solid-state drives in China. We are complying with the ruling and have requested the Fuzhou Court to reconsider or stay its decision.
On May 4, 2020, Flash-Control, LLC filed a patent infringement action against Micron in the U.S. District Court for the Western District of Texas. The complaint alleges that four U.S. patents are infringed by unspecified DDR4 SDRAM, NVRDIMM, NVDIMM, 3D XPoint, and/or SSD products that incorporate memory controllers and flash memory. The complaint seeks damages, attorneys’ fees, and costs. On July 21, 2020, in a separate matter, the District Court ruled that two of the four asserted patents are invalid, and on July 14, 2021, the U.S. Court of Appeals for the Federal Circuit affirmed the ruling of invalidity.
On April 28, 2021, Netlist, Inc. (“Netlist”) filed two patent infringement actions against Micron, Micron Semiconductor Products, Inc. (“MSP”) and Micron Technology Texas, LLC (“MTEC”) in the U.S. District Court for the Western District of Texas. The first complaint alleges that one U.S. patent is infringed by certain of our non-volatile dual in-line memory modules. The second complaint alleges that three U.S. patents are infringed by certain of our load-reduced dual in-line memory modules (“LRDIMMs”). Each complaint seeks injunctive relief, damages, attorneys’ fees, and costs. On March 31, 2022, Netlist filed a patent infringement complaint against Micron and Micron Semiconductor Germany, GmbH in Dusseldorf Regional Court alleging that two German patents are infringed by certain of our LRDIMMs. The complaint seeks damages and costs. On June 24, 2022, Netlist amended its complaint to also seek injunctive relief. On June 10, 2022, Netlist filed a patent infringement complaint against Micron, MSP, and MTEC in the U.S. District Court for the Eastern District of Texas (“E.D. Tex.”) alleging that six U.S. patents are infringed by certain of our memory modules and HBM products. The complaint seeks injunctive relief, damages, and attorneys’ fees. On August 1, 2022, Netlist filed a second patent infringement complaint against Micron, MSP, and MTEC in E.D. Tex. alleging that one U.S. patent is infringed by certain of our LRDIMMs. On August 15, 2022, Netlist amended the second complaint to assert that two additional U.S. patents are infringed by certain of our LRDIMMs. The second complaint in E.D. Tex. seeks injunctive relief, damages, and attorneys’ fees.
On May 10, 2021, Vervain, LLC filed a patent infringement action against Micron, MSP, and MTEC in the U.S. District Court for the Western District of Texas. The complaint alleges that four U.S. patents are infringed by certain SSD products. The complaint seeks injunctive relief, damages, attorneys’ fees, and costs.
On June 24, 2016, the President and Fellows of Harvard UniversityApril 27, 2022, Bell Semiconductor, LLC (“Bell”) filed a patent infringement action against Micron in the U.S. District Court for the District of Massachusetts.Idaho. The complaint alleges that one U.S. patent is infringed by a varietycertain SSD controller. On April 28, 2022, Bell filed a complaint with the U.S. International Trade Commission (“ITC”) alleging violations of our DRAM productsSection 337 of the Tariff Act of 1930 based on alleged importation of articles and components that infringe the same U.S. patent that Bell asserts in the complaint it filed in the District of Idaho. At Bell’s request, the ITC investigation was terminated on August 30, 2022. On August 26, 2022, Bell filed a second patent infringement complaint in the District of Idaho alleging that two U.S. patents are infringed by a certain SSD controller. On September 30, 2022, Bell filed a complaint against Micron in the U.S. District Court for the District of Delaware alleging that six U.S. patents are infringed by certain SSD, GDDR5, GDDR6, GDDR6X, and DDR3 SDRAM products. On October 5, 2022, Bell filed a third complaint against Micron in the District of Idaho alleging that one U.S. patent is infringed by Micron’s process for designing a NAND flash device included in certain Micron SSD products. Each of Bell’s complaints in the District Courts seeks damages, injunctive relief, attorneys’ fees, and costs. On October 6, 2022, Bell filed a complaint with the ITC alleging violations of Section 337 of the Tariff Act of 1930 based on alleged importation of certain SSDs that infringe two U.S. patents also asserted by Bell in two of the lawsuits pending in the District of Idaho. The complaint requests institution of an investigation and, after the investigation, issuance of a limited exclusion order and cease and desist orders prohibiting Micron from importing, selling, offering for sale, or marketing the accused products in the United States.
On August 16, 2022, Sonrai Memory Ltd. filed a patent infringement action against Micron in the U.S. District Court for the Western District of Texas. The complaint alleges that two U.S. patents are infringed by certain SSD and NAND flash products. The complaint seeks damages, injunctive relief,attorneys’ fees, and other unspecified relief.costs.
Among other things, the above lawsuits pertain to certainsubstantially all of our DDR DRAM, DDR2 DRAM, DDR3 DRAM, DDR4 DRAM, SDR SDRAM, PSRAM, RLDRAM, LPDRAM, NAND, and certain other memory and storage products we manufacture, which account for a significant portionsubstantially all of our net sales.revenue.
We are unable to predict the outcome of assertions of infringement made against us and therefore cannot estimate the range of possible loss. A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.
Qimonda
On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda'sQimonda’s insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary (" (“Micron B.V."”), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda'sQimonda’s shares of Inotera (the
"Inotera Shares" “Inotera Shares”), representing approximately 18% of Inotera'sInotera’s outstanding shares as of August 31, 2017,at that time, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.
72
Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the court issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera Shares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on the Inotera Shares and all other benefits; (4) denying Qimonda'sQimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda'sQimonda’s obligations under the patent cross-license agreement are canceled. In addition, the court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by Micron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by Micron B.V. from ownership of the Inotera Shares. The interlocutory judgments havehad no immediate, enforceable effect on us, and Micron, accordingly, we expect to behas been able to continue to operate with full control of the Inotera Shares subject to further developments in the case. We haveMicron and Micron B.V. appealed the judgments to the German Appeals Court, which thereafter appointed an independent expert to perform an evaluation of Dr. Jaffé’s claims that the amount Micron paid for Qimonda was less than fair market value. On March 31, 2020, the expert presented an opinion to the Appeals Court concluding that the amount paid by Micron was within an acceptable range of fair value. On October 5, 2022, the Appeals Court ruled that the relevant issue to be addressed is whether Qimonda's creditors were prejudiced such that the original transaction should be voided. A hearing of the Appeals Court has been scheduled for December 2022.
Antitrust Matters
On April 27, 2018, a complaint was filed against Micron and other DRAM suppliers in the U.S. District Court for the Northern District of California. Subsequently, two substantially identical cases were filed in the same court. The lawsuits purported to be on behalf of a nationwide class of indirect purchasers of DRAM products. On October 28, 2019, the plaintiffs filed a consolidated, amended complaint that purported to be on behalf of a nationwide class of indirect purchasers of DRAM products. The amended complaint asserted claims based on alleged price-fixing of DRAM products under federal and state law during the period from June 1, 2016 to at least February 1, 2018, and sought treble monetary damages, costs, interest, attorneys’ fees, and other injunctive and equitable relief. On December 21, 2020, the District Court dismissed the plaintiffs’ claims and entered judgment against them. The plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit. On March 7, 2022, the Court of Appeals affirmed the District Court’s ruling dismissing plaintiffs’ claims, and subsequently denied the plaintiffs’ request for rehearing. The plaintiffs did not further appeal the ruling of the Court of Appeals.
On June 26, 2018, a complaint was filed against Micron and other DRAM suppliers in the U.S. District Court for the Northern District of California. Subsequently, four substantially identical cases were filed in the same court. On October 28, 2019, the plaintiffs filed a consolidated, amended complaint. The consolidated complaint purported to be on behalf of a nationwide class of direct purchasers of DRAM products. The consolidated complaint asserted claims based on alleged price-fixing of DRAM products under federal and state law during the period from June 1, 2016 through at least February 1, 2018, and sought treble monetary damages, costs, interest, attorneys’ fees, and other injunctive and equitable relief. On January 11, 2021, the plaintiffs filed a further amended complaint asserting substantially the same claims and seeking the same relief. On September 3, 2021, the District Court granted Micron’s motion to dismiss the further amended complaint with prejudice. On October 1, 2021, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. On June 29, 2022, the Court of Appeals granted a joint motion to dismiss the plaintiffs’ appeal.
Additionally, six cases have been filed in the following Canadian courts on the dates indicated: Superior Court of Quebec (April 30, 2018 and May 3, 2018), the Federal Court of Canada (May 2, 2018), the Ontario Superior Court of Justice (May 15, 2018), and the parties have submitted briefsSupreme Court of British Columbia (May 10, 2018). The plaintiffs in these cases are individuals seeking certification of class actions on behalf of direct and indirect purchasers of DRAM in Canada (or regions of Canada) between June 1, 2016 and February 1, 2018. The substantive allegations in these cases are similar to those asserted in the appeals court.cases filed in the United States.
On May 15, 2018, the Chinese State Administration for Market Regulation (“SAMR”) notified Micron that it was investigating potential collusion and other anticompetitive conduct by DRAM suppliers in China. On May 31, 2018, SAMR made unannounced visits to our sales offices in Beijing, Shanghai, and Shenzhen to seek certain information as part of its investigation. We are unable to predictcooperating with SAMR in its investigation.
Securities Matters
On March 5, 2019, a derivative complaint was filed by a shareholder against certain current and former officers and directors of Micron, allegedly on behalf of and for the outcomebenefit of the matter and therefore cannot estimate the range of possible loss. The final resolution of this lawsuit could resultMicron, in the lossU.S. District Court for the District of Delaware alleging securities fraud, breaches of fiduciary duties, and other violations of law involving misrepresentations about purported anticompetitive behavior in the Inotera Shares or monetaryDRAM industry. The complaint seeks damages, unspecifiedfees, interest, costs, and other appropriate relief.
On February 9, 2021, a derivative complaint was filed by a shareholder against Sanjay Mehrotra and other current and former directors of Micron, allegedly on behalf of and for the benefit of Micron, in the U.S. District Court for the District of Delaware alleging violations of securities laws, breaches of fiduciary duties, and other violations of law involving allegedly false and misleading statements about Micron’s commitment to diversity and progress in diversifying its workforce, executive leadership, and Board of Directors. The complaint seeks damages, based on the benefits derived byfees, interest, costs, and an order requiring Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operation, or financial condition.to take various actions to allegedly improve its corporate governance and internal procedures.
Other Matters
In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the otheranother party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, our payments under these types of agreements have not had a material adverse effect on our business, results of operations, or financial condition.
Contingency Assessment
Redeemable Convertible Notes
UnderWe are unable to predict the termsoutcome of any of the indentures governing the 2033 Notes, upon conversion, we would be required to pay cash equal to the lesser of (1) the aggregate principal amount or (2) the conversion valuematters noted above and cannot make a reasonable estimate of the notes being converted. Topotential loss or range of possible losses. A determination that our products or manufacturing processes infringe the extentintellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the conversion value exceedsforegoing, as well as the principal amount, weresolution of any other legal matter noted above, could pay cash, shareshave a material adverse effect on our business, results of common stock,operations, or a combination thereof, at our option, for the amount of such excess. The closing price of our common stock met the thresholds for conversion for the calendar quarter ended June 30, 2017; therefore, the 2033 Notes were convertible by the holders as of August 31, 2017. As a result, the 2033 Notes were classified as current debt and the aggregate difference between the principal amount and the carrying value of $21 million was classified as redeemable convertible notes in the accompanying consolidated balance sheet as of August 31, 2017. The closing price of our common stock did not meet the thresholds for the calendar quarter ended June 30, 2016; therefore, the 2033 Notes were not convertible by the holders as of September 1, 2016. Therefore, as of September 1, 2016, the 2033 Notes had been classified as noncurrent debt and the aggregate difference between the principal amount and the carrying value had been classified as additional capital.financial condition.
Equity
Micron Shareholders' Equity
Common Stock Issuance: In October 2017, subsequent to the end of 2017, we issued 34 million shares of our common stock for $41.00 per share in a public offering, for net proceeds of $1.36 billion, net of underwriting fees and other offering costs.
Common Stock Repurchases: Our Board of Directors has authorized the discretionary repurchase of up to $1.25$10 billion of our outstanding common stock inthrough open-market purchases, block trades, privately-negotiated transactions, or derivative transactions. Through 2017, we had repurchased a total of 49 million shares for $956 million through open-market transactions, and/or pursuant to such authorization.Rule 10b5-1 trading plans. The shares received in all periods were recorded as treasury stock. Repurchases arerepurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash.
Treasury Stock: In connection with the Inotera Acquisition, we sold 58 We repurchased 35.4 million shares of our common stock to Nanya for $986$2.43 billion in 2022 and 15.6 million shares for $1.20 billion in 2021. Through September 1, 2022, we had repurchased an aggregate of $6.47 billion under the authorization. Amounts repurchased are included in treasury stock.
Dividends: On September 29, 2022, we announced that our Board of Directors had declared a quarterly dividend of $0.115 per share, payable in cash of which 54 million shares were issued from treasury stock. As a result, in 2017, treasury stock decreased by $1.03 billion while retained earnings decreased by $104 million for the difference between the carrying value of the treasury stock and its $925 million fair value.
Outstanding Capped Calls: We entered into capped call transactions in connection with certain of our convertible notes which are intendedon October 26, 2022, to reduce the effect of potential dilution. The capped calls provide for our receipt of cash or shares, at our election, from our counterparties if the trading price of our stock is above strike prices on the expiration dates. As of August 31, 2017, the dollar value of cash or shares that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our stock is below strike prices for all capped calls at expiration, to $527 million, if the trading price of our stock is at or above the cap prices for all capped calls. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.
The following table presents information related to outstanding capped calls as of August 31, 2017:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Capped Calls | |
| | | | Strike Price | | Weighted-Average Cap Price | | Underlying Common Shares | | Value at Expiration |
| | Expiration Dates | | | | | Minimum | | Maximum |
| 2032C | | Nov 2016 | – | Nov 2017 | | $ | 9.80 |
| | $ | 15.69 |
| | 25 |
| | $ | — |
| | $ | 147 |
|
| 2032D | | Nov 2016 | – | May 2018 | | 10.16 |
| | 15.91 |
| | 32 |
| | — |
| | 184 |
|
| 2033E | | Jan 2018 | – | Feb 2018 | | 10.93 |
| | 14.51 |
| | 27 |
| | — |
| | 98 |
|
| 2033F | | Jan 2020 | – | Feb 2020 | | 10.93 |
| | 14.51 |
| | 27 |
| | — |
| | 98 |
|
| | | | | | | | | | | 111 |
| | $ | — |
| | $ | 527 |
|
Expiration of Capped Calls: In 2017, we cash-settled and share-settled separate expirations of portions of our capped calls, and received $125 million in cash and 4 million shares (equal to a value of $67 million) based on the volume-weighted trading stock prices at the expiration dates. In 2016 and 2015, we share-settled expirations of portions of our capped calls and received 2 million shares of our stock (equal to a value of $23 million) and 3 million shares of our stock (equal to a value of $50 million), respectively. The shares received in all periods were recorded as treasury stock.
Shareholder Rights Plan: On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each shareOctober 11, 2022.
74
Accumulated Other Comprehensive Income (Loss):Changes in accumulated other comprehensive income (loss) by component for the year ended August 31, 2017September 1, 2022 were as follows: | | | | | | | | | | | | | | | | | |
| Gains (Losses) on Derivative Instruments | Unrealized Gains (Losses) on Investments | Pension Liability Adjustments | Cumulative Foreign Currency Translation Adjustment | Total |
| | | | | |
| As of September 2, 2021 | $ | (22) | | $ | 1 | | $ | 22 | | $ | 1 | | $ | 2 | |
| Other comprehensive income before reclassifications | (720) | | (63) | | 6 | | (1) | | (778) | |
| Amount reclassified out of accumulated other comprehensive income | 53 | | 1 | | (2) | | — | | 52 | |
| Tax effects | 151 | | 14 | | (1) | | — | | 164 | |
| Other comprehensive income (loss) | (516) | | (48) | | 3 | | (1) | | (562) | |
| As of September 1, 2022 | $ | (538) | | $ | (47) | | $ | 25 | | $ | — | | $ | (560) | |
|
| | | | | | | | | | | | | | | | |
| | | Cumulative Foreign Currency Translation Adjustments | | Gains (Losses) on Derivative Instruments, Net | | Pension Liability Adjustments | | Total |
| As of September 1, 2016 | | $ | (49 | ) | | $ | 2 |
| | $ | 12 |
| | $ | (35 | ) |
| Other comprehensive income | | 27 |
| | 15 |
| | 4 |
| | 46 |
|
| Amount reclassified out of accumulated other comprehensive income | | 21 |
| | 1 |
| | (1 | ) | | 21 |
|
| Tax effects | | — |
| | (1 | ) | | (2 | ) | | (3 | ) |
| Other comprehensive income | | 48 |
| | 15 |
| | 1 |
| | 64 |
|
| As of August 31, 2017 | | $ | (1 | ) | | $ | 17 |
| | $ | 13 |
| | $ | 29 |
|
Noncontrolling Interests in Subsidiaries
|
| | | | | | | | | | | | | | |
| As of | | 2017 | | 2016 |
| | | Noncontrolling Interest Balance | | Noncontrolling Interest Percentage | | Noncontrolling Interest Balance | | Noncontrolling Interest Percentage |
| IMFT | | $ | 832 |
| | 49 | % | | $ | 832 |
| | 49 | % |
| Other | | 17 |
| | Various |
| | 16 |
| | Various |
|
| | | $ | 849 |
| | | | $ | 848 |
| | |
IMFT:Since 2006, we have owned 51% of IMFT, a joint venture between us and Intel to manufacture memory products exclusively for its members, who share the output of IMFT in proportion to their investment under a long-term supply agreement at prices approximating cost. In 2017, IMFT began to transition its manufacturing from NAND to 3D XPoint memory products. IMFT is governed by a Board of Managers, for which the number of managers appointed by each member varies based on the members' respective ownership interests. The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. Through December 2018, Intel can put to us, and from January 2019 through December 2021, we can call from Intel, Intel's interest in IMFT, in either case, for an amount equal to the noncontrolling interest balance attributable to Intel at such time either member exercises its right. If Intel exercises its put right, we can elect to set the closing date of the transaction to be any time within two years following such election by Intel and can elect to receive financing of the purchase price from Intel for one to two years from the closing date. Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets.
IMFT manufactures memory products using designs and technology we develop with Intel. We generally share with Intel the costs of product design and process development activities for NAND and 3D XPoint memory at IMFT and our other facilities. Our R&D expenses were reduced by reimbursements from Intel of $213 million, $205 million, and $224 million for 2017, 2016, and 2015, respectively.
Non-Trade sales primarily consists of NAND and 3D XPoint memory products manufactured and sold to Intel through IMFT and were $553 million, $501 million, and $463 million for 2017, 2016, and 2015, respectively.
The following table presents the assets and liabilities of IMFT included in our consolidated balance sheets:
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Assets | | | | |
| Cash and equivalents | | $ | 87 |
| | $ | 98 |
|
| Receivables | | 81 |
| | 89 |
|
| Inventories | | 128 |
| | 68 |
|
| Other current assets | | 7 |
| | 6 |
|
| Total current assets | | 303 |
| | 261 |
|
| Property, plant, and equipment, net | | 1,852 |
| | 1,792 |
|
| Other noncurrent assets | | 49 |
| | 50 |
|
| Total assets | | $ | 2,204 |
| | $ | 2,103 |
|
| | | | | |
| Liabilities | | |
| | |
|
| Accounts payable and accrued expenses | | $ | 299 |
| | $ | 175 |
|
| Deferred income | | 6 |
| | 7 |
|
| Current debt | | 19 |
| | 16 |
|
| Total current liabilities | | 324 |
| | 198 |
|
| Long-term debt | | 75 |
| | 66 |
|
| Other noncurrent liabilities | | 88 |
| | 94 |
|
| Total liabilities | | $ | 487 |
| | $ | 358 |
|
Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.
The table below presents IMFT's distributions to and contributions from its members for 2016 and 2015. There were no distributions or contributions for 2017.
|
| | | | | | | | |
| For the year ended | | 2016 | | 2015 |
| IMFT distributions to Micron | | $ | 36 |
| | $ | 6 |
|
| IMFT distributions to Intel | | 34 |
| | 6 |
|
| Micron contributions to IMFT | | 38 |
| | 148 |
|
| Intel contributions to IMFT | | 37 |
| | 142 |
|
Restrictions on Net Assets
As a result of the corporate reorganization proceedings of MMJ initiated in 2012, and for so long as such proceedings continue, MMJ is subject to certain restrictions on dividends, loans, and advances. In addition, the 2021 MSTW Term Loan contains covenants that limit or restrict the ability of MSTW and/or MTTW to distribute cash dividends. Also, our ability to access the cash and other assets of IMFT through dividends, loans, or advances, including to finance our other operations, is subject to agreement by Intel. As a result, our total restricted net assets (excluding intercompany balances and noncontrolling interests) as of August 31, 2017 were $3.65 billion for the MMJ Group, $2.22 billion for MSTW and MTTW, and $885 million for IMFT. As of August 31, 2017, the MMJ Group held cash and equivalents of $580 million, MSTW and MTTW held an aggregate of $56 million, and IMFT held $87 million.
Fair Value Measurements
Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).
All of our marketable debt and equity investments (excluding equity method investments) were classified as available-for-sale and carried at fair value. In connection with our repurchases of our convertible notes in 2016 and 2015, we determined the fair value of the debt components, as if they were stand-alone instruments, using interest rates for similar nonconvertible debt
issued by entities with credit ratings comparable to ours (Level 2). Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair valuevalues and carrying valuevalues of our outstanding debt instruments (excluding the carrying value of equity and mezzanine equity components of our convertible notes) were as follows: | | | | | | | | | | | | | | | | | |
| 2022 | | 2021 |
| As of | Fair
Value | Carrying
Value | | Fair
Value | Carrying
Value |
| | | | | |
| Notes | $ | 5,472 | | $ | 6,020 | | | $ | 6,584 | | $ | 5,973 | |
|
| | | | | | | | | | | | | | | | |
| As of | | 2017 | | 2016 |
| | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
| Notes and MMJ Creditor Payments | $ | 8,793 |
| | $ | 8,423 |
| | $ | 7,257 |
| | $ | 7,050 |
|
| Convertible notes | | 3,901 |
| | 1,521 |
| | 2,408 |
| | 1,454 |
|
The fair values of our convertible notesdebt instruments were determinedestimated based on Level 2 inputs, that were observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of our convertible notes when available, our stock price,discounted cash flows, and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2). Theours.
Assets classified as held for sale are carried at the lower of estimated fair values ofvalue or carrying value. Significant judgments and assumptions are required to estimate their fair values. Actual selling prices could vary significantly from our other debt instruments were estimated based on discounted cash flows using inputs that were observablefair value and we could recognize additional losses in the market orevent that could be derived from, or corroborated with, observable market data, including the trading pricesales prices of our notes, when available, and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).assets classified as held for sale are lower than their carrying values.
Derivative Instruments
| | | | | | | | | | | |
| Notional or Contractual Amount | Fair Value of |
Assets(1) | Liabilities(2) |
| | | |
| As of September 1, 2022 | | | |
| Derivative instruments with hedge accounting designation | | | |
| Cash flow currency hedges | $ | 5,427 | | $ | — | | $ | (330) | |
| Cash flow commodity hedges | 97 | | 1 | | (6) | |
| Fair value interest rate hedges | 900 | | — | | (91) | |
| | | |
| Derivative instruments without hedge accounting designation | | | |
| Non-designated currency hedges | 2,821 | | 7 | | (13) | |
| | $ | 8 | | $ | (440) | |
| | | |
| As of September 2, 2021 | | | |
| Derivative instruments with hedge accounting designation | | | |
| Cash flow currency hedges | $ | 3,601 | | $ | 10 | | $ | (66) | |
| Cash flow commodity hedges | 45 | | 2 | | — | |
| Fair value interest rate hedges | 900 | | 5 | | — | |
| | | |
| Derivative instruments without hedge accounting designation | | | |
| Non-designated currency hedges | 996 | | 3 | | (2) | |
| | $ | 20 | | $ | (68) | |
(1)Included in receivables and other noncurrent assets.
(2)Included in accounts payable and accrued expenses and other noncurrent liabilities.
Derivative Instruments with Hedge Accounting Designation
Cash Flow Hedges:We use derivative instrumentsutilize forward and swap contracts that generally mature within two years designated as cash flow hedges to manageminimize our exposure to changes in currency exchange rates from our monetary assetsor commodity prices for certain capital expenditures and liabilities denominated in currencies other than the U.S. dollar.manufacturing costs. Forward and swap contracts are measured at fair value based on market-based observable inputs including market spot and forward rates, interest rates, and credit-risk spreads (Level 2). We do not use derivative instruments for speculative purpose.purposes. We recognized losses from cash flow hedges of $735 million and $52 million for 2022 and 2021, respectively, and gains of $51 million for 2020, in accumulated other comprehensive income. We reclassified $53 million of losses and $41 million of gains in 2022 and 2021, respectively, from accumulated other comprehensive income to earnings, primarily to cost of goods sold. The reclassifications were not significant in 2020. As of September 1, 2022, we expect to reclassify $263 million of pre-tax losses related to cash flow hedges from accumulated other comprehensive income into earnings in the next 12 months.
Fair Value Hedges: We utilize fixed-to-floating interest rate swaps designated as fair value hedges to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. Interest rate swaps are measured at fair value based on market-based observable inputs including interest rates and credit-risk spreads (Level 2). The changes in the fair values of derivatives designated as fair value hedges and the offsetting changes in the underlying fair values of the hedged items are both recognized in earnings. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized to earnings over the remaining life of the hedged item, or immediately if the hedged item has matured or been extinguished. We recognized interest expense of $96 million for changes in the fair value of our interest rate swaps in 2022. We also recognized offsetting interest expense of the same amounts related to the changes in the fair value of the hedged portion of the underlying debt for these periods. The amounts recognized for 2021 were not significant.
76
Derivative Instruments without Hedge Accounting Designation
Currency Derivatives: To hedge our exposures of monetary assets and liabilities to changes in currency exchange rates, weWe generally utilize a rolling hedge strategy with currency forward contracts that mature within nine months. In addition,three months to mitigate the riskhedge our exposures of the yen strengthening against the U.S. dollar with respect to our MMJ Creditor Payments duemonetary assets and liabilities from changes in December 2017 and 2018, we have forward contracts to purchase 18 billion yen in December 2017 and 28 billion yen in December 2018.currency exchange rates. At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars and the associated outstanding forward contracts are marked to market. Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or exchange quotations (Level 2).
Convertible Notes Settlement Obligations:
In August 2017, holders of our certain of our 2033E Notes converted their notes. For converted notes with an aggregate principal amount of $16 million, we elected to settle the conversion obligation in excess of the principal amount in cash. As a result, those settlement obligations became derivative debt liabilities subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common stock over a period of 20 consecutive trading days. The fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2), which requires inputs of stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and dividend rate. The subsequent measurements and final settlement amounts of our convertible notes settlement obligations were based on the volume-weighted-average stock price (Level 1). Changes in fair values of the derivative settlement obligations were included in other non-operating income (expense), net.
Total notional amounts and gross fair values for derivative instruments without hedge accounting designation were as follows:
|
| | | | | | | | | | | | | | | | |
| | | Notional Amount(1) | | Fair Value of |
Current Assets(2) | | Current Liabilities(3) | | Noncurrent Assets(4) |
| As of August 31, 2017 | | | | | | | | |
| Currency forward contracts | | | | | | | | |
| New Taiwan dollar | | $ | 2,921 |
| | $ | 22 |
| | $ | (2 | ) | | $ | — |
|
| Yen | | 1,209 |
| | 5 |
| | — |
| | 1 |
|
| Euro | | 368 |
| | 5 |
| | (2 | ) | | — |
|
| Singapore dollar | | 324 |
| | 1 |
| | — |
| | — |
|
| Other | | 25 |
| | 1 |
| | (1 | ) | | — |
|
| | | $ | 4,847 |
| |
| |
| | |
| | | | | | | | | |
| Convertible notes settlement obligation | | 2 |
| | — |
| | (47 | ) | | — |
|
| | | | | $ | 34 |
| | $ | (52 | ) | | $ | 1 |
|
| | | | | | | | | |
| As of September 1, 2016 | | | | | | | | |
| Currency forward contracts | | | | | | | | |
| Yen | | $ | 1,668 |
| | $ | — |
| | $ | (10 | ) | | $ | — |
|
| Euro | | 93 |
| | — |
| | — |
| | — |
|
| Singapore dollar | | 206 |
| | — |
| | — |
| | — |
|
| Other | | 85 |
| | — |
| | (1 | ) | | — |
|
| | | $ | 2,052 |
| | $ | — |
| | $ | (11 | ) | | $ | — |
|
| |
(1)
| Notional amounts of forward contracts in U.S. dollars and convertible notes settlement obligations in shares. |
| |
(2)
| Included in receivables – other. |
| |
(3)
| Included in accounts payable and accrued expenses – other for forward contracts and in current debt for convertible notes settlement obligations. |
| |
(4)
| Included in other noncurrent assets. |
Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changechanges in the underlying monetary assets and liabilities due tofrom changes in currency exchange rates are included in other non-operating income (expense). For, net. The amounts recognized for derivative instruments without hedge accounting designation recognized gains (losses) were as follows:
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Foreign exchange contracts | | $ | (45 | ) | | $ | 185 |
| | $ | (64 | ) |
| Convertible notes settlement obligations | | (2 | ) | | — |
| | 7 |
|
Derivative Instruments with Cash Flow Hedge Accounting Designation
Currency Derivatives: We may utilize currency forward contracts that generally mature within 12 months to hedge our exposure to changes in cash flows from changes in currency exchange rates for certain capital expenditures. Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rates, and credit-risk spreads (Level 2).
For derivative instruments designated as cash flow hedges, the effective portion of the realized and unrealized gain or loss on the derivatives is included as a component of accumulated other comprehensive income (loss). Amounts in accumulated other comprehensive income (loss) are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. The ineffective and excluded portion of the realized and unrealized gain or loss is included in other non-operating income (expense). Total notional amounts and gross fair values for derivative instruments with cash flow hedge accounting designation were as follows:
|
| | | | | | | | | | | | |
| | | Notional Amount (in U.S. Dollars) | | Fair Value |
| | | Current Assets(1) | | Current Liabilities(2) |
| As of August 31, 2017 | | | | | | |
| Yen | | $ | 258 |
| | $ | 4 |
| | $ | — |
|
| Euro | | 198 |
| | 13 |
| | — |
|
| | | $ | 456 |
| | $ | 17 |
|
| $ | — |
|
| As of September 1, 2016 | | |
| | | | |
|
| Yen | | $ | 107 |
| | $ | 2 |
| | $ | (1 | ) |
| Euro | | 65 |
| | — |
| | (1 | ) |
| | | $ | 172 |
| | $ | 2 |
|
| $ | (2 | ) |
| |
(1)
| Included in receivables – other. |
| |
(2)
| Included in accounts payable and accrued expenses – other. |
We recognized gains of $15 million and $10 million, and losses of $10 million, for 2017, 2016, and 2015, respectively, in accumulated other comprehensive income (loss) from the effective portion of cash flow hedges. Neither the ineffective portions of cash flow hedges recognized in other non-operating income (expense) nor the reclassifications from accumulated other comprehensive income (loss) to earnings were material in 2017, 2016, or 2015. The amounts from cash flow hedges included in accumulated other comprehensive income (loss) that are expected to be reclassified into earnings in the next 12 months were not material.significant for the periods presented.
Derivative Counterparty Credit Risk and Master Netting Arrangements
Our derivative instruments expose us to credit risk to the extent counterparties may be unable to meet the terms of the contracts. Our maximum exposure to loss due to credit risk if counterparties fail completely to perform according to the terms of the contracts would generally equal the fair value of assets for these contracts as listed in the tables above. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading risk across multiple financial institutions. As of August 31, 2017September 1, 2022 and September 1, 2016,2, 2021, amounts netted under our master netting arrangements were not material.significant.
Equity Plans
As of August 31, 2017, 101September 1, 2022, 90 million shares of our common stock were available for future awards under our equity plans.plans, including 18 million shares approved for issuance under our employee stock purchase plan (“ESPP”).
Stock Options
Our stock options are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options issued after February 2014 expire eight years from the date of grant. Options issued prior to February 2014 expire six years from the date of grant. Option activity for 2017 is summarized as follows:
|
| | | | | | | | | | | | | |
| | | Number of Shares | | Weighted-Average Exercise Price Per Share | | Weighted-Average Remaining Contractual Life (In Years) | | Aggregate Intrinsic Value |
| Outstanding as of September 1, 2016 | | 42 |
| | $ | 16.37 |
| | | | |
| Granted | | 8 |
| | 19.61 |
| | | | |
| Exercised | | (14 | ) | | 10.17 |
| | | | |
| Canceled or expired | | (3 | ) | | 22.55 |
| | | | |
| Outstanding as of August 31, 2017 | | 33 |
| | 19.32 |
| | 4.4 | | $ | 438 |
|
| | | | | | | | | |
| Exercisable as of August 31, 2017 | | 17 |
| | $ | 17.44 |
| | 2.7 | | $ | 255 |
|
| Unvested as of August 31, 2017 | | 16 |
| | 21.25 |
| | 6.2 | | 183 |
|
The total intrinsic value was $198 million, $52 million, and $229 million for options exercised in 2017, 2016, and 2015, respectively.
Stock options granted and assumptions used in the Black-Scholes option valuation model were as follows:
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Stock options granted | | 8 |
| | 8 |
| | 8 |
|
| Weighted-average grant-date fair value per share | | $ | 8.68 |
| | $ | 6.94 |
| | $ | 14.79 |
|
| Average expected life in years | | 5.5 |
| | 5.5 |
| | 5.6 |
|
| Weighted-average expected volatility | | 46 | % | | 47 | % | | 45 | % |
| Weighted-average risk-free interest rate | | 1.8 | % | | 1.7 | % | | 1.7 | % |
Stock price volatility was based on an average of historical volatility and the implied volatility derived from traded options on our stock. The expected lives of options granted were based, in part, on historical experience and on the terms and conditions of the options. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at each grant date. No dividends were assumed in estimated option values.
Restricted Stock and Restricted Stock Units ("(“Restricted Stock Awards"Awards”)
As of August 31, 2017,September 1, 2022, there were 1923 million shares of Restricted Stock Awards outstanding, 20 million of which 3 million were performance-based or market-based.contained only service conditions. For service-based Restricted Stock Awards granted through October 2021, restrictions generally lapse in one-fourth or one-third increments during each year of employment after the grant date. Vesting for performance-based awards is contingent upon the Company meeting a specified return on assets ("ROA"), as defined, over a three-year performance period and vesting for market-basedFor service-based Restricted Stock Awards is contingent upongranted beginning in November 2021, restrictions generally lapse on 25% of the Company achieving total shareholder return ("TSR") relative tounits granted after the companies included infirst year and on 6.25% each quarter thereafter over the S&P 500remaining three years of employment. Restrictions generally lapse on Restricted Stock with performance or market conditions as conditions are met over a three-year performance3-year period. At the end of the performance period, the number of actual shares to be awarded will vary between 0% and 200% of target amounts, depending upon the achievement levellevel. In 2022, our Board of the specified ROADirectors approved dividend equivalent rights for unvested restricted stock units awarded on or TSR. after October 13, 2021.
Restricted Stock Awards activity for 20172022 is summarized as follows: | | | | | | | | |
| Number of Shares | Weighted-Average Grant Date Fair Value Per Share |
| | |
| Outstanding as of September 2, 2021 | 20 | | $ | 49.39 | |
| Granted | 13 | | 70.81 | |
| Restrictions lapsed | (7) | | 47.36 | |
| Canceled | (3) | | 57.00 | |
| Outstanding as of September 1, 2022 | 23 | | 60.93 | |
|
| | | | | | | |
| | | Number of Shares | | Weighted-Average Grant Date Fair Value Per Share |
| Outstanding as of September 1, 2016 | | 18 |
| | $ | 20.24 |
|
| Granted | | 8 |
| | 18.77 |
|
| Restrictions lapsed | | (6 | ) | | 19.53 |
|
| Canceled | | (1 | ) | | 20.59 |
|
| Outstanding as of August 31, 2017 | | 19 |
| | 19.78 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 | |
| | | | | | | | | | | | |
| Restricted stock award shares granted | 13 | 11 | 8 |
| Weighted-average grant-date fair value per share | $ | 70.81 | | $ | 53.58 | | $ | 46.44 | |
| Aggregate vesting-date fair value of shares vested | $ | 498 | | $ | 385 | | $ | 294 | |
Employee Stock Purchase Plan (“ESPP”) |
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Restricted stock award shares granted | | 8 |
| | 10 |
| | 7 |
|
| Weighted-average grant-date fair value per share | | $ | 18.77 |
| | $ | 15.40 |
| | $ | 32.60 |
|
| Aggregate vesting-date fair value of shares vested | | $ | 115 |
| | $ | 71 |
| | $ | 155 |
|
Our ESPP is offered to substantially all employees and permitted eligible employees to purchase shares of our common stock through payroll deductions of up to 10% of their eligible compensation, subject to certain limitations prior to August 2021. Beginning in August 2021, employees are permitted to deduct up to 15% of their eligible compensation to purchase shares under the ESPP. The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of our common stock on either the first or last day of each six-month offering period. Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period. Grant-date fair value and assumptions used in the Black-Scholes option valuation model were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | | | | | | | | | | |
| Weighted-average grant-date fair value per share | $ | 18.87 | | | $ | 20.71 | | | $ | 14.24 | | |
| Average expected life in years | 0.5 | | | | 0.5 | | | | 0.5 | | | |
| Weighted-average expected volatility (based on implied volatility) | 43 | % | | 41 | % | | 45 | % | |
| Weighted-average risk-free interest rate | 2.0 | % | | 0.1 | % | | 0.8 | % | |
| Expected dividend yield | 0.6 | % | | 0.3 | % | | 0.0 | % | |
Under the ESPP, employees purchased 4 million shares of common stock for $215 million in 2022, 3 million shares for $140 million in 2021, and 3 million shares for $118 million in 2020.
Stock Options
As of September 1, 2022, stock options of 3 million shares were outstanding, all of which were fully exercisable. Stock options expire 8 years from the date of grant. We did not grant any stock options in 2022, 2021, or 2020. Stock options of 1 million shares were exercised in 2022. The total intrinsic value for options exercised was $54 million, $143 million, and $130 million in 2022, 2021, and 2020, respectively.
Stock-based Compensation Expense
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Stock-based compensation expense by caption | | | |
| Cost of goods sold | $ | 193 | | $ | 186 | | $ | 139 | |
| Research and development | 175 | | 110 | | 86 | |
| Selling, general, and administrative | 133 | | 99 | | 103 | |
| Restructure | (5) | | — | | — | |
| $ | 496 | | $ | 395 | | $ | 328 | |
| | | |
| Stock-based compensation expense by type of award | | | |
| Restricted stock awards | $ | 429 | | $ | 333 | | $ | 272 | |
| ESPP | 66 | | 52 | | 39 | |
| Stock options | 1 | | 10 | | 17 | |
| $ | 496 | | $ | 395 | | $ | 328 | |
78
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Stock-based compensation expense by caption | | | | | | |
| Cost of goods sold | | $ | 88 |
| | $ | 76 |
| | $ | 64 |
|
| Selling, general, and administrative | | 75 |
| | 66 |
| | 61 |
|
| Research and development | | 52 |
| | 49 |
| | 42 |
|
| Other | | — |
| | — |
| | 1 |
|
| | | $ | 215 |
| | $ | 191 |
| | $ | 168 |
|
| | | | | | | |
| Stock-based compensation expense by type of award | | | | | | |
| Stock options | | $ | 71 |
| | $ | 79 |
| | $ | 81 |
|
| Restricted stock awards | | 144 |
| | 112 |
| | 87 |
|
| | | $ | 215 |
| | $ | 191 |
| | $ | 168 |
|
Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards. Income tax benefits for share-based awards were $77 million, $83 million, and $72 million for 2022, 2021, and 2020, respectively. Stock-based compensation expense of $20$48 million and $18$30 million was capitalized and remained in inventory as of August 31, 2017 and September 1, 2016,2022 and September 2, 2021, respectively. As of August 31, 2017, $341 millionSeptember 1, 2022, $1.02 billion of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2021,2026, resulting in a weighted-average period of 1.21.3 years.
Employee Benefit Plans
We have employee retirement plans at our U.S. and international sites. Details of the more significant plans are discussed as follows:
Employee Savings Plan for U.S. Employees
We have a 401(k) retirement plan under which U.S. employees may contribute up to 75% of their eligible pay, (subjectsubject to IRSInternal Revenue Service annual contribution limits)limits, to various savings alternatives, none of which include direct investment in our stock. We match in cash eligible contributions from employees up to 5% of the employee'semployee’s annual eligible earnings. Contribution expense for the 401(k) plansplan was $52$66 million,, $54 $77 million,, and $55$66 million in 2017, 2016,2022, 2021, and 2015,2020, respectively.
Retirement Plans
We have pension plans in various countries available to local employees which are generally government mandated.at various foreign sites. As of August 31, 2017,September 1, 2022, the projected benefit obligations of our plans were $175$186 million and plan assets were $150$221 million. As of September 1, 2016,2, 2021, the projected benefit obligations of our plans were $167$222 million and plan assets were $131$256 million. Pension expense was not material for 2017, 2016,2022, 2021, or 2015.2020.
Revenue
Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Substantially all contracts with our customers are short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. From time to time, we have contracts with initial terms that include performance obligations that extend beyond one year. As of September 1, 2022, our future performance obligations beyond one year were not significant.
As of September 1, 2022 and September 2, 2021, other current liabilities included $1.26 billion and $846 million for estimates of consideration payable to customers, respectively, including estimates for pricing adjustments and returns.
Revenue by Technology
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| DRAM | $ | 22,386 | | $ | 20,039 | | $ | 14,510 | |
| NAND | 7,811 | | 7,007 | | 6,131 | |
| Other (primarily 3D XPoint memory and NOR) | 561 | | 659 | | 794 | |
| $ | 30,758 | | $ | 27,705 | | $ | 21,435 | |
See “Segment and Other Information” for disclosure of disaggregated revenue by market segment.
Restructure and Asset Impairments
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Restructure and asset impairments | $ | 48 | | $ | 488 | | $ | 60 | |
In separate transactions in 2017, we sold our assembly
Restructure and test facility located in Akita, Japanasset impairments for 2022 and our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets2021 are primarily related to Lexar. As a result, we recognized gains of $15 million in 2017 and expect to recognize an additional gain of approximately $100 million in 2019 upon the completion of the sale of the Singaporeour Lehi, Utah facility. See “Lehi, Utah Fab and 3D XPoint.” Restructure and asset impairments for 2020 primarily related to asset impairments and employee relocation and severance costs related to right-sizing our Lehi, Utah facility.
In 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities. The plan included the elimination of certain projects and programs, the permanent closure of a number of open headcount requisitions, workforce reductions in certain areas of our business, and other non-headcount related spending reductions. As a result, we incurred charges of $33 million in 2017 and $58 million in 2016 and do not expect to incur additional material charges. As of September 1, 2016, we had accrued liabilities of $24 million related to the plan, which was paid in 2017.
Other Operating (Income) Expense, Net
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Patent license charges | $ | — | | $ | 128 | | $ | — | |
| (Gain) loss on disposition of property, plant, and equipment | (41) | | (24) | | (3) | |
| Other | 7 | | (9) | | 11 | |
| $ | (34) | | $ | 95 | | $ | 8 | |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| (Gain) loss on disposition of property, plant, and equipment | | $ | (22 | ) | | $ | (4 | ) | | $ | (17 | ) |
| Other | | 5 |
| | (2 | ) | | (28 | ) |
| | | $ | (17 | ) | | $ | (6 | ) | | $ | (45 | ) |
Other Non-Operating Income (Expense), Net
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Gain (loss) on investments | $ | 26 | | $ | 82 | | $ | 22 | |
| Gain (loss) on debt prepayments, repurchases, and conversions | (83) | | (1) | | 40 | |
| Other | 19 | | — | | (2) | |
| $ | (38) | | $ | 81 | | $ | 60 | |
80 |
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Loss on debt repurchases and conversions | | $ | (100 | ) | | $ | (4 | ) | | $ | (49 | ) |
| Loss from changes in currency exchange rates | | (74 | ) | | (24 | ) | | (27 | ) |
| Gain on remeasurement of previously-held equity interest in Inotera | | 71 |
| | — |
| | — |
|
| Other | | (9 | ) | | (26 | ) | | 23 |
|
| | | $ | (112 | ) | | $ | (54 | ) | | $ | (53 | ) |
In 2016, we recognized other non-operating expense of $30 million to write off indemnification receivables upon the resolution of uncertain tax positions.
Income Taxes
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees | | | | | | |
| Foreign | | $ | 5,252 |
| | $ | (353 | ) | | $ | 2,431 |
|
| U.S. | | (56 | ) | | 72 |
| | 178 |
|
| | | $ | 5,196 |
| | $ | (281 | ) | | $ | 2,609 |
|
| | | | | | | |
| Income tax (provision) benefit | | | | | | |
| Current | | | | | | |
| Foreign | | $ | (152 | ) | | $ | (27 | ) | | $ | (93 | ) |
| State | | (1 | ) | | (1 | ) | | (1 | ) |
| U.S. federal | | — |
| | — |
| | 6 |
|
| | | (153 | ) | | (28 | ) | | (88 | ) |
| Deferred | | | | | | |
| Foreign | | 39 |
| | (32 | ) | | (85 | ) |
| State | | — |
| | 2 |
| | 1 |
|
| U.S. federal | | — |
| | 39 |
| | 15 |
|
| Income tax (provision) benefit | | $ | (114 | ) | | $ | (19 | ) | | $ | (157 | ) |
IncomeOur income tax (provision) benefit computed usingconsisted of the following: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees | | | |
| U.S. | $ | 112 | | $ | (211) | | $ | 308 | |
| Foreign | 9,459 | | 6,429 | | 2,675 | |
| | $ | 9,571 | | $ | 6,218 | | $ | 2,983 | |
| | | |
| Income tax (provision) benefit | | | |
| Current | | | |
| U.S. federal | $ | (65) | | $ | (42) | | $ | (20) | |
| State | (1) | | (1) | | (2) | |
| Foreign | (528) | | (370) | | (148) | |
| | (594) | | (413) | | (170) | |
| Deferred | | | |
| U.S. federal | (166) | | (9) | | 39 | |
| State | (225) | | 28 | | 23 | |
| Foreign | 97 | | — | | (172) | |
| (294) | | 19 | | (110) | |
| | | |
| Income tax (provision) benefit | $ | (888) | | $ | (394) | | $ | (280) | |
The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate reconciled to income tax (provision) benefit was as follows:our effective rate: | | | | | | | | | | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | | | | |
| U.S. federal income tax (provision) benefit at statutory rate | $ | (2,010) | | 21.0 | % | $ | (1,306) | | 21.0 | % | $ | (626) | | 21.0 | % |
| U.S. tax on foreign operations | (322) | | 3.4 | % | (226) | | 3.6 | % | (14) | | 0.5 | % |
| Change in valuation allowance | (241) | | 2.5 | % | 54 | | (0.9) | % | (20) | | 0.7 | % |
| Change in unrecognized tax benefits | (67) | | 0.7 | % | (238) | | 3.8 | % | (33) | | 1.1 | % |
| Foreign tax rate differential | 1,601 | | (16.7) | % | 951 | | (15.3) | % | 253 | | (8.5) | % |
| Research and development tax credits | 66 | | (0.7) | % | 123 | | (2.0) | % | 62 | | (2.1) | % |
| Foreign derived intangible income deduction | 41 | | (0.4) | % | 18 | | (0.3) | % | 67 | | (2.2) | % |
| State taxes, net of federal benefit | — | | — | % | 59 | | (0.9) | % | 23 | | (0.8) | % |
| Debt premium deductions | — | | — | % | 130 | | (2.1) | % | — | | — | % |
| Other | 44 | | (0.5) | % | 41 | | (0.6) | % | 8 | | (0.3) | % |
| Income tax (provision) benefit | $ | (888) | | 9.3 | % | $ | (394) | | 6.3 | % | $ | (280) | | 9.4 | % |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| U.S. federal income tax (provision) benefit at statutory rate | | $ | (1,819 | ) | | $ | 98 |
| | $ | (913 | ) |
| Foreign tax rate differential | | 1,571 |
| | (300 | ) | | 515 |
|
| Change in valuation allowance | | 64 |
| | 63 |
| | 260 |
|
| Change in unrecognized tax benefits | | 12 |
| | 52 |
| | (118 | ) |
| Tax credits | | 66 |
| | 48 |
| | 53 |
|
| Noncontrolling investment transactions | | — |
| | — |
| | 57 |
|
| Other | | (8 | ) | | 20 |
| | (11 | ) |
| Income tax (provision) benefit | | $ | (114 | ) | | $ | (19 | ) | | $ | (157 | ) |
We operate in a number of tax jurisdictions including Singapore and Taiwan, where our earnings are indefinitely reinvested and are taxed at lower effective tax rates than the U.S. statutory rate and in a number of locations outside the United States, including Singapore, where we have tax incentive arrangements thatarrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements which expire in whole or in part at various dates through 2030, reduced our tax provision by $742 million$1.12 billion (benefiting our diluted earnings per share by $0.64)$1.00) for 2017, were not material in 2016, and2022, by $338$758 million ($0.290.66 per diluted share) for 2015.2021, and by $215 million ($0.19 per diluted share) for 2020.
As of September 1, 2022, certain non-U.S. subsidiaries had cumulative undistributed earnings of $4.38 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.
Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following: | | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Deferred tax assets | | |
| Net operating loss and tax credit carryforwards | $ | 796 | | $ | 783 | |
| Accrued salaries, wages, and benefits | 157 | | 206 | |
| Operating lease liabilities | 138 | | 109 | |
| Inventories | 77 | | — | |
| Property, plant, and equipment | 44 | | 37 | |
| Other | 142 | | 115 | |
| Gross deferred tax assets | 1,354 | | 1,250 | |
| Less valuation allowance | (471) | | (233) | |
| Deferred tax assets, net of valuation allowance | 883 | | 1,017 | |
| | |
| Deferred tax liabilities | | |
| Right-of-use assets | (126) | | (90) | |
| Product and process technology | — | | (12) | |
| Other | (68) | | (143) | |
| Deferred tax liabilities | (194) | | (245) | |
| | |
| Net deferred tax assets | $ | 689 | | $ | 772 | |
| | |
| Reported as | | |
| Deferred tax assets | $ | 702 | | $ | 782 | |
| Deferred tax liabilities (included in other noncurrent liabilities) | (13) | | (10) | |
| Net deferred tax assets | $ | 689 | | $ | 772 | |
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Deferred tax assets | | | | |
| Net operating loss and tax credit carryforwards | | $ | 3,426 |
| | $ | 3,014 |
|
| Accrued salaries, wages, and benefits | | 211 |
| | 142 |
|
| Other accrued liabilities | | 59 |
| | 76 |
|
| Other | | 86 |
| | 65 |
|
| Gross deferred tax assets | | 3,782 |
| | 3,297 |
|
| Less valuation allowance | | (2,321 | ) | | (2,107 | ) |
| Deferred tax assets, net of valuation allowance | | 1,461 |
| | 1,190 |
|
| | | | | |
| Deferred tax liabilities | | | | |
| Debt discount | | (145 | ) | | (170 | ) |
| Property, plant, and equipment | | (300 | ) | | (135 | ) |
| Unremitted earnings on certain subsidiaries | | (123 | ) | | (121 | ) |
| Product and process technology | | (85 | ) | | (81 | ) |
| Other | | (59 | ) | | (28 | ) |
| Deferred tax liabilities | | (712 | ) | | (535 | ) |
| | | | | |
| Net deferred tax assets | | $ | 749 |
| | $ | 655 |
|
| | | | | |
| Reported as | | | | |
| Deferred tax assets | | $ | 766 |
| | $ | 657 |
|
| Deferred tax liabilities (included in other noncurrent liabilities) | | (17 | ) | | (2 | ) |
| Net deferred tax assets | | $ | 749 |
| | $ | 655 |
|
We continually assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of August 31, 2017September 1, 2022, and September 1, 2016,2, 2021, we had a valuation allowance of $1.52 billion$471 million and $1.16 billion,$233 million, respectively, against U.S.our net deferred tax assets, primarily related to net operating losscarryforwards in U.S. states and tax credit carryforwards. Income taxes on U.S. operations for 2017, 2016, and 2015 were substantially offset by changesMalaysia. Changes in the valuation allowance. We had valuation allowances against net deferred tax assets, primarily related to net operating loss carryforwards, for our subsidiaries in Japan and for our other foreign subsidiaries, of $627 million and $172 million, respectively, as of August 31, 2017, and $765 million and $177 million, respectively, as of September 1, 2016. Changes2022 in the valuation allowance were due to the effect of income or loss in the United States, changes in foreign currency, adjustments based on management's assessment of foreignthe realizability of tax credits, allowances and net operating losses based on a level that areis more likely than not to be realized. Due
On March 16, 2022, the Idaho governor signed a new law that changed the way corporations calculate Idaho taxable income. This new law is expected to reduce our Idaho taxable income, and consequently, we do not expect to utilize our tax credits in Idaho for the adoption of ASU 2016-09,foreseeable future. As a result, we recognizedrecorded a valuation allowance against our Idaho deferred tax assets and an increase to tax expense of $325$189 million offset by an equal increase in valuation allowance. See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Adopted Accounting Standards."2022.
As of August 31, 2017,September 1, 2022, our federal, state, and foreign net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows: | | | | | | | | | | | | | | | | | |
| Year of Expiration | State | Japan | Malaysia | Other | Total |
| | | | | |
| 2023 - 2027 | $ | 44 | | $ | 418 | | $ | — | | $ | 12 | | $ | 474 | |
| 2028 - 2032 | 377 | | 234 | | — | | — | | 611 | |
| 2033 - 2037 | 249 | | — | | — | | — | | 249 | |
| 2038 - 2042 | 197 | | — | | — | | — | | 197 | |
| Indefinite | 6 | | — | | 851 | | 4 | | 861 | |
| $ | 873 | | $ | 652 | | $ | 851 | | $ | 16 | | $ | 2,392 | |
82
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Expiration | | U.S. Federal | | State | | Japan | | Taiwan | | Other Foreign | | Total |
| 2018 - 2022 | | $ | — |
| | $ | 27 |
| | $ | 3,485 |
| | $ | 473 |
| | $ | 680 |
| | $ | 4,665 |
|
| 2023 - 2027 | | — |
| | 330 |
| | 587 |
| | 685 |
| | 6 |
| | 1,608 |
|
| 2028 - 2032 | | 3,027 |
| | 1,277 |
| | — |
| | — |
| | — |
| | 4,304 |
|
| 2033 - 2037 | | 852 |
| | 320 |
| | — |
| | — |
| | — |
| | 1,172 |
|
| Indefinite | | — |
| | — |
| | — |
| | 342 |
| | 45 |
| | 387 |
|
| | | $ | 3,879 |
| | $ | 1,954 |
| | $ | 4,072 |
| | $ | 1,500 |
| | $ | 731 |
| | $ | 12,136 |
|
As of August 31, 2017,September 1, 2022, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows: | | | | | | | | | | | |
| Year of Tax Credit Expiration | U.S. Federal | State | Total |
| | | |
| 2023 - 2027 | $ | — | | $ | 46 | | $ | 46 | |
| 2028 - 2032 | — | | 103 | | 103 | |
| 2033 - 2037 | — | | 128 | | 128 | |
| 2038 - 2042 | 278 | | 5 | | 283 | |
| Indefinite | — | | 115 | | 115 | |
| $ | 278 | | $ | 397 | | $ | 675 | |
|
| | | | | | | | | | | | |
| Year of Tax Credit Expiration | | U.S. Federal | | State | | Total |
| 2018 - 2022 | | $ | 48 |
| | $ | 62 |
| | $ | 110 |
|
| 2023 - 2027 | | 99 |
| | 37 |
| | 136 |
|
| 2028 - 2032 | | 64 |
| | 76 |
| | 140 |
|
| 2033 - 2037 | | 205 |
| | 1 |
| | 206 |
|
| Indefinite | | — |
| | 57 |
| | 57 |
|
| | | $ | 416 |
| | $ | 233 |
| | $ | 649 |
|
Provision has been made for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such companies are expected to result in additional tax liabilities. No provision has been made for taxes due on approximately $12.91 billion of the excess of the financial reporting amount over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested. Generally, this amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.
Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Beginning unrecognized tax benefits | $ | 660 | | $ | 411 | | $ | 383 | |
| Increases related to tax positions from prior years | 14 | | 2 | | 14 | |
| Increases related to tax positions taken in current year | 80 | | 260 | | 27 | |
| Decreases related to tax positions from prior years | (23) | | (13) | | (13) | |
| Ending unrecognized tax benefits | $ | 731 | | $ | 660 | | $ | 411 | |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Beginning unrecognized tax benefits | | $ | 304 |
| | $ | 351 |
| | $ | 228 |
|
| Increases due to the Inotera Acquisition | | 54 |
| | — |
| | — |
|
| Increases related to tax positions taken in current year | | 15 |
| | 5 |
| | 119 |
|
| Foreign currency translation increases (decreases) to tax positions | | 2 |
| | — |
| | (6 | ) |
| Settlements with tax authorities | | (47 | ) | | (47 | ) | | (1 | ) |
| Expiration of statute of limitations | | (1 | ) | | (5 | ) | | (6 | ) |
| Increases related to tax positions from prior years | | — |
| | — |
| | 17 |
|
| Ending unrecognized tax benefits | | $ | 327 |
| | $ | 304 |
| | $ | 351 |
|
As of the date of the Inotera Acquisition, Inotera's net operating loss carryforwards were $654 million, which expire on various dates through 2023. In connection with the Inotera Acquisition, we assumed $54 million of uncertain tax positions. The decrease inSeptember 1, 2022, gross unrecognized tax benefits in 2017 and 2016 is primarily related to favorable resolutionwere $731 million, which would have an impact of certain tax matters.
Included in the unrecognized tax benefits balance in the table above as of August 31, 2017 were $8approximately $564 million of unrecognized income tax benefits, which if recognized, would affecton our effective tax rate. The amountrate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions waswere not materialsignificant for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be material.significant.
We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 20132018 through 2017.2022. We are currently under audit by the Internal Revenue Service for our 2018 and 2019 tax years. In addition, tax returns that remain open to examination in Singapore, Taiwan and Japan range from the years 20112016 to 2017 and in Singapore and Taiwan from 2012 to 2017.2022. We believe that adequate amounts of taxes and related interest and penalties have been provided, for, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.
Earnings Per Share
| | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Net income attributable to Micron – Basic | $ | 8,687 | | $ | 5,861 | | $ | 2,687 | |
| Assumed conversion of debt | — | | — | | (4) | |
| Net income attributable to Micron – Diluted | $ | 8,687 | | $ | 5,861 | | $ | 2,683 | |
| | | |
| Weighted-average common shares outstanding – Basic | 1,112 | | 1,120 | | 1,110 | |
| Dilutive effect of equity plans and convertible notes | 10 | | 21 | | 21 | |
| Weighted-average common shares outstanding – Diluted | 1,122 | | 1,141 | | 1,131 | |
| | | |
| Earnings per share | | | |
| Basic | $ | 7.81 | | $ | 5.23 | | $ | 2.42 | |
| Diluted | 7.75 | | 5.14 | | 2.37 | |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Net income (loss) attributable to Micron – Basic | | $ | 5,089 |
| | $ | (276 | ) | | $ | 2,899 |
|
| Dilutive effect related to equity method investment | | — |
| | — |
| | (3 | ) |
| Net income (loss) attributable to Micron – Diluted | | $ | 5,089 |
| | $ | (276 | ) | | $ | 2,896 |
|
| | | | | | | |
| Weighted-average common shares outstanding – Basic | | 1,089 |
| | 1,036 |
| | 1,070 |
|
| Dilutive effect of equity plans and convertible notes | | 65 |
| | — |
| | 100 |
|
| Weighted-average common shares outstanding – Diluted | | 1,154 |
| | 1,036 |
| | 1,170 |
|
| | | | | | | |
| Earnings (loss) per share | | | | | | |
| Basic | | $ | 4.67 |
| | $ | (0.27 | ) | | $ | 2.71 |
|
| Diluted | | 4.41 |
| | (0.27 | ) | | 2.47 |
|
Listed below are theAntidilutive potential common shares asexcluded from the computation of the end of the periods shown,diluted earnings per share, that could dilute basic earnings per share in the future, that were not included inas follows at the computationend of diluted earnings per share because to do so would have been antidilutive:the periods shown: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Equity plans | 5 | | 2 | | 5 | |
|
| | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Equity plans | | 21 |
| | 60 |
| | 18 |
|
| Convertible notes | | 26 |
| | 119 |
| | 18 |
|
Segment and Other Information
Segment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. We have the following four business units, which are our reportable segments:
Compute and Networking Business Unit ("CNBU"(“CNBU”):Includes memory products sold into compute, networking,client, cloud server, enterprise, graphics, and cloud servernetworking markets.
StorageMobile Business Unit ("SBU"(“MBU”):Includes memory and storage products sold into enterprise, client, cloud, and removable storage markets. SBU also includes products sold to Intel through our IMFT joint venture.
Mobile Business Unit ("MBU"):Includes memory products sold into smartphone tablet, and other mobile-device markets.
Embedded Business Unit ("EBU"(“EBU”):Includes memory and storage products sold into automotive, industrial, connected home, and consumer electronics markets.
Storage Business Unit (“SBU”):Includes SSDs and component-level solutions sold into enterprise and cloud, client, and consumer storage markets, and other discrete storage products sold in component and wafer form.
Certain operating expenses directly associated with the activities of a specific segment are charged to that segment. Other indirect operating income and expenses (income) are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. In 2017, we revised the measure of segment profitability reviewed by our chief operating decision maker and, as a result, certain items are no longer allocated to our business units. Comparative periods have been revised to reflect these changes. Items not allocated are identified in the table below.
We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments. As of August 31, 2017,September 1, 2022 and September 2, 2021, CNBU, MBU, SBU, and EBU had goodwill of $832 million, $198 million, $101 million, and $97 million, respectively and asrespectively.
84
| | | For the year ended | | 2017 | | 2016 | | 2015 | For the year ended | 2022 | 2021 | 2020 |
| Net sales | | | | | | | |
| | Revenue | | Revenue | |
| CNBU | | $ | 8,624 |
| | $ | 4,529 |
| | $ | 6,725 |
| CNBU | $ | 13,693 | | $ | 12,280 | | $ | 9,184 | |
| SBU | | 4,514 |
| | 3,262 |
| | 3,687 |
| |
| MBU | | 4,424 |
| | 2,569 |
| | 3,692 |
| MBU | 7,260 | | 7,203 | | 5,702 | |
| EBU | | 2,695 |
| | 1,939 |
| | 1,999 |
| EBU | 5,235 | | 4,209 | | 2,759 | |
| SBU | | SBU | 4,553 | | 3,973 | | 3,765 | |
| All Other | | 65 |
| | 100 |
| | 89 |
| All Other | 17 | | 40 | | 25 | |
| | | $ | 20,322 |
| | $ | 12,399 |
| | $ | 16,192 |
| | $ | 30,758 | | $ | 27,705 | | $ | 21,435 | |
| | | | | | | | | |
| Operating income (loss) | | | | | | | Operating income (loss) | |
| CNBU | | $ | 3,755 |
| | $ | (25 | ) | | $ | 1,549 |
| CNBU | $ | 5,844 | | $ | 4,295 | | $ | 2,010 | |
| SBU | | 552 |
| | (123 | ) | | (39 | ) | |
| MBU | | 927 |
| | 97 |
| | 1,166 |
| MBU | 2,160 | | 2,173 | | 1,074 | |
| EBU | | 975 |
| | 473 |
| | 459 |
| EBU | 1,752 | | 1,006 | | 301 | |
| SBU | | SBU | 513 | | 173 | | 36 | |
| All Other | | 23 |
| | 28 |
| | 44 |
| All Other | 12 | | 20 | | (2) | |
| | | $ | 6,232 |
| | $ | 450 |
| | $ | 3,179 |
| | 10,281 | | 7,667 | | 3,419 | |
| | | | | | | | | |
| Unallocated | | | | | | | Unallocated | |
| Stock-based compensation | | $ | (215 | ) | | $ | (191 | ) | | $ | (167 | ) | Stock-based compensation | (501) | | (395) | | (328) | |
| Inventory accounting policy change to FIFO | | Inventory accounting policy change to FIFO | — | | (133) | | — | |
| Change in inventory cost absorption | | Change in inventory cost absorption | — | | (160) | | — | |
| 3D XPoint inventory write-down | | 3D XPoint inventory write-down | — | | (49) | | — | |
| Restructure and asset impairments | | (18 | ) | | (67 | ) | | (3 | ) | Restructure and asset impairments | (48) | | (488) | | (60) | |
| Flow-through of Inotera inventory step up | | (107 | ) | | — |
| | — |
| |
| Patent license charges | | Patent license charges | — | | (128) | | — | |
| Other | | (24 | ) | | (24 | ) | | (11 | ) | Other | (30) | | (31) | | (28) | |
| | | $ | (364 | ) | | $ | (282 | ) | | $ | (181 | ) | | (579) | | (1,384) | | (416) | |
| | | | | | | | | |
| Operating income | | $ | 5,868 |
|
| $ | 168 |
| | $ | 2,998 |
| Operating income | $ | 9,702 | | $ | 6,283 | | $ | 3,003 | |
Depreciation and amortization expense included in operating income was as follows: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| CNBU | $ | 2,766 | | $ | 2,497 | | $ | 2,318 | |
| MBU | 1,725 | | 1,553 | | 1,436 | |
| EBU | 1,280 | | 1,028 | | 741 | |
| SBU | 1,323 | | 1,101 | | 1,115 | |
| All Other | 2 | | 8 | | 12 | |
| Unallocated | 20 | | 27 | | 28 | |
| $ | 7,116 | | $ | 6,214 | | $ | 5,650 | |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| CNBU | | $ | 1,344 |
| | $ | 1,141 |
| | $ | 1,053 |
|
| SBU | | 1,083 |
| | 844 |
| | 761 |
|
| MBU | | 926 |
| | 580 |
| | 512 |
|
| EBU | | 484 |
| | 379 |
| | 321 |
|
| All Other | | 13 |
| | 20 |
| | 9 |
|
| Unallocated | | 11 |
| | 16 |
| | 11 |
|
| | | $ | 3,861 |
| | $ | 2,980 |
| | $ | 2,667 |
|
Product Sales
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| DRAM | | $ | 12,963 |
| | $ | 7,207 |
| | $ | 10,339 |
|
| Trade NAND | | 6,228 |
| | 4,138 |
| | 4,811 |
|
| Non-Trade | | 553 |
| | 501 |
| | 463 |
|
| Other | | 578 |
| | 553 |
| | 579 |
|
| | | $ | 20,322 |
| | $ | 12,399 |
| | $ | 16,192 |
|
Non-Trade primarily consists of NAND and 3D XPoint products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost. Information regarding products that combine both NAND and DRAM components is reported within Trade NAND. Other includes sales of NOR and trade 3D XPoint products.
Certain Concentrations
Markets with concentrationsRevenue by market segment as an approximate percent of net sales were approximately as follows:total revenue is presented in the table below: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| Mobile | 25 | % | 25 | % | 25 | % |
| Client and graphics | 20 | % | 20 | % | 20 | % |
| Enterprise and cloud server | 20 | % | 20 | % | 20 | % |
| SSDs and other storage | 15 | % | 15 | % | 20 | % |
| Automotive, industrial, and consumer | 15 | % | 15 | % | 15 | % |
|
| | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| Compute and graphics | | 20 | % | | 20 | % | | 25 | % |
| Mobile | | 20 | % | | 20 | % | | 25 | % |
| SSDs and other storage | | 20 | % | | 20 | % | | 20 | % |
| Automotive, industrial, medical, and other embedded | | 15 | % | | 15 | % | | 10 | % |
| Server | | 15 | % | | 10 | % | | 15 | % |
Revenue from Kingston Technology Company, Inc. was 12% and 11% of total revenue for 2022 and 2020, respectively. Revenue from WPG Holdings Limited was 11% and 13% of total revenue in 2022 and 2021, respectively. Sales to Kingston as a percentage of total net sales, were 10% and 11% for 2017 and 2015, respectively. Sales to Intel, including Non-Trade sales through IMFT, as a percentage of total net sales, were 14% for 2016 and no other customer exceeded 10% of our total net sales. Substantially all of our sales to Kingston wereprimarily included in our CNBU and SBU segmentssegments; and substantially all of our sales to IntelWPG were primarily included in our SBUMBU, CNBU, and CNBUEBU segments.
We generally have multiple sources of supply for our raw materials and production equipment; however, only a limited number of suppliers are capable of delivering certain raw materials and production equipment that meet our standards and, in some cases, materials or production equipment are provided by a single supplier.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, money market accounts, certificates of deposit, fixed-rate debt securities, trade receivables, share repurchase, and derivative contracts. We invest through high-credit-quality financial institutions and, by policy, generally limit the concentration of credit exposure by restricting investments with any single obligor and monitoring credit risk of bank counterparties on an ongoing basis. A concentration of credit risk may exist with respect to receivables of certain customers. We perform ongoing credit evaluations of customers worldwide and generally do not require collateral from our customers. Historically, we have not experienced material losses on receivables. A concentration of risk may also exist with respect to derivativesour foreign currency hedges as the number of counterparties to our currency hedges is limited and the notional amounts are relatively large. We seek to mitigate such risk by limiting our counterparties to major financial institutions and through entering into master netting arrangements. Capped calls expose us to credit risk to the extent the counterparties may be unable to meet the terms
86
Geographic Information
Geographic net salesRevenue based on customer ship-tothe geographic location wereof our customers’ headquarters was as follows: | | | | | | | | | | | |
| For the year ended | 2022 | 2021 | 2020 |
| | | |
| United States | $ | 16,026 | | $ | 12,155 | | $ | 10,381 | |
| Taiwan | 6,185 | | 6,606 | | 3,657 | |
| Mainland China (excluding Hong Kong) | 3,311 | | 2,456 | | 2,337 | |
| Japan | 1,696 | | 1,652 | | 1,387 | |
| Hong Kong | 1,665 | | 2,582 | | 1,792 | |
| Other Asia Pacific | 1,223 | | 1,420 | | 1,157 | |
| Other | 652 | | 834 | | 724 | |
| $ | 30,758 | | $ | 27,705 | | $ | 21,435 | |
|
| | | | | | | | | | | | |
| For the year ended | | 2017 | | 2016 | | 2015 |
| China | | $ | 10,388 |
| | $ | 5,301 |
| | $ | 6,658 |
|
| United States | | 2,763 |
| | 1,925 |
| | 2,565 |
|
| Taiwan | | 2,544 |
| | 1,521 |
| | 2,241 |
|
| Asia Pacific (excluding China and Japan) | | 1,808 |
| | 1,610 |
| | 2,037 |
|
| Europe | | 1,360 |
| | 937 |
| | 1,248 |
|
| Japan | | 1,025 |
| | 831 |
| | 1,026 |
|
| Other | | 434 |
| | 274 |
| | 417 |
|
| | | $ | 20,322 |
| | $ | 12,399 |
| | $ | 16,192 |
|
NetLong-lived assets by geographic area consisted of property, plant, and equipment by geographic areaand right-of-use assets and were as follows: | | | | | | | | |
| As of | 2022 | 2021 |
| | |
| Taiwan | $ | 13,143 | | $ | 11,457 | |
| Singapore | 12,045 | | 9,411 | |
| Japan | 7,113 | | 7,222 | |
United States(1) | 5,155 | | 5,205 | |
| Malaysia | 994 | | 757 | |
| China | 440 | | 436 | |
| Other | 337 | | 175 | |
| $ | 39,227 | | $ | 34,663 | |
(1)Included $899 million (net of impairment) as of September 2, 2021 of property, plant, and equipment for our Lehi facility that was classified as follows:held for sale and presented in other current assets.
|
| | | | | | | | |
| As of | | 2017 | | 2016 |
| Taiwan | | $ | 6,519 |
| | $ | 2,081 |
|
| Singapore | | 5,261 |
| | 5,442 |
|
| United States | | 4,253 |
| | 3,890 |
|
| Japan | | 2,827 |
| | 2,685 |
|
| China | | 453 |
| | 491 |
|
| Other | | 118 |
| | 97 |
|
| | | $ | 19,431 |
| | $ | 14,686 |
|
Quarterly Financial Information (Unaudited)
(in millions except per share amounts)
|
| | | | | | | | | | | | | | | | |
| 2017 | | Fourth Quarter | | Third Quarter | | Second Quarter | | First Quarter |
| Net sales | | $ | 6,138 |
| | $ | 5,566 |
| | $ | 4,648 |
| | $ | 3,970 |
|
| Gross margin | | 3,112 |
| | 2,609 |
| | 1,704 |
| | 1,011 |
|
| Operating income | | 2,502 |
| | 1,963 |
| | 1,044 |
| | 359 |
|
| Net income | | 2,369 |
| | 1,647 |
| | 894 |
| | 180 |
|
| Net income attributable to Micron | | 2,368 |
| | 1,647 |
| | 894 |
| | 180 |
|
| | | | | | | | | |
| Earnings per share | | | | | | | | |
| Basic | | $ | 2.13 |
| | $ | 1.49 |
| | $ | 0.81 |
| | $ | 0.17 |
|
| Diluted | | 1.99 |
| | 1.40 |
| | 0.77 |
| | 0.16 |
|
The second quarter of 2017 includes Inotera's results of operations from the December 6, 2016 acquisition date as well as a non-operating gain of $71 million for the revaluation of our previously-held 33% equity interest in Inotera to its fair value. (See "Acquisition of Inotera" note.) Results of operations in the fourth and third quarters of 2017 included losses of $37 million and $61 million, respectively, related to the repurchases and conversions of debt.
|
| | | | | | | | | | | | | | | | |
| 2016 | | Fourth Quarter | | Third Quarter | | Second Quarter | | First Quarter |
| Net sales | | $ | 3,217 |
| | $ | 2,898 |
| | $ | 2,934 |
| | $ | 3,350 |
|
| Gross margin | | 579 |
| | 498 |
| | 579 |
| | 849 |
|
| Operating income (loss) | | (32 | ) | | (27 | ) | | (5 | ) | | 232 |
|
| Net income (loss) | | (170 | ) | | (215 | ) | | (96 | ) | | 206 |
|
| Net income (loss) attributable to Micron | | (170 | ) | | (215 | ) | | (97 | ) | | 206 |
|
| | | | | | | | | |
| Earnings (loss) per share | | |
| | |
| | |
| | |
|
| Basic | | $ | (0.16 | ) | | $ | (0.21 | ) | | $ | (0.09 | ) | | $ | 0.20 |
|
| Diluted | | (0.16 | ) | | (0.21 | ) | | (0.09 | ) | | 0.19 |
|
Results of operations in the fourth quarter of 2016 included charges of $58 million related to restructure activities initiated in 2016.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Micron Technology, Inc.
In our opinion,
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated financial statements listed in the index appearing under Item 8 present fairly, in all material respects, the financial positionbalance sheets of Micron Technology, Inc. and its subsidiaries (the “Company”) as of August 31, 2017 September 1, 2022and September 1, 2016, 2, 2021,and the resultsrelated consolidatedstatements of their operations, of comprehensive income, of changes in equity and theirof cash flows for each of the three years in the period ended August 31, 2017 September 1, 2022, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 1, 2022 appearing under Item 15 (collectively referred to as the “consolidated financial statements”).We also have audited the Company’s internal control over financial reporting as of September 1, 2022, based on criteria established in Internal Control – Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 1, 2022and September 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended September 1, 2022in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2017,September 1, 2022, based on criteria established in Internal Control -– Integrated Framework(2013)issued by the Committee of Sponsoring Organizations ofCOSO.
Change in Accounting Principle
As discussed in the Treadway Commission (COSO). Significant Accounting Policies and Inventories notes to the consolidated financial statements, the Company changed the manner in which it accounts for inventory costing from the average cost inventory accounting method to the first-in, first-out inventory accounting method in 2021.
Basis for Opinions
The Company'sCompany’s management is responsible for these consolidated financial statements, and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management'sManagement’s Report on Internal Control overOver Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on thesethe Company’s consolidated financial statements on the financial statement schedules, and on the Company'sCompany’s internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
88
Definition and Limitations of Internal Control over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Inventories (Finished goods and Work in process)
As described in Management's Report on Internal Control over Financial Reporting, management has excluded Inotera Memories, Inc. ("Inotera") from its assessment of internal control overthe Significant Accounting Policies and Inventories notes to the consolidated financial reportingstatements, as of August 31, 2017, because it was acquired bySeptember 1, 2022, the Company had a net inventory balance for finished goods and work in a purchase business combination duringprocess inventory totaling approximately $5.9 billion. As disclosed by management, determining the fiscal year ended August 31, 2017. We have also excluded Inotera fromnet realizable value of the Company's net inventories involves significant judgments, including projecting future average selling prices and future sales volumes.
The principal considerations for our auditdetermination that performing procedures relating to the valuation of internal control over financial reporting. Inoterafinished goods and work in process inventories is a wholly-owned subsidiary whose total assetscritical audit matter are the significant judgment by management in determining the net realizable value of inventories, which in turn led to significant auditor judgment, subjectivity and total revenues excluded from management's assessment and our audit of internal controleffort in performing procedures over financial reporting represent 11% and 0%, respectively,the reasonableness of the significant assumptions related to future average selling prices and future sales volumes, used to estimate the net realizable value of finished goods and work in process inventories.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statement amounts asstatements. These procedures included testing the effectiveness of controls relating to management’s estimate of the net realizable value of finished goods and work in process inventories, significant assumptions, and data used to value the inventories. These procedures also included, among others, testing management's process for developing the net realizable value estimate of finished goods and work in process inventories; evaluating the appropriateness of management’s estimated net realizable value methodology; testing the completeness, accuracy, and relevance of underlying data used in the estimate of net realizable value of finished goods and work in process inventories; and evaluating the reasonableness of management's assumptions related to future average selling prices and future sales volumes. Evaluating management's assumptions related to future average selling prices and future sales volumes involved evaluating whether the assumptions used by management were reasonable considering (i) current and past results, including recent sales, (ii) the consistency with external market, industry data and current contract prices, (iii) a comparison of the prior year ended August 31, 2017.estimates to actual results in the current year, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
San Jose, California
October 26, 2017
7, 2022
We have served as the Company’s auditor since 1984.
90
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the Commission'sSEC’s rules and forms and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decisiondecisions regarding disclosure.
On December 6, 2016, we acquired the remaining 67% interest in Inotera and began consolidating Inotera. As a result, we are currently integrating Inotera's operations into our overall internal control over financial reporting. Under the guidelines established by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company, and accordingly, we expect to exclude Inotera from the assessment of internal control over financial reporting during that time.
During the fourth quarter of 2017,2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management'sManagement’s Report on Internal Control overOver Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of August 31, 2017.September 1, 2022. The effectiveness of our internal control over financial reporting as of August 31, 2017September 1, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Part II, Item 8, of this Form 10-K.
Management's evaluation of the effectiveness of its internal control over financial reporting as of August 31, 2017 has excluded Inotera from its assessment of internal control over financial reporting as of August 31, 2017 because it was acquired by us in a business combination on December 6, 2016. Inotera is a wholly-owned subsidiary whose total assets and total revenues represent 11% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended August 31, 2017.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Certain information concerning our executive officers is included under the caption, "Directors and“Information About Our Executive Officers of the Registrant,"Officers” in Part I, Item 1 of this report. Other information required by Items 10, 11, 12, 13, and 14 will be contained in our 2022 Proxy Statement which will be filed with the Securities and Exchange CommissionSEC within 120 days after August 31, 2017September 1, 2022 and is incorporated herein by reference.
92
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSCHEDULE
(a) The following documents are filed as part of this report:
|
| | | | |
1.1 | | Financial Statements: See Index to Consolidated Financial Statementsour consolidated financial statements under Item 8. |
2.2 | | Financial Statement Schedules: Schedule I – Condensed Financial Information of the Registrant
ScheduleSchedule:
See “Schedule II – Valuation and Qualifying Accounts
Accounts” within Item 15 below.
Certain Financial Statement Schedules have been omitted since they are either not required, not applicable, or the information is otherwise included. |
3.3 | | Exhibits. See “Index to Exhibits” within Item 15 below. |
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
MICRON TECHNOLOGY, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in millions)
|
| | | | | | | | | | | | |
| For the year ended | | August 31,
2017 | | September 1,
2016 | | September 3,
2015 |
| Net sales | | $ | 5,652 |
| | $ | 5,529 |
| | $ | 5,547 |
|
| | | | | | | |
| Costs and expenses | | | | | | |
| Cost of goods sold | | 3,478 |
| | 3,625 |
| | 3,329 |
|
| Selling, general, and administrative | | 331 |
| | 266 |
| | 299 |
|
| Research and development | | 1,551 |
| | 1,500 |
| | 1,483 |
|
| Other operating (income) expense, net | | — |
| | 26 |
| | (12 | ) |
| Total costs and expenses | | 5,360 |
| | 5,417 |
| | 5,099 |
|
| | | | | | | |
| Operating income | | 292 |
| | 112 |
| | 448 |
|
| | | | | | | |
| Interest income (expense), net | | (366 | ) | | (348 | ) | | (273 | ) |
| Other non-operating income (expense), net | | (69 | ) | | 182 |
| | (85 | ) |
| | | (143 | ) | | (54 | ) | | 90 |
|
| | | | | | | |
| Income tax (provision) benefit | | 22 |
| | 10 |
| | 38 |
|
| Equity in earnings (loss) of subsidiaries | | 5,210 |
| | (224 | ) | | 2,773 |
|
| Equity in net loss of equity method investees | | — |
| | (8 | ) | | (2 | ) |
| Net income (loss) attributable to Micron | | 5,089 |
| | (276 | ) | | 2,899 |
|
| Other comprehensive income (loss) | | 64 |
| | (48 | ) | | (43 | ) |
| Comprehensive income (loss) attributable to Micron | | $ | 5,153 |
| | $ | (324 | ) | | $ | 2,856 |
|
See accompanying notes to condensed financial statements.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
MICRON TECHNOLOGY, INC.
(Parent Company Only)
CONDENSED BALANCE SHEETS
(in millions except par value amounts)
|
| | | | | | | | |
| As of | | August 31,
2017 | | September 1,
2016 |
| Assets | | | | |
| Cash and equivalents | | $ | 2,197 |
| | $ | 2,716 |
|
| Short-term investments | | 319 |
| | 258 |
|
| Receivables | | 112 |
| | 102 |
|
| Notes and accounts receivable from subsidiaries | | 1,470 |
| | 1,159 |
|
| Finished goods | | 47 |
| | 49 |
|
| Work in process | | 215 |
| | 244 |
|
| Raw materials and supplies | | 89 |
| | 91 |
|
| Other current assets | | 42 |
| | 54 |
|
| Total current assets | | 4,491 |
| | 4,673 |
|
| Investment in subsidiaries | | 18,169 |
| | 12,897 |
|
| Long-term marketable investments | | 617 |
| | 414 |
|
| Noncurrent notes receivable from and prepaid expenses to subsidiaries | | 616 |
| | 709 |
|
| Property, plant, and equipment, net | | 2,330 |
| | 2,026 |
|
| Other noncurrent assets | | 335 |
| | 412 |
|
| Total assets | | $ | 26,558 |
| | $ | 21,131 |
|
| | | | | |
| Liabilities and equity | | | | |
| Accounts payable and accrued expenses | | $ | 929 |
| | $ | 916 |
|
| Short-term debt and accounts payable to subsidiaries | | 700 |
| | 314 |
|
| Current debt | | 530 |
| | 75 |
|
| Other current liabilities | | 9 |
| | 16 |
|
| Total current liabilities | | 2,168 |
| | 1,321 |
|
| Long-term debt | | 5,320 |
| | 7,313 |
|
| Other noncurrent liabilities | | 428 |
| | 417 |
|
| Total liabilities | | 7,916 |
| | 9,051 |
|
| | | | | |
| Commitments and contingencies | |
|
| |
|
|
| | | | | |
| Redeemable convertible notes | | 21 |
| | — |
|
| | | | | |
| Micron shareholders' equity | | | | |
| Common stock, $0.10 par value, 3,000 shares authorized, 1,116 shares issued and 1,112 outstanding (1,094 issued and 1,040 outstanding as of September 1, 2016) | | 112 |
| | 109 |
|
| Other equity | | 18,509 |
| | 11,971 |
|
| Total Micron shareholders' equity | | 18,621 |
| | 12,080 |
|
| Total liabilities and equity | | $ | 26,558 |
| | $ | 21,131 |
|
See accompanying notes to condensed financial statements.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
MICRON TECHNOLOGY, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
|
| | | | | | | | | | | | |
| For the year ended | | August 31,
2017 | | September 1,
2016 | | September 3,
2015 |
| Net cash provided by operating activities | | $ | 1,073 |
| | $ | 836 |
| | $ | 995 |
|
| | | | | | | |
| Cash flows from investing activities | | | | | | |
| Purchases of available-for-sale securities | | (1,239 | ) | | (859 | ) | | (1,799 | ) |
| Expenditures for property, plant, and equipment | | (694 | ) | | (651 | ) | | (609 | ) |
| Payments to settle hedging activities | | (279 | ) | | (155 | ) | | (135 | ) |
| Cash contributions to subsidiaries | | (2 | ) | | (111 | ) | | (151 | ) |
| Cash paid for acquisitions | | — |
| | (216 | ) | | (57 | ) |
| Proceeds from sales of available-for-sale securities | | 776 |
| | 1,015 |
| | 1,045 |
|
| Proceeds from settlement of hedging activities | | 195 |
| | 337 |
| | 78 |
|
| Proceeds from maturities of available-for-sale securities | | 194 |
| | 582 |
| | 536 |
|
| (Payments) proceeds on loans to subsidiaries, net | | 54 |
| | (550 | ) | | 65 |
|
| Cash distributions from subsidiaries | | 33 |
| | 47 |
| | 33 |
|
| Other | | 7 |
| | 72 |
| | (7 | ) |
| Net cash provided by (used for) investing activities | | (955 | ) | | (489 | ) | | (1,001 | ) |
| | | | | | | |
| Cash flows from financing activities | | | | | | |
| Repayments of debt | | (1,711 | ) | | (332 | ) | | (1,645 | ) |
| Payments of licensing obligations | | (83 | ) | | (83 | ) | | (82 | ) |
| Cash paid to acquire treasury stock | | (35 | ) | | (148 | ) | | (884 | ) |
| Proceeds from issuance of stock to Nanya | | 986 |
| | — |
| | — |
|
| Proceeds from issuance of stock under equity plans | | 142 |
| | 48 |
| | 74 |
|
| Proceeds from settlement of capped calls | | 125 |
| | — |
| | — |
|
| Proceeds from issuance of debt | | — |
| | 1,993 |
| | 2,050 |
|
| Proceeds from equipment sale-leaseback transactions | | — |
| | 216 |
| | — |
|
| Other | | (69 | ) | | (46 | ) | | (36 | ) |
| Net cash provided by (used for) financing activities | | (645 | ) | | 1,648 |
| | (523 | ) |
| | | | | | | |
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | | 8 |
| | — |
| | — |
|
| | | | | | | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | | (519 | ) | | 1,995 |
| | (529 | ) |
| Cash, cash equivalents, and restricted cash at beginning of period | | 2,716 |
| | 721 |
| | 1,250 |
|
| Cash, cash equivalents, and restricted cash at end of period | | $ | 2,197 |
| | $ | 2,716 |
| | $ | 721 |
|
See accompanying notes to condensed financial statements.
MICRON TECHNOLOGY, INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
(All tabular amounts in millions)
Basis of Presentation
Micron, a Delaware corporation, was incorporated in 1978. Micron is the parent company of its consolidated subsidiaries and, together with its consolidated subsidiaries, is a global leader in advanced semiconductor systems. These condensed financial statements have been prepared on a parent-only basis, and as such, reflect transactions in a manner that may be different than the consolidated financial statements. Under this parent-only presentation, Micron's investments in its consolidated subsidiaries are presented under the equity method of accounting. In accordance with Rule 12-04 of Regulation S-X, these parent-only financial statements do not include all of the information and footnotes required by Generally Accepted Accounting Principles (GAAP) in the United States for annual financial statements. Because these parent-only financial statements and notes do not include all of the information and footnotes required by GAAP in the United States for annual financial statements, they should be read in conjunction with Micron's audited Consolidated Financial Statements contained within Part II, Item 8 of this Annual Report on Form 10-K for the year ended August 31, 2017.
Debt
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 |
| Instrument | | Stated Rate | | Effective Rate | | Current | | Long-Term | | Total | | Current | | Long-Term | | Total |
| Capital lease obligations | | N/A |
| | 3.34 | % | | $ | 45 |
| | $ | 126 |
| | $ | 171 |
| | $ | 70 |
| | $ | 171 |
| | $ | 241 |
|
| 2022 Notes | | 5.88 | % | | 6.14 | % | | — |
| | — |
| | — |
| | — |
| | 590 |
| | 590 |
|
| 2022 Term Loan B | | 3.80 | % | | 4.22 | % | | 5 |
| | 725 |
| | 730 |
| | 5 |
| | 730 |
| | 735 |
|
| 2023 Notes | | 5.25 | % | | 5.43 | % | | — |
| | 991 |
| | 991 |
| | — |
| | 990 |
| | 990 |
|
| 2023 Secured Notes | | 7.50 | % | | 7.69 | % | | — |
| | 1,238 |
| | 1,238 |
| | — |
| | 1,237 |
| | 1,237 |
|
| 2024 Notes | | 5.25 | % | | 5.38 | % | | — |
| | 546 |
| | 546 |
| | — |
| | 546 |
| | 546 |
|
| 2025 Notes | | 5.50 | % | | 5.56 | % | | — |
| | 515 |
| | 515 |
| | — |
| | 1,139 |
| | 1,139 |
|
| 2026 Notes | | 5.63 | % | | 5.73 | % | | — |
| | 128 |
| | 128 |
| | — |
| | 446 |
| | 446 |
|
2032C Notes(1) | | 2.38 | % | | 5.95 | % | | — |
| | 211 |
| | 211 |
| | — |
| | 204 |
| | 204 |
|
2032D Notes(1) | | 3.13 | % | | 6.33 | % | | — |
| | 159 |
| | 159 |
| | — |
| | 154 |
| | 154 |
|
2033E Notes(1)(2) | | 1.63 | % | | 4.50 | % | | 202 |
| | — |
| | 202 |
| | — |
| | 168 |
| | 168 |
|
2033F Notes(1) | | 2.13 | % | | 4.93 | % | | 278 |
| | — |
| | 278 |
| | — |
| | 271 |
| | 271 |
|
2043G Notes(3) | | 3.00 | % | | 6.76 | % | | — |
| | 671 |
| | 671 |
| | — |
| | 657 |
| | 657 |
|
| Other notes | | 1.65 | % | | 1.65 | % | | — |
| | 10 |
| | 10 |
| | — |
| | 10 |
| | 10 |
|
| | | | | | | $ | 530 |
| | $ | 5,320 |
| | $ | 5,850 |
| | $ | 75 |
| | $ | 7,313 |
| | $ | 7,388 |
|
| |
(1)
| Since the closing price of Micron's common stock exceeded 130% of the conversion price per share for at least 20 trading days in the 30 trading-day period ended on June 30, 2017, these notes are convertible by the holders through the calendar quarter ended September 30, 2017. The closing price of Micron's common stock also exceeded the thresholds for the calendar quarter ended September 30, 2017; therefore, these notes are convertible by the holders through December 31, 2017. The 2033 Notes were classified as current as of August 31, 2017 because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of that date. |
| |
(2)
| The net carrying amount for 2017 included $31 million of derivative debt liabilities recognized as a result of our election to settle entirely in cash converted notes with an aggregate principal amount of $16 million. See "Convertible Senior Notes" below. |
| |
(3)
| The 2043G Notes have an original principal amount of $820 million that accretes up to $917 million through the expected term in November 2028 and $1.03 billion at maturity in 2043. |
Micron's convertible and other senior notes are unsecured obligations that rank equally in right of payment with all of Micron's other existing and future unsecured indebtedness, and are effectively subordinated to all of its other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness. As of August 31, 2017, Micron had $3.70 billion of unsecured debt (net of unamortized discount and debt issuance costs), including all of its convertible notes and the 2023 Notes, 2024 Notes, 2025 Notes, and 2026 Notes, that was structurally subordinated to all liabilities of its subsidiaries, including trade payables. The terms of all of Micron's indebtedness generally contain cross payment and cross acceleration provisions. As of August 31, 2017, Micron had guaranteed $4.16 billion of certain debt obligations of its subsidiaries, but does not guarantee the MMJ Creditor Payments (see "Commitments" below.) Micron's guarantees of its subsidiary debt obligations are unsecured obligations ranking equally in right of payment with all of Micron's other existing and future unsecured indebtedness.
The 2022 Term Loan B and 2023 Secured Notes are collateralized by substantially all of the assets of Micron and MSP, a subsidiary of Micron, subject to certain permitted liens on such assets. Included in Micron's balance sheet as of August 31, 2017 were $8.36 billion of assets which collateralize these notes, which includes $2.14 billion investment in subsidiaries. The 2022 Term Loan B Notes and 2023 Secured Notes are structurally subordinated to the indebtedness and other liabilities of all of Micron's subsidiaries that do not guarantee these debt obligations. MSP guarantees both of these notes.
Capital Lease Obligations
As of August 31, 2017 and September 1, 2016, Micron had production equipment with carrying values of $155 million and $226 million, respectively, under capital leases.
Convertible Senior Notes, Senior Secured Notes, and Unsecured Senior Notes
For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt."
Maturities of Notes Payable and Future Minimum Lease Payments
As of August 31, 2017, maturities of notes payable and future minimum lease payments under capital lease obligations were as follows:
|
| | | | | | | | |
| | | Notes Payable | | Capital Lease Obligations |
| 2018 | | $ | 211 |
| | $ | 51 |
|
| 2019 | | 231 |
| | 44 |
|
| 2020 | | 305 |
| | 56 |
|
| 2021 | | 195 |
| | 32 |
|
| 2022 | | 713 |
| | — |
|
| 2023 and thereafter | | 4,365 |
| | — |
|
| Unamortized discounts and interest, respectively | | (341 | ) | | (12 | ) |
| | | $ | 5,679 |
| | $ | 171 |
|
Commitments
Micron has provided various financial guarantees issued in the normal course of business on behalf of its subsidiaries. These contracts include debt guarantees and guarantees of certain banking facilities. Micron enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. Micron has entered into agreements covering certain activities of its subsidiaries, and occasionally Micron may be required to perform under such agreements on behalf of its subsidiaries.
As of August 31, 2017, the maximum potential amount of future payments Micron could have been required to make under its debt guarantees was approximately $4.16 billion. Substantially all of this amount relates to guarantees for debt of wholly-owned entities whereby Micron would be obligated to perform under the guarantee if a subsidiary were to default on the terms of their debt arrangements. In the event of performance under the guarantee, Micron would be permitted to seek reimbursement from the subsidiary company(ies) through liquidation of the assets which were collateral under various debt instruments. At the
time these contracts were entered into, the collateralized assets approximated the value of the outstanding guarantees. The majority of these guarantees expire at various times between January 2019 and April 2022. Micron guarantees a subsidiary credit facility that provides for up to $750 million of financing. As of August 31, 2017, there were no outstanding amounts drawn under this facility.
Micron has guaranteed the obligations of Micron Semiconductor Asia Pte. Ltd. ("MSA") and Micron Semiconductor (Xi'an) Co. Ltd. ("MXA"), each wholly-owned subsidiaries of Micron, in connection with a service agreement with Powertech Technology Inc. Xi'an ("PTI Xi'an") to provide assembly services to us at our manufacturing site in Xi'an, China. Micron would be required to pay the financial obligations of MSA and/or MXA in the event MSA and/or MXA fail to pay PTI Xi'an for services performed under the assembly services agreement. Micron's guarantee of MSA and of MXA extends through March 2022, the term of the assembly service agreement, but may be further extended through March 2024 if any party extends the assembly services agreement. The maximum potential amount of future payments Micron may be required to pay under this guarantee is indeterminable because the pricing and volume under the assembly services agreement are variable.
Micron has guaranteed the obligations of MSA under the 2021 MSAC Term Loan and the obligations of MSTW under the 2021 MSTW Term Loan. For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – 2021 MSAC Senior Secured Term Loan and 2021 MSTW Senior Secured Term Loan."
Micron has guaranteed the obligations of certain of its subsidiaries to a supplier of capital equipment through June 2019. As of August 31, 2017, Micron had guaranteed $65 million of such payments.
Micron guarantees certain banking facilities for its wholly-owned consolidated entities. Substantially all of these guarantees relate to bank overdraft protections or issuance of commercial letters of credit/bank guarantees. The maximum potential amount of future payments Micron could be required to make under these guarantees of banking facilities varies based on the extent of potential credit exposure. Micron's business processes substantially mitigate the risk of wholly-owned subsidiaries overdrawing their bank accounts and the exposure under commercial letters of credit/bank guarantees is $35 million. The majority of these banking facility guarantees have no contractual expiration.
Contingencies
As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that Micron and its subsidiaries' products or manufacturing processes infringe their intellectual property rights. Micron has accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date. Micron is currently a party to various litigation regarding patent, commercial, and other matters. Micron is a party to the matters listed in the "Contingencies" note in the consolidated financial statements. For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies."
Redeemable Convertible Notes
For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Redeemable Convertible Notes."
Related Party Transactions
Substantially all of Micron's activities relate to manufacturing and R&D services performed for its subsidiaries and to royalties received for use of product and process technology. Micron's net sales to consolidated subsidiaries were $5.58 billion, $5.38 billion, and $5.42 billion for 2017, 2016, and 2015, respectively. Gross margins on manufacturing activities are commensurate with market rates for such services. Transactions between Micron and its consolidated subsidiaries are eliminated in consolidation.
Micron engages in various transactions with its equity method investees and eliminate the profits or losses on those transactions to the extent of its ownership interest until such time as the profits or losses are realized. For further information regarding transactions between Micron and its equity method investees, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity Method Investments."
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(inIn millions)
MICRON TECHNOLOGY, INC. | | | | | | | | | | | | | | |
| | Balance at
Beginning of
Year | Charged
(Credited) to
Income Tax
Provision | Currency
Translation
and Charges
to Other
Accounts | Balance at
End of
Year |
| | | | |
| Deferred Tax Asset Valuation Allowance | | | | |
| Year ended September 1, 2022 | $ | 233 | | $ | 241 | | $ | (3) | | $ | 471 | |
| Year ended September 2, 2021 | 294 | | (54) | | (7) | | 233 | |
| Year ended September 3, 2020 | 277 | | 20 | | (3) | | 294 | |
94 |
| | | | | | | | | | | | | | | | | | | |
| | Balance at Beginning of Year | | Business Acquisitions | | Charged (Credited) to Income Tax Provision | | Currency Translation and Charges to Other Accounts | | Balance at End of Year |
| Deferred Tax Asset Valuation Allowance | |
| | |
| | |
| | |
| | |
|
| Year ended August 31, 2017 | $ | 2,107 |
| | $ | — |
| | $ | (64 | ) | | $ | 278 |
| | $ | 2,321 |
|
| Year ended September 1, 2016 | 2,051 |
| | 10 |
| | (63 | ) | | 109 |
| | 2,107 |
|
| Year ended September 3, 2015 | 2,443 |
| | — |
| | (260 | ) | | (132 | ) | | 2,051 |
|
Amounts chargedIndex to other accounts for the year ended August 31, 2017 includes $325 million as a result of the adoption of ASU 2016-09. See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Adopted Accounting Standards."
Exhibits
3. Exhibits.
| | | | | | | | | | | | | | | | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 3.1 | | | 8-K | | 99.2 | 1/26/15 |
| 3.2 | | | 8-K | | 3.1 | 2/16/21 |
| 4.1 | | | 8-K | | 4.1 | 2/6/19 |
| 4.2 | | | 8-K | | 4.2 | 2/6/19 |
| 4.3 | | | 8-K | | 4.4 | 2/6/19 |
| 4.4 | | | 8-K | | 4.5 | 2/6/19 |
| 4.5 | | | 8-K | | 4.2 | 7/12/19 |
| 4.6 | | | 8-K | | 4.3 | 7/12/19 |
| 4.7 | | | 8-K | | 4.4 | 7/12/19 |
| 4.8 | | | 8-K | | 4.2 | 11/1/21 |
| 4.9 | | | 8-K | | 4.3 | 11/1/21 |
| 4.10 | | | 8-K | | 4.4 | 11/1/21 |
| 4.11 | | | 8-K | | 4.5 | 11/1/21 |
| 4.12 | | X | | | | |
| 10.1* | | | DEF 14A | | B | 12/7/17 |
| 10.2* | | | 10-K | 9/1/16 | 10.6 | 10/28/16 |
| 10.3* | | | 10-K | 9/1/16 | 10.7 | 10/28/16 |
| 10.4* | | | DEF 14A | | A | 12/1/20 |
| 10.5* | | | 10-Q | 12/2/21 | 10.1 | 1/6/22 |
| 10.6* | | | 10-K | 9/1/16 | 10.10 | 10/28/16 |
| 10.7* | | | 10-K | 9/1/16 | 10.11 | 10/28/16 |
| 10.8* | | | 10-Q | 2/27/14 | 10.3 | 4/7/14 |
| 10.9* | | | 8-K | | 99.2 | 11/1/07 |
| 10.10* | | | 10-Q | 6/2/22 | 10.2 | 7/1/22 |
| 10.11* | | X | | | | |
| 10.12* | | | 10-Q | 11/30/17 | 10.70 | 12/20/17 |
| 10.13* | | | 8-K | | 99.1 | 11/13/17 |
| 10.14* | | | 10-Q | 11/30/17 | 10.74 | 12/20/17 |
| 10.15* | | | 10-Q | 6/2/22 | 10.1 | 7/1/22 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 2.1* | | | 8-K/A | | 2.1 | 10/31/12 |
| 2.2* | | | 8-K | | 2.3 | 10/29/12 |
| 2.3* | | | 8-K | | 2.4 | 8/6/13 |
| 2.4 | | | 8-K | | 2.5 | 8/6/13 |
| 2.5 | | | 10-Q | 3/3/16 | 2.6 | 4/8/16 |
| 3.1 | | | 8-K | | 99.2 | 1/26/15 |
| 3.2 | | | 8-K | | 99.1 | 4/15/14 |
| 4.1 | | | 8-K | | 4.1 | 4/18/12 |
| 4.2 | | | 8-K | | 4.3 | 4/18/12 |
| 4.3 | | | 8-K | | 4.3 | 4/18/12 |
| 4.4 | | | 8-K | | 4.3 | 4/18/12 |
| 4.5 | | | 8-K | | 4.3 | 7/26/11 |
| 4.6 | | | 8-K | | 4.1 | 2/12/13 |
| 4.7 | | | 8-K | | 4.3 | 2/12/13 |
| 4.8 | | | 8-K | | 4.1 | 2/12/13 |
| 4.9 | | | 8-K | | 4.3 | 2/12/13 |
| 4.10 | | | 8-K | | 4.1 | 11/18/13 |
| 4.11 | | | 8-K | | 4.1 | 11/18/13 |
| 4.12 | | | 10-Q | 2/27/14 | 4.3 | 4/7/14 |
| 4.13 | | | 8-K | | 4.1 | 2/12/14 |
| 4.14 | | | 8-K | | 4.1 | 2/12/14 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 4.15 | | | 8-K | | 4.1 | 7/29/14 |
| 4.16 | | | 8-K | | 4.1 | 7/29/14 |
| 4.17 | | | 8-K | | 4.1 | 4/30/15 |
| 4.18 | | | 8-K | | 4.2 | 4/30/15 |
| 4.19 | | | 8-K | | 4.1 | 4/30/15 |
| 4.20 | | | 8-K | | 4.2 | 4/30/15 |
| 4.21 | | | 8-K | | 4.1 | 2/3/15 |
| 4.22 | | | 8-K | | 4.1 | 2/3/15 |
| 4.23 | | | 8-K | | 4.1 | 4/26/16 |
| 4.24 | | | 8-K | | 4.1 | 4/26/16 |
| 4.25 | | | 8-K | | 4.1 | 7/20/16 |
| 10.1 | | | DEF 14A | | C | 12/12/14 |
| 10.2 | | | 10-K | 8/30/12 | 10.5 | 10/29/12 |
| 10.3 | | | 10-K | 8/30/12 | 10.7 | 10/29/12 |
| 10.4 | | | 10-K | 8/30/12 | 10.8 | 10/29/12 |
| 10.5 | | | 8-K | | 99.2 | 4/6/05 |
| 10.6 | | | 10-K | 9/1/16 | 10.6 | 10/28/16 |
| 10.7 | | | 10-K | 9/1/16 | 10.7 | 10/28/16 |
| 10.8 | | | 10-K | 9/1/16 | 10.8 | 10/28/16 |
| 10.9 | | | 10-K | 9/1/16 | 10.9 | 10/28/16 |
| 10.10 | | | 10-K | 9/1/16 | 10.10 | 10/28/16 |
| 10.11 | | | 10-K | 9/1/16 | 10.11 | 10/28/16 |
| 10.12 | | | S-8 | | 4.1 | 6/16/10 |
| 10.13 | | | S-8 | | 4.2 | 6/16/10 |
| 10.14* | | | 10-Q | 11/30/06 | 10.66 | 1/16/07 |
| 10.15 | | | 10-Q | 2/27/14 | 10.3 | 4/7/14 |
| 10.16* | | | 10-Q | 12/1/05 | 10.155 | 1/10/06 |
| 10.17* | | | 10-Q | 12/1/05 | 10.163 | 1/10/06 |
| 10.18 | | | 8-K | | 99.2 | 11/1/07 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 10.19 | | | 10-Q | 12/4/08 | 10.70 | 1/13/09 |
| 10.20* | | | 10-Q | 3/1/12 | 10.104 | 4/9/12 |
| 10.21* | | | 10-Q | 5/31/12 | 10.108 | 7/9/12 |
| 10.22* | | | 10-Q | 5/31/12 | 10.109 | 7/9/12 |
| 10.23* | | | 10-Q | 5/31/12 | 10.110 | 7/9/12 |
| 10.24* | | | 10-Q | 5/31/12 | 10.111 | 7/9/12 |
| 10.25* | | | 10-Q | 5/31/12 | 10.112 | 7/9/12 |
| 10.26* | | | 10-Q | 5/31/12 | 10.113 | 7/9/12 |
| 10.27 | | | 8-K | | 10.1 | 4/18/12 |
| 10.28* | | | 10-Q | 2/28/13 | 10.122 | 4/8/13 |
| 10.29* | | | 10-Q | 2/28/13 | 10.123 | 4/8/13 |
| 10.30* | | | 10-Q | 2/28/13 | 10.124 | 4/8/13 |
| 10.31 | | | 10-Q | 2/28/13 | 10.125 | 4/8/13 |
| 10.32* | | | 10-Q/A | 2/28/13 | 10.126 | 8/7/13 |
| 10.33* | | | 10-Q | 2/28/13 | 10.127 | 4/8/13 |
| 10.34* | | | 10-Q/A | 2/28/13 | 10.128 | 8/7/13 |
| 10.35* | | | 10-Q | 2/28/13 | 10.129 | 4/8/13 |
| 10.36* | | | 10-Q | 2/28/13 | 10.130 | 4/8/13 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 10.37* | | | 8-K/A | | 10.139 | 10/2/13 |
| 10.38* | | | 8-K | | 10.140 | 8/6/13 |
| 10.39* | | | 8-K/A | | 10.141 | 10/2/13 |
| 10.40 | | | 8-K | | 10.1 | 2/12/13 |
| 10.41 | | | 8-K | | 10.1 | 2/7/14 |
| 10.42 | | | 8-K | | 10.1 | 2/12/14 |
| 10.43 | | | 8-K | | 10.1 | 7/24/14 |
| 10.44 | | | 8-K | | 10.1 | 7/29/14 |
| 10.45 | Credit Agreement dated as of December 2, 2014 among Micron Technology, Inc. and Micron Semiconductor Products, Inc., as Borrowers, HSBC Bank USA, N.A., as Administrative Agent, Co-Collateral Agent, Joint Lead Arranger and Joint Book Runner, and certain other financial institutions party thereto as additional agents and/or lenders | | 8-K | | 99.1 | 12/8/14 |
| 10.46 | | | 10-Q | 3/5/15 | 10.88 | 4/10/15 |
| 10.47* | | | 10-Q | 3/5/15 | 10.90 | 4/10/15 |
| 10.48* | | | 10-Q | 3/5/15 | 10.91 | 4/10/15 |
| 10.49* |
| | 10-Q | 3/2/17 | 10.49 | 3/28/17 |
| 10.50* | | | 10-Q | 3/2/17 | 10.50 | 3/28/17 |
| 10.51* | | | 10-Q | 3/2/17 | 10.51 | 3/28/17 |
| 10.52* | | | 10-K | 9/3/15 | 10.54 | 10/27/15 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 10.53 | | | 8-K | | 10.1 | 4/30/15 |
| 10.54* | | | 10-Q/A | 3/3/16 | 10.56 | 9/8/16 |
| 10.55* | | | 10-Q/A | 3/3/16 | 10.57 | 9/8/16 |
| 10.56 | | | 10-Q | 3/3/16 | 10.58 | 4/8/16 |
| 10.57 | | | 10-Q | 3/3/16 | 10.59 | 4/8/16 |
| 10.58* | | | 10-Q | 6/2/16 | 10.60 | 7/6/16 |
| 10.59* | | | 10-Q | 6/2/16 | 10.61 | 7/6/16 |
| 10.60 | | | 8-K | | 10.1 | 4/26/16 |
| 10.61 | | | 8-K | | 10.2 | 4/26/16 |
| 10.62 | | | 8-K | | 10.3 | 4/26/16 |
| 10.63 | English translation of Syndicated Loan Agreement dated October 11, 2016, as Amended on November 23, 2016 by and among Inotera Memories, Inc., Micron Semiconductor Taiwan Co., Ltd., certain financial institutions party thereto and Bank of Taiwan, as Facility Agent and Mega International Commercial Bank Co., Ltd., as Collateral Agent | | 10-Q | 12/1/16 | 10.63 | 1/9/17 |
| 10.64 | | | 10-Q | 3/2/17 | 10.64 | 3/28/17 |
| 10.65 | | | 10-Q | 12/16/16 | 10.65 | 1/9/17 |
| 10.66 | | | 10-Q | 12/16/16 | 10.66 | 1/9/17 |
| 10.67 | | | 10-Q | 6/1/17 | 10.67 | 6/30/17 |
|
| | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 10.68 | | | 10-Q | 6/1/17 | 10.68 | 6/30/17 |
| 10.69 | English translation of the Second Amendment to the Syndicated Loan Agreement, dated as of July 14, 2017 by and among Micron Technology Taiwan, Inc., Micron Semiconductor Taiwan, Co., Ltd., certain financial institutions party thereto and Bank of Taiwan, as Facility Agent and Mega International Commercial Bank Co., Ltd., as Collateral Agent | X | | | | |
| 10.70 | | X | | | | |
| 10.71 | | X | | | | |
| 21.1 | | X | | | | |
| 23.1 | | X | | | | |
| 31.1 | | X | | | | |
| 31.2 | | X | | | | |
| 32.1 | | X | | | | |
| 32.2 | | X | | | | |
| 101.INS | XBRL Instance Document | X | | | | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | | | | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | | | | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | | | | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | | | | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Exhibit Number | Description of Exhibit | Filed Herewith | Form | Period Ending | Exhibit/ Appendix | Filing Date |
| 10.16* | | | 10-Q | 6/2/22 | 10.3 | 7/1/22 |
| 10.17 | Credit Agreement, dated as of May 14, 2021, by and among Micron Technology, Inc., as borrower, HSBC Bank USA, National Association, as administrative agent, the other agents party thereto, and each financial institution party from time to time thereto | | 10-Q | 6/3/21 | 10.22 | 7/1/21 |
| 10.18 | Term Loan Credit Agreement, dated as of May 14, 2021, by and among Micron Technology, Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, the other agents party thereto, and each financial institution party from time to time thereto | | 10-Q | 6/3/21 | 10.23 | 7/1/21 |
| 21.1 | | X | | | | |
| 23.1 | | X | | | | |
| 31.1 | | X | | | | |
| 31.2 | | X | | | | |
| 32.1 | | X | | | | |
| 32.2 | | X | | | | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | X | | | | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | | | | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | | | | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | | | | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | | | | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | | | | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | | | | |
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.Indicates management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
96
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boise, State of Idaho, on the 26th day of October 2017.
authorized. |
| | | | | | | | | | |
| | Micron Technology, Inc. |
| Date | By:October 7, 2022 | By: | /s/ Ernest E. MaddockMark Murphy |
| | | Ernest E. MaddockMark Murphy
SeniorExecutive Vice President and Chief Financial Officer
|
| | | (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Reportreport has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | |
| Signature | Title | Date |
| | |
| /s/ Sanjay Mehrotra | President and | October 7, 2022 |
| (Sanjay Mehrotra) | Chief Executive Officer and | |
| Director | |
| (Principal Executive Officer) | |
| | |
Signature | Title | Date |
| | |
/s/ Sanjay MehrotraMark Murphy | President and | October 26, 2017 |
(Sanjay Mehrotra) | Chief Executive Officer and | |
| Director | |
| (Principal Executive Officer) | |
| | |
/s/ Ernest E. Maddock | Senior Vice President and | October 26, 20177, 2022 |
(Ernest E. Maddock)Mark Murphy) | Chief Financial Officer
| |
| (Principal Financial andOfficer) | |
| Accounting Officer) | |
| /s/ Scott Allen | Corporate Vice President and | October 7, 2022 |
/s/ Robert L. Bailey(Scott Allen) | DirectorChief Accounting Officer | October 26, 2017 |
(Robert L. Bailey) | (Principal Accounting Officer) | |
| | |
| | |
| /s/ Richard M. Beyer | Director | October 26, 20177, 2022 |
| (Richard M. Beyer) | | |
| | |
| /s/ Lynn Dugle | Director | October 7, 2022 |
/s/ Patrick J. Byrne(Lynn Dugle) | Director | October 26, 2017 |
(Patrick J. Byrne) | | |
| /s/ Steve Gomo | Director | October 7, 2022 |
| (Steve Gomo) | | |
/s/ Mercedes Johnson | Director | October 26, 2017 |
(Mercedes Johnson)/s/ Linnie Haynesworth | Director | October 7, 2022 |
| (Linnie Haynesworth) | | |
| | |
/s/ Lawrence N. MondryMary Pat McCarthy | Director | October 26, 20177, 2022 |
(Lawrence N. Mondry)Mary Pat McCarthy) | | |
| | |
| | |
| /s/ Robert E. Switz | ChairmanChair of the Board | October 26, 20177, 2022 |
| (Robert E. Switz) | Director | |
| | |
| /s/ MaryAnn Wright | Director | October 7, 2022 |
| (MaryAnn Wright) | | |
