filings.toolsItem 1. FINANCIAL STATEMENTS
76K characters. Original on sec.gov · Markdown
Item 1. FINANCIAL STATEMENTS
Micron Technology, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Revenue | $ | 7,687 | $ | 5,773 | ||||
| Cost of goods sold | 4,122 | 4,037 | ||||||
| Gross margin | 3,565 | 1,736 | ||||||
| Research and development | 712 | 647 | ||||||
| Selling, general, and administrative | 259 | 214 | ||||||
| Restructure and asset impairments | 38 | 8 | ||||||
| Other operating (income) expense, net | (75) | 1 | ||||||
| Operating income | 2,631 | 866 | ||||||
| Interest income | 10 | 10 | ||||||
| Interest expense | (45) | (48) | ||||||
| Other non-operating income (expense), net | (75) | 13 | ||||||
| 2,521 | 841 | |||||||
| Income tax (provision) benefit | (219) | (51) | ||||||
| Equity in net income (loss) of equity method investees | 4 | 13 | ||||||
| Net income | $ | 2,306 | $ | 803 | ||||
| Earnings per share | ||||||||
| Basic | $ | 2.06 | $ | 0.72 | ||||
| Diluted | 2.04 | 0.71 | ||||||
| Number of shares used in per share calculations | ||||||||
| Basic | 1,119 | 1,115 | ||||||
| Diluted | 1,130 | 1,135 |
See accompanying notes to consolidated financial statements.
6 | 2022 Q1 10-Q
Micron Technology, Inc.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Net income | $ | 2,306 | $ | 803 | ||||
| Other comprehensive income (loss), net of tax | ||||||||
| Gains (losses) on derivative instruments | (86) | 40 | ||||||
| Gains (losses) on investments | (7) | (1) | ||||||
| Other comprehensive income (loss) | (93) | 39 | ||||||
| Total comprehensive income | $ | 2,213 | $ | 842 |
See accompanying notes to consolidated financial statements.
7
Micron Technology, Inc.
Consolidated Balance Sheets
(In millions, except par value amounts)
(Unaudited)
| As of | December 2, 2021 | September 2, 2021 | ||||||
| Assets | ||||||||
| Cash and equivalents | $ | 8,680 | $ | 7,763 | ||||
| Short-term investments | 900 | 870 | ||||||
| Receivables | 5,250 | 5,311 | ||||||
| Inventories | 4,827 | 4,487 | ||||||
| Assets held for sale | 13 | 974 | ||||||
| Other current assets | 521 | 502 | ||||||
| Total current assets | 20,191 | 19,907 | ||||||
| Long-term marketable investments | 1,817 | 1,765 | ||||||
| Property, plant, and equipment | 35,155 | 33,213 | ||||||
| Operating lease right-of-use assets | 574 | 551 | ||||||
| Intangible assets | 347 | 349 | ||||||
| Deferred tax assets | 746 | 782 | ||||||
| Goodwill | 1,228 | 1,228 | ||||||
| Other noncurrent assets | 1,188 | 1,054 | ||||||
| Total assets | $ | 61,246 | $ | 58,849 | ||||
| Liabilities and equity | ||||||||
| Accounts payable and accrued expenses | $ | 5,470 | $ | 5,325 | ||||
| Current debt | 118 | 155 | ||||||
| Other current liabilities | 924 | 944 | ||||||
| Total current liabilities | 6,512 | 6,424 | ||||||
| Long-term debt | 6,904 | 6,621 | ||||||
| Noncurrent operating lease liabilities | 523 | 504 | ||||||
| Noncurrent unearned government incentives | 767 | 808 | ||||||
| Other noncurrent liabilities | 632 | 559 | ||||||
| Total liabilities | 15,338 | 14,916 | ||||||
| Commitments and contingencies | ||||||||
| Micron shareholders’ equity | ||||||||
| Common stock, $0.10 par value, 3,000 shares authorized, 1,220 shares issued and 1,120 outstanding (1,216 shares issued and 1,119 outstanding as of September 2, 2021) | 122 | 122 | ||||||
| Additional capital | 9,564 | 9,453 | ||||||
| Retained earnings | 41,267 | 39,051 | ||||||
| Treasury stock, 100 shares held (97 shares as of September 2, 2021) | (4,954) | (4,695) | ||||||
| Accumulated other comprehensive income (loss) | (91) | 2 | ||||||
| Total equity | 45,908 | 43,933 | ||||||
| Total liabilities and equity | $ | 61,246 | $ | 58,849 |
See accompanying notes to consolidated financial statements.
8 | 2022 Q1 10-Q
Micron Technology, Inc.
Consolidated Statements of Changes in Equity
(In millions)
(Unaudited)
| Common Stock | Additional Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||||||
| Number of Shares | Amount | ||||||||||||||||||||||
| Balance at September 2, 2021 | 1,216 | $ | 122 | $ | 9,453 | $ | 39,051 | $ | (4,695) | $ | 2 | $ | 43,933 | ||||||||||
| Net income | — | — | — | 2,306 | — | — | 2,306 | ||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | — | (93) | (93) | ||||||||||||||||
| Stock issued under stock plans | 5 | — | 5 | — | — | — | 5 | ||||||||||||||||
| Stock-based compensation expense | — | — | 118 | — | — | — | 118 | ||||||||||||||||
| Repurchase of stock | (1) | — | (12) | (90) | (259) | — | (361) | ||||||||||||||||
| Balance at December 2, 2021 | 1,220 | $ | 122 | $ | 9,564 | $ | 41,267 | $ | (4,954) | $ | (91) | $ | 45,908 |
| Common Stock | Additional Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||||||
| Number of Shares | Amount | ||||||||||||||||||||||
| Balance at September 3, 2020 | 1,194 | $ | 119 | $ | 8,917 | $ | 33,384 | $ | (3,495) | $ | 71 | $ | 38,996 | ||||||||||
| Net income | — | — | — | 803 | — | — | 803 | ||||||||||||||||
| Other comprehensive income (loss), net | — | — | — | — | — | 39 | 39 | ||||||||||||||||
| Stock issued under stock plans | 5 | 1 | 33 | — | — | — | 34 | ||||||||||||||||
| Stock-based compensation expense | — | — | 92 | — | — | — | 92 | ||||||||||||||||
| Repurchase of stock | (1) | — | (8) | (49) | — | — | (57) | ||||||||||||||||
| Balance at December 3, 2020 | 1,198 | $ | 120 | $ | 9,034 | $ | 34,138 | $ | (3,495) | $ | 110 | $ | 39,907 |
See accompanying notes to consolidated financial statements.
9
Micron Technology, Inc.
Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 2,306 | $ | 803 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation expense and amortization of intangible assets | 1,671 | 1,487 | ||||||
| Stock-based compensation | 118 | 92 | ||||||
| (Gain) loss on debt repurchases and conversions | 83 | — | ||||||
| Change in operating assets and liabilities | ||||||||
| Receivables | 67 | 251 | ||||||
| Inventories | (344) | 130 | ||||||
| Accounts payable and accrued expenses | (42) | (753) | ||||||
| Deferred income taxes, net | 54 | (24) | ||||||
| Other | 25 | (19) | ||||||
| Net cash provided by operating activities | 3,938 | 1,967 | ||||||
| Cash flows from investing activities | ||||||||
| Expenditures for property, plant, and equipment | (3,265) | (2,738) | ||||||
| Purchases of available-for-sale securities | (528) | (1,002) | ||||||
| Proceeds from sale of Lehi, Utah fab | 893 | — | ||||||
| Proceeds from maturities of available-for-sale securities | 313 | 216 | ||||||
| Proceeds from sales of available-for-sale securities | 124 | 45 | ||||||
| Proceeds from government incentives | 55 | 40 | ||||||
| Other | (77) | 21 | ||||||
| Net cash provided by (used for) investing activities | (2,485) | (3,418) | ||||||
| Cash flows from financing activities | ||||||||
| Repayments of debt | (1,949) | (84) | ||||||
| Repurchases of common stock - repurchase program | (259) | — | ||||||
| Payments of dividends to shareholders | (112) | — | ||||||
| Repurchases of common stock - withholdings on employee equity awards | (102) | (57) | ||||||
| Payments on equipment purchase contracts | (78) | (97) | ||||||
| Proceeds from issuance of debt | 2,000 | — | ||||||
| Other | (13) | 24 | ||||||
| Net cash provided by (used for) financing activities | (513) | (214) | ||||||
| Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash | (6) | 27 | ||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 934 | (1,638) | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 7,829 | 7,690 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 8,763 | $ | 6,052 |
See accompanying notes to consolidated financial statements.
10 | 2022 Q1 10-Q
Micron Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in millions, except per share amounts)
(Unaudited)
Significant Accounting Policies
For a discussion of our significant accounting policies, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended September 2, 2021. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended September 2, 2021.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Micron and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended September 2, 2021.
In the opinion of our management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, consisting of a normal recurring nature, to fairly state the financial information set forth herein. Certain reclassifications have been made to prior period amounts to conform to current period presentation.
Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 2022 and 2021 each contain 52 weeks. All period references are to our fiscal periods unless otherwise indicated. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended September 2, 2021.
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 the third quarter of 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. In the second quarter of 2021, we also recognized a charge of $49 million in cost of goods sold to write down 3D XPoint inventory in connection with our decision to cease further development of this technology.
11
Cash and Investments
Substantially all of our marketable debt and equity 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:
| December 2, 2021 | September 2, 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 | $ | 6,516 | $ | — | $ | — | $ | 6,516 | $ | 5,796 | $ | — | $ | — | $ | 5,796 | |||||||||||||
| Level 1(2) | |||||||||||||||||||||||||||||
| Money market funds | 105 | — | — | 105 | 38 | — | — | 38 | |||||||||||||||||||||
| Level 2(3) | |||||||||||||||||||||||||||||
| Certificates of deposits | 1,996 | 63 | — | 2,059 | 1,907 | 69 | — | 1,976 | |||||||||||||||||||||
| Corporate bonds | 1 | 510 | 1,155 | 1,666 | 9 | 429 | 1,134 | 1,572 | |||||||||||||||||||||
| Asset-backed securities | — | 81 | 559 | 640 | 8 | 95 | 509 | 612 | |||||||||||||||||||||
| Government securities | 16 | 169 | 103 | 288 | 1 | 190 | 122 | 313 | |||||||||||||||||||||
| Commercial paper | 46 | 77 | — | 123 | 4 | 87 | — | 91 | |||||||||||||||||||||
| 8,680 | $ | 900 | $ | 1,817 | $ | 11,397 | 7,763 | $ | 870 | $ | 1,765 | $ | 10,398 | ||||||||||||||||
| Restricted cash(4) | 83 | 66 | |||||||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | 8,763 | $ | 7,829 |
*(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 the fair values indicated by such pricing information as of December 2, 2021 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 which restrictions lapse upon achieving certain performance conditions.
Gross realized gains and losses from sales of available-for-sale securities were not significant for any period presented.
In addition to the amounts included in the table above, we had $167 million and $153 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of December 2, 2021 and September 2, 2021, respectively.
Receivables
| As of | December 2, 2021 | September 2, 2021 | ||||||
| Trade receivables | $ | 4,924 | $ | 4,920 | ||||
| Income and other taxes | 217 | 264 | ||||||
| Other | 109 | 127 | ||||||
| $ | 5,250 | $ | 5,311 |
12 | 2022 Q1 10-Q
Inventories
| As of | December 2, 2021 | September 2, 2021 | ||||||
| Finished goods | $ | 610 | $ | 513 | ||||
| Work in process | 3,661 | 3,469 | ||||||
| Raw materials and supplies | 556 | 505 | ||||||
| $ | 4,827 | $ | 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. The change to FIFO was not material to any prior periods, and as such, prior periods were not retrospectively adjusted.
Property, Plant, and Equipment
| As of | December 2, 2021 | September 2, 2021 | ||||||
| Land | $ | 280 | $ | 280 | ||||
| Buildings | 15,440 | 14,776 | ||||||
| Equipment(1) | 54,271 | 51,902 | ||||||
| Construction in progress(2) | 1,440 | 1,517 | ||||||
| Software | 1,096 | 987 | ||||||
| 72,527 | 69,462 | |||||||
| Accumulated depreciation | (37,372) | (36,249) | ||||||
| $ | 35,155 | $ | 33,213 |
*(1)*Includes costs related to equipment not placed into service of $3.15 billion as of December 2, 2021 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.
Intangible Assets and Goodwill
| December 2, 2021 | September 2, 2021 | ||||||||||||||||
| As of | Gross Amount | Accumulated Amortization | Gross Amount | Accumulated Amortization | |||||||||||||
| Product and process technology | $ | 643 | $ | (296) | $ | 633 | $ | (284) | |||||||||
| Goodwill | 1,228 | 1,228 |
In the first quarters of 2022 and 2021, we capitalized $18 million and $22 million, respectively, for product and process technology with weighted-average useful lives of 11 years and 10 years, respectively. Amortization expense was $20 million for both the first three months of 2022 and 2021. Expected amortization expense is $55 million for the remainder of 2022, $63 million for 2023, $56 million for 2024, $36 million for 2025, and $27 million for 2026.
13
Leases
Operating lease costs include short-term and variable lease expenses. Short-term, variable leases, and sublease income are not material for the periods presented. The components of lease expense are presented below:
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Finance lease cost | ||||||||
| Amortization of right-of-use asset | $ | 25 | $ | 16 | ||||
| Interest on lease liability | 6 | 5 | ||||||
| Operating lease cost | 29 | 27 | ||||||
| $ | 60 | $ | 48 |
Supplemental cash flow information related to leases was as follows:
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Cash flows used for operating activities | ||||||||
| Finance leases | $ | 5 | $ | 6 | ||||
| Operating leases | 27 | 27 | ||||||
| Cash flows used for financing activities from financing leases | 20 | 21 | ||||||
| Noncash acquisitions of right-of-use assets | ||||||||
| Finance leases | 198 | 61 | ||||||
| Operating leases | 39 | 7 |
Supplemental balance sheet information related to leases was as follows:
| As of | December 2, 2021 | September 2, 2021 | ||||||||||||||||||||||||
| Finance lease right-of-use assets (included in property, plant, and equipment and assets held for sale) | $ | 886 | $ | 766 | ||||||||||||||||||||||
| Current operating lease liabilities (included in accounts payable and accrued expenses) | 58 | 55 | ||||||||||||||||||||||||
| Weighted-average remaining lease term (in years) | ||||||||||||||||||||||||||
| Finance leases | 6 | 5 | ||||||||||||||||||||||||
| Operating leases | 7 | 7 | ||||||||||||||||||||||||
| Weighted-average discount rate | ||||||||||||||||||||||||||
| Finance leases | 2.69 | % | 3.14 | % | ||||||||||||||||||||||
| Operating leases | 2.63 | % | 2.63 | % |
Maturities of lease liabilities existing as of December 2, 2021 were as follows:
| For the year ending | Finance Leases | Operating Leases | ||||||
| Remainder of 2022 | $ | 103 | $ | 53 | ||||
| 2023 | 123 | 72 | ||||||
| 2024 | 98 | 66 | ||||||
| 2025 | 83 | 53 | ||||||
| 2026 | 83 | 49 | ||||||
| 2027 and thereafter | 565 | 407 | ||||||
| Less imputed interest | (129) | (119) | ||||||
| $ | 926 | $ | 581 |
14 | 2022 Q1 10-Q
The table above excludes any lease liabilities for leases that have been executed but have not yet commenced. As of December 2, 2021, we had such lease liabilities relating to (1) operating lease payment obligations of $147 million for the initial 10-year lease term for a building, and (2) finance lease obligations of $324 million over a weighted-average period of 14 years for gas supply arrangements deemed to contain embedded leases. We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.
Accounts Payable and Accrued Expenses
| As of | December 2, 2021 | September 2, 2021 | ||||||
| Accounts payable | $ | 1,896 | $ | 1,744 | ||||
| Property, plant, and equipment | 2,105 | 1,887 | ||||||
| Salaries, wages, and benefits | 700 | 984 | ||||||
| Income and other taxes | 448 | 364 | ||||||
| Other | 321 | 346 | ||||||
| $ | 5,470 | $ | 5,325 |
Debt
| December 2, 2021 | September 2, 2021 | ||||||||||||||||||||||||||||
| Net Carrying Amount | Net Carrying Amount | ||||||||||||||||||||||||||||
| As of | Stated Rate | Effective Rate | Current | Long-Term | Total | Current | Long-Term | Total | |||||||||||||||||||||
| 2024 Term Loan A | 0.965 | % | 1.00 | % | $ | — | $ | 1,186 | $ | 1,186 | $ | — | $ | 1,186 | $ | 1,186 | |||||||||||||
| 2026 Notes | 4.975 | % | 5.07 | % | — | 498 | 498 | — | 498 | 498 | |||||||||||||||||||
| 2027 Notes(1) | 4.185 | % | 4.27 | % | — | 883 | 883 | — | 901 | 901 | |||||||||||||||||||
| 2029 Notes | 5.327 | % | 5.40 | % | — | 697 | 697 | — | 696 | 696 | |||||||||||||||||||
| 2030 Notes | 4.663 | % | 4.73 | % | — | 846 | 846 | — | 846 | 846 | |||||||||||||||||||
| 2032 Green Bonds | 2.703 | % | 2.77 | % | — | 994 | 994 | — | — | — | |||||||||||||||||||
| 2041 Notes | 3.366 | % | 3.41 | % | — | 496 | 496 | — | — | — | |||||||||||||||||||
| 2051 Notes | 3.477 | % | 3.52 | % | — | 496 | 496 | — | — | — | |||||||||||||||||||
| Finance lease obligations | N/A | 2.69 | % | 118 | 808 | 926 | 155 | 649 | 804 | ||||||||||||||||||||
| 2023 Notes | N/A | N/A | — | — | — | — | 1,247 | 1,247 | |||||||||||||||||||||
| 2024 Notes | N/A | N/A | — | — | — | — | 598 | 598 | |||||||||||||||||||||
| $ | 118 | $ | 6,904 | $ | 7,022 | $ | 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 value of our 2027 Notes reflects adjustments in fair value.
15
Debt Activity
The table below presents the effects of issuances and prepayments of debt in the first quarter of 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) |
Senior 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.
We may redeem our 2026 Notes, 2027 Notes, 2029 Notes, 2030 Notes, 2032 Green Bonds, 2041 Notes, and 2051 Notes (the “Senior Unsecured Notes”), in whole or in part, at our option prior to their respective maturity date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the present value of the remaining scheduled payments of principal, in each case plus accrued interest. We may also redeem any series of our Senior Unsecured Notes, in whole or in part, at a price equal to par between two and six months prior to maturity in accordance with the respective terms of such series.
Each series of Senior Unsecured Notes contains covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries (which are generally domestic subsidiaries in which we own at least 80% of the voting 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
As of December 2, 2021, $2.50 billion was available to us under the Revolving Credit Facility and no amounts were outstanding. Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid any time without penalty. Any amounts drawn under the Revolving Credit Facility would generally bear interest at a rate equal to LIBOR plus 1.00% to 1.75%, depending on our corporate credit ratings.
16 | 2022 Q1 10-Q
Maturities of Notes Payable
As of December 2, 2021, maturities of notes payable were as follows:
| Remainder of 2022 | $ | — | |||
| 2023 | — | ||||
| 2024 | — | ||||
| 2025 | 1,188 | ||||
| 2026 | 500 | ||||
| 2027 and thereafter | 4,450 | ||||
| Unamortized discounts | (29) | ||||
| Hedge accounting fair value adjustment | (13) | ||||
| $ | 6,096 |
Contingencies
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 August 12, 2014, MLC Intellectual Property, LLC filed a patent infringement action against Micron in the U.S. District Court for the Northern District of California. The complaint alleges that Micron infringes a single U.S. patent and seeks damages, attorneys’ fees, and costs. On November 5, 2021, the District Court dismissed MLC’s claims with prejudice pursuant to a stipulation of dismissal filed by the parties.
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’ 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 infringe a 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 infringe a 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
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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. The affected products made up slightly more than 1% of our annualized revenue in 2018. 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. filed two patent infringement actions against Micron, Micron Semiconductor Products, Inc. and Micron Technology Texas, LLC in the U.S. District Court for the Western District of Texas. The first complaint alleges that a single 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. Each complaint seeks injunctive relief, damages, attorneys’ fees, and costs.
On May 10, 2021, Vervain, LLC filed a patent infringement action against Micron, Micron Semiconductor Products, Inc., and Micron Technology Texas, LLC 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.
Among other things, the above lawsuits pertain to substantially all of our DRAM, NAND, and other memory and storage products we manufacture, which account for substantially all of our revenue.
Qimonda
On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda’s insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V. (“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 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.
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 had no immediate, enforceable effect and Micron, accordingly, has been able to continue to operate with full control of the Inotera Shares subject to further
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developments in the case. On April 17, 2014, Micron and Micron B.V. filed a notice of appeal with the German Appeals Court challenging the District Court’s decision. After opening briefs, the Appeals Court held a hearing on the matter on July 9, 2015, and 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 January 25, 2018, the court-appointed expert issued a report concluding that the amount paid by Micron was within an acceptable fair-value range. The Appeals Court held a subsequent hearing on April 30, 2019, and on May 28, 2019, the Appeals Court remanded the case to the expert for supplemental expert opinion. On March 31, 2020, the expert presented a revised opinion to the Appeals Court which reaffirmed the earlier view that the amount paid by Micron was still within an acceptable range of fair value. On March 4, 2021, the Appeals Court issued an order setting forth a new legal view that whether the 2008 sale of Inotera Shares is voidable depends on the question whether, in October 2008, Qimonda had a restructuring plan in place, and whether Micron was aware of and reasonably relied on that restructuring plan sufficient to form a belief that Qimonda was not imminently illiquid.
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 September 3, 2019, the District Court granted Micron’s motion to dismiss and allowed the plaintiffs the opportunity to file a consolidated, amended complaint. 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. On January 19, 2021, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. On May 3, 2021, several plaintiffs filed a substantially identical complaint in the U.S. District Court for the Northern District of California purportedly on behalf of a nationwide class of indirect purchasers of DRAM products. On July 19, 2021, the District Court dismissed the May 3, 2021 complaint pursuant to an agreement between the plaintiffs and Micron providing that the plaintiffs may refile the complaint if the District Court’s December 21, 2020 dismissal order is not affirmed on appeal.
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 December 21, 2020, the District Court granted Micron’s motion to dismiss and granted the plaintiffs permission to file a further amended complaint. 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.
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 Supreme 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 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 cooperating with SAMR in its investigation.
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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 benefit of Micron, in the U.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 DRAM industry. The complaint seeks damages, fees, 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, fees, interest, costs, and an order requiring Micron to take various actions to allegedly improve its corporate governance and internal procedures.
Other
On December 5, 2017, Micron filed a complaint against UMC and Jinhua in the U.S. District Court for the Northern District of California. The complaint alleged that UMC and Jinhua violated the Defend Trade Secrets Act, the civil provisions of the Racketeer Influenced and Corrupt Organizations Act, and California’s Uniform Trade Secrets Act by misappropriating Micron’s trade secrets and other misconduct. Micron’s complaint sought damages, restitution, disgorgement of profits, injunctive relief, and other appropriate relief. On January 3, 2022, pursuant to a settlement agreement between UMC and Micron, the District Court dismissed Micron's claims against UMC.
On June 13, 2019, current Micron employee, Chris Manning, filed a putative class action lawsuit on behalf of Micron employees subject to the Idaho Wage Claim Act who earned a performance-based bonus after the conclusion of 2018 whose performance rating was calculated based upon a mandatory percentage distribution range of performance ratings. On July 12, 2019, Manning and three other Company employees filed an amended complaint as putative class action representatives. On behalf of themselves and the putative class, Manning and the three other plaintiffs assert claims for violation of the Idaho Wage Claim Act, breach of contract, breach of the covenant of good faith and fair dealing, and fraud. On June 24, 2020, the court entered judgment in favor of Micron based on the statute of limitations, and the plaintiffs filed a notice of appeal on July 23, 2020.
On July 31, 2020, Micron and Intel entered into a binding arbitration agreement under which the parties agreed to present to an arbitral panel various financial disputes related to the IMFT joint venture between Micron and Intel, which ended October 31, 2019, and to other agreements relating to the joint development, production, and sale of non-volatile memory products. Each party alleges that the other owes damages relating to allegations of breach of one or more agreements.
On July 13, 2015, Allied Telesis, Inc. and Allied Telesis International (Asia) Pte Ltd. filed a complaint against Micron in the Superior Court of California in Santa Clara alleging breach of implied and express warranties and fraudulent inducement to contract arising from plaintiffs’ purchase of certain allegedly defective DDR1 products between 2008 and 2010. Through subsequent amendments to the complaint, the plaintiffs substituted Allied Telesis K.K. as plaintiff, withdrew the warranty claims, and added claims of fraudulent concealment, negligent misrepresentation, negligence, and strict products liability. The plaintiff’s amended complaint seeks an unspecified award of damages, including punitive damages and lost profits. On September 3, 2020, the Superior Court granted summary judgment dismissing the claims for negligence and strict products liability and denied summary judgment as to the claims for negligent misrepresentation, fraudulent concealment, and fraudulent inducement to contract. On November 15, 2021, the Superior Court granted summary judgment dismissing the claims for negligent misrepresentation and fraudulent inducement to contract. A trial regarding plaintiff’s claim for fraudulent concealment is scheduled to begin on January 10, 2022.
In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify another 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.
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We are unable to predict the outcome of the patent matters, Qimonda matter, antitrust matters, securities matters, binding arbitration with Intel, or any other matters noted above, and cannot make a reasonable estimate of the potential loss or range of possible losses. 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, as well as the resolution of any other legal matter noted above, could have a material adverse effect on our business, results of operations, or financial condition.
We are currently a party to legal actions other than those described in this note arising from the normal course of business, none of which are expected to have a material adverse effect on our business, results of operations, or financial condition.
Equity
Micron Shareholders’ Equity
Common Stock Repurchases**:** 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. In the first quarter of 2022, we repurchased 3.6 million shares of our common stock for $259 million. Through December 2, 2021, we had repurchased an aggregate of $4.30 billion under the authorization. The shares repurchased were recorded as treasury stock.
Dividends**:** In the first quarter of 2022, we paid dividends of $112 million ($0.10 per share) that were declared in the fourth quarter of 2021. On December 17, 2021, our Board of Directors declared a quarterly dividend of $0.10 per share, payable in cash on January 18, 2022, to shareholders of record as of the close of business on January 3, 2022.
Accumulated Other Comprehensive Income**:** Changes in accumulated other comprehensive income by component for the three months ended December 2, 2021 were as follows:
| Gains (Losses) on Derivative Instruments | Pension Liability Adjustments | Unrealized Gains (Losses) on Investments | Cumulative Foreign Currency Translation Adjustment | Total | |||||||||||||
| As of September 2, 2021 | $ | (22) | $ | 22 | $ | 1 | $ | 1 | $ | 2 | |||||||
| Other comprehensive income before reclassifications | (100) | — | (9) | — | (109) | ||||||||||||
| Amount reclassified out of accumulated other comprehensive income | (3) | — | — | — | (3) | ||||||||||||
| Tax effects | 17 | — | 2 | — | 19 | ||||||||||||
| Other comprehensive income (loss) | (86) | — | (7) | — | (93) | ||||||||||||
| As of December 2, 2021 | $ | (108) | $ | 22 | $ | (6) | $ | 1 | $ | (91) |
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Fair Value Measurements
The estimated fair values and carrying values of our outstanding debt instruments were as follows:
| December 2, 2021 | September 2, 2021 | ||||||||||||||||
| As of | Fair Value | Carrying Value | Fair Value | Carrying Value | |||||||||||||
| Notes | $ | 6,550 | $ | 6,096 | $ | 6,584 | $ | 5,973 |
The fair values of our debt instruments were estimated based on Level 2 inputs, including the trading price of our notes when available, discounted cash flows, and interest rates based on similar debt issued by parties with credit ratings similar to ours.
Derivative Instruments
| Notional or Contractual Amount | Fair Value of | ||||||||||
| Assets**(1)** | Liabilities**(2)** | ||||||||||
| As of December 2, 2021 | |||||||||||
| Derivative instruments with hedge accounting designation | |||||||||||
| Cash flow currency hedges | $ | 5,469 | $ | 19 | $ | (118) | |||||
| Cash flow commodity hedges | 55 | — | (1) | ||||||||
| Fair value interest rate hedges | 900 | — | (13) | ||||||||
| Derivative instruments without hedge accounting designation | |||||||||||
| Non-designated currency hedges | 1,858 | 2 | (6) | ||||||||
| $ | 21 | $ | (138) | ||||||||
| 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 utilize forward and swap contracts that generally mature within two years designated as cash flow hedges for our exposure to changes in currency exchange rates or commodity prices for certain capital expenditures and 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 purposes. We recognized losses of $100 million and gains of $47 million for the first quarters of 2022 and 2021, respectively, in accumulated other comprehensive income from cash flow hedges. As of December 2, 2021, we expect to reclassify $59 million of pre-tax losses related to cash flow hedges from accumulated other comprehensive income into earnings in the next 12 months.
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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. The effects of fair value hedges on our consolidated statements of operations, recognized in interest expense, were not significant for the periods presented.
Derivative Instruments without Hedge Accounting Designation
Currency Derivatives**:** We generally utilize a rolling hedge strategy with currency forward contracts that mature within three months to hedge our exposures of monetary assets and liabilities from changes in 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). Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changes in the underlying monetary assets and liabilities from changes in currency exchange rates are included in other non-operating income (expense), net. The amounts recognized for derivative instruments without hedge accounting designation were not significant for the periods presented.
Equity Plans
As of December 2, 2021, 98 million shares of our common stock were available for future awards under our equity plans.
Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”)
In the first quarter of 2022, our Board of Directors approved dividend equivalent rights for unvested restricted stock units awarded on or after October 13, 2021. Restricted Stock Awards activity is summarized as follows:
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||||||||||||||||||||
| Restricted stock award shares granted | 10 | 10 | ||||||||||||||||||||||||
| Weighted-average grant-date fair value per share | $ | 70.42 | $ | 50.78 |
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Stock-based Compensation Expense
Stock based compensation expense recognized in our statements of operations is presented below. Stock-based compensation expense of $36 million and $30 million was capitalized and remained in inventory as of December 2, 2021 and September 2, 2021, respectively.
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Stock-based compensation expense by caption | ||||||||
| Cost of goods sold | $ | 43 | $ | 41 | ||||
| Research and development | 38 | 24 | ||||||
| Selling, general, and administrative | 35 | 27 | ||||||
| Restructure | (5) | — | ||||||
| $ | 111 | $ | 92 | |||||
| Stock-based compensation expense by type of award | ||||||||
| Restricted stock awards | $ | 96 | $ | 77 | ||||
| ESPP | 14 | 12 | ||||||
| Stock options | 1 | 3 | ||||||
| $ | 111 | $ | 92 |
As of December 2, 2021, $1.21 billion of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the first quarter of 2026, resulting in a weighted-average period of 1.5 years.
Revenue and Customer Contract Liabilities
Revenue by Technology
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| DRAM | $ | 5,587 | $ | 4,056 | ||||
| NAND | 1,878 | 1,574 | ||||||
| Other (primarily 3D XPoint memory and NOR) | 222 | 143 | ||||||
| $ | 7,687 | $ | 5,773 |
See “Segment and Other Information” for disclosure of disaggregated revenue by market segment.
Customer Contract Liabilities
Contract liabilities from customer advance payments made to secure product in future periods were $74 million as of December 2, 2021 and as of September 2, 2021, and were reported within other current liabilities. Revenue recognized during the first quarter of 2022 from the ending balance of 2021 was $63 million from meeting performance obligations by shipping against customer advances.
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 December 2, 2021, our future performance obligations beyond one year were not significant.
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As of December 2, 2021 and September 2, 2021, other current liabilities included $824 million and $846 million for estimates of consideration payable to customers, respectively, including estimates for pricing adjustments and returns.
Restructure and Asset Impairments
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Restructure and asset impairments | $ | 38 | $ | 8 |
Restructure and asset impairments for the first quarter of 2022 primarily related to the sale of our Lehi, Utah facility. See “Lehi, Utah Fab and 3D XPoint.”
Other Non-Operating Income (Expense), Net
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Gain (loss) on investments | $ | 10 | $ | 14 | ||||
| Gain (loss) on debt repurchases and conversions | (83) | — | ||||||
| Other | (2) | (1) | ||||||
| $ | (75) | $ | 13 |
Income Taxes
Our income tax (provision) benefit consisted of the following:
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Income before taxes | $ | 2,521 | $ | 841 | ||||
| Income tax (provision) benefit | (219) | (51) | ||||||
| Effective tax rate | 8.7 | % | 6.1 | % |
We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. 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 reduced our tax provision by $290 million (benefiting our diluted earnings per share by $0.26) for the first quarter of 2022, and by $56 million ($0.05 per diluted share) for the first quarter of 2021.
As of December 2, 2021, gross unrecognized tax benefits were $680 million, substantially all of which would affect our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not significant for any period presented. We are currently under audit by the U.S. Internal Revenue Service for our 2018 and 2019 tax years. We believe that adequate amounts of taxes and related interest and penalties have been provided.
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Earnings Per Share
| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Net income attributable to Micron – Basic and Diluted | $ | 2,306 | $ | 803 | ||||
| Weighted-average common shares outstanding – Basic | 1,119 | 1,115 | ||||||
| Dilutive effect of equity plans and convertible notes | 11 | 20 | ||||||
| Weighted-average common shares outstanding – Diluted | 1,130 | 1,135 | ||||||
| Earnings per share | ||||||||
| Basic | $ | 2.06 | $ | 0.72 | ||||
| Diluted | 2.04 | 0.71 |
Antidilutive potential common stock shares that could dilute basic earnings per share in the future were 3 million and 2 million for the first quarters of 2022 and 2021, respectively.
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”)****: Includes memory products sold into client, cloud server, enterprise, graphics, and networking markets.
Mobile Business Unit (“MBU”)****: Includes memory and storage products sold into smartphone and other mobile-device 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.
Embedded Business Unit (“EBU”)****: Includes memory and storage products sold into automotive, industrial, and consumer markets.
Certain operating expenses directly associated with the activities of a specific segment are charged to that segment. Other indirect operating income and expenses are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. 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.
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| Three months ended | December 2, 2021 | December 3, 2020 | ||||||
| Revenue | ||||||||
| CNBU | $ | 3,406 | $ | 2,546 | ||||
| MBU | 1,907 | 1,501 | ||||||
| SBU | 1,150 | 911 | ||||||
| EBU | 1,220 | 809 | ||||||
| All Other | 4 | 6 | ||||||
| $ | 7,687 | $ | 5,773 | |||||
| Operating income (loss) | ||||||||
| CNBU | $ | 1,524 | $ | 483 | ||||
| MBU | 624 | 370 | ||||||
| SBU | 152 | 4 | ||||||
| EBU | 422 | 116 | ||||||
| All Other | 3 | — | ||||||
| 2,725 | 973 | |||||||
| Unallocated | ||||||||
| Stock-based compensation | (116) | (92) | ||||||
| Restructure and asset impairments | (38) | (8) | ||||||
| Other | 60 | (7) | ||||||
| (94) | (107) | |||||||
| Operating income | $ | 2,631 | $ | 866 |
Certain Concentrations
Revenue from Kingston Technology Company, Inc. was 10% of total revenue for the first three months of 2022.
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