Item 1. FINANCIAL STATEMENTS

Micron Technology, Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

(Unaudited)

Three months ended			December 1, 2022			December 2, 2021
Revenue			$	4,085		$	7,687
Cost of goods sold			3,192			4,122
Gross margin			893			3,565
Research and development			849			712
Selling, general, and administrative			251			259
Restructure and asset impairments			13			38
Other operating (income) expense, net			(11)			(75)
Operating income (loss)			(209)			2,631
Interest income			88			10
Interest expense			(51)			(45)
Other non-operating income (expense), net			(4)			(75)
			(176)			2,521
Income tax (provision) benefit			(8)			(219)
Equity in net income (loss) of equity method investees			(11)			4
Net income (loss)			$	(195)		$	2,306
Earnings (loss) per share
Basic			$	(0.18)		$	2.06
Diluted			(0.18)			2.04
Number of shares used in per share calculations
Basic			1,090			1,119
Diluted			1,090			1,130

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)

Three months ended			December 1, 2022			December 2, 2021
Net income (loss)			$	(195)		$	2,306
Other comprehensive income (loss), net of tax
Gains (losses) on derivative instruments			108			(86)
Pension liability adjustments			1			—
Gains (losses) on investments			(19)			(7)
Foreign currency translation adjustments			(3)			—
Other comprehensive income (loss)			87			(93)
Total comprehensive income (loss)			$	(108)		$	2,213

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Balance Sheets

(In millions, except par value amounts)

(Unaudited)

As of			December 1, 2022			September 1, 2022
Assets
Cash and equivalents			$	9,574		$	8,262
Short-term investments			1,007			1,069
Receivables			3,318			5,130
Inventories			8,359			6,663
Other current assets			663			657
Total current assets			22,921			21,781
Long-term marketable investments			1,426			1,647
Property, plant, and equipment			39,335			38,549
Operating lease right-of-use assets			693			678
Intangible assets			428			421
Deferred tax assets			672			702
Goodwill			1,228			1,228
Other noncurrent assets			1,171			1,277
Total assets			$	67,874		$	66,283
Liabilities and equity
Accounts payable and accrued expenses			$	5,438		$	6,090
Current debt			171			103
Other current liabilities			916			1,346
Total current liabilities			6,525			7,539
Long-term debt			10,094			6,803
Noncurrent operating lease liabilities			625			610
Noncurrent unearned government incentives			516			589
Other noncurrent liabilities			808			835
Total liabilities			18,568			16,376
Commitments and contingencies
Shareholders’ equity
Common stock, $0.10 par value, 3,000 shares authorized, 1,232 shares issued and 1,091 outstanding (1,226 shares issued and 1,094 outstanding as of September 1, 2022)			123			123
Additional capital			10,335			10,197
Retained earnings			46,873			47,274
Treasury stock, 141 shares held (132 shares as of September 1, 2022)			(7,552)			(7,127)
Accumulated other comprehensive income (loss)			(473)			(560)
Total equity			49,306			49,907
Total liabilities and equity			$	67,874		$	66,283

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Changes in Equity

(In millions, except per share amounts)

(Unaudited)

			Common Stock						Additional Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
			Number of Shares			Amount
Balance at September 1, 2022			1,226			$	123		$	10,197		$	47,274		$	(7,127)		$	(560)		$	49,907
Net income (loss)			—			—			—			(195)			—			—			(195)
Other comprehensive income (loss), net			—			—			—			—			—			87			87
Stock issued under stock plans			8			—			7			—			—			—			7
Stock-based compensation expense			—			—			146			—			—			—			146
Repurchase of stock - repurchase program			—			—			—			—			(425)			—			(425)
Repurchase of stock - withholdings on employee equity awards			(2)			—			(15)			(80)			—			—			(95)
Dividends and dividend equivalents declared ($0.115 per share)			—			—			—			(126)			—			—			(126)
Balance at December 1, 2022			1,232			$	123		$	10,335		$	46,873		$	(7,552)		$	(473)		$	49,306

			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 (loss)			—			—			—			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 - repurchase program			—			—			—			—			(259)			—			(259)
Repurchase of stock - withholdings on employee equity awards			(1)			—			(12)			(90)			—			—			(102)
Balance at December 2, 2021			1,220			$	122		$	9,564		$	41,267		$	(4,954)		$	(91)		$	45,908

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

Three months ended			December 1, 2022			December 2, 2021
Cash flows from operating activities
Net income (loss)			$	(195)		$	2,306
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense and amortization of intangible assets			1,921			1,671
Stock-based compensation			146			118
(Gain) loss on debt repurchases			—			83
Change in operating assets and liabilities:
Receivables			1,842			67
Inventories			(1,697)			(344)
Accounts payable and accrued expenses			(1,056)			(42)
Other			(18)			79
Net cash provided by operating activities			943			3,938
Cash flows from investing activities
Expenditures for property, plant, and equipment			(2,449)			(3,265)
Purchases of available-for-sale securities			(90)			(528)
Proceeds from maturities of available-for-sale securities			358			313
Proceeds from sales of available-for-sale securities			4			124
Proceeds from government incentives			2			55
Proceeds from sale of Lehi, Utah fab			—			893
Other			(91)			(77)
Net cash provided by (used for) investing activities			(2,266)			(2,485)
Cash flows from financing activities
Proceeds from issuance of debt			3,349			2,000
Repurchases of common stock - repurchase program			(425)			(259)
Payments of dividends to shareholders			(126)			(112)
Payments on equipment purchase contracts			(47)			(78)
Repayments of debt			(20)			(1,949)
Other			(99)			(115)
Net cash provided by (used for) financing activities			2,632			(513)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash			(6)			(6)
Net increase (decrease) in cash, cash equivalents, and restricted cash			1,303			934
Cash, cash equivalents, and restricted cash at beginning of period			8,339			7,829
Cash, cash equivalents, and restricted cash at end of period			$	9,642		$	8,763

See accompanying notes to consolidated financial statements.

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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 1, 2022. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended September 1, 2022.

Basis of Presentation

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 (“U.S. GAAP”) consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended September 1, 2022.

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 2023 and 2022 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 1, 2022.

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Cash and Investments

All of our short-term investments and long-term marketable 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 1, 2022															September 1, 2022
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			$	6,706		$	—		$	—		$	6,706					$	6,055		$	—		$	—		$	6,055
Level 1(2)
Money market funds			925			—			—			925						1,196			—			—			1,196
Level 2(3)
Certificates of deposit			1,879			50			—			1,929						976			50			—			1,026
Corporate bonds			8			757			839			1,604						—			759			995			1,754
Asset-backed securities			—			20			547			567						—			20			608			628
Government securities			13			130			40			183						2			155			44			201
Commercial paper			43			50			—			93						33			85			—			118
			9,574			$	1,007		$	1,426		$	12,007					8,262			$	1,069		$	1,647		$	10,978
Restricted cash(4)			68															77
Cash, cash equivalents, and restricted cash			$	9,642														$	8,339

*(1)*The maturities of long-term marketable securities primarily 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 1, 2022 or September 1, 2022.

*(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.

Non-marketable Equity Investments

In addition to the amounts included in the table above, we had $218 million and $222 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of December 1, 2022 and September 1, 2022, respectively.

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Receivables

As of			December 1, 2022			September 1, 2022
Trade receivables			$	2,875		$	4,765
Income and other taxes			279			251
Other			164			114
			$	3,318		$	5,130

Inventories

As of			December 1, 2022			September 1, 2022
Finished goods			$	1,649		$	1,028
Work in process			5,839			4,830
Raw materials and supplies			871			805
			$	8,359		$	6,663

Property, Plant, and Equipment

As of			December 1, 2022			September 1, 2022
Land			$	280		$	280
Buildings			17,133			16,676
Equipment(1)			63,450			61,354
Construction in progress(2)			1,828			1,897
Software			1,170			1,124
			83,861			81,331
Accumulated depreciation			(44,526)			(42,782)
			$	39,335		$	38,549

*(1)*Includes costs related to equipment not placed into service of $4.10 billion as of December 1, 2022 and $3.35 billion as of September 1, 2022.

*(2)*Includes building-related construction, tool installation, and software costs for assets not placed into service.

Intangible Assets and Goodwill

			December 1, 2022									September 1, 2022
As of			Gross Amount			Accumulated Amortization						Gross Amount			Accumulated Amortization
Product and process technology			$	763		$	(335)					$	742		$	(321)
Goodwill			1,228									1,228

In the first quarters of 2023 and 2022, we capitalized $30 million and $18 million, respectively, for product and process technology with weighted-average useful lives of 10 years, and 11 years, respectively. Amortization expense was $23 million and $20 million for the first three months of 2023 and 2022, respectively. Expected amortization expense is $65 million for the remainder of 2023, $76 million for 2024, $55 million for 2025, $46 million for 2026, and $39 million for 2027.

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Leases

The components of lease cost are presented below:

Three months ended			December 1, 2022			December 2, 2021
Finance lease cost
Amortization of right-of-use assets			$	24		$	25
Interest on lease liabilities			6			6
Operating lease cost(1)			36			29
			$	66		$	60

*(1)*Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.

Supplemental cash flow information related to leases was as follows:

Three months ended			December 1, 2022			December 2, 2021
Cash flows used for operating activities
Finance leases			$	5		$	5
Operating leases			33			27
Cash flows used for financing activities – Finance leases			20			20
Noncash acquisitions of right-of-use assets
Finance leases			43			198
Operating leases			35			39

Supplemental balance sheet information related to leases was as follows:

As of			December 1, 2022			September 1, 2022
Finance lease right-of-use assets (included in property, plant, and equipment)			$	924		$	904
Current operating lease liabilities (included in accounts payable and accrued expenses)			61			60
Weighted-average remaining lease term (in years)
Finance leases			11			12
Operating leases			12			12
Weighted-average discount rate
Finance leases			2.67		%	2.65		%
Operating leases			3.04		%	2.90		%

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As of December 1, 2022, maturities of lease liabilities by fiscal year were as follows:

For the year ending			Finance Leases			Operating Leases
Remainder of 2023			$	96		$	34
2024			105			72
2025			94			71
2026			93			74
2027			93			72
2028 and thereafter			569			524
Less imputed interest			(136)			(161)
			$	914		$	686

The table above excludes obligations for leases that have been executed but have not yet commenced. As of December 1, 2022, excluded obligations consisted of $186 million of estimated finance lease payments over a weighted-average period of 13 years for gas supply arrangements deemed to contain embedded leases and equipment 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 1, 2022			September 1, 2022
Accounts payable			$	1,789		$	2,142
Property, plant, and equipment			2,294			2,170
Salaries, wages, and benefits			594			877
Income and other taxes			419			420
Other			342			481
			$	5,438		$	6,090

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Debt

			December 1, 2022																		September 1, 2022
									Net Carrying Amount												Net Carrying Amount
As of			Stated Rate			Effective Rate			Current			Long-Term			Total						Current			Long-Term			Total
2024 Term Loan A			4.720		%	4.76		%	$	—		$	1,187		$	1,187					$	—		$	1,187		$	1,187
2025 Term Loan A			5.436		%	5.57		%	—			925			925						—			—			—
2026 Term Loan A			5.561		%	5.70		%	28			717			745						—			—			—
2027 Term Loan A			5.686		%	5.82		%	34			890			924						—			—			—
2026 Notes			4.975		%	5.07		%	—			499			499						—			498			498
2027 Notes(1)			4.185		%	4.27		%	—			796			796						—			806			806
2029 A Notes			5.327		%	5.40		%	—			697			697						—			697			697
2029 B Notes			6.750		%	6.89		%	—			744			744						—			—			—
2030 Notes			4.663		%	4.73		%	—			846			846						—			846			846
2032 Green Bonds			2.703		%	2.77		%	—			995			995						—			994			994
2041 Notes			3.366		%	3.41		%	—			497			497						—			496			496
2051 Notes			3.477		%	3.52		%	—			496			496						—			496			496
Finance lease obligations			N/A			2.67		%	109			805			914						103			783			886
									$	171		$	10,094		$	10,265					$	103		$	6,803		$	6,906

(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.

Debt Activity

The table below presents the effects of debt financing activities in the first quarter of 2023.

			Increase in Principal			Increase in Carrying Value			Increase in Cash
2025 Term Loan A			$	927		$	925		$	925
2026 Term Loan A			746			745			745
2027 Term Loan A			927			924			924
2029 B Notes			750			744			744
			$	3,350		$	3,338		$	3,338

Term Loan Agreement

On November 3, 2022, we entered into a term loan agreement consisting of three tranches and borrowed $2.60 billion in aggregate principal amount, including $927 million due November 3, 2025; $746 million due November 3, 2026; and $927 million due November 3, 2027 (the “Term Loan Agreement”). We incurred aggregate fees of $6 million in connection with these borrowings. The 2026 Term Loan A and 2027 Term Loan A each require equal quarterly installment payments in an amount equal to 1.25% of the original principal amount. The 2025 Term Loan A does not require quarterly installment payments. Borrowings under the Term Loan Agreement will generally bear interest at adjusted term SOFR plus an applicable interest rate margin ranging from 1.00% to 2.00%, varying by tranche and depending on our corporate credit ratings.

The Term Loan Agreement requires us to maintain, on a consolidated basis, a leverage ratio of total indebtedness to adjusted EBITDA, as defined in the Term Loan Agreement and calculated as of the last day of each fiscal quarter, not to exceed 3.25 to 1.00, subject to a temporary four fiscal quarter increase in such maximum ratio to 3.75 to 1.00 following certain material acquisitions. Our obligations under the Term Loan Agreement are unsecured.

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2029 B Notes

On October 31, 2022, we issued $750 million principal amount of senior unsecured 2029 B Notes in a public offering. The 2029 B Notes bear interest at a rate of 6.750% per year and will mature on November 1, 2029. Issuance costs and debt discount for these notes were $6 million. We may redeem the 2029 B Notes, in whole or in part, at our option prior to their 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 and interest, plus accrued interest in each case. We may also redeem the 2029 B Notes, in whole or in part, at a price equal to par two months prior to maturity in accordance with the terms of the 2029 B Notes.

The 2029 B Notes contain 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 indenture governing our 2029 B 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 1, 2022, $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. The credit facility agreement provides for a transition to SOFR or other alternate benchmark rate upon the retirement of LIBOR in 2023.

Maturities of Notes Payable

As of December 1, 2022, maturities of notes payable by fiscal year were as follows:

Remainder of 2023			$	42
2024			84
2025			1,271
2026			1,510
2027			1,562
2028 and thereafter			5,019
Unamortized discounts			(36)
Hedge accounting fair value adjustment			(101)
			$	9,351

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Contingencies

We are currently a party to legal actions other than those described below 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.

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 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. The complaint was dismissed on November 21, 2022 pursuant to an agreement between the parties.

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.

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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.

Between April 27, 2022 and October 18, 2022, Bell Semiconductor, LLC (“Bell”) filed four patent infringement complaints against Micron in the U.S. District Court for the District of Idaho. These complaints allege that a total of six U.S. patents are infringed by certain SSDs, a process for designing a NAND flash device included in certain SSDs, and an 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. 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, which was granted on November 8, 2022, 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, 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.

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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 developments in the case. Micron 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. The Appeals Court set a date of May 23, 2023 for issuing a decision.

Antitrust Matters

Six cases have been filed against Micron alleging price fixing of DRAM products 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.

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.

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 was dismissed on November 15, 2022, pursuant to a stipulation of voluntary dismissal.

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.

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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 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.

Contingency Assessment

We are unable to predict the outcome of any of the 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.

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 2023, we repurchased 8.6 million shares of our common stock for $425 million. Through December 1, 2022, we had repurchased an aggregate of $6.89 billion under the authorization. Amounts repurchased are included in treasury stock.

Dividends**:** In the first quarter of 2023, we declared and paid dividends of $126 million ($0.115 per share) to shareholders of record as of October 11, 2022.

Accumulated Other Comprehensive Income (Loss)****: Changes in accumulated other comprehensive income (loss) by component for the three months ended December 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 1, 2022			$	(538)		$	(47)		$	25		$	—		$	(560)
Other comprehensive income (loss) before reclassifications			70			(7)						(3)			60
Amount reclassified out of accumulated other comprehensive income (loss)			68			1			1			—			70
Tax effects			(30)			(13)			—			—			(43)
Other comprehensive income (loss)			108			(19)			1			(3)			87
As of December 1, 2022			$	(430)		$	(66)		$	26		$	(3)		$	(473)

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Fair Value Measurements

The estimated fair values and carrying values of our outstanding debt instruments were as follows:

			December 1, 2022									September 1, 2022
As of			Fair Value			Carrying Value						Fair Value			Carrying Value
Notes			$	8,902		$	9,351					$	5,472		$	6,020

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 1, 2022
Derivative instruments with hedge accounting designation
Cash flow currency hedges			$	4,604		$	59		$	(182)
Cash flow commodity hedges			111			1			(10)
Fair value interest rate hedges			900			—			(101)
Derivative instruments without hedge accounting designation
Non-designated currency hedges			2,042			16			(5)
						$	76		$	(298)
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)

*(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 to minimize 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 recognized gains from cash flow hedges of $53 million and losses of $100 million for the first quarters of 2023 and 2022, respectively, in accumulated other comprehensive income (loss). As of December 1, 2022, we expect to reclassify $239 million of pre-tax losses related to cash flow hedges from accumulated other comprehensive income (loss) 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. We do not use derivative instruments for speculative purposes.

Equity Plans

As of December 1, 2022, 51 million shares of our common stock were available for future awards under our equity plans, including 18 million shares approved for issuance under our employee stock purchase plan (“ESPP”).

Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”)

Restricted Stock Awards activity is summarized as follows:

Three months ended			December 1, 2022												December 2, 2021
Restricted stock award shares granted			14												10
Weighted-average grant-date fair value per share			$	53.94											$	70.42

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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 $69 million and $48 million was capitalized and remained in inventory as of December 1, 2022 and September 1, 2022, respectively.

Three months ended			December 1, 2022			December 2, 2021
Stock-based compensation expense by caption
Research and development			$	53		$	38
Selling, general, and administrative			37			35
Cost of goods sold			36			43
Restructure			—			(5)
			$	126		$	111
Stock-based compensation expense by type of award
Restricted stock awards			$	109		$	96
ESPP			17			14
Stock options			—			1
			$	126		$	111

As of December 1, 2022, $1.59 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 2027, resulting in a weighted-average period of 1.5 years.

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 December 1, 2022, our future performance obligations beyond one year were not significant.

As of December 1, 2022 and September 1, 2022, other current liabilities included $829 million and $1.26 billion for estimates of consideration payable to customers, respectively, including estimates for pricing adjustments and returns.

Revenue by Technology

Three months ended			December 1, 2022			December 2, 2021
DRAM			$	2,829		$	5,587
NAND			1,103			1,878
Other (primarily NOR and 3D XPoint memory)			153			222
			$	4,085		$	7,687

See “Segment and Other Information” for disclosure of disaggregated revenue by market segment.

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Other Non-Operating Income (Expense), Net

Three months ended			December 1, 2022			December 2, 2021
Gain (loss) on investments			$	(9)		$	10
Gain (loss) on debt repurchases			—			(83)
Other			5			(2)
			$	(4)		$	(75)

Income Taxes

Our income tax (provision) benefit consisted of the following:

Three months ended			December 1, 2022			December 2, 2021
Income (loss) before taxes			$	(176)		$	2,521
Income tax (provision) benefit			(8)			(219)
Effective tax rate			(4.5)		%	8.7		%

The change in our effective tax rate for the first quarter of 2023 as compared to the first quarter of 2022 was primarily due to a loss before taxes in the first quarter of 2023, which eliminated substantially all of our U.S. tax on foreign operations. The geographic mix of our income, together with U.S. and foreign tax rules, results in more variability in our tax rate at lower profitability levels.

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 benefit from tax incentive arrangements was not material for the first quarter of 2023. These arrangements reduced our tax provision by $290 million ($0.26 per diluted share) for the first quarter of 2022.

Earnings Per Share

Three months ended			December 1, 2022			December 2, 2021
Net income (loss) – Basic and Diluted			$	(195)		$	2,306
Weighted-average common shares outstanding – Basic			1,090			1,119
Dilutive effect of equity plans			—			11
Weighted-average common shares outstanding – Diluted			1,090			1,130
Earnings (loss) per share
Basic			$	(0.18)		$	2.06
Diluted			(0.18)			2.04

Antidilutive potential common shares excluded from the computation of diluted earnings per share, that could dilute basic earnings per share in the future, were 35 million and 3 million for the first quarters of 2023 and 2022, respectively.

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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.

Embedded Business Unit (“EBU”)****: Includes memory and storage products sold into automotive, industrial, and consumer 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 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.

Three months ended			December 1, 2022			December 2, 2021
Revenue
CNBU			$	1,746		$	3,406
MBU			655			1,907
EBU			1,000			1,220
SBU			680			1,150
All Other			4			4
			$	4,085		$	7,687
Operating income (loss)
CNBU			$	190		$	1,524
MBU			(195)			624
EBU			194			422
SBU			(257)			152
All Other			3			3
			(65)			2,725
Unallocated
Stock-based compensation			(126)			(116)
Restructure and asset impairments			(13)			(38)
Other			(5)			60
			(144)			(94)
Operating income (loss)			$	(209)		$	2,631

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Certain Concentrations

Revenue for key market segments as an approximate percent of total revenue is presented in the table below:

Three months ended			December 1, 2022			December 2, 2021
Automotive, industrial, and consumer			25		%	15		%
Enterprise and cloud server			20		%	20		%
Client and graphics			15		%	20		%
SSDs and other storage			15		%	15		%
Mobile			15		%	25		%

Subsequent Events

On December 19, 2022, we reached an agreement in principle to settle an insurance claim involving an operational disruption in 2017, under which we will receive $120 million in cash, the majority of which is for business interruption and will be recognized in revenue.

On December 19, 2022, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on January 19, 2023, to shareholders of record as of the close of business on January 3, 2023.

On December 21, 2022, we announced a restructure plan in response to challenging industry conditions. Under the restructure plan, we expect to reduce our headcount by approximately 10% over calendar year 2023, through a combination of voluntary attrition and personnel reductions. In connection with the plan, we expect to incur charges of at least $30 million in the second quarter of fiscal 2023.

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