Quarterly Report (10-q)

Date : 06/26/2019 @ 9:02PM
Source : Edgar (US Regulatory)
Stock : Micron Technology, Inc. (MU)
Quote : 43.06  -1.34 (-3.02%) @ 5:00AM

Quarterly Report (10-q)



 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 30, 2019

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from            to
 
Commission file number 1-10658
 
Micron Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware
75-1618004
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
8000 S. Federal Way, Boise, Idaho
83716-9632
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code
(208) 368-4000

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange on which registered
Common Stock, par value $0.10 per share
 
MU
 
NASDAQ Global Select Market
Common Stock Purchase Rights
 
MU
 
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  T  No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  T  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x
Accelerated Filer o
Non-Accelerated Filer o
Smaller Reporting Company o
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
The number of outstanding shares of the registrant's common stock as of June 19, 2019 was 1,103,803,379.
 
 
 
 
 




Micron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions. Through our global brands – Micron ® , Crucial ® , and Ballistix ® – our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPoint memory, is transforming how the world uses information to enrich life. Backed by 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles, in key market segments like data center, networking, automotive, industrial, mobile, graphics, and client.

Micron, Crucial, Ballistix, any associated logos, and all other Micron trademarks are the property of Micron. 3D XPoint is a trademark of Intel in the United States and/or other countries. Other product names or trademarks that are not owned by Micron are for identification purposes only and may be the registered or unregistered trademarks of their respective owners.

Definitions of Commonly Used Terms

As used herein, "we," "our," "us," and similar terms include Micron Technology, Inc. and our consolidated subsidiaries, unless the context indicates otherwise. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:
Term
 
Definition
 
Term
 
Definition
2022 Term Loan B
 
Senior Secured Term Loan B due 2022
 
Micron
 
Micron Technology, Inc. (Parent Company)
2024 Notes
 
4.64% Senior Unsecured Notes due 2024
 
MMJ
 
Micron Memory Japan, G.K.
2025 Notes
 
5.50% Senior Unsecured Notes due 2025
 
MMJ Group
 
MMJ and its subsidiaries
2026 Notes
 
4.98% Senior Unsecured Notes due 2026
 
MMT
 
Micron Memory Taiwan Co., Ltd.
2029 Notes
 
5.33% Senior Unsecured Notes due 2029
 
MTTW
 
Micron Technology Taiwan, Inc.
2032D Notes
 
3.13% Convertible Senior Notes due 2032
 
Qimonda
 
Qimonda AG
2033F Notes
 
2.13% Convertible Senior Notes due 2033
 
R&D
 
Research and Development
2043G Notes
 
3.00% Convertible Senior Notes due 2043
 
SG&A
 
Selling, General, and Administrative
IMFT
 
IM Flash Technologies, LLC
 
SSD
 
Solid-State Drive
Huawei
 
Huawei Technologies Co., Ltd.
 
TLC
 
Triple-Level Cell
Inotera
 
Inotera Memories, Inc.
 
VIE
 
Variable Interest Entity
Intel
 
Intel Corporation
 
 
 
 

The following Micron subsidiaries appear throughout this report:
Micron Consumer Products Group, Inc.
 
Micron Semiconductor Products, Inc.
Micron Europe Limited
 
Micron Semiconductor (Shanghai) Co. Ltd.
Micron Semiconductor B.V.,
 
Micron Semiconductor (Xi'an) Co., Ltd.
Micron Semiconductor (Deutschland) GmbH
 
 

Forward-Looking Statements

This Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements such as those made regarding our expected 3D XPoint TM development activities with Intel; the amount we expect to pay to purchase Intel's interest in IMFT; our expectation, from time to time, to engage in additional financing transactions; the sufficiency of our cash and investments, cash flows from operations, and available financing to meet our requirements at least through the next 12 months; capital spending in 2019; and capital commitments. We are under no obligation to update these forward-looking statements. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in "Part II, Other Information – Item 1A. Risk Factors."


1



PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)

 
Quarter ended
 
Nine months ended
 
May 30,
2019
 
May 31,
2018
 
May 30,
2019
 
May 31,
2018
Revenue
$
4,788

 
$
7,797

 
$
18,536

 
$
21,951

Cost of goods sold
2,960

 
3,074

 
9,229

 
9,211

Gross margin
1,828

 
4,723

 
9,307

 
12,740

 
 
 
 
 
 
 
 
Selling, general, and administrative
206

 
211

 
624

 
598

Research and development
606

 
603

 
1,818

 
1,574

Other operating (income) expense, net
6

 
(44
)
 
139

 
(49
)
Operating income
1,010

 
3,953

 
6,726

 
10,617

 
 
 
 
 
 
 
 
Interest income
52

 
36

 
148

 
86

Interest expense
(29
)
 
(80
)
 
(89
)
 
(292
)
Other non-operating income (expense), net
(317
)
 
(193
)
 
(392
)
 
(450
)
 
716

 
3,716

 
6,393

 
9,961

 
 
 
 
 
 
 
 
Income tax (provision) benefit
135

 
109

 
(622
)
 
(148
)
Equity in net income (loss) of equity method investees

 
(2
)
 
1

 
(1
)
Net income
851

 
3,823

 
5,772

 
9,812

 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
(11
)
 

 
(20
)
 
(2
)
Net income attributable to Micron
$
840

 
$
3,823

 
$
5,752

 
$
9,810

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.76

 
$
3.30

 
$
5.15

 
$
8.53

Diluted
0.74

 
3.10

 
5.01

 
7.96

 
 
 
 
 
 
 
 
Number of shares used in per share calculations
 
 
 
 
 
 
 
Basic
1,105

 
1,159

 
1,117

 
1,150

Diluted
1,129

 
1,235

 
1,148

 
1,233











See accompanying notes to consolidated financial statements.

2



MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)

 
Quarter ended
 
Nine months ended
 
May 30,
2019
 
May 31,
2018
 
May 30,
2019
 
May 31,
2018
Net income
$
851

 
$
3,823

 
$
5,772

 
$
9,812

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Gains (losses) on investments
3

 

 
6

 
(2
)
Gains (losses) on derivative instruments

 
(21
)
 
(6
)
 
(6
)
Foreign currency translation adjustments

 
1

 
(1
)
 
1

Pension liability adjustments
(1
)
 
(1
)
 
(1
)
 

Other comprehensive income (loss)
2

 
(21
)
 
(2
)
 
(7
)
Total comprehensive income
853

 
3,802

 
5,770

 
9,805

Comprehensive income attributable to noncontrolling interests
(11
)
 

 
(20
)
 
(2
)
Comprehensive income attributable to Micron
$
842

 
$
3,802

 
$
5,750

 
$
9,803



































See accompanying notes to consolidated financial statements.

3



MICRON TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS
(in millions, except par value amounts)
(Unaudited)

As of
 
May 30,
2019
 
August 30,
2018
Assets
 
 
 
 
Cash and equivalents
 
$
5,157

 
$
6,506

Short-term investments
 
1,532

 
296

Receivables
 
3,257

 
5,478

Inventories
 
4,905

 
3,595

Other current assets
 
215

 
164

Total current assets
 
15,066

 
16,039

Long-term marketable investments
 
1,167

 
473

Property, plant, and equipment
 
27,138

 
23,672

Intangible assets
 
339

 
331

Deferred tax assets
 
817

 
1,022

Goodwill
 
1,228

 
1,228

Other noncurrent assets
 
533

 
611

Total assets
 
$
46,288

 
$
43,376

 
 
 
 
 
Liabilities and equity
 
 
 
 
Accounts payable and accrued expenses
 
$
3,494

 
$
4,374

Current debt
 
1,346

 
859

Other current liabilities
 
557

 
521

Total current liabilities
 
5,397

 
5,754

Long-term debt
 
3,563

 
3,777

Noncurrent unearned government incentives
 
622

 
227

Other noncurrent liabilities
 
417

 
354

Total liabilities
 
9,999

 
10,112

 
 
 
 
 
Commitments and contingencies
 


 


 
 
 
 
 
Redeemable convertible notes
 
1

 
3

Redeemable noncontrolling interest
 
98

 
97

 
 
 
 
 
Micron shareholders' equity
 
 
 
 
Common stock, $0.10 par value, 3,000 shares authorized, 1,180 shares issued and 1,104 outstanding (1,170 shares issued and 1,161 outstanding as of August 30, 2018)
118

 
117

Additional capital
 
8,217

 
8,201

Retained earnings
 
30,201

 
24,395

Treasury stock, 76 shares held (9 shares as of August 30, 2018)
 
(3,221
)
 
(429
)
Accumulated other comprehensive income
 
8

 
10

Total Micron shareholders' equity
 
35,323

 
32,294

Noncontrolling interests in subsidiaries
 
867

 
870

Total equity
 
36,190

 
33,164

Total liabilities and equity
 
$
46,288

 
$
43,376


See accompanying notes to consolidated financial statements.

4



MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(Unaudited)

 
 
Micron Shareholders
 
 
 
 
 
 
Common Stock
 
Additional Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other Comprehensive
Income (Loss)
 
Total Micron Shareholders' Equity
 
Noncontrolling Interests in Subsidiaries
 
Total Equity
 
 
Number
of Shares
 
Amount
 
 
 
 
 
 
 
Balance at August 30, 2018
 
1,170

 
$
117

 
$
8,201

 
$
24,395

 
$
(429
)
 
$
10

 
$
32,294

 
$
870

 
$
33,164

Cumulative effect of adopting new accounting standards
 
 
 
 
 
 
 
92

 
 
 
 
 
92

 
 
 
92

Net income
 
 
 
 
 
 
 
3,293

 
 
 
 
 
3,293

 

 
3,293

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
(15
)
 
(15
)
 
 
 
(15
)
Stock issued under stock plans
 
3

 

 
15

 
 
 
 
 
 
 
15

 
 
 
15

Stock-based compensation expense
 
 
 
 
 
61

 
 
 
 
 
 
 
61

 
 
 
61

Repurchase of stock
 
(1
)
 

 
108

 
(11
)
 
(1,933
)
 
 
 
(1,836
)
 
 
 
(1,836
)
Reclassification of redeemable convertible notes, net
 
 
 
 
 
1

 
 
 
 
 
 
 
1

 
 
 
1

Conversion of convertible notes
 
 
 
 
 
(36
)
 
 
 
 
 
 
 
(36
)
 
 
 
(36
)
Balance at November 29, 2018
 
1,172

 
$
117

 
$
8,350

 
$
27,769

 
$
(2,362
)
 
$
(5
)
 
$
33,869

 
$
870

 
$
34,739

Net income
 
 
 
 
 
 
 
1,619

 
 
 
 
 
1,619

 
5

 
1,624

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
11

 
11

 
 
 
11

Stock issued under stock plans
 
7

 
1

 
76

 
 
 
 
 
 
 
77

 
 
 
77

Stock-based compensation expense
 
 
 
 
 
57

 
 
 
 
 
 
 
57

 
 
 
57

Repurchase of stock
 
(1
)
 

 
(5
)
 
(24
)
 
(702
)
 
 
 
(731
)
 
 
 
(731
)
Acquisitions of noncontrolling interest
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(12
)
 
(12
)
Reclassification of redeemable convertible notes, net
 
 
 
 
 
1

 
 
 
 
 
 
 
1

 
 
 
1

Conversion of convertible notes
 
 
 
 
 
(336
)
 
 
 
 
 
 
 
(336
)
 
 
 
(336
)
Balance at February 28, 2019
 
1,178

 
$
118

 
$
8,143

 
$
29,364

 
$
(3,064
)
 
$
6

 
$
34,567

 
$
863

 
$
35,430

Net income
 
 
 
 
 
 
 
840

 
 
 
 
 
840

 
9

 
849

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
2

 
2

 
 
 
2

Stock issued under stock plans
 
2

 

 
20

 
 
 
 
 
 
 
20

 
 
 
20

Stock-based compensation expense
 
 
 
 
 
58

 
 
 
 
 
 
 
58

 
 
 
58

Repurchase of stock
 

 

 

 
(3
)
 
(157
)
 
 
 
(160
)
 
 
 
(160
)
Acquisitions of noncontrolling interest
 
 
 
 
 
1

 
 
 
 
 
 
 
1

 
(5
)
 
(4
)
Conversion of convertible notes
 
 
 
 
 
(5
)
 
 
 
 
 
 
 
(5
)
 
 
 
(5
)
Balance at May 30, 2019
 
1,180

 
$
118

 
$
8,217

 
$
30,201

 
$
(3,221
)
 
$
8

 
$
35,323

 
$
867

 
$
36,190













See accompanying notes to consolidated financial statements.

5



MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(Unaudited)


 
 
Micron Shareholders
 
 
 
 
 
 
Common Stock
 
Additional Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated Other Comprehensive
Income (Loss)
 
Total Micron Shareholders' Equity
 
Noncontrolling Interests in Subsidiaries
 
Total Equity
 
 
Number
of Shares
 
Amount
 
 
 
 
 
 
 
Balance at August 31, 2017
 
1,116

 
$
112

 
$
8,287

 
$
10,260

 
$
(67
)
 
$
29

 
$
18,621

 
$
849

 
$
19,470

Net income
 
 
 
 
 
 
 
2,678

 
 
 
 
 
2,678

 

 
2,678

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
(5
)
 
(5
)
 
 
 
(5
)
Contributions from noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18

 
18

Stock issued in public offering
 
34

 
3

 
1,363

 
 
 
 
 
 
 
1,366

 
 
 
1,366

Stock issued under stock plans
 
9

 
1

 
105

 
 
 
 
 
 
 
106

 
 
 
106

Stock-based compensation expense
 
 
 
 
 
51

 
 
 
 
 
 
 
51

 
 
 
51

Repurchase of stock
 
(1
)
 

 
(90
)
 
 
 

 
 
 
(90
)
 
 
 
(90
)
Reclassification of redeemable convertible notes, net
 
 
 
 
 
3

 
 
 
 
 
 
 
3

 
 
 
3

Conversion of convertible notes
 
 
 
 
 
(271
)
 
 
 
67

 
 
 
(204
)
 
 
 
(204
)
Balance at November 30, 2017
 
1,158

 
$
116

 
$
9,448

 
$
12,938

 
$

 
$
24

 
$
22,526

 
$
867

 
$
23,393

Net income
 
 
 
 
 
 
 
3,309

 
 
 
 
 
3,309

 
2

 
3,311

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
19

 
19

 
 
 
19

Stock issued under stock plans
 
8

 

 
82

 
 
 
 
 
 
 
82

 
 
 
82

Stock-based compensation expense
 
 
 
 
 
52

 
 
 
 
 
 
 
52

 
 
 
52

Repurchase of stock
 
(1
)
 

 
(44
)
 
 
 

 
 
 
(44
)
 
 
 
(44
)
Settlement of capped calls
 
 
 
 
 
313

 
 
 
(313
)
 
 
 

 
 
 

Reclassification of redeemable convertible notes, net
 
 
 
 
 
5

 
 
 
 
 
 
 
5

 
 
 
5

Conversion of convertible notes
 
 
 
 
 
(252
)
 
 
 
 
 
 
 
(252
)
 
 
 
(252
)
Balance at March 1, 2018
 
1,165

 
$
116

 
$
9,604

 
$
16,247

 
$
(313
)
 
$
43

 
$
25,697

 
$
869

 
$
26,566

Net income
 
 
 
 
 
 
 
3,823

 
 
 
 
 
3,823

 

 
3,823

Other comprehensive income (loss), net
 
 
 
 
 
 
 
 
 
 
 
(21
)
 
(21
)
 
 
 
(21
)
Stock issued under stock plans
 
4

 
1

 
81

 
 
 
 
 
 
 
82

 
 
 
82

Stock-based compensation expense
 
 
 
 
 
48

 
 
 
 
 
 
 
48

 
 
 
48

Repurchase of stock
 

 

 
(4
)
 
 
 

 
 
 
(4
)
 
 
 
(4
)
Settlement of capped calls
 
 
 
 
 
116

 
 
 
(116
)
 
 
 

 
 
 

Reclassification of redeemable convertible notes, net
 
 
 
 
 
9

 
 
 
 
 
 
 
9

 
 
 
9

Conversion and repurchase of convertible notes
 
 
 
 
 
(985
)
 
 
 
 
 
 
 
(985
)
 
 
 
(985
)
Balance at May 31, 2018
 
1,169

 
$
117

 
$
8,869

 
$
20,070

 
$
(429
)
 
$
22

 
$
28,649

 
$
869

 
$
29,518






See accompanying notes to consolidated financial statements.

6



MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)

Nine months ended
 
May 30,
2019
 
May 31,
2018
Cash flows from operating activities
 
 
 
 
Net income
 
$
5,772

 
$
9,812

Adjustments to reconcile net income to net cash provided by operating activities
 
 

 
 

Depreciation expense and amortization of intangible assets
 
4,008

 
3,474

Amortization of debt discount and other costs
 
39

 
78

Loss on debt prepayments, repurchases, and conversions
 
386

 
386

Stock-based compensation
 
176

 
151

Change in operating assets and liabilities
 
 

 
 

Receivables
 
2,373

 
(1,177
)
Inventories
 
(1,315
)
 
(246
)
Accounts payable and accrued expenses
 
(703
)
 
151

Deferred income taxes, net
 
195

 
(216
)
Other
 
25

 
(168
)
Net cash provided by operating activities
 
10,956

 
12,245

 
 
 
 
 
Cash flows from investing activities
 
 

 
 

Expenditures for property, plant, and equipment
 
(7,752
)
 
(6,628
)
Purchases of available-for-sale securities
 
(3,814
)
 
(606
)
Proceeds from sales of available-for-sale securities
 
1,271

 
569

Proceeds from government incentives
 
668

 
171

Proceeds from maturities of available-for-sale securities
 
626

 
219

Other
 
16

 
188

Net cash provided by (used for) investing activities
 
(8,985
)
 
(6,087
)
 
 
 
 
 
Cash flows from financing activities
 
 

 
 

Payments to acquire treasury stock
 
(2,727
)
 
(69
)
Repayments of debt
 
(2,376
)
 
(6,767
)
Payments on equipment purchase contracts
 
(54
)
 
(170
)
Proceeds from issuance of debt
 
1,800

 
969

Proceeds from issuance of stock
 
112

 
1,636

Other
 
(85
)
 
(42
)
Net cash provided by (used for) financing activities
 
(3,330
)
 
(4,443
)
 
 
 
 
 
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash
 
6

 
(4
)
 
 
 
 
 
Net increase (decrease) in cash, cash equivalents, and restricted cash
 
(1,353
)
 
1,711

Cash, cash equivalents, and restricted cash at beginning of period
 
6,587

 
5,216

Cash, cash equivalents, and restricted cash at end of period
 
$
5,234

 
$
6,927





See accompanying notes to consolidated financial statements.

7



MICRON TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in millions, except per share amounts)
(Unaudited)

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 consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended August 30, 2018, except for changes related to recently adopted accounting standards. See "Recently Adopted Accounting Standards" note. Prior year information is presented in accordance with the accounting guidance in effect during that period and has not been recast for recently adopted accounting standards. 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 2019 and 2018 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 August 30, 2018.


Variable Interest Entities

We have interests in entities that are VIEs. If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIEs require significant assumptions and judgments.

Unconsolidated VIEs

PTI Xi'an : Powertech Technology Inc. Xi'an ("PTI Xi'an") is a wholly-owned subsidiary of Powertech Technology Inc. ("PTI") and was created to provide assembly services to us at our manufacturing site in Xi'an, China. We do not have an equity interest in PTI Xi'an. PTI Xi'an is a VIE because of the terms of its service agreement with us and its dependency on PTI to finance its operations. We do not have the power to direct the activities of PTI Xi'an that most significantly impact its economic performance, primarily because we do not have governance rights. Therefore, we do not consolidate PTI Xi'an. In connection with our assembly services with PTI, as of May 30, 2019 and August 30, 2018 , we had net property, plant, and equipment of $53 million and $63 million , respectively, and capital lease obligations of $51 million and $63 million , respectively.

Consolidated VIE

IMFT : IMFT is a VIE because all of its costs are passed to us and its other member, Intel, through product purchase agreements and because IMFT is dependent upon us or Intel for additional cash requirements. The primary activities of IMFT are driven by the constant introduction of product and process technology. Because we perform a significant majority of the technology development, we have the power to direct its key activities. We consolidate IMFT because we have the power to direct the activities of IMFT that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to it. In January 2019, we exercised our option to acquire Intel's interest in IMFT and, in the third quarter of 2019, Intel set the closing date to occur on October 31, 2019. (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)



8



Recently Adopted Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 – Intra-Entity Transfers Other Than Inventory ("ASU 2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted this ASU in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below.

In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities , which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. We adopted this ASU in the first quarter of 2019 under the modified retrospective method, with prospective adoption for amendments related to equity securities without readily determinable fair values. The adoption of this ASU did not have a material impact on our financial statements.

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (as amended, "ASC 606"), which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of ASC 606 is that an entity should recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We adopted ASC 606 in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below. We applied ASC 606 to contracts with customers that had not yet been completed as of the adoption date.

The following table summarizes the effects of adopting ASU 2016-16 and ASC 606:
 
 
 
 
 
 
 
 
 
Ending Balance
as of
August 30, 2018
 
ASU 2016-16
 
ASC 606
 
Opening Balance
as of
August 31, 2018
Receivables
$
5,478

 
$

 
$
114

 
$
5,592

Inventories
3,595

 

 
(5
)
 
3,590

Other current assets
164

 
(14
)
 
30

 
180

Deferred tax assets
1,022

 
56

 
(92
)
 
986

Other current liabilities
521

 

 
(4
)
 
517

Other noncurrent liabilities
354

 

 
1

 
355

Retained earnings
24,395

 
42

 
50

 
24,487


As a result of the adoption of ASC 606, the opening balances as of August 31, 2018 for receivables, other current assets, and other current liabilities increased due to the reclassification of allowances for rebates, pricing adjustments, and returns to conform to the new presentation requirements. In addition, the margin from previously deferred sales to distributors was reclassified from other current liabilities to retained earnings. The tax effects of the adoption of ASC 606 were recorded primarily as a reduction of net deferred tax assets, substantially as a result of recognizing income for accounting purposes earlier under ASC 606 than for tax purposes in various jurisdictions.


9



The effects of ASC 606 to our consolidated statement of operations and balance sheet were as follows:
 
Quarter ended May 30, 2019
 
Nine months ended May 30, 2019
 
As Reported
 
Adjustments
 
Amounts Without the Effects of Adoption of ASC 606
 
As Reported
 
Adjustments
 
Amounts Without the Effects of Adoption of ASC 606
Revenue
$
4,788

 
$
43

 
$
4,831

 
$
18,536

 
$
(72
)
 
$
18,464

Cost of goods sold
2,960

 
4

 
2,964

 
9,229

 
(65
)
 
9,164

Interest expense
(29
)
 
2

 
(27
)
 
(89
)
 
5

 
(84
)
Income tax (provision) benefit
135

 
(8
)
 
127

 
(622
)
 
(13
)
 
(635
)
Net income attributable to Micron
840

 
33

 
873

 
5,752

 
(15
)
 
5,737


As of May 30, 2019
 
As Reported
 
Adjustments
 
Amounts Without the Effects of Adoption of ASC 606
Receivables
 
$
3,257

 
$
(112
)
 
$
3,145

Other current assets
 
215

 
(41
)
 
174

Deferred tax assets
 
817

 
82

 
899

Accounts payable and accrued expenses
 
3,494

 
3

 
3,497

Other current liabilities
 
557

 
(8
)
 
549

Other noncurrent liabilities
 
417

 
(1
)
 
416

Retained earnings
 
30,201

 
(65
)
 
30,136



Recently Issued Accounting Standards Not Yet Adopted

In November 2018, the FASB issued ASU 2018-18 – Collaborative Arrangements , which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. This ASU will be effective for us in the first quarter of 2021 with early adoption permitted. This ASU requires retrospective adoption to the date we adopted ASC 606, August 31, 2018, by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In June 2016, the FASB issued ASU 2016-13 – Measurement of Credit Losses on Financial Instruments , which requires a financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected. This ASU requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the increases or decreases of expected credit losses that have taken place during the period. This ASU requires that credit losses of debt securities designated as available-for-sale be recorded through an allowance for credit losses and limits the credit loss to the amount by which fair value is below amortized cost. This ASU will be effective for us in the first quarter of 2021 with adoption permitted as early as the first quarter of 2020. This ASU requires modified retrospective adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In February 2016, the FASB issued ASU 2016-02 – Leases , which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding liability, measured at the present value of lease payments. This ASU, as amended, will be effective for us in the first quarter of 2020 with early adoption permitted and allows for either a modified retrospective adoption or a retrospective adoption by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The adoption of this ASU will result in an increase to our consolidated balance sheets for these right-of-use assets

10



and corresponding liabilities. We are evaluating the timing and other effects of our adoption of this ASU on our financial statements.


Cash and Investments

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:
As of
 
May 30, 2019
 
August 30, 2018
 
 
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
 
$
3,171

 
$

 
$

 
$
3,171

 
$
3,223

 
$

 
$

 
$
3,223

Level 1 (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
1,208

 

 

 
1,208

 
2,443

 

 

 
2,443

Level 2 (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit
 
732

 
749

 
5

 
1,486

 
806

 
11

 
2

 
819

Corporate bonds
 

 
516

 
704

 
1,220

 
3

 
172

 
272

 
447

Government securities
 
11

 
131

 
200

 
342

 
5

 
63

 
103

 
171

Asset-backed securities
 

 
83

 
258

 
341

 

 
34

 
96

 
130

Commercial paper
 
35

 
53

 

 
88

 
26

 
16

 

 
42

 
 
5,157

 
$
1,532

 
$
1,167

 
$
7,856

 
6,506

 
$
296

 
$
473

 
$
7,275

Restricted cash (4)
 
77

 
 
 
 
 
 
 
81

 
 
 
 
 
 
Cash, cash equivalents, and restricted cash
 
$
5,234

 
 
 
 
 
 
 
$
6,587

 
 
 
 
 
 
(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 analyses to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of May 30, 2019 or August 30, 2018 .
(4)  
Restricted cash is included in other noncurrent assets and primarily consisted of balances related to the MMJ Creditor Payments. The restrictions on the MMJ Creditor Payments lapse upon approval by the trustees and/or Tokyo District Court.

Gross realized gains and losses from sales of available-for-sale securities were not material for any period presented. As of May 30, 2019 , there were no available-for-sale securities that had been in a loss position for longer than 12 months.


Receivables

As of
 
May 30,
2019
 
August 30,
2018
Trade receivables
 
$
2,848

 
$
5,056

Income and other taxes
 
202

 
161

Other
 
207

 
261

 
 
$
3,257

 
$
5,478




11



Inventories

As of
 
May 30,
2019
 
August 30,
2018
Finished goods
 
$
853

 
$
815

Work in process
 
3,537

 
2,357

Raw materials and supplies
 
515

 
423

 
 
$
4,905

 
$
3,595



Property, Plant, and Equipment

As of
 
May 30,
2019
 
August 30,
2018
Land
 
$
352

 
$
345

Buildings
 
10,167

 
8,680

Equipment (1)
 
42,626

 
38,249

Construction in progress (2)
 
1,893

 
1,162

Software
 
767

 
655

 
 
55,805

 
49,091

Accumulated depreciation
 
(28,667
)
 
(25,419
)
 
 
$
27,138

 
$
23,672

(1)  
Included costs related to equipment not placed into service of $2.24 billion and $1.73 billion , as of May 30, 2019 and August 30, 2018 , respectively.
(2)  
Included building-related construction, tool installation, and software costs for assets not yet placed into service.


Intangible Assets and Goodwill

As of
 
May 30, 2019
 
August 30, 2018
 
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Amortizing assets
 
 
 
 
 
 
 
 
Product and process technology
 
$
574

 
$
(235
)
 
$
567

 
$
(344
)
Non-amortizing assets
 
 
 
 
 
 
 
 
In-process R&D
 

 

 
108

 

 
 
 
 
 
 
 
 
 
Total intangible assets
 
$
574

 
$
(235
)
 
$
675

 
$
(344
)
 
 
 
 
 
 
 
 
 
Goodwill
 
$
1,228

 
 
 
$
1,228

 
 

In the first nine months of 2019 and 2018 , we capitalized $71 million and $27 million , respectively, for product and process technology with weighted-average useful lives of 8 years and 11 years, respectively, and placed in service $108 million of in-process R&D in the first quarter of 2019, which is being amortized on a straight-line basis over six years. Expected amortization expense is $18 million for the remainder of 2019 , $68 million for 2020 , $59 million for 2021 , $48 million for 2022 , and $43 million for 2023 .



12



Accounts Payable and Accrued Expenses

As of
 
May 30,
2019
 
August 30,
2018
Accounts payable
 
$
1,336

 
$
1,692

Property, plant, and equipment payables
 
1,160

 
1,238

Salaries, wages, and benefits
 
565

 
841

Income and other taxes
 
254

 
402

Other
 
179

 
201

 
 
$
3,494

 
$
4,374



Debt

As of
 
May 30, 2019
 
August 30, 2018
 
 
 
 
 
 
Net Carrying Amount
 
Net Carrying Amount
Instrument
 
Stated Rate
 
Effective Rate
 
Current
 
Long-Term
 
Total
 
Current
 
Long-Term
 
Total
IMFT Member Debt (1)
 
N/A

 
N/A

 
$
858

 
$

 
$
858

 
$

 
$
1,009

 
$
1,009

Capital lease obligations
 
N/A

 
4.20
%
 
233

 
415

 
648

 
310

 
536

 
846

MMJ Creditor Payments
 
N/A

 
9.76
%
 
187

 

 
187

 
309

 
183

 
492

2022 Term Loan B
 
4.24
%
 
4.65
%
 
5

 
716

 
721

 
5

 
720

 
725

2024 Notes
 
4.64
%
 
4.76
%
 

 
597

 
597

 

 

 

2025 Notes
 
5.50
%
 
5.56
%
 

 
516

 
516

 

 
515

 
515

2026 Notes
 
4.98
%
 
5.07
%
 

 
497

 
497

 

 

 

2029 Notes
 
5.33
%
 
5.40
%
 

 
696

 
696

 

 

 

2032D Notes