MICRON TECHNOLOGY INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Micron Technology, Inc. Consolidated Statements of Operations (in millions, except per share amounts) For the year ended September 2, 2021 September 3, 2020 August 29, 2019 Revenue $ 27,705 $ 21,435 $ 23,406 Cost of goods sold 17,282 14,883 12,704 Gross margin 10,423 6,552 10,702 Research and development 2,663 2,600 2,441 Selling, general, and administrative 894 881 836 Restructure and asset impairments 488 60 ( 29 ) Other operating (income) expense, net 95 8 78 Operating income 6,283 3,003 7,376 Interest income 37 114 205 Interest expense ( 183 ) ( 194 ) ( 128 ) Other non-operating income (expense), net 81 60 ( 405 ) 6,218 2,983 7,048 Income tax (provision) benefit ( 394 ) ( 280 ) ( 693 ) Equity in net income (loss) of equity method investees 37 7 3 Net income 5,861 2,710 6,358 Net income attributable to noncontrolling interests — ( 23 ) ( 45 ) Net income attributable to Micron $ 5,861 $ 2,687 $ 6,313 Earnings per share Basic $ 5.23 $ 2.42 $ 5.67 Diluted 5.14 2.37 5.51 Number of shares used in per share calculations Basic 1,120 1,110 1,114 Diluted 1,141 1,131 1,143 See accompanying notes to consolidated financial statements. 48 | 2021 10-K Micron Technology, Inc. Consolidated Statements of Comprehensive Income (in millions) For the year ended September 2, 2021 September 3, 2020 August 29, 2019 Net income $ 5,861 $ 2,710 $ 6,358 Other comprehensive income (loss), net of tax Gains (losses) on derivative instruments ( 67 ) 46 ( 3 ) Gains (losses) on investments ( 7 ) 1 9 Pension liability adjustments 3 15 ( 6 ) Foreign currency translation adjustments 2 — ( 1 ) Other comprehensive income (loss) ( 69 ) 62 ( 1 ) Total comprehensive income 5,792 2,772 6,357 Comprehensive income attributable to noncontrolling interests — ( 23 ) ( 45 ) Comprehensive income attributable to Micron $ 5,792 $ 2,749 $ 6,312 See accompanying notes to consolidated financial statements. 49 Micron Technology, Inc. Consolidated Balance Sheets (in millions, except par value amounts) As of September 2, 2021 September 3, 2020 Assets Cash and equivalents $ 7,763 $ 7,624 Short-term investments 870 518 Receivables 5,311 3,912 Inventories 4,487 5,373 Assets held for sale 974 — Other current assets 502 538 Total current assets 19,907 17,965 Long-term marketable investments 1,765 1,048 Property, plant, and equipment 33,213 31,031 Operating lease right-of-use assets 551 584 Intangible assets 349 334 Deferred tax assets 782 707 Goodwill 1,228 1,228 Other noncurrent assets 1,054 781 Total assets $ 58,849 $ 53,678 Liabilities and equity Accounts payable and accrued expenses $ 5,325 $ 5,817 Current debt 155 270 Other current liabilities 944 548 Total current liabilities 6,424 6,635 Long-term debt 6,621 6,373 Noncurrent operating lease liabilities 504 533 Noncurrent unearned government incentives 808 643 Other noncurrent liabilities 559 498 Total liabilities 14,916 14,682 Commitments and contingencies Micron shareholders’ equity Common stock, $ 0.10 par value, 3,000 shares authorized, 1,216 shares issued and 1,119 outstanding ( 1,194 shares issued and 1,113 outstanding as of September 3, 2020) 122 119 Additional capital 9,453 8,917 Retained earnings 39,051 33,384 Treasury stock, 97 shares held ( 81 shares as of September 3, 2020) ( 4,695 ) ( 3,495 ) Accumulated other comprehensive income (loss) 2 71 Total equity 43,933 38,996 Total liabilities and equity $ 58,849 $ 53,678 See accompanying notes to consolidated financial statements. 50 | 2021 10-K Micron Technology, Inc. Consolidated Statements of Changes in Equity (in millions, except per share amounts) Micron Shareholders Common Stock Additional Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Micron Shareholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity Number of Shares Amount Balance at August 30, 2018 1,170 $ 117 $ 8,201 $ 24,395 $ ( 429 ) $ 10 $ 32,294 $ 870 $ 33,164 Cumulative effect from adoption of new accounting standards — — — 92 — — 92 — 92 Net income — — — 6,313 — — 6,313 36 6,349 Other comprehensive income (loss), net — — — — — ( 1 ) ( 1 ) — ( 1 ) Stock issued under stock plans 14 1 178 — — — 179 — 179 Stock-based compensation expense — — 243 — — — 243 — 243 Repurchase of stock ( 2 ) — 103 ( 39 ) ( 2,792 ) — ( 2,728 ) — ( 2,728 ) Acquisitions of noncontrolling interest — — 1 — — — 1 ( 17 ) ( 16 ) Reclassification of redeemable convertible notes, net — — 3 — — — 3 — 3 Cash settlement of convertible notes — — ( 515 ) — — — ( 515 ) — ( 515 ) Balance at August 29, 2019 1,182 $ 118 $ 8,214 $ 30,761 $ ( 3,221 ) $ 9 $ 35,881 $ 889 $ 36,770 Net income — — — 2,687 — — 2,687 15 2,702 Other comprehensive income (loss), net — — — — — 62 62 — 62 Stock issued under stock plans 14 1 224 — — — 225 — 225 Stock-based compensation expense — — 328 — — — 328 — 328 Repurchase of stock ( 2 ) — ( 11 ) ( 64 ) ( 176 ) — ( 251 ) — ( 251 ) Settlement of capped calls — — 98 — ( 98 ) — — — — Acquisitions of noncontrolling interest — — 120 — — — 120 ( 904 ) ( 784 ) Cash settlement of convertible notes — — ( 56 ) — — — ( 56 ) — ( 56 ) Balance at September 3, 2020 1,194 $ 119 $ 8,917 $ 33,384 $ ( 3,495 ) $ 71 $ 38,996 $ — $ 38,996 Net income — — — 5,861 — — 5,861 — 5,861 Other comprehensive income (loss), net — — — — — ( 69 ) ( 69 ) — ( 69 ) Stock issued under stock plans 13 2 223 — — — 225 — 225 Stock-based compensation expense — — 378 — — — 378 — 378 Repurchase of stock ( 2 ) — ( 12 ) ( 82 ) ( 1,200 ) — ( 1,294 ) — ( 1,294 ) Stock issued for convertible notes 11 1 ( 1 ) — — — — — — Cash settlement of convertible notes — — ( 52 ) — — — ( 52 ) — ( 52 ) Cash dividends declared ($ 0.10 per share) — — — ( 112 ) — — ( 112 ) — ( 112 ) Balance at September 2, 2021 1,216 $ 122 $ 9,453 $ 39,051 $ ( 4,695 ) $ 2 $ 43,933 $ — $ 43,933 See accompanying notes to consolidated financial statements. 51 Micron Technology, Inc. Consolidated Statements of Cash Flows (in millions) For the year ended September 2, 2021 September 3, 2020 August 29, 2019 Cash flows from operating activities Net income $ 5,861 $ 2,710 $ 6,358 Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense and amortization of intangible assets 6,214 5,650 5,424 Amortization of debt discount and other costs 30 26 49 Restructure and asset impairments 454 40 ( 97 ) Stock-based compensation 378 328 243 (Gains) losses on debt prepayments, repurchases, and conversions 1 ( 40 ) 396 Change in operating assets and liabilities Receivables ( 1,446 ) ( 723 ) 2,431 Inventories 866 ( 435 ) ( 1,489 ) Accounts payable and accrued expenses 210 725 ( 174 ) Deferred income taxes, net ( 50 ) 79 150 Other ( 50 ) ( 54 ) ( 102 ) Net cash provided by operating activities 12,468 8,306 13,189 Cash flows from investing activities Expenditures for property, plant, and equipment ( 10,030 ) ( 8,223 ) ( 9,780 ) Purchases of available-for-sale securities ( 3,163 ) ( 1,857 ) ( 4,218 ) Proceeds from maturities of available-for-sale securities 1,250 814 1,541 Proceeds from sales of available-for-sale securities 856 1,458 1,504 Proceeds from government incentives 495 262 748 Other 3 ( 43 ) 120 Net cash provided by (used for) investing activities ( 10,589 ) ( 7,589 ) ( 10,085 ) Cash flows from financing activities Repayments of debt ( 1,520 ) ( 4,366 ) ( 3,340 ) Payments to acquire treasury stock ( 1,294 ) ( 251 ) ( 2,729 ) Payments on equipment purchase contracts ( 295 ) ( 63 ) ( 75 ) Acquisition of noncontrolling interest in IMFT — ( 744 ) — Proceeds from issuance of debt 1,188 5,000 3,550 Other 140 107 156 Net cash provided by (used for) financing activities ( 1,781 ) ( 317 ) ( 2,438 ) Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash 41 11 26 Net increase (decrease) in cash, cash equivalents, and restricted cash 139 411 692 Cash, cash equivalents, and restricted cash at beginning of period 7,690 7,279 6,587 Cash, cash equivalents, and restricted cash at end of period $ 7,829 $ 7,690 $ 7,279 Supplemental disclosures Income taxes paid, net $ ( 361 ) $ ( 167 ) $ ( 524 ) Interest paid, net of amounts capitalized ( 171 ) ( 165 ) ( 53 ) Noncash equipment acquisitions on contracts payable and finance leases 684 278 119 See accompanying notes to consolidated financial statements. 52 | 2021 10-K Micron Technology, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All tabular amounts in millions, except per share amounts) Significant Accounting Policies Basis of Presentation Micron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all . With a relentless focus on our customers, technology leadership, and manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence and 5G applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience. The accompanying consolidated financial statements include the accounts of Micron Technology, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to current period presentation. See “Inventories” below for changes to our significant accounting policies, and the “Inventories” note for additional information. Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal 2021 contained 52 weeks, fiscal 2020 contained 53 weeks, and fiscal 2019 contained 52 weeks. Our fourth quarter of fiscal 2020 contained 14 weeks and all other fiscal quarters in the years presented contained 13 weeks. All period references are to our fiscal periods unless otherwise indicated. Derivative and Hedging Instruments We use derivative instruments to manage our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities denominated in currencies other than the U.S. dollar and (2) forecasted cash flows for certain capital expenditures and manufacturing costs. We also use derivative instruments to manage our exposure to changes in commodity prices for manufacturing supplies and to minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. Derivative instruments are measured at their fair values and recognized as either assets or liabilities. The accounting for changes in the fair value of derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments that are not designated for hedge accounting, gains or losses from changes in fair values are recognized in other non-operating income (expense). For derivative instruments designated as cash flow hedges, gains or losses are included as a component of accumulated other comprehensive income and reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. For derivative instruments designated as cash flow hedges, time value is excluded from the assessment of effectiveness and the gains and losses attributable to time value are recognized in earnings. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments and the offsetting changes in the fair values of the underlying hedged items are both recognized in earnings. We enter into master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions. These master netting arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled with each counterparty have been presented in our consolidated balance sheet on a net basis. 53 Financial Instruments Cash equivalents include highly liquid short-term investments with original maturities to us of three months or less that are readily convertible to known amounts of cash. Other investments with remaining maturities of less than one year are included in short-term investments. Investments with remaining maturities greater than one year are included in long-term marketable investments. The carrying value of investment securities sold is determined using the specific identification method. Functional Currency The U.S. dollar is the functional currency for us and all of our consolidated subsidiaries. Goodwill We perform an annual impairment assessment for goodwill in our fourth quarter each year. Government Incentives We receive incentives from governmental entities related to expenses, assets, and other activities. Our government incentives may require that we meet or maintain specified spending levels and other operational metrics and may be subject to reimbursement if such conditions are not met or maintained. Government incentives are recorded in the financial statements in accordance with their purpose: as a reduction of expenses, a reduction of asset costs, or other income. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. Incentives related to the acquisition or construction of fixed assets are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Other incentives are recognized as other operating income. Government incentives received prior to being earned are recognized in current or noncurrent deferred income, whereas government incentives earned prior to being received are recognized in current or noncurrent receivables. Cash received from government incentives related to operating expenses is included as an operating activity in the statement of cash flows, whereas cash received from incentives related to the acquisition of property, plant, and equipment is included as an investing activity. Inventories Effective as of the beginning of the second quarter of 2021, we changed the method of inventory costing from average cost to FIFO. The difference between average cost and FIFO was not material to any previously reported financial statements. Therefore, we have recognized the cumulative effect of the change as a reduction of inventories and a charge to cost of goods sold of $ 133 million as of the beginning of the second quarter of 2021. Inventories are stated at the lower of cost or net realizable value, with cost being determined on a FIFO basis. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. When net realizable value (which requires projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories) is below cost, we record a charge to cost of goods sold to write down inventories to their estimated net realizable value in advance of when inventories are actually sold. We review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of cost or net realizable value analysis and categorize all inventories (including DRAM, NAND, and other memory) as a single group. We remove amounts from inventory and charge such amounts to cost of goods sold on a FIFO basis. 54 | 2021 10-K Leases We adopted ASC 842 in the first quarter of 2020 under the modified retrospective method and elected to not recast prior periods. We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluate whether the lease is an operating lease or a finance lease at the commencement date. We recognize right-of-use assets and lease liabilities for operating and finance leases with terms greater than 12 months. Right-of-use assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments. We do not separate lease and non-lease components for real-estate and gas plant leases. Sublease income is presented within lease expense. Product and Process Technology Costs incurred to (1) acquire product and process technology, (2) patent technology, and (3) maintain patent technology, are capitalized and amortized on a straight-line basis over periods ranging up to 12.5 years. We capitalize a portion of costs incurred to patent technology based on historical data of patents issued as a percent of patents we file. Product and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement. Fully-amortized assets are removed from product and process technology and accumulated amortization. Product Warranty We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our standard terms and conditions. Our warranty obligations are not material. Property, Plant, and Equipment Property, plant, and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of generally 10 to 30 years for buildings, 5 to 7 years for equipment, and 3 to 5 years for software. Assets held for sale are carried at the lower of estimated fair value or carrying value and are included in current assets. When property, plant, or equipment is retired or otherwise disposed, the net book value is removed and we recognize any gain or loss in results of operations. We capitalize interest on borrowings during the period of time we carry out the activities necessary to bring assets to the condition of their intended use and location. Capitalized interest becomes part of the cost of assets. Research and Development Costs related to the conceptual formulation and design of products and processes are charged to R&D expense as incurred. Development of a product is deemed complete when it is qualified through reviews and tests for performance and reliability. Subsequent to product qualification, product costs are included in cost of goods sold. Amounts from cost-sharing arrangements are reflected as a reduction of R&D expense. Revenue Recognition Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Contracts with our customers are generally short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. We estimate a liability for returns using the expected value method based on historical returns. In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction price. We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of revenue recognized from sales to distributors. Differences between the estimated and actual amounts are recognized as adjustments to revenue. 55 Stock-based Compensation Stock-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period. We account for forfeitures as they occur. We issue new shares upon the exercise of stock options or conversion of share units. Treasury Stock Treasury stock is carried at cost. When we retire our treasury stock, any excess of the repurchase price paid over par value is allocated between additional capital and retained earnings. Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may differ under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Actual results could differ from estimates. Recently Adopted Accounting Standards In November 2018, the Financial Accounting Standards Board (“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. We adopted ASU 2018-18 in the first quarter of 2021 under the retrospective adoption method to the date we adopted ASC 606, which was August 31, 2018. The adoption of this ASU did not have a significant impact 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. We adopted ASU 2016-13 in the first quarter of 2021 under the modified retrospective adoption method. The adoption of this ASU did not have a significant impact on our financial statements. 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 that was dedicated to 3D XPoint production. As a result, we classified the property, plant, and equipment as held for sale and ceased depreciating the assets. On June 30, 2021, we announced a definitive agreement to sell our Lehi facility to TI for cash consideration of $ 900 million. The sale is anticipated to close in the first quarter of 2022. 56 | 2021 10-K In the third quarter of 2021, we recognized a charge of $ 435 million included in restructure and asset impairments (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, to be realized from the sale of these assets and liabilities. The impairment charge was based on Level 3 inputs including expected consideration and the composition of assets included in the sale, which were derived from the agreement with TI. In the second quarter of 2021, we also recognized a charge of $ 49 million to cost of goods sold to write down 3D XPoint inventory due to our decision to cease further development of this technology. As of September 2, 2021, the significant balances of assets held for sale in connection with our Lehi facility were as follows: As of September 2, 2021 Property, plant, and equipment $ 1,334 Other current assets 50 Impairment ( 435 ) Lehi assets held for sale $ 949 As of September 2, 2021, we also had a $ 50 million finance lease obligation included in the current portion of long-term debt and $ 11 million of other liabilities that we expect to transfer with the sale. The expected cash consideration, net of estimated selling expenses, approximates the carrying value of the net assets and liabilities expected to transfer in the sale, after giving effect to the impairment charge discussed above. Variable Interest Entities We have interests in entities that are variable interest entities (“VIEs”). If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE’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. Through October 31, 2019, IMFT was a VIE because all of its costs were passed to us and its other member, Intel, through product purchase agreements and because IMFT was dependent upon us or Intel for additional cash requirements. The primary activities of IMFT were driven by the constant introduction of product and process technology. Because we performed a significant majority of the technology development, we had the power to direct its key activities. We consolidated IMFT due to this power and our obligation to absorb losses and the right to receive benefits from IMFT that could have been potentially significant to it. On October 31, 2019, we paid $ 1.25 billion to acquire Intel’s noncontrolling interest in IMFT and settle IMFT’s debt obligations to Intel, at which time IMFT (now known as MTU) became a wholly-owned subsidiary. In connection therewith, we recognized a $ 160 million adjustment to equity for the difference between the $ 744 million of cash consideration allocated to Intel’s noncontrolling interest and its $ 904 million carrying value. IMFT manufactured semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost. In 2018, IMFT discontinued production of NAND and subsequent to that time manufactured 3D XPoint memory. IMFT sales to Intel were $ 158 million through the date of our purchase of Intel’s noncontrolling interest in 2020, and $ 731 million in 2019. 57 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: 2021 2020 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 $ 5,796 $ — $ — $ 5,796 $ 3,996 $ — $ — $ 3,996 Level 1 (2) Money market funds 38 — — 38 1,828 — — 1,828 Level 2 (3) Certificates of deposits 1,907 69 — 1,976 1,740 10 2 1,752 Corporate bonds 9 429 1,134 1,572 3 266 592 861 Asset-backed securities 8 95 509 612 1 31 211 243 Government securities 1 190 122 313 6 115 243 364 Commercial paper 4 87 — 91 50 96 — 146 7,763 $ 870 $ 1,765 $ 10,398 7,624 $ 518 $ 1,048 $ 9,190 Restricted cash (4) 66 66 Cash, cash equivalents, and restricted cash $ 7,829 $ 7,690 (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 September 2, 2021 or September 3, 2020. (4) Restricted cash is included in 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 $ 153 million and $ 92 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of September 2, 2021 and September 3, 2020, respectively. We recognized gains in other non-operating income on these non-marketable investments of $ 70 million and $ 13 million for 2021 and 2020, respectively. These gains primarily resulted from adjustments of these investments to the value indicated by transactions in the same or similar investments. Receivables As of 2021 2020 Trade receivables $ 4,920 $ 3,494 Income and other taxes 264 232 Other 127 186 $ 5,311 $ 3,912 58 | 2021 10-K Inventories As of 2021 2020 Finished goods $ 513 $ 1,001 Work in process 3,469 3,854 Raw materials and supplies 505 518 $ 4,487 $ 5,373 Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to FIFO. This change in accounting principle is preferable because in an environment with continuously changing production costs FIFO more closely matches the actual cost of goods sold with the revenues from sales of those specific units, better represents the actual cost of inventories remaining on hand at any period-end, and improves comparability with our semiconductor industry peers. The change to FIFO was not material to any prior periods, nor was the cumulative effect of $ 133 million material to the second quarter of 2021. As such, prior periods were not retrospectively adjusted, and the cumulative effect was reported as an increase to cost of goods sold for the second quarter of 2021 of $ 133 million, with an offsetting reduction to beginning inventories. This charge resulted in a corresponding reduction to operating income, a $ 128 million reduction to net income, and an $ 0.11 reduction to diluted earnings per share for both the second quarter and the year ended 2021. Beginning in the second quarter of 2021, we changed the classification of spare parts for equipment to better align with the manner in which they are used in operations. As a result, we now present spare parts as other current assets and no longer as a component of raw materials inventories. This reclassification was applied on a retrospective basis. As a result, $ 254 million of spare parts were presented in other current assets as of September 2, 2021, and we reclassified $ 234 million of spare parts from inventories to other current assets in the accompanying balance sheet as of September 3, 2020. Property, Plant, and Equipment As of 2021 2020 Land $ 280 $ 352 Buildings 14,776 13,981 Equipment (1) 51,902 48,525 Construction in progress (2) 1,517 1,600 Software 987 873 69,462 65,331 Accumulated depreciation ( 36,249 ) ( 34,300 ) $ 33,213 $ 31,031 (1) Includes costs related to equipment not placed into service of $ 1.99 billion as of September 2, 2021 and $ 1.63 billion as of September 3, 2020. (2) Includes building-related construction, tool installation, and software costs for assets not placed into service. Depreciation expense was $ 6.13 billion, $ 5.57 billion, and $ 5.34 billion for 2021, 2020, and 2019, respectively. Interest capitalized as part of the cost of property, plant, and equipment was $ 66 million, $ 77 million, and $ 103 million for 2021, 2020, and 2019, respectively. We periodically assess the estimated useful lives of our property, plant, and equipment. Based on our assessment of planned technology node transitions, capital spending, and re-use rates, we revised the estimated useful lives of the existing equipment in our NAND wafer fabrication facilities and our research and development (“R&D”) facilities from five years to seven years as of the beginning of the first quarter of 2020. This revision reduced our aggregate depreciation expense by approximately $ 675 million in 2020, of which approximately $ 165 million remained capitalized in inventory as of the end of 2020. After adjusting for the effect of the reduced amount of depreciation 59 expense remaining in inventory, the revision in estimated useful lives benefited both operating income and net income by approximately $ 510 million and diluted earnings per share by approximately $ 0.45 for 2020. Intangible Assets and Goodwill 2021 2020 As of Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization Product and process technology $ 633 $ ( 284 ) $ 616 $ ( 282 ) Goodwill 1,228 1,228 In 2021, 2020, and 2019, we capitalized $ 106 million, $ 73 million, and $ 91 million, respectively, for product and process technology with weighted-average useful lives of 9 years, 10 years, and 8 years, respectively. Amortization expense was $ 82 million, $ 78 million, and $ 82 million for 2021, 2020, and 2019, respectively. Expected amortization expense is $ 72 million for 2022, $ 61 million for 2023, $ 55 million for 2024, $ 34 million for 2025, and $ 26 million for 2026. Leases We have finance and operating leases through which we obtain the right to use equipment and facilities in our manufacturing operations and R&D activities as well as office space and other facilities used in our SG&A functions. Our finance leases consist primarily of gas or other supply agreements that are deemed to contain embedded leases in which we effectively control the underlying gas plants or other assets used to fulfill the supply agreements. Our operating leases consist primarily of offices, other facilities, and land used in SG&A, R&D, and certain of our manufacturing operations. Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 30 years for land. Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a lease of a right-of-use asset. Our assessment includes determining whether we or the supplier control the assets used to fulfill the supply or service agreement by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of the output of the assets. Our gas supply arrangements generally are deemed to contain a lease because we have the right to substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets. In determining the lease term, we assess whether we are reasonably certain to exercise options to renew or terminate a lease, and when or whether we would exercise an option to purchase the right-of-use asset. Measuring the present value of the initial lease liability requires judgment to determine the discount rate, which we base on interest rates for borrowings with similar terms and collateral issued by entities with credit ratings similar to ours. 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: For the year ended 2021 2020 Finance lease cost Amortization of right-of-use asset $ 69 $ 140 Interest on lease liability 20 22 Operating lease cost 108 102 $ 197 $ 264 Operating lease expense under the previous ASC 840 lease accounting guidance was $ 93 million for 2019. 60 | 2021 10-K Supplemental cash flow information related to leases was as follows: For the year ended 2021 2020 Cash flows used for operating activities Finance leases $ 21 $ 24 Operating leases (1) 106 39 Cash flows used for financing activities from financing leases 85 248 Noncash acquisitions of right-of-use assets Finance leases 395 107 Operating leases 27 11 (1) Includes $ 48 million of reimbursements received for tenant improvements for 2020. Supplemental balance sheet information related to leases was as follows: As of 2021 2020 Finance lease right-of-use assets (included in property, plant, and equipment and assets held for sale) $ 766 $ 426 Current operating lease liabilities (included in accounts payable and accrued expenses) 55 54 Weighted-average remaining lease term (in years) Finance leases 5 5 Operating leases 7 7 Weighted-average discount rate Finance leases 3.14 % 4.51 % Operating leases 2.63 % 2.67 % Maturities of lease liabilities existing as of September 2, 2021 were as follows: For the year ending Finance Leases Operating Leases 2022 $ 127 $ 68 2023 115 69 2024 89 61 2025 74 50 2026 74 47 2027 and thereafter 454 372 Less imputed interest ( 130 ) ( 108 ) $ 803 $ 559 The table above excludes any lease liabilities for leases that have been executed but have not yet commenced. As of September 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, which may, at our election, be terminated after 3 years or extended for an additional 10 years, and (2) finance lease obligations of $ 553 million over a weighted-average period of 15 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. 61 Accounts Payable and Accrued Expenses As of 2021 2020 Accounts payable $ 1,744 $ 2,191 Property, plant, and equipment 1,887 2,374 Salaries, wages, and benefits 984 849 Income and other taxes 364 237 Other 346 166 $ 5,325 $ 5,817 Debt 2021 2020 Net Carrying Amount Net Carrying Amount As of Stated Rate Effective Rate Principal Current Long-Term Total Principal Current Long-Term Total Finance lease obligations N/A 3.14 % $ 803 $ 154 $ 649 $ 803 $ 486 $ 76 $ 410 $ 486 2023 Notes 2.497 % 2.64 % 1,250 — 1,247 1,247 1,250 — 1,245 1,245 2024 Notes 4.640 % 4.76 % 600 — 598 598 600 — 598 598 2024 Term Loan A 0.975 % 1.01 % 1,188 — 1,186 1,186 — — — — 2026 Notes 4.975 % 5.07 % 500 — 498 498 500 — 498 498 2027 Notes (1) 4.185 % 4.27 % 900 — 901 901 900 — 895 895 2029 Notes 5.327 % 5.40 % 700 — 696 696 700 — 696 696 2030 Notes 4.663 % 4.73 % 850 — 846 846 850 — 845 845 2032D Notes N/A N/A — — — — 134 131 — 131 Extinguished 2024 Term Loan A N/A N/A — — — — 1,250 62 1,186 1,248 Other N/A N/A 1 1 — 1 1 1 — 1 $ 6,792 $ 155 $ 6,621 $ 6,776 $ 6,671 $ 270 $ 6,373 $ 6,643 (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. As of September 2, 2021, all of our debt, other than our finance leases, are unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness and are effectively subordinated to all of our other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness. As of September 2, 2021, Micron had $ 5.97 billion of unsecured debt (net of unamortized discount and debt issuance costs) that was structurally subordinated to all liabilities of its subsidiaries, including trade payables. The terms of our indebtedness generally contain cross payment default and cross acceleration provisions. Micron’s guarantees of its subsidiary debt obligations are unsecured obligations ranking equally in right of payment with all of Micron’s other existing and future unsecured indebtedness. Senior Unsecured Notes Our 2023 Notes, 2024 Notes, 2026 Notes, 2027 Notes, 2029 Notes, and 2030 Notes (the “Senior Unsecured Notes”) each 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 62 | 2021 10-K 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 On May 14, 2021, we terminated our existing undrawn credit facility and entered into a new five -year unsecured Revolving Credit Facility. Under the Revolving Credit Facility, we can draw up to $ 2.50 billion which would generally bear interest at a rate equal to LIBOR plus 1.00 % to 1.75 %, depending on our corporate credit ratings. Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid without penalty. As of September 2, 2021, no amounts were outstanding under the Revolving Credit Facility and $ 2.50 billion was available to us. Under the terms of the Revolving Credit Facility, we must maintain a leverage ratio, calculated as of the last day of each fiscal quarter, of total indebtedness to adjusted EBITDA not to exceed 3.25 to 1.00. The Revolving Credit Facility contains other covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries to (1) create or incur certain liens and enter into sale and lease-back transactions, (2) create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer, lease, or otherwise dispose of all or substantially all of our assets, to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications. 2024 Term Loans On May 14, 2021, we drew $ 1.19 billion under an unsecured 2024 Term Loan A and used the proceeds to repay the $ 1.19 billion Extinguished 2024 Term Loan A. The 2024 Term Loan A bears interest at a rate equal to LIBOR plus 0.625 % to 1.375 % based on our current corporate credit ratings. The principal amount is due October 2024 and may be prepaid without penalty. The 2024 Term Loan A contains the same leverage ratio and substantially the same other covenants as the Revolving Credit Facility. Debt Activity The table below presents the effects of issuances, prepayments, and settlements of debt conversions in 2021. Increase (Decrease) in Principal Increase (Decrease) in Carrying Value Increase (Decrease) in Cash Decrease in Equity Gain (Loss) Issuance of 2024 Term Loan A $ 1,188 $ 1,186 $ 1,186 $ — $ — Prepayment of Extinguished 2024 Term Loan A ( 1,188 ) ( 1,186 ) ( 1,188 ) — ( 2 ) Settlement of Conversions of 2032D Notes (1) ( 134 ) ( 134 ) ( 185 ) ( 52 ) 1 $ ( 134 ) $ ( 134 ) $ ( 187 ) $ ( 52 ) $ ( 1 ) (1) In 2021, substantially all holders of our 2032D Notes converted their notes. We settled these conversions and all remaining 2032D Notes with $ 185 million in cash and 11.1 million shares of our stock. In 2020, we recognized aggregate non-operating gains of $ 40 million in connection with debt prepayments and conversions of $ 3.77 billion of principal amount of notes (carrying value of $ 3.90 billion) for an aggregate of $ 3.92 billion in cash. In 2019, we recognized aggregate non-operating losses of $ 396 million in connection with debt prepayments, repurchases, and conversions of $ 1.80 billion of principal amount of notes (carrying value of $ 1.60 billion) for an aggregate of $ 2.38 billion in cash. 63 Maturities of Notes Payable As of September 2, 2021, maturities of notes payable were as follows: 2022 $ 1 2023 1,250 2024 600 2025 1,188 2026 500 2027 and thereafter 2,450 Unamortized discounts ( 21 ) $ 5,968 Commitments As of September 2, 2021, we had commitments of approximately $ 6.5 billion for purchase obligations, of which approximately $ 5.0 billion will be due within one year. Purchase obligations include payments for the acquisition of property, plant, and equipment, and other goods or services of either a fixed or minimum quantity and exclude any lease payments for leases that have been executed but have not yet commenced. 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 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 21, 2014, Elm 3DS Innovations, LLC (“Elm”) filed a patent infringement action against Micron; Micron Semiconductor Products, Inc.; and Micron Consumer Products Group, Inc. in the U.S. District Court for the District of Delaware. On March 27, 2015, Elm filed an amended complaint against the same entities. The amended complaint alleges that unspecified semiconductor products of ours that incorporate multiple stacked die infringe 13 U.S. patents and seeks damages, attorneys’ fees, and costs. On July 14, 2021, the action was dismissed 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; 64 | 2021 10-K 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 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 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, 65 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 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. 66 | 2021 10-K Additionally, six cases have been filed in the following Canadian courts: Superior Court of Quebec, the Federal Court of Canada, the Ontario Superior Court of Justice, and the Supreme Court of British Columbia. 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. 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 alleges 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 seeks damages, restitution, disgorgement of profits, injunctive relief, and other appropriate relief. 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. A trial is scheduled to begin on January 10, 2022. 67 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. 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. We repurchased 15.6 million shares of our common stock for $ 1.20 billion in 2021 and 3.6 million shares for $ 176 million in 2020. Through September 2, 2021, we had repurchased an aggregate of $ 4.04 billion under the authorization. Amounts repurchased are included in treasury stock. Dividends : On August 2, 2021, we announced that our Board of Directors had declared a quarterly dividend of $ 0.10 per share, payable in cash on October 18, 2021 , to shareholders of record as of the close of business on October 1, 2021 . Accumulated Other Comprehensive Income : Changes in accumulated other comprehensive income by component for the year ended September 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 3, 2020 $ 45 $ 19 $ 8 $ ( 1 ) $ 71 Other comprehensive income before reclassifications ( 52 ) 8 ( 6 ) 2 ( 48 ) Amount reclassified out of accumulated other comprehensive income ( 41 ) ( 1 ) ( 3 ) — ( 45 ) Tax effects 26 ( 4 ) 2 — 24 Other comprehensive income (loss) ( 67 ) 3 ( 7 ) 2 ( 69 ) As of September 2, 2021 $ ( 22 ) $ 22 $ 1 $ 1 $ 2 68 | 2021 10-K Fair Value Measurements The estimated fair values and carrying values of our outstanding debt instruments (excluding the carrying value of equity components of our convertible notes) were as follows: 2021 2020 As of Fair Value Carrying Value Fair Value Carrying Value Notes $ 6,584 $ 5,973 $ 6,710 $ 6,026 Convertible notes — — 634 131 The fair values of our convertible notes were determined based on Level 2 inputs, including the trading price of our convertible notes when available, our stock price, and interest rates based on similar debt issued by parties with credit ratings similar to ours. The fair values of our other 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. Assets classified as held for sale are carried at the lower of estimated fair value or carrying value. Significant judgments and assumptions are required to estimate their fair values. Actual selling prices could vary significantly from our estimated fair value and we could recognize additional losses in the event that the sales prices of assets classified as held for sale are lower than their carrying values. Derivative Instruments Notional or Contractual Amount Fair Value of Assets (1) Liabilities (2) As of September 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 ) As of September 3, 2020 Derivative instruments with hedge accounting designation Cash flow currency hedges $ 1,845 $ 41 $ ( 2 ) Derivative instruments without hedge accounting designation Non-designated currency hedges 1,587 4 ( 1 ) $ 45 $ ( 3 ) (1) Included in receivables – other and other noncurrent assets. (2) Included in accounts payable and accrued expenses – other 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- 69 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 $ 52 million and gains of $ 51 million for 2021 and 2020, respectively, in accumulated other comprehensive income from cash flow hedges. The amounts recognized in 2019 were not significant. We recognized losses of $ 14 million in 2021 in cost of goods sold related to the amounts excluded from hedge effectiveness testing. The amounts recognized in 2020 and 2019 were not significant. We reclassified $ 41 million of gains in 2021 from accumulated other comprehensive income to earnings, primarily to cost of goods sold. The reclassifications were not significant in 2020 or 2019. As of September 2, 2021, we expect to reclassify $ 12 million of pre-tax losses related to cash flow hedges from accumulated other comprehensive income into earnings in the next 12 months. Substantially all of the cash flow hedging relates to foreign currency contracts for all periods presented, and the commodity hedges had an immaterial impact. 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. For derivative instruments without hedge accounting designation, we recognized gains of $ 21 million and losses of $ 32 million for 2020 and 2019, respectively. The amounts recognized in 2021 were not significant. Convertible Notes Settlement Obligations : For settlement obligations associated with our convertible notes subject to mark-to-market accounting treatment, the fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2), which requires inputs of stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and dividend rate. The subsequent measurement amounts were based on the volume-weighted-average trading price of our common stock (Level 2). (See “Debt.”) We recognized losses $ 14 million and $ 58 million for 2020 and 2019, respectively, in other non-operating income (expense), net for the changes in fair value of the derivative settlement obligations. The amounts recognized in 2021 were not significant. Derivative Counterparty Credit Risk and Master Netting Arrangements Our derivative instruments expose us to credit risk to the extent counterparties may be unable to meet the terms of the contracts. Our maximum exposure to loss due to credit risk if counterparties fail completely to perform according to the terms of the contracts would generally equal the fair value of assets for these contracts as listed in the tables above. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading risk across multiple financial institutions. As of September 2, 2021 and September 3, 2020, amounts netted under our master netting arrangements were not significant. 70 | 2021 10-K Equity Plans As of September 2, 2021, 104 million shares of our common stock were available for future awards under our equity plans, including 23 million shares approved for issuance under our employee stock purchase plan (“ESPP”). Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”) As of September 2, 2021, there were 20 million shares of Restricted Stock Awards outstanding, 17 million of which contained only service conditions. For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth or one-third increments during each year of employment after the grant date. Restrictions generally lapse on Restricted Stock with performance or market conditions as conditions are met over a 3 -year period. At the end of the performance period, the number of actual shares to be awarded will vary between 0 % and 200 % of target amounts, depending upon the achievement level. Restricted Stock Awards activity for 2021 is summarized as follows: Number of Shares Weighted-Average Grant Date Fair Value Per Share Outstanding as of September 3, 2020 17 $ 42.13 Granted 11 53.58 Restrictions lapsed ( 6 ) 38.99 Canceled ( 2 ) 41.54 Outstanding as of September 2, 2021 20 49.39 For the year ended 2021 2020 2019 Restricted stock award shares granted 11 8 9 Weighted-average grant-date fair value per share $ 53.58 $ 46.44 $ 41.11 Aggregate vesting-date fair value of shares vested $ 385 $ 294 $ 248 Employee Stock Purchase Plan (“ESPP”) Our ESPP was offered to substantially all employees beginning in August 2018 and permitted eligible employees to purchase shares of our common stock through payroll deductions of up to 10 % of their eligible compensation, subject to certain limitations prior to August 2021. Beginning in August 2021, employees are permitted to deduct up to 15 % of their eligible compensation to purchase shares under the ESPP. The purchase price of the shares under the ESPP equals 85 % of the lower of the fair market value of our common stock on either the first or last day of each six -month offering period. Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period. Grant-date fair value and assumptions used in the Black-Scholes option valuation model were as follows: For the year ended 2021 2020 2019 Weighted-average grant-date fair value per share $ 20.71 $ 14.24 $ 11.60 Average expected life in years 0.5 0.5 0.5 Weighted-average expected volatility 41 % 45 % 45 % Weighted-average risk-free interest rate 0.1 % 0.8 % 2.2 % Expected dividend yield 0.3 % 0.0 % 0.0 % Under the ESPP, employees purchased 3 million shares of common stock for $ 140 million in 2021 and 3 million shares for $ 118 million in 2020. 71 Stock Options As of September 2, 2021, stock options of 4 million shares were outstanding, which are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options expire 8 years from the date of grant. We did not grant any stock options in 2021 or 2020 and options granted in 2019 were not material. Stock options of 3 million shares were exercised in 2021. The total intrinsic value for options exercised was $ 143 million, $ 130 million, and $ 108 million in 2021, 2020, and 2019, respectively. Stock-based Compensation Expense For the year ended 2021 2020 2019 Stock-based compensation expense by caption Cost of goods sold $ 186 $ 139 $ 102 Research and development 110 86 68 Selling, general, and administrative 99 103 73 $ 395 $ 328 $ 243 Stock-based compensation expense by type of award Restricted stock awards $ 333 $ 272 $ 178 ESPP 52 39 32 Stock options 10 17 33 $ 395 $ 328 $ 243 Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards. Income tax benefits for share-based awards were $ 83 million, $ 72 million, and $ 66 million for 2021, 2020, and 2019, respectively. Stock-based compensation expense of $ 30 million and $ 42 million was capitalized and remained in inventory as of September 2, 2021 and September 3, 2020, respectively. As of September 2, 2021, $ 691 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2025, resulting in a weighted-average period of 1.2 years. Employee Benefit Plans We have employee retirement plans at our U.S. and international sites. Details of significant plans are as follows: Employee Savings Plan for U.S. Employees We have a 401(k) retirement plan under which U.S. employees may contribute up to 75 % of their eligible pay, subject to Internal Revenue Service annual contribution limits, to various savings alternatives, none of which include direct investment in our stock. We match in cash eligible contributions from employees up to 5 % of the employee’s annual eligible earnings. Contribution expense for the 401(k) plan was $ 77 million, $ 66 million, and $ 67 million in 2021, 2020, and 2019, respectively. Retirement Plans We have pension plans available to employees at various foreign sites. As of September 2, 2021, the projected benefit obligations of our plans were $ 222 million and plan assets were $ 256 million. As of September 3, 2020, the projected benefit obligations of our plans were $ 202 million and plan assets were $ 222 million. Pension expense was not material for 2021, 2020, or 2019. 72 | 2021 10-K Revenue and Customer Contract Liabilities Revenue by Technology Revenue by technology is presented in the table below: For the year ended 2021 2020 2019 DRAM $ 20,039 $ 14,510 $ 16,841 NAND 7,007 6,131 5,355 Other (primarily 3D XPoint memory and NOR) 659 794 1,210 $ 27,705 $ 21,435 $ 23,406 Beginning in 2020, revenues for MCPs and SSDs, which contain both DRAM and NAND, are disaggregated into DRAM and NAND based on the relative values of each component. The amounts for 2019 in the table above have been conformed to the current period presentation. See “Segment and Other Information” for disclosure of disaggregated revenue by market segment. Customer Contract Liabilities Our contract liabilities from customer advances are for advance payments received from customers to secure product in future periods. Other contract liabilities consist of amounts received in advance of satisfying performance obligations. These balances are reported within other current liabilities and other noncurrent liabilities. Revenue recognized during 2021 from the ending balance of 2020 included $ 64 million from meeting performance obligations of other contract liabilities and shipments against customer advances. The following table presents contract liabilities: As of 2021 2020 Contract liabilities from customer advances $ 74 $ 40 Other contract liabilities — 25 $ 74 $ 65 Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Substantially all contracts with our customers are short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. From time to time, we have contracts with initial terms that include performance obligations that extend beyond one year. As of September 2, 2021, our future performance obligations were $ 117 million , substantially all of which are expected to be recognized as revenue within one year . As of September 2, 2021 and September 3, 2020, other current liabilities included $ 846 million and $ 466 million for estimates of consideration payable to customers, respectively, including estimates for pricing adjustments and returns. 73 Restructure and Asset Impairments For the year ended 2021 2020 2019 Restructure and asset impairments $ 488 $ 60 $ ( 29 ) Restructure and asset impairments for 2021 are primarily due to the planned sale of our Lehi, Utah facility. (See “Lehi, Utah Fab and 3D XPoint.”) Restructure and asset impairments for 2020 primarily related to asset impairments and employee relocation and severance costs related to right-sizing our Lehi, Utah facility. In 2019, we finalized the sale of our 200mm fabrication facility in Singapore and recognized restructure gains of $ 128 million. Other restructure and asset impairments for 2019 primarily related to our continued emphasis to centralize certain key functions. Other Operating (Income) Expense, Net For the year ended 2021 2020 2019 Patent license charges $ 128 $ — $ — (Gain) loss on disposition of property, plant, and equipment ( 24 ) ( 3 ) 43 Other ( 9 ) 11 35 $ 95 $ 8 $ 78 Other Non-Operating Income (Expense), Net For the year ended 2021 2020 2019 Gain (loss) on investments $ 82 $ 22 $ ( 4 ) Gain (loss) on debt prepayments, repurchases, and conversions ( 1 ) 40 ( 396 ) Other — ( 2 ) ( 5 ) $ 81 $ 60 $ ( 405 ) 74 | 2021 10-K Income Taxes Our income tax (provision) benefit consisted of the following: For the year ended 2021 2020 2019 Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees U.S. $ ( 211 ) $ 308 $ ( 67 ) Foreign 6,429 2,675 7,115 $ 6,218 $ 2,983 $ 7,048 Income tax (provision) benefit Current U.S. federal $ ( 42 ) $ ( 20 ) $ ( 36 ) State ( 1 ) ( 2 ) ( 2 ) Foreign ( 370 ) ( 148 ) ( 319 ) ( 413 ) ( 170 ) ( 357 ) Deferred U.S. federal ( 9 ) 39 ( 146 ) State 28 23 91 Foreign — ( 172 ) ( 281 ) 19 ( 110 ) ( 336 ) Income tax (provision) benefit $ ( 394 ) $ ( 280 ) $ ( 693 ) The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate: For the year ended 2021 2020 2019 U.S. federal income tax (provision) benefit at statutory rate $ ( 1,306 ) 21.0 % $ ( 626 ) 21.0 % $ ( 1,480 ) 21.0 % Change in unrecognized tax benefits ( 238 ) 3.8 % ( 33 ) 1.1 % ( 59 ) 0.8 % U.S. tax on foreign operations ( 226 ) 3.6 % ( 14 ) 0.5 % ( 327 ) 4.6 % Foreign tax rate differential 951 ( 15.3 ) % 253 ( 8.5 ) % 993 ( 14.1 ) % Debt premium deductions 130 ( 2.1 ) % — — % — — % Research and development tax credits 123 ( 2.0 ) % 62 ( 2.1 ) % 92 ( 1.3 ) % Change in valuation allowance 54 ( 0.9 ) % ( 20 ) 0.7 % ( 40 ) 0.6 % State taxes, net of federal benefit 59 ( 0.9 ) % 23 ( 0.8 ) % 102 ( 1.4 ) % Foreign derived intangible income deduction 18 ( 0.3 ) % 67 ( 2.2 ) % — — % Other 41 ( 0.6 ) % 8 ( 0.3 ) % 26 ( 0.4 ) % Income tax (provision) benefit $ ( 394 ) 6.3 % $ ( 280 ) 9.4 % $ ( 693 ) 9.8 % 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 $ 758 million (benefiting our diluted earnings per share by $ 0.66 ) for 2021, by $ 215 million ($ 0.19 per diluted share) for 2020, and by $ 756 million ($ 0.66 per diluted share) for 2019. As of September 2, 2021, certain non-U.S. subsidiaries had cumulative undistributed earnings of $ 3.53 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable. 75 Pursuant to SEC Staff Accounting Bulletin No. 118, measurement period adjustments in 2019 related to the Tax Cuts and Jobs Act included $ 47 million of benefit for the repatriation tax, net of adjustments related to uncertain tax positions. We recognize the foreign minimum tax in the period the tax is incurred. Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following: As of 2021 2020 Deferred tax assets Net operating loss and tax credit carryforwards $ 783 $ 912 Accrued salaries, wages, and benefits 206 176 Operating lease liabilities 109 114 Property, plant, and equipment 37 — Other 115 91 Gross deferred tax assets 1,250 1,293 Less valuation allowance ( 233 ) ( 294 ) Deferred tax assets, net of valuation allowance 1,017 999 Deferred tax liabilities Right-of-use assets ( 90 ) ( 95 ) Product and process technology ( 12 ) ( 57 ) Property, plant, and equipment — ( 50 ) Other ( 143 ) ( 99 ) Deferred tax liabilities ( 245 ) ( 301 ) Net deferred tax assets $ 772 $ 698 Reported as Deferred tax assets $ 782 $ 707 Deferred tax liabilities (included in other noncurrent liabilities) ( 10 ) ( 9 ) Net deferred tax assets $ 772 $ 698 We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of September 2, 2021, and September 3, 2020, we had a valuation allowance of $ 233 million and $ 294 million, respectively, against our net deferred tax assets, primarily related to carryforwards in Malaysia and Japan. Changes in 2021 in the valuation allowance were due to loss expirations during the year, offset by adjustments based on management’s assessment of tax credits, allowances and net operating losses that are more likely than not to be realized. As of September 2, 2021, our net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows: Year of Expiration State Japan Malaysia Singapore Other Total 2022 - 2026 $ 49 $ 617 $ — $ — $ 1 $ 667 2027 - 2031 537 — — — — 537 2032 - 2036 355 — — — — 355 2037 - 2041 61 — — — — 61 Indefinite 1 — 606 477 7 1,091 $ 1,003 $ 617 $ 606 $ 477 $ 8 $ 2,711 76 | 2021 10-K As of September 2, 2021, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows: Year of Tax Credit Expiration U.S. Federal State Total 2022 - 2026 $ — $ 45 $ 45 2027 - 2031 — 84 84 2032 - 2036 32 132 164 2037 - 2041 364 5 369 Indefinite — 104 104 $ 396 $ 370 $ 766 Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits: For the year ended 2021 2020 2019 Beginning unrecognized tax benefits $ 411 $ 383 $ 261 Increases related to tax positions from prior years 2 14 124 Increases related to tax positions taken in current year 260 27 44 Decreases related to tax positions from prior years ( 13 ) ( 13 ) ( 46 ) Ending unrecognized tax benefits $ 660 $ 411 $ 383 As of September 2, 2021, gross unrecognized tax benefits were $ 660 million, substantially all of which would affect our effective tax rate in the future, if recognized. Increases to unrecognized tax benefits were primarily due to tax return positions taken during 2021. Amounts accrued for interest and penalties related to uncertain tax positions were not significant for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be significant. We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2017 through 2021 . We are currently under audit by the Internal Revenue Service for our 2018 and 2019 tax years. In addition, tax returns that remain open to examination in Singapore, Taiwan and Japan range from the years 2015 to 2021 . We believe that adequate amounts of taxes and related interest and penalties have been provided, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition. Earnings Per Share For the year ended 2021 2020 2019 Net income attributable to Micron – Basic $ 5,861 $ 2,687 $ 6,313 Assumed conversion of debt — ( 4 ) ( 12 ) Net income attributable to Micron – Diluted $ 5,861 $ 2,683 $ 6,301 Weighted-average common shares outstanding – Basic 1,120 1,110 1,114 Dilutive effect of equity plans and convertible notes 21 21 29 Weighted-average common shares outstanding – Diluted 1,141 1,131 1,143 Earnings per share Basic $ 5.23 $ 2.42 $ 5.67 Diluted 5.14 2.37 5.51 77 Antidilutive potential common shares excluded from the computation of diluted earnings per share, that could dilute basic earnings per share in the future, were as follows at the end of the periods shown: For the year ended 2021 2020 2019 Equity plans 2 5 8 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. As of September 2, 2021 and September 3, 2020, CNBU, MBU, SBU, and EBU had goodwill of $ 832 million, $ 198 million, $ 101 million, and $ 97 million, respectively. 78 | 2021 10-K For the year ended 2021 2020 2019 Revenue CNBU $ 12,280 $ 9,184 $ 9,968 MBU 7,203 5,702 6,403 SBU 3,973 3,765 3,826 EBU 4,209 2,759 3,137 All Other 40 25 72 $ 27,705 $ 21,435 $ 23,406 Operating income (loss) CNBU $ 4,295 $ 2,010 $ 4,645 MBU 2,173 1,074 2,606 SBU 173 36 ( 386 ) EBU 1,006 301 923 All Other 20 ( 2 ) 13 7,667 3,419 7,801 Unallocated Stock-based compensation ( 395 ) ( 328 ) ( 243 ) Inventory accounting policy change to FIFO ( 133 ) — — Change in inventory cost absorption ( 160 ) — — 3D XPoint inventory write-down ( 49 ) — — Restructure and asset impairments ( 488 ) ( 60 ) 32 Patent license charges ( 128 ) — — Employee severance — — ( 116 ) Other ( 31 ) ( 28 ) ( 98 ) ( 1,384 ) ( 416 ) ( 425 ) Operating income $ 6,283 $ 3,003 $ 7,376 Depreciation and amortization expense included in operating income was as follows: For the year ended 2021 2020 2019 CNBU $ 2,497 $ 2,318 $ 1,833 MBU 1,101 1,436 1,235 SBU 1,028 1,115 1,555 EBU 1,553 741 748 All Other 8 12 27 Unallocated 27 28 26 $ 6,214 $ 5,650 $ 5,424 79 Certain Concentrations Revenue by market segment as an approximate percent of total revenue is presented in the table below: For the year ended 2021 2020 2019 Mobile 25 % 25 % 25 % Client and graphics 20 % 20 % 20 % Enterprise and cloud server 20 % 20 % 20 % SSDs and other storage 15 % 20 % 15 % Automotive, industrial, and consumer 15 % 15 % 15 % Revenue from WPG Holdings Limited was 13 % of total revenue in 2021. Revenue from Kingston Technology Company, Inc. was 11 % of total revenue for 2020 and 2019. Revenue from Huawei Technologies Co. Ltd. was 12 % of total revenue for 2019. Our sales to WPG were included in our MBU, CNBU, EBU, and SBU segments; our sales to Kingston were included in our CNBU, MBU, and SBU segments; and our sales to Huawei were included in our MBU, CNBU, SBU, and EBU segments. We generally have multiple sources of supply for our raw materials and production equipment; however, only a limited number of suppliers are capable of delivering certain raw materials and production equipment that meet our standards and, in some cases, materials or production equipment are provided by a single supplier. Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, money market accounts, certificates of deposit, fixed-rate debt securities, trade receivables, share repurchase, and derivative contracts. We invest through high-credit-quality financial institutions and, by policy, generally limit the concentration of credit exposure by restricting investments with any single obligor and monitoring credit risk of bank counterparties on an ongoing basis. A concentration of credit risk may exist with respect to receivables of certain customers. We perform ongoing credit evaluations of customers worldwide and generally do not require collateral from our customers. Historically, we have not experienced material losses on receivables. A concentration of risk may also exist with respect to our foreign currency hedges as the number of counterparties to our hedges is limited and the notional amounts are relatively large. We seek to mitigate such risk by limiting our counterparties to major financial institutions and through entering into master netting arrangements. Geographic Information Revenue based on the geographic location of our customers’ headquarters was as follows: For the year ended 2021 2020 2019 United States $ 12,155 $ 10,381 $ 12,451 Taiwan 6,606 3,657 2,703 Mainland China (excluding Hong Kong) 2,456 2,337 3,595 Hong Kong 2,582 1,792 1,614 Japan 1,652 1,387 958 Other Asia Pacific 1,420 1,157 1,032 Other 834 724 1,053 $ 27,705 $ 21,435 $ 23,406 80 | 2021 10-K Long-lived assets by geographic area consisted of property, plant, and equipment and right-of-use assets and were as follows: As of 2021 2020 Taiwan $ 11,457 $ 10,516 Singapore 9,411 8,161 Japan 7,222 6,478 United States (1) 5,205 5,434 Malaysia 757 385 China 436 478 Other 175 163 $ 34,663 $ 31,615 (1) Included $ 899 million (net of impairment) as of September 2, 2021 of property, plant, and equipment for our Lehi facility that was classified as held for sale and presented in other current assets. 81 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Micron Technology, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Micron Technology, Inc. and its subsidiaries (the “Company”) as of September 2, 2021 and September 3, 2020, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended September 2, 2021, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 2, 2021 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of September 2, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 2, 2021 and September 3, 2020 , and the results of its operations and its cash flows for each of the three years in the period ended September 2, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 2, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO. Changes in Accounting Principle As discussed in the Significant Accounting Policies and Inventories notes to the consolidated financial statements, the Company changed the manner in which it accounts for inventory costing from the average cost inventory accounting method to the first-in, first-out inventory accounting method and the manner in which it classifies spare parts for equipment from raw materials inventories to other current assets in 2021, and the manner in which it accounts for leases in 2020. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 82 | 2021 10-K Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Inventories (Finished goods and Work in process) As described in the Significant Accounting Policies and Inventories notes to the consolidated financial statements, as of September 2, 2021, the Company had a net inventory balance for finished goods and work in process inventory totaling approximately $4 billion. As disclosed by management, determining the net realizable value of the Company's net inventories involves significant judgments, including projecting future average selling prices and future sales volumes. The principal considerations for our determination that performing procedures relating to the valuation of finished goods and work in process inventories is a critical audit matter are the significant judgment by management in determining the net realizable value of inventories, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures over the reasonableness of the significant assumptions related to future average selling prices and future sales volumes, used to estimate the net realizable value of finished goods and work in process inventories. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the net realizable value of finished goods and work in process inventories, significant assumptions, and data used to value the inventories. These procedures also included, among others, testing management's process for developing the net realizable value estimate of finished goods and work in process inventories; evaluating the appropriateness of management’s estimated net realizable value methodology; testing the completeness, accuracy, and relevance of underlying data used in the estimate of net realizable value of finished goods and work in process inventories; and evaluating the reasonableness of management's assumptions related to future average selling prices and future sales volumes. Evaluating management's assumptions related to future average selling prices and future sales volumes involved evaluating whether the assumptions used by management were reasonable considering (i) current and past results, including recent sales, (ii) the consistency with external market, industry data and current contract prices, (iii) a comparison of the prior year estimates to actual results in the current year, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit. 83 /s/ PricewaterhouseCoopers LLP San Jose, California October 8, 2021 We have served as the Company’s auditor since 1984. 84 | 2021 10-K ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.