Business Context and Reporting Period
Micron Technology, Inc. designs and manufactures DRAM, NAND, NOR, SSD, managed NAND, and related memory and storage solutions for data center, client, mobile, automotive, industrial, and consumer markets. This Form 10-K covers the 52-week fiscal year ended September 2, 2021, compared primarily with the 53-week fiscal year ended September 3, 2020.
- Fiscal 2021 revenue was generated primarily by DRAM, which represented $20.04 billion of revenue, and NAND, which represented $7.01 billion.
- Reportable segment revenue: CNBU $12.28 billion, MBU $7.20 billion, SBU $3.97 billion, and EBU $4.21 billion.
- Approximately one-half of revenue came from the ten largest customers; WPG Holdings represented 13% of fiscal 2021 revenue.
Financial Performance and Position
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $27.705 billion | $21.435 billion | +29% |
| Gross profit | $10.423 billion | $6.552 billion | +59% |
| Gross margin | 38% | 31% | +7 percentage points |
| Operating income | $6.283 billion | $3.003 billion | +109% |
| Operating margin | 23% | 14% | +9 percentage points |
| Net income attributable to Micron | $5.861 billion | $2.687 billion | +118% |
| Diluted EPS | $5.14 | $2.37 | +117% |
| Cash flow from operations | $12.468 billion | $8.306 billion | +50% |
| Capital expenditures | $10.030 billion | $8.223 billion | +22% |
- DRAM sales increased 38%, driven by bit shipments in the high-20% range and a high-single-digit increase in average selling prices. NAND sales increased 14%, as bit shipments grew in the high-20% range, partially offset by a low-10% decline in average selling prices.
- Segment operating income was $4.295 billion for CNBU, $2.173 billion for MBU, $173 million for SBU, and $1.006 billion for EBU.
- Cash, cash equivalents, and marketable investments totaled $10.398 billion at year-end, including $7.763 billion of cash and equivalents. Cash increased from $9.190 billion at September 3, 2020.
- Total debt had a carrying value of $6.776 billion, comprising $155 million current debt and $6.621 billion long-term debt. The $2.5 billion revolving credit facility was undrawn and fully available.
- Total assets were $58.849 billion and total shareholders’ equity was $43.933 billion at September 2, 2021.
- Net cash used in financing activities was $1.781 billion, including $1.294 billion of treasury-stock purchases, $1.520 billion of debt repayments, and $112 million of dividends declared.
Material Changes Versus the Prior Comparable Period
- Revenue, operating income, net income, and operating cash flow increased substantially, reflecting stronger DRAM pricing, higher bit shipments, manufacturing cost reductions, and demand growth across data center, mobile, automotive, industrial, and consumer markets.
- Gross margin expanded from 31% to 38%. MTU underutilization costs declined to $335 million from $557 million.
- EBU revenue increased 53%, CNBU revenue increased 34%, MBU revenue increased 26%, and SBU revenue increased 6%.
- Micron ceased development of 3D XPoint technology and agreed to sell its Lehi, Utah facility to Texas Instruments for $900 million. The transaction was expected to close in the first quarter of fiscal 2022.
- Micron recorded a $435 million impairment and restructuring charge related to the Lehi assets and a $49 million 3D XPoint inventory write-down. The Lehi charge generated a $104 million tax benefit.
- Effective in the second quarter, Micron changed inventory costing from average cost to FIFO. The change produced a $133 million charge to cost of goods sold and reduced fiscal 2021 diluted EPS by approximately $0.11. Changes in inventory cost absorption produced an additional approximately $160 million charge to operating income.
- Micron repurchased 15.6 million shares for $1.20 billion during fiscal 2021. Approximately $5.962 billion remained under the $10 billion authorization at fiscal year-end.
Guidance, Outlook, Commentary, Risks, and Unusual Items
- Management estimated fiscal 2022 capital expenditures, net of partner contributions, at approximately $11 billion to $12 billion, weighted toward the first half of the year. Planned investments support the 176-layer NAND transition, next-generation NAND and DRAM pilot lines, and EUV lithography infrastructure.
- Management stated that cash, investments, operating cash flow, and available financing should be sufficient for at least the next 12 months and the foreseeable future.
- Near-term bit shipments could be constrained by shortages of non-memory components affecting customers and by supply constraints for certain integrated-circuit components.
- Key industry risks include volatile DRAM and NAND average selling prices, semiconductor oversupply, intense competition, rapid technology transitions, high fixed manufacturing costs, inventory obsolescence, and dependence on successful R&D and yield improvements.
- COVID-19 remained a source of uncertainty through potential impacts on demand, manufacturing, employee availability, supply chains, construction projects, and operating costs.
- International exposure is significant: 56% of fiscal 2021 revenue was from customers headquartered outside the United States and 89% was shipped to customer locations outside the United States. Trade restrictions, particularly U.S.-China restrictions, could limit sales to customers and access to markets or supplies.
- Pending or unresolved matters include patent litigation, Chinese patent proceedings, the Qimonda/Inotera dispute, antitrust claims and a Chinese regulatory investigation, securities matters, arbitration with Intel, and other legal claims. The filing states that potential losses generally cannot be reasonably estimated.
- Tax incentives reduced fiscal 2021 tax expense by $758 million, and the effective tax rate was 6.3%. Future benefits depend partly on meeting operational and employment requirements in relevant jurisdictions.
Important Facts for Investors to Verify
- Whether the Lehi facility sale closed on schedule and whether final proceeds or additional impairment charges differed from the $900 million expected consideration.
- Actual fiscal 2022 capital expenditures, free cash flow, and returns generated by the planned $11 billion to $12 billion investment program.
- Subsequent DRAM and NAND pricing, bit shipment growth, inventory levels, and gross-margin trends.
- The effect of supply-chain constraints and non-memory component shortages on customer orders and Micron’s bit shipments.
- Changes in U.S.-China trade restrictions, customer concentration, and the company’s ability to replace restricted or lost demand.
- Developments in the disclosed patent, antitrust, Qimonda, Intel arbitration, and other legal proceedings.
- The sustainability of foreign tax incentives, the 6.3% effective tax rate, the $10 billion repurchase authorization, and future dividend payments.