Analysis of Debt
Total Debt (Carrying Amount)
Micron Technology Inc., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2024-08-29), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-09-01), 10-K (reporting date: 2021-09-02), 10-K (reporting date: 2020-09-03), 10-K (reporting date: 2019-08-29).
- Current Debt
- The current debt exhibited a significant decline from 1310 million USD in August 2019 to a low of 103 million USD in September 2022. This downward trend indicates a reduction in short-term liabilities over this four-year span. However, there was a reversal beginning in 2023, with current debt increasing to 278 million USD and further rising to 431 million USD by August 2024, suggesting a recent buildup of short-term borrowings or obligations.
- Long-Term Debt
- Long-term debt showed a consistent upward trajectory throughout the entire period. Starting at 4541 million USD in August 2019, it steadily increased to 6803 million USD by September 2022. A marked acceleration in long-term debt was observed in the subsequent years, with balances nearly doubling to 13052 million USD in August 2023, and a slight decrease to 12966 million USD by August 2024. The surge in long-term debt during 2023 indicates aggressive financing, potentially for capital investment or expansion purposes.
- Total Debt (Carrying Amount)
- Total debt closely mirrored the trend of long-term debt given its dominant share in the debt structure. The total debt rose gradually from 5851 million USD in August 2019 to 6906 million USD in September 2022. Thereafter, a sharp increase occurred aligning with the spike in long-term debt, reaching 13330 million USD in August 2023 and slightly increasing further to 13397 million USD by August 2024. This pattern reflects an overall growth in the company's total borrowing, primarily driven by increased long-term liabilities.
- Summary
- Overall, the company's debt profile over the analyzed period indicates a strategic escalation in long-term debt with a controlled short-term debt exposure until 2022, followed by a recent increase in short-term obligations. The significant rise in total and long-term debt since 2022 suggests substantial capital raising activities, possibly linked to strategic initiatives or investments. The recent uptick in current debt may reflect shifts in working capital management or upcoming debt maturities being addressed through short-term borrowings.
Total Debt (Fair Value)
| Aug 29, 2024 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Notes | 11,316) |
| Convertible notes | —) |
| Finance lease obligations | 2,054) |
| Total debt (fair value) | 13,370) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.00 |
Based on: 10-K (reporting date: 2024-08-29).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt: 5.29%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 6.95% | 921) | 64) | |
| 7.08% | 1,063) | 75) | |
| 5.07% | 499) | 25) | |
| 4.27% | 838) | 36) | |
| 5.52% | 597) | 33) | |
| 5.40% | 698) | 38) | |
| 6.54% | 1,261) | 82) | |
| 4.73% | 847) | 40) | |
| 5.41% | 994) | 54) | |
| 2.77% | 996) | 28) | |
| 5.96% | 745) | 44) | |
| 6.01% | 891) | 54) | |
| 3.41% | 497) | 17) | |
| 3.52% | 496) | 17) | |
| 4.91% | 2,054) | 101) | |
| Total | 13,397) | 708) | |
| 5.29% | |||
Based on: 10-K (reporting date: 2024-08-29).
1 US$ in millions
2 Weighted-average interest rate = 100 × 708 ÷ 13,397 = 5.29%
Interest Costs Incurred
Micron Technology Inc., interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2024-08-29), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-09-01), 10-K (reporting date: 2021-09-02), 10-K (reporting date: 2020-09-03), 10-K (reporting date: 2019-08-29).
- Trend in Interest Expense
- The interest expense shows a general upward trend over the six-year period. Beginning at $128 million in 2019, it increased significantly to $194 million in 2020. Following a slight decrease to $183 million in 2021, it rose marginally to $189 million in 2022. The expense then experienced a sharp increase in 2023 and 2024, reaching $388 million and $562 million respectively, indicating a substantial rise in borrowing costs or debt levels during these later years.
- Trend in Interest Capitalized as Part of Cost of Property, Plant, and Equipment
- This category demonstrates a decreasing trend from 2019 through 2021, declining from $103 million to $66 million. It then showed a modest recovery to $77 million in 2022, followed by a pronounced increase in 2023 and 2024 to $208 million and $225 million, respectively. This pattern suggests growing investments in property, plant, and equipment being financed through debt, especially in the most recent years.
- Trend in Interest Costs Incurred
- The aggregate interest costs incurred reveal an overall increasing trajectory across the period. Starting at $231 million in 2019, the costs rose to $271 million in 2020, then fell slightly to $249 million in 2021 before increasing again marginally to $266 million in 2022. A significant escalation occurred in 2023, with costs more than doubling to $596 million, followed by a further increase to $787 million in 2024. This sharp rise aligns with the steep increases observed in both interest expense and capitalized interest in recent years.
- Overall Insights
- The data indicates that the company has faced rising interest costs over the analyzed timeframe, with a marked acceleration from 2023 onward. The substantial increase in both interest expenses and capitalized interest suggests an expansion in debt financing, potentially linked to increased investment activities in property, plant, and equipment. This heightened interest burden could impact financial leverage and future profitability, warranting ongoing monitoring and strategic management.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2024-08-29), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-09-01), 10-K (reporting date: 2021-09-02), 10-K (reporting date: 2020-09-03), 10-K (reporting date: 2019-08-29).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 1,791 ÷ 562 = 3.19
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 1,791 ÷ 787 = 2.28
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio demonstrated significant fluctuations over the years. Initially, it stood at a very strong level of 56.09 in 2019, indicating excellent ability to cover interest expenses. However, it sharply declined to 16.41 in 2020, reflecting a notable reduction in financial strength. The ratio rebounded to 35.18 in 2021 and further increased to 51.66 in 2022, suggesting a period of improving operating performance and interest coverage.
- Nonetheless, a dramatic deterioration occurred in 2023, with the ratio turning negative at -13.58, signaling an inability to cover interest expenses from operating earnings during that year. Although there was some recovery in 2024, reaching 3.19, this remains at a low level compared to prior years, indicating a fragile financial position with continued challenges in meeting interest obligations.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio, which accounts for capitalized interest, follows a similar trend pattern but at consistently lower levels compared to the non-adjusted ratio. It started at 31.08 in 2019, less than the non-adjusted ratio, and declined sharply to 11.75 in 2020.
- This ratio then improved to 25.86 in 2021 and 36.71 in 2022, reflecting a strengthening ability to cover interest when capitalized interest is considered. However, it also turned negative in 2023 at -8.84, representing operational difficulties impacting interest payments, followed by a modest recovery to 2.28 in 2024, still indicative of financial strain relative to earlier periods.
- Overall Insights
- Both ratios show high volatility over the six-year period, indicating varying operational performance and changing cost structures affecting interest expense coverage. The years 2020 and 2023 stand out as periods with significant pressure on the company’s ability to cover interest costs, particularly 2023 where negative ratios highlight financial distress. Recent partial recoveries suggest some improvement but ratios remain well below historical highs, implying continued caution is warranted regarding the company’s financial health and its ability to comfortably meet interest obligations.