Li Auto Inc.Announces Unaudited First Quarter 2024 Financial Results Quarterly total revenues reach.
2024-07-24
12页
5星级
SAP Half-Year Report 2024 1/51 SAP Half-Year Report 2024 SAP Half-Year Report 2024 2/51 Table of Con.
2024-07-24
51页
5星级
Meta Earnings Presentation Q1 $12,024$12,788$12,766$15,005$12,710$14,131$14,956$17,784$15,451$6,364$.
2024-07-23
18页
5星级
1 Autohome Inc.Announces Unaudited First Quarter 2024 Financial Results BEIJING,May 8,2024 Autohome .
2024-07-15
8页
5星级
Q2 2024 Update1Highlights03Financial Summary04Operational Summary06Vehicle Capacity07Core Technology08Other Highlights09Outlook10Photos&Charts11Key Metrics20Financial Statements22Additional Information282S U M M A R YH I G H L I G H T S(1)Excludes SBC(stock-based compensation),net of tax;(2)Free cash flow=operating cash flow less capex;(3)Includes cash,cash equivalents and investments;(4)Active driver supervision required;does not make the vehicle autonomous.Profitability$1.6B GAAP operating income in Q2 after restructuring and other charges of$0.6B$1.5B GAAP net income in Q2$1.8B non-GAAP net income1 in Q2In Q2,we achieved record quarterly revenues despite a difficult operating environment.The Energy Storage business continues to grow rapidly,setting a record in Q2 with 9.4 GWh of deployments,resulting in record revenues and gross profits for the overall segment.We also saw a sequential rebound in vehicle deliveries in Q2 as overall consumer sentiment improved and we launched attractive financing options to offset the impact of sustained high interest rates.We recognized record regulatory credit revenues in Q2 as other OEMs are still behind on meeting emissions requirements.Global EV penetration returned to growth in Q2 and is taking share from ICE vehicles.We believe that a pure EV is the optimal vehicle design and will ultimately win over consumers as the myths on range,charging and service are debunked.Progress continued for our AI initiatives in Q2.We reduced the price of FSD(Supervised)4 in North America and launched free trials to everyone with the necessary hardware.These programs have demonstrated success and are laying the foundation for more meaningful FSD monetization.We expect to see an increase in FSD attach rates for our fleet as the capability improves and we increase awareness of the convenience and safety it offers users.Overall,our focus remains on company-wide cost reduction,including reducing COGS per vehicle,growing our traditional hardware business and accelerating development of our AI-enabled products and services.Though timing of Robotaxi deployment depends on technological advancement and regulatory approval,we are working vigorously on this opportunity given the outsized potential value.Concurrently,we are managing our product portfolio with a long-term orientation and focusing on growing sales,maximizing our installed base and generating sufficient cash flow to invest in future growth.CashOperating cash flow of$3.6B in Q2Free cash flow2 of$1.3B in Q2(AI infrastructure capex was$0.6B in Q2)$3.9B increase in our cash and investments3 in Q2 to$30.7BOperationsRecord energy storage deployment of 9.4 GWh in Q2Optimus began performing tasks autonomously in one of our facilitiesCybertruck became the best-selling EV pickup in the U.S.in Q23F I N A N C I A L S U M M A R Y(Unaudited)($in millions,except percentages and per share data)Q2-2023Q3-2023Q4-2023Q1-2024Q2-2024YoYTotal automotive revenues21,26819,62521,56317,37819,878-7%Energy generation and storage revenue1,5091,5591,4381,6353,014100%Services and other revenue2,1502,1662,1662,2882,60821%Total revenues24,92723,35025,16721,30125,5002%Total gross profit4,5334,1784,4383,6964,5781%Total GAAP gross margin18.2.9.6.4.0%-23 bpOperating expenses2,134 2,4142,374 2,5252,97339%Income from operations2,399 1,7642,064 1,1711,605-33%Operating margin9.6%7.6%8.2%5.5%6.3%-333 bpAdjusted EBITDA4,653 3,7583,953 3,3843,674-21justed EBITDA margin18.7.1.7.9.4%-426 bpNet income attributable to common stockholders(GAAP)2,703 1,8537,928 1,1291,478-45%Net income attributable to common stockholders(non-GAAP)3,148 2,3182,485 1,5361,812-42%EPS attributable to common stockholders,diluted(GAAP)0.78 0.532.27 0.340.42-46%EPS attributable to common stockholders,diluted(non-GAAP)0.91 0.660.71 0.450.52-43%Net cash provided by operating activities3,065 3,3084,370 2423,61218pital expenditures(2,060)(2,460)(2,306)(2,773)(2,270)10%Free cash flow1,005 8482,064(2,531)1,34234sh,cash equivalents and investments23,075 26,07729,094 26,86330,72033O I N A N C I A L S U M M A R YRevenueTotal revenue increased 2%YoY in Q2 to$25.5B.YoY,revenue was impacted by the following items: growth in the Energy Generation and Storage business Cybertruck deliveries higher regulatory credit revenue growth in Services and Other-reduced S3XY vehicle average selling price(ASP)(excl.FX impact),due to pricing,attractive financing options and mix-decline in S3XY vehicle deliveries-negative FX impact of$0.3B1ProfitabilityOur operating income decreased YoY to$1.6B in Q2,resulting in a 6.3%operating margin.YoY,operating income was primarily impacted by the following items:-reduced S3XY vehicle ASP as noted above-restructuring charges-increase in operating expenses largely driven by AI projects-decline in S3XY vehicle deliveries higher regulatory credit revenue growth in Energy Generation and Storage gross profit lower cost per vehicle,including lower raw material costs,freight and duties lower cost of production ramp of 4680 cells and other related chargesCashQuarter-end cash,cash equivalents and investments in Q2 was$30.7B.The sequential increase of$3.9B was a result of positive free cash flow of$1.3B,driven by an inventory decrease of$1.8B and partially offset by AI infrastructure capex of$0.6B in Q2.5(1)Impact is calculated on a constant currency basis.Actuals are compared against current results converted into USD using average exchange rates from Q223.Q2-2023Q3-2023Q4-2023Q1-2024Q2-2024YoYModel 3/Y production460,211416,800476,777412,376386,576-16%Other models production19,48913,68818,21220,99524,25524%Total production479,700430,488494,989433,371410,831-14%Model 3/Y deliveries446,915419,074461,538369,783422,405-5%Other models deliveries19,22515,98522,96917,02721,55112%Total deliveries466,140435,059484,507386,810443,956-5%of which subject to operating lease accounting21,88317,42310,5638,36510,227-53%Total end of quarter operating lease vehicle count168,058176,231176,564173,131171,3532%Global vehicle inventory(days of supply)(1)161615281813%Storage deployed(GWh)3.74.03.24.19.4158%Tesla locations1,0681,1291,2081,2581,28620%Mobile service fleet1,7691,8461,9091,8971,8967%Supercharger stations5,2655,5955,9526,2496,47323%Supercharger connectors48,08251,10554,89257,57959,59624%(1)Days of supply is calculated by dividing new vehicle ending inventory by the relevant quarters deliveries and using 75 trading days(aligned with Automotive News definition).O P E R A T I O N A L S U M M A R Y(Unaudited)6V E H I C L E C A P A C I T YCurrent Installed Annual Vehicle CapacityRegionModelCapacityStatusCaliforniaModel S/Model X100,000ProductionModel 3/Model Y550,000ProductionShanghaiModel 3/Model Y950,000ProductionBerlinModel Y375,000ProductionTexasModel Y250,000ProductionCybertruck125,000ProductionNevadaTesla Semi-Pilot productionVariousNext Gen Platform-In developmentTBDRoadster-In developmentInstalled capacity current production rate and there may be limitations discovered as production rates approach capacity.Production rates depend on a variety of factors,including equipment uptime,component supply,downtime related to factory upgrades,regulatory considerations and other factors.Market share of Tesla vehicles by region(TTM)Source:Tesla estimates based on latest available data from ACEA;A;CAAM light-duty vehicles only;TTM=Trailing twelve months1 IRA=Inflation Reduction ActWe continued to add to our vehicle lineup globally,including the introduction of new Model 3 and Model Y trims and additional paint options for the S3XY lineup.After a sequential decline in production in Q2,we expect a sequential increase in production in Q3.US:California,Nevada and TexasRefreshed Model 3 ramp continued successfully,including the introduction of Model 3 Performance in Q2 and Long Range Rear-Wheel Drive in July.We also continue to qualify more Model 3 trims for the IRA1 Tax Credit.Cybertruck production more than tripled sequentially and remains on track to achieve profitability by end of year.Preparation of Semi factory continues and is on track to begin production by end of 2025.China:ShanghaiWe significantly increased deliveries in several markets supplied by Gigafactory Shanghai in Q2,including South Korea.While the automotive market in China remains among the most competitive globally,we feel that our cost structure and focus on core functionality that drives value for customers including autonomy position us well for the long-term.Europe:Berlin-BrandenburgIn Q2,Gigafactory Berlin-Brandenburg began producing vehicles for right-hand drive markets and delivered its first units to the U.K.We also began delivering vehicles to Qatar,while increasing deliveries to Israel and Taiwan.Our regional production strategy provides flexibility as needs change across markets.70%1%2%3%4%US/CanadaEuropeChinaTesla AI training capacity ramp through end of year(H100 equivalent GPUs)C O R E T E C H N O L O G YCumulative miles driven with FSD(Supervised)(billions)Artificial Intelligence Software and HardwareIn Q2,we focused on reducing interventions with FSD(Supervised)1,while improving driving comfort.Notably,we rolled out a version of FSD(Supervised)that primarily relies on eye tracking software to monitor driver attentiveness.We also increased the robustness of our next-gen FSD(Supervised)model with substantially more parameters.Looking ahead to future autonomous driving and robotaxi service,we continued progress on software and hardware development.Optimus is performing its first task handling batteries in one of our facilities.The south extension of Gigafactory Texas is nearing completion and will house our largest cluster of H100s yet.Vehicle and Other SoftwareWe continue to release software optimizations that enable an increasingly better experience for customers.The Spring Release included an immersive full-screen vehicle controls view when parked,large playback controls and quick access to Recents,Favorites and Up Next in media player,and an expandable Autopilot visualization,with a smaller map in the top right for trip guidance.Audible is now available as a native app,and Spotify queues can be synced across vehicles and devices and playback speed can be adjusted.Battery,Powertrain and ManufacturingIn Q2,we produced over 50%more 4680 cells than in Q1 and continued to see cost improvements.In July,we entered validation of vehicle testing for our first prototype Cybertruck produced with in-house dry cathode 4680 cells a major cost reduction milestone once ramped.Cost reduction across our product lineup remains a top priority.80.00.20.40.60.81.01.21.41.6FSD V12 MilesFSD Miles015,00030,00045,00060,00075,00090,000Existing CapacityFuture Planned Capacity(1)Active driver supervision required;does not make the vehicle autonomous.O T H E R H I G H L I G H T SEnergy Storage deployments(GWh)Non-Automotive gross profit($M)Our non-automotive business is becoming an increasingly profitable part of Tesla.As energy storage products continue to ramp and our vehicle fleet continues to grow,we are expecting continued profit growth of our non-automotive business over time.Energy Generation and StorageBoth Megapack and Powerwall achieved record deployment in Q2,resulting in 9.4 GWh of total storage deployments.Overall,the Energy business achieved record revenues and gross profit in Q2.The Lathrop Megafactory continues to ramp successfully,achieving a production record in Q2,and the Shanghai Megafactory remains on track for start of production in Q1 2025.While we expect production to continue to grow sequentially,deployments will continue to fluctuate.Deployment timing depends on many factors,including project milestones and logistics timing as we deliver product globally from a single factory.Powerwall 3 rollout continued successfully,and is now available in Canada,the U.K.and Germany,in addition to the U.S.Services and OtherSequential profit growth for the Services and Other business was driven mostly by service center margin improvement and higher gross profit generation from collision repair.We continue to expand our Supercharging network and expect to deploy more capacity this year than the rest of the industry combined in North America with a focus on capital efficiency,congestion and improved coverage.In an effort to increase EV penetration,we remain committed to opening the network to non-Tesla EVs,and plan to onboard more OEMs in North America by the end of the year.Over time,network utilization should continue to increase,driving revenue growth and profit generation.9012345678910-1,000-800-600-400-20002004006008001,000O U T L O O KVolumeOur company is currently between two major growth waves:the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products,including those built on our next generation vehicle platform.In 2024,our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023,as our teams work on the launch of the next generation vehicle and other products.In 2024,the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should outpace the Automotive business.CashWe have sufficient liquidity to fund our product roadmap,long-term capacity expansion plans and other expenses.Furthermore,we will manage the business such that we maintain a strong balance sheet during this uncertain period.ProfitWhile we continue to execute on innovations to reduce the cost of manufacturing and operations,over time,we expect our hardware-related profits to be accompanied by an acceleration of AI,software and fleet-based profits.ProductPlans for new vehicles,including more affordable models,remain on track for start of production in the first half of 2025.These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times.This should help us fully utilize our current expected maximum capacity of close to three million vehicles,enabling more than 50%growth over 2023 production before investing in new manufacturing lines.Our purpose-built Robotaxi product will continue to pursue a revolutionary“unboxed”manufacturing strategy.10P H O T O S&C H A R T SE L E C T R I C V E H I C L E A D O P T I O N R A T E -R E T U R N E D T O G R O W T H I N Q 2Global BEV market share*(12-months trailing)ChinaWorld ex-China*Source:ev- and https:/ I G A F A C T O R Y T E X A S -S O U T H E X P A N S I O N D A T A C E N T E R13C O R P U S C H R I S T I L I T H I U M R E F I N E R Y -S T A R T O F P R O D U C T I O N I N 2 0 2 514C Y B E R T R U C K -C O A T I N G S S H O P15M O D E L Y I N Q U I C K S I L V E R -1.9 9%A P R A V A I L A B L E F O R A L L M O D E L Y T R I M S I N T H E U S T H R O U G H A U G U S T 3 1 S T16L U N A R S I L V E R -N O W A V A I L A B L E F O R M O D E L S A N D M O D E L X17M E G A P A C K -P L U S P O W E R S 1 G W H S I E R R A E S T R E L L A S I T E18O P T I M U S -A U T O N O M O U S L Y H A N D L I N G B A T T E R Y C E L L S19Vehicle Deliveries(millions of units)K E Y M E T R I C S Q U A R T E R L Y(Unaudited)Operating Cash Flow($B)Free Cash Flow($B)Net Income($B)Adjusted EBITDA($B)200.00.10.20.30.40.53Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024-3-2-101234563Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-20240123456783Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024Operating Cash Flow($B)Free Cash Flow($B)K E Y M E T R I C S T R A I L I N G 1 2 M O N T H S(T T M)(Unaudited)Net Income($B)Adjusted EBITDA($B)Vehicle Deliveries(millions of units)210.00.20.40.60.81.01.21.41.61.82.03Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024024681012141618203Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024024681012141618203Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024F I N A N C I A L S T A T E M E N T SIn millions of USD or shares as applicable,except per share dataQ2-2023Q3-2023Q4-2023Q1-2024Q2-2024REVENUESAutomotive sales20,419 18,58220,63016,460 18,530Automotive regulatory credits282 554433442 890Automotive leasing567 489500476 458Total automotive revenues21,268 19,62521,56317,378 19,878Energy generation and storage1,509 1,5591,4381,635 3,014Services and other2,150 2,1662,1662,288 2,608Total revenues24,927 23,35025,16721,301 25,500COST OF REVENUESAutomotive sales16,841 15,65617,20213,897 15,962Automotive leasing338 301296269 245Total automotive cost of revenues17,179 15,95717,49814,166 16,207Energy generation and storage1,231 1,1781,1241,232 2,274Services and other1,984 2,0372,1072,207 2,441Total cost of revenues20,394 19,17220,72917,605 20,922Gross profit4,533 4,1784,4383,696 4,578OPERATING EXPENSESResearch and development943 1,1611,0941,151 1,074Selling,general and administrative1,191 1,2531,2801,374 1,277Restructuring and other-622Total operating expenses2,134 2,4142,3742,525 2,973INCOME FROM OPERATIONS2,399 1,7642,0641,171 1,605Interest income238 282333350 348Interest expense(28)(38)(61)(76)(86)Other income(expense),net328 37(145)10820INCOME BEFORE INCOME TAXES2,937 2,0452,1911,553 1,887Provision for(benefit from)income taxes323 167(5,752)409393NET INCOME2,614 1,8787,9431,144 1,494Net(loss)income attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries(89)251515 16NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS2,703 1,8537,9281,129 1,478Net income per share of common stock attributable to common stockholdersBasic$0.85$0.58$2.49$0.37$0.46 Diluted$0.78$0.53$2.27$0.34$0.42 Weighted average shares used in computing net income per share of common stockBasic3,1713,1763,1813,1863,191Diluted3,4783,4933,4923,4843,481S T A T E M E N T O F O P E R A T I O N S(Unaudited)23B A L A N C E S H E E T(Unaudited)In millions of USD30-Jun-2330-Sep-2331-Dec-2331-Mar-2430-Jun-24ASSETSCurrent assets Cash,cash equivalents and investments23,075 26,077 29,094 26,863 30,720 Accounts receivable,net3,447 2,520 3,508 3,887 3,737 Inventory14,356 13,721 13,626 16,033 14,195 Prepaid expenses and other current assets2,997 2,708 3,388 3,752 4,325 Total current assets43,875 45,026 49,616 50,535 52,977Operating lease vehicles,net5,935 6,119 5,989 5,736 5,541Solar energy systems,net5,365 5,293 5,229 5,162 5,102Property,plant and equipment,net26,389 27,744 29,725 31,436 32,902Operating lease right-of-use assets3,352 3,637 4,180 4,367 4,563Digital assets,net184 184 184 184 184Goodwill and intangible assets,net465 441 431 421 413Deferred tax assets537 648 6,733 6,769 6,692Other non-current assets4,489 4,849 4,531 4,616 4,458 Total assets90,591 93,941 106,618 109,226 112,832LIABILITIES AND EQUITYCurrent liabilities Accounts payable15,273 13,937 14,431 14,725 13,056 Accrued liabilities and other8,684 8,530 9,080 9,243 9,616 Deferred revenue2,176 2,206 2,864 3,024 2,793 Current portion of debt and finance leases(1)1,459 1,967 2,373 2,461 2,264 Total current liabilities27,592 26,640 28,748 29,453 27,729Debt and finance leases,net of current portion(1)872 2,426 2,857 2,899 5,481Deferred revenue,net of current portion3,021 3,059 3,251 3,214 3,357Other long-term liabilities6,924 7,321 8,153 8,480 9,002 Total liabilities38,409 39,446 43,009 44,046 45,569Redeemable noncontrolling interests in subsidiaries288 277 242 73 72Total stockholders equity51,130 53,466 62,634 64,378 66,468Noncontrolling interests in subsidiaries764 752 733 729 723 Total liabilities and equity90,591 93,941 106,618 109,226 112,832(1)Breakdown of our debt is as follows:Vehicle and energy product financing(non-recourse)1,475 3,660 4,613 4,820 7,355 Recourse debt44 44 44 54 7 Total debt excluding vehicle and energy product financing44 44 44 54 7 Days sales outstanding12 12 11 16 14 Days payable outstanding70 70 63 75 6024In millions of USDQ2-2023Q3-2023Q4-2023Q1-2024Q2-2024CASH FLOWS FROM OPERATING ACTIVITIESNet income2,614 1,878 7,943 1,1441,494Adjustments to reconcile net income to net cash provided by operating activities:Depreciation,amortization and impairment1,154 1,235 1,232 1,2461,278Stock-based compensation445 465 484 524439Deferred income taxes(148)(113)(6,033)(11)144Other(47)145 262 119Changes in operating assets and liabilities(953)(302)482(2,661)138Net cash provided by operating activities3,065 3,308 4,370 2423,612CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures(2,060)(2,460)(2,306)(2,773)(2,270)Purchases of solar energy systems,net of sales(0)1(1)(4)(2)Purchases of investments(5,075)(6,131)(5,891)(6,622)(8,143)Proceeds from maturities of investments3,539 3,816 3,394 4,3156,990Proceeds from sales of investments138 200Business combinations,net of cash acquired(76)12 Net cash used in investing activities(3,534)(4,762)(4,804)(5,084)(3,225)CASH FLOWS FROM FINANCING ACTIVITIESNet cash flows from other debt activities(124)(140)(141)(140)2,598Net(repayments)borrowings under vehicle and energy product financing(233)2,194952 216(212)Net cash flows from noncontrolling interests Solar(34)(45)(76)(131)(43)Other63 254 152 251197Net cash(used in)provided by financing activities(328)2,263887 1962,540Effect of exchange rate changes on cash and cash equivalents and restricted cash(94)(98)146(79)(37)Net(decrease)increase in cash and cash equivalents and restricted cash(891)711599(4,725)2,890Cash and cash equivalents and restricted cash at beginning of period16,770 15,879 16,590 17,18912,464Cash and cash equivalents and restricted cash at end of period15,879 16,590 17,189 12,46415,354S T A T E M E N T O F C A S H F L O W S(Unaudited)25In millions of USD or shares as applicable,except per share dataQ2-2023Q3-2023Q4-2023Q1-2024Q2-2024Net income attributable to common stockholders(GAAP)2,703 1,853 7,928 1,1291,478Stock-based compensation expense,net of tax445 465 484 407334Release of valuation allowance on deferred tax assets (5,927)Net income attributable to common stockholders(non-GAAP)3,148 2,318 2,485 1,5361,812Less:Buy-outs of noncontrolling interests 2 1(42)Net income used in computing diluted EPS attributable to common stockholders(non-GAAP)3,148 2,316 2,484 1,5781,812EPS attributable to common stockholders,diluted(GAAP)0.78 0.53 2.27 0.340.42Stock-based compensation expense per share,net of tax0.13 0.13 0.14 0.110.10Release of valuation allowance on deferred tax assets per share (1.70)EPS attributable to common stockholders,diluted(non-GAAP)0.91 0.66 0.71 0.450.52Shares used in EPS calculation,diluted(GAAP and non-GAAP)3,478 3,493 3,492 3,4843,481Net income attributable to common stockholders(GAAP)2,703 1,853 7,928 1,1291,478Interest expense28 38 61 7686Provision for(benefit from)income taxes323 167(5,752)409393Depreciation,amortization and impairment1,154 1,235 1,232 1,2461,278Stock-based compensation expense445 465 484 524439Adjusted EBITDA(non-GAAP)4,653 3,758 3,953 3,3843,674Total revenues24,927 23,350 25,167 21,30125,500Adjusted EBITDA margin(non-GAAP)18.7.1.7.9.4%R E C O N C I L I A T I O N O F G A A P T O N O N G A A P F I N A N C I A L I N F O R M A T I O N(Unaudited)26R E C O N C I L I A T I O N O F G A A P T O N O N G A A P F I N A N C I A L I N F O R M A T I O N(Unaudited)In millions of USD3Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024Net cash provided by operating activities TTM(GAAP)9,931 11,497 13,851 14,078 16,031 14,724 13,242 13,956 12,164 13,256 10,98511,532Capital expenditures TTM(5,823)(6,482)(6,901)(7,126)(7,110)(7,158)(7,463)(7,793)(8,450)(8,898)(9,599)(9,809)Free cash flow TTM(non-GAAP)4,108 5,015 6,950 6,952 8,921 7,566 5,779 6,163 3,714 4,358 1,3861,723In millions of USD3Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024Net income attributable to common stockholders TTM(GAAP)3,468 5,519 8,399 9,516 11,190 12,556 11,751 12,195 10,756 14,997 13,61312,388Interest expense TTM546 371 333 302 229 191 159 143 128 156 203261Provision for(benefit from)income taxes TTM490 699 976 1,066 1,148 1,132 1,047 1,165 1,027(5,001)(4,853)(4,783)Depreciation,amortization and impairment TTM2,681 2,911 3,170 3,411 3,606 3,747 3,913 4,145 4,424 4,667 4,8674,991Stock-based compensation expense TTM2,196 2,121 1,925 1,812 1,699 1,560 1,560 1,644 1,747 1,812 1,9181,912Adjusted EBITDA TTM(non-GAAP)9,381 11,621 14,803 16,107 17,872 19,186 18,430 19,292 18,082 16,631 15,74814,769TTM=Trailing twelve monthsIn millions of USD4Q-20201Q-20212Q-20213Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024Net cash provided by operating activities(GAAP)3,019 1,641 2,124 3,147 4,585 3,995 2,351 5,100 3,278 2,513 3,065 3,308 4,370 2423,612Capital expenditures(1,151)(1,348)(1,505)(1,819)(1,810)(1,767)(1,730)(1,803)(1,858)(2,072)(2,060)(2,460)(2,306)(2,773)(2,270)Free cash flow(non-GAAP)1,868 293 619 1,328 2,775 2,228 621 3,297 1,420 441 1,005 848 2,064(2,531)1,342In millions of USD4Q-20201Q-20212Q-20213Q-20214Q-20211Q-20222Q-20223Q-20224Q-20221Q-20232Q-20233Q-20234Q-20231Q-20242Q-2024Net income attributable to common stockholders(GAAP)270 438 1,142 1,618 2,321 3,318 2,259 3,292 3,687 2,513 2,703 1,853 7,928 1,1291,478Interest expense246 99 75 126 71 61 44 53 33 29 28 38 61 7686Provision for(benefit from)income taxes83 69 115 223 292 346 205 305 276 261 323 167(5,752)409393Depreciation,amortization and impairment618 621 681 761 848 880 922 956 989 1,046 1,154 1,235 1,232 1,2461,278Stock-based compensation expense633 614 474 475 558 418 361 362 419 418 445 465 484 524439Adjusted EBITDA(non-GAAP)1,850 1,841 2,487 3,203 4,090 5,023 3,791 4,968 5,404 4,267 4,653 3,758 3,953 3,3843,67427A D D I T I O N A L I N F O R M A T I O NWEBCAST INFORMATIONTesla will provide a live webcast of its second quarter 2024 financial results conference call beginning at 4:30 p.m.CT on July 23,2024 at .This webcast will also be available for replay for approximately one year thereafter.CERTAIN TERMSWhen used in this update,certain terms have the following meanings.Our vehicle deliveries include only vehicles that have been transferred to end customers with all paperwork correctly completed.Our energy product deployment volume includes both customer units when installed and equipment sales at time of delivery.Adjusted EBITDA is equal to(i)net income(loss)attributable to common stockholders before(ii)(a)interest expense,(b)provision for income taxes,(c)depreciation,amortization and impairment and(d)stock-based compensation expense.Free cash flow is operating cash flow less capital expenditures.Average cost per vehicle is cost of automotive sales divided by new vehicle deliveries(excluding operating leases).“Days sales outstanding”is equal to(i)average accounts receivable,net for the period divided by(ii)total revenues and multiplied by(iii)the number of days in the period.“Days payable outstanding”is equal to(i)average accounts payable for the period divided by(ii)total cost of revenues and multiplied by(iii)the number of days in the period.“Days of supply”is calculated by dividing new car ending inventory by the relevant quarters deliveries and using 75 trading days.Constant currency impacts are calculated by comparing actuals against current results converted into USD using average exchange rates from the prior period.NON-GAAP FINANCIAL INFORMATIONConsolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis to supplement our consolidated financial results.Our non-GAAP financial measures include non-GAAP net income(loss)attributable to common stockholders,non-GAAP net income(loss)attributable to common stockholders on a diluted per share basis(calculated using weighted average shares for GAAP diluted net income(loss)attributable to common stockholders),Adjusted EBITDA,Adjusted EBITDA margin and free cash flow.These non-GAAP financial measures also facilitate managements internal comparisons to Teslas historical performance as well as comparisons to the operating results of other companies.Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating,budgeting and financial planning purposes.Management also believes that presentation of the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results of operations,so that investors can see through the eyes of Tesla management regarding important financial metrics that Tesla uses to run the business and allowing investors to better understand Teslas performance.Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore,should only be read in conjunction with financial information reported under U.S.GAAP when understanding Teslas operating performance.A reconciliation between GAAP and non-GAAP financial information is provided above.FORWARD-LOOKING STATEMENTSCertain statements in this update,including statements in the“Outlook”section;statements relating to the future development,strategy,ramp,production and capacity,demand and market growth,cost,pricing and profitability,investment,deliveries,deployment,availability and other features and improvements and timing of existing and future Tesla products and services;statements regarding operating margin,operating profits,spending and liquidity;and statements regarding expansion,improvements and/or ramp and related timing at our factories are“forward-looking statements”that are subject to risks and uncertainties.These forward-looking statements are based on managements current expectations,and as a result of certain risks and uncertainties,actual results may differ materially from those projected.The following important factors,without limitation,could cause actual results to differ materially from those in the forward-looking statements:the risk of delays in launching and manufacturing our products and features cost-effectively;our ability to grow our sales,delivery,installation,servicing and charging capabilities and effectively manage this growth;consumers demand for electric vehicles generally and our vehicles specifically;the ability of suppliers to deliver components according to schedules,prices,quality and volumes acceptable to us,and our ability to manage such components effectively;any issues with lithium-ion cells or other components manufactured at our factories;our ability to ramp our factories in accordance with our plans;our ability to procure supply of battery cells,including through our own manufacturing;risks relating to international expansion;any failures by Tesla products to perform as expected or if product recalls occur;the risk of product liability claims;competition in the automotive and energy product markets;our ability to maintain public credibility and confidence in our long-term business prospects;our ability to manage risks relating to our various product financing programs;the status of government and economic incentives for electric vehicles and energy products;our ability to attract,hire and retain key employees and qualified personnel;our ability to maintain the security of our information and production and product systems;our compliance with various regulations and laws applicable to our operations and products,which may evolve from time to time;risks relating to our indebtedness and financing strategies;and adverse foreign exchange movements.More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports,including the risks identified under the section captioned“Risk Factors”in our annual report on Form 10-K filed with the SEC on January 26,2024.Tesla disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information,future events or otherwise.28
2024-07-11
29页
5星级
Job No:52409Proof Event:2Black Line Level:0Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600BlackRock Energy and Resources Income Trust plcHalf Yearly Financial Report 31 May 2024NM0824U-3791214-1/50ContentsJob No:52409Proof Event:2Black Line Level:0Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Keeping in touch We know how important it is to receive up-to-date information about the Company.To ensure that you are kept abreast,please scan the QR code to the right of this page to visit our website.If you have a smartphone,you can activate the QR code by opening the camera on your device and pointing it at the QR code.This will then open a link to the relevant section on the Companys website.By visiting our website,you will have the opportunity to sign up to our monthly newsletter which includes our latest factsheets and market commentary,as well as upcoming events and webinars.Information about how we process personal data is contained in our privacy policy available on our website.Further information about the Company can be found on our website at http:/ enquiries about the Company should be directed to the Company Secretary at:.Use this QR code to take you to the Companys website where you can sign up to monthly insights and factsheets.NM0824U-3791214-2/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Financial highlightsas at 31 May 2024121.50pOrdinary share price12.3%1,2138.24pNet asset value(NAV)per ordinary share13.8%1.83pRevenue earnings per ordinary share22.72.2mNet assets2.250pInterim dividends2.3%3.7%2,3Yield1 Mid-market share price and NAV performance are calculated in Pound Sterling terms with dividends reinvested.2 Alternative Performance Measures,see Glossary on pages 41 to 45.3 Based on dividends paid and declared for the twelve months to 31 May 2024 and share price as at 31 May 2024.Section 1:Overview and performance 1The above financial highlights are as at 31 May 2024 and percentage comparisons are against 30 November 2023.Revenue earnings per ordinary share percentage comparison is against 31 May 2023.As well as expanded demand for wind and solar,ambitions of a tripling in renewables capacity by 2030 confirmed at COP28 in Dubai will need to be matched with equally ambitious investments into electricity grids.PHOTO COURTESY OF NEXTERA ENERGYNM0824U-3791214-3/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66002 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Why BlackRock Energy and Resources Income Trust plc?Investment objectiveThe Companys objectives are to achieve an annual dividend target and,over the long term,capital growth by investing primarily in securities of companies operating in the mining and energy sectors.Reasons to invest A member of the Association of Investment CompaniesFurther details about the Company,including the latest annual and half yearly financial reports,fact sheets and stock exchange announcements,are available on the website at sensitivityA conviction-led approach,with the potential to benefit from inflation,delivering an attractive income from the best ideas in the Mining,Traditional Energy and Energy Transition sectors.YieldThe Company offers an attractive 3.7%dividend yield as at 31 May 2024,as the managers focus on higher quality companies with strong cash flows that are good allocators of capital.The Companys global nature means that the large majority of its holdings generate earnings from businesses around the world.FlexibilityThe Companys flexibility means that the portfolio will adapt as the demand for Mining,Energy and Energy Transition related stocks changes.This approach allows the team to change the portfolio makeup to select the best stocks to generate returns.Energy Transition opportunitiesMining and Energy companies lie at the heart of the global economy.Without them,countries cannot grow and develop.Mining companies provide everything from materials to build wind turbines to lithium for electric cars.These companies provide an important role in the long-term de-carbonisation of the global economy.Energy companies power our cars,our homes and drive economic development.The path to a lower carbon global economy is forecast to disrupt many industries and business models creating remarkable opportunities.Investment in a specialist trust gives targeted exposure to these important companies,as it is positioned to capture such industry shifts and reap the benefits from this transition.ExpertiseThe Companys assets are managed by BlackRocks Natural Resources Team.The team have been running Mining funds since 1993,Traditional Energy funds since 1999 and Energy Transition funds since 2001.The team undertakes extensive,proprietary,on-the-ground research to get to know the management of the companies in which they invest.ESG integrationConsideration of Environmental,Social and Corporate Governance(ESG)insights and data is integrated within the investment process.The teams philosophy is that whilst ESG is only one of many factors that should be considered when making an investment,there is a positive correlation between good ESG and investment performance.Portfolio asset allocation reflects this,with a significant allocation to companies active in the Energy Transition sector.More details in respect of BlackRocks approach to ESG integration can be found on page 48 of the Annual Report for the year to 30 November 2023.Investors should note that no ESG focused investment strategy or exclusionary screens have been adopted by the Company.However,in active and advisory portfolios,BlackRock as Manager excludes companies that generate more than 25%of their revenues from thermal coal production.NM0824U-3791214-4/50Contents Section 1:Overview and performance 3Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600ContentsSection 1:Overview and performanceFinancial highlights 1Why BlackRock Energy and Resources Income Trust plc?2Performance record 4Chairmans Statement 5Investment Managers Report 7Section 2:PortfolioDistribution of investments 16Ten largest investments 17Investments 19Section 3:GovernanceInterim Management Report and Responsibility Statement 22Section 4:Financial statementsConsolidated Statement of Comprehensive Income 24Consolidated Statement of Changes in Equity 25Consolidated Statement of Financial Position 26Consolidated Cash Flow Statement 27Notes to the financial statements 28Section 5:Additional informationDirectors,management and other service providers 38Shareholder information 39Glossary 41Share fraud warning 46NM0824U-3791214-5/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66004 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Performance recordAs at 31 May 2024As at 30 November 2023Net assets(000)1172,233 162,362 Net asset value per ordinary share(pence)138.24 123.58 Ordinary share price(mid-market)(pence)121.50 110.40 Discount to net asset value212.1.7%For the six months ended31 May 2024For the year ended30 November2023Performance(with dividends reinvested)Net asset value per share2 13.8%(11.8)%Ordinary share price212.3%(15.2)%Performance since inception(with dividends reinvested)Net asset value per share2 255.3!2.2%Ordinary share price2213.79.4%For the six months ended31 May2024For the six months ended31 May2023Change%RevenueNet profit on ordinary activities after taxation(000)2,3343,209-27.3Revenue earnings per ordinary share(pence)31.832.37-22.7Interim dividends(pence)1st interim1.1251.102.32nd interim41.1251.102.3Total dividends payable/paid2.2502.202.36080100120140160180200220240260May 24Nov 20Share price performanceNAV performanceSources:BlackRock and LSEG Datastream.Performance figures are calculated on a mid-market basis in Pound Sterling terms,with dividends reinvested.Share price and NAV at 31 May 2019,rebased to 100.%May 19Nov 19May 20Nov 21May 21May 22Nov 22May 23Nov 23Performance from 31 May 2019 to 31 May 20241 The change in net assets reflects portfolio movements,the buyback of shares and dividends paid during the period.2 Alternative Performance Measures,see Glossary on pages 41 to 45.3 Further details are given in the Glossary on page 44.4 Paid on 15 July 2024.NM0824U-3791214-6/50Contents Section 1:Overview and performance 5Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Dear ShareholderI am pleased to report that our portfolio has performed well during the six months to 31 May 2024,delivering strong absolute NAV returns.My fellow Board members and I believe that the Company remains well positioned to exercise flexibility to take advantage of the energy transition to a lower carbon global economy.Market overviewAt the start of the Companys financial year on 1 December 2023 and through into the first half of 2024,markets as a whole showed resilience driven initially by signs of easing inflation and expectations of interest rate cuts in the US and UK.Generally strong corporate earnings and labour markets,as well as enthusiasm for AI,helped markets subsequently look through stubbornly high core services inflation(and consequently higher for longer interest rates)and political uncertainty,although some cracks are starting to show as of the time of writing.Given the mix of opportunity and risks,the Board is confident in your Companys 3-pronged investment strategy(Mining,Traditional Energy and Energy Transition),giving the portfolio managers the flexibility to be able to manoeuvre the portfolio around volatile markets to invest in stocks where they think the best investment opportunities can be found.The portfolio managers decreased Traditional Energy exposure through 2023 and into 2024,to stand at 28.3%at the end of the period,and increased the weighting in the Energy Transition sector to 26.3%at 31 May 2024.PerformanceDuring the six months ended 31 May 2024,the Companys net asset value(NAV)per share rose by 13.8%and its share price rose by 12.3%(both percentages in Pound Sterling terms with dividends reinvested).Although the Company does not have a formal benchmark,to set this in the context of the market backdrop,the MSCI ACWI Metals and Mining Index rose by 10.6%,S&P Clean Energy Index rose by 5.5%and the MSCI World Energy Index rose by 9.7%over the same period(all percentages in Pound Sterling terms with dividends reinvested).As noted above,the Board does not formally benchmark the Companys performance against Mining and Energy sector indices because meeting a specific dividend target is not within the scope of these indices and also because no index appropriately reflects the Companys blended exposure to the Energy(including the Energy Transition)and Mining sectors.For internal monitoring purposes,however,the Board compares the performance of the portfolio against a bespoke internal Mining and Energy composite index.The neutral sector weightings of this bespoke index are 40%Mining,30%Traditional Energy and 30%Energy Transition.Further information on investment performance is given in the Investment Managers Report.Chairmans StatementAdrian Brown ChairmanNM0824U-3791214-7/50Contents6 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Revenue return and dividendsThe Companys revenue return per share for the six-month period was 1.83 pence per share,a decrease of 22.7%over the same period last year(the revenue return for the six months to 31 May 2023 was 2.37 pence per share).The Boards current target is to declare quarterly dividends of at least 1.125 pence per share in the year to 30 November 2024,making a total of at least 4.50 pence per share for the year as a whole.This target represents a yield of 3.7sed on the share price of 121.50 pence per share as at 31 May 2024,and 3.8sed on the share price of 117.00 pence per share at the close of business on 29 July 2024.When the Companys net revenue is insufficient to meet the dividend payments,the Boards policy is to utilise the considerable distributable reserves,including group revenue reserves of 3.46p per share as at 31 May 2024(after adjusting for the second interim dividend for 2024)to meet any shortfall.This enables the portfolio managers to focus on total return from their investment selections.The first quarterly interim dividend of 1.125 pence per share was paid on 26 April 2024 and the second quarterly interim dividend of 1.125 pence per share was paid on 15 July 2024(four quarterly interim dividends each of 1.10 pence per share were paid in the twelve months ended 30 November 2023).The Company may write options to generate revenue return,although the portfolio managers focus is on investing the portfolio to generate an optimal level of total return without striving to meet an annual income target from option writing.Consequently,they will only enter into option transactions with the intention that the overall contribution is beneficial to total return.GearingThe Company operates a flexible gearing policy which depends on prevailing market conditions.It is not intended that gearing will exceed 20%of the gross assets of the Company.The maximum gearing used during the period was 14.8%,and the level of gearing at 31 May 2024 was 9.6%.For calculations,see the Glossary on pages 41 and 42.Management of share ratingThe Directors recognise the importance to investors that the Companys share price should not trade at a significant premium or discount to NAV,and therefore,in normal market conditions,may use the Companys share buyback,sale of shares from treasury and share issuance powers to ensure that the share price is broadly in line with the underlying NAV.The Board seeks to balance this aim,and to control discount volatility,against its desire to avoid excessive buybacks which impact the size of the Company and hence the liquidity of its shares and the Ongoing Charges Ratio.During the period under review,the discounts on Investment Trusts in general have remained at close to historically high levels-the average discount for the Investment Trusts sector(ex 3i Group)has been 15.5%-and in this context,your Companys shares have been trading at a discount between 8.0%and 14.1%over the period under review with an average discount of 11.2%.The Company has therefore actively intervened to control the discount and has bought back 6,800,000 shares for costs of 7,684,000,representing an average discount of 12.6%.All shares were bought back at a discount to NAV,delivering an uplift to the NAV per share of 0.5%for continuing shareholders for the period under review.Since 31 May 2024 and as at 29 July 2024,the Company has bought back 1,841,697 shares for costs of 2,172,000 and at an average discount of 10.7%.As at 29 July 2024 the Companys shares are trading at a discount of 10.0%.Market outlook&portfolio positioningDespite the current political uncertainty,the ongoing drive by governments to address climate change and decarbonise the energy supply chain remains an important backdrop for the Companys three pillars,of Traditional Energy,Mining and Metals and Energy Transition.The Board considers that all three sectors have an important role to play as the energy system transitions to a lower carbon economy.Traditional energy is needed to support base load energy to continue to power economies during the transition.The Metals and Mining sector provides the material supply chain for low carbon technologies from steel for wind turbines to lithium for electric cars.The path to a lower carbon economy is also expected to disrupt many industries and business models with scope for the Company to invest directly in opportunities in the Energy Transition space.Against this backdrop,the flexibility of the Companys investment mandate with the ability to shift exposure between Traditional Energy,Energy Transition and Mining sectors,means that it is uniquely positioned to serve investors as these sectors evolve.The Board is confident that the Company remains well-placed to benefit from these key investment trends over the long term.Adrian BrownChairman31 July 2024NM0824U-3791214-8/50Contents Section 1:Overview and performance 7Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Investment Managers ReportMarket overviewThe first six months of 2024 saw strong momentum in the broader equity markets carry over from 2023.Whilst the Companys net asset value per share(NAV)saw a positive return,it again lagged the overall equity market as all three sectors the Company invests in lagged broader markets,which were once again driven in a narrow fashion by the spectacular performance of a small group of technology and artificial intelligence(AI)related companies.See Figure 1 below.Figure 1:Top 5 contributing stocks by year(%return contribution to overall return on S&P 500 Index)Source:Baird.Tom HollMark Hume0%1%2%3%4%5%6%7%8%9%AppleAppleCitigroupChevronChevronGeneralElectricExxonMobileAppleIBMPfizerPfizerPhilipMorrisExxonMobileAppleBank ofAmericaGeneralElectricGeneralElectricJPMorganJPMorganJPMorganWells FargoWells FargoGeneralElectricGoogleGoogleGoogleGoogleGoogleGoogleGoogleJohnson&JohnsonMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftMicrosoftExxonMobileExxonMobileAppleAppleAppleAppleAppleAppleEli LillyMetaMetaMetaAT&TAmazonAmazonAmazonAmazonAmazonBerkshireIntelMerckMastercardNvidiaNvidiaNvidiaTesslaMerckExxonMobileChevron2010%return contribution to overall return on S&P 500 Index201120122013201420152016201720182019202020212022 2023AmazonBank of AmericaBerkshireCitigroupChevronMetaGeneral ElectricGoogleIBMIntelJohnson&Johnson JPMorganCoca-ColaMicrosoftPfizerPhilip MorrisAT&TWells FargoExxon MobileMastercardMerckNvidiaTesslaEli LillyGoogleMicrosoftAppleAmazonYTDAppleMetaGoogleMicrosoftNvidiaNM0824U-3791214-9/50Contents8 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Whilst the market excitement about AI has naturally focused on the relevant technology companies and associated industrial companies that will benefit from the step change in demand for cooling etc.,there has been less attention paid to the energy and materials side of the equation.Just like the energy transition,the growth in AI is going to be materials and energy intensive as well as compounding some of the bottlenecks faced by the energy transition.We see some exciting opportunities associated with grid spending that is required to cope with the electricity demand growth as well as the upgrades to the grids.These investments are critical to cope with the rising complexity of grid management resulting from the higher proportion of intermittent generation from sources such as solar and wind.Although the market has been pre-occupied with the timing and pace of interest rate cuts in the major economies,we have not viewed delays in rate cut expectations as a concern.The higher for longer scenario that now faces the market is a result of stronger than expected economic data in the US,which we view as positive for many of the companies held or potential investment opportunities for the portfolio.The resurgent US manufacturing industry,fuelled by the triple forces of reshoring driven geopolitics,the investments funded by the Inflation Reduction Act of 2022 and the AI/datacentre boom,are all energy and materials intensive forms of growth,that more than offset the costs of higher interest rates for many of the companies in the portfolio.Commodity31 May 202430 November 2023%changeH1 2024 on H1 2023Average Price%Change1 Base Metals(US$/tonne)Aluminium2,6072,15620.9-2.3Copper9,9138,38818.22.4Lead2,2162,0925.9-2.1Nickel19,45616,43818.4-32.0Tin32,77522,98442.69.1Zinc2,9152,46718.2-12.4Precious Metals(US$/ounce)Gold2,330.72,037.814.413.2Silver30.325.320.08.0Platinum1,048.0937.011.8-7.5Palladium949.01,025.0-7.4-36.8EnergyOil(WTI)(US$/barrel)78.075.63.13.2Oil(Brent)(US$/barrel)79.481.7-2.82.8Natural Gas(US$/Metric Million British Thermal Unit(mmbtu)1.82.8-35.3-27.5Bulk Commodities(US$/tonne)Iron ore117.0132.5-11.74.7Coking coal220.5285.0-22.6-4.2Thermal coal142.4129.010.4-47.9Equity IndicesMSCI ACWI2 Metals&Mining Index(US$)643.7578.711.21.4MSCI ACWI Metals&Mining Index()505.6457.210.6-1.7MSCI3 World Energy Index(US$)507.6459.910.48.5MSCI World Energy Index()398.7363.39.71.8S&P Clean Energy Index(US$)1,279.01,205.76.1-27.0S&P Clean Energy Index()822.3779.75.5-29.3Source:LSEG Datastream,June 2024.1Average of 1/12/2022-31/05/2023 to 1/12/2023-31/05/2024.2Morgan Stanley Capital International All Country Weighted Index.3Morgan Stanley Capital International.NM0824U-3791214-10/50Contents Section 1:Overview and performance 9Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Portfolio activity&investment performanceThe Companys portfolio delivered a total NAV return of 13.8%during the period driven by positive performance within all three sectors of the Company.The most notable top down change in the portfolio during the first half was to add to our Energy Transition exposure(see Figure 2 below)as the valuations continue to move lower compared to broader equity markets,a trend we noted in the 2023 annual report too.This change was still relatively modest in size as whilst valuations have become more attractive,we do not think that broad based positive earnings momentum is imminent,given that areas like electric vehicles are still seeing shorter-term sales estimates being revised downwards.Within the three sectors we made some notable changes both to the industry/sub-sector exposures and the stock specific exposures(see Figure 3 on page 10).While we think that nuclear has a strong role to play in the energy transition,we exited our only uranium holding because both the spot price of uranium and the valuation of this particular company had got well ahead of fundamentals.On the Traditional Energy side we added several new positions across the infrastructure,services and production segments.The infrastructure companies we now own are focused on natural gas so should see good volume growth to drive earnings and also benefit if there are unexpected reduction in rates.These purchases were funded by exiting a refining company(Valero)and an Exploration and Production(E&P)company(EOG Resources).On the Energy Transition side we added a new holding in a US wind turbine manufacturer that looks to be a beneficiary from the ongoing fiscal support provided by the Inflation Reduction Act of 2022 and we initiated a position in a leading cable manufacturer,Prysmian.It should see its order books well supported by the array of investments needed in transmission and the grid.Figure 2:Portfolio positioning-20%0 00%Jun-2020Aug-2020Oct-2020Dec-2020Feb-2021Apr-2021Jun-2021Aug-2021Oct-2021Dec-2021Feb-2022Apr-2022Jun-2022Aug-2022Oct-2022Dec-2022Feb-2023Apr-2023Jun-2023Aug-2023Oct-2023Dec-2023Feb-2024Apr-2024MiningTraditional EnergyEnergy TransitionGearing/net cashSource:BlackRock.NM0824U-3791214-11/50Contents10 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600IncomeThe Company paid a total of 2.250p in dividends for the first half of the year,split between the two quarterly payments.The underlying dividend trends in the portfolio over the first six months of the year were a mixed picture.This is less as a result of companies deciding to make reductions to their dividend payments but more as a function of the changes we have made to the stock selection in the portfolio.The decisions to reduce Vale,TotalEnergies and BHP had negative implications for the ongoing income generation in the portfolio.However,we have conviction that the investments made with the proceeds offer a more attractive total return prospect to offset the income foregone.We did make an investment in a new convertible bond issue that came with an attractive coupon as well as an equity upside.This was in a leading lithium producer where despite the near-term headwinds,the convertible bond offers a better risk-adjusted return with the added benefit of enhancing the portfolios income.We also note that Pound Sterling has strengthened over 7%from its October 2023 lows against the US Dollar(as at 16 July 2024).If this trend continues then it will be a headwind for the Companys income in Pound Sterling as most of the dividends in the underlying portfolio companies are paid in US Dollars.Traditional EnergyOil prices remained relatively range-bound(see Figure 4 on page 11)in the period consistent with our view that Oil and Petroleum Exporting Countries(OPEC)plus countries continue to act in a disciplined fashion in balancing supply and demand.Our thesis remains supported by oil futures firmly in backwardation despite market concerns of oversupply following OPECs June announcement to gradually phase out cuts to production.Excluding COVID-19,US natural gas prices(Henry Hub,see Figure 5 on page 11)hit a 32-year low in February 2024 forcing gas drillers to reduce production.Lower activity levels helped to rebalance markets and prices have since recovered through June.Figure 3:Relative change in portfolio positioning-20%-15%-10%-5%0%5 %relative change in sector allocationAug-2020Oct-2020Dec-2020Feb-2021Apr-2021Jun-2021Aug-2021Oct-2021Dec-2021Feb-2022Apr-2022Jun-2022Aug-2022Oct-2022Dec-2022Feb-2023Apr-2023Jun-2023Aug-2023Oct-2023Dec-2023Feb-2024Apr-2024MiningTraditional EnergyEnergy TransitionSource:BlackRock.NM0824U-3791214-12/50Contents Section 1:Overview and performance 11Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Figure 4:Brent Oil Price Level and Structure Figure 5:Global Natural Gas PricesSource:Bloomberg data through 21 June 2024.Dark shaded area represents the difference between front-month(1m)Brent prices and 6th month(6m)futures prices.Light shaded area represents the difference between 6th month(6m)and 12th month(12m)futures prices.Henry Hub is the front-month natural gas price.TTF:Title Transfer Facility is the virtual trading point in the Netherlands.Although the Companys Traditional Energy holdings contributed positively to overall performance in the period,the underlying sub-sector performance was more mixed.Underweight positions in Chevron and Total Energies drove an overall negative contribution from Integrated Oil Companies(IOCs).Elsewhere,the Biden Administration announced a moratorium on US Liquified Natural Gas export licenses at the end of January which impacted shares in Cheniere Energy.Subsequent to the period end,a federal district judge in Louisiana ordered the Biden Administration to lift the suspension.On a more positive note,we made several changes within our Traditional Energy holdings during the period.We exited our position in EOG Resources to help fund new holdings in Targa Resources,Permian Resources and Saipem.The first two holdings reflect an overall positive view on the long-term growth outlook for the world-class Permian Basin in West Texas.Targa Resources provides compelling low-risk throughput growth in its midstream business with an attractive yield whilst Permian Resources has continued to demonstrate best-in-class execution with a highly motivated management team.Our holding in Saipem reflects an overall pivot within the Traditional Energy value-chain towards international oilfield services where we see a strong pipeline of new projects and improving margins.This follows new holdings initiated last year in TechnipFMC and Weatherford.Energy TransitionOver the trailing 12-month period(see Figure 6),Energy Transition-related stocks(S&P Clean Energy Index)have generally struggled against the Mining and Traditional Energy sectors,albeit with a strong step-up,particularly in the month of May(see Figure 7).This was partly driven by strong performance from a handful of renewable development companies that were subject to premium acquisitions including Encavis AG and Neoen SA.This precipitated a broader re-rating of renewables-focused stocks in the period which underpinned strong active return contributions from key holdings in NextEra Energy and First Solar.Figure 6:12-month Performance Rebased Figure 7:6-month Performance RebasedSource:Bloomberg.Data through 31st May 2024.The following Bloomberg indices were used Mining=MSXWD0MM Index;Energy:Global=MXWD0EN Index;S&P Clean=SPGTCED Index;Power:Global=MXWD0UT Index.50 60 70 80 90 100(2)-2 4 6 8 10 12 14Jun-23Sep-23Dec-23Mar-24Jun-24Brent 1-mth,USD/bblBrent Structure,USD/bbl1m-6m6m-12mBrent rhsBackwardation( )Contango(-)50 60 70 80 90 100(2)-2 4 6 8 10 12 14Jun-23Sep-23Dec-23Mar-24Jun-24Brent 1-mth,USD/bblBrent Structure,USD/bbl1m-6m6m-12mBrent rhsBackwardation( )Contango(-)-2 4 6 8 10 12 14 16 18 -0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0Jun-23Sep-23Dec-23Mar-24Jun-24USD/mmbtuUSD/mmbtuHenry HubTTF rhs 50 60 70 80 90 100 110 120 130May-23Nov-23May-24Rebased Px Perf(GBP)BERIMiningEnergy:GlobalS&P CleanSolar ETF 50 60 70 80 90 100 110 120 130May-23Nov-23May-24Rebased Px Perf(GBP)BERIMiningEnergy:GlobalS&P CleanSolar ETFBrent Structure,USD/barrelBrent 1-mth,USD/barrelNM0824U-3791214-13/50Contents12 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Elsewhere,manufacturing spend continued to broaden in the United States as a follow through from subsidies encapsulated in the Inflation Reduction Act of 2022 and the CHIPS and Science Act of 2022.This benefited stocks such as Trane Technologies and Ingersoll Rand with strong backlog expansion in CHVAC(Cooling,Heating,Ventilation and Air Conditioning)and industrial equipment demand,respectively.Excitement around AI/datacentre build-outs in the United States led to a sharp upwards revision in long-term electricity demand forecasts(see Figure 8)which for much of the last two decades has been largely flat.Given the competing forces around rapid data centre build-out and dramatic improvements in the energy efficiency of leading-edge chips from the likes of Nvidia the range of growth estimates remains necessarily wide at this stage.Nevertheless,the outlook for baseload power demand growth in the region is likely to hit mid-single digits in the coming years.This helped drive positive stock performance from the likes of Schneider Electric.The Company also benefitted from a new position in GE Vernova,a spin-off from General Electric which has a leading position in electric power systems and gas turbine manufacturing.Building on the rising electrification theme,we also initiated new positions in global cabling systems supplier,Prsymian,and UK grid-operator,National Grid.Figure 8:United States Internet Energy Consumption ForecastSource:ThunderSaid Energy,“Energy and AI:the power and the glory?”,April 2024.The Companys investments in renewables-focused utility companies in Europe were amongst the largest detractors for the period including German-utility RWE AG and Portuguese-based EDP Renovaveis SA.Both companies faced earnings headwinds from a combination of lower trading earnings for the former and impairment charges for the latter.MiningThe mining sector saw a fairly strong first half performance for both mining companies and commodities.However there was significant dispersion in performance which was more pronounced for commodities than related equities explained further below.The main differences came between steel related commodities(iron ore and coking coal),which both saw heavy price falls in the six months,and base metals(such a copper and aluminium)that posted strong double digit price gains.The real estate sector in China remains under significant pressure and this weighed heavily on the steel sentiment in China.NM0824U-3791214-14/50Contents Section 1:Overview and performance 13Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Figure 9:Morgan Stanley estimated gross profit/tonne for Mill-Rebar SteelSource:Mysteel,Morgan Stanley Research.As shown in Figure 9 above,steel margins were negative in China early in the period and,with demand subdued given the real estate woes,steel producers held back on iron ore purchases causing the price to fall back from$130/tonne to$100/tonne from the start of January to the end of March(SGX Iron Ore 62%).As margins improved in the second quarter steel production was able to pick up,with much of this destined for export given the depressed local demand.The chart below shows how much steel exports have picked up from China in 2024(and 2023)it is likely that this cant be sustained as trade barriers will be erected to protect steel industries in other countries(see Figure 10 below).Figure 10:Annual net exports of steel from ChinaSource Citigroup,end May 2024;2024 data is to end May and annualised to show 2024 potential exports at current run rate.million tonnesNM0824U-3791214-15/50Contents14 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Despite the challenging iron ore market,the major producers of iron ore,such as BHP and Rio Tinto,held up quite well(Rio Tinto total return 5.6%,BHP 0.0%;GBP).This performance relative to the underlying commodity implies a noticeable increase in valuation multiple associated with the companies in many ways we think this is deserved given the greater resilience and discipline of these businesses compared to previous cycles.However,despite this re-rating,they did lag their peers that have a more diversified commodity mix with another one of our portfolio companies,Teck Resources delivering substantially better returns for the six month period.A key thematic to surface in the period was a“buy or build”question in the copper space.This is something that we have described in the past when talking about the incentive price to bring new projects online being substantially higher than current prices and that existing copper production capacity used to trade at lower implied copper prices than that incentive price.We saw significant corporate activity to emphasise this point with BHP making several approaches to Anglo American to try to get a deal agreed.The prize that BHP were seeking was clearly the South American copper portfolio of Anglo,which has several long life and high quality assets.In the end,they could not agree a deal due to the complexities of Anglos South African assets but other copper orientated companies saw strong share price appreciation as a result of the approach,with portfolio holdings such as Ivanhoe Mines notable performers.Whilst our enthusiasm for copper longer-term remains,it should be noted that in the short term there are some clouds on the horizon.Inventories,although low in terms of numbers of days of use at around 7 weeks,have been rising steadily during the first half of the year,as shown in Figure 11 below.Investor sentiment towards copper though has remained very positive,as shown by the long positions and overall net length in copper futures in Figure 12 below.If physical markets do not see near-term improvements,there is every chance the“hot money”in futures will look to deploy elsewhere and cause a copper price pullback.Given our longer-term structural positive view,it is likely we would use such an opportunity to increase the portfolios exposure.Figure 11:LME COTR1 Investment Fund Figure 12:Visible global copper stocks,year to date changeMarket outlook and portfolio positioning Looking back at the 2023 annual report we flagged“an abnormally high level of uncertainty for the year ahead”.Part of this reflected a record spate of elections in 2024 as well as persistent tensions between the United States and China“where tariffs continue to be the tool of choice in tackling the competitive threat of cheaper manufactured goods in the Energy Transition value chain”.Since then,the European Union has announced tariffs against Chinese Electric Vehicles.Against this backdrop,we believe there is likely to be higher and stickier inflation than we have seen in the last two decades and reinforces our view of a higher interest rate environment.Whilst risks remain elevated,we believe the flexibility that the Company offers remains key to achieving our twin objectives of growth and income as these uncertainties drive persistent dispersion.1 London Metal Exchange(LME)Commitments of Traders Report(COTR).Source:LME,Comex,Shanghai Futures Exchange,Shanghai Metals Market,Bloomberg,Macquaire Strategy June 2024.kilotonsnumber of lots in thousandsNM0824U-3791214-16/50Contents Section 1:Overview and performance 15Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600AI and datacentre demand will be additive to prior estimates of baseload power demand which we see as supportive not just for renewables,but critically for natural gas and nuclear.Further,as technology companies seek to drive rapid build out of these energy intensive assets the demand for traditional investments will drive further bottlenecks on the supply side.As we look into the second half of the year we are also closely monitoring the outcome of Federal-level elections and their potential impact on energy and climate policy.The UK(22 May)and France(10 June)both announced snap elections during the period.Subsequent to the period end,a Labour majority has been confirmed in the UK that will likely see an acceleration of decarbonisation efforts and should provide a positive tailwind for grid expansion and permitting.Finally,as we head towards the November US Presidential election it is not unreasonable to surmise that,under either a Republican or Democratic victory,it will do little to derail the underlying pace of capital investment into the Energy Transition space.The Inflation Reduction Act of 2022,for instance,has been a very positive force in job creation and capital formation in the United States-an outcome most politicians will tend to favour.Tom Holl and Mark HumeBlackRock Investment Management(UK)Limited31 July 2024NM0824U-3791214-17/50Contents16 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Distribution of investments as at 31 May 2024Asset allocation GeographyGlobal 52.2%United States 20.6nada 9.4rica 2.7%Germany 2.6%United Kingdom 2.5%Latin America1 2.5%Australia 2.3%France 1.8%Brazil 1.5%Italy 1.3%Ireland 0.6%Traditional Energy 28.3%Mining 45.4%Energy Transition 26.3%Energy Efficiency 9.4%Electrification 7.1%Renewables 5.5%Transport 3.0%Storage 1.3%Diversified 23.4%Copper 7.9%Steel 3.7%Industrial Minerals 2.9%Gold 2.5%Oil Services 2.2%Integrated 8.4%Exploration&Production 12.2%Distribution 3.3%Refining&Marketing 0.8%Oil,Gas&Consumable Fuels 1.4%Aluminium 1.8%Metals&Mining 1.8%Nickel 1.4%Traditional Energy(28.3%)Energy Transition(26.3%)Mining(45.4%)Asset allocation Commodity1 Latin America represents Argentina.Source:BlackRock.Source:BlackRock.NM0824U-3791214-18/50Contents Section 2:Portfolio 17Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Ten largest investments1 Anglo American(2023:65th)Diversified mining groupMarket value:8,817,000Share of investments:4.7%1(2023:0.4%)A global mining group.The groups mining portfolio includes bulk commodities including iron ore,manganese,metallurgical coal,base metals including copper and nickel and precious metals and minerals including platinum and diamonds.AngloAmerican has mining operations globally,with significant assets in Africa and South America.2 Rio Tinto(2023:4th)Diversified mining groupMarket value:8,757,000Share of investments:4.6%(2023:4.4%)One of the worlds leading mining companies.The groups primary product is iron ore,but it also produces aluminium,copper,diamonds,gold,industrial minerals and energy products.3 Teck Resources(2023:14th)Diversified mining groupMarket value:7,951,000Share of investments:4.2%(2023:2.1%)A diversified mining group headquartered in Canada.Teck Resources is engaged in mining and mineral development with operations and projects in Canada,the US,Chile and Peru.The group has exposure to copper,zinc,steelmaking coal and energy.4 Glencore(2023:1st)Diversified mining groupMarket value:6,450,000Share of investments:3.4%(2023:4.8%)One of the worlds largest globally diversified natural resources groups.The groups operations include approximately 150 mining and metallurgical sites and oil production assets.Glencores mined commodity exposure includes copper,cobalt,nickel,zinc,lead,ferroalloys,aluminium,iron ore gold and silver.5 Shell(2023:5th)Integrated oil groupMarket value:6,147,000Share of investments:3.3%(2023:3.8%)Shell is one of the largest integrated energy companies globally with five main operating segments:Integrated Gas,Upstream,Marketing,Chemicals and Products,and Renewables and Energy Solutions.The company has a high quality,gas/liquified natural gas(LNG)-weighted portfolio.Together,the ten largest investments represent 31.7%of the Companys portfolio as at 31 May 2024(30 November 2023:36.3%).NM0824U-3791214-19/50Contents18 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66006 Filo Corp.(2023:13th)Copper mining groupMarket value:4,802,000Share of investments:2.5%(2023:2.2%)Filo Corp.,part of the Lundin Group of companies,is a Canadian mineral exploration company focused on exploring their copper-gold-silver deposit in Filo del Sol near the borders of Argentina and Chile.7 NextEra Energy(2023:7th)ElectrificationMarket value:4,610,000Share of investments:2.4%(2023:2.7%)NextEra Energy is Americas premier clean energy leader and the worlds largest producer of wind and solar energy.The company has a dominant market share in a structurally growing renewables market.8 BHP(2023:2nd)Diversified mining groupMarket value:4,291,000Share of investments:2.3%(2023:4.7%)The worlds largest diversified mining group by market capitalisation.The group is an important global player in a number of commodities including iron ore,copper,thermal and metallurgical coal,manganese,nickel,silver and diamonds.BHP also has significant interests in oil,gas and liquefied natural gas.9 Schneider Electric(2023:21st)Energy efficiencyMarket value:4,137,000Share of investments:2.2%(2023:1.8%)Schneider Electric is a French multinational company specialising in digital automation and energy management and addresses homes,buildings,data centres,infrastructure and industries,by combining energy technologies,real-time automation,software,and services.10 Hess(2023:10th)Exploration&ProductionMarket value:3,995,000Share of investments:2.1%(2023:2.4%)An American global independent energy company,involved in the exploration and production of crude oil and natural gas.All percentages reflect the value of the holding as a percentage of total investments.Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at 30 November 2023.Percentages in brackets represent the value of the holding as at 30 November 2023.Ten largest investmentscontinuedNM0824U-3791214-20/50Contents Section 2:Portfolio 19Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600InvestmentsMain geographic exposureMarketvalue 000%ofinvestmentsMiningDiversifiedAnglo AmericanGlobal8,822 4.7 Anglo American Put Option 21/06/24Global(5)Rio TintoGlobal8,757 4.6 Teck ResourcesGlobal7,951 4.2 GlencoreGlobal6,449 3.4 BHPGlobal4,291 2.3 Abaxx TechnologiesGlobal3,334 1.8 Vale Debentures*Brazil2,162 1.5ValeBrazil750 TridentGlobal1,629 0.9 44,140 23.4 CopperFilo Corp.Latin America4,802 2.5 First Quantum Minerals 6.875/10/27Global1,616 1.6First Quantum MineralsGlobal1,200 Foran MiningCanada2,018 1.1 Metals AcquisitionAustralia1,981 1.0 Freeport-McMoRanUnited States1,619 0.9 Ivanhoe ElectricUnited States1,219 0.6 Develop GlobalAustralia414 0.2 14,869 7.9 SteelSteel DynamicsUnited States2,424 1.3 ArcelorMittalGlobal2,354 1.2 StelcoCanada2,291 1.2 7,069 3.7 Industrial MineralsAlbemarleGlobal2,431 1.3 BungeGlobal1,061 0.6 NutrienUnited States988 0.5 Lynas CorporationAustralia919 0.5 CF IndustriesUnited States47 5,446 2.9 GoldAllied Gold Corporation 8.75/09/2028Africa1,728 0.9 Wheaton Precious MetalsGlobal1,603 0.8 Barrick GoldGlobal1,419 0.8 4,750 2.5 Metals&MiningIvanhoe MinesAfrica3,441 1.8 3,441 1.8 AluminiumNorsk HydroGlobal3,310 1.8 3,310 1.8 NickelNickel MinesAustralia1,138 0.6 Lifezone MetalsGlobal1,590 0.8 2,728 1.4 Total Mining85,75345.4NM0824U-3791214-21/50Contents20 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Main geographic exposureMarketvalue 000%ofinvestmentsTraditional EnergyExploration&ProductionHessGlobal3,995 2.1 Canadian Natural ResourcesCanada3,889 2.1 ConocoPhillipsGlobal3,540 1.9 Permian ResourcesUnited States2,920 1.5 Tourmaline OilCanada2,417 1.3 Arc ResourcesCanada2,284 1.2 Diamondback EnergyUnited States2,231 1.2 Kosmos EnergyUnited States1,688 0.9 22,964 12.2 IntegratedShellGlobal6,147 3.3 ExxonMobilGlobal3,985 2.1 BPGlobal3,564 1.9 Cenovus EnergyCanada2,188 1.1 Gazprom*Russian Federation15,884 8.4 DistributionTarga ResourcesUnited States3,887 2.1 Cheniere EnergyUnited States2,334 1.2 6,221 3.3 Oil ServicesTechnipFMCGlobal2,072 1.1 Weatherford InternationalGlobal1,228 0.6 SaipemGlobal898 0.5 4,198 2.2 Oil,Gas&Consumable FuelsPembina PipelineCanada2,703 1.4 2,703 1.4 Refining&MarketingMarathon Petroleum CorporationUnited States1,519 0.8 1,519 0.8 Total Traditional Energy53,48928.3Energy TransitionEnergy EfficiencySchneider ElectricGlobal4,137 2.2 Ingersoll-RandUnited States3,610 1.9 Analog DevicesGlobal3,422 1.8 Trane TechnologiesUnited States2,964 1.6 Regal RexnordUnited States1,683 0.9 Kingspan GroupIreland1,087 0.6 Nidec CorpGlobal809 0.4 17,712 9.4 InvestmentscontinuedNM0824U-3791214-22/50Contents Section 2:Portfolio 21Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Main geographic exposureMarketvalue 000%ofinvestmentsElectrificationNextEra EnergyUnited States4,610 2.4 RWEGermany3,607 1.9 National GridUnited Kingdom2,916 1.7National Grid Rights 11/06/2024United Kingdom161 Sempra EnergyUnited States1,975 1.1 EDP RenovveisGlobal42 13,311 7.1 RenewablesFirst SolarGlobal3,721 2.0 GE VernovaUnited States3,106 1.6 Vestas WindGlobal1,852 1.0 SSEUnited Kingdom1,660 0.9 10,339 5.5 TransportSTMicroelectronicsFrance3,365 1.8 Infineon TechnologiesGermany1,333 0.7 Samsung SDIGlobal967 0.5 5,665 3.0 StoragePrysmian SpaItaly2,420 1.3 2,420 1.3 Total Energy Transition49,447 26.3 Total Portfolio188,689 100.0 ComprisingEquity and debt investments188,694 100.0 Derivative financial instruments futures(5)188,689 100.0*The investment in the Vale debentures is illiquid and has been valued using secondary market pricing information provided by the Brazilian Financial and Capital Markets Association(ANBIMA).*The investment in Gazprom has been valued at a nominal value of RUB0.01 as secondary listings of the depositary receipts on Russian companies have been suspended from trading.All investments are ordinary shares unless otherwise stated.The total number of holdings(including options)at 31 May 2024 was 74(30 November 2023:78).There was one open option as at 31 May 2024(30 November 2023:one).The equity and fixed income investment total of 188,694,000(30 November 2023:175,540,000)above before the deduction of the negative valuation of commodity futures contracts of 5,000(30 November 2023:negative option valuation of 110,000 and negative futures contract valuation of 780,000)represents the Groups total investments held at fair value as reflected in the Consolidated Statement of Financial Position.The table above excludes cash and gearing;the level of the Groups gearing may be determined with reference to the bank overdraft of 15,213,000(30November 2023:17,862,000)and cash and cash equivalents of 73,000(30 November 2023:5,276,000)that are also disclosed in the Consolidated Statement of Financial Position.Details of the AIC methodology for calculating gearing are given in the Glossary on pages 41 and 42.As at 31 May 2024,the Company did not hold any equity interests comprising more than 3%of any companys share capital.NM0824U-3791214-23/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660022 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Interim Management Report and Responsibility StatementThe Chairmans Statement on pages 5 and 6 and the Investment Managers Report on pages 7 to 15 give details of the important events which have occurred during the period and their impact on the financial statements.Principal risks and uncertaintiesThe principal risks faced by the Company can be divided into various areas as follows:Investment performance;Income/dividend;Gearing;Legal and regulatory compliance;Operational;Market;and Financial.The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2023.A detailed explanation can be found in the Strategic Report on pages 38 to 42 and in note 18 on pages 110 to 122 of the Annual Report and Financial Statements which are available on the Companys website at Board and the Investment Manager continue to monitor investment performance in line with the Companys investment objectives,and the operations of the Company and the publication of net asset values are continuing.In the view of the Board,there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.Going concernThe Board is mindful of the risk that unforeseen or unprecedented events including(but not limited to)heightened geopolitical tensions such as the wars in Ukraine and Middle East,their longer-term effects on the global economy,high inflation and the current cost of living crisis could have a significant impact on global markets.Notwithstanding this significant degree of uncertainty,the Directors,having considered the nature and liquidity of the portfolio,the Companys investment objective,the Companys projected income and expenditure and the Companys substantial distributable reserves,are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound.The Company has a portfolio of investments which are considered to be readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets.Borrowings under the overdraft facility shall be lower of 40.0 million or 20%of the Companys net assets(calculated at the time of draw down)and this covenant was complied with during the period.Ongoing charges(excluding finance costs,direct transaction costs,custody transaction charges,VAT recovered,taxation,prior year expenses written back and certain non recurring charges)have been capped by the Manager at 1.25%of average daily net assets with effect from 17 March 2020 and were 1.20%of net assets for the year ended 30 November 2023.Based on the above,the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.Related party disclosure and transactions with the Investment ManagerBlackRock Fund Managers Limited(BFM)is the Companys Alternative Investment Fund Manager(AIFM)and has,with the Companys consent,delegated certain portfolio and risk management services,and other ancillary services,to BlackRock Investment Management(UK)Limited(BIM(UK).Both BFM and BIM(UK)are regarded as related parties under the Listing Rules.Details of the management fee payable are set out in note 4 on page 30 and note 14 on page 37 of the financial statements.The related party transactions with the Directors are set out in note 13 on page 36 of the financial statements.NM0824U-3791214-24/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600 Section 3:Governance 23Directors responsibility statementThe Disclosure Guidance and Transparency Rules(DTR)of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.The Directors confirm to the best of their knowledge that:the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting;and the Interim Management Report together with the Chairmans Statement and Investment Managers Report include a fair review of the information required by 4.2.7R and 4.2.8R of the FCAs Disclosure Guidance and Transparency Rules.This Half Yearly Financial Report has not been audited or reviewed by the Companys Auditor.The Half Yearly Financial Report was approved by the Board on 31 July 2024 and the above responsibility statement was signed on its behalf by the Chairman.Adrian BrownFor and on behalf of the Board31 July 2024NM0824U-3791214-25/50Contents24 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Consolidated Statement of Comprehensive Incomefor the six months ended 31 May 2024The notes on pages 28 to 37 form part of these financial statements.Six months ended 31 May 2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)RevenueCapitalTotal RevenueCapitalTotal RevenueCapitalTotalNotes000000000000000000000000000Income from investments held at fair value through profit or loss3 2,7002,7003,4111013,5126,258796,337Other income3 4284286526521,2181,218Total revenue3,1283,1284,0631014,1647,476797,555Net profit/(loss)on investments and derivatives held at fair value through profit or loss19,01119,011(29,497)(29,497)(27,606)(27,606)Net(loss)/profit on foreign exchange(1)(1)(35)(35)66Total 3,12819,01022,1384,063(29,431)(25,368)7,476(27,521)(20,045)ExpensesInvestment management fee4(181)(543)(724)(202)(606)(808)(387)(1,162)(1,549)Other operating expenses5(240)(4)(244)(232)(13)(245)(535)(16)(551)Total operating expenses(421)(547)(968)(434)(619)(1,053)(922)(1,178)(2,100)Net profit/(loss)on ordinary activities before finance costs and taxation2,70718,46321,1703,629(30,050)(26,421)6,554(28,699)(22,145)Finance costs6(128)(385)(513)(93)(279)(372)(196)(588)(784)Net profit/(loss)on ordinary activities before taxation2,57918,07820,6573,536(30,329)(26,793)6,358(29,287)(22,929)Taxation(expense)/credit(245)34(211)(327)54(273)(584)117(467)Net profit/(loss)on ordinary activities after taxation8 2,33418,11220,4463,209(30,275)(27,066)5,774(29,170)(23,396)Earnings/(loss)per ordinary share(pence)8 1.8314.1716.002.37(22.40)(20.03)4.39(22.17)(17.78)The total columns of this statement represent the Groups Statement of Comprehensive Income,prepared in accordance with UKadopted International Accounting Standards(IAS).The supplementary revenue and capital accounts are both prepared under guidance published by the Association of Investment Companies(AIC).All items in the above statement derive from continuing operations.No operations were acquired or discontinued during the period.All income is attributable to the equity holders of the Group.The Group does not have any other comprehensive income/(loss)(31 May 2023:nil;30 November 2023:nil).The net profit/(loss)for the period disclosed above represents the Groups total comprehensive income/(loss).NM0824U-3791214-26/50Contents Section 4:Financial statements 25Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Consolidated Statement of Changes in Equityfor the six months ended 31 May 2024Called up share capitalSharepremiumaccountSpecial reserveCapital reservesRevenue reserveTotalNotes000000000000000000For the six months ended 31 May 2024(unaudited)At 30 November 2023 1,356 69,980 66,100 18,660 6,266 162,362 Total comprehensive incomeNet profit for the period 18,112 2,334 20,446 Transaction with owners,recorded directly to equity:Ordinary shares bought back into treasury9 (7,631)(7,631)Share buyback costs (53)(53)Dividends paid17 (2,891)(2,891)At 31 May 2024 1,356 69,980 58,416 36,772 5,709 172,233 For the six months ended 31 May 2023(unaudited)At 30 November 20221,34468,20370,93747,8036,421194,708Total comprehensive(loss)/income:Net(loss)/profit for the period(30,275)3,209(27,066)Transactions with owners,recorded directly to equity:Ordinary share issues 121,7811,793Share issue costs(4)(4)Share reissue costs written back2828Dividends paid27(2,969)(2,969)At 31 May 20231,35669,98070,93717,5566,661166,490For the year ended 30 November 2023(audited)At 30 November 2022 1,344 68,203 70,937 47,803 6,421 194,708 Total comprehensive(loss)/income:Net(loss)/profit for the year (29,170)5,774(23,396)Transactions with owners,recorded directly to equity:Ordinary share issues 12 1,781 1,793 Share issue costs (4)(4)Ordinary shares bought back into treasury (4,802)(4,802)Share buyback costs (35)(35)Share reissue costs written back 27 27 Dividends paid37 (5,929)(5,929)At 30 November 2023 1,356 69,980 66,100 18,660 6,266 162,362 1 4th interim dividend of 1.125p per share for the year ended 30 November 2023,declared on 7 December 2023 and paid on 12 January 2024 and 1st interim dividend of 1.125p per share for the year ending 30 November 2024,declared on 15 March 2024 and paid on 26 April 2024.2 4th interim dividend of 1.100p per share for the year ended 30 November 2022,declared on 7 December 2022 and paid on 13 January 2023 and 1st interim dividend of 1.100p per share for the year ended 30 November 2023,declared on 13 March 2023 and paid on 19 April 2023.3 4th interim dividend of 1.100p per share for the year ended 30 November 2022,declared on 7 December 2022 and paid on 13 January 2023;1st interim dividend of 1.100p per share for the year ended 30 November 2023,declared on 13 March 2023 and paid on 19 April 2023;2nd interim dividend of 1.100p per share for the year ended 30 November 2023,declared on 7 June 2023 and paid on 14 July 2023 and 3rd interim dividend of 1.100p per share for the year ended 30 November 2023,declared on 20 September 2023 and paid on 27 October 2023.For information on the Companys distributable reserves,please refer to note 11 on page 34.The notes on pages 28 to 37 form part of these financial statements.NM0824U-3791214-27/50Contents26 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660031 May 2024(unaudited)31 May 2023(unaudited)30 November 2023(audited)Notes000000000Non current assetsInvestments held at fair value through profit or loss12 188,694175,627175,540Current assetsOther receivables 484 835618Current tax asset 195 134 130 Cash collateral pledged with brokers 343 1,0861,538Cash and cash equivalents 73 1945,276Total current assets 1,095 2,2497,562Total assets 189,789 177,876 183,102Current liabilitiesOther payables(2,338)(1,463)(1,988)Derivative financial liabilities held at fair value through profit or loss12(5)(559)(890)Bank overdraft(15,213)(9,364)(17,862)Total current liabilities(17,556)(11,386)(20,740)Net assets 172,233 166,490 162,362 Equity attributable to equity holdersCalled up share capital10 1,356 1,356 1,356Share premium account 69,980 69,980 69,980Special reserve 58,416 70,937 66,100Capital reserves 36,772 17,55618,660Revenue reserve 5,709 6,6616,266Total shareholders funds 172,233 166,490 162,362 Net asset value per ordinary share(pence)8 138.24 122.79 123.58 The financial statements on pages 24 to 37 were approved and authorised for issue by the Board of Directors on 31 July 2024 and signed on its behalf by Adrian Brown,Chairman.BlackRock Energy and Resources Income Trust plcRegistered in England,No.5612963Consolidated Statement ofFinancial Positionas at 31 May 2024The notes on pages 28 to 37 form part of these financial statements.NM0824U-3791214-28/50Contents Section 4:Financial statements 27Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Consolidated Cash Flow Statementfor the six months ended 31 May 2024Six monthsended31 May2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)000000000Operating activities:Net profit/(loss)on ordinary activities before taxation 20,657(26,793)(22,929)Add back finance costs513372784 Net(profit)/loss on investments and derivatives held at fair value through profit or loss(including transaction costs)(19,011)29,49727,606Net amount for capital special dividends received(86)Net loss/(profit)on foreign exchange135(6)Sales of investments held at fair value through profit or loss61,48453,13397,330Purchases of investments held at fair value through profit or loss(56,512)(51,272)(93,247)Decrease/(increase)in other receivables 20444(134)Increase in other payables253515471(Increase)/decrease in amounts due from brokers (70)1,1001,496 Increase/(decrease)in amounts due to brokers 23(4,838)(4,269)Net movement in cash collateral held with brokers 1,195(801)(1,253)Net cash inflow from operating activities before taxation8,737 9065,849Taxation on investment income included within gross income(276)(304)(494)Net cash inflow from operating activities8,461 6025,355Financing activitiesInterest paid(513)(372)(784)Receipts from share issues1,7931,793 Share issue costs paid(58)(59)Shares bought back into treasury(7,557)(4,802)Share buyback costs(53)(35)Dividends paid(2,891)(2,969)(5,929)Net cash outflow from financing activities (11,014)(1,606)(9,816)Decrease in cash and cash equivalents(2,553)(1,004)(4,461)Effect of foreign exchange rate changes(1)(35)6Change in cash and cash equivalents(2,554)(1,039)(4,455)Cash and cash equivalents at start of period/year(12,586)(8,131)(8,131)Cash and cash equivalents at end of period/year(15,140)(9,170)(12,586)Comprised of:Cash at bank73 1945,276Bank overdraft(15,213)(9,364)(17,862)(15,140)(9,170)(12,586)The notes on pages 28 to 37 form part of these financial statements.NM0824U-3791214-29/50Contents28 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66001.Principal activityThe principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.The principal activity of the subsidiary,BlackRock Energy and Resources Securities Income Company Limited,is investment dealing and options writing.2.Basis of preparationThe half yearly financial statements for the period ended 31 May 2024 have been prepared in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority and with the UK-adopted International Accounting Standard 34(IAS 34),Interim Financial Reporting.The half yearly financial statements should be read in conjunction with the Groups Annual Report and Financial Statements for the year ended 30 November 2023,which have been prepared in accordance with UK-adopted International Accounting Standards(IAS)in conformity with the requirements of the Companies Act 2006.Insofar as the Statement of Recommended Practice(SORP)for investment trust companies and venture capital trusts,issued by the Association of Investment Companies(AIC)in October 2019 and updated in July 2022,is compatible with UK-adopted IAS,the financial statements have been prepared in accordance with guidance set out in the SORP.Adoption of new and amended International Accounting Standards and interpretations:IFRS 17 Insurance contracts(effective 1 January 2023).This standard replaced IFRS 4 and applies to all types of insurance contracts.IFRS 17 provides a consistent and comprehensive model for insurance contracts covering all relevant accounting aspects.This standard did not have any impact on the Company as it has no insurance contracts.IAS 12-Deferred tax related to assets and liabilities arising from a single transaction(effective 1 January 2023).The IASB has amended IAS 12 Income Taxes to require companies to recognise deferred tax on particular transactions that,on initial recognition,give rise to equal amounts of taxable and deductible temporary differences.According to the amended guidance,a temporary difference that arises on initial recognition of an asset or liability is not subject to the initial recognition exemption if that transaction gave rise to equal amounts of taxable and deductible temporary differences.These amendments might have a significant impact on the preparation of financial statements by companies that have substantial balances of right-of-use assets,lease liabilities,decommissioning,restoration and similar liabilities.The impact for those affected would be the recognition of additional deferred tax assets and liabilities.The amendment of this standard did not have any significant impact on the Company.IAS 8 Definition of accounting estimates(effective 1 January 2023).The IASB has amended IAS 8 Accounting Policies,Changes in Accounting Estimates and Errors to help distinguish between accounting policies and accounting estimates,replacing the definition of accounting estimates.IAS 1 and IFRS Practice Statement 2 Disclosure of accounting policies(effective 1 January 2023).The IASB has amended IAS 1 Presentation of Financial Statements to help preparers in deciding which accounting policies to disclose in their financial statements by stating that an entity is now required to disclose material accounting policies instead of significant accounting policies.IAS 12 International Tax Reform Pillar Two Model Rules(effective 1 January 2023).The IASB has published amendments to IAS 12 Income Taxes to respond to stakeholders concerns about the potential implications of the imminent implementation of the OECD pillar two rules on the accounting for income taxes.The amendment is an exception to the requirements in IAS 12 that an entity does not recognise and does not disclose information about deferred tax assets as liabilities related to the OECD pillar two income taxes and a requirement that current tax expenses must be disclosed separately to pillar two income taxes.Relevant International Accounting Standards that have yet to be adopted:IAS 1 Classification of liabilities as current or non current(effective 1 January 2024).The IASB has amended IAS 1 Presentation of Financial Statements to clarify its requirement for the presentation of liabilities depending on the rights that exist at the end of the reporting period.The amendment requires liabilities to be classified as non current if the entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period.The amendment no longer refers to unconditional rights.Notes to the financial statementsfor the six months ended 31 May 2024NM0824U-3791214-30/50Contents Section 4:Financial statements 29Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600IAS 1-Non current liabilities with covenants(effective 1 January 2024).The IASB has amended IAS 1 Presentation of Financial Statements to introduce additional disclosures for liabilities with covenants within 12 months of the reporting period.The additional disclosures include the nature of covenants,when the entity is required to comply with covenants,the carrying amount of related liabilities and circumstances that may indicate that the entity will have difficulty complying with the covenants.None of the standards that have been issued but are not yet effective are expected to have a material impact on the Group.3.IncomeSix monthsended31 May2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)000000000Investment income:UK dividends654 329 608 Fixed income332 227 453 Overseas dividends1,560 2,0554,578Overseas special dividends154 800619Total investment income2,700 3,411 6,258 Other income:Bank interest2 2 Interest on collateral received8 7Option premium income418 652 1,209 428 6521,218 Total income3,128 4,063 7,476During the period,the Group received option premium income in cash totalling 418,000(six months ended 31 May 2023:652,000;year ended 30 November 2023:1,209,000)for writing covered call and put options for the purposes of revenue generation.Option premium income is amortised evenly over the life of the option contract and accordingly,during the period,option premiums of 418,000(six months ended 31 May 2023:652,000;year ended 30 November 2023:1,209,000)were amortised to revenue.At 31 May 2024,there was one open position(31 May 2023:nil;30 November 2023:one)with an associated liability of 5,000(31 May 2023:nil;30 November 2023:110,000).Dividends and interest received in cash during the period amounted to 2,374,000 and 287,000(six months ended 31 May 2023:2,837,000 and 178,000;year ended 30 November 2023:5,107,000 and 482,000).Special dividends of nil have been recognised in capital during the period(six months ended 31 May 2023:101,000;year ended 30 November 2023:79,000).NM0824U-3791214-31/50Contents30 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66004.Investment management feeSix months ended 31 May 2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)RevenueCapitalTotalRevenueCapitalTotalRevenueCapitalTotal000000000000000000000000000Investment management fee181 543 724 202606808 387 1,162 1,549Total181 543 724 202606808 387 1,162 1,549The investment management fee is levied at 0.80%of gross assets per annum.Gross assets for the purposes of calculating the management fee equate to the value of the portfolios gross assets held on the relevant date as valued on the basis of applicable accounting policies,less the value of any investments in in-house funds.The fee is allocated 25%to the revenue account and 75%to the capital account of the Consolidated Statement of Comprehensive Income.There is no additional fee for company secretarial and administration services.The Company is entitled to a rebate from the investment management fee charged by the Manager in the event the Companys ongoing charges exceed the cap of 1.25%per annum of average daily net assets.The amount of rebate accrued for the six months ended 31 May 2024 amounted to nil(six months ended 31 May 2023:nil;year ended 30 November 2023:nil).The rebate,if any,is offset against management fees and is allocated between revenue and capital in the ratio of total ongoing charges(as defined on page 142 of the Annual Report and Financial Statements for the year ended 30 November 2023)allocated between revenue and capital during the period.Notes to the financial statementscontinuedNM0824U-3791214-32/50Contents Section 4:Financial statements 31Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66005.Other operating expensesSix monthsended31 May2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)000000000Allocated to revenue:Custody fee4 5 9 Auditors remuneration audit services128 24 48 Registrars fee17 18 35 Directors emoluments75 66 133 Broker fees13 12 24 Depositary fees8 9 17 Marketing fees15 21 84 Printing and postage fees21 19 39 Legal and professional fees12 13 26 Directors search fees 6 38 Bank charges7 7 14 Stock exchange listings fees5 9 14 Other administration costs35 42 75 Write back of prior year expense accruals2(19)(21)240 232 535 Allocated to capital:Custody transaction costs34 13 16 244 245 551 1 No non-audit services were provided by the Companys auditors in the six months ended 31 May 2024(six months ended 31 May 2023:none;year ended 30 November 2023:none).2 No expenses were written back during the period(six months ended 31 May 2023:miscellaneous fees,external Director evaluation fees,legal and professional fees;year ended 30 November 2023:miscellaneous fees,external Director evaluation fees,legal and professional fees).3 For the six months ended 31 May 2024,expenses of 4,000(six months ended 31 May 2023:13,000;year ended 30 November 2023:16,000)were charged to the capital account of the Statement of Comprehensive Income.The transaction costs incurred on the acquisition of investments amounted to 99,000 for the six months ended 31 May 2024(six months ended 31 May 2023:32,000;year ended 30 November 2023:89,000).Costs relating to the disposal of investments amounted to 21,000 for the six months ended 31 May 2024(six months ended 31 May 2023:19,000;year ended 30 November 2023:23,000).All transaction costs have been included within the capital reserves.NM0824U-3791214-33/50Contents32 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66006.Finance costsSix months ended 31 May 2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)RevenueCapitalTotalRevenueCapitalTotalRevenueCapitalTotal000000000000000000000000000Interest payable bank overdraft128 385 513 93279372 196 588 784Total128 385 513 93279372 196 588 784Finance costs for the Company are charged 25%to the revenue account and 75%to the capital account of the Consolidated Statement of Comprehensive Income.Subsidiary finance costs are charged 100%to the revenue account of the Consolidated Statement of Comprehensive Income.At 31 May 2024,the Group had an overdraft facility of the lower of 40 million(six months ended 31 May 2023:40 million;year ended 30 November 2023:40 million)or 20%of the Groups net assets.7.DividendsThe Boards current dividend target is to declare quarterly dividends of 1.125 pence per share in the year to 30 November 2024,making a total of at least 4.500 pence per share for the year as a whole.A first interim dividend for the year ending 30 November 2024 of 1,423,000(1.125 pence per share)was paid on 26 April 2024 to shareholders on the register on 29 March 2024.The Directors have declared a second interim dividend for the year ending 30 November 2024 of 1.125 pence per share.The total cost of the dividend was 1,394,000 and was paid on 15 July 2024 to shareholders on the Companys register on 14 June 2024.This dividend has not been accrued in the financial statements for the six months ended 31 May 2024,as under IAS,interim dividends are not recognised until paid.Dividends are debited directly to reserves.The third and fourth interim dividends will be declared in September 2024 and December 2024 respectively.Dividends on equity shares paid during the period were:Six monthsended31 May2024(unaudited)000Six months ended 31 May 2023(unaudited)000Year ended 30 November 2023(audited)0002nd interim dividend of 1.100p per share for the year ended 30 November 2023(2022:1.100p)1,478 3rd interim dividend of 1.100p per share for the year ended 30 November 2023(2022:1.100p)1,491 4th interim dividend of 1.125p per share for the year ended 30 November 2023(2022:1.100p)1,468 1,478 1,491 1st interim dividend of 1.125p per share for the year ending 30 November 2024(2023:1.100p)1,423 1,491 1,469 2,891 2,969 5,929 Notes to the financial statementscontinuedNM0824U-3791214-34/50Contents Section 4:Financial statements 33Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 66008.Consolidated earnings and net asset value per ordinary shareRevenue,capital earnings/(loss)and net asset value per ordinary share are shown below and have been calculated using the following:Six monthsended31 May2024(unaudited)Six months ended 31 May 2023(unaudited)Year ended 30 November 2023(audited)Net revenue profit attributable to ordinary shareholders(000)2,334 3,2095,774Net capital profit/(loss)attributable to ordinary shareholders(000)18,112(30,275)(29,170)Total profit/(loss)attributable to ordinary shareholders(000)20,446(27,066)(23,396)Equity shareholders funds(000)172,233 166,490162,362The weighted average number of ordinary shares in issue during each period on which the earnings per ordinary share was calculated was:127,790,523 135,151,964131,610,148The actual number of ordinary shares in issue at the period end on which the net asset value per ordinary share was calculated was:124,586,194 135,586,194131,386,194Earnings per shareRevenue earnings per share(pence)-basic and diluted1.83 2.37 4.39Capital earnings/(loss)per share(pence)basic and diluted14.17(22.40)(22.17)Total earnings/(loss)per share(pence)basic and diluted16.00(20.03)(17.78)As at 31 May 2024(unaudited)As at 31 May 2023(unaudited)As at 30 November 2023(audited)Net asset value per ordinary share(pence)138.24 122.79 123.58Ordinary share price(pence)121.50 111.60 110.40There were no dilutive securities at the period end(six months ended 31 May 2023:nil;year ended 30 November 2023:nil).9.Reconciliation of liabilities arising from financing activitiesSix months ended 31 May 2024(unaudited)000Six monthsended31 May2023(unaudited)000Yearended30 November2023(audited)000Bank overdraft at beginning of period/year17,862 14,34514,345Cash flows:Movement in overdraft(2,649)4,9813,517Bank overdraft at end of period/year15,213 9,36417,86210.Called up share capitalOrdinaryshares TreasurysharesTotal sharesNominal value(unaudited)numbernumbernumber000Allotted,called up and fully paid share capital comprised:Ordinary shares of 1 pence each:At 30 November 2023131,386,194 4,200,000 135,586,194 1,356 Ordinary shares repurchased into treasury(6,800,000)6,800,000 At 31 May 2024124,586,194 11,000,000 135,586,194 1,356 During the period ended 31 May 2024,6,800,000 shares were bought back into treasury(six months ended 31 May 2023:nil;year ended 30 November 2023:4,200,000)for a net consideration after costs of 7,684,000(six months ended 31 May 2023:nil;year ended 30 November 2023:4,837,000).NM0824U-3791214-35/50Contents34 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660010.Called up share capital continuedDuring the period ended 31 May 2024,no shares were issued(six months ended 31 May 2023:1,230,000;year ended 30 November 2023:1,230,000)for a net consideration after costs of nil(six months ended 31 May 2023:1,789,000;year ended 30 November 2023:1,789,000).Since 31 May 2024,no shares have been issued.Since 31 May 2024 and as at 29 July 2024,the Company has bought back 1,841,697 shares for costs of 2,172,000.11.ReservesThe share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006.In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006,the special reserve and capital reserve of the Parent Company may be used as distributable reserves for all purposes and,in particular,the repurchase by the Parent Company of its ordinary shares and for payments such as dividends.In accordance with the Companys Articles of Association,the special reserve,capital reserves and revenue reserve may be distributed by way of dividend.The Parent Companys gain on the capital reserve arising on the revaluation of investments of 32,843,000(31 May 2023:gain of 13,039,000;year ended 30 November 2023:gain of 15,447,000)is subject to fair value movements and may not be readily realisable at short notice,as such it may not be entirely distributable.The investments are subject to financial risks,as such capital reserves(arising on investments sold)and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.The reserves of the subsidiary company are not distributable until distributed as a dividend to the Parent Company.12.Financial risks and valuation of financial instrumentsThe Companys investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests.The risks are substantially consistent with those disclosed in the previous annual financial statements with the exception of those outlined below.Market risk arising from price riskPrice risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices(other than those arising from interest rate risk or currency risk)whether those changes are caused by factors specific to the individual financial instrument or its issuer,or factors affecting similar financial instruments traded in the market.Local,regional or global events such as war,acts of terrorism,the spread of infectious illness or other public health issues,recessions,climate change or other events could have a significant impact on the Group and the market price of its investments and could result in increased premiums or discounts to the Companys net asset value.Valuation of financial instrumentsFinancial assets and financial liabilities are either carried in the Consolidated Statement of Financial Position at their fair value(investments and derivatives)or at an amount which is a reasonable approximation of fair value(due from brokers,dividends and interest receivable,due to brokers,accruals,cash at bank and bank overdrafts).IFRS 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements.The valuation techniques used by the Group are explained in the accounting policies note 2(h)as set out on page 100 of the Groups Annual Report and Financial Statements for the year ended 30 November 2023.Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.The fair value hierarchy has the following levels:Level 1 Quoted market price for identical instruments in active marketsA financial instrument is regarded as quoted in an active market if quoted prices are readily available from an exchange,dealer,broker,industry group,pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arms length basis.The Group does not adjust the quoted price for these instruments.Level 2 Valuation techniques using observable inputs This category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active,or other valuation techniques where all significant inputs are directly or indirectly observable from market data.Valuation techniques used for non-standardised financial instruments such as options,currency swaps and other over-the-counter derivatives include the use of comparable recent arms length transactions,reference to other instruments that are substantially the same,discounted cash flow analysis,option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.Notes to the financial statementscontinuedNM0824U-3791214-36/50Contents Section 4:Financial statements 35Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Over-the-counter derivative option contracts have been classified as Level 2 investments as their valuation has been based on market observable inputs represented by the underlying quoted securities to which these contracts expose the Group.Level 3 Valuation techniques using significant unobservable inputs This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instruments valuation.This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market.The Investment Manager considers observable data to be that market data that is readily available,regularly distributed or updated,reliable and verifiable,not proprietary and provided by independent sources that are actively involved in the relevant market.The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement.If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs,that measurement is a Level 3 measurement.Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement,considering factors specific to the asset or liability including an assessment of the relevant risks including but not limited to credit risk,market risk,liquidity risk,business risk and sustainability risk.The determination of what constitutes observable inputs requires significant judgement by the Investment Manager and these risks are adequately captured in the assumptions and inputs used in measurement of Level 3 assets or liabilities.Fair values of financial assets and financial liabilitiesThe table below sets out fair value measurements using the IFRS 13 fair value hierarchy.Financial assets/(liabilities)at fair value through profit or loss at 31May 2024(unaudited)Level 1Level 2Level 3Total000000000000Assets:Equity investments186,532 186,532Fixed income investments 2,162 2,162Liabilities:Derivative financial instruments written options(5)(5)186,5272,162 188,689 Financial assets/(liabilities)at fair value through profit or loss at 31May 2023(unaudited)Level 1Level 2Level 3Total000000000000Assets:Equity investments170,896 170,896Fixed income investments 2,714 2,017 4,731 Liabilities:Derivative financial instruments commodity futures(559)(559)173,0512,017 175,068Financial assets/(liabilities)at fair value through profit or loss at 30November 2023(audited)Level 1Level 2Level 3Total000000000000Assets:Equity investments169,171 169,171Fixed income investments4,022 2,347 6,369 Liabilities:Derivative financial instruments written options(110)(110)Derivative financial instruments commodity futures(780)(780)172,303 2,347174,650The investment in Vale debentures has been classified as Level 2 in the tables above for all periods as these are priced using secondary market pricing information provided by the Brazilian Financial and Capital Markets Association(ANBIMA).NM0824U-3791214-37/50Contents36 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660012.Financial risks and valuation of financial instruments continuedAs at 31 May 2024,the investment in Gazprom has been valued at a nominal value of RUB0.01(31 May 2023:RUB0.01;30 November 2023:RUB0.01)due to lack of access to the Moscow Stock Exchange as a result of sanctions against Russia following the invasion of Ukraine.Following the suspension of the secondary listings of depositary receipts of Russian companies,the investment in Gazprom ADRs was transferred from Level 1 to Level 3.Towards the previous year end,the ADRs in Gazprom were converted into equity shares of Gazprom.As at the period-end,this investment is considered a Level 3 financial asset.For exchange listed equity investments,the quoted price is the bid price.Substantially,all investments are valued based on unadjusted quoted market prices.Where such quoted prices are readily available in an active market,such prices are not required to be assessed or adjusted for any business risks,including climate change risk,in accordance with the fair value related requirements of the Companys financial reporting framework.The Company may invest no more than 10%of its net asset value in investments held through Stock Connect as set out on page 122 of the Groups Annual Report and Financial Statements for the year ended 30 November 2023.13.Related party disclosureDirectors emolumentsThe Board consists of four non-executive Directors,all of whom are considered to be independent of the Manager by the Board.None of the Directors has a service contract with the Company.The Chairman receives an annual fee of 42,000,the Chairman of the Audit and Management Engagement Committee receives an annual fee of 35,000,the Senior Independent Director receives an annual fee of 31,000 and each of the other Directors receives an annual fee of 30,000.As at 31 May 2024,an amount of 11,000(31 May 2023:11,000;30 November 2023:11,000)was outstanding in respect of Directors fees.At the period end,interests of the Directors in the ordinary shares of the Company are as set out below:31 May 202431 May 202330 November 2023Mr Adrian Brown(Chairman)35,00035,00035,000Mr Andrew Robson35,00035,00035,000Mrs Anne Marie Cannon115,000n/an/aMrs Carole Ferguson14,50510,00014,505Dr Carol Bell2n/a44,00050,8001 Mrs Cannon joined the Board with effect from 16 January 2024 and held no shares as at that date.2 Dr Carol Bell retired from the Board with effect from 15 March 2024.Since the period end and up to the date of this report there have been no changes in Directors holdings.Significant HoldingsThe following investors are:a.funds managed by the BlackRock Group or are affiliates of BlackRock,Inc.(Related BlackRock Funds);orb.investors(other than those listed in(a)above)who held more than 20%of the voting shares in issue in the Company and are as a result,considered to be related parties to the Company(Significant Investors).Total%of shares held by Related BlackRock FundsTotal%of shares held by Significant Investors who are not affiliates of BlackRock Group or BlackRock,Inc.Number of Significant Investors who are not affiliates of BlackRock Group or BlackRock,Inc.As at 31 May 20240.75n/an/aAs at 30 November 20230.70n/an/aAs at 31 May 20230.95n/an/aNotes to the financial statementscontinuedNM0824U-3791214-38/50Contents Section 4:Financial statements 37Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660014.Transactions with the Investment Manager and AIFMBlackRock Fund Managers Limited(BFM)provides management and administration services to the Group under a contract which is terminable on six months notice.BFM has(with the Groups consent)delegated certain portfolio and risk management services,and other ancillary services,to BlackRock Investment Management(UK)Limited(BIM(UK).Further details of the investment management contract are disclosed on page 53 of the Directors Report in the Companys Annual Report and Financial Statements for the year ended 30 November 2023.The investment management fee due for the six months ended 31 May 2024 amounted to 724,000(six months ended 31 May 2023:808,000;year ended 30 November 2023:1,549,000).At the period end 1,088,000 was outstanding in respect of these fees(31 May 2023:1,187,000;30 November 2023:742,000).The Company is entitled to a rebate from the investment management fee charged by the Manager in the event the Companys ongoing charges exceed the cap of 1.25%per annum of average daily net assets.The amount of rebate accrued to 31 May 2024 amounted to nil(six months ended 31 May 2023:nil;year ended 30 November 2023:nil).Any final rebate for the full year ending 30 November 2024 will not crystallise and fall due until the calculation date of 30 November 2024.In addition to the above services,BIM(UK)has provided the Group with marketing services.The total fees paid or payable for these services for the period ended 31 May 2024 amounted to 15,000 excluding VAT(six months ended 31 May 2023:21,000;year ended 30 November 2023:84,000).Marketing fees of 121,000(31 May 2023:43,000;30 November 2023:106,000)were outstanding at 31 May 2024.The ultimate holding company of the Manager and the Investment Manager is BlackRock,Inc.,a company incorporated in Delaware,USA.15.Capital commitments and contingent liabilitiesThe Group had no capital commitments at 31 May 2024(31 May 2023:one SPAC PIPE commitment for investment in Lifezone Metals;year ended 30 November 2023:none).There were no contingent liabilities at 31 May 2024(31 May 2023:none;30 November 2023:none).16.Publication of non-statutory accountsThe financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.The financial information for the six months ended 31 May 2024 and 31 May 2023 has not been reviewed or audited by the auditor.The information for the year ended 30 November 2023 has been extracted from the latest published audited financial statements,which have been filed with the Registrar of Companies unless otherwise stated.The report of the Auditors on those accounts contained no qualification or statement under Sections 498(2)or 498(3)of the Companies Act 2006.17.Annual resultsThe Board expects to announce the annual results for the year ending 30 November 2024 in January 2025.Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000 or at .The Annual Report and Financial Statements should be available at the beginning of February 2025,with the Annual General Meeting being held in March 2025.NM0824U-3791214-39/50ContentsJob No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 660038 BlackRock Energy and Resources Income Trust plclHalf Yearly Financial Report 31 May 2024Directors,management and other service providersDirectorsAdrian Brown(Chairman)Andrew Robson(Chairman of the Audit and Management Engagement Committee)Anne Marie Cannon(Senior Independent Director)Carole FergusonRegistered office(Registered in England,No.5612963)12 Throgmorton AvenueLondon EC2N 2DLAlternative Investment Fund Manager1BlackRock Fund Managers Limited212 Throgmorton AvenueLondon EC2N 2DLTelephone:020 7743 3000Investment Manager and Company SecretaryBlackRock Investment Management(UK)Limited212 Throgmorton AvenueLondon EC2N 2DLBanker,Custodian and DepositaryThe Bank of New York Mellon(International)Limited2160 Queen Victoria StreetLondon EC4V 4LARegistrarComputershare Investor Services PLC2The PavilionsBridgwater RoadBristol BS99 6ZZTelephone:0370 707 1476AuditorDeloitte LLP110 Queen StreetGlasgow G1 3BXStockbrokerWinterflood Securities Limited2The Atrium BuildingCannon Bridge25 Dowgate HillLondon EC4R 2GASolicitorGowling WLG(UK)LLP4 More London RiversideLondon SE1 2AU1 BlackRock Fund Managers Limited(BFM)was appointed as the Alternative Investment Fund Manager on 2 July 2014.BlackRock Investment Management(UK)Limited continues to act as the Investment Manager under a delegation agreement with BFM.2 Authorised and regulated by the Financial Conduct Authority.NM0824U-3791214-40/50Contents Section 5:Additional information 39Job No:52409Proof Event:17Black Line Level:4Park Communications LtdAlpine WayLondon E6 6LACustomer:BlackRockProject Title:BRERIT Interim Rpt 2024T:0207 055 6500F:020 7055 6600Contact informationGeneral enquiries about the Company should be directed to:The Company SecretaryBlackRock Energy and Resources Income Trust plc,12 Throgmorton Avenue,London EC2N 2DLTelephone:020 7743 3000Email:W enquiriesThe Com
2024-07-10
50页
5星级
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no respons.
2024-07-10
29页
5星级
Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30,2024oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number:1-32853M COMPANY(Exact name of registrant as specified in its charter)Delaware41-0417775(State or other jurisdiction of incorporation)(IRS Employer Identification No.)3M Center,St.Paul,Minnesota55144-1000(Address of Principal Executive Offices)(Zip Code)(Registrants Telephone Number,Including Area Code)(651)733-1110Not Applicable(Former Name or Former Address,if Changed Since Last Report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,Par Value$.01 Per ShareMMMNew York Stock ExchangeMMMChicago Stock Exchange,Inc.1.500%Notes due 2026MMM26New York Stock Exchange1.750%Notes due 2030MMM30New York Stock Exchange1.500%Notes due 2031MMM31New York Stock ExchangeNote:The common stock of the Registrant is also traded on the SIX Swiss Exchange.Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(orfor such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of thischapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See thedefinitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.:Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date.ClassOutstanding at June 30,2024Common Stock,$0.01 par value per share549,353,621 shares1Table of Contents3M COMPANYForm 10-Q for the Quarterly Period Ended June 30,2024TABLE OF CONTENTSPAGEPART I.Financial Information3Item 1.Financial Statements3Consolidated Statement of Income(Loss)3Consolidated Statement of Comprehensive Income(Loss)4Consolidated Balance Sheet5Consolidated Statement of Cash Flows6Notes to Consolidated Financial Statements7NOTE 1.Significant Accounting Policies7NOTE 2.Discontinued Operations7NOTE 3.Revenue9NOTE 4.Divestitures10NOTE 5.Goodwill and Intangible Assets10NOTE 6.Restructuring Actions11NOTE 7.Supplemental Income(Loss)Statement Information12NOTE 8.Supplemental Equity and Comprehensive Income(Loss)Information13NOTE 9.Income Taxes15NOTE 10.Earnings(Loss)Per Share16NOTE 11.Marketable Securities16NOTE 12.Long-Term Debt and Short-Term Borrowings17NOTE 13.Pension and Postretirement Benefit Plans18NOTE 14.Supplier Finance Program Obligations20NOTE 15.Derivatives20NOTE 16.Fair Value Measurements23NOTE 17.Commitments and Contingencies24NOTE 18.Stock-Based Compensation46NOTE 19.Business Segments47Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations50Overview50Results of Operations59Performance by Business Segment60Financial Condition and Liquidity65Item 3.Quantitative and Qualitative Disclosures About Market Risk69Item 4.Controls and Procedures69PART II.Other Information70Item 1.Legal Proceedings70Item 1A.Risk Factors70Item 2.Unregistered Sales of Equity Securities and Use of Proceeds78Item 3.Defaults Upon Senior Securities78Item 4.Mine Safety Disclosures78Item 5.Other Information78Item 6.Exhibits792Table of Contents3M COMPANYFORM 10-QFor the Quarterly Period Ended June 30,2024PART I.Financial InformationItem 1.Financial Statements3M Company and SubsidiariesConsolidated Statement of Income(Loss)(Unaudited)Three months endedJune 30,Six months endedJune 30,(Millions,except per share amounts)2024202320242023Net sales$6,255$6,283$12,271$12,338 Operating expensesCost of sales3,571 3,728 7,056 7,472 Selling,general and administrative expenses1,132 11,615 2,260 12,763 Research,development and related expenses280 298 534 595 Total operating expenses4,983 15,641 9,850 20,830 Operating income(loss)1,272(9,358)2,421(8,492)Other expense(income),net(138)72 82 128 Income(loss)from continuing operations before income taxes1,410(9,430)2,339(8,620)Provision(benefit)for income taxes203(2,261)423(2,116)Income(loss)from continuing operations of consolidated group1,207(7,169)1,916(6,504)Income(loss)from unconsolidated subsidiaries,net of taxes3 3 4 5 Net income(loss)from continuing operations including noncontrolling interest1,210(7,166)1,920(6,499)Less:Net income(loss)attributable to noncontrolling interest6 5 11 10 Net income(loss)from continuing operations attributable to 3M1,204(7,171)1,909(6,509)Net income(loss)from discontinued operations,net of taxes(59)330 164 644 Net income(loss)attributable to 3M$1,145$(6,841)$2,073$(5,865)Earnings(loss)per share attributable to 3M common shareholders:Weighted average 3M common shares outstanding basic553.8 553.9 554.4 553.3 Earnings(loss)per share from continuing operations basic$2.17$(12.94)$3.44$(11.76)Earnings(loss)per share from discontinued operations basic(0.10)0.59 0.30 1.16 Earnings(loss)per share basic$2.07$(12.35)$3.74$(10.60)Weighted average 3M common shares outstanding diluted554.8 553.9 555.3 553.3 Earnings(loss)per share from continuing operations diluted$2.17$(12.94)$3.44$(11.76)Earnings(loss)per share from discontinued operations diluted(0.10)0.59 0.29 1.16 Earnings(loss)per share diluted$2.07$(12.35)$3.73$(10.60)The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.3Table of Contents3M Company and SubsidiariesConsolidated Statement of Comprehensive Income(Loss)(Unaudited)Three months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Net income(loss)attributable to 3M$1,145$(6,841)$2,073$(5,865)Net income(loss)attributable to noncontrolling interest6 5 11 10 Net income(loss)including noncontrolling interest1,151(6,836)2,084(5,855)Other comprehensive income(loss),net of tax:Cumulative translation adjustment(145)25(353)141 Defined benefit pension and postretirement plans adjustment826 50 961 101 Cash flow hedging instruments(7)23 19(1)Total other comprehensive income(loss),net of tax674 98 627 241 Comprehensive income(loss)including noncontrolling interest1,825(6,738)2,711(5,614)Comprehensive(income)loss attributable to noncontrolling interest(5)(6)(11)(11)Comprehensive income(loss)attributable to 3M$1,820$(6,744)$2,700$(5,625)The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.4Table of Contents3M Company and SubsidiariesConsolidated Balance Sheet(Unaudited)(Dollars in millions,except per share amount)June 30,2024December 31,2023AssetsCurrent assetsCash and cash equivalents$10,083$5,735 Marketable securities current255 50 Accounts receivable net of allowances of$64 and$623,575 3,601 InventoriesFinished goods1,956 1,842 Work in process1,193 1,242 Raw materials and supplies911 860 Total inventories4,060 3,944 Prepaids444 344 Other current assets1,098 326 Current assets of discontinued operations 2,379 Total current assets19,515 16,379 Property,plant and equipment23,278 23,494 Less:Accumulated depreciation(15,806)(15,804)Property,plant and equipment net7,472 7,690 Operating lease right of use assets610 657 Goodwill6,318 6,382 Intangible assets net1,266 1,323 Other assets8,196 6,806 Non-current assets of discontinued operations 11,343 Total assets$43,377$50,580 LiabilitiesCurrent liabilitiesShort-term borrowings and current portion of long-term debt$1,302$2,947 Accounts payable2,813 2,776 Accrued payroll602 695 Accrued income taxes407 304 Operating lease liabilities current169 192 Other current liabilities9,052 6,660 Current liabilities of discontinued operations 1,723 Total current liabilities14,345 15,297 Long-term debt11,781 13,088 Pension and postretirement benefits1,717 2,156 Operating lease liabilities443 464 Other liabilities11,103 14,021 Non-current liabilities of discontinued operations 686 Total liabilities39,389 45,712 Commitments and contingencies(Note 17)Equity3M Company shareholders equity:Common stock par value,$.01 par value;944,033,056 shares issued9 9 Shares outstanding-June 30,2024:549,353,621,December 31,2023:552,581,136Additional paid-in capital7,146 6,956 Retained earnings35,475 37,479 Treasury stock,at cost:(33,147)(32,859)Shares at June 30,2024:394,679,435,December 31,2023:391,451,920Accumulated other comprehensive income(loss)(5,567)(6,778)Total 3M Company shareholders equity3,916 4,807 Noncontrolling interest72 61 Total equity3,988 4,868 Total liabilities and equity$43,377$50,580 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.5Table of Contents3M Company and SubsidiariesConsolidated Statement of Cash Flows(Unaudited)Six months endedJune 30,(Millions)20242023Cash Flows from Operating ActivitiesNet income(loss)including noncontrolling interest$2,084$(5,855)Adjustments to reconcile net income(loss)including noncontrolling interest to net cash provided by operating activitiesDepreciation and amortization731 915 Company pension and postretirement contributions(86)(57)Company pension and postretirement expense898 75 Stock-based compensation expense200 176 Deferred income taxes115(2,547)Changes in assets and liabilitiesAccounts receivable(219)(393)Inventories(270)101 Accounts payable166 135 Accrued income taxes(current and long-term)(172)(409)Other net(1,659)10,643 Net cash provided by(used in)operating activities1,788 2,784 Cash Flows from Investing ActivitiesPurchases of property,plant and equipment(PP&E)(644)(852)Proceeds from sale of PP&E and other assets53 23 Purchases of marketable securities and investments(943)(775)Proceeds from maturities and sale of marketable securities and investments707 945 Other net(29)40 Net cash provided by(used in)investing activities(856)(619)Cash Flows from Financing ActivitiesChange in short-term debt net(205)651 Repayment of debt(maturities greater than 90 days)(2,653)(1,802)Proceeds from debt(maturities greater than 90 days)8,367 1,107 Purchases of treasury stock(421)(29)Proceeds from issuance of treasury stock pursuant to stock option and benefit plans30 218 Dividends paid to shareholders(1,221)(1,655)Cash transferred to Solventum related to separation,net(577)Other net(57)(9)Net cash provided by(used in)financing activities3,263(1,519)Effect of exchange rate changes on cash and cash equivalents(45)(43)Net increase(decrease)in cash and cash equivalents4,150 603 Cash and cash equivalents at beginning of year5,933 3,655 Cash and cash equivalents at end of period$10,083$4,258 The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.The Consolidated Statements of Cash Flows include the results of continuing and discontinued operations and,therefore,also include cash and cash equivalents associated with Solventumthrough its April 2024 separation from 3M that were presented in current assets of discontinued operations in the 3M Consolidated Balance Sheet.116Table of Contents3M Company and SubsidiariesNotes to Consolidated Financial Statements(Unaudited)NOTE 1.Significant Accounting PoliciesBasis of Presentation:The interim consolidated financial statements are unaudited but,in the opinion of management,reflect all adjustments necessary for a fair statement ofthe Companys consolidated financial position,results of operations and cash flows for the periods presented.These adjustments consist of normal,recurring items.The resultsof operations for any interim period are not necessarily indicative of results for the full year.The interim consolidated financial statements and notes are presented as permittedby the requirements for Quarterly Reports on Form 10-Q.This Quarterly Report on Form 10-Q should be read in conjunction with the Companys consolidated financialstatements and notes included in its Annual Report on Form 10-K.Certain amounts in prior periods consolidated financial statements have been reclassified to conform to current period presentation.Information provided herein reflects theimpact of these changes for all applicable periods presented.As discussed in Note 2,on April 1,2024,3M completed the previously announced separation of its Health Care business(the Separation)through a pro ratadistribution of 80.1%of the outstanding shares of Solventum Corporation(Solventum)to 3M stockholders.As a result of the Separation,Solventum became anindependent public company and 3M no longer consolidates Solventum into 3Ms financial results.In connection with the Separation,the historical net income ofSolventum and applicable assets and liabilities included in the Separation are reported in 3Ms consolidated financial statements as discontinued operations.3M made certain changes to the composition of segment information reviewed by 3Ms chief operating decision maker(CODM)effective in the second quarter of2024 largely as a result of the separation of Solventum and changes within its business segments effective in the first quarter of 2024 as further described in Note 19.To the extent these changes impacted 3Ms disclosed disaggregated revenue information,data in Note 3 has also been updated.New Accounting Pronouncements:Refer to Note 1 to the Consolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K for a discussion of applicablestandards issued and not yet adopted by 3M.Relevant New Standards Issued Subsequent to Most Recent Annual ReportIn March 2024,the SEC adopted rules under SEC Release No.33-11275,The Enhancement and Standardization of Climate-Related Disclosures for Investors,which require aregistrant to disclose information in annual reports and registration statements about climate-related risks that are reasonably likely to have a material impact on its business,results of operations,or financial condition.The information would include disclosure of a registrants greenhouse gas emissions.In addition,certain disclosures related tosevere weather events and other natural conditions will be required in a registrants audited financial statements.Annual disclosure requirements would be effective for 3M asearly as the fiscal year beginning January 1,2025.However,in April 2024,the SEC voluntarily stayed the final rules pending certain legal challenges.The Company isevaluating the impact of these rules on its disclosures.NOTE 2.Discontinued OperationsOn April 1,2024,3M completed the previously announced separation of its Health Care business(the Separation)through a pro rata distribution of 80.1%of the outstandingshares of Solventum Corporation(Solventum)to 3M stockholders.The spin-off transaction was intended to be tax-free for U.S.federal income tax purposes.To reflect thecompletion of the spin,3M recorded a decrease in shareholders equity for the net book value of applicable assets and liabilities included in the Separation,net of the book valueof 3Ms retained ownership.As a result of the Separation,Solventum became an independent public company and 3M no longer consolidates Solventum into 3Ms financialresults.In connection with the Separation,the historical net income of Solventum and applicable assets and liabilities included in the Separation are reported in 3Msconsolidated financial statements as discontinued operations.Following the Separation,as 3M no longer controls or has the ability to exert significant influence overSolventum,3M measures,at fair value on a recurring basis,its retained ownership interest in Solventum common stock(see additional information in Note 7).3M expects tomonetize its stake in Solventum over time.The Company entered into various agreements to effect the Separation and provide for the relationship between 3M and Solventum,including,among others,a separation anddistribution agreement;a tax matters agreement;and transition service,distribution,and contract manufacturing agreements;as well as certain commercial supply agreements.The transition service and distribution agreements have overall terms of two years following the Separation and each may be extended an additional year.The transitioncontract manufacturing agreements term is three years with an ability to extend under certain circumstances.Supply agreements,by which each company may provide productto the other,have initial three-year terms,but may extend for particular products up to ten or twelve years following the Separation,under certain circumstances.In addition,the companies had certain amounts due between them as of the Separation date.7Table of Contents3M continuing involvement with Solventum in the form of net sales under supply agreements and income from transition agreements is reflected in amounts disclosed in Note19 relative to Corporate and Unallocated(recorded as net sales and associated costs)and Other(recorded as a direct offset to associated costs),respectively.Solventumtransition agreement income for the three months ended June 30,2024 included in Other was approximately$30 million(approximately$200 million gross fees,net ofassigned costs).Transition services or purchases from Solventum are not material to 3M.Amounts due from Solventum and amounts due to Solventum under the agreementsdescribed above were approximately$0.5 billion and$0.2 billion,respectively,as of June 30,2024.Information regarding net income(loss)from discontinued operations,net of taxes includes the following:Three months endedJune 30,Six months endedJune 30,Net Income(Loss)from Discontinued Operations,Net of Taxes(millions)2024202320242023Net sales$2,042$1,987$4,018Cost of sales8788441,747Other operating expenses467648371,496Other expense(income),net(7)44(11)Income(loss)from discontinued operations before income taxes(46)407262786Provision for income taxes137798142Net income(loss)from discontinued operations,net of taxes$(59)$330$164$644Major classes of assets and liabilities of discontinued operations include the following:Assets and Liabilities of Discontinued Operations(millions)December 31,2023AssetsCash and cash equivalents$198 Marketable securities current3 Accounts receivable net1,149 Inventories878 Other current assets151 Current assets of discontinued operations2,379 Property,plant and equipment net1,469 Operating lease right of use assets102 Goodwill6,545 Intangible assets net2,903 Other assets324 Non-current assets of discontinued operations11,343 LiabilitiesAccounts payable469 Accrued payroll209 Accrued income taxes61 Operating lease liabilities current33 Other current liabilities951 Current liabilities of discontinued operations1,723 Pension and postretirement benefits315 Operating lease liabilities70 Other liabilities301 Non-current liabilities of discontinued operations686 Cash flows related to discontinued operations have not been segregated,and are included in the Consolidated Statement of Cash Flows for all periods presented.Selectedfinancial information related to cash flows from discontinued operations is below.Six months endedJune 30,Selected Cash Flows from Discontinued Operations(millions)20242023Depreciation and amortization$139$277 Purchases of property,plant and equipment(PP&E)77 104 8Table of ContentsNOTE 3.RevenueDisaggregated Revenue Information:The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized duringthe respective reporting periods:Three months endedJune 30,Six months endedJune 30,Net Sales by Division(millions)2024202320242023Abrasives$324$334$652$675Automotive Aftermarket304305610617Electrical Markets325329636653Industrial Adhesives and Tapes5315171,0491,033Industrial Specialties Division285298569606Personal Safety8578491,7141,717Roofing Granules133133261243Total Safety and Industrial Business Segment2,7592,7655,4915,544Advanced Materials244305507606Automotive and Aerospace481477987939Commercial Branding and Transportation6726951,2821,310Electronics7467141,4711,386Total Transportation and Electronics Business Segment2,1432,1914,2474,241Consumer Safety and Well-Being280278546548Home and Auto Care302337607655Home Improvement369355699696Packaging and Expression312323551586Total Consumer Business Segment1,2631,2932,4032,485Corporate and Unallocated862211245Other4121823Total Company$6,255$6,283$12,271$12,338Three months endedJune 30,Six months endedJune 30,Net Sales by Geographic Area(millions)2024202320242023Americas$3,480$3,396$6,630$6,568 Asia Pacific1,721 1,776 3,489 3,590 Europe,Middle East and Africa1,054 1,111 2,152 2,180 Worldwide$6,255$6,283$12,271$12,338 Americas included United States net sales to customers of$2.8 billion and$5.3 billion for the three and six months ended June 30,2024,respectively,and$2.8 billion and$5.3billion for the three and six months ended June 30,2023,respectively.Asia Pacific included China/Hong Kong net sales to customers of$0.7 billion and$1.4 billion for thethree and six months ended June 30,2024,respectively,and$0.6 billion and$1.3 billion for the three and six months ended June 30,2023,respectively.9Table of ContentsNOTE 4.DivestituresRefer to Note 3 to the Consolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K for more information on relevant pre-2024 divestitures.On April 1,2024,3M completed the separation of its Health Care business(the Separation)through a pro rata distribution of 80.1%of the outstanding shares of SolventumCorporation(Solventum)to 3M stockholders.See Note 2 for additional detail,including information regarding reporting the historical net income of Solventum and applicableassets and liabilities included in the Separation in 3Ms consolidated financial statements as discontinued operations.NOTE 5.Goodwill and Intangible AssetsGoodwill:The change in the carrying amount of goodwill by business segment was as follows:(Millions)Safety and IndustrialTransportation andElectronicsConsumerCorporate andUnallocatedTotal CompanyBalance as of December 31,2023$4,542$1,512$270$58$6,382Translation and other(42)(10)(12)(64)Balance as of June 30,2024$4,500$1,502$258$58$6,318The amounts in the“Translation and other”row in the above table primarily relate to changes in foreign currency exchange rates.As of June 30,2024,the Companys accumulated goodwill impairment loss is$0.3 billion.Acquired Intangible Assets:The carrying amount and accumulated amortization of acquired finite-lived intangible assets,in addition to the balance of non-amortizableintangible assets follow:(Millions)June 30,2024December 31,2023Customer related$1,328$1,337 Patents224 225 Other technology-based373 375 Definite-lived tradenames488 489 Other46 48 Total gross carrying amount2,459 2,474 Accumulated amortization customer related(910)(883)Accumulated amortization patents(223)(224)Accumulated amortization other technology-based(322)(317)Accumulated amortization definite-lived tradenames(288)(276)Accumulated amortization other(30)(31)Total accumulated amortization(1,773)(1,731)Total finite-lived intangible assets net686 743 Indefinite lived intangible assets(primarily tradenames)580 580 Total intangible assets net$1,266$1,323 Certain tradenames acquired by 3M are not amortized because they have been in existence for over 60 years,have a history of leading-market share positions,have been andare intended to be continuously renewed,and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time.Amortization expense follows:Three months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Amortization expense$27$29$54$59 Expected amortization expense for acquired amortizable intangible assets recorded as of June 30,2024 follows:(Millions)Remainder of 202420252026202720282029After 2029Amortization expense$52$105$104$85$59$57$224 3M expenses the costs incurred to renew or extend the term of intangible assets.10Table of ContentsNOTE 6.Restructuring Actions2023 to 2025 Structural Reorganization Actions:As described in Note 5 in 3Ms 2023 Annual Report on Form 10-K,in the first quarter of 2023,3M announced it wouldundertake structural reorganization actions to reduce the size of the corporate center of the Company,simplify supply chain,streamline 3Ms geographic footprint,reduce layersof management,further align business go-to-market models to customers,and reduce manufacturing roles to align with production volumes.This aggregate initiative,beginningin the first quarter of 2023 and continuing through 2025,is expected(as updated to exclude discontinued operations)to impact approximately 8,000 positions worldwide withan expected pre-tax charge of$700 million to$800 million over that period.During 2023,management approved and committed to undertake associated actions resulting in a2023 pre-tax charge of$415 million.During 2024,management approved and committed to undertake additional actions under this initiative impacting approximately 700positions resulting in a pre-tax charge of$35 million and$138 million in the second quarter and six months ended June 30,2024,respectively.Since its beginning in 2023through committed second quarter 2024 actions,this initiative has impacted approximately 6,400 positions worldwide.Remaining activities related to the restructuring actionsapproved and committed through June 30,2024 under this initiative are expected to be completed in 2025.3M expects to commit to further actions under this initiative.The related restructuring charges for periods presented were recorded in the income(loss)statement as follows:Three months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Cost of sales$2$44$4$59 Selling,general and administrative expenses32 140 123 171 Research,development and related expenses1 18 11 22 Total operating income impact$35$202$138$252 The business segment operating income(loss)impact of these restructuring charges is summarized as follows:Three months ended June 30,20242023(Millions)Employee RelatedAsset-Related andOtherTotalEmployee RelatedAsset-Related andOtherTotalSafety and Industrial$13$5$18$44$44 Transportation and Electronics7 4 11 25 25 Consumer4 2 6 13 13 Corporate and unallocated 100 20 120 Total operating expense$24$11$35$182$20$202 Six months ended June 30,20242023(Millions)Employee RelatedAsset-Related andOtherTotalEmployee RelatedAsset-Related andOtherTotalSafety and Industrial$39$25$64$54$54 Transportation and Electronics16 18 34 37 37 Consumer9 11 20 16 16 Corporate and unallocated6 14 20 125 20 145 Total operating expense$70$68$138$232$20$252 Restructuring actions,including cash and non-cash impacts,follow:(Millions)Employee-RelatedAsset-Related andOtherTotalAccrued restructuring action balance as of December 31,2023$99$99 Incremental expense incurred in the first quarter of 202446 57 103 Incremental expense incurred in the second quarter of 202424 11 35 Non-cash changes(68)(68)Adjustments12 12 Cash payments(92)(92)Accrued restructuring action balance as of June 30,2024$89$89 11Table of Contents2023 to 2025 PFAS Exit Actions:As described in Note 5 in 3Ms 2023 Annual Report on Form 10-K,3M announced in 2022 that it will exit all PFAS manufacturing by theend of 2025.In 2023,3M management approved and committed to undertake certain related workforce actions resulting in a pre-tax charge of$64 million primarily impactingcost of sales.During 2024,management approved and committed to undertake additional related workforce actions impacting approximately 60 positions resulting in a pre-taxcharge of$8 million and$12 million primarily impacting cost of sales in the second quarter and six months ended June 30,2024,respectively.These charges are reflectedwithin the Transportation and Electronics business segment.This initiative,beginning in 2023 through committed second quarter 2024 actions,has impacted approximately 610positions worldwide.The remaining period of activities related to these approved and committed actions aligns with 3Ms PFAS exit timeframe.(Millions)Employee-RelatedAccrued restructuring action balance as of December 31,2023$60 Incremental expense incurred in the first quarter of 20244 Incremental expense incurred in the second quarter of 20248 Adjustments(4)Cash payments(17)Accrued restructuring action balance as of June 30,2024$51 NOTE 7.Supplemental Income(Loss)Statement InformationOther expense(income),net consists of the following:Three months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Interest expense$322$144$663$267Interest income(143)(47)(253)(88)Pension and postretirement net periodic benefit cost(benefit)796(25)785(51)Solventum ownership-change in value(1,113)(1,113)Total$(138)$72$82$128Beginning in the second quarter and third quarter of 2023,interest expense also includes imputed interest associated with the obligations resulting from the PWS Settlement andthe CAE Settlement,respectively(discussed in Note 17).Pension and postretirement net periodic benefit income described in the table above include all components of defined benefit plan net periodic benefit cost(benefit)exceptservice cost,which is reported in various operating expense lines.The second quarter of 2024 non-service cost component above was impacted by a$795 million pensionsettlement charge.Refer to Note 13 for additional details on the components of pension and postretirement net periodic benefit cost(benefit).Solventum ownership-change in value relates to the change in value of 3Ms retained ownership interest in common stock of Solventum Corporation,an independent publiccompany.Solventum separated from 3M in April 2024(discussed in Note 2).At June 30,2024,the balance of net unrealized gain on this investment is$1.1 billion.12Table of ContentsNOTE 8.Supplemental Equity and Comprehensive Income(Loss)InformationCash dividends declared and paid totaled$1.51 and$0.70 for the first and second quarters of 2024,respectively,and$1.50 per share for each of the first and second quarters of2023,or$2.21 and$3.00 per share for the first six months of 2024 and 2023,respectively.The table below presents the consolidated changes in equity for three and six months ended June 30,2024 and 2023:3M Company Shareholders(Millions)TotalCommon Stock andAdditional Paid-inCapitalRetainedEarningsTreasury StockAccumulated OtherComprehensive Income(Loss)Non-controllingInterestBalance at March 31,2024$4,933$6,982$37,472$(32,762)$(6,826)$67 Net income(loss)1,151 1,145 6 Other comprehensive income(loss),net of tax674 675(1)Solventum spin-off(2,169)(2,753)584 Dividends declared(386)(386)Stock-based compensation173 173 Reacquired stock(400)(400)Issuances pursuant to stock option and benefit plans12(3)15 Balance at June 30,2024$3,988$7,155$35,475$(33,147)$(5,567)$72 Balance at March 31,2023$15,351$6,825$47,966$(32,963)$(6,530)$53 Net income(6,836)(6,841)5 Other comprehensive income(loss),net of tax98 97 1 Dividends declared(828)(828)Stock-based compensation42 42 Issuances pursuant to stock option and benefit plans30(7)37 Balance at June 30,2023$7,857$6,867$40,290$(32,926)$(6,433)$59 3M Company Shareholders(Millions)TotalCommon Stock andAdditional Paid-inCapitalRetainedEarningsTreasury StockAccumulated OtherComprehensive Income(Loss)Non-controllingInterestBalance at December 31,2023$4,868$6,965$37,479$(32,859)$(6,778)$61 Net income(loss)2,084 2,073 11 Total other comprehensive income(loss),net of tax627 627 Solventum spin-off(2,169)(2,753)584 Dividends declared(1,221)(1,221)Stock-based compensation190 190 Reacquired stock(421)(421)Issuances pursuant to stock option and benefit plans30(103)133 Balance at June 30,2024$3,988$7,155$35,475$(33,147)$(5,567)$72 Balance at December 31,2022$14,770$6,700$47,950$(33,255)$(6,673)$48 Net income(5,855)(5,865)10 Total other comprehensive income(loss),net of tax241240 1 Dividends declared(1,655)(1,655)Stock-based compensation167 167 Reacquired stock(29)(29)Issuances pursuant to stock option and benefit plans218(140)358 Balance at June 30,2023$7,857$6,867$40,290$(32,926)$(6,433)$59 13Table of ContentsThe table below presents the changes in accumulated other comprehensive income(loss)attributable to 3M(AOCI),including the reclassifications out of AOCI by componentfor three and six months ended June 30,2024 and 2023:(Millions)Cumulative TranslationAdjustmentDefined Benefit Pension andPostretirement PlansAdjustmentCash Flow HedgingInstruments,UnrealizedGain(Loss)Total Accumulated OtherComprehensive Income(Loss)Balance at March 31,2024,net of tax:$(2,715)$(4,083)$(28)$(6,826)Other comprehensive income(loss),before tax:Amounts before reclassifications(148)218 23 93 Amounts reclassified out11 876(30)857 Total other comprehensive income(loss),before tax(137)1,094(7)950 Tax effect(7)(268)(275)Total other comprehensive income(loss),net of tax(144)826(7)675 Solventum spin-off64 520 584 Balance at June 30,2024,net of tax:$(2,795)$(2,737)$(35)$(5,567)Balance at March 31,2023,net of tax:$(2,712)$(3,787)$(31)$(6,530)Other comprehensive income(loss),before tax:Amounts before reclassifications3 72 75 Amounts reclassified out39 65(40)64 Total other comprehensive income(loss),before tax42 65 32 139 Tax effect(18)(15)(9)(42)Total other comprehensive income(loss),net of tax24 50 23 97 Balance at June 30,2023,net of tax:$(2,688)$(3,737)$(8)$(6,433)(Millions)Cumulative TranslationAdjustmentDefined Benefit Pension andPostretirement PlansAdjustmentCash Flow HedgingInstruments,UnrealizedGain(Loss)Total Accumulated OtherComprehensive Income(Loss)Balance at December 31,2023,net of tax:$(2,506)$(4,218)$(54)$(6,778)Other comprehensive income(loss),before tax:Amounts before reclassifications(401)285 84(32)Amounts reclassified out68 972(57)983 Total other comprehensive income(loss),before tax(333)1,257 27 951 Tax effect(20)(296)(8)(324)Total other comprehensive income(loss),net of tax(353)961 19 627 Solventum spin-off64 520 584 Balance at June 30,2024,net of tax:$(2,795)$(2,737)$(35)$(5,567)Balance at December 31,2022,net of tax:$(2,828)$(3,838)$(7)$(6,673)Other comprehensive income(loss),before tax:Amounts before reclassifications108 78 186Amounts reclassified out39 129(81)87 Total other comprehensive income(loss),before tax147129(3)273Tax effect(7)(28)2(33)Total other comprehensive income(loss),net of tax140101(1)240Balance at June 30,2023,net of tax:$(2,688)$(3,737)$(8)$(6,433)Includes tax expense(benefit)reclassified out of AOCI related to the following:Three months ended June 30,Six months ended June 30,(millions)2024202320242023Cumulative Translation Adjustment$Defined benefit pension and postretirement plans adjustment(216)(15)(229)(28)Cash flow hedging instruments,unrealized gain/loss7 8 13 18 2222214Table of ContentsIncome taxes are not provided for foreign translation relating to permanent investments in international subsidiaries,but tax effects within cumulative translation do includeimpacts from items such as net investment hedge transactions.The Company uses the portfolio approach for releasing income tax effects from accumulated othercomprehensive income.Additional details on the amounts reclassified from accumulated other comprehensive income(loss)into consolidated income(loss)include:Cumulative translation adjustment:amounts were reclassified into selling,general and administrative expense.In 2024,this was associated with country exits as partof streamlining 3Ms geographic footprint(see Note 6).Defined benefit pension and postretirement plan adjustments:amounts were reclassified into other(expense)income,net(see Note 13).Cash flow hedging instruments,unrealized gain(loss):foreign currency forward/option contacts amounts were reclassified into cost of sales;interest rate contractamounts were reclassified into interest expense(see Note 15).The tax effects,if applicable,associated with these reclassifications were reflected in provision for income taxes.NOTE 9.Income TaxesThe effective tax rate on a continuing operations basis for the second quarter of 2024 was 14.4 percent on pre-tax income compared to 24.0 percent on a pre-tax loss in the prioryear.The effective tax rate for the first six months of 2024 was 18.1 percent compared to 24.6 percent in the prior year.The primary factors that impacted the comparison ofthese rates year-over-year were the second quarter 2023 charge related to the settlement agreement with public water systems in the United States regarding PFAS(see Note17)and the tax rate associated with second quarter 2024 benefit related to the change in value of the retained ownership interest in Solventum.The total amounts of unrecognized tax benefits that,if recognized,would affect the effective tax rate as of June 30,2024 and December 31,2023 on a continuing operationsbasis are$691 million and$671 million,respectively.It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12months.At this time,the Company is not able to estimate the range by which these potential events could impact 3Ms unrecognized tax benefits in the next 12 months.The net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet.As of June 30,2024,3Ms net non currentdeferred tax asset balance was approximately$4.0 billion.This included a balance of approximately$3.2 billion as a result of the 2023 pre-tax charges related to the PWSSettlement and the CAE Settlement(both discussed in Note 17).As of June 30,2024 and December 31,2023,on a continuing operations basis,the Company had valuationallowances of$1,474 million and$689 million on its deferred tax assets,respectively.The primary factor that increased the valuation allowance balance as of June 30,2024 is avaluation allowance related to the difference in basis of the retained ownership interest in Solventum.In connection with the completion of the separation of Solventum in April 2024,3M re-evaluated its global cash needs and certain unrepatriated earnings are no longerconsidered permanently reinvested,which resulted in a charge of approximately$100 million in the second quarter of 2024.The Company has not provided deferred taxes onapproximately$1.0 billion of undistributed earnings from non-U.S.subsidiaries as of June 30,2024 which are indefinitely reinvested in operations.Because of the multipleavenues by which to repatriate the earnings to minimize tax cost,and because a large portion of these earnings are not liquid,it is not practical to determine the income taxliability that would be payable if such earnings were not reinvested indefinitely.In 2021,the Organization for Economic Cooperation and Development(OECD)published Pillar Two Model Rules defining a global minimum tax,which calls for the taxationof large corporations at a minimum rate of 15%.The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation ofthe Pillar Two global minimum tax.Effective January 1,2024,a number of countries have proposed or enacted legislation to implement core elements of the Pillar Twoproposal.Pillar Two did not have a significant impact on 3Ms second quarter 2024 results.While 3M is monitoring developments and evaluating the potential impact on futureperiods,3M does not expect Pillar Two to have a significant impact on its 2024 financial results.15Table of ContentsNOTE 10.Earnings(Loss)Per ShareThe difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is the result of thedilution associated with the Companys stock-based compensation plans.Certain awards outstanding under these stock-based compensation plans were not included in thecomputation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect of 33.1 million and 32.9 million averageoptions for the three and six months ended June 30,2024,respectively,and 36.9 million and 36.5 million average options for the three and six months ended June 30,2023,respectively.In periods of net losses,these anti-dilutive effects include all weighted option shares outstanding and weighted average shares is the same for the calculations ofboth basic and diluted loss per share.The computations for basic and diluted earnings(loss)per share follow:Three months endedJune 30,Six months endedJune 30,(Amounts in millions,except per share amounts)2024202320242023Numerator:Net income(loss)from continuing operations attributable to 3M$1,204$(7,171)$1,909$(6,509)Net income(loss)from discontinued operations,net of taxes(59)330 164 644 Net income(loss)attributable to 3M$1,145$(6,841)$2,073$(5,865)Denominator:Denominator for weighted average 3M common shares outstanding basic553.8 553.9 554.4 553.3 Dilution associated with stock-based compensation plans1.0 0.9 Denominator for weighted average 3M common shares outstanding diluted554.8 553.9 555.3 553.3 Earnings(loss)per share attributable to 3M common shareholders:Earnings(loss)per share from continuing operations basic$2.17$(12.94)$3.44$(11.76)Earnings(loss)per share from discontinued operations basic(0.10)0.59 0.30 1.16 Earnings(loss)per share basic$2.07$(12.35)$3.74$(10.60)Earnings(loss)per share from continuing operations diluted$2.17$(12.94)$3.44$(11.76)Earnings(loss)per share from discontinued operations diluted(0.10)0.59 0.29 1.16 Earnings(loss)per share diluted$2.07$(12.35)$3.73$(10.60)NOTE 11.Marketable SecuritiesThe Company invests in certificates of deposit/time deposits,commercial paper,and other securities.The following is a summary of amounts recorded on the ConsolidatedBalance Sheet for marketable securities(current and non-current).(Millions)June 30,2024December 31,2023Asset backed securities$4$Foreign corporate debt6 U.S.government securities27 Corporate debt securities70 Commercial paper40 Certificates of deposit/time deposits91 46 U.S.treasury securities13 U.S.municipal securities4 4 Current marketable securities255 50 Asset backed securities4 Corporate debt securities10 U.S.municipal securities20 20 Non-current marketable securities34 20 Total marketable securities$289$70 At June 30,2024 and December 31,2023,gross unrealized,gross realized,and net realized gains and/or losses(pre-tax)were not material.16Table of ContentsThe balances at June 30,2024 for marketable securities by contractual maturity are shown below.Actual maturities may differ from contractual maturities because the issuers ofthe securities may have the right to prepay obligations without prepayment penalties.(Millions)Due in one year or less$255 Due after one year through five years25 Due after five years through ten years9 Total marketable securities$289 NOTE 12.Long-Term Debt and Short-Term Borrowings2023 issuances,maturities,and extinguishments of short-and long-term debt are described in Note 13 to the Consolidated Financial Statements in 3Ms 2023 Annual Report onForm 10-K.The Consolidated Statements of Cash Flows include the results of continuing and discontinued operations and,therefore,information regarding similar debt-relatedactivity for 2024 includes that associated with Solventum through its April 2024 Separation.The Company had no commercial paper outstanding at June 30,2024,compared to$1.8 billion commercial paper outstanding as of December 31,2023.In the first quarter of 2024,Solventum,prior to the Separation discussed in Note 2,issued a total of$8.4 billion in aggregate principal amount of senior unsecured debt andterm loans.Also during the first quarter of 2024,Solventum further entered into a revolving credit facility of$2 billion which was undrawn as of March 31,2024.TheseSolventum items were guaranteed by 3M until the completion of the Separation on April 1,2024 and obligations under these notes,loans and facilities became,as transferredobligations,the sole responsibility of Solventum after the Separation.In February 2024,3M repaid$1.1 billion aggregate principal amount of medium-term notes that matured.Future Maturities of Long-term Debt:Maturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are netof the unamortized debt issue costs such that total maturities equal the carrying value of long-term debt as of June 30,2024.The maturities of long-term debt for the periodssubsequent to June 30,2024 are as follows(in millions):Remainder of 202420252026202720282029After 2029Total$53$1,868$1,540$847$818$1,790$6,167$13,083 17Table of ContentsNOTE 13.Pension and Postretirement Benefit PlansThe service cost component of defined benefit net periodic benefit cost is recorded in cost of sales;selling,general and administrative expenses;and research,development andrelated expenses.The other components of net periodic benefit cost are reflected in other expense(income),net.Effective April 1,2024,approximately$2.7 billion of benefitobligations and$2.4 billion of plan assets for certain pension and postretirement benefit plans,were transferred to Solventum,which is treated as a discontinued operation.Components of net periodic benefit cost and other supplemental information for the three and six months ended June 30,2024 and 2023 follow:Three months ended June 30,Qualified and Non-qualified Pension BenefitsPostretirement BenefitsUnited StatesInternational(Millions)202420232024202320242023Net periodic benefit cost(benefit)Operating expenseService cost$29$43$14$20$5$6 Non-operating expenseInterest cost141 165 49 54 21 23 Expected return on plan assets(196)(244)(80)(75)(15)(19)Amortization of transition asset 1 1 Amortization of prior service benefit(4)(6)(6)(8)Amortization of net actuarial loss83 74 3 2 4 2 Settlements,curtailments,special termination benefits and other795 Total non-operating expense(benefit)819(11)(27)(18)4(2)Total net periodic benefit cost(benefit)848 32(13)2 9 4 Service cost-continuing operations$29$35$14$16$5$5 Service cost-discontinued operations 8 4 1 Total service cost29 43 14 20 5 6 Non-operating expense(benefit)-continuing operations819(7)(27)(16)4(2)Non-operating expense(benefit)-discontinued operations(4)(2)Total non-operating expense(benefit)819(11)(27)(18)4(2)Total net periodic benefit cost(benefit)-continuing operations848 28(13)9 3 Total net periodic benefit cost(benefit)-discontinued operations 4 2 1 Total net periodic benefit cost(benefit)$848$32$(13)$2$9$4 18Table of ContentsSix months ended June 30,Qualified and Non-qualified Pension BenefitsPostretirement BenefitsUnited StatesInternational(Millions)202420232024202320242023Net periodic benefit cost(benefit)Operating expenseService cost$66$86$35$39$12$12 Non-operating expenseInterest cost301 331 103 109 43 45 Expected return on plan assets(433)(488)(167)(150)(34)(38)Amortization of transition asset 2 1 Amortization of prior service benefit(8)(12)1 1(12)(16)Amortization of net actuarial loss178 147 6 4 10 4 Settlements,curtailments,special termination benefits and other795 Total non-operating expense(benefit)833(22)(55)(35)7(5)Total net periodic benefit cost(benefit)899 64(20)4 19 7 Service cost-continuing operations$59$70$30$31$11$10 Service cost-discontinued operations7 16 5 8 1 2 Total service cost66 86 35 39 12 12 Non-operating expense(benefit)-continuing operations833(14)(55)(33)7(4)Non-operating expense(benefit)-discontinued operations(8)(2)(1)Total non-operating expense(benefit)833(22)(55)(35)7(5)Total net periodic benefit cost(benefit)-continuing operations892 56(25)(2)18 6 Total net periodic benefit cost(benefit)-discontinued operations7 8 5 6 1 1 Total net periodic benefit cost(benefit)$899$64$(20)$4$19$7 For the six months ended June 30,2024 contributions totaling$81 million were made to the Companys U.S.and international pension plans and$5 million to itspostretirement plans,including discontinued operations.Future contributions will depend on market conditions,interest rates and other factors.3M does not expect thepreviously disclosed range of$100 million to$200 million of expected 2024 cash contributions to its U.S.and international retirement plans to be materially impacted by theApril 1,2024 separation of Solventum(see Note 2).3Ms annual measurement date for pension and postretirement assets and liabilities is December 31 each year,which is alsothe date used for the related annual measurement assumptions.In the second quarter of 2024,3M recorded a non-cash pension settlement charge of approximately$795 million reflected in other expense(income),net as a result oftransferring approximately$2.5 billion of its U.S.pension payment obligations and related plan assets to an insurance company.The pension risk transfer requiredremeasurement of the plan prior to the calculation of the settlement charge.The net impact of the pension risk transfer and the remeasurement was a decrease of approximately$220 million in the non-current liability for pensions(and corresponding decrease in accumulated comprehensive loss,before deferred taxes).Assumptions used for thisremeasurement included discount rates determined using June 30,2024 market conditions and calculated using the same methodology as disclosed in Note 14 to theConsolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K.Using this methodology,the Company determined a discount rate of 5.43%for the U.S.pensionplan as of June 30,2024.The Company also reduced the expected return on assets assumption determined using June 30,2024 market conditions and calculated using the samemethodology as used at the annual measurement as of December 31,2023.All other assumptions were consistent with the December 31,2023 disclosures.This remeasurementwill impact net periodic benefit cost for the remainder of 2024.19Table of ContentsAs of March 31,2024,3M transferred eligible U.S.Solventum employees and retirees to new U.S.defined benefit pension and postretirement plans with the same benefits oftheir current plans.The transfer required remeasurement of the plans prior to the calculation of this split.The net impact of the remeasurement was a decrease of approximately$70 million in the non-current liability for pension and postretirement benefits(and corresponding decrease in accumulated comprehensive loss,before deferred taxes).Assumptions used for this remeasurement included discount rates determined using March 31,2024 market conditions and calculated using the same methodology as disclosedin Note 14 to the Consolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K.All other assumptions were consistent with the December 31,2023disclosures.Using this methodology,the Company determined a discount rate of 5.22%for the U.S.pension plans and 5.19%for the U.S.postretirement benefit plans as ofMarch 31,2024,which are increases of 0.24 percentage points and 0.25 percentage points,respectively,from the rates used as of December 31,2023.This remeasurement didnot impact consolidated income for the three months ended March 31,2024,but will impact net periodic benefit cost for the remainder of 2024.As of March 31,2024,therewere several small international pension plans remeasured for purposes of transferring Solventum employees to new pension plans,the impact of which was not material.NOTE 14.Supplier Finance Program ObligationsUnder supplier finance programs,3M agrees to pay participating banks the stated amount of confirmed invoices from its designated suppliers on the original maturity dates ofthe invoices,generally within 90 days of the invoice date.3M or the banks may terminate the agreements with advance notice.Separately,the banks may have arrangementswith the suppliers that provide them the option to request early payment from the banks for invoices confirmed by 3M.3Ms outstanding balances of confirmed invoices in theprograms as of June 30,2024 and December 31,2023 were approximately$320 million and$270 million,respectively.These amounts are included within accounts payable on3Ms consolidated balance sheet.NOTE 15.DerivativesThe Company uses interest rate swaps and forward and option contracts to manage risks generally associated with foreign exchange rate and interest rate fluctuations.Note 16to the Consolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K explains the types of derivatives and financial instruments used by 3M,how and why 3Muses such instruments,and how such instruments are accounted for.It also contains information regarding previously initiated contracts or instruments.Additional information with respect to derivatives is included elsewhere as follows:Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7.Fair value of derivative instruments is included in Note 16.Derivatives and/or hedging instruments associated with the Companys long-term debt are described in Note 13 to the Consolidated Financial Statements in 3Ms 2023Annual Report on Form 10-K.Refer to the section below titled Statement of Income(Loss)Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated asHedging Instruments for details on the location within the consolidated statements of income(loss)for amounts of gains and losses related to derivative instruments designatedas cash flow or fair value hedges(along with similar information relative to the hedged items)and derivatives not designated as hedging instruments.Additional informationrelative to cash flow hedges,fair value hedges,net investment hedges and derivatives not designated as hedging instruments is included below as applicable.Cash Flow Hedges:As of June 30,2024,the Company had a balance of$35 million associated with the after-tax net unrealized loss associated with cash flow hedginginstruments recorded in accumulated other comprehensive income(loss).This includes a remaining balance of$83 million(after-tax loss)related to forward starting interestrate swap and treasury rate lock contracts terminated in 2019 concurrent with associated debt issuances,which is being amortized over the respective lives of the underlyingnotes.Based on exchange rates as of June 30,2024 of the total after-tax net unrealized balance as of June 30,2024,3M expects to reclassify approximately$38 million after-tax net unrealized gain over the next 12 months(with the impact offset by earnings/losses from underlying hedged items).The amount of pretax gain(loss)recognized in other comprehensive income(loss)related to derivative instruments designated as cash flow hedges is provided in the followingtable.Pretax Gain(Loss)Recognized in Other Comprehensive Income(Loss)on DerivativeThree months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Foreign currency forward/option contracts$23$72$84$78 Fair Value Hedges:The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for active fair value hedges,as well asremaining amounts for discontinued fair value hedges:20Table of ContentsLocation on the Consolidated Balance Sheet(Millions)Carrying Value of the Hedged LiabilitiesCumulative Amount of Fair Value Hedging Adjustment Included in theCarrying Value of the Hedged LiabilitiesJune 30,2024December 31,2023June 30,2024December 31,2023Long-term debt$909$918$(93)$(84)Net Investment Hedges:At June 30,2024,the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150million euros,along with a principal amount of long-term debt instruments designated in net investment hedges totaling 1.8 billion euros.The maturity dates of these derivativeand nonderivative instruments designated in net investment hedges range from 2024 to 2031.The amount of gain(loss)excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material.Theamount of pre-tax gain(loss)recognized in other comprehensive income(loss)related to derivative and nonderivative instruments designated as net investment hedges are asfollows.Pretax Gain(Loss)Recognized as Cumulative Translation within OtherComprehensive Income(Loss)Three months endedJune 30,Six months endedJune 30,(Millions)2024202320242023Foreign currency denominated debt$13$(22)$56$(65)Foreign currency forward contracts2(1)5(3)Total$15$(23)$61$(68)Derivatives Not Designated as Hedging Instruments:Derivatives not designated as hedging instruments include de-designated foreign currency forward and option contractsthat formerly were designated in cash flow hedging relationships(as referenced in the Cash Flow Hedges section above).In addition,3M enters into foreign currency contractsthat are not designated in hedging relationships to offset,in part,the impacts of changes in value of various non-functional currency denominated items including certainintercompany financing balances.These derivative instruments are not designated in hedging relationships;therefore,fair value gains and losses on these contracts are recordedin earnings.The Company does not hold or issue derivative financial instruments for trading purposes.Statement of Income(Loss)Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments:Three months ended June 30,Six months ended June 30,Cost of salesOther expense(income),netCost of salesOther expense(income),net(Millions)20242023202420232024202320242023Total consolidated financial statement line item amount$3,571$3,728$(138)$72$7,056$7,472$82$128 Pre-tax amounts recognized in income related to derivative instruments Information regarding cash flow and fair value hedging relationships:(Gain)or loss on cash flow hedging relationships:Foreign currency forward/option contracts:Amount of(gain)or loss reclassified from accumulated othercomprehensive income(loss)into income(32)(42)(61)(85)Interest rate contracts:Amount of(gain)or loss reclassified from accumulated othercomprehensive income(loss)into income 2 2 4 4(Gain)or loss on fair value hedging relationships:Interest rate contracts:Hedged items 2(9)(9)3 Derivatives designated as hedging instruments (2)9 9(3)Information regarding derivatives not designated as hedginginstruments:(Gain)or loss on derivatives not designated as instruments:Foreign currency forward/option contracts2 13 4(39)75 6(13)For periods prior to the April 1,2024 separation of Solventum,these include certain insignificant amounts attributable to discontinued operations.*21Table of ContentsLocation,Fair Value,and Gross Notional Amounts of Derivative Instruments:The following tables summarize the fair value of 3Ms derivative instruments,excludingnonderivative instruments used as hedging instruments,and their location in the consolidated balance sheet.Notional amounts below are presented at period end foreignexchange rates,except for certain interest rate swaps,which are presented using the inception dates foreign exchange rate.Gross Notional AmountAssetsLiabilities(Millions)LocationFair Value AmountLocationFair Value AmountJune 30,2024December 31,2023June 30,2024December 31,2023June 30,2024December 31,2023Derivatives designated as hedging instrumentsForeign currency forward/optioncontracts$1,821$2,109 Other current assets$74$68 Other currentliabilities$5$27 Foreign currency forward/optioncontracts725 342 Other assets12 11 Other liabilities5 5 Interest rate contracts800 800 Other assets Other liabilities96 88 Total derivatives designated ashedging instruments86 79 106 120 Derivatives not designated as hedging instrumentsForeign currency forward/optioncontracts659 1,023 Other current assets 5 Other currentliabilities1 7 Total derivatives not designatedas hedging instruments 5 1 7 Total derivative instruments$86$84$107$127 Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments:The Company is exposed to credit loss in the event of nonperformance by counterparties ininterest rate swaps,currency swaps,and forward and option contracts.However,the Companys risk is limited to the fair value of the instruments.The Company activelymonitors its exposure to credit risk through the use of credit approvals and credit limits,and by selecting major international banks and financial institutions as counterparties.3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions.A master netting arrangement may allow eachcounterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple,separate derivative transactions.The Company does not anticipatenonperformance by any of these counterparties.3M has elected to present the fair value of derivative assets and liabilities within the Companys consolidated balance sheet on a gross basis even when derivative transactionsare subject to master netting arrangements and may otherwise qualify for net presentation.3M determined that the impact of the amount of eligible offsetting derivative assetsand liabilities was not material if it had elected to offset the asset and liability balances of derivative instruments,netted in accordance with various criteria in the event ofdefault or termination as stipulated by the terms of netting arrangements with each of the counterparties.For each counterparty,if netted,the Company would offset the assetand liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions.Derivatives not subject to master nettingagreements are not eligible for net presentation.For the periods presented,3M has not received cash collateral from derivative counterparties.Currency Effects:3M estimates that year-on-year foreign currency transaction effects,including hedging impacts,increased pre-tax income from continuing operations byapproximately$2 million and decreased pre-tax income from continuing operations by approximately$19 million for the three and six months ended June 30,2024,respectively,and decreased pre-tax loss from continuing operations by approximately$32 million and$62 million for the three and six months ended June 30,2023,respectively.These estimates include transaction gains and losses,including derivative instruments designed to reduce foreign currency exchange rate risks.22Table of ContentsNOTE 16.Fair Value Measurements3M follows ASC 820,Fair Value Measurements and Disclosures,with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis.Refer to Note 17 to the Consolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K for a qualitative discussion of the assets and liabilities that are measuredat fair value on a recurring and nonrecurring basis,a description of the valuation methodologies used by 3M,and categorization within the valuation framework of ASC 820.The following table provide information by level for material assets and liabilities that are measured at fair value on a recurring basis at June 30,2024 and December 31,2023.Fair Value atFair Value Measurements Using Inputs Considered asLevel 1Level 2Level 3Description(Millions)June 30,2024December 31,2023June 30,2024December 31,2023June 30,2024December 31,2023June 30,2024December 31,2023Assets:Available-for-sale:Marketable securities:Asset backed securities$8$8$Foreign corporate debt6 6 U.S.government securities27 27 Corporate debt securities80 80 Commercial paper40 40 Certificates of deposit/time deposits91 46 91 46 U.S.treasury securities13 13 U.S.municipal securities24 24 24 24 Solventum common stock1,817 1,817 Derivative instruments assets:Foreign currency forward/optioncontracts86 84 86 84 Liabilities:Derivative instruments liabilities:Foreign currency forward/optioncontracts11 39 11 39 Interest rate contracts96 88 96 88 The Company had no material activity with level 3 assets and liabilities during the periods presented.Solventum Corporation common stock is carried at stock prices that are readily available from active markets and are representative of fair value.3M classifies this investmentas Level 1.It is included within other assets on the Companys consolidated balance sheet.In addition,the plan assets of 3Ms pension and postretirement benefit plans are measured at fair value on a recurring basis(at least annually).Refer to Note 14 to theConsolidated Financial Statements in 3Ms 2023 Annual Report on Form 10-K.Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:3M had no material measurements at fair value on a nonrecurring basis of applicableassets or liabilities for the second quarter and first six months of 2024 and 2023.Fair Value of Financial Instruments:The Companys financial instruments include cash and cash equivalents,marketable securities,accounts receivable,certain investments,accounts payable,borrowings,and derivative contracts.The fair values of cash equivalents,accounts receivable,accounts payable,and short-term borrowings and currentportion of long-term debt approximated carrying values because of the short-term nature of these instruments.Available-for-sale marketable securities,in addition to certaininvestments and derivative instruments,are recorded at fair values as indicated in the preceding disclosures.To estimate fair values(classified as level 2)for its long-term debt,the Company utilized third-party quotes,which are derived all or in part from model prices,external sources,market prices,or the third-partys internal records.Informationwith respect to the carrying amounts and estimated fair values of these financial instruments follow:June 30,2024December 31,2023(Millions)Carrying ValueFair ValueCarrying ValueFair ValueLong-term debt,excluding current portion$11,781$10,374$13,088$11,859 23Table of ContentsThe fair values reflected in the sections above consider the terms of the related debt absent the impacts of derivative/hedging activity.The carrying amount of long-term debtreferenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobondsecurities issued by the Company as hedging instruments of the Companys net investment in its European subsidiaries.NOTE 17.Commitments and ContingenciesLegal Proceedings:The Company and some of its subsidiaries are involved in numerous claims and lawsuits,principally in the United States,and regulatory proceedingsworldwide.These claims,lawsuits and proceedings relate to matters including,but not limited to,products liability(involving products that the Company now or formerlymanufactured and sold),intellectual property,commercial,antitrust,federal healthcare program related laws and regulations,such as the False Claims Act and anti-kickbacklaws,securities,and environmental laws in the United States and other jurisdictions.Unless otherwise stated,the Company is vigorously defending all such litigation andproceedings.From time to time,the Company also receives subpoenas,investigative demands or requests for information from various government agencies in the UnitedStates and foreign countries.The Company generally responds in a cooperative,thorough and timely manner.These responses sometimes require time and effort and can resultin considerable costs being incurred by the Company.Such requests can also lead to the assertion of claims or the commencement of administrative,civil,or criminal legalproceedings against the Company and others,as well as to settlements.The outcomes of legal proceedings and regulatory matters are often difficult to predict.Anydetermination that the Companys operations or activities are not,or were not,in compliance with applicable laws or regulations could result in the imposition of fines,civil orcriminal penalties,and equitable remedies,including disgorgement,suspension or debarment or injunctive relief.Process for Disclosure and Recording of Liabilities Related to Legal Proceedings:Many lawsuits and claims involve highly complex issues relating to causation,scientificevidence,and alleged actual damages,all of which are otherwise subject to substantial uncertainties.Assessments of lawsuits and claims can involve a series of complexjudgments about future events and can rely heavily on estimates and assumptions.The categories of legal proceedings in which the Company is involved may include multiplelawsuits and claims,may be spread across multiple jurisdictions and courts which may handle the lawsuits and claims differently,may involve numerous and different types ofplaintiffs,raising claims and legal theories based on specific allegations that may not apply to other matters,and may seek substantial compensatory and,in some cases,punitive,damages.These and other factors contribute to the complexity of these lawsuits and claims and make it difficult for the Company to predict outcomes and makereasonable estimates of any resulting losses.The Companys ability to predict outcomes and make reasonable estimates of potential losses is further influenced by the fact that aresolution of one or more matters within a category of legal proceedings may impact the resolution of other matters in that category in terms of timing,amount of liability,orboth.When making determinations about recording liabilities related to legal proceedings,the Company complies with the requirements of ASC 450,Contingencies,and relatedguidance,and records liabilities in those instances where it can reasonably estimate the amount of the loss and when the loss is probable.Where the reasonable estimate of theprobable loss is a range,the Company records as an accrual in its financial statements the most likely estimate of the loss,or the low end of the range if there is no one bestestimate.The Company either discloses the amount of a possible loss or range of loss in excess of established accruals if estimable,or states that such an estimate cannot bemade.The Company discloses significant legal proceedings even where liability is not probable or the amount of the liability is not estimable,or both,if the Company believesthere is at least a reasonable possibility that a loss may be incurred.Based on experience and developments,the Company reexamines its estimates of probable liabilities andassociated expenses and receivables each period,and whether a loss previously determined to not be reasonably estimable and/or not probable is now able to be reasonablyestimated or has become probable.Where appropriate,the Company makes additions to or adjustments of its reasonably estimated losses and/or accruals.As a result,thecurrent accruals and/or estimates of loss and the estimates of the potential impact on the Companys consolidated financial position,results of operations and cash flows for thelegal proceedings and claims pending against the Company will likely change over time.24Table of ContentsBecause litigation is subject to inherent uncertainties,and unfavorable rulings or developments could occur,the Company may ultimately incur charges substantially in excessof presently recorded liabilities,including with respect to matters for which no accruals are currently recorded because losses are not currently probable and reasonablyestimable.Many of the matters described herein are at varying stages,seek an indeterminate amount of damages or seek damages in amounts that the Company believes are notindicative of the ultimate losses that may be incurred.It is not uncommon for claims to be resolved over many years.As a matter progresses,the Company may receiveinformation,through plaintiff demands,through discovery,in the form of reports of purported experts,or in the context of settlement or mediation discussions that purport toquantify an amount of alleged damages,but with which the Company may not agree.Such information may or may not lead the Company to determine that it is able to make areasonable estimate as to a probable loss or range of loss in connection with a matter.However,even when a loss or range of loss is not probable and reasonably estimable,developments in,or the ultimate resolution of,a matter could be material to the Company and could have a material adverse effect on the Company,its consolidated financialposition,results of operations and cash flows.In addition,future adverse rulings or developments,or settlements in,one or more matters could result in future changes todeterminations of probable and reasonably estimable losses in other matters.Process for Disclosure and Recording of Insurance Receivables Related to Legal Proceedings:The Company estimates insurance receivables based on an analysis of theterms of its numerous policies,including their exclusions,pertinent case law interpreting comparable policies,its experience with similar claims,and assessment of the natureof the claim and remaining coverage,and records an amount it has concluded is recognizable and expects to receive in light of the loss recovery and/or gain contingencymodels under ASC 450,ASC 610-30,and related guidance.For those insured legal proceedings where the Company has recorded an accrued liability in its financial statements,the Company also records receivables for the amount of insurance that it concludes as recognizable from the Companys insurance program.For those insured matters wherethe Company has not recorded an accrued liability because the liability is not probable or the amount of the liability is not estimable,or both,but where the Company hasincurred an expense in defending itself,the Company records receivables for the amount of insurance that it concludes as recognizable for the expense incurred.Impact of Solventum Spin-Off:On April 1,2024,the Company completed the planned spin-off of its Health Care business,known as Solventum,as an independent company.Concurrent with the spin-off,the Company and Solventum entered into various agreements,including transition agreements and a separation and distribution agreement that,among other things,identified the assets to be transferred,the liabilities to be assumed,indemnification and defense obligations,and the contracts to be transferred toSolventum and 3M as part of the spin-off.In general,and except as noted below and as set forth in the separation and distribution agreement,certain liabilities related toSolventum or the assets that are transferred to Solventum in connection with the spin-off will be retained by or transferred to Solventum.For example,potential liabilitiesassociated with the matters previously described under the Bair Hugger and Federal False Claims Act/Qui Tam Litigation sections of this Note 17 have been assumed bySolventum pursuant to the separation and distribution agreement,and Solventum will indemnify and defend the Company in these actions.25Table of ContentsThe separation and distribution agreement governs the allocation of liabilities related to PFAS(as defined below)between the Company and Solventum,which liabilities willnot be subject to the general allocation principles otherwise set forth in the separation and distribution agreement.The Company will retain all PFAS-related liabilities resultingfrom the business,operations,and activities of(x)the Companys business(as defined in the separation and distribution agreement)and(y)Solventums business(as defined inthe separation and distribution agreement)prior to April 1,2024.Solventum will retain liability for all PFAS-related liabilities resulting from the business,operations,andactivities of its business at or after April 1,2024,other than liabilities from product claims alleging harm from the presence of PFAS in certain products of Solventums businesssold at or after April 1,2024,and prior to January 1,2026(subject to exceptions described in further detail below).The Company will retain liabilities related to site-basedPFAS contamination at any real property owned,leased or operated by the Company and liabilities for site-based PFAS contamination arising from third-party claims at sitesallocated to the Solventum group in the separation to the extent such liabilities relate to PFAS contamination existing at or prior to April 1,2024.Solventum assumes PFASliabilities from the Solventum sites to the extent resulting from an action taken by any member of the Solventum group following April 1,2024 or from any failure bySolventum following April 1,2024,to use commercially reasonable efforts that are consistent with then-current industry standards to avoid contamination.The Company willalso retain PFAS liabilities for product claims(x)arising from the Companys products,(y)arising from Solventums products sold prior to April 1,2024,and(z)arising fromcertain products sold by Solventum at or after April 1,2024,and prior to January 1,2026(subject to the exceptions described below).Clause(z)in the immediately precedingsentence will not extend to PFAS liabilities for product claims resulting from(i)new products introduced by Solventum following April 1,2024,that contain or are enabled byPFAS that is not supplied by the Company,(ii)products that are modified by Solventum after April 1,2024,to add,contain or become enabled by PFAS that is not supplied bythe Company,or with respect to which any modification made after April 1,2024,in the formulation or production of the product that changes the amount or type of PFAScontained in the product or the amount or type of PFAS enabling the product,in each case from and after the date of such modification,(iii)PFAS that is added to a Solventumproduct after it is sold by Solventum and(iv)PFAS that has accumulated in or on a Solventum product as a result of the use of the product(whether or not the product is beingused as directed),including through filtration,purification or similar application.Solventum will be responsible for the maintenance of certain PFAS containment measures atits properties after the effective time of the distribution.In addition,and consistent with the allocation described above,the Company will retain specifically identified PFAS-related liabilities,including those resulting from specified PFAS-related litigation matters and liabilities under the Companys settlement agreement with public water systemsin the United States,as described below.The following sections first describe the significant legal proceedings in which the Company is involved,and then describe the liabilities and associated insurance receivablesthe Company has accrued relating to its significant legal proceedings.Respirator Mask/Asbestos Litigation:As of June 30,2024,the Company is a named defendant,with multiple co-defendants,in numerous lawsuits in various courts thatpurport to represent approximately 4,106 individual claimants,compared to approximately 4,060 individual claimants with actions pending March 31,2024.The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Companys mask and respirator products andseek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos,silica,coal mine dust or other occupational dustsfound in products manufactured by other defendants or generally in the workplace.A minority of the lawsuits and claims resolved by and currently pending against theCompany generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company,which are often unspecified,as wellas products manufactured by other defendants,or occasionally at Company premises.26Table of ContentsThe Companys current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003.The Company expects that the filing ofclaims in the future will continue to be at much lower levels than in the past.Accordingly,the number of claims alleging more serious injuries,including mesothelioma,othermalignancies,and black lung disease,will represent a greater percentage of total claims than in the past.Over the past twenty plus years,the Company has prevailed inseventeen of the eighteen cases tried to a jury(including the lawsuits described below).In 2018,3M received a jury verdict in its favor in two lawsuits one in California statecourt in February and the other in Massachusetts state court in December both involving allegations that 3M respirators were defective and failed to protect the plaintiffsagainst asbestos fibers.In April 2018,a jury in state court in Kentucky found 3Ms 8710 respirators failed to protect two coal miners from coal mine dust and awardedcompensatory damages of approximately$2 million and punitive damages totaling$63 million.In August 2018,the trial court entered judgment and the Company appealed.In2019,the Company settled a substantial majority of the then-pending coal mine dust lawsuits in Kentucky and West Virginia for$340 million,including the jury verdict in April2018 in the Kentucky case mentioned above,and the appeal was dismissed.In October 2020,3M defended a respirator case before a jury in King County,Washington,involving a former shipyard worker who alleged 3Ms 8710 respirator was defective and that 3M acted negligently in failing to protect him against asbestos fibers.The jurydelivered a complete defense verdict in favor of 3M,concluding that the 8710 respirator was not defective in design or warnings and any conduct by 3M was not a cause ofplaintiffs mesothelioma.The plaintiff appealed the verdict.In May 2022,the First Division intermediate appellate court in Washington affirmed in part and reversed in part3Ms trial victory,concluding that the trial court misapplied Washington law in instructing the jury about factual causation.The Washington Supreme Court declined to reviewthe matter.More recently,in November 2023,a jury in Hawaii delivered a complete defense verdict in favor of 3M,concluding that 3Ms 8710 respirator was not a cause ofplaintiffs mesothelioma.In addition,in February 2024,a jury in Kentucky delivered a complete defense verdict in favor of 3M,concluding that 3Ms 8710 and 8210respirators that the plaintiff claims to have used were not defective.In April 2024,another jury in Kentucky returned a complete defense verdict in 3Ms favor and concludedthat 3Ms 8710 respirator that the plaintiff claims to have used was not defective.The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in theintended circumstances.Consequently,the Company believes that claimants are unable to establish that their medical conditions,even if significant,are attributable to theCompanys respiratory protection products.Nonetheless,the Companys litigation experience indicates that claims of persons alleging more serious injuries,includingmesothelioma,other malignancies,and black lung disease,are costlier to resolve than the claims of unimpaired persons,and it therefore believes the average cost of resolvingpending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medicallyunimpaired claimants.In the second half of 2020 and into 2021,the Company experienced an increase in the number of cases filed that allege injuries from exposures to coalmine dust,but the rate of coal mine dust-related case filings decelerated in 2022 and continues to stay significantly lower than in 2021.3M moved two cases involving over 400plaintiffs to federal court based on,among others,the Class Action Fairness Act.The federal district court remanded the cases to state court.In March 2023,the Sixth CircuitCourt of Appeals granted 3Ms petition to review the remand order,and in April 2023 reversed the district courts remand order;accordingly,those cases will remain in federalcourt.As previously reported,the State of West Virginia,through its Attorney General,filed a complaint in 2003 against the Company and two other manufacturers of respiratoryprotection products in the Circuit Court of Lincoln County,West Virginia,and amended its complaint in 2005.The amended complaint seeks substantial,but unspecified,compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for workers compensation and healthcare benefits provided to all workers withoccupational pneumoconiosis and unspecified punitive damages.In October 2019,the court granted the States motion to sever its unfair trade practices claim,which seekscivil penalties of up to$5,000 per violation under the states Consumer Credit Protection Act relating to statements that the State contends were misleading about 3Msrespirators.In April 2024,the court set a trial date for the unfair trade practices claims in December 2024.An expert witness retained by the State has estimated that 3M soldover five million respirators into the state during the relevant time period,and the State alleges that each respirator sold constitutes a separate violation under the Act.3Mdisputes the experts estimates and the States position regarding what constitutes a separate violation of the Act.3M has asserted various additional defenses,including that theCompanys marketing did not violate the Act at any time,and that the States claims are barred under the applicable statute of limitations.No liability has been recorded for anyportion of this matter because the Company believes that liability is not probable and reasonably estimable at this time.In addition,the Company is not able to estimate apossible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia as to key issues,and the assertions of claims against two othermanufacturers where a defendants share of liability may turn on the law of joint and several liability and by the amount of fault,if any,a factfinder may allocate to eachdefendant if the case were ultimately tried.27Table of ContentsRespirator Mask/Asbestos Liabilities and Insurance ReceivablesThe Company regularly conducts a comprehensive legal review of its respirator mask/asbestos liabilities.The Company reviews recent and historical claims data,includingwithout limitation,(i)the number of pending claims filed against the Company,(ii)the nature and mix of those claims(i.e.,the proportion of claims asserting usage of theCompanys mask or respirator products and alleging exposure to each of asbestos,silica,coal or other occupational dusts,and claims pleading use of asbestos-containingproducts allegedly manufactured by the Company),(iii)the costs to defend and resolve pending claims,and(iv)trends in filing rates and in costs to defend and resolve claims(collectively,the“Claims Data”).As part of its comprehensive legal review,the Company regularly provides the Claims Data to a third party with expertise in determining theimpact of Claims Data on future filing trends and costs.The third party assists the Company in estimating the costs to defend and resolve pending and future claims.TheCompany uses this analysis to develop its estimate of probable liability.Developments may occur that could affect the Companys estimate of its liabilities.These developments include,but are not limited to,significant changes in(i)the keyassumptions underlying the Companys accrual,including the number of future claims,the nature and mix of those claims,and the average cost of defending and resolvingclaims and in maintaining trial readiness(ii)trial and appellate outcomes,(iii)the law and procedure applicable to these claims,and(iv)the financial viability of other co-defendants and insurers.As a result of its review of its respirator mask/asbestos liabilities,of pending and expected lawsuits and of the cost of resolving claims of persons who claim more seriousinjuries,including mesothelioma,other malignancies,and black lung disease,the Company increased its accruals in the first six months of 2024 for respirator mask/asbestosliabilities by$19 million.In the first six months of 2024,the Company made payments for legal defense costs and settlements of$41 million related to the respiratormask/asbestos litigation.As of June 30,2024,the Company had an accrual for respirator mask/asbestos liabilities(excluding Aearo accruals)of$552 million.This accrualrepresents the Companys estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050.TheCompany cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of(i)theinherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted,(ii)the fact that complaintsnearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendants share of liabilitymay turn on the law of joint and several liability,which can vary by state,(iii)the multiple factors described above that the Company considers in estimating its liabilities,and(iv)the several possible developments described above that may occur that could affect the Companys estimate of liabilities.As of June 30,2024,the Company had an immaterial receivable for insurance recoveries related to the respirator mask/asbestos litigation.In addition,the Company continuesto seek coverage under the policies of certain insolvent and other insurers.Once those claims for coverage are resolved,the Company will have collected substantially all of itsremaining insurance coverage for respirator mask/asbestos claims.Respirator Mask/Asbestos Litigation Aearo Technologies:On April 1,2008,a subsidiary of the Company acquired the stock of Aearo Holding Corp.,the parent of AearoTechnologies(“Aearo”).Aearo manufactured and sold various products,including personal protection equipment,such as eye,ear,head,face,fall and certain respiratoryprotection products.Aearo and/or other companies that previously owned and operated Aearos respirator business(American Optical Corporation,Warner-Lambert LLC,AOCorp.and Cabot Corporation(“Cabot”)are named defendants,with multiple co-defendants,including the Company,in numerous lawsuits in various courts in which plaintiffsallege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos,silica-related,coal mine dust,or other occupational dusts found in products manufactured by other defendants or generally in the workplace.In July 2022,Aearo Technologies and certain ofits related entities(collectively,the Aearo Entities)voluntarily initiated chapter 11 proceedings under the U.S.Bankruptcy Code seeking court supervision to establish a trust,funded by the Company,to efficiently and equitably satisfy all claims determined to be entitled to compensation(including the Aearo respirator mask/asbestos matters).TheU.S.Bankruptcy Court had stayed the Aearo respirator mask/asbestos litigation matters during the chapter 11 proceedings.During the voluntary chapter 11 proceedings,3Msaccrual relating to the commitments associated with funding that trust included Aearo respirator mask/asbestos matters.With the June 2023 dismissal of the Aearo bankruptcythat is described in the Product Liability Litigation section below,the stay of respirator mask/asbestos litigation is no longer in effect.For additional information,see thediscussion within the section Product Liability Litigation with respect to Aearo Technologies Dual-Ended Combat Arms Earplugs.28Table of ContentsAs of June 30,2024,the Company,through its Aearo subsidiary,had accruals of$53 million for product liabilities and defense costs related to current and future Aearo-relatedasbestos,silica-related and coal mine dust claims.Responsibility for legal costs,as well as for settlements and judgments,is shared in an informal arrangement among Aearo,Cabot,American Optical Corporation and a subsidiary of Warner Lambert and their respective insurers(the“Payor Group”).Liability is allocated among the parties based onthe number of years each company sold respiratory products under the“AO Safety”brand and/or owned the AO Safety Division of American Optical Corporation and thealleged years of exposure of the individual plaintiff.Aearos share of the contingent liability is further limited by an agreement entered into between Aearo and Cabot on July11,1995.This agreement provides that,so long as Aearo pays to Cabot a quarterly fee of$100,000,Cabot will retain responsibility and liability for,and indemnify Aearoagainst,any product liability claims involving exposure to asbestos,silica,or silica products for respirators sold prior to July 11,1995.Because of the difficulty in determininghow long a particular respirator remains in the stream of commerce after being sold,Aearo and Cabot have applied the agreement to claims arising out of the alleged use ofrespirators involving exposure to asbestos,silica or silica products prior to January 1,1997.With these arrangements in place,Aearos potential liability is limited to exposuresalleged to have arisen from the use of respirators involving exposure to asbestos,silica,or silica products on or after January 1,1997.To date,Aearo has elected to pay thequarterly fee.Aearo could potentially be exposed to additional claims for some part of the pre-July 11,1995,period covered by its agreement with Cabot if Aearo elects todiscontinue its participation in this arrangement,or if Cabot is no longer able to meet its obligations in these matters.Developments may occur that could affect the estimate of Aearos liabilities.These developments include,but are not limited to:(i)significant changes in the number of futureclaims,(ii)significant changes in the average cost of resolving claims,(iii)significant changes in the legal costs of defending these claims,(iv)significant changes in the mixand nature of claims received,(v)trial and appellate outcomes,(vi)significant changes in the law and procedure applicable to these claims,(vii)significant changes in theliability allocation among the co-defendants,(viii)the financial viability of members of the Payor Group including exhaustion of available insurance coverage limits,and/or(ix)a determination that the interpretation of the contractual obligations on which Aearo has estimated its share of liability is inaccurate.The Company cannot determine theimpact of these potential developments on its current estimate of Aearos share of liability for these existing and future claims.If any of the developments described above wereto occur,the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued.Because of the inherent difficulty inprojecting the number of claims that have not yet been asserted,the complexity of allocating responsibility for future claims among the Payor Group,and the several possibledevelopments that may occur that could affect the estimate of Aearos liabilities,the Company cannot estimate the amount or range of amounts by which Aearos liability mayexceed the accrual the Company has established.Environmental Matters and Litigation:The Companys operations are subject to environmental laws and regulations including those pertaining to air emissions,wastewaterdischarges,toxic or hazardous substances,and the handling and disposal of solid and hazardous wastes,which are enforceable by national,state,and local authorities aroundthe world,and many for which private parties in the United States and abroad may have rights of action.These laws and regulations can form the basis of,under certaincircumstances,claims for the investigation and remediation of contamination,for capital investment in pollution control equipment,for restoration of and/or compensation fordamages to natural resources,and for personal injury and property damages.The Company has incurred,and will continue to incur,costs and capital expenditures in complyingwith these laws and regulations,defending personal injury,natural resource,and property damage claims,and modifying its business operations in light of its environmentalresponsibilities.In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations,the Company has established,and periodicallyupdates,policies relating to environmental standards of performance for its operations worldwide.Under certain environmental laws,including the United States Comprehensive Environmental Response,Compensation and Liability Act of 1980(CERCLA)and similarstate laws,the Company may be jointly and severally liable,sometimes with other potentially responsible parties,for the costs of investigation and remediation ofenvironmental contamination at current or former facilities and at off-site locations where hazardous substances have been released or disposed of.The Company has identifiednumerous locations,many of which are in the United States,at which it may have some liability for remediation of contamination under applicable environmental laws.Pleaserefer to the section entitled“Environmental Liabilities and Insurance Receivables”that follows for information on the amount of the accrual for such liabilities.Environmental MattersAs previously reported,the Company has been voluntarily cooperating with ongoing reviews by local,state,federal(primarily the U.S.Environmental Protection Agency(EPA),and international agencies of possible environmental and health effects of various perfluorinated compounds,including perfluorooctanoate(PFOA),perfluorooctane sulfonate(PFOS),perfluorohexane sulfonic acid(PFHxS),perfluorobutane sulfonate(PFBS),hexafluoropropylene oxide dimer acid(HFPO-DA)andother per-and polyfluoroalkyl substances(collectively,PFAS).29Table of ContentsAs a result of a phase-out decision in May 2000,the Company no longer manufactures certain PFAS compounds including PFOA,PFOS,PFHxS,and their precursorcompounds.The Company ceased manufacturing and using the vast majority of those compounds within approximately two years of the phase-out announcement and ceasedall manufacturing and the last significant use of those compounds by the end of 2008.The Company continues to manufacture a variety of shorter chain length PFAScompounds.These compounds are used as input materials to a variety of products,including engineered fluorinated fluids,fluoropolymers and fluorelastomers,as well assurfactants,additives,and coatings.Through its ongoing life cycle management and its raw material composition identification processes associated with the Companyspolicies covering the use of all persistent and bio-accumulative materials,the Company continues to review,control or eliminate the presence of certain PFAS in purchasedmaterials,as intended substances in products,or as byproducts in some of 3Ms current manufacturing processes,products,and waste streams.3M announced in December 2022 it will take two actions with re
2024-07-10
91页
5星级
Use these links to rapidly review the documentTable of ContentsPart I.Financial InformationUNITED ST.
2024-07-09
61页
5星级
Use these links to rapidly review the documentTable of ContentsPart I.Financial InformationUNITED ST.
2024-07-09
113页
5星级
-Q1 Results 202425 April 2024Guillaume FAURY|Chief Executive OfficerThomas TOEPFER|Chief Financial O.
2024-07-08
35页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPO.
2024-07-08
118页
5星级
1FedEx CorporationFiscal Fourth Quarter 2024 Earnings|June 25,2024VP of Investor Relations2122Certai.
2024-07-05
20页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended November 30,2023ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number 1-10658Micron Technology,Inc.(Exact name of registrant as specified in its charter)Delaware75-1618004(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)Address of principal executive offices,including zip code8000 S.Federal Way,Boise,Idaho 83716-9632Registrants telephone number,including area code(208)368-4000Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,par value$0.10 per shareMUNasdaq Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the SecuritiesExchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YesNoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submittedpursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that theregistrant was required to submit such files).YesNoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large Accelerated FilerAccelerated FilerNon-Accelerated FilerSmaller Reporting CompanyEmerging Growth CompanyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YesNoThe number of outstanding shares of the registrants common stock as of December 14,2023 was 1,103,908,880.Table of ContentsIntroduction3PART I.Financial InformationItem 1.Financial Statements:5Consolidated Statements of Operations5Consolidated Statements of Comprehensive Income(Loss)6Consolidated Balance Sheets7Consolidated Statements of Changes in Equity8Consolidated Statements of Cash Flows9Notes to Consolidated Financial Statements10Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations25Results of Operations27Liquidity and Capital Resources30Item 3.Quantitative and Qualitative Disclosures about Market Risk32Item 4.Controls and Procedures33PART II.Other InformationItem 1.Legal Proceedings33Item 1A.Risk Factors34Item 2.Unregistered Sales of Equity Securities and Use of Proceeds53Item 5.Other Information54Item 6.Exhibits55Signatures56 2Table of ContentsDefinitions of Commonly Used TermsAs used herein,“we,”“our,”“us,”and similar terms include Micron Technology,Inc.and its consolidated subsidiaries,unless the contextindicates otherwise.Abbreviations,terms,or acronyms are commonly used or found in multiple locations throughout this report and includethe following:TermDefinitionTermDefinition2024 Term Loan ASenior Term Loan A due October 20242051 Notes3.477%Senior Notes due November 20512025 Term Loan ASenior Term Loan A due November 2025CACChinas Cyberspace Administration2026 Term Loan ASenior Term Loan A due November 2026DDRDouble data rate DRAM2027 Term Loan ASenior Term Loan A due November 2027EBITDAEarnings before interest,taxes,depreciation,and amortization2026 Notes4.975%Senior Notes due February 2026EUVExtreme ultraviolet lithography2027 Notes4.185%Senior Notes due February 2027HBMHigh-bandwidth memory,a stacked DRAMtechnology optimized for memory-bandwidthintensive applications2028 Notes5.375%Senior Notes due April 2028LPDRAMLow-power DRAM2029 A Notes5.327%Senior Notes due February 2029MCPMultichip packaged solutions with managedNAND and LPDRAM2029 B Notes6.750%Senior Notes due November 2029MicronMicron Technology,Inc.(Parent Company)2030 Notes4.663%Senior Notes due February 2030NRVNet realizable value2032 Green Bonds2.703%Senior Notes due April 2032Revolving CreditFacility$2.5 billion Revolving Credit Facility due May20262033 A Notes5.875%Senior Notes due February 2033SOFRSecured Overnight Financing Rate2033 B Notes5.875%Senior Notes due September 2033SSDSolid state drive2041 Notes3.366%Senior Notes due November 2041We are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all.Witha relentless focus on our customers,technology leadership,and manufacturing and operational excellence,Micron delivers a rich portfolio ofhigh-performance DRAM,NAND,and NOR memory and storage products through our Micron and Crucial brands.Every day,theinnovations that our people create fuel the data economy,enabling advances in artificial intelligence and 5G applications that unleashopportunities from the data center to the intelligent edge and across the client and mobile user experience.Micron,Crucial,any associated logos,and all other Micron trademarks are the property of Micron.Other product names or trademarks thatare not owned by Micron are for identification purposes only and may be the trademarks of their respective owners.Available InformationInvestors and others should note that we announce material financial information about our business and products through a variety ofmeans,including our investor relations website(),filings with the U.S.Securities and Exchange Commission(“SEC”),press releases,public conference calls,blog posts( webcasts.We use these channels to achieve broad,non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD.Therefore,weencourage investors,the media,and others interested in our company to review the information we post on such channels.3|2024 Q1 10-QTable of ContentsForward-Looking StatementsThis Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties.Suchforward-looking statements may be identified by words such as anticipate,expect,intend,pledge,committed,plan,opportunities,future,believe,target,on track,estimate,continue,likely,may,will,would,should,could,and variations of such wordsand similar expressions.However,the absence of these words or similar expressions does not mean that a statement is not forward-looking.Specific forward-looking statements include,but are not limited to,statements such as those made regarding potential change in our effectivetax rate;the timing for construction and ramping of production for new memory manufacturing fabs in the United States;intent to makeinvestments at our backend facility in Xian,China and build a new assembly and test facility in Gujarat,India;expected wafer starts andunderutilization charges for the second quarter of 2024,the payment of future cash dividends;market conditions and profitability in ourindustry;the impact of the Cyberspace Administration of China decision;capital spending in 2024;and the sufficiency of our cash andinvestments.Our actual results could differ materially from our historical results and those discussed in the forward-looking statements.Factors that could cause actual results to differ materially include,but are not limited to,those identified in“Part II.Other Information Item1A.Risk Factors.”4Table of ContentsPART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSMicron Technology,Inc.Consolidated Statements of Operations(In millions,except per share amounts)(Unaudited)Three months endedNovember 30,2023December 1,2022Revenue$4,726$4,085 Cost of goods sold4,761 3,192 Gross margin(35)893 Research and development845 849 Selling,general,and administrative263 251 Restructure and asset impairments 13 Other operating(income)expense,net(15)(11)Operating income(loss)(1,128)(209)Interest income132 88 Interest expense(132)(51)Other non-operating income(expense),net(27)(4)(1,155)(176)Income tax(provision)benefit(73)(8)Equity in net income(loss)of equity method investees(6)(11)Net income(loss)$(1,234)$(195)Earnings(loss)per shareBasic$(1.12)$(0.18)Diluted(1.12)(0.18)Number of shares used in per share calculationsBasic1,100 1,090 Diluted1,100 1,090 See accompanying notes to consolidated financial statements.5|2024 Q1 10-QTable of ContentsMicron Technology,Inc.Consolidated Statements of Comprehensive Income(Loss)(In millions)(Unaudited)Three months endedNovember 30,2023December 1,2022Net income(loss)$(1,234)$(195)Other comprehensive income(loss),net of taxGains(losses)on derivative instruments44 108 Unrealized gains(losses)on investments7(19)Pension liability adjustments2 1 Foreign currency translation adjustments(1)(3)Other comprehensive income(loss)52 87 Total comprehensive income(loss)$(1,182)$(108)See accompanying notes to consolidated financial statements.6Table of ContentsMicron Technology,Inc.Consolidated Balance Sheets(In millions,except par value amounts)(Unaudited)As ofNovember 30,2023August 31,2023AssetsCash and equivalents$8,075$8,577 Short-term investments973 1,017 Receivables2,943 2,443 Inventories8,276 8,387 Other current assets791 820 Total current assets21,058 21,244 Long-term marketable investments720 844 Property,plant,and equipment37,677 37,928 Operating lease right-of-use assets648 666 Intangible assets416 404 Deferred tax assets781 756 Goodwill1,150 1,150 Other noncurrent assets1,326 1,262 Total assets$63,776$64,254 Liabilities and equityAccounts payable and accrued expenses$3,946$3,958 Current debt908 278 Other current liabilities1,108 529 Total current liabilities5,962 4,765 Long-term debt12,597 13,052 Noncurrent operating lease liabilities601 603 Noncurrent unearned government incentives705 727 Other noncurrent liabilities1,026 987 Total liabilities20,891 20,134 Commitments and contingenciesShareholders equityCommon stock,$0.10 par value,3,000 shares authorized,1,245 shares issued and 1,104outstanding(1,239 shares issued and 1,098 outstanding as of August 31,2023)124 124 Additional capital11,217 11,036 Retained earnings39,356 40,824 Treasury stock,141 shares held(141 shares as of August 31,2023)(7,552)(7,552)Accumulated other comprehensive income(loss)(260)(312)Total equity42,885 44,120 Total liabilities and equity$63,776$64,254 See accompanying notes to consolidated financial statements.7|2024 Q1 10-QTable of ContentsMicron Technology,Inc.Consolidated Statements of Changes in Equity(In millions,except per share amounts)(Unaudited)Common StockAdditionalCapitalRetainedEarningsTreasuryStockAccumulatedOtherComprehensive Income(Loss)TotalShareholdersEquityNumber of SharesAmountBalance at August 31,20231,239$124$11,036$40,824$(7,552)$(312)$44,120 Net income(loss)(1,234)(1,234)Other comprehensive income(loss),net 52 52 Stock issued under stock plans8 9 9 Stock-based compensation expense 188 188 Repurchase of stock-withholdings onemployee equity awards(2)(16)(105)(121)Dividends and dividend equivalents declared($0.115 per share)(129)(129)Balance at November 30,20231,245$124$11,217$39,356$(7,552)$(260)$42,885 Common StockAdditionalCapitalRetainedEarningsTreasuryStockAccumulatedOtherComprehensive Income(Loss)TotalShareholdersEquityNumber of SharesAmountBalance at September 1,20221,226$123$10,197$47,274$(7,127)$(560)$49,907 Net income(loss)(195)(195)Other comprehensive income(loss),net 87 87 Stock issued under stock plans8 7 7 Stock-based compensation expense 146 146 Repurchase of stock-repurchase program (425)(425)Repurchase of stock-withholdings onemployee equity awards(2)(15)(80)(95)Dividends and dividend equivalents declared($0.115 per share)(126)(126)Balance at December 1,20221,232$123$10,335$46,873$(7,552)$(473)$49,306 See accompanying notes to consolidated financial statements.8Table of ContentsMicron Technology,Inc.Consolidated Statements of Cash Flows(In millions)(Unaudited)Three months endedNovember 30,2023December 1,2022Cash flows from operating activitiesNet income(loss)$(1,234)$(195)Adjustments to reconcile net income(loss)to net cash provided by operating activities:Depreciation expense and amortization of intangible assets1,915 1,921 Stock-based compensation188 146 Change in operating assets and liabilities:Receivables(501)1,842 Inventories111(1,697)Accounts payable and accrued expenses271(630)Other current liabilities579(430)Other72(14)Net cash provided by operating activities1,401 943 Cash flows from investing activities Expenditures for property,plant,and equipment(1,796)(2,449)Purchases of available-for-sale securities(199)(90)Proceeds from maturities and sales of available-for-sale securities374 362 Proceeds from government incentives85 2 Other(22)(91)Net cash provided by(used for)investing activities(1,558)(2,266)Cash flows from financing activities Payments of dividends to shareholders(129)(126)Payments on equipment purchase contracts(56)(47)Repayments of debt(53)(20)Repurchases of common stock-repurchase program(425)Proceeds from issuance of debt 3,349 Other(114)(99)Net cash provided by(used for)financing activities(352)2,632 Effect of changes in currency exchange rates on cash,cash equivalents,and restricted cash(1)(6)Net increase(decrease)in cash,cash equivalents,and restricted cash(510)1,303 Cash,cash equivalents,and restricted cash at beginning of period8,656 8,339 Cash,cash equivalents,and restricted cash at end of period$8,146$9,642 See accompanying notes to consolidated financial statements.9|2024 Q1 10-QTable of ContentsMicron Technology,Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(All tabular amounts in millions,except per share amounts)(Unaudited)Significant Accounting PoliciesFor a discussion of our significant accounting policies,see“Part II Item 8.Financial Statements and Supplementary Data Notes toConsolidated Financial Statements Significant Accounting Policies”of our Annual Report on Form 10-K for the year ended August 31,2023.There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended August31,2023.Basis of PresentationThe accompanying consolidated financial statements include the accounts of Micron Technology,Inc.and our consolidated subsidiaries andhave been prepared in accordance with accounting principles generally accepted in the United States of America(“U.S.GAAP”)consistent inall material respects with those applied in our Annual Report on Form 10-K for the year ended August 31,2023.In the opinion of our management,the accompanying unaudited consolidated financial statements contain all necessary adjustments,consisting of a normal recurring nature,to fairly state the financial information set forth herein.Certain reclassifications have been made toprior period amounts to conform to current period presentation.Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.Fiscal years 2024 and 2023 each contain 52 weeks.All period references are to our fiscal periods unless otherwise indicated.These interim financial statements should be read in conjunctionwith the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended August31,2023.Variable Interest EntitiesA number of special purpose entities(the Lease SPEs)were created by a third-party to facilitate equipment lease financing transactionsbetween us and financial institutions that fund the lease financing transactions(Financing Entities).Neither we nor the Financing Entitieshave an equity interest in the Lease SPEs.The Lease SPEs are variable interest entities because their equity is not sufficient to permit themto finance their activities without additional support from the Financing Entities and because the third-party equity holder lacks characteristicsof a controlling financial interest.By design,the arrangements with the Lease SPEs are merely financing vehicles and we do not bear anysignificant risks from variable interests with the Lease SPEs.We have determined that we do not have the power to direct the activities of theLease SPEs that most significantly impact their economic performance and we do not consolidate the Lease SPEs.As of November 30,2023,we had approximately$250 million of financial lease liabilities and right-of-use assets under these arrangements.10Table of ContentsCash and InvestmentsAll of our short-term investments and long-term marketable investments were classified as available-for-sale as of the dates noted below.Cash and equivalents and the fair values of our available-for-sale investments,which approximated amortized costs,were as follows:As of November 30,2023As of August 31,2023Cash andEquivalentsShort-termInvestmentsLong-termMarketableInvestmentsTotal FairValueCash andEquivalentsShort-termInvestmentsLong-termMarketableInvestmentsTotal FairValueCash$5,400$5,400$5,771$5,771 Level 1Money market funds1,570 1,570 1,629 1,629 Level 2Certificates of deposit1,090 26 1,116 1,172 25 1,197 Corporate bonds 681 359 1,040 737 437 1,174 Asset-backedsecurities 16 349 365 15 387 402 Government securities15 152 12 179 5 131 20 156 Commercial paper 98 98 109 109 8,075$973$720$9,768 8,577$1,017$844$10,438 Restricted cash71 79 Cash,cash equivalents,and restricted cash$8,146$8,656 The maturities of long-term marketable investments primarily range from one to five years,except for asset-backed securities which arenot due at a single maturity date.The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.The fair value of Level 2 securities is measured using information obtained from pricing services,which obtain quoted market prices forsimilar instruments,non-binding market consensus prices that are corroborated by observable market data,or various othermethodologies,to determine the appropriate value at the measurement date.We perform supplemental analysis to validate informationobtained from these pricing services.No adjustments were made to the fair values indicated by such pricing information as ofNovember 30,2023 or August 31,2023.Restricted cash is included in other current assets and other noncurrent assets and primarily relates to certain government incentivesreceived prior to being earned and for which restrictions lapse upon achieving certain performance conditions or which will be returned ifperformance conditions are not met.Gross realized gains and losses from sales of available-for-sale securities were not significant for any period presented.Non-marketable Equity InvestmentsIn addition to the amounts included in the table above,we had$188 million and$218 million of non-marketable equity investments without areadily determinable fair value that were included in other noncurrent assets as of November 30,2023 and August 31,2023,respectively.Werecognized losses in other non-operating income(expense)on our non-marketable investments of$31 million for the first quarter of 2024 andnet losses of$7 million for the first quarter of 2023.Our non-marketable equity investments are recorded at fair value on a non-recurringbasis and classified as Level 3.(1)(1)(2)(3)(4)(1)(2)(3)(4)11|2024 Q1 10-QTable of ContentsReceivablesAs ofNovember 30,2023August 31,2023Trade receivables$2,478$2,048 Income and other taxes217 194 Other248 201$2,943$2,443 InventoriesAs ofNovember 30,2023August 31,2023Finished goods$1,282$1,616 Work in process6,334 6,111 Raw materials and supplies660 660$8,276$8,387 Property,Plant,and EquipmentAs ofNovember 30,2023August 31,2023Land$283$283 Buildings18,652 17,967 Equipment66,392 65,555 Construction in progress2,215 2,464 Software1,377 1,316 88,919 87,585 Accumulated depreciation(51,242)(49,657)$37,677$37,928 Includes costs related to equipment not placed into service of$2.88 billion as of November 30,2023 and$2.91 billion as of August 31,2023.Includes building-related construction,tool installation,and software costs for assets not placed into service.Intangible AssetsAs of November 30,2023As of August 31,2023Gross AmountAccumulated AmortizationNet CarryingAmountGross AmountAccumulated AmortizationNet CarryingAmountProduct and process technology$631$(226)$405$613$(209)$404 Other11 11$642$(226)$416$613$(209)$404 In the first quarters of 2024 and 2023,we capitalized$22 million and$30 million,respectively,for product and process technology withweighted-average useful lives of 9 years and 10 years,respectively.Amortization expense was$20 million and$23 million for the first threemonths of 2024 and 2023,respectively.Expected amortization expense is$59 million for the remainder of 2024,$54 million for 2025,$50million for 2026,$46 million for 2027,and$44 million for 2028.(1)(2)(1)(2)12Table of ContentsLeasesThe components of lease cost are presented below:Three months endedNovember 30,2023December 1,2022Finance lease costAmortization of right-of-use asset$32$24 Interest on lease liability6 6 Operating lease cost33 36$71$66 Operating lease cost includes short-term and variable lease expenses,which were not material for the periods presented.Supplemental cash flow information related to leases was as follows:Three months endedNovember 30,2023December 1,2022Cash flows used for operating activitiesFinance leases$6$5 Operating leases33 33 Cash flows used for financing activities Finance leases27 20 Noncash acquisitions of right-of-use assetsFinance leases217 43 Operating leases 35 Supplemental balance sheet information related to leases was as follows:As ofNovember 30,2023August 31,2023Finance lease right-of-use assets(included in property,plant,and equipment)$1,497$1,311 Current operating lease liabilities(included in accounts payable and accrued expenses)62 66 Weighted-average remaining lease term(in years)Finance leases89Operating leases1111Weighted-average discount rateFinance leases4.25%3.86%Operating leases3.23%3.21%(1)(1)13|2024 Q1 10-QTable of ContentsAs of November 30,2023,maturities of lease liabilities by fiscal year were as follows:For the year endingFinance LeasesOperatingLeasesRemainder of 2024$204$50 2025255 77 2026241 76 2027235 76 2028225 74 2029 and thereafter541 453 Less imputed interest(220)(143)$1,481$663 The table above excludes obligations for leases that have been executed but have not yet commenced.As of November 30,2023,excludedobligations consisted of$122 million of finance lease obligations over a weighted-average period of 8 years for gas supply arrangementsdeemed to contain embedded leases and equipment leases.We will recognize right-of-use assets and associated lease liabilities at the timesuch assets become available for our use.Accounts Payable and Accrued ExpensesAs ofNovember 30,2023August 31,2023Accounts payable$1,721$1,725 Property,plant,and equipment1,197 1,419 Salaries,wages,and benefits621 367 Income and other taxes97 67 Other310 380$3,946$3,958 14Table of ContentsDebtAs of November 30,2023As of August 31,2023Net Carrying AmountNet Carrying AmountStatedRateEffectiveRateCurrentLong-TermTotalCurrentLong-TermTotal2024 Term Loan A6.163%6.20%$587$587$587$587 2025 Term Loan A6.698%6.83%1,050 1,050 1,050 1,050 2026 Term Loan A6.823%6.96I 909 958 49 921 970 2027 Term Loan A6.948%7.09W 1,049 1,106 57 1,063 1,120 2026 Notes4.975%5.07I9 499 499 499 2027 Notes4.185%4.27y7 797 798 798 2028 Notes5.375%5.52Y7 597 596 596 2029 A Notes5.327%5.40i7 697 697 697 2029 B Notes6.750%6.54%1,263 1,263 1,263 1,263 2030 Notes4.663%4.737 847 846 846 2032 Green Bonds2.703%2.775 995 995 995 2033 A Notes5.875%5.96t5 745 745 745 2033 B Notes5.875%6.010 890 890 890 2041 Notes3.366%3.41I7 497 497 497 2051 Notes3.477%3.52I6 496 496 496 Finance lease obligationsN/A4.25!5 1,266 1,481 172 1,109 1,281$908$12,597$13,505$278$13,052$13,330 In 2021,we entered into fixed-to-floating interest rate swaps on the 2027 Notes with an aggregate$900 million notional amount equal tothe principal amount of the 2027 Notes.The resulting variable interest paid is at a rate equal to SOFR plus approximately 3.33%.Thefixed-to-floating interest rate swaps are accounted for as fair value hedges,and as a result,the carrying values of our 2027 Notes reflectadjustments in fair value.Revolving Credit FacilityAs of November 30,2023,no amounts were outstanding under the Revolving Credit Facility and$2.50 billion was available to us.Under theRevolving Credit Facility,borrowings would generally bear interest at a rate equal to adjusted term SOFR plus 1.00%to 1.75%,depending onour corporate credit ratings.Adjusted term SOFR for the Revolving Credit Facility agreement is the SOFR benchmark plus a credit spreadadjustment ranging from approximately 0.11%to 0.43pending on the applicable interest period selected.Any amounts outstandingunder the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid without penalty.The Revolving Credit Facility requires us to maintain,on a consolidated basis,a leverage ratio of total indebtedness to adjusted EBITDA,asdefined in the Revolving Credit Facility and calculated as of the last day of each fiscal quarter,not to exceed 3.25 to 1.00.On March 27,2023,we amended the Revolving Credit Facility to provide that in lieu of the foregoing leverage ratio,during the fourth quarter of 2023 andeach quarter of 2024,we will be required to maintain,on a consolidated basis,a net leverage ratio of total net indebtedness to adjustedEBITDA,as defined in the Revolving Credit Facility and calculated as of the last day of each fiscal quarter,not to exceed 3.25 to 1.00.Alternatively,for up to three of such five quarters,we may elect to comply with a requirement of minimum liquidity,as defined in theRevolving Credit Facility,of not less than$5.0 billion.In the fourth quarter of 2023 and first quarter of 2024,we complied with the netleverage ratio requirement.Each of the leverage ratio and net leverage ratio maximums,as applicable,is subject to a temporary four quarterincrease in such ratio to 3.75 to 1.00 following certain material acquisitions.(1)(1)15|2024 Q1 10-QTable of ContentsMaturities of Notes PayableAs of November 30,2023,maturities of notes payable by fiscal year were as follows:Remainder of 2024$81 2025695 20261,659 20271,780 20281,492 2029 and thereafter6,450 Unamortized issuance costs,discounts,and premium,net(32)Hedge accounting fair value adjustment(101)$12,024 ContingenciesWe are currently a party to legal actions other than those described below arising from the normal course of business,none of which areexpected to have a material adverse effect on our business,results of operations,or financial condition.Patent MattersAs is typical in the semiconductor and other high-tech industries,from time to time,others have asserted,and may in the future assert,thatour products or manufacturing processes infringe upon their intellectual property rights.On March 19,2018,Micron Semiconductor(Xian)Co.,Ltd.(“MXA”)was served with a patent infringement complaint filed by Fujian JinhuaIntegrated Circuit Co.,Ltd.(“Jinhua”)in the Fuzhou Intermediate Peoples 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 alleged that MXA and MSSinfringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules.The complaint sought an order requiringMXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China;to stopmanufacturing,using,selling,and offering for sale the accused products in China;and to pay damages of 98 million Chinese yuan plus courtfees incurred.On December 4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua will file an application to theFuzhou Court to withdraw its complaints against MXA and MSS.On March 21,2018,MXA was served with a patent infringement complaint filed by United Microelectronics Corporation(“UMC”)in theFuzhou Court.On April 3,2018,MSS was served with the same complaint.The complaint alleges that MXA and MSS infringed one Chinesepatent by manufacturing and selling certain Crucial DDR4 DRAM modules.The complaint seeks an order requiring MXA and MSS to destroyinventory of the accused products and equipment for manufacturing the accused products in China;to stop manufacturing,using,selling,andoffering for sale the accused products in China;and to pay damages of 90 million Chinese yuan plus court fees incurred.On November 26,2021,pursuant to a settlement agreement between UMC and Micron,UMC filed an application to the Fuzhou Court to withdraw itscomplaints against MXA and MSS.16Table of ContentsOn April 3,2018,MSS was served with another patent infringement complaint filed by Jinhua and an additional complaint filed by UMC in theFuzhou Court.The additional complaints alleged that MSS infringed two Chinese patents by manufacturing and selling certain Crucial MX300SSDs.The complaint filed by UMC sought an order requiring MSS to destroy inventory of the accused products and equipment formanufacturing the accused products in China;to stop manufacturing,using,selling,and offering for sale the accused products in China;andto pay damages of 90 million Chinese yuan plus court fees incurred.The complaint filed by Jinhua sought an order requiring MSS to destroyinventory of the accused products and equipment for manufacturing the accused products in China;to stop manufacturing,using,selling,andoffering for sale the accused products in China;and to pay damages of 98 million Chinese yuan plus court fees incurred.On November 26,2021,pursuant to a settlement agreement between UMC and Micron,UMC filed an application to the Fuzhou Court to withdraw its complaintagainst MSS.On December 4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua will file an application to theFuzhou Court to withdraw its complaint against MSS.On July 5,2018,MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins themfrom manufacturing,selling,or importing certain Crucial and Ballistix-branded DRAM modules and solid-state drives in China.On December4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua will file an application to the Fuzhou Court to withdraw theinjunction.On April 28,2021,Netlist,Inc.(“Netlist”)filed two patent infringement actions against Micron,Micron Semiconductor Products,Inc.(“MSP”),and Micron Technology Texas,LLC(“MTEC”)in the U.S.District Court for the Western District of Texas.The first complaint alleges that oneU.S.patent is infringed by certain of our non-volatile dual in-line memory modules.The second complaint alleges that three U.S.patents areinfringed by certain of our load-reduced dual in-line memory modules(“LRDIMMs”).Each complaint seeks injunctive relief,damages,attorneys fees,and costs.On March 31,2022,Netlist filed a patent infringement complaint against Micron and Micron SemiconductorGermany,GmbH in Dusseldorf Regional Court alleging that two German patents are infringed by certain of our LRDIMMs.The complaintseeks damages,costs,and injunctive relief.On June 10,2022,Netlist filed a patent infringement complaint against Micron,MSP,and MTECin the U.S.District Court for the Eastern District of Texas(“E.D.Tex.”)alleging that six U.S.patents are infringed by certain of our memorymodules and HBM products.On August 1,2022,Netlist filed a second patent infringement complaint against the same defendants in E.D.Tex.alleging that one U.S.patent is infringed by certain of our LRDIMMs.On August 15,2022,Netlist amended the second complaint toassert that two additional U.S.patents are infringed by certain of our LRDIMMs.The complaints in E.D.Tex.seek injunctive relief,damages,and attorneys fees.On August 16,2022,Sonrai Memory Ltd.filed a patent infringement complaint against Micron in the U.S.District Court for the WesternDistrict of Texas.The complaint alleges that two U.S.patents are infringed by certain SSD and NAND flash products.The complaint seeksdamages,attorneys fees,and costs.On January 23,2023,Besang Inc.filed a patent infringement complaint against Micron in the U.S.District Court for the Eastern District ofTexas.The complaint alleges that one U.S.patent is infringed by certain of our 3D NAND and SSD products.The complaint seeks aninjunction,damages,attorneys fees,and costs.On November 9,2023,Yangtze Memory Technologies Company,Ltd.(“YMTC”)filed a patent infringement complaint against Micron and oneof its subsidiaries in the U.S.District Court for the Northern District of California.The complaint alleges that eight U.S.patents are infringedby certain of our 3D NAND products.The complaint seeks an injunction,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 wemanufacture,which account for substantially all of our revenue.Antitrust MattersSix cases have been filed against Micron alleging price fixing of DRAM products in the following Canadian courts on the dates indicated:Superior Court of Quebec(April 30,2018 and May 3,2018),the Federal Court of Canada(May 2,2018),the Ontario Superior Court ofJustice(May 15,2018),and the Supreme Court of British Columbia(May 10,2018).The plaintiffs in these cases are individuals seekingcertification of class actions on behalf of direct and indirect purchasers of DRAM in Canada(or regions of Canada)between June 1,2016and February 1,2018.17|2024 Q1 10-QTable of ContentsOn May 15,2018,the Chinese State Administration for Market Regulation(“SAMR”)notified Micron that it was investigating potentialcollusion and other anticompetitive conduct by DRAM suppliers in China.On May 31,2018,SAMR made unannounced visits to our salesoffices in Beijing,Shanghai,and Shenzhen to seek certain information as part of its investigation.We are cooperating with SAMR in itsinvestigation.Securities MattersOn February 9,2021,a derivative complaint was filed by a shareholder against Sanjay Mehrotra and other current and former directors ofMicron,allegedly on behalf of and for the benefit of Micron,in the U.S.District Court for the District of Delaware alleging violations ofsecurities laws,breaches of fiduciary duties,and other violations of law involving allegedly false and misleading statements about Micronscommitment to diversity and progress in diversifying its workforce,executive leadership,and Board of Directors.The complaint soughtdamages,fees,interest,costs,and an order requiring Micron to take various actions to allegedly improve its corporate governance andinternal procedures.On November 2,2023,the District Court granted the defendants motion to dismiss the complaint.Other MattersIn the normal course of business,we are a party to a variety of agreements pursuant to which we may be obligated to indemnify anotherparty.It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditionalnature of our obligations and the unique facts and circumstances involved in each particular agreement.Historically,our payments underthese types of agreements have not had a material adverse effect on our business,results of operations,or financial condition.Contingency AssessmentWe are unable to predict the outcome of any of the matters noted above and cannot make a reasonable estimate of the potential loss orrange of possible losses.A determination that our products or manufacturing processes infringe the intellectual property rights of others orentering into a license agreement covering such intellectual property could result in significant liability and/or require us to make materialchanges to our products and/or manufacturing processes.Any of the foregoing,as well as the resolution of any other legal matter notedabove,could have a material adverse effect on our business,results of operations,or financial condition.EquityCommon Stock RepurchasesOur 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.Therepurchase authorization has no expiration date,does not obligate us to acquire any common stock,and is subject to market conditions andour ongoing determination of the best use of available cash.No shares were repurchased in the first quarter of 2024.Through November 30,2023,we had repurchased an aggregate of$6.89 billion under the authorization.Amounts repurchased are included in treasury stock.DividendsIn the first quarter of 2024,we declared and paid dividends of$129 million($0.115 per share).On December 20,2023,our Board ofDirectors declared a quarterly dividend of$0.115 per share,payable in cash on January 18,2024,to shareholders of record as of the close ofbusiness on January 2,2024.18Table of ContentsAccumulated Other Comprehensive Income(Loss)Changes in accumulated other comprehensive income(loss)by component for the three months ended November 30,2023 were as follows:Gains(Losses)on DerivativeInstrumentsUnrealizedGains(Losses)onInvestmentsPensionLiabilityAdjustmentsCumulativeForeignCurrencyTranslationAdjustmentTotalAs of August 31,2023$(304)$(41)$36$(3)$(312)Other comprehensive income(loss)beforereclassifications14 7 (1)20 Amount reclassified out of accumulated othercomprehensive income(loss)44 2 46 Tax effects(14)(14)Other comprehensive income(loss)44 7 2(1)52 As of November 30,2023$(260)$(34)$38$(4)$(260)Fair Value MeasurementsThe estimated fair values and carrying values of our outstanding debt instruments were as follows:As of November 30,2023As of August 31,2023Fair ValueCarrying ValueFair ValueCarrying ValueNotes$11,651$12,024$11,549$12,049 The fair values of our debt instruments were estimated based on Level 2 inputs,including the trading price of our notes when available,discounted cash flows,and interest rates based on similar debt issued by parties with credit ratings similar to ours.19|2024 Q1 10-QTable of ContentsDerivative InstrumentsNotional orContractualAmountFair Value ofAssetsLiabilitiesAs of November 30,2023Derivative instruments with hedge accounting designationCash flow currency hedges$4,057$34$(139)Cash flow commodity hedges310 25(2)Fair value interest rate hedges900 (101)Derivative instruments without hedge accounting designationNon-designated currency hedges1,860 23(20)$82$(262)As of August 31,2023Derivative instruments with hedge accounting designationCash flow currency hedges$3,873$16$(180)Cash flow commodity hedges331 45 Fair value interest rate hedges900 (100)Derivative instruments without hedge accounting designationNon-designated currency hedges1,839 2(17)$63$(297)Included in receivables and other noncurrent assets.Included in accounts payable and accrued expenses and other noncurrent liabilities.Derivative Instruments with Hedge Accounting DesignationCash Flow Hedges:We utilize forward and swap contracts that generally mature within two years designated as cash flow hedges tominimize our exposure to changes in currency exchange rates or commodity prices for certain capital expenditures and manufacturing costs.Forward and swap contracts are measured at fair value based on market-based observable inputs including market spot and forward rates,interest rates,and credit-risk spreads(Level 2).We recognized gains from cash flow hedges of$53 million for the first quarter of 2023 inaccumulated other comprehensive income(loss).The amounts recognized in the first quarter of 2024 were not significant.As ofNovember 30,2023,we expect to reclassify$153 million of pre-tax losses related to cash flow hedges from accumulated othercomprehensive income(loss)into earnings in the next 12 months.Fair Value Hedges:We utilize fixed-to-floating interest rate swaps designated as fair value hedges to minimize certain exposures to changesin the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates.Interest rate swaps are measured at fair valuebased on market-based observable inputs including interest rates and credit-risk spreads(Level 2).The changes in the fair values ofderivatives designated as fair value hedges and the offsetting changes in the underlying fair values of the hedged items are both recognizedin earnings.When a derivative is no longer designated as a fair value hedge for any reason,including termination and maturity,the remainingunamortized difference between the carrying value of the hedged item at that time and the face value of the hedged item is amortized toearnings over the remaining life of the hedged item,or immediately if the hedged item has matured or been extinguished.The effects of fairvalue hedges on our consolidated statements of operations,recognized in interest expense,were not significant for the periods presented.(1)(2)(1)(2)20Table of ContentsDerivative Instruments without Hedge Accounting DesignationCurrency Derivatives:We generally utilize a rolling hedge strategy with currency forward contracts that mature within three months tohedge 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 associatedoutstanding forward contracts are marked to market.Currency forward contracts are valued at fair values based on the middle of bid and askprices of dealers or exchange quotations(Level 2).Realized and unrealized gains and losses on derivative instruments without hedgeaccounting designation as well as the changes in the underlying monetary assets and liabilities from changes in currency exchange rates areincluded in other non-operating income(expense),net.The amounts recognized for derivative instruments without hedge accountingdesignation were not significant for the periods presented.We do not use derivative instruments for speculative purposes.Equity PlansAs of November 30,2023,74 million shares of our common stock were available for future awards under our equity plans,including 14million shares approved for issuance under our employee stock purchase plan(“ESPP”).Restricted Stock and Restricted Stock Units(“Restricted Stock Awards”)Restricted Stock Awards activity is summarized as follows:Three months endedNovember 30,2023December 1,2022Restricted stock award shares granted1214Weighted-average grant-date fair value per share$67.36$53.94 Stock-based Compensation ExpenseStock-based compensation expense recognized in our statements of operations is presented below.Stock-based compensation expense of$94 million and$88 million was capitalized and remained in inventory as of November 30,2023 and August 31,2023,respectively.Three months endedNovember 30,2023December 1,2022Stock-based compensation expense by captionResearch and development$68$53 Cost of goods sold67 36 Selling,general,and administrative47 37$182$126 Stock-based compensation expense by type of awardRestricted stock awards$163$109 ESPP19 17$182$126 As of November 30,2023,$1.84 billion of total unrecognized compensation costs for unvested awards,before the effect of any futureforfeitures,was expected to be recognized through the first quarter of 2028,resulting in a weighted-average period of 1.4 years.21|2024 Q1 10-QTable of ContentsRevenue and Customer Contract LiabilitiesRevenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount thatreflects 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 initialterms that include performance obligations that extend beyond one year.As of November 30,2023,our future performance obligationsbeyond one year were not significant.Revenue by TechnologyThree months endedNovember 30,2023December 1,2022DRAM$3,427$2,829 NAND1,230 1,103 Other(primarily NOR)69 153$4,726$4,085 See“Segment and Other Information”for disclosure of disaggregated revenue by market segment.Customer Contract LiabilitiesContract liabilities from customer prepayments made to secure product supply in future periods were approximately$600 million as ofNovember 30,2023 and were reported within other current liabilities.As of November 30,2023 and August 31,2023,other current liabilities also included$455 million and$453 million,respectively,forestimates of consideration payable to customers including estimates for pricing adjustments and returns.Income TaxesOur income tax(provision)benefit consisted of the following:Three months endedNovember 30,2023December 1,2022Income(loss)before taxes$(1,155)$(176)Income tax(provision)benefit(73)(8)Effective tax rate(6.3)%(4.5)%For the first quarter of 2024,we recorded tax expense based on actual first quarter results for jurisdictions where small changes in ourprojected pre-tax income may cause significant changes in the estimated annual effective tax rate.The change in our effective tax rate for the first quarter of 2024 as compared to the first quarter of 2023 was primarily due to changes inlevels of profitability,interim tax expense methodology,and our geographic mix of earnings.Despite a consolidated pre-tax loss on aworldwide basis,we have taxes payable in certain geographies due to minimum taxable income reportable in those geographies.We operate in a number of jurisdictions outside the United States,including Singapore,where we have tax incentive arrangements.Theseincentives expire,in whole or in part,at various dates through 2034 and are conditional,in part,upon meeting certain business operationsand employment thresholds.As a result of a loss before taxes and geographic mix of income,the benefit from tax incentive arrangementswas not material for the first quarters of 2024 and 2023.22Table of ContentsEarnings Per ShareThree months endedNovember 30,2023December 1,2022Net income(loss)Basic and Diluted$(1,234)$(195)Weighted-average common shares outstanding Basic and Diluted1,100 1,090 Earnings(loss)per shareBasic$(1.12)$(0.18)Diluted(1.12)(0.18)Antidilutive potential common shares excluded from the computation of diluted earnings per share,that could dilute basic earnings per sharein the future,were 35 million for the first quarter of 2024 and 2023.Segment and Other InformationSegment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker.We have thefollowing four business units,which are our reportable segments:Compute and Networking Business Unit(“CNBU”):Includes memory products and solutions sold into client,cloud server,enterprise,graphics,and networking markets.Mobile Business Unit(“MBU”):Includes memory and storage products sold into smartphone and other mobile-device markets.Embedded Business Unit(“EBU”):Includes memory and storage products and solutions sold into automotive,industrial,and consumermarkets.Storage Business Unit(“SBU”):Includes SSDs and component-level solutions sold into enterprise and cloud,client,and consumer storagemarkets.Certain operating expenses directly associated with the activities of a specific segment are charged to that segment.Other indirect operatingincome and expenses are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted waferproduction.We do not identify or report internally our assets(other than goodwill)or capital expenditures by segment,nor do we allocategains and losses from equity method investments,interest,other non-operating income or expense items,or taxes to segments.23|2024 Q1 10-QTable of ContentsThree months endedNovember 30,2023December 1,2022RevenueCNBU$1,737$1,746 MBU1,293 655 EBU1,037 1,000 SBU653 680 All Other6 4$4,726$4,085 Operating income(loss)CNBU$(397)$190 MBU(687)(195)EBU10 194 SBU(490)(257)All Other4 3(1,560)(65)UnallocatedLower costs from sale of inventory written down in prior periods605 Stock-based compensation(182)(126)Restructure and asset impairments(13)Other9(5)432(144)Operating income(loss)$(1,128)$(209)Certain ConcentrationsRevenue by end market as an approximate percent of total revenue is presented in the table below:Three months endedNovember 30,2023December 1,2022Mobile25%Automotive,industrial,and consumer20%Client and graphics20%Enterprise and cloud server15 %SSDs and other storage15$Table of ContentsITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSThis discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in our AnnualReport on Form 10-K for the year ended August 31,2023.All period references are to our fiscal periods unless otherwise indicated.Ourfiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.Fiscal 2024 and 2023 each contain 52 weeks.Alltabular dollar amounts are in millions,except per share amounts.OverviewWe are an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all.Witha relentless focus on our customers,technology leadership,and manufacturing and operational excellence,Micron delivers a rich portfolio ofhigh-performance DRAM,NAND,and NOR memory and storage products through our Micron and Crucial brands.Every day,theinnovations that our people create fuel the data economy,enabling advances in artificial intelligence and 5G applications that unleashopportunities from the data center to the intelligent edge and across the client and mobile user experience.We manufacture our products at wholly-owned facilities and also utilize subcontractors for certain manufacturing processes.Our globalnetwork of manufacturing centers of excellence not only allows us to benefit from scale while streamlining processes and operations,but italso brings together some of the worlds brightest talent to work on the most advanced memory technology.Centers of excellence bringexpertise together in one location,providing an efficient support structure for end-to-end manufacturing,with quicker cycle times,inpartnership with teams such as research and development(“R&D”),product engineering,human resources,procurement,and supply chain.For our locations in Singapore and Taiwan,this is also a combination of bringing fabrication and back-end manufacturing together.We makesignificant investments to develop proprietary product and process technology,which generally increases bit density per wafer and reducesper-bit manufacturing costs of each generation of product.We continue to introduce new generations of products that offer improvedperformance characteristics,including higher data transfer rates,advanced packaging solutions,lower power consumption,improvedread/write reliability,and increased memory density.We face intense competition in the semiconductor memory and storage markets and to remain competitive we must continuously developand implement new products and technologies and decrease manufacturing costs in spite of ongoing inflationary cost pressures.Oursuccess is largely dependent on obtaining returns on our R&D investments,efficient utilization of our manufacturing infrastructure,development and integration of advanced product and process technologies,market acceptance of our diversified portfolio of semiconductor-based memory and storage solutions,and efficient capital spending.Product TechnologiesOur product portfolio of memory and storage solutions,advanced solutions,and storage platforms is based on our high-performancesemiconductor memory and storage technologies,including DRAM,NAND,and NOR.We sell our products into various markets through ourbusiness units in numerous forms,including components,modules,SSDs,managed NAND,MCPs,and wafers.Our system-level solutions,including SSDs and managed NAND,combine NAND,a controller,firmware,and in some cases DRAM.DRAM:DRAM products are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrievalwith a variety of performance characteristics.DRAM products lose content when power is turned off(“volatile”)and are most commonly usedin client,cloud server,enterprise,networking,graphics,industrial,and automotive markets.LPDRAM products,which are engineered to meetstandards for performance and power consumption,are sold into smartphone and other mobile-device markets(including client markets forChromebooks and notebook PCs),as well as into the automotive,industrial,consumer,and datacenter markets.25|2024 Q1 10-QTable of ContentsNAND:NAND products are non-volatile,re-writeable semiconductor storage devices that provide high-capacity,low-cost storage with avariety of performance characteristics.NAND is used in SSDs for the enterprise and cloud,client,consumer,and automotive markets and inremovable storage markets.Managed NAND is used in smartphones and other mobile devices,and in consumer,automotive,andembedded markets.Low-density NAND is ideal for applications like automotive,surveillance,machine-to-machine,automation,printer,andhome networking.NOR:NOR products are non-volatile,re-writable semiconductor memory devices that provide fast read speeds.NOR is most commonlyused for reliable code storage(e.g.,boot,application,operating system,and execute-in-place code in an embedded system)and forfrequently changing small data storage and is ideal for automotive,industrial,and consumer applications.Industry ConditionsThe memory and storage industry environment deteriorated sharply in the fourth quarter of 2022 and throughout 2023 due to weak demandin many end markets combined with global and macroeconomic challenges and lower demand resulting from customer actions to reduceinventory levels.This led to significant reductions in average selling prices for both DRAM and NAND and reductions in bit shipments forDRAM,resulting in declines in revenue across all our business segments and nearly all our end markets.For the first quarter of 2024,improving demand growth driven in part by deployment of artificial intelligence,customer inventory normalization,and industry-wide supplydiscipline,resulted in an improved industry supply and demand balance.As a result,we have experienced improvements in pricing andmargins.As a result of challenging market conditions that have persisted since the fourth quarter of 2022 and increased levels of our inventories,inrecent quarters we have reduced capital expenditures and wafer starts for both DRAM and NAND.We expect wafer starts will remain belowpeak capacity levels for the second quarter of 2024 as we remain focused on managing down our inventories and controlling our supply.Werecognized period costs from fabrication facility underutilization of$165 million in first quarter of 2024 and$222 million in the fourth quarter of2023 due to wafer start reductions.We expect reduced underutilization charges in the second quarter of 2024.In addition,we havestrategically diverted underutilized equipment toward ramping new technology nodes,which will help us increase leading edge production ina capital efficient manner.Since the number of wafer processing steps is higher for leading-edge nodes,this approach of divertingunderutilized tools to the leading edge meaningfully reduces our overall wafer capacity.Impact of China Cyberspace Administration DecisionOn March 31,2023,Chinas Cyberspace Administration(the“CAC”)notified us that it was conducting a cybersecurity review of our productssold in China.On May 21,2023,we received notice that the CAC had concluded its review and decided that our products presented acybersecurity risk.As such,the CAC determined that critical information infrastructure operators in China may not purchase Micron products.The CAC decision has impacted our business,particularly in the domestic data center and networking markets in China,and we have beenworking to mitigate that impact.Our long-term goal is to retain our worldwide DRAM and NAND market share.26Table of ContentsResults of OperationsConsolidated ResultsFirst QuarterFourth QuarterFirst Quarter202420232023Revenue$4,726 100%$4,010 100%$4,085 100%Cost of goods sold4,761 101%4,445 111%3,192 78%Gross margin(35)(1)%(435)(11)3 22%Research and development845 18q9 189 21%Selling,general,and administrative263 6!9 5%1 6%Restructure and asset impairments%4%Other operating(income)expense,net(15) 2%(11)%Operating income(loss)(1,128)(24)%(1,472)(37)%(209)(5)%Interest income(expense),net%57 1%Other non-operating income(expense),net(27)(1)%9%(4)%Income tax(provision)benefit(73)(2)$ 1%(8)%Equity in net income(loss)of equity method investees(6)%4%(11)%Net income(loss)$(1,234)(26)%$(1,430)(36)%$(195)(5)%Total Revenue:Total revenue for the first quarter of 2024 was impacted by the factors described in the section titled“Industry Conditions”above.Total revenue for the first quarter of 2024 increased 18%as compared to the fourth quarter of 2023 primarily due to increases in salesof both DRAM and NAND products.Sales of DRAM products in the first quarter of 2024 increased 24%as compared to the fourth quarter of 2023 primarily due to a low-20s percent range increase in bit shipments and increases in average selling prices in the low single-digit-percent range.Sales of NAND products in the first quarter of 2024 increased 2%as compared to the fourth quarter of 2023 primarily due to anapproximate 20%increase in average selling prices partially offset by decreases in bit shipments in the mid-teens percent rangeafter record NAND bit shipments in the fourth quarter of 2023.Total revenue for the first quarter of 2024 increased 16%as compared to the first quarter of 2023 primarily due to increases in sales of bothDRAM and NAND products.Sales of DRAM products in the first quarter of 2024 increased 21%as compared to the first quarter of 2023 primarily due to a low-80s percent range increase in bit shipments partially offset by a decrease in average selling prices in the low-30s percent range.Sales of NAND products in the first quarter of 2024 increased 12%as compared to the first quarter of 2023 primarily due to a high-70s percent range increase in bit shipments partially offset by a decrease in average selling prices in the high-30s percent range.Consolidated Gross Margin:Our consolidated gross margin has been impacted by the factors described in the section titled“IndustryConditions”above.Our consolidated gross margin percentage improved to negative 1%for the first quarter of 2024 from negative 11%forthe fourth quarter of 2023,as a result of improvements in margins for both DRAM and NAND products,primarily due to increases in averageselling prices,and a higher mix of revenue from DRAM.Our consolidated gross margin percentage declined to negative 1%for the firstquarter of 2024 from 22%for the first quarter of 2023 primarily due to declines in average selling prices for both DRAM and NAND and$165million of facility underutilization costs in the first quarter of 2024.27|2024 Q1 10-QTable of ContentsInventory NRV write-downs:Our consolidated gross margin was impacted by charges in the third and second quarters of 2023 to write downinventories to their estimated net realizable value as a result of declines in average selling prices for both DRAM and NAND.As charges towrite down inventories are recorded in advance of when inventories are sold,costs of goods sold in subsequent periods are lower than theyotherwise would be.The impact of inventory NRV write-downs for each period reflects(1)inventory write-downs in that period,offset by(2)lower costs in that period on the sale of inventory written down in prior periods.The impacts of inventory NRV write-downs are summarizedbelow:First QuarterFourth QuarterFirst Quarter202420232023Provision to write down inventory to NRV$Lower costs from sale of inventory written down in prior periods605 563$605$563$Revenue by Business UnitFirst QuarterFourth QuarterFirst Quarter202420232023CNBU$1,737 37%$1,200 30%$1,746 43%MBU1,293 27%1,211 30e5 16U1,037 220 21%1,000 24%SBU653 14s9 18h0 17%All Other6%4%$4,726$4,010$4,085 Percentages of total revenue may not total 100%due to rounding.Changes in revenue for each business unit for the first quarter of 2024 as compared to the fourth quarter of 2023 were as follows:CNBU revenue increased 45%primarily due to increases in bit shipments driven by strong demand in data center and client endmarkets.MBU revenue increased 7%primarily due to increases in average selling prices and NAND bit shipments,driven by improved endmarket demand.EBU revenue increased 21%primarily due to increases in bit shipments reflecting growth across most end markets.SBU revenue decreased 12%primarily due to declines in component NAND sales,partially offset by increases in SSD sales.Changes in revenue for each business unit for the first quarter of 2024 as compared to the first quarter of 2023 were as follows:CNBU revenue decreased 1%as declines in average selling prices were largely offset by increases in bit shipments.MBU revenue increased 97%primarily due to increases in bit shipments for both DRAM and NAND,partially offset by declines inaverage selling prices.EBU revenue increased 4%primarily due to increases in bit shipments,partially offset by declines in average selling prices.SBU revenue decreased 4%primarily due to declines in average selling prices,partially offset by increases in bit shipments.28Table of ContentsOperating Income(Loss)by Business UnitFirst QuarterFourth QuarterFirst Quarter202420232023CNBU$(397)(23)%$(403)(34)%$190 11%MBU(687)(53)%(733)(61)%(195)(30)U10 15 44 19%SBU(490)(75)%(672)(91)%(257)(38)%All Other4 67%2%3 75%$(1,560)$(1,771)$(65)Percentages reflect operating income(loss)as a percentage of revenue for each business unit.Changes in operating income or loss for each business unit for the first quarter of 2024 as compared to the fourth quarter of 2023 were asfollows:CNBU operating income(loss)was relatively unchanged.MBU operating income(loss)improved primarily due to increases in average selling prices.EBU operating income decreased slightly primarily due to declines in average selling prices.SBU operating income(loss)improved primarily due to increases in average selling prices.Changes in operating income or loss for each business unit for the first quarter of 2024 as compared to the first quarter of 2023 were asfollows:CNBU operating income(loss)deteriorated primarily due to declines in average selling prices.MBU operating income(loss)deteriorated primarily due to declines in average selling prices.EBU operating income decreased primarily due to declines in average selling prices.SBU operating income(loss)deteriorated primarily due to declines in average selling prices.Operating Expenses and OtherResearch and Development:R&D expenses vary primarily with the number of development and pre-qualification wafers processed,thecost of advanced equipment dedicated to new product and process development,and personnel costs.Because of the lead times necessaryto manufacture our products,we typically begin to process wafers before completion of performance and reliability testing.Development of aproduct is deemed complete when it is qualified through internal reviews and tests for performance and reliability.R&D expenses can varysignificantly depending on the timing of product qualification.R&D expenses for the first quarter of 2024 increased 18%as compared to the fourth quarter of 2023 due to higher volumes of developmentand prequalification wafers and an increase in employee compensation.R&D expenses for the first quarter of 2024 compared to the firstquarter of 2023 were relatively unchanged as lower volumes of development and prequalification wafers were largely offset by increases inemployee compensation.Selling,General,and Administrative:SG&A expenses for the first quarter of 2024 increased 20%as compared to the fourth quarter of2023 primarily due to an increase in employee compensation.SG&A expenses for the first quarter of 2024 were relatively unchangedcompared to the first quarter of 2023.Other operating(income)expense,net:In the fourth quarter of 2023,we recognized a charge of$101 million included in other operating(income)expense,net to impair all of the goodwill assigned to our SBU reporting unit based on a quantitative assessment for impairment.29|2024 Q1 10-QTable of ContentsIncome Taxes:Our income tax(provision)benefit consisted of the following:First QuarterFourth QuarterFirst Quarter202420232023Income(loss)before taxes$(1,155)$(1,458)$(176)Income tax(provision)benefit(73)24(8)Effective tax rate(6.3)%1.6%(4.5)%For the first quarter of 2024,we recorded tax expense based on actual first quarter results for jurisdictions where small changes in ourprojected pre-tax income may cause significant changes in the estimated annual effective tax rate.In future quarters where a reliable annual effective tax rate can be estimated for all jurisdictions,we would revert back to a global annualeffective tax rate method,which may result in a significant adjustment due to the change in methodology during that period.The change in our effective tax rate for the first quarter of 2024 as compared to the fourth quarter of 2023 was primarily due to discrete taxbenefits occurring in the fourth quarter of 2023 and interim tax expense methodology in the first quarter of 2024.The change in our effectivetax rate for the first quarter of 2024 as compared to the first quarter of 2023 was primarily due to changes in levels of profitability,interim taxexpense methodology,and our geographic mix of earnings.Despite a consolidated pre-tax loss on a worldwide basis,we have taxes payablein certain geographies due to minimum taxable income reportable in those geographies.We operate in a number of jurisdictions outside the United States,including Singapore,where we have tax incentive arrangements.Theseincentives expire,in whole or in part,at various dates through 2034 and are conditional,in part,upon meeting certain business operationsand employment thresholds.As a result of a loss before taxes and geographical mix of income,the benefit from tax incentive arrangementswas not material for the periods presented.Various tax reforms are being considered in multiple jurisdictions that,if enacted,contain provisions that could materially impact our taxexpense.We continue to monitor the potential impact of these various tax reform proposals to our overall global effective tax rate andfinancial statements.Other:Further information can be found in the following notes contained in“Item 1.Financial Statements Notes to Consolidated FinancialStatements Equity Plans.”Liquidity and Capital ResourcesOur primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions.Cash generated from operations is highly dependent on selling prices for our products,which can vary significantly from period to period.Cash and marketable investments totaled$9.77 billion as of November 30,2023,and$10.44 billion as of August 31,2023.Our cash andinvestments consist primarily of bank deposits,money market funds,and liquid investment-grade,fixed-income securities,which arediversified among industries and individual issuers.To mitigate credit risk,we invest through high-credit-quality financial institutions and bypolicy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor.As ofNovember 30,2023,$2.56 billion of our cash and marketable investments was held by our foreign subsidiaries.We continuously evaluate alternatives for efficiently funding our capital expenditures and ongoing operations.We expect,from time to time,to engage in a variety of financing transactions for such purposes,including the issuance of securities.As of November 30,2023,$2.50billion was available to draw under our Revolving Credit Facility.30Table of ContentsTo develop new product and process technology,support future growth,achieve operating efficiencies,and maintain product quality,we mustcontinue to invest in manufacturing technologies,facilities and equipment,and R&D.We estimate capital expenditures in 2024 for property,plant,and equipment,net of proceeds from government incentives,to be in the range of$7.5 billion to$8.0 billion.Actual amounts for 2024will vary depending on market conditions and may vary from quarter to quarter due to the timing of expenditures.As of November 30,2023,we had purchase obligations of approximately$1.03 billion for the acquisition of property,plant,and equipment,of which approximately$963million is expected to be paid within one year.For a description of other contractual obligations,such as leases and debt,see“Item 1.Financial Statements Notes to Consolidated Financial Statements Leases,”and“Debt.”To support expected memory demand in the second half of the decade,we will need to add new DRAM wafer capacity.Following theenactment of the CHIPS Act in 2022,we announced plans to invest in two leading-edge memory manufacturing fabs in the United States,contingent on CHIPS Act support through grants and investment tax credits.As part of this plan,in September 2022,we broke ground on aleading-edge memory manufacturing fab in Boise,Idaho.Construction of the fab began in October 2023 with DRAM production targeted tostart in calendar 2025 and first output in early calendar 2026.In addition,in October 2022,we announced plans to build a second leading-edge DRAM manufacturing fab in Clay,New York.We expect construction to begin in calendar 2024,with production anticipated to ramp inthe latter half of the decade.We expect these new fabs to be key to meeting our requirements for additional wafer capacity starting in thesecond half of the decade and beyond,in line with industry demand trends.On August 21,2023,we announced that two of our subsidiarieshad each submitted full applications on August 18,2023 for federal funding in the form of grants under the CHIPS Act for both of theseprojects.We are also advancing our global back-end assembly and test network in order to support our product portfolio and extend our ability todeliver on global customer demand in the future.We intend to make investments at our backend facility in Xian,China,including a newbuilding to provide space to add more product capability,to allow us over time to serve more of the demand from our customers in Chinafrom the Xian facility.We also intend to build a new assembly and test facility in Gujarat,India to address demand in the latter half of thisdecade.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.Therepurchase authorization has no expiration date,does not obligate us to acquire any common stock,and is subject to market conditions andour ongoing determination of the best use of available cash.Through November 30,2023,we had repurchased an aggregate of$6.89 billionof the authorized amount.See“Item 1.Financial Statements Notes to Consolidated Financial Statements Equity.”On December 20,2023,our Board of Directors declared a quarterly dividend of$0.115 per share,payable in cash on January 18,2024,toshareholders of record as of the close of business on January 2,2024.The declaration and payment of any future cash dividends are at thediscretion and subject to the approval of our Board of Directors.Our Board of Directors decisions regarding the amount and payment ofdividends will depend on many factors,including,but not limited to,our financial condition,results of operations,capital requirements,business conditions,debt service obligations,contractual restrictions,industry practice,legal requirements,regulatory constraints,and otherfactors that our Board of Directors may deem relevant.We expect that our cash and investments,cash flows from operations,and available financing will be sufficient to meet our requirements atleast through the next 12 months and thereafter for the foreseeable future.Cash FlowsFirst Quarter20242023Net cash provided by operating activities$1,401$943 Net cash provided by(used for)investing activities(1,558)(2,266)Net cash provided by(used for)financing activities(352)2,632 Effect of changes in currency exchange rates on cash,cash equivalents,and restricted cash(1)(6)Net increase(decrease)in cash,cash equivalents,and restricted cash$(510)$1,303 31|2024 Q1 10-QTable of ContentsOperating Activities:Cash provided by operating activities reflects net income(loss)adjusted for certain non-cash items,includingdepreciation expense,amortization of intangible assets,and stock-based compensation,and the effects of changes in operating assets andliabilities.The increase in cash provided by operating activities for the first quarter of 2024 as compared to the first quarter of 2023 wasprimarily due to a larger net loss in the current year adjusted for non-cash items and the effect of an increase in receivables,which was morethan offset by a decrease in inventories,an increase in accounts payable and accrued expenses,and an increase in other current liabilitieslargely due to approximately$600 million of customer prepayments to secure product supply.Investing Activities:For the first quarter of 2024,net cash used for investing activities consisted primarily of$1.80 billion of expenditures forproperty,plant,and equipment;contributions of$85 million received from government incentives to offset capital expenditures;partially offsetby$175 million of net inflows from maturities,sales,and purchases of available-for-sale securities.For the first quarter of 2023,net cash used for investing activities consisted primarily of$2.45 billion of expenditures for property,plant,andequipment;partially offset by$272 million of net inflows from maturities,sales,and purchases of available-for-sale securities.Financing Activities:For the first quarter of 2024,net cash used for financing activities consisted primarily of$129 million for payments ofdividends to shareholders,$56 million of payments on equipment purchase contracts,and$53 million for repayments of debt.For the first quarter of 2023,net cash provided by financing activities consisted primarily of$2.60 billion of proceeds from our 2025,2026,and 2027 Term Loan A borrowings and$749 million(net of original issue discount)from the issuance of the 2029 B Notes.Cash used forfinancing activities included$425 million for the acquisition of 8.6 million shares of our common stock under our share repurchaseauthorization,$126 million of cash payments of dividends to shareholders,and$47 million of payments on equipment purchase contracts.Critical Accounting EstimatesFor a discussion of our critical accounting estimates,see“Part II Item 7.Managements Discussion and Analysis of Financial Condition andResults of Operations Critical Accounting Estimates”of our Annual Report on Form 10-K for the year ended August 31,2023.There havebeen no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended August 31,2023.Recently Adopted Accounting StandardsNo material items.Recently Issued Accounting StandardsNo material items.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKFor further discussion about market risk and sensitivity analysis related to changes in interest rates and currency exchange rates,see“Part II Item 7A.Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report on Form 10-K for the year ended August 31,2023.32Table of ContentsITEM 4.CONTROLS AND PROCEDURESAn evaluation was carried out under the supervision and with the participation of our management,including our principal executive officerand principal financial officer,of the effectiveness of the design and operation of our disclosure controls and procedures(as defined in Rules13a-15(e)and 15d-15(e)under the Securities Exchange Act of 1934,as amended(the“Exchange Act”)as of the end of the period coveredby this report.Based upon that evaluation,the principal executive officer and principal financial officer concluded that those disclosurecontrols and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under theExchange Act are recorded,processed,summarized,and reported within the time periods specified in the SECs rules and forms and thatsuch information is accumulated and communicated to our management,including the principal executive officer and principal financialofficer,to allow timely decisions regarding disclosure.During the first quarter of 2024,there were no changes in our internal control over financial reporting that have materially affected,or arereasonably likely to materially affect,our internal control over financial reporting.PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSFor a discussion of legal proceedings,see“Part I Item 3.Legal Proceedings”of our Annual Report on Form 10-K for the year ended August31,2023 and the sections titled“Part I.Financial Information Item 1.Financial Statements Notes to Consolidated Financial Statements Contingencies”and“Item 1A.Risk Factors”in this Quarterly Report on Form 10-Q.SEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the relatedmonetary sanctions,if any,will be less than a specified threshold.We use a threshold of$1 million for this purpose.33|2024 Q1 10-QTable of ContentsITEM 1A.RISK FACTORSIn addition to the factors discussed elsewhere in this Form 10-Q,this section discusses important factors which could cause actual results orevents to differ materially from those contained in any forward-looking statements made by us.The order of presentation is not necessarilyindicative of the level of risk that each factor poses to us.Any of these factors could have a material adverse effect on our business,resultsof operations,financial condition,or stock price.Our operations could also be affected by other factors that are presently unknown to us ornot considered significant.Risk Factor SummaryRisks Related to Our Business,Operations,and Industryvolatility in average selling prices of our products;a range of factors that may adversely affect our gross margins;our international operations,including geopolitical risks;the highly competitive nature of our industry;our ability to develop and produce new and competitive memory and storage technologies and products;realizing expected returns from capacity expansions;achieving or maintaining certain performance or other obligations associated with incentives from various governments;availability and quality of materials,supplies,and capital equipment and dependency on third-party service providers;a downturn in regional or worldwide economies;disruptions to our manufacturing process from operational issues,natural disasters,or other events;dependency on a select number of key customers,including international customers;products that fail to meet specifications,are defective,or are incompatible with end uses;breaches of our security systems or products,or those of our customers,suppliers,or business partners;attracting,retaining,and motivating highly skilled employees;responsible sourcing requirements and related regulations;environmental,social,and governance considerations;acquisitions and/or alliances;andrestructure plans may not realize expected savings or other benefits.Risks Related to Intellectual Property and Litigationprotecting our intellectual property and retaining key employees who are knowledgeable of and develop our intellectual property;legal proceedings and claims;andclaims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others or failure toobtain or renew license agreements covering such intellectual property.Risks Related to Laws and Regulationsimpacts of government actions and compliance with tariffs,trade restrictions,and/or trade regulations;tax expense and tax laws in key jurisdictions;andcompliance with laws,regulations,or industry standards,including environmental considerations.Risks Related to Capitalization and Financial Marketsour ability to generate sufficient cash flows or obtain access to external financing;our debt obligations;changes in foreign currency exchange rates;counterparty default risk;volatility in the trading price of our common stock;andfluctuations in the amount and frequency of our common stock repurchases and payment of cash dividends and resulting impacts.34Table of ContentsRisks Related to Our Business,Operations,and IndustryVolatility in average selling prices for our semiconductor memory and storage products may adversely affect our business.We have experienced significant volatility in our average selling prices and may continue to experience such volatility in the future.Forexample,average selling prices for DRAM declined in the high-40s percent range and NAND declined in the low-50s percent range for 2023as compared to 2022.Since 2017,annual percentage changes in DRAM average selling prices have ranged from plus mid-30s percentrange to a minus high-40s percent range.Since 2017,annual percentage changes in NAND average selling prices have ranged from nearlyflat to a minus low-50s percent range.In current and recent periods,average selling prices for our products have been below ourmanufacturing costs and we may experience such circumstances in the future.Average selling prices for our products that decline faster thanour costs have recently had an adverse effect on our business and results of operations,and in future periods could have a material adverseeffect on our business,results of operations,or financial condition.Our gross margins may be adversely affected by a range of factors.Our gross margins are dependent,in part,upon continuing decreases in per gigabit manufacturing costs achieved through improvements inour manufacturing processes and product designs.Factors that may limit our ability to reduce our per gigabit manufacturing costs atsufficient levels to prevent deterioration of or improve gross margins include,but are not limited to:strategic product diversification decisions affecting product mix;increasing complexity of manufacturing processes;difficulties in transitioning to smaller line-width process technologies or additional 3D memory layers or NAND cell levels;process complexity including number of mask layers and fabrication steps;manufacturing yield;technological barriers;changes in process technologies;new products that may require relatively larger die sizes;start-up or other costs associated with capacity expansions;higher costs of goods and services due to inflationary pressures or market conditions;andhigher manufacturing costs per gigabit due to fabrication facility underutilization,lower wafer output,and insufficient volume to runnew technology nodes to achieve cost optimization.Many factors may result in a reduction of our output or a delay in ramping production,which could lead to underutilization of our productionassets.These factors may include,among others,a weak demand environment,industry oversupply,inventory surpluses,difficulties inramping emerging technologies,supply chain disruptions,and delays from equipment suppliers.See“Part I.Financial Information Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Overview Industry Conditions”for informationregarding our current underutilization.A significant portion of our manufacturing costs are fixed and do not vary proportionally with changes inproduction output.As a result,lower utilization,lower wafer output,and corresponding increases in our per gigabit manufacturing costs haveresulted in higher inventory carrying costs,and have had,and may continue to have,an adverse effect on our gross margins,business,results of operations,or financial condition.35|2024 Q1 10-QTable of ContentsWe have a broad portfolio of products to address our customers needs,which span multiple market segments and are subject to rapidtechnological changes.Our manufacturing costs on a per gigabit basis vary across our portfolio as they are largely influenced by thetechnology node in which the solution was developed.We strive to balance our demand and supply for each technology node,but thedynamics of our markets and our customers can create periods of imbalance,which can lead us to carry elevated inventory levels.Consequently,we may incur charges in connection with obsolete or excess inventories,or we may not fully recover our costs,which wouldreduce our gross margins.For example,in 2023,we recorded aggregate charges of$1.83 billion to write down the carrying value of ourinventories to their estimated net realizable value.In addition,due to the customized nature of certain products we manufacture,we may beunable to sell certain finished goods inventories to alternative customers or manufacture in-process inventory to different specifications,which may result in excess and obsolescence charges in future periods.In addition,if we are unable to supply products that meet customer design and performance specifications,we may be required to sell suchproducts at lower average selling prices,which may reduce our gross margins.Our gross margins may also be impacted by shifts in productmix,driven by our strategy to optimize our portfolio to best respond to changing market dynamics.Our inability to prevent deterioration of or improve gross margins could have a material adverse effect on our business,results of operations,or financial condition.We face geopolitical and other risks associated with our international operations that could materially adversely affect ourbusiness,results of operations,or financial condition.In addition to our U.S.operations,a substantial portion of our operations are conducted in Taiwan,Singapore,Japan,Malaysia,China,andIndia,and many of our customers,suppliers,and vendors also operate internationally.In 2023,nearly half of our revenue was from sales tocustomers who have headquarters located outside the United States,while over 80%of our revenue in 2023 was from products shipped tocustomer locations outside the United States.Our international operations are subject to a number of risks,including:restrictions on sales of goods or services to one or more of our significant foreign customers;export and import duties,changes to import and export regulations,customs regulations and processes,and restrictions on thetransfer of funds,including currency controls in China,which could negatively affect the amount and timing of payments from certainof our customers and,as a result,our cash flows;compliance with U.S.and international laws involving international operations,including the Foreign Corrupt Practices Act of 1977,as amended,sanctions and anti-corruption laws,export and import laws,and similar rules and regulations;theft of intellectual property;political and economic instability,including instability resulting from domestic and international conflicts;government actions or civil unrest preventing the flow of products and materials,including delays in shipping and obtaining productsand materials,cancellation of orders,or loss or damage of products;problems with the transportation or delivery of products and materials;issues arising from cultural or language differences and labor unrest;longer payment cycles and greater difficulty in collecting accounts receivable;compliance with trade,technical standards,and other laws in a variety of jurisdictions;contractual and regulatory limitations on the ability to maintain flexibility with staffing levels;disruptions to manufacturing or R&D activities as a result of actions imposed by foreign governments;changes in economic policies of foreign governments;difficulties in staffing and managing international operations;andpublic health issues.If we or our customers,suppliers,or vendors are impacted by any of these risks,it could have a material adverse effect on our business,results of operations,or financial condition.36Table of ContentsFollowing the May 21,2023 decision of its cybersecurity review of our products sold in China,the CAC determined that critical informationinfrastructure operators in China may not purchase Micron products,impacting our revenue with companies headquartered in mainlandChina and Hong Kong,including direct sales as well as indirect sales through distributors.Some revenue with customers headquarteredoutside of China has also been impacted.As we try to mitigate possible impacts due to the CAC decision,revenue may come at lower pricesor gross margins due to product or customer mix changes,which may impact our business results.Further actions by the Chinesegovernment could impact additional revenue inside or outside China,or our operations in China,or our ability to ship products to ourcustomers,any of which could have a material adverse effect on our business,results of operations,or financial condition.Political,economic,or other actions may adversely affect our operations in Taiwan.A majority of our DRAM production output in 2023 wasfrom our fabrication facilities in Taiwan and any loss of output could have a material adverse effect on us.Any political,economic,or otheractions may also adversely affect our customers and the technology industry supply chain,for which Taiwan is a central hub,and as a result,could have a material adverse impact on us.In addition,the U.S.government has in the past restricted American firms from selling products and software to certain of our customers andmay in the future impose similar restrictions on one or more of our significant customers.These restrictions may not prohibit our competitorsfrom selling similar products to our customers,which may result in our loss of sales and market share.Even as such restrictions are lifted,financial or other penalties or continuing export restrictions imposed with respect to our customers could have a continuing negative impacton our future revenue and results of operations,and we may not be able to recover any customers or market share we lose,or make suchrecoveries at acceptable average selling prices,while complying with such restrictions.The semiconductor memory and storage markets are highly competitive.We face intense competition in the semiconductor memory and storage markets from a number of companies,including Kioxia HoldingsCorporation;Samsung Electronics Co.,Ltd.;SK hynix Inc.;and Western Digital Corporation.Our competitors may use aggressive pricing toobtain market share.Some of our competitors are large corporations or conglomerates that may have a larger market share and greaterresources to invest in technology,capitalize on growth opportunities,and withstand downturns in the semiconductor markets in which wecompete.Consolidation of industry competitors could put us at a competitive disadvantage as our competitors may benefit from increasedmanufacturing scale and a stronger product portfolio.We operate in different jurisdictions than our competitors and may be impacted byunfavorable changes in currency exchange rates.In addition,some governments may provide,or have provided and may continue to provide,significant assistance,financial or otherwise,tosome of our competitors or to new entrants and may intervene in support of national industries and/or competitors.In particular,we face thethreat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and variousstate-owned or affiliated entities,in companies such as Yangtze Memory Technologies Co.,Ltd.(“YMTC”)and ChangXin MemoryTechnologies,Inc.(“CXMT”).In addition,the CACs decision that critical information infrastructure operators in China may not purchaseMicron products had an impact on our ability to compete effectively in China and elsewhere.We and our competitors generally seek to increase wafer output,improve yields,and reduce die size,which could result in significantincreases in worldwide supply and downward pressure on prices.Increases in worldwide supply of semiconductor memory and storage alsoresult from fabrication capacity expansions,either by way of new facilities,increased capacity utilization,or reallocation of othersemiconductor production to semiconductor memory and storage production.Our competitors may increase capital expenditures resulting infuture increases in worldwide supply.We,and some of our competitors,have plans to ramp,or are constructing or ramping,production atnew fabrication facilities.Increases in worldwide supply of semiconductor memory and storage,if not accompanied by commensurateincreases in demand,could lead to declines in average selling prices for our products and could materially adversely affect our business,results of operations,or financial condition.If competitors are more successful at developing or implementing new product or processtechnology,their products could have cost or performance advantages.The competitive nature of our industry could have a material adverse effect on our business,results of operations,or financial condition.37|2024 Q1 10-QTable of ContentsOur future success depends on our ability to develop and produce new and competitive memory and storage technologies andproducts.Our key semiconductor memory and storage technologies face technological barriers to continue to meet long-term customer needs.Thesebarriers include potential limitations on stacking additional 3D memory layers,increasing bits per cell(i.e.,cell levels),meeting higher densityrequirements,developing advanced packaging solutions,improving power consumption and reliability,and delivering advanced features andhigher performance.We may face technological barriers to continue to shrink our products at our current or historical rate,which hasgenerally reduced per gigabit cost.We have invested and expect to continue to invest in R&D for new and existing products and processtechnologies,such as EUV lithography,to continue to deliver advanced product requirements.Such new technologies can add complexityand risk to our schedule and may affect our costs and production output.We may be unable to recover our investment in R&D or otherwiserealize the economic benefits of reducing die size or increasing memory and storage densities.Our competitors are working to develop newmemory and storage technologies that may offer performance and/or cost advantages to existing technologies and render existingtechnologies obsolete.Accordingly,our future success may depend on our ability to develop and produce viable and competitive newmemory and storage technologies.We are developing new products,including system-level memory and storage products and solutions,which complement our traditionalproducts or leverage their underlying design or process technology.We have invested and expect to continue to invest in new semiconductorproduct and system-level solution development.We are increasingly differentiating our products and solutions to meet the specific demandsof our customers,which increases our reliance on our customers ability to accurately forecast the needs and preferences of their customers.As a result,our product demand forecasts may be impacted significantly by the strategic actions of our customers.In addition,our ability tosuccessfully introduce new products often requires us to make product specification decisions multiple years in advance of when newproducts enter the market.It is important that we deliver products in a timely manner with increasingly advanced performance characteristics at the time our customersare designing and evaluating samples for their products.If we do not meet their product design schedules,our customers may exclude usfrom further consideration as a supplier for those products.The process to develop new products requires us to demonstrate advancedfunctionality,performance,and reliability,often well in advance of a planned ramp of production,in order to secure design wins with ourcustomers.Many factors may negatively impact our ability to meet anticipated timelines and/or expected or required quality standards withrespect to the development of certain of our products.In addition,some of our components have long lead-times,requiring us to place ordersup to a year in advance of anticipated demand.Such long lead-times increase the risk of excess inventory or loss of sales in the event ourforecasts vary substantially from actual demand.There can be no assurance of the following:we will be successful in developing competitive new semiconductor memory and storage technologies and products;we will be able to cost-effectively manufacture new products;we will be able to successfully market these technologies;margins generated from sales of these products will allow us to recover costs of development efforts;we will be able to establish or maintain key relationships with customers,or that we will not be prohibited from working with certaincustomers,for specific chip set or design requirements;we will accurately predict and design products that meet our customers specifications;orwe will be able to introduce new products into the market and qualify them with our customers on a timely basis.Unsuccessful efforts to develop new memory and storage technologies and products could have a material adverse effect on our business,results of operations,or financial condition.38Table of ContentsWe may not be able to achieve expected returns from capacity expansions.We have announced our intent to expand our production capacity and/or make capital investments in the United States and in other regionswhere we operate.These expansions involve several risks including the following:capital expenditure requirements for capacity expansions during periods of relatively low free cash flow generation,resulting fromchallenging memory and storage industry conditions;availability of necessary funding,which may include external sources;ability to realize expected grants,investment tax credits,and other government incentives,including through the U.S.CHIPS andScience Act of 2022(“CHIPS Act”)and other national,international,state,and local grants;potential changes in laws or provisions of grants,investment tax credits,and other government incentives;potential restrictions on expanding in certain geographies;availability of equipment and construction materials;ability to complete construction as scheduled and within budget;availability of the necessary workforce;ability to timely ramp production in a cost-effective manner;increases to our cost structure until new production is ramped to adequate scale;andsufficient customer demand to utilize our increased capacity.We invest our capital in areas that we believe best align with our business strategy and optimize future returns.Investments in capitalexpenditures may not generate expected returns or cash flows.Significant judgment is required to determine which capital inve
2024-06-27
95页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended February 29,2024ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number 1-10658Micron Technology,Inc.(Exact name of registrant as specified in its charter)Delaware75-1618004(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)Address of principal executive offices,including zip code8000 S.Federal Way,Boise,Idaho 83716-9632Registrants telephone number,including area code(208)368-4000Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,par value$0.10 per shareMUNasdaq Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YesNoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 ofthis chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).YesNoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“largeaccelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large Accelerated FilerAccelerated FilerNon-Accelerated FilerSmaller Reporting CompanyEmerging Growth CompanyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards providedpursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YesNoThe number of outstanding shares of the registrants common stock as of March 14,2024 was 1,107,368,110.Table of ContentsIntroduction3PART I.Financial InformationItem 1.Financial Statements:5Consolidated Statements of Operations5Consolidated Statements of Comprehensive Income(Loss)6Consolidated Balance Sheets7Consolidated Statements of Changes in Equity8Consolidated Statements of Cash Flows10Notes to Consolidated Financial Statements11Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations27Results of Operations29Liquidity and Capital Resources33Item 3.Quantitative and Qualitative Disclosures about Market Risk35Item 4.Controls and Procedures35PART II.Other InformationItem 1.Legal Proceedings36Item 1A.Risk Factors37Item 2.Unregistered Sales of Equity Securities and Use of Proceeds56Item 5.Other Information57Item 6.Exhibits58Signatures59 2Table of ContentsDefinitions of Commonly Used TermsAs used herein,“we,”“our,”“us,”and similar terms include Micron Technology,Inc.and its consolidated subsidiaries,unless the context indicates otherwise.Abbreviations,terms,or acronyms are commonly usedor found in multiple locations throughout this report and include the following:TermDefinitionTermDefinition2024 Term Loan ASenior Term Loan A due October 2024,repaid January 12,20242041 Notes3.366%Senior Notes due November 20412025 Term Loan ASenior Term Loan A due November 20252051 Notes3.477%Senior Notes due November 20512026 Term Loan ASenior Term Loan A due November 2026CACChinas Cyberspace Administration2027 Term Loan ASenior Term Loan A due November 2027DDRDouble data rate DRAM2026 Notes4.975%Senior Notes due February 2026EBITDAEarnings before interest,taxes,depreciation,and amortization2027 Notes4.185%Senior Notes due February 2027EUVExtreme ultraviolet lithography2028 Notes5.375%Senior Notes due April 2028HBMHigh-bandwidth memory,a stacked DRAM technology optimized formemory-bandwidth intensive applications2029 A Notes5.327%Senior Notes due February 2029LPDRAMLow-power DRAM2029 B Notes6.750%Senior Notes due November 2029MCPMultichip packaged solutions with managed NAND and LPDRAM2030 Notes4.663%Senior Notes due February 2030MicronMicron Technology,Inc.(Parent Company)2031 Notes5.300%Senior Notes due January 2031NRVNet realizable value2032 Green Bonds2.703%Senior Notes due April 2032Revolving Credit Facility$2.5 billion Revolving Credit Facility due May 20262033 A Notes5.875%Senior Notes due February 2033SOFRSecured Overnight Financing Rate2033 B Notes5.875%Senior Notes due September 2033SSDSolid state driveWe are 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,andmanufacturing 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,theinnovations 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 theclient and mobile user experience.Micron,Crucial,any associated logos,and all other Micron trademarks are the property of Micron.Other product names or trademarks that are not owned by Micron are for identification purposes only and may bethe trademarks of their respective owners.3|2024 Q2 10-QTable of ContentsAvailable InformationInvestors and others should note that we announce material financial information about our business and products through a variety of means,including our investor relations website(),filingswith the U.S.Securities and Exchange Commission(“SEC”),press releases,public conference calls,blog posts( webcasts.We use these channels to achieve broad,non-exclusionarydistribution of information to the public and for complying with our disclosure obligations under Regulation FD.Therefore,we encourage investors,the media,and others interested in our company to review theinformation we post on such channels.Forward-Looking StatementsThis Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties.Such forward-looking statements may be identified by words such as anticipate,expect,intend,committed,plan,opportunities,future,believe,target,on track,estimate,continue,likely,may,will,would,should,could,and variations of such words and similarexpressions.However,the absence of these words or similar expressions does not mean that a statement is not forward-looking.Specific forward-looking statements include,but are not limited to,statements suchas those made regarding potential change in our effective tax rate;the timing for construction and ramping of production for new memory manufacturing fabs in the United States;intent to make investments at ourbackend facility in Xian,China;receipt and maintenance of government incentives;the payment of future cash dividends;market conditions and profitability in our industry;the impact of the CyberspaceAdministration of China decision;capital spending in 2024;and the sufficiency of our cash and investments.Our actual results could differ materially from our historical results and those discussed in the forward-looking statements.Factors that could cause actual results to differ materially include,but are not limited to,those identified in“Part II.Other Information Item 1A.Risk Factors.”4Table of ContentsPART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSMicron Technology,Inc.Consolidated Statements of Operations(In millions,except per share amounts)(Unaudited)Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Revenue$5,824$3,693$10,550$7,778 Cost of goods sold4,745 4,899 9,506 8,091 Gross margin1,079(1,206)1,044(313)Research and development832 788 1,677 1,637 Selling,general,and administrative280 231 543 482 Restructure and asset impairments 86 99 Other operating(income)expense,net(224)(8)(239)(19)Operating income(loss)191(2,303)(937)(2,512)Interest income130 119 262 207 Interest expense(144)(89)(276)(140)Other non-operating income(expense),net(7)2(34)(2)170(2,271)(985)(2,447)Income tax(provision)benefit622(54)549(62)Equity in net income(loss)of equity method investees1 13(5)2 Net income(loss)$793$(2,312)$(441)$(2,507)Earnings(loss)per shareBasic$0.72$(2.12)$(0.40)$(2.30)Diluted0.71(2.12)(0.40)(2.30)Number of shares used in per share calculationsBasic1,104 1,091 1,102 1,091 Diluted1,114 1,091 1,102 1,091 See accompanying notes to consolidated financial statements.5|2024 Q2 10-QTable of ContentsMicron Technology,Inc.Consolidated Statements of Comprehensive Income(Loss)(In millions)(Unaudited)Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Net income(loss)$793$(2,312)$(441)$(2,507)Other comprehensive income(loss),net of taxGains(losses)on derivative instruments(11)92 33 200 Pension liability adjustments(3)(1)1 Unrealized gains(losses)on investments9 7 16(12)Foreign currency translation adjustments1 1 (2)Other comprehensive income(loss)(4)100 48 187 Total comprehensive income(loss)$789$(2,212)$(393)$(2,320)See accompanying notes to consolidated financial statements.6Table of ContentsMicron Technology,Inc.Consolidated Balance Sheets(In millions,except par value amounts)(Unaudited)As ofFebruary 29,2024August 31,2023AssetsCash and equivalents$8,016$8,577 Short-term investments990 1,017 Receivables4,296 2,443 Inventories8,443 8,387 Other current assets1,690 820 Total current assets23,435 21,244 Long-term marketable investments627 844 Property,plant,and equipment37,587 37,928 Operating lease right-of-use assets642 666 Intangible assets414 404 Deferred tax assets664 756 Goodwill1,150 1,150 Other noncurrent assets1,199 1,262 Total assets$65,718$64,254 Liabilities and equityAccounts payable and accrued expenses$4,680$3,958 Current debt344 278 Other current liabilities1,235 529 Total current liabilities6,259 4,765 Long-term debt13,378 13,052 Noncurrent operating lease liabilities593 603 Noncurrent unearned government incentives662 727 Other noncurrent liabilities956 987 Total liabilities21,848 20,134 Commitments and contingenciesShareholders equityCommon stock,$0.10 par value,3,000 shares authorized,1,248 shares issued and 1,107 outstanding(1,239 shares issued and 1,098 outstanding as ofAugust 31,2023)125 124 Additional capital11,564 11,036 Retained earnings39,997 40,824 Treasury stock,141 shares held(141 shares as of August 31,2023)(7,552)(7,552)Accumulated other comprehensive income(loss)(264)(312)Total equity43,870 44,120 Total liabilities and equity$65,718$64,254 See accompanying notes to consolidated financial statements.7|2024 Q2 10-QTable of ContentsMicron Technology,Inc.Consolidated Statements of Changes in Equity(In millions,except per share amounts)(Unaudited)Common StockAdditionalCapitalRetainedEarningsTreasury StockAccumulated OtherComprehensive Income(Loss)Total ShareholdersEquityNumber of SharesAmountBalance at August 31,20231,239$124$11,036$40,824$(7,552)$(312)$44,120 Net income(loss)(1,234)(1,234)Other comprehensive income(loss),net 52 52 Stock issued under stock plans8 9 9 Stock-based compensation expense 188 188 Repurchase of stock-withholdings on employee equity awards(2)(16)(105)(121)Dividends and dividend equivalents declared($0.115 per share)(129)(129)Balance at November 30,20231,245$124$11,217$39,356$(7,552)$(260)$42,885 Net income(loss)793 793 Other comprehensive income(loss),net (4)(4)Stock issued under stock plans31 136 137 Stock-based compensation expense 213 213 Repurchase of stock-withholdings on employee equity awards (2)(22)(24)Dividends and dividend equivalents declared($0.115 per share)(130)(130)Balance at February 29,20241,248$125$11,564$39,997$(7,552)$(264)$43,870 See accompanying notes to consolidated financial statements.8Table of ContentsMicron Technology,Inc.Consolidated Statements of Changes in Equity(In millions,except per share amounts)(Unaudited)Common StockAdditionalCapitalRetainedEarningsTreasury StockAccumulated OtherComprehensive Income(Loss)Total ShareholdersEquityNumber of SharesAmountBalance at September 1,20221,226$123$10,197$47,274$(7,127)$(560)$49,907 Net income(loss)(195)(195)Other comprehensive income(loss),net 87 87 Stock issued under stock plans8 7 7 Stock-based compensation expense 146 146 Repurchase of stock-repurchase program (425)(425)Repurchase of stock-withholdings on employee equity awards(2)(15)(80)(95)Dividends and dividend equivalents declared($0.115 per share)(126)(126)Balance at December 1,20221,232$123$10,335$46,873$(7,552)$(473)$49,306 Net income(loss)(2,312)(2,312)Other comprehensive income(loss),net 100 100 Stock issued under stock plans3 142 142 Stock-based compensation expense 157 157 Repurchase of stock-withholdings on employee equity awards (1)(7)(8)Dividends and dividend equivalents declared($0.115 per share)(128)(128)Balance at March 2,20231,235$123$10,633$44,426$(7,552)$(373)$47,257 See accompanying notes to consolidated financial statements.9|2024 Q2 10-QTable of ContentsMicron Technology,Inc.Consolidated Statements of Cash Flows(In millions)(Unaudited)Six months endedFebruary 29,2024March 2,2023Cash flows from operating activitiesNet income(loss)$(441)$(2,507)Adjustments to reconcile net income(loss)to net cash provided by operating activities:Depreciation expense and amortization of intangible assets3,839 3,863 Stock-based compensation401 303 Provision to write-down inventories to net realizable value 1,430 Change in operating assets and liabilities:Receivables(1,759)2,910 Inventories(57)(2,896)Other current assets(799)4 Accounts payable and accrued expenses573(1,144)Other current liabilities706(638)Other157(39)Net cash provided by operating activities2,620 1,286 Cash flows from investing activities Expenditures for property,plant,and equipment(3,180)(4,654)Purchases of available-for-sale securities(465)(293)Proceeds from maturities and sales of available-for-sale securities726 773 Proceeds from government incentives234 64 Other(24)(71)Net cash provided by(used for)investing activities(2,709)(4,181)Cash flows from financing activities Repayments of debt(1,101)(53)Payments of dividends to shareholders(256)(252)Payments on equipment purchase contracts(82)(76)Repurchases of common stock-repurchase program(425)Proceeds from issuance of debt999 5,221 Other(18)19 Net cash provided by(used for)financing activities(458)4,434 Effect of changes in currency exchange rates on cash,cash equivalents,and restricted cash(8)9 Net increase(decrease)in cash,cash equivalents,and restricted cash(555)1,548 Cash,cash equivalents,and restricted cash at beginning of period8,656 8,339 Cash,cash equivalents,and restricted cash at end of period$8,101$9,887 See accompanying notes to consolidated financial statements.10Table of ContentsMicron Technology,Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(All tabular amounts in millions,except per share amounts)(Unaudited)Significant Accounting PoliciesFor a discussion of our significant accounting policies,see“Part II Item 8.Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Significant Accounting Policies”of ourAnnual Report on Form 10-K for the year ended August 31,2023.There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended August 31,2023.Basis of PresentationThe accompanying consolidated financial statements include the accounts of Micron Technology,Inc.and our consolidated subsidiaries and have been prepared in accordance with accounting principles generallyaccepted in the United States of America(“U.S.GAAP”)consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended August 31,2023.In the opinion of our management,the accompanying unaudited consolidated financial statements contain all necessary adjustments,consisting of a normal recurring nature,to fairly state the financial informationset forth herein.Certain reclassifications have been made to prior period amounts to conform to current period presentation.Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.Fiscal years 2024 and 2023 each contain 52 weeks.All period references are to our fiscal periods unless otherwiseindicated.These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year endedAugust 31,2023.Variable Interest EntitiesA number of special purpose entities(the Lease SPEs)were created by a third-party to facilitate equipment lease financing transactions between us and financial institutions that fund the lease financingtransactions(Financing Entities).Neither we nor the Financing Entities have an equity interest in the Lease SPEs.The Lease SPEs are variable interest entities because their equity is not sufficient to permit themto finance their activities without additional support from the Financing Entities and because the third-party equity holder lacks characteristics of a controlling financial interest.By design,the arrangements with theLease SPEs are merely financing vehicles and we do not bear any significant risks from variable interests with the Lease SPEs.We have determined that we do not have the power to direct the activities of theLease SPEs that most significantly impact their economic performance and we do not consolidate the Lease SPEs.As of February 29,2024,we had approximately$370 million of financial lease liabilities and right-of-use assets under these arrangements.11|2024 Q2 10-QTable of ContentsCash and InvestmentsAll of our short-term investments and long-term marketable investments were classified as available-for-sale as of the dates noted below.Cash and equivalents and the fair values of our available-for-saleinvestments,which approximated amortized costs,were as follows:As of February 29,2024As of August 31,2023Cash andEquivalentsShort-termInvestmentsLong-term MarketableInvestmentsTotal FairValueCash andEquivalentsShort-termInvestmentsLong-term MarketableInvestmentsTotal FairValueCash$5,588$5,588$5,771$5,771 Level 1Money market funds1,204 1,204 1,629 1,629 Level 2Certificates of deposit1,220 11 1,231 1,172 25 1,197 Corporate bonds 606 286 892 737 437 1,174 Asset-backed securities 17 330 347 15 387 402 Commercial paper3 183 186 109 109 Government securities1 173 11 185 5 131 20 156 8,016$990$627$9,633 8,577$1,017$844$10,438 Restricted cash85 79 Cash,cash equivalents,and restrictedcash$8,101$8,656 The maturities of long-term marketable investments primarily range from one to five years,except for asset-backed securities which are not due at a single maturity date.The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.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 arecorroborated 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 fromthese pricing services.No adjustments were made to the fair values indicated by such pricing information as of February 29,2024 or August 31,2023.Restricted cash is included in other current assets and other noncurrent assets and primarily relates to certain government incentives received prior to being earned and for which restrictions lapse uponachieving certain performance conditions or which will be returned if performance conditions are not met.Gross realized gains and losses from sales of available-for-sale securities were not significant for any period presented.Non-marketable Equity InvestmentsIn addition to the amounts included in the table above,we had$189 million and$218 million of non-marketable equity investments without a readily determinable fair value that were included in other noncurrentassets as of February 29,2024 and August 31,2023,respectively.We recognized a loss in other non-operating income(expense)on our non-marketable investments of$31 million for the first quarter of 2024.Theamounts recognized for the other periods presented were not significant.Our non-marketable equity investments are recorded at fair value on a non-recurring basis and classified as Level 3.(1)(1)(2)(3)(4)(1)(2)(3)(4)12Table of ContentsReceivablesAs ofFebruary 29,2024August 31,2023Trade receivables$3,648$2,048 Income and other taxes188 194 Other460 201$4,296$2,443 InventoriesAs ofFebruary 29,2024August 31,2023Finished goods$1,132$1,616 Work in process6,622 6,111 Raw materials and supplies689 660$8,443$8,387 Property,Plant,and EquipmentAs ofFebruary 29,2024August 31,2023Land$283$283 Buildings18,963 17,967 Equipment67,273 65,555 Construction in progress2,636 2,464 Software1,393 1,316 90,548 87,585 Accumulated depreciation(52,961)(49,657)$37,587$37,928 Includes costs related to equipment not placed into service of$2.27 billion as of February 29,2024 and$2.91 billion as of August 31,2023.Includes building-related construction,tool installation,and software costs for assets not placed into service.Intangible AssetsAs of February 29,2024As of August 31,2023Gross AmountAccumulated AmortizationNet CarryingAmountGross AmountAccumulated AmortizationNet CarryingAmountProduct and process technology$646$(243)$403$613$(209)$404 Other11 11$657$(243)$414$613$(209)$404 In the first six months of 2024 and 2023,we capitalized$40 million and$51 million,respectively,for product and process technology with weighted-average useful lives of 9 years and 10 years,respectively.Amortization expense was$41 million and$45 million for the first six months of 2024 and 2023,respectively.Expected amortization expense is$44 million for the remainder of 2024,$57 million for 2025,$51million for 2026,$47 million for 2027,and$45 million for 2028.(1)(2)(1)(2)13|2024 Q2 10-QTable of ContentsLeasesThe components of lease cost are presented below:Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Finance lease costAmortization of right-of-use asset$37$25$69$49 Interest on lease liability24 6 30 12 Operating lease cost35 31 68 67$96$62$167$128 Operating lease cost includes short-term and variable lease expenses,which were not material for the periods presented.Supplemental cash flow information related to leases was as follows:Six months endedFebruary 29,2024March 2,2023Cash flows used for operating activitiesFinance leases$25$11 Operating leases66 60 Cash flows used for financing activities Finance leases60 53 Noncash acquisitions of right-of-use assetsFinance leases483 225 Operating leases12 35 Supplemental balance sheet information related to leases was as follows:As ofFebruary 29,2024August 31,2023Finance lease right-of-use assets(included in property,plant,and equipment)$1,725$1,311 Current operating lease liabilities(included in accounts payable and accrued expenses)65 66 Weighted-average remaining lease term(in years)Finance leases119Operating leases1111Weighted-average discount rateFinance leases4.48%3.86%Operating leases3.27%3.21%(1)(1)14Table of ContentsAs of February 29,2024,maturities of lease liabilities by fiscal year were as follows:For the year endingFinance LeasesOperating LeasesRemainder of 2024$152$31 2025299 83 2026285 80 2027277 77 2028267 74 2029 and thereafter721 452 Less imputed interest(297)(139)$1,704$658 The table above excludes obligations for leases that have been executed but have not yet commenced.As of February 29,2024,excluded obligations consisted of$670 million of finance lease obligations over aweighted-average period of 14 years for gas supply arrangements deemed to contain embedded leases and equipment leases.We will recognize right-of-use assets and associated lease liabilities at the time suchassets become available for our use.Accounts Payable and Accrued ExpensesAs ofFebruary 29,2024August 31,2023Accounts payable$1,913$1,725 Property,plant,and equipment1,528 1,419 Salaries,wages,and benefits637 367 Income and other taxes188 67 Other414 380$4,680$3,958 15|2024 Q2 10-QTable of ContentsDebt As of February 29,2024As of August 31,2023Net Carrying AmountNet Carrying AmountStated RateEffective RateCurrentLong-TermTotalCurrentLong-TermTotal2025 Term Loan A6.676%6.81%$649$649$1,050$1,050 2026 Term Loan A6.801%6.94I 896 945 49 921 970 2027 Term Loan A6.926%7.06W 1,035 1,092 57 1,063 1,120 2026 Notes4.975%5.07I9 499 499 499 2027 Notes4.185%4.272 812 798 798 2028 Notes5.375%5.52Y7 597 596 596 2029 A Notes5.327%5.40i8 698 697 697 2029 B Notes6.750%6.54%1,262 1,262 1,263 1,263 2030 Notes4.663%4.737 847 846 846 2031 Notes5.300%5.413 993 2032 Green Bonds2.703%2.775 995 995 995 2033 A Notes5.875%5.96t5 745 745 745 2033 B Notes5.875%6.011 891 890 890 2041 Notes3.366%3.41I7 497 497 497 2051 Notes3.477%3.52I6 496 496 496 2024 Term Loan AN/AN/A 587 587 Finance lease obligationsN/A4.48#8 1,466 1,704 172 1,109 1,281$344$13,378$13,722$278$13,052$13,330 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 interestpaid 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,and as a result,the carrying values of our 2027 Notes reflectadjustments in fair value.Debt ActivityThe table below presents the effects of debt financing and prepayment activities in the first six months of 2024:Transaction DateIncrease(Decrease)inPrincipalIncrease(Decrease)inCarrying ValueIncrease(Decrease)inCashIssuance2031 NotesJanuary 12,2024$1,000$993$993 Prepayments2024 Term Loan AJanuary 12,2024(588)(587)(588)2025 Term Loan AJanuary 12,2024(402)(401)(402)$10$5$3 2031 NotesOn January 12,2024,we issued$1.00 billion principal amount of senior unsecured 2031 Notes in a public offering.The 2031 Notes bear interest at a rate of 5.300%per year and will mature on January 15,2031.Issuance costs and debt discount for the 2031 Notes were$7 million.(1)(1)16Table of ContentsWe may redeem the 2031 Notes,in whole or in part,at our option prior to their maturity dates at a redemption price equal to the greater of(i)100%of the principal amount of the notes to be redeemed and(ii)thepresent value of the remaining scheduled payments of principal and interest,plus accrued interest in each case.We may also redeem the 2031 Notes,in whole or in part,at a price equal to par two months prior tomaturity in accordance with the terms of the 2031 Notes.The 2031 Notes contain covenants that,among other things,limit,in certain circumstances,our ability and/or the ability of our restricted subsidiaries(which are generally domestic subsidiaries in which we own atleast 80%of the voting stock and which own principal property,as defined in the indenture governing the 2031 Notes)to(1)create or incur certain liens;(2)enter into certain sale and lease-back transactions;and(3)consolidate with or merge with or into,or convey,transfer,or lease all or substantially all of our properties and assets,to another entity.These covenants are subject to a number of limitations and exceptions.Additionally,if a change of control triggering event occurs,as defined in the indenture governing the 2031 Notes,we will be required to offer to purchase the 2031 Notes at 101%of the outstanding aggregateprincipal amount plus accrued interest up to the purchase date.Revolving Credit FacilityAs of February 29,2024,no amounts were outstanding under the Revolving Credit Facility and$2.50 billion was available to us.Under the Revolving Credit Facility,borrowings would generally bear interest at arate equal to adjusted term SOFR plus 1.00%to 1.75%,depending on our corporate credit ratings.Adjusted term SOFR for the Revolving Credit Facility agreement is the SOFR benchmark plus a credit spreadadjustment ranging from approximately 0.11%to 0.43pending on the applicable interest period selected.Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amountsborrowed may be prepaid without penalty.The Revolving Credit Facility requires us to maintain,on a consolidated basis,a leverage ratio of total indebtedness to adjusted EBITDA,as defined in the Revolving Credit Facility and calculated as of the last dayof each fiscal quarter,not to exceed 3.25 to 1.00.On March 27,2023,we amended the Revolving Credit Facility to provide that in lieu of the foregoing leverage ratio,during the fourth quarter of 2023 and eachquarter of 2024,we will be required to maintain,on a consolidated basis,a net leverage ratio of total net indebtedness to adjusted EBITDA,as defined in the Revolving Credit Facility and calculated as of the lastday of each fiscal quarter,not to exceed 3.25 to 1.00.Alternatively,for up to three of such five quarters,we may elect to comply with a requirement of minimum liquidity,as defined in the Revolving Credit Facility,ofnot less than$5.0 billion.Through the second quarter of 2024,we complied with the net leverage ratio requirement.Each of the leverage ratio and net leverage ratio maximums,as applicable,is subject to atemporary four quarter increase in such ratio to 3.75 to 1.00 following certain material acquisitions.Maturities of Notes PayableAs of February 29,2024,maturities of notes payable by fiscal year were as follows:Remainder of 2024$54 2025107 20261,257 20271,780 20281,493 2029 and thereafter7,450 Unamortized issuance costs,discounts,and premium,net(37)Hedge accounting fair value adjustment(86)$12,018 17|2024 Q2 10-QTable of ContentsContingenciesWe 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 ofoperations,or financial condition.Patent MattersAs 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 intellectualproperty rights.A description of certain claims is below.On March 19,2018,Micron Semiconductor(Xian)Co.,Ltd.(“MXA”)was served with a patent infringement complaint filed by Fujian Jinhua Integrated Circuit Co.,Ltd.(“Jinhua”)in the Fuzhou Intermediate PeoplesCourt 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 alleged that MXA and MSS infringedone Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules.The complaint sought an order requiring MXA and MSS to destroy inventory of the accused products and equipment formanufacturing 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.OnDecember 4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua filed an application to the Fuzhou Court to withdraw its complaints against MXA and MSS.On March 21,2018,MXA was served with a patent infringement complaint filed by United Microelectronics Corporation(“UMC”)in the Fuzhou Court.On April 3,2018,MSS was served with the same complaint.The complaint alleges that MXA and MSS infringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules.The complaint seeks an order requiring MXA and MSS to destroyinventory 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 of90 million Chinese yuan plus court fees incurred.On November 26,2021,pursuant to a settlement agreement between UMC and Micron,UMC filed an application to the Fuzhou Court to withdraw its complaintsagainst MXA and MSS.On April 3,2018,MSS was served with another patent infringement complaint filed by Jinhua and an additional complaint filed by UMC in the Fuzhou Court.The additional complaints alleged that MSS infringedtwo Chinese patents by manufacturing and selling certain Crucial MX300 SSDs.The complaint filed by UMC sought an order requiring MSS to destroy inventory of the accused products and equipment formanufacturing 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 sought 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,andoffering for sale the accused products in China;and to pay damages of 98 million Chinese yuan plus court fees incurred.On November 26,2021,pursuant to a settlement agreement between UMC and Micron,UMC filed an application to the Fuzhou Court to withdraw its complaint against MSS.On December 4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua filed an application to theFuzhou Court to withdraw its complaint against MSS.On July 5,2018,MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing,selling,or importing certain Crucial and Ballistix-branded DRAM modules and solid-state drives in China.On December 4,2023,Micron and Jinhua entered a settlement agreement under which Jinhua filed an application to the Fuzhou Court to withdraw theinjunction.18Table of ContentsOn April 28,2021,Netlist,Inc.(“Netlist”)filed two patent infringement actions against Micron,Micron Semiconductor Products,Inc.(“MSP”),and Micron Technology Texas,LLC(“MTEC”)in the U.S.District Courtfor the Western District of Texas.The first complaint alleges that one U.S.patent is infringed by certain of our non-volatile dual in-line memory modules.The second complaint alleges that three U.S.patents areinfringed by certain of our load-reduced dual in-line memory modules(“LRDIMMs”).Each complaint seeks injunctive relief,damages,attorneys fees,and costs.On March 31,2022,Netlist filed a patentinfringement complaint against Micron and Micron Semiconductor Germany,GmbH in Dusseldorf Regional Court alleging that two German patents are infringed by certain of our LRDIMMs.The complaint seeksdamages,costs,and injunctive relief.On June 10,2022,Netlist filed a patent infringement complaint against Micron,MSP,and MTEC in the U.S.District Court for the Eastern District of Texas(“E.D.Tex.”)allegingthat six U.S.patents are infringed by certain of our memory modules and HBM products.On August 1,2022,Netlist filed a second patent infringement complaint against the same defendants in E.D.Tex.allegingthat one U.S.patent is infringed by certain of our LRDIMMs.On August 15,2022,Netlist amended the second complaint to assert that two additional U.S.patents are infringed by certain of our LRDIMMs.Thecomplaints in E.D.Tex.seek injunctive relief,damages,and attorneys fees.On August 16,2022,Sonrai Memory Ltd.filed a patent infringement complaint against Micron in the U.S.District Court for the Western District of Texas.The complaint alleges that two U.S.patents are infringed bycertain SSD and NAND flash products.The complaint seeks damages,attorneys fees,and costs.On January 23,2023,Besang Inc.filed a patent infringement complaint against Micron in the U.S.District Court for the Eastern District of Texas.The complaint alleges that one U.S.patent is infringed by certain ofour 3D NAND and SSD products.The complaint seeks an injunction,damages,attorneys fees,and costs.On November 9,2023,Yangtze Memory Technologies Company,Ltd.(“YMTC”)filed a patent infringement complaint against Micron and one of its subsidiaries in the U.S.District Court for the Northern District ofCalifornia.The complaint alleges that eight U.S.patents are infringed by certain of our 3D NAND products.The complaint seeks an injunction,damages,attorneys fees,and costs.On January 22,2024,MicronSemiconductor(Shanghai)Co.,Ltd.(“MSS”)was served with three patent infringement complaints filed by YMTC in Beijing Intellectual Property Court and on February 27,2024,Micron Technology,Inc.(“MTI”)was served with the same complaints.The complaints assert that MTI and MSS infringed three Chinese patents owned by YMTC by importing,selling,offering for sale,and assisting others to sell certain 3D NANDproducts and SSDs in China.The complaint seeks an injunction,damages,attorneys fees,and costs.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.Antitrust MattersSix cases were filed against Micron alleging price fixing of DRAM products in the following Canadian courts on the dates indicated:Superior Court of Quebec(April 30,2018 and May 3,2018),the Federal Court ofCanada(May 2,2018),the Ontario Superior Court of Justice(May 15,2018),and the Supreme Court of British Columbia(May 10,2018).The plaintiffs in these cases are individuals seeking certification of classactions on behalf of direct and indirect purchasers of DRAM in Canada(or regions of Canada)between June 1,2016 and February 1,2018.Certification of class action status was denied in two of the cases.All sixcases are now either inactive or have been dismissed.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.OnMay 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.19|2024 Q2 10-QTable of ContentsOther MattersIn 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 futurepayments 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 thesetypes of agreements have not had a material adverse effect on our business,results of operations,or financial condition.Contingency AssessmentWe are unable to predict the outcome of any of the matters noted above and cannot make a reasonable estimate of the potential loss or range of possible losses.A determination that our products or manufacturingprocesses 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 ourproducts 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,orfinancial condition.EquityCommon Stock RepurchasesIn May 2018,our Board of Directors 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 conditionsand our ongoing determination of the best use of available cash.No shares were repurchased in the first six months of 2024.Through February 29,2024,we had repurchased an aggregate of$6.89 billion underthe authorization.Amounts repurchased are included in treasury stock.DividendsWe paid dividends of$127 million($0.115 per share)and$129 million($0.115 per share)in the second and first quarters of 2024,respectively.On March 20,2024,our Board of Directors declared a quarterlydividend of$0.115 per share,payable in cash on April 16,2024,to shareholders of record as of the close of business on April 1,2024.Accumulated Other Comprehensive Income(Loss)Changes in accumulated other comprehensive income(loss)by component for the six months ended February 29,2024 were as follows:Gains(Losses)onDerivative InstrumentsUnrealized Gains(Losses)onInvestmentsPension LiabilityAdjustmentsCumulative ForeignCurrency TranslationAdjustmentTotalAs of August 31,2023$(304)$(41)$36$(3)$(312)Other comprehensive income(loss)before reclassifications(50)16 (34)Amount reclassified out of accumulated other comprehensive income(loss)100 (2)98 Tax effects(17)1 (16)Other comprehensive income(loss)33 16(1)48 As of February 29,2024$(271)$(25)$35$(3)$(264)20Table of ContentsFair Value MeasurementsThe estimated fair values and carrying values of our outstanding debt instruments were as follows:As of February 29,2024As of August 31,2023Fair ValueCarrying ValueFair ValueCarrying ValueNotes$11,733$12,018$11,549$12,049 The fair values of our debt instruments were estimated based on Level 2 inputs,including the trading price of our notes when available,discounted cash flows,and interest rates based on similar debt issued byparties with credit ratings similar to ours.Derivative InstrumentsNotional or ContractualAmountFair Value ofAssetsLiabilitiesAs of February 29,2024Derivative instruments with hedge accounting designationCash flow currency hedges$4,028$8$(173)Cash flow commodity hedges393 25(1)Fair value interest rate hedges900 (86)Derivative instruments without hedge accounting designationNon-designated currency hedges2,061 3(15)$36$(275)As of August 31,2023Derivative instruments with hedge accounting designationCash flow currency hedges$3,873$16$(180)Cash flow commodity hedges331 45 Fair value interest rate hedges900 (100)Derivative instruments without hedge accounting designationNon-designated currency hedges1,839 2(17)$63$(297)Included in receivables and other noncurrent assets.Included in accounts payable and accrued expenses and other noncurrent liabilities.Derivative Instruments with Hedge Accounting DesignationCash Flow Hedges:We utilize forward and swap contracts that generally mature within two years designated as cash flow hedges to minimize our exposure to changes in currency exchange rates or commodityprices for certain capital expenditures and manufacturing costs.Forward and swap contracts are measured at fair value based on market-based observable inputs including market spot and forward rates,interestrates,and credit-risk spreads(Level 2).We recognized gains from cash flow hedges of$75 million and$128 million for the second quarter and first six months of 2023,respectively,in accumulated othercomprehensive income(loss).The amounts recognized for the second quarter and first six months of 2024 were not significant.(1)(2)(1)(2)21|2024 Q2 10-QTable of ContentsFor forward points excluded from our effectiveness testing,we recognized losses of$34 million and$70 million for the second quarter and first six months of 2024,respectively,in cost of goods sold.The amountsrecognized for the second quarter and first six months of 2023 were not significant.We reclassified losses of$56 million and$100 million for the second quarter and first six months of 2024,respectively,and losses of$54 million and$122 million for the second quarter and first six months of 2023,respectively,from accumulated other comprehensive income(loss)to earnings,primarily to cost of goods sold.As of February 29,2024,we expect to reclassify$126 million of pre-tax losses related to cash flowhedges from accumulated other comprehensive income(loss)into earnings in the next 12 months.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 inbenchmark 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 ofderivatives 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 valuehedge 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 toearnings 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,recognizedin interest expense,were not significant for the periods presented.Derivative Instruments without Hedge Accounting DesignationCurrency 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 incurrency 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 outstandingforward 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 gainsand 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 othernon-operating income(expense),net.The amounts recognized for derivative instruments without hedge accounting designation were not significant for the periods presented.We do not use derivative instrumentsfor speculative purposes.Equity PlansAs of February 29,2024,72 million shares of our common stock were available for future awards under our equity plans,including 12 million shares approved for issuance under our employee stock purchase plan(“ESPP”).Restricted Stock and Restricted Stock Units(“Restricted Stock Awards”)Restricted Stock Awards activity is summarized as follows:Six months endedFebruary 29,2024March 2,2023Restricted stock award shares granted1214Weighted-average grant-date fair value per share$67.78$54.00 Employee Stock Purchase Plan(“ESPP”)For each six-month ESPP offering period that ended in the second quarter of 2024 and 2023,employees purchased 2 million and 3 million shares,respectively,at a share price of$60.68 and$52.45,respectively.22Table of ContentsStock-based Compensation ExpenseStock-based compensation expense recognized in our statements of operations is presented below.Stock-based compensation expense of$98 million and$88 million was capitalized and remained in inventory asof February 29,2024 and August 31,2023,respectively.Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Stock-based compensation expense by captionCost of goods sold$80$40$147$76 Research and development77 59 145 112 Selling,general,and administrative52 36 99 73 Restructure(2)(2)$209$133$391$259 Stock-based compensation expense by type of awardRestricted stock awards$191$116$354$225 ESPP18 17 37 34$209$133$391$259 As of February 29,2024,$1.69 billion of total unrecognized compensation costs for unvested awards,before the effect of any future forfeitures,was expected to be recognized through the second quarter of 2028,resulting in a weighted-average period of 1.3 years.Revenue and Customer Contract LiabilitiesRevenue 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 thosegoods.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 termsthat include performance obligations that extend beyond one year.As of February 29,2024,our future performance obligations beyond one year were not significant.Revenue by TechnologyQuarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023DRAM$4,158$2,722$7,585$5,551 NAND1,567 885 2,797 1,988 Other(primarily NOR)99 86 168 239$5,824$3,693$10,550$7,778 See“Segment and Other Information”for disclosure of disaggregated revenue by market segment.23|2024 Q2 10-QTable of ContentsCustomer Contract LiabilitiesContract liabilities from customer prepayments made to secure product supply in future periods were approximately$600 million as of February 29,2024 and were reported within other current liabilities.As of February 29,2024 and August 31,2023,other current liabilities also included$562 million and$453 million,respectively,for estimates of consideration payable to customers including estimates for pricingadjustments and returns.Restructure and Asset ImpairmentsQuarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Employee severance$80$93 Asset impairments and other asset-related costs 8 8 Other(2)(2)$86$99 In 2023,we initiated a restructure plan in response to challenging industry conditions(the“2023 Restructure Plan”).Under the 2023 Restructure Plan,we reduced our headcount by approximately 15%by the endof calendar 2023,through a combination of voluntary attrition and personnel reductions.The plan was substantially completed in 2023.Other Operating(Income)Expense,NetQuarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Patent cross-license agreement gain$(200)$(200)$(Gain)loss on disposition of property,plant,and equipment(9)(9)(25)(22)Other(15)1(14)3$(224)$(8)$(239)$(19)Income TaxesOur income tax(provision)benefit consisted of the following:Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Income(loss)before taxes$170$(2,271)$(985)$(2,447)Income tax(provision)benefit622(54)549(62)Effective tax rate(365.9)%(2.4)U.7%(2.5)$Table of ContentsIn the first quarter of 2024,our tax expense was based on actual results for jurisdictions where small changes in our projected pre-tax income would have caused significant changes in the estimated annualeffective tax rate.With our improved fiscal 2024 outlook,we can now estimate a more reliable annual effective tax rate and have reverted to a global annual effective tax rate method for all jurisdictions.Applyingthis updated rate to our year-to-date earnings resulted in the tax benefit of$622 million recognized in the second quarter of 2024.The change in our effective tax rate for the second quarter of 2024 as compared to the first quarter of 2024 was primarily due to the use of the estimated annual effective tax rate for the quarter.The change in oureffective tax rate for the first six months of 2024 as compared to the first six months of 2023 was primarily due to changes in levels of profitability and the geographic mix of earnings.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 andare conditional,in part,upon meeting certain business operations and employment thresholds.As a result of the low level of profitability and the geographic mix of income,the benefit from tax incentivearrangements was not material for the periods presented.As of February 29,2024,other current assets included$882 million related to income taxes.Earnings Per ShareQuarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023Net income(loss)Basic and Diluted$793$(2,312)$(441)$(2,507)Weighted-average common shares outstanding Basic1,104 1,091 1,102 1,091 Dilutive effect of equity plans10 Weighted-average common shares outstanding Diluted1,114 1,091 1,102 1,091 Earnings(loss)per shareBasic$0.72$(2.12)$(0.40)$(2.30)Diluted0.71(2.12)(0.40)(2.30)Antidilutive potential common shares excluded from the computation of diluted earnings per share,that could dilute basic earnings per share in the future,were 4 million and 33 million for the second quarter andfirst six months of 2024,respectively,and were 33 million and 34 million for the second quarter and first six months of 2023,respectively.Segment and Other InformationSegment 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 and solutions sold into the client,cloud server,enterprise,graphics,and networking markets.Mobile Business Unit(“MBU”):Includes memory and storage products sold into the smartphone and other mobile-device markets.Embedded Business Unit(“EBU”):Includes memory and storage products and solutions sold into the automotive,industrial,and consumer markets.Storage Business Unit(“SBU”):Includes SSDs and component-level solutions sold into the enterprise and cloud,client,and consumer storage markets.25|2024 Q2 10-QTable of ContentsCertain 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 ontheir 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 gainsand losses from equity method investments,interest,other non-operating income or expense items,or taxes to segments.Quarter endedSix months endedFebruary 29,2024March 2,2023February 29,2024March 2,2023RevenueCNBU$2,185$1,375$3,922$3,121 MBU1,598 945 2,891 1,600 EBU1,111 865 2,148 1,865 SBU905 507 1,558 1,187 All Other25 1 31 5$5,824$3,693$10,550$7,778 Operating income(loss)CNBU$28$(35)$(369)$155 MBU(9)(344)(696)(539)EBU(1)88 9 282 SBU(217)(357)(707)(614)All Other21 1 25 4(178)(647)(1,738)(712)UnallocatedLower costs from sale of inventory written down in prior periods382 987 Patent cross-license agreement gain200 200 Stock-based compensation(209)(136)(391)(262)Restructure and asset impairments(86)(99)Provision to write-down inventories to net realizable value(1,430)(1,430)Other(4)(4)5(9)369(1,656)801(1,800)Operating income(loss)$191$(2,303)$(937)$(2,512)Certain ConcentrationsRevenue by end market as an approximate percent of total revenue is presented in the table below:Six months endedFebruary 29,2024March 2,2023Mobile25 %Automotive,industrial,and consumer20%Client and graphics20 %Enterprise and cloud server15 %SSDs and other storage15%Revenue from one customer,which is a distributor,was 11%of total revenue for the first six months of 2024.No customer accounted for 10%or more of total revenue for the first six months of 2023.26Table of ContentsITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThis discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended August 31,2023.All periodreferences are to our fiscal periods unless otherwise indicated.Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.Fiscal 2024 and 2023 each contain 52 weeks.All tabulardollar amounts are in millions,except per share amounts.OverviewWe are 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,andmanufacturing 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,theinnovations 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 theclient and mobile user experience.We manufacture our products at wholly-owned facilities and also utilize subcontractors for certain manufacturing processes.Our global network of manufacturing centers of excellence not only allows us to benefitfrom scale while streamlining processes and operations,but it also brings together some of the worlds brightest talent to work on the most advanced memory technology.Centers of excellence bring expertisetogether in one location,providing an efficient support structure for end-to-end manufacturing,with quicker cycle times,in partnership with teams such as research and development(“R&D”),product development,human resources,procurement,and supply chain.For our locations in Singapore and Taiwan,this is also a combination of bringing fabrication and back-end manufacturing together.We make significantinvestments to develop proprietary product and process technology,which generally increases bit density per wafer and reduces per-bit manufacturing costs of each generation of product.We continue to introducenew generations of products that offer improved performance characteristics,including higher data transfer rates,advanced packaging solutions,lower power consumption,improved read/write reliability,andincreased memory density.We face intense competition in the semiconductor memory and storage markets.To remain competitive we must continuously develop and implement new products and technologies and decrease manufacturingcosts in spite of ongoing inflationary cost pressures.Our success is largely dependent on obtaining returns on our R&D investments,efficient utilization of our manufacturing infrastructure,development andintegration of advanced product and process technologies,market acceptance of our diversified portfolio of semiconductor-based memory and storage solutions,and efficient capital spending.Product TechnologiesOur product portfolio of memory and storage solutions,advanced solutions,and storage platforms is based on our high-performance semiconductor memory and storage technologies,including DRAM,NAND,andNOR.We sell our products into various markets through our business units in numerous forms,including components,modules,SSDs,managed NAND,MCPs,HBM,and wafers.Our system-level solutions,including SSDs and managed NAND,combine NAND,a controller,firmware,and in some cases DRAM.DRAM:DRAM products are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval with a variety of performance characteristics.DRAM products losecontent when power is turned off(“volatile”)and are most commonly used in client,cloud server,enterprise,networking,graphics,industrial,and automotive markets.LPDRAM products,which are engineered tomeet standards for performance and power consumption,are sold into smartphone and other mobile-device markets(including client markets for Chromebooks,notebook PCs,and gaming consoles),as well asinto the automotive,industrial,consumer,and datacenter markets.HBM is a stacked DRAM technology optimized for memory-bandwidth intensive applications.27|2024 Q2 10-QTable of ContentsNAND:NAND products are non-volatile,re-writeable semiconductor storage devices that provide high-capacity,low-cost storage with a variety of performance characteristics.NAND is used in SSDs for theenterprise and cloud,client,consumer,and automotive markets and in removable storage markets.Managed NAND is used in smartphones and other mobile devices,and in consumer,automotive,and embeddedmarkets.Low-density NAND is ideal for applications like automotive,surveillance,machine-to-machine,automation,printer,and home networking.NOR:NOR products are non-volatile,re-writable semiconductor memory devices that provide fast read speeds.NOR is most commonly used for reliable code storage(e.g.,boot,application,operating system,andexecute-in-place code in an embedded system)and for frequently changing small data storage and is ideal for automotive,industrial,and consumer applications.Industry ConditionsThe memory and storage industry environment deteriorated sharply in the fourth quarter of 2022 and through 2023 due to weak demand in many end markets combined with global and macroeconomic challengesand lower demand resulting from customer actions to reduce inventory levels.This led to significant reductions in average selling prices for both DRAM and NAND and reductions in bit shipments for DRAM,resulting in declines in revenue across all our business segments and nearly all our end markets.For the first six months of 2024,increasing demand growth,driven in part by deployment of artificial intelligence andmostly normal customer inventories,combined with industry-wide supply discipline,resulted in an improved industry supply and demand balance.As a result,we have experienced improvements in pricing andmargins in 2024.We reduced capital expenditures and wafer starts for both DRAM and NAND in response to challenging market conditions that began in the latter part of 2022 and increased levels of our inventories.In the firstquarter of 2024,we recognized$165 million of period costs due to wafer start reductions.In the second quarter of 2024,fabrication facility underutilization was reduced and principally related to legacymanufacturing capacity,accordingly period costs were not significant.In addition,to improve capital efficiency,we have redeployed equipment from older technology nodes to support conversions to leading-edgenodes,which has resulted in a meaningful reduction in DRAM and NAND wafer capacity.Impact of China Cyberspace Administration DecisionOn March 31,2023,Chinas Cyberspace Administration(the“CAC”)notified us that it was conducting a cybersecurity review of our products sold in China.On May 21,2023,we received notice that the CAC hadconcluded its review and decided that our products presented a cybersecurity risk.As such,the CAC determined that critical information infrastructure operators in China may not purchase Micron products.TheCAC decision has impacted our business,particularly in the domestic data center and networking markets in China,and we have been working to mitigate that impact.Our goal is to retain our worldwide DRAM andNAND market share.28Table of ContentsResults of OperationsConsolidated ResultsSecond QuarterFirst QuarterSecond QuarterSix months ended20242024202320242023Revenue$5,824 100%$4,726 100%$3,693 100%$10,550 100%$7,778 100%Cost of goods sold4,745 81%4,761 101%4,899 133%9,506 90%8,091 104%Gross margin1,079 19%(35)(1)%(1,206)(33)%1,044 10%(313)(4)%Research and development832 145 18x8 21%1,677 16%1,637 21%Selling,general,and administrative280 5&3 6#1 6T3 5H2 6%Restructure and asset impairments 2 1%Other operating(income)expense,net(224)(4)%(15)%(8)%(239)(2)%(19)%Operating income(loss)191 3%(1,128)(24)%(2,303)(62)%(937)(9)%(2,512)(32)%Interest income(expense),net(14)0 1%(14)g 1%Other non-operating income(expense),net(7)%(27)(1)%2%(34)%(2)%Income tax(provision)benefit622 11%(73)(2)%(54)(1)T9 5%(62)(1)%Equity in net income(loss)of equity methodinvestees1%(6)%(5)%2%Net income(loss)$793 14%$(1,234)(26)%$(2,312)(63)%$(441)(4)%$(2,507)(32)%Total Revenue:Total revenue for the second quarter and first six months of 2024 was impacted by the factors described in the section titled“Industry Conditions”above.These conditions drove significant quarterlydeclines in average selling prices throughout 2023 and a subsequent recovery of average selling prices in the first two quarters of 2024.Total revenue for the second quarter of 2024 increased 23%as compared to the first quarter of 2024 due to increases in sales of both DRAM and NAND products.Sales of DRAM products in the second quarter of 2024 increased 21%as compared to the first quarter of 2024 primarily due to increases in average selling prices in the high-teens percentage range and alow-single-digit percent range increase in bit shipments.Sales of NAND products in the second quarter of 2024 increased 27%as compared to the first quarter of 2024 primarily due to a low-30%range increase in average selling prices,partially offset by a low-single-digit percent range decrease in bit shipments.Total revenue for the second quarter of 2024 increased 58%as compared to the second quarter of 2023 due to increases in sales of both DRAM and NAND products.Sales of DRAM products in the second quarter of 2024 increased 53%as compared to the second quarter of 2023 primarily due to a high-50%range increase in bit shipments.Sales of NAND products in the second quarter of 2024 increased 77%as compared to the second quarter of 2023 primarily due to a low-60%range increase in bit shipments and an approximate 10%increase in average selling prices.29|2024 Q2 10-QTable of ContentsTotal revenue for the first six months of 2024 increased 36%as compared to the first six months of 2023 due to increases in both DRAM and NAND sales.Sales of DRAM products in the first six months of 2024 increased 37%as compared to the first six months of 2023 primarily due to a high-60%range increase in bit shipments,partially offset by a high-teens percentage range decline in average selling prices.Sales of NAND products in the first six months of 2024 increased 41%as compared to the first six months of 2023 primarily due to a high-60%range increase in bit shipments,partially offset by a high-teens percentage range decline in average selling prices.Consolidated Gross Margin:Our consolidated gross margin has been impacted by the factors described in the section titled“Industry Conditions”above.Our consolidated gross margin percentage improved to19%for the second quarter of 2024 from negative 1%for the first quarter of 2024,as a result of improvements in margins for both DRAM and NAND products,primarily due to increases in average selling pricesand manufacturing cost reductions.Our consolidated gross margin percentage improved to 19%for the second quarter of 2024 from negative 33%for the second quarter of 2023 primarily due to increases inaverage selling prices for NAND,the effects of charges to write down inventories to their net realizable value(“NRV”)in 2023,and the sale of previously written down inventories(see“Inventory NRV write-downs”below).Our consolidated gross margin percentage improved to 10%for the first six months of 2024 from negative 4%for the first six months of 2023 primarily due to cost reductions resulting from the effects ofNRV write-downs as presented in the table below,partially offset by declines in average selling prices for both DRAM and NAND.Inventory NRV write-downs:Our consolidated gross margin was impacted by charges in the second and third quarters of 2023 to write inventories down to their estimated NRV as a result of declines in averageselling prices for both DRAM and NAND.As charges to write down inventories are recorded in advance of when inventories are sold,costs of goods sold in subsequent periods are lower than they otherwise wouldbe.The impact of inventory NRV write-downs for each period reflects(1)inventory write-downs in that period,offset by(2)lower costs in that period on the sale of inventory written down in prior periods.Theimpacts of inventory NRV write-downs are summarized below:Second QuarterFirst QuarterSecond QuarterSix months ended20242024202320242023Provision to write down inventory to NRV$(1,430)$(1,430)Lower costs from sale of inventory written down in prior periods382 605 987$382$605$(1,430)$987$(1,430)Revenue by Business UnitSecond QuarterFirst QuarterSecond QuarterSix months ended20242024202320242023CNBU$2,185 38%$1,737 37%$1,375 37%$3,922 37%$3,121 40%MBU1,598 27%1,293 275 26%2,891 27%1,600 21U1,111 19%1,037 225 23%2,148 20%1,865 24%SBU905 16e3 14P7 14%1,558 15%1,187 15%All Other25%6%11%5%$5,824$4,726$3,693$10,550$7,778 Percentages of total revenue may not total 100%due to rounding.30Table of ContentsChanges in revenue for each business unit for the second quarter of 2024 as compared to the first quarter of 2024 were as follows:CNBU revenue increased 26%primarily due to increases in DRAM average selling prices and bit shipments driven by improving demand in cloud and data center end markets.MBU revenue increased 24%primarily due to increases in average selling prices for both mobile DRAM and NAND,partially offset by decreases in bit shipments.EBU revenue increased 7%primarily due to increases in bit shipments driven by solid demand for leading-edge products in industrial markets.SBU revenue increased 39%primarily due to increases in NAND average selling prices and bit shipments driven by strong demand across markets.Changes in revenue for each business unit for the second quarter and first six months of 2024 as compared to the corresponding periods of 2023 were as follows:CNBU revenue increased 59%and 26%,respectively,primarily due to increases in bit shipments,partially offset by declines in average selling prices.MBU revenue increased 69%and 81%,respectively,primarily due to increases in bit shipments for both DRAM and NAND.MBU average selling prices increased for the second quarter of 2024 ascompared to the second quarter of 2023 and decreased slightly for the first six months of 2024 as compared to the first six months of 2023.EBU revenue increased 28%and 15%,respectively,primarily due to increases in bit shipments,partially offset by declines in average selling prices.SBU revenue increased 79%and 31%,respectively,primarily due to increases in bit shipments.SBU average selling prices increased for the second quarter of 2024 as compared to the second quarter of2023 and decreased for the first six months of 2024 as compared to the first six months of 2023.Operating Income(Loss)by Business UnitSecond QuarterFirst QuarterSecond QuarterSix months ended20242024202320242023CNBU$28 1%$(397)(23)%$(35)(3)%$(369)(9)%$155 5%MBU(9)(1)%(687)(53)%(344)(36)%(696)(24)%(539)(34)U(1) 1 10%9(2 15%SBU(217)(24)%(490)(75)%(357)(70)%(707)(45)%(614)(52)%All Other21 84%4 67%1 100% 81%4 80%$(178)$(1,560)$(647)$(1,738)$(712)Percentages reflect operating income(loss)as a percentage of revenue for each business unit.For the second quarter of 2024 as compared to the first quarter of 2024,CNBU,MBU,and SBU operating income(loss)improved primarily due to increases in average selling prices as a result of improvingconditions across most markets.Manufacturing cost reductions in the second quarter of 2024 also contributed to increases in operating income(loss).For EBU,operating income(loss)for the second quarter of2024 deteriorated from the first quarter of 2024 primarily due to declines in average selling prices.For the second quarter of 2024 as compared to the second quarter of 2023,MBU and SBU operating income(loss)improved primarily due to increases in average selling prices as a result of improving conditionsacross most markets in 2024.For CNBU,operating income(loss)for the second quarter of 2024 improved from the second quarter of 2023 primarily due to increases in bits sold and manufacturing cost reductions,partially offset by lower average selling prices that had not fully recovered from prior declines.For EBU,operating income(loss)for the second quarter of 2024 deteriorated from the second quarter of 2023 primarilydue to declines in average selling prices in 2023,which had not yet fully recovered.31|2024 Q2 10-QTable of ContentsFor the first six months of 2024 as compared to the first six months of 2023,operating income(loss)deteriorated for all business units due to lower average selling prices,which had not fully recovered from thesteep decline in market conditions across memory and storage markets that occurred throughout 2023.Manufacturing cost reductions and increases in DRAM bit shipments partially offset the adverse effects ofpricing on operating margins.Operating Expenses and OtherResearch and Development:R&D expenses vary primarily with the number of development and pre-qualification wafers processed,the cost of advanced equipment dedicated to new product and processdevelopment,and personnel costs.Because of the lead times necessary to manufacture our products,we typically begin to process wafers before completion of performance and reliability testing.Development ofa product is deemed complete when it is qualified through internal reviews and tests for performance and reliability.R&D expenses can vary significantly depending on the timing of product qualification.R&D expenses for the second quarter of 2024 compared to the first quarter of 2024 were relatively unchanged as lower volumes of development and prequalification wafers were offset by increases in employeecompensation.R&D expenses for the second quarter and first six months of 2024 increased 6%and 2%,respectively,as compared to the corresponding periods of 2023,primarily due to an increase in employeecompensation,partially offset by lower volumes of development and prequalification wafers.Selling,General,and Administrative:SG&A expenses for the second quarter of 2024 increased 6%as compared to the first quarter of 2024 primarily due to an increase in employee compensation.SG&Aexpenses for the second quarter and first six months of 2024 increased 21%and 13%,respectively,as compared to the corresponding periods of 2023,primarily due to an increase in employee compensation.Restructure and Asset Impairments:See“Item 1.Financial Statements Notes to Consolidated FinancialStatements Restructure and Asset Impairments”.Other Operating(Income)Expense,Net:See“Item 1.Financial Statements Notes to Consolidated FinancialStatements Other Operating(Income)Expense,Net”.Interest(Income)Expense,Net:Interest income(expense)was not significant for the second quarter of 2024.Interest income(expense)deteriorated for the second quarter and first six months of 2024 ascompared to the corresponding periods of 2023 primarily due to increases in interest expense as a result of higher debt balances and interest rates,partially offset by increases in interest income due to higherinterest rates on our cash and investments.Income Taxes:Our income tax(provision)benefit consisted of the following:Second QuarterFirst QuarterSecond QuarterSix months ended20242024202320242023Income(loss)before taxes$170$(1,155)$(2,271)$(985)$(2,447)Income tax(provision)benefit622(73)(54)549(62)Effective tax rate(365.9)%(6.3)%(2.4)U.7%(2.5)%In the first quarter of 2024,our tax expense was based on actual results for jurisdictions where small changes in our projected pre-tax income would have caused significant changes in the estimated annualeffective tax rate.With our improved fiscal 2024 outlook,we can now estimate a more reliable annual effective tax rate and have reverted to a global annual effective tax rate method for all jurisdictions.Applyingthis updated rate to our year-to-date earnings resulted in the tax benefit recognized in the second quarter of 2024.The change in our effective tax rate for the second quarter of 2024 as compared to the first quarter of 2024 was primarily due to the use of the estimated annual effective tax rate for the quarter.The change in oureffective tax rate for the first six months of 2024 as compared to the first six months of 2023 was primarily due to changes in levels of profitability and the geographic mix of earnings.32Table of ContentsWe 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 andare conditional,in part,upon meeting certain business operations and employment thresholds.As a result of the low level of profitability and the geographical mix of income,the benefit from tax incentivearrangements was not material for the periods presented.Various tax reforms are being considered in multiple jurisdictions that,if enacted,contain provisions that could materially impact our tax expense.We continue to monitor the potential impact of these various taxreform proposals to our overall global effective tax rate and financial statements.Other:Further information can be found in“Item 1.Financial Statements Notes to Consolidated Financial Statements Equity Plans”.Liquidity and Capital ResourcesOur primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions.Cash generated from operations is highly dependent on selling prices forour products,which can vary significantly from period to period.Cash and marketable investments totaled$9.63 billion as of February 29,2024,and$10.44 billion as of August 31,2023.Our cash and investmentsconsist primarily of bank deposits,money market funds,and liquid investment-grade,fixed-income securities,which are diversified among industries and individual issuers.To mitigate credit risk,we invest throughhigh-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor.As of February 29,2024,$1.98 billion of ourcash and marketable investments was held by our foreign subsidiaries.We continuously evaluate alternatives for efficiently funding our capital expenditures and ongoing operations.From time to time,we expect to engage in a variety of financing transactions for such purposes as wellas to refinance our existing indebtedness,including the issuance of securities.As of February 29,2024,$2.50 billion was available to draw under our Revolving Credit Facility.Funding of certain significant capitalprojects is also dependent on the receipt of government incentives,which are subject to conditions and may not be obtained.To develop new product and process technology,support future growth,achieve operating efficiencies,and maintain product quality,we must continue to invest in manufacturing technologies,facilities andequipment,and R&D.We estimate capital expenditures in 2024 for property,plant,and equipment,net of proceeds from government incentives,to be in the range of$7.5 billion to$8.0 billion.Actual amounts for2024 will vary depending on market conditions and may vary from quarter to quarter due to the timing of expenditures.As of February 29,2024,we had purchase obligations of approximately$1.01 billion for theacquisition of property,plant,and equipment,of which approximately$938 million is expected to be paid within one year.For a description of other contractual obligations,such as leases and debt,see“Item 1.Financial Statements Notes to Consolidated Financial Statements Leases,”and“Debt.”To support expected memory demand in the second half of the decade,we will need to add new DRAM wafer capacity.Following the enactment of the CHIPS Act in 2022,we announced plans to invest in twoleading-edge memory manufacturing fabs in the United States,contingent on CHIPS Act support through grants and investment tax credits.As part of this plan,in September 2022,we broke ground on a leading-edge memory manufacturing fab in Boise,Idaho.Construction of the fab began in October 2023 with DRAM production targeted to start in calendar 2025 and first output in early calendar 2026.In addition,inOctober 2022,we announced plans to build a second leading-edge DRAM manufacturing fab in Clay,New York.We expect construction to begin in calendar 2024,with production anticipated to ramp in the latterhalf of the decade.We expect these new fabs to be key to meeting our requirements for additional wafer capacity starting in the second half of the decade and beyond,in line with industry demand trends.OnAugust 21,2023,we announced that two of our subsidiaries had each submitted full applications on August 18,2023 for federal funding in the form of grants under the CHIPS Act for both of these projects.We are also advancing our global back-end assembly and test network in order to support our product portfolio and extend our ability to deliver on global customer demand in the future.We intend to makeinvestments at our33|2024 Q2 10-QTable of Contentsbackend facility in Xian,China,including a new building to provide space to add more product capability,to allow us over time to serve more of the demand from our customers in China from the Xian facility.Webegan construction of a new assembly and test facility in Gujarat,India to address demand in the latter half of this decade.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,derivativetransactions,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 ourongoing determination of the best use of available cash.Through February 29,2024,we had repurchased an aggregate of$6.89 billion of the authorized amount.See“Item 1.Financial Statements Notes toConsolidated Financial Statements Equity.”On March 20,2024,our Board of Directors declared a quarterly dividend of$0.115 per share,payable in cash on April 16,2024,to shareholders of record as of the close of business on April 1,2024.Thedeclaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors.Our Board of Directors decisions regarding the amount and payment of dividendswill depend on many factors,including,but not limited to,our financial condition,results of operations,capital requirements,business conditions,debt service obligations,contractual restrictions,industry practice,legal requirements,regulatory constraints,and other factors that our Board of Directors may deem relevant.We expect that our cash and investments,cash flows from operations,and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeablefuture.Cash FlowsSix months ended20242023Net cash provided by operating activities$2,620$1,286 Net cash provided by(used for)investing activities(2,709)(4,181)Net cash provided by(used for)financing activities(458)4,434 Effect of changes in currency exchange rates on cash,cash equivalents,and restricted cash(8)9 Net increase(decrease)in cash,cash equivalents,and restricted cash$(555)$1,548 Operating Activities:Cash provided by operating activities reflects net income(loss)adjusted for certain non-cash items,including depreciation expense,amortization of intangible assets,stock-basedcompensation,and inventory write-downs,and the effects of changes in operating assets and liabilities.The increase in cash provided by operating activities for the first six months of 2024 as compared to the firstsix months of 2023 was primarily due to a smaller net loss in the current year adjusted for non-cash items and the effect of an increase in accounts payable and accrued expenses and an increase in other currentliabilities largely due to approximately$600 million of customer prepayments to secure product supply,partially offset by an increase in receivables and an increase in other current assets primarily due to thesecond quarter 2024 income tax benefit.Investing Activities:For the first six months of 2024,net cash used for investing activities consisted primarily of$3.18 billion of expenditures for property,plant,and equipment;contributions of$234 millionreceived from government incentives to offset capital expenditures;partially offset by$261 million of net inflows from maturities,sales,and purchases of available-for-sale securities.For the first six months of 2023,net cash used for investing activities consisted primarily of$4.65 billion of expenditures for property,plant,and equipment,partially offset by$480 million of net inflows frommaturities,sales,and purchases of available-for-sale securities.Financing Activities:For the first six months of 2024,net cash used for financing activities consisted primarily of$1.10 billion of repayments of debt,which included the prepayment of the 2024 Term Loan A and aportion of the 2025 Term Loan A borrowings,$256 million for payments of dividends to shareholders,and$82 million of payments on equipment purchase contracts,partially offset by approximately$1.00 billion ofproceeds from the issuance of the 2031 Notes.See“Item 1.Financial Statements Notes to Consolidated Financial Statements Debt.”34Table of ContentsFor the first six months of 2023,net cash provided by financing activities consisted primarily of$3.20 billion of proceeds from our 2025,2026,and 2027 Term Loan A borrowings,$1.27 billion from the issuance ofthe 2029 B Notes,and$749 million from the issuance of the 2033 A Notes.Cash used for financing activities included$425 million for the acquisition of 8.6 million shares of our common stock under our sharerepurchase authorization,$252 million of cash payments of dividends to shareholders,and$76 million of payments on equipment purchase contracts.Critical Accounting EstimatesFor a discussion of our critical accounting estimates,see“Part II Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates”of our AnnualReport on Form 10-K for the year ended August 31,2023.There have been no significant changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended August 31,2023.Recently Adopted Accounting StandardsNo material items.Recently Issued Accounting StandardsNo material items.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKFor further discussion about market risk and sensitivity analysis related to changes in interest rates and currency exchange rates,see“Part II Item 7A.Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report on Form 10-K for the year ended August 31,2023.ITEM 4.CONTROLS AND PROCEDURESAn evaluation was carried out under the supervision and with the participation of our management,including our principal executive officer and principal financial officer,of the effectiveness of the design andoperation of our disclosure controls and procedures(as defined in Rules 13a-15(e)and 15d-15(e)under the Securities Exchange Act of 1934,as amended(the“Exchange Act”)as of the end of the period coveredby this report.Based upon that evaluation,the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required tobe disclosed by us in the reports that we file or submit under the Exchange Act are recorded,processed,summarized,and reported within the time periods specified in the SECs rules and forms and that suchinformation is accumulated and communicated to our management,including the principal executive officer and principal financial officer,to allow timely decisions regarding disclosure.During the second quarter of 2024,there were no changes in our internal control over financial reporting that have materially affected,or are reasonably likely to materially affect,our internal control over financialreporting.35|2024 Q2 10-QTable of ContentsPART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSFor a discussion of legal proceedings,see“Part I Item 3.Legal Proceedings”of our Annual Report on Form 10-K for the year ended August 31,2023,and the sections titled“Part I.Financial Information Item 1.Financial Statements Notes to Consolidated Financial Statements Contingencies”and“Item 1A.Risk Factors”in this Quarterly Report on Form 10-Q,as well as in our Quarterly Report on Form 10-Q for the firstquarter of 2024.SEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the related monetary sanctions,if any,will be less than a specified threshold.We use athreshold of$1 million for this purpose.36Table of ContentsITEM 1A.RISK FACTORSIn addition to the factors discussed elsewhere in this Form 10-Q,this section discusses important factors which could cause actual results or events to differ materially from those contained in any forward-lookingstatements made by us.The order of presentation is not necessarily indicative of the level of risk that each factor poses to us.Any of these factors could have a material adverse effect on our business,results ofoperations,financial condition,or stock price.Our operations could also be affected by other factors that are presently unknown to us or not considered significant.Risk Factor SummaryRisks Related to Our Business,Operations,and Industryvolatility in average selling prices of our products;a range of factors that may adversely affect our gross margins;our international operations,including geopolitical risks;the highly competitive nature of our industry;our ability to develop and produce new and competitive memory and storage technologies and products;realizing expected returns from capacity expansions;achieving or maintaining certain outcomes or compliance with other obligations associated with incentives from various governments;availability and quality of materials,supplies,and capital equipment and dependency on third-party service providers;a downturn in regional or worldwide economies;disruptions to our manufacturing process from operational issues,natural disasters,or other events;dependency on a select number of key customers,including international customers;products that fail to meet specifications,are defective,or are incompatible with end uses;breaches of our security systems or products,or those of our customers,suppliers,or business partners;attracting,retaining,and motivating highly skilled employees;responsible sourcing requirements and related regulations;environmental,social,and governance considerations;acquisitions and/or alliances;andrestructure plans may not realize expected savings or other benefits.Risks Related to Intellectual Property and Litigationprotecting our intellectual property and retaining key employees who are knowledgeable of and develop our intellectual property;legal proceedings and claims;andclaims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others or failure to obtain or renew license agreements covering such intellectual property.Risks Related to Laws and Regulationsimpacts of government actions and compliance with tariffs,trade restrictions,and/or trade regulations;tax expense and tax laws in key jurisdictions;andcompliance with laws,regulations,or industry standards,including environmental considerations.Risks Related to Capitalization and Financial Marketsour ability to generate sufficient cash flows or obtain access to external financing;our debt obligations;changes in foreign currency exchange rates;counterparty default risk;volatility in the trading price of our common stock;andfluctuations in the amount and frequency of our common stock repurchases and payment of cash dividends and resulting impacts.37|2024 Q2 10-QTable of ContentsRisks Related to Our Business,Operations,and IndustryVolatility in average selling prices for our semiconductor memory and storage products may adversely affect our business.We have experienced significant volatility in our average selling prices and may continue to experience such volatility in the future.For example,average selling prices for DRAM declined in the high-40s percentrange and NAND declined in the low-50s percent range for 2023 as compared to 2022.Since 2017,annual percentage changes in DRAM average selling prices have ranged from plus mid-30s percent range to aminus high-40s percent range.Since 2017,annual percentage changes in NAND average selling prices have ranged from nearly flat to a minus low-50s percent range.In recent periods,average selling prices forour products have been below our manufacturing costs and we may experience such circumstances in the future.Average selling prices for our products that decline faster than our costs have recently had anadverse effect on our business and results of operations,and in future periods could have a material adverse effect on our business,results of operations,or financial condition.Our gross margins may be adversely affected by a range of factors.Our gross margins are dependent,in part,upon continuing decreases in per gigabit manufacturing costs achieved through improvements in our manufacturing processes and product designs.Factors that may limitour ability to reduce our per gigabit manufacturing costs at sufficient levels to prevent deterioration of or improve gross margins include,but are not limited to:strategic product diversification decisions affecting product mix;increasing complexity of manufacturing processes;difficulties in transitioning to smaller line-width process technologies or additional 3D memory layers or NAND cell levels;process complexity including number of mask layers and fabrication steps;manufacturing yield;technological barriers;changes in process technologies;new products that may require relatively larger die sizes;start-up or other costs associated with capacity expansions;higher costs of goods and services due to inflationary pressures or market conditions;andhigher manufacturing costs per gigabit due to fabrication facility underutilization,lower wafer output,and insufficient volume to run new technology nodes to achieve cost optimization.Many factors may result in a reduction of our output or a delay in ramping production,which could lead to underutilization of our production assets.These factors may include,among others,a weak demandenvironment,industry oversupply,inventory surpluses,difficulties in ramping emerging technologies,supply chain disruptions,and delays from equipment suppliers.See“Part I.Financial Information Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Overview Industry Conditions”for information regarding our recent underutilization charges.A significant portion of ourmanufacturing costs are fixed and do not vary proportionally with changes in production output.As a result,lower utilization,lower wafer output,and corresponding increases in our per gigabit manufacturing costshave resulted in higher inventory carrying costs,and have had,and may continue to have,an adverse effect on our gross margins,business,results of operations,or financial condition.38Table of ContentsWe have a broad portfolio of products to address our customers needs,which span multiple market segments and are subject to rapid technological changes.Our manufacturing costs on a per gigabit basis varyacross our portfolio as they are largely influenced by the technology node in which the solution was developed.We strive to balance our demand and supply for each technology node,but the dynamics of ourmarkets and our customers can create periods of imbalance,which can lead us to carry elevated inventory levels.Consequently,we may incur charges in connection with obsolete or excess inventories,or we maynot fully recover our costs,which would reduce our gross margins.For example,in 2023,we recorded aggregate charges of$1.83 billion to write down the carrying value of our inventories to their estimated netrealizable value.In addition,due to the customized nature of certain products we manufacture,we may be unable to sell certain finished goods inventories to alternative customers or manufacture in-processinventory to different specifications,which may result in excess and obsolescence charges in future periods.In addition,if we are unable to supply products that meet customer design and performance specifications,we may be required to sell such products at lower average selling prices,which may reduce our grossmargins.Our gross margins may also be impacted by shifts in product mix,driven by our strategy to optimize our portfolio to best respond to changing market dynamics.Our inability to prevent deterioration of or improve gross margins could have a material adverse effect on our business,results of operations,or financial condition.We face geopolitical and other risks associated with our international operations that could materially adversely affect our business,results of operations,or financial condition.In addition to our U.S.operations,a substantial portion of our operations are conducted in Taiwan,Singapore,Japan,Malaysia,China,and India,and many of our customers,suppliers,and vendors also operateinternationally.In 2023,nearly half of our revenue was from sales to customers who have headquarters located outside the United States,while over 80%of our revenue in 2023 was from products shipped tocustomer locations outside the United States.Our international operations are subject to a number of risks,including:restrictions on sales of goods or services to one or more of our significant foreign customers;export and import duties,changes to import and export regulations,customs regulations and processes,and restrictions on the transfer of funds,including currency controls in China,which could negativelyaffect the amount and timing of payments from certain of our customers and,as a result,our cash flows;compliance with U.S.and international laws involving international operations,including the Foreign Corrupt Practices Act of 1977,as amended,sanctions and anti-corruption laws,export and import laws,and similar rules and regulations;theft of intellectual property;political and economic instability,including instability resulting from domestic and international conflicts;government actions or civil unrest preventing the flow of products and materials,including delays in shipping and obtaining products and materials,cancellation of orders,or loss or damage of products;problems with the transportation or delivery of products and materials;issues arising from cultural or language differences and labor unrest;longer payment cycles and greater difficulty in collecting accounts receivable;compliance with trade,technical standards,and other laws in a variety of jurisdictions;contractual and regulatory limitations on the ability to maintain flexibility with staffing levels;disruptions to manufacturing or R&D activities as a result of actions imposed by foreign governments;changes in economic policies of foreign governments;difficulties in staffing and managing international operations;andpublic health issues.If we or our customers,suppliers,or vendors are impacted by any of these risks,it could have a material adverse effect on our business,results of operations,or financial condition.39|2024 Q2 10-QTable of ContentsFollowing the May 21,2023 decision of its cybersecurity review of our products sold in China,the CAC determined that critical information infrastructure operators in China may not purchase Micron products,impacting our revenue with companies headquartered in mainland China and Hong Kong,including direct sales as well as indirect sales through distributors.Some revenue with customers headquartered outside ofChina has also been impacted.Further actions by the Chinese gove
2024-06-27
63页
5星级
Financial resultsFQ3 20242June 26,2024Safe harbor statementDuring the course of this meeting,we may .
2024-06-27
29页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549Form 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2024orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number 001-34960GENERAL MOTORS COMPANY(Exact name of registrant as specified in its charter)Delaware27-0756180(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)300 Renaissance Center,Detroit,Michigan 48265-3000(Address of principal executive offices)(Zip Code)(313)667-1500(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.01 par valueGMNew York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerginggrowth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of April 12,2024 there were 1,140,958,039 shares of common stock outstanding.INDEX PagePART IItem 1.Condensed Consolidated Financial Statements1Condensed Consolidated Income Statements(Unaudited)1Condensed Consolidated Statements of Comprehensive Income(Unaudited)1Condensed Consolidated Balance Sheets(Unaudited)2Condensed Consolidated Statements of Cash Flows(Unaudited)3Condensed Consolidated Statements of Equity(Unaudited)4Notes to Condensed Consolidated Financial Statements5Note 1.Nature of Operations and Basis of Presentation5Note 2.Revenue6Note 3.Marketable and Other Securities7Note 4.GM Financial Receivables and Transactions8Note 5.Inventories11Note 6.Equipment on Operating Leases11Note 7.Equity in Net Assets of Nonconsolidated Affiliates12Note 8.Variable Interest Entities12Note 9.Debt14Note 10.Derivative Financial Instruments15Note 11.Product Warranty and Related Liabilities16Note 12.Pensions and Other Postretirement Benefits16Note 13.Commitments and Contingencies17Note 14.Income Taxes20Note 15.Restructuring and Other Initiatives20Note 16.Stockholders Equity and Noncontrolling Interests21Note 17.Earnings Per Share22Note 18.Segment Reporting22Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations25Item 3.Quantitative and Qualitative Disclosures About Market Risk41Item 4.Controls and Procedures42PART IIItem 1.Legal Proceedings43Item 1A.Risk Factors43Item 2.Unregistered Sales of Equity Securities and Use of Proceeds44Item 5.Other Information44Item 6.Exhibits45Signature46Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESPART IItem 1.Condensed Consolidated Financial StatementsCONDENSED CONSOLIDATED INCOME STATEMENTS(In millions,except per share amounts)(Unaudited)Three Months Ended March 31,2024March 31,2023Net sales and revenueAutomotive$39,212$36,646 GM Financial3,802 3,339 Total net sales and revenue(Note 2)43,014 39,985 Costs and expensesAutomotive and other cost of sales33,996 32,247 GM Financial interest,operating and other expenses3,106 2,612 Automotive and other selling,general and administrative expense2,175 2,547 Total costs and expenses39,277 37,407 Operating income(loss)3,738 2,578 Automotive interest expense219 234 Interest income and other non-operating income,net302 409 Equity income(loss)(Note 7)(105)21 Income(loss)before income taxes3,715 2,775 Income tax expense(benefit)(Note 14)762 428 Net income(loss)2,953 2,346 Net loss(income)attributable to noncontrolling interests27 49 Net income(loss)attributable to stockholders$2,980$2,395 Net income(loss)attributable to common stockholders$2,970$2,369 Earnings per share(Note 17)Basic earnings per common share$2.57$1.70 Weighted-average common shares outstanding basic1,155 1,396 Diluted earnings per common share$2.56$1.69 Weighted-average common shares outstanding diluted1,162 1,402 Dividends declared per common share$0.12$0.09 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Unaudited)Three Months Ended March 31,2024March 31,2023Net income(loss)$2,953$2,346 Other comprehensive income(loss),net of tax(Note 16)Foreign currency translation adjustments and other(335)148 Defined benefit plans76(35)Other comprehensive income(loss),net of tax(259)113 Comprehensive income(loss)2,694 2,460 Comprehensive loss(income)attributable to noncontrolling interests73 58 Comprehensive income(loss)attributable to stockholders$2,768$2,518 Reference should be made to the notes to condensed consolidated financial statements.Amounts may not add due to rounding.1Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In millions,except per share amounts)(Unaudited)March 31,2024December 31,2023ASSETSCurrent AssetsCash and cash equivalents$17,635$18,853 Marketable debt securities(Note 3)7,845 7,613 Accounts and notes receivable,net of allowance of$270 and$29813,774 12,378 GM Financial receivables,net of allowance of$913 and$906(Note 4;Note 8 at VIEs)41,682 39,076 Inventories(Note 5)17,533 16,461 Other current assets(Note 3;Note 8 at VIEs)8,001 7,238 Total current assets106,470 101,618 Non-current AssetsGM Financial receivables,net of allowance of$1,442 and$1,438(Note 4;Note 8 at VIEs)43,511 45,043 Equity in net assets of nonconsolidated affiliates(Note 7)10,740 10,613 Property,net51,423 50,321 Goodwill and intangible assets,net4,823 4,862 Equipment on operating leases,net(Note 6;Note 8 at VIEs)30,106 30,582 Deferred income taxes21,704 22,339 Other assets(Note 3;Note 8 at VIEs)7,815 7,686 Total non-current assets170,121 171,446 Total Assets$276,591$273,064 LIABILITIES AND EQUITYCurrent LiabilitiesAccounts payable(principally trade)$29,393$28,114 Short-term debt and current portion of long-term debt(Note 9)Automotive378 428 GM Financial(Note 8 at VIEs)35,598 38,540 Accrued liabilities26,409 27,364 Total current liabilities91,777 94,445 Non-current LiabilitiesLong-term debt(Note 9)Automotive15,949 15,985 GM Financial(Note 8 at VIEs)70,312 66,788 Postretirement benefits other than pensions(Note 12)4,292 4,345 Pensions(Note 12)6,384 6,680 Other liabilities17,275 16,515 Total non-current liabilities114,213 110,312 Total Liabilities205,990 204,757 Commitments and contingencies(Note 13)Noncontrolling interest-Cruise stock incentive awards175 118 Equity(Note 16)Common stock,$0.01 par value11 12 Additional paid-in capital19,358 19,130 Retained earnings57,688 55,391 Accumulated other comprehensive loss(10,459)(10,247)Total stockholders equity66,598 64,286 Noncontrolling interests3,828 3,903 Total Equity70,426 68,189 Total Liabilities and Equity$276,591$273,064 Reference should be made to the notes to condensed consolidated financial statements.Amounts may not add due to rounding.2Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Three Months EndedMarch 31,2024March 31,2023Cash flows from operating activitiesNet income(loss)$2,953$2,346 Depreciation and impairment of Equipment on operating leases,net1,243 1,241 Depreciation,amortization and impairment charges on Property,net1,555 1,571 Foreign currency remeasurement and transaction(gains)losses(36)135 Undistributed earnings of nonconsolidated affiliates,net32(61)Pension contributions and OPEB payments(242)(236)Pension and OPEB income,net15(20)Provision(benefit)for deferred taxes655 46 Change in other operating assets and liabilities(3,022)(1,936)Net cash provided by(used in)operating activities3,152 3,086 Cash flows from investing activitiesExpenditures for property(2,783)(2,431)Available-for-sale marketable securities,acquisitions(995)(643)Available-for-sale marketable securities,liquidations745 2,947 Purchases of finance receivables(7,932)(8,963)Principal collections and recoveries on finance receivables7,651 7,282 Purchases of leased vehicles(3,436)(3,154)Proceeds from termination of leased vehicles3,085 3,264 Other investing activities(249)(563)Net cash provided by(used in)investing activities(3,914)(2,262)Cash flows from financing activitiesNet increase(decrease)in short-term debt(249)(167)Proceeds from issuance of debt(original maturities greater than three months)14,307 11,487 Payments on debt(original maturities greater than three months)(13,140)(12,127)Payments to purchase common stock(280)(369)Dividends paid(198)(185)Other financing activities(139)(324)Net cash provided by(used in)financing activities300(1,685)Effect of exchange rate changes on cash,cash equivalents and restricted cash(78)54 Net increase(decrease)in cash,cash equivalents and restricted cash(539)(807)Cash,cash equivalents and restricted cash at beginning of period21,917 21,948 Cash,cash equivalents and restricted cash at end of period$21,378$21,141 Significant Non-cash Investing and Financing ActivityNon-cash property additions$2,756$3,041 Reference should be made to the notes to condensed consolidated financial statements.Amounts may not add due to rounding.3Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EQUITY(In millions)(Unaudited)Common StockholdersNoncontrollingInterestsTotal Equity(PermanentEquity)NoncontrollingInterest Cruise Stock IncentiveAwards(Temporary Equity)CommonStockAdditionalPaid-inCapitalRetainedEarningsAccumulated OtherComprehensiveLossBalance at January 1,2023$14$26,428$49,251$(7,901)$4,135$71,927$357 Net income(loss)2,395 (49)2,346 Other comprehensive income(loss)123(9)113 Purchase of common stock(168)(201)(369)Stock based compensation(34)(2)(35)7 Cash dividends paid on common stock (126)(126)Other 97 7 103(93)Balance at March 31,2023$14$26,323$51,318$(7,778)$4,084$73,961$271 Balance at January 1,2024$12$19,130$55,391$(10,247)$3,903$68,189$118 Net income(loss)2,980 (27)2,953 Other comprehensive income(loss)(212)(47)(259)Purchase of common stock 208(539)(331)Stock based compensation 58(2)56 5 Cash dividends paid on common stock (139)(139)Other(38)(4)(2)(44)52 Balance at March 31,2024$11$19,358$57,688$(10,459)$3,828$70,426$175 Reference should be made to the notes to condensed consolidated financial statements.Amounts may not add due to rounding.4Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 1.Nature of Operations and Basis of PresentationGeneral Motors Company(sometimes referred to in this Quarterly Report on Form 10-Q as we,our,us,ourselves,the Company,General Motors or GM)designs,builds and sells trucks,crossovers,cars and automobile parts and provides software-enabled services and subscriptions worldwide.Additionally,weare investing in an autonomous vehicle(AV)business.We also provide automotive financing services through General Motors Financial Company,Inc.(GM Financial).We analyze the results of our operations through the following segments:GM North America(GMNA),GM International(GMI),Cruiseand GM Financial.Cruise is our global segment responsible for the development and commercialization of AV technology.Corporate includes certaincentrally recorded income and costs such as interest,income taxes,corporate expenditures and certain revenues and expenses that are not part of areportable segment.The condensed consolidated financial statements are prepared in conformity with U.S.generally accepted accounting principles(GAAP)pursuant to therules and regulations of the Securities and Exchange Commission(SEC)for interim financial information.Accordingly,they do not include all of theinformation and notes required by U.S.GAAP for complete financial statements.The condensed consolidated financial statements include all adjustments,which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods,considered necessary by management tofairly state our results of operations,financial position and cash flows.The operating results for interim periods are not necessarily indicative of results thatmay be expected for any other interim period or for the full year.These condensed consolidated financial statements should be read in conjunction with theaudited consolidated financial statements and notes thereto included in our 2023 Form 10-K.Except for per share amounts or as otherwise specified,amounts presented within tables are stated in millions.Certain columns and rows may not add due to rounding.Throughout this report,we refer to General Motors Company and its consolidated subsidiaries in a simplified manner and on a collective basis,usingwords like we,our,us and the Company.This drafting style is suggested by the SEC and is not meant to indicate that General Motors Company,thepublicly traded parent company,or any particular subsidiary of the parent company,owns or operates any particular asset,business or property.Theoperations and businesses described in this report are owned and operated by distinct subsidiaries of General Motors Company.Principles of Consolidation We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interestentities(VIEs)when we are the primary beneficiary.All intercompany balances and transactions are eliminated in consolidation.Our share of earnings orlosses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercisesignificant influence over the operating and financial decisions of the affiliate.GM Financial The amounts presented for GM Financial are adjusted to reflect the impact on GM Financials deferred tax positions and provision forincome taxes resulting from the inclusion of GM Financial in our consolidated tax returns and to eliminate the effect of transactions between GM Financialand the other members of the consolidated group.Accordingly,the amounts presented will differ from those presented by GM Financial on a stand-alonebasis.5Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 2.RevenueThe following table disaggregates our revenue by major source:Three Months Ended March 31,2024GMNAGMICorporateTotalAutomotiveCruiseGMFinancialEliminations/ReclassificationsTotalVehicle,parts and accessories$34,898$2,760$5$37,663$37,663 Used vehicles229 5 234 234 Services and other972 316 27 1,315 25 (25)1,316 Automotive net sales and revenue36,099 3,082 32 39,212 25 (25)39,212 Leased vehicle income 1,800 1,800 Finance charge income 1,786(8)1,778 Other income 225(1)224 GM Financial net sales and revenue 3,811(9)3,802 Net sales and revenue$36,099$3,082$32$39,212$25$3,811$(34)$43,014 Three Months Ended March 31,2023GMNAGMICorporateTotalAutomotiveCruiseGMFinancialEliminations/ReclassificationsTotalVehicle,parts and accessories$31,876$3,342$9$35,227$35,227 Used vehicles175 5 180 180 Services and other837 380 22 1,239 25 (25)1,239 Automotive net sales and revenue32,889 3,727 31 36,646 25 (25)36,646 Leased vehicle income 1,818 1,818 Finance charge income 1,368(3)1,366 Other income 156(1)155 GM Financial net sales and revenue 3,343(4)3,339 Net sales and revenue$32,889$3,727$31$36,646$25$3,343$(29)$39,985 Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.Adjustments to salesincentives for previously recognized sales increased revenue by an insignificant amount in the three months ended March 31,2024 and 2023.Contract liabilities in our Automotive segments primarily consist of vehicle connectivity,customer rewards programs,maintenance,extended warrantyand other contracts of$5.4 billion and$5.0 billion at March 31,2024 and December 31,2023,which are included in Accrued liabilities and Other liabilities.We recognized revenue of$490 million and$408 million related to contract liabilities in the three months ended March 31,2024 and 2023.We expect torecognize revenue of$1.4 billion in the nine months ending December 31,2024 and$1.5 billion,$1.2 billion and$1.3 billion in the years ending December31,2025,2026 and thereafter related to contract liabilities at March 31,2024.6Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 3.Marketable and Other SecuritiesThe following table summarizes the fair value of cash equivalents and marketable debt securities,which approximates cost:Fair ValueLevelMarch 31,2024December 31,2023Cash and cash equivalentsCash and time deposits$10,105$8,977 Available-for-sale debt securitiesU.S.government and agencies2849 211 Corporate debt22,997 1,439 Sovereign debt2840 734 Total available-for-sale debt securities cash equivalents4,685 2,384 Money market funds12,844 7,491 Total cash and cash equivalents$17,635$18,853 Marketable debt securitiesU.S.government and agencies2$3,459$3,495 Corporate debt and other23,808 3,529 Mortgage and asset-backed2578 589 Total available-for-sale debt securities marketable securities$7,845$7,613 Restricted cashCash and cash equivalents$293$277 Money market funds13,450 2,787 Total restricted cash$3,743$3,064 Available-for-sale debt securities included above with contractual maturities(a)Due in one year or less$6,137 Due between one and five years5,641 Total available-for-sale debt securities with contractual maturities$11,778 _(a)Excludes mortgage and asset-backed securities of$578 million at March 31,2024 as these securities are not due at a single maturity date.Proceeds from the sale of available-for-sale debt securities sold prior to maturity were$470 million and$380 million in the three months ended March 31,2024 and 2023.Net unrealized losses and gains on available-for-sale debt securities were insignificant in the three months ended March 31,2024 and 2023.Cumulative unrealized losses on available-for-sale debt securities were$158 million and$160 million at March 31,2024 and December 31,2023.The following table provides a reconciliation of cash,cash equivalents and restricted cash reported within the condensed consolidated balance sheet to thetotal shown in the condensed consolidated statement of cash flows:March 31,2024Cash and cash equivalents$17,635 Restricted cash included in Other current assets3,260 Restricted cash included in Other assets483 Total$21,378 7Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 4.GM Financial Receivables and TransactionsMarch 31,2024December 31,2023RetailCommercial(a)TotalRetailCommercial(a)TotalGM Financial receivables$73,230$14,317$87,547$72,729$13,734$86,463 Less:allowance for loan losses(2,320)(35)(2,355)(2,308)(36)(2,344)GM Financial receivables,net$70,911$14,282$85,193$70,421$13,698$84,119 Fair value of GM Financial receivables utilizing Level 2inputs$14,282$13,698 Fair value of GM Financial receivables utilizing Level 3inputs$71,427$70,911 _(a)Commercial finance receivables include dealer financing of$13.9 billion and$13.3 billion,and other financing of$378 million and$476 million at March 31,2024 andDecember 31,2023.Commercial finance receivables are presented net of dealer cash management balances of$2.8 billion and$2.6 billion at March 31,2024 andDecember 31,2023.Under the cash management program,subject to certain conditions,a dealer may choose to reduce the amount of interest on its floorplan line bymaking principal payments to GM Financial in advance.Three Months EndedMarch 31,2024March 31,2023Allowance for loan losses at beginning of period$2,344$2,096 Provision for loan losses204 131 Charge-offs(405)(322)Recoveries213 187 Effect of foreign currency and other(1)61 Allowance for loan losses at end of period$2,355$2,152 The allowance for loan losses as a percentage of finance receivables was 2.7%at March 31,2024 and December 31,2023.Retail Finance Receivables GM Financials retail finance receivable portfolio includes loans made to consumers and businesses to finance the purchaseof vehicles for personal and commercial use.The following tables are consolidated summaries of the retail finance receivables by FICO score or itsequivalent,determined at origination,for each vintage of the retail finance receivables portfolio at March 31,2024 and December 31,2023:Year of OriginationMarch 31,202420242023202220212020PriorTotalPercentPrime FICO score 680 and greater$6,124$21,739$14,060$8,080$4,274$1,055$55,332 75.6%Near-prime FICO score 620 to 679902 2,981 2,076 1,566 787 380 8,692 11.9%Sub-prime FICO score less than 620967 2,821 2,172 1,682 878 685 9,206 12.6%Retail finance receivables$7,993$27,542$18,308$11,329$5,938$2,120$73,230 100.0%Year of OriginationDecember 31,202320232022202120202019PriorTotalPercentPrime FICO score 680 and greater$23,940$15,581$9,039$4,926$1,076$320$54,882 75.5%Near-prime FICO score 620 to 6793,234 2,281 1,746 906 350 129 8,647 11.9%Sub-prime FICO score less than 6203,079 2,397 1,884 1,010 573 257 9,200 12.6%Retail finance receivables$30,253$20,259$12,670$6,842$2,000$707$72,729 100.0%8Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)GM Financial reviews the ongoing credit quality of retail finance receivables based on customer payment activity.A retail account is considereddelinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due.Retail finance receivablesare collateralized by vehicle titles and,subject to local laws,GM Financial generally has the right to repossess the vehicle in the event the customer defaultson the payment terms of the contract.The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractualamounts due of$721 million and$809 million at March 31,2024 and December 31,2023.The following tables are consolidated summaries of thedelinquency status of the outstanding amortized cost of retail finance receivables for each vintage of the portfolio at March 31,2024 and December 31,2023,as well as summary totals for March 31,2023:Year of OriginationMarch 31,2024March 31,202320242023202220212020PriorTotalPercentTotalPercent0-to-30 days$7,973$27,054$17,743$10,856$5,689$1,911$71,225 97.3%$66,109 97.61-to-60 days19 342 406 352 188 156 1,463 2.0%1,188 1.8%Greater-than-60 days1 125 140 109 56 50 482 0.763 0.5%Finance receivables morethan 30 days delinquent20 467 547 461 245 206 1,945 2.7%1,551 2.3%In repossession 21 19 12 4 3 60 0.1D 0.1%Finance receivables morethan 30 days delinquent orin repossession20 488 566 473 249 209 2,005 2.7%1,595 2.4%Retail finance receivables$7,993$27,542$18,308$11,329$5,938$2,120$73,230 100.0%$67,704 100.0%Year of OriginationDecember 31,202320232022202120202019PriorTotalPercent0-to-30 days$29,816$19,602$12,098$6,533$1,825$599$70,472 96.91-to-60 days318 470 415 227 130 78 1,637 2.3%Greater-than-60 days102 168 142 76 42 29 559 0.8%Finance receivables more than30 days delinquent421 637 557 302 172 107 2,196 3.0%In repossession17 20 14 6 3 1 61 0.1%Finance receivables more than30 days delinquent or inrepossession437 657 572 308 175 108 2,257 3.1%Retail finance receivables$30,253$20,259$12,670$6,842$2,000$707$72,729 100.0%Commercial Finance Receivables GM Financials commercial finance receivables consist of dealer financing,primarily for dealer inventory purchases,and other financing,which includes loans to commercial vehicle upfitters.For dealer financing,proprietary models are used to assign a risk rating to eachdealer.GM Financial performs periodic credit reviews of each dealership and adjusts the dealerships risk rating,if necessary.The credit risk associated withother financing is limited due to the structure of the business relationships.9Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)GM Financials dealer risk model and risk rating categories are as follows:RatingDescriptionIPerforming accounts with strong to acceptable financial metrics with at least satisfactory capacity to meet financial commitments.IIPerforming accounts experiencing potential weakness in financial metrics and repayment prospects resulting in increased monitoring.IIINon-Performing accounts with inadequate paying capacity for current obligations and have the distinct possibility of creating a loss ifdeficiencies are not corrected.IVNon-Performing accounts with inadequate paying capacity for current obligations and inherent weaknesses that make collection ofliquidation in full highly questionable or improbable.Dealers with III and IV risk ratings are subject to additional monitoring and restrictions on funding,including suspension of lines of credit and liquidationof assets.The following tables summarize the dealer credit risk profile by dealer risk rating at March 31,2024 and December 31,2023:Year of Origination(a)March 31,2024Dealer Risk RatingRevolving20242023202220212020PriorTotalPercentI$12,056$56$248$389$289$294$62$13,395 96.1%II274 3 7 284 2.0%III217 4 5 15 12 7 261 1.9%IVlance at end of period$12,547$60$256$411$302$294$69$13,939 100.0%_(a)Floorplan advances comprise 99.1%of the total revolving balance.Dealer term loans are presented by year of origination.Year of Origination(a)December 31,2023Dealer Risk RatingRevolving20232022202120202019PriorTotalPercentI$11,513$279$403$297$301$75$11$12,879 97.1%II182 2 2 187 1.4%III152 1 15 12 11 192 1.4%IVlance at end of period$11,846$281$421$311$301$86$11$13,257 100.0%_(a)Floorplan advances comprise 99.7%of the total revolving balance.Dealer term loans are presented by year of origination.There were no commercial finance receivables on nonaccrual status at March 31,2024 and December 31,2023.Transactions with GM Financial The following tables show transactions between our Automotive segments,Cruise and GM Financial.These amountsare presented in GM Financials condensed consolidated balance sheets and statements of income.March 31,2024December 31,2023Condensed Consolidated Balance Sheets(a)Commercial finance receivables due from GM consolidated dealers$183$164 Commercial finance receivables due from Cruise$395$353 Subvention receivable from GM(b)$600$508 Commercial loan funding payable to GM$179$55 10Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Three Months EndedMarch 31,2024March 31,2023Condensed Consolidated Statements of IncomeInterest subvention earned on finance receivables$335$279 Leased vehicle subvention earned$364$393 _(a)All balance sheet amounts are eliminated upon consolidation.(b)Our Automotive segments made cash payments to GM Financial for subvention of$777 million and$749 million in the three months ended March 31,2024 and 2023.GM Financials Board of Directors declared and paid dividends of$450 million on its common stock in the three months ended March 31,2024 and 2023.Note 5.InventoriesMarch 31,2024December 31,2023Total productive material,supplies and work in process$7,384$7,422 Finished product,including service parts10,149 9,039 Total inventories$17,533$16,461 Inventories are reflected net of allowances totaling$2.4 billion and$2.2 billion,of which$2.0 billion and$1.9 billion are electric vehicle(EV)-related,toremeasure inventory on-hand to net realizable value at March 31,2024 and December 31,2023.Note 6.Equipment on Operating LeasesEquipment on operating leases consists of leases to retail customers of GM Financial.March 31,2024December 31,2023Equipment on operating leases$37,119$37,921 Less:accumulated depreciation(7,013)(7,338)Equipment on operating leases,net$30,106$30,582 The estimated residual value of our leased assets at the end of the lease term was$22.4 billion and$22.7 billion at March 31,2024 and December 31,2023.Depreciation expense related to Equipment on operating leases,net was$1.2 billion in the three months ended March 31,2024 and 2023.The following table summarizes lease payments due to GM Financial on leases to retail customers:Year Ending December 31,20242025202620272028ThereafterTotalLease receipts under operating leases$3,793$3,651$1,758$253$9$1$9,464 11Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 7.Equity in Net Assets of Nonconsolidated AffiliatesNonconsolidated affiliates are entities in which we maintain an equity ownership interest and for which we use the equity method of accounting due toour ability to exert significant influence over decisions relating to their operating and financial affairs.Revenue and expenses of our joint ventures are notconsolidated into our financial statements;rather,our proportionate share of the earnings of each joint venture is reflected as Equity income(loss)orAutomotive and other cost of sales.Three Months EndedMarch 31,2024March 31,2023Automotive China joint ventures equity income(loss)$(106)$83 Ultium Cells Holding LLC and other joint ventures equity income(loss)(a)156(8)Total Equity income(loss)$50$75 _(a)Equity earnings related to Ultium Cells Holdings LLC,an equally owned joint venture with LG Energy Solution(LGES),are presented in Automotive and other cost ofsales as this entity is integral to the operations of our business by providing battery cells for our EVs.Equity earnings related to Ultium Cells Holdings LLC were$156 million and insignificant in the three months ended March 31,2024 and 2023.There have been no significant ownership changes in our Automotive China joint ventures(Automotive China JVs)or Ultium Cells Holdings LLC sinceDecember 31,2023.Three Months EndedMarch 31,2024March 31,2023Summarized Operating Data of Automotive China JVsAutomotive China JVs net sales$4,111$5,833 Automotive China JVs net income(loss)$(228)$123 Dividends declared but not paid from our nonconsolidated affiliates were an insignificant amount at March 31,2024 and December 31,2023.Dividendsreceived from our nonconsolidated affiliates were insignificant in the three months ended March 31,2024 and 2023.Undistributed earnings from ournonconsolidated affiliates were$1.7 billion at March 31,2024 and December 31,2023.Note 8.Variable Interest EntitiesConsolidated VIEsAutomotive Financing GM FinancialGM Financial uses special purpose entities(SPEs)that are considered VIEs to issue variable funding notes to third party,bank-sponsored warehousefacilities or asset-backed securities to investors in securitization transactions.The debt issued by these VIEs is backed by finance receivables and leasing-related assets transferred to the VIEs(Securitized Assets).GM Financial determined that it is the primary beneficiary of the SPEs because the servicingresponsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEsand the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially besignificant.The assets of the VIEs serve as the sole source of repayment for the debt issued by these entities.Investors in the notes issued by the VIEs donot have recourse to GM Financial or its other assets,with the exception of customary representation and warranty repurchase provisions and indemnitiesthat GM Financial provides as the servicer.GM Financial is not required to provide additional financial support to these SPEs.While these subsidiaries areincluded in GM Financials condensed consolidated financial statements,they are separate legal entities and the finance receivables,lease-related assets andcash held by them are legally owned by them and are not available to GM Financials creditors or creditors of GM Financials other subsidiaries.12Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following table summarizes the assets and liabilities related to GM Financials consolidated VIEs:March 31,2024December 31,2023Restricted cash current$3,041$2,398 Restricted cash non-current$382$367 GM Financial receivables current$22,098$22,990 GM Financial receivables non-current$22,341$23,535 GM Financial equipment on operating leases,net$15,639$15,794 GM Financial short-term debt and current portion of long-term debt$17,953$22,088 GM Financial long-term debt$26,319$23,210 GM Financial recognizes finance charge,leased vehicle and fee income on the Securitized Assets and interest expense on the secured debt issued in asecuritization transaction and records a provision for loan losses to recognize loan losses expected over the remaining life of the finance receivables.Nonconsolidated VIEsAutomotiveNonconsolidated VIEs principally include automotive related operating entities to which we provided financial support to ensure that our supply needs forproduction are met or are not disrupted.Our variable interests in these nonconsolidated VIEs include equity investments,accounts and loans receivable,committed financial support and other off-balance sheet arrangements.The carrying amounts of assets were approximately$2.7 billion and$2.4 billion andliabilities were insignificant related to our nonconsolidated VIEs at March 31,2024 and December 31,2023.Our maximum exposure to loss as a result ofour involvement with these VIEs was approximately$3.5 billion,inclusive of approximately$0.6 billion and$0.8 billion in committed capital contributionsto Ultium Cells Holdings LLC,at March 31,2024 and December 31,2023.Our maximum exposure to loss,and required capital contributions,could varydepending on Ultium Cells Holdings LLCs requirements and access to capital.We currently lack the power through voting or similar rights to direct theactivities of these entities that most significantly affect their economic performance.13Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 9.DebtAutomotive The following table presents debt in our automotive operations:March 31,2024December 31,2023Carrying AmountFair ValueCarrying AmountFair ValueSecured debt$116$116$134$132Unsecured debt(a)15,778 15,75715,842 15,911Finance lease liabilities433 442437 447Total automotive debt(b)$16,327$16,315$16,413$16,490Fair value utilizing Level 1 inputs$15,357$15,457Fair value utilizing Level 2 inputs$957$1,033Available under credit facility agreements(c)$13,536$16,446Weighted-average interest rate on outstanding short-term debt(d)16.9.2%Weighted-average interest rate on outstanding long-term debt(d)5.8%5.8%_(a)Primarily consists of senior notes.(b)Includes net discount and debt issuance costs of$505 million and$527 million at March 31,2024 and December 31,2023.(c)Excludes our 364-day,$2.0 billion facility allocated for exclusive use by GM Financial.(d)Includes coupon rates on debt denominated in various foreign currencies and interest free loans.In March 2024,we renewed our 364-day,$2.0 billion revolving credit facility allocated for the exclusive use of GM Financial,which now matures March27,2025.Interest rates on obligations under the renewed credit facility are based on Term Secured Overnight Financing Rate(SOFR).In March 2024,we terminated our unsecured 364-day delayed draw term loan credit agreement that permitted the Company to borrow up to$3.0 billionexecuted in November 2023,resulting in an insignificant loss.GM Financial The following table presents debt of GM Financial:March 31,2024December 31,2023Carrying AmountFair ValueCarrying AmountFair ValueSecured debt$44,212$43,892$45,243$44,971 Unsecured debt61,698 61,430 60,084 59,651 Total GM Financial debt$105,910$105,322$105,327$104,622 Fair value utilizing Level 2 inputs$103,049$102,262 Fair value utilizing Level 3 inputs$2,274$2,360 Secured debt consists of revolving credit facilities and securitization notes payable.Most of the secured debt was issued by VIEs and is repayable onlyfrom proceeds related to the underlying pledged assets.Refer to Note 8 to our condensed consolidated financial statements for additional information onGM Financials involvement with VIEs.In the three months ended March 31,2024,GM Financial renewed revolving credit facilities with total borrowingcapacity of$2.4 billion and issued$7.3 billion in aggregate principal amount of securitization notes payable with an initial weighted-average interest rateof 5.4%and maturity dates ranging from 2024 to 2036.Unsecured debt consists of senior notes,credit facilities and other unsecured debt.In the three months ended March 31,2024,GM Financial issued$4.4billion in aggregate principal amount of senior notes with an initial weighted-average interest rate of 5.3%and maturity dates ranging from 2027 to 2031.14Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 10.Derivative Financial InstrumentsThe following table presents the gross fair value amounts of GM Financials derivative financial instruments and the associated notional amounts:Fair ValueLevelMarch 31,2024December 31,2023NotionalFair Value ofAssetsFair Value ofLiabilitiesNotionalFair Value ofAssetsFair Value ofLiabilitiesDerivatives designated as hedges(a)Fair value hedgesInterest rate swaps2$21,991$9$352$18,379$75$238 Cash flow hedgesInterest rate swaps22,447 16 10 2,381 17 16 Foreign currency swaps(b)29,208 88 428 8,003 144 311 Derivatives not designated as hedges(a)Interest rate contracts2123,103 1,576 2,024 134,683 1,573 1,997 Foreign currency contracts2940 2 Total derivative financial instruments(c)$157,689$1,691$2,815$163,446$1,809$2,563 _(a)The gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three months ended March 31,2024 and2023 were insignificant,unless otherwise noted.Amounts accrued for interest payments in a net receivable position are included in Other assets.Amounts accrued forinterest payments in a net payable position are included in Other liabilities.(b)The effect of foreign currency cash flow hedges in the condensed consolidated statements of comprehensive income includes losses of$141 million and an insignificantgain recognized in Accumulated other comprehensive loss,and losses of$163 million and an insignificant gain reclassified from Accumulated other comprehensive lossinto income for the three months ended March 31,2024 and 2023.(c)GM Financial held$447 million and$457 million of collateral from counterparties available for netting against GM Financials asset positions and posted$1.2 billion ofcollateral to counterparties available for netting against GM Financials liability positions at March 31,2024 and December 31,2023.The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similarinstruments and foreign exchange and interest rate forward curves.The following amounts were recorded in the condensed consolidated balance sheets related to items designated and qualifying as hedged items in fairvalue hedging relationships:March 31,2024December 31,2023Carrying Amount of HedgedItemsCumulative Amount of Fair ValueHedging Adjustments(a)Carrying Amount of HedgedItemsCumulative Amount of Fair ValueHedging Adjustments(a)Short-term unsecured debt$4,283$(33)$3,508$(8)Long-term unsecured debt30,150 1,191 30,043 1,037 GM Financial unsecured debt$34,433$1,158$33,551$1,029 _(a)Includes$865 million and$872 million of unamortized losses remaining on hedged items for which hedge accounting has been discontinued at March 31,2024 andDecember 31,2023.15Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 11.Product Warranty and Related LiabilitiesThree Months EndedMarch 31,2024March 31,2023Product Warranty and Related LiabilitiesWarranty balance at beginning of period$9,295$8,530 Warranties issued and assumed in period recall campaigns266 236 Warranties issued and assumed in period product warranty668 490 Payments(1,024)(1,058)Adjustments to pre-existing warranties174 279 Effect of foreign currency and other(24)5 Warranty balance at end of period9,356 8,482 Less:Supplier recoveries balance at end of period(a)630 1,157 Warranty balance,net of supplier recoveries at end of period$8,726$7,325 _(a)The current portion of supplier recoveries is recorded in Accounts and notes receivable,net of allowance and the non-current portion is recorded in Other assets.Three Months EndedMarch 31,2024March 31,2023Product Warranty Expense,Net of RecoveriesWarranties issued and assumed in period$934$726 Supplier recoveries accrued in period(58)(44)Adjustments and other150 284 Warranty expense,net of supplier recoveries$1,026$966 We estimate our reasonably possible loss in excess of amounts accrued for recall campaigns to be insignificant at March 31,2024.Refer to Note 13 to ourcondensed consolidated financial statements for additional information.Note 12.Pensions and Other Postretirement BenefitsThree Months Ended March 31,2024Three Months Ended March 31,2023Pension BenefitsGlobal OPEBPlansPension BenefitsGlobal OPEBPlansU.S.Non-U.S.U.S.Non-U.S.Service cost$47$34$3$44$42$2 Interest cost533 128 56 568 161 59 Expected return on plan assets(685)(131)(730)(168)Amortization of prior service cost(credit)15 1 (1)1 Amortization of net actuarial(gains)losses2 12 8(6)Net periodic pension and OPEB(income)expense$(88)$44$59$(119)$44$55 The non-service cost components of net periodic pension and other postretirement benefits(OPEB)income of$49 million and$86 million in the threemonths ended March 31,2024 and 2023 are presented in Interest income and other non-operating income,net.16Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Note 13.Commitments and ContingenciesLitigation-Related Liability and Tax Administrative Matters In the normal course of our business,we are named from time to time as a defendant invarious legal actions,including arbitrations,class actions and other litigation.We identify below the material individual proceedings and investigationswhere we believe a material loss is reasonably possible or probable.We accrue for matters when we believe that losses are probable and can be reasonablyestimated.At March 31,2024 and December 31,2023,we had accruals of$1.1 billion and$1.2 billion in Accrued liabilities and Other liabilities.In manymatters,it is inherently difficult to determine whether a loss is probable or reasonably possible or to estimate the size or range of the potential loss.Somematters may involve compensatory,punitive or other treble damage claims,environmental remediation programs or sanctions that,if granted,could requireus to pay damages or make other expenditures in amounts that cannot be reasonably estimated.Accordingly,while we believe that appropriate accruals havebeen established for losses that are probable and can be reasonably estimated,it is possible that adverse outcomes from such proceedings could exceed theamounts accrued by an amount that could be material to our results of operations or cash flows in any particular reporting period.GM Korea Subcontract Workers Litigation GM Korea Company(GM Korea)is party to litigation with current and former subcontract workers overallegations that they are entitled to the same wages and benefits provided to full-time employees,and to be hired as full-time employees.In May 2018 andSeptember 2020,the Korean labor authorities issued adverse administrative orders finding that GM Korea must hire certain current subcontract workers asfull-time employees.GM Korea appealed the May 2018 and September 2020 orders.Since June 2020,the Seoul High Court(an intermediate-level appellatecourt)ruled against GM Korea in eight subcontract worker claims.Although GM Korea has appealed these decisions to the Supreme Court of the Republicof Korea,GM Korea has since hired certain of its subcontract workers as full-time employees.At March 31,2024,our accrual covering certain assertedclaims and claims that we believe are probable of assertion and for which liability is probable was approximately$133 million.We estimate the reasonablypossible loss in excess of amounts accrued for other current subcontract workers who may assert similar claims to be approximately$66 million at March31,2024.We are currently unable to estimate any reasonably possible material loss or range of loss that may result from additional claims that may beasserted by former subcontract workers.Other Litigation-Related Liability and Tax Administrative Matters Various other legal actions,including class actions,governmental investigations,claims and proceedings are pending against us or our related companies or joint ventures,including,but not limited to,matters arising out of alleged productdefects;employment-related matters;product and workplace safety,vehicle emissions and fuel economy regulations;product warranties;financial services;dealer,supplier and other contractual relationships;competition issues;tax-related matters not subject to the provision of Accounting Standards Codification740,Income Taxes(indirect tax-related matters);product design,manufacture and performance;consumer protection laws;and environmental protectionlaws,including laws regulating air emissions,water discharges,waste management and environmental remediation from stationary sources.We also fromtime to time receive subpoenas and other inquiries or requests for information from agencies or other representatives of U.S.federal,state and foreigngovernments on a variety of issues.There are several putative class actions pending against GM in the U.S.and Canada alleging that various vehicles sold,including model year 20112016Duramax Diesel Chevrolet Silverado and GMC Sierra vehicles,violate federal,state and foreign emission standards.In July 2023,the putative class actionspending in the U.S.were dismissed with prejudice and judgment entered in favor of GM,and plaintiffs appealed the dismissal.We are currently unable toestimate any reasonably possible material loss or range of loss that may result from these actions.GM has also faced a series of additional lawsuits in theU.S.based on these allegations,including a shareholder demand lawsuit that remains pending.There are several putative class actions and three certified class actions pending against GM in the U.S.alleging that various 20112014 model yearvehicles are defective because they excessively consume oil.While many of these proceedings have been dismissed or have been settled for insignificantamounts,several remain outstanding,and in October 2022,we received an adverse jury verdict in the certified class action proceeding involving threestates.We do not believe that the verdict is supported by the evidence and plan to appeal.We are currently unable to estimate any reasonably possiblematerial loss or range of loss that may result from the putative class action proceedings and have previously accrued an immaterial amount related to one ofthe certified class action proceedings.There is one putative class action and one certified class action pending against GM in the U.S.alleging that various 20152022 model year vehicles aredefective because they are equipped with faulty 8-speed transmissions.In March 2023,the judge overseeing the class action concerning 20152019 modelyear vehicles certified 26 state subclasses.The Sixth Circuit has agreed to hear our appeal of this class certification order.The putative class actionconcerning 20202022 model year vehicles17Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)is pending in front of a different judge that has not yet addressed class certification.We have similar cases pending in Canada concerning these vehicles.Weare currently unable to estimate any reasonably possible or probable material loss or range of loss that may result from these proceedings in excess ofamounts accrued.There is a class action pending against GM in the U.S.,and a putative class action in Canada,alleging that 20112016 model year Duramax DieselChevrolet Silverado and GMC Sierra vehicles are equipped with defective fuel pumps that are prone to failure.In March 2023,the U.S.court certified sevenstate subclasses.In the three months ended March 31,2024,we reached an agreement in principle to settle this matter on terms consistent with our accrual.Beyond the class action litigations disclosed,we have several other class action litigations pending at any given time.Historically,relatively few classeshave been certified in these types of cases.Therefore,we will generally only disclose specific class actions if a class is certified and we believe there is areasonably possible material exposure to the Company.We are currently in discussions with the Environmental Protection Agency(EPA)and other regulators regarding potential adjustments to certain prioryear greenhouse gas(GHG)and Corporate Average Fuel Economy(CAFE)accounting balances.Based on progress made in these discussions,in the threemonths ended March 31,2024,we accrued an insignificant amount,which brought the total costs expensed in connection with these matters toapproximately$490 million through March 31,2024.We currently expect to resolve these matters on terms generally consistent with our accrual.Indirect tax-related matters are being evaluated globally pertaining to value added taxes,customs,duties,sales tax,property taxes and other non-incometax-related tax exposures.Certain administrative proceedings are indirect tax-related and may require that we deposit funds in escrow or provide analternative form of security.For indirect tax-related matters,we estimate our reasonably possible loss in excess of amounts accrued to be up toapproximately$2.1 billion at March 31,2024.Takata Matters In November 2020,the National Highway Traffic Safety Administration(NHTSA)directed that we replace the Takata Corporation(Takata)airbag inflators in our GMT900 vehicles,which are full-size pickup trucks and sport utility vehicles(SUVs),and we decided not to contestNHTSAs decision.While we have already begun the process of executing the recall,given the number of vehicles in this population,the recall will takeseveral years to be completed.Accordingly,in the year ended December 31,2020,we recorded a warranty accrual of$1.1 billion for the expected costs ofcomplying with the recall remedy.At March 31,2024,our remaining accrual for these matters was$594 million,and we believe the currently accruedamount remains reasonable.GM has recalled certain vehicles sold outside of the U.S.to replace Takata inflators in those vehicles.There are significant differences in vehicle andinflator design between the relevant vehicles sold internationally and those sold in the U.S.We continue to gather and analyze evidence about these inflatorsand to share our findings with regulators.Any additional recalls relating to these inflators could be material to our results of operations and cash flows.There are several putative class actions that have been filed against GM,including in the U.S.and Canada,arising out of allegations that airbag inflatorsmanufactured by Takata are defective.In March 2023,a U.S.court overseeing one of the putative class actions issued a final judgment in favor of GM on allclaims in eight states at issue in that proceeding.Plaintiffs have appealed this decision.In August 2023,the U.S.court granted class certification as to aLouisiana claim,but denied certification as to seven other states.At this stage of these proceedings,we are unable to provide an estimate of the amounts orrange of reasonably possible material loss.ARC Matters In May 2023,we initiated a voluntary recall covering nearly one million 20142017 model year Buick Enclave,Chevrolet Traverse andGMC Acadia SUVs equipped with driver front airbag inflators manufactured by ARC Automotive,Inc.(ARC),and accrued an insignificant amount for theexpected costs of the recall.As part of its ongoing investigation into ARC airbag inflators,on September 5,2023,NHTSA issued an initial decision thatapproximately 52 million frontal driver and passenger airbag inflators manufactured by ARC and Delphi Automotive Systems LLC over a roughly 20-yearperiod contain a safety-related defect and must be recalled.NHTSAs initial decision is based on the occurrence of seven field ruptures involving ARC-manufactured frontal airbag inflators.We are continuing to investigate the cause of the ruptures in GM vehicles in connection with our existing recalls.Theadministrative record for NHTSAs investigation closed on December 18,2023,and we are waiting for NHTSA to issue its final decision.As indicated inGMs filed comment in the record,we do not believe that further GM vehicle recalls are necessary or appropriate at this time.However,depending on theoutcome of the dispute between NHTSA and ARC,and the possibility of additional recalls,the cost of which may not be fully recoverable,it is reasonablypossible that the costs associated with these matters in excess of amounts accrued could be material,but we are unable to provide an estimate of the amountsor range of reasonably possible material loss at this time.18Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)There are several putative class actions that have been filed against GM,including in the U.S.,Canada and Israel,arising out of allegations that airbaginflators manufactured by ARC are defective.At this stage of these proceedings,we are unable to provide an estimate of the amounts or range of reasonablypossible material loss.Chevrolet Bolt Recall In July 2021,we initiated a voluntary recall for certain 20172019 model year Chevrolet Bolt EVs due to the risk that twomanufacturing defects present in the same battery cell could cause a high voltage battery fire in certain of these vehicles.After further investigation into themanufacturing processes at our battery supplier,LGES,and disassembling battery packs,we determined that the risk of battery cell defects was not confinedto the initial recall population.As a result,in August 2021,we expanded the recall to include all 20172022 model year Chevrolet Bolt EV and ChevroletBolt Electric Utility Vehicles(EUVs).LG Electronics,Inc.(LGE)and LGES(collectively,LG),have agreed to reimburse GM for certain costs andexpenses associated with the recall.The commercial negotiations with LG also resolved other commercial matters associated with our Ultium CellsHoldings LLC joint venture with LGES.Accordingly,as of December 31,2023,we had accrued a total of$2.6 billion and recognized receivables totaling$1.6 billion in connection with these matters.At March 31,2024,our remaining accrual for these matters was$0.5 billion.These charges reflect our currentbest estimate for the cost of the recall remedy,which includes non-traditional recall remedies provided by GM to enhance customer satisfaction.The actualcosts of the recall could be materially higher or lower.In addition,putative class actions have been filed against GM in the U.S.and Canada alleging that the batteries contained in the Bolt EVs and EUVsincluded in the recall population are defective.GM has reached an agreement in principle to settle the U.S.class actions for an immaterial amount.Opel/Vauxhall Sale In 2017,we sold the Opel and Vauxhall businesses and certain other assets in Europe(the Opel/Vauxhall Business)to PSA Group,nowStellantis N.V.(Stellantis),under a Master Agreement(the Agreement).We also sold the European financing subsidiaries and branches to Banque PSAFinance S.A.and BNP Paribas Personal Finance S.A.Although the sale reduced our new vehicle presence in Europe,we may still be impacted by actionstaken by regulators related to vehicles sold before the sale.General Motors Holdings LLC agreed,on behalf of our wholly owned subsidiary(the Seller),toindemnify Stellantis for certain losses resulting from any inaccuracy of the representations and warranties or breaches of our covenants included in theAgreement and for certain other liabilities,including costs related to certain emissions claims,product liabilities and recalls.We are unable to estimate anyreasonably possible material loss or range of loss that may result from these actions either directly or through an indemnification claim from Stellantis.Certain of these indemnification obligations are subject to time limitations,thresholds and/or caps as to the amount of required payments.Currently,various consumer lawsuits have been filed against the Seller and Stellantis in Germany,the United Kingdom(UK),Austria and the Netherlandsalleging that Opel and Vauxhall vehicles sold by the Seller violated applicable emissions standards.In addition,we indemnified Stellantis for an immaterialamount for certain recalls that Stellantis has conducted or will conduct,including recalls in certain geographic locations that Stellantis intends to conductrelated to Takata inflators in legacy Opel vehicles.We may in the future be required to further indemnify Stellantis relating to its Takata recalls,but webelieve such further indemnification to be remote at this time.European Commission and UK Competition and Markets Authority Matter In March 2022,the European Commission and UK Competition andMarkets Authority(CMA)conducted inspections at the premises of,and sent out formal requests for information to several companies and associationsactive in the automotive sector.The investigations concern conduct related to coordination regarding the collection,treatment and recovery of end-of-lifecars and vans(ELVs),which are considered waste.GM was not the subject of the inspections but has since received requests for information related toactivities conducted by Opel,a former subsidiary business we sold to Stellantis in 2017.GM has replied to the European Commissions and CMAs requestsfor information.The inspections and requests for information are preliminary investigatory steps and do not prejudge the outcome of the investigations.Ifan infringement is established as to Opels conduct,there are a range of possible outcomes,including a fine,which could be material.We cannot currentlypredict the outcome or what remedies,if any,may be required.Product Liability We recorded liabilities of$636 million and$615 million in Accrued liabilities and Other liabilities at March 31,2024 and December 31,2023,for the expected cost of all known product liability claims,plus an estimate of the expected cost for product liability claims that have already beenincurred and are expected to be filed in the future for which we are self-insured.It is reasonably possible that our accruals for product liability claims mayincrease in future periods in material amounts,although we cannot estimate a reasonable range of incremental loss based on currently available information.We believe that any judgment against us involving our products for actual damages will be adequately covered by our recorded accruals and,whereapplicable,excess liability insurance coverage.19Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)Guarantees We enter into indemnification agreements for liability claims involving products manufactured primarily by certain joint ventures.Theseguarantees terminate in years ranging from 2024 to 2029,or upon the occurrence of specific events or are ongoing.We believe that the related potentialcosts incurred are adequately covered by our recorded accruals,which are insignificant.The maximum future undiscounted payments mainly based onroyalties received associated with vehicles sold to date were$3.5 billion for these guarantees at March 31,2024 and December 31,2023,the majority ofwhich relates to the indemnification agreements.We provide payment guarantees on commercial loans outstanding with third parties such as dealers.In some instances,certain assets of the party or ourpayables to the party whose debt or performance we have guaranteed may offset,to some degree,the amount of any potential future payments.We are alsoexposed to residual value guarantees associated with certain sales to rental car companies.We periodically enter into agreements that incorporate indemnification provisions in the normal course of business.It is not possible to estimate ourmaximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations.Insignificant amounts have been recordedfor such obligations as the majority of them are not probable or estimable at this time and the fair value of the guarantees at issuance was insignificant.Refer to the Opel/Vauxhall Sale section of this note for additional information on our indemnification obligations to Stellantis under the Agreement.Supplier Finance Programs Third-party finance providers offer certain suppliers the option for payment in advance of their invoice due date throughfinancing programs that we established.We retain our obligation to the participating suppliers,and we make payments directly to the third-party financeproviders on the original invoice due date pursuant to the original invoice terms.There are no assets pledged as security or other forms of guaranteesprovided for committed payments.Our outstanding eligible balances under our supplier finance programs were$1.3 billion at March 31,2024 andDecember 31,2023,which are recorded in Accounts payable(principally trade).Note 14.Income TaxesIn the three months ended March 31,2024 and 2023,Income tax expense of$762 million and$428 million was primarily due to tax expense attributableto entities included in our effective tax rate calculation.Note 15.Restructuring and Other InitiativesWe have executed various restructuring and other initiatives and we may execute additional initiatives in the future,if necessary,to streamlinemanufacturing capacity and reduce other costs to improve the utilization of remaining facilities.To the extent these programs involve voluntary separations,a liability is generally recorded at the time offers to employees are accepted.To the extent these programs provide separation benefits in accordance withpre-existing agreements,a liability is recorded once the amount is probable and reasonably estimable.If employees are involuntarily terminated,a liabilityis generally recorded at the communication date.Related charges are recorded in Automotive and other cost of sales and Automotive and other selling,general and administrative expense.The following table summarizes the reserves and charges related to restructuring and other initiatives,including postemployment benefit reserves andcharges:Three Months EndedMarch 31,2024March 31,2023Balance at beginning of period$779$520 Additions,interest accretion and other114 980 Payments(325)(51)Revisions to estimates and effect of foreign currency(3)Balance at end of period$565$1,450 In the three months ended March 31,2024,restructuring and other initiatives included strategic activities in GMNA related to Buick dealerships.Werecorded charges of$96 million in the three months ended March 31,2024,which are included in the table above,and incurred$162 million in net cashoutflows resulting from these dealer restructurings.Cumulatively,we have20Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)incurred charges of approximately$1.2 billion and net cash outflows of$956 million related to this initiative.The remaining$220 million is expected to bepaid by the end of 2024.In March 2023,we announced a voluntary separation program(VSP)to accelerate attrition related to the cost reduction program announced in January2023.We recorded charges in GMNA of$1.0 billion in the year ended December 31,2023,primarily related to employee separation charges of$905million,which are reflected in the table above,and non-cash pension curtailment and settlement charges of approximately$130 million,not reflected in thetable above.As of March 31,2024,we have incurred$878 million of cash outflows resulting from the VSP.This program was substantially complete atMarch 31,2024.In October 2023,Cruise voluntarily paused all of its driverless,supervised and manual AV operations in the U.S.while it examines its processes,systemsand tools.In conjunction with these actions,Cruise recorded charges before noncontrolling interest of$529 million in the year ended December 31,2023,primarily related to supplier related charges of$212 million and employee separation charges of$67 million,both of which are included in the table above.Additionally,Cruise recorded non-cash restructuring charges of$250 million primarily related to impairments,which are not reflected in the table above.Asof March 31,2024,we have incurred$70 million of cash outflows resulting from these restructuring activities.We expect the remaining cash outflowsrelated to these activities of approximately$209 million to be complete by the end of 2024.Note 16.Stockholders Equity and Noncontrolling InterestsWe have 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance.We had no shares of preferred stock issuedand outstanding at March 31,2024 and December 31,2023.We had 1.1 billion and 1.2 billion shares of common stock issued and outstanding at March 31,2024 and December 31,2023.Common Stock Holders of our common stock are entitled to dividends at the sole discretion of our Board of Directors.Our total dividends paid oncommon stock were$139 million and$126 million for the three months ended March 31,2024 and 2023.In November 2023,our Board of Directors increased the capacity under the share repurchase program by$10.0 billion to an aggregate of$11.4 billionand approved an accelerated share repurchase(ASR)program to repurchase an aggregate amount of$10.0 billion of our common stock.In December 2023,pursuant to the agreements entered into in connection with the ASR(collectively,the ASR Agreements),we advanced$10.0 billion and receivedapproximately 215 million shares of our common stock with a value of$6.8 billion,which were immediately retired.In March 2024,upon the firstsettlement of the transactions contemplated under the ASR Agreements,we received approximately 4 million additional shares,which were immediatelyretired.The final number of shares ultimately to be purchased will be based on the average of the daily volume-weighted average prices of our commonstock during the term of the ASR Agreements,less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements.Upon final settlement,we may receive additional shares of common stock,or,under certain circumstances,we may be required to deliver shares of commonstock or to make a cash payment,at our election.The final settlement of the transactions contemplated under the ASR Agreements in connection with theASR program is expected to occur no later than the three months ending December 31,2024.In the three months ended March 31,2024,in addition to shares received under the ASR program,we purchased approximately 8 million shares of ouroutstanding common stock for$331 million,including an insignificant amount related to purchases initiated in March 2024 that settled in April 2024,aspart of the share repurchase program.In the three months ended March 31,2023,we purchased 9 million shares of our outstanding common stock for$369 million.Cruise Common Shares During the three months ended March 31,2024 and 2023,GM Cruise Holdings LLC(Cruise Holdings)issued an insignificantamount of Class B Common Shares to net settle vested awards under Cruises 2018 Employee Incentive Plan and to fund the payment of statutory taxwithholding obligations resulting from the settlement or exercise of vested awards.The Class B Common Shares are classified as noncontrolling interests inour condensed consolidated financial statements except for certain shares that are liability classified that have an insignificant recorded value at March 31,2024 and December 31,2023.21Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following table summarizes the significant components of Accumulated other comprehensive loss:Three Months EndedMarch 31,2024March 31,2023Foreign Currency Translation AdjustmentsBalance at beginning of period$(2,457)$(2,776)Other comprehensive income(loss)and noncontrolling interests,net of reclassification adjustment andtax(a)(b)(c)(293)164 Balance at end of period$(2,750)$(2,611)Defined Benefit PlansBalance at beginning of period$(7,665)$(4,851)Other comprehensive income(loss)before reclassification adjustment,net of tax(c)51(39)Reclassification adjustment,net of tax(c)25 4 Other comprehensive income(loss),net of tax(c)76(35)Balance at end of period(d)$(7,589)$(4,886)_(a)The noncontrolling interests were insignificant in the three months ended March 31,2024 and 2023.(b)The reclassification adjustment was insignificant in the three months ended March 31,2024 and 2023.(c)The income tax effect was insignificant in the three months ended March 31,2024 and 2023.(d)Primarily consists of unamortized actuarial loss on our defined benefit plans.Refer to Note 2.Significant Accounting Policies of our 2023 Form 10-K for additionalinformation.Note 17.Earnings Per ShareThree Months EndedMarch 31,2024March 31,2023Basic earnings per shareNet income(loss)attributable to stockholders$2,980$2,395 Less:cumulative dividends on subsidiary preferred stock(a)(9)(27)Net income(loss)attributable to common stockholders$2,970$2,369 Weighted-average common shares outstanding1,155 1,396 Basic earnings per common share$2.57$1.70 Diluted earnings per shareNet income(loss)attributable to common stockholders diluted$2,970$2,369 Weighted-average common shares outstanding basic1,155 1,396 Dilutive effect of awards under stock incentive plans7 6 Weighted-average common shares outstanding diluted1,162 1,402 Diluted earnings per common share$2.56$1.69 Potentially dilutive securities(b)17 22 _(a)Includes an insignificant amount in participating securities income from a subsidiary for the three months ended March 31,2024.(b)Potentially dilutive securities attributable to outstanding stock options,Restricted Stock Units(RSUs)and Performance Stock Units(PSUs)at March 31,2024 and 2023were excluded from the computation of diluted earnings per share(EPS)because the securities would have had an antidilutive effect.Note 18.Segment ReportingWe analyze the results of our business through the following reportable segments:GMNA,GMI,Cruise and GM Financial.The chief operating decision-maker evaluates the operating results and performance of our automotive segments and Cruise22Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)through earnings before interest and income taxes(EBIT)-adjusted,which is presented net of noncontrolling interests.The chief operating decision-makerevaluates GM Financial through earnings before income taxes(EBT)-adjusted because interest income and interest expense are part of operating resultswhen assessing and measuring the operational and financial performance of the segment.Each segment has a manager responsible for executing ourstrategic initiatives.While not all vehicles within a segment are individually profitable,those vehicles attract customers to dealer showrooms and helpmaintain sales volumes for other,more profitable vehicles and contribute towards our commitment to an all-electric future and meeting required fuelefficiency standards.As a result of these and other factors,we do not manage our business on an individual brand or vehicle basis.Substantially all of the trucks,crossovers,cars and automobile parts produced are marketed through retail dealers in North America and throughdistributors and dealers outside of North America,the substantial majority of which are independently owned.In addition to the products sold to dealers forconsumer retail sales,trucks,crossovers and cars are also sold to fleet customers,including daily rental car companies,commercial fleet customers,leasingcompanies and governments.Fleet sales are completed through the dealer network and in some cases directly with fleet customers.Retail and fleetcustomers can obtain a wide range of after-sale vehicle services and products through the dealer network,such as maintenance,light repairs,collisionrepairs,vehicle accessories and extended service warranties.GMNA meets the demands of customers in North America and GMI primarily meets the demands of customers outside North America with vehiclesdeveloped,manufactured and/or marketed under the Buick,Cadillac,Chevrolet and GMC brands.We also have equity ownership stakes in entities that meetthe demands of customers in other countries,primarily China,with vehicles developed,manufactured and/or marketed under the Baojun,Buick,Cadillac,Chevrolet and Wuling brands.Cruise is our global segment responsible for the development and commercialization of AV technology,and includes AV-related engineering and other costs.We provide automotive financing services through our GM Financial segment.Our automotive interest income and interest expense,legacy costs from the Opel/Vauxhall Business(primarily pension costs),corporate expenditures andcertain revenues and expenses that are not part of a reportable segment are recorded centrally in Corporate.Corporate assets primarily consist of cash andcash equivalents,marketable debt securities and intersegment balances.All intersegment balances and transactions have been eliminated in consolidation.The following tables summarize key financial information by segment:At and For the Three Months Ended March 31,2024GMNAGMICorporateEliminationsTotalAutomotiveCruiseGMFinancialEliminations/ReclassificationsTotalNet sales and revenue$36,099$3,082$32$39,212$25$3,811$(34)$43,014 Earnings(loss)before interest and taxes-adjusted$3,840$(10)$(245)$3,585$(442)$737$(8)$3,871 Adjustments(a)$(96)$(96)$(96)Automotive interest income186 Automotive interest expense(219)Net income(loss)attributable tononcontrolling interests(27)Income(loss)before income taxes3,715 Income tax benefit(expense)(762)Net income(loss)2,953 Net loss(income)attributable tononcontrolling interests27 Net income(loss)attributable tostockholders$2,980 Equity in net assets of nonconsolidatedaffiliates$2,885$6,184$9,069$1,670$10,740 Goodwill and intangibles$2,054$701$2,755$715$1,353$4,823 Total assets$158,677$25,777$38,991$(79,334)$144,111$3,977$131,998$(3,496)$276,591 Depreciation and amortization$1,409$125$5$1,540$5$1,253$2,798 Impairment charges$Equity income(loss)(b)$127$(108)$19$32$50 _(a)Consists of charges for strategic activities related to Buick dealerships in GMNA.(b)Equity earnings related to Ultium Cells Holdings LLC are presented in Automotive and other cost of sales as this entity is integral to the operations of our business by providing battery cells for our EVs.In the threemonths ended March 31,2024,equity earnings related to Ultium Cells Holdings LLC were$156 million.23Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)At and For the Three Months Ended March 31,2023GMNAGMICorporateEliminationsTotalAutomotiveCruiseGMFinancialEliminations/ReclassificationsTotalNet sales and revenue$32,889$3,727$31$36,646$25$3,343$(29)$39,985 Earnings(loss)before interest and taxes-adjusted$3,576$347$(327)$3,596$(561)$771$(3)$3,803 Adjustments(a)$(974)$(974)$(974)Automotive interest income229 Automotive interest expense(234)Net income(loss)attributable tononcontrolling interests(49)Income(loss)before income taxes2,775 Income tax benefit(expense)(428)Net income(loss)2,346 Net loss(income)attributable tononcontrolling interests49 Net income(loss)attributable tostockholders$2,395 Equity in net assets of nonconsolidatedaffiliates$2,000$6,817$8,818$1,725$10,542 Goodwill and intangibles$2,154$732$4$2,890$728$1,350$4,968 Total assets$144,903$24,992$40,880$(69,676)$141,098$5,217$122,789$(2,099)$267,004 Depreciation and amortization$1,428$122$5$1,555$4$1,251$2,810 Impairment charges$Equity income(loss)(b)$(46)$81$34$41$75 _(a)Consists of charges for strategic activities related to Buick dealerships and charges related to the VSP in GMNA.(b)Equity earnings related to Ultium Cells Holdings LLC are presented in Automotive and other cost of sales as this entity is integral to the operations of our business by providing battery cells for our EVs.In the threemonths ended March 31,2023,equity earnings related to Ultium Cells Holdings LLC were insignificant.24Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsBasis of Presentation This Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)should be read inconjunction with the accompanying condensed consolidated financial statements and the notes thereto,and the audited consolidated financial statements andnotes thereto included in our 2023 Form 10-K.Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actualresults to differ materially from those projected.Refer to the Forward-Looking Statements section of this MD&A and Part 1,Item 1A.Risk Factors of our2023 Form 10-K for a discussion of these risks and uncertainties.Except for per share amounts or as otherwise specified,dollar amounts presented withintables are stated in millions.Certain columns and rows may not add due to rounding.Overview Our vision for the future is a world with zero crashes,zero emissions and zero congestion.We will adapt to customer preferences while executingour growth-focused strategy to invest in EVs,hybrids,AVs,software-enabled services and other new business opportunities.To support strong margins andcash flow during this transition,we are strengthening our market position in profitable internal combustion engine(ICE)vehicles,such as trucks and SUVs.We plan to execute our strategy with a steadfast commitment to good corporate citizenship through more sustainable operations and a leading health andsafety culture.Our financial performance continues to be driven by the strength of our vehicle portfolio including high margin full-size pickup trucks and SUVs,strongconsumer demand for our products and the execution of our core business strategy.We remain focused on reducing fixed costs and maintaining pricingdiscipline.We are monitoring industry pricing pressures,higher interest rates,inflation and consumer demand trends.We continue to prioritize driving downcosts and building scale in our EV portfolio to improve profitability.Cruise has also resumed operations with a focused and more capital efficient operatingplan.As we continue to assess our performance and the needs of our evolving business,additional restructuring and rationalization actions could be required.These actions could give rise to future asset impairments or other charges,which may have a material impact on our operating results.Refer to theConsolidated Results and regional sections of this MD&A for additional information.We face continuing market,operating and regulatory challenges in several countries across the globe due to,among other factors,competitive pressures,our product portfolio offerings,heightened emission standards,labor disruptions,foreign exchange volatility,evolving trade policy and political uncertainty.Refer to Part I,Item 1A.Risk Factors in our 2023 Form 10-K for a discussion of these challenges.For the year ending December 31,2024,we expect Net income attributable to stockholders of between$10.1 billion and$11.5 billion,EBIT-adjusted ofbetween$12.5 billion and$14.5 billion,EPS-diluted of between$8.94 and$9.94 and EPS-diluted-adjusted of between$9.00 and$10.00.Refer to the Non-GAAP Measures section of this MD&A for additional information.The following table reconciles expected Net income attributable to stockholders under U.S.GAAP to expected EBIT-adjusted(dollars in billions):Year Ending December 31,2024Net income attributable to stockholders$10.1-11.5Income tax expense2.2-2.8Automotive interest expense,net0.1Adjustments(a)0.1EBIT-adjusted$12.5-14.5_(a)Refer to the reconciliation of Net income attributable to stockholders under U.S.GAAP to EBIT-adjusted within the MD&A for adjustment details.These expectedfinancial results do not include the potential impact of future adjustments related to special items.25Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESThe following table reconciles expected EPS-diluted under U.S.GAAP to expected EPS-diluted-adjusted:Year Ending December 31,2024Diluted earnings per common share$8.94-9.94Adjustments(a)0.06EPS-diluted-adjusted$9.00-10.00_(a)Refer to the reconciliation of diluted earnings per common share under U.S.GAAP to EPS-diluted-adjusted within the MD&A for adjustment details.These expectedfinancial results do not include the potential impact of future adjustments related to special items.GMNA Industry sales in North America were 4.8 million units in the three months ended March 31,2024,representing an increase of 6.2%compared tothe corresponding period in 2023.U.S.industry sales were 3.9 million units in the three months ended March 31,2024,representing an increase of 4.8%compared to the corresponding period in 2023.Our total vehicle sales in the U.S.,our largest market in North America,were 0.6 million units for market share of 15.4%in the three months endedMarch 31,2024,representing a decrease of 1.0 percentage point compared to the corresponding period in 2023.We expect to sustain relatively strong EBIT-adjusted margins in 2024 on the continued strength of our product portfolio,improved EV margins andongoing fixed cost reduction efforts,partially offset by pricing moderation with increased incentives.While we expect EV margins to improve in 2024,it ispossible that we will continue to recognize losses to adjust inventory to net realizable value.Our outlook is dependent on the resiliency of the U.S.economy,continuing improvement of supply chain availability,EV-related cost reduction and overall economic conditions.GMI Industry sales in China were 5.6 million units in the three months ended March 31,2024,representing an increase of 10.1%compared to thecorresponding period in 2023.Our total vehicle sales in China were 0.4 million units for a market share of 7.9%in the three months ended March 31,2024,representing a decrease of 1.2 percentage points compared to the corresponding period in 2023.The domestic macro-economic environment and ongoinggeopolitical tensions continue to place pressure on Chinas automotive industry and our vehicle sales in China.Our Automotive China JVs generated anequity loss of$0.1 billion in the three months ended March 31,2024,driven primarily by reduced production in an effort to balance dealer inventory levels.Price competition,growing customer acceptance of domestic brands and demand for New Energy Vehicles(NEVs),and a more challenging regulatoryenvironment related to emissions,fuel consumption and NEVs continue to place pressure on our operations in China.Outside of China,industry sales were 6.3 million units in the three months ended March 31,2024,representing a decrease of 1.2%compared to thecorresponding period in 2023.Our total vehicle sales outside of China were 0.2 million units for market share of 3.1%in the three months ended March 31,2024,which represents a decrease of 0.2 percentage points compared to the corresponding period in 2023.Cruise Cruise Holdings,our majority-owned subsidiary,is pursuing the development and commercialization of AV technology.In October 2023,a hit-and-run accident involving a pedestrian and a third-party vehicle occurred,which resulted in the pedestrian being thrown into the path of a Cruise AV.During the resulting investigation,regulators perceived that Cruise representatives were not explicit about a secondary movement of the Cruise AV and,as aresult,the California Department of Motor Vehicles(DMV)suspended Cruises permits to operate AVs in California without a safety driver.Shortlythereafter,Cruise voluntarily paused all of its driverless,supervised and manual AV operations in the U.S.while it examines its processes,systems andtools.This orderly pause is designed to rebuild public trust while Cruise undertakes a comprehensive safety review.In addition,certain federal and stateagencies,including the California DMV,the California Public Utilities Commission,NHTSA,the U.S.Department of Justice and the SEC,have openedinvestigations or made inquiries to us and Cruise in connection with the incident.We and Cruise are investigating these matters internally and are activelycooperating with all government regulators and agencies in connection with these matters.In April 2024,Cruise announced plans to resume manual drivingto create maps and gather road information,starting in Phoenix,Arizona.At this time,we are not able to predict when Cruise will resume driverlessoperations or commercial AV operations.Refer to Part I,Item 1A.Risk Factors of our 2023 Form 10-K for a further discussion of the risks associated withour AV strategy.Vehicle Sales The principal factors that determine consumer vehicle preferences in the markets in which we operate include overall vehicle design,price,quality,available options,safety,reliability,fuel economy or range and functionality.Market leadership in individual countries in which we compete varieswidely.26Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESWe present both wholesale and total vehicle sales data to assist in the analysis of our revenue and market share.Wholesale vehicle sales data consists ofsales to GMs dealers and distributors as well as sales to the U.S.government and excludes vehicles sold by our joint ventures.Wholesale vehicle sales datacorrelates to our revenue recognized from the sale of vehicles,which is the largest component of Automotive net sales and revenue.In the three monthsended March 31,2024,26.0%of our wholesale vehicle sales volume was generated outside the U.S.The following table summarizes wholesale vehiclesales by automotive segment(vehicles in thousands):Three Months EndedMarch 31,2024March 31,2023GMNA792 88.4r3 83.7%GMI104 11.61 16.3%Total895 100.04 100.0%Total vehicle sales data represents:(1)retail sales(i.e.,sales to consumers who purchase new vehicles from dealers or distributors);(2)fleet sales(i.e.,sales to large and small businesses,governments and daily rental car companies);and(3)certain vehicles used by dealers in their business.Total vehiclesales data includes all sales by joint ventures on a total vehicle basis,not based on our percentage ownership interest in the joint venture.Certain jointventure agreements in China allow for the contractual right to report vehicle sales of non-GM trademarked vehicles by those joint ventures,which areincluded in the total vehicle sales we report for China.While total vehicle sales data does not correlate directly to the revenue we recognize during aparticular period,we believe it is indicative of the underlying demand for our vehicles.Total vehicle sales data represents managements good faith estimatebased on sales reported by our dealers,distributors and joint ventures;commercially available data sources such as registration and insurance data;andinternal estimates and forecasts when other data is not available.27Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESThe following table summarizes industry and GM total vehicle sales and our related competitive position by geographic region(vehicles in thousands):Three Months Ended March 31,2024March 31,2023 IndustryGMMarket ShareIndustryGMMarket ShareNorth AmericaUnited States3,860 594 15.4%3,682 603 16.4%Other892 115 12.9y3 103 13.0%Total North America4,752 709 14.9%4,475 707 15.8%Asia/Pacific,Middle East and AfricaChina(a)5,617 441 7.9%5,103 462 9.1%Other5,500 113 2.0%5,543 108 1.9%Total Asia/Pacific,Middle East and Africa11,117 554 5.0,646 570 5.4%South AmericaBrazil514 57 11.1G1 71 15.1%Other308 27 8.882 35 9.1%Total South America823 84 10.24 106 12.4%Total in GM markets16,692 1,347 8.1,974 1,382 8.7%Total Europe4,294%4,089%Total Worldwide(b)20,986 1,348 6.4 ,063 1,383 6.9%United StatesCars728 50 6.8p7 61 8.6%Trucks936 291 31.16 297 29.8%Crossovers2,196 253 11.5%1,979 246 12.4%Total United States3,860 594 15.4%3,682 603 16.4%China(a)SGMS155 173 SGMW287 289 Total China5,617 441 7.9%5,103 462 9.1%_(a)Includes sales by the Automotive China JVs:SAIC General Motors Sales Co.,Ltd.(SGMS)and SAIC GM Wuling Automobile Co.,Ltd.(SGMW).(b)Cuba,Iran,North Korea,Sudan and Syria are subject to broad economic sanctions.Accordingly,these countries are excluded from industry sales data andcorresponding calculation of market share.As discussed above,total vehicle sales and market share data provided in the table above includes fleet vehicles.Certain fleet transactions,particularlysales to daily rental car companies,are generally less profitable than retail sales to end customers.The following table summarizes estimated fleet sales andthose sales as a percentage of total vehicle sales(vehicles in thousands):Three Months EndedMarch 31,2024March 31,2023GMNA141 177 GMI68 90 Total fleet sales209 267 Fleet sales as a percentage of total vehicle sales15.5.3(Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESGM Financial We believe that offering a comprehensive suite of financing products will generate incremental sales of our vehicles,drive incrementalGM Financial earnings and help support our sales throughout various economic cycles.GM Financials penetration of our retail sales in the U.S.was 40%inthe three months ended March 31,2024 and 46%in the corresponding period in 2023.Penetration levels vary depending on incentive financing programsavailable and competing third-party financing products in the market.GM Financials prime loan originations as a percentage of total loan originations inNorth America decreased to 79%in the three months ended March 31,2024 from 83%in the corresponding period in 2023.In the three months endedMarch 31,2024,GM Financials revenue consisted of leased vehicle income of 47%,retail finance charge income of 39%and commercial finance chargeincome of 7%.GM Financials leasing program is exposed to residual values,which are heavily dependent on used vehicle prices.Gains on terminations of leasedvehicles of$0.2 billion were included in GM Financial interest,operating and other expenses for the three months ended March 31,2024 and 2023.Thefollowing table summarizes the estimated residual value based on GM Financials most recent estimates and the number of units included in GM FinancialEquipment on operating leases,net by vehicle type(units in thousands):March 31,2024December 31,2023Residual ValueUnitsPercentageResidual ValueUnitsPercentageCrossovers$12,659 632 67.6%$12,830 648 67.5%Trucks6,885 209 22.3%6,793 210 21.9%SUVs2,189 55 5.9%2,304 58 6.0rs671 39 4.2s4 44 4.6%Total$22,404 934 100.0%$22,661 960 100.0%Consolidated Results We review changes in our results of operations under five categories:Volume,Mix,Price,Cost and Other.Volume measures theimpact of changes in wholesale vehicle volumes driven by industry volume,market share and changes in dealer stock levels.Mix measures the impact ofchanges to the regional portfolio due to product,model,trim,country and option penetration in current year wholesale vehicle volumes.Price measures theimpact of changes related to Manufacturers Suggested Retail Price and various sales allowances.Cost primarily includes:(1)material and freight;(2)manufacturing,engineering,advertising,administrative and selling and warranty expense;and(3)non-vehicle related activity.Other primarily includesforeign exchange and non-vehicle related automotive revenues as well as equity income or loss from our nonconsolidated affiliates.Refer to the regionalsections of this MD&A for additional information.Total Net Sales and RevenueThree Months EndedFavorable/(Unfavorable)%Variance Due ToMarch 31,2024March 31,2023VolumeMixPriceOther(Dollars in billions)GMNA$36,099$32,889$3,210 9.8%$2.8$0.2$(0.2)$0.4 GMI3,082 3,727(645)(17.3)%$(0.8)$0.2$Corporate32 31 1 3.2%$Automotive39,212 36,646 2,566 7.0%$2.0$0.4$(0.2)$0.3 Cruise25 25%$GM Financial3,811 3,343 468 14.0%$0.5 Eliminations/reclassifications(34)(29)(5)(17.2)%$Total net sales and revenue$43,014$39,985$3,029 7.6%$2.0$0.4$(0.2)$0.8 Refer to the regional sections of this MD&A for additional information on Volume,Mix,Price and Other.29Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESAutomotive and Other Cost of SalesThree Months EndedFavorable/(Unfavorable)%Variance Due ToMarch 31,2024March 31,2023VolumeMixCostOther(Dollars in billions)GMNA$30,766$28,421$(2,345)(8.3)%$(1.9)$(0.8)$0.4$GMI2,803 3,235 432 13.4%$0.6$(0.1)$Corporate28 60 32 53.3%$Cruise400 532 132 24.8%$0.1 Eliminations(1)(1)n.m.$Total automotive and other cost ofsales$33,996$32,247$(1,749)(5.4)%$(1.3)$(1.0)$0.5$_n.m.=not meaningfulIn the three months ended March 31,2024,decreased Cost was primarily due to:(1)the absence of charges of$0.7 billion related to the VSP;(2)decreased engineering costs of$0.2 billion;and(3)decreased material and freight costs of$0.2 billion;partially offset by(4)increased manufacturing laborcosts of$0.2 billion;(5)increased campaigns and other warranty-related costs of$0.1 billion;and(6)increased costs of$0.3 billion due to otherindividually insignificant items.Refer to the regional sections of this MD&A for additional information on Volume and Mix.Automotive and Other Selling,General and Administrative ExpenseThree Months EndedFavorable/(Unfavorable)March 31,2024March 31,2023%Automotive and other selling,general and administrative expense$2,175$2,547$372 14.6%In the three months ended March 31,2024,Automotive and other selling,general and administrative expense decreased primarily due to decreasedadvertising costs of$0.2 billion and the absence of charges of$0.2 billion related to the VSP.Interest Income and Other Non-operating Income,netThree Months EndedFavorable/(Unfavorable)March 31,2024March 31,2023%Interest income and other non-operating income,net$302$409$(107)(26.2)%Income Tax ExpenseThree Months EndedFavorable/(Unfavorable)March 31,2024March 31,2023%Income tax expense$762$428$(334)(78.0)%In the three months ended March 31,2024,Income tax expense increased primarily due to a higher effective tax rate and higher pre-tax income.For the three months ended March 31,2024,our effective tax rate-adjusted(ETR-adjusted)was 20.6%.We expect our adjusted effective tax rate to bebetween 18%and 20%for the year ending December 31,2024.Refer to Note 14 to our condensed consolidated financial statements for additional information related to Income tax expense.30Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESGM North AmericaThree Months EndedFavorable/(Unfavorable)%Variance Due ToMarch 31,2024March 31,2023VolumeMixPriceCostOther(Dollars in billions)Total net sales and revenue$36,099$32,889$3,210 9.8%$2.8$0.2$(0.2)$0.4 EBIT-adjusted$3,840$3,576$264 7.4%$0.9$(0.6)$(0.2)$0.1$0.1 EBIT-adjusted margin10.6.9%(0.3)%(Vehicles in thousands)Wholesale vehicle sales792 723 69 9.5%GMNA Total Net Sales and Revenue In the three months ended March 31,2024,Total net sales and revenue increased primarily due to:(1)increased netwholesale volumes primarily due to increased sales of mid-size pickup trucks and full-size pickup trucks,partially offset by decreased sales of crossovervehicles;(2)favorable Other due to increased sales of parts and accessories;and(3)favorable Mix due to increased sales of full-size pickup trucks and full-size SUVs,partially offset by decreased sales of crossover vehicles and increased sales of mid-size pickup trucks and passenger cars;partially offset by(4)unfavorable pricing for carryover vehicles.GMNA EBIT-Adjusted In the three months ended March 31,2024,EBIT-adjusted increased primarily due to:(1)increased net wholesale volumesprimarily due to increased sales of full-size pickup trucks and mid-size pickup trucks,partially offset by decreased sales of crossover vehicles;and(2)favorable Cost primarily due to decreased material and freight costs of$0.3 billion and decreased advertising,selling and administrative costs of$0.2billion,partially offset by increased manufacturing labor costs of$0.2 billion and increased campaigns and other warranty-related costs of$0.1 billion;partially offset by(3)unfavorable Mix due to decreased sales of crossover vehicles and increased sales of mid-size pickup trucks,partially offset byincreased sales of full-size pickup trucks;and(4)unfavorable pricing for carryover vehicles.GM InternationalThree Months EndedFavorable/(Unfavorable)Variance Due ToMarch 31,2024March 31,2023%VolumeMixPriceCostOther(Dollars in billions)Total net sales and revenue$3,082$3,727$(645)(17.3)%$(0.8)$0.2$EBIT(loss)-adjusted$(10)$347$(357)n.m.$(0.2)$0.1$(0.1)$(0.2)EBIT(loss)-adjusted margin(0.3)%9.3%(9.6)%Equity income(loss)Automotive China$(106)$83$(189)n.m.EBIT-adjusted excludingEquity income(loss)$96$264$(168)(63.6)%(Vehicles in thousands)Wholesale vehicle sales104 141(37)(26.2)%_n.m.=not meaningfulThe vehicle sales of our Automotive China JVs are not recorded in Total net sales and revenue.The results of our joint ventures are recorded in Equityincome(loss),which is included in EBIT(loss)-adjusted above.GMI Total Net Sales and Revenue In the three months ended March 31,2024,Total net sales and revenue decreased primarily due to:(1)decreased netwholesale volumes in Brazil primarily due to decreased Fleet sales,Argentina and Colombia due to industry downturn;partially offset by(2)favorable Mixin Brazil.GMI EBIT-Adjusted In the three months ended March 31,2024,EBIT(loss)-adjusted decreased primarily due to:(1)decreased net wholesale volumes;(2)unfavorable variable Cost;and(3)unfavorable Other primarily due to decreased Automotive China equity income.31Table of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIESWe view the Chinese market as important to our global growth strategy and are employing a multi-brand approach.In the coming years,we plan toleverage our global architectures to introduce a number of new products under the Buick,Chevrolet and Cadillac brands in Ch
2024-06-24
62页
5星级
May 30,20241Q FY25Performance ReviewCopyright Dell Inc.All Rights Reserved.2DisclosuresNON-GAAP FINA.
2024-06-11
48页
5星级
1 Contact for Media and Investors:Email: Tel:( 86)571-8985-3378 NetEase Announces First Quarter 2024 Unaudited Financial Results Hangzhou,China,May 23,2024-NetEase,Inc.(NASDAQ:NTES and HKEX:9999,“NetEase”or the“Company”),a leading internet and game services provider,today announced its unaudited financial results for the first quarter ended March 31,2024.First Quarter 2024 Financial Highlights Net revenues were RMB26.9 billion(US$3.7 billion),an increase of 7.2%compared with the first quarter of 2023.Games and related value-added services net revenues were RMB21.5 billion(US$3.0 billion),an increase of 7.0%compared with the first quarter of 2023.Youdao net revenues were RMB1.4 billion(US$192.8 million),an increase of 19.7%compared with the first quarter of 2023.Cloud Music net revenues were RMB2.0 billion(US$281.1 million),an increase of 3.6%compared with the first quarter of 2023.Innovative businesses and others net revenues were RMB2.0 billion(US$272.8 million),an increase of 6.1%compared with the first quarter of 2023.Gross profit was RMB17.0 billion(US$2.4 billion),an increase of 14.2%compared with the first quarter of 2023.Total operating expenses were RMB9.4 billion(US$1.3 billion),an increase of 22.4%compared with the first quarter of 2023.2 Net income attributable to the Companys shareholders was RMB7.6 billion(US$1.1 billion).Non-GAAP net income attributable to the Companys shareholders was RMB8.5 billion(US$1.2 billion).1 Basic net income per share was US$0.33(US$1.65 per ADS).Non-GAAP basic net income per share was US$0.37(US$1.84 per ADS).1 First Quarter 2024 and Recent Operational Highlights Our numerous established game franchises continued their overall high level of popularity with their loyal user bases,demonstrating ongoing sustainability.Hit games,including Eggy Party,Identity V and Infinite Borders,continued to generate player community enthusiasm.Among them,Identity V achieved a strong performance in the first quarter with continued momentum during its sixth anniversary celebration event with record-high DAUs in May.Expanded recent hit title launches in more regions,bolstering our appeal in broader areas.Dunk City Dynasty topped the iOS download charts in Hong Kong,Macau and Taiwan and ranked No.1 in Taiwan and No.2 in Hong Kong on the iOS grossing charts,respectively,following its local market introductions in April.Powered by seasonal updates in April,Racing Master once again ranked No.1 on the iOS grossing chart in Taiwan and rose to the No.1 and No.2 positions in Macau and Hong Kong,respectively.Introduced more exciting new titles to domestic players in the first quarter.Shi Jie Zhi Wai ranked No.1 on Chinas iOS download chart soon after its launch and ranked No.3 on Chinas iOS grossing chart after releasing new content updates.Strengthened robust game pipeline with multiple highly anticipated games,including Where Winds Meet,an open-world action-adventure RPG slated for launch in the third quarter,and Justice mobile with planned introductions in more regions,as well as other exciting titles across different genres,such as Naraka:Bladepoint mobile,Once Human and Marvel Rivals.Renewed a publishing agreement with Blizzard Entertainment to bring beloved titles back to China and entered into a broader collaboration with Microsoft Gaming.1 As used in this announcement,non-GAAP net income attributable to the Companys shareholders and non-GAAP basic and diluted net income per share and per ADS are defined to exclude share-based compensation expenses.See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement.3 Youdao strategically focused on digital content services,online marketing services and AI-driven subscription-based membership services,achieving its first sequential quarter of positive net income.Cloud Music continued actively prioritizing its core music business,including a recent comprehensive product upgrade to its NetEase Cloud Music App,aimed at cultivating a music-centric ecosystem and driving sustainable long-term growth.“Alongside the enduring success of our time-honored flagship games,we continue to expand into diverse genres and achieve new milestones in game operations,user expansion and partnership establishment.With a portfolio featuring premium-quality games and more diversification across genres,we are well-positioned to extend our exciting gaming experiences to audiences around the globe,”said Mr.William Ding,Chief Executive Officer and Director of NetEase.“We remain committed to innovation and genre expansion by leveraging our strong R&D capabilities while exploring more opportunities through collaboration with talent and partners globally.“In our broader NetEase family,Cloud Music and Youdao are performing well,providing innovative content offerings in their respective domains.Our focus in 2024 remains on crafting products and content that ignite the market with passion and deliver vibrant experiences,ultimately creating value for both our users and our Company,”Mr.Ding concluded.First Quarter 2024 Financial Results Net Revenues Net revenues for the first quarter of 2024 were RMB26.9 billion(US$3.7 billion),compared with RMB27.1 billion and RMB25.0 billion for the preceding quarter and the first quarter of 2023,respectively.Net revenues from games and related value-added services were RMB21.5 billion(US$3.0 billion)for the first quarter of 2024,compared with RMB20.9 billion and RMB20.1 billion for the preceding quarter and the first quarter of 2023,respectively.Net revenues from the operation of online games accounted for approximately 95.2%of the segments net revenues for the first quarter of 2024,compared with 93.4%and 92.7%for the preceding quarter and the first quarter of 2023,respectively.Net revenues from mobile games accounted for approximately 78.6%of net revenues from the operation of online games for the first quarter of 2024,compared with 76.7%and 72.3%for the preceding quarter and the first quarter of 2023,respectively.Net revenues from Youdao were RMB1.4 billion(US$192.8 million)for the first quarter of 2024,compared with RMB1.5 billion and RMB1.2 billion for the preceding quarter and the first quarter of 2023,respectively.Net revenues from Cloud Music were RMB2.0 billion(US$281.1 million)for the first quarter of 2024,compared with RMB2.0 billion for the preceding quarter and the first quarter of 2023.4 Net revenues from innovative businesses and others were RMB2.0 billion(US$272.8 million)for the first quarter of 2024,compared with RMB2.8 billion and RMB1.9 billion for the preceding quarter and the first quarter of 2023,respectively.Gross Profit Gross profit for the first quarter of 2024 was RMB17.0 billion(US$2.4 billion),compared with RMB16.8 billion and RMB14.9 billion for the preceding quarter and the first quarter of 2023,respectively.The quarter-over-quarter and year-over-year increases in games and related value-added services gross profit were primarily due to increased net revenues from mobile games such as Eggy Party and certain newly launched titles.The quarter-over-quarter decrease in Youdaos gross profit was primarily due to decreased revenue contribution from its learning services and sales of smart devices.The year-over-year increase was primarily due to increased revenue contribution from its online marketing services.The quarter-over-quarter and year-over-year increases in Cloud Musics gross profit primarily resulted from the one-off adjustment of certain copyright costs,increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.The quarter-over-quarter decrease in innovative businesses and others gross profit was primarily due to decreased e-commerce net revenues from Yanxuan and advertising services resulting from seasonality.The year-over-year increase was primarily due to increased gross profit from Yanxuan and several other businesses included within the segment.Gross Profit Margin Gross profit margin for games and related value-added services for the first quarter of 2024 was 69.5%,compared with 69.5%and 66.7%for the preceding quarter and the first quarter of 2023,respectively.The year-over-year increase was mainly attributable to changes in revenue contribution from different platforms and self-developed games.Gross profit margin for Youdao for the first quarter of 2024 was 49.0%,compared with 49.9%and 51.7%for the preceding quarter and the first quarter of 2023,respectively.The quarter-over-quarter and year-over-year decreases were mainly due to increased revenue contribution from its online marketing services,which have a lower gross profit margin compared to its other products and services.Gross profit margin for Cloud Music for the first quarter of 2024 was 38.0%,compared with 30.3%and 22.4%for the preceding quarter and the first quarter of 2023,respectively.The quarter-over-quarter and year-over-year improvements were mainly due to the factors enumerated above.The one-off adjustment of certain copyright costs mentioned above increased the gross profit margin in the first quarter of 2024 by approximately five percentage points.5 Gross profit margin for innovative businesses and others for the first quarter of 2024 was 33.4%,compared with 34.4%and 25.4%for the preceding quarter and the first quarter of 2023,respectively.The quarter-over-quarter decrease was mainly due to decreased revenue contribution from advertising services.The year-over-year increase was mainly due to improved gross profit margins from Yanxuan and several other businesses included within the segment.Operating Expenses Total operating expenses for the first quarter of 2024 were RMB9.4 billion(US$1.3 billion),compared with RMB10.0 billion and RMB7.7 billion for the preceding quarter and the first quarter of 2023,respectively.The quarter-over-quarter decrease was mainly due to decreased research and development investments related to games and related value-added services and marketing expenditures,as well as lower staff-related costs.The year-over-year increase was mainly due to increased marketing expenditures and higher staff-related costs.Other Income/(Expenses)Other income/(expenses)consisted of investment income/(loss),interest income,exchange(losses)/gains and others.The quarter-over-quarter increase was mainly due to net exchange gains in the first quarter of 2024 compared with net exchange losses recorded in the prior quarter.The year-over-year increase was primarily attributable to higher interest income resulting from the improved net cash position and net exchange gains in the first quarter of 2024,compared with net exchange losses recorded in the first quarter of 2023.Income Tax The Company recorded a net income tax charge of RMB1.5 billion(US$205.8 million)for the first quarter of 2024,compared with RMB1.1 billion and RMB1.6 billion for the preceding quarter and the first quarter of 2023,respectively.The effective tax rate for the first quarter of 2024 was 16.0%,compared with 13.8%and 19.5%for the preceding quarter and the first quarter of 2023,respectively.The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter.Net Income and Non-GAAP Net Income Net income attributable to the Companys shareholders totaled RMB7.6 billion(US$1.1 billion)for the first quarter of 2024,compared with RMB6.6 billion and RMB6.8 billion for the preceding quarter and the first quarter of 2023,respectively.NetEase reported basic net income of US$0.33 per share(US$1.65 per ADS)for the first quarter of 2024,compared with US$0.28 per share(US$1.42 per ADS)and US$0.29 per share(US$1.45 per ADS)for the preceding quarter and the first quarter of 2023,respectively.6 Non-GAAP net income attributable to the Companys shareholders totaled RMB8.5 billion(US$1.2 billion)for the first quarter of 2024,compared with RMB7.4 billion and RMB7.6 billion for the preceding quarter and the first quarter of 2023,respectively.NetEase reported non-GAAP basic net income of US$0.37 per share(US$1.84 per ADS)for the first quarter of 2024,compared with US$0.32 per share(US$1.59 per ADS)and US$0.33 per share(US$1.63 per ADS)for the preceding quarter and the first quarter of 2023,respectively.Other Financial Information As of March 31,2024,the Companys net cash(total cash and cash equivalents,current and non-current time deposits and restricted cash,as well as short-term investments balance,minus short-term and long-term loans)totaled RMB113.4 billion(US$15.7 billion),compared with RMB110.9 billion as of December 31,2023.Net cash provided by operating activities was RMB9.6 billion(US$1.3 billion)for the first quarter of 2024,compared with RMB11.8 billion and RMB6.0 billion for the preceding quarter and the first quarter of 2023,respectively.Quarterly Dividend The board of directors has approved a dividend of US$0.0990 per share(US$0.4950 per ADS)for the first quarter of 2024 to holders of ordinary shares and holders of ADSs as of the close of business on June 6,2024,Beijing/Hong Kong Time and New York Time,respectively,payable in U.S.dollars.For holders of ordinary shares,in order to qualify for the dividend,all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Companys Hong Kong branch share registrar,Computershare Hong Kong Investor Services Limited,at Shops 1712-1716,17th Floor,Hopewell Centre,183 Queens Road East,Wanchai,Hong Kong no later than 4:30 p.m.on June 6,2024(Beijing/Hong Kong Time).The payment date is expected to be June 17,2024 for holders of ordinary shares and on or around June 21,2024 for holders of ADSs.NetEase paid a dividend of US$0.21597 per share(US$1.07985 per ADS)for the fourth quarter of 2023 in March 2024.Under the Companys current dividend policy,the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Companys operations and earnings,cash flow,financial condition and other relevant factors.7 Share Repurchase Program On November 17,2022,the Company announced that its board of directors had approved a share repurchase program of up to US$5.0 billion of the Companys ADSs and ordinary shares in open market transactions.This share repurchase program commenced on January 10,2023 and will be in effect for a period not to exceed 36 months from such date.As of March 31,2024,approximately 8.9 million ADSs had been repurchased under this program for a total cost of US$811.0 million.The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors,including market conditions.These programs may be suspended or discontinued at any time.*The United States dollar(US$)amounts disclosed in this announcement are presented solely for the convenience of the reader.The percentages stated are calculated based on RMB.Conference Call NetEases management team will host a teleconference call with a simultaneous webcast at 7:00 a.m.New York Time on Thursday,May 23,2024(Beijing/Hong Kong Time:7:00 p.m.,Thursday,May 23,2024).NetEases management will be on the call to discuss the quarterly results and answer questions.Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID:10038664,15 minutes prior to the initiation of the call.A replay of the call will be available by dialing 1-855-883-1031 and entering PIN:10038664.The replay will be available through May 30,2024.This call will be webcast live and the replay will be available for 12 months.Both will be available on NetEases Investor Relations website at http:/ NetEase,Inc.NetEase,Inc.(NASDAQ:NTES and HKEX:9999,“NetEase”)is a leading internet and game services provider centered around premium content.With extensive offerings across its expanding gaming ecosystem,the Company develops and operates some of the most popular and longest running mobile and PC games available in China and globally.Powered by one of the largest in-house game R&D teams focused on mobile,PC and console,NetEase creates superior gaming experiences,inspires players,and passionately delivers value for its thriving community worldwide.By infusing play with culture,and education with technology,NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world.8 Beyond games,NetEase service offerings include its majority-controlled subsidiaries Youdao(NYSE:DAO),an intelligent learning company with industry-leading technology,and Cloud Music(HKEX:9899),a well-known online music platform featuring a vibrant content community,as well as Yanxuan,NetEases private label consumer lifestyle brand.For more information,please visit:http:/ Looking Statements This announcement contains statements of a forward-looking nature.These statements are made under the“safe harbor”provisions of the U.S.Private Securities Litigation Reform Act of 1995.You can identify these forward-looking statements by terminology such as“will,”“expects,”“anticipates,”“future,”“intends,”“plans,”“believes,”“estimates”and similar expressions.In addition,statements that are not historical facts,including statements about NetEases strategies and business plans,its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements.NetEase may also make forward-looking statements in its periodic reports to the U.S.Securities and Exchange Commission(the“SEC”),in announcements made on the website of The Stock Exchange of Hong Kong Limited(the“Hong Kong Stock Exchange”),in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties.The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated,including risks related to:the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally;risks associated with NetEases business and operating strategies and its ability to implement such strategies;NetEases ability to develop and manage its operations and business;competition for,among other things,capital,technology and skilled personnel;potential changes in government regulation that could adversely affect the industry and geographical markets in which NetEase operates;the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set,or follow in a timely manner,trends in the market;risks related to economic uncertainty and capital market disruption;risks related to the expansion of NetEases businesses and operations internationally;risks associated with cybersecurity threats or incidents;and the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEases business and financial results.Further information regarding these and other risks is included in NetEases filings with the SEC and announcements on the website of the Hong Kong Stock Exchange.NetEase does not undertake any obligation to update this forward-looking information,except as required under applicable law.9 Non-GAAP Financial Measures NetEase considers and uses non-GAAP financial measures,such as non-GAAP net income attributable to the Companys shareholders and non-GAAP basic and diluted net income per ADS and per share,as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan.The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America(“U.S.GAAP”).NetEase defines non-GAAP net income attributable to the Companys shareholders as net income attributable to the Companys shareholders excluding share-based compensation expenses.Non-GAAP net income attributable to the Companys shareholders enables NetEases management to assess its operating results without considering the impact of share-based compensation expenses.NetEase believes that this non-GAAP financial measure provide useful information to investors in understanding and evaluating the Companys current operating performance and prospects in the same manner as management does,if they so choose.NetEase also believes that the use of this non-GAAP financial measure facilitates investors assessment of its operating performance.Non-GAAP financial measures are not defined under U.S.GAAP and are not presented in accordance with U.S.GAAP.Non-GAAP financial measures have limitations as analytical tools.One of the key limitations of using non-GAAP net income attributable to the Companys shareholders is that it does not reflect all items of expense/income that affect our operations.Share-based compensation expenses have been and may continue to be incurred in NetEases business and are not reflected in the presentation of non-GAAP net income attributable to the Companys shareholders.In addition,the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies,including peer companies,and therefore their comparability may be limited.NetEase compensates for these limitations by reconciling non-GAAP net income attributable to the Companys shareholders to the nearest U.S.GAAP performance measure,all of which should be considered when evaluating the Companys performance.See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement.NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.10 NETEASE,INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)December 31,March 31,March 31,202320242024 RMB RMB USD(Note 1)AssetsCurrent assets:Cash and cash equivalents21,428,902 43,026,904 5,959,157 Time deposits100,856,034 89,473,549 12,391,943 Restricted cash2,777,206 3,055,366 423,163 Accounts receivable,net6,422,417 7,767,599 1,075,800 Inventories695,374 603,981 83,650 Prepayments and other current assets,net6,076,595 5,769,626 799,084 Short-term investments4,436,057 2,095,218 290,184 Total current assets142,692,585 151,792,243 21,022,981 Non-current assets:Property,equipment and software,net8,075,044 8,056,689 1,115,839 Land use rights,net4,075,143 4,048,518 560,713 Deferred tax assets1,560,088 1,476,100 204,437 Time deposits1,050,000 1,050,000 145,423 Restricted cash550 3,250 450 Other long-term assets28,471,568 28,638,072 3,966,328 Total non-current assets43,232,393 43,272,629 5,993,190 Total assets185,924,978 195,064,872 27,016,171 Liabilities,Redeemable Noncontrolling Interests and Shareholders EquityCurrent liabilities:Accounts payable881,016 871,430 120,692 Salary and welfare payables4,857,206 2,700,087 373,958 Taxes payable2,571,534 3,844,879 532,510 Short-term loans19,240,163 24,843,410 3,440,773 Contract liabilities13,362,166 14,911,048 2,065,156 Accrued liabilities and other payables12,930,399 12,878,519 1,783,651 Total current liabilities53,842,484 60,049,373 8,316,740 Non-current liabilities:Deferred tax liabilities2,299,303 2,700,293 373,986 Long-term loans427,997 427,997 59,277 Other long-term liabilities1,271,113 1,248,717 172,945 Total non-current liabilities3,998,413 4,377,007 606,208 Total liabilities57,840,897 64,426,380 8,922,948 Redeemable noncontrolling interests115,759 118,460 16,407 NetEase,Inc.s shareholders equity124,285,776 127,275,764 17,627,490 Noncontrolling interests3,682,546 3,244,268 449,326 Total equity127,968,322 130,520,032 18,076,816 Total liabilities,redeemable noncontrolling interests and shareholders equity185,924,978 195,064,872 27,016,171 The accompanying notes are an integral part of this announcement.11 NETEASE,INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(in thousands,except per share data or per ADS data)March 31,December 31,March 31,March 31,2023202320242024 RMB RMB RMBUSD(Note 1)Net revenues25,046,287 27,140,165 26,851,741 3,718,923 Cost of revenues(10,149,741)(10,315,030)(9,835,821)(1,362,245)Gross profit14,896,546 16,825,135 17,015,920 2,356,678 Operating expenses:Selling and marketing expenses(2,905,046)(4,225,556)(4,022,204)(557,069)General and administrative expenses(1,021,678)(1,251,869)(1,196,475)(165,710)Research and development expenses(3,749,732)(4,479,219)(4,174,758)(578,197)Total operating expenses(7,676,456)(9,956,644)(9,393,437)(1,300,976)Operating profit7,220,090 6,868,491 7,622,483 1,055,702 Other income/(expenses):Investment income/(loss),net471,368 (8,940)179,291 24,832 Interest income,net776,030 1,261,583 1,277,597 176,945 Exchange(losses)/gains,net(386,568)(810,904)15,011 2,079 Other,net258,033 434,759 193,888 26,853 Income before tax8,338,953 7,744,989 9,288,270 1,286,411 Income tax(1,628,559)(1,068,657)(1,485,910)(205,796)Net income6,710,394 6,676,332 7,802,360 1,080,615 Accretion of redeemable noncontrolling interests(860)(966)(958)(133)Net loss/(income)attributable to noncontrolling interests and redeemable noncontrolling interests45,100 (93,103)(167,456)(23,192)Net income attributable to the Companys shareholders6,754,634 6,582,263 7,633,946 1,057,290 Net income per share*Basic 2.10 2.05 2.38 0.33Diluted 2.07 2.02 2.35 0.33Net income per ADS*Basic 10.49 10.25 11.88 1.65Diluted 10.37 10.12 11.75 1.63Weighted average number of ordinary shares used in calculating net income per share*Basic 3,221,083 3,212,328 3,211,665 3,211,665Diluted 3,256,511 3,253,166 3,249,452 3,249,452*Each ADS represents five ordinary shares.The accompanying notes are an integral part of this announcement.Three Months Ended 12 NETEASE,INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)March 31,December 31,March 31,March 31,2023202320242024 RMB RMB RMB USD(Note 1)Cash flows from operating activities:Net income 6,710,394 6,676,332 7,802,360 1,080,615 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization1,082,269 659,772 567,923 78,656 Fair value changes of equity security and other investments(226,720)151,571 (368,258)(51,003)Impairment losses on investments and other long-term assets-140,648 128,417 17,786 Fair value changes of short-term investments(137,916)(106,532)(60,810)(8,422)Share-based compensation cost822,413 812,987 894,300 123,859 Allowance for expected credit losses20,720 9,500 11,600 1,607 (Gains)/losses on disposal of property,equipment and software(610)3,385 2,132 295 Unrealized exchange losses/(gains)385,961 838,056 (17,509)(2,425)Gains on disposal of long-term investments,business and subsidiaries(5,768)(38,437)(13,487)(1,868)Deferred income taxes577,666 193,854 485,054 67,179 Share of results on equity method investees and revaluation results from previously held equity interest(95,808)(88,805)164,271 22,751 Changes in operating assets and liabilities:Accounts receivable(1,116,282)53,089 (1,358,711)(188,179)Inventories117,330 25,054 91,378 12,656 Prepayments and other assets125,827 542,593 326,140 45,170 Accounts payable(612,939)18,443 (7,001)(970)Salary and welfare payables(2,225,737)1,992,931 (2,178,608)(301,734)Taxes payable733,716 (500,172)1,271,822 176,145 Contract liabilities489,991 (847,562)1,574,086 218,008 Accrued liabilities and other payables(643,836)1,271,572 242,070 33,526 Net cash provided by operating activities6,000,671 11,808,279 9,557,169 1,323,652 Cash flows from investing activities:Purchase of property,equipment and software(652,939)(484,927)(415,018)(57,479)Proceeds from sale of property,equipment and software2,504 405 3,506 486 Purchase of intangible assets,content and licensed copyrights(826,682)(121,797)(188,821)(26,151)Net changes in short-term investments with terms of three months or less(723,151)(690,628)2,401,649 332,625 Proceeds from maturities of short-term investments with terms over three months104,269 4,897,291 -Investment in long-term investments and acquisition of subsidiaries(1,229,048)(914,962)(481,804)(66,729)Proceeds from disposal of long-term investments,businesses and subsidiaries41,280 73,855 85,456 11,836 Placement/rollover of matured time deposits(36,320,103)(46,666,670)(34,558,836)(4,786,344)Proceeds from maturities of time deposits22,332,349 33,273,393 46,048,382 6,377,627 Change in other long-term assets(120,841)(90,635)(34,625)(4,796)Net cash(used in)/provided by investing activities(17,392,362)(10,724,675)12,859,889 1,781,075 Cash flows from financing activities:Net changes from loans with terms of three months or less 2,638,040 6,179,979 (399,726)(55,361)Proceeds of loans with terms over three months1,279,559 2,511,000 6,998,250 969,246 Payment of loans with terms over three months(40,422)(695,000)(957,000)(132,543)Net amounts received related to capital contribution from noncontrolling interests shareholders24,349 28,009 42,214 5,847 Cash paid for repurchase of NetEases ADSs/purchase of subsidiaries ADSs and shares(2,116,757)(625,832)(1,233,780)(170,877)Dividends paid to NetEases shareholders(1,212,340)(2,258,892)(4,945,016)(684,877)Net cash provided by/(used in)financing activities 572,429 5,139,264 (495,058)(68,565)Effect of exchange rate changes on cash,cash equivalents and restricted cash held in foreign currencies15,498 (174,276)(43,138)(5,975)Net(decrease)/increase in cash,cash equivalents and restricted cash (10,803,764)6,048,592 21,878,862 3,030,187 Cash,cash equivalents and restricted cash,at the beginning of the period27,588,325 18,158,066 24,206,658 3,352,583 Cash,cash equivalents and restricted cash,at end of the period16,784,561 24,206,658 46,085,520 6,382,770 Supplemental disclosures of cash flow information:Cash paid for income taxes,net1,074,579 1,030,932 1,182,711 163,804 Cash paid for interest expenses275,714 71,847 146,455 20,284 The accompanying notes are an integral part of this announcement.Three Months Ended 13 NETEASE,INC.UNAUDITED SEGMENT INFORMATION(in thousands,except percentages)March 31,December 31,March 31,March 31,2023202320242024RMBRMBRMBUSD(Note 1)Net revenues:Games and related value-added services20,065,597 20,921,355 21,460,378 2,972,228 Youdao1,163,270 1,480,521 1,391,859 192,770 Cloud Music1,959,841 1,985,548 2,029,541 281,088 Innovative businesses and others1,857,579 2,752,741 1,969,963 272,837 Total net revenues25,046,287 27,140,165 26,851,741 3,718,923 Cost of revenues:Games and related value-added services(6,683,048)(6,383,474)(6,555,311)(907,900)Youdao(561,420)(741,720)(710,356)(98,383)Cloud Music(1,520,378)(1,384,537)(1,259,006)(174,370)Innovative businesses and others(1,384,895)(1,805,299)(1,311,148)(181,592)Total cost of revenues(10,149,741)(10,315,030)(9,835,821)(1,362,245)Gross profit:Games and related value-added services13,382,549 14,537,881 14,905,067 2,064,328 Youdao601,850 738,801 681,503 94,387 Cloud Music439,463 601,011 770,535 106,718 Innovative businesses and others472,684 947,442 658,815 91,245 Total gross profit14,896,546 16,825,135 17,015,920 2,356,678 Gross profit margin:Games and related value-added services66.7i.5i.5i.5%Youdao51.7I.9I.0I.0%Cloud Music22.40.38.08.0%Innovative businesses and others25.44.43.43.4%The accompanying notes are an integral part of this announcement.Three Months Ended 14 NETEASE,INC.NOTES TO UNAUDITED FINANCIAL INFORMATION Note 1:The conversion of Renminbi(RMB)into United States dollars(USD)is based on the noon buying rate of USD1.00=RMB7.2203 on the last trading day of March 2024(March 29,2024)as set forth in the H.10 statistical release of the U.S.Federal Reserve Board.No representation is made that the RMB amounts could have been,or could be,converted into US$at that rate on March 29,2024,or at any other certain date.Note 2:Share-based compensation cost reported in the Companys unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD(in thousands):Note 3:The financial information prepared and presented in this announcement might be different from those published and to be published by NetEases listed subsidiary to meet the disclosure requirements under different accounting standards requirements.Note 4:The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD(in thousands,except per share data or per ADS data):March 31,December 31,March 31,March 31,2023202320242024RMBRMBRMBUSD(Note 1)Share-based compensation cost included in:Cost of revenues203,514 216,717 254,935 35,308 Operating expenses Selling and marketing expenses32,353 35,575 17,869 2,475 General and administrative expenses294,281 262,830 289,636 40,114 Research and development expenses292,265 297,865 331,860 45,962 The accompanying notes are an integral part of this announcement.Three Months EndedMarch 31,December 31,March 31,March 31,2023202320242024RMBRMBRMBUSD(Note 1)Net income attributable to the Companys shareholders6,754,634 6,582,263 7,633,946 1,057,290 Add:Share-based compensation811,600 797,194 876,898 121,449 Non-GAAP net income attributable to the Companys shareholders7,566,234 7,379,457 8,510,844 1,178,739 Non-GAAP net income per share*Basic2.35 2.30 2.65 0.37 Diluted2.32 2.27 2.62 0.36 Non-GAAP net income per ADS*Basic11.74 11.49 13.25 1.84 Diluted11.62 11.34 13.10 1.81 *Each ADS represents five ordinary shares.The accompanying notes are an integral part of this announcement.Three Months Ended
2024-06-09
14页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission File Number 001-38769The Cigna Group(Exact name of registrant as specified in its charter)Delaware82-4991898(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)900 Cottage Grove RoadBloomfield,Connecticut 06002(Address of principal executive offices)(Zip Code)(860)226-6000(Registrants telephone number,including area code)Not Applicable(Former name,former address and former fiscal year,if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,Par Value$0.01CINew York Stock Exchange,Inc.Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during thepreceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerginggrowth company.See definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule 12b-2 of theExchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes NoAs of April 30,2024,284,074,001 shares of the issuers common stock were outstanding.THE CIGNA GROUPTABLE OF CONTENTSPagePART IFINANCIAL INFORMATIONItem 1.Financial Statements(Unaudited)3Consolidated Statements of Income3Consolidated Statements of Comprehensive Income4Consolidated Balance Sheets5Consolidated Statements of Changes in Total Equity6Consolidated Statements of Cash Flows7Notes to the Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations33Item 3.Quantitative and Qualitative Disclosures About Market Risk48Item 4.Controls and Procedures48PART IIOTHER INFORMATIONItem 1.Legal Proceedings50Item 1A.Risk Factors50Item 2.Unregistered Sales of Equity Securities and Use of Proceeds50Item 5.Other Information50Item 6.Exhibits52SIGNATURE53As used herein,the term Company refers to one or more of The Cigna Group and its consolidated subsidiaries.Part I.FINANCIAL INFORMATIONItem 1.FINANCIAL STATEMENTSThe Cigna GroupConsolidated Statements of IncomeUnauditedThree Months Ended March 31,(In millions,except per share amounts)20242023RevenuesPharmacy revenues$42,036$32,144 Premiums11,603 11,025 Fees and other revenues3,326 3,071 Net investment income290 277 TOTAL REVENUES57,255 46,517 Benefits and expensesPharmacy and other service costs41,431 31,459 Medical costs and other benefit expenses9,440 9,046 Selling,general and administrative expenses3,705 3,538 Amortization of acquired intangible assets423 459 TOTAL BENEFITS AND EXPENSES54,999 44,502 Income from operations2,256 2,015 Interest expense and other(322)(358)Loss on sale of businesses(19)Net realized investment losses(1,836)(56)Income before income taxes79 1,601 TOTAL INCOME TAXES291 295 Net(loss)income(212)1,306 Less:Net income attributable to noncontrolling interests65 39 SHAREHOLDERS NET(LOSS)INCOME$(277)$1,267 Shareholders net(loss)income per shareBasic$(0.97)$4.28 Diluted$(0.97)$4.24 The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.3The Cigna GroupConsolidated Statements of Comprehensive IncomeUnauditedThree Months Ended March 31,(In millions)20242023Net(loss)income$(212)$1,306 Other comprehensive income(loss),net of taxNet unrealized appreciation on securities and derivatives121 194 Net long-duration insurance and contractholder liabilities measurement adjustments(560)(331)Net translation(losses)gains on foreign currencies(26)16 Postretirement benefits liability adjustment5 10 Other comprehensive loss,net of tax(460)(111)Total comprehensive(loss)income(672)1,195 Comprehensive income(loss)attributable to noncontrolling interestsNet income attributable to redeemable noncontrolling interests 34 Net income attributable to other noncontrolling interests65 5 Total comprehensive income attributable to noncontrolling interests65 39 SHAREHOLDERS COMPREHENSIVE(LOSS)INCOME$(737)$1,156 The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.4The Cigna GroupConsolidated Balance SheetsUnauditedAs ofMarch 31,As ofDecember 31,(In millions)20242023AssetsCash and cash equivalents$8,439$7,822 Investments1,108 925 Accounts receivable,net20,563 17,722 Inventories4,630 5,645 Other current assets2,263 2,169 Assets of businesses held for sale6,354 3,068 Total current assets43,357 37,351 Long-term investments16,025 17,985 Reinsurance recoverables4,672 4,835 Property and equipment3,607 3,695 Goodwill44,258 44,259 Other intangible assets30,491 30,863 Other assets3,293 3,421 Separate account assets7,416 7,430 Assets of businesses held for sale,non-current 2,922 TOTAL ASSETS$153,119$152,761 LiabilitiesCurrent insurance and contractholder liabilities$5,788$5,514 Pharmacy and other service costs payable24,284 19,815 Accounts payable8,118 8,553 Accrued expenses and other liabilities8,857 9,955 Short-term debt1,715 2,775 Liabilities of businesses held for sale3,215 2,104 Total current liabilities51,977 48,716 Non-current insurance and contractholder liabilities10,641 10,904 Deferred tax liabilities,net7,029 7,173 Other non-current liabilities3,653 3,441 Long-term debt31,053 28,155 Separate account liabilities7,416 7,430 Liabilities of businesses held for sale,non-current 591 TOTAL LIABILITIES111,769 106,410 Contingencies Note 16Redeemable noncontrolling interests 107 Shareholders equityCommon stock 4 4 Additional paid-in capital30,292 30,669 Accumulated other comprehensive loss(2,324)(1,864)Retained earnings40,978 41,652 Less:Treasury stock,at cost(27,769)(24,238)TOTAL SHAREHOLDERS EQUITY41,181 46,223 Other noncontrolling interests169 21 Total equity41,350 46,244 Total liabilities and equity$153,119$152,761 Par value per share,$0.01;shares issued,402 million as of March 31,2024 and 400 million as of December 31,2023;authorized shares,600 million.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(1)5The Cigna GroupConsolidated Statements of Changes in Total EquityUnauditedThree Months Ended March 31,2024(In millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInterestsTotal EquityRedeemableNoncontrollingInterestsBalance at December 31,2023$4$30,669$(1,864)$41,652$(24,238)$46,223$21$46,244$107 Effects of issuing stock for employee benefitsplans263(114)149 149 Other comprehensive loss(460)(460)(460)Net(loss)income(277)(277)65(212)Common dividends declared(per share:$1.40)(397)(397)(397)Repurchase of common stock(640)(3,417)(4,057)(4,057)Other transactions impacting noncontrollinginterests 83 83(107)Balance at March 31,2024$4$30,292$(2,324)$40,978$(27,769)$41,181$169$41,350$Three Months Ended March 31,2023(In millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInterestsTotal EquityRedeemableNoncontrollingInterestsBalance at December 31,2022$4$30,233$(1,658)$37,940$(21,844)$44,675$13$44,688$66 Effect of issuing stock for employee benefitplans99(104)(5)(5)Other comprehensive loss(111)(111)(111)Net income1,267 1,267 5 1,272 34 Common dividends declared(per share:$1.23)(366)(366)(366)Repurchase of common stock(958)(958)(958)Other transactions impacting noncontrollinginterests (2)(2)(22)Balance at March 31,2023$4$30,332$(1,769)$38,841$(22,906)$44,502$16$44,518$78 The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.6The Cigna GroupConsolidated Statements of Cash FlowsUnauditedThree Months Ended March 31,(In millions)20242023Cash Flows from Operating ActivitiesNet(loss)income$(212)$1,306 Adjustments to reconcile net(loss)income to net cash provided by operating activities:Depreciation and amortization741 749 Realized investment losses,net1,836 56 Deferred income tax benefit(102)(108)Loss on sale of businesses19 Net changes in assets and liabilities,net of non-operating effects:Accounts receivable,net(2,687)(479)Inventories1,015 566 Reinsurance recoverable and Other assets68 72 Insurance liabilities532 1,533 Pharmacy and other service costs payable4,637 539 Accounts payable and Accrued expenses and other liabilities(1,068)690 Other,net61 104 NET CASH PROVIDED BY OPERATING ACTIVITIES4,840 5,028 Cash Flows from Investing ActivitiesProceeds from investments sold:Debt securities and equity securities268 196 Investment maturities and repayments:Debt securities and equity securities179 257 Commercial mortgage loans4 4 Other sales,maturities and repayments(primarily short-term and other long-term investments)272 160 Investments purchased or originated:Debt securities and equity securities(180)(2,794)Commercial mortgage loans(32)Other(primarily short-term and other long-term investments)(594)(377)Property and equipment purchases,net(300)(408)Divestitures,net of cash sold 22 Other,net(112)(43)NET CASH USED IN INVESTING ACTIVITIES(495)(2,983)Cash Flows from Financing ActivitiesDeposits and interest credited to contractholder deposit funds43 45 Withdrawals and benefit payments from contractholder deposit funds(65)(48)Net change in short-term debt(364)(9)Repayment of long-term debt(2,210)(80)Net proceeds on issuance of long-term debt4,462 1,491 Repurchase of common stock(4,022)(962)Issuance of common stock181 30 Common stock dividend paid(401)(368)Other,net(153)(136)NET CASH USED IN FINANCING ACTIVITIES(2,529)(37)Effect of foreign currency rate changes on cash,cash equivalents and restricted cash(9)5 Net increase in cash,cash equivalents and restricted cash1,807 2,013 Cash,cash equivalents and restricted cash January 1,8,337 5,976 Cash,cash equivalents and restricted cash,March 31,10,144 7,989 Cash and cash equivalents reclassified to assets of businesses held for sale(1,660)Cash,cash equivalents and restricted cash March 31,per Consolidated Balance Sheets$8,484$7,989 Supplemental Disclosure of Cash Information:Income taxes paid,net of refunds$110$77 Interest paid$336$322 Restricted cash and cash equivalents were reported in other long-term investments.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(1)(1)7THE CIGNA GROUPNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)TABLE OF CONTENTSNote NumberFootnotePageBUSINESS AND CAPITAL STRUCTURE1Description of Business92Summary of Significant Accounting Policies93Accounts Receivable,Net104Supplier Finance Program105Assets and Liabilities of Businesses Held for Sale116Earnings Per Share117Debt128Common and Preferred Stock14INSURANCE INFORMATION9Insurance and Contractholder Liabilities1510Reinsurance19INVESTMENTS11Investments2012Fair Value Measurements2313Variable Interest Entities2714Accumulated Other Comprehensive Income(Loss)27COMPLIANCE,REGULATION AND CONTINGENCIES15Income Taxes2816Contingencies and Other Matters29RESULTS DETAILS17Segment Information308Note 1 Description of BusinessThe Cigna Group,together with its subsidiaries(either individually or collectively referred to as the Company,we,us or our),is a global health companycommitted to creating a better future built on the vitality of every individual and every community.We relentlessly challenge ourselves to partner and innovatesolutions for better health.Powered by our people and our brands,we advance our mission to improve the health and vitality of those we serve.Our subsidiaries offer a differentiated set of pharmacy,medical,behavioral,dental and related products and services.The majority of these products and servicesare offered through employers and other groups such as governmental and non-governmental organizations,unions and associations.Cigna Healthcare also offershealth and dental insurance and Medicare products to individuals in the United States and selected international markets.In addition to these operations,The CignaGroup also has certain run-off operations.A full description of our segments follows:The Evernorth Health Services reportable segment now presents the Pharmacy Benefit Services and the Specialty and Care Services operating segments,whichpartner with health plans,employers,governmental organizations and health care providers to solve challenges in the areas of pharmacy benefits,home deliverypharmacy,specialty pharmacy,specialty distribution,and care delivery and management solutions.Pharmacy Benefit Services drives high-quality,cost-effective pharmacy care through various services such as drug claim adjudication,retail pharmacy networkadministration,benefit design consultation,drug utilization review,drug formulary management and access to our home delivery pharmacy.Specialty and CareServices provides specialty drugs for the treatment of complex and rare diseases,specialty distribution of pharmaceuticals and medical supplies,as well as clinicalprograms to help our clients drive better whole-person health outcomes through Care Delivery and Management Solutions.The Companys reporting units remainaligned with its operating segments and goodwill was allocated on a relative fair value basis.The Cigna Healthcare reportable segment includes the U.S.Healthcare and International Health operating segments,which provide comprehensive medical andcoordinated solutions to clients and customers.U.S.Healthcare provides medical plans and specialty benefits and solutions for insured and self-insured clients,Medicare Advantage,Medicare Supplement and Medicare Stand-Alone Prescription Drug Plans for seniors and individual health insurance plans.InternationalHealth provides health care solutions in our international markets,as well as health care benefits for globally mobile individuals and employees of multinationalorganizations.In January 2024,the Company entered into a definitive agreement to sell the Medicare Advantage,Medicare Stand-Alone Prescription Drug Plans,Medicare andOther Supplemental Benefits and CareAllies businesses within the U.S.Healthcare operating segment to Health Care Service Corporation(HCSC)forapproximately$3.3 billion cash,subject to applicable regulatory approvals and other customary closing conditions(the HCSC transaction).See Note 5 to theConsolidated Financial Statements for further information.Other Operations comprises the remainder of our business operations,which includes our continuing business(corporate-owned life insurance(COLI)and ourrun-off and other non-strategic businesses.Our run-off businesses include(i)variable annuity reinsurance business that was effectively exited through reinsurancewith Berkshire Hathaway Life Insurance Company of Nebraska(Berkshire)in 2013,(ii)settlement annuity business,and(iii)individual life insurance andannuity and retirement benefits businesses which were sold through reinsurance agreements.Corporate reflects amounts not allocated to operating segments,including net interest expense(defined as interest on corporate financing less net investmentincome on investments not supporting segment and other operations),certain litigation matters,expense associated with our frozen pension plans,charitablecontributions,operating severance,certain overhead and enterprise-wide project costs and eliminations for products and services sold between segments.Note 2 Summary of Significant Accounting Policies Basis of PresentationThe Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries.Intercompany transactions and accounts havebeen eliminated in consolidation.These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the UnitedStates of America(GAAP).Amounts recorded in the Consolidated Financial Statements necessarily reflect managements estimates and assumptions about medical costs,investment,tax andreceivable valuations,interest rates and other factors.Significant estimates are discussed throughout9these Notes;however,actual results could differ from those estimates.The impact of a change in estimate is generally included in earnings in the period ofadjustment.These interim Consolidated Financial Statements are unaudited but include all adjustments(including normal recurring adjustments)necessary,in the opinion ofmanagement,for a fair statement of financial position and results of operations for the periods reported.The interim Consolidated Financial Statements and Notesshould be read in conjunction with the Consolidated Financial Statements and Notes included in the 2023 Annual Report on Form 10-K(2023 Form 10-K).Thepreparation of interim Consolidated Financial Statements necessarily relies heavily on estimates.This and other factors,including the seasonal nature of portions ofthe health care and related benefits business,as well as competitive and other market conditions,call for caution in estimating full-year results based on interimresults of operations.Recent Accounting PronouncementsThe Companys 2023 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financialstatements in the future.There are no updates on significant accounting pronouncements recently adopted or recently issued and not yet adopted that have occurredsince the Company filed its 2023 Form 10-K.Note 3 Accounts Receivable,NetThe following amounts were included within Accounts receivable,net:(In millions)March 31,2024December 31,2023Noninsurance customer receivables$9,735$8,044 Pharmaceutical manufacturers receivables9,512 8,169 Insurance customer receivables2,045 2,359 Other receivables230 272 Total$21,522$18,844 Accounts receivable,net classified as assets of businesses held for sale(959)(1,122)Total$20,563$17,722 These accounts receivable are reported net of our allowances of$4.5 billion as of March 31,2024 and$3.7 billion as of December 31,2023.These allowancesinclude contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain accounts receivable from third-party payors,discountsand claims adjustments issued to customers in the form of client credits,an allowance for current expected credit losses and other non-credit adjustments.The Companys allowance for current expected credit losses was$91 million as of March 31,2024 and$90 million as of December 31,2023.Accounts Receivable Factoring FacilityThe Company maintains an uncommitted factoring facility(the Facility)under which certain accounts receivable may be sold on a non-recourse basis to afinancial institution.The Facilitys total capacity is$1.0 billion and began in July 2023 with an initial term of two years,followed by automatic one year renewalterms unless terminated by either party.Further information regarding the accounting policy for the Facility can be found in Note 3 in the Companys 2023 Form10-K.For the three months ended March 31,2024,we sold$1.9 billion of accounts receivable under the Facility and factoring fees paid were not material.As ofMarch 31,2024,there were$93 million of sold accounts receivable that have not been collected from manufacturers and have been removed from the CompanysConsolidated Balance Sheets.At December 31,2023,all sold accounts receivable had been collected from manufacturers.As of March 31,2024 and December 31,2023,there were$722 million and$515 million,respectively,of collections from manufacturers that have not been remitted to the financial institution.Suchamounts are recorded within Accrued expenses and other liabilities in the Consolidated Balance Sheets.Note 4 Supplier Finance ProgramThe Company facilitates a voluntary supplier finance program(the Program)that provides suppliers the opportunity to sell their accounts receivable due from us(i.e.,our payment obligations to the suppliers)to a financial institution,on a non-recourse basis,in order to be paid earlier than our payment terms require.Furtherinformation regarding the Programs terms can be found in Note 4 in the Companys 2023 Form 10-K.10As of March 31,2024 and December 31,2023,$1.6 billion and$1.5 billion,respectively,of the Companys outstanding payment obligations were confirmed asvalid within the Program by the financial institution and are reflected in Accounts payable in the Consolidated Balance Sheets.The amounts confirmed as valid forboth periods are predominately associated with one supplier.As of March 31,2024,we have been informed by the financial institution that$327 million of theCompanys outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the Program.Note 5 Assets and Liabilities of Businesses Held for SaleIn January 2024,the Company entered into the HCSC transaction for a total purchase price of approximately$3.3 billion cash,subject to applicable regulatoryapprovals and other customary closing conditions.The transaction is expected to close in the first quarter of 2025.The assets and liabilities of businesses held for sale were as follows:(In millions)March 31,2024December 31,2023Cash and cash equivalents$1,660$467 Investments1,341 1,438 Accounts receivable,net959 1,122 Other assets,including Goodwill 2,394 2,963 Total assets of businesses held for sale6,354 5,990 Insurance and contractholder liabilities2,081 1,636 All other liabilities1,134 1,059 Total liabilities of businesses held for sale$3,215$2,695 Includes Goodwill of$396 million as of March 31,2024 and December 31,2023.Integration and Transaction-related CostsIn 2024,the Company incurred costs related to the HCSC transaction.In 2023,the Company incurred net costs mainly related to the sale of our international life,accident and supplemental benefits businesses(Chubb transaction).These costs consisted primarily of certain projects to separate or integrate the Companyssystems,products and services,fees for legal,advisory and other professional services and certain employment-related costs.These costs were$37 million pre-tax($29 million after-tax)for the three months ended March 31,2024 and$1 million pre-tax($1 million after-tax)for the three months ended March 31,2023.Note 6 Earnings Per ShareBasic and diluted earnings per share were computed as follows:Three Months EndedMarch 31,2024March 31,2023(Shares in thousands,dollars in millions,except per share amounts)BasicEffect ofDilutionDilutedBasicEffect ofDilutionDilutedShareholders net(loss)income$(277)$(277)$1,267$1,267 Shares:Weighted average286,465 286,465 295,706 295,706 Common stock equivalents 3,293 3,293 Total shares286,465 286,465 295,706 3,293 298,999 Earnings per share$(0.97)$(0.97)$4.28$(0.04)$4.24 Due to the Shareholders net loss for the three months ended March 31,2024,8.2 million outstanding employee stock options,unvested restricted stock grants andunits and strategic performance shares were excluded in the computation of diluted earnings per share because their effect was anti-dilutive.For the three monthsended March 31,2023,0.9 million outstanding employee stock options were excluded in the computation of diluted earnings per share because their effect wasanti-dilutive.The Company held approximately 117.8 million shares of common stock in treasury at March 31,2024,107.4 million shares as of December 31,2023 and 102.7million shares as of March 31,2023.(1)(1)11The increase in Treasury stock as of March 31,2024 and the reduction in weighted average shares outstanding for the three months ended March 31,2024 wasdriven in part by 7.6 million shares of our common stock repurchased in February 2024 under the accelerated share repurchase agreements(the ASR agreements).Additionally,we expect final settlement of the ASR agreements to occur in the second quarter of 2024.See Note 8 for additional information.Note 7 DebtThe outstanding amounts of debt(net of issuance costs,discounts or premiums)and finance leases were as follows:(In millions)March 31,2024December 31,2023Short-term debtCommercial paper$884$1,237$500 million,0.613%Notes due March 2024 500$790 million,3.500%Notes due June 2024789 996 Other,including finance leases42 42 Total short-term debt$1,715$2,775 Long-term debt$900 million,3.250%Notes due April 2025881 882$1,216 million,4.125%Notes due November 20251,214 2,197$1,284 million,4.500%Notes due February 20261,285 1,502$550 million,1.250%Notes due March 2026 549 798$700 million,5.685%Notes due March 2026698 698$1,500 million,3.400%Notes due March 20271,454 1,450$259 million,7.875bentures due May 2027259 259$600 million,3.050%Notes due October 2027598 597$3,800 million,4.375%Notes due October 20283,788 3,787$1,000 million,5.000%Notes due May 2029994$1,400 million,2.400%Notes due March 2030 1,394 1,493$1,500 million,2.375%Notes due March 2031 1,382 1,397$750 million,5.125%Notes due May 2031745$45 million,8.080%Step Down Notes due January 2033 45 45$800 million,5.400%Notes due March 2033794 794$1,250 million,5.250%Notes due February 20341,242$190 million,6.150%Notes due November 2036190 190$2,200 million,4.800%Notes due August 20382,193 2,193$750 million,3.200%Notes due March 2040744 744$121 million,5.875%Notes due March 2041119 119$448 million,6.125%Notes due November 2041487 487$317 million,5.375%Notes due February 2042315 315$1,500 million,4.800%Notes due July 20461,467 1,467$1,000 million,3.875%Notes due October 2047989 989$3,000 million,4.900%Notes due December 20482,970 2,970$1,250 million,3.400%Notes due March 20501,237 1,237$1,500 million,3.400%Notes due March 20511,479 1,479$1,500 million,5.600%Notes due February 20541,482 Other,including finance leases59 66 Total long-term debt$31,053$28,155 Included in the February 2024 debt tender offers discussed below.The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments.See Note 11 to the Consolidated Financial Statements for further information about theCompanys interest rate risk management and these derivative instruments.Interest rate step down to 8.080fective January 15,2023.Short-term and Credit Facilities DebtRevolving Credit Agreements.Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes,including providingliquidity support if necessary under our commercial paper program discussed below.As of March 31,2024,there were no outstanding balances under theserevolving credit agreements.(1)(2)(1)(1)(1)(1)(2)(3)(1)(2)(3)12In April 2024,The Cigna Group replaced our existing$4.0 billion five-year revolving credit and letter of credit agreement maturing in April 2028 and a$1.0 billion364-day revolving credit agreement maturing in April 2024 by entering into the following revolving credit agreements(the Credit Agreements):a$5.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2029 with an option to extend the maturity date foradditional one-year periods,subject to consent of the banks.The Company can borrow up to$5.0 billion under the credit agreement for general corporatepurposes,with up to$500 million available for issuance of letters of credit.a$1.5 billion 364-day revolving credit agreement that will mature in April 2025.The Company can borrow up to$1.5 billion under the credit agreementfor general corporate purposes.This agreement includes the option to term out any revolving loans that are outstanding at maturity by converting theminto a term loan maturing on the one-year anniversary of conversion.The increase in the aggregate size of our revolving credit agreements from$5.0 billion to$6.5 billion will provide enhanced liquidity to support the continuedgrowth of our business.Each of the Credit Agreements include an option to increase commitments in an aggregate amount of up to$1.5 billion across both facilities for a maximum totalcommitment of$8.0 billion.The Credit Agreements allow for borrowings at either a base rate or an adjusted term Secured Overnight Funding Rate(SOFR)plus,in each case,an applicable margin based on the Companys senior unsecured credit ratings.Each of the two facilities is diversified among 22 large commercial banks,all of which had an A-equivalent or higher rating by at least one Nationally RecognizedStatistical Rating Organization(NRSRO)as of March 31,2024.Each facility also contains customary covenants and restrictions,including a financial covenantthat the Companys leverage ratio,as defined in the Credit Agreements,may not exceed 60%subject to certain exceptions upon the consummation of an acquisition.Commercial Paper.Under our commercial paper program,we may issue short-term,unsecured commercial paper notes privately placed on a discounted basisthrough certain broker-dealers at any time not to exceed an aggregate amount of$5.0 billion.Amounts available under the program may be borrowed,repaid and re-borrowed from time to time.The net proceeds of issuances have been and are expected to be used for general corporate purposes.The weighted average interest rateof our commercial paper was 5.54%at March 31,2024.Long-term debtDebt Issuance and Debt Tender Offers.In February 2024,we issued$4.5 billion of new senior notes,as detailed in the table below.The proceeds from this debtwere used to pay the consideration for the cash tender offers as described below.We used the remaining net proceeds to fund the repayment of our senior noteswhich matured in March 2024 and for general corporate purposes,including repayment of indebtedness and repurchases of shares of our common stock.Interest onthis debt is paid semi-annually.PrincipalMaturity DateInterest RateNet Proceeds$1,000 million May 15,20295.000%$995 million$750 million May 15,20315.125%$746 million$1,250 million February 15,20345.250%$1,244 million$1,500 million February 15,20545.600%$1,485 million Redeemable at any time prior to April 15,2029 at a make whole premium calculated using the most directly comparable U.S.Treasury rate plus 15 basis points.Redeemable at par on or after April 15,2029.Redeemable at any time prior to March 15,2031 at a make whole premium calculated using the most directly comparable U.S.Treasury rate plus 15 basis points.Redeemable at par on or after March15,2031.Redeemable at any time prior to November 15,2033 at a make whole premium calculated using the most directly comparable U.S.Treasury rate plus 20 basis points.Redeemable at par on or afterNovember 15,2033.Redeemable at any time prior to August 15,2053 at a make whole premium calculated using the most directly comparable U.S.Treasury rate plus 20 basis points.Redeemable at par on or after August15,2053.In the first quarter of 2024,the Company completed the repurchase of a total of$1.8 billion in aggregate principal amount of existing senior notes that weretendered to the Company pursuant to cash tender offers.Interest ExpenseInterest expense on long-term and short-term debt was$369 million for the three months ended March 31,2024 and$345 million for the three months endedMarch 31,2023.(1)(2)(3)(4)(1)(2)(3)(4)13Debt CovenantsThe Company was in compliance with its debt covenants as of March 31,2024.Note 8 Common and Preferred StockDividendsIn the first quarter of 2024,The Cigna Group declared quarterly cash dividends of$1.40 per share of the Companys common stock.In the first quarter of 2023,TheCigna Group declared quarterly cash dividends of$1.23 per share of the Companys common stock.The following table provides details of the Companys dividend payments:Record DatePayment DateAmount per ShareTotal Amount Paid(in millions)2024March 6,2024March 21,2024$1.40$4012023March 8,2023March 23,2023$1.23$368On April 24,2024,the Board of Directors declared the second quarter cash dividend of$1.40 per share of The Cigna Group common stock to be paid on June 20,2024 to shareholders of record on June 4,2024.The Company currently intends to pay regular quarterly dividends,with future declarations subject to approval byits Board of Directors and the Boards determination that the declaration of dividends remains in the best interests of The Cigna Group and its shareholders.Thedecision of whether to pay future dividends and the amount of any such dividends will be based on the Companys financial position,results of operations,cashflows,capital requirements,the requirements of applicable law and any other factors the Board may deem relevant.Accelerated Share Repurchase AgreementsIn February 2024,as part of our share repurchase program,we entered into separate accelerated share repurchase agreements with Deutsche Bank AG and Bank ofAmerica,N.A.(collectively,the Counterparties)to repurchase$3.2 billion of common stock in aggregate.We remitted$3.2 billion to the Counterparties andreceived an initial delivery of approximately 7.6 million shares of our common stock on February 15,2024,representing$2.6 billion of the total remitted.The finalnumber of shares to be received under the ASR agreements will be determined based on the daily volume-weighted average share price(VWAP)of our commonstock over the term of the agreements,less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements.We recorded the payment to the Counterparties as a reduction to Total shareholders equity,consisting of a$2.6 billion increase in Treasury stock,which reflects thevalue of the initial 7.6 million shares received,and a$640 million decrease in Additional paid-in capital,which reflects the value of the stock hold-back by theCounterparties pending final settlement of the ASR agreements.The$640 million recorded in Additional paid-in capital will be reclassified to Treasury stock uponsettlement of the ASR agreements in the second quarter of 2024.The initial delivery of shares resulted in an immediate reduction of the outstanding shares used tocalculate the weighted-average common shares outstanding for basic and diluted earnings per share.14Note 9 Insurance and Contractholder LiabilitiesA.Account Balances Insurance and Contractholder LiabilitiesThe Companys insurance and contractholder liabilities were comprised of the following:March 31,2024December 31,2023March 31,2023(In millions)CurrentNon-currentTotalCurrentNon-currentTotalTotalUnpaid claims and claim expensesCigna Healthcare$5,786$77$5,863$5,017$75$5,092$4,959 Other Operations99 161 260 99 154 253 272 Future policy benefitsCigna Healthcare92 515 607 97 518 615 601 Other Operations163 3,297 3,460 163 3,375 3,538 3,631 Contractholder deposit fundsCigna Healthcare11 130 141 12 133 145 163 Other Operations365 6,087 6,452 362 6,178 6,540 6,670 Market risk benefits26 865 891 37 966 1,003 1,220 Unearned premiums815 21 836 846 22 868 1,440 Total7,357 11,153 18,510 6,633 11,421 18,054 Insurance and contractholder liabilities classifiedas liabilities of businesses held for sale(1,569)(512)(2,081)(1,119)(517)(1,636)Total insurance and contractholder liabilities$5,788$10,641$16,429$5,514$10,904$16,418$18,956 Amounts classified as liabilities of businesses held for sale include$1,378 million of Unpaid claims,$427 million of Future policy benefits,$161 million of Unearned premiums and$115 million ofContractholder deposit funds as of March 31,2024 and$823 million of Unpaid claims,$429 million of Future policy benefits,$261 million of Unearned premiums and$123 million of Contractholderdeposit funds as of December 31,2023.Insurance and contractholder liabilities expected to be paid within one year are classified as current.B.Unpaid Claims and Claim Expenses Cigna HealthcareThis liability reflects estimates of the ultimate cost of claims that have been incurred but not reported,expected development on reported claims,claims that havebeen reported but not yet paid(reported claims in process)and other medical care expenses and services payable that are primarily comprised of accruals forincentives and other amounts payable to health care professionals and facilities.The total of incurred but not reported liabilities plus expected development on reported claims and reported claims in process was$5.4 billion at March 31,2024and$4.6 billion at March 31,2023.This increase was primarily due to claim submission and payment process disruptions related to a third-party cyber incident.(1)(1)15Activity,net of intercompany transactions,in the unpaid claims liability for the Cigna Healthcare segment was as follows:Three Months Ended March 31,(In millions)2024 2023Beginning balance$5,092$4,176 Less:Reinsurance and other amounts recoverable236 221 Beginning balance,net4,856 3,955 Incurred costs related to:Current year9,452 9,041 Prior years(226)(144)Total incurred9,226 8,897 Paid costs related to:Current year5,072 5,316 Prior years3,352 2,795 Total paid8,424 8,111 Ending balance,net5,658 4,741 Add:Reinsurance and other amounts recoverable205 218 Ending balance$5,863$4,959 Includes unpaid claims amounts classified as liabilities of businesses held for sale.As of March 31,2024 and December 31,2023,$1,378 million and$823 million classified as liabilities of businessesheld for sale,respectively.Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certainbusiness for which the Company administers the plan benefits without any right of offset.See Note 10 to the Consolidated Financial Statements for additionalinformation on reinsurance.Variances in incurred costs related to prior years unpaid claims and claim expenses that resulted from the differences between actual experience and the Companyskey assumptions were as follows:Three Months Ended March 31,20242023(Dollars in millions)$%$tual completion factors$76 0.2%$1%Medical cost trend150 0.4 143 0.5 Total favorable variance$226 0.6%$144 0.5%Percentage of current year incurred costs as reported for the year ended December 31,2023.Percentage of current year incurred costs as reported for the year ended December 31,2022.Favorable prior year development in both years reflects lower than expected utilization of medical services as compared to our assumptions.C.Future Policy BenefitsCigna HealthcareThe weighted average interest rates applied and duration for future policy benefits in the Cigna Healthcare segment,consisting primarily of supplemental healthproducts including individual Medicare supplement,limited benefit health products and individual private medical insurance,were as follows:As ofMarch 31,2024March 31,2023Interest accretion rate2.56%2.59%Current discount rate5.11%5.29%Weighted average duration7.8 years8.1 years(1)(1)(1)(2)(1)(2)16The net liability for future policy benefits for the segments supplemental health products represents the present value of benefits expected to be paid topolicyholders,net of the present value of expected net premiums,which is the portion of expected future gross premium expected to be collected frompolicyholders that is required to provide for all expected future benefits and expenses.The present values of expected net premiums and expected future policybenefits for the Cigna Healthcare segment were as follows:Three Months Ended March 31,(In millions)2024 2023Present value of expected net premiumsBeginning balance$9,233$8,557 Reversal of effect of beginning of period discount rate assumptions1,154 1,537 Issuances and lapses446 306 Net premiums collected(350)(326)Interest and other 73 56 Ending balance at original discount rate10,556 10,130 Effect of end of period discount rate assumptions(1,309)(1,312)Ending balance$9,247$8,818 Present value of expected policy benefitsBeginning balance$9,633$8,945 Reversal of effect of discount rate assumptions1,220 1,611 Issuances and lapses457 307 Benefit payments(362)(326)Interest and other 71 58 Ending balance at original discount rate11,019 10,595 Effect of discount rate assumptions(1,381)(1,378)Ending balance$9,638$9,217 Liability for future policy benefits$391$399 Other216 202 Total liability for future policy benefits$607$601 Includes future policy benefits amounts classified as liabilities of businesses held for sale.Includes the foreign exchange rate impact of translating from transactional and functional currency to United States dollar and the impact of flooring the liability at zero.The flooring impact iscalculated at the cohort level after discounting the reserves at the current discount rate.As of March 31,2024 and March 31,2023 undiscounted expected future gross premiums were$19.0 billion and$17.6 billion,respectively.As of March 31,2024 and March 31,2023 discountedexpected future gross premiums were$13.3 billion and$12.5 billion,respectively.As of March 31,2024 and March 31,2023,undiscounted expected future policy benefits were$13.6 billion and$12.8 billion,respectively.The liability for future policyholder benefits includes immaterial businesses shown as reconciling items above,most of which are in run-off.$72 million and$154 million reported in Reinsurance recoverables in the Consolidated Balance Sheets as of March 31,2024 and March 31,2023,respectively,relate to the liability for future policybenefits.Additionally,$81 million of reinsurance recoverables are reported in assets of businesses held for sale in the Consolidated Balance Sheets as of March 31,2024.Includes$427 million of future policy benefits classified as liabilities of businesses held for sale in the Consolidated Balance Sheets as of March 31,2024.Other OperationsThe weighted average interest rates applied and duration for future policy benefits in Other Operations,consisting of annuity and life insurance products,were asfollows:As ofMarch 31,2024March 31,2023Interest accretion rate5.64%5.64%Current discount rate5.16%4.95%Weighted average duration11.3 years11.7 yearsObligations for annuities represent discounted periodic benefits to be paid to an individual or groups of individuals over their remaining lives.Other Operationstraditional insurance contracts,which are in run-off,have no premium remaining to be collected;therefore,future policy benefit reserves represent the present valueof expected future policy benefits,discounted using the current discount rate,and the remaining amortizable deferred profit liability.Future policy benefits for Other Operations includes deferred profit liability of$379 million as of March 31,2024 and$392 million as of March 31,2023.Futurepolicy benefits excluding deferred profit liability were$3.1 billion as of March 31,2024 and$3.2 billion as(1)(2)(3)(2)(4)(5)(6)(7)(1)(2)(3)(4)(5)(6)(7)17of each of December 31,2023,March 31,2023,and December 31,2022.The change in future policy benefits reserves year-to-date was primarily driven by benefitpayments,as well as changes in the current discount rate.Undiscounted expected future policy benefits were$4.4 billion as of March 31,2024 and$4.6 billion asof March 31,2023.As of both March 31,2024 and March 31,2023,$1.0 billion of the future policy benefit reserve was recoverable through treaties with externalreinsurers.D.Contractholder Deposit FundsContractholder deposit fund liabilities within Other Operations were$6.5 billion as of March 31,2024 and December 31,2023 and$6.7 billion as of March 31,2023 and December 31,2022.Approximately 38%of the balance is reinsured externally.Activity in these liabilities is presented net of reinsurance in theConsolidated Statements of Cash Flows.The net year-to-date decrease in contractholder deposit fund liabilities generally relates to withdrawals and benefitpayments from contractholder deposit funds,partially offset by deposits and interest credited to contractholder deposit funds.As of March 31,2024,the weighted average crediting rate,net amount at risk and cash surrender value for contractholder deposit fund liabilities not effectivelyexited through reinsurance were 3.33%,$3.0 billion and$2.8 billion,respectively.The comparative amounts as of March 31,2023 were 3.25%,$3.2 billion and$2.8 billion,respectively.More than 99%of the$4.0 billion liability as of March 31,2024 and the$4.1 billion liability as of March 31,2023 not reinsuredexternally is for contracts with guaranteed interest rates of 3%-4%,and approximately$1.2 billion represented contracts with policies at the guarantee.At both ofthese same period ends,$1.2 billion was 50-150 basis points(bps)above the guarantee and the remaining$1.6 billion as of March 31,2024 and$1.7 billion as ofMarch 31,2023 represented contracts above the guarantee that pay the policyholder based on the greater of a guaranteed minimum cash value or the actual cashvalue.More than 90%of these contracts have actual cash values of at least 110%of the guaranteed cash value.E.Market Risk BenefitsLiabilities for market risk benefits consist of variable annuity reinsurance contracts in Other Operations.These liabilities arise under annuities and riders toannuities written by ceding companies that guarantee the benefit received at death and,for a subset of policies,also provide contractholders the option,within 30days of a policy anniversary after the appropriate waiting period,to elect minimum income payments.The Companys capital market risk exposure on variableannuity reinsurance contracts arises when the reinsured guaranteed minimum benefit exceeds the contractholders account value in the related underlying mutualfunds at the time the insurance benefit is payable under the respective contract.The Company receives and pays premium periodically based on the terms of thereinsurance agreements.Market risk benefits activity was as follows:Three Months Ended March 31,(Dollars in millions)20242023Balance,beginning of year$1,003$1,268 Balance,beginning of year,before the effect of nonperformance risk(own credit risk)1,085 1,379 Changes due to expected run-off(3)(6)Changes due to capital markets versus expected(113)(41)Changes due to policyholder behavior versus expected(14)6 Assumption changes(33)Balance,end of period,before the effect of changes in nonperformance risk(own credit risk)955 1,305 Nonperformance risk(own credit risk),end of period(64)(85)Balance,end of period$891$1,220 Reinsured market risk benefit,end of period$951$1,301 The following table presents the net amount at risk and the average attained age of contractholders(weighted by exposure)for contracts assumed by the Company.The net amount at risk is the amount the Company would have to pay to contractholders if all deaths or annuitizations occurred as of the earliest possible date inaccordance with the insurance contract.The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded,asdiscussed further in Note 10 to the Consolidated Financial Statements.(Dollars in millions,excludes impact of reinsurance ceded)March 31,2024March 31,2023Net amount at risk$1,441$2,183 Average attained age of contractholders(weighted by exposure)77.7 years75.4 years18Note 10 ReinsuranceThe Companys insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and to permit recovery of aportion of incurred losses.Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired.Reinsurance does not relieve the originating insurer of liability.Therefore,reinsured liabilities must continue to be reported along with the related reinsurancerecoverables.The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.A.Reinsurance RecoverablesThe majority of the Companys reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was notacquired.The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company.The Company reviews its reinsurance arrangements and establishes reserves against the recoverables primarily for expected credit losses.The Companys reinsurance recoverables as of March 31,2024 are presented at amount due by range of external credit rating and collateral level in the followingtable,with reinsurance recoverables that are market risk benefits separately presented at fair value:(In millions)Fair value of collateralcontractually required tomeet or exceed carryingvalue of recoverableCollateral provisionsexist that may mitigaterisk of credit loss No collateralTotalOngoing OperationsA-equivalent and higher current ratings$85$85 BBB-to BBB equivalent current credit ratings 60 60 Not rated145 7 188 340 Total recoverables related to ongoing operations145 7 333 485 Acquisition,disposition or run-off activitiesBBB equivalent and higher current ratings Lincoln National Life and Lincoln Life&Annuity of New York 2,619 2,619 Empower Annuity Insurance Company 128 128 Prudential Insurance Company of America351 351 Life Insurance Company of North America 334 334 Other167 23 14 204 Not rated 6 4 10 Total recoverables related to acquisition,disposition or run-off activities518 2,982 146 3,646 Total reinsurance recoverables before market risk benefits$663$2,989$479$4,131 Allowance for uncollectible reinsurance(35)Market risk benefits951 Total reinsurance recoverables$5,047 Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.Certified by an NRSRO.Includes$166 million of current reinsurance recoverables that are reported in Other current assets and$209 million of reinsurance recoverables classified as assets of businesses held for sale.Collateral levels are defined internally based on the fair value of the collateral relative to the carrying amount of the reinsurance recoverable,the frequency at whichcollateral is required to be replenished and the potential for volatility in the collaterals fair value.B.Effective Exit of Variable Annuity Reinsurance BusinessThe Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance transaction in 2013.Variableannuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk benefits as discussed in Note 9 to the Consolidated FinancialStatements.Berkshire reinsured 100%of the Companys future cash flows in this business,net of other reinsurance arrangements existing at that time.Thereinsurance agreement is subject to an overall(1)(2)(2)(2)(3)(1)(2)(3)19limit with approximately$3.1 billion remaining at March 31,2024.As a result of the reinsurance transaction,amounts payable are offset by a correspondingreinsurance recoverable,provided the increased recoverable remains within the overall Berkshire limit.(In millions)Reinsurer March 31,2024December 31,2023Collateral and Other Termsat March 31,2024Berkshire$777$873 100%were secured by assets in a trust.Sun Life Assurance Company of Canada79 92 Liberty Re(Bermuda)Ltd.91 104 100%were secured by assets in a trust.SCOR SE27 31 75%were secured by a letter of credit.Market risk benefits$974$1,100 All reinsurers are rated A-equivalent and higher by an NRSRO.Includes incurred but not reported(IBNR)and outstanding claims of$23 million as of March 31,2024 and$19 million as of December 31,2023.These amounts are excluded from market risk benefitsat of March 31,2024 in Note 9 and Note 10A to the Consolidated Financial Statements.The impact of nonperformance risk(i.e.,the risk that a counterparty might default)on the variable annuity reinsurance asset was immaterial for the three monthsended March 31,2024 and March 31,2023.Note 11 InvestmentsThe Cigna Groups investment portfolio consists of a broad range of investments including debt securities,equity securities,commercial mortgage loans,policyloans,other long-term investments,short-term investments and derivative financial instruments.The sections below provide more detail regarding our investmentbalances and realized investment gains and losses.See Note 12 to the Consolidated Financial Statements for information about the valuation of the Companysinvestment portfolio.Further information about our accounting policies for investment assets can be found in Note 12 in the Companys 2023 Form 10-K.The following table summarizes the Companys investments by category and current or long-term classification:March 31,2024December 31,2023(In millions)CurrentLong-termTotalCurrentLong-termTotalDebt securities$604$8,876$9,480$590$9,265$9,855 Equity securities18 1,553 1,571 31 3,331 3,362 Commercial mortgage loans197 1,365 1,562 182 1,351 1,533 Policy loans 1,186 1,186 1,211 1,211 Other long-term investments 4,301 4,301 4,181 4,181 Short-term investments374 374 206 206 Total$1,193$17,281$18,474$1,009$19,339$20,348 Investments classified as assets of businesses held for sale(85)(1,256)(1,341)(84)(1,354)(1,438)Investments per Consolidated Balance Sheets$1,108$16,025$17,133$925$17,985$18,910 Investments related to the HCSC transaction that were held for sale as of March 31,2024.These investments were primarily comprised of debt securities and commercial mortgage loans,and to a lesserextent,other long-term investments.(1)(2)(1)(2)(1)(1)20A.Investment PortfolioDebt SecuritiesThe amortized cost and fair value by contractual maturity periods for debt securities were as follows as of March 31,2024:(In millions)AmortizedCostFairValueDue in one year or less$633$619 Due after one year through five years3,768 3,587 Due after five years through ten years3,144 2,921 Due after ten years2,186 2,000 Mortgage and other asset-backed securities389 353 Total$10,120$9,480 Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepayobligations,with or without penalties.Gross unrealized appreciation(depreciation)on debt securities by type of issuer is shown below:(In millions)AmortizedCostAllowance forCredit LossUnrealizedAppreciationUnrealizedDepreciationFairValueMarch 31,2024Federal government and agency$289$21$(10)$300 State and local government37 2(1)38 Foreign government354 8(14)348 Corporate9,051(50)122(682)8,441 Mortgage and other asset-backed389 (36)353 Total$10,120$(50)$153$(743)$9,480 December 31,2023Federal government and agency$251$24$(8)$267 State and local government37 2(1)38 Foreign government355 10(13)352 Corporate9,338(33)158(630)8,833 Mortgage and other asset-backed398 1(34)365 Total$10,379$(33)$195$(686)$9,855 Review of declines in fair value.Management reviews debt securities in an unrealized loss position to determine whether a credit loss allowance is needed based oncriteria that include:severity of decline;financial health and specific prospects of the issuer;andchanges in the regulatory,economic or general market environment of the issuers industry or geographic region.21The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded,byinvestment grade and the length of time these securities have been in an unrealized loss position.Unrealized depreciation on these debt securities is primarily due todeclines in fair value resulting from increasing interest rates since these securities were purchased.March 31,2024December 31,2023(Dollars in millions)FairValueAmortizedCostUnrealizedDepreciationNumberof IssuesFairValueAmortizedCostUnrealizedDepreciationNumberof IssuesOne year or lessInvestment grade$562$576$(14)232$330$338$(8)142 Below investment grade133 137(4)253161 170(9)135 More than one yearInvestment grade5,284 5,946(662)1,5615,441 6,036(595)1,590 Below investment grade598 661(63)367701 775(74)486 Total$6,577$7,320$(743)2,413$6,633$7,319$(686)2,353 Equity SecuritiesThe following table provides the values of the Companys equity security investments as of March 31,2024 and December 31,2023:March 31,2024December 31,2023(In millions)CostCarrying Value CostCarrying ValueEquity securities with readily determinable fair values$647$39$656$51 Equity securities with no readily determinable fair value3,281 1,532 3,248 3,311 Total$3,928$1,571$3,904$3,362 We are a minority owner in VillageMD,a provider of primary,multi-specialty and urgent care services that is majority-owned by Walgreens Boots Alliance,Inc.These securities are included in equity securities with no readily determinable fair value in the above table.As of March 31,2024,we determined our investment inVillageMD was impaired and wrote down the carrying value to an estimated fair value of$0.9 billion,resulting in a$1.8 billion loss recorded in Net realizedinvestment losses in the Companys Consolidated Statements of Income.Consistent with our strategy to invest in targeted startup and growth-stage companies in the health care industry,approximately 90%of our investments in equitysecurities are in the health care sector.Commercial Mortgage LoansMortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type,location and borrower.Loans aregenerally issued at fixed rates of interest and are secured by high quality,primarily completed and substantially leased operating properties.The Company regularly evaluates and monitors credit risk from the initial mortgage loan underwriting and throughout the investment holding period.For moreinformation on the Companys accounting policies and methodologies regarding these investments,see Note 12 in the Companys 2023 Form 10-K.The following table summarizes the credit risk profile of the Companys commercial mortgage loan portfolio:(Dollars in millions)March 31,2024December 31,2023Loan-to-Value RatioCarrying ValueAverage DebtService CoverageRatioAverage Loan-to-Value RatioCarrying ValueAverage DebtService CoverageRatioAverage Loan-to-Value RatioBelow 60%$810 2.12$802 2.1360%to 79Y4 1.75574 1.7780%to 1008 0.63157 0.65Total$1,562 1.8164%$1,533 1.8264Other Long-Term InvestmentsOther long-term investments include investments in unconsolidated entities,including certain limited partnerships and limited liability companies holding realestate,securities or loans.These investments are carried at cost plus the Companys ownership percentage of reporting income or loss,based on the financialstatements of the underlying investments that are generally reported at fair value.Income or loss from these investments is reported on a one quarter lag due to thetiming of when financial information is received from the general partner or manager of the investments.Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicatethat the carrying value may not be recoverable.Additionally,statutory and other restricted deposits and foreign currency swaps carried at fair value are reported inthe table below as Other.The following table provides the carrying value information for these investments:Carrying Value as of(In millions)March 31,2024December 31,2023Real estate investments$1,696$1,606 Securities partnerships2,423 2,400 Other182 175 Total$4,301$4,181 B.Derivative Financial InstrumentsThe Company uses derivative financial instruments to manage the characteristics of investment assets(such as duration,yield,currency and liquidity)to meet thevarying demands of the related insurance and contractholder liabilities.The Company also uses derivative financial instruments to hedge the risk of changes in thenet assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.As of March 31,2024,there have been no material changes to the Companys derivative financial instruments.Please refer to the Companys 2023 Form 10-K forfurther discussion of the types of derivative financial instruments and associated accounting policies.The effects of derivative financial instruments used in ourindividual hedging strategies were not material to the Consolidated Financial Statements as of March 31,2024 and December 31,2023.The gross fair values of ourderivative financial instruments are presented in Note 12 to the Consolidated Financial Statements.C.Realized Investment Gains and LossesNet realized investment losses,before income taxes were$1,836 million for the three months ended March 31,2024 and$56 million for the three months endedMarch 31,2023.This increase was primarily driven by the impairment of equity securities in 2024.These amounts exclude realized gains and losses attributed tothe Companys separate accounts because those gains and losses generally accrue directly to separate account policyholders.Note 12 Fair Value MeasurementsThe Company carries certain financial instruments at fair value in the financial statements including debt securities,certain equity securities,short-term investmentsand derivatives.Other financial instruments are measured at fair value only under certain conditions,such as when impaired or when there are observable pricechanges for equity securities with no readily determinable fair value.Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date.A liabilitysfair value is defined as the amount that would be paid to transfer the liability to a market participant,not the amount that would be paid to settle the liability with thecreditor.The Companys financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP.The hierarchy gives the highestranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities(Level 1)and the lowest ranking to fair valuesdetermined using methodologies and models with unobservable inputs(Level 3).An assets or a liabilitys classification is based on the lowest level of input that issignificant to its measurement.For example,a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significantto the instruments fair value,even though the measurement may be derived using inputs that are both observable(Levels 1 and 2)and unobservable(Level 3).23For a description of the policies,methods and assumptions that are used to estimate fair value and determine the fair value hierarchy for each class of financialinstruments,see Note 13 in the Companys 2023 Form 10-K.A.Financial Assets and Financial Liabilities Carried at Fair ValueThe following table provides information about the Companys financial assets and liabilities carried at fair value.Further information regarding insurance assetsand liabilities carried at fair value is provided in Note 9E to the Consolidated Financial Statements.Separate account assets are also recorded at fair value on theCompanys Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generallyaccrue directly to contractholders:(In millions)Quoted Prices in Active Markets forIdentical Assets(Level 1)Significant Other Observable Inputs(Level 2)Significant Unobservable Inputs(Level 3)TotalMarch 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023Financial assets at fair valueDebt securitiesFederal government andagency$165$130$135$137$300$267 State and local government 38 38 38 38 Foreign government 348 352 348 352 Corporate 8,072 8,432 369 401 8,441 8,833 Mortgage and other asset-backed 300 319 53 46 353 365 Total debt securities165 130 8,893 9,278 422 447 9,480 9,855 Equity securities 2 4 37 47 39 51 Short-term investments 374 206 374 206 Derivative assets 147 131 1 147 132 Financial liabilities at fairvalueDerivative liabilities$4$4$4$4 Excludes certain equity securities that have no readily determinable fair value.Level 3 Financial Assets and Financial LiabilitiesCertain inputs for instruments classified in Level 3 are unobservable(supported by little or no market activity)and significant to their resulting fair valuemeasurement.Unobservable inputs reflect the Companys best estimate of what hypothetical market participants would use to determine a transaction price for theasset or liability at the reporting date.Additionally,as discussed in Note 9E to the Consolidated Financial Statements,the Company classifies variable annuityassets and liabilities in Level 3 of the fair value hierarchy.(1)(1)24Quantitative Information about Unobservable InputsThe significant unobservable input used to value our corporate and government debt securities and mortgage and other asset-backed securities is an adjustment forliquidity.This adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security.The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and used in pricing these debtsecurities.The range and weighted average basis point amounts for liquidity reflect the Companys best estimates of the unobservable adjustments a marketparticipant would make to calculate these fair values.Fair Value as ofUnobservable Adjustment Range(WeightedAverage by Quantity)as of(Fair value in millions)March 31,2024December 31,2023Unobservable Input March 31,2024March 31,2024December 31,2023Debt securitiesCorporate$369$401 Liquidity55-1230(280)bps70-1235(310)bpsMortgage and other asset-backed securities53 46 Liquidity110-605(280)bps95-640(310)bpsTotal Level 3 debt securities$422$447 An increase in liquidity spread adjustments would result in a lower fair value measurement,while a decrease would result in a higher fair value measurement.Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair ValueThe following table summarizes the changes in financial assets and financial liabilities classified in Level 3.Gains and losses reported in the table may include netchanges in fair value that are attributable to both observable and unobservable inputs.Three Months Ended March 31,(In millions)20242023Debt and Equity SecuritiesBeginning balance$447$447(Losses)gains included in Shareholders net(loss)income(21)1(Losses)gains included in Other comprehensive loss(3)5 Purchases,sales and settlementsPurchases 4 Settlements(14)(9)Total purchases,sales and settlements(14)(5)Transfers into/(out of)Level 3Transfers into Level 316 39 Transfers out of Level 3(3)(16)Total transfers into/(out of)Level 313 23 Ending balance$422$471 Total(losses)gains included in Shareholders net(loss)income attributable to instruments held at the reporting date$(21)$1 Change in unrealized gain or(loss)included in Other comprehensive loss for assets held at the end of the reporting period$(4)$5 Total gains and losses included in Shareholders net(loss)income in the tables above are reflected in the Consolidated Statements of Income as Net realizedinvestment losses and Net investment income.Gains and losses included in Other comprehensive loss,net of tax in the tables above are reflected in Net unrealized appreciation on securities and derivatives in theConsolidated Statements of Comprehensive Income.Transfers into or out of the Level 3 category occur when unobservable inputs,such as the Companys best estimate of what a market participant would use todetermine a current transaction price,become more or less significant to the fair value measurement.Market activity typically decreases during periods of economicuncertainty and this decrease in activity reduces the availability of market observable data.As a result,the level of unobservable judgment that must be applied tothe pricing of certain instruments increases and is typically observed through the widening of liquidity spreads.Transfers between Level 2 and Level 3 during 2024and 2023 primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors.See discussion under QuantitativeInformation about Unobservable Inputs above for more information.25Separate AccountsThe investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and,together with their depositsand withdrawals,are excluded from the Companys Consolidated Statements of Income and Cash Flows.The separate account activity for the three months endedMarch 31,2024 and 2023 was primarily driven by changes in the market values of the underlying separate account investments.Fair values of Separate account assets were as follows:Quoted Prices in Active Marketsfor Identical Assets(Level 1)Significant Other ObservableInputs(Level 2)Significant Unobservable Inputs(Level 3)Total(In millions)March 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023March 31,2024December 31,2023Guaranteed separate accounts(See Note 16)$230$226$339$352$569$578 Non-guaranteed separate accounts158 158 5,794 5,797 229 217 6,181 6,172 Subtotal$388$384$6,133$6,149$229$217 6,750 6,750 Non-guaranteed separate accounts priced atnet asset value(NAV)as a practicalexpedient 666 680 Total$7,416$7,430 Non-guaranteed separate accounts include$4.0 billion as of both March 31,2024 and December 31,2023 in assets supporting the Companys pension plans,including$0.2 billion classified in Level 3as of both March 31,2024 and December 31,2023.Separate account assets classified in Level 3 primarily support the Companys pension plans and include certain newly-issued,privately-placed,complex or illiquidsecurities that are priced using methods discussed above,as well as commercial mortgage loans.Activity,including transfers into and out of Level 3,was notmaterial for the three months ended March 31,2024 or 2023.Separate account investments in securities partnerships,real estate and hedge funds are generally valued based on the separate accounts ownership share of theequity of the investee(NAV as a practical expedient),including changes in the fair values of its underlying investments.Substantially all of these assets support theCompanys pension plans.The following table provides additional information on these investments:Fair Value as ofUnfunded Commitment asof March 31,2024Redemption Frequency(if currently eligible)Redemption NoticePeriod(In millions)March 31,2024December 31,2023Securities partnerships$412$419$252 Not applicableNot applicableReal estate funds251 258 Quarterly30-90 daysHedge funds3 3 Up to annually,varying by fund30-90 daysTotal$666$680$252 As of March 31,2024,the Company does not have plans to sell any of these assets at less than fair value.These investments are structured to satisfy longer-terminvestment objectives.Securities partnerships are contractually non-redeemable and the underlying investment assets are expected to be liquidated by the fundmanagers within ten years after inception.B.Assets and Liabilities Measured at Fair Value under Certain ConditionsSome financial assets and liabilities are not carried at fair value,such as commercial mortgage loans that are carried at unpaid principal,investment real estate thatis carried at depreciated cost and equity securities with no readily determinable fair value when there are no observable market transactions.However,thesefinancial assets and liabilities may be measured using fair value under certain conditions,such as when investments become impaired and are written down to theirfair value,or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.For the three months ended March 31,2024,our equity investment in VillageMD was written down to an estimated fair value of$0.9 billion resulting in aninvestment loss of$1.8 billion recorded in Net realized investment losses in the Companys Consolidated Statements of Income.For the three months endedMarch 31,2023,impairments recognized requiring these assets to be measured at fair value were not material.Observable price changes for other equity securitieswith no readily determinable fair value were not material for the three months ended March 31,2024 and March 31,2023.(1)(1)(1)26C.Fair Value Disclosures for Financial Instruments Not Carried at Fair ValueThe following table includes the Companys financial instruments not recorded at fair value but for which fair value disclosure is required.In addition to universallife products and finance leases,financial instruments that are carried in the Companys Consolidated Balance Sheets at amounts that approximate fair value areexcluded from the following table:Classification in FairValue HierarchyMarch 31,2024December 31,2023(In millions)Fair ValueCarrying ValueFair ValueCarrying ValueCommercial mortgage loansLevel 3$1,451$1,562$1,430$1,533 Long-term debt,including current maturities,excluding finance leasesLevel 2$29,806$31,783$28,033$29,585 Note 13 Variable Interest EntitiesWe perform ongoing qualitative analyses of our involvement with variable interest entities to determine if consolidation is required.The Company determined thatit was not a primary beneficiary in any material variable interest entity as of March 31,2024 or December 31,2023.The Companys involvement with variableinterest entities for which it is not the primary beneficiary has not materially changed from December 31,2023.For details of our accounting policy for variableinterest entities and the composition of variable interest entities with which the Company is involved,refer to Note 14 in the Companys 2023 Form 10-K.TheCompany has not provided,and does not intend to provide,financial support to any of these variable interest entities in excess of its maximum exposure.Note 14 Accumulated Other Comprehensive Income(Loss)Accumulated Other Comprehensive Income(Loss)(AOCI)includes net unrealized appreciation on securities and derivatives,change in discount rate andinstrument-specific credit risk for certain long-duration insurance contractholder liabilities(Note 9 to the Consolidated Financial Statements),foreign currencytranslation and the net postretirement benefits liability adjustment.AOCI includes the Companys share from unconsolidated entities reported on the equity method.Generally,tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders net(loss)income in the same period that the relatedpre-tax AOCI reclassifications are recognized.Shareholders other comprehensive loss,net of tax,for the three months ended March 31,2024 and March 31,2023,is primarily attributable to the change indiscount rates for certain long-duration liabilities(following the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023)andunrealized changes in the market values of securities and derivatives,including the impacts from unconsolidated entities reported on the equity method.Changes in the components of AOCI were as follows:Three Months Ended March 31,(In millions)20242023Securities and DerivativesBeginning balance$171$(332)Unrealized appreciation on securities and derivatives143 252 Tax(expense)(39)(54)Net unrealized appreciation on securities and derivatives104 198 Reclassification adjustment for losses(gains)included in Shareholders net(loss)income(Net realized investment losses)22(5)Reclassification adjustment for tax(benefit)expense included in Shareholders net(loss)income(5)1 Net losses(gains)reclassified from AOCI to Shareholders net(loss)income17(4)Other comprehensive income,net of tax121 194 Ending balance$292$(138)27Three Months Ended March 31,(In millions)20242023Net long-duration insurance and contractholder liabilities measurement adjustmentsBeginning balance$(971)$(256)Current period change in discount rate for certain long-duration liabilities(732)(411)Tax benefit186 101 Net current period change in discount rate for certain long-duration liabilities(546)(310)Current period change in instrument-specific credit risk for market risk benefits(18)(26)Tax benefit4 5 Net current period change in instrument-specific credit risk for market risk benefits(14)(21)Other comprehensive(loss),net of tax(560)(331)Ending balance$(1,531)$(587)Three Months Ended March 31,(In millions)20242023Translation of foreign currenciesBeginning balance$(149)$(154)Translation of foreign currencies(24)15 Tax(expense)benefit(2)1 Other comprehensive(loss)income,net of tax(26)16 Ending balance$(175)$(138)Three Months Ended March 31,(In millions)20242023Postretirement benefits liabilityBeginning balance$(915)$(916)Reclassification adjustment for amortization of net prior actuarial losses and prior service costs(Interest expense and other)8 13 Reclassification adjustment for tax(benefit)included in Shareholders net(loss)income(3)(3)Other comprehensive income,net of tax5 10 Ending balance$(910)$(906)Three Months Ended March 31,(In millions)20242023Total Accumulated other comprehensive lossBeginning balance$(1,864)$(1,658)Shareholders other comprehensive(loss),net of tax(460)(111)Ending balance$(2,324)$(1,769)Note 15 Income TaxesIncome Tax ExpenseThe effective tax rate for the three months ended March 31,2024 increased due to a valuation allowance related to the impairment of equity securities,partiallyoffset by a decrease related to the businesses held for sale and a decrease related to the release of tax reserves following a favorable state audit resolution.The368.4fective tax rate for the three months ended March 31,2024 was higher than the 18.4%rate for the three months ended March 31,2023.As of March 31,2024,we had approximately$664 million in deferred tax assets(DTAs)associated with the impairment of equity securities,as well as unrealizedinvestment losses that are partially recorded in Accumulated other comprehensive loss.A valuation allowance of$427 million,which drove the higher effective taxrate,was established in the three months ended March 31,2024,almost entirely related to the impairment of equity securities.For the remainder of the DTAs,wehave determined that a valuation allowance is not currently required based on the Companys ability to carry back losses and our ability and intent to hold certainsecurities until recovery.We continue to monitor and evaluate the need for any additional valuation allowance.28Note 16 Contingencies and Other MattersThe Company,through its subsidiaries,is contingently liable for various guarantees provided in the ordinary course of business.A.Financial Guarantees:Retiree and Life Insurance BenefitsThe Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits.For the majority of these benefits,thesponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certainpercentage of benefit obligations.If employers fail to do so,the Company or an affiliate of the buyer of the retirement benefits business has the right to redirect themanagement of the related assets to provide for benefit payments.As of March 31,2024,employers maintained assets that generally exceeded the benefitobligations under these arrangements of approximately$410 million.An additional liability is established if management believes that the Company will berequired to make payments under the guarantees;there were no additional liabilities required for these guarantees,net of reinsurance,as of March 31,2024.Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy.The Company does not expect that these financial guarantees will have a material effect on the Companys consolidated results of operations,liquidity or financialcondition.B.Certain Other GuaranteesThe Company had indemnification obligations as of March 31,2024 in connection with acquisition and disposition transactions.These indemnification obligationsare triggered by the breach of representations or covenants provided by the Company,such as representations for the presentation of financial statements,filing oftax returns,compliance with laws or regulations or identification of outstanding litigation.These obligations are typically subject to various time limitations,defined by the contract or by operation of law,such as statutes of limitation.In some cases,the maximum potential amount due is subject to contractual limitationsbased on a stated dollar amount or a percentage of the transaction purchase price,while in other cases limitations are not specified or applicable.The Company doesnot believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnificationobligations are subject to limitation.There were no recorded liabilities for these indemnification obligations as of March 31,2024.C.Guaranty Fund AssessmentsThe Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws.TheCompanys exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business writtenin the relevant jurisdictions.There were no material charges or credits resulting from existing or new guaranty fund assessments for the three months ended March 31,2024.D.Legal and Regulatory MattersThe Company is routinely involved in numerous claims,lawsuits,regulatory inquiries and audits,government investigations,including under the federal FalseClaims Act and state false claims acts initiated by a government investigating body or by a qui tam relators filing of a complaint under court seal,and other legalmatters arising,for the most part,in the ordinary course of managing a global health services business.Additionally,the Company has received and is cooperatingwith subpoenas or similar processes from various governmental agencies requesting information,all arising in the normal course of its business.Disputed taxmatters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions,including those resulting in litigation,are accounted for underGAAP guidance for uncertain tax positions.Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss and certain other material litigationmatters are described below.For those matters that the Company has identified with a reasonably possible material loss,the Company provides disclosure in theaggregate of accruals and range of loss,or a statement that such information cannot be estimated.The Companys accrual for the matter discussed below underLitigation Matters is not material.Due to numerous uncertain factors presented in this case,it is not possible to estimate an aggregate range of loss(if any)forthis matter at this time.In light of the uncertainties involved in this matter,there is no assurance that its ultimate resolution will not exceed the amount currentlyaccrued by the Company.An adverse outcome in this matter could be material to the Companys results of operations,financial condition or liquidity for anyparticular period.The outcomes of lawsuits are inherently unpredictable and we may be unsuccessful in this ongoing litigation matter or any future claims orlitigation.29Litigation MattersExpress Scripts Litigation with Elevance.In March 2016,Elevance filed a lawsuit in the United States District Court for the Southern District of New Yorkalleging various breach of contract claims against Express Scripts relating to the parties rights and obligations under the periodic pricing review section of thepharmacy benefit management agreement between the parties including allegations that Express Scripts failed to negotiate new pricing concessions in good faith,aswell as various alleged service issues.Elevance also requested that the court enter declaratory judgment that Express Scripts is required to provide Elevancecompetitive benchmark pricing,that Elevance can terminate the agreement and that Express Scripts is required to provide Elevance with post-termination servicesat competitive benchmark pricing for one year following any termination by Elevance.Elevance claimed it is entitled to$13 billion in additional pricingconcessions over the remaining term of the agreement,as well as$1.8 billion for one year following any contract termination by Elevance and$150 milliondamages for service issues(Elevances Allegations).On April 19,2016,in response to Elevances complaint,Express Scripts filed its answer denying ElevancesAllegations in their entirety and asserting affirmative defenses and counterclaims against Elevance.The court subsequently granted Elevances motion to dismisstwo of six counts of Express Scripts amended counterclaims.Express Scripts filed its Motion for Summary Judgment on August 27,2021.Elevance completedfiling of its Response to Express Scripts Motion for Summary Judgment on October 16,2021.Express Scripts filed its Reply in Support of its Motion for SummaryJudgment on November 19,2021.On March 31,2022,the court granted summary judgment in favor of Express Scripts on all of Elevances pricing claims fordamages totaling$14.8 billion and on most of Elevances claims relating to service issues.Elevances only remaining service claims relate to the review orprocessing of prior authorizations,with alleged damages over$100 million.On November 1,2023,the parties signed a settlement agreement pursuant to whichExpress Scripts agreed to resolve the service-related claims.The settlement agreement is not an admission of liability or fault by Express Scripts,the Company orits subsidiaries.Following the settlement,Elevance retains the right to appeal the pricing-related claims that were previously dismissed by the court and ExpressScripts retains the ability to reassert its own pricing-related claims in the event any appeal by Elevance is successful.Elevance filed its Notice of Appeal of itspricing-related claims on December 12,2023.Elevance filed its opening appellate brief on April 24,2024.Note 17 Segment InformationSee Note 1 to the Consolidated Financial Statements for a description of our segments.A description of our basis for reporting segment operating results is outlinedbelow.Intersegment revenues primarily reflect pharmacy and care services transactions between the Evernorth Health Services and Cigna Healthcare segments.The Company uses pre-tax adjusted income(loss)from operations and adjusted revenues as its principal financial measures of segment operating performancebecause management believes these metrics best reflect the underlying results of business operations and permit analysis of trends in underlying revenue,expensesand profitability.We define pre-tax adjusted income(loss)from operations as income(loss)before income taxes excluding pre-tax income(loss)attributable tononcontrolling interests,net realized investment results,amortization of acquired intangible assets,and special items.The Cigna Groups share of certain realizedinvestment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.Special items are mattersthat management believes are not representative of the underlying results of operations due to their nature or size.Adjusted income(loss)from operations ismeasured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.The Company defines adjusted revenues as total revenues excluding the following adjustments:special items and The Cigna Groups share of certain realizedinvestment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.Special items are matters that managementbelieves are not representative of the underlying results of operations due to their nature or size.We exclude these items from this measure because managementbelieves they are not indicative of past or future underlying performance of the business.The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance.30The following table presents the special items charges(benefits)recorded by the Company,as well as the respective financial statement line items impacted:Three Months Ended March 31,20242023(In millions)Pre-taxAfter-taxPre-taxAfter-taxIntegration and transaction-related costs(Selling,general and administrative expenses)$37$29$1$1 Loss(gain)on sale of businesses19(43)Deferred tax expenses,net(Income taxes,less amount attributable to noncontrolling interests)17 Total impact from special items$56$3$1$1 Summarized segment financial information was as follows:(In millions)EvernorthHealth ServicesCigna HealthcareOther OperationsCorporate andEliminationsTotalThree months ended March 31,2024Revenues from external customers$44,886$12,012$66$1$56,965 Intersegment revenues1,281 1,124 25(2,430)Net investment income59 149 75 7 290 Total revenues46,226 13,285 166(2,422)57,255 Net realized investment results from certain equity method investments(8)(8)Adjusted revenues$46,226$13,277$166$(2,422)$57,247(Loss)income before income taxes$(436)$943$18$(446)$79 Pre-tax adjustments to reconcile to adjusted income from operations(Income)attributable to noncontrolling interests(77)(77)Net realized investment losses 1,456 372 1,828 Amortization of acquired intangible assets417 6 423 Special itemsIntegration and transaction-related costs 37 37 Loss on sale of businesses 19 19 Pre-tax adjusted income(loss)from operations$1,360$1,340$18$(409)$2,309(In millions)EvernorthHealth ServicesCigna HealthcareOther OperationsCorporate andEliminationsTotalThree months ended March 31,2023Revenues from external customers$34,511$11,650$79$46,240 Intersegment revenues1,618 963 (2,581)Net investment income50 143 78 6 277 Total revenues36,179 12,756 157(2,575)46,517 Net realized investment results from certain equity method investments(38)(38)Adjusted revenues$36,179$12,718$157$(2,575)$46,479 Income(loss)before income taxes$918$1,077$21$(415)$1,601 Pre-tax adjustments to reconcile to adjusted income from operations(Income)attributable to noncontrolling interests(42)(1)(43)Net realized investment losses(gains)24(6)18 Amortization of acquired intangible assets444 15 459 Special itemsIntegration and transaction-related costs 1 1 Pre-tax adjusted income(loss)from operations$1,320$1,115$15$(414)$2,036 Includes Net realized investment losses as presented in our Consolidated Statements of Income,as well as the Companys share of certain realized investment results of its joint ventures reported in theCigna Healthcare segment using the equity method of accounting,which are presented within Fees and other revenues in our Consolidated Statements of Income.(1)(1)(1)31Revenue from external customers includes Pharmacy revenues,Premiums and Fees and other revenues.The following table presents these revenues by product,premium and service type:Three Months Ended March 31,(In millions)20242023Products(Pharmacy revenues)(ASC 606)Network revenues$24,166$15,748 Home delivery and specialty revenues16,458 16,025 Other revenues2,546 1,867 Total Evernorth Health Services43,170 33,640 Total Other Operations17 Intercompany eliminations(1,151)(1,496)Total Pharmacy revenues42,036 32,144 Insurance premiums(ASC 944)Cigna Healthcare U.S.HealthcareEmployer insured4,393 4,080 Medicare Advantage2,287 2,236 Stop loss1,668 1,503 Individual and Family Plans1,040 1,208 Other1,258 1,117 U.S.Healthcare10,646 10,144 International Health885 786 Total Cigna Healthcare11,531 10,930 Other48 79 Intercompany eliminations24 16 Total Premiums11,603 11,025 Services(Fees)(ASC 606)Evernorth Health Services2,943 2,499 Cigna Healthcare1,571 1,606 Other Operations25 1 Other revenues90 66 Intercompany eliminations(1,303)(1,101)Total Fees and other revenues3,326 3,071 Total revenues from external customers$56,965$46,240 Cigna Healthcare includes the U.S.Healthcare and International Health operating segments,which provide comprehensive medical and coordinated solutions to clients and customers.During the fourthquarter of 2023,the U.S.Commercial and U.S.Government operating segments merged to form the U.S.Healthcare operating segment.Information presented for the three months ended March 31,2023 has been restated to conform to the new operating segment presentation.Financial and performance guarantees.Evernorth Health Services may also provide certain financial and performance guarantees,including a minimum level ofdiscounts a client may receive,generic utilization rates and various service levels.Clients may be entitled to receive compensation if we fail to meet the guarantees.Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue for any estimated payoutswithin Accrued expenses and other liabilities(current).These estimates are adjusted and paid following the end of the annual guarantee period.Historically,adjustments to original estimates have not been material.This guarantee liability was$1.9 billion as of March 31,2024 and$1.6 billion as of December 31,2023.Major customers.Revenues from a single pharmacy benefit client were approximately 15%of consolidated revenues for the three months ended March 31,2024.These amounts were reported in the Evernorth Health Services segment.Additionally,revenues from U.S.Federal Government agencies,under a number of contracts,were approximately 13%of consolidated revenues for the threemonths ended March 31,2024.These amounts were reported in the Evernorth Health Services and Cigna Healthcare segments.See Note 25 in the Companys 2023Form 10-K for prior year revenue concentration information.(1)(1)32Item 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSPAGEExecutive Overview35Liquidity and Capital Resources38Critical Accounting Estimates41Segment Reporting42Evernorth Health Services42Cigna Healthcare44Other Operations45Corporate46Investment Assets46Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)is intended to provide information to assist you in betterunderstanding and evaluating our financial condition as of March 31,2024,compared with December 31,2023 and our results of operations for the three monthsended March 31,2024,compared with the same period last year and is intended to help you understand the ongoing trends in our business.We encourage you toread this MD&A in conjunction with our Consolidated Financial Statements included in Part I,Item 1 of this Form 10-Q and our Annual Report on Form 10-K forthe year ended December 31,2023(2023 Form 10-K).In particular,we encourage you to refer to the Risk Factors contained in Part I,Item 1A of our 2023Form 10-K.Unless otherwise indicated,financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States ofAmerica(GAAP).See Note 2 to the Consolidated Financial Statements in our 2023 Form 10-K for additional information regarding the Companys significantaccounting policies and see Note 2 to the Consolidated Financial Statements in this Form 10-Q for updates to those policies resulting from adopting newaccounting guidance,if any.The preparation of interim consolidated financial statements necessarily relies heavily on estimates.This and certain other factors callfor caution in estimating full-year results based on interim results of operations.In some of our financial tables in this MD&A,we present either percentagechanges or N/M when those changes are so large as to become not meaningful.Changes in percentages are expressed in basis points(bps).In this MD&A,our consolidated measures adjusted income from operations,earnings per share on that same basis and adjusted revenues are not determined inaccordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of shareholders net income(loss),earningsper share and total revenues.We also use pre-tax adjusted income(loss)from operations and adjusted revenues to measure the results of our segments.The Company uses pre-tax adjusted income(loss)from operations and adjusted revenues as its principal financial measures of segment operating performancebecause management believes these metrics best reflect the underlying results of business operations and permit analysis of trends in underlying revenue,expensesand profitability.We define adjusted income from operations as shareholders net income(loss)(or income(loss)before income taxes less pre-tax income(loss)attributable to noncontrolling interests for the segment metric)excluding net realized investment results,amortization of acquired intangible assets,and specialitems.The Cigna Groups share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method ofaccounting are also excluded.Special items are matters that management believes are not representative of the underlying results of operations due to their natureor size.Adjusted income(loss)from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.Consolidatedadjusted income(loss)from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparableGAAP measure,shareholders net income(loss).See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations toshareholders net income(loss).The Company defines adjusted revenues as total revenues excluding the following adjustments:special items and The Cigna Groups share of certain realizedinvestment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.Special items are matters that managementbelieves are not representative of the underlying results of operations due to their nature or size.We exclude these items from this measure because managementbelieves they are not indicative of past or future underlying performance of the business.Adjusted revenues is not determined in accordance with GAAP and shouldnot be viewed as a substitute for the most directly comparable GAAP measure,total revenues.See the below Financial Highlights section for a reconciliation ofconsolidated adjusted revenues to total revenues.33CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis report contains forward-looking statements within the meaning of the Private Securities Litigation
2024-06-07
57页
5星级
十五五规划建议全文（25页）.pdf
三个皮匠报告：2025银发经济生态：中国与全球实践白皮书（150页）.pdf
2025刘润年度演讲PPT：进化的力量.pdf
三个皮匠报告：2025中国情绪消费市场洞察报告（24页）.pdf
清华大学：2025年AIGC发展研究报告4.0版（152页）.pdf
三个皮匠报告：2025中国AI芯片市场洞察报告（24页）.pdf
三个皮匠报告：2025银发经济生态：中国与全球实践白皮书（PPT版）（55页）.pdf
三个皮匠报告：2025中国稀土产业市场洞察报告-从资源到战略武器，中美博弈的稀土战场（25页）.pdf
麦肯锡：2025年人工智能发展态势报告：智能体、创新与转型（英文版）（32页）.pdf
Gartner：2026年十大战略技术趋势报告（28页）.pdf
0731-84720580
商务合作：really158d
友链申请 (QQ)：1737380874
最新报告
中英对照
全文搜索
报告精选
PDF上传翻译
多格式文档互转
入驻&报告售卖
会员权益
机构报告
券商研报
财报库
专题合集
英文报告
数据图表
会议报告
其他资源
研报
新质生产力
DeepSeek
低空经济
大模型
AI Agent
AI Infra
具身智能
自动驾驶
宠物
银发经济
人形机器人
企业出海
算力
微短剧
薪酬
白皮书
创新药
行业分析
个股研究
年报财报
IPO招股书
会议纪要
宏观策略
政策法规
其他
人工智能
信息科技
互联网
消费经济
汽车交通
电商零售
传媒娱乐
医疗健康
投资金融
能源环境
地产建筑
传统产业
英文报告
其它
行业聚焦
芯片产业
热点概念
全球咨询智库
人工智能
500强
新质生产力
会议峰会
新能源汽车
企业年报
互联网
公司研究
行业综观
消费教育
科技通信
医药健康
人力资源
投资金融
汽车产业
物流地产
电子商务
传统产业
传媒营销
其它
2025年养老经济/银发经济/长寿经济/银发族/老龄化报告合集（共50套打包）
2025年商业航天行业报告合集（共41套打包）
AI、科技与通信
广告、传媒与营销
消费、零售与支付
HR、文化与旅游
金融、保险与投资
能源、环境与工业
医疗制药与大健康
物流、地产与建筑
其他行业
AI ▪ 科技 ▪ 通信
数字化
金融财经
智能制造
电商传媒
地产建筑
医疗医学
能源化工
其他行业
收藏
下载
2025-11-19
AI查数
行业数据
政策法规
商业模式
产业链
竞争格局
市场规模
产业概述
其它
2025年
AI读财报
年报
一季报
半年报
三季报
IPO招股书
社会责任报告
A股
IPO申报
港股
美股&全球
新三板
微信扫码登录
手机快捷登录
账号登录
