UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One) 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 2, 20171, 2018

OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

Commission file number 1-10658

Micron Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware75-1618004
(State or other jurisdiction of(IRS Employer Identification No.)
incorporation or organization) 
  
8000 S. Federal Way, Boise, Idaho83716-9632
(Address of principal executive offices)(Zip Code)
  
Registrant's telephone number, including area code(208) 368-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes xT No o¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website,Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes xT No o¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer x
Accelerated Filer o
Non-Accelerated Filer o
(Do not check if a smaller reporting company)
Smaller Reporting Company o
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

The number of outstanding shares of the registrant's common stock as of March 21, 2017,16, 2018 was 1,106,307,123.

1,159,764,549.
     




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

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

Forward-Looking Statements

This Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements such as those made regarding timing of product introductions; our expected NAND development activities with Intel; the effect of U.S. tax reform; our expectation to engage, from time to time, in additional financing transactions; the sufficiency of our cash and investments, cash flows from operations, and available financing to meet our requirements for at least the next 12 months; and capital spending in 2018. We are under no obligation to update these forward-looking statements. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in "Part II, Other Information – Item 1A. Risk Factors."

Definitions of Commonly Used Terms

As used herein, "we," "our," "us," and similar terms include Micron Technology, Inc. and our consolidated subsidiaries, unless the context indicates otherwise. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:

Term Definition Term Definition
2021 MSAC Term Loan Variable Rate MSAC Senior Secured Term Loan due 2021 MCPIntel Multi-Chip PackageIntel Corporation
2021 MSTW Term Loan Variable Rate MSTW Senior Secured Term Loan due 2021 MicronJapan Court Micron Technology, Inc. (Parent Company)Tokyo District Court
2022 Term Loan B Senior Secured Term Loan B due 2022 MSTWMicron Micron Semiconductor Taiwan Co., Ltd.Technology, Inc. (Parent Company)
20322023 Notes 2032C and 2032D5.25% Senior Notes due 2023 MMJ Micron Memory Japan, Inc.
2032C2023 Secured Notes 2.375% Convertible7.50% Senior Secured Notes due 2032MMJ CompaniesMAI and MMJ
2032D Notes3.125% Convertible Senior Notes due 20322023 MMJ Group MMJ and its subsidiaries
20332024 Notes 2033E and 2033F5.25% Senior Notes due 2024 MMT Micron Memory Taiwan Co., Ltd.
2025 Notes5.50% Senior Notes due 2025MSPMicron Semiconductor Products, Inc.
2026 Notes5.63% Senior Notes due 2026MSTWMicron Semiconductor Taiwan Co., Ltd.
2032C Notes2.38% Convertible Senior Notes due 2032MTTWMicron Technology Taiwan, Inc.
2032D Notes3.13% Convertible Senior Notes due 2032QimondaQimonda AG
2033 Notes2033E and 2033F NotesR&DResearch and Development
2033E Notes 1.625%1.63% Convertible Senior Notes due 2033 NanyaSG&A Nanya Technology CorporationSelling, General, and Administrative
2033F Notes 2.125%2.13% Convertible Senior Notes due 2033 QimondaSSD Qimonda AGSolid-State Drive
2043G Notes 3.00% Convertible Senior Notes due 2043 R&DTera Probe Research and Development
ElpidaElpida Memory,Tera Probe, Inc.SG&ASelling, General, and Administration
IMFT IM Flash Technologies, LLC SSDTLC Solid-State DriveTriple-Level Cell
Inotera Inotera Memories, Inc. TAIBORTaipei Interbank Offered Rate
IntelIntel CorporationTera ProbeTera Probe, Inc.
Japan CourtTokyo District CourtVIE Variable Interest Entity
MAIMicron Akita, Inc.

Additional Information

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


PART I. FINANCIAL INFORMATION
  
ITEM 1. FINANCIAL STATEMENTS

MICRON TECHNOLOGY, INC.

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

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Net sales $4,648
 $2,934
 $8,618
 $6,284
$7,351
 $4,648
 $14,154
 $8,618
Cost of goods sold 2,944
 2,355
 5,903
 4,856
3,081
 2,944
 6,137
 5,903
Gross margin 1,704
 579
 2,715
 1,428
4,270
 1,704
 8,017
 2,715
               
Selling, general, and administrative 187
 175
 346
 354
196
 187
 387
 346
Research and development 473
 403
 943
 824
523
 473
 971
 943
Restructure and asset impairments 4
 1
 33
 16
Other operating (income) expense, net (4) 5
 (10) 7
(16) —
 (5) 23
Operating income (loss) 1,044
 (5) 1,403
 227
Operating income3,567
 1,044
 6,664
 1,403
               
Interest income 8
 12
 15
 23
27
 8
 50
 15
Interest expense (161) (97) (300) (193)(88) (161) (212) (300)
Other non-operating income (expense), net 34
 (6) 20
 (10)(53) 34
 (257) 20
 925
 (96) 1,138
 47
3,453
 925
 6,245
 1,138
               
Income tax (provision) benefit (38) (5) (69) (1)(143) (38) (257) (69)
Equity in net income (loss) of equity method investees 7
 5
 5
 64
1
 7
 1
 5
Net income (loss) 894
 (96) 1,074
 110
Net income3,311
 894
 5,989
 1,074
       
Net (income) attributable to noncontrolling interests —
 (1) —
 (1)(2) —
 (2) —
Net income (loss) attributable to Micron $894
 $(97) $1,074
 $109
Net income attributable to Micron$3,309
 $894
 $5,987
 $1,074
               
Earnings (loss) per share  
  
    
Earnings per share       
Basic $0.81
 $(0.09) $1.00
 $0.11
$2.86
 $0.81
 $5.23
 $1.00
Diluted 0.77
 (0.09) 0.95
 0.10
2.67
 0.77
 4.86
 0.95
               
Number of shares used in per share calculations               
Basic 1,099
 1,036
 1,070
 1,035
1,156
 1,099
 1,145
 1,070
Diluted 1,160
 1,036
 1,125
 1,072
1,238
 1,160
 1,232
 1,125










See accompanying notes to consolidated financial statements.


MICRON TECHNOLOGY, INC.

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

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Net income (loss) $894
 $(96) $1,074
 $110
Net income$3,311
 $894
 $5,989
 $1,074
               
Other comprehensive income (loss), net of tax               
Foreign currency translation adjustments —
 1
 37
 (89)
Gain (loss) on derivatives, net —
 3
 (7) (1)18
 —
 15
 (7)
Pension liability adjustments —
 1
 (1) (5)2
 —
 1
 (1)
Gain (loss) on investments, net —
 1
 (1) (2)(1) —
 (2) (1)
Foreign currency translation adjustments—
 —
 —
 37
Other comprehensive income (loss) —
 6
 28
 (97)19
 —
 14
 28
        
Total comprehensive income (loss) 894
 (90) 1,102
 13
Total comprehensive income3,330
 894
 6,003
 1,102
Comprehensive (income) attributable to noncontrolling interests —
 (1) —
 (1)(2) —
 (2) —
Comprehensive income (loss) attributable to Micron $894
 $(91) $1,102
 $12
Comprehensive income attributable to Micron$3,328
 $894
 $6,001
 $1,102


































See accompanying notes to consolidated financial statements.


MICRON TECHNOLOGY, INC.

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

As of March 2,
2017		 September 1,
2016		 March 1,
2018		 August 31,
2017
Assets        
Cash and equivalents $3,633
 $4,140
 $7,828
 $5,109
Short-term investments 265
 258
 214
 319
Receivables 2,891
 2,068
 4,437
 3,759
Inventories 3,000
 2,889
 3,184
 3,123
Other current assets 156
 140
 173
 147
Total current assets 9,945
 9,495
 15,836
 12,457
Long-term marketable investments 589
 414
 520
 617
Equity method investments 38
 1,364
Deferred tax assets 679
 657
Property, plant, and equipment, net 19,098
 14,686
 21,864
 19,431
Intangible assets, net 425
 464
 348
 387
Deferred tax assets 1,026
 766
Goodwill 1,190
 104
 1,228
 1,228
Other noncurrent assets 391
 356
 441
 450
Total assets $32,355
 $27,540
 $41,263
 $35,336
        
Liabilities and equity        
Accounts payable and accrued expenses $3,801
 $3,879
 $4,194
 $3,664
Deferred income 289
 200
 427
 408
Current debt 1,117
 756
 1,514
 1,262
Total current liabilities 5,207
 4,835
 6,135
 5,334
Long-term debt 11,308
 9,154
 7,802
 9,872
Other noncurrent liabilities 677
 623
 746
 639
Total liabilities 17,192
 14,612
 14,683
 15,845
        
Commitments and contingencies 

 

 

 

        
Redeemable convertible notes 28
 —
 14
 21
        
Micron shareholders' equity        
Common stock, $0.10 par value, 3,000 shares authorized, 1,110 shares issued and 1,106 outstanding (1,094 issued and 1,040 outstanding as of September 1, 2016) 111
 109
Common stock, $0.10 par value, 3,000 shares authorized, 1,165 shares issued and 1,158 outstanding (1,116 shares issued and 1,112 outstanding as of August 31, 2017) 116
 112
Additional capital 8,003
 7,736
 9,604
 8,287
Retained earnings 6,247
 5,299
 16,247
 10,260
Treasury stock, 4 shares held (54 as of September 1, 2016) (67) (1,029)
Accumulated other comprehensive (loss) (7) (35)
Treasury stock, 7 shares (4 shares as of August 31, 2017) (313) (67)
Accumulated other comprehensive income 43
 29
Total Micron shareholders' equity 14,287
 12,080
 25,697
 18,621
Noncontrolling interests in subsidiaries 848
 848
 869
 849
Total equity 15,135
 12,928
 26,566
 19,470
Total liabilities and equity $32,355
 $27,540
 $41,263
 $35,336



See accompanying notes to consolidated financial statements.


MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Six months ended March 2,
2017		 March 3,
2016
Cash flows from operating activities    
Net income $1,074
 $110
Adjustments to reconcile net income to net cash provided by operating activities  
  
Depreciation expense and amortization of intangible assets 1,774
 1,511
Amortization of debt discount and other costs 63
 64
Stock-based compensation 101
 101
Gain on remeasurement of previously-held equity interest in Inotera (71) —
Equity in net (income) loss of equity method investees (5) (64)
Change in operating assets and liabilities  
  
Receivables (773) 542
Inventories 174
 (268)
Accounts payable and accrued expenses 399
 (67)
Payments attributed to intercompany balances with Inotera (361) —
Deferred income taxes, net 59
 (27)
Other 109
 (19)
Net cash provided by operating activities 2,543
 1,883
     
Cash flows from investing activities  
  
Acquisition of Inotera (2,634) —
Expenditures for property, plant, and equipment (2,428) (2,209)
Purchases of available-for-sale securities (803) (679)
Payments to settle hedging activities (249) (66)
Proceeds from sales and maturities of available-for-sale securities 620
 1,950
Proceeds from settlement of hedging activities 74
 114
Other 54
 (136)
Net cash provided by (used for) investing activities (5,366) (1,026)
     
Cash flows from financing activities  
  
Proceeds from issuance of debt 2,961
 174
Proceeds from issuance of stock under equity plans 68
 24
Proceeds from equipment sale-leaseback transactions —
 424
Repayments of debt (556) (519)
Payments on equipment purchase contracts (33) (14)
Cash paid to acquire treasury stock (33) (147)
Other (66) (10)
Net cash provided by (used for) financing activities 2,341
 (68)
     
Effect of changes in currency exchange rates on cash and equivalents (25) 2
     
Net increase (decrease) in cash and equivalents (507) 791
Cash and equivalents at beginning of period 4,140
 2,287
Cash and equivalents at end of period $3,633
 $3,078



Six months ended March 1,
2018		 March 2,
2017
Cash flows from operating activities    
Net income $5,989
 $1,074
Adjustments to reconcile net income to net cash provided by operating activities  
  
Depreciation expense and amortization of intangible assets 2,241
 1,774
Amortization of debt discount and other costs 55
 63
Loss on debt repurchases and conversions 218
 1
Stock-based compensation 103
 101
Gain on remeasurement of previously-held equity interest in Inotera —
 (71)
Change in operating assets and liabilities  
  
Receivables (630) (773)
Inventories (62) 174
Accounts payable and accrued expenses 93
 399
Payments attributed to intercompany balances with Inotera —
 (361)
Deferred income taxes, net (262) 59
Other noncurrent liabilities 229
 (23)
Other 10
 126
Net cash provided by operating activities 7,984
 2,543
     
Cash flows from investing activities  
  
Expenditures for property, plant, and equipment (4,217) (2,428)
Purchases of available-for-sale securities (502) (803)
Payments to settle hedging activities (28) (249)
Acquisition of Inotera —
 (2,634)
Proceeds from sales of available-for-sale securities 562
 548
Proceeds from maturities of available-for-sale securities 138
 72
Proceeds from settlement of hedging activities 111
 74
Other 93
 35
Net cash provided by (used for) investing activities (3,843) (5,385)
     
Cash flows from financing activities  
  
Repayments of debt (3,379) (556)
Payments on equipment purchase contracts (153) (33)
Proceeds from issuance of stock 1,554
 68
Proceeds from issuance of debt 650
 2,961
Other (92) (99)
Net cash provided by (used for) financing activities (1,420) 2,341
     
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash 4
 (33)
     
Net increase (decrease) in cash, cash equivalents, and restricted cash 2,725
 (534)
Cash, cash equivalents, and restricted cash at beginning of period 5,216
 4,263
Cash, cash equivalents, and restricted cash at end of period $7,941
 $3,729

See accompanying notes to consolidated financial statements.


MICRON TECHNOLOGY, INC.

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

Business and Basis of Presentation

We are a world leader in innovative memory solutions. Through our global brands – Micron®, Crucial®, Lexar®, and Ballistix® – our broad portfolio of high-performance memory technologies, including DRAM, NAND Flash, NOR Flash, and 3D XPoint™ memory, is transforming how the world uses information. Backed by more than 35 years of technology leadership, our memory solutions enable the world's most innovative computing, consumer, enterprise storage, data center, mobile, embedded, and automotive applications. The accompanying consolidated financial statements include the accounts of Micron and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended September 1, 2016.August 31, 2017. In the opinion of our management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, consisting of a normal recurring nature, to fairly state the financial information set forth herein. Certain reclassifications have been made to prior period amounts to conform to current period presentation.

Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 20172018 and 20162017 each contain 52 weeks. All period references are to our fiscal periods unless otherwise indicated. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended September 1, 2016.August 31, 2017.


Variable Interest Entities

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

Unconsolidated VIEs

Inotera:Prior to our acquisition of the remaining interest in Inotera on December 6, 2016, Inotera was a VIE because of the terms of its supply agreement with us. We had determined that we did not have the power to direct the activities of Inotera that most significantly impacted its economic performance, primarily due to limitations on our governance rights that required the consent of other parties for key operating decisions and due to Inotera's dependence on Nanya for financing and the ability of Inotera to operate in Taiwan. Therefore, we did not consolidate Inotera and we accounted for our interest under the equity method. (See "Acquisition of Inotera" and "Equity Method Investments – Inotera" notes.)

EQUVO: EQUVO HK Limited ("EQUVO"), a special purpose entity, was created to facilitate an equipment sale-leaseback financing transaction between us and a consortium of financial institutions. Neither we nor the financing entities have an equity interest in EQUVO. EQUVO was a VIE because its equity was not sufficient to permit it to finance its activities without additional support from the financing entities and because the third-party equity holder lacked characteristics of a controlling financial interest. By design, the arrangement with EQUVO was merely a financing vehicle and we did not bear any significant risks from variable interests with EQUVO. Therefore, we had determined that we did not have the power to direct the activities of EQUVO that most significantly impact its economic performance and we did not consolidate EQUVO. In February 2017, we completed all of our obligations under the sale-leaseback financing and no longer have any variable interests in EQUVO.



SC Hiroshima Energy Corporation:SC Hiroshima Energy Corporation ("SCHE") is an entity created to construct and operate a cogeneration, electrical power plant to support our wafer manufacturing facility in Hiroshima, Japan. We do not have an equity interest in SCHE. SCHE is a VIE due to the nature of its tolling agreements with us and our option to purchase SCHE's assets. We do not control the operation and maintenance of the plant, which we have determined are the activities of SCHE that most significantly impact its economic performance. Therefore, we do not consolidate SCHE.

PTI Xi'an:Powertech Technology Inc. Xi'an ("PTI Xi'an") is a wholly-owned subsidiary of Powertech Technology Inc. ("PTI") and was created to provide assembly services to us at our manufacturing site in Xi'an, China. We do not have an equity interest in PTI Xi'an. PTI Xi'an is a VIE because of the terms of its service agreement with us and its dependency on PTI to finance its operations. We have determined that we do not have the power to direct the activities of PTI Xi'an that most significantly impact its economic performance, primarily because we have no governance rights. Therefore, we do not consolidate PTI Xi'an. In connection therewith, we had capital lease obligations and net property, plant, and equipment of $78 million and $74 million, respectively, as of March 1, 2018, and $80 million and $76 million, respectively, as of August 31, 2017.

Consolidated VIE

IMFT:IMFT is a VIE because all of its costs are passed to us and its other member, Intel, through product purchase agreements and because IMFT is dependent upon us or Intel for additional cash requirements. The primary activities of IMFT are driven by the constant introduction of product and process technology. Because we perform a significant majority of the technology development, we have the power to direct its key activities. In addition, IMFT manufactures certain products exclusively for us using our technology. We consolidate IMFT because we have the power to direct the activities of IMFT that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to it. (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)




Recently AdoptedIssued Accounting Standards

In MarchOctober 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09 – Improvements to Employee Share-Based Payment Accounting, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification within the statement of cash flows. We adopted this ASU as of the beginning of the first quarter of 2017 and elected to account for forfeitures when they occur, on a modified retrospective basis. As a result of the adoption of this ASU, in the first quarter of 2017, we recognized deferred tax assets of $325 million for the excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting and also recognized an increase of an equal amount in the valuation allowance against those deferred tax assets. The adoption did not have any other material impacts on our financial statements.

In April 2015, the FASB issued ASU 2015-05 – Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provided additional guidance to customers about whether a cloud computing arrangement included a software license. Under ASU 2015-05, cloud computing arrangements that contain a software license should be accounted for in a manner consistent with the acquisition of other software licenses, otherwise customers should account for the arrangement as a service contract. ASU 2015-05 also removed the requirement to analogize to ASC 840-10 – Leases, to determine the asset acquired in a software licensing arrangement. We adopted this ASU as of the beginning of the first quarter of 2017 on a prospective basis. The adoption of this ASU did not have a material impact on our financial statements.

In February 2015, the FASB issued ASU 2015-02 – Amendments to the Consolidation Analysis, which amended the consolidation requirements in Accounting Standards Codification 810 – Consolidation. ASU 2015-02 made targeted amendments to the consolidation guidance for VIEs. We adopted this ASU as of the beginning of the first quarter of 2017 under a modified-retrospective approach. The adoption of this ASU did not have an impact on our financial statements.




Recently Issued Accounting Standards

In January 2017, the FASB issued ASU 2017-04 – Simplifying the Test for Goodwill Impairment, which modifies the goodwill impairment test and requires an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeds its fair value. This ASU will be effective for us beginning in the first quarter of 2021 with early adoption permitted and requires prospective adoption. We expect to adopt this ASU in the fourth quarter of 2017. Since the ASU simplifies the test for goodwill impairment, we do not expect the adoption of the ASU itself to have a material impact on our financial statements.

In November 2016, the FASB issued ASU 2016-18 – Restricted Cash, which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. This ASU will be effective for us beginning in the first quarter of 2019 with early adoption permitted and requires retrospective adoption. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In October 2016, the FASB issued ASU 2016-16 – Intra-Entity Transfers Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU will be effective for us beginning in the first quarter of 2019 with early adoption permitted and requires modified retrospective adoption. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In June 2016, the FASB issued ASU 2016-13 – Measurement of Credit Losses on Financial Instruments, which requires a financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected. This ASU requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This ASU requires that credit losses of debt securities designated as available-for-sale be recorded through an allowance for credit losses and limits the credit loss to the amount by which fair value is below amortized cost. We are required to adopt thisThis ASU beginningwill be effective for us in the first quarter of 2021; however, we are2021 with adoption permitted to adopt this ASU as early as the first quarter of 2020. This ASU is required to be adopted using arequires modified retrospective approach,adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In February 2016, the FASB issued ASU 2016-02 – Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-useright-of- use asset and corresponding liability, measured at the present value of the lease payments. This ASU will be effective for us beginning in the first quarter of 2020 with early adoption permitted and is required to be adopted using arequires modified retrospective approach.adoption. The adoption of this ASU will result in an increase to our consolidated balance sheets for thesein right-of-use assets and corresponding liabilities. We are evaluating the timing and other effects of our adoption of this ASU on our financial statements.

In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for us beginning in the first quarter of 2019 and requires modified retrospective adoption. WeOur assets and liabilities subject to this standard are evaluating the effects of our adoption of this ASU on our financial statements.not material.



In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the U.S.United States. The core principal of this ASU, as amended, is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We are required to adopt thisThis ASU beginningwill be effective for us in our the quarter of 2019; however, we are permitted to adopt this ASU as early as the first quarter of 2018. This ASU allows for either full retrospective or2019 and we expect to elect the modified retrospective adoption. We expect that, asadoption method.

As a result of the adoption of this ASU, the timing of recognizingwe expect to recognize revenue from sales of products to our distributors under(which generally have agreements allowing rights of return or price protection will beprotection) at the time control transfers to our distributors, which is generally earlier than recognizing revenue only upon resale by our distributors under the existing revenue recognition guidance. After adoption, the impact of this change in any reporting period is expected to be the net effect of changes to revenue recognized as of the beginning and end of each period. Revenue recognized upon resale by our customers withdistributors under these rightsarrangements was 17% and 19% of our consolidated revenue for the second quarter and first six months of 2018, respectively, and 20% and 22% of our consolidated revenue for the second quarter and first six months of 2017, respectively, and 24% forrespectively. On the second quarter and first six monthsdate of 2016.initial application of this ASU, we will derecognize the deferred income on sales made to our distributors through a cumulative adjustment to retained earnings. We are evaluatingexpect the timing, method, and other effectsrevenue deferral, historically recognized in the following period, to be offset by the earlier recognition of revenue as described above as control of product transfers to our distributors. As a result of the adoption of this ASU, onwe expect to recognize interest expense from the financing component for contracts with advanced payments under which we transfer control of our financial statements.products to our customers for periods extending beyond one year, although historically such arrangements would not have resulted in significant amounts of interest expense. As a result of the adoption of this ASU, we expect that revenue recognized under our current license agreements will not change materially.




Acquisition of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, Nanyanow known as Micron Technology Taiwan, Inc. ("MTTW") and certain of its affiliates held a 32%accounted for our ownership interest andunder the remaining ownership interest was publicly held.equity method. On December 6, 2016, we acquired the remaining 67% remainingownership interest in Inotera not owned by us (the "Inotera Acquisition") and began consolidating Inotera's operating results. The cash paid for the Inotera Acquisition was funded, in part, with proceeds from the 2021 MSTW Term Loan and the sale of shares of our common stock to Nanya. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan, and previously sold such products exclusively to us through supply agreements. SG&A expenses foragreements, under which we purchased $504 million of DRAM products in the first six monthsquarter of 2017, based on a pricing formula that equally shared margin between Inotera and for full fiscal 2016 included transaction costs of $13 million and $3 million, respectively, incurred in connection with the Inotera Acquisition.us.

In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value. In determining the fair value, we used various valuation techniques, including the share price of Inotera prior to the announcement of the acquisition and discounted cash flow projections using inputs including discount rate and terminal growth rate (Level 3). As a result, we recognized a non-operating gain of $71 million in the second quarter of 2017.

In connection with the Inotera Acquisition, we sold 58 million shares of our common stock to Nanya (the "Micron Shares") and received cash proceeds of $986 million. Because the sale of the Micron Shares to Nanya was contemporaneously contemplated with, and contingent upon, the closing the Inotera Acquisition, the issuance of the Micron Shares was treated in purchase accounting as a non-cash exchange for a portion of the shares of Inotera held by Nanya. The Micron Shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and are subject to certain restrictions on transfers. To reflect the lack of transferability, the fair value of the Micron Shares based on the trading price of our common stock on the acquisition date was reduced by a discount of $81 million, which was determined based on the implied volatility derived from traded options on our stock and on the duration of the lack of transferability (Level 2).



We estimated the assets acquired and liabilities assumed of Inotera as of the December 6, 2016 acquisition date. These estimates could change as additional information becomes available. The consideration and provisional valuation of assets acquired and liabilities assumed are as follows:

Consideration  
Cash paid for Inotera Acquisition $4,099
Less cash received from selling Micron Shares (986)
Net cash paid for Inotera Acquisition 3,113
Fair value of our previously-held equity interest in Inotera 1,441
Fair value of Micron Shares exchanged for Inotera shares 995
Other 3
Payments attributed to intercompany balances with Inotera (361)
  $5,191
   
Assets acquired and liabilities assumed  
Cash and equivalents $118
Inventories 285
Other current assets 27
Property, plant, and equipment 3,781
Deferred tax assets 74
Goodwill 1,086
Other noncurrent assets 117
Accounts payable and accrued expenses (232)
Debt (56)
Other noncurrent liabilities (9)
  $5,191

As a result of the Inotera Acquisition, we expect to experience greater operational flexibility to drive new technology in products manufactured by Inotera, optimize the deployment of our cash flows across our operations, and enhance our ability to adapt our product offerings to changes in market conditions. We are evaluating the assignment of goodwill to our reporting units. Goodwill resulting from the Inotera Acquisition is not deductible for Taiwan corporate income tax purposes; however, it is deductible for Taiwan surtax purposes.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations as if the Inotera Acquisition had occurred on September 4, 2015. The pro forma financial information includes the accounting effects of the business combination, including adjustments for depreciation of property, plant, and equipment, interest expense, elimination of intercompany activities, and revaluation of inventories. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the Inotera Acquisition occurred on September 4, 2015.

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 2,
2017		 March 2,
2017
Net sales $4,648
 $2,927
 $8,613
 $6,272
$4,648
 $8,613
Net income (loss) 890
 (196) 1,080
 (48)
Net income (loss) attributable to Micron 890
 (197) 1,080
 (49)
Earnings (loss) per share        
Net income890
 1,080
Net income attributable to Micron890
 1,080
Earnings per share   
Basic 0.81
 (0.18) 0.98
 (0.04)0.81
 0.98
Diluted 0.77
 (0.18) 0.93
 (0.04)0.77
 0.93
 


The unaudited pro forma financial information for 2017 includes our results for the quarter and six months ended March 2, 2017 (which includes the results of Inotera since our acquisition of Inotera on December 6, 2016), the results of Inotera for the three months ended November 30, 2016, and the adjustments described above. The pro forma information for 2016 includes our results for the quarter and six months ended March 3, 2016, the results of Inotera for the quarter and six months ended February 28, 2016, and the adjustments described above.

Technology Transfer and License Agreements with Nanya

Effective December 6, 2016, under the terms of technology transfer and license agreements, Nanya has options to require us to transfer to Nanya for Nanya's use certain technology and deliverables related to the next DRAM process node generation after our 20nm process node (the "1X Process Node") and the next DRAM process node generation after the 1X Process Node. Under the terms of the agreements, Nanya would pay royalties to us for a license to the transferred technologies based on revenues from products utilizing the technologies, subject to specified caps, and we would also receive an equity interest in Nanya upon the achievement of certain milestones.




Cash and Investments

Cash and equivalents and the fair values of our available-for-sale investments, which approximated amortized costs, were as follows:

As of March 2, 2017 September 1, 2016 March 1, 2018 August 31, 2017
 Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value
Cash $2,744
 $—
 $—
 $2,744
 $2,258
 $—
 $—
 $2,258
 $2,496
 $—
 $—
 $2,496
 $2,237
 $—
 $—
 $2,237
Level 1(2)
                                
Money market funds 306
 —
 —
 306
 1,507
 —
 —
 1,507
 5,099
 —
 —
 5,099
 2,332
 —
 —
 2,332
Level 2(3)
                                
Certificates of deposit 456
 9
 8
 473
 373
 33
 —
 406
Corporate bonds 13
 120
 300
 433
 —
 142
 235
 377
 —
 122
 299
 421
 —
 193
 315
 508
Government securities 24
 76
 106
 206
 2
 62
 82
 146
 39
 55
 95
 189
 1
 90
 126
 217
Certificates of deposit 172
 7
 1
 180
 483
 24
 3
 510
Asset-backed securities —
 2
 175
 177
 —
 12
 97
 109
 —
 14
 125
 139
 —
 2
 173
 175
Commercial paper 90
 58
 —
 148
 —
 9
 —
 9
 22
 16
 —
 38
 56
 10
 —
 66
 $3,633
 $265
 $589
 $4,487
 $4,140
 $258
 $414
 $4,812
 7,828
 $214
 $520
 $8,562
 5,109
 $319
 $617
 $6,045
Restricted cash(4)
 113
       107
      
Cash, cash equivalents, and restricted cash $7,941
       $5,216
      
(1) 
The maturities of long-term marketable investmentssecurities range from one to four years.
(2) 
The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.
(3) 
The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysisanalyses to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of March 2,1, 2018 or August 31, 2017.
(4)
Restricted cash is included in other noncurrent assets and primarily represents balances related to the MMJ Creditor Payments and interest reserve balances related to the 2021 MSTW Term Loan.

Proceeds from sales of available-for-sale securities were $36 million and $548 million for the second quarter and first six months of 2017, respectively, and $585 million and $992 million for the second quarter and first six months of 2016, respectively. Gross realized gains and losses from sales of available-for-sale securities were not material for any period presented. As of March 2, 2017,1, 2018, there were no available-for-sale securities that had been in a loss position for longer than 12 months.

Other noncurrent assets, excluded from the table above, included restricted cash of $97 million and $122 million as of March 2, 2017 and September 1, 2016, respectively.
Receivables

As of March 1,
2018		 August 31,
2017
Trade receivables $4,050
 $3,490
Income and other taxes 134
 100
Other 253
 169
  $4,437
 $3,759




Receivables

As of March 2,
2017		 September 1,
2016
Trade receivables $2,528
 $1,765
Income and other taxes 125
 119
Other 238
 184
  $2,891
 $2,068


Inventories

As of March 2,
2017		 September 1,
2016		 March 1,
2018		 August 31,
2017
Finished goods $862
 $899
 $876
 $856
Work in process 1,833
 1,761
 1,974
 1,968
Raw materials and supplies 305
 229
 334
 299
 $3,000
 $2,889
 $3,184
 $3,123


Property, Plant, and Equipment

As of September 1,
2016		 Additions Retirements and Other March 2,
2017		 March 1,
2018		 August 31,
2017
Land $145
 $205
 $(2) $348
 $345
 $345
Buildings 6,653
 785
 (12) 7,426
 8,367
 7,958
Equipment(1)
 25,910
 5,170
 (254) 30,826
 35,600
 32,187
Construction in progress(2)
 475
 (18) 3
 460
 599
 499
Software 422
 11
 (2) 431
 611
 544
 33,605
 6,153
 (267) 39,491
 45,522
 41,533
Accumulated depreciation (18,919) (1,720) 246
 (20,393) (23,658) (22,102)
 $14,686
 $4,433
 $(21) $19,098
 $21,864
 $19,431
(1) 
Included costs related to equipment not placed into service of $956$1.92 billion and $994 million, and $1.47 billion as of March 2,1, 2018 and August 31, 2017, and September 1, 2016, respectively.
(2) 
IncludedIncludes building-related construction and tool installation costs for assets not placed into service.

Depreciation expense was $976 million and $1.72 billion for the second quarter and first six months of 2017, respectively, and $745 million and $1.45 billion for the second quarter and first six months of 2016, respectively. In the fourth quarter of 2016, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years, which reduced depreciation costs by approximately $100 million per quarter in 2017.




Equity Method Investments

As of March 2, 2017 September 1, 2016
  Investment Balance Ownership Percentage Investment Balance Ownership Percentage
Inotera $—
 —% $1,314
 33%
Tera Probe 23
 40% 36
 40%
Other 15
 Various
 14
 Various
  $38
  
 $1,364
  

Equity in net income (loss) of equity method investees, net of tax, included the following:

  Quarter ended Six months ended
  March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016
Inotera $—
 $2
 $9
 $54
Tera Probe 7
 3
 (5) 6
Other —
 —
 1
 4
  $7
 $5
 $5
 $64

Inotera

Through December 6, 2016, we partnered with Nanya in Inotera, a Taiwan DRAM memory company, at which time we acquired the remaining 67% interest in Inotera. Historically, we accounted for our interest in Inotera on a two-month lag under the equity method. As a result of the Inotera Acquisition, we account for Inotera without a lag, consistent with our other wholly-owned subsidiaries.

From January 2013 through December 2015, we purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components. After December 2015 and until our acquisition of the remaining interest in Inotera, the price for DRAM products purchased by us was based on a formula that equally shared margin between Inotera and us. We purchased $504 million of DRAM products from Inotera in the first quarter of 2017 and $326 million and $705 million in the second quarter and first six months of 2016, respectively.

Tera Probe

We have a 40% interest in Tera Probe, which provides semiconductor wafer testing and probe services to us and others. In the first quarter of 2017, we recorded an impairment charge of $16 million within equity in net income (loss) of equity method investees to write down the carrying value of our investment in Tera Probe to its fair value based on its trading price (Level 1). As of March 2, 2017, our proportionate share of Tera Probe's underlying equity exceeded our investment balance by $47 million, which is expected to be accreted to earnings over a weighted-average period of seven years. We incurred manufacturing costs for services performed by Tera Probe for us of $16 million and $32 million in the second quarter and first six months of 2017, respectively, and $18 million and $39 million in the second quarter and first six months of 2016, respectively.




Intangible Assets and Goodwill

As of March 2, 2017 September 1, 2016 March 1, 2018 August 31, 2017
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Amortizing assets                
Product and process technology $755
 $(439) $757
 $(402) $731
 $(491) $756
 $(477)
Other 1
 —
 1
 —
 756
 (439) 758
 (402)
Non-amortizing assets                
In-process R&D 108
 —
 108
 —
 108
 —
 108
 —
                
Total intangible assets $864
 $(439) $866
 $(402) $839
 $(491) $864
 $(477)
                
Goodwill $1,190
   $104
   $1,228
   $1,228
  

During the first six months of 20172018 and 2016,2017, we capitalized $14$15 million and $16$14 million, respectively, for product and process technology with weighted-average useful lives of ten years. Amortization expense was $27 million12 years and $54 million10 for the second quarter and first six months of 2017, respectively, and $29 million and $60 million for the second quarter and first six months of 2016,years, respectively. Expected amortization expense is $55$45 million for the remainder of 2017, $95 million for 2018, $47$50 million for 2019, $31$35 million for 2020, and $27$29 million for 2021.2021, and $20 million for 2022.




Accounts Payable and Accrued Expenses

As of March 2,
2017		 September 1,
2016
Accounts payable $1,380
 $1,186
Property, plant, and equipment payables 1,378
 1,649
Salaries, wages, and benefits 447
 289
Customer advances 153
 132
Income and other taxes 117
 41
Related party payables 7
 273
Other 319
 309
  $3,801
 $3,879

As of September 1, 2016, related party payables included $266 million due to Inotera primarily for the purchase of DRAM products.
As of March 1,
2018		 August 31,
2017
Accounts payable $1,557
 $1,333
Property, plant, and equipment payables 1,351
 1,018
Salaries, wages, and benefits 517
 603
Income and other taxes 288
 163
Customer advances 176
 197
Other 305
 350
  $4,194
 $3,664




Debt

As of March 2, 2017 September 1, 2016
  Stated Rate Effective Rate Current Long-Term Total Current Long-Term Total
MMJ creditor installment payments N/A
 6.52% $148
 $446
 $594
 $189
 $680
 $869
Capital lease obligations N/A
 3.42% 349
 914
 1,263
 380
 1,026
 1,406
2021 MSAC senior secured term loan3.464% 3.87% —
 445
 445
 —
 —
 —
2021 MSTW senior secured term loan2.852% 3.02% —
 2,584
 2,584
 —
 —
 —
2022 senior notes 5.875% 6.14% —
 591
 591
 —
 590
 590
2022 senior secured term loan B 4.540% 4.95% 5
 728
 733
 5
 730
 735
2023 senior notes 5.250% 5.43% —
 990
 990
 —
 990
 990
2023 senior secured notes 7.500% 7.69% —
 1,238
 1,238
 —
 1,237
 1,237
2024 senior notes 5.250% 5.38% —
 546
 546
 —
 546
 546
2025 senior notes 5.500% 5.56% —
 1,140
 1,140
 —
 1,139
 1,139
2026 senior notes 5.625% 5.73% —
 446
 446
 —
 446
 446
2032C convertible senior notes(1)
 2.375% 5.95% —
 207
 207
 —
 204
 204
2032D convertible senior notes(1)
 3.125% 6.33% —
 156
 156
 —
 154
 154
2033E convertible senior notes(1)
 1.625% 4.50% 171
 —
 171
 —
 168
 168
2033F convertible senior notes(1)
 2.125% 4.93% 274
 —
 274
 —
 271
 271
2043G convertible senior notes 3.000% 6.76% —
 664
 664
 —
 657
 657
Other notes payable 2.189% 2.59% 170
 213
 383
 182
 316
 498
      $1,117
 $11,308
 $12,425
 $756
 $9,154
 $9,910
As of March 1, 2018 August 31, 2017
Instrument Stated Rate Effective Rate Current Long-Term Total Current Long-Term Total
MMJ Creditor Payments N/A
 6.52% $238
 $261
 $499
 $157
 $474
 $631
Capital lease obligations N/A
 3.75% 371
 679
 1,050
 357
 833
 1,190
2021 MSAC Term Loan 3.89% 4.13% 199
 578
 777
 99
 697
 796
2021 MSTW Term Loan 2.85% 3.01% —
 2,716
 2,716
 —
 2,640
 2,640
2022 Term Loan B 3.65% 4.06% 5
 723
 728
 5
 725
 730
2023 Notes 5.25% 5.43% —
 —
 —
 —
 991
 991
2023 Secured Notes 7.50% 7.69% —
 —
 —
 —
 1,238
 1,238
2024 Notes 5.25% 5.38% —
 546
 546
 —
 546
 546
2025 Notes 5.50% 5.56% —
 515
 515
 —
 515
 515
2026 Notes 5.63% 5.73% —
 129
 129
 —
 128
 128
2032C Notes(1)
 2.38% 5.95% —
 165
 165
 —
 211
 211
2032D Notes(1)
 3.13% 6.33% —
 161
 161
 —
 159
 159
2033E Notes(1)(2)
 1.63% 1.63% 197
 —
 197
 202
 —
 202
2033F Notes(1)(2)
 2.13% 4.93% 378
 —
 378
 278
 —
 278
2043G Notes(1)
 3.00% 6.76% —
 679
 679
 —
 671
 671
IMFT Member Debt 0.00% 0.00% —
 650
 650
 —
 —
 —
Other notes 2.09% 2.65% 126
 —
 126
 164
 44
 208
      $1,514
 $7,802
 $9,316
 $1,262
 $9,872
 $11,134
(1) 
Since the closing price of our common stock exceeded 130% of the conversion price per share for at least 20 trading days in the 30 trading day period ended on December 31, 2016,2017, these notes are convertible by the holders through the calendar quarter endingended March 31, 2017.2018. The 2033 Notes were classified as current as of March 2, 2017 because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of the dates presented.
(2)
Amounts as of March 1, 2018 include $178 million and $129 million for the settlement obligation (principal and amounts in excess of principal) of 2033E Notes and 2033F Notes, respectively, that date.had been converted but not settled. Amounts as of August 31, 2017 include $88 million for the settlement obligation (principal and amounts in excess of principal) of 2033E Notes that had been converted but not settled.

Capital Lease ObligationsDebt Repurchases and Conversions

In the second quarter of 2017, we recorded capital lease obligations aggregating $82 million at a weighted-average effective interest rate of 2.9% and a weighted-average expected term of 7 years. InDuring the first six months of 2017,2018, we recorded capital leaserepurchased or settled as a result of conversion an aggregate of $2.42 billion principal amount of our debt. When we receive a notice of conversion for any of our convertible notes and elect to settle in cash any amount of the conversion obligation in excess of the principal amount, the cash settlement obligations aggregating $133 million.become derivative debt liabilities subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common

2021 MSAC Senior Secured Term Loan

In November 2016,stock over a period of 20 consecutive trading days. Accordingly, at the date of our election to settle a conversion in cash, we entered into a five-year variable-rate facility agreement to obtain up to $800 million of financing, collateralized by certain production equipment. On December 2, 2016, we drew $450 million under the 2021 MSAC Term Loan and may utilize the remaining facility in multiple draws until June 10, 2017. Interest is payable quarterly at a per annum rate equal to three-month LIBOR plus 2.4%. Principal is payable in 16 equal quarterly installments beginning in March 2018. The 2021 MSAC Term Loan contains covenants which are customary for financings of this type, including negative covenants that limit or restrict our ability to create liens or dispose of the equipment securing the facility agreement. The 2021 MSAC Term Loan also contains a covenant that the ratio of the outstanding loan toreclassify the fair value of the equipment collateralizingequity component of the loan not exceed 0.8. If such ratio is exceeded, we are requiredconverted notes from additional capital to grant a security interestderivative debt liability within current debt in additional equipment and/or prepayour consolidated balance sheet.

The following table presents the 2021 MSAC Term Loan in an amount sufficient to reduce such ratio to 0.8 or less. The 2021 MSAC Term Loan also contains customary eventseffects of default which could resultrepurchases and conversions of our debt in the accelerationfirst six months of all amounts to be immediately due and payable and cancellation of all commitments under the facility agreement. The 2021 MSAC Term Loan is guaranteed by Micron.2018:
Six months ended March 1, 2018 Decrease in Principal Increase (Decrease) in Carrying Value Decrease in Cash Decrease in Equity Gain (Loss)
Repurchases          
2023 Notes $(1,000) $(991) $(1,046) $—
 $(55)
2023 Secured Notes (1,250) (1,238) (1,373) —
 (135)
Settled Conversions          
2032C Notes (52) (49) (240) (195) 4
2033E Notes(1)
 (113) (143) (249) (97) (9)
2033F Notes (5) (5) (22) (17) —
Conversions not settled          
2033E Notes(2)
 —
 137
 —
 (124) (13)
2033F Notes(2)
 —
 101
 —
 (91) (10)
  $(2,420) $(2,188) $(2,930) $(524) $(218)
(1)
Settlement included 4 million shares of our treasury stock in addition to cash.
(2)
As of March 1, 2018, $41 million in principal amount of the 2033E Notes and $30 million in principal amount of the 2033F Notes had converted but not settled. These notes will settle in cash in the third quarter of 2018.



2021 MSTW Senior Secured Term LoanIMFT Member Debt

In connection with the Inotera Acquisition, onNovember 2017 and December 6, 2016, we drew 80 billion New Taiwan dollars (equivalent2017, Intel provided debt financing ("IMFT Member Debt") of $150 million and $500 million, respectively, to $2.5 billion) under a collateralized, five-year term loan that bears interest at a variable per annum rate equalIMFT pursuant to the three-monthterms of the IMFT joint venture agreement. IMFT Member Debt bears no interest, matures upon the completion of the auction and the sale of assets of IMFT prior to the dissolution, liquidation, or six-month TAIBOR,other wind-up of IMFT, and is convertible, at our option, plusthe election of Intel, in whole or in part, into a margin of 2.05%. Principalcapital contribution to IMFT. Additionally, to the extent IMFT distributes cash to its members under the 2021 MSTW Term Loan is payable in six equal semi-annual installments, commencing in June 2019, through December 2021. The 2021 MSTW Term Loan is collateralized by certain assets, including a real estate mortgage on Inotera's main production facility and site, a chattel mortgage over certain equipment of Inotera, allterms of the stockIMFT joint venture agreement, Intel may, at its option, designate any portion of our MSTW subsidiary, and the 82% of stock of Inotera owned by MSTW. The 2021 MSTW Term Loan is guaranteed by Micron.

The 2021 MSTW Term Loan contains affirmative and negative covenants, including covenants that limit or restrict our ability to create liens in or dispose of collateral securing obligations under the 2021 MSTW Term Loan, mergers involving MSTW and/or Inotera, loans or guarantees to third parties by Inotera and/or MSTW, and MSTW's and/or Inotera's distribution of cash dividends. The 2021 MSTW Term Loan also contains financial covenants, which are tested semi-annually, as follows:

MSTW must maintain a consolidated ratio of total debt to adjusted EBITDA not higher than 5.5x in 2017 and 2018, and not higher than 4.5x in 2019 through 2021;
MSTW must maintain adjusted consolidated tangible net worth of not less than 4.0 billion New Taiwan dollars in 2017 and 2018, not less than 6.5 billion New Taiwan dollars in 2019 and 2020, and not less than 12.0 billion New Taiwan dollars in 2021;
on a consolidated basis, Micron must maintain a ratio of total debt to adjusted EBITDA not higher than 3.5x in 2017, not higher than 3.0x in 2018 and 2019, and not higher than 2.5x in 2020 and 2021; and
on a consolidated basis, Micron must maintain adjusted tangible net worth not less than $9.0 billion in 2017, not less than $12.5 billion in 2018 and 2019, and not less than $16.5 billion in 2020 and 2021.

If MSTW fails to maintain a required financial covenant, the interest rate will be increased by 0.25% until such time as the required financial ratios are maintained. If MSTW's failure continues for two consecutive semi-annual periods, such will constitute an event of default that could result in all obligations owed under the 2021 MSTW Term Loan being accelerated to be immediately due and payable. Micron's failurea repayment of the IMFT Member Debt. In the event Intel exercises its right to maintain a required financial covenantput its interest in IMFT to us, or if we exercise our right to call from Intel its interest in IMFT, Intel will only resulttransfer to Micron any IMFT Member Debt outstanding at the time of the closing of the put or call transaction. (See "Equity – Noncontrolling Interest in a 0.25% increase to the interest rate but will not constitute an event of default. The 2021 MSTW Term Loan also contains customary events of default.

Convertible Senior Notes

As of March 2, 2017, the trading price of our common stock was higher than the initial conversion prices of our 2032 Notes and our 2033 Notes. As a result, the conversion values for these notes exceeded the principal amounts by $1.21 billion as of March 2, 2017.Subsidiaries – IMFT" note.)

2022 Senior Secured Term Loan B Repricing Amendment

InOn October 2016,26, 2017, we amended our 2022 Term Loan B, substantially all of which was treated as a debt modification, to reduce the margins added tointerest rate margins. As of March 1, 2018, the base rate from 5.00% to 2.75% and to the adjusted2022 Term Loan B bears interest at LIBOR rate from 6.00% to 3.75%plus 2.00%.
Convertible Senior Notes

Tender Offers

OnAs of March 27, 2017, we commenced tender offers to purchase up to $1.00 billion aggregate purchase1, 2018, the trading price exclusive of accrued interest (such aggregate purchase price subject to increase by us), of our 2022 seniorcommon stock was higher than the initial conversion prices of our convertibles notes. As a result, the conversion values for these notes 2023 senior notes, 2024 senior notes, 2025 senior notes, and 2026 senior notes.exceeded the principal amounts by $3.18 billion as of March 1, 2018.


Contingencies

We have accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below. We are currently a party to other legal actions arising from the normal course of business, none of which isare expected to have a material adverse effect on our business, results of operations, or financial condition.



Patent Matters

As is typical in the semiconductor and other high-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights.

On November 21, 2014, Elm 3DS Innovations, LLC ("Elm") filed a patent infringement action against Micron, MSP, and Micron Consumer Products Group, Inc. in the U.S. District Court for the District of Delaware. On March 27, 2015, Elm filed an amended complaint against the same entities. The amended complaint alleges that unspecified semiconductor products of ours that incorporate multiple stacked die infringe thirteen13 U.S. patents and seeks damages, attorneys' fees, and costs.

On December 15, 2014, Innovative Memory Solutions, Inc. filed a patent infringement action against Micron in the U.S. District Court for the District of Delaware. The complaint alleges that a variety of our NAND Flash products infringe eight U.S. patents and seeks damages, attorneys' fees, and costs.

On June 24, 2016, the President and Fellows of Harvard University filed a patent infringement action against Micron in the U.S. District Court for the District of Massachusetts. The complaint allegesalleged that a variety of our DRAM products infringeinfringed two U.S. patents and seekssought damages, injunctive relief, and other unspecified relief. On March 1, 2018, we executed a settlement agreement resolving this litigation. The settlement amount did not have a material effect on our business, results of operations, or financial condition.

On March 19, 2018, Micron Semiconductor (Xi’an) Co., Ltd. ("MXA") was served with a patent infringement complaint filed by Fujian Jinhua Integrated Circuit Co., Ltd. ("Jinhua") in the Fuzhou Intermediate People’s Court in Fujian Province, China. The complaint alleges that MXA and Micron Semiconductor (Shanghai) Co., Ltd. infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring the defendants to destroy inventory of the accused products and equipment for manufacturing the accused products, to stop manufacturing, using, selling, and offering for sale the accused products, and to pay damages of 98 million Chinese yuan plus court fees incurred.

On March 21, 2018, MXA was served with a patent infringement complaint filed by United Microelectronics Corporation ("UMC") in the Fuzhou Intermediate People's Court in Fujian Province, China. The complaint alleges that MXA and Micron Semiconductor (Shanghai) Co., Ltd. infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring the defendants to destroy inventory of the accused products and equipment for manufacturing the accused products, to stop manufacturing, using, selling, and offering for sale the accused products, and to pay damages of 90 million Chinese yuan plus court fees incurred.

Among other things, the above lawsuits pertain to certain of our DDR DRAM, DDR2 DRAM, DDR3 DRAM, DDR4 DRAM, SDR SDRAM, PSRAM, RLDRAM, LPDRAM, NAND, Flash, and certain other memory products we manufacture, which account for a significant portion of our net sales.

We are unable to predict the outcome of assertions of infringement made against us and therefore cannot estimate the range of possible loss. A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.

Qimonda

On January 20, 2011, Dr. Michael Jaffé, administrator for QimondaQimonda's insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary ("Micron B.V."), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda's shares of Inotera Memories, Inc. (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares as of March 2, 2017,1, 2018, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the Courtcourt issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera shares Shares


sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on such sharesthe Inotera Shares and all other benefits; (4) denying Qimonda's claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Courtcourt issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by itMicron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by itMicron B.V. from ownership of the Inotera Shares. The interlocutory judgments have no immediate, enforceable effect on us, and, accordingly, we expect to be able to continue to operate with full control of the Inotera Shares subject to further developments in the case. We have filed a notice of appeal, and the parties have submitted briefs to the appeals court.

We are unable to predict the outcome of the matter and therefore cannot estimate the range of possible loss. The final resolution of this lawsuit could result in the loss of the Inotera Shares or monetary damages, unspecified damages based on the benefits derived by Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operation, or financial condition.


Other

OtherOn December 5, 2017, Micron filed a complaint against UMC and Jinhua in the U.S. District Court for the Northern District of California. The complaint alleges that UMC and Jinhua violated the Defend Trade Secrets Act, the civil provisions of the Racketeer Influenced and Corrupt Organizations Act, and California's Uniform Trade Secrets Act by misappropriating Micron's trade secrets and other misconduct. Micron's complaint seeks damages, restitution, disgorgement of profits, injunctive relief, and other appropriate relief.

In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, our payments under these types of agreements have not had a material adverse effect on our business, results of operations, or financial condition.


Redeemable Convertible Notes

Under the terms of the indentures governing the 2033 Notes, upon conversion, we would be required to pay cash equal to the lesser of (1) the aggregate principal amount or (2) the conversion value of the notes being converted. To the extent the conversion value exceeds the principal amount, we could pay cash, shares of common stock, or a combination thereof, at our option, for the amount of such excess. The closing price of our common stock met the thresholds for conversion for the calendar quarter ended December 31, 2016; therefore, the 2033 Notes are convertible by the holders through the calendar quarter ended March 31, 2017. As a result, the 2033 Notes were classified as current debt and the aggregate difference between the principal amount and the carrying value of $28 million was classified as redeemable convertible notes in the accompanying consolidated balance sheet. The closing price of our common stock did not meet the thresholds for the calendar quarter ended June 30, 2016; therefore, the 2033 Notes were not convertible by the holders as of September 1, 2016. Therefore, as of September 1, 2016, the 2033 Notes had been classified as noncurrent debt and the aggregate difference between the principal amount and the carrying value had been classified as additional capital.


Equity

Micron Shareholders' Equity

TreasuryCommon Stock Issuance: In connection with the Inotera Acquisition, in the second quarter ofOctober 2017, we sold 58issued 34 million shares of our common stock to Nanya for $986 million in cash, of which 54 million shares were issued from treasury stock. As a result, treasury stock decreased by $1.03 billion, resulting$41.00 per share in a decrease in retained earningspublic offering for proceeds of $104 million for the difference between the carrying value$1.36 billion, net of the treasury stockunderwriting fees and its $925 million fair value.other offering costs.

Outstanding Capped Calls:Our In connection with certain of our convertible notes, we entered into capped callscall transactions, which are intended to reduce the effect of potential dilution from our convertible notes anddilution. The capped calls provide for our receipt of cash or shares, at our election, from our counterparties if the trading price of our stock is above the strike prices on the expiration dates. As of March 2, 2017,1, 2018, the dollar value of cash or shares that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our stock is below the strike prices for all capped calls at expiration, to $652$214 million, if the trading price of our stock is at or above the cap prices for all capped calls. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.

ExpirationSettlement of Capped Calls: InDuring the second quarterfirst six months of 2017,2018, we share-settled a portionportions of our 2032C and 2032D Capped Callscapped calls upon expiration, and received 47 million shares of our stock, equal(equal to a value of $67 million,$313 million) based on the volume-weighted trading stock prices at the expiration dates.The shares Shares received were recorded as treasury stock.

Shareholder Rights Agreement: On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each share of common stock outstanding, which entitles shareholders to purchase additional shares of our common stock at a significant discount in the event of an ownership change. The Rights Agreement is intended to avoid an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, and thereby preserve our current ability to utilize certain net operating loss and credit carryforwards.



Noncontrolling Interests in Subsidiaries

As of March 2, 2017 September 1, 2016 March 1, 2018 August 31, 2017
 Noncontrolling Interest Balance Noncontrolling Interest Percentage Noncontrolling Interest Balance Noncontrolling Interest Percentage Noncontrolling Interest Balance Noncontrolling Interest Percentage Noncontrolling Interest Balance Noncontrolling Interest Percentage
IMFT $832
 49% $832
 49% $852
 49% $832
 49%
Other 16
 Various
 16
 Various
 17
 Various
 17
 Various
 $848
   $848
   $869
   $849
  

IMFT: Since IMFT's inception in 2006, we have owned 51% of IMFT, a joint venture between us and Intel that manufactures NAND Flash and 3D XPoint memory products exclusively for the members. The members share the output of IMFT generally in proportion to their investment.Intel. IMFT is governed by a Board of Managers, for which the number of managers appointed by each member varies based on the members' respective ownership interests. IMFT manufactures semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost.

IMFT's capital requirements are generally determined based on an annual plan approved by the members, and capital contributions to IMFT are requested as needed. Capital requests are made to the members in proportion to their then-current ownership interest. Members may elect to not contribute their proportional share, and in such event, the contributing member may elect to contribute any amount of the remaining capital request, either in the form of an equity contribution or member debt financing. Under the supply agreement, the members have rights and obligations to the capacity of IMFT in proportion to their investment, including member debt financing. Any capital contribution or member debt financing results in a proportionate adjustment to the sharing of output on an eight-month lag. Members pay their proportionate share of fixed costs associated with IMFT's capacity.

IMFT sales to Intel were $115 million and $227 million for the second quarter and first six months of 2018, respectively, and $142 million and $252 million for the second quarter and first six months of 2017, respectively. In the first quarter of 2018, IMFT discontinued production of NAND and subsequent to that time is entirely focused on 3D XPoint memory production.

The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. ThroughAt any time through December 2018, Intel can put to us, and from January 2019 through December 2021, we can call from Intel, Intel's interest in IMFT, in either case, for an amount equal toa price that approximates Intel's interest in the noncontrolling interest balance attributable to Intelnet book value of IMFT plus member debt at suchthe time either member exercises its right.of the closing. If Intel exercises its put right, we can elect to set the closing date of the transaction to be any time withinbetween six months and two years following such election by Intel and we can elect to receive financing of the purchase price from Intel for one to two years from the closing date. If we exercise our call right, Intel can elect to set the closing date of the transaction to be any time between six months and one year following such election. Following the closing date resulting from exercise of either the put or the call, we will continue to supply to Intel for a period of one year, at Intel's choice, between 50% and 100% of Intel's immediately preceding six-month period pre-closing volumes of IMFT products for the first six-month period following the closing and, at Intel's choice, between 0% and 100% of Intel's first six-month period following the closing volumes of IMFT products for the second six-month period following the closing, at a margin that varies depending on whether the put or call was exercised.



Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets. In the first six months of 2016, we and Intel contributed $38 million and $37 million, respectively, to IMFT.

IMFT manufactures memory products using designs and technology we develop with Intel. We generally share with Intel the costs of product design and process development activities for NAND Flash and 3D XPoint memory at IMFT and our other facilities. Our R&D expenses were reduced by reimbursements from Intel of $59 million and $115 million for the second quarter and first six months of 2017, respectively, and $53 million and $99 million for the second quarter and first six months of 2016, respectively.

Our sales include Non-Trade Non-Volatile Memory, which primarily consists of products sold to Intel through our IMFT joint venture at long-term negotiated prices approximating cost. Non-Trade Non-Volatile Memory sales to Intel were $158 million and $281 million for the second quarter and first six months of 2017, respectively, and $126 million and $252 million for the second quarter and first six months of 2016, respectively.



The following table presents the assets and liabilities of IMFT included in our consolidated balance sheets:

As of March 2,
2017		 September 1,
2016		 March 1,
2018		 August 31,
2017
Assets        
Cash and equivalents $94
 $98
 $317
 $87
Receivables 103
 89
 87
 81
Inventories 102
 68
 99
 128
Other current assets 6
 6
 5
 7
Total current assets 305
 261
 508
 303
Property, plant, and equipment, net 1,680
 1,792
 2,496
 1,852
Other noncurrent assets 42
 50
 43
 49
Total assets $2,027
 $2,103
 $3,047
 $2,204
        
Liabilities  
  
  
  
Accounts payable and accrued expenses $151
 $175
 $472
 $299
Deferred income 6
 7
 10
 6
Current debt 16
 16
 19
 19
Total current liabilities 173
 198
 501
 324
Long-term debt 37
 66
 715
 75
Other noncurrent liabilities 91
 94
 79
 88
Total liabilities $301
 $358
 $1,295
 $487
Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.

Restrictions on Net Assets

As a result of the corporate reorganization proceedings theof MMJ, Companies initiated in March 2012, and for so long as such proceedings continue, the MMJ Group is subject to certain restrictions on dividends, loans, and advances. In addition, the 2021 MSTW Term Loan contains covenants, that limit or restrictand the ability of MSTW and/or Inotera to distribute cash dividends. Also, our ability to access the cash and other assets of IMFT through dividends, loans, or advances, including to finance our other operations, is limited and is subject tojoint venture agreement, by Intel. As a result, our total restricted net assets (net assets less(excluding intercompany balances and noncontrolling interests) as of March 2, 20171, 2018 were $3.38$3.86 billion for the MMJ Group, $2.80$2.54 billion for MSTW and Inotera,MTTW, and $894 million for IMFT, which included cash and equivalents of $529 million for the MMJ Group, $297 million for MSTW and Inotera, and $94$900 million for IMFT.


Fair Value Measurements

All of our marketable debt and equity investments (excluding equity method investments) were classified as available-for-sale and carried at fair value. Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair value and carrying value of our outstanding debt instruments (excluding the carrying value of the equity and mezzanine equity components of our convertible notes) were as follows:

As of March 2, 2017 September 1, 2016 March 1, 2018 August 31, 2017
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes and MMJ creditor installment payments $10,092
 $9,690
 $7,257
 $7,050
Notes and MMJ Creditor PaymentsNotes and MMJ Creditor Payments$6,792
 $6,686
 $8,793
 $8,423
Convertible notes 3,191
 1,472
 2,408
 1,454
 4,922
 1,580
 3,901
 1,521

The fair values of our convertible notes were determined based on Level 2 inputs, that were observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of our convertible notes when available, our stock price, and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).ours. The fair values of our other debt instruments were estimated based on Level 2 inputs, including discounted cash flows, using inputs that were observable in the market or that could be derived from, or corroborated with, observable market data, including the trading price of our notes, when available, and interest rates based on similar debt issued by parties with credit ratings similar to ours (Level 2).ours.




Derivative Instruments

  
Gross Notional Amount(1)
 Fair Value of
Current Assets(2)
 
Current Liabilities(3)
 
Noncurrent Assets(4)
As of March 1, 2018        
Derivative instruments with hedge accounting designation        
Cash flow currency hedges $565
 $20
 $(1) $—
Fair value currency hedges 2,567
 44
 (2) —
  $3,132
 64
 (3) —
         
Derivative instruments without hedge accounting designation        
Non-designated currency hedges $1,763
 11
 (3) —
Convertible notes settlement obligation 6
 —
 (309) —
    11
 (312) —
         
    $75
 $(315) $—
         
As of August 31, 2017        
Derivative instruments with hedge accounting designation        
Cash flow currency hedges $456
 $17
 $—
 $—
         
Derivative instruments without hedge accounting designation        
Non-designated currency hedges $4,847
 34
 (5) 1
Convertible notes settlement obligation 2
 —
 (47) —
    34
 (52) 1
         
    $51
 $(52) $1
(1)
Notional amounts of currency forward hedge contracts in U.S. dollars and convertible notes settlement obligations in shares.
(2)
Included in receivables – other.
(3)
Included in accounts payable and accrued expenses – other for forward contracts and in current debt for convertible notes settlement obligations.
(4)
Included in other noncurrent assets.

Derivative Instruments with Hedge Accounting Designation

We use derivative instrumentsutilize currency forward contracts that generally mature within twelve months to manage a portion ofhedge our exposure to changes in currency exchange rates. Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rates, and credit-risk spreads (Level 2).

Cash Flow Hedges: We utilize cash flow hedges to hedge our exposure to changes in cash flows from changes in currency exchange rates for certain capital expenditures. For derivative instruments designated as cash flow hedges, the effective portion of the realized and unrealized gain or loss on the derivatives is included as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. For the periods presented prior to the second quarter of 2018, the ineffective and excluded portion of the realized and unrealized gain or loss was included in other non-operating income (expense). As a result of adopting ASU 2017-12, beginning in the second quarter of 2018, such amounts are included in the same line item in which the underlying transactions affect earnings.

We recognized gains in accumulated other comprehensive income from the effective portion of cash flow hedges of $21 million and $17 million for the second quarter and first six months of 2018, respectively, and losses of $9 million in the first six months of 2017. Neither the amount excluded from hedge effectiveness nor the reclassifications from accumulated other comprehensive income to earnings were material in the second quarters or first six months of 2018 and 2017. The amounts


from cash flow hedges included in accumulated other comprehensive income that are expected to be reclassified into earnings in the next 12 months were also not material.

Fair Value Hedges:We utilize fair value hedges to hedge our exposure to certain changes in fair values from changes in currency exchange rates for certain monetary assets and liabilities denominatedliabilities. For derivative forward contracts designated as fair value hedges, hedge effectiveness is determined by the change of the fair value of the undiscounted spot rate of the forward contract. The change in currenciesfair value of the hedge instrument attributed to changes in the undiscounted spot rate is recognized in other thannon-operating income (expense). The time value associated with the U.S. dollar. We dohedge instrument is excluded from the assessment of the effectiveness of the hedge and is recognized on a straight-line basis over the life of the hedge to other non-operating income (expense). Amounts recorded to other comprehensive income (loss) for the second quarter of 2018 were not use derivative instruments for speculative purpose.material. The effects of fair value hedges on our consolidated statements of operations were as follows:
Quarter ended March 1, 2018 
Other
Non-Operating
Income (Expense)
Gain (loss) on remeasurement of hedged assets and liabilities $(56)
Gain (loss) on derivatives designated as hedging instruments 56
Amortization of amounts excluded from hedge effectiveness (19)
  $(19)

Derivative Instruments without Hedge Accounting Designation

Currency Derivatives:To hedge our exposures of monetary assets Except for certain asset and liabilities to changes in currency exchange rates,hedged using fair value hedges, we generally utilize a rolling hedge strategy with currency forward contracts that mature within 8 months. In addition,nine months to mitigate the riskhedge our exposures of the yen strengthening against the U.S. dollar on our MMJ creditor installment payments duemonetary assets and liabilities to changes in December 2017 and 2018, we entered into forward contracts to purchase 18 billion yen in December 2017 and 28 billion yen in December 2018.currency exchange rates. At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars and the associated outstanding forward contracts are marked to market. Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or exchange quotations (Level 2). Total notional amounts and gross fair values for derivative instruments without hedge accounting designation were as follows:

  Notional Amount (in U.S. Dollars) Fair Value
Current Assets(1)
 
Current Liabilities(2)
 
Noncurrent Liabilities(3)
As of March 2, 2017        
New Taiwan dollar $2,855
 $57
 $(2) $—
Yen 1,033
 —
 (12) (4)
Euro 151
 —
 (1) —
Singapore dollar 134
 —
 (1) —
Other 20
 —
 —
 —
  $4,193
 $57
 $(16) $(4)
As of September 1, 2016        
Yen $1,668
 $—
 $(10) $—
Euro 93
 —
 —
 —
Singapore dollar 206
 —
 —
 —
Other 85
 —
 (1) —
  $2,052
 $—
 $(11) $—
(1)
Included in receivables – other.
(2)
Included in accounts payable and accrued expenses – other.
(3)
Included in other noncurrent liabilities.

Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changechanges in the underlying monetary assets and liabilities due to changes in currency exchange rates are included in other non-operating income (expense), net.. For derivative instruments without hedge accounting designation, we recognized netgains of $50 million and $52 million for the second quarter and first six months of 2018, respectively, and gains of $61 million and net losses of $117 million for the second quarter and first six months of 2017, respectively.

Convertible Notes Settlement Obligations2017: For settlement obligations associated with our convertible notes that become derivative debt liabilities subject to mark-to-market accounting treatment, the fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2), respectively,which requires inputs of stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and net gainsdividend rate. The subsequent measurement amounts of $92our convertible note settlement obligations were based on the volume-weighted-average stock price (Level 2). (See "Debt" note.) We recognized losses of $20 million and $71$24 million for the second quarter and first six months of 2016, respectively.



Derivative Instruments with Cash Flow Hedge Accounting Designation

Currency Derivatives:We utilize currency forward contracts that generally mature within 12 months to hedge our exposure to2018, respectively, for the changes in cash flows from changes in currency exchange rates for certain capital expenditures. Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rates, and credit-risk spreads (Level 2).

For derivative instruments designated as cash flow hedges, the effective portion of the realized and unrealized gain or loss on the derivatives is included as a component of accumulated other comprehensive income (loss). Amounts in accumulated other comprehensive income (loss) are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. The ineffective and excluded portion of the realized and unrealized gain or loss is includedderivative settlement obligations in other non-operating income (expense), net. Total notional amounts and gross fair values for derivative instruments with cash flow hedge accounting designation were as follows:

  Notional Amount (in U.S. Dollars) Fair Value
  
Current Assets(1)
 
Current Liabilities(2)
As of March 2, 2017      
Yen $6
 $—
 $—
Euro 6
 —
 —
  $12
 $—

$—
As of September 1, 2016  
    
Yen $107
 $2
 $(1)
Euro 65
 —
 (1)
  $172
 $2

$(2)
(1)
Included in receivables – other.
(2)
Included in accounts payable and accrued expenses – other.

We recognized losses in accumulated other comprehensive income (loss) from the effective portion of cash flow hedges of $9 million in the first six months of 2017, and gains of $5 million and $1 million in the second quarter and first six months of 2016, respectively. Neither the ineffective portions of cash flow hedges recognized in other non-operating income (expense) nor amounts reclassified from accumulated other comprehensive income (loss) to earnings were material in the second quarters and first six months 2017 and 2016. The amount from cash flow hedges included in accumulated other comprehensive income (loss) that is expected to be reclassified into earnings in the next 12 months is not material.


Equity Plans

As of March 2, 2017, 721, 2018, 94 million shares of our common stock were available for future awards under our equity plans.



Stock Options

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1, 2018 March 2, 2017 March 1, 2018 March 2, 2017
Stock options granted 4
 5
 6
 7
1
 4
 2
 6
Weighted-average grant-date fair value per share $8.37
 $6.59
 $8.15
 $7.01
$18.61
 $8.37
 $18.13
 $8.15
Average expected life in years 5.5
 5.5
 5.5
 5.5
5.5
 5.5
 5.5
 5.5
Weighted-average expected volatility 47% 47% 47% 47%44% 47% 44% 47%
Weighted-average risk-free interest rate 1.9% 1.7% 1.8% 1.7%2.2% 1.9% 2.2% 1.8%
Expected dividend yield 0% 0% 0% 0%0.0% 0.0% 0.0% 0.0%

Restricted Stock and Restricted Stock Units ("Restricted Stock Awards")

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Restricted stock awards granted 5
 6
 8
 9
Restricted stock award shares granted2
 5
 4
 8
Weighted-average grant-date fair value per share $18.67
 $14.71
 $18.52
 $15.84
$43.21
 $18.67
 $41.51
 $18.52

Stock-based Compensation Expense

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Stock-based compensation expense by caption               
Cost of goods sold $23
 $19
 $42
 $37
$22
 $23
 $42
 $42
Selling, general, and administrative 18
 21
 33
 38
16
 18
 34
 33
Research and development 14
 15
 26
 26
14
 14
 27
 26
 $55
 $55
 $101
 $101
$52
 $55
 $103
 $101
               
Stock-based compensation expense by type of award  
  
     
  
    
Stock options $18
 $22
 $35
 $42
$14
 $18
 $31
 $35
Restricted stock awards 37
 33
 66
 59
38
 37
 72
 66
 $55
 $55
 $101
 $101
$52
 $55
 $103
 $101

The income tax benefit related to share-based compensation expense was $58 million and $116 million for the second quarter and first six months of 2018, respectively, and $42 million and $63 million for the second quarter and first six months of 2017, respectively. The income tax benefits related to share-based compensation expense for the periods presented prior to the second quarter of 2018 were offset by an increase in the U.S. valuation allowance. As of March 2, 2017, $4381, 2018, $402 million of total unrecognized compensation costs for unvested awards was expected to be recognized through the second quarter of 2021,2022, resulting in a weighted-average period of 1.31.4 years. Stock-based compensation expense does not reflect significant income tax benefits, which is consistent with our treatment of income or loss from our U.S. operations.


RestructureResearch and Asset ImpairmentsDevelopment

  Quarter ended Six months ended
  March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016
2016 Restructuring Plan $4
 $—
 $33
 $—
Other —
 1
 —
 16
  $4
 $1
 $33
 $16

InWe share the fourth quarter of 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities (the "2016 Restructuring Plan"). The 2016 Restructuring Plan includes the eliminationcost of certain projectsproduct and programs,process development activities with development partners. Our R&D expenses were reduced by reimbursements under these arrangements of $58 million and $114 million for the permanent closuresecond quarter and first six months of a number of open headcount requisitions, workforce reductions in certain areas of our business,2018, respectively, and other non-headcount related spending reductions. As a result, we incurred charges of $33$59 million inand $115 million for the second quarter and first six months of 2017, and $58 million in the fourth quarter of 2016 and do not expect to incur additional material charges. As of March 2, 2017 and September 1, 2016, we had accrued liabilities of $9 million and $24 million, respectively, related to the 2016 Restructuring Plan.respectively.




Other Non-Operating Income (Expense), Net

 Quarter ended Six months endedQuarter ended Six months ended
 March 2, 2017 March 3, 2016 March 2, 2017 March 3, 2016March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Loss on debt repurchases and conversions$(23) $—
 $(218) $(2)
Loss from changes in currency exchange rates $(28) $(5) $(40) $(8)(27) (28) (36) (40)
Gain on remeasurement of previously-held equity interest in Inotera 71
 —
 71
 —
—
 71
 —
 71
Other (9) (1) (11) (2)(3) (9) (3) (9)
 $34
 $(6) $20
 $(10)$(53) $34
 $(257) $20

In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value. In determining the fair value, we used various valuation techniques, including the share price of Inotera prior to the announcement of the acquisition and discounted cash flow projections using inputs including discount rate and terminal growth rate (Level 3). As a result, we recognized a non-operating gain of $71 million in the second quarter of 2017.


Income Taxes

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") that lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate will be 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and 21% for subsequent years. The Tax Act imposes a one-time transition tax in 2018 on the higher of our accumulated foreign income, as determined as of November 2, 2017 or December 31, 2017 (the "Repatriation Tax"); provides a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a new minimum tax on certain foreign earnings in excess of a deemed return on tangible assets (the "Foreign Minimum Tax"). The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we are continuing to evaluate whether to account for the Foreign Minimum Tax provisions that begin for us in 2019 as a period cost or in our measurement of deferred taxes.

The Securities and Exchange Commission's Staff Accounting Bulletin No. 118 ("SAB 118") allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements for the second quarter of fiscal year 2018 are issued. Provisional amounts may be adjusted during a one-year measurement period as accounting for the income tax effects of the Tax Act are completed or as estimates are revised.



In accordance with SAB 118, we recorded certain provisional estimates included in the table below. Although the provisional estimates are based on the best available interpretations of the Tax Act, the final impacts may differ from the estimates due to, among other things, the issuance of additional regulatory and legislative guidance related to the Tax Act. Our income tax (provision) benefit consisted of the following:

  Quarter ended Six months ended
  March 2, 2017 March 3, 2016 March 2, 2017 March 3, 2016
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and Inotera $(8) $(10) $(21) $(32)
U.S. valuation allowance release resulting from business acquisition —
 —
 —
 41
Other, income tax (provision) benefit, primarily other non-U.S. operations (30) 5
 (48) (10)
  $(38) $(5) $(69) $(1)
 Quarter ended Six months ended
 March 1, 2018 March 2, 2017 March 1, 2018 March 2, 2017
Provisional estimate for the Repatriation Tax on substantially all of our accumulated foreign earnings, net of adjustments related to uncertain tax positions$(1,335) $—
 $(1,335) $—
Remeasurement of deferred tax assets and liabilities reflecting the lower U.S. corporate tax rates(133) —
 (133) —
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations1,337
 —
 1,337
 —
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW(17) (8) (43) (21)
Other income tax (provision) benefit5
 (30) (83) (48)
 $(143) $(38) $(257) $(69)

We have a fullAs noted above, provisional estimates were recorded for the Repatriation Tax and the release of the valuation allowance for ouron the net deferred tax asset associated withassets of our U.S. operations. TheTo determine the amount of the deferredRepatriation Tax, we must determine the accumulated foreign earnings of our foreign subsidiaries and the amount of foreign income tax asset considered realizable couldpaid on such earnings. The provisional estimate of the Repatriation Tax is also based, in part, on the amount of cash and other specified assets anticipated to be adjusted if significant positive evidence increases. Income taxesheld by our foreign subsidiaries as of August 30, 2018, the end of our fiscal year 2018, which may determine the portion of the accumulated foreign earnings taxed at an effective rate of 15.5% or 8%. As a result, the Repatriation Tax may change as amounts are finalized. The U.S. Department of Treasury has issued interpretive guidance regarding the Repatriation Tax and we expect that they will issue additional guidance. Based on U.S. operations in the second quartersinformation available, we can reasonably estimate the Repatriation Tax and first six monthstherefore recorded a provisional amount; however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of 2017 and 2016 were substantially offset by changes inthe Repatriation Tax as well as the impacts on the valuation allowance.allowance release of the Repatriation Tax and the Tax Act.

As of the dateMarch 1, 2018, we had gross unrecognized income tax benefits of the Inotera Acquisition, Inotera's net operating loss carryforward was $654$209 million, substantially all of which expires on various dates through 2022. In connection with$196 million would affect our effective tax rate in the Inotera Acquisition, we assumed $54 million offuture, if recognized. The Tax Act reduced unrecognized tax benefits by $123 million. The amount accrued for interest and penalties related to uncertain tax positions of which $26 million was recorded in purchase accounting as a reduction to deferred tax assets. The amounts recorded in purchase accounting primarily related to the surtax treatment of certain purchase accounting adjustments. During the second quarter of 2017, $21 million of the uncertain tax positions assumed in the Inotera Acquisition reached effective settlement with no impact to tax expense or purchase accounting. Although the timing of final resolution is uncertain, the estimated potential reduction in the Inotera unrecognized tax benefits in the next 12 months ranges from $0 to $33 million, including interest and penalties.not material for any period presented.

We operate in a number of tax jurisdictions including Singapore and Taiwan, where our earnings are indefinitely reinvested and are taxed at lower effective tax rates than the U.S. statutory rate and in a number of locations outside the U.S.,United States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements, which expire in whole or in part at various dates through 2030, reduced our tax provision by $436 million (benefitting our diluted earnings per share by $0.35) and $827 million ($0.67 per diluted share) for the second quarter and first six months 2017 byof 2018, respectively, and $132 million (benefitting our($0.11 per diluted earnings per share by $0.11)share) and $172 million ($0.15 per diluted share), respectively, and were not material for the second quarter orand first six months of 2016.2017, respectively.




Earnings Per Share

 Quarter ended Six months endedQuarter ended Six months ended
 March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016		March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Net income (loss) available to Micron – Basic and Diluted $894
 $(97) $1,074
 $109
Net income attributable to Micron – Basic and Diluted$3,309
 $894
 $5,987
 $1,074
               
Weighted-average common shares outstanding – Basic 1,099
 1,036
 1,070
 1,035
1,156
 1,099
 1,145
 1,070
Dilutive effect of equity plans and convertible notes 61
 —
 55
 37
82
 61
 87
 55
Weighted-average common shares outstanding – Diluted 1,160
 1,036
 1,125
 1,072
1,238
 1,160
 1,232
 1,125
               
Earnings (loss) per share        
Earnings per share       
Basic $0.81
 $(0.09) $1.00
 $0.11
$2.86
 $0.81
 $5.23
 $1.00
Diluted 0.77
 (0.09) 0.95
 0.10
2.67
 0.77
 4.86
 0.95

Antidilutive potential common shares that could dilute basic earnings per share in the future were 3 million for the second quarter and first six months of 2018, and 60 million and 62 million for the second quarter and first six months of 2017, respectively, and 185 million and 72 million for the second quarter and first six months of 2016, respectively.


Segment Information

Segment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. We have the following four business units, which are our reportable segments:

Compute and Networking Business Unit ("CNBU"): Includes memory products sold into compute, networking, graphics, and cloud server markets.
Mobile Business Unit ("MBU"): Includes memory products sold into smartphone, tablet, and other mobile-device markets.
Storage Business Unit ("SBU"): Includes memory and storage products sold into enterprise, client, cloud, and removable storage markets. SBU also includes products sold to Intel through our IMFT joint venture.
Embedded Business Unit ("EBU"): Includes memory products sold into automotive, industrial, connected home, and consumer electronics markets.

Certain operating expenses directly associated with the activities of a specific segment are charged to that segment. Other indirect operating expenses (income) are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. In the first quarter of 2017, we revised the measure of segment profitability reviewed by our chief operating decision maker and, as a result, certain items are no longer allocated to our business units. Comparative periods have been revised to reflect these changes. Items not allocated are identified in the table below.

We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments.



  Quarter ended Six months ended
  March 2,
2017		 March 3,
2016		 March 2,
2017		 March 3,
2016
Net sales        
CNBU $1,917
 $1,053
 $3,387
 $2,192
MBU 1,082
 503
 2,114
 1,337
SBU 1,041
 901
 1,901
 1,785
EBU 590
 460
 1,168
 939
All Other 18
 17
 48
 31
  $4,648
 $2,934
 $8,618
 $6,284
         
Operating income  
  
    
CNBU $736
 $(33) $940
 $7
MBU 170
 (10) 259
 138
SBU 71
 (3) 26
 (17)
EBU 193
 96
 371
 217
All Other 7
 5
 19
 8
  1,177
 55
 1,615
 353
         
Unallocated        
Flow-through of Inotera inventory step up (60) —
 (60) —
Stock-based compensation (55) (55) (101) (101)
Restructure and asset impairments (4) (1) (33) (16)
Other (14) (4) (18) (9)
  (133) (60) (212) (126)
         
Operating income (loss) $1,044
 $(5) $1,403
 $227


Certain Concentrations

Customer concentrations included net sales to Apple of 11% and Intel of 10% for the first six months of 2017.
 Quarter ended Six months ended
 March 1,
2018		 March 2,
2017		 March 1,
2018		 March 2,
2017
Net sales       
CNBU$3,691
 $1,917
 $6,903
 $3,387
MBU1,566
 1,082
 2,931
 2,114
SBU1,254
 1,041
 2,637
 1,901
EBU829
 590
 1,659
 1,168
All Other11
 18
 24
 48
 $7,351
 $4,648
 $14,154
 $8,618
        
Operating income (loss)       
CNBU$2,329
 $736
 $4,243
 $940
MBU689
 170
 1,194
 259
SBU251
 71
 651
 26
EBU363
 193
 705
 371
All Other(2) 7
 (6) 19
 3,630
 1,177
 6,787
 1,615
        
Unallocated       
Stock-based compensation(52) (55) (103) (101)
Restructure and asset impairments(7) (4) (13) (33)
Flow-through of Inotera inventory step-up—
 (60) —
 (60)
Other(4) (14) (7) (18)
 (63) (133) (123) (212)
        
Operating income$3,567
 $1,044
 $6,664

$1,403




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements such as those made regarding benefits from the Inotera Acquisition; the estimated revision in 2017 depreciation expense; effects of inventory step-up in connection with the Inotera Acquisition; future restructure charges; our pursuit of additional financing and debt restructuring; the sufficiency of our cash and investments, cash flows from operations, and available financing to meet our requirements for at least the next 12 months; capital spending in 2017; and the timing of payments for certain contractual obligations. We are under no obligation to update these forward-looking statements. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in "Part II Other Information – Item 1A. Risk Factors." This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended September 1, 2016.August 31, 2017. All period references 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. Our fiscal 20172018 and 20162017 each contain 52 weeks. All production data includes the production of IMFT and Inotera. All tabular dollar amounts are in millions, except per share amounts.

Our Management's Discussion and Analysis is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. This discussion is organized as follows:

Overview: Overview of our operations, business, and highlights of key events.
Results of Operations: An analysis of our financial results consisting of the following:
◦Consolidated results;
◦Operating results by business segment;
◦Operating results by product; and
◦Operating expenses and other.
Liquidity and Capital Resources: An analysis of changes in our balance sheet and cash flows and discussion of our financial condition and liquidity.
Critical Accounting Estimates
Recently Adopted and Issued Accounting Standards


Overview

We are a worldMicron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions. Through our global brands – Micron, Crucial, Lexar, and Ballistix– our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, Flash, NOR Flash, and 3D XPoint memory, is transforming how the world uses information.information to enrich life. Backed by more than 35nearly 40 years of technology leadership, our memory and storage solutions enable the world's most innovative computing, consumer, enterprise storage,disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles in key market segments like cloud, data center, mobile, embedded,networking, and automotive applications. mobile.

We manufacture our products at our worldwide wholly-owned and joint venture facilities. In recent years, we have increased our manufacturing scale and product diversity through strategic acquisitions, expansion, and various partnering arrangements.

We make significant investments to develop the proprietary product and process technology, which is implemented in our manufacturing facilities. We generally increase the density per wafer and reduce manufacturing costs of each generation of product through advancements in product and process technology, such as our leading-edge line-width process technology and 3D NAND architecture. We continue to introduce new generations of products that offer improved performance characteristics, including higher data transfer rates, reduced package size, lower power consumption, improved read/write reliability, and increased memory density. Storage products incorporating NAND, a controller, and firmware constitute a significant portion of our sales. We generally develop firmware and expect to introduce proprietary controllers into our SSDs in new products starting in 2018. Development of advanced technologies enables us to diversify our product portfolio toward a richer mix of differentiated, high-value solutions and target high-growth markets.

We market our products through our internal sales force, independent sales representatives, and distributors primarily to original equipment manufacturers and retailers located around the world. We face intense competition in the semiconductor memory marketand storage markets and, in order to remain competitive, we must continuously develop and implement new products and technologies and decrease manufacturing costs. Our success is largely dependent on market acceptance of our diversified portfolio of semiconductor products,semiconductor-based memory and storage solutions, efficient utilization of our manufacturing infrastructure, successful ongoing development and integration of advanced product and process technologies,technology, return-driven capital spending, and generating a return onsuccessful R&D investments.

AcquisitionTo leverage our significant investments in R&D, we have formed, and may continue to form, strategic joint ventures that allow us to share the costs of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, Nanyadeveloping memory and certain of its affiliates held a 32% ownership interest,storage product and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% interest in Inotera not owned by us (the "Inotera Acquisition"). The cash paid for the Inotera Acquisition was fundedprocess technology with 80 billion New Taiwan dollars (equivalent to $2.5 billion) of proceeds from the 2021 MSTW Term Loan, $986 million of proceeds from the sale of 58 million shares of our common stock to Nanya, and cash on hand. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan, and sold such products exclusively to us through supply agreements. As a result of the Inotera Acquisition, we expect to experience greater operational flexibility to drive new technology in products manufactured by Inotera, optimize the deployment of our cash flows across our operations, and enhance our ability to adapt our product offerings to changes in market conditions.third parties. In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value and recognized a non-operating gain of $71 million in the second quarter of 2017.addition,


from time to time, we also sell and/or license technology to other parties. We continue to pursue additional opportunities to monetize our investment in intellectual property through partnering and other arrangements.

Results of Operations

Consolidated Results

 Second Quarter First Quarter Six MonthsSecond Quarter First Quarter Six Months
 2017 % of Net Sales 2016 % of Net Sales 2017 % of Net Sales 2017 % of Net Sales 2016 % of Net Sales2018 % of Net Sales 2017 % of Net Sales 2018 % of Net Sales 2018 % of Net Sales 2017 % of Net Sales
Net sales $4,648
 100 % $2,934
 100 % $3,970
 100 % $8,618
 100 % $6,284
 100 %$7,351
 100 % $4,648
 100 % $6,803
 100 % $14,154
 100 % $8,618
 100 %
Cost of goods sold 2,944
 63 % 2,355
 80 % 2,959
 75 % 5,903
 68 % 4,856
 77 %3,081
 42 % 2,944
 63 % 3,056
 45 % 6,137
 43 % 5,903
 68 %
Gross margin 1,704
 37 % 579
 20 % 1,011
 25 % 2,715
 32 % 1,428
 23 %4,270
 58 % 1,704
 37 % 3,747
 55 % 8,017
 57 % 2,715
 32 %
                                       
SG&A 187
 4 % 175
 6 % 159
 4 % 346
 4 % 354
 6 %196
 3 % 187
 4 % 191
 3 % 387
 3 % 346
 4 %
R&D 473
 10 % 403
 14 % 470
 12 % 943
 11 % 824
 13 %523
 7 % 473
 10 % 448
 7 % 971
 7 % 943
 11 %
Restructure and asset impairments 4
 — % 1
 — % 29
 1 % 33
 — % 16
 — %
Other operating (income) expense, net (4) — % 5
 — % (6) — % (10) — % 7
 — %(16) — % —
 — % 11
 — % (5) — % 23
 — %
Operating income (loss) 1,044
 22 % (5) — % 359
 9 % 1,403
 16 % 227
 4 %
Operating income3,567
 49 % 1,044
 22 % 3,097
 46 % 6,664
 47 % 1,403
 16 %
                      

                
Interest income (expense), net (153) (3)% (85) (3)% (132) (3)% (285) (3)% (170) (3)%(61) (1)% (153) (3)% (101) (1)% (162) (1)% (285) (3)%
Other non-operating income (expense), net 34
 1 % (6) — % (14) — % 20
 — % (10) — %(53) (1)% 34
 1 % (204) (3)% (257) (2)% 20
 — %
Income tax (provision) benefit (38) (1)% (5) — % (31) (1)% (69) (1)% (1) — %(143) (2)% (38) (1)% (114) (2)% (257) (2)% (69) (1)%
Equity in net income (loss) of equity method investees 7
 — % 5
 — % (2) — % 5
 — % 64
 1 %1
 — % 7
 — % —
 — % 1
 — % 5
 — %
Net income attributable to noncontrolling interests —
 — % (1) — % —
 — % —
 — % (1) — %(2) — % —
 — % —
 — % (2) — % —
 — %
Net income (loss) attributable to Micron $894
 19 % $(97) (3)% $180
 5 % $1,074
 12 % $109
 2 %
Net income attributable to Micron$3,309
 45 % $894
 19 % $2,678
 39 % $5,987
 42 % $1,074
 12 %

Net Sales

 Second Quarter First Quarter Six MonthsSecond Quarter First Quarter Six Months
 2017 % of Total 2016 % of Total 2017 % of Total 2017 % of Total 2016 % of Total2018 % of Total 2017 % of Total 2018 % of Total 2018 % of Total 2017 % of Total
CNBU $1,917
 41% $1,053
 36% $1,470
 37% $3,387
 39% $2,192
 35%$3,691
 50% $1,917
 41% $3,212
 47% $6,903
 49% $3,387
 39%
MBU 1,082
 23% 503
 17% 1,032
 26% 2,114
 25% 1,337
 21%1,566
 21% 1,082
 23% 1,365
 20% 2,931
 21% 2,114
 25%
SBU 1,041
 22% 901
 31% 860
 22% 1,901
 22% 1,785
 28%1,254
 17% 1,041
 22% 1,383
 20% 2,637
 19% 1,901
 22%
EBU 590
 13% 460
 16% 578
 15% 1,168
 14% 939
 15%829
 11% 590
 13% 830
 12% 1,659
 12% 1,168
 14%
All Other 18
 —% 17
 1% 30
 1% 48
 1% 31
 —%11
 —% 18
 —% 13
 —% 24
 —% 48
 1%
 $4,648
   $2,934
   $3,970
   $8,618
   $6,284
  $7,351
   $4,648
   $6,803
 

 $14,154
 

 $8,618
 

Percentages of total net sales reflect rounding and may not total 100%.

Total net sales for the second quarter of 20172018 increased 17%8% as compared to the first quarter of 2017. Higher sales2018 due to strong execution and market conditions for all operating segments resulted primarily from increases inDRAM across our primary markets, particularly for server, mobile, and client. The strong demand for our products enabled us to increase DRAM average selling prices and sales volumes resulting in higher CNBU and MBU sales. Despite significant increases in Non-Volatile Memory gigabits soldSSD revenue in the second quarter of 2018 as compared to the first quarter of 2018, SBU revenue decreased due to increasesdeclines in market demand and higher manufacturing output as a result of improvements in product and process technologies.


NAND component revenue.

Total net sales for the second quarter and first six months of 20172018 increased 58% and 64%, respectively, as compared to the corresponding periods of 2017. Solid execution and strong demand for our products across our primary markets, particularly in client, enterprise, mobile, and cloud, drove higher sales in the second quarter of 2016 primarily due to2018 for all operating segments and significant increases in gigabits soldsales volumes for both DRAM and Trade NAND products as well as increases in average selling prices for DRAM products, partially offset by declines in average selling prices for Non-Volatile Memory products. Total net sales for the first six months of 2017 increased 37% as compared to the first six months of 2016 as increases in gigabits sold outpaced declines in average selling prices. The increases in gigabits sold for the second quarter and first six months of 2017 were primarily attributable to increases in market demand and higher manufacturing output due to improvements in product and process technologies.



Gross Margin

Our overall gross margin percentage increased to 37%58% for the second quarter of 20172018 from 25%55% for the first quarter of 2017 reflecting increases for all operating segments2018 primarily due to strong demand for our DRAM products that drove favorable pricing conditions, combined with overall reductions in manufacturing cost reductions and increasescosts. The increase in average selling pricesour gross margin percentage for the second quarter of 2018 reflects margin expansion for DRAM products.products driven by the continued growth in product offerings and sales for server and mobile products featuring our 1X nm DRAM technology. Gross margin percentages increased for CNBU, MBU, and EBU operating segments in the second quarter of 2018 as compared to the first quarter of 2018.

Our overall gross margin percentage increased to 58% for the second quarter of 2018 from 37% for the second quarter of 2017 from 20%and increased to 57% for the second quarterfirst six months of 2016 reflecting improvements for all operating segments, primarily due to manufacturing cost reductions and increases in average selling prices for DRAM products, partially offset by declines in average selling prices for Non-Volatile Memory products. Our overall gross margin percentage increased to2018 from 32% for the first six months of 2017, from 23% for the first six months of 2016 reflecting increases in the gross margin percentages for all operating segments, primarily due to strong execution and market demand together with manufacturing cost reductions.

Due to the lengthening period of time between DRAM product technology node transitions, an increased re-use rate of equipment, and industry trends, in the fourth quarter of 2016, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years, which reduced depreciation costs by approximately $100 million per quarter in 2017.

From January 20132016 through December 2015,6, 2016, the date we acquired the remaining interest in Inotera, we purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components. After December 2015 through our acquisition of Inotera on December 6, 2016, the price for DRAM products purchased by us was based on a formula that equally shared margin between Inotera and us. WeFor the first quarter of 2017, we purchased $504 million, and $326 million of DRAM products from Inotera in the first quarter of 2017 and second quarter of 2016, respectively. DRAM products produced by Inotera accounted forunder these agreements, representing 37% of our aggregate DRAM gigabit production for the second and first quarters of 2017 as compared to 29% for the second quarter of 2016. In accounting for the Inotera Acquisition, Inotera's work in process inventories were recorded at fair value, based on their estimated future selling prices, estimated costs to complete and other factors, which was approximately $107 million higher than the cost of work in process inventory recorded by Inotera prior to the acquisition. Of this amount, approximately $60 million was included in cost of goods sold for the second quarter of 2017 and a significant portion of the remainder is expected to be included in costs of goods sold in the third quarter of 2017.bit production.

Operating Results by Business Segments

In the first quarter of 2017, we revised the measure of segment profitability reviewed by our chief operating decision maker and, as a result, certain items are no longer allocated to our business units. Comparative periods have been revised to reflect these changes. (See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Segment Information.")

CNBU

  Second Quarter First Quarter Six Months
  2017 2016 2017 2017 2016
Net sales $1,917
 $1,053
 $1,470
 $3,387
 $2,192
Operating income (loss) 736
 (33) 204
 940
 7

CNBU sales and operating results are significantly impacted by average selling prices, gigabit sales volumes, and cost per gigabit of our DRAM products. (See "Operating Results by Product – DRAM" for further detail.) CNBU sales for the second quarter of 2017 increased 30% as compared to the first quarter of 2017 primarily due to increases in average selling prices as a result of favorable market conditions, particularly in cloud and enterprise markets. CNBU operating margin for the second quarter of 2017 increased from the first quarter of 2017 due to increases in average selling prices and manufacturing cost reductions.


 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$3,691
 $1,917
 $3,212
 $6,903
 $3,387
Operating income2,329
 736
 1,914
 4,243
 940

CNBU sales for the second quarter of 20172018 increased 82% as compared to the second quarter of 2016 primarily due to increases in gigabits sold and average selling prices. CNBU sales for the first six months of 2017 increased 55%15% as compared to the first six monthsquarter of 2016 primarily2018 due to increases in gigabits sold.higher sales into cloud server and client markets and improved pricing for our DRAM products. As a result, CNBU operating marginincome improved for the second quarter of 2018 compared to the first quarter of 2018. See "Operating Results by Product – DRAM" for further detail.

CNBU sales for the second quarter and first six months of 2018 increased 93% and 104%, respectively, as compared to the corresponding periods of 2017 due to increases in average selling prices for our products sold into the client market, growth in the cloud market driven by significant increases in DRAM content per server, and increases in sales into the enterprise market. Favorable conditions in key CNBU markets for the second quarter and first six months of 2018 drove increases in average selling prices and sales volumes as compared to the corresponding periods of 2017. CNBU operating income for the second quarter and first six months of 2018 improved from the corresponding periods of 20162017 primarily due to improved pricing, manufacturing cost reductions, and increases in average selling prices.product mix.

MBU

 Second Quarter First Quarter Six MonthsSecond Quarter First Quarter Six Months
 2017 2016 2017 2017 20162018 2017 2018 2018 2017
Net sales $1,082
 $503
 $1,032
 $2,114
 $1,337
$1,566
 $1,082
 $1,365
 $2,931
 $2,114
Operating income (loss) 170
 (10) 89
 259
 138
Operating income689
 170
 505
 1,194
 259

MBU sales are comprised primarily composed of DRAM and Non-Volatile Memory,NAND, with mobile DRAM products accounting for a significant majority of the sales. MBU sales for the second quarter of 20172018 increased 5%15% as compared to the first quarter of 20172018 primarily due to strong acceptance of our low-power DRAM products and increases in average selling prices as a resultsales of strong market conditions.mobile DRAM products into smartphone markets. MBU operating marginincome for the second quarter of 2017 increased2018 improved from the first quarter of 20172018 primarily due to manufacturing cost reductions and increases in average selling prices, partially offset by higher operating expenses.sales volumes for both DRAM and NAND products as well as improved DRAM pricing resulting from strong demand for our products.

MBU sales for the second quarter and first six months of 20172018 increased 115%45% and 58%39%, respectively, as compared to the corresponding periods of 20162017 primarily due to significantimprovements in DRAM pricing and increases in gigabits soldsales volumes, driven by the completion of customer qualifications for LPDRAM and managed NAND products, combined with higher memory content in smartphones, partially offset by declines in average selling prices. smartphones.


MBU operating marginincome for the second quarter and first six months of 20172018 improved from the corresponding periods of 2016 primarily due to manufacturing cost reductions and higher gigabit sales, partially offset by declines in average selling prices and higher R&D costs.

SBU

  Second Quarter First Quarter Six Months
  2017 2016 2017 2017 2016
Net sales $1,041
 $901
 $860
 $1,901
 $1,785
Operating income (loss) 71
 (3) (45) 26
 (17)

SBU sales and operating results are significantly impacted by average selling prices, gigabit sales volumes, and cost per gigabit of our Non-Volatile Memory products. (See "Operating Results by Product – Trade Non-Volatile Memory" for further details.) SBU sales for the second quarter of 2017 increased 21% from the first quarter of 2017 primarily due to increases in gigabits sold. average selling prices for mobile DRAM products, manufacturing cost reductions, and higher sales volumes.

SBU
 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$1,254
 $1,041
 $1,383
 $2,637
 $1,901
Operating income251
 71
 400
 651
 26

SBU sales includedof Trade NAND products for the second quarter of 2018 decreased 7% as compared to the first quarter of 2018 due to declines in NAND component sales from lower average selling prices, partially offset by increases in SSD sales. Sales of SSD storage products for the second quarter of 2018 increased 22% as compared to the first quarter of 2018, driven by strong demand in cloud and client markets for products incorporating our TLC 3D NAND technology. SBU Non-Trade Non-Volatile Memory sales of $158 million, $123 million and $126were $136 million for the second quarter of 2017,2018 as compared to $122 million for the first quarter of 2017,2018 and $158 million for the second quarter of 2016, respectively.2017. SBU operating income for the second quarter of 2018 was also adversely affected by costs associated with IMFT's production of 3D XPoint products at less than full capacity, partially offset by a mix shift to SSD products and NAND manufacturing cost reductions. See "Operating Results by Product – Trade NAND" for further details.

SBU sales of Trade Non-Volatile Memory products for the second quarter of 2017 increased 20% from the first quarter of 2017 primarily due to increases in gigabits sold as a result of higher SSD sales, particularly in enterprise and cloud markets, and strong demand in the overall NAND Flash market combined with higher manufacturing output. SBU operating margin for the second quarter of 2017 improved from the first quarter of 2017 primarily due to manufacturing cost reductions.

SBU sales of Trade Non-Volatile Memory products for the second quarter and first six months of 20172018 increased 15%23% and 6%40%, respectively, as compared to the corresponding periods of 20162017 primarily due to increases in gigabits sold as a result ofsales volumes from strong demand, combined with higher manufacturing output, partially offset by declines in average selling prices.particularly for sales of SSD products into the cloud market. SBU operating marginsales of SSD storage products for the second quarter and first six months of 2018 increased by 81% and 103%, respectively, as compared to the corresponding periods of 2017 primarily as a result of the launch of new SSD products incorporating our TLC 3D NAND technology. SBU operating income for the second quarter and first six months of 2018 improved from the corresponding periods of 2016 as2017 primarily due to manufacturing cost reductions outpaced declinesand improvements in average selling prices.


product mix.

EBU

 Second Quarter First Quarter Six MonthsSecond Quarter First Quarter Six Months
 2017 2016 2017 2017 20162018 2017 2018 2018 2017
Net sales $590
 $460
 $578
 $1,168
 $939
$829
 $590
 $830
 $1,659
 $1,168
Operating income 193
 96
 178
 371
 217
363
 193
 342
 705
 371

EBU sales are composedcomprised of DRAM, Non-Volatile Memory,NAND, and NOR Flash in decreasing order of revenue. EBU sales for the second quarter of 2017 increased 2% as compared to2018 were relatively unchanged from the first quarter of 2017 primarily due to higher sales volumes for DRAM products as a result of strong sales in our automotive business partially offset by lower sales of Non-Volatile products due to declines in average selling prices.2018. EBU operating income for the second quarter of 20172018 increased from the first quarter of 20172018 primarily due to manufacturing cost reductions and the increases in sales volumes.improved pricing for DRAM products resulting from strong demand for our products.

EBU sales for the second quarter and first six months of 20172018 increased 28%41% and 24%42%, respectively, as compared to the corresponding periods of 20162017 primarily due to strong demand and higher sales volumes offor DRAM, NAND, and Non-Volatile Memory products as a result of increaseseMCP in demand partially offset by declines in average selling prices.consumer markets. EBU operating income for the second quarter and first six months of 2017 improved2018 increased as compared to the corresponding periods of 20162017 as manufacturing cost reductions outpaced declinesa result of increases in average selling prices, manufacturing cost reductions, and asincreases in sales volumes increased.volumes.



Operating Results by Product

Net Sales by Product

 Second Quarter First Quarter Six MonthsSecond Quarter First Quarter Six Months
 2017 % of Total 2016 % of Total 2017 % of Total 2017 % of Total 2016 % of Total2018 % of Total 2017 % of Total 2018 % of Total 2018 % of Total 2017 % of Total
DRAM $2,960
 64% $1,588
 54% $2,421
 61% $5,381
 62% $3,533
 56%$5,213
 71% $2,960
 64% $4,562
 67% $9,775
 69% $5,381
 62%
Non-Volatile Memory                    
Trade 1,412
 30% 1,074
 37% 1,272
 32% 2,684
 31% 2,217
 35%
Trade NAND1,805
 25% 1,412
 30% 1,866
 27% 3,671
 26% 2,684
 31%
Non-Trade 158
 3% 126
 4% 123
 3% 281
 3% 252
 4%136
 2% 158
 3% 122
 2% 258
 2% 281
 3%
Other 118
 3% 146
 5% 154
 4% 272
 3% 282
 4%197
 3% 118
 3% 253
 4% 450
 3% 272
 3%
 $4,648
   $2,934
   $3,970
   $8,618
   $6,284
  $7,351
   $4,648
   $6,803
   $14,154
   $8,618
  
Percentages of total net sales reflect rounding and may not total 100%.

Trade Non-Volatile Memory includesNon-Trade consists of NAND Flash and 3D XPoint memory. Non-Trade Non-Volatile Memory primarily consists of Non-Volatile Memory products manufactured and sold to Intel through IMFT atunder a long-term negotiatedsupply agreement at prices approximating cost. Information regarding our MCP products whichthat combine both NAND Flash and DRAM components is reported within Trade Non-Volatile Memory. SalesNAND. Other includes sales of NOR Flash products are included in Other.and trade 3D XPoint products.

DRAM

  Second Quarter 2017 Versus First Six Months 2017 Versus
  First Quarter Second Quarter First Six Months
  2017 2016 2016
       
  (percentage change from period indicated)
Net sales 22 % 86 % 52 %
Average selling prices per gigabit 21 % 7 % (8)%
Gigabits sold 1 % 75 % 66 %
Cost per gigabit (3)% (23)% (22)%
Second Quarter 2018 VersusFirst Six Months 2018 Versus
First Quarter 2018Second Quarter 2017First Six Months 2017
(percentage change)
Average selling prices per gigabitincreased low double digitincreased low 40% rangeincreased high 40% range
Gigabits soldincreased mid single digitincreased low 20% rangeincreased low 20% range



The increasesIncreases in gigabits sold for the second quartersales volumes and first six months of 2017 as compared to the corresponding periods of 2016 were primarily due to strong demand across key markets and customer qualifications combined with increases in gigabit production. The decreases in cost per gigabitprices for the second quarter of 20172018 as compared to the first quarter of 20172018 and second quarter of 2016 were primarily due to improvements in product2017 resulted from strong conditions for server, mobile, and process technologies. The decreases in cost per gigabit for the second quarter and first six months of 2017 as compared to the corresponding periods of 2016 also reflected lower depreciation due to the change made in the fourth quarter of 2016 in estimated useful lives for equipment at our DRAM wafer fabrication facilities. Gigabit production and cost reductions for the second and first quarters of 2017 were affected by a transition to a higher mix of DDR4 products, which have larger die sizes and fewer bits per wafer. Cost reductions in the second quarter of 2017 were also adversely affected by the step-up of acquired Inotera inventories.

Our DRAM gross margin percentage for the second quarter of 2017 increased as compared to the first quarter of 2017 and second quarter of 2016 primarily due to increases in average selling prices and manufacturing cost reductions.client markets. Our gross margin percentage on sales of DRAM products for the first six monthssecond quarter of 20172018 improved from the first six monthsquarter of 2016 as manufacturing cost reductions outpaced declines in average selling prices.

Trade Non-Volatile Memory

  Second Quarter 2017 Versus First Six Months 2017 Versus
  First Quarter Second Quarter First Six Months
  2017 2016 2016
       
  (percentage change from period indicated)
Sales to trade customers      
Net sales 11 % 31 % 21 %
Average selling prices per gigabit (6)% (12)% (16)%
Gigabits sold 18 % 49 % 45 %
Cost per gigabit (15)% (24)% (22)%

Through the2018 and second quarter of 2017 substantially all of our primarily due to increases in average selling prices due to favorable market conditions and manufacturing cost reductions.

Trade Non-Volatile MemoryNAND
Second Quarter 2018 VersusFirst Six Months 2018 Versus
First Quarter 2018Second Quarter 2017First Six Months 2017
(percentage change)
Average selling prices per gigabytedecreased mid-teens rangedecreased high single digitdecreased mid single digit
Gigabytes soldincreased low double digitincreased low 40% rangeincreased low 40% range

Decreases in net sales were from NAND Flash products. The increase in gigabits sold of Trade Non-Volatile Memory for the second quarter of 20172018 as compared to the first quarter of 20172018 resulted from declines in average selling prices partially offset by increase in sales of cloud and client SSDs driven by growth and gains in market share for SSD products. Increases in net sales for the second quarter of 2016 was due2018 as compared to an increasethe second quarter of 2017 primarily resulted from increases in demand, primarily for SSD products.sales of cloud and client SSDs. Our ability to meet thisincreased demand was duefor SSDs and other NAND products in part to an increase in production from our facilities,the second quarter of 2018 was primarily due to the ramp of additional capacity and improvements in product and process technology, including our transition to 3D NAND Flash products.

products and strong execution. Our gross margin percentage on sales of Trade Non-Volatile Memory productsNAND for the second quarter of 2017 increased2018 declined slightly from the first quarter of 2018 as declines in average selling prices outpaced manufacturing cost reductions. Our gross margin percentage on sales of Trade NAND for the second quarter of 2018 improved from the second quarter of 2017 as manufacturing cost reductions outpaced declines in average selling prices. Our gross margin percentage on sales of Trade Non-Volatile Memory products for the second quarter and first six months of 2017 improved from the corresponding periods of 2016 as manufacturing cost reductions outpaced declines in average selling prices.



Operating Expenses and Other

Selling, General, and Administrative

SG&A expenses for the second quarter of 20172018 were 18%relatively unchanged compared to the first quarter of 2018. SG&A expenses for the second quarter of 2018 were 5% higher than the firstsecond quarter of 2017 primarily due to $12 million of transaction costs related to the Inotera Acquisition and increases in payroll costs. SG&A expenses for the second quarterfirst six months of 20172018 were 7%12% higher than the second quarter of 2016 primarily due to transaction costs related to the Inotera Acquisition partially offset by decreases in payroll costs as a result of the 2016 Restructuring Plan. SG&A expenses for the first six months of 2017 were relatively unchanged as comparedprimarily due to the first six months of 2016.


increases in performance-based pay and other payroll costs.

Research and Development

R&D expenses for the second quarter of 20172018 were relatively unchanged from17% higher than the first quarter of 20172018 primarily due to higher variable pay costs offset by lower volumes of development wafers processed.product being processed that had not been qualified and increases in payroll costs. R&D expenses for the second quarter of 20172018 were 17%11% higher than for the second quarter of 20162017 primarily due to higher volumes of development wafers processed.increases in payroll costs. R&D expenses for the first six months of 20172018 were 14%slightly higher thanas compared to the first six months of 2017 primarily due to higherincreases in payroll costs, partially offset by lower volumes of development wafers processed.product being processed that had not been qualified.

We generally share with Intel the costscost of certain product design and process development activities with development partners, including Intel. We expect to continue to jointly develop NAND technologies with Intel through the third generation of 3D NAND, which is expected to be delivered in 2019. In the second quarter of 2018, we and Intel mutually agreed to independently develop subsequent generations of 3D NAND in order to better optimize the technology and products for NAND Flash and 3D XPoint memory at IMFT and our other facilities.each individual business' needs. Our R&D expenses reflect net reductions as a result ofwere reduced by reimbursements under our cost-sharing arrangements with Intelby $58 million for the second quarter of 2018, $56 million for the first quarter of 2018, and others of $59 million for the second quarter of 2017, $56 million for the first quarter of 2017, and $53 million for the second quarter of 2016.2017.

Income Taxes

Our incomeIncome tax (provision) benefit consisted of the following:

  Second Quarter First Quarter Six Months
  2017 2016 2017 2017 2016
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and Inotera $(8) $(10) $(13) $(21) $(32)
U.S. valuation allowance release resulting from business acquisition —
 —
 —
 —
 41
Other, income tax (provision) benefit, primarily other non-U.S. operations (30) 5
 (18) (48) (10)
  $(38) $(5) $(31) $(69) $(1)
           
Effective tax rate 4.1% 5.2% 14.6% 6.1% 2.1%
 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Provisional estimate for the Repatriation Tax, net of adjustments related to uncertain tax positions$(1,335) $—
 $—
 $(1,335) $—
Remeasurement of deferred tax assets and liabilities reflecting lower U.S. corporate tax rates(133) —
 —
 (133) —
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations1,337
 —
 —
 1,337
 —
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW(17) (8) (26) (43) (21)
Other income tax (provision) benefit5
 (30) (88) (83) (48)
 $(143) $(38) $(114) $(257) $(69)
          
Effective tax rate4.1% 4.1% 4.1% 4.1% 6.1%

Our effective tax ratesincome taxes reflect the following:

operations invarious provisional estimates for the impacts of the Tax Act, including the Repatriation Tax, remeasurement of deferred tax jurisdictions, including Singaporeassets and Taiwan, whereliabilities at the lower U.S. corporate rate of 21%, and release of a substantial portion of the valuation allowance on the net deferred tax assets of our earnings are indefinitely reinvestedU.S. operations; and the tax rates are significantly lower than the U.S. statutory rate;
operations outside the U.S.,United States, including Singapore, where we have tax incentive arrangements that further decrease our effective tax rates;rates.
exclusion
On December 22, 2017, the U.S. government enacted the Tax Act which lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate will be 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and 21% for subsequent years. The Tax Act imposes a Repatriation


Tax in 2018; provides a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a Foreign Minimum Tax. The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we are continuing to evaluate whether to account for the Foreign Minimum Tax provisions that begin for us in 2019 as a period cost or in our measurement of deferred taxes.

SAB 118 allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements for the second quarter of fiscal year 2018 are issued. Provisional amounts may be adjusted during a one-year measurement period as accounting for the income tax effects of the Tax Act are completed or as estimates are revised.

In accordance with SAB 118, we recorded certain jurisdictionsprovisional estimates included in the table above. Although the provisional estimates are based on the best available interpretations of the Tax Act, the final impacts may differ from the consolidated effective tax rate computationsestimates due to, among other things, the issuance of additional regulatory and legislative guidance related to the Tax Act.

As noted above, provisional estimates were recorded for instances where no benefit is recorded on forecasted losses;the Repatriation Tax and
a the release of the valuation allowance against substantially allon the net deferred tax assets of our U.S. net deferredoperations. To determine the amount of the Repatriation Tax, we must determine the accumulated foreign earnings of our foreign subsidiaries and the amount of foreign income tax assets.  paid on such earnings. The provisional estimate of the Repatriation Tax is also based, in part, on the amount of cash and other specified assets anticipated to be held by our foreign subsidiaries as of August 30, 2018, the end of our fiscal year 2018, which may determine the portion of the accumulated foreign earnings taxed at an effective rate of 15.5% or 8%. As a result, the Repatriation Tax may change as amounts are finalized. The U.S. Department of Treasury has issued interpretive guidance regarding the Repatriation Tax and we expect that they will issue additional guidance. Based on the information available, we can reasonably estimate the Repatriation Tax and therefore recorded a provisional amount; however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax as well as the impacts on the valuation allowance release of the Repatriation Tax and the Tax Act.

We operate in a number of locations outside the U.S.,Unites States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operationoperations and employment thresholds. The effect of tax incentive arrangements, which expire in whole or in part at various dates through 2030, reduced our tax provision by $132$436 million (benefitting(benefiting our diluted earnings per share by $0.11)$0.35) for the second quarter of 2017, $402018, by $391 million ($0.040.32 per diluted share) in the first quarter of 2018, and by $132 million ($0.11 per diluted share) for the firstsecond quarter of 2017, and were not material2017. The Tax Act establishes a new provision designed to impose the Foreign Minimum Tax beginning in 2019. Consequently, we may incur additional U.S. tax expense on income of our foreign subsidiaries that could offset a significant portion of the benefits realized from our tax provisionincentive arrangements. Beginning in 2019, our tax rate may increase to the low teens percentage depending on profitability.

Other

Net interest expense decreased 40% for the second quarter of 2016.

Equity in Net Income (Loss) of Equity Method Investees

Equity in net income (loss) of equity method investees, net of tax, included the following:

  Second Quarter First Quarter Six Months
  2017 2016 2017 2017 2016
Inotera $—
 $2
 $9
 $9
 $54
Tera Probe 7
 3
 (12) (5) 6
Other —
 —
 1
 1
 4
  $7
 $5
 $(2) $5
 $64



We ceased recognizing our share of Inotera's earnings due to our acquisition of the remaining interest in Inotera on December 6, 2016. In the first quarter of 2017, we recorded an impairment charge of $16 million within equity in net income (loss) of equity method investees to write down the carrying value of our investment in Tera Probe to its fair value based on its trading price.

Other

Interest expense increased in the second quarter of 20172018 as compared to the first quarter of 2017 and2018 primarily due to decreases in debt obligations in the first six months of 2018. Net interest expense decreased 60% for the second quarter of 2016,2018 as compared to the second quarter of 2017 primarily due to decreases in debt obligations, including the redemption of $600 million in principal amount of notes in the fourth quarter of 2017 and the redemption and conversion of an aggregate of $2.42 billion in principal amount of notes in the first six months of 2018, as well as an increase in capitalized interest from higher levels of capital spending. Interest income also increased in the second quarter of 2018 as compared to the second quarter of 2017 primarily due to increases in our aggregate cash and investments. Net interest expense decreased 43% for the first six months of 2018 as compared to the first six months of 2017 primarily due to decreases in debt obligations, includingincreases in interest income as a result of increases in our borrowings of 80 billion New Taiwan dollars (equivalent to $2.5 billion) at an effective interest rate of 3.02% on December 6, 2016 under the 2021 MSTW Term Loancash and $450 million at an effective interest rate of 3.87% on December 2, 2016 under the 2021 MSAC Term Loan.investments, and increases in capitalized interest.

Further discussion of other operating and non-operating income and expenses can be found in the following notes contained in "Item 1. Financial Statements – Notes to Consolidated Financial Statements":

Statements – Equity Plans
Restructure and Asset Impairments
Other Non-Operating Income (Expense), NetNet" notes.




Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets.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. We are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We expect, from time to time in the future, to engage in a variety of financing transactions for such purposes, including the issuance or incurrence of securedsecurities. We have an undrawn revolving credit facility that expires in February 2020 and unsecured debt and the refinancing and restructuringprovides for additional borrowings of existing debt. As of March 2, 2017, we had credit facilities available for up to $1.03 billion of additional financing$750 million based in part, on eligible receivables. We expect that our cash and investments, cash flows from operations, and available financing will be sufficient to meet our requirements through at least through the next 12 months.

To develop new product and process technologies,technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate that cash expenditures in 20172018 for property, plant, and equipment, will be approximately $4.8 billion to $5.2 billion, which reflects the offsetnet of amounts we expectpartner contributions, to be funded by our partners.in the range of $7.5 billion plus or minus 5 percent, focused on technology transitions and product enablement. The actual amounts for 20172018 will vary depending on market conditions. As of March 2, 2017,1, 2018, we had commitments of approximately $580 million$1.6 billion for the acquisition of property, plant, and equipment, substantially all of which is expected to be paid within one year.

Cash and marketable investments included the following:

As of March 2, 2017 September 1, 2016
Cash and equivalents and short-term investments $3,898
 $4,398
Long-term marketable investments 589
 414

totaled $8.56 billion and $6.05 billion as of March 1, 2018 and August 31, 2017, respectively. Our investments consist primarily of money market funds and liquid investment-grade fixed-income securities, diversified among industries and individual issuers. As of March 2, 2017, $1.621, 2018, $3.94 billion of our cash and equivalents and short-termmarketable investments was held by our foreign subsidiaries. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor.

Tender Offers

On March 27,In October 2017, we commenced tender offers (the "Tender Offers") to purchase up to $1.00 billion aggregate purchase price, exclusive of accrued interest (such aggregate purchase price subject to increase by us), of our 2022 senior notes, 2023 senior notes, 2024 senior notes, 2025 senior notes, and 2026 senior notes. The Tender Offers are intended to lower our overall interest expense and decrease leverage and will be funded from available cash on hand.



Acquisition of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, Nanya and certain of its affiliates held a 32% ownership interest, and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% interest in Inotera not owned by us for an aggregate of $4.1 billion in cash. The cash paid for the Inotera Acquisition was funded with 80 billion New Taiwan dollars (equivalent to $2.5 billion) of proceeds from the 2021 MSTW Term Loan, $986 million of proceeds from the sale of 58issued 34 million shares of our common stock to Nanya,for $41.00 per share in a public offering for proceeds of $1.36 billion, net of underwriting fees and cash on hand.

Acquisition Financing

2021 MSTW Term Loan: On December 6, 2016,other offering costs. In the first six months of 2018, we drew 80 billion New Taiwan dollars (equivalent to $2.5 billion) under a collateralized, five-year term loan that bears interest at a variable per annum rate equal to the three-month or six-month TAIBOR, at our option, plus a margin of 2.05%. Principal under the 2021 MSTW Term Loan is payable in six equal semi-annual installments, commencing in June 2019, through December 2021. The 2021 MSTW Term Loan is collateralized by certain assets including a real estate mortgage on Inotera's main production facility and site, a chattel mortgage over certain equipment of Inotera, all of the stock of our MSTW subsidiary, and the 82% of stock of Inotera owned by MSTW. The 2021 MSTW Term Loan is guaranteed by Micron.

The 2021 MSTW Term Loan contains affirmative and negative covenants, including covenants that limit or restrict our ability to create liens in or dispose of collateral securing obligations under the 2021 MSTW Term Loan, mergers involving MSTW and/or Inotera, loans or guarantees to third parties by Inotera and/or MSTW, and MSTW's and/or Inotera's distribution of cash dividends. The 2021 MSTW Term Loan also contains financial covenants, which are tested semi-annually:

MSTW must maintain a consolidated ratio of total debt to adjusted EBITDA not higher than 5.5x in 2017 and 2018, and not higher than 4.5x in 2019 through 2021;
MSTW must maintain adjusted consolidated tangible net worth of not less than 4.0 billion New Taiwan dollars in 2017 and 2018, not less than 6.5 billion New Taiwan dollars in 2019 and 2020, and not less than 12.0 billion New Taiwan dollars in 2021;
on a consolidated basis, Micron must maintain a ratio of total debt to adjusted EBITDA not higher than 3.5x in 2017, not higher than 3.0x in 2018 and 2019, and not higher than 2.5x in 2020 and 2021; and
on a consolidated basis, Micron must maintain adjusted tangible net worth not less than $9.0paid $2.93 billion in 2017, not less than $12.5 billion in 2018 and 2019, and not less than $16.5 billion in 2020 and 2021.

If MSTW fails to maintain a required financial covenant,cash for the interest rate will be increased by 0.25% until such time as the required financial ratios are maintained. If MSTW's failure continues for two consecutive semi-annual periods, such will constitute an eventrepurchase or settlement upon conversion of default that could result in all obligations owed under the 2021 MSTW Term Loan being accelerated to be immediately due and payable. Micron's failure to maintain a required financial covenant will only result in a 0.25% increase to the interest rate but will not constitute an event of default. The 2021 MSTW Term Loan also contains customary events of default.

To hedge our currency exposure of this borrowing, we entered into a series of currency forward contracts in December 2016 to purchasenotes with an aggregate principal amount of 80 billion New Taiwan dollars under a rolling hedge strategy. As of March 2, 2017, substantially all of$2.42 billion. See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt." We may redeem, repurchase, or otherwise retire additional debt in the forward contracts expire at various dates through October 2017.future.

Limitations on the Use of Cash and Investments

MMJ Group: Cash and equivalents and short-termmarketable investments in the table above included an aggregate of $529$495 million held by the MMJ Group as of March 2, 2017.1, 2018. As a result of the corporate reorganization proceedings theof MMJ Companies initiated in March 2012, and for so long as such proceedings are continuing, the MMJ Companies and their subsidiaries areGroup is prohibited from paying dividends to us. In addition, pursuant to an order of the Japan Court, the MMJ CompaniesGroup cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court and may, under certain circumstances, be subject to the approval of the legal trustees and Japan Court.trustee. As a result, the assets of the MMJ Group are not available for use by us in our other operations. Furthermore, certain uses of the assets of the MMJ Group, including investments in certain capital expenditures and in MMT, may require consent of MMJ's trustees and/or the Japan Court.

MSTW and InoteraMTTW: Cash and equivalents and short-termmarketable investments in the table above included an aggregate of $297$59 million held by MSTW and InoteraMTTW as of March 2, 2017.1, 2018. The 2021 MSTW Term Loan contains covenants that limit or restrict the ability of eachMSTW and MTTW to pay dividends. As a result, the assets of MSTW and Inotera to pay dividends.MTTW are not available for use by us in our other operations.



IMFT: Cash and equivalents and short-termmarketable investments in the table above included $94$317 million held by IMFT as of March 2, 2017.1, 2018. Our ability to access funds held by IMFT to finance our other operations is subject to agreement by Intel and contractual limitations. Amounts held by IMFT are not anticipated to be available to finance our other operations.

Indefinitely Reinvested: As of March 2, 2017, $849 million1, 2018, $3.18 billion of cash and equivalents and short-termmarketable investments, including substantially all of the amounts held by the MMJ, Group, MSTW, and Inotera,MTTW, was held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested and repatriationreinvested. As a result of these funds to the U.S. would subject these funds toTax Act, substantially all of our accumulated foreign earnings earned before December 31, 2017 were treated as taxable for U.S. federal income taxes.taxes; however, the repatriation of all or a portion of these earnings would continue to be subject to foreign and state tax upon repatriation to the United States. As we evaluate the impact of the Tax Act and the future cash needs of our global operations, we may revise the amount of the foreign earnings considered to be indefinitely reinvested outside of the United States. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.



Cash Flows

 First Six MonthsFirst Six Months
 2017 20162018 2017
Net cash provided by operating activities $2,543
 $1,883
$7,984
 $2,543
Net cash provided by (used for) investing activities (5,366) (1,026)(3,843) (5,385)
Net cash provided by (used for) financing activities 2,341
 (68)(1,420) 2,341
Effect of changes in currency exchange rates on cash and equivalents (25) 2
Net increase (decrease) in cash and equivalents $(507) $791
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash4
 (33)
Net increase (decrease) in cash, cash equivalents, and restricted cash$2,725
 $(534)

Operating Activities: For the first six months of 2018, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $630 million of cash used for increases in receivables, partially offset by $93 million of cash provided by an increase in accounts payable and accrued expenses. For the first six months of 2017, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $773 million of cash used for net increases in receivables, $361 million of payments attributed to intercompany balances with Inotera, and $399 million of cash provided by net increases in accounts payable and accrued expenses. For the first six months of 2016, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $542 million of cash provided from net reductions in receivables, partially offset by $268 million of cash used for net increases in inventory.

Investing Activities: For the first six months of 2018, net cash used for investing activities consisted primarily of $4.22 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners), partially offset by $198 million of net inflows from sales, maturities, and purchases of available-for-sale securities. For the first six months of 2017, net cash used for investing activities consisted primarily of $2.63 billion of net cash paid for the Inotera Acquisition (net of $361 million of payments attributed to intercompany balances with Inotera included in operating activities) and $2.43 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners). For the first six months of 2016, net cash used for investing activities consisted primarily of $2.21 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners) and $148 million for our acquisition of Tidal Systems, Ltd., partially offset by $1.27 billion of net inflows from sales, maturities, and purchases of available-for-sale securities.

Financing Activities: For the first six months of 2018, net cash used for financing activities consisted primarily of redemption of our 2023 Secured Notes for $1.37 billion in cash, redemption of our 2023 Notes for $1.05 billion in cash, conversions of our convertible notes for $511 million of cash, and $449 million for repayments of other notes payable and capital leases, partially offset by net proceeds of $1.36 billion from the issuance of 34 million shares of our common stock for $41.00 per share in a public offering and $650 million of proceeds from IMFT Member Debt. For the first six months of 2017, net cash provided by financing activities consisted primarily of $2.48 billion of net proceeds from the 2021 MSTW Term Loan and $445 million of net proceeds from the 2021 MSAC Term Loan, partially offset by $556 million for repayments of debt. For the first six months of 2016, net cash used for financing activities consisted primarily of $519 million for repayments of debt (including $36 million for the amount in excess of principal in connection with the repurchase of a portion of our convertible notes) and $125 million for the open-market repurchases of 7 million shares of our common stock, partially offset by $424 million of proceeds from equipment sale-leaseback financing and $174 million from the issuance of debt. See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt."



Potential Settlement Obligations of Convertible Notes

Since the closing price of our common stock exceeded 130% of the conversion price per share of all our convertible notes for at least 20 trading days in the 30 trading day period ended on December 31, 2016 exceeded 130% of the conversion price per share of our 2032 Notes and 2033 Notes, those2017, holders may convert their notes are convertible by the holders duringthrough the calendar quarter ended March 31, 2017.2018. The following table summarizes the potential settlements that we could be required to make for the calendar quarter ending March 31, 20172018 if all holders converted their 2032 Notes and 2033 Notes.notes. The amounts in the table below are based on our closing share price of $24.70$47.62 as of March 2, 2017.

1, 2018.
  Settlement Option for   If Settled With Minimum Cash Required If Settled Entirely With Cash
  Principal Amount Amount in Excess of Principal Underlying Shares Cash Remainder in Shares Cash
2032C Notes Cash and/or shares Cash and/or shares 23
 $—
 23
 $574
2032D Notes Cash and/or shares Cash and/or shares 18
 —
 18
 438
2033E Notes Cash Cash and/or shares 16
 176
 9
 397
2033F Notes Cash Cash and/or shares 27
 297
 15
 672
    
 84
 $473
 65
 $2,081

Contractual Obligations

  Payments Due by Period
As of March 2, 2017 Total Remainder of 2017 2018 2019 2020 2021 2022 and Thereafter
Notes payable(1)(2)
 $14,689
 $332
 $1,039
 $1,529
 $2,105
 $1,562
 $8,122
Capital lease obligations(2)
 1,400
 202
 372
 313
 215
 87
 211
Operating leases(3)
 146
 14
 26
 25
 20
 17
 44
Total $16,235
 $548
 $1,437
 $1,867
 $2,340
 $1,666
 $8,377
 Settlement Option   If Settled With Minimum Cash Required If Settled Entirely With Cash
 Principal Amount Amount in Excess of Principal Underlying Shares Cash Remainder in Shares 
2032C NotesCash and/or shares Cash and/or shares 18
 $—
 18
 $849
2032D NotesCash and/or shares Cash and/or shares 18
 —
 18
 845
2033E Notes(1)
Cash Cash and/or shares 5
 197
 1
 261
2033F Notes(1)
Cash Cash and/or shares 27
 393
 18
 1,272
2043G NotesCash and/or shares Cash and/or shares 35
 —
 35
 1,674
   
 103
 $590
 90
 $4,901
(1) 
Amounts as of March 1, 2018 include MMJ Creditor Installment Payments, convertible notes,$178 million and other notes. Any future redemptions, repurchases, or conversions of debt could impact$129 million for the amountsettlement obligation (principal and timing of our cash payments.
(2)
Amounts include principal and interest.
(3)
Amounts include contractually obligated minimum lease payments for operating leases having an initial noncancelable termamounts in excess of one year.principal) of 2033E Notes and 2033F Notes, respectively, that had been converted but not settled. The settlement obligation of these notes will settle in cash in the third quarter of 2018.

The expected timingContractual Obligations

As of payment amountsMarch 1, 2018, the contractual obligations of principal and interest of all our notes payable was $9.80 billion, of which $610 million is due in the obligations discussed aboveremainder of 2018, $3.30 billion is estimated based on current information. Timingdue in 2019 and actual amounts paid may differ depending on the timing of receipt of goods or services, market prices,2020, $2.77 billion is due in 2021 and 2022, and $3.12 billion is due in 2023 and thereafter. There have been no other material changes to agreed-upon amounts, or timing of certain events for some obligations. Theour contractual obligations as described in "Part I – Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the table above includeyear ended August 31, 2017, other than our purchase commitments for the current portionsacquisition of the related long-term obligations. All other current liabilities are excluded.property, plant, and equipment as described above.


Recently AdoptedCritical Accounting StandardsEstimates

See "Item 1.For a discussion of our critical accounting estimates, see "Part I - Item 7. Management's Discussion and Analysis of Financial Statements – NotesCondition and Results of Operations" of our Annual Report on Form 10-K for the year ended August 31, 2017. Except for the critical accounting estimates associated with our income taxes as discussed below, there have been no material changes to Consolidated Financial Statements – Recently Adopted Accounting Standards."our critical accounting estimates since our Annual Report on Form 10-K for the year ended August 31, 2017.

Income taxes: We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of our performance and other relevant factors. Realization of deferred tax assets is dependent on our ability to generate future taxable income. In recent periods, our results of operations have benefitted from increases in the amount of deferred taxes we expect to realize, primarily from the levels of capital spending and increases in the amount of taxable income we expect to realize in Japan and Taiwan. Our income tax provision or benefit is dependent, in part, on our ability to forecast future taxable income in these and other jurisdictions. Such forecasts are inherently difficult and involve significant judgments including, among others, projecting future average selling prices and sales volumes, manufacturing and overhead costs, levels of capital spending, and other factors that significantly impact our analyses of the amount of net deferred tax assets that are more likely than not to be realized.

In connection with the Tax Act, we recognized a provision for income taxes of $131 million in the second quarter of 2018, of which $133 million was related to the impact of remeasuring our deferred tax assets and liabilities to reflect the lower tax rate and $2 million of income tax benefit was considered a provisional estimate. The provisional estimate included $1.34 billion associated with the Repatriation Tax, essentially offset by a benefit of $1.34 billion for the release of the valuation allowance on the net deferred tax assets of our U.S. operations. Based on the information available, we recorded a provisional amount;


however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax as well as the impacts on the valuation allowance release as a result of the Tax Act.


Recently Issued Accounting Standards

See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards."




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are affected by changes in currency exchange and interest rates. See discussion regarding certain interest rate risks below. For further discussion about market risk and sensitivity analysis related to changes in currency exchange rates, see "Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended August 31, 2017.

Interest Rate Risk

We are exposed to interest rate risk related to our indebtedness and our investment portfolio. The majorityAs of March 1, 2018 and August 31, 2017, the carrying value of our indebtedness is atdebt with fixed interest rates. Asrates was $4.0 billion and $5.7 billion, respectively, and as a result, the fair value of our debt fluctuates based onwith changes in market interest rates. We estimate that, as of March 2, 20171, 2018 and September 1, 2016,August 31, 2017, a decrease in market interest rates of 1% would increase the fair value of our notes payablefixed-rate debt by approximately $396$130 million and $420$273 million, respectively. A 1% increase in the interest rates of our variable-rate debt would result in an increase in interest expense of approximately $40 million per year.

As of March 2, 2017 and September 1, 2016, we held fixed-rate debt investment securities of $1.19 billion and $1.11 billion, respectively, which were subject to interest rate risk. We estimate that a 0.5% increase in market interest rates would decrease the fair value of these instruments by approximately $3 million as of March 2, 2017 and $1 million as of September 1, 2016.

Foreign Currency Exchange Rate Risk

The information in this section should be read in conjunction with the information related to changes in the currency exchange rates in "Part II. Other Information – Item 1A. Risk Factors." Changes in currency exchange rates could materially adversely affect our results of operations or financial condition.

The functional currency for all of our operations is the U.S. dollar. The substantial majority of our sales are transacted in the U.S. dollar; however, significant amounts of our debt financing, operating expenditures, and capital purchases are incurred in or exposed to other currencies, primarily the euro, New Taiwan dollar, Singapore dollar, and yen. We have established currency risk management programs for our foreign currency balances in monetary assets and liabilities to hedge against fluctuations in the fair value and volatility of future cash flows caused by changes in currency exchange rates. We generally utilize currency forward contracts in these hedging programs, which reduce, but do not entirely eliminate, the impact of currency exchange rate movements. We do not use derivative financial instruments for trading or speculative purposes.

Based on our foreign currency balances of monetary assets and liabilities, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $437 million as of March 2, 2017 and $241 million as of September 1, 2016. We hedge our exposure to changes in currency exchange rates from our monetary assets and liabilities by utilizing a rolling hedge strategy for our primary currency exposures with currency forward contracts that generally mature within 8 months. In addition, we have entered into foreign currency forward contracts that mature in December 2017 and December 2018 to hedge our currency exchange rate risk on certain debt. The effectiveness of our hedges is dependent, among other factors, upon our ability to accurately forecast our monetary assets and liabilities. To hedge the exposure of changes in cash flows from changes in currency exchange rates for certain capital expenditures, we utilize currency forward contracts that generally mature within 12 months.(See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Derivative Instruments.")


ITEM 4. CONTROLS AND PROCEDURES

An 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 and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by 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 to be 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 Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decision regarding disclosure.



On December 6, 2016, we acquired the 67% interest in Inotera not owned by us and began consolidating Inotera. As a result, we are currently integrating Inotera's operations into our overall internal control over financial reporting. Under the guidelines established by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company, and accordingly, we expect to exclude Inotera from the assessment of internal control over financial reporting during that time.

During the quarterly period covered by this report,second quarter of 2018, 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 financial reporting.


PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


For a discussion of legal proceedings, see "Part I – Item 3. Legal Proceedings" of our Annual Report on Form 10-K for 2016the year ended August 31, 2017 and "Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies" and "Item 1A. Risk Factors" herein.


ITEM 1A. RISK FACTORS

In addition to the factors discussed elsewhere in this Form 10-Q, the following are important factors, the order of which is not necessarily indicative of the level of risk that each poses to us, which could cause actual results or events to differ materially from those contained in any forward-looking statements made by us. The order of these factors is not necessarily indicative of the level of risk that each poses to us. Our operations could also be affected by other factors that are presently unknown to us or not considered significant. TheAny of the factors below could materially adversely affecthave a material adverse effect on our business, financial condition, results of operations, andfinancial condition, or stock price.



We have experienced dramatic declinesvolatility in average selling prices for our semiconductor memory and storage products which havemay adversely affectedaffect our business.

If average selling prices for our memory products decrease faster than we can decrease per gigabit costs, our business, results of operations, or financial condition could be materially adversely affected. We have experienced significant decreasesvolatility in our average selling prices, per gigabit in previous yearsincluding dramatic declines, as noted in the table below, and may continue to experience such decreasesvolatility in the future. In some prior periods, average selling prices for our memory products have been below our manufacturing costs and we may experience such circumstances in the future.

Decreases in average selling prices for our products that decline faster than our costs could have a material adverse effect on our business, results of operations, or financial condition.
 DRAM Trade Non-VolatileDRAM Trade NAND
       
 (percentage change in average selling prices)(percentage change in average selling prices)
2017 from 201619 % (9)%
2016 from 2015 (35)% (20)%(35)% (20)%
2015 from 2014 (11)% (17)%(11)% (17)%
2014 from 2013 6 % (23)%6 % (23)%
2013 from 2012 (11)% (18)%(11)% (18)%
2012 from 2011 (45)% (55)%

We may be unable to maintain or improve gross margins.

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, including, but not limited to, process line-width, additional 3D memory layers, additional bits per cell (i.e., cell levels), architecture, number of mask layers, number of fabrication steps, and yield. In future periods, we may be unable to reduce our per gigabit manufacturing costs at sufficient levels to maintain or improve gross margins. Factors that may limit our ability to reduce costs include, but are not limited to, strategic product diversification decisions affecting product mix, the increasing complexity of manufacturing processes, difficulties in transitioning to smaller line-width process technologies, 3D memory layers, NAND cell levels, process complexity including number of mask layers and fabrication steps, manufacturing yield, technological barriers, changes in process technologies, and new products that may require relatively larger die sizes. Per gigabit manufacturing costs may also be affected by the relativelya broader product portfolio, which may have smaller production quantities and shorter product lifecycleslifecycles. Our inability to maintain or improve gross margins could have a material adverse effect on our business, results of certain specialty memory products.


operations, or financial condition.

The semiconductor memory industry isand storage markets are highly competitive.

We face intense competition in the semiconductor memory marketand storage markets from a number of companies, including Intel; Samsung Electronics Co., Ltd.; SK Hynix Inc.; Toshiba Corporation; and Western Digital Corporation. Some of our competitors are large corporations or conglomerates that may have greater resources to invest in technology, capitalize on growth opportunities, and withstand downturns in the semiconductor markets in which we compete. Consolidation of industry competitors could put us at a competitive disadvantage. In addition, some governments, such as China, have provided, and may continue to provide, significant financial assistance to some of our competitors or to new entrants. Our competitors generally seek to increase silicon capacity, improve yields, and reduce die size and minimize mask levels in their product designs resultingwhich may result in significant increases in the worldwide supply of semiconductor memory and downward pressure on prices. Increases in worldwide supply of semiconductor memory and storage also result from semiconductor memory fabfabrication capacity expansions, either by way of new facilities, increased capacity utilization, or reallocation of other semiconductor production to semiconductor memory and storage production. Our competitors may increase capital expenditures resulting in future increases in worldwide supply. We and some of our competitors have plans to ramp, or are constructing or ramping, production at new fabrication facilities. Increases in worldwide supply of semiconductor memory and storage, if not accompanied by commensurate increases in demand, would lead to further declines in average selling prices for our products and would materially adversely affect our business, results of operations, or financial condition. If competitors are more successful at developing or implementing new product or process technology, 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.

Debt obligations could adversely affect our financial condition.

In recent periods, our debt levels have increased due to the capital intensive nature of our business, business acquisitions, and restructuring of our capital structure. As of March 2, 2017,1, 2018, we had debt with a carrying value of $12.43$9.32 billion. In addition, the conversion value in excess of principal of our convertible notes as of March 1, 2018 was $3.18 billion. In the first six months of 2018, and full years of 2017 and 2016, we paid $2.93 billion and 4 million shares of our treasury stock as non-cash settlement, $1.63 billion, and $94 million, respectively, to repurchase and settle notes with principal amounts of $2.42 billion, $1.55 billion, and $57 million,


respectively. As of March 2, 2017,1, 2018, we also had an undrawn revolving credit facilities availablefacility that provided for additional borrowings of up to $1.03 billion, and is subject to certain conditions, including outstanding balances of$750 million based on eligible receivables. Events and circumstances may occur which would cause us to not be able to satisfy these applicable draw-down conditions and utilize these facilities.this revolving credit facility. We have incurred in the past, and expect to incur in the future, debt to finance our capital investments, business acquisitions, and restructuring of our capital structure.

Our debt obligations could adversely impact us. For example, these obligations could:

require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of cash flow available to fund working capital, capital expenditures, acquisitions, R&D expenditures, and other business activities;
require us to use cash and/or issue shares of our common stock to settle any conversion obligations of our convertible notes;
result in certain of our debt instruments being accelerated to be immediately due and payable or being deemed to be in default if certain terms of default are triggered, under cross-defaultsuch as applicable cross payment default and/or cross-acceleration provisions;
result in all obligations owing under the 2021 MSTW Term Loan being accelerated to be immediately due and payable if our MSTW subsidiary fails to comply with certain covenants, including financial covenants;
increase the interest rate under the 2021 MSTW Term Loan if we or MSTW fails to maintain certain financial covenants;
adversely impact our credit rating, which could increase future borrowing costs;
limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D, and other general corporate requirements;
restrict our ability to incur specified indebtedness, create or incur certain liens, and enter into sale-leaseback financing transactions;
increase our vulnerability to adverse economic and semiconductor memory and storage industry conditions;
increase our exposure to interest rate risk from variable rate indebtedness;
continue to dilute our earnings per share as a result of the conversion provisions in our convertible notes; and
require us to continue to pay cash amounts substantially in excess of the principal amounts upon settlement of our convertible notes to minimize dilution of our earnings per share.

Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash flows in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in an amountamounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. If we are unable to generate sufficient cash flowflows to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we wereare unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, which could have a material adverse effect on our business, results of operations, or financial condition.



We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our operations, make scheduled debt payments, and make adequate capital investments.

Our cash flows from operations depend primarily on the volume of semiconductor memory and storage products sold, average selling prices, and manufacturing costs. To develop new product and process technologies,technology, support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital equipment, facilities, R&D, and product and process technology. We estimate that net cash expenditures in 20172018 for property, plant, and equipment will be approximately $4.8$7.5 billion to $5.2 billion,plus or minus 5 percent, which reflects the offset of amounts we expect to be funded by our partners. Investments in capital expenditures, for the first six months of 2017, offset by amounts funded by our partners, were $2.35 billion.$2.11 billion in the second quarter of 2018. As of March 2, 2017,1, 2018, we had cash and marketable investments of $4.49$8.56 billion. As of March 2, 2017, $849 million1, 2018, $3.18 billion of cash and equivalents and short-termmarketable investments, including substantially all of the cash held by the MMJ Group, MSTW, and Inotera,MTTW, was held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested andreinvested. As a result of the Tax Act, substantially all of our accumulated foreign earnings earned before December 31, 2017 were treated as taxable; however, the repatriation of all or a portion of these fundsearnings would continue to be subject to foreign and state tax upon repatriation to the U.S. would subject these funds to U.S. federal income taxes.United States. In addition, cash of $94$317 million held by IMFT was generally not available to finance our other operations.

The 2021 MSTW Term Loan contains covenants that limit or restrict MSTW's ability to create liens in or dispose of collateral securing obligations under the 2021 MSTW Term Loan, mergers involving MSTW and/or Inotera,MTTW, loans or


guarantees to third parties by InoteraMTTW and/or MSTW, and MSTW's and/or Inotera'sMTTW's distribution of cash dividends. As a result, the assets of MSTW and/or InoteraMTTW are not available for use by us in our other operations.

As a result of the Japan Proceedings,corporate reorganization proceedings of MMJ initiated in 2012, and for so long as such proceedings are continuing, the MMJ Companies areis prohibited from paying dividends, including any cash dividends, to us and such proceedings require that excess earnings be used in their businessesMMJ's business or to fund the MMJ Companies' installmentcreditor payments. In addition, pursuant to an order of the Japan Court, the MMJ Companies cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court and may, under certain circumstances, be subject to approval of the legal trustees and Japan Court.trustee. As a result, the assets of the MMJ Companies are not available for use by us in our other operations. Furthermore, certain uses of the assets of the MMJ, Group, including investments in certain capital expenditures of MMJ and MMT or further investments in MMT, may require consent of MMJ's trustees and/or the Japan Court.

In the past we have utilized external sources of financing when needed. As a result of our debt levels, expected debt amortization, and general economic conditions, it may be difficult for us to obtain financing on terms acceptable to us. There can be no assurance that we will be able to generate sufficient cash flows, use cash held by MMJ to fund its capital expenditures, access capital markets or find other sources of financing to fund our operations, make debt payments, and make adequate capital investments to remain competitive in terms of technology development and cost efficiency. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations, or financial conditions.

Our acquisition of the remaining shares of Inotera involves numerous risks.

On December 6, 2016, we acquired the remaining 67% interest in Inotera (the "Inotera Acquisition"). The cash paid for the Inotera Acquisition was funded with 80 billion New Taiwan dollars (equivalent to $2.5 billion) of proceeds from the 2021 MSTW Term Loan, $986 million of proceeds from the sale of shares of our common stock to Nanya, and cash on hand.
In addition to the acquisition risks described elsewhere, the acquisition is expected to involve the following significant risks:
we may be unable to realize the anticipated financial benefits of the acquisition;
increased exposure to the DRAM market, which has historically experienced significant declines in pricing;
increased leverage resulting from the transaction;
higher capital expenditures in future periods;
increased exposure to operating costs denominated in New Taiwan dollars;
changed relationship with Nanya and its affiliated companies;
effectiveness of internal controls and disclosure controls and procedures;
effectiveness of environmental, health and safety, anti-corruption, human resource, or other policies or practices;
integration issues with Inotera's manufacturing operations in Taiwan; and
integration of business systems and processes.

Our acquisition of the remaining shares of Inotera is inherently risky and may materially adversely affect our business, results of operations, or financial condition. (See "Part I Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Acquisition of Inotera.")



Our future success depends on our ability to develop and produce competitive new memory and storage technologies.

Our key semiconductor memory technologies of DRAM and NAND Flashstorage products and technologies face technological barriers to continue to meet long-term customer needs. These barriers include potential limitations on the ability to shrinkstacking additional 3D memory layers, increasing bits per cell (i.e., cell levels), shrinking products in order to reduce costs, meetmeeting higher density requirements, and improveimproving power consumption and reliability. To meet these requirements, we expect that new memory technologies will be developed by the semiconductor memory and storage industry. Our competitors are working to develop new memory and storage technologies that may offer performance and cost advantages to our existing memory technologies and render existing technologies obsolete. Accordingly, our future success may depend on our ability to develop and produce viable and competitive new memory and storage technologies. There can be no assurance of the following:

that we will be successful in developing competitive new semiconductor memory and storage technologies;
that we will be able to cost-effectively manufacture new products;
that we will be able to successfully market these technologies; and
that margins generated from sales of these products will allow us to recover costs of development efforts.

In 2015, we announced the development of newWe develop and produce advanced memory technologies, including 3D XPoint technology, which is an entirelymemory, a new class of non-volatile memory.technology. There is no assurance that our efforts to develop and market this new product technologytechnologies will be successful. If ourUnsuccessful efforts to develop new semiconductor memory and storage technologies are unsuccessful,could have a material adverse effect on our business, results of operations, or financial condition may be materially adversely affected.condition.

New product development may be unsuccessful.

We are developing new products, including system-level memory and storage products and solutions, which complement our traditional memory products or leverage their underlying design or process technology. We have made significant investments in product and process technologiestechnology and anticipate expending significant resources for new semiconductor product and system-level solution development over the next several years. The process to develop DRAM, NAND Flash, and certain specialty memorynew products requires us to demonstrate advanced functionality and performance, many timesoften well in advance of a planned ramp of production, in order to secure design wins with our customers. There can be no assurance of the following:

•that our product development efforts will be successful;
•that we will be able to cost-effectively manufacture new products;
•that we will be able to successfully market these products;
•that we will be able to qualifyestablish or maintain key relationships with customers with specific chip set or design requirements;
that we will be able to introduce new products into the market and qualify them with our customers on a timely basis; or
•that margins generated from sales of these products will allow us to recover costs of development efforts.

If ourOur unsuccessful efforts to develop new products and solutions could have a material adverse effect on our business, results of operations, or financial condition.



Our joint ventures and strategic relationships involve numerous risks.

We have entered into strategic relationships, including our IMFT joint venture with Intel, to manufacture products and develop new manufacturing process technologies and products. These joint ventures and strategic relationships are subject to various risks that could adversely affect the value of our investments and our results of operations. These risks include the following:

our interests could diverge from our partners' interests or we may not be able to agree with our partners on ongoing manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint ventures;
our joint venture partners' products may compete with our products;
we may experience difficulties in transferring technology to joint ventures;
we may experience difficulties and delays in ramping production at joint ventures;
our control over the operations of our joint ventures is limited;
due to financial constraints, our joint venture partners may be unable to meet their commitments to us or our joint ventures and may pose credit risks for our transactions with them;
due to differing business models or long-term business goals, we and our partners may not participate to the same extent on funding capital investments in our joint ventures;
cash flows may be inadequate to fund increased capital requirements of our joint ventures;
we may experience difficulties or delays in collecting amounts due to us from our joint ventures and partners;
the terms of our partnering arrangements may turn out to be unfavorable; and
changes in tax, legal, or regulatory requirements may necessitate changes in the agreements with our partners.

Our joint ventures and strategic relationships, if unsuccessful, could have a material adverse effect on our business, results of operations, or financial condition.

A significant concentration of our net sales is to a select number of customers.

In each of the last three years, approximately one-half of our total net sales were to our top ten customers. A disruption in our relationship with any of these customers could adversely affect our business. We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. In addition, any consolidation of our customers could reduce the number of customers to whom our products could be sold. Our inability to meet our customers' requirements or to qualify our products with them could adversely impact our sales. The loss of one or more of our major customers or any significant reduction in orders from, or a shift in product mix by, these customers could have a material adverse effect on our business, results of operations, or financial condition.

Increases in sales of system solutions may increase our dependency upon specific customers and our costs to develop and qualify our system solutions.

Our development of system-level memory and storage products is dependent, in part, upon successfully identifying and meeting our customers' specifications of those products. Developing and manufacturing system-level products with specifications unique to a customer increases our reliance upon that customer for purchasing our products in sufficient volume, quantity, and in a timely manner. If we fail to identify or develop products on a timely basis, or at all, that comply with our customers' specifications or achieve design wins with our customers, we may experience a significant adverse impact on our sales and margins. Even if our products meet customer specifications, our sales of system-level solutions are dependent upon our customers choosing our products over those of our competitors and purchasing our products at sufficient volumes and prices. Our competitors' products may be less costly, provide better performance, or include additional features when compared to our products. Our long-term ability to sell system-level memory and storage products is reliant upon our customer's ability to create, market, and sell their products containing our system-level solutions at sufficient volumes and prices in a timely manner. If we fail to successfully develop and market system-level products, our business, results of operations, or financial condition may be materially adversely affected.

Even if we are successful in selling system-level solutions to our customers in sufficient volume, we may be unable to generate sufficient profit if our per-unit manufacturing costs exceed our per-unit selling prices. Manufacturing system-level solutions to customer specifications requires a longer development cycle, as compared to discrete products, to design, test, and qualify, which may increase our costs. Additionally, some of our system solutions are increasingly dependent on sophisticated firmware that may require significant customization to meet customer specifications, which increases our costs and time to market. Additionally, we may update our firmware or develop new firmware as a result of new product introductions or changes


in customer specifications and/or industry standards, which increases our costs. System complexities and extended warranties for system-level products could also increase our warranty costs. Our failure to cost-effectively manufacture system-level solutions and/or firmware in a timely manner, may result in reduced demand for our system-level products, and could have a material adverse effect on our business, results of operations, or financial condition.

Products that fail to meet specifications, are defective, or that are otherwise incompatible with end uses could impose significant costs on us.

Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise materially adversely affect our business, results of operations, or financial condition. From time to time, we experience problems with nonconforming, defective, or incompatible products after we have shipped such products. In recent periods, we have further diversified and expanded our product offerings, which could potentially increase the chance that one or more of our products could fail to meet specifications in a particular application. As a result, of these problems, we could be adversely affected in several ways, including the following:

we may be required or agree to compensate customers for costs incurred or damages caused by defective or incompatible productproducts and to replace products;
we could incur a decrease in revenue or adjustment to pricing commensurate with the reimbursement of such costs or alleged damages; and
we may encounter adverse publicity, which could cause a decrease in sales of our products.products or harm our relationships with existing or potential customers.


Any of the foregoing items could have a material adverse effect on our business, results of operations, or financial condition.

A determinationWe may be unable to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property.

We maintain a system of controls over our intellectual property, including U.S. and foreign patents, trademarks, copyrights, trade secret laws, licensing arrangements, confidentiality procedures, non-disclosure agreements with employees, consultants, and vendors, and a general system of internal controls. Despite our system of controls over our intellectual property, it may be possible for our current or future competitors to obtain, copy, use, or disclose, illegally or otherwise, our product and process technology. The laws of some foreign countries may not protect our intellectual property to the same degree as do U.S. laws and our confidentiality, non-disclosure, and non-compete agreements may be unenforceable or difficult and costly to enforce.

Additionally, our ability to maintain and develop intellectual property is dependent upon our ability to attract, develop, and retain highly skilled employees. Global competition for such skilled employees in our industry is intense. Due to the volatile nature of our industry and our operating results, a decline in our operating results and/or stock price may adversely affect our ability to retain key employees whose compensation is dependent, in part, upon the market price of our common stock, achieving certain performance metrics, levels of company profitability, or other financial or company-wide performance. If our competitors or future entrants into our industry are successful in hiring our employees, they may directly benefit from the knowledge these employees gained while they were under our employment.

Our inability to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property could have a material adverse effect on our business, results of operations, or financial condition.

Claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others, or entering into afailure to obtain or renew license agreementagreements covering such intellectual property, could materially adversely affect our business, results of operations, or financial condition.

As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon, misappropriate, misuse, or otherwise violate their intellectual property rights. We are unable to predict the outcome of these assertions of infringement made against us. A determination that our productsAny of these types of claims, regardless of the merits, could subject us to significant costs to defend or manufacturing processes infringe the intellectual property rightsresolve such claims and may consume a substantial portion of others,management's time and attention. As a result of these claims, we may be required to:

pay significant monetary damages, fines, royalties, or entering apenalties;
enter into license agreementor settlement agreements covering such intellectual property could result in significant liability and/or require us to rights;


make material changes to or redesign our products and/or manufacturing processes. Anyprocesses; and/or
cease manufacturing, having made, selling, offering for sale, importing, marketing, or using products and/or manufacturing processes in certain jurisdictions.

We may not be able to take any of the actions described above on commercially reasonable terms and any of the foregoing results could have a material adverse effect on our business, results of operations, or financial condition. (See also "Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies.")

We have a number of intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional patent licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable terms.to us. The failure to obtain or renew licenses as necessary could have a material adverse effect on our business, results of operations, or financial condition.

If our manufacturing process is disrupted, our business, results of operations, or financial condition could be materially adversely affected.

We manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. We maintain operations and continuously implement new product and process technology at our manufacturing operations, which are widely dispersed in multiple locations in several countries including the United States, Singapore, Taiwan, Japan, Malaysia, and China. Additionally, our control over operations at IMFT is limited by our agreements with Intel. From time to time, we have experienced disruptions in our manufacturing process as a result of power outages, improperly functioning equipment, equipment failures, earthquakes, or other environmental events. If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected or we may be unable to meet our customers' requirements and they may purchase products from other suppliers. This could result in a significant increase in manufacturing costs, loss of revenues, or damage to customer relationships, any of which could have a material adverse effect on our business, results of operations, or financial condition.

The acquisition of our ownership interest in Inotera from Qimonda has been challenged by the administrator of the insolvency proceedings for Qimonda.

On January 20, 2011, Dr. Michael Jaffé, administrator for QimondaQimonda's insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary ("Micron B.V."), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda's shares of Inotera Memories, Inc. (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares as of March 1, 2018, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the Courtcourt issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera sharesShares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on such sharesthe Inotera Shares and all other benefits; (4) denying Qimonda'sQimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by itMicron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by itMicron B.V. from ownership of the Inotera Shares. The interlocutory judgments have no immediate, enforceable effect on us, and, accordingly, we expect to be able to continue to operate with full control of the Inotera Shares subject to further developments in the case. We have filed a notice of appeal, and the parties have submitted briefs to the appeals court.

We are unable to predict the outcome of the matter and, therefore, cannot estimate the range of possible loss. The final resolution of this lawsuit could result in the loss of the Inotera Shares or monetary damages, unspecified damages based on the


benefits derived by Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operation, or financial condition.

Our joint ventures and strategic relationships involve numerous risks.

We have entered into strategic relationships, including our IMFT joint venture with Intel, to manufacture products and develop new manufacturing process technologies and products. These joint ventures and strategic relationships are subject to various risks that could adversely affect the value of our investments and our results of operations. These risks include the following:

our interests could diverge from our partners or we may not be able to agree with partners on ongoing manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint venture;
our joint venture partners' products may compete with our products;


we may experience difficulties in transferring technology to joint ventures;
we may experience difficulties and delays in ramping production at joint ventures;
our control over the operations of our joint ventures is limited;
we may recognize losses from our equity method investments;
due to financial constraints, our joint venture partners may be unable to meet their commitments to us or our joint ventures and may pose credit risks for our transactions with them;
due to differing business models or long-term business goals, we and our partners may not participate to the same extent on funding capital investments in our joint ventures;
cash flows may be inadequate to fund increased capital requirements;
we may experience difficulties or delays in collecting amounts due to us from our joint ventures and partners;
the terms of our partnering arrangements may turn out to be unfavorable; and
changes in tax, legal, or regulatory requirements may necessitate changes in the agreements with our partners.

If our joint ventures and strategic relationships are unsuccessful, our business, results of operations, or financial condition may be materially adversely affected.

If our manufacturing process is disrupted, our business, results of operations, or financial condition could be materially adversely affected.

We manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. We maintain operations and continuously implement new product and process technology at our manufacturing operations which are widely dispersed in multiple locations in several countries including the U.S., Singapore, Taiwan, Japan, Malaysia, and China. Additionally, our control over operations at IMFT and Tera Probe is limited by our agreements with our partners. From time to time, we have experienced disruptions in our manufacturing process as a result of power outages, improperly functioning equipment, equipment failures, earthquakes, or other environmental events. If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected or we may be unable to meet our customers' requirements and they may purchase products from other suppliers. This could result in a significant increase in manufacturing costs, loss of revenues, or damage to customer relationships, any of which could materially adversely affect our business, results of operations, or financial condition.

We may incur additional restructurerestructuring charges in future periods.

In the fourth quarter ofseparate transactions in 2017, we sold our assembly and test facility located in Akita, Japan and our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets related to our Lexar brand. In 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities (the "2016 Restructuring Plan").priorities. The 2016 Restructuring Plan includesplan included the elimination of certain projects and programs, the permanent closure of a number of open headcount requisitions, workforce reductions in certain areas of theour business, and other non-headcount related spending reductions. In connection with the plan,As a result of these and other actions, we incurred charges of $33$18 million, in the first six months of$67 million, and $3 million for 2017, and $58 million in the fourth quarter of 2016, and do not expect to incur additional material charges. As of March 2, 2017 and September 1, 2016, we had accrued liabilities of $9 million and $24 million, respectively, related to the 2016 Restructuring Plan.2015, respectively.

We may not realize the expected savings or other benefits from our restructure plansactivities and may also incur additional restructure charges or other losses in future periods associated with other initiatives in future periods.initiatives. In connection with thoseany restructure initiatives, we could incur restructure charges, loss of production output, loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products, which could materially adversely affect our business, results of operations, or financial condition.



The operations of the MMJ Companies are subject to continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings.

Because the plans of reorganization of the MMJ Companies provide for ongoing payments to creditors following the closing of our acquisition of MMJ, the Japan Proceedings are continuing, and the MMJ Companies remain subject to the oversight of the Japan Court and of the trustees (including a trustee designated by us, who we refer to as the business trustee, and a trustee designated by the Japan Court, who we refer to as the legal trustee), pending completion of the Japan Proceedings. The Japan Proceedings and oversight of the Japan Court are expected to continue until the final creditor payment is made under the MMJ Companies' plans of reorganization, which is scheduled to occur in December 2019, but may occur on a later date to the extent any claims of creditors remain unfixed on the final scheduled installment payment date. Although we may be able to petition the court to terminate the Japan Proceedings once two-thirds of all payments under the plans of reorganization are made, there can be no assurance that the Japan Court will grant any such petition.

During the pendency of the Japan Proceedings, the MMJ Companies are obligated to provide periodic financial reports to the Japan Court and may be required to obtain the consent of the Japan Court prior to taking a number of significant actions relating to their businesses, including transferring or disposing of, or acquiring, certain material assets, incurring or guaranteeing material indebtedness, settling disputes, or entering into certain material agreements. The consent of the legal trustee may also be required for matters that would likely have a material impactadverse effect on the operations or assets of the MMJ Companies and their subsidiaries or for transfers of material assets, to the extent the matters or transfers would reasonably be expected to materially and adversely affect execution of the plans of reorganization of the MMJ Companies. Accordingly, during the pendency of the Japan Proceedings, our ability to effectively operate the MMJ Companies as part of our global operations or to cause the MMJ Companies to take certain actions that we deem advisable for their businesses could be adversely affected if the Japan Court or the legal trustee is unwilling to consent to various actions that we may wish to take with respect to the MMJ Companies.

Changes in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.

Across our global operations, significant transactions and balances are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Singapore dollar, New Taiwan dollar, and yen. We recorded net losses from changes in currency exchange rates of $40 million for the first six months of 2017, $24 million for 2016, and $27 million for 2015. Based on our foreign currency balances of monetary assets and liabilities as of March 2, 2017, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $437 million. Although we hedge our primary exposures to changes in currency exchange rates from our monetary assets and liabilities by hedging our primary currency exposures with currency forward contracts, the effectiveness of these hedges is dependent upon our ability to accurately forecast our monetary assets and liabilities. In addition, a significant portion of our manufacturing costs are denominated in foreign currencies. Exchange rates for some of these currencies against the U.S. dollar, particularly the yen, have been volatile in recent periods. If these currencies strengthen against the U.S. dollar, our manufacturing costs could significantly increase. In the event that exchange rates for the U.S. dollar adversely change against our foreign currency exposures, our results of operations or financial condition may be adversely affected. In addition, in connection with the Inotera Acquisition, our exposure to changes in foreign currency exchange rates could increase if not offset by corresponding hedges.

We may make future acquisitions and/or alliances, which involve numerous risks.

Acquisitions and the formation or operation of alliances, such as joint ventures and other partnering arrangements, involve numerous risks including the following:

integrating the operations, technologies, and products of acquired or newly formed entities into our operations;
increasing capital expenditures to upgrade and maintain facilities;
increased debt levels;
the assumption of unknown or underestimated liabilities;
the use of cash to finance a transaction, which may reduce the availability of cash to fund working capital, capital expenditures, R&D expenditures, and other business activities;
diverting management's attention from daily operations;
managing larger or more complex operations and facilities and employees in separate and diverse geographic areas;
hiring and retaining key employees;
requirements imposed by governmental authorities in connection with the regulatory review of a transaction, which may include, among other things, divestitures or restrictions on the conduct of our business or the acquired business;


inability to realize synergies or other expected benefits;
failure to maintain customer, vendor, and other relationships;
inadequacy or ineffectiveness of an acquired company's internal financial controls, disclosure controls and procedures, and/or environmental, health and safety, anti-corruption, human resource, or other policies or practices; and
impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements, or worse-than-expected performance of the acquired business.

In previous years, supply of memory products has significantly exceeded customer demand, resulting in significant declines in average selling prices for DRAM, NAND Flash, and NOR Flash products. Resulting operating losses have led to the deterioration in the financial condition of a number of industry participants, including the liquidation of Qimonda and the 2012 bankruptcy filing by Elpida (now known as MMJ). These types of proceedings often lead to court-directed processes involving the sale of related businesses or assets. We believe the global memory industry is experiencing a period of consolidation as a result of these market conditions and other factors, and we engage from time to time in discussions regarding potential acquisitions and similar opportunities arising out of these industry conditions. To the extent we are successful in completing any such transactions, we could be subject to some or all of the risks described above, including the risks pertaining to funding, assumption of liabilities, integration challenges, and increases in debt that may accompany such transactions. Acquisitions of, or alliances with, high-technology companies are inherently risky and may not be successful and may materially adversely affect our business, results of operations, or financial condition.

Breaches of our security systems could expose us to losses.

We maintain a system of controls over the physical security of our facilities. We also manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, we process, store, and transmit large amounts of data relating to our customers and employees, including sensitive personal information. Unauthorized persons or employees may gain access to our facilities or network systems to steal trade secrets or other proprietary information, compromise confidential information, create system disruptions, or cause shutdowns. These parties may also be able to develop and deploy viruses, worms, and other malicious software programs that disrupt our operations and create security vulnerabilities. Breaches of our physical security and attacks on our network systems could result in significant losses and damage our reputation with customers and suppliers and couldmay expose us to litigation if the confidential information of our customers, suppliers, or employees is compromised.compromised, which could have a material adverse effect on our business, results of operations, or financial condition.

Changes in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.

Across our global operations, significant transactions and balances are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Singapore dollar, New Taiwan dollar, and yen. We recorded net losses from changes in currency exchange rates of $36 million for the first six months of 2018, $74 million for 2017, and $24 million for 2016. Based on our foreign currency balances of monetary assets and liabilities, as of March 1, 2018, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $414 million. Although we hedge our primary exposures to changes in currency exchange rates from our monetary assets and liabilities, the effectiveness of these hedges is dependent upon our ability to accurately forecast our monetary assets and liabilities. In addition, a significant portion of our manufacturing costs are denominated in foreign currencies. Exchange rates for some of these currencies against the U.S. dollar, particularly the yen, have been volatile in recent periods. If these currencies strengthen against the U.S. dollar, our manufacturing costs could significantly increase. Exchange rates for the U.S. dollar that adversely change against our foreign currency exposures could have a material adverse effect on our business, results of operations, or financial condition.

We may make future acquisitions and/or alliances, which involve numerous risks.

Acquisitions and the formation or operation of alliances, such as joint ventures and other partnering arrangements, involve numerous risks, including the following:

integrating the operations, technologies, and products of acquired or newly formed entities into our operations;
increasing capital expenditures to upgrade and maintain facilities;
increased debt levels;
the assumption of unknown or underestimated liabilities;
the use of cash to finance a transaction, which may reduce the availability of cash to fund working capital, capital expenditures, R&D expenditures, and other business activities;
diverting management's attention from daily operations;


managing larger or more complex operations and facilities and employees in separate and diverse geographic areas;
hiring and retaining key employees;
requirements imposed by governmental authorities in connection with the regulatory review of a transaction, which may include, among other things, divestitures or restrictions on the conduct of our business or the acquired business;
inability to realize synergies or other expected benefits;
failure to maintain customer, vendor, and other relationships;
inadequacy or ineffectiveness of an acquired company's internal financial controls, disclosure controls and procedures, and/or environmental, health and safety, anti-corruption, human resource, or other policies or practices; and
impairment of acquired intangible assets, goodwill, or other assets as a result of changing business conditions, technological advancements, or worse-than-expected performance of the acquired business.

In previous years, supply of memory and storage products has significantly exceeded customer demand resulting in significant declines in average selling prices for DRAM and NAND. The global memory and storage industry has experienced consolidation and may continue to consolidate. We engage, from time to time, in discussions regarding potential acquisitions and similar opportunities. To the extent we are successful in completing any such transactions, we could be subject to some or all of the risks described above, including the risks pertaining to funding, assumption of liabilities, integration challenges, and increases in debt that may accompany such transactions. Acquisitions of, or alliances with, technology companies are inherently risky and may not be successful and could have a material adverse effect on our business, results of operations, or financial condition.

The limited availability of raw materials, supplies, or capital equipment could materially adversely affect our business, results of operations, or financial condition.

Our operations require raw materials, and in certain cases, third party services, that meet exacting standards. We generally have multiple sources of supply for our raw materials and services. However, only a limited number of suppliers are capable of delivering certain raw materials and services that meet our standards. In some cases, materials, components, or services are provided by a single supplier. Various factors could reduce the availability of raw materials or components such as chemicals, silicon wafers, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, sub-assemblies, targets, and reticle glass blanks. Shortages may occur, from time to time, in the future. We and/or our suppliers could be affected by laws and regulations enacted in response to concerns regarding climate change, which could increase the cost and limit the supply of our raw materials. In addition, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extended in the past. The disruption of our supply of raw materials or services or the extension of our lead times could have a material adverse effect on our business, results of operations, or financial condition.

Our operations are dependent on our ability to procure advanced semiconductor manufacturing equipment that enables the transition to lower cost manufacturing processes. For certain key types of equipment, including photolithography tools, we are sometimes dependent on a single supplier. From time to time, we have experienced difficulties in obtaining some equipment on a timely basis due to suppliers' limited capacity. Our inability to obtain equipment on a timely basis could adversely affect our ability to transition to next generation manufacturing processes and reduce our costs. Delays in obtaining equipment could also impede our ability to ramp production at new facilities and could increase our overall costs of a ramp. Our inability to obtain advanced semiconductor manufacturing equipment in a timely manner could have a material adverse effect on our business, results of operations, or financial condition.

Increases in tariffs or other taxes on our products or equipment and supplies could have an adverse impact on our operations.

We sell a significant majority of our products into countries outside the United States and we purchase a significant portion of equipment and supplies from suppliers outside the United States. The United States and other countries have levied tariffs and taxes on certain goods. Further tariffs, additional taxes or trade barriers may increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.

A downturn in the worldwide economy may harm our business.

Downturns in the worldwide economy have harmed our business in the past and future downturns could also adversely affect our business. Adverse economic conditions affect demand for devices that incorporate our products, such as personal computers, mobile devices, SSDs, and servers. Reduced demand for these products could result in significant decreases in our average selling prices and product sales. A deterioration of current conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. In addition, we may experience losses on


our holdings of cash and investments due to failures of financial institutions and other parties. Difficult economic conditions may also result in a higher rate of losses on our accounts receivables due to credit defaults. As a result, a downturn in the worldwide economy could have a material adverse effect on our business, results of operations, or financial condition.

Our results of operations could be affected by natural disasters and other events in the locations in which we or our customers or suppliers operate.

We have manufacturing and other operations in locations subject to natural occurrences such as severe weather and geological events, such as earthquakes or tsunamis, that could disrupt operations. In addition, our suppliers and customers also have operations in such locations. A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our operations, or the operations of our customers or suppliers, could have a material adverse effect on our business, results of operations, or financial condition.

Our incentives from various governments are conditional upon achieving or maintaining certain performance obligations and are subject to reduction, termination, or clawback.

We have received, and may in the future continue to receive, benefits and incentives from national, state, and local governments in various regions of the world designed to encourage us to establish, maintain, or increase investment, workforce, or production in those regions. These incentives may take various forms, including grants, loan subsidies, and tax arrangements, and typically require us to perform or maintain certain levels of investment, capital spending, employment, technology deployment, or research and development activities to qualify for such incentives. We cannot guarantee that we will successfully achieve performance obligations required to qualify for these incentives or that the granting agencies will provide such funding. These incentive arrangements typically provide the granting agencies with rights to audit our performance with the terms and obligations. Such audits could result in modifications to, or termination of, the applicable incentive program. The incentives we receive could be subject to reduction, termination, or clawback, and any decrease or clawback of government incentives could have a material adverse effect on our business, results of operations, or financial condition.

The operations of MMJ are subject to continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings.

Because MMJ's plan of reorganization provides for ongoing payments to creditors following the closing of our acquisition of MMJ, the reorganization proceedings in Japan (the "Japan Proceedings") are continuing and MMJ remains subject to the oversight of the Japan Court and of the trustees (including a trustee designated by us, who we refer to as the business trustee, and a trustee designated by the Japan Court, who we refer to as the legal trustee), pending completion of the reorganization proceedings. The business trustee is responsible for overseeing the operation of the business of MMJ, other than oversight in relation to acts that need to be carried out in connection with the Japan Proceedings, which are the responsibility of the legal trustee. MMJ's reorganization proceedings in Japan, and oversight of the Japan Court, will continue until the final creditor payment is made under MMJ's plan of reorganization, which is scheduled to occur in December 2019, but may occur on a later date to the extent any claims of creditors remain unfixed on the final scheduled installment payment date. MMJ may petition the Japan Court for an early termination of the reorganization proceedings once two-thirds of all payments under the plan of reorganization are made. Although such early terminations are customarily granted, there can be no assurance that the Japan Court will grant any such petition in this particular case.

During the pendency of the reorganization proceedings in Japan, MMJ is obligated to provide periodic financial reports to the Japan Court and may be required to obtain the consent of the Japan Court prior to taking a number of significant actions relating to its businesses, including transferring or disposing of, or acquiring, certain material assets, incurring or guaranteeing material indebtedness, settling material disputes, or entering into certain material agreements. The consent of the legal trustee may also be required for matters that would likely have a material impact on the operations or assets of MMJ or for transfers of material assets, to the extent the matters or transfers would reasonably be expected to materially and adversely affect execution of MMJ's plan of reorganization. Accordingly, during the pendency of the reorganization proceedings in Japan, our ability to operate MMJ as part of our global business or to cause MMJ to take certain actions that we deem advisable for its business could be adversely affected if the Japan Court or the legal trustee is unwilling to consent to various actions that we may wish to take with respect to MMJ.

The operations of MMJ being subject to the continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings could have a material adverse effect on our business, results of operations, or financial condition.



We may incur additional tax expense or become subject to additional tax exposure.

We operate in a number of locations outside the United States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. Our domestic and international taxes are dependent upon the geographic mix of our earnings among these jurisdictions. Our provision for income taxes and cash tax liabilities in the future could be adversely affected by numerous factors, including challenges by tax authorities to our tax positions and intercompany transfer pricing agreements, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, failure to meet performance obligations with respect to tax incentive agreements, and changes in tax laws and regulations. We file income tax returns with the U.S. federal government, various U.S. states, and various other jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2013 through 2017. In addition, tax returns that remain open to examination in Japan and Taiwan range from the years 2012 to 2017, and in Singapore from 2013 to 2017. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and cash tax liability. The foregoing items could have a material adverse effect on our business, results of operations, or financial condition.

A change in tax laws in key jurisdictions could materially increase our tax expense.

On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from our foreign operations are taxed in the United States. As a result of our fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 25.7% for 2018, and 21% for subsequent years. Based on the information available, we recorded provisional amounts under SAB 118; however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax. The final tax impacts may differ from our provisional estimates due to, among other things, the issuance of additional regulatory and legislative guidance. As a result of the Tax Act, our tax rate may increase up to the low teens percentage depending on future profitability.

We may not utilize all of our net deferred tax assets.

We have substantial deferred tax assets, which include, among others, net operating loss and credit carryforwards. As of August 31, 2017, our U.S. federal and state net operating loss carryforwards, including uncertain tax benefits, were $3.88 billion and $1.95 billion, respectively, which, if not utilized, will expire at various dates from 2028 through 2037 and 2018 through 2037, respectively. As of August 31, 2017, our foreign net operating loss carryforwards were $6.30 billion, which will, if not utilized, substantially all expire at various dates from 2019 through 2026. As of August 31, 2017, we had gross deferred tax assets of $3.78 billion and valuation allowances of $2.32 billion against our deferred tax assets. As of March 1, 2018, after recording the provisional estimated impact of the Tax Act, which includes the utilization of a substantial portion of our U.S. deferred tax assets, we had net deferred tax assets of $1.95 billion and valuation allowances of $943 million against our deferred tax assets. Utilization of all of our net operating loss and credit carryforwards would increase the amount of our annual cash taxes reducing the overall amount of cash available to be used in other areas of the business and could have a material adverse effect on our business, results of operations, or financial condition.

A change in ownership may limit our ability to utilize our net operating loss carryforwards.

On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each share of common stock outstanding, which entitles certain shareholders to purchase additional shares of our common stock at a significant discount in the event of certain transactions that may result in an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur when the percentage of our ownership by one or more 5% shareholders has increased by more than 50% at any time during the prior three years. Rights will attach to all shares of the Company’s common stock issued prior to the earlier of the rights' distribution date or expiration date as set forth in the Rights Agreement. Pursuant to the Rights Agreement, if a shareholder (or group) acquires beneficial ownership of 4.99% or more of the outstanding shares of our common stock without prior approval of our Board or without meeting certain customary exceptions, the rights (other than rights held by the acquiring shareholder (or group) and certain related persons) would become exercisable. The Rights Agreement is intended to avoid an adverse ownership change, thereby preserving our current ability to utilize certain net operating loss and credit carryforwards; however, there is no assurance that the Rights Agreement will prevent all transfers that could result in such an ownership change.

If we experience a 50% or greater change in ownership involving shareholders owning 5% or more of our common stock, it could adversely impact our ability to utilize our existing net operating loss and credit carryforwards. The inability to utilize


existing net operating loss and credit carryforwards would significantly increase the amount of our annual cash taxes and reduce the overall amount of cash available to be used in other areas of the business which could have a material adverse effect on our business, results of operations, or financial condition.

Compliance with regulations regarding the use of conflict minerals could limit the supply and increase the cost of certain metals used in manufacturing our products.

Increased focus on environmental protection and social responsibility initiatives led to the passage of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and its implementing Securities and Exchange CommissionSEC regulations. The Dodd-Frank Act imposes supply chain diligence and disclosure requirements for certain manufacturers of products containing specific minerals that may originate in or near the Democratic Republic of the Congo (the "DRC") and finance or benefit local armed groups. These "conflict minerals" are commonly found in materials used in the manufacture of semiconductors. The implementation of these new regulations may limit the sourcing and availability of some of these materials. This in turn may affect our ability to obtain materials necessary for the manufacture of our products in sufficient quantities and may affect related material pricing. Some of our customers may elect to disqualify us as a supplier or reduce purchases from us if we are unable to verify that our products are DRC conflict free. Our inability to comply with the regulations regarding the use of conflict minerals could have a material adverse effect on our business, results of operations, or financial condition.

We are subject to a variety of laws and regulations that may result in additional costs and liabilities.

The manufacturing of our products requires the use of facilities, equipment, and materials that are subject to a broad array of laws and regulations in numerous jurisdictions in which we operate. Additionally, we are subject to a variety of other laws and regulations relative to the construction, maintenance, and operations of our facilities. Any of these laws or regulations could cause us to incur additional direct costs, as well as increased indirect costs related to our relationships with our customers and suppliers, and otherwise harm our operations and financial condition. Any failure to comply with these laws or regulations could adversely impact our reputation and our financial results. Additionally, we partner with other companies in our joint ventures, which are also subject to a broad array of laws and regulations. Our ownership in these joint ventures may also expose us to risks associated with their respective compliance with these laws and regulations. As a result of these items, we could experience the following:

suspension of production;
remediation costs;
alteration of our manufacturing processes;
regulatory penalties, fines, and legal liabilities; and
reputational challenges.

Our failure, or the failure of our joint ventures, to comply with these laws and regulations could result in:

suspension of production;
remediation costs;
alteration of our manufacturing processes;


regulatory penalties, fines, and legal liabilities; and
reputational challenges.

We may incur additional tax expense or become subject to additional tax exposure.

We operate inhave a number of locations outside the U.S., including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. Our domestic and international taxes are dependent upon the distribution of our earnings among these different jurisdictions. Our provision for income taxes and cash tax liabilities in the future could be adversely affected by numerous factors, including challenges by tax authorities to our tax structure and intercompany transfer pricing agreements, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, failure to meet performance obligations with respect to tax incentive agreements, and changes in tax laws and regulations. We file income tax returns with the U.S. federal government, various U.S. states, and various other jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2012 through 2016. In addition, tax returns that remain open to examination in Japan and Taiwan range from the years 2011 to 2016 and in Singapore from 2012 to 2016. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have anmaterial adverse effect on our provision for income taxes and cash tax liability.

We may not utilize all of our net deferred tax assets.

We have substantial deferred tax assets, which include, among others, net operating loss and credit carryforwards. As of September 1, 2016, our U.S. federal and state net operating loss carryforwards, including uncertain tax benefits, were $3.90 billion and $1.94 billion, respectively, which, if not utilized, will expire at various dates from 2017 through 2036. As of September 1, 2016, our foreign net operating loss carryforwards were $6.04 billion, including $4.28 billion pertaining to Japan, which will, if not utilized, substantially all expire at various dates from 2019 through 2025. In addition, as a result of the Inotera Acquisition, we added foreign net operating loss carryforwards in Taiwan of $654 million, substantially all of which expires on various dates through 2022. As of September 1, 2016, we had valuation allowances of $1.16 billion and $765 million against our net deferred tax assets in the U.S. and Japan, respectively.

A change in ownership may limit our ability to utilize our net operating loss carryforwards.

If we experience a 50% or greater change in ownership involving shareholders owning 5% or more of our stock, it could adversely impact our ability to utilize our existing net operating loss and credit carryforwards. The inability to utilize existing net operating loss and credit carryforwards would significantly increase the amount of our annual cash taxes reducing the overall amount of cash available to be used in other areas of the business.

On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each share of common stock outstanding, which entitles certain shareholders to purchase additional shares of our common stock at a significant discount in the event of an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended. In general, an ownership change will occur when the percentage of our ownership by one or more 5% shareholders has increased by more than 50% at any time during the prior three years. Pursuant to the Rights Agreement, if a shareholder (or group) acquires beneficial ownership of 4.99% or more of the outstanding shares of our common stock without prior approval of our Board of Directors or without meeting certain customary exceptions, the rights would become exercisable. The Rights Agreement is intended to avoid an adverse ownership change, thereby preserving our current ability to utilize certain net operating loss and credit carryforwards; however, there is no assurance that the Rights Agreement will prevent all transfers that could result in such an ownership change.



The limited availability of raw materials, supplies, or capital equipment could materially adversely affect our business, results of operations, or financial condition.

Our operations require raw materials and in certain cases, third party services, that meet exacting standards. We generally have multiple sources of supply for our raw materials and services. However, only a limited number of suppliers are capable of delivering certain raw materials and services that meet our standards. In some cases, materials, components, or services are provided by a single supplier. Various factors could reduce the availability of raw materials or components such as silicon wafers, controllers, photomasks, chemicals, gases, photoresist, lead frames, and molding compound. Shortages may occur from time to time in the future. We and/or our suppliers could be affected by laws and regulations enacted in response to concerns regarding climate change, which could increase the cost and limit the supply of our raw materials. In addition, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extended in the past. If our supply of raw materials or services is disrupted or our lead times extended, our business, results of operations, or financial condition could be materially adversely affected.

Our operations are dependent on our ability to procure advanced semiconductor manufacturing equipment that enables the transition to lower cost manufacturing processes. For certain key types of equipment, including photolithography tools, we are sometimes dependent on a single supplier. From time to time we have experienced difficulties in obtaining some equipment on a timely basis due to the supplier's limited capacity. Our inability to obtain this equipment timely could adversely affect our ability to transition to next generation manufacturing processes and reduce costs. Delays in obtaining equipment could also impede our ability to ramp production at new facilities and increase our overall costs of the ramp. If we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, our business, results of operations, or financial condition could be materially adversely affected.

A downturn in the worldwide economy may harm our business.

Downturns in the worldwide economy have harmed our business in the past and future downturns could also adversely affect our business. Adverse economic conditions affect demand for devices that incorporate our products, such as personal computers, mobile devices, SSDs, and servers. Reduced demand for these products could result in significant decreases in our average selling prices and product sales. A deterioration of current conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. In addition, we may experience losses on our holdings of cash and investments due to failures of financial institutions and other parties. Difficult economic conditions may also result in a higher rate of loss on our accounts receivables due to credit defaults. As a result, our business, results of operations, or financial condition could be materially adversely affected.

Our results of operations could be affected by natural disasters and other events in the locations in which we or our customers or suppliers operate.

We have manufacturing and other operations in locations subject to natural occurrences such as severe weather and geological events including earthquakes or tsunamis that could disrupt operations. In addition, our suppliers and customers also have operations in such locations. A natural disaster, fire, explosion, or other event that results in a prolonged disruption to our operations, or the operations of our customers or suppliers, may materially adversely affect our business, results of operations, or financial condition.

We face risks associated with our international sales and operations that could materially adversely affect our business, results of operations, or financial condition.

Sales to customers outside the United States approximated 84%86% of our consolidated net sales for 2016.2017. In addition, a substantial portion of our manufacturing operations are located outside the United States. In particular, a significant portion of our manufacturing operations are concentrated in Singapore, Taiwan, Japan, and Japan.China. Our international sales and operations are subject to a variety of risks, including:

export and import duties, changes to import and export regulations, customs regulations and processes, and restrictions on the transfer of funds;
compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, export and import laws, and similar rules and regulations;
theft of intellectual property;
political and economic instability;
problems with the transportation or delivery of our products;


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 our ability to maintain flexibility with our staffing levels;


disruptions to our manufacturing operations as a result of actions imposed by foreign governments;
changes in economic policies of foreign governments; and
difficulties in staffing and managing international operations.

These factors may materially adversely affectcould have a material adverse effect on our business, results of operations, or financial condition.

We are subject to counterparty default risks.

We have numerous arrangements with financial institutions that subject us to counterparty default risks, including cash deposits, investments, capped-callcapped call contracts on our common stock, and derivative instruments. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will default on its performance obligations. A counterparty may not comply with their contractual commitments which could then lead to their defaulting on their obligations with little or no notice to us, which could limit our ability to take action to mitigate our exposure. Additionally, our ability to mitigate our exposures may be constrained by the terms of our contractual arrangements or because market conditions prevent us from taking effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceeding.proceedings. In the event of such default, we could incur significant losses, which could adversely impacthave a material adverse effect on our business, results of operations, or financial condition.


ITEM 2. UNREGISTERED SALESALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Our Board of Directors has authorized the discretionary repurchase of up to $1.25 billion of our outstanding common stock, which may be made in open-market purchases, block trades, privately-negotiated transactions, or derivative transactions. Through the second quarter of 2017, we had repurchased a total of 49 million shares for $956 million through open-market transactions pursuant to such authorization. Repurchases are subject to market conditions and our ongoing determination of the best use of available cash.

During the second quarter of 2017,2018, we share-settled all of our remaining 2032C and 2033E Capped Calls and a portion of our 2032C and 2032D Capped Calls and received 3,701,5687,022,506 shares of our common stock.

Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
December 2, 2016–January 5, 2017 3,701,568
 $18.15
 —
 $294,184,917
January 6, 2017–February 2, 2017 —
 —
 —
 294,184,917
February 3, 2017–March 2, 2017��—
 —
 —
 294,184,917
    3,701,568
 —
 —
  
Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under publicly announced plans or programs
December 1, 2017–January 4, 2018 4,710,314
 $45.68
    
January 5, 2018–February 1, 2018 —
 —
    
February 2, 2018–March 1, 2018 2,312,192
 42.47
    
    7,022,506
 44.62
 
  

Shares of common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are also treated as common stock repurchases. Those withheld shares of common stock are not considered common stock repurchases under an authorized common stock repurchase plan and accordingly are excluded from the above table.

In connection with the Inotera Acquisition on December 6, 2016, we sold 58 million shares of our common stock to Nanya, of which 54 million were issued from treasury stock, and received cash proceeds of $986 million. These shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and are subject to certain restrictions on transfers.

amounts above.



ITEM 6. EXHIBITS

The following documents are filed as part of this report:Exhibits

Exhibit NumberDescription of Exhibit
3.1Restated Certificate of Incorporation of the Registrant (1)
3.2Bylaws of the Registrant, Amended and Restated (2)
4.26Supplemental Indenture, dated as of January 19, 2017, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee
4.27Supplemental Indenture, dated as of January 19, 2017, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee
10.8Amended and Restated 2007 Equity Incentive Plan (3)
10.49*Second Amended and Restated Supply Agreement, dated February 10, 2017, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.50*Amended and Restated Supplemental Wafer Supply Agreement, dated February 10, 2017, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.51*Amended and Restated Wafer Supply Agreement No. 3 dated, February 10, 2017, by and among Micron Technology, Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.64Deferred Compensation Plan
31.1Rule 13a-14(a) Certification of Chief Executive Officer
31.2Rule 13a-14(a) Certification of Chief Financial Officer
32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
__________________________
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.
Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
3.1
Restated Certificate of Incorporation of the Registrant
 8-K 99.21/26/15
3.2
Bylaws of the Registrant, Amended and Restated
 8-K 99.14/15/14
10.1
Micron Technology, Inc. Executive Officer Performance Incentive Plan
 DEF 14A B12/7/2017
10.75
Micron Technology, Inc. Employee Stock Purchase Plan
 DEF 14A A12/7/2017
10.76
Severance Benefits for David A. Zinsner
ü    
31.1
Rule 13a-14(a) Certification of Chief Executive Officer
ü    
31.2
Rule 13a-14(a) Certification of Chief Financial Officer
ü    
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
ü    
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
ü    
101.INSXBRL Instance Documentü    
101.SCHXBRL Taxonomy Extension Schema Documentü    
101.CALXBRL Taxonomy Extension Calculation Linkbase Documentü    
101.DEFXBRL Taxonomy Extension Definition Linkbase Documentü    
101.LABXBRL Taxonomy Extension Label Linkbase Documentü    
101.PREXBRL Taxonomy Extension Presentation Linkbase Documentü    

(1) Incorporated by reference to Current Report on Form 8-K dated January 26, 2015.
(2) Incorporated by reference to Current Report on Form 8-K dated February 1, 2016.
(3) Incorporated by reference to Definitive Proxy Statement on Schedule 14A dated December 8, 2016.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  Micron Technology, Inc.
  (Registrant)
   
   
Date:March 28, 201723, 2018/s/ Ernest E. MaddockDavid A. Zinsner
  
Ernest E. Maddock
David A. Zinsner
Senior Vice President and Chief Financial Officer and Vice President, Finance
(Principal Financial and Accounting Officer)



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