UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-K
(Mark One) 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 3, 2015August 30, 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 incorporation or organization)(IRS Employer Identification No.)
8000 S. Federal Way, Boise, Idaho83716-9632
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code(208) 368-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registered
Common Stock, par value $.10$0.10 per shareNASDAQ Global Select Market
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes T No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ¨ No T

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 T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 T No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. T¨

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"filer," "smaller reporting company," and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act:Act.
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 aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price of such stock on March 5, 2015,1, 2018, as reported by the NASDAQ Global Select Market, was approximately $27.7 billion.$45.0 billion. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant's common stock as of October 21, 2015,8, 2018 was 1,085,753,663.

1,134,255,375.
DOCUMENTS INCORPORATED BY REFERENCE:Portions of the Proxy Statement for the registrant’sregistrant's Fiscal 20152018 Annual Meeting of Shareholders to be held on January 28, 2016,16, 2019 are incorporated by reference into Part II and Part III of this Annual Report on Form 10-K.
     



Forward-Looking Statements

This Form 10-K 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 controller development; increasing sales of DDR4, 3D NAND, 3D XPointTM memory, and client and cloud SSDs; growth in our production of, and the market for, NAND products; our production of DRAM products; our joint research and development arrangements with Intel; the need to obtain additional patent licenses or renew existing license agreements; the entry into additional sales or licenses of intellectual property and partnering agreements; debt incurred to finance our capital investments; and cash expenditures for property, plant, and equipment. 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 "Item 1A. Risk Factors." All period references are to our fiscal periods unless otherwise indicated.


Definitions of Commonly Used Terms

As used herein, "we," "our," "us," and similar terms include Micron Technology, Inc. and itsour 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
2014 Notes2021 MSAC Term Loan 1.875% Convertible NotesVariable Rate MSAC Senior Secured Term Loan due 2014LPDRAMMobile Low-Power DRAM
2022 Notes5.875% Senior Notes due 2022MAIMicron Akita, Inc.
2023 Notes5.250% Senior Notes due 2023MCPMulti-Chip Package
2024 Notes5.250% Senior Notes due 20242021 Micron Micron Technology, Inc. (Parent Company)
2025 Notes2021 MSTW Term Loan 5.500%Variable Rate MSTW Senior NotesSecured Term Loan due 2025MITMicron Technology, Italia, S.r.l.
2026 Notes5.625% Senior Notes due 20262021 MLC Multi-Level Cell (two bits per cell)
20272022 Notes 1.875% Convertible5.88% Senior Notes due 20272022 MMJ Micron Memory Japan, Inc.
2031 Notes2022 Term Loan B 2031A and 2031B NotesSenior Secured Term Loan B due 2022 MMJ Companies MAI and MMJ
2031A2023 Notes 1.500% Convertible5.25% Senior Notes due 20312023 MMJ Group MMJ and its subsidiaries
2031B2023 Secured Notes 1.875% Convertible7.50% Senior Secured Notes due 20312023 MMT Micron Memory Taiwan Co., Ltd.
20322024 Notes 2032C and 2032D5.25% Senior Notes due 2024MSPMicron Semiconductor Products, Inc.
2025 Notes MP Mask5.50% Senior Notes due 2025 MP MaskMSTWMicron Semiconductor Taiwan Co., Ltd.
2026 Notes5.63% Senior Notes due 2026MTTWMicron Technology Center, LLCTaiwan, Inc.
2032C Notes 2.375%2.38% Convertible Senior Notes due 2032NanyaNanya Technology Corporation
2032D Notes3.13% Convertible Senior Notes due 2032 OEM Original Equipment Manufacturer
2032D Notes3.125% Convertible Senior Notes due 2032PhotronicsPhotronics, Inc.
2033 Notes 2033E and 2033F Notes PSRAMQimonda Pseudo-static DRAMQimonda AG
2033E Notes 1.625%1.63% Convertible Senior Notes due 2033 QimondaQLC Qimonda AGQuad-Level Cell (four bits per cell)
2033F Notes 2.125%2.13% Convertible Senior Notes due 2033 R&D Research and Development
2043G Notes 3.00% Convertible Senior Notes due 2043 RexchipRexchip Electronics Corporation
AptinaAptina Imaging CorporationRLDRAMReduced Latency DRAM
ElpidaElpida Memory, Inc.SECSecurities and Exchange Commission
GbGigabitSG&A Selling, General, and Administration
HMCHybrid Memory CubeSLCSingle-Level Cell
HPHewlett-Packard CompanySSDSolid-State Drive
IMFT IM Flash Technologies, LLC STSLC STMicroelectronics S.r.l.Single-Level Cell (one bit per cell)
Inotera Inotera Memories, Inc.SSDSolid-State Drive
IntelIntel Corporation Tera Probe Tera Probe, Inc.
IntelLPDRAM Intel CorporationMobile Low-Power DRAM TLC Triple-Level Cell (three bits per cell)
Japan CourtMAI Tokyo District CourtMicron Akita, Inc. VIE Variable Interest Entity
MCPMulti-Chip Package

Micron, Crucial, Ballistix, any associated logos, and all other Micron trademarks are the property of Micron. 3D XPoint is a trademark of Intel or its subsidiaries 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.




PART I


ITEM 1. BUSINESS


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 in "Products" regarding increased sales of DDR4 products, growth in demand for NAND Flash products and SSDs, and production of 3D NAND Flash and 3D XPoint™ memory, and in "Manufacturing" regarding the transition to smaller line-width process technologies and 3D NAND Flash. 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 "Item 1A. Risk Factors." All period references are to our fiscal periods unless otherwise indicated.


Corporate Information

Micron, a Delaware corporation, was incorporated in 1978.  Our executive offices are located at 8000 South Federal Way, Boise, Idaho 83716-9632 and our telephone number is (208) 368-4000.  Information about us is available on the internet at www.micron.com.  Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to these reports, are available through our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.  Materials filed or furnished by us with the SEC are also available at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  Information on the operation of the Public Reference Room is available by calling (800) SEC-0330.  Also available on our website are our:  Corporate Governance Guidelines, Governance Committee Charter, Compensation Committee Charter, Audit Committee Charter, and Code of Business Conduct and Ethics.  Any amendments or waivers of our Code of Business Conduct and Ethics will also be posted on our website at www.micron.com within four business days of the amendment or waiver.  Copies of these documents are available to shareholders upon request.  Information contained or referenced on our website is not incorporated by reference and does not form a part of this Annual Report on Form 10-K.


Overview

Micron Technology, Inc., including its consolidated subsidiaries, is a globalan industry leader in advanced semiconductor systems. Ourinnovative 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 NOR Flash,3D XPoint memory, is transforming how the basis for solid-state drives, modules, multi-chip packages,world uses information to enrich life. Backed by 40 years of technology leadership, our memory and other system solutions. Our memorystorage 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, networking, mobile, embedded, and automotive applications. We market our products through our internal sales force, independent sales representatives, and distributors primarily to OEMs and retailers located around the world. Our success is largely dependent on the market acceptance of our diversified portfolio of semiconductor products, efficient utilization of our manufacturing infrastructure, successful ongoing development of advanced product and process technologies, and generating a return on R&D investments.mobile.

We obtainmanufacture our products for sale toat our customers from ourworldwide, wholly-owned manufacturing facilities and our joint ventures.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 technologies that aretechnology, which is implemented in our worldwide manufacturing facilities and through our joint ventures. These investments enable our production of semiconductor products with increasing functionality and performance at lower costs.facilities. We generally increase the density per wafer and reduce the manufacturing costcosts of each generation of product through advancements in product and process technologies,technology, such as our leading-edge line-width process technology.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. To leverageStorage products incorporating NAND, a controller, and firmware constitute a significant and increasing portion of our significant investmentssales. We generally develop firmware and expect to introduce proprietary controllers into our SSDs in R&D, we have formed, and may continue to form, strategic joint ventures that allowthe first half of 2019. Development of advanced technologies enables us to sharediversify our product portfolio toward a richer mix of differentiated, high-value solutions and to target high-growth markets.

We market our products through our internal sales force, independent sales representatives, distributors, and e-tailers, primarily to original equipment manufacturers and retailers located around the costsworld. We face intense competition in the semiconductor memory and 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 developingour diversified portfolio of semiconductor-based memory and storage solutions, efficient utilization of our manufacturing infrastructure, successful ongoing development and integration of advanced product and process technologies with joint venture partners. In 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 partneringreturn-driven capital spending, and other arrangements.successful R&D investments.


1



On July 31, 2013, we completed the acquisition of Elpida, now known as MMJ, and a controlling interest in Rexchip, now known as MMT (together, the "MMJ Acquisition"). The MMJ Acquisition included a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan, a 300mm DRAM wafer fabrication facility in Taichung City, Taiwan, and an assembly and test facility located in Akita, Japan. These wafer fabrication facilities together represented approximately 30% of our total wafer capacity for 2015. The operations from the MMJ Acquisition, which are included primarily in our MBU and CNBU segments, include the manufacture of mobile DRAM targeted to mobile phones and tablets and computing DRAM targeted to desktop PCs, servers, notebooks, and workstations. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Micron Memory Japan, Inc.")Products

Business Segments

Our product portfolio of memory and storage solutions, advanced solutions, and storage platforms are based on our high-performance semiconductor memory and storage technologies, including DRAM, NAND, 3D XPoint memory, and other technologies. We have the followingsell our products into various markets through our four business units which(which are also our reportable segments:segments) in various forms, including wafers, components, modules, SSDs and in MCPs that combine DRAM, NAND, and/or NOR with a controller and firmware. We are relentlessly focused on evolving our product portfolio to a richer mix of high-value solutions and cultivating deeper relationships with customers. Our position as a developer and manufacturer of DRAM, NAND, NOR and other emerging memory technologies uniquely enables us to collaborate with our customers to ensure our technology and engineering roadmaps deliver critical features. We continuously introduce new products on our advanced technologies, delivering performance, quality, and cost advantages to our customers.

Compute and Networking Business Unit ("CNBU"): Includes

CNBU includes memory products and solutions sold into compute, networking,cloud server, enterprise, client, graphics, and networking markets. CNBU reported revenue of $15.25 billion in 2018, $8.62 billion in 2017, and $4.53 billion in 2016. In 2018, we significantly increased our production of DRAM using 1Xnm technology and continued to focus on developing our 1Ynm technology. In 2018, we achieved volume production of our 8Gb GDDR6 memory, which delivers significant performance improvements over our GDDR5 design, and enables bandwidth-intensive applications in our core CNBU markets in a variety of applications such as artificial intelligence and networking.



Cloud Server: The cloud server markets.market was CNBU's fastest growing market in 2018, particularly in datacenters, with significant increases in DRAM content per server. The cloud server market has been driven, in part, by intelligent edge devices capable of artificial intelligence and augmented reality that store and access data in the cloud. Artificial intelligence servers require significantly increasing quantities of DRAM and as the number and capabilities of these intelligent edge devices increase, more data is stored, processed, and accessed in the cloud, creating a virtuous cycle between the cloud and edge devices. We anticipate continued growth of our 1Xnm portfolio with the continued ramp of our second-generation 1Xnm 8Gb DDR4 products, which were validated with key partners and customers in 2018.

Enterprise: Similar to the cloud server market, the enterprise market is experiencing strong demand growth from intelligent edge devices that require rapid data analysis and storage in enterprise and cloud servers to enable machine learning, training, and inferencing. Our enterprise RDIMM DRAM memory modules provide the high performance, reliability, and integrity requirements for such applications. In 2018, we qualified our 32GB non-volatile module ("NVDIMM") at key OEMs and also began shipping in volume our 128GB through-silicon via-based ("TSV") RDIMMS.

Client: In 2018, we achieved significant production and sales to the client market from our 1Xnm technology. Our products sold to the client market support both PC unit growth, driven primarily by corporate replacement cycles from upgraded operating systems, as well as increases in content per unit. Additionally, our products sold to the client market are incorporated into gaming and ultra-thin notebooks.

Graphics: Our GDDR5/5x DRAM graphics products are incorporated into applications providing virtual reality, augmented reality, and crypto-mining technology. In 2018, we benefitted from strong demand for graphics memory in gaming console applications, as well as a higher attach-rate of graphics DRAM products in performance and enthusiast graphics cards. In 2018, we migrated and scaled production of our 8Gb GDDR5 to our 1Xnm DRAM technology, which augmented production of our GDDR5/5x DRAM memory on our 20nm line-width technology. We remained focused on execution of technology transitions and achieved volume production of our 8Gb GDDR6 DRAM for the graphics and crypto-mining markets in 2018.

Networking: The networking memory market is characterized by long life-cycle DRAM products, and accordingly, a significant portion of our sales to the networking market consisted of products manufactured on our legacy 30nm and 25nm-series DRAM technology. In 2018, we accelerated a shift from DDR3 to DDR4 DRAM and began sales of 4Gb DDR4 DRAM into emerging 5G applications.

Mobile Business Unit ("MBU"): Includes

MBU includes memory products sold into smartphone tablet, and other mobile-device markets.markets and includes discrete DRAM, discrete NAND, and managed NAND. MBU managed NAND includes eMMC and universal flash storage ("UFS") solutions, which each combine high-capacity NAND with a high-speed controller and firmware in a small ball-grid array, and eMCP products, which combine an eMMC/UFS solution with LPDRAM. MBU reported revenue of $6.58 billion in 2018, $4.42 billion in 2017, and $2.57 billion in 2016. In 2018, we announced new 64-layer, second-generation 3D NAND storage products, which support the high-speed UFS 2.1 standard and eMMC 5.1 standard. These new mobile solutions are based on our industry-leading TLC 3D NAND technology, empowering smartphone makers to enhance the user experience with next-generation mobile features such as artificial intelligence, virtual reality, and facial recognition. Our 1Xnm LPDRAM solutions provide power efficiency, particularly critical to our mobile customers, and our 1Ynm 12Gb LPDDR4 solutions, the highest capacity LPDRAM monolithic die available in the industry, provide both power efficiency and higher capacity to our mobile customers.

Smartphone: In 2018, we achieved product qualification of our 1Xnm LPDDR4 DRAM with major mobile phone OEMs. Our LPDRAM offers low-power, high-performance solutions to perform in extreme environments demanded by high-end smartphones. High-end smartphones incorporate higher levels of NAND and LPDRAM that enable features such as larger 4K displays, multiple high-resolution cameras, and 4K high-dynamic range video recording. Additionally, our smartphone products are utilized by OEMs to enable artificial intelligence, augmented reality, and life-like virtual reality capabilities into high-end phones, including facial and voice recognition, real-time translation, fast image search, and scene detection. In 2018, our managed NAND products achieved strong growth, including our new 128GB NAND plus 4GB DRAM MCP and our first high-performance UFS managed NAND products introduced in the fourth quarter of 2018.



Storage Business Unit ("SBU"): Includes memory products

SBU includes SSDs and component-level solutions sold into enterprise and cloud, client, cloud, and consumer storage markets as well as other discrete storage products sold in component and wafer forms to the removable storage markets. SBU sales also includesinclude "non-trade" products consisting of products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost, which included 3D XPoint memory and NAND products. SBU reported revenue of $5.02 billion in 2018, $4.51 billion in 2017, and $3.26 billion in 2016. In 2018, we continued to ramp our IMFT joint venture.64-layer 3D NAND technology and achieved bit output crossover relative to 32-layer in the second half of 2018. In 2018, we also extended our leadership position in 3D NAND technology by delivering the industry's first commercially available QLC 3D NAND technology. Leveraging our 64-layer structure, the new QLC NAND technology achieves 1 terabit ("Tb") density per die, which has a 33% higher array density as compared to TLC, enabling new operating points for density and cost in the enterprise, cloud, and client-storage markets. In 2018, we advanced development of our third-generation 96-tier 3D NAND structure, providing a 50 percent increase in layers. Both the 64-layer QLC and 96-layer TLC 3D NAND technologies utilize CMOS under the array ("CuA") technology to reduce die sizes and deliver improved performance when compared to competitive approaches. By leveraging four planes versus two, our new NAND flash memory can write and read more cells in parallel, which delivers faster throughput and higher bandwidth at the system level.

SSDs: SSD storage products incorporate NAND, a controller, and firmware and offer benefits over HDDs of a smaller form factor, faster read and write speeds, and solid-state architecture. SSDs offer significant performance and features, including speed, reliability, and lower power consumption. We offer SSD solutions utilizing our NAND technology to the enterprise and cloud, client, and consumer markets.

Enterprise and Cloud SSDs: SBU sales to the enterprise and cloud SSD markets in 2018 consisted primarily of our flagship SATA 5100 and 5200 series SSDs. In 2018, our SATA 5200 series SSD achieved qualification at enterprise server OEMs, cloud service providers, and enterprise customers. Similar to trends in the memory market, the enterprise and cloud storage markets have been driven by intelligent edge devices capable of artificial intelligence, augmented reality, and other features that store, access, and analyze data in the cloud. Artificial intelligence servers require significantly higher SSD capacity, and our 64-layer QLC NAND technology provides cost-optimized storage solutions, providing significantly lower total cost of ownership for read-intensive cloud workloads. Our 5200 series SATA SSDs, which deliver best-in-class performance and capacity, are based on the same proven architecture as our 5100 series. We shipped our first 5200 series SATA SSDs in the third quarter of 2018 and received broad acceptance in the enterprise and cloud SSD markets. By leveraging our advanced CuA NAND in enterprise and cloud SSDs, we deliver low cost, high density, high performance storage solutions.

Client SSDs: SBU sales to the client SSD market in 2018 consisted primarily of our 1100 series 3D NAND SATA Client SSD, which is targeted for leading personal computer OEMs as a replacement to HDDs. Our client SSDs, used in notebooks, desktops, workstations, and related consumer applications, deliver high performance, power efficiency, security, and capacity to our customers. In the first half of 2019, we expect to introduce our 2200 series 3D NAND PCIe client SSD incorporating our internally-developed controller, enabling us to offer additional differentiated storage solutions for our client customers.

Consumer SSDs: SBU sales to the consumer SSD market in 2018 consisted primarily of our Crucial-branded MX500 SATA SSD, utilizing our 64-layer TLC 3D NAND. Similar to the client SSD market, our consumer SSD solutions are replacing HDDs as end-users seek the higher performance, power savings, and reliability of our SSDs.

Components and Wafers: SBU sales of components and wafers in 2018 consisted primarily of our 32-layer TLC NAND technology and our 64-layer TLC and QLC NAND technology. We continue to transition our business from a storage components supplier to a storage solutions provider with a richer mix of high-value solutions such as SSDs and mobile managed NAND. As a result, SBU sales of products in component and wafer form declined in 2018 as compared to 2017.

3D XPoint memory: 3D XPoint memory has 10 times the chip density of DRAM, 1,000 times the endurance capability of NAND, and is 1,000 times faster than NAND. These specifications create a significant value opportunity for 3D XPoint memory in solutions between DRAM and NAND in the memory and storage hierarchy. Trends in machine learning, big data analytics, and artificial intelligence are driving demand for the features offered by 3D XPoint memory. We are collaborating with our customers to develop 3D XPoint memory products and expect to sample such products in late calendar 2019.



Embedded Business Unit ("EBU"): Includes

EBU includes memory and storage products sold into automotive, industrial, connected home, and consumer electronicsmarkets and includes discrete DRAM, discrete NAND, managed NAND, and NOR. EBU reported revenue of $3.48 billion in 2018, $2.70 billion in 2017, and $1.94 billion in 2016. The embedded market is characterized by long life-cycle DRAM and NAND products manufactured on our mature process technologies. Our embedded products enable edge devices to store, connect, and share information in the growing internet of things ("IoT") and are utilized in a diverse set of applications in the automotive, industrial, and consumer markets.

For more information regarding our segments, see "Part II – Item 8. Financial StatementsAutomotive: Our DDR3 DRAM and Supplementary Data – Notes to Consolidated Financial Statements – Segment Information."


Products

DRAM

DRAMeMMC managed NAND automotive memory and storage products are high-density, low-cost-per-bit, random access memory devices that provide high-speed data storageenable connected, large display infotainment systems and retrieval with a variety of performance, pricing,higher definition 4K displays and other characteristics. Salessupport improved voice and gesture control in automotive applications. Our comprehensive and expanding portfolio of DRAM, products were 64%, 68%,NAND, and 48% ofNOR solutions to the automotive market, as well as our total net salesextensive customer support network, also support advancements in 2015, 2014,autonomous driving and 2013, respectively. DRAM products are sold by CNBU, MBU, and EBU.

DDR3 DRAM is a standardized, high-density, high-volume, DRAM product,automated driver assistance systems, which offersrequire high speed and high bandwidth at a relatively low cost. DDR3 products are primarily targeted at computers, servers, networking devices, communications equipment, consumer electronics, automotive, and industrial applications. In 2015, we offered DDR3 products in 1Gb, 2Gb, 4Gb, and 8Gb densities. We also offered next generation DDR4 DRAM products in 4Gb and 8Gb densities in 2015 and we expect sales of these products to increase significantly in 2016 as they replace DDR3 DRAM products in many applications. Sales of DDR3 and DDR4 DRAM products were 38%, 40%, and 31% of our total net sales in 2015, 2014, and 2013, respectively.

LPDRAM products offer lower power consumption relative to other DRAM products and are used primarily in mobile phones, tablets, embedded applications, ultra-thin laptop computers, and other mobile consumer devices that require low power consumption. We offer DDR4, DDR3, DDR2, and DDR versions of LPDRAM. Sales of LPDRAM products were 18%, 20%, and 6% of our total net sales in 2015, 2014, and 2013, respectively.

We also offer other DRAM products targeted to specialty markets including DDR2 DRAM, DDR DRAM, GDDR5 DRAM, SDRAM, RLDRAM, and PSRAM. These products are used primarily in networking devices, servers, consumer electronics, communications equipment, computer peripherals, automotive and industrial applications, and computer memory upgrades. We offer HMC products, which are semiconductor memory devices where vertical stacks of DRAM die that are connected using through-silicon-via interconnects are placed above a small, high-speed logic layer. HMC enables ultra-high system performance and is targeted primarily at networkingreliability and high performance computing applications.memory and storage.


2



Non-Volatile Memory

Non-Volatile Memory includesIndustrial: Our industrial products, featuring SLC and MLC NAND, FlashNOR, DDR3 DRAM, and 3D XPoint™ memory. Through 2015, substantially allMCP managed NAND, enable applications in the growing industrial IoT market, including factory automation, transportation, and surveillance. In 2018, we announced availability of our Non-Volatile Memory sales were from NAND Flash products. NAND Flash products are electrically re-writeable, non-volatile semiconductor memory devices that retain content when power is turned off. NAND Flash sales were 33%, 27%,128GB and 40% of our total net sales in 2015, 2014, and 2013, respectively. NAND Flash is ideal for mass-storage devices due to its fast erase and write times, high density, and low cost per bit relative to other solid-state memories. Embedded NAND Flash-based storage devices are utilized in mobile phones, SSDs, tablets, computers, industrial and automotive applications, networking, and other personal and consumer applications. Removable storage devices, such as USB and Flash memory cards, are used with applications such as PCs, digital still cameras, and mobile phones. The market for NAND Flash products has grown rapidly and we expect it to continue to grow due to increased demand for these and other embedded and removable storage devices. NAND Flash products are sold by SBU, EBU, MBU, and CNBU.

Our NAND Flash products feature a small cell structure that enables higher densities for demanding applications. We offer high-speed SLC, MLC, and TLC NAND Flash products that are compatible with advanced interfaces. MLC and TLC products have two and three times, respectively, the bit256GB density of SLC products. In 2015, we offered SLC NAND Flash products in 1Gbedge storage microSD card solutions and collaboration with several leading video surveillance solution providers to 64Gb densities; 2-bit-per-cell MLC NAND Flash products in 8Gb to 128Gb densities; and 3-bit-per-cellpromote surveillance-grade edge storage, utilizing our 64-layer TLC NAND Flash in 128Gb density. In 2015, we began sampling products featuring our new 3D NAND Flash technology, which stacks layers of data storage cells vertically to create storage devices with three times highertechnology. This newly released solution enables greater capacity than competing NAND Flash technologies. This enables more storage in a smaller space, bringing significant cost savings, low power usagedelivering up to 30 days of surveillance video storage in the camera.

Consumer: Our DDR3 DRAM, SLC NAND, and high performanceeMCP managed NAND products sold into the consumer market are used in a diverse set of consumer products, including service provider and set-top boxes, digital still and video cameras, home networking, ultra-high definition televisions, and many more applications. Our embedded memory and storage solutions enable edge devices in the consumer products market to a range of mobile consumer devices as well asstore, connect, and share information in the most demanding enterprise deployments. We expect to be in production of a 256Gb MLC version and 384Gb TLC version of 3D NAND Flash products by the end of calendar year 2015.IoT.


Manufacturing

We offer clientmanufacture our products at our worldwide, wholly-owned and enterprise SSDs which feature higher performance, reduced-power consumption, and enhanced reliability as compared to typical hard disk drives. Our client SSDs are targeted at notebooks, desktops, workstations, and other consumer applications. Using our NAND Flash process technology and a leading-edge SATA 6 Gb per second interface, our SSDs deliver read and write speeds that help improve boot and application load times and deliver higher performance than hard disk drives. Our client SSDs feature industry-leading encryption for corporate users and are offeredjoint venture facilities located in a 2.5-inch, M.2., and mSATA modules, with densities up to 1 terabyte. Our enterprise SSDs are targeted at server and storage applications and incorporate our Extended Performance and Enhanced Reliability Technology ("XPERT") architecture, which closely incorporates the storage and controller through highly optimized firmware algorithms and hardware enhancements. The end result is a set of market-focused enterprise features that deliver ultra-low latencies, improved data transfer time, power-loss protection, and cost-effectiveness, along with higher capacities and power efficiency. We offer enterprise SSDs with both PCIe and SATA interfaces and capacities up to 1.4 terabytes. We expect that demand for both client and enterprise SSDs will continue to increase significantly over the next several years.

We also offer managed MCP products, which incorporate our NAND Flash. These managed NAND Flash products include e-MMC, e-MCP, and embedded USB. Our e-MMC products combine NAND Flash with a logic controller that performs media management and Error Code Correction ("ECC"), which provides reduced ECC complexity, better system performance, improved reliability, easy integration, and lower overall system costs. Our e-MCP products combine e-MMC with LPDRAM on the same substrate, which improves overall functionality and performance while simplifying system design.

Through our Lexar® brand, we sell high-performance digital media products and other flash-based storage products through retail and OEM channels. Our digital media products include a variety of flash memory cards and JumpDrive® products with a range of speeds, capacities, and value-added features. We offer flash memory cards in a variety of speeds and capacities and in all major media formats, including CompactFlash®, Memory Stick®, and Secure Digital ("SD") formats. CompactFlash and Memory Stick products sold by us incorporate our patented controller technology. Other products, including SD memory cards and some JumpDrive products, incorporate third party controllers. We also manufacture products that are sold under other brand names and resell flash memory products that are purchased from other NAND Flash suppliers.

In the fourth quarter of 2015, we introduced 3D XPoint technology, a new category of non-volatile memory. 3D XPoint memory's innovative, transistor-less, cross point architecture creates a three-dimensional checkerboard where memory cells sit at the intersection of word lines and bit lines, allowing the cells to be addressed individually. As a result, data can be written and read in small sizes, leading to fast and efficient read/write processes. We plan to produce commercial volumes of 3D XPoint memory products in 2016.


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Other

Other products included primarily NOR Flash, which are electrically re-writeable, semiconductor memory devices that offer fast read times which are used in wireless and embedded applications.


Partnering Arrangements

The following is a summary of our partnering arrangements as of September 3, 2015:

Entity   Member or Partner 
Micron
Ownership Interest
 
Formed/
Acquired
 Product Market
Consolidated entities:        
IMFT(1)  Intel Corporation 51% 2006 Non-Volatile
MP Mask(2)  Photronics, Inc. 50% 2006 Photomasks
           
Equity method investments:        
Inotera(3)  Nanya Technology Corporation 33% 2009 DRAM
Tera Probe(4)  Various 40% 2013 Wafer Probe

(1)
IMFT: We partner with Intel for the design, development, and manufacture of NAND Flash and 3D XPoint memory products.  In connection therewith, we formed the IMFT joint venture with Intel to manufacture NAND Flash and 3D XPoint memory products for the exclusive use of the members.  The members share the output of IMFT generally in proportion to their investment.  We sell a portion of our products to Intel through IMFT at long-term negotiated prices approximating cost.  We generally share with Intel the costs of product design and process development activities for NAND Flash memory and 3D XPoint memory.  The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. Commencing in January 2015, Intel can put to us, and commencing in January 2018, we can call from Intel, Intel's interest in IMFT, in either case, for an amount equal to the noncontrolling interest balance attributable to Intel at that time. If Intel elects to sell to us, we can elect to set the closing date of the transaction to be any time within two years following such election by Intel and can elect to receive financing of the purchase price from Intel for one to two years from the closing date. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Noncontrolling Interests in Subsidiaries – IMFT.")

(2)
MP Mask: We produce photomasks for leading-edge and advanced next-generation semiconductors through MP Mask, a joint venture with Photronics.  On March 24, 2015, we notified Photronics of our election to terminate MP Mask effective in May 2016. Upon termination, we have the right to acquire Photronics' interest in MP Mask for an amount equal to the noncontrolling interest balance. Since its inception, we and Photronics have each owned approximately 50% of MP Mask.  We purchase a substantial majority of the photomasks produced by MP Mask pursuant to a supply arrangement. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Noncontrolling Interests in Subsidiaries – MP Mask.")

(3)
Inotera: We partner with Nanya for the manufacture of DRAM products by Inotera, a Taiwan DRAM memory company.  Since January 2013, we have purchased all of Inotera's DRAM output at prices reflecting discounts from market prices for our comparable components under a supply agreement. In the second quarter of 2015, we executed a supply agreement, to be effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replace the current agreement. Under the 2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin between Inotera and us.  The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period, and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions.  Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity Method Investments – Inotera.")

(4)
Tera Probe: We have an approximate 40% ownership interest in Tera Probe, an entity that provides semiconductor wafer testing and probe services to us and others.

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Manufacturing

Our manufacturing facilities are located inTaiwan, Singapore, the United States, Japan, and China Japan, Malaysia, Singapore, and Taiwan. Our Inotera joint venture has a wafer fabrication facility in Taiwan.also utilize subcontractors to perform certain manufacturing processes. Nearly all of our products are manufactured on 300mm wafers in facilities that generally operate 24 hours per day, 7seven days per week. Semiconductor manufacturing is extremely capital intensive, requiring large investments in sophisticated facilities and equipment. A significant portion of our semiconductor equipment is generally replaced every threefive to fiveseven years with increasingly advanced equipment. Our DRAM, NAND, Flash,3D XPoint memory, and NOR Flash products share a number of common manufacturing processes, enabling us to leverage much of our product and process technologiestechnology and manufacturing infrastructure across these product lines. In 2015, we began construction of a significant expansion of our wafer fabrication facilities in Singapore for production of NAND Flash memory.

Our process for manufacturing semiconductor products is complex involvingand involves a number of precise steps, including wafer fabrication, assembly, and test. Efficient production of semiconductor products requires utilization of advanced semiconductor manufacturing techniques and effective deployment of these techniques across multiple facilities. The primary determinants of manufacturing cost are process line-width, 3D non-volatile layers, NAND cell levels, process complexity, including number of mask layers number ofand fabrication steps, and number of good die produced on each wafer.manufacturing yield. Other factors that contribute to manufacturing costs are wafer size,the cost and sophistication of manufacturing equipment, equipment utilization, process complexity, cost of raw materials, labor productivity, package type, and cleanliness of theour manufacturing environment.environment, and utilization of subcontractors to perform certain manufacturing processes. We continuously enhance our production processes, reducing die sizes,increasing bits per wafer and transitioning to higher density products. In 2015,2018, we significantly increased our volume production of 1Xnm process node DRAM and expect to achieve bit crossover by the majorityend of the first quarter of 2019. In 2018, we continued to ramp our DRAM production was manufactured on our 25nm line-width process technologies. We expect that by64-layer 3D NAND technology and achieved bit output crossover relative to 32-layer in the second half of 2016 the majority of our DRAM production will be manufactured on our 20nm line-width process technology. In 2015, a majority of our NAND Flash production was manufactured on our 20nm and 16nm line-width process technology. We began production of 3D NAND Flash products in 2015 and expect that in 2016 the majority of our NAND Flash production will be manufactured using 16nm line-width process technology or 3D NAND technology.2018.

Wafer fabrication occurs in a highly controlled,highly-controlled clean environment to minimize dust and other yield and quality-limiting contaminants. Despite stringent manufacturing controls, individual circuits may be nonfunctional or wafers may need to be scrapped due to equipment errors, minute impurities in materials, defects in photomasks, circuit design marginalities or defects, and dust particles.air particle defects. Success of our manufacturing operations depends largely on minimizing defects to maximize yield of high-quality circuits. In this regard, we employ rigorous quality controls throughout the manufacturing, screening, and testing processes. We are able to recover certain devices by testing and grading them to their highest level of functionality.



We sell semiconductor products in both packaged and unpackaged (i.e., "bare die") forms. Our packaged products include memory modules, SSDs, and managed NAND including MCPs and eMMCs. We assemble many products in-house and, in some cases, outsource assembly services for certain memory modules, SSDs, and MCPs.

We test our products at various stages in the manufacturing process, perform high temperature burn-in on finished products, and conduct numerous quality control inspections throughout the entire production flow.flow, and perform high temperature burn-in on finished products. In addition, we use our proprietary AMBYX™ line of intelligent test and burn-in systems to perform simultaneous circuit tests of semiconductor memory die during the burn-in process, capturing quality and reliability data and reducing testing time and cost.

We sell semiconductor products in both packaged and unpackaged (i.e. "bare die") forms. Our packaged products include memory modules, SSDs, MCPs, managed NAND, memory cards, USB devices, and HMCs. We assemble many products in-house and, in some cases, outsource assembly services where we can reduce costs and minimize our capital investment. We contract with independent foundries and assembly and testing companies to manufacture NAND Flash media products such as memory cards and USB devices.

In recent years, we have produced an increasingly broad portfolio of products and system solutions, which enhances our ability to allocate resources to our most profitable products but also increases the complexity of our manufacturing and supply chain operations. Although our product lines generally use similar manufacturing processes, our overall cost efficiency can be affected by frequent conversions to new products, the allocation of manufacturing capacity to more complex, smaller-volume parts,products, and the reallocation of manufacturing capacity across various product lines.


Arrangements with Intel

IMFT

Since 2006, we have owned 51% of IMFT, a joint venture between us and 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. In the first quarter of 2018, IMFT discontinued production of NAND and subsequent to that time has been entirely focused on 3D XPoint memory production. IMFT sales to Intel were $507 million, $438 million, and $457 million in 2018, 2017, and 2016, respectively.
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The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. At 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 a price that approximates Intel's interest in the net book value of IMFT plus member debt at the time of the closing. If Intel exercises its put right, we can elect to set the closing date of the transaction any time between 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 between 50% and 100%, at Intel's choice, of Intel's immediately preceding six-month period pre-closing volumes of IMFT products for the first six-month period following the closing and between 0% and 100%, at Intel's choice, 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.

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 capital request, either in the form of an equity contribution or member debt financing. In 2018, Intel provided debt financing of $1.01 billion to IMFT pursuant to the terms of the IMFT joint venture agreement. 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.

R&D Arrangements

We have agreements to jointly develop NAND and 3D XPoint technologies with Intel. We continue to jointly develop NAND technologies with Intel through the third generation of 3D NAND, which is expected to be completed in the second half of 2019. In the second quarter of 2018, we and Intel agreed to independently develop subsequent generations of 3D NAND in order to better optimize the technology and products for our respective business needs. We continue to jointly develop 3D XPoint technologies with Intel through the second generation of 3D XPoint technology, which is expected to be completed in the second half of 2019. To better optimize 3D XPoint technology for our product roadmap and maximize the benefits for our



Availabilitycustomers and shareholders, in the fourth quarter of Raw2018, we announced that we will no longer jointly develop with Intel subsequent generations of 3D XPoint technology. As a result of the above actions, we expect reimbursements under our cost-sharing agreements to decrease in early fiscal 2019.


Supply Chain, Materials, and Use of Third-Party Service Providers

Our supply chain and operations require raware dependent on the availability of materials that meet exacting standards.standards and the use of third parties to provide us with components and services. We generally have multiple sources of supply for our raw materials; however,materials and services. However, only a limited number of suppliers are capable of delivering certain raw materials and services that meet our standards. Instandards and, in some cases, materials, components, or services are provided by a single supplier. Various factors could reduce the availability and increase the cost of raw materials or components such as chemicals, silicon wafers, photomasks, chemicals, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, targets, and molding compound.reticle glass blanks. Shortages or increases in lead times may occur from time to time in the future. Our manufacturing processes are also dependent on our relationships with third-party manufacturers of controllers used in a number of our products and with outsourced semiconductor assembly and test providers, contract manufacturers, logistic carriers, and other service providers. Certain raw materials are primarily available in certain countries, including rare earth minerals available primarily from China, and trade disputes or other political or economic conditions may limit our availability to obtain such raw materials. We and/or our suppliers and service providers could be affected by tariffs, embargoes or other trade restrictions, as well as laws and regulations enacted in response to concerns regarding climate change, conflict minerals, and responsible sourcing practices, which could increase the cost and limit the supply of our raw materials.materials and/or increase the cost. 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. IfThe disruption of our supply of raw materials, is disruptedcomponents, services, or the extension of our lead times extended,could have a material adverse effect on our business, results of operations, or financial condition could be materially adversely affected.condition. We monitor and manage supply-chain activities to mitigate risks associated with raw materials and service providers.


Marketing and Customers

OurWe continue to transform how we interact with our customers from transactional opportunistic sales of standardized memory components to collaborative relationships where we work with our customers to understand their unique opportunities and challenges. We engage with our customers early in the product life-cycle to identify and design features and performance characteristics into our products are sold into computethat our customers need in their end products, and graphics, mobile, SSDthen manufacture products that better anticipate and otherfit their changing needs. By collaborating with our customers on their design needs in a changing end market, we differentiate our memory and storage automotive, industrial, medical, and other embedded and server markets. Market concentrations from 2015 net sales were approximately as follows: 25% for compute and graphics (including desktop PCs, notebooks, and workstations); 25% for mobile; 20% for SSD and other storage; 15% for server; and 10% for automotive, industrial, medical, and other embedded. Salessolutions, which provides greater value to Kingston, primarily DRAM, were 11% of our net sales in 2015 and 10% of our net sales in 2014. Sales to Intel, primarily NAND Flash products through IMFT were 8% of our net sales in 2015, 8% of our net sales in 2014, and 10% of our net sales in 2013. Sales to HP, primarily DRAM, were 7% of our net sales in 2015, 9% of our net sales in 2014, and 10% of our net sales in 2013.customers.

Our semiconductor memory and storage products are offered under theour Micron,®, Lexar, Crucial,®, SpecTek®, and Elpida®Ballistix brand names and through private labels. We market our semiconductor memory and storage products primarily through our own direct sales force and maintain sales or representative offices in our primary markets around the world. We sell Lexar-branded NAND Flash memory products primarily through retail channels and our Crucial-branded products through a web-based customer direct sales channel as well as through channel and distribution partners. Our products are also offered through independent sales representatives, distributors, and distributors. Independente-tailers. Our independent sales representatives obtain orders subject to final acceptance by us, and are compensated on a commission basis. Wewe make shipments against thesethe orders directly to the customer. Distributorsour customers. Our distributors carry our products in inventory and typically sell a variety of other semiconductor products, including competitors' products. We maintain inventory at locations in close proximity to certain key customers to facilitate rapid delivery of products. Many of our customers require a thorough review or qualification of semiconductor products, which may take several months.

In each of the last three years, approximately one-half of our total net sales were to our top ten customers. For other information regarding our concentrations and customers, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Certain Concentrations."




Backlog

Because of volatile industry conditions, customers are generally reluctant to enter into long-term, fixed-price contracts. Accordingly, new order volumes for our semiconductormemory and storage products may fluctuate significantly. We typically accept orders with acknowledgment that the terms may be adjusted to reflect market conditions at the date of shipment. For these reasons, we do not believe that our order backlog as of any particular date is a reliable indicator of actual sales for any succeeding period.


Product Warranty

Because the design and manufacturing process for semiconductor products is highly complex, it is possible that we may produce products that do not comply with customerapplicable specifications, contain defects, or are otherwise incompatible with end uses. In accordance with industry practice, we generally provide a limited warranty that our products are in compliance with ourapplicable specifications existing at the time of delivery.delivery and will operate to those specifications during a stated warranty period. Under our generalstandard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our generalstandard terms and conditions.




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Competition

We face intense competition in the semiconductor memory marketand storage markets from a number of companies, including Intel; Samsung Electronics Co., Ltd.; SanDisk Corporation; SK Hynix Inc.; Toshiba Memory Corporation; and ToshibaWestern 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, investcompete. Consolidation of industry competitors could put us at a competitive disadvantage. In addition, some governments have provided and may continue to provide significant assistance, financial or otherwise, to some of our competitors or to new entrants and may intervene in technology,support of national industries and/or competitors. In particular, we face the threat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and capitalize on growth opportunities. various state-owned or affiliated entities that is intended to advance China's stated national policy objectives. In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies.

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 significantly increasedsignificant increases in worldwide supply and downward pressure on prices. ManyIncreases in worldwide supply of semiconductor memory and storage also result from fabrication 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 high-volumecompetitors 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 declines in average selling prices for our products and would adversely affect our business, results of operations, and financial condition. If competitors are more successful at developing or implementing new product or process technology, their products could have cost or performance advantages.

Certain of our memory and storage products are manufactured to industry standard specifications and, as such, have similar performance characteristics to those of our competitors. For these high-volume memory products, the principal competitive factors are generally price and performance characteristics including: operating speed, power consumption, reliability, compatibility, size, and form factors. For our other memory products, the aforementioned performance characteristics generally take precedence over pricing.




Research and Development

Our process technology R&D efforts are focused primarily on development of successively smaller line-width process technologies, as well astechnology that enables continuous improvement to cost structures and performance enhancements for our future products. We are also focused on developing new fundamentally different memory structures, materials, and packages, which are designed to facilitate our transition to next generation memory products. Additional process technology R&D efforts focus on the enablement of advanced computing, storage, and mobile memory architectures, the investigation of new opportunities that leverage our core semiconductor expertise, and the development of new manufacturing materials. Product design and development efforts include our high density DDR3DDR4 and DDR4DDR5 DRAM and LPDRAM products as well as high density and mobile NAND Flash memory (including 3D NAND (including TLC and MLC and TLCQLC technologies), 3D XPoint memory, NOR Flash memory,SSDs (including firmware and controllers), managed NAND, specialty memory, SSDs, HMCs, and other memory technologies and systems.

Our R&D expenses were $1.54 billion, $1.37 billion, and $931 million in 2015, 2014, and 2013, respectively. We generally share with Intel the costs of product design and process development activities for NAND Flash memory and 3D XPoint memory. Our R&D expenses reflect net reductions of $231 million, $162 million, and $176 million in 2015, 2014, and 2013, respectively, as a result of reimbursements under our Intel and other cost-sharing arrangements.

To compete in the semiconductor memory industry,and storage markets, we must continue to develop technologically advanced products and processes. We believe that expansion of our semiconductor product offerings is necessary to meet expected market demand for specific memory and storage products and solutions. Our process, design, and package development efforts occur at multiple locations across the world, with our largest R&D center located in Boise, Idaho and other significant R&D centers in Japan, China, Italy, Singapore, Taiwan, and other sites in the U.S. In addition, we develop photolithography mask technology at our MP Mask joint venture facility in Boise.United States.

R&D expenses vary primarily with the number of development wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. We deem developmentDevelopment of a product is deemed complete once the product has been thoroughly reviewedwhen it is qualified through reviews and testedtests for performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification.

Our R&D expenses were $2.14 billion, $1.82 billion, and $1.62 billion for 2018, 2017, and 2016, respectively. We share the cost of certain product and process development activities under development agreements with partners, including agreements to jointly develop NAND and 3D XPoint technologies with Intel. These R&D expenses reflect net reductions of $201 million, $213 million, and $205 million for 2018, 2017, and 2016, respectively, as a result of reimbursements under our cost-sharing arrangements with development partners.


Geographic Information

Sales to customers outside the United States totaled $13.63 billion for 2015 and included sales of $6.66 billion in China, $2.24 billion in Taiwan, $1.25 billion in Europe, $1.03 billion in Japan, and $2.04 billion in the rest of the Asia Pacific region (excluding China, Japan, and Taiwan).  Sales to customers outside the United States totaled $13.81 billion for 2014 and $7.56 billion for 2013.  As of September 3, 2015, we had net property, plant, and equipment of $3.64 billion in the United States, $3.24 billion in Singapore, $2.17 billion in Japan, $1.07 billion in Taiwan, $331 million in China, and $96 million in other countries.  (SeeSee "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Geographic Information" and "Item 1A. Risk Factors.Information.")




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Patents and Licenses

In recent years, we have beenWe are a recognized as a leader in per capita and quality of patents issued. As of September 3, 2015August 30, 2018, we owned approximately 16,80013,750 active U.S. patents and 4,2005,000 active foreign patents. In addition, we have thousands of U.S. and foreign patent applications pending. Our patents have various terms expiring through 2034.2038.

From time to time, we sell and/or license our technology to other parties and continue to pursue opportunities to monetize our investment in our intellectual property through partnering and other arrangements. We have also jointly developed memory and storage product and process technology with third parties on a limited basis.

We have a number of patent and intellectual property license agreements and have, from time to time, licensed or sold our intellectual property to third parties. Some of these license agreements require us to make one-time or periodic payments while others have resulted in us receiving payments. We may need to obtain additional patent licenses or renew existing license agreements in the future, and we may enter into additional sales or licenses of intellectual property and partnering arrangements. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable terms.to us.




Employees

As of September 3, 2015,August 30, 2018, we had approximately 31,80036,000 employees.


Environmental Compliance

GovernmentWe approach environmental stewardship and sustainability proactively to ensure we meet all government regulations impose various environmental controls onregarding raw materials, and discharges, emissions, and solid wastes from our manufacturing processes. In 2015, ourOur wafer fabrication facilities continued to conform to the requirements of the International Organization for Standardization ("ISO") 14001 environmental management systems standard to ensure we are continuously improving our performance. As part of the ISO 14001 certification.  To continue certification,framework, we must meet annual requirements in environmental policy, compliance, planning, management, structure and responsibility, training, communication, document control, operational control, emergency preparedness and response, record keeping, and management review. While we have not experienced any material adverse effects to our operations from environmental regulations, changes in the regulations could necessitate additional capital expenditures, modification of our operations, or other compliance actions.


Directors and Executive Officers of the Registrant

Our executive officers are appointed annually by theour Board of Directors (the "Board") and our directors are elected annually by our shareholders. Any directors appointed by the Board of Directors to fill vacancies on the Board serve until the next election by theour shareholders. All officers and directors serve until their successors are duly chosen or elected and qualified, except in the case of earlier death, resignation, or removal.

As of September 3, 2015,August 30, 2018, the following executive officers and directors were subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.

NameAgePosition
Mark W. Adams51President
April S. Arnzen44Vice President, Human Resources
Scott J. DeBoer49Vice President, Research & Development
D. Mark Durcan54Director and Chief Executive Officer
Ernest E. Maddock57Chief Financial Officer and Vice President, Finance
Joel L. Poppen51Vice President, Legal Affairs, General Counsel, and Corporate Secretary
Brian M. Shirley46Vice President, Memory Technology and Solutions
Steven L. Thorsen, Jr.50Vice President, Worldwide Sales
Robert L. Bailey58Director
Richard M. Beyer66Director
Patrick J. Byrne54Director
D. Warren A. East53Director
Mercedes Johnson61Director
Lawrence N. Mondry55Director
Robert E. Switz68Chairman


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Mark W. Adams joined us in June 2006 and served as our Vice President of Digital Media and Vice President of Worldwide Sales before being appointed our President in February 2012. Mr. Adams also served as our interim Chief Financial Officer from March 2015 through May 2015. From January 2006, until he joined us, Mr. Adams was the Chief Operating Officer of Lexar Media, Inc. Mr. Adams served as the Vice President of Sales and Marketing for Creative Labs, Inc. from December 2002 to January 2006. From March 2000 to September 2002, Mr. Adams was the Chief Executive Officer of Coresma, Inc. Mr. Adams currently serves as a member of the Board of Directors for Cadence Design Systems, Inc. Mr. Adams holds a BA in Economics from Boston College and an MBA from Harvard Business School.
Name Age Officer/ Director Since Position
April S. Arnzen 47 2015 Senior Vice President, Human Resources
Manish Bhatia 46 2018 Executive Vice President, Global Operations
Scott J. DeBoer 52 2007 Executive Vice President, Technology Development
Sanjay Mehrotra 60 2017 President and Chief Executive Officer, Director
Joel L. Poppen 54 2013 Senior Vice President, Legal Affairs, General Counsel, and Corporate Secretary
Sumit Sadana 49 2017 Executive Vice President and Chief Business Officer
Steven L. Thorsen, Jr. 53 2012 Senior Vice President, Worldwide Sales
David A. Zinsner 49 2018 Senior Vice President and Chief Financial Officer
Robert L. Bailey 61 2007 Director
Richard M. Beyer 69 2013 Director
Patrick J. Byrne 57 2011 Director
Mercedes Johnson 64 2005 Director
Lawrence N. Mondry 58 2005 Director
Robert E. Switz 71 2006 Chairman of the Board of Directors

April S. Arnzen joined us in December 1996 and has served in various leadership positions since that time. Ms. Arnzen was appointed ournamed Senior Vice President, Human Resources in January 2015.June 2017. Ms. Arnzen holds a BS in Human Resource Management and Marketing from the University of Idaho.Idaho, and is a graduate of the Stanford Graduate School of Business Executive Program.

Manish Bhatia joined us in October 2017 as our Executive Vice President of Global Operations. From May 2016 to October 2017, Mr. Bhatia served as the Executive Vice President of Silicon Operations at Western Digital Corporation. From March 2010 to May 2016, Mr. Bhatia held several executive roles at SanDisk Corporation including Executive Vice President of Worldwide Operations when it was acquired by Western Digital in May 2016. Mr. Bhatia holds a BS and MS in Mechanical Engineering and an MBA, each from the Massachusetts Institute of Technology.



Scott J. DeBoer joined us in February 1995 and has served in various leadership positions since that time. Dr. DeBoer became an officer in May 2007 and, in January 2013, he was appointed ournamed Executive Vice President, Research & Development.Technology Development in June 2017. Dr. DeBoer holds a PhD in Electrical Engineering and an MS in Physics from Iowa State University. He completed his undergraduate degree at Hastings College.

D. Mark DurcanSanjay Mehrotra joined us in June 1984May 2017 as our President, Chief Executive Officer, and has servedDirector. Mr. Mehrotra co-founded and led SanDisk Corporation as a start-up in various positions since that time.  Mr. Durcan was appointed our Chief Operating Officer1988 until its eventual sale in February 2006,May 2016, serving as its President in June 2007, and Director and Chief Executive Officer in February 2012. Mr. Durcan has been an officer since 1996.  Mr. Durcan isfrom January 2011 to May 2016, and as a member of theits Board of Directors of AmerisourceBergen Corporation and Freescale Semiconductor, Inc.from July 2010 to May 2016. Mr. Durcan holds a BS and MChE in Chemical Engineering from Rice University.

Ernest E. Maddock joined us in June 2015 as our Chief Financial Officer and Vice President, Finance. From April 2013 until he joined us, Mr. MaddockMehrotra served as Executive Vice President and Chief Financial Officer of Riverbed Technology. From October 2008 to April 2013, Mr. Maddock served as Executive Vice President and Chief Financial Officer of Lam Research Corporation after serving as Lam's Vice President of Global Operations from October 2003 to September 2008. Mr. Maddock currently serves as a member of the Board of Directors for Intersil Corporation.Cavium, Inc. from July 2009 until July 2018 and for Western Digital Corp. from May 2016 to February 2017. Mr. MaddockMehrotra holds a BS and an MS in Industrial ManagementElectrical Engineering and Computer Science from the Georgia InstituteUniversity of TechnologyCalifornia, Berkeley and an MBA from Georgia State University.is a graduate of the Stanford Graduate School of Business Executive Program.

Joel L. Poppen joined us in October 1995 and has held various leadership positions since that time. HeMr. Poppen was appointed to his current positionnamed Senior Vice President, Legal Affairs, General Counsel, and Corporate Secretary in December 2013.June 2017. Mr. Poppen holds a BS in Electrical Engineering from the University of Illinois and a JD from the Duke University School of Law.

Brian M. ShirleySumit Sadana joined us in August 1992June 2017 as our Executive Vice President and hasChief Business Officer. From April 2010 to May 2016, Mr. Sadana served in various leadership positions since that time.  Mr. Shirley becameroles at SanDisk Corporation, including Executive Vice President, Chief Strategy Officer, and General Manager, Enterprise Solutions when it was acquired by Western Digital in May 2016. Mr. Sadana currently serves on the Board of Memory in February 2006, Vice PresidentDirectors of DRAM Solutions in June 2010 and has served as Vice President, Memory Technology and Solutions since April 2014.Silicon Laboratories, Inc. Mr. ShirleySadana holds a BSB.Tech. in Electrical Engineering from the Indian Institute of Technology, Kharagpur, India and an MS in Electrical Engineering from Stanford University.

David A. Zinsner joined us in February 2018 as our Senior Vice President and Chief Financial Officer. From April 2017 to February 2018, Mr. Zinsner served as the President and Chief Operating Officer of Affirmed Networks. From January 2009 to April 2017, Mr. Zinsner served as the Senior Vice President of Finance and Chief Financial Officer of Analog Devices. From July 2005 to January 2009, Mr. Zinsner served as the Senior Vice President and Chief Financial Officer of Intersil Corporation. Mr. Zinsner holds an MBA, Finance and Accounting from Vanderbilt University and a BS in Industrial Management from Carnegie Mellon University.

Steven L. Thorsen, Jr. joined us in September 1988 and has served in various leadership positions since that time including Vice President and Chief Procurement Officer.time. Mr. Thorsen becamewas named Senior Vice President, Worldwide Sales in April 2012.June 2017. Mr. Thorsen holds a BA in Business Administration from Washington State University. On September 20, 2018, Mr. Thorsen announced his intention to retire from Micron in early November 2018. Mr. Thorsen served as our Senior Vice President, Worldwide Sales through September 30, 2018.

Robert L. Bailey was Chief Executive Officer of Blue Willow Systems, Inc. from August 2017 until August 2018. Blue Willow is a software as a service resident safety platform for senior living facilities. Mr. Bailey was the Chairman of the Board of Directors of PMC-Sierra, Inc. from 2005 until May 2011 and also served as PMC's Chairman from February 2000 until February 2003. Mr. Bailey served as a director of PMC from October 1996 to May 2011. He also served as the Chief Executive Officer of PMC from July 1997 until May 2008. PMC is a leading providerWithin the past five years, Mr. Bailey also served on the Board of broadband communication and semiconductor storage solutions for the next-generation Internet.Directors of Entropic Communications. Mr. Bailey holds a BS in Electrical Engineering from the University of Bridgeport and an MBA from the University of Dallas.  Mr. Bailey has served on our Board of Directors since 2007.

Richard M. Beyer was Chairman and CEOChief Executive Officer of Freescale Semiconductor, Inc. from 2008 through June 2012 and served as a director with Freescale until April 2013. Prior to Freescale, Mr. Beyer was President, Chief Executive Officer and a Directordirector of Intersil Corporation from 2002 to 2008. He also has also previously served in executive management roles at FVC.com, VLSI Technology, and National Semiconductor Corporation. Within the past five years, Mr. Beyer served on the Board of Directors of Microsemi Corporation, Analog Devices, Inc., and Freescale. He currently serves on the Board of Directors of Dialog Semiconductor and Analog Devices, Inc.Semiconductor. Mr. Beyer served three years as an officer in the United States Marine Corps. He holds a BA and an MA in Russian from Georgetown University and an MBA in Marketing and International Business from Columbia University Graduate School of Business. Mr. Beyer has served on ouris the Chair of the Board of Directors since 2013.Directors' Governance and Sustainability Committee.


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Patrick J. Byrne has served as Senior Vice President of Fortive Corporation since July 2016, when Danaher Corporation completed the separation of its Test & Measurement and Industrial Technologies segments. Mr. Byrne was President of Tektronix, a subsidiary of Danaher, Corporation, sincefrom July 2014. Mr. Byrne2014 to July 2016. Previously, he was Vice President of Strategy and Business Development and Chief Technical Officer of Danaher from November 2012 to July 2014. Danaher designs, manufactures, and markets innovative products and services to professional, medical, industrial, and commercial customers. Prior to that, Mr. Byrne served as Director, President and Chief Executive Officer of Intermec, Inc. from 2007 to May 2012. Within the past five years, Mr. Byrne was with Agilent Technologies, Inc. from 1999 to 2007 and


served in various management positions.on the Board of Directors of Flow International. Mr. Byrne holds a BS in Electrical Engineering from the University of California, Berkeley and an MS in Electrical Engineering from Stanford University.  Mr. Byrne has served on our Board of Directors since 2011.

D. Warren A. East has served as CEO of Rolls-Royce Holdings plc since July 2015. Mr. East was the CEO of ARM Holdings PLC from October 2001 to July 2013. He originally joined ARM in 1994, and served in various roles prior to being appointed CEO. He currently serves on the Board of Directors of Rolls-Royce plc. Mr. East is a chartered engineer, Distinguished Fellow of the British Computer Society, Fellow of the Institution of Engineering and Technology, Fellow of the Royal Academy of Engineering, and a Companion of the Chartered Management Institute. Mr. East holds a BA BSc(Eng) and an MBA MEng in Engineering Science from Oxford University and an MBA and honorary doctorate from Cranfield University. Mr. East has served on our Board of Directors since 2013.

Mercedes Johnson was the Senior Vice President and Chief Financial Officer of Avago Technologies Limited, a supplier of analog interface components for communications, industrial, and consumer applications, from December 2005 to August 2008. She also served as the Senior Vice President, Finance of Lam Research Corporation from June 2004 to January 2005 and as Lam's Chief Financial Officer from May 1997 to May 2004. Ms. Johnson holds a degree in Accounting from the University of Buenos Aires and currently serves on the Board of Directors for Intersil Corporation, Juniper Networks, Inc., and Teradyne, Inc., and Synopsys, Inc. She also served on the Board of Directors for Intersil Corporation from August 2005 to February 2017. Ms. Johnson is the ChairmanChair of the Board'sBoard of Directors' Audit Committee and has served on our Board of Directors since 2005.Finance Committee.

Lawrence N. Mondry has been the President and Chief Executive Officer of Stream Gas & Electric, Ltd., a provider of energy, mobile, and protective services, since February 2016. Mr. Mondry was the Chief Executive Officer of Apollo Brands, a consumer products portfolio company, from February 2014 to February 2015. Mr. Mondry was the Chief Executive Officer of Flexi Compras Corporation, a rent-to-own retailer, from June 2013 to February 2014. Mr. Mondry was the President and Chief Executive Officer of CSK Auto Corporation, a specialty retailer of automotive aftermarket parts, from August 2007 to July 2008. Prior to his appointment at CSK, Mr. Mondry served as the Chief Executive Officer of CompUSA Inc. from November 2003 to May 2006. Mr. Mondry joined CompUSA in 1990.  Mr. Mondry holds a BA degree from Boston University.  Mr. Mondry is the ChairmanChair of the Board's Compensation Committee and Governance Committee and has served on our Board of Directors since 2005.Directors' Compensation Committee.

Robert E. Switz was the Chairman, President, and Chief Executive Officer of ADC Telecommunications, Inc., a supplier of network infrastructure products and services, from August 2003 until December 2010, when Tyco Electronics Ltd. acquired ADC. Mr. Switz joined ADC in 1994 and throughout his career there held numerous leadership positions. Within the past five years, Mr. Switz served on the Board of Directors of GT Advanced Technologies Inc., Broadcom Corporation, Cyan, Inc., Pulse Electronics Corporation, Leap Wireless International, Inc., and Gigamon, Inc. Mr. Switz currently serves on the Board of Directors for Marvell Technology Group Ltd. and FireEye, Inc. Mr. Switz holds an MBA from the University of Bridgeport and a BS in Business Administration from Quinnipiac University. Mr. Switz also serves on the Board of Directors for Broadcom Corporation, GT Advanced Technologies, and Gigamon Inc.  Mr. Switz was appointed Chairman of the Board in 2012 and has served on our Board of Directors since 2006.in 2012.

There are no family relationships between any of our directors or executive officers.


AdditionalAvailable Information

Micron, Lexar, Crucial, SpecTek, Elpida, JumpDrive, any associated logos,a Delaware corporation, was incorporated in 1978. Our executive offices are located at 8000 South Federal Way, Boise, Idaho 83716-9632 and all other Micron trademarksour telephone number is (208) 368-4000. Information about us is available at our website, www.micron.com. Also available on our website are our: Corporate Governance Guidelines, Governance and Sustainability Committee Charter, Compensation Committee Charter, Audit Committee Charter, Finance Committee Charter, and Code of Business Conduct and Ethics. Any amendments or waivers of our Code of Business Conduct and Ethics will also be posted on our website within four business days of the propertyamendment or waiver. Copies of Micron. 3D XPointthese documents are available to shareholders upon request. Information contained or referenced on our website is not incorporated by reference and does not form a trademarkpart of Intel inthis Annual Report on Form 10-K.

We use our investor relations website http://investors.micron.com as a routine channel for distribution of important information, including news releases, analyst presentations, and financial information. Our filings are available free of charge on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the U.S. and/Securities and Exchange Commission, including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K, our proxy statements, and any amendments to those reports or statements. The Securities and Exchange Commission’s ("SEC") website, www.sec.gov, contains reports, proxy and information statements, and other countries. Other product namesinformation regarding issuers that file electronically with the SEC. Materials filed or trademarks thatfurnished by us with the SEC are also available at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room is available by calling (800) SEC-0330. The content on any website referred to in this Form 10-K is not ownedincorporated by Micron are for identification purposes only and may be the registered or unregistered trademarks of their respective owners.reference in this Form 10-K unless expressly noted.

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ITEM 1A. RISK FACTORS

In addition to the factors discussed elsewhere in this Form 10-K, 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. Our operations could also be affected by other factors that are presently unknown to us or not considered significant. Any of the factors below could have a material adverse effect on behalfour business, results of us.operations, financial 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 NAND Flash*
     
  (percentage change in average selling prices)
2015 from 2014 (11)% (17)%
2014 from 2013 6 % (23)%
2013 from 2012 (11)% (18)%
2012 from 2011 (45)% (55)%
2011 from 2010 (39)% (12)%
* Trade NAND Flash excludes sales to Intel from IMFT.    
  DRAM Trade NAND
     
  (percentage change in average selling prices)
2018 from 2017 37 % (11)%
2017 from 2016 19 % (9)%
2016 from 2015 (35)% (20)%
2015 from 2014 (11)% (17)%
2014 from 2013 6 % (23)%

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, difficultydifficulties 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, and changes in process technologies, orand 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.; SanDisk Corporation; SK Hynix Inc.; Toshiba Memory Corporation; and ToshibaWestern 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 assistance, financial assistanceor otherwise, to some of our competitors or to new entrants. entrants and may intervene in support of national industries and/or competitors. In particular, we face the threat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance China's stated national policy objectives. In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies.

Our competitors generally seek to increase silicon capacity, improve yields, and reduce die size and minimize mask levels in their product designs. Transitions to smaller line-width process technologies and product and process improvements have resulteddesigns which 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. In recent periods, weWe and some


of our competitors have begun construction on or announced plans to buildramp, 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.


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Debt obligations If competitors are more successful at developing or implementing new product or process technology, their products could adversely affect our financial condition.have cost or performance advantages.

In recent periods, our debt levels have increased due to the capital intensiveThe competitive nature of our business, business acquisitions, and restructuring of our capital structure. As of September 3, 2015, we had debt with a carrying value of $7.34 billion. In addition, the conversion value in excess of principal amount for our convertible notes outstanding as of September 3, 2015 was $553 million. In 2015, we paid $1.43 billion to repurchase and settle conversion obligations for convertible notes with a principal amount of $489 million. In 2014, we paid $2.30 billion to repurchase and settle conversion obligations for convertible notes with a principal amount of $1.09 billion. As of September 3, 2015, we had (1) revolving credit facilities available that provide for up to $842 million of additional financing and (2) a term loan agreement available to obtain financing collateralized by certain property, plant, and equipment in the amount of 6.90 billion New Taiwan dollars or an equivalent amount in U.S. dollars (approximately $213 million as of September 3, 2015), of which we drew $40 million in 2015. The availability of these revolving and other facilities is subject to certain conditions, including outstanding balances of trade receivables; inventories; collateralization of certain property, plant, and equipment; and other conditions. Events and circumstances may occur which would cause us to not be able to satisfy these applicable drawdown conditions and utilize these facilities. We have in the past and expect in the future to continue to incur additional 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;
continue to dilute our earnings per share as a result of the conversion provisions in our convertible notes;
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;
limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D, and other general corporate requirements;
adversely impact our credit rating, which could increase future borrowing costs; and
increase our vulnerability to adverse economic and semiconductor memory industry conditions.

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 general 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 amount sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. If we are unable to generate sufficient cash flow to service our debt 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 were 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 20162019 for property, plant, and equipment will be approximately $5.3$10.5 billion plus or minus 5%, which reflects the offset of amounts we expect to $5.8 billion.be funded by our partners. Investments in capital expenditures, net of amounts funded by our partners, were $8.20 billion for 2015 were $4.12 billion. In addition, as a result of the MMJ acquisition and our capacity expansion in Singapore, we expect our future capital spending will be higher than our historical levels. As of September 3, 2015, we had cash and marketable investments of $5.63 billion, which included $748 million held by the MMJ Group and $134 million held by IMFT, none of which is generally available to finance our other operations.2018.


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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 and their subsidiaries are subject to certain restrictions on dividends, loans, and advances. The plans of reorganization of the MMJ Companies prohibit the MMJ Companiesis 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. These prohibitions would also effectively prevent the subsidiaries of the MMJ Companies from paying cash dividends to us in respect of the shares of such subsidiaries owned by the MMJ Companies, as any such dividends would have to be first paid to the MMJ Companies which are prohibited from repaying those amounts to us as dividends under the plans of reorganization. In addition, pursuant to an order of the JapanTokyo District Court, the MMJ Companies cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court. Moreover, loans or advances by subsidiaries of the MMJ CompaniesTokyo District Court and may, under certain circumstances, be considered outside of the ordinary course of business and subject to approval of the legal trustees and Japan Court.trustee. As a result, the assets of the MMJ Companies and their subsidiaries, while available to satisfy the MMJ Companies' installment payments and the other obligations, capital expenditures, and other operating needs of the MMJ Companies and their subsidiaries, 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,of MMJ, may require consent of MMJ's trustees and/or the JapanTokyo District 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.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 Qimonda 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 55% of our total shares in Inotera as of September 3, 2015, 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 Court issued judgments:  (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera shares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on such shares and all other benefits; (4) denying Qimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Court issued interlocutory judgments ordering, among other things:  (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by it 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 it 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. The next hearing on the matter has not yet been scheduled.

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.  As of September 3, 2015, the Inotera Shares had a carrying value for purposes of our financial reporting of $683 million and a market value of $846 million.


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

Our key semiconductor memory technologies of DRAM, NAND Flash, and NOR Flashstorage products and technologies face technological barriers to continue to meet long-term customer needs. These barriers include potential limitations on the ability to shrink products in order to reduce costs, meetstacking additional 3D memory layers, increasing bits per cell (i.e., cell levels), meeting higher density requirements, and improveimproving power consumption and reliability. To meet these requirements, weWe may face technological barriers to continue to shrink our products at our current or historical rate, which has generally reduced per-unit cost. We have invested and expect thatto continue to invest in R&D for new and existing products, which involves significant risk and uncertainties. We may be unable to recover our investment in R&D or otherwise realize the economic benefits of reducing die size or increasing memory technologies will be developed by the semiconductor memory industry.and storage densities. Our competitors are working to develop new memory and storage technologies that may offer performance and/or 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 technologies.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 the fourth quarter of 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 and market development may be unsuccessful.

We are developing new products, including system-level memory and storage products thatand 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. Additionally, we are increasingly differentiating our products and solutions to meet the specific demands of our customers, which increases our reliance on our customer's ability to accurately forecast the end-customer's needs and preferences. As a result, our product demand forecasts may be impacted significantly by the strategic actions of our customers. In order to continue our success, we must develop, manufacture, and qualify the products our customers need at the time they need those products. The process to develop DRAM, NAND Flash, NOR 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. In addition, some of our components have long lead-times, requiring us to place orders several months in advance of anticipated demand. Such long lead-times increase the risk of excess inventory or loss of sales in the event our forecasts vary substantially from actual demand. 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 establish 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 joint development partnership and our IMFT joint venture with Intel, to develop new manufacturing process technologies and products and to manufacture certain 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, including the following:
•diverging interests between us and our partners and disagreements on the following:
◦ongoing or future development, manufacturing, or operational activities;
◦the amount, timing, or nature of further investments; and
◦commercial terms in our joint ventures or strategic relationships;
•competition from our partners;
•access by our partners to our proprietary product and process technology which they may use;
•difficulties in transferring technology to joint ventures;
•difficulties and delays in ramping production at joint ventures;
•limited control over the operations of our joint ventures;
•inability of our partners to meet their commitments to us or our joint ventures;
differences in participation on funding capital investments in our joint ventures due to differing business models or long-term business goals;
•inadequate cash flows to fund increased capital requirements of our joint ventures;
•difficulties or delays in collecting amounts due to us from our joint ventures and partners;
•disputes with partners regarding the terms of arrangements or that terms of such arrangements are unfavorable; and
•changes in tax, legal, or regulatory requirements that 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 for 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 customers' 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 need to 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 product orproducts 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.

Debt obligations could adversely affect our financial condition.
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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. As of August 30, 2018, we had debt with a carrying value of $4.64 billion and may borrow up to an additional $2.00 billion under an undrawn revolving credit facility. In addition, as of August 30, 2018, the conversion value in excess of principal of our convertible notes was $1.85 billion, based on the trading price of our common stock of $52.76 per share on such date.



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

A determinationrequire 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, such as applicable cross payment default and/or cross-acceleration provisions;
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 amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to not be able to satisfy applicable draw-down conditions and utilize our revolving credit facility. If we are unable to generate sufficient cash flows 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 are 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 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 secrets, 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 or other proprietary information. 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 "Part II. Financial InformationII – Item 8. Financial Statements and Supplementary Data – 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 timeone-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.

Our joint ventures and strategic relationships involve numerous risks.

Weto us. The failure to obtain or renew licenses as necessary could have entered into strategic relationships to manufacture products and develop new manufacturing process technologies and products. These relationships include our IMFT joint venture with Intel, our Inotera joint venture with Nanya, and our MP Mask joint venture with Photronics. 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 partnersa material adverse effect 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, our partners may decide not to join us in funding capital investment in our joint ventures, which may result in higher levels of cash expenditures by us;
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 conditioncondition.

We have been served with complaints in Chinese courts alleging patent infringement.

We have been served with complaints in Chinese courts alleging that we infringe certain Chinese patents by manufacturing and selling certain products in China. The complaints seek orders requiring us to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages plus court fees.

We are unable to predict the outcome of these 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 operations in China, products, and/or manufacturing processes. Any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies.")

Litigation could have a material adverse effect on our business, results of operations, or financial condition.

From time to time we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business or otherwise, both domestically and internationally. Any claim, with or without merit, could result in significant legal fees that could negatively impact our financial results, disrupt our operations, and require significant attention from our management. We could be subject to litigation or arbitration disputes arising from our relationships with vendors or customers, supply agreements, or contractual obligations with our subcontractors or business partners. We may also be associated with and subject to litigation arising from the actions of our subcontractors or business partners. We may also be subject to litigation as a result of indemnities we issue, primarily with our customers, the terms of our product warranties, and from product liability claims. As we continue to focus on developing system solutions with manufacturers of consumer products, including autonomous driving, augmented reality, and others, we may be materially adversely affected.exposed to greater potential for personal liability claims against us as a result of consumers' use of those products. There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters. Exposures to various litigation could lead to significant costs and expenses as we defend claims, are required to pay damage awards, or enter into settlement agreements, any of which 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 and our subcontractors 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 and our subcontractors maintain operations and continuously implement new product and process technology at our manufacturing operationsfacilities, which are widely dispersed in multiple locations in several countries including the U.S.,United States, Singapore, Taiwan, Japan, Malaysia, and China. Additionally, our control over operations at IMFT Inotera, MP Mask, and Tera Probe is limited by our agreements with our partners.Intel. From time to time, wethere have experiencedbeen disruptions in ourthe manufacturing process as a result of power outages, improperly functioning equipment, disruptions in supply of raw materials or components, 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 affecthave a material adverse effect on our business, results of operations, or financial condition.


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The operations of the MMJ Companies are subject to continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings.Increases in tariffs or other trade restrictions or taxes on our products or equipment and supplies could have an adverse impact on our operations.

Because the plans of reorganization of the MMJ Companies provide for ongoing payments to creditors following the closingIn 2018, 88% of our acquisitionsales were to customers located outside the United States. We also purchase a significant portion of MMJ,equipment and supplies from suppliers outside the United States. Additionally, a significant portion of our facilities are located outside the United States, including Taiwan, Singapore, Japan, Proceedingsand China. The United States and other countries have levied tariffs and taxes on certain goods. General trade tensions between the U.S. and China have been escalating in 2018, with three rounds of U.S. tariffs on Chinese goods taking effect in July, August, and September 2018, each followed by a round of retaliatory Chinese tariffs on U.S. goods. Some of our products are continuing,included in these announced tariffs. Higher duties on existing tariffs and further rounds of tariffs have been announced or threatened by U.S. and Chinese leaders. If the MMJ Companies remain subjectU.S. were to the oversight of the Japan Court and of the trustees (including a trustee designated by us, whoimpose additional tariffs on components that 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 anyor our suppliers source from China, our cost for 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 trusteecomponents would increase. We may also be required for matters that would likelyincur increases in manufacturing costs due to our efforts to mitigate the impact of tariffs on our customers and our operations. Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit our ability to produce products, increase our selling and/or 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 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 integrate 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.

Our Inotera supply agreements involves numerous risks.

Since January 2013, we have purchased all of Inotera's DRAM output at a price reflecting a discount from market prices for our comparable components under a supply agreement. In the second quarter of 2015, we executed a supply agreement, to be effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replace the current agreement. Under the 2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin between Inotera and us.  The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period, and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions.  Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. Our Inotera supply agreements involve numerous risks including the following:

higher costs for supply obtained under the Inotera supply agreements as compared to our wholly-owned facilities;
difficulties and delays in ramping production at Inotera;
difficulties in transferring technology to Inotera; and
difficulties in coming to an agreement with Nanya regarding major corporate decisions, such as capital expenditures or capital structure.

In 2015 and in 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities, due to the pricing formula of the current agreement and strong market conditions. For 2015, we purchased $2.37 billion of DRAM products from Inotera and our supply from Inotera accounted for 35% of our aggregate DRAM gigabit production. If our supply of DRAM from Inotera is impacted, our business, results of operations, or financial conditionconditions.

We must attract, retain, and motivate highly skilled employees.

To remain competitive, we must attract, retain, and motivate executives and other highly skilled employees. Hiring and retaining qualified executives, engineers, technical staff, and sales representatives are critical to our business, and competition for experienced employees in our industry can be intense. Our inability to attract and retain key employees may inhibit our ability to expand our business operations. Additionally, changes to immigration policies in the numerous countries in which we operate, including the United States, may limit our ability to hire and/or retain talent in specific locations. If our total compensation programs and workplace culture cease to be viewed as competitive, our ability to attract, retain, and motivate employees could be materially adversely affected.weakened, 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.

16On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda'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 (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares as of August 30, 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 court issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera Shares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on the Inotera Shares and all other benefits; (4) denying Qimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by Micron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by Micron B.V. from ownership of the Inotera Shares. The interlocutory judgments 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 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 may expose us to litigation if the confidential information of our customers, suppliers, or employees is 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, there aresignificant transactions and balances are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the British pound, euro, shekel, Singapore dollar, New Taiwan dollar, yen, and yuan. We recorded net losses fromyen. Although we hedge our primary exposures to changes in currency exchange rates of $27 million for 2015, $28 million for 2014, and $229 million for 2013. Based onfrom our foreign currency exposures from monetary assets and liabilities, offset by balance sheetthe effectiveness of these hedges we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $3 million as of September 3, 2015.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 exchangeExchange 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 may be adversely affected.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, compliance programs, and/or environmental, health and safety, anti-corruption, human resource, or other policies or practices; and
impairment of acquired intangible assets, and 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, 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 theprices. The global memory and storage industry is experiencing a period ofhas experienced consolidation as a result of these market conditions and other factors, and we may continue to consolidate. We engage, from time to time, in discussions regarding potential acquisitions and similar opportunities arising out of these industry conditions.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, high-technologytechnology 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 network security could expose us to losses.

We manage and store on our network systems various proprietary information and sensitive or confidential data relating to our operations. We also process, store, and transmit large amounts of data relating to our customers and employees, including sensitive personal information. Unauthorized users may be able to gain access to our network system and steal 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. Attacks on our network systems could result in significant losses and damage our reputation with customers, and could expose us to litigation if the confidential information of our customers, suppliers, or employees is compromised.

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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 Commission 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 relatedhave a 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.

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

We operate in a number of locations outside the U.S., including in Singapore, and, to a lesser extent, Taiwan, where we have tax incentive agreements that are, in part, conditional 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, 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 2011 through 2015.  In addition, tax returns open to examination in multiple other taxing jurisdictions range from the years 2007 to 2015. 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.

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 3, 2015, our U.S. federal and state net operating loss carryforwards, including uncertain tax benefits, were $4.02 billion and $2.05 billion, respectively, which, if not utilized, will expire at various dates from 2016 through 2035. As of September 3, 2015, our foreign net operating loss carryforwards were $5.15 billion, including $3.81 billion pertaining to Japan, which, if not utilized, substantially all will expire at various dates from 2017 through 2025. As of September 3, 2015, we had valuation allowances of $1.16 billion and $710 million against our net deferred tax assets in the U.S. and Japan, respectively.

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

Our business, results of operations, require rawor financial condition could be adversely affected by the limited availability and quality of materials, supplies, and in certain cases, third party services,capital equipment, or the dependency on third-party service providers.

Our supply chain and operations are dependent on the availability of materials that meet exacting standards.standards and the use of third parties to provide us with components and services. 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. Instandards and, 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, controllers, photomasks, chemicals, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, targets, and molding compound.reticle glass blanks. Shortages or increases in lead times may occur from time to time in the future. Our manufacturing processes are also dependent on our relationships with third-party manufacturers of controllers used in a number of our products and with outsourced semiconductor assembly and test providers, contract manufacturers, logistic carriers, and other service providers. Certain raw materials are primarily available in certain countries, including rare earth minerals available primarily from China, and trade disputes or other political or economic conditions may limit our availability to obtain such raw materials. We and/or our suppliers and service providers could be affected by tariffs, embargoes or other trade restrictions, as well as laws and regulations enacted in response to concerns regarding climate change, conflict minerals, and responsible sourcing practices, which could increase the cost and limit the supply of our raw materials.materials and/or increase the cost. 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. IfThe disruption of our supply of raw materials, components, services, or services is disrupted orthe extension of our lead times extended,could have a material adverse effect on our business, results of operations, or financial condition could be materially adversely affected.condition.


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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'ssuppliers' limited capacity. Our inability to obtain this 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 thea ramp. If we are unableOur 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 could be materially adversely affected.condition.

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, solid-state drives,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 losslosses 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 could be materially adversely affected.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, including earthquakes or tsunamis, that could disrupt operations.operations or result in construction delays. 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.

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

We are subject to income taxes in the U.S. and many foreign jurisdictions. Changes to income tax laws and regulations in any of the jurisdictions in which we operate, or in the interpretation of such laws, could significantly increase our effective tax rate and ultimately reduce our cash flow from operating activities and otherwise have a material adverse effect on our financial condition. For example, as a result of the Tax Cuts and Jobs Act (the "Tax Act") enacted on December 22, 2017 by the United States, our effective tax rate may increase to the low teens percentage in 2019, depending on the amount and geographic mix of our taxable income. Additionally, various levels of government are increasingly focused on tax reform and other legislative action to increase tax revenue. Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development, which represents a coalition of member countries and recommended changes to numerous long-standing tax principles. If adopted by countries, such changes, as well as changes in U.S. federal and state tax laws or in taxing jurisdictions' administrative interpretations, decisions, policies, and positions, 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 affectaffected by numerous factors, including challenges by tax authorities to our tax positions and intercompany transfer pricing agreements, failure to meet performance obligations with respect to tax incentive agreements, and changes in tax laws and regulations. Additionally, we file income tax returns with the U.S. federal government, various U.S. states, and various other jurisdictions throughout the world and certain tax returns may remain open to examination for several years. 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.

We may incur additional restructuring charges in future periods.

From time to time, we have, and may in the future, enter into restructure initiatives in order to, among other items, streamline our operations, respond to changes in business conditions, our markets or product offerings, or to centralize certain key functions. We may not realize expected savings or other benefits from our restructure activities and may incur additional restructure charges or other losses in future periods associated with other initiatives. In connection with any 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 have a material adverse effect on 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.

SalesA substantial majority of our consolidated net sales are to customers outside the United States approximated 84% of our consolidated net sales for 2015.States. 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;
protectiontheft 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 ourthe 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 affectMany of our customers, suppliers, and vendors operate internationally and are also subject to the foregoing risks. If we or our customers, suppliers, or vendors are impacted by these risks, it could have a material adverse effect on our business, results of operations, or financial condition.

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

19Increased 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 SEC 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 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. In addition, many of our customers have or are planning to adopt responsible sourcing programs with requirements that our broader in terms of minerals and geographies than DRC conflict minerals programs. Our inability to comply with requirements regarding the use of conflict and other minerals could have a material adverse effect on our business, results of operations, or financial condition.



We and others 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 engage various third parties to represent us or otherwise act on our behalf and we partner with other companies in our joint ventures, all of whom are also subject to a broad array of laws and regulations. Our engagement with these third parties and 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 third-party agents or joint ventures, to comply with these laws and regulations could 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 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 Tokyo District 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 Tokyo District 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 Tokyo District 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 Tokyo District 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 Tokyo District 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 Tokyo District 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 Tokyo District Court and may be required to obtain the consent of the Tokyo District 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 impactaffect 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 Tokyo District 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 Tokyo District Court during the pendency of the corporate reorganization proceedings could have a material adverse effect on our business, results of operations, or financial condition.


ITEM 1B. UNRESOLVED STAFF COMMENTS


None.



ITEM 2. PROPERTIES


Our corporate headquarters are located in Boise, Idaho. The following is a summary of our principal facilities as of September 3, 2015:

August 30, 2018:
Location Principal Operations
Boise, IdahoR&D, including wafer fabrication; reticle manufacturing; test and module assembly
Lehi, UtahTaiwan Wafer fabrication,
Manassas, VirginiaWafer fabrication component assembly and test, module assembly and test
Singapore ThreeR&D, wafer fabrication, facilities and a test,component assembly and test, module assembly facility
Xi’an, ChinaModule assembly and test
Muar, MalaysiaUnited States AssemblyR&D, wafer fabrication, reticle manufacturing
JapanR&D and wafer fabrication
ChinaComponent assembly and test, module assembly and test
Taichung City, TaiwanMalaysia Wafer fabrication
Hiroshima, JapanWafer fabrication and R&D
Akita, JapanModuleComponent assembly and test

Substantially all of the capacity of the facilities listed above is fully utilized. Our Inotera joint venture has a 300mm wafer fabrication facility in Kueishan, Taiwan. Under our supply agreement with Inotera, we purchase all of the output of Inotera. We also own andor lease a number of other facilities in locations throughout the world that are used for design, R&D, and sales and marketing activities.

Our facility in Lehi Substantially all of our manufacturing capacity is owned and operated byfully utilized. Certain of our IMFT joint venture with Intel.properties are collateral to secured borrowing arrangements. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Noncontrolling Interests in Subsidiaries – IMFT.Debt.")

In December 2014, we announced plans to add approximately 255,000 square feet of clean room space to our fabrication facility in Singapore to implement 3D NAND Flash production.  Construction of the additional space began in 2015 with initial manufacturing output likely in 2017.

We believe that our existing facilities are suitable and adequate for our present purposes. We do not identify or allocate assets by operating segment.segment, other than goodwill. (See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Geographic Information.")



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ITEM 3. LEGAL PROCEEDINGS

See "Part II – Financial Information – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies" and "Item 1A. Risk Factors" for a discussion of other legal proceedings.

Reorganization Proceedings of the MMJ Companies

On July 31,In 2013, we completed the acquisition of Elpida Memory, Inc., now known as MMJ, a Japanese corporation, pursuant to the terms and conditions of an Agreement on Support for Reorganization Companies (as amended, the "Sponsor Agreement") that we entered into on July 2,in 2012 with the trustees of the MMJ Companies' pending corporate reorganization proceedings under the Corporate Reorganization Act of Japan.

The MMJ Companies filed petitions for commencement of corporate reorganization proceedings with the Japan Court under the Corporate Reorganization Act of Japan on February 27, 2012, and the Japan Court issued an order to commence the reorganization proceedings (the "Japan Proceedings") on March 23, 2012. On July 2, 2012, we entered into the Sponsor Agreement with the legal trustees of the MMJ Companies and the Japan Court approved the Sponsor Agreement. Under the Sponsor Agreement, we agreed to provide certain support for the reorganization of the MMJ Companies and the trustees agreed to prepare and seek approval from the JapanTokyo District Court and the MMJ Companies' creditors of plansplan of reorganization consistent with such support.

The trustees initially submitted the proposed plansplan of reorganization for the MMJ Companies to the Japan Court on August 21, 2012 and submitted final proposed plans on October 29, 2012. On October 31, 2012, the Japan Court approved submission of the trustees' proposed plans of reorganization to creditors for approval. On February 26, 2013, the MMJ Companies' creditors approved the reorganization plans and on February 28, 2013, the Japan Court issued an order approving the plans of reorganization. Appeals filed by certain creditors of MMJ in Japan challenging the plan approval order issued by the Japan Court were denied.

In a related action, MMJ filed a Verified Petition for Recognition and Chapter 15 Relief in the United States Bankruptcy Court for the District of Delaware (the "U.S. Court") on March 19, 2012 and, on April 24, 2012, the U.S. Court entered an order that, among other things, recognized MMJ's corporate reorganization proceeding as a foreign main proceeding pursuant to 11 U.S.C. § 1517(b). On June 25, 2013, the U.S. Court issued a recognition order, which recognized the order of the Japan Court approving MMJ's plan of reorganization. On November 19, 2013, the U.S. Court closed the U.S. Chapter 15 proceeding.

The plans of reorganization provideprovides for payments by the MMJ Companies to their secured and unsecured creditors in an aggregate amount of 200 billion yen, less certain expenses of the reorganization proceedings and certain other items. The plansplan of reorganization also provided for the investment by us pursuant to the Sponsor Agreement of 60 billion yen ($615 million) paid at closing in cash into MMJ in exchange for 100% ownership of MMJ's equity and the use of such investment to fund the initial installment payment by the MMJ Companies to their creditors of 60 billion yen, subject to reduction for certain items specified in the Sponsor Agreement and plansplan of reorganization.



Under MMJ's plan of reorganization, secured creditors will recover 100% of the amount of their fixed claims and unsecured creditors will recover at least 17.4% of the amount of their fixed claims. The actual recovery of unsecured creditors will be higher, however, based in part on events and circumstances occurring following the plan approval. The remaining portion of the unsecured claims will be discharged, without payment, over the period that payments are made pursuant to the plansplan of reorganization. The secured creditors will be paid in full on or before the sixth installment payment date, while the unsecured creditors will be paid in seven installments. The unsecured creditors of MAI were scheduled to be paid in seven installments; however, in connection with our sale of MAI in 2017, the remaining MAI creditor obligation was paid in full and MAI's reorganization proceedings were closed.

Because MMJ's plan of reorganization provides that secured creditors will recover 100% of the amount of their claims, whereas unsecured creditors will recover 19% of the amount of their claims. The secured creditors of MAI were paid in full on the first installment payment date, while the unsecured creditors will be paid in seven installments.


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Because the plans of reorganization of the MMJ Companies provide for ongoing payments to creditors following the closing of the MMJ acquisition, the reorganization proceedings in Japan Proceedings are continuing and the MMJ Companies remainremains subject to the oversight of the JapanTokyo District 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 JapanTokyo District Court, who we refer to as the legal trustee), pending completion of the reorganization proceedings. The business trustee makes decisions in relation tois responsible for overseeing the operation of the businesses of the MMJ Companies, other than decisionsoversight in relation to acts that need to be carried out in connection with the Japan Proceedings, which are the responsibility of the legal trustee. TheMMJ's reorganization proceedings in Japan, Proceedings and oversight of the JapanTokyo District Court, will continue until the final creditor payment is made under the MMJ Companies' plansMMJ'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. The MMJ Companies may petition the JapanTokyo District Court for an early termination of the Japan Proceedingsreorganization proceedings once two-thirds of all payments under the plansplan of reorganization are made. Although such early terminations are customarily granted, there can be no assurance that the JapanTokyo District Court will grant any such petition in thesethis particular cases.case.

During the pendency of the reorganization proceedings in Japan, Proceedings, the MMJ Companies areis obligated to provide periodic financial reports to the JapanTokyo District Court and may be required to obtain the consent of the JapanTokyo District Court prior to taking a number of significant actions relating to theirits 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 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 plansMMJ's plan of reorganization of the MMJ Companies.reorganization. Accordingly, during the pendency of the reorganization proceedings in Japan, Proceedings, our ability to effectively integrate the MMJ Companies as part of our global operations or to cause the MMJ Companies to take certain actions that we deem advisable for theirits businesses could be adversely affected if the JapanTokyo District Court or the legal trustee is unwilling to consent to various actions that we may wish to take with respect to the MMJ Companies.

For a discussion of other legal proceedings, see "Part II Financial Information – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies" and "Item 1A. Risk Factors."MMJ.


ITEM 4. MINE SAFETY DISCLOSURES


Not Applicable.


22



PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES


Market for Common Stock

Our common stock is listed on the NASDAQ Global Select Market and trades under the symbol "MU." The following table represents the high and low closing sales prices for our common stock as reported by NASDAQ for each quarter of 20152018 and 2014, as reported by Bloomberg L.P.:

2017:
 Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
2015:        
2018        
High $26.59
 $29.52
 $36.49
 $36.10
 $61.39
 $62.62
 $48.81
 $49.68
Low 14.27
 26.31
 28.35
 27.03
 47.10
 45.89
 39.40
 32.07
                
2014:        
2017        
High $34.64
 $28.61
 $25.49
 $21.17
 $32.50
 $30.77
 $24.79
 $20.13
Low 28.59
 21.13
 20.67
 13.57
 27.49
 25.15
 18.61
 16.62

Holders of Record

As of October 21, 2015,8, 2018, there were 2,3782,062 shareholders of record of our common stock.


Dividends

We have not declared or paid cash dividends since 1996 and do not intend to pay cash dividends for the foreseeable future.

As a result of the Japan Proceedings, for so long as such proceedings continue, the MMJ Group is subject to certain restrictions on dividends, loans, and advances. Our ability to access IMFT's cash and other assets through dividends, loans, or advances, including to finance our other operations, is subject to agreement by Intel.


Equity Compensation Plan Information

The information required by this item is incorporated by reference from the information to be set forthincluded in our 20152018 Proxy Statement under the section entitled "Equity Compensation Plan Information," which will be filed with the Securities and Exchange Commission within 120 days after September 3, 2015.

August 30, 2018.

Issuer PurchasesPurchase of Equity Securities

Since the first quarter of 2015,Common Stock Repurchase Authorization: In May 2018, we announced that our Board of Directors had authorized the discretionary repurchase of up to $1.25$10 billion of our outstanding common stock $250 million of which was authorizedbeginning in the first quarter of 2016. Any repurchases under the authorization2019. We may be made in open marketpurchase shares on a discretionary basis through open-market purchases, block trades, privately negotiatedprivately-negotiated transactions, derivative transactions, and/or derivative transactions,pursuant to a Rule 10b5-1 trading plan, subject to market conditions and our ongoing determination that it isof the best use of available cash. During the fourth quarter of 2015, we purchased 35,495,175 shares of ourThe repurchase authorization does not obligate us to acquire any common stock through open market transactions.stock.

During the fourth quarter of 2015, we also received 2,685,482 shares of our common stock from the share settlement for a portion of our 2031 Capped Calls.

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Period (a) Total number of shares purchased 
(b) Average price paid per share(1)
 (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(2)
June 5, 2015–July 9, 2015 2,196,500
 $18.67
 2,196,500
 $766,818,080
July 10, 2015–August 6, 2015 19,961,832
 18.21
 18,507,698
 430,818,357
August 7, 2015–September 3, 2015 16,022,325
 17.69
 14,790,977
 169,836,046
    38,180,657
 18.02
 35,495,175
  
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
June 1, 2018–July 5, 2018 —
 $—
    
July 6, 2018–August 2, 2018 —
 —
    
August 3, 2018–August 30, 2018 —
 —
    
    —
     $10,000,000,000
(1) Excludes commissions.
(2) Does not include $250 million repurchase authorization received in the first quarterFor information on repurchases of 2016.our common stock subsequent to August 30, 2018, see "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Micron Shareholders' Equity."

In our consolidated financial statements, we also treat sharesShares of common stock withheld as payment of withholding taxes orand 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.

amounts in the table above.

Performance Graph

The following graph illustrates a five-year comparison of cumulative total returns for our common stock, the S&P 500 Composite Index, and the Philadelphia Semiconductor Index (SOX) from August 31, 2010,2013, through August 31, 2015.2018. We operate on a 52 or 53 week fiscal year which ends on the Thursday closest to August 31. Accordingly, the last day of our fiscal year varies. For consistent presentation and comparison to the industry indices shown herein, we have calculated our stock performance graph assuming an August 31 year end.

a2013q4_chart-42352a02a09.jpg
Note: Management cautions that the stock price performance information shown in the graph above is provided as of August 31 for the years presented and may not be indicative of current stock price levels or future stock price performance.


24



The performance graph above assumes $100 was invested on August 31, 20102013 in common stock of Micron Technology, Inc., the S&P 500 Composite Index, and the Philadelphia Semiconductor Index (SOX). Any dividends paid during the period presented were assumed to be reinvested. The performance was plotted using the following data:

 2010 2011 2012 2013 2014 2015 2013 2014 2015 2016 2017 2018
Micron Technology, Inc. $100
 $92
 $96
 $210
 $505
 $254
 $100
 $240
 $121
 $122
 $236
 $387
S&P 500 Composite Index 100
 119
 140
 166
 208
 209
 100
 125
 126
 142
 165
 197
Philadelphia Semiconductor Index (SOX) 100
 117
 132
 156
 223
 217
 100
 143
 139
 186
 263
 336




ITEM 6. SELECTED FINANCIAL DATA


 2015 2014 2013 2012 2011 2018 2017 2016 2015 2014
                    
 (in millions except per share amounts) (in millions except per share amounts)
Net sales $16,192
 $16,358
 $9,073
 $8,234
 $8,788
 $30,391
 $20,322
 $12,399
 $16,192
 $16,358
Gross margin 5,215
 5,437
 1,847
 968
 1,758
 17,891
 8,436
 2,505
 5,215
 5,437
Operating income (loss) 2,998
 3,087
 236
 (612) 761
Operating income 14,994
 5,868
 168
 2,998
 3,087
Net income (loss) 2,899
 3,079
 1,194
 (1,031) 190
 14,138
 5,090
 (275) 2,899
 3,079
Net income (loss) attributable to Micron 2,899
 3,045
 1,190
 (1,032) 167
 14,135
 5,089
 (276) 2,899
 3,045
Diluted earnings (loss) per share 2.47
 2.54
 1.13
 (1.04) 0.17
 11.51
 4.41
 (0.27) 2.47
 2.54
                    
Cash and short-term investments 3,521
 4,534
 3,101
 2,559
 2,160
 6,802
 5,428
 4,398
 3,521
 4,534
Total current assets 8,596
 10,245
 8,911
 5,758
 5,832
 16,039
 12,457
 9,495
 8,596
 10,245
Property, plant and equipment, net 10,554
 8,682
 7,626
 7,103
 7,555
Property, plant, and equipment 23,672
 19,431
 14,686
 10,554
 8,682
Total assets 24,143
 22,416
 19,068
 14,295
 14,730
 43,376
 35,336
 27,540
 24,143
 22,416
Total current liabilities 3,905
 4,791
 4,122
 2,243
 2,480
 5,754
 5,334
 4,835
 3,905
 4,791
Long-term debt 6,252
 4,893
 4,406
 3,005
 1,839
 3,777
 9,872
 9,154
 6,252
 4,893
Redeemable convertible notes 49
 68
 —
 —
 —
 3
 21
 —
 49
 68
Redeemable noncontrolling interest 97
 —
 —
 —
 —
Total Micron shareholders’ equity 12,302
 10,760
 9,142
 7,700
 8,470
 32,294
 18,621
 12,080
 12,302
 10,760
Noncontrolling interests in subsidiaries 937
 802
 864
 717
 1,382
 870
 849
 848
 937
 802
Total equity 13,239
 11,562
 10,006
 8,417
 9,852
 33,164
 19,470

12,928

13,239

11,562

On July 31, 2013, we completed the MMJ Acquisition, in whichIn December 2016, we acquired Elpida, now known as MMJ, and a controllingthe 67% remaining interest in Rexchip, now known as MMT.Inotera and began consolidating Inotera's operating results. In the periods presented above through December 2016, Inotera sold DRAM products exclusively to us through supply agreements. The MMJ Group's products include mobile DRAM targeted to mobile phonescash paid for the Inotera Acquisition was funded, in part, with a term loan of 80 billion New Taiwan dollars and tablets and computing DRAM targeted to desktop PCs, servers, notebooks, and workstations. The MMJ Acquisition included a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan, a 300mm DRAM wafer fabrication facility in Taichung City, Taiwan, and an assembly and test facility located in Akita, Japan. In connection with$986 million from the MMJ Acquisition, we recorded net assetssale of $2.60 billion, noncontrolling interests58 million shares of $168 million, and a gain on the transaction of $1.48 billion in 2013.our common stock. (See "ItemItem 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Micron Memory Japan, Inc.")

We entered into a joint venture relationship with Intel to form IMFT in 2006 and IM Flash Singapore, LLP ("IMFS") in 2007 to manufacture NAND Flash memory products for the exclusive useAcquisition of the members. We have owned 51% of IMFT from inception through September 3, 2015. Our ownership percentage of IMFS had increased from 51% at inception to 82% as of April 6, 2012 due to a series of contributions by us that were not fully matched by Intel. On April 6, 2012, we entered into a series of agreements with Intel to restructure IMFT and IMFS, in which we acquired Intel's remaining 18% interest in IMFS for $466 million. In addition, we acquired IMFT's assets located at our Virginia wafer fabrication facility, for which Intel received a distribution from IMFT of $139 million. For both transactions, the amounts Intel received approximated the book values of Intel's interests in the assets acquired. We consolidate IMFT (and IMFS through April 6, 2012) and report Intel's ownership interests as noncontrolling interests in subsidiaries. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Noncontrolling Interests in Subsidiaries – IMFT.Inotera.")

25





ITEM 7. 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 in "Liquidity and Capital Resources" regarding our pursuit of additional financing and debt restructuring, regarding capital spending in 2016, regarding the expansion of our clean room space in Singapore, regarding 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 regarding the timing of payments for certain contractual obligations; and in "Recently Issued Accounting Standards" regarding the impact of adopting these new standards. 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 I, Item 1A. Risk Factors." This discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended September 3, 2015.August 30, 2018. 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 2015 contains 53 weeks2018, 2017, and our fiscal 2014 and fiscal 20132016 each containedcontain 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 ("MD&A") 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. MD&A is organized as follows:

Overview: Overview of our operations and business.
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 potential sources of liquidity.
Off-Balance Sheet Arrangements: Description of off-balance sheet arrangements.
Critical Accounting Estimates: Accounting estimates that we believe are most important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
Recently Adopted and Issued Accounting Standards


Overview

For an overview of our business, see "Part I – Item 1. – Business – Overview."




26



Results of Operations

Consolidated Results

For the year ended 2015 2014 2013 2018 2017 2016
Net sales $16,192
 100 % $16,358
 100 % $9,073
 100 % $30,391
 100 % $20,322
 100 % $12,399
 100 %
Cost of goods sold 10,977
 68 % 10,921
 67 % 7,226
 80 % 12,500
 41 % 11,886
 58 % 9,894
 80 %
Gross margin 5,215
 32 % 5,437
 33 % 1,847
 20 % 17,891
 59 % 8,436
 42 % 2,505
 20 %
                        
Selling, general and administrative 719
 4 % 707
 4 % 562
 6 %
Selling, general, and administrative 813
 3 % 743
 4 % 659
 5 %
Research and development 1,540
 10 % 1,371
 8 % 931
 10 % 2,141
 7 % 1,824
 9 % 1,617
 13 %
Restructure and asset impairments 3
 — % 40
 — % 126
 1 %
Other operating (income) expense, net (45) — % 232
 1 % (8) — % (57) — % 1
 — % 61
 — %
Operating income 2,998
 19 % 3,087
 19 % 236
 3 % 14,994
 49 % 5,868
 29 % 168
 1 %
   

           

        
Interest income (expense), net (336) (2)% (329) (2)% (217) (2)% (222) (1)% (560) (3)% (395) (3)%
Gain on MMJ Acquisition —
 — % (33) — % 1,484
 16 %
Other non-operating income (expense), net (53) — % 8
 — % (218) (2)% (465) (2)% (112) (1)% (54) — %
Income tax (provision) benefit (157) (1)% (128) (1)% (8) — %
Income tax provision (168) (1)% (114) (1)% (19) — %
Equity in net income (loss) of equity method investees 447
 3 % 474
 3 % (83) (1)% (1) — % 8
 — % 25
 — %
Net income attributable to noncontrolling interests —
 — % (34) — % (4) — % (3) — % (1) — % (1) — %
Net income attributable to Micron $2,899
 18 % $3,045
 19 % $1,190
 13 %
Net income (loss) attributable to Micron $14,135
 47 % $5,089
 25 % $(276) (2)%

Business Segments

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 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.

Acquisition of Micron Memory Japan, Inc.

On July 31, 2013, we completed the MMJ Acquisition, in which we acquired Elpida, now known as MMJ, and a controlling interest in Rexchip, now known as MMT. In 2014, we purchased additional interests in MMT, increasing our ownership interest to 99.5%. In connection with the MMJ Acquisition, we recorded net assets of $2.60 billion, noncontrolling interests of $168 million and a gain on the transaction of $1.48 billion in 2013. In the second quarter of 2014, the provisional amounts recorded in connection with the MMJ Acquisition were adjusted, primarily for pre-petition liabilities. As a result, other non-operating expense for 2014 included these measurement period adjustments of $33 million. (See "Item 8. Financial Statements – Notes to Consolidated Financial Statements – Micron Memory Japan, Inc.")

The MMJ Acquisition included a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan, a 300mm DRAM wafer fabrication facility in Taichung City, Taiwan, and an assembly and test facility located in Akita, Japan. These wafer fabrication facilities together represented approximately 30% of our total wafer capacity for 2015. The MMJ Group's products include mobile DRAM targeted to mobile phones and tablets, and computing DRAM targeted to desktop PCs, servers, notebooks, and workstations. The operations from the MMJ Acquisition are included primarily in the MBU and CNBU segments.


27



Total Net Sales
For the year ended 2015 2014 2013
CNBU $6,725
 42% $7,333
 45% $3,462
 38%
MBU 3,692
 23% 3,627
 22% 1,214
 13%
SBU 3,687
 23% 3,480
 21% 2,824
 31%
EBU 1,999
 12% 1,774
 11% 1,275
 14%
All Other 89
 1% 144
 1% 298
 3%
  $16,192
 
 $16,358
 

 $9,073
 

Percentages reflect rounding and may not total 100%.

Total net sales for 2015 decreased 1%2018 increased 50% as compared to 20142017. Higher sales in 2018 for both DRAM and NAND products as compared to 2017 were driven by strong execution in delivering high-value products featuring our 1Xnm DRAM and 64-layer 3D NAND technologies combined with strong demand for products across our primary markets. Sales of DRAM products for 2018 increased 64% from 2017 primarily due to lower CNBUan increase in average selling prices of approximately 35% and an increase in sales volumes of approximately 20% as a result of decreases in DRAMstrong market conditions, particularly for cloud, enterprise, mobile, and graphics markets, combined with increased sales asinto high-value markets. Sales of trade NAND products for 2018 increased 26% from 2017 despite declines in average selling prices outpacedprimarily due to an increase in sales volumes of approximately 40% driven by increases in gigabit sales volumes. SBUof high-value SSD and MBUmobile managed NAND products enabled by strong demand and our execution in delivering 3D NAND products.

Total net sales for 20152017 increased 64% as compared to 20142016 due to strong conditions across our primary markets, particularly for enterprise, mobile, client, and SSD storage. Sales of DRAM products for 2017 increased 80% from 2016 due to an increase in sales volumes of approximately 50% and an increase in average selling prices of approximately 20% as a result of higherthe strong market conditions. Sales of trade NAND Flash salesproducts for 2017 increased approximately 50% as compared to 2016 due to increasesan increase in gigabit sales volumes of approximately 65% resulting from strong market demand for our 3D NAND products, which was partially offset by declines in average selling prices. EBU sales for 2015 increased as compared to 2014 due to higher sales volumes as a result of increasesIncreases in market demand. The increases in gigabitDRAM and NAND sales volumes for 20152017 as compared 2016 were primarily attributable toenabled by higher manufacturing output due to improvements in product and process technologies.technology and solid execution. Increases in sales volumes for NAND products for 2017 were also enabled by key customer qualifications of new products.

Total net sales for 2014 increased 80% as compared to 2013 primarily due to higher CNBU and MBU sales resulting from the MMJ Acquisition. Net sales for all segments in 2014 also benefitted, as compared to 2013, from increases in DRAM and NAND Flash sales volumes driven primarily by higher manufacturing output as a result of improvements in product and process technology and an increased share of output from Inotera.

Overall Gross Margin

Our overall gross margin percentage declinedincreased to 32%59% for 20152018 from 33%42% for 20142017 primarily due to declinesfavorable market conditions across key markets combined with strong execution in average selling prices partially offset bydelivering products featuring advanced technologies, including 1Xnm DRAM and 64-layer 3D NAND, enabling manufacturing cost reductions. CNBU and SBU experienced declines in gross margin percentage for 2015For 2018 as compared to 2014 as declines in average selling price outpaced2017, pricing for DRAM products increased while manufacturing cost reductions. MBU's gross margin percentagecosts declined and, for 2015 improved as compared to 2014 asNAND products, manufacturing cost reductions outpaced declines in average selling prices.

SinceOur overall gross margin percentage increased to 42% for 2017 from 20% for 2016 primarily due to strong markets that drove favorable pricing conditions and solid execution in manufacturing cost reductions from improvements in product and process technology. For 2017 as compared to 2016, pricing for DRAM products increased while manufacturing costs declined


and, for NAND products, manufacturing cost reductions outpaced declines in selling prices. We periodically assess the estimated useful lives of our property, plant, and equipment. In the fourth quarter of 2016, we identified factors such as the lengthening period of time between DRAM product technology node transitions, an increased re-use rate of equipment, and industry trends. As a result, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years in the fourth quarter of 2016. The effect of the revision was not material for 2016 and reduced depreciation expense at the time by approximately $100 million per quarter.

From January 2013 through December 2015, we have purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components under a supply agreement. Incomponents. After December 2015 through December 6, 2016, the second quarter of 2015,date we executed a supply agreement, to be effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replaceacquired the current agreement. Under the 2016 Supply Agreement,remaining interest in Inotera, the price for DRAM products sold to us will bewe purchased from Inotera was based on a formula that equally sharesshared margin between Inotera and us. The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period,Under these agreements, we purchased $504 million and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions.  Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. In 2015 and 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities, due to the pricing formula of the current agreement and strong market conditions.  Under the market conditions prevailing in the fourth quarter of 2015, costs of products purchased under the current agreement were higher than they would have been under the pricing formula of the 2016 Supply Agreement. We purchased $2.37 billion, $2.68 billion, and $1.26$1.43 billion of DRAM products from Inotera in 2015, 2014,2017 and 2013, respectively.2016, respectively, which represented 9% of our aggregate DRAM gigabit production for 2017 and 30% for 2016.

Our overall gross margin percentage improved to 33% for 2014 from 20% for 2013 primarily due to improvements in the gross margin percentage for CNBU and MBU as a result of higher margins for DRAM products. The gross margin improvements for CNBU and MBU for 2014 as compared to 2013 resulted primarily from the MMJ Acquisition, manufacturing cost reductions, and higher average selling prices for CNBU. Our gross margin percentage on sales of DRAM products for 2014 improved from 2013 primarily due to reductions in costs and increases in average selling prices. Cost reductions for 2014 primarily reflected improvements in product and process technologies and the comparatively lower manufacturing costs of the MMJ Group, partially offset by higher costs for product obtained under the Inotera supply agreement. For 2014 and the fourth quarter of 2013, our costs of goods sold for DRAM products included the sale of the MMJ Group's inventories recorded at fair value in the MMJ Acquisition, which was higher than the manufacturing cost of such inventories. This increased our costs of goods sold by approximately $153 million for 2014 and $41 million for 2013.


28



Operating ResultsNet Sales by Business Segments

CNBU

Unit
For the year ended 2015 2014 2013
Net sales $6,725
 $7,333
 $3,462
Operating income 1,481
 1,957
 160
For the year ended 2018 2017 2016
CNBU $15,252
 50% $8,624
 42% $4,529
 37%
MBU 6,579
 22% 4,424
 22% 2,569
 21%
SBU 5,022
 17% 4,514
 22% 3,262
 26%
EBU 3,479
 11% 2,695
 13% 1,939
 16%
All Other 59
 —% 65
 —% 100
 1%
  $30,391
 
 $20,322
 

 $12,399
 


CNBUPercentages are of total net 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 2015 decreased 8% as compared to 2014 primarilybut may not total 100% due to declines in average selling prices as a result of continued weakness in the PC sector, partially offset by increases in gigabits sold. CNBU operating income for 2015 declined from 2014 as decreases in average selling prices outpaced manufacturing cost reductions.rounding.

CNBU sales for 20142018 increased 112%77% as compared to 2013 primarily2017 due to (1) the MMJ Acquisition, (2) higher average selling prices, (3) increased DRAM supply from Inotera as a result of the restructuring of our supply agreement,strong market conditions and (4) higher output due to improvementsdemand in productkey markets, including cloud server, client, enterprise server markets, and process technologies. CNBUgraphics markets, which drove increases in pricing and sales for 2014volumes. Sales into cloud and graphics markets more than doubled in 2018 as compared to 2013 were adversely impacted by the transition of production at one of our Singapore wafer fabrication facilities from DRAM to NAND Flash. CNBU operating income2017. MBU sales for 2014 improved from 2013 primarily due to the MMJ Acquisition, higher average selling prices, and manufacturing cost reductions.

MBU

For the year ended 2015 2014 2013
Net sales $3,692
 $3,627
 $1,214
Operating income (loss) 1,126
 683
 (265)

In 2015 and 2014, MBU sales2018, which were comprised primarily of mobile LPDRAM and managed NAND products, increased 49% as compared to 2017 primarily due to customer qualifications for LPDRAM and managed NAND products, which combined with higher memory content in smartphones to drive improvements in DRAM pricing and increases in sales volumes. SBU sales of trade NAND products for 2018 increased 13% as compared to 2017 driven by higher sales of SSD storage products, which increased by 72%, partially offset by declines in SBU NAND component sales from a strategic reallocation of supply from component sales to SSD and mobile managed NAND products. Increases in SBU sales volumes for 2018 resulting from strong demand for cloud and enterprise SSD markets more than offset declines in selling prices. SBU sales also include "non-trade" products consisting of products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost, which included 3D XPoint memory and NAND products, aggregating $541 million, $553 million, and $501 million, for 2018, 2017, and 2016, respectively. EBU sales for 2018 increased 29% as compared to 2017 primarily due to strong demand across EBU's primary markets including consumer, industrial multimarkets, and automotive. EBU sales were comprised of products incorporating DRAM, NAND, Flash, and NOR Flash in decreasing order of revenue, with mobilerevenue.

CNBU sales for 2017 increased 90% as compared to 2016 due to increases in average selling prices due to strong demand across key markets, growth in the cloud market driven by significant increases in DRAM content per server, and increases in sales of our GDDR5 and GDDR5X products accounting for a significant majority ofinto the sales.graphics market driven by strong demand from the gaming industry. MBU sales for 20152017 increased 2%72% as compared to 20142016 primarily due to significant increases in gigabit sales volumes, driven by customer qualifications for LPDRAM and managed NAND Flashproducts, combined with higher memory content in smartphones and MCP productsgrowth in sales of eMCP products. MBU sales growth in 2017 was partially offset by lower sales of mobile DRAM products as a result of declines in average selling prices andfor trade NAND products. SBU sales volumes. MBU operating incomeof trade NAND products for 2015 improved from 2014 as manufacturing cost reductions outpaced declines in average selling prices.

MBU sales for 20142017 increased 199%41% as compared to 2013 primarily due to significant increases in mobile DRAM sales as a result of the MMJ Acquisition. MBU operating margin for 2014 also improved from 2013 primarily due to the MMJ Acquisition and manufacturing cost reductions, which significantly outpaced declines in average selling prices.

SBU

For the year ended 2015 2014 2013
Net sales $3,687
 $3,480
 $2,824
Operating income (loss) (89) 255
 173

SBU sales and operating results are significantly impacted by average selling prices, gigabit sales volumes, and cost per gigabit of our NAND Flash products. (See "Operating Results by Product – Non-Volatile Memory" for further details.) SBU sales for 2015 increased 6% from 20142016 primarily due to increases in gigabits soldsales volumes from strong demand, particularly for component NAND and client and cloud SSD storage products, partially offset by declines in average selling prices. SBU sells a portion of its products to Intel through our IMFT joint venture at long-term negotiated prices approximating cost. SBU sales of SSD storage products increased by 137% for 2017 as compared to Intel under this arrangement were $420 million, $423 million,2016 primarily as a result of the launch of new SSD products incorporating our TLC 3D NAND technology. EBU sales for 2017 increased 39% as compared to 2016 primarily due to strong demand and $387 millionhigher sales volumes for 2015, 2014,DRAM and 2013, respectively. All other SBUeMCP in consumer markets and DRAM and eMMC products are sold to OEMs, resellers, retailers, and other customers (including Intel), which we collectively refer to as "trade customers."in the automotive markets.


29




SBUOperating Income (Loss) by Business Unit
For the year ended 2018 2017 2016
CNBU $9,773
 64% $3,755
 44% $(25) (1)%
MBU 3,033
 46% 927
 21% 97
 4 %
SBU 964
 19% 552
 12% (123) (4)%
EBU 1,473
 42% 975
 36% 473
 24 %
All Other —
 —% 23
 35% 28
 28 %
  $15,243
   $6,232
   $450
  
Percentages reflect operating income (loss) as a percentage of net sales of NAND Flashfor each business unit.

CNBU operating income for 2018 improved from 2017 primarily due to improved pricing and higher sales volumes resulting from strong demand for our products to trade customerscombined with manufacturing cost reductions. MBU operating income for 2015 increased 7% as compared to 20142018 improved from 2017 primarily due to increases in gigabits sold partially offset by declines in average selling prices. Increases in gigabits soldpricing and sales volumes for 2015 as compared to 2014 wereLPDRAM products, higher sales of high-value managed NAND products, and manufacturing cost reductions. SBU operating income for 2018 improved from 2017 primarily due to higher manufacturing output. SBU operating margin for 2015 declined from 2014 as decreases in average selling prices outpaced manufacturing cost reductions and R&D costs increasedenabled by our execution in connection with increased spending on controllers, firmware, and engineering for SSDs and managedtransitioning to 64-layer TLC 3D NAND Flash products.

SBU sales for 2014 increased 23% from 2013 primarily due to increases in gigabits sold partially offset by declines in average selling prices. Increases in gigabits sold for 2014 were primarily due to the transition in 2014 of production at one of our wafer fabrication facilities in Singapore from DRAM to NAND Flashproducts and improvements in product and process technologies. SBU sales of NAND Flash products to trade customers for 2014 increased 26% as compared to 2013 primarily due to an increase in gigabits sold partially offset by declines in average selling prices.mix. SBU operating income for 2014 improved from 2013 primarily due to2018 was adversely impacted by higher gigabit sales volumes as manufacturing cost reductions were essentially offset by declines in average selling prices.

EBU

For the year ended 2015 2014 2013
Net sales $1,999
 $1,774
 $1,275
Operating income 435
 331
 227

In 2015 and 2014,costs associated with IMFT's production of 3D XPoint memory products at less than full capacity. EBU sales were comprised of DRAM, NAND Flash, and NOR Flash in decreasing order of revenue. EBU salesoperating income for 20152018 increased 13% as compared to 2014 primarily due to higher sales volumes of DRAM and NAND Flash products2017 as a result of increases in demand. EBUaverage selling prices, manufacturing cost reductions, and increases in sales volumes, partially offset by higher R&D costs.

CNBU operating margin for 2017 improved from 2016 primarily due to improved pricing from strong market conditions, manufacturing cost reductions, and product mix. MBU operating income for 20152017 improved as compared to 2014from 2016 primarily due to themanufacturing cost reductions and higher sales volumes.

EBU salesvolumes, partially offset by higher R&D costs and declines in average selling prices for 2014 increased 39% as compared to 2013trade NAND products. SBU operating margin for 2017 improved from 2016 primarily due to increased sales volumes of DRAM and NAND Flash productsmanufacturing cost reductions, partially offset by declines in average selling prices. EBU operating income for 2014 improved2017 increased as compared to 2013 primarily due to higher margins on sales of DRAM and NAND Flash products2016 as a result of the increase in sales and cost reductions.

Operating Results by Product

Net Sales by Product

For the year ended 2015 2014 2013
DRAM $10,339
 64% $11,164
 68% $4,361
 48%
Non-Volatile Memory 5,274
 33% 4,468
 27% 3,589
 40%
Other 579
 4% 726
 4% 1,123
 12%
  $16,192
   $16,358
   $9,073
  
Percentages reflect rounding and may not total 100%.

Non-Volatile Memory includes NAND Flash and 3D XPoint memory. Through 2015, substantially all of our Non-Volatile Memory sales were from NAND Flash products. Sales of NOR Flash products are included in Other. Information regarding our MCP products, which combine both NAND Flash and DRAM components, is reported within Non-Volatile Memory.

DRAM

For the year ended 2015 2014
     
  (percentage change from prior period)
Net sales (7)% 156 %
Average selling prices per gigabit (11)% 6 %
Gigabits sold 4 % 142 %
Cost per gigabit (12)% (20)%

30




The increase in gigabit sales volumes of DRAM products for 2015 as compared to 2014 was primarily due to increases in gigabit production despite our continued preparation of fabrication facilities for production of the next technology node, which constrained output. DRAM gigabit production growth in 2015 was also impacted by a shift to a higher mix of mobile and DDR4 products, which have larger die sizes and therefore produce fewer bits per wafer. The increase in gigabit sales of DRAM products for 2014 as compared to 2013 was primarily due to higher production volumes resulting from the MMJ Acquisition, increased supply under the Inotera supply agreement, and improved product and process technologies, partially offset by the transition of one of our wafer fabrication facilities in Singapore from DRAM to NAND Flash. In 2014, DRAM products produced by facilities acquired in the MMJ Acquisition constituted 54% of our aggregate DRAM gigabit production as compared to 9% in 2013.

In 2015 and 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities, due to the pricing formula of the current agreement and strong market conditions.  Under the market conditions prevailing in the fourth quarter of 2015, costs of products purchased under the current agreement were higher than they would have been under the pricing formula of the 2016 Supply Agreement. DRAM products acquired from Inotera accounted for 35% of our aggregate DRAM gigabit production for 2015 as compared to 38% for 2014 and 54% for 2013.

Our gross margin percentage on sales of DRAM products for 2015 improved from 2014 as manufacturing cost reductions, which outpaced declines in average selling prices. Our gross margin percentage on sales of DRAM products for 2014 improved from 2013 primarily due to reductions in costsprices, and increases in average selling prices. Cost reductions for 2014 primarily reflected improvements in product and process technologies and the comparatively lower manufacturing costs of the MMJ Group partially offset by higher costs for product obtained under the Inotera supply agreement and the sale of the MMJ Group's inventories recorded in the MMJ Acquisition.sales volumes.

Non-Volatile Memory

The following discussion focuses on sales of NAND Flash products which constituted substantially all of Non-Volatile Memory sales through 2015. This discussion of NAND Flash excludes NAND Flash products manufactured and sold to Intel through IMFT at long-term negotiated prices approximating cost.

For the year ended 2015 2014
     
  (percentage change from prior period)
Sales to trade customers:    
Net sales 20 % 27 %
Average selling prices per gigabit (17)% (23)%
Gigabits sold 45 % 65 %
Cost per gigabit (10)% (23)%

The increase in NAND Flash gigabits sold to trade customers for 2015 as compared to 2014 was primarily due to higher production from improved product and process technologies and the transition of our wafer fabrication facility in Singapore from DRAM to NAND Flash production. Increases in gigabit production of NAND Flash products for 2015 as compared to 2014 were limited by a shift in product mix to higher levels of managed NAND Flash and MCP products, which have both higher average selling prices and costs per gigabit. Increases in NAND Flash gigabits sold to trade customers for 2014 as compared to 2013 were primarily due to the transition of our wafer fabrication facility in Singapore from DRAM to NAND Flash production and improvements in product and process technologies.

Our gross margin percentage on sales of trade NAND Flash products for 2015 declined from 2014 as the declines in average selling prices outpaced manufacturing cost reductions resulting from improvements in product and process technologies. Our gross margin percentage on sales of trade NAND Flash products for 2014 was relatively unchanged from 2013 as manufacturing cost reductions offset declines in average selling prices. Manufacturing cost reductions for 2014 as compared to 2013 primarily resulted from improvements in product and process technologies.




31



Operating Expenses and Other

Selling, General, and Administrative

SG&A expenses for 2015 increased 2% as compared to 20142018 were 9% higher than 2017 primarily due to an additional weekincreases in 2015legal costs, technical and higher legal costs.

consulting fees, and employee compensation. SG&A expenses for 2014 increased 26% as compared to 20132017 were 13% higher than 2016 primarily due to increases in employee compensation as well as transaction costs related to the incremental costs resulting from the MMJ Acquisition and higher payroll costs resulting primarily from the reinstatement of variable pay plans.Inotera Acquisition.

Research and Development

R&D expenses for 2015 increased 12% from 2014vary primarily due to a higher volumewith the number of development wafers processed, an increase in depreciation expense duethe cost of advanced equipment dedicated to R&D capital expenditures, higher payroll costs, higher subcontracted engineeringnew product and other professional service costs,process development, and an additional week in 2015. Increases inpersonnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through reviews and tests for performance and reliability. R&D expenses for 2015 as compared to 2014 were partly attributable to increased spendingcan vary significantly depending on controllers, firmware, and engineering to support system level products, including SSD, managed NAND Flash, and HMC products.the timing of product qualification.

R&D expenses for 2014 increased 47% from 20132018 were 17% higher than 2017 primarily due to the incremental costs resulting from the MMJ Acquisition,increases in employee compensation, volumes of development and pre-qualification wafers, and depreciation expense as a result of increases in capital spending. R&D expenses for 2017 were 13% higher payroll costs resultingthan 2016 primarily from the reinstatementdue to higher volumes of variable pay plans,development and increased resources dedicated to development efforts.pre-qualification wafers and increases in employee compensation, partially offset by lower engineering and other professional services costs.

We generally share with Intel the costscost of certain product design and process development activities forunder development agreements with partners, including agreements to jointly develop NAND Flash memory and 3D XPoint memory.technologies with Intel. We continue to jointly develop NAND technologies with Intel through the third generation of 3D NAND, which is expected to be completed in the second half of 2019. In the second quarter of 2018, we and Intel agreed to independently develop subsequent generations of 3D NAND in order to better optimize the technology and products for our respective business needs. We continue to jointly develop 3D XPoint technologies with Intel through the second generation of 3D XPoint technology, which is expected to be completed in the second half of 2019. To better optimize 3D XPoint technology for our product roadmap and maximize the benefits for our customers and shareholders, in the fourth quarter of 2018, we announced that we will no longer jointly develop with Intel


subsequent generations of 3D XPoint technology. As a result of the above actions, we expect reimbursements under our cost-sharing agreements to decrease in early fiscal 2019. Our R&D expenses reflect net reductions of $231were reduced by reimbursements under these development partner arrangements by $201 million, $162$213 million, and $176$205 million in 2015, 2014,for 2018, 2017, and 2013, respectively, as a result of reimbursements under our Intel and other cost-sharing arrangements.2016, respectively.

Our process technology R&D efforts are focused primarily on development of successively smaller line-width process technologies which are designed to facilitate our transition to next generation memory products. Additional process technology R&D efforts focus on the enablement of advanced computing and mobile memory architectures, the investigation of new opportunities that leverage our core semiconductor expertise, and the development of new manufacturing materials. Product design and development efforts include our high density DDR3 and DDR4 DRAM, Mobile LPDRAM products, high density NAND Flash memory (including 3D NAND and MLC and TLC technologies), 3D XPoint memory, SSDs, Hybrid Memory Cubes, specialty memory, NOR Flash memory, and other memory technologies and systems.

Restructure and Asset Impairments

For the year ended 2015 2014 2013
Loss on impairment of LED assets $1
 $(6) $33
Loss on impairment of MIT assets —
 (5) 62
Gain on termination of lease to Transform —
 —
 (25)
Loss on restructure of ST consortium agreement —
 —
 26
Other 2
 51
 30
  $3
 $40
 $126

In order to optimize operations, improve efficiency, and increase our focus on our core memory operations, we have entered into various restructure activities. For 2014 and 2013, other restructure included charges associated with our efforts to wind down our 200mm operations primarily in Agrate, Italy and Kiryat Gat, Israel and charges associated with workforce optimization activities, primarily related to our MBU and EBU operating segments. As of September 3, 2015, we do not anticipate incurring any significant additional costs for these restructure activities. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Restructure and Asset Impairments.")

Interest Income (Expense)

Net interest expense for 2015, 2014, and 2013, included aggregate amounts of amortization of debt discount and other costs of $138 million, $167 million, and $122 million, respectively.


32



Income Taxes

On December 22, 2017, the United States enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") which lowered 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. Our effectiveU.S. statutory federal rate was 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 will be 21% beginning in 2019. The Tax Act imposed a one-time transition tax in 2018 on accumulated foreign income (the "Repatriation Tax"); provided a U.S. federal tax exemption on foreign earnings distributed to the United States after January 1, 2018; and beginning in 2019, created 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 made an accounting policy election to treat the Foreign Minimum Tax provision as a period cost in the period the tax is incurred.

SEC 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 have not been completed when our financial statements are issued. The provisional amounts below for 2018 represent reasonable estimates of the effects of the Tax Act for which our analysis is not yet complete. As we complete our analysis of the Tax Act, including collecting, preparing, and analyzing necessary information, performing and refining calculations, and obtaining additional guidance from the IRS, U.S. Treasury Department, FASB, or other standard setting and regulatory bodies on the Tax Act, we may record adjustments to the provisional amounts, which may be material. In accordance with SAB 118, our accounting for the tax effects of the Tax Act will be completed during the measurement period, which should not extend beyond one year from the enactment date. At August 30, 2018, there were no provisions for which we were unable to record a reasonable estimate of the impact.

Our income tax (provision) benefit consisted of the following:
For the year ended 2018 2017 2016
Provisional estimate for the Repatriation Tax, net of adjustments related to uncertain tax positions $(1,030) $—
 $—
Remeasurement of deferred tax assets and liabilities reflecting lower U.S. corporate tax rates (133) —
 —
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations 1,337
 —
 —
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW (68) 54
 (114)
U.S. valuation allowance release resulting from business acquisition —
 —
 41
Other income tax (provision) benefit (274) (168) 54
  $(168) $(114) $(19)
       
Effective tax rate 1.2% 2.2% (6.8)%

Our income taxes reflect various impacts of the Tax Act, including the remeasurement of deferred tax assets and liabilities at the lower U.S. corporate rate of 25.7% for 2018 and 21% for subsequent years and provisional estimates for the Repatriation Tax and the release of a substantial portion of the valuation allowance on the net deferred tax assets of our U.S. operations. Our income tax rates were 6.0%, 4.7%, and 0.6% for 2015, 2014, and 2013, respectively. Our effective tax rates reflect the following:

operations in tax jurisdictions, including Singapore and Taiwan, where our earnings are indefinitely reinvested and the effective tax rates in these jurisdictions are significantly lower than the U.S. statutory rate;
also include operations outside the U.S.,United States, including Singapore,and, to a lesser extent Taiwan, where we have tax incentive arrangements that further decrease our effective tax rates;rates. Beginning in 2019, our effective tax rate may increase to the low teens percentage depending on the amount and
geographic mix of taxable income. Income taxes for 2018, 2017, and 2016 included tax benefits of $1 million, $28 million, and $58 million, respectively, related to the favorable resolution of certain tax matters, which were previously reserved as uncertain tax positions.

During 2018, we reassessed our capital structure, including our Board of Directors' authorization to repurchase up to $10 billion of our outstanding common stock beginning in 2019, the future cash needs of our global operations, and the effects of the Tax Act. As a valuation allowance againstresult of this reassessment, we deemed a portion of our foreign earnings to be no longer indefinitely reinvested. As a result of the Repatriation Tax, substantially all of our accumulated foreign earnings prior to December 31, 2017


were subject to U.S. netfederal taxation. Although these earnings have been subject to U.S. federal income tax under the Repatriation Tax, the repatriation to the United States of all or a portion of these earnings would potentially be subject to foreign withholding and state income tax. As of August 30, 2018, we had a deferred tax assets.  

Income taxes for 2015 and 2014 included $80liability of $82 million and $59 million, respectively, related to changes in amounts of net deferred tax assets associated with the MMJ Group. Income taxes for 2013 included benefits of $19 million from the favorable resolution of prior year tax matters and a change in tax laws applicable to prior years.  The remaining tax provision for 2015, 2014, and 2013 primarily reflects taxes on our other non-U.S. operations. Income taxes on U.S. operations for 2015, 2014, and 2013 were substantially offset by changes in the valuation allowance.

We have a full valuation allowance for our net deferred tax asset associated with our U.S. operations.  Management continues to evaluate future projected financial performance to determine whether such performance is sufficient evidence to support a reduction in or reversal of the valuation allowances.  The amount of the deferred tax asset considered realizable could be adjusted if significant positive evidence increases.undistributed earnings.

We operate in a number of locationstax jurisdictions outside the U.S.,Unites States, including Singapore, and, to a lesser extent, Taiwan, where we have tax incentive agreementsarrangements, which expire in whole or in part at various dates through 2031, 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 for 2015, 2014, and 2013 by $338 million (benefitting$1.96 billion (benefiting our diluted earnings per share by $0.29), $286$1.59) for 2018, by $742 million ($0.240.64 per diluted share), for 2017, and $141 million ($0.13 per diluted share), respectively.were not material in 2016.

(See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Income Taxes.")

Equity in Net Income (Loss) of Equity Method InvesteesOther

We recognize our share of earnings or losses from equity method investments, generally on a two-month lag.  Equity in net income (loss) of equity method investees, net of tax, included the following:

For the year ended 2015 2014 2013
Inotera $445
 $465
 $(79)
Tera Probe 1
 11
 —
Other 1
 (2) (4)
  $447
 $474
 $(83)

Our share of earningsNet interest expense decreased 60% for 2015 included $49 million for the net effect of Inotera's full release of its valuation allowance against net deferred tax assets related to its net operating loss carryforward and the resulting tax provision in subsequent periods. As a result of the release, Inotera's future net income is subject to tax provisions. Our equity in net income of Inotera declined for 20152018 as compared to 20142017 due to a decreasedecreases in Inotera's operating resultsdebt obligations and increases in interest income. Net interest expense increased 42% for 2017 as a result of declines in average selling prices.

Since January 2013, we have purchased all of Inotera's DRAM output at prices reflecting a discount from market prices for our comparable components under a supply agreement. In the second quarter of 2015, we executed thecompared to 2016 Supply Agreement, to be effective beginning on January 1, 2016, which will replace the current agreement. Under the 2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin between Inotera and us. In 2015 and in 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities,primarily due to the pricing formulaincreases in debt obligations, including our borrowings of the current agreement and strong market conditions. Under the market conditions prevailing80 billion New Taiwan dollars in the fourth quarter of 2015, costs of products purchased under the current agreement were higher than they would have been under the pricing formula of theDecember 2016 Supply Agreement.


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Other Operating and Non-Operating

In 2014, we settled all pending litigation between us and Rambus, including all antitrust and patent matters, and entered into a patent cross-license agreement.  As a result, other operating expense for 2014 included a $233 million charge to accrue a liability, which reflects the discounted value of amounts due under this arrangement.

Other non-operating expense for 2015, 2014, and 2013 included losses from the restructure of our debt of $49 million, $184 million, and $31 million, respectively. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.")

Other non-operating expense included losses from changes in currency exchange rates of $27 million, $28 million, and $229 million for 2015, 2014, and 2013, respectively. The loss for 2013 included a $228 million loss for currency contracts to hedge our yen-denominated obligations in connection with our acquisition of Inotera and $1.25 billion from the MMJ Acquisition.

On August 15, 2014, ON Semiconductor Corporation acquired Aptina for approximately $433 million and we recognized a non-operating gain of $119 million on the saleissuance of our shares based on our diluted ownership interest of approximately 27%.

On May 15, 2014, Inotera issued 400 million common shares2023 Secured Notes in a public offering at a price equal to 31.50 New Taiwan dollars per share, which was in excess of our carrying value per share. As a result of the issuance, our ownership interest decreased from 35% to 33% and we recognized a non-operating gain of $93 million in 2014. On May 28, 2013, Inotera issued 634 million common shares to Nanya and certain of its affiliates in a private placement at a price equal to 9.47 New Taiwan dollars per share, which was in excess of our carrying value per share. As a result of the issuance, our ownership interest decreased from 40% to 35% and we recognized a non-operating gain of $48 million in 2013.April 2016.

Further discussion of other operating and non-operating income and expenses can be found in the following notes contained in "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements":

Equity Plans
Research and Development
Other Operating (Income) Expense,Income (Expense), Net
Other Non-Operating Income (Expense), Net


Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets. We generated cash from operations of $5.21 billion in 2015markets and $5.70 billion in 2014.financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. We obtained $2.50 billion from debt and lease financing in 2015 and $2.23 billion in 2014. As of September 3, 2015, we had (1) revolving credit facilities available that provide for up to $842 million of additional financing based on eligible receivables and inventories and (2) a term loan agreement available to obtain financing collateralized by certain property, plant, and equipment in the amount of 6.90 billion New Taiwan dollars or an equivalent amount in U.S. dollars (approximately $213 million as of September 3, 2015), of which we drew $40 million on June 18, 2015. We are continuously evaluating alternatives for efficiently funding our capital expenditures dilution-management activities (including repurchases of convertible notes and our common stock), 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 July 2023 and unsecured debt and the refinancing and restructuring of existing debt.

To develop new product and process technologies, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. As a result of the MMJ acquisition and our expansion in Singapore, we expect our future capital spending will be higher than our historical levels. We estimate that cash expenditures in 2016provides for property, plant, and equipment will be approximately $5.3 billion to $5.8 billion, which includes amounts we expect to be funded by our partners. The actual amounts for 2016 will vary depending on market conditions. Investments in capital expenditures for 2015 were $4.12 billion. Total additions to property, plant, and equipment were $4.46 billion, which, in comparison to cash expenditures, reflects differences in timing of receipts and payments for equipment as well as non-cash additions such as equipment leases. As of September 3, 2015, we had commitments of approximately $1.62 billion for the acquisition of property, plant, and equipment, substantially all of which is expected to be paid within one year.


34



In December 2014, we announced plans to add approximately 255,000 square feet of clean room space to our fabrication facility in Singapore.  This expansion facilitates efficient implementation of 3D NAND Flash production at the Singapore facility and gives us the flexibility to gradually add incremental capacity in response to market requirements.  Construction of the additional space began in 2015 with initial manufacturing output likely in 2017.  Subject to market conditions, we estimate capital expenditures of approximately $1.93 billion in 2016 related to this facility.

Since the first quarter of 2015, our Board of Directors has authorized the discretionary repurchaseborrowings of up to $1.25 billion of our outstanding common stock, $250 million of which was authorized in the first quarter of 2016. Any repurchases under the authorization may be made in open market purchases, block trades, privately-negotiated transactions, and/or derivative transactions. Repurchases are subject to market conditions and our ongoing determination of the best use of available cash. During 2015, we repurchased 42 million shares for $831 million (including commissions) in the open market.

$2.00 billion. We expect that our cash and investments, cash flows from operations, and available financing will be sufficient to meet our requirements at least through the next 12 months.

As of 2015 2014
Cash and equivalents and short-term investments:    
Bank deposits $1,684
 $2,445
Corporate bonds 618
 154
Government securities 449
 136
Certificates of deposit 339
 410
Commercial paper 255
 107
Money market funds 168
 1,281
Asset-backed securities 8
 1
  $3,521
 $4,534
     
Long-term marketable investments $2,113
 $819
To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate that capital expenditures in 2019 for property, plant, and equipment, net of partner contributions, to be $10.5 billion plus or minus 5%, focused on technology transitions and product enablement. The actual amounts for 2019 will vary depending on market conditions. As of August 30, 2018, we had commitments of approximately $1.8 billion for the acquisition of property, plant, and equipment, substantially all of which is expected to be paid within one year.

AsIn May 2018, we announced that our Board of September 3, 2015, $2.17Directors had authorized the discretionary repurchase of up to $10 billion of our cashoutstanding common stock beginning in 2019. We may purchase shares on a discretionary basis through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to a Rule 10b5-1 trading plan, subject to market conditions and equivalentsour ongoing determination of the best use of available cash. The repurchase authorization does not obligate us to acquire any common stock.

From August 31, 2018 through October 12, 2018, we repurchased an aggregate of $1.65 billion of our common stock under an accelerated share repurchase ("ASR") agreement, a Rule 10b5-1plan, and short-termthrough open market repurchases. Pursuant to the ASR, we entered into an agreement with a financial institution to purchase $1.00 billion of our common stock in the first quarter of fiscal 2019. The number of shares ultimately purchased will be calculated by dividing $1.00 billion by a volume-weighted average price of our common stock from September 5, 2018 through as late as November 29, 2018 (the


"Measurement Period"), subject to an agreed-upon discount. On September 5, 2018, we paid $1.00 billion to the financial institution and received an initial installment of 14 million shares, with the final share amount to be determined as of the end of the Measurement Period.

See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity."

Cash and marketable investments was held by foreign subsidiaries,totaled $7.28 billion and $6.05 billion as of which $149 million was denominated in currencies other than the U.S. dollar.August 30, 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. 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. As of August 30, 2018, $3.08 billion of our cash and marketable investments was held by our foreign subsidiaries.

Limitations on the Use of Cash and Investments

MMJ Group: Group:Cash and equivalents and short-termmarketable investments in the table aboveas of August 30, 2018 included an aggregate of $748 million$1.67 billion held by the MMJ Group as of September 3, 2015.Group. As a result of the corporate reorganization proceedings of the MMJ Companies entered intoinitiated in March 2012, and for so long as such proceedings are continuing, the MMJ Companies and their subsidiaries are subject to certain restrictions on dividends, loans, and advances. The plans of reorganization of the MMJ Companies prohibit the MMJ CompaniesGroup is prohibited from paying dividends including any cash dividends, to us and require that excess earnings be used in their businesses or to fund the MMJ Companies' installment payments. These prohibitions also effectively prevent the subsidiaries of the MMJ Companies from paying cash dividends.us. In addition, pursuant to an order of the JapanTokyo District Court, the MMJ CompaniesGroup cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court. Moreover, loans or advances by subsidiaries of the MMJ CompaniesTokyo District Court and may, under certain circumstances, be considered outside of the ordinary course of business and subject to the approval of the legal trustee and Japan Court.trustee. As a result, the assets of the MMJ Group are not available for use by us in our other operations. Moreover,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 JapanTokyo District Court.

IMFT:IMFT: Cash and equivalents and short-termmarketable investments in the table above included $134$91 million held by IMFT as of September 3, 2015.August 30, 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.


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Indefinitely Reinvested:Reinvested: As of September 3, 2015, we had $1.48August 30, 2018, $1.71 billion of cash and equivalents and short-termmarketable investments, including substantially all of the amounts held by the MMJ, Group, that werewas held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested and repatriation of these funds to the U.S. would subject these funds to U.S. federal income taxes.reinvested. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.

Operating ActivitiesCash Flows

For the year ended 2018 2017 2016
Net cash provided by operating activities $17,400
 $8,153
 $3,168
Net cash provided by (used for) investing activities (8,216) (7,537) (3,044)
Net cash provided by (used for) financing activities (7,776) 349
 1,745
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash (37) (12) 19
Net increase (decrease) in cash, cash equivalents, and restricted cash $1,371
 $953
 $1,888

Net cash provided by operating activities was Operating Activities$5.21 billion: for 2015. CashFor 2018, cash provided by operating activities was due primarily to net incomecash generated by our operations adjusted for certain non-cash items.and the effect of working capital adjustments, which included a $1.73 billion increase in receivables due to a higher level of net sales.

Investing ActivitiesFor 2017, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included a $1.65 billion increase in receivables due to a higher level of net sales, $361 million of payments attributed to intercompany balances in connection with the Inotera Acquisition, and a $564 million increase in accounts payable and accrued expenses.

For 2016, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included a $465 million decrease in receivables due to a lower level of net sales, offset by an increase of $549 million in inventories.



NetInvesting Activities: For 2018, net cash used for investing activities was $6.23 billion for 2015, which consisted primarily of cash$7.99 billion of expenditures of $4.02 billion for property, plant, and equipment and $2.14 billion(net of partner contributions), partially offset by $164 million of net outflows for investments ininflows from sales, maturities, and purchases of available-for-sale securities.

Financing ActivitiesFor 2017, net cash used for investing activities consisted primarily of $4.73 billion of expenditures for property, plant, and equipment (net of partner contributions), $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 $269 million of net outflows from sales, maturities, and purchases of available-for-sale securities.

For 2016, net cash used for investing activities consisted primarily of $5.75 billion of expenditures for property, plant, and equipment (net of partner contributions) and $148 million for the acquisition of Tidal Systems, Ltd., partially offset by $2.66 billion of net inflows from sales, maturities, and purchases of available-for-sale securities.

NetFinancing Activities: For 2018, net cash used byfor financing activities consisted primarily of cash payments to reduce our debt, including $9.42 billion to prepay or repurchase debt and settle conversions of notes and $774 million for scheduled repayment of other notes and capital leases. Cash used for financing activities was $718 million for 2015, which included outflowspartially offset by net proceeds of $2.33$1.36 billion for repayments from the issuance of debt (including $932 million for the amount in excess of principal of our convertible notes), $831 million for the open-market repurchases of 4234 million shares of our common stock for $41.00 per share in a public offering and $95$1.01 billion of proceeds from IMFT Member Debt.

For 2017, net cash provided by financing activities consisted primarily of $2.48 billion of net proceeds from the 2021 MSTW Term Loan, and $795 million of net proceeds from the 2021 MSAC Term Loan, partially offset by $1.63 billion to repurchase notes, repayments of $381 million of capital lease obligations, repayments of $550 million of other debt and convertible notes, and payments of $519 million on equipment purchase contracts. Cash outflows for

For 2016, net cash provided by financing activities in 2015 wereconsisted primarily of $2.20 billion of proceeds from issuance of notes and $765 million from equipment sale-leaseback financing transactions, partially offset by inflowsrepurchase of $2.00 billion in aggregate from the issuance$870 million of the 2023 Notes, 2024 Notes,debt and 2026 Notes, $291 million from the proceeds of sale-leaseback transactions, $125 million from draws on our revolving credit facilities, and $87 million from term loans.

2015 Debt Activity

Throughout 2015, we reducedfor the dilutive effectsopen-market repurchase of our convertible notes through conversions and repurchases. As a result, we eliminated convertible notes that were convertible into approximately 377 million shares of our common stock. The following table summarized our debt restructure activities in 2015.

See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt."
  Increase (Decrease) in Principal Increase (Decrease) in Carrying Value Increase (Decrease) in Cash (Decrease) in Equity 
Loss(1)
Conversions and settlements $(121) $(367) $(408) $(15) $(22)
Repurchases (368) (319) (1,019) (676) (22)
Issuances 2,000
 1,979
 1,979
 —
 —
Early repayment (121) (115) (122) —
 (5)
  $1,390
 $1,178
 $430
 $(691) $(49)
(1)
Included in other non-operating expense.

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 September 30, 2015 exceeded 130% of2018, holders may convert these notes through the conversion price per share of our 2032 Notes and 2033 Notes, holders of those notes have the right to convert their notes at any time throughcalendar quarter ended December 31, 2015. For all of our convertible notes, we have either: (1) the requirement to pay cash for the principal amount and the option to pay either cash, shares of our common stock, or any combination thereof for any remaining conversion obligation, or (2) the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion.


36



2018. The following table summarizes the potential settlements as of September 3, 2015, that we could be required to make for the calendar quarter ending December 31, 2018 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 $52.76 as of August 30, 2018.
 Conversion Price Per Share Settlement Option for Principal Amount Outstanding Principal 
If Settled With Minimum Cash Required(1)
 
If Settled Entirely With Cash(2)
 Settlement Option   If Settled With Minimum Cash Required If Settled Entirely With Cash
 Cash Remainder in Shares Cash Principal Amount Amount in Excess of Principal Underlying Shares Cash Remainder in Shares 
2032C Notes $9.63
 Cash and/or shares $224
 $—
 23
 $385
2032D Notes 9.98
 Cash and/or shares 177
 —
 18
 294
 Cash and/or shares Cash and/or shares 14
 $—
 14
 $758
2033E Notes 10.93
 Cash 233
 233
 7
 354
2033F Notes 10.93
 Cash 297
 297
 9
 451
 Cash Cash and/or shares 10
 239
 5
 515
2043G Notes Cash and/or shares Cash and/or shares 35
 —
 35
 1,843
   $931
 $530
 57
 $1,484
 
 59
 $239
 54
 $3,116

As of August 30, 2018, convertible notes in the table above included an aggregate of $165 million for the settlement obligation (including principal and amounts in excess of principal) for conversions of 2033F Notes that will settle in cash in the first quarter of 2019.



Contractual Obligations
  Payments Due by Period
As of August 30, 2018 Total Less than 1 year 1-3 years
 3-5 years
 More than 5 years
Notes payable(1)(2)
 $4,705
 $592
 $609
 $853
 $2,651
Capital lease obligations(2)
 965
 339
 331
 108
 187
Operating leases(3)
 616
 37
 93
 95
 391
Purchase obligations(4)
 3,350
 2,892
 385
 17
 56
Other long-term liabilities(5)
 596
 375
 192
 10
 19
Total $10,232
 $4,235
 $1,610
 $1,083
 $3,304
(1) 
We are required to settle the principal amount of the 2033 Notes in cash. The remaining conversion obligation paid in shares is based on our closing share price of $16.59 as of September 3, 2015.Amounts include MMJ Creditor Payments, convertible notes, and other notes.
(2) 
BasedAmounts include principal and interest.
(3)
Amounts include contractually obligated minimum lease payments for operating leases having an initial noncancelable term in excess of one year.
(4)
Purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that meet any of the following criteria: (1) they are noncancelable, (2) we would incur a penalty if the agreement was canceled, or (3) we must make specified minimum payments even if we do not take delivery of the contracted products or services. If the obligation to purchase goods or services is noncancelable, the entire value of the contract was included in the above table. If the obligation is cancelable, but we would incur a penalty if canceled, only the dollar amount of the penalty was included as a purchase obligation. Contracted minimum amounts specified in any take-or-pay contracts were included in the above table as they represent the portion of each contract that is a firm commitment.
(5)
Amounts represent future cash payments to satisfy other long-term liabilities recorded on our closing share price of $16.59 as of September 3, 2015. Assumes we elect cash settlementconsolidated balance sheet, including $375 million for the entire obligation.current portion of these long-term liabilities. We are unable to reliably estimate the timing of future certain payments related to uncertain tax positions and deferred tax liabilities; therefore, the amount has been excluded from the preceding table. However, other noncurrent liabilities recorded on our consolidated balance sheet included these uncertain tax positions and deferred tax liabilities.

Contractual Obligations

  Payments Due by Period
As of September 3, 2015 Total Less than 1 year 1-3 years
 3-5 years
 More than 5 years
Notes payable(1)(2)
 $9,429
 $556
 $1,315
 $1,712
 $5,846
Capital lease obligations(2)
 852
 349
 304
 123
 76
Operating leases(3)
 682
 218
 402
 27
 35
Purchase obligations 2,545
 2,189
 335
 11
 10
Other long-term liabilities(4)
 716
 222
 304
 152
 38
Total $14,224
 $3,534
 $2,660
 $2,025
 $6,005
(1) Amounts include MMJ Creditor Installment Payments, convertible notes, and other notes.The timing of payment amounts of the obligations discussed above is based on current information. Any future redemptions, repurchases, or conversions of convertible debt could impact the amount 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 term in excess of one year.
(4) Amounts represent future cash payments to satisfy other long-term liabilities recorded on our consolidated balance sheet, including $222 million for the current portion of these long-term liabilities. We are unable to reliably estimate the timing of future payments related to uncertain tax positions and noncurrent deferred tax liabilities; therefore, $91 million in aggregate of long-term income taxes payable and noncurrent deferred tax liabilities has been excluded from the preceding table. However, other noncurrent liabilities recorded on our consolidated balance sheet included these uncertain tax positions and noncurrent deferred tax liabilities.

The expected timing of payment amounts of the obligations discussed above is estimated based on current information. Timing and actual amounts paid may differ depending on the timing of receipt of goods or services, market prices, changes to agreed-upon amounts, or timing of certain events for some obligations. The contractual obligations in the table above include the current portions of the related long-term obligations. All other current liabilities are excluded.

Purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that meet any of the following criteria: (1) they are noncancelable, (2) we would incur a penalty if the agreement was canceled, or (3) we must make specified minimum payments even if we do not take delivery of the contracted products or services ("take-or-pay"). If the obligation to purchase goods or services is noncancelable, the entire value of the contract was included in the above table. If the obligation is cancelable, but we would incur a penalty if canceled, the dollar amount of the penalty was included as a purchase obligation. Contracted minimum amounts specified in take-or-pay contracts are also included in the above table as they represent the portion of each contract that is a firm commitment.


37



Inotera Supply Agreements: Since January 2013, we have purchased all of Inotera's DRAM output at prices reflecting discounts from market prices for our comparable components under a supply agreement. In the second quarter of 2015, we executed the 2016 Supply Agreement, to be effective beginning on January 1, 2016, which will replace the current agreement. Under the 2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin between Inotera and us.  The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period, and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions.  Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. We purchased $2.37 billion of DRAM products from Inotera in 2015 under the current agreement. The current agreement does not contain a fixed or minimum purchase quantity as quantities are based on qualified production output and pricing fluctuates as it is based on market prices. Therefore, we did not include any amounts under the current agreement in the contractual obligations table above. Under the 2016 Supply Agreement, payments are primarily based on fluctuating quantities and prices, but a portion of the expected costs under the agreement meet the criteria of a minimum lease payment under an operating lease and are included in the table above.


Off-Balance Sheet Arrangements

We have entered into capped calls which are intended to reduce the effect of potential dilution, from our convertible notes.  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 a specified initial strike price at the expiration dates. The amounts receivable varies based on the trading price of our stock, up to specified cap prices. The dollar value of the cash or shares that we would receive from the capped calls on their expiration dates ranges from $0 if the trading price of our stock is below the initial strike price for all of the capped calls to $814 million if the trading price of our stock is at or above the cap price for all of the capped calls. We paid $57 million in 2011, $103 million in 2012, and $48 million in 2013 to purchase capped calls. The amounts paid were recorded as charges to additional capital. For further details of our capped call arrangements, see "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Micron Shareholders' Equity – Outstanding Capped Calls."

We have an ASR agreement with a financial institution to purchase $1.00 billion of our common stock in the first quarter of fiscal 2019. See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Micron Shareholders' Equity – Common Stock Repurchase Authorization – Accelerated Share Repurchase."


Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may vary under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our management believes the accounting policies below are critical in the portrayal of our financial condition and results of operations and requiresrequire management's most difficult, subjective, or complex judgments.

Business Acquisitionsacquisitions: Accounting for acquisitions requires us to estimate the fair value of consideration paid and the individual assets and liabilities acquired, which involves a number of judgments, assumptions, and estimates that could materially affect the amount and timing of costs recognized.recognized in subsequent periods. Accounting for acquisitions can also involve significant judgment to determine when control of the acquired entity is transferred. We typically obtain independent third party


valuation studies to assist in determining fair values, including assistance in determining future cash flows, appropriate discount rates, and comparable market values. The itemsItems involving the most significant assumptions, estimates, and judgments included determininginclude the fair value of the following:

Property, plant,Debt, including discount rate and equipment, including determinationtiming of values in a continued-use model;payments;
Deferred tax assets, including projections of future taxable income and tax rates;
Inventory, including estimated future selling prices, timingFair value of product sales, and completion costs for work in process;
Debt, including discount rate and timing of payments; andconsideration paid or transferred;
Intangible assets, including valuation methodology, estimations of future revenue and costs, profit allocation rates attributable to the acquired technology, and discount rates.rates;
Inventory, including estimated future selling prices, timing of product sales, and completion costs for work in process; and
Property, plant, and equipment, including determination of values in a continued-use model.


38



ConsolidationsConsolidation: We have interests in joint venture entities that are VIEs. Determining whether to consolidate a VIE requires judgment in assessing whether an entity is a VIE and if we are the entity's primary beneficiary. If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, of a VIE, 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 assessmentassessments of whether we are the primary beneficiary of our VIEs requiresrequire significant assumptions and judgment.judgments.

Contingencies: We are subject to the possibility of losses from various contingencies. ConsiderableSignificant judgment is necessary to estimate the probability and amount of a loss, if any, loss from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We accrue a liability and charge operations for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the balance sheet date. In accounting for the resolution of contingencies, considerablesignificant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods.

Income TaxesGoodwill and intangible assets: We test goodwill for impairment in the fourth quarter of our fiscal year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, then we would record an impairment loss up to the difference between the carrying value and implied fair value.

Determining when to test for impairment, the reporting units, the assets and liabilities of the reporting unit, and the fair value of the reporting unit requires significant judgment and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates, forecasted manufacturing costs, and other expenses and are developed as part of our long-range planning process. The same estimates are used in business planning, forecasting, and capital budgeting as part of our long-term manufacturing capacity analysis. We test the reasonableness of the output of our long-range planning process by calculating an implied value per share and comparing that to current stock prices, analysts' consensus pricing, and management's expectations. These estimates and assumptions are used to calculate projected future cash flows for the reporting unit, which are discounted using a risk-adjusted rate to estimate a fair value. The discount rate requires determination of appropriate market comparables. We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

We test other identified intangible assets with definite useful lives when events and circumstances indicate the carrying value may not be recoverable by comparing the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We test intangible assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. Estimating fair values involves significant assumptions, including future sales prices, sales volumes, costs, and discount rates.



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 anythe applicable 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.the United States. 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 numeroussignificant 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.

Inventories: Inventories are stated at the lower of average cost or net realizable value. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of inventories involves numeroussignificant judgments, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. To project average selling prices and sales volumes, we review recent sales volumes, existing customer orders, current contract prices, industry analyses of supply and demand, seasonal factors, general economic trends, and other information. When these analyses reflect estimated net realizable valuevalues below our manufacturing costs, we record a charge to cost of goods sold in advance of when the inventory isinventories are actually sold. Differences in forecasted average selling prices used in calculating lower of cost or net realizable value adjustments can result in significant changes in the estimated net realizable value of product inventories and accordingly the amount of write-down recorded. For example, a 5% variance in the estimated selling prices would have changed the estimated net realizable value of our memory inventory by approximately $195$577 million as of September 3, 2015.August 30, 2018. Due to the volatile nature of the semiconductor memory industry,and storage markets, actual selling prices and volumes often vary significantly from projected prices and volumes; as a result, the timing of when product costs are charged to operations can vary significantly.

U.S. GAAP provides for products to be grouped into categories in order to compare costs to net realizable values. The amount of any inventory write-down can vary significantly depending on the determination of inventory categories. Inventories are primarily categorized as memory (including DRAM, non-volatile,We review the major characteristics of product type and other memory)markets in determining the unit of account for purposes of determiningwhich we perform the lower of average cost or net realizable value. The major characteristics we consider in determining inventory categories are product typevalue analysis and markets.categorize inventories primarily as memory (including DRAM, NAND, and other memory).

Property, Plantplant, and Equipmentequipment: We review the carrying value of property, plant, and equipment for impairment when events and circumstances indicate that the carrying value of an asset or group of assets may not be recoverable from the estimated future cash flows expected to result from its use and/or disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the estimated fair value of the assets. The estimationestimate of future cash flows involves numerous assumptions which require significant judgment by us, including, but not limited to, future use of the assets for our operations versus sale or disposal of the assets, future selling prices for our products and future production and sales volumes. In addition, significant judgment is required in determining the groups of assets for which impairment tests are separately performed.

39


We periodically assess the estimated useful lives of our property, plant, and equipment. We revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years in the fourth quarter of 2016. The effect of the revision was not material for 2016 and reduced depreciation expense at the time by approximately $100 million per quarter. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies.")


Research and Developmentdevelopment: Costs related to the conceptual formulation and design of products and processes are expensed as R&D as incurred. Determining when product development is complete requires significant judgment by us. We deem development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability. Subsequent to product qualification, product costs are valuedincluded in inventory.cost of goods sold.

Stock-based Compensationcompensation: Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expense using the straight-line amortization method over the requisite service period. For performance-based stock awards, the expense recognized is dependent on our assessment of the probabilitylikelihood of the performance measure being


achieved. We utilize forecasts of future performance to assess these probabilities and this assessment requires considerablesignificant judgment.

Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerablesignificant judgment, including estimating stock price volatility and expected option life, and forfeiture rates.life. We develop these estimates based on historical data and market information which can change significantly over time. A small change in the estimates used can result in a relatively large change in the estimated valuation. We use the Black-Scholes option valuation model to value employee stock awards.options and awards granted under our employee stock purchase plan ("ESPP"). We estimate stock price volatility based on an average of its historical volatility and the implied volatility derived from traded options on our stock.


Recently Adopted Accounting Standards

See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Adopted Accounting Standards."


Recently Issued Accounting Standards

See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards."


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Interest Rate Risk

We are exposed to interest rate risk related to our indebtedness and our investment portfolio. Substantially allAs of our indebtedness is at fixed interest rates. AsAugust 30, 2018 and August 31, 2017, we had fixed-rate debt of $3.1 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 September 3, 2015August 30, 2018 and August 28, 2014,31, 2017, a hypothetical decrease in market interest rates of 1% would increase the fair value of our notes payablefixed-rate debt by approximately $366$79 million and $250$273 million, respectively. The increase in interest expense caused byAs of August 30, 2018 and August 31, 2017, we had variable-rate debt of $725 million and $4.2 billion, respectively. As of August 30, 2018 and August 31, 2017, a 1% increase in the interest rates of our variable-rate debt would not be significant.

As of September 3, 2015 and August 24, 2014, we held debt securities of $3.83 billion and $1.65 billion, respectively, that were subject to interest rate risk. We estimate that a 0.5%result in an increase in marketannual interest rates would decrease the fair valueexpense of these instruments by approximately $13$7 million as of September 3, 2015and $6$43 million, as of August 28, 2014.

respectively.

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 I – Item 1A. Risk Factors." Changes in currency exchange rates could materially adversely affect our results of operations or financial condition.


40



The functional currency for all of our consolidated subsidiariesoperations is the U.S. dollar. The substantial majority of our revenuessales are transacted in the U.S. dollar; however, significant amounts of our debt, operating expenditures, and capital purchases are incurred in or exposed to other currencies, primarily the British pound, the euro, the shekel, the Singapore dollar, the New Taiwan dollar, the yen,Singapore dollar, and the yuan.yen. We have established currency risk management programs for our operating expendituresmonetary assets and capital purchasesliabilities denominated in foreign currencies 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 and option contracts in these hedging programs, which reduce, but do not always entirely eliminate, the impact of currency exchange rate movements. We do not use derivative financial instruments for trading or speculative purposes.

To hedge our exposure to changes in currency exchange rates from ourBased on monetary assets and liabilities we utilize a rolling hedge strategy for our primary currency exposures with currency forward contracts that generally mature within 35 days.  Based on ourdenominated in foreign currency exposures from monetary assets and liabilities, offset by balance sheet hedges,currencies, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $3$78 million as of September 3, 2015August 30, 2018 and $7$391 million as of August 28, 2014.31, 2017. We hedge our exposure to changes in currency exchange rates by utilizing a rolling hedge strategy for our primary currency exposures with currency forward contracts that generally mature within nine months. 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 may utilize currency forward contracts that generally mature within 12 months. (See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Derivative Instruments.")



41



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Index to Consolidated Financial Statements


 Page
  
Consolidated Financial Statements as of September 3, 2015August 30, 2018 and August 28, 201431, 2017 and for the fiscal years ended
August 30, 2018, August 31, 2017, and September 3, 2015, August 28, 2014, and August 29, 2013:
1, 2016		 
  
Consolidated Statements of Operations
4341
  
Consolidated Statements of Comprehensive Income (Loss)
4442
  
Consolidated Balance Sheets
4543
  
Consolidated Statements of Changes in Equity
4644
  
Consolidated Statements of Cash Flows
4745
  
Notes to Consolidated Financial Statements
4846
  
Report of Independent Registered Public Accounting Firm
90
Financial Statement Schedules:
Schedule I – Condensed Financial Information of the Registrant
99
Schedule II – Valuation and Qualifying Accounts
10680


42



MICRON TECHNOLOGY, INC.

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

For the year ended September 3,
2015		 August 28,
2014		 August 29,
2013		 August 30,
2018		 August 31,
2017		 September 1,
2016
Net sales $16,192
 $16,358
 $9,073
 $30,391
 $20,322
 $12,399
Cost of goods sold 10,977
 10,921
 7,226
 12,500
 11,886
 9,894
Gross margin 5,215
 5,437
 1,847
 17,891
 8,436
 2,505
            
Selling, general and administrative 719
 707
 562
Selling, general, and administrative 813
 743
 659
Research and development 1,540
 1,371
 931
 2,141
 1,824
 1,617
Restructure and asset impairments 3
 40
 126
Other operating (income) expense, net (45) 232
 (8) (57) 1
 61
Operating income 2,998
 3,087
 236
 14,994
 5,868
 168
            
Interest income 35
 23
 14
 120
 41
 42
Interest expense (371) (352) (231) (342) (601) (437)
Gain on MMJ Acquisition —
 (33) 1,484
Other non-operating income (expense), net (53) 8
 (218) (465) (112) (54)
 2,609
 2,733
 1,285
 14,307
 5,196
 (281)
            
Income tax (provision) benefit (157) (128) (8)
Income tax provision (168) (114) (19)
Equity in net income (loss) of equity method investees 447
 474
 (83) (1) 8
 25
Net income 2,899
 3,079
 1,194
Net income (loss) 14,138
 5,090
 (275)
            
Net income attributable to noncontrolling interests —
 (34) (4) (3) (1) (1)
Net income attributable to Micron $2,899
 $3,045
 $1,190
Net income (loss) attributable to Micron $14,135
 $5,089
 $(276)
            
Earnings per share:      
Earnings (loss) per share      
Basic $2.71
 $2.87
 $1.16
 $12.27
 $4.67
 $(0.27)
Diluted 2.47
 2.54
 1.13
 11.51
 4.41
 (0.27)
            
Number of shares used in per share calculations:      
Number of shares used in per share calculations      
Basic 1,070
 1,060
 1,022
 1,152
 1,089
 1,036
Diluted 1,170
 1,198
 1,057
 1,229
 1,154
 1,036

















See accompanying notes to consolidated financial statements.

43



MICRON TECHNOLOGY, INC.

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

For the year ended September 3,
2015		 August 28,
2014		 August 29,
2013
Net income $2,899
 $3,079
 $1,194
       
Other comprehensive income (loss), net of tax:      
Foreign currency translation adjustments (42) (2) (5)
Gain (loss) on derivatives, net (18) (9) (9)
Gain (loss) on investments, net (4) 1
 (1)
Pension liability adjustments 20
 3
 (1)
Other comprehensive income (loss) (44) (7) (16)
Total comprehensive income 2,855
 3,072
 1,178
Comprehensive (income) loss attributable to noncontrolling interests 1
 (34) (5)
Comprehensive income attributable to Micron $2,856
 $3,038
 $1,173
For the year ended August 30,
2018		 August 31,
2017		 September 1,
2016
Net income (loss) $14,138
 $5,090
 $(275)
       
Other comprehensive income (loss), net of tax      
Gains (losses) on derivative instruments (15) 15
 7
Pension liability adjustments (3) 1
 (9)
Unrealized gains (losses) on investments (2) —
 3
Foreign currency translation adjustments 1
 48
 (49)
Other comprehensive income (loss) (19) 64
 (48)
Total comprehensive income (loss) 14,119
 5,154
 (323)
Comprehensive (income) attributable to noncontrolling interests (3) (1) (1)
Comprehensive income (loss) attributable to Micron $14,116
 $5,153
 $(324)





































See accompanying notes to consolidated financial statements.

44



MICRON TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS
(in millions except par value amounts)

As of September 3,
2015		 August 28,
2014		 August 30,
2018		 August 31,
2017
Assets        
Cash and equivalents $2,287
 $4,150
 $6,506
 $5,109
Short-term investments 1,234
 384
 296
 319
Receivables 2,507
 2,906
 5,478
 3,759
Inventories 2,340
 2,455
 3,595
 3,123
Other current assets 228
 350
 164
 147
Total current assets 8,596
 10,245
 16,039
 12,457
Long-term marketable investments 2,113
 819
 473
 617
Property, plant and equipment, net 10,554
 8,682
Equity method investments 1,379
 971
Intangible assets, net 449
 468
Property, plant, and equipment 23,672
 19,431
Intangible assets 331
 387
Deferred tax assets 597
 816
 1,022
 766
Goodwill 1,228
 1,228
Other noncurrent assets 455
 415
 611
 450
Total assets $24,143
 $22,416
 $43,376
 $35,336
        
Liabilities and equity        
Accounts payable and accrued expenses $2,611
 $2,864
 $4,611
 $3,664
Deferred income 205
 309
 284
 408
Current debt 1,089
 1,618
 859
 1,262
Total current liabilities 3,905
 4,791
 5,754
 5,334
Long-term debt 6,252
 4,893
 3,777
 9,872
Other noncurrent liabilities 698
 1,102
 581
 639
Total liabilities 10,855
 10,786
 10,112
 15,845
        
Commitments and contingencies 

 

 

 

        
Redeemable convertible notes 49
 68
 3
 21
Redeemable noncontrolling interest 97
 —
        
Micron shareholders' equity:    
Common stock, $0.10 par value, 3,000 shares authorized, 1,084 shares issued and outstanding (1,073 as of August 28, 2014) 108
 107
Micron shareholders' equity    
Common stock, $0.10 par value, 3,000 shares authorized, 1,170 shares issued and 1,161 outstanding (1,116 shares issued and 1,112 outstanding as of August 31, 2017) 117
 112
Additional capital 7,474
 7,868
 8,201
 8,287
Retained earnings 5,588
 2,729
 24,395
 10,260
Treasury stock, 45 shares held as of September 3, 2015 (881) —
Treasury stock, 9 shares held (4 shares as of August 31, 2017) (429) (67)
Accumulated other comprehensive income 13
 56
 10
 29
Total Micron shareholders' equity 12,302
 10,760
 32,294
 18,621
Noncontrolling interests in subsidiaries 937
 802
 870
 849
Total equity 13,239
 11,562
 33,164
 19,470
Total liabilities and equity $24,143
 $22,416
 $43,376
 $35,336



See accompanying notes to consolidated financial statements.

45



MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)

 Micron Shareholders     Micron Shareholders    
 Common Stock Additional Capital 
Retained Earnings (Accumulated
Deficit)
 Treasury Stock 
Accumulated Other Comprehensive
Income (Loss)
 Total Micron Shareholders' Equity Noncontrolling Interests in Subsidiaries Total Equity Common Stock Additional Capital Retained Earnings Treasury Stock 
Accumulated Other Comprehensive
Income (Loss)
 Total Micron Shareholders' Equity Noncontrolling Interests in Subsidiaries Total Equity
 
Number
of Shares
 Amount  
Number
of Shares
 Amount 
Balance at August 30, 2012 1,018
 $102
 $8,920
 $(1,402) $—
 $80
 $7,700
 $717
 $8,417
Net income  
     1,190
     1,190
 4
 1,194
Other comprehensive income (loss), net           (17) (17) 1
 (16)
Stock issued under stock plans 27
 2
 148
       150
   150
Stock-based compensation expense     91
       91
   91
Contributions from noncontrolling interests             —
 11
 11
Distributions to noncontrolling interests             —
 (37) (37)
Noncontrolling interests acquired in connection with business combination             —
 168
 168
Repurchase and retirement of stock (1) —
 (5)       (5)   (5)
Purchase and settlement of capped calls     (24)       (24)   (24)
Issuance and repurchase of convertible notes     57
       57
   57
Balance at August 29, 2013 1,044
 $104
 $9,187
 $(212) $—
 $63
 $9,142
 $864
 $10,006
Net income       3,045
     3,045
 34
 3,079
Balance at September 3, 2015 1,084
 $108
 $7,474
 $5,588
 $(881) $13
 $12,302
 $937
 $13,239
Net income (loss)       (276)     (276) 1
 (275)
Other comprehensive income (loss), net           (7) (7)   (7)           (48) (48) —
 (48)
Stock issued under stock plans 36
 4
 262
       266
   266
 11
 1
 47
       48
   48
Stock-based compensation expense     115
       115
   115
     191
       191
   191
Contributions from noncontrolling interests             —
 102
 102
             —
 37
 37
Distributions to noncontrolling interests             —
 (18) (18)             —
 (34) (34)
Acquisitions of noncontrolling interests     34
       34
 (180) (146)             —
 (93) (93)
Repurchase and retirement of stock (4) (1) (33) (42)     (76)   (76) (1) —
 (10) (13)     (23)   (23)
Settlement of capped calls and share retirement (3) —
 62
 (62)     —
   —
Redeemable convertible notes     (68)       (68)   (68)
Exchange, conversion and repurchase of convertible notes     (1,691)       (1,691)   (1,691)
Balance at August 28, 2014 1,073
 $107
 $7,868
 $2,729
 $—
 $56
 $10,760
 $802
 $11,562
Repurchase of treasury stock         (125)   (125)   (125)
Settlement of capped calls     23
   (23)   —
   —
Reclassification of redeemable convertible notes, net     49
       49
   49
Conversion and repurchase of convertible notes     (38)       (38)   (38)
Balance at September 1, 2016 1,094
 $109
 $7,736
 $5,299
 $(1,029) $(35) $12,080
 $848
 $12,928
Net income       2,899
     2,899
 —
 2,899
       5,089
     5,089
 1
 5,090
Other comprehensive income (loss), net           (43) (43) (1) (44)           64
 64
 —
 64
Stock issued under stock plans 13
 1
 73
       74
   74
 20
 3
 139
       142
   142
Stock-based compensation expense     168
       168
   168
     217
 (2)     215
   215
Repurchase and retirement of stock (2) —
 (13) (22) 

   (35)   (35)
Stock issued to Nanya for Inotera Acquisition 4
 —
 70
 (104) 1,029
   995
   995
Settlement of capped calls     192
   (67)   125
   125
Reclassification of redeemable convertible notes, net     (21)       (21)   (21)
Conversion and repurchase of convertible notes     (33)       (33)   (33)
Balance at August 31, 2017 1,116
 $112
 $8,287
 $10,260
 $(67) $29
 $18,621
 $849
 $19,470
Net income       14,135
     14,135
 3
 14,138
Other comprehensive income (loss), net           (19) (19) —
 (19)
Stock issued in public offering 34
 3
 1,363
       1,366
   1,366
Stock issued under stock plans 22
 2
 287
       289
   289
Stock-based compensation expense     198
       198
   198
Contributions from noncontrolling interests             —
 142
 142
             —
 18
 18
Distributions to noncontrolling interests             —
 (6) (6)
Repurchase and retirement of stock (2) —
 (13) (40)     (53)   (53) (2) —
 (71)       (71)   (71)
Repurchase of treasury stock         (831)   (831)   (831)
Settlement of capped calls     50
   (50)   —
   —
     429
   (429)   —
   —
Redeemable convertible notes     19
       19
   19
Reclassification of redeemable convertible notes, net     18
       18
   18
Conversion and repurchase of convertible notes     (691)       (691)   (691)     (2,310)   67
   (2,243)   (2,243)
Balance at September 3, 2015 1,084
 $108
 $7,474
 $5,588
 $(881) $13
 $12,302
 $937
 $13,239
Balance at August 30, 2018 1,170
 $117
 $8,201
 $24,395
 $(429) $10
 $32,294
 $870
 $33,164



See accompanying notes to consolidated financial statements.

46



MICRON TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the year ended September 3,
2015		 August 28,
2014		 August 29,
2013
Cash flows from operating activities      
Net income $2,899
 $3,079
 $1,194
Adjustments to reconcile net income to net cash provided by operating activities:  
  
  
Depreciation expense and amortization of intangible assets 2,667
 2,103
 1,804
Amortization of debt discount and other costs 138
 167
 122
Stock-based compensation 168
 115
 91
(Gain) loss from currency hedges, net 64
 27
 222
Loss on restructure of debt 49
 195
 31
Noncash restructure and asset impairment, net 1
 (17) 106
(Gain) on MMJ Acquisition —
 33
 (1,484)
Equity in net (income) loss of equity method investees (447) (474) 83
Gain from Inotera issuance of shares (3) (97) (48)
Gain from disposition of interest in Aptina (1) (119) —
Change in operating assets and liabilities:  
  
  
Receivables 393
 (518) (409)
Inventories 116
 194
 83
Accounts payable and accrued expenses (691) 671
 28
Deferred income taxes, net 168
 68
 (7)
Other noncurrent liabilities (16) 243
 (15)
Other (297) 29
 10
Net cash provided by operating activities 5,208
 5,699
 1,811
       
Cash flows from investing activities  
  
  
Purchases of available-for-sale securities (4,392) (1,063) (924)
Expenditures for property, plant and equipment (4,021) (3,107) (1,442)
Payments to settle hedging activities (132) (26) (253)
(Increase) decrease in restricted cash (15) 536
 —
Proceeds from sales and maturities of available-for-sale securities 2,248
 557
 678
Cash received from disposition of interest in Aptina 1
 105
 —
Other 79
 96
 31
Net cash provided by (used for) investing activities (6,232) (2,902) (1,910)
       
Cash flows from financing activities  
  
  
Repayments of debt (2,329) (3,843) (743)
Cash paid to acquire treasury stock (884) (76) (5)
Payments on equipment purchase contracts (95) (30) (16)
Proceeds from issuance of debt 2,212
 2,212
 1,121
Proceeds from equipment sale-leaseback transactions 291
 14
 126
Contributions from noncontrolling interests 142
 102
 11
Proceeds from issuance of stock under equity plans 73
 265
 150
Other (128) (143) (124)
Net cash provided by (used for) financing activities (718) (1,499) 520
       
Effect of changes in currency exchange rates on cash and equivalents (121) (28) —
       
Net increase (decrease) in cash and equivalents (1,863) 1,270
 421
Cash and equivalents at beginning of period 4,150
 2,880
 2,459
Cash and equivalents at end of period $2,287
 $4,150
 $2,880
       
Supplemental disclosures  
  
  
Income taxes refunded (paid), net $(63) $(43) $4
Interest paid, net of amounts capitalized (226) (163) (107)
Noncash investing and financing activities:  
  
  
Exchange of convertible notes —
 756
 —
Acquisition of noncontrolling interest —
 127
 —
For the year ended August 30,
2018		 August 31,
2017		 September 1,
2016
Cash flows from operating activities      
Net income (loss) $14,138
 $5,090
 $(275)
Adjustments to reconcile net income (loss) to net cash provided by operating activities  
  
  
Depreciation expense and amortization of intangible assets 4,759
 3,861
 2,980
Amortization of debt discount and other costs 101
 125
 126
Loss on debt prepayments, repurchases, and conversions 385
 99
 4
Stock-based compensation 198
 215
 191
Gain on remeasurement of previously-held equity interest in Inotera —
 (71) —
Change in operating assets and liabilities  
  
  
Receivables (1,734) (1,651) 465
Inventories (472) 50
 (549)
Accounts payable and accrued expenses 549
 564
 272
Payments attributed to intercompany balances with Inotera —
 (361) —
Deferred income taxes, net (265) (22) (15)
Other (259) 254
 (31)
Net cash provided by operating activities 17,400
 8,153
 3,168
       
Cash flows from investing activities  
  
  
Expenditures for property, plant, and equipment (8,879) (4,734) (5,817)
Purchases of available-for-sale securities (760) (1,239) (1,026)
Payments to settle hedging activities (185) (274) (152)
Acquisition of Inotera —
 (2,634) —
Proceeds from sales of available-for-sale securities 604
 776
 2,314
Proceeds from government incentives 355
 21
 16
Proceeds from maturities of available-for-sale securities 320
 194
 1,376
Proceeds from settlement of hedging activities 163
 184
 335
Other 166
 169
 (90)
Net cash provided by (used for) investing activities (8,216) (7,537) (3,044)
       
Cash flows from financing activities  
  
  
Repayments of debt (10,194) (2,558) (870)
Payments on equipment purchase contracts (206) (519) (46)
Proceeds from issuance of stock 1,655
 142
 48
Proceeds from issuance of debt 1,009
 3,311
 2,199
Proceeds from equipment sale-leaseback transactions —
 —
 765
Other (40) (27) (351)
Net cash provided by (used for) financing activities (7,776) 349
 1,745
       
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash (37) (12) 19
       
Net increase in cash, cash equivalents, and restricted cash 1,371
 953
 1,888
Cash, cash equivalents, and restricted cash at beginning of period 5,216
 4,263
 2,375
Cash, cash equivalents, and restricted cash at end of period $6,587
 $5,216
 $4,263
       
Supplemental disclosures  
  
  
Income taxes paid, net $(226) $(99) $(90)
Interest paid, net of amounts capitalized (312) (468) (267)
Noncash investing and financing activity      
Equipment acquisitions on contracts payable and capital leases 84
 813
 993

See accompanying notes to consolidated financial statements.

47



MICRON TECHNOLOGY, INC.

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

Significant Accounting Policies

Basis of Presentation: We are a globalMicron Technology, Inc., including its consolidated subsidiaries, is an industry leader in advanced semiconductor systems. Ourinnovative 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 NOR Flash,3D XPoint memory, is transforming how the basis for solid-state drives, modules, multi-chip packages,world uses information to enrich life. Backed by 40 years of technology leadership, our memory and other system solutions. Our memorystorage 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, networking, mobile, embedded, and automotive applications.mobile. The accompanying consolidated financial statements include the accounts of Micron Technology, Inc. and itsour consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America.

Certain reclassifications have been made to prior period amounts to conform to current period presentation. In addition, amounts for certain equipment purchases were reclassified from financing to investing within the statement of cash flows to better reflect the current nature of these transactions and to improve comparability with our industry peers. In the fourth quarter of 2015, we adopted, on a retrospective basis, Accounting Standards Update 2015-03 – Simplifying the Presentation of Debt Issuance Costs. (See "Debt – Retrospective Application of a New Accounting Standard" note.)

Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal year 2015 contained 53 weeksyears 2018, 2017, and fiscal years 2014 and 20132016 each contained 52 weeks. All period references are to our fiscal periods unless otherwise indicated.

Derivative and Hedging Instruments: We use derivative instruments to manage a portion of our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities or futuredenominated in currencies other than the U.S. dollar and (2) forecasted cash flows and to reduce volatility in our earnings caused by changes in interest rates that affect our variable-rate debt. Our derivatives have consisted of forward and option contracts and we have also entered into interest rate swap contracts. We do not use derivative instruments for trading or speculative purposes.certain capital expenditures. Derivative instruments are measured at their fair values and recognized as either assets or liabilities. The accounting for changes in the fair value of derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments that are not designated as hedges for hedge accounting, purpose, gains or losses from changes in fair values are recognized in other non-operating income (expense).

For derivative instruments designated as cash-flowcash flow hedges, the effective portion of the gainrealized and unrealized gains or losslosses on derivatives is included as a component of accumulated other comprehensive income (loss), and the ineffective or excluded portion of the gain or loss is included in other non-operating income (expense). The amountsincome. Amounts in accumulated other comprehensive income (loss) from these cash flow hedges are reclassified into earnings in the same line items of the consolidated statements of operation and in the same periods in which the underlying transactions affect earnings. EffectivenessFor 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 Accounting Standards Update ("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.

For derivative forward contracts designated as fair value hedges, hedge effectiveness is measureddetermined by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the forecasted cash flowsundiscounted spot rate of the hedged item. Forforward contract. The changes in fair values of hedge instruments attributed to changes in undiscounted spot rates are recognized in other non-operating income (expense). The time value associated with hedge instruments is excluded from the assessment of the effectiveness assessment of our cash-flow hedges changes inand is recognized on a straight-line basis over the time value are excluded for forward contracts.life of hedges to other non-operating income (expense).

We enter into master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions. These master netting arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled with each counterparty have been presented in our consolidated balance sheet on a net basis.

(See "Derivative Instruments" note.)

Financial Instruments: Cash equivalents include highly liquid short-term investments with original maturities to us of three months or less that are readily convertible to known amounts of cash. InvestmentsOther investments with remaining maturities greater than three months andof less than one year are included in short-term investments. Investments with remaining maturities greater than one year are included in long-term marketable investments. The carrying value of investment securities sold is determined using the specific identification method.

Functional Currency: The U.S. dollar is the functional currency for us and all of our consolidated subsidiaries.


48Goodwill and Non-Amortizing Intangible Assets: We perform an annual impairment assessment for goodwill and non-amortizing intangible assets in the fourth quarter of our fiscal year.



Government Incentives: We receive incentives from governmental entities related to expenses, assets, and other activities. Our government incentives may require that we meet or maintain specified spending levels and other operational metrics and may be subject to reimbursement if such conditions are not met or maintained. Government incentives are recorded in the financial statements in accordance with their purpose: as a reduction of expenses, a reduction of asset costs, or other income. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. Incentives related to the acquisition or construction of fixed assets are recognized as a reduction in the carrying amounts of the related assets and reduce depreciation expense over the useful lives of the assets. Other incentives are recognized as other operating income. Government incentives received prior to being earned are recognized in current or noncurrent deferred income, whereas government incentives earned prior to being received are recognized in current or noncurrent receivables. Cash received from government incentives related to operating expenses are included as an operating activity in the statement of cash flows, whereas cash received from incentives related to the acquisition of property, plant, and equipment are included as an investing activity.

Inventories: Inventories are stated at the lower of average cost or net realizable value. Cost includes depreciation, labor, material, and overhead costs, including product and process technology costs. Determining net realizable value of inventories involves numerous judgments, including projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories. When net realizable value is below cost, we record a charge to cost of goods sold to write down inventories to their estimated net realizable value in advance of when the inventories are actually sold. Inventories are primarily categorized as memory (including DRAM, non-volatile,We review the major characteristics of product type and other memory)markets in determining the unit of account for purposes of determiningwhich we perform the lower of average cost or net realizable value. The major characteristics considered in determining inventory categories for purposes of determining the lower of cost or net realizable value are product typeanalysis and markets.categorize inventories primarily as memory (including DRAM, NAND, and other memory). We remove amounts from inventory and charge such amounts to cost of goods sold on an average cost basis.

Product and Process Technology: Costs incurred to (1) acquire product and process technology, (2) patent technology, and (3) maintain patent technology, are capitalized and amortized on a straight-line basis over periods ranging up to 12.5 years. We capitalize a portion of the costs incurred to patent technology based on historical and projecteddata of patents issued as a percent of patents we file. Capitalized product and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement. Fully-amortized assets are removed from product and process technology and accumulated amortization.

Product Warranty: We generally provide a limited warranty that our products are in compliance with ourapplicable specifications existing at the time of delivery. Under our generalstandard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our generalstandard terms and conditions. Our warranty obligations are not significant.material.

Property, Plant, and Equipment: Property, plant, and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of generally 10 to 30 years for buildings, 5 to 7 years for equipment, and 3 to 5 years for software. Assets held for sale are carried at the lower of cost or estimated fair value and are included in other noncurrent assets. When property, plant, or equipment is retired or otherwise disposed, the net book value is removed and we recognize any gain or loss in our results of operations.

We capitalize interest on borrowings during the period of time over which we carry out the activities necessary to bring the assetassets to the condition of itstheir intended use and location. Capitalized interest becomes part of the cost of assets.

We periodically assess the underlying assets and amortized over theestimated useful lives of our property, plant, and equipment. In the assets.fourth quarter of 2016, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years as a result of the lengthening period of time between DRAM product technology node transitions, an increased re-use rate of equipment, and industry trends. The effect of the revision reduced depreciation expense at the time by approximately $100 million per quarter.

Research and Development: Costs related to the conceptual formulation and design of products and processes are expensedcharged to R&D expense as research and development as incurred.  Determining when product development is complete requires judgment. Development of a product is deemed complete once the product has been thoroughly reviewedwhen it is qualified through reviews and has passed tests for performance and reliability. Subsequent to product qualification, product costs are valuedincluded in inventory.cost of goods sold. Product design and other research and developmentR&D costs for certain technologies aremay be shared with our joint venture partners.a development partner. Amounts receivable from cost-sharing arrangements are reflected as a reduction of research and developmentR&D expense.  (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)

Revenue Recognition: We recognize product or license revenue when persuasive evidence that a sales arrangement exists, delivery has occurred, the price is fixed or determinable, and collectabilitycollectibility is reasonably assured.assured, which is generally at the time


of shipment to our customers. If we are unable to reasonably estimate returns or the price is not fixed or determinable, sales made under agreements allowing rights of return or price protection are deferred until customers have resold the product.

Stock-based Compensation: Stock-based compensation is measured at the grant date, based on the fair value of the award, and recognized as expense under the straight-line attribution method over the requisite service period. We account for forfeitures as they occur. We issue new shares upon the exercise of stock options or conversion of share units.  (See "Equity Plans" note.)

Treasury Stock: Treasury stock is carried at cost. When we retire our treasury stock, any excess of the repurchase price paid over par value is allocated between additional capital and retained earnings.

Use of Estimates: The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Estimates and judgments are based on historical experience, forecasted events, and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments may differ under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Actual results could differ from estimates.

49





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:PTI Xi'an: InoteraPowertech 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 supplyservice agreement with us.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 InoteraPTI Xi'an that most significantly impact its economic performance, primarily due to limitations on ourbecause we have no governance rights that require 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.rights. Therefore, we do not consolidate InoteraPTI Xi'an. In connection with our assembly services with PTI, we had capital lease obligations and we account for our interest under the equity method. (See "Equity Method Investments – Inotera" note.)

EQUVO:EQUVO HK Limited ("EQUVO") is a special purpose entity created to facilitate annet property, plant, and equipment sale-leaseback financing transaction between usof $63 million and a consortium$63 million, respectively, as of financial institutions. Neither we nor the financing entities have an equity interest in EQUVO. EQUVO is a VIE because its equity is not sufficient to permit it to finance its activities without additional support from the financing entitiesAugust 30, 2018 and because the third-party equity holder lacks characteristics$80 million and $76 million, respectively, as of a controlling financial interest. By design, the arrangement with EQUVO is merely a financing vehicle and we do not bear any significant risks from variable interests with EQUVO. Therefore, we have determined that we do not have the power to direct the activities of EQUVO that most significantly impact its economic performance and we do not consolidate 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. SCHE is a VIE due to the nature of its tolling agreements with us and our purchase and call options for SCHE's assets. We do not have an equity ownership interest in SCHE. 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.August 31, 2017.

Consolidated VIEsVIE

IMFT: 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.

MP Mask: MP Mask is a VIE because substantially all of its costs are passed to us and its other member, Photronics, through product purchase agreements and MP Mask is dependent upon us or Photronics for any additional cash requirements.  We have tie-breaking voting rights over key operating decisions and nearly all key MP Mask activities are driven by our supply needs.  We consolidate MP Mask because we have the power to direct the activities of MP Mask that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from MP Mask that could potentially be significant to it.

(See (See "Equity – Noncontrolling Interests in Subsidiaries"Subsidiaries – IMFT" note.)




50



Recently AdoptedIssued Accounting Standards

In July 2015,October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11ASU 2016-16 – – Simplifying the Measurement ofIntra-Entity Transfers Other Than Inventory which changed the subsequent measurement guidance from the lower of cost or market to the lower of cost or net realizable value, with net realizable value defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. We adopted this standard in the fourth quarter of 2015. The adoption of this standard did not have a material impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03 – Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs relatedan entity to a recognized debt liability be presented inrecognize the balance sheet as a direct deduction fromincome tax consequences of an intra-entity transfer of an asset other than inventory when the carrying amount of that debt liability, as appropriate, consistent with debt discounts, as opposed to an asset. We adopted this standard in the fourth quarter of 2015 on a retrospective basis. As a result of adopting this standard, we presented our debt issuance costs for recognized debt liabilities as a direct reduction of the related debt liability in the consolidated balance sheets for all periods presented. (See "Debt – Retrospective Application of a New Accounting Standard" note.)


Recently Issued Accounting Standards

In April 2015, the FASB issued ASU 2015-05 – Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides additional guidance to customers about whether a cloud computing arrangement includes a software license. Under ASU 2015-05, if a software cloud computing arrangement contains a software license, customers should account for the license element of the arrangement in a manner consistent with the acquisition of other software licenses. If the arrangement does not contain a software license, customers should account for the arrangement as a service contract. ASU 2015-05 also removes the requirement to analogize to ASC 840-10 –Leases to determine the asset acquired in a software licensing arrangement.transfer occurs. This ASU will be effective for us beginning in ourthe first quarter of 20172019 and requires modified retrospective adoption. We do not anticipate the adoption of this ASU will have a material impact to 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. This ASU will be effective for us in the first quarter of 2021 with adoption permitted as early as the first quarter of 2020. This ASU requires modified retrospective adoption, is permitted.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 theour adoption of this ASU on our financial statements.

In February 2015,2016, the FASB issued ASU 2015-022016-02 – Amendments to the Consolidation AnalysisLeases, 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- use asset and corresponding liability, measured at the consolidation requirementspresent value of the lease payments. This ASU, as amended, will be effective for us in Accounting Standards Codification 810 –Consolidation.  ASU 2015-02 makes targeted amendmentsthe first quarter of 2020 with early adoption permitted and allows for either a modified retrospective adoption or a retrospective adoption by recognizing a cumulative-effect adjustment to the current consolidationopening balance of retained earnings in the period of adoption. The adoption of this ASU will result in an increase to our consolidated balance sheets for these 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 VIEs, which could change consolidation conclusions.the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for us beginning in ourthe first quarter of 20172019 and earlyrequires modified retrospective adoption, is permitted.  Wewith prospective adoption for amendments related to equity securities without readily determinable fair values. Our assets and liabilities subject to this standard are evaluating the effects of the 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. IncludingThis ASU is effective for us in the one-year extensionfirst quarter of 2019 and we expect to elect the modified retrospective adoption method.

As a result of the adoption of this ASU, providedwe will recognize revenue from sales of products to our distributors (which generally have agreements allowing rights of return or price protection) at the time control transfers to our distributors, which is generally earlier than recognizing revenue only upon resale by ASU 2015-14, we are requiredour distributors under existing revenue recognition guidance. Revenue recognized upon resale by our distributors under these arrangements was 19%, 20%, and 25% of our consolidated revenue for the 2018, 2017, and 2016, respectively. As of August 30, 2018, deferred income related to adoptour distributor sales was $232 million. Upon adoption of this ASU, beginningamounts deferred related to our sales to distributors, net of estimated price adjustments, will be recognized as an increase to retained earnings, net of taxes. We will also reclassify certain allowances from accounts receivable to accounts payable and accrued expenses in our first quarterconnection with new presentation requirements of 2019; however, we are permitted to adopt this ASU as early as our first quarter of 2018. This ASU allows for either full retrospective or modified retrospective adoption. We are evaluating the timing of our adoption, the transition method we will elect, and theASU. The tax effects of the adoption of this ASU on our financial statements.will be recorded primarily as a reduction of net deferred tax assets.


Acquisition of Inotera


51Through December 6, 2016, we held a 33% ownership interest in Inotera, now known as MTTW, 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% remaining 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 the Micron Shares (as defined below) 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 for 2017 and 2016 included transaction costs of $13 million and $3 million, respectively, incurred in connection with the Inotera Acquisition.




Micron Memory Japan, Inc.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 Inotera 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 2017.

On July 31, 2013,In connection with the Inotera Acquisition, we acquired Elpida, now known as MMJ,sold 58 million shares of our common stock to Nanya (the "Micron Shares") and a controlling interest in Rexchip, now known as MMT, for an aggregatereceived cash proceeds of $949 million in cash (collectively, "the MMJ Acquisition"). The MMJ Acquisition included (1)$986 million. Because the acquisition of MMJ, including its 65% interest in MMT and (2) the acquisition of an additional 24% interest in MMT from Powerchip Technology Corporation (the "MMT Share Purchase"). The MMJ Acquisition was treated as a single business combination because: (1) the two transactions were entered into and closed contemporaneously, and (2) the MMT Share Purchase was negotiated in contemplationsale of the acquisition of MMJMicron Shares to Nanya was contemporaneous with, and its completion was contingent onupon, the closing of 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 were subject to certain restrictions on transfers at the time of sale. 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 MMJ.$81 million, based on the implied volatility derived from traded options on our stock and on the duration of the lack of transferability (Level 2).

In 2014, we purchased additional interests in MMT, increasing our ownership interestThe allocation of purchase price to 99.5%. (See "Equity – Noncontrolling Interest in Subsidiaries – MMT" note.)
The MMJ Acquisition included a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan, a 300mm DRAM wafer fabrication facility located in Taichung City, Taiwan, and an assembly and test facility located in Akita, Japan. The operations from the MMJ Acquisition, which are included primarily in our MBU and CNBU segments, include the manufacture of mobile DRAM targeted to mobile phones and tablets and computing DRAM targeted to desktop PCs, servers, notebooks, and workstations.

We estimated the provisional fair values of the assets and liabilities of the MMJ Group as of the July 31, 2013 acquisition date using an in-use model, which reflects its value through its use in combination with other assets as a group and we recognized a gain in 2013 of $1.48 billion. In the second quarter of 2014, the provisional amounts recorded in connection with the MMJ Acquisition were adjusted, primarily for pre-petition liabilities, and we recognized a charge in 2014 for these measurement period adjustments. The valuation of assets acquired and liabilities assumed wereof Inotera was as follows:

Assets acquired and liabilities assumed: 
Cash and equivalents$999
Receivables697
Inventories962
Restricted cash557
Other current assets142
Property, plant and equipment935
Equity method investment40
Intangible assets10
Deferred tax assets811
Other noncurrent assets66
Accounts payable and accrued expenses(409)
Current portion of long-term debt(673)
Long-term debt(1,461)
Other noncurrent liabilities(75)
Total net assets acquired2,601
Noncontrolling interest in MMJ168
Consideration949
Preliminary gain on acquisition recognized in 20131,484
Adjustment for preliminary pre-petition liabilities(33)
Final gain on acquisition$1,451
Consideration  
Cash paid for Inotera Acquisition $4,099
Less cash received from sale of 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 3,722
Deferred tax assets 82
Goodwill 1,124
Other noncurrent assets 130
Accounts payable and accrued expenses (232)
Debt (56)
Other noncurrent liabilities (9)
  $5,191

Our resultsThe Inotera Acquisition enhances our flexibility to drive new technology, optimize the deployment of operations for 2013 included $355 million of net salescapital, and $46 million of operating income from the MMJ Group's operations after the July 31, 2013 acquisition date. Selling, general, and administrative expensesadapt our product offerings to changes in our results of operations for 2013 included transaction costs of $50 million incurred in connection with the MMJ Acquisition.


52



The acquisition of MMJ was pursuant to the terms and conditions of an Agreement on Support for Reorganization Companies (as amended, the "Sponsor Agreement") that we entered into in July 2012 with the trustees of the MMJ Companies pursuant to and in connection with the MMJ Companies' corporate reorganization proceedings under the Corporate Reorganization Act of Japan.market conditions. As a result of these synergies, we allocated goodwill of $829 million, $198 million, and $97 million to CNBU, MBU, and EBU, respectively. Goodwill resulting from the Japan Proceedings,Inotera Acquisition is not deductible for so long as such proceedings are continuing, the MMJ Companies are subject to certain restrictions on dividends, loans, and advances. The plans of reorganization of the MMJ Companies prohibit the MMJ Companies from paying dividends, including any cash dividends, to us and require that excess earnings be used in their businesses or to fund the MMJ Companies' installment payments. These prohibitions would also effectively prevent the subsidiaries of the MMJ Companies from paying cash dividends to us as any such dividends would have to be first paid to the MMJ Companies which are prohibited from repaying those amounts to us as dividends under the plans of reorganization. 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. Moreover, loans or advances by subsidiaries of the MMJ Companies may be considered outside the ordinary course of business and may require consent of MMJ's trustees or, in certain cases, approval by the Japan Court. As a result, the assets of the MMJ Companies, while available to satisfy the MMJ Companies' installment payments and other obligations, capital expenditures, and other operating needs of the MMJ Companies, are not availableTaiwan corporate income tax purposes; however, it is deductible for use by us in our other operations. Certain uses of the assets of the MMJ Companies, including investments in certain capital expenditures and in MMT, may require consent of MMJ's trustees or, in certain cases, approval by the Japan Court. Disposition of certain assets of the MMJ Companies may also require consent of one or more of the secured creditors.Taiwan surtax purposes.



Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations as if the MMJInotera Acquisition had occurred on September 2, 2011.4, 2015. The pro forma financial information includes the accounting effects of the business combination, including adjustments to the amortization of intangible assets;for depreciation of property, plant, and equipment;equipment, interest expense; andexpense, elimination of intercompany activities.  The historical resultsactivities, and revaluation of operations of the MMJ Group for the eleven months ended May 31, 2013 included a gain of $1.69 billion for the forgiveness of debt related to liabilities subject to compromise upon approval of the plans of reorganization by the creditors and the Japan Court. No adjustments were made to the unaudited pro forma financial information for this item, consistent with the requirements for preparation of the pro forma financial information.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 MMJInotera Acquisition occurred on September 2, 2011.

4, 2015.
For the year ended 2013
Net sales $12,494
Net income 3,825
Net income attributable to Micron 3,770
   
Earnings per share:  
Basic $3.69
Diluted 3.57
  Year ended
  August 31,
2017		 September 1,
2016
Net sales $20,317
 $12,341
Net income (loss) 5,172
 (543)
Net income (loss) attributable to Micron 5,171
 (544)
Earnings (loss) per share    
Basic 4.68
 (0.50)
Diluted 4.42
 (0.50)

The unaudited pro forma financial information for 20132017 includes our results for the year ended August 29, 2013, which31, 2017 (which includes one month of results from the MMJ Group following the closing of the MMJ Acquisition, and the results of Inotera since our acquisition of Inotera on December 6, 2016), the MMJ Group, includingresults of Inotera for the three months ended November 30, 2016, and the adjustments described above,above. The pro forma information for 2016 includes our results for the elevenyear ended September 1, 2016, the results of Inotera for the twelve months ended MayAugust 31, 2013.2016, and the adjustments described above.

Technology Transfer and License Agreements with Nanya

Effective December 6, 2016, the terms of technology transfer and license agreements provided Nanya with options to require us to transfer to Nanya certain technology for Nanya's use 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 (the "1Y Process Node"). Nanya's option for the 1X Process Node expired unexercised. If Nanya exercises its right for the 1Y Process Node, Nanya would pay us royalties for a license to the transferred 1Y Process Node technology based on revenues from products utilizing the technology, subject to specified caps, and we would also receive an equity interest in Nanya upon the achievement of certain milestones.




53



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 September 3, 2015 August 28, 2014 2018 2017
 Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(3)
 Total Fair Value Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(3)
 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 $1,684
 $—
 $—
 $1,684
 $2,445
 $—
 $—
 $2,445
 $3,223
 $—
 $—
 $3,223
 $2,237
 $—
 $—
 $2,237
Level 1(1)(2)
                                
Money market funds 168
 —
 —
 168
 1,281
 —
 —
 1,281
 2,443
 —
 —
 2,443
 2,332
 —
 —
 2,332
Marketable equity securities —
 —
 —
 —
 —
 —
 1
 1
 168
 —
 —
 168
 1,281
 —
 1
 1,282
Level 2(2)
                
Level 2(3)
                
Corporate bonds 2
 616
 1,261
 1,879
 —
 154
 407
 561
 3
 172
 272
 447
 —
 193
 315
 508
Certificates of deposit 806
 11
 2
 819
 483
 24
 3
 510
Government securities 58
 391
 254
 703
 —
 136
 284
 420
 5
 63
 103
 171
 1
 90
 126
 217
Asset-backed securities —
 8
 575
 583
 —
 1
 127
 128
 —
 34
 96
 130
 —
 2
 173
 175
Certificates of deposit 311
 28
 23
 362
 402
 8
 —
 410
Commercial paper 64
 191
 —
 255
 22
 85
 —
 107
 26
 16
 —
 42
 56
 10
 —
 66
 435
 1,234
 2,113
 3,782
 424
 384
 818
 1,626
 6,506
 $296
 $473
 $7,275
 5,109
 $319
 $617
 $6,045
 $2,287
 $1,234
 $2,113
 $5,634
 $4,150
 $384
 $819
 $5,353
Restricted cash(4)
 81
       107
      
Cash, cash equivalents, and restricted cash $6,587
       $5,216
      
(1)
The maturities of long-term marketable securities range from one to four years.
(2) 
The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.
(2)(3) 
The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from these pricing services. As of September 3, 2015, noNo adjustments were made to the fair values indicated by such pricing information.information as of August 30, 2018 or August 31, 2017.
(3)(4) 
Restricted cash is included in other noncurrent assets and included balances related to the MMJ Creditor Payments. The maturitiesrestrictions on the MMJ Creditor Payments lapse upon approval by the trustees and/or Tokyo District Court. Restricted cash as of August 31, 2017 also included interest reserve balances related to our long-term marketable securities generally range from one to four years.2021 MSTW Term Loan, which were released in 2018 in connection with our prepayment of the 2021 MSTW Term Loan. (See "Debt" note.)

Proceeds from sales of available-for-sale securities for 2015, 2014, and 2013 were $1.49 billion, $355 million, and $526 million, respectively. Gross realized gains and losses from sales of available-for-sale securities were not significantmaterial for any period presented. As of September 3, 2015, none of ourAugust 30, 2018, there were no available-for-sale securities that had been in a loss position for longer than 12 months.


Receivables

As of 2015 2014
Trade receivables $2,188
 $2,524
Income and other taxes 116
 104
Other 203
 278
  $2,507
 $2,906

As of September 3, 2015 and August 28, 2014, other receivables included $120 million and $70 million, respectively, due from Intel for amounts related to product design and process development activities under cost-sharing agreements for NAND Flash memory and 3D XPoint memory.  (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)
As of 2018 2017
Trade receivables $5,056
 $3,490
Income and other taxes 161
 100
Other 261
 169
  $5,478
 $3,759




54



Inventories

As of 2015 2014 2018 2017
Finished goods $785
 $898
 $815
 $856
Work in process 1,315
 1,372
 2,357
 1,968
Raw materials and supplies 240
 185
 423
 299
 $2,340
 $2,455
 $3,595
 $3,123


Property, Plant, and Equipment

As of2014 Additions Retirements and Other 2015 2018 2017
Land$86
 $2
 $—
 $88
 $345
 $345
Buildings (includes $289 as of 2014 and $271 as of 2015 for capital leases)5,093
 273
 (8) 5,358
Equipment(1) (includes $1,113 as of 2014 and $1,192 as of 2015 for capital leases)
17,781
 3,805
 (566) 21,020
Buildings (includes $483 and $475, respectively, under capital leases) 8,680
 7,958
Equipment(1) (includes $1,336 and $1,331, respectively, under capital leases)
 38,249
 32,187
Construction in progress(2)
114
 345
 (23) 436
 1,162
 499
Software358
 39
 (24) 373
 655
 544
23,432
 4,464
 (621) 27,275
 49,091
 41,533
Accumulated depreciation (includes $695 as of 2014 and $717 as of 2015 for capital leases)(14,750) (2,550) 579
 (16,721)
Accumulated depreciation (includes $868 and $626, respectively, under capital leases) (25,419) (22,102)
$8,682
 $1,914
 $(42) $10,554
 $23,672
 $19,431
(1) 
Included costs related to equipment not placed into service of $928 million$1.73 billion and $826$994 million, as of September 3, 2015August 30, 2018 and August 28, 2014,31, 2017, respectively.
(2) 
Included building-related construction and tool installation costs onfor assets not placed into service.

Depreciation expense was $2.554.66 billion, $1.993.76 billion, and $1.722.86 billion for 20152018, 20142017, and 20132016, respectively. Other noncurrent assets included land held for development of $58 million as of September 3, 2015 and $57 million as ofAugust 28, 2014. As of September 3, 2015,August 30, 2018, production equipment, buildings, and buildingsland with an aggregate carrying value of $248 million and land with a carrying value of $42 million$2.33 billion were pledged as collateral under various notes payable. (See "Debt – Other Facilities" note.)Interest capitalized as part of the cost of property, plant, and equipment was $44 million, $7 million, and $43 million for 2018, 2017, and 2016, respectively.




55



Equity Method Investments

As of 2015 2014
  Investment Balance Ownership Percentage Investment Balance Ownership Percentage
Inotera(1)
 $1,332
 33% $914
 33%
Tera Probe 38
 40% 48
 40%
Other 9
 Various
 9
 Various
  $1,379
  
 $971
  
(1) Entity is a variable interest entity.

As of September 3, 2015, substantially all of our maximum exposure to loss from our VIEs that were not consolidated was the $1.33 billion carrying value of our investment in Inotera.  We may also incur losses in connection with our rights and obligations to purchase all of Inotera's wafer production capacity under our supply agreements with Inotera.

We recognize our share of earnings or losses from our equity method investees generally on a two-month lag.  Our share of earnings for 2015 included $49 million for the net effect of Inotera's full release of its valuation allowance against net deferred tax assets related to its net operating loss carryforward and the resulting tax provision in subsequent periods. Equity in net income (loss) of equity method investees, net of tax, included the following:

For the year ended 2015 2014 2013
Inotera $445
 $465
 $(79)
Tera Probe 1
 11
 —
Other 1
 (2) (4)
  $447
 $474
 $(83)

The summarized financial information in the tables below reflects aggregate amounts for our equity method investees. Financial information is presented for equity method investments as of the respective dates and for the periods through which we recorded our proportionate share of each investee's results of operations. Summarized results of operations are presented only for the periods subsequent to the acquisition or through the disposition of our ownership interests.

As of 2015 2014
Current assets $1,980
 $2,233
Noncurrent assets 3,038
 2,502
Current liabilities 436
 1,417
Noncurrent liabilities 119
 254
For the year ended 2015 2014 2013
Net sales $2,647
 $3,382
 $1,788
Gross margin 1,253
 1,576
 1
Operating income (loss) 1,191
 1,371
 (203)
Net income (loss) 1,361
 1,339
 (188)
For the year ended 2018 2017 2016
Inotera $—
 $9
 $32
Tera Probe —
 (3) (11)
Other (1) 2
 4
  $(1) $8
 $25

Inotera

We have partnered with Nanyaheld a 33% interest in Inotera, a Taiwan DRAM memory company, since 2009.  In 2013, Inotera issued 634 million common shares to Nanya and certain of its affiliates in a private placementthrough December 6, 2016, at a price equal to 9.47 New Taiwan dollars per share, which was in excess of our carrying value per share. As a result oftime we acquired the issuance, our ownership interest decreased from 40% to 35% and we recognized a non-operating gain of $48 million in 2013. In 2014, Inotera issued 400 million common shares in a public offering at a price equal to 31.50 New Taiwan dollars per share, which was in excess of our carrying value per share. As a result of the issuance, our ownership interest decreased from 35% to 33% and we recognized a non-operating gain of $93 million in 2014. As of September 3, 2015, we held a 33% ownershipremaining 67% interest in Inotera, Nanya and certain of its affiliates held a 33% ownership interest, and the remaining ownership interest in Inotera was publicly held.

56




As of September 3, 2015, the market value of our equity interest in Inotera was $1.53 billion based on the closing trading price of 23.20 New Taiwan dollars per share in an active market. As of September 3, 2015 and August 28, 2014, there were gains of $13 million and $44 million, respectively, in accumulated other comprehensive income (loss) for cumulative translation adjustments from our equity investment in Inotera.

Since From January 2013 through December 2015, we have purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components under a supply agreement. Incomponents. After December 2015 and until our acquisition of the second quarter of 2015, we executed a supply agreement, to be effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replace the current agreement. Under the 2016 Supply Agreement,remaining interest in Inotera, the price for DRAM products sold topurchased by us will bewas based on a formula that equally sharesshared margin between Inotera and us. The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period,Under these agreements, we purchased $504 million and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions.  Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. In 2015 and 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities. We purchased $2.37 billion, $2.68 billion and $1.26$1.43 billion of DRAM products in 2015, 2014,2017 through the date of our acquisition and 20132016, respectively. In 2016, we manufactured and sold specialized equipment to Inotera and recognized net sales of $55 million and margin of $16 million.



Tera Probe

In 2013, as part of the MMJ Acquisition,2017, we acquired asold our 40% interest in Tera Probe, which providesprovided semiconductor wafer testing and probe services to us, and others. The initial net carrying valuein a transaction that included the sale of our investment was less than our proportionate shareassembly and test facility located in Akita, Japan. In 2017 and 2016, we recorded impairment charges of Tera Probe's equity$16 million and the difference is being amortized as a credit to our earnings through$25 million, respectively, within equity in net income (loss) of equity method investees (the "Tera Probe Amortization"). As of September 3, 2015, the remaining balance of the Tera Probe Amortization was $27 million and is expected to be amortized over a weighted-average period of seven years. Based on closing trading prices, the market value of our equity interest in Tera Probe was $32 million as of September 3, 2015 and $41 million as of June 30, 2015 (the other-than-temporary impairment measurement date for our fourth quarter, commensurate with our lag period). We evaluated our investment in Tera Probe and concluded that the decline in the market value did not indicate an other-than-temporary impairment primarily because of the limited amount of time of the decline and historical volatility of Tera Probe's stock price. In the first quarter of 2015, we recorded an impairment charge of $10 million within equity in net income 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 fair value measurement)1). We incurred manufacturing costs for 2015, 2014, and 2013 of $90 million, $117 million, and $13 million respectively, for services performed by Tera Probe.

Other

Aptina: We held an equity interest in Aptina until August 15, 2014. On August 15, 2014, ON Semiconductor Corporation acquired Aptina for approximately $433Probe of $47 million and we recognized a non-operating gain$70 million in 2017 through the date of $119 million based on our diluted ownership interest of approximately 27%. The gain approximated our share of the consideration because the carrying value of our investment had been reduced to zero in 2012, at which time we ceased recognizing our proportionate share of Aptina's losses.

Through May 3, 2013, we manufactured components for Complementary Metal-Oxide Semiconductor ("CMOS") image sensors for Aptina under a wafer supply agreement.  Subsequent to May 3, 2013, we provided various services for Aptina under a service agreement. For 2014sale and 2013, we recognized net sales of $43 million and $182 million, respectively, from products sold to and services performed for Aptina, and cost of goods sold of $37 million and $219 million,2016, respectively. In 2013, we assigned to LFoundry Marsica L.r.l. ("LFoundry") our supply agreement with Aptina to manufacture components for image sensors. (See "Restructure and Asset Impairments" note.)




57



Intangible Assets and Goodwill

As of 2015 2014 2018 2017
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Amortizing assets        
Product and process technology $864
 $(416) $809
 $(341) $567
 $(344) $756
 $(477)
Other 2
 (1) 1
 (1)
Non-amortizing assets        
In-process R&D 108
 —
 108
 —
 $866
 $(417) $810
 $(342)        
Total intangible assets $675
 $(344) $864
 $(477)
        
Goodwill $1,228
   $1,228
  

During 2015In 2018, 2017, and 2014,2016, we capitalized $98$48 million, $29 million, and $177$30 million, respectively, for product and process technology with weighted-average useful lives of seven10 years, 11 years, and six10 years, respectively. Amortization expense was $117 million, $110 million, and $83 million for 2015, 2014, and 2013, respectively.  The expected annualExpected amortization expense for intangible assets held as of September 3, 2015 is $118$55 million for 2019, $38 million for 2020, $33 million for 2021, $23 million for 2022, and $17 million for 2023.

In 2016, we acquired Tidal Systems, Ltd., $102a developer of PCIe NAND Flash storage controllers, to enhance our NAND Flash controller technology for $148 million. In connection therewith, we recognized $108 million of in-process R&D; $81 million of goodwill, which was derived from expected cost reductions and other synergies and was assigned to SBU; and $41 million of deferred tax liabilities; which, in aggregate, represented substantially all of the purchase price. The in-process R&D was valued using a replacement cost approach, which included inputs of reproduction cost, including developer's profit, and opportunity cost. We expect to begin amortizing the in-process R&D in 2019 and will amortize it over its estimated useful life. The goodwill is not deductible for 2017, $93 million for 2018, $43 million for 2019, and $26 million for 2020.tax purposes.



Accounts Payable and Accrued Expenses

As of 2015 2014
Accounts payable $1,020
 $996
Property, plant and equipment payables 577
 289
Related party payables 338
 673
Salaries, wages and benefits 321
 456
Income and other taxes 85
 71
Customer advances 15
 98
Other 255
 281
  $2,611
 $2,864

As of September 3, 2015 and August 28, 2014, related party payables included $327 million and $660 million, respectively, due to Inotera primarily for the purchase of DRAM products. As of September 3, 2015 and August 28, 2014, related party payables also included $11 million and $13 million, respectively, due to Tera Probe for probe services performed. (See "Equity Method Investments" note.)

As of August 28, 2014, customer advances included $90 million, and other noncurrent liabilities also included $90 million, for amounts received from a customer in 2014 under a DRAM supply agreement, all of which was applied to purchases during 2015.
As of 2018 2017
Accounts payable $1,692
 $1,333
Property, plant, and equipment payables 1,238
 1,018
Salaries, wages, and benefits 841
 603
Income and other taxes 402
 163
Customer advances 207
 197
Other 231
 350
  $4,611
 $3,664




58



Debt

      2015 2014
Instrument(1)
 Stated Rate Effective Rate Current Long-Term Total Current Long-Term Total
MMJ creditor installment payments N/A
 6.25% $161
 $701
 $862
 $192
 $939
 $1,131
Capital lease obligations(2)
 N/A
 N/A
 326
 466
 792
 323
 588
 911
1.258% notes 1.258% 1.97% 87
 217
 304
 86
 305
 391
2022 senior notes 5.875% 6.14% —
 589
 589
 —
 587
 587
2023 senior notes 5.250% 5.43% —
 988
 988
 —
 —
 —
2024 senior notes 5.250% 5.38% —
 545
 545
 —
 —
 —
2025 senior notes 5.500% 5.56% —
 1,138
 1,138
 —
 1,137
 1,137
2026 senior notes 5.625% 5.73% —
 446
 446
 —
 —
 —
2031B convertible senior notes(3)
 1.875% 6.98% —
 —
 —
 361
 —
 361
2032C convertible senior notes(4)
 2.375% 5.95% —
 197
 197
 —
 309
 309
2032D convertible senior notes(4)
 3.125% 6.33% —
 150
 150
 —
 284
 284
2033E convertible senior notes(4)
 1.625% 4.50% 217
 —
 217
 272
 —
 272
2033F convertible senior notes(4)
 2.125% 4.93% 264
 —
 264
 260
 —
 260
2043G convertible senior notes 3.000% 6.76% —
 644
 644
 —
 631
 631
Other notes payable 2.209% 2.38% 34
 171
 205
 124
 113
 237
      $1,089
 $6,252
 $7,341
 $1,618
 $4,893
 $6,511
As of 2018 2017
        Net Carrying Amount   Net Carrying Amount
Instrument Stated Rate Effective Rate Principal Current Long-Term 
Total(1)
 Principal Current Long-Term 
Total(1)
IMFT Member Debt N/A
 N/A
 $1,009
 $—
 $1,009
 $1,009
 $—
 $—
 $—
 $—
Capital lease obligations N/A
 3.86% 845
 310
 535
 845
 1,190
 357
 833
 1,190
MMJ Creditor Payments N/A
 9.76% 520
 309
 183
 492
 695
 $157
 474
 631
2022 Term
Loan B
 3.83% 4.24% 735
 5
 720
 725
 743
 5
 725
 730
2025 Notes 5.50% 5.56% 519
 —
 515
 515
 519
 —
 515
 515
2032D Notes(2)
 3.13% 6.33% 143
 —
 132
 132
 177
 —
 159
 159
2033F Notes(2)(3)
 2.13% 4.93% 107
 235
 —
 235
 297
 278
 —
 278
2043G Notes(2)(4)
 3.00% 6.76% 1,019
 —
 682
 682
 1,025
 —
 671
 671
2021 MSAC Term Loan 4.42% 4.65% —
 —
 —
 —
 800
 99
 697
 796
2021 MSTW Term Loan 2.85% 3.01% —
 —
 —
 —
 2,652
 —
 2,640
 2,640
2023 Notes 5.25% 5.43% —
 —
 —
 —
 1,000
 —
 991
 991
2023 Secured Notes 7.50% 7.69% —
 —
 —
 —
 1,250
 —
 1,238
 1,238
2024 Notes 5.25% 5.38% —
 —
 —
 —
 550
 —
 546
 546
2026 Notes 5.63% 5.73% —
 —
 —
 —
 129
 —
 128
 128
2032C Notes 2.38% 5.95% —
 —
 —
 —
 223
 —
 211
 211
2033E Notes 1.63% 1.63% —
 —
 —
 —
 173
 202
 —
 202
Other notes 2.50% 2.50% 1
 —
 1
 1
 216
 164
 44
 208
      $4,898
 $859
 $3,777
 $4,636
 $11,639
 $1,262
 $9,872
 $11,134
(1) 
We have either the obligation or the option to pay cash forNet carrying amount is the principal amount due upon conversion for allless unamortized debt discount and issuance costs. In addition, the net carrying amount as of our convertible notes. Since it is our current intent to settle in cash the principal amountAugust 30, 2018 and August 31, 2017 included $132 million and $31 million, respectively, of all of our convertible notes upon conversion, the dilutive effect of such notes on earnings per share is computed under the treasury stock method.
(2) Weighted-average imputed rate of 3.7% and 4.3% as of September 3, 2015 and August 28, 2014, respectively.
(3)
Amount recorded for 2014 included thederivative debt and equity components. The equity component was reclassified to a debt liabilityliabilities recognized as a result of our obligationelection to settle the conversionsentirely in cash converted notes with an aggregate principal amount of the 2031B Notes in cash.$35 million and $16 million, respectively.
(4)(2) 
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 endingended on June 30, 2015 exceeded 130% of2018, these notes are convertible by the conversion price per share, holders had the right to convert their notes at any time duringthrough the calendar quarter ended September 30, 2015. The2018. Additionally, the closing price of our common stock also exceeded the thresholds for the calendar quarter ended September 30, 2015;2018; therefore, these notes are convertible by the holders at any time through December 31, 2015.2018.
(3)
Current debt as of August 30, 2018 included an aggregate of $165 million for the settlement obligation (including principal and amounts in excess of principal) for conversions of our 2033F Notes that will settle in cash in the first quarter of 2019. The 2033remainder of the 2033F Notes arewere classified as current as of August 30, 2018 because the terms of these notes require us to pay cash for the principal amount of any converted notes.notes and holders of these notes had the right to convert their notes as of that date.


59



    2015 2014
As of 
Expected Remaining Term
(Years)(1)
 Outstanding Principal Unamortized Discount and Debt Issuance Costs Net Carrying Amount Outstanding Principal Unamortized Discount and Debt Issuance Costs Net Carrying Amount
MMJ creditor installment payments 4 $1,012
 $(150) $862
 $1,369
 $(238) $1,131
Capital lease obligations 4 792
 —
 792
 911
 —
 911
1.258% notes 3 323
 (19) 304
 416
 (25) 391
2022 Notes 6 600
 (11) 589
 600
 (13) 587
2023 Notes 8 1,000
 (12) 988
 —
 —
 —
2024 Notes 8 550
 (5) 545
 —
 —
 —
2025 Notes 9 1,150
 (12) 1,138
 1,150
 (13) 1,137
2026 Notes 10 450
 (4) 446
 —
 —
 —
2031B Notes(2)
 N/A —
 —
 —
 114
 (28) 361
2032C Notes 4 224
 (27) 197
 362
 (53) 309
2032D Notes 6 177
 (27) 150
 344
 (60) 284
2033E Notes 2 233
 (16) 217
 300
 (28) 272
2033F Notes 4 297
 (33) 264
 300
 (40) 260
2043G Notes(3)
 13 1,025
 (381) 644
 1,025
 (394) 631
Other notes payable 4 205
 —
 205
 243
 (6) 237
    $8,038
 $(697) $7,341
 $7,134
 $(898) $6,511
(1)(4) 
Expected remaining term for amortization of the remaining unamortized discount and debt issuance costs as of September 3, 2015. The expected remaining term of the 2031B2043G Notes was not applicable because the notes were not outstanding as of September 3, 2015. Expected remainingAugust 30, 2018 have an original principal amount of $815 million that accretes up to $911 million through the expected term for capital lease obligations is the weighted-average remaining term.in November 2028 and $1.02 billion at maturity in 2043.
(2) As holders had elected to convert these notes and we elected to settle the conversions in cash, the net carrying amount for 2014 included the debt component and equity component, which were reclassified to a debt liability as a result of our obligation to settle the conversions of the 2031B Notes in cash, resulting in an aggregate liability of $389 million. The outstanding principal reflects the original principal of the 2031B Notes.
(3) The 2043G Notes have an original principal amount of $820 million that accretes up to $917 million through the expected term on November 15, 2028 and $1.03 billion at maturity in 2043. The discount is based on the principal at maturity. See "2043G Notes" below.

Our convertible and other senior notes are unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness, and are effectively subordinated to all of our other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness. Our parent company,As of August 30, 2018, Micron has $5.18had $1.56 billion of unsecured debt (net of unamortized discount and debt issuance costs), including all of ourits convertible notes and the 2022 Notes, 2023 Notes, 2024 Notes, 2025 Notes, and 2026 Notes, that iswas structurally subordinated to all liabilities of its subsidiaries, including trade payables. The terms of our indebtedness generally contain cross payment default and cross acceleration provisions. Micron guarantees certain debt obligations of its subsidiaries. Micronsubsidiaries, but does not guarantee the MMJ creditor installment payments.Creditor Payments. Micron's guarantees of its subsidiary debt


obligations are unsecured obligations ranking equally in right of payment with all of Micron's other existing and future unsecured indebtedness.


60



2015IMFT Member Debt Restructure

In 2015, we consummated a number2018, Intel provided debt financing ("IMFT Member Debt") of transactions$1.01 billion to restructure our debt, including conversions and settlements, repurchases of convertible notes, issuances of non-convertible notes, and the early repayment of a note. The following table presents the effect of each of the actions in 2015:

  Increase (Decrease) in Principal Increase (Decrease) in Carrying Value Increase (Decrease) in Cash (Decrease) in Equity 
(Loss) Gain(1)
Conversions and settlements:          
2031B Notes $(114) $(361) $(389) $—
 $(24)
2033E Notes (7) (6) (19) (15) 2
  (121) (367) (408) (15) (22)
           
Repurchases:          
2032C Notes (139) (121) (415) (283) (10)
2032D Notes (166) (140) (492) (341) (11)
2033E Notes (60) (56) (107) (49) (1)
2033F Notes (3) (2) (5) (3) —
  (368) (319) (1,019) (676) (22)
           
Issuances:          
2023 Notes 1,000
 988
 988
 —
 —
2024 Notes 550
 545
 545
 —
 —
2026 Notes 450
 446
 446
 —
 —
  2,000
 1,979
 1,979
 —
 —
           
Early repayment (121) (115) (122) —
 (5)
           
  $1,390
 $1,178
 $430
 $(691) $(49)
(1)
Included in other non-operating expense.

Conversions and Settlements: During 2015, we had the following debt conversions and settlements:

2031B Notes: On July 23, 2014, we called for the redemption of our remaining 2031B Notes effective on August 22, 2014. PriorIMFT pursuant to such effective date, substantially all of the holders of our 2031B Notes exercised their option to convert their notes and, in each case, we elected to settle the amount due upon conversion entirely in cash. These notes were cash settled in 2015.

2033E Notes: During 2015, holders converted a portion of our 2033E Notes, and we elected to settle the amounts due upon conversion entirely in cash.

As a result of our elections to settle the amounts due upon conversion in cash, each of the settlement obligations became derivative debt liabilities subject to mark-to-market accounting treatment. Under the terms of the indentures forIMFT joint venture agreement. IMFT Member Debt is non-interest bearing, matures upon the above notes, cash settlement amounts for these derivative debt liabilities were determined based oncompletion of an auction and sale of assets of IMFT prior to the shares underlying the converted notes multiplied by the volume-weighted-average pricedissolution, liquidation, or other wind-up of our common stock over a period of 20 consecutive trading days. Therefore,IMFT, and is convertible, at the dateselection of our electionIntel, in whole or in part, into a capital contribution to settleIMFT. Additionally, to the conversion inextent IMFT distributes cash we reclassifiedto its members under the fair valuesterms of the equity components of eachIMFT joint venture agreement, Intel may, at its option, designate any portion of the converted notes from additional capitaldistribution to derivative debt liabilities within current debt in our consolidated balance sheet.


61



Repurchases: During 2015, we repurchased portions of our convertible 2032C Notes, 2032D Notes, 2033E Notes, and 2033F Notes. The liability and equity componentsbe a repayment of the repurchased notes had previously been stated separately within debt and additional capitalIMFT Member Debt. In the event Intel exercises its right to put its interest in IMFT to us, or if we exercise our consolidated balance sheet. As a result, our accounting forright to call from Intel its interest in IMFT, any IMFT Member Debt outstanding at the repurchased notes affected debt and equity.time of the closing of the put or call transaction will transfer to Micron. (See "Equity – Noncontrolling Interest in Subsidiaries – IMFT" note.)

Issuances: On April 30, 2015, we issued $550 million in principal amount of 2024 Notes due January 2024 and $450 million in principal amount of 2026 Notes due January 2026. On February 3, 2015, we issued $1.00 billion in principal amount of 2023 Notes due August 2023. Issuance costs for these notes totaled $21 million. (See further discussion in "Senior Notes" below.)

Early Repayment: On October 17, 2014, we repaid a note prior to its scheduled maturity.

2014 Debt RestructureCapital Lease Obligations

In 2014,2018, we consummatedrecorded capital lease obligations aggregating $20 million at a numberweighted-average effective interest rate of transactions to restructure our debt, including exchanges, conversions and settlements, repurchases4.6%, with a weighted-average expected term of convertible notes, issuances of non-convertible notes, and early repayments of notes. The following table presents the net effect of each of the actions:five years. In 2017, we recorded capital lease obligations aggregating $220 million.

  Increase (Decrease) in Principal Increase (Decrease) in Carrying Value Increase (Decrease) in Cash (Decrease) in Equity 
Loss(1)
Exchanges $585
 $282
 $—
 $(238) $49
Conversions and settlements (770) (434) (1,446) (886) 130
Repurchases (320) (264) (857) (567) 23
Issuances 2,212
 2,157
 2,157
 —
 —
Early repayments (336) (332) (339) —
 3
  $1,371
 $1,409
 $(485) $(1,691) $205
(1)
$184 million included in other non-operating expense and $21 million included in interest expense

Exchanges: Exchanged $440 million in aggregate principal amount of our 2027 Notes, 2031A Notes, and 2031B Notes into $1.03 billion principal amount at maturity of 2043G Notes.
Conversions and Settlements: Holders of substantially all of our remaining 2014 Notes, 2027 Notes, and 2031A Notes (with an aggregate principal amount of $770 million) converted their notes and we settled the conversions in cash for $1.45 billion. Holders of substantially all of our remaining 2031B Notes converted their notes in August 2014. As a result of our election to settle the conversion amounts entirely in cash, the settlement obligations became derivative debt liabilities, increasing the carrying value of the 2031B Notes by $275 million in 2014 before being cash settled in 2015.
Repurchases: Repurchased $320 million in aggregate principal amount of our convertible 2031B Notes, 2032C Notes, and 2032D Notes for an aggregate of $857 million in cash.
Issuances: Issued $600 million in principal amount of the 2022 Notes and $1.15 billion in principal amount of the 2025 Notes, and issued $462 million in principal amount of the 1.258% senior notes due 2019.
Early Repayments: Repaid $332 million of notes and capital leases prior to their scheduled maturities.

2013 Debt Restructure

During 2013, we repurchased $464 million in aggregate principal amount of our 2014 Notes for $477 million in cash. The liability and equity components of the 2014 Notes had previously been stated separately within debt and additional capital in our consolidated balance sheet. As a result, the repurchase resulted in the derecognition of $430 million in debt for the principal amount (net of $34 million of debt discount) and $15 million in additional capital for the equity component. We recognized a loss of $31 million in 2013, which was included in other non-operating expense.


62



MMJ Creditor Installment Payments

Under the MMJ Companies' plans ofcorporate reorganization proceedings, which set forth the treatment of the MMJ Companies' pre-petition creditors and their claims, the MMJ Companies were required to pay 200 billion yen, less certain expenses of the reorganization proceedings and other items, to their secured and unsecured creditors in 7seven annual installment payments (the "MMJ Creditor Installment Payments"). The MMJ Creditor Installment Payments do not provide for interest and, wereas a result of our acquisition of the MMJ Companies in 2013, we recorded the MMJ Creditor Payments at fair value in the MMJ Acquisition.value. The fair-value discount is accreted to interest expense over the term of the installment payments.

Under the MMJ Companies' corporate reorganization proceedings, the secured creditors of MMJ will recover 100% of theirthe amount of their fixed claims in 6six annual installment payments through DecemberOctober 2018 and the unsecured creditors will recover at least 17.4% of the amount of their fixed claims in 7seven annual installment payments through December 2019. In December 2014, we paid the second installment payment of 21 billion yen to the reorganization creditors of the MMJ Companies. The secured creditors of MAI were paid in full with a portion of the first installment payment made in October 2013, while the unsecured creditors of MAI will recover at least 19% of the amount of their claims in 7 installment payments through December 2019. The remaining portion of the unsecured claims of the creditors of the MMJ Companies not recovered pursuant to the Reorganization Proceedingscorporate reorganization proceedings will be discharged, without payment, through December 2019.

The following table presents the remaining amounts of MMJ Creditor Installment Payments (stated in Japanese yen and U.S. dollars) and the amount of unamortized discount as of September 3, 2015:

August 30, 2018:
2016 ¥19,813
 $165
2017 19,840
 165
2018 19,762
 164
2019 28,687
 238
 ¥36,392
 $326
2020 33,642
 280
 21,720
 194
 121,744
 1,012
 58,112
 520
Less unamortized discount (17,981) (150) (3,186) (28)
 ¥103,763
 $862
 ¥54,926
 $492

Pursuant to the terms of an Agreement on Support for Reorganization Companies that we executed in 2012 with the Sponsor Agreement,trustees of the MMJ Companies' pending corporate reorganization proceedings, we entered into a series of agreements with the MMJ Companies, including supply agreements, research and development services agreements, and general services agreements, which are intended to generate operating cash flows to meet the requirements of the MMJ Companies' businesses, including the funding of the MMJ Creditor Installment Payments.

Capital Lease Obligations2022 Senior Secured Term Loan B

In 2015, we recorded capital lease obligations aggregating $324 million, including $291 million related to equipment sale-leaseback transactions, at a weighted-average effective interest rate of 3.2%, payable in periodic installments through May 2019. In 2014, we recorded capital lease obligations aggregating $121 million at a weighted-average effective interest rate of 4.6%, payable in periodic installments through December 2023.

1.258% Notes

On December 20, 2013,April 2016, we issued $462$750 million in principal amount of 2022 Term Loan B notes due April 2022. The 2022 Term Loan B provides for periodic repricing of the 1.258% Notes. The 1.258% Notes mature on January 15, 2019interest rates and, are collateralized by certain equipment, which had a carrying value of $95 million as of September 3, 2015. TheAugust 30, 2018, the 2022 Term Loan B generally bears interest at LIBOR plus 1.75%. We may elect to convert outstanding term loan interest to other variable-rate indexes. Principal payments are due quarterly in an amount equal to 0.25% of the initial aggregate principal amount ofwith the 1.258% Notesbalance due at maturity and may be prepaid without penalty. Interest is payable in 10 semiannual installments in January and July of each year, commencing in July 2014. The Export-Import Bank of the United States (the "Ex-Im Bank") guaranteed payment of all regularly scheduled installment payments of principal and interest on the 1.258% Notes. We paid $23 million to Ex-Im Bank for its guarantee upon issuance of the 1.258% Notes.at least quarterly.



The 1.258% Notes contain covenants2022 Term Loan B is collateralized by substantially all of the assets of Micron and MSP, a subsidiary of Micron, subject to certain permitted liens on such assets. Included in our consolidated balance sheet as of August 30, 2018 were $8.32 billion of assets which are customary for financingscollateralize these notes. The 2022 Term Loan B is structurally subordinated to the indebtedness and other liabilities of this type, including negativeall of Micron's subsidiaries that do not guarantee these debt obligations and is guaranteed by MSP.

The 2022 Term Loan B contains covenants that, among other things, limit, in certain circumstances, the ability of Micron and/or restrict our abilityits domestic restricted subsidiaries to (1) create or incur certain liens and enter into sale-leaseback financing transactions; (2) in the case of domestic restricted subsidiaries, create, assume, incur, or guarantee additional indebtedness; and (3) in the case of Micron, consolidate or merge with or into, or sell, assign, convey, transfer, lease, or otherwise dispose of the equipment securing the 1.258% Notes. Eventsall or substantially all of default also include, among others, the occurrenceits assets to another entity. These covenants are subject to a number of any event or circumstance that, in the reasonable judgment of Ex-Im Bank, is likely materiallylimitations, exceptions, and adversely to affect our ability to perform any payment obligation, or any of our other material obligations under the indenture, the 1.258% Notes, or under any other related transaction documents to which Ex-Im Bank is a party.

63




Cash Redemption at Our Option: At any time prior to the maturity date of the 1.258% Notes, we may redeem the 1.258% Notes, in whole or in part, at a price equal to the principal amount of the 1.258% Notes to be redeemed plus a make-whole premium as described in the indenture, together with accrued and unpaid interest.qualifications.

Senior2025 Notes

  Issuance Date Maturity Date Principal Issued
2022 Notes Feb 2014 Feb 2022 $600
2023 Notes Feb 2015 Aug 2023 1,000
2024 Notes Apr 2015 Jan 2024 550
2025 Notes Jul 2014 Feb 2025 1,150
2026 Notes Apr 2015 Jan 2026 450

The senior2025 unsecured notes above contain covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our domestic restricted subsidiaries (which are generally subsidiaries in the U.S. in which we own at least 80% of the voting stock) to (1) create or incur certain liens and enter into sale and lease-back transactions, (2) create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our domestic restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer or lease all or substantially all of our assets, to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications.

Cash Redemption at Our Option:Option: We havePrior to August 1, 2019, we may redeem the option2025 Notes, in whole or in part, at a price equal to the principal amount of the 2025 Notes to be redeemed plus a make-whole premium as described in the indenture governing the 2025 Notes, together with accrued and unpaid interest. On or after August 1, 2019, we may redeem these notes. The applicable redemption price will be determinedthe 2025 Notes, in whole or in part, at prices above the principal amount that decline over time, as follows:specified in the indenture, together with accrued and unpaid interest.
Convertible Senior Notes

Redemption Period Requiring Payment of:
Redemption up to 35% Using Cash Proceeds From an Equity Offering(3)
Make-Whole(1)
Premium(2)
DateSpecified Price
2022 NotesPrior to Feb 15, 2017On or after Feb 15, 2017Prior to Feb 15, 2017105.875%
2023 NotesPrior to Feb 1, 2018On or after Feb 1, 2018Prior to Feb 1, 2018105.250%
2024 NotesPrior to May 1, 2018On or after May 1, 2018Prior to May 1, 2018105.250%
2025 NotesPrior to Aug 1, 2019On or after Aug 1, 2019Prior to Aug 1, 2017105.500%
2026 NotesPrior to May 1, 2020On or after May 1, 2020Prior to May 1, 2018105.625%
  
Holder Put
Date(1)
 Maturity Date Conversion Price Per Share 
Conversion Price Per Share Threshold(2)
 Underlying Shares of Common Stock 
Conversion Value in Excess of Principal(3)
 
Principal
Settlement
Option(4)
2032D Notes May 2021 May 2032 $9.98
 $12.97
 14
 $615
 Cash and/or shares
2033F Notes(5)
 Feb 2020 Feb 2033 10.93
 14.21
 10
 408
 Cash
2043G Notes Nov 2028 Nov 2043 29.16
 37.91
 35
 824
 Cash and/or shares
          59
 $1,847
  
(1) 
If we redeem prior toDebt discount and debt issuance costs are amortized through the applicable date, the price is principal plus a make-whole premium equal to the present value of the remaining scheduled interest payments as described in the applicable indenture, together with accrued and unpaid interest.earliest holder put date.
(2) 
If we redeem on or after the applicable date, the price is principal plus a premium which declines over time as specified in the applicable indenture, together with accrued and unpaid interest.
(3)
If we redeem prior to the applicable date with net cash proceeds of one or more equity offerings, the price is equal to the amount specified above, together with accrued and unpaid interest, subject to a maximum redemption of 35%Represents 130% of the aggregate principal amount ofconversion price per share. If the respective notes being redeemed.

Convertible Senior Notes

Accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion require the debt and equity components to be separately accounted for in a manner that reflects a nonconvertible borrowing rate when interest expense is recognized in subsequent periods. The amount initially recorded as debt is based on the fair value of the debt component as a standalone instrument, determined using an interest rate for similar nonconvertible debt issued by entities with credit ratings similar to ours at the time of issuance. The difference between the debt recorded at inception and its principal amount is accreted to principal through interest expense over the estimated life of the note.


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As of September 3, 2015, 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 were in excess of principal amounts for such notes. The following table summarizes our convertible notes outstanding as of September 3, 2015:

  
Holder Put Date(1)
 Outstanding Principal Underlying Shares Conversion Price Per Share 
Conversion Price Per Share Threshold(2)
 
Conversion Value in Excess of Principal(3)
2032C Notes May 2019 $224
 23
 $9.63
 $12.52
 $161
2032D Notes May 2021 177
 18
 9.98
 12.97
 117
2033E Notes February 2018 233
 21
 10.93
 14.21
 121
2033F Notes February 2020 297
 27
 10.93
 14.21
 154
2043G Notes(4)
 November 2028 1,025
 35
 29.16
 37.91
 —
    $1,956
 124
     $553
(1)
The terms of our convertible notes give holders the right to require us to repurchase all or a portion of their notes at a date prior to the contractual maturities of the notes at a price equal to the principal amount thereof plus accrued interest.
(2)
Holders have the right to convert all or a portion of their notes at a date prior to the contractual maturity if, during any calendar quarter, the closing price of our common stock exceeds such threshold for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price. The closing price of our common stock exceeded the thresholds for the calendar quarter ended September 30, 2015 for our 2032 Notes and 2033 Notes; therefore, thosea specified period, holders may convert such notes are convertible by the holders through December 31, 2015.during a specified period. See "Conversion Rights" below.
(3) 
Based on our closing sharethe trading price of $16.59our common stock of $52.76 as of September 3, 2015.August 30, 2018.
(4) 
See "2043G Notes."It is our current intent to settle in cash the principal amount of our convertible notes upon conversion. As a result, only the amounts payable in excess of the principal amounts upon conversion of our convertible notes are considered in diluted earnings per share under the treasury stock method. For each of our convertible notes, we may elect to settle any amounts in excess of the principal in cash, shares of our common stock, or a combination thereof.

Carrying amounts of the equity components of our convertible notes, which are included in additional capital in the accompanying consolidated balance sheets were as follows:

As of 2015 2014
2032C Notes $41
 $67
2032D Notes 35
 69
2033E Notes (excludes $16 and $27 million in mezzanine equity, respectively) 8
 3
2033F Notes (excludes $33 and $41 million in mezzanine equity, respectively) 8
 1
2043G Notes 173
 173
  $265
 $313

Interest expense for our convertible notes, consisting of contractual interest and amortization of discount and issuance costs, aggregated $101 million, $132 million, and $156 million for 2015, 2014, and 2013, respectively. Interest expense by note was as follows:

  Contractual Interest Amortization of Discount and Issuance Costs
For the year ended 2015 2014 2013 2015 2014 2013
2032C Notes $8
 $11
 $13
 $9
 $12
 $14
2032D Notes 9
 13
 14
 6
 8
 9
2033E Notes 5
 5
 3
 7
 7
 4
2033F Notes 6
 6
 3
 7
 6
 3
2043G Notes 31
 24
 —
 13
 9
 —
Other notes(1)
 —
 7
 27
 —
 24
 66
  $59
 $66
 $60
 $42
 $66
 $96
(1)    Other notes include the 2014 Notes, 2027 Notes, 2031A Notes, and 2031B Notes.


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2031B Notes:On July 26, 2011, we issued $345 million of 2031B Notes due August 2031. During 2014, we exchanged $205 million of aggregate principal amount of 2031B Notes for a portion of the 2043G Notes, repurchased $26 million of aggregate principal amount for cash, and called for the redemption of the remaining $114 million of aggregate principal amount effective on August 22, 2014. Prior to such effective date, substantially all of the holders of the 2031B Notes had converted their notes, which were settled in cash with payments of $389 million in 2015.

2032C and 2032D Notes: On April 18, 2012, we issued $550 million of the 2032C Notes and $450 million of the 2032D Notes, each due May 2032. The initial conversion rate for the 2032C Notes is 103.8907 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $9.63 per share of common stock. The initial conversion rate for the 2032D Notes is 100.1803 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $9.98 per share of common stock. Interest is payable in May and November of each year. During 2015 and 2014, we repurchased $139 million and $188 million, respectively of aggregate principal amounts of the 2032C Notes and $166 million and $106 million, respectively of aggregate principal amounts of the 2032D Notes, for cash.
(5)
Holders may put their notes to us on February 15, 2023.

Conversion Rights: Holders of our convertible notes may convert their 2032 Notesnotes under the following circumstances: (1) if the 2032 Notes are called for redemption; (2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price of the 2032 Notes (approximately $12.52 per share for the 2032C Notes and $12.97 per share for the 2032D Notes); (3) if the trading price of the 2032 Notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2032 Notes during the periods specified in the indenture; (4) if specified distributions or corporate events occur, as set forth in the indenture for the 2032 Notes; or (5) at any time after February 1, 2032.

We have the option to pay cash, issue shares of common stock or any combination thereof for the aggregate amount due upon conversion. It is our intent to settle the principal amount of the 2032 Notes in cash upon any conversion. As a result, only the amounts payable in excess of the principal amounts upon conversion of the 2032 Notes are considered in diluted earnings per share under the treasury stock method.

Cash Redemption at Our Option: We may redeem for cash the 2032C Notes on or after May 1, 2016 and the 2032D Notes on or after May 1, 2017 if the volume weighted average price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period. The redemption price will equal the principal amount plus accrued and unpaid interest. If we redeem the 2032C Notes prior to May 4, 2019, or the 2032D Notes prior to May 4, 2021, we will also pay a make-whole premium in cash equal to the present value of all remaining scheduled payments of interest from the redemption date to May 4, 2019 for the 2032C Notes, or to May 4, 2021 for the 2032D Notes, using a discount rate equal to 1.5%.

Cash Repurchase at the Option of the Holder: We may be required by the holders of the 2032 Notes to repurchase for cash all or a portion of the 2032C Notes on May 1, 2019 and all or a portion of the 2032D Notes on May 1, 2021 at a price equal to the principal amount plus accrued and unpaid interest. Upon a change in control or a termination of trading, as defined in the indenture, holders of the 2032 Notes may require us to repurchase for cash all or a portion of their 2032 Notes at a price equal to the principal amount plus accrued and unpaid interest.

2033E and 2033F Notes: On February 12, 2013, we issued $300 million of the 2033E Notes and $300 million of the 2033F Notes. The initial conversion rate for the 2033 Notes is 91.4808 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $10.93 per share of common stock. Interest is payable in February and August of each year. During 2015, holders converted $7 million of aggregate principal amounts of the 2033E Notes, and we elected to settle the amounts due upon conversion entirely in cash. During 2015, we repurchased $60 million of aggregate principal amounts of the 2033E Notes and $3 million of aggregate principal amounts of the 2033F Notes, for cash.

Conversion Rights: Holders may convert their 2033 Notes under the following circumstances: (1) if the 2033 Notesnotes are called for redemption; (2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price of(see "Conversion Price Per Share Threshold" in the 2033 Notes (approximately $14.21 per share)table above); (3) if the trading price of the 2033 Notesnotes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2033 Notesnotes during the periods specified in the indenture;indentures; (4) if specified distributions or corporate events occur, as set forth in the indenture for the 2033 Notes;notes; or (5) at any time after November 15, 2032.during the last three months prior to the maturity date of the notes. For the calendar quarter ended September 30, 2018, the closing price of our common stock exceeded 130% of the conversion price for each series of our convertible notes; therefore, those notes are convertible by the holders through December 31, 2018.


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Upon conversion, we will pay cash equal to the lesserIn August 2018, holders of theour 2033F Notes with an aggregate principal amount andof $35 million converted their notes, which were settled in cash the conversion valuefirst quarter of the notes being converted and cash, shares of common stock or a combination of cash and shares of common stock, at our option, for any remaining conversion obligation.2019. As a result onlyof our election to settle all amounts due upon conversion in cash for these notes, such settlement obligations became derivative debt liabilities in 2018 subject to mark-to-market accounting treatment based on the amounts payablevolume-weighted-average price of our common stock over a period of 20 consecutive trading days. Accordingly, at the dates of our elections to settle the conversions in excesscash, we reclassified the fair values of the principal amounts upon conversionequity components of each of the 2033 Notes are consideredconverted notes from additional capital to derivative debt liabilities within current debt in diluted earnings per share underour consolidated balance sheet. The net carrying amount for 2018 included $132 million for the treasury stock method.fair values of the derivative debt liabilities as of August 30, 2018. The 20 consecutive trading day period ended in the first quarter of 2019, and we settled the conversion for $153 million in cash.

Cash Redemption at Our Option: We may redeem our convertible notes under the circumstances listed in the table below. The redemption price for cash the 2033Enotes will equal the principal amount at maturity, or the accreted principal amount in the case of the 2043G Notes redeemed on or after FebruaryNovember 20, 2018, and the 2033F Notes on or after February 20, 2020 at a price equal the principal amount plus accrued and unpaid interest.
Conditional Redemption Period
at Our Option(1)
Unconditional Redemption Period
at Our Option
Redemption Period Requiring
Make-Whole
2032D NotesOn or after May 1, 2017On or after May 4, 2021
Prior to May 4, 2021(2)
2033F NotesN/AOn or after Feb 20, 2020N/A
2043G NotesPrior to Nov 20, 2018On or after Nov 20, 2018
Prior to Nov 20, 2018(3)
(1)
We may redeem for cash on or after the applicable dates if the volume weighted average price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period.
(2)
If we redeem prior to the applicable date, we will pay a make-whole premium in cash equal to the present value of the remaining scheduled interest payments from the redemption date to May 4, 2021.
(3)
If we redeem prior to the applicable date, we will be required to pay a make-whole premium only if, as a result of our redemption notice, holders convert their notes. The make-whole premium will be based on the price of our common stock and the conversion date, as set forth in the indenture, and is payable at our election in cash and/or shares.

Cash Repurchase at the Option of the HolderHolders: We may be required by the holders of the 2033 Notesour convertible notes to repurchase for cash all or a portion of the 2033E Notesnotes on February 15, 2018 and on February 15, 2023 and allthe "Holder Put Date" listed in the table above. The repurchase price would equal the principal amount, or a portionthe accreted principal amount in the case of the 2033F2043G Notes, on February 15, 2020 and on February 15, 2023 at a price equal to the principal amount plus accrued and unpaid interest. Upon a change in control or a termination of trading, as defined in the indenture, holders of the 2033 Notes may require us to repurchase for cash all or a portion of their 2033 Notes at a price equal to the principal amount plus accrued and unpaid interest.

2043G Notes: On November 12, 2013, we issued $1.03 billion principal amount of the 2043G Notes in exchange for $440 million in aggregate principal amount of our 2027 Notes, 2031A Notes, and 2031B Notes. Each $1,000 of principal amount at maturity had an original issue price of $800. An amount equal to the difference between the original issue price and the principal amount at maturity will accrete in accordance with a schedule set forth in the indenture.  The original principal amount of $820 million accretes up to $1.03 billion at maturity in 2043. The initial conversion rate for the 2043G Notes is 34.2936 shares of common stock per $1,000 principal amount at maturity, equivalent to an initial conversion price of approximately $29.16 per share of common stock. Interest is payable in May and November of each year.

Conversion Rights: Holders may convert their 2043G Notes under the following circumstances: (1) if the 2043G Notes are called for redemption; (2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price of the 2043G Notes (approximately $37.91 per share); (3) if the trading price of the 2043G Notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the 2043G Notes during the periods specified in the indenture; (4) if specified distributions or corporate events occur, as set forth in the indenture; or (5) at any time after August 15, 2043.

We have the option to pay cash, issue shares of common stock or any combination thereof, for the aggregate amount due upon conversion. It is our current intent to settle in cash the principal amount of the 2043G Notes upon conversion. As a result, the dilutive effect of the 2043G Notes in earnings per share is computed under the treasury stock method.

Cash Redemption at Our Option: Prior to November 20, 2018, we may redeem for cash the 2043G Notes if the volume weighted average price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period. The redemption price will equal the principal amount at maturity plus accrued and unpaid interest. On or after November 20, 2018, we may redeem for cash the 2043G Notes without regard to the closing price of our common stock at a price equal the accreted principal amount plus accrued and unpaid interest. If we redeem the 2043G Notes prior to November 20, 2018, we are required to pay in cash a make-whole premium as specified in the indenture.

Cash Repurchase at the Option of the Holder: Holders of the 2043G Notes may require us to repurchase for cash all or a portion of the 2043G Notes on November 15, 2028 at a price equal to the accreted principal amount of $917 million plus accrued and unpaid interest. Holders of the 2043G Notes may also require us to repurchase for cash all or a portion of their 2043G Notes at a price equal to the accreted principal amount plus accrued and unpaid interestAlso, upon a change in control or a termination of trading, as defined in the indenture.respective indentures, holders of our convertible notes may require us to repurchase for cash all or a portion of their notes.


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Other Facilities

Other: Interest expense for our convertible notes consisted of contractual interest of $44 million, $51 million, and $51 million for 2018, 2017, and 2016, respectively, and amortization of discount and issuance costs of $32 million, $37 million, and $36 million for 2018, 2017, and 2016, respectively. As of August 30, 2018 and August 31, 2017, the carrying amounts of the equity components of our convertible notes, which are included in additional capital in the accompanying consolidated balance sheets, were $208 million and $287 million, respectively.

Available Revolving Credit Facilities: Facility

On February 12, 2015,August 9, 2018, we terminated our unused $255 million senior three-yearundrawn revolving credit facility and entered into a senior five-year revolving credit facility. Under this credit facility,scheduled to expire in February 2020, under which we canwere able draw up to the lesser of $750 million or 80% of the net outstanding balance of certain trade receivables, as definedreceivables.

On July 3, 2018, we entered into a revolving credit facility that expires in July 2023, under which we can draw up to $2.00 billion. Borrowings under the facility agreement.will generally bear interest, at a rate equal to LIBOR plus 1.25% to 2.00%, depending on our corporate credit ratings or leverage ratio. Any amounts drawn are collateralized by substantially all of the assets of Micron and MSP, a subsidiary of Micron, subject to certain permitted liens. Additionally, any amounts drawn are pari passu with the 2022 Term Loan B and are structurally subordinated to the indebtedness and other liabilities of all of Micron's subsidiaries that do not guarantee these debt obligations, and is guaranteed by MSP. As of August 30, 2018, there were no outstanding amounts drawn under this facility. We may suspend the security interest in such trade receivables.the collateral under the facility upon achieving specified credit ratings and repayment of the 2022 Term Loan B; however, the security interest will be automatically reinstated upon a decline in our corporate credit rating.

Under the terms of the revolving credit agreement, we must maintain a ratio calculated as of the last day of each fiscal quarter of total indebtedness to adjusted EBITDA not to exceed 2.75 to 1.00. We must also maintain a ratio of adjusted EBITDA to net interest expense of not less than 3.50 to 1.00. The credit facility contains customaryother covenants and conditions, including as a funding conditionthat, among other things,


limit, in certain circumstances, our ability and/or the absence of any event or circumstance that has a material adverse effect on certainability of our operations, assets, prospects, business,restricted subsidiaries to (1) create or condition,incur certain liens and including negative covenants that limitenter into sale and lease-back transactions, (2) create, assume, incur, or restrictguarantee certain additional secured indebtedness and unsecured indebtedness of our ability to create liens on,restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer, lease, or otherwise dispose of the collateral underlying the obligations under this facility.  Interest is payable onall or substantially all of our assets, to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications.

Debt Prepayments, Repurchases, and Conversions

During 2018, we prepaid, repurchased, and settled conversions of debt with an aggregate principal amount of $6.96 billion. When we receive a notice of conversion for any outstanding principal balance at a variable rate equalof our convertible notes and elect to the London Interbank Offered Rate ("LIBOR") plus an applicable margin ranging between 1.75% to 2.25%, depending upon the utilized portionsettle in cash any amount of the facility.  On April 16, 2015,conversion obligation in excess of the principal amount, the cash settlement obligations become derivative debt liabilities subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common stock over a period of 20 consecutive trading days. Accordingly, at the date of our election to settle a conversion in cash, we drew $75 million under this facility at an interest rate equalreclassify the fair value of the equity component of the converted notes from additional capital to 2.15% per annum. Asderivative debt liability within current debt in our consolidated balance sheet.

The following table presents the effects of September 3, 2015, $75prepayments, repurchases, and conversions of debt in 2018:
  Decrease in Principal Increase (Decrease) in Carrying Value Decrease in Cash Decrease in Equity Gain (Loss)
Prepayments and repurchases          
2021 MSAC Term Loan $(730) $(727) $(730) $—
 $(3)
2021 MSTW Term Loan (2,625) (2,616) (2,625) —
 (10)
2023 Notes (1,000) (991) (1,046) —
 (55)
2023 Secured Notes (1,250) (1,238) (1,373) —
 (135)
2024 Notes (550) (546) (572) —
 (25)
2026 Notes (129) (129) (139) —
 (11)
2033F Notes (66) (63) (316) (252) (1)
Other Notes (46) (44) (46) —
 (2)
Settled conversions          
2032C Notes (223) (216) (1,230) (965) (50)
2032D Notes (34) (31) (182) (145) (6)
2033E Notes(1)
 (173) (203) (552) (297) (52)
2033F Notes (124) (118) (596) (462) (16)
2043G Notes (6) (4) (13) (5) (4)
Conversions not settled          
2033F Notes(2)
 —
 132
 —
 (117) (15)
  $(6,956) $(6,794) $(9,420) $(2,243) $(385)
(1)
Settlement included issuance of 4 million shares of our treasury stock in addition to payment of cash.
(2)
As of August 30, 2018, an aggregate of $35 million principal amount of our 2033F Notes (with a carrying value of $165 million) had converted but not settled. These notes settled in the first quarter of 2019 for $153 million in cash.

In 2017, we repurchased $631 million of principal was outstanding under this facility and $572 million was available for us to draw.

On December 2, 2014, we terminated our unused $153 million senior three-year revolving credit facility and entered into a senior five-year revolving credit facility, collateralized by a security interest in certain trade receivables and inventory. The new credit facility has an aggregate revolving commitment which is subject to certain adjustments, including an availability block that effectively limits the maximum amount we could draw to $540 million. Additionally, the maximum amount we could draw may decrease further if the value, as defined, of our trade receivables and inventory collateralizing the credit facility decreases below a specified threshold. The credit facility contains customary covenants and conditions, including as a funding condition the absence2025 Notes (carrying value of any event or circumstance that has a material adverse effect on our business or financial condition.  Generally, interest is payable on any outstanding principal balance at a variable rate not to exceed LIBOR plus an applicable margin ranging between 1.25% to 1.75%$625 million), depending upon the utilized portion of the facility. On April 16, 2015, we drew $50 million under this facility at an interest rate equal to 1.65% per annum. As of September 3, 2015, $50repurchased $321 million of principal was outstanding under this facilityamount of our 2026 Notes (carrying value of $318 million), and $270redeemed $600 million was availableprincipal amount of our 2022 Notes (carrying value of $592 million) for us to draw.an aggregate of $1.63 billion in cash. In connection with the transactions, we recognized aggregate non-operating losses of $94 million in 2017.

Other Facilities: On April 14, 2015, our IMFT joint venture entered into a commitment letter and progress payment agreement to obtain up to $275In 2016, we repurchased $57 million of financing collateralizedprincipal amount of our 2033E Notes (carrying value of $54 million) for $94 million in cash. The liability and equity components of the repurchased notes had previously been stated separately within debt and equity in our consolidated balance sheet. As a result, the repurchase decreased the carrying value of debt by semiconductor production equipment. The facility was terminated in September 2015$54 million and not utilized.

On May 28, 2015, we entered into a term loan agreement to obtain financing collateralizedequity by certain property, plant, and equipment. Subject to customary conditions, we can draw up to 6.90 billion New Taiwan dollars or an equivalent amount in U.S. dollars (approximately $213 million as of September 3, 2015). On June 18, 2015, we drew $40 million under this arrangement. Subsequent draws must occur by December 18, 2015. Amounts drawn will be made subject to a three-year loan, with equal quarterly principal payments beginning six months after the initial draw. Amounts drawn in New Taiwan dollars will accrue interest at a variable rate equal to the three-month Taipei Interbank Offered Rate ("TAIBOR") plus a margin not to exceed 2.0%. Amounts drawn in U.S. dollars will accrue interest at a variable rate equal to the three-month LIBOR plus a margin not to exceed 2.2%. As of September 3, 2015, the outstanding balance was $40$38 million.

On March 13, 2015, we borrowed $47 million under a two-year note, collateralized by certain property, plant, and equipment. The note is payable in equal quarterly installments, plus interest at a variable rate equal to the 90-day TAIBOR plus 1.65% per annum. As of September 3, 2015, the outstanding balance was $40 million.

During 2015, we repaid, prior to their scheduled maturities, an aggregate of $159 million to close certain other notes payable with a weighted-average annual interest rate of 2.44% and repaid, according to the scheduled payment terms, another note payable of $127 million, which amount represented the present value of monthly installment payments for the acquisition of an additional 9.9% interest in MMT.


68



Maturities of Notes Payable and Future Minimum Lease Payments

As of September 3, 2015,August 30, 2018, maturities of notes payable (including the MMJ Creditor Installment Payments) and future minimum lease payments under capital lease obligations were as follows:

  Notes Payable Capital Lease Obligations
2016 $291
 $349
2017 289
 173
2018 504
 131
2019 508
 91
2020 702
 32
2021 and thereafter 4,844
 76
Unamortized discounts and interest, respectively (589) (60)
  $6,549
 $792

Retrospective Application of a New Accounting Standard

Effective in the fourth quarter of 2015, we adopted ASU 2015-03 – Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, as appropriate, consistent with debt discounts, as opposed to an asset. The new accounting standard required retrospective application; therefore, our financial statements and notes to these statements contained herein have been adjusted to reflect the impact of adopting this new accounting standard. The following table sets forth the financial statement line items affected by retrospective application of this new accounting standard:

As of August 28, 2014 Previously Reported Effect of Adoption Retrospectively Adjusted
Other noncurrent assets $497
 $(82) $415
Current debt 1,638
 (20) 1,618
Long-term debt 4,955
 (62) 4,893
Redeemable convertible debt 57
 11
 68
Additional capital 7,879
 (11) 7,868
  Notes Payable Capital Lease Obligations
2019 $501
 $339
2020 274
 231
2021 151
 100
2022 713
 66
2023 —
 42
2024 and thereafter 2,439
 187
Unamortized discounts and interest, respectively (287) (120)
  $3,791
 $845


Commitments

As of September 3, 2015August 30, 2018, we had commitments of approximately $1.621.8 billion for the acquisition of property, plant, and equipment. We lease certain facilities and equipment under operating leases.  Total rentalleases, for which expense was $4863 million, $5752 million, and $4146 million for 20152018, 20142017, and 20132016, respectively. Minimum future operating lease commitments as of September 3, 2015August 30, 2018 were as follows:

2016 $218
2017 296
2018 106
2019 15
2020 12
2021 and thereafter 35
  $682
2019 $37
2020 43
2021 50
2022 50
2023 45
2024 and thereafter 391
  $616




69



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 applicable balance sheet dates,date, including those described below. We are currently a party to other legal actions arising from the normal course of business, none of which is 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 technologyhigh-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, Micron Semiconductor Products, Inc.,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’attorneys' fees, and costs.

On December 15, 2014, Innovative Memory Solutions, Inc. ("IMS") filed a patent infringement action against usMicron 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 July 23, 2018, IMS served a patent infringement complaint on Micron Semiconductor (Deutschland) GmbH and Micron Europe Limited alleging that products including our SSDs infringe a European patent. The complaint seeks unspecified damages and an order forbidding Micron Semiconductor (Deutschland) GmbH and Micron Europe Limited from offering to sell, using, and importing the accused products. On August 31, 2018,


Micron was served with a complaint filed by IMS in Shenzhen Intermediate People's Court in Guangdong Province, China. The complaint alleges that certain of our NAND flash products infringe a Chinese patent. The complaint seeks an order requiring Micron to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 1 million Chinese yuan plus expenses.

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 alleged that a variety of our DRAM products infringed two U.S. patents and sought 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 "Fuzhou Court"). On April 3, 2018, Micron Semiconductor (Shanghai) Co. Ltd. ("MSS") was served with the same complaint. The complaint alleges that MXA and MSS infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 98 million Chinese yuan plus court fees incurred.

On March 21, 2018, MXA was served with a patent infringement complaint filed by United Microelectronics Corporation ("UMC") in the Fuzhou Court. On April 3, 2018, MSS was served with the same complaint. The complaint alleges that MXA and MSS infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 90 million Chinese yuan plus court fees incurred.

On April 3, 2018, MSS was served with another patent infringement complaint filed by Jinhua and two additional complaints filed by UMC in the Fuzhou Court. The three additional complaints allege that MSS infringes three Chinese patents by manufacturing and selling certain Crucial MX300 SSDs and certain GDDR5 memory chips. The two complaints filed by UMC each seek an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 90 million Chinese yuan plus court fees incurred. The complaint filed by Jinhua seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 98 million Chinese yuan plus court fees incurred. On October 9, 2018, UMC withdrew its complaint that alleged MSS infringed a Chinese patent by manufacturing and selling certain GDDR5 memory chips.

On July 5, 2018, MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing, selling, or importing certain Crucial and Ballistic-branded DRAM modules and solid-state drives in China. The affected products make up slightly more than 1% of our annualized revenues. We are complying with the ruling and have requested the Fuzhou Court to reconsider or stay its decision.

Among other things, the above lawsuits pertain to certainsubstantially all of our DDR DRAM, DDR2 DRAM, DDR3 DRAM, DDR4 DRAM, SDR SDRAM, PSRAM, RLDRAM, LPDRAM, NAND, Flash, and certain other memory and storage 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 55%18% of our totalInotera's outstanding shares in Inotera as of September 3, 2015,August 30, 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 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. The next hearing on the matter has not yet been scheduled.

70




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.  As

Antitrust Matters

On April 27, 2018, a purported class-action lawsuit was filed against Micron and other DRAM suppliers in the U.S. District Court for the Northern District of September 3, 2015,California asserting claims based on alleged price-fixing of DRAM products during the Inotera Shares hadperiod from June 1, 2016 to February 1, 2018. Similar cases were subsequently filed in federal court in the United States, as well as in Canadian courts in Quebec, Montreal and Toronto, Ontario. The complaints seek treble monetary damages, costs, interest, attorneys' fees, and other injunctive and equitable relief. We are unable to predict the outcome of these matters and therefore cannot estimate the range of possible loss. The final resolution of these matters could result in significant liability and could have a carrying valuematerial adverse effect on our business, results of operations, or financial condition.

On May 15, 2018, the Chinese State Administration for Market Regulation ("SAMR") notified Micron that it was investigating potential collusion among DRAM suppliers in equity method investments for purposesChina. On May 31, 2018, SAMR made unannounced visits to our sales offices in Beijing, Shanghai, and Shenzhen to seek certain information as part of our financial reporting of $683 million and a market value of $846 million.its investigation. We are cooperating with SAMR in its investigation.

Other

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



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 theour 2033 Notes, upon conversion, we would be required to pay cash equal to the lesser amount 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 threshold for conversion and our 2033 Notes were convertible at the option of theby their holders as of September 3, 2015August 30, 2018 and August 28, 2014. Therefore,31, 2017. As a result, the 2033 Notes werebalance of these notes was classified as current debt and the aggregate difference between the principal amount and the carrying value of $49 million as of September 3, 2015 and $68 million as of August 28, 2014 was classified as redeemable convertible notes in the accompanying consolidated balance sheets. (See "Debt" note.)sheet.


Redeemable Noncontrolling Interest

Redeemable noncontrolling interest reflects 100,000 preferred shares authorized and issued by Micron Semiconductor Asia Operations Pte. Ltd., a subsidiary of Micron, in August 2018 for proceeds, net of issuance related costs, of $97 million, which are redeemable by the holders after August 29, 2028. The preferred shareholders are entitled to a cumulative fixed dividend of 7.75% per annum, which is reflected in net income attributable to noncontrolling interests, and a liquidation preference senior to the entity's common shares. We have the right to reacquire the preferred shares during the period beginning August 31, 2020 through August 29, 2026.


Equity

Micron Shareholders' Equity

Common Stock Repurchases:Repurchase Authorization: Since the first quarter of 2015,In May 2018, we announced that our Board of Directors hashad authorized the discretionary repurchase of up to $1.25$10 billion of our outstanding common stock $250 million of which was authorizedbeginning in the first quarter of 2016. Any repurchases under the authorization2019. We may be made in open marketpurchase shares on a discretionary basis through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or derivative transactions. Repurchases arepursuant to a Rule 10b5-1 trading plan, subject to market conditions and our ongoing determination of the best use of available cash. During 2015,The repurchase authorization does not obligate us to acquire any common stock.

Accelerated Share Repurchase: On August 10, 2018, we entered into an accelerated share repurchase ("ASR") agreement with a financial institution to purchase $1.00 billion of our common stock under our common stock repurchase authorization. The number of shares purchased will be calculated by dividing $1.00 billion by a volume-weighted average price of our common stock from September 5, 2018 through as late as November 29, 2018 (the "Measurement Period"), subject to an agreed-upon discount. On September 5, 2018, we paid $1.00 billion to the financial institution and received an initial installment of 14 million shares, equal to $750 million divided by the closing price of our common stock on September 4, 2018. Based on the final number of shares purchased at the end of the Measurement Period, we will either receive an incremental number of shares, or settle any amount owed to the financial institution in either cash or shares, at our option. In the first quarter of 2019, we recorded the initial shares as treasury stock. The second installment is treated as an equity-linked contract indexed to our stock and therefore qualifies for equity accounting.

Other Repurchases: From August 31, 2018 through October 12, 2018, we repurchased 42an aggregate of 15 million shares of our common stock for $831an aggregate of $653 million (including commissions)under a Rule 10b5-1 plan and through open market transactions, which were recorded as treasury stock.repurchases.

Capped CallsCommon Stock Issuance: In October 2017, we issued 34 million shares of our common stock for $41.00 per share in a public offering, for net proceeds of $1.36 billion, net of underwriting fees and other offering costs.



IssuedTreasury Stock: In connection with the Inotera Acquisition, we sold 58 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, in 2017, treasury stock decreased by $1.03 billion while retained earnings decreased by $104 million for the difference between the carrying value of the treasury stock and its $925 million fair value.

Outstanding Capped Calls: We have In connection with our 2033F Notes, we entered into capped calls,the 2033F Capped Calls, which cover, subject to anti-dilution adjustments similar to those contained in the 2033F Notes, 27 million shares of common stock and are intended to reduce the effect of potential dilution from our convertible notes.dilution. The capped calls2033F Capped Calls have an initial strike price of $10.93, subject to certain adjustments, which equals the conversion price of the 2033 Notes, a cap price of $14.51, and provide for our receipt of cash or shares, at our election, from our counterparties if the trading price of our stock is above a specified initialthe strike price atprices on the expiration dates. The amounts receivable varies based2033F Capped Calls expire on the trading pricevarious dates between January 2020 and February 2020. As of our stock, up to specified cap prices. TheAugust 30, 2018, the dollar value of the cash or shares that we would receive from the capped callsour 2033F Capped Calls upon their expiration date rangesdates range from $0, if the trading price of our stock is below the initial strike price for all of the capped callsprices at expiration, to $814$98 million, if the trading price of our stock is at or above the cap price for allprices. Settlement of the capped calls.  We paid $57 million in 2011 to purchase the 2031 Capped Calls, $103 million in 2012 to purchase the 2032 Capped Calls and $48 million in 2013 to purchase the 2033 Capped Calls. The amounts paid were recorded as charges to additional capital.


71



The following table presents information relatedcalls prior to the issued and outstanding capped calls as of September 3, 2015:

Capped Calls 
   Strike Price Cap Price Range Underlying Common Shares 
Value at Expiration(1)
 Expiration Dates  Low High  Minimum Maximum
2031 Jan 2016–Feb 2016 $9.50
 $13.17
 $13.17
 18
 $—
 $67
2032C May 2016–Nov 2017 9.80
 14.26
 15.69
 56
 —
 307
2032D Nov 2016–May 2018 10.16
 14.62
 16.04
 44
 —
 244
2033E Jan 2018–Feb 2018 10.93
 14.51
 14.51
 27
 —
 98
2033F Jan 2020–Feb 2020 10.93
 14.51
 14.51
 27
 —
 98
            172
 $—
 $814
(1)expiration dates may be for an amount less than the maximum value at expiration.
Settlement in cash on the respective expiration dates would result in us receiving an amount ranging from zero, if the market price per share of our common stock is at or below the low strike price, to the maximum amount if the market price per share of our common stock is at or above the high cap price. If share settlement were elected, the number of shares received would be determined by the value of the capped calls at the time of settlement divided by the share price on the settlement date. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.

Expiration and Unwind of Capped Calls: A portion of our 2031 Capped Calls expired in the fourth quarter of 2015. We elected share settlementIn 2018, we share-settled certain capped calls upon their expirations, and received 39 million shares, equal to a value of $429 million. In 2017, we cash-settled and share-settled certain capped calls upon their expirations, and received $125 million in cash and 4 million shares, equal to a value of $67 million and in 2016, we share-settled certain capped calls upon their expirations and received 2 million shares of our stock, equivalentequal to approximately $50 milliona value of $23 million. The amounts received upon settlement were based on thevolume-weighted-average trading prices of our stock price at the time of expiration whichdates. The shares received in all periods were recorded as treasury stock. In May 2014, we and the counterparties agreed to terminate and unwind a portion of our 2031 Capped Calls. We elected share settlement and received 3 million shares of our stock, equivalent to approximately $86 million based on the trading stock price at the time of the unwind. The shares received in May 2014 were retired from treasury stock in 2014.

Accumulated Other Comprehensive Income (Loss):Changes in accumulated other comprehensive income (loss) by component for the year ended September 3, 2015,August 30, 2018 were as follows:

  Cumulative Foreign Currency Translation Adjustments Gains (Losses) on Derivative Instruments, Net Gains (Losses) on Investments, Net Pension Liability Adjustments Total
Balance as of August 28, 2014 $42
 $12
 $1
 $1
 $56
Other comprehensive income (loss) before reclassifications (42) (11) (2) 33
 (22)
Amount reclassified out of accumulated other comprehensive income —
 (6) (2) (2) (10)
Tax effects —
 —
 —
 (11) (11)
Other comprehensive income (loss) (42) (17) (4) 20
 (43)
Balance as of September 3, 2015 $—
 $(5) $(3) $21
 $13
  Cumulative Foreign Currency Translation Adjustments Gains (Losses) on Derivative Instruments Pension Liability Adjustments Unrealized Gains (Losses) on Investments Total
As of August 31, 2017 $(1) $17
 $13
 $—
 $29
Other comprehensive income 1
 (17) (3) (3) (22)
Amount reclassified out of accumulated other comprehensive income —
 (1) (1) —
 (2)
Tax effects —
 3
 1
 1
 5
Other comprehensive income 1
 (15) (3) (2) (19)
As of August 30, 2018 $—
 $2
 $10
 $(2) $10

Noncontrolling Interests in Subsidiaries

As of 2015 2014 2018 2017
 Noncontrolling Interest Balance Noncontrolling Interest Percentage Noncontrolling Interest Balance Noncontrolling Interest Percentage Balance Percentage Balance Percentage
IMFT(1)
 $829
 49% $693
 49% $853
 49% $832
 49%
MP Mask(1)
 93
 50% 93
 50%
Other 15
 Various
 16
 Various
 17
 Various
 17
 Various
 $937
   $802
   $870
   $849
  
(1) Entity is a variable interest entity.


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IMFT: IMFT:Since inception in 2006, we have owned 51% of IMFT, a joint venture between us and Intel to manufacture NAND Flash and 3D XPoint memory products for the exclusive use of the members.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. In the first quarter of 2018, IMFT discontinued production of NAND and subsequent to that time has been entirely focused on 3D XPoint memory production. Through our IMFT joint venture, we continue to jointly develop 3D XPoint technologies with Intel through the second generation of 3D XPoint technology, which is expected to be completed in the second half of 2019. To better optimize the 3D XPoint technology for our product roadmap and maximize the benefits for our customers and shareholders, in the fourth quarter of 2018, we announced that we will no longer jointly develop with Intel subsequent generations of 3D XPoint technology. IMFT will continue to manufacture memory based on 3D XPoint technology at the fabrication facility in Lehi, Utah for its members. IMFT sales to Intel were $507 million, $438 million, and $457 million for 2018, 2017, and 2016, respectively.

The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. Commencing in January 2015,At any time through December 2018, Intel can put to us, and commencing infrom January 2018,2019 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 that time.the time of the closing. If Intel elects to sell to us,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 between 50% and 100%, at Intel's choice, of Intel's immediately preceding six-month period pre-closing volumes of IMFT products for the first six-month period following the closing and between 0% and 100%, at Intel's choice, 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.

IMFT's capital requirements are generally determined based on an annual plan approved by the members, and capital contributions to IMFT manufactures memory products using designsare 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 technology we develop with Intel. We generally share with Intelin such event, the costscontributing member may elect to contribute any amount of product designthe capital request, either in the form of an equity contribution or member debt financing. Under the supply agreement, the members have rights and process development activities for NAND Flash memory and 3D XPoint memory. Our R&D expenses were reduced by reimbursements from Intel of $224 million, $137 million, and $127 million for 2015, 2014, and 2013, respectively.

We sell a portion of our productsobligations to Intel through our IMFT joint venture at long-term negotiated prices approximating cost. Sales of products to Intel under this arrangement were $420 million, $423 million, and $387 million for 2015, 2014, and 2013, respectively. Receivables from Intel as of September 3, 2015 and August 28, 2014, were $67 million and $66 million, respectively, for these sales.

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

As of 2015 2014
Assets    
Cash and equivalents $134
 $84
Receivables 79
 73
Inventories 65
 48
Other current assets 7
 5
Total current assets 285
 210
Property, plant and equipment, net 1,768
 1,545
Other noncurrent assets 49
 47
Total assets $2,102
 $1,802
     
Liabilities  
  
Accounts payable and accrued expenses $182
 $106
Deferred income 9
 8
Current debt 22
 21
Total current liabilities 213
 135
Long-term debt 49
 71
Other noncurrent liabilities 100
 110
Total liabilities $362
 $316
Amounts exclude intercompany balances that were eliminatedproportion to their investment, including member debt financing. Any capital contribution or member debt financing results in our consolidated balance sheets.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.

Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets.

The following table presents IMFT's distributions to and contributions from its shareholders:

For the year ended 2015 2014 2013
IMFT distributions to Micron $6
 $10
 $38
IMFT distributions to Intel 6
 10
 37
Micron contributions to IMFT 148
 106
 12
Intel contributions to IMFT 142
 102
 11


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MP Mask: In 2006, we formed a joint venture with Photronics to produce photomasks for leading-edge and advanced next generation semiconductors.  On March 24, 2015, we notified Photronics of our election to terminate MP Mask effective in May 2016. Upon termination, we have the right to acquire Photronics' interest in MP Mask for an amount equal to the noncontrolling interest balance. Since its inception, we and Photronics have each owned approximately 50% of MP Mask.  We purchase a substantial majority of the photomasks produced by MP Mask pursuant to a supply arrangement.

The assets and liabilities of MP MaskIMFT included in our consolidated balance sheets were as follows:sheets:


As of 2015 2014
Current assets $21
 $24
Noncurrent assets (primarily property, plant and equipment) 180
 203
Current liabilities 21
 28
Noncurrent liabilities —
 14
As of 2018 2017
Assets    
Cash and equivalents $91
 $87
Receivables 126
 81
Inventories 114
 128
Other current assets 8
 7
Total current assets 339
 303
Property, plant, and equipment 2,641
 1,852
Other noncurrent assets 45
 49
Total assets $3,025
 $2,204
     
Liabilities  
  
Accounts payable and accrued expenses $138
 $299
Deferred income 9
 6
Current debt 20
 19
Total current liabilities 167
 324
Long-term debt 1,064
 75
Other noncurrent liabilities 74
 88
Total liabilities $1,305
 $487
Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.

Creditors of MP Mask have recourse only to MP Mask's assets and do not have recourse to any other of our assets.

MMT: As of August 29, 2013, noncontrolling interests in MMT were 11%. In 2014, we purchased additional interests in MMT for an aggregate of $1462016, IMFT distributed $36 million and as of August 28, 2014, noncontrolling interests in MMT were less than 1%. Substantially all of the MMT shares purchased in 2014 were financed with a short-term loan from a seller. As a result of the purchases of MMT shares in 2014, in aggregate, noncontrolling interests decreased by $180$34 million to us and Intel, respectively, and we and Intel contributed $38 million and additional capital increased by $34 million.

Restrictions on Net Assets

As a result of the reorganization proceedings of the MMJ Companies initiated on March 23, 2012, and for so long as such proceedings continue, the MMJ Group is subject$37 million, respectively, to certain restrictions on dividends, loans, and advances. In addition, our ability to access IMFT's cash and other assets through dividends, loans, or advances, including to finance our other operations, is subject to agreement by Intel. As a result, our total restricted net assets (net assets less intercompany balances and noncontrolling interests) as of September 3, 2015 were $3.35 billion for the MMJ Group and $911 million for IMFT, which included cash and equivalents of $748 million for the MMJ Group and $134 million for IMFT. (See "Micron Memory Japan, Inc." note and "IMFT" above.)

As of September 3, 2015, our retained earnings included undistributed earnings from our equity method investees of $232 million.


Fair Value Measurements

Accounting standards establish three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

All of our marketable debt and equity investments (excluding equity method investments) were classified as available-for-sale and carried at fair value. In addition to the fair value measurements disclosed in the "Cash and Investments" note, as of September 3, 2015 and August 28, 2014, we had certificates of deposit classified as restricted cash (included in other noncurrent assets) of $45 million and $27 million, respectively, valued using Level 2 fair value measurements.

In connection with our repurchases of debt in 2015, 2014, and 2013, we determined the fair value of the debt components of our convertible notes as if they were stand-alone instruments, using interest rates for similar nonconvertible debt issued by entities with credit ratings comparable to ours (Level 2).


74



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 (carrying(excluding the carrying value excludes theof equity and mezzanine equity components of our convertible notes) were as follows:

As of 2015 2014 2018 2017
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes and MMJ creditor installment payments$5,020
 $5,077
 $3,634
 $3,483
Convertible notes 2,508
 1,472
 5,886
 2,117
 $3,124
 $1,049
 $3,901
 $1,521
Notes and MMJ Creditor PaymentsNotes and MMJ Creditor Payments2,798
 2,742
 8,793
 8,423

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 valuevalues of our other debt instruments waswere 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).

In connection with our restructure and asset impairment charges in 2014 and 2013, the fair value of our 200mm wafer fabrication equipment in Kiryat Gat, Israel was determined primarily based on the expected proceeds from the sale and the fair value of a supply agreement to manufacture NOR flash memory at the facility (Level 3). The fair values of our MIT assets and our Light-emitting Diode ("LED") production assets were based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment (Level 3). (See "Restructure and Asset Impairments" note.)ours.


Derivative Instruments

We use derivative instruments to manage a portion of our exposure to changes in currency exchange rates from our monetary assets and liabilities denominated in currencies other than the U.S. dollar. We have also had convertible note settlement obligations which were accounted for as derivative instruments as a result of our elections to settle conversions in cash. We do not use derivative instruments for speculative purpose.

Derivative Instruments without Hedge Accounting Designation

Currency Derivatives: We use derivative instruments to manage a portion of our exposure to changes in currency exchange rates from our monetary assets and liabilities. Our primary objective for entering into currency derivatives is to reduce the volatility that changes in currency exchange rates have on our earnings.

To hedge our exposures to monetary assets and liabilities, we generally utilize a rolling hedge strategy with currency forward contracts that mature within 35 days.  At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured in 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 fair value measurements). In connection with the currency exchange rate risk associated with the MMJ Acquisition in July 2013, we entered into currency exchange transactions (the "MMJ Acquisition Hedges"). The MMJ Acquisition Hedges were not designated for hedge accounting and were remeasured at fair value each period. We recorded losses from the MMJ Acquisition Hedges of $228 million in 2013. To mitigate the risk of the yen strengthening against the U.S. dollar on the MMJ creditor installment payments due in December 2014 and December 2015, we entered into forward contracts to purchase 20 billion yen on November 28, 2014 and 10 billion yen on November 27, 2015. In the first quarter of 2015, we paid $33 million to settle the 20 billion yen forward contracts.

Realized and unrealized gains and losses on currency derivatives without hedge accounting designation as well as the change in the underlying monetary assets and liabilities due to changes in currency exchange rates are included in other non-operating income (expense), net.


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Convertible Notes Settlement Obligations: During 2015, holders elected to convert a portion of our 2033E Notes. In 2014, holders elected to convert substantially all of our remaining 2014 Notes, 2027 Notes, 2031A Notes, and 2031B Notes. As a result of our elections to settle the amounts due upon conversion in cash, each of the settlement obligations became derivative debt liabilities subject to mark-to-market accounting treatment for a period of approximately 30 days, beginning on the dates we notified the holder of our intention to settle the obligation in cash through the settlement dates. The fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2 fair value measurements). The Black-Scholes model requires the input of assumptions, including the stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and dividend rate. The subsequent measurements and final settlement amounts of our convertible note settlement obligations were based on the volume-weighted average stock price (Level 2 fair value measurements). Changes in fair values of the derivative settlement obligations were included in other non-operating income (expense), net.

Total notional amounts and gross fair values for derivative instruments without hedge accounting designation were as follows:

  
Notional Amount(1)
 Fair Value of
Current Assets(2)
 
Current Liabilities(3)
 
Noncurrent Liabilities(4)
As of September 3, 2015        
Currency forward contracts:        
Yen $928
 $—
 $(24) $—
Singapore dollar 282
 —
 —
 —
New Taiwan dollar 89
 —
 —
 —
Yuan 32
 1
 —
 —
Euro 29
 —
 —
 —
Shekel 27
 —
 —
 —
British Pound 19
 —
 —
 —
  $1,406
 $1
 $(24) $—
As of August 28, 2014        
Currency forward contracts:        
Yen $554
 $—
 $(12) $(6)
Singapore dollar 330
 —
 —
 —
Euro 245
 —
 (1) —
Shekel 62
 —
 (1) —
  $1,191
      
         
Convertible notes settlement obligations 12
 —
 (389) —
    $—
 $(403) $(6)
  
Gross Notional Amount(1)
 Fair Value of
Current Assets(2)
 
Current Liabilities(3)
 
Noncurrent Assets(4)
As of August 30, 2018        
Derivative instruments with hedge accounting designation        
Cash flow currency hedges $538
 $—
 $(13) $—
         
Derivative instruments without hedge accounting designation        
Non-designated currency hedges 1,919
 14
 (10) —
Convertible notes settlement obligation(5)
   —
 (167) —
    14
 (177) —
         
    $14
 $(190) $—
         
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(5)
   —
 (47) —
  

 34
 (52) 1
         
    $51
 $(52) $1
(1)
Notional amounts of forwardcurrency hedge contracts in U.S. dollars and convertible notes settlement obligations in shares.dollars.
(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 liabilities.assets.
(5)
Notional amounts of convertible notes settlement obligations as of August 30, 2018 and August 31, 2017 were 3 million and 2 million shares of our common stock, respectively.

Net gains (losses) for derivative instruments without hedge accounting designation were included in other non-operating income (expense), net as follows:

For the year ended 2015 2014 2013
Foreign exchange contracts $(64) $(27) $(222)
Convertible notes settlement obligations 7
 (59) —


76



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 to changes in cash flows from changes in currency exchange rates for certain capital expenditures.rates. Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rate,rates, and credit risk spreadcredit-risk spreads (Level 2 fair value measurements)2). We do not use derivative instruments for speculative purposes.

Cash Flow Hedges: We utilize cash flow hedges for our exposure 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 gaingains or losslosses on the derivatives is included as a component of accumulated other comprehensive income (loss).income. Amounts in accumulated other comprehensive income (loss) are reclassified into earnings in the same line items of the consolidated statements of operations and in the same periods in which the underlying transactions affect earnings. TheFor the periods presented prior to the second quarter of 2018, the ineffective orand excluded portion of the realized and unrealized gain or loss iswas included in other non-operating income (expense), net.  Total notional. As a result of adopting ASU 2017-12, beginning in the second quarter of 2018, the excluded portion of such amounts is included in the same line item in which the underlying transactions affect earnings and gross fair values for derivative instruments with cash flow hedge accounting designation werethe ineffective portion of the realized and unrealized gains or losses on derivatives is included as follows:a component of accumulated other comprehensive income.

  Notional Amount (in U.S. Dollars) Fair Value of
  
Current Assets(1)
 
Current Liabilities(2)
As of September 3, 2015      
Yen $81
 $3
 $—
Euro 12
 —
 —
  $93
 $3

$—
As of August 28, 2014  
    
Yen $94
 $—
 $(2)
Euro 24
 —
 —
  $118
 $—

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

For 2015, 2014, and 2013, weWe recognized losses of $10$17 million, $4 and gains of $15 million, and $8$10 million, for 2018, 2017, and 2016, respectively, in accumulated other comprehensive income (loss) from the effective portion of cash flow hedges. The ineffective andNeither the amount excluded portions of cash flow hedges recognized in other non-operating income (expense) were not significant in 2015, 2014, or 2013.  For 2015, 2014, and 2013, we reclassified gains of $6 million, $4 million, and $1 million, respectively,from hedge effectiveness nor the reclassifications from accumulated other comprehensive income (loss) to earnings. As of September 3, 2015, $3 million of net gainsearnings were material in 2018,


2017, or 2016. The amounts from cash flow hedges included in accumulated other comprehensive income (loss) isthat are expected to be reclassified into earnings in the next 12 months.months were also not material.

Fair Value Hedges:We utilize fair value hedges for our exposure from changes in currency exchange rates for certain monetary assets and liabilities. For derivative forward contracts designated as fair value hedges, hedge effectiveness is determined by the change in the fair value of the undiscounted spot rate of the forward contract. The changes in fair values of hedge instruments attributed to changes in undiscounted spot rates are recognized in other non-operating income (expense). The time value associated with hedge instruments is excluded from the assessment of the effectiveness of hedges and is recognized on a straight-line basis over the life of hedges to other non-operating income (expense). Amounts recorded to other comprehensive income (loss) for 2018 were not material. The effects of fair value hedges on our consolidated statements of operations were as follows:
  
Other
Non-Operating
Income (Expense)
For the year ended 2018
Gain (loss) on remeasurement of hedged assets and liabilities $(25)
Gain (loss) on derivatives designated as hedging instruments 25
Amortization of amounts excluded from hedge effectiveness (32)
  $(32)

Derivative Instruments without Hedge Accounting Designation

Currency Derivatives: Except for certain assets and liabilities hedged using fair value hedges, we generally utilize a rolling hedge strategy with currency forward contracts that mature within nine months to hedge our exposures of monetary assets and liabilities from changes in currency exchange rates. At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars and the associated outstanding forward contracts are marked to market. Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or exchange quotations (Level 2). Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changes in the underlying monetary assets and liabilities from changes in currency exchange rates are included in other non-operating income (expense). For derivative instruments without hedge accounting designation, we recognized losses of $38 million and $45 million, and gains of $185 million for 2018, 2017, and 2016, respectively.

Convertible Notes Settlement Obligations:For settlement obligations associated with our convertible notes subject to mark-to-market accounting treatment, the fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2), which requires inputs of stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and dividend rate. The subsequent measurement amounts were based on the volume-weighted-average trading price of our common stock (Level 2). (See "Debt" note.) We recognized losses of $124 million for 2018 in other non-operating income (expense), net for the changes in fair value of the derivative settlement obligations. Recognized gains and losses for 2017 and 2016 were not material.

Derivative Counterparty Credit Risk and Master Netting Arrangements

Our derivative instruments expose us to credit risk to the extent counterparties may be unable to meet the terms of the contracts. Our maximum exposure to loss due to credit risk if counterparties fail completely to perform according to the terms of the contracts would generally equal the fair value of assets for these contracts as listed in the tables above. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading risk across multiple financial institutions.

We enter into As of August 30, 2018 and August 31, 2017, amounts netted under our master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions. These master netting arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled with each counterparty under these arrangements have been presented in our consolidated balance sheets on a net basis. As of September 3, 2015 and August 28, 2014, amounts netted were not significant.material.




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Equity Plans

As of September 3, 2015August 30, 2018, our equity plans permit us to issue an aggregate of up to 170125 million shares of our common stock of which 112 million shares were available for future awards.  Awards are subject to terms and conditions as determined byawards under our Board of Directors.equity plans, including 33 million shares approved for issuance under our employee stock purchase plan ("ESPP").



Stock Options

Our stock options are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options issued after February 2014 generally expire eight years from the date of grant. Options issued prior to February 2014 generally expire six years from the date of grant.

Option activity for 20152018 is summarized as follows:

  Number of Shares Weighted-Average Exercise Price Per Share 
Weighted-Average Remaining Contractual Life
(In Years)
 Aggregate Intrinsic Value
Outstanding at August 28, 2014 48
 $10.57
    
Granted 8
 34.45
    
Exercised (10) 7.35
    
Canceled or expired (2) 15.93
    
Outstanding at September 3, 2015 44
 15.33
 3.8 $256
         
Exercisable at September 3, 2015 18
 $9.33
 2.4 $145
Expected to vest after September 3, 2015 25
 19.11
 4.7 109
  Number of Shares Weighted-Average Exercise Price Per Share 
Weighted-Average Remaining Contractual Life
(In Years)
 Aggregate Intrinsic Value
Outstanding as of August 31, 2017 33
 $19.32
    
Granted 2
 43.30
    
Exercised (16) 17.82
    
Canceled or expired (1) 22.67
    
Outstanding as of August 30, 2018 18
 23.38
 4.8 $527
         
Exercisable as of August 30, 2018 8
 $21.66
 3.2 $233
Unvested as of August 30, 2018 10
 24.61
 6.0 294

The total intrinsic value was $229446 million, $421198 million, and $10352 million for options exercised duringin 20152018, 20142017, and 20132016, respectively.

Stock options granted and assumptions used in the Black-Scholes option valuation model were as follows:
For the year ended 2015 2014 2013 2018 2017 2016
Stock options granted 8
 12
 18
 2
 8
 8
Weighted-average grant-date fair value per share $14.79
 $9.64
 $3.34
 $18.65
 $8.68
 $6.94
Average expected life in years 5.6
 4.9
 5.1
 5.5
 5.5
 5.5
Weighted-average expected volatility 45% 48% 59% 44% 46% 47%
Weighted-average risk-free interest rate 1.7% 1.6% 0.7% 2.2% 1.8% 1.7%
Expected dividend yield 0.0% 0.0% 0.0%

The expected volatilities utilized wereStock price volatility was based on an average of historical volatility and the implied volatilitiesvolatility derived from traded options on our stock and on our historical volatility.stock. The expected lives of options granted were based, in part, on historical experience and on the terms and conditions of the options. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at each grant date. No dividends were assumed in estimated option values.


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

As of September 3, 2015August 30, 2018, there were 1415 million shares of Restricted Stock Awards outstanding, of which 113 million were performance-based or market-based Restricted Stock Awards. contained only service conditions. For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth or one-third increments during each year of employment after the grant date. Vesting for performance-based awards is contingent upon meeting a specified returnRestrictions lapse on assets ("ROA"), as defined,Restricted Stock granted in 2018 with performance or market conditions over a three-year performancethree year period and vesting for market-based Restricted Stock Awards is contingent upon achieving total shareholder return ("TSR") relative to the companies included in the S&P 500 over a three-year performance period.if conditions are met. At the end of the performance period, the number of actual shares to be awarded varieswill vary between 0% and 200% of target amounts, depending upon the achievement level of the specified ROA or TSR.level. Restricted Stock Awards activity for 20152018 is summarized as follows:

 Number of Shares Weighted-Average Grant Date Fair Value Per Share Number of Shares Weighted-Average Grant Date Fair Value Per Share
Outstanding at August 28, 2014 13
 $15.08
Outstanding as of August 31, 2017 19
 $19.78
Granted 7
 32.60
 4
 42.48
Restrictions lapsed (5) 13.48
 (6) 21.70
Canceled (1) 19.81
 (2) 21.93
Outstanding at September 3, 2015 14
 23.88
    
Expected to vest after September 3, 2015 13
 $23.78
Outstanding as of August 30, 2018 15
 25.18



For the year ended 2015 2014 2013
Restricted stock awards granted 7
 7
 7
Weighted-average grant-date fair values per share $32.60
 $21.88
 $6.23
Aggregate fair values at vesting date 155
 115
 17
For the year ended 2018 2017 2016
Restricted stock award shares granted 4
 8
 10
Weighted-average grant-date fair value per share $42.48
 $18.77
 $15.40
Aggregate vesting-date fair value of shares vested $259
 $115
 $71

Employee Stock Purchase Plan

Our ESPP permits eligible employees to purchase shares of our common stock through payroll deductions of up to 10% of their eligible compensation, subject to certain limitations. The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of our common stock on either the first or last day of each six-month offering period. Our ESPP was offered to substantially all employees beginning in August 2018. Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees' purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period. Assumptions used in the Black-Scholes option valuation model for the offering period beginning August 1, 2018 were as follows:
Weighted-average grant-date fair value per share$14.55
Average expected life in years0.5
Weighted-average expected volatility43%
Weighted-average risk-free interest rate2.2%
Expected dividend yield0.0%

Stock-based Compensation Expense

For the year ended 2015 2014 2013 2018 2017 2016
Stock-based compensation expense by caption:      
Stock-based compensation expense by caption      
Cost of goods sold $65
 $39
 $27
 $83
 $88
 $76
Selling, general and administrative 60
 50
 45
Selling, general, and administrative 61
 75
 66
Research and development 42
 25
 18
 54
 52
 49
Other 1
 1
 1
 $168
 $115
 $91
 $198
 $215
 $191
            
Stock-based compensation expense by type of award:      
Stock-based compensation expense by type of award      
Stock options $81
 $61
 $57
 $55
 $71
 $79
Restricted stock awards 87
 54
 34
 140
 144
 112
ESPP 3
 —
 —
 $168
 $115
 $91
 $198
 $215
 $191

The income tax benefit related to share-based compensation was $158 million, $97 million and $41 million for 2018, 2017 and 2016, respectively. The income tax benefits related to share-based compensation for the periods presented prior to the second quarter of 2018 were offset by an increase in the U.S. valuation allowance. Stock-based compensation expense of $919 million and $920 million was capitalized and remained in inventory as of September 3, 2015August 30, 2018 and August 28, 201431, 2017, respectively. As of September 3, 2015August 30, 2018, $384316 million of total unrecognized compensation costs for unvested awards, netbefore the effect of estimatedany future forfeitures, was expected to be recognized through the fourth quarter of 2019,2022, resulting in a weighted-average period of 1.3 years.1.3 years. Stock-based compensation expense in the above presentation does not reflect any significant income tax benefits, which is consistent with our treatment of income or loss from our U.S. operations.




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Employee Benefit Plans

We have employee retirement plans at our U.S. and international sites. Details of the more significant plans are discussed as follows:

Employee Savings Plan for U.S. Employees

We have a 401(k) retirement plansplan under which U.S. employees may contribute up to 75% of their eligible pay (subject to IRSInternal Revenue Service ("IRS") annual contribution limits) to various savings alternatives, none of which include direct investment in our stock. We match in cash eligible contributions from employees up to 5% of the employee's annual eligible earnings. Contribution expense for the 401(k) plansplan was $5561 million, $4452 million, and $4154 million in 20152018, 20142017, and 20132016, respectively.

Retirement Plans

We have pension plans in various countries.  The pension plans are onlycountries available to local employees andwhich are generally government mandated. As of September 3, 2015,August 30, 2018, the projected benefit obligations of our plans was $132were $190 million and plan assets were $105$171 million. As of August 28, 2014,31, 2017, the projected benefit obligations of our plans was $164were $175 million and plan assets were $90$150 million. Pension expense was not significantmaterial for 2015, 2014,2018, 2017, or 2013.2016.


RestructureResearch and Asset ImpairmentsDevelopment

For the year ended 2015 2014 2013
Loss on impairment of LED assets $1
 $(6) $33
Loss on impairment of MIT assets —
 (5) 62
Gain on termination of lease to Transform —
 —
 (25)
Loss on restructure of ST Consortium agreement —
 —
 26
Other 2
 51
 30
  $3
 $40
 $126
We share the cost of certain product and process development activities with development partners. Our R&D expenses were reduced by reimbursements under these arrangements by $201 million, $213 million, and $205 million for 2018, 2017, and 2016, respectively.

We have agreements to jointly develop NAND and 3D XPoint technologies with Intel. We continue to jointly develop NAND technologies with Intel through the third generation of 3D NAND, which is expected to be completed in the second half of 2019. In the second quarter of 2018, we and Intel agreed to independently develop subsequent generations of 3D NAND in order to better optimize operations, improve efficiency,the technology and increaseproducts for our focus on our core memory operations, we have entered into various restructure activities. For 2014, our MBU and EBU operating segments recorded restructure and asset impairment chargesrespective business needs. We continue to jointly develop 3D XPoint technologies with Intel through the second generation of $21 million and $20 million, respectively. For 2013, restructure and asset impairment charges of $20 million, $14 million, $12 million, and $12 million were recognized by our SBU, EBU, MBU, and CNBU operating segments, respectively. The remaining restructure and asset impairment charges were recognized by our other segments that do not meet the thresholds of a reportable segment. As of September 3, 2015, we do not anticipate incurring any significant additional costs for these restructure activities.

For 2014 and 2013, other restructure included charges associated with workforce optimization activities and with our efforts3D XPoint technology, which is expected to wind down our 200mm operations primarily in Agrate, Italy and Kiryat Gat, Israel.

For 2013, we also recognized charges of $33 million primarily to impair certain production assets usedbe completed in the developmentsecond half of LED2019. To better optimize 3D XPoint technology $62 million to impairfor our product roadmap and maximize the assetsbenefits for our customers and shareholders, in the fourth quarter of MIT, a wholly-owned subsidiary, to their estimated fair values in connection2018, we announced that we will no longer jointly develop with the saleIntel subsequent generations of MIT to LFoundry, and $26 million in connection with the restructure of a consortium agreement with ST, whereby certain assets and approximately 500 employees from our Agrate, Italy fabrication facility were transferred to ST. For 2013, we also recognized a gain of $25 million related to the termination of a lease with Transform Solar Pty Ltd. ("Transform"), an equity method investee, to a portion of our manufacturing facilities in Boise, Idaho.3D XPoint technology.




80



Other Operating (Income) Expense, Net

For the year ended 2015 2014 2013 2018 2017 2016
(Gain) loss on disposition of property, plant and equipment $(17) $10
 $(3)
Rambus settlement —
 233
 —
(Gain) loss on disposition of property, plant, and equipment $(96) $(22) $(4)
Restructure and asset impairments 28
 18
 67
Other (28) (11) (5) 11
 5
 (2)
 $(45) $232
 $(8) $(57) $1
 $61

Restructure and asset impairments in 2018 primarily consisted of costs incurred as a result of our continued emphasis to centralize certain key functions. In December 2013,2017, we settled all pending litigation between usrecognized gains of $15 million related to our sale of assembly and Rambus, Inc., including all antitrusttest facility located in Akita, Japan and patent matters.our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets related to Lexar and also expect to recognize an additional gain of approximately $100 million in 2019 upon the completion of the sale of the Singapore facility. We also entered into a seven-year term patent cross-license agreement with Rambus, Inc. that allows usincurred charges of $33 million and $58 million in 2017 and 2016, respectively, related to avoid coststhe elimination of patent-related litigation during the term.  The primary benefits we received from these arrangements were (1) the settlementcertain projects and terminationprograms, workforce reductions in certain areas of all existing litigation, (2) the avoidance of future litigation expensesour business, and (3) the avoidance of future management and customer disruptions.  As a result, other operating expense for 2014 included a $233 million charge to accrue a liability, which reflects the discounted value of amounts due under this arrangement.non-headcount related spending reductions.




Other Non-Operating Income (Expense), Net

For the year ended 2015 2014 2013
Loss on restructure of debt $(49) $(184) $(31)
Gain (loss) from changes in currency exchange rates (27) (28) (229)
Gain from disposition of interest in Aptina 1
 119
 —
Gain from issuance of Inotera shares —
 93
 48
Other 22
 8
 (6)
  $(53) $8
 $(218)
For the year ended 2018 2017 2016
Loss on debt prepayments, repurchases, and conversions $(385) $(100) $(4)
Loss from changes in currency exchange rates (75) (74) (24)
Gain on remeasurement of previously-held equity interest in Inotera —
 71
 —
Other (5) (9) (26)
  $(465) $(112) $(54)


In 2016, we recognized other non-operating expense of $30 million to write off indemnification receivables upon the resolution of uncertain tax positions.

81



Income Taxes

For the year ended 2015 2014 2013
Income before income taxes, net income attributable to noncontrolling interests and equity in net income (loss) of equity method investees:      
Foreign $2,431
 $2,619
 $839
U.S. 178
 114
 446
  $2,609
 $2,733
 $1,285
       
Income tax (provision) benefit:      
Current:      
Foreign $(93) $(46) $(17)
State (1) (2) —
U.S. federal 6
 (3) —
  (88) (51) (17)
Deferred:      
Foreign (85) (81) 9
U.S. federal 15
 4
 —
State 1
 —
 —
  (69) (77) 9
Income tax (provision) benefit $(157) $(128) $(8)
On December 22, 2017, the United States enacted tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") which lowered 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. Our U.S. statutory federal rate was 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 will be 21% beginning in 2019. The Tax Act imposed a one-time transition tax in 2018 on accumulated foreign income (the "Repatriation Tax"); provided a U.S. federal tax exemption on foreign earnings distributed to the United States after January 1, 2018; and beginning in 2019, created 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 made an accounting policy election to treat the Foreign Minimum Tax provision as a period cost in the period the tax is incurred.

IncomeSEC 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 have not been completed when our financial statements are issued. The provisional amounts below for 2018 represent reasonable estimates of the effects of the Tax Act for which our analysis is not yet complete. As we complete our analysis of the Tax Act, including collecting, preparing, and analyzing necessary information, performing and refining calculations, and obtaining additional guidance from the IRS, U.S. Treasury Department, FASB, or other standard setting and regulatory bodies on the Tax Act, we may record adjustments to the provisional amounts, which may be material. In accordance with SAB 118, our accounting for the tax effects of the Tax Act will be completed during the measurement period, which should not extend beyond one year from the enactment date. At August 30, 2018, there were no provisions for which we were unable to record a reasonable estimate of the impact.



Our income tax (provision) benefit computed usingconsisted of the following:
For the year ended 2018 2017 2016
Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees      
U.S. $141
 $(56) $72
Foreign 14,166
 5,252
 (353)
  $14,307
 $5,196
 $(281)
       
Income tax (provision) benefit      
Current      
U.S. federal $(54) $—
 $—
State 1
 (1) (1)
Foreign (374) (152) (27)
  (427) (153) (28)
Deferred      
U.S. federal 232
 —
 39
State 101
 —
 2
Foreign (74) 39
 (32)
  259
 $39
 9
       
Income tax (provision) benefit $(168) $(114) $(19)

The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate reconciled to income tax (provision) benefit was as follows:

our effective rate:
For the year ended 2015 2014 2013 2018 2017 2016
U.S. federal income tax (provision) benefit at statutory rate $(913) $(956) $(450) $(3,677) 25.7 % $(1,819) 35.0 % $98
 35.0 %
Foreign tax rate differential 2,572
 (18.0)% 1,571
 (30.2)% (300) (106.8)%
Repatriation Tax related to the Tax Act (1,049) 7.3 % —
 — % —
 — %
Remeasurement of deferred tax assets and liabilities related to the Tax Act (179) 1.3 % —
 — % —
 — %
Change in valuation allowance 2,079
 (14.5)% 64
 (1.2)% 63
 22.4 %
Change in unrecognized tax benefits (118) (152) 2
 60
 (0.4)% 12
 (0.2)% 52
 18.5 %
Foreign tax rate differential 515
 474
 339
Change in valuation allowance 260
 544
 (418)
Noncontrolling investment transactions 57
 —
 —
Tax credits 53
 11
 36
 90
 (0.6)% 66
 (1.3)% 48
 17.1 %
State taxes, net of federal benefit 19
 (39) 6
Gain on MMJ Acquisition —
 (11) 520
Transaction costs related to the MMJ Acquisition —
 —
 (38)
Other (30) 1
 (5) (64) 0.4 % (8) 0.1 % 20
 7.0 %
Income tax (provision) benefit $(157) $(128) $(8) $(168) 1.2 % $(114) 2.2 % $(19) (6.8)%

We operateProvisional estimates for 2018 in the table above included $1.34 billion of benefit for the release of the valuation allowance on the net deferred tax jurisdictions, including Singaporeassets of our U.S. operations and Taiwan, where our earnings are indefinitely reinvested and are taxed at lower effective$1.03 billion of provision for the Repatriation Tax, net of adjustments related to uncertain tax rates than the U.S. statutory rate. positions.

We operate in a number of locationstax jurisdictions outside the U.S.,United States, including Singapore, and, to a lesser extent, Taiwan, where we have tax incentive agreementsarrangements, which expire in whole or in part at various dates through 2031, that are conditional, in part, conditional 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 for 2015, 2014, and 2013 by $338 million (benefitting$1.96 billion (benefiting our diluted earnings per share by $0.29), $286$1.59) for 2018, by $742 million ($0.240.64 per diluted share), for 2017, and $141 million ($0.13 per diluted share), respectively.were not material in 2016.


82Provision has been recognized for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such companies are expected to result in additional tax liabilities. As a result of the Repatriation Tax, substantially all of our accumulated foreign earnings prior to December 31, 2017 were subject to U.S. federal taxation. Although these earnings have been subject to U.S. federal income tax under the Repatriation Tax, the repatriation to the United States of all or a portion of these earnings would potentially be subject to foreign withholding and state income tax. As of August 30, 2018, we had a deferred tax liability of $82 million associated with our undistributed earnings. As of August 30,


2018, certain non-U.S. subsidiaries had cumulative undistributed earnings of $2.35 billion that were deemed to be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.

Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:

As of 2015 2014 2018 2017
Deferred tax assets:    
Deferred tax assets    
Net operating loss and tax credit carryforwards $2,869
 $3,162
 $1,417
 $3,426
Accrued salaries, wages and benefits 143
 152
Accrued salaries, wages, and benefits 163
 211
Other accrued liabilities 97
 113
 35
 59
Property, plant and equipment —
 284
Other 86
 104
 80
 86
Gross deferred tax assets 3,195
 3,815
 1,695
 3,782
Less valuation allowance (2,051) (2,443) (228) (2,321)
Deferred tax assets, net of valuation allowance 1,144
 1,372
 1,467
 1,461
        
Deferred tax liabilities:    
Deferred tax liabilities    
Debt discount (207) (291) (77) (145)
Property, plant, and equipment (173) (300)
Unremitted earnings on certain subsidiaries (162) (115) (82) (123)
Product and process technology (43) (29) (62) (85)
Other (57) (67) (54) (59)
Deferred tax liabilities (469) (502) (448) (712)
        
Net deferred tax assets $675
 $870
 $1,019
 $749
        
Reported as:    
Current deferred tax assets (included in other current assets) $104
 $228
Noncurrent deferred tax assets 597
 816
Current deferred tax liabilities (included in accounts payable and accrued expenses) (4) (4)
Noncurrent deferred tax liabilities (included in other noncurrent liabilities) (22) (170)
Reported as    
Deferred tax assets $1,022
 $766
Deferred tax liabilities (included in other noncurrent liabilities) (3) (17)
Net deferred tax assets $675
 $870
 $1,019
 $749

We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of September 3, 2015,August 30, 2018 and August 31, 2017, we had a valuation allowance of $1.16$28 million and $1.52 billion, respectively, against substantially all U.S. net deferred tax assets, primarily related to net operating loss and tax credit carryforwards. TheIncome taxes on U.S. operations for 2017 and 2016 were substantially offset by changes in the valuation allowance is based on our assessment of the deferred tax assets that are more likely than not to be realized. As of September 3, 2015, weallowance. We had partial valuation allowances of $710 million for Japan and $177 million for our other foreign subsidiaries against net deferred tax assets, primarily related to net operating loss carryforwards. As of September 3, 2015, we had $3.81 billion of net operating loss carryforwards, for our subsidiaries in Japan and for our other foreign subsidiaries, of which $2.19 billion is subject to a valuation allowance. Our$192 million and $8 million, respectively, as of August 30, 2018, and $627 million and $172 million, respectively, as of August 31, 2017. Changes in 2018 in the valuation allowance decreased $392 million in 2015 primarilywere due to the utilizationprovisional estimate for the release of the valuation allowance in the U.S. and foreign net operating losses as well asa result of the Tax Act, adjustments based on management's assessment of the amount of foreign net operating losses that are more likely than not to be realized.

Werealized, and changes in foreign currency. As a result of internal restructuring during the year, we have a full valuation allowance forconcluded that the possibility of utilizing certain of our net operating loss carryovers are now remote. As such, we have removed $119 million of deferred tax asset associatedassets that were previously fully reserved with our U.S. operations.  Management continues to evaluate future projected financial performance to determine whether such performance is sufficient evidence to support a reduction in or reversal of the valuation allowances. The amount of the deferred tax asset considered realizable could be adjusted if significant positive evidence increases. Income taxes on U.S. operations for 2015 and 2014 were substantially offset by changes in the valuation allowance.


83



As of September 3, 2015,August 30, 2018, our federal, state, and foreign net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Expiration U.S. Federal State Japan Other Foreign Total
2016 - 2020 $—
 $103
 $1,311
 $1,011
 $2,425
2021 - 2025 —
 265
 2,499
 294
 3,058
2026 - 2030 2,022
 1,028
 —
 —
 3,050
2031 - 2035 1,999
 652
 —
 —
 2,651
Indefinite —
 —
 —
 30
 30
  $4,021
 $2,048
 $3,810
 $1,335
 $11,214
Year of Expiration U.S. Federal State Japan Taiwan Other Foreign Total
2019 - 2023 $—
 $28
 $1,782
 $711
 $2
 $2,523
2024 - 2028 —
 136
 536
 3
 —
 675
2029 - 2033 —
 407
 —
 —
 —
 407
2034 - 2038 10
 84
 —
 —
 —
 94
Indefinite —
 1
 —
 622
 38
 661
  $10
 $656
 $2,318
 $1,336
 $40
 $4,360

As of September 3, 2015,August 30, 2018, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Tax Credit Expiration Federal State Total
2016 - 2020 $20
 $65
 $85
2021 - 2025 99
 43
 142
2026 - 2030 65
 61
 126
2031 - 2035 119
 —
 119
Indefinite —
 39
 39
  $303
 $208
 $511

We have not recognized deferred tax assets of $307 million for excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting. These excess stock compensation benefits will be credited to additional capital if realized. We use the "with and without" method, as described in ASC 740, for purposes of determining when excess tax benefits have been realized.

Provision has been made for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such companies are expected to result in additional tax liabilities.  Remaining undistributed earnings of $6.96 billion as of September 3, 2015 have been indefinitely reinvested; therefore, no provision has been made for taxes due on approximately $8.52 billion of the excess of the financial reporting amount over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested. Generally, this amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.
Year of Tax Credit Expiration U.S. Federal State Total
2019 - 2023 $122
 $63
 $185
2024 - 2028 44
 46
 90
2029 - 2033 69
 90
 159
2034 - 2038 275
 3
 278
Indefinite —
 62
 62
  $510
 $264
 $774

Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:

For the year ended 2015 2014 2013 2018 2017 2016
Beginning unrecognized tax benefits $228
 $78
 $77
 $327
 $304
 $351
Increases related to tax positions taken during current year 119
 152
 4
Increases related to tax positions from prior years 17
 —
 —
Increases due to the Inotera Acquisition —
 54
 —
Increases related to tax positions taken in current year 68
 15
 5
Foreign currency translation increases (decreases) to tax positions (6) 1
 4
 —
 2
 —
Lapse of statute of limitations (6) (1) —
Settlements with tax authorities (1) (1) (8) (8) (47) (47)
Expiration of statute of limitations —
 (1) (5)
Decreases related to tax positions from prior years —
 (1) —
 (126) —
 —
Unrecognized tax benefits acquired in current year —
 —
 1
Ending unrecognized tax benefits $351
 $228
 $78
 $261
 $327
 $304


84



IncludedThe changes in uncertain tax positions in 2018 are primarily related to the Tax Act and transfer pricing. In connection with the Inotera Acquisition in 2017, we assumed $54 million of uncertain tax positions. The decreases to unrecognized tax benefits balance asin 2017 and 2016 from settlements with tax authorities were primarily related to the favorable resolution of September 3, 2015,certain tax matters.

As of August 28, 2014, and August 29, 2013 were $5330, 2018, we had $256 million $66 million, and $63 million, respectively, of unrecognized income tax benefits whichthat would, if recognized, would affect our effective tax rate. The increase in unrecognized tax benefits in 2015 primarily related to transfer pricing and other matters which were substantially offset by changes in our deferred tax asset valuation allowance. We recognize interest and penalties related to income tax matters within income tax expense. As of September 3, 2015, August 28, 2014, and August 29, 2013, the amount accrued for interest and penalties related to uncertain tax positions was $16 million, $19 million, and $16 million, respectively.not material for any period presented. The resolution of tax audits or lapsesexpiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months ranges from $0 to $67 million, including interest and penalties.would not be material.

We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 20112014 through 2015.2018. In addition, tax returns that remain open to examination in multiple foreign taxing jurisdictionsJapan range from the years 20072012 to 2015.2018 and in Singapore and Taiwan from 2013 to 2018. We believe that adequate amounts of taxes and related interest and penalties have been provided, for, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.




Earnings Per Share

For the year ended 2015 2014 2013 2018 2017 2016
Net income available to Micron shareholders – Basic $2,899
 $3,045
 $1,190
Dilutive effect related to equity method investment (3) (2) —
Net income available to Micron shareholders – Diluted $2,896
 $3,043
 $1,190
Net income (loss) attributable to Micron – Basic and Diluted $14,135
 $5,089
 $(276)
            
Weighted-average common shares outstanding – Basic 1,070
 1,060
 1,022
 1,152
 1,089
 1,036
Dilutive effect of equity plans and convertible notes 100
 138
 35
 77
 65
 —
Weighted-average common shares outstanding – Diluted 1,170
 1,198
 1,057
 1,229
 1,154
 1,036
            
Earnings per share:      
Earnings (loss) per share      
Basic $2.71
 $2.87
 $1.16
 $12.27
 $4.67
 $(0.27)
Diluted 2.47
 2.54
 1.13
 11.51
 4.41
 (0.27)

Listed below are the potential common shares, as of the end of the periods shown, that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been antidilutive:

For the year ended 2015 2014 2013
Equity plans 18
 7
 40
Convertible notes 18
 26
 186

Our 2033 Notes and, to the extent our 2027 Notes and 2031 Notes were outstanding during the periods presented, contain terms that upon conversion require us to settle the aggregate principal amount in cash and the remainder of our conversion obligation amount in either shares of our common stock or cash, at our election. Our 2032 Notes and 2043 Notes, and, to the extent our 2014 Notes were outstanding during the periods presented, contain terms that upon conversion provide us the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due. It is our current intent to settle the principal amount of our 2032 Notes and 2043 Notes in cash upon conversion. As a result of these conversion terms and stated intent, the shares underlying the 2014 Notes, 2027 Notes, 2031 Notes, 2032 Notes, 2033 Notes, and 2043 Notes were considered in diluted earnings per share for the periods they were outstanding under the treasury stock method. (See "Debt" note.)
For the year ended 2018 2017 2016
Equity plans 3
 21
 60
Convertible notes —
 26
 119




85



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,cloud server, enterprise, client, graphics, and cloud servernetworking markets.
Mobile Business Unit ("MBU"):Includes memory products sold into smartphone tablet, and other mobile-device markets.
Storage Business Unit ("SBU"):Includes memory productsSSDs and component-level solutions sold into enterprise and cloud, client, cloud, and consumer SSD markets, other discrete storage products sold in component and wafer forms to the removable storage markets. SBU also includes products sold to Intel through our IMFT joint venture.markets, and sales of 3D XPoint memory.
Embedded Business Unit ("EBU"):Includes memory and storage 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 income and expenses (income) are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. The unallocated amount of operating expense for 2014 related to the Rambus settlement.

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. There are no differences in the accounting policies for segment reportingAs of August 30, 2018 and our consolidated resultsAugust 31, 2017, CNBU, MBU, SBU, and EBU had goodwill of operations.$832 million, $198 million, $101 million, and $97 million, respectively.


For the year ended 2015 2014 2013 2018 2017 2016
Net sales:      
Net sales      
CNBU $6,725
 $7,333
 $3,462
 $15,252
 $8,624
 $4,529
MBU 3,692
 3,627
 1,214
 6,579
 4,424
 2,569
SBU 3,687
 3,480
 2,824
 5,022
 4,514
 3,262
EBU 1,999
 1,774
 1,275
 3,479
 2,695
 1,939
All Other 89
 144
 298
 59
 65
 100
 $16,192
 $16,358
 $9,073
 $30,391
 $20,322
 $12,399
            
Operating income (loss):      
Operating income (loss)      
CNBU $1,481
 $1,957
 $160
 $9,773
 $3,755
 $(25)
MBU 1,126
 683
 (265) 3,033
 927
 97
SBU (89) 255
 173
 964
 552
 (123)
EBU 435
 331
 227
 1,473
 975
 473
All Other 45
 94
 (59) —
 23
 28
 $15,243
 $6,232
 $450
      
Unallocated —
 (233) —
      
Stock-based compensation $(198) $(215) $(191)
Restructure and asset impairments (28) (18) (67)
Flow-through of Inotera inventory step up —
 (107) —
Other (23) (24) (24)
 $2,998
 $3,087
 $236
 $(249) $(364) $(282)
      
Operating income $14,994

$5,868
 $168

Depreciation and amortization expense included in operating income was as follows:

For the year ended 2015 2014 2013 2018 2017 2016
CNBU $1,058
 $878
 $687
 $1,755
 $1,344
 $1,141
MBU 514
 475
 293
 1,077
 926
 580
SBU 765
 512
 551
 1,295
 1,083
 844
EBU 322
 226
 215
 603
 484
 379
All Other 10
 11
 67
 18
 13
 20
Depreciation and amortization expense included in operating income (loss) 2,669
 2,102
 1,813
Other amortization 136
 168
 113
Total depreciation and amortization expense $2,805
 $2,270
 $1,926
Unallocated 11
 11
 16
 $4,759
 $3,861
 $2,980


86




Product Sales

For the year ended 2015 2014 2013 2018 2017 2016
DRAM $10,339
 $11,164
 $4,361
 $21,232
 $12,963
 $7,207
Non-Volatile Memory 5,274
 4,468
 3,589
Trade NAND 7,843
 6,228
 4,138
Non-Trade 554
 553
 501
Other 579
 726
 1,123
 762
 578
 553
 $16,192
 $16,358
 $9,073
 $30,391
 $20,322
 $12,399

Non-Volatile Memory includesNon-Trade consists primarily of NAND Flash and 3D XPoint memory. Through 2015, substantially all of our Non-Volatile Memory sales were from NAND Flash products. Sales of NOR Flashmemory products are included in Other.manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost. Information regarding our MCP products whichthat combine both NAND Flash and DRAM components is reported within Non-Volatile Memory.Trade NAND. Other includes sales of NOR and trade 3D XPoint memory products.




Certain Concentrations

Markets with concentrations of net sales were approximately as follows:
For the year ended 2015 2014 2013 2018 2017 2016
Compute and graphics 25% 30% 20% 25% 20% 20%
Server 25% 15% 10%
Mobile 25% 20% 15% 20% 20% 20%
SSDs and other storage 20% 20% 25% 15% 20% 20%
Server 15% 10% 10%
Automotive, industrial, medical, and other embedded 10% 10% 15% 10% 15% 15%

Customer concentrations includedSales to Kingston Technology Company, Inc. ("Kingston"), as a percentage of total net sales, to Kingston of 11% for 2015 andwere 10% for 2014,2018 and 2017. Sales to Intel, including Non-Trade sales through IMFT, as a percentage of total net sales, to Intelwere 14% for 2016 and no other customer exceeded 10% of 10% for 2013, andour total net sales to HP of 10% for 2013. Substantially all of oursales. Our sales to Kingston were included in our CNBU, SBU, and SBUMBU segments and substantially all of our sales to Intel were included in our SBU segment, and substantially all of our sales to HP were included in our CNBU and SBU segments.

CertainWe generally have multiple sources of thesupply for our raw materials and production equipment we use in manufacturing semiconductor products are available from multiple sources and in sufficient supply;equipment; however, only a limited number of suppliers are capable of delivering certain raw materials and production equipment that meet our standards. Instandards and, in some cases, materials or production equipment are provided by a single supplier.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, money market accounts, certificates of deposit, fixed-rate debt securities, trade receivables, share repurchase, capped call, and derivative contracts. We invest through high-credit-quality financial institutions and, by policy, generally limit the concentration of credit exposure by restricting investments with any single obligor.obligor and monitoring credit risk of bank counterparties on an ongoing basis. A concentration of credit risk may exist with respect to receivables as a substantial portion of our customers are affiliated with the computing industry.certain customers. We perform ongoing credit evaluations of customers worldwide and generally do not require collateral from our customers. Historically, we have not experienced significantmaterial losses on receivables. A concentration of risk may also exist with respect to derivativesour foreign currency hedges as the number of counterparties to our currency hedges is limited and the notional amounts are relatively large. We seek to mitigate such risk by limiting our counterparties to major financial institutions and through entering into master netting arrangements. Capped callsShare repurchase and capped call agreements expose us to credit risk to the extent the counterparties may be unable to meet the terms of the agreements. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis.




87



Geographic Information

Geographic net sales based on customer ship-to location were as follows:

For the year ended 2015 2014 2013 2018 2017 2016
China $6,658
 $6,715
 $3,783
 $17,357
 $10,388
 $5,301
United States 2,565
 2,551
 1,512
 3,624
 2,763
 1,925
Taiwan 2,241
 2,313
 980
 2,798
 2,544
 1,521
Asia Pacific (excluding China, Taiwan, and Japan) 2,037
 1,791
 946
Other Asia Pacific 2,559
 1,808
 1,610
Europe 1,248
 1,252
 820
 2,128
 1,360
 937
Japan 1,026
 1,253
 589
 1,254
 1,025
 831
Other 417
 483
 443
 671
 434
 274
 $16,192
 $16,358
 $9,073
 $30,391
 $20,322
 $12,399



Net property, plant, and equipment by geographic area was as follows:

As of 2015 2014 2018 2017
Taiwan $7,640
 $6,519
Singapore 6,933
 5,261
United States $3,643
 $3,282
 5,113
 4,253
Singapore 3,238
 3,101
Japan 2,173
 1,221
 3,451
 2,827
Taiwan 1,073
 761
China 331
 242
 398
 453
Other 96
 75
 137
 118
 $10,554
 $8,682
 $23,672
 $19,431



88



Quarterly Financial Information (Unaudited)
(in millions except per share amounts)

2015 Fourth Quarter Third Quarter Second Quarter First Quarter
2018 Fourth Quarter Third Quarter Second Quarter First Quarter
Net sales $3,600
 $3,853
 $4,166
 $4,573
 $8,440
 $7,797
 $7,351
 $6,803
Gross margin 970
 1,202
 1,405
 1,638
 5,151
 4,723
 4,270
 3,747
Operating income 427
 631
 855
 1,085
 4,377
 3,953
 3,567
 3,097
Net income 471
 491
 935
 1,002
 4,326
 3,823
 3,311
 2,678
Net income attributable to Micron 471
 491
 934
 1,003
 4,325
 3,823
 3,309
 2,678
                
Earnings per share:  
  
  
  
Earnings per share        
Basic $0.44
 $0.46
 $0.87
 $0.94
 $3.73
 $3.30
 $2.86
 $2.36
Diluted 0.42
 0.42
 0.78
 0.84
 3.56
 3.10
 2.67
 2.19

Results of operations in the fourth, third, and first quarters of 2015 included losses of $1 million, $18 million, and $30 million, respectively, for losses on restructure of debt.

2014 Fourth Quarter Third Quarter Second Quarter First Quarter
2017 Fourth Quarter Third Quarter Second Quarter First Quarter
Net sales $4,227
 $3,982
 $4,107
 $4,042
 $6,138
 $5,566
 $4,648
 $3,970
Gross margin 1,385
 1,368
 1,403
 1,281
 3,112
 2,609
 1,704
 1,011
Operating income 828
 839
 869
 551
 2,502
 1,963
 1,044
 359
Net income 1,151
 806
 741
 381
 2,369
 1,647
 894
 180
Net income attributable to Micron 1,150
 806
 731
 358
 2,368
 1,647
 894
 180
                
Earnings per share:        
Earnings per share  
  
  
  
Basic $1.08
 $0.76
 $0.69
 $0.34
 $2.13
 $1.49
 $0.81
 $0.17
Diluted 0.96
 0.68
 0.61
 0.30
 1.99
 1.40
 0.77
 0.16

Results of operations for the first quarter of 2014 included a $233 million charge to accrue a liability for the settlement of all pending litigation between us and Rambus, including all antitrust and patent matters, which reflects the discounted value of amounts due under the arrangement.

Results of operations in the fourth, third, second, and first quarters of 2014 included losses of $17 million, $16 million, $80 million, and $92 million, respectively, for losses on restructure of debt.

Results of operations for the fourth quarter of 2014 included a gain of $93 million from the issuance of shares by Inotera, which reduced our ownership interest from 35% to 33%. (See "Equity Method Investments – Inotera" note.)

Results of operations for the fourth quarter of 2014 included a gain of $119 million from the sale of interest in Aptina to ON Semiconductor Corporation. (See "Equity Method Investments – Other" note.)

Results of operations for the fourth quarter of 2014 included a $66 million charge associated with a license agreement with Tessera executed in the fourth quarter of 2014.


89




Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors and Shareholders
of Micron Technology, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

In our opinion,We have audited the accompanying consolidated financial statements listed in the index appearing under Item 8 present fairly, in all material respects, the financial positionbalance sheets of Micron Technology, Inc. and its subsidiaries at September 3, 2015 as of August 30, 2018and August 28, 2014, 31, 2017,and the resultsrelated consolidatedstatements of their operations, comprehensive income (loss), changes in equity and their cash flows for each of the three years in the period ended September 3, 2015 August 30, 2018, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended August 30, 2018 appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements").We also have audited the Company's internal control over financial reporting as of August 30, 2018, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 30, 2018and August 31, 2017, and the results of their operations and theircash flows for each of the three years in the period ended August 30, 2018in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 8 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 3, 2015,August 30, 2018, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO.
Basis for Opinions

The Company's management is responsible for these consolidated financial statements, and financial statement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’sManagement's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on thesethe Company's consolidated financial statements on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidatedfinancial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Jose, California
October 15, 2018


San Jose, CA    We have served as the Company's auditor since 1984.
October 27, 2015

90



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.



ITEM 9A. 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 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.

During the fourth quarter of 2015,2018, 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.


Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "InternalInternal Control – Integrated Framework"Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of September 3, 2015.August 30, 2018. The effectiveness of our internal control over financial reporting as of September 3, 2015August 30, 2018 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in Part II, Item 8, of this Form 10-K.



ITEM 9B. OTHER INFORMATION


None.


91




PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE


ITEM 11. EXECUTIVE COMPENSATION


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


Certain information concerning our executive officers is included under the caption, "Directors and Executive Officers of the Registrant," in Part I, Item 1 of this report. Other information required by Items 10, 11, 12, 13, and 14 will be contained in our Proxy Statement which will be filed with the Securities and Exchange Commission within 120 days after September 3, 2015August 30, 2018 and is incorporated herein by reference.



92



PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a) The following documents are filed as part of this report:
1.Financial Statements:  See Index to Consolidated Financial Statements under Item 8.
2.
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts

Certain Financial Statement Schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
3.Exhibits.

Exhibit NumberDescription of Exhibit
2.1*English Translation of Agreement on Support for Reorganization Companies with Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and its wholly-owned subsidiary, Akita Elpida Memory, Inc. dated July 2, 2012 (3)
2.2*Share Purchase Agreement dated July 2, 2012, among Micron Technology, Inc., Micron Semiconductor B.V, Powerchip Technology Corporation, Li-Hsin Investment Co. Ltd., Quantum Vision Corporation, Maxchip Electronics Corporation and Dr. Frank Huang (4)
2.3*English Translation of Agreement Amending Agreement on Support for Reorganization Companies, dated October 29, 2012, by and among Micron Technology, Inc. and Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and Akita Elpida Memory, Inc. (5)
2.4*English Translation of Agreement Amending Agreement on Support for Reorganization Companies, dated July 31, 2013, by and among Micron Technology, Inc. and Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and Akita Elpida Memory, Inc. (6)
2.5English Translation of the Reorganization Plan of Elpida Memory, Inc. (6)
3.1Restated Certificate of Incorporation of the Registrant (7)
3.2Bylaws of the Registrant, Amended and Restated (31)
4.1Indenture dated November 3, 2010, by and between Micron Technology, Inc. and Wells Fargo Bank, National Association (9)
4.2Form of Note (included in Exhibit 4.1) (9)
4.3Indenture dated as of April 18, 2012, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 2.375% Convertible Senior Notes due 2032 (1)
4.4Indenture dated as of April 18, 2012, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 3.125% Convertible Senior Notes due 2032 (1)
4.5Form of 2032C Note (included in Exhibit 4.3) (1)
4.6Form of 2032D Note (included in Exhibit 4.4) (1)
4.7Indenture dated as of May 23, 2007, by and between Micron Technology, Inc. and Wells Fargo Bank, National Association, as trustee (10)
4.8Indenture dated July 26, 2011, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 1.50% Convertible Senior Notes due 2031 (11)
4.9Indenture dated July 26, 2011, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 1.875% Convertible Senior Notes due 2031 (11)
4.10Form of 2031A Note (included in Exhibit 4.8) (11)
4.11Form of 2031B Note (included in Exhibit 4.9) (11)
4.12Indenture, dated as of February 12, 2013, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee (2)
4.13Indenture, dated as of February 12, 2013, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee (2)
4.14Form of 2033E Note (included in Exhibit 4.12) (2)
4.15Form of 2033F Note (included in Exhibit 4.13) (2)
4.16Indenture, dated as of November 12, 2013, by and between Micron Technology, Inc. & U.S. Bank National Association (12)
4.17Form of New Note (included in Exhibit 4.16) (12)

93


SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in millions)

MICRON TECHNOLOGY, INC.

4.18Indenture dated as of December 16, 2013, by and among Micron Semiconductor Asia Pte., Ltd., Wells Fargo Bank, National Association, and Export-Import Bank of the United States (13)
4.19Indenture dated as of February 10, 2014, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee (14)
4.20Form of Note (included in Exhibit 4.19) (14)
4.21Indenture, dated as of July 28, 2014, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee (15)
4.22Form of Note (included in Exhibit 4.21) (15)
4.23Indenture, dated as of April 30, 2015, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee. (8)
4.24Indenture, dated as of April 30, 2015, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee. (8)
4.25Form of Note (included in Exhibit 4.23). (8)
4.26Form of Note (included in Exhibit 4.24). (8)
4.27Indenture, dated as of February 3, 2015, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee. (35)
4.28Form of Note (included in Exhibit 4.27). (35)
10.1Executive Officer Performance Incentive Plan, as Amended (34)
10.21997 Nonstatutory Stock Option Plan, as Amended (4)
10.31998 Nonstatutory Stock Option Plan, as Amended (4)
10.42001 Stock Option Plan, as Amended (4)
10.52001 Stock Option Plan Form of Agreement (17)
10.62004 Equity Incentive Plan, as Amended and Restated
10.72004 Equity Incentive Plan Forms of Agreement and Terms and Conditions
10.8Amended and Restated 2007 Equity Incentive Plan
10.92007 Equity Incentive Plan Forms of Agreement
10.10Nonstatutory Stock Option Plan, as Amended
10.11Nonstatutory Stock Option Plan Form of Agreement and Terms and Conditions
10.12Numonyx Holdings B.V. Equity Incentive Plan (18)
10.13Numonyx Holdings B.V. Equity Incentive Plan Forms of Agreement (18)
10.14*Patent License Agreement dated September 15, 2006, by and among Toshiba Corporation, Acclaim Innovations, LLC and Micron Technology, Inc. (19)
10.15Form of Indemnification Agreement between the Registrant and its officers and directors (13)
10.16*Master Agreement dated as of November 18, 2005, between Micron Technology, Inc. and Intel Corporation (20)
10.17*Supply Agreement dated as of January 6, 2006, between Intel Corporation and IM Flash Technologies, LLC (20)
10.18Form of Severance Agreement (21)
10.19Share Purchase Agreement by and among Micron Technology, Inc. as the Buyer Parent, Micron Semiconductor B.V., as the Buyer, Qimonda Ag as the Seller Parent and Qimonda Holding B.V., as the Seller Sub dated as of October 11, 2008 (16)
10.20Form of Capped Call Confirmation dated as of July 20, 2011, between Micron Technology, Inc. and Société Genérale (22)
10.21Form of Capped Call Confirmation dated as of July 22, 2011 (22)
10.22*2012 Master Agreement by and among Intel Corporation, Intel Technology Asia PTE LTD, Micron Technology, Inc., Micron Semiconductor Asia PTE LTD, IM Flash Technologies, LLC and IM Flash Singapore, LLP dated February 27, 2012 (23)
10.23*Second Amended and Restated Limited Liability Company Operating Agreement of IM Flash Technologies, LLC dated April 6, 2012, between Micron Technology, Inc. and Intel Corporation (24)
10.24*Amendment to the Master Agreement dated April 6, 2012, between Intel Corporation and Micron Technology, Inc. (24)
10.25*Amended and Restated Supply Agreement dated April 6, 2012, between Intel Corporation and IM Flash Technologies, LLC (24)
10.26*Amended and Restated Supply Agreement dated April 6, 2012, between Micron Technology, Inc. and IM Flash Technologies, LLC (24)
 
Balance at
Beginning of
Year
 Business Acquisitions 
Charged
(Credited) to
Income Tax
Provision
 
Currency
Translation
and Charges
to Other
Accounts
 
Balance at
End of
Year
Deferred Tax Asset Valuation Allowance 
  
  
  
  
Year ended August 30, 2018$2,321
 $—
 $(2,079) $(14) $228
Year ended August 31, 20172,107
 —
 (64) 278
 2,321
Year ended September 1, 20162,051
 10
 (63) 109
 2,107

94Amounts charged to other accounts for the year ended August 31, 2017 includes $325 million as a result of the adoption of ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting.


3. Exhibits.

10.27*Product Supply Agreement dated April 6, 2012, among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia PTE LTD (24)
10.28*Wafer Supply Agreement dated April 6, 2012, among Micron Technology, Inc., Intel Corporation and Micron Singapore (24)
10.29Form of Capped Call Confirmation dated April 2012 (1)
10.30*Supply Agreement, dated January 17, 2013, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc. (25)
10.31*Joint Venture Agreement, dated January 17, 2013, by and among Micron Semiconductor B.V., Numonyx Holdings B.V., Micron Technology Asia Pacific, Inc. and Nanya Technology Corporation (25)
10.32*Facilitation Agreement, dated January 17, 2013, by and among Micron Semiconductor B.V., Numonyx Holdings B.V., Micron Technology Asia Pacific, Inc., Nanya Technology Corporation and Inotera Memories, Inc. (25)
10.33Micron Guaranty Agreement, dated January 17, 2013, by Micron Technology, Inc. in favor of Nanya Technology Corporation (25)
10.34*Technology Transfer and License Option Agreement for 20NM Process Node, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation (26)
10.35*Omnibus IP Agreement, dated January 17, 2013, by and between Nanya Technology Corporation and Micron Technology, Inc. (25)
10.36*Second Amended and Restated Technology Transfer and License Agreement for 68-50NM Process Nodes, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation (26)
10.37*Third Amended and Restated Technology Transfer and License Agreement, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation (25)
10.38*Omnibus IP Agreement, dated January 17, 2013, by and between Micron Technology, Inc. and Inotera Currency Option Transaction 590297603-2 Trade Date March 26, 2013, by and between Micron Technology, Inc. and Deutsche Bank AG, London Branch (25)
10.39*English Translation of Front-End Manufacturing Supply Agreement, dated July 31, 2013, by and between Micron Semiconductor Asia Pte. Ltd. and Elpida Memory, Inc. (27)
10.40*English Translation of Research and Development Engineering Services Agreement, dated July 31, 2013, by and between Micron Technology, Inc. and Elpida Memory, Inc. (6)
10.41*English Translation of General Services Agreement, dated July 31, 2013, by and between Micron Semiconductor Asia Pte. Ltd. and Elpida Memory, Inc. (27)
10.42Form of Capped Call Confirmation dated February 2013 (2)
10.43Purchase Agreement, dated as of February 5, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers (28)
10.44Registration Rights Agreement, dated as of February 10, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers (14)
10.45Purchase Agreement, dated as of July 23, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers (29)
10.46Registration Rights Agreement dated as of July 28, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers (15)
10.47Credit Agreement dated as of December 2, 2014 among Micron Technology, Inc. and Micron Semiconductor Products, Inc., as Borrowers, HSBC Bank USA, N.A., as Administrative Agent, Co-Collateral Agent, Joint Lead Arranger and Joint Book Runner, JPMorgan Chase Bank, N.A., as Co-Collateral Agent and Syndication Agent, J.P. Morgan Securities LLC, as Joint Lead Arranger and Joint Book Runner, Bank of America, N.A., Citigroup Global Markets,�� Inc. and Wells Fargo Bank, N.A., as Joint Book Runners and Co-Documentation Agents, and certain financial institutions, as lenders. (30)
10.48Facility Agreement, dated February 12, 2015, among Micron Semiconductor Asia Pte. Ltd., as borrower, certain financial institutions party thereto, and The Hongkong and Shanghai Banking Corporation Limited, as facility agent, security agent and account bank. (32)
10.49*2015 Supply Agreement, dated February 10, 2015, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc. (33)
10.50*2016 Supply Agreement, dated February 10, 2015, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc. (33)
10.51*Amended and Restated Supply Agreement, dated September 1, 2015, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.

95



10.52*Supplemental Supply Agreement, dated September 1, 2015, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.53*Wafer Supply Agreement No. 3, dated September 1, 2015, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.54*First Amendment to the Wafer Supply Agreement, dated September 1, 2015, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
10.55Purchase Agreement, dated as of April 27, 2015, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers. (8)
21.1Subsidiaries of the Registrant
23.1Consent of Independent Registered Public Accounting Firm
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
Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
2.1*
English Translation of Agreement on Support for Reorganization Companies with Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and its wholly-owned subsidiary, Akita Elpida Memory, Inc. dated July 2, 2012
 8-K/A 2.110/31/12
2.2*
English Translation of Agreement Amending Agreement on Support for Reorganization Companies, dated October 29, 2012, by and among Micron Technology, Inc. and Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and Akita Elpida Memory, Inc.
 8-K 2.310/31/12
2.3*
English Translation of Agreement Amending Agreement on Support for Reorganization Companies, dated July 31, 2013, by and among Micron Technology, Inc. and Nobuaki Kobayashi and Yukio Sakamoto, the trustees of Elpida Memory, Inc. and Akita Elpida Memory, Inc.
 8-K 2.48/6/13
2.4
English Translation of the Reorganization Plan of Elpida Memory, Inc.
 8-K 2.58/6/13
2.5
2016 Share Swap Agreement, dated February 3, 2016 by and among Micron Technology B.V., Micron Semiconductor Taiwan Co. Ltd. and Inotera Memories, Inc.
 10-Q3/3/162.64/8/16
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
4.1
Indenture dated as of April 18, 2012, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 2.375% Convertible Senior Notes due 2032
 8-K 4.14/18/12
4.2
Indenture dated as of April 18, 2012, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee for 3.125% Convertible Senior Notes due 2032
 8-K 4.34/18/12
4.3
Form of 2032C Note (included in Exhibit 4.1)
 8-K 4.14/18/12
4.4
Form of 2032D Note (included in Exhibit 4.2)
 8-K 4.34/18/12
4.5
Indenture, dated as of February 12, 2013, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee
 8-K 4.12/12/13
4.6
Indenture, dated as of February 12, 2013, by and between Micron Technology, Inc. and U.S. Bank National Association, as trustee
 8-K 4.32/12/13
4.7
Form of 2033E Note (included in Exhibit 4.5)
 8-K 4.12/12/13
4.8
Form of 2033F Note (included in Exhibit 4.6)
 8-K 4.32/12/13
4.9
Indenture, dated as of November 12, 2013, by and between Micron Technology, Inc. & U.S. Bank National Association
 8-K 4.111/18/13
4.10
Form of New Note (included in Exhibit 4.9)
 8-K 4.111/18/13
4.11
Indenture dated as of December 16, 2013, by and among Micron Semiconductor Asia Pte., Ltd., Wells Fargo Bank, National Association, and Export-Import Bank of the United States
 10-Q2/27/144.34/7/14
4.12
Indenture, dated as of July 28, 2014, by and between Micron Technology, Inc. and U.S. Bank National Association, as Trustee
 8-K 4.17/29/14
4.13
Form of Note (included in Exhibit 4.12)
 8-K 4.17/29/14
4.14
Section 382 Rights Agreement, dated as of July 20, 2016 by and between Micron Technology, Inc. and Wells Fargo Bank, National Association, as rights agent
 8-K 4.17/22/16



96
Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
10.1
Micron Technology, Inc. Executive Officer Performance Incentive Plan
 DEF 14A B12/7/17
10.2
2004 Equity Incentive Plan, as Amended and Restated
 10-K9/1/1610.610/28/16
10.3
2004 Equity Incentive Plan Forms of Agreement and Terms and Conditions
 10-K9/1/1610.710/28/16
10.4
Amended and Restated 2007 Equity Incentive Plan
 10-K9/1/1610.810/28/16
10.5
2007 Equity Incentive Plan Forms of Agreement
 10-K9/1/1610.910/28/16
10.6
Nonstatutory Stock Option Plan, as Amended
 10-K9/1/1610.1010/28/16
10.7
Nonstatutory Stock Option Plan Form of Agreement and Terms and Conditions
 10-K9/1/1610.1110/28/16
10.8
Numonyx Holdings B.V. Equity Incentive Plan
 S-8 4.16/16/10
10.9
Numonyx Holdings B.V. Equity Incentive Plan Forms of Agreement
 S-8 4.26/16/10
10.10*
Patent License Agreement dated September 15, 2006, by and among Toshiba Corporation, Acclaim Innovations, LLC and Micron Technology, Inc.
 10-Q11/30/0610.661/16/07
10.11
Form of Indemnification Agreement between the Registrant and its officers and directors
 10-Q2/27/1410.34/7/14
10.12*
Master Agreement dated as of November 18, 2005, between Micron Technology, Inc. and Intel Corporation
 10-Q12/1/0510.1551/10/06
10.13
Form of Severance Agreement
 8-K 99.211/1/07
10.14
Share Purchase Agreement by and among Micron Technology, Inc. as the Buyer Parent, Micron Semiconductor B.V., as the Buyer, Qimonda Ag as the Seller Parent and Qimonda Holding B.V., as the Seller Sub dated as of October 11, 2008
 10-Q12/4/0810.701/13/09
10.15*
2012 Master Agreement by and among Intel Corporation, Intel Technology Asia PTE LTD, Micron Technology, Inc., Micron Semiconductor Asia PTE LTD, IM Flash Technologies, LLC and IM Flash Singapore, LLP dated February 27, 2012
 10-Q3/1/1210.1044/9/12
10.16*
Second Amended and Restated Limited Liability Company Operating Agreement of IM Flash Technologies, LLC dated April 6, 2012, between Micron Technology, Inc. and Intel Corporation
 10-Q5/31/1210.1087/9/12
10.17*
Amendment to the Master Agreement dated April 6, 2012, between Intel Corporation and Micron Technology, Inc.
 10-Q5/31/1210.1097/9/12
10.18*
Amended and Restated Supply Agreement dated April 6, 2012, between Intel Corporation and IM Flash Technologies, LLC
 10-Q5/31/1210.1107/9/12
10.19*
Amended and Restated Supply Agreement dated April 6, 2012, between Micron Technology, Inc. and IM Flash Technologies, LLC
 10-Q5/31/1210.1117/9/12
10.20*
Product Supply Agreement dated April 6, 2012, among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd. 
 10-Q5/31/1210.1127/9/12
10.21*
Wafer Supply Agreement dated April 6, 2012, among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
 10-Q5/31/1210.1137/9/12
10.22
Form of Capped Call Confirmation dated April 2012
 8-K 10.14/18/12
10.23*
Supply Agreement, dated January 17, 2013, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc.
 10-Q2/28/1310.1224/8/13


Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
10.24*
Facilitation Agreement, dated January 17, 2013, by and among Micron Semiconductor B.V., Numonyx Holdings B.V., Micron Technology Asia Pacific, Inc., Nanya Technology Corporation and Inotera Memories, Inc.
 10-Q2/28/1310.1244/8/13
10.25
Micron Guaranty Agreement, dated January 17, 2013, by Micron Technology, Inc. in favor of Nanya Technology Corporation
 10-Q2/28/1310.1254/8/13
10.26*
Technology Transfer and License Option Agreement for 20NM Process Node, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation
 10-Q/A2/28/1310.1268/7/13
10.27*
Omnibus IP Agreement, dated January 17, 2013, by and between Nanya Technology Corporation and Micron Technology, Inc.
 10-Q2/28/1310.1274/8/13
10.28*
Second Amended and Restated Technology Transfer and License Agreement for 68-50NM Process Nodes, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation
 10-Q/A2/28/1310.1288/7/13
10.29*
Third Amended and Restated Technology Transfer and License Agreement, dated January 17, 2013, by and between Micron Technology, Inc. and Nanya Technology Corporation
 10-Q2/28/1310.1294/8/13
10.30*
Omnibus IP Agreement, dated January 17, 2013, by and between Micron Technology, Inc. and Inotera Memories, Inc.
 10-Q2/28/1310.1304/8/13
10.31*
English Translation of Front-End Manufacturing Supply Agreement, dated July 31, 2013, by and between Micron Semiconductor Asia Pte. Ltd. and Elpida Memory, Inc.
 8-K/A 10.13910/2/13
10.32*
English Translation of Research and Development Engineering Services Agreement, dated July 31, 2013, by and between Micron Technology, Inc. and Elpida Memory, Inc.
 8-K 10.1408/6/13
10.33*
English Translation of General Services Agreement, dated July 31, 2013, by and between Micron Semiconductor Asia Pte. Ltd. and Elpida Memory, Inc.
 8-K/A 10.14110/2/13
10.34
Form of Capped Call Confirmation dated February 2013
 8-K 10.12/12/13
10.35
Purchase Agreement, dated as of February 5, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers
 8-K 10.12/7/14
10.36
Purchase Agreement, dated as of July 23, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers
 8-K 10.17/24/14
10.37
Registration Rights Agreement dated as of July 28, 2014, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers
 8-K 10.17/29/14
10.38
Facility Agreement, dated February 12, 2015, among Micron Semiconductor Asia Pte. Ltd., as borrower, certain financial institutions party thereto, and The Hongkong and Shanghai Banking Corporation Limited, as facility agent, security agent and account bank
 10-Q3/5/1510.884/10/15
10.39*
2015 Supply Agreement, dated February 10, 2015, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc. 
 10-Q3/5/1510.904/10/15
10.40*
2016 Supply Agreement, dated February 10, 2015, by and among Micron Technology, Inc., Micron Semiconductor Asia Pte. Ltd. and Inotera Memories, Inc.
 10-Q3/5/1510.914/10/15
10.41*
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-Q3/2/1710.493/28/17

__________________________
(1)Incorporated by reference to Current Report on Form 8-K dated April 12, 2012
(2)Incorporated by reference to Current Report on Form 8-K dated February 6, 2013
(3)Incorporated by reference to Current Report on Form 8-K/A dated July 2, 2012, and filed October 31, 2012
(4)Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended August 30, 2012
(5)Incorporated by reference to Current Report on Form 8-K dated October 29, 2012
(6)Incorporated by reference to Current Report on Form 8-K dated July 31, 2013
(7)Incorporated by reference to Current Report on Form 8-K dated January 26, 2015
(8)Incorporated by reference to Current Report on Form 8-K dated April 30, 2015
(9)Incorporated by reference to Current Report on Form 8-K dated November 3, 2010
(10)Incorporated by reference to Current Report on Form 8-K dated May 17, 2007
(11)Incorporated by reference to Current Report on Form 8-K dated July 26, 2011
(12)Incorporated by reference to Current Report on Form 8-K dated November 12, 2013
(13)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended February 27, 2014
(14)Incorporated by reference to Current Report on Form 8-K dated February 10, 2014
(15)Incorporated by reference to Current Report on Form 8-K dated July 28, 2014
(16)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended December 4, 2008
(17)Incorporated by reference to Current Report on Form 8-K dated April 3, 2005
(18)Incorporated by reference to Registration Statement on Form S-8 (Reg. No. 333-167536)
(19)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2006
(20)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended December 1, 2005
(21)Incorporated by reference to Current Report on Form 8-K dated October 26, 2007
(22)Incorporated by reference to Annual Report on Form 10-K for the fiscal year ended September 1, 2011
(23)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended March 1, 2012
(24)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2012
(25)Incorporated by reference to Quarterly Report on Form 10-Q for the fiscal quarter ended March 5, 2015
(26)Incorporated by reference to Quarterly Report on Form 10-Q/A Amendment 2 for the fiscal quarter ended February 28, 2013
(27)Incorporated by reference to Current Report on Form 8-K/A dated July 31, 2013, and filed October 2, 2013
(28)Incorporated by reference to Current Report on Form 8-K dated February 5, 2014
(29)Incorporated by reference to Current Report on Form 8-K dated July 23, 2014
(30)Incorporated by reference to Current Report on Form 8-K dated December 8, 2014
(31)Incorporated by reference to Current Report on Form 8-K dated April 9, 2014
(32)Incorporated by reference to Current Report on Form 8-K dated February 12, 2015
(33)Incorporated by reference to Current Report on Form 8-K dated February 10, 2015
(34)Incorporated by reference to Definitive Proxy Statement on Form DEF 14A filed on December 12, 2014
(35)Incorporated by reference to Current Report on Form 8-K dated February 3, 2015
Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
10.42*
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-Q3/2/1710.503/28/17
10.43*
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-Q3/2/1710.513/28/17
10.44*
First Amendment to the Wafer Supply Agreement, dated September 1, 2015, by and among Micron Technology, Inc., Intel Corporation and Micron Semiconductor Asia Pte. Ltd.
 10-K9/3/1510.5410/27/15
10.45
Purchase Agreement, dated as of April 27, 2015, by and among Micron Technology, Inc. and Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers
 8-K 10.14/30/15
10.46*
2016 Technology Transfer and License Option Agreement for 1X Process Node dated as of February 3, 2016 by and between Micron Technology, Inc. and Nanya Technology Corporation
 10-Q/A3/3/1610.569/8/16
10.47*
2016 Technology Transfer and License Option Agreement for 1Y Process Node dated as of February 3, 2016 by and between Micron Technology, Inc. and Nanya Technology Corporation
 10-Q/A3/3/1610.579/8/16
10.48
Form of Voting and Support Agreement by and among Micron Technology B.V., Micron Semiconductor Taiwan Co. Ltd., and Nanya Technology Corporation and certain of its affiliates
 10-Q3/3/1610.584/8/16
10.49
2016 First Amendment to the Second Amended and Restated Operating Agreement dated January 5, 2016 by and among Micron Technology, Inc. and Intel Corporation
 10-Q3/3/1610.594/8/16
10.50*
Amendment to Technology Transfer and License Option Agreement for 1X Process Node dated as of May 17, 2016 by and between Micron Technology Inc. and Nanya Technology Corporation
 10-Q6/2/1610.607/6/16
10.51*
Amendment to Technology Transfer and License Option Agreement for 1Y Process Node dated as of May 17, 2016 by and between Micron Technology Inc. and Nanya Technology Corporation
 10-Q6/2/1610.617/6/16
10.52
Credit Agreement, dated as of April 26, 2016, by and among Micron Technology, Inc., as borrower, Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
 8-K 10.24/26/16
10.53
Guarantee and Collateral Agreement, dated as of April 26, 2016, made by Micron Technology, Inc. and certain of its subsidiaries in favor of Morgan Stanley Senior Funding, Inc., as collateral agent
 8-K 10.34/26/16
10.54
Deferred Compensation Plan
 10-Q5/31/1810.646/22/18
10.55
First Amendment to the Credit Agreement, dated April 26, 2016, by and among Micron Technology, Inc., as borrower, Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
 10-Q12/1/1610.651/9/17
10.56
English translation of Facility Agreement dated November 18, 2016, by and among Micron Semiconductor Asia Capital II Pte. Ltd., certain financial institutions party thereto and DBS Bank Ltd., as Facility Agent, Security Agent and Account Bank
 10-Q12/1/1610.661/9/17
10.57
Executive Agreement dated April 26, 2017 by and between Micron Technology, Inc. and Sanjay Mehrotra
 10-Q6/1/1710.676/30/17


Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
10.58
Second Amendment to the Credit Agreement, dated April 26, 2016, by and among Micron Technology, Inc., as borrower, Morgan Stanley Senior Funding, Inc. as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
 10-Q6/1/1710.686/30/17
10.59
Severance Benefits for Sumit Sadana
 10-Q11/30/1710.7012/20/17
10.60
Second Amendment to the Amended and Restated Severance Agreement effective July 24, 2017 by and between Micron Technology, Inc. and D. Mark Durcan
 10-K8/31/1710.7110/26/17
10.61
Form of Amendment to Executive/Severance Agreement
 8-K 99.111/13/17
10.62
Third Amendment to the Credit Agreement, dated April 26, 2016, by and among Micron Technology, Inc., as borrower, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
 10-Q11/30/1710.7312/20/17
10.63
Severance Benefits for Manish Bhatia
 10-Q11/30/1710.7412/20/17
10.64
Underwriting Agreement, dated as of October 11, 2017, by and between Micron Technology, Inc. and J.P. Morgan Securities LLC
 8-K 1.110/16/17
10.65
Micron Technology, Inc. Employee Stock Purchase Plan
 DEF 14A A12/7/17
10.66
Severance Benefits for David A. Zinsner
 10-Q3/1/1810.763/23/18
10.67
Fourth Amendment to the Credit Agreement, dated April 26, 2016, by and among Micron Technology, Inc., as borrower, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
 10-Q5/31/1810.776/22/18
10.68
Credit Agreement, dated as of July 3, 2018, by and among Micron Technology, Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents party thereto and each financial institution party from time to time thereto
X    
10.69
Guarantee and Collateral Agreement, dated as of July 3, 2018, made by Micron Technology, Inc. and certain of its subsidiaries in favor of JPMorgan Chase Bank, N.A., as collateral agent
X    
21.1
Subsidiaries of the Registrant
X    
23.1
Consent of Independent Registered Public Accounting Firm
X    
31.1
Rule 13a-14(a) Certification of Chief Executive Officer
X    
31.2
Rule 13a-14(a) Certification of Chief Financial Officer
X    
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
X    
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
X    
101.INSXBRL Instance DocumentX    
101.SCHXBRL Taxonomy Extension Schema DocumentX    
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentX    
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentX    
101.LABXBRL Taxonomy Extension Label Linkbase DocumentX    
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentX    

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.


97


ITEM 16. 10-K SUMMARY

None.




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Boise, State of Idaho, on the 27th15th day of October 20152018.
 Micron Technology, Inc.
 By:/s/ Ernest E. MaddockDavid A. Zinsner
  
Ernest E. MaddockDavid A. Zinsner
Senior Vice President and Chief Financial Officer and Vice President, Finance
  (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SignatureTitleDate
   
/s/ D. Mark DurcanSanjay MehrotraPresident andOctober 15, 2018
(Sanjay Mehrotra)Chief Executive Officer andOctober 27, 2015
(D. Mark Durcan)Director
(Principal Executive Officer) 
   
/s/ Ernest E. MaddockDavid A. ZinsnerSenior Vice President andOctober 15, 2018
(David A. Zinsner)Chief Financial Officer andOctober 27, 2015
(Ernest E. Maddock)Vice President, Finance 
 (Principal Financial and 
 Accounting Officer) 
   
/s/ Robert L. BaileyDirectorOctober 27, 201515, 2018
(Robert L. Bailey)  
   
   
/s/ Richard M. BeyerDirectorOctober 27, 201515, 2018
(Richard M. Beyer)  
   
   
/s/ Patrick J. ByrneDirectorOctober 27, 201515, 2018
(Patrick J. Byrne)  
   
   
/s/ Warren EastDirectorOctober 27, 2015
(Warren East)
/s/ Mercedes JohnsonDirectorOctober 27, 201515, 2018
(Mercedes Johnson)  
   
   
/s/ Lawrence N. MondryDirectorOctober 27, 201515, 2018
(Lawrence N. Mondry)  
   
   
/s/ Robert E. SwitzChairman of the BoardOctober 27, 201515, 2018
(Robert E. Switz)Director 

98



SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

MICRON TECHNOLOGY, INC.
(Parent Company Only)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions)

92
For the year ended September 3,
2015		 August 28,
2014		 August 29,
2013
Net sales $5,547
 $5,819
 $4,404
Cost of goods sold 3,329
 3,514
 3,721
Gross margin 2,218
 2,305
 683
       
Selling, general and administrative 299
 264
 238
Research and development 1,483
 1,389
 921
Other operating (income) expense, net (12) 251
 77
Operating income (loss) 448
 401
 (553)
       
Gain on MMJ Acquisition —
 (33) 1,484
Interest income (expense), net (273) (209) (189)
Other non-operating income (expense), net (85) (86) (248)
  90
 73
 494
       
Income tax (provision) benefit 38
 18
 (1)
Equity in earnings (loss) of subsidiaries 2,773
 2,956
 703
Equity in net loss of equity method investees (2) (2) (6)
Net income attributable to Micron 2,899
 3,045
 1,190
Other comprehensive income (loss) (43) (7) (17)
Comprehensive income attributable to Micron $2,856
 $3,038
 $1,173






















See accompanying notes to condensed financial statements.

99



SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

MICRON TECHNOLOGY, INC.
(Parent Company Only)

CONDENSED BALANCE SHEETS
(in millions except par value amounts)
As of September 3,
2015		 August 28,
2014
Assets    
Cash and equivalents $721
 $1,249
Short-term investments 479
 384
Receivables 133
 114
Notes and accounts receivable from subsidiaries 1,091
 1,767
Finished goods 77
 84
Work in process 321
 228
Raw materials and supplies 86
 68
Other current assets 82
 215
Total current assets 2,990
 4,109
Investment in subsidiaries 13,051
 10,149
Long-term marketable investments 932
 819
Noncurrent notes receivable from and prepaid expenses to subsidiaries 163
 111
Property, plant and equipment, net 1,679
 1,519
Equity method investments —
 9
Other noncurrent assets 488
 543
Total assets $19,303
 $17,259
     
Liabilities and equity    
Accounts payable and accrued expenses $677
 $766
Short-term debt and accounts payable to subsidiaries 384
 619
Current debt 655
 1,065
Other current liabilities 8
 30
Total current liabilities 1,724
 2,480
Long-term debt 4,797
 3,191
Other noncurrent liabilities 431
 760
Total liabilities 6,952
 6,431
     
Commitments and contingencies 

 

     
Redeemable convertible notes 49
 68
     
Micron shareholders' equity:    
Common stock, $0.10 par value, 3,000 shares authorized, 1,084 shares issued and outstanding (1,073 as of August 28, 2014) 108
 107
Other equity 12,194
 10,653
Total Micron shareholders' equity 12,302
 10,760
Total liabilities and equity $19,303
 $17,259



See accompanying notes to condensed financial statements.

100



SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

MICRON TECHNOLOGY, INC.
(Parent Company Only)

CONDENSED STATEMENTS OF CASH FLOWS
(in millions)

For the year ended September 3,
2015		 August 28,
2014		 August 29,
2013
Net cash (used for) provided by operating activities $996
 $888
 $(347)
       
Cash flows from investing activities      
Purchases of available-for-sale securities (1,799) (1,047) (924)
Expenditures for property, plant, and equipment (609) (392) (350)
Cash contributions to subsidiaries (151) (121) (23)
Payments to settle hedging activities (135) (27) (256)
Cash paid for acquisitions (57) —
 (596)
Expenditures for intangible assets (42) (43) (34)
Proceeds from sales and maturities of available-for-sale securities 1,581
 557
 678
Proceeds from settlement of hedging activities 78
 23
 38
Proceeds from repayment of loans to subsidiaries, net 65
 379
 851
Cash distributions from subsidiaries 33
 227
 38
Proceeds from sales of property, plant, and equipment 19
 45
 38
Proceeds from receipt of loan payments 10
 56
 —
Cash received from disposition of interest in Aptina 1
 105
 —
Other 5
 7
 (36)
Net cash provided by (used for) investing activities (1,001) (231) (576)
       
Cash flows from financing activities      
Repayments of debt (1,645) (2,469) (777)
Cash paid to acquire treasury stock (884) (76) (5)
Payments of licensing obligations (82) (47) (31)
Proceeds from issuance of debt 2,050
 1,750
 693
Proceeds from issuance of stock under equity plans
 73
 265
 150
Proceeds from equipment sale-leaseback transactions —
 —
 126
Other (35) (32) (43)
Net cash provided by (used for) financing activities (523) (609) 113
       
Effect of changes in currency exchange rates on cash and cash equivalents —
 (1) —
       
Net increase (decrease) in cash and equivalents (528) 47
 (810)
Cash and equivalents at beginning of period 1,249
 1,202
 2,012
Cash and equivalents at end of period $721
 $1,249
 $1,202









See accompanying notes to condensed financial statements.

101



MICRON TECHNOLOGY, INC.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT


NOTES TO CONDENSED FINANCIAL STATEMENTS
(All tabular amounts in millions)


Basis of Presentation

Micron, a Delaware corporation, was incorporated in 1978.  Micron is the parent company of its consolidated subsidiaries and, together with its consolidated subsidiaries, is a global leader in advanced semiconductor systems.

These condensed financial statements have been prepared on a parent-only basis. Under this parent-only presentation, Micron's investments in its consolidated subsidiaries are presented under the equity method of accounting. In accordance with Rule 12-04 of Regulation S-X, these parent-only financial statements do not include all of the information and footnotes required by Generally Accepted Accounting Principles (GAAP) in the United States for annual financial statements. Because these parent-only financial statements and notes do not include all of the information and footnotes required by GAAP in the U.S. for annual financial statements, these parent-only financial statements and other information included should be read in conjunction with Micron's audited Consolidated Financial Statements contained within Part II, Item 8 of this Form 10-K for the year ended September 3, 2015.

Effective in the fourth quarter of 2015, Micron adopted ASU 2015-03 – Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, as appropriate, consistent with debt discounts, as opposed to an asset. The new accounting standard required retrospective application; therefore, Micron's financial statements and notes to those statements contained herein have been adjusted to reflect the impact of adopting this new accounting standard.


Debt

      2015 2014
Instrument(1)
 Stated Rate Effective Rate Current Long-Term Total Current Long-Term Total
Capital lease obligations(2)
 N/A
 N/A
 $174
 $40
 $214
 $172
 $233
 $405
2022 senior notes 5.875% 6.14% —
 589
 589
 —
 587
 587
2023 senior notes 5.250% 5.43% —
 988
 988
 —
 —
 —
2024 senior notes 5.250% 5.38% —
 545
 545
 —
 —
 —
2025 senior notes 5.500% 5.56% —
 1,138
 1,138
 —
 1,137
 1,137
2026 senior notes 5.625% 5.73% —
 446
 446
 —
 —
 —
2031B convertible senior notes(3)
 1.875% 6.98% —
 —
 —
 361
 —
 361
2032C convertible senior notes(4)
 2.375% 5.95% —
 197
 197
 —
 309
 309
2032D convertible senior notes(4)
 3.125% 6.33% —
 150
 150
 —
 284
 284
2033E convertible senior notes(4)
 1.625% 4.50% 217
 —
 217
 272
 —
 272
2033F convertible senior notes(4)
 2.125% 4.93% 264
 —
 264
 260
 —
 260
2043G convertible senior notes 3.000% 6.76% —
 644
 644
 —
 631
 631
Other 1.654% 1.65% —
 60
 60
 —
 10
 10
      $655
 $4,797
 $5,452
 $1,065
 $3,191
 $4,256
(1)
Micron has either the obligation or the option to pay cash for the principal amount due upon conversion for all of its convertible notes. Micron's current intent is to settle in cash the principal amount of all of its convertible notes upon conversion.
(2) Weighted-average imputed rate of 4.5% and 4.7% as of September 3, 2015 and August 28, 2014, respectively.

102



(3)
Amount recorded for 2014 included the debt and equity components. The equity component was reclassified to a debt liability as a result of Micron's obligation to settle the conversions of the 2031B Notes in cash.
(4)
Since the closing price of Micron's common stock for at least 20 trading days in the 30 trading day period ending on June 30, 2015 exceeded 130% of the initial conversion price per share, holders have the right to convert their notes at any time during the calendar quarter ended September 30, 2015. The closing price of Micron's common stock also exceeded the thresholds for the calendar quarter ended September 30, 2015; therefore, these notes are convertible by the holders through December 31, 2015. The 2033 Notes are classified as current because the terms of these notes require us to pay cash for the principal amount of any converted notes.

Micron's convertible and senior notes are unsecured obligations that rank equally in right of payment with all of Micron's other existing and future unsecured indebtedness, and are effectively subordinated to all of Micron's other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness.  The convertible notes and the 2022 Notes, 2023 Notes, 2024 Notes, 2025 Notes, and 2026 Notes of Micron are structurally subordinated to all liabilities of its subsidiaries, including trade payables. Micron guarantees certain debt obligations of its subsidiaries. Micron does not guarantee the MMJ creditor installment payments. As of September 3, 2015, Micron had guaranteed $655 million of debt obligations of its subsidiaries. Micron's guarantees of its subsidiary debt obligations are unsecured obligations ranking equally in right of payment with all of its other existing and future unsecured indebtedness.

Capital Lease Obligations

Micron has various capital lease obligations due in periodic installments with a weighted-average remaining term of 1 year. As of September 3, 2015 and August 28, 2014, Micron had production equipment with carrying values of $140 million and $305 million, respectively, under capital leases.

Convertible Senior Notes and Other Senior Notes

For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt" of Micron's consolidated financial statements.

Other Facilities

Micron has a credit facility with an aggregate revolving commitment which is subject to certain adjustments, including an availability block that effectively limits the maximum amount Micron could draw to $540 million. As of September 3, 2015, $50 million of principal was outstanding under this facility and $270 million was available for Micron to draw. For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Other Facilities – Revolving Credit Facilities" of Micron's consolidated financial statements.

Maturities of Notes Payable and Future Minimum Lease Payments

As of September 3, 2015, maturities of notes payable and future minimum lease payments under capital lease obligations were as follows:

  Notes Payable Capital Lease Obligations
2016 $—
 $179
2017 —
 30
2018 233
 3
2019 224
 3
2020 347
 3
2021 and thereafter 4,854
 3
Unamortized discounts and interest, respectively (420) (7)
  $5,238
 $214



103



Commitments

Micron has provided various financial guarantees issued in the normal course of business on behalf of its subsidiaries. These contracts include debt guarantees and guarantees on certain banking facilities. Micron enters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. Micron has entered into agreements covering certain activities of its subsidiaries, and occasionally Micron may be required to perform under such agreements on behalf of its subsidiaries.
As of September 3, 2015, the maximum potential amount of future payments Micron could have been required to make under its debt guarantees was approximately $655 million. Substantially all of this amount relates to guarantees for debt of wholly-owned entities whereby Micron would be obligated to perform under the guarantee if a subsidiary were to default on the terms of their debt arrangements. In the event of performance under the guarantee, Micron would be permitted to seek reimbursement from the subsidiary company(s) through liquidation of the assets which were collateral under various debt instruments. At the time these contracts were entered into, the collateralized assets approximated the value of the outstanding guarantees. The majority of these guarantees expire at various times between March 2016 and February 2020. Micron guarantees a credit facility of a subsidiary that provides for up to $750 million of financing. As of September 3, 2015, $75 million of principal amount was outstanding under this facility.
Micron guarantees certain banking facilities for its wholly-owned consolidated entities. Substantially all of these guarantees relate to bank overdraft protections. The maximum potential amount of future payments Micron could be required to make under these guarantees varies based on the extent of potential overdrafts. Micron's business processes substantially mitigate the risk of wholly-owned subsidiaries overdrafting their bank accounts. The majority of these guarantees have no contractual expiration.


Contingencies

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 Micron and its subsidiaries' products or manufacturing processes infringe their intellectual property rights. Micron has 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. Micron is currently a party to various litigation regarding patent, commercial, and other matters. Micron is a party to the matters listed in the "Contingencies" note in the consolidated financial statements. For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Contingencies" of Micron's consolidated financial statements.


Redeemable Convertible Notes

For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Redeemable Convertible Notes" of Micron's consolidated financial statements.


Related Party Transactions

Substantially all of Micron's activities relate to manufacturing services performed for a subsidiary and to royalties received from its subsidiaries for use of product and process technology. Micron's net sales to consolidated subsidiaries were $5.42 billion, $5.64 billion, and $4.19 billion for 2015, 2014, and 2013, respectively. Gross margins on manufacturing activities are commensurate with market rates for such services. Transactions between Micron and its consolidated subsidiaries are eliminated in consolidation.

Micron engages in various transactions with its equity method investees and eliminates the profits or losses on those transactions to the extent of its ownership interest until such time as the profits or losses are realized. Micron held an equity interest in Aptina through August 15, 2014. Net sales for 2014 and 2013 included $43 million and $182 million, respectively, from products sold to and services performed for Aptina.


104



On August 15, 2014, ON Semiconductor Corporation acquired Aptina for approximately $433 million and Micron recognized a non-operating gain of $119 million on the sale of its shares based on its diluted ownership interest of approximately 27%. The gain approximated Micron's share of the consideration because the carrying value of its investment had been reduced to zero since the second quarter of 2012, at which time Micron ceased recognizing its proportionate share of Aptina's losses. For further information regarding transactions between Micron and its equity method investees, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity Method Investments – Other" of Micron's consolidated financial statements.

105



SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in millions)

MICRON TECHNOLOGY, INC.

 
Balance at
Beginning of
Year
 Business Acquisitions 
Charged
(Credited) to
Income Tax
Provision
 
Currency
Translation
and Charges
to Other
Accounts
 
Balance at
End of
Year
Deferred Tax Asset Valuation Allowance 
  
  
  
  
Year ended September 3, 2015$2,443
 $—
 $(260) $(132) $2,051
Year ended August 28, 20143,155
 —
 (544) (168) 2,443
Year ended August 29, 20131,470
 1,292
 418
 (25) 3,155


106