Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

	Page
Consolidated Financial Statements as of August 31, 2017 and September 1, 2016 and for the fiscal years ended August 31, 2017, September 1, 2016, and September 3, 2015
Consolidated Statements of Operations	41
Consolidated Statements of Comprehensive Income (Loss)	42
Consolidated Balance Sheets	43
Consolidated Statements of Changes in Equity	44
Consolidated Statements of Cash Flows	45
Notes to Consolidated Financial Statements	46
Report of Independent Registered Public Accounting Firm	80

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions except per share amounts)

For the year ended		August 31, 2017				September 1, 2016				September 3, 2015
Net sales		$	20,322			$	12,399			$	16,192
Cost of goods sold		11,886				9,894				10,977
Gross margin		8,436				2,505				5,215
Selling, general, and administrative		743				659				719
Research and development		1,824				1,617				1,540
Restructure and asset impairments		18				67				3
Other operating (income) expense, net		(17		)		(6		)		(45		)
Operating income		5,868				168				2,998
Interest income		41				42				35
Interest expense		(601		)		(437		)		(371		)
Other non-operating income (expense), net		(112		)		(54		)		(53		)
		5,196				(281		)		2,609
Income tax (provision) benefit		(114		)		(19		)		(157		)
Equity in net income (loss) of equity method investees		8				25				447
Net income (loss)		5,090				(275		)		2,899
Net (income) loss attributable to noncontrolling interests		(1		)		(1		)		—
Net income (loss) attributable to Micron		$	5,089			$	(276	)		$	2,899
Earnings (loss) per share
Basic		$	4.67			$	(0.27	)		$	2.71
Diluted		4.41				(0.27		)		2.47
Number of shares used in per share calculations
Basic		1,089				1,036				1,070
Diluted		1,154				1,036				1,170

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

For the year ended		August 31, 2017				September 1, 2016				September 3, 2015
Net income (loss)		$	5,090			$	(275	)		$	2,899
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		48				(49		)		(42		)
Gain (loss) on derivatives, net		15				7				(18		)
Pension liability adjustments		1				(9		)		20
Gain (loss) on investments, net		—				3				(4		)
Other comprehensive income (loss)		64				(48		)		(44		)
Total comprehensive income (loss)		5,154				(323		)		2,855
Comprehensive (income) loss attributable to noncontrolling interests		(1		)		(1		)		1
Comprehensive income (loss) attributable to Micron		$	5,153			$	(324	)		$	2,856

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(in millions except par value amounts)

As of		August 31, 2017				September 1, 2016
Assets
Cash and equivalents		$	5,109			$	4,140
Short-term investments		319				258
Receivables		3,759				2,068
Inventories		3,123				2,889
Other current assets		147				140
Total current assets		12,457				9,495
Long-term marketable investments		617				414
Property, plant, and equipment, net		19,431				14,686
Equity method investments		16				1,364
Intangible assets, net		387				464
Deferred tax assets		766				657
Goodwill		1,228				104
Other noncurrent assets		434				356
Total assets		$	35,336			$	27,540
Liabilities and equity
Accounts payable and accrued expenses		$	3,664			$	3,879
Deferred income		408				200
Current debt		1,262				756
Total current liabilities		5,334				4,835
Long-term debt		9,872				9,154
Other noncurrent liabilities		639				623
Total liabilities		15,845				14,612
Commitments and contingencies
Redeemable convertible notes		21				—
Micron shareholders' equity
Common stock, $0.10 par value, 3,000 shares authorized, 1,116 shares issued and 1,112 outstanding (1,094 shares issued and 1,040 outstanding as of September 1, 2016)		112				109
Additional capital		8,287				7,736
Retained earnings		10,260				5,299
Treasury stock, 4 shares held (54 shares as of September 1, 2016)		(67		)		(1,029		)
Accumulated other comprehensive income (loss)		29				(35		)
Total Micron shareholders' equity		18,621				12,080
Noncontrolling interests in subsidiaries		849				848
Total equity		19,470				12,928
Total liabilities and equity		$	35,336			$	27,540

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)

		Micron Shareholders
		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
Balance at August 28, 2014		1,073			$	107			$	7,868			$	2,729			$	—			$	56			$	10,760			$	802			$	11,562
Net income													2,899												2,899				—				2,899
Other comprehensive income (loss), net																					(43		)		(43		)		(1		)		(44		)
Stock issued under stock plans		13			1				73																74								74
Stock-based compensation expense									168																168								168
Contributions from noncontrolling interests																									—				142				142
Distributions to noncontrolling interests																									—				(6		)		(6		)
Repurchase and retirement of stock		(2	)		—				(13		)		(40		)										(53		)						(53		)
Repurchase of treasury stock																	(831		)						(831		)						(831		)
Settlement of capped calls									50								(50		)						—								—
Reclassification of redeemable convertible notes, net									19																19								19
Conversion and repurchase of convertible notes									(691		)														(691		)						(691		)
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																					(48		)		(48		)		—				(48		)
Stock issued under stock plans		11			1				47																48								48
Stock-based compensation expense									191																191								191
Contributions from noncontrolling interests																									—				37				37
Distributions to noncontrolling interests																									—				(34		)		(34		)
Acquisitions of noncontrolling interests																									—				(93		)		(93		)
Repurchase and retirement of stock		(1	)		—				(10		)		(13		)										(23		)						(23		)
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													5,089												5,089				1				5,090
Other comprehensive income (loss), net																					64				64				—				64
Stock issued under stock plans		20			3				139																142								142
Stock-based compensation expense									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

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

For the year ended		August 31, 2017				September 1, 2016				September 3, 2015
Cash flows from operating activities
Net income (loss)		$	5,090			$	(275	)		$	2,899
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation expense and amortization of intangible assets		3,861				2,980				2,667
Amortization of debt discount and other costs		125				126				138
Stock-based compensation		215				191				168
Loss on debt repurchases and conversions		99				4				49
Gain on remeasurement of previously-held equity interest in Inotera		(71		)		—				—
Equity in net (income) loss of equity method investees		(8		)		(25		)		(447		)
Change in operating assets and liabilities
Receivables		(1,651		)		465				393
Inventories		50				(549		)		116
Accounts payable and accrued expenses		564				272				(691		)
Payments attributed to intercompany balances with Inotera		(361		)		—				—
Deferred income		218				(6		)		(105		)
Other		22				(15		)		21
Net cash provided by operating activities		8,153				3,168				5,208
Cash flows from investing activities
Expenditures for property, plant, and equipment		(4,734		)		(5,817		)		(4,021		)
Acquisition of Inotera		(2,634		)		—				—
Purchases of available-for-sale securities		(1,239		)		(1,026		)		(4,392		)
Payments to settle hedging activities		(274		)		(152		)		(132		)
Proceeds from sales and maturities of available-for-sale securities		970				3,690				2,248
Proceeds from settlement of hedging activities		184				335				56
Other		190				(74		)		25
Net cash provided by (used for) investing activities		(7,537		)		(3,044		)		(6,216		)
Cash flows from financing activities
Proceeds from issuance of debt		3,311				2,199				2,212
Proceeds from issuance of stock under equity plans		142				48				74
Proceeds from equipment sale-leaseback transactions		—				765				291
Repayments of debt		(2,558		)		(870		)		(2,329		)
Payments on equipment purchase contracts		(519		)		(46		)		(95		)
Cash paid to acquire treasury stock		(35		)		(148		)		(884		)
Other		8				(203		)		13
Net cash provided by (used for) financing activities		349				1,745				(718		)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash		(12		)		19				(133		)
Net increase (decrease) in cash, cash equivalents, and restricted cash		953				1,888				(1,859		)
Cash, cash equivalents, and restricted cash at beginning of period		4,263				2,375				4,234
Cash, cash equivalents, and restricted cash at end of period		$	5,216			$	4,263			$	2,375
Supplemental disclosures
Income taxes paid, net		$	(99	)		$	(90	)		$	(63	)
Interest paid, net of amounts capitalized		(468		)		(267		)		(226		)
Noncash investing and financing activity
Equipment acquisitions on contracts payable and capital leases		813				993				345

See accompanying notes to consolidated financial statements.

MICRON TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All tabular amounts in millions except per share amounts)

Significant Accounting Policies

Basis of Presentation: Micron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions. Through our global brands – Micron, Crucial, and Ballistix – our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPoint memory, is transforming how the world uses information to enrich life. Backed by more than 35 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, machine learning, and autonomous vehicles in key market segments like cloud, data center, networking, and mobile. The accompanying consolidated financial statements include the accounts of Micron and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain reclassifications have been made to prior period amounts to conform to current period presentation.

Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 2017 and 2016 each contained 52 weeks and fiscal year 2015 contained 53 weeks. All period references are to our fiscal periods unless otherwise indicated.

Derivative and Hedging Instruments: We use derivative instruments to manage our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities denominated in currencies other than the U.S. dollar and (2) forecasted cash flows for 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 accounting purposes, gains or losses from changes in fair values are recognized in other non-operating income (expense). For derivative forward contracts designated as cash-flow hedges, we exclude changes in the time value from the effectiveness assessment. The effective portion of the gain or loss is included as a component of other comprehensive income (loss) and the ineffective or excluded portion of the gain or loss is included in other non-operating income (expense). Amounts in accumulated other comprehensive income (loss) from these cash flow hedges are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. Effectiveness is measured by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the forecasted cash flows of the hedged item.

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.

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. Other investments with remaining maturities of 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.

Goodwill 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.

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 inventories are actually sold. In determining the lower of average cost or net realizable value, inventories are primarily categorized as memory (including DRAM, NAND, and other memory) based on the major characteristics of product type and markets. 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 data 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 applicable specifications existing at the time of delivery. Under our standard 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 standard terms and conditions. Our warranty obligations are not 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 we carry out the activities necessary to bring assets to the condition of their intended use and location. Capitalized interest becomes part of the cost, and amortized over the useful lives of, the assets.

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 costs by approximately $100 million per quarter in 2017.

Research and Development: Costs related to the conceptual formulation and design of products and processes are expensed as R&D as incurred. Development of a product is deemed complete when it is qualified through thorough reviews and tests for performance and reliability. Subsequent to product qualification, product costs are included in cost of goods sold. Product design and other R&D costs for certain technologies may be shared with a development partner. Amounts receivable from cost-sharing arrangements are reflected as a reduction of R&D expense.

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 collectibility is reasonably 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. Revenue recognized upon resale by our customers under these arrangements was 20%, 25%, and 21% of our consolidated revenue for 2017, 2016, and 2015, respectively.

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 issue new shares upon the exercise of stock options or conversion of share units.

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.

Variable Interest Entities

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

Unconsolidated VIEs

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

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

Consolidated VIE

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

Recently Adopted Accounting Standards

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04 – Simplifying the Test for Goodwill Impairment, which modified the goodwill impairment test and required an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeded its fair value. We adopted this ASU as of the beginning of the fourth quarter of 2017 in connection with our annual impairment test. The adoption of the ASU did not have a material impact on our financial statements.

In November 2016, the FASB issued ASU 2016-18 – Restricted Cash, which required amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. We adopted this ASU in the fourth quarter of 2017 on a retrospective basis. As of September 1, 2016, September 3, 2015, and August 28, 2014, restricted cash was $123 million, $88 million, and $84 million, respectively. The adoption of this ASU did not have a material impact on our cash flows.

In March 2016, the FASB issued ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting, which simplified several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification within the statement of cash flows. We adopted this ASU as of the beginning of the first quarter of 2017 and elected to account for forfeitures when they occur, on a

modified retrospective basis. At the time of adoption in the first quarter of 2017, we recognized deferred tax assets of $325 million for the excess tax benefits that arose directly from tax deductions related to equity compensation greater than amounts recognized for financial reporting and also recognized an increase of an equal amount in the valuation allowance against those deferred tax assets. The adoption did not have any other material impacts on our financial statements.

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

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

Recently Issued Accounting Standards

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

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

In February 2016, the FASB issued ASU 2016-02 – Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of- use asset and corresponding liability, measured at the present value of the lease payments. This ASU will be effective for us in the first quarter of 2020 with early adoption permitted and requires modified retrospective 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 the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for us in the first quarter of 2019 and requires modified retrospective adoption. We are evaluating the effects of our adoption of this ASU on our financial statements.

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 United States. The core principal of this ASU, as amended, is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We are required to adopt this ASU in the first quarter of 2019 with adoption permitted as early as the first quarter of 2018. This ASU allows for either full retrospective or modified retrospective adoption. We expect that, as a result of the adoption of this ASU, the timing of recognizing revenue from sales of products to our distributors under

agreements allowing rights of return or price protection will be generally earlier than under the existing revenue recognition guidance. Revenue recognized upon resale by our customers under these arrangements was 20%, 25%, and 21% of our consolidated revenue for 2017, 2016, and 2015, respectively. After adoption, the impact of this change in any reporting period would be the net effect of changes to revenue recognized as of the beginning and end of each period. We are evaluating the timing, method, and other effects of our adoption of this ASU on our financial statements.

Acquisition of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, now known as Micron Technology Taiwan, Inc. ("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.

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.

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

We provisionally estimated the fair value of the Inotera assets acquired and liabilities assumed as of the December 6, 2016 acquisition date. In 2017, we incorporated additional information in our analysis about facts and circumstances that existed as of the acquisition date and adjusted our provisional values, which resulted in a decrease in the amount of purchase price allocated to property, plant, and equipment of $59 million and increases in the amounts allocated to other noncurrent assets of $13 million, deferred income taxes of $8 million, and goodwill of $38 million. The allocation of purchase price to assets acquired and liabilities assumed of Inotera could further change as additional information becomes available. The consideration and provisional valuation of assets acquired and liabilities assumed, as adjusted in 2017, were as follows:

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

The Inotera Acquisition enhances our flexibility to drive new technology, optimize the deployment of capital, and adapt our product offerings to changes in 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 Inotera Acquisition is not deductible for Taiwan corporate income tax purposes; however, it is deductible for Taiwan surtax purposes.

Unaudited Pro Forma Financial Information

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

		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 2017 includes our results for the year ended August 31, 2017 (which includes the results of Inotera since our acquisition of Inotera on December 6, 2016), the results of Inotera for the three months ended November 30, 2016, and the adjustments described above. The pro forma information for 2016 includes our results for the year ended September 1, 2016, the results of Inotera for the twelve months ended August 31, 2016, and the adjustments described above.

Technology Transfer and License Agreements with Nanya

Effective December 6, 2016, under the terms of technology transfer and license agreements, Nanya has options to require us to transfer to Nanya 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. Under the terms of the agreements, Nanya would pay royalties to us for a license to the transferred technologies based on revenues from products utilizing the technologies, subject to specified caps, and we would also receive an equity interest in Nanya upon the achievement of certain milestones.

Cash and Investments

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

As of		2017																2016
		Cash and Equivalents				Short-term Investments				Long-term Marketable Investments(1)				Total Fair Value				Cash and Equivalents				Short-term Investments				Long-term Marketable Investments(1)				Total Fair Value
Cash		$	2,237			$	—			$	—			$	2,237			$	2,258			$	—			$	—			$	2,258
Level 1(2)
Money market funds		2,332				—				—				2,332				1,507				—				—				1,507
Level 2(3)
Certificates of deposit		483				24				3				510				373				33				—				406
Corporate bonds		—				193				315				508				—				142				235				377
Government securities		1				90				126				217				2				62				82				146
Asset-backed securities		—				2				173				175				—				12				97				109
Commercial paper		56				10				—				66				—				9				—				9
		5,109				$	319			$	617			$	6,045			4,140				$	258			$	414			$	4,812
Restricted cash(4)		107																123
Cash, cash equivalents, and restricted cash		$	5,216															$	4,263

(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.

(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. No adjustments were made to such pricing information as of August 31, 2017 or September 1, 2016.

(4)

Restricted cash is included in other noncurrent assets and generally represents balances related to the MMJ Creditor Payments and interest reserve balances related to the 2021 MSTW Term Loan. The restrictions on the MMJ Creditor Payments lapse upon approval by the trustees and/or Japan Court. The restrictions on the interest reserve balances lapse in proportion to the reduction in the amount of interest expected to be paid under the 2021 MSTW Term Loan for the subsequent six months. (See "Debt" note.)

Proceeds from sales of available-for-sale securities for 2017, 2016, and 2015 were $776 million, $2.31 billion, and $1.49 billion, respectively. Gross realized gains and losses from sales of available-for-sale securities were not material for any period

presented. As of August 31, 2017, there were no available-for-sale securities that had been in a loss position for longer than 12 months.

Receivables

As of		2017				2016
Trade receivables		$	3,490			$	1,765
Income and other taxes		100				119
Other		169				184
		$	3,759			$	2,068

Inventories

As of		2017				2016
Finished goods		$	856			$	899
Work in process		1,968				1,761
Raw materials and supplies		299				229
		$	3,123			$	2,889

Property, Plant, and Equipment

As of		2017				2016
Land		$	345			$	145
Buildings (includes $475 and $347, respectively, under capital leases)		7,958				6,653
Equipment(1) (includes $1,331 and $1,374, respectively, under capital leases)		32,187				25,910
Construction in progress(2)		499				475
Software		544				422
		41,533				33,605
Accumulated depreciation (includes $626 and $492, respectively, under capital leases)		(22,102		)		(18,919		)
		$	19,431			$	14,686

(1)	Included costs related to equipment not placed into service of $994 million and $1.47 billion, as of August 31, 2017 and September 1, 2016, respectively.

(2)	Included building-related construction and tool installation costs for assets not placed into service.

Depreciation expense was $3.76 billion, $2.86 billion, and $2.55 billion for 2017, 2016, and 2015, respectively. As of August 31, 2017, production equipment, buildings, and land with an aggregate carrying value of $6.14 billion were pledged as collateral under various notes payable. Interest capitalized as part of the cost of property, plant, and equipment was $7 million, $43 million, and $20 million for 2017, 2016, and 2015, respectively. In the fourth quarter of 2016, we revised the estimated useful lives of equipment in our DRAM wafer fabrication facilities from five to seven years, which reduced depreciation costs by approximately $100 million per quarter in 2017.

Equity Method Investments

As of		2017							2016
		Investment Balance				Ownership Percentage			Investment Balance				Ownership Percentage
Inotera		$	—			—	%		$	1,314			33	%
Tera Probe		—				—	%		36				40	%
Other		16				Various			14				Various
		$	16						$	1,364

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

For the year ended		2017				2016				2015
Inotera		$	9			$	32			$	445
Tera Probe		(3		)		(11		)		1
Other		2				4				1
		$	8			$	25			$	447

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		2017				2016
Current assets		$	107			$	1,222
Noncurrent assets		256				4,294
Current liabilities		19				604
Noncurrent liabilities		66				411

For the year ended		2017				2016				2015
Net sales		$	557			$	1,671			$	2,647
Gross margin		82				155				1,253
Operating income		126				199				1,191
Net income		76				184				1,361

Inotera

We held a 33% interest in Inotera, a Taiwan DRAM memory company, through December 6, 2016, at which time we acquired the remaining 67% interest in Inotera. Historically, we accounted for our interest in Inotera on a two-month lag under the equity method. As a result of the Inotera Acquisition, we account for Inotera without a lag, consistent with our other wholly-owned subsidiaries.

From January 2013 through December 2015, we purchased all of Inotera's DRAM output under supply agreements at prices reflecting discounts from market prices for our comparable components. After December 2015 and until our acquisition of the remaining interest in Inotera, the price for DRAM products purchased by us was based on a formula that equally shared margin between Inotera and us. Under these agreements, we purchased $504 million, $1.43 billion and $2.37 billion of DRAM products in 2017 through the date of our acquisition, 2016, and 2015 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 2017, we sold our 40% interest in Tera Probe, which provided semiconductor wafer testing and probe services to us, in a transaction that included the sale of our assembly and test facility located in Akita, Japan. (See "Restructure and Asset Impairments" note.) In 2017, 2016, and 2015, we recorded impairment charges of $16 million, $25 million, and $10 million, respectively, within equity in net income (loss) of equity method investees to write down the carrying value of our investment

in Tera Probe to its fair value based on its trading price (Level 1). We incurred manufacturing costs for services performed by Tera Probe of $47 million, $70 million, and $90 million in 2017 through the date of sale, 2016, and 2015, respectively.

Intangible Assets and Goodwill

As of		2017								2016
		Gross Amount				Accumulated Amortization				Gross Amount				Accumulated Amortization
Amortizing assets
Product and process technology		$	755			$	(476	)		$	757			$	(402	)
Other		1				(1		)		1				—
		756				(477		)		758				(402		)
Non-amortizing assets
In-process R&D		108				—				108				—
Total intangible assets		$	864			$	(477	)		$	866			$	(402	)
Goodwill		$	1,228							$	104

In 2017, 2016, and 2015, we capitalized $29 million, $30 million, and $98 million, respectively, for product and process technology with weighted-average useful lives of 11 years, 10 years, and 7 years, respectively. Amortization expense was $106 million, $117 million, and $117 million for 2017, 2016, and 2015, respectively. Expected amortization expense is $99 million for 2018, $49 million for 2019, $33 million for 2020, $28 million for 2021, and $17 million for 2022.

In 2016, we acquired Tidal Systems, Ltd., a 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 will begin amortizing the in-process R&D when development is complete, estimated to be in 2018, and will amortize it over its then estimated useful life. The goodwill is not deductible for tax purposes.

Accounts Payable and Accrued Expenses

As of		2017				2016
Accounts payable		$	1,333			$	1,186
Property, plant, and equipment payables		1,018				1,649
Salaries, wages, and benefits		603				289
Related party payables		—				273
Customer advances		197				132
Income and other taxes		163				41
Other		350				309
		$	3,664			$	3,879

As of September 1, 2016, related party payables included $266 million due to Inotera primarily for the purchase of DRAM products.

Debt

		2017																						2016
												Net Carrying Amount																Net Carrying Amount
Instrument		Stated Rate			Effective Rate			Principal				Current				Long-Term				Total(1)				Principal				Current				Long-Term				Total(1)
MMJ Creditor Payments		N/A			6.52	%		$	695			$	157			$	474			$	631			$	985			$	189			$	680			$	869
Capital lease obligations		N/A			3.68	%		1,190				357				833				1,190				1,406				380				1,026				1,406
2021 MSAC Term Loan		3.61	%		3.85	%		800				99				697				796				—				—				—				—
2021 MSTW Term Loan		2.85	%		3.02	%		2,652				—				2,640				2,640				—				—				—				—
2022 Notes		5.88	%		6.14	%		—				—				—				—				600				—				590				590
2022 Term Loan B		3.80	%		4.22	%		743				5				725				730				750				5				730				735
2023 Notes		5.25	%		5.43	%		1,000				—				991				991				1,000				—				990				990
2023 Secured Notes		7.50	%		7.69	%		1,250				—				1,238				1,238				1,250				—				1,237				1,237
2024 Notes		5.25	%		5.38	%		550				—				546				546				550				—				546				546
2025 Notes		5.50	%		5.56	%		519				—				515				515				1,150				—				1,139				1,139
2026 Notes		5.63	%		5.73	%		129				—				128				128				450				—				446				446
2032C Notes(2)		2.38	%		5.95	%		223				—				211				211				223				—				204				204
2032D Notes(2)		3.13	%		6.33	%		177				—				159				159				177				—				154				154
2033E Notes(2)		1.63	%		4.50	%		173				202				—				202				176				—				168				168
2033F Notes(2)		2.13	%		4.93	%		297				278				—				278				297				—				271				271
2043G Notes(3)		3.00	%		6.76	%		1,025				—				671				671				1,025				—				657				657
Other notes		2.13	%		2.66	%		216				164				44				208				512				182				316				498
								$	11,639			$	1,262			$	9,872			$	11,134			$	10,551			$	756			$	9,154			$	9,910

(1)	Net carrying amount is the principal amount less unamortized debt discount and issuance costs. In addition, the net carrying amount for our 2033E Notes for 2017 included $31 million of derivative debt liabilities recognized as a result of our election to settle entirely in cash converted notes with an aggregate principal amount of $16 million.

(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 ended on June 30, 2017, these notes are convertible by the holders through the calendar quarter ended September 30, 2017. The closing price of our common stock also exceeded the thresholds for the calendar quarter ended September 30, 2017; therefore, these notes are convertible by the holders through December 31, 2017. The 2033 Notes were classified as current as of August 31, 2017 because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of that date.

(3)	The 2043G Notes have an original principal amount of $820 million that accretes up to $917 million through the expected term in November 2028 and $1.03 billion at maturity in 2043.

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. As of August 31, 2017, Micron had $3.70 billion of unsecured debt (net of unamortized discount and debt issuance costs), including all of its convertible notes and the 2023 Notes, 2024 Notes, 2025 Notes, and 2026 Notes, that was 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, but does not guarantee the MMJ 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.

MMJ Creditor Payments

Under the MMJ Companies' corporate 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 seven annual installment payments (the "MMJ Creditor Payments"). The MMJ Creditor Payments do not provide for interest and, as a result of our acquisition of the MMJ Companies in 2013, we recorded the MMJ Creditor Payments at fair 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 the amount of their fixed claims in six annual installment payments through December 2018 and the unsecured creditors will recover at least 17.4% of the amount of their fixed claims in seven annual installment payments through December 2019. 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 obligations were paid in full. The remaining portion of the unsecured claims of the creditors of MMJ not recovered pursuant to the corporate reorganization proceedings will be discharged, without payment, through December 2019. The following table presents the remaining amounts of MMJ Creditor Payments (stated in Japanese yen and U.S. dollars) and the amount of unamortized discount as of August 31, 2017:

2018		¥	17,675			$	160
2019		27,154				246
2020		31,762				289
		76,591				695
Less unamortized discount		(7,075		)		(64		)
		¥	69,516			$	631

Pursuant to the terms of an Agreement on Support for Reorganization Companies that we executed in the fourth quarter of 2012 with the 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 Payments.

Capital Lease Obligations

In 2017, we recorded capital lease obligations aggregating $220 million at a weighted-average effective interest rate of 5.1%, with a weighted-average expected term of ten years. In 2016, we recorded capital lease obligations aggregating $882 million, including $765 million related to equipment sale-leaseback transactions.

2021 MSAC Senior Secured Term Loan

In November 2016, we entered into a five-year variable-rate facility agreement to obtain up to $800 million of financing, collateralized by certain production equipment, and drew $800 million under the facility in 2017. Interest is payable quarterly at a per annum rate equal to three-month LIBOR plus 2.4%. Principal is payable in 16 equal quarterly installments beginning in March 2018. The 2021 MSAC Term Loan contains covenants which are customary for financings of this type, including negative covenants that limit or restrict our ability to create liens or dispose of the equipment securing the facility agreement. The 2021 MSAC Term Loan also contains customary events of default which could result in the acceleration of all amounts to be immediately due and payable. The 2021 MSAC Term Loan is guaranteed by Micron.

2021 MSTW Senior Secured Term Loan

In connection with the Inotera Acquisition, on December 6, 2016, we drew 80 billion New Taiwan dollars under a collateralized, five-year term loan that bears interest at a variable per annum rate equal to the three-month TAIBOR plus a margin of 2.05%. Principal under the 2021 MSTW Term Loan is payable in six equal semi-annual installments from June 2019 through December 2021. The 2021 MSTW Term Loan is collateralized by certain assets, including a real estate mortgage on MTTW's main production facility and site, a chattel mortgage over certain equipment of MTTW, all of the stock of our MSTW subsidiary, and the 82% of stock of MTTW owned by MSTW. The 2021 MSTW Term Loan is guaranteed by Micron.

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

•	MSTW must maintain a consolidated ratio of total liabilities to adjusted EBITDA not higher than 5.5x in 2017 and 2018, and not higher than 4.5x in 2019 through 2021;

•	MSTW must maintain adjusted consolidated tangible net worth of not less than 4.0 billion New Taiwan dollars in 2017 and 2018, not less than 6.5 billion New Taiwan dollars in 2019 and 2020, and not less than 12.0 billion New Taiwan dollars in 2021;

•	on a consolidated basis, Micron must maintain a ratio of total liabilities to adjusted EBITDA not higher than 3.5x in 2017, not higher than 3.0x in 2018 and 2019, and not higher than 2.5x in 2020 and 2021; and

•	on a consolidated basis, Micron must maintain adjusted tangible net worth not less than $9.0 billion in 2017, not less than $12.5 billion in 2018 and 2019, and not less than $16.5 billion in 2020 and 2021.

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

Unsecured Senior Notes

The unsecured notes in the table below (the " Unsecured Senior Notes") 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: We have the option to redeem the Unsecured Senior Notes. The applicable redemption price will be determined as follows:

		Maturity Date		Redemption Period Requiring Payment of:				Redemption of up to 35% of Original Principal Amount Using Cash Proceeds From an Equity Offering(3)
			Make-Whole(1)		Premium(2)		Date		Specified Price
2023 Notes(4)		Aug 2023		Prior to Feb 1, 2018		On or after Feb 1, 2018		Prior to Feb 1, 2018		105.250	%
2024 Notes		Jan 2024		Prior to May 1, 2018		On or after May 1, 2018		Prior to May 1, 2018		105.250	%
2025 Notes		Feb 2025		Prior to Aug 1, 2019		On or after Aug 1, 2019		N/A		N/A
2026 Notes		Jan 2026		Prior to May 1, 2020		On or after May 1, 2020		N/A		N/A

(1)	If we redeem prior to the applicable date, the redemption price is principal plus a make-whole premium as described in the applicable indenture.

(2)	If we redeem on or after the applicable date, the redemption price is principal plus a premium which declines over time as specified in the applicable indenture.

(3)

If we redeem prior to the applicable date with net cash proceeds of one or more equity offerings, the redemption price is equal to the amount specified above, together with accrued and unpaid interest, subject to a maximum redemption of 35% of the aggregate original principal amount of the respective series of notes being redeemed. The 2025 Notes and 2026 Notes can not be redeemed with cash proceeds from an equity offering because the principal amount outstanding as of August 31, 2017 of such notes is less than 65% of the original principal amount issued.

(4)	In the first quarter of 2018, we issued a notice to redeem our 2023 Notes. See "Debt Repurchases and Conversions" below.

Senior Secured Borrowings

2022 Senior Secured Term Loan B: In April 2016, we issued $750 million in principal amount of 2022 Term Loan B notes due April 2022. Interest was payable at a rate equal to LIBOR plus 6.00%. In April 2017 and October 2016, we amended our

2022 Term Loan B, substantially all of which was treated as a debt modification, to reduce the interest rate margins, and as of August 31, 2017, the 2022 Term Loan B generally bears interest at LIBOR plus 2.50%. We may elect to convert outstanding term loans to other variable-rate indexes. Principal payments are due quarterly in an amount equal to 0.25% of the initial aggregate principal amount with the balance due at maturity and may be prepaid without penalty. Interest is payable at least quarterly.

2023 Senior Secured Notes: In April 2016, we issued $1.25 billion in principal amount of 2023 Secured Notes due September 2023. In the first quarter of 2018, we issued notices to redeem our 2023 Secured Notes. See "Debt Repurchases and Conversions" below.

Senior Secured Borrowings Collateral and Covenants: The 2022 Term Loan B and 2023 Secured Notes are 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 31, 2017 were $6.22 billion of assets which collateralize these notes. The 2022 Term Loan B and 2023 Secured Notes are structurally subordinated to the indebtedness and other liabilities of all of Micron's subsidiaries that do not guarantee these debt obligations. MSP guarantees both of these notes.

The 2022 Term Loan B and 2023 Secured Notes each contain covenants that, among other things, limit, in certain circumstances, the ability of Micron and/or its 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 all or substantially all of its assets to another entity. These covenants are subject to a number of limitations, exceptions, and qualifications.

Convertible Senior Notes

		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)
2032C Notes		May 2019		May 2032		$	9.63			$	12.52			23			$	519			Cash and/or shares
2032D Notes		May 2021		May 2032		9.98				12.97				18			390				Cash and/or shares
2033E Notes(5)		Feb 2018		Feb 2033		10.93				14.21				16			332				Cash
2033F Notes(5)		Feb 2020		Feb 2033		10.93				14.21				27			572				Cash
2043G Notes		Nov 2028		Nov 2043		29.16				37.91				35			99				Cash and/or shares
														119			$	1,912

(1)	Debt discount and debt issuance costs are amortized through the earliest holder put date.

(2)	Represents 130% of the conversion price per share. If the trading price of our common stock price exceeds such threshold for a specified period, holders may convert such notes. See "Conversion Rights" below.

(3)	Based on the trading price of our common stock of $31.97 as of August 31, 2017.

(4)

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.

(5)	Holders of the 2033E Notes and 2033F Notes may also put their notes to us on February 15, 2023.

Conversion Rights: Holders of our convertible notes may convert their notes under the following circumstances: (1) if the 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 (see "Conversion Price Per Share Threshold" in the table above); (3) if the trading price of the notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the notes during the periods specified in the indentures; (4) if specified distributions or corporate events occur, as set forth in the indenture for the notes; or (5) during the last three months prior to the maturity date of the notes. For the calendar quarter ended September 30, 2017, the closing price of our common stock exceeded 130% of the conversion price for our 2032 Notes and 2033 Notes; therefore, those notes are convertible by the holders through December 31, 2017.

In August 2017, holders of our 2033E Notes with an aggregate principal amount of $58 million converted their notes, which were settled in the first quarter of 2018. For converted notes with an aggregate principal amount of $16 million, we

elected to settle the conversion obligation in excess of the principal amount in cash. We elected to settle the remaining notes with an aggregate principal amount of $42 million with a combination of cash for the principal amount and shares of our common stock for the remainder of the settlement amount. As a result of our election to settle all amounts due upon conversion in cash for some of these notes, such settlement obligations became 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 dates of our elections to settle the conversions in cash, we reclassified the fair values of the equity components of each of the converted notes from additional capital to derivative debt liabilities within current debt in our consolidated balance sheet. The net carrying amount for 2017 included $31 million for the fair values of the derivative debt liabilities as of August 31, 2017. The 20 consecutive trading day period ended in the first quarter of 2018, and we settled the conversion for $92 million in cash and 3 million shares of our treasury stock.

Cash Redemption at Our Option: We may redeem our convertible notes under the circumstances listed in the table below. The redemption price for the notes will equal the principal amount at maturity, or the accreted principal amount in the case of the 2043G Notes redeemed on or after November 20, 2018, plus accrued and unpaid interest.

		Conditional Redemption Period at Our Option(1)		Unconditional Redemption Period at Our Option		Redemption Period Requiring Make-Whole
2032C Notes		On or after May 1, 2016		On or after May 4, 2019		Prior to May 4, 2019(2)
2032D Notes		On or after May 1, 2017		On or after May 4, 2021		Prior to May 4, 2021(2)
2033E Notes		N/A		On or after Feb 20, 2018		N/A
2033F Notes		N/A		On or after Feb 20, 2020		N/A
2043G Notes		Prior to Nov 20, 2018		On 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, 2019 for the 2032C Notes and to May 4, 2021 for the 2032D Notes.

(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 Holders: We may be required by the holders of our convertible notes to repurchase for cash all or a portion of the notes on the "Holder Put Date" listed in the table above. The repurchase price would equal the principal amount, or the accreted principal amount in the case of the 2043G Notes, plus accrued and unpaid interest. Also, upon a change in control or a termination of trading, as defined in the respective indentures, holders of our convertible notes may require us to repurchase for cash all or a portion of their notes.

Other: Interest expense for our convertible notes consisted of contractual interest of $51 million, $51 million, and $59 million for 2017, 2016, and 2015, respectively and amortization of discount and issuance costs of $37 million, $36 million, and $42 million for 2017, 2016, and 2015, respectively. As of August 31, 2017 and September 1, 2016, the carrying amounts of the equity components of our convertible notes, which are included in additional capital in the accompanying consolidated balance sheets, were $287 million and $308 million, respectively.

Available Revolving Credit Facility

We have a senior secured revolving credit facility that expires in 2020, under which we can draw up to the lesser of $750 million or 80% of the net outstanding balance of certain trade receivables, as defined in the facility agreement. Any amounts drawn are collateralized by a security interest in such trade receivables. The credit facility contains customary covenants and conditions, including as a funding condition the absence of any event or circumstance that has a material adverse effect on certain of our operations, assets, prospects, business, or condition, and including negative covenants that limit or restrict our ability to create liens on, or dispose of, the collateral underlying the obligations under this facility. Interest is payable on any outstanding principal balance at a variable rate equal to the LIBOR plus an applicable margin ranging between 1.75% to 2.25%, depending upon the utilized portion of the facility. As of August 31, 2017, there were no outstanding amounts drawn under this facility and $750 million was available for us to draw.

Debt Repurchases and Conversions

On October 12, 2017, subsequent to the end of 2017, we issued a notice to redeem $438 million of principal amount of our 2023 Secured Notes on November 13, 2017 for $470 million in cash, excluding accrued and unpaid interest. The amount redeemed represents 35% of the original principal amount of the 2023 Secured Notes issued and will be settled with proceeds from our common stock issuance in October 2017. On October 17, 2017, we issued a notice to redeem the remaining $812 million of principal amount of our 2023 Secured Notes on November 16, 2017 for approximately $885 million, excluding accrued and unpaid interest. Additionally, on October 17, 2017, we issued a notice to redeem all of our 2023 Notes on November 16, 2017 for approximately $1.05 billion in cash, excluding accrued and unpaid interest. In connection with these redemptions, we expect to recognize non-operating losses of approximately $170 million in the first quarter of 2018.

In 2017, we repurchased $631 million of principal amount of our 2025 Notes (carrying value of $625 million), repurchased $321 million of principal amount of our 2026 Notes (carrying value of $318 million), and redeemed $600 million principal amount of our 2022 Notes (carrying value of $592 million) for an aggregate of $1.63 billion in cash. In connection with the transactions, we recognized aggregate non-operating losses of $94 million in 2017.

In 2016, we repurchased $57 million of principal 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 $54 million and equity by $38 million.

In 2015, we consummated a number of transactions to restructure our debt, including repurchases, conversions and settlements of convertible notes, and the early repayment of a note. As a result, $489 million of aggregate principal amount of our convertible notes was settled for $1.43 billion in cash. The liability and equity components of the repurchased convertible notes had previously been stated separately within debt and equity in our consolidated balance sheet. As a result, the repurchases, conversions and settlements decreased the carrying value of debt by $686 million (including $275 million for the fair value of our derivative debt liability to settle the conversions entirely in cash) and equity by $691 million. In connection with these transactions, we recognized aggregate non-operating losses of $49 million.

Maturities of Notes Payable and Future Minimum Lease Payments

As of August 31, 2017, maturities of notes payable (including the MMJ Creditor Payments) and future minimum lease payments under capital lease obligations were as follows:

		Notes Payable				Capital Lease Obligations
2018		$	641			$	402
2019		1,166				334
2020		1,727				229
2021		1,269				97
2022		1,204				62
2023 and thereafter		4,365				227
Unamortized discounts and interest, respectively		(428		)		(161		)
		$	9,944			$	1,190

Commitments

As of August 31, 2017, we had commitments of approximately $1.10 billion for the acquisition of property, plant, and equipment. We lease certain facilities and equipment under operating leases, for which expense was $52 million, $46 million, and $48 million for 2017, 2016, and 2015, respectively. Minimum future operating lease commitments as of August 31, 2017 were as follows:

2018		$	29
2019		28
2020		23
2021		19
2022		17
2023 and thereafter		38
		$	154

Contingencies

We have accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below. We are currently a party to other legal actions arising from the normal course of business, none of which 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-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights.

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

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

On June 24, 2016, the President and Fellows of Harvard University filed a patent infringement action against Micron in the U.S. District Court for the District of Massachusetts. The complaint alleges that a variety of our DRAM products infringe two U.S. patents and seeks damages, injunctive relief, and other unspecified relief.

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

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

Qimonda

On January 20, 2011, Dr. Michael Jaffé, administrator for 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 31, 2017, 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 operation, or financial condition.

Other

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

Redeemable Convertible Notes

Under the terms of the indentures governing the 2033 Notes, upon conversion, we would be required to pay cash equal to the lesser of (1) the aggregate principal amount or (2) the conversion value of the notes being converted. To the extent the conversion value exceeds the principal amount, we could pay cash, shares of common stock, or a combination thereof, at our option, for the amount of such excess. The closing price of our common stock met the thresholds for conversion for the calendar quarter ended June 30, 2017; therefore, the 2033 Notes were convertible by the holders as of August 31, 2017. As a result, the 2033 Notes were classified as current debt and the aggregate difference between the principal amount and the carrying value of $21 million was classified as redeemable convertible notes in the accompanying consolidated balance sheet as of August 31, 2017. The closing price of our common stock did not meet the thresholds for the calendar quarter ended June 30, 2016; therefore, the 2033 Notes were not convertible by the holders as of September 1, 2016. Therefore, as of September 1, 2016, the 2033 Notes had been classified as noncurrent debt and the aggregate difference between the principal amount and the carrying value had been classified as additional capital.

Equity

Micron Shareholders' Equity

Common Stock Issuance: In October 2017, subsequent to the end of 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.

Common Stock Repurchases: Our Board has authorized the discretionary repurchase of up to $1.25 billion of our outstanding common stock in open-market purchases, block trades, privately-negotiated transactions, or derivative transactions. Through 2017, we had repurchased a total of 49 million shares for $956 million through open-market transactions pursuant to such authorization. The shares received in all periods were recorded as treasury stock. Repurchases are subject to market conditions and our ongoing determination of the best use of available cash.

Treasury 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 entered into capped call transactions in connection with certain of our convertible notes which are intended to reduce the effect of potential dilution. 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 strike prices on the expiration dates. As of August 31, 2017, the dollar value of cash or shares that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our stock is below strike prices for all capped calls at expiration, to $527 million, if the trading price of our stock is at or above the cap prices for all capped calls. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.

The following table presents information related to outstanding capped calls as of August 31, 2017:

Capped Calls						Strike Price				Weighted-Average Cap Price				Underlying Common Shares			Value at Expiration
	Expiration Dates							Minimum				Maximum
2032C		Nov 2016	–	Nov 2017		$	9.80			$	15.69			25			$	—			$	147
2032D		Nov 2016	–	May 2018		10.16				15.91				32			—				184
2033E		Jan 2018	–	Feb 2018		10.93				14.51				27			—				98
2033F		Jan 2020	–	Feb 2020		10.93				14.51				27			—				98
														111			$	—			$	527

Expiration of Capped Calls: In 2017, we cash-settled and share-settled separate expirations of portions of our capped calls, and received $125 million in cash and 4 million shares (equal to a value of $67 million) based on the volume-weighted trading stock prices at the expiration dates. In 2016 and 2015, we share-settled expirations of portions of our capped calls and received 2 million shares of our stock (equal to a value of $23 million) and 3 million shares of our stock (equal to a value of $50 million), respectively. The shares received in all periods were recorded as treasury stock.

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

Accumulated Other Comprehensive Income (Loss): Changes in accumulated other comprehensive (loss) by component for the year ended August 31, 2017 were as follows:

		Cumulative Foreign Currency Translation Adjustments				Gains (Losses) on Derivative Instruments, Net				Pension Liability Adjustments				Total
As of September 1, 2016		$	(49	)		$	2			$	12			$	(35	)
Other comprehensive income		27				15				4				46
Amount reclassified out of accumulated other comprehensive income		21				1				(1		)		21
Tax effects		—				(1		)		(2		)		(3		)
Other comprehensive income		48				15				1				64
As of August 31, 2017		$	(1	)		$	17			$	13			$	29

Noncontrolling Interests in Subsidiaries

As of		2017							2016
		Noncontrolling Interest Balance				Noncontrolling Interest Percentage			Noncontrolling Interest Balance				Noncontrolling Interest Percentage
IMFT		$	832			49	%		$	832			49	%
Other		17				Various			16				Various
		$	849						$	848

IMFT: Since 2006, we have owned 51% of IMFT, a joint venture between us and Intel to manufacture memory products exclusively for its members, who share the output of IMFT in proportion to their investment under a long-term supply agreement at prices approximating cost. In 2017, IMFT began to transition its manufacturing from NAND to 3D XPoint memory products. 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. The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. Through December 2018, Intel can put to us, and from January 2019 through December 2021, we can call from Intel, Intel's interest in IMFT, in either case, for an amount equal to the noncontrolling interest balance attributable to Intel at such time either member exercises its right. If Intel exercises its put right, 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. Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets.

IMFT manufactures memory products using designs and technology we develop with Intel. We generally share with Intel the costs of product design and process development activities for NAND and 3D XPoint memory at IMFT and our other facilities. Our R&D expenses were reduced by reimbursements from Intel of $213 million, $205 million, and $224 million for 2017, 2016, and 2015, respectively.

Non-Trade sales primarily consists of NAND and 3D XPoint memory products manufactured and sold to Intel through IMFT and were $553 million, $501 million, and $463 million for 2017, 2016, and 2015, respectively.

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

As of		2017				2016
Assets
Cash and equivalents		$	87			$	98
Receivables		81				89
Inventories		128				68
Other current assets		7				6
Total current assets		303				261
Property, plant, and equipment, net		1,852				1,792
Other noncurrent assets		49				50
Total assets		$	2,204			$	2,103
Liabilities
Accounts payable and accrued expenses		$	299			$	175
Deferred income		6				7
Current debt		19				16
Total current liabilities		324				198
Long-term debt		75				66
Other noncurrent liabilities		88				94
Total liabilities		$	487			$	358

Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.

The table below presents IMFT's distributions to and contributions from its members for 2016 and 2015. There were no distributions or contributions for 2017.

For the year ended		2016				2015
IMFT distributions to Micron		$	36			$	6
IMFT distributions to Intel		34				6
Micron contributions to IMFT		38				148
Intel contributions to IMFT		37				142

Restrictions on Net Assets

As a result of the corporate reorganization proceedings of MMJ initiated in 2012, and for so long as such proceedings continue, MMJ is subject to certain restrictions on dividends, loans, and advances. In addition, the 2021 MSTW Term Loan contains covenants that limit or restrict the ability of MSTW and/or MTTW to distribute cash dividends. Also, our ability to access the cash and other assets of IMFT through dividends, loans, or advances, including to finance our other operations, is subject to agreement by Intel. As a result, our total restricted net assets (excluding intercompany balances and noncontrolling interests) as of August 31, 2017 were $3.65 billion for the MMJ Group, $2.22 billion for MSTW and MTTW, and $885 million for IMFT. As of August 31, 2017, the MMJ Group held cash and equivalents of $580 million, MSTW and MTTW held an aggregate of $56 million, and IMFT held $87 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 connection with our repurchases of our convertible notes in 2016 and 2015, we determined the fair value of the debt components, 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). Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair value and carrying value of our outstanding debt instruments (excluding the carrying value of equity and mezzanine equity components of our convertible notes) were as follows:

As of		2017								2016
		Fair Value				Carrying Value				Fair Value				Carrying Value
Notes and MMJ Creditor Payments		$	8,793			$	8,423			$	7,257			$	7,050
Convertible notes		3,901				1,521				2,408				1,454

The fair values of our convertible notes were determined based on 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). The fair values of our other debt instruments were estimated based on 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).

Derivative Instruments

We use derivative instruments to manage our exposure to changes in currency exchange rates from our monetary assets and liabilities denominated in currencies other than the U.S. dollar. We do not use derivative instruments for speculative purpose.

Derivative Instruments without Hedge Accounting Designation

Currency Derivatives: To hedge our exposures of monetary assets and liabilities to changes in currency exchange rates, we generally utilize a rolling hedge strategy with currency forward contracts that mature within nine months. In addition, to mitigate the risk of the yen strengthening against the U.S. dollar with respect to our MMJ Creditor Payments due in December 2017 and 2018, we have forward contracts to purchase 18 billion yen in December 2017 and 28 billion yen in December 2018. 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).

Convertible Notes Settlement Obligations:

In August 2017, holders of our certain of our 2033E Notes converted their notes. For converted notes with an aggregate principal amount of $16 million, we elected to settle the conversion obligation in excess of the principal amount in cash. As a result, those settlement obligations became 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. 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 measurements and final settlement amounts of our convertible notes settlement obligations were based on the volume-weighted-average stock price (Level 1). 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 Assets(4)
As of August 31, 2017
Currency forward contracts
New Taiwan dollar		$	2,921			$	22			$	(2	)		$	—
Yen		1,209				5				—				1
Euro		368				5				(2		)		—
Singapore dollar		324				1				—				—
Other		25				1				(1		)		—
		$	4,847
Convertible notes settlement obligation		2				—				(47		)		—
						$	34			$	(52	)		$	1
As of September 1, 2016
Currency forward contracts
Yen		$	1,668			$	—			$	(10	)		$	—
Euro		93				—				—				—
Singapore dollar		206				—				—				—
Other		85				—				(1		)		—
		$	2,052			$	—			$	(11	)		$	—

(1)	Notional amounts of forward contracts in U.S. dollars and convertible notes settlement obligations in shares.

(2)	Included in receivables – other.

(3)	Included in accounts payable and accrued expenses – other for forward contracts and in current debt for convertible notes settlement obligations.

(4)	Included in other noncurrent assets.

Realized and unrealized gains and losses on derivative instruments 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). For derivative instruments without hedge accounting designation, recognized gains (losses) were as follows:

For the year ended		2017				2016				2015
Foreign exchange contracts		$	(45	)		$	185			$	(64	)
Convertible notes settlement obligations		(2		)		—				7

Derivative Instruments with Cash Flow Hedge Accounting Designation

Currency Derivatives: We may 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. Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rates, and credit-risk spreads (Level 2).

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

		Notional Amount (in U.S. Dollars)				Fair Value
		Current Assets(1)				Current Liabilities(2)
As of August 31, 2017
Yen		$	258			$	4			$	—
Euro		198				13				—
		$	456			$	17			$	—
As of September 1, 2016
Yen		$	107			$	2			$	(1	)
Euro		65				—				(1		)
		$	172			$	2			$	(2	)

(1)	Included in receivables – other.

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

We recognized gains of $15 million and $10 million, and losses of $10 million, for 2017, 2016, and 2015, respectively, in accumulated other comprehensive income (loss) from the effective portion of cash flow hedges. Neither the ineffective portions of cash flow hedges recognized in other non-operating income (expense) nor the reclassifications from accumulated other comprehensive income (loss) to earnings were material in 2017, 2016, or 2015. The amounts from cash flow hedges included in accumulated other comprehensive income (loss) that are expected to be reclassified into earnings in the next 12 months 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. As of August 31, 2017 and September 1, 2016, amounts netted under our master netting arrangements were not material.

Equity Plans

As of August 31, 2017, 101 million shares of our common stock were available for future awards under our equity plans.

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 expire eight years from the date of grant. Options issued prior to February 2014 expire six years from the date of grant. Option activity for 2017 is summarized as follows:

		Number of Shares			Weighted-Average Exercise Price Per Share				Weighted-Average Remaining Contractual Life (In Years)		Aggregate Intrinsic Value
Outstanding as of September 1, 2016		42			$	16.37
Granted		8			19.61
Exercised		(14	)		10.17
Canceled or expired		(3	)		22.55
Outstanding as of August 31, 2017		33			19.32				4.4		$	438
Exercisable as of August 31, 2017		17			$	17.44			2.7		$	255
Unvested as of August 31, 2017		16			21.25				6.2		183

The total intrinsic value was $198 million, $52 million, and $229 million for options exercised in 2017, 2016, and 2015, respectively.

Stock options granted and assumptions used in the Black-Scholes option valuation model were as follows:

For the year ended		2017				2016				2015
Stock options granted		8				8				8
Weighted-average grant-date fair value per share		$	8.68			$	6.94			$	14.79
Average expected life in years		5.5				5.5				5.6
Weighted-average expected volatility		46		%		47		%		45		%
Weighted-average risk-free interest rate		1.8		%		1.7		%		1.7		%

Stock price volatility was based on an average of historical volatility and the implied volatility derived from traded options on our 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.

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

As of August 31, 2017, there were 19 million shares of Restricted Stock Awards outstanding, of which 3 million were performance-based or market-based. For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth increments during each year of employment after the grant date. Vesting for performance-based awards is contingent upon the Company meeting a specified return on assets ("ROA"), as defined, over a three-year performance period and vesting for market-based Restricted Stock Awards is contingent upon the Company achieving total shareholder return ("TSR") relative to the companies included in the S&P 500 over a three-year performance period. At the end of the performance period, the number of actual shares to be awarded will vary between 0% and 200% of target amounts, depending upon the achievement level of the specified ROA or TSR. Restricted Stock Awards activity for 2017 is summarized as follows:

		Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding as of September 1, 2016		18			$	20.24
Granted		8			18.77
Restrictions lapsed		(6	)		19.53
Canceled		(1	)		20.59
Outstanding as of August 31, 2017		19			19.78

For the year ended		2017				2016				2015
Restricted stock award shares granted		8				10				7
Weighted-average grant-date fair value per share		$	18.77			$	15.40			$	32.60
Aggregate vesting-date fair value of shares vested		$	115			$	71			$	155

Stock-based Compensation Expense

For the year ended		2017				2016				2015
Stock-based compensation expense by caption
Cost of goods sold		$	88			$	76			$	64
Selling, general, and administrative		75				66				61
Research and development		52				49				42
Other		—				—				1
		$	215			$	191			$	168
Stock-based compensation expense by type of award
Stock options		$	71			$	79			$	81
Restricted stock awards		144				112				87
		$	215			$	191			$	168

Stock-based compensation expense of $20 million and $18 million was capitalized and remained in inventory as of August 31, 2017 and September 1, 2016, respectively. As of August 31, 2017, $341 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2021, resulting in a weighted-average period of 1.2 years.

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 plan under which U.S. employees may contribute up to 75% of their eligible pay (subject to 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) plans was $52 million, $54 million, and $55 million in 2017, 2016, and 2015, respectively.

Retirement Plans

We have pension plans in various countries available to local employees which are generally government mandated. As of August 31, 2017, the projected benefit obligations of our plans were $175 million and plan assets were $150 million. As of September 1, 2016, the projected benefit obligations of our plans were $167 million and plan assets were $131 million. Pension expense was not material for 2017, 2016, or 2015.

Restructure and Asset Impairments

In separate transactions in 2017, we sold our assembly and test facility located in Akita, Japan and our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets related to Lexar. As a result, we recognized gains of $15 million in 2017 and expect to recognize an additional gain of approximately $100 million in 2019 upon the completion of the sale of the Singapore facility.

In 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities. The plan included the elimination of certain projects and programs, the permanent closure of a number of open headcount requisitions, workforce reductions in certain areas of our business, and other non-headcount related spending reductions. As a result, we incurred charges of $33 million in 2017 and $58 million in 2016 and do not expect to incur additional material charges. As of September 1, 2016, we had accrued liabilities of $24 million related to the plan, which was paid in 2017.

Other Operating (Income) Expense, Net

For the year ended		2017				2016				2015
(Gain) loss on disposition of property, plant, and equipment		$	(22	)		$	(4	)		$	(17	)
Other		5				(2		)		(28		)
		$	(17	)		$	(6	)		$	(45	)

Other Non-Operating Income (Expense), Net

For the year ended		2017				2016				2015
Loss on debt repurchases and conversions		$	(100	)		$	(4	)		$	(49	)
Loss from changes in currency exchange rates		(74		)		(24		)		(27		)
Gain on remeasurement of previously-held equity interest in Inotera		71				—				—
Other		(9		)		(26		)		23
		$	(112	)		$	(54	)		$	(53	)

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

Income Taxes

For the year ended		2017				2016				2015
Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees
Foreign		$	5,252			$	(353	)		$	2,431
U.S.		(56		)		72				178
		$	5,196			$	(281	)		$	2,609
Income tax (provision) benefit
Current
Foreign		$	(152	)		$	(27	)		$	(93	)
State		(1		)		(1		)		(1		)
U.S. federal		—				—				6
		(153		)		(28		)		(88		)
Deferred
Foreign		39				(32		)		(85		)
State		—				2				1
U.S. federal		—				39				15
Income tax (provision) benefit		$	(114	)		$	(19	)		$	(157	)

Income tax (provision) benefit computed using the U.S. federal statutory rate reconciled to income tax (provision) benefit was as follows:

For the year ended		2017				2016				2015
U.S. federal income tax (provision) benefit at statutory rate		$	(1,819	)		$	98			$	(913	)
Foreign tax rate differential		1,571				(300		)		515
Change in valuation allowance		64				63				260
Change in unrecognized tax benefits		12				52				(118		)
Tax credits		66				48				53
Noncontrolling investment transactions		—				—				57
Other		(8		)		20				(11		)
Income tax (provision) benefit		$	(114	)		$	(19	)		$	(157	)

We operate in a number of tax jurisdictions, including Singapore and Taiwan, where our earnings are indefinitely reinvested and are taxed at lower effective tax rates than the U.S. statutory rate and in a number of locations outside the United States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements, which expire in whole or in part at various dates through 2030, reduced our tax provision by $742 million (benefiting our diluted earnings per share by $0.64) for 2017, were not material in 2016, and by $338 million ($0.29 per diluted share) for 2015.

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		2017				2016
Deferred tax assets
Net operating loss and tax credit carryforwards		$	3,426			$	3,014
Accrued salaries, wages, and benefits		211				142
Other accrued liabilities		59				76
Other		86				65
Gross deferred tax assets		3,782				3,297
Less valuation allowance		(2,321		)		(2,107		)
Deferred tax assets, net of valuation allowance		1,461				1,190
Deferred tax liabilities
Debt discount		(145		)		(170		)
Property, plant, and equipment		(300		)		(135		)
Unremitted earnings on certain subsidiaries		(123		)		(121		)
Product and process technology		(85		)		(81		)
Other		(59		)		(28		)
Deferred tax liabilities		(712		)		(535		)
Net deferred tax assets		$	749			$	655
Reported as
Deferred tax assets		$	766			$	657
Deferred tax liabilities (included in other noncurrent liabilities)		(17		)		(2		)
Net deferred tax assets		$	749			$	655

We continually 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 August 31, 2017 and September 1, 2016, we had a valuation allowance of $1.52 billion and $1.16 billion, respectively, against U.S. net deferred tax assets, primarily related to net operating loss and tax credit carryforwards. Income taxes on U.S. operations for 2017, 2016, and 2015 were substantially offset by changes in the valuation allowance. We had valuation allowances against net deferred tax assets, primarily related to net operating loss carryforwards, for our subsidiaries in Japan and for our other foreign subsidiaries, of $627 million and $172 million, respectively, as of August 31, 2017, and $765 million and $177 million, respectively, as of September 1, 2016. Changes in the valuation allowance were due to the effect of income or loss in the United States, changes in foreign currency, adjustments based on management's assessment of foreign net operating losses that are more likely than not to be realized. Due to the adoption of ASU 2016-09, we recognized deferred tax assets of $325 million offset by an equal increase in valuation allowance. See "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Recently Adopted Accounting Standards."

As of August 31, 2017, 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				Taiwan				Other Foreign				Total
2018 - 2022		$	—			$	27			$	3,485			$	473			$	680			$	4,665
2023 - 2027		—				330				587				685				6				1,608
2028 - 2032		3,027				1,277				—				—				—				4,304
2033 - 2037		852				320				—				—				—				1,172
Indefinite		—				—				—				342				45				387
		$	3,879			$	1,954			$	4,072			$	1,500			$	731			$	12,136

As of August 31, 2017, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Tax Credit Expiration		U.S. Federal				State				Total
2018 - 2022		$	48			$	62			$	110
2023 - 2027		99				37				136
2028 - 2032		64				76				140
2033 - 2037		205				1				206
Indefinite		—				57				57
		$	416			$	233			$	649

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. No provision has been made for taxes due on approximately $12.91 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.

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

For the year ended		2017				2016				2015
Beginning unrecognized tax benefits		$	304			$	351			$	228
Increases due to the Inotera Acquisition		54				—				—
Increases related to tax positions taken in current year		15				5				119
Foreign currency translation increases (decreases) to tax positions		2				—				(6		)
Settlements with tax authorities		(47		)		(47		)		(1		)
Expiration of statute of limitations		(1		)		(5		)		(6		)
Increases related to tax positions from prior years		—				—				17
Ending unrecognized tax benefits		$	327			$	304			$	351

As of the date of the Inotera Acquisition, Inotera's net operating loss carryforwards were $654 million, which expire on various dates through 2023. In connection with the Inotera Acquisition, we assumed $54 million of uncertain tax positions. The decrease in unrecognized tax benefits in 2017 and 2016 is primarily related to favorable resolution of certain tax matters.

Included in the unrecognized tax benefits balance in the table above as of August 31, 2017 were $8 million of unrecognized income tax benefits, which if recognized, would affect our effective tax rate. The amount accrued for interest and penalties related to uncertain tax positions was not material for any period presented. The resolution of tax audits or expiration 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 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 2013 through 2017. In addition, tax returns that remain open to examination in Japan range from the years 2011 to 2017 and in Singapore and Taiwan from 2012 to 2017. 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		2017				2016				2015
Net income (loss) attributable to Micron – Basic		$	5,089			$	(276	)		$	2,899
Dilutive effect related to equity method investment		—				—				(3		)
Net income (loss) attributable to Micron – Diluted		$	5,089			$	(276	)		$	2,896
Weighted-average common shares outstanding – Basic		1,089				1,036				1,070
Dilutive effect of equity plans and convertible notes		65				—				100
Weighted-average common shares outstanding – Diluted		1,154				1,036				1,170
Earnings (loss) per share
Basic		$	4.67			$	(0.27	)		$	2.71
Diluted		4.41				(0.27		)		2.47

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		2017			2016			2015
Equity plans		21			60			18
Convertible notes		26			119			18

Segment Information

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

Compute and Networking Business Unit ("CNBU"): Includes memory products sold into compute, networking, graphics, and cloud server markets.

Storage Business Unit ("SBU"): Includes memory and storage products sold into enterprise, client, cloud, and removable storage markets. SBU also includes products sold to Intel through our IMFT joint venture.

Mobile Business Unit ("MBU"): Includes memory products sold into smartphone, tablet, and other mobile-device markets.

Embedded Business Unit ("EBU"): Includes memory products sold into automotive, industrial, connected home, and consumer electronics markets.

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

We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments. As of August 31, 2017, CNBU, MBU, SBU, and EBU had goodwill of $832 million, $198 million, $101 million, and $97 million, respectively and as of September 1, 2016, SBU and CNBU had goodwill of $101 million and $3 million, respectively.

For the year ended		2017				2016				2015
Net sales
CNBU		$	8,624			$	4,529			$	6,725
SBU		4,514				3,262				3,687
MBU		4,424				2,569				3,692
EBU		2,695				1,939				1,999
All Other		65				100				89
		$	20,322			$	12,399			$	16,192
Operating income (loss)
CNBU		$	3,755			$	(25	)		$	1,549
SBU		552				(123		)		(39		)
MBU		927				97				1,166
EBU		975				473				459
All Other		23				28				44
		$	6,232			$	450			$	3,179
Unallocated
Stock-based compensation		$	(215	)		$	(191	)		$	(167	)
Restructure and asset impairments		(18		)		(67		)		(3		)
Flow-through of Inotera inventory step up		(107		)		—				—
Other		(24		)		(24		)		(11		)
		$	(364	)		$	(282	)		$	(181	)
Operating income		$	5,868			$	168			$	2,998

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

For the year ended		2017				2016				2015
CNBU		$	1,344			$	1,141			$	1,053
SBU		1,083				844				761
MBU		926				580				512
EBU		484				379				321
All Other		13				20				9
Unallocated		11				16				11
		$	3,861			$	2,980			$	2,667

Product Sales

For the year ended		2017				2016				2015
DRAM		$	12,963			$	7,207			$	10,339
Trade NAND		6,228				4,138				4,811
Non-Trade		553				501				463
Other		578				553				579
		$	20,322			$	12,399			$	16,192

Non-Trade primarily consists of NAND and 3D XPoint products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost. Information regarding products that combine both NAND and DRAM components is reported within Trade NAND. Other includes sales of NOR and trade 3D XPoint products.

Certain Concentrations

Markets with concentrations of net sales were approximately as follows:

For the year ended		2017			2016			2015
Compute and graphics		20	%		20	%		25	%
Mobile		20	%		20	%		25	%
SSDs and other storage		20	%		20	%		20	%
Automotive, industrial, medical, and other embedded		15	%		15	%		10	%
Server		15	%		10	%		15	%

Sales to Kingston, as a percentage of total net sales, were 10% and 11% for 2017 and 2015, respectively. Sales to Intel, including Non-Trade sales through IMFT, as a percentage of total net sales, were 14% for 2016 and no other customer exceeded 10% of our total net sales. Substantially all of our sales to Kingston were included in our CNBU and SBU segments and substantially all of our sales to Intel were included in our SBU and CNBU segments.

We generally have multiple sources of supply for our raw materials and production equipment; however, only a limited number of suppliers are capable of delivering certain raw materials and production equipment that meet our standards 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, 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 and monitoring credit risk of bank counterparties on an ongoing basis. A concentration of credit risk may exist with respect to receivables of certain customers. We perform ongoing credit evaluations of customers worldwide and generally do not require collateral from our customers. Historically, we have not experienced material losses on receivables. A concentration of risk may also exist with respect to derivatives 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 calls 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.

Geographic Information

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

For the year ended		2017				2016				2015
China		$	10,388			$	5,301			$	6,658
United States		2,763				1,925				2,565
Taiwan		2,544				1,521				2,241
Asia Pacific (excluding China and Japan)		1,808				1,610				2,037
Europe		1,360				937				1,248
Japan		1,025				831				1,026
Other		434				274				417
		$	20,322			$	12,399			$	16,192

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

As of		2017				2016
Taiwan		$	6,519			$	2,081
Singapore		5,261				5,442
United States		4,253				3,890
Japan		2,827				2,685
China		453				491
Other		118				97
		$	19,431			$	14,686

Quarterly Financial Information (Unaudited)

(in millions except per share amounts)

2017		Fourth Quarter				Third Quarter				Second Quarter				First Quarter
Net sales		$	6,138			$	5,566			$	4,648			$	3,970
Gross margin		3,112				2,609				1,704				1,011
Operating income		2,502				1,963				1,044				359
Net income		2,369				1,647				894				180
Net income attributable to Micron		2,368				1,647				894				180
Earnings per share
Basic		$	2.13			$	1.49			$	0.81			$	0.17
Diluted		1.99				1.40				0.77				0.16

The second quarter of 2017 includes Inotera's results of operations from the December 6, 2016 acquisition date as well as a non-operating gain of $71 million for the revaluation of our previously-held 33% equity interest in Inotera to its fair value. (See "Acquisition of Inotera" note.) Results of operations in the fourth and third quarters of 2017 included losses of $37 million and $61 million, respectively, related to the repurchases and conversions of debt.

2016		Fourth Quarter				Third Quarter				Second Quarter				First Quarter
Net sales		$	3,217			$	2,898			$	2,934			$	3,350
Gross margin		579				498				579				849
Operating income (loss)		(32		)		(27		)		(5		)		232
Net income (loss)		(170		)		(215		)		(96		)		206
Net income (loss) attributable to Micron		(170		)		(215		)		(97		)		206
Earnings (loss) per share
Basic		$	(0.16	)		$	(0.21	)		$	(0.09	)		$	0.20
Diluted		(0.16		)		(0.21		)		(0.09		)		0.19

Results of operations in the fourth quarter of 2016 included charges of $58 million related to restructure activities initiated in 2016.

Report of Independent Registered Public Accounting Firm

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

In our opinion, the consolidated financial statements listed in the index appearing under Item 8 present fairly, in all material respects, the financial position of Micron Technology, Inc. and its subsidiaries as of August 31, 2017 and September 1, 2016, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2017 in 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 15(a)(2) 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 August 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these 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's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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.

A company'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'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'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.

As described in Management's Report on Internal Control over Financial Reporting, management has excluded Inotera Memories, Inc. ("Inotera") from its assessment of internal control over financial reporting as of August 31, 2017, because it was acquired by the Company in a purchase business combination during the fiscal year ended August 31, 2017. We have also excluded Inotera from our audit of internal control over financial reporting. Inotera is a wholly-owned subsidiary whose total assets and total revenues excluded from management's assessment and our audit of internal control over financial reporting represent 11% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended August 31, 2017.

/s/ PricewaterhouseCoopers LLP

San Jose, California

October 26, 2017