Crucial 2014 Annual Report Download - page 114

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As of August 28, 2014, the maximum potential amount of future payments Micron could have been required to make under
its debt guarantees was approximately $610 million. Substantially all of this amount relates to guarantees for debt of wholly-
owned entities whereby Micron would be obligated to perform under the guarantee if a subsidiary were to default on the terms
of their debt arrangements. In the event of performance under the guarantee, Micron would be permitted to seek
reimbursement from the subsidiary company(s) through liquidation of the assets collateralized by the various debt instruments.
At the time these contracts were entered into, the collateralized assets approximated the value of the outstanding guarantees.
The majority of these guarantees expire at various times between December 2014 and January 2019. Micron also guarantees
credit facilities of certain of its subsidiaries that provide for up to $408 million of financing. As of August 28, 2014, no
amounts had been drawn under these credit facilities.
Micron guarantees certain banking facilities for its wholly-owned consolidated entities. Substantially all of these
guarantees relate to bank overdraft protections. The maximum potential amount of future payments Micron could be required
to make under these guarantees varies based on the extent of potential overdrafts. Micron's business processes substantially
mitigate the risk of wholly-owned subsidiaries overdrafting their bank accounts. The majority of these guarantees have no
contractual expiration.
Contingencies
As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in
the future assert, that Micron and its subsidiaries' products or manufacturing processes infringe their intellectual property rights.
Micron has accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted
and unasserted claims existing as of the balance sheet date. Micron is currently a party to various litigation regarding patent,
antitrust, commercial and other matters. Micron is a party to the matters listed in the "Contingencies" note in the consolidated
financial statements, with the exception of the complaint filed on July 12, 2013 by seven former shareholders of Elpida (now
known as MMJ) against the board of directors of MMJ as of February 2013 and the patent infringement case Tessera Inc.,
which was resolved on July 30, 2014. For further information, see "Part II – Item 8. Financial Statements and Supplementary
Data – Notes to Consolidated Financial Statements – Contingencies" to Micron's consolidated financial statements.
Redeemable Convertible Notes
For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated
Financial Statements – Redeemable Convertible Notes" to Micron's consolidated financial statements.
Related Party Transaction
Substantially all of Micron's activities relate to manufacturing services performed for a subsidiary and to royalties received
from its subsidiaries for use of product and process technology. Micron's net sales to consolidated subsidiaries were $5.64
billion, $4.19 billion and $4.15 billion for 2014, 2013 and 2012, respectively. Gross margins on manufacturing activities are
commensurate with market rates for such services. Transactions between Micron and its consolidated subsidiaries are
eliminated in consolidation.
Micron engages in various transactions with its equity method investees and eliminates the profits or losses on those
transactions to the extent of its ownership interest until such time as the profits or losses are realized. As of August 28, 2014,
Micron held a 50% ownership interest in Transform and, until August 15, 2014, an equity interest in Aptina. Net sales for
2014, 2013 and 2012 also included $43 million, $182 million and $372 million, respectively, from products sold to and services
performed for Aptina.
On August 15, 2014, ON Semiconductor Corporation acquired Aptina for approximately $433 million and Micron
recognized a non-operating gain of $119 million on the sale of its shares based on its diluted ownership interest of
approximately 27%. The gain approximated Micron's share of the consideration because the carrying value of its investment
had been reduced to zero since the second quarter of 2012, at which time Micron ceased recognizing its proportionate share of
Aptina's losses. For further information regarding transactions between Micron and its equity method investees, see "Part II –
Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity Method
Investments – Other" to Micron's consolidated financial statements.