Crucial 2015 Annual Report Download - page 106

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104
Commitments
Micron has provided various financial guarantees issued in the normal course of business on behalf of its subsidiaries.
These contracts include debt guarantees and guarantees on certain banking facilities. Micron enters into these arrangements to
facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. Micron has
entered into agreements covering certain activities of its subsidiaries, and occasionally Micron may be required to perform
under such agreements on behalf of its subsidiaries.
As of September 3, 2015, the maximum potential amount of future payments Micron could have been required to make
under its debt guarantees was approximately $655 million. Substantially all of this amount relates to guarantees for debt of
wholly-owned entities whereby Micron would be obligated to perform under the guarantee if a subsidiary were to default on
the terms of their debt arrangements. In the event of performance under the guarantee, Micron would be permitted to seek
reimbursement from the subsidiary company(s) through liquidation of the assets which were collateral under various debt
instruments. At the time these contracts were entered into, the collateralized assets approximated the value of the outstanding
guarantees. The majority of these guarantees expire at various times between March 2016 and February 2020. Micron
guarantees a credit facility of a subsidiary that provides for up to $750 million of financing. As of September 3, 2015, $75
million of principal amount was outstanding under this facility.
Micron guarantees certain banking facilities for its wholly-owned consolidated entities. Substantially all of these
guarantees relate to bank overdraft protections. The maximum potential amount of future payments Micron could be required
to make under these guarantees varies based on the extent of potential overdrafts. Micron's business processes substantially
mitigate the risk of wholly-owned subsidiaries overdrafting their bank accounts. The majority of these guarantees have no
contractual expiration.
Contingencies
As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in
the future assert, that Micron and its subsidiaries' products or manufacturing processes infringe their intellectual property rights.
Micron has accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted
and unasserted claims existing as of the balance sheet date. Micron is currently a party to various litigation regarding patent,
commercial, and other matters. Micron is a party to the matters listed in the "Contingencies" note in the consolidated financial
statements. For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to
Consolidated Financial Statements – Contingencies" of Micron's consolidated financial statements.
Redeemable Convertible Notes
For further information, see "Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated
Financial Statements – Redeemable Convertible Notes" of Micron's consolidated financial statements.
Related Party Transactions
Substantially all of Micron's activities relate to manufacturing services performed for a subsidiary and to royalties received
from its subsidiaries for use of product and process technology. Micron's net sales to consolidated subsidiaries were $5.42
billion, $5.64 billion, and $4.19 billion for 2015, 2014, and 2013, respectively. Gross margins on manufacturing activities are
commensurate with market rates for such services. Transactions between Micron and its consolidated subsidiaries are
eliminated in consolidation.
Micron engages in various transactions with its equity method investees and eliminates the profits or losses on those
transactions to the extent of its ownership interest until such time as the profits or losses are realized. Micron held an equity
interest in Aptina through August 15, 2014. Net sales for 2014 and 2013 included $43 million and $182 million, respectively,
from products sold to and services performed for Aptina.