Overview

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

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

Variable Interest Entities

Micron Technology has interests in entities that are VIEs. If Micron Technologyare the primary beneficiary of a VIE, Micron Technologyare required to consolidate it. To determine if Micron Technologyare the primary beneficiary, Micron Technologyevaluate whether Micron Technologyhave 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. The company's evaluation includes identification of significant activities and an assessment of the company 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. Its assessments of whether Micron Technologyare the primary beneficiary of the company VIEs require significant assumptions and judgments.

Unconsolidated VIEs

Inotera : Prior to the company acquisition of the remaining interest in Inotera on December 6, 2016, Inotera was a VIE because of the terms of its supply agreement with it. Micron Technologyhad determined that Micron Technologydid not have the power to direct the activities of Inotera that most significantly impacted its economic performance, primarily due to limitations on the company's 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, Micron Technologydid not consolidate Inotera and Micron Technologyaccounted for the company's interest under the equity method. (See "Acquisition of Inotera" and "Equity Method Investments – Inotera" notes.)

**EQUVO **: EQUVO HK Limited ("EQUVO"), a special purpose entity, was created to facilitate an equipment sale-leaseback financing transaction between the company and a consortium of financial institutions. Neither Micron Technologynor the financing entities have an equity interest in EQUVO. EQUVO was a VIE because its equity was not sufficient to permit it to finance its activities without additional support from the financing entities and because the third-party equity holder lacked characteristics of a controlling financial interest. By design, the arrangement with EQUVO was merely a financing vehicle and Micron Technologydid not bear any significant risks from variable interests with EQUVO. Therefore, Micron Technologyhad determined that Micron Technologydid not have the power to direct the activities of EQUVO that most significantly impact its economic performance and Micron Technologydid not consolidate EQUVO. In February 2017, Micron Technologycompleted all of the company obligations under the sale-leaseback financing and no longer have any variable interests in EQUVO.

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

PTI Xi'an : Powertech Technology Inc. Xi'an ("PTI Xi'an") is a wholly-owned subsidiary of Powertech Technology Inc. ("PTI") and was created to provide assembly services to the company at manufacturing site in Xi'an, China. Micron Technologydo not have an equity interest in PTI Xi'an. PTI Xi'an is a VIE because of the terms of its service agreement with the company and its dependency on PTI to finance its operations. Micron Technologyhave determined that Micron Technologydo not have the power to direct the activities of PTI Xi'an that most significantly impact its economic performance, primarily because Micron Technologyhave no governance rights. Therefore, Micron Technologydo not consolidate PTI Xi'an.

Consolidated VIE

IMFT : IMFT is a VIE because all of its costs are passed to it and its other member, Intel, through product purchase agreements and because IMFT is dependent upon the company or Intel for additional cash requirements. The primary activities of IMFT are driven by the constant introduction of product and process technology. Because Micron Technologyperform a significant majority of the technology development, Micron Technologyhave the power to direct its key activities. In addition, IMFT manufactures certain products exclusively for it using the company technology. Micron Technologyconsolidate IMFT because Micron Technologyhave the power to direct the activities of IMFT that most significantly impact its economic performance and because Micron Technologyhave the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to it.

References