(1) The company’s results of operations for the second quarter of fiscal 2009, the first nine months of fiscal 2009 and the first nine months of fiscal 2008 include charges of $234 million, $603 million and $77 million, respectively, to write down the carrying value of work in process and finished goods inventories of memory products (both DRAM and NAND Flash) to their estimated market values.
(2) In the second quarter of fiscal 2009, in response to a sustained severe downturn in the semiconductor memory industry and global economic conditions, the company announced that it would phase out all remaining 200mm wafer manufacturing operations at its Boise, Idaho, facility. In the first quarter of fiscal 2009, the company announced a restructuring of its memory operations. As part of the restructure announced in the first quarter, IM Flash Technologies (“IMFT”), a joint venture between the company and Intel Corporation, terminated its agreement with the company to supply NAND Flash memory from the company’s Boise facility, reducing IMFT’s NAND Flash production by approximately 35,000 200mm wafers per month. As a result of these actions, the company recorded a restructure charge of $19 million and $105 million in the third quarter and second quarter of fiscal 2009, respectively, and a net $66 million credit to restructure in the first quarter of fiscal 2009.
(3) In the second quarter of fiscal 2009, in accordance with FASB Statement No. 142, “Goodwill and Other Intangible Assets,” the company performed a test to determine whether its goodwill associated with its Imaging segment was impaired. Based on the results of the test, the company wrote off the $58 million of goodwill associated with its Imaging segment as of March 5, 2009. Additionally, in the second quarter of fiscal 2008, the company wrote off the $463 million of goodwill associated with its Memory segment as of February 28, 2008.
(4) Other operating (income) expense for the third quarter and first nine months of fiscal 2009 includes losses of $12 million and $55 million, respectively, on disposals of semiconductor equipment and losses of $28 million and $25 million, respectively, from changes in currency exchange rates. Other operating (income) expense for the third quarter of fiscal 2009 includes a loss of $53 million to write down the carrying value of certain long-lived assets in connection with the company’s planned sale of a majority interest in its Aptina imaging solutions business. Other operating (income) expense for the third quarter and first nine months of 2008 included gains of $13 million and $70 million, respectively, on disposals of semiconductor equipment. Other operating (income) expense for the first nine months of 2008 included a gain of $38 million for receipts from the U.S. government in connection with anti-dumping tariffs and losses of $33 million from changes in currency exchange rates.
(5) Income taxes for fiscal 2009 and 2008 primarily reflect taxes on the company’s non-U.S. operations and U.S. alternative minimum tax. The company has a valuation allowance for its net deferred tax asset associated with its U.S. operations. Tax attributable to U.S. operations in fiscal 2009 and 2008 were substantially offset by changes in the valuation allowance.
(6) In the first quarter of fiscal 2009, the company acquired from Qimonda AG approximately 35.5% of the outstanding common stock of Inotera Memories, Inc. (“Inotera”) in a series of transactions for $398 million. The company’s results of operations for the third quarter and second quarter of fiscal 2009 include charges of $43 million and $56 million, respectively, for its share of the equity in net losses of Inotera. The carrying value of the company’s investment in Inotera as of June 4, 2009 was $261 million.
In connection with the acquisition, the company entered into a loan agreement with Nan Ya Plastics Corporation (“NPC”), pursuant to which NPC made a loan to the company in the principal amount of $200 million, the proceeds of which were used to pay for a portion of the purchase price of the shares in Inotera. In addition, the company entered into a loan agreement with Inotera, pursuant to which Inotera made a loan to the company in the principal amount of $85 million. The loan from Inotera was repaid in the third quarter of fiscal 2009. The loans were recorded at their fair values and reflect an aggregate discount of $31 million from their face amounts. The aggregate discount was reflected as a reduction in the basis of the company’s investment in Inotera.
(7) In the third and second quarters of fiscal 2009, the company received $104 million and $97 million, respectively, in proceeds from term loans from the Singapore Economic Development Board (“EDB”). The proceeds of the loans were used to make additional contributions into the company’s TECH Semiconductor joint venture subsidiary. The loan agreement requires that TECH use the proceeds from the company’s equity contributions to purchase production assets and meet certain production milestones related to the implementation of advanced process manufacturing. The loan contains a covenant that limits the amount of indebtedness TECH can incur without approval from the EDB. The loan is collateralized by the Company’s shares in TECH up to a maximum of 66% of TECH’s outstanding shares.
In the third quarter of fiscal 2009, the company issued $230 million of
4.25% Convertible Senior Notes due October 15, 2013 (the “Senior
Notes”). The initial conversion rate for the Senior Notes is 196.7052
shares of common stock per $1,000 principal amount of Senior Notes. This
is equivalent to an initial conversion price of approximately $5.08 per
share of common stock. Holders of the Senior Notes may convert the
Senior Notes at any time prior to maturity, unless previously redeemed
or repurchased. The company may redeem all or part of the Senior Notes
at any time after April 19, 2012 if the last reported sale price of
common stock has been at least 135% of the conversion price for a
specified period of time.
