Crucial 2013 Annual Report Download - page 37

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Overview
For an overview of our business, see "Item 1 – Business – Overview." Our results of operations for 2013 were affected by
the following key transactions and events.
Acquisition of Elpida Memory, Inc.
On July 31, 2013, we completed our acquisition of Elpida Memory, Inc. ("Elpida"), a Japanese corporation, pursuant to the
terms and conditions of an Agreement on Support for Reorganization Companies (as amended, the "Sponsor Agreement") that
we entered into on July 2, 2012 with the trustees of Elpida and one of its subsidiaries, Akita Elpida Memory, Inc., a Japanese
corporation ("Akita" and, together with Elpida, the "Elpida Companies") pursuant to and in connection with the Elpida
Companies' pending corporate reorganization proceedings under the Corporate Reorganization Act of Japan. We paid $615
million for the acquisition of 100% of Elpida's equity. On July 31, 2013, we also acquired a 24% ownership interest in Rexchip
Electronics Corporation ("Rexchip''), a Taiwanese corporation and manufacturing joint venture formed by Powerchip
Technology Corporation ("Powerchip") and Elpida, from Powerchip and certain of its affiliates (the "Powerchip Group")
pursuant to a share purchase agreement. We paid $334 million in cash for the shares. Elpida and it's subsidiaries (the "Elpida
Group") own approximately 65% of Rexchip's outstanding common stock. Therefore, as a result of the consummation of our
acquisition of Elpida and the Rexchip shares from the Powerchip Group, we own approximately 89% of Rexchip's common
stock. The provisional fair values of assets and liabilities acquired include, among other items, cash and restricted cash
aggregating $1,618 million; inventories of $962 million; property, plant and equipment of $935 million; net deferred tax assets
of $917 million and debt of $2,134 million.
Elpida's assets include, among others: a 300mm DRAM wafer fabrication facility located in Hiroshima, Japan; its
ownership interest in Rexchip, whose assets include a 300mm DRAM wafer fabrication facility located in Taichung City,
Taiwan; and an assembly and test facility located in Akita, Japan. The Elpida and Rexchip fabrication facilities together
represent approximately one-third of our wafer capacity.
Elpida's semiconductor memory products include Mobile DRAM, targeted toward mobile phones and tablets. We believe
that combining the complementary product portfolios of Micron and Elpida strengthens our position in the memory market and
enables us to provide customers with a wider portfolio of high-quality memory solutions. We also believe that the Elpida
transaction strengthens our market position in the memory industry through increased research and development and
manufacturing scale, improved access to core memory market segments, and additional wafer capacity to balance among our
DRAM, NAND Flash and NOR Flash memory solutions. Elpida's operations are included primarily in the DSG and WSG
segments. Our results of operations for 2013 included approximately one month of operating results from the Elpida
operations, which accounted for sales of $355 million and net income of $29 million.
The Elpida Companies are currently subject to corporate reorganization proceedings under the Corporate Reorganization
Act of Japan. Both of the Elpida Companies have adopted plans of reorganization which set forth the treatment of the Elpida
Companies' pre-petition creditors and their claims, which plans were approved by the Elpida Companies' creditors and the
Tokyo District Court in February 2013. The plans of reorganization provide for payments by the Elpida Companies to their
secured and unsecured creditors in an aggregate amount of 200 billion yen (or the equivalent of approximately $2.05 billion as
of August 29, 2013), less certain expenses of the reorganization proceedings and certain other items. The plans of
reorganization provide for the Elpida Companies' pre-petition creditors to be paid in seven installments. The initial installment
payment of 60 billion yen ($615 million as of August 29, 2013), which amount is subject to reduction for certain items
specified in the Sponsor Agreement and plans of reorganization, was paid in October 2013. Substantially all of the $615
million that we paid in connection with the Elpida acquisition was deposited into accounts that are legally restricted for
payment to the secured and unsecured creditors of Elpida in October 2013 and was presented as restricted cash in the amount of
$556 million on our August 29, 2013 balance sheet. The remaining 140 billion yen (or the equivalent of approximately $1.43
billion as of August 29, 2013) of installment payments payable to the Elpida Companies' creditors are scheduled to be made by
the Elpida Companies in six annual installments payable beginning on December 31, 2014. Pursuant to the terms of the
Sponsor Agreement, we entered into a series of agreements with the Elpida Companies, including supply agreements, research
and development services agreements and general services agreements, which are intended to generate more stable operating
cash flows to meet the requirements of the Elpida Companies' businesses, including the funding of the installment payments to
the Elpida Companies' creditors. We anticipate that, once fully in effect, payments made under these agreements will generally
cover all of Elpida and Akita's costs.