Intel 2012 Annual Report Download - page 72
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As part of the agreements to modify our joint venture relationship, we also entered into an amended operating agreement
for IMFT. This amended operating agreement extends the term of IMFT to 2024, unless earlier terminated under certain
terms and conditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to
NAND flash memory. These agreements include a supply agreement for Micron to supply us with NAND flash memory
products. We provided approximately $365 million to Micron in the second quarter of 2012, primarily for subsequent
product purchases under the supply agreement with Micron. A substantial majority of this $365 million is reflected as a
cash flow used for operating activities. The agreements also extend our NAND joint development program with Micron
and expand it to include emerging memory technologies. Additionally, the amended agreement provides for certain rights
that, beginning in 2015, will enable us to sell to Micron, or enable Micron to purchase from us, our interest in IMFT. If Intel
exercises this right, Micron would set the closing date of the transaction within two years following such election and could
elect to receive financing from Intel for one to two years.
The closing of the joint venture expansion did not have an impact on our consolidated statements of income.
These joint ventures are variable interest entities. All costs of the IMFT joint venture will be passed on to Micron and Intel
through our purchase agreements. Our portion of IMFT and IMFS costs, primarily related to product purchases and
production-related services, was approximately $705 million during 2012 (approximately $985 million during 2011 and
approximately $795 million during 2010). Subsequent to the sale of our ownership interest in IMFS in the second quarter
of 2012, we no longer incur costs related to IMFS. The amount due to IMFT for product purchases and services provided
was approximately $90 million as of December 29, 2012 (approximately $125 million as of December 31, 2011 due to
IMFT and IMFS). During 2012, IMFT returned $137 million to us, which is reflected as a return of equity method
investment within investing activities on the consolidated statements of cash flows ($263 million during 2011 and $197
million during 2010).
IMFT depends on Micron and Intel for any additional cash requirements. Our known maximum exposure to loss
approximated the carrying value of our investment balance in IMFT as of December 29, 2012. Except for the amount due
to IMFT for product purchases and services, we did not have any additional liabilities recognized on our consolidated
balance sheets in connection with our interest in this joint venture as of December 29, 2012. In addition, our potential
future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future
operating costs or obligations of IMFT. Future cash calls could also increase our investment balance and the related
exposure to loss. In addition, as we are currently committed to purchasing 49% of IMFT’s production output and
production-related services, we may be required to purchase products at a cost in excess of realizable value.
Under the accounting standards for consolidating variable interest entities, the consolidating investor is the entity with the
power to direct the activities of the venture that most significantly impact the venture’s economic performance and with the
obligation to absorb losses or the right to receive benefits from the venture that could potentially be significant to the
venture. We have determined that we do not have both of these characteristics; therefore, we have accounted for our
interest in IMFT and our prior interest in IMFS using the equity method of accounting.
Intel-GE Care Innovations, LLC
In the first quarter of 2011, Intel and General Electric Company (GE) formed Intel-GE Care Innovations, LLC (Care
Innovations), an equally owned joint venture in the healthcare industry, that focuses on independent living and delivery of
health-related services by means of telecommunications. The company was formed by combining assets of GE
Healthcare’s Home Health division and Intel’s Digital Health Group. As a result of forming Care Innovations, we
recognized a gain of $164 million in the first quarter of 2011 that was recorded in interest and other, net.
Care Innovations depends on Intel and GE for any additional cash requirements; therefore, it is a variable interest entity.
Our known maximum exposure to loss approximated the carrying value of our investment balance in Care Innovations as
of December 29, 2012.
Intel and GE equally share the power to direct all of Care Innovations’ activities that most significantly impact its economic
performance. As a result, we account for our interest in Care Innovations under the equity method of accounting.
SMART Technologies, Inc.
We hold an equity interest in SMART Technologies, Inc. and account for our interest using the equity method of
accounting. In 2010, SMART completed an initial public offering of shares approved for listing on The NASDAQ Global
Select Market*. We sold approximately 10 million of our 27.5 million shares in the secondary offering. We recognized a
gain of $181 million in 2010 on the initial public offering and subsequent sale of our shares in the secondary offering,
which is included in gains (losses) on equity investments, net.