Crucial 2011 Annual Report Download - page 203

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52
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
term loans are normally granted every year to the Company by syndicate banks, aside from the syndicate loans which were
already provided by these syndicate banks to the Company as of December 31, 2010. The unused balance from these
facilities amounted to approximately $19,000,000 as of December 31, 2010. Based on prior years’
experience,
management expects that these facilities will continue to be available to the Company even if and when the Company is
not in compliance with the relevant financial covenants from the syndicated loan agreements, as it was the case from time
to time in previous years. Banks continue to extend their credit facilities to the Company due partly to the Company’
s
affiliation with the Formosa Group which has a high financial standing in the banking community.
As a result of the necessary investment in connection with the technology conversion from 70nm trench to 50nm stack
process technology, the company reached a historical high in annual capital expenditures of approximately $55,000,000 in
2010. With this capex behind it, upcoming technology conversions are expected to be less capital-
intensive for the
foreseeable future. 2011 capital expenditures for the full conversion to 42nm plus a 3xnm pilot are expected to be
$17,000,000, approximately 70% down from 2010.
Consequently, management believes free cash flows provided by the Company’
s operation in 2011 will increase as
compared to 2010.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets
or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be
unable to continue as a going concern.
(Continued)
(c)
Use of credit facilities from other banks of approximately $2,000,000.
(d)
The completion of the full wafer-
start migration from 70 nanometer to 50 nanometer process technology in December 2010
is expected to have its full effect in improving production efficiency and reducing operating costs from the beginning of
2011. This, in turn, is expected to have a positive impact on operating results in 2011. On a quarter to quarter basis,
fully-loaded cost per chip decreased by approximately 24% in the 4
th
quarter of 2010 as compared to the 4
th
quarter of
2009. As the volume of wafer production and the number of good bits per wafer increases significantly, operating cash
flow is expected to improve assuming a stable or improving DRAM pricing environment. In order to further strengthen
cost competitiveness and revenue generation, the Company continues to migrate to more advanced technologies.