Crucial 2012 Annual Report Download - page 84

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On May 7, 2010, in connection with the acquisition of Numonyx, we issued 137.7 million shares of our common stock and
issued 4.8 million restricted stock units. Of the common stock issued, 21 million shares were held in escrow as partial security
for Numonyx shareholders indemnity obligations. During 2011, the Numonyx shareholders sold all of the 21 million shares in
escrow. The shares held in escrow were included in diluted earnings per share but were excluded from basic earnings per
share. (See "Numonyx" note.)
Listed below are the potential common shares, as of the end of the periods shown, that could dilute basic earnings per
share in the future that were not included in the computation of diluted earnings per share because to do so would have been
antidilutive:
For the year ended 2012 2011 2010
Employee stock plans 104.8 81.4 92.2
Convertible notes 257.6 182.7 —
Our 2027 Notes and 2031 Notes contain terms that upon conversion require us to settle the aggregate principal amount in
cash and the remainder of our conversion obligation amount in either shares of our common stock or cash, at our election. Our
2014 Notes and 2032 Notes contain terms that upon conversion provide us the option to pay cash, issue shares of common
stock or any combination thereof for the aggregate amount due. It is our current intent to settle the principal amount of the
2014 Notes and 2032 Notes in cash upon conversion. As a result of these conversion terms, the 257.6 million shares
underlying the 2014 Notes, 2027 Notes, 2031 Notes and 2032 Notes are considered in diluted earnings per share under the
treasury stock method. (See "Debt" note.)
Consolidated Variable Interest Entities
IM Flash
We partnered with Intel to form IMFT in 2006 and IMFS in 2007 to manufacture NAND Flash memory products for the
exclusive use of the members. IMFT (and IMFS prior to April 6, 2012) is governed by a Board of Managers. The number of
managers appointed by each member to the board varies based on the members' respective ownership interests. The members'
ownership percentage is based on contributions to the partnership. We have owned 51% of IMFT from inception through
August 30, 2012. Our ownership percentage of IMFS had increased from 51% at inception to 82% as of April 6, 2012 due to a
series of contributions by us that were not fully matched by Intel.
On April 6, 2012, we entered into a series of agreements with Intel to restructure IM Flash. We acquired Intel's remaining
18% interest in IMFS for $466 million. In addition, we acquired IMFT's assets located at our Virginia wafer fabrication
facility, for which Intel received a distribution from IMFT of $139 million. For both transactions, the amounts Intel received
approximated the book values of Intel's interests in the assets acquired. Additionally, we received a $300 million deposit from
Intel which may be applied either to Intel's purchases of NAND Flash under a supply agreement or, under certain
circumstances, refunded.
The agreements also provided for the following:
• expansion of the scope of the IMFT joint venture to include certain emerging memory technologies;
• supply of NAND Flash memory products and certain emerging memory products to Intel on a cost-plus basis and
termination of IMFS's supply agreement with us and Intel;
• extension of IMFT's joint venture agreement through 2024;
• certain buy-sell rights, commencing in 2015, pursuant to which Intel may elect to sell to us, or we may elect to
purchase from Intel, Intel’s interest in IMFT (if Intel so elects, we 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);
• financing of $65 million provided by Intel to us under a two-year senior unsecured promissory note, payable with
interest in approximately equal quarterly installments; and
• termination of IMFT's lease to use approximately 50% of our Virginia fabrication facility, which resulted in a charge
to other operating expense of $17 million in 2012.