Crucial 2014 Annual Report Download - page 82

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80
MP Mask
In 2006, we formed a joint venture with Photronics to produce photomasks for leading-edge and advanced next generation
semiconductors. The MP Mask joint venture agreement allows either party to terminate the joint venture in either May 2016,
provided notice is given prior to May 2015, or in each five-year successive period following May 2016, provided such notice is
given at least twelve months prior to the end of the successive five-year period. At inception and through August 28, 2014, we
owned approximately 50% and Photronics owned approximately 50% of MP Mask. We contributed $21 million to MP Mask
and Photronics contributed $20 million to MP Mask in 2012. We purchase a substantial majority of the photomasks produced
by MP Mask pursuant to a supply arrangement.
The following table presents the assets and liabilities of MP Mask included in our consolidated balance sheets:
As of 2014 2013
Current assets $ 24 $ 26
Noncurrent assets (primarily property, plant and equipment) 203 182
Current liabilities 28 25
Noncurrent liabilities 14 —
Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.
Creditors of MP Mask have recourse only to MP Mask's assets and do not have recourse to any other of our assets.
In February 2012, we sold to Photronics for $35 million a photomask production facility we had leased to them under an
operating lease. The proceeds were equal to our net carrying value and no gain or loss was realized from the sale.
MMT
As of August 29, 2013, noncontrolling interests in MMT were 11%. In 2014, we purchased additional interests in MMT
for an aggregate of $146 million, and as of August 28, 2014, noncontrolling interests in MMT were less than 1%. Substantially
all of the MMT shares purchased in 2014 were financed with a short-term loan from a seller. As a result of the purchases of
MMT shares in 2014, in aggregate, noncontrolling interests decreased by $180 million and additional capital increased by $34
million. (See "Debt – Other Notes Payable" note.)
Derivative Instruments
We use derivative instruments to manage a portion of our exposure to changes in currency exchange rates from our
monetary assets and liabilities and to reduce the volatility that changes in interest rates on variable-rate debt have on our
earnings. We also have convertible note settlement obligations which became derivative instruments as a result of our elections
to settle conversions in cash. We do not use derivative instruments for speculative purpose.
Derivative Instruments without Hedge Accounting Designation
Currency Derivatives: We use derivative instruments to manage a portion of our exposure to changes in currency
exchange rates from our monetary assets and liabilities. Our primary objective in entering into currency derivatives is to
reduce the volatility that changes in currency exchange rates have on our earnings.
To hedge our exposures to monetary assets and liabilities, we generally utilize a rolling hedge strategy with currency
forward contracts that mature within 35 days. At the end of each reporting period, monetary assets and liabilities denominated
in currencies other than the U.S. dollar are remeasured in U.S. dollars and the associated outstanding forward contracts are
marked-to-market. Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or
exchange quotations (Level 2 fair value measurements). In connection with the currency exchange rate risk associated with the
MMJ Acquisition in July 2013, we entered into currency exchange transactions (the "MMJ Acquisition Hedges"). The MMJ
Acquisition Hedges were not designated for hedge accounting and were remeasured at fair value each period. We recorded
losses from the MMJ Acquisition Hedges of $228 million in 2013 and gains of $8 million in 2012. To mitigate the risk of the
yen strengthening against the U.S. dollar on the MMJ creditor installment payments due in December 2014 and December
2015, we entered into forward contracts to purchase 20 billion yen on November 28, 2014 and 10 billion yen on November 27,
2015.