Crucial 2015 Annual Report Download - page 14

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12
Debt obligations could adversely affect our financial condition.
In recent periods, our debt levels have increased due to the capital intensive nature of our business, business acquisitions,
and restructuring of our capital structure. As of September 3, 2015, we had debt with a carrying value of $7.34 billion. In
addition, the conversion value in excess of principal amount for our convertible notes outstanding as of September 3, 2015 was
$553 million. In 2015, we paid $1.43 billion to repurchase and settle conversion obligations for convertible notes with a
principal amount of $489 million. In 2014, we paid $2.30 billion to repurchase and settle conversion obligations for convertible
notes with a principal amount of $1.09 billion. As of September 3, 2015, we had (1) revolving credit facilities available that
provide for up to $842 million of additional financing and (2) a term loan agreement available to obtain financing collateralized
by certain property, plant, and equipment in the amount of 6.90 billion New Taiwan dollars or an equivalent amount in U.S.
dollars (approximately $213 million as of September 3, 2015), of which we drew $40 million in 2015. The availability of these
revolving and other facilities is subject to certain conditions, including outstanding balances of trade receivables; inventories;
collateralization of certain property, plant, and equipment; and other conditions. Events and circumstances may occur which
would cause us to not be able to satisfy these applicable drawdown conditions and utilize these facilities. We have in the past
and expect in the future to continue to incur additional debt to finance our capital investments, business acquisitions, and
restructuring of our capital structure.
Our debt obligations could adversely impact us. For example, these obligations could:
• require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of
cash flow available to fund working capital, capital expenditures, acquisitions, R&D expenditures, and other business
activities;
• continue to dilute our earnings per share as a result of the conversion provisions in our convertible notes;
• require us to continue to pay cash amounts substantially in excess of the principal amounts upon settlement of our
convertible notes to minimize dilution of our earnings per share;
• limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D,
and other general corporate requirements;
• adversely impact our credit rating, which could increase future borrowing costs; and
• increase our vulnerability to adverse economic and semiconductor memory industry conditions.
Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash
flows in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, and regulatory
factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow
from operations, or that additional capital will be available to us, in an amount sufficient to enable us to meet our debt payment
obligations and to fund other liquidity needs. If we are unable to generate sufficient cash flow to service our debt obligations,
we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional
capital. If we were unable to implement one or more of these alternatives, we may be unable to meet our debt payment
obligations, which could have a material adverse effect on our business, results of operations, or financial condition.
We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our
operations, make scheduled debt payments, and make adequate capital investments.
Our cash flows from operations depend primarily on the volume of semiconductor memory sold, average selling prices,
and manufacturing costs. To develop new product and process technologies, support future growth, achieve operating
efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital
equipment, facilities, R&D, and product and process technology. We estimate that cash expenditures in 2016 for property,
plant, and equipment will be approximately $5.3 billion to $5.8 billion. Investments in capital expenditures for 2015 were
$4.12 billion. In addition, as a result of the MMJ acquisition and our capacity expansion in Singapore, we expect our future
capital spending will be higher than our historical levels. As of September 3, 2015, we had cash and marketable investments of
$5.63 billion, which included $748 million held by the MMJ Group and $134 million held by IMFT, none of which is generally
available to finance our other operations.