Micron Technology, Inc.
MICRON TECHNOLOGY INC (Form: 8-K, Received: 02/05/2013 16:06:13)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

February 5, 2013

Date of Report (date of earliest event reported)

 

MICRON TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

1-10658

 

75-1618004

(State or other jurisdiction of
incorporation)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

8000 South Federal Way

Boise, Idaho  83716-9632

(Address of principal executive offices)

 

(208) 368-4000

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

 

 

 



 

Item 7.01.     Regulation FD Disclosure.

 

The information set forth in this Item 7.01 is intended to be furnished under Item 7.01 of Form 8-K (Regulation FD Disclosure). This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. In addition, this information shall not be incorporated by reference into any registration statement filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless it is specifically incorporated by reference in such filing.

 

Micron Technology, Inc. (“Micron”) is furnishing certain financial information, updated disclosure regarding the proposed Elpida Acquisition (as defined below), and risk factors.

 

As previously reported, on July 2, 2012, Micron entered into an agreement with the trustees of Elpida Memory, Inc. (“Elpida”) and its subsidiary, Akita Elpida Memory, Inc. that provides for, among other things, Micron’s acquisition of 100% of the equity of Elpida (the “Elpida Acquisition”).  The audited consolidated financial statements of Elpida for the years ended March 31, 2012 and 2011 are attached hereto as Exhibit 99.1.

 

The unaudited consolidated financial statements of Elpida for the six months ended September 30, 2012 and 2011 are attached hereto as Exhibit 99.2.

 

The unaudited pro forma financial information for Micron, after giving effect to the proposed Elpida Acquisition and adjustments described in such pro forma financial information, are attached hereto as Exhibit 99.3.

 

Micron has updated its disclosure regarding the proposed Elpida Acquisition.  The revised disclosure is attached hereto as Exhibit 99.4.

 

Micron has updated its disclosure regarding its risk factors.  The revised disclosure is attached hereto as Exhibit 99.5.

 

Item 9.01.      Financial Statement and Exhibits.

 

(d)  Exhibits

 

The following exhibits are attached herewith:

 

Exhibit

 

Description

99.1

 

Elpida Memory, Inc.’s audited consolidated financial statements, including the report of Ernst & Young ShinNihon LLC, independent auditors, for the fiscal years ended March 31, 2012 and 2011

 

 

 

99.2

 

Elpida Memory, Inc.’s unaudited consolidated financial statements as of September 30, 2012 and for the six month periods ended September 30, 2012 and 2011

 

 

 

99.3

 

Unaudited pro forma financial information for Micron Technology, Inc., after giving effect to the proposed acquisition of Elpida Memory, Inc. and adjustments described in such pro forma financial information

 

 

 

99.4

 

Disclosure regarding the proposed acquisition of Elpida Memory, Inc.

 

 

 

99.5

 

Risk Factors

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

MICRON TECHNOLOGY, INC.

 

 

 

 

Date: February 5, 2013

By:

/s/ Ronald C. Foster

 

Name:

Ronald C. Foster

 

Title:

Chief Financial Officer and

 

 

Vice President of Finance

 

3



 

INDEX TO EXHIBITS FILED WITH

THE CURRENT REPORT ON FORM 8-K DATED FEBRUARY 5, 2013

 

Exhibit

 

Description

99.1

 

Elpida Memory, Inc.’s audited consolidated financial statements, including the report of Ernst & Young ShinNihon LLC, independent auditors, for the fiscal years ended March 31, 2012 and 2011

 

 

 

99.2

 

Elpida Memory, Inc.’s unaudited consolidated financial statements as of September 30, 2012 and for the six month periods ended September 30, 2012 and 2011

 

 

 

99.3

 

Unaudited pro forma financial information for Micron Technology, Inc., after giving effect to the proposed acquisition of Elpida Memory, Inc. and adjustments described in such pro forma financial information

 

 

 

99.4

 

Disclosure regarding the proposed acquisition of Elpida Memory, Inc.

 

 

 

99.5

 

Risk Factors

 

4


EXHIBIT 99.1

 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

 

(DEBTORS-IN-POSSESSION)

 

CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2012 and 2011

 



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012 and 2011

 

Table of Contents

 

 

Page

 

 

Independent Auditors’ Report

1

 

 

Consolidated Balance Sheets

2 - 3

 

 

Consolidated Statements of Operations

4

 

 

Consolidated Statements of Stockholders’ Equity and Comprehensive Loss, Redeemable Noncontrolling Interest and Redeemable Preferred Stock

5

 

 

Consolidated Statements of Cash Flows

6

 

 

Notes to Consolidated Financial Statements

7 - 40

 



 

Independent Auditors’ Report

 

The Trustee

Elpida Memory, Inc. (Debtors-in-Possession)

 

We have audited the accompanying consolidated balance sheets of Elpida Memory, Inc. and subsidiaries as of March 31, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity, comprehensive loss, redeemable noncontrolling interest and redeemable preferred stock, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Elpida Memory, Inc. and subsidiaries at March 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

 

The accompanying consolidated financial statements have been prepared assuming that Elpida Memory, Inc. will continue as a going concern. As more fully described in Note (1) to the consolidated financial statements, on February 27, 2012, Elpida Memory, Inc. filed a voluntary petition for reorganization under the Corporate Reorganization Act in Japan. Uncertainties inherent in the bankruptcy process raise substantial doubt about Elpida Memory, Inc.’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note (1). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

/s/ Ernst & Young ShinNihon LLC

Tokyo, Japan

December 5, 2012

 

1



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS

March 31, 2012 and 2011

(Yen in millions, except share data)

 

 

 

2012

 

2011

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

¥

51,428

 

¥

112,839

 

Accounts receivable, trade less allowance for doubtful accountsof ¥1,875 and ¥1,893 at March 31, 2012 and 2011, respectively

 

28,794

 

69,146

 

Accounts receivable, other less allowance for doubtful accountsof ¥914 at March 31, 2011

 

11,499

 

17,685

 

Inventories

 

81,053

 

73,840

 

Prepaid expense and other current assets

 

5,301

 

3,375

 

Total current assets

 

178,075

 

276,885

 

 

 

 

 

 

 

Property, plant, and equipment:

 

 

 

 

 

Land

 

504

 

4,219

 

Buildings and structures

 

36,615

 

117,298

 

Machinery and equipment

 

467,745

 

991,253

 

Furniture and fixtures

 

6,134

 

47,206

 

Construction in progress

 

13,728

 

24,656

 

Total property, plant, and equipment

 

524,726

 

1,184,632

 

Less accumulated depreciation and amortization

 

(195,287

)

(575,628

)

Net property, plant, and equipment

 

329,439

 

609,004

 

 

 

 

 

 

 

Investment securities

 

2,113

 

3,281

 

Investment in an affiliated company

 

3,172

 

9,532

 

Intangible assets

 

1,807

 

16,212

 

Other assets

 

680

 

3,285

 

 

 

 

 

 

 

Total assets

 

¥

515,286

 

¥

918,199

 

 

2



 

 

 

2012

 

2011

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities not subject to compromise:

 

 

 

 

 

Current portion of long-term debt

 

¥

27,840

 

¥

132,188

 

Current portion of obligations under capital leases

 

10,900

 

24,833

 

Accounts payable, trade

 

19,912

 

54,137

 

Accounts payable, other

 

4,726

 

29,542

 

Accrued income taxes

 

1,016

 

398

 

Accrued expenses and other current liabilities

 

13,574

 

28,600

 

Total current liabilities not subject to compromise

 

77,968

 

269,698

 

Long-term liabilities not subject to compromise:

 

 

 

 

 

Long-term debt, excluding current portion

 

10,849

 

204,968

 

Obligations under capital leases, excluding current portion

 

30,794

 

76,391

 

Liability for retirement benefits

 

5,261

 

3,914

 

Deferred income taxes

 

777

 

970

 

Other liabilities

 

1,702

 

7,766

 

Total long-term liabilities not subject to compromise

 

49,383

 

294,009

 

Total liabilities not subject to compromise

 

127,351

 

563,707

 

Liabilities subject to compromise

 

362,246

 

 

Total liabilities

 

489,597

 

563,707

 

Redeemable noncontrolling interest

 

19,550

 

20,800

 

Redeemable Type I preferred stock, Authorized 1,000,000 shares; issued and outstanding 1,000,000 shares at March 31, 2012 and 2011, respectively

 

10,554

 

10,554

 

Redeemable Type II preferred stock, Authorized 2,000,000 shares; issued 2,000,000 shares and outstanding 1,838,967 shares at March 31, 2012 and 2011, respectively

 

19,409

 

19,409

 

Stockholders’ equity:

 

 

 

 

 

Common stock, Authorized 400,000,000 shares; issued and outstanding 271,787,370 shares and 214,517,370 shares at March 31, 2012 and 2011, respectively

 

222,738

 

202,258

 

Additional paid-in capital

 

234,179

 

213,918

 

Accumulated deficit

 

(513,256

)

(152,822

)

Accumulated other comprehensive loss

 

(22,796

)

(19,318

)

Treasury stock, 1,518 and 1,476 common shares at March 31, 2012 and 2011, respectively, at cost

 

(5

)

(5

)

Total stockholders’ (deficit) equity attributable to Elpida Memory, Inc. and subsidiaries

 

(79,140

)

244,031

 

Noncontrolling interest

 

55,316

 

59,698

 

Total stockholders’ equity

 

(23,824

)

303,729

 

Total liabilities and stockholders’ equity

 

¥

515,286

 

¥

918,199

 

 

See accompanying notes to consolidated financial statements.

 

3



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended March 31, 2012 and 2011

(Yen in millions)

 

 

 

2012

 

2011

 

Net sales

 

¥

284,410

 

¥

511,636

 

Cost of sales

 

331,523

 

402,902

 

Gross (loss) profit

 

(47,113

)

108,734

 

Selling, general, and administrative expenses

 

64,201

 

67,718

 

Impairment charge

 

229,560

 

493

 

Operating (loss) income

 

(340,874

)

40,523

 

Equity in (loss) income of an equity method investee

 

(2,392

)

536

 

Interest income

 

236

 

206

 

Interest expense
(contractual interest expense of ¥8,576 for the year ended March 31, 2012)

 

8,445

 

10,897

 

Foreign exchange losses

 

(341

)

(8,295

)

Other expense, net

 

(7,737

)

(2,362

)

(Loss) income before reorganization items and income taxes

 

(359,553

)

19,711

 

Reorganization items, net

 

(3,505

)

 

(Loss) income before income taxes

 

(363,058

)

19,711

 

Income taxes:

 

 

 

 

 

Current

 

960

 

558

 

Deferred

 

(260

)

640

 

Net (loss) income

 

(363,758

)

18,513

 

Less:  Net (loss) income attributable to noncontrolling interest

 

(3,344

)

16,871

 

Net (loss) income attributable to Elpida Memory, Inc. and subsidiaries

 

¥

(360,414

)

¥

1,642

 

 

See accompanying notes to consolidated financial statements.

 

4



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY,

COMPREHENSIVE LOSS, REDEEMABLE NONCONTROLLING INTEREST

AND REDEEMABLE PREFERRED STOCK

Years ended March 31, 2012 and 2011

(Yen in millions, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

Additional
paid-in

 

Accumulated

 

Accumulated
other
comprehensive

 

Treasury

 

Stockholders’
(deficit) equity
attributable to
Elpida
Memory, Inc.
and

 

Noncontrolling

 

Total
stockholders’

 

Redeemable
noncontrolling

 

Redeemable Type I
preferred stock

 

Redeemable Type II
preferred stock

 

 

 

Shares

 

Amount

 

capital

 

deficit

 

loss

 

stock

 

Subsidiaries

 

interest

 

equity

 

interest

 

Shares

 

Amount

 

Shares

 

Amount

 

Balances at March 31, 2010

 

196,601,419

 

¥

189,650

 

¥

202,323

 

¥

(154,464

)

¥

(15,393

)

¥

(5

)

¥

222,111

 

¥

53,485

 

¥

275,596

 

¥

35,800

 

1,000,000

 

¥

10,204

 

2,000,000

 

¥

20,408

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

1,642

 

 

 

1,642

 

16,871

 

18,513

 

0

 

 

 

 

 

Net change in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investment securities, net of tax

 

 

 

 

 

(209

)

 

(209

)

 

(209

)

 

 

 

 

 

Retirement benefits, net of tax

 

 

 

 

 

(120

)

 

(120

)

1

 

(119

)

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

 

 

 

(3,596

)

 

(3,596

)

(1,476

)

(5,072

)

 

 

 

 

 

Total comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,283

)

15,396

 

13,113

 

0

 

 

 

 

 

 

 

 

 

Shares issued in connection with:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase of capital

 

16,470,200

 

11,803

 

11,803

 

 

 

 

23,606

 

 

23,606

 

 

 

 

 

 

Sale of subsidiary’s shares

 

 

 

 

 

 

 

 

(7,868

)

(7,868

)

 

 

 

 

 

Purchase of subsidiary’s shares

 

 

 

0

 

 

 

 

0

 

(900

)

(900

)

 

 

 

 

 

Redemption of subsidiary’s preferred stock

 

 

 

 

 

 

 

 

 

 

(15,000

)

 

 

 

 

Purchase of 15 common shares

 

 

 

 

 

 

(0

)

(0

)

 

 

 

 

 

 

 

Conversion of preferred stock

 

1,445,751

 

805

 

805

 

 

 

 

1,610

 

 

1,610

 

 

 

 

(161,033

)

(1,610

)

Increase in redeemable preferred stock

 

 

 

(961

)

 

 

 

(961

)

 

(961

)

 

 

350

 

 

611

 

Other, net

 

 

 

(52

)

 

 

 

(52

)

(415

)

(467

)

 

 

 

 

 

Balances at March 31, 2011

 

214,517,370

 

202,258

 

213,918

 

(152,822

)

(19,318

)

(5

)

244,031

 

59,698

 

303,729

 

20,800

 

1,000,000

 

10,554

 

1,838,967

 

19,409

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

(360,414

)

 

 

(360,414

)

(3,344

)

(363,758

)

0

 

 

 

 

 

Net change in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investment securities, net of tax

 

 

 

 

 

120

 

 

120

 

 

120

 

 

 

 

 

 

Retirement benefits, net of tax

 

 

 

 

 

(791

)

 

(791

)

1

 

(790

)

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

 

 

 

(2,807

)

 

(2,807

)

(987

)

(3,794

)

 

 

 

 

 

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(363,892

)

(4,330

)

(368,222

)

0

 

 

 

 

 

 

 

 

 

Shares issued in connection with:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase of capital

 

57,270,000

 

20,480

 

20,480

 

 

 

 

40,960

 

 

40,960

 

 

 

 

 

 

Sale of subsidiary’s preferred stock

 

 

 

 

 

 

 

 

 

 

3,750

 

 

 

 

 

Redemption of subsidiary’s preferred stock

 

 

 

 

 

 

 

 

 

 

(5,000

)

 

 

 

 

Purchase of 42 common shares

 

 

 

 

 

 

(0

)

(0

)

 

(0

)

 

 

 

 

 

Other, net

 

 

 

(219

)

(20

)

 

 

(239

)

(52

)

(291

)

 

 

 

 

 

Balances at March 31, 2012

 

271,787,370

 

¥

222,738

 

¥

234,179

 

¥

(513,256

)

¥

(22,796

)

¥

(5

)

¥

(79,140

)

¥

55,316

 

¥

(23,824

)

¥

19,550

 

1,000,000

 

¥

10,554

 

1,838,967

 

¥

19,409

 

 

See accompanying notes to consolidated financial statements.

 

5



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended March 31, 2012 and 2011

(Yen in millions)

 

 

 

2012

 

2011

 

Cash flows provided by operating activities:

 

 

 

 

 

Net (loss) income

 

¥

(363,758

)

¥

18,513

 

Adjustments to reconcile net (loss) income to cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

120,978

 

117,825

 

Impairment charge

 

229,560

 

493

 

Deferred income tax

 

(260

)

640

 

Allowance for doubtful accounts

 

(1,317

)

(226

)

Retirement benefits

 

1,321

 

609

 

Equity in loss (income) of equity method investees

 

2,392

 

(536

)

Impairment loss on investment securities

 

6,226

 

566

 

Loss (gain) on sale of equipment

 

47

 

(127

)

Loss on disposal of fixed assets

 

329

 

1,521

 

Gain on sales of subsidiary’s shares

 

(78

)

(674

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

Decrease in accounts receivable, trade

 

38,895

 

39,155

 

Decrease (increase) in accounts receivable, other

 

7,055

 

(6,343

)

Increase in inventories

 

(7,331

)

(1,802

)

Increase (decrease) in accounts payable, trade

 

2,653

 

(1,628

)

Increase (decrease) in accounts payable, other

 

12,476

 

(2,385

)

Other, net

 

(19,040

)

10,925

 

Cash provided by operating activities

 

30,148

 

176,526

 

Cash flows from investing activities:

 

 

 

 

 

Net increase in time deposits

 

(1

)

(1

)

Purchase of fixed assets

 

(65,126

)

(97,598

)

Proceeds from sales of property

 

429

 

985

 

Acquisition of subsidiaries’ stock

 

 

(15,245

)

Purchase of investment securities

 

(1,240

)

 

Proceeds from sale of subsidiaries, net of cash disposed

 

3,567

 

939

 

Purchase of intangible assets

 

(6,437

)

(6,581

)

Collection of loans receivable

 

 

5,686

 

Other, net

 

25

 

73

 

Net cash used in investing activities

 

(68,783

)

(111,742

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from short-term debt

 

6,032

 

3,191

 

Proceeds from long-term borrowings

 

11,452

 

 

Repayments of short-term debt

 

(6,032

)

(3,597

)

Repayments of long-term borrowings

 

(65,287

)

(130,196

)

Proceeds from issuance of bonds

 

27,462

 

66,720

 

Repayments of bonds

 

(30,000

)

(30,000

)

Proceeds from issuance of stock

 

40,746

 

23,201

 

Proceeds from sale and lease-back transactions

 

17,604

 

32,479

 

Principal payments on capital lease obligations

 

(23,780

)

(25,815

)

Net cash used in financing activities

 

(21,803

)

(64,017

)

Effect of exchange rate changes on cash and cash equivalents

 

(973

)

(1,266

)

Net decrease in cash and cash equivalents

 

(61,411

)

(499

)

Cash and cash equivalents at beginning of year

 

112,839

 

113,338

 

Cash and cash equivalents at end of year

 

¥

51,428

 

¥

112,839

 

 

See accompanying notes to consolidated financial statements.

 

6



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012 and 2011

(Yen in millions, except share data)

 

(1)             Description of Business, Basis of Presentation and Other Relevant Information

 

(a)             Description of Business and Basis of Presentation

 

Elpida Memory, Inc. (“Elpida”) was established in December 1999 as a joint venture owned 50% each by NEC Corporation and Hitachi, Ltd. under the Commercial Code of Japan. Its initial public offering was completed on November 15, 2004, in the First Section of the Tokyo Stock Exchange (the “TSE”).

 

Elpida and its subsidiaries (hereinafter referred to collectively as the “Company”) develop, design, manufacture and sell dynamic random access memory semiconductors (“DRAMs”). The Company’s product portfolio consists of two categories, premier DRAMs (for digital consumer electronics and mobile devices) and computing DRAMs (for servers and personal computers). The Company provides a wide variety of products to leading international electronics companies in Japan, Asia, North America and Europe. The Company has manufacturing facilities in Hiroshima (wafer processing) and in Akita (packaging and testing). Further, it has sales and marketing support offices in Japan, North America, Europe, Taiwan, Hong Kong and Singapore. In addition to its own manufacturing facilities, Elpida utilizes the foundry services of Rexchip Electronic Corporation (“Rexchip”) and Powerchip Technology Corporation (“PTC”) for the production of DRAMs for the computing market. Rexchip is Elpida’s consolidated subsidiary and PTC owns a 24.06% interest in Rexchip as a noncontrolling interest holder at March 31, 2012.

 

Elpida and its domestic subsidiaries maintain their records and prepare their consolidated financial statements in accordance with the provisions set forth in the Japan Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of generally accepted accounting principles in the United States of America. The accounts of foreign subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with accounting principles generally accepted in the United States of America. These adjustments include, but are not limited to, those related to the scope of consolidation and the accounting for business combinations, income taxes, goodwill and intangible assets, inventories, leases, stock-based compensation, revenue recognition, post-retirement benefits, depreciation and amortization, derivative instruments, accruals for certain expenses, and liabilities subject to compromise. These adjustments and reclassifications were not recorded in the statutory books of account.

 

(b)             Reorganization Proceedings

 

On February 27, 2012 (the “Petition Date”), Elpida and Akita Elpida Memory, Inc., a wholly owned subsidiary of Elpida, (collectively, the “Debtors”) filed voluntary petitions in the Tokyo District Court (the “Court”) to commence corporate reorganization proceedings under the Corporate Reorganization Act ( Kaisha Kosei Ho ) of Japan (the “Reorganization Act”).

 

7



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

On March 23, 2012, the Court made the order to commence such proceedings and appointed the incumbent President & CEO and an attorney-at-law as trustees. The Debtors are continuing to operate their business as a “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Reorganization Act and the orders of the Court. The Court also appointed and ordered an examiner to examine whether a reorganization plan (the “Plan”) and the related procedures are performed fairly.

 

On March 28, 2012, shares of Elpida were delisted from the Tokyo Stock Exchange.

 

On July 2, 2012, Micron Technology Inc. (“Micron”, a company established in the United States of America) and Elpida signed a definitive sponsor agreement whereby Micron would acquire and support Elpida.

 

On August 21, 2012, Elpida submitted the proposed reorganization plan to the Court. The Plan prepared by the trustees is based on the assumption that Elpida will receive financial support from Micron in accordance with the sponsorship agreement entered on July 2, 2012 and Elpida will pay the reorganization claims, and maintain and reorganize its business with such support.

 

On October 31, 2012, the Tokyo District Court made an order to refer the proposed reorganization plan submitted by Elpida to a resolution.

 

Under the Reorganization Act, the Court must confirm the Plan if it has been accepted by a certain number of creditors required under the Reorganization Act and meets other specific requirements including the examination of whether the Plan is in accordance with the Reorganization Act. In addition, even if such Plan cannot be accepted by the required number of creditors under the Reorganization Act, the Court may approve such Plan by modifying it and including a provision that is meant to protect the rights of the respective classes of creditors that opposed such Plan.

 

In relation to the Plan, no acceptance by the shareholders is required since Elpida is currently insolvent as a result of an appraisal of the properties performed by an appraiser appointed by the trustees. Under these circumstances, pursuant to Article 166, Paragraph 2 of the Reorganization Act, shareholders have no voting rights. Therefore, all of the issued and outstanding shares of Elpida will be acquired and cancelled without any compensation after the order of the confirmation of the Plan, and then the amount of the stated capital will be decreased and eliminated in accordance with the Plan.

 

There can be no assurance that the Plan will be confirmed by the Court and consummated. Furthermore, there can be no assurance that Elpida will be successful in achieving its reorganization goals.

 

Subsidiaries that are not included in the Plan continue to operate without the supervision of the Court and are not part of the bankruptcy proceedings.

 

(c)              Tokyo Stock Exchange Delisting Determination

 

On March 28, 2012, the Company’s common stock was delisted from the First Section of the TSE in accordance with Rule 601 of the Securities Listing Regulations due to the filing of the petition and commencement of reorganization proceedings.

 

On February 28, 2012, the Company’s 2nd and 3rd 130% Call Option Attached Unsecured Convertible Bonds with Stock Acquisition Rights were delisted from the TSE in accordance with Rule 921 of the Securities Listing Regulations due to the filing of the petition for the commencement of reorganization proceedings, which led to the Company’s forfeiture of the benefit of time.

 

8



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(d)             Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the Company is operating pursuant to the Reorganization Act and its continuation as a going concern is contingent upon, among other things, its ability to: (i) develop a plan of reorganization and obtain confirmation from the court, (ii) successfully implement the plan of reorganization, (iii) reduce debt and other liabilities through the reorganization process, (iv) return to profitability, and (v) generate sufficient cash flows from operations. These matters create substantial doubt about the Company’s ability to continue as a going concern. As a result of operating under the Reorganization Act, the realization of assets and the satisfaction of liabilities are subject to uncertainty. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability of assets and the classification of liabilities that might result from the outcome of these uncertainties. While operating as debtors-in-possession pursuant to the Reorganization Act, the Company may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Court or as otherwise permitted in the ordinary course of business for amounts other than those as reflected in the accompanying consolidated financial statements. Furthermore, the Plan, once confirmed, could materially change the amounts and classifications reported in the accompanying consolidated financial statements which do not give effect to any adjustments to the carrying values of assets or amounts of liabilities that might be necessary as consequence of the confirmation of the Plan.

 

(2)             Reorganization Disclosures

 

(a)             Financial Reporting in Reorganization

 

The Company has applied Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 852, Reorganizations , effective as of the Petition Date, which is applicable to companies in reorganization proceedings under US bankruptcy law, because reorganization proceedings under the Reorganization Act are similar to those under the US bankruptcy law. While ASC 852 generally does not change the manner in which financial statements are prepared, ASC 852 requires that the financial statements for periods subsequent to the petition filing distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses (including professional fees), realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business must be reported separately as reorganization items, except for those required to be reported as discontinued operations and extraordinary items, in the consolidated statements of operations. The balance sheet must distinguish pre-petition liabilities subject to compromise from pre-petition liabilities that are not subject to compromise and post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts as a result of the reorganization. In addition, cash receipts and payments resulting from the reorganization must be disclosed.

 

(b)             Condensed Combined Financial Information

 

The consolidated financial statements of the Company include entities which are not in the reorganization proceedings, the following presents condensed combined financial information of the entities in the reorganization proceedings. The condensed combined financial information has been prepared, in all material aspects, on the same basis as the consolidated financial statements of the Company.

 

9



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The financial information contained herein represents the condensed combined financial information for the Debtors only. Elpida’s non-Debtor subsidiaries are treated as non-consolidated subsidiaries in this presentation of combined financial information and as such their net loss is included as “equity losses from non-Debtor subsidiaries, net of tax” in the condensed combined statement of operations and their net assets are included as “investments in non-Debtor subsidiaries” in the condensed combined balance sheet. Intercompany transactions between the Debtors have been eliminated in this presentation of combined financial information contained herein. Intercompany transactions between the Debtors and non-Debtor subsidiaries have not been eliminated in the financial information and are reflected as Accounts receivable from non-Debtor subsidiaries and Accounts payable to non-Debtor subsidiaries.

 

Condensed Combined Debtors-in-Possession Balance Sheet

 

 

 

March 31, 2012

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

¥

14,864

 

Accounts receivable, net

 

10,280

 

Accounts receivable from non-Debtor subsidiaries

 

36,626

 

Inventories

 

68,750

 

Other current assets

 

10,213

 

Total current assets

 

140,733

 

Property, plant, and equipment, net of accumulated depreciation and amortization

 

134,458

 

Investment in non-Debtor subsidiaries

 

130,173

 

Other assets

 

4,340

 

Total assets

 

¥

409,704

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

Current liabilities:

 

 

 

Current portion of obligations under capital leases

 

¥

3,734

 

Accounts payable

 

12,114

 

Accounts payable to non-Debtor subsidiaries

 

37,471

 

Other liabilities

 

9,699

 

Total current liabilities

 

63,018

 

Long-term liabilities

 

33,617

 

Liabilities subject to compromise

 

362,246

 

Total liabilities

 

458,881

 

Temporary equity

 

29,963

 

Total stockholders’ deficit

 

(79,140

)

Total liabilities and stockholders’ deficit

 

¥

409,704

 

 

10



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Condensed Combined Debtors-in-Possession Statement of Operations

 

 

 

For the period
from February
27, 2012 through
March 31, 2012

 

Net sales

 

¥

25,751

 

Cost of sales

 

31,442

 

Gross loss

 

(5,691

)

Selling, general and administrative expenses

 

4,753

 

Operating losses

 

(10,444

)

Equity losses from non-Debtor subsidiaries, net of tax

 

(17,342

)

Reorganization items, net

 

(3,505

)

Other expense, net

 

(6,024

)

Loss before income tax

 

(37,315

)

Income tax

 

29

 

Net loss

 

¥

(37,344

)

 

Condensed Combined Debtors-in-Possession Statement of Cash Flows

 

 

 

For the period
from February
27, 2012 through
March 31, 2012

 

Net cash used in:

 

 

 

Operating activities

 

¥

(12,711

)

Investing activities

 

(690

)

Net decrease in cash and cash equivalents

 

(13,401

)

Cash and cash equivalents, beginning of period

 

28,265

 

Cash and cash equivalents, end of period

 

¥

14,864

 

 

(c)              Liabilities Subject to Compromise

 

Liabilities subject to compromise refers to pre-petition obligations which may be impacted by the petition filing. These liabilities represent the estimated amounts expected to be allowed on known or potential claims to be resolved through the reorganization proceedings.

 

In accordance with ASC 852, substantially all of the Company’s unsecured debt has been classified as liabilities subject to compromise. Additionally, certain of the Company’s undersecured debt has also been classified as liabilities subject to compromise due to an expected deficiency in collateral value.

 

Differences between the liability amounts Elpida and Elpida Akita estimated and the claims filed by creditors will be investigated and resolved in connection with the claim resolution process. Elpida will continue to evaluate these liabilities throughout the reorganization proceedings and adjust the amounts as necessary. Such adjustments may be material. In light of the expected number of creditors, the claims resolution process may take considerable time to complete. Accordingly, the ultimate settlement amounts of allowed claims are not presently known.

 

11



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The following table summarizes the components of liabilities subject to compromise included on the consolidated balance sheet at March 31, 2012:

 

 

 

2012

 

Long-term debt

 

¥

240,021

 

Accounts payable and other liabilities

 

63,027

 

Obligations under capital leases

 

59,198

 

Total liabilities subject to compromise

 

¥

362,246

 

 

(d)             Reorganization Items

 

Reorganization items, net represent amounts incurred and recorded subsequent to the petition filing as a direct result of the filing of the petition and commencement of reorganization proceedings and are comprised of the following for the year ended March 31, 2012:

 

 

 

2012

 

Settlement of long-term debt (*1)

 

¥

(238

)

Professional fees (*2)

 

244

 

Adjustments of bond issuance costs (*3)

 

448

 

Penalties (*4)

 

3,051

 

Total reorganization items, net

 

¥

3,505

 

 


(*1)                The settlement of certain long-term debt resulted in a gain recognized due to 1) the abandonment of the related claim by the respective creditors and 2) the rejection of claims due to the creditors’ application process deficiency.

(*2)                Professional fees are expenses incurred directly related to the reorganization and restructuring.

(*3)                Adjustments of bond issuance costs related to certain debt that has been classified as subject to compromise and previously recorded as an asset to be amortized were fully expensed to adjust related debt amounts to the amounts of the allowed claims.

(*4)                Elpida was obligated to pay penalties for certain debt and lease contracts. In addition, Elpida reimbursed holders of Taiwan Depositary Receipts as a result of filing voluntary petition in Japan.

 

(3)             Summary of Significant Accounting Policies

 

(a)             Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; allowances for doubtful accounts and sales returns; the valuation of derivatives, deferred tax assets, fixed assets, inventory, investments, and stock options; reserves for employee benefit obligations, income tax uncertainties and other contingencies; and classification and measurement of lease obligations and liabilities subject to compromise.

 

12



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(b)             Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Elpida and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no involvement with variable interest entities. The Company accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting.

 

(c)              Foreign Currency Translation

 

Foreign currency transactions are measured at the applicable rates of exchange prevailing at the transaction dates. Assets and liabilities denominated in currencies other than Japanese yen are remeasured at the applicable rates of exchange prevailing at the balance sheet date with the resulting gain or loss credited or charged to income.

 

Elpida’s foreign subsidiaries use the local currencies other than Japanese yen as their functional currencies. Accordingly, assets and liabilities of foreign subsidiaries are translated into Japanese yen at applicable year-end rates of exchange and all revenue and expense accounts are translated at average rates of exchange during the year. The resulting translation adjustments are accumulated and included in accumulated other comprehensive income (loss) classified as part of stockholders’ equity.

 

(d)             Cash and Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 

(e)              Trade Accounts Receivable

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Allowance for doubtful trade receivables are determined based on a combination of historical experience, aging analysis, and any specific factors affecting customer accounts. Uncollectible trade accounts receivable are charged-off when legal actions have been taken to collect the receivable, and it becomes clear that an amount smaller than the original receivable will be recovered.

 

(f)                Inventories

 

Inventories, except for supplies, are stated at the lower of cost or market, cost being determined using the first-in, first-out method or the average cost method.

 

The cost of supplies is determined using the first-in, first-out method.

 

(g)             Revenue Recognition

 

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.

 

Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of operations.

 

13



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(h)             Investment Securities

 

Investment securities at March 31, 2012 and 2011 consist of equity securities. The Company classifies its equity securities that have readily determinable fair values as available-for-sale.

 

Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis.

 

A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in an impairment to reduce the carrying amount to fair value. To determine whether an impairment is other-than-temporary, the Company considers all available information relevant to the collectibility of the security, including past events, current conditions, and reasonable and supportable forecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

 

(i)                Derivative Instruments and Hedging Activities

 

The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivatives designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income, to the extent the derivative is effective at offsetting the changes in cash flows being hedged until the hedged item affects earnings.

 

The Company enters into derivative contracts that it intends to designate as a hedge of an exposure to changes in the fair value of a recognized asset or liability that are attributable to a particular risk (fair value hedge). For hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in fair value of hedged transactions. For derivative instruments that are designated and qualify as part of a fair value hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings.

 

The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting changes in fair value attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the fair value hedge is dedesignated in accordance with the derecognition criteria for hedge accounting.

 

In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value in earnings.

 

14



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(j)                Property, Plant, and Equipment

 

Property, plant, and equipment are stated at cost. Plant and equipment under capital leases are stated at the present value of minimum lease payments.

 

Depreciation is calculated on the straight-line method over the following estimated useful lives of the respective assets:

 

Building and structures

 

2 to 56 years

 

Machinery and equipment

 

2 to 20 years

 

Furniture and fixtures

 

2 to 25 year

 

 

Plant and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset.

 

Total depreciation for the years ended March 31, 2012 and 2011 was ¥113,733 and ¥111,258, respectively.

 

(k)             Major Maintenance Activities

 

The Company incurs maintenance costs on its major equipment. Repair and maintenance costs are expensed as incurred.

 

(l)                Intangible Assets

 

Intangible assets with finite lives consist primarily of license fees and technologies. License fees are amortized on a straight-line basis over the contractual periods which are principally two to 15 years. Certain costs incurred to develop or obtain internal use computer software are capitalized according to ASC Subtopic 350-40,  Internal-Use Software, and amortized on a straight-line basis over the estimated useful lives of five years or less.

 

(m)          Research and Development and Advertising Costs

 

Research and development and advertising costs are expensed as incurred. Research and development costs amounted to ¥42,183 and ¥39,705 for the years ended March 31, 2012 and 2011, respectively. Advertising costs amounted to ¥8 and ¥32 for the years ended March 31, 2012 and 2011, respectively.

 

(n)             Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.

 

15



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(o)             Stock Option Plan

 

The Company recognizes the cost of all employee stock options in the consolidated financial statements. Equity-classified awards are measured at the grant date fair value of the award. The Company estimates grant date fair value using the Black-Scholes-Merton option-pricing model. Compensation cost for all stock options is recognized using the straight-line attribution method reduced for estimated forfeitures.

 

Excess tax benefits of awards that are recognized in equity related to stock option exercises are reflected as financing cash inflows. Stock option cost that has been included in income from continuing operations amounted to ¥0 and ¥44 for the years ended March 31, 2012 and 2011, respectively. The total income tax benefit recognized in the consolidated statements of operations for stock option arrangements was ¥0 and ¥18 for the years ended March 31, 2012 and 2011, respectively.

 

(p)             Retirement Benefits

 

The Company has retirement benefit plans which consist of defined benefit pension plans, lump-sum indemnity plans and defined contribution plans.

 

The Company records annual amounts relating to its defined benefit plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases and turnover rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

 

For the defined contribution plans, the Company recognizes cash contributions as net pension cost.

 

(q)             Long-Lived Assets

 

Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

 

(r)               Commitments and Contingencies

 

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

 

16



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(s)               Capitalized Interest

 

The Company’s policy is to capitalize interest cost incurred on debt during the construction of major projects. A reconciliation of total interest cost to “interest expense” as reported in the consolidated statements of operations for the years ended March 31, 2012 and 2011 is as follows:

 

 

 

2012

 

2011

 

Interest cost capitalized

 

¥

153

 

¥

39

 

Interest cost charged to expense

 

8,445

 

10,897

 

Total interest cost

 

¥

8,598

 

¥

10,936

 

 

(t)                Fair Value Measurements

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

·                   Level 1 Inputs:                                       Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

·                   Level 2 Inputs:                                       Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

·                   Level 3 Inputs:                                       Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

 

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides additional disclosures for transfers in and out of Levels 1 and 2 and for activity in Level 3. ASU 2010-06 also clarifies certain other existing disclosure requirements including level of desegregation and disclosures around inputs and valuation techniques. The provisions of ASU 2010-06 are effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity for purchases, sales, issuances, and settlements on a gross basis, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. In the period of initial adoption, the reporting entity shall not be required to provide the disclosures required for any previous periods presented for comparative purposes. The Company adopted the provisions of ASU 2010-06 for the year ended March 31, 2011, except for the requirements to provide the Level 3 activity for purchases, sales, issuances, and settlements on a gross basis, which were adopted for the year ended March 31, 2012. The adoption of ASU 2010-06 did not have a material effect on its consolidated financial statements.

 

17



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(u)             Product Warranties

 

The Company generally provides a limited warranty that its products are in compliance with Company specifications existing at the time of delivery. Under the Company’s general terms and conditions of sale, the liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items. The Company accrues product warranty costs which are based primarily on historical experience of actual warranty claims as well as current information on costs for repair or replacement of defective products.

 

(4)            Business and Credit Concentrations

 

The Company is primarily engaged in a single line of business of designing, manufacturing and sale of DRAMs and therefore the fluctuation of unit volumes and prices in the DRAM market can significantly impact the Company’s business.

 

For the year ended March 31, 2012, the two largest customers accounted for 18.5% and 12.6% of the Company’s sales, and the largest customer accounted for 13.9% of accounts receivable at March 31, 2012. For the year ended March 31, 2011, the largest customer accounted for 30.8% of the Company’s sales, and the same customer accounted for 25.6% of accounts receivable at March 31, 2011.

 

(5)             Inventories

 

Inventories at March 31, 2012 and 2011 consisted of the following:

 

 

 

2012

 

2011

 

Finished products

 

¥

34,750

 

¥

31,665

 

Semi-finished components

 

20,221

 

10,390

 

Raw materials

 

1,752

 

2,031

 

Work in process

 

21,114

 

26,517

 

Supplies

 

3,216

 

3,237

 

 

 

¥

81,053

 

¥

73,840

 

 

(6)             Pledged Assets

 

Assets pledged as collateral for guarantees for liabilities at March 31, 2012 and 2011 were as follows:

 

 

 

2012

 

2011

 

Buildings and structures

 

¥

22,116

 

¥

80,630

 

Machinery and equipment

 

149,661

 

232,593

 

Land

 

465

 

4,000

 

 

 

¥

172,242

 

¥

317,223

 

 

The above assets were pledged against the following liabilities at March 31, 2012 and 2011:

 

 

 

2012

 

2011

 

Long-term debt

 

¥

129,662

 

¥

185,945

 

Obligations under capital leases

 

17,294

 

10,567

 

Future lease payments

 

1,178

 

3,957

 

Deposits received

 

2,930

 

 

 

 

¥

151,064

 

¥

200,469

 

 

Of the ¥129,662 of long-term debt at March 31, 2012 above, ¥90,973 was classified as Liabilities subject to compromise.

 

18



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(7)          Investment Securities

 

The carrying amount, gross unrealized holding gains, gross unrealized holding losses, and fair value of available-for-sale equity securities at March 31, 2012 and 2011 were as follows:

 

 

 

Aggregate
cost basis

 

Gross
unrealized
holding gains

 

Gross
unrealized
holding losses

 

Aggregate fair
value

 

At March 31, 2012

 

 

 

 

 

 

 

 

 

Available for sale:

 

 

 

 

 

 

 

 

 

Equity securities

 

¥

2,113

 

¥

 

¥

 

¥

2,113

 

At March 31, 2011

 

 

 

 

 

 

 

 

 

Available for sale:

 

 

 

 

 

 

 

 

 

Equity securities

 

¥

3,446

 

¥

 

¥

(165

)

¥

3,281

 

 

For equity securities, management considers the various factors described in Note (3)(h), including its intent and ability to hold the equity security for a period of time sufficient for recovery in market value. Where management lacks that intent or ability, the security’s decline in fair value is deemed to be other-than-temporary and is recorded in earnings.

 

(8)             Intangible Assets

 

Intangible assets subject to amortization at March 31, 2012 and 2011 consisted of the following:

 

 

 

March 31, 2012

 

 

 

Gross
carrying
amount

 

Accumulated
amortization

 

Net
carrying
amount

 

Software

 

¥

1,547

 

¥

(19

)

¥

1,528

 

License fees

 

279

 

 

279

 

Total

 

¥

1,826

 

¥

(19

)

¥

1,807

 

 

 

 

March 31, 2011

 

 

 

Gross
carrying
amount

 

Accumulated
amortization

 

Net
carrying
amount

 

Software

 

¥

17,422

 

¥

(13,571

)

¥

3,851

 

License fees

 

24,854

 

(13,572

)

11,282

 

Technology

 

1,577

 

(499

)

1,078

 

Total

 

¥

43,853

 

¥

(27,642

)

¥

16,211

 

 

Aggregate amortization expense for intangible assets subject to amortization was ¥7,245 and ¥6,567 for the years ended March 31, 2012 and 2011, respectively. Estimated amortization expense for the next five years is as follows:

 

Year ending March 31:

 

 

 

2013

 

¥

729

 

2014

 

438

 

2015

 

229

 

2016

 

46

 

2017

 

26

 

 

19



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(9)                    Derivative Instruments and Hedging Activities

 

The Company has entered into interest rate swap agreements to manage the exposure to interest rate risk associated with its underlying debt and foreign exchange forward contracts to offset the adverse impact of fluctuations in foreign exchange rates on accounts receivable and accounts payable denominated in foreign currencies arising from the Company’s operating activities. Neither the interest rate swap agreements nor the foreign exchange forward contracts are designated as hedging instruments under ASC 815, and changes in fair value of both interest rate swap agreements and foreign exchange forward contracts are recognized in income. The related receivable or payable is included in other current assets or other current liabilities.

 

The counterparties to the Company’s interest rate swap agreements and foreign exchange forward contracts are major financial institutions. As a normal business risk, the Company is exposed to credit loss in the event of nonperformance by the counterparties; however, the Company does not anticipate nonperformance by the counterparties to these agreements, and no material losses are expected.

 

The fair values of derivative instruments held at March 31, 2012 and 2011 were as follows:

 

 

 

2012

 

2011

 

 

 

B/S Location

 

Fair
value

 

B/S Location

 

Fair
value

 

Interest rate swap agreements

 

Other assets

 

¥

 

Other assets

 

¥

69

 

Foreign exchange forward contracts

 

Other assets

 

 

Other assets

 

276

 

Foreign exchange forward contracts

 

Other liabilities

 

 

Other liabilities

 

70

 

 

The effect of derivative instruments on the consolidated statements of operations for the years ended March 31, 2012 and 2011 was as follows:

 

 

 

Recognized as gain (loss) on derivative instruments

 

 

 

 

 

2012

 

2011

 

Interest rate swap agreements

 

Other (expense) / income

 

¥

(69

)

¥

(45

)

Foreign exchange forward contracts

 

Other (expense) / income

 

(206

)

967

 

 

20



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(10)             Fair Value Measurements

 

(a)             Fair Value of Financial Instruments

 

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments at March 31, 2012 and 2011. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

 

 

2012

 

2011

 

 

 

Carrying
amount

 

Fair
value

 

Carrying
amount

 

Fair
value

 

Financial assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

¥

51,428

 

¥

51,428

 

¥

112,839

 

¥

112,839

 

Accounts receivable, trade

 

28,794

 

28,794

 

69,146

 

69,146

 

Accounts receivable, other

 

11,499

 

11,499

 

17,685

 

17,685

 

Investment securities

 

2,113

 

2,113

 

3,281

 

3,281

 

Foreign exchange forwards

 

 

 

206

 

206

 

Interest rate swaps

 

 

 

69

 

69

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable, trade

 

¥

19,912

 

¥

19,912

 

¥

54,137

 

¥

54,137

 

Accounts payable, other

 

4,726

 

4,726

 

29,542

 

29,542

 

Accrued income taxes

 

1,016

 

1,016

 

398

 

398

 

Long-term borrowings

 

140,206

 

See below

 

195,944

 

194,530

 

Straight bonds

 

44,799

 

See below

 

74,976

 

75,439

 

Convertible bonds

 

93,705

 

See below

 

66,236

 

70,942

 

Long-term other payables

 

3,856

 

See below

 

5,023

 

4,850

 

 

The carrying amounts shown in the table are included in the consolidated balance sheets under the indicated captions, except for interest rate swaps and foreign exchange forwards, which are included in other current assets and other assets; long-term borrowings, straight bonds and convertible bonds, which are included in long-term debt; and long-term other payables, which are included in other liabilities.

 

The estimated fair values of the financial instruments shown in the above table at March 31, 2012 and 2011 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

 

21



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

 

·                  Cash and cash equivalents, trade accounts receivable, other accounts receivables, trade accounts payable, other accounts payable, and accrued income taxes: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

 

·                  Investment securities: Equity securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. The fair values of equity securities accounted for under the cost method (nonmarketable equity securities) are determined using methodologies that give consideration to a range of factors, including but not limited to the price at which investments were acquired, the nature of the investments, market conditions, trading values on comparable public securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investments.

 

·                  Foreign exchange forwards and interest rate swaps: The fair value is determined by obtaining quotes from brokers.

 

·                  Long-term borrowings and long-term other payables: With respect to the fair value at March 31, 2011, the fair value of the Company’s long-term borrowings, and long-term other payables is determined by discounting the future cash flows of each instrument at rates that reflect rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk. For long-term debt measurements, where there are not rates currently observable in publicly traded debt markets of similar terms to companies with comparable credit, the Company uses market interest rates and adjusts that rate for all necessary risks, including its own credit risk. In determining an appropriate spread to reflect its credit standing, the Company considers credit default swap spreads, bond yields of other long-term debt offered by the Company, and interest rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s bankers as well as other banks that regularly compete to provide financing to the Company. With respect to the fair value at March 31, 2012, the Company, having filed the voluntary petitions, would not have been able to enter into similar financing at March 31, 2012. As such, it is impractical to obtain a fair value for the long-term debt and long-term other payables.

 

·                  Straight bonds and convertible bonds: With respect to the fair value at March 31, 2011, the fair value of the Company’s straight bonds and convertible bonds is measured using quoted offer side prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined using the standard pricing model taking into account the exercisable period, exercise price, volatility, remaining period and credit risk. With respect to the fair value at March 31, 2012, the Company, having filed the voluntary petitions, would not have been able to enter into similar financing at March 31, 2012. As such, it is impractical to obtain a fair value for the bonds as of March 31, 2012.

 

22



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(b)             Fair Value Hierarchy

 

The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis at March 31, 2012 and 2011:

 

 

 

 

 

Fair value measurements
at reporting date using

 

 

 

March 31,
2012

 

Quoted prices
in active
markets for
identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

Equity securities (foreign)

 

¥

2,113

 

¥

2,031

 

¥

82

 

¥

 

Total

 

¥

2,113

 

¥

2,031

 

¥

82

 

¥

 

 

 

 

 

 

Fair value measurements
at reporting date using

 

 

 

March 31,
2011

 

Quoted prices
in active
markets for
identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

Equity securities (foreign)

 

¥

3,281

 

¥

3,281

 

¥

 

¥

 

Derivatives

 

 

 

 

 

 

 

 

 

Foreign exchange forwards

 

206

 

 

206

 

 

Interest rate swaps

 

69

 

 

69

 

 

Total

 

¥

3,556

 

¥

3,281

 

¥

275

 

¥

 

 

The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no significant transfers into or out of Level 1 and Level 2 for the years ended March 31, 2012 and 2011.

 

The following table presents fair value measurements of assets and liabilities that are measured at fair value on a nonrecurring basis for the years ended March 31, 2012 and 2011.

 

Description

 

Year ended
March 31,
2012

 

Quoted prices
in active
markets for
identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Total gains
(losses)

 

Investment in an affiliated company

 

¥

3,172

 

¥

3,172

 

¥

 

¥

 

¥

(4,029

)

Long-lived assets

 

136,907

 

 

 

136,907

 

(229,560

)

 

For the year ended March 31, 2012, the Company classified certain investments in Level 1 as the Company used an unadjusted quoted market price in active markets as input to value the investment. In addition, the Company classified the assets described above in Level 3 as the Company used unobservable inputs to value the assets when recognizing impairment losses related to the assets. The fair value for the major assets was measured through the replacement cost method and discounted cash flow method. See Note 24 for further details of impairment of long-lived assets.

 

23



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Description

 

Year ended
March 31,
2011

 

Quoted prices
in active
markets for
identical assets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Total gains
(losses)

 

Investment in an affiliated company

 

¥

8,538

 

¥

8,538

 

¥

 

¥

 

¥

(22

)

Long-lived assets

 

0

 

 

 

0

 

(493

)

 

For the year ended March 31, 2011, the Company classified certain investments in Level 1 as the Company used an unadjusted quoted market price in active markets as input to value the investment. In addition, the Company classified the assets described above in Level 3 as the Company used unobservable inputs to value the assets when recognizing impairment losses related to the assets. The fair value for the major assets was measured through the discounted cash flow method.

 

(11)             Equity Method Investments

 

Investments in an affiliate accounted for under the equity method consist of 39.66% of the common stock of Tera Probe, Inc. (“Tera Probe”), a semiconductor test house.

 

Tera Probe was a consolidated subsidiary until December 16, 2010, on which date Tera Probe completed an IPO and listed its shares on the Mothers Section of Tokyo Stock Exchange. As a result of the IPO, the Company’s interest in Tera Probe decreased to 39.66% and the Company has been applying the equity method for the investment in Tera Probe since then.

 

In December 2010, the investment was measured at fair value as Tera Probe was deconsolidated and the equity method was applied. The fair value determined based on the quoted stock price of Tera Probe as of the date of the deconsolidation was ¥8,538. As a result of the deconsolidation, the Company recognized a loss of ¥22 for the year ended March 31, 2011.

 

The carrying amount of the investment in Tera Probe was ¥9,532 and the fair value of the investment based on its market price was ¥8,630 at March 31, 2011.

 

At March 31, 2012, the fair value of the investment decreased to ¥3,172 and the Company evaluated the recoverability of the carrying value of the investment. As a result, the Company determined that there was an other-than-temporary decline in the value of the investment in Tera Probe and recorded an impairment loss of ¥4,029 at March 31, 2012.

 

(12)             Leases

 

The Company is obligated under long-term capital lease agreements covering certain facilities and equipment that expire at various dates during the next 12 years. Certain leases contain renewal options for varying periods, and certain leases include options to purchase the leased property at the end of the lease term. Leases generally require the Company to pay for insurance, taxes and maintenance of the property.

 

The Company entered into long-term agreements to purchase electricity and gas with certain suppliers (see Note 23). The electricity and gas are generated by co-generation systems and nitrogen gas supply systems owned by the energy suppliers and these systems are built on the Company’s premises to provide the electricity and gas exclusively for the Company. The arrangements are treated as leases, and based on the terms of agreement, the arrangements are accounted for as capital leases.

 

24



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

At March 31, 2012 and 2011, the gross amount of leased assets and related accumulated amortization recorded under capital leases were as follows:

 

 

 

2012

 

2011

 

Machinery and equipment

 

¥

121,056

 

¥

193,405

 

Others

 

121

 

1,147

 

 

 

121,177

 

194,552

 

Less accumulated amortization

 

39,607

 

85,603

 

 

 

¥

81,570

 

¥

108,949

 

 

Amortization of assets held under capital leases is included with depreciation expense.

 

Impairment losses were recognized on certain leased assets during the year ended March 31, 2012. See Note 24 for further details of impairment of long-lived assets.

 

The Company also has noncancelable operating leases with minimum rental commitments. Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease. Rental expense for operating leases for the years ended March 31, 2012 and 2011 was ¥3,802 and ¥6,836, respectively.

 

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments at March 31, 2012 are as follows:

 

 

 

Capital
leases

 

Operating
leases

 

Year ending March 31:

 

 

 

 

 

2013

 

¥

11,900

 

¥

992

 

2014

 

6,506

 

706

 

2015

 

6,490

 

157

 

2016

 

5,185

 

66

 

2017

 

4,098

 

 

2018 and thereafter

 

11,495

 

 

Total minimum lease payments

 

45,674

 

1,921

 

Less amount representing interest

 

3,980

 

 

 

Present value of net minimum capital lease payments

 

41,694

 

 

 

Less current portion of obligations under capital leases

 

10,900

 

 

 

Obligations under capital leases, excluding current portion

 

¥

30,794

 

 

 

 

25



 

ELPIDA MEMORY, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

(13)             Asset Retirement Obligations

 

The Company has asset retirement obligations (AROs) arising from regulatory requirements to perform certain asset retirement activities at the time that certain long-lived assets are disposed of. The liability was initially measured at fair value and subsequently is adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life. The following table presents the activity for the AROs for the years ended March 31, 2012 and 2011:

 

 

 

2012

 

2011

 

Balance at beginning of year

 

¥

886

 

¥

848

 

Additional obligations incurred

 

 

18

 

Changes in estimates, including timing

 

(2

)

 

Accretion expense

 

21

 

20

 

Balance at end of year

 

¥

905

 

¥

886

 

 

(14)             Long-Term Debt

 

 

 

2012

 

2011

 

 

 

Balance prior to
financial
statement
reclassification

 

Amounts
classified as
subject to
compromise

 

Amounts not
subject to
compromise

 

Amounts not
subject to
compromise

 

Borrowings from banks and financial institutions, due 2012 to 2016 with an average interest rate of 2.6% at March 31, 2012 and due 2011 to 2013 with an average interest rate of 2.4 % at March 31, 2011

 

¥

140,206