e6vk
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
April 30, 2008
QIMONDA AG
Gustav-Heinemann-Ring 212
D-81739 Munich
Federal Republic of Germany
Tel: +49-89-60088-0
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes o No þ
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82-___.
This Report on Form 6-K is incorporated by reference into the registration statement on Form F-3,
File No. 333-145983.
Explanatory Note
This Report on Form 6-K contains the quarterly report for the second financial quarter ended
March 31, 2008 of Qimonda AG dated April 30, 2008 and is hereby incorporated by reference into our
Registration Statement on Form F-3, Registration No. 333-145983.
QIMONDA AG AND
SUBSIDIARIES
QUARTERLY REPORT
FOR THE THREE AND SIX MONTHS ENDED
MARCH 31, 2008
INDEX
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12
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(This page is intentionally left blank)
OVERVIEW OF
FINANCIAL RESULTS
Three And Six
Months Ended March 31, 2008 Compared To Three And Six
Months Ended March 31, 2007
Results of
Operations
Net
Sales
The following table presents data on our net sales for the
periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except
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(in millions, except
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percentages)
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percentages)
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Net sales
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984
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412
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2,157
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925
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Effect of foreign exchange over prior period
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(85
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)
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(60
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)
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(185
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)
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(125
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)
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% of net sales
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(9%
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(15%
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(9%
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)
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(14%
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)
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Our net sales in the six months ended March 31, 2008
decreased by 1,232 million, or 57%, from
2,157 million in the six months ended March 31,
2007 to 925 million in the six months ended
March 31, 2008. This decrease was primarily due to:
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an average price decline of 69% for our DRAM products;
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a decrease in our non-PC bit shipment share from 54% to
45%; and
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exchange rate effects due to the 14% weakening of the
U.S. dollar.
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Offsetting this decrease in part was
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an increase in bit shipments of 60%.
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Price decreases. A steep price decline of DRAM
prices was seen in the three months ended December 31,
2007. Despite the continued oversupply market situation, the
price remained stable at a low level in the three months ended
March 31, 2008. This was caused by higher DRAM demand
across different applications especially from the PC industry,
which has absorbed a significant portion of the oversupply in
the industry (albeit at low prices). DRAM bit production growth
in the industry persisted due to productivity increases as
manufacturers employed increasingly efficient technologies.
Since January 2007, we have experienced a sharp decline of
market prices (for DDR2 memories in particular) with prices
falling during 2007 by more than 80%.
Overall the average selling prices of our DRAM products were 69%
lower in the six months ended March 31, 2008 as compared to
the six months ended March 31, 2007.
We continue to expect that prices for standard DRAM products
will decline over time across the industry as a whole. Such
declines can be severe, as we have experienced in the last
several financial quarters. We intend to continue to follow our
strategy to mitigate the impact of declining prices by reducing
our costs on a per unit basis and continuing to diversify our
product mix.
In the six months ended March 31, 2008, 45% of our total
bit shipments was for use in non-PC applications compared to 54%
for the six months ended March 31, 2007. The decrease in
our non-PC share was mainly due to weaker than usual seasonal
demand in the consumer and infrastructure markets in the three
months ended March 31, 2008 and, as a result of our
technology conversion, stronger shipments in the PC market to
meet demand growth.
Exchange rate effects. The U.S. dollar
weakened against the euro in the first six months of the 2008
financial year, with the average exchange rate for the period
14% lower than it was for the corresponding period of our 2007
financial year. This unfavorable U.S. dollar to euro
exchange rate negatively affected our revenues during the six
months ended March 31, 2008. We have calculated the effects
of this translation risk as follows: we would have achieved
125 million more in net sales in the six months ended
March 31, 2008, had the average exchange rates we used to
translate our U.S. dollar denominated sales into euros been
the same in the six months ended March 31, 2008 as they
were in the six months ended March 31, 2007. For the three
months ended March 31, 2008 compared to the three months
ended March 31, 2007 the respective negative impact on
sales amounted to 60 million.
1
Increase in bit shipments. Our bit shipments
increased by 60% during the six months ended March 31, 2008
compared to the six months ended March 31, 2007 due to
increasing manufacturing output. Demand for our products was
especially high in the PC market, as PC manufacturers increased
the amount of DRAM included in each system (or bits per
box) in the current low price environment. As of
March 31, 2008, 76% of our capacities were converted to the
80nm and below technology nodes, compared to less than 11% for
the six months ended March 31, 2007.
Net Sales by
Region
The following table sets forth our sales by region for the
periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except percentages)
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(in millions, except percentages)
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Germany
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73
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7%
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37
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9%
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160
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7%
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73
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8%
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Rest of Europe
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124
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13%
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35
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8%
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266
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12%
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85
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9%
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North America
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375
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38%
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131
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32%
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849
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40%
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307
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33%
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Asia/Pacific
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309
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31%
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162
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40%
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669
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31%
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346
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38%
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Japan
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103
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11%
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47
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11%
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213
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10%
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114
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12%
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Total
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984
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100%
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412
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100%
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2,157
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100%
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925
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100%
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The relative increase in the share of sales in Asia/Pacific and
decrease in North America and Rest of Europe during the six
months ended March 31, 2008 was mainly caused by Original
Equipment Manufacturer (OEM) customers
shifting their production to Asia, as well as the shifting of
volume from customers in North America to customers in Asia.
For practical purposes, the Rest of Europe region also includes
other countries and territories in the rest of the world outside
of the main geographic regions listed above, with aggregate
sales representing no more than 1% of total sales in any period.
In addition, prior period amounts have been reclassified to
conform to the current period presentation.
Cost of Goods
Sold and Gross Margin
The following table sets forth our cost of goods sold and
related data for the periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except percentages)
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(in millions, except percentages)
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Cost of goods sold
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(785
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)
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(652
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)
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(1,608
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(1,579
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)
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% of net sales
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80%
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158%
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75%
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171%
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Gross margin (loss)
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20%
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(58%
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25%
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(71%
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)
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Cost of goods sold decreased by 29 million, or 2%,
from 1,608 million in the six months ended
March 31, 2007 to 1,579 million in the six
months ended March 31, 2008. As a percentage of net sales,
cost of goods sold increased from 75% to 171% over the same
period. The absolute decrease in our cost of goods sold was due
primarily to:
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improvements in our productivity;
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reduced purchase prices from our joint ventures and
foundries; and
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exchange rate effects.
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Offsetting this decrease in part were:
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a 60% increase in bit shipments; and
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negative effects of 109 million from inventory
revaluation relating to price risks.
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Improved productivity. Similar to our 2007
financial year, we achieved productivity improvements through
converting our capacities to 80nm and 75nm process technologies
and increasing the percentage of our chips produced on 300mm
wafers. As previously announced, to improve our productivity we
are actively phasing out the purchase of 200mm wafers from
Infineon Dresden and are reducing our 200mm production capacity
in Richmond. Measured in wafer starts, 83% of our total
production (including capacity
2
sourced from our strategic and foundry partners) was on 300mm
wafers in the six months ended March 31, 2008 as compared
to 72% of our production in the six months ended March 31,
2007. We believe that productivity improvements, together with a
larger sales volume over which our fixed costs are spread,
permitted us to achieve a lower percentage increase in costs as
compared to the percentage increase in bit shipments. As of
March 31, 2008, 76% of our capacities were converted to the
80nm and below technology nodes, compared to less than 11% for
the six months ended March 31, 2007. Other DRAM suppliers
have been converting their capacities to smaller feature sizes
very aggressively during the past few quarters and thus we have
implemented measures to accelerate our conversion.
Decreased purchase prices from joint ventures and
foundries. Cost of goods sold includes the cost
of inventory purchased from our joint ventures, such as Inotera,
and other associated and related companies as well as our
foundry partners Winbond, SMIC and Infineon Dresden. For the six
months ended March 31, 2008, cost of sales includes losses
related to purchase commitments for 200mm wafer manufacturing at
Infineon Dresden in the amount of 20 million. Our
purchase from joint ventures and foundries amounted to
402 million in the six months ended March 31,
2008 as compared to 707 million in the six months
ended March 31, 2007. While, as a result of the significant
decline in DRAM prices, our purchases from these entities
declined in absolute amounts, we increased the percentage of
total bit shipments purchased from these partners to 67% in
the six months ended March 31, 2008 as compared to 61%
during the six months ended March 31, 2007.
Exchange rate effects. The decline in the
exchange rate of other currencies against the euro in the six
months ended March 31, 2008, as compared to the equivalent
period one year earlier, decreased the euro value of our costs
that are denominated in other currencies, mainly the
U.S. dollar, by approximately 141 million. This
means that we would have incurred approximately
141 million more in costs of goods sold in our six
months ended March 31, 2008, had the average exchange rates
we used to translate our non-euro expenses into euro been the
same in the six months ended March 31, 2008 as they were in
the six months ended March 31, 2007. However, considered
together with the decrease in our net sales due to negative
foreign exchange effects in the amount of
125 million, foreign currency movements overall only
had a net positive effect of 16 million on our gross
margin during the six months ended March 31, 2008. For the
three months ended March 31, 2008 the positive exchange
rate impact on our costs of goods sold was 77 million
compared to the respective quarter in financial year 2007.
Considering the negative exchange rate impact of
60 million on net sales in the three months ended
March 31, 2008 there would have been a net positive effect
of 17 million on gross margin if the U.S. dollar
to euro exchange rate would have remained constant since
March 31, 2007.
Higher bit shipments. The 60% increase in bit
shipments in the six months ended March 31, 2008 compared
to the six months ended March 31, 2007 was primarily
enabled by the further ramp-up of production volumes at our
Richmond 300mm facility and higher purchase volumes from
foundries and joint ventures. In response to the low price
levels, PC manufacturers started to increase the quantities of
DRAMs that were installed per system, which absorbed a
significant portion of the oversupply in the industry.
Inventory revaluation and reserves. We value
our inventory on a quarterly basis at the lower of cost or
market value. If the market price declines below the full
production cost of a particular product group, then all
inventories of that product group are written down to the market
price. Due to the significant price decline (especially during
the first three months of the current financial year), we
recorded write-downs on inventory in an amount of
109 million for the six months ended March 31,
2008 in accordance with our policy. In the comparable period of
our 2007 financial year, as a result of more stable selling
prices, we recorded write-downs on inventory in an amount of
24 million. Due to the volatility of the DRAM market,
write-downs of this nature may occur in future periods of sharp
price decline.
Our gross margin decreased to a negative 71% during the six
months ended March 31, 2008, from a positive 25% in the six
months ended March 31, 2007. This was primarily due to
lower average selling prices and related inventory write-downs
due to lower selling prices which could not be compensated by
lower production costs per unit resulting from increased
manufacturing productivity and lower purchase prices from
foundry partners. In the second quarter of our 2008 financial
year our gross margin improved to negative 58% as compared to a
negative 81% in the first quarter of our 2008 financial year.
This improvement resulted mainly from the combined effect of
inventory write-downs in the first quarter which did not
re-occur in the second quarter, continuing productivity
improvements and reduced foundry purchases which offset the
effect of lower sales.
3
While average selling prices, especially for standard DRAM
products, generally decline over time, they can display
significant volatility from period to period. Our gross margin
suffers in periods, such as each of our most recent financial
quarters, in which prices decline faster than we can reduce our
unit costs. Conversely, our gross margin is stronger during
periods when prices decrease more slowly or increase, such as at
the end of our 2006 financial year.
Research and
Development (R&D) Expenses
The following table sets forth our R&D expenses for the
periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except percentages)
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(in millions, except percentages)
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Research and development expenses
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(96
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)
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(109
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)
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(193
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)
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(219
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)
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% of net sales
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10%
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26%
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9%
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24%
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In the six months ended March 31, 2008, research and
development expenses increased by 13% to 219 million
from 193 million in the six months ended
March 31, 2007. This was principally due to our efforts to
strengthen our development of capabilities with respect to the
next generation of memory technologies to further diversify our
portfolio of memory products as well as with respect to
non-volatile memory technologies. In the six months ended
March 31, 2007, our research and development expenses were
low due to the substantial completion of technology development
for 80nm and 75nm during September and October 2006,
respectively.
In February 2008 we announced the development of our new
innovative Buried Wordline DRAM technology, which is aimed at
reducing the cell size of our DRAM products towards
4F2
over the next several years, consistent with our views on the
progression of the industry, while at the same time meeting
customer requirements regarding high performance and low power
consumption. This new architecture combines a variety of
innovations at the cell and wiring levels, and we are currently
expending additional R&D efforts to introduce it in initial
product designs. We plan to introduce this technology initially
in 65nm technologies and to begin production of a 1 Gbit DDR2 in
the second half of the 2008 calendar year. Because the degree of
innovation, testing and other development work that is involved
with the progression to this new architecture exceeds that
required for the reductions in the feature sizes that we have
implemented in recent technology generations, we may be unable
to meet our goals or to keep pace with the rate of development
in the industry in a timely manner or at all, or do so at
competitive costs. In addition, the increased R&D work in
which we are currently engaged and expect to continue with in
the coming financial periods will add to demands for capital.
See Liquidity Capital Requirements.
Selling,
General and Administrative (SG&A) Expenses
The following table sets forth information on our selling,
general and administrative expenses for the periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except percentages)
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(in millions, except percentages)
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Selling, general and administrative expenses
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(48
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)
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(42
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)
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(92
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)
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(90
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)
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% of net sales
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5%
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10%
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4%
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10%
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During the six months ended March 31, 2008, selling,
general and administrative expenses decreased by 2% as compared
to the same period in the prior year. The increase as a
percentage of sales was mainly attributable to the decrease in
sales compared to the prior year.
4
Restructuring
Expenses
The following table sets forth information on our restructuring
expenses for the periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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2007
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2008
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2007
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2008
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(in millions, except percentages)
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(in millions, except percentages)
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Restructuring expenses
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0
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(2
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)
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0
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(18
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% of net sales
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0%
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0%
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0%
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2%
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Our restructuring expenses comprise three measures: The
relocation of the backend production in Malaysia from Malacca to
Senai (Johor) near Singapore, the phase-out of 200mm
manufacturing at Infineons manufacturing facility in
Dresden and the combination of our research centers in North
America.
In March 2007 we announced our intention to relocate our backend
production in Malaysia from our existing facility in Malacca to
a new backend production facility in Senai (Johor) near
Singapore by December 2008. Following the move, the existing
site in Malacca is to be completely closed and the remaining
employees are to be laid off. During the three months ended
March 31, 2008 we accrued 4 million for
severance payments for 631 employees.
Furthermore, as part of our focus to improve profitability and
300mm manufacturing, we terminated our wafer purchase contract
with Infineon. Our purchase of wafers from Infineon Dresden will
be completely phased out by the end of May 2008. Under the terms
of the contract with Infineon, we had agreed to indemnify
Infineon for 50% of the restructuring costs, that Infineon will
incur in connection with the termination of this contract. As a
result of the termination, we accrued restructuring liabilities
of 12 million and 10 million as of
December 31, 2007 and March 31, 2008, respectively. In
addition, cost of goods sold includes losses related to purchase
commitments for 200mm wafer contract manufacturing at Infineon
Dresden in the amount of 3 million and
20 million for the three and six months ended
March 31, 2008, respectively. Infineon and we are
presently discussing additional reimbursements to Infineon from
us in respect of idle costs at Infineon Dresden in the amount of
approximately 20 million, which have not been
incurred or accrued as of March 31, 2008.
Due to continued efforts to improve costs and efficiencies, we
decided to consolidate our U.S. research and development
facilities into a single development center located in Raleigh,
North Carolina. As a result, our development center in
Burlington, Vermont, is to be closed by the end of June 2008. We
accrued restructuring costs of 0 million and
4 million during the three and six months ended
March 31, 2008, respectively, relating to lease termination
costs and expected severance payments for approximately 100
employees.
Goodwill
Impairment
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For the three months ended March 31,
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For the six months ended March 31,
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2007
|
|
2008
|
|
2007
|
|
2008
|
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|
(in millions, except percentages)
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(in millions, except percentages)
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|
Goodwill impairment
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0
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(61
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)
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0
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(61
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)
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% of net sales
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0%
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15%
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0%
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7%
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Due to the decline in our share price and the general weakness
in pricing for DRAM products we tested the goodwill on our
balance sheet for impairment at March 31, 2008 in
accordance with SFAS No. 142 Goodwill and Other
Intangible Assets. As a result of our fair value
analysis as of March 31, 2008, we determined that the
carrying value of the goodwill exceeded the implied fair value
of zero. Accordingly, during the three months ended
March 31, 2008 we charged 61 million to the
income statement to write off the existing goodwill in full. We
also assessed our long-lived assets for impairment as of
March 31, 2008 in accordance with SFAS No. 144
Accounting for Impairment or Disposal of Long-Lived
Assets, and determined that our long-lived assets are
recoverable.
5
Other
Operating Income, Net
The following table sets forth information on our other
operating (expense) income, net for the periods indicated.
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For the three months ended March 31,
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For the six months ended March 31,
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|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
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|
(in millions, except percentages)
|
|
Other operating income, net
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|
|
3
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|
|
1
|
|
|
3
|
|
|
4
|
% of net sales
|
|
|
0%
|
|
|
0%
|
|
|
0%
|
|
|
0%
|
Other operating income, net contains various items related to
our operations, and may fluctuate from period to period due to
the more or less infrequent nature of these items, which include
subsidies, grants, insurance proceeds and accruals for legal
matters. No material items of this nature were incurred in the
six months ended March 31, 2007 as well as in the six
months ended March 31, 2008.
Equity in
Earnings (loss) of Associated Companies
The following table sets forth information on our equity in
earnings (loss) of associated companies for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Equity in earnings (loss) of associated companies
|
|
|
28
|
|
|
(12
|
)
|
|
|
65
|
|
|
(10
|
)
|
% of net sales
|
|
|
3%
|
|
|
(3%
|
)
|
|
|
3%
|
|
|
(1%
|
)
|
The equity in earnings (loss) of associated companies with
financial year-ends that differ by not more than three months
from the Companys financial year-end is recorded with a
three-month delay. This applies in particular to our joint
venture Inotera Memories, which has a December 31 financial
year-end. Market price fluctuations during the three months
ended March 31, 2008 would, to the extent these impact
Inoteras results, affect our equity in Inoteras
earnings (loss) during the three months ending June 30,
2008.
In both periods, Inotera contributed most of our equity in
earnings (loss) from associated companies, which decreased in
the three months ended March 31, 2008, primarily due to
lower selling prices in the three months ended December 31,
2007. Our equity in Inoteras earnings (loss) is, however,
sensitive not only to fluctuations in the price of DRAM and
production volumes, but also to changes in the portion of our
inventory which we purchased from Inotera and that remains
unsold. This is because we eliminate Inoteras profit from
the inventory we have not yet sold.
Loss on
Associated Company Share Issuance
The following table sets forth information on our loss on
associated company share issuance for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
For the Six Months Ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Loss on associated company share issuance
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(7
|
)
|
% of net sales
|
|
|
0%
|
|
|
0%
|
|
|
0%
|
|
|
1%
|
|
On August 20, 2007 Inotera issued 40 million common
shares, representing 1.2% of its outstanding share capital, as
bonuses to its employees. This diluted our ownership interest to
35.6%, which amounted to a loss of 7 million in the
six months ended March 31, 2008.
6
Other
Non-Operating Income, Net
The following table sets forth information on other
non-operating income for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Other non-operating income (expense), net
|
|
|
1
|
|
|
(2
|
)
|
|
|
6
|
|
|
0
|
% of net sales
|
|
|
0%
|
|
|
0%
|
|
|
|
0%
|
|
|
0%
|
Other non-operating income, net consists of various items from
period to period not directly related to our principal
operations, including gains and losses on sales of marketable
securities. In the six months ended March 31, 2008, other
non-operating income related primarily to an increase in the
valuation of derivatives and gains and losses on sales of
marketable securities, whereas in the six months ended
March 31, 2007, other non-operating income related
principally to foreign currency transaction gains as well as a
gain in the amount of 2 million on the sale of our
investment in Ramtron.
Earnings
(Loss) Before Interest and Taxes
(EBIT)
EBIT is a non-GAAP financial measure which is determined from
our consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Net income (loss)
|
|
|
57
|
|
|
|
(482
|
)
|
|
|
234
|
|
|
|
(1,080
|
)
|
Add: interest (income) expense
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
4
|
|
Add: income tax expense
|
|
|
30
|
|
|
|
9
|
|
|
|
104
|
|
|
|
18
|
|
EBIT
|
|
|
85
|
|
|
|
(468
|
)
|
|
|
335
|
|
|
|
(1,058
|
)
|
Interest
Income, Net
The following table sets forth information on our
net interest income (expense) for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Interest income (expense), net
|
|
|
2
|
|
|
(5
|
)
|
|
|
3
|
|
|
(4
|
)
|
% of net sales
|
|
|
0%
|
|
|
1%
|
|
|
|
0%
|
|
|
0%
|
|
Interest expense mainly relates to interest on our sale and
lease back transactions and convertible notes, which is offset
by interest income we earn on cash and cash equivalents and
marketable securities.
Income
Taxes
Income tax expense for the three and six months ended
March 31, 2007 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions, except percentages)
|
|
(in millions, except percentages)
|
|
Income tax expense
|
|
|
(30
|
)
|
|
|
(9
|
)
|
|
|
(104
|
)
|
|
|
(18
|
)
|
% of net sales
|
|
|
3%
|
|
|
|
2%
|
|
|
|
5%
|
|
|
|
2%
|
|
Effective tax rate
|
|
|
34%
|
|
|
|
(2%
|
)
|
|
|
31%
|
|
|
|
(2%
|
)
|
On August 17, 2007, the Business Tax Reform Act of 2008 was
enacted in Germany. This bill introduces several changes to the
taxation of German business activities, including a reduction of
the
7
combined corporate and trade tax rate in Germany from
approximately 39% to 30%. Most of the changes apply to the
Company effective October 1, 2007 and affect the
Companys current tax rate from that date.
In the three and six months ended March 31, 2007 and 2008,
our effective tax rate was lower than the combined German
statutory tax rate of 39% and 30%, respectively. This resulted
primarily from income in jurisdictions with lower than average
corporate tax rates, the utilization of tax credits, and the
recording of additional valuation allowances against current
period deferred tax benefits arising in connection with the
operating losses in the three and six months ended
March 31, 2008. Despite the consolidated pretax loss, we
generated taxable income in some tax jurisdictions which
resulted in the negative effective tax rate during the three and
six months ended March 31, 2008.
Pursuant to SFAS No. 109 Accounting for
Income Taxes, we have assessed our deferred tax assets
and the need for a valuation allowance. The assessment was based
on the benefits that could be realized from available tax
strategies, forecasted future taxable income to the extent
applicable, and the reversal of temporary differences in future
periods. As a result of this assessment, we increased the
deferred tax asset valuation allowance as of March 31, 2008
to reduce the deferred tax asset to an amount that is more
likely than not expected to be realized in future. Changes in
valuation allowance attributable to prior year tax credits in
the amounts of 6 million and 10 million
were recorded for the three and six months ended March 31,
2008, respectively.
Net Income
(Loss)
We had a net loss of 1,080 million in the six months
ended March 31, 2008 compared to net income of
234 million in the six months ended March 31,
2007. In the three months ended March 31, 2008 our net loss
amounted to 482 million, compared to a net loss of
598 million in the three months ended
December 31, 2007.
Financial
Condition
The following table sets forth selected items from our
consolidated balance sheets for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
|
|
September 30,
|
|
March 31,
|
|
|
|
|
2007
|
|
2008
|
|
Change
|
|
|
(in millions, except
|
|
%
|
|
|
percentages)
|
|
|
|
Current assets
|
|
|
2,257
|
|
|
1,484
|
|
|
(34%
|
)
|
Non-Current assets
|
|
|
3,124
|
|
|
2,780
|
|
|
(11%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
5,381
|
|
|
4,264
|
|
|
(21%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,244
|
|
|
1,149
|
|
|
(8%
|
)
|
Non-current liabilities
|
|
|
620
|
|
|
792
|
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,864
|
|
|
1,941
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
3,517
|
|
|
2,323
|
|
|
(34%
|
)
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008, our current assets decreased
significantly as compared to September 30, 2007 mainly due
to lower inventories, lower trade accounts receivables, lower
other current assets and lower cash and cash equivalents.
Inventories decreased as a result of lower gross inventories and
higher inventory write-downs due to market price decline in the
six months ended March 31, 2008 compared to
September 30, 2007. Trade accounts receivables decreased in
the six months ended March 31, 2008 primarily due to lower
sales. As of March 31, 2008, non-current assets decreased
compared to September 30, 2007 principally due to lower
property, plant and equipment, lower long term investments and
lower intangible assets. Property, plant and equipment decreased
primarily because our capital expenditures were lower than our
depreciation expenses. The decrease of intangible assets is
attributable to the write-off of goodwill in the amount of
61 million as described above under Results of
operations Goodwill Impairment.
As of March 31, 2008, current liabilities decreased
slightly compared to September 30, 2007 principally due to
lower trade accounts payable and lower short-term provisions,
offset by higher short-term debt and higher other current
liabilities. Trade accounts payable mainly decreased as a result
of lower capital expenditures in the three months ended March
31, 2008 compared to the three months
8
ended September 30, 2007. Short-term debt increased compared to
September 30, 2007 mainly due to higher short-term portions of
long-term debt and our sale and leaseback transactions. As of
March 31, 2008, non-current liabilities increased compared to
September 30, 2007 principally due to increased long-term debt
as a result of our sale and leaseback transactions and the
issuance of our convertible bond.
As of March 31, 2008, our shareholders equity
decreased to 2,323 million, primarily due to our net
loss of 1,080 million incurred during the six months
ended March 31, 2008, as well as foreign currency
translation losses affecting equity in the amount of
100 million.
Liquidity
Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions)
|
|
Net cash provided by (used in) operating activities
|
|
|
286
|
|
|
|
(110
|
)
|
|
|
724
|
|
|
|
(268
|
)
|
Net cash used in investing activities
|
|
|
(278
|
)
|
|
|
(87
|
)
|
|
|
(486
|
)
|
|
|
(122
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(191
|
)
|
|
|
232
|
|
|
|
(295
|
)
|
|
|
194
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
2
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(10
|
)
|
Cash and cash equivalents at end of period
|
|
|
872
|
|
|
|
540
|
|
|
|
872
|
|
|
|
540
|
|
Our operating cash flow decreased significantly from an inflow
of 724 million in the six months ended March 31,
2007 to an outflow of 268 million in the six months
ended March 31, 2008. This was mainly caused by our net
loss of 1,080 million in the six months ended
March 31, 2008, which in turn was largely a result of lower
net sales due to the strong decline in our average selling
prices as compared to the previous year. This negative impact in
our operating cash flow was partly offset by working capital
improvements resulting from the decrease in our inventories and
trade accounts receivable. Operating cash flow was also
negatively impacted by a higher decrease in trade accounts
payable during the six months ended March 31, 2008 compared
to the decrease during the six months ended March 31, 2007.
Cash used in investing activities decreased substantially from
an outflow of 486 million in the six months ended
March 31, 2007 to an outflow of 122 million in
the six months ended March 31, 2008. This was principally
due to lower capital expenditures (a reduction of
96 million) lower investment in marketable securities
(a reduction of 150 million) and the execution of our
sale and lease back transactions (a contribution of
129 million in the six months ended
March 31, 2008).
Cash provided in financing activities during the six months
ended March 31, 2008 refers mainly to the issuance of our
convertible bond, from which we raised 168 million,
and a drawing of 40 million under a
long-term
loan agreement. During the six months ended March 31, 2007,
cash used in financing refers principally to the repayment of
296 million of short-term debt to Infineon.
The 40 million drawn under the
long-term
loan agreement must be repaid by July 31, 2009. This loan
agreement and other contracts which we are a party to contain
covenants customary for such transactions and that relate to our
financial performance. We were in compliance with such covenants
at March 31, 2008.
Free Cash
Flow
Free cash flow is a non-GAAP financial measure which is
determined from our consolidated statements of cash flows as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions)
|
|
Net cash (used in) provided by operating activities
|
|
|
286
|
|
|
|
(110
|
)
|
|
|
724
|
|
|
|
(268
|
)
|
Net cash used in investing activities
|
|
|
(278
|
)
|
|
|
(87
|
)
|
|
|
(486
|
)
|
|
|
(122
|
)
|
Purchases (proceeds) of marketable securities, net
|
|
|
119
|
|
|
|
4
|
|
|
|
130
|
|
|
|
(20
|
)
|
Free cash flow
|
|
|
127
|
|
|
|
(193
|
)
|
|
|
368
|
|
|
|
(410
|
)
|
9
Our free cash flow in the six months ended March 31, 2008,
was negative primarily due to our currently non-profitable
operations and capital expenditures that were higher than our
proceeds from sales of marketable securities and sale and
leaseback transactions.
Our free cash flow was positive in the three and six months
ended March 31, 2007 mainly due to our profitable
operations during that timeframe and capital expenditures that
were lower than cash provided from operating activities.
Capital
Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
For the six months ended March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
(in millions)
|
|
Purchases of property, plant and equipment
|
|
|
144
|
|
|
79
|
|
|
365
|
|
|
269
|
Our capital expenditures for the six months ended March 31,
2008, consisted primarily of equipment for the technology
conversion at our 300mm facility in Richmond, Virginia and for
our 300mm R&D facility in Dresden.
We target capital expenditures for the 2008 financial year in a
range of 400 million to 500 million.
Furthermore, as part of our conversion to Buried Wordline
technology we anticipate investing an additional
100 million over the course of our 2009 and 2010
financial years.
Capital
Requirements
We had aggregate cash, cash equivalents and available-for-sale
marketable securities as of March 31, 2008 in the amount of
768 million, which we refer to as our gross cash
position, compared to 1,011 million as of
September 30, 2007. As of March 31, 2008 we had
short-term debt obligations of 123 million payable
within one year. Our total short and long-term debt amounted to
552 million as of March 31, 2008, which
represents 24% of our shareholders equity as of the same
date. We therefore believe that our capital structure provides
us with flexibility to obtain financing suitable to our
business, such as the sale and lease back transactions we have
recently executed despite difficult global financial market
conditions.
We intend to explore a wide range of potential sources of
capital, including capital market transactions, debt financing,
the leveraging of selected assets and ventures with third
parties. To the extent our performance remains at current levels
or deteriorates further, which we view to a substantial extent
as dependent on price developments for DRAM products, we may
have difficulty obtaining capital.
Recent
Developments
On April 21, 2008 we announced a comprehensive cost
reduction program designed to adjust our cost structure and
lower our breakeven point. We target 180 million in
annualized cost reductions compared to the current cost
structure. These cost reductions are based on a combination of
reducing workforce in the range of 10% on a worldwide basis and
cutting our recurring costs. This includes a reduction in
non-volatile memory development to basic research activities and
the termination of the related agreement with Macronix. We
expect to realize these savings in full starting in our 2009
financial year and to accrue any restructuring charges relating
to this program by the end of our 2008 financial year.
On April 21, 2008 we announced that we have signed a
technology license and foundry agreement with Winbond whereby
Winbond will license our Buried Wordline technology for 65 nm
manufacturing.
On April 24, 2008 we and Elpida Memory, Inc., Japan,
(Elpida) announced that we have signed a Memorandum
of Understanding for a strategic technology partnership for the
joint development of memory chips (DRAMs). In the planned
cooperation, we will provide our know-how with the innovative
Buried Wordline technology and Elpida its advanced stack
capacitor technology. The strategic technology cooperation will
leverage the strength of both companies to accelerate their
roadmap to DRAM products featuring cell sizes of
4F2.
The companies expect to conclude their negotiations and finalize
definitive agreements in due course.
10
Outlook for the
Third Quarter and 2008 Financial Year
For the third quarter of our financial years, we are expecting
our bit production to decrease by a high single digit percentage
compared to the second quarter, mainly due the reduction of
capacity corridors with our foundry partners.
We are currently targeting an increase in our bit production for
the full 2008 financial year, of between 20% and 30%, taking
into account a reduction of 300mm capacities at our foundry
partners. This compares to our prior estimate of 30% to 40%. In
general, due to the reductions of capital expenditures and the
retirements of 200mm facilities in the
semi-conductor
industry as announced by several DRAM companies, including
ourselves, we expect a slow-down of supply growth in the market,
in line with the expectations of market researchers, which
should eventually lead to a more balanced supply and demand
situation.
We are further reducing our target for selling, general and
administrative expenses for our 2008 financial year to a range
of 180 million to 200 million compared to
our original target at the beginning of the financial year of
between 210 million and 230 million.
For the 2008 financial year, we continue to expect bit demand
for DRAM to be driven by continued solid growth in servers,
consumer and communication applications and the move to higher
density modules in the PC market. We expect our share of
bit-shipments for use in non-PC applications to be greater than
50% for the full 2008 financial year.
11
QIMONDA AG AND
SUBSIDIARIES
For the three months ended March 31, 2007 and
2008
(in millions, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Notes
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
()
|
|
|
()
|
|
|
($)
|
|
|
Net sales to third parties
|
|
|
19
|
|
|
|
984
|
|
|
|
412
|
|
|
|
651
|
|
Cost of goods sold
|
|
|
|
|
|
|
(785
|
)
|
|
|
(652
|
)
|
|
|
(1,030
|
)
|
|
|
Gross profit (loss)
|
|
|
|
|
|
|
199
|
|
|
|
(240
|
)
|
|
|
(379
|
)
|
|
|
Research and development expenses
|
|
|
|
|
|
|
(96
|
)
|
|
|
(109
|
)
|
|
|
(173
|
)
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
(48
|
)
|
|
|
(42
|
)
|
|
|
(66
|
)
|
Restructuring charges
|
|
|
3
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Goodwill impairment
|
|
|
9
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
(96
|
)
|
Other operating income, net
|
|
|
|
|
|
|
3
|
|
|
|
1
|
|
|
|
1
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
58
|
|
|
|
(453
|
)
|
|
|
(716
|
)
|
|
|
Interest income (expense), net
|
|
|
14
|
|
|
|
2
|
|
|
|
(5
|
)
|
|
|
(8
|
)
|
Equity in earnings (loss) of associated companies
|
|
|
8
|
|
|
|
28
|
|
|
|
(12
|
)
|
|
|
(19
|
)
|
Other non-operating income (expense), net
|
|
|
17
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Minority interests
|
|
|
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
87
|
|
|
|
(473
|
)
|
|
|
(748
|
)
|
|
|
Income tax expense
|
|
|
4
|
|
|
|
(30
|
)
|
|
|
(9
|
)
|
|
|
(14
|
)
|
|
|
Net income (loss)
|
|
|
|
|
|
|
57
|
|
|
|
(482
|
)
|
|
|
(762
|
)
|
|
|
Basic and diluted earnings (loss) per share
|
|
|
5
|
|
|
|
0.17
|
|
|
|
(1.41
|
)
|
|
|
(2.23
|
)
|
|
|
See accompanying notes to the unaudited condensed consolidated
financial statements.
12
QIMONDA AG AND
SUBSIDIARIES
For the six months ended March 31, 2007 and 2008
(in millions, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Notes
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
()
|
|
|
()
|
|
|
($)
|
|
|
Net sales to third parties
|
|
|
19
|
|
|
|
2,157
|
|
|
|
925
|
|
|
|
1,462
|
|
Cost of goods sold
|
|
|
|
|
|
|
(1,608
|
)
|
|
|
(1,579
|
)
|
|
|
(2,496
|
)
|
|
|
Gross profit (loss)
|
|
|
|
|
|
|
549
|
|
|
|
(654
|
)
|
|
|
(1,034
|
)
|
|
|
Research and development expenses
|
|
|
|
|
|
|
(193
|
)
|
|
|
(219
|
)
|
|
|
(347
|
)
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
(92
|
)
|
|
|
(90
|
)
|
|
|
(142
|
)
|
Restructuring charges
|
|
|
3
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(28
|
)
|
Goodwill impairment
|
|
|
9
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
(96
|
)
|
Other operating income, net
|
|
|
|
|
|
|
3
|
|
|
|
4
|
|
|
|
6
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
267
|
|
|
|
(1,038
|
)
|
|
|
(1,641
|
)
|
|
|
Interest income (expense), net
|
|
|
14
|
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
(6
|
)
|
Equity in earnings (loss) of associated companies
|
|
|
8
|
|
|
|
65
|
|
|
|
(10
|
)
|
|
|
(16
|
)
|
Loss on associated company share issuance
|
|
|
8
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
(11
|
)
|
Other non-operating income, net
|
|
|
17
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
338
|
|
|
|
(1,062
|
)
|
|
|
(1,679
|
)
|
|
|
Income tax expense
|
|
|
4
|
|
|
|
(104
|
)
|
|
|
(18
|
)
|
|
|
(28
|
)
|
|
|
Net income (loss)
|
|
|
|
|
|
|
234
|
|
|
|
(1,080
|
)
|
|
|
(1,707
|
)
|
|
|
Basic and diluted earnings (loss) per share
|
|
|
5
|
|
|
|
0.68
|
|
|
|
(3.16
|
)
|
|
|
(4.99
|
)
|
|
|
See accompanying notes to the unaudited condensed consolidated
financial statements.
13
QIMONDA AG AND
SUBSIDIARIES
As of September 30, 2007 and March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Notes
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
( millions)
|
|
|
( millions)
|
|
|
($ millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
746
|
|
|
|
540
|
|
|
|
853
|
|
Marketable securities
|
|
|
|
|
|
|
265
|
|
|
|
228
|
|
|
|
360
|
|
Trade accounts receivable, net
|
|
|
6
|
|
|
|
341
|
|
|
|
194
|
|
|
|
307
|
|
Inventories
|
|
|
7
|
|
|
|
619
|
|
|
|
344
|
|
|
|
544
|
|
Deferred income taxes
|
|
|
4
|
|
|
|
32
|
|
|
|
31
|
|
|
|
49
|
|
Other current assets
|
|
|
|
|
|
|
254
|
|
|
|
147
|
|
|
|
232
|
|
|
|
Total current assets
|
|
|
|
|
|
|
2,257
|
|
|
|
1,484
|
|
|
|
2,345
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
2,186
|
|
|
|
1,982
|
|
|
|
3,133
|
|
Intangible assets, net
|
|
|
9
|
|
|
|
143
|
|
|
|
71
|
|
|
|
112
|
|
Long-term investments
|
|
|
8
|
|
|
|
628
|
|
|
|
561
|
|
|
|
887
|
|
Deferred income taxes
|
|
|
4
|
|
|
|
147
|
|
|
|
142
|
|
|
|
224
|
|
Other assets
|
|
|
|
|
|
|
20
|
|
|
|
24
|
|
|
|
38
|
|
|
|
Total assets
|
|
|
|
|
|
|
5,381
|
|
|
|
4,264
|
|
|
|
6,739
|
|
|
|
Liabilities and shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt and current maturities
|
|
|
11, 14
|
|
|
|
77
|
|
|
|
123
|
|
|
|
194
|
|
Trade accounts payable
|
|
|
10
|
|
|
|
756
|
|
|
|
603
|
|
|
|
954
|
|
Accrued liabilities
|
|
|
|
|
|
|
147
|
|
|
|
121
|
|
|
|
191
|
|
Deferred income taxes
|
|
|
4
|
|
|
|
5
|
|
|
|
5
|
|
|
|
8
|
|
Other current liabilities
|
|
|
|
|
|
|
259
|
|
|
|
297
|
|
|
|
469
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
1,244
|
|
|
|
1,149
|
|
|
|
1,816
|
|
|
|
Long-term debt
|
|
|
12
|
|
|
|
227
|
|
|
|
429
|
|
|
|
678
|
|
Pension liabilities
|
|
|
16
|
|
|
|
25
|
|
|
|
27
|
|
|
|
43
|
|
Deferred income taxes
|
|
|
4
|
|
|
|
23
|
|
|
|
14
|
|
|
|
22
|
|
Long-term accrued liabilities
|
|
|
|
|
|
|
14
|
|
|
|
16
|
|
|
|
25
|
|
Other liabilities
|
|
|
17
|
|
|
|
248
|
|
|
|
226
|
|
|
|
357
|
|
Minority interest
|
|
|
|
|
|
|
83
|
|
|
|
80
|
|
|
|
126
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
1,864
|
|
|
|
1,941
|
|
|
|
3,067
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary share capital
|
|
|
|
|
|
|
684
|
|
|
|
684
|
|
|
|
1,081
|
|
Additional paid-in capital
|
|
|
|
|
|
|
3,117
|
|
|
|
3,119
|
|
|
|
4,930
|
|
Accumulated deficit
|
|
|
|
|
|
|
(25
|
)
|
|
|
(1,105
|
)
|
|
|
(1,746
|
)
|
Accumulated other comprehensive loss
|
|
|
13
|
|
|
|
(259
|
)
|
|
|
(375
|
)
|
|
|
(593
|
)
|
|
|
Total shareholders equity
|
|
|
|
|
|
|
3,517
|
|
|
|
2,323
|
|
|
|
3,672
|
|
|
|
Total liabilities and shareholders equity
|
|
|
|
|
|
|
5,381
|
|
|
|
4,264
|
|
|
|
6,739
|
|
|
|
See accompanying notes to the unaudited condensed consolidated
financial statements.
14
QIMONDA AG AND
SUBSIDIARIES
For the six months ended March 31, 2007 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
earnings
|
|
|
other
|
|
|
|
|
|
|
|
|
|
Issued Ordinary shares
|
|
|
paid-in
|
|
|
(accumulated
|
|
|
comprehensive
|
|
|
|
|
|
|
Notes
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit)
|
|
|
(loss) income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
(millions)
|
|
|
( millions)
|
|
|
( millions)
|
|
|
( millions)
|
|
|
( millions)
|
|
|
( millions)
|
|
|
Balance as of October 1, 2006
|
|
|
|
|
|
|
342
|
|
|
|
684
|
|
|
|
3,097
|
|
|
|
224
|
|
|
|
(134
|
)
|
|
|
3,871
|
|
|
|
Contribution by Infineon
|
|
|
1, 18
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
Stock-based compensation
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Other comprehensive loss
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72
|
)
|
|
|
(72
|
)
|
|
|
Balance as of March 31, 2007
|
|
|
|
|
|
|
342
|
|
|
|
684
|
|
|
|
3,112
|
|
|
|
458
|
|
|
|
(206
|
)
|
|
|
4,048
|
|
|
|
Balance as of October 1, 2007
|
|
|
|
|
|
|
342
|
|
|
|
684
|
|
|
|
3,117
|
|
|
|
(25
|
)
|
|
|
(259
|
)
|
|
|
3,517
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,080
|
)
|
|
|
|
|
|
|
(1,080
|
)
|
Stock-based compensation
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Other comprehensive loss
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116
|
)
|
|
|
(116
|
)
|
|
|
Balance as of March 31, 2008
|
|
|
|
|
|
|
342
|
|
|
|
684
|
|
|
|
3,119
|
|
|
|
(1,105
|
)
|
|
|
(375
|
)
|
|
|
2,323
|
|
|
|
See accompanying notes to the unaudited condensed consolidated
financial statements.
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
Notes
|
|
|
2007
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
( millions)
|
|
|
( millions)
|
|
|
($ millions)
|
|
|
Net income (loss)
|
|
|
|
|
|
|
234
|
|
|
|
(1,080
|
)
|
|
|
(1,707
|
)
|
Adjustments to reconcile net income (loss) to cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
332
|
|
|
|
325
|
|
|
|
514
|
|
Goodwill impairment
|
|
|
9
|
|
|
|
|
|
|
|
61
|
|
|
|
96
|
|
Provision for doubtful accounts
|
|
|
6
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Gain on sales of business interests
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
Gain on sales of long-term assets
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
Gain on sales of marketable securities
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
Equity in (earnings) loss of associated companies
|
|
|
|
|
|
|
(65
|
)
|
|
|
10
|
|
|
|
16
|
|
Loss on associate company share issuance
|
|
|
8
|
|
|
|
|
|
|
|
7
|
|
|
|
11
|
|
Stock-based compensation
|
|
|
12
|
|
|
|
3
|
|
|
|
2
|
|
|
|
3
|
|
Minority interests
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
5
|
|
Deferred income taxes
|
|
|
4
|
|
|
|
18
|
|
|
|
7
|
|
|
|
11
|
|
Due to changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
6
|
|
|
|
285
|
|
|
|
152
|
|
|
|
240
|
|
Inventories
|
|
|
7
|
|
|
|
(141
|
)
|
|
|
266
|
|
|
|
420
|
|
Other current assets
|
|
|
|
|
|
|
77
|
|
|
|
118
|
|
|
|
186
|
|
Trade accounts payable
|
|
|
10
|
|
|
|
(47
|
)
|
|
|
(140
|
)
|
|
|
(221
|
)
|
Accrued liabilities
|
|
|
|
|
|
|
(7
|
)
|
|
|
(21
|
)
|
|
|
(33
|
)
|
Other current liabilities
|
|
|
|
|
|
|
49
|
|
|
|
43
|
|
|
|
68
|
|
Other assets and liabilities
|
|
|
|
|
|
|
(9
|
)
|
|
|
(20
|
)
|
|
|
(32
|
)
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
724
|
|
|
|
(268
|
)
|
|
|
(424
|
)
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities available for sale
|
|
|
|
|
|
|
(146
|
)
|
|
|
(45
|
)
|
|
|
(71
|
)
|
Proceeds from sales of marketable securities available for sale
|
|
|
|
|
|
|
16
|
|
|
|
65
|
|
|
|
103
|
|
Proceeds from disposal of business interests and dividends
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
Purchases of intangible assets
|
|
|
|
|
|
|
(22
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Purchases of property, plant and equipment
|
|
|
|
|
|
|
(365
|
)
|
|
|
(269
|
)
|
|
|
(426
|
)
|
Proceeds from sales of long-term assets
|
|
|
11, 14
|
|
|
|
4
|
|
|
|
129
|
|
|
|
204
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(486
|
)
|
|
|
(122
|
)
|
|
|
(193
|
)
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in short-term debt due Infineon
|
|
|
15
|
|
|
|
(296
|
)
|
|
|
|
|
|
|
|
|
Increase in short-term debt due third parties
|
|
|
11
|
|
|
|
|
|
|
|
79
|
|
|
|
125
|
|
Repayments of short-term debt due third parties
|
|
|
11
|
|
|
|
|
|
|
|
(69
|
)
|
|
|
(109
|
)
|
Decrease in financial payables due related parties
|
|
|
15
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
Decrease in financial receivables due related parties
|
|
|
15
|
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
Proceeds from issuance of long-term debt
|
|
|
11
|
|
|
|
|
|
|
|
208
|
|
|
|
328
|
|
Principal repayments under capital lease obligations
|
|
|
11, 14
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
(30
|
)
|
Dividend payments to minority shareholders
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
(9
|
)
|
Contribution by and advances from Infineon
|
|
|
1, 18
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
|
|
|
|
(295
|
)
|
|
|
194
|
|
|
|
307
|
|
|
|
Effect of foreign exchange rate changes on cash and cash
equivalents
|
|
|
|
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(16
|
)
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
|
|
|
(60
|
)
|
|
|
(206
|
)
|
|
|
(326
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
932
|
|
|
|
746
|
|
|
|
1,179
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
|
|
|
872
|
|
|
|
540
|
|
|
|
853
|
|
|
|
See accompanying notes to the unaudited condensed consolidated
financial statements.
16
QIMONDA AG AND
SUBSIDIARIES
(euro in millions, except where otherwise stated)
1. Description
of Business, Formation and Basis of Presentation
Description of
Business
Qimonda AG and its subsidiaries (collectively, the
Company or Qimonda) is one of the
worlds leading suppliers of semiconductor memory products.
Qimonda designs memory technologies and develops, manufactures,
markets and sells a large variety of memory products on a
module, component and chip level. Qimonda has operations,
investments and customers located mainly in Europe, Asia and
North America. The Company is a majority-owned subsidiary of
Infineon Technologies AG and its subsidiaries
(Infineon). The financial year-end for the Company
is September 30.
Formation
Effective May 1, 2006, substantially all the memory
products-related assets and liabilities, operations and
activities of Infineon (the Memory Products
business) were contributed to the Company (the
Formation). In conjunction with the Formation the
Company entered into a contribution agreement and various other
service agreements with Infineon (note 15 and 18).
At the Formation certain of the Companys operations and
investments that could not be directly transferred were
initially held in trust for Qimondas benefit by Infineon
until the legal transfer to Qimonda could take place. Pursuant
to agreements entered into on December 14, 2007
Infineons investments in Advanced Mask Technology Center
GmbH & Co. (AMTC) and Maskhouse Building
Administration GmbH & Co. KG (BAC) were
transferred to Qimonda subject to registration in the commercial
register. On January 11, 2008 the legal transfer from
Infineon of the Companys interest in AMTC became effective
with the entry in the commercial register. Similarly, on
January 21, 2008 the legal transfer from Infineon of the
Companys interest in BAC became effective with the entry
in the commercial register. The accompanying financial
statements include the results of operations of these activities
for all periods presented.
Basis of
Presentation
The accompanying condensed consolidated financial statements as
of and for the three and six months ended March 31, 2007
and 2008 have been prepared in accordance with accounting
principles generally accepted in the United States of America
(U.S. GAAP). The accompanying financial statements are
condensed, because certain information and footnote disclosures
normally included in annual financial statements have been
condensed or omitted. In addition, the condensed consolidated
balance sheet as of September 30, 2007 was derived from
audited financial statements and condensed for comparative
purposes, but does not include all disclosures required by U.S.
GAAP. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments
necessary to present fairly the financial position, results of
operations and cash flows of the interim periods presented. All
such adjustments are of a normal recurring nature. The results
of operations for any interim period are not necessarily
indicative of results for the full financial year. The
accompanying condensed consolidated financial statements should
be read in conjunction with the audited combined and
consolidated financial statements for the year ended
September 30, 2007. The accounting policies applied in
preparing the accompanying condensed financial statements are
consistent with those for the year ended September 30, 2007
(note 2).
All amounts herein are shown in millions of euro (or
) except where otherwise stated. The
accompanying balance sheet as of March 31, 2008 and the
statements of operations and cash flows for the periods then
ended are also presented in U.S. dollars ($), solely
for the convenience of the reader, at the rate of 1 =
$1.5805, the Federal Reserve noon buying rate on March 31,
2008.
Certain amounts in prior period condensed consolidated financial
statements and notes have been reclassified to conform to the
current period presentation. Intangible assets, pension
liabilities and minority interest are presented separately on
the Companys balance sheet. The Companys
consolidated results of operations, financial position or
overall cash flows have not been affected by these
reclassifications.
17
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
Estimates
The preparation of the accompanying condensed consolidated
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, as well as disclosure of contingent amounts and
liabilities, at the date of the financial statements and the
reported amounts of revenues and expenses during the periods
presented. Actual results could differ materially from such
estimates made by management.
2. Recent
Accounting Pronouncements
Adopted in the
financial year beginning October 1, 2007
In July 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
an interpretation of FASB Statement No. 109
(FIN 48) which defines the threshold for
recognizing the benefits of tax return positions in the
financial statements as more-likely-than-not to be
sustained by the taxing authority. FIN 48 also provides
guidance on the de-recognition measurement and classification of
income tax uncertainties, along with any related interest and
penalties. FIN 48 also includes guidance concerning
accounting for income tax uncertainties in interim periods and
increases the level of disclosures associated with any recorded
income tax uncertainties. The Company adopted FIN 48
beginning October 1, 2007 (note 4).
Issued since
October 1, 2007 but principally applicable in future
financial years
In December 2007, the FASB issued SFAS No. 141(R)
Business Combinations.
SFAS No. 141(R) replaces SFAS No. 141
Business Combinations and requires the
acquiring entity in a business combination to recognize all the
assets acquired and liabilities assumed in the transaction even
if the business is not acquired by 100% by the acquirer. The
revised statement establishes the acquisition-date fair value as
the measurement objective for all assets acquired and
liabilities assumed. Further major differences to the current
accounting practices are the definition of a
business, the shift from the purchase method to the
acquisition method, a changed treatment of acquisition and
restructuring costs related to the acquirement and the
recognition of contingent assets, contingent liabilities and
contingent considerations. The new SFAS No. 141(R)
will be effective prospectively for fiscal years beginning on or
after December 15, 2008. The Company is currently
evaluating the impact on its results of operations and financial
position.
In December 2007, the FASB issued SFAS No. 160
Non-controlling Interests in Consolidated Financials
Statements an Amendment of ARB
No. 51. SFAS No. 160 requires companies
to measure an acquisition of a non-controlling (minority)
interest at fair value in the equity section of the acquiring
entitys balance sheet. The new SFAS No. 160 will
be effective prospectively for fiscal years beginning on or
after December 15, 2008. For presentation and disclosure
requirements the new statement is to be applied retrospectively
for all periods presented. The Company is currently evaluating
the impact on its results of operations and financial position.
In March 2008, the FASB issued SFAS No. 161
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133. The Statement requires enhanced
disclosures about an entitys derivative and hedging
activities. This Statement is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The
Company does not expect the adoption of this Statement to have a
material impact on its financial statements.
3. Restructuring
During the three months ended December 31, 2007 Qimonda
announced various restructuring measures aimed at reducing costs
by focusing efforts on faster conversions to more cost efficient
technologies. The Companys restructuring expenses comprise
three measures: The relocation of the backend production in
Malaysia from Malacca to Senai (Johor) near Singapore, the
phase-out of 200mm manufacturing at Infineon Dresden and the
combination of research activities in North America. As of
March 31, 2008, the Company has recorded accruals of
18 related to these measures. The Company
18
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
currently expects additional costs of 4 related to these
measures which are to be expensed as they are incurred during
the year ending September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months
|
|
|
|
|
|
|
ended
|
|
|
|
|
As of
|
|
March 31, 2008
|
|
As of
|
|
|
September 30,
|
|
Restructuring
|
|
|
|
March 31,
|
|
|
2007
|
|
Charges
|
|
Payments
|
|
2008
|
|
Employee terminations
|
|
|
|
|
|
8
|
|
|
|
|
|
8
|
Other exit costs
|
|
|
|
|
|
10
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
18
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relocation of
backend production in Malaysia
In March 2007, the Company had announced its intention to
relocate its backend production in Malaysia from its existing
facility in Malacca to a new backend production facility in
Senai (Johor) near Singapore by December 2008. Following the
move, the existing site in Malacca is to be completely closed
and the remaining employees are to be laid off. During the three
months ended March 31, 2008 the Company accrued 4 for
severance payments for 631 employees.
Phase-out of
200mm Manufacturing at Infineon Dresden
In April 2006, Infineon and Qimonda entered into a product
purchase agreement for the production of 200mm wafers by
Infineon Technologies Dresden GmbH & Co. OHG
(Infineon Dresden) through September 30, 2007.
In January 2007, the agreement was extended through
September 30, 2009. Pursuant to the agreement, Infineon
agreed to manufacture wafers at Infineon Dresden, using the
Companys manufacturing technologies and masks, and to sell
them to the Company at prices specified in the agreement. The
Company agreed to pay for idle costs resulting from its
purchasing fewer wafers from Infineon Dresden than agreed upon,
if Infineon cannot otherwise utilize the capacity. Infineon and
the Company agreed to share equally any potential restructuring
costs arising in connection with one Infineon Dresden module.
As part of its focus on improved profitability and 300mm
manufacturing, on November 30, 2007, the Company terminated
the aforementioned product purchase agreement with Infineon. The
Companys purchases of wafers from Infineon Dresden will be
completely phased out by the end of May 2008. As a result of the
termination, the Company accrued restructuring liabilities of
12 and 10 as of December 31, 2007 and
March 31, 2008, respectively, for amounts to be reimbursed
to Infineon for costs related to one Infineon Dresden module. In
addition, cost of goods sold includes losses related to purchase
commitments for 200mm wafer contract manufacturing at Infineon
Dresden of 3 and 20 for the three and six months
ended March 31, 2008, respectively. Additionally, Infineon
and the Company are presently discussing additional
reimbursement for Infineon from the Company in respect of idle
costs at Infineon Dresden of approximately 20, which have
not been incurred or accrued as of March 31, 2008.
Combination of
research activities in North America
Due to continued efforts to improve cost and efficiency, in
December 2007, the Company announced plans to consolidate its
U.S. research and development facilities into a single
development center located in Raleigh, North Carolina. As a
result, the Companys development center in Burlington,
Vermont, is to be closed by the end of June 2008. The Company
accrued restructuring costs of 0 and 4 during the
three and six months ended March 31, 2008, respectively,
relating to lease termination costs and expected severance
payments for approximately 100 employees.
19
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
4. Income
Taxes
Income tax expense for the three and six months ended
March 31, 2007 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes
|
|
|
(22
|
)
|
|
|
(3
|
)
|
|
|
(86
|
)
|
|
|
(11
|
)
|
Deferred taxes
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(18
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(30
|
)
|
|
|
(9
|
)
|
|
|
(104
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (income) loss (note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
34%
|
|
|
|
(2
|
)%
|
|
|
31%
|
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 17, 2007, the Business Tax Reform Act of 2008 was
enacted in Germany. This bill introduces several changes to the
taxation of German business activities, including a reduction of
the combined corporate and trade tax rate in Germany from
approximately 39% to 30%. Most of the changes apply to the
Company effective October 1, 2007 and affect the
Companys current tax rate from that date.
In the three and six months ended March 31, 2007 and 2008,
the Companys effective tax rate was lower than the
combined German statutory tax rate of 39% and 30%, respectively.
This resulted primarily from income in jurisdictions with lower
than average corporate tax rates, the utilization of tax
credits, and the recording of additional valuation allowances
against current period deferred tax benefits arising in
connection with the operating losses in the three and six months
ended March 31, 2008. Despite the consolidated pretax loss,
the Company generated taxable income in some tax jurisdictions
which resulted in the negative effective tax rate during the
three and six months ended March 31, 2008.
Pursuant to SFAS No. 109, Accounting for
Income Taxes, the Company has assessed its deferred
tax asset and the need for a valuation allowance. The assessment
was based on the benefits that could be realized from available
tax strategies, forecasted future taxable income to the extent
applicable, and the reversal of temporary differences in future
periods. As a result of this assessment, the Company increased
its deferred tax asset valuation allowance as of March 31,
2008 to reduce the deferred tax asset to an amount that is more
likely than not expected to be realized in future. Changes in
valuation allowance attributable to prior year tax credits in
the amounts of 6 and 10 were recorded for the three
and six months ended March 31, 2008, respectively.
Application of
FIN 48
The Company adopted FIN 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement
No. 109 and related guidance on October 1,
2007. FIN 48 clarifies the accounting and reporting for
uncertainties in income tax law. FIN 48 prescribes a
comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of uncertain tax
positions taken or expected to be taken in income tax returns.
FIN 48 contains a two-step approach to recognizing and
measuring uncertain tax positions accounted for in accordance
with SFAS No. 109. The first step is to evaluate the
tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not
that the position will be sustained upon being audited,
including resolution of any related appeals or litigation
processes. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized
upon ultimate settlement.
The adoption of FIN 48 as of October 1, 2007 did not
affect the Companys liability for unrecognized tax
benefits. The total amount of gross unrecognized tax benefits as
of the date of adoption was 37. The unrecognized tax
benefits were increased during the three and six months ended
March 31, 2008, respectively. If recognized, the
unrecognized tax benefits resulting from the adoption of
FIN 48 and its increase in the three and six months ended
March 31, 2008, would favorably affect the Companys
effective tax rate. Interest and penalties related to income tax
liabilities are classified as interest expense. The Company had
no significant accrued interest and penalties recorded as of the
date of adoption.
20
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
During the three and six months ended March 31, 2008 the
total amount of unrecognized tax benefits was as follows:
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2008
|
|
2008
|
|
Unrecognized tax benefits at beginning of period
|
|
|
45
|
|
|
37
|
Increase in unrecognized tax benefits
|
|
|
4
|
|
|
12
|
|
|
|
|
|
|
|
Unrecognized tax benefits at end of period
|
|
|
49
|
|
|
49
|
|
|
|
|
|
|
|
The Company does not expect significant changes in the total
amount of unrecognized tax benefits through September 30,
2008. As of the date of adoption, the Companys tax returns
since the Formation remain subject to examination in the
majority of tax jurisdictions.
5. Earnings
(Loss) Per Share
Basic earnings (loss) per share (EPS) is calculated
by dividing net income (loss) by the weighted average number of
ordinary shares outstanding during the three and six months
ended March 31, 2007 and 2008, respectively.
On November 24, 2006, the Company granted 1.9 million
stock options pursuant to the Qimonda Stock Option Plan
(note 11). None of these options were dilutive to EPS for
the three and six months ended March 31, 2007 and 2008. The
Company accounts for the potentially dilutive effects of its
stock options according to the provisions of
SFAS No. 123(R) Share Based Payment.
On February 13, 2008, the Company issued convertible notes,
due in 2013, with a conversion option for up to 30 million
ADSs plus an overallotment option that was exercised by the
underwriting banks representing a conversion option for
4.2 million additional ADSs (notes 11 and 17). If the
conversion option were to be exercised, the number of
outstanding shares would increase. None of these options were
dilutive to EPS for the three and six months ended
March 31, 2008.
The computation of basic and diluted EPS for the three and six
months ended March 31, 2007 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Numerator Income (loss) available to ordinary
shareholders, basic and diluted
|
|
|
57
|
|
|
(482
|
)
|
|
|
234
|
|
|
(1,080
|
)
|
Denominator Weighted-average shares outstanding (in
millions), basic and diluted
|
|
|
342
|
|
|
342
|
|
|
|
342
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share (in euro), basic and diluted
|
|
|
0.17
|
|
|
(1.41
|
)
|
|
|
0.68
|
|
|
(3.16
|
)
|
6. Trade
Accounts Receivable, net
Trade accounts receivable at September 30, 2007 and
March 31, 2008 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Third party trade
|
|
|
333
|
|
|
|
193
|
|
Infineon group trade (note 14)
|
|
|
11
|
|
|
|
2
|
|
Associated and Related Companies trade (note 14)
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, gross
|
|
|
347
|
|
|
|
198
|
|
Allowance for doubtful accounts
|
|
|
(6
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
341
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
21
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
7. Inventories
Inventories at September 30, 2007 and March 31, 2008
consist of the following:
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Raw materials and supplies
|
|
|
63
|
|
|
32
|
Work-in-process
|
|
|
311
|
|
|
153
|
Finished goods
|
|
|
245
|
|
|
159
|
|
|
|
|
|
|
|
Total inventories
|
|
|
619
|
|
|
344
|
|
|
|
|
|
|
|
8. Long-term
Investments
On August 20, 2007, Inotera issued 40 million common
shares, representing 1.2% of its outstanding share capital, as
bonuses to its employees, which diluted the Companys
ownership interest to 35.6%. The Company recorded the related
dilution loss of 7 as part of non-operating expense during
the three months ended December 31, 2007.
In connection with the Formation, Infineon and Qimonda entered
into a trust agreement under which Infineon placed the Inotera
shares in trust for the Company until the shares could legally
be transferred. In March 2007, the Inotera shares (except for a
portion representing less than 1% of the total shares) were
transferred to Qimonda. The Inotera shares were subject to
Taiwanese
lock-up
provisions related to the Inotera IPO until January 2008, after
which the remaining less than 1% of the shares are eligible to
be transferred to Qimonda. Qimonda expects the final transfer to
occur during the year ending September 30, 2008.
During the three months ended December 31, 2007 Sony
Corporation and Qimonda AG established the Qreatic Design joint
venture. The scope of the joint venture is the design of
high-performance, low power, embedded and customer specific
DRAMs for consumer and graphic applications. According to the
agreement, the 50:50 joint venture started with specialists from
Sony and Qimonda, bringing together their engineering expertise
for the mutual benefit of both companies. Qreatic Design, which
is located in Tokyo, Japan, started operations during the three
months ended December 31, 2007. The Company accounts for
its investment in Qreatic Design using the equity method of
accounting due to the lack of unilateral control.
9. Intangible
Assets, net
Pursuant to SFAS No. 142 Goodwill and Other
Intangible Assets the Company tested goodwill for
impairment at March 31, 2008 due to the decline in the
Companys share price and general weakness in pricing for
DRAM products. Goodwill is tested for impairment using a
two-step process. In the first step, the fair value of the
reporting unit is compared to its carrying value. If the fair
value of the reporting unit exceeds the carrying value of the
net assets assigned to the reporting unit, goodwill is
considered not impaired and no further testing is required. If
the carrying value of the net assets assigned to a reporting
unit exceeds the fair value of a reporting unit, the second step
of the impairment test is performed in order to determine the
implied fair value of the reporting units goodwill.
Determining the implied fair value of goodwill requires the
valuation of the reporting units tangible and intangible
assets and liabilities in a manner similar to the allocation of
purchase price in a business combination and requires
considerable judgment. If the carrying value of the reporting
units goodwill exceeds its implied fair value, goodwill is
deemed impaired and is written down to the extent of the
difference.
As a result of the Companys fair value analysis as of
March 31, 2008, the carrying value of goodwill was
determined to exceed its implied fair value in full.
Accordingly, as of March 31, 2008 the Company recognized a
goodwill impairment charge in the amount of 61.
22
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
As of September 30, 2007 and March 31, 2008, the
Company had goodwill as follows:
|
|
|
|
|
|
|
Goodwill
|
|
September 30, 2007
|
|
|
64
|
|
Foreign currency effects
|
|
|
(3
|
)
|
Impairment
|
|
|
(61
|
)
|
|
|
|
|
|
March 31, 2008
|
|
|
|
|
|
|
|
|
|
The Company also assessed its long-lived assets for impairment
pursuant to SFAS No. 144 Accounting for
Impairment or Disposal of Long-Lived Assets as
of March 31, 2008 and determined that the Companys
long-lived assets are recoverable.
10. Trade
Accounts Payable
Trade accounts payable at September 30, 2007 and
March 31, 2008 consists of the following:
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Third party trade
|
|
|
601
|
|
|
451
|
Infineon group trade (note 14)
|
|
|
56
|
|
|
78
|
Associated and Related Companies trade (note 14)
|
|
|
99
|
|
|
74
|
|
|
|
|
|
|
|
Total
|
|
|
756
|
|
|
603
|
|
|
|
|
|
|
|
11. Debt
Debt at September 30, 2007 and March 31, 2008 consists
of the following:
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Short-term debt and current maturities:
|
|
|
|
|
|
|
Notes payable to banks, rate 4.43%
|
|
|
28
|
|
|
57
|
Current portion of long term debt, rate 5.33%
|
|
|
21
|
|
|
21
|
Capital lease obligations
|
|
|
28
|
|
|
45
|
|
|
|
|
|
|
|
Total short-term debt and current maturities
|
|
|
77
|
|
|
123
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
Unsecured term bank loan, rate 5.33%, due 2013
|
|
|
103
|
|
|
83
|
Bank loan, rate 6.96% due 2009
|
|
|
|
|
|
40
|
Notes payable to governmental entity, rate 2.53%, due 2027
|
|
|
24
|
|
|
21
|
Capital lease obligations
|
|
|
100
|
|
|
151
|
Convertible notes principal portion, rate 6.75%, due
2013
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
227
|
|
|
429
|
|
|
|
|
|
|
|
In September 2007, the Company entered into a four-year sale and
lease back transaction of a portion of its 200mm equipment at
its Richmond facility. In December 2007, the Company entered
into an additional four-year sale and lease back transaction of
additional 200mm equipment and a five-year sale and lease back
transaction of a portion of its 300mm equipment, both at its
Richmond facility. The leases are accounted for as capital
leases, whereby the present values of the respective lease
payments are reflected as capital lease obligations.
The Company can also draw, for short term purposes, on the
working capital lines it maintains in several locations with an
aggregate amount of 248 as of March 31, 2008.
On January 29, 2008, Qimonda AG held its annual general
meeting of shareholders. The shareholders resolved to replace
the previous authorization of July 14, 2006 relating to the
issuance of securities
23
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
with a new authorization to the Management Board, effective
until January 28, 2013, to issue various types of
securities having an aggregate face value of up to the
equivalent of 2,063. Following this authorization, on
February 13, 2008, Qimonda AGs 100%-owned
finance subsidiary Qimonda Finance LLC issued $218 million
convertible notes due 2013 at par which are fully and
unconditionally guaranteed by Qimonda AG in an underwritten
registered offering in the U.S.A. On March 11, 2008, in
connection with the exercise of the underwriters
overallotment option, an additional $30 million convertible
notes were issued on the same terms. The notes are convertible,
at the option of the holders of the notes, into an aggregate
34.2 million ordinary shares of the Company, at an initial
conversion price of $7.2549 per share through maturity. The
notes accrue interest at 6.75% per year. The notes are unsecured
and rank pari passu with all present and future unsecured
unsubordinated obligations of the issuer. The note holders have
a negative pledge relating to future capital market
indebtedness, as defined. The note holders have an early
redemption option in the event of a fundamental change, as
defined. The Company may redeem the convertible notes after
three years at their principal amount plus interest accrued
thereon, if the Companys share price exceeds 150% of the
conversion price on 20 trading days during a period of 30
consecutive trading days. The convertible notes have been
admitted for open trading on the Frankfurt Stock Exchange.
Concurrently with this transaction, Infineon loaned Credit
Suisse International up to 21 million Qimonda ADSs
ancillary to the placement of the convertible notes.
Furthermore at issuance, the Company deferred issuance costs of
5 which will be amortized as part of interest expense over
the term of the convertible notes. At March 31, 2008
unamortized debt issuance costs amounted to 5.
At issuance, the equity conversion option embedded in the
convertible notes was bifurcated pursuant to
SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities and a corresponding
amount is amortized as debt premium to interest expense over the
term of the convertible notes (notes 5 and 17).
For the period ended March 31, 2008, the Company recognized
interest expense of 2 related to both the nominal interest
and amortized debt premium of the convertible notes.
Aggregated amounts of debt, including capital lease obligations,
maturing subsequent to March 31, 2008 are as follows:
|
|
|
|
Next 12 Months ending March 31,
|
|
Amount
|
|
2009
|
|
|
123
|
2010
|
|
|
111
|
2011
|
|
|
76
|
2012
|
|
|
53
|
2013
|
|
|
168
|
Thereafter
|
|
|
21
|
|
|
|
|
Total debt
|
|
|
552
|
|
|
|
|
24
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
12. Stock-based
Compensation
A summary of the status of the Qimonda stock option plan 2006 as
of March 31, 2008, and changes during the six months then
ended is presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
average
|
|
Weighted
|
|
|
Number of
|
|
|
Weighted-
|
|
remaining
|
|
average
|
|
|
Options in
|
|
|
average
|
|
contractual life
|
|
grant date
|
|
|
million
|
|
|
exercise price
|
|
(in years)
|
|
fair value
|
|
Outstanding at beginning of period
|
|
|
1.9
|
|
|
$
|
15.97
|
|
|
5.16
|
|
$
|
4.23
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(0.1
|
)
|
|
$
|
15.97
|
|
|
|
|
$
|
4.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
1.8
|
|
|
$
|
15.97
|
|
|
4.65
|
|
$
|
4.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to ultimately vest at end of period
|
|
|
1.7
|
|
|
$
|
15.97
|
|
|
4.65
|
|
$
|
4.23
|
Exercisable at end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-Based
Compensation Expense
Stock-based compensation expense for the Infineon and Qimonda
stock option plans was allocated as follows for the three and
six months ended March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Compensation expense recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
1
|
|
|
|
|
|
2
|
|
|
1
|
Selling, general and administrative expenses
|
|
|
|
|
|
1
|
|
|
1
|
|
|
1
|
Research and development expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Infineon stock options:
|
|
|
1
|
|
|
|
|
|
3
|
|
|
1
|
Qimonda stock options:
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
The amount of stock-based compensation cost which was
capitalized and remained in inventories during the three and six
months ended March 31, 2007 and 2008 was immaterial.
Stock-based compensation expense does not reflect income tax
benefits, since stock options are primarily granted in tax
jurisdictions where the expense is not deductible for tax
purposes. In addition, stock-based compensation expense did not
have a cash flow effect during the six months ended
March 31, 2008 since no exercises of stock options occurred
during the period. As of March 31, 2008, for the
Infineon-related stock options, there was a total of 2 in
unrecognized compensation expense related to unvested stock
options, which is expected to be recognized over a remaining
total period of 2.0 years, and for the Qimonda-related
stock options, there was a total of 3 in unrecognized
compensation expense related to unvested stock options which is
expected to be recognized over a remaining total period of
1.77 years.
Options on Infineon stock do not represent potential dilutive
instruments for Qimonda AG, and accordingly, they have no
dilutive impact on diluted EPS (note 5). The Qimonda stock
options were not dilutive to EPS for the three and six months
ended March 31, 2008 (note 5).
25
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
13. Comprehensive
Loss
The changes in the components of other comprehensive income
(loss) for the three and six months ended March 31, 2007
and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Three months ended
|
|
|
March 31, 2007
|
|
March 31, 2008
|
|
|
|
|
Tax
|
|
|
|
|
|
Tax
|
|
|
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Accumulated other comprehensive (loss) income
beginning of period
|
|
|
(190
|
)
|
|
|
2
|
|
|
(188
|
)
|
|
|
(304
|
)
|
|
|
(2
|
)
|
|
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Unrealized losses on securities, net
|
|
|
(3
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
(14
|
)
|
* Additional minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Foreign currency translation adjustment
|
|
|
(15
|
)
|
|
|
|
|
|
(15
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(18
|
)
|
|
|
|
|
|
(18
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
(69
|
)
|
Accumulated other comprehensive (loss) income end of
period
|
|
|
(208
|
)
|
|
|
2
|
|
|
(206
|
)
|
|
|
(373
|
)
|
|
|
(2
|
)
|
|
|
(375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
Six months ended
|
|
|
March 31, 2007
|
|
March 31, 2008
|
|
|
|
|
Tax
|
|
|
|
|
|
Tax
|
|
|
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Accumulated other comprehensive (loss) income
beginning of period
|
|
|
(136
|
)
|
|
|
2
|
|
|
(134
|
)
|
|
|
(257
|
)
|
|
|
(2
|
)
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Unrealized losses on securities, net
|
|
|
(3
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
(16
|
)
|
* Additional minimum pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Foreign currency translation adjustment
|
|
|
(69
|
)
|
|
|
|
|
|
(69
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(72
|
)
|
|
|
|
|
|
(72
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
(116
|
)
|
Accumulated other comprehensive (loss) income end of
period
|
|
|
(208
|
)
|
|
|
2
|
|
|
(206
|
)
|
|
|
(373
|
)
|
|
|
(2
|
)
|
|
|
(375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
Accumulated other comprehensive (loss) income as of
March 31, 2007 and 2008 has the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
As of March 31, 2008
|
|
|
|
|
Tax
|
|
|
|
|
|
Tax
|
|
|
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Pretax
|
|
Effect
|
|
Net
|
|
Unrealized losses on securities, net
|
|
|
(3
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
(22
|
)
|
Additional minimum pension liability
|
|
|
(4
|
)
|
|
|
2
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(201
|
)
|
|
|
|
|
|
(201
|
)
|
|
|
(356
|
)
|
|
|
|
|
|
|
(356
|
)
|
Pension net actuarial gain (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
6
|
|
Pension net prior service credit (cost)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
(3
|
)
|
Total comprehensive income (loss) for the three and six months
ended March 31, 2007 and 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net income (loss)
|
|
|
57
|
|
|
|
(482
|
)
|
|
|
234
|
|
|
|
(1,080
|
)
|
Other comprehensive loss
|
|
|
(18
|
)
|
|
|
(69
|
)
|
|
|
(72
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
39
|
|
|
|
(551
|
)
|
|
|
162
|
|
|
|
(1,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest to Infineon
|
|
|
3
|
|
|
|
|
|
|
12
|
|
|
|
Interest to third parties
|
|
|
2
|
|
|
6
|
|
|
|
3
|
|
|
10
|
Income taxes
|
|
|
35
|
|
|
8
|
|
|
|
47
|
|
|
9
|
Non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations (note 11), net of foreign
currency translation effect
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
101
|
15. Related
Parties
The Company has transactions in the normal course of business
with Infineon group companies and with Related and Associated
Companies (together, Related Parties). The Company
purchases certain of its raw materials, especially chipsets,
from, and sells certain of its products to, Related Parties.
Purchases and sales to Related Parties are generally based on
market prices or manufacturing cost plus a
mark-up.
27
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
Related Party receivables as of September 30, 2007 and
March 31, 2008 consist of the following:
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
Infineon group trade (note 6)
|
|
|
11
|
|
|
2
|
Associated and Related Companies trade (note 6)
|
|
|
3
|
|
|
3
|
Associated and Related Companies financial and other
|
|
|
2
|
|
|
1
|
Employee receivables
|
|
|
3
|
|
|
2
|
|
|
|
|
|
|
|
Total Related Party receivables
|
|
|
19
|
|
|
8
|
|
|
|
|
|
|
|
Related Party payables as of September 30, 2007 and
March 31, 2008 consist of the following:
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
Infineon group trade (note 9)
|
|
|
56
|
|
|
78
|
Associated and Related Companies trade (note 9)
|
|
|
99
|
|
|
74
|
|
|
|
|
|
|
|
Total Related Party payables
|
|
|
155
|
|
|
152
|
|
|
|
|
|
|
|
Related Party receivables and payables have been segregated
first between amounts owed by or to Infineon group companies and
companies in which the Company has an ownership interest, and
second based on the underlying nature of the transactions. Trade
receivables and payables include amounts for the purchase and
sale of products and services. Financial and other receivables
and payables represent amounts owed relating to loans and
advances and accrued interest at interbank rates.
Transactions with Related Parties during the three and six
months ended March 31, 2007 and 2008 include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Purchases from Related Parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Infineon group companies
|
|
|
63
|
|
|
65
|
|
|
161
|
|
|
128
|
Associated and Related Companies
|
|
|
149
|
|
|
95
|
|
|
286
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212
|
|
|
160
|
|
|
447
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense to Infineon group companies
|
|
|
3
|
|
|
|
|
|
8
|
|
|
|
Purchases from Infineon during the three and six months ended
March 31, 2007 and 2008 are principally related to products
purchased from Infineon Dresden (note 3) and are based
on Infineons cost plus a margin.
Since the Formation, the Company entered into several service
agreements with Infineon. These include general support services
(including sales support, logistics services, purchasing
services, human resources services, facility management
services, patent support, finance, accounting and treasury
support, legal services and strategy services), R&D
services and IT services. Transactions under these
28
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
agreements during the three and six months ended March 31,
2007 and 2008 are included in purchases from Infineon (see
above) and reflected in the consolidated statements of
operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Cost of goods sold
|
|
|
3
|
|
|
7
|
|
|
8
|
|
|
12
|
Research and development expenses
|
|
|
5
|
|
|
6
|
|
|
15
|
|
|
12
|
Selling, general and administrative expenses
|
|
|
4
|
|
|
4
|
|
|
9
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
17
|
|
|
32
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the Formation, the Company entered into a
global service agreement with Infineon, whereby the parties
intend to provide standard support services to one another based
on actual costs plus a margin of 3%. The Company and Infineon
have also entered into a research and development services
agreement for the provision of research and development services
between the parties based on actual cost plus a margin of 3%.
Under the master information technology cost sharing agreement,
Infineon and the Company generally agree to share costs of a
variety of information technology services provided by one or
both parties in the common interest and for the common benefit
of both parties. In general, the parties agree to share the
fixed costs of the services provided (accounting for
approximately 53% of total costs) roughly equally and to share
variable costs in a manner that reflects each partys
contribution to those costs. Under the master information
technology service agreement, Infineon and the Company agree to
provide information technology services to one another. In
general, under all of these agreements, the service recipient
pays a fee based on actual or estimated total costs incurred
plus a margin of 3% for the period from May 1, 2006 to
September 30, 2008 and thereafter as mutually agreed from
year to year.
16. Pension
Plans
The components of net periodic pension cost (NPPC)
for the three and six months ended March 31, 2007 and 2008
are presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
|
Domestic
|
|
Foreign
|
|
Domestic
|
|
Foreign
|
|
Domestic
|
|
Foreign
|
|
Domestic
|
|
Foreign
|
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Plans
|
|
Service cost
|
|
|
(2
|
)
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
(2
|
)
|
|
|
|
Interest cost
|
|
|
(1
|
)
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
(2
|
)
|
|
|
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NPPC
|
|
|
(3
|
)
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qimonda made contributions during the three and six months ended
March 31, 2007 and 2008, respectively, as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Contribution
|
|
|
0
|
|
|
0
|
|
|
1
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. Financial
Instruments
The Company periodically enters into financial instruments,
including foreign currency forward contracts. The objective of
foreign currency forward contracts is to reduce the impact of
exchange rate fluctuations on the Companys foreign
currency-denominated net future cash flows. The Company does not
enter into derivatives for trading or speculative purposes.
29
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
The euro equivalent notional amounts in millions and fair values
of the Companys derivative instruments as of
September 30, 2007 and March 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30, 2007
|
|
March 31, 2008
|
|
|
Notional
|
|
Fair
|
|
Notional
|
|
Fair
|
|
|
Amount
|
|
Value
|
|
Amount
|
|
Value
|
|
Forward contracts sold:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
|
475
|
|
|
11
|
|
|
|
284
|
|
|
9
|
|
Japanese yen
|
|
|
2
|
|
|
|
|
|
|
10
|
|
|
|
|
Forward contracts purchased:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
|
72
|
|
|
(1
|
)
|
|
|
180
|
|
|
(4
|
)
|
Japanese yen
|
|
|
70
|
|
|
(2
|
)
|
|
|
34
|
|
|
|
|
Singapore dollar
|
|
|
5
|
|
|
|
|
|
|
7
|
|
|
|
|
Malaysian ringgit
|
|
|
17
|
|
|
|
|
|
|
13
|
|
|
(1
|
)
|
Other currencies
|
|
|
1
|
|
|
|
|
|
|
15
|
|
|
|
|
Conversion option
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
Other
|
|
|
108
|
|
|
11
|
|
|
|
110
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, net
|
|
|
|
|
|
19
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and losses from foreign currency derivatives and
transactions are principally included in cost of goods sold, and
were as follows for the three and six months ended
March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net gains (losses) from foreign currency derivatives and
transactions
|
|
|
3
|
|
|
18
|
|
|
(8
|
)
|
|
|
21
|
At the issuance of the Companys convertible notes
(note 11) during the three months ended March 31,
2008, the equity conversion option embedded in the convertible
notes was bifurcated pursuant to SFAS No. 133
Accounting for Derivative Instruments and Hedging
Activities and a corresponding amount of 23 is
accreted as debt premium to interest expense over the term of
the convertible notes. The conversion option is recorded at its
estimated fair value of 22 in other non-current
liabilities as of March 31, 2008, with changes in the fair
value recorded as part of other non-operating income or expense.
For the period ended March 31, 2008, the Company recognized
other non-operating income of 1 as a result of the change
in value of the conversion option.
18. Commitments
and Contingencies
Contribution
from Infineon
These contingencies described below were assigned to the Company
pursuant to the contribution agreement entered into between
Infineon and the Company in connection with the Formation.
Under the contribution agreement, the Company is required to
indemnify Infineon, in whole or in part as specified below, for
any claim (including any related expenses) arising in connection
with the liabilities, contracts, offers, uncompleted
transactions, continuing obligations, risks, encumbrances and
other liabilities Infineon incurs in connection with the matters
described below.
The contribution agreement is based on the principle that all
potential liabilities and risks in connection with legal matters
existing as of the Formation date are generally to be borne by
the business unit which caused the risk or liability or where
the risk or liability arose. Except to the limited extent
described below for the securities class action litigation and
the settled Tessera litigation (for which the Company has
different arrangements), the Company has agreed to indemnify
Infineon for all liabilities arising in connection with all
legal matters specifically described below, including court
costs and legal fees. Infineon will not settle or otherwise
agree to any of these liabilities without the Companys
prior consent. Liabilities and risks relating to the securities
class action litigation, including court costs, will be equally
shared by Infineon and the
30
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
Company, but only with respect to the amount by which the total
amount payable exceeds the amount of the corresponding accrued
liability that Infineon transferred to the Company at the
Formation. Infineon has agreed not to settle this lawsuit
without the Companys prior consent. Any expenses incurred
in connection with the assertion of claims against the provider
of directors and officers (D &
O) insurance covering Infineons two current or former
officers named as defendants in the suit will also be equally
shared. The D & O insurance provider has so far
refused coverage. The Company has agreed to indemnify Infineon
for 80% of the court costs and legal fees relating to the
settled litigation with Tessera.
The Company has further agreed to pay 60% of the total license
fees payable by Infineon and the Company to which Infineon and
the Company may agree in connection with two cases in which
negotiations relating to licensing and cross-licensing were
ongoing at the time of the Formation, one of which is still
ongoing.
In accordance with the general principle that all potential
risks or liabilities are to be borne by the entity which caused
the risk or liability or where the risk or liability arose, the
indemnification provisions of the contribution agreement include
the following specific provisions with respect to claims or
lawsuits arising after the Formation:
|
|
|
|
|
liabilities arising in connection with intellectual property
infringement claims relating to memory products are to be borne
by the Company.
|
|
|
|
liabilities arising in connection with actual or alleged
antitrust violations with respect to DRAM products are to be
borne by the Company.
|
Litigation
In September 2004, Infineon entered into a plea agreement with
the Antitrust Division of the U.S. Department of Justice
(DOJ) in connection with its ongoing investigation
of alleged antitrust violations in the DRAM industry. Pursuant
to this plea agreement, Infineon agreed to plead guilty to a
single count related to the pricing of DRAM between July 1,
1999 and June 15, 2002, and to pay a fine of
$160 million. The fine plus accrued interest is to be paid
in equal annual installments through 2009. On October 25,
2004, the plea agreement was accepted by the U.S. District Court
for the Northern District of California. Therefore, the matter
has been fully resolved as between Infineon and the DOJ, subject
to Infineons obligation to cooperate with the DOJ in its
ongoing investigation of other participants in the DRAM
industry. The charges by the DOJ related to DRAM-product sales
to six Original Equipment Manufacturer (OEM)
customers that manufacture computers and servers. Infineon has
entered into settlement agreements with five of these OEM
customers and is considering the possibility of a settlement
with the remaining OEM customer, which purchased only a very
small volume of DRAM from Infineon.
Subsequent to the commencement of the DOJ investigation, a
number of purported class action lawsuits were filed against
Infineon, its principal U.S. subsidiary and other DRAM suppliers.
Sixteen cases were filed between June 2002 and September 2002 in
several U.S. federal district courts purporting to be on behalf
of a class of individuals and entities who purchased DRAM
directly from various DRAM suppliers in the U.S. during a
specified time period (Direct U.S. Purchaser Class),
alleging price-fixing in violation of the Sherman Act and
seeking treble damages in unspecified amounts, costs,
attorneys fees, and an injunction against the allegedly
unlawful conduct.
In September 2002, the Judicial Panel on Multi-District
Litigation ordered that the foregoing federal cases be
transferred to the U.S. District Court for the Northern District
of California for coordinated or consolidated pre-trial
proceedings as part of a Multi-District Litigation
(MDL).
In September 2005, Infineon and its principal U.S. subsidiary
entered into a definitive settlement agreement with counsel to
the Direct U.S. Purchaser Class (granting an opportunity for
individual class members to opt out of the settlement). The
settlement agreement was approved by the court on
November 1, 2006 and the court entered final judgment and
dismissed the class action claims with prejudice on
November 2, 2006. The Company has reached individual
settlements with eight direct customers in addition to those
OEMs identified by the DOJ.
31
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
In April 2006, Unisys Corporation (Unisys) filed a
complaint against Infineon and its principal U.S. subsidiary,
among other DRAM suppliers, alleging state and federal claims
for price fixing and seeking recovery as both a direct and
indirect purchaser of DRAM. The complaint was filed in the
Northern District of California, and have been related to the
MDL described above.
On May 5, 2006, Honeywell International, Inc. filed a
complaint against Infineon and its U.S. subsidiary, among other
DRAM suppliers, alleging a claim for price fixing under federal
law, and seeking recovery as a direct purchaser of DRAM; this
claim was dismissed without prejudice in April 2007.
In February 2007 and March 2007 four more opt-out cases were
filed by All American Semiconductor, Inc., Edge Electronics,
Inc., Jaco Electronics, Inc. and DRAM Claims Liquidation Trust,
by its Trustee, Wells Fargo Bank, N.A. The All American
Semiconductor complaint alleges claims for price-fixing under
the Sherman Act. The Edge Electronics, Jaco Electronics and DRAM
Claims Liquidation Trust complaints allege state and federal
claims for price-fixing. As with Unisys, the claims of these
plaintiffs are not barred by Infineons settlement with the
Direct U.S. Purchaser Class, since they opted out of the Direct
U.S. Purchaser Class and settlement. All four of these opt-out
cases were filed in the Northern District of California and have
been related to the MDL described above. Based upon the
Courts order dismissing portions of the initial Unisys
complaint, the plaintiffs in all these opt-out cases filed
amended complaints in May 2007. In June 2007, Infineon and its
principal U.S. subsidiary answered the complaints filed by All
American Semiconductor, Inc., Edge Electronics, Inc., and Jaco
Electronics, Inc. and, along with its co-defendants, filed joint
motions to dismiss certain portions of the DRAM Claims
Liquidation Trust and Unisys amended complaint. On
October 15, 2007 the Court denied the motion to dismiss the
Unisys amended complaint and deferred ruling on the motion to
dismiss the DRAM Claims Liquidation Trust complaint. On
October 29, 2007, Infineon and its principal U.S.
subsidiary answered the amended complaints of Unisys and DRAM
Claims Liquidations Trust. Fact discovery in all of the cases
closed on December 17, 2007. The court has scheduled a
trial date for June 1, 2009.
Sixty-four additional cases were filed between August 2002 and
October 2005 in numerous federal and state courts throughout the
United States. Each of these state and federal cases (except a
case filed in the U.S. District Court for the Eastern District
of Pennsylvania in May 2005 on behalf of foreign purchasers who
directly purchased DRAM outside the U.S. between 1999 and 2002
(Foreign Purchaser Case)) purports to be on behalf
of a class of individuals and entities who indirectly purchased
DRAM in the U.S. during specified time periods commencing in or
after 1999. The complaints variously allege violations of the
Sherman Act, Californias Cartwright Act, various other
state laws, unfair competition law and unjust enrichment and
seek treble damages in generally unspecified amounts,
restitution, costs, attorneys fees and an injunction
against the allegedly unlawful conduct.
Twenty-three of the state (outside California) and federal court
cases and the Foreign Purchaser Case were ordered transferred to
the U.S. District Court for the Northern District of California
for coordinated and consolidated pre-trial proceedings as part
of the MDL described above. After this transfer, the plaintiffs
dismissed two of the transferred cases. Two additional
transferred cases were subsequently remanded back to their
relevant state courts. Nineteen of the twenty-three transferred
cases are currently pending in the MDL-litigation. The Foreign
Purchaser Case was dismissed with prejudice and without leave to
amend in March 2006. Plaintiffs in that case appealed and oral
arguments were heard before the Ninth Circuit Court of Appeals
on March 13, 2008. No decision has yet been issued. The
California state cases were ordered transferred for coordinated
and consolidated pre-trial proceedings to the San Francisco
County Superior Court. The plaintiffs in the indirect purchaser
cases that originated outside California which have not been
transferred to the MDL agreed to stay proceedings in those cases
pending resolution of the MDL pretrial-proceedings through a
single complaint on behalf of a putative nationwide class of
indirect purchasers in the MDL. On January 29, 2008, the
court issued an order granting in part and denying in part
defendants motion to dismiss several of the claims. The
order dismissed certain claims brought under a number of
states antitrust laws on behalf of indirect purchasers of
products in which DRAM was a component without leave to amend.
Plaintiffs filed a Third Amended Complaint on February 27,
2008. Infineon and its principal U.S. subsidiary answered the
complaint on March 18, 2008. On March 28, 2008, the
court granted plaintiffs leave to immediately appeal the
decision to the Court of Appeals for the Ninth Circuit.
Plaintiffs must still obtain permission from the Court of
Appeals to pursue an immediate appeal.
32
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
In July 2006, the New York state attorney general filed an
action in the U.S. District Court for the Southern District of
New York against Infineon, its principal U.S. subsidiary and
several other DRAM manufacturers on behalf of New York
governmental entities and New York consumers who purchased
products containing DRAM beginning in 1998. The plaintiffs
allege violations of state and federal antitrust laws arising
out of the same allegations of DRAM price-fixing and artificial
price inflation practices discussed above, and seek recovery of
actual and treble damages in unspecified amounts, penalties,
costs (including attorneys fees) and injunctive and other
equitable relief. In October 2006, this action was made part of
the MDL proceedings. In July 2006, the attorneys general of
California, Alaska, Arizona, Arkansas, Colorado, Delaware,
Florida, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Nebraska,
Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont,
Virginia, Washington, West Virginia and Wisconsin filed a
lawsuit in the U.S. District Court for the Northern District of
California against Infineon, its principal U.S. subsidiary and
several other DRAM manufacturers on behalf of governmental
entities, consumers and businesses in each of those states who
purchased products containing DRAM beginning in 1998. In
September 2006, the complaint was amended to add claims by the
attorneys general of Kentucky, Maine, New Hampshire, North
Carolina, the Northern Mariana Islands and Rhode Island. This
action is based on state and federal law claims relating to the
same alleged anticompetitive practices in the sale of DRAM and
plaintiffs seek recovery of actual and treble damages in
unspecified amounts, penalties, costs (including attorneys
fees) and injunctive and other relief. In October 2006 Infineon
joined the other defendants in filing motions to dismiss several
of the claims alleged in these two actions. In August 2007, the
court entered orders granting the motions in part and denying
the motions in part. The courts order dismissed the claims
on behalf of consumers, businesses and governmental entities in
a number of states, and dismissed certain other claims with
leave to amend. Amended complaints in both actions were filed on
October 1, 2007. On November 26, 2007 Infineon joined
the other defendants in filing motions to dismiss several of the
claims alleged in these amended complaints. A hearing was held
for these motions on February 27, 2008 (note 20).
Since then, plaintiffs California and New Mexico filed a joint
motion for class certification seeking to certify classes of all
public entities within both states. Between June 25, 2007
and August 15, 2007, the attorneys general of four states,
Alaska, New Hampshire, Ohio and Texas, filed requests for
dismissal of their claims without prejudice.
In April 2003, Infineon received a request for information from
the European Commission (the Commission) to enable
the Commission to assess the compatibility with the
Commissions rules on competition of certain practices of
which the Commission has become aware in the European market for
DRAM products. Infineon reassessed the matter after its plea
agreement with the DOJ and made an accrual during the 2004
financial year for a probable minimum fine that may be imposed
as a result of the Commissions investigation. Any fine
actually imposed by the Commission may be significantly higher
than the reserve established, although Infineon cannot more
accurately estimate the amount of such actual fine. Infineon is
fully cooperating with the Commission in its investigation.
In May 2004, the Canadian Competition Bureau advised
Infineons principal U.S. subsidiary that it and its
affiliated companies are among the targets of a formal inquiry
into alleged violations of the Canadian Competition Act. No
compulsory process (such as subpoenas) has commenced. Infineon
is cooperating with the Competition Bureau in its inquiry.
Between December 2004 and February 2005, two putative class
proceedings were filed in the Canadian province of Quebec and
one was filed in each of Ontario and British Columbia against
Infineon, its principal U.S. subsidiary and other DRAM
manufacturers on behalf of all direct and indirect purchasers
resident in Canada who purchased DRAM or products containing
DRAM between July 1999 and June 2002, seeking damages,
investigation and administration costs, as well as interest and
legal costs. Plaintiffs primarily allege conspiracy to unduly
restrain competition and to illegally fix the price of DRAM. In
the British Columbia action, two hearings on the certificate
motion took place in August 2007 and in November 2007. In one
Quebec class action, a tentative date for the motion for
authorization (certification) has been set for May 2008; the
other Quebec action has been stayed pending developments in the
one that is going forward.
Between September 2004 and November 2004, seven securities class
action complaints were filed against Infineon and three of its
current or former officers (of which one officer was
subsequently dropped
33
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
as a defendant) in the U.S. District Courts for the Northern
District of California and the Southern District of New York.
The plaintiffs voluntarily dismissed the New York cases, and in
June 2005 filed a consolidated amended complaint in California
on behalf of a putative class of purchasers of Infineons
publicly-traded securities, who purchased them during the period
between March 2000 and July 2004, effectively combining all
lawsuits. The consolidated amended complaint added
Infineons principal U.S. subsidiary and four then-current
or former employees of Infineon and its affiliate as defendants.
It alleges violations of the U.S. securities laws and asserts
that the defendants made materially false and misleading public
statements about Infineons historical and projected
financial results and competitive position because they did not
disclose Infineons alleged participation in DRAM
price-fixing activities and that, by fixing the price of DRAM,
defendants manipulated the price of Infineons securities,
thereby injuring its shareholders. The plaintiffs seek
unspecified compensatory damages, interest, costs and
attorneys fees. In September 2006, the court dismissed the
complaint with leave to amend and in October 2006 the plaintiffs
filed a second amended complaint. In March 2007, pursuant to a
stipulation agreed with the defendants, the plaintiffs withdrew
the second amended complaint and were granted a motion for leave
to file a third amended complaint. Plaintiffs filed a third
amended complaint in July 2007. On January 25, 2008 the
court entered into an order granting in part and denying in part
the defendants motion to dismiss. The court denied the
motion to dismiss with respect to plaintiffs claims under
§§ 10 (b) and 20 (a) of the U.S. Exchange
Act of 1934 (the Act) and dismissed the claim under
§ 20 A of the Act with prejudice. In the contribution
agreement the Company entered into with Infineon, the Company
agreed to share any future liabilities arising out of this
lawsuit equally with Infineon, including the cost of defending
the suit.
Infineon believes these claims are without merit. The Company is
currently unable to provide an estimate of the likelihood of an
unfavorable outcome to Infineon or of the amount or range of
potential loss arising from these actions. If the outcome of
these actions is unfavorable or if Infineon incurs substantial
legal fees in defending these actions regardless of outcome, it
may have a material adverse effect on the Companys
financial condition and results of operations. Infineons
directors and officers insurance carriers have
denied coverage in the securities class actions and Infineon
filed suits against the carriers in December 2005 and August
2006. Infineons claims against one D&O insurance
carrier were finally dismissed in May 2007. The claims against
the other insurance carrier are still pending.
On April 10, 2007, Lin Packaging Technologies, Ltd. (Lin)
filed a lawsuit against Infineon, its principal U.S. subsidiary
and an additional DRAM manufacturer in the U.S. District Court
for the Eastern District of Texas, alleging that certain DRAM
products were infringing two Lin patents. In May 2007, Lin
amended its complaint to include Qimonda AG, Qimonda North
America Corp. and Qimonda Richmond LLC. In November 2007 the
parties settled and the case was dismissed.
On March 31, 2008, Technology Park Partners, LLC
(Technology Park), filed a lawsuit against Qimonda North America
Corp. (Qimonda NA) in the United
States District Court for the District of Vermont. The lawsuit
alleges that Qimonda NA has breached a ten year term lease
whereby Qimonda NA, as tenant, leased from Technology Park
59,245 net square feet of office space in its building in South
Burlington, Vermont for a period of ten years starting
March 1, 2008 (Lease), by failing
to take possession of the premises and to pay for certain
improvements and other amounts Technology Park claims are due
under the Lease.
Qimonda is in the process of evaluating the lawsuit and
formulating an answer and is currently unable to provide an
estimate of the likelihood of an unfavorable outcome or of the
amount or range of potential loss arising from this lawsuit.
Accruals and the
potential effect of these lawsuits
Liabilities related to legal proceedings are recorded when it is
probable that a liability has been incurred and the associated
amount can be reasonably estimated. Where the estimated amount
of loss is within a range of amounts and no amount within the
range is a better estimate than any other amount or the range
cannot be estimated, the minimum amount is accrued. As of
March 31, 2008 the Company had accrued liabilities in the
amount of 76 related to the DOJ and European antitrust
investigations and the direct and indirect purchaser litigation
and settlements described above, as well as for legal expenses
relating to the securities class actions and the Canadian
antitrust investigation and litigation described
34
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
above. As additional information becomes available, the
potential liability related to these matters will be reassessed
and the estimates revised, if necessary. These accrued
liabilities would be subject to change in the future based on
new developments in each matter, or changes in circumstances,
which could have a material adverse effect on the Companys
results of operations and financial condition.
An adverse final resolution of the antitrust investigations or
related civil claims or the securities class action lawsuits
described above could result in significant financial liability
to, and other adverse effects on the Company, which would have a
material adverse effect on the Companys business, results
of operations, financial condition and cash flows. In each of
these matters, the Company is continuously evaluating the merits
of its respective claims and defending itself vigorously or
seeking to arrive at alternative resolutions in the best
interests of the Company, as its deems appropriate. Irrespective
of the validity or the successful assertion of the claims
described above, the Company could incur significant costs with
respect to defending against or settling such claims, which
could have a material adverse effect on the Companys
results of operations and financial condition and cash flows.
The Company is subject to various other lawsuits, legal actions,
claims and proceedings related to products, patents and other
matters incidental to its businesses. The Company has accrued a
liability for the estimated costs of adjudication of various
asserted and unasserted claims existing as of the balance sheet
date. Based upon information presently known to management, the
Company does not believe that the ultimate resolution of such
other pending matters will have a material adverse effect on the
Companys financial position, although the final resolution
of such matters could have a material adverse effect on the
Companys results of operations or cash flows in the year
of settlement.
Contractual
Commitments
On October 8, 2007, Qimonda entered into a rental agreement
for new headquarter offices south of Munich, Germany. The
agreement involves the construction of a building by a third
party lessor, and includes a 15 year non-cancelable lease
term, which is expected to start in early 2010. Qimonda has an
option to extend the lease for two 5 year periods at
similar lease terms to the initial non-cancelable lease term.
The minimum rental payments aggregate 96 over the initial
lease term. The lease contract provides for rent escalation in
line with market-based increases in rent. The agreement will be
accounted for as an operating lease with monthly lease payments
expensed on a straight-line basis over the lease term.
The Companys operating lease expenses were 8 and
15 for the three and six months ended March 31, 2007
and were 7 and 15 for the three and six months ended
March 31, 2008, respectively. Operating lease payments
include amounts paid to Infineon for lease payments. Premises
currently occupied by the Company that are leased by Infineon
are expected to be the subject of a sublease agreement between
Infineon and the Company.
Other
Contingencies
The Company has received government grants and subsidies related
to the construction and financing of certain of its production
facilities. These amounts are recognized upon the attainment of
specified criteria. Certain of these grants have been received
contingent upon the Company maintaining compliance with certain
project-related requirements for a specified period after
receipt. The Company is committed to maintaining these
requirements. Nevertheless, should such requirements not be met,
as of March 31, 2008, a maximum of 416 of these
subsidies could be refundable.
The Company has guarantees outstanding to external parties of
142 as of March 31, 2008, that mainly expire through
2013. Guarantees are mainly issued by Infineon for the payment
of import duties, rentals of buildings, contingent obligations
related to government grants received and the consolidated debt
of subsidiaries. Such guarantees which relate to Qimonda AG were
transferred to the Company as part of the Formation. The Company
also agreed to indemnify Infineon against any losses it may
suffer under several guarantee and financing arrangements that
relate to its business but that cannot be transferred to it for
legal, technical or practical reasons.
The Company, through certain of its sales and other agreements,
in the normal course of business, may be obligated to indemnify
its counterparties under certain conditions for warranties,
patent
35
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
infringement or other matters. The maximum amount of potential
future payments under these types of agreements is not
predictable with any degree of certainty, since the potential
obligation is contingent on conditions that may or may not occur
in future, and depends on specific facts and circumstances
related to each agreement. Historically, payments made by the
Company under these types of agreements have not had a material
adverse effect on the Companys business, results of
operations or financial condition.
19. Operating
Segment and Geographic Information
The Company has one operating segment, Memory Products, which is
also its reportable segment, consistent with the manner in which
financial information is internally reported and used by the
Chief Operating Decision Maker for purposes of evaluating
business performance and allocating resources.
The Company defines EBIT as earnings (loss) before interest and
taxes. The Companys management uses EBIT, among other
measures, to establish budgets and operational goals, to manage
the consolidated Companys business and to evaluate and
report performance as part of the Infineon Group. Because many
operating decisions, such as allocations of resources to
individual projects, are made on a basis for which the effects
of financing the overall business and of taxation are of
marginal relevance, management finds a metric that excludes the
effects of interest on financing and tax expense useful. In
addition, in measuring operating performance, particularly for
the purpose of making internal decisions, such as those relating
to personnel matters, it is useful for management to consider a
measure that excludes items over which the individuals being
evaluated have minimal control, such as enterprise-level
taxation and financing. The Company reports EBIT information
because it believes that it provides investors with meaningful
information about the operating performance of the Company in a
manner similar to that which management uses to assess and
direct the business. EBIT is not a substitute for net income,
however, because the exclusion of interest and tax expense is
not appropriate when reviewing the overall profitability of the
Company.
EBIT is determined as follows from the consolidated statements
of operations, without adjustment to the U.S. GAAP amounts
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net (loss) income
|
|
|
57
|
|
|
|
(482
|
)
|
|
|
234
|
|
|
|
(1,080
|
)
|
Adjust:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
30
|
|
|
|
9
|
|
|
|
104
|
|
|
|
18
|
|
Interest (income) expense, net
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
85
|
|
|
|
(468
|
)
|
|
|
335
|
|
|
|
(1,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of net sales by geographic area for
the three and six months ended March 31, 2007 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
73
|
|
|
7%
|
|
|
37
|
|
|
9%
|
|
|
160
|
|
|
7%
|
|
|
73
|
|
|
8%
|
Rest of Europe
|
|
|
124
|
|
|
13%
|
|
|
35
|
|
|
8%
|
|
|
266
|
|
|
12%
|
|
|
85
|
|
|
9%
|
North America
|
|
|
375
|
|
|
38%
|
|
|
131
|
|
|
32%
|
|
|
849
|
|
|
40%
|
|
|
307
|
|
|
33%
|
Asia/Pacific
|
|
|
309
|
|
|
31%
|
|
|
162
|
|
|
40%
|
|
|
669
|
|
|
31%
|
|
|
346
|
|
|
38%
|
Japan
|
|
|
103
|
|
|
11%
|
|
|
47
|
|
|
11%
|
|
|
213
|
|
|
10%
|
|
|
114
|
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
984
|
|
|
100%
|
|
|
412
|
|
|
100%
|
|
|
2,157
|
|
|
100%
|
|
|
925
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For practical purposes, the Rest of Europe region also includes
other countries and territories in the rest of the world outside
of the listed main geographic regions with aggregate sales
representing no more
36
QIMONDA AG AND
SUBSIDIARIES
Notes to the Unaudited Condensed Consolidated Financial
Statements
(euro in millions, except where otherwise stated)
than 2% of total sales in any period. In addition, prior period
amounts have been reclassified to conform to the current period
presentation.
20. Subsequent
Events
The following significant events occurred after March 31,
2008:
On April 3, 2008, the Company entered into a four-year sale
and lease back transaction of a portion of its 300mm equipment
in its Dresden facility. The lease will be accounted for as
capital lease in the three months ending June 30, 2008,
whereby the present value of the respective lease payments of
$43 million will be reflected as a capital obligation over
the lease term.
On April 7, 2008, the indirect purchaser plaintiffs filed a
petition with the Ninth Circuit Court of Appeals for leave to
file an immediate appeal of the order on the motion to dismiss.
No decision has yet been issued by the Ninth Circuit. On
April 18, 2008, the U.S. District Court for the Northern
District of California entered an order staying the indirect
purchaser lawsuit pending the decision by the Ninth Circuit
Court of Appeals on the plaintiffs request to file an
immediate appeal.
On April 9, 2008, a hearing on the joint motion for class
certification by the state attorneys general of California and
New Mexico was held, but no decision has yet been issued. On
April 10, 2008, the state attorney general of Delaware
filed a request for dismissal of his claims without prejudice.
On April 15, 2008, the U.S. District Court for the Northern
District of California issued two orders in the New York and
multistate state attorneys general cases on the defendants
motions to dismiss. The order in the New York action denied
defendants motion to dismiss. The order in the multistate
state attorneys general case dismissed indirect purchaser claims
under one states antitrust law and dismissed parens
patriae claims on behalf of consumers under certain
states consumer protection laws. The multistate order also
granted defendants motion to strike any claim for relief
seeking damages under certain states laws. The order
denied defendants motion with respect to indirect
purchaser claims under one states consumer protection
statute and claims under certain states antitrust statutes
(note 18). On April 28, 2008, the state attorney
general of Vermont filed a request for dismissal of his claims
without prejudice.
On April 21, 2008 the Company announced a comprehensive
cost reduction program designed to adjust its cost structure and
lower its breakeven point. The Company targets 180 in
annualized cost reductions compared to the current cost
structure. These cost reductions are based on a combination of
reducing workforce in the range of 10% on a worldwide basis and
cutting its recurring costs. This includes a reduction in
non-volatile memory development to basic research activities and
the termination of the related agreement with Macronix. The
Company expects to realize these savings in full starting in its
2009 financial year and to accrue any restructuring charges
relating to this program by the end of its 2008 financial year.
On April 21, 2008 the Company announced that it has signed
a technology license and foundry agreement with Winbond whereby
Winbond will license the Companys Buried Wordline
technology for 65 nm manufacturing.
On April 24, 2008 the Company and Elpida Memory, Inc.,
Japan, (Elpida) announced that they have signed a
Memorandum of Understanding for a strategic technology
partnership for the joint development of memory chips (DRAMs).
In the planned cooperation, Qimonda will provide its know-how
with the innovative Buried Wordline technology and Elpida its
advanced stack capacitor technology. The strategic technology
cooperation will leverage the strength of both companies to
accelerate their roadmap to DRAM products featuring cell sizes
of
4F2.
The companies expect to conclude their negotiations and finalize
definitive agreements in due course.
37
SUPPLEMENTARY
INFORMATION (UNAUDITED)
Gross and Net
Cash Position
Qimonda defines gross cash position as cash and cash equivalents
and marketable securities, and net cash position as gross cash
position less short and long-term debt. Since its Formation,
Qimonda holds a substantial portion of its available monetary
resources in the form of readily marketable securities, which
for U.S. GAAP purposes are not considered to be
cash, it reports its gross cash position to provide
investors with an understanding of its overall liquidity. The
gross and net cash positions are determined as follows from the
condensed consolidated balance sheets as of September 30,
2007 and March 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Cash and cash equivalent
|
|
|
746
|
|
|
|
540
|
|
Marketable securities
|
|
|
265
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Gross Cash Position
|
|
|
1,011
|
|
|
|
768
|
|
Less: Short-term debt and current maturities
|
|
|
(77
|
)
|
|
|
(123
|
)
|
Long-term debt
|
|
|
(227
|
)
|
|
|
(429
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Position
|
|
|
707
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
Return on Capital
Employed (RoCE)
In addition to EBIT, the Qimonda management committed itself
from the 2007 financial year to focus on measuring the
profitability of the Company compared to the capital that has
been required. Therefore the financial indicator Return on
Capital Employed (RoCE) was implemented to measure
this performance.
Earnings before interest, Capital Employed and RoCE are non-GAAP
financial measures. Reconciliations to the closest GAAP measures
of net (loss) income, shareholders equity, and net (loss)
income to shareholders equity ratio, respectively, are
presented below. Capital Employed is the end period
shareholders equity less the net cash position. RoCE is
calculated as Earnings before Interest (EBI) divided by Capital
Employed. Quarterly RoCE calculations are annualized for
purposes of this ratio only, which may exceed reported annual
earnings and is not indicative of expected earnings in any
future period.
RoCE is determined as follows from the condensed consolidated
financial statements:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
Shareholders Equity
|
|
|
3,517
|
|
|
|
2,323
|
|
Less: Net Cash Position
|
|
|
(707
|
)
|
|
|
(216
|
)
|
|
|
|
|
|
|
|
|
|
Capital Employed
|
|
|
2,810
|
|
|
|
2,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net income (loss)
|
|
|
57
|
|
|
|
(482
|
)
|
|
|
234
|
|
|
|
(1,080
|
)
|
Adjust: Interest (income) expense, net
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before Interest
|
|
|
55
|
|
|
|
(477
|
)
|
|
|
231
|
|
|
|
(1,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)/Shareholders Equity
|
|
|
6%
|
|
|
|
(83
|
)%
|
|
|
12%
|
|
|
|
(93
|
)%
|
Return on Capital Employed
|
|
|
7%
|
|
|
|
(91
|
)%
|
|
|
15%
|
|
|
|
(102
|
)%
|
Free Cash
Flow
Qimonda defines free cash flow as cash from operating and
investing activities excluding purchases or sales of marketable
securities. Free cash flow is not defined under U.S. GAAP and
may not be comparable with measures of the same or similar title
that are reported by other companies. Under SEC rules,
free cash flow is considered a non-GAAP financial
measure. It should not be considered as a substitute for, or
confused with, any U.S. GAAP financial measure. Management
believes the most
38
comparable U.S. GAAP measure is net cash provided by operating
activities. Since Qimonda operates in a capital-intensive
industry, it reports free cash flow to provide investors with a
measure that can be used to evaluate changes in liquidity after
taking capital expenditures into account. It is not intended to
represent residual cash flow available for discretionary
expenditures, since debt service requirements or other
non-discretionary expenditures are not deducted. The free cash
flow is determined as follows from the Companys condensed
consolidated statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2007
|
|
2008
|
|
2007
|
|
2008
|
|
Net cash provided by (used in) operating activities
|
|
|
286
|
|
|
|
(110
|
)
|
|
|
724
|
|
|
|
(268
|
)
|
Net cash used in investing activities
|
|
|
(278
|
)
|
|
|
(87
|
)
|
|
|
(486
|
)
|
|
|
(122
|
)
|
Therein: Purchases of marketable securities available
for sale
|
|
|
135
|
|
|
|
10
|
|
|
|
146
|
|
|
|
45
|
|
Proceeds
from marketable securities available for sale
|
|
|
(16
|
)
|
|
|
(6
|
)
|
|
|
(16
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
|
127
|
|
|
|
(193
|
)
|
|
|
368
|
|
|
|
(410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
As of March 31, 2008 Qimonda had 13,298 employees
worldwide, including 2,531 engaged in research and development.
Market for
ordinary shares
Qimonda AG ordinary shares are traded as American Depository
Shares (ADSs) on the New York Stock Exchange under the symbol
QI.
Financial
Calendar
Qimonda plans to announce results for its third quarter ending
June 30, 2008, on July 24, 2008.
Publication
date
April 30, 2008
Contact
information
Qimonda Technologies AG
Investor Relations
Gustav-Heinemann-Ring 123
81739 Munich, Germany
Phone: +49 89
60088-1200
E-Mail:
mailto:investor.relations@qimonda.com
Visit http://www.qimonda.com/ for an electronic version of this
report and other information.
39
Risk
Factors
As a Company, we face numerous risks incidental to our business.
We face risks that are inherent to companies in the
semiconductor industry, as well as operational, financial and
regulatory risks that are unique to us. Risks relating to the
semiconductor industry include the cyclical nature of the
market, which suffers from periodic downturns and industry
overcapacity. Our production related risks include the need to
match our production capacity with demand, and to avoid
interruptions in manufacturing and supplies. We may be exposed
to claims from others that we infringe their intellectual
property rights or that we are liable for damages under
warranties. We are the subject of governmental antitrust
investigations and civil claims related to those antitrust
investigations. Financial risks include our need to have access
to sufficient capital and governmental subsidies, as well as
declines in our share price which may result in impairment
charges. Our regulatory risks include potential claims for
environmental remediation. We face numerous risks due to the
international nature of our business, including volatility in
foreign countries and exchange rate fluctuations.
These and other material risks that we face are described in
detail in the Risk Factors section of our annual
report on
Form 20-F
for the year ended September 30, 2007, which we have filed
with the U.S. Securities and Exchange Commission. A copy of our
Form 20-F
is available at the Investor Relations section of our website
http://www.qimonda.com, as well as on the SECs website,
http://www.sec.gov. We encourage you to read the detailed
description of the risks that we face in our
Form 20-F.
The occurrence of one or more of the events described in the
Risk Factors section of the
Form 20-F
could have a material adverse effect on our Company and our
results of operations, which could result in a drop in our share
price.
Forward-looking
Statements
This quarterly report contains forward-looking statements.
Statements that are not historical facts, including statements
about our beliefs and expectations, are forward-looking
statements.
These forward-looking statements include statements relating to
future developments of the world semiconductor market,
especially the market for memory products, Qimondas future
growth, the benefits of research and development alliances and
activities, our planned levels of future investment in the
expansion and modernization of our production capacity, the
introduction of new technology at our facilities, the
transitioning of our production processes to smaller structures,
cost savings related to such transitioning and other
initiatives, our successful development of technology based on
industry standards, our ability to offer commercially viable
products based on our technology, our ability to achieve our
cost savings and growth targets, and any further corporate
reorganization measures in that regard. These statements are
based on current plans, estimates and projections, and you
should not place too much reliance on them.
These forward-looking statements speak only as of the date they
are made, and we undertake no obligation to update any of them
in light of new information or future events. These
forward-looking statements involve inherent risks and are
subject to a number of uncertainties, including trends in demand
and prices for semiconductors generally and for our products in
particular, the success of our development efforts, both alone
and with our partners, the success of our efforts to introduce
new production processes at our facilities and the actions of
our competitors, the availability of funds for planned expansion
efforts, the outcome of antitrust investigations and litigation
matters, as well as other factors. We caution you that these and
a number of other important factors could cause actual results
or outcomes to differ materially from those expressed in any
forward-looking statement. These factors include those
identified under the heading Risk Factors in the
Form 20-F.
40
SIGNATURES
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, thereunto duly authorized.
|
|
|
|
|
|
QIMONDA AG
|
|
Date: April 30, 2008 |
By: |
/s/ Kin Wah Loh
|
|
|
|
Kin Wah Loh |
|
|
|
Chief Executive Officer and
Chairman of the Management Board |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Dr. Michael Majerus
|
|
|
|
Dr. Michael Majerus |
|
|
|
Chief Financial Officer and
Member of the Management Board |
|
|