Notes to the Audited December 31, 2012 and 2011 Combined Financial Statements
and the Unaudited June 30, 2013 and 2012 Interim Combined Financial Statements
1. NATURE OF OPERATIONS
SunEdison Semiconductor, Inc. (the Company, SunEdison Semiconductor, we, us and
our) is a global leader in the development, manufacture and sale of silicon wafers to the semiconductor industry. Silicon wafers are used as the base substrate for nearly all semiconductor devices, which in turn provide the foundation
for the entire electronics industry. Our business was established in 1959 and was recently known during most of our history as MEMC Electronic Materials, Inc., or MEMC. We believe we have developed a broad product portfolio, an extensive global
footprint, process technology expertise and supply chain flexibility, while increasing our capital efficiency and maintaining a lean operating culture.
The Company consists of the combined operations of certain entities currently owned by SunEdison, Inc. (SunEdison or Parent) (formerly
known as MEMC), as discussed in the basis of presentation below. On August 22, 2013, SunEdison announced an initial public
offering (the Offering) of its semiconductor business to create SunEdison Semiconductor, Inc. as an
independent company. SunEdison plans to sell a minority ownership interest in the semiconductor business to the public. In connection with this Offering, SunEdison will undertake a series of transactions to separate our net assets and entities.
Basis of Presentation
We currently operate as a
business segment of SunEdison. The combined financial statements have been derived from the consolidated financial statements and accounting records of SunEdison and include allocations for direct costs and indirect costs attributable to the
operations of the semiconductor materials business of SunEdison. The unaudited interim combined financial statements include all adjustments (consisting of normal, recurring items) necessary to present fairly our financial position and results of
operations and cash flows for the interim periods. SunEdison Semiconductor has presented the audited combined financial statements as of and for the years ended December 31, 2012 and 2011 and the unaudited interim combined financial statements
as of June 30, 2013 and for the six months ended June 30, 2013 and 2012. These combined financial statements and related notes to the combined financial statements, including prior year financial information, are presented on a consistent
basis for all periods presented. Operating results for the six months ending June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
SunEdison maintains a number of stock-based compensation and benefit programs at a corporate level. Our employees participate in those programs and as such,
we were allocated expenses associated with those programs. Our combined balance sheets do not include any Parent outstanding equity related to the stock-based compensation programs. Since substantially all of the Parent pension and other
post-employment benefit plans relate solely to us, our combined balance sheets include net benefit plan obligations related to those plans and those benefit plans in certain foreign locations that are our direct obligation. See Note 7 and 9 for
further description of these stock-based compensation and benefit programs.
We generate a portion of our net sales from sales to SunEdison subsidiaries.
These sales are reflected in a separate line item in our combined statements of operations, net sales to affiliates. Normal operating activities with affiliates are reflected as amounts due from affiliates and amounts due to affiliates within
operating activities in the combined cash flow statements. Cash transferred to and from SunEdison has been recorded as notes receivable, affiliate and long-term debt, affiliate on the combined balance sheets and notes receivable from affiliates and
borrowings from affiliates in the combined cash flow statements. The combined balance sheets do not separately present certain of the Parents assets or liabilities where management deemed it inappropriate due to the underlying nature of those
assets and liabilities. The Parent performs financing, cash management, treasury and other services for us on a centralized basis. These amounts have been accounted for through the net Parent investment account because it is not practicable to
specifically identify the portion of cash related to those