Selling, general and administrative

Reconciliation of GAAP to Non-GAAP Financial Measures (6)

CONSOLIDATED FINANCIAL SUMMARY, Continued

Noncash equipment acquisitions on contracts payable and capital leases

(1) The results for the second and first quarters of fiscal 2008 include charges of $15 million and $62 million, respectively, to write down the carrying value of work in process and finished goods inventories of memory products to their estimated fair market values.

(2) In the second quarter of fiscal 2008, in accordance with FASB Statement No. 142, "Goodwill and Other Intangible Assets," the company performed a test to determine whether or not its goodwill was impaired. Based on the results of the test, the company wrote off all of the $463 million of goodwill associated with its Memory segment as of February 28, 2008.

(3) In the fourth quarter of fiscal 2007, the company announced it was pursuing a number of initiatives to drive greater cost efficiencies and revenue growth across its operations. In the third quarter and first nine months of fiscal 2008, the company recorded restructure charges of $8 million and $29 million, respectively, consisting primarily of employee severance and related costs and relocation and retention bonuses. The company also incurred a charge to write down the carrying value of certain facilities to their estimated fair values in the first quarter of fiscal 2008. Since the fourth quarter of fiscal 2007, the company has incurred $48 million due to the restructuring initiatives. At the end of the third quarter of fiscal 2008, liabilities for unpaid portions of the restructure charge were $8 million.

(4) Other operating income for the third quarter of fiscal 2008 includes $13 million from the gains on disposals of semiconductor equipment. Other operating income for the first nine months of 2008 includes $70 million from gains on disposals of semiconductor equipment, $33 million of losses from changes in foreign currency exchange rates and $38 million of receipts from the U.S. government in connection with anti-dumping tariffs received in the first quarter of fiscal 2008. Other operating income for the third quarter of fiscal 2007 includes $15 million from gains on disposals of semiconductor equipment and $7 million in grants received in connection with the company's operations in China. Other operating income for the first nine months of fiscal 2007 includes $25 million from gains on disposals of semiconductor equipment and a gain of $30 million from the sale of certain intellectual property to Toshiba Corporation.

(5) Income taxes for fiscal 2008 and 2007 primarily reflect taxes on the company's non-U.S. operations and U.S. alternative minimum tax. The company has a valuation allowance for its net deferred tax asset associated with its U.S. operations. Tax attributable to U.S. operations in fiscal 2008 and 2007 were substantially offset by changes in the valuation allowance.

Effective at the beginning of the first quarter of fiscal 2008, the company adopted the provisions of FIN 48. In connection with the adoption of FIN 48, the company increased its liability and decreased retained earnings by $1 million for net unrecognized tax benefits at August 31, 2007. Due to certain foreign statutes of limitations which expired on December 31, 2007, the company recognized approximately $15 million of previously unrecognized tax benefits in the second quarter of fiscal 2008. The company does not expect to recognize any additional previously unrecognized tax benefits during fiscal 2008.

(6) To supplement our consolidated financial statements presented on a GAAP basis, the company uses non-GAAP measures of net income and earnings per share, which are adjusted to exclude goodwill impairment charges. Management does not consider these charges in evaluating the core operational activities of the company. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in the company's operating results across different time periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The non-GAAP financial measures presented by the company may be different than the non-GAAP financial measures presented by other companies.

(7) In the third quarter of fiscal 2008, the company's TECH subsidiary borrowed $270 million against a credit facility at Singapore Interbank Offered Rate ("SIBOR") plus 2.5%, subject to customary covenants. Payments are due in approximately equal installments over 13 quarters commencing in May 2009. Also in the third quarter of fiscal 2008, TECH repaid $240 million outstanding under its previous credit facility.