UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 3, 1994
-----------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
--------- --------
Commission File Number 1-10658
----------------------
MICRON TECHNOLOGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-1618004
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2805 East Columbia Road, Boise, Idaho 83706-9698
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (208) 368-4000
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---- ----
The number of outstanding shares of the registrant's Common Stock as
of March 17, 1994 was 40,547,435.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MICRON TECHNOLOGY, INC.
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
March 3, September 2,
1994 1993
(Unaudited)
--------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 40,770 $ 47,523
Liquid investments 182,412 138,290
Receivables 192,881 154,686
Inventories 95,591 83,164
Prepaid expenses 3,939 1,493
Deferred income taxes 13,930 14,920
-------------------------------------------------------------------
Total current assets 529,523 440,076
Product and process technology, net 58,079 69,703
Property, plant, and equipment, net 533,959 437,761
Other assets 19,865 18,116
-----------------------------------------------------------------
Total assets $1,141,426 $965,656
================ ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------------
Current liabilities:
Accounts payable and accrued
expenses $ 179,920 $154,963
Deferred income 5,735 5,501
Equipment purchase contracts 19,440 24,913
Current portion of long-term debt 20,635 25,407
-----------------------------------------------------------------
Total current liabilities 225,730 210,784
Long-term debt 42,588 54,361
Deferred income taxes 45,933 46,216
Other liabilities 24,226 14,786
-----------------------------------------------------------------
Total liabilities 338,477 326,147
-----------------------------------------------------------------
Commitments and contingencies
-----------------------------------------------------------------
Shareholders' equity:
Common stock, $.10 par value,
authorized 150,000,000 shares,
issued 40,515,378 and
40,099,156 shares, respectively 4,052 4,010
Additional paid-in capital 365,612 353,277
Retained earnings 434,759 282,468
Unamortized stock compensation (1,474) (246)
------------------------------------------------------------------
Total shareholders' equity 802,949 639,509
------------------------------------------------------------------
Total liabilities and
shareholders' equity $1,141,426 $965,656
========================= ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Operations
(Dollars in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 3, March 4,
1994 1993
<S> <C> <C>
------------------------------------------------------------------
Net sales $390,459 $176,410
------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 204,105 123,738
Selling, general, and
administrative 33,094 23,545
Research and development 18,714 13,861
------------------------------------------------------------------
Total costs and expenses 255,913 161,144
------------------------------------------------------------------
Operating income 134,546 15,266
Interest income (expense), net 1,012 (1,149)
------------------------------------------------------------------
Income before income taxes 135,558 14,117
Income tax provision 48,800 5,082
------------------------------------------------------------------
Net income $ 86,758 $ 9,035
========== ======== ========
Earnings per share:
Primary $2.09 $0.22
Fully diluted 2.07 0.22
Number of shares used in per share
calculations:
Primary 41,518,000 40,352,000
Fully diluted 41,827,000 40,511,000
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Operations
(Dollars in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 3, March 4,
1994 1993
<S> <C> <C>
------------------------------------------------------------------
Net sales $710,597 $307,378
------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 370,693 221,513
Selling, general, and
administrative 67,185 39,845
Research and development 33,048 25,496
------------------------------------------------------------------
Total costs and expenses 470,926 286,854
------------------------------------------------------------------
Operating income 239,671 20,524
Interest income (expense), net 1,439 (2,193)
------------------------------------------------------------------
Income before income taxes 241,110 18,331
Income tax provision 86,799 6,599
------------------------------------------------------------------
Net income $154,311 $ 11,732
========== ======== ========
Earnings per share:
Primary $3.73 $0.29
Fully diluted 3.70 0.29
Number of shares used in per share
calculations:
Primary 41,371,000 39,944,000
Fully diluted 41,715,000 40,184,000
Cash dividends declared per share $0.05 $0.05
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 3, March 4,
1994 1993
<S> <C> <C>
-------------------------------------------------------------------
Cash flows from operating activities:
Net income $154,311 $ 11,732
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 64,707 53,494
Amortization 22,981 12,165
Increase in receivables (38,195) (21,536)
Increase in inventories (12,427) (7,720)
Increase in accounts payable and accrued
expenses 24,957 25,559
Increase (decrease) in deferred income
taxes 707 (2,952)
Increase in other long-term liabilities 3,298 1,494
Other 9,008 2,506
-------------------------------------------------------------------
Net cash provided by operating activities 229,347 74,742
-------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investments (109,023) (101,756)
Proceeds from sale and maturity of
investments 64,142 42,044
Property, plant, and equipment
expenditures (106,745) (19,537)
Purchase of product and process technology (10,000) --
Other 629 466
-------------------------------------------------------------------
Net cash used for investing activities (160,997) (78,783)
-------------------------------------------------------------------
Cash flows from financing activities:
Payments on equipment purchase contracts (62,519) (25,450)
Repayments of debt (37,457) (20,639)
Proceeds from issuance of debt 20,343 24,793
Proceeds from issuance of common stock 6,780 10,463
Payment of Dividends (2,013) (1,941)
Other (237) (232)
-------------------------------------------------------------------
Net cash used for financing activities (75,103) (13,006)
-------------------------------------------------------------------
Net decrease in cash and equivalents (6,753) (17,047)
Cash and equivalents at beginning of period 47,523 35,733
-------------------------------------------------------------------
Cash and equivalents at end of period $ 40,770 $ 18,686
===================================== ======== ========
Supplemental disclosures:
Income taxes (paid) refunded $(109,750) $ 238
Interest paid (2,985) (3,115)
Noncash investing and financing activities:
Equipment acquisitions on contracts payable
and capital leases 57,045 25,639
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Notes to Consolidated Financial Statements
(All tabular dollar amounts are stated in thousands)
1. Unaudited Interim Financial Statements
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments necessary
to present fairly the consolidated financial position of Micron
Technology, Inc., and subsidiaries (the "company"), and their
consolidated results of operations and cash flows.
This report on Form 10-Q for the quarter and six months ended
March 3, 1994 should be read in conjunction with the company's Annual
Report to Shareholders and/or Form 10-K for the year ended September
2, 1993.
<TABLE>
<CAPTION>
2. Receivables
March 3, September 2,
1994 1993
-------- ------------
<S> <C> <C>
Trade receivables $193,446 $155,010
Other 6,406 7,145
Allowance for returns and
discounts (5,194) (5,680)
Allowance for doubtful accounts (1,777) (1,789)
-------- --------
$192,881 $154,686
======== ========
3. Inventories
March 3, September 2,
1994 1993
-------- ------------
Finished goods $ 6,533 $ 7,343
Work in progress 59,130 52,473
Raw materials and supplies 29,928 23,348
-------- --------
$ 95,591 $ 83,164
======== ========
5
<PAGE>
Notes to Consolidated Financial Statements, continued
4. Product and process technology, net
March 3, September 2,
1994 1993
-------- ------------
Product and process technology,
at cost $139,881 $129,221
Less accumulated amortization (81,802) (59,518)
-------- --------
$ 58,079 $ 69,703
======== ========
5. Property, plant, and equipment, net
March 3, September 2,
1994 1993
-------- ------------
Land $ 7,968 $ 7,483
Buildings 223,479 217,655
Machinery and equipment 692,358 578,810
Construction in progress 57,212 24,667
-------- --------
981,017 828,615
Less accumulated depreciation
and amortization (447,058) (390,854)
-------- --------
$533,959 $437,761
======== ========
6. Accounts payable and accrued expenses
March 3, September 2,
1994 1993
-------- ------------
Accounts payable $ 39,174 $ 34,740
Salaries, wages, and benefits 41,699 28,829
Product and process technology 78,405 45,932
Income taxes payable 1,568 30,581
Commissions 6,822 4,675
Other 12,252 10,206
-------- --------
$179,920 $154,963
======== ========
6
<PAGE>
Notes to Consolidated Financial Statements, continued
7. Long-term debt
March 3, September 2,
1994 1993
-------- ------------
Notes payable in monthly
installments through January
1999, weighted average interest
rate of 7.26% and 8.24%,
respectively $40,033 $31,174
Capitalized lease obligations
payable in monthly installments
through April 1998, weighted
average interest rate of 7.96%
and 8.79%, respectively 13,880 28,550
Noninterest bearing obligation,
due in annual installments
through November 1994, original
face amount of $50.0 million
(net of discount based on
imputed interest rate of 10.25%) 9,310 18,775
Noninterest bearing obligation,
paid January 1994, (net of
discount based on imputed
interest rate of 7.41%) -- 1,269
--------- --------
63,223 79,768
Less current portion (20,635) (25,407)
------- -------
$42,588 $54,361
======= =======
</TABLE>
8. Earnings per share
Earnings per share is computed using the weighted average number
of common and common equivalent shares outstanding. Common
equivalent shares result from the assumed exercise of outstanding
stock options and affect earnings per share when they have a dilutive
effect.
7
<PAGE>
Notes to Consolidated Financial Statements, continued
9. Income taxes
Effective September 3, 1993, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." Adoption of SFAS No. 109 did not have a material effect on
the company's financial position or results of operations. The
estimated effective income tax rate for all periods presented was
36%.
The approximate tax effect of temporary differences and
carryforwards which give rise to the net deferred tax asset and
liability are as follows:
<TABLE>
<CAPTION>
March 3,
1994
--------
<S> <C>
Current deferred tax asset:
Accrued compensation 3,097
Deferred income 1,931
Other 8,902
--------
Net deferred tax asset $ 13,930
========
Noncurrent deferred tax liability:
Excess tax over book depreciation $(50,263)
Deferred internal patent charges (2,182)
Accrued compensation 5,794
Product and process technology
amortization 2,724
Other (2,006)
--------
Net deferred tax liability $(45,933)
========
</TABLE>
10. Commitments
As of March 3, 1994, the company had commitments of
approximately $165.1 million for equipment purchases and $60.0
million for the construction of buildings.
8
<PAGE>
Notes to Consolidated Financial Statements, continued
11. Contingencies
Periodically, the company is made aware that technology used by
the company in the manufacture of some or all of its products may
infringe on product or process technology rights held by others. The
company has accrued a liability and charged operations for the
estimated costs of settlement or adjudication of asserted and
unasserted claims for infringement prior to the balance sheet date.
Management can give no assurance that the amounts accrued have been
adequate and cannot estimate the range of additional possible loss,
if any, from resolution of these uncertainties. Resolution of
whether the company's manufacture of products has infringed on valid
rights held by others may have a material adverse effect on the
company's financial position or results of operations, and may
require material changes in production processes and products.
On March 9, 1994, the company entered into a patent cross-
license agreement with Texas Instruments Incorporated ("TI"). As a
result of this agreement, the various patent lawsuits between Micron
Semiconductor, Inc., and TI in Idaho, Texas, and Delaware have been
settled. Similar to a prior cross-license agreement between the
parties which expired in 1992, the company will pay ongoing royalties
to TI based on sales of DRAMs and other semiconductor devices. The
company has accrued a sufficient amount to pay the royalties related
to sales for periods from expiration of the previous cross-license to
the date of the settlement.
On November 13, 1992, Micron Semiconductor, Inc., filed a patent
infringement action with the United States International Trade
Commission ("ITC") against Goldstar Electron Company, Ltd., and
Goldstar Electron America, Inc. (collectively, "Goldstar"), and
Hyundai Electronics Industries Co., Ltd., and Hyundai Electronics
America, Inc. (collectively, "Hyundai"). The Company has since
entered into patent cross-license agreements with Goldstar and
Hyundai. The ITC action against Goldstar and Hyundai has been
dismissed.
The company is a party to various other legal actions arising
out of the normal course of business, none of which is expected to
have a material effect on the company's financial position or results
of operations.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
All references are to the company's fiscal periods ended March
3, 1994 and March 4, 1993, unless otherwise indicated. All tabular
dollar amounts are stated in thousands.
The company reported net income of $86.8 million, or $2.07 per
fully diluted share, on net sales of $390.5 million for the second
quarter of 1994, and net income of $154.3 million, or $3.70 per fully
diluted share, on net sales of $710.6 million for the first six
months of 1994. For the second quarter a year ago, the company
reported net income of $9.0 million, or $0.22 per share, on net sales
of $176.4 million, and for the first six months of 1993 reported net
income of $11.7 million, or $0.29 per share, on net sales of $307.4
million.
Net sales and profits in the first two quarters of fiscal 1994
were substantially higher than in comparable periods of fiscal 1993
reflecting favorable market conditions, improved productivity, and
increased fab capacity. The company continues to benefit from strong
market conditions for the 4 Meg DRAM which is responsible for a
substantial portion of the company's net sales and net income. To
date, only a limited portion of the company's production has been
converted to the reduced die size 4 Meg DRAM. The company has begun
to produce a limited number of 16 Meg DRAMs in a 400 mil package and
is continuing to develop a reduced die size 16 Meg DRAM in a 300 mil
package. The company expects that the 300 mil package will be
required to meet volume market requirements. Any downturn in the
market for 4 Meg DRAMs or a rapid transition to the 16 Meg DRAM as
the industry's primary product would likely have a negative impact on
the company's results of operations.
The semiconductor industry has historically experienced
significant volatility. As has occurred in the past in reaction to
improved market conditions, the company and several competitors have
recently announced expansions of semiconductor manufacturing
capacity.
Future operating results could be influenced by potentially
adverse market conditions, expansion of total industry capacity
faster than total industry demand, continuing high capital spending
requirements to remain competitive in the industry, manufacturing
yield fluctuations, patent litigation claims and litigation against
the company, an inability of the company to keep pace with
technological advances by competitors, and currency fluctuations
resulting in a strengthening dollar against the yen. The market
price for the company's common stock has been, and is expected to
continue to be, extremely volatile. See "Certain Factors".
10
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Second Quarter Six Months Ended
------------------------ ------------------------
1994 % Change 1993 1994 % Change 1993
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $390,459 121.3% $176,410 $710,597 131.2% $307,378
</TABLE>
Net sales for the second quarter and first six months of fiscal
1994 were significantly higher than for the comparable periods of
1993 principally due to favorable market conditions resulting in
higher average selling prices for 4 Meg and 1 Meg DRAM products, and
increased sales of higher density memory products. Selling prices
on average were lower for 2 Meg VRAM and 1 Meg SRAM products. Sales
of 4 Meg DRAMs represented a substantial portion of the company's net
sales for the second quarter of 1994. Memory volumes were higher for
the second quarter and first six months of 1994 as compared to the
corresponding periods of 1993 through shrinks of existing products,
transitions to higher density memory products, increased wafer
output, and yield improvements.
The company's principal products for the first six months of
1994 were 4 Meg and 1 Meg DRAMs, 1 Meg SRAM, and 2 Meg and 1 Meg
specialty DRAMs. SRAM net sales increased in both the second quarter
and first six months of 1994, but declined as a percentage of total
net sales to approximately 9% for the second quarter and first six
months of 1994. SRAM net sales for the second quarter and first six
months of 1993 were 15% and 17% of total net sales, respectively.
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------ ------------------------
1994 % Change 1993 1994 % Change 1993
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Cost of goods sold $204,105 64.9% $123,738 $370,693 67.3% $221,513
Gross margin % 47.7% 29.9% 47.8% 27.9%
</TABLE>
The company's overall gross margin percentage improved
significantly, comparing both the second quarter and first six months
of 1994 to the corresponding periods of 1993, due to generally higher
selling prices and reductions in cost per unit of memory sold for
DRAM products. Reductions in cost per unit sold were realized
primarily from die shrinks, transition to higher density memory
products, increased wafer output, and yield improvements. The
company continues to transition to shrink versions of existing
products. To date, only a limited portion of the company's
production of 4 Meg DRAMs has been converted to the reduced die size
version. The company has begun to produce a limited number of 16 Meg
DRAMs in a 400 mil package and is continuing to develop a reduced die
size 16 Meg DRAM in a 300 mil package. The company expects that the
300 mil device will become the industry's primary 16 Meg product. As
is typical with product and process transitions, the company may
experience volatility in manufacturing yields or other difficulties
in ramping production of the 16 Meg DRAM to commercial volumes. The
company's operating results are highly dependent on increasing yields
at an acceptable rate and to an acceptable level, of which there can
be no assurance.
11
<PAGE>
Sales of personal computers accounted for approximately 6% of
total net sales for the second quarter and first six months of 1994.
Gross margin percentages for personal computer sales are
substantially lower than for the company's other products. Should
sales of personal computers increase as a percentage of total net
sales, the company's overall gross margin percentage would decrease.
Cost of goods sold includes estimated costs of settlement or
adjudication of asserted and unasserted claims for patent
infringement prior to the balance sheet date, and costs of product
and process technology licensing arrangements. The company recently
settled various legal proceedings with Texas Instruments
Incorporated. The company has accrued a sufficient amount to pay
the royalties under the settlement agreement related to sales for
periods from expiration of the previous cross-license to the date of
the settlement. The charges for product and process technology have
remained, and are expected to remain, relatively constant as a
percentage of net sales. Future product and process technology
charges may fluctuate, however, as a result of claims that may be
asserted in the future. See "Certain Factors".
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------ ------------------------
1994 % Change 1993 1994 % Change 1993
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Selling, general,
and administrative $ 33,094 40.6% $23,545 $ 67,185 68.6% $ 39,845
as a % of net sales 8.5% 13.3% 9.5% 13.0%
</TABLE>
Selling, general, and administrative expenses increased
significantly in the second quarter and first six months of 1994 over
the comparable periods of 1993, primarily as a result of higher
personnel costs, increased commissions based on a higher level of net
sales, increased costs incurred in conjunction with the company's
action before the International Trade Commission and patent
litigation, and a higher level of bad debt expense. These increases
were partially offset by a $3 million pre-tax benefit realized in the
second quarter of fiscal 1994 from an insurance reimbursement arising
from settlement of the shareholders' consolidated class action
lawsuit.
12
<PAGE>
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------ ------------------------
1994 % Change 1993 1994 % Change 1993
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Research and
development $ 18,714 35.0% $ 13,861 $ 33,048 29.6% $ 25,496
as a % of net sales 4.8% 7.9% 4.7% 8.3%
</TABLE>
Research and development expenses, which vary primarily with the
number of wafers and personnel dedicated to new product and process
development, increased in absolute dollars while decreasing as a
percentage of net sales for the second quarter and first six months
of 1994 compared to the corresponding periods of 1993. Efforts in
the current quarter were focused primarily on development of the 16
Meg DRAM, and design and development of the 64 Meg DRAM, and of the 4
Meg and 16 Meg SRAMs. Development of VRAMs beyond the company's
current 2 Meg generation has been terminated as the company pursues
more cost-effective alternatives for graphics applications. The
company expects that the absolute level of research and development
expenses for fiscal 1994 will be higher than fiscal 1993 as
additional resources are dedicated to development of the 16 Meg DRAM
and design and development of the 64 Meg DRAMs as well as design and
development of radio frequency identification products, non-volatile
semiconductor memory devices, and new technologies relating to field
emission flat panel displays.
The company has begun to produce a limited number of 16 Meg
DRAMs in a 400 mil package and is continuing to develop a reduced die
size 16 Meg DRAM in a 300 mil package. The company expects that the
300 mil device will become the industry's primary 16 Meg product.
Future results of operations may be adversely impacted if the company
is unable to transition to these products in commercial volume in a
timely fashion.
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------ ------------------------
1994 % Change 1993 1994 % Change 1993
------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Income tax
provision $ 48,800 860% $ 5,082 $ 86,799 1,215% $ 6,599
</TABLE>
Effective September 3, 1993, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." Adoption of SFAS No. 109 did not have a material effect on
the company's financial position or results of operations. The
effective tax rate for the second quarter and first six months of
1994 and 1993 was 36%.
13
<PAGE>
Liquidity and Capital Resources
The company had cash and liquid investments of $223.2 million at
March 3, 1994, representing an increase of $37.4 million during the
first six months of 1994. The company's principal sources of
liquidity during the first six months of 1994 were cash flows from
operations of $229.3 million, equipment financing of $57.0 million,
long-term debt of $20.3 million, and proceeds of $6.8 million from
the issuance of common stock in connection with the company's
employee stock purchase and stock option plans. The principal uses
of funds in the first six months of 1994 were $106.7 million for
property, plant, and equipment expenditures, $62.5 million for
payments on equipment contracts, $37.5 million for payments on long-
term debt, and $10.0 million for acquisition of product and process
technology.
On March 9, 1994, the company entered into a patent cross-
license agreement with Texas Instruments Incorporated ("TI"). As a
result of this agreement, the various lawsuits between the Micron
Semiconductor, Inc., and TI in Idaho, Texas, and Delaware have been
settled. Similar to a prior cross-license agreement between the
parties which expired in 1992, the company will pay ongoing royalties
to TI based on sales of DRAM and other semiconductor devices. The
company has accrued a sufficient amount to pay the royalties related
to sales for periods from expiration of the previous cross-license
agreement to the date of the settlement. Royalties accrued from
expiration of the prior cross-license to January 1, 1994, the
effective date of the current agreement, will be paid in the third
quarter of fiscal 1994.
As of March 3, 1994, the company had commitments of
approximately $165.1 million for equipment purchases and
approximately $60.0 million for the construction of buildings.
Anticipated capital expenditures include remodels and upgrades of
existing fabrication facilities and equipment, and the construction
of a central ion implant facility and an additional central utilities
plant. Completion of these and future projects as currently
anticipated will require substantial cash resources including
significant payments out of the company's cash flow from operations
for the current and upcoming fiscal year.
In the second quarter of fiscal 1994, the company revised its
bank credit agreement to increase the number of banks from two to
four, increase the total borrowings available, and to change the
collateral pledged. The revised agreement provides for borrowings up
to $120 million under a revolving loan expiring January 1997. All
equipment, accounts receivable, and inventories of Micron Technology,
Inc., and Micron Semiconductor, Inc., not otherwise pledged as
collateral for other notes payable and capital leases are pledged as
collateral under the agreement. The agreement restricts, except with
prior approval, declaration and payment of cash dividends or
repurchase of common stock to an amount not in excess of the greater
of $3.0 million or 25% of net income earned after September 2, 1993,
and contains working capital requirements and other covenants. As of
March 3, 1994, the company had no borrowings outstanding under the
agreement.
14
<PAGE>
The company believes continuing investments in manufacturing
technology, capital equipment, research and development, and product
and process technology are necessary to support future growth,
achieve operating efficiencies, and maintain product quality.
Although external sources of cash have been required historically to
supplement the company's cash flows from operations to fund these
ongoing investments, the company currently expects that it will be
able to fund its near-term liquidity needs through cash flows from
operations, existing cash and liquid investment balances, and
equipment financings. Depending on overall market conditions, the
company may borrow amounts available under the bank credit agreement
or pursue other external sources of liquidity.
Certain Factors
The semiconductor memory industry is characterized by rapid
technological change, frequent product introductions and
enhancements, difficult product transitions, relatively short product
life cycles, and volatile market conditions as evidenced by
significantly fluctuating product pricing. These circumstances
historically have made the semiconductor industry highly cyclical,
particularly in the market for DRAMs and SRAMs, which are the
company's primary products. The company has recently benefited from
supply and demand relationships resulting in favorable pricing and
increased volume for the company's products. However, the company
expects product pricing to return to the long-term historical
declining trend line at some point in the future. The company
experiences intense competition from a number of substantially larger
foreign and domestic companies, which are reportedly adding
significant semiconductor manufacturing capacity. Several of these
new facilities use 8-inch wafers which contain greater than 70% more
surface area than the company's exclusively used 6-inch wafer
facility. Use of 8-inch wafers could result in a comparative cost
advantage. A substantial increase in overall industry production
capacity, adverse market conditions, and currency fluctuations
resulting in a strengthening dollar against the yen, could result in
downward pricing pressure. A decline in the current favorable
product pricing could have a material adverse effect on the company's
results of operations. Historically, severe downward movements in
product pricing have resulted in decreases in the market value for
the company's stock.
The manufacture of the company's products is a complex process
and involves a number of precise steps, including wafer fabrication,
assembly in a variety of packages, burn-in, and final test. From
time to time, the company has experienced volatility in its
manufacturing yields, as it is not unusual to encounter difficulties
in ramping shrink versions of existing devices or new generation
devices to commercial volumes. The company's net sales and operating
results are highly dependent on increasing yields at an acceptable
rate and to an acceptable level, of which there can be no assurance.
Future results of operations may be adversely impacted if the company
is unable to transition to future generation products in a timely
fashion.
15
<PAGE>
Periodically, the company is made aware that technology used by
the company in the manufacture of some or all of its products may
infringe on product or process technology rights held by others. The
company has accrued a liability and charged operations for the
estimated costs of settlement or adjudication of asserted and
unasserted claims for infringement prior to the balance sheet date.
Management can give no assurance that the amounts accrued have been
adequate and cannot estimate the range of additional possible loss,
if any, from resolution of these uncertainties. Resolution of
whether the company's manufacture of products has infringed on valid
rights held by others may have a material adverse effect on the
company's financial position or results of operations, and may
require material changes in production processes and products.
16
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Micron Technology, Inc.'s patent cross-license agreement with
Texas Instruments, Inc. ("TI"), expired on September 3, 1992.
Attempts to negotiate a new cross-license agreement on terms
acceptable to the company were unsuccessful. On September 2, 1992,
Micron Semiconductor, Inc. ("MSI"), filed suit against TI in the
United States District Court for the District of Idaho to have
thirty-nine TI patents declared invalid or not infringed. This suit
was amended on September 4, 1992, to include a claim against TI for
infringement of one of MSI's patents. TI counterclaimed for
infringement of the thirty-nine TI patents for the period since the
expiration of the cross-license. On September 25, 1992, TI
instituted a suit against Micron Technology, Inc., MSI, Hyundai
Electronics Industries, Co., Ltd., Hyundai Electronics America, Inc.,
and Nova Marketing Incorporated in the United States District Court
for the Eastern District of Texas alleging infringement of two of
TI's patents. That suit was stayed pending the outcome of the Idaho
case. On October 1, 1992, TI filed an amended complaint (amending an
earlier unserved complaint filed on September 3, 1992) against MSI in
the United States District Court for the Northern District of Texas
to have certain MSI patents declared invalid or not infringed. On
June 16, 1993, the Court in that action transferred TI's suit to the
United States District Court in Idaho. On May 5, 1993, TI filed an
additional suit against MSI in the United States District Court for
the Eastern District of Texas alleging infringement of three TI
patents not previously cited in TI's earlier suits. On September 20,
1993, MSI filed a counterclaim alleging infringement by TI of one of
MSI's patents. On December 20, 1993, MSI filed a motion to amend its
counterclaim alleging infringement by TI of three additional MSI
patents. Simultaneously, on December 20, 1993, MSI filed a complaint
against TI in the United States District Court for the District of
Delaware alleging infringement by TI of the same three patents.
MSI's infringement suit against TI and TI's infringement suit against
MSI sought injunctive relief, compensatory damages, including treble
damages, and attorneys' fees and costs. On March 9, 1994, the
company entered into a patent cross-license agreement with TI. As a
result of this agreement, the various patent lawsuits between MSI and
TI in Idaho, Texas, and Delaware have been settled and will be
dismissed with prejudice as to all claims of both parties, with each
party to pay its own fees and costs.
17
<PAGE>
On November 13, 1992, MSI filed a patent infringement action
with the United States International Trade Commission ("ITC") against
Hyundai Electronics Industries Co., Ltd., Hyundai Electronics
America, Inc., Goldstar Electron Co., Ltd., and Goldstar Electron
America, Inc. On June 2, 1993, Micron Technology, Inc., and Goldstar
Electron Co., Ltd., entered into a cross-licensing agreement. As a
result of this agreement, the ITC action against Goldstar Electron
Co., Ltd., and Goldstar Electron America, Inc., was terminated on
August 3, 1993. Trial for the ITC action against Hyundai Electronics
Industries Co., Ltd., and Hyundai Electronics America, Inc.,
(together, "Hyundai") was held before the ITC administrative law
judge. On February 3, 1994, the company entered into a cross-license
agreement with Hyundai. As a result of this agreement, the ITC
action against Hyundai was terminated on March 9, 1994.
On November 20, 1992, Thorn EMI North America, Inc., ("Thorn")
filed suit against Micron Technology, Inc., and MSI in the United
States District Court in the District of Delaware alleging
infringement of four of Thorn's patents and seeking injunctive
relief, compensatory damages, including treble damages, attorneys'
fees, and costs. On December 4, 1993, the parties entered into a
settlement agreement dismissing the lawsuit.
A consolidated class action complaint was filed on January 18,
1990, in the United States District Court for the District of Idaho
in substitution for five similar suits previously filed against the
company and certain of its past and present officers and directors.
The suit alleged federal securities law violations in connection with
certain statements allegedly made by the company during the period
from approximately December 1988 through September 1989 and claims of
insider trading violations by certain past and present officers and
directors, as well as pendant state law claims. On September 10,
1993, the court approved a settlement agreement between the parties
providing for dismissal of the action with prejudice. Under the
terms of the agreement, the company paid $6.0 million into a
settlement fund on behalf of the plaintiff class. An intervening
shareholder appealed the court's order approving the settlement
alleging that the settlement was inadequate and that the attorney's
fees charged to the class were excessive. The notice of appeal did
not specify the basis for appeal, but the shareholder has now moved
to dismiss the appeal voluntarily requesting that the court rule only
on the issue of the objecting party's attorney fees. By the
voluntary dismissal, the settlement is now final as to the company.
The company filed a lawsuit on February 26, 1993, in the United
States District Court for the District of Idaho against American
Casualty Co. of Reading, Pennsylvania, the company's directors and
officers liability insurance carrier ("American Casualty"), for the
amount of the shareholders' suit settlement, plus attorney's fees and
costs incurred in defending the class action. On March 1, 1994, the
company and American Casualty entered into a settlement agreement.
As a result of this agreement, American Casualty paid the company
$6.0 million and the suit was dismissed with prejudice, with each
party paying its own fees and costs.
The company is also a party in various other legal actions
arising out of the normal course of business, none of which is
expected to have a material effect on the company's financial
position or results of operations.
18
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The Registrant's 1993 Annual Meeting of Shareholders was held on
January 31, 1994 at the Registrant's corporate office. At the
meeting, the following items were submitted to a vote of the
shareholders. At the meeting, 40,264,436 shares were entitled to
vote.
(a) The following nominees for Directors were elected. Each
person elected as a Director will serve until the next annual meeting
of shareholders or until such person's successor is elected and
qualified:
<TABLE>
<CAPTION>
Votes Votes Broker
Name of Nominee Cast For Withheld Non-votes
--------------- ---------- ---------- -----------
<S> <C> <C> <C>
James W. Garrett 37,351,616 5,810 318,124
Reid N. Langrill 37,351,876 5,550 318,324
Thomas T. Nicholson 37,351,885 5,301 318,364
Allen T. Noble 37,351,785 5,401 318,364
Joseph L. Parkinson 37,351,588 5,598 318,364
Don J. Simplot 37,350,999 6,187 318,564
John R. Simplot 37,351,050 6,036 318,464
Gordon C. Smith 37,243,753 5,313 318,484
</TABLE>
(b) An amendment to the company's Certificate of Incorporation
increasing the number of authorized shares of common stock from
100,000,000 to 150,000,000 was approved with 34,422,063 votes in
favor, 3,134,141 votes against, and 35,746 votes representing
abstentions and broker non-votes.
(c) An amendment to the company's 1985 Incentive Stock Option
Plan to increase the number of shares reserved thereunder by
1,000,000 shares was approved with 34,603,227 votes in favor,
2,878,038 votes against, and 108,740 votes representing abstentions
and broker non-votes.
(d) The ratification of the appointment of Coopers & Lybrand as
independent public accountants of the company for the fiscal year
ending September 1, 1994 was approved with 37,522,533 votes in favor,
40,486 votes against, and 107,231 votes representing abstentions
and broker non-votes.
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ---------------------------------
<C> <S>
11 Computation of per share earnings
for the quarters and six month
periods ended March 3, 1994, and
March 4, 1993
</TABLE>
b) The registrant filed a Report on Form 8-K dated February 28,
1994, announcing the company's board of directors approval of a 5 for
2 stock split effected in the form of a stock dividend effective
April 1, 1994.
20
<PAGE>
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.
Micron Technology, Inc.
-----------------------
(Registrant)
Dated: March 21, 1994 Reid N. Langrill
----------------------------------
Vice President, Finance and
Chief Financial Officer (Principal
Financial and Accounting Officer)
21
MICRON TECHNOLOGY, INC.
Exhibit 11
Computation of Per Share Amounts
(Amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
March 3, March 4,
1994 1993
-------- --------
<S> <C> <C>
PRIMARY
Weighted average shares
outstanding 40,369 39,423
Stock options using average
market price 1,149 929
------- ------
Total shares 41,518 40,352
======= ======
Net income $86,758 $9,035
======= ======
Per share amount $2.09 $0.22
======= ======
FULLY DILUTED
Weighted average shares
outstanding 40,369 39,423
Stock options using greater of
average or ending market price 1,458 1,088
------- ------
Total shares 41,827 40,511
======= ======
Net income $86,758 $9,035
======= ======
Per share amount $2.07 $0.22
======= ======
</TABLE>
<PAGE>
MICRON TECHNOLOGY, INC.
Exhibit 11
Computation of Per Share Amounts
(Amounts in thousands except for per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
March 3, March 4,
1994 1993
-------- --------
<S> <C> <C>
PRIMARY
Weighted average shares
outstanding 40,284 39,111
Stock options using average
market price 1,087 833
-------- -------
Total shares 41,371 39,944
======== =======
Net income $154,311 $11,732
======== =======
Per share amount $3.73 $0.29
======== =======
FULLY DILUTED
Weighted average shares
outstanding 40,284 39,111
Stock options using greater of
average or ending market price 1,431 1,073
-------- -------
Total shares 41,715 40,184
======== =======
Net income $154,311 $11,732
======== =======
Per share amount $3.70 $0.29
======== =======
</TABLE>
