FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 30, 1996
-------------------------------------------------
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
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Micron Technology, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 75-1618004
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 S. Federal Way, P.O. Box 6, Boise, Idaho 83707-0006
-----------------------------------------------------------------
(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 June 24, 1996 was 208,611,647.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MICRON TECHNOLOGY, INC.
Consolidated Balance Sheets
(Dollars in millions, except for par value amount)
<TABLE>
<CAPTION>
(Unaudited)
May 30, August 31,
As of 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 393.0 $ 128.1
Liquid investments 7.0 427.7
Receivables 299.1 455.4
Inventories 294.4 204.8
Prepaid expenses 15.4 9.1
Deferred income taxes 87.7 49.0
-------- --------
Total current assets 1,096.6 1,274.1
Product and process technology, net 47.7 41.6
Property, plant, and equipment, net 2,598.9 1,385.6
Other assets 55.8 73.6
-------- --------
Total assets $3,799.0 $2,774.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 474.1 $ 502.3
Short-term debt 200.0 --
Deferred income 13.6 16.4
Equipment purchase contracts 87.3 59.6
Current portion of long-term debt 57.4 26.5
-------- --------
Total current liabilities 832.4 604.8
Long-term debt 211.8 129.4
Deferred income taxes 168.7 93.3
Non-current product and process technology 48.6 3.6
Other liabilities 61.4 47.6
-------- --------
Total liabilities 1,322.9 878.7
-------- --------
Commitments and contingencies
Common stock, $0.10 par value, authorized
1.0 billion shares, issued and
outstanding 208.6 million and 206.4
million shares, respectively 20.8 20.6
Additional capital 427.4 391.5
Retained earnings 2,027.9 1,484.1
-------- -------
Total shareholders' equity 2,476.1 1,896.2
-------- -------
Total liabilities and shareholders' equity $3,799.0 $2,774.9
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Operations
(Amounts in millions, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
May 30, June 1,
For the quarter ended 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 771.0 $ 761.2
-------- --------
Costs and expenses:
Cost of goods sold 558.0 357.2
Selling, general, and administrative 67.1 54.4
Research and development 51.2 33.6
-------- --------
Total costs and expenses 676.3 445.2
-------- --------
Operating income 94.7 316.0
Gain from merger transaction -- 29.0
Interest income, net 2.1 7.4
Income before income taxes 96.8 352.4
Income tax provision 38.6 132.2
-------- --------
Net income $ 58.2 $ 220.2
======== ========
Earnings per share:
Primary $0.27 $1.02
Fully diluted 0.27 1.02
Number of shares used in per share calculations:
Primary 214.5 215.1
Fully diluted 214.5 215.8
Cash dividend declared per share $0.05 $0.05
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Operations
(Amounts in millions, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
May 30, June 1,
For the nine months ended 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net sales $2,953.3 $1,924.7
-------- --------
Costs and expenses:
Cost of goods sold 1,648.2 849.2
Selling, general, and administrative 213.9 131.6
Research and development 145.8 89.5
Restructuring charge 29.9 --
-------- --------
Total costs and expenses 2,037.8 1,070.3
-------- --------
Operating income 915.5 854.4
Gain from merger transaction -- 29.0
Interest income, net 14.9 17.4
-------- --------
Income before income taxes 930.4 900.8
Income tax provision 355.5 337.8
-------- --------
Net income $ 574.9 $ 563.0
======== ========
Earnings per share:
Primary $2.66 $2.65
Fully diluted 2.66 2.62
Number of shares used in per share calculations:
Primary 215.9 212.7
Fully diluted 215.9 214.7
Cash dividend declared per share $0.15 $0.10
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MICRON TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
May 30, June 1,
For the nine months ended 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS OF OPERATING ACTIVITIES
Net income $ 574.9 $ 563.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 261.7 137.6
Gain from merger transaction -- (29.0)
Restructuring charge 29.9 --
Decrease (increase) in receivables 156.1 (84.9)
Increase in inventories (104.0) (68.5)
Increase (decrease) in accounts payable
and accrued expenses (30.1) 162.8
Increase in non-current product and
process technology 45.0 --
Other 17.7 12.7
-------- --------
Net cash provided by operating activities 951.2 693.7
-------- --------
CASH FLOWS OF INVESTING ACTIVITIES
Expenditures for property, plant, and equipment (1,275.9) (451.7)
Purchase of investments (188.5) (551.1)
Proceeds from sales and maturities of securities 611.5 403.7
Proceeds from sale of equipment 24.9 13.3
Cash acquired in merger transaction -- 14.0
Other (10.9) 0.5
-------- --------
Net cash used for investing activities (838.9) (571.3)
-------- --------
CASH FLOWS OF FINANCING ACTIVITIES
Proceeds from issuance of debt 568.0 59.7
Repayments of debt (237.9) (27.3)
Payments on equipment purchase contracts (178.7) (116.2)
Proceeds from issuance of common stock 21.7 13.8
Payment of dividends (20.7) (10.2)
Other 0.2 (2.4)
-------- --------
Net cash provided by (used for) financing
activities 152.6 (82.6)
-------- --------
Net increase in cash and equivalents 264.9 39.8
Cash and equivalents at beginning of period 128.1 78.4
-------- --------
Cash and equivalents at end of period $ 393.0 $ 118.2
======== ========
SUPPLEMENTAL DISCLOSURES
Income taxes paid, net $ (417.5) $ (310.6)
Interest paid (8.0) (7.0)
Noncash investing and financing activities:
Equipment acquisitions on contracts payable
and capital leases 206.4 142.0
Assets acquired, net of cash and liabilities
assumed in merger transaction -- 26.0
Long-term debt offset against accounts receivable 19.8 --
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Notes to Consolidated Financial Statements
(All tabular dollar amounts are stated in millions)
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. In the
third quarter of 1996, the Company recognized a $12.0 million pre-tax
gain on the sale of 6-inch manufacturing equipment. In the second
quarter of 1996, the Company recognized a $29.9 million
pre-tax restructuring charge resulting from the decisions by
Micron Electronics, Inc., an approximately 80% owned subsidiary,
to discontinue sales of ZEOS brand PC systems and to close the
related PC manufacturing operations in Minneapolis, Minnesota.
On December 31, 1995, the Company reclassified held-to-maturity
liquid investment securities with an amortized cost of $151 million
to available-for-sale concurrent with the Company's adoption of the
Federal Accounting Standards Board's special report on implementing
Statement 115 "Accounting for Certain Investments in Debt and
Equity Securities".
This report on Form 10-Q for the quarter ended May 30, 1996,
should be read in conjunction with the Company's Annual Report to
Shareholders and/or Form 10-K for the year ended August 31, 1995.
<TABLE>
<CAPTION>
2. Receivables May 30, August 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Trade receivables $ 271.3 $ 457.4
Income taxes recoverable 56.5 --
Allowance for returns and discounts (37.9) (9.2)
Allowance for doubtful accounts (7.5) (7.4)
Other 16.7 14.6
-------- --------
$ 299.1 $ 455.4
======== ========
</TABLE>
<TABLE>
<CAPTION>
3. Inventories May 30, August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 59.2 $ 17.8
Work in progress 133.8 99.1
Raw materials and supplies 101.4 87.9
-------- --------
$ 294.4 $ 204.8
======== ========
</TABLE>
<TABLE>
<CAPTION>
4. Product and process technology, net May 30 August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Product and process technology, at cost $ 166.8 $ 152.3
Less accumulated amortization (119.1) (110.7)
-------- --------
$ 47.7 $ 41.6
======== ========
</TABLE>
<TABLE>
<CAPTION>
5. Property, plant, and equipment, net May 30 August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 37.3 $ 34.4
Buildings 618.2 392.0
Machinery and equipment 1,950.9 1,338.4
Construction in progress 757.9 259.2
-------- --------
3,364.3 2,024.0
Less accumulated depreciation and amortization (765.4) (638.4)
-------- --------
$2,598.9 $1,385.6
======== ========
</TABLE>
5
<PAGE>
Notes to Consolidated Financial Statements, continued
<TABLE>
<CAPTION>
6. Accounts payable and accrued expenses May 30, August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 200.0 $ 193.2
Salaries, wages, and benefits 64.5 103.2
Product and process technology 125.8 91.5
Income taxes payable 12.0 72.7
Other 71.8 41.7
-------- --------
$ 474.1 $502.3
======== ========
</TABLE>
7. Short-term debt
In the third quarter of 1996, the Company established a
revolving credit facility that provides for borrowings up to $500
million. As of May 30, 1996, the Company had $200 million
outstanding and is operating under a 60-day waiver from the bank
syndicate while negotiating changes to covenant provisions. The
interest rate on borrowed funds is based on various pricing
options and was 5.99% as of May 30, 1996.
<TABLE>
<CAPTION>
8. Long-term debt May 30, August 31,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes payable in periodic installments through
July 2015, weighted average interest rate of
7.03% and 6.82%, respectively $ 234.8 $ 89.3
Noninterest bearing obligations, $3 million due
October 1997, $20.5 million due December
1997, and $5.0 million due December 1998,
weighted average imputed interest rate of
6.94% and 7.17%, respectively 25.5 20.0
Noninterest bearing obligation, $19.8 million
retired in May 1996 by an offset against accounts
receivable, imputed interest rate of 6.50% -- 17.8
Notes payable, due June 1998, weighted average of
interest rate 5.14% and 5.49%, respectively 3.0 20.0
Capitalized lease obligations payable in monthly
installments through April 1998, weighted
average interest rate of 7.59% and 8.94%,
respectively 5.9 8.8
-------- --------
269.2 155.9
Less current portion (57.4) (26.5)
-------- --------
$ 211.8 $ 129.4
======== ========
</TABLE>
9. 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.
6
<PAGE>
Notes to Consolidated Financial Statements, continued
10. Income taxes
The estimated effective income tax rate for fiscal year 1996 of
approximately 38% and the effective income tax rate of 37.5% in
fiscal year 1995 principally reflect the statutory federal
corporate income tax rate and the net effect of state taxation.
11. Commitments
As of May 30, 1996, the Company had commitments extending into
fiscal 1998 of approximately $371 million for equipment purchases
and $20 million for the construction of facilities.
12. 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. The Company had various product and
process technology agreements expire in calendar 1995 and is not
able to predict whether these license agreements can be renewed
on terms acceptable to the Company.
The Company is a party to various 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.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion contains trend information and other
forward looking statements that involve a number of risks and
uncertainties. The Company's actual results could differ
materially from the Company's historical results of operations
and those discussed in the forward looking statements. Factors
that could cause actual results to differ materially are
included, but are not limited to, those identified in "Certain
Factors". All period references are to the Company's fiscal periods
ended May 30, 1996, February 29,1996, November 30, 1995 and June 1,
1995, unless otherwise indicated. All tabular dollar amounts are
stated in millions.
Overview
Net income for the third quarter of 1996 was $58 million, or
$0.27 per fully-diluted share, on net sales of $771 million
compared to net income of $220 million, or $1.02 per fully-
diluted share, on net sales of $761 million for the third quarter
of 1995. For the first nine months of 1996, net income was $575
million, or $2.66 per fully-diluted share, on net sales of $2,953
million compared to net income of $563 million, or $2.62 per
fully-diluted share, on net sales of $1,925 million for the first
nine months of 1995. The Company previously reported net sales
of $1,186 million and net income of $329 million, or $1.51 per
fully-diluted share, for its first quarter of 1996 and net sales
of $997 million and net income of $188 million, or $0.87 per
fully-diluted share, for its second quarter of 1996.
The principal cause of the decline in net sales and net income
for the third quarter compared to the second quarter of 1996 was
the continued decline of average selling prices of semiconductor
memory products as a result of growth in worldwide memory supply
outpacing growth in demand. Average pricing for the 4 Meg DRAM,
the Company's primary product, has declined approximately 75%
from late calendar 1995 to the end of third quarter 1996. The
megabit volume of semiconductor memory produced in the third
quarter of 1996 was approximately 27% higher than in the second
quarter of 1996 and approximately double that of the third
quarter of fiscal 1995 primarily as a result of conversion to 8-
inch wafer processing and further shrinks of the 4 Meg DRAM.
While completion of the conversion of Fab I/II to 8-inch wafers
is dependent upon market conditions for semiconductor memory
products, substantial completion is anticipated prior to the end
of calendar 1996.
The Company is managing its transition from the relatively
mature 4 Meg DRAM to the 16 Meg DRAM to capitalize on the higher
gross margin of the 4 Meg devices. The transition to the 16 Meg
DRAM as the Company's primary memory device will be driven by
customer demand and overall industry conditions and is expected
to occur in the Fall of 1996 and could have a negative impact on
the Company's results of operations and cash flows.
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
--------------------------- --------------------------
1996 Change 1995 1996 Change 1995
--------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $771.0 1.3% $ 761.2 $2,953.4 53.4% $1,924.7
</TABLE>
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
---------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------ -------------- --------------
Net Sales % Net Sales % Net Sales % Net Sales %
------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Semiconductor
memory
products $416.3 54.0% $618.4 81.2% $1,931.7 65.4% $1,606.4 83.5%
Personal
computer
systems 280.3 36.4% 131.1 17.2% 779.4 26.4% 248.5 12.9%
Other 74.4 9.6% 11.7 1.6% 242.3 8.2% 69.8 3.6%
Total net
sales $771.0 100.0% $761.2 100.0% $2,953.4 100.0% $1,924.7 100.0%
</TABLE>
The value of the Company's semiconductor memory products
included in PC systems and other products is included under
"Semiconductor memory products". "Other" includes revenue from
contract manufacturing and module assembly services, construction
management services, government contracts, and licensing fees.
The slight increase in net sales in the third quarter of 1996
compared to the third quarter of 1995 reflects the higher level
of net sales in PC systems and other sales, which were offset by
the reduced sales of the semiconductor memory products. Megabit
production of semiconductor memory products increased 98%
comparing the third quarter of 1996 to the third quarter of 1995.
This increased production was offset by lower average selling
prices for such semiconductor memory products. Average selling
price for the Company's primary product, the 4 Meg DRAM,
decreased 61% for the third quarter of 1996 compared to the third
quarter of 1995, 60% compared to the first quarter of 1996, and
53% compared to the second quarter of 1996. Selling prices for
the Company's semiconductor memory products were substantially
lower in the month of May, 1996, compared to the average for the
third quarter of 1996. The 4 Meg DRAM comprised approximately
86% of net sales of semiconductor memory products in the third
quarter of 1996.
The volume of semiconductor memory produced in the third
quarter of 1996 increased 27% compared to the second quarter of
1996 principally as a result of the conversion of Fab III
production to 8-inch wafers. The increase in volume was
partially offset by inefficiencies encountered in the conversion
of Fab I/II to 8-inch wafers. 8-inch wafers have approximately
84% greater usable surface area than 6-inch wafers. Production
of semiconductor memory megabits was 97% higher for the first
nine months of 1996 compared to the first nine months of 1995 as
a result of the greater surface area on 8-inch wafers and a shift
to a further shrink of the 4 Meg DRAM.
Net sales of PC systems, excluding the value of the Company's
semiconductor memory included therein, increased to approximately
36% of the Company's total net sales for the third quarter of
1996 from approximately 17% in the third quarter of 1995. Net
sales of PC systems as a percentage of the Company's total net
sales were higher in 1996 primarily as a result of higher unit
sales of Micron brand desktop PC systems and lower average
selling prices on the Company's semiconductor memory products.
The Company also experienced an increase in sales of its notebook
products due primarily to the introduction in the third quarter
of 1996 of its Millennia Transport product offering. The increase
in unit sales of Micron brand PC systems was principally a result
of enhanced name recognition and market acceptance of such
systems, which the Company attributes to the receipt of a number
of awards from computer trade magazines relating to price and
performance characteristics of such systems and the Company's
service and support functions.
<PAGE>
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------- --------------------------
1996 Change 1995 1996 Change 1995
------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Cost of goods sold $558.0 56.2% $ 357.2 $1,648.2 94.1% $ 849.2
Gross margin % 27.6% 53.1% 44.2% 55.9%
</TABLE>
The Company's gross margin percentage was lower in the third
quarter of 1996 than in the third quarter of 1995 primarily as a
result of lower average selling prices on semiconductor memory
products and the effect of increased PC systems sales as a
percentage of total sales. PC systems sales have historically
had a lower gross margin percentage than the Company's
semiconductor memory products. The Company's gross margin
percentage on sales of semiconductor memory products for the
third quarter of 1996 was approximately 38% compared to
approximately 62% in both the third quarter of 1995 and the
second quarter of 1996.
The Company is managing its transition from the relatively
mature 4 Meg DRAM to the 16 Meg DRAM to capitalize on the higher
gross margin of the 4 Meg devices. The transition to the 16 Meg
DRAM as the Company's primary memory device will be driven by
customer demand and overall industry conditions and is expected
to occur in the Fall of 1996. The transition to the 16 Meg DRAM
as its principal memory product could have a negative impact on
the Company's results of operations and cash flows. During prior
periods of transition to new generation products, the Company's
gross margin percentages were adversely affected.
The Company's gross margin percentage on sales of PC systems
increased in the third quarter of 1996 compared to both the
second quarter of 1996 and the third quarter of 1995, primarily
as a result of more favorable prices for components and improved
inventory management. Many of the Company's competitors have
substantially greater resources and purchasing power relative to
those of the Company dedicated to PC operations. Although the
Company has begun to realize reduction in costs of components for
PC systems in recent periods, the Company's gross margin
percentage on sales of PC systems continues to be lower than
those of the Company's semiconductor memory products. Continuing
pressure on the gross margin for PC systems results from intense
competition in the PC industry and consumer expectations of more
powerful PC systems at lower prices. In the event that sales of
PC systems continue to increase as a percentage of total net
sales and/or average selling prices for semiconductor memory
products continue to decline, the Company's overall gross margin
percentage will be adversely affected.
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. Charges
for product and process technology remained relatively constant
as a percentage of net sales in the third quarter of 1996
compared to both the second quarter of 1996 and the third quarter
of 1995. Future product and process technology charges may
fluctuate in absolute dollars and as a percentage of net sales,
however, as a result of claims that may be asserted in the
future, and as a result of future license arrangements.
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------- ---------------------------
1996 Change 1995 1996 Change 1995
------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Selling, general,
and administrative $ 67.1 23.3% $ 54.4 $ 213.9 62.5% $ 131.6
as a % of net sales 8.7% 7.1% 7.2% 6.8%
</TABLE>
The higher level of selling, general, and administrative
expenses during the third quarter and first nine months of 1996
as compared to comparable periods of 1995 resulted primarily from
increased personnel costs, legal fees, depreciation charges, and
advertising costs associated with the administrative and
information systems support for the Company and the growth of its
subsidiaries. These higher costs were partially offset by a gain
during the third quarter of 1996 of approximately $12 million on
the sale of 6-inch manufacturing equipment as compared to a $3
million gain on the sale of assets in the third quarter of 1995.
<PAGE>
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------ --------------------------
1996 Change 1995 1996 Change 1995
------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Research and
development $51.2 52.4% $ 33.6 $ 145.8 62.9% $ 89.5
as a % of net sales 6.6% 4.4% 4.9% 4.7%
</TABLE>
Research and development expenses vary primarily with the
number of wafers and personnel dedicated to new product and
process development. Research and development efforts in the
third quarter of 1996 were focused primarily on further
development of .35, .30 and .25 micron technology to be used on
shrinks of the 16 Meg DRAM, 64 Meg DRAM and initial 256 Meg DRAM
products, design and development of non-volatile semiconductor
memory devices, synchronous SRAMs and future generation
technology. The Company expects research and development
expenses for fourth quarter 1996 to approximate those for third
quarter 1996.
<TABLE>
<CAPTION>
Third Quarter Nine Months Ended
------------------------- --------------------------
1996 Change 1995 1996 Change 1995
------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Income tax
provision $38.6 (70.8)% $ 132.2 $355.5 5.2% $ 337.8
</TABLE>
The estimated effective income tax rate for fiscal year 1996 of
approximately 38% and the effective income tax rate of 37.5% in
fiscal year 1995 principally reflect the statutory federal
corporate income tax rate and the net effect of state taxation.
Liquidity and Capital Resources
The Company's principal sources of liquidity during the first
nine months of 1996 were cash flows from operations of $951
million, equipment financing of $374 million, and net borrowings
under the Company's bank credit agreement of $200 million. The
principal uses of funds in the first nine months of 1996 were
$1,276 million for property, plant, and equipment, and $217
million for repayments of equipment contracts and long-term debt.
The Company had cash and liquid investments of $400 million as of
May 30, 1996, which includes the proceeds of $200 million on the
Company's revolving credit facility. Excluding borrowings under
the credit facility, cash and liquid investments decreased $356
million from the $556 million held at August 31, 1995.
During the third quarter of 1996, the Company replaced its
temporary $250 million credit facility with a $500 million
revolving credit agreement expiring in May 1999. As of May 30,
1996, the Company had borrowings outstanding under the facility
of $200 million. The agreement contains certain restrictive
covenants and conditions including an Earnings Before Interest,
Taxes, Depreciation and Amortization covenant for which the
Company has obtained a 60-day waiver. There can be no assurance
that the Company will be able to negotiate amended terms,
including covenants, acceptable to the Company or to borrow the
full amount of the credit facility. Depending on overall market
conditions, the Company may pursue debt or equity financing. The
availability of financing on terms acceptable to the Company is
required for continuing the Company's capacity enhancement
program and to preclude changes in operations which could have
the effect of limiting production capacity.
The Company's ability to invest in its capacity enhancement
program has been largely dependent on the Company's ability to
generate cash flows from operations. Cash flow from operations
for the third quarter of 1996 was lower than cash flow from
operations for the second quarter of 1996 primarily as a result
of lower overall average selling prices for semiconductor memory
products. Cash flow from operations depends significantly on
average selling prices and variable cost per part for the
Company's semiconductor memory products. The semiconductor
memory industry is experiencing, and may continue to experience,
downward pressure on selling prices for DRAM products. Future
declines in selling prices for DRAM products will further erode
the Company's ability to fund capital expenditures. Should the
Company be unable to decrease costs per part for semiconductor
memory products at a rate equal to the rate of decline in selling
prices for such products, the Company's results of operations and
cash flows will be adversely impacted.
<PAGE>
Completion of the Company's semiconductor memory manufacturing
facility in Lehi, Utah, is on indefinite hold except for
completion of the exterior of the facility which is expected in
the Fall of 1996. The Company's conversion of Fab I/II to
process 8-inch wafers is currently proceeding. The Company
expects capital expenditures in the fourth quarter of 1996 to be
between $200 million and $300 million, primarily to complete the
conversion of Fab I/II to 8-inch wafers. Additional expenditures
will be required to achieve full and efficient utilization of
recent capacity additions and all capital expenditures are
dependent upon market conditions which the Company cannot
predict.
The Company paid a $0.05 per share cash dividend on May 31,
1996, aggregating approximately $10 million to shareholders of
record on May 9, 1996.
As of May 30, 1996, the Company had contractual commitments and
order cancellation fees extending through calendar 1998 of
approximately $371 million for equipment purchases and
approximately $20 million for the construction of facilities.
Should the Company elect to cancel its outstanding equipment
purchase commitments, the Company could be subject to
cancellation fees. The Company believes continuing investments
in manufacturing technology, facilities and equipment, research
and development, and product and process technology are necessary
to support growth, achieve operating efficiencies, and enhance
product quality. However, due to current market conditions the
Company is unlikely to have sufficient internal sources of
liquidity to increase or enhance production capacity at its
existing facilities or to pursue development of new product and
process technologies at a rate commensurate to the Company's
competition. The Company's sources of liquidity will be used to
complete the conversion of Fab I/II to 8-inch wafers and sustain
production capacity.
Certain Factors
The following are important factors which could cause actual
results or events to differ materially from those contained in
any forward looking statements made by or on behalf of the
Company.
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. These
characteristics historically have made the semiconductor industry
highly cyclical, particularly in the market for DRAMs, which are
the Company's primary products.
DRAMs are the most widely used semiconductor memory
component in most PC systems. Approximately 62% of the Company's
sales of semiconductor memory products during the third quarter
of 1996 were directly into the personal computer or peripheral
markets. Should demand for PC systems decrease, or fail to
increase in accordance with industry expectations, demand for
semiconductor memory would likely decrease, placing further
downward pressure on selling prices for the Company's
semiconductor memory products. In recent periods the average
selling prices of the Company's semiconductor memory products
have decreased significantly. Average pricing for the 4 Meg
DRAM, the Company's primary product, has declined approximately
75% from late calendar 1995 to the end of the third quarter of
1996. The Company is unable to predict changes in industry
supply, major customer inventory management strategies, or end
user demand, which are significant factors influencing pricing
for the Company's semiconductor memory products.
The selling prices for the Company's semiconductor memory
products fluctuate significantly with changes in the balance of
supply and demand for these commodity products. Although
recently some of the Company's competitors have announced
adjustments to the rate at which they will implement capacity
expansion programs, many of the Company's competitors have
already added significant capacity for the production of
semiconductor memory components. The Company is unable to
accurately estimate the amount of world-wide production capacity.
Current market conditions indicate that growth in worldwide
supply is outpacing growth in demand. The Company has taken
measures to manage costs under these conditions, including
deferral of capacity expansion plans, but there can be no
assurance that these measures will be sufficient to sustain the
Company's future profitability. The amount of capacity to be
placed into production and future yield improvements by the
Company's competitors could dramatically increase world-wide
supply of semiconductor memory and further increase downward
pressure on pricing.
<PAGE>
The manufacture of the Company's semiconductor memory 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. The Company has completed the
conversion of Fab III to process 8-inch wafers and is continuing
the conversion of Fab I/II. While completion of the conversion
of Fab I/II is dependent upon future market conditions for
semiconductor memory products, substantial completion is
anticipated prior to the end of calendar 1996. There can be no
assurance that the Company will not experience an interruption of
its manufacturing process or experience decreases in
manufacturing yields as a result of the conversion.
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, such as the 16 Meg DRAM, to commercial
volumes. The Company is continuing the transition of its primary
semiconductor memory products from the relatively mature 4 Meg
DRAM to the 16 Meg DRAM. During prior periods of transition to
new generation products, the Company's gross margins were
adversely affected and there can be no assurance that they will
not be adversely affected as a result of the transition to the 16
Meg DRAM. The Company's ability to reduce costs per part of its
semiconductor memory products is largely dependent on its ability
to design and develop new generation products and shrink versions
of existing products and its ability to ramp such products at
acceptable rates to acceptable yields, of which there can be no
assurance. Should the Company be unable to decrease costs per
part for semiconductor memory products at a rate equal to the
rate of decline in selling prices for such products, the
Company's results of operations and cash flows will be adversely
impacted.
The Company's cash flow from operations depends significantly
on average selling prices and costs per part for the Company's
semiconductor memory products. Historically, the Company has
reinvested substantially all cash flows from operations in
capacity expansion and improvement programs. Market conditions
for the Company's semiconductor memory products led to the
decision to place the Lehi, Utah manufacturing complex on
indefinite hold. Decreases in average selling prices have
required further cutbacks in capital expenditures and may
necessitate changes to operations which would have the effect of
limiting production capacity. There can be no assurance that the
Company will be able to secure additional sources of financing on
terms acceptable to the
Company.
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. The Company had various product and
process technology license agreements expire in calendar 1995 and
is not able to predict whether these license agreements can be
renewed on terms acceptable to the Company.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) The following are filed as a part of this report:
Exhibit Page
Number Description of Exhibit Number
------- ------------------------------------------ ------
10.114(*) Revolving Credit Agreement dated as of P
May 14, 1996 among the Registrant and
several financial institutions
11 Computation of per share earnings for the 16-17
quarters and nine month periods ended
May 30, 1996 and June 1, 1995
(b) The registrant did not file any reports on Form 8-K during the quarter
ended May 30, 1996.
* Confidential treatment requested
15
<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: June 27, 1996 /s/ Wilbur G. Stover, Jr.
----------------------------------
Wilbur G. Stover, Jr. Vice
President of Finance, and
Chief Financial Officer (Principal
Financial and Accounting Officer)
15
Exhibit 11
MICRON TECHNOLOGY, INC.
Computation of Per Share Earnings
(Amounts in millions except for per share amounts)
<TABLE>
<CAPTION>
May 30, June 1,
For the quarter ended 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Weighted average shares outstanding 208.2 205.6
Net effect of dilutive stock options 6.3 9.5
------ ------
Total shares 214.5 215.1
====== ======
Net income $ 58.2 $220.2
====== ======
Primary earnings per share $0.27 $ 1.02
===== ======
FULLY DILUTED
Weighted average shares outstanding 208.2 205.6
Stock options using greater of average or
ending market price 6.3 10.2
------ ------
Total shares 214.5 215.8
====== ======
Net income $ 58.2 $220.2
====== ======
Fully diluted earnings per share $0.27 $1.02
====== =====
</TABLE>
Exhibit 11
MICRON TECHNOLOGY, INC.
Computation of Per Share Earnings
(Amounts in millions except for per share amounts)
<TABLE>
<CAPTION>
May 30, June 1,
For the nine months ended 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Weighted average shares outstanding 207.4 204.8
Stock options using average market price 8.5 7.9
------ ------
Total shares 215.9 212.7
====== ======
Net income $574.9 $563.0
====== ======
Primary earnings per share $2.66 $2.65
===== =====
FULLY DILUTED
Weighted average shares outstanding 207.4 204.8
Stock options using greater of average or
ending market price 8.5 9.9
------ ------
Total shares 215.9 214.7
====== ======
Net income $574.9 $563.0
====== ======
Fully diluted earnings per share $2.66 $2.62
===== =====
</TABLE>
18
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the accompanying financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-29-1996
<PERIOD-END> May-30-1996
<CASH> 393
<SECURITIES> 7
<RECEIVABLES> 344
<ALLOWANCES> 45
<INVENTORY> 294
<CURRENT-ASSETS> 1,097
<PP&E> 3,364
<DEPRECIATION> 765
<TOTAL-ASSETS> 3,799
<CURRENT-LIABILITIES> 832
<BONDS> (LTD) 213
0
0
<COMMON> 21
<OTHER-SE> 2,455
<TOTAL-LIABILITY-AND-EQUITY> 3,799
<SALES> 2,953
<TOTAL-REVENUES> 2,953
<CGS> 1,648
<TOTAL-COSTS> 2,038
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15)
<INCOME-PRETAX> 930
<INCOME-TAX> 356
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 575
<EPS-PRIMARY> 2.66
<EPS-DILUTED> 2.66
</TABLE>
