FORM 10-Q/A
Amendment No. 1
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 June 1, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17932
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Micron Electronics, Inc.
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(Exact name as specified in charter)
Minnesota 41-1404301
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 E. Karcher Road, Nampa, Idaho 83687
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (208) 465-3434
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Indicate by check mark whether the registrant (1) has filed all
reports required to the 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 16, 1995 was 91,421,615.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MICRON ELECTRONICS, INC.
Balance Sheets
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 1, September 1,
As of 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and equivalents $ 37,179 $ 35,048
Liquid investments - 2,181
Receivables 97,364 50,797
Inventories 97,778 31,110
Deferred income taxes 13,572 1,156
Other current assets 1,911 588
-------- --------
Total current assets 247,804 120,880
Property, plant and equipment, net 51,515 30,746
Goodwill, net 13,904 -
Other assets 6,142 138
-------- --------
Total assets $319,365 $151,764
======== ========
Liabilities and shareholders' equity
Accounts payable and accrued expenses $145,484 $ 72,290
Accrued licenses and royalties 13,613 1,661
Current portion of long-term debt 1,021 1,023
-------- --------
Total current liabilities 160,118 74,974
Long-term debt 6,056 6,822
Deferred income taxes - 1,081
Other liabilities 852 718
-------- --------
Total liabilities 167,026 83,595
Commitments and contingencies
Common stock 914 550
Additional paid-in capital 58,239 14,662
Retained earnings 93,186 52,957
-------- --------
Total shareholders' equity 152,339 68,169
-------- --------
Total liabilities and shareholders'
equity $319,365 $151,764
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
MICRON ELECTRONICS, INC.
Statements of Operations
(Amounts in thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the For the nine
quarter ended months ended
------------------ ------------------
June 1, June 2, June 1, June 2,
1995 1994 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $271,477 $106,249 $596,031 $278,634
Cost of goods sold 221,695 83,494 476,732 220,475
-------- -------- -------- --------
Gross margin 49,782 22,755 119,299 58,159
Selling, general and
administrative 23,225 7,051 46,468 16,943
Research and development 585 155 1,090 398
-------- -------- -------- --------
Operating income 25,972 15,549 71,741 40,818
Interest income, net 620 168 1,199 365
-------- -------- -------- --------
Income before income taxes 26,592 15,717 72,940 41,183
Income tax provision 10,987 6,220 28,811 16,056
-------- -------- -------- --------
Net income $ 15,605 $ 9,497 $ 44,129 $ 25,127
======== ======== ======== ========
Earnings per share $ 0.17 $ 0.11 $ 0.51 $ 0.31
Number of shares used in per
share calculations 89,669 83,587 86,581 80,758
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
MICRON ELECTRONICS, INC.
Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
-------------------------
June 1, June 2,
1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 44,129 $ 25,127
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7,317 3,116
Amortization 679 25
Change in assets and liabilities, net
of effects of merger transaction:
Increase in receivables (24,669) (17,060)
Increase in inventories (39,121) (12,872)
Increase in accounts payable and
accrued expenses 34,786 16,238
Increase (decrease) in deferred
income taxes (3,965) 569
Other (1,453) 148
-------- --------
Net cash provided by operating activities 17,703 15,291
Cash flows from investing activities
Property, plant and equipment expenditures (29,075) (12,268)
Proceeds from sale of equipment 221 468
Purchase of investments and securities (3,165) -
Proceeds from sale and maturity of investments 5,400 -
Cash acquired in merger transaction 14,060 -
Other (427) (36)
-------- --------
Net cash used for investing activities (12,986) (11,836)
======== ========
Cash flows from financing activities
Repayments of debt (767) (1,413)
Proceeds from issuance of common stock 344 4,217
Stock repurchases (882) (1)
Other (1,281) -
-------- --------
Net cash (used for) provided by financing
activities (2,586) 2,803
-------- --------
Net increase in cash and equivalents 2,131 6,258
Cash and equivalents at beginning of period 35,048 21,684
-------- --------
Cash and equivalents at end of period $ 37,179 $ 27,942
======== ========
Supplemental disclosures
Noncash investing and financing activities:
Assets acquired, net of cash and
liabilities assumed in merger
transaction $ 25,998 $ -
Treasury stock retired 882 -
Assets acquired in exchange for debt - 186
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MICRON ELECTRONICS, INC.
Notes to Financial Statements
(Tabular dollar amounts in thousands, except for per share amounts)
1. Unaudited interim financial statements
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting solely of normal recurring
adjustments, necessary to present fairly the financial position of Micron
Electronics, Inc. and subsidiaries (the "Company") and their results of
operations and cash flows.
The accompanying unaudited financial statements and notes should be
read in conjunction with the audited financial statements and notes
thereto included in the ZEOS International, Ltd. Registration Statement
on Form S-4 and Joint Proxy Statement dated March 13, 1995 and the ZEOS
International, Ltd. Annual Report on Form 10-K for the year ended
December 31, 1994.
2. The merger
A. On April 7, 1995, Micron Computer, Inc. ("MCI") and Micron Custom
Manufacturing Services, Inc. ("MCMS"), Subsidiaries of Micron Technology,
Inc. ("MTI"), merged with and into ZEOS International, Ltd. ("ZEOS").
Pursuant to the terms of the merger, ZEOS issued approximately 82.5
million shares of its common stock in exchange for all of the outstanding
shares of MCI and MCMS and the name of the surviving corporation was
changed to Micron Electronics, Inc. ("MEI"). The merger resulted in a
change of control of approximately 89% of ZEOS wherein, assuming exercise
of all outstanding options, (a) MTI owns an approximate 79% interest in
ZEOS, and (b) the other shareholders of MCI and MCMS own an approximate
10% interest in ZEOS. The merger has been accounted for as a purchase of
ZEOS by MCI and MCMS. A new basis of accounting was established for the
assets and liabilities of ZEOS to the extent of the change of control.
The new basis reflects the allocation of the approximate $39.1 million
purchase price to the ZEOS assets and liabilities on the basis of their
fair values. Goodwill of approximately $14.6 million was recorded to the
extent the purchase price exceeded the fair value of the identifiable net
assets for which a change of control occurred. Goodwill is amortized on
a straight line basis over three years.
MEI's fiscal year is a 52 or 53 week period ending on the Thursday
closest to August 31, which is the fiscal year of the Micron entities.
Subsequent to the merger, the financial statements of MEI reflect the
combined financial position and results of operations of ZEOS, MCI and
MCMS based on the new basis of accounting for ZEOS and the historical
cost basis of MCI and MCMS. Prior to April 7, 1995, the financial
position and results of operations of MEI include only the combined
financial position and results of operations of MCI and MCMS.
The following pro forma financial information presents the results of
operations of MEI for the quarter and nine month periods ended June 1,
1995 and June 2, 1994, as if the merger had occurred at the beginning of
the periods, after giving effect to pro forma adjustments, including
amortization of goodwill, certain product and process technology costs
and related income tax effects.
<TABLE>
<CAPTION>
Quarter ended Nine Months ended
------------------- -------------------
June 1, June 2, June 1, June 2,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $307,909 $170,886 $785,050 $440,891
Gross margin 55,325 23,658 145,347 69,365
Net income 16,690 4,099 45,001 14,525
Earnings per share 0.18 0.04 0.48 0.16
</TABLE>
The pro forma financial information is provided for illustrative
purposes and is not necessarily indicative of the combined results of
operations that would have actually occurred for such periods nor does
it represent a forecast of results of operations for any future periods.
4
<PAGE>
<TABLE>
<CAPTION>
3. Receivables June 1, September 1,
1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Trade receivables $102,614 $ 51,715
Other 1,381 1,507
Allowance for doubtful accounts (4,151) (1,760)
Allowance for returns and discounts (2,480) (665)
-------- --------
$ 97,364 $ 50,797
======== ========
4. Inventories June 1, September 1,
1995 1994
- ------------------------------------------------------------------------
Finished goods $ 12,547 $ 3,464
Work in process 10,909 4,333
Raw materials and supplies 74,322 23,313
-------- --------
$ 97,778 $ 31,110
======== ========
5. Property, plant and equipment, net June 1, September 1,
1995 1994
- ------------------------------------------------------------------------
Land $ 987 $ 987
Buildings 15,460 9,202
Equipment 65,155 33,024
Construction in progress 3,401 3,161
-------- --------
85,003 46,374
Less accumulated depreciation (33,488) (15,628)
-------- --------
$ 51,515 $ 30,746
======== ========
6. Accounts payable and accrued expense June 1, September 1,
1995 1994
- ------------------------------------------------------------------------
Accounts payable $105,265 $ 59,800
Salaries, wages and benefits 20,080 4,335
Other 20,139 8,155
-------- --------
$145,484 $ 72,290
======== ========
5
<PAGE>
7. Shareholders' equity June 1, September 1,
1995 1994
- ------------------------------------------------------------------------
Common stock:
MEI common stock, $.01 par value,
150,000,000 shares authorized,
91,421,615 shares issued and
outstanding $ 914 $ -
MCI common stock, no par value:
Class A - 7,900,000 shares
authorized, 987,500 shares
issued and outstanding - 79
Class B - 2,100,000 shares
authorized, 469,940 shares
issued and outstanding - 286
MCMS common stock, $.10 par value,
10,000,000 shares authorized,
1,849,481 shares issued and
outstanding - 185
-------- --------
$ 914 $ 550
======== ========
Additional paid-in-capital:
MEI $ 58,239 $ -
MCI - 6
MCMS - 14,656
-------- --------
$ 58,239 $ 14,662
======== ========
Retained earnings:
MEI $ 93,186 $ -
MCI - 20,959
MCMS - 31,998
-------- --------
$ 93,186 $ 52,957
======== ========
</TABLE>
8. Income taxes
During the third quarter of fiscal 1995, the Company changed its
estimate of the effective tax rate for fiscal 1995 to 39.5%. The
effective income tax rate for the nine months ended June 1, 1995 and June
2, 1994 reflects primarily the statutory federal income tax rate and the
net effect of state income taxes.
9. Earnings per share
Earnings per share is computed using the weighted average number of
common and common equivalent shares outstanding, adjusted to give effect
to the merger. Common equivalent shares result from the assumed exercise
of outstanding stock options and affect earnings per share when they have
a dilutive effect.
10. Commitments
As of June 1, 1995, the Company had commitments of approximately $6.3
million for equipment purchases and $3.6 million for the construction of
a building.
6
<PAGE>
11. Contingencies
Periodically, MEI is made aware that technology used by MEI may
infringe on product or process technology rights held by others. MEI 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 are adequate and cannot estimate the
range of additional possible loss, if any, from resolution of these
uncertainties. Resolution of whether MEI has infringed on valid rights
held by others may have a material adverse effect on MEI's financial
position or results of operations, and may require material changes in
production processes and products.
MEI is currently 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 MEI's financial position or results of operations.
7
<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 Electronics, Inc.
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(Registrant)
Dated: October 18, 1995 /s/ T. Erik Oaas
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T. Erik Oaas, Vice President, Finance, and
Chief Financial Officer (Principal
Financial and Accounting Officer)
16
Exhibit 11
MICRON ELECTRONICS, INC.
Computation of Per Share Earnings
(Amounts in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Quarter ended Nine Months ended
------------------- -------------------
June 1, June 2, June 1, June 2,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares
outstanding 88,521 83,587 85,469 80,758
Stock options using average
market price 1,148 - 1,112 -
-------- -------- -------- --------
Total shares 89,669 83,587 86,581 80,758
======== ======== ======== ========
Net income $ 15,605 $ 9,497 $ 44,129 $ 25,127
Per share amount $ 0.17 $ 0.11 $ 0.51 $ 0.31
FULLY DILUTED
Weighted average shares
outstanding 88,521 83,587 85,469 80,758
Stock options using
greater of average or
ending market price 1,157 - 1,120 -
-------- -------- -------- --------
Total shares 89,678 83,587 86,589 80,758
======== ======== ======== ========
Net income $ 15,605 $ 9,497 $ 44,129 $ 25,127
Per share amount $ 0.17 $ 0.11 $ 0.51 $ 0.31
</TABLE>
17