SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 26, 1998
MICRON ELECTRONICS, INC.
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(Exact name of registrant as Specified in Its Charter)
Minnesota
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(State or other jurisdiction of incorporation)
0-17932 41-1404301
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(Commission File No) (IRS Employer
Identification Number)
900 E. Karcher Road
Nampa, Idaho 83687
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(Address of principal executive offices including zip code)
(208) 898-3434
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On February 26, 1998, the recapitalization of MCMS,
Inc. ("MCMS"), formerly Micron Custom Manufacturing Services,
Inc. and formerly a wholly-owned indirect subsidiary of the
Registrant, pursuant to the Amended and Restated Recapitalization
Agreement (the "Recapitalization Agreement") by and among Micron
Electronics, Inc. ("Registrant" or "Micron"), MCMS, MEI
California, Inc. ("MEIC") and Cornerstone Equity Investors IV,
L.P. ("Cornerstone"), dated as of February 1, 1998, as amended by
Amendment No. 1, dated as of February 26, 1998, by and among
Micron, MEIC, MCMS and Cornerstone ("Amendment No. 1"), was
consummated. The descriptions herein of the Recapitalization
Agreement and Amendment No. 1 are qualified in their entirety
by reference to Exhibits 2.3 and 2.4, respectively.
Pursuant to the Recapitalization Agreement, Cornerstone,
certain other investors and certain members of MCMS management,
including Robert F. Subia who was formerly a director of Micron,
acquired 90% of the equity in MCMS. In exchange for the 90%
interest in MCMS, Micron received $249.2 million in cash (the
"Purchase Price"). The Purchase Price was determined pursuant to
arm's length negotiations between Micron and Cornerstone.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On February 26, 1998, Micron Electronics, Inc. (the
"Company") completed the sale of 90% of its interest in MCMS,
Inc. ("MCMS"), formerly Micron Custom Manufacturing Services,
Inc. and formerly a wholly-owned subsidiary of the Company, in a
recapitalization transaction (the "Recapitalization"). Pursuant
to the Recapitalization, Cornerstone Equity Investors IV, L.P.
("Cornerstone"), certain other investors and certain members of
MCMS management, acquired the 90% interest in the equity of MCMS.
Net proceeds of $242.9 million were received by the Company
pursuant to the Recapitalization which is net of $6.3 million
of estimated transaction costs.
The following unaudited pro forma condensed financial
information ("Pro Forma Financial Statements") present the pro
forma condensed financial position of the Company as of November
27, 1997 and the pro forma results of operations of the Company
for the three months ended November 27, 1997 and for the fiscal
year ended August 28, 1997. The pro forma condensed balance sheet
of the Company as of November 27, 1997 includes the historical
financial information of the Company and MCMS and gives effect to
the Recapitalization as if it occurred on that date. The pro forma
condensed statement of operations of the Company for the three month
period and fiscal year ended November 27, 1997 and August 28, 1997,
respectively, give effect to the Recapitalization as if it
occurred at the beginning of each such period.
The pro forma adjustments have been determined based on available
information, some of which is preliminary, and actual results may
differ. The Pro Forma Financial Statements are provided for
illustrative purposes only and are not necessarily indicative of
the financial position or results of operations that would have
been reported had the Recapitalization occurred on the dates
indicated, nor do they represent a forecast of the financial
position or results of operations of the Company at any future
date or for any future period.
The Pro Forma Financial Statements should be read in conjunction
with the Company's audited consolidated financial statements and
notes thereto for its fiscal year ended August 28, 1997 included
in its Annual Report on Form 10-K and its interim consolidated
financial statements and notes thereto for the three month period
ended November 27, 1997 in its Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission.
<PAGE>
MICRON ELECTRONICS, INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
As of November 27, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
- ---------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 157,134 $ 229,607 (A)(B) $ 386,741
Liquid investments 10,051 - 10,051
Receivables 257,173 (43,096)(A) 214,077
Inventories 130,654 (23,384)(A) 107,270
Deferred income taxes 27,560 (1,906)(A) 25,654
Other current assets 3,674 (295)(A) 3,379
--------- --------- ---------
Total current assets 586,246 160,926 (A) 747,172
Property, plant and
equipment, net 201,051 (61,257)(A) 139,794
Other assets 3,811 (56)(A) 3,755
--------- --------- ---------
Total assets $ 791,108 $ 99,613 $ 890,721
========= ========= =========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and
accrued expenses $ 338,284 $ 8,376 (A)(B) $ 346,660
Accrued product and
process technology 32,511 - 32,511
Current debt 18,815 (1,279)(A) 17,536
--------- --------- ---------
Total current
liabilities 389,610 7,097 396,707
Long-term debt 18,949 (312)(A) 18,637
Deferred income taxes 3,149 (3,538)(A) (389)
Other liabilities 13,992 (662)(A) 13,330
--------- --------- ---------
Total liabilities 425,700 2,585 428,285
--------- --------- ---------
Shareholders' equity:
Common stock 956 - 956
Additional capital 120,140 - 120,140
Retained earnings 246,190 94,514(B) 340,704
Cumulative translation
adjustment (1,878) 2,514(A) 636
--------- --------- ---------
Total shareholders'
equity 365,408 97,028 462,436
--------- --------- ---------
Total liabilities and
shareholders' equity $ 791,108 $ 99,613 $ 890,721
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the Pro Forma
Financial Statements.
<PAGE>
MICRON ELECTRONICS, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
For the fiscal year ended August 28, 1997
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
- -----------------------------------------------------------------
(C)
<S> <C> <C> <C>
Net sales $1,955,783 $ (289,756) $1,666,027
Cost of goods sold 1,618,037 (256,359) 1,361,678
---------- ---------- ----------
Gross margin 337,746 (33,397) 304,349
Selling, general and
administrative 191,667 (12,422) 179,245
Research and development 9,621 (138) 9,483
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Operating income 136,458 (20,837) 115,621
Interest income, net 7,896 (380) 7,516
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Income before taxes 144,354 (21,217) 123,137
Income tax provision 57,092 (8,465) 48,627
---------- ---------- ----------
Net income $ 87,262 $ (12,752) $ 74,510
========== ========== ==========
Earnings per share $ 0.92 $ 0.79
Number of shares used
in per share calculation 94,621 94,621
</TABLE>
The accompanying notes are an integral part of the Pro Forma
Financial Statements.
<PAGE>
MICRON ELECTRONICS, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
For the three months ended November 27, 1997
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
- -----------------------------------------------------------------
(C)
<S> <C> <C> <C>
Net sales $ 558,890 $ (70,703) $ 488,187
Cost of goods sold 481,676 (60,612) 421,064
--------- --------- ---------
Gross margin 77,214 (10,091) 67,123
Selling, general and
administrative 74,065 (3,067) 70,998
Research and development 3,582 (54) 3,528
--------- --------- ---------
Operating income (433) (6,970) (7,403)
Interest income, net 2,194 (134) 2,060
--------- --------- ---------
Income before taxes 1,761 7,104 (5,343)
Income tax provision 696 2,629 (B) (1,933)
--------- --------- ---------
Net income $ 1,065 $ 4,475 $ (3,410)
========= ========= =========
Earnings per share $ 0.01 $ (0.04)
Number of shares used
in per share calculation 95,971 95,971
</TABLE>
The accompanying notes are an integral part of the Pro Forma
Financial Statements.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
A. The Pro Forma Balance Sheet reflects the disposition of the
net assets of MCMS as if the recapitalization had occurred on
November 27, 1997.
B. The Pro Forma Balance Sheet reflects the proceeds from the
Recapitalization transaction and resultant gain as follows (in
thousands):
Proceeds from sale $249,200
Transaction costs (6,331)
--------
Net proceeds 242,869
Net assets of MCMS (86,647)
--------
Gain on sale 156,222
Income tax expense (61,708)
--------
Gain, net of tax $ 94,514
========
The gain realized by the Company from the recapitalization
transaction has been excluded from the Pro Forma Statements of
Operations.
C. The Pro Forma Statements of Operations reflect the
elimination of MCMS' net revenues and costs, including the
provision for income taxes. Intercompany transactions with
MCMS were not eliminated in the Pro Forma Statements of
Operations.
<PAGE>
(c) Exhibits.
2.3 Amended and Restated Recapitalization Agreement
dated February 1, 1998, by and among Micron, MCMS, MEIC. and
Cornerstone. Incorporated by reference to Exhibit 2.3
Registrant's Form 8-K filed on February 19, 1998.
2.4 Amendment 1 to Amended and Restated
Recapitalization Agreement dated February 26, 1998 by and among
Micron, MCMS, MEIC and Cornerstone.
<PAGE>
SIGNATURES
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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 hereunto duly authorized.
MICRON ELECTRONICS, INC.
Date: March 13, 1998 By /s/ T. Erik Oaas
----------------------------------
T. Erik Oaas
Executive Vice President, Finance
and Chief Financial Officer
EXHIBIT 2.4
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
THIS AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
RECAPITALIZATION AGREEMENT (this "Amendment No. 1") is dated as
of February 26, 1998, and is entered into by and among Micron
Electronics, Inc., a Minnesota corporation ("MEI"), MEI
California, Inc., a California corporation and a wholly owned
subsidiary of MEI ("Sub"), MCMS, Inc. (formerly known as Micron
Custom Manufacturing Services, Inc.), an Idaho corporation and a
wholly-owned subsidiary of Sub (the "Company") and Cornerstone
Equity Investors IV L.P., a Delaware limited partnership
("Investor").
WHEREAS, the parties hereto have entered into that
certain Amended and Restated Recapitalization Agreement, dated as
of February 1, 1998 (the "Original Agreement") (it being
understood that capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the
Original Agreement);
WHEREAS, the parties hereto desire to amend certain
provisions of the Original Agreement;
NOW, THEREFORE, the parties hereto, intending to be
legally bound, agree as follows:
1. The fourth whereas clause of the Original
Agreement is hereby amended and restated to read in its entirety
as follows:
"WHEREAS, Investor will contribute $61.2 million
(the "Purchase Price") to the Company in exchange for
2,761,176 shares of Class A Common Stock of the
Company, 863,824 shares of Class B Common Stock of the
Company, 875,000 shares of Class C Common Stock of the
Company, 2,761,176 shares of Series A Convertible
Preferred Stock of the Company, 863,824 shares of
Series B Convertible Preferred Stock of the Company and
875,000 shares of Series C Convertible Preferred Stock
of the Company (the Class A Common Stock, Class B
Common Stock, Class C Common Stock, Series A
Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred
Stock are referred to herein as the "Recapitalized
Securities") which Recapitalized Securities shall have
the terms set forth in the Amended Charter (as herein
defined) (collectively, the "Purchase Shares") (such
purchase, the "Stock Purchase");"
2. The sixth whereas clause of the Original Agreement
is hereby amended and restated to read in its entirety:
"WHEREAS, the parties hereto desire that,
immediately after the Stock Purchase and the BTAB
Financing, the Company shall redeem from Sub 1,000
shares (such number to be appropriately adjusted for
any stock split or stock dividend of the Company Common
Stock after the date hereof and prior to the Closing
Date) (the "Redemption Shares") of Company Common Stock
in exchange for the Redemption Price (as herein
defined) (such redemption, the "Stock Redemption") and
that immediately after Closing and payment of the
Redemption Price, Sub shall own 10% of the outstanding
Recapitalized Securities;"
3. Section 8.3 of the Original Agreement is hereby
amended and restated to read in its entirety as follows:
"Section 8.3 Stock Redemption. Pursuant to the
authorization contemplated by Section 8.1 hereof and
subject to the terms and conditions set forth in this
Agreement, the parties hereto agree that Sub shall
offer for redemption, and the Company shall redeem the
Redemption Shares. In consideration for the Redemption
Shares, at the Closing, Sub will receive from the
Company (a) $249,200,000, (b) 500,000 shares of the
Company's Class A Common Stock having the terms set
forth in the Amended Charter and (c) 500,000 shares of
the Company' Series A Convertible Preferred Stock
having the terms set forth in the Amended Charter (the
items referred to in (b) and (c) above are referred to
herein collectively as the "Recapitalized Shares" and
the items referred to in (a), (b) and (c) above are
referred to herein collectively as the "Redemption
Price")."
4. Section 8.4(b)(4) is hereby amended and restated
to read in its entirety as follows:
"(4) Deliveries by Company to Sub. The Company
shall pay to Sub the cash Redemption Price by wire
transfer of immediately available funds to one or more
accounts as designated by Sub and shall deliver to Sub
certificates evidencing the Recapitalized Shares."
5. Except as expressly set forth herein, the terms of
the Original Agreement shall remain in full force and effect.
6. This Amendment No. 1 may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for
purposes of this Amendment No. 1, provided receipt of copies of
such counterparts is confirmed.
IN WITNESS WHEREOF, this Amendment No. 1 to the Amended
and Restated Recapitalization Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
MCMS, Inc.
(formerly known as Micron Custom
Manufacturing Services, Inc.)
By: /s/ Robert F. Subia
--------------------------------
Name: Robert F. Subia
Title: President and Chief
Executive Officer
MICRON ELECTRONICS, INC.
By: /s/ T. Erik Oaas
--------------------------------
Name: T. Erik Oaas
Title: Executive Vice President
MEI CALIFORNIA, INC.
By: /s/ T. Erik Oaas
--------------------------------
Name: T. Erik Oaas
Title: President
CORNERSTONE EQUITY INVESTORS IV, L.P.
By:Cornerstone IV, L.L.C.,
as General Partner
By: /s/ Michael Najjar
--------------------------------
Name: Michael Najjar
Title: Managing Director
