FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended August 31, 1995
----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
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
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.10 per share New York Stock Exchange
- -------------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------------------------------------------------
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant, based upon the closing price of such stock on August 31, 1995,
as reported by the New York Stock Exchange, was approximately $11.1 billion.
Shares of Common Stock held by each officer and director and by each person
who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
The number of outstanding shares of the registrant's Common Stock on
August 31, 1995 was 206,437,704.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrant's 1995 Annual Meeting of
Shareholders to be held on January 29, 1996, are incorporated by reference to
Part III of this Annual Report on Form 10-K.
PART I
Item 1. Business
General
Micron Technology, Inc. ("MTI") and its subsidiaries (hereinafter
referred to collectively as "Micron" or the "Company") principally
design, develop, manufacture and market semiconductor memory products,
personal computers ("PCs") and custom complex printed circuit board
assemblies. During fiscal 1995, the Company consolidated the
operations of Micron Semiconductor, Inc. and Micron Systems Integration,
Inc., into MTI. In addition, two other MTI subsidiaries, Micron
Computer, Inc., and Micron Custom Manufacturing Services Inc., were
merged on April 7, 1995, with and into ZEOS International, Ltd.,
a personal computer manufacturer. The newly merged company was
renamed Micron Electronics, Inc. ("MEI"), and is a majority owned
subsidiary of MTI.
Micron's semiconductor operations focus on the design, manufacture,
and marketing of semiconductor memory components primarily for use in
computers. The Company's primary semiconductor products are Dynamic
Random Access Memories ("DRAMs") and Static RAMs ("SRAMs"). The
Company also manufactures and markets semiconductor testing equipment,
including AMBYX(Registered Trademark) Intelligent Test and Burn-in systems,
and high through-put device loading and unloading equipment. Micron Europe
Limited and Micron Semiconductor Asia Pacific Pte., Ltd., wholly-owned
subsidiaries of MTI, provide sales services in Europe and Asia
Pacific. Additional MTI subsidiaries include Micron Communications,
Inc., which designs and develops radio frequency identification
systems; Micron Construction, Inc., which provides construction
management and general contractor services for facility owners and
developers; Micron Display Technology, Inc., which designs and
develops new technologies relating to field emission flat panel
displays; and Micron Quantum Devices, Inc., which designs and develops
non-volatile semiconductor memory devices.
MEI's operations focus on the Company's PC, contract manufacturing,
and component recovery operations. MEI's PC operations design,
develop, market, manufacture and support two brand names of PC systems
and related hardware incorporating third party operating systems and
application software. MEI's contract manufacturing operation provides
a full range of turnkey manufacturing services, including the assembly
and test of complex printed circuit boards and memory modules, design
layout and product engineering, materials procurement, inventory
management, quality assurance and just-in-time delivery.
MTI was incorporated in Idaho in 1978 and reincorporated in Delaware
in 1984. The Company's executive offices and principal manufacturing
operations are located at 8000 South Federal Way, P.O. Box 6, Boise,
Idaho, 83707-0006 and its telephone number is (208) 368-4000.
Products
The Company's principal product categories are semiconductor memory
products, including DRAMs and SRAMs, PC systems, and contract
manufactured board level products.
Semiconductor Memory Products
The Company's semiconductor manufacturing operations focus primarily
on the design, development, and manufacture of semiconductor memory
products for standard and custom memory applications, with various
packaging and configuration options, architectures, and performance
characteristics.
Dynamic Random Access Memory DRAMs are semiconductor devices which
store digital information in the form of bits and provide high speed
storage and retrieval of data. The Company is developing its 64 Meg
DRAM and is in the design phase for its 256 Meg DRAM. DRAM sales
represented approximately 68%, 73% and 70% of the Company's total net
sales in fiscal 1995, 1994, and 1993, respectively. Manufacture of
the Company's DRAM products utilizes proprietary advanced
complimentary metal-oxide-semiconductor ("CMOS") silicon-gate process
technology. DRAMs are the highest density, lowest cost per bit random
access memory components available, and are the most widely used
semiconductor memory components in most PC systems. Demand for the
Company's products has recently benefited from strong market
conditions for PC systems and increased utilization of more powerful
microprocessors, more memory-intensive software applications and
enhanced system architectures. The Company's primary product during
fiscal 1995 was the 4 Meg DRAM which sells in multiple configurations,
speeds, and package types. The Company is limiting its production of
16 Meg DRAMs in order to maximize production of the 4 Meg DRAM which
currently is the Company's most profitable memory product.
The Company believes the market transition to the 16 Meg DRAM as the
primary DRAM product will be largely driven by the timing of increases
in demand for main memory in PC systems and by the increasing market
availability of the 1 Meg x 16 configuration of the 16 Meg DRAM.
Currently, most PC systems are sold with between 8 and 12 megabytes of
main memory. Such system requirements can be satisfied with memory
modules comprised of either 1 Meg x 4 (4 Meg) DRAMs or 1 Meg x 16 (16
Meg) DRAMs. The present limited market availability of the 1 Meg x 16
configuration of the 16 Meg DRAM has made the 1 Meg x 4 DRAM module a
more cost-effective solution and has resulted in continued demand for
the 4 Meg DRAM. When typical PC system requirements exceed 16
megabytes, memory modules can no longer cost-effectively incorporate 4
Meg DRAMs. Either increasing availability of the 1 Meg x 16
configuration of the 16 Meg DRAM or PC main memory requirements
increasing to in excess of 16 megabytes will likely cause an industry
transition to the 16 Meg DRAM as its primary product.
Static Random Access Memory SRAMs are semiconductor devices which
perform memory functions much the same as DRAMs; however, unlike
DRAMs, SRAMs do not require their memory cells to be electronically
refreshed which generally simplifies application system designs.
SRAMs contain more complex electronic circuitry than DRAMs, and
consequently have higher per bit production costs. The Company's SRAM
family focuses on the high-performance, or "Very Fast", sector of the
SRAM market which requires very high speed access to memory. Very
Fast SRAMs provide access times approximately five times faster than
that of DRAMs. The market for Very Fast SRAMs has grown with the
number of applications that require a "buffer" or "cache" of high
speed memory between the central processing unit and the main DRAM-
based memory. The Company manufactures its current SRAM products
utilizing CMOS silicon-gate process technology. The Company currently
sells primarily synchronous 256K, and 1 Meg SRAMs in a variety of
configurations, speeds, and package types, and has 4 Meg and 16 Meg
SRAMs under development. SRAM sales represented 6%, 8%, and 14% of
the Company's total net sales in fiscal 1995, 1994, and 1993,
respectively.
Personal Computer Systems
The Company develops, markets, manufactures and supports a broad line
of memory intensive, high performance PC systems under the Micron and
ZEOS brand names. The Company's PC product line includes: the Micron
Millennia, targeted for high-end business users; the Micron
PowerStation, targeted for general business users; the Micron Home
MPC, targeted for home office and general consumers; the Micron
PowerServer, a business network server; the ZEOS Pantera, targeted for
mainstream business; and the ZEOS Meridian, a portable notebook.
The Company continues to evaluate the marketing strategy for its
products to take advantage of both Micron and ZEOS brand names. Until
the Company's PC product line strategies are fully implemented,
including coordination of marketing strategies, the sharing of
research and development efforts, and the coordination and potential
integration of overall product lines. While it is not yet known
whether the Company will undertake any such potential actions, any
such action would involve a number of significant risks, could result
in the recognition of unanticipated expenses and could otherwise have
a material adverse effect on the Company's net sales.
Revenue from the sale of PC systems, excluding the value of the
Company's memory components contained therein, represented
approximately 15%, 5% and 2% of the Company's total net sales in
fiscal 1995, 1994, and 1993, respectively.
ZEOS(Registered Trademark) is a registered trademark and
Micron(Trademark), Millennia(Trademark), PowerStation(Trademark),
HomeMPC(Trademark), PowerServer(Trademark), Pantera(Trademark) and
Meridian(Trademark) are trademarks of the Company.
Contract Manufacturing
The Company's contract manufacturing operations consist of assembling
and testing complex printed circuit boards and memory modules and "box
build" final product assembly services. In addition to assembly and
test, the Company offers a full range of turnkey manufacturing
services, including design lay-out and product engineering, materials
procurement, inventory management, quality assurance and just-in-time
delivery.
Revenue from contract manufacturing operations, excluding the value
of the Company's memory components contained therein, represented
approximately 3%, 3% and 2% of the Company's total net sales in fiscal
1995, 1994 and 1993, respectively.
Manufacturing
Semiconductor Memory Products
Semiconductor memory manufacturing cost per unit is primarily a
function of die size (since the potential number of good die per wafer
increases with reduced die size), number of mask layers, and the yield
of acceptable die produced on each wafer. Other contributing factors
are wafer size, number of fabrication steps, costs and sophistication
of the manufacturing equipment, package type, equipment up time,
process complexity and cleanliness. The manufacture of the Company's
semiconductor products is a complex process and involves a number of
precise steps, including wafer fabrication, assembly, burn-in and
final test. Efficient production of the Company's semiconductor
memory products requires utilization of advanced semiconductor
manufacturing techniques. The Company is engaged in ongoing efforts
to enhance its production processes to reduce the die size of existing
products and increase capacity utilization. Smaller die sizes and
higher production yields generally reduce manufacturing cost per part.
The Company's principal existing semiconductor manufacturing facility
in Boise, Idaho, includes two wafer fabrication lines equipped with
diffusion tubes, photolithography systems, ion implant equipment,
chemical vapor deposition reactors, sputtering systems, plasma and wet
etchers and automated mask inspection systems. The production
facility operates in 12-hour shifts, 24 hours per day, and 7 days per
week to reduce down time during shift changes, and to reduce
fabrication costs further through maximum utilization of fabrication
facilities. Wafer fabrication occurs in a highly controlled, clean
environment to minimize dust and other yield- and quality-limiting
contaminants. Notwithstanding the highly controlled manufacturing
operation, equipment does not consistently perform flawlessly and
minute impurities, defects in the photomasks, or other difficulties in
the process may cause a substantial percentage of the wafers to be
rejected or individual circuits to be nonfunctional. The success of
the Company's manufacturing operation will be largely dependent on its
ability to minimize such impurities and to maximize its yield of
acceptable, high-quality circuits. In this regard, the Company
employs rigorous quality controls throughout the manufacturing,
screening, and testing processes.
After fabrication, each silicon wafer is separated into individual
die. Functional die are connected to external leads by extremely fine
wire and are assembled into plastic packages. Each completed package
is then inspected, sealed, and tested. The assembly process uses high
speed automatic systems such as wire bonders, as well as semi-
automatic plastic encapsulation and solder systems. The Company tests
its products at various stages in the manufacturing process, performs
high temperature burn-in on finished products, and conducts numerous
quality control inspections throughout the entire production flow. In
addition, through the utilization of its proprietary AMBYX(Registered
Trademark) line of intelligent test and burn-in systems, the Company
simultaneously conducts circuit testing of all die during the burn-in
process, thereby providing improved quality and reliability data and
reduced time and cost of testing.
The Company is in the process of converting its two 6-inch wafer
fabrication lines to 8-inch processing capabilities. Substantial
conversion of Fab III to 8-inch wafer processing capabilities is
targeted for the end of calendar 1995 and the Fab I/II conversion is
targeted for calendar 1996. To date only a limited number of 8-inch
wafers have been processed. Significant capital expenditures are
required for the 8-inch conversion. There can be no assurance that
the conversion can be accomplished without disruption of production.
The Company has begun construction of a manufacturing facility in
Lehi, Utah, that will include 8-inch wafer fabrication, assembly and
test operations. The approximate 2 million square foot facility is
planned to have approximately two-thirds the manufacturing capacity of
the existing Boise site. The cost of the Utah facility is currently
estimated at approximately $2.5 billion and is targeted for initial
wafer production in late calendar 1996. Several other semiconductor
manufacturers are also adding significant manufacturing capacity. All
semiconductor manufacturers are dependent upon and compete for products
of a limited number of sophisticated equipment suppliers. The cyclical
nature of the industry often results in extended lead times for equipment
deliveries. There can be no assurance the Company will not encounter
delays in the currently planned expansion as a result of limited
availability of equipment.
Personal Computer Systems
The Company manufactures, sells, and supports its Micron brand name
systems from the Nampa facility and ZEOS brand name systems from the
Minneapolis facility. The Company's PC manufacturing process is
designed to provide custom-configured products to its customers, and
includes assembling components, loading software and performing
quality control tests on each system prior to shipment. The
Company's PC systems are assembled to customer specifications. Only
a limited number of the most popular PC system configurations are
manufactured in advance of customer orders. Parts and components
required for each customer order are selected from inventory and
are prepared for assembly into the customized PC system. While custom
assembly is advantageous to the Company's PC customers, the Company is
unable to achieve the manufacturing efficiencies normally associated with
mass production of standardized products.
The Company's PC systems are subject to functionality and quality
testing during the assembly process. The Company's desktop PC systems
are assembled in production lines. The Company's notebook PC systems
are primarily assembled and tested by its suppliers prior to delivery
to the Company for custom configuration. Software programs are loaded
into the PC systems prior to a burn-in process during which they are
powered-up and certain diagnostic tests are performed. The Company's
notebook PC systems are assembled and tested by suppliers prior to
delivery to the Company. PCsystems are subject to final inspection
after which they are packaged and made available for shipment to
customers.
Contract Manufacturing
The Company's contract manufacturing operation consists of assembling
and testing complex printed circuit boards and memory modules. The
assembly of printed circuit boards involves the attachment of
electronic components, such as resistors, capacitors, diodes, logic
devices, RAM components and processors to printed circuit boards.
Nearly all assembly operations utilize surface mount technology whereby
the leads on integrated circuits and other electronic components are
soldered to the surface of the printed circuit board rather than inserted
into holes and soldered on the back side of the assembly. Automated
in-circuit and functionality tests are generally performed on all
printed circuit boards assembled.
Availability of Raw Materials
Semiconductor Memory Products
Raw materials utilized by the Company's semiconductor manufacturing
operation generally must meet exacting product specifications. The
Company generally uses multiple sources of supply, but the number of
suppliers capable of delivering certain raw materials is very limited.
The Company and many other semiconductor manufacturers are adding new
facilities or modifying existing facilities to process 8-inch wafers.
The availability of both 6-inch and 8-inch wafers for semiconductor
memory production is partially dependent on how readily wafer
suppliers can increase or create additional capacity to accommodate
the demand for 8-inch wafers without creating shortages in supply of 6-
inch wafers. The availability of other raw materials may decline due
to the overall increase in world-wide semiconductor manufacturing.
Although shortages have occurred from time to time and lead times in
the industry have been extended on occasion, the Company has not
experienced any significant difficulty in obtaining raw materials for
its semiconductor manufacturing operations to date. Interruption of
any one raw material source could adversely affect the Company's
operations.
Personal Computer Systems
The Company's PC operations rely on third-party suppliers for most of
its PC system components. The Company purchases substantially all of
its components and subassemblies from suppliers on a purchase order
basis and generally does not maintain long-term supply arrangements
with its suppliers. Although the Company attempts to use standard
components and subassemblies available from multiple suppliers,
certain of its components and subassemblies are available only from
sole suppliers. Microprocessors used in the Company's PC systems are
supplied exclusively by Intel. Substantially all of the RAM
components used in the Company's PC systems are supplied internally
from the Company's semiconductor manufacturing operation. In
addition, the Meridian line of ZEOS notebook computers is currently
obtained from a single third party manufacturer. Although most other
components and subassemblies used by the Company are currently
available from multiple sources, the Company has from time to time
experienced shortages in the components and subassemblies used to
produce its PC systems. Any supply interruption for any of the
components and subassemblies currently obtained from a single source
could result in production delays and adversely affect the Company's
PC operations.
Contract Manufacturing
The Company uses numerous suppliers for electronic components and
materials, including RAM, in its contract manufacturing operations.
Shortages of certain types of electronic components have occurred in
the past and may occur in the future. Component shortages or price
fluctuations could have an adverse effect on the Company's contract
manufacturing operations.
Marketing and Customers
Export sales totaled approximately $754 million for fiscal 1995,
including approximately $285 million to Europe and $274 million to
Asia Pacific. Export sales approximated $471 million and $251 million
for fiscal 1994 and 1993, respectively. Export sales are made
primarily in United States currency. The Company incurs import duties
on sales into Europe of up to 14% of the product value. The Company
has sales offices in the United Kingdom, Germany, Singapore, and
Taiwan.
Semiconductor Memory Products
The semiconductor memory industry is characterized by rapid
technological change, relatively short product life cycles,
frequent product introductions and enhancements, difficult product
transitions, and volatile market conditions. These circumstances
historically have made the semiconductor industry, and the DRAM market
in particular, highly cyclical.
The Company's primary semiconductor memory products are essentially
interchangeable with, and have similar functionality to, products
offered by the Company's competition. Customers for the Company's
semiconductor memory products include major domestic computer
manufacturers and others in the computer, telecommunications, and
office automation industries. The Company markets its semiconductor
memory products world-wide through independent sales representatives,
distributors, and its own direct sales force. Sales representatives
serve on a commission basis and obtain orders subject to final
acceptance by the Company. Shipments against these orders are made
directly to the customer by the Company. Distributors carry the
Company's products in inventory and typically sell a variety of other
semiconductor products, including competitors' products.
Semiconductor memory products sold through distributors approximated
10%, 12% and 16% of total net sales of such products in fiscal 1995,
1994, and 1993, respectively.
Many of Micron's customers require a thorough review or
"qualification" of new semiconductor memory products and processes
which may take several months. As the Company diversifies its product
lines and reduces the die sizes of existing memory products,
acceptance of these products and processes may be hampered by this
qualification procedure. There can be no assurance that new products
or processes will be qualified for purchase by existing or potential
customers.
The Company's sales of semiconductor memory products to Compaq
Computer Corporation and Intel Corporation each represented
approximately 11% of the Company's sales of semiconductor memory
products in fiscal 1995. Compaq Computer Corporation represented
approximately 13% and 11% of the Company's sales of semiconductor
memory products for fiscal 1994 and 1993, respectively. No other
customer individually accounted for 10% or more of the Company's net
sales of semiconductor memory products.
Personal Computer Systems
Micron markets its PC systems directly to customers including
business, educational institutions, government agencies, and the
general public, primarily by strategically placing advertisements in
personal computer trade publications. The Company's PC products
compete with products from other PC manufacturers to win computer
trade magazine awards. The receipt of numerous such awards has
resulted in enhanced brand name recognition for the Company's PC
systems. In the event the Company's PC systems are unsuccessful in
receiving similar awards in the future, customer interest in the
Company's PC systems could decline materially.
Contract Manufacturing
The Company markets its contract manufacturing services through a
direct sales force that works with independent sales
representatives and, to a lesser extent, original equipment
manufacturers. Board-level products are also marketed directly to the
Company's existing DRAM and SRAM component customers.
Backlog
Semiconductor Memory Products
The Company primarily manufactures and markets standard memory
products. The rate of booking new orders varies from month to month
and depends upon the ordering practices of individual customers.
Cyclical industry conditions make it difficult for many customers to
enter into long-term, fixed-price contracts. Orders for the Company's
semiconductor memory products are typically accepted with acknowledgment
that the terms may be adjusted to reflect market conditions at the
delivery date. For the foregoing reasons, and because of the possibility
of customer changes in delivery schedules or cancellation of orders with-
out significant penalty, the Company does not believe that its backlog of
semiconductor memory products as of any particular date is firm or a
reliable indicator of actual sales for any succeeding period.
Personal Computer Systems
Levels of unfilled orders for PC systems fluctuate depending upon to
unexpected demand for certain products or production delays.
Customers frequently change delivery schedules and orders depending on
market conditions and other reasons. Unfilled orders can be, and
often are, canceled. As of August 31, 1995, the Company had unfilled
orders for PC systems of approximately $46.3 million as compared to
unfilled orders of $24.3 million as of September 1, 1994. The Company
anticipates that substantially all of the unfilled orders as of August
31, 1995, other than canceled orders, will be shipped within 30 days.
Because customers may cancel or reschedule orders for PC systems
without penalty, the Company does not believe that unfilled orders for
PC systems are a meaningful indicator for future sales.
Contract Manufacturing
Backlog for the Company's contract manufacturing operation as of
August 31, 1995, and September 1, 1994, was approximately $95.0
million and $22.3 million, respectively. Backlog generally consists
of purchase orders believed to be firm and are expected to be filled
within the next three months. Because of variations in the timing of
orders, delivery intervals, customer and product mix and delivery
schedules, the Company's backlog of contract manufacturing products as
of any particular date may not be representative of actual sales for
any succeeding period.
Product Warranty
Consistent with semiconductor memory industry practice, Micron
generally provides a limited warranty that its semiconductor memory
and contract manufactured products are in compliance with
specifications existing at the time of delivery. Liability for a
stated warranty period is usually limited to replacement of defective
items or return of amounts paid. Micron provides a 30-day money back
guarantee on sales of its PC systems. PC systems are generally
provided with a one-year limited warranty from the delivery date that
covers repairs or replacement for defects in either workmanship or
components. All other warranties are typically disclaimed.
Competition
Semiconductor Memory Products
The Company's semiconductor memory operations experience intense
competition from a number of substantially larger foreign and domestic
companies, including Fujitsu, Ltd., Lucky Goldstar, Hitachi, Ltd.,
Hyundai Electronics, Co., Ltd., Mitsubishi Electric Corp., Motorola, Inc.,
NEC Corp., Samsung Semiconductor, Inc., Texas Instruments, Inc., and
Toshiba Corporation. Micron has captured only a small percentage of the
semiconductor memory market and may be at a disadvantage in competing
against these larger manufacturers with significantly greater capital
resources or manufacturing capacities, larger engineer and employee bases,
larger portfolios of intellectual property, and more diverse product lines.
The Company's larger competitors may also have long-term advantages
over Micron in research and new product development and in their
ability to withstand periodic downturns in the semiconductor market.
In addition, the Company believes its competition has sufficient
resources and manufacturing capacity to influence market pricing.
The SRAM overall market size is considerably smaller than the DRAM
market and is more susceptible to a number of competitors increasing
supply, and thereby influencing market pricing for SRAM products.
As has previously occurred in reaction to increased market demand,
the Company and many of its competitors are adding new wafer
fabrication facilities. Most new wafer fabrication facilities are
designed to process 8-inch wafers, which have approximately 84%
greater usable surface area than 6-inch wafers. Excess supply
resulting from increased world-wide semiconductor manufacturing
capacity, improved manufacturing yields, changes in demand for
semiconductor memory, 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 would
have a material adverse effect on the Company's results of operations.
Personal Computer Systems
The PC industry is highly competitive and has been characterized by
intense pricing pressure, rapid technological advances in hardware and
software, frequent introduction of new products, and low gross
margins. Competitive factors include price, performance, variety of
products offered, availability of peripherals and software, marketing
and sales capabilities, service, and support. There can be no
assurance the Company will compete successfully in the future with
respect to these factors.
The Company's PC operations compete with a number of PC manufacturers
which sell their products primarily through direct marketing channels,
including Dell Computer Corporation and Gateway 2000, Inc. The
Company also competes with PC manufacturers including IBM Corporation,
Compaq Computer Corporation, Packard Bell Electronics, Inc., and Apple
Computer, Inc., which have traditionally sold their products through
national and regional distributors, dealers, value-added resellers,
retail stores, and the PC manufacturers' direct sales forces. Many
competitors have substantially greater financial, marketing,
manufacturing, and technological resources devoted to PC operations
than the Company and also have greater purchasing power, broader
product lines, and larger installed customer bases, and greater brand
name recognition. In addition, the Company competes with smaller PC
manufacturers in local markets primarily on the basis of price.
Contract Manufacturing
The Company's contract manufacturing operation competes with numerous
domestic and offshore contract manufacturers, including a significant
number regional companies. In addition, the Company competes against
in-house manufacturing capabilities of certain of its existing
customers as well as with certain large computer manufacturers,
including IBM and its subsidiaries, which also offer third party
contract manufacturing services. The Company's contract manufacturing
competitors include Avex Electronics, Inc., Benchmark Electronics,
Inc., DOVAtron, International, Inc., Flextronics International, Group
Technologies Corporation, Jabil Circuits, Inc., SCI Systems, Inc., and
Solectron Corporation. Many of the Company's contract manufacturing
competitors have substantially greater manufacturing, financial, and
marketing resources devoted to contract operations than the Company.
Many of the Company's contract manufacturing customers also have
manufacturing relationships with one or more of the Company's
competitors.
The Company believes that the significant competitive factors in
contract manufacturing are technology, quality, service, price,
location, and the ability to offer flexible delivery schedules and
deliver finished products on a timely basis in accordance with
customers' expectations. The Company may be at a disadvantage as to
price when compared to contract manufacturers with substantial
offshore facilities or substantially larger domestic facilities.
There can be no assurance that the Company will compete successfully
in the future with regard to these factors.
Research and Development
Rapid technological change and intense price competition place a
premium on both new product and new process development efforts. The
Company's continued ability to compete in the semiconductor memory
market will depend in part on its ability to continue to develop
technologically advanced products and processes, of which there can be
no assurance. Research and development is being performed in
strategic areas related to the Company's historical semiconductor
expertise. Total research and development expenditures for the
Company were $129 million, $83 million, and $57 million in fiscal
1995, 1994, and 1993, respectively.
Research and development expenses vary primarily with the number of
wafers and personnel dedicated to new product and process development.
The Company's research and development efforts are currently focused
principally on further development of shrink versions of the 16 Meg
and 4 Meg DRAMs. Although the Company's 16 Meg DRAM product has been
transferred into production, it is not currently being produced in
significant volume pending the shift in customer demand from the 4 Meg
DRAM. Other research and development efforts have been devoted to
design and development of the 64 Meg and 256 Meg DRAMs and design and
development of new technologies including radio frequency
identification systems, non-volatile semiconductor memory products,
and field emission flat panel displays.
The Company has entered into various research and development cost-
sharing contracts with the Advanced Research Projects Agency ("ARPA")
aggregating approximately $20 million to pursue development of a flat
panel field emission display, alternative semiconductor materials and
high density ferroelectric memory.
Patents and Licenses
As of August 31, 1995, the Company owned approximately 470 United
States patents and 270 non-U.S. patents relating to the use of its
products and processes. In addition, the Company has numerous United
States and foreign patent applications pending. There can be no
assurance that patents will be issued for such applications or that
any patents, if issued, will be determined to be valid. The Company
intends to continue to seek patent protection on its significant
patentable technology.
The Company has entered into several cross-license agreements with
third parties. The agreements typically require one-time and/or
periodic royalty payments and expire at various times. One-time
payments are typically capitalized and amortized over the shorter of
the estimated useful life of the technology, the patent term, or the
term of the agreement. Royalty and other product and process
technology expenses were $203 million, $128 million, and $78 million
in fiscal 1995, 1994, and 1993, respectively. It may be necessary or
advantageous for the Company to obtain additional patent licenses or
to renew existing license agreements, some of which expire in calendar
1995, including an agreement with IBM. The Company is unable to
predict whether these license agreements can be obtained or renewed on
terms acceptable to the Company. Failure to renew such licenses could
result in litigation and the attendant cost and diversion of resources
associated therewith and could also result in material changes in the
Company's production processes or products. An adverse decision on
any such litigation or such material changes could have a material
adverse effect on the Company's financial position or results of
operations.
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 and process technology rights held by others. An adverse
decision on infringement of patents may have a material adverse effect
on the Company's financial position or results of operations and may
require material changes in production processes or products. For
additional discussion of product and process technology issues, see
"Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Certain Factors" and "Item 8. Financial
Statements and Supplementary Data - Notes to Consolidated Financial
Statements - Contingencies".
Employees
As of August 31, 1995, Micron had 8,080 full-time employees,
including approximately 5,900 in the semiconductor memory
manufacturing operation, 1,400 in the PC operation and 570 in the
contract manufacturing operation. Employment levels can vary
depending on market conditions and the level of utilization of the
Company's production, research and product and process development,
and administrative support activities. Many of the Company's
employees are highly-skilled and the Company's continued success will
depend in part upon its ability to retain such employees. None of the
Company's employees are represented by a labor organization, the
Company has never had a work stoppage as a result of labor issues, and
the Company considers relations with employees to be satisfactory.
The Company has hired a significant number of employees in recent
years, particularly in and around the Boise, Idaho area. In addition,
the Company is pursuing a significant expansion of its semiconductor
manufacturing operations in Lehi, Utah, that is anticipated to employ
3,500 full-time employees. The Company may experience difficulties in
locating and hiring qualified employees at a rate sufficient to
accommodate the Company's current rate of expansion.
Environmental Compliance
Government regulations impose various environmental controls on the
discharge of chemicals and gasses used in the Company's manufacturing
processes. The Company believes that its activities conform to
present environmental regulations. While the Company has not
experienced any materially adverse effects on its operations from
government regulations, there can be no assurance that changes in such
regulations will not impose the need for additional capital equipment
or other compliance requirements. Additionally, the extensive process
required to obtain permits for expansion of the Company's facilities
may impact how quickly the Company can respond to increases in market
demand.
Executive Officers of the Registrant
The executive officers of the Company and their ages as of August 31,
1995 are as follows:
Name Position Age Officer Since
- --------------------- ------------------------------------ --- -------------
Steven R. Appleton Chief Executive Officer, President 35 1989
and Chairman of the Board of
Directors
Tyler A. Lowrey Chief Technical Officer and Vice 42 1986
Chairman of the Board of Directors
Wilbur G. Stover, Jr. Chief Financial Officer, Vice 42 1992
President, Finance, Corporate
Secretary and Director
Edward J. Heitzeberg Vice President, DRAM Design and 49 1986
Product Engineering
Thomas M. Trent Vice President, Computer Aided Design 49 1986
Robert M. Donnelly Vice President, SRAM Design and 56 1989
Product Engineering
Kipp A. Bedard Vice President, Corporate Affairs 36 1990
Eugene H. Cloud Vice President, Marketing 53 1990
Donald D. Baldwin Vice President, Sales 35 1991
Nancy M. Self Vice President, Administration 41 1993
W. Bryan Farney Vice President, Legal Affairs and 35 1995
General Counsel
Background of Executive Officers
Steven R. Appleton joined Micron Technology, Inc., in February 1983
and served in various manufacturing management positions until April
1988 when he was named Director of Manufacturing. He was appointed
Vice President, Manufacturing in August 1989 and served in that
position until April 1991 when he was appointed President and Chief
Operating Officer of Micron Technology, Inc. He was elected to the
Board of Directors in April 1991. Mr. Appleton served in these
positions until July 1992, when he assumed responsibilities as
Chairman of the Board, President, and Chief Executive Officer for
Micron Semiconductor, Inc. In May 1994, Mr. Appleton was re-elected to
the Board of Directors of Micron Technology, Inc. In September 1994,
Mr. Appleton was named Chairman, Chief Executive Officer, and
President for Micron Technology, Inc.
Tyler A. Lowrey joined Micron Technology, Inc., in July 1984 as a
senior process engineer. In March 1986, he became a Process Research
and Development/Device Group Manager and was promoted to Vice
President, Process Research and Development, and Assistant Technical
Officer in September 1986. In April 1990, he was named Vice President,
Research and Development. Mr. Lowrey was appointed to the Board of
Directors of Micron Technology, Inc., in August 1990. Mr. Lowrey
served in these positions until July 1992, when he was elected to the
Board of Directors of Micron Semiconductor, Inc. and named that
company's Vice President, Chief Technical Officer. In September 1994,
Mr. Lowrey was re-elected to the Board of Directors of Micron
Technology, Inc. and named Vice Chairman and Chief Technical Officer
for Micron Technology, Inc.
Wilbur G. Stover, Jr. joined Micron Technology, Inc., in June
1989 as an accounting manager. In February 1990, Mr. Stover was named
Controller where he served until July 1992 when he was named Vice
President, Finance, and Chief Financial Officer of Micron
Semiconductor, Inc. Mr. Stover served in this position until
September 1994, when he was named Chief Financial Officer, Vice
President Finance, and Treasurer for Micron Technology, Inc. He was
elected to the Board of Directors in October 1994. In November 1994,
he was named Chief Financial Officer, and Vice President, Finance and
served in that position until April 1995, when he was named Chief
Financial Officer, Vice President, Finance, and Corporate Secretary.
Edward J. Heitzeberg joined Micron Technology, Inc., in January 1984
as Information Systems Manager. In March 1986, he became Senior Staff
Engineer and served in that capacity until June 1986, when he was
named Vice President, Quality. Mr. Heitzeberg served in this position
until July 1992, when he was named Vice President, Quality for Micron
Semiconductor, Inc. In November 1994, Mr. Heitzeberg was named Vice
President, Quality for Micron Technology, Inc. In October 1995, Mr.
Heitzeberg was named Vice President, DRAM Design and Product
Engineering.
Thomas M. Trent joined Micron Technology, Inc., in July 1980 as a
senior design engineer. From August 1986 to April 1990, Mr. Trent
served as Vice President, Research and Development, and Chief
Technical Officer, at which time he was named Vice President and
Manager of DRAM Design. In June 1991, he assumed responsibilities of
all DRAM products and was named Vice President and Manager of DRAM
Products Group. Mr. Trent served in these positions until July 1992,
when he was named Vice President, DRAM Products Group for Micron
Semiconductor, Inc. In April 1993, he was named Vice President for
Micron Semiconductor, Inc. In November 1994, Mr. Trent was named Vice
President for Micron Technology, Inc. In October 1995, Mr. Trent was
named Vice President, Computer Aided Design.
Robert M. Donnelly joined Micron Technology, Inc., in September 1988
and served in various manufacturing management positions until August
1989, at which time he was appointed Vice President, Business Units.
From April 1990 to June 1991, Mr. Donnelly served as Vice President
and Manager of DRAM Products Group. In June 1991, he was named Vice
President and Manager of SRAM Products Group. Mr. Donnelly served in
this position until July 1992, when he was named Vice President, SRAM
Products Group for Micron Semiconductor, Inc. In November 1994, Mr.
Donnelly was named Vice President SRAM Products Group for Micron
Technology, Inc. In October 1995, Mr. Donnelly was named Vice
President, SRAM Design and Product Engineering.
Kipp A. Bedard joined Micron Technology, Inc., in November 1983 as
an accountant and held various management responsibilities until he
was appointed Manager of Corporate Affairs in June 1988. Mr. Bedard
held that position until April 1990 when he was named Vice President
and Manager of Corporate Affairs. From July 1992 to January 1994, Mr.
Bedard served as Vice President, Corporate Affairs for Micron
Semiconductor, Inc. In January 1994, he was named Vice President,
Corporate Affairs for Micron Technology, Inc.
Eugene H. Cloud joined Micron Technology, Inc., in January 1985 as
an applications engineer. In June 1985, he was named Applications
Manager. He served in that position until June 1986, when he was named
Marketing Manager. In April 1990, he was named Vice President,
Semiconductor Marketing. Mr. Cloud served in this position until July
1992, when he was named Vice President, Marketing for Micron
Semiconductor, Inc. In November 1994, Mr. Cloud was named Vice
President, Marketing for Micron Technology, Inc.
Donald D. Baldwin joined Micron Technology, Inc., in April 1984 and
served in various manufacturing and sales positions until April 1987,
when he was named Key Accounts Manager. From April 1990 to May 1991,
he served as Manager of North American Sales. In May 1991, he was
named Vice President, Sales. Mr. Baldwin served in this position until
July 1992, when he was named Vice President, Sales for Micron
Semiconductor, Inc. In November 1994, Mr. Baldwin was named Vice
President, Sales for Micron Technology, Inc.
Nancy M. Self joined Micron Technology, Inc., in February 1988 as a
benefits specialist. In July 1988, she was named Benefits Manager and
served in that position until July 1989, when she was named Risk
Manager. In March 1993, she was named Vice President, Administration.
W. Bryan Farney joined Micron Technology, Inc. in November 1994 as
General Counsel for Intellectual Property. In March 1995, he was named
General Counsel and served in that position until April 1995 when he
was named Vice President, Legal Affairs and General Counsel. Prior to
joining the Company, Mr. Farney was a shareholder of the law firm of
Arnold, White & Durkee, where he had been employed since October 1987.
Item 2. Properties
The Company's principal semiconductor manufacturing, engineering,
administrative, and support facilities are located on a 740 acre site
in Boise, Idaho. All facilities have been constructed since 1981 and
are owned by the Company. The Company has approximately 1.8 million
square feet of building space at this primary site. Of the total,
approximately 422,000 square feet is production space, 662,000 square
feet is facility support space, and 666,000 square feet is office and
other space. The Company's PC operations are housed in a 128,000
square foot facility in Nampa, Idaho on approximately 30 acres of
land, and in a 234,000 square foot leased facility in Minneapolis,
Minnesota. The Company's contract manufacturing operations are
located in a 93,000 square foot facility on approximately 5 acres of
land in Boise, Idaho, and in a 30,000 square foot leased facility in
Durham, North Carolina.
The Company initiated construction of an approximate 2 million square
foot semiconductor memory manufacturing facility in Lehi, Utah. This
facility is expected to include wafer fabrication, assembly, test,
facility support and administration operations. The cost of the Utah
facility is currently estimated to approximate $2.5 billion. Initial
wafer fabrication is currently expected in late calendar 1996 with
completion between three to five years. Market conditions for
semiconductor memory products will effect how quickly the Lehi complex
is ramped to full capacity.
Equipment with a book value of approximately $67 million is pledged
as collateral for outstanding debt and capital leases as of August 31,
1995.
Item 3. Legal Proceedings
The Company is a party in 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. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Certain Factors."
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of fiscal 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Market for Common Stock
Micron Technology, Inc.'s common stock is listed on the New York
Stock Exchange and is traded under the symbol MU. The following table
represents the high and low sales prices for the Company's common
stock for each quarter of fiscal 1995 and 1994, as reported by The
Wall Street Journal. All stock prices have been restated to reflect a
2 for 1 stock split (to shareholders of record as of May 4, 1995) and
a 5 for 2 stock split (to shareholders of record as of April 1, 1994)
effected in the form of a stock dividend.
High Low
1995:
4th quarter $78.00 $44.75
3rd quarter 50.75 32.56
2nd quarter 33.13 19.94
1st quarter 21.63 15.25
1994:
4th quarter $22.44 $15.31
3rd quarter 19.95 14.13
2nd quarter 15.30 8.73
1st quarter 12.73 7.58
Holders of Record
As of August 31, 1995, there were 5,649 shareholders of record of
the Company's Common Stock.
Dividends
The Company declared and paid cash dividends totaling $0.15 during
fiscal 1995, $0.06 in fiscal 1994 and $0.01 in fiscal 1993. Future
dividends, if any, will vary depending on the Company's profitability
and anticipated capital requirements.
Item 6. Selected Financial Data
(Amounts in millions, except for per share amounts)
1995 1994 1993 1992 1991
-------- -------- ------ ------ ------
Net sales $2,952.7 $1,628.6 $828.3 $506.3 $425.4
Gross Margin 1,624.0 839.2 311.1 116.0 92.7
Operating income 1,296.5 620.1 165.9 13.7 11.8
Net income 844.1 400.5 104.1 6.6 5.1
Fully diluted earnings
per share 3.90 1.90 0.51 0.03 0.03
Cash dividend declared
per share 0.15 0.06 0.01 0.01 --
Current assets 1,274.1 793.2 440.1 227.0 213.2
Property, plant and
equipment, net 1,385.6 663.5 437.8 396.3 389.3
Total assets 2,774.9 1,529.7 965.7 724.5 705.9
Current liabilities 604.8 274.2 210.8 106.1 98.0
Long-term debt 129.4 124.7 54.4 61.5 69.6
Shareholders' equity 1,896.2 1,049.3 639.5 511.2 494.8
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Certain Factors."
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
All yearly references are to the Company's fiscal years ended August
31, 1995, September 1, 1994, or September 2, 1993, unless otherwise
indicated. Shares and per share amounts have been restated to reflect
a 2 for 1 stock split (to shareholders of record as of May 4, 1995)
and a 5 for 2 stock split (to shareholders of record as of April 1,
1994) effected in the form of a stock dividend. All tabular dollar amounts
are stated in millions.
Overview
Net income for 1995 was $844 million, or $3.90 per fully diluted
share, on net sales of $2,953 million. The Company achieved record
sales and net income in 1995 primarily as a result of continued stable
pricing and increased production of semiconductor memory and increased
sales of PC systems. Net income for 1994 was $401 million, or $1.90
per fully diluted share, on net sales of $1,629 million.
Results of Operations
The following table presents the Company's net sales by related
products or services. The value of the Company's semiconductor memory
products included in PC systems and other products is included in the
caption "Semiconductor memory products." The caption "Other" includes
revenue from contract manufacturing and module assembly services,
construction management services, government contracts, and licensing
fees.
1995 1994 1993
-------------------- -------------------- --------------------
Net Sales % of Total Net Sales % of Total Net Sales % of Total
--------- ---------- --------- ---------- --------- ----------
Semiconductor
memory products $2,287.0 77% $1,367.5 84% $ 736.6 89%
Personal computer
systems 429.1 15% 73.7 5% 20.6 2%
Other 236.6 8% 187.4 11% 71.1 9%
--------- ---------- --------- ---------- --------- ----------
Total net sales $2,952.7 100% $1,628.6 100% $ 828.3 100%
========= ========== ========= ========== ========= ==========
1995 % Change 1994 % Change 1993
-------- -------- -------- -------- --------
Net sales $2,952.7 81.3% $1,628.6 96.6% $828.3
The substantial increase in net sales in 1995 compared to 1994 was
principally due to increased production and current favorable market
conditions for the Company's semiconductor memory products, in
particular the 4 Meg DRAM, and a higher level of net sales of PC
systems. Although the volume of wafers produced during 1995 increased
only moderately compared to 1994, total megabits produced increased
approximately 74% principally due to ongoing transitions to successive
shrink versions of existing memory products, particularly the 4 Meg
DRAM, shift in the Company's mix of semiconductor memory products to a
higher average density, and enhanced yields on existing memory
products. Demand for the 4 Meg DRAM remained strong and prices
remained stable for the Company's DRAM products during 1995. The
relatively stable prices for the Company's DRAM products over the past
three years represents a deviation from the historical long-term trend
of declining DRAM prices per megabit. While current demand appears to
be in excess of world-wide supply, the Company is unable to predict
if, or when, a combination of product shrinks, yield improvements, and
capacity expansions will allow world-wide supply to equal or exceed
demand, or to predict changes in demand and the corresponding effects
on pricing for the Company's products.
The Company's principal product in 1995 was the 4 Meg DRAM which
comprised approximately 83% of the net sales of the semiconductor
memory products, and 64% of total net sales. SRAM net sales were
higher in 1995 as compared to 1994, but declined as a percentage of
net sales of semiconductor memory products to approximately 8% in 1995
due to the Company's production emphasis on the 4 Meg DRAM. SRAM net
sales were 10% and 16% of net sales of semiconductor products in 1994
and 1993, respectively.
Net sales of PC systems, less the value of the Company's
semiconductor memory included therein, increased to approximately 15%
of the Company's total net sales for 1995 from 5% and 2% in 1994 and
1993, respectively. PC sales increased principally
due to increased demand for the Company's PC systems as a result of
greater brand name recognition and market acceptance of such products.
Increased brand name recognition and market acceptance resulted primarily
from the receipt of a number of awards from computer trade magazines
relating to performance characteristics of its systems and increased
advertising expenditures. In addition, approximately 22% of the
Company's PC sales during 1995 were attributable to sales of ZEOS
brand name PC systems subsequent to the Company's acquisition of ZEOS.
Net sales in 1994 increased compared to 1993 principally due to the
relatively stable prices for semiconductor memory products and the
comparatively higher volume of semiconductor memory produced in 1994.
The Company's production of semiconductor memory as measured in
megabits nearly doubled in 1994 compared to 1993, principally as a
result of expenditures on equipment and facilities; improved
manufacturing yields resulting from increased manufacturing
efficiencies; and conversion to shrink versions of then existing
products.
1995 % Change 1994 % Change 1993
-------- -------- -------- -------- --------
Cost of goods sold $1,328.7 68.3% $789.4 52.6% $517.2
Gross margin % 55.0% 51.5% 37.6%
The Company's gross margin percentage in 1995 was slightly higher
than that experienced in 1994 primarily as a result of a higher gross
margin percentage on the Company's semiconductor memory products
offset in part by the effects of a higher level of net sales of PC
systems, which generally have considerably lower gross margins. The
Company's gross margin percentage on semiconductor memory products
increased to approximately 65% in 1995, compared to 57% and 39% in
1994 and 1993, respectively. The higher gross margin percentage for
semiconductor memory products in 1995 was principally due to
relatively stable selling prices for such products as compared to
decreases in per unit manufacturing costs. Decreases in per unit
manufacturing costs were principally due to the greater number of
potential die per wafer achieved through transitions to shrink
versions of existing products and shifts in the Company's mix of
semiconductor memory products to a higher average density, improved
manufacturing yields and increased wafer output.
The Company continues limited production of its 16 Meg DRAM at a
level only sufficient to continue development of process efficiencies.
The Company continues to maximize its production of the 4 Meg DRAM,
which is currently the most profitable product offered by the Company.
The Company believes the market transition to the 16 Meg DRAM as the
primary DRAM product will be largely driven by the timing of increases
in demand for main memory in PC systems and by the increasing market
availability of the 1 Meg x 16 configuration of the 16 Meg DRAM.
Currently, most PC systems are sold with between 8 and 12 megabytes of
main memory. Such system requirements can be satisfied with memory
modules comprised of either 1 Meg x 4 (4 Meg) DRAMs or 1 Meg x 16 (16
Meg) DRAMs. The present limited market availability of the 1 Meg x 16
configuration of the 16 Meg DRAM has made the 1 Meg x 4 DRAM module a
more cost-effective solution and has resulted in continued demand for
the 4 Meg DRAM. When typical PC system requirements exceed 16
megabytes, memory modules can no longer cost-effectively incorporate 4
Meg DRAMs. Either increasing availability of the 1 Meg x 16
configuration of the 16 Meg DRAM or an increase in PC main memory
requirements to in excess of 16 megabytes will likely cause an
industry transition to the 16 Meg DRAM as its primary product. The
Company's transition to the 16 Meg DRAM as its principal memory
product could have a negative impact on the Company's results of
operations.
The Company's gross margin percentage on sales of PC systems has been
lower than the Company's overall gross margin percentage. Intense pricing
pressure in the PC market has caused the Company to reduce the average
selling prices of its PC systems at a rate faster than the decline in the
Company's cost of components. In addition, the PC market's ongoing
transition to new products and product features may have an adverse effect
on the Company's PC gross margins by increasing inventory obsolescence and,
to a lesser extent, decreasing manufacturing efficiencies. Should the rate
of future growth in net sales of PC systems exceed the rate of future
growth of the balance of the Company's products, the Company's overall gross
margin 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. Product and process technology
costs decreased as a percentage of total net sales in 1995 principally
due to a paid-up license which became fully amortized late in 1994,
and the higher level of net sales of PC systems in 1995 which are
subject to generally lower royalty costs compared to the Company's
semiconductor memory products. Future product and process technology
charges may increase, however, as a result of claims that may be
asserted in the future. See "Certain Factors."
The significant increase in gross margin percentage for 1994 compared
to 1993 was principally due to relatively stable prices and reductions
in cost per unit of memory sold for DRAM products. Reductions in cost
per unit sold were realized primarily from a combination of increased
wafer output, yield improvements, die shrinks, and transitions to
generally higher density
memory products.
1995 % Change 1994 % Change 1993
-------- -------- -------- -------- --------
Selling, general,
and administrative $198.7 46.4% $135.7 54.4% $87.9
as a % of net sales 6.7% 8.3% 10.6%
The higher level of selling, general, and administrative expenses for
1995 as compared to 1994 principally resulted from a higher level of
personnel costs associated with the Company's profit sharing programs,
increased number of administrative employees, and to a lesser extent,
increased advertising and credit card processing fees associated with
the increased level of net sales of the Company's PC systems. Such
increases were partially offset by a reduction in legal fees compared
to 1994 primarily resulting from the Company's settlement of patent
litigation in 1994.
The increase in selling, general, and administration expenses in 1994
compared to 1993 were primarily a result of a higher level of
personnel costs associated with the Company's profit sharing programs;
increased costs incurred with the Company's action before the
International Trade Commission and patent litigation, each of which
was settled in 1994; increased sales commissions based on a higher
level of net sales; and a higher level of state sales tax.
1995 % Change 1994 % Change 1993
-------- -------- -------- -------- --------
Research and
development $128.8 54.4% $83.4 45.5% $57.3
as a % of net sales 4.4% 5.1% 6.9%
Research and development expenses vary primarily based on the number
of wafers and personnel dedicated to new product and process
development. Research and development efforts in 1995 were focused
primarily on development of 16 Meg and 4 Meg DRAM shrinks, 32K x 32
and 32K x 36 synchronous SRAMs, and design and development of the 64
Meg and 256 Meg DRAMs. The Company expects the level of research and
development expenses in 1996 to be higher than in 1995 as additional
resources are dedicated to the 16 Meg and 64 Meg DRAMs and the design
and development of the 256 Meg DRAM, as well as design and development
of new technologies including radio frequency identification systems,
non-volatile semiconductor memory devices, and field emission flat
panel displays.
1995 % Change 1994 % Change 1993
-------- -------- -------- -------- --------
Income tax provision $506.4 125% $225.3 285% $58.5
The effective tax rate for 1995 is 37.5% which primarily reflects the
statutory corporate tax rate and the net effect of state taxation.
The effective tax rate for 1994 and 1993 was 36%. The increase in the
Company's effective tax rate in 1995 was principally due to the change
in the mix of income among taxing jurisdictions and the decreased
utilization of state tax credits as a percentage of pretax income.
State income taxes have been reduced by state tax credits.
Merger Transaction
During 1995, the Company acquired ZEOS International, Ltd. ("ZEOS"),
a manufacturer of PC systems, in a merger transaction accounted for as
a purchase. Under terms of the transaction, the Company merged two of
its operating subsidiaries, Micron Computer, Inc., and Micron Custom
Manufacturing Services, Inc., with and into ZEOS on April 7, 1995, in
exchange for an approximate 79% ownership interest in ZEOS. The newly
merged company was renamed Micron Electronics, Inc. ("MEI"), and the
results of its operations (including those of the former ZEOS
operation subsequent to the merger date) are included in the
consolidated financial statements of the Company. The merger resulted
in the recognition of an approximate $29.0 million pretax nonrecurring
gain.
Liquidity and Capital Resources
The Company had cash and liquid investments of $556 million as of
August 31, 1995, representing an increase of $123 million during 1995.
The Company's principal sources of liquidity during 1995 were cash flows
from operations of $1,039 million, equipment financing of $231 million,
proceeds from issuance of long-term debt of $62 million, proceeds from
issuance of common stock in connection with the Company's employee stock
purchase and stock option plans of $18 million. The principal uses of
funds in 1995 were $961 million for property, plant, and equipment, $203
million for repayments of equipment contracts, $63 million for payments
on long-term debt, and $31 million for payments of cash dividends.
As of August 31, 1995, the Company had contractual commitments
extending through calendar 1998 of approximately $643 million for
equipment purchases and approximately $35 million for the construction
of buildings. The cost of the Utah complex is currently estimated to
be approximately $2.5 billion. Substantially all of the Company's
near term cash flows from operations are expected to be dedicated to
these capacity improvement programs. The Company can give no
assurance that the expansion programs will be completed as currently
scheduled or within current cost estimates.
The Company believes continuing investments in manufacturing
technology, facilities and capital equipment, research and
development, and product and process technology are necessary to
support future growth, achieve operating efficiencies, and maintain
product quality. The Company periodically evaluates various
alternatives to expand its production capacity and evaluates
opportunities for product diversification. Although in recent periods
the Company has been able to fund such investments principally
through cash flows from operations and equipment financings,
historically, in order to fund such investments, the Company has
required external sources to supplement the Company's cash flows from
operations. The Company's current expansion and capital improvement
projects at the Boise and Lehi sites are currently estimated to cost
approximately $4.5 billion. The Company may be required to pursue external
sources of liquidity to complete its current expansion and capital
improvement programs as scheduled. There can be no assurance that external
sources of liquidity will be available to fund the Company's ongoing
operations or expansion, diversification, and capital improvement
programs on terms acceptable to the Company.
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. These characteristics historically
have made the semiconductor industry highly cyclical, particularly in
the market for DRAMs, which are the Company's primary products.
Demand for semiconductor memory products has grown, fueled primarily
by growth in the personal computer industry. The Company and many of its
competitors are adding new facilities designed to process 8-inch wafers,
which have approximately 84% greater usable surface area than 6-inch wafers.
In addition, many competitors are currently believed to be running
their 16 Meg DRAM manufacturing operations at significantly lower
yields than could be expected when such products mature. The amount
of capacity to be placed into production and future yield improvements
by these competitors would dramatically increase world-wide supply of
semiconductor memory. Excess supply of semiconductor memory, changes
in demand for semiconductor memory market conditions, or currency
fluctuation resulting in a strengthening dollar against the yen, could
result in downward pricing pressure. A decline in the current
favorable product pricing would have a material adverse effect on the
Company's results of operations.
The Company is in the process of converting its existing wafer
fabrication facilities and equipment to process 8-inch wafers from 6-
inch. Such conversion requires expansion of portions of the Company's
facilities and modifications, enhancements, or replacement of a
significant portion of the Company's wafer processing equipment.
There can be no assurance the Company will not experience an
interruption of its manufacturing process or experience decreased
manufacturing yields as a result of the conversion. An interruption
of the manufacturing process or decreased manufacturing yields could
have a material adverse effect on the Company's results of operations.
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. 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 or at gross margin rates comparable to the Company's
current primary products.
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 has various product and process technology
agreements which expire in calendar 1995, including an agreement with
IBM. The Company is unable to predict whether these license agreements
can be obtained or renewed on terms acceptable to the Company. Failure
to renew such licenses could result in litigation and the attendant cost
and diversion of resources associated therewith and could
also result in material changes in the Company's production processes or
products. Any such litigation on changes could have a material adverse
effect on the Company's results of operations.
The Company began construction of an additional manufacturing
facility in Utah which represents a significant capital investment by
the Company. While the Company has at times conducted certain
assembly and test operations at sites remote to its primary
manufacturing operation, the Lehi, Utah facility will be the Company's
first fabrication facility off the Boise site. The success of the
Utah operation will largely depend on the Company's ability to achieve
manufacturing efficiencies comparable to the Boise facility, which is
largely a function of the skill and dedication of its work force. As
of August 31, 1995, the Company's semiconductor manufacturing
operations employed approximately 5,900 employees, an increase of
1,250 during the past year, and it is anticipated that the Utah site
will employ approximately 3,500 full-time employees. The inability of
the Company to retain a qualified work force or to locate and hire
qualified candidates could have a negative affect on existing
operations or limit efficiencies to be obtained by the Company's
expansion efforts.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Financial Statements:
Consolidated Statements of Operations for
Fiscal Years Ended August 31, 1995,
September 1, 1994, and September 2,1993.......................... 41
Consolidated Balance Sheets as of August 31,
1995, and September 1,1994....................................... 42
Consolidated Statements of Shareholders'
Equity for Fiscal Years Ended August 31,
1995, September 1, 1994, and September 2, 1993................... 43
Consolidated Statements of Cash Flows for
Fiscal Years Ended August 31, 1995,
September 1, 1994, and September 2, 1993......................... 44
Notes to Consolidated Financial Statements........................ 45
Report of Independent Accountants................................. 53
Micron Technology, Inc.
Consolidated Statements of Operations
(Amounts in millions, except for per share amounts)
August 31, September 1, September 2,
Fiscal year ended 1995 1994 1993
- -----------------------------------------------------------------------------
Net sales $2,952.7 $1,628.6 $ 828.3
-------- -------- --------
Costs and expenses:
Cost of goods sold 1,328.7 789.4 517.2
Selling, general, and administrative 198.7 135.7 87.9
Research and development 128.8 83.4 57.3
-------- -------- --------
Total costs and expenses 1,656.2 1,008.5 662.4
-------- -------- --------
Operating income 1,296.5 620.1 165.9
Gain from merger transaction 29.0 -- --
Interest income (expense), net 25.0 5.7 (3.3)
-------- -------- --------
Income before income taxes 1,350.5 625.8 162.6
Income tax provision 506.4 225.3 58.5
-------- -------- --------
Net income $ 844.1 $ 400.5 $ 104.1
======== ======== ========
Earnings per share:
Primary $3.95 $1.92 $0.52
Fully diluted 3.90 1.90 0.51
Number of shares used in per share
calculation:
Primary 213.9 208.9 200.3
Fully diluted 216.2 210.4 202.6
The accompanying notes are an integral part of the financial statements.
Micron Technology, Inc.
Consolidated Balance Sheets
(Dollars in millions, except for par value amount)
August 31, September 1,
As of 1995 1994
- -----------------------------------------------------------------------------
Assets
Cash and equivalents $ 128.1 $ 78.4
Liquid investments 427.7 354.6
Receivables 455.4 235.7
Inventories 204.8 101.1
Prepaid expenses 9.1 3.3
Deferred income taxes 49.0 20.1
-------- --------
Total current assets 1,274.1 793.2
Product and process technology, net 41.6 48.2
Property, plant, and equipment, net 1,385.6 663.5
Other assets 73.6 24.8
-------- --------
Total assets $2,774.9 $1,529.7
======== ========
Liabilities and shareholders' equity
Accounts payable and accrued expenses $ 502.3 $ 200.2
Deferred income 16.4 13.0
Equipment purchase contracts 59.6 31.2
Current portion of long-term debt 26.5 29.8
-------- --------
Total current liabilities 604.8 274.2
Long-term debt 129.4 124.7
Deferred income taxes 93.3 54.1
Other liabilities 51.2 27.4
-------- --------
Total liabilities 878.7 480.4
-------- --------
Commitments and contingencies
Common stock, $0.10 par value, authorized 300.0
million shares, issued and outstanding 206.4
million and 203.8 million shares, respectively 20.6 10.2
Additional capital 391.5 368.3
Retained earnings 1,484.1 670.8
-------- --------
Total shareholders' equity 1,896.2 1,049.3
-------- --------
Total liabilities and shareholders' equity $2,774.9 $1,529.7
======== ========
The accompanying notes are an integral part of the financial statements.
Micron Technology, Inc.
Consolidated Statements of Shareholders' Equity
(Dollars and shares in millions)
August 31, September 1, September 2,
Fiscal year ended 1995 1994 1993
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------
Common stock
Balance at beginning
of year 101.9 $ 10.2 40.1 $ 4.0 38.3 $ 3.8
Stock sold 1.6 0.1 0.9 0.1 1.8 0.2
Stock split 102.9 10.3 60.9 6.1 -- --
------- -------- ------- -------- ------- -------
Balance at end of year 206.4 $ 20.6 101.9 $ 10.2 40.1 $ 4.0
======= ======== ======= ======== ======= =======
Additional capital
Balance at beginning of year $ 368.3 $ 353.0 $ 327.2
Stock sold 17.7 9.8 18.2
Stock option plan 2.2 1.0 (0.1)
Tax effect of stock purchase
plans 13.6 10.6 7.7
Stock split (10.3) (6.1) --
-------- -------- -------
Balance at end of year $ 391.5 $ 368.3 $ 353.0
======== ======== =======
Retained earnings
Balance at beginning of year $ 670.8 $ 282.5 $180.3
Net income 844.1 400.5 104.1
Dividends paid (30.8) (12.2) (1.9)
-------- -------- -------
Balance at end of year $1,484.1 $ 670.8 $ 282.5
======== ======== =======
The accompanying notes are an integral part of the financial statements.
Micron Technology, Inc.
Consolidated Statements of Cash Flows
(Dollars in millions)
August 31, September 1, September 2,
Fiscal year ended 1995 1994 1993
- -----------------------------------------------------------------------------
Cash flows of operating activities
Net income $ 844.1 $ 400.5 $ 104.1
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 199.0 138.8 111.9
Increase in receivables (197.9) (81.0) (76.7)
Increase in inventories (76.0) (17.9) (8.7)
Increase in accounts payable and
accrued expenses 249.4 45.2 96.2
Gain from merger transaction (29.0) -- --
Other 49.2 71.9 30.5
-------- -------- --------
Net cash provided by operating
activities 1,038.8 557.5 257.3
-------- -------- --------
Cash flows of investing activities
Purchase of available-for-sale and
held-to-maturity securities (719.6) (403.6) (218.0)
Proceeds from sales and maturities
of securities 651.8 185.3 114.7
Expenditures for property, plant,
and equipment (730.0) (251.0) (83.4)
Other 27.2 (10.5) (1.8)
-------- -------- --------
Net cash used for investing activities (770.6) (479.8) (188.5)
-------- -------- --------
Cash flows of financing activities
Payments on equipment purchase
contracts (202.5) (119.3) (63.0)
Proceeds from issuance of debt 62.4 119.2 41.7
Repayments of debt (63.4) (46.2) (52.8)
Proceeds from issuance of common stock 18.4 12.1 19.3
Payments of dividends (30.8) (12.2) (1.9)
Other (2.6) (0.4) (0.3)
-------- -------- --------
Net cash used for financing activities (218.5) (46.8) (57.0)
-------- -------- --------
Net increase in cash and equivalents 49.7 30.9 11.8
Cash and equivalents at beginning of
year 78.4 47.5 35.7
-------- -------- --------
Cash and equivalents at end of year $ 128.1 $ 78.4 $ 47.5
======== ======== ========
Supplemental disclosures
Income taxes paid, net $ (438.6) $ (197.4) $ (22.1)
Interest paid (9.5) (6.6) (6.1)
Noncash investing and financing
activities:
Equipment acquisitions on contracts
payable and capital leases 230.8 125.6 71.0
Equipment acquisition in exchange
for license of product and process
technology -- -- 8.4
Assets acquired, net of cash and
liabilities assumed in merger
transaction 26.0 -- --
The accompanying notes are an integral part of the financial statements.
Micron Technology, Inc.
Notes to Consolidated Financial Statements
(All tabular dollar and share amounts are stated in millions)
Significant Accounting Policies
Basis of presentation: The consolidated financial statements include
the accounts of Micron Technology, Inc., and its domestic and foreign
subsidiaries (the "Company"). The Company designs, develops,
manufactures, and markets semiconductor memory products, including
DRAMs and SRAMs, personal computers and complex printed circuit board
assemblies. All significant intercompany accounts and transactions
have been eliminated. The Company's fiscal year ends on the Thursday
closest to August 31. During 1995, the Company acquired ZEOS
International, Ltd. ("ZEOS"), a manufacturer of personal computer
systems, in a merger transaction accounted for as a purchase. Under
terms of the transaction, the Company, merged two of its operating
subsidiaries, Micron Computer, Inc., and Micron Custom Manufacturing
Services, Inc., with and into ZEOS in exchange for an approximate 79%
ownership interest in ZEOS. The newly merged company was renamed
Micron Electronics, Inc. ("MEI"), and the results of its operations
(including those of the former ZEOS operation subsequent to the merger
date) are included in the consolidated financial statements of the
Company.
Revenue recognition: Revenue from product sales to direct customers is
recognized upon shipment. The Company defers recognition of sales to
distributors, which allow certain rights of return and price
protection, until distributors have sold the products. Net sales
include construction management fees earned, and revenues under cross-
license agreements with third parties and under government research
contracts.
Earnings per share: Earnings per share are 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.
Financial instruments: Cash equivalents include highly liquid short-
term investments with original maturities of three months or less,
readily convertible to known amounts of cash. The amounts reported as
cash and equivalents, liquid investments, receivables, other assets,
accounts payable and accrued expenses, and equipment purchase
contracts and long-term debt are considered to be reasonable
approximations of their fair values. The fair value estimates
presented herein were based on market information available to
management as of August 31, 1995. The use of different market
assumptions and/or estimation methodologies could have a material
effect on the estimated fair value amounts. The reported fair values
do not take into consideration potential expenses that would be
incurred in an actual settlement.
Financial instruments that potentially subject the Company to
concentrations of credit risk, consist principally of cash, liquid
investments, and trade accounts receivable. The Company invests cash
through high-credit-quality financial institutions and performs
periodic evaluations of the relative credit standing of these
financial institutions. The Company, by policy, limits the
concentration of credit exposure by restricting investments with any
single obligor, instrument, or geographic area. A concentration of
credit risk may exist with respect to trade receivables, as a
substantial portion of the Company's customers are affiliated with
the computer, telecommunications, and office automation industries.
The Company performs ongoing credit evaluations of customers
world-wide and generally does not require collateral from its
customers. Historically, the Company has not experienced
significant losses related to receivables for individual customers
or groups of customers in any particular industry or geographic area.
Inventories: Inventories are stated at the lower of average cost or
market. Cost includes labor, material, and overhead costs, including
product and process technology costs.
Property, plant, and equipment: Property, plant, and equipment are
stated at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of 5 to 30 years for buildings
and 2 to 5 years for equipment.
Product and process technology: Costs related to the conceptual
formulation and design of products and processes are expensed as
research and development. Costs incurred to establish patents and
acquire product and process technology are capitalized. Capitalized
costs are amortized on the units-of-production method and on the
straight-line method over the shorter of the estimated useful life
of the technology, the patent term, or the agreement, ranging up to
10 years.
Foreign currency: The U.S. dollar is the Company's functional currency
for financial reporting.
Restatements and reclassifications: On March 27, 1995, the Company's
Board of Directors announced a 2 for 1 stock split effected in the
form of a stock dividend to shareholders of record as of May 4, 1995.
On March 1, 1994, the Company's Board of Directors announced a 5 for 2
stock split effected in the form of a stock dividend to shareholders
of record as of April 1, 1994. The Company distributed cash in lieu
of fractional shares resulting from the stock split. The Company's par
value of $0.10 per share remained unchanged. Historical share and per
share amounts have been restated to reflect retroactively the stock
splits.
Certain reclassifications have been made, none of which affected
results of operations, to present the financial statements on a
consistent basis.
Liquid Investments
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" as of September 1, 1994. Securities classified as
available-for-sale are stated at their fair values which approximate
cost. Securities classified as held-to-maturity are stated at
amortized cost.
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Available-for-sale securities:
U.S. Government agency $ 28.6 $ 36.9
State and local governments 7.6 2.1
Corporate notes 4.0 3.9
-------- --------
40.2 42.9
-------- --------
Held-to-maturity securities:
State and local governments 196.2 140.3
Commercial paper 118.3 76.9
U.S. Government agency 88.8 51.1
Bankers' acceptances 44.5 42.5
Corporate notes 16.5 28.8
Certificate of deposit 1.0 --
Other 3.1 7.1
-------- --------
Total investments 468.4 346.7
-------- --------
508.6 389.6
Less cash equivalents (80.9) (35.0)
-------- --------
$ 427.7 $ 354.6
======== ========
Securities classified as available-for-sale mature within one to three
years, and securities classified as held-to-maturity have remaining
maturities within one year.
Receivables
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Trade receivables $ 457.4 $ 227.6
Other 14.6 15.9
Allowance for returns and discounts (9.2) (5.2)
Allowance for doubtful accounts (7.4) (2.6)
-------- --------
$ 455.4 $ 235.7
======== ========
Inventories
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Finished goods $ 17.8 $ 5.2
Work in progress 99.1 64.2
Raw materials and supplies 87.9 31.7
-------- --------
$ 204.8 $ 101.1
======== ========
Product and Process Technology
Amortization of capitalized product and process technology costs
charged to operations was $10.3 million in 1995; $40.9 million in
1994; and $26.2 million in 1993. Accumulated amortization was $110.7
million and $100.4 million as of August 31, 1995, and September 1,
1994, respectively.
Property, Plant, and Equipment
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Land $ 34.4 $ 7.9
Buildings 392.0 260.0
Equipment 1,338.4 825.5
Construction in progress 259.2 68.7
-------- --------
2,024.0 1,162.1
Less accumulated depreciation and amortization (638.4) (498.6)
-------- --------
$1,385.6 $ 663.5
======== ========
Accounts Payable and Accrued Expenses
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Accounts payable $ 193.2 $ 55.3
Salaries, wages, and benefits 103.2 63.5
Product and process technology payable 91.5 16.6
Income taxes payable 72.7 44.0
Other 41.7 20.8
-------- --------
$ 502.3 $ 200.2
======== ========
Long-Term Debt
8/31/95 9/1/94
- -----------------------------------------------------------------------------
Notes payable in periodic installments through
July 2015, weighted average interest rate 6.82%
and 7.30%, respectively $ 89.3 $ 78.7
Noninterest bearing obligations, $19.8 million due
June 1997, $3 million due October 1997 and $20.5
million due December 1997, weighted average imputed
interest rate of 6.85% and 6.50%, respectively 37.8 16.6
Notes payable, due at maturity, ranging from December
1996 to December 1997, weighted average interest
rate of 5.49% and 5.11%, respectively 20.0 37.0
Capitalized lease obligations payable in monthly
installments through April 1998, weighted average
interest rate 8.94% and 7.93%, respectively 8.8 12.4
Noninterest bearing obligation, paid in November
1994, original face amount of $50.0 million (net of
discount based on imputed interest rate of 10.25%) -- 9.8
-------- --------
155.9 154.5
Less current portion (26.5) (29.8)
-------- --------
$ 129.4 $ 124.7
======== ========
Certain notes payable are collateralized by plant and equipment with a
total cost of approximately $103.3 million and accumulated depreciation
of approximately $42.7 million as of August 31, 1995. Equipment under
capital leases, and the accumulated depreciation thereon, were
approximately $16.7 million and $10.7 million, respectively, as of
August 31, 1995, and $16.9 million and $8.5 million, respectively,
as of September 1, 1994. Maturities of long-term debt are as follows:
Noninterest
Notes bearing Capital
Fiscal year payable obligations leases
- -----------------------------------------------------------------------------
1996 $ 23.5 $ -- $ 3.5
1997 61.0 19.8 5.2
1998 17.4 23.5 0.8
1999 6.9 -- --
2000 0.5 -- --
Less discount and interest -- (5.5) (0.7)
-------- -------- --------
$ 109.3 $ 37.8 $ 8.8
======== ======== ========
Interest income in 1995 and 1994 is net of interest expense of $7.3
million and $5.8 million, respectively. Interest expense in 1993 is
net of $4.5 million of interest income. Construction period interest
of $4.9 million, $2.6 million, and $0.3 million was capitalized in
1995, 1994, and 1993, respectively.
Stock Purchase Plans
The Company's 1985 and 1994 Incentive Stock Option Plans ("ISO Plans")
provide for the granting of incentive or nonstatutory stock options.
As of August 31, 1995, there was an aggregate of 22.1 million shares
of common stock reserved for issuance of which 18.8 million are
committed under the ISO Plans. Options are subject to terms and
conditions determined by the Board of Directors, and generally are
exercisable in increments of 20% during each year of employment
beginning one year from date of grant and expire six years from date
of grant.
Option activity under the ISO Plans is summarized as follows:
Fiscal year ended 8/31/95 9/1/94 9/2/93
- -----------------------------------------------------------------------------
Outstanding at beginning of year 11.6 9.7 12.4
Granted 5.0 5.0 4.8
Terminated or cancelled (.5) -- (0.3)
Exercised (2.4) (3.1) (7.2)
-------- -------- --------
Outstanding at end of year 13.7 11.6 9.7
======== ======== ========
Exercisable at end of year 1.4 .8 1.4
======== ======== ========
Shares available for future grants 3.3 5.8 10.7
======== ======== ========
Options outstanding under the ISO Plans as of August 31, 1995, were at
per share prices ranging from $1.53 to $72.20. Options exercised were
at per share prices ranging from $1.30 to $21.33 in 1995, $1.30 to
$4.71 in 1994, and $.85 to $4.06 in 1993.
The 1989 Employee Stock Purchase Plan allows eligible employees to
purchase shares of the Company's common stock through payroll
deductions. The shares can be purchased for 85% of the lower of the
beginning or ending fair market value of each three-month offering
period and are restricted from resale for a period of one year from
the date of purchase. Purchases are limited to 20% of an employee's
eligible compensation. A total of 2.5 million shares are reserved for
issuance under the plan, of which 1.2 million shares have been issued
as of August 31, 1995.
Employee Savings Plan
The Company has a 401(k) profit-sharing plan ("RAM Plan") in which
substantially all employees are participants. Employees may contribute
from 2% - 16% of their eligible pay to various savings alternatives in
the RAM Plan. In 1994, the RAM Plan was modified, changing the
Company's contribution, to provide for an annual match of the first
$1,500 of eligible employee contributions, in addition to
contributions based on the Company's financial performance. The
Company's RAM Plan expense was $15.9 million in 1995, $8.2 million in
1994, and $2.4 million in 1993.
Commitments
As of August 31, 1995, the Company had commitments of $643.4 million
for equipment purchases and $34.6 million for the construction of
buildings.
Income Taxes
Effective the first day of fiscal 1994, the Company adopted SFAS No.
109, "Accounting for Income Taxes," which prescribes the liability
method of 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. Previously, income taxes were accounted for in
accordance with SFAS No. 96.
The provision for income taxes consists of the following:
Fiscal year ended 8/31/95 9/1/94 9/2/93
- -----------------------------------------------------------------------------
Current:
U.S. federal $ 409.3 $ 192.4 $ 57.9
State 64.6 25.2 4.8
Foreign 7.0 5.0 1.0
-------- -------- --------
480.9 222.6 63.7
-------- -------- --------
Deferred:
U.S. federal 21.6 2.3 (6.5)
State 3.9 0.4 1.4
Foreign -- -- (0.1)
-------- -------- --------
25.5 2.7 (5.2)
-------- -------- --------
Income tax provision $ 506.4 $ 225.3 $ 58.5
======== ======== ========
The tax benefit associated with disqualifying dispositions by employees
of shares issued in the Company's stock purchase plans reduced taxes
payable by $13.6 million and $10.6 million for 1995 and 1994,
respectively. Such benefits are credited to additional capital.
A reconciliation between income tax computed using the federal
statutory rate and the income tax provision follows:
U.S. federal income tax at statutory
rate $ 472.7 $ 219.0 $ 56.4
State taxes, net of federal benefit 47.4 16.7 4.0
Other (13.7) (10.4) (1.9)
-------- -------- --------
Income tax provision $ 506.4 $ 225.3 $ 58.5
======== ======== ========
State taxes reflect utilization of investment tax credits of $19.1
million, $20.1 million and $4.9 million for 1995, 1994 and 1993,
respectively.
Deferred income taxes reflect the net tax effects of temporary
differences between the basis of assets and liabilities for financial
reporting and income tax purposes. The approximate tax effects of
temporary differences which give rise to the net deferred tax
liability are as follows:
8/31/95 9/1/94
-------- --------
Current deferred tax asset:
Accrued product and process technology $ 10.4 $ --
Inventory 9.7 2.3
Accrued compensation 6.0 5.8
Deferred income 3.4 3.7
Net operating loss acquired in merger 2.8 --
Other 16.7 8.3
-------- --------
Net deferred tax asset 49.0 20.1
-------- --------
Noncurrent deferred tax asset (liability):
Excess tax over book depreciation (83.5) (58.2)
Accrued product and process technology 15.3 7.9
Investment in subsidiary (11.5) --
Other (13.6) (3.8)
-------- --------
Net deferred tax liability (93.3) (54.1)
-------- --------
Total net deferred tax liability $ (44.3) $ (34.0)
======== ========
During 1993, in accordance with SFAS No. 96, deferred income taxes
were provided for significant temporary differences comprised of
product and process technology of $14.5 million, depreciation of $2.8
million, and other items of $6.5 million.
Export Sales and Major Customers
Export sales were $753.7 million, $471.0 million, and $250.9 million
in 1995, 1994, and 1993, respectively. Sales to one
personal computer manufacturing customer approximated 11% and 10% of
total net sales in 1994 and 1993, respectively. No other customer
individually accounted for 10% or more of the Company's total net
sales.
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 has various product and
process technology agreements which expire in calendar 1995, including
an agreement with IBM. The Company is unable to predict whether these
license agreements can be obtained or renewed on terms acceptable to
the Company. Failure to renew such licenses could result in
litigation and the attendant cost and diversion of resources
associated therewith and could result in material changes in the
Company's production processes or products. An adverse decision on
any such litigation or such material changes could have a material
effect on the Company's financial position or results of operations.
The Company is not able to predict whether these license agreements
can be renewed on terms acceptable to the Company.
The Company is currently a party to various other legal actions
arising out of the normal course of business, none of which are
expected to have a material effect on the Company's financial position
or results of operations.
Quarterly Financial and Market Information (Unaudited)
(Dollars in millions, except for per share amounts)
1995 Quarter 1st 2nd 3rd 4th
-------- -------- -------- --------
Net sales $ 535.0 $ 628.5 $ 761.2 $1,028.0
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold 224.5 267.5 357.2 479.5
Selling, general, and
administrative 38.2 39.0 54.4 67.1
Research and development 27.0 28.9 33.6 39.3
-------- -------- -------- --------
Total costs and expenses 289.7 335.4 445.2 585.9
-------- -------- -------- --------
Operating income 245.3 293.1 316.0 442.1
Gain from merger transaction -- -- 29.0 --
Interest income, net 3.6 6.5 7.4 7.5
-------- -------- -------- --------
Income before income taxes 248.9 299.6 352.4 449.6
Income tax provision 89.6 116.1 132.2 168.5
-------- -------- -------- --------
Net income $ 159.3 $ 183.5 $ 220.2 $ 281.1
======== ======== ======== ========
Fully diluted earnings per share $.75 $.86 $1.02 $1.29
Quarterly stock price:
High $21.63 $33.13 $50.75 $78.00
Low 15.25 19.94 32.56 44.75
Dividends declared per share 0.025 0.025 0.050 0.050
1994 Quarter 1st 2nd 3rd 4th
-------- -------- -------- --------
Net sales $ 320.1 $ 390.5 $ 426.4 $ 491.6
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold 166.6 204.1 207.0 211.7
Selling, general, and
administrative 34.1 33.1 35.8 32.7
Research and development 14.3 18.7 22.9 27.5
-------- -------- -------- --------
Total costs and expenses 215.0 255.9 265.7 271.9
-------- -------- -------- --------
Operating income 105.1 134.6 160.7 219.7
Interest income, net 0.4 1.0 2.3 2.0
-------- -------- -------- --------
Income before income taxes 105.5 135.6 163.0 221.7
Income tax provision 38.0 48.8 58.7 79.8
-------- -------- -------- --------
Net income $ 67.5 $ 86.8 $ 104.3 $ 141.9
======== ======== ======== ========
Fully diluted earnings per share $0.33 $0.41 $0.49 $0.67
Quarterly stock price:
High $12.73 $15.30 $19.95 $22.44
Low 7.58 8.73 14.13 15.31
Dividends declared per share 0.010 -- 0.025 0.025
As of August 31, 1995, the Company had 5,649 shareholders of record.
Cost of goods sold for the third quarter of 1995 included a $25.0
million pretax charge associated with contingencies for product and
process technology rights.
Report of Independent Accountants
The Shareholders and Board of Directors
Micron Technology, Inc.
We have audited the consolidated financial statements of Micron
Technology, Inc., listed in the index on page 40 of this Form 10-K.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Micron Technology, Inc., as of August 31, 1995, and September 1,
1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended August 31, 1995,
in conformity with generally accepted accounting principles.
As discussed in the contingencies note to the consolidated financial
statements, management can give no assurance that the amounts accrued
as of August 31, 1995, for estimated costs of settlement or
adjudication of asserted and unasserted claims for infringement of
product and process technology rights held by others, have been
adequate, nor can management estimate the range of additional possible
loss, if any, from resolution of these uncertainties.
/s/ Coopers & Lybrand L.L.P.
Boise, Idaho
September 21, 1995
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Certain information concerning the registrant's executive officers is
included under the caption "Executive Officers of the Registrant"
following Part I, Item 1 of this report. Other information required by
Items 10, 11, 12 and 13 will be contained in the registrant's Proxy
Statement which will be filed with the Securities and Exchange
Commission within 120 days after August 31, 1995, and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) The following documents are filed as part of this report:
Consolidated financial statements and financial statement schedules
- -- see "Item 8. Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements - Contingencies."
Exhibit Description
3.1 Certificate of Incorporation of the Registrant, as amended.
3.7 Bylaws of the Registrant, as amended.
10.82 Form of Indemnification Agreement between the Registrant and
its officers and directors.(1)
10.91 Board Resolution regarding stock and bonus plan vesting schedules
in the event of change in control of the Registrant.(2)
10.92 Additional provisions related to Management Bonus Arrangements
for Certain Executive Officers.(2)
10.96 Form of Termination Agreement for members of the Registrant's
Operations Committee and other Officers of the Company.(3)
10.100 Amended and Restated 1985 Incentive Stock Option Plan.(4)
10.103 Real Estate Agreement and Addendum dated May 29, 1991 between the
Registrant and Thomas T. Nicholson, Allen T. Noble, Don J. Simplot,
J. R. Simplot, Ronald C. Yanke, Semienterprises, a partnership
and Macron, a partnership.(5)
10.105 Form of Management bonus arrangements for Executive Officers of
Micron Technology, Inc., and Micron Semiconductor, Inc., for
1993.(5)
10.109 Form of Management bonus arrangements for Executive Officers of
Micron Technology, Inc., and Micron Semiconductor, Inc., for
1994.(6)
10.110 1994 Stock Option Plan
10.111 Executive Bonus Plan
11.1 Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedule
- ---------------------------------
(1) Incorporated by Reference to Proxy Statement for the 1986 Annual
Meeting of Shareholders.
(2) Incorporated by Reference to Annual Report on Form 10-K for the
fiscal year ended August 31, 1989.
(3) Incorporated by Reference to Annual Report on Form 10-K for the
fiscal year ended August 30, 1990.
(4) Incorporated by Reference to Registration Statements on Forms S-8
(Reg. Nos. 33-38665, 33-38926, and 33-52653).
(5) Incorporated by Reference to Annual Report on Form 10-K for the
fiscal year ended September 3, 1992.
(6) Incorporated by Reference to Annual Report on Form 10-K for the
fiscal year ended September 2, 1993.
Exhibit numbers from Registration Statement on Form S-1 (Reg. No. 2-93343)
retained, where applicable.
(b) Reports on Form 8-K:
The registrant did not file any Reports on Form 8-K during the
quarter ended August 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Boise, State of Idaho, on the 10th day of
October, 1995.
MICRON TECHNOLOGY, INC.
By /s/ Wilbur G. Stover, Jr.
--------------------------------------------
Wilbur G. Stover, Jr., Vice President,
Finance, Chief Financial Officer and
Corporate Secretary
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
- ------------------------- ---------------------------------- ---------------
/s/ Steven R. Appleton Chairman of the Board, Chief October 10, 1995
- ------------------------- Executive Officer and President
(Steven R. Appleton) (Principal Executive Officer)
/s/ Tyler A. Lowrey Director, Vice Chairman and Chief October 10, 1995
- ------------------------- Technical Officer
(Tyler A. Lowrey)
/s/ Wilbur G. Stover, Jr. Director; Vice President, Finance, October 10, 1995
- ------------------------- Chief Financial Officer and
(Wilbur G. Stover, Jr.) Corporate Secretary (Principal
Financial and Accounting Officer)
/s/ Jerry M. Hess Director October 10, 1995
- -------------------------
(Jerry M. Hess)
/s/ Robert A. Lothrop Director October 10, 1995
- -------------------------
(Robert A. Lothrop)
/s/ Thomas T. Nicholson Director October 10, 1995
- -------------------------
(Thomas T. Nicholson)
/s/ Allen T. Noble Director October 10, 1995
- -------------------------
(Allen T. Noble)
Director October 10, 1995
- -------------------------
(Don J. Simplot)
/s/ John R. Simplot Director October 10, 1995
- -------------------------
(John R. Simplot)
Director October 10, 1995
- -------------------------
(Gordon C. Smith)