Micron Technology Reports Second Quarter Financial Results

by Anton Shilov
03/21/2003 | 12:18 PM

Micron Technology today announced results of operations for the second quarter of its 2003 fiscal year which ended February 27, 2003.

The company reported a second quarter net loss of $619 million, or $1.02 per diluted share, on sales of $785 million. Sales for the second quarter were $100 million, or 15%, higher than the immediately preceding quarter, which ended November 28, 2002, and were $400 million, or 37%, higher comparing the first six months of fiscal 2003 to the corresponding period of the prior year. The second quarter operating results include charges of $197 million for the write-down of work in process and finished goods inventories to their estimated market values, and restructure and other charges of $116 million. Absent these restructure and other charges and the net effects of the current quarter and prior quarters’ inventory write-downs of $99 million, the company’s operating loss for the second quarter of fiscal 2003 would have been $386 million. The comparable loss for the first quarter of fiscal 2003 was $345 million. The company recognized no tax benefit in fiscal 2003 on its U.S. net operating losses, and similarly, future U.S. income will not bear an income tax provision until the company’s net operating loss carryforwards are utilized.

Average selling prices per megabit for the company’s semiconductor products were down slightly in the second quarter compared to the immediately preceding quarter. This decrease reflects the net effect of a significant decrease in selling prices for DDR DRAM products partially offset by increases in the selling prices for Synchronous DRAMs. DDR DRAM products comprised approximately 60% of Micron’s megabit sales in the second quarter of fiscal 2003, compared to approximately 40% in the first quarter of fiscal 2003. The company’s sales volume as measured in megabits increased approximately 20% in the second quarter of fiscal 2003 compared to the previous quarter. The higher level of megabit sales reduced the company’s finished goods inventories to their lowest level, as measured in weeks of sales on hand, since 1999.

The $116 million of restructure and other charges in the second quarter of fiscal 2003 relate to Micron’s recently announced restructure plan that includes the shut-down of its 200mm wafer fabrication line in Virginia, the discontinuance of certain product lines and the 10% reduction in worldwide workforce. The company expects to realize annualized cost savings in excess of $250 million as a result of this plan.

According to the CEO of Micron, 0.13 micron products are realizing noticeable manufacturing improvements which will be reflected in reduced costs over the next two quarters; the company expects to gain further economies on its 0.13 micron production by re-deploying many of the 200mm tools from Virginia to other sites. He added that the company is ahead of plan for the worldwide transition to 200mm 0.11 micron process, while 300mm 0.11 micron production line in Virginia is progressing on schedule.

The $197 million write-down of inventories to their market values in the second quarter of fiscal 2003 includes $72 million related to products that were discontinued by the company pursuant to the restructure plan.

As of February 27, 2003, Micron had $1.2 billion in cash and short-term investments. During the second quarter of fiscal 2003, the company issued $633 million of 2.5% seven-year convertible subordinated notes. Net proceeds received of $507 million reflect the cost of call spread options purchased in conjunction with the issuance of the notes. The call spread options are designed to effectively increase the conversion price on the convertible subordinated notes from $11.79 per share to a maximum of $18.19.