Micron Technology has reported its Q4 and fiscal 2002 results. The company made operating losses of $468 million and $1,025 million, respectively, on net sales of $748 million and $2,589 million. Micron blamed weak PC sales and declining memory prices for the losses.
Operating results for the fourth quarter of fiscal 2002 include a write-down of $174 million to record inventories of semiconductor products at their estimated market values.
Average selling prices for the company’s semiconductor products decreased approximately 30% in the fourth quarter compared to the immediately preceding quarter ended May 30, 2002. The decrease in average selling prices was substantially offset by an approximate 40% increase in the company’s megabit shipments during the fourth quarter resulting in only slightly lower net sales for the fourth quarter compared to the third quarter.
Despite adverse market conditions, the company claims it is executing successfully with respect to its products and technology. In the fourth quarter the company completed its transition from the 256 Meg Sync DRAM to the 256 Meg DDR DRAM as its primary product. Finished goods inventory levels of DDR products are minimal as demand for DDR memory remains strong. The company spent approximately $2.6 billion over the past two fiscal years on capital expenditures for leading edge R&D and manufacturing capability. The company’s recent efficiency measures reduced fourth quarter per megabit manufacturing costs by approximately 10% as compared to the immediately preceding quarter. Near term cost reductions are expected to result from utilization of .13 and .11 micron manufacturing capacity. Megabit production in the fourth quarter was approximately 20% higher than the immediately preceding quarter. In addition to next generation memory development efforts, research and development expense includes costs incurred in design and development of devices for data networking applications and CMOS imagers.
Due to historically low average selling prices, estimated market values of certain of the company’s products, in particular synchronous DRAM products, held in finished goods and work in process inventories are currently below their costs, requiring an inventory write-down to estimated market values. Excluding the effects on gross margin of the fourth quarter write-down and of previous write-downs on products sold in the fourth quarter, gross margin for the fourth quarter of fiscal 2002 would have been higher by approximately $130 million.
In the fourth quarter of fiscal 2002, as part of the income tax provision for the period, the company recorded a non-cash charge of $348 million, or $0.58 per diluted share, through the establishment of a valuation allowance against its deferred tax asset consisting primarily of U.S. net operating loss carryforwards ($1.3 billion as of August 29, 2002). The valuation allowance is in accordance with generally accepted accounting principles, which require the assessment of the company’s performance and other relevant factors when determining the need for a valuation allowance. Factors such as recent losses are given substantially more weight than forecast future profitability. Until the company utilizes these U.S. operating loss carryforwards, the income tax provision will reflect modest levels of foreign taxation.
Including the aforementioned effects of the lower of cost or market write-downs and the deferred tax asset valuation allowance, the company’s after-tax net loss for the fourth quarter was $587 million, or $0.97 per diluted share, and for fiscal year 2002 was $907 million, or $1.51 per diluted share. For fiscal year 2001, the company had a net loss from continuing operations of $521 million, or $0.88 per diluted share, on net sales of $3,936 million.
Micron finished its 2002 fiscal year with approximately $1.1 billion in cash and investments (including $160 million of marketable investments, classified as other long-term assets, with average duration of less than one year).
