8-KMaterial AgreementsOther Events

MICRON TECHNOLOGY INC 8-K Report, Agreement Terminated (Feb 14, 2006)

Filed February 14, 2006For Securities:MU

Summary

Micron Technology, Inc. (MU) has filed a Form 8-K to report the termination of its outstanding call spread options, which covered approximately 53.7 million shares of common stock. These options were originally put in place in February 2003 in connection with the company's offering of 2.5% Convertible Subordinated Notes due February 1, 2010. The termination follows the company's decision in January 2006 to call for the redemption of all outstanding Notes, which were largely converted into common stock. The termination of the call spread options, which were structured as capped calls with strike prices of $11.79 and $18.19, signifies that these instruments are no longer necessary. The company will receive proceeds from the termination based on a volume-weighted average price formula. Additionally, an interest rate swap agreement tied to the Notes also terminated as scheduled in early February 2006, upon the closing stock price exceeding $14.15.

Key Highlights

  • 1Termination of call spread options covering approximately 53.7 million shares of common stock.
  • 2Call spread options were originally issued in conjunction with the 2003 offering of 2.5% Convertible Subordinated Notes.
  • 3The termination is a result of the company calling for redemption of all outstanding Notes in January 2006.
  • 4Substantially all of the Convertible Notes were converted into common stock.
  • 5The call spread options were structured as capped calls with strike prices between $11.79 and $18.19.
  • 6Proceeds will be received from the termination of the call spread options, determined by a volume-weighted average price formula.
  • 7An associated interest rate swap agreement also terminated as per its terms.

Frequently Asked Questions

The call spread options are being terminated because the company has redeemed all of its outstanding 2.5% Convertible Subordinated Notes, for which the options were originally established as a hedge. With the Notes no longer outstanding, the options are no longer needed.

The termination itself is largely a procedural event reflecting the conversion and redemption of the convertible notes. The company will receive proceeds from the termination based on a formula. It does not inherently signal a new buy or sell recommendation for the stock, but rather unwinds a previous financial instrument.

The call spread options were structured as capped calls. The lower strike price was $11.79, and the upper strike price was $18.19.

The interest rate swap agreement was also linked to the convertible notes and terminated by its terms on February 6, 2006, because the closing price of Micron's common stock exceeded $14.15. This indicates that the company's stock performance met a condition for the natural termination of the swap.