8-KAcquisitions & DispositionsMaterial Agreements

MICRON TECHNOLOGY INC 8-K Report, Material Agreement (Mar 7, 2006)

Filed March 7, 2006For Securities:MU

Summary

This 8-K filing from Micron Technology, Inc. (MU) on March 7, 2006, details significant changes to its ownership and consolidation of the TECH Semiconductor Singapore Pte. Ltd. joint venture. The company contributed approximately $130 million as part of a $260 million capital infusion into TECH, increasing its ownership stake to roughly 43%. More importantly, Micron has entered into an option agreement with EDBI Investments Pte Ltd (EDBI) that could lead to Micron significantly increasing its ownership in TECH, potentially to around 73%, by exercising an option to purchase EDBI's shares or by EDBI putting its shares to Micron. As a direct consequence of this option agreement, Micron has determined that it is the primary beneficiary of TECH under FIN 46(R) accounting rules. Therefore, the company will begin consolidating TECH's financial results into its own statements starting in the third quarter of fiscal year 2006. This consolidation means TECH's assets, liabilities, revenues, and expenses will be fully reflected on Micron's balance sheet and income statement, which could significantly impact Micron's reported financial metrics.

Key Highlights

  • 1Micron contributed approximately $130 million to a $260 million capital raise for the TECH semiconductor joint venture, increasing its ownership to ~43%.
  • 2Micron entered into an option agreement with EDBI Investments Pte Ltd (EDBI) regarding EDBI's shares in TECH.
  • 3The option agreement allows Micron to potentially increase its ownership in TECH to ~73% by exercising a purchase option or by EDBI exercising a put option.
  • 4Micron has concluded it is the primary beneficiary of TECH under FIN 46(R) due to the option agreement.
  • 5Micron will begin consolidating TECH's financial results into its own statements starting in the third quarter of fiscal year 2006.
  • 6The consolidation will lead to TECH's assets, liabilities, and financial performance being fully reflected on Micron's financial statements.

Frequently Asked Questions

The $130 million contribution is part of a larger $260 million capital infusion into the TECH joint venture. This investment increased Micron's ownership stake in TECH to approximately 43%, strengthening its position within the semiconductor manufacturing partnership.

The option agreement establishes reciprocal rights for Micron and EDBI to buy and sell EDBI's shares in TECH. Micron has an option to purchase EDBI's shares until October 1, 2009, while EDBI has an option to sell its shares to Micron from March 3, 2008, until October 1, 2010. If either option is exercised, Micron's ownership in TECH could rise to about 73%.

Micron will consolidate TECH's financial results because, as a result of the option agreement, the company has determined it is the 'primary beneficiary' of TECH under Financial Accounting Standards Board Interpretation No. 46(R) (FIN 46(R)). This accounting standard requires consolidation when a company absorbs a majority of the entity's expected losses or receives a majority of its expected residual returns.

Consolidating TECH means that all of TECH's assets, liabilities, revenues, and expenses will be fully integrated into Micron's financial statements. This will likely increase Micron's reported total assets and liabilities, and its reported revenue and expenses, potentially impacting key financial ratios and overall financial performance metrics starting in the third quarter of fiscal year 2006.