On June 28, computer memory and consumer electronics designer Micron Technology
- Oh dear. The computer memory sector is a stern mistress indeed. Where else can you lower your production costs by 15%-30% from the preceding quarter and still drop gross margins by two-thirds, year over year? That kind of shock to the system is nigh-on impossible to soften before the bottom line suffers, too.
- Despite product prices in free-fall, inventory levels are ballooning unchecked. That suggests either overproduction, low customer demand, or a combination of the two.
- There's $1.3 billion in brand-new debt on the balance sheet, presumably to batten down the hatches as the cash started flowing out. It's all in senior convertible notes, explaining the growth in diluted shares, and heavily hedged with call options contracts on 91 million shares of company stock. The complex transaction was orchestrated by Morgan Stanley
(NYSE:MS) and financed by Wells Fargo(NYSE:WFC) .
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q3 2007 |
Q3 2006 |
Change |
|
|---|---|---|---|
|
Sales |
$1,294 |
$1,312 |
(1.4%) |
|
Net Profit |
($225) |
$88.5 |
N/A |
|
EPS |
($0.29) |
$0.12 |
N/A |
|
Diluted Shares |
769.9 |
720.1 |
6.9% |
Get back to basics with the income statement.
Margin Checkup
|
Q3 2007 |
Q3 2006 |
Change* |
|
|---|---|---|---|
|
Gross Margin |
8.2% |
25.1% |
(16.9) |
|
Operating Margin |
(15.1%) |
3.6% |
(18.7) |
|
Net Margin |
(17.4%) |
6.7% |
(24.1) |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$2,920 |
$2,830 |
3.2% |
|
Accounts Rec. |
$839 |
$722 |
16.2% |
|
Inventory |
$1,449 |
$800 |
81.2% |
|
Liabilities |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Accounts Payable & Accrued Expenses |
$1,245 |
$952 |
30.8% |
|
Long-Term Debt* |
$2,313 |
$519 |
345.5% |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q3 2007 |
Q3 2006 |
Change |
|
|---|---|---|---|
|
Cash From Ops. |
$77.0 |
$384 |
(79.9%) |
|
Capital Expenditures |
$671 |
$335 |
100.4% |
|
Free Cash Flow |
($594) |
$48.7 |
N/A |
|
($434) |
$95.2 |
N/A |
Free cash flow is a Fool's best friend.
Related Foolishness:
- Foolish Forecast: Micron Not So Mighty
- Micron's Good News, Bad News Opportunity
- Micron's Microscopic Margins: Q2 Fool by Numbers
Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.
At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.
