26.10.2007: Meldung: MEMC reports Q3 financial results

MEMC Electronic Materials, Inc. reported financial results for the quarter ended September 30, 2007.


* Net sales of $472.8 million

* Gross margin of $238.8 million (50.5% of net sales)

* Operating income of $200.1 million (42.3% of net sales)

* Cash and short-term investment balances exceed $1 billion mark

* Solar wafer agreement total doubles to $15-$18 billion with signing of 2 additional wafer agreements

The company reported third quarter net sales of $472.8 million versus second quarter 2007 net sales of $472.7 million. This represents an increase of 15.9% over third quarter 2006 net sales of $408.0 million.

Gross margin in the quarter was $238.8 million, or 50.5% of net sales, compared to $245.6 million, or 52.0% of sales, in the 2007 second quarter and $192.6 million, or 47.2% of sales, in the 2006 third quarter. The impact associated with the previously disclosed construction incident at the company"s Pasadena polysilicon manufacturing facility was the primary factor contributing to the sequential reduction in gross margin. Compared to the 2006 third quarter, gross margin improved 24.0% in dollar terms and 330 basis points as a percentage of net sales.

The company reported operating income during the quarter of $200.1 million, or 42.3% of net sales. This compares to $207.3 million, or 43.9% of net sales, for the 2007 second quarter and $160.7 million, or 39.4% of net sales, for the 2006 third quarter. Operating expenses were $38.7 million, or 8.2% of sales, compared to $38.3 million, or 8.1% of sales, in the 2007 second quarter, and $31.9 million, or 7.8% of sales, in the 2006 third quarter. Non- operating income in the quarter includes a non-cash benefit of $9.3 million, reflecting the required quarterly valuation of the Suntech warrants.

Using an estimated effective cash tax rate of 15%, non-GAAP net income for the third quarter of 2007 was $188.1 million and non-GAAP diluted EPS was $0.81. This represents non-GAAP earnings per share which is flat with the previous quarter and up 45% versus the year-ago quarter. Net income for the third quarter, using a book tax rate of 31.6%, was $151.5 million and GAAP diluted EPS was $0.65. Both GAAP and non-GAAP EPS figures include $9.3 million in pre-tax benefit relating to the Suntech warrants ($0.03 per share after tax in Q3, versus $7.9 million benefit or $0.02 per share after tax in Q2). See non-GAAP reconciliation information at the end of this press release following the financial statement tables.

During the third quarter, the company generated operating cash flow of $266.6 million, or 56.4% of sales, compared to $197.6 million, or 41.8% of sales, in the second quarter. The sequential increase was driven by customer deposits and improvements in working capital. Capital expenditures for the third quarter totaled $71.3 million, or 15.1% of sales. Free cash flow (operating cash flow minus capital expenditures) was $195.3 million or 41.3% of sales. MEMC ended the third quarter with cash and short-term investments of $1,212.5 million, compared to $995.7 million at the end of the second quarter.

"Early last month we announced that a construction incident caused an abrupt power interruption at our Pasadena polysilicon production facility. Although the power was quickly recovered, the extended effects of the incident caused us to lose well over a week"s worth of production, miss our cost projections by the double digit millions, and delay our expansion. In spite of this incident and its unanticipated consequences, we are pleased to report healthy sales and profits during the quarter, and a strong improvement over the year-ago quarter," said Nabeel Gareeb, MEMC"s chief executive officer. "Cash flow generation continues to be strong, and cash balances crossed the $1 billion milestone."

Fourth Quarter 2007 Outlook

"Semiconductor inventory levels appear to have declined from second quarter levels, resulting in improved demand indications from some customers," continued Gareeb. "Demand from solar applications continues to be robust. As a result, we are targeting revenues of between $540 and $545 million for the fourth quarter, in spite of the lingering effects of the construction incident. In addition, we are targeting gross margin of approximately 53%, with operating expenses of approximately $39 million. This range of revenue would represent recovery of some of the lost third quarter sales. Regarding polysilicon capacity, we are still targeting our year-end polysilicon capacity to be over 6,000 metric tons per year."

Other Events

"In addition to our third quarter results, the company today announced two agreements to supply solar wafers worth approximately $8-$9 billion in incremental revenue to MEMC over a ten year period. With this announcement, MEMC now has agreements to supply wafers to solar customers worth approximately $15-$18 billion in revenue to MEMC over the next ten years, up from the $7-$9 billion level previously reported. Solar applications represent a significant growth opportunity for MEMC, and we are very pleased with the announcement of these partnerships," concluded Gareeb.

Conference Call

MEMC will host a conference call today, October 25, 2007, at 5:30 p.m. ET to discuss the company"s third quarter results and related business matters. A live webcast will be available on the company"s web site at www.memc.com. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.

A replay of the conference call will be available from 7:30 p.m. ET on October 25, 2007, until 11:59 p.m. ET on November 1, 2007. To access the replay, please dial (203) 369-1824 at any time during that period. A replay will also be available until 11:59 p.m. ET on November 1, 2007 on the company"s web site at www.memc.com.

About MEMC

MEMC is a global leader in the manufacture and sale of wafers and related intermediate products to the semiconductor and solar industries. MEMC has been a pioneer in the design and development of wafer technologies over the past four decades. With R&D and manufacturing facilities in the U.S., Europe and Asia, MEMC enables the next generation of high performance semiconductor devices and solar cells. MEMC"s common stock is listed on the New York Stock Exchange under the symbol "WFR" and is included in the S&P 500 Index.

Certain matters discussed in this news release are forward-looking statements, including our expectation that fourth quarter 2007 sales are targeted to be between $540 and $545 million; that we are targeting gross margins of approximately 53%, with operating expenses of approximately $39 million; that we are targeting year-end polysilicon capacity to be over 6,000 metric tons per year; that the two agreements announced today will be worth approximately $8-$9 billion in incremental revenue to MEMC over a ten year period, and that all existing agreements will be worth between $15-$18 billion in revenue to MEMC over the next ten years; and that solar applications represent a significant growth opportunity for MEMC. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include market demand for wafers and semiconductors as well as polysilicon; customer acceptance of our new products; utilization of manufacturing capacity; our ability to reduce manufacturing and operating costs; inventory levels of our customers; changes in the pricing environment for both silicon wafers and polysilicon; supply chain difficulties or problems; interruption of production; delays in capacity expansion; assumptions underlying management"s financial estimates; general economic conditions; actions by competitors, customers and suppliers; changes in product specifications and manufacturing processes; changes in financial market conditions; changes in the composition of worldwide taxable income; the impact of competitive products and technologies; changes in interest and currency exchange rates and other risks described in the company"s filings with the Securities and Exchange Commission. These forward-looking statements represent the company"s judgment as of the date of this release. The company disclaims, however, any intent or obligation to update these forward-looking statements.

(Unaudited; In millions, except per share data)

Three Months Ended Nine Months Ended
Sept. June Sept. Sept. Sept.
30, 30, 30, 30, 30,
2007 2007 2006 2007 2006

Net sales $472.8 $472.7 $408.0 $1,385.9 $1,120.0
Cost of goods sold 234.0 227.1 215.4 679.0 634.3
Gross margin 238.8 245.6 192.6 706.9 485.7

Operating expenses:
Marketing and administration 28.8 28.9 22.8 83.0 69.0
Research and development 9.9 9.4 9.1 28.8 27.0
Operating income 200.1 207.3 160.7 595.1 389.7

Nonoperating (income) expense:
Interest expense 0.5 0.3 0.2 1.1 2.0
Interest income (12.1) (10.5) (4.2) (31.0) (8.4)
(Gain) loss on fair value of
warrant (9.3) (7.9) 2.4 (16.1) 2.4
Other, net 0.1 1.6 0.4 1.5 (0.3)
Total nonoperating
(income) expense (20.8) (16.5) (1.2) (44.5) (4.3)
Income before income tax
expense and minority
interests 220.9 223.8 161.9 639.6 394.0
Income tax expense 69.7 58.9 68.3 187.4 148.8
Income before minority
interests 151.2 164.9 93.6 452.2 245.2
Minority interests 0.3 (1.3) (2.5) (2.4) (4.9)
Net income $151.5 $163.6 $91.1 $449.8 $240.3

Basic income per share $0.67 $0.73 $0.41 $2.00 $1.08
Diluted income per share(1) $0.65 $0.70 $0.40 $1.94 $1.05

Weighted-average shares used
in computing basic income per
share 225.0 225.0 222.1 224.7 221.9
Weighted-average shares used
in computing diluted income
per share 232.3 232.5 229.7 232.2 229.6

(1) The sum of quarterly EPS amounts may be different than year-to-date
amounts as a result of the impact of variations in shares outstanding
due to timing of stock option exercises and treasury stock repurchases
and rounding differences.

(In millions)

September 30, December 31,
2007 2006
Current assets:
Cash and cash equivalents $1,052.3 $527.5
Short-term investments 160.2 58.0
Accounts receivable, net 188.9 199.0
Inventories 44.6 80.2
Prepaid and other current assets 26.5 34.8
Total current assets 1,472.5 899.5

Property, plant and equipment, net 748.7 603.5
Deferred tax assets, net 120.8 119.5
Other assets 170.8 143.0
Total assets $2,512.8 $1,765.5

Current liabilities:
Current portion of long-term debt $5.2 $5.0
Accounts payable 157.6 125.4
Accrued liabilities 36.1 31.9
Accrued wages and salaries 33.9 32.8
Customer deposits 130.1 8.4
Income taxes payable 53.0 54.3
Total current liabilities 415.9 257.8
Long-term debt, less current portion 27.7 29.4
Pension and post-employment liabilities 75.8 85.2
Deferred revenue 81.7 68.1
Other liabilities 199.2 119.5
Total liabilities 800.3 560.0
Minority interests 34.8 38.6
Commitments and contingencies
Stockholders" equity:
Preferred stock - -
Common stock 2.3 2.2
Additional paid-in capital 329.7 242.5
Retained earnings 1,384.1 933.8
Accumulated other comprehensive
income (loss) 14.4 (7.4)
Treasury stock (52.8) (4.2)
Total stockholders" equity 1,677.7 1,166.9
Total liabilities and
stockholders" equity $2,512.8 $1,765.5

(Unaudited; In millions)

Three Months Ended Nine Months Ended
Sept. June Sept. Sept. Sept.
30, 30, 30, 30, 30,
2007 2007 2006 2007 2006
Cash flows from operating
Net income $151.5 $163.6 $91.1 $449.8 $240.3
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 20.7 20.2 17.6 59.9 51.5
Minority interests (0.3) 1.3 2.5 2.4 4.9
Stock compensation 8.5 7.8 4.5 23.7 11.9
Working capital and other 34.5 6.7 12.8 96.1 54.0
Customer deposits 51.7 (2.0) 11.9 46.8 12.8
Net cash provided by
operating activities 266.6 197.6 140.4 678.7 375.4

Cash flows from investing
Proceeds from sales and
maturities of investments 2.9 29.3 2.1 46.4 16.4
Purchases of investments (13.2) (132.7) (4.3) (157.6) (17.6)
Capital expenditures (71.3) (53.9) (34.0) (173.1) (96.8)
Other 0.5 - 3.8 0.5 3.9
Net cash used in investing
activities (81.1) (157.3) (32.4) (283.8) (94.1)

Cash flows from financing
Net repayments on short-term
borrowings - - (0.2) - (13.2)
Proceeds from customer
deposits 48.1 - 21.2 111.8 21.2
Principal payments on long-
term debt - (2.5) - (2.5) (2.7)
Excess tax benefits from
stock-based compensation
arrangements 4.4 16.0 1.0 32.5 1.0
Dividend to minority interest - (6.2) - (6.2) (5.6)
Common stock repurchased (43.5) (4.8) - (48.3) -
Proceeds from issuance of
common stock 8.4 8.2 1.0 26.8 6.3
Net cash provided by
financing activities 17.4 10.7 23.0 114.1 7.0

Effect of exchange rate
changes on cash and cash
equivalents 12.6 2.4 1.1 15.8 3.6

Net increase in cash and cash
equivalents 215.5 53.4 132.1 524.8 291.9
Cash and cash equivalents at
beginning of period 836.8 783.4 286.3 527.5 126.5
Cash and cash equivalents at
end of period $1,052.3 $836.8 $418.4 $1,052.3 $418.4

Reconciliation of GAAP Net Income and Diluted EPS
to non-GAAP Net Income and Diluted EPS
Three Months Ended September 30, 2007
(Unaudited; In millions)

Net Income EPS

GAAP $151.5 $0.65
Cash Tax Difference* 36.6 0.16
Non-GAAP $188.1 $0.81

*Our estimated cash tax rate is the estimated tax payable on our tax
returns as a percentage of estimated annual pre-tax book income. The
annual cash tax rate is estimated quarterly by reference to book taxable
income and then taking into account temporary book/tax differences and
any tax basis items reflected on our annual tax returns. The Q3 2007
estimated cash tax rate is 15%. The Q3 2007 book tax rate is 31.6%,
giving rise to a $36.6 million tax difference from GAAP to non-GAAP EPS
calculations as reflected in the above table.

SOURCE: MEMC Electronic Materials, Inc.

CONTACT: Bill Michalek, Director, Investor Relations, of MEMC Electronic
Materials, Inc., 636-474-5443
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