27.10.2006: Meldung: MEMC Reports Third Quarter Results

MEMC Electronic Materials, Inc. today reported financial results for the quarter ended September 30, 2006.


* Net sales of $407.9 million
* Gross margin of $192.5 million (47.2% of net sales)
* Operating income of $160.7 million (39.4% of net sales)
* Ending cash and short-term investment balance of $451.9 million
* Finalized solar wafer agreement with Suntech

The Company reported net sales of $407.9 million, which represents an increase of over 10% from the second quarter level of $370.5 million. Higher selling prices and increased product volumes drove the sequential improvement.

The Company reported gross margin in the quarter of $192.5 million, or 47.2% of net sales, compared to $160.5 million, or 43.3% of net sales, in the second quarter. The sequential improvement in gross margin was primarily the result of higher selling prices, increased product volume and continued cost reductions.

The Company reported operating income during the quarter of $160.7 million, or 39.4% of net sales. This compares to $127.3 million, or 34.4% of net sales, for the second quarter. This sequential improvement in operating income was the result of both a higher gross margin and operating leverage as operating expenses moved below the 8% mark as a percentage of net sales.

During the quarter, deferred revenue on the balance sheet decreased by $8.7 million. This change resulted in a $2.0 million benefit to revenue on the income statement, with an associated $0.6 million increase in cost of goods sold.

Using an estimated effective cash tax rate of 19%, non-GAAP net income for the third quarter of 2006 was $128.6 million (including $4.5 million in pre- tax stock compensation expense) and non-GAAP diluted EPS was $0.56. Net income for the third quarter, using a book tax rate of 42.2% and including $4.5 million in pre-tax stock compensation expense, was $91.0 million and diluted EPS was $0.40. The book tax rate was higher during the quarter due in part to the repatriation of cash from foreign operations.

During the quarter, the company finalized its $5-$6 billion solar wafer agreement with Suntech. As part of the agreement, the company received a warrant to purchase up to a 4.9% equity stake in Suntech, for which the company will be required to mark the warrants to market each quarter until they are exercised. The results for the third quarter include a non-cash charge to other income/expense of $2.4 million from re-valuing these warrants to reflect the market value of the warrants as of the end of the quarter. In addition, as a result of the Suntech agreement, the company has established a long term deferred revenue account with a balance of $67 million. This deferred revenue and associated profit will be recognized as product deliveries are made to Suntech over the 10-year life of the agreement and will be included in the company"s regularly reported results.

During the third quarter, the company generated operating cash flow of $140.4 million, or 34.4% of sales. Capital expenditures for the quarter totaled $34.0 million. Free cash flow (operating cash flow minus capital expenditures) was $106.4 million or 26.1% of sales. MEMC ended the third quarter with cash and short-term investments of $451.9 million, compared to $314.2 million at the end of the prior quarter.

"Our robust third quarter results reflect our strong market position," commented Nabeel Gareeb, MEMC"s chief executive officer. "Compared to the previous quarter, MEMC achieved significant growth in revenue and margins. In addition, our continuing focus on execution and cash flow generation has enabled the Company to grow cash balances by almost $140 million during the third quarter alone. The company now has cash and short-term investments of over $450 million."


"The environment in the semiconductor industry is mixed. Some customers have indicated short-term softness as they work through their inventory issues. A second group is indicating a recovery as they have finished working through their inventory issues present earlier in the quarter. A third group of customers never slowed down and show signs of continued growth. Throughout all of this, the solar market continues to be strong. As a result, demand for polysilicon continues to be robust, thereby allowing the pricing environment to stay healthy."

"Based on these factors, and the strong baseline results from the third quarter, we are targeting sales in the fourth quarter to be between $410-$415 million. In addition, we are targeting margins to improve by up to 100 basis points compared to the reported third quarter levels."

Other Events

"In addition to our third quarter results, the company announced today a $2.5-$3 billion definitive agreement to supply solar wafers to Gintech. With this announcement, MEMC now has agreements to supply solar wafers worth between $7-$9 billion over the next ten years. Solar represents a very significant and profitable growth vehicle for MEMC, and we are excited to announce Gintech as our newest partner," concluded Gareeb.

Conference Call

MEMC will host a conference call today, October 26, 2006, 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 26, 2006, until 11:59 pm ET on November 2, 2006. To access the replay, please dial (402) 220-2075 at any time during that period. A replay will also be available until 11:59 pm ET on November 2, 2006 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.

Certain matters discussed in this news release are forward-looking statements, including our expectation that fourth quarter 2006 sales will be between $410-$415 million and that margins will improve by up to 100 basis points compared to the third quarter levels. 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; 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; Dollars in thousands, except share data)

Three Months Ended Nine Months Ended

Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005

Net sales $407,949 $280,743 $1,120,038 $803,938
Cost of goods sold 215,441 195,497 634,387 548,113
Gross margin 192,508 85,246 485,651 255,825

Operating expenses:
Marketing and
administration 22,774 18,634 68,961 55,504
Research and
development 9,072 7,166 27,055 24,809
Operating income 160,662 59,446 389,635 175,512

Nonoperating (income)
Interest expense 199 1,703 2,011 5,551
Interest income (4,227) (882) (8,465) (2,584)
Currency (gains)
losses 667 (1,083) 1,045 (324)
Other, net 2,215 1,778 1,118 943
Total nonoperating
(income) expense (1,146) 1,516 (4,291) 3,586
Income before
income taxes,
equity in loss of
joint venture and
interests 161,808 57,930 393,926 171,926
Income tax provision
(benefit) 68,329 (45,107) 148,782 (30,595)
Income before
equity in loss of
joint venture and
interests 93,479 103,037 245,144 202,521
Minority interests (2,432) (1,412) (4,806) (3,381)
Net income $91,047 $101,625 $240,338 $199,140

Basic income per share $0.41 $0.47 $1.08 $0.94
Diluted income per
share $0.40 $0.45 $1.05 $0.88
Weighted average
shares used in
computing basic
income per share 222,058,257 214,706,291 221,926,627 210,934,542
Weighted average
shares used in
computing diluted
income per share 229,713,394 227,148,309 229,554,783 225,538,733

(Unaudited; Dollars in thousands)

September 30, December 31,
2006 2005

Current assets:
Cash and cash equivalents $418,394 $126,494
Short term investments 33,478 27,117
Accounts receivable, net 186,955 125,183
Inventories 96,055 119,956
Prepaid and other current assets 31,344 37,528
Total current assets 766,226 436,278
Property, plant and equipment, net 552,748 494,927
Deferred tax assets, net 152,986 165,570
Other assets 118,194 51,328
Total assets $1,590,154 $1,148,103

Current liabilities:
Short-term borrowings and current
portion of long-term debt $5,100 $18,305
Accounts payable 108,250 105,500
Accrued liabilities 59,635 48,938
Deferred revenue 5,069 14,558
Accrued wages and salaries 34,549 25,987
Income taxes payable 92,813 11,621
Total current liabilities 305,416 224,909
Long-term debt, less current
portion 32,299 34,821
Pension and similar liabilities 81,922 91,028
Deferred revenue 67,261 -
Other liabilities 71,482 41,362
Total liabilities 558,380 392,120
Minority interests 43,816 44,646
Commitments and contingencies
Stockholders" equity:
Preferred stock
Common stock 2,229 2,223
Additional paid-in capital 214,017 191,535
Retained earnings 798,042 557,704
Accumulated other comprehensive loss (22,059) (35,854)
Treasury stock (4,271) (4,271)
Total stockholders" equity 987,958 711,337
Total liabilities and
stockholders" equity $1,590,154 $1,148,103

(Unaudited; Dollars in thousands)

Three Months Ended Nine Months Ended

Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005

Cash Flows from Operating
Net income $91,047 $101,625 $240,338 $199,140
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 17,637 14,989 51,547 41,628
Minority interests 2,432 1,412 4,805 3,381
Stock compensation 4,542 174 11,948 673
Working capital and other 24,739 (37,895) 66,758 (30,823)
Net cash provided by operating
activities 140,397 80,305 375,396 213,999

Cash Flows from Investing
Proceeds from sale of time
deposits 2,088 (43) 16,383 19,045
Purchases of time deposits (4,242) 48 (17,611) (20,060)
Capital expenditures (33,985) (30,990) (96,740) (141,567)
Proceeds from sale of property,
plant and equipment - 2 145 6
Other 3,750 - 3,750 -
Net cash used in investing
activities (32,389) (30,983) (94,073) (142,576)

Cash Flows from Financing
Net short-term borrowings (240) (6,604) (13,209) (7,752)
Proceeds from issuance of long-
term debt - 60,000 - 60,000
Principal payments on long-term
debt - (66,523) (2,691) (70,967)
Debt financing fees - (1,184) - (1,184)
Proceeds from issuance of common
stock 975 7,752 6,284 12,873
Proceeds from customer deposit 21,219 - 21,219
Dividend to minority interest - - (5,636) (9,546)
Excess tax benefits from share-
based payment arrangements 1,052 - 1,052 -
Net cash provided by (used in)
financing activities 23,006 (6,559) 7,019 (16,576)

Effect of exchange rate changes on
cash and cash equivalents 1,049 (124) 3,558 3,266

Net increase in cash and cash
equivalents 132,063 42,639 291,900 58,113
Cash and cash equivalents at
beginning of period 286,331 64,993 126,494 49,519
Cash and cash equivalents at end
of period $418,394 $107,632 $418,394 $107,632

SOURCE MEMC Electronic Materials, Inc.

CONTACT: Bill Michalek, Director, Investor Relations of MEMC Electronic Materials, Inc., +1-636-474-5443
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