27.04.06

27.4.2006: Meldung: MEMC Reports Record First Quarter Results

MEMC Electronic Materials, Inc. today reported preliminary financial results for the first quarter ended March 31, 2006.

Highlights:

* Record net sales of $340 million
* Record gross margin of $136.4 million, or 40.1% of sales
* Cash balance increases by more than $83 million vs. prior quarter
* MEMC signs $1.6 billion LOI for supply of solar wafers

The company announced first quarter 2006 net sales of $339.9 million. Increased product volumes and higher selling prices drove the sequential improvement.

The company reported gross margin in the quarter of $136.4 million, or 40.1% of sales, results which include a $0.6 million stock option expense. In the first quarter of 2006, MEMC began expensing stock-based compensation pursuant to FAS 123R.

Operating income, which includes a total of $3.2 million of stock option expense, was $102.5 million, or 30.2% of net sales. Operating expenses of $33.9 million, or 10.0% of sales, increased by $2.4 million sequentially due to the inclusion of $2.6 million of stock option expense.

On a non-GAAP basis, using an effective cash tax rate of 19%, net income for the first quarter of 2006 was $83.1 million (including $3.2 million in pre-tax option expense) and non-GAAP diluted EPS was $0.36 (which includes approximately $0.01 impact from options). Net income for the first quarter, using a book tax rate of 34% and including $3.2 million in stock option expense, was $67.8 million and diluted EPS was $0.30.

MEMC ended the first quarter with cash and cash equivalents of $237.0 million, compared to $153.6 million at the end of the prior quarter, and $116.3 million in the year ago period. Operating cash flow for the quarter was $120.6 million, or 35.5% of sales. Capital expenditures for the quarter totaled $30.6 million. Free cash flow (operating cash flow minus capital expenditures) was $90.0 million or 26.5% of sales.

"The pricing environment continued to improve during the quarter due to increased volumes, high utilization rates, and a polysilicon supply chain that continues to be constrained," said Nabeel Gareeb, MEMC"s chief executive officer. "As a result, MEMC set new financial records in several categories including revenue, gross margin and operating profit. We also signed a $1.6 billion letter of intent to supply solar wafers over an 8 year period to a leading solar cell manufacturer. We are looking forward to finalizing the agreement and to start providing wafers to the fast growing solar market in the second half of this year."

Outlook

"Broad-based demand momentum continues into the second quarter. Wafer demand has accelerated, we are seeing strength across virtually all products and geographic regions, and the raw material polysilicon continues to be in short supply. As a result, the pricing environment continues to strengthen."

"Based on this environment, we are targeting second quarter 2006 sales to increase by approximately 5-7% over the strong first quarter of 2006. In addition, we expect to see an additional 200-300 basis point improvement over the gross and operating margins achieved in the first quarter. Operating expenses should be approximately $34-$35 million, including option expense of just over $3 million," concluded Gareeb.

Financial Reporting Update

On January 26, 2006 the company provided unaudited financial results for 2005, which reflected the company"s understanding of its financial results as of that time. As part of this earnings release, to allow for period comparisons, the company has also provided an update to those results to reflect the company"s current understanding of its 2005 financial statements. These updated results follow the 2006 first quarter results set forth immediately after the narrative text of this press release. The updated results also include a brief summary of the reasons behind any updated numbers. More detailed explanations of these updated numbers will be set forth in the company"s Form 10-Qs for the first three quarters of 2005 and Form 10-K for 2005 when those documents are filed with the SEC.

The preliminary results for the first quarter of 2006 are subject to review by the company"s independent registered public accountants before filing on Form 10-Q and the preliminary results for the 2005 quarters and year are subject to audit by the company"s independent registered public accountants. The company is continuing its work to finalize its restated Form 10-Qs for the first two quarters of 2005 and its third quarter Form 10-Q which must be completed before the filing of the 2005 Form 10-K. Information contained herein is therefore subject to change.

Conference Call

MEMC will host a conference call today, April 26, 2006, at 5:30 p.m. ET to discuss the company"s preliminary first 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 April 26, 2006, until 11:59 p.m. ET on May 3, 2006. To access the replay, please dial (203) 369-3326 at any time during that period. A replay will also be available until 11:59 pm ET on May 3, 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 second quarter 2006 sales will increase by 5-7% over first quarter 2006 sales, that the company will experience an additional 200-300 basis point improvement in the second quarter of 2006 over the first quarter gross and operating margins and that operating expenses should be approximately $34-$35 million for the second quarter of 2006, including option expense of just over $3 million. 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; assumptions underlying management"s financial estimates; general economic conditions; actions by competitors, customers and suppliers; the impact of competitive products and technologies; changes in 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.


MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands, except share data)

Three Months Ended
March 31, December 31, March 31,
2006 2005 2005

Net sales $339,906 $314,349 $249,292
Cost of goods sold 203,461 195,200 167,881
Gross margin 136,445 119,149 81,411
Operating expenses:
Marketing and administration 21,938 21,471 18,268
Research and development 12,005 10,076 10,039
Operating income 102,502 87,602 53,104
Nonoperating (income) expense:
Interest expense 982 1,705 1,911
Interest income (1,591) (1,572) (711)
Currency (gains) losses (363) 765 731
Other, net (497) 413 (647)
Total nonoperating (income)
expense (1,469) 1,311 1,284
Income before income taxes,
equity in loss of joint
venture and minority
interests 103,971 86,291 51,820
Income tax provision (benefit) 35,028 22,497 (30,751)
Income before equity in loss
of joint venture and minority
interests 68,943 63,794 82,571
Equity in loss of joint venture - - -
Minority interests (1,116) (2,474) (1,764)
Net income $67,827 $61,320 $80,807

Basic income per share $0.31 $0.28 $0.39
Diluted income per share $0.30 $0.27 $0.36
Weighted average shares used in
computing basic income per share 221,744,847 221,164,731 208,826,451
Weighted average shares used in
computing diluted income per share 229,595,235 228,284,715 223,934,369


MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)

March 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $236,969 $153,611
Accounts receivable, net 139,152 129,378
Inventories 110,256 117,450
Prepaid and other current assets 60,825 39,733
Total current assets 547,202 440,172
Property, plant and equipment, net 525,712 501,695
Deferred tax assets, net 177,888 215,527
Other assets 52,409 51,328
Total assets $1,303,211 $1,208,722

LIABILITIES AND STOCKHOLDERS" EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $3,229 $17,475
Accounts payable 117,112 105,788
Accrued liabilities 23,609 30,996
Deferred revenue 6,233 7,017
Accrued wages and salaries 24,613 21,990
Income taxes payable 21,807 2,202
Total current liabilities 196,603 185,468
Long-term debt, less current portion 34,950 34,821
Pension and similar liabilities 109,196 111,621
Other liabilities 41,516 38,509
Total liabilities 382,265 370,419
Minority interests 55,048 53,932
Commitments and contingencies
Stockholders" equity:
Preferred stock
Common stock 2,226 2,223
Additional paid-in capital 204,437 197,687
Retained earnings 692,962 625,135
Accumulated other comprehensive loss (29,433) (36,275)
Deferred compensation (23) (128)
Treasury stock (4,271) (4,271)
Total stockholders" equity 865,898 784,371
Total liabilities and
stockholders" equity $1,303,211 $1,208,722


MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)

Three Months Ended
March 31, December 31, March 31,
2006 2005 2005

Cash Flows from Operating Activities:
Net income $67,827 $61,320 $80,807
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 16,034 15,320 13,339
Minority interests 1,116 2,423 1,764
Stock compensation 3,572 1,673 386
Equity in loss of joint venture - - -
Working capital and other 32,029 24,713 (33,813)
Net cash provided by operating
activities 120,578 105,449 62,483

Cash Flows from Investing
Activities:
Capital expenditures (30,572) (21,171) (54,051)
Proceeds from sale of property,
plant and equipment 145 15 -
Other - 1,736 -
Net cash used in investing
activities (30,427) (19,420) (54,051)

Cash Flows from Financing
Activities:
Net short-term borrowings (12,373) 389 10,310
Principal payments on long-term debt - (78,515) (883)
Proceeds from issuance of common stock 3,287 1,944 3,867
Net cash provided by (used in)
financing activities (9,086) (76,182) 13,294

Effect of exchange rate changes on
cash and cash equivalents 2,293 517 2,279

Net increase in cash and cash
equivalents 83,358 10,364 24,005
Cash and cash equivalents at
beginning of period 153,611 143,247 92,314
Cash and cash equivalents at end of
period $236,969 $153,611 $116,319


SUMMARY: The MEMC earnings announcements on November 16, 2005 and January 26, 2006 included quarterly statements of operations summaries and a full 2005 summary based on management"s then most current understanding of the Company"s financial position. Management continues to work on finalizing the 2005 quarterly reports on Form 10-Q and the annual report on Form 10-K for 2005. The consolidated statements of operations below include all known adjustments to date to the financial statements previously reported. Also set forth below is a brief summary of the changes to the previously reported financial statements. More detailed explanations of these updated numbers will be set forth in the company"s Form 10-Qs for the first three quarters of 2005 and Form 10-K for 2005 when those documents are filed with the SEC.

Consolidated Condensed Statements of Operations
(Unaudited; Dollars in thousands, except share data)

Three Months Ended 2005
3/31/2005 6/30/2005 9/30/2005 12/31/2005 Total

Net sales $249,292 $273,988 $280,036 $314,349 $1,117,665
Cost of goods
sold 167,881 181,989 191,951 195,200 737,021
Gross margin 81,411 91,999 88,085 119,149 380,644

Marketing and
administration 18,268 18,679 18,530 21,471 76,948
Research and
development 10,039 10,599 10,072 10,076 40,786

Operating income 53,104 62,721 59,483 87,602 262,910

Nonoperating
expense 1,284 1,496 1,531 1,311 5,622
Income before
income
taxes 51,820 61,225 57,952 86,291 257,288
Income tax
(benefit)
provision (30,751) 16,884 (85,121) 22,497 (76,491)
Income before
minority
interests 82,571 44,341 143,073 63,794 333,779
Minority
interests (1,764) (2,019) (1,197) (2,474) (7,454)
Net income $80,807 $42,322 $141,876 $61,320 $326,325

Diluted income
per share $0.36 $0.19 $0.62 $0.27 $1.44
Diluted
weighted
average
shares 223,934,369 224,681,998 227,148,309 228,284,715 226,449,944


REVENUE: Overall 2005 revenue has been adjusted lower by $7.0 million, which reduces net sales from $1,124.7 million to $1,117.7 million. A deferred revenue adjustment was booked in the fourth quarter which reduced net sales for the year by $6.2 million. In addition, a $3.3 million reduction in first quarter sales was booked with an offsetting increase of $3.3 million in fourth quarter sales. These other adjustments were related primarily to revised sales terms, offset by certain accrual adjustments.

GROSS MARGIN: Quarterly cost allocations to R&D were reversed and charged to cost of goods sold, which increased 2005 cost of goods sold by $10 million. This adjustment also had a small favorable impact on operating profit because a portion of these costs were inventoriable. The $6.2 million deferred revenue adjustment reduced gross margin by $6.2 million. A prior years" adjustment to eliminate profit in inventory was recorded in the first quarter, which increased cost of goods sold for the year by $3.5 million. 2005 cost of goods sold also increased due a $2.0 million adjustment to retiree health benefits; a $2.2 million adjustment to capital expenditures; a $1.0 million adjustment to the formula for deferring standard cost variances; a $1.3 million payroll adjustment; a $0.9 million additional inventory reserve; and $1.5 million of other adjustments. The aggregate impact of these adjustments increased cost of goods sold and reduced gross margin, by $28.4 million. This reduced 2005 gross margin as a percent of sales from 36.4% to 34.1%.

RESEARCH AND DEVELOPMENT EXPENSE: A manufacturing cost allocation to R&D expense was reduced by $10.0 million because it was determined that certain costs in this allocation were inventoriable manufacturing costs and should be accounted for in cost of sales and inventory. This adjustment reduced 2005 R&D expense as a percent of sales from 4.5% to 3.6%. The inventory portion of this adjustment resulted in a small increase in operating income.

MARKETING AND ADMINISTRATION EXPENSE: An employee stock option expense adjustment in the fourth quarter increased Marketing and Administration expense by $1.5 million. The Company changed its estimate for external audit fees, thereby increasing expense by $1.2 million. An adjustment related to retiree health benefits increased this expense by $0.8 million. Total adjustments for 2005 increased Marketing & administration expense by $3.7 million. This increased 2005 expense as a percent of sales from 6.5% to 6.9%.

INCOME BEFORE INCOME TAXES: The cumulative impact of the above adjustments reduced 2005 pretax income by 8.0% or $22.2 million. This reduced 2005 pre-tax diluted earnings per share by $0.07.

PROVISION FOR INCOME TAXES: The purchase price of MEMC in 2001, specifically as it relates to calculation and timing of favorable discrete income tax adjustments and the reversal of valuation allowances, involves complex income tax accounting issues. Adjustments to account for these issues resulted in significant quarterly changes from amounts previously reported, such as a $67.6 million increase in fourth quarter income taxes, and offsetting favorable adjustments primarily in the third and first quarter of 2005. The net impact of these income tax adjustments for the year was $4.0 million and increased diluted earnings per share by $0.02. Income tax expense for 2005 is still under review, however, and could unfavorably reduce diluted earnings per share by up to $0.18 per share.

DILUTED EARNINGS PER SHARE: Cumulative adjustments summarized above reduce 2005 earnings per share by $0.05 to $1.44 per share.

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited; Dollars in thousands)

March June September December
31, 30, 30, 31,
2005 2005 2005 2005

ASSETS
Current assets:
Cash and cash
equivalents $116,319 $100,997 $143,247 $153,611
Accounts receivable, net 134,485 141,759 130,393 129,378
Inventories 135,905 131,867 129,930 117,450
Prepaid and other
current assets 26,339 23,061 32,608 39,733
Total current assets 413,048 397,684 436,178 440,172
Property, plant and
equipment, net 475,957 503,179 508,265 501,695
Deferred tax assets, net 174,888 174,529 323,767 215,527
Other assets 54,527 53,338 51,553 51,328
Total assets $1,118,420 $1,128,730 $1,319,763 $1,208,722


LIABILITIES AND
STOCKHOLDERS" EQUITY
Current liabilities:
Short-term borrowings
and current portion of
long-term debt $33,537 $38,276 $25,931 $17,475
Accounts payable 133,790 104,988 104,343 105,788
Accrued liabilities 24,092 27,391 15,517 30,996
Deferred revenue - - 13,261 7,017
Accrued wages and
salaries 24,080 23,122 28,011 21,990
Income taxes payable 27,097 33,479 56,355 2,202
Total current
liabilities 242,596 227,256 243,418 185,468
Long-term debt, less
current portion 113,345 108,229 106,706 34,821
Pension and similar
liabilities 115,580 113,252 109,292 111,621
Other liabilities 75,301 79,084 96,245 38,509
Total liabilities 546,822 527,821 555,661 370,419
Minority interests 48,242 50,262 51,459 53,932
Stockholders" equity 523,356 550,647 712,643 784,371
Total liabilities and
stockholders" equity $1,118,420 $1,128,730 $1,319,763 $1,208,722


MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)

Twelve
Months
Three Months Ended Ended
March June September December December
31, 30, 30, 31, 31,
2005 2005 2005 2005 2005


Cash Flows from
Operating Activities:
Net income $80,807 $42,322 $141,879 $61,320 $326,328
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 13,339 14,363 14,741 15,320 57,763
Minority interests 1,764 2,019 1,197 2,423 7,403
Stock compensation 386 217 174 1,673 2,450
Equity in loss of
joint venture - - - - -
Working capital and
other (33,813) (19,442) (77,407) 24,713 (105,949)
Net cash provided by
operating
activities 62,483 39,479 80,584 105,449 287,995

Cash Flows from
Investing Activities (54,051) (50,897) (31,649) (19,420) (156,017)

Cash Flows from
Financing Activities:
Net short-term
borrowings 10,310 6,085 (6,140) 389 10,644
Proceeds from issuance
of long-term debt - - 60,000 - 60,000
Principal payments on
long-term debt (883) (3,561) (66,523) (78,515) (149,482)
Debt financing fees - - (1,184) - (1,184)
Proceeds from issuance
of common stock 3,867 1,254 7,752 1,944 14,817
Dividends to minority
interest - (9,546) - - (9,546)
Net cash provided by
(used in) financing
activities 13,294 (5,768) (6,095) (76,182) (74,751)

Effect of exchange
rate changes on cash
and cash equivalents 2,279 1,864 (590) 517 4,070

Net increase
(decrease) in cash
and cash equivalents 24,005 (15,322) 42,250 10,364 61,297
Cash and cash
equivalents at
beginning of period 92,314 116,319 100,997 143,247 92,314
Cash and cash
equivalents at end of
period $116,319 $100,997 $143,247 $153,611 $153,611



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

SOURCE: MEMC Electronic Materials, Inc.
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