MEMC Continues to Deliver Solid Quarterly Results ST. PETERS, Mo.,
Oct. 27 /PRNewswire-FirstCall/ -- MEMC Electronic Materials, Inc.
today reported financial results for the third quarter ended
September 30, 2003. Summary of the 2003 third quarter results: *
Net sales of $195.9 million * Gross margin of 30% of net sales *
Operating income of $36.5 million (19% of net sales) * Net income
of $35.2 million, diluted EPS of $0.16 Commenting on the quarter,
Nabeel Gareeb, MEMC's Chief Executive Officer, said, "MEMC
continues to execute on our strategy and to deliver solid financial
results. This quarter, our net sales continued to increase. Our
diluted earnings per share improved to $0.16, compared to $0.13 in
the 2003 second quarter. We continue to benefit from our
operational improvements, as well as currency gains this quarter."
Net sales were $195.9 million for the 2003 third quarter compared
to $191.8 million for the 2003 second quarter. The increase in net
sales was primarily a result of increased product volumes. The
Company reported gross margin in the 2003 third quarter of $58.5
million, or 30% of net sales, compared to $55.6 million, or 29% of
net sales, in the 2003 second quarter. The Company reported
operating income of $36.5 million, or 19% of net sales, in the 2003
third quarter, up from operating income of $33.7 million, or 18% of
net sales, for the 2003 second quarter. Other nonoperating income
in the 2003 third quarter included currency gains of $11.6 million,
compared to currency gains of $1.5 million in the 2003 second
quarter. The currency gains in the 2003 third quarter were
primarily associated with the revaluation of a Yen-based
intercompany loan and the strengthening of the Yen during the
quarter. The Company's effective income tax rate for the 2003 third
quarter was 25%, compared to 22.5% in the 2003 second quarter. The
Company expects its effective income tax rate in 2003 will be
approximately 25%. The Company reported increased net income
available to common stockholders of $35.2 million, or $0.16 per
diluted share, for the 2003 third quarter compared to $27.3
million, or $0.13 per diluted share, in the 2003 second quarter.
The Company achieved operating cash flow of $25.3 million for the
2003 third quarter, compared to $23.5 million in the 2003 second
quarter. Capital expenditures during the 2003 third quarter totaled
$25.2 million, compared to $21.2 million in the 2003 second
quarter. The Company expects capital expenditures in calendar year
2003 to be in the range of $80.0 to $90.0 million as the Company
increases its capability and capacity for larger diameter products.
The Company's cash and cash equivalents and short-term investments
totaled $125.8 million at the end of the 2003 third quarter,
compared to $127.6 million at the end of the 2003 second quarter.
On August 19, 2003, the Company's controlling stockholder, an
investor group led by Texas Pacific Group (TPG) agreed to pay E.ON
AG and its affiliates (E.ON) a $25.2 million contingent performance
purchase price payment. This payment arises out of the November 13,
2001 acquisition by TPG of all of E.ON's debt and equity holdings
in MEMC. The purchase agreement between E.ON and TPG contained
provisions for a contingent performance purchase price payment by
TPG to E.ON based on MEMC's "Earnings Before Interest, Taxes,
Depreciation and Amortization", as defined in that agreement, for
fiscal year 2002. As a result of the contingent performance
purchase price payment in August, TPG's additional $25.2 million
basis in MEMC was pushed down to MEMC's accounting records for the
third quarter. This increased the Company's property, plant and
equipment balance by $26.1 million, increased the value of the
Company's investments in joint ventures by $1.1 million, and
decreased the Company's deferred tax assets by $2.0 million.
Additionally, the value assigned to the common stock and warrants
acquired by TPG was increased by approximately $23.5 million and
the value assigned to the senior subordinated secured notes held by
TPG was increased by approximately $1.7 million. The senior
subordinated secured notes will accrete up to their face value plus
accrued stated interest over their maturity using the effective
interest method. Based on the new basis of the notes, assuming
these notes remain outstanding until their maturity, interest
expense related to the accretion of the notes and the related
stated interest expense is expected to be $0.7 million, $3.9
million, $10.2 million, $26.4 million, and $55.6 million in the
years 2003 through 2007, respectively. The contingent payment and
the related pushdown evaluation caused the Company to reevaluate
its estimates of useful lives for its property, plant and
equipment. In this process, the useful lives were extended to
reflect longer productive lives based on research and development
activities. The net result of the push-down of the contingent
payment, the extension of the useful lives of property, plant and
equipment, and the increase in our planned 2003 capital
expenditures is expected to favorably impact the quarterly run rate
of depreciation and amortization by approximately $2.5 million per
quarter. The 2003 third quarter was similarly impacted. A
significant portion of the Company's depreciation and amortization
is reflected in cost of goods sold. Outlook "Depending upon our
customers' fab shutdown schedules during the holiday season, we
expect our net sales in the 2003 fourth quarter to increase by
approximately 3 to 5 percentage points compared to the 2003 third
quarter. We also anticipate that our operating results will
continue to improve sequentially in the 2003 fourth quarter
compared to the 2003 third quarter," concluded Gareeb. Conference
Call MEMC will host a conference call today, October 27, 2003, 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 http://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 6:30 p.m. ET on October 27,
until 11:59 p.m. ET on October 31, 2003. To access the replay,
please dial 706-645-9291, and use passcode "3507717", at any time
during that period. About MEMC MEMC is the world's largest public
company solely devoted to the supply of wafers to semiconductor
device manufacturers. 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. Certain matters discussed in this news release are
forward-looking statements, including our expectation that our
effective income tax rate in 2003 will be approximately 25%, our
expectation that our capital expenditures in calendar year 2003
will be in the range of $80 to $90 million, our expectation that
the quarterly run rate of depreciation and amortization will be
favorably impacted by approximately $2.5 million per quarter,
depending upon our customers' fab shutdown schedules during the
holiday season, our expectation that our net sales in the 2003
fourth quarter will increase by approximately 3 to 5 percentage
points compared to the 2003 third quarter, and our anticipation
that our operating results will improve sequentially in the 2003
fourth quarter compared to the 2003 third quarter. 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, customer acceptance of our new products, utilization of
manufacturing capacity, our ability to reduce manufacturing and
operating costs, inventory levels of our customers, demand for
semiconductors generally, changes in the pricing environment,
general economic conditions, actions by competitors, customers, and
suppliers, the impact of competitive products and technologies,
technological changes, changes in currency exchange rates, changes
in the composition of worldwide taxable income, the accuracy of our
assumptions regarding the amount and timing of our capital
expenditures, and other risks described in the Company's filings
with the Securities and Exchange Commission, including the
Company's 2002 Form 10-K, as amended. 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 Nine Months Ended September 30, June 30,
September 30, September 30, 2003 2003 2002 2003 2002 Net sales $
195,897 $ 191,829 $ 190,264 $576,071 $501,186 Costs of goods sold
137,378 136,205 137,417 407,726 381,805 Gross margin 58,519 55,624
52,847 168,345 119,381 Operating expenses Marketing and
administration 13,613 13,391 16,053 41,098 51,221 Research and
development 8,406 8,530 6,725 24,326 19,993 Restructuring costs - -
8,315 - 15,300 Operating income 36,500 33,703 21,754 102,921 32,867
Nonoperating (income) expense Interest expense 2,665 3,303
58,250(1) 9,975 69,194(1) Interest income (1,870) (1,916) (1,860)
(5,777) (4,672) Royalty income (1,038) (1,092) (769) (2,924)
(2,371) Other, net (11,921) (1,163) 3,843 (10,920) (4,582) Total
nonoperating (income) expense (12,164) (868) 59,464 (9,646) 57,569
Income (loss) before income taxes, equity in income of joint
ventures and minority interests 48,664 34,571 (37,710) 112,567
(24,702) Income taxes 12,166 7,763 5,368 28,142 13,235 Income
(loss) before equity in income of joint ventures and minority
interests 36,498 26,808 (43,078) 84,425 (37,937) Equity in income
of joint ventures 1,589 1,665 1,308 4,317 1,971 Minority interests
(2,890) (1,197) (2,982) (6,529) (4,839) Net income (loss) $35,197 $
27,276 $(44,752) $82,213 $(40,805) Cumulative preferred stock
dividends $ - $ - $(934) $ - $(17,027) Net income (loss) allocable
to common stockholders $35,197 $ 27,276 $(45,686) $82,213 $(57,832)
Basic income (loss) per share $ 0.17 $ 0.14 $ (0.25) $ 0.41 $
(0.54) Diluted income (loss) per share $ 0.16 $ 0.13 $ (0.25) $
0.38 $ (0.54) Weighted average shares used in computing basic
income (loss) per share 206,517,384 200,637,931 182,742,775
200,908,620 107,850,403 Weighted average shares used in computing
diluted income (loss) per share 223,771,825 217,710,967 182,742,775
217,401,562 107,850,403 (1) Includes non-cash accretion of $53,382
for the 2002 third quarter, $639 for the 2002 second quarter, and
$54,021 for the nine months ended September 30, 2002, to bring the
55 million Euro note to its full face value. MEMC ELECTRONIC
MATERIALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS (Dollars in thousands) September 30, June 30, December 31,
2003 2003 2002 (Unaudited) (Unaudited) ASSETS Current assets Cash
and cash equivalents $ 85,141 $ 86,763 $ 119,651 Short-term
investments 40,680 40,853 45,995 Accounts receivable, net 107,378
98,099 95,022 Inventories 97,962 96,177 85,106 Prepaid and other
current assets 25,767 18,515 17,934 Total current assets 356,928
340,407 363,708 Property, plant and equipment, net 253,453 203,315
184,875 Investments in joint ventures 22,237 19,548 16,820
Goodwill, net 3,761 3,761 3,761 Deferred tax assets, net 18,494
26,090 33,668 Other assets 38,489 33,935 28,850 Total assets $
693,362 $ 627,056 $ 631,682 LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) Current liabilities Short-term borrowings and current
portion of long-term debt $ 80,625 $ 53,350 $ 123,640 Accounts
payable 82,642 69,400 68,014 Accrued liabilities 28,768 31,103
33,986 Customer deposits 14,555 14,468 15,055 Provision for
restructuring costs 3,020 4,826 7,808 Income taxes 10,992 13,317
14,183 Accrued wages and salaries 22,239 19,969 23,387 Total
current liabilities 242,841 206,433 286,073 Long-term debt, less
current portion 60,017 87,414 160,998 Pension and similar
liabilities 109,445 107,611 104,866 Customer deposits 9,742 14,789
19,617 Other liabilities 32,274 29,789 26,812 Total liabilities
454,319 446,036 598,366 Minority interests 62,015 59,125 57,996
Commitments and contingencies Stockholders' equity (deficiency)
Common stock 2,078 2,072 1,965 Additional paid-in capital 150,553
123,572 26,965 Retained earnings (deficit) 47,746 12,549 (34,467)
Accumulated other comprehensive loss (14,712) (6,556) (7,329)
Deferred compensation (4,190) (5,022) (7,094) Treasury stock
(4,447) (4,720) (4,720) Total stockholders' equity (deficiency)
177,028 121,895 (24,680) Total liabilities and stockholders' equity
(deficiency) $ 693,362 $ 627,056 $ 631,682 MEMC ELECTRONIC
MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited; Dollars in thousands) Three Months Ended Nine
Months Ended September 30, June 30, September 30, September 30,
2003 2003 2002 2003 2002 Cash flows from operating activities Net
income (loss) $ 35,197 $ 27,276 $(44,752) $ 82,213 $(40,805)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities Depreciation and amortization 6,183 8,334
8,442 23,274 25,149 Interest accretion 695 554 54,154 1,868 56,556
Minority interests 2,890 1,197 2,982 6,529 4,839 Stock compensation
832 837 2,523 2,904 6,682 Equity in income of joint ventures
(1,589) (1,665) (1,308) (4,317) (1,971) Working capital and other
(18,885) (13,026) 14,453 (39,087) (6,332) Net cash provided by
operating activities 25,323 23,507 36,494 73,384 44,118 Cash flows
from investing activities Capital expenditures (25,209) (21,202)
(5,179) (62,224) (12,325) Short-term investments, net 172 4,485
(4,818) 5,314 (7,138) Proceeds from sale of property, plant and
equipment 15 - 577 37 911 Net cash used in investing activities
(25,022) (16,717) (9,420) (56,873) (18,552) Cash flows from
financing activities Net short-term borrowings (7,791) (53,060)
(3,622) (61,129) 9,950 Proceeds from issuance of common stock 3,783
96,135 - 100,498 695 Dividend to minority interest - (2,510) -
(2,510) (2,251) Proceeds from issuance of long-term debt - 35,000 -
40,000 Principal payments on long-term debt (1,447) (81,384)
(35,267) (94,295) (57,502) Net cash used in financing activities
(5,455) (40,819) (3,889) (57,436) (9,108) Effective of exchange
rate changes on cash and cash equivalents 3,532 5,331 (1,784) 6,415
6,556 Net increase (decrease) in cash and cash equivalents (1,622)
(28,698) 21,401 (34,510) 23,014 Cash and cash equivalents at
beginning of period 86,763 115,461 76,969 119,651 75,356 Cash and
cash equivalents at end of period $ 85,141 $ 86,763 $ 98,370 $
85,141 $ 98,370 DATASOURCE: MEMC Electronic Materials, Inc.
CONTACT: Janine Orf, Director, Investor Relations of MEMC
Electronic Materials, Inc., +1-636-474-5443; Ian Bailey or Michael
Polyviou, +1-212-850-5600, or Press - Scot Hoffman,
+1-212-850-5617, all of Financial Dynamics, for MEMC Electronic
Materials, Inc. Web site: http://www.memc.com/
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