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MEMC Reports Second Quarter Results
ST. PETERS, Mo., July 23, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- MEMC Electronic
Materials, Inc. (NYSE: WFR) today reported financial results for the quarter
ended June 30, 2008.
Highlights:
-- Net sales of $531.4 million
-- Gross margin of $282.8 million (53.2% of net sales)
-- Operating income of $242.5 million (45.6% of net sales)
-- Cash and investment balances grow to approximately $1.5 billion
-- MEMC amends Conergy agreement and signs new wafer agreement with
Tainergy
-- Board authorizes $500 million increase in share repurchase program
The company reported second quarter 2008 net sales of $531.4 million,
which represents an increase of 6.0% from first quarter 2008 net sales of
$501.4 million, and an increase of 12.4% from second quarter 2007 net sales of
$472.7 million. The increase in net sales was primarily the result of higher
product volumes.
Gross margin in the quarter was $282.8 million, or 53.2% of net sales,
compared to $259.3 million, or 51.7% of sales, in the 2008 first quarter and
$245.6 million, or 52.0% of sales, in the 2007 second quarter. Compared to
the 2008 first quarter, gross margin improved by 9.1% in dollar terms, and 150
basis points as a percentage of net sales. Compared to the 2007 second
quarter, gross margin improved by 15.1% in dollar terms, and 126 basis points
as a percentage of net sales.
The company reported operating income during the quarter of $242.5
million, or 45.6% of net sales. This compares to $218.4 million, or 43.6% of
net sales, for the 2008 first quarter and $207.3 million, or 43.9% of net
sales, for the 2007 second quarter. Operating expenses were $40.3 million, or
7.6% of sales, compared to $40.9 million, or 8.2% of sales, in the 2008 first
quarter, and $38.3 million, or 8.1% of sales, in the 2007 second quarter.
Using an estimated effective cash tax rate of 15%, non-GAAP net income for
the second quarter of 2008, excluding the non-cash effects of the quarterly
valuation of the Suntech warrants, was $212.0 million and non-GAAP diluted
EPS, excluding warrants, was $0.92 per share. See non-GAAP reconciliation
information at the end of this press release following the financial statement
tables. GAAP net income for the second quarter, using a GAAP tax rate of
25.6%, was $176.1 million or $0.76 per share, which includes a $0.05 per share
non-cash impact relating to a decrease in the valuation of the Suntech
warrants.
During the second quarter, the company generated operating cash flow of
$205.0 million, or 38.6% of sales, compared to $197.2 million, or 39.3% of
sales, in the 2008 first quarter. Capital expenditures for the second quarter
totaled $87.3 million, or 16.4% of sales. Free cash flow (operating cash flow
minus capital expenditures) was $117.7 million or 22.1% of sales. MEMC ended
the second quarter with cash and investments of $1.5 billion, compared to $1.4
billion at the end of the 2008 first quarter.
"MEMC grew sales by 6% sequentially, expanded gross and operating margins
by 150 and 200 basis points, respectively, continued to generate industry-
leading levels of free cash flow at 22% of sales, and further expanded our
cash and investment balances to approximately $1.5 billion," said Nabeel
Gareeb, MEMC's chief executive officer. "However, our financial results were a
bit below the bottom end of our targeted range as the company encountered
unanticipated events towards the tail end of the quarter."
The premature failure of a relatively new heat-exchanger at the company's
Merano, Italy facility in June reduced the company's second quarter
polysilicon output by just under five percent. The output from the company's
Pasadena, Texas facility during the month of May and early part of June (shown
on the attached silane and polysilicon output charts) had positioned the
company on a trajectory to exceed the upper end of the company's targeted
second quarter revenue range. Unfortunately, a loose pipe fitting caused a
fire at the company's Pasadena facility that required a shut down of half the
silane production commencing on Friday June 13. Even though the complications
lasted for approximately a week, the Pasadena facility recovered and managed
to produce enough silane and polysilicon during the remainder of the quarter
to be in the middle of that facility's targeted range for second quarter
production, but there was not enough Pasadena production to completely offset
the Merano shortfall.
Continued Gareeb, "While we are disappointed that we experienced an
uncharacteristic event at our Merano facility, we are pleased that we were
able to limit the impact to a few percent below the targeted revenue range.
This was primarily a result of the accomplishments in the second quarter that
helped to offset the Merano shortfall. Specifically, we:
-- Achieved strong output from Unit 3 in Pasadena, overcoming most of the
issues that held us back in the first quarter. While output was
limited by the fire incident and its associated complications, the unit
has recovered well.
-- Completed and ramped Unit 4 in Pasadena over a month prior to the end
of the quarter, with the unit running at good rates save for the
interruption of the fire incident.
-- Completed this technically and operationally challenging phase of
silane expansion and established a high level of confidence in the
longer-term performance of Units 3 and 4 based on actual output. We
expect that this should eliminate silane production as a constraining
element for polysilicon production.
In addition, so far in the third quarter we have:
-- Mechanically completed two additional poly reactors in Pasadena, with
ramps scheduled to begin next week. As a result of these
installations, the company is now at 7,500MT of annualized capacity and
we have demonstrated good output in July as shown in the charts.
-- Replaced and restarted the Merano heat exchanger and commenced the
Merano expansion several weeks ago, which will get the company to the
targeted level of 8,000MT of annualized polysilicon capacity before the
end of the third quarter."
"While the last six months of this expansion and ramp have been difficult,
our accomplishments in the second quarter and early part of the third should
allow us to demonstrate significant growth in the second half of the year
compared to the first half, as mentioned in the April earnings call."
Third Quarter 2008 Outlook
"Solar application demand continues to be strong, however, semiconductor
application demand seems to be uncertain, primarily due to macroeconomic
conditions. In addition, although we have made significant progress as a
result of the accomplishments mentioned earlier, we did not achieve the
targeted level of results for the second quarter, and that continues to
warrant a degree of caution. Based on these considerations, we are targeting
revenues of approximately $560 to $620 million for the third quarter. In
addition, we are targeting gross margin of approximately 54%-55%, with
operating expenses of approximately $41 million," added Gareeb.
"Given the number of unanticipated events associated with our expansion
and ramp during the last few quarters as well as our cautious view, we are
planning on providing an interim update this quarter via a conference call on
September 2. In this update call we intend to review the status of the
company's production rate and provide an update to the quarterly financial
targets, if appropriate."
Full Year 2008 Update
"For the full year 2008, based on market indicators, customer indications
and our projected expansion plans, we are currently targeting:
-- Revenue of approximately $2.25 to $2.35 billion.
-- Non-GAAP EPS of approximately $4-$4.30 based on a cash tax rate of
approximately 15%, and excluding the non-cash effects of the Suntech
warrant valuation.
-- Capital expenditures of approximately 15% of sales.
-- Operating expenses of approximately $163-$165 million.
These targets would represent 2008 sales growth of 20%-25% and non-GAAP
EPS growth (excluding the Suntech warrants) of 23%-33% compared to 2007,"
concluded Gareeb.
Other Events
The company also announced that the Board of Directors today approved an
increase to the company's existing share repurchase plan. The Board has
authorized the repurchase of up to an additional $500 million of the company's
common stock, bringing the total authorization to $1 billion. Since the
initial $500 million authorization was approved in May 2007, the company has
repurchased approximately 4 million shares for a total of $270 million through
June 30, 2008.
On July 10, the company announced an amendment to the 10-year solar wafer
agreement with Conergy, which amendment adjusts the sales volume to
approximately $4 billion from $7-$8 billion, providing more financial
flexibility for Conergy and allowing MEMC to reallocate solar wafer volumes to
other customers. MEMC concurrently announced that it had signed a $3-$3.5
billion solar wafer agreement with Tainergy Tech Co. Ltd. Under the terms of
the Tainergy agreement, MEMC will supply solar wafers to Tainergy over a 10-
year period, on a take or pay basis, beginning in the third quarter of 2008.
In total, MEMC has signed solar wafer contracts worth between $15-$18 billion
in revenue to MEMC.
In association with these agreements, the company today announced that the
first set of deposits due from Tainergy have been received. The company
anticipates that the final deposits from both Conergy and Tainergy will be
received in the current quarter, with wafer deliveries commencing subsequent
to receipt.
Conference Call
MEMC will host a conference call today, July 23, 2008, at 5:30 p.m. ET to
discuss the company's second 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
July 23, 2008, until 11:59 p.m. ET on July 30, 2008. To access the replay,
please dial (320) 365-3844 at any time during that period, using passcode
953714. A replay will also be available until 11:59 p.m. ET on July 30, 2008
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 that third quarter 2008 revenues are targeted to be
approximately $560-$620 million, with gross margin of approximately 54%-55%
and operating expenses of approximately $41 million; that the remaining
polysilicon expansion at our Merano, Italy facility will be completed before
the end of the third quarter getting us to 8,000MT of annualized capacity in
total; that for the full year 2008 we are currently targeting revenue of
approximately $2.25 to $2.35 billion, non-GAAP EPS of approximately $4-$4.30
based on a cash tax rate of approximately 15%, and excluding the non-cash
effects of the Suntech warrant valuation; that for the full year we are
targeting capital expenditures of approximately 15% of sales and operating
expenses of approximately $163-$165 million; that the Conergy agreement will
provide MEMC with approximately $4 billion in revenue; and that the Tainergy
agreement will provide MEMC with $3-$3.5 billion in revenue; that final
deposits from Conergy and Tainergy will be received in the current quarter;
that solar wafer deliveries to these customers will commence subsequent to
receipt of these deposits; and that MEMC's solar wafer contracts will be worth
between $15-$18 billion in revenue to 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; utilization of manufacturing capacity; good working order of our
manufacturing facilities; 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; customer
acceptance of our new products; 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.
-tables to follow-
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Unaudited Three Months Ended Six Months Ended
June March June June June
30, 31, 30, 30, 30,
2008 2008 2007 2008 2007
Net sales $531.4 $501.4 $472.7 $1,032.8 $913.1
Cost of goods sold 248.6 242.1 227.1 490.7 445.0
Gross margin 282.8 259.3 245.6 542.1 468.1
Operating expenses:
Marketing and administration 30.3 30.6 28.9 60.9 54.2
Research and development 10.0 10.3 9.4 20.3 18.9
Operating income 242.5 218.4 207.3 460.9 395.0
Nonoperating (income) expense:
Interest expense 0.3 0.3 0.3 0.6 0.6
Interest income (11.3) (12.8) (10.5) (24.1) (18.9)
Loss (gain) on fair value of
warrant 12.3 209.4 (7.9) 221.7 (6.8)
Other, net 2.5 1.5 1.6 4.0 1.4
Total nonoperating (income)
expense: 3.8 198.4 (16.5) 202.2 (23.7)
Income before income tax
expense and minority
interests 238.7 20.0 223.8 258.7 418.7
Income tax expense 61.2 60.7 58.9 121.9 117.7
Income (loss) before
minority interests 177.5 (40.7) 164.9 136.8 301.0
Minority interests (1.4) (1.1) (1.3) (2.5) (2.7)
Net income (loss) $176.1 $(41.8) $163.6 $134.3 $298.3
Basic income (loss) per share $0.77 $(0.18) $0.73 $0.59 $1.33
Diluted income (loss) per share $0.76 $(0.18) $0.70 $0.58 $1.29
Weighted-average shares used in
computing basic income (loss)
per share 228.3 228.5 225.0 228.4 224.5
Weighted-average shares used in
computing diluted income (loss)
per share 230.7 228.5 232.5 231.1 232.1
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
June 30, December 31,
2008 2007
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,110.9 $859.3
Short-term investments 276.1 457.1
Accounts receivable, net 230.6 197.9
Inventories 33.9 36.4
Prepaid and other current assets 26.9 38.8
Total current assets 1,678.4 1,589.5
Long-term investments 109.7 12.7
Property, plant and equipment, net 950.4 834.0
Deferred tax assets, net 100.6 89.3
Other assets 141.3 361.7
Total assets $2,980.4 $2,887.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $5.6 $5.3
Accounts payable 147.7 168.3
Accrued liabilities 53.8 40.8
Accrued wages and salaries 32.7 31.9
Customer deposits 168.0 122.0
Income taxes payable 42.7 75.9
Total current liabilities 450.5 444.2
Long-term debt, less current portion 24.5 25.6
Pension and post-employment
liabilities 57.2 60.6
Deferred revenue 86.1 81.4
Other liabilities 238.4 204.6
Total liabilities 856.7 816.4
Minority interests 35.1 35.8
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 2.3 2.3
Additional paid-in capital 420.2 358.0
Retained earnings 1,894.8 1,760.5
Accumulated other comprehensive
income 45.9 29.8
Treasury stock (274.6) (115.6)
Total stockholders' equity 2,088.6 2,035.0
Total liabilities and
stockholders' equity $2,980.4 $2,887.2
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Unaudited Three Months Ended Six Months Ended
June March June June June
30, 31, 30, 30, 30,
2008 2008 2007 2008 2007
Cash flows from operating
activities:
Net income (loss) $176.1 $(41.8) $163.6 $134.3 $298.3
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization 25.5 22.8 20.2 48.3 39.2
Minority interests 1.4 1.1 1.3 2.5 2.7
Stock-based compensation 9.6 12.6 7.8 22.2 15.2
Loss (gain) on fair value of
warrant 12.3 209.4 (7.9) 221.7 (6.8)
Working capital and other (19.9) (6.9) 12.6 (26.8) 63.5
Net cash provided by
operating activities 205.0 197.2 197.6 402.2 412.1
Cash flows from investing
activities:
Proceeds from sales and
maturities of investments 111.3 201.6 29.3 312.9 43.5
Purchases of investments (62.6) (177.6) (132.7) (240.2) (144.4)
Capital expenditures (87.3) (81.9) (53.9) (169.2) (101.8)
Net cash used in investing
activities (38.6) (57.9) (157.3) (96.5) (202.7)
Cash flows from financing
activities:
Net proceeds from customer
deposits related to long-term
supply agreements 31.0 17.5 - 48.5 63.7
Principal payments on long-
term debt (2.9) - (2.5) (2.9) (2.5)
Dividends to Minority Interest (3.2) - (6.2) (3.2) (6.2)
Excess tax benefits from
stock-based payment
arrangements 12.1 6.5 16.0 18.6 28.1
Common stock repurchased (76.3) (78.6) (4.8) (154.9) (4.8)
Proceeds from issuance of
common stock 9.3 9.3 8.2 18.6 18.4
Net cash (used in)
provided by financing
activities (30.0) (45.3) 10.7 (75.3) 96.7
Effect of exchange rate
changes on cash and cash
equivalents (5.2) 26.4 2.4 21.2 3.2
Net increase in cash and cash
equivalents 131.2 120.4 53.4 251.6 309.3
Cash and cash equivalents at
beginning of period 979.7 859.3 783.4 859.3 527.5
Cash and cash equivalents at
end of period $1,110.9 $979.7 $836.8 $1,110.9 $836.8
Reconciliation of GAAP Net Income (Loss) and Diluted EPS
to non-GAAP Net Income and Diluted EPS
(Unaudited; In millions, except per share data)
Three Months Ended
June 30, March 31, December 31,
2008 2008 2007
Net Net Net
Income EPS Income EPS Income EPS
GAAP Net Income (Loss) $176.1 $0.76 $(41.8) $(0.18) $376.4 $1.62
Cash Tax Difference* 25.4 0.11 57.7 0.25 24.0 0.10
Non-GAAP 201.5 0.87 15.9 0.07 400.4 1.72
Loss (Gain) on Warrants at
Cash Tax Rate** 10.5 0.05 178.0 0.77 (174.0) (0.75)
Non-GAAP Income Excluding
Warrants $212.0 $0.92 $193.9 $0.84 $226.4 $0.97
Estimated annual book tax
rate 25% 25% 20%
Estimated cash tax rate 15% 15% 15%
*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 company uses an estimated cash tax rate to adjust for the
historical variation in the effective book tax rate associated with the
reversal of valuation allowances, foreign tax credits and loss
carry-forwards that are not tied to actual operating results, because
the company believes that the cash tax rate provides a more transparent
view of the company's operating results. Please note that the actual
book rate used for the purposes of calculating actual book net income
for the second quarter was 25.6%.
**Because the value of the Suntech warrant may vary significantly from
quarter to quarter, the company believes excluding its effect for non-
GAAP EPS comparisons provides a more transparent view of the company's
operating results.
Please click here for silane and polysilicon output charts:
(Photo: http://www.newscom.com/cgi-bin/prnh/20080723/NYW107 )
SOURCE MEMC Electronic Materials, Inc.
http://www.memc.com/
Copyright (C) 2008 PR Newswire. All rights reserved
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