North Coast Solar Stocks

April 23, 2009

MEMC Reports First Quarter Results

Filed under: WFR — Tags: , , , , , — Jason @ 4:01 pm

Thursday April 23, 2009, 4:01 pm EDT

ST. PETERS, Mo., April 23 /PRNewswire-FirstCall/ — MEMC Electronic Materials, Inc. (WFR) today reported financial results for the first quarter ended March 31, 2009.

Summary of first quarter results:

* Net sales of $214.0 million
* Gross profit of $19.7 million (9.2% of net sales)
* Earnings of $0.01 per share
* Cash and investment balances of $1.3 billion

The company reported first quarter 2009 net sales of $214.0 million, which represents a decrease of 49.7% from fourth quarter 2008 net sales of $425.7 million, and a decrease of 57.3% from first quarter 2008 net sales of $501.4 million. The sequential decrease in sales was primarily the result of lower wafer volumes for both semiconductor and solar applications and lower prices associated with semiconductor and solar products.

Gross profit in the quarter was $19.7 million, or 9.2% of net sales, compared to $193.0 million, or 45.3% of net sales, in the 2008 fourth quarter and $259.3 million, or 51.7% of net sales, in the 2008 first quarter. The sequential decline in gross profit was primarily the result of lower product volumes, significant underutilization charges associated with abnormally low factory utilization rates and lower pricing for semiconductor and solar products.

The company reported an operating loss during the quarter of $26.4 million, which compares to operating income of $164.8 million in the 2008 fourth quarter and $218.4 million in the 2008 first quarter. First quarter 2009 operating expenses, which include charges of $6.7 million relating to the previously announced layoffs in three of the company’s manufacturing facilities, were $46.1 million, or 21.5% of sales, compared to $28.2 million, or 6.6% of sales, in the 2008 fourth quarter, and $40.9 million, or 8.2% of sales, in the 2008 first quarter. Fourth quarter 2008 operating expenses included a benefit of $15.5 million relating to the forfeiture of stock options previously disclosed.

Net income for the first quarter, including a tax benefit of $18.9 million, was $2.0 million, or $0.01 per share, and includes a $0.1 million charge relating to the decrease in the value of the Suntech warrants. In previous quarters the company presented non-GAAP EPS figures which adjusted GAAP EPS figures for the company’s estimated cash tax rate. Due to the company’s belief that normalized GAAP tax rates will more closely approximate cash tax rates in the future, and therefore that GAAP and non-GAAP figures will be essentially the same, the company no longer intends to provide separate non-GAAP figures related to tax matters.

During the first quarter, the company consumed operating cash of $14.6 million, compared to operating cash flow generated of $123.0 million in the 2008 fourth quarter. Capital expenditures for the first quarter totaled $53.2 million, or 24.9% of sales. Free cash (operating cash flow minus capital expenditures) consumed was $67.8 million. MEMC ended the first quarter with cash and investments of $1.3 billion, and does not maintain any significant debt.

“Our first quarter results reflect a continuation of what has been an unprecedented reduction in demand in the semiconductor and solar industries,” said Ahmad Chatila, MEMC’s President and Chief Executive Officer. “The weak end demand for semiconductor and electronic products, as well as continued inventory reduction efforts by our customers, resulted in our semiconductor wafer factories running at abnormally low levels in the first quarter, creating a significant drag on our financial results.”

“Since my appointment as CEO on March 2, I have been assessing the company’s global operations and meeting personally with many current and prospective customers and suppliers as well as hundreds of MEMC employees around the world. Feedback from many of our customers regarding our products and capabilities has been very positive. MEMC has some of the best R&D capabilities and product and patent portfolios in the business.”

“While MEMC has been very efficient and profitable for a number of years, there continue to be a great deal of cost savings opportunities available to the company. In the near-term, we have taken the unfortunate but necessary step of reducing staffing levels to better align with anticipated steady-state levels of demand in the semiconductor industry. Once completed, this will provide annualized cost savings to the company of approximately $30 million, beginning in the third quarter. During the first quarter we also began to introduce our customers to our new facility in Ipoh, Malaysia. This facility will provide our customers with some of the industry’s most advanced production capabilities while also allowing MEMC to reduce costs over the intermediate and longer-term.”

“MEMC’s strong financial position with $1.3 billion in cash and investments and essentially no debt enables us to provide our team with the technology, resources, and support needed to strengthen our competitive position for the long term. As I continue to assess our strengths and weaknesses from a fresh perspective, I will focus on additional opportunities to improve our cost structure, enhance our product portfolio and drive innovation and entrepreneurial thinking throughout the company,” concluded Chatila.

Second Quarter 2009 Outlook

Wafer demand for semiconductor applications, which showed significant weakness for most of the first quarter, has begun to show some signs of improvement in the early part of the second quarter, although still far below levels seen in the recent past. Wafer pricing for semiconductor and solar applications, however, remains weak, and factory utilization rates, while improving, remain below normal operating levels.

Due to limited demand visibility amid the current macroeconomic environment, the company is not providing a revenue or margin outlook at this time.

Other Events

The company has recently been engaged in negotiations with Conergy AG regarding a potential amendment to its 10-year wafer supply agreement with MEMC. The company announced today that, based on the current status of negotiations, it does not expect to enter into such an amendment and the company has advised Conergy that the contract remains in full force and effect.

Conference Call

MEMC will host a conference call today, April 23, 2009, at 5:00 p.m. ET to discuss the company’s first 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 7:00 p.m. ET on April 23, 2009, until 11:59 p.m. ET on April 30, 2009. To access the replay, please dial (320) 365-3844 at any time during that period, using passcode 997161. A replay will also be available until 11:59 p.m. ET on April 30, 2009 on the company’s web site at http://www.memc.com.

    MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
    (In millions, except per share data)
    Unaudited                              Three Months Ended
                                     ----------------------------------
                                     March 31,  December 31,  March 31,
                                       2009         2008        2008
                                       ----         ----        ----

    Net sales                         $214.0        $425.7     $501.4
    Cost of goods sold                 194.3         232.7      242.1
                                       -----         -----      -----
        Gross profit                    19.7         193.0      259.3

    Operating expenses:
      Marketing and administration      29.8          18.0       30.6
      Research and development           9.6          10.2       10.3
      Restructuring costs                6.7             -          -
                                         ---           ---        ---
        Operating (loss) income        (26.4)        164.8      218.4

    Nonoperating (income) expense:
      Interest expense                   0.3           0.4        0.3
      Interest income                  (11.7)        (11.1)     (12.8)
      Decline in fair value of
       warrant                           0.1          61.2      209.4
      Other, net                         2.6           9.7        1.5
                                         ---           ---        ---
        Total nonoperating
         (income) expense               (8.7)         60.2      198.4
                                        ----          ----      -----
      (Loss) income before
       income tax expense              (17.7)        104.6       20.0
    Income tax (benefit) expense       (18.9)         35.4       60.7
                                       -----          ----       ----
        Net income (loss)                1.2          69.2      (40.7)
    Net loss (income) attributable
     to noncontrolling interests         0.8           1.1       (1.1)
                                         ---           ---       ----
    Net income (loss) attributable
     to MEMC stockholders               $2.0         $70.3     $(41.8)
                                        ----         -----     ------

    Basic income (loss) per share      $0.01         $0.31     $(0.18)
    Diluted income (loss) per
     share                             $0.01         $0.31     $(0.18)

    Weighted-average shares used
     in computing basic income (loss)
     per share                         223.6         224.5      228.5
    Weighted-average shares used
     in computing diluted income
     (loss) per share                  224.0         225.1      228.5

    MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (In millions)
    Unaudited
                                        March 31,   December 31,
                                          2009          2008
                                          ----          ----
    ASSETS
    Current assets:
      Cash and cash equivalents          $898.4        $988.3
      Short-term investments              109.4         148.4
      Accounts receivable, net            169.1         197.3
      Inventories                         118.3          81.3
      Prepaid and other current assets     37.9          38.9
                                           ----          ----
        Total current assets            1,333.1       1,454.2
    Investments                           291.5         284.7
    Property, plant and
     equipment, net                     1,018.2       1,041.2
    Deferred tax assets, net               75.7          69.7
    Other assets                           81.1          86.9
                                           ----          ----
        Total assets                   $2,799.6      $2,936.7
                                       --------      --------

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Current portion of long-term debt    $5.8          $6.1
      Accounts payable                    122.4         162.4
      Accrued liabilities                  45.1          67.5
      Accrued wages and salaries           30.6          31.7
      Customer deposits                   150.0         187.0
      Income taxes payable                 18.1          17.9
                                           ----          ----
        Total current liabilities         372.0         472.6
    Long-term debt, less current
     portion                               24.3          26.1
    Pension and post-employment
     liabilities                           45.0          46.3
    Deferred revenue                       92.0          88.8
    Other liabilities                     186.2         186.1
                                          -----         -----
        Total liabilities                 719.5         819.9
                                          -----         -----
    Commitments and contingencies
    Stockholders' equity:
      Preferred stock                         -             -
      Common stock                          2.3           2.3
      Additional paid-in capital          434.7         425.6
      Retained earnings                 2,149.1       2,147.1
      Accumulated other
       comprehensive loss                 (86.7)        (55.6)
      Treasury stock                     (453.3)       (437.4)
                                         ------        ------
        Total MEMC stockholders'
         equity                         2,046.1       2,082.0
      Noncontrolling interests             34.0          34.8
                                           ----          ----
        Total stockholders' equity      2,080.1       2,116.8
                                        -------       -------
          Total liabilities and
           stockholders' equity        $2,799.6      $2,936.7
                                       --------      --------

    MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    Unaudited                                     Three Months Ended
                                           -----------------------------------
                                           March 31,  December 31,   March 31,
                                             2009         2008        2008
                                             ----         ----        ----

    Cash flows from operating activities:
    Net income (loss)                         $2.0         $70.3     $(41.8)
    Adjustments to reconcile net income
     (loss) to net cash provided by
     operating activities:
       Depreciation and amortization          28.4          28.4       22.8
       Stock-based compensation                9.2          (5.6)      12.6
       Decline in fair value of warrant        0.1          61.2      209.4
       Working capital and other             (54.3)        (31.3)      (5.8)
                                             -----         -----       ----
        Net cash (used in) provided by
         operating activities                (14.6)        123.0      197.2
                                             -----         -----      -----

    Cash flows from investing activities:
    Proceeds from sales and maturities
     of investments                           37.7         107.9      201.6
    Purchases of investments                     -         (68.4)    (177.6)
    Capital expenditures                     (53.2)        (60.9)     (81.9)
    Other                                      0.1             -          -
                                               ---           ---        ---
        Net cash used in
         investing activities                (15.4)        (21.4)     (57.9)
                                             -----         -----      -----

    Cash flows from financing activities:
    Net (repayments of) proceeds from
     customer deposits related to
     long-term supply agreements             (36.0)            -       17.5
    Principal payments on long-term debt         -          (3.1)         -
    Excess tax benefits from stock-
     based payment arrangements                  -             -        6.5
    Common stock repurchased                 (15.8)        (35.5)     (78.6)
    Proceeds from issuance of common
     stock                                     0.1           0.1        9.3
                                               ---           ---        ---
        Net cash used in
         financing activities                (51.7)        (38.5)     (45.3)
                                             -----         -----      -----

    Effect of exchange rate changes on
     cash and cash equivalents                (8.2)         (7.1)      26.4

                                             -----          ----      -----
    Net (decrease) increase in cash and
     cash equivalents                        (89.9)         56.0      120.4
    Cash and cash equivalents at
     beginning of period                     988.3         932.3      859.3
                                             -----         -----      -----
    Cash and cash equivalents at end of
     period                                 $898.4        $988.3     $979.7
                                            ------        ------     ------
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