MEMC CONTINUES TO DELIVER SOLID QUARTERLY RESULTS St. Peters, MO, October 27, 2003 - MEMC Electronic Materials, Inc. (NYSE: WFR) 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. -more- MEMC ELECTRONIC MATERIALS PAGE 2 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. -more- MEMC ELECTRONIC MATERIALS PAGE 3 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. EST to discuss the Company's third quarter results and related business matters. A live webcast will be available on the Company's web site atwww.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. -more- MEMC ELECTRONIC MATERIALS PAGE 4 A replay of the conference call will be available from 6:30 p.m. EST on October 27, until 11:59 p.m. EST 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 ma rket 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. -tables to follow- | 