Exhibit 99.1
MEMC Electronic
Materials, Inc. 501 Pearl Drive (City of
O’Fallon) Post Office Box 8 St. Peters, Missouri
63376 USA Phone: 636-474-5000 Fax: 636-474-5158 www.memc.com | 
For Immediate Release
|
MEMC REPORTS RECORD FIRST QUARTER RESULTS
St. Peters, MO, April 26, 2006 – MEMC Electronic Materials, Inc. (NYSE: WFR) 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.
-more-
MEMC ELECTRONIC MATERIALS
PAGE 2
“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.
-more-
MEMC ELECTRONIC MATERIALS
PAGE 3
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.
Contact:
Director, Investor Relations
MEMC Electronic Materials, Inc.
(636) 474-5443
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.
-tables to follow-
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 |
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES |
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 31, | June 30, | September 30, | December 31, |
| | | | 2005 | 2005 | 2005 | 2005 |
| | | | | | | |
ASSETS | | | | | |
Current assets: | | | | |
| Cash and cash equivalents | $ 16,319 | $ 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) | | | | | | | | |
| | | | Three Months Ended | | Twelve Months Ended |
| | | | | | | | | | | |
| | | | March 31, | June 30, | September 30, | December 31, | | | December 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 | |
| | | | | | | | | | | |
