MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
P. O. Box 8
St. Peters, Missouri 63376 (USA)
www.memc.com
For Immediate Release
MEMC REPORTS FIRST QUARTER RESULTS:
NET SALES OF $258 MILLION, UP 13% OVER PRIOR YEAR
DILUTED EPS OF $0.34
St. Peters, MO, April 28, 2005 - MEMC Electronic Materials, Inc. (NYSE: WFR) today reported financial results for the quarter ended March 31, 2005.
Summary of the 2005 first quarter results:
- Net sales of $257.9 million
- Diluted Earnings per share of $0.34
- Gross margin of $93.3 million (36.2% of net sales)
- Operating income of $63.7 million (24.7% of net sales)
- Operating cash flow of $73.3 million (28.4% of net sales)
|
The company reported net sales of $257.9 for the first quarter of 2005, which represents a 12.7% increase over 2004's first quarter. Sales declined 3.9% sequentially from the fourth quarter due to prevailing market conditions and slower than expected customer ramps in March.
Gross margin of 36.2% of sales in the first quarter was approximately flat with the fourth quarter but up from the 32.1% recorded in first quarter of 2004. Operating income for the first quarter of $63.7 million increased by 34.9% over the first quarter of 2004 and came in at 24.7% of sales. Operating income declined by $5.9 million from the fourth quarter due to lower sales and higher R&D expenses.
Diluted earnings per share for the first quarter totaled $0.34 which compares to $0.32 in the fourth quarter and $0.16 in the first quarter of 2004. Favorable tax adjustments in the first quarter added $0.11 in diluted earnings per share. Excluding adjustments, 2005's effective tax rate is forecasted to be approximately 15%.
The company increased its cash balances by $24.0 million over the December 31, 2004 balance, and operating cash flow totaled $73.3 million or 28.4% of sales. Capital expenditures in the first quarter totaled $54.4 million, due to the front-end loaded nature of the 300mm and SOI expansion. For the full year, the company anticipates that capital expenditures will amount to approximately 15% of sales.
-more-
MEMC ELECTRONIC MATERIALS
PAGE 2
"A slower than anticipated market recovery had an impact on our first quarter results", stated Nabeel Gareeb, MEMC's Chief Executive Officer. "However even during this period of industry softness, MEMC's strong financial model allowed us to generate operating income of 25% of sales and operating cash flow of 28% of sales. It is profitable results like these during slow periods that position the company well for upcoming periods of recovery and growth."
"In addition to the market weakness, two specific customer related issues caused a temporary slowdown in our growth in March. However, we have implemented the appropriate actions and are in the process of increasing volumes again", continued Gareeb. "Although sales volume was lower sequentially, and there was increased pricing pressure associated with this inventory correction period, we are pleased that MEMC was able to maintain approximately flat margins, due primarily to continued cost reductions."
"We also accomplished quite a few things during the quarter to improve the fundamental stature of our company", added Tom Linnen, MEMC's Chief Financial Officer. "In February, the company announced the successful completion of a 65 million share secondary offering on behalf of our largest shareholder. Although MEMC did not receive any of the proceeds from this offering, it was significant for several reasons. We believe the offering alleviated investor concern about a concentrated ownership structure, as TPG's stake was reduced to 34%. The offering also increased our available float, improving liquidity and opening the shares to a larger pool of potential investors. Finally, the company is no longer considered a "controlled" company, and our board of directors is becoming more independent. We expect to have a majority independent board before the end of this calendar year. In association with its reduced ownership stake, TPG agreed to terminate its management advisory agreement. As a result, we will no longer pay the associated $2 million annual fee."
"Another major activity was to seek new lines of credit to replace our existing facilities. Currently our primary line of credit includes several restrictions as well as financial and business covenants. We recently executed an engagement letter to establish a new line of credit to replace the current $150 million line. This new line of credit will have more favorable terms and more limited financial covenants."
"We view these achievements as very positive steps in our growth as a company, as we continue to generate cash, pay down debt, and further strengthen our balance sheet" concluded Linnen.
-more-
MEMC ELECTRONIC MATERIALS
PAGE 3
Outlook
Gareeb continued, "Last quarter we indicated our belief that most of the industry inventory adjustments would be completed in the current spring season. We continue to believe this to be true. While we continued to see the effects of customer inventory adjustments in the first quarter, pockets of demand are emerging in various market segments and geographies, and we believe that our mix of customers matches well with these developing demand patterns. We are beginning to see signs of improving demand and we anticipate the second half of 2005 will provide good momentum for the recovery from this transition period."
"Based on some degree of uncertainty during the early part of the second quarter associated with this market inflection point, we are guiding net sales in the second quarter to be up in the 2% to 5% range sequentially. We anticipate that increased cost reduction activities should offset price weakness as customers work through the remainder of this inventory correction, which should allow margins to remain flat or improve slightly as a percentage of sales. Operating expenses should decline in absolute dollar terms" concluded Gareeb.
Conference Call
MEMC will host a conference call today, April 28, 2005, at 5:30 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 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.
A replay of the conference call will be available from 7:30 pm ET on April 28, 2005, until 11:59 pm ET on May 5, 2005. To access the replay, please dial (402) 220-4736 at any time during that period. A replay will also be available until 11:59 pm ET on May 5, 2005 on the Company's web site at www.memc.com.
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.
CONTACT: Bill Michalek
Director, Investor Relations
636-474-5443
-more-
MEMC ELECTRONIC MATERIALS
PAGE 4
Certain matters discussed in this news release are forward-looking statements, including our belief that excluding adjustments, 2005's effective tax rate will be approximately 15%; our plan to have a majority independent board with the addition of one independent director before the end of this calendar year; our belief that the new line of credit will have more favorable terms and more limited financial covenants than our existing line; our continued belief that most of the inventory adjustments will be completed in the current spring season; our view that pockets of demand are emerging in various market segments and geographies, and our belief that our mix of customers matches well with these developing demand patterns; our anticipation that the second half of 2005 will provide good momentum for the recovery from this inventory correction period; our expectation that net sales in the second quarter will be up in the 2% to 5% range sequentially; our belief that increased volumes and cost reduction activities should offset price weakness as customers work through the remainder of the inventory correction which should allow margins to remain flat or improve slightly as a percentage of sales; and our expectation that operating expenses should decline in absolute dollar terms. 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 our ability to identify and retain independent directors, the accuracy of our assumptions regarding future taxable income, our ability to negotiate and close a new line of credit on the terms set forth in the engagement letter, market demand for wafers and semiconductors, 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, general economic conditions, actions by competi tors, customers, and suppliers, the impact of competitive products and technologies, technological changes, changes in currency exchange rates, and other risks described in the Company's filings with the Securities and Exchange Commission, including the Company's 2004 Form 10-K. 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,
2005 | December 31,
2004 | March 31,
2004 |
| | | |
Net sales | $ 257,854 | $ 268,376 | $ 228,760 |
Cost of goods sold | 164,577 | 170,209 | 155,417 |
| Gross margin | 93,277 | 98,167 | 73,343 |
Operating expenses: | | | |
| Marketing and administration | 18,153 | 19,150 | 17,188 8,913 |
Research and development | 11,397 | 10,381 |
| Restructuring | - | (996) | - |
| Operating income | 63,727 | 69,632 | 47,242 |
Nonoperating (income) expense: | | | |
| Interest expense | 1,911 | 3,228 | 3,319 |
| Interest income | (711) | (1,015) | (1,549) |
| Currency (gains) losses | 731 | 360 | (6,364) |
Loss on the extinguishment of debt | - | 61,403 | - |
| Other, net | (647) | (5,001) | (1,898) |
| Total nonoperating (income) expense | 1,284 | 58,975 | (6,492) |
| Income before income taxes, equity in loss of joint venture and minority interests | 62,443 | 10,657 | 53,734 |
Income tax provision (benefit) | (16,479) | (61,763) | 13,434 |
| Income before equity in loss of joint venture and minority interests | 78,922 | 72,420 | 40,300 |
Equity in loss of joint venture | - | - | (1,717) |
Minority interests | (1,764) | (2,446) | (2,677) |
| Net income | $ 77,158
========= | $ 69,974
======== | $ 35,906
======= |
Basic income per share | $ 0.37
========= | $ 0.34
========= | $ 0.17
========= |
Diluted income per share | $ 0.34
========= | $ 0.32
========= | $ 0.16
========= |
| | | |
Weighted average shares used in computing basic income per share |
208,826,451
=========
| 208,099,813
========= | 207,192,291
========= |
| | | |
Weighted average shares used in computing diluted income per share | 223,934,369
========= | 222,103,839
========= | 222,131,836
========= |
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) |
| (Unaudited)
March 31,
2005 | December 31,
2004 |
ASSETS | | |
Current assets: | | |
| Cash and cash equivalents | $ 116,319 | $ 92,314 |
| Accounts receivable, net | 130,534 | 140,728 |
| Inventories | 135,266 | 127,564 |
| Prepaid and other current assets | 28,220 | 29,724 |
| Total current assets | 410,339 | 390,330 |
| | |
Property, plant and equipment, net | 476,338 | 444,670 |
Deferred tax assets, net | 126,766 | 119,835 |
Other assets | 54,527 | 55,107 |
| Total assets | $ 1,067,970
========= | $ 1,009,942
========= |
LIABILITIES AND STOCKHOLDERS' EQUITY | | |
Current liabilities: | | |
| Short-term borrowings and current portion of long-term debt | $ 23,056 | $ 24,399 |
| Accounts payable | 133,380 | 124,083 |
| Accrued liabilities | 21,393 | 37,743 |
| Accrued wages and salaries | 24,080 | 19,117 |
| Income taxes payable | 21,855 | 10,282 |
| Total current liabilities | 223,764 | 215,624 |
| | |
Long-term debt, less current portion | 113,345 | 116,082 |
Pension and similar liabilities | 116,219 | 116,427 |
Other liabilities | 46,693 | 72,432 |
| Total liabilities | 500,021 | 520,565 |
| | |
Minority interests | 48,242 | 46,479 |
Commitments and contingencies | - | - |
Stockholders' equity: | | |
| Preferred stock | - | - |
| Common stock | 2,098 | 2,091 |
| Additional paid-in capital | 158,448 | 154,736 |
| Retained earnings | 385,510 | 308,351 |
| Accumulated other comprehensive loss | (21,993) | (17,389) |
| Deferred compensation | (728) | (1,263) |
| Treasury stock | (3,628) | (3,628) |
| Total stockholders' equity | 519,707 | 442,898 |
| Total liabilities and stockholders' equity | $ 1,067,970
========= | $ 1,009,942
========= |
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands) |
| |
| Three Months Ended |
| March 31,
2005 | December 31,
2004 | March 31,
2004 |
| | | | |
Cash flows from operating activities: | | | |
| Net income | $ 77,158 | $ 69,974 | $ 35,906 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 13,339 | 12,528 | 9,921 |
| Interest accretion | 221 | 1,543 | 1,081 |
| Minority interests | 1,764 | 2,446 | 2,677 |
| Stock compensation | 386 | 502 | 718 |
| Equity in loss of joint venture | - | - | 1,717 |
| Working capital and other | (19,523) | 20,195 | (4,506) |
| Net cash provided by operating activities | 73,345 | 107,188 | 47,514 |
| | | |
Cash flows from investing activities: | | | |
| Capital expenditures | (54,432) | (51,738) | (26,089) |
| Purchase of business, net of cash acquired | - | - | (57,226) |
| Proceeds from sale of property, plant and equipment | - | 19 | - |
| Net cash used in investing activities | (54,432) | (51,719) | (83,315) |
| | | |
Cash flows from financing activities: | | | |
| Net short-term borrowings | (171) | 741 | (1,221) |
| Proceeds from issuance of long-term debt | - | - | 60,014 |
| Principal payments on long-term debt | (883) | (71,485) | (962) |
| Proceeds from issuance of common stock | 3,867 | 2,381 | 1,856 |
| Net cash provided by (used in) financing activities | 2,813 | (68,363) | 59,687 |
| | | |
Effect of exchange rate changes on cash and cash equivalents | 2,279 | 1,900 | 1,934 |
| | | |
Net increase (decrease) in cash and cash equivalents | 24,005 | (10,994) | 25,820 |
Cash and cash equivalents at beginning of period | 92,314 | 103,308 | 96,859 |
Cash and cash equivalents at end of period | $ 116,319
========= | $ 92,314
========= | $ 122,679
========= |
