MEMC Reports First Quarter 2013 Results

US$ Millions except for EPS

Financial Highlights

1Q'13

4Q'12

1Q'12

Qtr/Qtr

Yr/Yr

GAAP

Net Sales

$443.6

^(1),(2)

$600.7

⁽³⁾

$519.2

($157.1)

or

-26%

($75.6)

or

-15%

Gross Margin %

11.2%

^(1),(2)

18.0%

⁽³⁾

9.6%

(681) bps

155 bps

Operating Income (Loss)

($33.5)

^(1),(2)

$67.8

^(3),(4)

($54.2)

($101.3)

$20.7

Net Income (Loss)

($89.4)

^(1),(2)

($11.8)

^(3),(4)

($98.6)

($77.6)

$9.2

EPS

($0.40)

^(1),(2)

($0.05)

^(3),(4)

($0.43)

($0.35)

$0.03

Non-GAAP

Net Sales

$431.3

⁽¹⁾

$704.3

$523.8

($273.0)

or

-39%

($92.5)

or

-18%

Gross Margin %

9.7%

⁽¹⁾

13.1%

8.8%

(343) bps

93 bps

Operating Income (Loss)

($41.4)

⁽¹⁾

$52.0

⁽⁴⁾

($58.4)

($93.4)

$17.0

Net Income (Loss)

($35.5)

⁽¹⁾

$19.9

⁽⁴⁾

($66.0)

($55.4)

$30.5

EPS

($0.16)

⁽¹⁾

$0.08

⁽⁴⁾

($0.29)

($0.24)

$0.13

Cash Flow

Capital Expenditures

$30.8

$38.1

$40.0

($7.3)

($9.2)

Cash Flow from Operations

($118.6)

$19.4

($386.7)

($138.0)

$268.1

Free Cash Flow

($110.6)

($16.3)

($241.0)

($94.3)

$130.4

(1) Includes $25.0 million, or EPS of $0.11, due to the amendment of a supply contract with Tainergy.

(2) Includes $8.2 million, or EPS of $0.02, related to previously deferred GAAP revenue.

(3) Includes $54.4 million, or EPS of $0.17, related to previously deferred GAAP revenue related to the

Rovigo solar project.

(4) Includes $11.6 million, or EPS of $0.05, related to restructuring and asset impairments and $31.7 million,

or EPS of $0.14, related to a gain on the acquisition of a TCS plant as part of a contract settlement with Evonik.

Note: Table unaudited

Segment Summary

1Q'13

4Q'12

1Q'12

Qtr/Qtr

Yr/Yr

Net Sales

Semiconductor Materials

$229.8

$228.5

$216.0

$1.3

 or 

1%

$13.8

 or 

6%

Solar Energy

GAAP

$213.8

^(1),(2)

$372.2

⁽³⁾

$303.2

($158.4)

 or 

-43%

($89.4)

 or 

-29%

Solar Energy

Non-GAAP

$201.5

⁽¹⁾

$475.8

$307.8

($274.3)

 or 

-58%

($106.3)

 or 

-35%

Operating Income (Loss)

Semiconductor Materials

$1.4

$3.1

($12.5)

($1.7)

$13.9

Solar Energy

GAAP

($10.8)

^(1),(2)

$91.8

^(3),(4)

($17.1)

($102.6)

$6.3

Solar Energy

Non-GAAP

($18.7)

⁽¹⁾

$76.0

⁽⁴⁾

($21.3)

($94.7)

$2.6

(1)  Includes $25.0 million, or EPS of $0.11, due to the amendment of a supply contract with Tainergy.

(2)  Includes $8.2 million, or EPS of $0.02, related to previously deferred GAAP revenue.

(3)  Includes $54.4 million, or EPS of $0.17, related to previously deferred GAAP revenue related to the

       Rovigo solar project.

(4)  Includes $11.6 million, or EPS of $0.05, related to restructuring and asset impairments and $31.7 million, 

       or EPS of $0.14, related to a gain on the acquisition of a TCS plant as part of a contract settlement with Evonik.

Note: Table unaudited

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions; except per share data)

Three Months Ended

March 31, 2013

December 31, 2012

March 31, 2012

Net sales

$             443.6

$                     600.7

$             519.2

Cost of goods sold

393.9

492.5

469.1

Gross profit

49.7

108.2

50.1

Operating expenses:

Marketing and administration

70.3

69.5

83.2

Research and development

17.4

16.0

20.1

Restructuring (reversals) charges

(4.5)

(13.4)

1.0

Gain on receipt of property, plant and equipment

—

(31.7)

—

Operating (loss) income

(33.5)

67.8

(54.2)

Non-operating expense (income):

Interest expense

47.5

35.0

27.7

Interest income

(0.5)

(0.8)

(0.8)

Other, net

1.1

6.9

0.2

Total non-operating expense

48.1

41.1

27.1

(Loss) income before income taxes and equity in (loss) earnings of joint venture

(81.6)

26.7

(81.3)

Income tax expense

19.5

37.0

17.0

Loss before equity in loss of joint venture

(101.1)

(10.3)

(98.3)

Equity in loss of joint ventures, net of tax

(0.3)

(1.4)

(1.2)

Net loss

(101.4)

(11.7)

(99.5)

Net loss (income) attributable to noncontrolling interests

12.0

(0.1)

0.9

Net loss attributable to MEMC stockholders

$              (89.4)

$                     (11.8)

$              (98.6)

Basic loss per share  [*]

$              (0.40)

$                     (0.05)

$              (0.43)

Diluted loss per share  [*]

$              (0.40)

$                     (0.05)

$              (0.43)

[*] During the three months ended March 31, 2013 and December 31, 2012, the company recorded an adjustment to redeemable noncontrolling interest which affected the numerator of the EPS calculation by ($2.4) million and ($0.7) million, respectively.

RESULTS BY REPORTABLE SEGMENT

Three Months Ended

March 31, 2013

December 31, 2012

March 31, 2012

Net sales:

Semiconductor Materials

$             229.8

$                     228.5

$             216.0

Solar Energy

213.8

372.2

303.2

Consolidated net sales

$             443.6

$                     600.7

$             519.2

Operating income (loss):

Semiconductor Materials

$                 1.4

$                         3.1

$              (12.5)

Solar Energy

(10.8)

91.8

(17.1)

Corporate and Other

(24.1)

(27.1)

(24.6)

Consolidating operating (loss) income:

$              (33.5)

$                       67.8

$              (54.2)

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)

March 31,

December 31,

ASSETS

2013

2012

Current assets:

Cash and cash equivalents

$           421.6

$                   572.6

Restricted cash

54.6

72.4

Accounts receivable, net

278.5

220.4

Inventories

227.6

247.8

Solar energy systems held for development and sale

221.0

133.8

Prepaid and other current assets

190.3

212.2

Total current assets

1,393.6

1,459.2

Property, plant and equipment, net:

Non-solar energy systems

1,170.6

1,213.1

Solar energy systems

1,409.3

1,459.9

Restricted cash

55.1

50.2

Other assets

524.6

519.2

Total assets

4,553.2

4,701.6

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt & short term borrowing

5.7

3.4

Short-term solar energy system financing, current portion of solar energy system financing and capital lease obligations

128.2

97.8

Accounts payable

402.6

477.0

Accrued liabilities

365.1

344.2

Contingent consideration related to acquisitions

22.9

23.1

Deferred revenue for solar energy systems

140.2

113.1

Customer and other deposits

37.4

77.2

Total current liabilities

1,102.1

1,135.8

Long-term debt, less current portion

757.7

758.7

Long-term solar energy system financing and capital lease obligations, less current portion

1,535.6

1,508.4

Customer and other deposits

174.4

184.5

Deferred revenue for solar energy systems

152.6

146.0

Non-solar energy deferred revenue

29.1

29.2

Other liabilities

263.8

261.6

Total liabilities

4,015.3

4,024.2

Redeemable noncontrolling interest

11.9

11.3

Stockholders' equity:

Preferred stock

—

—

Common stock

2.4

2.4

Additional paid-in capital

654.8

647.7

Retained earnings

333.7

425.3

Accumulated other comprehensive loss

(72.9)

(39.8)

Treasury stock

(460.5)

(460.3)

Total MEMC stockholders' equity

457.5

575.3

Noncontrolling interests

68.5

90.8

Total stockholders' equity

526.0

666.1

Total liabilities and stockholders' equity

$        4,553.2

$                4,701.6

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Three Months Ended

March 31,

2013

December 31,

2012

March 31,

2012

Cash flows from operating activities

Net Loss

$            (101.4)

$           (11.7)

$              (99.5)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

60.8

78.8

52.9

Stock-based compensation

7.2

9.6

7.3

(Benefit) expense for deferred taxes

(7.5)

6.2

7.3

Other

(10.9)

(29.3)

4.4

Changes in operating assets and liabilities

Accounts receivable

(60.5)

30.9

(56.4)

Inventories

18.6

17.6

42.3

Solar energy systems held for development and sale

(36.8)

39.8

(172.4)

Accounts payable

(67.5)

(61.0)

(113.7)

Deferred revenue for solar energy systems

36.4

(34.5)

(17.9)

Customer and other deposits

(19.6)

(5.4)

(16.7)

Accrued liabilities

46.7

(18.2)

(46.1)

Other long term liabilities

6.8

(8.2)

1.2

Other

9.1

4.8

20.6

Net cash (used in) provided by operating activities

(118.6)

19.4

(386.7)

Cash flows from investing activities:

Capital expenditures

(30.8)

(38.1)

(40.0)

Construction of solar energy systems

(47.4)

(153.7)

(99.0)

Purchases of equity method investments

(18.5)

(12.2)

—

Net proceeds from equity method investments

11.7

2.4

9.3

Change in restricted cash

8.8

8.6

34.4

Receipts from vendors for refundable deposits on long-term agreements

—

3.3

—

Other

—

(0.1)

(0.2)

Net cash used in investing activities

(76.2)

(189.8)

(95.5)

Cash flows from financing activities:

Cash paid for contingent consideration for acquisitions

(0.8)

(11.3)

(3.8)

Proceeds from solar energy system financing and capital lease obligations

98.5

183.9

351.5

Repayments of solar energy system financing and capital lease obligations

(12.4)

(62.3)

(72.8)

Net repayments of customer deposits related to long-term supply agreements

(26.2)

(0.7)

—

Principal payments on long-term debt

—

(1.8)

—

Common stock issued and repurchased

(0.2)

(0.4)

(0.1)

Proceeds from noncontrolling interests

0.1

34.5

6.0

Debt financing fees

(8.1)

(7.1)

(5.3)

Net cash provided by financing activities

50.9

134.8

275.5

Effect of exchange rate changes on cash and cash equivalents

(7.1)

(1.6)

1.5

Net decrease in cash and cash equivalents

(151.0)

(37.2)

(205.2)

Cash and cash equivalents at beginning of period

572.6

609.8

585.8

Cash and cash equivalents at end of period

$             421.6

$           572.6

$             380.6

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL INFORMATION
NON-GAAP FINANCIAL MEASURES
(In millions, except per share data and percentages) [A]

Three Months Ended

March 31,

December 31,

March 31,

2013

2012

2012

Consolidated Non-GAAP Financial Measures

Non-GAAP net sales

$              431.3

$               704.3

$               523.8

Non-GAAP gross margin

41.8

92.4

45.9

Non-GAAP gross margin percentage

9.7 %

13.1 %

8.8 %

Non-GAAP operating (loss) income

(41.4)

52.0

(58.4)

Non-GAAP net (loss) income

(35.5)

19.9

(66.0)

Non-GAAP fully diluted (loss) earnings per share

(0.16)

0.08

(0.29)

Reconciliations of GAAP to Non-GAAP Measures

MEMC Inc. Consolidated

GAAP net sales

$              443.6

$               600.7

$               519.2

Direct sales[B]

(14.9)

(3.7)

(5.3)

Financing sale-leasebacks [C]

2.6

107.3

9.9

Non-GAAP net sales

$              431.3

$               704.3

$               523.8

GAAP gross margin

$                49.7

$               108.2

$                 50.1

Direct sales[B]

(4.1)

(36.3)

(3.0)

Financing sale-leasebacks [C]

(3.8)

20.5

(1.2)

Non-GAAP gross margin

$                41.8

$                 92.4

$                 45.9

Non-GAAP Gross Margin %

9.7 %

13.1 %

8.8 %

GAAP operating (loss) income

$              (33.5)

$                 67.8

$               (54.2)

Direct sales[B]

(4.1)

(36.3)

(3.0)

Financing sale-leasebacks [C]

(3.8)

20.5

(1.2)

Non-GAAP operating (loss) income

$              (41.4)

$                 52.0

$               (58.4)

GAAP net loss attributable to MEMC stockholders

$              (89.4)

$               (11.8)

$               (98.6)

Recurring Non-GAAP adjustments, net of tax [B, C and D]

53.9

31.7

32.6

Non-GAAP net (loss) income

$              (35.5)

$                 19.9

$               (66.0)

GAAP fully diluted loss per share

$              (0.40)

$               (0.05)

$               (0.43)

Recurring Non-GAAP adjustments [B, C and D]

0.24

0.13

0.14

Non-GAAP fully diluted (loss) earnings per share

$              (0.16)

$                 0.08

$               (0.29)

[A]Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting and reporting.  In addition to reporting financial results in accordance with GAAP, we have provided non-GAAP financial measures for the Solar Energy segment. The Company believes that these non-GAAP measures represent important internal measures of performance for our Solar Energy business, and better reflect Solar Energy's results from operations and near term cash flows.  Accordingly, where these measures are provided, it is done so that investors have the same financial data that management uses to evaluate the operational and financial performance of the Solar Energy segment. MEMC management uses these measures to manage the Solar Energy segment because it believes these measures are more representative of the operational health and performance of that segment. These non-GAAP measures should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance prepared in accordance with GAAP and the reconciliation of each non-GAAP measure to the directly comparable GAAP measure set forth in the press release.

[B]These non-GAAP measures include adjustments to revenue in the Company's Solar Energy business from direct sales of solar energy systems where we have received upfront partial payments and, absent real estate accounting requirements, we would have recognized revenues under the percentage of completion accounting method.  The non-GAAP measures also include adjustments to non-GAAP revenue and/or profit deferred related to our maximum exposure for power warranties, system uptime guarantees and breach of contract provisions offered to the direct sale customers for these systems that are considered continuing involvement by us in the sold solar energy systems.  This revenue is not recognized as of the reporting date under GAAP real estate accounting rules because the solar energy systems are considered integral to the real estate on which they were built.  Absent real estate accounting requirements, deferred revenues related to continuing involvement would be recognized under GAAP during the reporting period because we have historically experienced minimal losses related to these guarantees.  For these direct sales, the sales contracts have been executed and we have either received payment in full or maintains a valid and legal note receivable for the full sales price that we expect to collect within a short period after completion of the project.   

[C]Adjustment relates to revenue from our sale-leaseback transactions accounted for as financings. This includes cash received for the legal sale of the solar energy system to the purchaser that will not be recognized as revenue under GAAP.  Non-GAAP operating income includes the upfront cash margin in an amount equal to the difference between (a) the cash received as of the reporting date from our financing partners in sale-leaseback transactions considered financings and (b) our total costs to construct the solar energy systems sold under the sale-leaseback transactions.  These sale-leaseback transactions are classified as financing transactions under GAAP because the system is considered integral to the land or building on which it resides and because we have continuing involvement with the system through a purchase option.  This system development margin will be recognized under GAAP upon termination of the related lease through the non-cash extinguishment of the debt offset by any remaining net book value of the solar energy system asset.

[D]Income tax has been calculated using the estimated effective tax rate for MEMC in the jurisdictions giving rise to the related adjustments and assumes sale-leaseback deferred tax assets will be realized.

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL INFORMATION
NON-GAAP FINANCIAL MEASURES
(In millions, except percentages) [A]

Three Months Ended

March 31,

December 31,

March 31,

2013

2012

2012

Non-GAAP Financial Measures

Solar Energy Segment Non-GAAP net sales

$        201.5

$              475.8

$         307.8

Solar Energy Segment Non-GAAP operating (loss) income

(18.7)

76.0

(21.3)

Reconciliations of GAAP to Non-GAAP Measures

Solar Energy Segment

Solar Energy GAAP net sales

$        213.8

$              372.2

$         303.2

Direct sales [B]

(14.9)

(3.7)

(5.3)

Financing sale-leasebacks [C]

2.6

107.3

9.9

Solar Energy Non-GAAP net sales

$        201.5

$              475.8

$         307.8

Solar Energy GAAP operating (loss) income

$         (10.8)

$                91.8

$         (17.1)

Direct sales[B]

(4.1)

(36.3)

(3.0)

Financing sale-leasebacks [C]

(3.8)

20.5

(1.2)

Solar Energy Non-GAAP operating (loss) income

$         (18.7)

$                76.0

$         (21.3)

[A], [B], [C] - See previous page

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES

UNAUDITED SUPPLEMENTAL INFORMATION

(In millions)

Three Months Ended

March 31,

December 31,

March 31,

EBITDA CALCULATION [A]

2013

2012

2012

Net loss attributable to MEMC stockholders

$    (89.4)

$          (11.8)

$    (98.6)

Net interest expense

47.0

34.2

26.9

Depreciation and amortization

60.8

78.8

52.9

Income tax expense

19.5

37.0

17.0

EBITDA   [A]

$      37.9

$         138.2

$      (1.8)

[A]EBITDA is a non-GAAP disclosure consisting of net loss attributable to MEMC stockholders plus interest expense, net, depreciation and amortization and income taxes.  The Company believes that EBITDA is useful to an investor in evaluating the company's operating performance and liquidity because (i) it is widely used to measure a company's operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, (ii) it presents a meaningful measure of corporate performance exclusive of the company's capital structure and the method by which the assets were acquired, and (iii) it is a widely accepted financial indicator of a company's ability to service its debt, as the company is required to comply with certain covenants and limitations that are based on variations of EBITDA in the company's financing documents.

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES

UNAUDITED SUPPLEMENTAL INFORMATION

(In millions)

March 31,

December 31,

SUMMARY OF CONSOLIDATED DEBT OUTSTANDING

2013

2012

Senior notes

$     550.0

$           550.0

Term loan

196.3

196.1

Semiconductor Materials - Bank debt

17.1

16.0

Solar Energy - Debt

42.6

43.3

Solar Energy - Current portion of non-recourse system financing debt and capital lease obligations

128.2

97.8

Solar Energy - Non-recourse system financing debt and capital lease obligations, less current portion

1,493.0

1,465.1

Total

$  2,427.2

$        2,368.3

NON-GAAP RECONCILIATION OF FREE CASH FLOW [A]

Three Months Ended

March 31,

December 31,

March 31,

2013

2012

2012

Net cash (used in) provided by operating activities

$   (118.6)

$             19.4

$        (386.7)

Capital expenditures

(30.8)

(38.1)

(40.0)

Construction of solar energy systems

(47.4)

(153.7)

(99.0)

Proceeds from solar energy system financing and capital lease obligations

98.5

183.9

351.5

Repayments of solar energy system financing and capital lease obligations

(12.4)

(62.3)

(72.8)

Proceeds from noncontrolling interests

0.1

34.5

6.0

Free cash flow [A]

$   (110.6)

$           (16.3)

$        (241.0)

[A]Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting and reporting. In addition to reporting financial results in accordance with GAAP, we have provided a non-GAAP financial measure for free cash flow which we believe is useful to help investors better understand the capital intensity of our business, including our project financing operations. In addition to other key performance indicators, we evaluate the performance of the solar project business on the cash generation abilities of the projects, which are typically financed at the inception of a lease, resulting in a gain on sale that is deferred and not immediately included in net income (loss). Any non-GAAP measure should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net income (loss).