UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
Or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-13828
MEMC ELECTRONIC MATERIALS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 56-1505767 | |
| (State or other jurisdiction of incorporation or organization) |
(I. R. S. Employer Identification No.) |
| 501 Pearl Drive (City of O’Fallon) St. Peters, Missouri |
63376 | |
| (Address of principal executive offices) | (Zip Code) |
(636) 474-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). x Yes ¨ No
The number of shares of the registrant’s common stock outstanding at October 29, 2004 was 207,880,168.
PART I— FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II— OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits
PART I - FINANCIAL INFORMATION
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands, except share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 275,283 | $ | 195,897 | $ | 759,582 | $ | 576,071 | ||||||||
| Cost of goods sold |
164,537 | 137,378 | 488,334 | 407,726 | ||||||||||||
| Gross margin |
110,746 | 58,519 | 271,248 | 168,345 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Marketing and administration |
17,768 | 13,613 | 52,798 | 41,098 | ||||||||||||
| Research and development |
9,413 | 8,406 | 27,594 | 24,326 | ||||||||||||
| Operating income |
83,565 | 36,500 | 190,856 | 102,921 | ||||||||||||
| Nonoperating (income) expense: |
||||||||||||||||
| Interest expense |
3,408 | 2,665 | 10,284 | 9,975 | ||||||||||||
| Interest income |
(975 | ) | (1,870 | ) | (3,988 | ) | (5,777 | ) | ||||||||
| Royalty income |
— | (1,038 | ) | (105 | ) | (2,924 | ) | |||||||||
| Currency (gains) losses |
441 | (11,709 | ) | 1,547 | (10,605 | ) | ||||||||||
| Other, net |
(2,474 | ) | (212 | ) | (4,756 | ) | (315 | ) | ||||||||
| Total nonoperating (income) expense |
400 | (12,164 | ) | 2,982 | (9,646 | ) | ||||||||||
| Income before income tax expense, equity in income (loss) of joint venture and minority interests |
83,165 | 48,664 | 187,874 | 112,567 | ||||||||||||
| Income tax expense |
20,791 | 12,166 | 21,644 | 28,142 | ||||||||||||
| Income before equity in income (loss) of joint venture and minority interests |
62,374 | 36,498 | 166,230 | 84,425 | ||||||||||||
| Equity in income (loss) of joint venture |
— | 1,589 | (1,717 | ) | 4,317 | |||||||||||
| Minority interests |
(2,654 | ) | (2,890 | ) | (8,286 | ) | (6,529 | ) | ||||||||
| Net income |
$ | 59,720 | $ | 35,197 | $ | 156,227 | $ | 82,213 | ||||||||
| Basic income per share |
$ | 0.29 | $ | 0.17 | $ | 0.75 | $ | 0.41 | ||||||||
| Diluted income per share |
$ | 0.27 | $ | 0.16 | $ | 0.71 | $ | 0.38 | ||||||||
| Weighted average shares used in computing basic income per share |
207,829,540 | 206,517,384 | 207,584,240 | 200,908,620 | ||||||||||||
| Weighted average shares used in computing diluted income per share |
220,369,530 | 223,771,825 | 220,678,058 | 217,401,562 | ||||||||||||
See accompanying notes to consolidated financial statements.
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
| September 30, 2004 |
December 31, 2003 |
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| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 103,308 | $ | 96,859 | ||||
| Short-term investments |
— | 33,838 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $1,861 and $2,408 in 2004 and 2003, respectively |
151,873 | 103,020 | ||||||
| Inventories |
119,777 | 109,488 | ||||||
| Prepaid and other current assets |
20,118 | 22,140 | ||||||
| Total current assets |
395,076 | 365,345 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $180,375 and $164,266 in 2004 and 2003, respectively |
387,276 | 270,367 | ||||||
| Investment in joint venture |
— | 24,155 | ||||||
| Deferred tax assets, net |
43,558 | 20,248 | ||||||
| Other assets |
55,377 | 46,637 | ||||||
| Total assets |
$ | 881,287 | $ | 726,752 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Short-term borrowings and current portion of long-term debt |
$ | 21,865 | $ | 71,841 | ||||
| Accounts payable |
99,021 | 95,178 | ||||||
| Accrued liabilities |
32,418 | 35,537 | ||||||
| Customer deposits |
5,023 | 15,655 | ||||||
| Income taxes payable |
9,231 | 3,002 | ||||||
| Accrued wages and salaries |
21,940 | 22,841 | ||||||
| Total current liabilities |
189,498 | 244,054 | ||||||
| Long-term debt, less current portion |
120,514 | 59,251 | ||||||
| Pension and similar liabilities |
112,360 | 126,401 | ||||||
| Customer deposits |
3,208 | 3,606 | ||||||
| Other liabilities |
57,623 | 35,690 | ||||||
| Total liabilities |
483,203 | 469,002 | ||||||
| Minority interests |
44,033 | 64,127 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued and outstanding at 2004 and 2003 |
— | — | ||||||
| Common stock, $.01 par value, 300,000,000 shares authorized, 208,549,642 and 207,878,032 issued at 2004 and 2003, respectively |
2,085 | 2,079 | ||||||
| Additional paid-in capital |
152,450 | 150,095 | ||||||
| Retained earnings |
238,377 | 82,150 | ||||||
| Accumulated other comprehensive loss |
(33,378 | ) | (33,338 | ) | ||||
| Deferred compensation |
(1,855 | ) | (2,916 | ) | ||||
| Treasury stock, 714,205 and 875,455 shares in 2004 and 2003, respectively |
(3,628 | ) | (4,447 | ) | ||||
| Total stockholders’ equity |
354,051 | 193,623 | ||||||
| Total liabilities and stockholders’ equity |
$ | 881,287 | $ | 726,752 | ||||
See accompanying notes to consolidated financial statements.
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 156,227 | $ | 82,213 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
31,607 | 23,274 | ||||||
| Interest accretion |
3,705 | 1,868 | ||||||
| Stock compensation |
1,808 | 2,904 | ||||||
| Minority interests |
8,286 | 6,529 | ||||||
| Equity in (income) loss of joint venture |
1,717 | (4,317 | ) | |||||
| Working capital and other |
(27,494 | ) | (32,024 | ) | ||||
| Net cash provided by operating activities |
175,856 | 80,447 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(98,073 | ) | (62,224 | ) | ||||
| Proceeds from sale of property, plant and equipment |
72 | 37 | ||||||
| Purchase of business, net of cash acquired |
(57,226 | ) | — | |||||
| Net cash used in investing activities |
(155,227 | ) | (62,187 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net short-term borrowings |
(30,552 | ) | (61,129 | ) | ||||
| Proceeds from issuance of long-term debt |
60,014 | — | ||||||
| Principal payments on long-term debt |
(41,922 | ) | (94,295 | ) | ||||
| Proceeds from issuance of common stock |
2,445 | 100,498 | ||||||
| Dividend to minority interest |
(4,765 | ) | (2,510 | ) | ||||
| Net cash used in financing activities |
(14,780 | ) | (57,436 | ) | ||||
| Effect of exchange rates changes on cash and cash equivalents |
600 | 4,666 | ||||||
| Net increase (decrease) in cash and cash equivalents |
6,449 | (34,510 | ) | |||||
| Cash and cash equivalents at beginning of period |
96,859 | 119,651 | ||||||
| Cash and cash equivalents at end of period |
$ | 103,308 | $ | 85,141 | ||||
See accompanying notes to consolidated financial statements.
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
(1) Nature of Operations
We are a leading worldwide producer of wafers for the semiconductor industry. We are one of the top four wafer suppliers in the world, with each having more than a 10% share of the overall market. We operate manufacturing facilities in every major semiconductor manufacturing region throughout the world, including Europe, Japan, Malaysia, South Korea, Taiwan and the United States. Our customers include virtually all of the major semiconductor device manufacturers in the world, including the major memory, microprocessor and applications specific integrated circuit, or ASIC, manufacturers, as well as the world’s largest foundries. We provide wafers in sizes ranging from 100 millimeters (4 inch) to 300 millimeters (12 inch) and in four general categories: prime polished, annealed, epitaxial and test/monitor. A prime polished wafer is a highly refined, pure wafer