SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 10, 1996
MEMC ELECTRONIC MATERIALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-13828 56-1505767
(State or other (Commission file Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
501 Pearl Drive, St. Peters, Missouri 63376
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (314) 279-5500
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events
MEMC Electronic Materials, Inc. (the Company) issued a news release
on September 10, 1996, with respect to its outlook for the third and
fourth quarters of 1996 which contains forward-looking statements. This
news release is incorporated herein by reference to Exhibit 99 attached
hereto.
Set forth herein is an elaboration of the principal factors and risks
which the Company considers to be most likely to cause actual results to
differ materially from the forward-looking statements included in the news
release.
Impact of Downturns in the Semiconductor Industry
The Company's business depends in large part upon market demand for
semiconductors and products utilizing semiconductors. The semiconductor
industry historically has been cyclical and has experienced periodic
downturns, which have had an adverse impact on suppliers to the
semiconductor industry - including manufacturers of silicon wafers. Prior
semiconductor industry downturns have adversely affected the Company's
operating results. The Company believes that its strategy of geographic
diversification of operations may partially reduce the effect of regional
downturns in the semiconductor industry. However, the Company's operating
results will be adversely affected by any future downturns in the
semiconductor industry. In addition, the continued investment in
engineering, research and development, expanded capacity and marketing
necessary to penetrate targeted markets and to maintain extensive
worldwide customer service and support capabilities limits the Company's
ability to reduce expenses during downturns.
Highly Competitive Industry
The silicon wafer industry is highly competitive. The Company faces
substantial competition from established silicon wafer manufacturers
throughout the world, some of which have substantial financial, technical,
engineering and manufacturing resources.
The Company competes principally on the basis of technical innovation
and product quality and performance, as well as customer service, price
and product availability. The Company's competitors can be expected to
continue to improve the design and performance of their products and to
introduce new products with competitive price and performance
characteristics. Competitive pressures or downturns in the semiconductor
industry may necessitate price reductions which could adversely affect the
Company's operating results. Although the Company believes that it has
certain technological, geographic and other strengths over its
competitors, realizing and maintaining such strengths will require a
continued high level of investment by the Company in engineering, research
and development, marketing and customer service and support and increased
manufacturing capacity. There can be no assurance that the Company will
be able to maintain such competitive advantages.
Risks Associated with Planned Expansions
The Company is currently expanding its manufacturing facilities at
certain of its locations around the world and continues to make
investments in its joint ventures for the purpose of funding capital
expenditures by such joint ventures. These capacity additions require
significant capital investment and result in a significant increase in
fixed and operating expenses. In addition, the Company expects to incur
additional indebtedness to partially finance such expenditures and
investments. If there is insufficient demand for the silicon wafers
produced in the Company's new or expanded facilities or if revenue levels
do not increase sufficiently to offset these additional costs, the
Company's operating results would be adversely impacted.
The Company believes that its principal competitors are rapidly
increasing manufacturing capacity, principally with respect to 200 mm
wafer manufacturing facilities. There can be no assurance that expansion
by the Company and its competitors will not lead to overcapacity in the
Company's target markets, which could cause declines in product prices
that would adversely affect the Company's operating profit.
Limited Number of Principal Customers
Historically, the Company has sold a significant proportion of its
products to a limited number of principal customers. In 1995, more than
half of its sales were generated by seven customers. Likewise, the
majority of PHC's sales were to one customer. The loss of, or a
significant curtailment of purchases by, one or more top customers could
have a material adverse effect on the Company's operating results.
Changing Customer Specifications
The silicon wafer industry is highly competitive and subject to rapid
technological change, new and enhanced product specification requirements
and manufacturing processes, as well as evolving industry standards. The
Company's ability to remain competitive will depend upon its ability to
develop technologically advanced products and processes, and to meet the
increasingly demanding requirements of its customers on a cost effective
basis.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MEMC Electronic Materials, Inc.
Date September 10, 1996 /s/ JAMES M. STOLZE
-------------------------------
James M. Stolze
Executive Vice President and Chief
Financial Officer
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K:
Exhibit No. Description
- ----------- -----------
99 News release of September 10, 1996
Exhibit 99:
FOR IMMEDIATE RELEASE: CONTACT: Sam Duggan
Director, Investor Relations
314-279-5920
Michele Katz/Jessica Davis
Morgen-Walke Associates
Press: Lee Foley/Jennifer Rutter
212-850-5600
MEMC COMMENTS ON THIRD QUARTER OUTLOOK
ST. PETERS, MO, September 10, 1996 -- MEMC Electronic Materials, Inc.
indicated today that its financial results for the third quarter ending
September 30, 1996 will be adversely affected by the current difficult
business conditions in the semiconductor industry.
The Company stated that third quarter net sales are expected to be
sequentially down from the second quarter 1996 net sales and more in line
with first quarter 1996 net sales of $289.8 million. In comparison, in
the 1995 third quarter net sales were $251.2 million. Gross margin for
the period is expected to approximate the gross margin of $62.7 million
reported in the third quarter of 1995. However, as a percent of sales,
the gross margin is likely to be below the 25% reported in last year's
third quarter. This is a result of a lower rate of capacity utilization
and start-up costs. The Company noted that net earnings in the 1996 third
quarter will also reflect a significant decrease in the level of
contribution from equity in income of joint ventures in comparison to the
1995 third quarter. This decrease is attributable to lower sales at PHC,
the Korean joint venture, and start-up costs at Taisil, the Taiwanese
joint venture.
Ludger H. Viefhues, Chief Executive Officer, commented "The inventory
correction that is taking place in the worldwide semiconductor industry
has begun to impact silicon wafer manufacturers. Although our market
ranking and technological leadership put us in a strong competitive
position within the industry, we could not maintain our previous growth
momentum during these difficult market conditions."
Dr. Robert Sandfort, President and Chief Operating Officer, continued, "As
a result of this environment, our visibility with respect to the level
of future customer orders and requirements is continuing to contract, and it
is difficult to predict how long these conditions will prevail. At this
point in time, anticipated sales for the 1996 fourth quarter are
significantly below our earlier expectations."
"We continue to be optimistic for the longer term prospects of the
industry. However, in response to the current rapidly changing
environment, we are taking actions to improve efficiencies and reduce costs
throughout the Company. We have begun eliminating temporary employees
and overtime throughout our manufacturing facilities worldwide."
MEMC Electronic Materials will report final results for the three months
ended September 30, 1996 on or about October 24, 1996.
Except for the historical information contained herein, the matters
discussed in this news release are forward-looking statements that 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 such factors as overall economic conditions,
demand for semiconductors generally, demand for the Company's silicon
wafers, technological and product development risks, competitors' actions
and other risks described in the Company's filings with the Securities and
Exchange Commission, including the reports on Form 8-K dated September 10,
1996 and 10-K for the year ended December 31, 1995. These forward-looking
statements represent the Company's judgement as of the date of this
release. The Company disclaims, however, any intent or obligation to
update these forward-looking statements.
Based in St. Peters, MO, MEMC is the world's second-largest producer of
polished and epitaxial silicon wafers. The silicon wafer is the
fundamental building block of semiconductors, which, in turn, are found in
every type of microelectronics application, including computer systems,
telecommunications equipment, automobiles, consumer electronics products,
industrial automation and control systems, and analytical and defense
systems.
The Company and its affiliates operate manufacturing facilities throughout
the world and employ approximately 9,000 people. In the United States,
MEMC operates manufacturing plants in St. Peters, MO; Santa Clara, CA;
Spartanburg, SC; and Pasadena and Sherman, TX. The Company and its
affiliates also operate plants in Italy, Japan, Malaysia, the Peoples
Republic of China, South Korea and Taiwan. MEMC is traded on the New York
Stock Exchange under the symbol "WFR."
World wide web: Press announcements and other information about MEMC are
available on the Internet via the World Wide Web at http://www.memc.com.
