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): January 26, 1999
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MEMC ELECTRONIC MATERIALS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-13828 56-1505767
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
501 Pearl Drive, St. Peters, Missouri 63376
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 279-5000
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(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Fourth Quarter 1998 Results
MEMC Electronic Materials, Inc. issued a news release on January 26, 1999
announcing its financial results for the three and twelve months ended December
31, 1998. This news release is incorporated herein by reference to Exhibit 99.1
attached hereto.
Item 7. Financial Statements and Exhibits
C. Exhibits
Exhibit No. Description
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99.1 News Release issued by MEMC Electronic Materials, Inc.
dated January 26, 1999
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: January 27, 1999 /s/ James M. Stolze
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James M. Stolze
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K:
Exhibit No. Description
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99.1 News Release issued by MEMC Electronic Materials,
Inc. dated January 26, 1999
CONTACT: Janine Orf
Director, Investor Relations
(314) 279-5443
For Immediate Release:
Michele Katz/Connie Bienfait/
Elric Martinez
Morgen-Walke Associates
Press: Lee Foley/Frank Domondon
(212) 850-5600
MEMC ANNOUNCES FOURTH QUARTER 1998 RESULTS
St. Peters, MO, January 26, 1999 -- MEMC Electronic Materials, Inc. (NYSE: WFR)
today released financial results for the fourth quarter and year ended December
31, 1998. MEMC reported net sales of $153.8 million for the 1998 fourth quarter.
In the year-ago period, net sales totaled $258.6 million.
For the 1998 fourth quarter, the Company reported a net loss of $65.1 million,
or $1.61 per share before after-tax restructuring charges of $5.3 million, or
$0.13 per share, compared to a net loss of $3.5 million, or $0.08 per share in
the 1997 fourth quarter.
Restructuring expenses in the fourth quarter related to severance benefits for
certain employees and costs associated with facility rationalization actions.
For the year ended December 31, 1998, the Company reported net sales of $758.9
million, and a net loss of $194.6 million, or $4.80 per share before after-tax
restructuring charges of $115.8 million, or $2.85 per share. In 1997, net sales
were $986.7 million and net loss totaled $6.7 million, or $0.16 per share.
Advanced large diameter and epitaxial products represented 51% of product volume
for the 1998 fourth quarter compared to 41% in the year-ago period. The increase
in this ratio is indicative of the Company's customers utilizing 8-inch
facilities in preference to their smaller diameter facilities in order to obtain
the lowest cost per device.
In the fourth quarter of 1998 gross margin was a negative 15.4%, compared to a
positive 11.5% in the year-ago period. The decline in gross margin is primarily
attributable to significant declines in volume and lower prices, only partially
offset by an improved product mix. Gross margin improved somewhat from the
negative 16.8% reported in the 1998 third quarter.
"As anticipated MEMC's product volumes continued to decline in the fourth
quarter of 1998 as the Japanese market remained weak. We also experienced
decreased volumes in the European region, while volumes in the U.S. were flat in
the 1998 fourth quarter as compared to the 1998 third quarter," commented Ludger
H. Viefhues, Chief Executive Officer. "MEMC is aggressively continuing its
cost-cutting and plant rationalization strategies."
(more)
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MEMC Electronic Materials Page 2.
"Looking forward, we expect to see some sequential improvement in product
volumes in the first quarter of 1999, especially in the U.S. and Europe, as well
as at our unconsolidated joint ventures in Korea and Taiwan. While we are
encouraged by the expected improvement in volumes, it remains to be seen if the
trend will be sustained," noted Mr. Viefhues. "Silicon wafer prices have
continued to decline, especially for 8-inch wafers as excess capacity still
affects the industry. However, we believe we will see some reduction in losses
in the first quarter of 1999 as a result of the restructuring and cost cutting
actions undertaken by MEMC as well as the anticipated higher volumes."
Research and development costs totaled $23.3 million for the fourth quarter of
1998, compared to $18.0 million in the year-ago period. The increase in research
and development is primarily due the Company's 12-inch (300 millimeter) wafer
development program and depreciation expense from related investments made in
1997 and in 1998.
Interest expense totaled $16.6 million for the 1998 fourth quarter compared to
$8.2 million in the year-ago period. The increase in interest expense is
principally attributable to increased borrowings, as well as higher interest
rates resulting from the re-negotiation of the Company's debt with VEBA AG and
its affiliates in September 1998, as previously announced. This renegotiation
included an additional three-year $100 million credit facility from VEBA AG, and
the extension of all outstanding debt with VEBA AG and its affiliates to 2001.
The Company's effective tax rate was 24.0% for the year ended December 31, 1998.
Equity in loss of joint ventures was $10.7 million in the fourth quarter of
1998, compared to income of $12.7 million in the year-ago period. The loss in
the 1998 fourth quarter included foreign currency losses on New Taiwanese dollar
currency exposure at Taisil, the Company's unconsolidated Taiwanese joint
venture, and on Korean won exposure at PHC, the Company's unconsolidated Korean
joint venture, totaling $2.9 million. Excluding the net foreign currency losses,
equity in loss of joint ventures would have been $7.8 million in the fourth
quarter of 1998, reflecting improved volumes and product mix at PHC and Taisil
as compared to the 1998 third quarter loss of $9.8 million.
The Company previously announced its intention to proceed with a private
placement of approximately $106 million of MEMC Common Stock to VEBA
Corporation, the Company's 53.1% stockholder and a rights offering to all common
stockholders other than VEBA of approximately $94 million. The Company filed a
registration statement with the Securities and Exchange Commission relating to
the rights offering. The private placement to VEBA will close concurrently with
the SEC's declaring effective the registration statement associated with the
rights offering. The Company has $128 million in cash and available credit as of
December 31, 1998. The Company believes it will have adequate cash and available
credit until the private placement is closed.
(more)
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MEMC Electronic Materials Page 3.
As part of its normal review process, the SEC staff is currently reviewing the
registration statement and has issued comments concerning certain legal and
accounting issues. The SEC staff has questioned the timing of the change in
functional currency for accounting purposes used by Taisil and PHC, the
Company's unconsolidated joint ventures. The Company believes that the joint
ventures' accounting for their functional currency was appropriate and the
Company is in the process of working with the SEC staff to resolve this and
other comments to enable the Company to proceed with it rights offering as soon
as possible. There can be no assurance that the Company will prevail in its
discussions with the SEC staff. Depending on the outcome of these discussions,
the Company may be required to restate its 1997 financial statements to reflect
additional equity in income from joint ventures of approximately $6 million,
which would reduce the reported overall consolidated net loss of $6.7 million to
approximately break-even.
The rights and underlying common stock may be not be sold nor may offers to buy
be accepted prior to the time the registration statement becomes effective. This
news release shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any state or
other jurisdiction which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
state or other jurisdiction. In any state or other jurisdiction where
securities, blue sky or other laws require the rights offering to be made by a
licensed broker or dealer, the rights offering will be deemed to be made on the
behalf of the Company by the dealer managers or one or more registered brokers
or dealers licensed under the laws of such jurisdiction. The rights offering
will be made only by means of a prospectus.
The share of common stock to be purchased by VEBA Corporation will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United Sates without such registration or an applicable exemption from such
registration requirements.
MEMC is the second largest producer of silicon wafers in the world. The silicon
wafer is the fundamental building block of semiconductors, which, in turn, are
found in virtually all electronics applications, including computers,
telecommunications equipment, automobiles, consumer electronics products,
industrial automation and control systems, and analytical and defense systems.
Headquartered in St. Peters, MO, MEMC operates manufacturing facilities directly
or through joint ventures in Italy, Japan, Malaysia, South Korea, Taiwan and the
United States. To learn more about MEMC visit its web site at www.memc.com
The matters discussed in this news release regarding product volumes, pricing,
and operating results for the first quarter of 1999 and regarding the Company's
intentions with respect to the rights offering and private placement to VEBA,
including the statement regarding adequate cash and available credit, are
forward-looking statements. 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 such
factors as demand for the Company's silicon wafers, demand for semiconductors
generally, general economic conditions in the Asia Pacific region and Japan,
competitors actions and other risks described in the Company's filings with the
Securities and Exchange Commission, including the registration statement on Form
S-3 filed with the Securities and Exchange Commission on October 22, 1998, as
amended on December 11, 1998 and December 31, 1998. 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-
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<TABLE>
<CAPTION>
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Dollars in thousands, except share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net sales $ 153,835 $ 258,583 $ 758,916 $ 986,673
Cost of goods sold 177,525 228,895 790,745 861,914
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Gross margin (23,690) 29,688 (31,829) 124,759
Operating expenses:
Marketing and administration 19,850 18,743 73,515 70,715
Research and development 23,261 18,040 81,591 64,457
Restructuring costs 6,870(1) - 146,324(1) -
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Operating loss (73,671) (7,095) (333,259) (10,413)
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Nonoperating (income) expense:
Interest expense 16,637 8,222 45,832 14,743
Interest income (1,119) (1,522) (2,291) (2,570)
Royalty income (916) (1,661) (4,628) (8,186)
Other, net (2,293) 3,226 1,043 (4,070)
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Total nonoperating (income) expense 12,309 8,265 39,956 (83)
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Loss before income taxes, equity
in income (loss) of joint ventures and
minority interests (85,980) (15,360) (373,215) (10,330)
Income taxes (24,258) 606 (89,394) 2,769
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Loss before equity in income (loss) of joint
ventures and minority interests (61,722) (15,966) (283,821) (13,099)
Equity in income (loss) of joint ventures (10,677) 12,723 (37,522) 3,246
Minority interests 1,978 (219) 10,985 3,106
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Net loss $ (70,421)(1) $ (3,462) $ (310,358)(1) $ (6,747)
======= ======= ======= =======
Basic loss per share $ (1.74) $ (0.08) $ (7.65) $ (0.16)
Diluted loss per share $ (1.74)(1) $ (0.08) $ (7.65)(1) $ (0.16)
======= ======= ======= =======
Weighted average shares used in computing basic
loss per share 40,485,524 41,358,566 40,580,869 41,345,193
Weighted average shares used in computing diluted
loss per share 40,485,524 41,358,566 40,580,869 41,345,193
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<FN>
(1) For the quarter, the Company reported a net loss of $65.1 million, or $1.61
per share, before after-tax restructuring charges of $5.3 million or $0.13
per share. For the year, the Company reported a net loss of $194.6 million
or $ 4.80 per share before after-tax restructuring charges of $115.8
million or $2.85 per share.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,168 $ 30,053
Accounts receivable, less allowance for doubtful accounts of
$2,853 and $3,473 in 1998 and 1997, respectively 98,528 154,702
Income taxes receivable 10,161 14,382
Inventories 115,927 141,447
Deferred tax assets, net 23,129 13,206
Prepaid and other current assets 35,225 23,185
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Total current assets 299,138 376,975
Property, plant and equipment, net of accumulated depreciation of
$569,327 and $465,384 in 1998 and 1997, respectively 1,188,832 1,200,827
Investment in joint ventures 83,318 95,307
Excess of cost over net assets acquired, net of accumulated amortization
of $5,128 and $3,752 in 1998 and 1997, respectively 48,396 49,772
Deferred tax assets, net 103,025 15,472
Other assets 42,255 38,805
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Total assets $ 1,764,964 $ 1,777,158
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 170,044 $ 122,476
Accounts payable 112,581 146,172
Provision for restructuring costs 37,299 -
Accrued liabilities 53,043 48,611
Accrued wages and salaries 17,077 21,267
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Total current liabilities 390,044 338,526
Long-term debt, less current portion 739,763 510,038
Pension and similar liabilities 92,466 76,837
Customer deposits 59,033 67,141
Other liabilities 45,126 26,901
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Total liabilities 1,326,432 1,019,443
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Minority interests 48,242 59,227
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 50,000,000 shares authorized, none
issued or outstanding in 1998 or 1997 - -
Common stock, $.01 par value, 200,000,000 shares authorized,
41,436,421 and 41,440,369 issued and outstanding in 1998 and 1997 414 414
Additional paid-in capital 574,188 574,317
Retained earnings (accumulated deficit) (145,963) 164,396
Accumulated other comprehensive loss (21,204) (38,887)
Unearned restricted stock awards (125) (424)
Treasury stock, at cost: 929,205 and 36,205 shares in 1998 and 1997,
respectively (17,020) (1,328)
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Total stockholders' equity 390,290 698,488
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Total liabilities and stockholders' equity $ 1,764,964 $ 1,777,158
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</TABLE>
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