MEMC ELECTRONIC MATERIALS INC
10-Q, 2000-08-10
SEMICONDUCTORS & RELATED DEVICES
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                                  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 June 30, 2000

                                       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:                                                1-13828
                              --------------------------------------------------

                         MEMC ELECTRONIC MATERIALS, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                     56-1505767
--------------------------------------------------------------------------------
(State or other jurisdiction of           (I. R. S. Employer Identification No.)
  incorporation or organization)

   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)

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)

     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


The number of shares of the registrant's  common stock  outstanding at July 31,
2000 was 69,610,900.


<PAGE>
                        PART I -- FINANCIAL INFORMATION
Item 1.  Financial Statements.

                MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              (Unaudited; Dollars in thousands, except share data)


                                       Three Months Ended      Six Months Ended
                                             June 30,              June 30,
                                        2000        1999       2000      1999
                                     ---------- ---------- ---------- ----------
Net sales                             $200,516    $168,043   $393,605  $327,843
Costs of goods sold                    174,628     170,009    353,713   343,625
                                     ---------- ---------- ---------- ----------
      Gross margin                      25,888      (1,966     39,892   (15,782)
Operating expenses:
    Marketing and administration        17,091      17,293     32,685    34,172
    Research and development            18,240      19,710     37,628    40,567
                                     ---------- ---------- ---------- ----------
      Operating loss                    (9,443)    (38,969)   (30,421)  (90,521)
Nonoperating (income) expense:
    Interest expense                    18,333      15,696     35,814    33,155
    Interest income                     (1,316)       (291)    (1,692)     (733)
    Royalty income                      (2,119)     (1,458)    (4,199)   (2,683)
    Other, net                            (542)       (411)       259      (146)
                                     ---------- ---------- ---------- ----------
      Total nonoperating expense        14,356      13,536     30,182    29,885
      Loss before income taxes,
         equity in income (loss)
         of joint ventures
         and minority interests        (23,799)    (52,505)   (60,603) (120,406)
Income taxes                            (6,426)    (16,277)   (16,363)  (37,326)
                                     ---------- ---------- ---------- ----------
      Loss before equity in income
      (loss) of joint ventures and
      minority interests               (17,373)    (36,228)   (44,240)  (83,080)
Equity in income (loss) of
     joint ventures                      1,789      (3,891)       716    (8,480)
Minority interests                          74         807        675     1,994
                                     ---------- ---------- ---------- ----------
      Net loss                        $(15,510)   $(39,312)  $(42,849) $(89,566)
                                     ========== ========== ========== ==========
Basic loss per share                  $   (.22)   $   (.58)  $   (.62) $  (1.63)
                                     ========== ========== ========== ==========
Diluted loss per share                $   (.22)   $   (.58)  $   (.62) $  (1.63)
                                     ========== ========== ========== ==========
Weighted average shares
  used in computing
  basic loss per share               69,610,900 67,266,653 69,581,327 54,800,850
                                     ========== ========== ========== ==========
Weighted average shares
  used in computing
  diluted loss per share             69,610,900 67,266,653 69,581,327 54,800,850
                                     ========== ========== ========== ==========

See accompanying notes to consolidated financial statements.


<PAGE>
                MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except share data)

                                                   June 30,         December 31,
                                                     2000               1999
                                                 (Unaudited)
                                                  ------------      -----------
ASSETS
Current assets:
    Cash and cash equivalents                      $    16,545      $    28,571
    Accounts receivable, less allowance
      for doubtful accounts  $2,828 and
      $2,409 in 2000 and 1999, respectively            132,105          111,559
    Income taxes receivable                                  -            9,237
    Inventories                                         99,229           98,419
    Deferred tax assets, net                            13,813           12,905
    Prepaid and other current assets                    19,905           15,229
                                                  ------------      -----------
        Total current assets                           281,597          275,920
Property, plant and equipment, net of
     accumulated depreciation of
     $758,619 and $703,252 in 2000
     and 1999, respectively                            989,795        1,090,358
Investments in joint ventures                           97,970           97,254
Excess of cost over net assets
    acquired, net of accumulated
    amortization of $6,628 and $6,466
    in 2000 and 1999, respectively                      46,396           47,058
Deferred tax asset, net                                207,314          183,902
Other assets                                            57,468           30,089
                                                  ------------      -----------
        Total assets                               $ 1,680,540      $ 1,724,581
                                                  ============      ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings and current
      portion of long-term debt                    $    50,852      $    22,163
    Accounts payable                                    73,990           85,704
    Accrued liabilities                                 33,940           29,795
    Customer deposits                                   18,680           16,556
    Provision for restructuring costs                   10,469           12,839
    Income taxes payable                                 3,696                -
    Accrued wages and salaries                          26,533           22,557
                                                  ------------      -----------
        Total current liabilities                      218,160          189,614
Long-term debt, less current portion                   856,829          869,759
Pension and similar liabilities                         97,305           95,731
Customer deposits                                       38,028           48,456
Other liabilities                                       44,012           44,893
                                                  ------------      -----------
        Total liabilities                            1,254,334        1,248,453
                                                  ------------      -----------
Minority interests                                      42,662           43,337
Commitments and contingencies
Stockholders' equity:
    Preferred stock, $.01 par value,
        50,000,000 shares authorized,
        none issued or outstanding at
        2000 or 1999                                         -                -
    Common stock, $.01 par value,
        200,000,000 shares authorized,
        70,540,105 and 70,463,505 issued
        in 2000 and 1999, respectively                     705              705
    Additional paid-in capital                         771,411          770,476
    Accumulated deficit                               (342,166)        (299,317)
    Accumulated other comprehensive loss               (29,386)         (22,053)
    Treasury stock, at cost: 929,205
        in 2000 and 1999                               (17,020)         (17,020)
                                                  ------------      -----------
        Total stockholders' equity                     383,544          432,791
                                                  ------------      -----------
        Total liabilities and
          stockholders' equity                    $  1,680,540      $ 1,724,581
                                                  ============      ===========

See accompanying notes to consolidated financial statements.

<PAGE>
                MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (Unaudited; Dollars in thousands)



                                                          Six Months Ended
                                                              June 30,
                                                        2000              1999
                                                      ----------     ----------
Cash flows from operating activities:
    Net loss                                         $   (42,849)    $  (89,566)
    Adjustments to reconcile net loss
        to net cash used
        in operating activities:
            Depreciation and amortization                 80,731         79,786
            Minority interests                              (675)        (1,994)
            Equity in (income) loss of
              joint ventures                                (716)         8,480
            (Gain) loss on sale of property,
              plant and equipment                         (1,300)         1,383
            Working capital and other                    (47,785)       (71,094)
                                                      ----------     ----------
              Net cash used in operating activities      (12,594)       (73,005)
                                                      ----------     ----------
Cash flows from investing activities:
    Capital expenditures                                 (22,467)       (20,271)
    Proceeds from sale of property,
      plant and equipment                                  1,365              3
    Equity infusions in joint ventures                         -        (12,052)
    Notes receivable from affiliates                           -          9,654
                                                      ----------     ----------
              Net cash used in investing activities      (21,102)       (22,666)
                                                      ----------     ----------
Cash flows from financing activities:
    Net short-term borrowings                             (5,575)        (6,039)
    Proceeds from issuance of long-term debt              31,138          8,735
    Principal payments on long-term debt                  (3,926)       (86,474)
    Proceeds from issuance of common stock                   935        196,951
                                                      ----------     ----------
              Net cash provided by financing activities   22,572        113,173
                                                      ----------     ----------
Effect of exchange rates on cash and cash equivalents       (902)        (2,004)
                                                      ----------     ----------
Net increase (decrease) in cash                          (12,026)        15,498
Cash and cash equivalents at beginning of period          28,571         16,168
                                                      ----------     ----------
Cash and cash equivalents at end of period            $   16,545     $   31,666
                                                      ==========     ==========

See accompanying notes to consolidated financial statements.


<PAGE>
                MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (Dollars in thousands, except share data)

(1) Basis of Presentation

The accompanying  unaudited consolidated financial statements of MEMC Electronic
Materials,  Inc. and Subsidiaries  (the Company),  in the opinion of management,
include all adjustments  (consisting of normal,  recurring  items)  necessary to
present  fairly the Company's  financial  position and results of operations and
cash flows for the periods presented.  The consolidated financial statements are
presented in accordance with the requirements of Regulation S-X and consequently
do not  include  all  disclosures  required  by  generally  accepted  accounting
principles. This report on Form 10-Q, including unaudited consolidated financial
statements,  should be read in conjunction  with the Company's  annual report to
shareholders  for the fiscal year ended  December 31, 1999,  which  contains the
Company's   audited   financial   statements  for  such  year  and  the  related
management's  discussion  and  analysis of  financial  condition  and results of
operations.  Operating  results for the six-month period ended June 30, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 2000.

(2) Earnings (loss) per share

The numerator for basic and diluted loss per share  calculations is net loss for
all periods presented.  The denominator for the basic and diluted loss per share
calculations for the three and six-month periods ended June 30, 2000 and 1999 is
the same within each period (the weighted  average shares  outstanding  for each
respective  period).  The Company had 2,859,157 options  outstanding at June 30,
2000 which were not included in the computation of diluted loss per share due to
the net loss  incurred  during  the three and six month  periods  ended June 30,
2000.

(3) Inventories

Inventories consist of the following:

                                                June 30,            December 31,
                                                  2000                  1999

Raw materials and supplies                    $   44,225            $   49,537
Goods in process                                  27,637                23,493
Finished goods                                    27,367                25,389
                                              ----------            ----------
                                              $   99,229            $   98,419
                                              ==========            ==========

<PAGE>

(4) Restructuring Costs

During 1998, the Company  recorded a charge to operations of $121,670 related to
the decisions to close its small diameter wafer facility in  Spartanburg,  South
Carolina,  withdraw from its 60%-owned  joint venture in a small  diameter wafer
operation  in China and to forego  construction  of a new 200  millimeter  wafer
facility at its  75%-owned  joint  venture in Malaysia.  Restructuring  activity
since the provision for restructuring costs was recorded is as follows:

                                                   Amount  Balance   Balance
                                                 Reversed/ June 30, December 31,
                                     Provision   Utilized    2000       1999
                                      ---------  --------- --------   --------
Asset impairment/write-off:
  Spartanburg property, plant
    and equipment                     $  36,300  $  36,300 $      -   $      -
  Malaysian joint venture assets         28,000     27,484      516        530
  Chinese joint venture assets           13,800     13,597      203        360
  Other infrastructure                    3,225      3,225        -          -
                                      ---------  --------- --------   --------
  Total                                  81,325     80,606      719        890
                                      ---------  --------- --------   --------
Dismantling and related costs:
  Dismantling costs                      11,345      5,447    5,898      7,260
  Costs incurred by equipment
    suppliers                             5,000      5,000        -          -
  Environmental costs                     3,500      3,395      105        400
  Operating leases                        3,000      2,343      657      1,000
  Other                                   3,000        240    2,760      2,864
                                      ---------  --------- --------   --------
  Total                                  25,845     16,425    9,420     11,524
                                      ---------  --------- --------   --------
Personnel costs                          14,500     14,170      330        425
                                      ---------  --------- --------   --------
Total restructuring costs             $ 121,670  $ 111,201 $ 10,469   $ 12,839
                                      =========  ========= ========   ========

Substantially  all of the dismantling and related costs, and the personnel costs
included in the  $10,469  restructuring  reserve are related to the  Spartanburg
facility.  Approximately  twenty-five  percent of the  reserve is expected to be
utilized by December 31, 2000.  Timing for  utilization  of the remainder of the
reserve is  primarily  dependent  on the  timing of the sale of the  Spartanburg
facility.

(5) Comprehensive Loss

Comprehensive loss for the three months ended June 30, 2000 and 1999 was $15,721
and $48,212, respectively.  Comprehensive loss for the six months ended June 30,
2000 and  1999 was  $50,182  and  $107,086,  respectively.  The  Company's  only
adjustment from net loss to comprehensive loss was foreign currency  translation
adjustments in all periods presented.


<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.

Net Sales.  Net sales  increased  19% to $201 million for the second  quarter of
2000  from $168  million  for the  second  quarter  of 1999.  The  increase  was
primarily  attributable  to a 13%  increase in product  volume and modest  price
increases in the second  quarter of 2000 compared to the second quarter of 1999.
Net sales  increased  20% to $394 million for the six months ended June 30, 2000
from $328  million for the six months  ended June 30,  1999.  The  increase  was
primarily  attributable  to a 17%  increase in product  volume and modest  price
increases.  On a geographic  basis,  product volumes for the three and six-month
periods ended June 30, 2000 increased by double digit percentages in all regions
except the U.S. market as compared to the three and six-month periods ended June
30, 1999.  Product volumes for the U.S.  market showed moderate  increase in the
three and six-month  periods  ended June 30, 2000 compared to the  corresponding
June 30, 1999 periods.

The  Company  expects to see  moderate  increases  in product  volume as well as
modest  increases in average  selling  prices in the next quarter.  Coupled with
continued  cost  reductions,  the  Company's  near-term  target is to  achieve a
positive operating profit.

Gross Margin.  Gross margin  improved to 13% in the second  quarter of 2000 from
negative 1% for the second quarter of 1999.  Gross margin improved to 10% in the
six months ended June 30, 2000 from negative 5% in the six months ended June 30,
1999.  The  increase  in gross  margin in both the three and six -month  periods
ended June 30, 2000  compared  to the  corresponding  June 30, 1999  periods was
primarily attributable to significantly higher volumes coupled with modest price
increases and significant cost reductions.  The Company expects  continued,  but
gradual,  improvements in its cost structure in the next few quarters.  Advanced
large diameter and epitaxial products  represented 54% and 51% of product volume
for the second quarters of 2000 and 1999, respectively.

Research  and  development  expenses  in the 2000  second  quarter  totaled  $18
million,   compared  to  $20  million  in  the  year-ago  period.  Research  and
development  expenses  for the six months  ended June 30, 2000 were $38 million,
compared  to $41 million in the  year-ago  period.  The  decrease in expenses is
primarily a result of  additional  300 mm sales from the  Company's  pilot line,
which  sales are being  offset  against  the related  research  and  development
expenses.

Income Taxes.  The Company realized an income tax benefit at the rate of 27% for
both the three and  six-month  periods  ended  June 30,  2000 and an income  tax
benefit at the rate of 31% for both the three and  six-month  periods ended June
30,  1999.  The  reduced  rate of income tax  benefit is  primarily  a result of
changes in the  composition  of the  Company's  worldwide  taxable  income.  The
Company  expects an  effective  tax rate for the year 2000  consistent  with the
first six months.

Equity in  Income  (Loss) of Joint  Ventures.  Equity in income  (loss) of joint
ventures was $2 million in the second  quarter of 2000, as compared to a loss of
$4 million in the second quarter of 1999.  The Company's  share of the income of
Posco Huls Co.,  Ltd.  (PHC),  the  Company's  40%-owned,  unconsolidated  joint
venture in South Korea, was $1 million in the second quarter of 2000 compared to
a  loss  of  $2  million  in  the  second  quarter  of  1999.  PHC's  return  to
profitability was primarily due to a significant increase in product volume. The
Company's  share  of the  income  of  Taisil  Electronic  Materials  Corporation
(Taisil),  the Company's 45%-owned,  unconsolidated joint venture in Taiwan, was
$1 million in the second  quarter  2000  compared to a loss of $2 million in the
second  quarter  of  1999.  Taisil's  improved  income  was  primarily  due to a
significant  increase  in average  selling  price and a 7%  increase  in product
volume in the second quarter of 2000 compared to second quarter of 1999.
<PAGE>
Equity in income (loss) of joint ventures was $1 million in the six months ended
June 30,  2000,  as compared to loss of $8 million in the six months  ended June
30, 1999.  The Company's  share of the income of PHC was $0.5 million in the six
months  ended June 30,  2000  compared to a loss of $4 million in the six months
ended June 30, 1999. PHC's income was primarily due to a significant increase in
product  volume in the six months ended June 30, 2000 compared to the six months
ended  June 30,  1999.  The  Company's  share of the  income of Taisil  was $0.5
million in the six months  ended June 30, 2000  compared to a loss of $4 million
in the six months ended June 30, 1999.  Taisil's  income was  primarily due to a
significant  increase in product volume and an increase in average selling price
in the six months ended June 30, 2000  compared to the six months ended June 30,
1999.

Net Loss. Net loss for the three-month  periods ended June 30, 2000 and 1999 was
approximately  $16 million and $39 million,  respectively.  The reduction in net
loss for the  three  months  ended  June  30,  2000 was  primarily  a result  of
increased gross margin of $28 million and a $6 million increase in joint venture
income partially  offset by a reduced income tax benefit.  The Company had a net
loss of $0.22 per share for the  quarter  ended June 30,  2000 on  approximately
69.6 million shares outstanding compared to a net loss of $.58 per share for the
quarter ended June 30, 1999 on 67.3 million weighted average shares outstanding.

Net  loss  for  the  six-month   periods  ended  June  30,  2000  and  1999  was
approximately  $43 million and $90 million,  respectively.  The reduction in net
loss for the six months ended June 30, 2000 was  primarily a result of increased
gross  margin of $56  million and joint  venture  income  increasing  $9 million
partially offset by a reduced income tax benefit.  The Company had a net loss of
$0.62 per share for the  six-month  period ended June 30, 2000 on  approximately
69.6 million  shares  outstanding  compared to a net loss of $1.63 per share for
the six-month period ended June 30, 1999 on 54.8 million weighted average shares
outstanding.

The weighted  average  shares  outstanding  reflect the issuance of 15.4 million
shares   of   common   stock   in   a   private   placement   to   VEBA   Zweite
Verwaltungsgesellschaft  mbH in March  1999 and 13.6  million  shares  of common
stock in connection with the Company's rights offering in April 1999.

<PAGE>
Liquidity and Capital Resources.

At June 30,  2000,  the  Company  had $17  million of cash and cash  equivalents
compared to $29 million at December 31, 1999.

Cash flows used in  operating  activities  decreased  to $13 million for the six
months  ended June 30, 2000 from $73 million for six months ended June 30, 1999.
This $60 million  improvement  was due  primarily  to a reduction  in  operating
losses.

Accounts  receivable of $132 million at June 30, 2000 increased $20 million,  or
18%,  from $112  million at December  31,  1999.  This  increase  was  primarily
attributable  to the 10%  increase in net sales  during the second  quarter 2000
over fourth quarter 1999. Days' sales  outstanding were 60 days at June 30, 2000
compared to 56 days at December  31,  1999 based upon  annualized  sales for the
respective immediately preceding quarters.

Inventories  increased $1 million,  or 1%, from December 31, 1999 to $99 million
at June 30, 2000. This increase was primarily due to increased  customer managed
inventories. Total related inventory reserves for obsolescence, lower of cost or
market issues, or other impairments were $15 million at June 30, 2000,  compared
to $17 million at December 31, 1999. Quarter-end  inventories as a percentage of
annualized  quarterly net sales declined 1% to 12% for the period ended June 30,
2000 compared to the period ended December 31, 1999.

The  Company's  net deferred tax assets  increased  $24 million in the first six
months of 2000 to $221 million at June 30, 2000. The Company provides for income
taxes on a quarterly basis based on an estimated  annual effective tax rate. The
Company estimates that net operating loss carryforwards increased $14 million in
the six months ended June 30, 2000.  Management  believes it is more likely than
not that, with its projections of future taxable income and after  consideration
of the valuation allowance,  the Company will generate sufficient taxable income
to realize the  benefits  of the net  deferred  tax assets  existing at June 30,
2000. In order to realize the net deferred tax assets existing at June 30, 2000,
the Company will need to generate  future taxable income of  approximately  $615
million over the next 20 years.  There can be no  assurance,  however,  that the
Company will generate  sufficient  taxable income to realize the full benefit of
the existing net deferred tax assets.

At December 31, 1999,  the Company's net operating  loss  carryforwards  totaled
$647 million,  of which $7 million will expire in 2001;  $13 million will expire
in 2002;  $29 million will expire in 2003;  $9 million will expire in 2004;  $14
million will expire in 2012;  $322 million will expire in 2018; and $253 million
will expire in 2019.

On June  16,  2000,  VEBA AG,  which  through  its  affiliates  is the  majority
shareholder  and  principal  lender of the  Company,  merged  with VIAG AG.  The
VEBA/VIAG  group, now known as E.ON AG, has stated that its core businesses will
be energy and specialty chemicals.  E.ON AG's stated intent is to systematically
and optimally divest certain  non-core  businesses,  including the Company.  The
Company  intends  to  work  closely  with  E.ON  AG  to  effectuate  an  orderly
divestiture  process that  preserves and  optimizes the value of the Company.  A
decrease  of  ownership  interest  of E.ON AG and its  affiliates  may result in
annual  limitations for federal income tax purposes of the Company's  ability to
use its tax loss carryforwards under Internal Revenue Code Section 382.

Net cash used in investing activities decreased $2 million to $21 million in the
six months  ended June 30, 2000  compared to the six months ended June 30, 1999.
For the six  months  ended  June 30,  2000,  cash used by  investing  activities
reflected  slightly increased spending on capital projects offset by a reduction
in equity  infusions in joint ventures and a reduction in notes  receivable from
affiliates.  The capital  expenditures in the first six months of 2000 primarily
related to the implementation of SAP worldwide and to maintenance  capital.  The
Company expects to continue to tightly control capital  expenditures in 2000. At
June 30,  2000,  the Company had $12 million of committed  capital  expenditures
related to the  implementation  of SAP worldwide and various  manufacturing  and
technology projects.
<PAGE>

The Company made no equity infusions into joint ventures in the six months ended
June 30, 2000,  compared to an equity  infusion of $12 million in the six months
ended June 30, 1999.  Although to date Taisil has an  accumulated  deficit,  the
Company does not consider its investment in Taisil to be impaired as of June 30,
2000 based on Taisil's  increasing  product  volumes and  capacity  utilization,
improving operating results,  positive operating cash flow generated in 1999 and
in the first two quarters of 2000,  and positive net income in the quarter ended
June 30, 2000.

Cash flows provided by financing  activities decreased to $23 million in the six
months  ended June 31, 2000 from $113  million in the six months  ended June 31,
1999. The 2000 financing  activities  consisted primarily of issuance of debt by
the Company.  In the six months ended June 30, 1999,  the  financing  activities
consisted  primarily  of  stock  offerings  partially  offset  by  repayment  of
short-term and long-term debt.

At June 30, 2000,  the Company  maintained  $947 million of committed  long-term
loan  agreements,  of which $907  million  was  outstanding.  The  Company  also
maintained  $53  million of  short-term  lines of credit,  of which less than $1
million was outstanding at June 30, 2000. The Company's weighted average cost of
borrowing  was 8.1% at June 30, 2000 and 7.8% at December 31,  1999.  Total debt
outstanding  increased  to $908  million at June 30,  2000 from $892  million at
December 31, 1999.  The total debt to total  capital  ratio at June 30, 2000 was
68% as compared to 65% at December 31, 1999.

The silicon wafer industry is highly capital  intensive.  The Company's  capital
needs depend on numerous factors,  including its profitability and investment in
capital expenditures and research and development.  Management believes that the
liquidity  provided by existing  cash balances and credit  facilities,  together
with cash generated from operations,  will be sufficient to satisfy  commitments
for capital  expenditures  and operating  cash  requirements  through 2000.  If,
however,  the Company's future financial  performance fails to meet management's
current expectations, then the Company may require additional financing in order
to satisfy  planned capital  expenditures  and operating cash  requirements  for
2000.  There can be no assurance  that such financing will be available on terms
acceptable to the Company.

Historically, the Company has funded its operations primarily through loans from
E.ON AG and its affiliates,  internally generated funds, and issuances of common
stock. To a lesser extent,  the Company has raised funds by borrowing money from
commercial  banks.  Under its credit facilities with E.ON AG and its affiliates,
the  Company  cannot  pledge  any of its assets to secure  additional  financing
without the consent of E.ON AG and its affiliates.

The Company's loans from E.ON AG and its affiliates begin to mature in 2001. The
Company does not currently anticipate having sufficient funds from operations to
repay these loans upon maturity  commencing  in 2001,  and will need to seek and
obtain  replacement  financing.  The Company is currently engaged in discussions
with its financial advisors regarding  additional sources of capital.  There can
be no assurance  that such capital will be available on terms  acceptable to the
Company or that the Company will be able to refinance its loans with E.ON AG and
its affiliates  upon maturity.  If the Company fails to repay the loans when due
the Company  will be in default  under the loans and E.ON AG and its  affiliates
could  accelerate  all amounts  outstanding  under the loans.  This would have a
material adverse effect on the Company.


<PAGE>
Recently Issued Accounting Pronouncements.

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities."  SFAS No. 133 requires the recognition of
all derivatives as assets or liabilities  within the balance sheet, and requires
both the derivatives  and the underlying  exposure to be recorded at fair value.
Any gain or loss  resulting  from changes in fair value will be recorded as part
of the results of operations, or as a component of comprehensive income or loss,
depending upon the intended use of the  derivative.  In July 1999, the Financial
Accountings  Standards  Board changed the effective  date of SFAS No. 133 to all
fiscal  quarters of fiscal years beginning after June 15, 2000. The Company does
not  believe  that the  implementation  of this  Statement  will have a material
effect on its financial condition or results of operations.


Cautionary Statement Regarding Forward-Looking Statements.

This Form 10-Q contains  "forward-looking"  statements within the meaning of the
Securities  Litigation  Reform  Act of 1995,  including  those  concerning:  the
utilization  of  the  restructuring  reserve;  future  pricing;  future  product
volumes;  continued cost improvements;  near-term target of a positive operating
profit;  expected  effective  income tax rate;  liquidity  through  2000;  tight
control of capital  expenditures  in 2000;  the  Company's  ability to  generate
future taxable  income as it relates to the  realization of the net deferred tax
asset; the Company's intention to work closely with E.ON AG to effect an orderly
divestiture  process  that  preserves  and  optimizes  the value of the Company;
expectation  that the Company will not have sufficient  funds from operations to
repay loans from E.ON AG and its affiliates upon maturity; and the impact of the
implementation  of SFAS No.  133.  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:  market  demand for silicon  wafers;  utilization  of  manufacturing
capacity;  ability of the  Company  to reduce  manufacturing  costs;  demand for
semiconductors generally;  changes in the pricing environment;  general economic
conditions; competitors' actions; changes in currency exchange rates; changes in
the components of worldwide taxable income;  technological  changes;  changes in
product  specifications  and manufacturing  processes;  accuracy of management's
assumptions  regarding the  dismantling  and sale of the  Spartanburg  facility;
changes in the plans and intentions of third parties, including E.ON AG; changes
in  financial  market  conditions;  changes in interest  rates;  and other risks
described in the Company's  filing with the Securities and Exchange  Commission,
including the Company's  annual report on Form 10-K for the year ended  December
31, 1999.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risks relating to the Company's  operations result primarily from changes
in interest rates and changes in foreign exchange rates. The Company enters into
currency  forward  contracts to minimize its  transactional  currency risks. The
Company does not use derivative financial instruments for speculative or trading
purposes.  There have been no significant  changes in the Company's  holdings of
interest rate sensitive or foreign currency exchange rate sensitive  instruments
since December 31, 1999.
<PAGE>
                          PART II -- OTHER INFORMATION


Item 2.  Changes in Securities and Use of Proceeds.

At the  Company's  Annual  Meeting  of  Stockholders  held on May 9,  2000,  the
stockholders  approved an amendment to the  Company's  Restated  Certificate  of
Incorporation  to change the advance notice required for a stockholder to notify
the Company that such stockholder  wishes to nominate a person for election as a
director  at an annual  stockholders'  meeting.  As amended,  Section  (3)(c) of
Article Fifth of the Company's  Restated  Certificate of Incorporation  provides
that a stockholder who wishes to nominate a person for election as a director at
an annual  stockholders'  meeting  must now notify the  Company not less than 90
days nor more than 120 days  prior to the  anniversary  date of the last  annual
stockholders'  meeting.  Prior to this amendment,  a stockholder was required to
notify  the  Company  not  less  than 60 days nor more  than 90 days  prior  the
anniversary date of the last annual stockholders' meeting.

Item 4.  Submission of Matters to a Vote of Security Holders.

The following matters were voted upon at the Annual Meeting of Stockholders held
on May 9, 2000, and received the votes set forth below:

1.       All of the following  persons  nominated were elected to serve as
         directors for terms expiring in 2003 and received the number
         of votes set forth opposite their respective names:

                                                For                 Withheld

         Hans Michael Gaul                   62,555,881             5,913,234
         Helmut Mamsch                       68,165,081               304,034
         Michael B. Smith                    68,170,117               298,998

2.       A proposal to amend the Company's 1995 Equity Incentive Plan to
         increase the number of shares of common stock available
         under the plan from 3,597,045 to 7,197,045 was approved,
         receiving 55,965,987 votes FOR and 6,396,160 votes AGAINST, with
         144,196 abstentions and 5,962,772 broker non-votes.

3.       A proposal to amend the Company's Restated Certificate of Incorporation
         to change the advance notice required for a stockholder to nominate a
         person for election to the Company's Board of Directors was approved,
         receiving 60,901,639 votes FOR and 1,540,119 votes AGAINST,
         with 64,585 abstentions and 5,962,772 broker non-votes.





<PAGE>
Item 6. Exhibits and Reports on Form 8-K.


(a)      Exhibits

Exhibit
Number      Description

    3(i)    Restated Certificate of Incorporation of the Company (incorporated
            by reference to Exhibit 3-a of the Company's Form 10-Q for the
            Quarter ended June 30, 1995)

    3(i)(a) Certificate of Amendment of Restated Certificate of Incorporation of
            the Company as filed with the Secretary of State of the State of
            Delaware on June 2, 2000

    3(ii)   Restated By-laws of the Company (incorporated by reference to
            Exhibit 3(ii) of the Company's Form 10-Q for the Quarter ended
            June 30, 1999)

  *10-e(1)  Second Amendment to Shareholders' Agreement dated as of April 1,
            2000 by and among the Company, MEMC Southwest Inc.
            ("MEMC Southwest") and Texas Instruments Incorporated ("TI")

  *10-f(2)  First Amendment to TI Purchase Agreement dated as of April 1, 2000
            by and among the Company, MEMC Southwest and TI

  *10-g(2)  First Amendment to Lease Agreement dated as of April 1, 2000
            between TI and MEMC Southwest

  *10-g(3)  First Amendment to Sublease Agreement dated as of April 1, 2000
            between TI and MEMC Southwest

 **10-cc    MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan as
            Amended and Restated on August 3, 2000

   27       Financial Data Schedule  (filed  electronically  with the SEC only)


-------------------------------

 *       Portions of these Exhibits have been redacted pursuant to a
         request for confidential treatment filed separately with the
         Secretary of the Securities and Exchange Commission.

**       This Exhibit constitutes a management contract, compensatory plan
         or arrangement.

(b)      Reports on Form 8-K

During the second quarter of 2000, the Company filed no current reports
on Form 8-K.





<PAGE>


                                    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 thereunto duly authorized.



                         MEMC Electronic Materials, Inc.



August 10, 2000                     /s/ JAMES M. STOLZE
---------------                     ---------------------------------
                                    James M. Stolze
                                    Executive Vice President and Chief Financial
                                    Officer (on behalf of the registrant and as
                                    principal financial and accounting officer)


<PAGE>

                                  EXHIBIT INDEX

The exhibits  below are numbered in  accordance  with the Exhibit  Table of Item
601 of Regulation S-K.

Exhibit
Number        Exhibit

   3(i)(a)     Certificate of Amendment of Restated Certificate of Incorporation
               of the Company as filed with the Secretary of State of the State
               of Delaware on June 2, 2000

 *10-e(1)      Second Amendment to Shareholders' Agreement dated as of April 1,
               2000 by and among the Company, MEMC Southwest Inc.
               ("MEMC Southwest") and Texas Instruments Incorporated ("TI")

 *10-f(2)      First Amendment to TI Purchase Agreement dated as of April 1,
               2000 by and among the Company, MEMC Southwest and TI

 *10-g(2)      First Amendment to Lease Agreement dated as of April 1, 2000
               between TI and MEMC Southwest

 *10-g(3)      First Amendment to Sublease Agreement dated as of April 1, 2000
               between TI and MEMC Southwest

  10-cc        MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan as
               Amended and Restated on August 3, 2000

 27            Financial Data Schedule (filed electronically with SEC only)
-------------------------------

 *       Portions of these Exhibits have been redacted pursuant to a
         request for confidential treatment filed separately with the
         Secretary of the Securities and Exchange Commission.




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