MEMC Reports 2010 Third Quarter Results

(PRNewswire) —

Highlights:  

  • GAAP revenue of $503.1 million, up 12.2% sequentially and 62.3% versus last year; Non-GAAP revenue of $550.8 million
  • GAAP EPS $0.08; Non-GAAP EPS $0.10
  • Operating cash flow of $52.3 million
  • SunEdison reached agreement to sell 70 MW Rovigo project; received 46 million Euro in initial payment; no P&L impact in the third quarter

MEMC Electronic Materials, Inc. (NYSE: WFR) today announced its financial results for the third quarter ending September 30, 2010.  

GAAP net sales for the quarter were $503.1 million, up 12.2% from $448.3 million in the 2010 second quarter and up 62.3% from $310.0 million in the 2009 third quarter.  Non-GAAP net sales for the quarter, which includes SunEdison deferrals required under GAAP real estate and lease accounting, were $550.8 million.  Third quarter 2010 net sales include $21.5 million from the SunEdison business that was acquired in November 2009. Non-GAAP net sales include $47.7 million of deferrals required under GAAP real estate and lease accounting.  See the non-GAAP reconciliation table at the end of this press release following the financial statement tables.

GAAP gross profit in the quarter was $84.9 million or 16.9% of net sales, an increase of 10.4% from $76.9 million in the 2010 second quarter and 314.1% from $20.5 million in the 2009 third quarter.  

The company reported GAAP operating income of $9.9 million for the quarter, compared to operating income of $3.3 million in the 2010 second quarter and an operating loss of $66.7 million in the 2009 third quarter. Non-GAAP operating income for the current quarter was $16.7 million, which includes a net benefit of $6.8 million related to the SunEdison deferrals required under GAAP real estate and lease accounting.  

MEMC's GAAP net income for the 2010 third quarter was $17.6 million, or $0.08 per share, compared to a net income of $13.8 million, or $0.06 per share, in the 2010 second quarter and a net loss of $64.6 million, or $0.29 per share, in the 2009 third quarter. Non-GAAP net income, adjusted for SunEdison deferrals required under GAAP real estate and lease accounting for the 2010 third quarter, was $22.0 million, or $0.10 per share.

"Our third quarter results extended our recent trend of steady improvement," said Ahmad Chatila, MEMC's Chief Executive Officer. "While our end markets are dynamic, we continue to improve our execution, while continuing with strategic initiatives that will catalyze our growth in 2011 and beyond."

Segment Operating Results

Semiconductor Materials Operating Results

Semiconductor Materials net sales for the 2010 third quarter were $261.1 million, an increase of 4.6% from second quarter 2010 net sales of $249.6 million, and an increase of 49.8% from third quarter 2009 net sales of $174.3 million.  The sequential increase in sales was primarily driven by higher pricing, and the year-over-year increase in sales was the result of significantly higher wafer volume and higher pricing.  

Segment operating profit was $26.2 million, compared to $24.3 million in the 2010 second quarter, which second quarter included a net benefit of $8.0 million related to an insurance recovery, and a loss of $75.4 million in the 2009 third quarter.  The improved results in the 2010 third quarter were primarily a result of higher pricing.  The year-over-year increase was driven by lower restructuring cost, better fixed cost absorption and higher pricing.

Solar Materials Operating Results

Solar Materials net sales for the 2010 third quarter were $220.5 million, an increase of 31.3% from second quarter 2010 net sales of $168.0 million and an increase of 62.5% from third quarter 2009 net sales of $135.7 million.  The sequential increase was the result of significantly higher wafer volume and higher pricing. The year-over-year increase was primarily driven by higher wafer volumes, partially offset by a modest decline in pricing.  

Segment operating profit was $17.6 million in the third quarter of 2010, compared to $19.1 million in the second quarter of 2010, which quarter included a net benefit of $3.9 million related to an insurance recovery, and $31.0 million in the third quarter of 2009. Third quarter segment operating profit also included $4.5 million in ramp-related loss from Solaicx, of which $0.8 million was purchase accounting expenses related to the acquisition.  Higher wafer prices in the third quarter of 2010 fueled the profit growth over the second quarter of 2010.  The year-over-year decrease in segment operating profit was the result of lower wafer pricing and higher external wafer tolling cost.

Solar Energy (SunEdison) Operating Results

SunEdison GAAP net sales for the third quarter were $21.5 million, compared to net sales of $30.7 million in the second quarter of 2010.  A year-over-year comparison is not meaningful, because SunEdison was acquired on November 20, 2009, and historical SunEdison results are not reflected in our consolidated financial results prior to that time.  Non-GAAP net sales for SunEdison for the 2010 third quarter were $69.2 million, which include $47.7 million of deferrals required under real estate and lease accounting.

SunEdison 2010 third quarter GAAP operating loss was $7.2 million, compared to an operating loss of $4.4 million in the second quarter of 2010, primarily driven by an increase in sale-leaseback transactions.  SunEdison's non-GAAP segment operating loss for the 2010 third quarter was $0.4 million.

As previously announced, SunEdison reached an agreement to sell the 70 megawatt (MW) Rovigo project to First Reserve in September 2010.  As of quarter-end, construction on the project was 66% complete.  As of October 31, 2010, construction was 75% complete.  Third quarter results, on either a GAAP or non-GAAP basis, do not include any amounts related to the sale of the Rovigo project.

During the third quarter of 2010, SunEdison added 10MW of new projects to its portfolio of energy producing assets. SunEdison ended the quarter with a pipeline of 1,023MW, of which 155MW was under construction.  

SunEdison uses the term "pipeline" to identify solar energy systems for which SunEd has a signed PPA contract or a secured grid connection site and completed permitting, or document of customer intent/LOI  identifying the terms and conditions to develop the proposed transaction. "Under construction" refers to projects within pipeline, in various stages of completion, which are not yet operational. There can be no assurance that projects in pipeline will be converted to completed projects.

Corporate/Other

Corporate/other cost was $26.7 million in the 2010 third quarter, compared to $35.7 million in the second quarter of 2010 and $22.3 million in the third quarter of 2009.  The sequential decrease was driven largely by the timing of non-cash stock vesting and forfeitures, as well as expenses related to the Solaicx acquisition in the prior quarter. The year-over-year increase was largely a result of higher corporate headcount.

Capital Position

During the 2010 third quarter, the company generated operating cash flows of $52.3 million, compared to operating cash flow generated of $118.8 million in the second quarter of 2010 and operating cash flow generated of $11.8 million in the third quarter of 2009. The sequential decrease in operating cash flow was driven by higher inventory related to direct sale projects under construction, including the Rovigo project. The year-over-year increase was driven by more favorable accounts payable terms and an increase in deferred revenue for solar energy systems.

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