MEMC Announces Global Restructuring



Immediate Actions To Reduce Costs, Improve Cash Flow and Position MEMC for Profitable Long-Term Growth

ST. PETERS, Mo., Dec. 8, 2011 /PRNewswire/ — MEMC Electronic Materials, Inc. (NYSE: WFR) today announced a series of actions to be taken during the fourth quarter of 2011 and the first quarter of 2012 that will reduce the company’s global workforce, right size its production capacity and accelerate operating cost reductions in 2012 and beyond.  The actions better align the business to current and expected market conditions in the semiconductor and solar markets and are expected to improve the company’s overall cost competitiveness and increase cash flow generation across all segments.

As a result of market conditions and the actions announced today, MEMC expects to take a charge in the fourth quarter of 2011 of approximately $700 million, of which approximately $520 million is expected to be non-cash.  Cash use associated with the restructuring is expected to be approximately $180 million, more than half of which is expected to occur after 2012.  The company projects annualized cash flow benefits to exceed $200 million by the end of 2012 through labor productivity, procurement savings, and a more efficient asset base.

In addition to the charges related to the global restructuring announced today, the company is evaluating existing goodwill and deferred tax assets.  An additional non-cash charge associated with the potential impairment of goodwill is expected to be taken in the 2011 fourth quarter, and based on preliminary results of MEMC’s annual goodwill impairment testing, could range from $200 million to $400 million.  A non-cash charge related to the potential realizability of deferred tax assets is also expected to be taken in the 2011 fourth quarter which could range from $225 million to $275 million.

“We believe these actions strengthen MEMC in the near term and position us for more profitable growth in our core businesses – semiconductor wafers and solar energy systems,” said Ahmad Chatila, MEMC’s Chief Executive Officer. “Changed market conditions require that we improve productivity across all segments and in solar move to a more balanced manufacturing model aligned with our downstream business.  We are moving quickly on these carefully considered actions and expect increased cash flow during the next year.  Going forward, we remain committed to our tradition of providing advanced technology and superior service to our global semiconductor and solar customers.”

Summary of Restructuring Activities

Restructuring actions to improve the cash flow outlook for the company are broad based, covering all segments and impacting a substantial number of employees and production assets.  The company expects these actions to result in a leaner and more focused business serving semiconductor wafer and solar energy systems customers.  These actions are expected to reduce operating expenses by over 15% versus the company’s current run rate.

  • As part of this restructuring, MEMC will reduce its total workforce by over 1,300 persons worldwide, approximately 20% of the company’s employees.  Of the reductions, approximately 250 positions are in the United States, and an estimated 41% are in the Semiconductor Materials segment and 47% are in the Solar Materials segment;
  • Having substantially completed a multi-year realignment of our global semiconductor crystal and wafer manufacturing footprint, the company is undertaking more aggressive productivity initiatives to implement best practices across sites;
  • The company intends to idle its Merano, Italy polysilicon facility, up to 6,000 metric tons of annual capacity, and may close it unless dramatic feedstock, power, and other cost reductions are achieved in the near term.  The company is working with the province and key suppliers to determine the feasibility of such reductions;
  • To improve costs and alignment with current market conditions, the company will reduce production capacity at its Portland, Oregon crystal facility to allow us to optimize the technology utilized at this facility, and will limit the ramp of the Kuching, Malaysia wafering facility to 300MW; and
  • To focus on providing our downstream solar customers the highest quality and lowest cost systems and achieve improved operating efficiencies, the Solar Materials and SunEdison business units will be consolidated into a single Solar Energy business unit, effective January 1, 2012.

Summary of Restructuring Related Financial Matters

As a result of these initiatives and overall semiconductor and solar market conditions, the company expects to incur total charges of approximately $700 million, of which approximately $520 million is non-cash.  The charges consist of the following:

  • Approximately $475 million in asset impairments (non-cash charge), primarily reduction in capacity at manufacturing sites, including Merano;
  • Approximately $175 million in contract termination charges, some of which would be non-cash; and
  • Approximately $50 million in severance benefits to terminated employees, to be paid out largely by the end of the second quarter of 2012.

Summary of Non-Restructuring Related Impairment Financial Matters

Based on the current market capitalization of MEMC and market outlook, additional non-cash charges associated with the potential impairment of goodwill and the potential realizability of deferred tax assets are expected to be taken in the 2011 fourth quarter.  These charges would consist of the following:

  • An estimated $200 million to $400 million of goodwill impairment driven by MEMC’s current market capitalization, which goodwill is related to the Solar Energy segment; and
  • An estimated $225 million to $275 million of deferred tax asset valuation allowance on less positive evidence of realizability of these tax assets.

Fourth Quarter Outlook

As a result of underlying semiconductor and solar market conditions, MEMC is revising its fourth quarter 2011 guidance.  Current expectations for the range for fourth quarter 2011 non-GAAP EPS is ($0.05) to $0.10 and for non-GAAP revenue is $789 million to $861 million.  These non-GAAP future performance measures exclude all fourth quarter restructuring and impairment charges discussed above.  The company expects fourth quarter 2011 GAAP EPS in the range of ($5.20) to ($6.38) and GAAP revenues in the range of $523 million to $585 million.  Capital market and liquidity risks in Europe may impact the timing of planned fourth quarter 2011 SunEdison project sales and pricing, which would result in a shift of these project sales into 2012 and some reduction in both GAAP and non-GAAP fourth quarter revenues and EPS discussed above.  The reconciliation table at the end of this press release provides a complete reconciliation of these non-GAAP to GAAP measures.

Conference Call

The company will discuss the global restructuring initiatives and the financial matters set out in this press release during a conference call to be held on December 8, 2011 at 8:30 a.m. Eastern Time.  Investors are invited to listen to a broadcast of the MEMC conference call to discuss these restructuring activities.  A live webcast will take place December 8, 2011 at 8:30 a.m. Eastern Time at www.memc.com.  Participating in the call will be Ahmad Chatila, Chief Executive Officer, and Mark Murphy, Chief Financial Officer.  A replay of the call will be available until 11:59 p.m. Eastern Time on December 15, 2011 on the company’s website at www.memc.com.

The company also filed a Form 8-K with the Securities and Exchange Commission today with additional information about these actions.

Contact Information

MEMC Electronic Materials, Inc.

501 Pearl Drive
St. Peters, MO, 63376
USA

tele: 636-474-7660
toll-free: 636-474-5000
fax: 636-474-7660
http://www.memc.com

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