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MEMC Posts Decent 4Q

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MEMC Electronic Materials Inc. reported fourth-quarter 2012 adjusted earnings per share of 8 cents, which outperformed the Zacks Consensus Estimate of 1 cent.

The adjusted figure excludes the impact of direct sales and lease-back from the Solar Energy segment as well as some tax benefits, and also excludes restructuring and impairment charges.


On a GAAP basis, MEMC reported fourth-quarter revenues of $600.7 million, down 16.3% from $717.8 million in the year-earlier quarter. Reported revenues came much below the Zacks Consensus Estimate of $644.0 million. Lower solar sales volume and weak semiconductor pricing led to the revenue decrease. Pricing was mostly affected by industry-wide slowdown.

Including direct sales from the Solar Energy segment and lease-back transactions, non-GAAP revenues came in at $704.3 million, which decreased 8.8% from the year-ago quarter.

Segment wise, revenues from Semiconductor Materials inched up 0.3% year over year to $228.5 million and was 38.0% of total revenue. The nominal growth was mainly due to higher volume offset by weaker pricing. But revenue declined 4.9% sequentially (at the lower end of guidance range) due to weakness in both pricing and volume.

The Solar Energy segment (which now includes Solar Materials) accounted for 62.0% of total revenue. The segment generated revenues of $372.2 million, down 24.0% year over year. The decrease was driven by lower project sales and weaker solar wafer pricing and volume.

Solar Energy segment sold 91 megawatts (MW) of solar energy systems on a non-GAAP basis and 52 MW on a GAAP basis. This compares with 102 MW and 109 MW, sold respectively, in the year-ago period. Projects interconnected during the fourth quarter represented 106 MW in 29 projects. MEMC also reported that construction of 73 MW of systems is underway. The project pipeline was 2.6 gigawatt (GW), down 0.3 GW compared with the prior quarter and down 0.4 GW from the year-ago period.

Operating Results

Reported gross profit was $108.2 million compared with gross loss of $58.8 million in the year-ago quarter. Gross margin was 18.0%, compared with (8.2%) in the year-ago quarter. The margin expansion was mostly due to cost control measures, partially offset by lower pricing.

Operating income was $67.8 million compared with operating loss of $1.25 billion in the year-earlier quarter. Operating margin was 11.3% compared with (173.9%) in the year-ago quarter.

Total operating expenses decreased 96.6% from the year-ago quarter with marketing and administration expenses falling 17.4% and research and development expenses decreasing 28.6%.

Reported net loss was $11.8 million or 5 cents per share compared with net loss of $1.48 billion or 6.44 cents in the prior-year quarter. Net loss for the quarter narrowed from the prior-quarter level. However, adjusted earnings per share (EPS) were 8 cents, up 138.1% from loss per share of 21 cents in the year-ago quarter.

Balance Sheet & Cash Flow

MEMC ended the quarter with cash, cash equivalents and restricted cash of $645.0 million, down from $694.0 million in the previous quarter. Long-term debt was $758.7 million, down from $761.8 million in the previous quarter.

MEMC generated $19.2 million cash in operations, up from $3.0 million in the preceding quarter. Capital expenditure was $38.1 million, up from $24.0 million in the previous quarter.


Keeping in mind the ongoing uncertainty in the semiconductor and solar markets, MEMC refrained from providing any quantitative revenue and EPS guidance for the upcoming quarter.

 However, the company mentioned that it is optimistic about gaining operating leverage from ongoing cost reduction measures. Also, it aims to reduce solar materials pricing with the help of economical and flexible sourcing strategy. Together, these potential benefits would help MEMC to deliver stronger results in 2013, management believes.


MEMC posted a decent fourth quarter with the bottom line surpassing the Zacks Consensus Estimate. But revenues failed to encourage us as it decreased on a year over year basis and came below our expectation. Solar systems sales were lower than expected. The demand uncertainty barred the company from providing any guidance.

However, we are encouraged by management’s commentary of expecting a better demand/supply situation in the semiconductor market in 2013. Of course, expense control will also provide some support.

Also, declining solar system pipeline concerns us. But on the other hand, market share growth in semiconductor is a positive.

Currently, MEMC has a Zacks Rank #3 (Hold). Investors may also consider other technology stocks that are performing well. Rambus Inc. (RMBS - Free Report) , DIODES Inc. (DIOD - Free Report) and PLX Technology Inc. all  have a Zacks Rank #1 (Strong Buy) and are worth buying.

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