*AV* -- Disappointing information from WFR:
Monday January 26, 4:47 pm Eastern Time
Company Press Release
MEMC Announces Fourth Quarter 1997 Results
ST. PETERS, Mo.--(BUSINESS WIRE)--Jan. 26, 1998--MEMC Electronic Materials, Inc. (NYSE:WFR - news) today released financial results for the fourth quarter and year ended December 31, 1997. MEMC reported net sales of $258.6 million for the 1997 fourth quarter, up 28% from $201.8 million in the fourth quarter of 1996 and approximately equal to 1997 third quarter net sales of $260.0 million.
The Company reported a net loss of $3.5 million, or $0.08 per share in the fourth quarter of 1997, compared to a net loss of $5.7 million, or $0.14 per share in the 1996 fourth quarter and a net loss of $4.3 million, or $0.10 per share in the third quarter of 1997.
For the year ended December 31, 1997, the Company reported net sales of $986.7 million and a net loss totaling $6.7 million, or $0.16 per share. In 1996, net sales were $1.1 billion and net earnings totaled $101.6 million, or $2.45 per share.
In the fourth quarter of 1997 gross margin was 11.5%, compared to 6.7% in the year-ago period and 13.9% in the third quarter of 1997. The decline in gross margin compared to the 1997 third quarter is attributable to continuing pressure on prices, especially for advanced large diameter wafers, as well as the relative mix of wafer sales.
Marketing, administration and technology expenses (MAT) totaled $36.8 million for the fourth quarter of 1997, compared to $31.4 million in the 1996 fourth quarter and $34.4 million in the third quarter of 1997. Technology expenses increased by approximately 5% compared to the 1997 third quarter due to higher epitaxial and wafering research and development costs. The increase in MAT expenses in comparison to the year-ago period is primarily attributable to a 48% increase in technology expenses offset by a 3% reduction in marketing and administration expenses.
The Company noted that income tax expense recorded in the 1997 fourth quarter and for the year reflects a number of factors, including the worldwide composition of pre-tax income and the effect of the Company's tax planning alternatives.
Equity in income of joint ventures resulted in a contribution of $12.7 million in the fourth quarter of 1997, compared to $3.4 million in the year-ago period and a loss of $6.0 million in the 1997 third quarter. This contribution is primarily the result of net currency gains on Korean won and New Taiwan dollar currency exposure at PHC, the Korean joint venture, and Taisil, the Taiwanese joint venture, respectively. This was due to the dramatic fall in their currencies compared to the US dollar and the Company's adoption of the US dollar as the functional currency for these joint ventures effective October 1, 1997. Excluding the impact of the net currency gains on non-US dollar exposures, contributions from these joint ventures would have been $ 5.3 million reflecting higher volumes and improved capacity utilization at both PHC and Taisil.
''Order flows by some of our customers appear to reflect additional caution as a result of the financial crisis in Asia,'' noted Mr. Ludger H. Viefhues, Chief Executive Officer. ''We believe the current environment in Asia and the lower prices from the January 1998 price negotiations will place additional pressure on financial results and on some of our joint ventures, particularly PHC, as we enter 1998. Based upon this information, we would expect net sales in the 1998 first quarter to be lower than fourth quarter 1997 net sales.''
Mr. Viefhues continued, ''We have taken a number of steps in 1997 to reduce the impact of the industry downturn on our financial results. During the year, we improved yields and enhanced productivity within manufacturing. Additionally, we reduced marketing and administrative expenses in 1997 by 11%. We are aggressively stepping up these efforts in 1998 to reduce costs, to further optimize our manufacturing processes and manufacturing productivity and to more efficiently manage our capital. At the same time we will continue to make the appropriate strategic investments in technology and capital expenditures to position MEMC at the forefront of the wafer industry.''
The matters discussed in this news release regarding the financial results for the Company and its joint ventures, particularly PHC, entering 1998 and net sales for the 1998 first quarter 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, utilization of manufacturing capacity, demand for semiconductors generally, changes in the pricing environment, general economic conditions in Asia and specifically in Korea, competitors' actions and other risks described in the Company's filings with the Securities and Exchange Commission, including the report on Form 10-K for the year ended December 31, 1996. These forward-looking statements represent the Company's judgement as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements.
MEMC is the leading worldwide producer of silicon wafers outside of Japan and is the only non-Japanese silicon wafer manufacturer with manufacturing and research facilities in Japan. The silicon wafer is the fundamental building block of semiconductors, which, in turn, are found in every type of microelectronics application, including computer systems, 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 China, Italy, Japan, Malaysia, South Korea, Taiwan and the United States.
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