10-Q 1 0001.txt 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. 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. 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. 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. 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 ========== ========== (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. 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. 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. 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. 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. 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. 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. 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. 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. 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) 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.