MEMC Electronic Materials 10-K 2008
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
For the transition period from to
Commission file number 001-13828
MEMC Electronic Materials, Inc.
(Exact name of registrant as specified in its charter)
Registrants telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Securities Registered Pursuant to Section 12(g) of the Act:
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the registrants Common Stock held by nonaffiliates of the registrant, based upon the closing price of such stock on June 29, 2007 of $61.12 as reported by the New York Stock Exchange, and 225,348,362 shares outstanding on such date, was approximately $13,767,179,885.44. The number of shares outstanding of the registrants Common Stock as of February 15, 2008, was 228,412,220 shares.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the registrants 2007 Annual Report to Stockholders (Part I and Part II)
2. Portions of the registrants 2008 Proxy Statement (Part III)
We are a global leader in the manufacture and sale of wafers and have been a pioneer in the design and development of wafer technologies over the past four decades. With R&D and manufacturing facilities in the US, Europe and Asia Pacific, we enable the next generation of high performance semiconductor and solar applications. Our customers include major semiconductor device and solar cell (device) manufacturers. We provide wafers in sizes ranging from 100 millimeters (4 inch) to 300 millimeters (12 inch). In the first quarter of 2007, we began delivering 156 millimeter wafers targeted for solar applications. Depending on market conditions, we also sell intermediate products such as polysilicon, silane gas, partial ingots and scrap wafers to semiconductor device and equipment makers, solar customers, flat panel and other industries.
We were formed in 1984 as a Delaware corporation and completed our initial public stock offering in 1995. Our corporate structure includes, in addition to our wholly owned subsidiaries, an 80%-owned consolidated joint venture in South Korea (MEMC Korea Company or MKC).
On November 13, 2001, an investor group led by Texas Pacific Group and including TPG Wafer Holdings LLC and funds managed by Leonard Green & Partners, L.P. and TCW/Crescent Mezzanine Management LLC (collectively, TPG) acquired beneficial ownership of approximately 72% of our outstanding common stock and approximately $910 million of our debt from E.ON AG, our former parent company. All of the debt acquired by TPG from E.ON has been restructured or repaid. As part of the restructuring, TPG received shares of our Series A Cumulative Convertible Preferred Stock, all of which have been converted into shares of our common stock, and warrants to purchase our common stock. In a series of registered public offerings from 2003 to 2005 and in privately negotiated sales in 2006 and 2007, TPG divested all of its equity securities in MEMC and now owns none of our common stock or warrants.
In 2007, we were engaged in one reportable industry segmentthe design, manufacture and sale of silicon wafers. Financial information regarding this industry segment is contained in our 2007 Annual Report, which information is incorporated herein by reference.
Almost all semiconductor devices and solar cells (devices) are manufactured from wafers. The silicon wafer industry grew shipments, measured in square inches of silicon, for semiconductor and solar applications at a compound annual growth rate of approximately 18% from approximately 2,200 million square inches in 1990 to approximately 40,000 million square inches in 2007, according to MEMC estimates based on data from SIA/SEMI, Solarbuzz and Prometheus. This growth was driven by the increase in the unit shipments of the semiconductor device industry and the megawatts (MW) of cells by the solar industry.
Wafers are becoming increasingly differentiated by specific physical and electrical characteristics such as flatness, silicon purity and uniform crystal structures. As markets for devices (semiconductor and solar) continue to evolve and become more specialized, we believe device manufacturers recognize the enhanced role that wafers and other materials play in improving device performance and reducing their production costs.
Semiconductor device manufacturers continue to move towards devices with shrinking device geometries and more stringent technical specifications. The wafers required to produce these next-generation devices are being developed in larger sizes. Thus, semiconductor device manufacturers continue to move to larger size wafers, with the 200 millimeter wafer being the primary wafer used today (measured in square inches). Solar cell makers are evolving to larger size wafers much like the semiconductor device makers did fifteen years ago.
Over the past decade, we believe the wafer industry has consolidated, with only four major suppliers of wafers targeted for semiconductor applications. We believe this change in the competitive landscape is causing segmentation between larger and smaller producers, with larger manufacturers gaining an increasing share of the overall wafer market. In parallel, there are a number of companies developing wafer manufacturing capability targeted for solar applications. Device manufacturers seek suppliers with whom they can better align wafer technology development with their own product development efforts. We believe these manufacturers will continue to select wafer suppliers that offer advanced technological capabilities, a broad product portfolio and superior service to satisfy their exacting device requirements.
We offer wafers with a wide variety of features satisfying numerous product specifications to meet our customers exacting requirements. Our wafers vary in size, surface features, composition, purity levels, crystal properties and electrical properties. We provide our customers with a reliable supply of high quality wafers with consistent characteristics. These wafers range from 100 millimeter to 300 millimeter and are round in shape for semiconductor customers because of the nature of their processing equipment. Customers using wafers for solar applications utilize wafers that are square in nature so that they fit into solar panels. Our wafers are used as the starting material for the manufacture of various types of semiconductor devices, including microprocessor, memory, logic and power devices, as well as the starting material for solar cells. In turn, these semiconductor devices are used in computers, cellular phones and other mobile electronic devices, automobiles and other consumer and industrial products, and the solar cells are used to manufacture solar modules for converting energy from the sun into usable electrical energy.
Our wafers include three general categories of wafers:
Our prime wafer is a polished, highly refined, pure wafer with an ultraflat and ultraclean surface. The vast majority of our prime wafers are manufactured with a sophisticated chemical-mechanical polishing process that removes defects and leaves an extremely smooth surface. As devices become more complex, wafer flatness and cleanliness requirements, along with crystal perfection, become increasingly important because these properties have a significant impact on our customers processes and yields.
Our OPTIA wafer is a 100% defect-free crystalline structure based on our patented technologies and processes, including Magic Denuded Zone®, or MDZ®. Our patented MDZ® product feature can increase our customers yield by drawing impurities away from the surface of the wafer in a manner that is efficient and reliable, with results that are reproducible. We believe the OPTIA wafer is the most technologically advanced polished wafer available today. Our annealed wafer is a prime wafer with near surface crystalline defects dissolved during a high-temperature thermal treatment.
Our epitaxial, or epi, wafers consist of a thin silicon layer grown on the polished surface of the wafer. Typically, the epitaxial layer has different electrical properties from the underlying wafer. This provides our customers with better isolation between circuit elements than a polished wafer, and the ability to tailor the wafer to the specific demands of the device. Without sufficient isolation of the various circuit elements, the elements could communicate electrically with each other, which could render the device useless. Epitaxial wafers provide improved isolation, thereby allowing for increased reliability of the finished semiconductor device and greater efficiencies during the semiconductor manufacturing process, which ultimately allows for more complex semiconductor devices.
Our AEGIS product is designed for certain specialized applications requiring high resistivity epitaxial wafers and our MDZ® product feature. The AEGIS wafer includes a thin epitaxial layer grown on a standard starting wafer. The AEGIS wafers thin epitaxial layer eliminates harmful defects on the surface of the wafer, thereby allowing device manufacturers to increase yields and improve process reliability.
We supply test/monitor wafers to our customers for their use in testing semiconductor fabrication lines and processes. Although test/monitor wafers are substantially the same as prime wafers with respect to cleanliness, and in some cases flatness, other specifications are generally less rigorous. This allows us to produce some of the test/monitor wafers from the portion of the silicon ingot that does not meet customer specifications for wafers to be used in the manufacture of semiconductors.
Sales, Marketing and Customers
We market our products primarily through a global direct sales force. We have customer service and support centers globally, including in China, France, Germany, Italy, Japan, Malaysia, Singapore, South Korea, Taiwan and the United States. A key element of our marketing strategy is establishing and maintaining close relationships with our customers. We accomplish this through multi-functional teams of technical, sales and marketing, and manufacturing personnel. These teams work closely with our customers to continually optimize our products for their production processes in their current and future facilities. We monitor changing customer
needs and target our research and development and manufacturing to produce wafers adapted to each customers process, requirements and specifications. Although we have some long-term supply agreements with a ten year term that specify price and volume for the length of the agreement, we make sales of wafers principally through agreements of one year or less (such agreements often are of three months or six months duration), which specify price and typically indicate only expected volumes or market share. We sell our wafers to virtually all major semiconductor device manufacturers, including the major memory, microprocessor and ASIC manufacturers, the worlds largest foundries, and solar cell and module manufacturers.
In 2007, two customers, Samsung and Yingli Green Energy, both accounted for more than 10% of our revenue. No other customer represented 10% or more of our 2007 revenue.
We sell some of our products to certain customers under consignment arrangements. Generally, these consignment arrangements require us to maintain a certain quantity of product in inventory at the customers facility or at a storage facility designated by the customer. Under these arrangements, we ship the wafers to the storage facility, but do not charge the customer or recognize revenue for those wafers until title passes to the customer. Title passes when the customer pulls the product from the assigned storage facility or storage area or, if the customer does not pull the product within a stated period of time (generally 6090 days), at the end of that period, or when the customer otherwise agrees to take title to the product. Until that time, the wafers are considered part of MEMCs inventory and are reflected on MEMCs books and records as inventory. As such, these consignment arrangements are essentially inventory transfer arrangements. At December 31, 2007, we had approximately $8.4 million of inventory held on consignment.
To meet our customers needs worldwide, we have established a global manufacturing network consisting of nine manufacturing facilities. We also utilize subcontractors to manufacture wafers.
Our monocrystalline wafer manufacturing process begins with high purity polysilicon. The polysilicon is melted in a quartz crucible along with minute amounts of electrically active elements such as arsenic, boron, phosphorous or antimony. We then lower a silicon seed crystal into the melt and slowly extract it from the melt. The resultant body of silicon is called an ingot. The temperature of the melt, speed of extraction and rotation of the crucible govern the size of the ingot, while the concentration of the electrically active element in the melt governs the electrical properties of the wafers to be made from the ingot. This is a complex, proprietary process requiring many control features on the crystal-growing equipment.
We then grind the ingots to the specified size and slice the ingots into thin wafers. Next, we prepare the wafers for surface polishing with a multi-step process using precision wafer planarization machines, edge contour machines and chemical etchers. Final polishing and cleaning processes give the wafers the clean and ultraflat mirror polished surfaces required for the fabrication of semiconductor devices. We further process some of our products into epitaxial wafers by utilizing a chemical vapor deposition process to deposit a single crystal silicon layer on the polished surface.
In certain of our manufacturing facilities we have fully integrated manufacturing capabilities that encompass the full range of wafer manufacturing process steps, including ingot growth, wafer slicing, wafer polishing and epitaxial deposition. We conduct certain of our processes in state-of-the-art cleanroom environments.
We obtain our requirements for several raw materials, equipment, parts and supplies from sole suppliers. The main raw material in our production process is polysilicon. We use two types of polysilicon: granular polysilicon and chunk polysilicon. We produce all of our requirements for granular polysilicon at our facility in Pasadena, Texas. We produce chunk polysilicon in our Merano, Italy facility. Chunk polysilicon can be substituted for granular polysilicon, although our manufacturing throughput and yields could be adversely affected. We believe our ability to meet all of our polysilicon requirements through our in-house capabilities provides us with a key cost advantage to compete more effectively in the wafer industry. We have previously announced our plans to expand our polysilicon production capacity over the next few years, and we continue to work toward our capacity expansion targets. We sell some polysilicon to third parties. We also buy some polysilicon on the open market from time to time.
Research and Development
The wafer market is characterized by continuous technological development and product innovation. We believe that continued and timely development of new products and enhancements to existing products is necessary to maintain our competitive position. Our goal in research and development is to maintain a close working relationship with our customers to continually develop new
products and refine existing products to meet the needs of the marketplace. Our research and development model combines engineering innovation with specific commercialization strategies. Our model closely aligns our technology efforts with our customers requirements for new applications. We accomplish this through a better understanding of our customers technology requirements and through targeted research and development projects aimed at developing products to meet those technology requirements and applications. Some of these projects involve formal and informal joint development efforts with our customers.
In addition, in order to strengthen our customer relationships and interaction and to better target our research and development efforts, we assign research and development engineers to key customers worldwide. We do this through our Applications Engineering Group, in our laboratories located in the United States, Italy, Japan and South Korea, as well as field and resident engineers located at strategic locations throughout the world. The primary purpose of the Applications Engineering Group is to establish a close, technical working relationship with our customers to obtain a better knowledge of our customers materials requirements.
We devote a portion of our research and development resources to enhance our position in the crystal technology area. We have dedicated engineers and scientists, located in our St. Peters, Missouri, Merano, Italy and Chonan, South Korea facilities, to further our understanding of defect control and cost reduction. In conjunction with these efforts, we are developing wafering technologies to meet advanced flatness and particle requirements of our customers. In addition, we continue to focus on the development of our advanced epitaxial wafer technology with a dedicated staff of scientists located primarily in our St. Peters, Missouri, Novara, Italy and Utsunomiya, Japan facilities, who focus on the development of new epitaxial wafer products and cost reduction processes.
In addition to our focus on advancements in wafer material properties, we also continue to invest in research and development associated with larger wafer sizes. We produced our first 300 millimeter wafer in 1991 and continue to enhance our 300 millimeter technology program using our staff of research and development scientists, engineers and technicians located primarily in our St. Peters, Missouri and Utsunomiya, Japan facilities. In addition, we continue to focus on process design advancements to drive cost reductions and productivity improvements.
We have also entered into a license agreement for certain layer-transfer wafer technology and we are in the process of establishing production capability for 200 millimeter and 300 millimeter silicon-on-insulator (SOI) wafers using a dedicated group of engineers and scientists located in our St. Peters, Missouri facility.
The market for wafers is competitive. We compete globally and face competition from established manufacturers. Our major competitors are Shin-Etsu Handotai, SUMCO, Siltronic, BP Solar International, Evergreen Solar, Kyocera Corp., REC Group, Sanyo Corporation, Sharp Corporation, and SolarWorld AG.
Our wafers compete with wafers manufactured by others on the basis of product quality, consistency, price, technical innovation, customer service and product availability. We believe we are competitive on the basis of these factors.
Proprietary Information and Intellectual Property
We believe that the success of our business depends in part on our proprietary technology, information, processes and know how. We protect our intellectual property rights based on patents and trade secrets as part of our ongoing research, development and manufacturing activities. As of December 31, 2007, we owned of record or beneficially approximately 219 U.S. patents, of which approximately four will expire by 2010, approximately 42 will expire between 2011 and 2015 and approximately 174 will expire after 2015. As of December 31, 2007, we owned of record or beneficially approximately 453 foreign patents, of which approximately 43 will expire by 2010, approximately 34 will expire between 2011 and 2015 and approximately 377 will expire after 2015. These foreign patents are generally counterparts of our U.S. patents. As of December 31, 2007, we had approximately 58 pending U.S. patent applications and approximately 275 pending foreign patent applications. The patents we beneficially own relate to polysilicon technology. We exclusively licensed these patents from Albemarle Corporation in connection with our purchase of Albemarles granular polysilicon business. We may request that these patents be assigned to us at any time in exchange for a nominal purchase price.
We have agreed to indemnify some of our customers against claims of infringement of the intellectual property rights of others in our sales contracts with these customers. Historically, we have not paid any claims under these indemnification obligations and we do not have any pending indemnification claims.
At December 31, 2007, we had approximately 4,900 full time employees and approximately 450 temporary workers worldwide. We have approximately 1,600 unionized employees in our St. Peters, Missouri, Pasadena, Texas, South Korea and Italy facilities. We have not experienced any material work stoppages at any of our facilities due to labor union activities during the last several years.
Information regarding our foreign and domestic operations is contained in Note 17, Geographic Segments, of Notes to Consolidated Financial Statements included in our 2007 Annual Report, which information is incorporated herein by reference.
We make available free of charge through our website (http://www.memc.com) reports we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those set forth under Item 1. Business and Item 3. Legal Proceedings and those incorporated herein by reference from our 2007 Annual Report. In addition to the business risks and uncertainties discussed elsewhere in this Form 10-K, the following are important risk factors which could cause actual results and events to differ materially from those contained in any forward-looking statement made by us.
Our business depends primarily on the semiconductor device industry and if that industry experiences future downturns, our sales could decrease and we could be forced to reduce our prices while maintaining fixed costs, all of which could have significant negative effects on our operating results and financial condition.
Our business depends in large part upon the market demand for our customers semiconductor devices that are utilized in electronics applications. The semiconductor device industry experiences:
From time to time, the semiconductor device industry has experienced significant downturns. These downturns often occur in connection with declines in general economic conditions. Some of these downturns have lasted for more than a year and have resulted in a substantial decrease in demand for our products. For much of the second half of 2007 and into the early months of 2008, the semiconductor device industry has had pockets of soft or weakened demand. If the semiconductor device industry experiences future downturns, we will face pressure to reduce prices and we may need to further rationalize capacity and reduce fixed costs. If we are unable to reduce our expenses sufficiently to offset reductions in price and volume, our operating results and financial condition could be materially adversely affected.
We are also subject to the risks that affect the solar industry.
The solar industry has experienced a high level of growth in recent years, but it has also experienced wide fluctuations in the operating results of industry participants, some of which has been caused by the lack of readily available supply of certain raw materials, such as polysilicon or silane gas. In the past few years, a large number of companies have announced plans to produce polysilicon. In addition, in part due to the lack of available polysilicon supply, a number of companies are supplying thin-film solar cells, which are intended to obviate the need for crystalline-based cells, which would use wafers supplied by us. Both new available polysilicon supply and the increased use of thin-film cells by our customers or other solar cell and module companies could potentially lead to an excess supply of available material to service the demand of the industry. In such event, we may need to reduce our prices on certain products to retain or gain market share, which could have a material adverse effect on our operating results.
In addition, the demand for solar electricity generation products is heavily influenced by macroeconomic factors such as the supply and price of other energy products, such as oil, coal and natural gas, as well as foreign, federal, state and local government regulations and policies concerning the electric utility industry, including the availability and size of government and economic incentives related to the use of solar power. Today, the cost of solar power exceeds the cost of power furnished by the electric utility grid in many locations. As a result, federal, state and local government bodies in many countries, most notably Germany and Japan, have provided incentives in the form of rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. These government economic incentives could be reduced or eliminated altogether. Some of these solar program incentives expire, decline over time, are limited in total funding or require renewal of authority. Reductions in, or eliminations or expirations of, governmental incentives could result in decreased demand for our wafers and our customers products.
Our dependence on single and limited source suppliers could harm our production output and adversely affect our manufacturing throughput and yield.
We obtain several raw materials, equipment, parts and supplies from sole suppliers. Likewise, we obtain all of our requirements for granular polysilicon from our facility in Pasadena, Texas. In the case of granular polysilicon, we believe that we could substitute chunk polysilicon for granular polysilicon. We cannot predict whether this substitution would be successful or how long this qualification process would take. In addition, our manufacturing process could be interrupted and our manufacturing throughput and yields could be adversely affected. A failure to obtain a new qualification or a decrease in our manufacturing throughput or yields could have a material adverse effect on our operating results.
From time to time we have experienced limited supplies of certain raw materials, equipment, parts and supplies, particularly polysilicon. Because of the cyclical nature of our industry, we may experience shortages of our key raw materials, equipment, parts and supplies in the future. A prolonged inability to obtain raw materials, equipment, parts or supplies, or increases in prices resulting from these shortages, could have a material adverse effect on our operating results.
Our expansion of manufacturing volume and capacity presents business risks which could materially adversely affect our results of operations if we fail to manage these expansions successfully.
We are investing significantly in expanding our raw material (polysilicon) production capacity and our 300mm production capacity. We have also announced our intention to develop significant 156mm production capacity. Expansion of our polysilicon production capacity is subject to risks such as availability of capital equipment; delays in construction and ramp of new production capacity; and availability of additional precursor raw materials.
Because our plan to manufacture 156mm wafers involves a new size wafer for MEMC, it is also subject to additional risks, including refining and adapting our manufacturing technologies to customer requirements; creating and developing demand for and market acceptance of our technologies and products; identifying and managing qualified subcontractors to manufacture 156mm wafers; and establishing and maintaining sufficient internal research and development, marketing, sales, production and customer service infrastructure to support this effort.
In July 2005, we embarked upon a significant expansion of our 300 millimeter production capacity by establishing such production capacity at our Taisil facility in Taiwan, in addition to continuing our improvements to our Japan 300 millimeter operation. The expansion of this capacity involves significant risks, including availability and timing of capital equipment installation; distraction of worldwide and local management; costs and spending in excess of budgeted amounts; timing of production ramp; and qualification of a new facility at new and existing customers.
In order to succeed in these planned expansions and increased quantities of wafer deliveries, we will need to devote capital expenditures as well as the investment of management time and related resources to successfully execute these planned expansions. This could disrupt our existing business, affect our operating results and distract our management team. There can be no assurance that we will be able to successfully reach our production, timing and cost goals for our planned expansions as customer specifications and demand evolve. Use of capital and management resources that otherwise would have been made available to expand other parts of our business could have material adverse consequences on our results of operations if we fail to manage these expansions successfully.
We experience competition in the wafer industry which could force us to reduce our prices to retain market share or face losing market share and revenues.
We face competition in the wafer industry from established manufacturers throughout the world. The largest wafer suppliers with whom we compete are Shin-Etsu Handotai, SUMCO, Siltronic, BP Solar International, Evergreen Solar, Kyocera Corp., REC Group, Sanyo Corporation, Sharp Corporation, and SolarWorld AG. We compete on the basis of product quality, consistency, price, technical innovation, customer service and product availability. We expect that our competitors will continue to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Some of our competitors have substantial financial, technical, engineering and manufacturing resources to develop products that currently, and may in the future, compete favorably against our products. We may need to reduce our prices to retain or gain market share, which could have a material adverse effect on our operating results.
If we fail to meet changing customer demands, we may lose customers and our sales could suffer.
The wafer industry changes rapidly. Changes in our customers requirements result in new and more demanding technologies, product specifications and sizes, and manufacturing processes. Our ability to remain competitive will depend upon our ability to develop technologically advanced products and processes. We must continue to meet the increasingly demanding requirements of our customers on a cost-effective basis. As a result, we expect to continue to make significant investments in research and development and equipment. We cannot be certain that we will be able to successfully introduce, market and cost-effectively manufacture any new products, or that we will be able to develop new or enhanced products and processes that satisfy customer needs or achieve market acceptance.
Because we cannot easily transfer production of specific products from one of our manufacturing facilities to another, manufacturing delays or lack of capacity or output at a single facility could result in a loss of product volume.
It typically takes three to six months for our customers to qualify a manufacturing facility to produce a specific product, but it can take longer depending upon a customers requirements and market conditions. Interruption of operations or lack of available additional capacity at any of our primary wafer manufacturing facilities could result in delays or cancellations of shipments of wafers and a loss of product volume. Likewise, interruption of operations at our granular polysilicon manufacturing facility could adversely affect our wafer manufacturing throughput and yields and could result in our inability to produce certain qualified wafer products, delays or cancellations of shipments of wafers and a loss of product volume. An August 2007 accident at this facility caused reduced product volumes and increased costs in the 2007 third quarter. Similarly, an interruption of our chunk polysilicon manufacturing operations could adversely affect our results of operations. A number of factors could cause interruptions, including labor disputes, equipment failures, shortages of raw materials or supplies, or transportation logistic complications. Unions represent some of the employees at our wafer facilities in St. Peters, Missouri, Italy and South Korea and our granular polysilicon facility in Pasadena, Texas. A strike at any of these facilities could cause interruptions in manufacturing. We cannot be certain that alternate qualified capacity would be available on a timely basis or at all.
If we do not continue to reduce our manufacturing costs and operating expenses, we may not be able to compete effectively in the wafer industry.
The success of our business depends, in part, on our continuous reduction of manufacturing costs and operating expenses. The wafer industry has historically experienced price erosion and will likely continue to experience such price erosion. In addition, our long-term agreements to supply solar wafers have fixed price reduction curves. If we are not able to reduce our manufacturing costs and operating expenses sufficiently to offset future price erosion, our operating results will be adversely affected. During the past few years, we have engaged in various cost-cutting and other initiatives intended to reduce costs and increase productivity. These activities have included reduction of headcount, refinement of our processes and efforts to increase yields and reduce cycle time. We cannot assure you that we will be able to continue to reduce our manufacturing costs and operating expenses. Moreover, any future closure of facilities or reduction of headcount may adversely affect our ability to manufacture wafers in required volumes to meet customer demand and may result in other production disruptions.
We are subject to periodic fluctuations in foreign currency exchange rates which could cause operating results and reported financial results to vary significantly from period to period.
Approximately 76% of our sales in 2007 were made outside the United States, and we expect that international sales will continue to represent a significant percentage of our total sales. Sales outside of the United States could expose us to currency exchange rate fluctuations. Our risk exposure from these sales is primarily related to the Euro, Japanese Yen and Korean Won. Because the majority of our sales are denominated in the U.S. Dollar, if one or more competitors is selling to our customers in a different currency than the U.S. Dollar, we are subject to the risk that the competitors products will be relatively less expensive than our products due to exchange rate effects.
In addition, a significant portion of our manufacturing operations is located outside of the United States. Our risk exposure from expenses at international manufacturing facilities is concentrated in the Euro, Japanese Yen, Korean Won, Malaysian Ringgit and the New Taiwanese Dollar. When possible, we denominate our foreign sales in the same foreign currency in which we incurred manufacturing expenses. To the extent that our sales in foreign currencies occur at foreign sites which incur expenses in those same currencies, this natural hedge reduces our net exposure to foreign currency risk. We generally hedge receivables denominated in foreign currencies at the time of sale. One of our foreign subsidiaries has debt denominated in Japanese Yen. We generally do not hedge these net foreign currency exposures.
We recognized net currency losses totaling approximately $1.7 million in 2007, $1.0 million in 2006, and $0.5 million in 2005. We cannot predict whether the foreign currency exchange risks inherent in doing business in foreign countries will have a material adverse effect on our operations and financial results in the future.
We may acquire other businesses, products or technologies; if we do, we may be unable to integrate them with our business effectively or at all, which may impair our financial performance.
If we find appropriate opportunities, we may acquire businesses, products or technologies that we believe are strategic. If we acquire a business, product or technology, the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significant attention of our management that would otherwise be available for the ongoing development of our business. If we make future acquisitions, we may issue shares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing other intangible assets with estimated useful lives, any of which might harm our business, financial condition or results of operations.
Our business may be harmed if we fail to properly protect our intellectual property.
We believe that the success of our business depends in part on our proprietary technology, information, processes and know how. We try to protect our intellectual property rights based on trade secrets and patents as part of our ongoing research, development and manufacturing activities. We cannot be certain, however, that we have adequately protected or will be able to adequately protect our technology, that our competitors will not be able to utilize our existing technology or develop similar technology independently, that the claims allowed with respect to any patents held by us will be broad enough to protect our technology or that foreign intellectual property laws will adequately protect our intellectual property rights. Moreover, we cannot be certain that our patents do or will provide us with a competitive advantage.
The protection of our intellectual property rights and the defense of claims of infringement against us by third parties may subject us to costly patent litigation.
Any litigation in the future to enforce patents issued to us, to protect trade secrets or know how possessed by us or to defend us or to indemnify others against claimed infringement of the rights of others could have a material adverse effect on our financial condition and operating results. From time to time, we receive notices from other companies that allege we may be infringing certain of their patents or other rights. If we are unable to resolve these matters satisfactorily, or to obtain licenses on acceptable terms, we may face litigation, which could have a material adverse effect on us. In fact, we are presently involved in multiple cases involving allegations of patent infringement. Regardless of the validity or successful outcome of any such intellectual property claims, we may need to expend significant time and expense to protect our intellectual property rights or to defend against claims of infringement by third parties, which could have a material adverse effect on us. If we lose any such litigation where we are alleged to infringe the rights of others, we may be required to:
Any of these outcomes could have a material adverse effect on our business, results of operations or financial condition.
We have a limited number of principal customers and a loss of one or several of those customers would hurt our business.
Two customers accounted for more than 10% of our revenue in 2007. Our operating results could materially suffer if we experience a significant reduction in, or loss of, purchases by one or more of our top customers.
The loss of one or more of our customers with whom we have long-term agreements could materially adversely affect our results of operations. We have previously announced the execution of long-term supply agreements with three customers between July 2006 and October 2007. Although these long-term supply agreements are take or pay contracts, there can be no assurance that the customers will be able to fulfill their financial commitments to us in the agreements to pay the associated penalties if they do not fulfill their purchase obligations under the agreements. If we had to stop shipping to a customer who failed to meet its obligations under the contract, we could have excess or idle production capacity. The loss of any of these customers could materially adversely affect our operating results.
We are subject to periodic foreign economic downturns and political instability, which may adversely affect our sales and cost of doing business in those regions of the world.
Economic downturns have affected our operating results in the past, and could affect our operating results in the future. Additionally, other factors may have a material adverse effect on our operations in the future, including:
We cannot predict whether these economic risks inherent in doing business in foreign countries will have a material adverse effect on our operations and financial results in the future.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and could have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. The report must also contain a statement that our auditors have issued an attestation report on managements assessment of our internal controls over financial reporting.
If our management identifies one or more material weaknesses in our internal control over financial reporting, we will be unable to assert our internal control over financial reporting is effective. We reported one material weakness in our internal control over financial reporting in 2004 and three material weaknesses in our internal control over financial reporting in 2005. We did not report any material weaknesses for fiscal 2006 and we will not report any material weaknesses for fiscal 2007, although there can be no assurance that we will not have one or more material weaknesses in the future. If we are unable to assert that our internal control over financial reporting is effective presently or in the future (or if our auditors are unable to express an opinion on the effectiveness of our internal controls over financial reporting), we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.
We are subject to numerous environmental laws and regulations, which could require us to discharge environmental liabilities, increase our manufacturing and related compliance costs or otherwise adversely affect our business.
We are subject to a variety of foreign, federal, state and local laws and regulations governing the protection of the environment. These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials used in our manufacturing processes. These materials may have been or
could be released into the environment at properties currently or previously owned or operated by us, at other locations during the transport of the materials, or at properties to which we send substances for treatment or disposal. If we were to violate or become liable under environmental laws and regulations or become non-compliant with permits required at some of our facilities, we could be held financially responsible and incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims. Groundwater and/or soil contamination has been detected at four of our facilities. We believe we are taking all necessary remedial steps at these facilities. We do not expect these known conditions to have a material impact on our business. However, environmental issues relating to presently known or unknown matters could require additional investigation, assessment or expenditures. In addition, new laws and regulations or stricter enforcement of existing laws and regulations could give rise to additional compliance costs and liabilities.
The market price of our common stock has fluctuated significantly and may continue to do so.
The market price of our common stock may be affected by various factors, including:
Technology company stocks in general have experienced extreme price and trading volume fluctuations that often have been unrelated to the operating performance of these companies. This market volatility may adversely affect the market price of our common stock.
If we fail to comply with covenants under our credit facility, the lenders could cause outstanding amounts to become immediately due and payable, and we might not have sufficient funds and assets to pay such loans.
We are party to a $200 million revolving credit facility with National City Bank of the Midwest, US Bank National Association and other lenders named therein. This facility contains certain restrictive covenants, including covenants to maintain minimum consolidated EBITDA and interest coverage ratios, as those terms are defined in the agreement. A continuing violation of any of these covenants, which in our industry could occur in a sudden or sustained downturn, would be deemed an event of default under the facility. In such event, upon election of the lenders, the loan commitments under the credit facility would terminate and the loans and accrued interest then outstanding would be due and payable immediately. We may not have sufficient funds and assets to cover any such required payments and may not be able to obtain replacement financing on a timely basis or at all. These events could have a material adverse effect on us depending on our outstanding balances at that time. As of December 31, 2007, we had no outstanding borrowings under this facility, although we had approximately $112.0 million of outstanding third party letters of credit backed by this facility at such date.
Certain provisions of our Restated Certificate of Incorporation and Restated By-Laws could delay or make more difficult a change of control or change in management that would benefit our stockholders.
Certain provisions of our Restated Certificate of Incorporation and Restated By-Laws may delay, defer or make more difficult:
For example, our Restated Certificate of Incorporation divides the Board of Directors into three classes, with members of each class to be elected for staggered three-year terms. This provision may make it more difficult for stockholders to change the majority of directors and may frustrate accumulations of large blocks of common stock by limiting the voting power of such blocks. This may further discourage a change of control or change in current management.
These provisions may limit participation by our stockholders in any merger or other change of control transaction, whether or not the transaction is favored by current management or would be favorable to our stockholders. These provisions may also make removal of current management by our stockholders more difficult, even if such removal would be beneficial to the stockholders generally.
In addition, our Board of Directors is authorized to issue up to 50,000,000 shares of preferred stock without the vote of our holders of common stock. The issuance of preferred stock could adversely affect the voting power or other rights of the holders of our common stock and could have the effect of delaying, deferring or impeding a change in control of us.
Cautionary Statement Regarding Forward-Looking Statements
The following statements are or may constitute forward-looking statements:
Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. You should not place undue reliance on such statements, which speak only as of the date that they were made. Factors that could cause actual results to differ materially are set forth under this Item 1A. Risk Factors.
These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
Our principal executive offices are located at 501 Pearl Drive (City of OFallon), St. Peters, Missouri 63376, and our telephone number at that address is (636) 474-5000. Our principal manufacturing and administrative facilities comprised approximately 3.9 million square feet as of December 31, 2007 and were situated in the following locations:
In December 2005, we purchased from the City of OFallon, Missouri the portion of our St. Peters facility that had been leased from the City of OFallon in connection with an industrial revenue bond financing. We lease the land on which our Pasadena, Texas facility is located. The term of the Pasadena lease expires in 2030 and is extendable for four (4) additional renewal terms of five (5) years each. We lease the land on which our Hsinchu, Taiwan facility is located. This lease expires in 2014. We also lease our facility in Kuala Lumpur, Malaysia, which lease expires in March 2009 and our facility in Singapore, which lease expires in July 2010.
We believe that our existing facilities and equipment are well maintained, in good operating condition and are adequate to meet our current requirements. The extent of utilization of these facilities varies from plant to plant and from time to time during the year.
Sumitomo Mitsubishi Silicon Corporation et al. vs. MEMC Electronic Materials, Inc.
First SUMCO Case. On December 14, 2001, MEMC filed a lawsuit against Sumitomo Mitsubishi Silicon Corporation (SUMCO) and several of SUMCOs affiliates (the First SUMCO Case) in the U.S. District Court for the Northern District of California alleging infringement of one of MEMCs U.S. patents. On March 16, 2004, the U.S. District Court entered summary judgment against MEMC. MEMC appealed this decision to the U.S. Federal Circuit Court of Appeals, and on August 22, 2005, the U.S. Federal Circuit Court of Appeals reversed the grant of summary judgment with respect to inducement of infringement by SUMCO, and the case was remanded to the U.S. District Court for further proceedings. On February 24, 2006, the U.S. District Court granted certain summary judgment motions of each of SUMCO and MEMC. In light of the summary judgment rulings in favor of SUMCO, on February 27, 2006, the U.S. District Court issued a final judgment against MEMC in the First SUMCO Case.
On February 28, 2006, MEMC filed its Notice of Appeal with the U.S. Federal Circuit Court of Appeals in connection with two of the summary judgment rulings in favor of SUMCO in the First SUMCO Case related to the issue of enablement of the MEMC patent at issue in the case and the issue of exclusion of certain MEMC expert testimony and expert reports. MEMC and SUMCO filed their appellate briefs in this matter in 2006 and early 2007, and oral argument was held by the Federal Circuit on June 6, 2007. On September 20, 2007, the Federal Circuit reversed the summary judgment finding against MEMC on the issue of enablement, thereby
vacating the judgment by the U.S. District Court below of the invalidity of the patent at issue in the case. The Federal Circuit did not reverse the judgment by the U.S. District Court excluding MEMCs expert testimony and expert reports, and as a result, did not remand the case for further proceedings. On January 15, 2008, SUMCO petitioned the U.S. Supreme Court for the right to appeal the decision of the Federal Circuit below by filing a Writ of Certiorari with the U.S. Supreme Court. The U.S. Supreme Court had not made a decision to grant or deny the right to appeal as of the date hereof.
Second SUMCO Case. On July 13, 2004, SUMCO and certain of its affiliates filed a lawsuit against MEMC (the Second SUMCO Case) in the U.S. District Court for the District of Delaware in a case captioned Sumitomo Mitsubishi Silicon Corporation, aka SUMCO, a corporation of Japan and SUMCO USA Corporation, a Delaware corporation, v. MEMC Electronic Materials, Inc., a Delaware corporation, Civil Action No. 04-852-SLR. In May 2005, MEMC successfully had this case removed to the Northern District of California, although the Second SUMCO Case and the First SUMCO Case were not consolidated. In the Second SUMCO Case, plaintiffs alleged that MEMC violated the antitrust laws by attempting to control sales of low defect silicon wafers in the United States, including through its patent policies and enforcement of its patents related to low defect silicon wafers. Plaintiffs also sought a declaratory judgment that plaintiffs wafers do not infringe the claims of two MEMC patents and that these two MEMC patents are invalid and unenforceable. Finally, plaintiffs alleged that these two MEMC patents are void and unenforceable because of MEMCs alleged patent misuse. Plaintiffs sought treble damages in an unspecified amount, and attorneys fees and costs incurred by plaintiffs in the Second SUMCO Case and in the First SUMCO Case. MEMC asserted defenses against these claims, including a counterclaim for infringement of one of the two patents. In June 2006, in light of the then pending appeal with the U.S. Federal Circuit Court of Appeals of the matters discussed above in the First SUMCO Case, certain of the counts related to the two MEMC patents were dismissed from the Second SUMCO Case without prejudice.
On August 13, 2007, the U.S. District Court granted summary judgment in favor of MEMC, and in light of the summary judgment ruling in favor of MEMC, the U.S. District Court issued a final judgment against SUMCO in the Second SUMCO Case. On August 23, 2007, SUMCO filed its Notice of Appeal of the grant of summary judgment in favor of MEMC in the Second SUMCO Case with the U.S. Federal Circuit Court of Appeals. MEMC believes that SUMCOs position in the Second SUMCO Case and the resulting appeal of the U.S. District Court decision has no merit and will assert a vigorous defense in connection with that appeal.
We do not believe that this matter will have a material adverse effect on our consolidated results of operations and financial condition. Due to uncertainty regarding the litigation process, however, the outcome of this matter could be unfavorable, in which event we might be required to pay damages and other expenses.
S.O.I.TEC Silicon on Insulator Technologies S.A. and Soitec USA, Inc. vs. MEMC Electronic Materials, Inc.
On November 21, 2005, S.O.I.TEC Silicon on Insulator Technologies S.A. and Soitec USA, Inc. (Soitec) filed a Complaint for Declaratory Judgment against MEMC in the U.S. District Court for the District of Delaware (Civil Action No. 05-806) alleging invalidity and/or non-infringement of seven MEMC U.S. patents. In January 2006, MEMC filed a motion to dismiss with respect to six of the seven patents in the case, and also brought a counterclaim against Soitec for infringement in the United States by Soitec of the remaining U.S. patent. The parties subsequently agreed to the dismissal of six of the seven patents from the case. Soitec filed an amended complaint in April 2006, and MEMC filed its amended answer and counterclaim in May 2006. Although the case is still in the discovery stage, we believe that Soitecs declaratory judgment action against us has no merit, and we are asserting a vigorous defense against that claim, as well as pursuing our counterclaim for infringement.
Also, on December 28, 2005, MEMC filed suit against Soitec in France for infringement by Soitec of three of MEMCs foreign patents. This case remains in the early stages. In August 2007, the Lyon Court issued a stay in the lawsuit pending the outcome of certain Opposition Proceedings before the European Patent Office related to one of the three patents. MEMC requested the right to appeal this stay, which right the Lyon Court of Appeals granted in October 2007. In December 2007 and January 2008, the parties submitted briefs in connection with this appeal. A hearing is expected in April 2008 on the appeal.
We do not believe that the Soitec cases, should they be decided against MEMC, in whole or in part, will have a material adverse effect on MEMC. Due to uncertainty regarding the litigation process, however, the outcome of both matters are unpredictable and the result of either case could be unfavorable for MEMC.
ASi Industries GmbH vs. MEMC Electronic Materials, Inc. and MEMC Pasadena, Inc.
On June 19, 2006, ASi Industries GmbH (ASi) filed a Complaint for Breach of Contract and Declaratory Judgment against MEMC in the U.S. District Court for the Eastern District of Missouri (Civil Action No. 4:06-CV-00951-CDP) alleging breach of contract by MEMC, unjust enrichment, tortious interference with ASis contracts, antitrust violations and seeking a declaratory judgment of non-infringement, all related to a purchase order agreement related to polysilicon. MEMC filed its answer and related counterclaims in August 2006. In November 2006, the District Court granted MEMCs motion to dismiss ASis antitrust claims. ASi also agreed at that time to dismiss its unjust enrichment claims. We dismissed our counterclaims related to infringement in June 2007, and ASi dismissed its declaratory judgment claims in April 2007, in each case based on lack of jurisdiction. The case is scheduled for trial in April 2008. We believe our actions under the purchase order at issue were permitted, and are asserting a vigorous defense.
We do not believe that the ASi case, should it be decided against MEMC, in whole or in part, will have a material adverse effect on us. Due to uncertainty regarding the litigation process, however, the outcome of this matter is unpredictable and the result of the case could be unfavorable for MEMC.
Semi-Materials Co., Ltd. vs. MEMC Electronic Materials, Inc. and MEMC Pasadena, Inc.
On September 28, 2006, Semi-Materials Co., Ltd. (Semi-Materials) filed a Complaint for Breach of Contract against MEMC in the U.S. District Court for the Eastern District of Missouri (Civil Action No. 4:06-CV-01426-FRB) alleging breach of contract by MEMC, unjust enrichment, fraud, conversion and seeking specific performance, all related to a series of purchase orders for chunk polysilicon and polysilicon solar ingot. MEMC filed its answer in the case in December 2006. The Court dismissed Semi-Materials conversion claim. Some discovery has been completed, and trial is scheduled to begin in August 2008. Although the case is in the very early stages, we believe our actions under the purchase orders at issue were permitted, and we intend to assert a vigorous defense.
We do not believe that the Semi-Materials case, should it be decided against MEMC, in whole or in part, will have a material adverse effect on us. Due to uncertainty regarding the litigation process, the outcome of this matter is unpredictable and the result of the case could be unfavorable for MEMC.
No matters were submitted to a vote of security holders during the fourth quarter 2007.
Executive Officers of the Registrant
The following is information concerning our executive officers as of January 31, 2008.
Mr. Gareeb has been our President and Chief Executive Officer since April 2002 and has been a Director since that time. Prior to joining MEMC, Mr. Gareeb was Chief Operating Officer of International Rectifier Corporation, a leading supplier of power semiconductors. Mr. Gareeb joined International Rectifier in 1992 as Vice President of Manufacturing and subsequently held other senior management positions.
Mr. Hannah joined us as Senior Vice President and Chief Financial Officer in April 2006. Prior to joining MEMC, Mr. Hannah was employed by The Home Depot, Inc. from 2003 to 2006. Mr. Hannah most recently served as the Senior Vice President, Operations, covering all aspects of The Home Depots operations in the United States, Mexico, and Canada. Prior to that, he served as Senior Vice President, Finance, supporting all Home Depot stores in the United States and Mexico, as well as store operations and the global supply chain. Before Home Depot, from 2001 to 2003 Mr. Hannah worked as Vice President for The Boeing Company where he led the audit and financial planning functions. He also held senior finance positions at several GE divisions from 1997 to 2001.
Mr. Hunkler joined us in August 2005 as Senior Vice President, Manufacturing. Prior to joining MEMC, from June 1984 to July 2005, Mr. Hunkler worked for Freescale Semiconductor (previously Motorola (Semiconductor Products Sector)), where he was most recently in charge of Final Manufacturing and, before that, Worldwide Wafer Fab Operations.
Mr. Kauffmann has been our Senior Vice President, Sales and Marketing since October 2004. Mr. Kauffmann served as Vice President, Marketing from August 2003 to October 2004 and Acting Vice President, Sales and Marketing from March 2003 to August 2003. Mr. Kauffmann served as our Director, Segment Marketing from August 2002 to February 2003 and as the Commercial Manager for our 300 millimeter business unit from June 2000 to July 2002. From September 1994 to May 2000, Mr. Kauffmann held various positions with MEMC in Taiwan including Technical Director from September 1994 to December 1997, Director of Operations from December 1997 to April 1999, and Director, Foundry Marketing from April 1999 to May 2000. From February 1980 to August 1994, Mr. Kauffmann held manufacturing positions in one of our U.S. manufacturing plants.
Dr. Sadasivam has been our Senior Vice President, Research and Development since July 2002. Dr. Sadasivam was President of MEMC Japan Ltd., our Japanese subsidiary, from April 2002 to June 2002. From July 2000 to March 2002, Dr. Sadasivam served as our Director, Worldwide Operations Technology. Dr. Sadasivam was Director, Technology for MEMC Korea Company, our South Korean subsidiary, from July 1999 to June 2000. From September 1997 to June 1999, Dr. Sadasivam held positions in the manufacturing technology group for our St. Peters facility.
Ms. Cabrera joined MEMC in August 2006 as Senior Vice President, Human Resources. Prior to joining MEMC, Ms. Cabrera was owner and principal of Professional Consulting Services, a human resource consulting firm, from September 2005 to August 2006. Previous to her consulting experience, from January 1999 to August 2005, Ms. Cabrera served as Vice President of Human Resources and General Affairs with Samsung Telecommunications America.
Mr. Cheles joined MEMC in September 2006 as Vice President, Information Technology and Chief Information Officer. Prior to joining MEMC, Mr. Cheles was a Director of Information for the Uniprise Division of United HealthCare, from April 2005 to August 2006. Previous to his employment with Uniprise, Mr. Cheles was Vice President, Information Technology at Hussmann Corporation from July 1997 to February 2004.
Mr. Kohn joined MEMC in September 2005 as Vice President, General Counsel and Corporate Secretary. Prior to joining MEMC, from March 2000 until September 2005, Mr. Kohn was with Pillsbury Winthrop Shaw Pittman LLP (formerly Pillsbury Madison & Sutro LLP) in its Palo Alto office, most recently as a partner in the Corporate Securities Group.
There are no family relationships between or among any of the named officers and the directors.
(a) The narrative and tabular information regarding the market for our common equity and related stockholder matters required by this item is set forth under Note 18, Unaudited Quarterly Financial Information, of Notes to Consolidated Financial Statements, included in our 2007 Annual Report and under Stockholders Information in our 2007 Annual Report, which information is incorporated herein by reference. We have not paid any dividends on our common stock for the last two fiscal years.
(c) Unregistered Sales of Equity Securities and Use of Proceeds
On May 16, 2007, our Board of Directors approved a $500 million share repurchase program. The stock repurchase program allows MEMC to purchase common stock from time to time on the open market or through privately negotiated transactions using available cash. The specific timing and amount of repurchases will vary based on market conditions and other factors. The stock repurchase program may be modified, extended or terminated by the Board of Directors at any time. Repurchases made are set forth below.
(d) The information required under this Item 5 concerning equity compensation plan information is set out below under Item 12 and is incorporated herein by this reference.
The tabular information (including the footnotes thereto) required by this item is set forth under Five Year Selected Financial Highlights in our 2007 Annual Report, which information is incorporated herein by reference.
The information required by this item is set forth under Managements Discussion and Analysis of Financial Condition and Results of Operations in our 2007 Annual Report, which information is incorporated herein by reference.
The information required by this item is set forth under Market Risk included in Managements Discussion and Analysis of Financial Condition and Results of Operations in our 2007 Annual Report, which information is incorporated herein by reference.
The information required by this item is set forth under Consolidated Statements of Operations, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, Consolidated Statements of Stockholders Equity, Notes to Consolidated Financial Statements and Report of the Independent Registered Public Accounting Firm in our 2007 Annual Report, all of which are incorporated herein by reference.
The information required by this item is set forth under Managements Report on Internal Control Over Financial Reporting in our 2007 Annual Report, which information is incorporated herein by reference.
The information required by this item with respect to compliance with Section 16(a) of the Exchange Act will be set forth in the 2008 Proxy Statement under Section 16(a) Beneficial Ownership Reporting Compliance and is incorporated herein by reference. The remaining information required by this item with respect to directors will be set forth in the 2008 Proxy Statement under Information about Nominees, and Continuing Directors and is incorporated herein by reference. Information required by this Item relating to our Code of Ethics and Audit Committee will be set forth in the 2008 Proxy Statement under Board of Directors and Committees of the Board of Directors. The remaining information required by this item with respect to executive officers is set forth in Part I of this Annual Report on Form 10-K under Executive Officers of the Registrant.
The information regarding beneficial ownership of our securities required by this Item will be set forth in our 2008 Proxy Statement under the headings Director Compensation, Compensation Discussion and Analysis, Report of the Compensation Committee, Executive Compensation and Compensation Committee Interlocks and Insider Participation and is incorporated herein by reference.
The information regarding beneficial ownership of our securities required by this Item will be set forth in our 2008 Proxy Statement under the headings Beneficial Ownership by Directors and Executive Officers and is incorporated herein by reference.
Equity Compensation Plans
The following table summarizes certain information regarding MEMC securities that have been and may be issued pursuant to our equity compensation plans as of December 31, 2007.
The information concerning related party transactions which is required by this Item will be set forth in our 2008 Proxy Statement under the heading Certain Transactions and is incorporated herein by reference. The information concerning director independence required by this Item will be set forth in our 2008 Proxy Statement under the heading Board of Directors and Committees of the Board of Directors and is incorporated herein by this reference.
The information required by this Item will be set forth in our 2008 Proxy Statement under the heading Principal Accounting Firm Services and Fees and is incorporated herein by reference.
(a) The following documents are filed as part of this report:
1. Financial Statements
The following consolidated financial statements of us and our subsidiaries and the Reports of the Independent Registered Public Accounting Firm of KPMG LLP are included in our 2007 Annual Report, and are incorporated herein by reference:
Consolidated Statements of OperationsYears Ended December 31, 2007, 2006 and 2005.
Consolidated Balance SheetsDecember 31, 2007 and 2006.
Consolidated Statements of Cash FlowsYears Ended December 31, 2007, 2006 and 2005.
Consolidated Statements of Stockholders EquityYears Ended December 31, 2007, 2006 and 2005.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
2. Financial Statement Schedules
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 28, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant and in the capacities and on the dates indicated.
The following exhibits are filed as part of this report.