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Executives

Bill Michalek – Director, IR & Corporate Communications

Ahmad Chatila – President and CEO

Tim Oliver – SVP and CFO

Analysts

Stephen Chin – UBS

Stephen O'Rourke – Deutsche Bank

Krish Sankar – Merrill Lynch

Vishal Shah – Barclays Capital

Mehdi Hosseini – FBR Capital Markets

Satya Kumar – Credit Suisse

John Hardy – Broadpoint AmTech

Stuart Bush – RBC Capital Markets

Jesse Pichel – Piper Jaffray

Timothy Arcuri – Citigroup

Chris Blansett – JP Morgan

Paul Leming – Soleil Securities

Hendi Susanto – Gabelli & Company

Atif Malik – Morgan Stanley

Conor Irvine – Needham & Company

Jeff Osborne – Thomas Weisel Partners

Gordon Johnson – Hapoalim Securities

MEMC Electronic Materials, Inc. (WFR) Q4 2009 Earnings Call Transcript February 3, 2010 5:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MEMC fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. And the instructions will be given at that time. (Operator instructions) As a reminder, today’s conference is being recorded. I would now like to turn the conference over to Mr. Bill Michalek, Director of Investor Relations. Please go ahead.

Bill Michalek

Good afternoon and thank you for joining our conference call. We’re conducting today’s call from New York because tomorrow morning we are hosting a Capital Markets Day here for analysts and institutional investors. We invite all investors to listen to the webcast that will begin at 9:00 AM Eastern and be available on our website. Participating in tonight’s call are Ahmad Chatila, President and Chief Executive Officer, and Tim Oliver, Chief Financial Officer.

Before we begin, please note this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. These risks are described in the earnings release published today and in our Form 10-K filed with the SEC.

I will now turn the call over to Ahmad to provide an overview of our business progress and then Tim Oliver to review financial details.

Ahmad Chatila

Thank you, Bill. Good afternoon and thanks for joining us. 2009, as you know, was for us, like most, a very difficult year with unprecedented decline in semiconductor volume and pricing and dramatic price compression in solar wafers from unsustainable highs. We also took necessary restructuring actions, including augmenting stable operations in our polysilicon manufacturing facility. But for MEMC, though it might not be evident in the reported financial metric, it was also a very successful year. There were tremendous efforts to rebuild our company and reposition it for growth.

First, the efforts encompass to focus on people, processes and customers. A good example actually is the solar customer base. We launched a team, created a business process for business development, and MEMC had great results here, and expanded customers served from two in the top 25 in Q1 ’09 through ’10, by Q4 ’09, and we are developing another six.

We had similar results in semiconductors where we achieved top ranking service at three of the top six largest semiconductor companies in the world on three continents, up actually from last place in 2008. The team capitalized on economic crisis and acquired SunEdison, one of the leading brands worldwide in development, EPC and operations of solar power plants. All these actions are changing our risk profile to the better. More customers, deeper relationships, and controlling our destiny in solar by vertical integration, after that a strong balance sheet to weather the cycle.

2010 will look different. We are actually cautiously optimistic and looking at 2010 as a year of positioning for MEMC. MEMC will get significant return on our efforts over the past several quarters and reported financial metrics will get demonstrably better as markets recover.

Volumes will grow and profits will expand. But those metrics again will be less than adequate to truly gauge our success in 2010, progress on our cost roadmap, our customer momentum in semiconductors, our solar backlog, our restructuring effort, our growth initiatives, and our ability to track and retain the best talent will be most important. These things will predetermine our success in 2011 and beyond.

So thank you. I’m really looking forward to see many of you tomorrow in our meeting. And I’ll turn it now to Tim.

Tim Oliver

Great. Thank you, Ahmad. Thanks to all of you who joined this afternoon and we appreciate you being here. My comments today will reference charts provided in our website, which both summarize the data provided in the press release and its attachments and provide some additional analytics. Since Bill already walked you through the cautionary Safe Harbor language, I’m going right to my slides.

Slide three is entitled Q4 Results Summary. Walking down the income statement, revenue in the quarter was up 15% sequentially to $357 million, somewhat higher than the guidance we provided last quarter. Most of the growth was generated by semiconductor wafer volumes. The inclusion of SunEdison for the stub period added about $4 million and pricing was relatively benign.

Year-over-year revenue was down 16%. While semiconductor wafer volumes nearly doubled and solar volumes were relatively stable, price declines offset more than all of that benefit. Gross profit rate increased by more than 800 basis points to almost 15%. This result also exceeded the high end of the range we provided last quarter. Half of this improvement can be attributed to volume leverage and productivity, but the recovery from the disruption at Pasadena representing the other half. Year-over-year, more than all of the decline was caused by lower prices that were partially offset by volume leverage and productivity.

Moving to operating expense, excluding restructuring, expenses were up sequentially about $16 million, $12 million of which came from the SunEdison acquisition. Higher selling and customer freight expense accounted for most of the remaining increase. Year-over-year, the casuals include the same $12 million for SunEdison, $5 million for the EPO facility, and the absence of prior year’s $15 million credit in stock expense for the forfeiture of options by a departing executive.

Math, interest and taxes get you down to equity in earnings of JV and minority interest. This line includes the impact of the successful conclusion of our Q-Cells joint venture project. The sale of this power plant now provides clarity as to the final cash flows and returns.

We recognized a $6 million detriment in this quarter that represents both one more quarter of deferred profit and reduction in the asset value to reflect the agreed-upon sale price. Next quarter we expect to recognize a larger $9 million benefit, representing the deferred profit accrued to date once all these contingencies are clear. In totality, this project was very successful and generated an IRR greater than 20%. The walk completes at the bottom of the page with an EPS loss of $0.03 a share.

Flipping then to slide four entitled 2009 Results Summary. This page depicts the very same information for the full year 2009 versus those we posted in 2008. I want to spend a lot of time in this page. I think it’s helpful to give you some color. From a revenue perspective, about one-third of the decline is attributable to the significant decline in raw poly sales in 2009. We don’t expect raw poly sale to be a factor in 2010. In fact, our plan calls for us to make the poly that we need and to use all the poly we make. The remaining decline was caused by wafer pricing.

The gross margin decline is driven predominantly by lower prices, but about one-third of the decline related to lower raw poly sales. And OpEx, excluding restructuring, increased by $55 million. This includes the same $12 million for SunEdison, $14 million for the EPO facility, and the absence of the $15 million credit and stock expense. The rest of the page illustrates the remaining equation for an undoubtedly tough year.

Move to slide five, which is a graphical depiction of five rolling quarters of revenue and margin results for our legacy materials business segment or the MEMC ex SunEdison results. These results represent the basis for our prior period guidance, and I suspect for your Q4 models. Because SunEdison is only part of MEMC for a portion of the quarter, these results differ from the total company results only slightly.

As you can see, net sales increased almost 14% sequentially on higher wafer volumes in both semi and solar. Prices began to recover in semi and had very dramatic declines in solar price that we had experienced in previous quarters moderated. From a profit perspective, volume leverage, real cost productivity, and a full recovery from the Pasadena disruption, all helped to push gross margins closer to 15%.

Moving then to page six. We attempt to provide a similar information in similar walk for the SunEdison segment. As you know, the business model of SunEdison deployed -- that the SunEdison deploys is very different than that of our traditional materials businesses. The actual reported GAAP results in any quarter will be much less -- much more descriptive of the financing vehicles we choose to use and much less descriptive of the actual operating success of the segment itself.

It will be important for us to provide metrics that allow you to judge not only our success developing power plants, but also the returns we are generating for the company. This page mixes results in two very different bases. The orange bars are the pre-acquisition results and the small blue bars represent the post-acquisition GAAP numbers for the period of November 20th to December 31.

We will spend more time on this topic as we go forward, but for today, the chart in the left depicts full year 2008 and ’09 reported revenue and gross margin. During 2009, SunEdison installed and interconnected about 40 megawatts, a 15% increase over 2008. And because their mix of projects skewed more to direct sales, revenue nearly doubled. Gross margin sustained at very strong levels, and lower operating expenses helped to drive dramatic bottom line improvement.

The right hand side of the page shows that megawatts and revenue will not be linear. It also shows that this business does have a natural calendarization that tends to cause more installed and interconnects toward the end of the year. For the stub period, revenue was $3.8 million, and gross profit was $1.1 million or 27.7% of sales. SunEdison interconnected 13 megawatts since the acquisition, and most importantly, their backlog continues to grow.

Moving to slide seven titled Free Cash Flow Walk, it too shows the impact of the acquisition of SunEdison. As you can tell from the number of line items in this page, our free cash flow metric needs to be amended to capture the net impact of the financing of solar projects. For the direct sales of projects, all of the puts and takes will occur in the operating activities and would therefore be reflected in our existing definition. Once, however, we utilize non-recourse debt financing or sale lease-back structures, the impact will be reflected below CapEx.

The net of the bottom three lines in this page, construction of solar energy systems, which is really contracts and process for finance projects, and the proceeds and repayments from financing and capital lease obligations represent the amount of capital left unfinanced and still invested in solar projects. All these numbers should net out over time. There may be a net positive or negative in any 90-day period. In the case of this quarter, the number was a net positive.

Turning to pages eight and nine, I thought it’s also important to lay out for you the obvious changes to our balance sheet as a result of the closing of this acquisition. We left off equity to keep the thoughts larger. I’ve been assured by my controller that the balance sheet does in fact balance. The column in the far right is meant is show where the transaction impacted the balance sheet and why, but does not explain the entire change in those line items. Restricted cash, both current and not, represents moneys held in the non-recourse LLCs to provide some security to lenders. These moneys typically represent the next 12 months of rent payments due to the lender.

Inventories increased due to both modules purchased for early 2010 SunEdison installs as well as some raw material safety stock for our wafer business. PP&E increases by the solar energy systems owned by SunEdison were by the least asset. And of course, we now have some goodwill from this transaction.

Turning to liabilities, the sale lease-back and project debt associated with the related assets in PP&E are reflected appropriately. As I said before, we will continue to say this debt is non-recourse to MEMC and to SunEdison. We also highlight the obvious impact on working capital and on the inclusion of earn-out in other liabilities. We will provide more detail on all of these lines in our 10-K.

And finally on chart 10 where we typically provide an update to our guidance, we have inserted a shameless plug for the meeting that Bill mentioned earlier. Rather than attempt to navigate a change to new metrics and new reporting segments and new guidance tonight, we decided it’s better to close out the discussion on 2009 and then have a full discussion on 2010 in the morning.

Tomorrow we will provide a look at each of these three new reported segments, their historical performance, their strategies, and their outlooks for 2010. I’ll then provide some annual guidance for 2010 and some qualitative thoughts on how to calendarize that annual guidance. We will also work hard to try to have all of the relevant historical information for these segments, pulled together in time for distribution before the end of February.

With that, we’d be happy to take your questions on the fourth quarter or on the full year 2009, and we ask that you hold your questions on 2010 until tomorrow since we are likely to answer a lot of them in our prepared remarks tomorrow. So with that, Shannon [ph], we are ready for questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) The first question comes from the line of Stephen Chin with UBS. Please go ahead.

Stephen Chin – UBS

Thank you, Ahmad and Tim.

Tim Oliver

Hi there.

Stephen Chin – UBS

It looks like the MEMC core business is basically breakeven here in the fourth quarter. So I was wondering if you could share any color about how the solar division did and the semi division did. Were both the divisions breakeven? And if one wasn’t, how close are they both would be to break even? Thanks.

Tim Oliver

We will give you a little bit more color today, but you can imagine as we said that in an environment where we are getting some price in the semi side of the house, more of the improvement occurred in the semi side. Semi is the place however we suffered the most from price declines earlier in the year. So I’d say they both improved approximately the same in the second half of the year, with semi having a better fourth quarter than third.

Stephen Chin – UBS

Just a follow-up on that, Tim, is semi -- are you on a utilization rate inside the factories that would enable the semi division to be profitable?

Tim Oliver

Yes.

Stephen Chin – UBS

Okay.

Tim Oliver

Yes. I guess that if you average the two together, you would be in the low 80s in terms of utilization.

Stephen Chin – UBS

Okay. Last question I had was about the SunEdison operating expenses going forward. If we take this, it looks like SunEdison’s OpEx could have been about $30 million for the full fourth quarter. Is that the right way to think about SunEdison’s OpEx?

Tim Oliver

No, I’m glad you asked the question. There are some deal-related costs in that number. SunEdison’s operating expenses for the full year would have looked like about $40 million. That was down dramatically from the previous year. 2008, they were almost double that. So they made a conscious effort to reduce that operating expense in 2009. And now that they are part of us, you can imagine first that we expect them to grow rapidly, have yet another year of doubling, which you need to add some expense for. But we will describe a little bit more carefully tomorrow the OpEx going forward, but you should think about it for the -- the 2009 run rate being about $10 million a quarter.

Stephen Chin – UBS

Okay. Thanks, Tim.

Tim Oliver

Sure.

Ahmad Chatila

And then these are just one-time. This does not include any stock option expensing because they were a private company. But as they roll into us, you will have stock option expensing as well for the company.

Tim Oliver

There is a significant amount of expense, and we will talk about this tomorrow too, that we have to absorb into the P&L next year, associated really with the purchase price of the transaction. But because the transaction has some contingencies built into it and because a lot of this paid in equity securities, we take that through the P&L, throughout the remainder of 2010. And I’ll break that up for you tomorrow.

Operator

The next question comes from the line of Stephen O'Rourke with Deutsche Bank. Please go ahead.

Stephen O'Rourke – Deutsche Bank

Thank you. Good afternoon. Couple questions. First, can you comment a bit on maybe your market share regains recovery as you see them progressing in the semiconductor business, because I think it’s pretty clear that over the past several years there were some share losses?

Ahmad Chatila

Yes. I’ll take that one, Steve. Good to hear from you. The answer is we have a lot of customer momentum. As I said, we rank number one at three of the top six companies in the world. And when you get ranked number one, you get more business. So we have a lot of momentum and we will show you tomorrow the details behind that momentum. And we think that that momentum will hold true in 2010 as well.

Stephen O'Rourke – Deutsche Bank

Okay. And could you comment a bit on what you saw with wafer pricing, both on the semi side as well as on the solar wafer side, in Q4 and kind of how it looks going into the first quarter here?

Ahmad Chatila

Yes. What I said last time, Steve, if you could remember, I said that first I’m going to negotiate for Q1 higher pricing, and that was in October. And one of the things that we did is we do not put a gun to the head of our customers anymore. So we give them a heads-up – three-month heads-up. And I have to say that we’ve been fairly successful for Q1. The demand is really high. The market is hot. As you know in cycles, we don’t know how long it’s going to stay, but right now we were on a two-year negative cycle. So I’m optimistic for the next -- for the horizon in front of me. Q2 looks again pretty strong. People are trying to negotiate pricing with us now, even few weeks ago for Q2. That means they are pretty anxious to getting the wafers.

Stephen O'Rourke – Deutsche Bank

And that’s for the semi business or both semi and solar?

Ahmad Chatila

That’s for semi. And then I just want to say that some competitors have said that they were unsuccessful in raising price, but remember, a lot of them (inaudible) that I read, is they are talking about Q4 results. So I do not know about their numbers in Q1. But definitely we’ve been fairly successful in Q1 and we think we are going to be fairly successful in Q2. From a solar perspective, I think, Tim, our pricing has -- the declines have moderated. So it’s not as cheap as it used to be.

Stephen O'Rourke – Deutsche Bank

Are you seeing potential price increases in solar as well -- solar wafers?

Ahmad Chatila

We will talk tomorrow more about 2010 in there. I’ll get Ken to answer. He is not here today. And so that’s (inaudible).

Stephen O'Rourke – Deutsche Bank

And just one last question along those lines. What percentage of your solar wafer business comes from other than your four announced contracts?

Ahmad Chatila

Actually that’s a good answer. Don’t have the percentage in front of me, but as I said, in the beginning of the year, we had only two customers that we were shipping to. Now we have 10 in the top 25. We have around 25 customers we are shipping to. Don’t know the number exactly, but tomorrow maybe Ken can answer it on the podium.

Tim Oliver

My best guess is we are now approaching about half. Half of our volume would be related to the big four and the remaining half would be to the other 21 customers.

Stephen O'Rourke – Deutsche Bank

Great. Thank you very much.

Ahmad Chatila

Yes. Thank you, Steve.

Operator

We have a question from the line of Krish Sankar with Merrill Lynch. Please go ahead.

Krish Sankar – Merrill Lynch

Yes. Thanks for taking my questions. Number one, Ahmad, these market share gains on the semiconductor side, can you be more specific if you are seeing more instrumental share gains from the memory customers or is it more from foundry/logic?

Ahmad Chatila

Okay. So first of all, I just want to tell you that I do not like to talk about market share as much because I have to admit I do not want to create a price war with competitors. Everybody is pretty bad there. There is a lot of blood out of our noses. And by no means I’m trying to affect the market. However, having said that -- having said that, it is broad. It is absolutely broad. It’s in every continent, every market segment, whether logic, memory, memory being DRAM, Flash, Japan Europe, the United States, Asia, China, where we have a strong team now, Singapore, it is just broad. What’s happening in there, of course, is people are giving us our fair share like we used to have before. So we literally -- Shaker and John Kauffmann and the team have doubled our share since Q1 ’09.

Krish Sankar – Merrill Lynch

Got it. Got it. And on the solar side of the business, you said that you guys went from about two to 10 customers on increase. Can I ask how much of -- did you guys get any solar market share because you got SunEdison? Or in other words, did SunEdison contribute any potential share gains in solar?

Ahmad Chatila

You know, it’s still early because it’s only -- we just closed the deal a month ago. But what tomorrow you’ll see from Carlos and Ken is the collaboration between us and the seven module companies that’s been intensified. A lot of our module and cell customers who buy wafers from us, now they also like to sell us those materials. And we are evolving them -- what Ken is doing actually is evolving them into strategic partners. So a long answer, yes.

Krish Sankar – Merrill Lynch

And then final question for Tim. If I look at your CapEx for Q4, even after backing out SunEdison, seems you had like 20%, 21% of revenue run rate, which is much higher than your usual 15%. So is there just one quarter perturbation or do you have to think of structurally different business going forward?

Tim Oliver

No, I don’t -- I wouldn’t draw any conclusions about structure from any one quarter, any one year. I think over time, the model would suggest 15% of revenue, the absolute right level of CapEx. That being said, coming off of a year with as little revenue as we had, it’s a tough -- it's a tough equation to solve for. I do think, however, going into next year that we may stay closer to the level that we saw in the fourth quarter as we ramp up for pretty considerable growth in our businesses. But I think your supposition of 15% is the right number over the long haul is the right one.

Ahmad Chatila

Yes. We believe in it. It’s a great model. We are going to stick to it.

Krish Sankar – Merrill Lynch

Thank you.

Tim Oliver

Thank you.

Operator

We have a question from the line of Vishal Shah with Barclays Capital. Please go ahead.

Vishal Shah – Barclays Capital

Yes, thanks for taking my question. On the semiconductor side, what we have -- what were your utilization rates for the quarter? You said high-80s, is that right?

Tim Oliver

No, low-80s, I said.

Vishal Shah – Barclays Capital

Low-80s. And your margins in that business, were they in line with the corporate average margins or were they low or higher -- give a sense of -- just trying to get a sense of what the under-utilization rate impact was on the semiconductor margins.

Tim Oliver

Yes. They were -- for most of the year, they had been considerably lower than the company average. They got back to just a little bit below the company average this quarter.

Vishal Shah – Barclays Capital

Okay. So -- okay. And then for the solar business, you said your volumes were stable in the quarter, is that right, from the third quarter levels?

Ahmad Chatila

What we said is the price declines have moderated. The volume is a little bit up. The pricing is a little bit down. Revenue kind of flattish to up a little bit.

Vishal Shah – Barclays Capital

Okay. Were you able to sell -- were you able to renegotiate contracts with all of your long-term contract customers? I know you announced a few of those agreements initially, but how are the negotiations going with some of the other customers?

Ahmad Chatila

Going extremely well. We are in good shape across the board. As you know, as the markets evolve over time, we might have to discuss more things. But right now, it’s in great shape. Actually had you noticed our release (inaudible) we thought that’s a great relationship. The guys have done a great job there both ways. And so that was the last one that we are dealing with.

Vishal Shah – Barclays Capital

And what are your customers saying on the solar side? Are they looking to kind of get into long-term contracts or are they looking at spot pricing? What -- could you give us some color on that?

Ahmad Chatila

You know, from -- to say it out loud, I mean, no one wants a long-term contract during a down-cycle. And everybody wants a long-term contract during an up-cycle. And part of the long-term contract is we protect both companies. And I think the people that we are dealing with are pretty mature about it. They understand our value in the past, and they’re giving us the business in this timeframe. But if the market is at a low level, who wants it? I don’t want it. No one wants it. But I have my own long-term contract as well. So that’s how it goes.

Vishal Shah – Barclays Capital

Okay. Very good. Thank you very much.

Ahmad Chatila

Thank you.

Tim Oliver

Thanks.

Operator

We have a question from the line of Mehdi Hosseini with FBR. Please go ahead.

Mehdi Hosseini – FBR Capital Markets

Yes. Thanks for taking my question. Two things. First, I missed the first part of your prepared remarks. Can you update me on the Q-Cells project that was supposed to be sold late last year? It seems to me that it didn't -- give us an idea of how should we think about that particular project. And then moving on to the solar, Ahmad, are you concerned or maybe your customers or customers' customers are billing inventory due to demand pull-in driven by Germany? And I was kind of intrigued by your characterization of down-cycle associated with solar because your customers are actually very upbeat. So where is the disconnect here?

Tim Oliver

Okay. So let me -- I'll take the Q-Cells project and I’ll let Ahmad take the solar stuff. You’re right. We did mention the Q-Cells project. And in fact, we did sell during the fourth quarter. So that project is complete and the cash flows from it are now certain. We’ve agreed on a pricing. And if you notice in the P&L, there is a $6 million detriment in the P&L. $3 million of that would be for one more quarter of deferred revenue -- deferred profit on the wafer revenue, and the other $3 million would be a mark on the asset value of the property back to the pricing negotiated with the ultimate -- with the buyer. Because there are still some contingencies, prior to close it need to be settled, we weren’t able to take the profit on the wafers’ deferred revenue back through the P&L in the same quarter that we took the $6 million this quarter. So there is a timing issue between Q1 and Q2, but it is done. We do have a price there and we do expect to get our cash in Q1. The IRR in a project in total is important. In totality, this project had an IRR north of 20%. So we are very pleased with the way the project closed out. And I’ll let Ahmad take the solar question.

Ahmad Chatila

So -- Mehdi, for sure, we have some concerns about how Germany is going to evolve. No question about it. But our reaction to that is we direct our business by having SunEdison BU as part of MEMC. They have action in Italy, Spain, in Canada, and in North America across the board. And we have a clear view of the end market. And we are careful about getting ahead of ourselves in building capacity and listening to every customer that wants a lot of our wafers. So we are careful, prudent, worried, but at the same time, we have good plans in terms of how to handle the situation.

Mehdi Hosseini – FBR Capital Markets

But are you concerned about inventory building up in the channel?

Ahmad Chatila

In commodity business, as you know, you are either light on inventory or heavy on inventory. And if I have to bet in Las Vegas right now, it is heavy on inventory potentially because people are trying to overbuild in Germany in the short-term. But you know what, I truly don’t care as much because I have diversified customer base on wafers and I have the SunEdison business and project deals that Ken is working on in his view [ph]. So my situation is a lot de-risked as compared to a pure wafer supplier that is just shipping wafers. All right?

Mehdi Hosseini – FBR Capital Markets

Got it. Got it. Thank you. (inaudible) tomorrow.

Ahmad Chatila

Yes.

Operator

The next question comes from the line of Satya Kumar with Credit Suisse. Please go ahead.

Satya Kumar – Credit Suisse

Yes. Hi, guys. In terms of the semi business, in Q1 you mentioned that you will be able to increase the pricing. Is that a done deal? What type of price increases are we thinking about?

Ahmad Chatila

It’s single-digit. It’s done deal. And because we are now like in February, so we made all these kind of negotiations in November and December.

Satya Kumar – Credit Suisse

Okay. You feel your competitors are also matching those price increases or is this some kind of (inaudible)?

Ahmad Chatila

I really don’t -- I really don’t know. I know there is a lot of noise in the industry about it. I hope they are, because if I look at the results of many of us, they are not good. It’s not sustainable. There is no reason why we should be at that low level at all. It doesn’t make sense. When someone has a minus 25% EBITDA margin or someone has a $4 billion debt with zero EBITDA, it just doesn’t make sense. So something has to change. We definitely are successful about it, but also it comes with improved service.

Satya Kumar – Credit Suisse

Okay. Do you have any plans of adding 300 millimeter wafering capacity this year?

Ahmad Chatila

Yes, yes. Actually we announced that we are expanding our wafer capacity in Korea. So we are adding -- we are converting our 200-millimeter or 300-millimeter in that country. But we are going to be very prudent. We are not going to expand it in a big way. There is no reason for us to do it unless we gain pricing for us. We are not going to do it just for the sake of growing volume. We want to ensure that we are paid correctly for it.

Satya Kumar – Credit Suisse

The semi cap equipment industry is coming off of a really short downturn. And there is a period that chip companies are spending a bit more technology versus capacity adds. What type of visibility do you get from your chip customers in terms of the amount of wafers that they require? And do you see any inflection point in the growth rate of raw wafers required from your customers if you look into the back half of the year?

Ahmad Chatila

I don’t know about the back half of the year. I worked in chip business for a long time. Right now I think it’s like a herd mentality. Everybody thinks the world is going to just become massive in wafer consumption and everybody is saying they are going to expand our capacity like tomorrow. And you know that is never going to -- that's why we have cycles. So we are going to be very prudent how to deal with this. We are going to have long-term deals with customers, cheap and well on service, have strong relationship with them, and diversify risk by having all of them as our customers. In the past, we used to have only five that we concentrated on. And now we have everyone that we deal with. So that’s my answer. I do not understand the cycle. I actually worry about these things. And everybody is running towards adding a lot of capacity and demanding more. It is the type to be very careful.

Satya Kumar – Credit Suisse

Got it. Then lastly on the solar wafer side, what are you thinking pricing will do in Q1 from Q4?

Tim Oliver

Q4 2009 -- I think pricing -- this is Tim. I think pricing stopped declining at a rapid rate we’ve had in the fourth quarter, declined at a rate that we could digest. And I think in Q1 we are hoping it would stay stable at that level.

Satya Kumar – Credit Suisse

Got it. Thank you.

Tim Oliver

But we are not full. We know that it will continue to decline. We just think it’s a pause.

Satya Kumar – Credit Suisse

Understood. Thanks.

Operator

We have a question from the line of John Hardy with Broadpoint. Please go ahead.

John Hardy – Broadpoint AmTech

Hi, thank you for taking my call. I was wondering if you could talk a little bit about what SunEdison saw in their backlog in the quarter. And also what the mix was between PPA business and direct sale business and whether that’s different from what they have been historically?

Tim Oliver

Yes. So their historic average has been -- about 15% of their business has been direct sale and the rest is they finance in the PPA. This year about 30% of their projects were direct sales. So they just went [ph] a little bit toward direct sale. I think we expect going forward that the more -- that the mix is more likely to sustain itself, particularly if you get more involved in Europe with direct sales a more important part of the mix. There was other half of your question that I forgot -- oh, backlog. The backlog continues to grow -- I don’t have the numbers here in front of me, but we’ll be happy to talk about backlog tomorrow. It is an important metric and one that not only that they make tremendous progress across the year in 2009, they nearly doubled their backlog. We suspect we’ll do that again in 2010. But we will give you specific numbers. Grab Carlos tomorrow, he will give you specific numbers.

John Hardy – Broadpoint AmTech

Great. Thanks.

Operator

We have a question from the line of Stuart Bush with RBC Capital Markets. Please go ahead.

Stuart Bush – RBC Capital Markets

Yes. Hi, good evening. Can you give us some update on the progress of the Pasadena plant? And have you guys successfully stress tested that at full yield?

Ahmad Chatila

I would say -- some feedback from somebody. Whoever asked the question, if you could mute your phone, I think we got some feedback there. We made tremendous progress at Pasadena. We’ll give you a little bit of data on how successful that progress was tomorrow. We’ve got some graphics to describe it. What I’d say is a lot of the progress thus far is through brute force. Good process implementation, but they are not institutionalized yet. And we need to make it part and parcel that -- part of the DNA of that facility. And I don’t think any of us sleep well at night thinking that that problem is completely behind us. But it has certainly improved dramatically and the work now is to make sure that we de-risk that plan and make that part of a DNA down there.

Stuart Bush – RBC Capital Markets

Okay, great. And my second question is, is it fair to look at the revenue in SunEdison in the fourth quarter as that 30% ratio on direct sales and the left from PPAs or is that too lumpy to extrapolate that to that particular quarter?

Tim Oliver

It is really tough to draw the conclusion, to draw any one 90-day period and try and get one thing closed. What I’d say is, as we go forward, we will give you an operational metric. We will talk about megawatts installed. And that will tell you operationally how well they are doing. And then we will tell you how we financed the projects in that quarter such that you can see the map. But in general, the total revenue that could be had if everything was sold direct would be about $4 a watt. If you take the 13 megawatts in the quarter just ended and multiply by $4 -- or somewhere between $4 and $5, (inaudible) -- okay. Yes, $4 and $5, and you’ll be there.

Stuart Bush – RBC Capital Markets

Okay. Thanks a lot.

Tim Oliver

Sure.

Operator

The next question comes from the line of Jesse Pichel with Piper Jaffray. Please go ahead.

Jesse Pichel – Piper Jaffray

Hi, good afternoon. What was the kilowatt hours sold in 2009 under the PPAs? You gave us the megawatts, but I'm curious to know what the yield is on those megawatts. And secondly, while the SunEdison business diversifies your solar business outside of Germany, how do you think your largest solar wafer customers that really are not allowed to vertically integrate by nature of the contract with you, how will these customers cope with a 15% lower fit?

Ahmad Chatila

Let me try to answer your question a little bit. First of all, I don’t know the number. I think we contracted around three -- I really don’t know the number actually. So sorry, tomorrow we will answer it. I’ll grab Carlos and I’ll ensure that he will mention it.

Jesse Pichel – Piper Jaffray

Maybe you can give us -- instead of that, maybe you can give us the average kilowatt price and whether or not you have annual escalators.

Ahmad Chatila

Well, let me tell you. Maybe I cut to the chase. If we have good IRRs and gross margins on the business, if you just want to get to that, it’s very healthy and tomorrow you’ll get the exact numbers.

Jesse Pichel – Piper Jaffray

Okay.

Ahmad Chatila

I would tell you also that -- I don’t understand your comment about our customers do not vertically integrate. So can you repeat -- can you tell me really what you are trying to drive to?

Jesse Pichel – Piper Jaffray

Well, in the past, it was publicly disclosed that in your contract with some of your wafer customers like Suntech that Suntech was not allowed to be in the wafering business itself and vertically integrate. And I'm just curious to know how Suntech can continue to make money buying wafers from you with a 15% lower fit?

Ahmad Chatila

Got it. Well, I don’t know Suntech’s overall plan, frankly speaking about their own business. But I’d tell you one thing. It’s a leading company. It’s a great company. The vertical integration discussion is about we do not do cells and modules, and they do not do wafers and polysilicon. It’s very simple. And for us to be two leading companies and not trip over each other, we try to say this is what we do, this is what you do. But from a downstream business, last time I checked, they have operation and they have a lot of activities. And they are a great company. So I’m not aligned with you on your comment.

Jesse Pichel – Piper Jaffray

You said they have operations in wafers?

Ahmad Chatila

No, I didn’t say that. I said that from a downstream perspective, they do. And I do not know how successful they are. I don’t understand it very well. So -- I don’t understand really the logic of your question. Forgive me.

Jesse Pichel – Piper Jaffray

Well, I just think the companies have to adjust to a much lower ASP in Germany. And to do so, to vertically integrated ones should have no problem, but the horizontal ones will have to really take a margin hit. And some of the companies that have decided to integrate downstream like Suntech have very high OpEx.

Ahmad Chatila

Oh, got it.

Jesse Pichel – Piper Jaffray

So I just don't know how you’re going to work with these non-vertically integrated customers that seem to be disadvantaged here in the market relative to the vertically integrated ones like Gingly [ph] and Trina [ph], for instance.

Ahmad Chatila

Well, you need to ask that question to the Suntech folks. I really don’t know how to answer some other company’s question. From our perspective, Jesse, we figured out that this is an energy business. For us to de-risk our involvement, we have to have a good view across the value chain. And part of the de-risking as well is to be in places where it has many [ph] countries, like Italy, Spain, the United States. And this is how we are conducting it. And I do not know the overall strategy of other corporations, but just as I tell you, it’s a big deal for us. And the prices continue to decline. And if we have to compete with other sources of renewal energy and coal and others, we cannot wait for the government to give us handout. We have to have a long range roadmap to get to the bottom of this issue and compete and win without those subsidies. We recognize that and we want to be an active guy in it. We want to control our destiny. We are not going to wait for some other company to give us the business. We’re just going to go grab it ourselves.

Jesse Pichel – Piper Jaffray

Would you be willing to let that customer vertically integrate? And do you have demand to move that volume around should you wish to direct more business to your downstream operations?

Ahmad Chatila

We don’t talk about exactly our own discussions with customers or situations. So I’m sorry, I can’t answer that.

Jesse Pichel – Piper Jaffray

Understood. Thanks very much. (inaudible)

Ahmad Chatila

Thank you, Jesse. Thanks, Jesse.

Operator

The next question comes from the line of Timothy Arcuri with Citigroup. Please go ahead.

Timothy Arcuri – Citigroup

Hi, a couple things. You guys talked about in June that the revenue is basically split 50/50 between semi and solar. I'm sort of wondering whether you can give us a breakout in Q4?

Ahmad Chatila

It’s trending towards 60/40 in Q4.

Timothy Arcuri – Citigroup

60/40 semi-solar.

Ahmad Chatila

Correct.

Timothy Arcuri – Citigroup

Okay. Okay. Second question, you also have previously talked about your poly plants for 2010 being at about 12.5K tons, and yet also you said that you're not going to be selling poly on spot anymore and that you're going to consume it all. So I'm wondering whether that's still your plan, 12,500 tons.

Ahmad Chatila

It’s currently our plan. It’s 12,500 tons by the end of this year. And as you remember, we are expanding our semiconductor business. So we are going to absorb a lot of that poly -- not a lot of it, but a big portion of it to that business. So we are growing from 10,000 to 12,500. So it’s going to be consumed by semi and the rest by solar.

Timothy Arcuri – Citigroup

Okay. And then just last thing for me. Are you selling xylene on the spot market now?

Ahmad Chatila

We are looking at it. A lot of people are approaching us across the board. We are the second largest xylene manufacturer in the world. We have not actively sold it in the past. So we are assessing it and negotiating with people to see if that’s interesting. But we have not made any formal announcement on it.

Timothy Arcuri – Citigroup

Okay. And if you were to do that though, wouldn't that impact your ability to produce poly and therefore consume it internally or you have to up your 12,500 tons?

Ahmad Chatila

You know, it might have to up our capacity, but I’d tell you, it's a great problem to have. It’s almost like I have all these ideas to de-risk the company from a price and customer perspective.

Timothy Arcuri – Citigroup

Okay. Thanks.

Ahmad Chatila

Yes.

Operator

The next question comes from the line of Chris Blansett with JP Morgan. Please go ahead.

Chris Blansett – JP Morgan

Thanks, guys, for taking my call. Ahmad, I had a question, you've indicated that you've gained significant share in the semi side. I wasn't sure what your thoughts were about the overall utilization rate of 300-millimeter wafer making capacity. And as we see the semi industry recover, what are your expectations of when that capacity overall would be running at full utilization rates for the industry?

Ahmad Chatila

I don’t have a full view of the industry. I’d tell you, for us, it’s very high utilization rate and the demand is extremely high, and I expect it to continue to go up in the foreseeable future. I don’t understand the other competitors. I think some of them maybe have some capacity. So you need to look at the broader view of the industry. I don’t have their numbers. And some of them, while they have it, they don’t have the labor, and it’s hard for them to hire people back. And they are not going to do it unless people give them the right price. So it’s a chicken-and-egg situation with the customers. So that’s why I’m optimistic about price increases.

Chris Blansett – JP Morgan

And the second question I had was related to -- you've gained share and one would have to believe that your semi customers want to maintain good competition among the suppliers. So I guess to say you haven't seen a competitive response from some of your comps yet, or what are your thoughts on that? And then secondly, even within a semi device maker, depending on which technology node you sell to, you sell a different quality wafer. So, has some of your gain been more at the leading edge versus trailing edge, or how do you look at that type of quality mix within the semi customer base?

Ahmad Chatila

On the semi customer base, the market share momentum has been broad, all technologies, all customers, all end markets, all continents. And response from -- we are not shaking up the world. I mean, we are like a small guy at the end, frankly speaking. We are a single-digit guy. We are going to be a double-digit guy. And that’s about it. And when you look at the corporations with 30% or 33% market share and they lose couple of points is not a big deal. And let me tell you, I actually try to avoid the market share discussion, I have to tell you, because you’re going to see our numbers accelerating. But I don’t like to talk about it and I don’t want to create a price war with anybody. I see to destroy no one. I don’t want anybody to destroy me. I just want to get a fair return on our business. And I want to get back to the historical run rate of the corporation. That’s it. No more, no less. I’m not trying to be number one, attack them, displace them. This is not in my gut right now. I just want us to make a lot of profit. That’s it.

Chris Blansett – JP Morgan

I guess I had follow-on on that. And I know previously you had indicated you felt the semi wafer business to get back to more historical 30% gross margin type levels. Do you still think that’s true going forward?

Tim Oliver

Yes. This is Tim. Absolutely.

Chris Blansett – JP Morgan

All right. Thanks, guys. Appreciate it.

Tim Oliver

Sure.

Operator

The next question comes from the line of Paul Leming with Soleil Securities. Please go ahead.

Paul Leming – Soleil Securities

Good evening. Just had some questions on the overall semiconductor market and wonder if you could give us some flavor whether it’s from an industry standpoint or MEMC specifically. You've talked about how you're -- the improvement that MEMC has seen is broad based, all geographies, all nodes, all segments, but as you look within the industry today, is a lot of the strength in the overall wafer business really attributable to strong growth out of memory? How long, how much visibility is there in memory continuing to grow units at twice the rate of the rest of the industry? Could you just talk about the dynamics of the memory segment a little? Has that gotten to where it's half of the business? Does it pose any risks, if you will, that memory is in -- I hate to use the word bubble, but it's the question that goes through my mind.

Ahmad Chatila

Very good question. Don’t have a good answer for you, but let me tell you what, that’s why we are very careful. Like people say that DRAM, from a wafer perspective, is not going to expand as much. A lot of it is going to be bits, cost reduction, or bit count increase per wafer. But NAND is going to go up pretty hard. But for us, part of de-risking the company is trying to service many, many accounts. In the past, we lost share. Part of it is we focused too much on few transactional high-volume customers that hurt us. And now we sell wafers to everybody. So six-inch, eight-inch, 300-millimeter, all guys. So I actually worry about bubbles. And I worry about when people start telling they won double, triple, whatever the number is, because just after that it’s going to decline and it’s going to decline hard. So for me, I’m just trying to diversity the business. Don’t understand the dynamic anymore, I just work in memory, don’t working it anymore. Don’t understand it and we don’t have to, frankly speaking. I just want to de-risk the company by selling to everybody.

Paul Leming – Soleil Securities

I wonder if you got a seal that you could share with us as to what percentage of total industry shipments these days is being consumed by memory across the industry.

Ahmad Chatila

Don’t know.

Paul Leming – Soleil Securities

Thanks very much.

Ahmad Chatila

Thank you.

Operator

The next question comes from the line of Hendi Susanto with Gabelli & Company.

Hendi Susanto – Gabelli & Company

Hi, thank you for taking my questions. First, of all of the increases in accounts payable, account receivables, and inventories, how much of those are attributed to SunEdison? And second, how should we think of impact of SunEdison on your working capital, especially on its views of cash to finance projects?

Tim Oliver

Yes. The increases in working capital this quarter had more to do with timing at the legacy businesses and less to do with SunEdison. So it had some impact, but it was in line with the size of their revenue base. It wasn’t a step function change. As far as the financing of projects go, we are going to break out in separate line items. Those dollars used to finance projects. And they are going to either be -- if it’s an outright direct sale, it’s up above in our traditional sense in our free cash flow model or we are going to give you new line items in our balance sheet to make sure you can understand the financing, because you have to get the number, you’ve got to get the net difference between inflows and outflows associated with these projects. So we will break that out as time goes on. But as I said, in this quarter it was actually a net positive. It was a net pickup for the company because it actually financed more projects than we built.

Hendi Susanto – Gabelli & Company

Okay. And then on the semi side, what kind of semi factory utilization rate should we expect for the first quarter 2010? And when you mentioned price increase in the first quarter of 2010, does it cover all wafers or only certain size of wafers?

Ahmad Chatila

Because we expect volumes to be up, utilization will be up slightly in the first quarter. And on the mix of wafers, I’m not certain -- do you have any -- do you have a mix in the first quarter?

Tim Oliver

No, I don’t.

Hendi Susanto – Gabelli & Company

When you mentioned price increase, does that price increase covers like all wafers or only, let's say, like large wafers, 300-millimeter wafers?

Ahmad Chatila

All wafers. To a large extent, all wafers we have price increases.

Hendi Susanto – Gabelli & Company

Okay. Thank you.

Ahmad Chatila

Sure, thanks.

Operator

The next question comes from the line of Atif Malik with Morgan Stanley. Please go ahead.

Atif Malik – Morgan Stanley

Hi, thanks for taking my questions. Your comment on solar wafer pricing could stabilize or pause for near-term, I'm just trying to understand what's driving that pause. We are hearing supply chain shortages of wafer SOD [ph]. How much of that pause is being driven by increased demand and offset by supply coming on and how much is driven by the fact that the solar wafer makers cannot produce enough wafers because of shortage of SOD or other components in the food chain?

Tim Oliver

Our expectation is that it’s demand. Our perception is that it’s demand. We think that while it may not hold true for all year long, right now it is true that demand is holding prices firm.

Atif Malik – Morgan Stanley

Okay. And have you talked about the gross margins for 1Q in your commentary the pricing will go up for semi wafers and flat for solar wafers? What's your expectations for the margin for Q1?

Tim Oliver

Remember, in the past, we only had one reported segment in our materials business. So when I talk about 2009, I really only have the gross margin rate for the total company, which you saw in the quarter expanded nicely. And we do expect our gross margin rate in all three of our businesses next year -- all of three of our segments next year to expand throughout the year.

Atif Malik – Morgan Stanley

Great. And one last one. A couple of your peers in Asia have made commentary that they have closed the gap with Tier 1 wafer makers on cost per wafer or maybe cost per KV of polysilicon. And I'm just trying to understand what you guys have to maintain your cost advantage or the peers in China or Asia?

Ahmad Chatila

I’ll try to answer that one. First of all, there are few companies that are really successful. We recognize them. And demand -- worldwide demand can absorb them, frankly speaking. Most of the others don’t have the cost -- don’t have the quality or the cost, but some of them do. And from our own performance, tomorrow hopefully Ken will show you some of our cost reduction activities and impact of that. So I’ll let you wait for that for tomorrow. So we have a lot of stuff we can do, procurement, productivity of our plants. So tomorrow you will see more. Okay?

Atif Malik – Morgan Stanley

Okay.

Operator

The next question comes from the line of Conor Irvine with Needham & Company. Please go ahead.

Conor Irvine – Needham & Company

Hi there. Couple of quick questions for you guys. First is sort of back to mix. I was wondering what sort of percentage of sales were from the non-wafer business. And my second question, I was also a little curious about sort of the pricing trend you're seeing in poly quarter-to-date. Thanks.

Tim Oliver

When you say non-wafer business, I expect you talking about poly and the spot market.

Conor Irvine – Needham & Company

Yes, correct. Sorry.

Tim Oliver

So a year ago, that mattered a great deal. And we were -- about 30% of revenue in 2008 was poly and spot market. It will be less than 5% this year. So it was -- and it was even less than that in the quarter, I believe. So it is not an important part of our revenue stream any longer, which means we also have very little good information on poly pricing in the spot market.

Ahmad Chatila

And most of it, if not all, actually is not even spot. It’s for strategic customers who in various industries, not only in solar and other industries. So we don’t sell on the spot. We don’t have a good view on it.

Conor Irvine – Needham & Company

Okay. Thanks so much.

Ahmad Chatila

Thanks.

Operator

One moment for the next question please. It comes from the line of Jeff Osborne with Thomas Weisel Partners.

Jeff Osborne – Thomas Weisel Partners

Okay, thank you. Just a quick one. Could you update us on the capacity expansion that you have going on in Italy? Is it going to be more back-end loaded? And then as you expand, are you doing a retrofit of the existing capacity or capacity would have to come off line for each reactor, or are you going to -- is it incremental in terms of a new site?

Ahmad Chatila

It’s second half loaded more. And we have not decided if want to retrofit the older capacity yet. But that’s a good question. Next one, operator?

Operator

The next one comes from the line of Gordon Johnson with Hapoalim Securities. Please go ahead.

Gordon Johnson – Hapoalim Securities

Thanks for taking my question. In the second and third quarter, I noticed that you guys recognize all of the revenues and gross margins on the sale of your wafers into the JV you have with Q-Cells. And it sounds like you guys have -- you've almost crossed all of the T’s and dotted all the I’s, but you haven't sold that fully yet, that 50-megawatt facility. And you guys eliminated 50% of the profit below the operating income line with respect to those revenues and gross margins, all those revenues and gross margins you recognized. So I just wanted to get some clarity on that, and also kind of understand why do the wafers sold to that JV appear to carry significantly higher gross margins in the rest of the business. And then I have a follow-up.

Tim Oliver

Okay. I don't want to comment on the margin within transaction, but you can imagine that the -- when we are a major investor in a project like that, you are going to make sure that when you -- before you invest that the wafer pricing is such that you make a fair margin. I think we walked you [ph] twice thus far, but the -- you are correct. The project is now complete. It’s interconnected, and we have a price finality [ph] in a contract. So while from a GAAP perspective, we weren’t able to call it a sale this quarter because there is a minor contingency outstanding, the profit that we have deferred to date, which would be about $9 million, will flow through in Q1. The $6 million detriment you saw in this quarter was $3 million more that we deferred, that point that you made, and a $3 million adjustment on the value of the plant to the agreed-upon price with the buyer.

Gordon Johnson – Hapoalim Securities

But, I guess the question really was, why are you guys deferring revenue -- I'm sorry, profit below the operating income line but recognizing all the revenue and gross margin on the sale when by GAAP standards you haven't officially sold the facility?

Tim Oliver

If we are a 50/50 JV partner, we can recognize -- the GAAP accounting rules allow us to recognize the revenue, but the profit on the sales of the wafers have to be deferred until the project is sold.

Gordon Johnson – Hapoalim Securities

Okay. And then, when I'm looking at your customer contracts and potential renegotiations, specifically with Suntech, which is among your largest contracted customers, when I look at their long-term supply agreement liabilities of $3.2 billion and $2.7 billion in 2010 and ‘11, and I look at Street revenue estimates of $1.5 billion and $1.8 billion over those same periods, it looks like their long-term agreement liabilities are much higher than their expected revenues. So have you guys looked at this, not just for Suntech but your other customers in any potential additional incremental contract renegotiations that are going to impact you guys? And have you taken this into account when considering your forward guidance, which I guess we’re going to get tomorrow?

Tim Oliver

Yes, yes to all of those. We are in very active communication with all those folks. We consider them all partners. We are actively selling all four of the folks that we have agreements with, and we are pleased with where we sit with all of them.

Ahmad Chatila

And it is -- it will be part of our guidance. We clearly understand the future to a large extent, not 100%, but we have a feel for it.

Gordon Johnson – Hapoalim Securities

So, there is some risk in variability around incremental contract renegotiations.

Ahmad Chatila

Sure, sure.

Tim Oliver

We would -- in giving prudent guidance, we would consider that, but yes.

Gordon Johnson – Hapoalim Securities

Okay. And then lastly, did you guys -- I noticed these refundable security deposits that you guys applied against your receivable balances of $44.1 million in Q2 and Q3, that was in the Q's. Did you guys apply additional refundable security deposits against your receivable balances in Q4 as well?

Tim Oliver

I don’t believe so.

Ahmad Chatila

No, we didn’t.

Tim Oliver

No.

Gordon Johnson – Hapoalim Securities

Okay. And have you collected the receivable -- I'm sorry, the security deposits you applied against your receivables in Q2 and Q3?

Tim Oliver

No, those were part -- maybe would be the answer, they were part of the renegotiation of the contract. So --

Gordon Johnson – Hapoalim Securities

I’m sorry. You said maybe?

Tim Oliver

Well, in some instances we did. We collected some of them. They were part and parcel to a renegotiation of the contracts that extended those payments.

Ahmad Chatila

We actually had the cash. We just applied it against the receivable balance.

Tim Oliver

Depended on the customer and how we renegotiated that contract.

Gordon Johnson – Hapoalim Securities

Okay, thank you.

Operator

And the final question comes from the line of Satya Kumar with Credit Suisse. Please go ahead.

Satya Kumar – Credit Suisse

Yes, thanks. Looking forward to tomorrow, but just so I can sleep better tonight, just a quick question on the semi business again. What is pricing actually down from peak to trough in the semi business?

Tim Oliver

Peak to trough.

Satya Kumar – Credit Suisse

Some sort of middle or early part of 2008 to Q4 ’09.

Tim Oliver

Got it. Well, it’s a lot. And I would -- 2008 was --

Satya Kumar – Credit Suisse

Just a ballpark --?

Tim Oliver

Yes. Tomorrow you will see -- I don’t have the chart in front of me, but I remember it. 2008 was not actually a peak. 2007 was the peak. 2008 was down most of the year. 2009 was down beginning of the year until end of Q2.

Satya Kumar – Credit Suisse

Okay. And the ballpark of 50%, is that roughly --?

Tim Oliver

Yes, but -- I don’t know. It’s double-digit and it’s not a double-digit. It’s high-double digit, but it’s not 50%. Don’t think that it’s that high.

Satya Kumar – Credit Suisse

All right. Thanks a lot.

Tim Oliver

I think that concludes our call. Thanks very much for everybody tuning in and we will see most of you tomorrow; we hope.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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Source: MEMC Electronic Materials, Inc. Q4 2009 Earnings Call Transcript
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