The sequential decrease in sales was mainly the result of lower wafer volumes for both semiconductor and solar applications and lower prices associated with semiconductor and solar products.
Gross profit in the quarter was $19.7 million, or 9.2% of net sales, compared with $193.0 million, or 45.3% of net sales, in the 2008 fourth quarter and $259.3 million, or 51.7% of net sales, in the 2008 first quarter. The sequential decline in gross profit was mainly the result of lower product volumes, major underutilization charges associated with abnormally low factory utilization rates and lower pricing for semiconductor and solar products.
The company reported an operating loss during first quarter of 2009 of $26.4 million, compared with operating income of $164.8 million in the 2008 fourth quarter and $218.4 million in the 2008 first quarter. First quarter 2009 operating expenses, which include charges of $6.7 million relating to the previously announced layoffs in three of the company’s manufacturing facilities, were $46.1 million, or 21.5% of sales, compared to $28.2 million, or 6.6% of sales, in the 2008 fourth quarter, and $40.9 million, or 8.2% of sales, in the 2008 first quarter. Fourth quarter 2008 operating expenses included a benefit of $15.5 million relating to the forfeiture of stock options previously disclosed.
Net income for first quarter of 2009, including a tax benefit of $18.9 million, was $2.0 million, or $0.01 per share, and includes a $0.1 million charge relating to the decrease in the value of the Suntech warrants.
During the first quarter 2009, the company consumed operating cash of $14.6 million, compared to operating cash flow generated of $123.0 million in the 2008 fourth quarter. Capital expenditures for the first quarter 2009 totaled $53.2 million, or 24.9% of sales. Free cash (operating cash flow minus capital expenditures) consumed was $67.8 million. MEMC ended the first quarter with cash and investments of $1.3 billion, and does not maintain any significant debt.
Our first quarter results reflect a continuation of what has been an unprecedented reduction in demand in the semiconductor and solar industries, said Ahmad Chatila, MEMC’s president and chief executive officer. The weak end demand for semiconductor and electronic products, as well as continued inventory reduction efforts by our customers, resulted in our semiconductor wafer factories running at abnormally low levels in the first quarter, creating a significant drag on our financial results.
Since my appointment as CEO on March 2, I have been assessing the company’s global operations and meeting personally with many current and prospective customers and suppliers as well as hundreds of MEMC employees around the world. Feedback from many of our customers regarding our products and capabilities has been very positive. MEMC has some of the best R&D capabilities and product and patent portfolios in the business.
While MEMC has been very efficient and profitable for a number of years, there continue to be a great deal of cost savings opportunities available to the company. In the near-term, we have taken the unfortunate but necessary step of reducing staffing levels to better align with anticipated steady-state levels of demand in the semiconductor industry. Once completed, this will provide annualized cost savings to the company of about $30 million, beginning in the third quarter. During the first quarter we also began to introduce our customers to our new facility in Ipoh, Malaysia. This facility will provide our customers with some of the industry’s most advanced production capabilities while also allowing MEMC to reduce costs over the intermediate and longer-term.
MEMC’s strong financial position with $1.3 billion in cash and investments and essentially no debt enables us to provide our team with the technology, resources, and support needed to strengthen our competitive position for the long term. As I continue to assess our strengths and weaknesses from a fresh perspective, I will focus on additional opportunities to improve our cost structure, enhance our product portfolio and drive innovation and entrepreneurial thinking throughout the company, concluded Chatila.
