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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 

Date of Report (Date of earliest event reported): November 16, 2005

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                        MEMC Electronic Materials, Inc.                        

(Exact Name of Registrant as Specified in its Charter)

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        Delaware                    1-13828                   56-1505767       
     (State or other        (Commission File Number)       (I.R.S. Employer    
      jurisdiction                                                             
                                                        Identification Number) 
    of Incorporation)                                                          

  501 Pearl Drive (City of O Fallon)                      63376                

         St. Peters, Missouri                                                  
   (Address of principal executive                     (Zip Code)              
               offices)                                                        

(636) 474-5000 

(Registrant s telephone number, including area code) 

                                Not Applicable                                 

(Former name or former address, if changed since last report) 

------------- 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision (see General Instruction A.2 below): 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 

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Item 2.02. Results of Operations and Financial Condition. 

On November 16, 2005, MEMC Electronic Materials, Inc. (the  Company ) issued a press release reporting additional and revised preliminary results of operations for the quarter ended September 30, 2005. The Company also announced preliminary restatement information for each of the first and second quarters of 2005. A copy of the press release is furnished with this Form 8-K as Exhibit 99.1. 

As reported in its press release of October 26, 2005 and in a Form 8-K furnished on the same date, the Company is restating its quarterly reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005 to reinstate a reserve for the deductibility of a redemption interest payment made in 2004. On November 10, 2005, the Company filed a Form 12b-25 disclosing that the Company s quarterly report on Form 10-Q for the period ended September 30, 2005 could not be filed by the prescribed due date and the amendments to the Form 10-Qs for the first and second quarters of 2005 could not yet be filed. As disclosed in the Form 12b-25, the Audit Committee and management are reviewing revenue recognition related to the Company s polysilicon sales. At the same time, management is completing its review and working on these reports with respect to revenue recognition, tax and other miscellaneous adjustments. The Company has made substantial progress in completing its consolidated financial statements for these periods and the contemplated adjustments, however, and is therefore furnishing with this Form 8-K the Company s preliminary consolidated financial statements, footnotes and related management s discussion and analysis of financial condition and results of operations for each of the first three quarters of 2005. These preliminary consolidated financial statements, footnotes and related MD&A have not been reviewed by the Company s independent registered public accountants or the Company s Audit Committee. Accordingly, the information furnished with this Form 8-K is subject to change. As described in Item 4.02(a) of the Company s Form 8-K dated October 26, 2005, until such time as the Company is able to file its Form 10-Qs for these periods with the Securities and Exchange Commission, neither the existing consolidated financial statements in the Company s quarterly reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005 nor the preliminary information set forth in the attached exhibits should be relied upon. 

Attached as Exhibit 99.2 are the preliminary consolidated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended September 30, 2005. 

Attached as Exhibit 99.3 are the preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended June 30, 2005. 

Attached as Exhibit 99.4 are the preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended March 31, 2005. 

	<original-page -2- >

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Item 9.01. Exhibits. 

(d) 

Exhibit     Item No.        --- ------- 99.1        Press release dated November 16, 2005 furnished with this report. 
 99.2        Preliminary consolidated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended September 30, 2005 furnished with this report. 
 99.3        Preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended June 30, 2005 furnished with this report. 
 99.4        Preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended March 31, 2005 furnished with this report. 

	<original-page -3- >

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                                  SIGNATURES                                   

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

                                     MEMC ELECTRONIC MATERIALS, INC.            
Date: November 16, 2005              By:      /s/    Thomas E. Linnen           
                                              ----------------------------------
                                     Name:    Thomas E. Linnen                  
                                     Title:   Senior Vice President and Chief   
                                              Financial Officer                 

	<original-page -4- >

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                                 EXHIBIT INDEX                                 

Exhibit     Description No.        -------- ------- 99.1        Press Release dated November 16, 2005. 
 99.2        Preliminary consolidated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended September 30, 2005 furnished with this report. 
 99.3        Preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended June 30, 2005 furnished with this report. 
 99.4        Preliminary consolidated restated financial statements, footnotes to financial statements and management s discussion and analysis of financial condition and results of operations for the period ended March 31, 2005 furnished with this report. 

                                                                   Exhibit 99.1

MEMC Electronic           LOGO                                                 

Materials, Inc.                                                                

501 Pearl Drive           For Immediate Release 
 (City of O Fallon) 

Post Office Box 8 

St. Peters,                                                                    
Missouri                                                                       

63376 USA                                                                      

Phone:                                    MEMC FILES FORM 8-K, 
 636-474-5000 PROVIDES PRELIMINARY FINANCIAL RESULTS, Fax: 636-474-5158 
  UPDATES GUIDANCE www.memc.com 
  St. Peters, MO, November 16, 2005   MEMC Electronic Materials, Inc. (NYSE: WFR) today is filing a Form 8-K with the SEC to furnish preliminary financial results for the first three quarters of 2005. The financial information provided on the Form 8-K has not yet been reviewed by the Company s independent registered public accountants and is subject to that review before filing on Form 10-Q. 

This information is being furnished because the company is experiencing a delay in filing its quarterly report on Form 10-Q for the third quarter of 2005, as announced on November 10, 2005, and the restated Form 10-Qs for the first two quarters of 2005. 

The furnished preliminary financial information for the first three quarters of 2005 reflects the company s most current understanding of the financial results for the respective periods based on the changes in revenue recognition related to polysilicon sales, tax adjustments, and other miscellaneous adjustments that need to be made as part of the restatement process. This information is subject to change. 

As reflected and explained in the Form 8-K, the company will be deferring more revenue, and associated profits, into the fourth quarter of 2005 than previously disclosed. The deferred revenue balance at the end of the third quarter is $13.3 million compared to the $7.3 million stated in the earnings press release dated October 26, 2005. Almost all of the deferred revenue, and associated profit, is expected to be recognized in Q4 2005, which will increase the revenue and profits for that period by an equal amount. 

As a result, the company now expects net sales in the 2005 fourth quarter to be between $317-$320 million, with gross margin of approximately 40%, in the same favorable pricing environment referred to in the earnings release from October 26. This revised guidance includes the favorable impact of the deferred revenue and profits discussed above. Including the additional expenses for the activities the company now expects in connection with the delayed filing of the Form 10-Q, operating expenses are now anticipated to be closer to $30 million. 

Due to the additional net favorable tax adjustments of approximately $7.3 million made in the first three quarters of 2005 as reflected in the Form 8-K, the company now expects its tax rate to be approximately 18% for the fourth quarter of 2005. On a non-GAAP basis, our cash tax rate is anticipated to be in the mid-teens as a percentage of sales for the foreseeable future. 

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                             About MEMC                                        

MEMC is the world s largest public company solely devoted to the supply of wafers to semiconductor device manufacturers. MEMC has been a pioneer in the design and development of wafer technologies over the past four decades. With R&D and manufacturing facilities in the U.S., Europe and Asia, MEMC enables the next generation of high performance semiconductor devices. CONTACT:             Bill Michalek 

                                                              Director,        
                             Investor Relations                                

                                                              MEMC Electronic  
                             Materials, Inc.                                   

636-474-5443 Certain matters discussed in this news release are forward-looking statements, including our expectation that the deferred revenue balance at the end of the third quarter will be $13.3 million; that almost all of the deferred revenue (and associated profit) is expected to be recognized in Q4 2005 which will increase the revenue and profits for that period by an equal amount; that net sales in the 2005 fourth quarter will be between $317-$320 million with gross margin of approximately 40% in a healthier pricing environment; that operating expenses are anticipated to be closer to $30 million; that due to net favorable tax adjustments of approximately $7.3 million in the first three quarters of 2005, the company now expects its tax rate to be approximately 18% for Q4 2005; and that on a non-GAAP basis, our cash tax rate is anticipated to be in the mid-teens as a percentage of sales for the foreseeable future. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include market demand for wafers and semiconductors as well as polysilicon; customer acceptance of our new products; utilization of manufacturing capacity; our ability to reduce manufacturing and operating costs; inventory levels of our customers; changes in the pricing environment; assumptions underlying management s financial estimates; general economic conditions; actions by competitors, customers and suppliers; the impact of competitive products and technologies; changes in currency exchange rates and other risks described in the Company s filings with the Securities and Exchange Commission, including the Company s 2004 Form 10-K. These forward-looking statements represent the Company s judgment as of the date of this release. The Company disclaims, however, any intent or obligation to update these forward-looking statements. 

                                                   # # #                       

                                                                   Exhibit 99.2

                        PART I - FINANCIAL INFORMATION                         

Item 1. Financial Statements. 

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                     CONSOLIDATED STATEMENTS OF OPERATIONS                     

(Unaudited; Dollars in thousands, except share data) 

                         Three Months Ended                   Nine Months Ended         
                            September 30,                       September 30,           
                   -------------------------------     -------------------------------  
                       2005              2004              2005              2004       
                   -------------     -------------     -------------     -------------  
Net sales          $     280,788     $     275,283     $     807,394     $     759,582  

Cost of goods            187,126           164,537           526,039           488,334  
sold                                                                                    
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Gross margin              93,662           110,746           281,355           271,248  

Operating                                                                               
expenses:                                                                               
Marketing and             18,199            17,768            54,308            52,798  
administration                                                                          
Research and              12,689             9,413            37,606            27,594  
development                                                                             
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Operating income          62,774            83,565           189,441           190,856  

Nonoperating (income) expense: Interest expense           1,703             3,408             5,551            10,284 

Interest income             (882 )            (975 )          (2,584 )          (3,988 )

Currency (gains)          (1,083 )             441               483             1,547  
losses                                                                                  
Other, net                 1,793            (2,474 )             861            (4,861 )

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Total                      1,531               400             4,311             2,982  
nonoperating                                                                            
expense                                                                                 
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Income before             61,243            83,165           185,130           187,874 income taxes, equity in loss of joint venture and minority interests Income tax               (29,973 )          20,791           (23,511 )          21,644 provision 
 (benefit) - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Income before             91,216            62,374           208,641           166,230 equity in loss of joint venture and minority interests Equity in loss               -                 -                 -              (1,717 ) of joint venture Minority                  (1,452 )          (2,654 )          (5,235 )          (8,286 ) interests 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Net income         $      89,764     $      59,720     $     203,406     $     156,227  

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Basic income per   $        0.42     $        0.29     $        0.96     $        0.75  
share                                                                                   
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Diluted income     $        0.40     $        0.27     $        0.90     $        0.71  
per share                                                                               
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Weighted average     214,706,291       207,829,540       210,934,542       207,584,240 shares used in computing basic income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Weighted average     227,148,309       220,369,530       225,538,733       220,678,058 shares used in computing diluted income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

See accompanying notes to consolidated financial statements. 

                                    Page 1                                     

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                          CONSOLIDATED BALANCE SHEETS                          

(Dollars in thousands, except share data) 

                                                   September        December    
                                                       30,             31,      
                                                      2005            2004      
                                                   -----------     -----------  
                                                   (Unaudited)                  
ASSETS                                                                          
Current assets:                                                                 
Cash and cash equivalents                          $   143,247     $    92,314  
Accounts receivable, less allowance for                123,984         140,728  
doubtful accounts of $1,479 and $1,633 in 2005                                  
and 2004, respectively                                                          
Inventories                                            132,220         127,564  
Prepaid and other current assets                        35,337          29,724  
                                                   - --------- -   - --------- -
Total current assets                                   434,788         390,330  
Property, plant and equipment, net of                  510,463         444,670  
accumulated depreciation of $225,259 and                                        
$198,595 in 2005 and 2004, respectively                                         
Deferred tax assets, net                               176,303         119,835  
Other assets                                            51,553          55,107  
                                                   - --------- -   - --------- -
Total assets                                       $ 1,173,107     $ 1,009,942  
                                                   - --------- -   - --------- -
LIABILITIES AND STOCKHOLDERS  EQUITY                                            
Current liabilities:                                                            
Short-term borrowings and current portion of       $    15,444     $    24,399  
long-term debt                                                                  
Accounts payable                                       103,933         124,083  
Accrued liabilities                                     15,409          37,743  
Deferred revenue                                        13,261             -    
Accrued wages and salaries                              28,011          19,117  
Income taxes payable                                     4,995          10,282  
                                                   - --------- -   - --------- -
Total current liabilities                              181,053         215,624  
Long-term debt, less current portion                   106,706         116,082  
Pension and similar liabilities                        107,231         116,427  
Other liabilities                                       81,396          72,432  
                                                   - --------- -   - --------- -
Total liabilities                                      476,386         520,565  
                                                   - --------- -   - --------- -
Minority interests                                      51,714          46,479  
Commitments and contingencies                                                   
Stockholders  equity:                                                           
Preferred stock, $.01 par value, 50,000,000                -               -    
shares authorized, none issued and outstanding                                  
at 2005 and 2004                                                                
Common stock, $.01 par value, 300,000,000                2,216           2,091  
shares authorized, 220,927,718 and 209,108,105                                  
issued at 2005 and 2004, respectively                                           
Additional paid-in capital                             178,432         154,736  
Retained earnings                                      502,211         308,351  
Accumulated other comprehensive loss                   (33,905 )       (17,389 )
Deferred compensation                                     (319 )        (1,263 )
Treasury stock, 714,205 shares in 2005 and 2004         (3,628 )        (3,628 )
                                                   - --------- -   - --------- -
Total stockholders  equity                             645,007         442,898  
                                                   - --------- -   - --------- -
Total liabilities and stockholders  equity         $ 1,173,107     $ 1,009,942  
                                                   - --------- -   - --------- -

See accompanying notes to consolidated financial statements. 

                                    Page 2                                     

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited; Dollars in thousands) 

                                                         Nine Months Ended      
                                                           September 30,        
                                                     -------------------------  
                                                        2005           2004     
                                                     ----------     ----------  
Cash flows from operating activities:                                           

Net income                                           $  203,406     $  156,227  

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                            42,443         31,607 

Interest accretion                                          -            3,705  

Minority interests                                        5,235          8,286  

Equity in income (loss) of joint venture                    -            1,717  

Stock compensation                                          777          1,808  

Working capital and other                               (57,542 )      (27,494 )

                                                     - -------- -   - -------- -

Net cash provided by operating activities               194,319        175,856  

                                                     - -------- -   - -------- -

Cash flows from investing activities: 

Capital expenditures                                   (137,889 )      (98,073 )

Purchase of business, net of cash acquired                  -          (57,226 )

Proceeds from sale of property, plant and                     6             72  
equipment                                                                       
                                                     - -------- -   - -------- -

Net cash used in investing activities                  (137,883 )     (155,227 )

                                                     - -------- -   - -------- -

Cash flows from financing activities: 

Net short-term borrowings                                  (232 )      (30,552 )

Proceeds from issuance of long-term debt                 60,000         60,014  

Principal payments on long-term debt                    (70,967 )      (41,922 )

Debt financing fees                                      (1,184 )          -    

Proceeds from issuance of common stock                   12,873          2,445  

Dividend to minority interest                            (9,546 )       (4,765 )

                                                     - -------- -   - -------- -

Net cash used in financing activities                    (9,056 )      (14,780 )

                                                     - -------- -   - -------- -

Effect of exchange rate changes on cash and cash          3,553            600  
equivalents                                                                     
                                                     - -------- -   - -------- -

Net increase in cash and cash equivalents                50,933          6,449  

Cash and cash equivalents at beginning of period         92,314         96,859  

                                                     - -------- -   - -------- -

Cash and cash equivalents at end of period           $  143,247     $  103,308  

                                                     - -------- -   - -------- -

See accompanying notes to consolidated financial statements. 

                                    Page 3                                     

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   

(Dollars in thousands, except share data) 

(1) Nature of Operations

We are a leading worldwide producer of wafers for the semiconductor industry. We operate manufacturing facilities in every major semiconductor manufacturing region throughout the world, including Europe, Japan, Malaysia, South Korea, Taiwan and the United States. Our customers include virtually all of the major semiconductor device manufacturers in the world. We provide wafers in sizes ranging from 100 millimeters (4 inch) to 300 millimeters (12 inch) and in three general categories: prime polished, epitaxial and test/monitor. A prime polished wafer is a highly refined, pure wafer with an ultra-flat and ultra-clean surface. An epitaxial wafer consists of a thin, silicon layer grown on the polished surface of the wafer. A test/monitor wafer is substantially the same as a prime polished wafer, but with some less rigorous specifications. 

(2) Significant Accounting Policies 

Stock-Based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees,  and related interpretations. We record compensation expense related to restricted stock unit awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under the plans when the exercise price of the stock options equals the market price on the date of grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below market price on the grant date and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. Had compensation cost been determined for our non-qualified stock options based on the fair value at the grant dates consistent with the alternative method set forth under Statement of Financial Accounting Standards No. 123,  Accounting for Stock-Based Compensation,  we would have reported the amounts indicated below: 

                                   Three Months Ended          Nine Months Ended     
                                      September 30,              September 30,       
                                  ---------------------     -----------------------  
                                    2005         2004         2005          2004     
                                  --------     --------     ---------     ---------  
Net income as reported            $ 89,764     $ 59,720     $ 203,406     $ 156,227  

Add:                                                                                 

Stock-based employee                   108          339           482         1,120 compensation included in reported net income, net of related tax effects Deduct: 

Total stock-based compensation      (2,831 )     (3,551 )      (7,066 )     (10,422 ) expense determined under fair value based method for all awards, net of related tax effects 
  - ------ -   - ------ -   - ------- -   - ------- - 

Pro forma net income              $ 87,041     $ 56,508     $ 196,822     $ 146,925  

                                  - ------ -   - ------ -   - ------- -   - ------- -

Income per share: 

Basic-as reported                 $   0.42     $   0.29     $    0.96     $    0.75  

Diluted-as reported               $   0.40     $   0.27     $    0.90     $    0.71  

Basic-pro forma                   $   0.41     $   0.27     $    0.93     $    0.71  

Diluted-pro forma                 $   0.38     $   0.26     $    0.87     $    0.67  

                                    Page 4                                     

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(3) Basis of Presentation 

The accompanying unaudited consolidated financial statements of MEMC Electronic Materials, Inc. and subsidiaries (MEMC), in our opinion, include all adjustments (consisting of normal, recurring items) necessary to present fairly MEMC s financial position and results of operations and cash flows for the periods presented. We have presented the consolidated financial statements in accordance with the requirements of Regulation S-X and consequently do not include all disclosures required by U.S. generally accepted accounting principles. This unaudited consolidated financial information has not yet been reviewed by the company s independent registered public accountants and is subject to that review before filing on Form 10-Q. These unaudited consolidated financial statements, should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2004, which contains MEMC s audited financial statements for such year and the related management s discussion and analysis of financial condition and results of operations. Operating results for the nine month period ended September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. 

(4) Earnings per share 

For the three month periods ended September 30, 2005 and 2004, basic and diluted earnings per share (EPS) were calculated as follows: 

                           Three Months Ended              Three Months Ended      
                           September 30, 2005              September 30, 2004      
                      -----------------------------   -----------------------------
                          Basic          Diluted          Basic          Diluted   
                      -------------   -------------   -------------   -------------
EPS numerator:                                                                     

Net income            $      89,764   $      89,764   $      59,720   $      59,720

                      - -----------   - -----------   - -----------   - -----------

EPS denominator: 

Weighted average        214,664,671     214,664,671     207,814,757     207,814,757
shares outstanding                                                                 
Warrants                        -         9,225,366             -        10,766,823

Stock options                   -         3,200,139             -         1,760,642

Restricted stock             41,620          58,133          14,783          27,308
units                                                                              
                      - -----------   - -----------   - -----------   - -----------

Total shares            214,706,291     227,148,309     207,829,540     220,369,530

                      - -----------   - -----------   - -----------   - -----------

Earnings per share    $        0.42   $        0.40   $        0.29   $        0.27

                      - -----------   - -----------   - -----------   - -----------

For the nine month periods ended September 30, 2005 and 2004, basic and diluted earnings per share (EPS) were calculated as follows: 

                             Nine Months Ended               Nine Months Ended      
                            September 30, 2005              September 30, 2004      
                       -----------------------------   -----------------------------
                           Basic          Diluted          Basic          Diluted   
                       -------------   -------------   -------------   -------------
EPS numerator:                                                                      

Net income             $     203,406   $     203,406   $     156,227   $     156,227

                       - -----------   - -----------   - -----------   - -----------

EPS denominator: 

Weighted average         210,907,256     210,907,256     207,579,276     207,579,276
shares outstanding                                                                  
Warrants                         -        11,772,629             -        11,162,544

Stock options                    -         2,804,096             -         1,924,841

Restricted stock              27,286          54,752           4,964          11,397
units                                                                               
                       - -----------   - -----------   - -----------   - -----------

Total shares             210,934,542     225,538,733     207,584,240     220,678,058

                       - -----------   - -----------   - -----------   - -----------

Earnings per share     $        0.96   $        0.90   $        0.75   $        0.71

                       - -----------   - -----------   - -----------   - -----------

                                    Page 5                                     

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During the three months ended September 30, 2005, Texas Pacific Group (TPG) exercised 10,000,000 warrants issued in 2001. The warrants were exercised on a cashless basis, resulting in the retirement of 1,989,391 additional warrants held by TPG which were used as payment for the exercise price. 

At September 30, 2005, MEMC had outstanding 9,126,867 options and 4,677,276 warrants. For the three months ended September 30, 2005 and 2004, options to purchase 88,528 and 3,737,399 shares, respectively, of MEMC stock were excluded from the calculation of diluted EPS because the effect was antidilutive. For the nine months ended September 30, 2005 and 2004, options to purchase 511,297 and 3,587,718 shares, respectively, of MEMC stock were excluded from the calculation of diluted EPS because the effect was antidilutive. Stock options are antidilutive when the exercise price of the options is greater than the average market price of the common shares for the period. 

(5) Inventories

Inventories consist of the following: 

                                                 September     December 
                                                    30,           31,   
                                                   2005          2004   
                                                 ---------     ---------
Raw materials and supplies                       $  13,580     $  20,307
Goods in process                                    56,189        54,160
Finished goods                                      62,451        53,097
                                                 - -------     - -------
                                                 $ 132,220     $ 127,564
                                                 - -------     - -------

(6) Comprehensive Income

Comprehensive income for the three months ended September 30, 2005 and 2004 was $84,703 and $57,721, respectively. Comprehensive income for the nine months ended September 30, 2005 and 2004 was $186,889 and $156,187, respectively. MEMC s only adjustment from net income to comprehensive income was foreign currency translation adjustments in each period presented. 

(7) Debt

Our short-term unsecured borrowings from banks totaled approximately $1,503 at September 30, 2005, under approximately $71,397 of short-term loan agreements. 

Long-term borrowings outstanding were $120,647 at September 30, 2005, under $266,677 of long-term committed loan facilities. Of the $266,677 committed long-term loan agreements at September 30, 2005, $4,500 was unavailable as it related to the issuance of third party letters of credit. 

On July 21, 2005, the company entered into a Revolving Credit Agreement with National City Bank of the Midwest, US Bank National Association, and such other lending institutions as may from time to time become lenders (the  National City Agreement ). The National City Agreement provides for a $200,000 secured revolving credit facility and replaced the $150,000 revolving credit facility from Citibank/UBS and the $35,000 revolving credit facility from Texas Pacific Group and certain of its affiliates (TPG). 

The extinguishment of the Citibank/UBS and the TPG credit facilities resulted in the write-off of $1,929 of deferred financing fees. This loss was recorded in nonoperating expenses for the three months ended September 30, 2005. 

                                    Page 6                                     

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(8) Income Taxes 

For the nine months ended September 30, 2005, we recorded an income tax benefit of $23,511, compared to income tax expense of $21,644 for the nine months ended September 30, 2004. The tax benefit for the nine months ended September 30, 2005 reflects the reversal of valuation allowances and the net favorable impact of adjustments to contingent tax liabilities totaling $15,120. 

In the three months ended September 30, 2005, we reversed $42,370 in valuation allowances against deferred tax assets as we believe that it is more likely than not that certain deferred tax assets will be realized, taking into consideration all available evidence, including historical pre-tax and taxable income (losses), projected future pre-tax and taxable income (losses) and the expected timing of the reversals of existing temporary differences by taxable jurisdiction. As of September 30, 2005, we have remaining valuation allowances of approximately $59,000, which reduces our net deferred tax assets to $186,477 (of which $10,174 was included in prepaid and other current assets). 

The company recorded a contingent tax liability of $1,881 during the three months ended September 30, 2005 related to some additional tax deductions for which the company has not obtained appropriate tax opinions to record the book tax benefit. 

In the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67,700 payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17,699, of the redemption payment should be deductible and we reversed a portion, or $7,783, of the contingent tax liability. The company also reversed a contingent tax liability of $9,218 primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

(9) Benefit Plans

Net periodic benefit cost consists of the following: 

               Three Months Ended      Three Months Ended     Nine Months Ended        Nine Months Ended  
               September 30, 2005      September 30, 2004     September 30, 2005       September 30, 2004 
               -------------------     -------------------   --------------------     --------------------
               Pension      Health     Pension      Health   Pension      Health      Pension      Health 
                Plans        Care       Plans        Care     Plans        Care        Plans        Care  
               --------      Plan      --------      Plan    --------      Plan       --------      Plan  
                            ------                  ------                -------                  -------
Service Cost   $    970     $   91     $    973     $   60   $  2,910     $   275     $  2,929     $   180

Interest          2,298        657        2,265        743      7,028       1,971        6,799       2,228 Cost Expected         (1,880 )      -         (1,493 )      -       (5,640 )       -         (4,427 )       - return on plan assets Amortization          1        -              1        -            3         -              3         - of service costs Net                 409        (43 )        239        -        1,201        (129 )        752         - actuarial loss/(gain) Transition            6        -            -          -           18         -            -           - obligation recognized 
  - ------ -   - ---- -   - ------ -   - ----   - ------ -   - ----- -   - ------ -   - ----- 

Net periodic   $  1,804     $  705     $  1,985     $  803   $  5,520     $ 2,117     $  6,056     $ 2,408
benefit cost                                                                                              
               - ------ -   - ---- -   - ------ -   - ----   - ------ -   - ----- -   - ------ -   - -----

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare 

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Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. The company s actuarial calculations have been completed and while we have determined that our plan will qualify for a subsidy in 2006, the subsidy will not have a material impact on the accumulated benefit obligation and the net periodic postretirement benefit cost. 

(10) Commitments and Contingencies 

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. 

(11) Insurance Recovery

In December 2004, our Italian plant experienced a minor fire. As a result, we incurred losses from property damage and business interruption in the first quarter of 2005. Cost of goods sold in the first quarter was charged for incremental costs of $1,100 and unfavorable manufacturing expense variances associated with the loss of production. In March 2005, we recorded an insurance recovery receivable of $2,700 that was recorded as a reduction of cost of goods sold. 

(12) Government Grant

We received a contract with the Department of Defense in the second quarter of 2005 related to the development of thin film silicon on insulator (SOI) wafers utilizing silicon layer transfer technology. The total contract value was $12,069 representing the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The contract provides for the government to reimburse the company $3,514 of the total costs to be incurred of $12,069 and is recognized on a percentage completion basis. For the three and nine months ended September 30, 2005, the company recognized $1,250 and $2,252, respectively, as an offset of actual SOI costs incurred within research and development expenses. 

Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations. 

Overview.

The company showed solid improvement in operating results in the first nine months of 2005 compared to the first nine months of 2004, despite supply disruptions caused by two major hurricanes. Wafer unit volumes continued to improve as the semiconductor industry finished up its first full quarter following the inventory adjustment period. Polysilicon and other product sales to the solar industry continue to increase and are now at an annualized rate of $100 million. Additionally, a secondary offering by the investor group led by Texas Pacific Group (TPG) of 18.3 million shares was completed in August 2005. The shares offered included all of the remaining shares on the resale shelf registration statement filed in February 2004, including 10.0 million shares acquired by TPG upon the exercise of warrants issued in 2001. 

Net Sales.

Our net sales increased by 2.0% to $280.8 million in the third quarter of 2005 from $275.3 million in the third quarter of 2004. For the nine months ended September 30, 2005, net sales increased by 6.3% to $807.4 million from $759.6 million for the nine months ended September 30, 2004. In both the 2005 third quarter and the 2005 nine month period, the sales increase was primarily due to higher sales volumes in polysilicon products and a 

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favorable change in the mix of wafer products. These increases were partially offset by lower average selling prices for wafers. Year to year overall average selling prices for wafers decreased 6.8% compared to the third quarter of 2004 and 1.8% for the nine month period. 

Gross Margin.

In the 2005 third quarter, our gross margin was $93.7 million compared to $110.7 million in the 2004 third quarter. As a percentage of net sales, gross margin declined to 33.4% in the 2005 third quarter from 40.2% in the third quarter of 2004. The gross margin decline was primarily a result of lower average selling prices for wafers as discussed above. 

For the nine months ended September 30, 2005, our gross margin was $281.4 million compared to $271.2 million for the nine months ended September 30, 2004. As a percentage of net sales, gross margin for the nine month period decreased to 34.8% in 2005 from 35.7% in 2004. 

Marketing and Administration. 

Marketing and administration expenses for the three months ended September 30, 2005 increased to $18.2 million compared to $17.8 million for the three months ended September 30, 2004. As a percentage of net sales, marketing and administration expenses remained flat at 6.5% in both the 2005 and 2004 third quarters. 

For the nine months ended September 30, 2005, marketing and administration expenses increased to $54.3 million from $52.8 million for the nine months ended September 30, 2004. As a percentage of net sales, marketing and administration decreased to 6.7% in the 2005 period from 7.0% for the 2004 period. 

The increases in aggregate dollar amount were primarily a result of the increased freight on customer shipments related to the increase in large diameter product sales, higher tax-related professional fees and the increased cost of providing sample wafers to customers. These increases were partially offset by the termination of a management advisory agreement with TPG in February 2005. 

Research and Development. 

Our research and development (R&D) expenses increased in the three months ended September 30, 2005 to $12.7 million compared to $9.4 million in the year ago period. As a percentage of net sales, R&D expenses increased to 4.5% for the 2005 third quarter from 3.4% in the 2004 third quarter. 

For the nine months ended September 30, 2005, research and development expenses increased to $37.6 million from $27.6 million for the nine months ended September 30, 2004. As a percentage of net sales, R&D expenses increased to 
4.7% for the 2005 period from 3.6% for the 2004 period. 

The increases in R&D expenses were primarily the result of the development of silicon layer transfer technology (SOI), including the installation and testing of production lines in 2005. We also continue to increase our efforts to expand our capability in the areas of flatness, particles and crystal defectivity. 

We received a contract with the Department of Defense in the second quarter of 2005 related to the development of thin film silicon on insulator wafers. The total contract value was $12.1 million, representing the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The contract provides for the government to reimburse the company $3.5 million of the total costs to be incurred of $12.1 million and is recognized on a percentage completion basis. For the three and nine months ended September 30, 2005, the company recognized $1.3 million and $2.3 million, respectively, as an offset of actual SOI costs incurred within research and development expenses. 

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Operating Income.

Operating income decreased to $62.8 million, or 22.4% of sales, in the third quarter of 2005 compared to $83.6 million, or 30.4% of sales, in the 2004 third quarter. This decrease is primarily a result of the changes in gross margin and R&D discussed above. 

For the nine months ended September 30, 2005, operating income decreased to $189.4 million, or 23.5% of sales, from $190.9 million, or 25.1% of sales, for the nine months ended September 30, 2004. The decrease is primarily a result of the changes in gross margin and R&D expenses discussed above. 

Nonoperating (Income) Expense.

Interest Expense.

In the three months ended September 30, 2005, interest expense decreased to $1.7 million, compared to $3.4 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, interest expense decreased to $5.6 million from $10.3 million for the nine months ended September 30, 2004. The decrease in interest expense was primarily the result of the redemption in December 2004 of the senior subordinated secured notes as well as the reduction of our South Korean debt throughout 2004. 

Interest Income.

In the three months ended September 30, 2005, interest income decreased to $0.9 million, compared to $1.0 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, interest income decreased to $2.6 million from $4.0 million for the nine months ended September 30, 2004. The decrease in interest income was primarily the result of the liquidations of short-term investments in South Korea to fund the reduction of our South Korean debt throughout 2004. 

Currency (Gains) Losses.

Currency gains in the three months ended September 30, 2005 were $1.1 million, compared to losses of $0.4 million in the three months ended September 30, 2004. For the nine months ended September 30, 2005, currency losses were $0.5 million, compared to $1.5 million for the year ago period. 

On July 1, 2004, we designated a Yen-based intercompany loan as a long-term investment with settlement not planned or anticipated in the foreseeable future. Since we no longer expect settlement of this intercompany loan, foreign currency gains and losses from this loan are no longer being recorded in the Consolidated Statement of Operations. The current year gains and losses are primarily related to Yen-based third party debt and working capital. 

Other, Net.

In the three months ended September 30, 2005, other nonoperating expense was $1.8 million compared to income of $2.5 million in the three months ended September 30, 2004. For the nine months ended September 30, 2005, other nonoperating expense was $0.9 million compared to income of $4.9 million for the year ago period. This decrease was primarily a result of the writing-off of $1.9 million of deferred financing fees in conjunction with the extinguishment of the Citibank/UBS and the TPG credit facilities. Nonrecurring gains in 2004 included a $1.5 million gain in the first quarter of 2004 from a business interruption insurance recovery relating to a minor fire at Taisil in December 2003 and a $1.7 million gain recorded from the termination of a customer supply arrangement in August 2004. 

Income Taxes.

For the three months ended September 30, 2005, we recorded an income tax benefit of $30.0 million, compared to income tax expense of $20.8 million for the three months ended September 30, 2004. For the nine months ended September 30, 2005, we recorded an income tax benefit of $23.5 million, compared to income tax expense of 

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$21.6 million for the year ago period. The tax benefit for the nine months ended September 30, 2005 reflects the reversal of valuation allowances and the net favorable impact of adjustments to contingent tax liabilities totaling $15.1 million. 

In the three months ended September 30, 2005, we reversed $42.4 million in valuation allowances against deferred tax assets as we believe that it is more likely than not that certain deferred tax assets will be realized taking into consideration all available evidence including historical pre-tax and taxable income (losses), projected future pre-tax and taxable income (losses) and the expected timing of the reversals of existing temporary differences by taxable jurisdiction. As of September 30, 2005, we have remaining valuation allowances of approximately $59.0 million, which reduces our net deferred tax assets to $185.5 million (of which $10.2 million was included in prepaid and other current assets). 

The company recorded a contingent tax liability of $1.9 million during the three months ended September 30, 2005 related to some additional tax deductions for which the company has not obtained appropriate tax opinions to record the book tax benefit. 

In the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67.7 million payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17.7 million, of the redemption payment should be deductible and we reversed a portion, or $7.8 million, of the contingent tax liability. The company also reversed a contingent tax liability of $9.2 million primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

During the three months ended June 30, 2004, the company reversed $25.3 million in valuation allowances against deferred tax assets based on our belief that it was more likely than not that certain deferred tax assets would be realized based on management s estimate of future earnings. 

Outlook.

We are targeting net sales in the 2005 fourth quarter to be between $317 million and $320 million with gross margin of approximately 40% in a healthier pricing environment. This revised guidance includes the deferral of $13.3 million of revenue and profits discussed in more detail under Liquidity and Capital Resources. Including the additional expenses for the activities the company now expects in connection with the delayed filing of the Form 10-Q, operating expenses are now anticipated to be closer to $30 million. Due to the additional net favorable tax adjustments of approximately $7.3 million made in the first three quarters of 2005, the company now expects its tax rate to be approximately 18% for the fourth quarter of 2005. On a non-GAAP basis, our cash tax rate is anticipated to be in the mid-teens as a percentage of sales for the foreseeable future. 

Liquidity and Capital Resources.

In the nine months ended September 30, 2005, we generated $194.3 million of cash from operating activities, compared to $175.9 million in the nine months ended September 30, 2004. This increase was a result of the improved operating results discussed above. 

Accounts receivable of $124.0 million at September 30, 2005 decreased $16.7 million from $140.7 million at December 31, 2004. Days  sales outstanding improved to 41 days at September 30, 2005 compared to 48 days at December 31, 2004 based upon annualized sales for the respective immediately preceding quarter. This decrease in days sales outstanding was primarily attributable to the mix of customers and the more favorable payment terms received from solar industry customers. 

Our inventories increased $4.6 million to $132.2 million at September 30, 2005 from $127.6 million at December 31, 2004. Finished goods inventories increased primarily as a result of lower than forecasted shipments in the first nine months of 2005. Annualized inventory turns, calculated as the ratio of annualized respective quarterly cost of goods sold divided by the period-end inventory balance, increased to six for the three month period ended September 30, 2005 compared to five at the three month period December 31, 2004. At September 30, 2005, we had approximately $25.8 million of inventory held on consignment, compared to $22.2 million at December 31, 2004. 

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Related inventory reserves for obsolescence, lower of cost or market issues, or other impairments were $3.8 million at September 30, 2005 compared to $5.0 million at December 31, 2004. 

Our net deferred tax assets totaled $186.5 million as of September 30, 2005 versus $127.6 million at December 31, 2004 (of which $10.2 million and $7.8 million was included in prepaid and other current assets at September 30, 2005 and December 31, 2004, respectively). We provide for income taxes on a quarterly basis based on an estimated annual effective income tax rate. We believe it is more likely than not that, with our projections of future taxable income and after consideration of valuation allowances, MEMC will generate sufficient taxable income to realize the benefits of the net deferred tax assets existing at September 30, 2005. As of September 30, 2005, we have valuation allowances of approximately $59.0 million reducing our net deferred tax assets, of which we expect to reverse $22.5 million in the fourth quarter of 2005. The remaining valuation allowances primarily relate to foreign tax credits. 

Our accounts payable decreased $20.2 million to $103.9 million at September 30, 2005, compared to $124.1 million at the end of 2004. The decrease was partially a result of the decrease in capital expenditure-related payables following the end of the 300 millimeter expansion in Japan and the purchase of SOI-related equipment domestically. 

Accrued liabilities decreased $22.3 million to $15.4 million at September 30, 2005, compared to $37.7 million at the end of 2004. The decrease was a result of a variety of items including the payment of U.S. property taxes, the payment of insurance premiums, the payment of withholding taxes on dividends and the adjustment of certain benefits liabilities. 

As of September 30, 2005, we had deferred revenue of $13.3 million related to deliveries for sales arrangements that contained future deliveries of polysilicon. The revenue for these deliveries was recorded at the fair value of the arrangement, rather than current prices. See Critical Accounting Estimates 
  Revenue Recognition. 

Our cash used in investing activities was $137.9 million for the nine months ended September 30, 2005 compared to $155.2 million for the nine months ended September 30, 2004. The 2004 period included the acquisition of the remaining interest in Taisil in the 2004 first quarter for $57.2 million, net of cash acquired. Cash used for capital expenditures increased $39.8 million to $137.9 million for the nine months ended September 30, 2005, with incremental changes to our existing manufacturing facilities and manufacturing lines primarily related to increasing our capacity and capability for our next generation products, including 300 millimeter and silicon-on-insulator (SOI). With 2005 capital expenditures more heavily weighted toward the first half of the year with the 300 millimeter expansion in Taiwan and the purchase of SOI-related equipment, we still expect our 2005 capital expenditures will be approximately 15% of net sales for the full year. Our existing facilities may be modified to permit the manufacture of greater quantities of current products. Alternatively, with incremental improvements, the existing facilities may be modified to become capable of manufacturing next generation products. 

Cash used in financing activities was $9.1 million in the nine months ended September 30, 2005 versus $14.8 million in the nine months ended September 30, 2004. The change in cash from financing activities was primarily related to the proceeds from issuance of common stock upon exercise of stock options of $12.9 million in 2005 compared to $2.4 million in 2004. 

Our unsecured short-term borrowings were approximately $1.5 million at September 30, 2005, under approximately $71.4 million of short-term loan agreements. Long-term borrowings outstanding were $120.6 million at September 30, 2005, under $266.7 million of committed long-term loan agreements. Of the $266.7 million committed long-term loan agreements at September 30, 2005, $4.5 million was unavailable as it related to the 

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issuance of third party letters of credit. Our weighted average cost of borrowing was 3.5% at September 30, 2005 and 2.9% at December 31, 2004. Our total debt to capital ratio at September 30, 2005 was 15%, compared to 22% at December 31, 2004. 

On July 21, 2005, the company entered into a Revolving Credit Agreement with National City Bank of the Midwest ( National City Bank ), US Bank National Association, and such other lending institutions as may from time to time become lenders (the  National City Agreement ). The National City Agreement provides for a $200 million secured revolving credit facility and replaced the $150 million revolving credit facility from Citibank/UBS (the  Citibank Facility ) and the $35 million revolving credit facility from TPG and certain of its affiliates (the  TPG Facility ). 

The National City Agreement has a term of five years. Interest on borrowings under the National City Agreement will be payable based on the company s election at LIBOR plus an applicable margin (currently 1.0%) or at a defined prime rate plus an applicable margin (currently 0.00%). The National City Agreement also provides for the company to pay various fees, including a commitment fee, on the unused portion of the lenders  commitments (such fee is currently set at 0.25% per annum). The National City Agreement contains covenants typical for credit arrangements of comparable size, such as minimum earnings before interest, taxes, depreciation and amortization and an interest coverage ratio. 

On July 21, 2005 we borrowed an aggregate of $60 million under the National City Agreement and used those funds to repay all outstanding amounts under the Citibank Facility; interest on this $60 million loan is due quarterly beginning October 1, 2005. The proceeds of subsequent borrowings under the National City Agreement will be used for working capital needs and to finance capital expenditures. 

The obligations of the company under the National City Agreement are guaranteed by certain subsidiaries of the company. The obligations of the company and the guaranty obligations of the subsidiaries are secured by a pledge of the capital stock of certain domestic and foreign subsidiaries of the company. The other assets of the company are not pledged as security for the National City Agreement as they were under the Citibank Facility and the TPG Facility. 

In connection with the execution of the National City Agreement, we terminated the Citibank Facility upon the repayment by the company of all amounts then outstanding. In addition, the company terminated the TPG Facility and the reimbursement agreement among the company and certain TPG entities. Those TPG entities had guaranteed the company s obligations under the Citibank Facility and the TPG Facility and in return, the Company had entered into a reimbursement agreement with those guarantors under which the company agreed to reimburse them for any payment made under the guaranties. 

On July 21, 2005, all of the liens and security interests of Citibank, UBS and the other lenders under the Citibank Facility and the TPG entities under the TPG Facility on and in our assets were released, as were the subsidiaries guarantees of MEMC s repayment obligations. 

The extinguishment of the Citibank Facilities and the TPG Facility resulted in the write-off of approximately $1.9 million of deferred financing fees. This loss was recorded in nonoperating expenses for the three months ended September 30, 2005. 

We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital expenditures and working capital requirements. 

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates of certain amounts included in the financial 

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statements. Application of these accounting policies, however, involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. MEMC s significant accounting policies are more fully discussed in Exhibit 13 to our annual report on Form 10-K for the fiscal year ended December 31, 2004. 

Inventory

The valuation of inventory requires us to estimate excess and obsolete inventory. The determination of the value of excess and obsolete inventory is based upon assumptions of future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. 

Property, Plant and Equipment

We depreciate our land improvements, building and building improvements, and machinery and equipment evenly over the assets  estimated useful lives. Changes in circumstances such as technological advances, changes in our business model, or changes in our capital strategy could result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened or lengthened, we depreciate the net book value over its remaining useful life. 

Income Taxes

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as temporary differences. We record the tax effect of these temporary differences as deferred tax assets (generally items that can be used as a tax deduction or credit in future periods) and deferred tax liabilities (generally items that we received a tax deduction for, but have not yet been recorded in the Consolidated Statement of Operations). We regularly review our deferred tax assets for realizability and adjust the valuation allowance based upon our judgment as to whether it is more likely than not that some items recorded as deferred tax assets will be realized, taking into consideration all available evidence, both positive and negative, including historical pre-tax and taxable income (losses), projected future pre-tax and taxable income (losses) and the expected timing of the reversals of existing temporary differences. In arriving at these judgements, the weight given to the potential effect of all positive and negative evidence is commensurate with the extent to which it can be objectively verified. 

We provide for U.S. income taxes, net of available foreign tax credits, on earnings of consolidated international subsidiaries that we plan to remit to the U.S. We do not provide for U.S. income taxes on the remaining earnings of these subsidiaries, as we expect to reinvest these earnings overseas or we expect the taxes to be minimal based upon available foreign tax credits. 

Employee-related Liabilities

We have a long-term liability for our defined benefit pension plans. Our pension obligation is funded in accordance with provisions of federal law. 

Our pension liability is actuarially determined, and we use various actuarial assumptions, including the discount rate, rate of salary increase, and expected return on assets, to estimate our costs and obligations. If our assumptions do not materialize as expected, expenditures and costs that we incur could differ from our current estimates. 

Revenue Recognition

We generally record revenue from product sales when the goods are shipped and title passes to the customer. Our wafers are generally made to customer specifications at plant sites that have been pre-qualified by the customer. We conduct rigorous quality control and testing procedures to ensure that the finished wafers meet the customer s specifications before the product is shipped. In the case of most of our polysilicon sales, delivery terms provide for the transfer of title and risk of loss prior to shipment but we do not recognize revenue prior to shipment. For 

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sales arrangements that contain future deliveries (in the case of some of our polysilicon arrangements), revenue is not recognized on current deliveries unless the fair value of pricing can be determined based on specific objective evidence. 

Stock-based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees , and related interpretations. We record compensation expense related to restricted stock units awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under our plans when the exercise price of the stock options equals the market price on the date of the grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below the market price on the date of the grant and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. 

Recently Issued Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board ( FASB ) issued Statement of Financial Accounting Standard ( SFAS ) No. 154,  Accounting Changes and Error Corrections  ( SFAS 154 ) which replaces Accounting Principles Board Opinions No. 20  Accounting Changes  and SFAS No. 3,  Reporting Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by MEMC in the first quarter of 2006. MEMC is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact. 

In March 2005, the FASB issued FIN 47,  Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143  ( FIN 47 ), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005 for MEMC. MEMC is currently evaluating the effect that the adoption of FIN 47 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact. 

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004),  Share-Based Payment  ( SFAS 123R ), which replaces SFAS No. 123,  Accounting for Stock-Based Compensation  (SFAS 123) and supersedes APB Opinion No. 25,  Accounting for Stock Issued to Employees.  SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning in our year ended December 31, 2006, with early adoption 

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encouraged. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. Under SFAS 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We have not yet determined the method of adoption. 

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ( SAB 107 ) regarding the SEC s interpretation of SFAS 123R and the valuation of share-based payments for public companies. MEMC is evaluating the requirements of SFAS 123R and SAB 107 and we expect that the adoption of SFAS 123R will have an estimated negative $0.03 to $0.04 impact on diluted earnings per share for the year ended December 31, 2006. 

In December 2004, the FASB issued FASB Staff Position ( FSP ) No. 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004  ( FSP 109-2 ), which provides guidance under FASB Statement No. 109,  Accounting for Income Taxes, with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the  Jobs Act ) on enterprises income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. MEMC has no current plans to repatriate funds under the provisions of the Jobs Act. Accordingly, we have not adjusted our tax expense or deferred tax liability to reflect a deduction related to the Jobs Act. 

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. The company s actuarial calculations have been completed and while we have determined that our plan will qualify for a subsidy in 2006, the subsidy will not have a material impact on the accumulated benefit obligation and the net periodic postretirement benefit cost. 

Cautionary Statement Regarding Forward-Looking Statements

This Form 8-K contains  forward-looking  statements within the meaning of the Securities Litigation Reform Act of 1995, including those concerning our expectation that our net sales in the 2005 fourth quarter will be between $317 million and $320 million with gross margin of approximately 40%; our anticipation that our operating expenses will be closer to $30 million; that due to net favorable tax adjustments in the first three quarters of 2005 of approximately $7.3 million, the company now expects its tax rate to be approximately 18% for Q4 2005; that on a non-GAAP basis our cash tax rate is anticipated to be in the mid-teens as a percentage of sales for the foreseeable future; our expectation that we will generate sufficient taxable income to realize the benefits of net deferred tax assets existing as of September 30, 2005; our expectation to reverse valuation allowances of $22.5 million in the fourth quarter of 2005; our expectation that capital expenditures will be approximately 15% of sales for 2005; our belief that we have the financial resources needed to meet business requirements for the next twelve months, including capital expenditure and working capital requirements; our belief that the Medicare Act will not have a material impact on the accumulated benefit obligation and the net periodic postretirement benefit cost; our expectation that the adoption of SFAS 123R will have an estimated negative impact on diluted earnings per share of $0.03 to $0.04 for the year ending December 31, 2006; and our belief that the implementation of SFAS 154 and FIN 47 will not have a material effect on our financial condition or results of operations. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as: market demand for wafers and semiconductors; customer acceptance of our new products; utilization of manufacturing capacity; our ability to reduce manufacturing and operating costs; inventory levels of our customers; changes in the pricing environment; general economic conditions; the accuracy of our assumptions regarding future book and taxable income; actions by our competitors, customers and suppliers; the impact of competitive products and technologies; technological changes; changes in product specifications and manufacturing processes; changes in financial market conditions; changes in interest and currency exchange rates; changes in the composition of worldwide taxable income; our ability to obtain commitments from lenders; the accuracy of our assumptions regarding the impact of the adoption of SFAS 123R on our consolidated results of operations and earnings per share; and other risks described in MEMC s filings with the Securities and Exchange Commission, including MEMC s annual report on Form 10-K for the year ended December 31, 2004. 

Page 16 

                                                                   Exhibit 99.3

                        PART I - FINANCIAL INFORMATION                         

Item 1. Financial Statements.

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                     CONSOLIDATED STATEMENTS OF OPERATIONS                     

(Unaudited; Dollars in thousands, except share data) 

                         Three Months Ended                   Six Months Ended          

                              June 30,                            June 30,              
                   -------------------------------     -------------------------------  
                       2005              2004              2005              2004       
                   -------------     -------------     -------------     -------------  
                   (As restated,                       (As restated,                    
                   See Note 13)                        See Note 13)                     
Net sales          $     273,988     $     255,539     $     526,606     $     484,299  

Cost of goods            175,779           168,380           338,913           323,797  
sold                                                                                    
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Gross margin              98,209            87,159           187,693           160,502  

Operating                                                                               
expenses:                                                                               
Marketing and             18,344            17,842            36,109            35,030  
administration                                                                          
Research and              13,220             9,268            24,917            18,181  
development                                                                             
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Operating income          66,645            60,049           126,667           107,291  

Nonoperating (income) expense: Interest expense           1,937             3,557             3,848             6,876 

Interest income             (991 )          (1,464 )          (1,702 )          (3,013 )

Currency losses              835             7,470             1,566             1,106  

Other, net                  (285 )            (489 )            (932 )          (2,387 )

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Total                      1,496             9,074             2,780             2,582  
nonoperating                                                                            
expense                                                                                 
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Income before             65,149            50,975           123,887           104,709 income taxes, equity in loss of joint venture and minority interests Income tax                10,257           (12,581 )           6,462               853 provision 
 (benefit) - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Income before             54,892            63,556           117,425           103,856 equity in loss of joint venture and minority interests Equity in loss               -                 -                 -              (1,717 ) of joint venture Minority                  (2,019 )          (2,955 )          (3,783 )          (5,632 ) interests 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Net income         $      52,873     $      60,601     $     113,642     $      96,507  

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Basic income per   $        0.25     $        0.29     $        0.54     $        0.47  
share                                                                                   
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Diluted income     $        0.24     $        0.27     $        0.51     $        0.44  
per share                                                                               
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Weighted average     209,206,270       207,728,191       209,017,410       207,460,241 shares used in computing basic income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Weighted average     224,681,998       220,953,006       224,321,328       221,061,904 shares used in computing diluted income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                          CONSOLIDATED BALANCE SHEETS                          

(Dollars in thousands, except share data) 

                                                   June 30,       December 31,  
                                                                      2004      
                                                     2005         ------------  
                                                  -----------                   
                                                  (Unaudited)                   
                                                      (As                       
                                                   restated,                    
                                                   See Note                     
                                                      13)                       
ASSETS                                                                          

Current assets: 

Cash and cash equivalents                         $   100,997     $     92,314  

Accounts receivable, less allowance for               128,518          140,728  
doubtful accounts of $1,457 and $1,633 in 2005                                  
and 2004, respectively                                                          
Inventories                                           135,596          127,564  

Prepaid and other current assets                       24,045           29,724  

                                                  - --------- -   - ---------- -

Total current assets                                  389,156          390,330  

Property, plant and equipment, net of                 503,861          444,670  
accumulated depreciation of $212,961 and                                        
$198,595 in 2005 and 2004, respectively                                         
Deferred tax assets, net                              129,634          119,835  

Other assets                                           53,338           55,107  

                                                  - --------- -   - ---------- -

Total assets                                      $ 1,075,989     $  1,009,942  

                                                  - --------- -   - ---------- -

LIABILITIES AND STOCKHOLDERS  EQUITY                                            

Current liabilities: 

Short-term borrowings and current portion of      $    21,709     $     24,399  
long-term debt                                                                  
Accounts payable                                      104,578          124,083  

Accrued liabilities                                    27,285           37,743  

Accrued wages and salaries                             23,122           19,117  

Income taxes payable                                   23,388           10,282  

                                                  - --------- -   - ---------- -

Total current liabilities                             200,082          215,624  

Long-term debt, less current portion                  108,229          116,082  

Pension and similar liabilities                       111,878          116,427  

Other liabilities                                      64,378           72,432  

                                                  - --------- -   - ---------- -

Total liabilities                                     484,567          520,565  

                                                  - --------- -   - ---------- -

Minority interests                                     50,262           46,479  

Commitments and contingencies 

Stockholders  equity: 

Preferred stock, $.01 par value, 50,000,000               -                - shares authorized, none issued and outstanding at 2005 and 2004 Common stock, $.01 par value, 300,000,000               2,101            2,091 shares authorized, 210,037,271 and 209,108,105 issued at 2005 and 2004, respectively Additional paid-in capital                            159,576          154,736 

Retained earnings                                     412,447          308,351  

Accumulated other comprehensive loss                  (28,844 )        (17,389 )

Deferred compensation                                    (492 )         (1,263 )

Treasury stock, 714,205 shares in 2005 and 2004        (3,628 )         (3,628 )

                                                  - --------- -   - ---------- -

Total stockholders  equity                            541,160          442,898  

                                                  - --------- -   - ---------- -

Total liabilities and stockholders  equity        $ 1,075,989     $  1,009,942  

                                                  - --------- -   - ---------- -

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited; Dollars in thousands) 

                                                       Six Months Ended         

                                                           June 30,             
                                                 -----------------------------  
                                                      2005             2004     
                                                 --------------     ----------  
                                                 (As restated,                  
                                                  See Note 13)                  
Cash flows from operating activities:                                           

Net income                                       $      113,642     $   96,507  

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                            27,702         20,165 

Interest accretion                                          -            2,326  

Minority interests                                        3,783          5,632  

Equity in income (loss) of joint venture                    -            1,717  

Stock compensation                                          603          1,260  

Working capital and other                               (26,519 )        2,249  

                                                 -- ----------- -   - -------- -

Net cash provided by operating activities               119,211        129,856  

                                                 -- ----------- -   - -------- -

Cash flows from investing activities: 

Capital expenditures                                   (105,630 )      (72,525 )

Purchase of business, net of cash acquired                  -          (57,226 )

Proceeds from sale of property, plant and                   -               18  
equipment                                                                       
                                                 -- ----------- -   - -------- -

Net cash used in investing activities                  (105,630 )     (129,733 )

                                                 -- ----------- -   - -------- -

Cash flows from financing activities: 

Net short-term borrowings                                  (172 )      (26,858 )

Proceeds from issuance of long-term debt                    -           60,014  

Principal payments on long-term debt                     (4,444 )       (4,823 )

Proceeds from issuance of common stock                    5,121          2,383  

Dividend to minority interest                            (9,546 )       (4,765 )

                                                 -- ----------- -   - -------- -

Net cash provided by (used in ) financing                (9,041 )       25,951  
activities                                                                      
                                                 -- ----------- -   - -------- -

Effect of exchange rate changes on cash and               4,143          1,353  
cash equivalents                                                                
                                                 -- ----------- -   - -------- -

Net increase in cash and cash equivalents                 8,683         27,427  

Cash and cash equivalents at beginning of                92,314         96,859  
period                                                                          
                                                 -- ----------- -   - -------- -

Cash and cash equivalents at end of period       $      100,997     $  124,286  

                                                 -- ----------- -   - -------- -

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   

(Dollars in thousands, except share data) 

(1) Nature of Operations

We are a leading worldwide producer of wafers for the semiconductor industry. We operate manufacturing facilities in every major semiconductor manufacturing region throughout the world, including Europe, Japan, Malaysia, South Korea, Taiwan and the United States. Our customers include virtually all of the major semiconductor device manufacturers in the world. We provide wafers in sizes ranging from 100 millimeters (4 inch) to 300 millimeters (12 inch) and in three general categories: prime polished, epitaxial and test/monitor. A prime polished wafer is a highly refined, pure wafer with an ultra-flat and ultra-clean surface. An epitaxial wafer consists of a thin, silicon layer grown on the polished surface of the wafer. A test/monitor wafer is substantially the same as a prime polished wafer, but with some less rigorous specifications. 

(2) Significant Accounting Policies 

Stock-Based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees,  and related interpretations. We record compensation expense related to restricted stock unit awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under the plans when the exercise price of the stock options equals the market price on the date of grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below market price on the grant date and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. Had compensation cost been determined for our non-qualified stock options based on the fair value at the grant dates consistent with the alternative method set forth under Statement of Financial Accounting Standards No. 123,  Accounting for Stock-Based Compensation,  we would have reported the amounts indicated below: 

                                    Three Months Ended       Six Months Ended June   
                                         June 30,                     30,            
                                  ----------------------     ----------------------  
                                    2005          2004         2005          2004    
                                  ---------     --------     ---------     --------  
                                    (As                        (As                   
                                  restated,                  restated,               
                                  See Note                   See Note                
                                     13)                        13)                  
Net income as reported            $  52,873     $ 60,601     $ 113,642     $ 96,507  

Add:                                                                                 

Stock-based employee                    144          336           383          781 compensation included in reported net income, net of related tax effects Deduct: 

Total stock-based compensation       (2,014 )     (3,421 )      (4,298 )     (7,018 ) expense determined under fair value based method for all awards, net of related tax effects 
  - ------- -   - ------ -   - ------- -   - ------ - 

Pro forma net income              $  51,003     $ 57,516     $ 109,727     $ 90,270  

Income per share: 

Basic-as reported                 $    0.25     $   0.29     $    0.54     $   0.47  

Diluted-as reported               $    0.24     $   0.27     $    0.51     $   0.44  

Basic-pro forma                   $    0.24     $   0.28     $    0.52     $   0.44  

Diluted-pro forma                 $    0.23     $   0.26     $    0.49     $   0.41  

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(3) Basis of Presentation 

The accompanying unaudited consolidated financial statements of MEMC Electronic Materials, Inc. and subsidiaries (MEMC), in our opinion, include all adjustments (consisting of normal, recurring items) necessary to present fairly MEMC s financial position and results of operations and cash flows for the periods presented. We have presented the consolidated financial statements in accordance with the requirements of Regulation S-X and consequently do not include all disclosures required by U.S. generally accepted accounting principles. This unaudited consolidated financial information has not yet been reviewed by the company s independent registered public accountants and is subject to that review before filing on Form 10-Q. These unaudited consolidated financial statements, should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2004, which contains MEMC s audited financial statements for such year and the related management s discussion and analysis of financial condition and results of operations. Operating results for the six month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. 

(4) Earnings per share 

For the three month periods ended June 30, 2005 and 2004, basic and diluted earnings per share (EPS) were calculated as follows: 

                           Three Months Ended              Three Months Ended      

                              June 30, 2005                   June 30, 2004        
                      -----------------------------   -----------------------------
                          Basic          Diluted          Basic          Diluted   
                      -------------   -------------   -------------   -------------
                       (As restated, See Note 13)                                  

EPS numerator: 

Net income            $      52,873   $      52,873   $      60,601   $      60,601

                      - -----------   - -----------   - -----------   - -----------

EPS denominator: 

Weighted average        209,186,270     209,186,270     207,728,191     207,728,191
shares outstanding                                                                 
Warrants                        -        12,956,257             -        11,124,720

Stock options                   -         2,486,807             -         2,100,095

Restricted stock             20,000          52,664             -               -  
units                                                                              
                      - -----------   - -----------   - -----------   - -----------

Total shares            209,206,270     224,681,998     207,728,191     220,953,006

                      - -----------   - -----------   - -----------   - -----------

Earnings per share    $        0.25   $        0.24   $        0.29   $        0.27

                      - -----------   - -----------   - -----------   - -----------

For the six month periods ended June 30, 2005 and 2004, basic and diluted earnings per share (EPS) were calculated as follows: 

                              Six Months Ended                Six Months Ended       

                                June 30, 2005                   June 30, 2004        
                        -----------------------------   -----------------------------
                            Basic          Diluted          Basic          Diluted   
                        -------------   -------------   -------------   -------------
                         (As restated, See Note 13)                                  

EPS numerator: 

Net income              $     113,642   $     113,642   $      96,507   $      96,507

                        - -----------   - -----------   - -----------   - -----------

EPS denominator: 

Weighted average          208,997,410     208,997,410     207,460,241     207,460,241
shares outstanding                                                                   
Warrants                          -        12,836,922             -        11,342,477

Stock options                     -         2,434,209             -         2,259,186

Restricted stock               20,000          52,787             -               -  
units                                                                                
                        - -----------   - -----------   - -----------   - -----------

Total shares              209,017,410     224,321,328     207,460,241     221,061,904

                        - -----------   - -----------   - -----------   - -----------

Earnings per share      $        0.54   $        0.51   $        0.47   $        0.44

                        - -----------   - -----------   - -----------   - -----------

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At June 30, 2005, MEMC had outstanding 9,610,076 options and 16,666,667 warrants. For the three months ended June 30, 2005 and 2004, options to purchase 298,652 and 3,613,540 shares, respectively, of MEMC stock were excluded from the calculation of diluted EPS because the effect was antidilutive. For the six months ended June 30, 2005 and 2004, options to purchase 336,853 and 3,312,777 shares, respectively, of MEMC stock were excluded from the calculation of diluted EPS because the effect was antidilutive. Stock options are antidilutive when the exercise price of the options is greater than the average market price of the common shares for the period. 

(5) Inventories

Inventories consist of the following: 

                                                       June 30,    December 31,
                                                         2005          2004    
                                                       ---------   ------------
                                                         (As                   
                                                       restated,               
                                                       See Note                
                                                          13)                  
Raw materials and supplies                             $  14,665         20,307

Goods in process                                          54,643         54,160

Finished goods                                            66,288         53,097

                                                       - -------   -- ---------

                                                       $ 135,596   $    127,564

                                                       - -------   -- ---------

(6) Comprehensive Income

Comprehensive income for the three months ended June 30, 2005 and 2004 was $46,021 and $65,319, respectively. Comprehensive income for the six months ended June 30, 2005 and 2004 was $102,186 and $98,466, respectively. MEMC s only adjustment from net income to comprehensive income was foreign currency translation adjustments in each period presented. 

(7) Debt

Our short-term unsecured borrowings from banks totaled approximately $1,583 at June 30, 2005, under approximately $71,728 of short-term loan agreements. 

Long-term borrowings outstanding were $128,351 at June 30, 2005, under $253,351 of long-term committed loan facilities. Of the $253,351 committed long-term loan agreements at June 30, 2005, $4,317 was unavailable as it related to the issuance of third party letters of credit. 

On July 21, 2005, the company entered into a Revolving Credit Agreement with National City Bank of the Midwest, US Bank National Association, and such other lending institutions as may from time to time become lenders (the  National City Agreement ). The National City Agreement provides for a $200,000 secured revolving credit facility and replaces the $150,000 revolving credit facility from Citibank/UBS and the $35,000 revolving credit facility from Texas Pacific Group and certain of its affiliates (TPG). 

                                    Page 6                                     

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The extinguishment of the Citibank/UBS and the TPG credit facilities will result in the write-off of approximately $1,900 of deferred financing fees. This loss will be recorded in nonoperating expenses for the three months ended September 30, 2005. 

(8) Income Taxes

For the six months ended June 30, 2005, we recognized income tax expense of $6,462, as compared to income tax expense of $853 for the six months ended June 30, 2004. As discussed in Note 13, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67,700 payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17,699, of the redemption payment should be deductible and we reversed a portion, or $7,783, of the contingent tax liability. The company also reversed a contingent tax liability of $9,218 primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

(9) Benefit Plans

Net periodic benefit cost consists of the following: 

               Three Months Ended      Three Months Ended      Six Months Ended         Six Months Ended  
                  June 30, 2005           June 30, 2004                                                   
               -------------------     -------------------      June 30, 2005            June 30, 2004    
                                                             --------------------     --------------------
               Pension      Health     Pension      Health   Pension      Health      Pension      Health 
                Plans        Care       Plans        Care     Plans        Care        Plans        Care  
               --------      Plan      --------      Plan    --------      Plan       --------      Plan  
                            ------                  ------                -------                  -------
Service Cost   $    970     $   92     $    973     $   60   $  1,940     $   184     $  1,955     $   120

Interest          2,365        657        2,265        743      4,730       1,314        4,534       1,486 Cost Expected         (1,880 )      -         (1,493 )      -       (3,760 )       -         (2,933 )       - return on plan assets Amortization          1        -              1        -            2         -              2         - of service costs Net                 396        (43 )        239        -          792         (86 )        513         - actuarial loss/(gain) Transition            6        -            -          -           12         -            -           - obligation recognized 
  - ------ -   - ---- -   - ------ -   - ----   - ------ -   - ----- -   - ------ -   - ----- 

Net periodic   $  1,858     $  706     $  1,985     $  803   $  3,716     $ 1,412     $  4,071     $ 1,606
benefit cost                                                                                              
               - ------ -   - ---- -   - ------ -   - ----   - ------ -   - ----- -   - ------ -   - -----

As discussed in Note 13, in the first quarter of 2005 the company recognized a one-time gain of $1,327 resulting from a correction to the benefit obligation of a pension plan. 

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. While we have determined that our plan will qualify for the federal subsidy payments beginning in 2006, we have not yet adjusted the accumulated benefit obligation and the net periodic postretirement benefit cost for any amount associated with the subsidy. We expect to reflect the subsidy in the accumulated benefit obligation and the net periodic postretirement benefit cost in the third quarter of 2005 following the finalization of the actuarial calculations. 

(10) Commitments and Contingencies 

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. 

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(11) Insurance Recovery 

In December 2004, our Italian plant experienced a minor fire. As a result, we incurred losses from property damage and business interruption in the first quarter of 2005. Costs of goods sold in the first quarter was charged for incremental costs of $1,100 and unfavorable manufacturing expense variances associated with the loss of production. In March 2005, we recorded an insurance recovery receivable of $2,700 that was recorded as a reduction of cost of goods sold. 

(12) Government Grant

We received a contract with the Department of Defense in the second quarter of 2005 related to the development of thin film silicon on insulator (SOI) wafers utilizing silicon layer transfer technology. The total contract value was $12,069, representing the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The contract provides for the government to reimburse the company $3,514 of the total costs to be incurred of $12,069 and is recognized on a percentage completion basis. For the three and six months ended June 30, 2005, the company recognized $1,002 as an offset of actual SOI costs incurred within research and development expenses. 

(13) Restatement of Consolidated Financial Statements 

The company has identified several adjustments that have resulted in a restatement of the previously reported consolidated financial statements as of June 30, 2005 and for the three and six months ended June 30, 2005. As a result of these adjustments, the company s consolidated net income decreased by $6,040 and $22,429, for the three and six months ended June 30, 2005, respectively. Net cash provided by operating activities for the three and six months ended June 30, 2005 was not affected by these adjustments. The adjustments are grouped into the following categories: 

Income Tax Benefit. In March 2005, the company recognized a benefit related to a deduction for which it had previously established a reserve in the fourth quarter of 2004 for the potential non-deductibility of a portion of a $67,700 interest payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. In the first quarter of 2005, the company obtained opinions from outside tax advisors indicating that the redemption payment should be deductible and we reversed this tax liability in an amount of approximately $26,583. The company has now determined that it should not rely on those opinions and that $18,800 of that amount should not have been reversed in connection with the deductibility of a portion of this redemption payment. This adjustment reduced the income tax benefit by $18,800 for the six months ended June 30, 2005. Additionally, the company reversed a contingent tax liability of $9,218 primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

Net Sales and Cost of Goods Sold. Adjustments to net sales and cost of goods sold included deliveries with internationally recognized shipment terms (the IncoTerm of ExWorks) that provided for the transfer of title and risk of loss upon customer notification. We now understand that ExWorks needs to meet the bill and hold  tests as defined by United States generally accepted accounting principles. These tests require separate letters from customers (in addition to the purchase orders) that were not available prior to the end of the reported quarter, but will be obtained by the company for future transactions. Other adjustments were related to the revenue recognized on deliveries for sales agreements entered into within proximate periods for current and longer term deliveries of polysilicon. The revenue for the deliveries in the first two quarters of 2005 was originally recorded at current invoice prices. It has been determined that the revenue recognized on current deliveries should be recorded at fair value, which fair value has now been deemed to be the average of the current and longer term prices. The adjustment for these transactions for the three months ended June 30, 2005, is a decrease of $1,400 and $2,223 to net sales and gross margin, respectively, and an increase of $823 to cost of goods sold. The impact of these adjustments to net sales, cost of goods sold and gross margin, for the six months ended June 30, 2005, is a decrease of $6,636, $1,670 and $4,966, respectively. Additionally, a correction was made of amounts improperly included in inventory. The impact of this adjustment was an increase to cost of goods sold and a decrease to gross margin of $926 for the three months ended March 31, 2005. 

Supplemental Executive Pension Plan. Amounts previously recorded as cost of goods sold and marketing and administration expenses in connection with our supplemental executive pension plan have been corrected for a data error in the estimated liability calculation. This adjustment decreased cost of goods sold and marketing and administration expenses by $939 and $388, respectively, for the three months ended March 31, 2005. 

Insurance Recovery. In December 2004, our Italian plant experienced a minor fire. As a result, we incurred losses from property damage and business interruption in the first quarter of 2005. Cost of goods sold was higher due to incremental costs of $1,100 and unfavorable manufacturing expense variances associated with the loss of production. In March 2005, we recorded an insurance recovery receivable of $3,400 that was recorded as a reduction of cost of goods sold. The company has now determined that it should record only the amount committed to date by the insurance company, rather than estimate the probable amount and therefore has increased cost of goods sold $700 with the offset to prepaids and other for the three months ended March 31, 2005. 

Warranty. The company engages in extensive product quality programs and processes, and offers a limited warranty to customers. The company has determined that its warranty reserve at March 31, 2005 was inadequate and therefore has increased cost of goods sold $363 with the offset to accrued liabilities for the three months ended March 31, 2005. 

Government Grant. We received a contract with the Department of Defense in the second quarter of 2005 related to the development of thin film silicon on insulator (SOI) wafers utilizing silicon layer transfer technology. The total contract value was $12,069, representing the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The contract provides for the government to reimburse the company $3,514 of the total costs to be incurred of $12,069. In anticipation of the contract, the company recognized a grant receivable of $300 as an offset to research and development expenses during the three months ended March 31, 2005. During the three months ended June 30, 2005, the company recognized the grant of $3,214 as an offset of actual SOI costs incurred within research and development expenses. The company has now determined that the grant should be recorded on a percentage completion basis. This adjustment increased research and development expenses $2,212 and $2,512 for the three and six months ended June 30, 2005, respectively. 

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The following table sets forth the consolidated statements of operations for the company, showing previously reported and restated amounts, for the three and six months ended June 30, 2005 (unaudited, in thousands, except per share data): 

                         Three Months Ended                   Six Months Ended          

                            June 30, 2005                       June 30, 2005           
                   -------------------------------     -------------------------------  
                   As previously      As restated      As previously      As restated   
                                     -------------                       -------------  
                     reported                            reported                       
                   -------------                       -------------                    
Net sales          $     275,388     $     273,988     $     533,242     $     526,606  

Cost of goods            174,956           175,779           339,533           338,913  
sold                                                                                    
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Gross margin             100,432            98,209           193,709           187,693  

Operating                                                                               
expenses:                                                                               
Marketing and             18,344            18,344            36,497            36,109  
administration                                                                          
Research and              11,008            13,220            22,405            24,917  
development                                                                             
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Operating income          71,080            66,645           134,807           126,667  

Nonoperating (income) expense: Interest expense           1,937             1,937             3,848             3,848 

Interest income             (991 )            (991 )          (1,702 )          (1,702 )

Currency losses              835               835             1,566             1,566  

Other, net                  (285 )            (285 )            (932 )            (932 )

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Total                      1,496             1,496             2,780             2,780  
nonoperating                                                                            
expense                                                                                 
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Income before             69,584            65,149           132,027           123,887 income taxes, equity in loss of joint venture and minority interests Income tax                 8,652            10,257            (7,827 )           6,462 (benefit) provision 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Income before             60,932            54,892           139,854           117,425 equity in loss of joint venture and minority interests Equity in loss               -                 -                 -                 - of joint venture Minority                  (2,019 )          (2,019 )          (3,783 )          (3,783 ) interests 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Net income         $      58,913     $      52,873     $     136,071     $     113,642  

                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Basic income per   $        0.28     $        0.25     $        0.65     $        0.54  
share                                                                                   
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Diluted income     $        0.26     $        0.24     $        0.61     $        0.51  
per share                                                                               
                   - ----------- -   - ----------- -   - ----------- -   - ----------- -

Weighted average     209,206,270       209,206,270       209,017,410       209,017,410 shares used in computing basic income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

Weighted average     224,681,998       224,681,998       224,321,328       224,321,328 shares used in computing diluted income per share 
  - ----------- -   - ----------- -   - ----------- -   - ----------- - 

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The following table sets forth the consolidated balance sheet for the company, showing previously reported and restated amounts, as of June 30, 2005 (unaudited, in thousands): 

                                                          As          As restated  
                                                      previously      -----------  

                                                       reported                    
                                                      -----------                  
ASSETS                                                                             

Current assets: 

Cash and cash equivalents                             $   100,997     $   100,997  

Accounts receivable, net                                  132,107         128,518  

Inventories                                               134,851         135,596  

Prepaid and other current assets                           27,257          24,045  

                                                      - --------- -   - --------- -

Total current assets                                      395,212         389,156  

Property, plant and equipment, net                        503,861         503,861  

Deferred tax assets, net                                  127,134         129,634  

Other assets                                               53,338          53,338  

                                                      - --------- -   - --------- -

Total assets                                          $ 1,079,545     $ 1,075,989  

                                                      - --------- -   - --------- -

LIABILITIES AND STOCKHOLDERS  EQUITY                                               

Current liabilities: 

Short-term borrowings and current portion of          $    21,709     $    21,709  
long-term debt                                                                     
Accounts payable                                          104,578         104,578  

Accrued liabilities                                        23,875          27,285  

Accrued wages and salaries                                 23,122          23,122  

Income taxes payable                                       25,629          23,388  

                                                      - --------- -   - --------- -

Total current liabilities                                 198,913         200,082  

Long-term debt, less current portion                      108,229         108,229  

Pension and similar liabilities                           113,204         111,878  

Other liabilities                                          45,348          64,378  

                                                      - --------- -   - --------- -

Total liabilities                                         465,694         484,567  

                                                      - --------- -   - --------- -

Minority interests                                         50,262          50,262  

Commitments and contingencies 

Stockholders  equity: 

Preferred stock                                               -               -    

Common stock                                                2,101           2,101  

Additional paid-in capital                                159,576         159,576  

Retained earnings                                         434,876         412,447  

Accumulated other comprehensive loss                      (28,844 )       (28,844 )

Deferred compensation                                        (492 )          (492 )

Treasury stock                                             (3,628 )        (3,628 )

                                                      - --------- -   - --------- -

Total stockholders  equity                                563,589         541,160  

                                                      - --------- -   - --------- -

Total liabilities and stockholders  equity            $ 1,079,545     $ 1,075,989  

                                                      - --------- -   - --------- -

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The following presents the impact of the restatement on the components of net cash provided by operating activities for the company, showing previously reported and restated amounts, for the six months ended June 30, 2005 (unaudited, in thousands): 

                                                                 As              As      
                                                              previously      restated   
                                                                              ---------  
                                                               reported                  
                                                              ----------                 
Cash flows from operating activities:                                                    
Net income                                                    $  136,071      $ 113,642  
Adjustments to reconcile net income to net cash provided                                 
by operating activities:                                                                 
Depreciation and amortization                                     27,702         27,702  
Interest accretion                                                   -              -    
Minority interests                                                 3,783          3,783  
Equity in income (loss) of joint venture                             -              -    
Stock compensation                                                   603            603  
Working capital and other                                        (48,948 )      (26,519 )
                                                              - -------- -    - ------- -
Net cash provided by operating activities                     $  119,211      $ 119,211  
                                                              - -------- -    - ------- -

Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations. 

As discussed in Note 13 to our consolidated financial statements included herein, we have restated our unaudited consolidated financial statements as of and for the three and six month periods ended June 30, 2005. All amounts included in this discussion and analysis reflect the effects of the restatement. 

Overview.

The company showed strong improvement in operating results in the first six months of 2005 compared to the first six months of 2004, despite what the company believes to be the bottoming quarter for the 9-month semiconductor industry production slowdown. The company is beginning to see customers ordering more in line with their end sales, although we continue to experience pricing pressure from the lingering effects of the industry slowdown/inventory correction period. 

Net Sales.

Our net sates increased by 7.2% to $274.0 million in the second quarter of 2005 from $255.5 million in the second quarter of 2004. For the six months ended June 30, 2005, net sales increased 8.7% to $526.6 million from $484.3 million. In both periods, the sales increase was primarily due to higher sales volumes in polysilicon products and wafer products. Year to year overall average wafer selling prices decreased 1.3% for the quarter and increased 1.0% for the six months. 

Gross Margin.

In the 2005 second quarter, our gross margin was $98.2 million compared to $87.2 million in the 2004 second quarter. As a percentage of net sales, gross margin improved to 35.8% in the 2005 second quarter from 34.1% in the second quarter of 2004. 

For the six months ended June 30, 2005, our gross margin was $187.7 million compared to $160.5 million for the six months ended June 30, 2004. As a percentage of net sales, gross margin improved to 35.6% in 2005 from 33.1% in 2004. 

The improved gross margin was primarily a result of the higher product volumes, especially 300 millimeter products, productivity improvements which lowered unit costs, increased sales and pricing on polysilicon products, and a one-time gain from a correction to the benefit obligation of a pension plan. 

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Marketing and Administration. 

Marketing and administration expenses increased by $0.5 million to $18.3 million for the three months ended June 30, 2005 compared to $17.8 million for the three months ended June 30, 2004. As a percentage of net sales, marketing and administration expenses decreased to 6.7% in the 2005 second quarter from 
7.0% in the 2004 period. 

For the six months ended June 30, 2005, marketing and administration expenses increased $1.1 million to $36.1 million from $35.0 million for the six months ended June 30, 2004. As a percentage of net sales, marketing and administration decreased to 6.9% in the 2005 period from 7.2% for the 2004 period. 

The increases were primarily a result of the increased freight on customer shipments related to the increase in large diameter product sales, higher tax-related professional fees and the increased cost of providing sample wafers to customers, partially offset by a one-time gain from a correction to the benefit obligation of a pension plan. 

Research and Development. 

Our research and development (R&D) expenses increased in the three months ended June 30, 2005 to $13.2 million compared to $9.3 million in the year ago period. As a percentage of net sales, R&D expenses increased to 4.8% for the 2005 second quarter from 3.6% in the 2004 second quarter. 

For the six months ended June 30, 2005, research and development expenses increased to $24.9 million from $18.2 million for the six months ended June 30, 2004. As a percentage of net sales, R&D expenses increased to 4.7% for the 2005 period from 3.8% for the 2004 period. 

We received a contract with the Department of Defense in the second quarter of 2005 related to the development of thin film silicon on insulator wafers utilizing silicon layer transfer technology (SOI). The total contract value was $12.1 million, representing the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The contract provides for the government to reimburse the company $3.5 million of the total costs to be incurred of $12.1 million and is recognized on a percentage completion basis. For the three and six months ended June 30, 2005, the company recognized $1.0 million as an offset of actual SOI costs incurred within research and development expenses. Other increased expenses were due to the efforts to increase our capability in the areas of flatness, particles and crystal defectivity. 

Operating Income.

Operating income increased to $66.6 million, or 24.3% of sales, in the second quarter of 2005 compared to $60.0 million, or 23.5% of sales, in the 2004 second quarter. 

For the six months ended June 30, 2005, operating income increased to $126.7 million, or 24.1% of sales, from $107.3 million, or 22.2% of sales, for the six months ended June 30, 2004. 

The improved operating results were primarily a result of the increases in sales and gross margin discussed above. 

Nonoperating (Income) Expense.

Interest Expense.

In the three months ended June 30, 2005, interest expense decreased to $1.9 million, compared to $3.6 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, interest expense decreased to $3.8 million from $6.9 million for the six months ended June 30, 2004. The decrease in interest expense was primarily the result of the redemption in December 2004 of the senior subordinated secured notes as well as the reduction of our South Korean debt throughout 2004. 

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Interest Income.

In the three months ended June 30, 2005, interest income decreased to $1.0 million, compared to $1.5 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, interest income decreased to $1.7 million from $3.0 million for the six months ended June 30, 2004. The decrease in interest income was primarily the result of the liquidations of short-term investments in South Korea to fund the reduction of our South Korean debt throughout 2004. 

Currency (Gains) Losses.

Currency losses in the three months ended June 30, 2005 were $0.8 million, compared to $7.5 million in the comparable 2004 period. For the six months ended June 30, 2005, currency losses were $1.6 million, compared to $1.1 million for the year ago period. 

On July 1, 2004, we designated a Yen-based intercompany loan as a long-term investment with settlement not planned or anticipated in the foreseeable future. Since we no longer expect settlement of this intercompany loan, foreign currency gains and losses from this loan are no longer being recorded in the Consolidated Statement of Operations. The $7.5 million currency loss in the three months ended June 30, 2004 was substantially a result of the revaluation of this Yen-based intercompany loan. The company had recorded a substantial gain in the three months ended March 31, 2004 resulting in the overall $1.1 million currency loss for the six months ended June 30, 2004. 

Other, Net.

In the three months ended June 30, 2005, our other nonoperating income decreased to $0.3 million compared to $0.5 million in the three months ended June 30, 2004. For the six months ended June 30, 2005, other nonoperating income decreased to $0.9 million from $2.4 million for the year ago period. This decrease was primarily a result of the recording of a $1.5 million gain in the first quarter of 2004 from a business interruption insurance recovery relating to a minor fire at Taisil in December 2003. 

Income Taxes.

For the three months ended June 30, 2005, we recorded income tax expense of $10.3 million, compared to an income tax benefit of $12.6 million for the three months ended June 30, 2004. For the six months ended June 30, 2005, we recognized income tax expense of $6.5 million compared to $0.9 million for the year ago period. 

During the three months ended June 30, 2004, the company reversed $25.3 million in valuation allowances against deferred tax assets based on our belief that it was more likely than not that certain deferred tax assets would be realized based on management s estimate of future earnings. 

As discussed in Note 13 to the consolidated financial statements, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67.7 million payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17.7 million, of the redemption payment should be deductible and we reversed a portion, or $7.8 million, of the contingent tax liability. The company also reversed a contingent tax liability of $9.2 million primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

Liquidity and Capital Resources.

In the six months ended June 30, 2005, we generated $119.2 million of cash from operating activities, compared to $129.9 million in the six months ended June 30, 2004. This decrease despite improved operating results was a result of the increase in working capital discussed below. 

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Accounts receivable of $128.5 million at June 30, 2005 decreased $12.2 million from $140.7 million at December 31, 2004. Days  sales outstanding improved to 43 days at June 30, 2005 compared to 48 days at December 31, 2004 based upon annualized sales for the respective immediately preceding quarter. This decrease in days sales outstanding was primarily attributable to the mix of customers and the more favorable payment terms received from solar industry customers. 

Our inventories increased $8.0 million to $135.6 million at June 30, 2005 from $127.6 million at December 31, 2004. Finished goods inventories increased primarily as a result of lower than forecasted shipments in the first half of 2005. Annualized inventory turns, calculated as the ratio of annualized respective quarterly cost of goods sold divided by the period-end inventory balance, remained constant at five for the three month periods ended June 30, 2005 and December 31, 2004. At June 30, 2005, we had approximately $21.9 million of inventory held on consignment, compared to $22.2 million at December 31, 2004. Related inventory reserves for obsolescence, lower of cost or market issues, or other impairments were $4.0 million at June 30, 2005 compared to $5.0 million at December 31, 2004. 

Our net deferred tax assets totaled $137.1 million as of June 30, 2005 versus $127.6 million at December 31, 2004 (of which $7.5 million and $7.8 million was included in prepaid and other current assets at June 30, 2005 and December 31, 2004, respectively). We provide for income taxes on a quarterly basis based on an estimated annual effective income tax rate. We believe it is more likely than not that, with our projections of future taxable income and after consideration of the valuation allowance, MEMC will generate sufficient taxable income to realize the benefits of the net deferred tax assets existing at June 30, 2005. As of June 30, 2005, we have valuation allowances of approximately $113.1 million reducing our net deferred tax assets. Approximately 25% of the remaining valuation allowances may not be available for future reversal as an income tax benefit on the consolidated statement of operations. 

Our accounts payable decreased $19.5 million to $104.6 million at June 30, 2005, compared to $124.1 million at the end of 2004. The decrease was partially a result of the decrease in capital expenditure-related payables following the end of the 300 millimeter expansion in Japan and the purchase of SOI related equipment domestically. 

Accrued liabilities decreased $10.4 million to $27.3 million at June 30, 2005, compared to $37.7 million at the end of 2004. The decrease was a result of a variety of items including the payment of U.S. property taxes, the payment of insurance premiums and the adjustment of certain benefits liabilities. 

Other noncurrent liabilities decreased $8.0 million to $64.4 million at June 30, 2005, compared to $72.4 million at the end of 2004. As discussed in Note 13 to the consolidated financial statements, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67.7 million payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17.7 million, of the redemption payment should be deductible and we reversed a portion, or $7.8 million, of the contingent tax liability. 

Our cash used in investing activities was $105.6 million for the six months ended June 30, 2005 compared to $129.7 million for the six months ended June 30, 2004. The 2004 period included the acquisition of the remaining interest in Taisil in the 2004 first quarter for $57.2 million, net of cash acquired. Capital expenditures increased $33.1 million to $105.6 million for the six months ended June 30, 2005 primarily related to increasing our capacity and capability for our next generation products, including 300 millimeter and silicon-on-insulator (SOI), by making incremental changes to our existing manufacturing facilities and manufacturing lines. The existing facilities may be modified to permit the manufacture of greater quantities of current products. Alternatively, with incremental improvements, the existing facilities may be modified to become capable of manufacturing next generation products. While 2005 capital expenditures are more heavily weighted toward the first half of the year with the 300 millimeter expansion in Taiwan and the purchase of SOI-related equipment, we still expect our 2005 capital expenditures will be approximately 15% of sales for the full year. 

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Cash used in financing activities was $9.0 million in the six months ended June 30, 2005 versus cash provided from financing activities of $26.0 million in the six months ended June 30, 2004. The change in cash from financing activities was primarily related to borrowing of $60.0 million on our Citibank/UBS credit facility to fund the acquisition of the remaining interest in Taisil in the 2004 first quarter and the payments on short-term borrowings and long-term debt of $4.6 million in 2005 compared to $31.7 million in 2004. 

Our unsecured short-term borrowings were approximately $1.6 million at June 30, 2005, under approximately $71.7 million of short-term loan agreements. Long-term borrowings outstanding were $128.4 million at June 30, 2005, under $253.4 million of committed long-term loan agreements. Of the $253.4 million committed long-term loan agreements at June 30, 2005, $4.3 million was unavailable as it related to the issuance of third party letters of credit. Our weighted average cost of borrowing was 3.4% at June 30, 2005 and 2.9% at December 31, 2004. Our total debt to capital ratio at June 30, 2005 was 18%, compared to 22% at December 31, 2004. 

We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital expenditures and working capital requirements. 

Recent Developments.

On July 21, 2005, the company entered into a Revolving Credit Agreement with National City Bank of the Midwest ( National City Bank ), US Bank National Association, and such other lending institutions as may from time to time become lenders (the  National City Agreement ). The National City Agreement provides for a $200 million secured revolving credit facility and replaces the $150 million revolving credit facility from Citibank/UBS (the  Citibank Facility ) and the $35 million revolving credit facility from TPG and certain of its affiliates (the  TPG Facility ). 

The National City Agreement has a term of five years. Interest on borrowings under the National City Agreement will be payable based on the company s election at LIBOR plus an applicable margin (currently 1.0%) or at a defined prime rate plus an applicable margin (currently 0.00%). The National City Agreement also provides for the company to pay various fees, including a commitment fee, on the unused portion of the lenders  commitments (such fee is currently set at 0.25% per annum). The National City Agreement contains covenants typical for credit arrangements of comparable size, such as minimum earnings before interest, taxes, depreciation and amortization and an interest coverage ratio. 

On July 21, 2005 we borrowed an aggregate of $60 million under the National City Agreement and used those funds to repay all outstanding amounts under the Citibank Facility; interest on this $60 million loan is due quarterly beginning October 1, 2005. The proceeds of subsequent borrowings under the National City Agreement will be used for working capital needs and to finance capital expenditures. 

The obligations of the company under the National City Agreement are guaranteed by certain subsidiaries of the company. The obligations of the company and the guaranty obligations of the subsidiaries are secured by a pledge of the capital stock of certain domestic and foreign subsidiaries of the company. The other assets of the company are not pledged as security for the National City Agreement as they were under the Citibank Facility and the TPG Facility. 

In connection with the execution of the National City Agreement, we terminated the Citibank Facility upon the repayment by the company of all amounts then outstanding. In addition, the company terminated the TPG Facility and the reimbursement agreement among the company and certain TPG entities. Those TPG entities had guaranteed the company s obligations under the Citibank Facility and the TPG Facility and in return, the Company had entered into a reimbursement agreement with those guarantors under which the company agreed to reimburse them for any payment made under the guaranties. 

On July 21, 2005, all of the liens and security interests of Citibank, UBS and the other lenders under the Citibank Facility and the TPG entities under the TPG Facility on and in our assets were released, as were the subsidiaries guarantees of MEMC s repayment obligations. 

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The extinguishment of the Citibank Facilities and the TPG Facility will result in the write-off of approximately $1.9 million of deferred financing fees. This loss will be recorded in nonoperating expenses for the three months ended September 30, 2005. 

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates of certain amounts included in the financial statements. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. MEMC s significant accounting policies are more fully discussed in Exhibit 13 to our annual report on Form 10-K for the fiscal year ended December 31, 2004. 

Inventory

The valuation of inventory requires us to estimate excess and obsolete inventory. The determination of the value of excess and obsolete inventory is based upon assumptions of future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. 

Property, Plant and Equipment

We depreciate our land improvements, building and building improvements, and machinery and equipment evenly over the assets  estimated useful lives. Changes in circumstances such as technological advances, changes in our business model, or changes in our capital strategy could result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened or lengthened, we depreciate the net book value over its remaining useful life. 

Income Taxes

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as temporary differences. We record the tax effect of these temporary differences as deferred tax assets (generally items that can be used as a tax deduction or credit in future periods) and deferred tax liabilities (generally items that we received a tax deduction for, but have not yet been recorded in the Consolidated Statement of Operations). We regularly review our deferred tax assets for realizability and adjust the valuation allowance based upon our judgement as to whether it is more likely than not that some items recorded as deferred tax assets will be realized, taking into consideration all available evidence, both positive and negative, including historical pre-tax and taxable income (losses), projected future pre-tax and taxable income (losses) and the expected timing of the reversals of existing temporary differences. In arriving at these judgements, the weight given to the potential effect of all positive and negative evidence is commensurate with the extent to which it can be objectively verified. 

We provide for U.S. income taxes, net of available foreign tax credits, on earnings of consolidated international subsidiaries that we plan to remit to the U.S. We do not provide for U.S. income taxes on the remaining earnings of these subsidiaries, as we expect to reinvest these earnings overseas or we expect the taxes to be minimal based upon available foreign tax credits. 

Employee-related Liabilities

We have a long-term liability for our defined benefit pension plans. Our pension obligation is funded in accordance with provisions of federal law. 

Our pension liability is actuarially determined, and we use various actuarial assumptions, including the discount rate, rate of salary increase, and expected return on assets, to estimate our costs and obligations. If our assumptions do not materialize as expected, expenditures and costs that we incur could differ from our current estimates. 

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Revenue Recognition

We generally record revenue from product sales when the goods are shipped and title passes to the customer. Our wafers are generally made to customer specifications at plant sites that have been pre-qualified by the customer. We conduct rigorous quality control and testing procedures to ensure that the finished wafers meet the customer s specifications before the product is shipped. In the case of most of our polysilicon sales, delivery terms provide for the transfer of title and risk of loss prior to shipment but we do not recognize revenue prior to shipment. For sales arrangements that contain future deliveries (in the case of some of our polysilicon arrangements), revenue is not recognized on current deliveries unless the fair value of pricing can be determined based on specific objective evidence. 

Stock-based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees , and related interpretations. We record compensation expense related to restricted stock units awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under the plans when the exercise price of the stock options equals the market price on the date of the grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below the market price on the date of the grant and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. 

Recently Issued Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board ( FASB ) issued Statement of Financial Accounting Standard ( SFAS ) No. 154,  Accounting Changes and Error Corrections  ( SFAS 154 ) which replaces Accounting Principles Board Opinions No. 20  Accounting Changes  and SFAS No. 3,  Reporting Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by MEMC in the first quarter of 2006. MEMC is currently evaluating the effect that the adoption of SFAS 154 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact. 

In March 2005, the FASB issued FIN 47,  Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143  ( FIN 47 ), which requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability s fair value can be reasonably estimated. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005 for MEMC. MEMC is currently evaluating the effect that the adoption of FIN 47 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact. 

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ( SAB 107 ) regarding the SEC s interpretation of SFAS 123R and the valuation of share-based payments for public companies. MEMC is evaluating the requirements of SFAS 123R and SAB 107 and we expect that the adoption of SFAS 123R will have an estimated negative $0.03 to $0.04 impact on diluted earnings per share for the year ended December 31, 2006. 

In December 2004, the Financial Accounting Standards Board ( FASB ) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment  ( SFAS 123R ), which replaces SFAS No. 123,  Accounting for Stock-Based Compensation  (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning in our year ended December 31, 2006, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. Under SFAS 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We have not yet determined the method of adoption. 

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In December 2004, FASB issued FASB Staff Position ( FSP ) No. 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004  ( FSP 109-2 ), which provides guidance under FASB Statement No. 109,  Accounting for Income Taxes, with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the  Jobs Act ) on enterprises income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. We expect to make our repatriation determination during the third quarter of 2005. Accordingly, as provided for in FSP 109-2, we have not adjusted our tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. 

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. While we have determined that our plan will qualify for the federal subsidy payments beginning in 2006, we have not yet adjusted the accumulated benefit obligation and the net periodic postretirement benefit cost for any amount associated with the subsidy. We expect to reflect the subsidy in the accumulated benefit obligation and the net periodic postretirement benefit cost in the third quarter of 2005 following the finalization of the actuarial calculations. 

The adoption of the following recent accounting pronouncements did not have a material impact on our results of operations and financial condition: 

.    SFAS No. 151,  Inventory Costs-An Amendment of ARB No. 43, Chapter 4 and 

.    SFAS No. 153,  Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29. 

Cautionary Statement Regarding Forward-Looking Statements

This Form 8-K contains  forward-looking  statements within the meaning of the Securities Litigation Reform Act of 1995, including those concerning our expectation that we may need to adjust our valuation allowances during the remaining six months of 2005 if financial results continue to improve; our expectation that we will generate sufficient taxable income to 

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realize the benefits of net deferred tax assets existing as of June 30, 2005; our expectation that capital expenditures will be approximately 15% of sales for 2005; our belief that we have the financial resources needed to meet business requirements for the next twelve months including capital expenditure and working capital requirements; our expectation that the adoption of SFAS 123R will have an estimated negative impact on diluted earnings per share of $0.03 to $0.04 for the year ending December 31, 2006; and our belief that the implementation of SFAS 154 and FIN 47 will not have a material effect on our financial condition or results of operations. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as: market demand for wafers and semiconductors; customer acceptance of our new products; utilization of manufacturing capacity; our ability to reduce manufacturing and operating costs; inventory levels of our customers; changes in the pricing environment; general economic conditions; the accuracy of our assumptions regarding future book and taxable income; actions by our competitors, customers and suppliers; the impact of competitive products and technologies; technological changes; changes in product specifications and manufacturing processes; changes in financial market conditions; changes in interest and currency exchange rates; changes in the composition of worldwide taxable income; our ability to obtain commitments from lenders and close the new line of credit on the terms set forth in the engagement letter; the accuracy of our assumptions regarding the impact of the adoption of SFAS 123R on our consolidated results of operations and earnings per share; and other risks described in MEMC s filing with the Securities and Exchange Commission, including MEMC s annual report on Form 10-K for the year ended December 31, 2004. 

Page 19 

                                                                   Exhibit 99.4

                        PART I - FINANCIAL INFORMATION                         

Item 1 - Financial Statements.

MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                     CONSOLIDATED STATEMENTS OF OPERATIONS                     

(Unaudited; Dollars in thousands, except share data) 

                                                     Three Months Ended         

                                                         March 31,              
                                              --------------------------------  
                                                  2005               2004       
                                              -------------      -------------  
                                              (As restated,                     

                                              see Note 12)                      
Net sales                                     $     252,618      $     228,760  
Cost of goods sold                                  163,134            155,417  
                                              - ----------- -    - ----------- -
Gross margin                                         89,484             73,343  
Operating expenses:                                                             
Marketing and administration                         17,765             17,188  
Research and development                             11,697              8,913  
                                              - ----------- -    - ----------- -
Operating income                                     60,022             47,242  
                                              - ----------- -    - ----------- -
Nonoperating (income) expense:                                                  
Interest expense                                      1,911              3,319  
Interest income                                        (711 )           (1,549 )
Currency (gains) losses                                 731             (6,364 )
Other, net                                             (647 )           (1,898 )
                                              - ----------- -    - ----------- -
Total nonoperating (income) expense                   1,284             (6,492 )
                                              - ----------- -    - ----------- -
Income before income taxes, equity in loss           58,738             53,734  
of joint venture and minority interests                                         
Income tax provision (benefit)                       (3,795 )           13,434  
                                              - ----------- -    - ----------- -
Income before equity in loss of joint                62,533             40,300  
venture and minority interests                                                  
Equity in loss of joint venture                         -               (1,717 )
Minority interests                                   (1,764 )           (2,677 )
                                              - ----------- -    - ----------- -
Net income                                    $      60,769      $      35,906  
                                              - ----------- -    - ----------- -
Basic income per share                        $        0.29      $        0.17  
Diluted income per share                      $        0.27      $        0.16  
                                              - ----------- -    - ----------- -
Weighted average shares used in computing       208,826,451        207,192,291  
basic income per share                                                          
Weighted average shares used in computing       223,934,369        222,131,836  
diluted income per share                                                        
                                              - ----------- -    - ----------- -

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                          CONSOLIDATED BALANCE SHEETS                          

(Dollars in thousands, except share data) 

                                                     March 31,       December    
                                                       2005             31,      
                                                    -----------        2004      
                                                                    -----------  
                                                    (Unaudited)                  

                                                     see Note                    
                                                        12)                      
ASSETS                                                                           

Current assets: 

Cash and cash equivalents                           $   116,319     $    92,314  

Accounts receivable, less allowance for doubtful        127,330         140,728 accounts of $1,555 and $1,633 in 2005 and 2004, respectively Inventories                                             136,833         127,564 

Prepaid and other current assets                         27,220          29,724  

                                                    - --------- -   - --------- -

Total current assets                                    407,702         390,330  

Property, plant and equipment, net of accumulated       476,338         444,670 depreciation of $205,466 and $198,595 in 2005 and 2004, respectively Deferred tax assets, net                                125,105         119,835 

Other assets                                             54,527          55,107  

                                                    - --------- -   - --------- -

Total assets                                        $ 1,063,672     $ 1,009,942  

                                                    - --------- -   - --------- -

LIABILITIES AND STOCKHOLDERS  EQUITY                                             

Current liabilities: 

Short-term borrowings and current portion of        $    23,056     $    24,399  
long-term debt                                                                   
Accounts payable                                        133,380         124,083  

Accrued liabilities                                      23,788          37,743  

Accrued wages and salaries                               24,080          19,117  

Income taxes payable                                     18,828          10,282  

                                                    - --------- -   - --------- -

Total current liabilities                               223,132         215,624  

Long-term debt, less current portion                    113,345         116,082  

Pension and similar liabilities                         114,892         116,427  

Other liabilities                                        60,743          72,432  

                                                    - --------- -   - --------- -

Total liabilities                                       512,112         520,565  

                                                    - --------- -   - --------- -

Minority interests                                       48,242          46,479  

Commitments and contingencies 

Stockholders  equity: 

Preferred stock, $.01 par value, 50,000,000                 -               - shares authorized, none issued and outstanding at 2005 and 2004 Common stock, $.01 par value, 300,000,000 shares          2,098           2,091 authorized, 209,829,078 and 209,108,105 issued at 2005 and 2004, respectively Additional paid-in capital                              158,448         154,736 

Retained earnings                                       369,120         308,351  

Accumulated other comprehensive loss                    (21,992 )       (17,389 )

Deferred compensation                                      (728 )        (1,263 )

Treasury stock, 714,205 shares in 2005 and 2004          (3,628 )        (3,628 )

                                                    - --------- -   - --------- -

Total stockholders  equity                              503,318         442,898  

                                                    - --------- -   - --------- -

Total liabilities and stockholders  equity          $ 1,063,672     $ 1,009,942  

                                                    - --------- -   - --------- -

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited; Dollars in thousands) 

                                                         Three Months Ended     
                                                              March 31,         
                                                       -----------------------  
                                                         2005          2004     
                                                       ---------     ---------  
                                                         (As                    
                                                       restated,                

                                                       see Note                 
                                                          12)                   
Cash flows from operating activities:                                           

Net income                                             $  60,769     $  35,906  

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                             13,339         9,921 

Interest accretion                                           221         1,081  

Minority interests                                         1,764         2,677  

Equity in income (loss) of joint venture                     -           1,717  

Stock compensation                                           386           718  

Working capital and other                                 (3,134 )      (4,506 )

                                                       - ------- -   - ------- -

Net cash provided by operating activities                 73,345        47,514  

                                                       - ------- -   - ------- -

Cash flows from investing activities: 

Capital expenditures                                     (54,432 )     (26,089 )

Purchase of business, net of cash acquired                   -         (57,226 )

                                                       - ------- -   - ------- -

Net cash used in investing activities                    (54,432 )     (83,315 )

                                                       - ------- -   - ------- -

Cash flows from financing activities: 

Net short-term borrowings                                   (171 )      (1,221 )

Proceeds from issuance of long-term debt                     -          60,014  

Principal payments on long-term debt                        (883 )        (962 )

Proceeds from issuance of common stock                     3,867         1,856  

                                                       - ------- -   - ------- -

Net cash provided by financing activities                  2,813        59,687  

                                                       - ------- -   - ------- -

Effect of exchange rate changes on cash and cash           2,279         1,934  
equivalents                                                                     
                                                       - ------- -   - ------- -

Net increase in cash and cash equivalents                 24,005        25,820  

Cash and cash equivalents at beginning of period          92,314        96,859  

                                                       - ------- -   - ------- -

Cash and cash equivalents at end of period             $ 116,319     $ 122,679  

                                                       - ------- -   - ------- -

See accompanying notes to consolidated financial statements. 

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MEMC ELECTRONIC MATERIALS, INC. AND SUBSIDIARIES 

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                   

(Dollars in thousands, except share data) 

(1) Nature of Operations

We are a leading worldwide producer of wafers for the semiconductor industry. We operate manufacturing facilities in every major semiconductor manufacturing region throughout the world, including Europe, Japan, Malaysia, South Korea, Taiwan and the United States. Our customers include virtually all of the major semiconductor device manufacturers in the world. We provide wafers in sizes ranging from 100 millimeters (4 inch) to 300 millimeters (12 inch) and in three general categories: prime polished, epitaxial and test/monitor. A prime polished wafer is a highly refined, pure wafer with an ultra-flat and ultra-clean surface. An epitaxial wafer consists of a thin, silicon layer grown on the polished surface of the wafer. A test/monitor wafer is substantially the same as a prime polished wafer, but with some less rigorous specifications. 

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(2) Significant Accounting Policies 

Stock-Based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees , and related interpretations. We record compensation expense related to restricted stock units awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under the plans when the exercise price of the stock options equals the market price on the date of grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below market price on the grant date and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. Had compensation cost been determined for our non-qualified stock options based on the fair value at the grant dates consistent with the alternative method set forth under Statement of Financial Accounting Standards No. 123,  Accounting for Stock-Based Compensation,  we would have reported the amounts indicated below: 

                                                 Three Months Ended     
                                                      March 31,         
                                               -----------------------  
                                                 2005           2004    
                                               ---------      --------  
                                                 (As                    
                                               restated,                

                                               see Note                 
                                                  12)                   
Net income, as reported                        $  60,769      $ 35,906  
Add:                                                                    
Stock-based employee compensation included           240           718  
in reported net income, net of related tax                              
effects                                                                 
Deduct:                                                                 
Total stock-based compensation expense            (2,425 )      (5,084 )
determined under fair value based method                                
for all awards, net of related tax effects                              
                                               - ------- -    - ------ -
Pro forma net income                           $  58,584      $ 31,540  
                                               - ------- -    - ------ -
Income per share:                                                       
Basic-as reported                              $    0.29      $   0.17  
Diluted-as reported                            $    0.27      $   0.16  
                                               - ------- -    - ------ -
Basic-pro forma                                $    0.28      $   0.15  
Diluted-pro forma                              $    0.26      $   0.14  
                                               - ------- -    - ------ -

(3) Basis of Presentation

The accompanying unaudited consolidated financial statements of MEMC Electronic Materials, Inc. and subsidiaries (MEMC), in our opinion, include all adjustments (consisting of normal, recurring items) necessary to present fairly MEMC s financial position and results of operations and cash flows for the periods presented. We have presented the consolidated financial statements in accordance with the requirements of Regulation S-X and consequently do not include all disclosures required by U.S. generally accepted accounting principles. This unaudited consolidated financial information has not yet been reviewed by the company s independent registered public accountants and is subject to that review before filing on Form 10-Q. These unaudited consolidated financial statements, should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2004, which contains MEMC s audited financial statements for such year and the related management s discussion and analysis of financial condition and results of operations. Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. 

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(4) Earnings per share 

For the three month periods ended March 31, 2005 and 2004, basic and diluted earnings per share (EPS) were calculated as follows: 

                           Three Months Ended              Three Months Ended      

                             March 31, 2005                  March 31, 2004        
                      -----------------------------   -----------------------------
                          Basic          Diluted          Basic          Diluted   
                      -------------   -------------   -------------   -------------
                       (As restated, see Note 12)                                  

EPS numerator: 

Net income            $      60,769   $      60,769   $      35,906   $      35,906

                      - -----------   - -----------   - -----------   - -----------

EPS denominator: 

Weighted average        208,806,451     208,806,451     207,192,291     207,192,291
shares outstanding                                                                 
Warrants                        -        12,703,163             -        11,534,830

Stock options                   -         2,377,593             -         3,404,715

Restricted stock             20,000          47,162             -               -  
units                                                                              
                      - -----------   - -----------   - -----------   - -----------

Total shares            208,826,451     223,934,369     207,192,291     222,131,836

                      - -----------   - -----------   - -----------   - -----------

Earnings per share    $        0.29   $        0.27   $        0.17   $        0.16

                      - -----------   - -----------   - -----------   - -----------

At March 31, 2005, MEMC had outstanding 8,949,529 options and 16,666,667 warrants. For the three months ended March 31, 2005 and 2004, options to purchase 444,467 and 2,980,585 shares, respectively, of MEMC stock were excluded from the calculation of diluted EPS because the effect was antidilutive. Stock options are antidilutive when the exercise price of the options is greater than the average market price of the common shares for the period. 

(5) Inventories

                                                 March 31,    December 
                                                   2005          31,   
                                                 ---------      2004   
                                                              ---------
                                                   (As                 
                                                 restated,             

                                                 see Note              
                                                    12)                
Inventories consist of the following:                                  
Raw materials and supplies                       $  17,127    $  20,307
Goods in process                                    52,141       54,160
Finished goods                                      67,565       53,097
                                                 - -------    - -------
                                                 $ 136,833    $ 127,564
                                                 - -------    - -------

(6) Comprehensive Income

Comprehensive income for the three months ended March 31, 2005 and 2004 was $56,165 and $33,147, respectively. MEMC s only adjustment from net income to comprehensive income was foreign currency translation adjustments in each period presented. 

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(7) Debt

Our short-term unsecured borrowings from banks totaled approximately $1,584 at March 31, 2005, under approximately $73,670 of short-term loan agreements. 

Long-term borrowings outstanding were $134,817 at March 31, 2005, under $259,817 of long-term committed loan facilities. Of the $259,817 committed long-term loan agreements, $4,317 is unavailable as it relates to the issuance of third party letters of credit. 

(8) Income Taxes

For the three months ended March 31, 2005, we recognized an income tax benefit of $3,795, as compared to income tax expense of $13,434 for the three months ended March 31, 2004. As discussed in Note 12, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67,700 payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17,699, of the redemption payment should be deductible and we reversed a portion, or $7,783, of the contingent tax liability. The company also reversed a contingent tax liability of $9,218 primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

(9) Benefit Plans

Net periodic benefit cost consists of the following: 

                                     Three Months Ended      Three Months Ended 
                                       March 31, 2005          March 31, 2004   
                                     -------------------     -------------------
                                     Pension      Health     Pension      Health
                                      Plans        Care       Plans        Care 
                                     --------     Plans      --------     Plans 
                                                  ------                  ------
Service cost                         $    970     $   92     $    982     $   60

Interest cost                           2,365        657        2,269        743

Expected return on plan assets         (1,880 )      -         (1,440 )      -  

Amortization of service costs               1        -              1        -  

Net actuarial loss/(gain)                 396        (43 )        274        -  

Transition obligation recognized            6        -            -          -  

                                     - ------ -   - ---- -   - ------ -   - ----

Net periodic benefit cost            $  1,858     $  706     $  2,086     $  803

                                     - ------ -   - ---- -   - ------ -   - ----

As discussed in Note 12, in the first quarter of 2005 the company recognized a one-time gain of $1,327 resulting from a correction to the benefit obligation of a pension plan. 

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. Due to the lack of information or guidance from Health and Human Services, it is not clear 

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whether our plan will qualify for the federal subsidy payments beginning in 2006. Therefore, the accumulated pension benefit obligation and the net periodic postretirement benefit cost do not reflect any amount associated with the subsidy. 

(10) Commitments and Contingencies 

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. 

(11) Insurance Recovery

In December 2004, our Italian plant experienced a minor fire. As a result, we incurred losses from property damage and business interruption in the first quarter of 2005. Costs of goods sold was charged for incremental costs of $1,100 and unfavorable manufacturing expense variances associated with the loss of production. In March 2005, we recorded an insurance recovery receivable of $2,700 (restated as discussed in Note 12) that was recorded as a reduction of cost of goods sold. 

(12) Restatement of Consolidated Financial Statements 

The company has identified several adjustments that have resulted in a restatement of the previously reported consolidated financial statements as of and for the three months ended March 31, 2005. As a result of these adjustments, the company s consolidated net income decreased by $16,389 for the three months ended March 31, 2005. Net cash provided by operating activities for the three months ended March 31, 2005 was not affected by these adjustments. The adjustments are grouped into the following categories: 

Income Tax Benefit. In March 2005, the company recognized a benefit related to a deduction for which it had previously established a reserve in the fourth quarter of 2004 for the potential non-deductibility of a portion of a $67,700 interest payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. In the first quarter of 2005, the company obtained opinions from outside tax advisors indicating that the redemption payment should be deductible and we reversed this tax liability in an amount of approximately $26,583. The company has now determined that it should not rely on those opinions and that $18,800 of that amount should not have been reversed in connection with the deductibility of a portion of this redemption payment. This adjustment reduced the income tax benefit by $18,800 for the three months ended March 31, 2005. Additionally, the company reversed a contingent tax liability of $9,218 primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

Net Sales and Cost of Goods Sold. Adjustments to net sales and cost of goods sold included deliveries with internationally recognized shipment terms (the IncoTerm of ExWorks) that provided for the transfer of title and risk of loss upon customer notification. We now understand that ExWorks needs to meet the bill and hold  tests as defined by United States generally accepted accounting principles. These tests require separate letters from customers (in addition to the purchase orders) that were not available prior to the end of the reported quarter, but will be obtained by the company for future transactions. Other adjustments were related to the revenue recognized on deliveries for sales agreements entered into within proximate periods for current and longer term deliveries of polysilicon. The revenue for the deliveries in the current quarter was originally recognized at current invoice prices. It has been determined that the revenue recognized on current deliveries should be recorded at fair value, which fair value has now been deemed to be the average of the current and longer term prices. The adjustment for these transactions to net sales, cost of goods sold and gross margin is a decrease of $5,236, $2,494 and $2,742, respectively for the three months ended March 31, 2005. Additionally, a correction was made of amounts improperly included in inventory. The impact of this adjustment was an increase to cost of goods sold and a decrease to gross margin of $926 for the three months ended March 31, 2005. 

Supplemental Executive Pension Plan. Amounts previously recorded as cost of goods sold and marketing and administration expenses in connection with our supplemental executive pension plan have been corrected for a data error in the estimated liability calculation. This adjustment decreased cost of goods sold and marketing and administration expenses by $939 and $388, respectively, for the three months ended March 31, 2005. 

Insurance Recovery. In December 2004, our Italian plant experienced a minor fire. As a result, we incurred losses from property damage and business interruption in the first quarter of 2005. Cost of goods sold was higher due to incremental costs of $1,100 and unfavorable manufacturing expense variances associated with the loss of production. In March 2005, we recorded an insurance recovery receivable of $3,400 that was recorded as a reduction of cost of goods sold. The company has now determined that it should record only the amount committed to date by the insurance company, rather than estimate the probable amount and therefore has increased cost of goods sold $700 with the offset to prepaids and other as of March 31, 2005. 

Warranty. The company engages in extensive product quality programs and processes, and offers a limited warranty to customers. The company has determined that its warranty reserve at March 31, 2005 was inadequate and therefore has increased cost of goods sold $363 with the offset to accrued liabilities as of March 31, 2005. 

Government Grant. In anticipation of a Department of Defense contract we received in the second quarter of 2005 related to the development of thin film silicon on insulator (SOI) wafers utilizing silicon layer transfer technology, the company recognized a grant receivable of $300 as an offset to research and development expenses during the three months ended March 31, 2005. The subsequent contract provides for the government to reimburse the company $3,514 of the total costs to be incurred of $12,069. The total contract value of $12,069, represents the proposed development costs expected to be incurred by the company during the nine month period from April 1 through December 31, 2005. The company has now determined that the grant should be recorded on a percentage completion basis. This adjustment increased research and development expenses $300 with the offset to prepaids and other as of March 31, 2005. 

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The following table sets forth the consolidated statement of operations for the company, showing previously reported and restated amounts, for the three months ended March 31, 2005 (unaudited, in thousands, except per share data): 

                                              As previously       As restated   
                                                                 -------------  
                                                reported                        
                                              -------------                     
Net sales                                     $     257,854      $     252,618  
Cost of goods sold                                  164,577            163,134  
                                              - ----------- -    - ----------- -
Gross margin                                         93,277             89,484  
Operating expenses:                                                             
Marketing and administration                         18,153             17,765  
Research and development                             11,397             11,697  
                                              - ----------- -    - ----------- -
Operating income                                     63,727             60,022  
Nonoperating (income) expense:                                                  
Interest expense                                      1,911              1,911  
Interest income                                        (711 )             (711 )
Currency losses                                         731                731  
Other, net                                             (647 )             (647 )
                                              - ----------- -    - ----------- -
Total nonoperating expense                            1,284              1,284  
                                              - ----------- -    - ----------- -
Income before income taxes, equity in loss           62,443             58,738  
of joint venture and minority interests                                         
Income tax (benefit) provision                      (16,479 )           (3,795 )
                                              - ----------- -    - ----------- -
Income before equity in loss of joint                78,922             62,533  
venture and minority interests                                                  
Equity in loss of joint venture                         -                  -    
Minority interests                                   (1,764 )           (1,764 )
                                              - ----------- -    - ----------- -
Net income                                    $      77,158      $      60,769  
                                              - ----------- -    - ----------- -
Basic income per share                        $        0.37      $        0.29  
                                              - ----------- -    - ----------- -
Diluted income per share                      $        0.34      $        0.27  
                                              - ----------- -    - ----------- -
Weighted average shares used in computing       208,826,451        208,826,451  
basic income per share                                                          
                                              - ----------- -    - ----------- -
Weighted average shares used in computing       223,934,369        223,934,369  
diluted income per share                                                        
                                              - ----------- -    - ----------- -

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The following table sets forth the consolidated balance sheet for the company, showing previously reported and restated amounts, as of March 31, 2005 (unaudited, in thousands): 

                                                          As          As restated  
                                                      previously      -----------  

                                                       reported                    
                                                      -----------                  
ASSETS                                                                             

Current assets: 

Cash and cash equivalents                             $   116,319     $   116,319  

Accounts receivable, net                                  130,534         127,330  

Inventories                                               135,266         136,833  

Prepaid and other current assets                           28,220          27,220  

                                                      - --------- -   - --------- -

Total current assets                                      410,339         407,702  

Property, plant and equipment, net                        476,338         476,338  

Deferred tax assets, net                                  126,766         125,105  

Other assets                                               54,527          54,527  

                                                      - --------- -   - --------- -

Total assets                                          $ 1,067,970     $ 1,063,672  

                                                      - --------- -   - --------- -

LIABILITIES AND STOCKHOLDERS  EQUITY                                               

Current liabilities: 

Short-term borrowings and current portion of          $    23,056     $    23,056  
long-term debt                                                                     
Accounts payable                                          133,380         133,380  

Accrued liabilities                                        21,393          23,788  

Accrued wages and salaries                                 24,080          24,080  

Income taxes payable                                       21,855          18,828  

                                                      - --------- -   - --------- -

Total current liabilities                                 223,764         223,132  

Long-term debt, less current portion                      113,345         113,345  

Pension and similar liabilities                           116,219         114,892  

Other liabilities                                          46,693          60,743  

                                                      - --------- -   - --------- -

Total liabilities                                         500,021         512,112  

                                                      - --------- -   - --------- -

Minority interests                                         48,242          48,242  

Commitments and contingencies 

Stockholders  equity: 

Preferred stock                                               -               -    

Common stock                                                2,098           2,098  

Additional paid-in capital                                158,448         158,448  

Retained earnings                                         385,509         369,120  

Accumulated other comprehensive loss                      (21,992 )       (21,992 )

Deferred compensation                                        (728 )          (728 )

Treasury stock                                             (3,628 )        (3,628 )

                                                      - --------- -   - --------- -

Total stockholders  equity                                519,707         503,318  

                                                      - --------- -   - --------- -

Total liabilities and stockholders  equity            $ 1,067,970     $ 1,063,672  

                                                      - --------- -   - --------- -

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The following table presents the impact of the restatement on the components of net cash provided by operating activities for the company, showing previously reported and restated amounts, for the three months ended of March 31, 2005 (unaudited, in thousands): 

                                                         As             As      
                                                      previously      restated  
                                                                      --------  
                                                       reported                 
                                                      ----------                
Cash flows from operating activities:                                           
Net income                                            $   77,158      $ 60,769  
Adjustments to reconcile net income to net cash                                 
provided by operating activities:                                               
Depreciation and amortization                             13,339        13,339  
Interest accretion                                           221           221  
Minority interests                                         1,764         1,764  
Equity in income (loss) of joint venture                     -             -    
Stock compensation                                           386           386  
Working capital and other                                (19,523 )      (3,134 )
                                                      - -------- -    - ------ -
Net cash provided by operating activities             $   73,345      $ 73,345  
                                                      - -------- -    - ------ -

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Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations. 

As discussed in Note 12 to our consolidated financial statements included herein, we have restated our unaudited consolidated financial statements as of and for the three month period ended March 31, 2005. All amounts included in this discussion and analysis reflect the effects of the restatement. 

Overview.

The company showed strong improvement in operating results in the 2005 first quarter compared to the 2004 first quarter. However, sales and operating income were down slightly from the 2004 fourth quarter. Prevailing market conditions and the slower than expected customer ramps in March 2005 impacted sales in the first quarter of 2005. We have addressed two specific customer issues causing the temporary slowdown and implemented appropriate actions to increase volumes. Overall, despite the softness in our markets, we continued to maintain approximately flat margins sequentially, primarily through continued cost reductions. 

Additionally, in February 2005 we completed a 65 million share stock offering on behalf of the investor group led by Texas Pacific Group. In association with this reduced ownership stake, TPG agreed to terminate its management advisory agreement and the associated $2 million annual fee. We also signed an engagement letter to establish a new line of credit for $150 million. This new line of credit will have more favorable terms and financial covenants than the company s existing facilities. 

Net Sales.

Our net sales increased by 10.4% to $252.6 million in the first quarter of 2005 from $228.8 million in the first quarter of 2004. This increase was primarily due to increased sales of polysilicon products, a 3.9% increase in wafer product volumes and a 3.6% increase in overall average selling prices. The increased wafer product volumes were across the larger diameter products resulting in the higher overall average selling prices. 

Gross Margin.

In the 2005 first quarter, our gross margin was $89.5 million compared to $73.3 million in the 2004 first quarter. As a percentage of net sales, gross margin improved to 35.4% in the 2005 first quarter from 32.1% in the first quarter of 2004. The improved gross margin was primarily a result of the higher product volumes, continued cost savings and productivity improvements which lowered unit costs, increased sales and pricing on polysilicon products, and a one-time gain from a correction to the benefit obligation of a pension plan. 

Marketing and Administration. 

Marketing and administration expenses increased to $17.8 million for the three months ended March 31, 2005 compared to $17.2 million for the three months ended March 31, 2004. The increase was primarily a result of the increased freight on customer shipments related to the increase in large diameter product sales, partially offset by a one-time gain from a correction to the benefit obligation of a pension plan. As a percentage of net sales, marketing and administration expenses decreased to 7.0% in the 2005 first quarter from 7.5% in the 2004 period. 

Research and Development. 

Our research and development (R&D) expenses increased in the three months ended March 31, 2005 to $11.7 million compared to $8.9 million in the year ago period. The increased expense was due to the development of next-generation products and efforts to increase our capability in the areas of flatness, particles and crystal defectivity. As a percentage of net sales, R&D expenses increased to 4.6% for the 2005 first quarter from 3.9% in the 2004 first quarter. 

Operating Income.

Operating income increased to $60.0 million, or 23.8% of sales, in the first quarter of 2005 compared to $47.2 million, or 20.7% of sales, in the 2004 first quarter. The improved operating results were primarily a result of the increase in gross margin in the three month period ending March 31, 2005 as compared to the 2004 period. 

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Nonoperating (Income) Expense. 

Interest Expense.

In the three months ended March 31, 2005, our interest expense decreased to $1.9 million, compared to $3.3 million for the three months ended March 31, 2004. The decrease in interest expense was primarily the result of the redemption in December 2004 of the senior subordinated secured notes and the debt reductions throughout 2004 of our South Korean debt. 

Interest Income.

In the three months ended March 31, 2005, our interest income decreased to $0.7 million, compared to $1.5 million for the three months ended March 31, 2004. The decrease in interest income was primarily the result of the liquidations of short-term investments in South Korea to fund the debt reductions throughout 2004 of our South Korean debt. 

Currency (Gains) Losses.

Currency losses in the three months ended March 31, 2005 were $0.7 million, compared to currency gains of $6.4 million in the same 2004 period. The large currency gain in 2004 resulted from the revaluation of the Yen-based intercompany loan. The currency gain resulted primarily from the significant strengthening of the Japanese Yen against the US Dollar in the three months ended March 31, 2004. On July 1, 2004, we designated the Yen-based intercompany loan as a long-term investment with settlement not planned or anticipated in the foreseeable future. Since we no longer expect settlement of the intercompany loan, foreign currency gains and losses from this loan are no longer being recorded in the Consolidated Statement of Operations. 

Other, Net.

In the three months ended March 31, 2005, our other nonoperating income decreased to $0.6 million compared to $1.9 million in the three months ended March 31, 2004. This decrease was primarily a result of the recording of a $1.5 million gain in the first quarter of 2004 from a business interruption insurance recovery relating to a minor fire at Taisil in December 2003. 

Income Taxes.

For the three months ended March 31, 2005, we recognized an income tax benefit of $3.8 million, as compared to income tax expense of $13.4 million for the three months ended March 31, 2004. As discussed in Note 12 to the consolidated financial statements, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67.7 million payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17.7 million, of the redemption payment should be deductible and we reversed a portion, or $7.8 million, of the contingent tax liability. The company also reversed a contingent tax liability of $9.2 million primarily related to tax depreciation deductions on fixed assets pertaining to asset values from the Texas Pacific Group transaction. 

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Liquidity and Capital Resources.

Accounts receivable of $127.3 million at March 31, 2005 decreased $13.4 million from $140.7 million at December 31, 2004. This decrease was primarily attributable to the decrease in sales of $15.8 million in the quarter ended March 31, 2005 compared to the quarter ended December 31, 2004. Days  sales outstanding improved to 46 days at March 31, 2005 compared to 48 days at December 31, 2004 based upon annualized sales for the respective immediately preceding quarter. This decrease in days sales outstanding was primarily attributable to the mix of customers. 

Our inventories increased $9.2 million to $136.8 million at March 31, 2005 from $127.6 million at December 31, 2004. Finished goods inventories increased primarily as a result of lower than forecasted shipments in first quarter of 2005. Annualized inventory turns, calculated as the ratio of annualized respective quarterly cost of goods sold divided by the period-end inventory balance, remained constant at five for the three month periods ended March 31, 2005 and December 31, 2004. At March 31, 2005, we had approximately $26.1 million of inventory held on consignment, compared to $22.2 million at December 31, 2004. Related inventory reserves for obsolescence, lower of cost or market issues, or other impairments were $4.3 million at March 31, 2005 compared to $5.0 million at December 31, 2004. 

Our prepaid and current assets decreased to $27.2 million at March 31, 2005 compared to $29.7 million at December 31, 2004, primarily as a result of the collection of consumption tax refunds in Japan. 

Our net deferred tax assets totaled $132.9 million as of March 31, 2005 versus $127.6 million at December 31, 2004 (of which $7.8 million was in was included in prepaids and other assets at March 31, 2005 and December 31, 2004). We provide for income taxes on a quarterly basis based on an estimated annual effective income tax rate. We believe it is more likely than not that, with our projections of future taxable income and after consideration of the valuation allowance, MEMC will generate sufficient taxable income to realize the benefits of the net deferred tax assets existing at March 31, 2005. As of March 31, 2005, we have valuation allowances of approximately $128.6 million reducing our net deferred tax assets. Approximately 25% of the remaining valuation allowances will not be available for future reversal as an income tax benefit on the consolidated statement of operations. 

Our accounts payable increased $9.3 million to $133.4 million at March 31, 2005, compared to $124.1 million at the end of 2004. The increase was a result of increased payables at March 31, 2005 related to capital expenditures and increased days payable outstanding. 

Accrued liabilities decreased $13.9 million to $23.8 million at March 31, 2005, compared to $37.7 million at the end of 2004. The decrease was a result of a variety of items including the payment of U.S. property taxes, payment of 2004 year end bonuses, payment of insurance premiums and the adjustment of certain benefits reserves. 

Other noncurrent liabilities decreased $11.7 million to $60.7 million at March 31, 2005, compared to $72.4 million at the end of 2004. As discussed in Note 12 to the consolidated financial statements, in the three months ended March 31, 2005, the company reversed a portion of a contingent tax liability established in 2004 for the potential non-deductibility of a portion of a $67.7 million payment to an investor group led by Texas Pacific Group in connection with the redemption of the company s senior subordinated secured notes. We obtained opinions from outside tax advisors indicating that the interest portion, or $17.7 million, of the redemption payment should be deductible and we reversed a portion, or $7.8 million, of the contingent tax liability. 

In the three months ended March 31, 2005, we generated $73.3 million of cash from operating activities, compared to $47.5 million in the three months ended March 31, 2004. This improvement was primarily due to our improved operating results partially offset by an increase in working capital. 

Our cash used in investing activities decreased to $54.4 million in the three months ended March 31, 2005 compared to $83.3 million in the three months ended March 31, 2004, primarily as a result of the acquisition of the remaining interest in Taisil in the 2004 first quarter, partially offset by increased capital expenditures in the 2005 first quarter compared to the 2004 first quarter. Capital expenditures in 2005 primarily relate to increasing our capacity and capability for our next generation products, including 300 millimeter and silicon-on-insulator, by making incremental changes to our existing manufacturing facilities and manufacturing lines. The existing facilities may be modified to permit the manufacture of greater quantities of current products. Alternatively, with incremental improvements, the existing facilities may be modified to become capable of manufacturing next generation products. We expect our 2005 capital expenditures will be approximately 15% of sales for the full year. 

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Cash provided by financing activities decreased to $2.8 million in the three months ended March 31, 2005 compared to $59.7 million in the three months ended March 31, 2004. The decrease in cash provided by financing activities was primarily related to borrowing of $60.0 million on our Citibank/UBS credit facility to fund the acquisition of the remaining interest in Taisil in the 2004 first quarter. 

Our unsecured short-term borrowings were approximately $1.6 million at March 31, 2005, under approximately $73.7 million of short-term loan agreements. Long-term borrowings outstanding were $134.8 million at March 31, 2005, under $259.8 million of committed long-term loan agreements. Of the $259.8 million committed long-term loan agreements, $4.3 million is unavailable as it relates to the issuance of third party letters of credit. Our weighted average cost of borrowing was 3.3% at March 31, 2005 and 2.9% at December 31, 2004. Our total debt to capital ratio at March 31, 2005 was 20%, compared to 22% at December 31, 2004. 

As part of the purchase and restructuring transactions in 2001, Texas Pacific Group (TPG) committed to provide a five-year $150 million revolving credit facility to MEMC. That revolving credit facility was replaced with a five-year $150 million revolving credit facility from Citibank/UBS (the Citibank/UBS Facility), guaranteed by TPG. Loans under this facility bear interest at a rate of LIBOR plus 1.5% or an alternate base rate plus 0.5% per annum. At March 31, 2005, our borrowings under this credit facility totaled approximately $60.0 million. However, credit available under the facility has been reduced by $4.3 million related to the issuance of third party letters of credit. 

TPG has also provided us with a five-year $35 million revolving credit facility (the TPG Facility) bearing interest at a rate of LIBOR plus 10% or an alternate base rate plus 9%. As a condition to any borrowings under the TPG Facility, we must have borrowed all amounts available under the Citibank/UBS Facility. The commitments under the TPG Facility terminate and any outstanding loans under the facility, together with any accrued interest thereon, will become due and payable upon the closing and funding of a debt or equity financing in which the net proceeds to MEMC equal or exceed $100 million. At March 31, 2005, we had no outstanding balance against the TPG Facility. 

The Citibank/UBS Facility and the TPG Facility contain certain highly restrictive covenants, including covenants to maintain minimum quarterly consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), as defined; minimum monthly consolidated backlog; minimum monthly consolidated revenues; maximum annual capital expenditures; and other covenants customary for revolving loans and indentures of this type and size. The minimum quarterly consolidated EBITDA covenant is $40 million, $42 million, and $44 million in the second, third and fourth quarters of 2005, respectively. Thereafter, the minimum quarterly consolidated EBITDA covenant progressively increases to $52 million and $60 million in the last quarter of 2006 and 2007, respectively. The minimum monthly consolidated backlog covenant was 68 million square inches (msi) in January 2005, progressively increasing to 74 msi, 81 msi and 92 msi in the last month of 2005, 2006 and 2007, respectively. The minimum monthly consolidated revenue covenant was $70 million in January 2005, progressively increasing to $76 million, $84 million and $92 million in the last month of 2005, 2006 and 2007, respectively. Finally, the maximum annual capital expenditures covenant is $55 million for each of the years 2005 through 2007. In 2005, we obtained the consent of our lenders to increase the covenant for maximum annual capital expenditures to $200 million. In the event that we violate these covenants, which could occur in a sudden or sustained downturn, the loan commitments under the revolving credit facilities may terminate and the loans and accrued interest then outstanding under the facilities and the senior subordinated secured notes and related accrued interest may be due and payable immediately. At March 31, 2005, we were in compliance with all of these debt covenants. 

The Citibank/UBS Facility is guaranteed by TPG. The various guaranties terminate in November 2005, prior to the expiration of the Citibank/UBS Facility. In addition, each guarantor may terminate its guaranty for any reason. In the event that a guarantor terminates its guaranty, or does not renew its guaranty and in the case of a non-renewal the lenders have not received cash collateral or a replacement guaranty executed by a replacement guarantor satisfactory to the lenders, then the loan commitments under the revolving credit facility will terminate and we will be required to repay all outstanding loans and accrued interest under this facility. Likewise, if any guarantor defaults under its guaranty, then the guarantor s default will constitute an event of default under this revolving credit facility. In such event, the loan commitments under this revolving credit facility may terminate and the loans and accrued interest under the facility may be due and payable immediately. 

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In any of these events, the guarantors and their affiliates have severally agreed to make new revolving credit loans available to us on terms and conditions no less favorable to us than provided in the original $150 million revolving credit facility between us and TPG. The original TPG $150 million revolving credit facility was substantially similar to the Citibank/UBS Facility except that the interest rates were 2% higher than the interest rates under the Citibank/UBS Facility. 

The Citibank/UBS Facility and the TPG Facility contain change in control provisions. Under these instruments, if (1) TPG s ownership interest in us is reduced below 15% of our total outstanding equity interests, (2) another person or group acquires ownership of a greater percentage of our outstanding equity than TPG, or (3) a majority of our Board of Directors is neither nominated by our Board of Directors nor appointed by directors so nominated, then an event of default shall be deemed to have occurred under the Citibank/UBS Facility and the TPG Facility in which event the loan commitments under these facilities may terminate and the loans and accrued interest then outstanding may become immediately due and payable. As part of the February 2005 underwriters agreement with TPG, TPG agreed to not sell any additional shares for 180 days following the February 2005 stock offering. There are no other restrictions preventing TPG from further reducing its ownership interest in the company. 

We recently executed an engagement letter which details the proposed terms of a new line of credit for $150 million to replace the current Citibank/UBS Facility and TPG Facility. This new line of credit will have more favorable terms and financial covenants than the company s existing facilities. The new line of credit is expected to be closed by the end of July 2005. 

We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital expenditures and working capital requirements. 

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. In preparing these financial statements, management has made its best estimates of certain amounts included in the financial statements. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. MEMC s significant accounting policies are more fully discussed in Exhibit 13 to our annual report on Form 10-K for the fiscal year ended December 31, 2004. 

Inventory

The valuation of inventory requires us to estimate excess and obsolete inventory. The determination of the value of excess and obsolete inventory is based upon assumptions of future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. 

Property, Plant and Equipment

We depreciate our land improvements, building and building improvements, and machinery and equipment evenly over the assets  estimated useful lives. Changes in circumstances such as technological advances, changes in our business model, or changes in our capital strategy could result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened or lengthened, we depreciate the net book value over its remaining useful life. 

Income Taxes

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as temporary differences. We record the tax effect of these temporary differences as deferred tax assets (generally items that can be used as a tax deduction or credit in future periods) and deferred tax liabilities (generally items that we received a tax deduction for, but have not yet been recorded in the Consolidated Statement of 

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Operations). We regularly review our deferred tax assets for realizability and adjust the valuation allowance based upon our judgement as to whether it is more likely than not that some items recorded as deferred tax assets will be realized, taking into consideration all available evidence, both positive and negative, including historical pre-tax and taxable income (losses), projected future pre-tax and taxable income (losses) and the expected timing of the reversals of existing temporary differences. In arriving at these judgements, the weight given to the potential effect of all positive and negative evidence is commensurate with the extent to which it can be objectively verified. 

We provide for U.S. income taxes, net of available foreign tax credits, on earnings of consolidated international subsidiaries that we plan to remit to the U.S. We do not provide for U.S. income taxes on the remaining earnings of these subsidiaries, as we expect to reinvest these earnings overseas or we expect the taxes to be minimal based upon available foreign tax credits. 

Employee-related Liabilities

We have a long-term liability for our defined benefit pension plans. Our pension obligation is funded in accordance with provisions of federal law. 

Our pension liability is actuarially determined, and we use various actuarial assumptions, including the discount rate, rate of salary increase, and expected return on assets, to estimate our costs and obligations. If our assumptions do not materialize as expected, expenditures and costs that we incur could differ from our current estimates. 

Revenue Recognition

We generally record revenue from product sales when the goods are shipped and title passes to the customer. Our wafers are generally made to customer specifications at plant sites that have been pre-qualified by the customer. We conduct rigorous quality control and testing procedures to ensure that the finished wafers meet the customer s specifications before the product is shipped. In the case of most of our polysilicon sales, delivery terms provide for the transfer of title and risk of loss prior to shipment but we do not recognize revenue prior to shipment. For sales arrangements that contain future deliveries (in the case of some of our polysilicon arrangements), revenue is not recognized on current deliveries unless the fair value of pricing can be determined based on specific objective evidence. 

Stock-based Compensation

We account for our stock-based compensation under Accounting Principles Board Opinion No. 25 (Opinion 25),  Accounting for Stock Issued to Employees , and related interpretations. We record compensation expense related to restricted stock units awards over the vesting periods of the awards and reflect the unearned portion of deferred compensation as a separate component of stockholders  equity. 

No compensation cost has been recognized for non-qualified stock options granted under the plans when the exercise price of the stock options equals the market price on the date of the grant. Compensation expense equal to the intrinsic value of the options has been recognized over the vesting periods for options granted at a price below the market price on the date of the grant and deferred compensation has been recorded for the unearned portion of the options as a separate component of stockholders  equity. 

Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board ( FASB ) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment  ( SFAS 123R ), which replaces SFAS No. 123,  Accounting for Stock-Based Compensation  (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning in our year ended December 31, 2006, with early adoption encouraged. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. Under SFAS 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first 

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quarter of adoption of SFAS 123R, while the retroactive method would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. We have not yet determined the method of adoption. We are evaluating the requirements of SFAS 123R and expect that the adoption of SFAS 123R will have an estimated 2 cents to 3 cents impact on diluted earnings per share for the year ending December 31, 2006. 

In December 2004, FASB issued FASB Staff Position ( FSP ) No. 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004  ( FSP 109-2 ), provides guidance under FASB Statement No. 109,  Accounting for Income Taxes, with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the  Jobs Act ) on enterprises income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. We have not yet completed evaluating the impact of the repatriation provisions. Accordingly, as provided for in FSP 109-2, we have not adjusted our tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. 

In December 2004, the FASB issued SFAS No. 153,  Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions  ( SFAS 153 ). SFAS 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,  Accounting for Nonmonetary Transactions,  and replaces it with an exception for exchanges that do not have commercial substance. SFAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for the fiscal periods beginning after June 15, 2005 and is required to be adopted by us in the first quarter of 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of SFAS 153 will have on our consolidated results of operations and financial condition but we do not expect it to have a material impact. 

In November 2004, the FASB issued SFAS No. 151,  Inventory Costs-An Amendment of ARB No. 43, Chapter 4  ( SFAS 151 ). SFAS 151 amends the guidance in ARB No. 43, Chapter 4,  Inventory Pricing,  to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of  so abnormal  as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by us in the first quarter of 2006, beginning on January 1, 2006. We are currently evaluating the effect that the adoption of SFAS 151 will have on our consolidated results of operations and financial condition but we do not expect SFAS 151 will have a material impact. 

In May 2004, the FASB issued FSP No. 106-2 ( FSP 106-2 ),  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003  (the  Medicare Act ). The Medicare Act was enacted December 8, 2003. FSP 106-2 supersedes FSP 106-1,  Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,  and provides authoritative guidance on accounting for the federal subsidy specified in the Medicare Act. The Medicare Act provides for a federal subsidy equal to 28% of certain prescription drug claims for sponsors of retiree health care plans with drug benefits that are at least actuarially equivalent to those to be offered under Medicare Part D, beginning in 2006. Due to the lack of information or guidance from Health and Human Services, it is not clear whether our plan will qualify for the federal subsidy payments beginning in 2006. Therefore, the accumulated pension benefit obligation and the net periodic postretirement benefit cost do not reflect any amount associated with the subsidy. 

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Cautionary Statement Regarding Forward-Looking Statements.

This Form 8-K contains  forward-looking  statements within the meaning of the Securities Litigation Reform Act of 1995, including those concerning our belief that the new line of credit will have more favorable terms and more limited financial covenants than the Citibank/UBS Facility and the TPG Facility; our expectation that the new line of credit will be closed by the end of July 2005; our expectation that we will generate sufficient taxable income to realize the benefits of net deferred tax assets existing as of March 31, 2005; our belief that we have the financial resources needed to meet business requirements for the next twelve months including capital expenditure and working capital requirements; our expectation that the adoption of SFAS 123R will have an estimated 2 cents to 3 cents impact on diluted earnings per share for the year ending December 31, 2006; and our belief that the implementation of SFAS 151 and SFAS 153 will not have a material effect on our financial condition or results of operations. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as: market demand for wafers and semiconductors; customer acceptance of our new products; utilization of manufacturing capacity; our ability to reduce manufacturing and operating costs; inventory levels of our customers; changes in the pricing environment; general economic conditions; the accuracy of our assumptions regarding future book and taxable income; actions by our competitors, customers and suppliers; the impact of competitive products and technologies; technological changes; changes in product specifications and manufacturing processes; changes in financial market conditions; changes in interest and currency exchange rates; changes in the composition of worldwide taxable income; our ability to obtain commitments from lenders and close the new line of credit on the terms set forth in the engagement letter; the accuracy of our assumptions regarding the impact of the adoption of SFAS 123R on our consolidated results of operations and earnings per share; and other risks described in MEMC s filing with the Securities and Exchange Commission, including MEMC s annual report on Form 10-K for the year ended December 31, 2004. 

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