These non-GAAP measures include adjustments to revenue in the Companys Solar Energy
(SunEdison) segment from direct sales of solar energy systems where we have received upfront partial payments and, absent real estate accounting requirements, we would have recognized revenues under the percentage of completion accounting method.
The non-GAAP measures also include adjustments to non-GAAP revenue and/or profit deferred related to SunEdisons maximum exposure for power warranties, system uptime guarantees and breach of contract provisions offered to the direct sale
customers for these systems that are considered continuing involvement by SunEdison in the sold solar energy systems. This revenue is not recognized as of the reporting date under GAAP real estate accounting rules because the solar energy systems
are considered integral to the real estate on which they were built. Absent real estate accounting requirements, deferred revenues related to continuing involvement would be recognized under GAAP during the reporting period because SunEdison has
historically experienced minimal losses related to these guarantees. For these direct sales, the sales contracts have been executed and SunEdison has either received payment in full or maintains a valid and legal note receivable for the full sales
price that SunEdison expects to collect within a short period after completion of the project.
The non-GAAP measures also include revenue
related to SunEdison sale-leaseback transactions accounted for as financings. This includes cash received for the legal sale of the solar energy system to the purchaser that will not be recognized as revenue under GAAP. Non-GAAP operating income
(loss) includes the upfront cash margin in an amount equal to the difference between (a) the cash received as of the reporting date from SunEdisons financing partners in sale-leaseback transactions considered financings and
(b) SunEdisons total costs to construct the solar energy systems sold under the sale-leaseback transactions. These sale-leaseback transactions are classified as financing transactions under GAAP because the system is considered integral
to the land or building on which it resides and because SunEdison has continuing involvement with the system through a purchase option. This system development margin will be recognized under GAAP upon termination of the related lease through the
non-cash extinguishment of the debt offset by any remaining net book value of the solar energy system asset.
The Company believes that
these non-GAAP measures represent important internal measures of performance for the SunEdison business, and better reflect SunEdisons results from operations and near-term cash flows. Accordingly, where these measures are provided, it is done
so that investors have the same financial data that management uses to evaluate the operational and financial performance of the SunEdison business. MEMC management uses these measures to manage the SunEdison business because it believes these
measures are more representative of the operational health and performance of that business. These non-GAAP measures should not be considered as a substitute for, and should only be read in conjunction with, measures of financial performance
prepared in accordance with GAAP and the reconciliation of each non-GAAP measure to the directly comparable GAAP measure set forth in the press release.
The presentation also refers to the Companys EBITDA margin for 2010, 2011 and 2012. EBITDA is a non-GAAP disclosure consisting of net
income (loss) attributable to MEMC stockholders plus interest expense, net, depreciation and amortization and provision for income taxes. The Company believes that EBITDA is useful to an investor in evaluating the Companys operating
performance and liquidity because (i) it is widely used to measure a companys operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of
assets, (ii) it presents a meaningful measure of corporate performance exclusive of the Companys capital structure and the method by which the assets were acquired, and (iii) it is a widely accepted financial indicator of a
companys ability to service its debt, as the Company is required to comply with certain covenants and limitations that are based on variations of EBITDA in the Companys financing documents.
This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.