OVERVIEW
As previously disclosed, the significant 2011 downturn in the solar industry, which has continued throughout 2012, has seen sharp reductions in pricing of solar modules, solar cells, solar wafers, polysilicon, and to a lesser extent, solar systems. The resulting decline in profitability for all solar companies, including MEMC, has been pronounced. Although we believe the 2011 and 2012 semiconductor downturn is cyclical, we view the solar market changes as a prolonged market dislocation. During the fourth quarter of 2011, in order to better align our business to the then current and expected market conditions in the semiconductor and solar markets, as well as to improve the company's overall cost competitiveness and increase cash flow generation across all segments, we committed to a series of actions to reduce the company's global workforce, right size its production capacity and accelerate operating cost reductions in 2012 and beyond (the "2011 Global Plan").
In the third quarter of 2012, we continued the implementation of the 2011 Global Plan. As part of those efforts, on September 4, 2012 we executed two settlement agreements with Evonik to settle disputes arising from our early termination of two take-or-pay supply agreements. As part of the settlement, we will pay Evonik a total of 70 million euro, of which 10 million euro was paid in the current quarter, and forfeited a deposit of $10.2 million. As a result of this settlement, a favorable adjustment to our 2011 Global Plan accrual was made resulting in $69.2 million of income within restructuring and impairment on the consolidated statement of operations and comprehensive income (loss). Our business strategy is designed to address the most significant opportunities and challenges facing the company, including managing cash flow and liquidity risks, executing on our restructuring plans, focusing on semiconductor market share gains, and optimizing solar project pipeline.
In furtherance of that strategy, we closed on a $200.0 million second lien term loan ("Term Loan") during the third quarter. The Term Loan has a maturity of five years with a variable rate, which as of September 30, 2012 is at 10.75%. The company plans to use the proceeds of the Term Loan for incremental liquidity and general corporate purposes. We believe our liquidity will be sufficient to support our operations for the foreseeable future, although no assurances can be made if significant adverse events beyond our control occur, or if we are unable to access project capital needed to execute our business plan.

Semiconductor Materials Segment
Net sales and gross margins in our Semiconductor Materials segment were lower in the third quarter of 2012 as compared to the same period in 2011 primarily due to pricing and volume decreases. During the third quarter of 2012, we continued to realize the benefits of our cost reduction efforts through the ramp of our Ipoh, Malaysia plant and the 2011 Global Plan. These benefits were offset by lower prices due to the semiconductor market slowdown and lower absorption of fixed production costs as we reduced production levels on lower demand and to lower inventories. At this time, we expect both volume and demand

to stay relatively flat to down during the fourth quarter of 2012. Due to increasing macroeconomic concerns, our visibility into 2013 has diminished. Solar Energy Segment
During the three month period ended September 30, 2012, revenues were recognized for direct sales on five projects totaling 48.4 megawatts ("MW"). We currently have 116.8MW of solar projects under construction, including 23.2 MW recognized in earnings for direct sales accounted for under the percentage of completion method. The MW under construction are predominately in the United States, but we continue to evaluate project development opportunities outside of the U.S. Additionally, as of September 30, 2012, we have a 13.6MW completed project in Spain which is being actively marketed for sale. SunEdison has a project pipeline of approximately 2.9 gigawatts ("GW") as of September 30, 2012, down slightly from the 3.0GW of project pipeline as of December 31, 2011. For the three and nine month periods ended September 30, 2012, solar wafer revenue decreased significantly from the three and nine month periods ended September 30, 2011 because a significant portion of the wafers we manufacture are now internally consumed in our downstream business. While there continued to be external solar wafer sales during the three month period ended September 30, 2012, these sales were significantly diminished from the prior year period and, going forward, solar wafer sales to external parties are expected to continue to decline or remain at lower levels given the company's strategic shift to primarily supplying wafers for internal consumption by our solar energy system business. Additionally, solar wafer prices have declined significantly when compared to prior year periods due to softening demand and industry overcapacity. Our solar wafer average selling prices for the three and nine months ended September 30, 2012 were approximately 53% and 62% lower as compared to the three and nine month periods ended September 30, 2011, respectively.

RESULTS OF OPERATIONS
Net sales by segment for the three and nine month periods ended September 30,
2012 and September 30, 2011 were as follows:

                                                 Three Months Ended              Nine Months Ended
                                                    September 30,                  September 30,
Net Sales                                        2012             2011           2012          2011
Dollars in millions
Semiconductor Materials                    $     240.3         $   268.4     $    689.0     $   795.2
Solar Energy                                     361.3             247.8        1,240.2       1,202.5
Total Net Sales                            $     601.6         $   516.2     $  1,929.2     $ 1,997.7

Semiconductor Materials Segment Net Sales The decrease in Semiconductor Materials net sales in the three month period ended September 30, 2012 compared to the comparable period in the prior year was the result of price decreases of $28.7 million, a less favorable product mix of $2.6 million, offset slightly by volume increases of $2.6 million. Price decreases occurred across all wafer diameters.
The decrease in Semiconductor Materials net sales in the nine month period ended September 30, 2012 compared to the comparable period in the prior year was the result of price decreases of $73.9 million, volume decreases of $26.8 million and a less favorable product mix of $5.8 million. Price decreases occurred across all wafer diameters while the volume decrease was across all diameters except 300mm wafers. Both pricing and volume continue to be negatively impacted by unfavorable market conditions. Our semiconductor wafer average selling price in the three and nine month periods ended September 30, 2012 was approximately 11.3% and 10.1%, respectively, lower than the average semiconductor wafer selling price for the same periods in 2011. Solar Energy Segment Net Sales
During the three and nine month periods ended September 30, 2012, revenue from solar energy system sales was $166.2 million and $824.7 million, respectively. Comparatively, revenue from solar energy system sales was $14.1 million and $270.1 million during the three and nine month periods ended September 30, 2011, respectively. The increase is due largely to the sale of solar energy systems totaling 48.4MW and 239.8MW during the three and nine month periods ended September 30, 2012, respectively, compared to 3.3MW and 56.8MW during the three and nine month periods ended September 30, 2011, respectively. Net sales for the three and nine month periods ended September 30, 2012 also included revenues of $36.7 million

and $99.0 million, respectively, from energy production as compared to $24.4 million and $60.3 million in the three and nine month periods ended September 30, 2011, respectively. The increase in energy revenues is a result of the increase in financing sale-leaseback systems when compared to the prior period.
Net sales for the three and nine month periods ended September 30, 2012 include $37.1 million related to revenue recognized as part of the cancellation of a long-term solar wafer supply contract with Conergy. Similarly, net sales for the three and nine month periods ended September 30, 2011 include $19.4 million and $168.8 million, respectively, of revenue recognized in connection with the resolution of our long-term solar wafer supply agreement with a customer. Solar Energy segment net sales do not include cash proceeds received from financing sale-leasebacks transactions with contract sales values of $93.0 million and $173.9 million in the three and nine month periods ended September 30, 2012, respectively. Sales contract values of financing sale-leasebacks were $191.5 million and $282.1 million in the three and nine month periods ended September 30, 2011, respectively. These transactions are not included in net sales and result in the retention of assets on our balance sheet along with the related non-recourse debt. See "Revenue Recognition" contained in Note 2, "Summary of Significant Accounting Policies", within our 2011 Annual Report on Form 10-K.
Solar wafer sales decreased $124.7 million, or 78%, in the three month period ended September 30, 2012 compared to the comparable period in the prior year, primarily due to solar wafer price decreases of $85.4 million and lower volumes of $39.3 million. Due to the downturn in the solar wafer market, our solar wafer average selling prices in the three and nine month periods ended September 30, 2012 were approximately 49% and 59% lower than the solar wafer average selling prices for the same periods in 2011. These sales were significantly diminished from prior periods, and going forward, solar wafer sales to external parties are expected to remain at lower levels.
During the three and nine month periods ended September 30, 2012 we had $76.9 million and $113.3 million, respectively, of solar module sales to external third parties. Sales of modules are made on an opportunistic basis considering the demand in our downstream solar energy system business. Additionally, during the nine month period ended September 30, 2012, we recorded revenues of $27.3 million on polysilicon sales to reduce our raw material inventory.

                           Three Months Ended
                             September 30,           Nine Months Ended September 30,
Gross Profit                2012         2011             2012                 2011
Dollars in millions
Cost of Goods Sold      $   514.7      $ 457.6      $      1,701.8       $      1,644.0
Gross Profit                 86.9         58.6               227.4                353.7
Gross Margin Percentage      14.4 %       11.4 %              11.8 %               17.7 %

The increase in our gross profit dollars and percentage for the three month period ended September 30, 2012 compared to the three month period ended September 30, 2011 is primarily attributed to the $37.1 million in revenue recognized from the termination of a long term solar wafer supply contract with Conergy in the three month period ended September 30, 2012, offset by $19.4 million of revenue recognized as part of a contract resolution with a customer and $15.0 million due to a change in our estimate of the probable shortfall in one of our take-or-pay purchase obligations in 2011, which increased income. The remaining increases in gross profit dollars were caused by $76.9 million of solar module sales to external third parties during the three month period ended September 30, 2012 that did not occur in 2011. These increases were partially offset by overall declines in the Semiconductor Materials segment margins resulting from lower prices.

The decrease in our gross profit dollars and percentage for the nine month period ended September 30, 2012 compared to the nine month period ended September 30, 2011 is primarily attributed to the absence of $168.8 million in revenue recognized from a contract resolution with a customer, partially offset by a $37.4 million charge from our take-or-pay purchase obligations in the nine month period ended September 30, 2011 and $37.1 million of revenue recognized from the termination of a long term solar wafer supply contract with Conergy in the nine month period ended September 30, 2012.
For the three and nine month periods ended September 30, 2012, we did not recognize approximately $17.6 million and $92.0 million, respectively, of expected gross margins on completed projects with executed sales agreements that we expect will be recognized at a later date. We also received cash in excess of our system construction costs of $14.8 million and $23.9 million in the three and nine month periods ended September 30, 2012, respectively, for our executed sale-leasebacks in which margin will be recognized for U.S. GAAP purposes at the end of the leases.
For the three and nine month periods ended September 30, 2011, we did not recognize approximately $35.4 million and $74.5

million, respectively, of expected gross margins on completed projects with executed sales agreements. We also received cash in excess of our system construction costs of $33.1 million and $47.8 million in the three and nine month periods ended September 30, 2011, respectively, for our executed sale-leasebacks in which margin will be recognized for U.S. GAAP purposes at the end of the leases.

                                                   Three Months Ended      Nine Months Ended September
                                                     September 30,                     30,
Marketing and Administration                       2012          2011             2012         2011
Dollars in millions
Marketing and Administration                   $     68.9    $     83.8       $   239.2     $   270.8
As a Percentage of Net Sales                         11.5 %        16.2 %          12.4 %        13.6 %

The decrease in marketing and administration expenses for the three month period ended September 30, 2012 is primarily due to the decline in spend on staffing, infrastructure and certain other costs as part of our restructuring efforts. Additionally, the decrease is caused by a decline in stock compensation expense.

The decrease in marketing and administration expenses for the nine month period ended September 30, 2012 is due to the absence of Japan earthquake related charges of $10.6 million and $13.1 million of net legal verdicts taken in the comparable period in 2011. Additionally, the decrease is caused by a decline in stock compensation expense of $9.5 million. The FRV contingent consideration was deemed fully earned and increased by $9.8 million during the nine month period ended September 30, 2012 based on a change in the estimated fair value of the contingent consideration. This increase was offset by a favorable adjustment to the Solaicx contingent consideration of $13.5 million in the nine month period ended September 30, 2011.

                                                Three Months Ended
                                                  September 30,             Nine Months Ended September 30,
Research and Development                        2012          2011                 2012              2011
Dollars in millions
Research and Development                   $      17.4    $      22.3       $         55.8     $         65.1
As a Percentage of Net Sales                       2.9 %          4.3 %                2.9 %              3.3 %

R&D expenses consist mainly of product and process development efforts to increase our capabilities in each of our business units. Overall spend on R&D in 2012 has and is expected to continue to decrease from 2011 amounts, particularly as it relates to solar wafering.

                                                 Three Months Ended     Nine Months Ended September
                                                   September 30,                    30,
Goodwill Impairment Charge                         2012        2011             2012        2011
Dollars in millions
Goodwill Impairment Charge                    $          -   $  56.4        $        -   $    56.4
As a Percentage of Net Sales                             -      10.9 %               -         2.8 %

During the third quarter of 2011, we impaired $56.4 million of goodwill related to our Solaicx acquisition. There were no such impairments in the comparable period in 2012 because all historical goodwill was impaired in 2011.

                                                  Three Months Ended
                                                    September 30,          Nine Months Ended September 30,
Restructuring and Impairment                       2012          2011             2012            2011
Dollars in millions
Restructuring and Impairment                  $     (58.3 )   $  (0.1 )      $   (53.0 )     $        13.7
As a Percentage of Net Sales                         (9.7 )%        -  %          (2.7 )%              0.7 %

During the three and nine month periods ended September 30, 2012, we recorded income of $58.3 million and $53.0 million, respectively, which was primarily a result of our executed settlement agreements with Evonik to settle disputes arising from our early termination of two take-or-pay supply agreements (see Note 2). As part of this settlement, a favorable adjustment to our

2011 Global Plan restructuring accrual was made resulting in $69.2 million of income within restructuring and impairment on the consolidated statement of comprehensive income (loss). In the 2012 fourth quarter, as part of this settlement, we expect to obtain title to a chlorosilanes plant, which could have additional favorable consequences for the consolidated statement of comprehensive income (loss). The settlement income was partially offset by an impairment of tangible assets of $14.2 million.
The restructuring and impairment charges in the nine month period ended September 30, 2011 related to the initial actions taken in the second quarter of 2011 for the 2011 Global Plan.

                                                   Three Months Ended
                                                      September 30,               Nine Months Ended September 30,
Insurance Recovery                                  2012             2011                  2012             2011
Dollars in millions
Insurance Recovery                          $            -       $        -        $       (4.0 )       $         -
As a Percentage of Net Sales                             -                -                (0.2 )%                -

During the nine month period ended September 30, 2012, we recorded income of $4.0 million for an insurance settlement to recover the final portion of our losses related to the disruption in production at our Utsunomiya, Japan facility as a result of the March 2011 Japan earthquake.

                                                Three Months Ended
                                                   September 30,          Nine Months Ended September 30,
Operating Income (loss)                          2012          2011                2012            2011
Dollars in millions
   Semiconductor Materials                  $       8.7    $     18.5       $          (8.1 )   $    30.3
   Solar Energy                                    75.8         (94.9 )                70.4          18.7
   Corporate and Other                            (25.6 )       (27.4 )               (72.9 )      (101.3 )
Total Operating Income (Loss)               $      58.9    $   (103.8 )     $         (10.6 )   $   (52.3 )

During the three month period ended September 30, 2012, we had operating income of $58.9 million as compared to a loss of$103.8 million in the comparable period in 2011. During the nine month period ended September 30, 2012, we had an operating loss of $10.6 million as compared to a loss of $52.3 million in the comparable period in 2011. These changes were the net result of the changes in gross profit dollars and operating costs discussed above, including the revenue related to the settlement with Conergy and the income related to the settlement with Evonik, and as further described below. Semiconductor Materials Segment
The decrease in our Semiconductor Materials operating income from $18.5 million in the three month period ended September 30, 2011 to $8.7 million in the three month period ended September 30, 2012 was primarily the result of reduced gross profit from lower average wafer prices. During the three month period ended September 30, 2011, operating margins were negatively impacted by $2.9 million of charges as a result of the earthquake in Japan. When comparing to 2011 results, the reductions in costs which we have begun to realize from the ramp of our Ipoh, Malaysia plant and the 2011 Global Plan were partially offset by lower absorption of fixed production costs as we reduced semiconductor wafer production capacity on lower demand and to lower inventories. The decrease in operating income for the nine month period ended September 30, 2012, when compared to the same period in 2011 was the result of price and volume decreases more than offsetting the cost saving benefits of the 2011 Global Plan and 2009 U.S. Plan.
Solar Energy Segment
The increase in our Solar Energy operating income to $75.8 million in the three month period ended September 30, 2012 from an operating loss of $94.9 million in the three month period ended September 30, 2011 is primarily attributable to the favorable adjustment from the Evonik supply agreement resolution of $69.2 million and revenue of $37.1 million in the three month period ended September 30, 2012 in connection with the termination of a long term solar wafer supply contract with Conergy. These amounts were offset by the $19.4 million of revenue recognized on a contract resolution with a customer and $15.0 million due to a favorable change in our estimate of the probable shortfall in our take-or-pay purchase obligations in the same period in 2011. Additionally, there was $56.4 million of goodwill impairment charges in the three month period ended September 30, 2011 that did not occur in 2012. The other additional increases were the result of timing of direct sales of solar energy systems offset by lower solar wafer volumes and pricing.

The increase in operating income for the nine month period ended September 30, 2012 when compared to the same period in 2011 was the result of the benefit from the Evonik supply agreement resolution of $69.2 million and revenue of $37.1 million in connection with the termination of a long term solar wafer supply contract with Conergy. These amounts were offset by the $168.8 million of revenue recognized on a contract resolution with a customer and a $37.4 million charge due to a change in our estimate of the probable shortfall in our take-or-pay purchase obligations in the same period in 2011. Additionally, there was $56.4 million of goodwill impairment charges in the nine month period ended September 30, 2011 that did not occur in 2012. The other additional increases were the result of timing of direct sales of solar energy systems offset by lower solar wafer volumes and pricing.
The Solar Energy segment's operating results are highly dependent upon the timing of system sales and revenue recognition requirements related to the terms of the sales agreements and type of project finance method utilized, as well as completed and uncompleted projects. Revenue and income recognition in any given period may differ due to the timing of installations, related expenditures, system warranty and indemnity provisions and the type of financing obtained. Corporate and Other
Corporate and Other expenses are comprised of substantially all of our stock-based compensation expense, general corporate marketing and administration costs, research and development administration costs, legal, auditing and tax professional services and related costs, salary and other personnel costs, and other items not reflected in the segments. Corporate and Other operating loss decreased by $1.8 million in the three month period ended September 30, 2012 compared to the same period of 2011, primarily due to lower stock compensation expense. The decrease of $28.4 million in operating loss for the nine month period ended September 30, 2012, when compared to the same period in the prior year was primarily due to the absence of $13.1 million of net legal verdicts and settlements described above. Additional decreases were caused by lower stock compensation expense, legal fees and other professional fees.

                                                Three Months Ended
                                                  September 30,          Nine Months Ended September 30,
Non-operating Expense (Income)                  2012          2011               2012           2011
Dollars in millions
   Interest Expense                        $      28.0    $      20.7       $    100.3     $        50.9
   Interest Income                                (0.9 )         (1.3 )           (2.8 )            (3.1 )
   Other, Net                                     (2.4 )         13.4              0.1              (3.9 )
Total Non-operating Expense                $      24.7    $      32.8       $     97.6     $        43.9

For the three month period ended September 30, 2012, we recorded interest expense, including amortization of deferred debt issuance fees, accretion of contingent consideration and letter of credit and commitment fees of $15.0 million related to solar energy systems, net of capitalized interest of $3.5 . . .