Energy Conversion Devices Announces Second Quarter Fiscal 2003 Operating Results
ROCHESTER HILLS, Mich., Feb. 14 -- Energy Conversion Devices, Inc. (ECD) announced today its
operating results for the second quarter ended December 31, 2002. Revenues
were $18.5 million compared to $26.7 million in the second quarter last year,
primarily due to the near completion of the first phase of three phases of
contracts with Rare Earth Ovonic. The Company's net loss was $5.8 million for
the second quarter compared to a loss of $4.3 million in the same quarter last
year. On a per-share basis, the loss was $.26 in the second quarter of Fiscal
2003 compared to a loss of $.20 in the same quarter last year.
"We are positioned to lead the hydrogen economy and have the products and
technologies that make the 'hydrogen loop' of clean, affordable renewable
energy possible, starting with Ovonic nickel metal hydride batteries which are
the enabling technology for the fast-growing hybrid electric vehicle market.
Our leadership position as a driver of hydrogen technology has recently
focused attention on our technologies and products from the White House to
global television media. As my colleague Bob Stempel says: 'We're on our
way'," said Stanford R. Ovshinsky, ECD President and CEO.
The financial results for the three months and six months ended December
31, 2002 and December 31, 2001 are shown in the following table:
Three Months Ended Six Months Ended
December 31, December 31,
2002 2001 2002 2001
(In thousands, except per-share amounts)
Revenues
Product Sales $4,512 $11,176 $9,847 $22,336
Royalties 370 416 899 1,024
Revenue from Product
Development Agreements 10,226 15,001 19,979 25,544
Revenue from License
Agreements 3,269 - 3,419 -
Other 101 152 188 299
Total Revenue 18,478 26,745 34,332 49,203
Expenses 22,514 31,747 44,756 58,102
Net Loss from Operations (4,036) (5,002) (10,424) (8,899)
Other Income (Expense)
Interest Income 1,050 1,369 2,090 2,726
Equity Loss in Joint Ventures (2,870) (1,038) (3,734) (1,811)
Other 77 354 636 902
Total Other Income (Expense) (1,743) 685 (1,008) 1,817
Net Loss Before Cumulative Effect
of Change in Accounting Principle (5,779) (4,317) (11,432) (7,082)
Cumulative Effect of Change in
Accounting Principle - - 2,216 -
Net Loss $(5,779) $(4,317) $(9,216) $(7,082)
Basic and Diluted Net Loss Per
Share Before Cumulative
Effect of Change in
Accounting Principle $(.26) $(.20) $(.52) $(.33)
Cumulative Effect of Change
in Accounting Principle $ - $ - $.10 $ -
Basic and Diluted Net Loss
Per Share $(.26) $(.20) $(.42) $(.33)
Notes to Financial Results:
These investments in our technologies have led to strategic alliances with
major companies, including ChevronTexaco, Intel, General Electric and China's
Rare Earth High-Tech Co., Ltd. of Baotou Steel Company. In accordance with
accounting principles generally accepted in the United States of America, the
investments the Company makes in developing its technologies are expensed as
research and development expense in the periods in which they are incurred and
the value of these technologies are not carried as assets in the Company's
balance sheet.
The Company had revenues of $18,478,000 in the three months ended December
31, 2002 compared to $26,745,000 in the three months ended December 31, 2001.
The decrease in consolidated revenues primarily resulted from a reduction
in product sales of $6,664,000 and a reduction in revenues from product
development agreements of $4,775,000, partially offset by increased license
and other agreements ($3,269,000 in 2002 versus zero in 2001).
Product sales, consisting of machine building and equipment sales,
photovoltaic products and metal hydride materials, decreased 60% to $4,512,000
in the three months ended December 31, 2002 from $11,176,000 in the three
months ended December 31, 2001. Machine-building and equipment sales revenues
decreased 64% to $3,293,000 in 2002 from $9,214,000 in 2001, primarily due to
Ovonic Battery's contracts with Rare Earth Ovonic to provide battery-making
equipment, the first phase of which is nearing completion ($2,922,000 in 2002
compared to $8,252,000 in 2001). All machine-building and equipment sales
contracts are accounted for using percentage-of-completion accounting.
Photovoltaic sales, which are sales of semi-finished products to an affiliate,
Bekaert ECD Solar Systems, were $1,088,000 for 2002 and $1,469,000 for the
three months ended December 31, 2001. Sales of metal hydride materials were
$131,000 in 2002 compared to $409,000 in 2001. The Company currently has a
product sales backlog of $15,175,000, of which $11,161,000 is expected to be
recognized as revenues in Fiscal 2003.
Royalties decreased 11% to $370,000 in the three months ended December 31,
2002 from $416,000 in the three months ended December 31, 2001. Royalties
related to batteries for propulsion applications increased in the current
quarter, but were more than offset by lower royalties for consumer
applications reflecting increased production efficiencies of the Company's
licensees and a small reduction in the number of batteries sold by the
Company's licensees.
Revenues from product development agreements decreased 32% to $10,226,000
in the three months ended December 31, 2002 from $15,001,000 in the three
months ended December 31, 2001, primarily due to lower revenues under advanced
product development agreements with Texaco Ovonic Battery Systems ($2,754,000
for 2002 compared to $5,099,000 in 2001) and lower revenues from Texaco Ovonic
Hydrogen Systems ($3,270,000 for 2002 compared to $4,998,000 for 2001), Texaco
Ovonic Fuel Cell ($1,922,000 for 2002 compared to $2,483,000 for 2001), and
General Motors (zero for 2002 versus $780,000 for 2001); reduced activity
related to Ovonic Media ($272,000 in 2002 versus $435,000 in 2001); and the
completion of programs with the National Institute of Standards and Technology
(NIST) and the Department of Energy (DOE), which advanced the Company's
hydrogen storage and optical memory technologies (zero in 2002 versus $205,000
in 2001). Increased product development revenues for United Solar ($515,000
in 2002 compared to $126,000 in 2001) partially offset the decreases.
Revenues from license and other agreements increased to $3,269,000 in the
three months ended December 31, 2002 from zero in the three months ended
December 31, 2001. In December 2002, United Solar issued to Canon Inc. a
notice whereby United Solar granted Canon rights to manufacture in two
countries of their choice in Southeast Asia, excluding India and the People's
Republic of China. This notice was issued in satisfaction of the outstanding
obligation ($2,500,000 plus accrued interest of $769,000) due Canon in
connection with a previous loan made to United Solar by Canon. United Solar
recorded the satisfaction of the loan from Canon ($3,269,000) as revenue from
license agreements in its statement of operations for the three months ended
December 31, 2002. Revenues from license and other agreements depend on a
small number of new business arrangements, are sporadic and vary dramatically
from period to period.
Other revenues are primarily related to personnel, facilities and
miscellaneous administrative and laboratory services provided to some of the
Company's joint ventures. Other revenues decreased to $101,000 in the three
months ended December 31, 2002 from $152,000 in the three months ended
December 31, 2001. This decrease was due to reductions in revenues from
Ovonyx, Inc.
The Company had a net loss of $5,779,000 on revenues of $18,478,000 in the
three months ended December 31, 2002 compared to a net loss of $4,317,000 on
revenues of $26,745,000 for the three months ended December 31, 2001. The
Company had a $3,269,000 increase in license fees, a $539,000 reduction in
patent expense and a decrease of $345,000 in general and administrative
expense (net) that were more than offset by a $1,832,000 increase in equity
loss in joint ventures, a decrease in margins on product sales of $1,669,000,
an increase of $1,420,000 in the net cost of product development, a $319,000
reduction in interest income due to lower interest rates and a $105,000
reduction of other nonoperating income.
Revenues were $34.3 million for the six months ended December 31, 2002
compared to $49.2 million for the six months ended December 31, 2001,
primarily due to the near completion of the first phase of three phases of
contracts with Rare Earth Ovonic. The Company's net loss was $9.2 million for
the six months ended December 31, 2002 compared to a loss of $7.1 million in
the same period last year. On a per-share basis, the loss was $.42 compared
to a loss of $.33 in the same period last year.
For the six months ended December 31, 2002, the decrease in consolidated
revenues primarily resulted from a reduction in product sales of $12,489,000
and a reduction in revenues from product development agreements of $5,565,000,
partially offset by increased license and other agreements ($3,419,000 in 2002
versus zero in 2001).
Product sales, consisting of machine building and equipment sales,
photovoltaic products and metal hydride materials, decreased 56% to $9,847,000
in the six months ended December 31, 2002 from $22,336,000 in the six months
ended December 31, 2001. Machine-building and equipment sales revenues
decreased 63% to $7,016,000 in 2002 from $18,768,000 in 2001, primarily due to
Ovonic Battery's contracts with Rare Earth Ovonic to provide battery-making
equipment, the first phase of which is nearing completion ($6,505,000 in 2002
compared to $16,664,000 in 2001). All machine-building and equipment sales
contracts are accounted for using percentage-of-completion accounting.
Photovoltaic sales, which are sales of semi-finished products to an affiliate,
Bekaert ECD Solar Systems, were $2,361,000 for 2002 and $2,698,000 for 2001.
Sales of metal hydride materials were $383,000 in 2002 compared to $612,000 in
2001. The Company currently has a product sales backlog of $15,175,000, of
which $11,161,000 is expected to be recognized as revenues in Fiscal 2003.
Royalties decreased 12% to $899,000 in the six months ended December 31,
2002 from $1,024,000 in the six months ended December 31, 2001. Royalties
related to batteries for propulsion applications increased in the current
period, but were more than offset by lower royalties for consumer applications
reflecting increased production efficiencies of the Company's licensees and a
small reduction in the number of batteries sold by our licensees.
Revenues from product development agreements decreased 22% to $19,979,000
in the six months ended December 31, 2002 from $25,544,000 in the six months
ended December 31, 2001, primarily due to reduced battery activities under
advanced product development agreements with Texaco Ovonic Battery Systems
($5,465,000 for 2002 compared to $8,228,000 in 2001); reduced activity related
to Ovonic Media ($605,000 in 2002 versus $842,000 in 2001); and the completion
of programs with the NIST and the DOE, which advanced the Company's hydrogen
storage and optical memory technologies (zero in 2002 versus $481,000 in
2001). In addition, there was a decrease in revenues from Texaco Ovonic
Hydrogen Systems ($6,744,000 for 2002 compared to $8,296,000 for 2001) and
Texaco Ovonic Fuel Cell ($3,942,000 for 2002 compared to $4,419,000 for 2001).
Increased product development revenues for United Solar ($972,000 in 2002
compared to $469,000 in 2001) partially offset the decrease.
Revenues from license and other agreements increased to $3,419,000 in the
six months ended December 31, 2002, from zero in the six months ended December
31, 2001. In December 2002, United Solar issued to Canon a notice whereby
United Solar granted Canon rights to manufacture in two countries of their
choice in Southeast Asia, excluding India and People's Republic of China.
This notice was issued in satisfaction of the outstanding obligation
($2,500,000 plus accrued interest) due Canon in connection with a previous
loan made to United Solar by Canon. United Solar recorded the satisfaction of
the loan from Canon ($3,269,000) as revenue from license agreement in its
statement of operations for the six months ended December 31, 2002.
License fees were also received from licenses to Henan Huanyu Power Source
Co., Ltd., Guangdong Shida Battery Co., Ltd. and TWD Battery Co., Ltd.
Revenues from license and other agreements depend on a small number of new
business arrangements, are sporadic and vary dramatically from period to
period.
Other revenues are primarily related to personnel, facilities and
miscellaneous administrative and laboratory services provided to some of the
Company's joint ventures. Other revenues decreased to $188,000 in the six
months ended December 31, 2002 from $299,000 in the six months ended December
31, 2001. This decrease was due to reductions in revenues from Ovonyx.
The Company had a net loss of $9,216,000 on revenues of $34,332,000 in the
six months ended December 31, 2002 compared to a net loss of $7,082,000 on
revenues of $49,203,000 for the six months ended December 31, 2001. The
Company had increased license fees of $3,419,000 and a reduced patent expenses
of $979,000 that were more than offset by a decrease in margin on product
sales of $1,610,000, an increase of $3,430,000 in the net cost of product
development, an increase of $647,000 in general and administrative expense
(net), a $635,000 reduction in interest income due to lower interest rates,
increased equity losses of $1,923,000 and a $310,000 reduction of other
nonoperating income. In addition, the Company recognized income of $2,216,000
attributable to the cumulative effect of a change in accounting principle.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141 required the
Company to recognize, at the adoption of SFAS 142, the unamortized negative
goodwill of $2,216,000 (a favorable benefit) as the cumulative effect of a
change in accounting principle in the Company's statements of operations on
July 1, 2002.
While the Company is seeking to expand and strengthen its joint ventures
with the participation of new equity investors, it anticipates that future
results from operations will be affected due to the Company's funding, from
time to time, of certain of its joint venture operations. The Company expects
that its financial results will be affected by the following circumstances:
Bekaert ECD Solar Systems/United Solar -- Bekaert has advised the Company
that Bekaert, in order to focus on its core businesses, will not provide any
additional funds to Bekaert ECD Solar Systems/United Solar beyond March 31,
2003. ECD is in discussions with potential new equity investors who will
advance our unique, proprietary thin-film technology represented by our new
30MW manufacturing facility to meet the joint ventures' future cash
requirements, as well as discussing restructuring of the joint ventures. ECD
is prepared, under the appropriate terms, to provide 100% of Bekaert ECD Solar
Systems/United Solar's funding requirements after March 31, 2003, until new
equity investors are brought into the joint ventures. Historically, as a
consequence of ECD's 81% ownership of United Solar and United Solar's 40%
membership interest in Bekaert ECD Solar Systems, the Company's financial
results have included approximately 50% of the combined operating results of
these entities. The Company will reflect up to 100% of the operating results
when it funds 100% of the cash requirements until new equity investors are
brought into the joint ventures.
Texaco Ovonic Fuel Cell Company LLC (ECD's joint venture with
ChevronTexaco Corp.) -- While Texaco Ovonic Fuel Cell has successfully
demonstrated the concept of the Ovonic(TM) regenerative fuel cell and received
a patent covering its Ovonic(TM) Instant Startup Fuel Cell, ChevronTexaco has
advised the Company that it does not have funds in its budget to fund the
venture's activities after December 31, 2002. The Company and ChevronTexaco
are currently in discussions regarding the venture's operations and its
business strategy to involve additional joint venture partners to fund and
expand the venture's operations. In the interim, the Company plans, under
acceptable terms, to fund the venture.
Ovonic Media, LLC, the joint venture formed in March 2000 between GE
Plastics and ECD, is the first activity resulting from our strategic alliance
with General Electric. Ovonic Media was formed to commercialize ECD's process
for high-volume manufacture of rewritable DVDs using GE's advanced film
product. Ovonic Media has successfully met its various milestones. GE is
evaluating the current market situation to determine next steps and has
informed the Company that additional funding after January 3, 2003 is
suspended. GE and ECD are in discussions as to how to position the joint
venture in order to meet the needs of the marketplace and to expand the joint
venture's operations, including the possibility of new equity investors and
strategic partners to fund the joint venture's operations. In the interim,
ECD will fund the joint venture, under acceptable terms, until GE resumes
funding, or until new partners who will provide funding, marketing and
distribution are brought into the venture. The other activities of the
strategic alliance are continuing on schedule.
These matters have not affected the results of operations for the periods
ended December 31, 2002.
ECD will hold a conference call on Tuesday, February 18 at 1:00 p.m. ET to
discuss its second quarter fiscal 2003 results. Access to the call may be
obtained by calling 1-877-858-2512. A replay will be available through
February 24, 2003, at 1-800-642-1687. Callers should use conference ID#
8287574 to access the replay. A live webcast of the conference call will be
available online at http://www.videonewswire.com/OVONIC/021803/ or through the
Company's website at http://www.ovonic.com . ECD's financial results on Form 10-Q
for the three and six months ended December 31, 2002 will also be available on
the Company's website on or around February 14, 2003.
ECD is the leader in the synthesis of new materials and the development of
advanced production technology and innovative products. It has invented,
pioneered and developed enabling technologies leading to new products and
production processes based on amorphous, disordered and related materials,
with an emphasis on advanced information technologies and alternative energy,
including photovoltaics, fuel cells, hydride batteries and hydride storage
materials capable of storing hydrogen in the solid state for use as a
feedstock for fuel cells or internal combustion engines or as an enhancement
or replacement for any type of hydrocarbon fuel. ECD designs and builds
manufacturing machinery that incorporates its proprietary production
processes, maintains ongoing research and development programs to continually
improve its products and develops new applications for its technologies. ECD
holds the basic patents in its fields. ECD's website address is
http://www.ovonic.com .
This release may contain forward-looking statements within the meaning of
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are based on assumptions which ECD, as
of the date of this release, believes to be reasonable and appropriate. ECD
cautions, however, that the actual facts and conditions that may exist in the
future could vary materially from the assumed facts and conditions upon which
such forward-looking statements are based.