Energy Conversion Devices Reports Second Quarter 2007 Operating Results
ROCHESTER HILLS, Mich., Feb. 8, 2007 -- Energy Conversion Devices, Inc. (ECD Ovonics) today reported its results for the second quarter ended December 31, 2006. The company reported a net loss of $2.9 million (or $0.07 per share) on revenues of $22.9 million in the second quarter of fiscal 2007, as compared to a net loss of $5.7 million (or $0.19 per share) on revenues of $24.3 million in the second quarter of fiscal 2006. The company also reported a net loss of $5.2 million (or $0.13 per share) on revenues of $50.1 million for the six months ended December 31, 2006, as compared to a net loss of $12.2 million (or $0.42 per share) on revenues of $47.5 million for the six months ended December 31, 2005.
"We had a challenging quarter on a number of fronts, but we also marked important successes during the quarter," said Chairman and CEO Robert C. Stempel. "We successfully launched our new Auburn Hills 2 facility, effectively doubling our PV module manufacturing capacity once it is fully ramped up this fall, and our new Greenville facilities are well underway. In addition, our Cobasys and Ovonyx joint ventures are making significant progress with their respective product commercialization initiatives."
The following are highlights from ECD Ovonics' second quarter of 2007:
* ECD Ovonics' wholly owned subsidiary United Solar Ovonic had operating
income of $1.2 million on revenues of $19.2 million in the second
quarter of fiscal 2007, as compared to operating income of $1.8 million
on revenues of $21.7 million in the second quarter of fiscal 2006. Its
operating income was $2.6 million on revenues of $43.1 million in 2007
for the six months ended December 31, 2006, as compared to operating
income of $3.4 million on revenues of $41.0 million in 2006 for the six
months ended December 31, 2005. The second quarter of fiscal 2007
results include $750,000 of preproduction costs and a $1 million
decrease in the allowance for uncollectible accounts for one of our
major customers.
* As expected, United Solar Ovonic's gross profit margin was impacted by
costs in the second quarter of fiscal 2007 associated with production
capacity ramp up at its new Auburn Hills 2 manufacturing facility,
decreasing to 16.0% in the second quarter of fiscal 2007 from 21.2% in
the second quarter of fiscal 2006 and was unchanged for the six-month
period ended December 31, 2006, as compared to the prior year period.
* United Solar Ovonic currently has 58MW of annual production capacity,
which reflects 30MW added in December 2006, as the company placed in
service the manufacturing equipment for its new Auburn Hills 2
manufacturing facility. The company is also constructing two 60MW per
annum PV cell manufacturing facilities in Greenville, Michigan, which
are expected to begin operation in late 2007 and mid-2008. The
company's expansion plan increases United Solar Ovonic's manufacturing
capacity to 118MW, 178MW and over 300MW per annum by the end of calendar
years 2007, 2008 and 2010, respectively.
* United Solar Ovonic's largest customer, Solar Integrated Technologies,
Inc. ("SIT"), recently announced a 2MW roofing system using United Solar
Ovonic's PV modules to be installed at Tesco USA's distribution center
under construction in Riverside, California. SIT recently completed an
equity offering and used a portion of the proceeds to pay its
outstanding payables to the company. SIT, which had not purchased any
products from United Solar Ovonic during the current fiscal year, has
resumed purchasing United Solar Ovonic's PV modules and will begin
receiving shipments in the third quarter.
* United Solar Ovonic's solar modules have been installed and activated in
a 433KW array by SunEdison, LLC on a Staples Distribution Center in
Killingly, Conn. This installation, which represents the largest solar
panel installation in New England, will provide a significant portion of
the building's electricity and reduce overall electricity costs. As is
becoming an increasingly common structure for commercial customers,
Staples will purchase electricity from the array under a long-term power
purchase agreement without the up-front capital costs, which are being
funded by a third-party source that owns the array.
* United Solar Ovonic recently announced a joint venture in China to
assemble PV modules from solar cells supplied by United Solar Ovonic
beginning in late 2007. This joint venture, owned 75% by United Solar
Ovonic, is expected to open new sales opportunities for United Solar
Ovonic in the China solar markets, as well as provide manufacturing cost
advantages for modules shipped globally. It is subject to, among other
things, government approvals.
* United Solar Ovonic added a solar industry veteran to its sales and
marketing group. Karl-Heinz Toenges joined the company as its Vice
President of Sales and Marketing in Europe. Mr. Toenges is a seasoned
industry executive with broad operational experience and extensive
industry connections, who will enhance the company's global sales and
marketing activities.
* Cobasys, the only United States-based supplier of NiMH battery systems
for hybrid electric vehicles, continued to successfully compete for new
business opportunities, including selection by General Motors to provide
Cobasys' NiMHax(R) Nickel Metal Hydride (NiMH) battery system for GM's
2007 Saturn Aura Green Line Hybrid Mid-Size Sedan, which is expected to
be available to consumers in the spring of 2007.
* Cobasys was awarded a contract to develop and test lithium-ion battery
system technology for the General Motors plug-in hybrid electric vehicle
program, recognizing Cobasys' proven expertise in providing complete
"plug-and-play" energy storage system solutions for today's hybrid
electric vehicles. Cobasys will be working with its partner,
A123Systems, to provide complete battery systems featuring A123Systems'
proprietary nanophosphate technology.
* ECD Ovonics' Ovonyx, Inc. joint venture secured a new license with
Qimonda AG to commercialize Ovonic Unified Memory (OUM) technology.
Additionally, a joint research program consisting of Qimonda, IBM and
Macronix announced positive research results for a prototype phase-
change memory device that they had designed, built and demonstrated.
* Ovonyx also added an industry veteran to its management team, announcing
that Dr. Stefan Lai joined the company as Vice President of Business
Development. Dr. Lai, the co-inventor of the industry-standard ETOX
flash memory cell, was previously Vice President of the Flash Memory
Group and CTO & Co-Director of California Manufacturing and Technology
at Intel Corporation.
* Mr. Pasquale Pistorio resigned as a director of the Company effective
February 6, 2007, due to other professional and personal commitments.
The Company has no immediate plans to appoint a replacement.
* The quarter-over-quarter results were favorably impacted by higher
interest income, together with approximately $0.8 million of favorable
one-time items in 2006.
Mr. Stempel added, "While we are not in the practice of providing guidance, I want to update an operating goal that we had established regarding sustainable profitability. We are on track with a number of our businesses, including our United Solar Ovonic business, but we do not at this time expect to achieve sustainable profitability by the end of this fiscal year as previously projected. This is in large part due to the fact that it is taking longer than we originally expected to secure additional funding opportunities for our emerging technologies. We remain firmly committed to sustainable profitability and will be pursuing funding and restructuring alternatives to achieve our goal in the near term."
"The markets in which we participate are experiencing robust growth, and we are positioned to capitalize on the opportunities and succeed in these markets. The solar market continues its rapid, global expansion, buoyed in part by incentives, but also by improved economics. Our United Solar Ovonic subsidiary, a global leader for thin-film solar modules, is acting globally through its aggressive expansion manufacturing plans and marketing activities," Stempel said. "Our Cobasys joint venture is becoming a key Tier 1 supplier in the auto industry at the same time this industry is making a broad commitment to electric vehicles, which was demonstrated at the recent Detroit and Los Angeles Auto Shows. And, our Ovonyx joint venture continues to add important licensees who are successfully demonstrating products based on OUM technology for a growing global market of memory-intensive applications. Our products are addressing important needs in each of these markets and we are confident of our capabilities to pursue these opportunities."
Additional information about the company and its consolidated financial results can be found in the company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, which was filed with the Securities and Exchange Commission today and will be available on the company's website.
Conference Call Information
ECD Ovonics will hold a conference call today, Thursday, February 8, 2007, at 5:00 p.m. (Eastern Standard Time) to discuss operating results for the three months and six months ended December 31, 2006. To access the conference call, please call (877) 858-2512 or (706) 634-1291. A live webcast of the call will be available online at http://www.ovonic.com/investor or through the company's website at www.ovonic.com. A replay of the call will be available approximately one hour after the conclusion of the call through close of business on Tuesday, February 13, 2007, at (800) 642-1687 or (706) 645-9291. Callers should use conference ID 6999558 to access the conference call and the replay.
About ECD Ovonics
ECD Ovonics 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 its proprietary, enabling technologies in the fields of energy and information leading to new products and production processes based on amorphous, disordered and related materials. The company's portfolio of alternative energy solutions includes Ovonic thin-film amorphous solar cells, modules, panels and systems for generating solar electric power; Ovonic NiMH batteries; Ovonic 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; and Ovonic fuel cell technology. ECD Ovonics' proprietary advanced information technologies include Ovonic phase-change electrical memory, Ovonic phase-change optical memory and the Ovonic Threshold Switch. ECD Ovonics 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 Ovonics holds the basic patents in its fields. More information on the company is available on 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 Ovonics, as of the date of this release, believes to be reasonable and appropriate. ECD Ovonics 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. The risk factors identified in the ECD Ovonics filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K, could impact any forward-looking statements contained in this release.
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
(in thousands, except per-share amounts)
Revenues
Product sales $18,667 $21,681 $41,525 $40,948
Royalties 964 331 1,627 1,514
Revenue from product
development agreements 2,758 1,868 5,863 4,180
Revenue from license agreements 238 238 496 496
Other 320 167 618 394
Total revenues 22,947 24,285 50,129 47,532
Expenses
Cost of product sales 16,319 17,689 34,323 33,549
Cost of revenues from product
development agreements 2,220 1,932 4,793 3,803
Product development and
research 8,496 7,773 16,671 16,278
Patents 664 590 1,359 1,177
Patent defense 238 13 404 32
Preproduction costs 750 - 1,104 -
Operating, general and
administrative (net) 2,136 3,351 6,694 6,540
Total expenses 30,823 31,348 65,348 61,379
Net loss from operations (7,876) (7,063) (15,219) (13,847)
Total other income 4,963 756 10,004 1,332
Net loss from continuing operations (2,913) (6,307) (5,215) (12,515)
Discontinued operations - 572 - 314
Net loss $(2,913) $(5,735) $(5,215) $(12,201)
Basic net loss per share
Continuing operations $(.07) $(.21) $(.13) $(.43)
Discontinued operations - .02 - .01
$(.07) $(.19) $(.13) $(.42)
Diluted net loss per share
Continuing operations $(.07) $(.21) $(.13) $(.43)
Discontinued operations - .02 - .01
$(.07) $(.19) $(.13) $(.42)
Shares used in calculation of net
loss per share
Basic 39,302 29,427 39,186 29,222
Diluted 39,302 29,427 39,186 29,222
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, June 30,
2006 2006
(Unaudited)
ASSETS
Cash and cash equivalents $20,662 $164,962
Short-term investments 330,633 239,505
Accounts receivable (net) 22,742 27,885
Inventories 31,682 21,527
Property, plant and equipment (net) 204,065 138,231
Other 5,932 4,232
TOTAL ASSETS $615,716 $596,342
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other liabilities $42,227 $26,339
Long-term liabilities 32,130 32,982
Total Liabilities 74,357 59,321
Stockholders' equity 541,359 537,021
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $615,716 $596,342
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Six Months Ended
December 31,
2006 2005
(Unaudited)
OPERATING ACTIVITIES:
Net loss $(5,215) $(12,201)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,583 3,857
Bad debt expense (83) 93
Amortization of premium (discount) on
investments (589) -
Stock and stock options issued for
services rendered 1,084 1,393
Other (518) (1,075)
Changes in working capital 9,462 (4,122)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 8,724 (12,055)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
(including construction in progress) (net) (70,261) (25,824)
Purchase (proceeds from sale) of investments (90,590) 9,861
Investment in Ovonyx (200) (150)
NET CASH USED IN INVESTING ACTIVITIES (161,051) (16,113)
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,006 10,898
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 21 (70)
NET CASH FLOW (144,300) (17,340)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 164,962 84,295
CASH AND CASH EQUIVALENTS AT END OF PERIOD $20,662 $66,955
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
SEGMENT REVENUE AND OPERATING INCOME/(LOSS)
(In Thousands)
(Unaudited)
Three Months Ended December 31,
2006 2005 2006 2005
Revenues Income (Loss) from Operations
United Solar Ovonic $19,194 $21,651 $1,150 $1,756
Ovonic Battery(1) 2,620 1,584 (97) (2,044)
Energy Conversion
Devices 25,433(2) 15,592(2) (8,391) (6,605)
Consolidating Entries (24,300) (14,542) (538) (170)
Consolidated $22,947 $24,285 $(7,876) $(7,063)
(1) Excludes discontinued operations.
(2) Principally the sales ($24,063,000 and $14,323,000 for the three
months ended December 31, 2006 and 2005, respectively) by ECD to
United Solar Ovonic of the solar PV module machinery and equipment
which is eliminated in consolidation. The ECD revenues, excluding
primarily the aforementioned sales to United Solar Ovonic, were
$1,138,000 and $1,142,000 for the three months ended December 31, 2006
and 2005, respectively.
Six Months Ended December 31,
2006 2005 2006 2005
Revenues Income (Loss) from Operations
United Solar Ovonic $43,054 $41,010 $2,620 $3,437
Ovonic Battery(1) 4,480 4,547 (1,618) (2,769)
Energy Conversion
Devices 45,294(2) 26,707(2) (15,153) (14,197)
Consolidating Entries (42,699) (24,732) (1,068) (318)
Consolidated $50,129 $47,532 $(15,219) $(13,847)
(1) Excludes discontinued operations.
(2) Principally the sales ($42,220,000 and $24,348,000 for the six months
ended December 31, 2006 and 2005, respectively) by ECD to United Solar
Ovonic of the solar PV module machinery and equipment which is
eliminated in consolidation. The ECD revenues, excluding primarily
the aforementioned sales to United Solar Ovonic, were $2,612,000 and
$2,076,000 for the six months ended December 31, 2006 and 2005,
respectively.