Energy Conversion Devices, Inc. Announces Year-End Operating Results
26 September 1997
Energy Conversion Devices, Inc. Announces Year-End Operating Results
TROY, Mich., Sept. 26 -- Energy Conversion Devices, Inc.
("ECD") announced today its operating results for the fiscal
year ended June 30, 1997. During the year, ECD made substantial investments
for new product development in its core businesses: Ovonic nickel metal
hydride ("NiMH") batteries, photovoltaic technology, and information
technology, all resulting in important technology advances. Additionally,
significant litigation expenses were incurred in defending the Company's
patents and intellectual property. The year was one of major advances and
exceptional achievements which required large investment, paving the way for
commercial expansion of the Company's core activities.
ECD reported its operating results for the year ended June 30, 1997, as
follows:
Year Ended June 30,
1997 1996
(in thousands)
REVENUES $ 29,578 $ 37,312
EXPENSES $ 48,606 $ 41,491
Net Loss from Operations $(19,028) $ (4,179)
Other Income - Net 1,073 733
Sale of Ovonic Battery Company stock -- 4,500
NET (LOSS) INCOME $(17,955) $ 1,054
NET (LOSS) INCOME PER COMMON SHARE
AND COMMON EQUIVALENT SHARE $ (1.67) $ .10
The change from net income for the year ended June 30, 1996 compared to
the net loss for the current year is primarily a result of the sale of
$4,500,000 of Ovonic Battery Company, Inc. ("Ovonic Battery") stock in the
prior year, an approximate $6,700,000 decrease for one-time license fees in
the year ended June 30, 1997 and the investment by the Company of its own
funds in the current year to develop its new "Family of Batteries."
The net loss in the year ended June 30, 1997 was primarily due to:
* The decision to increase Company-funded Ovonic NiMH battery development
focused on the "Family of Batteries" project for electric vehicles ("EVs") and
hybrid electric vehicles ("HEVs").
* A decrease in revenues from third parties for Ovonic NiMH battery
development programs.
* Costs associated with expansion of negative electrode production and
initiation of positive electrode production.
* Technical, engineering, and manufacturing support for licensees and
customers, including the production start-up of the GM Ovonic, L.L.C., ("GM
Ovonic"), the Company's joint manufacturing venture.
* Cost of patent defense.
* Continuation of the phase-change semiconductor memory development
program.
* Investment in advanced photovoltaic development in conjunction with new
business opportunities.
Additional details of financial results can be found in the section
entitled Notes to Operating Results.
Stanford R. Ovshinsky, President and CEO, and Robert C. Stempel, Chairman,
commented on a number of significant recent developments in ECD's three core
businesses: Ovonic NiMH batteries, photovoltaic technology and information
technology.
Ovonic NiMH Batteries
Significant achievements included the successful development of a new
"Family of Batteries" with the capability to cover the full spectrum of EVs
and HEVs, including bicycles, scooters, cars, trucks and vans. The "Family
of Batteries" project was demonstrated to General Motors and has led to an
Ovonic Battery production development program that is a multi-year, multi-task
activity to support our joint manufacturing venture, GM Ovonic. Covering both
EV and HEV batteries, this development program has the objective of increasing
the energy and reducing the size and cost of current Ovonic NiMH batteries.
GM Ovonic is currently engaged in low-volume manufacturing of NiMH
batteries at its manufacturing facility in Troy, Michigan. Production volume
is expected to increase during 1998 at a larger facility.
In September 1997, the Japanese Patent Office recognized and registered
the important basic Ovonic Battery patent for NiMH batteries. In addition to
the basic patent, there is a continuing string of significant other patents
that assure Ovonic Battery's continued domination in the NiMH battery field.
Virtually, all of Japan's NiMH battery manufacturers have royalty-bearing
agreements with Ovonic Battery covering consumer NiMH batteries. With the
issuance of this patent, these manufacturers must pay additional royalties
based on all sales of NiMH batteries produced in Japan from the December 18,
1992 publication date of the patent until April 22, 2003. Moreover, with the
issuance of this patent, the running royalties are expected to increase
substantially.
USABC has stated that the only battery technology with the capability to
meet or exceed USABC's mid-term goals for EV battery performance is NiMH.
Ovonic Battery has been designing and building cells and modules for
independent evaluation by USABC as well as testing advanced prototype
batteries with favorable results.
The General Motors EV1, the first modern limited-production EV designed
from the ground-up, and the Chevrolet S-10 electric pickup, powered by Ovonic
NiMH batteries manufactured by GM Ovonic, will become available in limited
quantities later this year.
One of our licensees, Sanoh Industrial Co., Ltd. ("Sanoh") is accelerating
its production of NiMH batteries for electric scooter applications. Among
Sanoh's customers are several large manufacturers of electric scooters and
bicycles such as Honda and Yamaha Motor Co. Ltd. who have announced plans to
introduce new products.
Ovonic NiMH batteries continue to set records and win EV races. The
Ovonic NiMH battery powered the first-place winning Solectria Force EV to a
range of 249 miles on a single charge during the May 1997 American Tour de Sol
race, outdistancing all other production competitors and surpassing the year-
earlier first-place winning range, also set with the Ovonic NiMH battery. In
that same year, the Solectria Sunrise, a four-passenger ground-up designed
electric vehicle achieved 373 miles on a single charge. In July 1997, the
Chevrolet S-10 electric pickup, powered by GM Ovonic NiMH batteries, set a
record for EVs in winning the Pikes Peak International Hill Climb in 15
minutes and 32 seconds, surpassing previous EV records.
Photovoltaic Technology
ECD's photovoltaic joint venture with Canon Inc., United Solar Systems
Corp. ("United Solar"), continues to receive widespread recognition for its
solar shingle and metal roofing products. Recently, United Solar received
Discover Magazine's 1997 Technology Innovation Award for its solar shingles.
Commenting on the award, Secretary of Energy Federico Pena said, "This project
is an excellent example of the benefits of public-private partnerships
furthering the commercialization of clean energy technologies. There is a
tremendous international competition in the development of roof-integrated
solar panels, and DOE is proud to be associated with this cutting-edge
technology to maintain the U.S. lead in the world."
The manufacturing equipment built by ECD for United Solar, for
photovoltaic material capable of producing 5 megawatts of electricity on an
annual basis is operational and United Solar is manufacturing and selling the
new line of prize-winning solar shingles and its metal photovoltaic ("PV")
rooftop products. Just last month, United Solar achieved record sales of
nearly $1,000,000, including $460,000 of PV shingle systems exported to the
Middle East.
President Clinton's announcement of the "Million Roofs" Program at the
United Nations, on June 26, 1997, focused attention on the use of PV roofing
products to reduce global warming gases from fuel-fired electric generation
plants. United Solar expects that the new Program will further enhance sales
of its new roofing products.
United Solar's standard line of products has also received approval from
the Underwriters Laboratories, Inc. (UL) and the lightweight and rugged thin-
film PV products are finding not only increased use in the developing world
for remote electricity generation, but are now addressing potential large-
volume uses in the telecommunication industry.
Information Technology
ECD is continuing development of Ovonic phase-change semiconductor memory
devices that build on the successful commercialization through licensing of
its proprietary phase-change rewritable optical memory disk technology.
Ovonic phase-change semiconductor memory is a unique thin-film non-volatile
computer memory technology with the capability to outperform significantly
both conventional Flash memory devices and the newly announced multi-bit Flash
memories. The Ovonic device offers increased storage capacity because of its
smaller cell size and use of greater multi-bit storage, much faster speed, and
as much as a billion times longer cycle life than Flash. Because of its high
speed and long cycle life, the Ovonic semiconductor memory has the capability
to become a universal semiconductor memory device, replacing DRAM and
SRAM as well as Flash. ECD is currently in discussion with major
semiconductor memory manufacturers in order to establish partners for product
commercialization.
Commercial manufacturing and sales of compact disk-rewritable ("CD-RW")
storage media, which incorporate Ovonic phase-change rewritable optical memory
technology, began in mid-1997. ECD's phase change technology is now being
used in the two leading rewritable optical disk products CD-RW and phase-
change dual (PD).
An even higher-capacity data storage rewritable optical memory product,
the DVD-RAM ("DVD-Random Access Memory") disk, is planned for commercial
introduction in late calendar 1997. A number of the Company's optical memory
licensees now producing phase-change dual ("PD") and CD-RW media have
announced that they will become manufacturers of DVD-RAM products. The high
data storage capacity DVD-RAM disks will be used for a wide range of computer
and information technology applications, including digital television
recording. Our proprietary phase-change memory has been chosen to be the
worldwide standard medium for the much-discussed DVD-RAM.
A year of investing in the future has involved significant costs and was a
part of the reported operating loss; however, management believes that the
advanced product developments will provide a new base leading to significant
returns for the Company over the long term.
Notes to Operating Results
Year Ended June 30,
1997 1996
(in thousands)
REVENUES
Product sales:
Negative and positive electrodes $10,832 $ 4,903
Battery packs 2,333 2,258
Machine building 1,732 7,667
Total 14,897 14,828
Royalties 1,394 1,321
Revenue from research and development
agreements 5,739 7,349
Revenues from license agreements 5,829 12,524
Other 1,719 1,290
TOTAL REVENUES $29,578 $37,312
Product sales of negative and positive electrodes increased $5,900,000,
and this is offset by a $5,900,000 decrease in revenues from machine-building
activities, which are cyclical in nature.
Royalties increased from $1,321,000 in the year ended June 30, 1996 to
$1,394,000 in the year ended June 30, 1997, primarily due to increases in
royalties from battery technology, partially offset by decreases in royalties
from optical memory technology. Royalties from licensees based in Japan were
also negatively impacted by the weakness in the Japanese Yen.
Revenues from research and development agreements decreased 22% to
$5,739,000 in the year ended June 30, 1997 from $7,349,000 in the year ended
June 30, 1996 due to reductions in 1997 revenues recognized in photovoltaic
and battery technologies.
Revenues from license and other agreements decreased 53% to $5,829,000 in
the year ended June 30, 1997 from $12,524,000 in the year ended June 30, 1996
due to a reduction in 1997 in battery license agreements. Revenues from
license and other agreements are non-recurring, sporadic, and are based upon
developing new business relationships.
The net income for the year ended June 30, 1996 also includes a gain of
$4,500,000 on the sale of a small percentage of the common stock of ECD's
Ovonic Battery subsidiary.
ECD is a leader in the synthesis of new materials and the development of
advanced production technology and innovative products. ECD has pioneered the
development of products and production technology based on amorphous,
disordered and related materials with an emphasis on alternative energy and
advanced information technologies. ECD's web site is http://ovonic.com.
SOURCE Energy Conversion Devices