Energy Conversion Devices Announces Second Quarter Operating Results
15 February 2000
Energy Conversion Devices Announces Second Quarter Operating Results
TROY, Mich., Feb. 14 -- Energy Conversion Devices, Inc.
("ECD") today announced results for the three months and six
months ended December 31, 1999. A large portion of the losses reported below
is due to the Company's investment in programs to commercialize its various
technologies that are integral to the new business agreements noted below.
For the second quarter ended December 31, 1999, the Company recorded a net
loss of $4,290,000 on revenues of $6,770,000 compared to net income of
$1,666,000 on revenues of $11,869,000 in the second quarter last year. For
the six months ended December 31, 1999, the Company recorded a net loss of
$8,036,000 on revenues of $14,350,000 compared to a net loss of $3,558,000 on
revenues of $18,046,000 in the same period in 1998.
Stanford R. Ovshinsky, president and CEO, said, "ECD has made significant
progress in each of its core commercial lines of business."
A few of the highlights are:
* Ovonyx, Inc. ("Ovonyx"), ECD's joint venture with Tyler Lowrey to
commercialize ECD's proprietary non-volatile semiconductor memory technology,
Ovonic Unified Memory ("OUM"), recently announced two significant events:
* Intel Capital made an investment in Ovonyx. Intel also entered into
a non-exclusive royalty-bearing license agreement and is jointly developing
with Ovonyx the OUM technology at one of Intel's wafer fabrication facilities.
According to Dr. Sunlin Chou, Vice President and General Manager, Technology
and Manufacturing Group of Intel Corporation, "Intel continuously develops and
fosters technology that has the potential to improve the computing experience.
We believe that innovations in materials will enable us to take silicon
devices beyond perceived scaling limits for the continued rapid advancement of
the digital world."
* A royalty-bearing agreement with Lockheed Martin Space Electronics
& Communications to commercialize OUM to replace Flash, DRAM, FPGA and other
electronic devices in radiation hardened space and military applications. The
non-space and military applications of the OUM memory technology address
markets that are over $100 billion.
* The Company's proprietary next-generation Ovonic nickel metal hydride
("NiMH") batteries were featured in the GM Advanced Hybrid Technology
Demonstration Vehicle, Precept, shown at the North American International Auto
Show in Detroit this past month. The Ovonic NiMH battery is a liquid-cooled,
compact design pack mounted under the front seat floor area.
* ECD designed, built and is preparing for the shipment of a new high-
speed deposition machine to Southwall Technologies, Inc. where it will supply
product for the fast growing antireflective film market for cathode ray tubes
(CRTs) and liquid crystal displays (LCDs). The machine utilizes ECD's new
proprietary Microwave Plasma Enhanced Chemical Vapor Deposition production
technology.
* The recently signed nonexclusive, royalty-bearing license agreement
with Toshiba Battery Company, Ltd. of Japan ("Toshiba Battery") is another
important step for the Company in addressing the growing market of batteries
for hybrid electric vehicles which utilize battery power for electrically
driven propulsion together with another type of propulsion power such as an
internal combustion engine or a fuel cell. The license includes the right to
manufacture cylindrically wound Ovonic NiMH in Japan and to sell such
batteries worldwide subject to certain exceptions and limitations.
* There continues to be a widespread recognition of the Company's thin-
film amorphous photovoltaic products. United Solar Systems Corp. ("United
Solar") sales increased in calendar 1999 by 37% from 1998. ECD's Production
Technology and Machine Building Division is currently in the design and
engineering stage for a proprietary continuous web machine capable of five
times the production capacity of United Solar's current production line,
leading to lower costs.
Hydrogen, often referred to as the ultimate fuel, contains no carbon and
emits no climate changing gases and no pollution, with water vapor being its
only byproduct. With the Ovonic solid hydrogen storage system, the hydrogen
stored in the hydride material can be released as a fuel for fuel cells as
well as internal combustion engines.
ECD's proprietary atomic engineering approach has permitted the design of
various hydride materials-from the widely used NiMH for EVs, HEVs and FCEVs to
the safe solid storage of hydrogen with many uses especially those in the
transportation sector. Robert C. Stempel, chairman of ECD, added, "The Ovonic
Solid Hydrogen Storage System is receiving worldwide attention because of its
capability to safely store hydrogen in a solid state. For example, one of its
materials in the solid state stores hydrogen at practical operating conditions
(7wt% at 300 degrees C desorption temperature). The solid stage hydrogen
storage system can be recharged in under two and one-half minutes. An Ovonic
hydrogen-powered mid-size automobile can achieve mileage of over 300 miles
between charges."
A large portion of the losses in 1999 was primarily due to the fact that,
in accordance with Generally Accepted Accounting Principles ("GAAP"), ECD must
report its activities to further its advancements in its technologies as a
loss. The ECD/Ovonic Battery programs in its Ovonic NiMH battery technology
have led to a new family of batteries not only for HEVs, EVs and FCEVs, but
also for a new universal battery platform that has included a much-needed
addition to the Starter Lighter Ignition field where especially high voltages
are required. ECD's continued investments in United Solar, its Ovonyx joint
venture activities and its solid hydride development programs are all reported
as losses. Losses related to electrode production and the ongoing protection
of the Company's intellectual property also contributed to the 1999 losses.
The change in revenues from the three months ended December 31, 1999,
compared to the same quarter last year primarily resulted from:
* a $2,664,000 reduction in revenues from license and other agreements
(the 1999 quarter included $1,778,000 related to a license with Toshiba
Battery while the prior year's quarter included $4,400,000 related to a
license with Sanyo Electric Co. ("Sanyo"));
* a $2,837,000 reduction in revenues from product development agreements
primarily relating to the successful conclusion of programs with GM to develop
batteries for electric and hybrid electric applications and with the National
Institute of Standards and Technology ("NIST") for the development of a new
low-cost manufacturing system for DVDs (digital versatile disks) based on
ECD's proprietary phase-change optical memory technology (ECD still has a
continuing program with NIST to develop super-high density optical data
storage);
* a $458,000 increase in royalties.
The change in net income (loss) from the three months ended December 31,
1999, compared to the same quarter last year primarily resulted from:
* the reduced revenues noted above, partially offset by a $1,008,000
reduction in operating expenses;
* the prior year quarter included a $1,970,000 gain on the sale of Ovonic
Battery stock to Sanyo, while the current quarter had no such gain;
* a $289,000 reduction in the net loss related to ECD's equity interest
in United Solar due to improved operating performance at United Solar. In
connection with ECD's investments in United Solar, GAAP requires that ECD
recognize as a loss its share of the losses of United Solar's ongoing
operations regardless of the value of the investment.
The change in revenues from the six months ended December 31, 1999,
compared to the same period last year primarily resulted from:
* a $2,306,000 reduction in revenues from license and other agreements
(the six months ended December 31, 1999 included $1,778,000 related to a
license with Toshiba and $400,000 from Japan Storage while the prior year
included $4,400,000 related to a license with Sanyo);
* a $2,692,000 reduction in revenues from product development agreements
primarily related to the successful conclusion of programs with GM to develop
batteries for electric and hybrid electric applications and with the NIST for
the development of a new low-cost manufacturing system for DVDs based on ECD's
proprietary phase-change optical memory technology (ECD still has a continuing
program with NIST to develop super-high density optical data storage);
* a $506,000 increase in royalties;
* an increase in product sales of $1,239,000 primarily due to $1,123,000
in machine-building revenues applicable to the contract to build a high-speed
deposition machine for Southwall Technologies.
The change in net loss from the six months ended December 31, 1999,
compared to the same period last year primarily resulted from:
* the reduced revenues noted above, partially offset by a $605,000
reduction in operating expenses;
* the prior year period included a $1,970,000 gain on the sale of Ovonic
Battery stock to Sanyo, while the current period had no such gain;
* a $818,000 reduction in the net loss related to ECD's equity interest
in United Solar due to improved operating performance at United Solar. In
connection with ECD's investments in United Solar, GAAP requires that ECD
recognize as a loss its share of the losses of United Solar's ongoing
operations regardless of the value of the investment.
A summary of the Company's operating results follows:
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
(In thousands) (In thousands)
Product sales $1,377 $1,041 $3,247 $2,008
Royalties 1,075 617 1,738 1,232
Revenues from product development
agreements 1,992 4,829 5,910 8,602
Revenues from license and other
agreements 1,778 4,442 2,178 4,484
Other 548 940 1,277 1,720
Total revenues 6,770 11,869 14,350 18,046
Expenses 10,521 11,529 21,535 22,140
Net income (loss) from operations (3,751) 340 (7,185) (4,094)
Gain on sale of Ovonic Battery
Company Stock -- 1,970 -- 1,970
Equity interest in United Solar's net
loss* (738) (1,027) (1,298) (2,116)
Other non-operating income - (net) 199 383 447 682
Net income (loss) $(4,290) $1,666 $(8,036) $(3,558)
Basic net income (loss) per
common share $(.32) $.13 $(.60) $(.28)
*In connection with ECD's investments in United Solar, GAAP requires that
ECD recognize as a loss its share of the losses of United Solar's ongoing
operations.
ECD is a leader in the synthesis of new materials and the development of
advanced production technology and innovative products. It has pioneered and
developed enabling technologies leading to new products and production
processes based on amorphous, disordered and related materials, with an
emphasis on alternative energy and advanced information technologies. 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.