Energy Conversion Devices, Inc. Announces Year-End Operating Results
29 September 2000
Energy Conversion Devices, Inc. Announces Year-End Operating Results
TROY, Mich., Sept. 28 Energy Conversion Devices, Inc.
today announced results for the fiscal year ended June 30,
2000. For the 2000 fiscal year, ECD recorded a loss of $16.7 million on
revenues of $30.0 million compared with a loss of $13.8 million on revenues of
$33.0 million recorded in 1999. The loss from operations was $16.1 million in
2000 compared to $13.0 million in 1999. On a per share basis, the loss was
$1.16 in 2000 compared to a loss of $1.06 in 1999.
ECD has continued an aggressive investment approach to developing ECD's
advanced energy and information technologies to the proof-of-concept, fully
demonstrable state. The ability to demonstrate ECD's technologies has led to
significant joint ventures and investments with major industrial partners to
commercialize them, thus assuring the long-term prospects for ECD.
Mr. Stanford R. Ovshinsky, President and CEO, and Mr. Robert C. Stempel,
Chairman, said, "All areas of our core businesses have entered a new stage of
acceptance and growth in the fundamental industries of the new millennium --
energy and information. The long-standing strategy to invest in our
technologies has led to new strategic alliances over the past nine months
with: Texaco Inc. and its wholly-owned subsidiary, Texaco Energy Systems,
Inc.; Intel Corporation; General Electric; Lockheed Martin Space Electronics
and Communications; N.V. Bekaert S.A.; and China's Rare Earth High Tech Co.,
Ltd. of Baotou Steel Company."
The agreements have not only brought ECD's cash reserves to over $90
million but will also have a significant positive impact on future cash flows
and form the basis of a fundamental restructuring of the Company. Since the
third quarter of the fiscal year, the company has entered into the following
agreements:
* On September 21, Texaco Energy Systems and ECD announced that Texaco
Ovonic Fuel Cell Company, LLC, a 50-50 joint venture, was formed. The initial
funding from Texaco Energy Systems for product and market development is
estimated to exceed $40 million. The primary use of this funding is to fund a
multimillion dollar contract from Texaco Ovonic Fuel Cell to ECD to further
develop Ovonic Regenerative Fuel Cells(TM) technology, validate manufacturing
methodologies and produce production-ready prototypes.
* In May Texaco and ECD announced that Texaco had purchased a 20% equity
stake in ECD for approximately $67 million and that Texaco and ECD intended as
soon as practical to establish joint ventures for the commercialization of
ECD's advanced energy technologies, initially in the fields of the Ovonic
Solid Hydrogen Storage Systems(TM) and the Ovonic Regenerative Fuel Cells(TM)
(noted above).
* In April, Bekaert and ECD entered into a strategic alliance to expand
United Solar's manufacturing capacity fivefold with the construction of the
25-megawatt annual capacity equipment designed and being built by ECD and to
initiate a worldwide sales and marketing program for Uni-Solar(R) photovoltaic
products. The $84 million investment by Bekaert includes approximately $50
million for the purchase of production equipment from us and will allow United
Solar to accelerate the market penetration of United Solar's unique
lightweight, flexible, and rugged solar products to address the rapidly
expanding photovoltaic markets.
* Beginning in April, Ovonic Battery, after having received all necessary
government approvals, officially started the first three (valued at $63.6
million) in a series of NiMH projects in China valued in total at
approximately $100 million. Each of these projects involves the licensing of
advanced NiMH technology and the sale of production equipment. To date, cash
payments exceeding $4,000,000 have been received related to this contract.
Three joint ventures have been established in China for the production of
metal hydride materials, negative electrodes and consumer batteries. ECD has
a 19% interest in each of the joint ventures. These projects provide an
important entry for us into the vast Chinese market and have led to royalty-
bearing, consumer battery licensing agreements with two other Chinese
companies -- BYD Battery Co., Ltd. and Sanik Battery Co., Ltd.
During the fiscal year other agreements were negotiated and reported to
shareholders. These included:
* In February, Ovonyx Inc., ECD's joint venture with Mr. Tyler Lowrey,
formed a strategic alliance with Intel in which Intel Capital made equity
investments in Ovonyx. Additionally, Ovonyx granted Intel a nonexclusive
royalty-bearing license and began a joint development program utilizing one of
Intel's wafer fabrication facilities. Ovonyx' memory devices, which are based
on ECD's proprietary technology, have a wide variety of computer and
information technology applications and are intended to replace conventional
FLASH, DRAM and SRAM semiconductor memory devices.
* A strategic alliance was formed in March with General Electric Company,
the first activity of which resulted in the creation of a new joint venture,
Ovonic Media, LLC. ECD received a multi-million dollar contract from Ovonic
Media to design, develop, demonstrate and commercialize ECD's proprietary
continuous web roll-to-roll technology for the ultra-high-speed manufacture of
optical media products, primarily rewritable DVDs.
* A two-year cost-sharing contract was awarded to ECD in April by the
U.S. Air Force (USAF) to further advance the proprietary photovoltaic space
technology developed by ECD and United Solar. The award is the result of a
successful Phase I contract with the USAF; under the contract ECD and United
Solar will develop laser-integrated ultralight, thin-film amorphous silicon-
based solar panels on Kapton(R), a lightweight, 1 to 2 mil thick plastic
substrate for auxiliary spacecraft power systems. The technology being
developed is capable of providing 2500 watts per kilogram.
In all of these agreements, ECD joint venture partners assume the
responsibility for funding development and commercialization activities. This
is why demonstrable products and technology are so important, since the first
question, is usually "does it work?" At ECD, we show that, "it works!"
Other important developments include:
* In November, Ovonyx announced that it had entered into a royalty-
bearing agreement with Lockheed Martin Space Electronics & Communications to
commercialize the Ovonyx non-volatile semiconductor memory technology to
replace FLASH, DRAM, FPGA and other electronic devices in radiation hardened
space and military applications.
* The Air Force Research Laboratory (AFRL) stated, commenting on Ovonyx's
space and military applications, "Because of a revolutionary breakthrough in
special 'phase-change' alloy materials ... we now expect to advance computer
data storage capabilities ... by addressing, with a single new technology,
most of the challenges facing modern memory devices." AFRL further said,
"This will lead to computer data storage that is more durable, less expensive,
and faster ... this new technology may become the 'holy grail' for satellite
computer designers seeking low-cost, lightweight, low-power memory that will
work reliably in any environment and will store data indefinitely with no
power requirements, or record data thousands of times a second for the life of
the satellite -- unprecedented for space-based computers today."
* The demonstration of a much-needed new Ovonic monoblock battery, which
is a compact design for high-voltage (36-42 volt) automotive electrical
systems for future gasoline-powered automobiles. This new battery can address
a wide range of product applications including hybrid electric vehicles,
electric vehicles and fuel cell electric vehicles.
The new business agreements have both near-term and long-term impact on
the company's capital resources. The Texaco, Bekaert, GE and Ovonyx
agreements are all expected to result in improved cash flows as the company's
business partners assume the responsibility for funding development and
commercialization activities.
The financial results for the fiscal year are shown in the following
table:
Financial Results:
Year Ended June 30,
2000 1999
(In thousands, except per-share amounts)
Revenues
Product sales $6,892 $4,524
Royalties 3,440 2,735
Revenue from product development
Agreements 10,419 17,241
Revenues from license agreements 3,138 4,754
Other 6,090 3,718
Total Revenues 29,979 32,972
Expenses 46,031 45,966
Net Loss from Operations (16,052) (12,994)
Other Income (Expense)
Gain on sale of Ovonic Battery
Company stock - 1,970
Equity in loss from investment
in joint ventures (2,463) (3,660)
Other 1,859 906
(604) (784)
Net Loss $(16,656) $(13,778)
Basic Net Loss Per Common Share $(1.16) $(1.06)
Notes to Financial Results:
The company has continued to invest to further advance its technologies.
These investments in its technologies have led to historic new strategic
alliances over the past nine months as noted above. According to generally
accepted accounting principles as practiced in the United States (GAAP), the
Company was required to report these investments as losses.
The company had a net loss in the year ended June 30, 2000, of $16,656,000
compared to a net loss of $13,778,000 for the year ended June 30, 1999. The
change in net loss resulted primarily from a reduction in revenues, lower
revenues from license and other agreements and revenues from product
development agreements partially offset by higher product sales and royalties.
The ECD/Ovonic Battery programs in the Ovonic nickel metal hydride (NiMH)
battery technology have led to a new family of batteries not only for hybrid
electric vehicles (HEVs), electric vehicles (EVs) and fuel cell electric
vehicles (FCEVs), but also for a new universal battery platform that includes
a much-needed addition to the starter lighter ignition battery field where
especially high voltages are required. ECD's continued investments in its
battery, solid hydride and fuel cell development programs, as well as its
activities at United Solar and Bekaert-ECD Solar Systems are all reported as
losses. Losses related to electrode production and the ongoing protection of
the Company's intellectual property also contributed to the 2000 losses. In
addition to the loss from operations, the Company incurred other expense (net)
of $604,000 in the year ended June 30, 2000, compared to other expense (net)
of $784,000 in the same period in the prior year.
Product sales, consisting of positive and negative electrodes, battery
packs, machine-building and photovoltaic products (for United Solar since
April 11, 2000), increased 52% to $6,892,000 in the year ended June 30, 2000
from $4,525,000 in the year ended June 20, 1999. Battery pack sales increased
to $1,493,000 in 2000 from $1,060,000 in 1999 and machine-building revenues
increased to $1,824,000 in 2000 from $348,000 in 1999. The machine-building
revenues in both years were applicable to contracts to build large-area
microwave deposition equipment. Sales of negative and positive electrodes
decreased $1,753,000, primarily due to one of the Company's principal negative
electrode licensees currently manufacturing its own electrode products as
allowed under its license from the Company. Photovoltaic sales for the period
from April 11, 2000 (the date United Solar was consolidated) through June 30,
2000 were $2,212,000.
Royalties increased 26% to $3,440,000 in the year ended June 30, 2000 from
$2,736,000 in the year ended June 30, 1999, reflecting increased production
efficiencies of its licensees which have resulted in lower prices as licensees
move aggressively to increase market share.
Revenues from product development agreements decreased 40% from
$17,241,000 in the year ended June 30, 1999 to $10,419,000 in the year ended
June 30, 2000. While there were increased revenues from hydrogen storage
programs ($1,531,000 in 2000 compared to $191,000 in 1999), this increase in
2000 was more than offset by decreases in revenues resulting from the
successful conclusion of programs with General Motors Corporation to develop
batteries for electric and hybrid electric vehicle applications and with the
National Institute of Standards and Technology (NIST) for a new, low-cost
manufacturing system for DVDs based on ECD's proprietary phase-change optical
memory technology ($3,883,000 in 2000 compared to $5,606,000 in 1999).
Contracts with DOE and National Renewable Energy Laboratory (NREL) in
photovoltaics also had decreased revenues ($1,733,000 in 2000 compared to
$2,928,000 in 1999).
Revenues from license and other agreements decreased from $4,754,000 in
the year ended June 30, 1999 to $3,138,000 in the year ended June 30, 2000.
The 2000 revenues included a $1,778,000 license fee from Toshiba Battery;
$1,000,000 from Sanyo, which had previously been deferred from the agreement
entered into with Sanyo in October 1999; and $360,000 from Japan Storage. The
1999 license fees included $4,400,000 from Sanyo.
Other revenues increased by $2,372,000 to $6,090,000 in the year ended
June 30, 2000 from $3,718,000 in the year ended June 30, 1999, primarily due
to revenues from Ovonyx of $2,686,000 related to services provided to Ovonyx
and $1,098,000 related to services provided to Bekaert-ECD Solar Systems,
partially offset by lower billings to GM Ovonic L.L.C.