Energy Conversion Devices Announces Operating Results for Q1
15 November 2000
Energy Conversion Devices Announces Improved Operating Results for the First Quarter
TROY, Mich., Nov. 14 Energy Conversion Devices, Inc. (ECD)
announced today a significant improvement in its operating
results. Revenues increased 33.7% to $10,134,000 compared to $7,580,000 in
the first quarter last year. Similarly, the Company's net loss of $1,745,000
was a $2,000,000 improvement compared to the same quarter last year. On a
per-share basis, the loss was $.09 in 2000 compared to a loss of $.28 in 1999.
In a joint statement, Stanford R. Ovshinsky, President and CEO, and Robert
C. Stempel, Chairman, said, "We're very pleased to see the tangible
improvement in our operating results. Our technologies and products have
entered a new stage of acceptance and growth in both energy and information,
and our new strategic alliances will allow us to greatly accelerate the
commercialization of our products." They further noted that revenue growth is
expected to continue based on agreements and orders in hand for commercial
products, product development and large-scale machine building.
The improved performance is a direct result of a fundamental restructuring
of the Company. Strategic alliances formed over the last year resulted in
ECD's business partners funding the development and commercialization of the
Company's products, costs that ECD shouldered on their own in the past. The
alliances include those with Texaco Inc. and its wholly owned subsidiary,
Texaco Energy Systems, Inc. (TESI); Intel Corporation; General Electric; 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 have a significant positive impact on future cash flows and
operations. As part of its long-standing strategy, the Company has made
investments in its technologies which have resulted in enabling intellectual
property and products. Since June 30, 2000, the Company has entered into the
following agreements:
* On October 31, 2000, ECD and TESI formed Texaco Ovonic Hydrogen Systems
LLC. TESI is funding Texaco Ovonic Hydrogen Systems, including initial
product and market development and a multimillion dollar contract from Texaco
Ovonic Hydrogen Systems to ECD to further develop and advance the
commercialization of ECD's technology to store hydrogen in metal hydrides.
* On October 12, 2000, ECD announced that Texaco and Ovonic Battery
signed a Memorandum of Understanding (MOU) to continue the business of GM
Ovonic as a new entity, to be named Texaco Ovonic LLC. General Motors'
interest is to be converted and restructured so that ECD and Texaco each will
have a 50 percent interest in the joint venture. The MOU was signed in
conjunction with an MOU signed between Texaco and General Motors on October
10, 2000.
* On September 21, 2000, TESI and ECD announced that Texaco Ovonic Fuel
Cell Company LLC, a 50-50 joint venture, was formed. TESI is funding Texaco
Ovonic Fuel Cell in an amount estimated to exceed $40 million, including
initial product and market development and 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.
On November 9, 2000, ECD announced the creation of a new position, Senior
Vice President of Global Sales and Marketing. Mr. Thomas S. Neslage, former
president of Texaco Global Products, was appointed to this position. He will
oversee the development of cohesive corporate and product brand management
strategies for all ECD products and services.
The following significant events, which were previously reported to ECD's
shareholders, also help enhance the Company's cash flows and results from
operations:
* An $84 million investment in United Solar Systems Corp. by Bekaert,
including approximately $50 million for purchase of production equipment from
ECD which will enable 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.
* A series of NiMH projects in China with Rare Earth High Tech Co. Ltd.
(Rare Earth High-Tech) of Baotou Steel Company of Inner Mongolia, China. Rare
Earth High Tech is one of the principal suppliers of rare earth raw materials
to NiMH battery material manufacturers around the world and, together with its
affiliates, is believed to own approximately half of the world's reserves of
these rare earth materials. These projects are valued in total at
approximately $100 million, of which the first three (valued at $63.6 million)
have started. Each of these projects involves joint ventures, 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 these
projects.
The financial results for the first quarter are shown in the following
table:
Financial Results:
Three Months Ended September 30,
2000 1999
(In thousands, except per-share amounts)
Revenues
Product sales $3,192 $1,870
Royalties 876 663
Revenue from product development agreements 5,093 3,918
Revenues from license agreements 300 400
Other 673 729
Total Revenues 10,134 7,580
Expenses 13,227 11,014
Net Loss from Operations (3,093) (3,434)
Other Income (Expense)
Interest Income 1,554 226
Equity loss in joint ventures (207) (560)
Other 1 23
1,348 (311)
Net Loss $(1,745) $(3,745)
Basic Net Loss Per Common Share $(.09) $(.28)
Notes to Financial Results:
ECD has continued to make investments to further advance their
technologies which 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 three months ended September 30, 2000 of
$1,745,000 compared to a net loss of $3,745,000 for the three months ended
September 30, 1999. The improvement resulted primarily from increased product
sales and increased revenues from product development agreements, partially
offset by increased expenses.
Product sales, consisting of photovoltaics, machine building, battery
packs and positive and negative battery electrodes, increased 71% to
$3,192,000 in the three months ended September 30, 2000 from $1,870,000 in the
three months ended September 30, 1999. Photovoltaic sales were $1,381,000 in
2000 versus zero in 1999 (United Solar financial statements were consolidated
effective April 11, 2000). Machine-building revenues increased to $1,563,000
in 2000 compared to $728,000 in 1999. The machine-building revenues in 2000
were applicable to contracts to build a 25MW annual capacity production
equipment for Bekaert ECD Solar Systems and for equipment for the manufacture
of NiMH batteries for the Rare Earth Ovonic joint ventures. Sales of negative
and positive electrodes decreased $520,000, 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. The
Company has continued its development of advanced electrode materials to be
introduced to its customers. Because most battery pack orders are being
filled through GM Ovonic, the Company's battery pack sales decreased to
$178,000 in 2000 versus $553,000 in 1999.
Royalties increased 32% to $876,000 in the three months ended September
30, 2000 from $663,000 in the three months ended September 30, 1999, primarily
from royalties for battery technologies.
Revenues from product development agreements, primarily related to the
Company's enabling technologies in NiMH batteries and hydrogen systems,
increased 30% to $5,093,000 in the three months ended September 30, 2000 from
$3,918,000 in the three months ended September 30, 1999. There were total
increases in product development agreements of $3,014,000 which were due to
development programs in 2000 for Texaco Ovonic Fuel Cell ($897,000), Texaco
Ovonic Hydrogen Systems ($1,440,000) and United Solar ($677,000), partially
offset by the successful conclusion of programs with General Motors to develop
batteries for electric and hybrid electric vehicle applications ($0 in 2000
compared to $1,003,000 in 1999), other hydrogen programs ($0 in 2000 compared
to $313,000 in 1999), and decreases in programs with Department of Energy and
National Renewable Energy Laboratory ($444,000 in 2000 compared to $986,000 in
1999) and National Institute of Standards and Technology in the Company's
battery and optical memory technologies ($660,000 in 2000 compared to
$1,275,000 in 1999).
Revenues from license and other agreements decreased to $300,000 in the
three months ended September 30, 2000 from $400,000 in the three months ended
September 30, 1999. The 2000 revenues consisted of agreements with two
Chinese companies ($250,000 from BYD Battery Co., Ltd. and $50,000 from SANIK
Battery Co., Ltd.).
Other revenues decreased by $56,000 to $673,000 in the three months ended
September 30, 2000 from $729,000 in the three months ended September 30, 1999,
primarily due to decreased billings for work performed for Ovonyx, Inc.
The change to other income (net) of $1,348,000 in the three months ended
September 30, 2000, from other expense (net) of $311,000 in the three months
ended September 30, 1999, was due principally to significantly increased
interest income ($1,554,000 in 2000 compared to $226,000 in 1999) in the three
months ended September 30, 2000.