* Implementation of Restructuring Plan Progressing Smoothly to Cut Costs,
Focus on Profitability, Commercialization and Marketing of Products
* Company Broadens Initiatives to Drive Top-Line Growth
ROCHESTER HILLS, Mich., May 8 /PRNewswire-FirstCall/ -- Energy
Conversion Devices, Inc. (Nasdaq: ENER) (ECD) today reported results for
the third quarter ended March 31, 2007. The company reported a net loss of
$6.9 million (or $0.17 per share) on revenues of $27.4 million in the third
quarter of fiscal 2007, compared to a net loss of $5.6 million (or $0.17
per share) on revenues of $27.0 million in the third quarter of fiscal
2006. The company also reported a net loss of $12.1 million (or $0.31 per
share) on revenues of $77.6 million for the nine months ended March 31,
2007, as compared to a net loss of $17.8 million (or $0.59 per share) on
revenues of $74.5 million for the nine months ended March 31, 2006. The
third quarter of 2007 reflects an increase in interest income of $2.2
million compared to the same period in the prior year and a year-over-year
increase in weighted average number of shares outstanding from 32,598,000
to 39,517,000.
"Our thin-film lightweight photovoltaic product is the best solution
for building-integrated photovoltaics, the fastest growing segment of the
solar market," said Chairman and CEO Robert C. Stempel. "We are steadily
building marketing and sales activities to align with our capacity
expansion as part of our overall commitment to this rapidly growing
opportunity."
"We recently embarked on a comprehensive restructuring plan to move ECD
toward sustainable profitability and shift the emphasis of the company's
operating strategy from research and development to commercialization and
marketing," said James R. Metzger, Interim President and Chief Operating
Officer. "The restructuring plan is proceeding as planned, and the
organization is committed to taking the steps necessary to evolve ECD into
a profitable enterprise."
Mr. Metzger noted that the restructuring has redefined the company's
structure into two operating segments-the United Solar Ovonic and Ovonic
Materials segments-and updated the three key areas of the restructured
organization:
United Solar Ovonic
"Our strategy at United Solar Ovonic has been to align with strategic
customers in the building-integrated photovoltaic segment," said Mr.
Metzger. "We've developed key relationships with industry leaders like
Solar Integrated Technologies, Inc., Constellation Energy, Alwitra and
Unimetal, who have been and will continue to be significant customers.
We're now significantly enhancing our marketing and sales activities in
order to accelerate our revenue growth and gain market share." Mr. Metzger
highlighted the following key marketing and sales initiatives being
implemented by the company:
* Increase Marketing and Sales Staff -- The company is increasing its
sales and marketing staff, which is expected to double during fiscal
year 2008. This staff will be located primarily in the fastest-growing
markets in Europe and the United States, primarily California.
* Increase Sales with Existing Customers and Add New Customers -- The
company has developed strategic relationships with systems and building
integrators throughout the world, who actively market and sell the
company's photovoltaic products as part of a complete roofing system.
The company's existing strategic customers are increasing their
penetration, and the company continues to add new strategic customers,
who are in the process of ramping up their sales and marketing of Uni-
Solar products.
* Enhance Focus on Large and Rapidly Expanding Markets -- Germany
continues to be the world's largest solar market, but there are
significant opportunities in other countries, such as Spain, Italy and
Greece, which are actively developing solar markets. Italy, for
example, recently adopted an aggressive incentive plan to spur solar
adoption in that country, with building-integrated photovoltaic
solutions eligible to receive the highest incentive levels. The company
is adding new strategic customer alliances in Italy and adding sales
staff in Italy to address these new and growing opportunities.
* Add New Products to the Portfolio for New Markets -- The company will
soon be introducing innovative, more competitive products and solutions
for non-building- integrated applications, residential and ground-
mounted installations that will provide additional growth opportunities.
"We are excited about our marketing and sales activities, yet we know
that top-line growth is only part of the equation for the success of our
United Solar Ovonic business," said Mr. Metzger. "Importantly, we are
focusing on our entire cost structure, particularly product costs and
capital equipment costs, to drive our overall United Solar Ovonic
performance toward enhanced profitability." In that regard, during the
quarter the company was selected for negotiation to receive approximately
$19 million of funding under an innovative, new U.S. Department of Energy
program, the Solar America Initiative, and was awarded a contract for
approximately $9 million from the U.S. Air Force Research laboratory. The
company will use this funding to offset internal research and development
costs and increase the efficiency of photovoltaic products and
manufacturing processes in order to reduce overall system costs.
Ovonic Materials
"Our recent restructuring actions are refocusing our R&D in the Ovonic
Materials segment on near-term commercial opportunities," said Mr. Metzger.
"We expect these activities to be substantially funded by our growing
revenue base in this segment, such as our NiMH battery royalties and
government and commercial contracts. In all, this segment is and will be an
increasingly important positive contributor to cash flow and profits."
OUM and Other Opportunities
The company noted that there have been a number of recent announcements
regarding near-term production of Ovonic Universal Memory technology, which
is being commercialized through the company's Ovonyx joint venture. Intel
and Samsung, for example, have announced sampling programs that will lead
to production in late calendar 2007 or early 2008. "Royalties from Ovonyx
have been modest in the pre-commercialization stage and we are excited
about the building momentum and expect the growth to result in increased
royalties without additional cost to us," said Mr. Metzger.
The company also noted that it is continuing to focus on reducing its
cost structure and right-sizing its administrative structure as part of
Phase II of its announced restructuring plan.
Financial Summary
Gross margin as a percentage of United Solar Ovonic's product sales
decreased as expected to 17.1% and 19% for the three- and nine-month
periods, respectively, compared to 23.7% and 21.6%, respectively, for the
comparable 2006 periods. This decrease primarily reflects the expected
impact of production ramp-up at our Auburn Hills 2 facility. Gross margins
for the remainder of 2007 and for fiscal 2008 will likewise be impacted as
the company continues to bring new production capacity on stream.
The company's loss from operations for the quarter totaled $11.0
million, compared with $7.5 million for the same period in fiscal 2006. Two
primary factors account for the increased operating loss: 1) the expected
ramp-up of our new Auburn Hills 2 facility and 2) an anticipated increase
in pre- production costs related to our expansion in Greenville, Michigan,
and Tijuana, Mexico. As a result, United Solar Ovonic's income from
operations totaled $585,000 for the quarter, compared to $2.6 million for
the same period in fiscal 2006. In addition, 2006 included one-time
royalties of approximately $965,000, which did not recur in 2007.
Sanjeev Kumar, Vice President and Chief Financial Officer, said, "As
expected, the ramp-up of production at the Greenville and Tijuana
facilities is affecting our margins. These facilities, of course, will play
a crucial role in supporting our ongoing growth initiatives. Combined with
our R&D efforts to increase the efficiency of our photovoltaic products and
manufacturing processes and the recently announced restructuring plan,
these initiatives will speed our move toward sustainable profitability. We
are moving forward rapidly with our restructuring efforts, and we are
confident that the savings we announced will be achieved by the end of
fiscal year 2008.
"At the end of the quarter, the company's cash and short-term
investments were $271.9 million. Inventories rose to $38.0 million, a $16.5
million increase in the nine months ended March 31, 2007 compared to a $3.1
million increase in the nine months ended March 31, 2006. The
building-integrated photovoltaics segment, the primary market which United
Solar Ovonic addresses, has extended sales cycles, which we have been
balancing with our capacity expansion program. This will sometimes, as in
this quarter, result in an inventory build up," he noted.
Looking Ahead
The company expects that its consolidated fourth quarter revenues will
be between $33 million and $37 million, and United Solar Ovonic product
sales will be between $28 million and $32 million. In addition to the
previously disclosed restructuring charges ($3-6 million), the company
expects to incur in the fourth quarter $2-3 million of pre-production costs
associated with the new manufacturing facilities in Greenville, Michigan.
Mr. Stempel noted, "The photovoltaic market continues its robust
growth, and we are taking the steps necessary to responsibly grow our
business to maximize this opportunity. We effectively doubled our capacity
this past year and are looking to double it again in the next year. Now, we
are aggressively expanding our photovoltaic marketing and sales efforts to
better align with our expansion. We expect that our efforts will begin
achieving results in the fourth quarter of fiscal 2007 and into next year.
"Our Cobasys joint venture is a global leader in the hybrid electric
vehicle market," Mr. Stempel continued. "Cobasys continues to win new
business, and we are continuing to explore strategic alternatives to ensure
its success in the hybrid electric vehicle market, and our Ovonyx joint
venture is seeing an acceleration in the commercialization of products
based on OUM technology."
The company noted that its succession planning activities are
continuing.
Conference Call Information
ECD will hold a conference call today, Tuesday, May 8, 2007, at 5:00
p.m. (EDT) to discuss operating results for the three months and nine
months ended March 31, 2007. 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 http://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 Friday, May 11, 2007, at (800) 642-1687 or (706) 645-9291.
Callers should use conference ID 8070452 to access the conference call and
the replay.
About Energy Conversion Devices
Energy Conversion Devices is the leader in the synthesis of new
materials and the development of advanced production technology and
innovative alternative energy products and solutions. The company's
portfolio of alternative energy solutions and proprietary information
processing technologies features the latest advances in solar electric
power generation, NiMH batteries, and fuel cell, solid hydride storage and
phase-change memory technologies. ECD 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 holds the
basic patents in its fields. More information on the Company is available
at 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. The
risk factors identified in the ECD 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 Nine Months Ended
March 31, March 31,
2007 2006 2007 2006
(in thousands, except per-share amounts)
Revenues
Product Sales $23,206 $21,401 $64,731 $62,349
Royalties 769 1,704 2,397 3,218
Revenue from Product Development
Agreements 2,887 3,267 8,750 7,448
Revenue from License Agreements 238 288 734 784
Other 329 297 947 691
Total Revenue 27,429 26,957 77,559 74,490
Expenses 38,409 34,411 103,758 95,790
Loss from Operations (10,980) (7,454) (26,199) (21,300)
Other Income (Expense)
Interest Income 4,141 1,933 14,375 3,530
Interest Expense - - - (197)
Equity Loss in Joint Ventures - (105) - (150)
Other Nonoperating Income (Expense) (32) - (262) (24)
Total Other Income 4,109 1,828 14,113 3,159
Net Loss from Continuing Operations (6,871) (5,626) (12,086) (18,141)
DISCONTINUED OPERATIONS (including
gain on disposition of discontinued
operations of $739,602) - - - 314
Net Loss $(6,871) $(5,626)$(12,086) $(17,827)
Basic Net Loss Per Share
Continuing Operations $(.17) $(.17) $(.31) $(.60)
Discontinued Operations - - - .01
Basic Net Loss Per Share $(.17) $(.17) $(.31) $(.59)
Diluted Net Loss Per Share
Continuing Operations $(.17) $(.17) $(.31) $(.60)
Discontinued Operations - - - .01
Diluted Net Loss Per Share $(.17) $(.17) $(.31) $(.59)
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, June 30,
2007 2006
(Unaudited)
ASSETS
Cash and cash equivalents $53,804 $164,962
Short-term investments 218,117 239,505
Accounts receivable (net) 25,467 27,885
Inventories 38,044 21,527
Property, plant and equipment (net) 269,584 138,231
Other 7,672 4,232
TOTAL ASSETS $612,688 $596,342
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other liabilities $45,622 $26,339
Long-term liabilities 31,640 32,982
Total Liabilities 77,262 59,321
Stockholders' equity 535,426 537,021
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $612,688 $596,342
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Ended
March 31,
2007 2006
(Unaudited)
OPERATING ACTIVITIES:
Net loss $(12,086) $(17,827)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,258 5,734
Bad debt expense (55) 261
Amortization of premium (discount) on
investments (146) (3)
Stock and stock options issued for
services rendered 1,455 1,970
Other (745) (1,871)
Changes in working capital 1,987 (5,294)
NET CASH USED IN OPERATING ACTIVITIES (1,332) (17,030)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
(including construction in progress) (net) (139,420) (40,032)
Purchase (proceeds from sale) of investments 21,504 (93,277)
Investment in Ovonyx (200) (150)
NET CASH USED IN INVESTING ACTIVITIES (118,116) (133,459)
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,308 348,175
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (18) (147)
NET CASH FLOW (111,158) 197,539
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 164,962 84,295
CASH AND CASH EQUIVALENTS AT END OF PERIOD $53,804 $281,834
ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
SEGMENT REVENUE AND OPERATING INCOME/(LOSS)
(In Thousands)
(Unaudited)
Three Months Ended March 31,
2007 2006 2007 2006
Revenues Income (Loss) from
Operations
United Solar Ovonic $23,841 $23,059 $585 $2,552
Ovonic Battery(1) 2,210 1,811 (1,584) (891)
Energy Conversion Devices 46,551(2) 14,311(2) (9,464) (9,193)
Consolidating Entries (45,173) (12,224) (517) 78
Consolidated $27,429 $26,957 $(10,980) $(7,454)
(1) Excludes discontinued operations.
(2) Principally the sales ($44,962,000 and $11,909,000 for the three
months ended March 31, 2007 and 2006, 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 $1,411,000 and
$2,131,000 for the three months ended March 31, 2007 and 2006,
respectively.
Nine Months Ended March 31,
2007 2006 2007 2006
Revenues Income (Loss) from
Operations
United Solar Ovonic $66,895 $64,069 $3,205 $5,989
Ovonic Battery(1) 6,691 6,358 (3,203) (3,659)
Energy Conversion Devices 91,845(2) 41,018(2) (24,617) (23,391)
Consolidating Entries (87,872) (36,955) (1,584) (240)
Consolidated $77,559 $74,490 $(26,199) $(21,301)
(1) Excludes discontinued operations.
(2) Principally the sales ($87,182,000 and $36,257,000 for the nine months
ended March 31, 2007 and 2006, 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 $4,023,000 and
$4,207,000 for the nine months ended March 31, 2007 and 2006,
respectively.
SOURCE Energy Conversion Devices, Inc.
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Related links:
http://www.ovonic.com
http://www.ovonic.com/investor
CONTACT:
Sanjeev Kumar, Vice President and CFO, or
Ghazaleh Koefod, Investor Relations, both of Energy Conversion
Devices, Inc., +1-248-293-0440
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