North Coast Solar Stocks

November 8, 2007

Energy Conversion Devices Reports First Quarter 2008 Results

Filed under: ENER — Tags: , , , — Jason @ 8:00 am

Revenues Increase 73 Percent On Strong Solar Sales – Solar Sales Pipeline Nearly Doubles – Momentum Continues to Build – Expects to Reach Sustainable Profitability in Fiscal Q4

ROCHESTER HILLS, Mich., Nov 08, 2007 /PRNewswire-FirstCall via COMTEX News Network/ — Energy Conversion Devices, Inc. (ECD) (ENER), a leading global manufacturer of solar products, today reported financial results for the first quarter of fiscal 2008, ended September 30, 2007.

Revenues in the first quarter of fiscal 2008 were $47.0 million, up 31 percent from prior-quarter revenues of $36.0 million and up 73 percent from $27.2 million in the first quarter of fiscal 2007. Revenues from the company’s solar business represented 89 percent of total revenues, or $41.9 million, a 33 percent sequential increase, and a 76 percent increase over the prior-year quarter. The substantial increase in demand for UNI-SOLAR(R) laminates came from growing domestic orders, as well as strong international demand from customers in Italy and Germany.

ECD reported a net loss for the period of $7.6 million, or $0.19 per share, compared to a net loss of $13.1 million, or $0.33 per share, in the fourth quarter of fiscal 2007, and $2.3 million, or $0.06 per share, in the year-ago period. First quarter results included $2.5 million, or $0.06 per share, of restructuring charges principally for costs associated with the company’s management transition. Results in the quarter were also impacted by approximately $2.5 million, or $0.06 per share, of preproduction costs for the manufacturing lines and higher selling, general and administrative expenses to support growth in the solar business, as well as lower interest income. ECD ended the quarter with cash and short-term investments of approximately $156 million.

Mark Morelli, ECD’s new president and CEO, commented, “Since joining ECD as CEO in September, I have focused our organization on accelerating the growth and enhancing the profitability of our solar business. We are rapidly transitioning from an R&D orientation to a company with a performance-based culture that is expanding production capacity to meet increasing global demand for our solar laminates. Our primary near-term objective is to improve sales and operating efficiencies as we ramp up significant new production capacity. Our laminates continue to gain momentum in the marketplace as demonstrated by our growing pipeline of business. For example, our supply agreements and commitments for the second quarter of fiscal 2008 exceed our available capacity.”

Key Developments

— In September, Uni-Solar signed an 18-month agreement with EDF Energies
Nouvelles (EDF EN), one of the world’s largest renewable utilities, to
supply up to 30 MW of thin-film PV laminates for large-scale
installations on industrial and commercial buildings.

— Uni-Solar laminates will be installed on the roof of the General Motors
facility in Fontana, California, one of the largest solar power
installations in corporate use in the United States. This project is
the second installation of Uni-Solar laminates for GM after the 1MW
solar installation in Rancho Cucamonga, California.

— Uni-Solar currently has 58MW of annual production capacity, and is
expected to be 148MW by the end of fiscal 2008. The first 30MW line at
Uni-Solar’s Greenville, Michigan facility went online November 1, one
month ahead of schedule.

— Ovonyx, the company’s joint venture, signed a technology and licensing
agreement for phase-change memory with Hynix, one of the world’s
top-tier memory semiconductor suppliers offering DRAM and Flash memory
chips.

Sanjeev Kumar, ECD’s chief financial officer, said, “We produced 10.4 MW and shipped 13.1MW in the quarter. The gross margin in our solar business was 18 percent in the quarter, including an approximately six percent adverse impact primarily related to the ramp up of Auburn Hills 2 and manufacturing- related issues at Auburn Hills 1. We have taken steps to resolve these issues. We are now starting to ramp our first Greenville facility and expect that it will impact our overall gross margins beginning the second quarter of fiscal year 2008. As we continue to implement production process changes that improve our yield and throughput, increase the dawn-to-dusk operating output of our laminates and reduce materials and labor cost, we continue to expect longer-term to achieve our 25 percent gross margin target in our Uni-Solar business.”

“Our restructuring program, for which we took additional charges of $2.5 million in the quarter, has taken more than $17 million of annualized costs out of Corporate Activities and our Ovonic Materials segment in the past few months. We are moving toward our goal of making Ovonic Materials self-funded, and the business is near breakeven. Since our highest priority is to invest in our growing solar business, we will now only invest in areas that have a clear near-term path to commercialization. Additionally, we have recently begun Phase 2 of our restructuring, focused principally on general and administrative expenses, and expect to aggressively reduce our costs in this area by the end of the fiscal year,” Kumar added.

Reiterating Full-Year Revenue Guidance; Targeting Sustainable Profitability in Fiscal Q4

The company reiterated its prior revenue guidance provided at the end of the fiscal fourth quarter. Fiscal year 2008 consolidated revenues are expected to be in the range of $220 million to $245 million, of which Uni-Solar’s fiscal 2008 product sales are expected to be $205 million to $225 million. Preproduction costs for the year are expected to be between $6 million and $9 million and restructuring costs for 2008 are expected to be between $3 million and $5 million. Fiscal second quarter total consolidated revenues are expected to be $50 million to $55 million, of which solar product sales are expected to be $45 to $49 million. Gross margins on solar product sales for the second fiscal quarter are expected to be approximately 15 to 16 percent, reflecting the ramp up of the company’s first Greenville facility. The company also expects restructuring charges of $2.0 to $2.5 million and preproduction costs of approximately $2 to $3 million in the quarter. Gross margins in the Uni-Solar business are expected to approach 21 percent to 23 percent in the fourth quarter fiscal 2008, at which time the company expects to reach sustainable profitability.

Morelli concluded, “Our compelling solar products and strong sales momentum position ECD well for profitable growth. We are placing significant focus on improving operating efficiencies, and are already achieving important progress. During the quarter, we launched a new laminate that delivers six percent greater conversion efficiency, an improvement that both increases our effective capacity and favorably impacts income. We are instilling operational excellence across the company and are focused on improving product and manufacturing efficiencies that will enable us to reach sustainable profitability in the fourth fiscal quarter and deliver steadily increasing value for shareholders. I am encouraged by our opportunities and our progress.”

               ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

                                                       Three Months Ended
                                                          September 30,
                                                       2007           2006
                                                           (Unaudited)
    Revenues
       Product Sales                                 $42,467        $22,858
       Royalties                                       1,015            664
       Revenues from Product Development Agreements    2,877          3,105
       Revenues from License and Other Agreements        683            555
    Total Revenues                                    47,042         27,182

    Expenses
       Cost of Product Sales                          35,069         18,010
       Cost of Revenues from Product Development
        Agreements                                     1,709          2,014
       Product Development and Research                3,462          4,741
       Preproduction Costs                             2,545            354
       Operating, General and Administrative
        (including patents)                           11,694          9,407
       Restructuring Charges                           2,516              -

    Total Expenses                                    56,995         34,526
    Loss from Operations                              (9,953)        (7,344)
    Interest and Other Income (Expense), Net           2,392          5,042
    Net Loss Before Income Taxes                      (7,561)        (2,302)
    Income Taxes                                           6              -
    Net Loss                                         $(7,567)       $(2,302)
    Basic Net Loss Per Share                           $(.19)         $(.06)
    Diluted Net Loss Per Share                         $(.19)         $(.06)
    Shares used in calculation of net loss per share:
       Basic                                          39,838         39,070
       Diluted                                        39,838         39,070

                         Non-GAAP Financial Measures
    To supplement its financial statements presented in accordance with
    Generally Accepted Accounting Principles (GAAP), ECD uses the following
    measures as defined by the Securities and Exchange Commission as non-GAAP
    measures:

                                                       Three Months Ended
                                                          September 30,
                                                       2007           2006
                                                         (in thousands)

    Net Loss                                         $(7,567)       $(2,302)
       Add:
         -- Preproduction Costs                        2,545            354
         -- Restructuring Charges                      2,516              -
    Net Loss as Adjusted (non-GAAP)                  $(2,506)       $(1,948)
    Net Loss (basic and fully diluted) per share
     as reported                                       $(.19)         $(.06)
    Net Loss (basic and fully diluted) per share
     as adjusted (non-GAAP)                            $(.06)         $(.05)

               ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In Thousands)

                                             Three Months Ended   Year Ended
                                             September 30,2007   June 30, 2007
                                                           (Unaudited)
    ASSETS
       Cash and cash equivalents                     $71,699        $80,770
       Short-term investments                         84,274        125,004
       Restricted Investments                          5,594              -
       Accounts receivable (net)                      44,890         36,498
       Inventories                                    34,258         38,692
       Assets held for sale                            1,539          1,524
       Property, plant and equipment (net)           337,313        311,369
       Other                                           7,887          6,822
    TOTAL ASSETS                                    $587,454       $600,679

    LIABILITIES AND STOCKHOLDERS' EQUITY
       Accounts payable and other liabilities        $35,785        $42,940
       Long-term liabilities                          32,315         32,232
    TOTAL LIABILITIES                                 68,100         75,172
    STOCKHOLDERS' EQUITY                             519,354        525,507
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $587,454       $600,679

               ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
                      CONDENSED STATEMENTS OF CASH FLOWS
                                (In Thousands)

                                                       Three Months Ended
                                                          September 30,
                                                       2007          2006
                                                           Unaudited)
    OPERATING ACTIVITIES:
       Net loss                                      $(7,567)       $(2,302)
       Adjustments to reconcile net loss to
        net cash used in operating activities:
          Depreciation and amortization                3,693          1,982
          Bad debt expense                               250          1,051
          Restructuring charge                           664              -
          Amortization of premium (discount) on
           investments                                    (1)           534
          Stock and stock options issued for
           services rendered                             268            603
          Other                                         (208)           147
       Changes in working capital                    (11,908)        (2,034)
    NET CASH USED IN OPERATING ACTIVITIES            (14,809)           (19)
    INVESTING ACTIVITIES:
       Purchases of property, plant and
        equipment (including construction
        in progress) (net)                           (30,118)       (26,472)
       Purchase (proceeds from sale) of
        investments                                   34,979        (75,370)
    NET CASH PROVIDED BY (USED IN) INVESTING
     ACTIVITIES                                        4,861       (101,842)
    NET CASH PROVIDED BY FINANCING ACTIVITIES            758            226
    EFFECT OF EXCHANGE RATE CHANGES ON CASH
     AND CASH EQUIVALENTS                                119             33
    NET CASH FLOW                                     (9,071)      (101,602)
    CASH AND CASH EQUIVALENTS AT BEGINNING
     OF PERIOD                                        80,770        164,962
    CASH AND CASH EQUIVALENTS AT END OF PERIOD       $71,699        $63,360

               ENERGY CONVERSION DEVICES, INC. AND SUBSIDIARIES
                 SEGMENT REVENUE AND OPERATING INCOME/(LOSS)
                                (In Thousands)

                               September 30,             September 30,
                             2007        2006          2007        2006
                                             (Unaudited)
                                Revenues       Income (Loss) from Operations

    United Solar Ovonic    $41,887     $23,860        $(468)       $1,487
    Ovonic Materials         5,092       3,241         (700)       (3,908)
    Corporate Activities       169         243       (8,833)       (4,392)
    Consolidating Entries     (106)       (162)          48          (531)
    Consolidated           $47,042     $27,182      $(9,953)      $(7,344)

                   Segment Operations - United Solar Ovonic
                                (In Thousands)

                           Quarterly Periods Ended

                                                                       Fiscal
                       Sept. 30, June 30, March 31, Dec. 31, Sept. 30,  Year
                         2007      2007     2007     2006     2006      2007
                                           (Unaudited)

    PV Product Sales   $39,870   $29,467  $22,143  $17,445  $22,127   $91,182
      Megawatts
       Produced           10.4      10.7      8.8      6.8      6.2      32.5
      Megawatts
       Shipped            13.1      10.2      7.4      5.3      6.5      29.4
    Cost of Product
     Sales             $32,622   $24,798  $18,303  $15,029  $16,966   $75,096
    Gross Margin        $7,248    $4,669   $3,840   $2,416   $5,161   $16,086
    Gross Margin %       18.18%    15.84%   17.34%   13.85%   23.32%    17.64%
    Other Revenues:
      Research &
       Development      $2,017    $2,000   $1,696   $1,748   $1,730    $7,174
      Other Operating
       Revenues                       $1       $2       $1       $3        $7
    Other Revenues
     Total              $2,017    $2,001   $1,698   $1,749   $1,733    $7,181
    Other Expenses:
      Research &
       Development      $2,275    $1,865   $1,945   $1,451   $1,398    $6,659
      Preproduction     $2,545    $2,019     $491     $750     $354    $3,614
    Operating, Selling,
     General and
     Administrative
     Expenses           $4,913    $3,693   $2,584   $1,100   $3,655   $11,032
    Total Expenses      $9,733    $7,577   $5,020   $3,301   $5,407   $21,305
    Income (Loss)
     from Operations     $(468)    $(907)    $518     $864   $1,487    $1,962

                    Segment Operations - Ovonic Materials
                                (In Thousands)

                           Quarterly Periods Ended

                                                                        Fiscal
                        Sept. 30, June 30, March 31, Dec. 31, Sept. 30,  Year
                          2007      2007     2007     2006     2006      2007
                                           (Unaudited)

    Product Sales       $2,615    $1,817   $1,062   $1,222     $731    $4,832
    Cost of Product
     Sales              $2,568    $1,992   $1,098     $925     $651    $4,666
    Other Revenues:
      Royalties         $1,015      $925     $770     $964     $664    $3,323
      Research &
      Development         $860    $1,185   $1,193   $1,014   $1,388    $4,780
      Licenses            $513      $313     $238     $238     $258    $1,047
      Other Operating
       Revenues            $89      $133     $178     $142     $200      $653
    Other Revenues
     Total              $2,477    $2,556   $2,379   $2,358   $2,510    $9,803
    Other Expenses:
      Research &
      Development       $2,915    $4,501   $5,740   $5,180   $5,369   $20,790
    Operating, General
     and Administrative
     Expenses             $309      $628     $789     $339   $1,129    $2,885
    Total Expenses      $3,224    $5,129   $6,529   $5,519   $6,498   $23,675
    Loss from
     Operations          $(700)  $(2,748) $(4,186) $(2,864) $(3,908) $(13,706)

                  Segment Operations - Corporate Activities
                                (In Thousands)

                           Quarterly Periods Ended

                                                                        Fiscal
                        Sept. 30, June 30, March 31, Dec. 31, Sept. 30,  Year
                          2007      2007     2007     2006     2006      2007
                                           (Unaudited)
    Other Operating
     Revenues             $169      $257     $291     $356     $243    $1,147
    Other Expenses:
      Restructuring     $2,516    $5,385       $-       $-       $-    $5,385
      Operating,
       General and
       Administrative
       Expenses         $6,486    $7,113   $7,088   $5,695   $4,635   $24,531
    Total Expenses      $9,002   $12,498   $7,088   $5,695   $4,635   $29,916
    Loss from
     Operations        $(8,833) $(12,241) $(6,797) $(5,339) $(4,392) $(28,769)
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