North Coast Solar Stocks

February 7, 2008

Energy Conversion Devices Reports Second Quarter 2008 Results

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

– Consolidated Revenues Increase 20 Percent on Strong UNI-SOLAR(R) Sales
– Solar Production Increases Nearly 50 Percent
– Company Reaffirms Sustainable Profitability in Fiscal Q4

ROCHESTER HILLS, Mich., Feb 07, 2008 /PRNewswire-FirstCall via COMTEX News Network/ — Energy Conversion Devices, Inc. (ECD) (ENER), the leading global manufacturer of solar thin-film laminate products, today reported financial results for the second quarter of fiscal 2008, ended December 31, 2007.

Revenues in the second quarter of fiscal 2008 were $56.4 million, up 20 percent from first quarter revenues of $47.0 million and up 146 percent from $22.9 million in the second quarter of fiscal 2007. Revenues from the company’s solar business were $51.7 million, or 92 percent of total revenues. Second quarter solar revenues represented a 23 percent sequential increase and a 169 percent increase over the prior-year quarter. Gross margins in the solar business were 19.2 percent.

ECD reported a net loss for the quarter of $5.4 million, or $0.14 per share, compared to a net loss of $7.6 million, or $0.19 per share, in the first quarter of fiscal 2008, and a net loss of $2.9 million, or $0.07 per share, in the year-ago period. Second quarter results included $2.5 million, or $0.06 per share, of restructuring charges principally for severance and other costs associated with corporate staff reductions and management transition. Results in the quarter were also impacted by approximately $2.3 million, or $0.06 per share, of preproduction costs.

For the first six months of fiscal 2008, total revenues were $103.5 million compared with $50.1 million for the first six months of fiscal 2007, an increase of 106 percent. Revenues from the solar business totaled $93.6 million in the first six months of fiscal 2008, a 118 percent increase compared with $43.0 million last year.

For the six-month period, the company reported a net loss of $13.0 million, or $0.33 per share, compared with the previous year’s net loss of $5.2 million, or $0.13 per share. Restructuring costs for the first six months of fiscal 2008 amounted to $5.1 million, or $0.13 per share. Preproduction costs for the period were $4.8 million, or $0.12 per share.

Mark Morelli, ECD’s president and CEO, commented, “We are excited with the progress we are making in growing revenues and reinventing the company around operational excellence. During the quarter, our production of thin-film solar laminates expanded by 50 percent over the first quarter, and tripled over last year’s second quarter. At the same time, our sales pipeline continues to run ahead of production capacity as new and repeat customers in key markets around the world have come to recognize the significant advantages and attractive return on investment of our UNI-SOLAR laminates. As a result, we remain confident that we will reach sustainable profitability by the fiscal fourth quarter.”

The company’s manufacturing ramp continues on schedule, and United Solar Ovonic produced 15.4 MW in the quarter and 25.8 MW for the first half of the fiscal year. No polysilicon is required for the manufacturing of UNI-SOLAR laminates; therefore, production is not affected by polysilicon supply. Nameplate capacity currently stands at 118 MW.

Sanjeev Kumar, ECD’s CFO, said, “United Solar’s gross margin of 19.2 percent for the quarter exceeded our forecast of 15 to 16 percent due to improved production ramp and operational efficiencies. We continue to see excellent top-line momentum going forward, which will begin to appear below the line in the coming quarters as we complete our restructuring and management transition.”

“As a result of our significant cost reductions in R&D, Ovonic Materials has reached breakeven, and we expect it to remain so going forward. Second quarter, consolidated SG&A costs increased about $6 million from the second quarter last year as a result of investments we are making in the right staff and expertise to grow our solar business. The key takeaway is that these costs are increasing at a much slower rate than our overall sales and productivity. These line items now constitute about 23% of revenues and will continue to decline as a percentage of revenues over time as we successfully scale our operations,” Kumar added.

Key Developments

— A multiple-year supply agreement to sell up to 21.15 MW of UNI-SOLAR
laminates to Enfinity Management, one of Europe’s largest investors in
solar PV installations. Enfinity will use the UNI-SOLAR products for
rooftop installations in Europe.
— An agreement with SunEdison, North America’s largest solar energy
service provider, to provide up to 17 MW of UNI-SOLAR laminates for use
on large-scale rooftop installations on industrial and commercial
buildings, principally in the US.
— The hiring of key senior management, including Marcelino Susas, Vice
President, Strategic Marketing; Corby Whitaker, Vice President, Global
Sales; Joseph Conroy, Vice President, Operations; and Tom Schultz, Vice
President, Human Resources – United Solar Ovonic Operations.
— The signing of several sales agreements in South Korea, one of the
world’s fastest growing solar markets, including a take-or-pay
commitment from AirTec for 25 MW in calendar 2008 and 2009.
— The completion of a $55 million credit facility. In addition, the
company had approximately $155 million in cash and cash equivalents at
the end of the quarter.

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

The company narrowed its prior revenue guidance provided at the end of the fiscal first quarter. Fiscal year 2008 consolidated revenues are now expected to be $235 to $245 million versus prior guidance of $220 to $245 million. Fiscal year United Solar product sales are expected to be $215 to $225 million versus prior guidance of $205 to $225 million. Anticipated full-year preproduction costs are in the range of $8 to $9 million. Restructuring costs for fiscal year 2008 are expected to be $7.0 to $8.0 million versus prior guidance of $3 to $5 million due to additional staff reductions and other cost-saving initiatives. The company is reiterating its expectation that it will reach sustainable profitability in the fiscal fourth quarter.

For the fiscal third quarter ending March 31, 2008, total consolidated revenues are expected to be between $65 to $70 million, of which solar product sales are expected to be $60 to $65 million. Gross margins on solar product sales for the fiscal third quarter are expected to be approximately 21 to 23 percent, reflecting further improvement in operational performance and the ramp up of the company’s first Greenville manufacturing facility. Restructuring costs for the third quarter are expected to be in the range of $2.0 to $3.0 million. The company anticipates preproduction costs of approximately $1.5 to $2.5 million in the quarter.

Additionally, the company is increasing its guidance on United Solar gross margins for the fiscal fourth quarter to approximately 23 to 25 percent.

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

                                  Three Months Ended       Six Months Ended
                                    December 31,             December 31,
                                  2007         2006        2007         2006
                                   (in thousands, except per-share amounts)

    Revenues
      Product sales             $51,558      $18,667     $94,025      $41,525
      Royalties                   1,492          964       2,507        1,627
      Revenue from product
       development agreements     2,921        2,758       5,799        5,863
      Revenue from license
       agreements                   238          238         751          496
      Other                         240          320         409          618
    Total revenues               56,449       22,947     103,491       50,129

    Expenses
      Cost of product sales      41,745       16,325      76,813       34,335
      Cost of revenues from
       product development
       agreements                 1,819        1,700       3,528        3,713
      Product development and
       research                   2,583        4,926       6,045        9,667
      Preproduction costs         2,279          750       4,824        1,104
      Operating, general and
       administrative (net)
       (including patents)       12,925        7,122      24,621       16,529
      Restructuring charges       2,555            -       5,070            -
    Total expenses               63,906       30,823     120,901       65,348
    Loss from operations         (7,457)      (7,876)    (17,410)     (15,219)
    Total other income            2,082        4,963       4,475       10,004
    Net loss before income
     taxes                       (5,375)      (2,913)    (12,935)      (5,215)
    Income taxes                     51            -          58            -

    Net loss                    $(5,426)     $(2,913)   $(12,993)     $(5,215)

    Basic net loss per share      $(.14)       $(.07)      $(.33)       $(.13)

    Diluted net loss per share    $(.14)       $(.07)      $(.33)       $(.13)

    Shares used in calculation
     of net loss per share
      Basic                      40,035       39,302      39,950       39,186
      Diluted                    40,035       39,302      39,950       39,186

                         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       Six Months Ended
                                       December 31,            December 31,
                                     2007       2006         2007       2006
                                                 (In Thousands)

    Net Loss                       $(5,426)   $(2,913)    $(12,993)   $(5,215)
    Add:
      - Preproduction Costs          2,279        750        4,824      1,104
      - Restructuring Charges        2,555          -        5,070          -

    Net Loss as adjusted (non-GAAP)  $(592)   $(2,163)     $(3,099)   $(4,111)
    Net Loss (basic and fully
     diluted) per share as
     reported                        $(.14)     $(.07)       $(.33)     $(.13)
    Net Loss (basic and fully
     diluted) per share as
     adjusted (non-GAAP)             $(.01)     $(.06)       $(.08)     $(.10)

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

                                            December 31, 2007   June 30, 2007
                                                (Unaudited)
    ASSETS
      Cash and cash equivalents                       $90,764         $80,770
      Restricted investment                             5,614               -
      Short-term investments                           59,042         125,004
      Accounts receivable (net)                        34,603          36,498
      Inventories                                      30,932          38,692
      Assets held for sale                              1,539           1,524
      Property, plant and equipment (net)             364,935         311,369
      Other                                             8,654           6,822
    TOTAL ASSETS                                     $596,083        $600,679
    LIABILITIES AND STOCKHOLDERS' EQUITY
      Accounts payable and other liabilities          $44,618         $42,940
      Long-term liabilities                            31,859          32,232
    TOTAL LIABILITIES                                  76,477          75,172
    STOCKHOLDERS' EQUITY                              519,606         525,507
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $596,083        $600,679

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

                                                          Six Months Ended
                                                            December 31,
                                                         2007          2006
                                                            (Unaudited)

    OPERATING ACTIVITIES:
      Net loss                                        $(12,993)      $(5,215)
      Adjustments to reconcile net loss to net
       cash provided by operating activities:
        Depreciation and amortization                    8,640         4,583
        Bad debt and other expenses                        866           (83)
        Obsolescence charge                              1,374            46
        Restructuring charge                               979             -
        Stock and stock options issued for services
         rendered                                          866         1,084
        Other                                               (6)         (154)
      Changes in working capital                         6,773         8,463
    NET CASH PROVIDED BY OPERATING ACTIVITIES            6,499         8,724
    INVESTING ACTIVITIES:
      Increase in restricted investment                 (5,614)            -
      Purchases of property, plant and equipment
       (including construction in progress) (net)      (62,270)      (70,261)
      Purchase (proceeds from sale) of investments      65,640       (90,790)
    NET CASH USED IN INVESTING ACTIVITIES               (2,244)     (161,051)
    NET CASH PROVIDED BY FINANCING ACTIVITIES            5,639         8,006
    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
     CASH EQUIVALENTS                                      100            21
    NET CASH FLOW                                        9,994      (144,300)
    CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD    80,770       164,962
    CASH AND CASH EQUIVALENTS AT END OF PERIOD         $90,764       $20,662

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

                                        Three Months Ended December 31,
                                   2007       2006         2007        2006
                                                             Income (Loss)
                                      Revenues              from Operations

    United Solar Ovonic          $51,720    $19,194       $2,084        $864
    Ovonic Materials               4,570      3,580          399      (2,864)
    Corporate Activities             376        356       (9,974)     (5,339)
    Consolidating Entries           (217)      (183)          34        (537)
    Consolidated                 $56,449    $22,947      $(7,457)    $(7,876)

                                        Six Months Ended December 31,
                                   2007       2006         2007        2006
                                                             Income (Loss)
                                      Revenues              from Operations

    United Solar Ovonic          $93,607    $43,054       $1,616      $2,351
    Ovonic Materials               9,662      6,821         (301)     (6,772)
    Corporate Activities             545        599      (18,807)     (9,731)
    Consolidating Entries           (323)      (345)          82      (1,067)
    Consolidated                $103,491    $50,129     $(17,410)   $(15,219)

                   Segment Operations - United Solar Ovonic
                                (In Thousands)
                           Quarterly Periods Ended

                                    Three Months Ended      Six Months Ended
                                      December 31,             December 31,
                                    2007        2006         2007      2006
                                                  (Unaudited)

    PV Product Sales              $49,726     $17,445      $89,596   $39,572
        Megawatts Produced           15.4         6.8         25.8      12.9
        Megawatts Shipped            16.9         5.3         30.0      11.8
    Cost of Product Sales         $40,203     $15,029      $72,826   $31,995
    Gross Margin                   $9,523      $2,416      $16,770    $7,577
    Gross Margin %                   19.2%       13.8%        18.7%     19.1%

    Other Revenues:
      Research and Development     $1,994      $1,748       $4,011    $3,478
      Other Operating Revenues          -          $1           $-        $4
    Other Revenues Total           $1,994      $1,749       $4,011    $3,482
    Total Revenues                $51,720     $19,194      $93,607   $43,054

    Other Expenses:
      Research and Development     $2,096      $1,451       $4,371    $2,849
      Preproduction                $2,279        $750       $4,824    $1,104
      Operating, Selling, General
       and Administrative Expenses $5,058      $1,100       $9,970    $4,755
    Total Other Expenses           $9,433      $3,301      $19,165    $8,708
    Income from Operations         $2,084        $864       $1,616    $2,351

                    Segment Operations - Ovonic Materials
                                (In Thousands)
                           Quarterly Periods Ended

                                   Three Months Ended      Six Months Ended
                                      December 31,           December 31,
                                    2007       2006        2007       2006
                                                 (Unaudited)

    Product Sales                  $1,831     $1,222      $4,446     $1,953
    Cost of Product Sales          $1,594       $925      $4,163     $1,576
    Other Revenues:
      Royalties                    $1,492       $964      $2,507     $1,628
      Research and Development       $928     $1,014      $1,788     $2,402
      Licenses                       $238       $238        $751       $496
      Other Operating Revenues        $81       $142        $170       $342
    Other Revenues Total           $2,739     $2,358      $5,216     $4,868
    Total Revenues                 $4,570     $3,580      $9,662     $6,821
    Other Expenses:
      Research and Development     $2,289     $5,180      $5,203    $10,549
      Operating, General and
       Administrative Expenses       $288       $339        $597     $1,468
    Total Other Expenses           $2,577     $5,519      $5,800    $12,017
    Income (Loss) from Operations    $399    $(2,864)      $(301)   $(6,772)

                  Segment Operations - Corporate Activities
                                (In Thousands)
                           Quarterly Periods Ended

                                   Three Months Ended      Six Months Ended
                                      December 31,           December 31,
                                    2007       2006        2007       2006
                                                 (Unaudited)

    Other Operating Revenues         $376       $356        $545       $599
    Other Expenses:
      Restructuring                $2,555         $-      $5,070         $-
      Operating, General and
       Administrative Expenses     $7,795     $5,695     $14,282    $10,330
    Total Expenses                $10,350     $5,695     $19,352    $10,330
    Loss from Operations          $(9,974)   $(5,339)   $(18,807)   $(9,731)
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