Rochester Hills, Mich., 14.11.2002 - Energy Conversion Devices, Inc. (ECD) (Nasdaq: ENER) announced today its operating results for the first quarter ended September 30, 2002. Revenues were $15.9 million compared to $22.5 million in the first quarter last year, primarily due to the current contracts with Rare Earth Ovonic nearing completion. The Company"s net loss was $3.4 million for the first quarter compared to a loss of $2.8 million in the same quarter last year. On a per- share basis, the loss was $.16 in the first quarter of Fiscal 2003 compared to a loss of $.13 in the same quarter last year.
Summarized results for the first quarter are shown in the following table:
Three Months Ended
(In thousands, except per-share amounts)
Product Sales $5,334 $11,160
Royalties 530 609
Revenues from Product Development
Agreements 9,753 10,543
Revenues from License Agreements 150 -
Other 88 147
Total Revenues 15,855 22,459
Expenses 22,243 26,356
Net Loss from Operations (6,388) (3,897)
Other Income (Expense)
Interest Income 1,040 1,357
Equity Loss in Joint Ventures (864) (773)
Other 560 548
Net Loss Before Cumulative Effect of Change
in Accounting Principle (5,652) (2,765)
Cumulative Effect of Change in Accounting
Principle 2,216 -
Net Loss $(3,436) $(2,765)
Basic and Diluted Net Loss Per Share Before
Cumulative Effect of Change in Accounting
Principle $(.26) $(.13)
Cumulative Effect of Change in Accounting
Principle .10 -
Basic and Diluted Net Loss Per Share $(.16) $(.13)
Notes to Financial Results:
We have continued to make investments to further advance our technologies. According to accounting principles generally accepted in the United States, we were required to report these investments as losses.
The Company had revenues of $15,855,000 in the three months ended September 30, 2002 compared to $22,459,000 in the three months ended September 30, 2001.
The decrease in consolidated revenues primarily resulted from a reduction in product sales of $5,826,000, a reduction in revenues from product development agreements of $790,000 and a $79,000 reduction in royalty revenue, partially offset by increased license and other agreements ($150,000 in 2002 versus zero in 2001).
· The ECD segment"s revenues, net of consolidating entries, decreased to $6,254,000 in 2002 from $7,842,000 in 2001 due to decreased revenues of $1,002,000 related to the 30MW machine-building contract with Bekaert ECD Solar Systems, which is nearing completion, and a decrease of $501,000 from product development agreements, primarily resulting from a reduction relating to ECD"s photovoltaic product development activities.
· The $5,171,000 decrease in Ovonic Battery"s revenues was primarily due to lower equipment sales to Rare Earth Ovonic ($3,583,000 in 2002 versus $8,412,000 in 2001) as the current contracts neared completion. The agreements with Rare Earth Ovonic call for the creation of five joint ventures. Three joint ventures have been started, with the remaining two expected to be formed in the future. Additionally, there were reduced revenues from product development agreements ($3,206,000 in 2002 versus $3,611,000 in 2001) and a $48,000 reduction in royalty revenue, partially offset by increased revenues from license and other agreements ($150,000 in 2002 versus zero in 2001).
· United Solar"s 2002 revenues increased to $1,803,000 in 2002 versus $1,648,000 in 2001 due to higher sales prices for semi-finished products sold to Bekaert ECD Solar Systems and higher revenues from product development agreements.
Product sales, consisting of machine building and equipment sales, photovoltaic products and metal hydride materials, decreased 52% to $5,334,000 in the three months ended September 30, 2002 from $11,160,000 in the three months ended September 30, 2001. Machine-building and equipment sales revenues decreased 61% to $3,722,000 in 2002 from $9,553,000 in 2001, primarily due to Ovonic Battery"s contracts with Rare Earth Ovonic to provide battery-making equipment which are nearing completion ($3,583,000 in 2002 compared to $8,412,000 in 2001). All machine-building and equipment sales contracts are accounted for using percentage-of-completion accounting. Photovoltaic sales, which are sales of semi-finished products to an affiliate, Bekaert ECD Solar Systems, were $1,274,000 for 2002 and $1,230,000 for 2001. Sales of metal hydride materials were $251,000 in 2002 compared to $202,000 in 2001. The Company currently has a product sales backlog of $18,471,000, of which $14,457,000 is expected to be recognized as revenues in Fiscal 2003.
Royalties decreased 13% to $530,000 in the three months ended September 30, 2002 from $609,000 in the three months ended September 30, 2001. Lower royalties reflect increased production efficiencies of the Company"s licensees, which have resulted in lower prices as licensees move aggressively to increase market share and unfavorable exchange rates.
Revenues from product development agreements decreased 8% to $9,753,000 in the three months ended September 30, 2002 from $10,544,000 in the three months ended September 30, 2001 primarily due to reduced battery activities under an advanced product development agreement with Texaco Ovonic Battery Systems ($2,711,000 for 2002 compared to $3,064,000 in 2001); reduced activity related to Ovonic Media ($332,000 in 2002 versus $406,000 in 2001); and the completion of programs with the National Institute of Standards and Technology and the Department of Energy, which advanced the Company"s hydrogen storage and optical memory technologies (zero in 2002 versus $276,000 in 2001). This decrease was partially offset by an increase in revenues from Texaco Ovonic Hydrogen Systems ($3,475,000 for 2002 compared to $3,298,000 for 2001) and Texaco Ovonic Fuel Cell ($2,020,000 for 2002 compared to $1,936,000 for 2001) and increased product development revenues for United Solar ($457,000 in 2002 compared to $342,000 in 2001).
Revenues from license and other agreements increased to $150,000 in the three months ended September 30, 2002, from zero in the three months ended September 30, 2001. The 2002 license fees resulted from licenses to Henan Huanyu Power Source Co., Ltd., Guangdong Shida Battery Co., Ltd. and TWD Battery Co., Ltd. Revenues from license and other agreements depend on a small number of new business arrangements, are sporadic and vary dramatically from period to period.
Other revenues are primarily related to personnel, facilities and miscellaneous administrative and laboratory services provided to some of the Company"s joint ventures. Other revenues decreased to $88,000 in the three months ended September 30, 2002 from $147,000 in the three months ended September 30, 2001. This decrease was due to reductions in revenues from Texaco Ovonic Battery Systems. Since the formation of Texaco Ovonic Battery Systems, work previously performed by Ovonic Battery has been transferred to the joint venture.
The Company had a net loss of $3,436,000 on revenues of $15,855,000 in the three months ended September 30, 2002 compared to a net loss of $2,765,000 on revenues of $22,459,000 for the three months ended September 30, 2001. The $671,000 increase in the net loss resulted primarily from an increase of $2,011,000 in the net cost of product development, an increase of $992,000 in general and administrative expense (net), a $79,000 reduction in royalty revenue, a $316,000 reduction in interest income due to lower interest rates and a $206,000 reduction of other income. These items contributing to the net loss were partially offset by increased license fees of $150,000 and a reduction in patent costs of $440,000. In addition, the Company recognized income of $2,216,000 attributable to the cumulative effect of a change in accounting principle.
The loss from operations increased to $6,388,000 in 2002 from $3,897,000 in 2001 because of:
· an operating loss of $2,924,000 in 2002 for the ECD segment (net of consolidating entries) versus operating loss of $841,000 in 2001, primarily due to higher investment in product development as the Company increased spending on its core technologies;
· an increased operating loss of $922,000 for United Solar (operating loss of $1,972,000 in 2002 versus operating loss of $1,050,000 in 2001) primarily due to start-up and other costs associated with United Solar moving its production from the 5MW manufacturing facility in Troy, Michigan, to the 30MW manufacturing facility in Auburn Hills, Michigan;
· an improved operating loss for Ovonic Battery (operating loss of $1,492,000 in 2002 versus operating loss of $2,006,000 in 2001) primarily resulting from a profitable equipment sales contract, lower costs for litigation, and higher revenues from license agreements, partially offset by a write-off ($272,000) of an intangible asset associated with a license agreement.
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141 required the Company to recognize, at the adoption of SFAS 142, the unamortized negative goodwill of approximately $2,216,000 (a favorable benefit) as the cumulative effect of a change in accounting principle in the Company"s statements of operations on July 1, 2002.
ECD is the leader in the synthesis of new materials and the development of advanced production technology and innovative products. It has invented, pioneered and developed enabling technologies leading to new products and production processes based on amorphous, disordered and related materials, with an emphasis on advanced information technologies and alternative energy, including photovoltaics, fuel cells, hydride batteries and hydride storage materials capable of storing hydrogen in the solid state for use as a feedstock for fuel cells or internal combustion engines or as an enhancement or replacement for any type of hydrocarbon fuel. 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. ECD"s web site address is http://www.ovonic.com.
Energy Conversion Devices (ECD Ovonics)
2956 Waterview Drive
Rochester Hills, Michigan 48309
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