Hoku Scientific, Inc.: Results for Fiscal Year 2009 and Fourth Quarter
* On Thursday June 11, 2009, 4:10 pm EDT
HONOLULU, HI----Jun 11, 2009 -- Hoku Scientific, Inc., a materials science company focused on clean energy technologies, today announced its financial results for the fiscal year and fourth quarter ended March 31, 2009. The Company also provided a general update on its business.
Revenue for the fiscal year ended March 31, 2009 was $5.0 million, compared to $3.2 million for fiscal 2008. Revenues for the quarters ended March 31, 2009 and 2008 were $112,000 and $621,000, respectively. All revenue in fiscal 2009 was derived from photovoltaic, or PV, system installation and other related services and the resale of solar inventory. Revenue for fiscal 2008 was primarily derived from PV system installations and fuel cell revenue from contracts with the U.S. Navy. As of March 31, 2009 and March 31, 2008, deferred revenues of $784,000 and $36,000, respectively, were attributable to PV system installation projects and related service contracts.
Net loss, computed in accordance with U.S. generally accepted accounting principles, or GAAP, for the fiscal year ended March 31, 2009 was $3.0 million, or $0.15 per diluted share, compared to $4.3 million, or $0.26 per diluted share for fiscal 2008. GAAP net loss for the quarter ended March 31, 2009 was $904,000, or $0.04 per diluted share, compared to $2.1 million, or $0.12 per diluted share for the same period in fiscal 2008.
Non-GAAP net loss for the fiscal year ended March 31, 2009 was $1.7 million, or $0.09 per diluted share, compared to $3.2 million, or $0.20 per diluted share for fiscal 2008. Non-GAAP net loss for fiscal 2009 and fiscal 2008 excludes non-cash stock-based compensation of $1.2 million and $1.1 million, respectively. Non-GAAP net loss for the quarter ended March 31, 2009 was $634,000, or $0.03 per diluted share, compared to $1.9 million, or $0.11 per diluted share, for the same period in fiscal 2008. Non-GAAP net loss for the quarters ended March 31, 2009 and 2008 excludes non-cash stock-based compensation of $270,000 and $192,000, respectively. The accompanying schedules provide a reconciliation of net loss per share computed on a GAAP basis to net loss per share computed on a non-GAAP basis.
Dustin Shindo, chairman, president, and chief executive officer of Hoku Scientific, said, "We were pleased to have met our revised revenue guidance of $5 million for fiscal 2009. In addition, we received $121 million in customer prepayment deposits against future polysilicon shipments from our production facility currently under development in Pocatello, Idaho. These receipts bring the total amount of prepayment deposits received as of March 31, 2009 to $134 million."
Mr. Shindo continued, "These results were in keeping with our previous guidance, with losses expected as we continued advancing the development of both our polysilicon manufacturing and PV systems integration businesses. Going forward, we plan to continue expanding our PV integration business in fiscal 2010 and, provided we are able to secure the required financing for the construction of our polysilicon plant, we look forward to generating revenue from the sale of polysilicon in fiscal 2010."
Hoku Materials Polysilicon Plant Update
Commenting on the Company's polysilicon subsidiary, Hoku Materials, Inc., Mr. Shindo said, "We have made excellent progress during the past fiscal year and we remain on track to make our first deliveries of polysilicon in accordance with our customer contracts, assuming satisfactory financing is identified to accelerate the current pace of construction."
Mr. Shindo said, "Together with our partners, we have focused the construction effort on delivering those elements of the polysilicon facility required for initial commercial operations. This includes the main reactor, engineering, and control buildings; vent gas recovery equipment, cooling water loops, and process piping, among other systems. We installed the first six of our expected 28 polysilicon deposition reactors, and in the coming months, expect to complete construction of the substation and transmission lines required to deliver up to 82 megawatts of electricity to the plant, more than enough to power our facility at full capacity."
The Company had previously reported that it had the ability to defer some of its planned capital expenditure by delaying the construction of its trichlorosilane (TCS) production facility and by further delaying the arrival of additional reactors, while still ensuring enough production capacity to fulfill its current contractual obligations.
Mr. Shindo confirmed this approach, saying, "We now plan to purchase TCS from a third-party supplier to support our reactor testing and initial production runs. We will also time the delivery of our remaining reactors to match customer prepayment receipts as closely as possible, while still supporting our planned production ramp-up schedule. Cash flow permitting, we expect this revised approach will allow us to meet all delivery obligations to our current customers."
Hoku planned to conduct its initial reactor testing in June 2009, but to preserve cash as Hoku seeks additional financing, it reported that the testing has been delayed, and may now occur in the third quarter of calendar year 2009. Subject to receipt of financing, Hoku plans to make initial shipments to its customers in the second half of 2009.
Polysilicon Plant Financing Update
Hoku Materials has signed off-take contracts with six customers for the aggregate sale of up to $1.9 billion of polysilicon over 10 years. In total, these customers have committed to provide more than $243 million in cash prepayments, which Hoku plans to use as a primary source of financing for developing and constructing its polysilicon facility.
Regarding the strength of the Company's customer base, Mr. Shindo said, "In fiscal 2009, we signed new long-term polysilicon sales agreements with four industry leaders: Jiangxi Jinko Solar Co., Ltd.; Tianwei New Energy (Chengdu) Wafer Co., Ltd.; Wealthy Rise International, a wholly owned subsidiary of Solargiga Energy Holdings, Ltd.; and Shanghai Alex New Energy Co., Ltd. We also continued to pursue our long-term partnership approach, working closely and successfully with our partners and customers to navigate challenging market conditions and produce mutually beneficial contract amendments where required."
Hoku had received $134 million in prepayment deposits from its current customers as of March 31, 2009. In April and May 2009, the Company received subsequent prepayments from Wealthy Rise International (Solargiga) and Tianwei New Energy in the amounts of $7 million and $14.5 million, respectively, for a total of $155.5 million received to date. As of March 31, 2009, construction-in-progress for the project was $199 million.
Mr. Shindo said, "We continue to manage our cash position carefully. While we work to identify the remaining sources of financing, we have decreased spending to match our project investment obligations with our cash inflows from customer prepayments. This has allowed us to make continued progress without jeopardizing our delivery obligations to our customers."
Hoku Materials estimates the total cost to engineer, procure and construct its polysilicon plant to be approximately $390 million. The estimate is based on its discussion with vendors, declining costs of materials and labor, and ongoing adjustments of certain design elements; however, changes in costs, modifications in construction timelines, and other factors could significantly increase the actual costs.
In addition to the $243 million in customer commitments, Hoku has already contributed $41 million of its available cash. Assuming that all of Hoku's customers meet their prepayment commitments in full, a gap remains of approximately $106 million of additional capital required to fully fund the estimated $390 million construction budget. Hoku is actively working to finance this remaining amount through a combination of prepayments from new customers, and through one or more financing strategies.
However, due to recent challenges in the credit and equity markets, the Company reported that securing these final sources of funding has proven challenging. In addition, downward pressure on both the PV industry and the spot market price of polysilicon has affected demand for contract-based polysilicon sales. Because of these difficulties in raising capital, if the Company does not receive any such additional financing, the Company may not have sufficient funds to complete the construction of its polysilicon plant, or to continue as a going concern for the next 12 months.
Even if Hoku is able to raise capital and manage its liquidity, the Company may need to acquire polysilicon on the spot market for resale to its customers in order to meet its initial contractual delivery obligations in a timely fashion, or Hoku may fail to meet those obligations.
"Having reduced the amount of allocated production capacity through contract amendments with both Solargiga and Jinko, we are now working to reallocate the remaining 600 to 800 metric tons of annual capacity through new long-term sales agreements. Over time, we believe we will be able to replace some of these unmet and revised customer prepayment commitments with deposits from future customers," said Mr. Shindo.
"While current market conditions remain challenging, we remain focused on raising capital, increasing revenues and reducing expenses," Mr. Shindo said. "In addition to evaluating a variety of fundraising alternatives, we have modified payment terms in purchase orders with more than twenty of our vendors in order to structure payment plans for amounts past due and for those to be invoiced in the future."
Mr. Shindo concluded: "Thanks to the continued support of our partners, vendors, and customers, we have been able to make continued strong progress on our polysilicon plant development in 2009. Provided we satisfy our remaining financing needs -- and we believe we will -- Hoku Materials looks forward to moving into commercial operations during the fiscal year to come."
Hoku Solar Update
The Company's wholly owned subsidiary, Hoku Solar, Inc., markets, sells, and installs turnkey photovoltaic, or PV, systems in Hawaii.
Commenting on Hoku Solar, Mr. Shindo said, "Hoku Solar enjoyed a more than 400% growth in aggregate installed PV capacity during the 13-month period from April 2008 through April 2009, as compared to the year before. This effort included the installation of approximately 900 kilowatts of generating capacity for the Hawaii Department of Transportation (HDOT)."
In April 2009, Hoku completed the installation and commissioning of solar power arrays at HDOT locations throughout the state, including the following airport locations: Kona, Hawaii; Hilo, Hawaii; Lihue, Kauai; and Kahului, Maui, among other locations.
In addition to the HDOT projects, the Company developed other commercial and industrial PV systems in fiscal 2009, including systems installed on Oahu for Paradise Beverages, Prudential Locations, and Xcel International (Billabong), among others.
Mr. Shindo said, "Going forward, we expect to continue expanding Hoku Solar's focus on large-scale PV projects, including ground-based generating facilities such as the estimated 1.5 MW solar farm Hoku is planning to develop in Kapolei, Hawaii, on land owned by the James Campbell Company."
"In summary, through conservative cash management, strong partnerships and proactive planning, Hoku has continued making progress in both its solar installation and materials businesses throughout fiscal 2009," said Mr. Shindo.
"Thanks to the collective efforts of the entire Hoku team -- partners, vendors, customers, and employees alike -- Hoku Materials remains positioned to initiate commercial operations during the fiscal year to come. We have some stark financing challenges to resolve in order to remain on this schedule, but we continue to address those head-on."
Mr. Shindo continued, "In Hawaii, Hoku Solar expects to continue to gain market share in the commercial, industrial, and residential photovoltaic markets. We are focused on growing strategically, and look forward to increasing both the average size and revenue of our installation projects."
Owing to variability in the scale and timing of future PV system installations, as well as flexibility in the timing and volume of the Company's polysilicon deliveries, Hoku does not expect to issue revenue guidance for fiscal 2010. In addition, the Company expects that it will need to increase its efforts in supporting its polysilicon manufacturing and PV systems installation service businesses, developing its products and expanding its corporate infrastructure. As a result, the Company expects its costs to continue to increase significantly and it may continue to incur losses for the foreseeable future. Except as required by law, the Company assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
About Hoku Scientific, Inc.
Hoku Scientific (NasdaqGM:HOKU - News) is a diversified clean energy technologies company with three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. Hoku Materials plans to manufacture market and sell polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho. Hoku Solar markets and installs turnkey photovoltaic systems and related services in Hawaii. Hoku Fuel Cells has developed proprietary fuel cell membranes and membrane electrode assemblies for stationary and automotive proton exchange membrane fuel cells. For more information visit www.hokucorp.com.
Hoku, Hoku Solar, and the Hoku Scientific logo are trademarks of Hoku Scientific, Inc., and Hoku Materials is the trademark of Hoku Materials, Inc., all rights reserved. All other trademarks, trade names and service marks appearing in this press release are the property of their respective holders.