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Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future sales or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this prospectus, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts, foresees, likely, may, should, goal, target and
variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this report.
These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things, the matters discussed in this Item 1A, Risk Factors, of our Annual Report on Form 10-K for fiscal year ended June 30, 2008, and in other filings with the SEC from time to time. Any or all of these factors could cause our actual results and financial or legal status for future periods to differ materially from those expressed or referred to in any forward-looking statement. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made. Except as
required by law, we undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
There may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by law.
Item 3
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Quantitative and Qualitative Disclosures about Market Risk
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The following discussion about our exposure to market risk of financial instruments contains forward-looking statements. Actual results may differ materially from those described.
Interest Rate Risk
Our holdings of financial instruments are comprised of debt securities. All such instruments are classified as securities available-for-sale. We do not invest in portfolio equity securities, or commodities, or use financial derivatives for trading purposes. Our debt security portfolio represents funds held temporarily, pending use in our business and operations. The Company had $458,916 and $483,350 of these investments on September 30, 2008 and June 30, 2008, respectively. It is the Companys policy that investments (including cash equivalents) shall be rated A or higher by Moodys or Standard and Poors, no single
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investment (excluding cash equivalents) shall represent more than 10% of the portfolio and at least 10% of the total portfolio shall have maturities of 90 days or less. Our market risk primarily relates to the risks of changes in the
credit quality of issuers. An interest rate increase of 1% would decrease the value of our portfolio by approximately $115. A decrease of 1% would increase the fair value by approximately $120.
The Company invests in auction rate certificates. Recent market conditions have resulted in failures of certain auctions; however, the Companys securities have not experienced such failures. Due to the recent temporary liquidation problems experienced with certain securities, we have reclassified them as long-term investments.
Our Convertible Senior Notes are subject to interest rate and market price risk due to the convertible feature of the notes. Since the notes are convertible to common stock, as the fair market value of our common stock increases, so will the fair market value of the notes. Conversely, as the fair market value of our common stock decreases, the fair market value of the notes will decrease as well. As interest rates rise, the fair market value of the notes will decrease and as interest rates fall, the fair market value of the notes will increase. At September 30, 2008, the estimated fair market value of our Convertible Senior Notes was approximately $263,158. An increase or a decrease in market interest rates of 1% would increase or decrease the fair value of our Convertible Senior Notes by approximately $2,635.
Foreign Exchange Risk
A significant portion of the equipment acquisitions necessary for our planned expansion are denominated in yen. We have entered into contracts for equipment purchases that are denominated in yen. In order to mitigate the risk associated with these transactions, we have entered in currency forward contracts to buy or sell yen at future dates. As of September 30, 2008, we have forward contracts to sell approximately 148.3 million yen and to purchase approximately 1.3 billion yen. For the quarter ended September 30, 2008, an increase or a decrease in exchange rates of 1% would increase or decrease our capital equipment purchases by approximately $107. We are unable to predict the future exchange rates between the dollar and the yen and, therefore, we cannot estimate the impact on our future operating results.
Item 4
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Controls and Procedures
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Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective.
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PART II OTHER INFORMATION
Item 1
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Legal Proceedings
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Please see Note M to the accompanying unaudited financial statements for a summary of material pending litigation.
Recent global economic, capital markets and credit disruptions pose risks and present opportunities for our business segments.
The risks may include slower economic activity and investment in new construction projects that make use of our products. While credit availability is not presently a limiting factor for our planned manufacturing operations and expansion, the current volatile credit markets may diminish credit availability for some of our customers. Also, we conduct our business in U.S. dollars which may impact our foreign customers and suppliers as a result of changes in the currency exchange rates. These factors may adversely impact our existing or future take-or-pay agreements and require that we reallocate product shipments to other customers or pursue other remedies. Conversely, we are encouraged by the opportunities for large scale restructuring of the energy infrastructure to increase emphasis on renewable energy, like our solar laminates. Recent government support in this
direction includes the solar investment tax credit initiatives enacted as part of the U.S. Emergency Economic Stabilization Act of 2008, including an 8-year extension of the 30%, uncapped investment tax credit for commercial and residential solar installations, and permitted utilities to benefit from these tax credits. We also foresee increased opportunity to generate cost reductions in our operations as the economic slowdown affects raw material and labor prices. We are actively managing these risks and opportunities as we continue to pursue our growth strategy.
10.1
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Revised Separation Agreement with Executive Officer effective August 31, 2008 (portions of the agreement have been omitted pursuant to a request for confidential treatment under Rule 24b-2)
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10.2
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Amendment No. 1 to 2006 Stock Incentive Plan
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10.3
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Form of Performance Share Award Agreement pursuant to the Energy Conversion Devices, Inc. 2006 Stock Incentive Plan, as amended
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10.4
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Amended Executive Severance Plan
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31.1
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ENERGY CONVERSION DEVICES, INC.
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(Registrant)
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Date: November 10, 2008
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By:
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/s/ Harry W. Zike
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Harry W. Zike
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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Date: November 10, 2008
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By:
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/s/ Mark D. Morelli
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Mark D. Morelli
President and Chief Executive Officer
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