##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 1-8403
 ENERGY CONVERSION DEVICES, INC.
  Delaware
    
    38-1749884(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)3800 Lapeer, Auburn Hills, Michigan
    
    48326(Address of principal executive offices)
    
    (Zip Code)
 (248) 293-0440
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
    
    þ
Yes
    
    o
NoIndicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
    
    o
Yes
    
    o
No
  Large accelerated filer o
Accelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company 
o Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
    
    o
Yes
    
    þ
No




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##### 



TABLE OF CONTENTS
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2011
 PART I  FINANCIAL INFORMATIONItem 1: Financial Statements
    
    
    2Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4: Controls and Procedures
    
    
    37PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    38Item 1A: Risk Factors
    
    
    38Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3: Defaults Upon Senior Securities
    
    
    38Item 4: Removed and Reserved
    
    
    38Item 5: Other Information
    
    
    38Item 6: Exhibits
    
    
    38SIGNATURES
    
    
    39EX-31.1EX-31.2EX-32
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1 : Financial Statements
 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010(1)
    
    
    2011
    
    
    2010(1)RevenuesProduct sales
    
    $
    17,601
    
    
    $
    55,593
    
    
    $
    125,730
    
    
    $
    133,562System sales
    
    
    1,067
    
    
    
    9,483
    
    
    
    24,542
    
    
    
    15,419Royalties
    
    
    1,865
    
    
    
    1,919
    
    
    
    5,923
    
    
    
    6,132Revenues from product development agreements
    
    
    562
    
    
    
    2,580
    
    
    
    1,980
    
    
    
    9,578License and other revenues
    
    
    399
    
    
    
    2,831
    
    
    
    1,263
    
    
    
    3,571Total Revenues
    
    
    21,494
    
    
    
    72,406
    
    
    
    159,438
    
    
    
    168,262ExpensesCost of product sales
    
    
    16,743
    
    
    
    60,368
    
    
    
    104,690
    
    
    
    135,754Cost of system sales
    
    
    1,000
    
    
    
    8,614
    
    
    
    23,102
    
    
    
    19,442Cost of revenues from product development agreements
    
    
    245
    
    
    
    1,949
    
    
    
    794
    
    
    
    7,624Product development and research
    
    
    2,562
    
    
    
    3,442
    
    
    
    7,354
    
    
    
    8,817Preproduction costs
    
    
    
    
    
    
    72
    
    
    
    93
    
    
    
    82Selling, general and administrative
    
    
    15,660
    
    
    
    16,730
    
    
    
    49,358
    
    
    
    50,152Net loss on disposal of property, plant and equipment
    
    
    130
    
    
    
    31
    
    
    
    75
    
    
    
    1,296Impairment loss
    
    
    222,803
    
    
    
    357,975
    
    
    
    222,803
    
    
    
    359,228Restructuring expense
    
    
    1,678
    
    
    
    338
    
    
    
    2,100
    
    
    
    3,460Total Expenses
    
    
    260,821
    
    
    
    449,519
    
    
    
    410,369
    
    
    
    585,855Operating Loss
    
    
    (239,327
    )
    
    
    (377,113
    )
    
    
    (250,931
    )
    
    
    (417,593
    )Other Income (Expense)Interest income
    
    
    1,154
    
    
    
    404
    
    
    
    2,224
    
    
    
    960Interest expense
    
    
    (6,208
    )
    
    
    (7,200
    )
    
    
    (19,891
    )
    
    
    (21,414
    )Gain on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    3,327
    
    
    
    Distribution from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,309Other nonoperating income (expense), net
    
    
    1,189
    
    
    
    (1,257
    )
    
    
    1,114
    
    
    
    (1,333
    )Total Other Income (Expense)
    
    
    (3,865
    )
    
    
    (8,053
    )
    
    
    (13,226
    )
    
    
    (20,478
    )Loss before Income Taxes and Equity Loss
    
    
    (243,192
    )
    
    
    (385,166
    )
    
    
    (264,157
    )
    
    
    (438,071
    )Income tax expense (benefit)
    
    
    128
    
    
    
    (55
    )
    
    
    295
    
    
    
    (1,955
    )Loss before Equity Loss
    
    
    (243,320
    )
    
    
    (385,111
    )
    
    
    (264,452
    )
    
    
    (436,116
    )Equity gain (loss)
    
    
    118
    
    
    
    148
    
    
    
    103
    
    
    
    (185
    )Net Loss
    
    
    (243,202
    )
    
    
    (384,963
    )
    
    
    (264,349
    )
    
    
    (436,301
    )Net (Loss) Income Attributable to Noncontrolling Interest
    
    
    (99
    )
    
    
    113
    
    
    
    (277
    )
    
    
    (40
    )Net Loss Attributable to ECD Stockholders
    
    $
    (243,103
    )
    
    $
    (385,076
    )
    
    $
    (264,072
    )
    
    $
    (436,261
    )Loss Per Share, Attributable to ECD Stockholders
    
    $
    (4.88
    )
    
    $
    (9.10
    )
    
    $
    (5.60
    )
    
    $
    (10.31
    )Diluted Loss Per Share, Attributable to ECD Stockholders
    
    $
    (4.88
    )
    
    $
    (9.10
    )
    
    $
    (5.60
    )
    
    $
    (10.31
    )
 
 (1)
    
    As adjusted due to the implementation of FASB ASC 470-20 (See Note 1).  2




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
 March 31,
    
    
    June 30,2011
    
    
    2010(1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    52,683
    
    
    $
    79,158Short-term investments
    
    
    109,001
    
    
    
    113,771Accounts receivable, net
    
    
    30,765
    
    
    
    72,021Inventories, net
    
    
    94,863
    
    
    
    61,495Other current assets
    
    
    23,985
    
    
    
    27,237Total Current Assets
    
    
    311,297
    
    
    
    353,682Property, Plant and Equipment, net
    
    
    88,339
    
    
    
    301,056Other Assets:Restricted cash
    
    
    10,350
    
    
    
    11,749Lease receivable, net
    
    
    10,304
    
    
    
    10,854Other assets
    
    
    11,199
    
    
    
    14,606Total Other Assets
    
    
    31,853
    
    
    
    37,209Total Assets
    
    $
    431,489
    
    
    $
    691,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    49,173
    
    
    $
    56,035Current portion of warranty liability
    
    
    14,748
    
    
    
    12,125Other current liabilities
    
    
    9,096
    
    
    
    9,130Total Current Liabilities
    
    
    73,017
    
    
    
    77,290Long-Term Liabilities:Convertible senior notes
    
    
    228,754
    
    
    
    243,654Capital lease obligations
    
    
    19,349
    
    
    
    20,296Warranty liability
    
    
    26,950
    
    
    
    29,210Other liabilities
    
    
    18,275
    
    
    
    19,872Total Long-Term Liabilities
    
    
    293,328
    
    
    
    313,032Commitments and Contingencies (Note 10)Stockholders EquityCommon stock, $0.01 par value, 150 million and 100
million shares authorized, 53,273,831 and 48,554,812
issued at March 31, 2011
and June 30, 2010,
respectively
    
    
    533
    
    
    
    486Additional paid-in capital
    
    
    1,104,838
    
    
    
    1,079,910Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (1,038,364
    )
    
    
    (774,388
    )Accumulated other comprehensive loss, net
    
    
    (773
    )
    
    
    (3,570
    )Total ECD stockholders equity
    
    
    65,534
    
    
    
    301,738Accumulated deficit  noncontrolling interest
    
    
    (390
    )
    
    
    (113
    )Total Stockholders Equity
    
    
    65,144
    
    
    
    301,625Total Liabilities and Stockholders Equity
    
    $
    431,489
    
    
    $
    691,947
 
 (1)
    
    As adjusted due to the implementation of FASB ASC 470-20 (See Note 1).  3




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
 Nine Months EndedMarch 31,2011
    
    
    2010(1)Cash flows from operating activities:Net loss
    
    $
    (264,349
    )
    
    $
    (436,301
    )Adjustments to reconcile net loss to net cash used in operating
activities:Impairment loss
    
    
    222,803
    
    
    
    359,228Depreciation and amortization
    
    
    16,092
    
    
    
    27,302Amortization of debt discount and deferred financing fees
    
    
    12,466
    
    
    
    12,571Share-based compensation
    
    
    3,219
    
    
    
    3,440Gain on debt extinguishment
    
    
    (3,327
    )
    
    
    Net loss on disposal of property, plant and equipment
    
    
    75
    
    
    
    1,296Equity (gain) loss
    
    
    (103
    )
    
    
    185Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    42,138
    
    
    
    (3,417
    )Inventories
    
    
    (31,329
    )
    
    
    3,328Other assets
    
    
    2,877
    
    
    
    (14,285
    )Accounts payable and accrued expenses
    
    
    (1,801
    )
    
    
    (17,492
    )Other liabilities
    
    
    (1,563
    )
    
    
    (579
    )Net cash used in operating activities
    
    
    (2,802
    )
    
    
    (64,724
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (29,810
    )
    
    
    (26,904
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (2,088
    )Purchases of investments
    
    
    (87,316
    )
    
    
    (68,089
    )Proceeds from maturities of investments
    
    
    14,200
    
    
    
    174,644Proceeds from sale of investments
    
    
    75,069
    
    
    
    10,120Proceeds from sale of property, plant and equipment
    
    
    219
    
    
    
    Proceeds from development loans
    
    
    7,177
    
    
    
    Decrease (increase) in restricted cash
    
    
    1,399
    
    
    
    (6,510
    )Net cash (used in) provided by investing activities
    
    
    (19,062
    )
    
    
    81,173Cash flows from financing activities:Principal payments under capitalized lease obligations and other debt
    
    
    (1,313
    )
    
    
    (1,131
    )Repayment of revolving credit facility
    
    
    
    
    
    
    (5,705
    )Repayment of convertible notes
    
    
    
    
    
    
    (8,000
    )Net cash used in financing activities
    
    
    (1,313
    )
    
    
    (14,836
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (3,298
    )
    
    
    252Net (decrease) increase in cash and cash equivalents
    
    
    (26,475
    )
    
    
    1,865Cash and cash equivalents at beginning of period
    
    
    79,158
    
    
    
    56,379Cash and cash equivalents at end of period
    
    $
    52,683
    
    
    $
    58,244
 
 (1)
    
    As adjusted due to the implementation of FASB ASC 470-20 (See Note 1).  4




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Nature of Operations, Basis of Presentation and Summary of Significant Accounting
Policies
 Nature of Operations
   Basis of Presentation
    Summary of Significant Accounting Policies
 Use of Estimates
  5




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Capitalized Interest
  General
  Restricted Cash
  Revenues from Product Development Agreements
  Recently Adopted Accounting Pronouncements
 Disclosures About the Credit Quality
of Financing Receivables and the Allowance for Credit Losses Receivables
 Consolidations
 6




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements  a Consensus of the FASB Emerging Issues Task Force
 Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance or Other Financing
 7




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Statements of Operations for theThree Months Ended
    
    Nine Months EndedMarch 31, 2010
    
    March 31, 2010As
    
    
    
    
    
    
    
    
    
    AsPreviously
    
    ASC
    
    As
    
    Previously
    
    ASC
    
    AsReported
    
    470-20
    
    Reported
    
    Reported
    
    470-20
    
    Reported(in thousands, except per share amounts)Interest expense
    
    $
    (6,970
    )
    
    $
    (230
    )
    
    $
    (7,200
    )
    
    $
    (20,770
    )
    
    $
    (644
    )
    
    $
    (21,414
    )Total Other Income (Expense)
    
    
    (7,823
    )
    
    
    (230
    )
    
    
    (8,053
    )
    
    
    (19,834
    )
    
    
    (644
    )
    
    
    (20,478
    )Loss before Income Taxes
and Equity Loss
    
    
    (384,936
    )
    
    
    (230
    )
    
    
    (385,166
    )
    
    
    (437,427
    )
    
    
    (644
    )
    
    
    (438,071
    )Loss before Equity Loss
    
    
    (384,881
    )
    
    
    (230
    )
    
    
    (385,111
    )
    
    
    (435,472
    )
    
    
    (644
    )
    
    
    (436,116
    )Net Loss
    
    
    (384,733
    )
    
    
    (230
    )
    
    
    (384,963
    )
    
    
    (435,657
    )
    
    
    (644
    )
    
    
    (436,301
    )Net loss attributable to
ECD Stockholders
    
    
    (384,846
    )
    
    
    (230
    )
    
    
    (385,076
    )
    
    
    (435,617
    )
    
    
    (644
    )
    
    
    (436,261
    )Loss per share
    
    
    (9.10
    )
    
    
    
    
    
    
    (9.10
    )
    
    
    (10.30
    )
    
    
    (0.01
    )
    
    
    (10.31
    )Diluted loss per share
    
    
    (9.10
    )
    
    
    
    
    
    
    (9.10
    )
    
    
    (10.30
    )
    
    
    (0.01
    )
    
    
    (10.31
    )
 Consolidated Balance Sheet as of June 30, 2010As PreviouslyReported
    
    ASC 470-20
    
    As Reported(in thousands)Other assets
    
    $
    10,980
    
    
    $
    3,626
    
    
    $
    14,606Total assets
    
    
    688,321
    
    
    
    3,626
    
    
    
    691,947Additional paid-in capital
    
    
    1,074,410
    
    
    
    5,500
    
    
    
    1,079,910Accumulated deficit
    
    
    (772,514
    )
    
    
    (1,874
    )
    
    
    (774,388
    )Total ECD stockholders equity
    
    
    298,112
    
    
    
    3,626
    
    
    
    301,738Total stockholders equity
    
    
    297,999
    
    
    
    3,626
    
    
    
    301,625Total liabilities and stockholders equity
    
    
    688,321
    
    
    
    3,626
    
    
    
    691,947
 Consolidated Statement of Cash Flows for theNine Months Ended March 31, 2010As PreviouslyReported
    
    ASC 470-20
    
    As Reported(in thousands)Net loss
    
    $
    (435,657
    )
    
    $
    (644
    )
    
    $
    (436,301
    )Amortization of
debt discount and
deferred financing
fees
    
    
    11,927
    
    
    
    644
    
    
    
    12,571
 Recent Accounting Pronouncements Not Yet Adopted
  Note 2  Loss Per Share
  8




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended March 31,2011
    
    
    2010Net Loss
    
    
    
    
    
    
    
    
    
    
    Net LossAttributable
    
    
    
    
    
    
    
    
    
    
    Attributableto ECD
    
    
    
    
    
    
    
    
    
    
    to ECDStockholders
    
    
    Shares
    
    
    Per Share
    
    
    Stockholders
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amounts
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Amounts(in thousands, except per share amounts)Basic and diluted
loss per share
    
    $
    (243,103
    )
    
    
    49,798
    
    
    $
    (4.88
    )
    
    $
    (385,076
    )
    
    
    42,307
    
    
    $
    (9.10
    )
 Nine Months Ended March 31,2011
    
    
    2010Net Loss
    
    
    
    
    
    
    
    
    
    
    Net LossAttributable
    
    
    
    
    
    
    
    
    
    
    Attributableto ECD
    
    
    
    
    
    
    
    
    
    
    to ECDStockholders
    
    
    Shares
    
    
    Per Share
    
    
    Stockholders
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amounts
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Amounts(in thousands, except per share amounts)Basic and diluted
loss per share
    
    $
    (264,072
    )
    
    
    47,165
    
    
    $
    (5.60
    )
    
    $
    (436,261
    )
    
    
    42,307
    
    
    $
    (10.31
    )
  Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2011
    
    2010
    
    2011
    
    2010(in thousands)Share-based payment arrangements
    
    
    1,492
    
    
    
    1,299
    
    
    
    1,543
    
    
    
    1,304
  9




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 3  Supplemental Cash Flow Information
  Nine Months EndedMarch 31,2011
    
    2010(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    6,336
    
    
    $
    6,678Cash paid for income taxes
    
    
    115
    
    
    
    231Decrease in accounts payable for capital expenditures
    
    
    6,390
    
    
    
    3,120
 Note 4  Acquisition
   10




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Purchase Price Allocation
  (in thousands)Cash
    
    $
    9,180Accounts receivable
    
    
    9,962Inventory
    
    
    24,031Other current assets
    
    
    2,372Long-term receivables
    
    
    11,769Property, plant and equipment
    
    
    2,030Other long-term assets
    
    
    2,010Identifiable intangible assets
    
    
    2,780Goodwill
    
    
    35,299Warranty liability
    
    
    (38,548
    )Current liabilities
    
    
    (27,293
    )Long-term liabilities
    
    
    (21,913
    )Total net assets acquired
    
    $
    11,679
   Three Months Ended
    
    Nine Months EndedMarch 31, 2010(1)
    
    March 31, 2010(1)(in thousands, except per share amounts)Pro Forma InformationRevenues
    
    $
    72,406
    
    
    $
    173,156Net loss attributable to ECD stockholders
    
    
    (385,076
    )
    
    
    (439,928
    )Loss per share
    
    
    (9.10
    )
    
    
    (10.40
    )Diluted loss per share
    
    
    (9.10
    )
    
    
    (10.40
    )
 
 (1)
    
    As adjusted due to implementation of FASB ASC 470-20  11




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Goodwill and Intangible Assets
    Note 5  Investments
 Short-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)March 31, 2011Corporate bonds
    
    $
    108,906
    
    
    $
    247
    
    
    $
    (1,153
    )
    
    $
    108,000U.S. Government securities
    
    
    1,001
    
    
    
    
    
    
    
    
    
    
    
    1,001$
    109,907
    
    
    $
    247
    
    
    $
    (1,153
    )
    
    $
    109,001June 30, 2010Corporate bonds
    
    $
    89,935
    
    
    $
    5
    
    
    $
    (1,377
    )
    
    $
    88,563U.S. Government securities
    
    
    11,001
    
    
    
    4
    
    
    
    
    
    
    
    11,005Auction rate certificates
    
    
    14,200
    
    
    
    
    
    
    
    (1,731
    )
    
    
    12,469Auction rate securities rights
    
    
    
    
    
    
    1,734
    
    
    
    
    
    
    
    1,734$
    115,136
    
    
    $
    1,743
    
    
    $
    (3,108
    )
    
    $
    113,771
 12




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2011
    
    
    June 30, 2010Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    value
    
    
    Cost
    
    
    Value(in thousands)Due in less than one year
    
    $
    69,446
    
    
    $
    68,668
    
    
    $
    38,586
    
    
    $
    39,189Due after one year
through five years
    
    
    40,461
    
    
    
    40,333
    
    
    
    76,550
    
    
    
    74,582$
    109,907
    
    
    $
    109,001
    
    
    $
    115,136
    
    
    $
    113,771
  Note 6  Sales-Type Lease Receivables
   March 31, 2011(in thousands)Total minimum lease payments receivable
    
    $
    17,243Less: Unearned income
    
    
    (6,028
    )Net investment in sales-type leases
    
    $
    11,215
  Fiscal Year
    
    (in thousands)2011
    
    $
    2912012
    
    
    1,0132013
    
    
    1,0342014
    
    
    1,0542015
    
    
    1,075Thereafter
    
    
    12,776$
    17,243
 13




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Inventories
  March 31,
    
    
    June 30,2011
    
    
    2010(in thousands)Finished products
    
    $
    50,974
    
    
    $
    27,690Work in process
    
    
    33,626
    
    
    
    13,905Raw materials
    
    
    10,263
    
    
    
    19,900$
    94,863
    
    
    $
    61,495
  Note 8  Liabilities
 Warranty Liability
  (in thousands)Liability at June 30, 2010
    
    $
    41,335Warranty expense
    
    
    3,176Warranty claims
    
    
    (3,949
    )Foreign currency impact
    
    
    1,136Liability at March 31, 2011
    
    $
    41,698
 Other Long-Term Liabilities
  March 31,
    
    
    June 30,2011
    
    
    2010(in thousands)Structured financing
    
    $
    12,287
    
    
    $
    12,929Long-term retirement
    
    
    1,488
    
    
    
    1,663Customer deposits
    
    
    
    
    
    
    120Deferred patent license fees
    
    
    2,619
    
    
    
    3,333Deferred revenue and royalties
    
    
    297
    
    
    
    297Rent payable
    
    
    1,273
    
    
    
    1,145Other
    
    
    311
    
    
    
    385$
    18,275
    
    
    $
    19,872
 14




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Long-Term Debt
 Lines of Credit
  Convertible Senior Notes
     15




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2011
    
    
    June 30, 2010(in thousands)Outstanding principal
    
    $
    263,153
    
    
    $
    293,250Less: unamortized discount
    
    
    34,399
    
    
    
    49,596Net carrying amount
    
    $
    228,754
    
    
    $
    243,654
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010(in thousands)Contractual interest
    
    $
    1,974
    
    
    $
    2,372
    
    
    $
    6,304
    
    
    $
    7,116Amortization of discount
    
    
    3,392
    
    
    
    3,772
    
    
    
    10,756
    
    
    
    10,969Amortization of debt issue costs
    
    
    582
    
    
    
    570
    
    
    
    1,710
    
    
    
    1,602Gross interest expense
recognized
    
    $
    5,948
    
    
    $
    6,714
    
    
    $
    18,770
    
    
    $
    19,687
  Note 10  Commitments and Contingencies
  16




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Impairment
     Note 12  Restructuring Charges
   Employee-Related
    
    
    OtherExpenses
    
    
    Expenses
    
    
    Total(in thousands)Balance June 30, 2010
    
    $
    3,311
    
    
    $
    
    
    
    $
    3,311Charges
    
    
    1,885
    
    
    
    215
    
    
    
    2,100Utilization or payment
    
    
    (2,814
    )
    
    
    (215
    )
    
    
    (3,029
    )Currency translation
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Balance March 31, 2011
    
    $
    2,373
    
    
    $
    
    
    
    $
    2,373
 17




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Share-Based Compensation
  Stock Options
    AggregateWeighted-Average
    
    Intrinsic Value(1)Shares
    
    Exercise Price
    
    (in thousands)Outstanding at June 30, 2010
    
    
    864,849
    
    
    $
    25.06
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (313,210
    )
    
    
    22.99Forfeited
    
    
    (22,922
    )
    
    
    23.40Outstanding at March 31, 2011
    
    
    528,717
    
    
    
    26.36
    
    
    
    
 
 (1)
    
    The intrinsic value of a stock option is the amount by which the current
market value of the underlying stock exceeds the exercise price of the option. 18




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted-Weighted-
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate Intrinsic
    
    
    Contractual LifeExercise
    
    
    Value(1)
    
    
    RemainingShares
    
    
    Price
    
    
    (in thousands)
    
    
    in YearsExercisable at March 31, 2011
    
    
    453,328
    
    
    $
    24.17
    
    
    $
    
    
    
    
    3.67Exercisable at June 30, 2010
    
    
    726,944
    
    
    
    22.75
    
    
    
    
    
    
    
    2.80
 
 (1)
    
    The intrinsic value of a stock option is the amount by which the current
market value of the underlying stock exceeds the exercise price of the option.  Restricted Stock Awards
   Number of
    
    Weighted-AverageShares
    
    Grant Date Fair ValueNonvested at June 30, 2010
    
    
    101,668
    
    
    $
    31.14Awarded
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    (1,870
    )
    
    
    18.19Released from restriction
    
    
    (48,425
    )
    
    
    26.97Nonvested at March 31, 2011
    
    
    51,373
    
    
    
    35.54
  19




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Restricted Stock Units
   Weighted-AverageNumber of
    
    Grant DateShares
    
    Fair ValueNonvested at June 30, 2010
    
    
    309,622
    
    
    $
    18.57Awarded
    
    
    1,602,205
    
    
    
    4.28Vested
    
    
    
    
    
    
    Forfeited
    
    
    (154,503
    )
    
    
    12.86Released from restriction
    
    
    (10,271
    )
    
    
    5.11Nonvested at March 31, 2011
    
    
    1,747,053
    
    
    
    7.47
  Note 14  Fair Value Measurements
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities
    
    Level 2  Valuations based on quoted prices in markets that are not active,
quoted prices for similar assets or liabilities or all other inputs that are
observable
    
    Level 3  Unobservable inputs for which there is little or no market data which
require the Company to develop its own assumptions
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    As of March 31, 2011Fair Value Measurements atReporting Date UsingTotal Fair Valueand CarryingValue on ourLevel 1
    
    Level 2
    
    Level 3
    
    Balance Sheet(in thousands)Investments in corporate bonds
    
    $
    108,000
    
    
    
    
    
    
    
    
    
    
    $
    108,000Investments in U.S. government securities
    
    
    1,001
    
    
    
    
    
    
    
    
    
    
    
    1,001Investments in money market funds
    
    
    32,990
    
    
    
    
    
    
    
    
    
    
    
    32,990As of June 30, 2010Fair Value Measurements atReporting Date UsingTotal Fair Valueand CarryingValue on ourLevel 1
    
    Level 2
    
    Level 3
    
    Balance Sheet(in thousands)Auction rate certificates
    
    
    
    
    
    
    
    
    
    $
    12,469
    
    
    $
    12,469Auction rate securities rights
    
    
    
    
    
    
    
    
    
    
    1,734
    
    
    
    1,734Investments in corporate bonds
    
    $
    88,563
    
    
    
    
    
    
    
    
    
    
    
    88,563Investments in U.S. government securities
    
    
    11,005
    
    
    
    
    
    
    
    
    
    
    
    11,005Investments in money market funds
    
    
    59,375
    
    
    
    
    
    
    
    
    
    
    
    59,375
 21




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Auction Rate
    
    
    Auction RateCertificates
    
    
    Securities Rights(in thousands)Balance at June 30, 2010
    
    $
    12,469
    
    
    $
    1,734Redeemed by UBS
    
    
    (14,200
    )
    
    
    Net gain (loss) recognized in earnings
    
    
    1,731
    
    
    
    (1,734
    )Balance at March 31, 2011
    
    $
    
    
    
    $
    
   As
of March 31, 2011
    
    
    As
of March 31, 2010Level 3
    
    Level 3(in thousands)
    
    (in thousands)Property, plant and equipment, net
    
    $
    86,709
    
    
    $
    296,007
 Note 15 - Income Taxes
    22




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 16  Derivative and Hedging Activities
    Note 17  Variable Interest Entity
   23




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       24




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 18 - Business Segments
   UnitedSolar
    
    Ovonic
    
    CorporateOvonic
    
    Materials
    
    and Other
    
    Total(in thousands)Three Months Ended March 31, 2011Revenues
    
    $
    19,152
    
    
    $
    2,342
    
    
    $
    
    
    
    $
    21,494Operating (loss) income
    
    
    (235,421
    )
    
    
    407
    
    
    
    (4,313
    )
    
    
    (239,327
    )Three Months Ended March 31, 2010Revenues
    
    
    66,210
    
    
    
    6,143
    
    
    
    53
    
    
    
    72,406Operating (loss) income
    
    
    (375,452
    )
    
    
    3,778
    
    
    
    (5,439
    )
    
    
    (377,113
    )Nine Months Ended March 31, 2011Revenues
    
    
    151,387
    
    
    
    7,998
    
    
    
    53
    
    
    
    159,438Operating (loss) income
    
    
    (238,996
    )
    
    
    3,532
    
    
    
    (15,467
    )
    
    
    (250,931
    )Nine Months Ended March 31, 2010Revenues
    
    
    154,709
    
    
    
    13,426
    
    
    
    127
    
    
    
    168,262Operating (loss) income
    
    
    (405,495
    )
    
    
    7,003
    
    
    
    (19,101
    )
    
    
    (417,593
    )
 Note 19 - Litigation
  25




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  26




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Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     27




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Key Indicators of Financial Condition and Operating Performance
  Results of Operations
 Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 United Solar Ovonic Segment
 Three Months EndedMarch 31,2011
    
    
    2010(in thousands)REVENUESProduct sales
    
    $
    17,472
    
    
    $
    54,567System sales
    
    
    1,067
    
    
    
    9,483Revenues from product development agreements
    
    
    507
    
    
    
    2,144License and other revenues
    
    
    106
    
    
    
    16TOTAL REVENUES
    
    
    19,152
    
    
    
    66,210EXPENSESCost of product sales
    
    
    16,589
    
    
    
    59,505Cost of system sales
    
    
    1,000
    
    
    
    8,614Cost of revenues from product development agreements
    
    
    222
    
    
    
    1,627Product development and research
    
    
    1,220
    
    
    
    2,603Preproduction costs
    
    
    
    
    
    
    72Selling, general and administrative
    
    
    11,083
    
    
    
    10,923Loss on disposal of property, plant and equipment
    
    
    132
    
    
    
    31Impairment loss
    
    
    222,803
    
    
    
    357,975Restructuring expense
    
    
    1,524
    
    
    
    312TOTAL EXPENSES
    
    
    254,573
    
    
    
    441,662OPERATING INCOME (LOSS)
    
    $
    (235,421
    )
    
    $
    (375,452
    )
  28




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29




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Ovonic Materials Segment
 Three Months EndedMarch 31,2011
    
    
    2010(in thousands)REVENUESProduct sales
    
    $
    129
    
    
    $
    1,026Royalties
    
    
    1,865
    
    
    
    1,919Revenues from product development agreements
    
    
    55
    
    
    
    436License and other revenues
    
    
    293
    
    
    
    2,762TOTAL REVENUES
    
    
    2,342
    
    
    
    6,143EXPENSESCost of product sales
    
    
    154
    
    
    
    863Cost of revenues from product development agreements
    
    
    23
    
    
    
    322Product development and research
    
    
    1,342
    
    
    
    839Selling, general and administrative expenses
    
    
    416
    
    
    
    341TOTAL EXPENSES
    
    
    1,935
    
    
    
    2,365OPERATING INCOME
    
    $
    407
    
    
    $
    3,778
    Corporate and Other
  Other Income (Expense)
  30




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Income Taxes
  Nine Months Ended March 31, 2011 Compared to Nine Months Ended March 31, 2010
 United Solar Ovonic Segment
 Nine Months EndedMarch 31,2011
    
    
    2010(in thousands)REVENUESProduct sales
    
    $
    125,398
    
    
    $
    131,008System sales
    
    
    24,542
    
    
    
    15,419Revenues from product development agreements
    
    
    1,304
    
    
    
    8,134License and other revenues
    
    
    143
    
    
    
    148TOTAL REVENUES
    
    
    151,387
    
    
    
    154,709EXPENSESCost of product sales
    
    
    104,404
    
    
    
    133,582Cost of system sales
    
    
    23,102
    
    
    
    19,442Cost of revenues from product development agreements
    
    
    437
    
    
    
    6,593Product development and research
    
    
    4,802
    
    
    
    6,421Preproduction costs
    
    
    93
    
    
    
    82Selling, general and administrative
    
    
    32,426
    
    
    
    30,197Loss on disposal of property, plant and equipment
    
    
    205
    
    
    
    1,298Impairment loss
    
    
    222,803
    
    
    
    359,228Restructuring expense
    
    
    2,111
    
    
    
    3,361TOTAL EXPENSES
    
    
    390,383
    
    
    
    560,204OPERATING LOSS
    
    $
    (238,996
    )
    
    $
    (405,495
    )
   31




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32




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Ovonic Materials Segment
 Nine Months EndedMarch 31,2011
    
    
    2010(in thousands)REVENUESProduct sales
    
    $
    332
    
    
    $
    2,554Royalties
    
    
    5,923
    
    
    
    6,132Revenues from product development agreements
    
    
    676
    
    
    
    1,444License and other revenues
    
    
    1,067
    
    
    
    3,296TOTAL REVENUES
    
    
    7,998
    
    
    
    13,426EXPENSESCost of product sales
    
    
    286
    
    
    
    2,172Cost of revenues from product development agreements
    
    
    357
    
    
    
    1,030Product development and research
    
    
    2,552
    
    
    
    2,397Selling, general and administrative expenses
    
    
    1,271
    
    
    
    824TOTAL EXPENSES
    
    
    4,466
    
    
    
    6,423OPERATING INCOME
    
    $
    3,532
    
    
    $
    7,003
    Corporate and Other
  33




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Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
  Cash Flows
    Short-term Borrowings
  34




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Convertible Senior Notes
   Significant Accounting Policies and Critical Accounting Estimates
  Forward-Looking Statements
  35




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36




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Item 3:
    
    Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk
  Foreign Exchange Risk
    
 Item 4:
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  37




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PART II  OTHER INFORMATION
 
 Item 1:
    
    Legal Proceedings
  
 Item 1A:
    
    Risk Factors
  
 Item 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3:
    
    Defaults Upon Senior Securities
  
 Item 4:
    
    Removed and Reserved
  
 Item 5:
    
    Other Information
  
 Item 6:
    
    Exhibits
 31.1
    
    Certificate of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certificate of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232
    
    Certifications 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
 38




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SIGNATURES
  ENERGY CONVERSION DEVICES, INC.Dated: May 10, 2011
    By:
    /S/ William C. AndrewsWilliam C. AndrewsChief Financial Officer
(Principal Financial and Accounting Officer)Dated: May 10, 2011
    By:

/S/
Jay B. KnollJay B. KnollInterim President 39