##### 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 December 31, 2010
 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
 
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2010
 PART I  FINANCIAL INFORMATIONItem 1: Financial Statements
    
    
    2Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4: Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    35Item 1A: Risk Factors
    
    
    35Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3: Defaults Upon Senior Securities
    
    
    35Item 4: Removed and Reserved
    
    
    35Item 5: Other Information
    
    
    35Item 6: Exhibits
    
    
    35SIGNATURES
    
    
    36EX-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
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009(1)
    
    
    2010
    
    
    2009(1)RevenuesProduct sales
    
    $
    54,732
    
    
    $
    43,826
    
    
    
    108,129
    
    
    $
    77,969System sales
    
    
    11,825
    
    
    
    3,369
    
    
    
    23,475
    
    
    
    5,936Royalties
    
    
    1,943
    
    
    
    2,254
    
    
    
    4,058
    
    
    
    4,213Revenues from product development agreements
    
    
    591
    
    
    
    3,007
    
    
    
    1,418
    
    
    
    6,998License and other revenues
    
    
    456
    
    
    
    456
    
    
    
    864
    
    
    
    740Total Revenues
    
    
    69,547
    
    
    
    52,912
    
    
    
    137,944
    
    
    
    95,856ExpensesCost of product sales
    
    
    42,931
    
    
    
    51,279
    
    
    
    87,947
    
    
    
    75,386Cost of system sales
    
    
    11,547
    
    
    
    7,102
    
    
    
    22,102
    
    
    
    10,828Cost of revenues from product development agreements
    
    
    220
    
    
    
    2,394
    
    
    
    549
    
    
    
    5,675Product development and research
    
    
    2,393
    
    
    
    3,130
    
    
    
    4,792
    
    
    
    5,375Preproduction costs
    
    
    29
    
    
    
    
    
    
    
    93
    
    
    
    10Selling, general and administrative
    
    
    16,054
    
    
    
    17,220
    
    
    
    33,698
    
    
    
    33,422Net loss (gain) on disposal of property, plant and
equipment
    
    
    21
    
    
    
    291
    
    
    
    (55
    )
    
    
    1,265Impairment loss
    
    
    
    
    
    
    1,253
    
    
    
    
    
    
    
    1,253Restructuring (income) expense
    
    
    (69
    )
    
    
    2,445
    
    
    
    422
    
    
    
    3,122Total Expenses
    
    
    73,126
    
    
    
    85,114
    
    
    
    149,548
    
    
    
    136,336Operating Loss
    
    
    (3,579
    )
    
    
    (32,202
    )
    
    
    (11,604
    )
    
    
    (40,480
    )Other Income (Expense)Interest income
    
    
    726
    
    
    
    264
    
    
    
    1,070
    
    
    
    556Interest expense
    
    
    (6,697
    )
    
    
    (7,044
    )
    
    
    (13,683
    )
    
    
    (14,214
    )Gain on debt extinguishment
    
    
    2,138
    
    
    
    
    
    
    
    3,327
    
    
    
    Distribution from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,309Other nonoperating expense, net
    
    
    (207
    )
    
    
    (981
    )
    
    
    (75
    )
    
    
    (76
    )Total Other Income (Expense)
    
    
    (4,040
    )
    
    
    (7,761
    )
    
    
    (9,361
    )
    
    
    (12,425
    )Loss before Income Taxes and Equity Loss
    
    
    (7,619
    )
    
    
    (39,963
    )
    
    
    (20,965
    )
    
    
    (52,905
    )Income tax expense (benefit)
    
    
    12
    
    
    
    (985
    )
    
    
    167
    
    
    
    (1,900
    )Loss before Equity Loss
    
    
    (7,631
    )
    
    
    (38,978
    )
    
    
    (21,132
    )
    
    
    (51,005
    )Equity gain (loss)
    
    
    19
    
    
    
    (313
    )
    
    
    (15
    )
    
    
    (333
    )Net Loss
    
    
    (7,612
    )
    
    
    (39,291
    )
    
    
    (21,147
    )
    
    
    (51,338
    )Net Loss Attributable to Noncontrolling Interest
    
    
    (99
    )
    
    
    (79
    )
    
    
    (178
    )
    
    
    (153
    )Net Loss Attributable to ECD Stockholders
    
    $
    (7,513
    )
    
    $
    (39,212
    )
    
    $
    (20,969
    )
    
    $
    (51,185
    )Loss Per Share, Attributable to ECD Stockholders
    
    $
    (0.16
    )
    
    $
    (0.93
    )
    
    $
    (0.46
    )
    
    $
    (1.21
    )Diluted Loss Per Share, Attributable to ECD Stockholders
    
    $
    (0.16
    )
    
    $
    (0.93
    )
    
    $
    (0.46
    )
    
    $
    (1.21
    )
 
 (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)
 December 31,
    
    
    June 30,2010
    
    
    2010(1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    65,988
    
    
    $
    79,158Short-term investments
    
    
    105,683
    
    
    
    113,771Accounts receivable, net
    
    
    61,666
    
    
    
    72,021Inventories, net
    
    
    66,191
    
    
    
    61,495Other current assets
    
    
    38,695
    
    
    
    27,237Total Current Assets
    
    
    338,223
    
    
    
    353,682Property, Plant and Equipment, net
    
    
    307,269
    
    
    
    301,056Other Assets:Restricted cash
    
    
    10,924
    
    
    
    11,749Lease receivable, net
    
    
    10,458
    
    
    
    10,854Other assets
    
    
    11,725
    
    
    
    14,606Total Other Assets
    
    
    33,107
    
    
    
    37,209Total Assets
    
    $
    678,599
    
    
    $
    691,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    58,578
    
    
    $
    56,035Current portion of warranty liability
    
    
    9,855
    
    
    
    12,125Other current liabilities
    
    
    9,274
    
    
    
    9,130Total Current Liabilities
    
    
    77,707
    
    
    
    77,290Long-Term Liabilities:Convertible senior notes
    
    
    225,362
    
    
    
    243,654Capital lease obligations
    
    
    19,672
    
    
    
    20,296Warranty liability
    
    
    31,127
    
    
    
    29,210Other liabilities
    
    
    18,733
    
    
    
    19,872Total Long-Term Liabilities
    
    
    294,894
    
    
    
    313,032Commitments and Contingencies (Note 10)Stockholders EquityCommon stock, $0.01 par value,
150 and 100 million shares authorized,
53,274,101 and
48,554,812 issued at
December 31, 2010 and
June 30, 2010,
respectively
    
    
    533
    
    
    
    486Additional paid-in capital
    
    
    1,103,322
    
    
    
    1,079,910Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (795,261
    )
    
    
    (774,388
    )Accumulated other comprehensive loss, net
    
    
    (1,605
    )
    
    
    (3,570
    )Total ECD stockholders equity
    
    
    306,289
    
    
    
    301,738Accumulated deficit  noncontrolling interest
    
    
    (291
    )
    
    
    (113
    )Total Stockholders Equity
    
    
    305,998
    
    
    
    301,625Total Liabilities and Stockholders Equity
    
    $
    678,599
    
    
    $
    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)
 Six Months EndedDecember 31,2010
    
    
    2009(1)Cash flows from operating activities:Net loss
    
    $
    (21,147
    )
    
    $
    (51,338
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    10,715
    
    
    
    18,300Amortization of debt discount and deferred financing fees
    
    
    8,492
    
    
    
    8,229Share-based compensation
    
    
    1,703
    
    
    
    2,266Gain on debt extinguishment
    
    
    (3,327
    )
    
    
    Net (gain) loss on disposal of property, plant and equipment
    
    
    (55
    )
    
    
    1,265Impairment loss
    
    
    
    
    
    
    1,253Equity loss
    
    
    15
    
    
    
    333Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    11,035
    
    
    
    4,632Inventories
    
    
    (3,755
    )
    
    
    (22,430
    )Other assets
    
    
    (7,430
    )
    
    
    (1,773
    )Accounts payable and accrued expenses
    
    
    4,348
    
    
    
    (21,348
    )Other liabilities
    
    
    (869
    )
    
    
    502Net cash used in operating activities
    
    
    (275
    )
    
    
    (60,109
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (19,053
    )
    
    
    (18,759
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (2,088
    )Purchases of investments
    
    
    (71,944
    )
    
    
    Proceeds from maturities of investments
    
    
    14,200
    
    
    
    120,119Proceeds from sale of investments
    
    
    64,062
    
    
    
    9,921Proceeds from sale of property, plant and equipment
    
    
    145
    
    
    
    Proceeds from development loans
    
    
    1,420
    
    
    
    Decrease in restricted cash
    
    
    825
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (10,345
    )
    
    
    109,193Cash flows from financing activities:Principal payments under capitalized lease obligations and other debt
    
    
    (902
    )
    
    
    (734
    )Repayment of revolving credit facility
    
    
    
    
    
    
    (5,705
    )Repayment of convertible notes
    
    
    
    
    
    
    (8,000
    )Net cash used in financing activities
    
    
    (902
    )
    
    
    (14,439
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,648
    )
    
    
    (368
    )Net (decrease) increase in cash and cash equivalents
    
    
    (13,170
    )
    
    
    34,277Cash and cash equivalents at beginning of period
    
    
    79,158
    
    
    
    56,379Cash and cash equivalents at end of period
    
    $
    65,988
    
    
    $
    90,656
 
 (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
 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
  Consolidated Statements of Operations for theThree Months Ended
    
    
    Six Months EndedDecember 31, 2009
    
    
    December 31, 2009As
    
    
    
    
    
    
    
    
    
    
    AsPreviously
    
    
    ASC
    
    
    As
    
    
    Previously
    
    
    ASC
    
    
    AsReported
    
    
    470-20
    
    
    Reported
    
    
    Reported
    
    
    470-20
    
    
    Reported(in thousands, except per share amounts)Interest expense
    
    $
    (6,837
    )
    
    $
    (207
    )
    
    $
    (7,044
    )
    
    $
    (13,800
    )
    
    $
    (414
    )
    
    $
    (14,214
    )Total Other Income (Expense)
    
    
    (7,554
    )
    
    
    (207
    )
    
    
    (7,761
    )
    
    
    (12,011
    )
    
    
    (414
    )
    
    
    (12,425
    )Loss before Income Taxes
and Equity Loss
    
    
    (39,756
    )
    
    
    (207
    )
    
    
    (39,963
    )
    
    
    (52,491
    )
    
    
    (414
    )
    
    
    (52,905
    )Loss before Equity Loss
    
    
    (38,771
    )
    
    
    (207
    )
    
    
    (38,978
    )
    
    
    (50,591
    )
    
    
    (414
    )
    
    
    (51,005
    )Net Loss
    
    
    (39,084
    )
    
    
    (207
    )
    
    
    (39,291
    )
    
    
    (50,924
    )
    
    
    (414
    )
    
    
    (51,338
    )Net loss attributable to
ECD Stockholders
    
    
    (39,005
    )
    
    
    (207
    )
    
    
    (39,212
    )
    
    
    (50,771
    )
    
    
    (414
    )
    
    
    (51,185
    )Loss per share
    
    
    (0.92
    )
    
    
    (0.01
    )
    
    
    (0.93
    )
    
    
    (1.20
    )
    
    
    (0.01
    )
    
    
    (1.21
    )Diluted loss per share
    
    
    (0.92
    )
    
    
    (0.01
    )
    
    
    (0.93
    )
    
    
    (1.20
    )
    
    
    (0.01
    )
    
    
    (1.21
    )
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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 theSix Months Ended December 31, 2009As PreviouslyReported
    
    
    ASC 470-20
    
    
    As Reported(in thousands)Net loss
    
    $
    (50,924
    )
    
    $
    (414
    )
    
    $
    (51,338
    )Amortization of
debt discount and
deferred financing
fees
    
    
    7,815
    
    
    
    414
    
    
    
    8,229
 Recent Accounting Pronouncements Not Yet Adopted
  Note 2  Loss Per Share
  Three Months Ended December 31,2010
    
    
    2009Net 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
    
    $
    (7,513
    )
    
    
    46,431
    
    
    $
    (0.16
    )
    
    $
    (39,212
    )
    
    
    42,299
    
    
    $
    (0.93
    )
 8




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Six Months Ended December 31,2010
    
    
    2009Net 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
    
    $
    (20,969
    )
    
    
    45,869
    
    
    $
    (0.46
    )
    
    $
    (51,185
    )
    
    
    42,299
    
    
    $
    (1.21
    )
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Share-based payment arrangements
    
    
    1,566
    
    
    
    1,303
    
    
    
    1,576
    
    
    
    1,307
   9




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Supplemental Cash Flow Information
  Six Months EndedDecember 31,2010
    
    
    2009(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    5,713
    
    
    $
    6,058Cash paid for income taxes
    
    
    75
    
    
    
    153Decrease in accounts payable for capital expenditures
    
    
    2,792
    
    
    
    1,676
 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
    
    
    Six Months EndedDecember 31, 2009(1)
    
    
    December 31, 2009(1)(in thousands, except per share amounts)Pro Forma InformationRevenues
    
    $
    52,912
    
    
    $
    100,750Net loss attributable to ECD stockholders
    
    
    (39,212
    )
    
    
    (54,852
    )Loss per share
    
    
    (0.93
    )
    
    
    (1.30
    )Diluted loss per share
    
    
    (0.93
    )
    
    
    (1.30
    )
 
 (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)December 31, 2010Corporate bonds
    
    $
    100,577
    
    
    $
    240
    
    
    $
    (1,132
    )
    
    $
    99,685Commercial paper
    
    
    4,993
    
    
    
    5
    
    
    
    (1
    )
    
    
    4,997U.S. Government securities
    
    
    1,002
    
    
    
    
    
    
    
    (1
    )
    
    
    1,001$
    106,572
    
    
    $
    245
    
    
    $
    (1,134
    )
    
    $
    105,683June 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
  December 31, 2010
    
    
    June 30, 2010Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    value
    
    
    Cost
    
    
    Value(in thousands)Due in less than one year
    
    $
    52,967
    
    
    $
    52,098
    
    
    $
    38,586
    
    
    $
    39,189Due after one year
through five years
    
    
    53,605
    
    
    
    53,585
    
    
    
    76,550
    
    
    
    74,582$
    106,572
    
    
    $
    105,683
    
    
    $
    115,136
    
    
    $
    113,771
  Note 6  Sales-Type Lease Receivables
   December 31, 2010(in thousands)Total minimum lease payments receivable
    
    $
    17,419Less: Unearned income
    
    
    (6,044
    )Net investment in sales-type leases
    
    $
    11,375
  Fiscal Year
    
    (in thousands)2011
    
    $
    5052012
    
    
    1,0132013
    
    
    1,0342014
    
    
    1,0542015
    
    
    1,075Thereafter
    
    
    12,738$
    17,419
 13




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Inventories
  December 31,
    
    
    June 30,2010
    
    
    2010(in thousands)Finished products
    
    $
    37,793
    
    
    $
    27,690Work in process
    
    
    15,783
    
    
    
    13,905Raw materials
    
    
    12,615
    
    
    
    19,900$
    66,191
    
    
    $
    61,495
  Note 8   Liabilities
 Warranty Liability
  (in thousands)Liability at June 30, 2010
    
    $
    41,335Warranty expense
    
    
    2,307Warranty claims
    
    
    (3,365
    )Foreign currency impact
    
    
    705Liability at December 31, 2010
    
    $
    40,982
 Other Long-Term Liabilities
  December 31,
    
    
    June 30,2010
    
    
    2010(in thousands)Structured financing
    
    $
    12,467
    
    
    $
    12,929Long-term retirement
    
    
    1,546
    
    
    
    1,663Customer deposits
    
    
    
    
    
    
    120Deferred patent license fees
    
    
    2,857
    
    
    
    3,333Deferred revenue and royalties
    
    
    297
    
    
    
    297Rent payable
    
    
    1,234
    
    
    
    1,145Other
    
    
    332
    
    
    
    385$
    18,733
    
    
    $
    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
  December 31, 2010
    
    
    June 30, 2010(in thousands)Outstanding principal
    
    $
    263,153
    
    
    $
    293,250Less: unamortized discount
    
    
    37,791
    
    
    
    49,596Net carrying amount
    
    $
    225,362
    
    
    $
    243,654
  Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Contractual interest
    
    $
    2,131
    
    
    $
    2,372
    
    
    $
    4,330
    
    
    $
    4,744Amortization of discount
    
    
    3,701
    
    
    
    3,598
    
    
    
    7,364
    
    
    
    7,197Amortization of debt issue costs
    
    
    549
    
    
    
    516
    
    
    
    1,128
    
    
    
    1,032Gross interest expense
recognized
    
    $
    6,381
    
    
    $
    6,486
    
    
    $
    12,822
    
    
    $
    12,973
  Note 10  Commitments and Contingencies
  16




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Restructuring Charges
   Employee-Related
    
    
    OtherExpenses
    
    
    Expenses
    
    
    Total(in thousands)Balance June 30, 2010
    
    $
    3,311
    
    
    $
    
    
    
    $
    3,311Charges
    
    
    340
    
    
    
    82
    
    
    
    422Utilization or payment
    
    
    (2,598
    )
    
    
    (82
    )
    
    
    (2,680
    )Balance December 31, 2010
    
    $
    1,053
    
    
    $
    
    
    
    $
    1,053
 Note
12  Share-Based Compensation
  Stock Options
   17




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  AggregateWeighted-Average
    
    
    Intrinsic Value(1)Shares
    
    
    Exercise Price
    
    
    (in thousands)Outstanding at June 30, 2010
    
    
    864,849
    
    
    $
    25.06
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (23,925
    )
    
    
    24.31Forfeited
    
    
    (21,988
    )
    
    
    22.35Outstanding at December 31,
2010
    
    
    818,936
    
    
    
    25.15
    
    
    
    
 
 (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.  Weighted-AverageWeighted-
    
    
    Aggregate
    
    
    ContractualAverage
    
    
    Intrinsic
    
    
    LifeExercise
    
    
    Value(1)
    
    
    RemainingShares
    
    
    Price
    
    
    (in thousands)
    
    
    in YearsExercisable at December 31, 2010
    
    
    737,613
    
    
    $
    23.67
    
    
    $
    
    
    
    
    2.51Exercisable 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
  18




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Number of
    
    
    Weighted-AverageShares
    
    
    Grant Date Fair ValueNonvested at June 30, 2010
    
    
    101,668
    
    
    $
    31.14Awarded
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    (1,600
    )
    
    
    19.65Released from restriction
    
    
    (45,910
    )
    
    
    27.07Nonvested at December 31, 2010
    
    
    54,158
    
    
    
    34.92
  Restricted Stock Units
   Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueNonvested at June 30, 2010
    
    
    309,622
    
    
    $
    18.57Awarded
    
    
    583,326
    
    
    
    4.32Vested
    
    
    
    
    
    
    Forfeited
    
    
    (149,603
    )
    
    
    5.65Released from restriction
    
    
    (10,271
    )
    
    
    5.11Nonvested at December 31, 2010
    
    
    733,074
    
    
    
    8.82
  19




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  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
   20




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  As of December 31, 2010Total Fair ValueFair Value Measurements at
    
    
    and CarryingReporting Date Using
    
    
    Value on ourLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Balance Sheet(in thousands)Investments in corporate bonds
    
    $
    99,685
    
    
    
    
    
    
    
    
    
    
    $
    99,685Investments in commercial paper
    
    
    4,997
    
    
    
    
    
    
    
    
    
    
    
    4,997Investments in U.S. government securities
    
    
    1,001
    
    
    
    
    
    
    
    
    
    
    
    1,001Investments in money market funds
    
    
    47,863
    
    
    
    
    
    
    
    
    
    
    
    47,863
 As of June 30, 2010Total Fair ValueFair Value Measurements at
    
    
    and CarryingReporting Date Using
    
    
    Value 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
  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 December 31, 2010
    
    $
    
    
    
    $
    
 Note
14  Income Taxes
  21




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 15  Derivative and Hedging Activities
    Note 16  Variable Interest Entity
   22




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Note
17  Business Segments
   23




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  UnitedSolar
    
    
    Ovonic
    
    
    CorporateOvonic
    
    
    Materials
    
    
    and Other
    
    
    Total(in thousands)Three Months Ended December 31,
2010Revenues
    
    $
    66,951
    
    
    $
    2,595
    
    
    $
    1
    
    
    $
    69,547Operating income (loss)
    
    
    911
    
    
    
    1,301
    
    
    
    (5,791
    )
    
    
    (3,579
    )Three Months Ended December 31,
2009Revenues
    
    
    48,979
    
    
    
    3,878
    
    
    
    55
    
    
    
    52,912Operating (loss) income
    
    
    (28,329
    )
    
    
    1,620
    
    
    
    (5,493
    )
    
    
    (32,202
    )Six Months Ended December 31, 2010Revenues
    
    
    132,235
    
    
    
    5,656
    
    
    
    53
    
    
    
    137,944Operating (loss) income
    
    
    (3,575
    )
    
    
    3,125
    
    
    
    (11,154
    )
    
    
    (11,604
    )Six Months Ended December 31, 2009Revenues
    
    
    88,499
    
    
    
    7,283
    
    
    
    74
    
    
    
    95,856Operating (loss) income
    
    
    (30,043
    )
    
    
    3,225
    
    
    
    (13,662
    )
    
    
    (40,480
    )
 Note
18  Litigation
   24




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Item 2 : Managements Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
   .
 Key Indicators of Financial Condition and Operating Performance
  25




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Results of Operations
 Three Months Ended December 31, 2010 Compared to Three Months Ended December 31, 2009
 United Solar Ovonic Segment
 Three Months EndedDecember 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    54,666
    
    
    $
    42,905System sales
    
    
    11,825
    
    
    
    3,369Revenues from product development agreements
    
    
    423
    
    
    
    2,573License and other revenues
    
    
    37
    
    
    
    132TOTAL REVENUES
    
    
    66,951
    
    
    
    48,979EXPENSESCost of product sales
    
    
    42,896
    
    
    
    50,482Cost of system sales
    
    
    11,547
    
    
    
    7,102Cost of revenues from product development agreements
    
    
    126
    
    
    
    2,086Product development and research
    
    
    1,720
    
    
    
    2,292Preproduction costs
    
    
    29
    
    
    
    Selling, general and administrative
    
    
    9,699
    
    
    
    11,412Loss on disposal of property, plant and equipment
    
    
    30
    
    
    
    293Impairment loss
    
    
    
    
    
    
    1,253Restructuring (income) expense
    
    
    (7
    )
    
    
    2,388TOTAL EXPENSES
    
    
    66,040
    
    
    
    77,308OPERATING INCOME (LOSS)
    
    $
    911
    
    
    $
    (28,329
    )
    26




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##### Table of Contents



Ovonic Materials Segment
 Three Months EndedDecember 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    66
    
    
    $
    921Royalties
    
    
    1,943
    
    
    
    2,254Revenues from product development agreements
    
    
    168
    
    
    
    434License and other revenues
    
    
    418
    
    
    
    269TOTAL REVENUES
    
    
    2,595
    
    
    
    3,878EXPENSESCost of product sales
    
    
    35
    
    
    
    797Cost of revenues from product development agreements
    
    
    94
    
    
    
    308Product development and research
    
    
    673
    
    
    
    838Selling, general and administrative expenses
    
    
    492
    
    
    
    315TOTAL EXPENSES
    
    
    1,294
    
    
    
    2,258OPERATING INCOME
    
    $
    1,301
    
    
    $
    1,620
    27




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Corporate and Other
  Other Income (Expense)
  Income Taxes
  Six Months Ended December 31, 2010 Compared to Six Months Ended December 31, 2009
 United Solar Ovonic Segment
 Six Months EndedDecember 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    107,926
    
    
    $
    76,441System sales
    
    
    23,475
    
    
    
    5,936Revenues from product development agreements
    
    
    797
    
    
    
    5,990License and other revenues
    
    
    37
    
    
    
    132TOTAL REVENUES
    
    
    132,235
    
    
    
    88,499EXPENSESCost of product sales
    
    
    87,815
    
    
    
    74,077Cost of system sales
    
    
    22,102
    
    
    
    10,828Cost of revenues from product development agreements
    
    
    215
    
    
    
    4,966Product development and research
    
    
    3,582
    
    
    
    3,818Preproduction costs
    
    
    93
    
    
    
    10Selling, general and administrative
    
    
    21,343
    
    
    
    19,274Loss on disposal of property, plant and equipment
    
    
    73
    
    
    
    1,267Impairment loss
    
    
    
    
    
    
    1,253Restructuring expense
    
    
    587
    
    
    
    3,049TOTAL EXPENSES
    
    
    135,810
    
    
    
    118,542OPERATING LOSS
    
    $
    (3,575
    )
    
    $
    (30,043
    )
 28




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29




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Ovonic Materials Segment
 Six Months EndedDecember 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    203
    
    
    $
    1,528Royalties
    
    
    4,058
    
    
    
    4,213Revenues from product development agreements
    
    
    621
    
    
    
    1,008License and other revenues
    
    
    774
    
    
    
    534TOTAL REVENUES
    
    
    5,656
    
    
    
    7,283EXPENSESCost of product sales
    
    
    132
    
    
    
    1,309Cost of revenues from product development agreements
    
    
    334
    
    
    
    708Product development and research
    
    
    1,210
    
    
    
    1,558Selling, general and administrative expenses
    
    
    855
    
    
    
    483TOTAL EXPENSES
    
    
    2,531
    
    
    
    4,058OPERATING INCOME
    
    $
    3,125
    
    
    $
    3,225
    Corporate and Other
  30




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Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
  Cash Flows
    Short-term Borrowings
  31




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Convertible Senior Notes
   Significant Accounting Policies and Critical Accounting Estimates
  Forward-Looking Statements
  32




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33




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##### Table of Contents



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
  34




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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
 35




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SIGNATURES
  ENERGY CONVERSION DEVICES, INC.Dated: February 9, 2011
    By:
    /S/ William C. AndrewsWilliam C. AndrewsChief Financial Officer
(Principal Financial and Accounting Officer)Dated: February 9, 2011
    By:
    /S/ Mark D. MorelliMark D. MorelliPresident and Chief Executive Officer 36