##### 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 September 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period  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.)2956 Waterview Drive,
Rochester Hills, Michigan
    
    48309(Address of principal executive offices)
    
    (Zip Code)
 (248) 293-0440
 
 þ o
 o o
  Large accelerated filer þ
    

Accelerated filer o
    

Non-accelerated filer o
( Do not check if a smaller reporting company)
    

Smaller reporting company o
 o þ




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TABLE OF CONTENTS
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2009
 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
    
    
    32Item 4: Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    35Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3: Defaults Upon Senior Securities
    
    
    35Item 4: Submission of Matters to a Vote of Security Holders
    
    
    35Item 5: Other Information
    
    
    35Item 6: Exhibits
    
    
    35SIGNATURES
    
    
    36EX-31.1EX-31.2EX-32.1
  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 EndedSeptember 30,2009
    
    
    2008(1)RevenuesProduct and project sales
    
    $
    36,710
    
    
    $
    90,801Royalties
    
    
    1,959
    
    
    
    1,344Revenues from product development agreements
    
    
    3,991
    
    
    
    3,271License and other revenues
    
    
    284
    
    
    
    349Total Revenues
    
    
    42,944
    
    
    
    95,765ExpensesCost of product and project sales
    
    
    27,833
    
    
    
    60,979Cost of revenues from product development agreements
    
    
    3,281
    
    
    
    2,181Product development and research
    
    
    2,245
    
    
    
    2,190Preproduction costs
    
    
    10
    
    
    
    1,977Selling, general and administrative
    
    
    16,202
    
    
    
    14,150Net loss on disposal of property, plant and equipment
    
    
    974
    
    
    
    284Restructuring charges
    
    
    677
    
    
    
    244Total Expenses
    
    
    51,222
    
    
    
    82,005Operating (Loss) Income
    
    
    (8,278
    )
    
    
    13,760Other Income (Expense)Interest income
    
    
    292
    
    
    
    2,604Interest expense
    
    
    (6,963
    )
    
    
    (3,564
    )Distribution from joint venture
    
    
    1,309
    
    
    
    Other nonoperating income (expense), net
    
    
    885
    
    
    
    (926
    )Total Other Income (Expense)
    
    
    (4,477
    )
    
    
    (1,886
    )Net (Loss) Income before Income Taxes
    
    
    (12,755
    )
    
    
    11,874Income tax (benefit) expense
    
    
    (915
    )
    
    
    57Net (Loss) Income
    
    
    (11,840
    )
    
    
    11,817Net Loss Attributable to Noncontrolling Interest
    
    
    (74
    )
    
    
    Net (Loss) Income Attributable to ECD Shareholders
    
    $
    (11,766
    )
    
    $
    11,817(Loss) Earnings Per Share
    
    $
    (0.28
    )
    
    $
    0.28Diluted (Loss) Earnings Per Share
    
    $
    (0.28
    )
    
    $
    0.27
 
 (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)
 June 30,September 30, 2009
    
    
    2009(1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    54,407
    
    
    $
    56,379Short-term investments
    
    
    201,015
    
    
    
    245,182Accounts receivable, net
    
    
    54,912
    
    
    
    69,382Inventories, net
    
    
    128,497
    
    
    
    74,266Other current assets
    
    
    7,910
    
    
    
    4,897Total Current Assets
    
    
    446,741
    
    
    
    450,106Property, Plant and Equipment, net
    
    
    614,617
    
    
    
    614,330Other Assets:Restricted cash
    
    
    1,563
    
    
    
    Goodwill
    
    
    30,523
    
    
    
    Intangible assets, net
    
    
    2,659
    
    
    
    Lease receivable, net
    
    
    11,656
    
    
    
    Other assets
    
    
    11,758
    
    
    
    11,661Total Other Assets
    
    
    58,159
    
    
    
    11,661Total Assets
    
    $
    1,119,517
    
    
    $
    1,076,097LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    45,025
    
    
    $
    50,238Warranty liability
    
    
    40,299
    
    
    
    5,917Convertible notes
    
    
    8,000
    
    
    
    Other current liabilities
    
    
    4,453
    
    
    
    3,506Total Current Liabilities
    
    
    97,777
    
    
    
    59,661Long-Term Liabilities:Convertible senior notes
    
    
    251,573
    
    
    
    247,974Capital lease obligations
    
    
    21,154
    
    
    
    21,412Other liabilities
    
    
    22,754
    
    
    
    9,701Total Long-Term Liabilities
    
    
    295,481
    
    
    
    279,087Commitments and Contingencies (Note 10)Stockholders EquityCommon stock, $0.01 par value, 100 million shares authorized,
45,755,412 and
45,754,652 issued at
September 30, 2009
and June 30,2009,
respectively
    
    
    458
    
    
    
    458Additional paid-in capital
    
    
    1,056,756
    
    
    
    1,055,705Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (328,384
    )
    
    
    (316,618
    )Accumulated other comprehensive loss, net
    
    
    (1,797
    )
    
    
    (1,496
    )Total ECD stockholders equity
    
    
    726,333
    
    
    
    737,349Accumulated deficit  noncontrolling interest
    
    
    (74
    )
    
    
    Total Stockholders Equity
    
    
    726,259
    
    
    
    737,349Total Liabilities and Stockholders Equity
    
    $
    1,119,517
    
    
    $
    1,076,097
 
 (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)
 Three Months EndedSeptember 30,2009
    
    
    2008(1)Cash flows from operating activities:Net (loss) income
    
    $
    (11,840
    )
    
    $
    11,817Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Depreciation and amortization
    
    
    8,892
    
    
    
    6,981Amortization of debt discount and deferred financing fees
    
    
    3,908
    
    
    
    3,601Share-based compensation
    
    
    1,051
    
    
    
    1,478Other-than-temporary impairment of investment
    
    
    
    
    
    
    964Loss on sale of property, plant and equipment
    
    
    974
    
    
    
    284Other
    
    
    
    
    
    
    46Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    8,924
    
    
    
    (9,784
    )Inventories
    
    
    (29,880
    )
    
    
    (3,127
    )Other assets
    
    
    446
    
    
    
    (1,956
    )Accounts payable and accrued expenses
    
    
    (7,442
    )
    
    
    13,744Other liabilities
    
    
    (954
    )
    
    
    2,484Net cash (used in) provided by operating activities
    
    
    (25,921
    )
    
    
    26,532Cash flows from investing activities:Purchases of property, plant and equipment, net
    
    
    (12,157
    )
    
    
    (46,909
    )Acquisition of business, net of cash acquired
    
    
    (2,088
    )
    
    
    Investment in joint ventures
    
    
    
    
    
    
    (1,000
    )Proceeds from maturities of investments
    
    
    34,069
    
    
    
    2,700Proceeds from sale of investments
    
    
    9,771
    
    
    
    Net cash provided by (used in) investing activities
    
    
    29,595
    
    
    
    (45,209
    )Cash flows from financing activities:Principal payments under capitalized lease obligations
    
    
    (174
    )
    
    
    (256
    )Repayment of revolving credit facility
    
    
    (5,705
    )
    
    
    Proceeds from sale of stock and share-based compensation, net of
expenses
    
    
    
    
    
    
    1,191Net cash (used in) provided by financing activities
    
    
    (5,879
    )
    
    
    935Effect of exchange rate changes on cash and cash equivalents
    
    
    233
    
    
    
    268Net decrease in cash and cash equivalents
    
    
    (1,972
    )
    
    
    (17,474
    )Cash and cash equivalents at beginning of period
    
    
    56,379
    
    
    
    484,492Cash and cash equivalents at end of period
    
    $
    54,407
    
    
    $
    467,018
 
 (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
   Revenue Recognition  Installed Solar Systems and Traditional Roofing
   Restricted Cash
  Warranty Reserve  Installed Solar Systems
  6




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Recent Accounting Pronouncements Not Yet Adopted
 Consolidations
 Accounting for
Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements  a Consensus of the FASB Emerging Issues Task Force
 7




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value Measurements and Disclosures (Topic
820)  Measuring Liabilities at Fair Value
 Recently Adopted Accounting Pronouncements
 Investments  Equity
Method and Joint Ventures
 Contracts in
Entitys Own Equity Derivatives
and Hedging.
 Earnings Per Share
 Business Combinations
 8




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Collaborative
Arrangements
 Consolidation,
 Debt with
Conversion and Other Options
 9




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Statement of Operations for theThree Months Ended September 30, 2008As PreviouslyReported
    
    ASC 470-20
    
    As Reported(in thousands)Cost of product and project sales
    
    $
    60,967
    
    
    $
    12
    
    
    $
    60,979Total expenses
    
    
    81,993
    
    
    
    12
    
    
    
    82,005Operating income
    
    
    13,772
    
    
    
    (12
    )
    
    
    13,760Interest expense
    
    
    (2,732
    )
    
    
    (832
    )
    
    
    (3,564
    )Total other (expense) income
    
    
    (1,054
    )
    
    
    (832
    )
    
    
    (1,886
    )Net income before income taxes
    
    
    12,718
    
    
    
    (844
    )
    
    
    11,874Net income
    
    
    12,661
    
    
    
    (844
    )
    
    
    11,817Earnings (loss) per share
    
    
    0.30
    
    
    
    (0.02
    )
    
    
    0.28Diluted earnings (loss) per share
    
    
    0.29
    
    
    
    (0.02
    )
    
    
    0.27Consolidated Balance Sheets as of June 30, 2009As PreviouslyReported(1)
    
    ASC 470-20
    
    As Reported(in thousands)Property, plant and equipment, net
    
    $
    605,742
    
    
    $
    8,588
    
    
    $
    614,330Other assets
    
    
    13,330
    
    
    
    (1,669
    )
    
    
    11,661Total assets
    
    
    1,069,178
    
    
    
    6,919
    
    
    
    1,076,097Accounts payable and accrued expenses
    
    
    50,264
    
    
    
    (26
    )
    
    
    50,238Total current liabilities
    
    
    59,687
    
    
    
    (26
    )
    
    
    59,661Convertible senior notes
    
    
    316,250
    
    
    
    (68,276
    )
    
    
    247,974Total long-term liabilities
    
    
    347,363
    
    
    
    (68,276
    )
    
    
    279,087Additional paid-in capital
    
    
    976,575
    
    
    
    79,130
    
    
    
    1,055,705Accumulated deficit
    
    
    (312,709
    )
    
    
    (3,909
    )
    
    
    (316,618
    )Total stockholders equity
    
    
    662,128
    
    
    
    75,221
    
    
    
    737,349Total liabilities and stockholders equity
    
    
    1,069,178
    
    
    
    6,919
    
    
    
    1,076,097
 
 (1)
    
    The balance as previously reported for Accounts payable and accrued expenses above
also includes (in thousands) Salaries, wages and amounts withheld from employees of $3,243,
Amounts due under incentive plans of $694 and excludes Warranty liability of $5,917. 10




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Consolidated Statement of Cash Flows for theThree Months Ended September 30, 2008As PreviouslyReported
    
    ASC 470-20
    
    As Reported(in thousands)Net income
    
    $
    12,661
    
    
    $
    (844
    )
    
    $
    11,817Depreciation and amortization
    
    
    6,969
    
    
    
    12
    
    
    
    6,981Amortization of debt discount and
deferred financing fees
    
    
    
    
    
    
    3,601
    
    
    
    3,601Other assets
    
    
    813
    
    
    
    (2,769
    )
    
    
    (1,956
    )Note 2  Earnings (Loss) Per ShareBasic earnings (loss) per common share are computed by dividing the net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted earnings (loss) per
share reflect the potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock or resulted in the issuance of common
stock that then shared in the net income (loss) of the Company. The following table reconciles the
numerator and denominator to calculate basic and diluted earnings (loss) per share:Net Income
    
    
    
    
    
    Earnings(Loss)
    
    Shares
    
    (Loss) Per(Numerator)
    
    (Denominator)
    
    Share(in thousands, except per share amounts)Three Months Ended September 30, 2009Basic and diluted loss per share
    
    $
    (11,766
    )
    
    
    42,299
    
    
    $
    (0.28
    )Three Months Ended September 30, 2008Basic earnings per share
    
    $
    11,817
    
    
    
    42,222
    
    
    $
    0.28Effect of dilutive securities:Stock warrants
    
    
    
    
    
    
    261
    
    
    
    Stock options
    
    
    
    
    
    
    569
    
    
    
    (0.01
    )Diluted earnings per share
    
    $
    11,817
    
    
    
    43,052
    
    
    $
    0.27
   11




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Three Months EndedSeptember 30,2009
    
    
    2008(in thousands)Share-based payment arrangements
    
    
    1,311
    
    
    
    72
 Note 3  Supplemental Cash Flow Information
  Three Months EndedSeptember 30,2009
    
    
    2008(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    680
    
    
    $
    598Cash paid for income taxes
    
    
    6
    
    
    
    Decrease in accounts payable for capital expenditures
    
    
    3,845
    
    
    
    Non-cash transactions:Capital lease obligations incurred to finance capital equipment
    
    
    50
    
    
    
    
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4 - Acquisition
   Purchase Price Allocation
  (in thousands)Cash
    
    $
    9,180Accounts receivable
    
    
    9,962Inventory
    
    
    24,031Other current assets
    
    
    2,372Long-term receivables
    
    
    11,769Property, plant and equipment
    
    
    1,951Other long term assets
    
    
    2,010Identifiable intangible assets
    
    
    2,780Goodwill
    
    
    30,523Warranty liability
    
    
    (33,693
    )Current liabilities
    
    
    (27,293
    )Long-term liabilities
    
    
    (21,913
    )Total net assets acquired
    
    $
    11,679
  13




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedSeptember 30,2009
    
    
    2008Pro Forma Information
    
    (in thousands)Revenues
    
    $
    47,838
    
    
    $
    104,750Net (loss) income
    
    
    (15,433
    )
    
    
    3,781(Loss) earnings per share
    
    
    (0.36
    )
    
    
    0.09Diluted (loss) earnings per share
    
    
    (0.36
    )
    
    
    0.09
  Goodwill
  Intangibles
   September 30, 2009AccumulatedGross Value
    
    
    Amortization
    
    
    Net Value
    
    
    Useful life(in thousands)Customer contracts
    
    $
    870
    
    
    $
    (72
    )
    
    $
    798
    
    
    1.5 yearsProprietary processes
    
    
    500
    
    
    
    (22
    )
    
    
    478
    
    
    2 - 9 yearsOrder backlog
    
    
    290
    
    
    
    (26
    )
    
    
    264
    
    
    1.4 yearsTotal
    
    $
    1,660
    
    
    $
    (120
    )
    
    $
    1,540
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Fiscal Year
    
    (in thousands)2010
    
    $
    7222011
    
    
    6512012
    
    
    402013
    
    
    212014
    
    
    21
 Note 5  Investments
 Short-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)September 30, 2009Corporate bonds
    
    $
    7,250
    
    
    $
    
    
    
    $
    (1,015
    )
    
    $
    6,235U.S. Government securities
    
    
    160,642
    
    
    
    137
    
    
    
    (1
    )
    
    
    160,778Auction rate certificates
    
    
    34,100
    
    
    
    
    
    
    
    (4,086
    )
    
    
    30,014Auction rate securities rights
    
    
    
    
    
    
    3,988
    
    
    
    
    
    
    
    3,988$
    201,992
    
    
    $
    4,125
    
    
    $
    (5,102
    )
    
    $
    201,015June 30, 2009Corporate bonds
    
    $
    23,047
    
    
    $
    
    
    
    $
    (1,037
    )
    
    $
    22,010U.S. Government securities
    
    
    188,902
    
    
    
    148
    
    
    
    (10
    )
    
    
    189,040Auction rate certificates
    
    
    34,250
    
    
    
    
    
    
    
    (4,056
    )
    
    
    30,194Auction rate securities rights
    
    
    
    
    
    
    3,938
    
    
    
    
    
    
    
    3,938$
    246,199
    
    
    $
    4,086
    
    
    $
    (5,103
    )
    
    $
    245,182
  September 30, 2009
    
    
    June 30, 2009Amortized Cost
    
    
    Market value
    
    
    Amortized Cost
    
    
    Market Value(in thousands)Due in less than one year
    
    $
    167,892
    
    
    $
    171,001
    
    
    $
    211,949
    
    
    $
    211,050Due after one year
through five years
    
    
    34,100
    
    
    
    30,014
    
    
    
    34,250
    
    
    
    34,132$
    201,992
    
    
    $
    201,015
    
    
    $
    246,199
    
    
    $
    245,182
  15




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        Note 6 - Sales-Type Lease Receivables
  16




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30, 2009(in thousands)Total minimum lease payments receivable
    
    $
    18,699Less: Unearned income
    
    
    (6,086
    )Net investment in sales-type leases
    
    $
    12,613
  Fiscal Year
    
    (in thousands)2010
    
    $
    6632011
    
    
    9942012
    
    
    1,0132013
    
    
    1,0342014
    
    
    1,054Thereafter
    
    
    13,941$
    18,699
 Note 7 - Inventories
  September 30,
    
    
    June 30,2009
    
    
    2009(in thousands)Finished products
    
    $
    96,249
    
    
    $
    41,167Work in process
    
    
    18,668
    
    
    
    19,247Raw materials
    
    
    13,580
    
    
    
    13,852$
    128,497
    
    
    $
    74,266
  17




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8   Liabilities
 Warranty Liability
  September 30,
    
    
    June 30,2009
    
    
    2009(in thousands)Liability at beginning of the period
    
    $
    5,917
    
    
    $
    1,499Liability assumed in SIT acquisition
    
    
    33,693
    
    
    
    Warranty expense
    
    
    1,077
    
    
    
    5,680Warranty claims
    
    
    (388
    )
    
    
    (1,262
    )Liability at end of the period
    
    $
    40,299
    
    
    $
    5,917
 Other Long-Term Liabilities
  September 30,
    
    
    June 30,2009
    
    
    2009(in thousands)Structured financing
    
    $
    13,510
    
    
    $
    Long-term retirement
    
    
    1,842
    
    
    
    1,894Customer deposits
    
    
    1,360
    
    
    
    1,940Deferred patent license fees
    
    
    4,048
    
    
    
    4,286Deferred revenue and royalties
    
    
    321
    
    
    
    321Rent payable
    
    
    944
    
    
    
    884Other
    
    
    729
    
    
    
    376$
    22,754
    
    
    $
    9,701
 Note 9 - Long-Term Debt
 Convertible Senior Notes
   18




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    September 30,
    
    
    June 30,2009
    
    
    2009(in thousands)Outstanding principal
    
    $
    316,250
    
    
    $
    316,250Less: unamortized discount
    
    
    64,677
    
    
    
    68,276Net carrying amount
    
    $
    251,573
    
    
    $
    247,974The gross interest expense recognized is as follows:September 30,
    
    
    September 30,2009
    
    
    2008(in thousands)Contractual interest
    
    $
    2,372
    
    
    $
    2,346Amortization of the discount
    
    
    3,599
    
    
    
    3,389Amortization of debt issue costs
    
    
    309
    
    
    
    212Gross
interest expense recognized
    
    $
    6,280
    
    
    $
    5,947
 Structured Financing
  Convertible Notes
  19




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Commitments and Contingencies
  Note 11  Restructuring Charges
   Employee-RelatedExpenses(in thousands)Balance June 30, 2009
    
    $
    840Liability assumed in SIT acquisition
    
    
    122Charges
    
    
    525Utilization or payment
    
    
    (474
    )Balance September 30, 2009
    
    $
    1,013
 Note 12  Share-Based Compensation
  Stock Options
  20




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Estimated fair value
    
    $
    10.02AssumptionsDividend Yield
    
    
    0
    %Volatility %
    
    
    73.53
    %Risk-Free Interest Rate
    
    
    3.14
    %Expected Life
    
    7.33 years
  Aggregate IntrinsicWeighted-Average
    
    
    Value(1)Shares
    
    
    Exercise Price
    
    
    (in thousands)Outstanding at June 30, 2009
    
    
    894,504
    
    
    $
    26.33
    
    
    $
    387Granted
    
    
    16,500
    
    
    
    14.05Exercised
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (12,100
    )
    
    
    42.33Forfeited
    
    
    (397
    )
    
    
    76.74Outstanding at September 30, 2009
    
    
    898,507
    
    
    
    25.87
    
    
    
    112
 
 (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. 21




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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 September
30, 2009
    
    
    727,320
    
    
    $
    22.62
    
    
    $
    112
    
    
    
    3.58Exercisable at June 30, 2009
    
    
    709,074
    
    
    
    21.85
    
    
    
    376
    
    
    
    3.58
 
 (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 Units RSUs
  Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueNonvested at June 30, 2009
    
    
    204,468
    
    
    $
    52.63Awarded
    
    
    13,000
    
    
    
    11.71Vested
    
    
    
    
    
    
    Forfeited
    
    
    (2,482
    )
    
    
    41.09Nonvested at September 30, 2009
    
    
    214,986
    
    
    
    50.32
  Offer to Exchange RSUs
  22




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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
     23




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(in thousands)Auction rate certificates
    
    
    
    
    
    
    
    
    
    $
    30,014
    
    
    $
    30,014Auction rate securities rights
    
    
    
    
    
    
    
    
    
    
    3,988
    
    
    
    3,988Investments in corporate bonds
    
    $
    6,235
    
    
    
    
    
    
    
    
    
    
    
    6,235Investments in U.S. government securities
    
    
    160,778
    
    
    
    
    
    
    
    
    
    
    
    160,778Investments in money market funds
    
    
    41,140
    
    
    
    
    
    
    
    
    
    
    
    41,140
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(in thousands)Auction rate certificates
    
    
    
    
    
    
    
    
    
    $
    30,194
    
    
    $
    30,194Auction rate securities rights
    
    
    
    
    
    
    
    
    
    
    3,938
    
    
    
    3,938Investments in corporate bonds
    
    $
    22,010
    
    
    
    
    
    
    
    
    
    
    
    22,010Investments in U.S. government securities
    
    
    189,040
    
    
    
    
    
    
    
    
    
    
    
    189,040Investments in money market funds
    
    
    45,411
    
    
    
    
    
    
    
    
    
    
    
    45,411
  Auction Rate
    
    
    Auction RateCertificates
    
    
    Securities Rights(in thousands)Balance at June 30, 2009
    
    $
    30,194
    
    
    $
    3,938Redeemed by UBS
    
    
    (150
    )
    
    
    Net (loss) gain included in investment
    
    
    (30
    )
    
    
    50Balance at September 30, 2009
    
    $
    30,014
    
    
    $
    3,988
 Note 14  Income Taxes
   24




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 15  Tax Benefits Preservation Plan
    Note 16  Business Segments
  25




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   United Solar Ovonic
    
    
    Ovonic Materials
    
    
    Corporate and Other
    
    
    Total(in thousands)Three Months Ended
September 30, 2009Revenues
    
    $
    39,520
    
    
    $
    3,405
    
    
    $
    19
    
    
    $
    42,944Operating income (loss)
    
    
    (1,714
    )
    
    
    1,605
    
    
    
    (8,169
    )
    
    
    (8,278
    )Three Months Ended
September 30, 2008Revenues
    
    
    91,811
    
    
    
    3,879
    
    
    
    75
    
    
    
    95,765Operating income (loss)
    
    
    20,774
    
    
    
    254
    
    
    
    (7,268
    )
    
    
    13,760
 Note 17  Litigation
   26




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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
  27




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Results of Operations
 United Solar Ovonic Segment
 Three Months EndedSeptember 30,2009
    
    
    2008(in thousands)REVENUESProduct and project sales
    
    $
    36,103
    
    
    $
    89,450Revenues from product development agreements
    
    
    3,417
    
    
    
    2,361TOTAL REVENUES
    
    
    39,520
    
    
    
    91,811EXPENSESCost of product and project sales
    
    
    27,321
    
    
    
    59,601Cost of revenues from product development agreements
    
    
    2,880
    
    
    
    1,555Product development and research
    
    
    1,526
    
    
    
    984Preproduction costs
    
    
    10
    
    
    
    1,977Selling, general and administrative
    
    
    7,862
    
    
    
    6,636Loss on disposal of property, plant and equipment
    
    
    974
    
    
    
    284Restructuring charges
    
    
    661
    
    
    
    TOTAL EXPENSES
    
    
    41,234
    
    
    
    71,037OPERATING (LOSS) INCOME
    
    $
    (1,714
    )
    
    $
    20,774
     28




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Ovonic Materials Segment
 Three Months EndedSeptember 30,2009
    
    
    2008(in thousands)REVENUESProduct sales
    
    $
    607
    
    
    $
    1,351Royalties
    
    
    1,959
    
    
    
    1,345Revenues from product development agreements
    
    
    574
    
    
    
    910License and other revenues
    
    
    265
    
    
    
    273TOTAL REVENUES
    
    
    3,405
    
    
    
    3,879EXPENSESCost of product sales
    
    
    512
    
    
    
    1,437Cost of revenues from product development agreements
    
    
    400
    
    
    
    627Product development and research
    
    
    720
    
    
    
    1,206Selling, general and administrative expenses
    
    
    168
    
    
    
    355TOTAL EXPENSES
    
    
    1,800
    
    
    
    3,625OPERATING INCOME
    
    $
    1,605
    
    
    $
    254
    29




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Corporate and Other
  Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
    30




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Cash Flows
    Short-term Borrowings
  Convertible Senior Notes
  31




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Forward-Looking Statements
    
 Item 3 : Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk
  32




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Foreign Exchange Risk
    33




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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 : Submission of Matters to a Vote of Security Holders
  
 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: November 9, 2009
    By:
    /S/ Harry W. ZikeHarry W. ZikeVice President and Chief Financial Officer
(Principal Financial and Accounting Officer)Dated: November 9, 2009
    By:
    /S/ Mark D. MorelliMark D. MorelliPresident and Chief Executive Officer 36