##### 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, 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
    
    (I.R.S. Employer Identification No.)organization)2956 Waterview Drive, Rochester Hills, Michigan
    
    48309(Address of principal executive offices)
    
    (Zip Code)
 (248) 293-0440
 Former name, former address and former fiscal year, if changed since last report
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    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 MARCH 31, 2010
 PART I  FINANCIAL INFORMATIONItem 1: Financial Statements
    
    
    2Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4: Controls and Procedures
    
    
    43PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    44Item 1A: Risk Factors
    
    
    44Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3: Defaults Upon Senior Securities
    
    
    44Item 4: Submission of Matters to a Vote of Security Holders
    
    
    45Item 5: Other Information
    
    
    45Item 6: Exhibits
    
    
    45SIGNATURES
    
    
    46EX-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 31,2010
    
    
    2009(1)
    
    
    2010
    
    
    2009(1)RevenuesProduct and project sales
    
    $
    65,076
    
    
    $
    60,190
    
    
    $
    148,981
    
    
    $
    248,978Royalties
    
    
    1,919
    
    
    
    1,477
    
    
    
    6,132
    
    
    
    4,365Revenues from product development agreements
    
    
    2,580
    
    
    
    3,967
    
    
    
    9,578
    
    
    
    10,316License and other revenues
    
    
    2,831
    
    
    
    372
    
    
    
    3,571
    
    
    
    1,220Total Revenues
    
    
    72,406
    
    
    
    66,006
    
    
    
    168,262
    
    
    
    264,879ExpensesCost of product and project sales
    
    
    68,982
    
    
    
    42,719
    
    
    
    155,196
    
    
    
    167,347Cost of revenues from product development agreements
    
    
    1,949
    
    
    
    2,451
    
    
    
    7,624
    
    
    
    6,974Product development and research
    
    
    3,442
    
    
    
    2,424
    
    
    
    8,817
    
    
    
    6,568Preproduction costs
    
    
    72
    
    
    
    1,325
    
    
    
    82
    
    
    
    5,133Selling, general and administrative
    
    
    16,730
    
    
    
    12,314
    
    
    
    50,152
    
    
    
    43,742Net loss on disposal of property, plant and equipment
    
    
    31
    
    
    
    677
    
    
    
    1,296
    
    
    
    1,086Impairment loss
    
    
    357,975
    
    
    
    
    
    
    
    359,228
    
    
    
    Restructuring charges
    
    
    338
    
    
    
    139
    
    
    
    3,460
    
    
    
    574Total Expenses
    
    
    449,519
    
    
    
    62,049
    
    
    
    585,855
    
    
    
    231,424Operating (Loss) Income
    
    
    (377,113
    )
    
    
    3,957
    
    
    
    (417,593
    )
    
    
    33,455Other Income (Expense)Interest income
    
    
    404
    
    
    
    712
    
    
    
    960
    
    
    
    4,783Interest expense
    
    
    (6,970
    )
    
    
    (2,310
    )
    
    
    (20,770
    )
    
    
    (9,904
    )Distribution from joint venture
    
    
    
    
    
    
    
    
    
    
    1,309
    
    
    
    Other nonoperating expense, net
    
    
    (1,257
    )
    
    
    (552
    )
    
    
    (1,333
    )
    
    
    (1,392
    )Total Other Income (Expense)
    
    
    (7,823
    )
    
    
    (2,150
    )
    
    
    (19,834
    )
    
    
    (6,513
    )(Loss) Income before Income Taxes and Equity Income (Loss)
    
    
    (384,936
    )
    
    
    1,807
    
    
    
    (437,427
    )
    
    
    26,942Income tax (benefit) expense
    
    
    (55
    )
    
    
    549
    
    
    
    (1,955
    )
    
    
    822(Loss) Income before Equity Income (Loss)
    
    
    (384,881
    )
    
    
    1,258
    
    
    
    (435,472
    )
    
    
    26,120Equity income (loss)
    
    
    148
    
    
    
    
    
    
    
    (185
    )
    
    
    Net (Loss) Income
    
    
    (384,733
    )
    
    
    1,258
    
    
    
    (435,657
    )
    
    
    26,120Net Income (Loss) Attributable to Noncontrolling Interest
    
    
    113
    
    
    
    
    
    
    
    (40
    )
    
    
    Net (Loss) Income Attributable to ECD Shareholders
    
    $
    (384,846
    )
    
    $
    1,258
    
    
    $
    (435,617
    )
    
    $
    26,120(Loss) Earnings Per Share, Attributable to ECD Shareholders
    
    $
    (9.10
    )
    
    $
    0.03
    
    
    $
    (10.30
    )
    
    $
    0.62Diluted (Loss) Earnings Per Share, Attributable to ECD
Shareholders
    
    $
    (9.10
    )
    
    $
    0.03
    
    
    $
    (10.30
    )
    
    $
    0.61
 
 (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 30,2010
    
    
    2009(1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    58,244
    
    
    $
    56,379Short-term investments
    
    
    127,242
    
    
    
    245,182Accounts receivable, net
    
    
    67,472
    
    
    
    69,382Inventories, net
    
    
    94,416
    
    
    
    74,266Other current assets
    
    
    21,575
    
    
    
    4,897Total Current Assets
    
    
    368,949
    
    
    
    450,106Property, Plant and Equipment, net
    
    
    297,237
    
    
    
    614,330Other Assets:Restricted cash
    
    
    8,073
    
    
    
    Lease receivable, net
    
    
    11,316
    
    
    
    Other assets
    
    
    11,877
    
    
    
    11,661Total Other Assets
    
    
    31,266
    
    
    
    11,661Total Assets
    
    $
    697,452
    
    
    $
    1,076,097LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    43,476
    
    
    $
    50,238Current portion of warranty liability
    
    
    13,432
    
    
    
    5,917Other current liabilities
    
    
    6,122
    
    
    
    3,506Total Current Liabilities
    
    
    63,030
    
    
    
    59,661Long-Term Liabilities:Convertible senior notes
    
    
    258,944
    
    
    
    247,974Capital lease obligations
    
    
    20,596
    
    
    
    21,412Warranty liability
    
    
    28,633
    
    
    
    Other liabilities
    
    
    21,197
    
    
    
    9,701Total Long-Term Liabilities
    
    
    329,370
    
    
    
    279,087Commitments and Contingencies (Note 10)Stockholders EquityCommon stock, $0.01 par value,
100 million shares authorized,
45,774,386 and
45,754,652 issued at
March 31, 2010 and
June 30,2009,
respectively
    
    
    458
    
    
    
    458Additional paid-in capital
    
    
    1,059,145
    
    
    
    1,055,705Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (752,235
    )
    
    
    (316,618
    )Accumulated other comprehensive loss, net
    
    
    (1,576
    )
    
    
    (1,496
    )Total ECD stockholders equity
    
    
    305,092
    
    
    
    737,349Accumulated deficit  noncontrolling interest
    
    
    (40
    )
    
    
    Total Stockholders Equity
    
    
    305,052
    
    
    
    737,349Total Liabilities and Stockholders Equity
    
    $
    697,452
    
    
    $
    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)
 Nine Months EndedMarch 31,2010
    
    
    2009(1)Cash flows from operating activities:Net (loss) income
    
    $
    (435,657
    )
    
    $
    26,120Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Impairment loss
    
    
    359,228
    
    
    
    Depreciation and amortization
    
    
    27,302
    
    
    
    23,695Amortization of debt discount and deferred financing fees
    
    
    11,927
    
    
    
    10,958Share-based compensation
    
    
    3,440
    
    
    
    4,885Other-than-temporary impairment of investment
    
    
    
    
    
    
    969Net loss on disposal of property, plant and equipment
    
    
    1,296
    
    
    
    1,086Equity loss
    
    
    185
    
    
    
    Other
    
    
    
    
    
    
    6,482Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    (3,417
    )
    
    
    (13,084
    )Inventories
    
    
    3,328
    
    
    
    (35,058
    )Other assets
    
    
    (14,285
    )
    
    
    (9,040
    )Accounts payable and accrued expenses
    
    
    (17,492
    )
    
    
    17,584Other liabilities
    
    
    (579
    )
    
    
    (876
    )Net cash (used in) provided by operating activities
    
    
    (64,724
    )
    
    
    33,721Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (26,904
    )
    
    
    (193,508
    )Acquisition of business, net of cash acquired
    
    
    (2,088
    )
    
    
    Purchases of investments
    
    
    (68,089
    )
    
    
    (68,357
    )Proceeds from maturities of investments
    
    
    174,644
    
    
    
    2,700Proceeds from sale of investments
    
    
    10,120
    
    
    
    Increase in restricted cash
    
    
    (6,510
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    81,173
    
    
    
    (259,165
    )Cash flows from financing activities:Principal payments under capitalized lease obligations and other debt
    
    
    (1,131
    )
    
    
    (787
    )Repayment of revolving credit facility
    
    
    (5,705
    )
    
    
    Repayment of convertible notes
    
    
    (8,000
    )
    
    
    Proceeds from sale of stock and share-based compensation, net of
expenses
    
    
    
    
    
    
    1,966Net cash (used in) provided by financing activities
    
    
    (14,836
    )
    
    
    1,179Effect of exchange rate changes on cash and cash equivalents
    
    
    252
    
    
    
    (51
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,865
    
    
    
    (224,316
    )Cash and cash equivalents at beginning of period
    
    
    56,379
    
    
    
    484,492Cash and cash equivalents at end of period
    
    $
    58,244
    
    
    $
    260,176
 
 (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
   Revenue Recognition  Installed Solar Systems and Traditional Roofing
   Restricted Cash  SIT
  6




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Warranty Reserve  Installed Solar Systems
  Recent Accounting Pronouncements Not Yet Adopted
 Consolidations
 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
 Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements  a Consensus of the FASB Emerging Issues Task Force
 Recently Adopted Accounting Pronouncements
 Subsequent
Events (Topic 855)  Amendments to Certain Recognition and Disclosure Requirements
 Fair Value
Measurements and Disclosures (Topic 820)  Improving Disclosures about Fair Value
 8




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value
Measurements and Disclosures (Topic 820)  Measuring Liabilities at Fair Value
 Investments  Equity
Method and Joint Ventures
 Contracts in
Entitys Own Equity Derivatives
and Hedging.
 Earnings Per Share
 Business Combinations
 9




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Collaborative
Arrangements
 Consolidation,
 Debt with
Conversion and Other Options
 10




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Statement of Operations for theThree Months Ended
    
    
    Nine Months EndedMarch 31, 2009
    
    
    March 31, 2009As Previously
    
    
    
    
    
    
    
    
    
    
    As PreviouslyReported
    
    
    ASC 470-20
    
    
    As Reported
    
    
    Reported
    
    
    ASC 470-20
    
    
    As Reported(in thousands)Cost of product and project sales
    
    $
    42,693
    
    
    $
    26
    
    
    $
    42,719
    
    
    $
    167,284
    
    
    $
    63
    
    
    $
    167,347Total expenses
    
    
    62,023
    
    
    
    26
    
    
    
    62,049
    
    
    
    231,361
    
    
    
    63
    
    
    
    231,424Operating income
    
    
    3,983
    
    
    
    (26
    )
    
    
    3,957
    
    
    
    33,518
    
    
    
    (63
    )
    
    
    33,455Interest expense
    
    
    (2,268
    )
    
    
    (42
    )
    
    
    (2,310
    )
    
    
    (7,860
    )
    
    
    (2,044
    )
    
    
    (9,904
    )Total other expense
    
    
    (2,108
    )
    
    
    (42
    )
    
    
    (2,150
    )
    
    
    (4,469
    )
    
    
    (2,044
    )
    
    
    (6,513
    )Net income before income taxes
    
    
    1,875
    
    
    
    (68
    )
    
    
    1,807
    
    
    
    29,049
    
    
    
    (2,107
    )
    
    
    26,942Net income
    
    
    1,326
    
    
    
    (68
    )
    
    
    1,258
    
    
    
    28,227
    
    
    
    (2,107
    )
    
    
    26,120Earnings per share
    
    
    0.03
    
    
    
    
    
    
    
    0.03
    
    
    
    0.67
    
    
    
    (0.05
    )
    
    
    0.62Diluted earnings per share
    
    
    0.03
    
    
    
    
    
    
    
    0.03
    
    
    
    0.66
    
    
    
    (0.05
    )
    
    
    0.61
 Consolidated 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. 11




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Consolidated Statement of Cash Flows for theNine Months Ended March 31, 2009AsPreviouslyReported
    
    ASC 470-20
    
    As Reported(in thousands)Net income
    
    $
    28,227
    
    
    $
    (2,107
    )
    
    $
    26,120Depreciation and amortization
    
    
    23,632
    
    
    
    63
    
    
    
    23,695Amortization of debt
discount and deferred
financing fees
    
    
    
    
    
    
    10,958
    
    
    
    10,958Other assets
    
    
    (125
    )
    
    
    (8,915
    )
    
    
    (9,040
    )
 Note 2  Earnings (Loss) Per Share
  Three Months Ended March 31,2010
    
    
    2009Net Income
    
    
    
    
    
    
    
    
    
    
    Net Income(Loss)
    
    
    
    
    
    
    
    
    
    
    (Loss)Attributable
    
    
    
    
    
    
    
    
    
    
    Attributableto ECD
    
    
    
    
    
    
    Per
    
    
    to ECD
    
    
    
    
    
    
    PerShareholders
    
    
    Shares
    
    
    Share
    
    
    Shareholders
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    Amounts
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Amounts(in thousands, except per share amounts)Basic
    
    $
    (384,846
    )
    
    
    42,307
    
    
    $
    (9.10
    )
    
    $
    1,258
    
    
    
    42,303
    
    
    $
    0.03Effect of dilutive securities:Stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    Diluted
    
    $
    (384,846
    )
    
    
    42,307
    
    
    $
    (9.10
    )
    
    $
    1,258
    
    
    
    42,392
    
    
    $
    0.03
 12




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Nine Months Ended March 31,2010
    
    
    2009Net Income
    
    
    
    
    
    
    
    
    
    
    Net Income(Loss)
    
    
    
    
    
    
    
    
    
    
    (Loss)Attributable
    
    
    
    
    
    
    
    
    
    
    Attributableto ECD
    
    
    
    
    
    
    Per
    
    
    to ECD
    
    
    
    
    
    
    PerShareholders
    
    
    Shares
    
    
    Share
    
    
    Shareholders
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    Amounts
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Amounts(in thousands, except per share amounts)Basic
    
    $
    (435,617
    )
    
    
    42,307
    
    
    $
    (10.30
    )
    
    $
    26,120
    
    
    
    42,266
    
    
    $
    0.62Effect of dilutive
securities:Stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    381
    
    
    
    (0.01
    )Diluted
    
    $
    (435,617
    )
    
    
    42,307
    
    
    $
    (10.30
    )
    
    $
    26,120
    
    
    
    42,821
    
    
    $
    0.61
    13




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Share-based payment arrangements
    
    
    1,299
    
    
    
    405
    
    
    
    1,304
    
    
    
    113
 Note 3  Supplemental Cash Flow Information
  Nine Months Ended 
March 31,2010
    
    2009(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    6,678
    
    
    $
    Cash paid for income taxes
    
    
    231
    
    
    
    (Decrease) increase in accounts payable for capital expenditures
    
    
    (3,120
    )
    
    
    23,135Non-cash transactions:Auction rate securities rights
    
    
    
    
    
    
    3,964
 Note 4  Acquisition
   14




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##### Table of Contents



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
   15




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2010
    
    2009
    
    2010
    
    2009(in thousands)Actual AmountsRevenues
    
    $
    12,186
    
    
    
    N/A
    
    
    $
    27,754
    
    
    
    N/ANet loss attributable to ECD shareholders
    
    
    (39,741
    )
    
    
    N/A
    
    
    
    (54,010
    )
    
    
    N/APro Forma InformationRevenues
    
    $
    72,406
    
    
    $
    61,480
    
    
    $
    173,156
    
    
    $
    294,668Net (loss) income attributable to ECD
shareholders
    
    
    (384,846
    )
    
    
    (5,059
    )
    
    
    (439,284
    )
    
    
    7,984(Loss) earnings per share
    
    
    (9.10
    )
    
    
    (0.12
    )
    
    
    (10.38
    )
    
    
    0.19Diluted (loss) earnings per share
    
    
    (9.10
    )
    
    
    (0.12
    )
    
    
    (10.38
    )
    
    
    0.19
  Goodwill
  (in thousands)Balance at September 30, 2009
    
    $
    30,523SIT acquisition adjustment
    
    
    4,776Foreign currency impact
    
    
    54Impairment loss
    
    
    (35,353
    )Balance at March 31, 2010
    
    $
    
  Intangible Assets
  16




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2010Gross
    
    
    Accumulated
    
    
    ImpairmentValue
    
    
    Amortization
    
    
    Loss
    
    
    Net Value(in thousands)Customer contracts
    
    $
    842
    
    
    $
    (379
    )
    
    $
    (463
    )
    
    $
    Proprietary processes
    
    
    190
    
    
    
    (13
    )
    
    
    (177
    )
    
    
    Order backlog
    
    
    276
    
    
    
    (129
    )
    
    
    (147
    )
    
    
    Total
    
    $
    1,308
    
    
    $
    (521
    )
    
    $
    (787
    )
    
    $
    
   Note 5  Investments
 Short-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)March 31, 2010Corporate bonds
    
    $
    58,615
    
    
    $
    
    
    
    $
    (1,140
    )
    
    $
    57,475U.S. Government securities
    
    
    36,118
    
    
    
    8
    
    
    

    (21
    )

    
    
    36,105Auction rate certificates
    
    
    33,750
    
    
    
    
    
    
    
    (4,141
    )
    
    
    29,609Auction rate securities rights
    
    
    
    
    
    
    4,053
    
    
    
    
    
    
    
    4,053$
    128,483
    
    
    $
    4,061
    
    
    $
    (5,302
    )
    
    $
    127,242June 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
 17




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2010
    
    
    June 30, 2009Amortized Cost
    
    
    Market value
    
    
    Amortized Cost
    
    
    Market Value(in thousands)Due in less than one year
    
    $
    39,067
    
    
    $
    42,102
    
    
    $
    211,949
    
    
    $
    211,050Due after one year
through five years
    
    
    89,416
    
    
    
    85,140
    
    
    
    34,250
    
    
    
    34,132$
    128,483
    
    
    $
    127,242
    
    
    $
    246,199
    
    
    $
    245,182
       18




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 6 - Sales-Type Lease Receivables
   March 31, 2010(in thousands)Total minimum lease payments receivable
    
    $
    18,350Less: Unearned income
    
    
    (6,078
    )Net investment in sales-type leases
    
    $
    12,272
  Fiscal Year
    
    (in thousands)2010
    
    $
    2852011
    
    
    9942012
    
    
    1,0132013
    
    
    1,0342014
    
    
    1,054Thereafter
    
    
    13,970$
    18,350
 19




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7 - Inventories
  March 31,
    
    
    June 30,2010
    
    
    2009(in thousands)Finished products
    
    $
    55,762
    
    
    $
    41,167Work in process
    
    
    19,451
    
    
    
    19,247Raw materials
    
    
    19,203
    
    
    
    13,852$
    94,416
    
    
    $
    74,266
  Note 8 - Liabilities
 Warranty Liability
  (in thousands)Liability at June 30, 2009
    
    $
    5,917Liability assumed in SIT acquisition
    
    
    38,548Warranty expense
    
    
    2,510Warranty claims
    
    
    (4,188
    )Foreign currency impact
    
    
    (722
    )Liability at March 31, 2010
    
    $
    42,065
 20




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other Long-Term Liabilities
  March 31,
    
    
    June 30,2010
    
    
    2009(in thousands)Structured financing
    
    $
    13,049
    
    
    $
    Long-term retirement
    
    
    1,728
    
    
    
    1,894Customer deposits
    
    
    780
    
    
    
    1,940Deferred patent license fees
    
    
    3,571
    
    
    
    4,286Deferred revenue and royalties
    
    
    320
    
    
    
    321Rent payable
    
    
    1,080
    
    
    
    884Other
    
    
    669
    
    
    
    376$
    21,197
    
    
    $
    9,701
 Note 9 - Long-Term Debt
 Convertible Senior Notes
    21




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  March 31,
    
    
    June 30,2010
    
    
    2009(in thousands)Outstanding principal
    
    $
    316,250
    
    
    $
    316,250Less: unamortized discount
    
    
    57,306
    
    
    
    68,276Net carrying amount
    
    $
    258,944
    
    
    $
    247,974
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Contractual interest
    
    $
    2,372
    
    
    $
    2,372
    
    
    $
    7,116
    
    
    $
    7,089Amortization of discount
    
    
    3,772
    
    
    
    3,434
    
    
    
    10,969
    
    
    
    10,211Amortization of debt
issue costs
    
    
    339
    
    
    
    281
    
    
    
    957
    
    
    
    747Gross interest expense
recognized
    
    $
    6,483
    
    
    $
    6,087
    
    
    $
    19,042
    
    
    $
    18,047
 Structured Financing
  Convertible Notes
  Note 10  Commitments and Contingencies
  22




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Impairment Loss
     Note 12  Restructuring Charges
  23




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Employee-Related 
Expenses(in thousands)Balance June 30, 2009
    
    $
    840Liability assumed in SIT
acquisition
    
    
    122Charges
    
    
    3,252Utilization or payment
    
    
    (1,767
    )Balance March 31, 2010
    
    $
    2,447
 Note 13  Share-Based Compensation
  Stock Options
    Estimated fair value
    
    $
    10.02AssumptionsDividend Yield
    
    
    0
    %Volatility %
    
    
    73.53
    %Risk-Free Interest Rate
    
    
    3.14
    %Expected Life
    
    7.33 years
 24




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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
    
    
    (23,151
    )
    
    
    38.50Forfeited
    
    
    (779
    )
    
    
    76.74Outstanding at March 31, 2010
    
    
    887,074
    
    
    
    25.74
    
    
    
    
 
 (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-
    
    
    
    
    
    
    Weighted-AverageAverage
    
    
    Aggregate Intrinsic
    
    
    Contractual LifeExercise
    
    
    Value(1)
    
    
    RemainingShares
    
    
    Price
    
    
    (in thousands)
    
    
    in YearsExercisable at March 31, 2010
    
    
    737,744
    
    
    $
    22.79
    
    
    $
    
    
    
    
    3.02Exercisable 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 Awards
  25




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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, 2009
    
    
    97,418
    
    
    
    34.10Awarded
    
    
    13,290
    
    
    
    9.58Vested
    
    
    
    
    
    
    Forfeited
    
    
    (90
    )
    
    
    9.58Released from restriction
    
    
    (3,500
    )
    
    
    28.34Nonvested at March 31, 2010
    
    
    107,118
    
    
    
    31.27
  Restricted Stock Units RSUs
  Weighted-AverageNumber of
    
    Grant DateShares
    
    Fair ValueNonvested at June 30, 2009
    
    
    204,468
    
    
    $
    52.63Awarded
    
    
    284,529
    
    
    
    11.20Vested
    
    
    
    
    
    
    Forfeited
    
    
    (12,107
    )
    
    
    29.42Exchanged
    
    
    (95,234
    )
    
    
    52.36Released from restriction
    
    
    (5,774
    )
    
    
    9.45Nonvested at March 31, 2010
    
    
    375,882
    
    
    
    22.82
  26




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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
     27




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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
    
    
    
    
    
    
    
    
    
    $
    29,609
    
    
    $
    29,609Auction rate securities rights
    
    
    
    
    
    
    
    
    
    
    4,053
    
    
    
    4,053Investments in corporate bonds
    
    $
    57,475
    
    
    
    
    
    
    
    
    
    
    
    57,475Investments in U.S. government securities
    
    
    36,105
    
    
    
    
    
    
    
    
    
    
    
    36,105Investments in money market funds
    
    
    49,014
    
    
    
    
    
    
    
    
    
    
    
    49,014
  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
    
    
    (500
    )
    
    
    Net (loss) gain included in investment
    
    
    (85
    )
    
    
    115Balance at March 31, 2010
    
    $
    29,609
    
    
    $
    4,053
  28




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Level 3(in thousands)Property, plant and equipment, net
    
    $
    296,007Goodwill
    
    
    Intangible assets, net
    
    
    
 Note 15 - Income Taxes
     Note 16  Tax Benefits Preservation Plan
  29




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 17  Business Segments
   UnitedSolar
    
    Ovonic
    
    CorporateOvonic
    
    Materials
    
    and Other
    
    Total(in thousands)Three Months Ended March 31, 2010Revenues
    
    $
    66,210
    
    
    $
    6,143
    
    
    $
    53
    
    
    $
    72,406Operating (loss) income
    
    
    (375,452
    )
    
    
    3,778
    
    
    
    (5,439
    )
    
    
    (377,113
    )Three Months Ended March 31, 2009Revenues
    
    
    63,006
    
    
    
    2,948
    
    
    
    52
    
    
    
    66,006Operating income (loss)
    
    
    8,478
    
    
    
    948
    
    
    
    (5,469
    )
    
    
    3,957Nine Months Ended March 31, 2010Revenues
    
    
    154,709
    
    
    
    13,426
    
    
    
    127
    
    
    
    168,262Operating (loss) income
    
    
    (405,495
    )
    
    
    7,003
    
    
    
    (19,101
    )
    
    
    (417,593
    )Nine Months Ended March 31, 2009Revenues
    
    
    254,461
    
    
    
    10,258
    
    
    
    160
    
    
    
    264,879Operating income (loss)
    
    
    51,488
    
    
    
    2,427
    
    
    
    (20,460
    )
    
    
    33,455
 30




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 18 - Litigation
   31




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Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
    32




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.
  Key Indicators of Financial Condition and Operating Performance
  33




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##### Table of Contents



Results of Operations
 Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
 United Solar Ovonic Segment
 Three Months EndedMarch 31,2010
    
    
    2009(in thousands)REVENUESProduct and project sales
    
    $
    64,050
    
    
    $
    59,654Revenues from product development agreements
    
    
    2,144
    
    
    
    3,352License and other revenues
    
    
    16
    
    
    
    TOTAL REVENUES
    
    
    66,210
    
    
    
    63,006EXPENSESCost of product and project sales
    
    
    68,119
    
    
    
    42,272Cost of revenues from product development agreements
    
    
    1,627
    
    
    
    1,992Product development and research
    
    
    2,603
    
    
    
    1,592Preproduction costs
    
    
    72
    
    
    
    1,325Selling, general and administrative
    
    
    10,923
    
    
    
    6,531Loss on disposal of property, plant and equipment
    
    
    31
    
    
    
    677Impairment loss
    
    
    357,975
    
    
    
    Restructuring charges
    
    
    312
    
    
    
    139TOTAL EXPENSES
    
    
    441,662
    
    
    
    54,528OPERATING (LOSS) INCOME
    
    $
    (375,452
    )
    
    $
    8,478
    34




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##### Table of Contents



Ovonic Materials Segment
 Three Months EndedMarch 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    1,026
    
    
    $
    537Royalties
    
    
    1,919
    
    
    
    1,477Revenues from product development agreements
    
    
    436
    
    
    
    615License and other revenues
    
    
    2,762
    
    
    
    319TOTAL REVENUES
    
    
    6,143
    
    
    
    2,948EXPENSESCost of product sales
    
    
    863
    
    
    
    509Cost of revenues from product development agreements
    
    
    322
    
    
    
    459Product development and research
    
    
    839
    
    
    
    833Selling, general and administrative expenses
    
    
    341
    
    
    
    199TOTAL EXPENSES
    
    
    2,365
    
    
    
    2,000OPERATING INCOME
    
    $
    3,778
    
    
    $
    948
  35




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Corporate and Other
  Other Income (Expense)
  Income Taxes
  36




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Nine Months Ended March 31, 2010 Compared to Nine Months Ended March 31, 2009
 United Solar Ovonic Segment
 Nine Months EndedMarch 31,2010
    
    
    2009(in thousands)REVENUESProduct and project sales
    
    $
    146,427
    
    
    $
    246,419Revenues from product development agreements
    
    
    8,134
    
    
    
    8,042License and other revenues
    
    
    148
    
    
    
    TOTAL REVENUES
    
    
    154,709
    
    
    
    254,461EXPENSESCost of product and project sales
    
    
    153,024
    
    
    
    164,974Cost of revenues from product development agreements
    
    
    6,593
    
    
    
    5,434Product development and research
    
    
    6,421
    
    
    
    3,714Preproduction costs
    
    
    82
    
    
    
    5,133Selling, general and administrative
    
    
    30,197
    
    
    
    22,655Loss on disposal of property, plant and equipment
    
    
    1,298
    
    
    
    924Impairment loss
    
    
    359,228
    
    
    
    Restructuring charges
    
    
    3,361
    
    
    
    139TOTAL EXPENSES
    
    
    560,204
    
    
    
    202,973OPERATING (LOSS) INCOME
    
    $
    (405,495
    )
    
    $
    51,488
    37




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##### Table of Contents



Ovonic Materials Segment
 Nine Months EndedMarch 31,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    2,554
    
    
    $
    2,559Royalties
    
    
    6,132
    
    
    
    4,365Revenues from product development agreements
    
    
    1,444
    
    
    
    2,274License and other revenues
    
    
    3,296
    
    
    
    1,060TOTAL REVENUES
    
    
    13,426
    
    
    
    10,258EXPENSESCost of product sales
    
    
    2,172
    
    
    
    2,555Cost of revenues from product development agreements
    
    
    1,030
    
    
    
    1,540Product development and research
    
    
    2,397
    
    
    
    2,854Selling, general and administrative expenses
    
    
    824
    
    
    
    882TOTAL EXPENSES
    
    
    6,423
    
    
    
    7,831OPERATING INCOME
    
    $
    7,003
    
    
    $
    2,427
 38




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##### Table of Contents



Corporate and Other
  Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
  39




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##### Table of Contents



Cash Flows
    Short-term Borrowings
  40




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##### Table of Contents



Convertible Senior Notes
  Significant Accounting Policies and Critical Accounting Estimates
  Forward-Looking Statements
    41




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Item 3 : Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk
     Foreign Exchange Risk
  42




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##### Table of Contents



Item 4 : Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  43




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##### Table of Contents



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
  44




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##### Table of Contents



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
 45




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##### Table of Contents



SIGNATURES
  ENERGY CONVERSION DEVICES, INC.Dated: May 10, 2010
    By:
    /S/ William C. AndrewsWilliam C. AndrewsChief Financial Officer
(Principal Financial and Accounting Officer) Dated: May 10, 2010
    By:
    /S/ Mark D. MorelliMark D. MorelliPresident and Chief Executive Officer 46