##### 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, 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
 
  
 þ o
 o o
 o o
 Large accelerated filer o
Accelerated
filer þNon-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, 2010
 PART I  FINANCIAL INFORMATIONItem 1: Financial Statements
    
    
    2Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4: Controls and Procedures
    
    
    30PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    32Item 1A: Risk Factors
    
    
    32Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3: Defaults Upon Senior Securities
    
    
    32Item 4: Removed and Reserved
    
    
    32Item 5: Other Information
    
    
    32Item 6: Exhibits
    
    
    32SIGNATURES
    
    
    33EX-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 EndedSeptember 30,2010
    
    
    2009 (1)RevenuesProduct sales
    
    $
    53,397
    
    
    $
    34,143System sales
    
    
    11,650
    
    
    
    2,567Royalties
    
    
    2,115
    
    
    
    1,959Revenues from product development agreements
    
    
    827
    
    
    
    3,991License and other revenues
    
    
    408
    
    
    
    284Total Revenues
    
    
    68,397
    
    
    
    42,944ExpensesCost of product sales
    
    
    45,016
    
    
    
    24,107Cost of system sales
    
    
    10,555
    
    
    
    3,726Cost of revenues from product development agreements
    
    
    329
    
    
    
    3,281Product development and research
    
    
    2,399
    
    
    
    2,245Preproduction costs
    
    
    64
    
    
    
    10Selling, general and administrative
    
    
    17,644
    
    
    
    16,202Net (gain) loss on disposal of property, plant and equipment
    
    
    (76
    )
    
    
    974Restructuring charges
    
    
    491
    
    
    
    677Total Expenses
    
    
    76,422
    
    
    
    51,222Operating Loss
    
    
    (8,025
    )
    
    
    (8,278
    )Other Income (Expense)Interest income
    
    
    344
    
    
    
    292Interest expense
    
    
    (6,986
    )
    
    
    (7,170
    )Gain on debt extinguishment
    
    
    1,189
    
    
    
    Distribution from joint venture
    
    
    
    
    
    
    1,309Other nonoperating income, net
    
    
    132
    
    
    
    885Total Other Income (Expense)
    
    
    (5,321
    )
    
    
    (4,684
    )Loss before Income Taxes and Equity Loss
    
    
    (13,346
    )
    
    
    (12,962
    )Income tax expense (benefit)
    
    
    155
    
    
    
    (915
    )Loss before Equity Loss
    
    
    (13,501
    )
    
    
    (12,047
    )Equity loss
    
    
    (34
    )
    
    
    Net Loss
    
    
    (13,535
    )
    
    
    (12,047
    )Net Loss Attributable to Noncontrolling Interest
    
    
    (79
    )
    
    
    (74
    )Net Loss Attributable to ECD Stockholders
    
    $
    (13,456
    )
    
    $
    (11,973
    )Loss Per Share, Attributable to ECD Stockholders
    
    $
    (0.29
    )
    
    $
    (0.28
    )Diluted Loss Per Share, Attributable to ECD Stockholders
    
    $
    (0.29
    )
    
    $
    (0.28
    )
 
 (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)
 September 30,
    
    
    June 30,2010
    
    
    2010 (1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    68,963
    
    
    $
    79,158Short-term investments
    
    
    125,369
    
    
    
    113,771Accounts receivable, net
    
    
    58,366
    
    
    
    72,021Inventories, net
    
    
    63,596
    
    
    
    61,495Other current assets
    
    
    33,321
    
    
    
    27,237Total Current Assets
    
    
    349,615
    
    
    
    353,682Property, Plant and Equipment, net
    
    
    303,296
    
    
    
    301,056Other Assets:Restricted cash
    
    
    12,157
    
    
    
    11,749Lease receivable, net
    
    
    10,592
    
    
    
    10,854Other assets
    
    
    13,727
    
    
    
    14,606Total Other Assets
    
    
    36,476
    
    
    
    37,209Total Assets
    
    $
    689,387
    
    
    $
    691,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    60,383
    
    
    $
    56,035Current portion of warranty liability
    
    
    11,166
    
    
    
    12,125Other current liabilities
    
    
    10,523
    
    
    
    9,130Total Current Liabilities
    
    
    82,072
    
    
    
    77,290Long-Term Liabilities:Convertible senior notes
    
    
    239,645
    
    
    
    243,654Capital lease obligations
    
    
    19,988
    
    
    
    20,296Warranty liability
    
    
    30,952
    
    
    
    29,210Other liabilities
    
    
    19,268
    
    
    
    19,872Total Long-Term Liabilities
    
    
    309,853
    
    
    
    313,032Commitments and Contingencies (Note 10)Stockholders EquityCommon stock, $0.01 par value, 100
million shares authorized,
49,863,710 and
48,554,812 issued at
September 30, 2010
and June 30, 2010,
respectively
    
    
    499
    
    
    
    486Additional paid-in capital
    
    
    1,087,005
    
    
    
    1,079,910Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (787,844
    )
    
    
    (774,388
    )Accumulated other comprehensive loss, net
    
    
    (1,306
    )
    
    
    (3,570
    )Total ECD stockholders equity
    
    
    297,654
    
    
    
    301,738Accumulated deficit  noncontrolling interest
    
    
    (192
    )
    
    
    (113
    )Total Stockholders Equity
    
    
    297,462
    
    
    
    301,625Total Liabilities and Stockholders Equity
    
    $
    689,387
    
    
    $
    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)
 Three Months EndedSeptember 30,2010
    
    
    2009 (1)Cash flows from operating activities:Net loss
    
    $
    (13,535
    )
    
    $
    (12,047
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    5,409
    
    
    
    8,892Amortization of debt discount and deferred financing fees
    
    
    4,242
    
    
    
    4,115Share-based compensation
    
    
    881
    
    
    
    1,051Gain on debt extinguishment
    
    
    (1,189
    )
    
    
    Net (gain) loss on disposal of property, plant and equipment
    
    
    (76
    )
    
    
    974Equity loss
    
    
    34
    
    
    
    Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    14,350
    
    
    
    8,924Inventories
    
    
    (868
    )
    
    
    (29,880
    )Other assets
    
    
    (229
    )
    
    
    446Accounts payable and accrued expenses
    
    
    9,410
    
    
    
    (7,442
    )Other liabilities
    
    
    769
    
    
    
    (954
    )Net cash provided by (used in) operating activities
    
    
    19,198
    
    
    
    (25,921
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (12,068
    )
    
    
    (12,157
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (2,088
    )Purchases of investments
    
    
    (45,478
    )
    
    
    Proceeds from maturities of investments
    
    
    14,200
    
    
    
    34,069Proceeds from sale of investments
    
    
    19,259
    
    
    
    9,771Proceeds from sale of property, plant and equipment
    
    
    126
    
    
    
    Development loans
    
    
    (3,275
    )
    
    
    Increase in restricted cash
    
    
    (408
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (27,644
    )
    
    
    29,595Cash flows from financing activities:Principal payments under capitalized lease obligations and other debt
    
    
    (426
    )
    
    
    (174
    )Repayment of revolving credit facility
    
    
    
    
    
    
    (5,705
    )Net cash used in financing activities
    
    
    (426
    )
    
    
    (5,879
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,323
    )
    
    
    233Net decrease in cash and cash equivalents
    
    
    (10,195
    )
    
    
    (1,972
    )Cash and cash equivalents at beginning of period
    
    
    79,158
    
    
    
    56,379Cash and cash equivalents at end of period
    
    $
    68,963
    
    
    $
    54,407
 
 (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
  Multiple-Deliverable Revenue Arrangements  a Consensus of the
FASB Emerging Issues Task Force
 6




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing
  Consolidated Statement of Operations for theThree Months Ended September 30, 2009As PreviouslyReported
    
    
    ASC 470-20
    
    
    As Reported(in thousands, except per share amounts)Interest expense
    
    $
    (6,963
    )
    
    $
    (207
    )
    
    $
    (7,170
    )Total Other Income (Expense)
    
    
    (4,477
    )
    
    
    (207
    )
    
    
    (4,684
    )Net Loss before Income Taxes
    
    
    (12,755
    )
    
    
    (207
    )
    
    
    (12,962
    )Net Loss
    
    
    (11,840
    )
    
    
    (207
    )
    
    
    (12,047
    )Net loss attributable to ECD Stockholders
    
    
    (11,766
    )
    
    
    (207
    )
    
    
    (11,973
    )Loss per share
    
    
    (0.28
    )
    
    
    
    
    
    
    (0.28
    )Diluted loss per share
    
    
    (0.28
    )
    
    
    
    
    
    
    (0.28
    )
 7




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Consolidated Balance Sheets 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 theThree Months Ended September 30, 2009As PreviouslyReported
    
    
    ASC 470-20
    
    
    As Reported(in thousands)Net loss
    
    $
    (11,840
    )
    
    $
    (207
    )
    
    $
    (12,047
    )Amortization of
debt discount and
deferred financing
fees
    
    
    3,908
    
    
    
    207
    
    
    
    4,115
 Note 2  Loss Per Share
  Net LossAttributableto ECDStockholders
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amounts(in thousands, except per share amounts)Three Months Ended September 30, 2010Basic and diluted loss per share
    
    $
    (13,456
    )
    
    
    46,128
    
    
    $
    (0.29
    )Three Months Ended September 30, 2009Basic and diluted loss per share
    
    $
    (11,973
    )
    
    
    42,299
    
    
    $
    (0.28
    )
 8




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedSeptember 30,2010
    
    
    2009(in thousands)Share-based payment arrangements
    
    
    1,428
    
    
    
    1,311
   Note 3  Supplemental Cash Flow Information
  Three Months EndedSeptember 30,2010
    
    
    2009(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    849
    
    
    $
    680Cash paid for income taxes
    
    
    36
    
    
    
    6Decrease in accounts payable for capital expenditures
    
    
    4,679
    
    
    
    3,845Non-cash transactions:Capital lease obligations incurred to finance capital equipment
    
    
    
    
    
    
    50
 9




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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
    
    
    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
  10




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three Months EndedSeptember 30, 2009(1)(in thousands, except per share amounts)Pro Forma InformationRevenues
    
    $
    47,838Net loss attributable to ECD stockholders
    
    
    (15,640
    )Loss per share
    
    
    (0.37
    )Diluted loss per share
    
    
    (0.37
    )
 
 (1)
    
    As adjusted due to implementation of FASB ASC 470-20  Goodwill and Intangible Assets
    11




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Investments
 Short-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)September 30, 2010Corporate bonds
    
    $
    118,092
    
    
    $
    350
    
    
    $
    (1,050
    )
    
    $
    117,392Commercial paper
    
    
    6,979
    
    
    
    5
    
    
    
    (9
    )
    
    
    6,975U.S. Government securities
    
    
    1,002
    
    
    
    
    
    
    
    
    
    
    
    1,002$
    126,073
    
    
    $
    355
    
    
    $
    (1,059
    )
    
    $
    125,369June 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
  September 30, 2010
    
    
    June 30, 2010Amortized Cost
    
    
    Market value
    
    
    Amortized Cost
    
    
    Market Value(in thousands)Due in less than one year
    
    $
    65,504
    
    
    $
    64,723
    
    
    $
    38,586
    
    
    $
    39,189Due after one year
through five years
    
    
    60,569
    
    
    
    60,646
    
    
    
    76,550
    
    
    
    74,582$
    126,073
    
    
    $
    125,369
    
    
    $
    115,136
    
    
    $
    113,771
  Note 6 - Sales-Type Lease Receivables
  12




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  September 30, 2010(in thousands)Total minimum lease payments receivable
    
    $
    17,567Less: Unearned income
    
    
    (6,054
    )Net investment in sales-type leases
    
    $
    11,513
  Fiscal Year
    
    (in thousands)2011
    
    $
    1,0002012
    
    
    1,0202013
    
    
    1,0402014
    
    
    1,0612015
    
    
    1,082Thereafter
    
    
    12,364$
    17,567
 Note 7 - Inventories
  September 30,
    
    
    June 30,2010
    
    
    2010(in thousands)Finished products
    
    $
    31,420
    
    
    $
    27,690Work in process
    
    
    17,430
    
    
    
    13,905Raw materials
    
    
    14,746
    
    
    
    19,900$
    63,596
    
    
    $
    61,495
  13




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Liabilities
 Warranty Liability
  (in thousands)Liability at June 30, 2010
    
    $
    41,335Warranty expense
    
    
    1,578Warranty claims
    
    
    (1,659
    )Foreign currency impact
    
    
    864Liability at September 30, 2010
    
    $
    42,118
 Other Long-Term Liabilities
  September 30,
    
    
    June 30,2010
    
    
    2010(in thousands)Structured financing
    
    $
    12,717
    
    
    $
    12,929Long-term retirement
    
    
    1,608
    
    
    
    1,663Customer deposits
    
    
    
    
    
    
    120Deferred patent license fees
    
    
    3,095
    
    
    
    3,333Deferred revenue and royalties
    
    
    297
    
    
    
    297Rent payable
    
    
    1,195
    
    
    
    1,145Other
    
    
    356
    
    
    
    385$
    19,268
    
    
    $
    19,872
 Note 9  Long-Term Debt
 Lines of Credit
  Convertible Senior Notes
  14




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     September 30, 2010
    
    
    June 30, 2010(in thousands)Outstanding principal
    
    $
    284,153
    
    
    $
    293,250Less: unamortized discount
    
    
    44,508
    
    
    
    49,596Net carrying amount
    
    $
    239,645
    
    
    $
    243,654
  Three Months EndedSeptember 30,2010
    
    
    2009(in thousands)Contractual interest
    
    $
    2,199
    
    
    $
    2,372Amortization of discount
    
    
    3,663
    
    
    
    3,599Amortization of debt issue costs
    
    
    579
    
    
    
    516Gross interest expense recognized
    
    $
    6,441
    
    
    $
    6,487
  15




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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-Related
    
    
    OtherExpenses
    
    
    Expenses
    
    
    Total(in thousands)Balance June 30, 2010
    
    $
    3,311
    
    
    $
    
    
    
    $
    3,311Charges
    
    
    473
    
    
    
    18
    
    
    
    491Utilization or payment
    
    
    (1,800
    )
    
    
    (18
    )
    
    
    (1,818
    )Balance September 30, 2010
    
    $
    1,984
    
    
    $
    
    
    
    $
    1,984
 Note 12  Share-Based Compensation
  16




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock Options
    Aggregate IntrinsicWeighted-Average
    
    
    Value (1)Shares
    
    
    Exercise Price
    
    
    (in thousands)Outstanding at June 30, 2010
    
    
    864,849
    
    
    $
    25.06
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (15,625
    )
    
    
    24.94Forfeited
    
    
    (4,988
    )
    
    
    46.62Outstanding at September
30, 2010
    
    
    844,236
    
    
    
    24.94
    
    
    
    
 
 (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 September 30, 2010
    
    
    740,913
    
    
    $
    23.60
    
    
    $
    
    
    
    
    2.73Exercisable 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. 17




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Restricted Stock Awards
   Number of
    
    
    Weighted-AverageShares
    
    
    Grant Date Fair ValueNonvested at June 30, 2010
    
    
    101,668
    
    
    $
    31.14Awarded
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    (1,435
    )
    
    
    20.81Released from restriction
    
    
    (30,285
    )
    
    
    25.76Nonvested at September 30, 2010
    
    
    69,948
    
    
    
    33.68
  Restricted Stock Units RSUs
  18




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueNonvested at June 30, 2010
    
    
    309,622
    
    
    $
    18.57Awarded
    
    
    399,500
    
    
    
    3.95Vested
    
    
    
    
    
    
    Forfeited
    
    
    (132,570
    )
    
    
    12.52Released from restriction
    
    
    (1,070
    )
    
    
    4.59Nonvested at September 30, 2010
    
    
    575,482
    
    
    
    9.84
  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
   19




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   As of September 30, 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
    
    $
    117,392
    
    
    
    
    
    
    
    
    
    
    $
    117,392Investments in commercial paper
    
    
    6,975
    
    
    
    
    
    
    
    
    
    
    
    6,975Investments in U.S. government securities
    
    
    1,002
    
    
    
    
    
    
    
    
    
    
    
    1,002Investments in money market funds
    
    
    52,141
    
    
    
    
    
    
    
    
    
    
    
    52,141
 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 September 30, 2010
    
    $
    
    
    
    $
    
 20




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 14  Income Taxes
     Note 15  Variable Interest Entity
   21




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 16  Business Segments
   UnitedSolar
    
    
    Ovonic
    
    
    CorporateOvonic
    
    
    Materials
    
    
    and Other
    
    
    Total(in thousands)Three Months Ended
September 30, 2010Revenues
    
    $
    65,284
    
    
    $
    3,061
    
    
    $
    52
    
    
    $
    68,397Operating (loss) income
    
    
    (4,486
    )
    
    
    1,824
    
    
    
    (5,363
    )
    
    
    (8,025
    )Three Months Ended
September 30, 2009Revenues
    
    
    39,520
    
    
    
    3,405
    
    
    
    19
    
    
    
    42,944Operating (loss) income
    
    
    (1,714
    )
    
    
    1,605
    
    
    
    (8,169
    )
    
    
    (8,278
    )
 Note 17  Litigation
  22




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   23




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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
  24




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Results of Operations
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 United Solar Ovonic Segment
 Three Months EndedSeptember 30,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    53,260
    
    
    $
    33,536System sales
    
    
    11,650
    
    
    
    2,567Revenues from product development agreements
    
    
    374
    
    
    
    3,417TOTAL REVENUES
    
    
    65,284
    
    
    
    39,520EXPENSESCost of product sales
    
    
    44,919
    
    
    
    23,595Cost of system sales
    
    
    10,555
    
    
    
    3,726Cost of revenues from product development agreements
    
    
    89
    
    
    
    2,880Product development and research
    
    
    1,862
    
    
    
    1,526Preproduction costs
    
    
    64
    
    
    
    10Selling, general and administrative
    
    
    11,644
    
    
    
    7,862Loss on disposal of property, plant and equipment
    
    
    43
    
    
    
    974Restructuring charges
    
    
    594
    
    
    
    661TOTAL EXPENSES
    
    
    69,770
    
    
    
    41,234OPERATING LOSS
    
    $
    (4,486
    )
    
    $
    (1,714
    )
     25




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Ovonic Materials Segment
 Three Months EndedSeptember 30,2010
    
    
    2009(in thousands)REVENUESProduct sales
    
    $
    137
    
    
    $
    607Royalties
    
    
    2,115
    
    
    
    1,959Revenues from product development agreements
    
    
    453
    
    
    
    574License and other revenues
    
    
    356
    
    
    
    265TOTAL REVENUES
    
    
    3,061
    
    
    
    3,405EXPENSESCost of product sales
    
    
    97
    
    
    
    512Cost of revenues from product development agreements
    
    
    240
    
    
    
    400Product development and research
    
    
    537
    
    
    
    720Selling, general and administrative expenses
    
    
    363
    
    
    
    168TOTAL EXPENSES
    
    
    1,237
    
    
    
    1,800OPERATING INCOME
    
    $
    1,824
    
    
    $
    1,605
   Corporate and Other
  26




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Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
  Cash Flows
    Short-term Borrowings
  27




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Convertible Senior Notes
   Significant Accounting Policies and Critical Accounting Estimates
  Forward-Looking Statements
  28




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29




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Item 3 : Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk
  Foreign Exchange Risk
    
 Item 4 : Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Remediation of Prior Material Weakness in Internal Control Over Financial Reporting
  30




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Changes in Internal Control over Financial Reporting
  31




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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:
    

Exhibits31.1
    
    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
 32




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SIGNATURES
  ENERGY CONVERSION DEVICES, INC.Dated: November 9, 2010
    By:
    /S/ William C. AndrewsWilliam C. AndrewsChief Financial Officer
(Principal Financial and Accounting Officer) Dated: November 9, 2010
    By:
    /S/ Mark D. MorelliMark D. MorelliPresident and Chief Executive Officer 33