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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-8403
 ENERGY CONVERSION DEVICES, INC.
  Delaware
    
    38-1749884(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)2956 Waterview Drive, Rochester Hills, Michigan
    
    48309(Address of principal executive offices)
    
    (Zip Code)
 (248) 293-0440
  Title of Each Class
    
    Name of each Exchange on which registeredCommon Stock, $.01 par value per share
    
    NASDAQ Global Select Market
 None
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
    
    þYes
    
    oNoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
    
    o
Yes
    
    þ
NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
    
    þ
Yes
    
    o
No
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o (Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
    
    o
Yes
    
    þ
NoIndicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
    
    o
Yes
    
    o
No
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
ENERGY CONVERSION DEVICES, INC. and SUBSIDARIES
FORM 10-K
FISCAL YEAR ENDED JUNE 30, 2009
 PART IItem 1: Business
    
    
    2Item 1A: Risk Factors
    
    
    8Item 1B: Unresolved Staff Comments
    
    
    22Item 2: Properties
    
    
    22Item 3: Legal Proceedings
    
    
    22Item 4: Submission of Matters to a Vote of Security Holders
    
    
    23PART IIItem 5: Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    24Item 6: Selected Financial Data
    
    
    26Item 7: Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    27Item 7A: Quantitative and Qualitative Disclosures about Market Risk
    
    
    45Item 8: Consolidated Financial Statements and Supplementary Data
    
    
    47Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    93Item 9A: Controls and Procedures
    
    
    93Item 9B: Other Information
    
    
    95PART IIIItem 10: Directors, Executive Officers and Corporate Governance
    
    
    96Item 11: Executive Compensation
    
    
    96Item 12: Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    96Item 13: Certain Relationships and Related Transactions,
and Director Independence
    
    
    97Item 14: Principal Accountant Fees and Services
    
    
    97PART IVItem 15: Exhibits and Financial Statement Schedules
    
    
    98SCHEDULE II  Valuation and Qualifying Accounts
    
    
    103SIGNATURES
    
    
    104EX-10.25EX-21.1EX-23.1EX-31.1EX-31.2EX-32
  1




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##### Table of Contents



PART I
Energy Conversion Devices, Inc. and Subsidiaries
 
 Item 1 : Business
 In this Report, we use the terms Company, ECD, we, us and our, unless otherwise
indicated or the context otherwise requires, to refer to Energy Conversion Devices, Inc. and its
consolidated subsidiaries. Certain disclosures included in this Report constitute forward-looking
statements that are subject to risks and uncertainties. See Item 1A, Risk Factors, and Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations -
Forward-Looking Statements.
 Overview
  Our Business Segments
  United Solar Ovonic
    2




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3




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Ovonic Materials
  4




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NiMH Batteries
   Licensing
   Materials Manufacturing
   Emerging Technologies
  5




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Ovonic Solid Hydrogen Storage Technologies
  Ovonic Metal Hydride Fuel Cell Technologies
  Ovonic Biofuel Reformation Technologies
  Ovonyx
    6




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Our Technology and Intellectual Property
  Research and Development Expenditures
  Patents and Intellectual Property
  Competition
   7




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Our Employees
  Available Information
  
 Item 1A: Risk Factors
 The continuing global economic, capital markets and credit disruptions pose risks for our
business segments.
   The decline in polysilicon prices, and the increase in the global capacity of PV products, is
causing downward pressure on the prices of our products, resulting in lower revenues and earnings.
  We have instituted demand creation initiatives that are extending our business model and subjecting
us to additional business and financial risks.
 8




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In response to market conditions, we have instituted capital expenditure and cost reduction
initiatives that are impacting our financial performance and our cash resources and will continue
to do so in the future.
  Volatility in customer demand in the solar industry could affect future levels of sales and
profitability and limit our ability to predict such levels; if we are unable to balance our
production levels with customer demand, our business and financial results will be materially
adversely impacted.
   9




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We have acquired SIT to extend our business model and enhance our competitiveness, but we face
integration and other related risks arising from this acquisition that could expose us to liability
or cause us not to achieve these benefits.
  We face intense competition from other companies producing solar energy and other renewable energy
products.
    10




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Our customers increasingly need financing to purchase our products, which exposes us to additional
business and credit risks.
  We have a history of losses and our future profitability is uncertain; the failure to maintain
sustainable profitability could have a material adverse effect on our business, results of
operations, financial condition and cash flows.
  
    
    continuously improve our manufacturing operations, whether domestically or
internationally;
    
    service our debt obligations;
    
    develop our distribution network;
    
    continue to research and develop our products and manufacturing technologies;
    
    implement our demand creation initiatives, which may include project financing and
strategic acquisitions;
    
    implement internal systems and infrastructure to support our growth; and
    
    retain key members of management, retain other personnel and hire additional personnel.
 11




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We have international operations, which we are expanding, that are vulnerable to risks associated
with doing business in foreign countries.
  
    
    the potential that we may be forced to forfeit, voluntarily or involuntarily, foreign
assets due to economic or political instability in the countries in which we choose to
locate our manufacturing facilities;
    
    difficult and expensive compliance with the commercial and legal requirements of
international markets;
    
    difficulty in interpreting and enforcing contracts governed by foreign law, which may
be subject to multiple, conflicting and changing laws, regulations and tax systems;
    
    inability to obtain, maintain or enforce intellectual property rights;
    
    encountering trade barriers such as export requirements, tariffs, currency exchange
controls, taxes and other restrictions and expenses, which could affect the competitive
pricing of our solar laminates and reduce our market share in some countries;
    
    being subjected to additional withholding taxes or other tax on our foreign income or
tariffs and other restrictions on foreign trade and investment, including currency
exchange controls;
    
    being subjected to fluctuations in exchange rates which may affect product demand and
our profitability in U.S. dollars to the extent the price of our solar laminates and cost
of raw materials, labor and equipment is denominated in a foreign currency;
    
    limitations on dividends or restrictions against repatriation of earnings;
    
    difficulty in recruiting and retaining individuals skilled in international business
operations; and
    
    increased costs associated with maintaining international marketing efforts.
  Demand for our products is affected by existing regulations concerning the electrical utility
industry; changes to such regulations may present technical, regulatory and economic barriers to
the purchase and use of solar power products, which may significantly reduce demand for our
products.
  12




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We receive a significant portion of our revenues from a small number of customers.
  The reduction or elimination of government incentives related to solar power could cause our
revenues to decline.
  We must continue to develop and market new and innovative products and there can be no assurance
that such efforts will be successful.
  13




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The expansion of our business into new markets, such as residential, may increase our exposure to
certain risks, including class action claims.
  We have focused our business strategy on, and invested significant financial resources in, the BIPV
segment of the PV market and there is no guarantee that the demand for BIPV systems will develop as
we anticipate.
  We may be unable to obtain key raw materials that meet our quality, quantity and cost requirements.
  14




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Significant warranty and product liability claims could adversely affect our business and results
of operations.
    The conversion rate of our outstanding convertible debt is dependent upon the trading price of our
common stock and thus the dilutive impact of the future converted shares cannot be predicted.
  15




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If we lose key personnel or are unable to attract and retain qualified personnel to maintain and
expand our business, financial condition, results of operations and prospects could be adversely
affected.
  We may become subject to legal or regulatory proceedings which may reach unfavorable resolutions.
  We are subject to a variety of federal, state and local laws, rules and regulations related to the
discharge or disposal of toxic, volatile or other hazardous chemicals that may expose us to
liability and other compliance risks.
   16




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Our success depends in part upon our ability to protect our intellectual property and our
proprietary technology including our trade secrets and other confidential information.
   We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time
consuming.
  17




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Third parties may own or control patents or patent applications that are infringed by our products
or technologies.
    18




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Compliance with environmental regulations can be expensive, and noncompliance with these
regulations may require us to pay substantial fines, suspend production or cease operations.
    We have entered into joint ventures and licensing agreements to develop and commercialize products
based on our technologies and we must manage such joint ventures and licensing agreements
successfully.
  19




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Our government product development and research contracts may be terminated by unilateral
government action, or we may be unsuccessful in obtaining new government contracts to replace those
that have been terminated or completed.
  The credit facility entered into by our subsidiaries, United Solar Ovonic Corporation and United
Solar Ovonic LLC, contains covenant restrictions that may limit our ability to operate our
business.
  
    
    incur additional debt or issue guarantees;
    
    create liens;
    
    make certain investments;
    
    enter into transactions with our affiliates;
    
    sell certain assets;
    
    make certain restricted payments; declare or pay dividends or make other distributions
to stockholders; and
    
    merge or consolidate with any person.
  Our ability to utilize our net operating loss carryforwards could be substantially limited if we
experience an ownership change under the Internal Revenue Code, which may adversely affect our
results of operations and financial condition.
  20




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We have a significant amount of debt outstanding. Our indebtedness, along with our other
contractual commitments, could adversely affect our business, financial condition and results of
operations, as well as our ability to meet any of our payment obligations.
  
    
    making it more difficult for us to meet our payment and other obligations;
    
    resulting in an event of default if we and our subsidiaries fail to comply with
covenants contained in our debt agreements, which could result in such debt becoming
immediately due and payable;
    
    reducing the availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other general corporate purposes, and limiting our ability
to obtain additional financing for these purposes;
    
    subjecting us to the risk of increased sensitivity to interest rate increases on our
indebtedness with variable interest rates, including borrowings under our new credit
facility;
    
    limiting our flexibility in planning for, or reacting to, and increasing our
vulnerability to, changes in our business, the industry in which we operate and the
general economy; and
    
    placing us at a competitive disadvantage compared to our competitors that have less
debt or are less leveraged.
  21




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Item 1B: Unresolved Staff Comments
  
 Item 2 : Properties
     
 Item 3 : Legal Proceedings
   22




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Item 4 : Submission of Matters to a Vote of Security Holders
  23




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PART II
 
 Item 5:
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
   For the year ended June 30,2009
    
    2008High
    
    Low
    
    High
    
    Low(in dollars per share)First Quarter (July  September)
    
    $
    79.38
    
    
    $
    53.05
    
    
    $
    36.00
    
    
    $
    22.26Second Quarter (October  December)
    
    
    61.77
    
    
    
    18.50
    
    
    
    36.45
    
    
    
    22.90Third Quarter (January  March)
    
    
    29.38
    
    
    
    13.23
    
    
    
    34.28
    
    
    
    20.47Fourth Quarter (April  June)
    
    
    20.51
    
    
    
    13.37
    
    
    
    83.33
    
    
    
    29.55
 Dividends
  Stock Repurchases
  Stock Price Performance Graph
  24




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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 6/30/2004
    
    
    6/30/2005
    
    
    6/30/2006
    
    
    6/30/2007
    
    
    6/30/2008
    
    
    6/30/2009Energy Conversion Devices, Inc.
    
    
    
    100.00
    
    
    
    
    198.76
    
    
    
    
    323.53
    
    
    
    
    273.71
    
    
    
    
    654.00
    
    
    
    
    125.67NASDAQ Composite
    
    
    
    100.00
    
    
    
    
    101.09
    
    
    
    
    109.49
    
    
    
    
    132.47
    
    
    
    
    117.33
    
    
    
    
    92.91NASDAQ Clean Edge Green Energy
    
    
    
    100.00
    
    
    
    
    102.23
    
    
    
    
    119.43
    
    
    
    
    160.46
    
    
    
    
    190.56
    
    
    
    
    103.36
  25




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Item 6 : Selected Financial Data
  Year Ended June 30,2009
    
    2008
    
    2007
    
    2006
    
    2005(in thousands, except per share data)Consolidated Statements of
OperationsTotal Revenues
    
    $
    316,293
    
    
    $
    255,861
    
    
    $
    113,567
    
    
    $
    102,419
    
    
    $
    156,570Net income (loss) from
continuing operations before
discontinued operations and
extraordinary item
    
    
    12,456
    (1)
    
    
    3,853
    (1)
    
    
    (25,231
    )(1)
    
    
    (18,910
    )
    
    
    49,462Discontinued operations, net of
tax  benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314
    
    
    
    (1,393
    )Extraordinary item, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,263Net income (loss)
    
    $
    12,456
    (1)
    
    $
    3,853
    (1)
    
    $
    (25,231
    )(1)
    
    $
    (18,596
    )
    
    $
    50,332Basic earnings (loss) per shareContinuing operations
    
    $
    0.29
    
    
    $
    0.10
    
    
    $
    (0.64
    )
    
    $
    (0.58
    )
    
    $
    1.80Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.05
    )Extraordinary item
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08$
    0.29
    
    
    $
    0.10
    
    
    $
    (0.64
    )
    
    $
    (0.57
    )
    
    $
    1.83Diluted earnings (loss) per shareContinuing operations
    
    $
    0.29
    
    
    $
    0.09
    
    
    $
    (0.64
    )
    
    $
    (0.58
    )
    
    $
    1.67Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.05
    )Extraordinary item
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08$
    0.29
    
    
    $
    0.09
    
    
    $
    (0.64
    )
    
    $
    (0.57
    )
    
    $
    1.70Consolidated Balance SheetsTotal Assets
    
    $
    1,069,178
    
    
    $
    1,041,967
    
    
    $
    600,679
    
    
    $
    596,342
    
    
    $
    198,063Long-Term Obligations
    
    
    337,662
    
    
    
    342,055
    
    
    
    25,796
    
    
    
    25,594
    
    
    
    10,204
 
 (1)
    
    Includes restructuring charges of $2.2 million, $9.4 million and $5.4 million in 2009, 2008
and 2007, respectively. 26




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Item 7:
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
  Overview
   
    
    Our consolidated financial results are driven primarily by the performance of our
United Solar Ovonic segment. Our United Solar Ovonic segment accounted for 96% and 94% of
our total revenue in the fiscal years ended June 30, 2009 and 2008, respectively. Our
United Solar Ovonic segment generated operating income of $44.5 million and $31.6 million
in the fiscal years ended June 30, 2009 and 2008, respectively. Given the expected growth
of this segment (as discussed below) relative to our other business activities, our
overall success in the foreseeable future will be aligned primarily with the performance
of our United Solar Ovonic segment and subject to the risks of that business.
    
    Global economic, capital markets and credit disruptions have significantly impacted
current market conditions in the solar market and created uncertainty, but we believe that
growth opportunities will resume in calendar year 2010.We believe that there remains
strong interest in alternative energy in general and solar in particular, but existing
global financial constraints are impacting the funding of solar projects that otherwise
have strong strategic rationale and/or financial returns. These macroeconomic conditions
are adversely impacting our customers, including some customers (who are unable to fully
comply) with take-or-pay agreements, and, as a result, our revenues and net income are
likewise adversely impacted. We are working with our customers to preserve relationships
and maximize long-term value by, among other things, reallocating product shipments to
other customers and pursuing other remedies (including contract renegotiations), as
appropriate on a case-by-case basis. We also continue to be encouraged by the
opportunities for large scale restructuring of the energy infrastructure to increase
emphasis on renewable energy, such as our solar laminates. Recent government support in
this direction includes renewable energy spending and incentive programs included in the
American Recovery and Reinvestment Act, and the solar investment tax credit initiatives
enacted as part of the U.S. Emergency Economic Stabilization Act of 2008, including an
8-year extension of the 30%, uncapped investment tax credit for commercial and residential
solar installations, and permitting utilities to benefit from these tax credits. Pending
energy legislation would also adopt a national renewable portfolio standard. We believe
that these programs will provide meaningful stimulus for U.S. growth in calendar year
2010.
 27




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
    
    We are adjusting our production in our United Solar Ovonic segment and reducing costs
to respond to near-term market conditions and improve our overall competitiveness.In
June 2008, in order to meet increasing demand for our products, we announced the active
expansion of our production capacity and the commencement of a plan to reach 1GW of annual
production capacity by 2012. In March of 2009, we announced that we were slowing the pace
of our demand-driven production and expansion plan to better reflect the present impact
of credit availability on project flow in the global pipeline for photovoltaics. In
connection with this announcement, we have implemented actions, including temporary
production hiatuses and a consolidation of certain production operations from our Auburn
Hills 1 facility into our newer Auburn Hills 2 facility. This consolidation, which will
lower overall costs and improve manufacturing efficiencies, is part of an overall program
to reduce costs. Other activities focus on improvement in our operations to generate
higher throughput and yield, reductions in administrative costs, and raw material cost
reductions. We have incurred restructuring expenses as a result of certain of these
activities and may incur additional restructuring expenses as we pursue further cost
reduction activities in the future. We have also recognized under-absorption of fixed
overhead costs, and associated period costs, resulting from our production adjustments and
may recognize similar costs and/or asset impairments in the future if we do not operate
our facilities at productive capacity. At the same time, we intend to continue to invest
strategically in our business, for example to bolster our sales and marketing functions
and to add technical competencies related to application engineering and structured
finance. Additionally, in July 2009, we approved a project to upgrade our deposition
process, materials and equipment in our Auburn Hills 1 facility. The project will utilize
existing equipment in Auburn Hills as well as equipment from our other facilities and will
require an additional investment. This action temporarily reduces our production capacity
in this facility until the project is completed. We expect that these activities will
improve our competitiveness and margins, both in the near-and long-term.
    
    We are enhancing our revenues in our United Solar Ovonic segment through a demand
creation strategy, which includes focusing on customers and markets where our solar
laminates have a competitive advantage, particularly the rooftop market.As indicated
above, there have been disruptions in the solar markets caused by global macro economic
conditions. At the same time, competition within the solar market is increasing primarily
as a result of sharp declines in the pricing of polysilicon, a key raw material in
traditional, rigid PV modules. We are continuing to concentrate on the rooftop market,
particularly the BIPV market, which we believe represents the most attractive opportunity
for our solar laminates. The physical flexibility, durability and lightweight nature of
our solar laminates makes them an attractive value proposition for the BIPV market,
particularly commercial rooftop applications, where our solar laminates can be integrated
with roofing materials and other building products. Our strategy is to increase our sales
in the rooftop market, which includes developing new channels for rooftop applications,
such as the utilities channel, and designing new rooftop applications, such as residential
applications. We are also developing new applications that leverage the unique
characteristics of our laminates, such as landfill covers.
    
    We are strategically deploying our capital resources to implement our demand creation
strategy in our United Solar Ovonic segment and enhance our business model.As described
below, we have paused our manufacturing capacity expansion, upon which we had previously
principally focused our capital resources, in response to weakened market conditions. We
are now utilizing our capital resources to, among other things, offer financing to
encourage and support the installation of systems utilizing our laminates, and make
strategic acquisitions, like the recent
 28




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acquisition of SIT (as described below). We expect to strategically deploy our capital
resources to improve our capabilities, enhance our competitiveness, and opportunistically
develop demand under current market conditions. These activities may impact the adequacy of
our existing capital resources in re-starting our manufacturing capacity expansion when
market conditions improve.
    
    Subsequent to June 30, 2009, we have acquired and are integrating Solar Integrated
Technologies, Inc. to extend our value proposition and improve our overall competitiveness
as part of our demand creation and operational excellence initiatives.SIT is a global
leader in designing, developing, bonding, installing and servicing rooftop PV systems, and
has significant field experience with our laminates. SITs core competencies in rooftop
solar are expected to improve our engineering and technical capabilities to better support
our channel partners in Europe and the U.S. and to provide a platform for directly
participating in the growing U.S. market. SITs expertise is also expected to enhance our
applications activities to improve our responsiveness to market opportunities and reduce
overall systems costs for rooftop installations of our laminates. We have begun the
process of integrating SIT into our business, which we expect will require significant
resources until completed in the second half of fiscal year 2010.
    
    We are pausing our manufacturing capacity expansion in our United Solar Ovonic segment
to respond to existing uncertainties in the market consistent with our demand driven
expansion strategy.We presently have 150MW of nameplate capacity and are delaying
further manufacturing capacity expansion until market demand and visibility improves. We
have delayed expansion at our Greenville facility and planned Battle Creek facility, which
will reduce or defer our capital expenditures and allow us to preserve and, in strategic
situations, redeploy our capital in other areas (as described above). When market
conditions and visibility improves, we believe that we have the operational capabilities
to quickly re-initiate our manufacturing capacity expansion, as a result of the
improvements we have made with respect to the construction and ramp of new facilities. We
do not presently believe that we will expand to 300MW of nameplate capacity by 2010 or 1GW
by 2012.
    
    We are profitably operating our Ovonic Materials segment and are continuing to realize
value from our technology portfolio.We have developed proprietary technologies in our
Ovonic Materials segment that we believe have value, including technologies for NiMH
batteries, solid hydrogen storage, metal hydride fuel cells, and biofuel reformation. The
development activities for these technologies have been substantially balanced with
external sources of revenues, such as royalties and development agreements (principally
government contracts), to align our development commercialization efforts at sustainable
levels. We are continually evaluating commercialization opportunities and strategic
alternatives to maximize value for these technologies, which may include licenses, joint
ventures, and sales. We completed the disposition of our Cobasys joint venture interest,
but retained certain technology and royalty rights.
 Key Indicators of Financial Condition and Operating Performance
  29




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Results of Operations
  Revenues
    
    
    Operating Income (Loss)(in thousands)2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007United Solar Ovonic
    
    $
    302,758
    
    
    $
    239,398
    
    
    $
    98,363
    
    
    $
    44,537
    
    
    $
    31,644
    
    
    $
    1,962Ovonic Materials
    
    
    13,317
    
    
    
    16,066
    
    
    
    14,635
    
    
    
    3,912
    
    
    
    899
    
    
    
    (13,706
    )Corporate and Other(1)
    
    
    218
    
    
    
    397
    
    
    
    569
    
    
    
    (27,763
    )
    
    
    (36,604
    )
    
    
    (30,758
    )Consolidated
    
    $
    316,293
    
    
    $
    255,861
    
    
    $
    113,567
    
    
    $
    20,686
    
    
    $
    (4,061
    )
    
    $
    (42,502
    )
 
 (1)
    
    Revenues consist primarily of services, facilities and miscellaneous administrative and
laboratory and machine shop services provided to certain non-consolidated affiliates; expenses
primarily include corporate operations, including facilities, human resources, legal,
governance, finance, information technology, business development, purchasing and
restructuring. The operating income (loss) for 2009, 2008 and 2007 includes restructuring
costs associated with the Companys restructuring plan. 30




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Year Ended June 30, 2009 Compared to Year Ended June 30, 2008
 United Solar Ovonic Segment
 Year Ended June 30,2009
    
    
    2008(in thousands)REVENUESProduct sales
    
    $
    292,402
    
    
    $
    231,519Revenues from product development agreements
    
    
    10,356
    
    
    
    7,879TOTAL REVENUES
    
    
    302,758
    
    
    
    239,398EXPENSESCost of product sales
    
    
    205,957
    
    
    
    169,015Cost of revenues from product development agreements
    
    
    7,414
    
    
    
    4,938Product development and research
    
    
    5,412
    
    
    
    3,650Preproduction costs
    
    
    5,409
    
    
    
    6,920Selling, general and administrative
    
    
    31,397
    
    
    
    21,935Loss on disposal of property, plant and equipment
    
    
    979
    
    
    
    1,296Restructuring charges
    
    
    1,653
    
    
    
    TOTAL EXPENSES
    
    
    258,221
    
    
    
    207,754OPERATING INCOME
    
    $
    44,537
    
    
    $
    31,644
    31




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32




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Ovonic Materials Segment
 Year Ended June 30,2009
    
    
    2008(in thousands)REVENUESProduct sales
    
    $
    2,590
    
    
    $
    5,690Royalties
    
    
    6,355
    
    
    
    5,306Revenues from product development agreements
    
    
    3,053
    
    
    
    3,560License and other revenues
    
    
    1,319
    
    
    
    1,510TOTAL REVENUES
    
    
    13,317
    
    
    
    16,066EXPENSESCost of product sales
    
    
    2,581
    
    
    
    5,374Cost of revenues from product development agreements
    
    
    2,093
    
    
    
    2,318Product development and research
    
    
    3,574
    
    
    
    6,256Selling, general and administrative expenses
    
    
    1,157
    
    
    
    1,219TOTAL EXPENSES
    
    
    9,405
    
    
    
    15,167OPERATING INCOME
    
    $
    3,912
    
    
    $
    899
    Year Ended June 30,2009
    
    
    2008(in thousands)RoyaltiesTransportation  NiMH
Battery
    
    $
    3,304
    
    
    $
    2,086Consumer  NiMH Battery
    
    
    2,779
    
    
    
    2,985Ovonyx
    
    
    40
    
    
    
    64Other
    
    
    232
    
    
    
    171Total Royalties
    
    $
    6,355
    
    
    $
    5,306
  33




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Corporate and Other
 Year Ended June 30,2009
    
    
    2008(in thousands)TOTAL REVENUES
    
    $
    218
    
    
    $
    397EXPENSESSelling, general and administrative
    
    
    26,096
    
    
    
    27,605Net loss on disposal of property, plant and equipment
    
    
    1,307
    
    
    
    Restructuring charges
    
    
    578
    
    
    
    9,396TOTAL EXPENSES
    
    
    27,981
    
    
    
    37,001OPERATING LOSS
    
    $
    (27,763
    )
    
    $
    (36,604
    )
     Other Income (Expense)
   34




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Income Taxes
  Year Ended June 30, 2008 Compared to Year Ended June 30, 2007
 United Solar Ovonic Segment
 Year Ended June 30,2008
    
    
    2007(in thousands)REVENUESProduct sales
    
    $
    231,519
    
    
    $
    91,182Revenues from product development agreements
    
    
    7,879
    
    
    
    7,174License and other operating revenues
    
    
    
    
    
    
    7TOTAL REVENUES
    
    
    239,398
    
    
    
    98,363EXPENSESCost of product sales
    
    
    169,015
    
    
    
    75,096Cost of revenues from product development agreements
    
    
    4,938
    
    
    
    2,922Product development and research
    
    
    3,650
    
    
    
    3,737Preproduction costs
    
    
    6,920
    
    
    
    3,614Selling, general and administrative
    
    
    21,935
    
    
    
    10,713Loss on disposal of property, plant and equipment
    
    
    1,296
    
    
    
    319TOTAL EXPENSES
    
    
    207,754
    
    
    
    96,401OPERATING INCOME
    
    $
    31,644
    
    
    $
    1,962
   35




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36




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##### Table of Contents



Ovonic Materials Segment
 Year Ended June 30,2008
    
    
    2007(in thousands)REVENUESProduct sales
    
    $
    5,690
    
    
    $
    4,832Royalties
    
    
    5,306
    
    
    
    3,323Revenues from product development agreements
    
    
    3,560
    
    
    
    4,780License and other revenues
    
    
    1,510
    
    
    
    1,700TOTAL REVENUES
    
    
    16,066
    
    
    
    14,635EXPENSESCost of product sales
    
    
    5,374
    
    
    
    4,666Cost of revenues from product development agreements
    
    
    2,318
    
    
    
    4,782Product development and research
    
    
    6,256
    
    
    
    16,008Selling, general and administrative
    
    
    1,219
    
    
    
    2,885TOTAL EXPENSES
    
    
    15,167
    
    
    
    28,341OPERATING INCOME (LOSS)
    
    $
    899
    
    
    $
    (13,706
    )
    Year Ended June 30,2008
    
    
    2007(in thousands)RoyaltiesTransportation  NiMH Battery
    
    $
    2,086
    
    
    $
    1,515Consumer  NiMH Battery
    
    
    2,985
    
    
    
    1,688Ovonyx
    
    
    64
    
    
    
    51Other
    
    
    171
    
    
    
    69Total Royalties
    
    $
    5,306
    
    
    $
    3,323
  37




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##### Table of Contents



Corporate and Other
 Year Ended June 30,2008
    
    
    2007(in thousands)TOTAL REVENUES
    
    $
    397
    
    
    $
    569EXPENSESSelling, general and administrative
    
    
    27,605
    
    
    
    25,942Restructuring costs
    
    
    9,396
    
    
    
    5,385TOTAL EXPENSES
    
    
    37,001
    
    
    
    31,327OPERATING LOSS
    
    $
    (36,604
    )
    
    $
    (30,758
    )
     Other Income (Expense)
  Income Taxes
  38




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Liquidity and Capital Resources
    Cash Flows
 Year Ended June 30, 2009 Compared to Year Ended June 30, 2008
   39




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##### Table of Contents



Year Ended June 30, 2008 Compared to Year Ended June 30, 2007
    Short-term Borrowings
  Convertible Senior Notes
  40




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##### Table of Contents



Off Balance Sheet Arrangements
  Contractual Obligations
    Payments Due by Period(in thousands)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsConvertible senior notes, including interest
    
    $
    358,944
    
    
    $
    9,488
    
    
    $
    18,975
    
    
    $
    330,481
    
    
    $
    Capital lease obligations, including interest
    
    
    41,072
    
    
    
    3,106
    
    
    
    6,251
    
    
    
    6,382
    
    
    
    25,333Operating leases
    
    
    27,063
    
    
    
    4,418
    
    
    
    6,318
    
    
    
    5,780
    
    
    
    10,547Purchase obligations
    
    
    82,889
    
    
    
    81,647
    
    
    
    1,242
    
    
    
    
    
    
    
    Total
    
    $
    509,968
    
    
    $
    98,659
    
    
    $
    32,786
    
    
    $
    342,643
    
    
    $
    35,880
  Significant Accounting Policies and Critical Accounting Estimates
  41




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##### Table of Contents



Inventory Reserves
  Warranty Reserve
  Allowance for Uncollectible Accounts
  Government Contracts, Reserves and Liabilities
  Federal Taxes on Income
   42




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##### Table of Contents



Accounting for Income Taxes
 
    
    The continuing global economic, capital markets and credit disruptions resulting in
reduced industry demand for solar products,
    
    Continued uncertainty in the overall economy,
    
    Changes within the sales pipeline
  Share-Based Compensation
    Impact of Recent Accounting Pronouncements
  43




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##### Table of Contents



Forward-Looking Statements
   
    
    the worldwide credit markets including sufficiency and availability of credit financing
for solar projects and for our customers;
    
    the impact of the current lack of credit financing capacity on our customers ability
to meet their obligations to ECD and its subsidiaries;
    
    the worldwide demand for electricity and the market for renewable energy, including
solar energy;
    
    the ability or inability of conventional fossil fuel-based generation technologies to
meet the worldwide demand for electricity;
    
    government subsidies and policies supporting renewable energy, including solar energy;
our expenses, sources of sales and international sales and operations;
    
    future pricing of, and demand for, our solar laminates;
    
    the performance, features, costs, and benefits of our solar laminates and plans for the
enhancement of solar laminates;
    
    our ability to maintain high standards of quality in our product;
    
    the supply and price of components and raw materials;
    
    our ability to expand our manufacturing capacity in a timely and cost-effective manner;
    
    our ability to retain our current key executives, integrate new key executives and
attract and retain other skilled managerial, engineering and sales marketing personnel;
    
    the viability of our intellectual property and our continued investment in research and
development;
    
    payments and other obligations resulting from the unfavorable resolution of legal
proceedings;
    
    changes in, or the failure to comply with, government regulations and environmental,
health and safety requirements;
    
    interest rate fluctuations and both our and our end-users ability to secure financing
on commercially reasonable terms or at all; and
    
    general economic and business conditions, including those influenced by international
and geopolitical events.
  44




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##### Table of Contents



Item 7A : Quantitative and Qualitative Disclosures about Market Risk
  Interest Rate Risk
      45




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##### Table of Contents



Foreign Exchange Risk
   46




---



##### Table of Contents



Item 8 : Consolidated Financial Statements and Supplementary Data
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal
ControlIntegrated Framework
 
 47




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)
 Year Ended June 30,2009
    
    
    2008
    
    
    2007REVENUESProduct sales
    
    $
    294,992
    
    
    $
    237,191
    
    
    $
    96,014Royalties
    
    
    6,355
    
    
    
    5,306
    
    
    
    3,323Revenues from product development agreements
    
    
    13,409
    
    
    
    11,440
    
    
    
    11,934License and other revenues
    
    
    1,537
    
    
    
    1,924
    
    
    
    2,296TOTAL REVENUES
    
    
    316,293
    
    
    
    255,861
    
    
    
    113,567EXPENSESCost of product sales
    
    
    208,285
    
    
    
    174,075
    
    
    
    81,241Cost of revenues from product development agreements
    
    
    9,507
    
    
    
    7,257
    
    
    
    7,684Product development and research
    
    
    8,986
    
    
    
    9,906
    
    
    
    19,745Preproduction costs
    
    
    5,409
    
    
    
    6,920
    
    
    
    3,614Selling, general and administrative
    
    
    58,902
    
    
    
    51,252
    
    
    
    38,082Net loss on disposal of property, plant and equipment
    
    
    2,287
    
    
    
    1,116
    
    
    
    318Restructuring charges
    
    
    2,231
    
    
    
    9,396
    
    
    
    5,385TOTAL EXPENSES
    
    
    295,607
    
    
    
    259,922
    
    
    
    156,069OPERATING INCOME (LOSS)
    
    
    20,686
    
    
    
    (4,061
    )
    
    
    (42,502
    )OTHER INCOME (EXPENSE)Interest income
    
    
    5,226
    
    
    
    7,019
    
    
    
    17,542Interest expense
    
    
    (10,863
    )
    
    
    (165
    )
    
    
    (2
    )Other nonoperating income (expense), net
    
    
    (1,118
    )
    
    
    1,216
    
    
    
    (269
    )TOTAL OTHER INCOME (EXPENSE)
    
    
    (6,755
    )
    
    
    8,070
    
    
    
    17,271Net Income (Loss) before Income Taxes
    
    
    13,931
    
    
    
    4,009
    
    
    
    (25,231
    )Income Taxes
    
    
    1,475
    
    
    
    156
    
    
    
    Net Income (Loss)
    
    $
    12,456
    
    
    $
    3,853
    
    
    $
    (25,231
    )Earnings (Loss) Per Share
    
    $
    0.29
    
    
    $
    0.10
    
    
    $
    (0.64
    )Diluted Earnings (Loss) Per Share
    
    $
    0.29
    
    
    $
    0.09
    
    
    $
    (0.64
    )
  48




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands)
 June 30,2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    56,379
    
    
    $
    484,492Short-term investments
    
    
    245,182
    
    
    
    14,989Accounts receivable, net
    
    
    69,382
    
    
    
    53,525Inventories, net
    
    
    74,266
    
    
    
    31,337Assets held for sale
    
    
    
    
    
    
    1,539Other current assets
    
    
    4,897
    
    
    
    4,130Total Current Assets
    
    
    450,106
    
    
    
    590,012Property, Plant and Equipment, net
    
    
    605,742
    
    
    
    404,119Long-Term Investments
    
    
    
    
    
    
    32,277Other Assets
    
    
    13,330
    
    
    
    15,559Total Assets
    
    $
    1,069,178
    
    
    $
    1,041,967LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    52,244
    
    
    $
    39,017Salaries, wages and amounts withheld from employees
    
    
    3,243
    
    
    
    3,160Amounts due under incentive plans
    
    
    694
    
    
    
    6,747Current maturities of capital leases
    
    
    1,013
    
    
    
    1,087Other
    
    
    2,493
    
    
    
    2,092Total Current Liabilities
    
    
    59,687
    
    
    
    52,103Long-Term Liabilities:Convertible senior notes
    
    
    316,250
    
    
    
    316,250Capital lease obligations
    
    
    21,412
    
    
    
    22,468Other liabilities
    
    
    9,701
    
    
    
    9,234Total Long-Term Liabilities
    
    
    347,363
    
    
    
    347,952Commitments and Contingencies (Note 13)Stockholders EquityCommon stock, $0.01 par value, 100 million shares authorized,
45,754,652 and 45,575,554 issued in 2009 and 2008, respectively
    
    
    458
    
    
    
    456Additional paid-in capital
    
    
    976,575
    
    
    
    969,421Treasury stock
    
    
    (700
    )
    
    
    (700
    )Accumulated deficit
    
    
    (312,709
    )
    
    
    (325,165
    )Accumulated other comprehensive loss, net
    
    
    (1,496
    )
    
    
    (2,100
    )Total Stockholders Equity
    
    
    662,128
    
    
    
    641,912Total Liabilities and Stockholders Equity
    
    $
    1,069,178
    
    
    $
    1,041,967
  49




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)
 Year Ended June 30,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    12,456
    
    
    $
    3,853
    
    
    $
    (25,231
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    33,515
    
    
    
    21,917
    
    
    
    12,170Provision for slow-moving and obsolete inventory
    
    
    8,111
    
    
    
    2,920
    
    
    
    1,348Allowance for doubtful accounts
    
    
    3,692
    
    
    
    868
    
    
    
    10Share-based compensation
    
    
    5,273
    
    
    
    2,010
    
    
    
    1,763Warranty expense
    
    
    5,680
    
    
    
    391
    
    
    
    (292
    )Other-than-temporary impairment of investment
    
    
    1,002
    
    
    
    
    
    
    
    Loss (gain) on sale of property, plant and equipment
    
    
    2,287
    
    
    
    1,116
    
    
    
    504Other
    
    
    (597
    )
    
    
    1,649
    
    
    
    (700
    )Changes in operating assets and liabilities, net of foreign exchange:Accounts receivable
    
    
    (21,068
    )
    
    
    (17,815
    )
    
    
    (8,590
    )Inventories
    
    
    (51,165
    )
    
    
    4,662
    
    
    
    (17,165
    )Other assets
    
    
    3,799
    
    
    
    (1,168
    )
    
    
    (2,371
    )Accounts payable and accrued expenses
    
    
    14,661
    
    
    
    4,004
    
    
    
    12,914Accrued incentive plan
    
    
    (6,053
    )
    
    
    6,204
    
    
    
    543Restructuring reserve
    
    
    (574
    )
    
    
    (2,301
    )
    
    
    3,523Other liabilities
    
    
    70
    
    
    
    200
    
    
    
    (240
    )Net cash provided by (used in) operating activities
    
    
    11,089
    
    
    
    28,510
    
    
    
    (21,814
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (242,257
    )
    
    
    (117,335
    )
    
    
    (186,989
    )Investment in joint ventures
    
    
    (1,000
    )
    
    
    
    
    
    
    (200
    )Purchases of investments
    
    
    (203,355
    )
    
    
    (62,250
    )
    
    
    (423,033
    )Proceeds from maturities of investments
    
    
    3,400
    
    
    
    22,591
    
    
    
    248,180Proceeds from sale of investments
    
    
    2,750
    
    
    
    115,038
    
    
    
    288,828Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    288
    
    
    
    1Net cash used in investing activities
    
    
    (440,462
    )
    
    
    (41,668
    )
    
    
    (73,213
    )Cash flows from financing activities:Proceeds from convertible senior notes
    
    
    
    
    
    
    306,762
    
    
    
    Payments for deferred financing costs
    
    
    
    
    
    
    (1,258
    )
    
    
    Proceeds from common stock issuance
    
    
    
    
    
    
    98,998
    
    
    
    Principal payments under capitalized lease obligations
    
    
    (1,054
    )
    
    
    (1,144
    )
    
    
    (850
    )Increase in long-term customer deposits
    
    
    
    
    
    
    680
    
    
    
    Decrease in restricted investments
    
    
    
    
    
    
    (273
    )
    
    
    Proceeds from sale of stock and share-based compensation, net of
expenses
    
    
    1,966
    
    
    
    13,482
    
    
    
    11,866Net cash provided by financing activities
    
    
    912
    
    
    
    417,247
    
    
    
    11,016Effect of exchange rate changes on cash and cash equivalents
    
    
    348
    
    
    
    (367
    )
    
    
    (181
    )Net (decrease) increase in cash and cash equivalents
    
    
    (428,113
    )
    
    
    403,722
    
    
    
    (84,192
    )Cash and cash equivalents at beginning of period
    
    
    484,492
    
    
    
    80,770
    
    
    
    164,962Cash and cash equivalents at end of period
    
    $
    56,379
    
    
    $
    484,492
    
    
    $
    80,770
  50




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
 Common Stock
    
    
    
    
    
    
    Treasury Stock
    
    
    
    
    
    
    AccumulatedNumber
    
    
    
    
    
    
    Additional
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Totalof
    
    
    
    
    
    
    Paid In
    
    
    of
    
    
    
    
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    Income (Loss)
    
    
    EquityBalance at June 30, 2006
    
    
    39,059
    
    
    $
    391
    
    
    $
    840,539
    
    
    
    
    
    
    $
    
    
    
    $
    (303,787
    )
    
    $
    (121
    )
    
    $
    537,022Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,231
    )
    
    
    
    
    
    
    (25,231
    )Unrealized gain on
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    57Foreign currency
translation gains, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,143
    )Share-based
compensation expense,
net of shares issued
    
    
    738
    
    
    
    7
    
    
    
    13,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,635Stock expenses
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Balance at June 30, 2007
    
    
    39,797
    
    
    
    398
    
    
    
    854,161
    
    
    
    
    
    
    
    
    
    
    
    (329,018
    )
    
    
    (33
    )
    
    
    525,508Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,853
    
    
    
    
    
    
    
    3,853Unrealized losses on
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,210
    )
    
    
    (2,210
    )Foreign currency
translation gains, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    77Unrealized gains on
derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    66Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786Share-based
compensation expense,
net of shares issued
    
    
    873
    
    
    
    9
    
    
    
    16,311
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,320Stock repurchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    (700
    )
    
    
    
    
    
    
    
    
    
    
    (700
    )Equity offering (net of
expenses $6.2 million)
    
    
    4,905
    
    
    
    49
    
    
    
    98,949
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,998Balance at June 30, 2008
    
    
    45,575
    
    
    
    456
    
    
    
    969,421
    
    
    
    (11
    )
    
    
    (700
    )
    
    
    (325,165
    )
    
    
    (2,100
    )
    
    
    641,912Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,456
    
    
    
    
    
    
    
    12,456Unrealized gain on
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,292
    
    
    
    2,292Foreign currency
translation losses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,622
    )
    
    
    (1,622
    )Unrealized losses on
derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )
    
    
    (66
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,060Share-based
compensation expense,
net of shares issued
    
    
    180
    
    
    
    2
    
    
    
    7,168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,170Equity offering expenses
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Balance at June 30, 2009
    
    
    45,755
    
    
    $
    458
    
    
    $
    976,575
    
    
    
    (11
    )
    
    $
    (700
    )
    
    $
    (312,709
    )
    
    $
    (1,496
    )
    
    $
    662,128
  51




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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
  52




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Foreign Currency Translation
  Product Sales
     53




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Royalties
  Business Agreements
     54




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Other Operating Revenues
  Deferred Revenues
  Product Development, Patents and Technology
  Preproduction Costs
  Other Nonoperating Income (Expense)
  Cash and Cash Equivalents
  Investments
  55




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Accounts Receivable
  Inventories
  Property, Plant, and Equipment
  YearsBuildings and improvements*
    
    
    1 to 33Machinery and other equipment
    
    3 to 12.5Assets under capitalized leases
    
    
    3 to 20
 
 *
    
    Includes leasehold improvements which are amortized
over the shorter of the balance of the lease term or the
life of the improvement, ranging from one to 20 years.   56




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Accounting
for the Impairment or Disposal of Long-Lived Assets,
 Capitalized Interest
 Capitalization of
Interest Costs.
 Warranty Reserve
  Income Taxes
   57




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Derivative Instruments
  Recent Accounting Pronouncements Not Yet Adopted
 The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles . FASB Accounting Standards Codification TM
 Amendments to FASB Interpretation No. 46(R),
 58




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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
 Equity Method Investment Accounting
Considerations
  Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities
 Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion
 59




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Business Combinations
 Noncontrolling Interests in
Consolidated Financial Statements  An Amendment of ARB No. 51
 Accounting for Collaborative Arrangements
 60




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Recently Adopted Accounting Pronouncements
 Subsequent Events Subsequent Events
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Interim Disclosures about Fair Value of Financial Instruments
 Disclosures About Derivative Instruments and
Hedging Activities  An Amendment of FASB Statement No. 133 Accounting for
Derivative Instruments
 61




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 and Hedging Activities
 Disclosures by Public
Entities (Enterprises) About Transfers of Financial Assets and Interest in Variable Interest
Entities
 The Fair Value Option for Financial Assets
and Financial Liabilities Including an Amendment of FASB Statement No. 115
 Fair Value Measurements, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification
or Measurement under Statement 13 Accounting for Leases Effective Date of FASB Statement No. 157 Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly, Fair Value Measurements
 62




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 2  Earnings (Loss) Per Share
  Net Income
    
    
    
    
    
    Earnings(Loss)
    
    Shares
    
    (Loss) Per(Numerator)
    
    (Denominator)
    
    Share(in thousands, except per share amounts)Year Ended June 30, 2009Basic
earnings per share
    
    $
    12,456
    
    
    
    42,277
    
    
    $
    0.29Effect of
dilutive securities:Stock
warrants
    
    
    
    
    
    
    133
    
    
    
    Stock options
    
    
    
    
    
    
    301
    
    
    
    Diluted
earnings per share
    
    $
    12,456
    
    
    
    42,711
    
    
    $
    0.29Year Ended June 30, 2008Basic
earnings per share
    
    $
    3,853
    
    
    
    40,231
    
    
    $
    0.10Effect of
dilutive securities:Stock
warrants
    
    
    
    
    
    
    127
    
    
    
    Stock options
    
    
    
    
    
    
    780
    
    
    
    (0.01
    )Diluted
earnings per share
    
    $
    3,853
    
    
    
    41,138
    
    
    $
    0.09Year Ended June 30, 2007Basic
and diluted loss per share
    
    $
    (25,231
    )
    
    
    39,389
    
    
    $
    (0.64
    )
  63




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Year Ended June 30,2009
    
    2008
    
    2007(in thousands)Share-based payment arrangements
    
    
    160
    
    
    
    
    
    
    
    1,140
 64




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Supplemental Cash Flow Information
  Year Ended June 30,2009
    
    2008
    
    2007(in thousands)Supplemental disclosures:Cash paid for interest, including capitalized interest
    
    $
    11,605
    
    
    $
    2,842
    
    
    $
    2,125Cash paid for income taxes
    
    
    809
    
    
    
    65
    
    
    
    Decrease in accounts payable for capital expenditures
    
    
    4,439
    
    
    
    
    
    
    
    Non-cash transactions:Auction rate securities rights
    
    
    3,938
    
    
    
    
    
    
    
    Capital lease obligations incurred to finance capital
equipment
    
    
    
    
    
    
    362
    
    
    
    245Depreciation allocated to construction in progress
    
    
    
    
    
    
    
    
    
    
    326
 Note 4  Investments
 Short-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)June 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
    )
    
    $
    245,182June 30, 2008Corporate bonds
    
    $
    15,156
    
    
    $
    
    
    
    $
    (167
    )
    
    $
    14,989
 65




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  June 30,2009
    
    
    2008Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    value
    
    
    Cost
    
    
    Value(in thousands)Due in less than one year
    
    $
    211,949
    
    
    $
    211,050
    
    
    $
    3,401
    
    
    $
    3,396Due after one year
through five years
    
    
    34,250
    
    
    
    34,132
    
    
    
    11,755
    
    
    
    11,593$
    246,199
    
    
    $
    245,182
    
    
    $
    15,156
    
    
    $
    14,989
 Accounting for Certain Investments in Debt and Equity Securities.
      66




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Long-Term Investments
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(in thousands)June 30, 2008Auction rate certificates
    
    $
    34,300
    
    
    $
    
    
    
    $
    (2,023
    )
    
    $
    32,277
 67




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Accounts Receivable
  June 30,2009
    
    
    2008(in thousands)BilledTrade
    
    $
    65,313
    
    
    $
    44,970Related parties
    
    
    271
    
    
    
    345Other
    
    
    160
    
    
    
    3,305Subtotal
    
    
    65,744
    
    
    
    48,620UnbilledRoyalties under license agreements
    
    
    4,372
    
    
    
    3,044Government contracts
    
    
    2,174
    
    
    
    1,604Government grants
    
    
    593
    
    
    
    439Related parties
    
    
    37
    
    
    
    77Other
    
    
    943
    
    
    
    566Subtotal
    
    
    8,119
    
    
    
    5,730Less allowance for uncollectible accounts
    
    
    (4,481
    )
    
    
    (825
    )$
    69,382
    
    
    $
    53,525
  68




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6   Inventories
  June 30,2009
    
    
    2008(in thousands)Finished products
    
    $
    41,167
    
    
    $
    3,893Work in process
    
    
    19,247
    
    
    
    15,414Raw materials
    
    
    13,852
    
    
    
    12,030$
    74,266
    
    
    $
    31,337
  Note 7  Property, Plant and Equipment, Net
  June 30,2009
    
    
    2008(in thousands)Machinery and equipment
    
    $
    345,330
    
    
    $
    253,424Machinery and equipment  under capital leases
    
    
    339
    
    
    
    922Buildings and improvements
    
    
    85,015
    
    
    
    58,914Buildings and improvements  under capital leases
    
    
    25,900
    
    
    
    25,900Land
    
    
    1,526
    
    
    
    1,157Construction in progress
    
    
    245,271
    
    
    
    124,679Subtotal
    
    
    703,381
    
    
    
    464,996Less accumulated depreciation and amortization
    
    
    (97,639
    )
    
    
    (60,877
    )Total
    
    $
    605,742
    
    
    $
    404,119
   69




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Investments in Affiliates
 Ovonyx, Inc.
    United Solar Ovonic Jinneng Limited
  70




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Cobasys, LLC
  Consolidation of
Variable Interest Entities  An Interpretation of ARB No. 51
   Note 9   Liabilities
 Warranty Liability
  Year ended June 30,2009
    
    
    2008(in thousands)Liability at beginning of the period
    
    $
    1,499
    
    
    $
    1,325Amounts accrued for as warranty costs
    
    
    5,680
    
    
    
    391Warranty claims
    
    
    (1,262
    )
    
    
    (217
    )Liability at end of the period
    
    $
    5,917
    
    
    $
    1,499
 71




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Government Contracts, Reserves and Liabilities
  Other Long-Term Liabilities
  June 30,2009
    
    
    2008(in thousands)Long-term retirement
    
    $
    1,894
    
    
    $
    1,976Customer deposits
    
    
    1,940
    
    
    
    680Deferred patent license fees
    
    
    4,286
    
    
    
    5,238Deferred revenue and royalties
    
    
    321
    
    
    
    321Rent payable
    
    
    884
    
    
    
    533Other
    
    
    376
    
    
    
    486$
    9,701
    
    
    $
    9,234
 Long-Term Retirement
  Note 10  Employee Benefit Plans
  72




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 11  Derivative and Hedging Activities
     Note 12  Long-Term Debt
 Lines of Credit
    73




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 y
  Convertible Senior Notes
    74




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Long-Term
    
    Capital LeaseYear
    
    Debt
    
    Obligations
    
    Total(in thousands)2010
    
    $
    
    
    
    $
    1,013
    
    
    $
    1,0132011
    
    
    
    
    
    
    1,116
    
    
    
    1,1162012
    
    
    
    
    
    
    1,278
    
    
    
    1,2782013
    
    
    316,250
    
    
    
    1,411
    
    
    
    317,6612014
    
    
    
    
    
    
    1,647
    
    
    
    1,647Thereafter
    
    
    
    
    
    
    15,960
    
    
    
    15,960Total
    
    $
    316,250
    
    
    $
    22,425
    
    
    $
    338,675
 Note 13  Commitments and Contingencies
 Operating Leases
   (in thousands)2010
    
    $
    4,4182011
    
    
    3,4752012
    
    
    2,8432013
    
    
    2,8852014
    
    
    2,895Thereafter
    
    
    10,547Total
    
    $
    27,063
  75




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 14  Royalties, Nonrefundable Advance Royalties and License Agreements
    Note 15  Restructuring Charges
   76




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Employee-RelatedExpenses
    
    
    Other Expenses
    
    
    Total(in thousands)Balance July 1, 2007
    
    $
    2,884
    
    
    $
    747
    
    
    $
    3,631Charges
    
    
    4,179
    
    
    
    5,217
    
    
    
    9,396Utilization or payment
    
    
    (5,977
    )
    
    
    (5,805
    )
    
    
    (11,782
    )Balance June 30, 2008
    
    $
    1,086
    
    
    $
    159
    
    
    $
    1,245Charges
    
    
    986
    
    
    
    1,245
    
    
    
    2,231Utilization or payment
    
    
    (1,232
    )
    
    
    (1,404
    )
    
    
    (2,636
    )Balance June 30, 2009
    
    $
    840
    
    
    $
    
    
    
    $
    840
  Note 16  Share-Based Compensation
    77




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Number of SharesJune 30, 2009
    
    June 30, 2008Stock options
    
    
    1,508,204
    
    
    
    1,692,968Warrants
    
    
    400,000
    
    
    
    400,000Convertible Investment Certificates
    
    
    5,210
    
    
    
    5,210Total
authorized shares
    
    
    1,913,414
    
    
    
    2,098,178
 Stock Options
    2009
    
    2008
    
    2007Estimated fair value
    
    $
    35.43
    
    
    $
    19.19
    
    
    $
    22.03AssumptionsDividend Yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility %
    
    
    65.04
    %
    
    
    61.40
    %
    
    
    67.89
    %Risk-Free Interest Rate
    
    
    2.95
    %
    
    
    4.02
    %
    
    
    4.62
    %Expected Life
    
    7.03 years
    
    6.47 years
    
    6.63 years
 78




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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, 2006
    
    
    1,649,263
    
    
    $
    18.00
    
    
    $
    30,658Granted
    
    
    15,000
    
    
    
    32.90Exercised
    
    
    (501,623
    )
    
    
    16.91
    
    
    
    13,730Expired
    
    
    (1,500
    )
    
    
    11.98Forfeited
    
    
    (14,300
    )
    
    
    26.40Outstanding at June 30, 2007
    
    
    1,146,840
    
    
    
    18.58
    
    
    
    14,525Granted
    
    
    149,000
    
    
    
    31.19Exercised
    
    
    (328,644
    )
    
    
    16.30
    
    
    
    13,844Expired
    
    
    (1,410
    )
    
    
    35.13Forfeited
    
    
    (1,200
    )
    
    
    50.16Outstanding at June 30, 2008
    
    
    964,586
    
    
    
    21.24
    
    
    
    50,541Granted
    
    
    94,870
    
    
    
    56.00Exercised
    
    
    (158,166
    )
    
    
    12.52
    
    
    
    6,817Expired
    
    
    (3,190
    )
    
    
    23.63Forfeited
    
    
    (3,596
    )
    
    
    54.14Outstanding at June 30, 2009
    
    
    894,504
    
    
    
    26.33
    
    
    $
    387
 
 (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. 79




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted-
    
    
    
    
    
    
    Weighted-AverageAverage
    
    
    Aggregate
    
    
    Contractual LifeExercise
    
    
    Intrinsic
    
    
    RemainingShares
    
    
    Price
    
    
    Value(1)
    
    
    in Years(in thousands)Exercisable at June
30, 2007
    
    
    1,039
    
    
    $
    17.96
    
    
    $
    13,547
    
    
    
    3.96Exercisable at June
30, 2008
    
    
    801
    
    
    
    19.02
    
    
    
    43,751
    
    
    
    3.84Exercisable at June
30, 2009
    
    
    709
    
    
    
    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
  80




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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, 2006
    
    
    
    
    
    $
    Awarded
    
    
    23,352
    
    
    
    35.92Vested
    
    
    
    
    
    
    Nonvested at June 30, 2007
    
    
    23,352
    
    
    
    35.92Awarded
    
    
    99,266
    
    
    
    28.88Vested
    
    
    
    
    
    
    Released from restriction
    
    
    (32,784
    )
    
    
    26.76Nonvested at June 30, 2008
    
    
    89,834
    
    
    
    31.49Awarded
    
    
    26,500
    
    
    
    43.03Vested
    
    
    
    
    
    
    Forfeited
    
    
    (5,568
    )
    
    
    35.92Released from restriction
    
    
    (13,348
    )
    
    
    33.46Nonvested at June 30, 2009
    
    
    97,418
    
    
    
    34.10
  Restricted Stock Units RSUs
  Weighted-AverageNumber of
    
    Grant DateShares
    
    Fair ValueNonvested at June 30, 2007
    
    
    Awarded
    
    
    2,500
    
    
    $
    73.64Vested
    
    
    
    
    
    
    Nonvested at June 30, 2008
    
    
    2,500
    
    
    
    73.64Awarded
    
    
    208,428
    
    
    
    52.70Vested
    
    
    (760
    )
    
    
    76.74Forfeited
    
    
    (5,700
    )
    
    
    60.49Nonvested at June 30, 2009
    
    
    204,468
    
    
    
    52.63
 81




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Warrants
  Note 17  Fair Value Measurements
 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
    82




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  The Fair Value Option for Financial Assets and Liabilities
  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 July 1, 2008
    
    $
    32,277
    
    
    $
    Redeemed by UBS
    
    
    (50
    )
    
    
    Net (loss) gain included in investment
    
    
    (2,033
    )
    
    
    3,938Balance at June 30, 2009
    
    $
    30,194
    
    
    $
    3,938
 83




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 18  Income Taxes
 Accounting for Uncertainty
for Income Taxes  an interpretation of FASB Statement No. 109.
   June 30, 2009
    
    
    June 30, 2008(in thousands)Federal Income Tax
    
    $
    858
    
    
    $
    State Income Tax
    
    
    266
    
    
    
    Foreign Income Tax
    
    
    351
    
    
    
    156Total Income Taxes
    
    $
    1,475
    
    
    $
    156
  84




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  June 30,2009
    
    
    2008(in thousands)Deferred tax asset:Basis difference in intangibles
    
    $
    10,464
    
    
    $
    11,510NOL carryforwards
    
    
    95,539
    
    
    
    112,592R&D credit carryforwards
    
    
    812
    
    
    
    170AMT credit carryforwards
    
    
    2,222
    
    
    
    1,363All other
    
    
    24,654
    
    
    
    8,870133,691
    
    
    
    134,505Deferred tax liability:Basis and depreciation differences of property
    
    
    (2,424
    )
    
    
    (5,462
    )All other
    
    
    (732
    )
    
    
    (286
    )Net deferred tax asset
    
    
    130,535
    
    
    
    128,757Valuation allowance
    
    
    (130,535
    )
    
    
    (128,757
    )Net deferred tax asset
    
    $
    
    
    
    $
    
  Share-Based Payment
 85




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Net Tax Operating
    
    
    R&D CreditLoss Carryforward
    
    
    Carryforward(in thousands)2010
    
    
    
    
    
    
    152011
    
    
    
    
    
    
    402012
    
    
    16,742
    
    
    
    142013
    
    
    19,272
    
    
    
    292014
    
    
    
    
    
    
    422015
    
    
    
    
    
    
    2016
    
    
    
    
    
    
    2017
    
    
    
    
    
    
    2018
    
    
    
    
    
    
    2019
    
    
    8,212
    
    
    
    2020
    
    
    10,170
    
    
    
    2021
    
    
    4,674
    
    
    
    2022
    
    
    22,599
    
    
    
    2023
    
    
    36,846
    
    
    
    2024
    
    
    67,627
    
    
    
    2025
    
    
    
    
    
    
    2026
    
    
    46,979
    
    
    
    2027
    
    
    47,877
    
    
    
    2028
    
    
    
    
    
    
    672Total
    
    $
    280,998
    
    
    $
    812
   Accounting for Income Taxes"
 86




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 19  Business Segments
  
    
    United Solar Ovonic  designs, manufactures and sells photovoltaic (PV) laminates
that generate clean, renewable energy by converting sunlight into electricity.
    
    Ovonic Materials  invents, designs, develops and licenses materials and products
based on the Companys pioneering materials science technology. This segment also
commercializes the Companys NiMH materials and consumer battery technology.
 87




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  UnitedSolar
    
    Ovonic
    
    CorporateOvonic
    
    Materials
    
    and Other
    
    Total(in thousands)Year Ended June 30, 2009Revenues
    
    $
    302,758
    
    
    $
    13,317
    
    
    $
    218
    
    
    $
    316,293Depreciation and
amortization
    
    
    32,467
    
    
    
    296
    
    
    
    752
    
    
    
    33,515Operating income (loss)
    
    
    44,537
    
    
    
    3,912
    
    
    
    (27,763
    )
    
    
    20,686Year Ended June 30, 2008Revenues
    
    
    239,398
    
    
    
    16,066
    
    
    
    397
    
    
    
    255,861Depreciation and
amortization
    
    
    20,862
    
    
    
    330
    
    
    
    725
    
    
    
    21,917Operating income (loss)
    
    
    31,644
    
    
    
    899
    
    
    
    (36,604
    )
    
    
    (4,061
    )Year Ended June 30, 2007Revenues
    
    
    98,363
    
    
    
    14,635
    
    
    
    569
    
    
    
    113,567Depreciation and
amortization
    
    
    10,007
    
    
    
    1,478
    
    
    
    685
    
    
    
    12,170Operating income (loss)
    
    
    1,962
    
    
    
    (13,706
    )
    
    
    (30,758
    )
    
    
    (42,502
    )As of June 30, 2009Capital expenditures
    
    
    242,094
    
    
    
    
    
    
    
    163
    
    
    
    242,257Total assets
    
    
    784,755
    
    
    
    6,329
    
    
    
    278,094
    
    
    
    1,069,178As of June 30, 2008Capital expenditures
    
    
    116,743
    
    
    
    
    
    
    
    592
    
    
    
    117,335Total assets
    
    
    552,618
    
    
    
    8,469
    
    
    
    480,880
    
    
    
    1,041,967
 88




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended June 30,2009
    
    
    2008
    
    
    2007(in thousands)United States
    
    $
    82,564
    
    
    $
    119,424
    
    
    $
    52,531France
    
    
    69,282
    
    
    
    32,661
    
    
    
    381Italy
    
    
    66,859
    
    
    
    25,758
    
    
    
    12,893Germany
    
    
    60,254
    
    
    
    39,012
    
    
    
    32,407Switzerland
    
    
    16,704
    
    
    
    
    
    
    
    South Korea
    
    
    6,410
    
    
    
    17,646
    
    
    
    103Japan
    
    
    6,244
    
    
    
    5,396
    
    
    
    3,824Hong Kong
    
    
    3,364
    
    
    
    6,087
    
    
    
    3,663China
    
    
    406
    
    
    
    1,693
    
    
    
    1,889Other Countries
    
    
    4,206
    
    
    
    8,184
    
    
    
    5,876$
    316,293
    
    
    $
    255,861
    
    
    $
    113,567
   Year Ended June 30,Significant Customer
    
    Business Segment
    
    2009
    
    2008
    
    2007EDF En Developpement
    
    United Solar Ovonic
    
    
    12
    %
    
    
    *
    
    
    
    
    %Solar Integrated Technologies**
    
    United Solar Ovonic
    
    
    *
    
    
    
    21
    %
    
    
    *Advanced Green Technologies
    
    United Solar Ovonic
    
    
    *
    
    
    
    11
    %
    
    
    
    %
 
 *
    
    denotes less than 10% during the period**
    
    acquired by the Company subsequent to June 30, 2009 Note 20  Litigation
 Cobasys
  89




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Note 21  Subsequent Events
  90




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Acquisition of Solar Integrated Technologies
    Cobasys
   91




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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 22   Selected Quarterly Financial Data (Unaudited)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Total(in thousands, except for per-share amounts)Year ended June 30, 2009Revenues
    
    $
    95,765
    
    
    $
    103,107
    
    
    $
    66,006
    
    
    $
    51,415
    
    
    $
    316,293Operating
income (loss)
    
    
    13,772
    
    
    
    15,926
    
    
    
    3,983
    
    
    
    (12,995
    )
    
    
    20,686Net income (loss)
    
    
    12,661
    
    
    
    14,240
    
    
    
    1,326
    
    
    
    (15,771
    )
    
    
    12,456Basic net income (loss) per share
    
    
    0.30
    
    
    
    0.34
    
    
    
    0.03
    
    
    
    (0.37
    )
    
    
    0.29Diluted net income (loss) per share
    
    
    0.29
    
    
    
    0.33
    
    
    
    0.03
    
    
    
    (0.37
    )
    
    
    0.29Year ended June 30, 2008Revenues
    
    
    47,042
    
    
    
    56,449
    
    
    
    69,982
    
    
    
    82,388
    
    
    
    255,861Operating (loss) income
    
    
    (9,953
    )
    
    
    (7,457
    )
    
    
    5,572
    
    
    
    7,777
    
    
    
    (4,061
    )Net income (loss)
    
    
    (7,567
    )
    
    
    (5,426
    )
    
    
    6,974
    
    
    
    9,872
    
    
    
    3,853Basic net income (loss) per share
    
    
    (0.19
    )
    
    
    (0.14
    )
    
    
    0.17
    
    
    
    0.24
    
    
    
    0.10Diluted net income (loss) per
share
    
    
    (0.19
    )
    
    
    (0.14
    )
    
    
    0.17
    
    
    
    0.24
    
    
    
    0.09
 92




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##### Table of Contents



Item 9:
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
  
 Item 9A:
    
    Controls and Procedures
  Report of Management on Internal Control over Financial Reporting
     93




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
 Internal ControlIntegrated Framework
   Internal
ControlIntegrated Framework
 94




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##### Table of Contents



Item 9B:
    
    Other Information
  95




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##### Table of Contents



PART III
 DOCUMENTS INCORPORATED BY REFERENCE
  
 Item 10:
    
    Directors, Executive Officers and Corporate Governance
   www.ovonic.com
 www.ovonic.com
 
 Item 11:
    
    Executive Compensation
  
 Item 12:
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
   96




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##### Table of Contents



Item 13:
    
    Certain Relationships and Related Transactions, and Director Independence
  
 Item 14:
    
    Principal Accountant Fees and Services
  97




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##### Table of Contents



PART IV
 
 Item 15:
    
    Exhibits and Financial Statement Schedules
 Page(a) 1. Financial StatementsReport of Independent Registered Accounting Firm
    
    
    47Consolidated Statements of Operations
    
    
    48Consolidated Balance Sheets
    
    
    49Consolidated Statements of Cash Flows
    
    
    50Consolidated Statements of Stockholders Equity and Comprehensive Income
    
    
    512. Financial Statement Schedules:Schedule II  Valuation and Qualifying Accounts
    
    
    103
  3.
    
    Exhibits (including those incorporated by reference):
 Reference3.1
    
    Restated Certificate of Incorporation filed September 29, 1967
    
    (a)3.2
    
    Certificate of Amendment to Certificate of Incorporation filed March
25, 1999 extending voting rights of the Companys Class A Common
Stock, increasing the authorized capital stock of the Companys Common
Stock to 20,930,000 shares, and authorizing 430,000 shares of Class B
Common Stock
    
    (b)3.3
    
    Certificate of Amendment to Certificate of Incorporation filed March
18, 2004, increasing the number of authorized shares from 30,000,000
to 50,000,000
    
    (c)3.4
    
    Certificate of Amendment to Certificate of Incorporation filed
December 8, 2006, increasing the number of authorized shares from
50,000,000 to 100,000,000
    
    (d)3.5
    
    Amended and Restated Certificate of Incorporation filed January 8, 2008
    
    (e)3.6
    
    Bylaws in effect as of October 11, 2007
    
    (f)4.1
    
    Form of Indenture, dated June 24, 2008, between Energy Conversion
Devices, Inc. and The Bank of New York Trust Company, N.A. as Trustee
    
    (g)
 98




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##### Table of Contents



Reference4.2
    
    Form of First Supplemental Indenture dated June 24, 2008, between
Energy Conversion Devices, Inc. and The Bank of New York Trust
Company, N.A., as Trustee
    
    (g)4.3
    
    Indenture, dated June 24, 2008, between Energy Conversion Devices,
Inc. and The Bank of New York Trust Company, N.A. as Trustee
    
    (h)4.4
    
    First Supplemental Indenture dated June 24, 2008, between Energy
Conversion Devices, Inc. and The Bank of New York Trust Company,
N.A., as Trustee
    
    (h)10.1
    
    Energy Conversion Devices, Inc. 1995 Non-Qualified Stock Option Plan
    
    (i)10.2
    
    Energy Conversion Devices, Inc. 2000 Non-Qualified Stock Option Plan
    
    (j)10.3
    
    Restricted Stock Agreement and Stock Option Agreement dated as of
January 15, 1999 between the Company and Robert C. Stempel
    
    (k)10.4
    
    Amended and Restated Operating Agreement of Cobasys LLC dated as of
December 2, 2004 by and between ChevronTexaco Technology Ventures
LLC and Ovonic Battery Company, Inc.
    
    (l)10.5
    
    Energy Conversion Devices, Inc. 2006 Stock Incentive Plan
    
    (m)10.6
    
    Energy Conversion Devices, Inc. Executive Severance Plan effective
July 24, 2007
    
    (n)10.7
    
    Form of Severance Plan Participation Agreement
    
    (o)10.8
    
    Energy Conversion Devices, Inc. Annual Incentive Plan
    
    (p)10.9
    
    Form of Stock Option Agreement
    
    (q)10.10
    
    Form of Restricted Stock Agreement
    
    (r)10.11
    
    Offer Letter dated July 25, 2007 between Energy Conversion Devices,
Inc. and Mark D. Morelli
    
    (s)10.12
    
    Letter Agreement dated August 23, 2007 among Stanford R. Ovshinsky,
Energy Conversion Devices, Inc. and Ovonic Battery Company
    
    (t)10.13
    
    Letter Agreement dated August 31, 2007 between Robert C. Stempel
and Energy Conversion Devices, Inc.
    
    (u)10.14
    
    Revised Separation Agreement with executive officer effective
December 31, 2007
    
    (v)
 99




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##### Table of Contents



Reference10.15
    
    Revised Separation Agreement with executive officer
effective March 31, 2008
    
    (w)10.16
    
    Share Lending Agreement dated as of June 18, 2008 among
Energy Conversion Devices, Inc. and Credit Suisse
International and Credit Suisse Securities (USA) LLC
    
    (g)10.17
    
    Form of Restricted Stock Unit
    
    (x)10.18
    
    Offer Letter dated July 16, 2008 between Energy Conversion
Devices, Inc. and Harry W. Zike
    
    (y)10.19
    
    Revised Separation Agreement with Executive Officer
effective August 31, 2008 (portions of the agreement have
been omitted pursuant to a request for confidential
treatment under Rule 24b-2)
    
    (z)10.20
    
    Amendment No. 1 to 2006 Stock Incentive Plan
    
    (aa)10.21
    
    Form of Performance Share Award Agreement pursuant to the
Energy Conversion Devices, Inc. 2006 Stock Incentive Plan,
as amended
    
    (bb)10.22
    
    Amended Executive Severance Plan
    
    (cc)10.23
    
    Form of Restricted Stock Unit Award Agreement
    
    (dd)10.24
    
    Termination Agreement dated as of July 13, 2009 by and
among Ovonic Battery Company, Inc., Energy Conversion
Devices, Inc. and Chevron Technology Ventures LLC
    
    (ee)10.25
    
    Agreement and Plan of Merger entered into by Energy
Conversion Devices, Inc. and Solar Integrated Technologies
dated July 21, 200921.1
    
    List of all direct and indirect subsidiaries of the Company23.1
    
    Consent of Independent Registered Public Accounting Firm,
Grant Thornton LLP31.1
    
    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
 
 Notes to Exhibit List(a)
    
    Filed as Exhibit 2-A to the Companys Form 8-A and incorporated herein by reference.(b)
    
    Filed as Exhibit 3.3 to the Companys Annual Report on Form 10-K for the fiscal year ended
June 30, 1999 and incorporated herein by reference. 100




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##### Table of Contents



(c)
    
    Filed as Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004 and incorporated herein by reference.(d)
    
    Filed with the Companys Proxy Statement dated October 12, 2006 and incorporated herein by
reference.(e)
    
    Filed with the Companys Proxy Statement dated October 29, 2007 and incorporated herein by
reference.(f)
    
    Filed as Exhibit 3.1 to the Companys Current Report on Form 8-K dated October 17, 2007 and
incorporated herein by reference.(g)
    
    Filed as Exhibits 4.1, 4.2 and 10.18 to the Companys Current Report on Form 8-K dated June
19, 2008 and incorporated herein by reference.(h)
    
    Filed as Exhibits 4.3 and 4.4 to the Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 2008(i)
    
    Filed as Exhibit 10.77 to the Companys Annual Report on Form 10-K for the fiscal year ended
June 30, 1995 and incorporated herein by reference.(j)
    
    Filed as Exhibit A to the Companys Proxy Notice and Statement dated January 19, 2001 and
incorporated herein by reference.(k)
    
    Filed as Exhibits B, C and D, respectively, to the Companys Proxy Notice and Statement dated
February 23, 1999 and incorporated herein by reference.(l)
    
    Filed as Exhibit 10.2 to the Companys Current Report on Form 8-K dated December 7, 2004 and
incorporated herein by reference.(m)
    
    Filed as Exhibit A to the Companys Proxy Statement dated October 12, 2006 and incorporated
herein by reference.(n)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated July 30, 2007 and
incorporated herein by reference.(o)
    
    Filed as Exhibit 10.2 to the Companys Current Report on Form 8-K dated July 30, 2007 and
incorporated herein by reference.(p)
    
    Filed as Exhibit 10.3 to the Companys Current Report on Form 8-K dated July 30, 2007 and
incorporated herein by reference.(q)
    
    Filed as Exhibit 10.4 to the Companys Current Report on Form 8-K dated July 30, 2007 and
incorporated herein by reference.(r)
    
    Filed as Exhibit 10.5 to the Companys Current Report on Form 8-K dated July 30, 2007 and
incorporated herein by reference.(s)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated August 3, 2007 and
incorporated herein by reference.(t)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated August 27, 2007 and
incorporated herein by reference.(u)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated August 31, 2007 and
incorporated herein by reference. 101




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##### Table of Contents



(v)
    
    Filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008 and incorporated herein by reference.(w)
    
    Filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008 and incorporated herein by reference.(x)
    
    Filed as Exhibit 10.19 to the Companys Annual Report on Form 10-K for the fiscal year ended
June 30, 2008.(y)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated September 2, 2008 and
incorporated herein by reference.(z)
    
    Filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference(aa)
    
    Filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference.(bb)
    
    Filed as Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference.(cc)
    
    Filed as Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 and incorporated herein by reference.(dd)
    
    Filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended
December 31, 2008 and incorporated herein by reference(ee)
    
    Filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated July 14, 2009 and
incorporated herein by reference. 102




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##### Table of Contents



ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES
 
 Schedule II  Valuation and Qualifying Accounts
 AdditionsBalance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    End ofof Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    Period(in thousands)June 30, 2009Allowance for uncollectible accounts
    
    
    825
    
    
    
    3,692
    
    
    
    
    
    
    
    (36
    )
    
    
    4,481Reserve for losses on government
contracts
    
    
    1,851
    
    
    
    
    
    
    
    
    
    
    
    (90
    )
    
    
    1,761Reserve for inventory obsolescence
    
    
    4,790
    
    
    
    8,111
    
    
    
    
    
    
    
    
    
    
    
    12,901Reserve for warranty
    
    
    1,499
    
    
    
    5,680
    
    
    
    
    
    
    
    (1,262
    )
    
    
    5,917Valuation allowance for deferred taxes
    
    
    128,757
    
    
    
    4,934
    
    
    
    
    
    
    
    (3,156
    )
    
    
    130,535June 30, 2008Allowance for uncollectible accounts
    
    
    538
    
    
    
    868
    
    
    
    6
    
    
    
    (587
    )
    
    
    825Reserve for losses on government
contracts
    
    
    1,899
    
    
    
    158
    
    
    
    
    
    
    
    (206
    )
    
    
    1,851Reserve for inventory obsolescence
    
    
    1,870
    
    
    
    3,059
    
    
    
    
    
    
    
    (139
    )
    
    
    4,790Reserve for warranty
    
    
    1,325
    
    
    
    391
    
    
    
    
    
    
    
    (217
    )
    
    
    1,499Valuation allowance for deferred taxes
    
    
    129,571
    
    
    
    4,934
    
    
    
    
    
    
    
    (5,748
    )
    
    
    128,757June 30, 2007Allowance for uncollectible accounts
    
    
    691
    
    
    
    10
    
    
    
    57
    
    
    
    (220
    )
    
    
    538Reserve for losses on government
contracts
    
    
    2,343
    
    
    
    134
    
    
    
    
    
    
    
    (578
    )
    
    
    1,899Reserve for inventory obsolescence
    
    
    1,164
    
    
    
    1,348
    
    
    
    
    
    
    
    (642
    )
    
    
    1,870Reserve for warranty
    
    
    1,835
    
    
    
    (292
    )
    
    
    
    
    
    
    (218
    )
    
    
    1,325Valuation allowance for deferred taxes
    
    
    112,674
    
    
    
    22,398
    
    
    
    
    
    
    
    (5,501
    )
    
    
    129,571
 103




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##### Table of Contents



SIGNATURES
  ENERGY CONVERSION DEVICES, INC.August 27, 2009
    By:
    /S/ Mark D. MorelliMark D. MorelliPresident and Chief Executive Officer /s/ Mark D. Morelli

Mark D. Morelli
    
    President, Chief
Executive Officer
and 
Director
(Principal Executive
Officer)
    
    August 27, 2009/s/ Harry W. Zike

Harry W. Zike
    
    Vice President and
Chief Financial

Officer (Principal
Financial and

Accounting Officer)
    
    August 27, 2009/s/ Joseph A. Avila

Joseph A. Avila
    
    Director
    
    August 27, 2009/s/ Alan E. Barton

Alan E. Barton
    
    Director
    
    August 27, 2009/s/ Christopher P. Belden

Christopher P. Belden
    
    Director
    
    August 27, 2009/s/ Robert I. Frey

Robert I. Frey
    
    Director
    
    August 27, 2009/s/ William J. Ketelhut

William J. Ketelhut
    
    Director
    
    August 27, 2009/s/ Stephen Rabinowitz

Stephen Rabinowitz
    
    Director
    
    August 27, 2009/s/ George A. Schreiber, Jr.

George A. Schreiber, Jr.
    
    Director
    
    August 27, 2009
 104