CEO Out, Layoffs In At Energy Conversion Devices
AUBURN HILLS (WWJ) – A day of layoff announcements and management change at Auburn Hills based solar panel maker Energy Conversion Devices Inc.
In Tuesday filings with the U.S. Securities and Exchange Commission, the company announced a huge loss for its third fiscal quarter ended March 31 and the resignation of president and CEO Mark D. Morelli.
ECD said it negotiated a resignation agreement with Morelli under which he agreed to forego outplacement and other services that would have cost the company $950,000. However, under a previously negotiated separation agreement, he will still receive nearly $2 million in salary over the next two years, and will be immediately vested for options in about 200,000 shares of ECD stock, currently worth about $300,000.
As for the company’s financial performance, sales plunged to $21.5 million from $79.4 million a year earlier. ECD posted a huge net loss of $243.2 million in its third fiscal quarter. Most of the loss was caused by a huge “impairment charge” of $221.5 million, essentially a writedown of the value of its assets. The company said that “due to changing market conditions in the quarter ended March 31, 2011, losses incurred to-date and a dramatic and abrupt shift in the Italian and French solar incentives structures, the company concluded that the carrying values of its assets may not be recoverable.”
The same thing happened last year — the company said in its SEC filings that “In the quarter ended March 31, 2010, due to changing market conditions, losses incurred to-date and the increased near-term capacity anticipated from the company’s technology roadmap, the company concluded that the carrying values of its long-lived assets, including goodwill, may not recoverable, and the Company recorded an impairment loss of $358.0 million.”
Thus, officially, the company posted a loss of $243.2 million or $4.88 a share, vs. a loss of $385.1 million or $9.10 a share a year earlier.
For the first nine months of the fiscal year, the company posted revenue of $159.4 million, down from $168.3 million in the first nine months of the prior fiscal year. The loss for the nine months was $264.1 million or $5.60 a share, vs. $436.3 million or $10.31 a share in the first nine months of the prior fiscal year.
The company also said it is laying off 300 employees, most of whom work in Michigan. That’s one-fifth of its work force.
Energy Conversion Devices blames its first-quarter woes on “significant industry-wide disruptions in the company’s key European solar markets.”
In its SEC filing, ECD said: “We believe that there remains strong interest in alternative energy in general and solar in particular, but existing global political and financial conditions are significantly disrupting key solar markets. Our United Solar Ovonic segment has been significantly impacted by these disruptions, as reflected by the substantial decline in our solar shipments, revenues and income during the fiscal third quarter, principally due to our concentration on two of these markets, Italy and France. While we believe that these markets will return as attractive markets for us, albeit with different dynamics, we have undertaken several initiatives to improve our business to respond to the near disruptions and better position our company for the future.”
In addition to the layoffs, the company said it would boost its focus on the North American market and sell more to building materials companies based on the ease of its products’ installation.
Jay Knoll has been named interim president while a nationwide search for a CEO will be launched. Knoll was previously ECD’s executive vice president, general counsel, chief administrative officer and corporate secretary. Knoll’s base salary was increased to $335,000. In addition, the company named Knoll a participant under the Senior Management Retention Plan described below with a retention benefit equal to 75 percent of his base salary.
The layoffs mean a worldwide glut in solar panel production is apparently hitting home. A speaker at the Michigan Growth Capital Symposium Wednesday said global solar panel production is currently about twice worldwide annual demand of 20 gigawatts.