BURNABY, BC, May 15 /PRNewswire-FirstCall/ -- Day4 Energy Inc. (TSX: DFE), a solar electric technology developer and manufacturer of superior performance solar modules, today reported operating results for the first quarter of 2009.
"The first quarter of 2009 was perhaps one of the most challenging quarters in the history of the solar sector," said George Rubin, president of Day4 Energy. "In addition to the typical seasonality expected for this time of year in the solar industry, our first quarter results were impacted by the ongoing credit crisis and difficult global economic conditions. In response to these grim market conditions, significant decline in sales and associated deterioration in operating margin, management has continued defensive actions initiated in the fourth quarter with a demand driven manufacturing approach. We have taken further steps to reduce our operating expenses and purchase commitments as well as protecting cash and working capital to the greatest extent possible."
"At the same time there are some positive aspects to the tough times we are experiencing. Severe economic conditions have dramatically accelerated material cost reduction across the value chain. While this rapid average selling price deterioration clearly poses significant challenges to manufacturers in the near term, in the medium to long term this development is exactly what the industry needs to move closer to achieving grid parity. Further, the fundamental rebalancing of margin and power along the value chain continuum are important drivers for the long-term health and viability of the industry. Finally, in the short term, the rapid price declines should have driven up returns for capital investments in PV projects to a higher level and should offer a tremendous opportunity for those willing to invest in projects, particularly in countries such as Germany, Italy and ultimately North American locations with strong subsidy programs."
"We are working cooperatively with our channel partners and cell suppliers to manage through these times. From the beginning our approach has been a collaborative model and we are pleased that the relationships we have cultivated with our suppliers and partners are enabling us to weather this storm together," he concluded.
Q1 2009 FINANCIAL RESULTS Worldwide Product Revenues
First quarter revenues of $4.3 million decreased by $12.3 million or 74% from the prior quarter revenues and by $9.2 million or 68% for the same period in 2008. While seasonality is typical for this sector, unusually adverse weather conditions in the first quarter combined with the economic downturn affected sales to a much greater extent than expected.
Gross Margins
The gross loss of 11% for the first quarter compared to a loss of 45% in the fourth quarter 2008 and a gross margin of 2% for the same period in 2008. Adjusted gross losses before inventory write-down were 4% and 13% for the first quarter 2009 and the fourth quarter 2008 respectively. As outlined at the end of the fourth quarter 2008, further decreases in average selling price (ASP), the resulting inventory write-down, foreign exchange rate fluctuations and declining sales volume resulted in a deterioration of gross margins.
Expenses
For the first quarter of 2009, general and administrative expenses were $3.0 million, a decrease of $7.4 million over the prior quarter expenses of $10.4 million and an increase of $1.8 million for the same period in 2008. The increase in the year over year period comparison resulted primarily from the increase in staff, operating a larger facility and activities related to the start up of outsource manufacturing at Jabil Inc. After adjusting for expenses not expected to recur (allowance for doubtful accounts, workforce reduction plan and outsourced production start-up costs), our G&A expenses have decreased quarter over quarter by $1.5 million from $3.6 million due to management cost reduction efforts. Allowance for doubtful account expense for the first quarter is $nil compared to $6.3 million in the previous quarter. Though we could expect some bad debts expense in a normal course of business, with the company's current credit procedures and processes, we do not expect the expense to recur in the magnitude as in the fourth quarter 2008.
Sales and marketing expenses of $0.6 million for the first quarter 2009 were relatively stable compared to the same period in 2008 and represented a slight decrease from $0.8 million for the prior quarter.
R&D expenses of $0.5 million were also relatively consistent with the prior quarter and represented a slight increase from the same period 2008 reflecting our continued commitment to developing our PV technologies and opportunities provided by the Day4 Electrode.
Loss Per Share
The net loss for the first quarter 2009 was $2.6 million ($0.07) per share compared with ($0.79) per share the prior quarter and ($0.02) per share for the same period in 2008. Higher net loss in the first quarter compared to the same period in 2008 was mainly attributed to the increase in operating costs from an increase in staff, operating a larger facility, and activities relating to the start up of Jabil as well as the impact of the difficult market conditions on our gross margins.
Cash and Short-Term Investments
At March 31, 2009, we had $22 million in cash and short term investments, including restricted cash of $5 million, down from total cash and short term investments of $25.8 million at December 31, 2008. Cash used by operations was $10.6 million for the first quarter 2009, a decrease of $2.6 million over the same period in 2008.
Outlook
As outlined in this section in our Q42008 earnings release, the underlying instability in the economy and extended weather delay in our primary market well into the first quarter of 2009 were expected to impact our results. Further, we had also outlined that in addition to an expected impact on our revenues and gross margins in the first half of the year, the continued downward pressure on ASP would likely result in further write-downs of inventory in the first quarter of 2009. Given the continued slowdown in demand combined with continued deterioration of ASP we have taken write-downs in the first quarter and expect further write-downs may continue into the second quarter.
Earlier this year we reduced production at our Burnaby facility to minimal levels. In response to continued slow demand we have now halted production at that site to avoid build up of additional inventory and manage our cash position. Should demand pick up through the third quarter, as we currently expect, we will be able to move our current inventory while the Jabil facility completes its ramp and becomes fully operational. Our priority, in addition to depleting current inventory, will be to continue with the production ramp at Jabil to take advantage of the lower cost, more efficient production and closer proximity to our primary market. We will maintain some production at the Burnaby facility as a pilot plant for further technology development, and we expect to utilize production capacity at our Burnaby facility to meet demand and serve the North American market in the future.
We continue to explore the potential for our product in a number of markets with a key focus on Germany, Italy, Ontario and the US as key drivers for the next few months and into 2010. We remain optimistic about the future potential of this industry however near term pressure resulting from the global recession, consumer confidence issues and continued tight credit markets make it difficult to provide accurate and reliable guidance at this time.
Other Business
The Day4 Energy Annual General Meeting will be held on June 15th, 2008 at 10am at the company's headquarters in Burnaby.
Directors Mr. Thomas J. Longworth and Mr. Mark Galvin are not standing for re-election. The Board would like to acknowledge and thank both board members for their valuable expertise and significant contributions to Day4 Energy during their respective tenures.
The Board has also approved the appointment of John Stonier to the role of VP Strategic Planning and Treasurer.
Detailed financial results and management's discussion and analysis can be found on our website at http://www.day4energy.com/ or on SEDAR at http://www.sedar.com/.
About Day4 Energy
Day4 Energy Inc. is Canada's largest manufacturer of high performance photovoltaic (PV) modules for residential, commercial and utility scale installations around the world. By fundamentally improving on the design and assembly of solar modules, Day4 Energy produces unique PV panels of high power density, increased lifetime and uncompromised aesthetic appearance. Day4 Energy partners with international technology leaders to develop and deliver IEC- and UL-certified solar products to customers throughout Europe and North America. Day4 Energy is listed on the Toronto Stock Exchange under the symbol "DFE". For more information, please visit http://www.day4energy.com/.
Conference Call Information
Day4 Energy's management will conduct a conference call at 8:30am (ET) May 15, 2009 to review the company's first-quarter financial results. The conference call will be webcast live over the Internet and can be accessed by logging on to Day4 Energy's website, http://www.day4energy.com/, prior to the event. The call can also be accessed by dialing 1-800-319-4610 (Canada and US) or 1-604-638-5340 (International) prior to the start of the call. The webcast will also be archived on the company's website.
Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements include, among other things, statements relating to our expectations regarding our revenues, expenses, cash flows, operating performance and future profitability; and our statements under the heading "Outlook".
The forward-looking statements contained in this news release are based on assumptions, which include, but are not limited to, our successful implementation of outsource manufacturing with Jabil; our ability to obtain an adequate spread between our module average selling price and cost of raw materials, including PV cells; achieving increased PV cell and PV module efficiencies; expanding our existing product line; building the Day4 brand, attracting customers and developing and maintaining customer and supplier relationships; continuing our strong relationships with our suppliers; effectively managing foreign exchange risks; protecting our intellectual property rights and not infringing on the intellectual property rights of third parties; timely processing by certification agencies of new products; and complying with applicable governmental regulations and standards.
Such forward-looking statements are subject to risks, uncertainties and other factors, including those listed in our Annual Information Form filed with Canadian securities regulatory authorities, many of which are beyond our control and each of which contributes to the possibility that our forward-looking statements will not occur or that actual results, performance or achievements may differ materially from those expressed or implied by such statements. These risks, uncertainties and other factors include, but are not limited to, the impact of general economic, market or business conditions; risks related to the implementation of outsource manufacturing with Jabil; our limited operating history; risks relating to the protection of our intellectual property and intellectual property infringement claims by third parties; our dependence on a limited number of PV cell suppliers; government subsidies and economic incentives for PV power could be reduced or eliminated; our ability to achieve higher PV module efficiencies; our dependence on a limited number of customers and our lack of long-term purchase contracts; demand for PV modules; technological changes in the PV power industry could render our products uncompetitive or obsolete; unexpected warranty expenses; fluctuations in exchange rates; product liability claims; compliance with environmental regulations; and other factors, many of which are beyond our control.
The forward-looking statements made in this news release relate only to events or information as of the date indicated above. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Day4 Energy Inc. Consolidated Balance Sheets As at March 31, 2009 and December 31, 2008 ------------------------------------------------------------------------- March 31, December 31, 2009 2008 $ $ (unaudited) Assets Current assets Cash and cash equivalents 12,954,941 14,730,294 Restricted cash 5,083,550 11,085,230 Short-term investments 4,000,000 - Accounts receivable 2,598,473 3,320,849 Investment tax credits receivable 600,000 600,000 Other receivables 4,957,880 1,511,301 Inventory 42,432,778 35,018,558 Prepaid expenses 384,965 379,429 Equipment held for sale - 2,704,913 ----------------------------- 73,012,587 69,350,574 Property, plant and equipment 23,942,579 28,254,320 ----------------------------- 96,955,166 97,604,894 ----------------------------- ----------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 16,515,268 12,504,078 Taxes payable 830,000 830,000 Short-term debt 157,737 142,940 Deferred revenue - current 150,569 168,012 Derivative instruments - 2,157,218 ----------------------------- 17,653,574 15,802,248 Long-term debt 1,143,521 1,143,521 ----------------------------- 18,797,095 16,945,769 Non-controlling interest - 26,410 Shareholders' Equity Share capital Authorized Unlimited number of common shares Unlimited number of preferred shares Issued and outstanding 36,679,366 (2008 - 36,679,366) common shares 130,952,257 130,952,257 Contributed surplus 2,241,585 2,091,952 Warrants 2,279,890 2,279,890 Deficit (57,315,661) (54,691,384) ----------------------------- 78,158,071 80,632,715 ----------------------------- 96,955,166 97,604,894 ----------------------------- ----------------------------- Day4 Energy Inc. Consolidated Statements of Operations, Comprehensive Loss and Deficit For the three months ended March 31, 2009 and 2008 (unaudited) ------------------------------------------------------------------------- 2009 2008 $ $ Revenue Sales 4,344,545 13,494,386 Cost of goods sold 4,808,157 13,223,997 ----------------------------- Gross (loss) margin (463,612) 270,389 ----------------------------- Expenses General and administrative 3,004,701 1,158,704 Research and development 515,707 480,483 Selling and marketing 650,858 665,317 Depreciation 3,417 94,524 Amortization - 71,055 ----------------------------- 4,174,683 2,470,083 ----------------------------- Loss before undernoted 4,638,295 2,199,694 ----------------------------- Foreign exchange gain (loss) 1,923,033 1,439,996 Unrealized gain (loss) on derivative instruments - (757,750) Interest and other income 65,721 831,867 Interest expense (31,132) - Gain on disposition of property, plant and equipment 26,730 - Gain on disposition of subsidiary 24,677 - Accretion expense (6,334) (46,541) ----------------------------- 2,002,695 1,467,572 ----------------------------- Loss before non-controlling interest 2,635,600 732,122 Non-controlling interest 11,323 - ----------------------------- Loss and comprehensive loss for the year 2,624,277 732,122 Deficit - Beginning of period 54,691,384 20,818,033 ----------------------------- Deficit - End of period 57,315,661 21,550,155 ----------------------------- ----------------------------- Net loss per share - basic and diluted 0.07 0.02 ----------------------------- ----------------------------- Weighted average number of shares outstanding - basic and diluted 36,679,366 36,605,836 ----------------------------- ----------------------------- Day4 Energy Inc. Consolidated Statements of Cash Flows For the three months ended March 31, 2009 and 2008 (unaudited) ------------------------------------------------------------------------- 2009 2008 $ $ Cash flows from operating activities Loss and comprehensive loss for the year (2,624,277) (732,122) Items not affecting cash Stock-based compensation 149,633 219,051 Accretion and royalty premium on IRAP-TPC loan - 41,749 Depreciation and amortization 416,933 338,069 Gain on disposal of property, plant and equipment (26,730) - Gain on disposal of subsidiary (24,677) - Unrealized foreign exchange (gain) loss (197,094) (239,506) Change in value of derivative instruments (2,157,218) 757,750 Deferred lease inducement - (5,623) Non-controlling interest (11,323) - Changes in non-cash working capital items Accounts receivable 1,233,612 (10,795,566) Other receivables (3,446,579) 979,242 Inventory (7,414,220) 114,650 Prepaid expenses (5,536) 75,059 Accounts payable and accrued liabilities 3,578,464 (4,362,526) Deferred revenue (17,443) 415,506 ----------------------------- (10,546,455) (13,194,267) ----------------------------- Cash flows from investing activities Purchase of short-term investments (4,000,000) - Proceeds from sale of short-term investments - 10,000,000 Change in restricted cash 6,001,680 (11,198,118) Purchase of property, plant and equipment (1,587,187) (8,576,822) Proceeds from disposal of property, plant and equipment 8,213,638 - Proceeds from sale of subsidiary - net of cash included in sale of 29,098 9,590 - ----------------------------- 8,637,721 (9,774,940) ----------------------------- Cash flows from financing activities Proceeds from exercise of warrants - 492,500 ----------------------------- - 492,500 ----------------------------- Impact of foreign exchange on cash and cash equivalents 133,381 702,321 ----------------------------- Decrease in cash and cash equivalents 1,775,353 21,774,386 Cash and cash equivalents - Beginning of period 14,730,294 53,093,136 ----------------------------- Cash and cash equivalents - End of period 12,954,941 31,318,750 ----------------------------- ----------------------------- Supplemental cash flow information Cash paid for interest 1,782 - Cash received for interest 15,359 404,135 Non-cash transactions Conversion of warrants to common shares - 354,097
Day4 Energy Inc.
CONTACT: Therese Hayes, Head, Corporate Development, Day4 Energy Inc.,
(604) 296-0434, thayes@day4energy.com; Agnieszka Pozniak, Media Contact, Day4
Energy Inc., (604) 297-0444, media@day4energy.com
