Day4 Energy Reports First-Quarter 2010 Results

BURNABY, BC, May 11 /CNW/ - Day4 Energy Inc. (TSX: DFE), a solar electric technology developer and supplier of premium solar energy solutions, today reported operating results for the first quarter 2010.

"The beginning of 2010 in our industry has been characterized by significant increases in overall product demand, intense speculation regarding the changes to the German PV subsidy and a clear realization that simply making non-differentiated products is not enough to sustainably compete in the new post-2009 environment," said George Rubin, president of Day4 Energy. "It is the rapidly emerging need for competitive differentiation that we believe will have the most profound impact on the PV industry going forward. We have anticipated the emergence of this trend for some time and have taken the necessary steps to position our company to capitalize on the opportunity that this trend presents."

Key events of the quarter and subsequent weeks included:

    
    -   Achieved highest historical gross margin, surpassing the previous
        high set in the fourth quarter 2009, despite seasonality and
        resultant pressure on sales volume that is typically experienced in
        the first quarter.

    -   Increased capacity at Jabil to meet demand requirements and further
        improve manufacturing cost structure with a goal to bring capacity to
        120MW per annum by the end of the second quarter 2010.

    -   Demonstrated progress on the introduction of the 60MC-I product line
        with the achievement of IEC certification.

    -   Expansion into new and emerging markets with the announcement of a
        distribution partnership with Regency Solar for the Australian
        market.

    -   Enhancements to the business model to take advantage of the focus on
        product differentiation with the announcement of an agreement in
        principle to acquire ACI-ecotec GmbH & Co. KG, a privately owned
        specialized photovoltaic (PV) equipment design and manufacturing
        company based in Germany.
    

"The combination of the Day4 proprietary and patented technology and ACI's specialized know-how and equipment allows Day4 to immediately launch its highly anticipated turnkey manufacturing technology solution for production of PV cells and PV modules," added George Rubin. "The key advantage of the franchise model is that not only are we shifting our operational activities to higher margin products we are also implementing a strategy to increase market share in the future."

Q1 2010 FINANCIAL RESULTS

Worldwide Product Revenues

First quarter revenues of $23 million increased by $18.6 million or 428% from the same period in 2009. First quarter 2010 revenues represented a decrease of $13.7 million or 37% from the fourth quarter of 2009 mainly due to the natural seasonality of the company's core market in Germany. The significant increase from the same period in 2009 reflects solid recovery in demand in our primary markets following the impact of the global economic recession and financial crisis in the first half of 2009. The decrease from the prior quarter revenues reflected the combination of the typical seasonality that is seen in the first quarter of the year and the impact of sales into projects in the fourth quarter 2009 that were not repeated in the first quarter of 2010.

Gross Margins

Gross margin was $1.7 million (7%) for the first quarter 2010 as compared to a gross loss of $0.5 million (11%) in the first quarter 2009 and a gross margin of $2.6 million (7%) in the fourth quarter 2009. The significant improvement in our margin started from the second half of 2009 as a direct result of the transition to the outsourced manufacturing cost structure. We were able to maintain the 7% gross margins we have seen in the prior quarter despite the effects of an unfavourable foreign exchange impact and the typical seasonal slowdown that we historically experience in our first quarter of the year. Cost relating to low capacity utilization was nil in the first quarter of 2010 compared to $0.8 million in the fourth quarter of 2009.

Expenses

For the first quarter of 2010, general and administrative (G&A) expenses were $2.5 million, a decrease of $0.5 million from the $3.0 million for the same period in 2009. G&A expenses for the first quarter of 2009 included expenses relating to the workforce reduction plan and the start-up of Jabil offset by a recovery of allowance for doubtful accounts totaling $0.7 million. Compared to the previous quarter our G&A expenses have increased by $1.8 million from $0.7 million. The increase in expenses is primarily attributable to one-time costs relating to the due diligence activities for the acquisition of ACI-ecoTech GmbH & Co. KG (ACI) in the first quarter 2010, and a $1.6 million recovery of bad debts in the fourth quarter 2009 that did not recur in 2010. We expect to incur additional costs in the subsequent months relating to pre- and post-closing on the acquisition of ACI.

Sales and marketing expenses of $0.8 million for the first quarter 2010 compared to $1 million and $0.7 million in the previous quarter and the same period in 2009 respectively. The greater expenses in the previous quarter primarily reflect seasonal tradeshow activity during the period. In the second half of 2009, we expanded our sales force to meet expectations of the growing European markets with a goal to strengthen the team with the addition of seasoned management experience and leadership. This focused and dedicated effort is a key requirement to address the rapidly expanding field of opportunities in each of our core markets. This expansion contributed to the increased sales and marketing expenses in the first quarter 2010 when compared to the same period expenses in 2009.

R&D expenses in the first quarter were $0.9 million compared to $1 million in the prior quarter and $0.5 million in the first quarter of 2009. The increase in R&D expenses in 2010 compared to the prior year related primarily to the costs associated with our Burnaby facility which is now used almost exclusively for R&D following the transfer of production to Jabil. Starting in the third quarter of 2009, all production equipment, personnel and facility costs, with the exception of Day4(R) Electrode wire production, have been repurposed from production to R&D.

Loss Per Share

The net loss for the first quarter 2010 was $1.9 million ($0.05 per share) compared with a net income of $0.6 million ($0.02 per share) for the previous quarter and a net loss of $2.6 million ($0.07 per share) for the same period in 2009. Higher net loss in the first quarter 2010 compared to the previous quarter was mainly attributed to a recovery for doubtful accounts of $1.6 million in the previous quarter. Lower net loss in the first quarter 2010 compared to the same period in 2009 was mainly attributed to the improved gross margin in the first quarter 2010.

Cash and Short-Term Investments

Management made the strategic decision at the beginning of the year to build up inventory during the first two months of the year, when we typically experience seasonal slowdowns, in order to be able to take advantage of the anticipated demand in the subsequent months. The anticipated demand strength was confirmed as weather conditions improved in our core markets. Working capital at the end of the first quarter 2010 was $31.4 million compared to $35.9 million at the end of the previous quarter. Cash and cash equivalents including restricted cash and short-term investments were $16.3 million at March 31, 2010, a decrease of $10.9 million from $27.2 million at December 31, 2009. Cash and cash equivalents have decreased since December 31, 2009 primarily due to the build up of inventory from $11.1 million to $18.4 million at March 31, 2010.

Detailed financial results and management's discussion and analysis can be found on our website at www.day4energy.com or on SEDAR at www.sedar.com.

About Day4 Energy

Day4 Energy Inc. is a Canadian company dedicated to providing high performance photovoltaic (PV) solutions for residential, commercial and utility scale installations. By fundamentally improving on the design and assembly of solar cells and modules, the Company 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 around the world. Day4 Energy is listed on the Toronto Stock Exchange under the symbol "DFE". For more information, please visit www.day4energy.com.

Conference Call Information

Day4 Energy's management will conduct a conference call at 8:30am (ET) May 11, 2010 to review the company's first quarter 2010 financial results. The call can be accessed by dialing 1-800-319-4610 (Canada and US) or 1-604-638-5340 (International) prior to the start of the call. Following the call a recording of the conference call will be archived on Day4 Energy's website, www.day4energy.com

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. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target", and similar words suggesting future events or future performance.

The forward-looking statements contained in this news release are based on assumptions, which include, but are not limited to, our ability to continue to successfully outsource the majority of our annual PV manufacturing capacity; our ability to manage and meet demand for our products; 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 and our dependence on Jabil for the manufacture of our products; the meeting of conditions precedent to the completion of the acquisition of ACI and the approval of the transaction by the Toronto Stock Exchange; our dependence on a limited number of PV cell suppliers; price fluctuations that may impact relations with existing customers; risks relating to the protection of our intellectual property and intellectual property infringement claims by third parties; our reliance on a limited number of suppliers; government subsidies and economic incentives for PV power could be reduced or eliminated; the financial strength of our competitors; competition from other forms of renewable energy; our ability to manage growth effectively; our ability to open up new markets for our products; demand for PV modules may reduce; technological advances from competitors that may render our products uneconomic or obsolete; the impact of global events; 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, 2010 and December 31, 2009
    -------------------------------------------------------------------------

                                                     March 31    December 31
                                                         2010           2009
                                                            $              $
                                                   (unaudited)

    Assets

    Current assets
    Cash and cash equivalents                       7,120,400     17,804,941
    Restricted cash                                   185,000        335,000
    Short-term investments                          9,037,534      9,067,397
    Accounts receivable                             5,010,416      3,598,384
    Investment tax credits receivable                 600,000        600,000
    Other receivables                               7,197,709      8,447,806
    Inventory                                      18,409,002     11,078,173
    Prepaid expenses                                  467,065        564,336
                                                -----------------------------
                                                   48,027,126     51,496,037

    Property, plant and equipment                  19,634,845     21,679,300
                                                -----------------------------
                                                   67,661,971     73,175,337
                                                -----------------------------
                                                -----------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities       14,215,661     13,321,691
    Taxes payable                                     830,000        830,000
    Short-term debt                                 1,152,858      1,143,521
    Deferred revenue                                  410,516        322,331
                                                -----------------------------
                                                   16,609,035     15,617,543

    Shareholders' Equity

    Share capital
    Authorized
      Unlimited number of common shares
      Unlimited number of preferred shares

    Issued and outstanding
      36,739,366 (2009 - 36,739,366) common
       shares                                     130,972,498    130,972,498

    Contributed surplus                             2,681,501      2,581,508

    Warrants                                        2,279,890      2,279,890

    Accumulated other comprehensive income         (7,941,053)    (3,201,330)

    Deficit                                       (76,939,900)   (75,074,772)
                                                -----------------------------
                                                   51,052,936     57,557,794
                                                -----------------------------
                                                   67,661,971     73,175,337
                                                -----------------------------
                                                -----------------------------



    Day4 Energy Inc.
    Consolidated Statements of Operations and Deficit
    For the three months ended March 31, 2010 and 2009 (unaudited)
    -------------------------------------------------------------------------

                                                         2010           2009
                                                            $              $

    Revenues                                       22,924,148      4,344,545

    Cost of revenues                               21,238,879      4,808,157
                                                -----------------------------

    Gross margin (loss)                             1,685,269       (463,612)
                                                -----------------------------

    Expenses
    General and administrative                      2,520,073      3,004,701
    Research and development                          850,714        515,707
    Less:  Government assistance                      (77,019)             -
    Selling and marketing                             751,071        650,858
    Depreciation                                      479,359          3,417
                                                -----------------------------
                                                    4,524,198      4,174,683
                                                -----------------------------
    Loss before undernoted                          2,838,929      4,638,295
                                                -----------------------------

    Foreign exchange gain                             947,268      1,923,033
    Interest and other income                          47,999         65,721
    Interest expense                                  (21,466)       (31,132)
    Gain (loss) on disposal of property,
     plant and equipment                                    -         26,730
    Gain on disposition of subsidiary                       -         24,677
    Accretion expense                                       -         (6,334)
                                                -----------------------------
                                                      973,801      2,002,695
                                                -----------------------------
    Loss before non-controlling interest            1,865,128      2,635,600

    Non-controlling interest                                -         11,323
                                                -----------------------------

    Loss for the period                             1,865,128      2,624,277

    Deficit - Beginning of period                  75,074,772     54,691,384
                                                -----------------------------

    Deficit - End of period                        76,939,900     57,315,661
                                                -----------------------------
                                                -----------------------------

    Net loss per share - basic and diluted               0.05           0.07
                                                -----------------------------
                                                -----------------------------

    Weighted average number of shares
     outstanding - basic and diluted               36,739,366     36,679,366
                                                -----------------------------
                                                -----------------------------



    Day4 Energy Inc.
    Consolidated Statements of Cash Flows
    For the three months ended March 31, 2010 and 2009 (unaudited)
    -------------------------------------------------------------------------

                                                         2010           2009
                                                            $              $

    Cash flows from operating activities
    Loss for the period                            (1,865,128)    (2,624,277)
      Items not affecting cash
        Stock-based compensation                       99,993        149,633
        Depreciation and amortization                 740,905        416,933
        Loss (gain) on sale of property,
         plant and equipment                                -        (26,730)
        Gain on disposal of subsidiary                      -        (24,677)
        Unrealized foreign exchange (gain) loss    (1,014,442)      (197,094)
        Change in value of derivative instruments           -     (2,157,218)
        Non-controlling interest                            -        (11,323)
    Changes in non-cash working capital items
      Accounts receivable                          (1,805,835)     1,233,612
      Other receivables                               601,891     (3,446,579)
      Inventory                                    (8,766,539)    (7,414,220)
      Prepaid expenses                                 52,810         (5,536)
      Accounts payable and accrued liabilities      1,958,670      3,578,464
      Deferred revenue                                122,335        (17,443)
                                                -----------------------------
                                                   (9,875,340)   (10,546,455)
                                                -----------------------------

    Cash flows from investing activities
    Purchase of short-term investments                      -     (4,000,000)
    Change in restricted cash                         150,000      6,001,680
    Purchase of property, plant and equipment        (526,597)    (1,587,187)
    Proceeds from sale of property, plant
     and equipment                                          -      8,213,638
    Proceeds from sale of subsidiary -
     net of cash included in sale of 29,098                 -          9,590
                                                -----------------------------
                                                     (376,597)     8,637,721
                                                -----------------------------
    Cash flows from financing activities                    -              -
                                                -----------------------------
                                                            -              -
                                                -----------------------------
    Impact of foreign exchange on cash flows         (432,604)       133,381
                                                -----------------------------
    Increase (decrease) in cash and
     cash equivalents                             (10,684,541)    (1,775,353)

    Cash and cash equivalents -
     Beginning of period                           17,804,941     14,730,294
                                                -----------------------------
    Cash and cash equivalents - End of period       7,120,400     12,954,941
                                                -----------------------------
                                                -----------------------------

    Supplemental cash flow information
    Cash paid for interest                              1,177          1,782
    Cash received for interest                             44         15,359



    Day4 Energy Inc.
    Consolidated Statements of Comprehensive Loss and Accumulated
     Other Comprehensive Loss
    For the three months ended March 31, 2010 and 2009 (unaudited)
    -------------------------------------------------------------------------

                                                         2010           2009
                                                            $              $

    Loss for the period                             1,865,128      2,624,277

    Unrealized foreign exchange losses on
     translation of consolidated financial
     statements to the presentation currency        4,739,723              -

                                                -----------------------------
    Other Comprehensive Loss                        4,739,723              -
                                                -----------------------------
    Comprehensive Loss                              6,604,851      2,624,277
                                                -----------------------------
                                                -----------------------------


                                                         2010           2009
                                                            $              $

    Accumulated Other Comprehensive Loss -
     Beginning of period                            3,201,330              -

    Unrealized foreign exchange losses on
     translation of consolidated financial
     statements to the presentation currency        4,739,723              -

                                                -----------------------------
    Accumulated Other Comprehensive Loss -
     End of period                                  7,941,053              -
                                                -----------------------------
                                                -----------------------------
    

%SEDAR: 00026066E

SOURCE Day4 Energy Inc.

For further information: For further information: Therese Hayes, Head, Corporate Development, Day4 Energy Inc., (604) 296-0434, thayes@day4energy.com; Heather Ballachey, Media Contact, Day4 Energy Inc., (604) 297-0444, media@day4energy.com

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