Day4 Energy Reports Fourth-Quarter and Year End 2009 Results

Fourth Quarter Strongest in History with Revenues of $36.6 Million

BURNABY, BC, March 16 /CNW/ - Day4 Energy Inc. (TSX: DFE), a solar electric technology developer and supplier of premium solar energy solutions, today reported operating results for the fourth quarter and full year 2009.

"2009 was far from an ordinary year. Global economic events that started to unfold in late 2008 have certainly had a profound impact on the entire PV industry. In the first months of the year market demand for PV modules plummeted and product average selling prices deteriorated rapidly. Day4's management responded to these challenges by implementing aggressive cash preservation measures, companywide cost reduction and accelerated transition to the outsourced manufacturing model," said George Rubin, president of Day4 Energy. "We ended 2009 with the strongest quarter in the history of our company. Strong sales, superior cost structure of our outsourced manufacturing as well as recovery in accounts receivable previously accounted for as bad debt expense contributed to the achievement of one of the most significant milestones in our limited operating history - EBITDA profitability during the fourth quarter of 2009. Finally, we ended the year with a cash position of $27.2 million, 5% higher than at the end of 2008."

    
    Key events of the quarter and full year 2009 included:

    1.  Strongest six months performance in the history of the company. The
        company's revenues during the second half of 2009 have reached $50
        million CDN with $36.6 million coming from the 4th quarter sales.
        This improvement in sales was partly a result of improved market
        conditions and partly due to the steps taken by management during the
        year to stimulate demand through actively focusing on new markets
        opportunities, trade credit insurance and pricing strategy.
        Notwithstanding slow demand in the first six months of 2009, we
        managed to maintain our product turn-over at approximately the same
        level as in 2008 while posting the strongest operating performance in
        the company's history in the second six months of the year.

    2.  Gross profit margins have further improved substantially on increased
        volume and superior cost structure of the outsourced manufacturing
        facility, adjusted gross profit realized during the 4th quarter as
        well as over the course of the entire 6 month period during the
        second half of 2009 was approximately 7%.

    3.  During the 4th quarter of 2009 the company has achieved perhaps one
        of the most significant milestones in our limited operating history -
        EBITDA profitability. This achievement was possible due to a number
        of factors including substantial improvement in production cost
        structure, volume increase as well as tight credit and cash
        collection policies that resulted in recovery of $1.7 million in
        accounts receivable previously accounted for as bad debt.

    4.  In 2009, we explored and developed opportunities to expand our
        expertise and product offerings into the investor funded PV project
        space, where we sell our modules into PV projects that are funded by
        investors. Revenue related to investor funded projects in 2009 total
        $11.2 million relating to 2.4MW project with Günter Heiss Solar GmbH
        & Co.KG and 1.0MW phase I and II projects with SolarFarm Hüfingen.

    5.  We successfully completed our implementation of outsourcing
        manufacturing with Jabil in Poland. The outsourced production reduces
        the overall capital intensity of the business and leverages existing
        industry infrastructure to achieve maximum capital utilization
        efficiency and economies of scales. Positioning our outsourced
        manufacturing within our largest market enables us to manage our
        working capital requirements by eliminating long trans-continental
        shipping times. This additionally provides a natural hedge against
        foreign exchange risk by operating within the same currency as our
        primary sales market, Europe.

    6.  We continued to expand 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.

    7.  As a result of the continued advancements in our R&D efforts, we
        introduced our second major product, the 60MC-I modules with Guardian
        Technology(TM). This Guardian Technology(TM) lends itself
        particularly well to the roof-top market since this is where it
        offers the biggest advantage. Both North American and European
        legislation is starting to favour this market. The key advancement in
        our proprietary new module technology minimizes energy losses caused
        by shading over the modules as well as the effects of debris such as
        leaves and bird droppings, all of which can dramatically reduce or
        eliminate electricity production from a standard module. As Day4's
        60MC-I modules are able to operate well even when partially shaded,
        it is possible to arrange them closer together, enabling a larger
        number of modules to be installed in a smaller area with a greater
        energy yield, something that is key on a rooftop where space is
        limited.
    

Q4 and YE 2009 FINANCIAL RESULTS

Worldwide Product Revenues

Fourth quarter revenues of $36.6 million increased by $23.3 million or 175% from the prior quarter revenues and by $20.0 million or 120% for the same period in 2008. The increase in revenues compared to the prior quarter is due to a solid recovery in demand in our primary markets. Full year revenues for 2009 were $60.0 million compared to $76.8 million for the prior year. The decrease in revenue versus the same period in 2008 was primarily due to the impact of the global economic recession and financial crisis that started in the fourth quarter 2008. Notwithstanding slow demand in the first six months of 2009, we have managed to maintain our product turn-over at approximately the same level as in 2008 while posting the strongest operating performance in the company history in the second six months of the year.

Gross Margins

Gross margin was $2.6 million for the fourth quarter as compared to $0.1 million in the third quarter 2009 and a gross loss of $7.4 million in the same period in 2008. Gross margins have sequentially improved through the end of the year as there were no inventory write-downs in the fourth quarter and period costs relating to fixed overhead costs due to low capacity utilization at Jabil of $0.8 million. These costs continue to be reduced from the period costs in Q3 of $0.9 million that unfavorably impacted our gross margin in that quarter. During the second half of 2009, Day4 revenues reached $50 million while adjusted gross margins averaged 7.1% over the same time period, compared to adjusted gross loss of 5.5% over the second half of 2008.

Gross loss was $8.5 million for 2009 compared to $7.2 million in 2008. The higher gross loss during the year was primarily due to inventory write-downs of $9.8 million and period costs due to low capacity utilization of $4.1 million. In 2008, inventory write-downs totaled $5.2 million. While the year over year gross losses increased from 9% in 2008 to 14% in 2009 a number of economic factors contributed to the increase. Adjusted gross margin for 2009 was 5% compared to a loss of 3% in 2008. Adjusted gross margins removes the costs relating to inventory write-downs, inefficiency cost due to low capacity utilization and the zero cost based revenue to provide a view of the margin under normal conditions where production is operating at full capacity and when PV module prices are more stable. The improvement in the adjusted gross margin mainly resulted from the outsourcing of our manufacturing to Poland as well as management's continuous efforts in working closely with our material suppliers to negotiate raw material price structures compatible with our product pricing.

Expenses

For the fourth quarter of 2009, general and administrative (G&A) expenses were $0.7 million, compared to the prior quarter expenses of $1.9 million and expenses in the fourth quarter of 2008 of $10.4 million. 2009 full year general and administrative expenses were $7.6 million compared to $14.9 million for 2008. Several factors contributed to this decrease and can be divided into operating and non-operating expenses. While operational activities remained relatively stable between 2009 and 2008 we did decrease our G&A staffing levels from forty-one to thirty-three. Specific charges in 2009 included $0.1 million of workforce reduction restructuring costs, outsourcing start-up costs of $1.0 million and a recovery of $1.7 million on allowance for doubtful accounts previously provisioned in 2008. Equivalent non-operating costs included in 2008 were allowance for doubtful accounts of $6.3 million and $0.6 million related to workforce reduction restructuring costs.

Sales and marketing expenses of $1.0 million for the fourth quarter 2009 compared to $0.9 million and $0.8 million in the previous quarter and the same period in 2008 respectively. Full year 2009 sales and marketing expenses were $3.5 million compared to $3.6 million for 2008. In 2009, we continued to expand our activities, initiatives and staff resources from the prior year, including customer relations and sales channel development initiatives with our key customers. During 2009, sales and marketing staff levels increased from fifteen to eighteen.

R&D expenses in the fourth quarter decreased to $1.0 million from $1.1 million in the prior quarter and $0.5 million in the fourth quarter in 2008. 2009 full year R&D expenses were $3.1 million compared to $2.3 million in 2008. The increase in R&D expenses in 2009 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. During the year staff assigned to R&D remained stable at fourteen.

Loss Per Share

The net income for the fourth quarter 2009 was $0.6 million $0.02 per share compared with a net loss of $4.2 million ($0.12) per share for the prior quarter and a net loss of $29.0 million ($0.79) per share for the same period in 2008. Improvement in net income reflected the continuing cost reduction initiatives, new market development and pricing strategy. Fourth quarter results also include the benefit of the recovery of $1.6 million relating to accounts receivable we had previously written-off in 2008 and revenue of $0.9 million related to PV modules with a zero cost base because they had been previously written down.

The net loss for the year ended December 31, 2009 was $20.4 million ($0.56) per share compared to $33.9 million ($0.92) per share for the same period in 2008. The differences in 2008 compared to 2009 were mainly a result of decreased impairment charges on long-lived assets, allowance and recovery for doubtful accounts, increased inventory write-downs, outsourced manufacturing start-up cost, zero cost based module sales and period cost related to low capacity utilization. Net loss adjusted for the above was $9.5 million in 2009 compared to $13.7 million for the prior year.

Cash and Short-Term Investments

At December 31, 2009, we had $27.2 million in cash and short term investments, including restricted cash of $0.3 million, an increase of $6.4 million from total cash and short term investments of $20.8 million at September 30, 2009 and $25.8 million at December 31, 2008. Cash generated from operations was $9.6 million for the fourth quarter 2009, compared to cash outflows of $0.4 million for the third quarter of 2009 and $5.2 million for the same period in 2008.

Cash used by operations for fiscal 2009 was $2.0 million, compared to $32.9 million for the prior year. The decrease in cash used by operations for the year was driven by non-cash working capital decreases relating to inventory and accounts receivable, a direct result of management focus in 2009 to manage working capital and reduce inventory.

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) March 16, 2010 to review the company's fourth-quarter and year end 2009 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; 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 December 31, 2009 and 2008
    -------------------------------------------------------------------------

                                                           2009         2008
                                                              $            $

    Assets

    Current assets
    Cash and cash equivalents                        17,804,941   14,730,294
    Restricted cash                                     335,000   11,085,230
    Short-term investments                            9,067,397            -
    Accounts receivable                               3,598,384    3,320,849
    Investment tax credits receivable                   600,000      600,000
    Other receivables                                 8,447,806    1,511,301
    Inventory                                        11,078,173   35,018,558
    Prepaid expenses                                    564,336      379,429
    Equipment held for sale                                   -    2,704,913
                                                    -------------------------
                                                     51,496,037   69,350,574

    Property, plant and equipment                    21,679,300   28,254,320
                                                    -------------------------
                                                     73,175,337   97,604,894
                                                    -------------------------
                                                    -------------------------

    Liabilities

    Current liabilities
    Accounts payable and accrued liabilities         13,321,691   12,504,078
    Taxes payable                                       830,000      830,000
    Short-term debt                                   1,143,521      142,940
    Deferred revenue                                    322,331      168,012
    Derivative instruments                                    -    2,157,218
                                                    -------------------------
                                                     15,617,543   15,802,248

    Long-term debt                                            -    1,143,521
                                                    -------------------------
                                                     15,617,543   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
      36,739,366 (2008 - 36,679,366) common shares  130,972,498  130,952,257

    Contributed surplus                               2,581,508    2,091,952

    Warrants                                          2,279,890    2,279,890

    Accumulated other comprehensive income           (3,201,330)           -

    Deficit                                         (75,074,772) (54,691,384)
                                                    -------------------------
                                                     57,557,794   80,632,715
                                                    -------------------------
                                                     73,175,337   97,604,894
                                                    -------------------------
                                                    -------------------------



    Day4 Energy Inc.
    Consolidated Statements of Operations and Deficit
    For the years ended December 31, 2009 and 2008
    -------------------------------------------------------------------------

                                                           2009         2008
                                                              $            $

    Revenues                                         60,044,856   76,836,546

    Cost of revenues                                 68,531,840   84,075,455
                                                    -------------------------
    Gross loss                                        8,486,984    7,238,909
                                                    -------------------------
    Expenses
    General and administrative                        7,602,859   14,910,590
    Research and development                          3,149,962    2,256,373
    Less: Investment tax credits and
     Government assistance                             (120,184)    (195,302)
    Selling and marketing                             3,476,698    3,568,579
    Depreciation                                      1,387,853      524,420
    Amortization                                              -      284,218
                                                    -------------------------
                                                     15,497,188   21,348,878
                                                    -------------------------
    Loss before undernoted                           23,984,172   28,587,787
                                                    -------------------------

    Foreign exchange gain                             3,419,896    4,176,771
    Unrealized loss on derivative instruments                 -   (2,157,218)
    Interest and other income                           253,527    2,132,336
    Interest expense                                   (109,848)     (87,507)
    Royalty premium expense                                   -     (476,467)
    Gain (loss) on disposal of property,
     plant and equipment                                 23,603      (39,973)
    Impairment of intangible assets                           -     (541,141)
    Impairment of property, plant and equipment               -   (8,153,256)
    Gain on disposition of subsidiary                    24,677            -
    Accretion expense                                   (22,394)    (144,088)
                                                    -------------------------
                                                      3,589,461   (5,290,543)
                                                    -------------------------
    Loss before non-controlling interest             20,394,711   33,878,330

    Non-controlling interest                            (11,323)      (4,979)
                                                    -------------------------
    Loss for the year                                20,383,388   33,873,351

    Deficit - Beginning of year                      54,691,384   20,818,033
                                                    -------------------------
    Deficit - End of year                            75,074,772   54,691,384
                                                    -------------------------
                                                    -------------------------
    Net loss per share - basic and diluted                 0.56         0.92
                                                    -------------------------
                                                    -------------------------
    Weighted average number of shares outstanding
     - basic and diluted                             36,681,667   36,651,193
                                                    -------------------------
                                                    -------------------------



    Day4 Energy Inc.
    Consolidated Statements of Cash Flows
    For the years ended December 31, 2009 and 2008
    -------------------------------------------------------------------------

                                                           2009         2008
                                                              $            $

    Cash flows from operating activities
    Loss and comprehensive loss for the year        (20,383,388) (33,873,351)
      Items not affecting cash
        Stock-based compensation                        494,797      742,751
        Accretion and royalty premium on
         IRAP-TPC loan                                        -      608,188
        Depreciation and amortization                 2,834,615    2,095,104
        Loss (gain) on sale of property,
         plant and equipment                            (23,603)      39,973
        Valuation write down of inventory             9,812,699    5,222,615
        Impairment of intangible assets                       -      541,141
        Impairment of property, plant and equipment           -    8,153,256
        Gain on disposal of subsidiary                  (24,677)           -
        Unrealized foreign exchange (gain) loss       5,881,263    1,530,165
        Change in value of derivative instruments    (2,157,218)   2,157,218
        Deferred lease inducement                             -      (11,245)
        Non-controlling interest                        (11,323)      (4,979)
    Changes in non-cash working capital items
      Accounts receivable                            (2,967,342)  (2,183,441)
      Investment tax credits receivable                       -      565,000
      Other receivables                              (7,003,902)   1,208,506
      Inventory                                      14,127,685  (25,072,632)
      Prepaid expenses                                 (184,904)     168,015
      Accounts payable and accrued liabilities       (2,529,878)   5,259,453
      Deferred revenue                                  154,319      (23,616)
                                                    -------------------------
                                                     (1,980,857) (32,877,879)
                                                    -------------------------
    Cash flows from investing activities
    Purchase of short-term investments               (9,000,000)  (8,000,000)
    Proceeds from sale of short-term investments              -   48,000,000
    Change in restricted cash                        10,750,230   (9,763,090)
    Purchase of property, plant and equipment        (2,985,530) (33,939,145)
    Proceeds from sale of property,
     plant and equipment                              8,215,702       54,795
    Proceeds from non-controlling interest                    -       31,389
    Proceeds from sale of subsidiary -
     net of cash included in sale of 29,098               9,590            -
                                                    -------------------------
                                                      6,989,992   (3,616,051)
                                                    -------------------------
    Cash flows from financing activities
    Repayment of IRAP loan                             (142,940)    (142,940)
    Proceeds from exercise of warrants                        -      492,498
    Proceeds from exercise of stock options              15,000       80,000
                                                    -------------------------
                                                       (127,940)     429,558
                                                    -------------------------
    Impact of foreign exchange on cash
     and cash equivalents                            (1,806,548)  (2,298,470)
                                                    -------------------------
    Increase (decrease) in cash and cash
     equivalents                                      3,074,647  (38,362,842)

    Cash and cash equivalents - Beginning of year    14,730,294   53,093,136
                                                    -------------------------
    Cash and cash equivalents - End of year          17,804,941   14,730,294
                                                    -------------------------
                                                    -------------------------
    Supplemental cash flow information
    Cash paid for interest                               51,634       13,472
    Cash received for interest                           19,894    1,937,448



    Day4 Energy Inc.
    Consolidated Statements of Comprehensive Loss and Accumulated Other
    Comprehensive Loss
    For the years ended December 31, 2009 and 2008
    -------------------------------------------------------------------------

                                                           2009         2008
                                                              $            $

    Loss for the year                                20,383,388   33,873,351

    Unrealized foreign exchange losses
     on translation of consolidated financial
     statements to the presentation currency          3,201,330            -
                                                    -------------------------
    Other Comprehensive Loss                          3,201,330            -
                                                    -------------------------

    Comprehensive Loss                               23,584,718   33,873,351
                                                    -------------------------
                                                    -------------------------



                                                           2009         2008
                                                              $            $

    Unrealized foreign exchange losses
     on translation of consolidated financial
     statements to the presentation currency          3,201,330            -
                                                    -------------------------

    Accumulated Other Comprehensive Loss              3,201,330            -
                                                    -------------------------
                                                    -------------------------
    

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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