Day4 Energy Reports First-Quarter 2009 Results

    BURNABY, BC, May 15 /CNW/ - 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.


    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.


    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.


    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
    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

    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 or on SEDAR at

    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

    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,, 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
    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
    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
                                                            $              $


    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

    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
      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
                                                            $              $
    Sales                                           4,344,545     13,494,386

    Cost of goods sold                              4,808,157     13,223,997
    Gross (loss) margin                              (463,612)       270,389
    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

    %SEDAR: 00026066E

For further information:

For further information: Therese Hayes, Head, Corporate Development,
Day4 Energy Inc., (604) 296-0434,; Agnieszka Pozniak,
Media Contact, Day4 Energy Inc., (604) 297-0444,

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