“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

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 $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), the company 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 the company could expect some bad debts expense in a normal course of business, with the current credit procedures and processes, the company does 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 its continued commitment to developing the company’s PV technologies and opportunities provided by the Day4 Electrode.

Loss Per Share

The net loss for the first quarter 2009 was $2.6million ($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 its gross margins.

Cash and Short-Term Investments

At March 31, 2009, the company 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 the Q42008 earnings release, the underlying instability in the economy and extended weather delay in the primary market well into the first quarter of 2009 were expected to impact the company’s results. Further, the company had also outlined that in addition to an expected impact on its 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 the company have taken write-downs in the first quarter and expect further write-downs may continue into the second quarter.

Earlier this year the company reduced production at its Burnaby facility to minimal levels. In response to continued slow demand the company has 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 the company currently expect, the company will be able to move its current inventory while the Jabil facility completes its ramp and becomes fully operational. The company’s 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 its primary market. The company will maintain some production at the Burnaby facility as a pilot plant for further technology development, and it expect to utilize production capacity at its Burnaby facility to meet demand and serve the North American market in the future.

The company continues to explore the potential for the 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. The company remains 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.