Published: May 26, 2010
Hoku Corporation Reports Fourth Quarter and Fiscal Year 2010 Results
Hoku Corporation (NASDAQ: HOKU), a clean
energy products and services company, today announced its financial results
for the fourth quarter and fiscal year ended March 31, 2010, and provided a
general update on its business.
Financial Results
Revenues for the quarters ended March 31, 2010 and 2009 were $776,000 and
$112,000, respectively. Revenue for the fiscal year ended March 31, 2010
was $2.6 million compared to $5.0 million for fiscal 2009. All revenue in
fiscal 2010 and 2009 was derived from photovoltaic, or PV, system
installations and related services, the sale of electricity, and the resale
of solar inventory. As of March 31, 2010 and 2009, deferred revenue of
$6,000 and $784,000, respectively, were attributable to PV system
installation and related service contracts.
Net loss, computed in accordance with U.S. generally accepted accounting
principles, or GAAP, for the quarter ended March 31, 2010 was $2.0 million,
or $0.04 per diluted share, compared to $904,000, or $0.04 per diluted
share, for the same period in fiscal 2009. GAAP net loss for the fiscal
year ended March 31, 2010 was $5.4 million, or $0.23 per diluted share,
compared to $3.0 million, or $0.15 per diluted share, for fiscal 2009.
Non-GAAP net loss for the quarter ended March 31, 2010 was $1.8 million, or
$0.03 per diluted share, compared to $634,000, or $0.03 per diluted share,
for the same period in fiscal 2009. Non-GAAP net loss for the quarters
ended March 31, 2010 and 2009 excludes non-cash stock-based compensation of
$206,000 and $270,000, respectively. Non-GAAP net loss for the fiscal year
ended March 31, 2010 was $4.6 million, or $0.19 per diluted share, compared
to $1.7 million, or $0.09 per diluted share, for fiscal 2009. Non-GAAP net
loss for fiscal 2010 and 2009 exclude non-cash stock based compensation of
$830,000 and $1.2 million, respectively. The accompanying schedules provide
a reconciliation of net loss and net loss per share computed on a GAAP
basis to net loss and net loss per share computed on a non-GAAP basis.
Scott Paul, president and chief executive officer of Hoku Corporation,
said, "Fiscal 2010 was a transformative year for Hoku as we continued
investing in both our polysilicon and PV system installation businesses.
During the last fiscal year, we recapitalized the company through a
strategic financing transaction with Tianwei New Energy, and we nearly
doubled the amount of PV installed by Hoku Solar on a year-over-year
basis."
Mr. Paul continued, "In Idaho, despite some delays due to the timing of our
financing, Hoku Materials recorded $83 million in construction progress
during fiscal 2010 and -- thanks to the support of our customers, vendors
and partners -- ended the fiscal year in position to conduct a polysilicon
production demonstration, which we completed successfully in April."
Mr. Paul said, "In Hawaii, Hoku Solar commissioned more than a megawatt of
PV systems during fiscal 2010, with the majority of these installed systems
remaining under our management via power purchase agreements. In addition,
we added new product lines to the broad range of off-the-shelf solar
technologies that we offer our commercial and industrial customers, and we
continued building both our system integration and project development
expertise."
"In short, we were able to make continued progress in both our solar
business units during the past fiscal year," said Mr. Paul. "Looking ahead,
we plan to commence commercial shipments of polysilicon in the third
quarter of calendar 2010, and expect to reach a total polysilicon
production capacity of 4,000 metric tons by the end of March 2011."
Reflecting on Hoku's financial performance during the past fiscal year, Mr.
Paul said, "Although our year-end revenue numbers are lower in fiscal 2010
than in fiscal 2009, in fact we installed nearly twice as much PV on a
year-over-year basis. The revenue difference is primarily due to the
ownership structure of the nearly one-megawatt project we completed earlier
in fiscal 2010 for the State of Hawaii Department of Transportation.
Because these systems were financed and constructed under a series of power
purchase agreements, and because Hoku Solar is a co-owner of the systems,
we were unable to recognize revenue from the sale of these projects.
However, because we do have a long-term ownership interest in these
projects, we expect to derive revenue from the sale of electricity to the
State of Hawaii during the 20-year term of our power purchase agreements."
Commenting on the higher loss in fiscal 2010, Mr. Paul said, "Our losses
increased primarily due to fourth quarter preparations for our
recently-completed pilot production runs, and due to payments to Idaho
Power for reserve power capacity in advance of our plant start-up."
Regarding the company's financing and liquidity, Mr. Paul said, "To date,
Tianwei has invested more than $129 million of its own capital in Hoku. In
addition, they provided collateral support for the $20 million in debt
financing from China Merchants Bank we announced earlier today. During the
past fiscal year, this investment by Tianwei helped address much of the
immediate financing risk for our Hoku Materials polysilicon plant, and it
allowed us to work with our vendors and partners to develop payment plans
which were both achievable and fair. As a result, we have systematically
improved our balance sheet, reducing our payables by two-thirds over the
last quarter alone."
Mr. Paul concluded, "To reach our goals for the upcoming fiscal year, we
are working closely with Tianwei to identify appropriate sources for our
remaining financing. Importantly, though, while we plan to adjust the scale
and pace of our construction efforts and production ramp to match the
timing of receipt of these additional funds, we remain on track today, and
we continue to expect that we will meet all of our contractual customer
shipment obligations."
Business Updates
Hoku Materials Polysilicon Plant Update
Commenting on the Company's polysilicon subsidiary, Hoku Materials, Inc.,
Mr. Paul said, "Having successfully completed our polysilicon production
demonstration, we are now engaged in the next phase of construction which
will bring us to commercial production. But, the importance of the
demonstration cannot be overstated. Operating our plant allowed us to
validate our systems, processes and operator training, and gave us an
opportunity to qualify some prospective trichlorosilane suppliers during
actual production runs."
Hoku noted that the completion of its polysilicon demonstration had also
been helpful in providing access to additional financing for the project.
The Company reported that, subsequent to the successful testing, it had
entered into a $20 million credit agreement with the New York branch of
China Merchants Bank Co., Ltd.; a loan which had been guaranteed by Hoku's
majority shareholder, Tianwei New Energy Holdings Co., Ltd. Hoku said it
planned to use these funds to initiate shipment of additional process
equipment, to pay certain key vendors, and to support ongoing construction,
hiring, and operations at its Pocatello facility.
"While the exact length of this phased construction will be driven by the
timing of receipt of our remaining financing, we currently expect to
commence commercial production of polysilicon in the third quarter of
calendar year 2010," said Mr. Paul. "We plan to continue on-site
construction while we are producing polysilicon, and expect to complete the
installation of all 28 planned polysilicon reactors by December 2010. We
plan to commission the on-site reactors on a rolling basis throughout the
second half of this fiscal year."
Hoku Materials Customers and Financing
Hoku confirmed that it had contracted future revenue from the sale of up to
$1.7 billion of polysilicon to six leading solar companies in China.
"During the past fiscal year, we worked closely with each of our customers
to ensure that the terms and conditions of our seven long-term polysilicon
sales agreements remained favorable to all parties," said Mr. Paul. "In
some cases, this has involved repositioning or restructuring the contracts
to account for changing market conditions and the revisions to Hoku's
ramp-up schedule. Nevertheless, I believe the stability of our customer
base reflects the strength of these partnerships."
Hoku said it was in continuing discussions with Wuxi Suntech Power Co.,
Ltd. about a potential contract amendment. "We value Suntech as a long-term
partner and customer and will continue to work closely with them to make
the required adjustments to our sales agreement," said Mr. Paul. "However,
for the purposes of financing our plant, we are no longer counting on the
remaining $30 million in contractual prepayment commitments provided for
under our existing contract with Suntech. That said, considering the $20
million investment Suntech made in our common stock during calendar year
2008 and their willingness to work with us, we remain confident that we
will find a mutually-beneficial way forward."
Excluding Suntech's remaining prepayment commitments of $30 million, Hoku's
customers have committed to make $148 million in contractual prepayments,
$130 million of which has been paid to date. In addition, Hoku has
contributed $41 million of its available cash. Thus, considering Tianwei's
$50 million in converted equity, the $70 million in debt financing received
to date, and assuming that all of Hoku's customers meet their future
prepayment commitments in full, Hoku has secured approximately $309 million
in financing.
Commenting on the financing for Hoku Materials' polysilicon project, Mr.
Paul said, "We estimate the total cost of the 4,000 metric ton plant will
be between $390 million and $410 million, meaning that we will need to
secure a total of approximately $81 million in additional financing during
this fiscal year in order to achieve our 4,000 metric ton production
capacity targets."
Mr. Paul clarified these requirements further, saying, "We believe that the
total investment required to reach initial commercial production is
approximately $340 million. Thus, since we have a total of approximately
$291 million in cash already invested or in-hand, and since we expect to
receive approximately $6 million in additional pre-payments prior to our
initial commercial production, we are looking at near-term financing of
approximately $43 million in order to initiate partial commercial
operations. Our annualized production capacity during this phase is
expected to be approximately 2,500 metric tons."
"Tianwei continues to support our efforts to find appropriate financing,"
Mr. Paul continued. "The additional $20 million loan we received this week
on very favorable terms from China Merchants Bank was only made possible
with Tianwei's collateral support. Tianwei had no contractual obligation to
provide that support, and this is a very strong indication of their
long-term commitment to Hoku. Thus, while near-term receipt of additional
funds will be critical to our achieving our stated goals, with Tianwei's
support, we are confident that we will be able to secure the necessary
financing in a timely manner. We expect that this financing will come
primarily from debt sources; however, we can't rule out the sale of
equity."
Hoku Solar Update
Commenting on Hoku Solar, Inc., Mr. Paul said, "Hoku Solar is
well-positioned as a leading solar installer in Hawaii and remains focused
on the turnkey delivery of industrial, institutional and utility-scale PV
projects throughout the state."
"Our total annual PV installations increased from approximately 600
kilowatts in fiscal 2009 to over 1,100 kilowatts in fiscal 2010," said Mr.
Paul. "Looking ahead, we see an opportunity in fiscal 2011 to continue
growing Hoku Solar's market share in Hawaii, even as we explore the
expansion of our project development efforts to other markets in the
continental U.S. and beyond. To that end, we plan to continue working with
Tianwei and other potential partners on the possibility of creating a fund
of up to $50 million, which would be used to finance PV systems developed
by Hoku Solar."
Financial Guidance
Commenting on expected revenues in fiscal 2011, Mr. Paul said, "For Hoku
Materials, the exact timing of receipt of funds to complete construction
will impact our production output, and the final resolution of our contract
amendment discussions with Suntech will impact our sales volume. For Hoku
Solar, the long sales cycle and often extended development schedules for PV
projects makes it difficult to predict our sales in any given period. As
such, we are not prepared to give revenue guidance at this time. That
said, depending on the exact timing of our polysilicon ramp-up and the
commencement of commercial shipments, and our relatively low fixed cost for
Hoku Solar, we are aiming to break even, or achieve profitability this
fiscal year."
Summary
Mr. Paul summarized the Company's prospects saying, "We see fiscal 2011 as
Hoku's year to execute. We have made a considerable investment in our solar
and polysilicon businesses over the past few years and believe that we are
poised to realize the benefits of these efforts. With Tianwei's continuing
support, we expect positive growth in both our polysilicon and PV
installation businesses during the coming fiscal year and beyond. I look
forward to announcing the successful achievements of key milestones along
the way."
Conference Call Information
Hoku Corporation has scheduled a conference call on Wednesday, May 26, 2010
at 5:00 p.m., Eastern Time, to discuss results for the Company's fourth
quarter and fiscal year 2010 ended March 31, 2010 and the Company's
business outlook. All interested parties are invited to call-in. To
participate, please call (877) 312-8619. A live webcast can also be
accessed by going directly to the Company's website at www.hokucorp.com and
selecting the conference call link on the home page. A playback of the
webcast will be available on the Company's website until the Company's
conference call to discuss its financial results for its first quarter
fiscal year 2011.
About Hoku Corporation
Hoku Corporation (NASDAQ: HOKU) is a diversified clean energy products and
services company with three business units: Hoku Materials, Hoku Solar and
Hoku Fuel Cells. Hoku Materials plans to manufacture, market and sell
polysilicon for the solar market from its plant currently under
construction in Pocatello, Idaho. Hoku Solar markets and installs turnkey
photovoltaic systems and provides related services. Hoku Fuel Cells has
developed proprietary fuel cell membranes and membrane electrode assemblies
for stationary and automotive proton exchange membrane fuel cells. For more
information, visit www.hokucorp.com.
Hoku, Hoku Solar, and the Hoku Corporation logo are trademarks of Hoku
Corporation, and Hoku Materials is the trademark of Hoku Materials, Inc.,
all rights reserved. All other trademarks, trade names and service marks
appearing in this press release are the property of their respective
holders.
©Copyright 2010, Hoku Corporation, all rights reserved.
Forward-Looking Statements
This press release contains forward-looking statements that involve many
risks and uncertainties. In some cases, you can identify forward-looking
statements by terms such as "anticipate," "believe," "can," "continue,"
"could," "estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "project," "should," "will," "would" and similar expressions
intended to identify forward-looking statements. These forward-looking
statements include statements about the Company's future growth, financing
of the completion and operations of its polysilicon facility, the timing
and completion of polysilicon facility milestones, the timing of the
commencement of commercial production of polysilicon and the ramp of the
commercial production, the Company's fiscal year 2011 profitability, growth
in the Hoku Solar's PV installations in fiscal year 2011, and the creation
of a fund to finance PV installations. These statements involve known and
unknown risks, uncertainties and other factors that may cause the Company's
actual results, performance, time frames or achievements to be materially
different from any future results, performance, time frames or achievements
expressed or implied by the forward-looking statements. These risks,
uncertainties and other factors include the Company's ability to secure
additional financing necessary to complete its planned polysilicon
production facility in Pocatello, Idaho; the Company's receipt, if at all,
of $18.1 million in customer prepayments based on agreed-upon schedules and
contingent upon the Company meeting certain milestones under its current
polysilicon supply agreements; the Company's ability to negotiate an
amendment to its polysilicon supply agreement with Suntech Power Co., Ltd.,
and to avoid Suntech's termination of that agreement; the Company's ability
to meet its polysilicon delivery commitments under certain supply
agreements; the Company's ability to ramp its production capacity for
manufacturing in fiscal year 2011 in accordance with its operating plan;
the Company's ability to commission its planned chemical plant and produce
trichlorosilane (TCS) in the first calendar quarter of calendar 2011, if at
all; the Company's ability to install PV systems in Hawaii, including
securing financing for such installations; and the risks, uncertainties and
other factors disclosed in the Company's most recent Form 10-K and Form
10-Q filed with the Securities and Exchange Commission. Given these risks,
uncertainties and other factors, you should not place undue reliance on
these forward-looking statements. In evaluating these statements, you
should specifically consider the risks described in the Company's filings
with the Securities and Exchange Commission, as applicable. Except as
required by law, the Company assumes no obligation to update these
forward-looking statements publicly, or to update the reasons actual
results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in
the future.
Use of Non-GAAP Financial Information
To supplement its financial statements presented on a GAAP basis, the
Company uses non-GAAP measures of net loss and net loss per share, which
are each adjusted to exclude expenses relating to non-cash stock-based
compensation, which the Company believes is appropriate to enhance an
overall understanding of its past financial performance and its future
prospects. As the Company uses FASB ASC 718 to calculate its non-cash
stock-based compensation expense, it believes that it is useful to
investors to understand how the expenses associated with the application of
FASB ASC 718 are reflected on its statements of operations. The Company
further believes that where the adjustments used in calculating non-GAAP
net loss and non-GAAP net loss per share are based on specific, identified
charges that impact different line items in the statements of operations
(including cost of service and license revenue, and sales, general and
administrative expense), it is useful to investors to know how these
specific line items in the statements of operations are affected by these
adjustments. For its internal budgets and forecasting, the Company uses
financial statements that do not include non-cash stock-based compensation
expense. The presentation of this additional information is not meant to be
considered in isolation or as a substitute for net loss or net loss per
share prepared in accordance with GAAP. Whenever the Company uses such
non-GAAP financial measures, it provides a reconciliation of non-GAAP
financial measures to the most closely applicable GAAP financial measure.
Investors are encouraged to review the related GAAP financial measures and
the reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measure.
HOKU CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended Twelve Months Ended
March 31, March 31,
2010 2009 2010 2009
------------- ------------- ------------- -------------
Service and license
revenue $ 776 $ 68 $ 2,606 $ 4,390
Product revenue - 44 - 567
------------- ------------- ------------- -------------
Total revenue 776 112 2,606 4,957
------------- ------------- ------------- -------------
Cost of service and
license revenue
(1) 623 54 2,112 3,240
Cost of product
revenue - 39 - 465
------------- ------------- ------------- -------------
Total cost of
revenue 623 93 2,112 3,705
------------- ------------- ------------- -------------
Gross margin 153 19 494 1,252
------------- ------------- ------------- -------------
Operating expenses:
Selling, general
and
administrative
(1) 2,478 1,120 6,573 4,548
------------- ------------- ------------- -------------
Total operating
expenses 2,478 1,120 6,573 4,548
------------- ------------- ------------- -------------
Loss from
operations (2,325) (1,101) (6,079) (3,296)
Interest and other
income 243 197 561 284
------------- ------------- ------------- -------------
Net loss (2,082) (904) (5,518) (3,012)
Net loss
attributable to
noncontrolling
interest (51) - (86) (50)
------------- ------------- ------------- -------------
Net loss
attributable to
Hoku Corporation $ (2,031) $ (904) $ (5,432) $ (2,962)
============= ============= ============= =============
Basic net loss per
share attributable
to Hoku
Corporation $ (0.04) $ (0.04) $ (0.23) $ (0.15)
============= ============= ============= =============
Diluted net loss
per share
attributable to
Hoku Corporation $ (0.04) $ (0.04) $ (0.23) $ (0.15)
============= ============= ============= =============
Shares used in
computing basic
net loss per share 54,544,918 20,994,542 23,548,244 20,325,433
============= ============= ============= =============
Shares used in
computing diluted
net loss per share 54,544,918 20,994,542 23,548,244 20,325,433
============= ============= ============= =============
---------
(1) Includes
stock-based
compensation as
follows:
Cost of
service and
license
revenue $ - $ 5 $ 8 $ 14
Selling,
general and
administrative 206 265 830 1,202
HOKU CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31,
2010 2009
--------- ---------
Assets
Cash and cash equivalents $ 6,962 $ 17,383
Accounts receivable 249 420
Inventory 894 1,549
Costs of uncompleted contracts 93 108
Prepaid expenses 856 226
--------- ---------
Total current assets 9,054 19,686
--------- ---------
Deferred cost of debt financing 1,175 -
Property, plant and equipment, net 287,975 204,525
--------- ---------
Total assets $ 298,204 $ 224,211
========= =========
Liabilities and Equity
Accounts payable and accrued expenses $ 22,660 $ 38,191
Deferred revenue 6 784
Deposits - Hoku Solar - 158
Deposits - Hoku Materials 16,184 375
Other current liabilities 204 446
--------- ---------
Total current liabilities 39,054 39,954
--------- ---------
Notes payable- net 37,709 -
Long-term debt (Deposits - Hoku Materials) 110,816 133,625
--------- ---------
Total liabilities 187,579 173,579
--------- ---------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $0.001 par value. Authorized
5,000,000 shares; no shares issued and
outstanding as of March 31, 2010 and 2009 - -
Common stock, $0.001 par value. Authorized
100,000,000 shares; issued and
outstanding 54,853,677 and 21,092,079
shares as of March 31, 2010 and 2009,
respectively 54 21
Warrant for 10,000,000 shares of common
stock 12,884 -
Additional paid-in capital 114,748 65,780
Accumulated deficit (20,601) (15,169)
--------- ---------
Total Hoku Corporation stockholders' equity 107,085 50,632
--------- ---------
Noncontrolling interest 3,540 -
--------- ---------
Total equity 110,625 50,632
--------- ---------
Total liabilities and equity $ 298,204 $ 224,211
========= =========
HOKU CORPORATION AND SUBSIDIARIES
Reconciliations from GAAP Net Loss and GAAP Net Loss per share
to Non-GAAP Net Loss
and Non-GAAP Net Loss per share
(Unaudited)
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
March 31, March 31,
2010 2009 2010 2009
------------------ ------------------
GAAP net loss $ (2,031) $ (904) $ (5,432) $ (2,962)
Stock-based compensation expense 206 270 830 1,216
-------- -------- -------- --------
Non-GAAP net loss $ (1,825) $ (634) $ (4,602) $ (1,746)
======== ======== ======== ========
GAAP basic net loss per share $ (0.04) $ (0.04) $ (0.23) $ (0.15)
Basic stock-based compensation
expense per share 0.01 0.01 0.04 0.06
-------- -------- -------- --------
Non-GAAP basic net loss per share $ (0.03) $ (0.03) $ (0.19) $ (0.09)
======== ======== ======== ========
GAAP diluted net loss per share $ (0.04) $ (0.04) $ (0.23) $ (0.15)
Diluted stock-based compensation
expense per share 0.01 0.01 0.04 0.06
-------- -------- -------- --------
Non-GAAP diluted net loss per share $ (0.03) $ (0.03) $ (0.19) $ (0.09)
======== ======== ======== ========
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