AMSC Reports Second Quarter Fiscal Year 2009 Financial Results

October 29, 2009 7:30 AM EDT

- Increased Revenues 85 Percent Year Over Year

- Grew Non-GAAP EPS to $0.19

- Generated $35.8 million in Cash From Operations

- Increased Backlog to $587 million

- Revenue and Net Income Forecasts Increased for Full Year Fiscal 2009

DEVENS, Mass.--(BUSINESS WIRE)-- American Superconductor Corporation (NASDAQ: AMSC), a global energy technologies company, today reported record financial results for the second quarter of its fiscal year 2009 ended September 30, 2009.

Revenues for the second quarter of fiscal 2009 were $74.7 million, an 85 percent increase over $40.4 million in revenues for the second quarter of fiscal 2008. Gross margin for the second quarter of fiscal 2009 was 38.9 percent, which compares with 26.5 percent for the second quarter of fiscal 2008.

AMSC generated GAAP net income of $4.3 million, or $0.10 per diluted share, for the second quarter of fiscal 2009. This compares with a GAAP net loss for the second quarter of fiscal 2008 of $4.1 million, or $0.10 per share. The company generated non-GAAP net income of $8.7 million, or $0.19 per diluted share, for the second quarter of fiscal 2009. This compares with a non-GAAP net loss of $1.4 million, or $0.03 per share, for the second quarter of fiscal 2008. Please refer to the financial table included below for a reconciliation of GAAP to non-GAAP results.

Cash, cash equivalents, marketable securities and restricted cash at September 30, 2009 were $141.1 million. This compares with $103.2 million as of June 30, 2009 and $117.2 million as of March 31, 2009.

The company reported backlog as of September 30, 2009 of approximately $587 million compared with $497 million as of June 30, 2009.

"Our team executed extremely well on all fronts, and we exceeded all of our financial objectives for the second fiscal quarter," said Greg Yurek, AMSC's founder and chief executive officer. "In addition to the 3 MW core electrical component contract we signed with Sinovel Wind Co., Ltd. valued at more than $100 million, our second-quarter bookings also included electrical system orders from several other wind turbine customers and a series of power grid sales in Australia, China, the United Kingdom and the United States. This positions us for continued strong growth in the second half of our fiscal year, and we have therefore increased our forecasts for revenues and net income for full year fiscal 2009."

Financial Forecast

"For the full year fiscal 2009, we are increasing our revenue guidance from a range of $260 million to $270 million to a range of $300 million to $310 million," said David Henry, AMSC senior vice president and chief financial officer. "We are increasing our gross margin forecast from a range of 32 percent to 34 percent to a range of 34 percent to 35 percent. Our GAAP net income forecast for fiscal 2009 is being increased from a range of $5.0 million to $7.0 million, or $0.11 to $0.16 per diluted share, to a range of $11.0 million to $13.0 million, or $0.24 to $0.29 per diluted share. AMSC's non-GAAP net income forecast has increased from a range of $18 million to $21 million, or $0.41 to $0.47 per diluted share, to a range of $27.0 million to $29.0 million, or $0.59 to $0.64 per diluted share."

"We expect to increase revenues quarter over quarter through the remainder of fiscal 2009," Henry continued. "We now expect to generate a GAAP profit in the third fiscal quarter, whereas we previously forecasted the potential for a small GAAP net loss. Non-GAAP earnings per share for the third fiscal quarter are expected to be approximately half of our second-quarter non-GAAP earnings per share due to lower-margin shipments and a planned increase in operating expenses to support future growth. Earnings are expected to increase again in our fourth fiscal quarter, consistent with our current full fiscal year forecast."

Please refer to the financial table included below for a reconciliation of GAAP to non-GAAP forecasts.

Conference Call Reminder

In conjunction with this announcement, AMSC management will participate in a conference call with investors beginning at 10:00 a.m. ET today to discuss the company's results and its business outlook. Those who wish to listen to the live conference call webcast should visit the "Investors" section of the company's website at www.amsc.com/investors. The live call also can be accessed by dialing 913-312-1482 and using conference ID 7640398. A telephonic playback of the call will be available from 1:00 p.m. ET on October 29, 2009 through 1:00 p.m. ET on November 5, 2009. Please call 888-203-1112 and refer to conference ID 7640398 to access the playback.

About American Superconductor (NASDAQ: AMSC)

AMSC offers an array of proprietary technologies and solutions spanning the electric power infrastructure - from generation to delivery to end use. The company is a leader in alternative energy, providing proven, megawatt-scale wind turbine designs and electrical control systems. The company also offers a host of Smart Grid technologies for power grid operators that enhance the reliability, efficiency and capacity of the grid, and seamlessly integrate renewable energy sources into the power infrastructure. These include superconductor power cable systems, grid-level surge protectors and power electronics-based voltage stabilization systems. AMSC's technologies are protected by a broad and deep intellectual property portfolio consisting of hundreds of patents and licenses worldwide. More information is available at www.amsc.com.

American Superconductor and design, Revolutionizing the Way the World Uses Electricity, AMSC, Powered by AMSC, D-VAR, dSVC, PowerModule, PQ-IVR, Secure Super Grids, Windtec and SuperGEAR are trademarks or registered trademarks of American Superconductor Corporation or its subsidiaries. All other brand names, product names or trademarks belong to their respective holders. The Windtec logo and design is a registered European Union Community Trademark.

Any statements in this release about future expectations, plans and prospects for the company, including our expectations regarding the future financial performance of the company and other statements containing the words "believes," "anticipates," "plans," "expects," "will" and similar expressions, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include: we have a history of operating losses, and we may incur losses in the future; a significant portion of our revenues are derived from a single customer, and a reduction in business with this customer could adversely affect our operating results; adverse changes in domestic and global economic conditions could adversely affect our operating results; changes in exchange rates could adversely affect our results from operations; our common stock may experience extreme market price and volume fluctuations, which may prevent our stockholders from selling our common stock at a profit and could lead to costly litigation against us that could divert our management's attention; if we fail to implement our business strategy, our financial performance and our growth could be materially and adversely affected; we may not realize all of the sales expected from our backlog of orders and contracts; many of our revenue opportunities are dependent upon subcontractors and other business collaborators, and a reduction in orders stemming from these companies could adversely affect our operating results; our products face intense competition, which could limit our ability to acquire or retain customers; our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; and our international operations are subject to risks that we do not face in the U.S., which could have an adverse effect on our operating results. Reference is made to these and other factors discussed in the "Risk Factors" section of the company's most recent quarterly or annual report filed with the Securities and Exchange Commission. In addition, any forward-looking statements included in this press release represent the company's views as of the date of this release. While the company anticipates that subsequent events and developments may cause the company's views to change, the company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the company's views as of any date subsequent to the date this press release is issued.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

                                Three months ended      Six months ended
                                September 30,           September 30,

                                2009        2008        2009         2008

Revenues:

 Power Systems                  $ 71,791    $ 35,576    $ 142,487    $ 71,506

 Superconductors                  2,881       4,799       5,185        8,686

 Total revenues                   74,672      40,375      147,672      80,192

Cost of revenues                  45,637      29,670      96,054       57,866

Gross profit                      29,035      10,705      51,618       22,326

Operating expenses:

 Research and development         5,416       4,688       9,944        9,601

 Selling, general and             12,712      8,849       23,597       17,742
 administrative

 Amortization of acquisition      460         481         905          984
 related intangibles

 Restructuring and impairments    117         500         451          500

 Total operating expenses         18,705      14,518      34,897       28,827

Operating income (loss)           10,330      (3,813 )    16,721       (6,501  )

Interest income                   190         801         433          1,576

Other income (expense), net       (871   )    481         (2,847  )    (1,990  )

Income (loss) before income       9,649       (2,531 )    14,307       (6,915  )
tax expense

Income tax expense                5,309       1,537       8,175        3,256

Net income (loss)               $ 4,340     $ (4,068 )  $ 6,132      $ (10,171 )

Net income (loss) per common
share

 Basic                          $ 0.10      $ (0.10  )  $ 0.14       $ (0.24   )

 Diluted                        $ 0.10      $ (0.10  )  $ 0.14       $ (0.24   )

Weighted average number of
common shares outstanding

 Basic                            44,247      42,745      44,020       42,380

 Diluted                          45,233      42,745      44,922       42,380

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)

                                              September 30,  March 31,

                                              2009           2009

ASSETS

Current assets:

 Cash and cash equivalents                    $ 86,752       $ 70,674

 Marketable securities                          36,177         39,255

 Accounts receivable, net                       47,004         50,103

 Inventory                                      29,187         35,129

 Restricted cash                                6,398          5,872

 Prepaid expenses and other current assets      10,143         10,313

 Deferred tax assets, net                       1,102          1,160

  Total current assets                          216,763        212,506

Property, plant and equipment, net              54,435         54,838

Goodwill                                        39,217         26,233

Intangibles, net                                8,763          8,859

Restricted cash                                 1,634          1,406

Marketable securities                           10,127         --

Other assets                                    12,765         5,264

  Total assets                                $ 343,704      $ 309,106

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Accounts payable and accrued expenses        $ 57,832       $ 60,253

 Deferred revenue                               18,244         21,066

  Total current liabilities                     76,076         81,319

Deferred revenue                                9,156          4,902

Deferred tax liabilities, net                   877            840

Other                                           241            184

  Total liabilities                             86,350         87,245

Stockholders' equity:

 Common stock                                   441            433

 Additional paid-in capital                     675,209        653,052

 Accumulated other comprehensive loss           2,709          (4,487   )

 Accumulated deficit                            (421,005 )     (427,137 )

  Total stockholders' equity                    257,354        221,861

  Total liabilities and stockholders' equity  $ 343,704      $ 309,106

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                                                        For the six months ended
                                                        September 30,

                                                        2009         2008

Cash flows from operating activities:

 Net income (loss)                                      $ 6,132      $ (10,171 )

 Adjustments to reconcile net income/(loss) to net
 cash used in operations:

  Depreciation and amortization                           4,704        4,134

  Stock-based compensation expense                        6,918        5,194

  Stock-based compensation expense--non-employee          30           42

  Allowance for doubtful accounts                         52           778

  Re-valuation of warrant                                 --           1,334

  Deferred income taxes                                   (1,111  )    616

  Other non-cash items                                    382          489

  Changes in operating asset and liability accounts,
  excluding the effect of acquisition:

    Accounts receivable                                   3,010        4,837

    Inventory                                             6,235        (4,762  )

    Prepaid expenses and other current assets             712          (1,780  )

    Accounts payable and accrued expenses                 (4,810  )    (1,044  )

    Deferred revenue                                      (567    )    3,853

 Net cash provided by operating activities                21,687       3,520

Cash flows from investing activities:

  Purchase of property, plant and equipment               (2,741  )    (3,303  )

  Purchase of marketable securities                       (40,533 )    (62,217 )

  Proceeds from the maturity of marketable securities     33,374       34,679

  Change in restricted cash                               (546    )    5,785

  Purchase of intangible assets                           (843    )    (612    )

  Change in other assets                                  (617    )    (84     )

 Net cash used in investing activities                    (11,906 )    (25,752 )

Cash flows from financing activities:

  Proceeds from exercise of employee stock options        4,068        11,997

 Net cash provided by financing activities                4,068        11,997

Effect of exchange rate changes on cash and cash          2,229        (1,805  )
equivalents

Net increase (decrease) in cash and cash equivalents      16,078       (12,040 )

Cash and cash equivalents at beginning of period          70,674       67,834

Cash and cash equivalents at end of period              $ 86,752     $ 55,794

Supplemental schedule of cash flow information:

  Non-cash contingent consideration in connection with  $ 10,828     $ 9,784
  acquisitions

  Non-cash issuance of common stock                       320          301

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)

(In thousands, except per share data)

                                 Three months ended      Six months ended
                                 September 30,           September 30,

                                 2009        2008        2009        2008

Net income (loss)                $ 4,340     $ (4,068 )  $ 6,132     $ (10,171 )

Amortization of                    460         481         905         984
acquisition-related intangibles

Restructuring and impairments      117         500         451         500

Stock-based compensation           3,852       2,895       6,918       5,194

Re-valuation of stock warrants     --          (1,062 )    --          1,334

Tax effects                        (93    )    (98    )    (181   )    (201    )

Non-GAAP net income (loss)       $ 8,676     $ (1,352 )  $ 14,225    $ (2,360  )

Non-GAAP earnings (loss) per     $ 0.19      $ (0.03  )  $ 0.32      $ (0.06   )
share

Weighted average shares            45,233      42,745      44,922      42,380
outstanding *

* Diluted shares are used for periods where non-GAAP net income is generated.

Reconciliation of Forecast GAAP Net Income to Non-GAAP Net Income for Fiscal
Year 2009

(In millions, except per share data)

                                 Low                     High

Net Income                       $ 11.0                  $ 13.0

Amortization of                  1.9                     1.9
acquisition-related intangibles

Stock-based compensation         14.0                    14.0

Restructuring                    0.5                     0.5

Tax effects                      (0.4                 )  (0.4                  )

Non-GAAP net income              $ 27.0                  $ 29.0

Non-GAAP net income per share    $ 0.59                  $ 0.64

Diluted shares outstanding       45.5                    45.5

Note: Non-GAAP net income (loss) is defined by the company as net income (loss) before amortization of acquisition-related intangibles, restructuring and impairments, stock-based compensation, re-valuation of stock warrants, other unusual charges and any tax effects related to these items. The company believes non-GAAP net income (loss) is an important measurement for management and investors given the effect that these non-cash or non-recurring charges have on the company's net income (loss). The company regards non-GAAP net income (loss) as a useful measure of operating performance and cash flow to complement operating income, net income (loss) and other GAAP financial performance measures.

Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net income (loss) is set forth in the table above.

    Source: American Superconductor Corporation

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