e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: December 31, 2009
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o |
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission File Number: 0-19672
American Superconductor Corporation
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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04-2959321
(I.R.S. Employer
Identification No.) |
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64 Jackson Road, Devens, Massachusetts
(Address of principal executive offices)
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01434
(Zip Code) |
(978) 842-3000
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
Shares outstanding of the Registrants common stock:
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Common Stock, par value $0.01 per share
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44,789,359 |
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Class
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Outstanding as of January 29, 2010 |
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
2
AMERICAN SUPERCONDUCTOR CORPORATION
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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December 31, |
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March 31, |
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2009 |
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2009 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
40,383 |
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$ |
70,674 |
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Marketable securities |
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50,913 |
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39,255 |
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Accounts receivable, net |
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78,894 |
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50,103 |
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Inventory |
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36,100 |
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35,129 |
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Restricted cash |
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5,802 |
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5,872 |
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Prepaid expenses and other current assets |
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13,074 |
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10,313 |
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Deferred tax assets, net |
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791 |
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1,160 |
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Total current assets |
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225,957 |
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212,506 |
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Property, plant and equipment, net |
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58,094 |
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54,838 |
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Goodwill |
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38,643 |
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26,233 |
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Intangibles, net |
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8,526 |
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8,859 |
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Marketable securities |
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15,681 |
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Restricted cash |
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1,406 |
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Other assets |
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18,008 |
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5,264 |
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Total assets |
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$ |
364,909 |
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$ |
309,106 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
65,386 |
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$ |
60,253 |
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Deferred revenue |
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19,494 |
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21,066 |
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Total current liabilities |
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84,880 |
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|
81,319 |
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Deferred revenue |
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11,637 |
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|
4,902 |
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Deferred tax liabilities, net |
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915 |
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|
840 |
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Other |
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375 |
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184 |
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Total liabilities |
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97,807 |
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87,245 |
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Commitments and contingencies (Note 9) |
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Stockholders equity: |
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Common stock |
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444 |
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433 |
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Additional paid-in capital |
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682,059 |
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653,054 |
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Deferred contract costs warrant |
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(2 |
) |
Accumulated other comprehensive income (loss) |
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|
425 |
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(4,487 |
) |
Accumulated deficit |
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(415,826 |
) |
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(427,137 |
) |
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Total stockholders equity |
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267,102 |
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221,861 |
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Total liabilities and stockholders equity |
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$ |
364,909 |
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$ |
309,106 |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
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Three months ended |
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Nine months ended |
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December 31, |
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December 31, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues |
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$ |
80,659 |
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$ |
41,334 |
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$ |
228,331 |
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$ |
121,526 |
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Cost and operating expenses: |
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Cost of revenues |
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50,444 |
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31,764 |
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146,498 |
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89,630 |
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Research and development |
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6,421 |
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5,305 |
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16,365 |
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14,906 |
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Selling, general and administrative |
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12,881 |
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9,400 |
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36,478 |
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27,142 |
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Amortization of acquisition related intangibles |
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473 |
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433 |
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1,378 |
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1,417 |
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Restructuring and impairments |
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168 |
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451 |
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668 |
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Total cost and operating expenses |
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70,219 |
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|
47,070 |
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|
201,170 |
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133,763 |
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Operating income (loss) |
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10,440 |
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(5,736 |
) |
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27,161 |
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(12,237 |
) |
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Interest income |
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195 |
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|
697 |
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|
628 |
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|
2,273 |
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Other income (expense), net |
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193 |
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|
(423 |
) |
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(2,654 |
) |
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(2,413 |
) |
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Income (loss) before income tax expense |
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10,828 |
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(5,462 |
) |
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|
25,135 |
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(12,377 |
) |
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Income tax expense |
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5,649 |
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|
2,310 |
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|
13,824 |
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|
5,566 |
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Net income (loss) |
|
$ |
5,179 |
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|
$ |
(7,772 |
) |
|
$ |
11,311 |
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$ |
(17,943 |
) |
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Net income (loss) per common share |
|
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Basic |
|
$ |
0.12 |
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|
$ |
(0.18 |
) |
|
$ |
0.26 |
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$ |
(0.42 |
) |
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Diluted |
|
$ |
0.11 |
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$ |
(0.18 |
) |
|
$ |
0.25 |
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$ |
(0.42 |
) |
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Weighted average number of common shares outstanding |
|
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|
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Basic |
|
|
44,623 |
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|
|
43,024 |
|
|
|
44,222 |
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|
|
42,596 |
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Diluted |
|
|
45,566 |
|
|
|
43,024 |
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|
|
45,072 |
|
|
|
42,596 |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
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Three months ended |
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Nine months ended |
|
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December 31, |
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December 31, |
|
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2009 |
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2008 |
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|
2009 |
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|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income (loss) |
|
$ |
5,179 |
|
|
$ |
(7,772 |
) |
|
$ |
11,311 |
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|
$ |
(17,943 |
) |
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Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Foreign currency translation |
|
|
(2,275 |
) |
|
|
(832 |
) |
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|
5,030 |
|
|
|
(4,587 |
) |
Unrealized gain/(loss) on investments |
|
|
(9 |
) |
|
|
254 |
|
|
|
(118 |
) |
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Other comprehensive income (loss) |
|
|
(2,284 |
) |
|
|
(578 |
) |
|
|
4,912 |
|
|
|
(4,458 |
) |
|
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|
|
|
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|
|
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Comprehensive income (loss) |
|
$ |
2,895 |
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|
$ |
(8,350 |
) |
|
$ |
16,223 |
|
|
$ |
(22,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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For the nine months ended |
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December 31, |
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|
2009 |
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|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
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|
Net income (loss) |
|
$ |
11,311 |
|
|
$ |
(17,943 |
) |
Adjustments to reconcile net income/(loss) to net cash used in operations: |
|
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|
|
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Depreciation and amortization |
|
|
7,158 |
|
|
|
6,192 |
|
Stock-based compensation expense |
|
|
10,440 |
|
|
|
7,586 |
|
Stock-based compensation expensenon-employee |
|
|
91 |
|
|
|
18 |
|
Allowance for doubtful accounts |
|
|
260 |
|
|
|
1,466 |
|
Re-valuation of warrant |
|
|
|
|
|
|
1,334 |
|
Deferred income taxes |
|
|
(1,608 |
) |
|
|
427 |
|
Other non-cash items |
|
|
745 |
|
|
|
652 |
|
Changes in operating asset and liability accounts: |
|
|
|
|
|
|
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|
Accounts receivable |
|
|
(33,035 |
) |
|
|
(5,735 |
) |
Inventory |
|
|
(728 |
) |
|
|
(11,531 |
) |
Prepaid expenses and other current assets |
|
|
(2,978 |
) |
|
|
(1,433 |
) |
Accounts payable and accrued expenses |
|
|
3,325 |
|
|
|
9,602 |
|
Deferred revenue |
|
|
3,882 |
|
|
|
8,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(1,137 |
) |
|
|
(842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment, net |
|
|
(8,232 |
) |
|
|
(5,247 |
) |
Purchase of marketable securities |
|
|
(68,096 |
) |
|
|
(77,602 |
) |
Proceeds from the maturity of marketable securities |
|
|
40,638 |
|
|
|
57,080 |
|
Change in restricted cash |
|
|
1,645 |
|
|
|
5,030 |
|
Purchase of intangible assets |
|
|
(1,360 |
) |
|
|
(845 |
) |
Change in other assets |
|
|
(879 |
) |
|
|
(80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(36,284 |
) |
|
|
(21,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of employee stock options |
|
|
6,048 |
|
|
|
12,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
6,048 |
|
|
|
12,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
1,082 |
|
|
|
(1,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(30,291 |
) |
|
|
(12,246 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
70,674 |
|
|
|
67,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
40,383 |
|
|
$ |
55,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of cash flow information: |
|
|
|
|
|
|
|
|
Non-cash issuance of common stock |
|
$ |
1,610 |
|
|
$ |
443 |
|
Non-cash contingent consideration in connection
with acquisitions |
|
|
10,828 |
|
|
|
11,008 |
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of the Business and Basis of Presentation
American Superconductor Corporation (the Company or AMSC) was founded on April 9, 1987.
The Company 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 power grid, and seamlessly integrate renewable energy
sources into the power infrastructure. These technologies include superconductor power cable
systems, grid-level surge protectors and power electronics-based voltage stabilization systems. The
Company operates in two business segments: AMSC Power Systems and AMSC Superconductors.
These unaudited condensed consolidated financial statements of the Company have been prepared
in accordance with the Securities and Exchange Commissions (SEC) instructions to Form 10-Q.
Certain information and footnote disclosures normally included in the financial statements prepared
in accordance with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to those instructions. The year-end condensed balance sheet data was
derived from audited financial statements but does not include all disclosures required by
generally accepted accounting principles in the United States of America. The unaudited condensed
consolidated financial statements, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair statement of the results for the
interim periods ended December 31, 2009 and 2008 and the financial position at December 31, 2009.
The unaudited condensed consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation.
The results of operations for an interim period are not necessarily indicative of the results
of operations to be expected for the fiscal year. These unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements for the
fiscal year ended March 31, 2009 (fiscal 2008) which are contained in the Companys Annual Report
on Form 10-K, filed with the SEC on May 28, 2009.
New Accounting Pronouncements
In June 2008, the Financial Accounting Standards Boards (FASB) issued guidance in
determining whether instruments granted in share-based payment transactions are participating
securities for purposes of calculating earnings per share. Under the provisions of this standard,
unvested awards of share-based payments with non-forfeitable rights to receive dividends or
dividend equivalents are considered participating securities for purposes of calculating earnings
per share. This accounting standard is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. The Company adopted this
standard on April 1, 2009. The adoption did not have a material effect on its financial condition
or results of operations.
In April 2009, the FASB issued a standard, which amends and clarifies a previous standard for
business combinations, to address application issues on initial recognition and measurement,
subsequent measurement and accounting, and disclosure of assets and liabilities arising from
contingencies in a business combination. Under this standard, an acquirer is required to recognize
at fair value an asset acquired or liability assumed in a business combination that arises from a
contingency if the acquisition date fair value can be determined during the measurement period. If
the acquisition date fair value cannot be determined, then the acquirer applies the recognition
criteria in accounting for contingencies, and makes a reasonable estimation of the amount of a
loss, to determine whether the contingency should be recognized as of the acquisition date or after
it. The adoption of this standard could materially change the accounting for business combinations
consummated subsequent to its effective date of April 1, 2009. On April 1, 2009, the Company
adopted the provisions of this standard and the adoption did not have a material effect on its
financial condition or results of operations.
In June 2009, the FASB issued the FASB Accounting Standards Codification (Codification). The
Codification became the single source for all authoritative United States generally accepted
accounting principles (U.S. GAAP) recognized by the FASB to be applied for financial statements
issued for periods ending after September 15, 2009. The Codification does not change U.S. GAAP and
did not have an effect on the Companys financial condition or results of operations.
In July 2009, the FASB issued new guidance for all U.S. GAAP financial statements for public
and private companies, which significantly amends the existing consolidation accounting model for
variable interest entities, and includes extensive new disclosure requirements. This new guidance
is effective for fiscal years (and interim periods in those fiscal years)
7
beginning after November 15, 2009. The Company does not currently have a variable interest
entity and does not expect this standard to have a material impact on its financial condition or
results of operations.
In September 2009, the Emerging Issues Task Force issued new rules pertaining to the
accounting for revenue arrangements with multiple deliverables. The new rules provide an
alternative method for establishing fair value of a deliverable when vendor specific objective
evidence or third party evidence cannot be determined. The rules provide for the determination of
the best estimate of selling price for separate deliverables and allow the allocation of
arrangement consideration using this relative selling price model. The guidance supersedes the
prior multiple element revenue arrangement accounting rules that are currently used by the Company.
The new guidance can be prospectively applied in fiscal years beginning on or after June 15, 2010
or can be earlier or retrospectively adopted. The Company is currently evaluating the impact of
adopting the guidance.
2. Stock-Based Compensation
The Company accounts for its stock-based compensation at fair value. The following table
summarizes employee stock-based compensation expense by financial statement line item for the three
and nine months ended December 31, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31 |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Cost of revenues |
|
$ |
307 |
|
|
$ |
353 |
|
|
$ |
886 |
|
|
$ |
1,035 |
|
Research and development |
|
|
509 |
|
|
|
538 |
|
|
|
1,499 |
|
|
|
1,574 |
|
Selling, general and administrative |
|
|
2,706 |
|
|
|
1,501 |
|
|
|
8,055 |
|
|
|
4,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,522 |
|
|
$ |
2,392 |
|
|
$ |
10,440 |
|
|
$ |
7,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the nine months ended December 31, 2009, the Company granted approximately 850,000
stock options and 205,000 shares of restricted stock and 10,000 restricted stock units to employees
under the 2007 Stock Incentive Plan. The Company also granted 18,000 shares of restricted stock to
directors under the 2007 Director Stock Option Plan. The fair value of the grants made during the
nine months ended December 31, 2009 was $20.6 million. The restricted stock awards include
approximately 92,000 shares of performance-based restricted stock, which will vest upon achievement
of certain annual financial and operational performance measurements. The remaining awards of
restricted stock vest upon the passage of time, generally in equal annual installments over three
years. The 10,000 restricted stock units are performance-based and will vest upon achievement of
certain operational performance measurements. For awards that vest upon the passage of time,
expense is being recorded on a straight-line basis over the vesting period. At December 31, 2009,
the Company determined that achievement of the performance measures for the shares of
performance-based restricted stock is probable and as such, is recognizing the fair value of the
performance-based restricted stock awards over the estimated performance period of each award.
The total unrecognized compensation cost for unvested employee stock-based compensation awards
outstanding, net of estimated forfeitures, was $21.1 million at December 31, 2009. This expense
will be recognized over a weighted-average expense period of 2.0 years.
The assumptions used in the Black-Scholes valuation model for stock options granted
during the three and nine months ended December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
December 31, |
|
December 31, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Expected volatility |
|
|
65.6 |
% |
|
|
71.2 |
% |
|
|
68.9 |
% |
|
|
60.2 |
% |
Risk-free interest rate |
|
|
2.6 |
% |
|
|
1.5 |
% |
|
|
2.6 |
% |
|
|
3.1 |
% |
Expected life (years) |
|
|
4.8 |
|
|
|
4.9 |
|
|
|
4.8 |
|
|
|
4.9 |
|
Dividend yield |
|
None |
|
None |
|
None |
|
None |
The expected volatility was estimated based on an equal weighting of the historical
volatility of the Companys common stock and the implied volatility of the Companys traded
options. The expected life was estimated based on an analysis of the Companys historical
experience of exercise, cancellation, and expiration patterns. The risk-free interest rate is based
on five-year U.S. Treasury rates. The stock-based compensation expense recognized in the unaudited
condensed consolidated statements of operations is based on awards that ultimately are expected to
vest; therefore, the amount of expense has been reduced for estimated forfeitures. Forfeitures are
estimated at the time of grant and revised, if necessary, in
8
subsequent periods if actual forfeitures differ from those estimates. Forfeitures were
estimated based on historical experience. This analysis is re-evaluated periodically and the
forfeiture rate is adjusted as necessary.
3. Computation of Net Income (Loss) per Common Share
Basic earnings per share (EPS) is computed by dividing net income (loss) by the
weighted-average number of common shares outstanding during the period. Diluted EPS is computed by
dividing the net income (loss) by the weighted-average number of common shares and dilutive common
equivalent shares outstanding during the period, calculated using the treasury stock method. Common
equivalent shares include the effect of restricted stock, exercise of stock options and warrants
and contingently issuable shares. For the three and nine months ended December 31, 2009 and 2008,
common equivalent shares of 0.1 million shares and 0.9 million shares, respectively, and 3.3
million shares and 3.3 million shares, respectively, were not included in the calculation of
diluted EPS as they were considered anti-dilutive.
The following table reconciles the numerators and denominators of the earnings per share
calculation for the three and nine months ended December 31, 2009 and 2008 (in thousands, except
per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
5,179 |
|
|
$ |
(7,772 |
) |
|
$ |
11,311 |
|
|
$ |
(17,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding |
|
|
44,665 |
|
|
|
43,653 |
|
|
|
44,276 |
|
|
|
43,196 |
|
Weighted-average shares subject to repurchase |
|
|
(42 |
) |
|
|
(629 |
) |
|
|
(54 |
) |
|
|
(600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per-share calculation basic |
|
|
44,623 |
|
|
|
43,024 |
|
|
|
44,222 |
|
|
|
42,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of employee equity incentive plans |
|
|
943 |
|
|
|
|
|
|
|
850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per-share calculation diluted |
|
|
45,566 |
|
|
|
43,024 |
|
|
|
45,072 |
|
|
|
42,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic |
|
$ |
0.12 |
|
|
$ |
(0.18 |
) |
|
$ |
0.26 |
|
|
$ |
(0.42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted |
|
$ |
0.11 |
|
|
$ |
(0.18 |
) |
|
$ |
0.25 |
|
|
$ |
(0.42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
On April 1, 2009, the Company began determining whether instruments granted in
share-based payment transactions are participating securities. Under the applicable standard, the
unvested restricted stock awards that contain non-forfeitable rights to receive dividends or
dividend equivalents are considered participating securities, and therefore, are included in the
computation of earnings per share pursuant to the two class method. Application of the standard had
an insignificant effect on shares outstanding. This standard required retrospective application.
Net income allocable to participating securities was immaterial for all periods presented.
4. Marketable Securities
The accounting standard for fair value measurements provides a framework for measuring fair
value and requires expanded disclosures regarding fair value measurements. Fair value is defined as
the price that would be received for an asset or the exit price that would be paid to transfer a
liability in the principal or most advantageous market in an orderly transaction between market
participants on the measurement date. The accounting standard established a fair value hierarchy
which requires an entity to maximize the use of observable inputs, where available. This hierarchy
prioritizes the inputs into three broad levels as follows:
Valuation Hierarchy
|
|
|
|
|
Level 1
|
|
|
Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the
ability to access at the measurement date. |
Level 2
|
|
|
Inputs include quoted prices for similar assets and liabilities
in active markets, quoted prices for |
9
|
|
|
|
|
|
|
|
identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the asset or
liability, and inputs that are derived principally from or
corroborated by observable market data by correlation or other
means (market corroborated inputs). |
Level 3
|
|
|
Unobservable inputs that reflect the Companys assumptions that
market participants would use in pricing the asset or
liability. The Company develops these inputs based on the best
information available, including its own data. |
A financial assets or liabilitys classification within the hierarchy is determined based on
the lowest level input that is significant to the fair value measurement.
The following table provides the assets carried at fair value, measured as of December 31,
2009 and March 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Using Significant |
|
Using Significant |
|
|
|
|
|
|
Quoted Prices in |
|
Other |
|
Unobservable |
|
|
Total Carrying |
|
Active Markets |
|
Observable Inputs |
|
Inputs |
|
|
Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
29,141 |
|
|
$ |
29,141 |
|
|
$ |
|
|
|
$ |
|
|
Marketable securities |
|
|
66,594 |
|
|
|
|
|
|
|
66,594 |
|
|
|
|
|
March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
30,483 |
|
|
$ |
30,483 |
|
|
$ |
|
|
|
$ |
|
|
Marketable securities |
|
|
39,255 |
|
|
|
|
|
|
|
39,255 |
|
|
|
|
|
The Company uses foreign currency derivatives. The fair value of the Companys foreign
currency derivatives is immaterial to all periods presented.
Valuation Techniques
Cash equivalents consist of highly liquid money market instruments with maturities of three
months or less that are regarded as high quality, low risk investments, are measured using such
inputs as quoted prices and inputs that are derived principally from or corroborated by observable
market data by correlation or other means, and are classified within Level 1 of the valuation
hierarchy.
The Companys marketable securities are classified as available-for-sale securities and,
accordingly, are recorded at fair value. At December 31, 2009, the Company primarily held U.S.
government backed commercial paper and European sovereign bonds and at March 31, 2009, the Company
primarily held U.S. government backed commercial paper. All commercial paper is rated A-1 or
higher. The difference between amortized cost and fair value is included in stockholders equity.
Marketable securities are measured using such inputs as quoted prices for identical or similar
assets in markets that are not active, inputs other than quoted prices that are observable for the
asset (for example, interest rates and yield curves observable at commonly quoted intervals), and
inputs that are derived principally from or corroborated by observable market data by correlation
or other means, and are classified within Level 2 of the valuation hierarchy.
Effective April 1, 2009, the Company implemented a newly issued accounting standard for fair
value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or
disclosed at fair value in the financial statements on a non-recurring basis. Adoption of the new
accounting standard for the Companys nonfinancial assets and nonfinancial liabilities that are
measured at fair value on a non-recurring basis did not impact its financial position or results of
operations; however, could have an impact in future periods. The Company may have additional
disclosure requirements in the event of a completed acquisition or if an impairment of these occurs
in a future period.
5. Derivative Financial Instruments
On April 1, 2009, the Company adopted a newly issued accounting standard regarding disclosure
of derivative instruments and hedging activities. This statement improves transparency in financial
reporting by requiring enhanced disclosures of an entitys derivative instruments and hedging
activities and their effects on the entitys financial position, financial performance and cash
flows.
The Companys foreign currency risk management strategy is principally designed to mitigate
the potential financial impact of changes in the value of transactions and balances denominated in
foreign currency, resulting from changes in foreign currency exchange rates. The Companys foreign
currency hedging program uses both forward contracts and
10
currency options to manage the foreign
currency exposures that exist as part of its ongoing business operations. The contracts
primarily are denominated in the Euro and Chinese renminbi (CNY) and have maturities of less
than six months. On December 31, 2009, the Company had a forward contract outstanding to hedge the
Companys wholly-owned Austrian subsidiary, AMSC Windtec GmbH (Windtec) USD exposure, with a
nominal value of $25.0 million, which expired on January 29, 2010. The forward contract sold US
dollars and bought Euros at $1.4423. The Company also had two forward contracts outstanding to
hedge receivables exposure at the Companys wholly-owned China subsidiary, Suzhou AMSC
Superconductor Co., Ltd., selling CNY and buying USD at $6.797 and $6.772, respectively, with
nominal values of $15.0 million each, which expire on March 31, 2010 and April 30, 2010,
respectively.
Generally, the Company does not designate forward contracts or currency option contracts as
hedges for accounting purposes, and changes in the fair value of these instruments are recognized
immediately in earnings. Gains and losses on these contracts are included in other expense, net.
Net realized and unrealized losses on forward contracts and option contracts included in other
expense, net, excluding the underlying foreign currency exposure being hedged, were $0.6 million
and $0.4 million for the three and nine months ended December 31, 2009 respectively.
6. Inventory
The components of inventory are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2009 |
|
Raw materials |
|
$ |
13,868 |
|
|
$ |
16,098 |
|
Work-in-progress |
|
|
7,788 |
|
|
|
6,522 |
|
Finished goods |
|
|
10,966 |
|
|
|
8,150 |
|
Deferred program costs |
|
|
3,478 |
|
|
|
4,359 |
|
|
|
|
|
|
|
|
Net inventory |
|
$ |
36,100 |
|
|
$ |
35,129 |
|
|
|
|
|
|
|
|
Finished goods inventory of $11.0 million as of December 31, 2009 includes $1.0 million
which represents costs of product shipped to customers on contracts for which revenue was deferred
until final customer acceptance.
Deferred program costs of $3.5 million as of December 31, 2009 and $4.4 million as of
March 31, 2009 primarily represent costs incurred on wind turbine development programs where the
Company needs to achieve certain milestones or complete development programs before revenue and
costs will be recognized. Deferred program costs of $2.6 million as of March 31, 2009 were incurred
on a long-term turnkey D-VAR® system project that were subsequently recorded in cost of revenue in
the three months ended June 30, 2009 when the related revenue was recognized.
7. Product Warranty
The Company generally provides a one to two year warranty on its products, commencing upon
installation. A provision is recorded upon revenue recognition to Cost of revenues for estimated
warranty expense based on historical experience.
Product warranty activity was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Balance at beginning of period |
|
$ |
5,497 |
|
|
$ |
2,443 |
|
|
$ |
4,749 |
|
|
$ |
1,775 |
|
Accruals for warranties during the period |
|
|
2,238 |
|
|
|
1,269 |
|
|
|
4,955 |
|
|
|
3,706 |
|
Settlements and adjustments during the period |
|
|
(1,703 |
) |
|
|
(1,069 |
) |
|
|
(3,672 |
) |
|
|
(2,838 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
6,032 |
|
|
$ |
2,643 |
|
|
$ |
6,032 |
|
|
$ |
2,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Income Taxes
The Company recorded income tax expense of $5.6 and $13.8 million for the three and nine
months ended December 31, 2009, respectively, and $2.3 and $5.6 million for the three and nine
months ended December 31, 2008, respectively, related primarily to income generated in foreign
jurisdictions. The Company has provided a valuation allowance against all deferred tax assets in
the U.S. as it is more likely than not that its deferred tax assets are not currently realizable
due to the net operating losses incurred by the Company in the U.S. since its inception.
11
9. Commitments and Contingencies
In April 2005, the Company issued to TM Capital (which subsequently assigned it to Provident
Premier Master Fund, Ltd. (Provident)) a common stock purchase warrant for 200,000 shares of the
Companys common stock, exercisable for a five-year term, with an exercise price of $9.50 per share
(the Warrant). In August 2008, Provident utilized the cashless exercise provision and exercised
the entire Warrant in exchange for 148,387 shares of the Companys common stock. The Warrant was
re-valued at $4.3 million at the time of exercise, resulting in a charge of $1.3 million for the
nine months ended December 31, 2008, (reported in Other income (expense) in the Unaudited Condensed
Consolidated Statements of Operations).
From time to time, the Company enters into long-term construction contracts and other
business arrangements with customers that require the Company to obtain bank guarantees or
performance bonds. The Company may be required to deposit an amount equivalent to some or all of the
face amount of the performance bonds into an escrow account until the termination of the bond. When
the performance conditions are met, amounts deposited as collateral for the performance bonds are
returned to the Company.
On June 26, 2008, the Company entered into a performance bond for CNY 1.1 million
(approximately $0.2 million) with a Chinese customer to guarantee supply of core components and
software, which expires June 30, 2012. The performance bond was issued utilizing a Bank of China
CNY 18.9 million (approximately $2.8 million) unsecured line of credit, which is available until
June 30, 2012.
As of December 31, 2009, the Company had outstanding performance bonds issued on behalf of
Windtec, for 0.9 million (approximately $1.4 million) in connection with three contracts to
provide power electronics for three customers. The first performance bond for 0.1 million
(approximately $0.1 million) expires on February 6, 2010, the second performance bond for
0.3 million (approximately $0.4 million) will expire on September 30, 2010 and the third
performance bond for 0.6 million (approximately $0.8 million) will expire on December 31, 2010.
In the event that the payment is made in accordance with the requirements of any of these
performance bonds, the Company would record the payment as an offset to revenue. The performance
bonds are secured with restricted cash, included in current assets.
At December 31, 2009 and March 31, 2009, the Company had $5.8 million and $5.9 million,
respectively, of restricted cash included in current assets, which includes the restricted cash
securing the Windtec performance bonds noted above, and $1.4 million of long-term restricted cash
at March 31, 2009. Total restricted cash as of December 31, 2009 and March 31, 2009 was $5.8
million and $7.3 million, respectively. The Company also has an additional $1.6 million in bank
guarantees and letters of credit supported by unsecured lines of credit.
The Company also has unused, unsecured lines of credit of 0.5 million (approximately $0.7
million) which is available until June 30, 2010, and CNY 17.5 million (approximately $2.6
million) which is available until June 30, 2012. During the three months ended December 31,
2009, the Company was able to reduce its long term restricted cash in the U.S. through the
establishment of credit relationships with a number of U.S. banks.
10. Cost-Sharing Arrangements
The Company has entered into several cost-sharing arrangements with various agencies of the
United States government. Funds paid to the Company under these agreements are not reported as
revenues but are used to directly offset the Companys research and development (R&D) and
selling, general and administrative (SG&A) expenses, and to purchase capital equipment.
Costs incurred and funding received under these agreements are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
December 31, |
|
December 31, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Costs incurred |
|
$ |
943 |
|
|
$ |
615 |
|
|
$ |
3,418 |
|
|
$ |
3,392 |
|
R&D expenditures offset by cost sharing funding received |
|
|
250 |
|
|
|
163 |
|
|
|
867 |
|
|
|
840 |
|
G&A expenditures offset by cost sharing funding received |
|
|
217 |
|
|
|
141 |
|
|
|
755 |
|
|
|
731 |
|
At December 31, 2009, total funding received to date under these agreements was $29.5 million.
11. Acquisitions
Acquisition of Power Quality Systems, Inc.
On April 27, 2007, the Company acquired Power Quality Systems, Inc. (PQS), a Pennsylvania
corporation, for $4.5 million in common stock. PQS offers reactive compensation products known as
Static VAR Compensators, or SVCs, based
12
on its proprietary thyristor switch technology. These
products enhance the reliability of power transmission and distribution grids and improve the
quality of power for manufacturing operations.
The acquisition agreement included an earn-out provision for the issuance of up to an
additional 0.5 million shares of common stock based on the achievement of certain order growth
targets for existing PQS products for the fiscal years ended March 31, 2008 and 2009. During the
nine months ended December 31, 2008, the Company recorded contingent consideration related to the
acquisition of PQS of $1.7 million to Goodwill and Additional paid-in capital, representing 75,000
shares earned. These shares were issued during the first quarter of the fiscal year ended March 31,
2009. In addition, during the nine months ended December 31, 2009, the Company recorded contingent
consideration of $1.2 million to Goodwill and Additional paid-in capital, representing 75,000
shares earned for the fiscal year ended March 31, 2009. These shares were issued in the first
quarter of the fiscal year ending March 31, 2010.
Acquisition of Windtec Consulting GmbH
On January 5, 2007, the Company acquired Windtec Consulting GmbH (Windtec), an Austrian
corporation. Windtec develops and sells electrical systems for wind turbines. Windtec also provides
technology transfer for the manufacturing of wind turbines; documentation services; and training
and support regarding the assembly, installation, commissioning, and service of wind turbines.
The acquisition agreement included an earn-out provision for the issuance of up to an
additional 1,400,000 shares of common stock upon Windtecs achievement of specified revenue
objectives during the fiscal years ending March 31, 2008, 2009, 2010 and 2011. The Company recorded
contingent consideration of $9.8 million to Goodwill and Additional paid-in capital based on
350,000 shares earned in the nine months ended December 31, 2008. These shares were issued in the
first quarter of the fiscal year ending March 31, 2010. During the nine months ended December 31,
2009, the Company recorded contingent consideration of $10.8 million to Goodwill and Additional
paid-in capital representing 350,000 shares earned. These shares are expected to be issued in the
first quarter of the fiscal year ending March 31, 2011. No further contingent consideration will
be recorded for the fiscal year ending March 31, 2010 as this was the maximum amount of contingent
consideration that can be earned.
Investment
in Tres Amigas
On October 13, 2009, the
Company announced it had made a minority investment in Tres Amigas LLC (Tres Amigas), a merchant transmission
company, for $1.8 million. Consideration for the investment was $0.8 million in cash and $1.0 million in AMSC common stock.
The investment was recorded under the equity method of accounting and is included in Other assets on the condensed consolidated
balance sheet.
The Companys minority interest in the losses of Tres Amigas are included in Other income (expense) on the condensed
consolidated statement of operations, and were immaterial for the three months ended December 31, 2009.
12. Restructuring and Impairments
On October 25, 2007, the Companys Board of Directors approved a restructuring plan (the
Fiscal 2007 Plan) to reduce operating costs by closing its last remaining facility in
Westborough, Massachusetts and consolidating those operations into its Devens, Massachusetts
facility. No headcount reductions were associated with the Fiscal 2007 Plan.
Aggregate restructuring charges associated with the Fiscal 2007 Plan were $7.8 million, of
which $0.5 million was recorded during the nine months ended December 31, 2009, for additional
costs related to the consolidation of the Companys Massachusetts operations and the closure of its
former headquarters facility in Westborough. These additional costs were driven by delays in
returning the building to the landlord in its mutually-agreed upon condition. The lease termination
date was August 31, 2009. All restructuring charges associated with the Fiscal 2007 Plan have
resulted in cash disbursements and had been completed at the end of the second quarter of the
fiscal year ending March 31, 2010.
The following table presents the restructuring expense and cash disbursements for the Fiscal
2007 Plan for the nine months ended December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
|
|
Decontamination and |
|
|
|
|
|
|
Termination |
|
|
Other Facility |
|
|
|
|
|
|
Costs |
|
|
Closing Costs |
|
|
Total |
|
Balance March 31, 2009 |
|
$ |
462 |
|
|
$ |
1,648 |
|
|
$ |
2,110 |
|
Charges to operations |
|
|
445 |
|
|
|
6 |
|
|
|
451 |
|
Cash disbursements |
|
|
(907 |
) |
|
|
(1,654 |
) |
|
|
(2,561 |
) |
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
13. Business Segment Information
The Company reports its financial results in two reportable business segments: AMSC Power
Systems and AMSC Superconductors.
AMSC Power Systems business unit produces a broad range of products to increase electrical
grid capacity and reliability; supplies electrical systems used in wind turbines; sells power
electronic products that regulate wind farm voltage
13
to enable their interconnection to the power grid; licenses proprietary wind turbine designs
to manufacturers of such systems; provides consulting services to the wind industry; and offers
products that enhance power quality for industrial operations.
AMSC Superconductors business unit manufactures high temperature superconductor (HTS) wire
and coils; designs and develops superconductor products, such as power cables, fault current
limiters and motors; and manages large-scale superconductor projects.
The operating results for the two business segments are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMSC Power Systems |
|
$ |
77,026 |
|
|
$ |
38,277 |
|
|
$ |
219,513 |
|
|
$ |
109,783 |
|
AMSC Superconductors |
|
|
3,633 |
|
|
|
3,057 |
|
|
|
8,818 |
|
|
|
11,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
80,659 |
|
|
$ |
41,334 |
|
|
$ |
228,331 |
|
|
$ |
121,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMSC Power Systems |
|
$ |
19,941 |
|
|
$ |
3,208 |
|
|
$ |
55,202 |
|
|
$ |
13,587 |
|
AMSC Superconductors |
|
|
(5,941 |
) |
|
|
(6,264 |
) |
|
|
(17,085 |
) |
|
|
(17,265 |
) |
Unallocated corporate expenses |
|
|
(3,560 |
) |
|
|
(2,680 |
) |
|
|
(10,956 |
) |
|
|
(8,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,440 |
|
|
$ |
(5,736 |
) |
|
$ |
27,161 |
|
|
$ |
(12,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The accounting policies of the business segments are the same as those for the
consolidated Company, except that certain corporate expenses which the Company does not believe are
specifically attributable or allocable to either of the two business segments have been excluded
from the segment operating income (loss). Unallocated corporate expenses include stock-based
compensation expense of $3.5 million and $2.4 million for the three months ended December 31, 2009
and 2008, respectively, and $10.4 million and $7.6 million for the nine months ended December 31,
2009 and 2008, respectively. Unallocated corporate expenses for the nine months ended December 31,
2009 included $0.5 million of restructuring charges related primarily to the closure of the
Companys facility in Westborough, Massachusetts.
For the three and nine months ended December 31, 2009, a substantial portion of the Companys
revenues was derived from one customer: Sinovel Wind Co., Ltd., a manufacturer of wind turbines
based in China. Sales to Sinovel represented 76% and 69% of total revenues for the three and nine
months ended December 31, 2009, respectively, compared to 70% and 67% for the three and nine months
ended December 31, 2008, respectively.
Total assets for the two business segments are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2009 |
|
AMSC Power Systems |
|
$ |
190,620 |
|
|
$ |
136,777 |
|
AMSC Superconductors |
|
|
29,028 |
|
|
|
21,830 |
|
Corporate assets |
|
|
145,261 |
|
|
|
150,499 |
|
|
|
|
|
|
|
|
Total |
|
$ |
364,909 |
|
|
$ |
309,106 |
|
|
|
|
|
|
|
|
Corporate assets includes cash and cash equivalents, marketable securities,
restricted cash and Corporate fixed assets.
14. Subsequent Events
The Company has performed an evaluation of subsequent events through February 3, 2010, which
is the date the financial statements were issued.
14
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, any statements
contained herein that relate to future events or conditions, including without limitation, the
statements under Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations and in Part II, Item 1A. Risk Factors and located elsewhere herein regarding
industry prospects or our prospective results of operations or financial position, may be deemed to
be forward-looking statements. Without limiting the foregoing, the words believes, anticipates,
plans, expects, and similar expressions are intended to identify forward-looking statements.
Such forward-looking statements represent managements current expectations and are inherently
uncertain. The important factors discussed below under the caption Risk Factors in Item 1A, among
others, could cause actual results to differ materially from those indicated by forward-looking
statements made herein and presented elsewhere by management from time to time. Any such
forward-looking statements represent managements estimates as of the date of this Quarterly Report
on Form 10-Q. While we may elect to update such forward-looking statements at some point in the
future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
These forward-looking statements should not be relied upon as representing our views as of any date
subsequent to the date of this Quarterly Report on Form 10-Q.
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. The
Windtec logo and design is a registered European Union Community Trademark. All other brand names,
product names, trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the
property of their respective holders.
Executive Overview
American Superconductor Corporation was founded in 1987. We offer an array of proprietary
technologies and solutions spanning the electric power infrastructure from generation to delivery
to end use. Our company is a leader in alternative energy, providing proven, megawatt-scale wind
turbine designs and electrical control systems. We also offer 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 technologies
include superconductor power cable systems, grid-level surge protectors and power electronics-based
voltage stabilization systems. Our technologies are protected by a broad and deep intellectual
property portfolio consisting of hundreds of patents and licenses worldwide.
Our company markets two primary, proprietary technologies: programmable power electronic
converters and high temperature superconductor (HTS) wires. The programmability and scalability of
our power electronic converters differentiates them from most competitive offerings. Our power
electronic converters increase the quantity, quality and reliability of electric power that is
produced by a renewable source, such as wind, transmitted by electric utilities or consumed by
large industrial entities.
Our HTS wire can carry 150 times the electric current of comparatively sized copper wire and
therefore increases the electric current carrying capacity of the transmission cables comprising
these power grids and provides current limiting functionality in cables and stand-alone devices. In
addition, our HTS wire, when incorporated into primary electrical equipment such as motors and
generators, can provide increased manufacturing and operating savings due to a significant
reduction in the size and weight of this equipment.
Our products are in varying stages of commercialization. Thousands of our power electronic
converters have been sold commercially, as part of integrated systems, to electric utilities, wind
turbines and other manufacturers and wind farm developers, owners and operators since 1999. We
began production of our first generation, or 1G, HTS wire in 2003, and ceased 1G production in
2006 in favor of second generation or 2G HTS wire. We started initial production of 344
superconductors, our brand name for 2G HTS wire, in November 2007. The principal applications for
HTS wire (power cables, fault current limiters, rotating machines and specialty magnets) are
currently in the prototype stage. Some of these prototypes are funded by U.S. government contracts,
primarily with the Department of Defense (DOD), Department of Energy (DOE) and the Department
of Homeland Security (DHS).
15
Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal
year, we are referring to the fiscal year ending on March 31 of the following year. For example,
fiscal 2009 refers to the fiscal year ending March 31, 2010. Our third quarter of fiscal 2009 began
on October 1, 2009 and ended on December 31, 2009.
Our cash requirements depend on numerous factors, including successful completion of our
product development activities, ability to commercialize our product prototypes, rate of customer
and market adoption of our products and the continued availability of U.S. government funding
during the product development phase. Significant deviations to our business plan with regard to
these factors, which are important drivers to our business, could have a material adverse effect on
our operating performance, financial condition, and future business prospects. We expect to pursue
the expansion of our operations through internal growth and potential strategic alliances and
acquisitions.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements requires that we make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. We base our estimates on historical
experience and various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may
differ under different assumptions or conditions. There were no significant changes in the third
quarter of fiscal 2009 in our critical accounting policies as disclosed in our Form 10-K for fiscal
2008, which ended on March 31, 2009.
Results of Operations
Three and nine months ended December 31, 2009 compared to the three and nine months ended December
31, 2008
We operate our business and report our financial results to the Chief Executive Officer in two
reportable business segments: AMSC Power Systems and AMSC Superconductors.
AMSC Power Systems business unit produces a broad range of products to increase electrical
grid capacity and reliability; supplies electrical systems used in wind turbines; sells power
electronic products that regulate wind farm voltage to enable their interconnection to the power
grid; licenses proprietary wind turbine designs to manufacturers of such systems; provides
consulting services to the wind industry; and offers products that enhance power quality for
industrial operations.
AMSC Superconductors business unit manufactures HTS wire and coils; designs and develops
superconductor products, such as power cables, fault current limiters and motors; and manages
large-scale superconductor projects.
Revenues
Total revenues increased by 95% and 88% to $80.7 million and $228.3 million for the three and
nine months ended December 31, 2009 from $41.3 million and $121.5 million for the three and nine
months ended December 31, 2008. Our revenues are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMSC Power Systems |
|
$ |
77,026 |
|
|
$ |
38,277 |
|
|
$ |
219,513 |
|
|
$ |
109,783 |
|
AMSC Superconductors |
|
|
3,633 |
|
|
|
3,057 |
|
|
|
8,818 |
|
|
|
11,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
80,659 |
|
|
$ |
41,334 |
|
|
$ |
228,331 |
|
|
$ |
121,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues in our AMSC Power Systems business unit consist of revenues from wind turbine
electrical systems, wind turbine license and development contracts as well as D-VAR®,
D-VAR RT, SVC, and PowerModule product sales, service contracts, and consulting arrangements. We
also engineer, install and commission our products on a turnkey basis for some customers. Our AMSC
Power Systems business unit accounted for 95% and 96% of total revenues for the three and nine
month periods ended December 31, 2009, compared to 93% and 90% of total revenues for the three and
nine months ended December 31, 2008, respectively. Revenues in the AMSC Power Systems business unit
increased 101% and 100% to $77.0 million and $219.5 million in the three and nine months ended
December 31, 2009, respectively, from $38.3 million and $109.8 million in the three and nine months
ended December 31, 2008, respectively. The increases in AMSC Power Systems business unit revenues
were primarily due to higher sales of wind electrical systems and core components, primarily to
customers in China and additionally, for the nine months ended December 31, 2009, higher D-VAR®
system shipments, as well as shipments of our D-VAR RT products to ACCIONA Energy in Spain. The
Company records revenue in foreign
16
currencies, primarily the Euro and Chinese renminbi. Changes in exchange rates from the prior
year had a deminimus effect on revenues for both the three and nine months ended December 31, 2009.
For the three and nine months ended December 31, 2009, a substantial portion of our revenues
was derived from one customer: Sinovel Wind Co., Ltd., a manufacturer of wind turbines based in
China. Sales to Sinovel represented 76% and 69% of total revenues for the three and nine months
ended December 31 2009, respectively, compared to 70% and 67% for the three and nine months ended
December 31, 2008, respectively.
Revenues in our AMSC Superconductors business unit consist of contract revenues, HTS wire
sales, revenues under government-sponsored electric utility projects, and other prototype
development contracts. AMSC Superconductors business unit revenue is primarily recorded using the
percentage-of-completion method. AMSC Superconductors business unit accounted for 5% and 4% of
total revenues for the three and nine month periods ended December 31, 2009, compared to 7% and 10%
for the three and nine months ended December 31, 2008, respectively. AMSC Superconductors business
unit revenue increased 19% to $3.6 million in the three months ended December 31, 2009, from $3.1
million in the three months ended December 31, 2008, and decreased 25% to $8.8 million in the nine
months ended December 31, 2009, from $11.7 million for the nine months ended December 31, 2008.
Revenues from significant AMSC Superconductors government funded contracts are summarized as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Earned for the |
|
Revenue Earned for the |
|
|
|
|
|
|
Revenue Earned |
|
three months |
|
nine months |
|
|
Expected Total |
|
through |
|
ended December 31, |
|
ended December 31, |
|
|
Contract Value |
|
December 31, 2009 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Project Name |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HYDRA |
|
$ |
24,908 |
|
|
$ |
8,877 |
|
|
$ |
196 |
|
|
$ |
1,023 |
|
|
$ |
1,025 |
|
|
$ |
3,443 |
|
LIPA I and II |
|
|
40,141 |
|
|
|
33,489 |
|
|
|
1,115 |
|
|
|
593 |
|
|
|
2,754 |
|
|
|
1,889 |
|
DOE-FCL |
|
|
7,898 |
|
|
|
3,983 |
|
|
|
403 |
|
|
|
489 |
|
|
|
980 |
|
|
|
1,741 |
|
NAVSEA Motor Study |
|
|
6,511 |
|
|
|
6,087 |
|
|
|
133 |
|
|
|
336 |
|
|
|
207 |
|
|
|
2,748 |
|
These significant projects represented 51% and 56% of AMSC Superconductors business unit
revenue for the three and nine months ended December 31, 2009, respectively, compared to 80% and
84% for the three and nine months ended December 31, 2008, respectively.
The increase in AMSC Superconductors business unit revenue for the three months ended December
31, 2009 was driven by increased efforts in support of the LIPA II project and the delivery of 2G wire on a commercial cable project. The decrease in AMSC
Superconductors business unit revenue for the first nine months of fiscal 2009 was driven primarily
by lower HYDRA project revenues due to delays in project milestones and the completion of the
NAVSEA Motor Study. We recognize superconductor cable project revenues from the Project HYDRA
contract with Consolidated Edison, Inc. (ConEdison), which is being funded by DHS. DHS is
expected to invest up to a total of $24.9 million in the development of a new high temperature
superconductor power grid technology to enable Secure Super Grids. Secure Super Grids utilize
customized HTS wires, superconductor power cables and ancillary controls to deliver more power
through the grid while also being able to suppress power surges that can disrupt service. Of the
total $24.9 million in funding expected from DHS, it has committed funding of $16.3 million to us
as of December 31, 2009. We recognized $0.2 million in revenue related to the Project HYDRA during
the third quarter of fiscal 2009, compared to $1.0 million in the same period of fiscal 2008.
ConEdison and Southwire Company are subcontractors to us on this project. In 2009, we received word
from ConEdison that, due to the recent economic downturn and a resulting decrease in New York City
power demands, they are deferring investment in a new substation that was to be connected to an
existing substation by our Secure Super Grids solution in 2010. Since that time, we have
successfully tested a prototype Secure Super Grids system and met our other project milestones, but
the timing of project completion is currently unknown. AMSC remains actively engaged with
ConEdison and the Department of Homeland Security to find a new site for the Secure Super Grids
installation.
LIPA I is a project to install an HTS power cable system at transmission voltage using our
first generation HTS wire for the Long Island Power Authority. LIPA II is a project to install an
HTS power cable utilizing our second generation HTS wire for the Long Island Power Authority.
DOE-FCL is a project to develop and demonstrate a transmission voltage SuperLimiter fault current
limiter (FCL). The NAVSEA Motor Study is a project designed to test the 36.5 MW superconductor
motor developed for the U.S. Navy.
Cost-sharing funding
In addition to reported revenues, we also received funding of $0.4 million and $1.6 million
for the three and nine months ended December 31, 2009, respectively, under U.S. government
cost-sharing agreements with the U.S. Air Force and DOE, compared to $0.3 million and $1.6 million
for the three and nine months ended December 31, 2008, respectively. All of our cost-sharing
agreements provide funding in support of development work on our 344 superconductors being done in
our AMSC Superconductors business unit. We anticipate that a portion of our funding in the future
will continue to come from cost-sharing agreements as we execute joint programs with government
agencies. Funding from government cost-
17
sharing agreements is recorded as an offset to research and development (R&D) and selling,
general and administrative (SG&A) expenses, rather than as revenue. As of December 31, 2009, we
anticipate recognizing an additional $0.2 million offset to R&D and SG&A expenses related to these
cost-sharing agreements over the next year.
Cost of Revenues and Gross Margin
Cost of revenues increased by 59% and 63% to $50.4 million and $146.5 million for the three
and nine months ended December 31, 2009, respectively, compared to $31.8 million and $89.6 million
for the three and nine months ended December 31, 2008, respectively. Gross margin was 37.5% and
35.8% for the three and nine months ended December 31, 2009, respectively, compared to 23.2% and
26.2%, respectively, for the same periods of fiscal 2008. The increases in gross margin in the
three and nine months ended December 31, 2009 as compared to the same periods in fiscal 2008 were
due primarily to a shift in mix towards higher margin wind turbine core electrical component
shipments and material cost reductions, primarily resulting from the localization of component
supply in China for our power electronic converters which are now manufactured there.
Operating Expenses
Research and development
A portion of our R&D expenditures related to externally funded development contracts has been
classified as cost of revenues (rather than as R&D expenses). Additionally, a portion of R&D
expenses was offset by cost-sharing funding. Our R&D expenditures are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
R&D expenses per Consolidated Statements of Operations |
|
$ |
6,421 |
|
|
$ |
5,305 |
|
|
$ |
16,365 |
|
|
$ |
14,906 |
|
R&D expenditures reclassified as cost of revenues |
|
|
1,832 |
|
|
|
4,710 |
|
|
|
4,679 |
|
|
|
14,765 |
|
R&D expenditures offset by cost-sharing funding |
|
|
250 |
|
|
|
163 |
|
|
|
867 |
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregated R&D expenses |
|
$ |
8,503 |
|
|
$ |
10,178 |
|
|
$ |
21,911 |
|
|
$ |
30,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R&D expenses (exclusive of amounts classified as cost of revenues and amounts offset by
cost-sharing funding) increased by 21% and 10% to $6.4 million and $16.4 million, or 8% and 7% of
revenue, for the three and nine months ended December 31, 2009, respectively, from $5.3 million and
$14.9 million, or 13% and 12% of revenue, for the three and nine months ended December 31, 2008,
respectively. The increases in R&D expenses were driven primarily by increased headcount and
related labor spending, as well as added material and overhead spending to support new product
development in our Power Systems business unit. The decreases in R&D expenditures reclassified to
cost of revenues were a result of decreased efforts under our government funded contracts in our
AMSC Superconductors business unit compared to the prior year periods. Aggregated R&D expenses,
which include amounts classified as cost of revenues and amounts offset by cost-sharing funding,
decreased 16% and 28% to $8.5 million and $21.9 million, or 11% and 10% of revenue, for the three
and nine months ended December 31, 2009, respectively, compared to $10.2 million and $30.5 million,
or 25% of revenue, for both the three and nine months ended December 31, 2008, respectively. The
decreases in fiscal 2009 were driven primarily by the net impact of the factors described above.
Selling, general, and administrative
A portion of the SG&A expenditures related to externally funded development contracts has been
classified as cost of revenues (rather than as SG&A expenses). Additionally, a portion of SG&A
expenses was offset by cost-sharing funding. Our SG&A expenditures are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
SG&A expenses per Consolidated Statements of Operations |
|
$ |
12,881 |
|
|
$ |
9,400 |
|
|
$ |
36,478 |
|
|
$ |
27,142 |
|
SG&A expenditures reclassified as cost of revenues |
|
|
125 |
|
|
|
91 |
|
|
|
252 |
|
|
|
551 |
|
SG&A expenditures offset by cost sharing funding |
|
|
217 |
|
|
|
141 |
|
|
|
755 |
|
|
|
731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregated SG&A expenses |
|
$ |
13,223 |
|
|
$ |
9,632 |
|
|
$ |
37,485 |
|
|
$ |
28,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses (exclusive of amounts classified as cost of revenues and amounts offset by
cost-sharing funding) increased by 37% and 34% to $12.9 million and $36.5 million, or 16% of
revenue, in the three and nine months ended December 31, 2009, respectively, from $9.4 million and
$27.1 million, or 23% and 22% of revenue, for the three and nine
18
months ended December 31, 2008, respectively. For the three and nine months ended December 31,
2009, the increases in SG&A expenses were due primarily to higher stock-based compensation expense
and higher labor and related costs driven by headcount growth, partially offset by a reduction of
$0.8 million and $1.9 million, respectively, in bad debt expense as a result of payments received
and improved expectations for realizing a recovery on certain past due accounts. For these same
reasons, Aggregated SG&A expenses, which include amounts classified as cost of revenues and amounts
offset by cost sharing funding, increased 37% and 32% to $13.2 million and $37.5 million, or 16% of
revenue, for the three and nine months ended December 31, 2009, respectively, from $9.6 million and
$28.4 million, or 23% of revenue, for the three and nine months ended December 31, 2008,
respectively.
We present Aggregated R&D and Aggregated SG&A expenses, which are non-GAAP measures, because
we believe this presentation provides useful information on our aggregate R&D and SG&A spending and
because R&D and SG&A expenses as reported on the Consolidated Statements of Operations have been,
and may in the future be, subject to significant fluctuations solely as a result of changes in the
level of externally funded contract development work, resulting in significant changes in the
amount of the costs recorded as cost of revenues rather than as R&D and SG&A expenses, as discussed
above.
We plan to continue to increase R&D and SG&A expenditures in absolute terms in the coming
quarters to provide the platform for growth in subsequent years, but expect them to decline for
full year fiscal 2009 as a percent of revenue from fiscal year 2008 levels.
Amortization of acquisition related intangibles
We recorded $0.5 million and $1.4 million in the three and nine months ended December 31,
2009, respectively, compared to $0.4 million and $1.4 million in the three and nine months ended
December 31, 2008, respectively, in amortization expense related to our contractual
relationships/backlog, customer relationships, core technology and know-how, trade names and
trademark intangible assets. These intangible assets are a result of our AMSC Windtec GmbH and
Power Quality Systems, Inc. acquisitions.
Restructuring and impairments
On October 25, 2007, our Board of Directors approved a restructuring plan (the Fiscal 2007
Plan) to reduce operating costs through the closure of our last remaining facility in Westborough,
Massachusetts and the consolidation of operations there, including our corporate headquarters, into
our Devens, Massachusetts facility. No headcount reductions were associated with this plan.
Aggregate restructuring charges associated with the Fiscal 2007 Plan were $7.8 million, of
which $0.5 million was recorded during the nine months ended December 31, 2009. In the nine months
ended December 31, 2008, $0.7 million was recorded related to the closure of our Westborough,
Massachusetts facility. All restructuring charges associated with the Fiscal 2007 Plan have
resulted in cash disbursements and had been completed at the end of the second quarter of fiscal
2009.
Operating income (loss)
Our operating income (loss) is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
AMSC Power Systems |
|
$ |
19,941 |
|
|
$ |
3,208 |
|
|
$ |
55,202 |
|
|
$ |
13,587 |
|
AMSC Superconductors |
|
|
(5,941 |
) |
|
|
(6,264 |
) |
|
|
(17,085 |
) |
|
|
(17,265 |
) |
Unallocated corporate expenses |
|
|
(3,560 |
) |
|
|
(2,680 |
) |
|
|
(10,956 |
) |
|
|
(8,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,440 |
|
|
$ |
(5,736 |
) |
|
$ |
27,161 |
|
|
$ |
(12,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
AMSC Power Systems operating income increased to $19.9 million and $55.2 million in the
three and nine months ended December 31, 2009, respectively, from $3.2 million and $13.6 million in
the three and nine months ended December 31, 2008, respectively. The increase in the three and nine
months ended December 31, 2009 was primarily the result of higher sales and margins, as described
above.
AMSC Superconductors operating loss decreased to $5.9 million and $17.1 million for the three
and nine months ended December 31, 2009, respectively, compared to $6.3 million and $17.3 million
in the three and nine months ended December 31, 2008, respectively. The decrease in the three
months ended December 31, 2009 was primarily the result of higher sales and margins, as described
above. The slight decrease in operating loss for the nine months ended December 31, 2009 is
primarily a result of reduced subcontractor costs compared to the nine months ended December 31,
2008.
19
Unallocated corporate expenses include stock-based compensation expense of $3.5 million and
$10.4 million in the three and nine months ended December 31, 2009, respectively, compared to $2.4
million and $7.6 million for the three and nine months ended December 31, 2008.
Non-operating expenses/Interest income
Interest income decreased to $0.2 million and $0.6 million in the three and nine months ended
December 31, 2009, respectively, from $0.7 million and $2.3 million in the same periods of fiscal
2008, primarily due to lower interest rates, as we are investing in more conservative assets due to
the current economic environment.
Other income (expense), net, was income of $0.2 million and expense of $2.7 million in the
three and nine months ended December 31, 2009, respectively, compared to expense of $0.4 million
and $2.4 million for the three and nine months ended December 31, 2008, respectively. Other income
(expense), net, for the three and nine months ended December 31, 2009 primarily relates to net
foreign currency transaction and translation gains and losses as well as net realized and
unrealized gains and losses on hedging contracts. Other income (expense), net, for the three and
nine months ended December 31, 2008 primarily relates to net foreign currency transaction and
translation gains and losses as well as $1.3 million charged to expense from mark-to-market
adjustments on a warrant held by Provident Premier Master Fund.
Income Taxes
In the three and nine months ended December 31, 2009, we recorded income tax expense of $5.6
million and $13.8 million, respectively, compared to $2.3 million and $5.6 million in the three and
nine months ended December 31, 2008, respectively. Income tax expense in all periods was driven
primarily by income generated in foreign jurisdictions. We incurred losses in the U.S. during the
three and nine months ended December 31, 2009 and 2008 for which no tax benefit was recognized.
Non-GAAP Measures
Generally, a non-GAAP financial measure is a numerical measure of a companys 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 Form 10-Q, however, should be considered in
addition to, and not as a substitute for or superior to the comparable measure prepared in
accordance with GAAP.
We define non-GAAP net income (loss) 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.
We believe 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 our net income (loss). We
regard non-GAAP net income (loss) as a useful measure of operating performance which more closely
aligns net income with cash earnings generated by continuing operations. A reconciliation of
non-GAAP to GAAP net income (loss) is set forth in the table below (in thousands, except per share
data):
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net income (loss) |
|
$ |
5,179 |
|
|
$ |
(7,772 |
) |
|
$ |
11,311 |
|
|
$ |
(17,943 |
) |
Amortization of acquisition-related intangibles |
|
|
473 |
|
|
|
433 |
|
|
|
1,378 |
|
|
|
1,417 |
|
Restructuring and impairments |
|
|
|
|
|
|
168 |
|
|
|
451 |
|
|
|
668 |
|
Stock-based compensation |
|
|
3,522 |
|
|
|
2,392 |
|
|
|
10,440 |
|
|
|
7,586 |
|
Re-valuation of stock warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,334 |
|
Tax effects |
|
|
(96 |
) |
|
|
(86 |
) |
|
|
(277 |
) |
|
|
(287 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income (loss) |
|
$ |
9,078 |
|
|
$ |
(4,865 |
) |
|
$ |
23,303 |
|
|
$ |
(7,225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP earnings (loss) per share |
|
$ |
0.20 |
|
|
$ |
(0.11 |
) |
|
$ |
0.52 |
|
|
$ |
(0.17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding * |
|
|
45,566 |
|
|
|
43,024 |
|
|
|
45,072 |
|
|
|
42,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Diluted shares are used for periods where non-GAAP net income is generated. |
We generated non-GAAP net income of $9.1 million and $23.3 million, or $0.20 and $0.52
per diluted share for the three and nine months ended December 31, 2009, respectively, compared to
a non-GAAP net loss of $4.9 million and $7.2 million, or $0.11 and $0.17 per share for the three
and nine months ended December 31, 2008, respectively. The increases in non-GAAP net income in all
periods were driven primarily by higher net income and higher stock-based compensation expense
which was added back to net income. The increases in stock-based compensation expense in all
periods were due primarily to higher stock prices at the time stock grants were made in fiscal
2009.
Liquidity and Capital Resources
At December 31, 2009, we had cash, cash equivalents, marketable securities and restricted cash
of $112.8 million compared to $117.2 million at March 31, 2009, a decrease of $4.4 million. Our
cash and cash equivalents, marketable securities and restricted cash are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2009 |
|
Cash and cash equivalents |
|
$ |
40,383 |
|
|
$ |
70,674 |
|
Marketable securities |
|
|
66,594 |
|
|
|
39,255 |
|
Restricted cash |
|
|
5,802 |
|
|
|
7,278 |
|
|
|
|
|
|
|
|
Total cash, cash equivalents, marketable securities and restricted cash |
|
$ |
112,779 |
|
|
$ |
117,207 |
|
|
|
|
|
|
|
|
The decrease in cash and cash equivalents, marketable securities and restricted cash at
December 31, 2009 from March 31, 2009 was primarily due to timing differences in payments and a
resulting increase in accounts receivable from Sinovel Wind Corporation, Ltd. for shipments of core
components late in the third quarter for which we collected a majority of the balance in January 2010.
For the nine months ended December 31, 2009, net cash used by operating activities was $1.1
million compared to $0.8 million for the nine months ended December 31, 2008. A decrease of working
capital of $29.0 million, due primarily to increased Accounts receivable as described above
partially offset by an increase of Net income of $29.3 million.
For the nine months ended December 31, 2009, net cash used in investing activities was $36.3
million compared to $21.7 million in the nine months ended December 31, 2008. The increase in cash
used in investing activities was driven primarily by higher capital expenditures and a net increase
in marketable securities during the first nine months of fiscal 2009.
21
For the nine months ended December 31, 2009, cash provided by financing activities was $6.0
million compared to $12.2 million in the same period of fiscal 2008. The decrease was due to a
reduction in proceeds from the exercise of employee stock options.
Although our cash requirements fluctuate based on a variety of factors, including customer
adoption of our products and our research and development efforts to commercialize our products, we
believe that our available cash will be sufficient to fund our working capital, capital
expenditures, and other cash requirements for at least the next twelve months.
We also have unused, unsecured lines of credit of 0.5 million (approximately $0.7
million), which is available until June 30, 2010, and CNY 17.5 million (approximately $2.6 million)
which is available until June 30, 2012. We were able to reduce our long term restricted cash in the
U.S. during the three months ended December 31, 2009 through the establishment of credit
relationships with a number of U.S. banks. We also have an additional $1.6 million in bank
guarantees and letters of credit supported by unsecured lines of credit.
The possibility exists that we may pursue additional acquisition and joint venture
opportunities in the future that may affect liquidity and capital resource requirements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under SEC rules, such as
relationships with unconsolidated entities or financial partnerships, which are often referred to
as structured finance or special purpose entities, established for the purpose of facilitating
transactions that are not required to be reflected on our balance sheet except as discussed below.
We occasionally enter into construction contracts that include a performance bond. As these
contracts progress, we continually assess the probability of a payout from the performance bond.
Should we determine that such a payout is likely, we would record a liability. As of December 31,
2009, there were no recorded performance-based liabilities.
New Accounting Pronouncements
In June 2008, the Financial Accounting Standards Boards (FASB) issued guidance in
determining whether instruments granted in share-based payment transactions are participating
securities for purposes of calculating earnings per share. Under the provisions of this standard,
unvested awards of share-based payments with non-forfeitable rights to receive dividends or
dividend equivalents are considered participating securities for purposes of calculating earnings
per share. This accounting standard is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. We adopted this standard
on April 1, 2009. The adoption required us to modify its prior year weighted average number of
common shares outstanding but did not have a material effect on our financial condition or results
of operations.
In April 2009, the FASB issued a standard, which amends and clarifies a previous standard for
business combinations, to address application issues on initial recognition and measurement,
subsequent measurement and accounting, and disclosure of assets and liabilities arising from
contingencies in a business combination. Under this standard, an acquirer is required to recognize
at fair value an asset acquired or liability assumed in a business combination that arises from a
contingency if the acquisition date fair value can be determined during the measurement period. If
the acquisition date fair value cannot be determined, then the acquirer applies the recognition
criteria in accounting for contingencies, and makes a reasonable estimation of the amount of a
loss, to determine whether the contingency should be recognized as of the acquisition date or after
it. The adoption of this standard could materially change the accounting for business combinations
consummated subsequent to its effective date of April 1, 2009. On April 1, 2009, we adopted the
provisions of this standard and the results of adoption did not have a material effect on our
financial condition or results of operations.
In June 2009, the FASB issued the FASB Accounting Standards Codification (Codification). The
Codification became the single source for all authoritative U.S. generally accepted accounting
principles (U.S. GAAP) recognized by the FASB to be applied for financial statements issued for
periods ending after September 15, 2009. The Codification does not change U.S. GAAP and will not
have an effect on our financial condition or results of operations.
In July 2009, the FASB issued new guidance for all U.S. GAAP financial statements for public
and private companies, which significantly amends the existing consolidation accounting model for
variable interest entities, and includes extensive new disclosure requirements. This new guidance
is effective for fiscal years (and interim periods in those fiscal years) beginning after November
15, 2009. We do not currently have a variable interest entity and do not expect this standard to
have a material impact on our financial condition or results of operations.
22
In September 2009, the Emerging Issues Task Force issued new rules pertaining to the
accounting for revenue arrangements with multiple deliverables. The new rules provide an
alternative method for establishing fair value of a deliverable when vendor specific objective
evidence or third party evidence cannot be determined. The rules provide for the determination of
the best estimate of selling price of separate deliverables and allow the allocation of arrangement
consideration using this relative selling price model. The rules supersedes the prior multiple
element revenue arrangement accounting rules that are currently used by us. The new rules can be
prospectively applied beginning January 1, 2011 or can be earlier or retrospectively adopted. We
are currently evaluating the impact of adopting the rules.
23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We face exposure to financial market risks, including adverse movements in foreign currency
exchange rates and changes in interest rates. These exposures may change over time as our business
practices evolve and could have a material adverse impact on our financial results.
Cash and cash equivalents
Our exposure to market risk through financial instruments, such as investments in marketable
securities, is limited to interest rate risk and is not material. Our investments in marketable
securities consist primarily of federal government and government agency obligations and high
quality short term commercial paper and are designed, in order of priority, to preserve principal,
provide liquidity, and maximize income. Interest rates are variable and fluctuate with current
market conditions. We do not believe that a 10% change in interest rates would have a material
impact on our financial position or results of operation.
Foreign currency exchange risk
Our earnings and cash flows are subject to fluctuations due to changes in foreign currency
exchange rates. Our most significant foreign currency exposures relate to our Austrian and Chinese
subsidiaries. We enter into various hedging transactions to manage this risk. We do not enter into
or hold foreign currency derivative financial instruments for trading or speculative purposes.
The functional currency of all our foreign entities is the U.S. dollar, except for our
wholly-owned Austrian subsidiary, AMSC Windtec GmbH, for which the local currency (Euro) is the
functional currency, and our wholly-owned Chinese subsidiary, Suzhou AMSC Superconductor Co.,
Ltd., for which the local currency (renminbi) is the functional currency. We monitor foreign
currency exposures and hedge currency risk when deemed appropriate. Cumulative translation
adjustments are excluded from net loss and reported as a separate component of stockholders
equity. Foreign currency transaction and translation losses were $2.1 million for the nine months
ended December 31, 2009. Future operating results could be impacted by material foreign currency
fluctuations. In the future, should foreign currency fluctuations become material, management will
review options to limit the financial impact to our operations.
Our foreign currency risk management strategy is principally designed to mitigate the
potential financial impact of changes in the value of transactions and balances denominated in
foreign currency, resulting from changes in foreign currency exchange rates. Our foreign currency
hedging program uses forward contracts and currency options to manage the foreign currency
exposures that exist as part of our ongoing business operations. The contracts primarily are
denominated in Euros and Chinese renminbi (CNY) and have maturities of less than six months. On
December 31, 2009, we had a forward contract outstanding to hedge our wholly-owned Austrian
subsidiary, AMSC Windtec GmbH (Windtec) USD exposure, with a nominal value of $25.0 million,
which expired on January 29, 2010. The forward contract sold US dollars and bought Euros at
$1.4423. We also had two forward contracts outstanding to hedge receivables exposure at our
wholly-owned China subsidiary, Suzhou AMSC Superconductor Co., Ltd., selling CNY and buying USD at
$6.797 and $6.772, respectively, with nominal values of $15.0 million each, which expire on March
31, 2010 and April 30, 2010, respectively. Generally, we do not designate forward contracts and
currency option contracts as hedges for accounting purposes, and changes in the fair value of these
instruments are recognized immediately in earnings. Gains and losses on these contracts are
included in Other income (expense), net.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31,
2009. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act), means controls and other procedures
of a company that are designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the companys management, including its principal executive
and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of our disclosure controls and procedures as
24
of December 31, 2009, our chief executive officer and chief financial officer concluded that,
as of such date, our disclosure controls and procedures were effective at the reasonable assurance
level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2009 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
25
PART IIOTHER INFORMATION
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described in our annual report on Form 10-K for the year ended March
31, 2009 in addition to the other information included in this quarterly report. If any of the
risks actually occurs, our business, financial condition or results of operations would likely
suffer. In that case, the trading price of our common stock could fall.
During the quarter ended December 31, 2009, there were no material changes to the risk factors
disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009, although we
may disclose changes to such risk factors or disclose additional risk factors from time to time in
our future filings with the SEC.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On October 9, 2009, we entered into a Unit Purchase Agreement with Tres Amigas, LLC, a
Delaware limited liability company (Tres Amigas), pursuant to which we issued 31,878 shares of
our common stock and made a cash payment in exchange for a minority equity interest in Tres
Amigas. The issuance of our common stock described herein was exempt from registration
requirements under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof,
because the transaction did not involve a public offering.
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits
filed as part of this quarterly report, which Exhibit Index is incorporated herein by this
reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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AMERICAN SUPERCONDUCTOR CORPORATION
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Date: February 3, 2010 |
/s/ DAVID A. HENRY
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David A. Henry |
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Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
10.1
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First Amendment to Amended and Restated Executive
Severance Agreement, effective as of December 11, 2009,
between the Registrant and Daniel P. McGahn |
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31.1
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Chief Executive OfficerCertification pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
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31.2
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Chief Financial OfficerCertification pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
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32.1
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Chief Executive OfficerCertification pursuant to
Rule13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
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32.2
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Chief Financial OfficerCertification pursuant to
Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
28
exv10w1
Exhibit 10.1
AMERICAN SUPERCONDUCTOR CORPORATION
First Amendment to Amended and Restated Executive Severance Agreement
This First Amendment to Amended and Restated Executive Severance Agreement (Amendment) by
and between American Superconductor Corporation, a Delaware corporation (the Company), and Daniel
P. McGahn (the Executive) is made as of January 29, 2010.
WHEREAS, the Company and the Executive are parties to an Amended and Restated Executive
Severance Agreement, dated as of December 23, 2008 (the Agreement);
WHEREAS, the Company promoted the Executive to President and Chief Operating Officer and
adjusted the Executives severance payment period from 12 months to 18 months in connection
therewith;
WHEREAS, the parties desire to amend the Agreement to effectuate such adjustment to the
Executives severance payment period; and
WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the
Executive agree as follows:
1. Effective as of December 11, 2009, the definition of Severance Period set forth in
Section 1.6 of the Agreement is hereby amended by deleting said section and by substituting
therefor:
Severance Period shall mean the period of 18 months immediately following the Date of
Termination (as defined in Section 3.2(a) below).
2. All other provisions of the Agreement shall remain in full force and effect according to
their respective terms, and nothing contained herein shall be deemed a waiver of any right or
abrogation of any obligation otherwise existing under the Agreement except to the extent
specifically provided for herein.
3. The validity, interpretation, construction and performance of this Amendment shall be
governed by the internal laws of the Commonwealth of Massachusetts, without regard to conflicts of
law principles.
4. This Agreement may be executed in counterparts, each of which shall be deemed to be an
original but both of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Amended and
Restated Executive Severance Agreement as of the day and year first set forth above.
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AMERICAN SUPERCONDUCTOR CORPORATION
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Signature:
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/s/ David A. Henry
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Print name:
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David A. Henry |
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Title:
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Senior Vice President and Chief Executive Officer
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EXECUTIVE |
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Signature:
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/s/ Daniel P. McGahn |
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Print name:
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Daniel P. McGahn |
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2
exv31w1
Exhibit 31.1
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATIONS
I, Gregory J. Yurek, certify that:
1. |
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I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
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b) |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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c) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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d) |
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Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Date: February 3, 2010 |
/s/ Gregory J. Yurek |
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Gregory J. Yurek |
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Chief Executive Officer |
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exv31w2
Exhibit 31.2
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATIONS
I, David A. Henry, certify that:
1. |
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I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation; |
2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
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a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared; |
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b) |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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c) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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d) |
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Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Date: February 3, 2010 |
/s/ David A. Henry
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David A. Henry |
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Chief Financial Officer |
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exv32w1
Exhibit 32.1
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation
(the Company) for the period ended December 31, 2009 as filed with the Securities and Exchange
Commission on the date hereof (the Report), the undersigned, Gregory J. Yurek, Chief Executive
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
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Date: February 3, 2010 |
/s/ Gregory J. Yurek |
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Gregory J. Yurek |
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Chief Executive Officer |
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exv32w2
Exhibit 32.2
AMERICAN SUPERCONDUCTOR CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation
(the Company) for the period ended December 31, 2009 as filed with the Securities and Exchange
Commission on the date hereof (the Report), the undersigned, David A. Henry, Chief Financial
Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
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Date: February 3, 2010 |
/s/ David A. Henry |
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David A. Henry |
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Chief Financial Officer |
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